The current market conditions are confusing to say the least. Sellers trying to sell their house are finding out that their house might be worth less today than when they bought it a couple of years ago, buyers are finding it harder to qualify to get a loan with the increased tightening of credit by the banks, and interest rates are going up rather than going down like logic would seem to dictate. What is going on?
The good news is that everything in life seems to be cyclical. I have heard phrases such as: history repeats itself, what comes around goes around, and the market makes adjustments and things always bounce back. That all sounds well and good, but what do we do today about all of that? Most people don’t know when that cycle will come back and the people being affected today aren’t too concerned about what happens two years from now. It seems like a vicious cycle that in all honesty would be better if there was some clarity to it.
My suggestion to a seller is to identify why they want to sell. If they have to because their job is being transferred, then there isn’t much choice. If it is because the family has grown out of the size of the current home, again maybe no choice. However, if someone is wanting to sell their house, then maybe the best thing to do is to dabble at selling it. In other words, aggressively try to get it sold at a price you feel comfortable with, but at the same time not get to charged up about it and dream of that new home you want. The difference between “have to sell” and “want to sell” are two different things. I know that is a hard thing to separate, because we live in a world of wants, but taking a more relaxed approach and testing the waters might be the best approach in today’s market. If the house gets sold quickly, trust me, finding a house to buy isn’t going to be overly difficult.
My suggestion to a buyer is to make sure that you can afford what you are buying. Get your finances in order and make sure that a new house is affordable. Make sure to take into consideration the expenses that might not be seen on paper. You need to look at the house payment, but what about the other expenses involved like: landscaping, improvements, utilities, etc. Those expenses are important to consider as well as the principal, interest, taxes, and insurance payment. The other thing to think about is down payment. Lenders have tightened their grips so much that most loan programs require some sort of down payment. There are only two or three programs still available that require no money down. There used to be several programs. Not any longer. Get into the savings mode and save some money for a down payment. One of the most rewarding things about having a down payment is the fact that when you do buy a house, you feel like you have put part of your soul into the purchase of that home. There is a feeling of accomplishment and a dedication to that house more so than when you don’t put a penny of your own money, your owe blood and sweat into the transaction.
Wednesday, June 11, 2008
Friday, February 1, 2008
HOW ARE FIRST MORTGAGE RATES DETERMINED?
One of the most difficult things to explain is, how are first mortgage rates determined? The reason it is so difficult to explain is that there are all kinds of media that allow people to show interest rates at misleading terms. A consumer must take the time to read the fine print for the real explanation on what is being offered.
Let me first tell you the truth on how first mortgage rates are determined. The 10-year bond is the ONLY indicator of first mortgage rates. I view the activity of the 10-year bond daily on a website at: http://finance.yahoo.com. On that site, the 10-year bond is clearly readable and the history of the bond can be seen very easily. If you were to follow the movement of that bond through history, you would see that first mortgage rates mirror that chart.
The Federal Reserve, are the people that get all the news when interest rates are lowered. They control whether or not to lower or raise the Fed Funds Rate. When this action is taken, most banks then lower the Prime Rate. The Prime Rate is what 2nd mortgages are generally based off. In other words, if you have a Home Equity Line of Credit or HELOC, and the Prime Rate is lowered ½ point, your interest rate on your mortgage will go down ½ point.
The lowering or increasing of the FED Funds Rate has zero bearing on first mortgage rates. As a matter of fact, the Fed lowered their rates a total of 1.25% in the month of January 2008 and first mortgage rates actually increased. Remember, the 10-year bond is what to look for if you are trying to predict whether mortgage rates will go up or down.
Let me first tell you the truth on how first mortgage rates are determined. The 10-year bond is the ONLY indicator of first mortgage rates. I view the activity of the 10-year bond daily on a website at: http://finance.yahoo.com. On that site, the 10-year bond is clearly readable and the history of the bond can be seen very easily. If you were to follow the movement of that bond through history, you would see that first mortgage rates mirror that chart.
The Federal Reserve, are the people that get all the news when interest rates are lowered. They control whether or not to lower or raise the Fed Funds Rate. When this action is taken, most banks then lower the Prime Rate. The Prime Rate is what 2nd mortgages are generally based off. In other words, if you have a Home Equity Line of Credit or HELOC, and the Prime Rate is lowered ½ point, your interest rate on your mortgage will go down ½ point.
The lowering or increasing of the FED Funds Rate has zero bearing on first mortgage rates. As a matter of fact, the Fed lowered their rates a total of 1.25% in the month of January 2008 and first mortgage rates actually increased. Remember, the 10-year bond is what to look for if you are trying to predict whether mortgage rates will go up or down.
Thursday, January 3, 2008
Foreclosures and Current Mortgage Climate
As most of you have been reading the newspapers and listening to the news about the increase in foreclosures and adjustable rate mortgages coming due, I have been trying to do some research in regards to the loans that Middlestead Mortgage originated. I have found some very interesting information.
As of November 2007, Middlestead Mortgage has loans that Countrywide Home Loans services of over $34 million. Pat Knoebel, Market Sales Manager for Countrywide, said " On more of a historical note, as of November 2007, Countrywide is servicing 290 loans for just over $34 million of loans originated by Middlestead Mortgage. Of these 290 loans, none are in foreclosure status. Middlestead Mortgage epitomizes the type of customer we look for at Countrywide."
The reason I wanted to write about this is that all the negative publicity tends to lump all Lenders, Brokers, Realtors, or anyone associated with the mortgage business in to one category. Clearly that is a wrong. I completely agree that there are things wrong within our industry. I am all for certain changes to be made that will make the entire loan process more easily digested by consumers. As a matter of fact, Middlestead Mortgage has taken certain precautions with each loan that is what I call "full disclosure". We take the time to explain to our clients what the loan is all about and how much compensation we will receive. We have been doing this for several years now, well before the industry is going to force everyone to do it.
The bottom line is that there are unscrupulous people in all walks of life. If the hair stands up on your neck or your gut tells you something is wrong, go find yourself a loan originator that makes you feel comfortable. Your pocketbook will thank you and you will sleep better at night.
As of November 2007, Middlestead Mortgage has loans that Countrywide Home Loans services of over $34 million. Pat Knoebel, Market Sales Manager for Countrywide, said " On more of a historical note, as of November 2007, Countrywide is servicing 290 loans for just over $34 million of loans originated by Middlestead Mortgage. Of these 290 loans, none are in foreclosure status. Middlestead Mortgage epitomizes the type of customer we look for at Countrywide."
The reason I wanted to write about this is that all the negative publicity tends to lump all Lenders, Brokers, Realtors, or anyone associated with the mortgage business in to one category. Clearly that is a wrong. I completely agree that there are things wrong within our industry. I am all for certain changes to be made that will make the entire loan process more easily digested by consumers. As a matter of fact, Middlestead Mortgage has taken certain precautions with each loan that is what I call "full disclosure". We take the time to explain to our clients what the loan is all about and how much compensation we will receive. We have been doing this for several years now, well before the industry is going to force everyone to do it.
The bottom line is that there are unscrupulous people in all walks of life. If the hair stands up on your neck or your gut tells you something is wrong, go find yourself a loan originator that makes you feel comfortable. Your pocketbook will thank you and you will sleep better at night.
Thursday, October 4, 2007
Title Insurance Business
One of the goals of Middlestead Mortgage has always been to try and be as progressive as possible to keep updated on changes in the market, new available products, and diversification in the industry.
Some of the recent things we have done or looked into include: Myself getting a special designation as a mortgage professional. Our staff being more educated on the WHEDA first-time home buyer program, doing our due diligence on getting approved to do FHA home loans, and bringing our title company more to the public eye.
Our title company, called ABC Title, was formed in September of 2006. Many people weren't or are still not aware of it simply because we haven't promoted it very much. We opened it with the idea of taking care of our current database of customers to streamline the refinance process or help them with title insurance when they were selling their homes. What has happened, however, has been a twist I didn't expect. Since we really opened the title company intending to be a benefit to our current clients, we have been contacted by many new people interested in our services because we have been very competitive with our pricing.
Title insurance is a confusing, but necessary evil. It is a process designed to protect the seller, the buyer, and the lender against any judgements or liens that are attached to the house that is being purchased or refinanced. Basically, a title search will tell the parties involved what mortgages are against the property, what other liens are against the property (such as state or federal tax liens, child support liens, etc), if there are any outstanding property taxes due, if there are special easements that go along with the legal description of the property, if there are any outstanding assessments on the property (such as a sidewalk that was put in a subdivision and the city allowed the owner to pay in installments), or if there were any outstanding judgements against the owner of the property. All of the above things can affect whether or not a person can sell their home or if a lender is willing to attach a new mortgage to the house, and several other things.
Title insurance can be very involved, but the most important thing to know is that we have all the resources to provide the much needed service at an extremely competitive price. If you would like more information, please feel free to visit our website at: www.abc-title.com for more information. The website is in it's designing stage, so please bear with us as we update it.
ABC Title is All 'Bout Customers :)
Some of the recent things we have done or looked into include: Myself getting a special designation as a mortgage professional. Our staff being more educated on the WHEDA first-time home buyer program, doing our due diligence on getting approved to do FHA home loans, and bringing our title company more to the public eye.
Our title company, called ABC Title, was formed in September of 2006. Many people weren't or are still not aware of it simply because we haven't promoted it very much. We opened it with the idea of taking care of our current database of customers to streamline the refinance process or help them with title insurance when they were selling their homes. What has happened, however, has been a twist I didn't expect. Since we really opened the title company intending to be a benefit to our current clients, we have been contacted by many new people interested in our services because we have been very competitive with our pricing.
Title insurance is a confusing, but necessary evil. It is a process designed to protect the seller, the buyer, and the lender against any judgements or liens that are attached to the house that is being purchased or refinanced. Basically, a title search will tell the parties involved what mortgages are against the property, what other liens are against the property (such as state or federal tax liens, child support liens, etc), if there are any outstanding property taxes due, if there are special easements that go along with the legal description of the property, if there are any outstanding assessments on the property (such as a sidewalk that was put in a subdivision and the city allowed the owner to pay in installments), or if there were any outstanding judgements against the owner of the property. All of the above things can affect whether or not a person can sell their home or if a lender is willing to attach a new mortgage to the house, and several other things.
Title insurance can be very involved, but the most important thing to know is that we have all the resources to provide the much needed service at an extremely competitive price. If you would like more information, please feel free to visit our website at: www.abc-title.com for more information. The website is in it's designing stage, so please bear with us as we update it.
ABC Title is All 'Bout Customers :)
Tuesday, July 24, 2007
We Are In A Crazy Time
As many of you have either heard or read, the mortgage industry is experiencing a difficult time due to high foreclosure rates. Even in Wisconsin, where we have historically had lower nationwide foreclosure rates, we are experiencing high foreclosures. There are questions as to why this is. Is it the lenders fault? The mortgage brokers? The customers? There is much debate on who is to blame, but I have my own ideas.
First and foremost, we need to look at the customer. There isn't anyone that has held a gun to someone's head and said you must purchase this home. In ALL cases, there are disclosures that are signed and at the closing table, it is the right of the buyer to walk away if the terms are different than when quoted or if they feel that they can't live up to the terms of what they are signing. I definitely don't want to put all the blame on the consumer, but they are responsible for their actions (as are all of us associated within this business)
Secondly, I think we need to look at the mortgage programs that have been made available. There are so many loan programs available that allowed almost anyone to purchase a home. I think what happened is that there was such a craze to purchase homes and lenders were so busy taking care of home purchases and also refinances because interest rates were so low, that they never saw coming what is happening now. Everyone was living in the fantasy world that interest rates were going to continue to go down, home prices were going to continue to increase in value, and that people were going to be able to afford the payments they were getting. What happened is that people that shouldn't have been buying homes, bought homes. People were getting themselves into adjustable rate mortgages and never looking at what could happen three or five years later when their rates adjusted higher. People were able to buy homes with no money down. All these things added up to what we are seeing today. I don't want to place blame on all the lenders, either.
Next comes the mortgage brokers themselves. Middlestead Mortgage included. We experienced a time where we all were making very good money. We were refinancing people left and right to get them lower rates. We were taking equity out of there homes to consolidate debts. We were getting mortgages for people that were first time home buyers with little or no money down and not taking the time to educate the buyer on what home ownership was all about. Many people didn't understand what to expect six months later. Home maintenance, possible repairs, property taxes, possible increase in interest rates if they had adjustable rate mortgages. Many of these things could have been gone over better and maybe people would have made different choices. Then there are the mortgage brokers that did the wrong thing to be profitable. Putting people into crazy loans that made the broker a lot of money, but wasn't in the best interest of the customer. Doing stated income loans when they knew the customer couldn't afford to make the payment. These types of things mortgage brokers should have done a better job with.
What is next? I think the industry is going to have some overhaul. Remember that people will always buy houses, people will always look to access the equity in their home to consolidate debt, and people will always need mortgage professionals to assist them. What is the most important thing I believe is to do business with someone you trust and have confidence in. Someone with a proven track record. Ask questions. Look at the big picture and the short and long term consequences of what decisions you are about to make. Know exactly what you are getting in to and take the time to figure out if the direction you are going is in the best interest of you and your family. As a consumer, realize the responsibility you have to the entire process. You ultimately make the final decision. If you don't like the terms, the person you are dealing with, or feel uncomfortable, then don't do it.
As far as the lenders are concerned. We will see a tightening of rules and regulations. No money down loans will become harder and harder to come by. I think that is a good thing. Statistics show that people that put their hard earned money as down payment are more committed to making things work. If you don't put anything into the deal and things don't work out, what have you lost financially? Nothing. Getting approved for a loan will be tougher.
Lastly, as mortgage brokers we need to due the responsible thing. We need to make our clients aware of what is good and bad. We shouldn't be afraid to say no. I can tell you at Middlestead Mortgage we are committed to do the right thing. If that means saying no and having a client mad at us, then I guess I am willing to do that. Even if they can go down the street to get a loan, I don't want to feel guilty about doing something I know in my heart is wrong. However, that doesn't mean I am not going to work my tail off to help someone. If things makes sense to me, then I believe I can help it make sense to my client.
Overall, this isn't a time of panic. This is a typical adjustment to the industry in general. That doesn't help the individual that is going through this now, but in the end it will make things better for future people trying to buy houses and refinance their existing mortgage. We all need to take a look in the mirror and accept some responsibility for what has happened and make the corrections needed to make sure we do the right things in the future. All of us.
First and foremost, we need to look at the customer. There isn't anyone that has held a gun to someone's head and said you must purchase this home. In ALL cases, there are disclosures that are signed and at the closing table, it is the right of the buyer to walk away if the terms are different than when quoted or if they feel that they can't live up to the terms of what they are signing. I definitely don't want to put all the blame on the consumer, but they are responsible for their actions (as are all of us associated within this business)
Secondly, I think we need to look at the mortgage programs that have been made available. There are so many loan programs available that allowed almost anyone to purchase a home. I think what happened is that there was such a craze to purchase homes and lenders were so busy taking care of home purchases and also refinances because interest rates were so low, that they never saw coming what is happening now. Everyone was living in the fantasy world that interest rates were going to continue to go down, home prices were going to continue to increase in value, and that people were going to be able to afford the payments they were getting. What happened is that people that shouldn't have been buying homes, bought homes. People were getting themselves into adjustable rate mortgages and never looking at what could happen three or five years later when their rates adjusted higher. People were able to buy homes with no money down. All these things added up to what we are seeing today. I don't want to place blame on all the lenders, either.
Next comes the mortgage brokers themselves. Middlestead Mortgage included. We experienced a time where we all were making very good money. We were refinancing people left and right to get them lower rates. We were taking equity out of there homes to consolidate debts. We were getting mortgages for people that were first time home buyers with little or no money down and not taking the time to educate the buyer on what home ownership was all about. Many people didn't understand what to expect six months later. Home maintenance, possible repairs, property taxes, possible increase in interest rates if they had adjustable rate mortgages. Many of these things could have been gone over better and maybe people would have made different choices. Then there are the mortgage brokers that did the wrong thing to be profitable. Putting people into crazy loans that made the broker a lot of money, but wasn't in the best interest of the customer. Doing stated income loans when they knew the customer couldn't afford to make the payment. These types of things mortgage brokers should have done a better job with.
What is next? I think the industry is going to have some overhaul. Remember that people will always buy houses, people will always look to access the equity in their home to consolidate debt, and people will always need mortgage professionals to assist them. What is the most important thing I believe is to do business with someone you trust and have confidence in. Someone with a proven track record. Ask questions. Look at the big picture and the short and long term consequences of what decisions you are about to make. Know exactly what you are getting in to and take the time to figure out if the direction you are going is in the best interest of you and your family. As a consumer, realize the responsibility you have to the entire process. You ultimately make the final decision. If you don't like the terms, the person you are dealing with, or feel uncomfortable, then don't do it.
As far as the lenders are concerned. We will see a tightening of rules and regulations. No money down loans will become harder and harder to come by. I think that is a good thing. Statistics show that people that put their hard earned money as down payment are more committed to making things work. If you don't put anything into the deal and things don't work out, what have you lost financially? Nothing. Getting approved for a loan will be tougher.
Lastly, as mortgage brokers we need to due the responsible thing. We need to make our clients aware of what is good and bad. We shouldn't be afraid to say no. I can tell you at Middlestead Mortgage we are committed to do the right thing. If that means saying no and having a client mad at us, then I guess I am willing to do that. Even if they can go down the street to get a loan, I don't want to feel guilty about doing something I know in my heart is wrong. However, that doesn't mean I am not going to work my tail off to help someone. If things makes sense to me, then I believe I can help it make sense to my client.
Overall, this isn't a time of panic. This is a typical adjustment to the industry in general. That doesn't help the individual that is going through this now, but in the end it will make things better for future people trying to buy houses and refinance their existing mortgage. We all need to take a look in the mirror and accept some responsibility for what has happened and make the corrections needed to make sure we do the right things in the future. All of us.
Friday, February 9, 2007
Going Backwards
What sense would it make to have a fixed 30-year interest rate of 5.5% on your present mortgage and then change it to a fixed 30-year rate at 6.25%?
On the surface that sounds silly. You are clearly going backwards. However, there may be exceptions to the rule. For example, what if someone had a payment of $1000 per month on the mortgage, but also had payments of $800 per month with other debt, like a car payment and a couple of credit cards? If we could show that customer a way to cut their payments from $1800 per month to $1400 per month, how are things sounding now? Then, if we took it one step further and shortened the term of the 30-year mortgage to 25 years, which sould save several thousands of dollars in interest, are we making things even more interesting?
My point here is two-fold. If someone has a great interest rate and has no other debt, then it would be foolish to refinance to a higher interest rate. Even if the term were shortened it wouldn't make sense. You can always take a 30-year mortgage and calculate how much more you can add each month to shorten the term yourself, without the expense of refinancing.
However, a large percentage of the population is not fortunate enough to have only a mortgage debt. I know I am not one of those lucky ones. So, ca we look in the mirror and say to ourselves, "How do I swallow my pride or check my ego at the door to take a step backwards?" I say let's forget about the step backwards and focus on the two steps forward we are about to take. If we can clearly show you how you can save money each month and save you interest over the life of the mortgage, we should be willling to look at that option.
I do warn, however, that the concept needs to be well thought out and explained properly. Numbers never lie, so if a professional mortgage consultant can take the time and explain the numbers, the results will either clearly make sense or they won't
Middlestead Mortgage's staff is highly trained on this concept and can provide you with a professional and accurate consultation. We will never do a loan just to do a loan. If it is not in the customer's best interest, then it is not in our best interest to do the transaction. Please feel free to contact a mortgage consultant to review your own personal situation.
On the surface that sounds silly. You are clearly going backwards. However, there may be exceptions to the rule. For example, what if someone had a payment of $1000 per month on the mortgage, but also had payments of $800 per month with other debt, like a car payment and a couple of credit cards? If we could show that customer a way to cut their payments from $1800 per month to $1400 per month, how are things sounding now? Then, if we took it one step further and shortened the term of the 30-year mortgage to 25 years, which sould save several thousands of dollars in interest, are we making things even more interesting?
My point here is two-fold. If someone has a great interest rate and has no other debt, then it would be foolish to refinance to a higher interest rate. Even if the term were shortened it wouldn't make sense. You can always take a 30-year mortgage and calculate how much more you can add each month to shorten the term yourself, without the expense of refinancing.
However, a large percentage of the population is not fortunate enough to have only a mortgage debt. I know I am not one of those lucky ones. So, ca we look in the mirror and say to ourselves, "How do I swallow my pride or check my ego at the door to take a step backwards?" I say let's forget about the step backwards and focus on the two steps forward we are about to take. If we can clearly show you how you can save money each month and save you interest over the life of the mortgage, we should be willling to look at that option.
I do warn, however, that the concept needs to be well thought out and explained properly. Numbers never lie, so if a professional mortgage consultant can take the time and explain the numbers, the results will either clearly make sense or they won't
Middlestead Mortgage's staff is highly trained on this concept and can provide you with a professional and accurate consultation. We will never do a loan just to do a loan. If it is not in the customer's best interest, then it is not in our best interest to do the transaction. Please feel free to contact a mortgage consultant to review your own personal situation.
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