Colorado Home Mortgage udpate Good Faith Estimate

As your Colorado Home Mortgage provider it is important to me that you understand the Good Faith Estimate.  I have listed a detail explanation of the Goof Faith Estimate for you to review.

Good Faith Estimate

The Good Faith Estimate is a listed of fees associated with the loan being offered to you.  These fees are broken down into three major sections; Closing Costs, Prepaid Items, and Title fees.

A common issue associated with disclosing Good Faith Estimate costs verbally is that only the closing costs are referenced.  This will give the appearance that the costs are actually lower then they are. 

Prepaid items are a major part of the good faith estimate and need to be disclosed and understood.

First we will talk about the closing costs.  Closing costs are broken down by line items on the good faith estimate and are easily recognizable and understood.  The most common good faith estimate closing costs are: origination fee, points, credit report, processing fee, underwriting fee, and appraisal fee.  Some other fees not always understood is Tax service fee, and wire transfer fee. 

For those who do not know the difference between any of the fees I will quickly go through each.

Before I start it is important that I point out that many of the fees on the good faith estimate is a third party fee and I will highlight the differences between both shortly.  These fees will primarily be the same no matter where you decided to go for your mortgage needs.

The first fee is the loan origination fee which is the primary fee the broker charges for services rendered on your loan.  It is what we get paid.  The fee will range from .25% to 2.5% of the loan amount; however it is normally 1%.  Obviously it is the gross amount the broker receives and it is subject to additional splits being shared with the company that employees the broker.  Normally about 60% going to the broker themselves.

Loan Discount fee can be paid out in two different ways either to the broker or the lender depending on the rate being charged on the loan.  This fee will range between .25% to 2.5% of the loan amount.  The rate on the loan will have a cost or a premium depending on what rate you finally lock into to.  Please review Yield Spread Premium in order to calculate the premium your broker receives for the rate you are charged.  Loan discount fee should be used to pay the lender directly for the cost of the rate you received.  Typically if the rate is low enough a cost is associated to the rate that cost is paid directly to the lender in the form of Loan discount.  On rare occasions if a cost is not associated with the rate your broker has given you and a Loan Discount fee is charged then the fee becomes additional broker compensation.  The compensation will still be gross compensation but it is still compensation.  You can get this determination on the final Settlement statement know as a HUD which will tell you who is receiving the Loan Discount fee.  This should be negotiated and talked about between you and your broker if the charge is listed.

Next is the Appraisal fee which is the first of many third party fee that goes directly to the appraiser who offers a detailed report on the value of your property.  This fee ranges from $350 to $450 depending on the Appraiser used on the loan.

After the appraisal fee you will have a credit report fee which should not exceed  $50.  We do not charge that fee to our clients but it typically shows up on other broker’s good faith estimates.

The Lender’s Inspection Fee is a fee that lenders will charge in order to review an appraisal already done on the property.  It is a fee not normally seen on the good faith estimate so it rarely shows up if ever.  However if the lender requires an inspection to be done then the fee will typically be in the range of $100 - $250.

The mortgage broker fee is another fee paid to brokers for compensation on a mortgage loan.  If the fee is charged it could range from .25% to 2.0% of the loan amount.  Most brokers will use the mortgage broker fee as a secondary fee on loans that put a cap on loan origination such as Veteran home loans.  The fee may also be applied to higher risk loans that require more work, but should always be negotiated by you and the broker.  It is another fee tied to compensation to the broker originating your loan.

Tax Related Service Fee is another third party fee charged by the lender for handling tax related matters.  It is a small fee but it is paid directly to the lender who funds your loan proceeds.  This fee will typically range from $60- $90.

Processing Fee is charged by the branch processing your file.  This fee can be tricky as it is a source for income to the broker and the broker’s office.  The fee is intended to cover matters like the collection of your application, running credit, automated approvals, documentation preparations, ordering services and other administration activities done at the branch.  The fee helps off set costs for the processor and administration staffs.  This fee can also help in additional compensation to the office depending on the relationship to actual costs and income received from this fee.  The fee should range between $300 - $600 but beware of excess charges being applied in this area.  My administrative staff receives 100% of the proceeds tied to this fee.  Our brokers and managing partners receive absolutely no additional compensation from these charges listed on the good faith estimate.

The Underwriting Fee is a third party fee paid to the lender to approve your loan in full.  It also pays for the closing preparation done by the lender and the final issue of funds for your closing.  It is basically the fee the lender charges for your loan.  This fee will range between $450 - $1200 depending on the level of risk associated on the loan, and the lender underwriting your file.

The final Good Faith Estimate normally tied to closing costs will be the Wire Transfer Fee.  Simply put it is the fee to wire the loan funds from the lender to the title company.  It is a third party fee but it is small in nature.  Ranging from $50 - $90.

All of these fees will typically be included in the good faith estimate as closing costs.  Be cautious of any other fees that may apply these fees do not account for normal closing cost fees and are used as additional compensation to the broker.  These fees may include but are not limited to:

Administration fees,

Application fees,

Warehouse fees,

Amortization fees,

Affiliated consulting fees,

Endorsement fees,

Express mail fees,

And miscellaneous fees.

The next section of the good faith estimate will typically be referred to as the prepaid items tied to your loan.  Prepaid items are normally costs tied to items that must be paid in advance for the purpose of your loan.  These are also funds set up in an escrow account which will be fully explained under escrows located on the resource page.  Here on the good faith estimate we will simply go through the items as they appear.

Daily interest charged for per day interest on the loan.  This item will appear as a per day charge and will vary depending on what day of the month you close your loan.  The per day charge can seem a bit complicated but it does not have to be that way.  Simply put it is the number of days between the day you close until the last day of the month.  For example if you close on the 15^th and there are 30 days in that month you will be charged 15 days interest.  The reason for this is simple.  Your first mortgage statement does not come out until the first full month is completed.  On the 1^st day of the following month you pay the mortgage for the month you had the loan.  Mortgage payments will pay interest in the rear and that is what your mortgage payment will be the following month.  Best way to look at this is by example:  Lets say you close on the 10^th of April since there is not a full month behind you since acquiring the loan a payment will not be due on May 1^st.  The first full month under the new loan will actually be June 1^st which will cover May 1^st through May 31^st.  So if you move in on April 10^th and don’t make a payment until June 1^st you actually have the loan for about 51 days.  June 1^st covers 31 from May 1^st to May 31^st so what happens to the other 20 days.  That is what will show up on your line item.  These days will always be paid in advanced as part of your prepaid items. 

Mortgage Insurance Premium will be a premium charged by lenders which will be issued to a Mortgage Insurance company to help protect the mortgage in the event of default.  These premiums are normally tied to loans that carry a loan to value ratio above 80%, or FHA loans.  FHA loans will charge Mortgage insurance premiums ranging from 1.5%-1.75% of the loan amount.

Hazard Insurance Premium is only charged on purchases and will be an annual charge made by your Home Owners insurance provider and will be paid directly to them for your home owners insurance for one year.

VA Funding Fee just like Mortgage Insurance Premium will be used to off set the risk tied to these loan programs.  VA provides lenders with a guarantee on the loan proceeds and in order to do this VA will charge a fee to all borrowers depending on how often they have used their VA eligibility.  The VA funding fee will range from .5% found in refinances and 2.15% - 3.3% on Purchases depending on whether it is a 1^st time use of multiple use VA benefit.

The 2^nd component of prepaid Items will be your escrow balance which is an account set up by the lender to pay taxes and insurance in the future.  A New Escrow balance must be established on all transactions and will be collected here.

Hazard Insurance Premium reserves will be collected depending on when your insurance is due next.  Normally it will be about 4-6 months insurance premium set aside to pay next year’s insurance obligations.

Mortgage Ins. Premiums reserves very rare and will typically not show up on a good faith estimate is collected to off set yearly Mortgage Insurance Premiums.  I can’t remember the last time that was used, but if the program warrants it, it will be collected.

School Tax Reserves.  Like the Mortgage Insurance premium is rare and will only be collected if the school district requires it as a function of the yearly mortgage premiums to be collected.  It is set up for future tax requirement for schools.

Taxes and Assessment Reserves are required on most loans and pretty much compiles the 2^nd major component to a typical escrow account.  Like Hazard premiums depending on what part of the year you close will dictate the amount paid in your reserve account.  Taxes are paid on twice a year once at the in of April and again in July.  Lenders will project how much is needed to ensure payment is available on these due dates and will set aside the amount in your reserve account to pay the premiums as they come due.

Flood Insurance Reserve will also be rare in the state of Colorado, but other states do require it.  Flood insurance is used to cover premiums associated with Flood insurance and work in a similar manner that taxes and home owners insurance is collected for reserve requirements.  The flood insurance reserve will cover the flood insurance requirement for the home.

Finally the last section of the Good Faith Estimate is title fees.  Title fees are fees charged by the title company to close and services the needs to allocate funds for your loan.  These fees are broken down and disclosed to you on the good faith estimate.  What people don’t realize in this section is that the borrower has the right to negotiate who the title company will be.  Title fees are listed as follows:

Closing/Escrow Fee is the charge that title companies charge to sit down with you and deliver the closing documents to you.  Basically it is the compensation received for closing your loan documents.  In a sales contract an additional charge is charged for the real estate closing documents and will be explained later. This fee will rage from $175 to $350.

Doc Prep Fee is another compensation fee charged to the borrower and is typically tied to administrative tasks done by the title company the fee will range from $100 - $300.

Notary Fees will be an administration fee given to a notary typically working for the title company in the even documents require notary services.  This is rare and is often associated as a junk fee.  The fee should be no greater then $100

Attorney Fees normally not needed in the state of Colorado are fees associated for the services of an attorney for closing a real estate transaction.  Some states like New York require attorney’s to negotiate and handle any contract administration which is involved in every Real Estate Transaction there for are required to close these deals.  This is where an Attorney Fee will be charged.  These fees can be as high as $2000, but should not be seen on a Good Faith Estimate in the State of Colorado.

Title Insurance fee is mandatory by law and will be charged on every real estate loan.  The Title Insurance fee insures protection to the lender that they no other outstanding liens appear on the deed and that they will have 1^st or 2^nd position depending on what loan you have.  The fee on this is paid directly to the title company and a portion of this fee will be compensation to the title company for services rendered.  Because the fees for title are registered with the state it is set in stone, but make no mistake title companies do make money on title insurance.

Recording Fees are charges made by the county clerk’s office for recording the deed of trust and note.  It is a per page charge and will typically range from $125 - $195.

Finally the Real Estate closing fee which will be the exact charge for the closing fee and is additional compensation given to the title company for services rendered in closing the actual real estate transaction portion of a purchase. $175 - $350

The title company may have some other charges that show up on the settlement statement but the costs of those additional charges are small.  Examples of these but limited to.  A variety of form fees that may be required by the lender, Improvement Land Certificate, Courier Fee, and Stamps fees.

These are the actual line items that will accumulate and be calculated as your total costs for the loan.  Closing costs and prepaid items plus your payoffs for your current loans of the purchase price will be your total cost for financing. 

Colorado Mortgage information part 1 of 10

What is Credit?

This is the fist of three major qualifying components for a home loan: Credit, Income/employment/, Previous residency

Lender will review your credit report to determine credit worthiness.

Three major reporting agencies are: Experian, Transunion, and Equifax.  We use Credit Plus to order credit there are many vendors, but primarily the scores will be similar, but not always exactly the same. 

What’s on the credit report: Identifying information, Public information such as judgments or BK’s,  Account history for every account you have ever opened. 

Credit History will determine a FICO score: The top 5 things impacting credit scores on a credit report are:   Amounts owed on accounts are too high, Delinquency on Accounts, Too Few bank revolving accounts, too many accounts with balances,

Things that can help boost credit scores immediately:  Opt Out Prescreen, Authorized user on good accounts, pay down total balance on accounts to 35% of the high credit limit.  Pay off or eliminate debt on American Express cards they do not report a high limit only the current balance, Pay your accounts on time

Pre-Qualification Process

Shopping for the right loan will be as important as shopping for the right home; you should find out what you qualify for 1^st before actually going out and starting the buying process. 

Preapproval commitment from the lender can be achieved if in fact you go through the loan process first.  Sellers are more likely to accept offers with a preapproval letter then without.

It is important that you ask yourself a few questions before obtaining a Loan, these questions will help you and your loan officer determine the right program for you: 

How long do I plan to stay in this home?

Do I anticipate any income or debt changes in the near future?

How quickly do I want to pay my mortgage off or do you want to pay your mortgage off?

If I do decided to move out of this property do I plan on keeping it as an investment property?

Finally do you homework and be prepared to ask as many questions as you need to feel comfortable with the choice you are making.

Mortgage Process

There are several steps that need to be followed in the mortgage process but it can be easy.  We understand that this is a major step for you and your family and we take it very serious.  We will put you at ease

The fist step is to have a mortgage application appointment where the application is completed so that your loan officer can begin working on what programs best fit your situation

Typically a loan program is recommended at applications and you will be asked to sign the documentation at that time.  If you need more time we will accomidate your requests, however by signing the documentation you are not in any way tied to the paperwork being submitted to our lenders, nor are you required to use us for the transaction.  Signatures on the disclosures and applications allows us to obtain information from a variety of sources in order to provide you with the best loan options available in the market today.  We work for you and we do not forget that in the process, because you can fire us at will.

With the application we will collect a variety of standard qualify documents to prove the information on the application is accurate and true; W-2’s, tax returns, bank statements, current pay stubs, home owners insurance, asset information. Public information reports like bk or proof of judgment pay offs, divorce documentation, and other sources of income information

Once the signed documentation takes place and all supporting documentation is in place, we will shop the loan with all 92 investors currently signed up with us to see who is offering the best programs.  We are in a sense a travel agent for banks and these banks work hard to obtain our business by providing large incentives to us which we pass on to you in order to be competitive in this market.

The next step is to secure the loan program with a rate.  The rate will be determined by the market and will be explained in more depth in the rate section of the web site.  We will make float and lock recommendations daily, but ultimately you get to decide when to lock your rate.  We will do everything in our power to ensure you lock at the right time that maximizes your rate benefits. 

The entire loan packages is faxed or shipped out to the loan processing center located at the selected banking institution.  An underwriter is assigned where they review the file to ensure all supporting documentation is verified and accurate.  Their job is to prepare the file so that it can be portfolio’ed and sold in the secondary market.  Typically they will issue an approval with conditions and send it back to the loan officer or processor at the branch.  We will then contact you to gather the remaining components to complete your loan application in full.

The loan application is then again reviewed by the underwriter and hopefully all required documentation is in place, if not a new approval with conditions will be issued.  If the loan has all the appropriate information a Loan Commitment is generated and the loan application is sent to a closing department.

The closing department will be responsible for issuing the wire transfer that will ultimately be wired to the title company of your choice. 

Finally you will be given a closing date and closing time where you will be signing all of the final disclosures and application for loan approval.  Once the signing takes place the title company will issue all funds to the appropriate entities and your loan transaction will be complete.

Appraisal

An appraisal is done by a unbiased third party to assess value in the property.  The lender uses the appraisal in determining the maximum loan amounts offered to you.

The appraisal fee is typically paid to the appraiser at the time the appraisal is done and will normally require you to make this payment upfront.

The appraiser will view the home and take measurements to calculate size and features of the home.  They will also take pictures to show what condition the home is in.

Once the measurements are completed and all features analyzed the appraiser will then pull comparable sales normally within the last 90 days to start assessing the value of the home. 

These comparable homes are analyzed to determine like models and features that best relate to the subject property.  Once 3 or 4 comparable homes are determined the price for which these home sold for will be the starting point when assessing value to the subject property.

These comparable homes are broken down by all the features and amenities offered by each and simple reduction or additions are made to the subject property based on the differences found in each of these homes.  These differences will ultimately be calculated to create an even value for all the homes being compared.

A final value is determined and a full appraisal report is generated for the lender. A copy of this report will also be given to you at the time of closing or upon request.

It is important to remember an appraiser differs from a home inspector and will not inspect the house the same way.  A home inspection is highly recommended before purchasing a home.   

Title Insurance

Required by law and will vary in cost depending on which title company you use.

A new policy will be required anytime a new deed is filed which will be done on all loan transaction.

This will protect the lender and the home owner from any unresolved title issues that appear after the closing from circumstances that arose before closing.

For example:  Lets say you bought a home and the reason for buying that home was the beautiful landscaping throughout the property.  This landscaping could have been done recently on credit with th landscaping company.  If for some reason the previous owners default the likelihood that a lein be placed on your home is high.  The title Insurance would protect you in this situation

Colorado Mortgage Loan: I’m Back:-)

The week’s headline economic report showed that inflation rose far more than expected in July, yet mortgage rates barely reacted and ended the week essentially unchanged. The July Consumer Price Index (CPI), the most widely watched inflation indicator, rose at the fastest annual rate since 1991. The core rate, which excludes the volatile food and energy components, rose at a 2.5% annual rate. The Fed’s perceived comfort level for core inflation is between 1.5% and 2.0%.

Mortgage rates usually move higher after an unexpected increase in inflation. This time they did not. Investors have started to expect that inflation levels will diminish later in the year and point to a couple of factors. First, slower economic growth in major global markets will reduce demand for goods and energy. In addition, a stronger US dollar will lower the cost of imported goods.

Even the Fed’s Stern, noted for his vigilant anti-inflation stance, stated that he expects inflation to come d own after the third quarter. To summarize, economic weakness at home and abroad, a stronger dollar, and a decline in oil prices offer hope that future inflation levels will be lower.

The Economic Calendar will be very light next week. The Producer Price Index (PPI) will come out on Tuesday. PPI focuses on the increase in prices of “intermediate” goods used by companies to produce finished products. Housing Starts will also be released on Tuesday. Leading Indicators and the Philadelphia Fed index will come out on Thursday

FHA Colorado Home Loans: Will this save us again in our time of need?

FHA Colorado Home Loans continue to be a great solution for Americans looking for another option in home loan financing.  These federally assisted mortgages are issued by qualified lenders like 1st Metropolitan Mortgage right here in Colorado.  FHA Colorado Home Loans opened the door for an entire nation in its biggest time of need.  During the Great Depression many home owners were experiencing high levels of foreclosures and defaults which created major concern for lending institutions.  In order to prevent a complete shut down of conventional home loan lending, The U.S. established the Federal Housing Administration, often referred to as FHA.  FHA began to subsidize loans by offering guarantees to lending institutions in the event of default.  Over night FHA Colorado Home Loans became available to all Americans.  In order to ensure that the Federal Housing Administration did not experience any substantial losses, Mortgage Insurance companies were allowed to offer insurance in place of subsidized FHA loans.  The term FHA Colorado Home Loans continued through the years and is mandated by the Federal Housing Administration; however its funding consists primarily of independent Mortgage Insurance companies.  Mortgage Insurance is often known as PMI in the mortgage lending world. 

FHA has maintained its current course of business for some time without any substantial changes to its FHA Home Loan products.  In August of 2007 that all changed.  FHA Colorado Home Loans have gained significant attention in light of the subprime crisis which has plagued our countries financial markets.  FHA Colorado Home Loans have come to the rescue again, offering several home owners a better solution to their current subprime nightmare.  FHA Home Loan programs have reduced their qualifying restrictions in order to qualify more buyers, but more significantly, FHA Colorado Home Loans have increased the lending limits for all counties located in the United States.  The changes that have taken place over the last couple of years have opened the market for you to qualify for a FHA Home Loan.

The Federal Housing Administration made it easy to offer the best mortgage to first time home buyer at interest rates so competitive that mortgage lenders were required to maintain licensing agreements with the Federal Housing Administration in order to originate FHA Colorado Home Loans. The primary goal for the Federal Housing Administration was to provide Colorado mortgage companies an adequate home mortgage financing system backed by federally insured funds protecting mortgage lenders from FHA Colorado Home Loans in the event the home mortgage defaults. Due to the Federal Housing Administration ability to protect mortgage lenders from default, mortgage lenders are able to offer the best interest rates available, giving you your best mortgage option. So before we move to quickly on what Colorado real estate home mortgage option is best, we should first look to see if our mortgage lenders will qualify you for any one of the FHA Colorado Home Loans available today.  To get today’s interest rate update go to www.coloradomortgagebanking.com/news

Thank you for giving me a chance to earn your business,  Daniel

Colorado Home Mortgage: My Adjustable Mortgage is about to adjust. What should I do?

My Colorado Home Mortgage Rate is about to adjust.  What does that mean and what should I do?

The full impact of a Colorado Home Mortgage that has an adjustable rate tied to it really depends on the type of Colorado Home Mortgage you have.  The most popular adjustable rate programs used over the last six years were the subprime loans.  These Colorado Home Mortgage Programs were designed to get high risk borrowers into homes at a rate normally just low enough to qualify.  The adjustable rate period for these loans ranged from 2 years to 3 years.  They are known in the mortgage business as two/twenty-sevens or three/Thirty-eights.  They were designed to adjust every 6 months until the rate hit the market cap rate, which is around 11%.  Pretty scary for anyone that currently has these Colorado Home Mortgage Programs.  These loans are designed so that you have to refinance after the 2 or 3 year grace periods.  If you do not refinance your Colorado Home Mortgage, you can expect your rate to jump up 2% every 6 months until it hits that Market Cap rate.  So if you had a 5% rate on this loan it would jump up to 7%, 9%, 11% respectively over time. 

The 2^nd type of Adjustable Rate Mortgages offered in the market has far less risk tied to it, and as a result, the adjustment periods are a bit friendlier.  FHA and Conventional A-Paper Colorado Home Mortgage programs have an Adjustable Rate Mortgage Option.  These Rates typically adjust only once per year and will not exceed 1% per year during that time.  This option will give most Colorado Home Mortgage clients the ability to refinance when it makes sense to them.  For example, we have several clients that got into an ARM Colorado Home Mortgage program at 3.875%.  This is a great rate and they have it locked for 5 years.  In year 6 that Colorado Home Mortgage will be set to adjust.  The adjustment can only go up 1%, therefore making the highest rate available for that year set at 4.875%.  That rate is still better then the 30 year rate currently being offered.  Year number 7 the rate could go to 5.875%, assuming worst case scenario. Again that rate is right in line with what is being offered on 30 year fixed rates.  

Much of the publicity circling around adjustable rate mortgages comes from media outlets.  These media outlets will only report the most negative aspects of the business.  A tornado hits a small town what do you see, 3 trailers hanging from a tree.  You know what I am talking about and the point I am trying to make is that you need to understand what type of Colorado Home Mortgage you are getting yourself into.  There are benefits from an Adjustable Rate Mortgage when it is done right.  Those clients that have been in their house for 5 years at 3.875% will attest to the benefits that they had.  There are so many right reasons to do an Adjustable Rate Mortgage, however the biggest wrong reason is for qualification purposes.  Many of the subprime lenders now out of business qualified these Colorado Home Mortgage programs with the lower teaser rates in order to get people approved.  What they did not do is analyze the impacts created by the adjustment for these buyers.  These borrowers were put in a position where they could no longer afford their payments at the higher interest rate levels.  This has caused many Americans to fall into Foreclosure status.

So now that we have talked about what the Adjustable Rate Mortgage is, we will focus on what you should do.

Option 1:  Refinance Your Home

Utilizing a premier Colorado Home Mortgage broker, you can get access to all programs that are available to you, not just the programs offered by that bank.  The most popular refinance for those borrowers that took out a subprime loan is a FHA Colorado Home Mortgage.  The FHA option allows for a little more risk then the conventional A-Paper loan option.  The Higher risk also allows for a higher loan to value ratio.  This is big as most Colorado Home Mortgage programs face home value issues.  You do not need much appreciation on your home to qualify.  In fact you only need 3% if you have not refinanced before, and 5% if you have.  If the rate creates payment obstacles for you and new 5 year adjustable rate mortgage might be the solution.  FHA Colorado Home Mortgage ARM products are far less volatile then subprime ARM products.  The reason that I recommend the 5 year option as a qualifying option is that it will allow you an additional 5 years to get your current situation back on track.  This is the most feasible option available for people who are not happy with the adjustment that is about to take place on their Colorado Home Mortgage program.

Option 2:  Let your Rate adjust and continue paying.

I stated above that some adjustments are not bad.  Colorado Home Mortgage programs that only adjust once a year at a rate of 1% a year may still offer a lower rate then what the market currently offers.  In these circumstances it is best to wait and refinance only when the market hits a low point.  Colorado Home Mortgage programs should be designed to meet both your current and future needs.  Refinancing should only take place when it makes sense for your long term objectives.  Many people looking to refinance their current Colorado Home Mortgage Program do so because it saves them $200 a month today.  Then they sell their home a year later.  The cost of the refinance will set you back much more then the savings you get over the next year.  Your net proceeds from the sell of that house will be far lower then the savings your received from the refinance.  So refinancing your Colorado Home Mortgage should only take place when it makes sense to do so.  Talking to your Colorado Home Mortgage broker and asking for amortization schedules will help you make that decision.

Option 3:  Sell your Home

Not the most popular option, but if you find yourself in a situation where you can no longer afford your payments selling your home will be the best option.  Hopefully you have some equity to make the sell of the home complete.  However if you are upside down on your home like many of us are, you can also go into a short sale situation.  You should contact a professional Real Estate agent to answer your short sale questions.  Colorado Home Mortgage loans have been adjusting for many people in a way that makes it impossible for them to continue making payments.  Circumstance arise that may have contributed to these obstacles, but putting your home up for sale and eliminating the threat of continued Colorado Home Mortgage rate hikes may help you save money over the long term.  

I hope that you found the information helpful, if you are looking for current Colorado Home Mortgage market updates you can check out my market blog at www.coloradomortgagebanking.com/news

I am here to help you and I would be pleased to earn your business.  If you are someone you know needs my assistance please don’t hesitate to call me directly.  My goal is to be your Colorado Home Mortgage provider for life.

Daniel   

Colorado Online Mortgage: How are Rates determined

Many consumers regard mortgage rates as moving targets, apparently governed by the whim of some Colorado Online Mortgage Genie. People often feel confused and helpless by whatever rates Colorado Online mortgage lenders toss their way. Seemingly mysterious changes in rates can have a positive or negative affect on consumers and prospective real estate investors depending on investor purchasing goals. In turn, consumer reaction to various economic forces can further fuel factors that cause Colorado Online mortgage rates to change.

Consumers read about economic factors that cause Colorado Online mortgage rates to change ranging from the Federal Reserve Board interest rate decisions to standard release of Economic data.  The Data used in these Economic reports allow investors the tools to predict future bond results.  If investors feel bonds will improve in price then Colorado Online Mortgage rates will drop.  Typically the decision on whether to buy bonds or equities will depend on how stable our economic outlook will be.  But how does this relate to real estate? And why aren’t Colorado Online mortgage rates more stable?  There is no secret formula to account for Colorado Online Mortgage rate behavior. In fact, it’s really quite simple. Oftentimes, like the stock market, Colorado Online mortgage rates are dictated by investor emotion and by mass media force-feeding.  That means that most Colorado Online Mortgage consumers are subjected to what investors think the market will do.  Investors make that determination from the economic data released on a daily basis.  Not only does the economic data influence investor behavior, but the media outlook does as well.  So this brings us back to Media Influence and how you should determine whether your Colorado Online Mortgage rate is the best rate available.  Contacting reputable real estate and mortgage broker professionals, and weighing what they say against your research done on the Internet or local library or bookstore should give you the edge over anyone else who simply goes with the biggest advertiser for Colorado Online Mortgage products. Educate yourself first.

It’s not unusual for Colorado Online mortgage rates or loan percentage points to change more than once per day. For example, a Colorado Online mortgage loan that is being offered at 5.875% in the morning may inflate by a .25 percent increase by mid-afternoon.  The Bond market has a continuous stream of trading that takes place, including after hour trading.  Because of this activity Colorado Online Mortgage rates almost never stand still.  Think of mortgage loan rates as a variable movement on your loan until you lock it in place.  That is why it is so important to have someone that specializes in the field and actually understands the variables to provide you with your Colorado Online Mortgage services.

The real economic factors that cause Colorado Online Mortgage rates to fluctuate include but is not limited to the following economic reports, unemployment percentages, inflation fears, GDP, CPI, PPI, and so on.  These reports account for the biggest influencer beyond current economic headlines.  Obviously when Headlines report major activity whether positive or negative the resulting influence can create Colorado Online Mortgage rate movement. Gauging what causes Colorado Online Mortgage rates to change means identifying and defining those factors that affect interest rates in a timely manner. If the data shows hesitancy and confusion about poor economic performance, Colorado Online mortgage rates may fall. Conversely, if the data shows strength in the economy and low unemployment, Colorado Online Mortgage rates may rise.

In summary, what effects Colorado Online Mortgage rates are factors that are highly subjective, but when these factors are taken together, they not only influence the buying habits of the prospective real estate consumers but the overall Colorado Online Mortgage industry.   I am in the business to be your expert advisor and would welcome the opportunity to do business with you.

Daniel

Colorado Mortgage: What is the difference between a broker and a banker?

The biggest decision facing borrowers today is whether to use a Colorado Mortgage Broker or a Colorado Mortgage Banker.  Normally the decision is made by which Colorado Mortgage provider is offering you a better rate or lower fees.  For this article we will make the assumption that both Colorado Mortgage broker and Colorado Mortgage banker can offer the same product.  I will discuss some of the product availability differences later on, but for now let’s compare apples to apples.  This assumes that both Colorado Mortgage Brokers and Colorado Mortgage Bankers offer the same products.  The product we will look at is a standard Conventional Loan at 20% down.  The loan parameters also assume good credit, income, and job stability.

I can go into detail about where the money comes from to help finance these mortgages, but for time purposes lets also assume that Colorado Mortgage Brokers and Colorado Mortgage Bankers all get their source of funds from the same place.  The Mortgage Backed Securities market is the largest market dealing with the investment returns expected from Colorado Mortgage Portfolios.  The money used in these investments comes from investors dealing in mortgage securities right from Wall Street.  So the primary difference on what is charged on a Colorado Mortgage stems from overhead costs and profit expectations from one Colorado Mortgage Bank from another.

Now let’s talk about a Colorado Mortgage Banker.  These Colorado Mortgage Bankers are considered retail outlets for a bigger bank entity.  It is simply one division of the banks total operations.  They borrow the funds from a wholesale lender in order to issue Colorado Mortgage products back to the borrower.  Often times, they Borrower right from their own wholesale divisions.  For example Wells Fargo has a wholesale division that works directly with investors on Wall Street.  This Wholesale division offers Colorado Mortgage funds to its Retail Wells Fargo Branch and their Colorado Mortgage Broker relationships (which I will talk about later).  The Retail Branch has a Colorado Mortgage Banker that offers these products to the public.  Now the Wholesale division offers the Colorado Mortgage Funds at the same rate and cost as they do the Colorado Mortgage Brokers which they have relationships with.  The Retail Branch then is required to put in a profit margin and compensate for overhead.  Overhead expenses are not exclusive to the mortgage part of a retail bank, but instead the entire operations of the Retail Bank.  The minimum break even point for a Colorado Mortgage Banker is much higher then it is for a Colorado Mortgage Broker. 

There are two ways the Colorado Mortgage Banker can make up for the difference in cost.  One way is to charge higher fees (which the rarely do) or they can make up the compensation through a higher rate.  The higher rate allows the Colorado Mortgage Banker additional income reward to them by the Wholesale division.  This compensation difference is known as Yield Spread.  The costs for all Colorado Mortgage products are about the same as it relates to third party fees.  These fees must be paid by the borrower of the Colorado Mortgage Provider.  One way or another they are paid.  So if the third party fees are similar and the wholesale rate is similar then what really sets the Colorado Mortgage Banker apart from the Colorado Mortgage Broker is its overall cost structure and profit expectations.

This brings us to Colorado Mortgage Brokers.  Colorado Mortgage Brokers enter into relationships directly with Wholesale lenders throughout the United States.  Colorado Mortgage Brokers are not limited to the number of relationships they enter into and often find huge benefits by entering into several relationships.  Unlike a Colorado Mortgage Banker, Colorado Mortgage Brokers are not limited to only one Wholesale lender this gives Colorado Mortgage Brokers a competitive edge.  Colorado Mortgage Brokers have the ability to price out wholesale lenders and offer its borrowers the lowest wholesale rate available.  Colorado Mortgage Bankers and only offer what their wholesale lender has and if it is not competitive they too are not competitive.  Colorado Mortgage Brokers like Colorado Mortgage Bankers also have Overhead costs and Profit expectations priced into every loan.  The difference is that Colorado Mortgage Brokers only have overhead related to actual Colorado Mortgage production versus multiple lines of business in a Retail Bank.  Overhead tends to be lower and assuming the Colorado Mortgage Broker is offering you the same Profit margins their rates will most often be lower then the rates offered by a Colorado Mortgage Banker.

In summary, it is important to do you homework and not all Colorado Mortgage Brokers are on the up and up.  Colorado Mortgage Bankers typically have a small but fair profit margin built into their rates, where as a Colorado Mortgage Broker can pretty much charge as much as they want.  In these circumstances a Colorado Mortgage Banker will be you best options, however we have our price structured similar to most Retail Banking institutions and we benefit from Volume generated Profits.  This allows us to competitively price our Colorado Mortgage options and it is in rare situations that a Colorado Mortgage Banker can beat what we can offer.  It is so rare that I will match or beat any Colorado Mortgage Banker offer in order to win your business.

Finally some caution to all borrowers.  There are still many Colorado Mortgage Brokers that lack the ethical standards to provide you with an honest and accurate account of what your Colorado Mortgage will be at closing.  Bait and Switch is still a common practice and is far less likely to happen in the Colorado Mortgage Banker situation then a Colorado Mortgage Broker situation.  I can only say that with our services we are committed to ensure there are no surprises in your Colorado Mortgage Process.  This commitment is probably the biggest reason for our large referral business which we take great pride in.  We want you to be completely satisfied with your Colorado Mortgage experience and we know that working with any one of our Colorado Mortgage Brokers you can count on getting the best package available to you in the market.  Call me directly with any Colorado Mortgage questions, and take a look at www.coloradomortgagebanking.com/news for current Colorado Mortgage rate information.

Daniel

Colorado Foreclosures Are your really getting a deal?

Colorado Foreclosures continues to be a problem throughout Colorado.  Already up 42% from last year, Colorado Foreclosures seem to be making an impact on the overall home values.  Homes currently on the market are selling for less because of the buyers demand for Colorado Foreclosures.  Buyers looking for Colorado Foreclosures have become accustom to the offer procedures on these homes.  A buyer can come in and offer as little as they want for these homes and if the bank accepts the offer the home will be theirs.  It’s a bargain for everyone involved.  The seller feels as if they are cleared from the debt, Buyers feel as if they bought a home drastically undervalue and the realtors tend to get paid higher commissions on these homes.  Win/Win for everyone.

This may appear to be good for all those involved, but what buyer’s don’t know is that this practice has drastically devalued homes in several areas throughout Colorado.  Which means, that the home you thought you bought undervalue is not as undervalued as you thought.  I have several Clients that come to me stating that they are getting into a Colorado Foreclosure home with 10% or 20% already built into the value, giving them the perception that they are walking into equity.  Here is a reality check!  What makes you think that some how you found a house drastically undervalue when no one else had a chance to see it first.  Lucky?????  Not really, what has happened is that no one would buy this house at the price that is owed (Probably because it was way overvalued in the first place).  There are several reasons that the value of these homes can appear higher then they are.  The biggest cause of over inflated home prices are due to an exaggerated market felt 3 years ago, when everyone was buying, therefore the demand was greater.  People who typically could not buy a home all of a sudden could.  These individuals had no idea what values should be and they trusted the professionals working in these fields had their best interest in mind.  Unfortunately, many of these individuals were more concerned about the income they could generate and not so much about the people buying the homes.  Many homes were pushed in the appraisal process in order for buyers to qualify.  We also experienced many people qualifying for payments which after the adjustment period were guaranteed to put them into trouble.  So the next time you think you are getting a deal on Colorado Foreclosures remember that if the home sat on the market odds are it sat on the market for a reason. 

Normally when you are in the market to buy up Colorado Foreclosures you expect to get into a house that needs work.  Well all the money you spend to bring that house up to speed is not a value savings for you.  In fact it should be considered in the price of the home as you buy it.  Most people believe that they are getting a great buy, but by the time you add the maintenance and the home adjusts to the area value, you will more then likely be buying the home at value.   

Please call me for any questions related to Colorado Foreclosures.  I would be happy to give you a market analysis which can help you recognize the true value of that home.   Also Check out www.coloradomortgagebanking.com/news for current market updates.

Daniel

Colorado Home Mortgage Loan rates might see some additional improvments before the 4th of July

Colorado Home Mortgage Loan rates will be impacted by a variety of Economic reports due out this week.  We saw some nice improvements last week and we are hoping that the momentum will continue to drive Colorado Home Mortgage Loan rates down.  We are hitting some resistance in the MBS market and you can learn more about that at www.coloradomortgagebanking.com/news.  We will focus this site on the news that will impact your Colorado Home Mortgage Loan rates today.  We only had one report today, which was the Chicago Purchasing Managers Index.   The Chicago PMI is measured by new orders, production, supplier deliveries, inventories and employment; asking for positive, negative or unchanged readings of each. A reading above 50% generally indicates that the manufacturing sector is expanding, and below 50% signifies contraction.  The Chicago PMI report came in at 49.6 which still indicates contraction in production however it does appear that we may be hitting the turning point soon.  We can only contract so far before expansion becomes inevitable.  Colorado Home Mortgage Loan rates did not move much from the news as it basically came in close to expectations.  With no surprises in the report investors looked to the headlines to make their buying decisions.  The stock market did increase a bit and because of those gains MBS did take a bit of a hit.  Colorado Home Mortgage Loan rates did jump up about .125% by close of business. 

I do not think that the increase seen today will continue unless something unexpected happens in the next day or so.  Most of the Economic reports being released this week will have minor impacts on Colorado Home Mortgage Loan rates, and will not be enough to break any new barriers.  Most of the decreases felt in Colorado Home Mortgage Loan rates over the last couple of weeks have found its way into the Rate Sheets today, and LOCKING would be a good idea.  Those that think inflationary pressures will not creep into the news might find this week’s economic data favorable to Colorado Home Mortgage Loan rates.  We have a variety of reports due out that will create some movement.  The two reports to watch out for this week are tomorrows ISM index and Thursday Nonfarm Payroll.  These are the only two reports that could break some of the barriers we are seeing in the MBS market.

The ISM Manufacturing Index is a national survey of purchasing managers which covers such indicators as orders, production, employment, inventories, delivery times, prices, export orders, and import orders. The ISM provides a composite index of national manufacturing conditions.  Manufacturing is an important sector of the economy and the ISM index is one of the two primary national measures (the Chicago PMI is the other). Like the Chicago PMI anything reported below 50 indicates a contraction in the market.  If the Chicago PMI is a preview of what is to come in the ISM Manufacturing Index, we will see this report indicating some contraction in the market.  Colorado Home Mortgage Loan rates should decrease a bit if the report indicates contraction.  How much Colorado Home Mortgage Loan rates will improve depends greatly on what the report says.  I don’t expect any surprises in this report and because of that, do not expect any real movement to play out in the Colorado Home Mortgage Loan rate market.

Non-Farm Payrolls is estimated based on a survey of larger businesses measuring the number of paid employees working part-time or full-time in businesses or for the government.  This report typically has a big impact on Colorado Home Mortgage Loan rates, because on the inflationary implications that come from the report. The Non-Farm Payroll data is the top number of the Employment Report, one of the most highly anticipated pieces of economic data. The headline figure is often a major market mover with the labor market a strong predictor of the strength of the economy. The Unemployment Rate is obtained from a different data sample, and together the two reports provide the most comprehensive picture of the labor market.  This could be the information we need to break through the price Ceiling currently being felt in the market.  This also assumes that we do not see any additional movement in Colorado Home Mortgage Loan rates until then.  Inflation is a hot topic and if the reading comes in worse then expected, much of the inflationary fears revolving around this report will dissipate (for the time being).  Colorado Home Mortgage Loan rates will see some nice improvements and we might at that time get below the 6.0% range.  We need to weigh out the risk/reward in any decision to float or Lock.  We have hit a low point for the last couple of weeks and we will need the economic data to indicate something that is contradictory to what experts are say.  Which is that inflation is under control.  Only if this happens will rates improve to a point where floating makes sense.  Its like betting on the right horse, about a 1 in 10 shot, because of this if you are not risk adverse, then LOCKING would be a good idea.

Please call me with your Colorado Home Mortgage Loan rate questions.  I would enjoy earning your business.

Daniel

Colorado Online Mortgage

Colorado Online Mortgage rates experienced a lot of activity in the last couple of days.  We have a variety of economic reports to talk, but in short most of the data released came in positive for Colorado Online Mortgage rates.  The movement seen in the Mortgage Backed Securities markets however has not been enough to send Colorado Online Mortgage rates to far down.  We have seen about a 1/8^th decrease in Colorado Online Mortgage rates and we are hoping that going into next week we see Colorado Online Mortgage rates continue to drop.  Listed below are the Economic reports reported in the last couple of days all of which will have some impact on Colorado Online Mortgage rates:

Yesterday 6/26/2008

Corporate Profits continue to be the hot headline topic.  So far Corporate Profits are down and with recent troubles being reported by GM and Ford its hard to believe that Corporate Profits will come back this year.  The negative press related to Corporate Profits will increase the likelihood that investors will buy Mortgage Backed Securities.  This demand should decrease pressure on interest rates and should move Colorado Online Mortgage rates down.  

Jobless Claims continue to jump over expectations sending another weakening influence in our economy.  Jobless claims are monitored as a signal of strength in our economic system.  We are trending above 3.1 Million Claims which is at a new high for this decade.  Investors again tend to lean towards MBS in order to ride out the poor economic storm.  Colorado Online Mortgage rates tend to do better when this report comes in worse then expected.

Existing Home Sales did come in a bit better then expected.  We were anticipating 4.96 Million homes sold and in fact we had 4.99 Million.  This report would have normally had negative impacts on Colorado Online Mortgage rates, but the difference was not enough to send any real shock waves to investors.  As a Colorado Online Mortgage Provider I will attribute the higher then expected numbers to an increased activity seen in the summer months.  We also have many new home owners recognizing the potential to buy now and this would increase home sale activity.  The report though negative did not move Colorado Online Mortgage rates in one direction or the other.

Gross Domestic Product Came in as expected showing about a 1% increase.  GDP is the biggest monitor for recessionary pressures.  Negative GDP numbers are defined as Recessionary periods.  Two GDP reports in a row showing negative output indicates that we are in a recession.  Colorado Online Mortgage rates did not react to the information.  Most of the expectations in GDP have already been priced into the Colorado Online Mortgage markets and would have only impacted them if the news came in different then what was expected. 

06/27/2008  Economic Data

The Personal Consumption Expenditures (PCE) report is a component of the monthly Personal Income report. It is a measure of price changes in consumer goods and services. The PCE is the Fed’s favorite inflation indicator and markets tend to be extremely sensitive to unexpected changes to the reported numbers. As inflation and expectations of future inflation rates change, the markets adjust Colorado Online Mortgage interest rates to reflect those changes.   The fact that the actual Core PCE come in lower then expected indicated that inflationary pressures were weaker then anticipated by the market.  This will create buying demand in the market and will help lower Colorado Online Mortgage rates.

Consumer Sentiment, like Consumer Confidence measure how people feel our economic situation is.  A strong report typically indicates stronger then expected expenditures by consumers.  A weak report indicates consumer’s propensity to save.  When people are not spending, economic stimulus does not take place.  Poor economic stimulus activities will increases the demand for bonds and as a result lower the price for Colorado Online Mortgage rates.  Our current Consumer Sentiment reading is at its lowest level in 20 years and appears to be motivating people to save.  This will help Colorado Online Mortgage rates over time.

In conclusion, most of the economic data seems to positive for Colorado Online Mortgage rates.  We are hoping to see Colorado Online Mortgage rates continue their downward momentum.  We will need to stay tuned to all the economic data influencing our markets over the next week or so.  We should drop a bit over the next few days. 

Please call me with your Colorado Online Mortgage questions.