Texas Home Loan Blog: February 2009

Pursuant to my sources at the USDA it will be taking about another two weeks for the funding allocated by the recent economic stimulus bill to trickle down to retail levels. For those who are seeking a Guaranteed Rural Development loan from a lender such as myself, this should not affect you since we are still funding loans in anticipation of the money we know is coming. If you are working with another lender who is not funding loans, it's probably worth it to wait with them as opposed to starting over with another lender. Do know, however, they have no reason to be holding back on funding your loan.

For those awaiting a Direct Rural Development loan it's a different story. Since you are working directly (hence the name) with the USDA with no lender involved, you will need to wait until they can actually write the check to close. Again that should be about two weeks from now, but you should be able to confirm that with your local USDA office.

For more local information please feel free to contact your local USDA offices. You can find them at this link.

Gerry Suarez, Jr.

Your FHA Loan Pro!

Many of you reading this have been waiting for those government promised mortgage rates of 4.5%, or even lower.  Do you realize those rates may never come in actuality?  Can you comprehend how much money you are wasting by not refinancing or outright purchasing a property right now?

First, let's look at those of you waiting to refinance.  Since rates are currently around 5% and it usually doesn't make sense to refinance with less than a 1% drop in rate, let's put together a scenario.  You have a $200,000 loan at 6%, with monthly mortgage payments (not including taxes and insurance) of $1,199.  You are now faced with the dilemma of refinancing since rates dropped lower, down into the 4's, but you didn't take advantage of them and they have now risen to 5%.  You hear the media talk about lower mortgage rates, namely 4.5%, throughout the headlines and this causes you to wait longer in anticipation.  As we near the passage of a new stimulus package, along with headlines from the federal Reserve stating they will keep buying mortgage backed securities, you think to yourself that mortgage rates must be heading lower, so I will wait.

But how much money are you wasting while you wait.  Let's say that it takes 6 months to get rates that low (personally I don't think it will happen) and we will leave the tax benefits aside.  If you refinanced that $200,000 right now, your monthly payment would drop to $1,074, giving you an extra $125 in cash flow.  That $125 can go a long way to paying off high interest debt, or we can simply save it.  That means that 6 months down the road, you would have saved $750, right?  Actually it is more since when you have a lower interest rate, more money each month goes to the principal, so your savings actually are $1,000, even more if you invested the savings instead, which I highly recommend.  It would take you over 15 months to recover those losses if you refinanced into a 4.5% mortgage at 6 months.  And what if rates continue to go up?  How much more will that cost you in the long run?

What about those of you whom continue to rent, say at $1,000 a month?  If you were to buy a home with a $200,000 mortgage at 5% right now, your payment would go up, yes, to $1,074.  But what about the tax savings you gain, not to mention the equity building?  Let's take a look, of course I need an estimated tax bracket, so we will just use 25%.

If you were to buy the home now, your net after tax payments would go down to $865, yielding a savings of $135 each month.  You can adjust your W-4 form with your employer and start reaping that savings immediately as well, instead of lending it to Uncle Sam interest free.  So, in 6 months you would have paid down $1,457 in principal, plus had a net savings of $810, for a total savings of $2,267!!  Again, what if mortgage rates don't go down or even continue their climb?  Are you willing to risk those losses?

The reason I am writing this is not to get you to rush into taking on that new mortgage right now.  rather, this is to ignite in you the realization that every decision you make, even not making one, has a profound effect on your finances, especially when it comes to your mortgage.  Use your mortgage as a financial tool, and it can be the best investment you ever made.  Enter into a mortgage without incorporating into your overall financial and investment plans, it could easily lead to financial disaster, and you could become another statistic or part of the next hews headline.  I cannot stress the importance of seeking a genuine mortgage planner, and those are hard to come by as mortgage professionals across the country struggle to survive.

 

Dear Mr. & Mrs. Borrower,

Liar Liar pants on fire....  Do I have your attention?  Well, I have been know on Active Rainand on a few outside blogs as the meanie. (just using polite words since I am speaking of myself) Also that I seem harsh and my comments come across rude and demeaning. Why is this?  Please read on....

Because I give my honest opinion of 16 years in the mortgage industry about other loan officers and mortgages in general. I believe that education is a huge issue when it comes to mortgages and real estate, and there are a good number of loan officers that lie, mislead, and bait and switch.  It's just a fact, not opinion.

 

Someone recently wrote a post that I thought was misleading in tone, in regards to why so many loans don't close on time or that don't close period. Their opinion, which sounded like fact, was that they get denied last minute on appraisal issues and because of title issues. In my opinion, many of these loans don't close because the loan officer didn't know what they were doing, that they lied, or thought they could make it work. And I stated that I believe that 50% of the loan officers in this business shouldn't be handling mortgages. Then another loan officer chimed in and asked why I was being so negative towards loan officers, that I could be scaring off potential borrowers, and that this gives us a bad name. Okay???  My response?  That this is part of what I call education, letting people know what is going on out there. That they shouldn't just believe anyone at any time. That they should do some research on the side, especially if something does sound right. And the author of the blog actually said that they don't believe that anyone would purposely lie or purposely stick a loan file on the wall, hoping that it would stick. I then asked 15 other loan officers that I know and each and every one of them agreed with my statements and actually said that my percentage was actually very polite, that they thought it was higher. My whole reasoning for my comments that might sound harsh, is to wake up the general public, to edcuate them. Here is a great example.

 

 

I received this e-mail from someone the other day....

Hello,
My friend is applying for an FHA loan. He filled out an application monday with Countrywide mortgage. He said that because the loan is a FHA loan, that he was told it would take a week to get the good faith estimate.

I think it should be given to the applicant within 3 days regardless if it is FHA loan or not.

Is that correct?

 

 

That is a great example...   It doesn't matter if it's a FHA loan, a conventional loan, a VA loan, etc, etc. By law, the lender has 3 days to give that borrower a copy of a good faith estimate (please read this).  I had another borrower that was told that you couldn't lock a rate in until 5 days before settlement. Just a blatant lie in probably giving that borrower a lower rate that can't be given by any other lender. Knowing that rates change and that this borrower will be at the loan officer's mercy.

 

Conclusion :  I am just curious when it comes to comments and debate. If I state in my comment that this is my opinion, and that these are things that I learned throughout my career, how can one sound positive if it's negative news and feedback? 

Hey Mr. & Mrs. Borrower, or realtor, or consumer.....  do you want me to sugarcoat the issue then? Make you feel all warm and fuzzy, just so I don't scare you?  Or would you rather be properly informed and armed with ammunition, in case you run into a scenario such as mentioned above. Sorry people, I wish I didn't have to say this, but it happens. It doesn't happen all of the time, but it happens, in any business. People actually lie on purpose. And if the loan officer wasn't sure of an answer, that's when they should be asking for help. 

Sincerely,

A loan officer that just tries to be honest and to educate people about the mortgage process

 

 

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Experience & Knowledge at its BEST !!!

 

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For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2008-2009 Tax Credit for First Time Homebuyers : 2008 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

Copyright © 2009 by Jeff Belonger