Sep
18
Fed Funds Rate down .5%
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Fed Funds Rate down .5%
WASHINGTON (Reuters) - The U.S. Federal Reserve on Tuesday slashed the benchmark federal funds rate by a half-percentage point in a bold bid to buffer the economy from a housing slump and related financial market turbulence.
ADVERTISEMENTThe decision by the central bank’s Federal Open Market Committee took the overnight rate down to 4.75 percent, its lowest level since May of last year. It was the first cut in the interbank rate — the Fed’s main tool to influence the economy — since June 2003 and the first half-point reduction since November 2002.
Financial markets had widely expected the Fed to lower overnight borrowing costs, but were split over whether the move would be a quarter-point or more-aggressive half-point.
In a related move, the Fed also lowered the discount rate it charges for direct loans to banks by a half-point to 5.25 percent.
What does this mean?
According to Marketwatch:
Here’s what consumers can expect:
If a consumer is paying 8.25% interest on a $100,000 loan that is based on the prime rate — such as a home-equity line — a rate reset to 7.75% is likely. That’s the difference of about $500 a year, or roughly $41.66 a month in interest charges. Resets on some adjustable-rate mortgages will be slightly better. Many ARM interest rates are based on an average of Treasury note yields coupled with a fixed margin, now at about 2.75 percentage points. At Tuesday’s 10-year yield of 4.49%, the rate is 7.24%. In July, it was at 7.77%. That makes the monthly payment on a $200,000 mortgage $1,363, about $73 less than it was in July. But Treasurys could head even lower following the Fed action. Rates on credit cards, which have taken on a bigger role in consumer financing in recent months, are likely to dip a bit too, lowering minimum monthly payments. Savings-deposit rates will go down, meaning that your bank balances won’t appreciate at the same rates you’ve seen all year. Ditto on money market rates, hurting those on fixed incomes — generally the elderly — who rely on cash generated from such safe investments. Interest rates on new loans for cars will fall, though it won’t have any effect on loans already in place. But Brian Bethune, the U.S. economist with Global Insight, urges consumers to wait until contract negotiations between autoworkers and their bosses are done this month. “They could pull out all the stops,” he said about automakers’ desire to unload inventory. And if the Fed lowers rates again next month, all the better.
Jan
17
FAQ: How do I get the best rate?
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From time to time I’ll be addressing client questions that are frequently asked and some questions that are quite obscure. Some questions are mortgage related, some are real estate related, and some are Denver related. My answers won’t be the canned answers you see on most mortgage sites.
Q: “How do I get the best rate?”
A: Let’s assume the following:
- you’re asking about a mortgage on a single family house that’s considered your primary residence
- you’re asking about a first mortgage without a second mortgage
- you have either 20% equity (refinance) or you’re putting a 20% down payment (purchase)
- you have credit scores over 720
- you don’t have any late payments of any kind
- you have assets i.e. money in a checking account, savings account, 401k, mutual funds and/or stocks at established financial institution(s)
- you have statements from the aforementioned financial institution(s)
- you’ve been in the same line of work for quite some time for the same company
- you have a limited amount of debt
- your debt to income ratio is far below the 40% threshold
If you fit this profile you’ll get the best rates because mortgage institutions view this profile as little to no risk. These loans are typically run through an automated underwriting program i.e. computer software that runs an algorerithm (software geek joke) and gives you a loan approval in seconds. Even if you don’t fit this profile 100%, the automated underwriting program may still grant you an approval in seconds. Your history of paying debt (credit score), capacity to pay the loan (income/assets), and the collateral backing the debt (property) all plays a role in getting the best rate.
Aug
23
Everyone has heard the line, ‘When banks compete, you win!” Well, not really when it comes to a second mortgage or home equity loan. These loans rely on credit score and equity. If you have bad credit, you better have equity. If you have no equity, you better have good credit to get a 115% or 125% loan. If you have bad credit and no equity, sayonara.
So where do you go when banks won’t compete. Enter person to person lending at www.prosper.com. Featured in Inc, Newsweek, Business Week, Entrepreneur, et. al. prosper has grown exponentially.
The premise is simple: People who need money request it, and other people bid for the privilege of lending it to them. Prosper makes sure everything is safe, fair and easy. You can borrow anywhere from $50 to $25,000. Seems like an interesting lending alternative when no else is willing.
Jun
29
Feds raising rates, again!
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The Federal Reserve today raised a key interest rate for the 17th consecutive time and signaled that further rate hikes may still be needed to fight inflation.
For those of you who have a home equity line of credit, Prime rate is going to 8.25%
Jan
1
Why should I use a mortgage broker
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A mortgage broker should be used because of the product availability that they have. They can be your one stop shop for all of your home financing needs. They work with hundreds, and sometimes thousands, of different banks and lenders to find the program that is right for you. A mortgage broker, also called a loan officer, can generally assist with all credit types, all income types and all available loan programs types. Having one person or team of people taking care of and familiarizing themselves with all of your financial needs and your specific situation is much more beneficial than utilizing someone to buy your home, then someone else to refinance your home and then someone new to obtain a home equity line of credit. A mortgage broker should be your trusted advisor, an excellent source of information and a link to finding other qualified and trustworthy referral partners such as realtors, homeowners insurance agents, home improvement contractors, etc… Use of a mortgage broker obviously has tons of benefits. Over 75% of all mortgages originated over the past couple of years have been handled by mortgage brokers.
Your mortgage broker can provide you with many more options than a banker in most cases. Having access to all types of banks gives brokers more options. While a banker has to do business based on their specific bank rules.
Using a mortgage broker gives you flexibility in regards to how you can have your mortgage structured. A mortgage broker is no different than a banker in the terms of providing a service, however the difference is what service they can be provided. To go into your local bank and apply for a loan will generally cause you to miss out on some value added programs that are not available to you through that banks product line. The overall time of closing is no different with a broker or a banker, and there is not an approval advantage with going with a bank, and can most times go quicker and smoother with a broker. There are many lenders out there that do not lend directly to the general public and that is where a broker can help you find those programs and terms that will benefit you most.
Mortgage lending is not like it was twenty or even ten years ago. Lenders have split up into niches. Will the bank that you apply at cater to your niche? Maybe or maybe not. Wouldn’t it be better to apply with a full service mortgage broker who can find the bank or lender that has the best program and rates for your situation?
A mortgage broker has to disclose the amount of money that they are making in Yield Spread Premium (also called rebate). Bankers do not have to do this. Would you like to know how much your mortgage professional is making off of your loan, or would you like to be left in the dark?
Jan
1
Why should I refinance?
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Many homeowners are using the appreciation in there homes to get rid of high rate credit cards by consolidating. When you consolidate your loans you often reduce the amount of money your spending each month.
One of the main benefits to refinancing is to consolidate consumer debt. Consumer debt (i.e. Credit Cards ampersand Auto Payment) is typically at a higher interest rate and is never tax deductible. Interest paid on debt tied to your home is deducted from your income at the end of the year often substantially reducing your tax liability. This tax favorable status is one of the many benefits of refinancing.
Refinancing your home can save you hundreds per month when you consolidate debt.
What if you want to add on, remodel or update the kitchen? You may not have the cash to do so, but the cost of improvements may be more than covered by the increase in value of the home. This is a great use for a home equity line of credit or a cash-out refinance.
Many people refinance to change from a variable rate to a fixed one or vice versa. Refinancing a high interest rate after a 24 month good payment history could save you a lot of money on your monthly payment.
If planning to purchase investment property, refinancing your primary residence is a great way to raise the cash for the down payment required.
Always consider your long term benefits of doing a refinance. The interest rate is not the most important aspect of the transaction. Even if your current rate is lower, you will probably save more money over time with a debt consolidation refinance then you would be with maintaining the situation you are currently in. Ask yourself a few questions: How long have I had this balance on my cards? At the rate I am paying my credit card debt down, how long will it actually take to pay them completely off? What will be my total cost once I have paid off all my credit card debt?
You can refinance to switch to an interest only loan to maximize cash flow or to switch to a Pay Option ARM to provide yourself with a lot of flexibility in your monthly mortgage payment. Some people also refinance simply to get a way from their current mortgage lender because they are not pleased with them.
Another main benefit of refinancing is to get out of PMI (Private Mortgage Insurance). In most cases if your Loan-To-Value was above 80% when you moved into the home then you most likely got stuck paying PMI. Your home may have appreciated quite substantially over the past year or two and with a new lender they will take new appraised value thus eliminating PMI.
Most people refinance to because of changes in their financial situations. Some, after determining that they can afford a bigger mortgage payment, refinance to a shorter loan term to save on the total amount of interest charges. Others, after experiencing a decrease in income, may refinance to a longer term loan to take advantage of the lower monthly payments. Yet others refinance to withdraw from the equity built in their homes for other financial purposes.
Using equity in your home to pay off high rate loans (credit cards, auto loans, etc.) may have certain tax benefits also. Consult your CPA for more information.
Many homeowners refinance to pull out cash to purchase another property.
To reduce the term or length of your loan, doing so can save you thousands of dollars in interest.
Jan
1
Which Index Should I choose?
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Loans with an adjustable rate feature are tied to an index. Each index has advantages and disadvantages. You will want to research each of these indexes to see the historical movements.
Most home equity lines of credit use the Prime index. Some adjustable rate mortgages use the Prime index also. Other indexes that are used for adjustable rate mortgages are Cosi, Cofi, MTA, LIBOR and CODI. Your mortgage broker can assist in finding which index is best for you.
Jan
1
A HELOC is a home equity line of credit.
This type of loan is basically a line of credit secured by a second mortgage on a property. You can borrow a much as you need as long as you do not exceed the maximum loan amount. You pay interest on the outstanding loan balance and not the entire line of credit.
A Home Equity Line of Credit is an open ended mortgage, meaning a homeowner can withdraw and repay as often as he likes, up to the available credit limit. A HELOC works much like a credit card account in that respect. It differs from a credit card account in that a credit card account is an unsecured loan, whereas a HELOC is secured by the homeowner’s property.
Usually, whenever you have a mortgage that is above 80% Loan TO Value, then the difference above 80% is usually a HELOC loan. For example, if you need 95% Loan To Value then your 1st mortgage will be at 80% Loan To Value and at a lower rate and the remaining 15% will be considered a 2nd mortgage and be a HELOC.
A HELOC (home equity line of credit) is an excellent financing tool, for some borrowers. A HELOC is essentially a line of credit secured by a mortgage or deed of trust on your home. You only pay interest on the amounts you borrow on the HELOC. If you don’t use any of the line of credit, then you don’t make any monthly payments. You can draw from the HELOC by writing checks issued to you by the lender. Usually a HELOC is considered a second lien on your property.
It’s important to be careful with HELOC’s. As any other type of credit they have a good use but one can end up spending too much with this line of credit. If you are paying off other debts such as credit cards ampersand autos it might make sense to get a standard fixed rate 2nd mortgage where you get the lump sum at closing to pay off all debts and then you pay on that mortgage along with your first until it’s paid off. You won’t have the ability to pull money whenever you think you need it. On the flip side of that, if you have income that comes in large quantities and is sporadic or not stable. This type of loan might be used as a cushion for the times in-between the checks.
A HELOC is a far superior debt device than using a credit card or financing a car/boat/ RV purchase. One of the many advantages to using a HELOC is that the interest expense is tax deductible. Essentially you are saving 25-35% on every interest dollar as it is deducted from your income when you do your year end tax preparations.
Many HELOCS today offer a credit card which can be used at your favorite stores and restaurants.
Usually the rate on the Heloc is the prime rate plus a margin.
A HELOC is traditionally based on the prime rate and a margin is added to reflect the true rate to be paid by the borrower. HELOC’s may offer a initial lower rate (Teaser rate) for a specific time period. When the defined time period has expired the rate will adjust to prime + margin.
HELOC(s) or Home Equity Line(s) of Credit are very popularly used as the “20″ in an “80-20″ or 80/20 piggyback mortgage strategy.
A Home Equity Line of Credit can also be used to purchase the property or as a first lien on the property. The HELOC can be used to payoff or consolidate debt, personal use, or just to have.
A home equity line is a revolving credit line tied to the equity in your home. Most home equity lines use the prime rate as a base for setting interest rates. For example, you hear lenders describe rates as prime + zero or prime + 1. This means the borrower will pay monthly interest according to the Prime Rate (lets use an example prime rate of 5.00%) plus a margin. In this case, prime + zero would equal an interest rate of 5.00%, or in the case of prime + one it would be 6.00%. Additionally, most home equity lines have interest only payments.
Jan
1
Unlimited Cash-out Refinance
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Unlimited cash out HELOC refinancing primary residence and second homes
HELOC stands for Home Equity Line of Credit.
Preferably a job where you can show W2’s and pay stubs.
Higher credit score individual’s can obtain “no-doc” HELOCS or fixed second mortgages.
Many times you can take advantage of a “no cost” HELOC or Fixed rate second. Ask your Loan Officer if this option is available to you.
If you need to borrow money, home equity lines may be one useful source of credit. Initially at least, they may provide you with large amounts of cash at relatively low interest rates. And they may provide you with certain tax advantages unavailable with other kinds of loans. (Check with your tax adviser for details.) At the same time, home equity lines of credit require you to use your home as collateral for the loan. This may put your home at risk if you are late or cannot make your monthly payments. Those loans with a large final (balloon) payment may lead you to borrow more money to pay off this debt, or they may put your home in jeopardy if you cannot qualify for refinancing. And, if you sell your home, most plans require you to pay off your credit line at that time. In addition, because home equity loans give you relatively easy access to cash, you might find you borrow money more freely. Remember too, there are other ways to borrow money from a lending institution. For example, you may want to explore second mortgage installment loans. Although these plans also place an additional mortgage on your home, second mortgage money usually is loaned in a lump sum, rather than in a series of advances made available by writing checks on an account. Also, second mortgages usually have fixed interest rates and fixed payment amounts
Ask about our special low monthly payment programs for unlimited cash out and debt consolidation refinance. Pay off those high interest bills.
You still need to have a job to qualify.
Is there anything else I can do to help? I understand a cash-out refinance is a difficult decision and I want to thank you for reading the information above. If you would like to continue this conversation than please contact me so you and I can discuss your financial situation. Please read more valuable information and when you feel comfortable I would like you to contact me.
Unlimited cash out’s may also be available as a reduced or no documentation type of program.
Jan
1
Types of Loan Programs
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Editors Note: Due to the mortgage and credit crunch, many loan programs have been eliminated. If you’re in need of a Denver mortgage contact us to discuss your mortgage options.
There are a wide variety of loan programs available.
One of the most popular loan options in the market today is the Pay Option adjustable rate mortgage, which is often called a flex or borrower’s choice loan. Available in 30 and 40 year amortized varieties, many of our customers who value having cash in their pockets each month have taken advantage of this innovative financing program.
For example, you have fixed rate mortgages, adjustable rate mortgages, VA mortgages, FHA loans, Reverse Mortgages, Interest-Only loans, Option Arm loans, Stated-income loans, No Ratio loans, HELOC’s, 30 year loans due in 15 years, etc. The list goes on and on. You should ask your mortgage professional which loans apply to your situation, whether you qualify, and what will save you the most money.
Adjustable (or Variable) Rate Mortgage (ARM) is a mortgage in which the Note rate can change throughout the life of the loan. The interest rate of an ARM is calculated by adding a predetermined margin to an interest market index. Some of the more common indices chosen as the underlying index are the 1-year Treasury Bill, London Interbank Offered Rate, and the 11th District Cost of Funds. Because the underlying index constantly changes to reflect market conditions, any ARM that base the their interest rates on that index would move in tandem.
Interest only options can be used on many of the other types of programs. It can be used on the fixed rate or adjustable rate programs. With the interest only option the borrower is paying only the interest and not the principle. There is usually a small fee charged to the interest rate for adding this option.
NINA loans are loans that don’t require income and assets to be disclosed or verified.
A HELOC is a home equity line-of-credit.
The traditional fixed rate mortgage is the most common type of loan programs, where monthly principal and interest payments never change during the life of the loan.
With a 15 year fixed loan, you will pay off your principle faster than with a 30 year fixed loan, even if you were only to stay in the loan for a few years.
The option arm loan is a loan that provides four payment options each month:-minimum payment-interest only-30 year amortization-15 year amortization This loan has a variable interest rate. However, the minimum payment is very low - much lower than the interest payment. The unpaid interest for each month is added to the total loan amount. This is referred to as “negative amortization”, because the amount you owe on the house will go up in time, not down. This loan can be good for short terms, such as for investors who will soon sell the property. It is also good for people whose income may change from month-to-month, and they need some flexibility.