Shopping for a home mortgage loan? Despite Government efforts, the industry is still full of slick advertising, phony rate quotes, and bait-n-switch offers from home mortgage loan companies and banks you probably don’t want to really do business with. Joe Metzler explains…
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Need a home mortgage loan in MN or WI? Try www.StPaul-mortgage.com or www.mortgage-duluth.com
1) What are mortgage interest rates based on? (The only correct answer is Mortgage Backed Securities or Mortgage Bonds, NOT the 10-year Treasury Note. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions. DO NOT work with a lender who has their eyes on the wrong indicators.)
2) What is the next Economic Report or event that could cause interest rate movement? (A professional lender will have this at their fingertips. For an up-to-date calendar of weekly economic reports and events that may cause rates to fluctuate.
3) When the Fed “changes rates”, what does this mean and what impact does this have on mortgage interest rates? (The answer may surprise you. When the Fed makes a move, they are changing a rate called the “Fed Funds Rate”. This is a very short-term rate that impacts credit cards, credit lines, auto loans and the like. Mortgage rates most often will actually move in the opposite direction as the Fed change, due to the dynamics within the financial markets. For more information and explanation, just give us a call)
4) What is happening in the market today and what do you see in the near future? (If a lender cannot explain how Mortgage Bonds and interest rates are moving at the present time, as well as what is coming up in the near future, you are talking with someone who is still reading last week’s newspaper, and probably not a professional with whom to entrust your home mortgage financing.)
One additional important aspect, is also understanding that not all Loan Officers are licensed. Be sure to only work with a licensed professional. You can verify a Loan Officer has a license by going to www.NMLSconsumerAccess.org
Be Smart… Ask Questions, and Get Answers!
(C) 2011 – Joe Metzler – Cambria Mortgage, St Paul, MN #274132.
There are a lot of things “not to do”. I will point out only the 3 most common mistakes I see people make.
Don’t get piggy. Work with us. Set a goal and lock when it gets there. Are we going to hit the bottom? Probably not. Are we going to save you money? Yes. If you can save money with no out of pocket costs, than you have nothing to lose. If you want to gamble go to Las Vegas. It’s a heck of a lot more fun. Apply Now
Extra Tricks to Save Money When Refinancing
The purpose of most refinance loans is simply to save money. The goal is to minimize your expense over the life of the loan or to minimize your monthly payment in the near future.
If you can swing it, don’t roll every cost of refinancing into your new loan. Most people escrow for taxes and insurance. If you do, your current lender must give you escrow refund within 30 days of paying off their loan. Your new lender, be it us or someone else, must take the equivalent amount of money (or more) at closing to start the new escrow account.
Remember that you always get to skip a month of payments. If you close June 5th, your first new payment is August 1st.
Knowing this, paying some of your closing costs out-of-pocket will save you even more money in the long run. Why roll in $4000 in closing costs, when you really only need to roll in $2000 ($1000 escrow refund + $1000 missed payment = $2000). Paying that $2000 over 30 years doesn’t make sense if you don’t have too.
On the other hand, some people love the fact that they didn’t pay anything out of pocket to refinance, got a nice escrow refund check, then got to miss a mortgage payment. They use the ‘extra’ money to pay bills, go on vacation, etc. 
Picking a Lender & Closing Costs
Shopping for a home loan is confusing. No matter what we’re looking for — from cars to refrigerators’ — there’s a built-in element of confusion. Why? Lack of knowledge. An unfortunate rule of thumb is that the less we know about something we need to buy, the more we can expect to pay for it.
Shopping for a mortgage in Minneapolis, St Paul, Duluth, Rochester, Madison, Milwaukee, and throughout all of Minnesota and Wisconsin is complex at best — even for the savvy previous home owner. Daily rate changes, time-sensitive lock-in periods, points, lender’s fees… plus the emotional element of probably the largest financial deal any of us will ever make. Throw in to this already murky stew the ingredients of tricky internet mortgage rate advertising, commissions for every officer, agent and broker who ‘helps’ in your transaction, and the obscure differences between ‘rates’ and ‘fees.’ It’s no mystery that many buyers settle for a home loan that exceeds their monetary means out of sheer exasperation!
Please review our information on closing costs and “BAD Good Faith Estimates“. There is currently a large number of fly-by-night lenders doing some incredibly misleading rate & closing cost advertising. Remember, if it sounds too good, it probably is! Also check out my article “Best Rate or Lowest Cost” for more loan comparison information.
The Bottom Line
Remember, the first rule is that there are no rules. You should refinance if it makes sense for you. Every person & situation is different. What makes sense for one family, may not make sense for you. Call me today to discuss your wants, needs, and goals. Together we’ll determine if refinancing makes sense for YOU.
Click here for more information on the actual loan process.
Click here for 10 Tips to a Smooth Closing
Click here for 10 Mistakes to Avoid
NAR fees are up, advertising costs are up, real estate sales are down, but as a Real Estate Agent, you need to find more clients, and you need to do it on a budget. Here are a few simple tools to increase your business and make more money from Joe Metzler at Cambria Mortgage, and the Mn Real Estate Daily Show.
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You’ve seen the logo’s, but what is HomePath and HomeSteps?
The HomePath and HomeSteps programs allows a person to buy a specially designated Fannie Mae or Freddie Mac owned foreclosed property with a low down payment, flexible mortgage terms, no lender-requested appraisal and no mortgage insurance. Expanded seller contributions to closing costs are allowed as well
How Does It Work?
Simple. Just follow these steps:
Where can I see the list of available houses?
Easy. Contact a Real Estate Agent, and they’ll show you a list of qualified HomePath and HomeStep properties.
What about closing costs?
Closing costs can be rolled into the transaction, up to 6% of the loan amount.
How do I get started?
It all starts with a no obligation application, and a visit to a special lender offering the programs.
Buying a home in MN or WI? Click here for a HomePath, HomeSteps lender in MN and WI, or call (651) 705-6261, where one of their specially trained Loan Officers will assist you.
Buying a Home in 2011 is a Good Idea
Minneapolis, MN: As we enter the traditional spring home buying market, many people are trying to decide if owning a home is better than renting. Renting may be preferable for some folks… but there’s a reason 68% of Americans choose home ownership over rent.
Here are several very good reasons to own:
Use this online “Rent vs Buy” calculator – it’s Free!
Joe and Eric Metzler talk about why you should refinance today. Mortgage Interest Rates are set to go up soon for many reasons. Fannie Mae and Freddie Mac are both increasing the wholesale costs of mortgage loans, the economy may be improving, and home values may continue to fall slightly, all items that will effect your mortgage interest rates. Searching rates on home loans, or rates for refinancing your mortgage in MN or WI? We have some of the best rates on home loans!
Visit Cambria Mortgage, St Paul, MN at www.MortgagesUnlimited.biz
No Closing Cost Mortgage Refinance? BUYER BEWARE?
Good or Bad Idea? YOU DECIDE after reading this
…
St Paul, MN: Mortgage interest rates are currently at historic lows. Your mailbox and the airwaves have become full with mortgage companies competing for your business. Many of these advertisements are for “No Cost” or “No Lender Fee” loans.
Are No Cost Loans a Deal? For most people, usually not.
One of the most confusing areas for consumers in a mortgage loan transaction are closing costs. Here I’ll explain the advantages and disadvantages of the highly advertised “no closing cost” or “low cost “loans.
First and foremost, there is no such thing as a NO Closing Cost Loan! Everyone knows there are costs associated with getting a mortgage loan; appraisal, credit reports, state taxes, county recording fees, title companies fees, lender fees, escrows, and more. Someone has to pay these fees, and it is always YOU. How you pay them is what this article tries to explain.
Homeowners in Minneapolis, St Paul, Madison, Milwaukee, and throughout all of Minnesota and Wisconsin need to understand that in a no lender fee or no closing cost mortgage loan, the lender simply uses “negative” points to offset your costs. In the example below, by having the 5.00% rate (versus the 4.5% rate), you can reduce (or offset through interest rate) $5,000 of closing costs. By choosing this option, it appear as if you saved thousands in closing costs. GREAT! But while lower costs always sounds good, you now have a significantly higher interest rate! OK, now what?
No matter what anyone says, a zero cost, or no lender fee loan is NOT automatically a great deal. Although it may sound so much better than adding thousands in closing fees to your principal balance, you have to analyze each individual loan and client situation to determine the benefits. Many lenders speak highly of the “thousands of dollars” you save in fees. They never discuss the fact that you may spend significantly more in interest over the full life of the loan than you ever saved in up-front closing costs! In the example below, you can pay $12,578 MORE for your no cost loan!
FACT: In a refinance loan, the vast majority of people roll the closing costs into the new loan.
View the following chart, then call us. We’ll run your personal numbers. Then you can decide if a no closing cost home loan is right or wrong for you.
| Deal or No Deal? | Most Common / NORMAL |
OK short-term BAD long-term Most CommonLow Cost Option |
OK short-term Very BAD long-term |
| Loan Amount | $205,000 | $203,000 | $200,000 |
| Interest Rate | 4.50% | 4.75% | 5.00% |
| Principal & Interest Payment | $1,038 (+$20) | $1,058 (+ $45) | $1,073 (+$60) |
| Closing Costs On Estimate | $5,000 | $3,000 | $0 |
| Out of Pocket Closing Cost Paid | $0 – all rolled in loan | $0. $2k in rate, $3k in loan | $0. $5k in rate |
| Interest Paid over 5 years | $48,192 | $50,271 | $52,054 |
| Interest Paid over 15 years | $121,743 | $127,744 | $133,002 |
| Interest Paid over 30 years | $172,932 ($373,935) | $182,215 | $190,491 ($386,513) |
OK, so you are looking at the math, and maybe say “this isn’t so bad”, especially if you are in the home under 5-years.
But wait, here is a giant “Gotcha”
ANY LENDER who sells the no cost mortgage simultaneously sells a client into becoming a “serial refinancer,” which is not looking out for the client. They are “churning” the client and raking in fees year after year by fooling you into refinancing constantly at “no cost”, but always moving you BACKWARDS into a new 30-year loan. How many times have YOU gone backwards?
Factor in the monthly payments on all those additional “backward years” on all those “no cost” refinances, and that “biggest no brainer in history” no closing cost loan has actually cost you dearly.
Churning of home owner mortgages is illegal in most states
I hope this article has helped you to understand the varied measures used to determine the advantages and disadvantages of zero cost loans. Each borrower is different, and the evaluations must be made on a case-by-case basis. As you can see, there are many factors to consider when looking at the available options. With us as your personal Mortgage Consultants, we will be able to answer all of your questions, outline the costs and benefits, and even give you a few new ones to consider!
While everyone’s individual financial situation varies, let us show you the math so you make the correct choice. Of course, if a zero cost loan makes sense for your case, we will be happy to do one for you.