Archive for Interest Rates

ALERT: “Brexit” Provides Great Home Loan Opportunities

Britain’s June 23 vote to exit the European Union (or Brexit, as it is known) has caused tremendous volatility in markets around the world.

This is important news for homebuyers who have been on the fence, and homeowners worried they missed the chance to lower their monthly payment. Here’s why…

Loan rates are influenced by economic news here at home as well as circumstances around the globe that make news headlines. Global instability of any kind, including the mere uncertainty over the impact of Britain’s decision on the global economy, has caused investors to move money out of riskier Stocks and into more stable or safer investments, including Mortgage Bonds here in the U.S.

Home loan rates are tied to Mortgage Bonds, so when Mortgage Bonds improve, home loan rates typically do as well … just like they did after Britain’s historic decision. But the reality is, we simply don’t know how long this rate opportunity will be available.

If you or anyone you know would like to discuss home loan rates, or whether refinancing makes sense at this time, please get in touch today. I’m here to help!

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The Fed Raised Rates:
Find Out What This Really Means

The Fed just raised its benchmark Federal Funds Rate for the first time in almost a decade. After holding the rate near zero to support the economic recovery, the Fed upped the target rate range to between 0.25 to 0.5 percent.

While a “rate hike” may sound worrisome, it’s important to understand what this really means.

The Fed Funds Rate is the rate at which banks lend money to each other overnight. It is not directly tied to long-term rates on consumer products like purchase or refinance home loans.

This means that consumers should not expect an increase in home loan rates as a direct result of the Fed’s decision.

Instead, home loan rates are tied to Mortgage Backed Securities, which are a type of Bond. Many factors impact the performance of both Stocks and Bonds, and will play a role in the direction of home loan rates as we move into the new year.

For example, an improving economy, higher wages and higher inflation could all cause home loan rates to rise. However, if our economy falters, or if there is continued uncertainty and turmoil here or overseas, investors could seek out “safer” investments like Bonds, which could help keep home loan rates low.

The good news is that you don’t have to figure this out on your own. If you want to see if you can take advantage of today’s low rates, or if you have any questions about the housing market, current rates or loan products, please don’t hesitate to contact us.

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Once your loan package has been sent to the lender, there are a number of things you should avoid doing that will change your financial picture. Remember, the lender is looking for stability and consistency. If you want the best interest rate, keep that in mind. Here are a few things to consider:

The lender is looking to see what your source of down payment is.

Your lender will most likely ask you to provide proof of your liquid assets. This includes bank statements for checking and savings accounts, verification of investments, and any other liquid assets. Some of the things they ask for may seem trivial, but keep in mind, if you are planning a move to a new home, it’s important to have all documentation readily available. If the lender asks for cancelled checks or deposit receipts to meet certain conditions, you want to be able to find these things quickly to avoid delaying the closing of your loan. Make sure your paper trail is easy to document, and don’t move money from one account to another or open or close accounts.

Major purchases tip the scales against your favor.

Avoid making any major purchases. You might be thinking about purchasing new appliances for the new home. This is not the time to do it. Avoid making any major purchases on jewelry, appliances, furniture, vacations, or anything with a significant price tag until after your loan is closed.

Buying or leasing a car can make a negative impact on the way the lender views your financial status. This is a big ticket item that dramatically affects your debt-to-income ratio. You may feel you have room in your budget to purchase a new car, and think this is a worthy investment if you are looking for a home that will mean a longer commute for you on a daily basis. But by tacking a car payment onto your existing debt, you reduce the amount that you will qualify for in a home loan. A $400 a month car payment can reduce your approved loan limit by as much as $50,000. Think about doing this after your loan is closed if you really need it.

If you have to change jobs, you may be asked to document why this change occurred.

If you are changing jobs to increase your income, that’s a no-brainer for the lender. If you have an erratic work history to start with, another job change may make it look worse for you.

If you are an hourly wage employee, most likely a job change will have no effect on your ability to qualify for a loan. If you have a track record of a consistent amount of overtime or consistent bonuses over the last two years, the lender views this favorably. If you change jobs, there is no way of knowing if the new employer will pay overtime. Many do not! If you work on a salary + commission or straight commission basis, it has a dramatic effect on your stability. If you are considering starting your own business, again, this is something to consider after your loan is funded.

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A good credit score translates into lower interest rates for home-shopping borrowers. In a mortgage lender’s eyes, the higher your score is, the less risk you are, and the more likely it is you will pay off your debt. For this reason, borrowers with lower scores usually end up paying higher interest rates on their loans.If this is you, don’t panic. There are a number of things you can do to adjust your credit score to receive a favorable review from the underwriter. Here are a few suggestions:

Should I pay off all my past due balances and charge-offs?
This is usually a good idea, but you only need to worry about the past due balances and charge-offs that have occurred in the last two years. Items more than two years old have little effect on your current credit score. In fact, if you pay off delinquent items over two years old, it can actually bring your credit score down – something you don’t want to do. Bringing that score up means you’ll get a better interest rate on your loan.

Should I close existing credit card accounts that I don’t use?

No. Part of your credit score is based upon credit history. If you have old credit cards that you don’t use very much, you still have the benefit of the credit history they represent.

Rather than trying to pay off all your credit cards, you can move part of the debt from one card to another to even out the distribution of debt. Try to keep balances as close to zero as possible, and definitely below 30% of the available credit limit when trying to purchase a home. Also, if your credit provider will increase your line of credit, the ratio of debt to available credit is automatically reduced.

When married couples have separate credit card accounts, the debt can be transferred from one spouse to another to clear up credit issues for the other spouse. That spouse with clean credit can be designated as the sole borrower on the loan, but ownership of the home can still go in both names.

What about errors on my credit report?

If you have items that are showing up on your credit report that you know you have already paid, request that these items be removed by the credit bureau. They are obligated to rectify this within 30 days.

If there are items on your credit report that are less than two years old, send in your payment if possible and mark the back of the check with the following notation: “Accepting this check is evidence that the transaction is complete and this charge will be deleted from my credit record.” If necessary, the cancelled check will be proof that this should be promptly removed from your credit report if it interferes with the closing of your loan.

Nov
11

You Served Your Country With Honor

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