The 1 Force That Can Really Change A Mortgage Rate

All day, every day, conforming and FHA mortgage rates in Colorado are in flux.  Rates move in response to hundreds of factors which exact varying levels of influence.
Among the biggest influences on mortgage rates is inflation.  When inflation is unexpectedly high, mortgage rates tend to rise quickly. Conversely, when inflation is unexpectedly low, rates tend to fall quickly.
But what is inflation?
By definition, inflation is when a currency loses its value; when what used to cost $1.00 now costs $1.10.
As consumers, we recognize inflation by the items we buy on a daily basis becoming more expensive.  However, it's not that goods are more expensive -- it's that the dollars we're using to buy them have become worth less.
With respect to mortgage rates, this is a big deal because mortgage rates are directly related to the price of a special type of bond called a mortgage-backed bond.
On Wall Street, mortgage-backed bonds are priced, bought, and sold in U.S. dollars so as inflation renders those dollars less valuable, so it does to mortgage-backed bonds as well. It's a chain reaction by which mortgage bonds lose value, leading investors sell them, causing bond prices to fall on the excess supply.
And, because mortgage rates move opposite of bond prices, as inflation takes hold, mortgage rates rise.
Lately, inflation has been exceptionally low. The Federal Reserve acknowledged as much in its last statement to the markets, and available data backs that position.  This, after predictions that inflation would be "runaway" in 2010.
The Cost of Living is up just modestly this year and it's helping mortgage rates stay low. And, so long as it lasts, the cost of owning a home in Belle Creek will remain relatively inexpensive.

The New and Improved GFE?

A “Simplified” GFE?

Making the Good Faith Estimate More Transparent May Make it More Difficult to Close

I have been living in the same home for almost 8 years now.  It is cozy and has enough room for my family.  We have designed it to suit our needs and updated or upgraded paint, bathrooms, basement.  

When we bought our home, we got a great deal on it (for the time!), and we were able to put down a pretty decent downpayment after selling our previous property.

So, our loan isn’t big.  It was originally with ABN-Amro and along the line it was purchased by WaMu.  We had no problems with that, and in fact, when  we were sent a mailer about doing a re-fi several years ago for a flat fee of $495, we decided to go for it.  We were smart- we got an adjustable rate (not the smart part...) mortgage, took a little cash out, and went on with our happy lives.  

We are thankfully nowhere near being upside down on the house (that’s the smart part), but one of these days it IS going to adjust.  Mind you, this won’t happen for at least another year.  With interest rates being low, we decided now would be a good time to lock in our rate.  If we could do that now, we would drop the interest rate down over a point, without changing our payment.  Score!

Enter Chase Bank

In the meantime, Chase acquired WaMu.  (Cue the music: Duh-duh-DUHHHNNNN!)  People have many different stories to tell about their experience with Chase Home Loans.  This is mine:

It started with a call to the 800 number on my loan statement to try and get the right department.  This was an adventure in its own right and might even be worth another blog.

Once I got through to the correct department, I spoke with a very nice man whom I’ll call AxA.  AxA was very informative.  Per the notes I took during this first call, he told me that it would be no problem, we might even be able to lock in a rate without an appraisal!  Because we are already Chase customers, there is no origination fee!  There won’t be any points!  We have great credit!  He! was! very! Enthusiastic!!!  In double time, with me furiously taking notes, he said that there would be a processing fee of $750, but we would get some of this back at closing.  It turns out that we would need a full appraisal, but that was to be expected in this market.

The Good Faith Estimate Arrives

Per the new regulations and Truth in Lending, a Good Faith Estimate is sent when you originate a home loan, and then a final one is sent just before closing.  There are certain fees that a consumer is able to “shop”- among them title insurance, home inspection and a couple of others.  Because we are not purchasing a different home, inspection is not necessary.

I tore into the paperwork to see what lay inside.  This document is dated January 15- the new Truth in Lending went into effect January 1, so this would be my first glimpse.

I glanced down the page.  At the bottom, “Summary of Charges:  $2560.47”

What.  The.  Hell?

Origination charges 1510.59.  “All other Settlement Services” 1049.88.  I don’t think so.  

Next:  RealtorJenn gets to the bottom of it...

Do you trust your lender? Bank of the West Costs Buyer the Deal

Today on the Tom Martino radio show, a caller phoned in to share an unbelievable story.  Only it was all too true.
The buyer and his wife had found their dream home after going to Bank of the West and getting a prequal letter.  They negotiated a successful offer on the property and were under contract.  After completing all necessary steps- submitting an earnest money check, submitting a completed mortgage application, completing inspection, getting title insurance- they set their closing date.  Two days ahead of time they contacted the lender to be sure that everything would go through as planned.  "Absolutely," they were told.  "No problem at all, we will see you on Friday."
Friday morning they awoke with excitement and anticipation.  Today would be the day that they would close on their dream home.  In the state of Colorado, possession usually takes place at the time of closing, so they were set to enjoy a romantic dinner in their brand new home.
Two hours before closing, they got a call.  The lenders were trying to verify employment.  It seems that the banker never started the loan process.
They didn't close that day.  The seller refused to extend the closing date and kept their $2,000 earnest money. 
They sold their previous home and now no longer had their dream home to move into.  The sellers don't want to work with them at all.  Tom is getting the would-be buyers a lawyer.
And we wonder how banking got to be such a mess. 

Tips for Avoiding Identity Theft

Here's a final takeaway from what I learned at my Credit Scores class.  Look for a consumer class coming soon!

Avoid Identity Theft!

• Monitor your credit report annually  Whether you sign up to monitor your credit with the company that has those catchy ads, or do it yourself, make sure you do it!  Remember that they have to pay for those ads and do so by charging a credit monitoring fee after your first report.  To monitor your own credit completely FREE, go to http://www.annualcreditreport.com/
• Secure Your Mail  It might be a good idea to have it delivered to your office or post office.  Outgoing mail should be posted at the post office or a secured mail box.
• Electronic keypad signatures  One of the most common points of theft.  Add the date after the signature so it cannot be reused.
• Never list your social security number  And never carry your card with you!
• Destroy all statements and solicitations  It's not enough to just tear them in half and throw them away.  Shred!
• Don't leave paper trails  Take ALL ATM and gas receipts with you.  These are other very common points of origination for identity theft.
• Always review your statements  Make sure all of the charges are yours.  If you don't recognize a store or vendor, call your credit card company and ask. 
• Know who you are dealing with  Don't give out personal information over the phone or internet.  If someone calls claiming to be your bank or credit card company, call them back using the number on your statement, not the number the caller gives you.
• Know your delivery dates  If the bill isn't there when expected, call.
• Remove bar code from magazines and shred them!  There is a world of information about you contained in those little lines.
• Keep your medical insurance card safe  Medical ID theft is the newest form of identity theft.
• If you pay your bills by check  Put your work phone and address on your checks.
• Have different passwords online  and change them every so often.

Hopefully this has been helpful information.  I know I learned a lot and wanted to share it.  There is nothing that feels quite so helpless as when someone is using your information- protect yourselves!

Tipping the Credit Score Scales in Your Favor

You might be wondering what you can do to improve your credit score.  Here are some good tips from the Credit Scores class I took last week:

• Pay ALL of your bills on time or early.  Even a 30 day late on a small credit card can have a significant negative impact on your credit score.  Sign up to have the minimum payment automatically deducted on the due date to ensure that no matter when your "real" payment gets there, you have at least paid your minimum on time every month.
• Don't co-sign loans!  Remember that their late payment becomes your late payment.  No exceptions, no do-overs.
• Don't open new accounts unless absolutely necessary.  Inquiries may or may not affect your score depending on the rest of your credit history.  There are two types of inquiries: hard or soft.  A "hard" inquiry is when your full credit file is pulled, as when you try to open a new credit card.  A "soft" inquiry is when you pull your own credit score.  Fortunately, multiple credit inquiries from mortgage companies or auto loans within a 14 day period will not hurt your score, so you can shop around.  Just be careful where you do this- online mortgage companies are reportedly not the way to go.
• In related news... Department Store Credit Cards hurt your credit!  It can be so tempting to "save 10% all day today".  However, the credit is only good in that particular store, so it isn't good for your overall rating.
• Report Fraud Immediately!  If you are a victim of fraud, contact the credit bureaus, your credit card companies, banks and the FTC at http://www.ftc.gov/
• Monitor your credit.  Order a FREE copy of your credit report once a year at http://www.annualcreditreport.com/  This site will not require you to sign up for paid service.
• If you are planning on refinancing or buying a home, do not make any purchases or runup the balances on your cards.  Wait until you move in to buy that furniture, carpet, appliances, etc.

What Goes into Your Credit Score?

It seems like some kind of mystery.  How DO they figure out your credit score anyway?  Until recently, the calculations were fairly well guarded.  Yesterday, I took a class that gave an estimate of how it is figured. 
Being the mommy of a 9 year old, and a former teacher, I like to advocate SHARING!  So, here it is:

Payment History= 35%

• Pay your accounts ON TIME, even if it is only the minimum.  You can usually sign up to pay the minimum automatically online.  This ensures that a payment is recorded on time every month, even if you still mail paper payments of any amount.  Most of us have experienced going out of town and forgetting to mail your bills...  this takes care of those "oops" moments.
• Length of Positive Credit History. The longer you have your credit and pay it on time, the better
• Severity and Quantity of Delinquencies. 

Amount Owed= 30%

• Quantity of Credit Accounts.  Too many credit cards with balances can lower your score.

Length of Credit History= 15%

• The longer the better
• How long have your credit accounts been established?  It can take 6 months to a year to establish a payment history on a new credit card.  Until that time, it is a negative against your credit history because it is unestablished.
• How long has it been since you've used your accounts?  If you have many cards that you never use, this can count against you.  Unfortunately, suddenly closing a bunch of accounts is not a good idea either.  Ultimately, you should have 3 cards that you use, and pay, regularly.

New Credit= 10%

• Opening several credit accounts in a short period of time is a greater risk- especially if you have not established a credit history.

Types of Credit in Use/Having a Healthy Mix= 10%

• 2 Intallment Loans (eg. Car payments)
• 3 revolving Credit Accounts with balances
• Balances on revolving debt below 30% of the high credit (credit limit)
• No collection accounts
• No public records
• No foreclosures
• No late payments

Coming Next:  Tipping the Scales in YOUR Favor