Texas Mortgage & Real Estate Thoughts

About a year ago, I received a call from Manuel Thomas of Liberty Mutual. He wanted to meet for coffee and talk about working together.

Typically, I won’t meet with just any agent until I’ve had time to check them out (online personality, website information, testimonials, etc). It just so happens that I was meeting with someone else in the area, so I agreed to get together.

Manuel and I spoke for about an hour. There wasn’t a lot of hard selling. We found that we actually had a lot in common. One thing he was most proud of was his new born baby girl, “Macaria” (which is a combination of his and his wife’s name).

I agreed to send him a client to test out and see how it goes. That was about a year ago and I have ONLY used Manuel since then. His service, response time, and fees are better than anyone else I have worked with in the past.

I was so impressed with the rate and service that I actually took the time to call all of my past clients. He was able to provide insurance coverage for many of them, while saving them hundreds of dollars per year and still maintaining the same coverage. In some cases, he was even able to lower the deductible.

If you need homeowners and/or auto insurance in Texas, I highly recommend you contact Manuel Thomas. It costs nothing to see what he can do. You’ll find out that your current coverage is FANTASTIC or you’ll save hundreds of dollars per year on insurance. Either way, you can’t lose.

Call him today!

Manuel Thomas – Ph# 972-955-5570

http://www.libertymutual.com/manuelthomas

Buying and financing a home is the most important personal financial decision an individual will make in their lifetime. Over a lifetime, the average homeowner may pay one-half of a million dollars or more in mortgage interest—many times more than any other single expense. In addition, much of the wealth of the nation lies in real estate. Over two-thirds of American families own their own home, while our country has the lowest savings rate in the industrialized world.

As significant as these statistics are, the process and substance of home finance remains a mystery to the average American. We tend to know much more about our automobiles and the loans that finance these vehicles than we do about mortgages that make our home purchase possible. How many Americans are familiar with the formulas for mortgage qualification or the workings of adjustable rate mortgages? Not many, which is why people pay too much for their mortgages or have no idea if they are making the right decision in relation to their personal financial situation. We tend to pay too much because we tend to make up to ten essential mistakes when involved in the homebuying process:

• We do not have a relationship with a lender.An individual formulates a multitude of professional relationships in his or her lifetime - doctor, attorney, accountant, financial planner and even a car dealership. We tend not to have a relationship with a mortgage lender because the need for the home finance transaction arises much less frequenty. In the past, homeowners averaged a new home loan once every seven years. With the advent of adjustable rate mortgages and refinances, this average has been shortened significantly. If you have no relationship with a qualified mortgage lender you are much less likely to find qualified advice when the need arises. When rates go down and you are one of many trying to join the hordes of those refinancing homes, you will have little time to develop a relationship with a qualified professional.
• We have no idea whether the lender we pick is qualified.Since we do not tend to have long-term relationships, we do not tend to shop for the right reasons. We know how to ask about a mortgage company’s rates (or, at least we think we do)—but not the background of the company or the individual with whom we are dealing. For example, what is the experience level of the loan officer? While it is typical for a real estate agent to be required to take a course and pass a test in most states, loan officers may be hired off the street. You are about to make the most important financial decision you may ever make. Would it not make sense to go over the resume from the person with whom you are working.
• We do not know how to shop for a mortgage.Most homebuyers know how to ask: what is your rate? We do not know how to ask about lock options, miscellaneous fees, annual percentage rates, or even the variety of programs available. One example would be options for avoiding mortgage insurance. If we put less than 20% down on a home financed with a conventional mortgage, we may need private mortgage insurance. Many lenders have programs that do not require this insurance.
• We do not know enough about mortgages in general—especially how the choices might affect our economic gains or losses.Since we do not know about mortgages, it is not likely we will know how to shop or what to look for in a mortgage. We tend to know that there are fixed rates and adjustables. We tend to be clueless when asked how the down payment might affect our overall rate of return on our investment in the long run. If we refinance or sell in a short period of time, any points paid will result in a loss. How many home shoppers know how to calculate the time frame necessary to break even on the dollars invested in points?
• We think we know what type of mortgage we would like—without knowing all the options.Many of us begin by shopping for a 30-year fixed mortgage or a one-year adjustable because we are familiar with only one or two options and we have made our decision on our preference. There are several additional major mortgage types which should be considered. Are you familiar with buydowns, long-term adjustables and 20-year mortgages?

Changing spreads between short and long term rates can make adjustable rate mortgages more attractive during certain time-periods. Even within the adjustable rate family, certain economic conditions can make one adjustable more attractive than another. The point here is that you should not shop for a particular type of mortgage. You should work with a professional to evaluate which is best for you under the present economic scenario. If we could predict the future of interest rates, the process would be easy.

• When we refinance our mortgage, we forget about the long-term.With lower interest rates, everyone thinks that we come out ahead when we refinance. In reality, every time we refinance purely for a lower rate and/or payment, we stretch out the mortgage’s term and slow down the process of building equity.
• We have no idea how the mortgage approval process works.Many of us sign a contract to purchase a home and then address the idea of obtaining a mortgage. Most do not know that it makes more sense to obtain a mortgage approval first. This helps our own piece of mind while we shop and also increases our bargaining power with the seller. It also allows us time to address any issues before agreeing to a ‘closing date’ on the purchase contract.
• We do not know that the lock options may be as important as the rate.Most shoppers have no idea that many lock options exist. There are options which allow us to lock in the rate and points for 15, 30, 45, 60, 90 or more days. Many people shop different companies in order to save $250 in points and then make the wrong decision with regard to lock options. Considering the volatility of the interest rate markets, the wrong lock option may cost many thousands of dollars.
• We do not know what to ask the lender with regard to the services he or she offers.We assume that all mortgages are the same. One 30-year fixed mortgage is the exact same as another. It is not the variance of mortgages we are referring t, it is the quality of service that is delivered. For example, Supreme Lending offers quick approval programs that will render a decision in a few days. Other lenders may struggle with your application for weeks or months. Supreme Lending will process and approve your loans with our own staff. Others send their loans to other lenders for processing or approval. We are not advocating here which is the best mode of service. A smaller broker that sends your loan to a larger lender might offer you a wider range of programs than a bank. The important thing is that you are aware of what services are available and that tradeoffs must be made in order to make a final decision.
• We are intimidated by the whole process. Buying and financing a home seems to be a very large task—one which most of us would rather avoid. The reason we become intimidated is that we are not knowledgeable regarding the subject of mortgages. The mortgage decision is important enough to spend some time learning. Certainly, it is as important as learning about the latest four wheel drive vehicle. With knowledge comes confidence. With confidence comes power.

Remember how we felt about personal computers ten years ago?

Mortgage Application Fees - Do Not Pay Them

I am still hearing that companies are charging a Mortgage Application Fee just to run some numbers for clients. To me, it does not make any sense.

If you are client / home buyer, here is what you should do (this is my opinion)...

Find a Loan Officer or company that will not charge you a fee to run some numbers. Before you spend one dollar, you should know what you qualify for. Our company believes in telling you what you are applying for before you write a check to anyone. We will need to run a credit check and there is a fee for that, but we do not charge you for the credit check until your home loan has closed and funded.

If you don't qualify (YET) then we will help you find a great credit repair company that will help you improve your scores in as little as 3-6 months. Please note that there are times when credit repair can take longer, depending you the history. In either case, we will set you up in a program that will improve your scores and help you get into a home as quickly as possible.

And YES you will great service whether you qualify or not. We WANT TO HELP YOU buy your home as soon as possible and help anyone else you may know in the same situation.

If you are a Loan Officer/Banker, my thoughts are this...

I know it costs money to run credit reports and it takes time out of your day to work with clients that 'may' not qualify today. In the end, your service to them and the qualify of information you provide will help keep those clients coming back to you.

There is a cost to doing business. As a matter of fact, you may be able to save yourself time and money with the right questions to the potential client. You may find out early that the client has recently had a Foreclosure or filed Bankruptcy; perhaps they have no open lines of credit and all past accounts are delinquent; or you'll find out that they have never been late on anything and keep credit card balances very low. Certain questions will help you save money so that you don't have to run credit just yet and can still generate some 'basic numbers' for your client to consider using you. If you find out afterwards that they were not honest (and we know there are clients like that) then you help them get their credit in order and prepare them for homeownership at some point. Continue to follow-up, answer questions, and ensure they are staying the path to repairing their credit.

In my opinion, that is service we should provide without being compensated. Perhaps I do not see an issue because I do not run credit for every person that calls me. I have always felt comfortable assessing someone's credit range without pulling their credit based on questions I've asked and answers I've received. As you would figure, its not always 100% accurate but its a start and it saves me some time and money. In the end, if something is different than the client thinks, I share the report with them and we review areas we focus on further. We get them set up in a program to improve their scores and go from there.

Again, this is my opinion. If I were shopping for a home mortgage, I would not spend one dollar until I know for sure what I am applying for.

I do not judge any company that charges an upfront application fee. That is just not how I do business myself.

** As of today, this is a proposed change and is not finalized. **

Well, just when you thought it could not possibly cost any more... the Mortgage Insurance Premium, better known as MIP, as been increased for FHA loans.

As of right now, I do not have a Mortgagee Letter to reference, but will update this post at a later date with the correct Mortgagee Letter to go along with the below post.

Currently, the Upfront FHA premium is 1% of the loan amount. The premium was lowered from 2.25% a year ago, which sounded great. Well, the new upfront premium beginning in April 2012 is 1.75%. The premium can still be rolled into the loan.

In addition, the Monthly MIP is going to increase from the current rate of 1.10% (5% down payment or higher) to 1.20%. And if you opt to pay less than 5% down, your monthly MIP is increasing from 1.15% today to 1.25%.

The monthly MIP is not a huge jump, but it could certainly make a difference to someone that already is pushing a High Debt-to-Income ratio. In turn, it could cause a client to go from 'qualified' to 'unqualified'.Once you have reached your DTI limits, your client would need to look for a slightly inexensive home.

If you know someone looking to buy a home and/or they are under contract, this would be good information to share with them. As long as the FHA case number is locked before April 1st, the loan will todays pricing instead of the April 1st pricing.

*** More to follow, as this gets finalized ***

Deciding to refinance your Texas home is one of your

most important financial decisions ...

There is no more important financial decision you can make than refinancing your present home in Texas. One easytransaction can help you better your long-term finance prospects in many ways: