Q: Should I lock in my mortgage rate?

A: Because the interest rate market fluctuates constantly and is subject to quick movements without notice, locking in a mortgage rate with a lender certainly protects you from the time your lock is confirmed to the day it expires.

Lock-ins make sense in a rapidly-rising rate environment or when borrowers expect rates to climb during the next 30 – 60 days, which is typically the amount of time a lock-in remains in effect.

A lock-in given at the time of application is useful because it may take the lender several weeks to prepare a loan application.  These days, however, automated loan practices have cut the time quite a bit.

Lock-ins are not necessarily free.  Some lenders require you to pay a lock-in fee to guarantee both the rate and the terms.

If your lock-in expires before you close on the loan, most lenders will base the loan rate on current market interest rates and points.

This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.

Top 10 Homeowner Financing Tips

1. Don’t Stretch Your Loan Qualification Limits to Buy a Home Beyond Your Budget. A home should be a source of satisfaction and an investment not a financial albatross, especially for first-time buyers. Borrowing heavily from family members, selling assets, and living poor just to own a bigger or better home, makes for larger mortgage payments and risks difficulties in the future.

2. Always Shop for Competitive Rates, Points, and Fees. Get at least three bids. The most competitive lender one week may not be next week so get (or reconfirm) quotes the same week you are ready to make the commitment.

3. Get An Immediate Written Confirmation of Your Locked-in Interest Rate and Interest Rate Terms. You might find some discrepancies with the figures used on the final loan documents.

4. Don’t Agree to Prepayment Penalties. You may want to refinance or partially prepay part of the mortgage. If there is no mention of prepayment penalties, make sure you have an addendum attached to the mortgage specifying that no fees will be imposed.

5. Understanding All the Conditions of Your Loan: You or a professional that you trust should thoroughly scrutinize each document. Ask questions if you aren’t sure what something means.

6. Pick the Right Kind of Loan. Rates are higher on 30 year loans than on comparable 15 year loans. That’s because there is a greater risk that rates will go up the longer the lender commits to a fixed rate. Lenders hate holding loans at below market rates. While there is an advantage to the predictability of fixed rates, if you expect to be transferred in 5 years, you’ll be paying more than you need for a 30 year fixed rate loan. If you want both the security of predictable payments and the lowest monthly payment consider “hybrid” loans – those with a fixed rate for the first five or seven years of their 30 year duration. If you are going to be there for a shorter period, or have confidence that rates will be dropping further, consider an adjustable rate mortgage.

7. If You Are Buying Rather Than Refinancing, Consider Getting a Pre-approved Mortgage or Contingent Loan Approval Letter. The former is a binding commitment for a loan up to a certain amount. It can substantially strengthen your negotiating position with the seller, but it puts pressure on you to close a deal before the loan commitment expires. A contingent approval is a letter from a lender that states the largest loan you would qualify for, subject to confirmation of the financial information you’ve provided and formal approval. It will also give you additional negotiating leverage without binding you to the lender (or vice versa). Sometimes owner financing can work to both parties advantage. Ask the seller if it’s a possibility. If so explore further to see if there might be mutually agreeable terms before making an offer.

8. Save Everything. Lenders require and provide numerous documents. Some get misplaced, usually at the most critical time. Keep copies of everything you send the lender and everything the lender sends you.

9. Take Advantage of the Deduction. The mortgage interest deduction is one of the few remaining tax deductible interest payments, and it’s also the cheapest form of long term financing. Consider financing/refinancing as an alternative source of funds for home improvements or other constructive long term investments like education. Don’t get in over your head, and never use it to finance your summer vacation or other short term pleasures.

10. Study! A lot of money is at stake. You can’t learn too much, and you won’t have time to learn what you need, interview and select a lender in the five days allowed most buyers to apply for a loan. Read the real estate section of your local paper and books on the subject.

Courtesy of the American Homeowners Foundation and the American Homeowners Grassroots Alliance, www.AmericanHomeowners

This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.

Top 8 Things to Know about a Mortgage

By Barbara Pronin, RISMedia Columnist
Deciding what kind of home loan is best for your needs is an integral part of the home buying process. But it’s not always easy, according to California mortgage broker Ken Go.

Go notes the eight most important factors to compare when shopping for a mortgage:
• Principal – The principal is the amount you are borrowing—or the price of the home you are buying minus the down payment. Lenders will tell you how much they are prepared to lend you based on your income and credit score. That will help you determine how much house you can afford.
• Mortgage type – Mortgages fall into two categories; fixed rate or adjustable. With a fixed rate mortgage, you pay the same amount each month for as long as you have the loan. The interest rate is slightly higher than some adjustable rate mortgages, but adjustable rates change with the market and will likely rise over time.
• Interest rate – A loan with the lowest posted rate may have higher closing costs. Consider the Annual Percentage Rate (APR), which takes into account the interest rate and the loan’s other costs.
• Monthly payment – A mortgage loan should help you build equity in your home. The best one may or may not be the one that carries the lowest monthly payment. Consult a mortgage broker for details.
• Term – The term is the number of years your loan will remain active. Mortgages with shorter terms generally carry a higher monthly payment but they can save you a lot of interest over the years.
• Discount points - A point is equal to one percent of the principal. Lenders may offer you the chance to pay points in order to lower the interest rate of your mortgage. If you plan to stay in the home a long time, it may make sense to pay points.
• Lock-ins – When you apply for a loan, the lender will quote you the rates. But rates can go up while you shopping for a home, so it’s a good idea to lock in the quoted rates. There may or may not be a fee to do so.
• Closing costs – Origination fees, appraisal fees, and other costs will be added to your loan. Ask your lender for a good faith estimate of the costs, and an explanation of any charges you don’t understand.

This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.

The 30-year fixed-rate mortgage (FRM) averaged 3.98 percent with an average 0.7 point for the week ending November 23, 2011, down from last week when it averaged 4.00 percent. Last year at this time, the 30-year FRM averaged 4.40 percent.

The survey showed that the 15-year FRM this week averaged 3.30 percent with an average 0.7 point, down from last week when it averaged 3.31 percent. A year ago at this time, the 15-year FRM averaged 3.77 percent.

Additionally, the 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.91 percent this week, with an average 0.6 point, down from last week when it averaged 2.97 percent. A year ago, the 5-year ARM averaged 3.45 percent.

The one-year Treasury-indexed ARM averaged 2.79 percent this week with an average 0.6 point, down from last week when it averaged 2.98 percent. At this time last year, the 1-year ARM averaged 3.23 percent.

“Mortgage rates eased slightly this week with fixed-rate loans hovering above all-time lows and ARMs reaching a new nadir,” says Frank Nothaft, vice president and chief economist for Freddie Mac. “The high-degree of home-buyer affordability in recent months translated into a 1.4 percent pickup in existing home sales during October, according to the National Association of REALTORS® (NAR). NAR also reported that contract cancellations were up in October as well, which restrained sales from achieving a stronger rebound.”

For more information, visit www.freddiemac.com.

This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.

Credit scores range between 200 and 800, with scores above 620 considered desirable for obtaining a mortgage. The following factors affect your score:

1. Your payment history. Did you pay your credit card obligations on time? If they were late, then how late? Bankruptcy filing, liens, and collection activity also impact your history.
2. How much you owe. If you owe a great deal of money on numerous accounts, it can indicate that you are overextended. However, it’s a good thing if you have a good proportion of balances to total credit limits.

3. The length of your credit history. In general, the longer you have had accounts opened, the better. The average consumer’s oldest obligation is 14 years old, indicating that he or she has been managing credit for some time, according to Fair Isaac Corp., and only one in 20 consumers have credit histories shorter than 2 years.
4. How much new credit you have. New credit, either installment payments or new credit cards, are considered more risky, even if you pay them promptly.

5. The types of credit you use. Generally, it’s desirable to have more than one type of credit — installment loans, credit cards, and a mortgage, for example.

For more on evaluating and understanding your credit score, visit www.myfico.com

Reprinted from REALTOR® magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS®.

Copyright 2008. All rights reserved.

In today’s brave new world of  South Florida real estate, getting a home loan is arguably the most stressful component of your transaction. On the one hand, the “big box” national lenders have frequently proven to be unreliable in just about every step of the funding process. With their thin staffs, poor communication and underwriting rules that seem to change on a daily basis, a Florida home buyer cannot rely on a successful closing. On the other hand, working with a mortgage broker may compound these problems since you are adding a middleman to the equation.

Going With a Stuart Area Direct Lender

For me, the best option for my clients is to work with a local direct lender. Our preferred direct lender is Group One Mortgage. With offices thtoughout the Treasure Coast, Group One offers skilled, personalized service coupled with the same programs offered by the national lenders.

Why a Florida Based Direct Lender Can Ensure a Successful Closing

1. Full Service – a direct lender processes your loan, underwrites your loan and funds your loan right in their office. This includes FHA loans, VA loans, 100% USDA loans, conventional and Jumbo loans.
2. Easy Access to Decision Makers – having the loan underwriter in their office allows your loan officer to communicate directly with the person responsible for approving and clearing your loan to close.
3. Direct Government Lender – a direct lender can provide in-house FHA, VA and USDA underwriting. As a direct Government lender Group One Mortgage has a DE (delegated endorsement)underwriter in their office. All FHA, VA and USDA loans stay in house and are not being brokered through middle men companies.

Please contact me with all your real estate needs. Or call Wayne Katz at Group One Mortgage (561) 791-0000 to get pre-approved for a mortgage today!

Eric Slifkin, Broker Associate
Keller Williams Realty
819 South Federal Highway
Stuart, FL 34994
(888) 288-1765

This post has been authored by Eric Slifkin, REALTOR® serving South Florida’s Treasure Coast. You can reach me at 888-288-1765, or visit my Web site at www.TreasureCoastHomeSales.com. As your resource for information on new or resale homes throughout the Treasure Coast, please be sure to contact me about any home you may find on the Web, yard sign or ad and I will research the property, arrange showings and handle all the details.