UNDERSTANDING CREDIT (FICO) SCORES

Robin Gamby with M&T BANK- toll free at 1-888-539-1160, ext 8082.

UNDERSTANDING THE LOAN PROCESS

            “Prequalification” occurs before you actually apply for a loan. The lender gathers information from you about your income and debts and makes a financial determination, subject to the later underwriting process, to determine how much house you may be able to afford.

            It’s a good idea to know how expensive a home you can afford before you start shopping for one.  If you are refinancing the loan on your existing home, then the prequalification process should help you decide whether refinancing is a good idea for you.

            The “application” is actually the beginning of the loan process, and usually occurs after you have found a property you want to buy, or have determined that you wish to refinance the loan on your existing home.  You complete a mortgage application with the loan officer and supply all of the required documentation for processing.  Various fees and down payment options are discussed at this time and you receive a Good Faith Estimate (GFE) and a Truth- In- Lending Disclosure (TIL) within three days that itemize the rates and associated costs for obtaining the loan.  You may wish to discuss “locking” an interest rate at any point after you complete your loan application.  If you choose not to “lock” an interest rate, then the interest rate will “float” with the daily rates offered by the lender until you close your loan.

The “underwriter” is responsible for determining whether the package prepared by the processor meets all the lender’s criteria. If the lender needs more information, the loan will be “suspended” until the lender contacts you to request additional information.

            If the application package meets all the lender’s criteria, the lender will be able to offer a full loan approval.  Full loan approval often depends on the resolution of challenging credit, income or property issues that may arise during the underwriting process. If the underwriter is able to give a full approval, then the lender issues a commitment to lend, orders title insurance, clears all contingencies to its commitment to lend, and then schedules a closing date.

            The “closing” will occur after the lender gives a full loan approval and clears any closing conditions. At the closing, the lender “funds” the loan with a cashier’s check, draft or wire to the closing agent who disburses funds in exchange for the title to the property. This is the point at which you finish the loan process and actually refinance or buy the house, subject to the loan criteria. Closings occur at different places in different states.  For instance, some states require that the closing take place at a closing attorney’s office while others use a title or escrow company. (New York State closings occur at attorneys offices)

Article  written by Nancy Lilly-Hamilton.  A Certified Mortgage Planning Specialist with CTX Mortgage LLC.  1279 Route 300  Newburgh, NY 12550  Contact me by cell at 914-760-9524, or email me at Nancy.lilly.hamilton@ctxmort.com.  Visit my web site at www.ctxloanofficer.com/nancylilly

FOUR QUESTIONS?????

                                                                                                                                                                                                  HERE’S THE INSIDE SCOOP ON HOW TO  DO IT RIGHT! 

First:  make sure you are working with an experienced, professional loan officer.  The largest financial transaction of your life is far too important to place into the hands of someone who is not capable of advising you properly and troubleshooting the issues that may arise along the way.  But how can you tell?   Here are FOUR SIMPLE QUESTIONS YOUR LENDER ABSOLUTELY MUST BE ABLE TO ANSWER CORRECTLY.  IF THEY DO NOT KNOW THE ANSWERS…RUN…DON’T WALK… RUN…TO A LENDER THAT DOES!  

1) What are mortgage interest rates based on?  (The only correct answer is Mortgage Backed Securities or Mortgage Bonds, NOT the 10-year Treasury Note. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions.  DO NOT work with a lender who has their eyes on the wrong indicators.)

2) What is the next Economic Report or event that could cause interest rate movement?  (A professional lender will have this at their fingertips.  For an up-to-date calendar of weekly economic reports and events that may cause rates to fluctuate, visit http://www.ctxmortgage.com/NancyLilly/ and hit the newsletter tab – this is a copy of our weekly newsletter, let us know if you want to be added to my weekly distribution list)

3) When Bernanke and the Fed “change rates”, what does this mean… and what impact does this have on mortgage interest rates?  (The answer may surprise you.  When the Fed makes a move, they can change a rate called the “Fed Funds Rate” or “Discount Rate”.  These are both very short- term rates that impact credit cards, Home Equity credit lines, auto loans and the like.  On the day of the Fed move, Mortgage rates most often will actually move in the opposite direction as the Fed change.  This is due to the dynamics within the financial markets in response to inflation.   For more information and explanation, just give us a call).

4) Do you have access to live, real time, mortgage bond quotes?  (If a lender cannot explain how Mortgage Bonds and interest rates are moving in real time and warn you in advance of a costly intra-day price change, you are talking with someone who is still reading yesterday’s newspaper, and probably not a professional with whom to entrust your home mortgage financing.  Would you work with a stockbroker who is only able to grab yesterday’s paper to tell you how a stock traded yesterday, but had no idea what the movement looks like at the present time and what market conditions could cause changes in the near future?  No way!)  Be smart...  Ask questions…  Get answers! More than likely, this is one of the largest and most important financial transactions you will ever make.  You might do this only four or five times in your entire life… but we do this every single day.  It’s your home and your future.  It’s our profession and our passion.  We're ready to work for your best interest.
     
Once you are satisfied that you are working with a top-quality professional mortgage advisor, here are the rules and secrets you must know to “shop” effectively. First, IF IT SEEMS TO GOOD TO BE TRUE, IT PROBABLY IS.  But you didn’t really need us to tell you that, did you?  Mortgage money and interest rates all come from the same places, and if something sounds really unbelievable, better ask a few more questions and find the hook.  Is there a prepayment penalty?  If the rate seems incredible, are there extra fees?  What is the length of the lock-in?  If fees are discounted, is it built into a higher interest rate? 

 Second, YOU GET WHAT YOU PAY FOR.  If you are looking for the cheapest deal out there, understand that you are placing a hugely important process into the hands of the lowest bidder.  Best case, expect very little advice, experience and personal service.  Worst case, expect that you may not close at all.  All too often, you don’t know until it’s too late that cheapest isn’t BEST.  But if you want the cheapest quote – head on out to the Internet, and we wish you good luck.  Just remember that if you’ve heard any horror stories from family members, friends or coworkers about missed closing dates, or big surprise changes at the last minute on interest rate or costs…these are often due to working with discount or internet lenders who may have a serious lack of experience.  Most importantly, remember that the cheapest rate on the wrong strategy can cost you thousands more in the long run.  This is the largest financial transaction most people will make in their lifetime.  That being said – we are not the cheapest.  Of course our rates and costs are very competitive, but we have also invested in the systems and team we need to ensure the top quality experience that you deserve. 

 Third, MAKE CORRECT COMPARISONS.  When looking at estimates, don’t simply look at the bottom line.  You absolutely must compare lender fees to lender fees, as these are the only ones that the lender controls.  And make sure lender fees are not “hidden” down amongst the title or state fees. A lender is responsible for quoting other fees involved with a mortgage loan, but since they are third party fees – they are often under-quoted up front by a lender to make their bottom line appear lower, since they know that many consumers are not educated to NOT simply look at the bottom line!  APR?  Easily manipulated as well, and worthless as a tool of comparison. 

Fourth, UNDERSTAND THAT INTEREST RATES AND CLOSING COSTS GO HAND IN HAND.  This means that you can have any interest rate that you want – but you may pay more in costs if the rate is lower than the norm.  On the other hand, you can pay discounted fees, reduced fees, or even no fees at all – but understand that this comes at the expense of a higher interest rate.  Either of these balances might be right for you, or perhaps somewhere in between.  It all depends on what your financial goals are.  A professional lender will be able to offer the best advice and options in terms of the balance between interest rate and closing costs that correctly fits your personal goals.

 Fifth, UNDERSTAND THAT INTEREST RATES CAN CHANGE DAILY, EVEN HOURLY.  This means that if you are comparing lender rates and fees – this is a moving target on an hourly basis.  For example, if you have two lenders that you just can’t decide between and want a quote from each – you must get this quote at the exact same time on the exact same day with the exact same terms or it will not be an accurate comparison.  You also must know the length of the lock you are looking for, since longer rate locks typically have slightly higher rates. Again, our advice to you is to be smart.  Ask questions.  Get answers.  As you can imagine, we wouldn’t be encouraging you to shop around if we weren’t pretty confident that we feel that we can give you a great value and serve you the very best. 

Please call us with any further questions you may have at this time – we are ready to work for your best interest!  Nancy Lilly-Hamilton 914-760-9524

The Nancy Lilly-Hamilton Team

6 Jeanne Drive Newburgh, NY 12550   Cell 914-760-9524

TO BUY OR NOT TO BUY

January 17,2008

Buyers, Are you standing on the side lines waiting for the bottom of the real estate market to hit?  Are you waiting to purchase your new home for as little as possible? Are you listenening to the all the negativity in the media?

If so, you also need to hear the GOOD NEWS! As of today January 17th we have here in Dutchess County alone, 2,525 Single Family units and 208 Attached units available on the market.  The rates today for a 30 year fixed rate mortgage are 5.5% and a 15 year fixed rate is 5%.  Due to the large amount of inventory, we have sellers negotiating and builders offering great incentives in some developments.

Do the math. Low interest rates + buying power+ increased inventory=BUY NOW. This formula works great for you if you want to find your dream home and plan on enjoying it for the next few years.

For the investor, now is the time to investigate in the foreclosures in our area.

I am an Accredited Buyers Representative and can offer you the very best personalized care, knowledge and undivided attention to assisting you in making one of the biggest investments of your life.

Helen Schweitzer,ABR

Broker/Owner