Tag: The Mortgage Network

Mortgage Interest Buydowns Can Benefit Both Buyers and Sellers  

Interest rates have doubled in the last year. Buyers have reduced buying power at higher rates, and sellers are seeing their listings take longer to go under contract. Lowering the list price is one strategy to entice buyers, but that makes a nominal difference in terms of the monthly payment for a prospective purchaser. 

I talked with Jaxzann Riggs at The Mortgage Network to learn how buying down the interest rate can take the sting out of rising rates and more importantly, how sellers might employ the offer of a buydown to increase the number of offers received.

There are two types of buydowns — temporary and permanent, and each has its own benefits, but the MOST important thing to know about buydowns is that they can be paid for by either the buyer or the seller.

Let’s look at both options for a fictitious buyer.  Rebecca is interested in a house that is listed for $695,000. She is planning on putting 20% down, and her mortgage broker quoted her a rate of 5.454%, with a monthly P&I payment of $3,141. This payment is a little above what Rebecca was hoping for, so she is thinking about asking the seller to assist with the cost of an interest rate buydown.

Temporary buydowns allow the seller or the buyer to contribute money to an escrow account for the benefit of the buyer at the time of closing. A portion of the escrow is used each month to reduce the borrower’s payments for a set amount of time.  A  “2-1 Buydown” is a common option that decreases the interest rate for the first two years of the mortgage. The rate is 2% lower the first year, and 1% lower the second. While the buyer’s mortgage contract is always going to reflect the note rate, the buydown escrow is used to pay the remaining interest balance each month. To ensure that she can afford the full monthly payment, she must qualify for the loan based on the note rate.

In Rebecca’s scenario, a 2-1 buydown will cost $11,968, and would lower her first year’s monthly payments to $2,482, equivalent to an interest rate of 3.454%. This is a monthly savings of $659, which will be paid out of the buydown account. The second year she will pay $2,802 monthly, comparable to a 4.454% rate, with a savings of $339 a month. The third year she will have exhausted the subsidized funds and she will pay the full payment of $3,141 for the remainder of the loan. While the effects of this option only last a couple of years, the monthly savings are significant and for borrowers who anticipate increases in income, this can make home ownership more of possibility.

Permanent Buydowns allow the rate to be “bought down” for the life of the loan. “Points” are paid to the lender at the time of closing in exchange for a lower rate for the life of the loan. While the monthly savings aren’t quite as dramatic as with the temporary buydowns, the benefit will continue throughout the life of the mortgage. 

For Rebecca, the dollars that she would spend for a temporary buydown, $11,968 would buy her rate down to 4.796% for 30 years, lowering her monthly payments to $2,968, saving her $157 a month versus a payment based upon a current rate of 5.45%.  Again, this buydown could be paid for by the seller instead of lowering their sale price, to make their listing more attractive to more buyers.

The bottom line is that buydowns make sense for some.  And sellers who are willing to participate in the cost of buydowns will dramatically increase their buying pool.

If you would like more information about buydowns, call Jaxzann at (303) 990-2992.

With the Rise in Mortgage Interest Rates, ARMs Are Making a Comeback and Can Save You Money

As mortgage interest rates rise, many potential homebuyers have asked me about the wisdom of using an adjustable-rate mortgage loan (often referred to as an ARM) to finance their home purchase. 

Adjustable-rate mortgages, also known as “variable-rate mortgages” are mortgages that offer a low introductory interest rate for a specific period of time. The borrowers’ interest rate and correspondingly their monthly principal and interest payment will be “locked in” for the first five, seven, or ten years. For example, a 10/6 ARM means that you will pay a fixed interest rate for 10 years, then the rate will adjust every 6 months. A 7/1 ARM, on the other hand, means that your rate will be fixed for 7 years and then the rate will adjust every year.

Because the lender is not “locking in” the interest rate for a 30-year period, the borrower is sharing in the risk associated with rising rates. In exchange for the ability to increase the borrowers’ rate based upon future market conditions, lenders offer lower rates for ARMs than they do for 30-year fixed rate loans. The lowest ARM rates are offered on shorter terms, as an example, a 5-year ARM will have a lower rate than a 10-year ARM. The difference in today’s pricing for a 5-year ARM versus a 30-year fixed rate is approximately .75%, with a 5-year ARM being offered at 4.25% and a 30-year fixed rate loan being offered at 5.00%

Borrowers considering an ARM should know which index will be used to calculate their new interest rate, as well as the “margin” that will be added to the indexed rate to determine the “fully indexed interest rate” at the time of adjustment. While this might seem extraordinarily risky, all loans offered thru FNMA and FHMLC (and most jumbo lenders as well) “cap” the increases that can occur at each adjustment period as well as the maximum amount that the rate may increase over the life of the loan. Unlike the ARMs of previous years, borrowers are not allowed to make partial interest payments, so there is no risk of the loan amount increasing as the rate increases.

The most obvious benefit to choosing an ARM is lower monthly payments. While homebuyers will have to qualify for the loan based on the future higher payment price, they can take advantage of the lower payments by investing the savings somewhere with higher gains, making home improvements, or adding more to the principal balance to pay off the loan more quickly.

ARMs are typically best suited for borrowers who do not anticipate that they will still own the home at the time of the initial adjustment or those who anticipate increases in income that will keep pace with interest rate increases. If a borrower’s circumstances change, there is always the option to refinance into a fixed rate loan. Unlike ARMs of the past, there are no longer prepayment penalties to dissuade the borrower from refinancing once the initial fixed interest rate ends. If you decide to refinance from an ARM to a fixed-rate mortgage, the refinancing process is straightforward and is similar to when you purchased your home. When you refinance, you take out another loan that is used to pay off your original note, then your new payments are based upon the new loan.

As the housing market continues to change, Jaxzann Riggs, owner of The Mortgage Network, is available to answer questions and help you decide which loan options are best suited for your current needs.

You can reach out to Jaxzann with any questions at 303-990-2992.  Mention that I suggested you contact her.

Overdue Medical Bills? Upcoming Changes Will Improve Your Credit Score  

Your credit scores affect nearly every facet of your financial life. And it’s no secret that life is better with a good credit score. Good credit makes it easier to buy a car, rent an apartment or get a home loan. 

Jaxzann Riggs, owner of The Mortgage Network, shared with me some important changes that will likely improve many consumers’ credit scores.

While many potential homeowners do their homework and check their credit scores prior to applying for a loan, they are often surprised when they sit down with a mortgage broker, who informs them that the credit scores appearing on their “tri-merged, residential credit report” are significantly lower than those obtained thru consumer online sites. For some, this could mean that their house hunting is going to have to wait. 

Bank sites and Credit Karma may give you a good picture of your “consumer” credit score, but when mortgage lenders review your credit history, they use a credit score formula tailored to determine what kind of risk you’ll be for a mortgage loan. The formula weighs pieces of your credit history differently to test for such risk factors as debt collections that have been paid off. The score is tailored to mortgage lenders because it’s specifically focused on your ability to repay a home loan, versus an auto loan or credit card. With credit scores, the higher the score, the lower the mortgage interest rate. For borrowers with a credit score under 740, lenders factor the additional risk into your interest rate.

What impacts different scores? Mortgage lenders typically use a FICO score (by Fair Isaac Corporation) to determine your loan options. Your FICO score is based on many things such as your amounts owed, length of credit history, and your payment history. Payment history alone accounts for 35% of your FICO score, which looks at late payments, unpaid balances, or accounts that have gone into collections. While you may have paid off the collection shortly after a notice, unfortunately, those negative records can stay on your FICO report for a long time!

A collection account, no matter what it is owed for and no matter what the amount, can easily drop a credit score 100 points or more, depending on what the rest of the credit report looks like. According to the Consumer Financial Protection Bureau’s research, 58% of collections on a consumer’s reports are medical. And as of June 2021, the amount of medical debt on consumer credit reports was $88 billion dollars

Good News Has Arrived

Starting July 1st, the three large credit bureaus — Equifax, Experian and TransUnion — will stop including medical debt that went to collections on credit reports after it’s paid off. Under current practice, it can remain on your record for seven years.

Additionally, consumers will get a year, up from six months, before unpaid medical debt appears on credit reports once it goes to a collection agency. And in the first half of 2023, the credit bureaus will stop including anything that has a balance less than $500.

What does that mean for your FICO score? Well, that is a good question! While we know that the changes will positively affect many people, we don’t know the extent to which it will change the mortgage FICO scores until the changes go into effect.

If you have questions about your credit scores or report, get in touch with Jaxzann at 303-990-2992. She will also answer any other mortgage loan questions that you may have. 

Amid Today’s Rising Interest Rates, Let’s Revisit the Concept of Buying Down Those Rates  

With mortgage rates rising and many homebuyers believing that now is the time to buy, anything that can reduce the cost of a mortgage is worth looking into. Many savvy homebuyers are asking about discount points, wanting to know what they are and whether it makes sense to buy them.

Mortgage points, often referred to as discount points, let you make a tradeoff between your upfront costs and your monthly payment. By paying points, you are essentially buying down the interest rate. You pay more upfront, but you receive a lower interest rate, decreasing your monthly payments.

The cost of one discount point is equivalent to 1% of the total mortgage. In other words, if you had a $400,000 loan, the cost of purchasing one discount point would be $4,000. Lenders typically allow a borrower to purchase up to three discount points, and they can also be purchased in increments of one-half point.

The specific amount that an interest rate will be reduced with the purchase of points varies from loan to loan but can be thought of as a 0.25% rate reduction for each point purchased. Thus, if you had an initial interest rate of 5% and purchased 3 discount points, your new interest rate would be 4.25%.

How do you know if it makes financial sense to pay for points? The first step is to calculate how long it will take for the decreased monthly payments to pay for the added upfront fee. This is called the “breakeven point.” You can determine when you will break even by dividing the total cost of the discount points by the monthly savings. The answer will be the number of months it will take. Divide this number by 12 to find the number of years it will take.

Here’s an example to show how it would work for you. The cost of buying down the rate from 5% to 4.25% on a $400,000 loan would be $12,000. The difference in the monthly principal and interest (“P&I”) payment between 5% and 4.25% would be $178 per month ($2,138 P&I at 5% versus $1,960 P&I at 4.25%). If you are spending $12,000 to save $178 per month, you will need to own the property for 67 months to break even.

If you were to sell the home or pay off the loan (including by refinancing) in the first 5½ years, you would not be reaping the full benefit of your rate buy-down from buying points.

On the other hand, if you bought down the rate to 4.25% and stayed in your home for thirty years, the difference in monthly payments over the life of your 30-year loan would be $64,080. Subtracting the initial investment of $12,000, you would be left with savings of roughly $52,000. As you can see, whether paying points makes sense for you depends primarily on one major factor — how long you think you will keep your home and/or the mortgage on it. If you don’t plan to keep your home for very long, or plan on refinancing soon, it may not benefit you to purchase points.

Purchasing a home is a major financial step. If you aren’t sure how long you will be in the property, you may decide that the money spent on points would be better spent on furnishing or fixing up the property, or by simply investing it in another financial instrument that will gain value over time.

Jaxzann Riggs of The Mortgage Network helped me with this column. You can reach her at 303-990-2992 for more information about points and to discuss whether they may be right for your personal financial journey.

Changes Announced to 2nd Home & Jumbo Loans, Self-Employed Borrowers and Appraisal Fees  

I received a call this week from Jaxzann Riggs, owner of The Mortgage Network informing me of several changes occurring at FNMA and FHLMC that may “level” the playing field for some purchasers.

Roughly 17% of the homes sold in the last 12 months in the Denver metro area have been sold to investors, according to an article in the Denver Post. Demand for second homes has also skyrocketed, as newly remote workers seek more space and better surroundings. Until now, those purchasers were able to obtain loans with interest rates that were comparable to those being offered to purchasers who would be occupying their new home as their primary residence.

On Jan. 5th Fannie Mae and Freddie Mac (FNMA and FHLMC) jointly announced new “loan-level price adjustments” (or LLPAs) for high-balance, investment and second home loans. An LLPA is a risk–based fee assessed to mortgage borrowers using a conventional mortgage. Loan pricing adjustments vary by borrower, based on loan traits such as loan-to-value (LTV), credit score, occupancy type, and the number of units in a home. Borrowers often pay LLPAs in the form of higher mortgage rates. Increasing the LLPAs on high-balance, investment and second homes makes interest rates less attractive for the buyers and allows FNMA and FHLMC to offer new programs to help first-time or lower-income homebuyers.

Other recent changes by FNMA and FHLMC help self-employed borrowers.  They have rescinded rules imposed in June 2020 requiring self-employed borrowers to supply a year-to-date P&L as well as their most recent 2 or 3 months of bank statements. This reduction in paperwork should make it much easier for self-employed borrowers to obtain financing.

Another benefit may be found in the potential for lower appraisal fees. With the current red hot housing market, demand for appraisers is outstripping the supply, pushing up fees and extending appraisal completion times. Enter technology. Fannie Mae will allow desktop appraisals for certain loans submitted after March 19. This technology may help alleviate the appraiser shortage in the long term and lower appraisal costs in the current market. Jaxzann reminded me that she pays for her clients’ appraisals so they can be ordered immediately upon acceptance of a purchaser’s offer. With the ability to obtain desktop appraisals, Jaxzann expects that loan approvals can consistently be obtained in two weeks.

Though median home prices have shot up in the last two years (by 25%, according to HUD), what hasn’t changed is that people still need their homes to serve as an anchor for their life.

If you are in the market for a jumbo loan, things have gotten easier. A jumbo loan is a mortgage that exceeds the conforming loan limit set by the federal government. Jumbo loans — meant to finance expensive properties — cannot be purchased or securitized by FNMA and FHLMC. Loan amounts above $684,250 are considered “jumbo” and often have higher standards for approval. 

While people typically assume you need 10% down for a jumbo loan, there are currently products that allow as little as 3.5% down. This can free up some of your savings for being more competitive in this market, using funds for escalation causes, appraisal gaps, updates if the house isn’t in dream home condition.

Yes, today’s market can make buying a home stressful, but working with an experienced professional like Jaxzann Riggs will allow you to navigate its challenges. Call her at 303-990-2992 with your lending questions.

The Hidden (But Very High) Cost of Waiting to Buy Your Home  

It seems almost impossible to open a newspaper or listen to a news broadcast without being reminded that mortgage loan rates are on the rise. I asked Jaxzann Riggs, owner of The Mortgage Network, for her thoughts on how rising rates will affect our market. Here is what she told me.

Borrowers are being impacted on two levels right now. In the Denver metro area, the median price for a single-family home has increased by 19.3% in the past 12 months, according to the Denver Post. That means a home that you could have bought for $502,775 in January 2021, would cost $599,900 now.

Let’s assume that you agreed to purchase that home in January 2021 for $502,775. At that time, interest rates were hovering around 2.75%. If you made a 20% down payment, your expected monthly principal and interest payment would be approximately $1,642. If, on the other hand, you waited until January 2022 to buy that same home, your purchase price would be $599,810 and your interest rate would have risen to 4.087% and you would be paying $2,315 per month in principal and interest. That’s an increase of $673 per month.

Underwriters qualify borrowers for a maximum monthly payment based upon their income and other monthly liabilities. Underwriters refer to this as the borrower’s “debt to income” ratio, or DTI ratio, a term that you may have heard before. The maximum allowable monthly payment is then translated to a loan amount based upon current interest rates.

Rising rates make the maximum loan amount that a borrower can afford a moving target. By most accounts, The Federal Reserve is likely to increase the federal funds discount rates 3 to 5 times this year, with an increase certain to occur on March 16th. There is no direct correlation between the fed funds discount rate and long-term mortgage rates, but the trend for both is up. Jaxzann believes that the March 16th increase has already been factored into the cost of 30-year mortgage money by Fannie Mae and Freddie Mac, but expects rates as high as 4.75% by the year’s end. The mortgage market is resilient, changing daily, and we are beginning to see a variety of loan products (for example, adjustable-rate mortgages and interest-only loans) being offered by conventional lenders that will offset some of the damage done by increasing rates.

 While prospective purchasers can’t control real estate prices or mortgage rates, they do have some small measure of control when it comes to the price they pay for a loan while they are actively shopping for a home. Many of our lending partners have begun to offer a feature that allows the borrower to obtain a preliminary loan approval (without finding a property) and to “lock in” an interest rate, while shopping for a new home. Some lenders will lock in an interest rate for up to 120 days while their clients shop, but the most common term is 90 days. The lender charges a small premium to hold the consumers’ rate for a set timeframe and typically will also offer the borrower the ability to “roll down” the rate if interest rates drop by a preset amount during the lock period. Borrowers wishing to execute the roll down feature will pay a small fee, but it ensures that they will still be able to qualify for a specific loan amount, when they finally go under contract.

What does this mean for future homeowners? The cost of waiting is just too high. Don’t allow rising home prices and mortgage rates to price you out of the market. If you are currently house hunting and would like to learn more about locking in an interest rate, call Jaxzann at (303) 990-2992.

Do You Have an Adjustable Rate Mortgage? Here Are Some Important Changes

I recently received a call from a reader asking what is likely to happen with his adjustable rate mortgage (ARM) that is tied to the LIBOR Index. LIBOR may be just another acronym that you’ve skipped over in the sea of real estate acronyms, but if you have an ARM read on, because the “index” (LIBOR) that is used to set your interest rate is being phased out after 2021. I asked Jaxzann Riggs, owner of The Mortgage Network what borrowers should expect.

LIBOR, or the London Interbank Offered Rate, was a benchmark interest rate index used for decades by lenders all around the world, as a predictor of future loan costs. To break it down, LIBOR was calculated based on estimates of the average interest rate a group of leading global banks would charge each other for short-term loans. Lenders then used that information (referred to as the “index”) to calculate the rate you would pay for your mortgage as the interest rate on your ARM was “adjusted.”

During higher-priced housing markets, many homeowners chose an adjustable rate mortgage because they preferred the lower monthly payments that an ARM offered. Most ARMs created in the past 20 years were tied to the LIBOR benchmark, which is why this index has played an important role in how much interest you pay on your mortgage if you have an ARM.

The LIBOR index, as I said, is being phased out. Introduced in 1986 by the British Bankers’ Association, the LIBOR index quickly became the default standard interest rate used by both local and international lenders. Despite wide acceptance, LIBOR was based on self-reporting and good faith estimations, which made it very susceptible to manipulation and fraud. Scheming and collusion within the LIBOR index were brought to light in 2012, causing distrust, tighter regulations, and the beginnings of a plan to create a new system. 

Introducing… SOFR, the Secured Overnight Financing Rate (pronounced “so-far”).

Effective January 3, 2022, the mortgage industry began to adopt SOFR. SOFR is a benchmark rate that uses the rates banks are charged for their overnight transactions. This system helps deter manipulation and subjectivity, as it is based on transactions secured by U.S. Treasuries.

What does this mean for you?

Absolutely nothing if you have a fixed-rate mortgage. However, if you have an adjustable rate mortgage, you might see changes in your upcoming bills. ARMs typically adjust annually and as LIBOR-based ARMs hit reset, the new SOFR index is likely to be used to calculate your new rate. When SOFR ARMs reset, they will be adjusted every six months, the reason being that the 1-year LIBOR looks forward, while SOFR looks backward. LIBOR reflects where interest rates are expected to go in the next 12 months, while SOFR reflects an average of short-term rates during a recent 30-day period. 

Jaxzann told me that LIBOR and SOFR rates should be close to each other. “It won’t be identical but within the margin of a homeowner’s perspective, it should be a minimally different.” 

I agree that the switch from LIBOR to SOFR is going to have a relatively limited effect on most borrowers, but as with all things, knowl-edge is power and consumers who have an ARM should contact their loan servicers to discuss the changes that they can expect.

So, take a deep breath and remember, you are not alone in this! Reach out to Jaxzann Riggs  at 303-990-2992 to discuss the implications that SOFR will have on your existing ARM or the future benefits that you might enjoy by having an ARM.

Interest-Only Loans Make a Comeback. Is One Right for You?  

Interest-only mortgages are making a comeback. Having a full appreciation of how interest-only loans work is key to determining whether this type of loan is the best fit for you. I spoke to Jaxzann Riggs of The Mortgage Network to break down these loans for me.

Well, let’s first answer the question: What is an interest-only mortgage? 

An interest-only mortgage allows you to pay only the interest due on the loan during the first 10 years of the loan – making your monthly payments lower when you first start making mortgage payments.

How do interest-only mortgages work?

A fully amortizing loan requires you pay an amount toward the interest and the loan balance (called the principal) for a set term, usually 15, 20, or 30 years. Lenders often refer to this as the P&I payment (principal and interest).

Interest-only mortgages, however, allow you to make monthly payments that equal only the interest due on the loan, for the first 10 years of the loan. At the beginning of the 11th year, you will begin paying both, the interest due on the loan and a portion of the loan balance.

For example, if you take out a $500,000 interest-only fixed rate mortgage at 4%, with an interest only period of 10 years and a fully amortizing period of 20 years, you’d have to pay about $1666 per month for the first 10 years. When the interest-only period ends, you will still owe the entire $500,000 and your monthly payment amount will almost double to about $3,029 with the inclusion of both principal and interest payments. 

What are the Pros and Cons of an interest-only mortgage?

According to Business Insider, there are many pros and cons to think about. 

Pros:

The initial monthly payments are usually lower: Since you’re only making payments towards interest the first several years, your monthly payments are lower compared to some other loans. 

May help you afford a pricier home: You may be able to borrow a larger sum of money because of the lower interest-only payments during the introductory period. 

Increase to your cash flow: Lower monthly payments can leave you with extra dollars in your budget. You can use that money to put towards other investments, home improvements, or you can start paying down the principal early.

Cons:

You won’t build equity in the home: With an interest-only loan, you aren’t building equity until you begin making payments towards the principal.

You can lose existing equity gained from your payment: If the value of your home declines, this may cancel out any equity you had from your down payment, making it difficult to refinance or sell.

Low payments are temporary: Your low monthly payment won’t last forever — when the interest-only period ends, your payments will increase significantly.

Interest rates can go up: Interest-only loans usually come with variable interest rates. If rates rise, so will the amount of interest you pay on your mortgage.

There are many homebuyers that may benefit from an interest-only mortgage. People who aren’t planning to stay in their home long term can take advantage of the lower monthly payments for several years, and then sell their house before the higher monthly payments kick in. Buyers who are just starting in their careers may appreciate the lower payments while they are making an entry level salary. If your finances are strong and you’re not worried about building equity, this may be a great option for you.

As with any large financial commitment, it’s important for all prospective buyers to seek expert advice. Reach out to Jaxzann Riggs at 303-990-2992 with any questions.

It is important to note, however, that once the initial interest-only term ends, you’d continue making payments toward the loan with both principal and interest included.

It Takes Many ‘Players’ on a Mortgage Lending Team to Get You to the Closing Table  

By JIM SMITH, Realtor®

The government’s supervision of lenders has changed the way that home loans are made. Once you select your lender, you will be interacting with multiple people. Understanding who the “players” are is important.

I asked Jaxzann Riggs, owner of The Mortgage Network to describe those players..

The Loan Originator/Loan Officer

Sometimes called a “loan originator” or “loan officer” (LO) this is your team manager. Your LO will typically be your first contact with the lender. The LO decides if your income, assets, and credit will allow you to obtain the financing you need. The LO will be an educator and your advocate. He/she will manage the overall progress of the application, making sure that deadlines agreed upon by you and the seller are honored.

The Processor

The processor is the player tending to your loan application as it winds its way from application to closing. Your processor will request documentation from you that supports the information that you and the LO have put into the application for the loan. Their job is to organize your documents so that they paint a clear picture of your ability to repay the loan. The loan processor is the go-between between the borrower and underwriter.

The Appraiser 

The appraiser will create a report that assesses the home’s market value to ensure that the amount of money requested for the loan will be acceptable to FNMA or FHLMC. The appraiser confirms the home’s dimensions, examines amenities, and evaluates the overall condition. He/she examines the records of comparable properties, ideally ones in the same neighborhood that have sold recently. Based on this information, the appraiser arrives at an opinion of how much your property would sell for if you put it on the market. This opinion assists the underwriter, along with your income, assets, and credit history in deciding how much it will lend you and on what terms.

The Underwriter

Think of the underwriter as the final word. FNMA and FHLMC are quasi-governmental agencies that set underwriting standards which lenders must follow. After reviewing your credit history, assets, the size of the loan, and the appraisal of the home, it is the underwriter who will decide whether your application meets government standards and either approve or decline the application. If they decide that your credit profile or application does not meet FNMA/FHLMC standards, they may deny your mortgage or require a larger down payment. Underwriters have discretion in the approval decision and, while they are the “gatekeeper” for the lender, they typically will look for ways to approve the loan.

The Closer

While not obvious, there are two “closers” working on your loan team. The title company’s closer must coordinate with the lender’s closer to reconcile the numbers associated with the loan and real estate transaction. The title closer will be presenting the lender’s final documents for your signature on the day of closing. The closing package includes the final loan application, loan estimate and closing disclosure, title insurance documents, deed of trust, bill of sale, affidavit of title, tax documents, etc. While they start their work at the beginning of the transaction, their work is not finished until all the documents that you sign at closing have been recorded with the county.

The Most Valuable Player (MVP)

The most important player is YOU. Your LO and Loan Processor will not ask you for documentation unless they know that it will be required by the underwriter. The more responsive you are to their requests, the faster the loan will be approved and the lower your stress level will be during the process.

Do you have other questions about the mortgage process? I recommend calling Jaxzann at 303-990-2992.

Pressure is Building for Potential Home Buyers: Why Now May Be the Best Time to Buy  

Roughly 6.5 million homebuyers have taken advantage of ridiculously low interest rates since the beginning of 2021. Low interest rates have allowed them to become first-time homebuyers, to move up to their dream home or to downsize.

Many would-be home purchasers have watched this ‘boom’ from the sidelines and decided that now may not be the best time to buy. Bidding wars and the need to make split second buying decisions over the last few months have reduced their appetite for home buying. It might be time to reconsider that decision.

I asked Jaxzann Riggs about the wisdom of “waiting” to make a move, and the following is based on our conversation.

Rental rates fell in 2020, but nothing could be further from the truth in 2021. While accounts vary, some leasing agents (according to ApartmentList.com) report that rental rates could increase as much as 32.4% in the next 12 months and stats indicate that they are up a shocking 16.5% in the first eight months of 2021.

As rental prices spike, potential homeowners should do a little mortgage math.

A potential homeowner who is paying $2,600 per month for rent, would be able to own a home valued at around $475,000. With a 3% down payment of around $14,279, this renter could turn into a homeowner, allowing them to enjoy the associated tax benefits and the opportunity for appreciation on their new property

Housing inventory is increasing and with the threat posed by rising rental rates, and rising interest rates, there is no better time than today to explore home buying options.

During the Covid-19 pandemic, the Federal Reserve supported lending to households, consumers, and small businesses to stimulate the economy. The Federal Reserve recently signaled that it plans to begin reducing the support it has been providing to the U.S. economy. Long term fixed mortgage rates are driven by the overall economy and inflation, but they are directly influenced by Fed policy.

Once the Federal Reserve starts to slow the pace of bond purchases, mortgage rates will move up. Fed officials indicated that they would begin “tapering” the asset-buying activities that it began last year as early as November. After the announcement, mortgage rates did in fact, show a rising trend. For someone with a $500,000 home loan, a 4-basis point jump will cost them $115 more per month and $41,400.44 more over the life of the loan on a 30-year, fixed-rate mortgage.

Mortgage rates are hovering near 3% and demand remains strong but higher rates are clearly on the horizon. Remember our potential renter? As rates rise, a monthly rent of $2,600 would instead result in a $410,000 house (vs. $475,000), if interest rates move from 3% to 4.5%

Even more incentive to potential homeowners is housing inventory. The inventory of active listings on the market rose by a record monthly amount (according to Denver Metro Association of Realtors). Some potential homebuyers that I am working with report they are waiting for prices to cool off to make offers, but even if that does occur, they are unlikely to see lower monthly house payments because any potential savings in purchase price will be lost to rising interest rates.

Future home buyers are not the only ones affected by higher interest rates. For homeowners who have been procrastinating with their refinance application, now is the time to call a lender. Jaxzann Riggs and I are standing by to make the process as simple as possible.”

If you have lending questions, you can reach Jaxzann, who is the owner of The Mortgage Network, at (303) 990-2992.