My Calyx application software was updated on Monday and it looks like there were several changes. This morning I received an email regarding the changes in Desktop Underwriter®. The one that caught my eye concerns biweekly mortgages being sold to Fannie Mae. This was announced back in September in FNMA Announcement 09-29:
“Due to a lack of demand and increased operational costs, Fannie Mae is retiring the biweekly payment mortgage product, which requires the borrower to make biweekly payments in accordance with the note. Fannie Mae is also discontinuing the standard first-lien notes and riders that were used in connection with the biweekly payment mortgage.” CLICK HERE to read the entire announcement.
Lenders can still offer the option on portfolio loans, but it sounds like the largest player is out of the game on these.
Showing posts with label monthly payment. Show all posts
Showing posts with label monthly payment. Show all posts
Wednesday, December 16, 2009
Tuesday, November 24, 2009
Rates Continue to Improve
It is a very strange market. A few days ago I commented that interest rates are nearing the bottom and that is still my position. But here we are two days before a four day weekend and rates are still improving. The markets are going to be closed Thursday and Friday and normally that alone would push rate higher.
My primary goal is to help buyers and sellers close transactions as quickly and smoothly as possible. Doing that is good for our local economy. Rates as low as they are today are creating all types of opportunities for both buyers and sellers.
Consider this, if you check out the rates on my application site you will find and FHA 30 year fixed under 5% without points. Click Here
FHA allows the seller to contribute funds for the buyer’s closing cost (payable at closing from the sale proceeds). This is a huge marketing tool that could give a seller a distinct advantage over other properties listed for sale. Consider a home selling for $200,000, a buyer could purchase with only 3.5% down or $7,000, roll the up front mortgage insurance premium into the loan amount making the loan $196,377. Based on today’s rate of 4.875% it is possible for the seller to provide a start rate of only 2.875% fixed for the first year, 3.875% for the second year and then 4.875% for the remaining 28 years!!! Cost to the seller for this example would be two points or $4,084. That is much better than a 5% reduction in the sale price, the seller would net almost $6,000 more and the buyer receives awesome payments.
STOP!! He said something other than "fixed rate" - no I didn’t. The example is a fixed rate of 4.875% for 30 years, it is temporally bought down for 2 years. And it works very well if the buyer is qualified for the payment based on the highest rate. I have closed about a kazillion of these loans over the years.
In our example above the APR is 5.843% assuming a note and payment rate of 4.875%, fixed for 30 years.
My primary goal is to help buyers and sellers close transactions as quickly and smoothly as possible. Doing that is good for our local economy. Rates as low as they are today are creating all types of opportunities for both buyers and sellers.
Consider this, if you check out the rates on my application site you will find and FHA 30 year fixed under 5% without points. Click Here
FHA allows the seller to contribute funds for the buyer’s closing cost (payable at closing from the sale proceeds). This is a huge marketing tool that could give a seller a distinct advantage over other properties listed for sale. Consider a home selling for $200,000, a buyer could purchase with only 3.5% down or $7,000, roll the up front mortgage insurance premium into the loan amount making the loan $196,377. Based on today’s rate of 4.875% it is possible for the seller to provide a start rate of only 2.875% fixed for the first year, 3.875% for the second year and then 4.875% for the remaining 28 years!!! Cost to the seller for this example would be two points or $4,084. That is much better than a 5% reduction in the sale price, the seller would net almost $6,000 more and the buyer receives awesome payments.
STOP!! He said something other than "fixed rate" - no I didn’t. The example is a fixed rate of 4.875% for 30 years, it is temporally bought down for 2 years. And it works very well if the buyer is qualified for the payment based on the highest rate. I have closed about a kazillion of these loans over the years.
In our example above the APR is 5.843% assuming a note and payment rate of 4.875%, fixed for 30 years.
Thursday, November 19, 2009
Mortgage Rates Hit The Low Point
Here is the most frequent question I am asked about interest rates, "How much lower do you think they can go?" Whenever asked this question (everyday) my answer is a simple observation, "There are more numbers above the current rate than there are below it."
The most common rate mistake I have witnessed over the years is when people wait for another 1/8% improvement and then lock when the market moves up ¼% or ½% instead of down. Consider this, on a 30 year fixed rate loan of $200,000 with a rate of 5% the monthly payment is $1,073.64. An 1/8% improvement to 4.875% results in a payment of $1,058.42 which is a monthly savings of $15.22. Over the life of the loan that is a potential savings of $5,479. Not bad if the loan is not paid off early.
Now let us assume the rates move up instead of down, many people will lock on a ¼ point up tick but almost everyone that does not will when it hits ½ point higher. The same loan amount of $200,000 with a rate of 5.5% will have a monthly payment of $1,135.58 or $61.94 per month higher than the 5% rate. Over the life of the loan that is a $22,298 mistake!
Of course the majority of homebuyers will not keep the loan for 30 years. This is the reason I warn against any rule of thumb approach. It is personal, what works for your neighbor may not be the right path for you.
The most common rate mistake I have witnessed over the years is when people wait for another 1/8% improvement and then lock when the market moves up ¼% or ½% instead of down. Consider this, on a 30 year fixed rate loan of $200,000 with a rate of 5% the monthly payment is $1,073.64. An 1/8% improvement to 4.875% results in a payment of $1,058.42 which is a monthly savings of $15.22. Over the life of the loan that is a potential savings of $5,479. Not bad if the loan is not paid off early.
Now let us assume the rates move up instead of down, many people will lock on a ¼ point up tick but almost everyone that does not will when it hits ½ point higher. The same loan amount of $200,000 with a rate of 5.5% will have a monthly payment of $1,135.58 or $61.94 per month higher than the 5% rate. Over the life of the loan that is a $22,298 mistake!
Of course the majority of homebuyers will not keep the loan for 30 years. This is the reason I warn against any rule of thumb approach. It is personal, what works for your neighbor may not be the right path for you.
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