Paying points is a way to accomplish one of two things… buy down your interest rate and save yourself money on your monthly payment, or pad the pockets of the bank, mortgage broker, or loan originator you are working with.

Obviously you only want to pay points if it reduces your interest rate, and you want to avoid the latter at all costs.

Normally speaking, the cost of ‘buying’ points, versus your monthly savings on the reduced rate, takes about 3 years to recover.

Recently I did a loan for a young couple who had just had their first child.  They bought a large house in Los Angeles that they knew they would be in for years.  The house was big enough for the family to grow, and they were 100% comfortable with staying in this house and California for the long haul.  Due to their time horizon, they paid 1.50% points up front to get a lower rate.  This was a fee of approximately $9,000 up front.

Guess what?  Life happens.  A family member of theirs recently got sick and they have to move back east as soon as possible.  They are frantically working to sell their house after only enjoying the lower payment for 6 month.  In the end, a majority of that $9,000 up front fee will be wasted.

This is just one of the hundreds of reasons not to pay points.  Stuff happens, refinance opportunities come along, loans get paid off, houses get sold way before the original expectations.

For all these reasons, I always recommend my clients pay as little as possible in up front fees in order to obtain a mortgage.

Anytime there is a buyer’s market in real-estate, the numbers of “Lookie-Loo’s” and “fake” buyers increases dramatically.

Mortgage processing centers around the country have been slammed with pre-qualification files for clients who may not be serious about ever purchasing a piece of property.  This, in turn, slows down processing times for serious buyers. 

To help filter out the serious buyers from the applicants who aren’t serious, several banks such as Chase and B of A are now charging a $200 – $300 in pre-approval fee.

This fee, as of today, is a seperate fee from additional application fees associated with the real deal application that begins once a property is identified and a purchase contract signed.

When the new HOEPA / HERA laws go into affect on July 30th, 2009… these banks may have to suspend the collection of up front fees.  However, for the time being, clients may be facing hundreds of dollars in up front fees just to see if they are qualified buyers.

As of now, your trusted lender is not requiring an application fee for pre-approvals.   By processing much of the loan file internally, I can continue to process pre-approvals in good faith and without an up front fee. 

Working with well qualified, serious buyers, is the key to keeping this fee out of my normal work process.

Private Mortgage Insurance, commonly referred to as PMI, is an insurance premium that is charged to clients putting down less than 20% on the purchase of their home.

Contrary to popular belief, PMI does nothing to protect the borrower.  The insurance is in place to protect the bank who is taking the risk of lending to a borrower who has less than 20% down. Read the rest of this entry »

In the first 10 minutes of meeting a new client I’m usually asked “how much are my closing costs”?

This is such a loaded question I usually try to side-step the item and come back to it later in our conversation.  Here is why… Read the rest of this entry »

A quick update on conforming, 30 year fixed rate mortgages under $729,750.00

Rate right now rates are hovering at 5.250% at NO points and approximately 4.875% at 1 point.

This rate takes certain credit assumptions and qualification factors that vary from bank to bank.  For example, Bank A may offer their very best rate to clients who have a credit score over 740; while Bank B will extend the same great rate for any borrower with a credit score over 680.  Some banks even treat a 30 year fixed mortgage as a pass / fail type of situation; if you qualify for the loan regardless of whether your credit score is 680 or 780… you get the same rate.

A question I get a lot is, “Why are your rates so much higher than the 4.50% I keep hearing about in radio and television advertisements?”… Read the rest of this entry »