Locking in a Mortgage Rate

If you're in the market for a new home, you will need to know when the best time to lock your mortgage rate is. When to lock the rate depends solely on individual circumstances, so borrowers should work closely with their lender to make the decision. A borrower can lock in a rate only after the initial loan is approved. However, many borrowers wait until they have found a home to lock. Mortgage rates are currently the lowest they've been in years but this could change within the week, so it's important to take advantage of this and lock in a low rate. In a previous blog we discussed why the mortgage rates are so low, but this will change frequently. In this blog we will be looking at how to lock in the lowest rate possible to save you the most money.

The process for locking in an interest rate varies from one lender to another. You may have a lock-in agreement with your mortgage lender which ensures the interest rate at the time of closing, regardless of the actual rate at that time. This is obviously more important when rates are going up, so you can keep your mortgage interest rate low.

There are a few things to keep in mind regarding a mortgage rate lock-in to help ensure you are getting the best rate:

1. A rate quote is different than a rate lock - a quote has not legally binding and subject to change as the rates change; a rate lock secures that interest rate at the time of closing and is a binding agreement

2. Be organized and prepared; it is best to have a specific property in mind and even better to be close to closing

3. Get the rate lock in a legally binding document, not just a verbal offer

4. Make sure the rate lock gives you enough time to finalize your loan - most are 30 - 60 days in duration

When locking in a mortgage rate, let your mortgage lender guide you through the process. Know your estimated closing date, and try to time your rate lock with that date. If you estimate 30 days to close, find out what the interest rate would be if you locked it for a 45-day period. You can't afford to take more time then you should.

You can save a lot of money by locking in the lowest rate possible to you. The important thing is to get your rate on a day it's low and lock for enough time to close your loan. Interest rates are constantly changing, and currently they're the lowest they've been in years. Intercoastal Mortgage Company can help you obtain the best possible rate for you. Contact me and I will assist you in locking the best interest rate for your loan.

What's the house's value

If you're in the market for a new house there are things you must do before you obtain one. I've gone over the steps of mortgage pre-approval in a previous blog. After you get pre-approved and begin house hunting, you will find the house you want. It will be priced according to what the seller wants, but this isn't always the correct price for that house. This is very common, it's the way of the world to try to get the most for your money, but you shouldn’t have to pay more because of it. You must know the correct value for the house you want before you buy it, the term for this is the fair market value (FMV). By using real estate professionals, mortgage lenders, and property appraisers, you can know the actual value of the home, regardless of the listing price. It is important to establish the FMV, since this price could be lower than the asking price.

Fair Market Value is the price at which the home you are looking for should sell, based on certain criteria - square footage value, assessed value, and a comparative market analysis (CMA). Real estate agents create the CMA by comparing other homes on the MLS (Multiple Listing Service) either in the neighborhood you specify or by the attributes of that particular house. They look at houses already sold as a determination of accurate pricing. The square footage value helps to balance some of the variables houses in the same neighborhood; such as lot size or improvements needed/completed. Assessed value adds a third dimension to give a comprehensive picture of what the fair market value is for a home.

The home sale price is what a buyer must pay in order to purchase a home. This includes the financed amount and the amount of the down payment. In a previous week's blog, we discussed the advantages of mortgage pre-approval. Through this process your mortgage lender will assess your financial situation and calculate a maximum affordable sale price. This indicates what mortgage amount you can realistically afford. Assuming your enter the home buying process with a pre-approved mortgage amount, knowing the fair market value of the houses you are interested in will allow you to align your financial picture with the right property.

It is common for people to think a house is out of their reach because they can't afford the asking price. What they may not know is that with the help of mortgage and real estate professionals, they may be able to own the home they want in their desired neighborhood. At Intercoastal Mortgage Company, we help you secure a loan that can fits your needs, based on your income and budget. Contact me for more information or to follow up on a loan application.

Mortgage rates are setting records

Buying a house right now is very attractive, you're hearing how great of a time it is to buy, but why is this so? In the last two weeks mortgage rates have sunk to historic lows. A low mortgage rate means you spend a lot less money for the same house, and this is because the interest on your loan will be low. A mortgage rate is the interest rate charged on a mortgage. If you're looking to purchase a house, this is great news for you. I'm going to explain why that is true in this blog.

Recently, the average U.S. mortgage rates for a 30-year loan dropped to 3.83 percent. A 15-year mortgage, commonly used for refinancing a home mortgage, dropped to 3.03 percent. Both of these numbers set a low interest rate record for recent times, and it is the second week to do so. To put this in perspective, last year at this time the interest rate on a 30 year mortgage was 4.63 percent. This translates into an increase of nearly 1% of interest for the same house.

What is the reason for this

Mortgage rates are set low to encourage a comeback in the housing industry based on these factors:

1. Mortgage rates normally track the yield on the 10-year Treasury note.
2. The employment rate is down - fewer people with jobs means fewer buyers for homes on the market.
3. US Mortgage Backed Securities (MBS’s) are considered the quality investment with the European turmoil in Greece, Spain etc. This high demand is driving the price of MBS’s up and the yield/rate down; a ‘Flight to Quality’ to the US MBS market.
4. With home prices down, those who can afford a house may be concerned about entering the market right now.

What this means for you

On May 9th, the National Association of Realtors reported that prices for single-family homes were increasing in the first quarter in 74 of 146 metro areas. Increasing home prices is usually a good sign. By the end of March, 22 percent fewer homes were for sale than the same time last year, and home sales rose 5.3 percent in the first quarter. Prices of houses are the lowest they've been in years, and although they are rising, the mortgage rates are not. This is why it is the perfect time to buy.

In this economy, the last thing you're being told to do is spend money. Most of the time not spending would be a good practice, but when you think about the current situation based on all the factors you will see it is the time to buy. Take advantage of these low rates. Contact me here and we will get you into the house you desire.

How to buy a house when you still own one

You may find yourself in the position where you need to buy a house while you still own one. How to accomplish this feat is a dilemma that many people confront. Very few people are able to sell a house and go straight into another one.  Unfortunately, the housing crisis has prompted a situation where financing and obtaining a house aren't as easy as they used to be. In this blog I'm going to address the proper technique for handling a situation like this.

There are many reasons why you may need to buy a house while you still own one;

• You are trying to make the deadline for a specific tax credit for repeat home buyers
• You are going through a recent job change or transfer
• You may have found your dream home and don't want to lose it
• You don't want to pay for or live in a hotel for weeks after your first house sells

In the past, purchasing a new house before selling the old house wasn't a difficult task – you could rent the home and use the new rental payments to help offset the existing mortgage payment. Now it is harder for legitimate sellers to buy new homes. The main reason for this is to keep lenders from losing money on walk-away borrowers, a person who “strategically defaults” to avoid foreclosure. 

Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) have gotten much tougher with their requirements for sellers who are in the market to buy and want to rent their existing homes.  If you want to use the new rental payments to offset the existing mortgage, the lender will require that you have 30% equity in your home as evidenced by an appraisal (FHA requires only 25% equity).   Again, this is to stop strategic defaulters.  If you don’t have the required equity in your residence, then whether you rent your home or not, you’ll have to qualify carrying the entire existing mortgage payment.  Additionally, if you already have an FHA loan and want to obtain another FHA loan, you will most likely be out of luck as FHA, for the most part, only allows borrowers to have 1 FHA open loan at a time.  

You may have enough equity in your home and the ability to carry your existing mortgage payment isn’t a problem;  you intend to sell your home, but you want to purchase your new home before you sell (thus having the ability to write a contract that is not contingent on your sale).  Chances are money will be tight; if you don’t have enough in savings, you’ll need to borrow funds until you can sell your current home. You have some options, such as a “bridge loan” - tapping into your home equity, or as your last resort, you could borrow from your retirement savings. You should run these numbers by your mortgage lender to understand the consequences of each action. Whichever works best for you is what you should do. The economy is still very tight and there is no need to put yourself in a tough spot.

You may feel that you just don't have a choice and moving into a new home while you still own another is unavoidable. It is not impossible to do, but the system is designed to be wary of frauds, so prepare for some extra hoops to jump through.

We help people get into new homes while still owning another quite frequently. It’s one of the things we do well. Contact me here and we can help you with the process of transitioning into your new home.

Why is a Smaller Mortgage Company Better than a Bank?

If you're in the market for a house or have purchased in the past, you've undoubtedly needed a mortgage. Did you go to a mortgage lender or directly to the bank? I'm going to show you not only the benefit of going to a lender instead of bank, but also the advantages that far supersede what you get from a bank. Do you want to be just another number? The answer to that question is obvious, of course not. With a lender you will have a personal experience with people who genuinely care about putting you in the house you desire.

For the past several years the media has focused on how large banks have handled their mortgage business. Even removing the flagrant abuses in the industry and just focusing on the home loan process with large banks generally, the consistent theme highlights these qualities:

• Impersonal process
• Inexperienced loan officers
• Unnecessary and endless paperwork
• Outrageous fees for every part of the process
• Mortgages are a very small part of their business

Consider the advantages of going with a smaller mortgage company such as ourselves.

• Intercoastal is a Lender not a broker

Our mortgage loans are processed, underwritten closed and funded in-house. We make the loan decision. We are accountable for the entire process from beginning to end. As a result your transaction will go smoothly and your closing will be on time.

• Intercoastal is Not a Single Banking Entity

While we are mortgage bankers, we are not limited to one banks mortgage products. Not only does this allow us to remain competitively priced, but to offer a wide range of products to suit all of our borrower’s needs.

• Incredible Product Variety

Our product line is second to none. We are constantly updating our products to meet the changing needs or our valued customers. Whether you are a 1^st time homebuyer or an experienced homeowner, Intercoastal has the product and program to suit your needs.

• Intercoastal is a local lender

We understand our local market and we are housed right here in Fairfax. This means direct access to the underwriting and closing department, which allows us to provide prompt, full approvals without surprises. Need a quick closing? No problem!

• Our Place in the community

Intercoastal is listed as one of the top 25 lenders in the Washington Post and Washington Business Journal. We have built a reputation as a reliable, professional and innovative company. We pride ourselves on delivering quality mortgage products and services while helping our valued customers realize their American dream.

Efficiency, reliability, trust and experience play the most important roles in the mortgage process. Developing a rapport with your home buying professionals is a crucial aspect of a successful home buying experience; as it allows for a customized mortgage to fit a specific needs and budget. What can start as the most exciting adventure of one’s life can quickly turn into a nightmare if the right decision is not made when choosing where you will receive your home loan. Choose the smaller mortgage company.

Read my previous blog on the steps to get pre-approved and contact me to help you get into your dream home.

In this weeks’s blog post, I will explain why buying is significantly better than renting. You may have wondered about this yourself. The responsibility of owning a home, and long term commitment may seem like buying is much more expensive, but I’m going to show you why that isn’t the case. 

It's very common for someone in the market for a new home to look only at the sale price .  For instance, you may be looking in a specific neighborhood for a house for sale and say ‘Why am I looking here?  We can’t afford a home for that much'  They see the sales price and get intimidated, without stopping to think about what the realized cost will be.  By “cost” we typically mean out of pocket expense.  For example, a home listing at $400,000 does not mean that is what you will spend on it.  With our wide array of loan options, and historically low interest rates available, mortgage payments now are now very comparable to current monthly rents.  .  

I've prepared a list of reasons why it's better to buy than rent

• The ability to build equity — your wealth will grow as you gain more equity

• Tax benifits — mortgage loan interest is tax deductible 

• Stabilize your payments — While your landlord can increase the rent, your mortgage payments are relatively steady if your loan has a fixed interest rate

• Have something that belongs to YOU — a home is a place where your family can live and grow, and even though you will still owe a large amount you can decorate or build onto a house the way you like

• Gain a sense of belonging— homeowners often are more in tune with their communities; it's common for homeowners to work together to provide better schools and less crime 

Here is a breakdown of the differences between renting and owning from a financial perspective:

Rent                                                              Mortgage

$2,000 per month                       $2,500 per month (PITI)

3 year total - $72,000               3 year total - $90,000

Equity - $0               Equity - $22,006

Not Tax Deductible               Mortgage interest and mortgage insurance 

                      are tax deductible

Rent can increase year over year       Principle and Interest portion of mortgage is

                      fixed and will not increase

Wouldn't you prefer to build your own equity rather your landlords? Contact me here to complete the loan process and launch your future as a home owner.

Advantages of Mortgage Pre-approval

There was a time when getting a mortgage was as easy and common as shopping for groceries.  Unfortunately, that is no longer the case. There are, however, options available now to make the process easier; they are essential, and in some cases required. One step is to get pre-approved for a mortgage.  This means a mortgage lender has reviewed your financial standing and given you authorization to look for a mortgage for a certain price with certain terms. It is far more efficient and effective to get pre-approved before  starting a home search -  this way you go into the process more secure about what is realistic for your situation and confident to find what you are actually looking for.

Here are some advantages to consider when deciding on getting a pre-approval:

      1. Quicker approval process when applying for a home mortgage

      2. Buyers are taken more seriously by agents and sellers when looking for a home

      3. Credit issues and potential problems can be addressed ahead of time, proactively

      4. Buyers with a pre-approval are far more likely to win a bidding war if the other party is not similarly positioned

      5. The home search is narrowed to properties that are realistic for the buyers - making it a far more pleasant and efficient process for all

          involved

When going for pre-approval, there are a few things you will need for all applicants (if this is a purchase where both spouses financials are required to secure the loan, both parties information is required):  

1. Previous two years W-2 statements (or 1099 if self-employed/contractor)

2. Federal tax returns for the last two years

3. Bank statements for the last 3 months

4.  Recent pay stubs and proof of other income

5. Proof of investment income (if you have it). 

With this information on hand, you will be well on your way to being pre-approved. It is important to keep in mind that a pre-approval letter states that at that time you are eligible for a particular loan amount with certain terms. It is not a promise to fund a loan and does not guarantee any rates or conditions. It is simply a letter that should go with you when you are searching for a home and lets the agents know you are ready to stand behind a legitimate offer within your price range.

If you're in the market for a home or just thinking about it, give me a call or apply online. Click here to get your loan process started. I can help you get pre-approved getting you one step closer to your dream home.