1.We are looking for a house and are concerned that rates are going up. Is there anything we can do to protect ourselves?

2.I bought my house a few months ago, and the appraised value actually exceeded the purchase price. If I now want to do a cash out re-finance, can I use the appraised value since it is higher?

3.We won’t close on selling our current home until 1 month after closing on purchasing our new home. What are our options?

4.Can I still get a mortgage if I am unable to provide proof of my income or assets?

5.Does it make sense to ‘buy down my interest rate’ by paying points and/or closing costs?

6.What determines whether or not my mortgage gets approved?

7.How are the mortgage rates advertised on the Internet and in the newspaper so low?

8.How does the Fed changing the Federal Funds Rate affect me?

9.Is a 30-year fixed mortgage always the best way to go?

10.Is it possible to purchase a home with little or no money down?

11.What is an ARM?

12.What is Annual Percentage Rate (APR), and how is it different from my mortgage rate?

13.What is the difference between a Pre-Approval Letter and a Commitment Letter?

14.With Fixed rates so low, is now a good time to switch from an Adjustable Rate Mortgage (ARM) to a Fixed Rate Mortgage?  

1.We are looking for a house and are concerned that rates are going up. Is there anything we can do to protect ourselves? 
 

Yes, there is. Generally, when you lock an interest rate, you are reserving that rate for a particular property and need to supply the address in order to lock in that rate. If you are currently out home shopping, you obviously don't have an address yet. With Prime increasing and rates inching up, many of my clients are smartly taking advantage of our 'Lock, Shop & Drop' program. This program allows you to lock in for 90 days without a property address and also allows for one free drop down in rate up until a couple of weeks before you close. So you not only protect yourselves against rates going up while you're out house hunting, but you still get an opportunity to take advantage of a better rate should it come along.  back to top

2.I bought my house a few months ago, and the appraised value actually exceeded the purchase price. If I now want to do a cash out re-finance, can I use the appraised value since it is higher?
 

Great question. Although every bank has its own policy on this, the general rule of thumb is as follows. For conforming loans ($417,000 or less on a single family), during the 1st 6 months after the purchase, the Purchase Price must be used as the home’s value for Loan to Value (LTV) calculations. After 6 month’s worth of seasoning, the home can carry a new and increased appraised value that overrides the Purchase Price. For a Jumbo loan (more than $333,700 on a single family), 1 year’s worth of seasoning is required before the new appraised value can be used.

For those of you who may not be familiar with what LTV is and why it is important, it is the measure that represents the loan amount as a percentage of the home’s value. The difference, of course, represents your equity in your home. Often times people re-finance and, in essence, borrow back some of their equity and get cash to do work on their home, pay for their kids’ educations, take advantage of investment opportunities, etc. Generally, once you borrow over 80% of the home’s value, interest rates increase. Keep in mind, though, that in many cases, you can borrow up to 100% of your home’s value if necessary. If you have had your home more than 6 months or a year, a new appraisal is done and that new value is the number used for the Loan to Value (LTV) calculation.  back to top

3.We won’t close on selling our current home until 1 month after closing on purchasing our new home. What are our options? 

A wealthy relative or a Bridge Loan is the perfect solution! Just as it sounds, a Bridge Loan ‘bridges’ the financial gap between purchasing your new home and selling your current home. Because Bridge Loans are typically short term loans they carry a higher interest rate, currently Prime + 4. Like any mortgage, Bridge Loans must be secured. Most often, they are secured against the home you’re selling. Of course, in order to secure the loan against the home you’re selling, you must have enough equity in it to pay off the Bridge Loan once the sale is complete. back to top
 

4.Can I still get a mortgage if I am unable to provide proof of my income or assets? 

Yes, there are programs available for people who simply don't want to provide proof of their income or assets. One program is a Stated Income Mortgage, it means just what its name implies. You simply ‘state’ your income and the lender does not need to verify it. You do, however, need to prove that you are self-employed in some way – whether it be consulting, your own business, etc. You would either need to supply a business license or have a letter from your accountant stating that they have been preparing your business’ taxes. The standard debt to income ratios still apply as does the need for a strong credit score. The trade-off for not having to prove your income with a W-2 or tax return is that you pay between 1/4 - 1/2 point higher interest rate. Of course once you are in a situation where you can qualify with full documentation, you can re-finance at a lower rate.

Another option is a NINA, or No Income No Assets mortgage. In this case, you pay between 1/2 - 3/4 higher interest rate, but don’t even have to state your income. You are simply granted the mortgage based on your credit score and history. Many people who are out of work, re-locating without a job lined up, going through a divorce, or have other reasons why they don’t want to share income and/or asset information opt for a NINA mortgage. 
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5.Does it make sense to ‘buy down my interest rate by paying points and/or closing costs? 

This depends on what your long term goals are.  Typically, if you plan on only owning your property for 5 years or less, paying points may not make sense.  One of our loan officers can discuss the advantages and disadvantages with you. 
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6.What determines whether or not my mortgage gets approved? 

Every client is unique and there are numerous mortgage programs available.  There are many factors involved in getting approved and it is our job, as your loan officer, to place you in the program that best suites you. 
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7.How are the mortgage rates advertised on the Internet and in the newspaper so low? 

There are really 2 answers to this question. When you see wildly low rates, like in the 1 - 2% range it is most likely some sort of a Cash Flow ARM (Adjustable Rate Mortgage). These products offer a minimum payment option which is way lower than even an Interest Only loan. These products cause you to 'negatively amortize' your loan, which in layman's terms, means that you are borrowing from your equity every month and will end up with a higher principal balance in the end. In some cases, this strategy makes sense...it just depends on your situation and your long term goals. Just make sure to be informed and understand the product.

The rates that you see that are 1/2 to 3/4% lower than 'real rates' are generally assuming that the borrower is paying closing costs and/or points. The important thing to remember is that it's key to be comparing apples to apples when comparing programs and rates...and to have all of the facts in writing if possible. The last thing you want is to be surprised at the closing table with costs, prepayment penalties, etc. 
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8.How does the Fed changing the Federal Funds Rate affect me? 

The Fed steers the economy most directly by periodically raising and lowering the Federal Funds Rate, which banks charge to each other on overnight loans. Such rate changes can take 6-9 months to work completely through the economy.  The Fed generally raises rates to prevent the economy from overheating and to keep a lid on inflation. In June, 2004 the Fed raised rates for the first time in four years, ending a long cycle of rate cuts. From a consumer perspective, when the Federal Funds Rate goes up, we see higher interest rates on credit cards and mortgages which can cool consumer spending. From an investment market perspective, higher interest rates tend to attract investment into bonds and other fixed-income investments, pushing down stock prices. From a business perspective, unemployment tends to rise, which eases wage inflation, although at a human cost.

Changes in the Federal Funds Rate directly affect the Prime Rate, which is the interest rate charged by commercial lenders to their most creditworthy customers. Obviously,
Home Equity Lines of Credit (HELOCs) are immediately affected, since they are based on the Prime Interest Rate. It follows that regular Fannie Mae/Freddie Mac mortgage rates will change as well, although more slowly, as commercial lenders will take many other factors into consideration when revising their rates, e.g. economy, consumer confidence and world events among other things and make their own judgments to remain as competitive as they can. back to top
 

9.Is a 30-year fixed mortgage always the best way to go? 

Not always.  Again, this decision should be based on your long term goals.  back to top

10.Is it possible to purchase a home with little or no money down? 

Yes, we have 100% financing options available which can be structured in multiple ways. back to top

11.What is an ARM? 

An ARM is an Adjustable Rate Mortgage which stays fixed for only a certain specific period of time.  back to top

12.What is Annual Percentage Rate (APR), and how is it different from my mortgage rate? 

Annual Percentage Rate (APR) is an expression of the effective interest rate that will be paid on a loan, taking into account one-time fees and standardizing the way the rate is expressed.  The aim of using APR is to calculate a total cost of borrowing.  APR is intended to make it easier to compare lenders and loan options. back to top
 

13.What is the difference between a Pre-Approval Letter and a Commitment Letter? 

A "Pre-Approval Letter" is issued by your loan officer based on the information you have provided on your application, subject to verification.  Your "Commitment Letter" is issued by the lender once they have completed the full underwriting process. back to top

14.With Fixed rates so low, is now a good time to switch from an Adjustable Rate Mortgage (ARM) to a Fixed Rate Mortgage? 

This is something you should give serious consideration to.  Fixed rates are actually the same if not lower, then the current ARMS.  The Prime Rate has most likely risen since you obtained your existing mortgage.  This means your rate may adjust to a higher rate than the fixed rates currently being offered. back to top