Over the last few months refinancing has seen what could be deemed a “boom” in our current lending climate; yet, according to the Bloomberg report, the refinance index decreased 3.1 % in the beginning of September, so why the recent slow? When I turn on the radio, open a paper or see a pop-up in my email, I am bombarded with phrases like; “Lowest Levels on Record! Historic Lows! Lower Your Payment! Rates as Low As.” Mortgage companies are using confidence boosting words to create hype in their marketing strategies, and this is important, but more crucial is providing information and education to consumers so they understand their options. In a time when we have some of the best rates in history, getting the word out about refinancing options is fundamental.
One of the best things you can do is dig through your file cabinet, find your mortgage statement and check your current interest rate. If it’s anything over 4.5% it’s worth a phone call. Just like your mom said, “you won’t know until you ask” and really, there are a lot of options. Many consumers who refinanced two years ago may have an incentive to refinance again and this is a good thing. From a local perspective, when consumers seek a lower monthly payment it increases disposable income which creates consumer spending and helps Oregon’s economy as a whole.
So here’s the scoop, there are programs that allow you to refinance without equity in your property or very little. There are options for large loan amounts and those for small. Each program has its own set of guidelines which we, the mortgage banker, will walk you through. Credit issues may not disqualify you if they can be resolved; it’s just a matter of looking at everything carefully. It’s our job to determine the best program for your situation and your ability to repay. The magic recipe for low rate bliss requires four basic ingredients from you: assets, income, credit and property. Although this may seem daunting, if you tell us what your situation is and we can verify it, you may be able to save a significant amount of money. The reality is that rates still are historically low and there is a lot of opportunity for consumers to improve their interest rates. Choosing a local company like Pacific Residential Mortgage helps make for a smart consumer because we have the skills and local expertise to educate our borrowers. In this new mortgage market, the difficulty isn’t in qualifying our consumers it’s simply a matter of gathering information, stirring the ingredients together, and you may be the one that takes the cake!
Chris Wagner, CMPS
American Capital Mortgage Corporation
555 SE 99th Ave., Suite 101
Portland, OR 97216
The mortgage industry has gone through more transitions in the past few years than Lady Gaga has had costume changes! Since mid-2007, qualifying has gone from just being able to fog a mirror to having to document your high school transcripts before your loan gets funded!
All joking aside, we are seeing some outstanding refinancing opportunities that simply did not exist a short while ago. Despite the current economic adversity, chances are good that you can significantly improve your current mortgage, simply due to the fact that we are seeing rates that haven’t been around since the 1940’s!
Here are just a few highlights
For those with an existing FHA loan: a streamline refinance will allow you to lower your rate without an appraisal or income qualifications! VA loans offer a similar program called IRRL (interest rate reduction loan)
For those whose conventional loans are owned by Fannie Mae or Freddie Mac: A “refi-plus” or the Home Affordable Refinance Plan (HARP) allows you to refinance, often without an appraisal, and if an appraisal is required, they provide for lowered values without paying for mortgage insurance while often allowing for limited income documentation as well.
Getting qualified is simple! Within a short 5 to 10 minute phone call, your mortgage professional should be able to learn everything they need to update your file and determine which program is the best fit. Realistically, most of the information are top of mind items and should be enough to get the ball rolling without the completion of a formal application. This will allowyou to get a good idea if refinancing now is a good idea for you.
Let’s get down to business……
Once you get a feel for what can be done based on your current circumstances and loan type, you will have the information necessary to make a good decision to get the best results you can, but there is more to it than just APR. Call it cultural training, but we have all been conditioned to pursue an interest rate like a raccoon runs after whatever is shiny. In both cases, what you end up with is not always good.
There are essentially four categories that when surveyed, the vast majority of clients will describe their satisfaction or dissatisfaction based on how the following transactional components were executed. You may consider keeping this list in the back of your mind as a scorecard while you are considering the individuals and institutions you will or are working with.
1. Communication: This is the number one source of concern that clients describe as a source of anxiety and ill ease. Our imaginations tend to work against us when we are left to our own and there are few things that are crueler than being ignored. Your broker/banker’s job is to effectively quarterback all of the people involved with your transaction and to report the progress and timelines to you in a pre-described manner. This is the only way that expectations can be set properly. Much like a safari guide, every trip is a little different, but there are enough similarities that your professional should know what to look out for, what to do if it is encountered and how it will affect your outcome. If you have trouble getting your calls or emails returned promptly when you are initially inquiring about a loan, you can only count on it getting worse down the road.
2. Honesty and Integrity: This should be obvious, but it is not. We are not talking about premeditated deception here. The level of disclosure required by all parties is geared towards virtually eliminating that. What we are talking about is a mortgage provider who quotes rates and terms prior to gathering the details of your transaction, thus paving the way toward disappointment. What would you think of a doctor who gave you a prescription without asking questions or examining you first? This kind of malpractice is due to an urgency to get a commitment from you and may indicate a lack of experience on the part of the interviewer. Internet advertisers often employ phone-room type data input clerks that often work from a script. Ask your provider for a written closing cost guarantee prior to spending any money besides the charge for a credit report. This will go a long way to indicate to you if the numbers are real.
3. Smooth and Complete Process: Perhaps you have already been, or know of someone who was the victim of the “Oh, just one more thing” series of phone calls requesting additional information that never seem to end once started. Granted, there are circumstances that in fact do generate requests that could not be anticipated initially, however you should receive a list of items required that you need to begin gathering immediately once your application has been taken. In addition, you should be given a timeline of the various milestones that will occur during your transaction. Examples would be, when appraisal is ordered, received, underwriting timelines, and ultimately when you will be signing. You might get a super low rate, but if it feels like you had to crawl over broken glass to get it and you have been working on it for 4 months, much of the shine will have worn off that apple by the time you actually close.
4. Rates, terms and fees: This also seems fairly straightforward, as it has to make economic sense to proceed. In reality, you may initially consider this to be the most significant detail when considering a lender. The fact is, the lenders and individuals who are still in business after the past few years had to be competitive, or they simply would not be around. It is wise to determine what your real savings is after all costs are considered. If it costs you $5000 to lower your rate and that saves you $100 per month, you want to be aware that it will take you 50 months before you reach the break even point of expenses versus savings. That could be an excellent strategy based on other criteria, but each situation needs to be considered individually in order to be genuinely accurate. In this case, one size does NOT fit all.
Action step: Don’t Wait!
Find out what can be done in your present situation. Don’t make assumptions regarding employment, home values or credit. You owe it to yourself to know for sure. Don’t wait until rates start creeping up, because they most certainly will. You are under no obligation to act once you do get qualified, and if you do nothing else, you can get an updated credit report from all three major credit bureaus. You have a historic opportunity to impact you and your family’s financial future, don’t wait!
Mainstream media, the Government and consumers themselves vilify debt as the root of the consumer’s financial plight and the root of a weakening country. Debt is not the problem; it’s the management of debt and the way debt is structured that is creating the problem not the debt itself. Unless you win the lottery, invent a cure for cancer or get adopted by Bill Gates or Warren Buffett, debt will be something you will have to face somewhere along the course of your adult life; it’s a natural component of our society.
In today’s economic environment hard working American’s are experiencing a level of fear and financial uncertainty they have never been faced with. This is keeping them up at night wondering how they are going to sustain a life they have worked so hard to build. Americans are also wondering why those we have trusted for all these years; the banks, money managers and politicians, are thriving financially, but don’t seem to be contributing anything of real value to the public? Today, the predominant questions being asked by the American public as it relates to their financial future are; what am I going to do, what can I do, how am I going to do it? We all work way too hard to be faced with these questions. The answers to these frightening questions are right in front of us. The answers lie in the use of the financial resources we use every day. You just need to know how to use them to your advantage.
The crux of the problem for consumers and the country alike lie with misaligned, improper or a shear lack of education on the use of the banking tools we use every day. The three banking tools that we use every day; checking accounts, credit cards and loans are simply being used improperly. The solution lies in educating consumers and institutions to use these tools in the proper sequence and function to manage debt properly, regain control of income and possess the authority to control the repayment of debt. It’s as simple as that. By exposing the failed business model of conventional banking and borrowing practices, realigning them into a model that actually helps consumers get more out of what they own and what they earn, we can once again grow individually, as a society and a nation.