So you are in the market for a mortgage in Ventura County. Maybe you are purchasing a first time home, second home, investment property or just looking to refinance your newly adjustable rate mortgage into a fixed rate with these historically low rates (well, almost historically low rates).

What do you do?

Well the best approach is to call your mortgage professional that did your past loan, or if you do not have a mortgage then you ask your family and friends for a referral. This in itself could be a challenge due to the exodus of many loan officers from the business due to the “easy pickens” days are over. All that are left are those mortgage professionals that are grounded from years of experience (not so bad). Once you hook up with a professional then you are in good shape to get the best mortgage program and rate possible. Why?

For those that do not have a mortgage source to go to, they will call around and get mortgage rate quotes. This is backwards for a couple of reasons.

First, you may get a quote that you really like, go with it and then find out that the loan officer that quoted the “really nice” rate can not perform or the quote will not work in the time frame needed (I just got a random call today asking if I could refer a mortgage attorney due to failure to perform within the rate lock commitment..basically the customer lost their rate and now that rate does not exist).

Second, calling around and getting quotes does not work in today’s multiple rate sheet environment. What do I mean? Due to the volatility in the market, lenders price rates in the morning, then depending on how the market is performing (the mortgage backed securities..I’ll save this for a different blog post) you can get a mortgage rate re-price. So what? Well if you call my competitor at 10:00 a.m. and then call me at 2:00 p.m. and the market has improved to warrant a mortgage re-price, I will beat out my competitor just due to the improvement in the market.

You need to be able to compare apples with apples. In May, rates changed about every 4 hours. This makes it very challenging to shop for rates.

Back to my earlier point. Find a mortgage professional first, one that is established, has weathered the storm and understands the market, then stick with that professional. You will in the long run end up with the best program and rate.

If you want to follow mortgage rates on a daily basis, follow me on twitter were I give daily updates to how the mortgage market is performing.

If only I had a dollar for..you know how the saying goes.

Rates that used to be 4.5% are now at around 5.5%. And it only took about 15 days to move. What does that mean to a homeowner in Ventura County? It means what used to be a payment on a $400,00 loan at 4.5% has increased $245 per month based on 5.5% mortgage rate.

Before I get into all of you in Ventura County who were, should of, was, possible, thinking about purchasing or refinancing let’s talk about why?

First there are many explanations, but I will stick with the simplified version.

1. The economy is improving. Maybe not on a day to day living basis, but on an overall bigger picture basis. With this improvement is the FEAR of inflation. Inflation is mortgage rates worst nightmare.

2. The technical side. This is were the market trades in patterns by traders who watch the market. This gets way to involved for this blog, but just trust me that when the rates seem to move for no apparent reason, there is usually heavy trading going on.

Are the rates going to come back down? Can you take advantage of the dip back down? There might be hope. Due to the quickness of the rise in rates, technical factors should pull back down the rates. The Federal Reserve will do its part to keep its commitment to keeping rates low. And rates seem to be seasonal.

Now, the hand slapping, do not miss the next drop in rates. Do not get caught up in the rumors that rates will always drop to something lower than what you could of taken advantage of when they hit their all time low! Ok, maybe you missed the boat once, but do not miss it again. Get yourself ready today for the dip. Speak to your mortgage professional and put yourself in a position to win. Rates as demonstrated above can move swiftly.

When will you know that rates have dropped so you can take advantage..not by reading the newspaper..that is too late..follow me on twitter were I give daily rate updates or subscribe to this blog.

Finally, if you want to forget about it and let someone else worry about it. Go to www.watchingyourmortage.com, sign up once and let me do the watching for you with my rate watch program.

But whatever you do, to do nothing will surely end up costing you in the long run.

Today, the use of a professional mortgage broker is one of the key strategies used by sophisticated borrowers.

Understand, I have worked for direct lenders (big banks) and as a mortgage broker. You can find professional loan officers in both environments.

But the topic of this article is why use a mortgage broker, therefore let me continue.

A mortgage broker is an independent real estate financing professional who specializes in the origination of residential mortgage loans. Mortgage brokers normally pass the actual funding and servicing of loans on to wholesale lending sources. A mortgage broker is also an independent contractor working with (on average) as many as 20 lenders at one time. By combining professional expertise with direct access to hundreds of loan products, your broker provides the most efficient way to obtain financing tailored to your specific financial goals.

In the volatile home lending market, mortgage brokers can serve as safeguards, offering their clients security, safety, and peace of mind. One of the broker’s most important functions is escorting your loan application through the entire process, constantly patrolling the transactions looking for possible breakdowns. A professional mortgage broker can wade through the mountains of rate data and program options, researching current market conditions to find the most accurate and up-to-date information about cost effective options.

There are literally thousands of variables that can affect the outcome of your mortgage transaction. That’s why you need a mortgage broker to act as a liaison between the title and escrow companies, real estate agent, lender, appraiser, credit agency, the underwriters, the processors and any other services which may affect your transaction.

A mortgage broker also:

• Discusses and expain financing program options
• Provide detailed spreadsheets on the total costs of the transaction
• Explains all associated costs to the loan application
• Explains the loan process from application to closing
• Provides you with a good faith estimate of costs and fees
• Communicated with you in a timely manner througout the entire process
• Coordinates the final closing of your transaction

As you can see, when you are preparing to take on your biggest investment, your mortgage, you need a professional handling all the steps to ensure a smooth transaction.

This is a question that is asked many times. Everyone has heard of points but do you know what they are and if you should be paying for them?

Basically, points are up front fees (which I call investment) paid by the borrower to obtain a better interest rate on their loan. One point is equal to 1% of the loan amount. For example, on a $400,000 loan, if you paid a point investment, it would equate to $4000 in costs. Typically paying a point versus not paying a point will lower your interest rate. The key in determining if you should buy down the interest rate (pay points/costs) is how long you will be in the loan and to compare current interest rates to historical market trends.

Let’s take my example a little further. Let’s say paying $4000 on a $400,000 loan over not paying a point (saving $4000 in costs) would save you $50 per month (remember paying the points will get you a lower interest rate thus saving you on your monthly payment). What this means is that it would take you 80 months to recoup your $4000. What you do is divide the savings per month ($50) into what it cost ($4000) you to get that savings. If you decide to refinance or sell you home within 80 months then your money is lost. In this scenario, you would benefit from paying the points if you were to stay in the house for 80  months or longer.

Can I pay more than 1 point investment. Of course, the more you invest in buying odwn the interest rate, the lower that rate will be. Typically, rates are quoted with 1 point or no points..but you have the option to go for it and pay more than 1 point.

It is also important to take a look at where rates are from a historical perspective. If rates are at a all time low (like they are today), and you plan to be in the house for an extended period of time, it makes more sense to pay points and take advantage of the SUPER low rates. If it’s unlikely that rates will go down in the near future, then there will be no need to refinance…one and done!

On the opposite side, if rates are high, and there is a good chance rates will drop down, then paying points may not be in your best interest. The reason why is if rates drop, chances are you will refinance again and you will not have been in your current loan long enough to re-coup the points paid on your current loan.

Another consideration is tax deductibility. Let’s remember I am not an accountant and you should refer to them for advice as well. On a purchase, interest from both your points paid and your mortgage are tax deductible up front. For refinances, however, points are not deductible up front. Instead the deductions are spread out over the term of the loan, making points more costly in comparison.

Ultimately, there is a lot to consider when it comes to points and whether or not they are a worthwhile investment. An experienced mortgage professional will work with you to determine the best course of action based on your SPECIFIC needs. You should always request a loan comparison to see if paying or not paying is best for you. If you would like more information please contact me or your local lender.

I recently created a video explaining why it is vital to have a professional watching your mortgage for  you. You can view the video below.

In today’s environment there are many changes to the mortgage guidelines that even someone in the business has a hard time keeping up with. As a consumer, you need to be plugged into a professional who will monitor those changes and keep you posted as to how you might be able to take advantage of the mortgage changes.

Let me give you a couple of examples. Just in the last week there has been two changes that are huge for most homeowners who have a mortgage.

The first is the ability to refinance your home up to 105% of the value. For the most part, even though we are at historically low rates, most of us have not been able to take advantage of these rates due the value of our house has dropped. Now that has changed.  There are restrictions to this, but if you do not talk to someone, how are you going to know if this applies to you.

Second, loan limits have been raised to $729,750 in certain areas. Again this is big. Before this change the rates quoted were limited to $417,000 or less. Now the increased limits may have additional fees, but they are still going to be lower than they were prior to this change. This also means that a 30 year fixed rate is a real option for those of you that are above $417,000.

These are just two simple but powerful changes that were made in the last two weeks. My point is, many people put their hard earned dollars with a financial planner, why would you not put your biggest investment in the hands of a loan professional.

Call you lender today, or ask you accountant, financial planner, tax preparer, or Realtor for a recommendation. You need to see if refinancing makes sense and if the new changes apply to you.

Ok-you now understand what to look for in a loan officer based on my previous post. Now let’s talk about rate shopping. But, let me be clear, shopping for a rate and not taking in consideration the person or entity that will orchestrate the rate to the finish line is crazy. I have seen to many times, people changing rates from one lender to another only to become very frustrated due to excess fees, or delays.

With that being said:

1. If it seems too good to be true, it probably is. Mortgage money and interest rates all come from the same places, and if something sounds really unbelievable, then you better ask a few more questions. Is there a prepayment penalty, are there extra fees, what is the length of the lock-in.  Many quotes that are given are for the shortest lock (meaning 7 or 15 days). In reality, you will not get your application turned around in that amount of time, therefore you would need to lock in for a greater length. Locking in for a longer period costs you more in points. Also if fees are minimal, is it built into a higher interest rate?

2. You get what you pay for. If you are looking for the cheapest deal out there, understand that you are placing a hugely important process in the hands of the lowest bidder. Best case, expect very little advice, experience and personal service. Worst case, you may not close at all. Some times it is too late and yo find out that you can not close (especially with all the changes in the mortgage guidelines) and now when you go out to find another rate and source the rates have increased. Or course if you want the cheapest rate, head out to the Internet..yikes! The stories about last minute changes, increase in rate and fees or worse yet, not closing on time are usually Internet transactions. Ask any competent Realtor and they will suggest (demand) that you speak with a local experienced lender. This is the largest financial transaction you will more than likely be involved in, don’t risk it.

3. Compare apples with apples. First, make sure you are comparing quotes from the same day. Second, review lender fees and points against another lender fees and points. What I mean is that if you look at the bottom line, some lenders may skimp on the third party fees in hopes that it makes them look less expensive.

4. Understand that interest rates and closing costs go hand and hand. This means that you can have any interest rate you want, but you will pay more in points. On the other hand, you can have less fees, discounted points or no costs at all but you will have a higher interest rate. One strategy is not better than the other. It depends on your current situation and long-term goals. A professional loan officer will guide you through this process.

5. Finally, you must understand that interest rates and points can and do change daily and even hourly. If you are comparing lenders, this is a moving target on an hourly basis. For example, if comparing two lenders, you must get a quote from each of them on the same day and at the same hour to be exact. You must also know the length of the lock as well to compare the tow lenders. As mentioned above, one could quote a 15 day rate and another a more realistic 45 day lock.

Bottom line, ask the right questions, determine which lenders are competent and will provide the service that is required on a transaction as big as this and then if choosing between two compare on the same day.

Is this a loaded question?

This can be answered many ways. Let me give you my thoughts.

First and foremost, make sure you end up working with someone competent. This will more than likely be the biggest investment in your life and is far too important to put in the hands of someone who is not capable of advising you properly and troubleshooting the issues. So first, how can you tell if you are working with the right person?

Ask these simple questions, which your lender must get right!

1. What are mortgage interest rates based on? Answer-Mortgage backed securities (MBS), not the 10 year treasury. Although the 10 year treasury can trend in the same direction of MBS, but it can move completely in the opposite direction. Make sure you are working with a lender that has their eyes fixed on the right indicator.

2. What does it mean when Bernanke and the Fed “change rates”, and what impact does it have on mortgage interest rates? Answer-Typically when the Fed moves rates, they adjust the Feds Fund Rate or the Discount Rate. These are SHORT term rates that impact home equity lines, auto lines, credit cards and so on. On the day that they make a move, long term rates (mortgage rates) may even go the other direction. Other times it can be priced into the rates ahead of the move and you will not see much difference on the day of the move.

3. Does the lender have access to live, real time mortgage bond quotes? Answer-You should know the answer to his by reading #1. If your lender is not tied into a real time quote during the day, then how will you be able to make informed decisions when there is an intra-day price change? In today’s volitale environment, we have seen rates priced in the morning, only to change not once but twice during the day. You may be working with someone that is reading yesterday’s news. Would you work with a stockbroker who based your investments on yesterday’s paper?

Yes, finding a rate that works for you is important, but you need someone that will also orchestrate the transaction for you. There is a lot that is involved with purchasing or refinancing a home. Most importantly, work with someone that understands the market, has experience in navigating the real estate/mortgage world, and who you can trust. Trust is so important when you put the biggest investment of your life in the hands of someone. Most of can get a feel if someone has their best interest in mind, not their own. Look for testimonials as well.