Let’s Talk Appraisals – Or Religion – Or Politics……

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Michael Nelson - Equity Prime, LLC
What You Need to Know About Home Appraisals – Geoff Williams – US News

We all have heard the age-old adage – never talk religion or politics with customers, the date you want to impress, or the in-laws.  Well, we might as well add appraisals into the forbidden discussion category.  As a mortgage lender, this is a tough topic.  Regulations are very clear on the interaction allowed between a loan officer and an appraiser.  Which is to say a loan officer and an appraiser can have no interaction at all.

 

 

Appraisals are a hot topic – lots of emotion and added stress!

Michael Nelson - Equity Prime
What You Should Know About the Appraisal Process – Michele Lerner – Realtor.com

I don’t take issue with the regulations for all the obvious reasons.  History has certainly taught us that relationships between loan officer and appraiser are ill-advised.  But, I do suggest regulation has taken the pendulum too far to the other side.  Scarcity of appraisers and the time required to get an appraisal have made the 30 day close very hard to hit.  Especially in a TRID environment and refinance transactions.  While, I understand that each state is different, I can tell you the appraisal situation in Colorado is especially troublesome.

Click for moreLet’s Talk Appraisals – Or Religion – Or Politics……

What is APR And Is It Important?

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There is a lot of regulation around APR and home mortgages – anything with this much regulation must be important, right?  Lenders and loan officers spend a lot of time calculating, managing, and disclosing APR – it is a big part of everyday life in the lending industry.

Candidly, APR is confusing and hard to understand.  I have heard it called many things – average percentage rate, about percentage rate, approximate percentage rates…  For the record it is Annual Percentage Rate.  Let’s clear up some of the confusion.

Equity Prime - Michael Nelson
The Mortgage Reports – by Gina Pogol

What is APR and Why Is It Important?

APR (annual percentage rate) is  the interest rate plus the costs associated with the loan.  This mysterious number is intended to give an apples to apples comparison between two different loans.  Theoretically, if the consumer compares the APR of two loans, the loan with the lowest annual percentage rate is naturally the best loan for the consumer.  APR is designed to protect consumes from hidden costs, bait & switch, and deceptive marketing schemes which have been used in this industry.

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5 Suggestions to Reduce the Cost of a Mortgage

 

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Equity Prime - Michael F NelsonSource: 5 Ways To Get A Lower Mortgage Rate | Mortgage Rates, Mortgage News and Strategy : The Mortgage Reports

Obviously the most important customers in a mortgage  transaction are the buyers, sellers, and agents.  Without the buyers, the sellers, and the agents – there is no need for financing.

The strongest borrower is well qualified with a low-cost mortgage!

One of my many responsibilities in lending is to make sure the buyer has the right product which maximizes their ability to borrow and close on time.  It is not only my responsibility, but also in my best interest to leverage cost savings opportunities of the borrower.  Why? The lender business is about  relationship.  A buyer who funds on time is a well qualified borrower.   In most cases the strongest buyer will also be the borrower with the lowest cost.  Low cost  impacts important borrower ratios such as loan to value and debt to income.  Debt to income and loan to value are important in all mortgage transactions and directly impact the borrowers ability to qualify.

I like the article attached to my blog – written by Gina Pogol.   Her five suggestions are spot on:

  1. Add 1 point to your credit score
  2. Consider an adjustable mortgage
  3. Close faster
  4. Borrow less
  5. Shop more

Click for more5 Suggestions to Reduce the Cost of a Mortgage

ARMS – Great money saving mortgage product or buyer beware!

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Fixed rate loans versus ARMs is a hotly debated topic.  Proponents of each product have strong arguments why their particular favorite is better than the other.  I have seen numerous mathematical examples proving ARMs are better than fixed and vice versa.  So what is the truth?

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Which is better the ARM or the fixed rate loan?

The answer to this questions lies in the particular financial situation of the borrower and their tolerance for risk.   A properly selected mortgage is not a simple math exercise to determine which loan has the lowest interest rate.  While an ARM has a lower introductory rate than a fixed, if the borrower is risk averse the ARM, is not the right loan.   A mortgage is a personal product, it must fit the needs and risk tolerance of the borrower.

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ARMs – Some Basics

 Now, lets take a minute to explore ARMs.   An ARM is an Adjustable Rate Mortgage.  At specific periods of time the rate may go up or it may go down.  The most common ARMs in the mortgage world are  5/1 or  7/1.  The first number is the number of years before the first adjustment.  The second number is the number of years before each subsequent adjustment.  So a 7/1 ARM is an ARM that remains fixed for the first 7 years and then it may adjust depending on market conditions each 1 year thereafter.
Let’s go a bit further with our understanding of an ARM.  ARMS are tied to an index – such as LIBOR.  The interest rate of the ARM will adjust according to its index.  The margin is the interest percentage added to the index rate.  Hence a fully indexed rate is the index plus the margin.

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5 Nosy Questions To Expect From Your Mortgage Lender

Your mortgage lender is going to ask a lot of questions as part of any home loan application. Some of the questions might seem nosy — and downright rude. Source: 5 Nosy Questions To Expect From Your Mortgage Lender [shareaholic app=”share_buttons” id=”24213484″] I read the Mortgage Reports several times each …

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Re-Approve An Un-Approved Mortgage

Your situation can change, making your pre-approval invalid. But you can take steps to keep yourself approved, or re-approved.

Source: Here’s How To Re-Approve An “Un-Approved” Mortgage | Mortgage Rates, Mortgage News and Strategy : The Mortgage Reports

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Michael Nelson - Equity Prime, LLCLast week I put up a blog on the differences of a pre-approval and a pre-qualification letter.  There are significant differences between these two letters that a lender will give potential borrowers.  Click here if you would like to read this post.  This week, I thought some information on “What To Do” when your mortgage is un-approved is appropriate.

Click for moreRe-Approve An Un-Approved Mortgage

#2 In a Series – Observations from a LO: Pre-Approval & Pre-Qualification

Source: Mortgage Pre-Qualifications Are Good (But Pre-Approvals Are Better)

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mortgage products michael nelson equity primeToday, I am going to post some thoughts on Pre-Approvals and Pre-Qualifications.  The article linked above does a great job explaining what these two items are – give it a read. Rather than re-hash what this article does so well – define these terms,  I am going to provide my observations on experiences I have had with borrowers, agents, and lenders on this important topic

Observation #1:  If you are not Pre-Approved, you are not a serious buyer.

Michael Nelson - Equity Prime, LLC The reality is this – if you are making an offer on a home – a pre-qualification letter is not worth the paper it is written on.  A pre-qualification letter by definition does not require  verified income, assets, and liabilities by the loan originator.  It may have a reliable FICO score – it might not.  The lender will pre-qualify your ability to borrower based upon the data you provide over the phone, e-mail, or text.  If the information is 100% correct you might be in luck and get approved.  If the information is wrong…….  let’s just say the experience is not pleasant and a lot of money is at risk.  Originating loans properly requires skill, experience, and certain financial analysis.  Don’t shorten this important process with the false hope that pre-qualification is as thorough as pre-approval.

Click for more#2 In a Series – Observations from a LO: Pre-Approval & Pre-Qualification

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