April 16, 2014

How to shop for mortgage interest rates.

Many people reading this article may not have much experience comparing interest rates and lenders and may be avoiding shopping for a mortgage out of anxiety. Here are some dos and don'ts from someone who works in the mortgage industry to help you navigate the experience:

Don't fill out multiple loan applications.

You don't need to complete a full mortgage application to receive an interest rate and fee quote. Some companies will train their employees to get an application to further the sales process before telling you what they can offer. The reality is that they can accurately quote you rates and fees without a credit report or loan application (assuming you provide them with enough information). It is important to note that the rate quote will be based on the information you provide. The home value, credit score or some other piece of information may change things later, but at this stage you are comparing lenders and the reality is that the best lender for you at a credit score of 740 is probably still the best lender for you if your score turns out to be 680.  

Do provide the lender with all the details.

Calling a handful of lenders and asking them what "the rate is" does neither you or the lender any good. Mortgage quotes are based on multiple factors, all of which can change the rate and fees you qualify for. If a lender is asking you something basic about your situation or the property, answer to the best of your ability. It will only make the quote you receive that much more accurate. In other words, if you are hiding the fact that the home has renters to receive a better quote, it will come out during the process and the lender can hardly be blamed for not following through on the pricing offered under false pretenses. 

Do provide the same information to all lenders.

This may sound basic, but make sure that any lenders you receive rate and fee quotes from are basing their loan quotes on the same loan scenario. I have spoken with borrowers many times who have said that another lender was offering a better deal, only to find out they have given them a different home value, credit score or some other vital piece of information has changed. It only makes sense, if you tell one lender the home value is x and you tell another that your home is worth y, they are not using the same information to determine the rate and fees you qualify for.

Do compare lenders on the same day.

Rates can change by the hour, so if you are comparing a quote from one lender on Monday to a quote from another lender on Friday, you are comparing apples to oranges. Try to set aside a block of time one day to do some rate shopping for the most accurate results. Once you have compared lenders at any given time, the difference between them will likely remain similar regardless of whether rates go up or down before you lock. 

Do ignore tax, insurance and title figures.

If you receive a Good Faith Estimate, ignore the insurance, tax and title figures because these are not typically dependent on the financing you choose. The property taxes are what they are, no matter who you choose for your mortgage. Your homeowner's insurance premium is determined by the company and coverage you choose. The title charges on a purchase are determined by the title company on the contract, not by the lender on the loan. It is important to note that on refinances, borrowers often choose the title company recommended by the lender, but they are not required to do so and are free to shop for those services if they wish. The title, insurance, and tax figures on a Good Faith Estimate are simply there for you to get a rough idea of your closing figures, not for comparison shopping. 

Don't assume lowest is always best.

Obviously, if you feel comfortable with two lenders and you believe they can both deliver on the mortgage they have quoted, you should probably choose the lower of the two. However, many factors go into a mortgage and not all mortgage professionals or companies are created equal. Sometimes you may have to ask yourself if it is worth the stress and possibly not closing on time to get the lowest possible estimate. If it takes 35 days to close and the lowest rate lender locked you for 30 days, who pays for the lock extension and at what cost? If it is you, was that really the best deal? If the lowest rate lender has the strictest guidelines, will you get approved or will you have to spend money on appraisals and inspections to find out? 

Wrapping up: 

In order to get the best results when interest rate shopping, obtain quotes in writing for your unique situation from a number of different lenders on the same day. Compare only the lender charges and the rates on the same loan program. Once you have compared and researched, choose a lender you believe will deliver as promised and move forward with the confidence that you have done everything possible to obtain the best loan. 

Thanks for reading my blog!

Website: Mortgage Rates in Arizona

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April 15, 2014

What are the steps involved in the home mortgage process?

Every home mortgage process is a little different, but nearly all loans follow this same timeline of events.

Here is a quick overview of the steps nearly all loans will follow before the mortgage officially closes. 
  1. The Application: In order to begin the loan process, a prospective borrower must first fill out an application.  There are three typical methods to complete this portion of the loan process; an online application, a face-to-face interview or a phone interview. Most of the information contained in the application is something a borrower would know off the top of their head, but some things require extra research.  
  2. The Documentation Stage: In order to close a mortgage quickly and efficiently, it is imperative that the borrower follows up the application with the supporting documentation. Any delay by the borrower in gathering documents at this stage delays the entire loan process. The list of documents required varies greatly depending the circumstances of the borrower. Some mortgage professionals will collect only the bare necessities at this stage of the process to push the loan forward, while others proactively request everything they know will eventually be required at some point in the process. I personally believe it is best to provide as many relevant documents as possible upfront to lower the possibility of last minute issues or rushes.
  3. The Appraisal & Title Work: The next step in the process is to order and schedule the home appraisal and title reports. On a home purchase, the borrower is rarely involved at this stage beyond providing payment information for the appraisal. On a home refinance, the borrower works with the appraisal professional to schedule a time to inspect the home. The appraisal can be one of the more time consuming portions of the process, so it important to schedule it as quickly as possible. The title work is also ordered by your mortgage professional or his/her team during this step of the process. Borrowers are usually not involved in the title report step unless an urgent issue arises on the preliminary report.  
  4. The Loan Approval: When the loan is ready, it is packaged up and submitted to the underwriter. The underwriter may or may not work for the same company as the mortgage professional depending on the type of company he/she works for. The underwriter is the person who approves, suspends, or denies the home loan. Many loans that reach this step are eventually approved because experienced mortgage professionals only submit loans they believe will be approved. There are two types of loan approvals: 
    • Conditional approval means that the underwriter requires a few more items to fully approve the loan. Assuming those conditions are met, the loan is acceptable. The conditional loan approval may require items from the borrower, title company, appraiser, or processor. Please see my article here regarding the roles each person plays in the process. 
    • Final Approval (referred to as "cleared to close") means that all the conditions have been satisfied and the loan is ready for the next step.
  5. The Loan Documents: Once the loan is finally approved, the loan documents are transmitted to the title company. This typically happens by email, so it is almost instantaneous. The title company then prepares the preliminary settlement statement (known as the HUD statement) and sends a copy back to the lender for approval.  
  6. The Signing: Once the lender has approved the HUD, it is time to schedule the signing of the final paperwork, including the new note and mortgage. Up until this point in the process, nothing a borrower has signed is a binding lien on the property. The fees at the signing are no longer estimates, they are actual closing figures. After the signing, the loan documents are transmitted to the lender. For a purchase, upon receiving the executed closing documents, the lender releases the money to complete the transaction. For certain refinance loans, this will begin the three day right of rescission period, in which the borrower has three days to look over the documents. After this three day period, the loan will be completed.
  7. The Funding: This is the day everyone has been waiting for. Once the lender has released the funds, the title company disburses them to all parties per the settlement statement. For purchase loans, this is when you finally receive the keys to your new house and the seller receives any monies due to them. For refinance loans, this is the date that existing liens or debts are paid off and/or the borrower receives any cash back.

That is the basic flow of mortgage loans. The process may appear daunting, but many of the steps are done behind the scenes by the professionals involved in the transaction without borrowers having to worry about them. The more research a consumer does upfront finding true professionals, the quicker and smoother everything is throughout the process. 

Please feel free to contact me with any questions you may have regarding the loan process. 

Thanks for reading my blog!

Website: Mortgage Rates in Arizona

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March 13, 2014

Are Realtors and real estate agents giving away business?

Most likely, yes. I'm going to throw some numbers out that should really make you sit up in your chair and take notice. 

Homebuyer info graphicRegardless of whether you are a multi-million dollar superstar or you started in real estate yesterday, this is something to think about:

  • 88% of homebuyers would use their agent again or recommend them to others. (1)
  • 12% of homebuyers actually use an agent they have previously used. (1)
  • The average American household moves every 5 years. (2)

Read through those figures again and honestly think about the amount of referrals or repeat customers you typically generate from your past clients.

Why are those numbers so important?

They are important because if you are not actively staying in front of your previous clients, you are actively giving away business. It is estimated that it costs 4-10 times as much to gain a new client than it does to retain a client. (3) I have seen people estimate in various places online that as many 70-80% of homeowners forget their real estate agent's name within two years of owning their home. I can't seem to find anything verifying or contradicting these figures, but from anecdotal evidence, I think they may be close.

Don't you love it when a past client calls to buy or sell a home with you again? Wouldn't you like to get more of those calls?

It is important to stay in front of past clients while still providing them with value. Emailing everyone in your database to ask them for business every week probably won't cut it. You need an effective mix of media presentations at appropriate times. Mailed cards, emails, informational videos, and phone calls are all excellent tools when used judiciously and when they provide something of value to the customer.

There's some good news if you are a real estate agent here in Arizona. I already have a system in place to help you retain more of your previous clients. The best part is - you don't have to do anything! I'll keep both of our names in front of homebuyers with co-branded items during the home-shopping process, the loan process and for years after the purchase has closed. You've spent time and money to find homebuyers, let me put your customer retention on auto-pilot while you work on your business.

If you are not located here in Arizona, it is probably time to think about a system to keep more of your hard-earned business (if you don't have one already). Lenders are great partners to help split the effort and cost that are required to put that plan into action. I have a vast network of mortgage professionals throughout the country. Simply reach out to me and I'll be glad to refer you to a great lender in your area.

As always, thanks for reading my blog and don't hesitate to contact me with any questions!

Website: Arizona Mortgages

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(1) NAR 2013 Profile of Home Buyers and Sellers

(2) Census Info

(3) Cost of customer acquisition vs customer retention

March 3, 2014

Arizona - Get rid of your monthly FHA Mortgage Insurance Premium (MIP) already!

Homeowners in Arizona with FHA loans should all take a good look at their home's current value to see if refinancing into a conventional home loan is an option.

It's no secret that home values have risen significantly over the past year or two here in Arizona. AZCentral estimates between 15-45% in the greater Phoenix area (info here). Many homeowners who purchased in the last few years chose an FHA loan because of the low down payment options. What those homeowners don't realize is that they may be able to refinance out of their FHA loan and into a conventional loan with lower monthly mortgage insurance or possibly no mortgage insurance at all!

Not everyone's home has risen enough to take advantage of this possibility, but there are many people out there who would greatly benefit from it that haven't even considered it an option.

What are the advantages and disadvantages of refinancing from an FHA to a conventional loan?

Advantages of moving from an FHA loan to a conventional loan:

  • Conventional loans have much lower monthly mortgage insurance premiums than FHA.
  • Conventional loans do not require upfront mortgage insurance premiums - FHA loans currently require 1.75% of the loan amount to be paid at the time of the loan. 
  • Monthly mortgage insurance lasts for the life with FHA loans taken out after June 3, 2013.
  • Conventional loans remove monthly mortgage insurance once a homeowner reaches 22% equity.
  • Conventional loans do not require monthly mortgage insurance if a home has 20% or more equity when the loan is taken out. 
  • If your FHA loan is less than 36 months old, you may be entitled to a refund for a portion of your upfront mortgage insurance.

Disadvantages of moving from an FHA loan to a conventional loan:

  • Rates are likely to be higher (this is typically more than offset by the monthly mortgage insurance savings).
  • Costs of refinancing (this may be limited depending on the rate and program chosen by the borrower)

Here's a recent refinance example to give you a real world perspective on how much could be saved:

Todd & Sandy S. have a beautiful home in Gilbert, AZ that they purchased in 2011 with an FHA loan. They originally put 3.5% down on the home and purchased it for $183,950 with a 30 year fixed FHA loan for . The interest rate was 4.5%. This was the best option for their situation in 2011. The total monthly payment was $1,229.54 including principal, interest, mortgage insurance, taxes and insurance.

Fast forward to 2014, Todd and Sandy's home increased dramatically in value to $282,000 (the appraisal confirmed this amount). Todd and Sandy were able to refinance into a conventional loan with limited closing costs (less than $1,000) and completely get rid of the mortgage insurance altogether. Their new interest rate? 4.50%. However, because they were able to leave the FHA program and go conventional with at least 20% equity, their new total monthly payment is $1062.30. Their new monthly payment is $167 less and they didn't even lower their rate!

They also had the option to take equity out of their house to consolidate debt or do home improvement projects, but for Todd and Sandy, lowering their monthly payment was their most important goal.

If you are currently in an FHA loan here in the greater Phoenix area, why not give me a call and discuss the possibility of lowering your payment by taking advantage of rising home values?

Thanks for reading my blog!

Website: Mortgage Refinance in Arizona

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February 26, 2014

Purchasing a Home - Who are the people involved?

In a typical home sale involving financing, these are the major players involved and some info about the role each plays:

Buyer's Agent: 

The buyer's agent is a real estate agent or Realtor who acts on behalf of the buyer in order to secure a new property. This typically involves searching for properties, negotiating on a buyer's behalf and generally acting in the buyer's best interest. Home shoppers and buyer's agents may or may not have an actual signed agreement in place for exclusive representation.

Listing Agent (Seller's Agent):

The listing or seller's agent represents the other party involved in the transaction, the seller. In a typical home sale, the seller enters into a listing contract with a real estate agent for the exclusive right to sell the property. Among the responsibilities of a seller's agent are marketing a property, negotiating on a seller's behalf, advising a seller on pricing the home effectively, arranging access to the property for prospective buyers and generally acting in the seller's best interest.

*It should be noted that it is possible for an agent to be both a buyer's agent and seller's agent on the same home sale, known as dual agency. Disclosure of this practice is required and the agent is responsible to each side on a more limited basis.*

Loan Officer:

The loan officer is usually a buyer's first point of contact with a mortgage lender or broker. Loan officers are also known as loan originators, mortgage bankers, mortgage brokers, lenders, mortgage consultants, etc. They are responsible for assessing each buyer's credit profile, advising buyers on program and rate availability, gathering initial supporting documentation and generally helping buyers with the mortgage process. The loan officer is basically in charge of making sure a mortgage has a high probability of approval before moving it forward.

Mortgage Processor:

Once a loan officer has gathered the initial documentation from a borrower and determined that the loan should proceed to the next step in the process, he/she sends the loan to a mortgage processor. The mortgage processor does much of the behind the scenes work on  a mortgage. They are in charge of gathering further documentation, coordinating with title and homeowner's insurance agents and generally moving mortgages along in the process.


The underwriter is in charge of making the official decision on a loan file for a lender. The mortgage processor will move the file into underwriting once much of the behind the scenes work is completed. At this point, an underwriter reviews the file and approves, suspends or declines it. If the file is approved, it is typically a conditional approval. This means that the file is temporarily approved, but need some items addressed and is fully approved as soon as the underwriter's conditions are satisfied. Most files that reach the underwriting phase are conditionally approved. If a file is suspended, it simply means the underwriter requires more info to make an official decision. If the file is declined, that is typically the end of the line and the borrower will likely have to wait to reapply until the reason for the decline has been addressed.

Home Appraiser:

The appraiser is in charge of providing a value estimate on a home. For residential homes, this figure is typically arrived at by inspecting and measuring the property and comparing it to recent similar home sales. Recent similar home sales are commonly referred to as comps or sales comps (comparables). A few days after inspecting the home, the appraiser provides a report to the lender, who then provides it to the borrower. If the value appears accurate and the appraisal was properly done, the process moves forward without change. If the value is low, the borrower may renegotiate with the seller or walk away from the purchase entirely.

Homeowner's Insurance Agent:

The homeowner's insurance agent provides the buyer with insurance on the new property. The agent is chosen by the buyer and works closely with the lender, usually the mortgage processor directly, to provide sufficient coverage against a loss on the property. Buyers may choose to have more coverage than the lender requires as long as the lender's minimum requirements are met.

It is worth noting that a separate flood insurance policy may be required in certain areas determined as flood zones. This policy may be obtained from the same agent or another agent entirely.

Title Agent:

Title agent is a broad term because there are multiple persons involved in the title, escrow or closing part of the purchase transaction. You may hear terms like escrow officer, closing agent, notary, title agent, etc. This can vary depending on where you are located and which company you use. Essentially the title agent is in charge of ensuring the home has a clear chain of title and covering the lender and/or buyer against any title claims that may arise after closing. The title agent may or may not be the same as the escrow or closing agent, who is in charge of balancing all of the final figures, carrying out the actual signing and closing and distributing funds to the necessary parties.

Thanks for reading my blog!

Website: Arizona Mortgage Lender

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