The Changes Keep A-coming…

Significant new mortgage lending rules, the Ability-to-Repay rule (ATR) and the Qualified Mortgage rule (QM) rules became effective January 10.  These are the latest regulations to come from the Consumer Financial Protection Board.  Opinions vary as to the extent of their impact, but most agree they will impact some borrowers’ ability to qualify for a home loan.  But from the “better late than never” category, on January 14th a Subcommittee of the House Financial Services Committee held hearings to consider how the new rules will harm current and prospective homeowners. Mortgage industry leaders spoke about the limiting effect these rules will have on credit availability, especially on credit for low to moderate income borrowers. Committee members are considering proposed new laws to modify these rules.  Stay tuned.

Scott Sanderson  ·  Residential Mortgage Loan Originator  ·  NMLS #213254

The Fearless Mortgage Rate Blog

OK – the world has kept spinning even after the Federal Reserve said they would start “tapering” beginning in January.  In fact, while rates might (I said might) move slightly higher from here, I’m all for it.  Why, you ask – don’t higher rates hurt your business?  Well, maybe in the short run they do.  But putting a longer term perspective on things (and I have that long-term view since I’ve been in the business for 27 years), I would view the fed’s pullback as healthy since it signals an economy that is on the mend with employment improving throughout the economy.  While we can always use a bit faster growth I’ll take anything in the way of an improving economy for now given the issues we have weathered since the initial downturn/correction that began in 2008.

As to my earlier point, I’m not totally convinced that rates will move materially higher from here.  There are a couple of factors at work that I think will mitigate any significant rise.  First off, measures of inflation (at least as measured by the Feds) remain subdued.  With wholesale inflation measured year-over-year at around 1.20% (recent PPI statistics), mortgage bond investors appear to be being adequately rewarded today at a “real” rate of return (after inflation) that is above historical norms.  Finally, what’s lost with the Fed announcement of their tapering is that, given the significantly lower mortgage supply, they don’t have anything to buy anyway!  Therefore, the perceived reduction in “demand” is totally mitigated by the reduced “supply” and should provide a ceiling for rates.  Consequently, my muddy crystal ball says rates can pause here as the traders and banks adjust to a Fed that is trying to take away the punch bowl ever so slowly.

If you are starting to think about buying that first home or eyeing a move up then remember that rates are still awfully low by historical standards.  Finally, if I can help you in any way than I hope you will give Austin’s “home grown” mortgage banker an opportunity to help

Michael Scott/Residential Mortgage Loan Originator/NMLS#216603

No Increase to “G” Fees — Yet…

The MBA helped to convince Fannie to delay the increase in mortgage fees that had been planned for March and April.  This is great news for home loan rates for the first quarter of 2014!  These fees would have increased rates for borrowers that do not have perfect credit scores or large down payments.  With QM beginning January 2014 this would have been a big hit that the housing market does not need at this time.

Deborah Ginac/Residential Mortgage Loan Originator/NMLS#216619

Closing

At the end of the mortgage loan process is the closing, where all the loan documents are signed, typically at a title company or attorney’s office. I like to attend as many of my closings as I can, and not just because most title companies have coffee and cookies in the lobbies. Most closings are fairly straightforward. It is at an office I’m familiar with, the closer is knowledgeable and friendly and my clients are happy they are buying a new home or refinancing to save money. It is a good time to see everyone after most of our work has been done over phone and email.

The exceptions are more memorable. Once I showed up for a 10 am closing where the buyers and the seller, a small builder, each had an attorney and they were all yelling at each other. After a while I went to eat lunch, when I returned they were still yelling at each other so I went back to my office. At 4:55 they sent over the signed closing documents, I called the title officer to confirm we were ready to fund the loan and I could hear them all still yelling at each other in the background.

One investor I was working with was using the proceeds from selling a property as the down payment for the property I was financing. The sale of his property was delayed which delayed our closing by about a week. This upset the seller greatly, which is understandable but sometimes these things happen and the fault wasn’t with me or the buyer. This didn’t stop her from calling to threaten the buyer and me if the closing didn’t happen on time. When the buyer and I arrived at closing seated at the table was the seller and three large, scruffy guys she identified as her sons. They didn’t say a word through the whole closing and fortunately didn’t follow us to the parking lot.

At closing everyone is signing legal documents and the title officer does have to make sure everything happens correctly. I wasn’t present to witness this, but one of our closings was finishing a divorce and the now ex-husband had to come in to sign over his part of the house and receive his proceeds. The first thing he told the title officer was, “I had to have three drinks to get myself in here today.” Since legal documents can’t be signed while impaired, she rescheduled him to come in first thing in the morning. I had another buyer who was ready to celebrate the purchase of her first home with a bottle of champagne, at 9:00 am. The title officer let her know that would be OK, after everything was signed so the cork wasn’t popped for another 30 minutes or so.

I’ll keep going to closings, where hopefully there won’t be any drama bigger than a coffee spill.

Adam Stephens /  Residential Mortgage Loan Originator  /  NMLS#216606

Capstar Offers “Home Possible” Mortgage

Capstar Lending is pleased to announce they have expanded their mortgage offerings to include the “Home Possible” Mortgage.

Home Possible Mortgages are a responsible, low down payment mortgage option that will help more borrowers realize their dream of homeownership.

Home Possible is a loan option for first-time homebuyers and low- to moderate-income borrowers.

Key Features

  • Stable monthly payments with our fixed-rate mortgages
  • Reduced mortgage insurance coverage levels
  • Flexible closing cost funding options
  • No cash-out refinancing
  • Additional flexibilities for teachers, firefighters, law enforcement officers, healthcare workers, and members of the United States Armed Forces

Source: Freddiemac.com

Where To Go For Your Mortgage? Mortgage Banker vs Broker, or the Best of Both?

When you begin your search for a new home, one of the first things to consider is where you’ll get the money. Your basic choices will be mortgage brokers and banks.

Your first instinct may be to go with your bank, because you know them from doing business with them for your checking and savings accounts. But you’ve probably also heard that mortgage brokers can get you a better interest rate, since they deal with multiple lending sources. It can be confusing, but there’s a third source of funding that combines the best of both–the correspondent lender.

In order to understand the differences, let’s look at how the lending process works in each case:

Mortgage bankers are given rate sheets by their institutions, telling them what interest rates they can quote to their clients on any given day.  Mortgage brokers have an advantage in that regard. They’re not loaning their own money, and are free to “shop your loan around,” looking for the best terms from various lending sources. Since they have many sources to choose from, they can often find loans at lower rates than most banks.

While a broker is often more competitive than a bank, they have two disadvantages when it comes to underwriting the loan.  Because a broker is placing a loan with a lender, they have to send the loan file to the lender to underwrite, which takes time and can leave the borrower and mortgage broker wondering what the lender’s underwriter will do with the file.  Banks underwrite their own loans, but due to the volume and nature of their business, the turn-around times can be excessively long as well.  Secondly, a broker doesn’t control when the loan actually funds because they have to rely on the lender to provide the money on closing day.

The third alternative, correspondent lenders, combines the best features from both groups. Correspondent lenders are similar to mortgage banks in that they make the lending decision and fund the loan with their own credit line.  This means faster turn-around times for loan approvals and closings. As soon as a loan has closed, it’s sold to another lender that they chose based on best interest rate and product at a previously negotiated price.

It’s the best of both worlds for you as a borrower. You’ll be dealing with the lender who is underwriting and funding your loan, yet they are able to shop your mortgage around, getting you a lower interest rate and the mortgage product that fits your needs.  A correspondent lender offers an attractive alternative to a banker or mortgage broker when it comes to shopping for your next home loan.

Capstar Lending is a correspondent lender located in Austin, Texas and MacKenzie Price is a Senior Loan Officer available to help with all of your mortgage needs. MacKenzie has been in the business since 2001 and is an expert in residential mortgage lending.  She holds a BA in Psychology and Economics from Stanford University.

MacKenzie Price / Residential Mortgage Loan Originator / NMLS #226753
512-587-9936
mackenzie.price@capstarlending.com

Should you Buy or Rent?

As a loan officer, one of the things I am often asked is “Should we buy or rent?”  My answer is that it depends.  Assuming you live in a desirable area with a stable economy and you are planning to stay there for at least 3 years and as long as you expect your source of income to remain stable, it almost always makes financial sense to buy – here’s why:

  1. You’re heard it a thousand times – and it’s just as true today as it was 50 years ago – location, location, location.  Real estate is only a good investment when you invest in a home that’s in a good area of a city where people want to live.  The outlook in your town may be different than in other parts of the state or other parts of the country.  Do your homework and make sure that the market in your area is stable or likely to appreciate.
  2. Home prices are always tied to employment opportunities.  If the city you want to invest in has a diversified economy with a healthy job market, the housing market is more likely to be stable as well.  This translates to a safe investment.
  3. Do the math.  If you are renting for $1,500.00/mo. and your landlord increases your rent payment by 5% per year, you would be paying $100,000 over a 5 year period and you would have nothing to show for it.    Any improvements you may make to the home would be going into your landlord’s pocket not yours.
  4. Even though interest rates are not as good as they were in 2013, they are still at historically low levels.  Assume you buy a home in Austin, Texas for $375,000.00 and you invest 20% for your down payment.  You would have a mortgage of $300,000 for 30 years.  Based on an interest rate of 4.75% (APR = 4.798%), your monthly payment would be about $ 2,500.00 including property taxes and insurance.  Assuming you’re in a 25% tax bracket, this would be equivalent to a rent payment of approximately $2,000.00/mo.  The best part is that if the home appreciates at a modest rate of just 5% per year, at the end of 3 years the home would be worth $434,000.00. Although appreciation rates are never guaranteed, if you do your homework you should be able to predict with a fair degree of certainty what the rate of appreciate should be.
  5. The benefits of home ownership are numerous.  If you can find a good neighborhood in a good part of town you will notice that you will build a sense of community, you will take pride in ownership and appreciate not having to get the landlord’s permission to do what you want to do and you will be building equity to boot.
  6. When you buy a home, you can adjust the amount of your withholding tax to the IRS.  This allows you to have less money withheld from your paycheck each month so that you can handle the new mortgage payment more comfortably.

If you are thinking seriously about becoming a homeowner it’s important to talk to a professional who understands your personal financial situation as well as the local market in which you intend to buy.

Dorothy Erminger, Residential Loan Originator   NMLS # 216624

Dorothy Erminger has been helping people to buy homes in Texas since 1992.  She has a degree in Education from Stephen F. Austin University in Nacogdoches, Texas.