Mortgage Rate Round-Up – August 9, 2008

This week saw mortgage rates mixed. Here are the national figures:

• Conventional 30-year fixed-rate mortgage rates rose slightly to a national average of 6.74 percent
• Jumbo 30-year fixed-rate mortgage rates rose to a national average of 7.68 percent
• 15-year fixed-rate mortgage rose slightly to 6.27 percent
• 5/1 ARMs fell slightly to 6.32 percent
• 1-year ARMs fell slightly to 6.24 percent

Though rates didn’t move much at all, there’s some not-so-good news for borrowers. Fannie Mae announced this week that it will be doubling their "adverse market delivery charge" fee which will be passed on to borrowers.

Source: Bankrate.com

Weekly Mortgage Rate Update

This is the first in a weekly series of posts regarding mortgage rates. The posts are aimed at keeping you in tune with what’s going on with mortgage rates currently and why.

The weekly mortgage rate update will be published every Saturday beginning this Saturday. The source of the information will be Darran Anthony of Suntrust Mortgage in Leesburg, Virginia, as well as other local and national loan officers and sources.

So here’s today’s mortgage rate update:

• Mortgage rates are rising this week
• The national average on a 30 year fixed is up from 6.125% to 6.375%

Here are some of the reasons why rates have are rising:

• A weak employment report last Friday
• Federal Reserve worried about inflation
• Soft demand for mortgage back securities

In a nutshell, rates are climbing due to weak economic figures, supply and demand and fear. But a mortgage rate of 6.375 percent is still great when compared to rates over the past 30 years. Buyers are still sitting pretty when it comes to mortgage rates.

Mortgage 101 – Closing Costs and Good Faith Estimates

Home buyers who obtain a mortgage have to pay "closing costs". Closing costs is the general term used to describe the various fees and expenses paid in order to obtain a mortgage. As a general rule of thumb, closing costs are between 2 and 3 percent of the gross purchase price. In order to see a break down of closing costs, you need to get a "Good Faith Estimate" (GFE) from the lender(s) you’re working with or comparison shopping. A GFE shows all the closing costs line by line. It also shows you your estimated total monthly payment.

Here’s a sample Good Faith Estimate (click on picture to enlarge):

   

Note: If a lender drags their feet or gives you a hard time about providing you with a GFE, do not work with that lender.

Once you get the GFE, ask your lender to go over it with you in detail. You may also want to go over the GFE with your real estate agent to make sure you didn’t miss something and that the lender didn’t hide any fees.

In order to better understand the Good Faith Estimate prior to going over it with your lender/agent, here’s a list of some common items and their fees and what line they can be found on.

Items that must be paid in order to close the loan. Neither the lender nor broker have control over these charges:

• Title Settlement Fee – line 1101
• Title Insurance – line 1108
• State Recording Tax/Stamps – line 1203
• Property Tax Escrows – line 1004
• Hazard Insurance (Home Owner’s Insurance) Escrows – line 1001

Items that can change, but are associated with all lenders:

• Pre-paid Interest – line 901
• Underwriting Fee – line 811
• Processing Fee – line 810
• Flood Certification Fee – line 815

Items that are specific to the broker/lender:

• Origination Fee – line 801
• Discount Fee – line 802
• Broker Processing Fee – line 813
• Broker Administrative Fee – line 814

The last set of fees (specific to the broker/lender) are directly controlled by the broker/lender and can be negotiated. But understand that if these fees are reduced or waived, the interest rate usually goes up since the broker/lender has to make a profit somewhere. And remember…you get what you pay for.

When looking at GFE’s, don’t simply look at the bottom line. You must compare lender fees to lender fees as these are the only ones that the lender controls. Make sure there aren’t fees hidden among the title or state tax fees, a tactic used by some shady lenders out there.

Lenders are also responsible for quoting other fees involved with a mortgage loan. Since many of these are third party fees (title search, survey, etc), they are often under-quoted up front by a lender in order to make their bottom line appear lower. 

Important note: Lender’s Good Faith Estimates are not held to much of a standard by law. The total amount of closing costs listed on your GFE can vary greatly from what your actual closing costs are on settlement day. Unfortunately, you will probably not be able to back out of the purchase due to a change in closing costs and/or your interest rate (check with your agent/broker/lawyer for further guidance). That is why using a reputable lender with a proven track record and high customer satisfaction is so important.

For more about Good Faith Estimates and why you should be careful, read Lenders versus Mechanics.

Special thanks to Christopher Koegler of America Funding in Mclean, Virginia.

Great Loan Opportunity for First Time Buyers in Loudoun County

Beth Perry of Suntrust Mortgage has brought to our attention a great new loan for first time home buyers in Loudoun County.  Here is her description of the loan and its details:

Loudoun County has just released a New "First-Time Homebuyer" program to help increase Home Sales in the area as well as make housing affordable to buyers.  In partnership with Virginia Housing, the County is offering a 1% reduction to their current fixed rate. With this reduction it brings their current 30 year fixed rate as low as 5.375%. 

They offer 100% financing with No Mortgage Insurance or Second Trust  which adds to the homeowners monthly savings.  With the current market changes it allows 100% financing to buyers with a middle credit score of 660 and as low as 620 with 5% down and a maximum Loan Amount of $417,000.

It really opens up the door for first time buyers!  In the past First-Time Homebuyers were limited to Condo’s and lower-priced Townhomes. Now they can even consider a Single Family Home!  This is a limited time offer for these funds until the 30th of June.

For more information or to get in on this program, here is Beth’s contact information:

Office # 703-464-4346

Cell #703-408-7346

Elizabeth.Perry-hauser@suntrust.com

Or you can always respond here and we can answer any questions you might have.

Will Private Mortgage Insurance (PMI) Soon Be Tax Deductible and Better Than A Piggy-Back Mortgage?

A post on Mortgage New Daily entitled "PMI Deduction Buried In The Closing Acts Of Congress" reports that Congress may have passed a bill ammending Section 6050H of the Internal Revenue Code. If this is so and the bill is signed by the President, PMI will be treated as interest and will become tax deductible.

Many consumers have avoided PMI by obtaining a piggy-back mortgage or "2nd trust" for the remaining financing amount over 80% LTV. The interest on the piggy-back mortgage is tax deductible and one of the reasons why the option is so popular.

In speaking with a lender today, if the bill becomes law, it was explained to me that,

• financing less than $400K and going with an 80%+ LTV loan and PMI may be the best option for you.
• financing more than $400K and getting a piggy-back mortgage without PMI may be the best option for you.

Though it hasn’t officially been passed, there’s plenty of discussion going on within the industry already. And we’re sure to see plenty of debate between lenders and mortgage insurance companies on which is better.

We’ll have to see what happens next month when it’s put before the President to sign.

Check with an experienced and reputable lender and tax professional for clarification and to see which loan program is best suited for you.

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