Blog with MAE Capital

April 8th, 2014 4:51 PM

I have been watching the housing statistics for a long time and I am seeing a very interesting trend of houses falling out of escrow.  If you look at the Local Tri-county area of Sacramento you will see that in March there were 1702 homes that went pending and only 1183 sold properties. In February 1281 went pending and only 985 were sold and in January there were 1227 home that went pending and 979 sold.  What does that mean you might ask?  Well it means that more homes went into contract than actually made it to the closing table.  This could mean several things but I am wondering if this has anything to do with the new Dodd Frank rules that went into effect January of this year. 

If in fact more transactions are not closing escrow and more are falling out due to the new rules then something should be done to fix those rules.  The rules limit the debt-to-income (DTI) ratio to 43% and this could be a factor in less loans getting approved where they would have last year before the rules went into effect.  In prior years underwriters could use other factors to determine if a borrower could make the payments other than having to give heavy weight to the DTI ratio.  In the past an underwriter could see that if a borrower had a good credit score and money in the bank left over after the close that the likelihood of the borrower defaulting would be less even if the DTI was high.  Now even if the borrower has money in the bank after the down payment, even if they have more money in the bank than the mortgage amount, if the DTI is higher than 43% then by law an underwriter cannot approve the loan.  The exception would be if the underwriter received an automated approval from FNMA’s Desktop underwriter (DU) or FHMC’s system then the underwriter could exceed the 43%.  The problem is, in many cases, DU does not approve the loan because the DTI is too high. 

So the only way this can be changed is by changing the law.  This would have to come from congress in order to change the rules.  Since the Mortgage crisis most of the risk that has traditionally been in the hands of the mortgage companies has switched to laws created by the government.  So if a Mortgage Company makes a loan and it goes to default and the government finds that the Mortgage Company’s underwriting may have approved the loan with a DTI higher than 43% then it could be said that the Mortgage Company is at fault for poor underwriting.  So if that is the case the Mortgage Company is less likely to make loans where the DTI is higher than 43%.   Thus, we will have more loans being declined than we have in the past for the simple reason the Mortgage Companies don’t want to take on additional risk of a high DTI loan.  This is now policed, if you will, by the Consumer Finance Protection Bureau (CFPB) and in the case where Mortgage Companies are found guilty of making high risk loans the remedy may be that the loan has to be forgiven and the borrower who would have normally lost their home now owns it free and clear.  When lawyers get wind of this there will be lawsuits and lending will get even tighter.  This is a case where the government has created rules that are intended to help the consumer will inevitably hurt them.  As usual leave any comment you might have.

Posted by Gregg Mower on April 8th, 2014 4:51 PMPost a Comment (0)

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Here we go again a drop in Real Estate values?  With the growing numbers of houses listed for sale and the lack of demand for them basic economics say that prices have to float down to reach the demand.  Although the American dream of home ownership is alive and well the ability for first time buyers to get into the market might be hampered by a nudge upward in interest rates at the end of last year (2013).  It might be hampered with the tightening of underwriting guidelines that went into effect the first of this year.  It further may be slowing due to weather related problems on the east coast.  Whatever the economics are behind the slowdown, we are seeing Real Estate sales lower than 2008 when Real Estate sales hit rock bottom. 

What does this mean and will it continue?  First of all I think we all need the Real Estate Markets to be in good shape as this is a large sector of our economy.  Many different industries are dependent upon Real Estate, most importantly the Construction industry.  If the existing homes are not selling there is no reason for Builders to build new homes if the demand is not there, nor will it be economically feasible if you can buy an existing house for far less than new home.  This poses several problems with other related jobs such as all the building supply companies and the heavy equipment industry to mention a few. 

If we are going to see an increase in Real Estate sales we need to see more job creation.  If people are working they will be able to afford to purchase a home and those that have jobs will feel more secure in making an investment in a home and not have to worry about losing their job.  Good quality jobs are what are really needed in our local economy as well as our national economy.  Our lawmakers here in California need to be educated on how to bring good jobs to California and keep them here.  Texas is doing a great job in bringing new business to their State, whereas California is still pushing those good quality jobs out of our state with high Corporate Taxes, high Property taxes and high income taxes.  Texas is doing such a good job of enticing business’ to come in to their state that they are one of the only states that actually have a housing shortage and construction is booming.  It is not a popular view point to give business incentives, especially in California, however, not everyone can work for the government ( I digress).  But it is an economic fact that more good quality jobs will mean better housing sales and a better economy altogether.

As we can see housing is driven by jobs and those that feel comfortable in their current job.   Across America housing sales are slow overall, but we now know that is not true everywhere.  The East Coast can certainly blame slower housing sales on the weather as they have seen record cold weather as well as the Midwest and Plane States.  California on the other hand has a drought situation and good quality jobs are, for the most part, concentrated to small pocket areas in the State.   Silicon Valley, by San Jose has a housing shortage as they have high quality jobs in the tech industry and they don’t have any more land to build on to support the workforce.  San Francisco is basically a commuter City as there is no more land to build on so we see support in housing in the cities that surround San Francisco, which is called the Bay Area.  In the Los Angeles area in places close to the beaches you have a limited supply of homes so those prices will be supported with a shortage of supply of Beach type properties.  Other than that California is economically depressed as business’ are leaving the State in droves to States like Texas that have open arms and incentives for business.  California will also have a building moratorium with the pending drought for 2014 as there is not enough water to support any increases in population. 

So if you are looking for an answer to the economics of Real Estate look for the jobs and you will find a prosperous Real Estate environment.  I, unfortunately, see Real Estate Sales slowing further into 2014 in California especially in the central valley areas.  Since the beginning of the year we have seen an increase in the amount of homes for sale and a sharp decrease in demand to purchase them.  In the years past we have had institutional buyers come into the markets and buy homes freely and this created a demand and an increase in home values.  Unfortunately, those investors have left our State and have left our markets to deal with a normal amount of houses for sale and a still lowering demand fueled by the lack of good quality jobs.  I think it is obvious that California needs to change it’s higher than mighty attitude and go back to attracting business to come to our state by lowering corporate taxes, property taxes, income taxes and make it easier to build in our State. By doing this you would see an increase in Companies that want to come to our State and Companies that won’t want to leave.  California is a Beautiful State with its Beaches to its Mountains but its Politics are the worst in the nation and that pushes jobs from our state and devalues our Real Estate.  Mother Nature is not helping us this year either with the drought. 

To conclude, 2014 will probably go down in the history books as the worst year in California for drought, Real Estate, Job growth, and Politics.  There will be bargains to be had in Real Estate; however we will see prices fall with an abnormally high of houses for sale.  It will and is a buyer’s market here in the Central Valley of California and prices will fall because of that, and unfortunately foreclosures and Short Sales will increase throughout the year.  I don’t want to sound pessimistic but I only look at the economic factors that face us as of right now and where they will take us.  If you are in the market to buy a home this year you will have many choices and you will be in command of the process and you should get a great deal on whatever you do purchase.  Investors better be ready to buy and hold this year as flipping homes will only be profitable if you get a special deal.  Rental property owners will have to invest into their properties to keep their tenants from leaving to find a better deal.  It will be a tough year for most in the Real Estate business as competition will be tight for that coveted buyer, but for those Real Estate Companies that diversify (like MAE Capital Real Estate and Loan) and offer different ways for Realtors to make a living and serve their customers better will survive and thrive.



Posted by Gregg Mower on March 17th, 2014 4:37 PMPost a Comment (0)

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February 24th, 2014 1:36 PM

Private money lending is where private individuals will invest in Deeds of Trust and Notes secured to Real Estate or a Business.  Private money lending is sometimes referred to as “Hard Money” due to the cost obtaining funding.  These types of loans are generally more expensive than traditional loans from Banks or Mortgage companies.  The reason they are more expensive is due to the increased risk they take when they lend their money.   The basis for this lending is the equity in the transaction.  Generally credit is not an issue with these types of loans.  The investors are protected by the equity in the property, if there is a default the investor will get the property back to sell.  So if someone buys a $500,000 building and puts $250,000 down, for example, the likelihood of the buyer defaulting on a $250,000 investment is slim.  If they do default the investor gets the entire $500,000 building, thus making the investment pretty safe all the way around. 

These loans are not for everyone, and for the most part for the informed investor and not designed for the first time Homebuyer. These loans are used for those situations where Banks and other institutions don’t want to lend or won’t lend.  Private money has been used for many purposes such as quick closing for those who flip properties, want to buy land, need a construction loan to build, need to buy a commercial building and many more uses.  Recently we closed a transaction where we used several different properties and businesses to secure enough money for a client to open a restaurant.  We have also used private funds for an RV park and motel.  We have also used private funds for quick closing for flip properties so the buyer appears to like a “cash buyer”.  The uses of private funds are almost limitless; if someone needs money we generally can find an investor for them. 

This brings up a very important point and that is that we use different investors from across the country for the different needs of our clients.   Each private investor has an appetite for what they are comfortable in lending on, or the terms they want, so it is important to use a broker, such as MAE Capital Mortgage, to find the source of funds that matches your needs to theirs. There is no secondary market for these loans and are generally held by private people or privately held companies or trusts.   In fact, with the recent changes to prime lending laws there are very few companies that actually have the ability to do this type of brokering as it requires regulation under the Bureau of Real Estate and most lenders are regulated by the Department of Business Oversight formerly the Department of Corporations in California.    The Agents you will be dealing with to secure this funding hold a BRE license and in most cases also a NMLS license. 

Ok so now you know a little about how private money flows, how do you apply for one of these loans?  Well it is a little different than applying for a standard mortgage in that you do not have to provide the documentation that is usually required by a traditional lender.  Usually, the process starts by the person needing the money providing a scenario of their needs.  Once we hear those needs we then go in search of an investor that will fund based on those needs of the client.  We then get an “offer” from the investor of their terms of which they will lend on the scenario.  Those terms include interest rate and fees.  Once we have received the terms from the investor we will present them to the client, and if they accept the terms we then get the required information from the client for the investor.  The investor will draw the loan documents and send them to an escrow company for signatures.  Once it has been signed and everyone has accepted the terms of the agreement the investor will fund to the escrow and the deal can close.  The terms can vary from an interest only 6 month loan to a 40 year amortized loan and everything in between.  The costs range from 3% of the loan amount up 15% depending on the risk and type of loan.  The interest rates can range from 7.5% to 15% again depending on the risk.  Remember the client does not have to accept the terms and these loans are not for everyone.  But for those that need to leverage money and can see the long term gain in utilizing this type of financing it works.

Private Money Lending, Hard Money Lending, Collateralized loans, Capital loans, whatever you want to call it is a tool used by real estate investors to leverage their capital so all their personal capital is not invested in one place.  This type of lending falls outside of the Real Estate Settlements and Procedures Act or RESPA in that it is used for people that use properties for business use.  The business use can be flipping, renting, and operating a business of some sort from the property the money is intended to be lent for.  Again, this type of lending is not for those that use or intend to use the property as their primary residence.  In fact, unless you can show that you are using the property for a business use this type of financing is not available.  For more information or to see if you can get this type of financing please give us a call we would love the opportunity to help you with your Real Estate investing goals. 

Posted by Gregg Mower on February 24th, 2014 1:36 PMPost a Comment (0)

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February 19th, 2014 3:23 PM

Well as I write this blog the industry is still reeling from all the sweeping changes that have happened since the beginning of the year.  All these changes have been over-shadowed by the Affordable Care Act or Oboma Care in the media.   Those who have tried to obtain financing since the beginning of the year know what I am talking about here when I say these changes are not consumer friendly.  These changes were designed by the powers-at-be to help consumers navigate through the lending environment all the while protecting them from predatory lenders, high fees, bad loan programs, and other mischievous activities of the lenders of the past.  In doing so credit standards have tightened so much that unless you are one of those who work for the government, and have one bank account, and never move money around you are OK with these new stadards, but for the rest of the world that may be self-employed or hourly, on commission, or any combination of the above the rules have limited you on how you can qualify for a home loan. 

So what has changed, you asked?  Well the single biggest change is the debt-to–income ratio has been capped at 43%.  This is the mathematical number that a lender will use to qualify you.  It is all your revolving debt (minimum monthly payments), that shows on your credit report, plus the calculation of your new house payment, plus taxes and insurance (PITI, even if you don’t pay those in your payment) divided by your gross monthly income.


This little formula is now the culprit for more people NOT qualifying for a mortgage.  There are exceptions to this to allow for a higher DTI.  Those exceptions will allow a borrower to have a higher than 43% DTI but not to exceed 45% for conventional loans or 50% for FHA loans.  In order to exceed the 43% limitation a borrower must demonstrate that they will have several monthly mortgage payments left in their savings after the loan is consummated or prove that they are not increasing their housing expense significantly from either their prior rent situation or their prior mortgage situation.  Oh, did I mention that you have to have an automated approval in addition to those compensating factors; well you do, to exceed a 43% DTI.  Sounds complicated and it really is.  I have had a real tough time explaining this to my customers sometimes, as in the case of a refinance, a client may have been making higher payments on their mortgage but fail to qualify for a mortgage with a lower payment because their DTI falls outside of the qualifying number.

Another problem with this rule is in the definition of income.  Income is almost subjective when you are calculating it for a client as most of the time the income we use is less than what the client is actually receiving.  This is especially prevalent in the self-employed folks, or those on commission or anyone that is not on a fixed salary for that matter.  A salaried employee is the best form of income to use to qualify for a loan as an underwriter can use the income they make right now, but this is not true if you are paid anything other than a salary.  For example; if you are hourly and are not guaranteed a set amount of hours per week then an underwriter will have to average your income over a period of time.  Averaging works like this; if you have been working for the same employer for over a year and the employer can break down the hours you work, per week, month, or year the underwriter has a basis to work from.  If you worked an average of 33 hours a week for the last year the underwriter will then take your current rate of pay (hourly rate) times it by the average hours per week times that by 52 (there are 52 weeks in a year) and divide that by 12 to get a monthly qualifying income figure.  As you can see this may lower the income you think you make as you may have been working 40+ hours a week for the last month but your average is something less.  For self-employed people it gets even worse, you have to have a 24 month average to calculate income.  If a self-employed person made $100,000 last year net on their income taxes, but only made $25,000 the year prior the average will be $5,208 a month verses $8,333 the amount they are really making now.  Also most self-employed people write off things on their tax returns to lower their overall tax liability and lenders have to use a self-employed person’s net income after all deductions to qualify them.    

Enough about the boring details, but as they, “the Devil is in the details”.  The whole idea of these new rules from the government is to protect people from themselves.  Yes, the government figures that we are not capable of figuring out what we can afford and what we can’t.  The same is true for lenders; the government has put these rules on private industry as the government believes that private companies are not capable of making good business decisions, even though the industry has been around for over hundred years.  I could get into government intervention into our lives here but this is not forum for that (biting my tongue).  There are more changes that I will cover in future articles but this is the largest change I have seen thus far.  As always you can comment on this topic or any other topic within this blog. 

Posted by Gregg Mower on February 19th, 2014 3:23 PMPost a Comment (0)

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January 29th, 2014 4:18 PM

So you have been thinking of selling of your home.  But you have no idea where to start, so you turn to the internet and “google it” and here you are.   I welcome you as you have found an article written by a 30 year seasoned veteran of the Real Estate industry and the Mortgage Industry. If you want to know more about me you can “google me” or look in the bio section of my site here.  Enough about me let’s talk about selling Real Estate.  The first thing we need to do is plan our move, yes, we need to know where we are going and what we are going to do for housing once our home is sold.  So many people make the decision to sell and have no idea of what they can afford to move into.  Most folks see that they have equity in their current home, and that’s great, but you still have to income qualify for a new loan unless you are one of the fortunate ones that can pay all cash for a house.  So the real first step in selling a home is to figure what you can buy once your home is sold.  So any good Agent/Loan Officer like me (selfless plug) can quickly get you approved for financing before listing your home for sale.  By doing this you have a road map of where you can go.  Finding this information out before you have sold your home is invaluable. 

Ok, you have a plan and know what you can afford to buy when you sell your home.  You should also have a good idea how much money you will “NET” from the sale of your home.  Your Agent should have given you a good value estimate based on sales in your neighborhood.  Now it is time to get you home ready to be shown.  The best tip I can give for this is to go with a minimalist theme in your home, meaning take everything out of the house that is clutter.  This is the hardest thing for a homeowner as their “stuff” is comforting to them.  The house must be staged to allow potential home buyers to envision your home as theirs.  This is tricky, as you still live in the house.  You should take all personal pictures, trophies, and knick knacks down and put them in a box to move to your next home.  A fresh coat of paint is always a good idea as it makes the house look fresh and smell fresh.  Rooms that are painted in a theme, or wall papered in your favorite design should be painted over, as home buyers are looking to make your house their home.  Again, this tough as your child may have painted his or her room in High School colors or mascot that they find really cool.  It has to go, as the potential home buyers may not have kids, or have younger kids, so you want your house to reflect a blank canvas when others are looking to buy it.  You have to keep your home in “show ready” condition all the time, because you never know when it is going to be shown.  This is probably the single biggest hassle with selling your home as buyers always want to see your home at un-opportune times, such as at night when you get home form work.  Put away your laundry when it is done as potential buyers are going to look in your closet and any of those usual hiding places that normal company will not usually look at, but buyers will.  If you have extra furniture that you can store in the garage or a storage unit, do it, as by removing extra furniture it makes the house look bigger.  

Ok the house is staged, and if you don’t feel comfortable doing this ask your Agent for advice they should know.  If you have not signed your listing agreement by now with your Agent now would be a good time to do so.  The listing agreement or “exclusive right to sell agreement” is the form your Agent will use (in California).  This gives your Agent the rights to market your home for sale on your behalf.  The Agent will then implement their marketing strategies that they told you about when you first met. These marketing strategies should include some basic things such as listing your home in the Multiple Listing Service or MLS, this is where other Agents go to see properties for sale to show their buyer clients.  Chances are that your Agent will not be the Agent bringing a buyer to the table it will be another Agent that sees your home from the marketing your Agent has done for you.  As for paying the other Agent, this will be spelled out in your listing agreement, usually the total commission is split 50/50 with the Agents (Listing Agent and Selling Agent).  Your Agent may take some other form of payment for his or her commission; this should be negotiated from the beginning. 

Now an “offer” to purchase your home has come in to your Agent.  It is your Agents responsibility to show you all offers that tendered.  Don’t be offended if the offer comes in lower than the listed price of your home as this whole process is a negotiation.  I would recommend to my clients that they counter offer if the terms in the offer doesn’t meet their needs.  The single most countered item in Real Estate is price, so if the original offer comes in lower than you can go then simply instruct your Agent to  give the potential byer a counter offer with different terms that are acceptable to you.  This process of going back and forth is the negotiating process.  Once you and the buyer have come to terms you have entered into a Contract.    It has taken a lot to get to this point, but you are not done as the buyer will usually be required by their lender to obtain an appraisal on your house.  The appraisal itself is basically an outside person’s opinion of value of your home based on sales of similar homes in your neighborhood.  Sometimes an appraisal will come in lower than the agreed upon price.  If this happens you have to either be willing to lower the sales price to accommodate the appraised value or see if the buyer can come up with the difference in cash above the appraised value to buy your home.  Sometimes, if both parties are not flexible a deal can fall apart by both sides holding to their original terms.  As a seller you must revert back to your contract as there might be an appraisal contingency in the contract that states; if the appraisal comes in low the buyer has the right to back out of the contract and not buy the house for the original agreed upon sale price.    You do have the right to dispute if you are the one who paid for the appraisal, but if you did not pay for the appraisal you do not have that right.  So as a seller beware if you are pricing your home on the high side of the market that this scenario can happen. 

Next, we have made it past the appraisal at this point and are steaming towards the close of escrow.  The buyer still has to go through final underwriting, even though they gave you a pre-approval letter in the beginning, anything can happen with underwriting.  If the buyer’s loan gets denied by the lender at this point we have wasted about 2 to 3 weeks unless we took backup offers.  A backup offer is an offer that was not originally accepted by the seller (you) and the potential buyer told your Agent to hold on to it in case the accepted deal does not close.  That would be bad, so let’s assume here that the loan is approved and all is good.  The next step will be for the buyer’s lender to draw the loan documents and send them to the title company.  You then will be called in to sign off the title of your home.  The buyer’s lender will review all the signed paperwork and fund the loan.  Once the Title Company receives the funds, they then record the transaction with the county and the home is no longer yours, and you get your proceeds from the sale.  If you have found your next home and are ready to close on that home you can instruct the Title Company to wire the funds to close on your next home.  As you can see this process can be a little tricky so if you are not represented by a good Agent, like me (another selfless plug) then you could be completely lost and liable for any or all legal mistakes made.  Having an Agent is just smart as there are so many disclosures that a seller has to provide to a potential buyer, not to mention that Agents do this for a living and are up to date on all the current laws and the amount of commission that is made on the sale is nothing to what the legal fees could be if you have to defend yourself in the court system. 

I am Gregg Mower and I am a licensed Real Estate Broker #00953953 and I also hold a National Mortgage Licensing Number NMLS # 246961.  I have been licensed by the former Department of Real Estate and the new California Bureau of Real Estate since 1984.  I also hold the lending license that allows me to do Mortgage Loans on Real Estate as well.     I own MAE Capital Real and Loan and look forward to helping you sell your home and plan for your next one, as well as approving you for the financing for your next home and finding it for you.  Please call me at 916-849-7170 for more questions.

Posted by Gregg Mower on January 29th, 2014 4:18 PMPost a Comment (0)

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December 11th, 2013 3:30 PM

Ok you have decided it is time to buy a home. You may have come to this conclusion to buy a house by either you are sick of renting and dealing with your landlord or you have thought it through and decided it would be a good investment, or all your friends are buying a home maybe I should too. Whatever your motivation is to start the process now is a good time to buy a home. You will hear that from every Real Estate Professional on the planet and it is sound advice for no other fact Real Estate has increased steadily over the long term and is the best hedge against inflation. But you don’t care about all that, you just want to have a home you can call your own, great. But now the question is where do I start, who do I call, how do I research this on the internet? I think most every homeowner out there today has went through the same questions. Most people will ask a family member or a friend how they bought their first house. Some folks will turn to the internet to educate themselves and that is how you found this article. It really doesn’t matter how you find the information it just matters that you do educate yourself of the process and what to expect. So let’s put the steps into focus so you understand some to terms used and the players in the game.

Buying a home is the largest investment most people will make in their lives so they should know some basics when starting the process. The following steps are broken down so you can understand what they are and who is involved as well as basic Real Estate Law. So let’s start with;

Step 1: This is your information gathering stage and you are doing it right now. Learn some basic terms that will be used throughout the process and learn the players in the process. One term you should become familiar with is the term “Escrow” the dictionary says that an escrow is a third party that brings a buyer and a seller together in a neutral place. In Real Estate that is true and is used out of context in many ways, you will hear your Agent say that he or she is “opening escrow” which simply means the process is starting. There are more terms we will go over in the coming steps.

Step 2: You will need to know how much of home you can purchase based on your income, bills, credit and cash you have to buy a house with. The best way to do this is to find an experienced Loan Officer at MAE Capital Mortgage (a selfish plug but hey I am writing this article) and provide them with 30 days of pay-stubs from you job, your tax returns for the last 2 years, W2s for the last 2 years, you last 2 months Bank Statements and any other documents that impact your financial situation like Bankruptcy papers (if applicable) or Divorce Documents (if applicable). This will allow your Loan Officer to get you approved for a specific loan amount before looking at homes that you might not qualify for. You can do this over the phone, in person, over the internet, email, or combination of these. Be prepared to answer any questions about your financial past upfront, don’t hold anything back as it will be found in the process and you will eventually have to answer to it anyway. The more open you are about your finances the easier it will be for your Loan Officer to approve you and make sure that approval will work when you do find a house.

Step 3: This would be the stage you will need a Real Estate professional. Note that I don’t use the word Realtor as this designation can only be used if a licensed Real Estate Agent under the California Bureau of Real Estate is a member of the National Association of Realtors (a trade association). So for the ease of this article we will call the Real Estate Professional an Agent for simplicity purposes. Anyway, I would suggest that your Loan Officer refer you to a good Agent as they will know who is doing good work for their clients and have experience like MAE Capital Real Estate and Loan Agents (again a selfish plug). The Agent will then take your qualifying number from the Loan Officer and ask you some simple questions as to narrow the search parameters. He/She will ask: what area do you want to be in; how many bedrooms and bathrooms you want; what size of a house do you need; what amenities would like? This will allow the Agent to input those parameters into the Multiple Listing Service (MLS) site and retrieve homes that are in the area you desire with all the items you requested. You will be looking at pictures of homes in the area(s) you have chosen and you will be looking for those that stand out to you. Once you have narrowed it down to several homes the Agent will then set up showings of those homes. This is the fun part as you get to go look at the homes now.

Step 4: You have found the house that fits your needs and you tell your Agent that you would like to buy that home. Your Agent will then write an offer to purchase the home. An offer is where a sales price is proposed and any other items you may wish the seller to comply with. The offer is signed by you and the Agent will then present the offer to the seller usually through the Listing Agent (an Agent who represents the seller). The seller will look it over and decide if the offer meets their needs and satisfies what their expectations are with regards to how much money they will walk away with after the sale is complete. If the offer meets the needs of the seller, the seller will sign your offer and it will then become the contract to sell and purchase. If there are items the seller is not satisfied with they may make a counter offer to you with their expectations spelled out in it. If the seller’s counter offer is OK then you sign it and those new terms make up the contract of sale. You are now in contract, at this point you will hear your Agent say that they will be “opening escrow”. This simply means that they will be contacting an escrow company to act as a disinterested third party in the transaction. The Escrow Company will order a Preliminary Title report that shows all the liens (stuff owed against the property) and it will show the legal property lines, the county parcel number, and legal description of the property. In Northern California most Title Companies also do the escrow function, in Southern California there are separate Escrow Companies that many order the title insurance from various carriers. In other states the escrow function is done by an attorney. You will not have to worry about any of that as your Agent will take care of that for you. Your Agent will ask you to put a deposit in escrow of usually $1,000 to show the seller you really intend on purchasing the home and if you do change your mind for no good reason the seller will get the deposit funds.

Step 5: Once the escrow process has started your Loan Officer will contact you to update your loan file. They will ask for your most updated pay-stubs and any other documents that they may not have to complete the final approval process. Your lender will be required to send you “disclosures” within 3 days of the final signature on the contract (remember the offer that has both signatures on it is now the contract). The disclosures that will be sent to you, usually through your email, will consist of many documents and forms that are necessary to protect the lender from legal issues. These documents are meant to help you, the consumer, but really are not worth the typing to explain to you as they are our Government’s way of feeling like they have helped the consumer and are so confusing that most lawyers can’t explain them correctly. You will receive these same disclosures every time something changes with the loan such as the down payment changes, the interest is locked in, the term of the loan changes etc. . On the average you will receive 3 sets of these disclosures. The most import information to you is your monthly payment and how much it will cost with down payment and closing costs to buy this house and your Loan Officer should have covered that with you before you made the offer. Once you have acknowledged the receipt of those disclosures the appraisal can be ordered. Your Loan Officer will ask for you your credit card number on a written authorization form so that the appraisal can be ordered at this point. Now we wait until the appraisal is in, once it has arrived the underwriter (the assigned person at the lender who does the final approval on behalf of the lender) will make sure everything is order and issue the final approval. If there are any conditions that need to be met prior to the legal paper work being drawn up this will be the time to provide those conditions or underwriting stipulations. Once any conditions are signed off by the underwriter your file is then moved over to the legal department so that the Note and Deed can be drawn correctly and sent to the Escrow Company.

Step 6: At this stage a few weeks have gone by and it is nearing the time you are slated to move. By now you should have your new utilities, phone and billing information ready to be changed over once the transaction is done, you still have a few days at this point before the house is yours. Your Agent and or Loan Officer will call you to go to the Escrow Company to sign the legal documents. You will also be told at this time to bring in a cashier’s check or to wire the rest of the funds needed to close. Remember you already made a $1,000 deposit and that will go towards the total. You will then physically sign the legal documents either at the escrow company or you can request a courtesy signing at your home or at the Loan Company. Once you have signed everything the Escrow Company will review everything and send the legal documents back to the lender for their review. The lender will review the documents once they have received them back from escrow and if everything is in order they will fund the balance of the loan.

Step 7: Ok, we have made this far and it has been quite a road to test all of your patience, but we are almost done. The lender funds the money back to the Escrow Company and the Escrow Officer distributes the funds to pay the seller and the seller’s lender off, commissions to the Agents, and any other distributions that may need to be made. The Deed is sent to the county to be recorded, once recorded the home is legally yours. Finally, it is your house and now all you have to do is move in……. I say that sarcastically as most folks want to paint, carpet or do some things to make the house their home before the actually move all their stuff in.

There you go the steps to purchasing a house. I think you can see that it is a process and every client is different and will require different levels of help. Having an Agent on your side is very important, and most folks don’t realize that your Agent is paid by the seller; you don’t have to pay for their services in most cases. Of course if you are going to enter into this process we at MAE Capital Real Estate and Loan would love the opportunity to help you with this process from start to finish. We have done thousands of transactions and know the little ins and outs of the Real Estate industry.  Click here to get started

Posted by Gregg Mower on December 11th, 2013 3:30 PMPost a Comment (0)

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November 15th, 2013 1:19 PM

Should I get a FHA Loan or a Conventional Loan? This question is asked every day in our business. FHA loans are traditionally used when a home buyer has a low down payment and Conventional Loans are used for those who have large down payments. We will explore some of the reasoning your loan officer will direct you to one loan or the other.  Both loans are the most widely used loan types in the Mortgage Industry today.

First, FHA Loans have a lower down payment requirement than Conventional Loans, however, we are talking about the difference between FHA with a 3.5% down payment requirement and a Conventional Loan with a 5% down payment requirement. Conventional loans used to have a 3% down program for years, however, as of December of 2013 they will no longer be offered at 3%, 5% will be the minimum down payment requirement for Conventional Loans. With FHA the 3.5% can all come from a gift, employer or government program, whereas, Conventional Loans require that all of the 5% be from the borrowers savings. This is significant for those home buyers that have the income to afford a home but may need assistance with the down payment.  Conventional Loans will allow for gifts, but unless the gift ids for more than 20% of the sales price 5% must be from the primary borrowers own funds.

Another major difference that needs to be addressed is the fact that while both Loans will require Mortgage Insurance with a minimum down payment the FHA Mortgage Insurance is higher than that of Conventional loans. The Mortgage Insurance is always two fold with FHA loans which means that you will be required to have up-front mortgage insurance of 1.75% of the loan amount, generally added to the base loan amount, and you will have a monthly payment of 1.35% of the loan amount as well. With Conventional Loans you can pick the way you would like to pay for the Mortgage insurance, either up-front, monthly, or a combination of up-front and monthly. The rates for mortgage insurance for Conventional Loans will vary based on the Loan-to-Value (LTV) with a 95% LTV loan being at a higher rate than of a 85% LTV, and with Mortgage insurance not required if the LTV is less than 80%. FHA will have the same rates regardless of the LTV even below 80% LTV.

Now that we understand that Mortgage insurance rates are higher on FHA Loans, the next question would be, why use FHA and not always look at the Conventional Loan? There are several reasons for using FHA and not a Conventional Loan. We already talked about the down payment can be a 100% gift for a FHA Loan, but FHA also has some other guidelines that can be a deciding factor for using FHA. Traditionally FHA Loans have a little known clause call “compensating factors”, and these compensating factors will allow for the borrower to qualify with a higher debt to income ratio (DTI), a lower credit score, a spottier income history, and more creative ways to cumulate the cash to close the transaction. Some compensating factors FHA will take into consideration are the stability of income, a higher down payment, a good cash reserve after all down payment and closing costs are paid for, a low DTI, and high credit score. Conventional Loans have tighter guidelines to follow than does FHA.

With regards to refinancing your current home all the same rules apply, you just need to change down payment for equity. When refinancing and determining whether to use FHA or Conventional financing most of the time it will be determined based on the equity you have in the house. Equity is the difference between the appraised value of your home and the amount you owe against it. FHA will allow you, if you have a FHA loan on your home currently, to refinance with no equity or even if you owe more than the value of the home. This type of loan is called a streamline refinance. Conventional Loans currently have a program similar called HARP or Home Affordable Refinance Program but it is very limited in who it can help as the original loan has to have been taken out prior to May 2009 and the loan must be secured by FNMA or FHLMC.

So when deciding on which loan to choose, in most cases, your loan officer will do this for you, but you should be informed of the reasons why they are doing what they are doing. I hope this quick explanation was helpful. At MAE Capital we want our clients informed as to the reason things are being done. We understand sometimes it is hard to ask some questions at the risk of looking ignorant but we know that you are not doing this for a career and are going to have questions. Our staff and Loan Originators are highly trained and are ready to assist you with your Real Estate and Mortgage needs.

Posted by Gregg Mower on November 15th, 2013 1:19 PMPost a Comment (0)

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November 11th, 2013 1:51 PM

It has come to my attention that there are still folks that are afraid of applying for a mortgage online. I can understand the logic, but in today’s world the systems that are in place to protect client’s information are ultra-secure. Since the Mortgage crisis started in 2007 there have been laws upon laws to protect clients and their personal information. I supposed there are hackers out there that can break such encryptions used to protect data, but most hackers can get your information in easier placers than trying to break an encrypted file.

When you enter your information online most sites take you to a far more secure site, although it may look like it is part of the original site, in most cases such as ours, it is a site we pay for to be ultra-secure. We use a system called embedding that embeds another site into the original site so it looks like the host site. This is for your protection, when you go there you will generally have to create a login to start the process. Once logged in you will see that the site suddenly looks and feels different than the host site. This is the security working for you. Once all you information is entered you should be able to go back and use your login to edit and see the progression of your application. It is also nice to apply online as you will be updated automatically as the lender touches your file.  Conversely, if the information is entered into the lender’s processing system by them you will not be able to see the progress. With our site you can also upload your documents securely.  You should be able go back in and add documents as you get them at your leisure and the lender will be notified of their existence and the documents will be automatically attached to your file.

Most Real Estate Loans, in today’s world, are kept digitally which means even if you provide the lender with a photocopy of your documents requested the lender will then scan them and attach them to the file digitally. When files are sold or transferred they are transferred digitally. So to scan a document and email it to your loan officer he or she will simply attach it to the digital file anyway. In fact, your financial information with your lender, your credit cards, student loans and most all financial institutions are kept digitally. So if you are afraid of entering your private information on a digital application, you should not be, as it is already digital somewhere else. Real Estate loan sites are probably the most secure sites to enter your information in, so don’t be afraid we have your securely taken care of as well.

Posted by Gregg Mower on November 11th, 2013 1:51 PMPost a Comment (0)

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October 23rd, 2013 10:37 AM

If you are in mortgage business you have heard of Qualified Mortgages or QM. But do you know what it really is, and did you know there are alternatives for your investors? A qualified mortgage is a home loan that is attached to a primary residence and fits the Dodd Frank rules for protecting home owners from predatory lending with high interest rates and fees. This rule is under Regulation Z Truth in Lending Act and was designed to make sure a consumer will have the ability to repay the loan at the time of application. The final ruling holds these elements for creditors to determine the “ability-to-repay” their home loan. These eight factors are; 1. Current or reasonably expected income or assets; 2 current employment status; 3 the monthly payment on the covered transaction; 4 the monthly payment on any simultaneous loan; 5 the monthly payment for mortgage related obligations; 6 current debt obligations; 7 the monthly debt-to-income ratio or residual income and 8 credit history. These factors are simply government’s way of trying to protect the home owner.

These are all good guidelines and have to be followed if you are doing transactions that are going to be sold to FNMA, FHLMC, GNMA. These loans are the loans that people gravitate to as they have the lowest rates. These loans are your Conventional 30 year, 15 year fixed rates, FHA loans, VA loans, USDA loans. The rule has also outlawed the Adjustable rate mortgage in these categories as well. The rule was designed to protect the consumer from Loan Companies that had a practice of charging higher rates and fees in exchange for higher risk loans that may not have required a borrower to verify their income or assets to qualify for a loan. All good intentions, however, the unintended consequences are that the people that may not be able to prove income levels as they might be self-employed, or paid commission may not be able to obtain such a loan. It might also prohibit certain minority groups from being able to purchase a home. So are there alternatives to a “Qualified Mortgage”?

Yes, there are alternative mortgage options for those folks that need an alternative to this type of financing. Non-Qualified Mortgages are those loans that are funded by private sources, hedge funds, mortgage pools. This type of financing is predominantly for Real Estate investors or non-occupied loans. These “non-owner occupied loans” fall outside of the Dodd Frank Act and allow for higher risk loans. It is assumed that if you are buying investment property you are more astute or savvy in the Real Estate game and you know your risks of obtaining a loan with a higher rate and fees. These Non-Qualified loans are also known as Private money loans or Hard Money Loans and are not designed for long term loans. Generally, a loan like this is used to purchase Real Estate fast and for buyer of Real Estate to look like a cash buyer to sellers. There generally are no limitations on the types of properties that can be financed with this type of loan. Hard Money loans can be used to purchase, 1-4 family homes, construction, apartments, churches, warehouses, commercial building, raw land and list goes on. The documentation on these loans are far less, as the assumption is that if someone is going to put a large down payment on a property, the likelihood of them walking away is far less than loans with a low down payment. In the future I anticipate this type of money will be able to be used to help the owner occupied purchasing buyer, and it is in some cases, but since there have been many rules set for “owner-occupied” primary residences most non-qualified lenders stay away from owner-occupied Hard Money transactions for obvious reasons.` This type of financing has not made the main stream media yet, however, it has been around far longer most people know, for over a century this type of lending has been available to folks in form or another. So if you are Loan professional or a Consumer you need to be aware that this money is out there.

The money comes from everywhere in today’s market as the Banks are only giving maybe 1% on your money and the stock market is volatile, so many ordinary folks are investing into these mortgage notes and seeing double digit returns on their money. It is not for everyone, but those that have money and are not sure where they should be investing should look towards the non-qualified mortgage markets. There are companies that can invest your money in a note that will be an interest only note where your principle is persevered and you are protected by the equity in the property you are lending on. The average Loan-to-Value on these transactions are 50-75%, so if for some reason there is a default you get the property to sell to recoup your investment plus appreciation. Now, you can have this done by private firms that specialize in foreclosure or a servicing mortgage company. As usual if you have any questions or comment please leave them on this blog.

Posted by Gregg Mower on October 23rd, 2013 10:37 AMPost a Comment (0)

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OK the Federal Government is shut down, what does that mean for your home loan? Well so far, 3 days in and no effects that I have seen other than it will take longer to get verification of your taxes when we send in the form, but most investors we sell loans to have said that it will be fine to close those transactions without that form in the file (form 4506t). It is interesting that we are a business that is highly regulated by the Federal Government and we are not feeling any real ill effects of the Government being gone. In fact, other than it effecting our military men and women, I really can’t see a problem with the Government shutdown. The big influence that the News has not really reported is the debt ceiling debate. This is where the national debt reaches a point that, by law, it can’t go past. That means that, by law, the government cannot spend any more money that it does not collect. Basically, the Federal Government has the possibility of defaulting on their debt. Who do the United States Government owe you ask? Answer, everyone, yes the government owes everyone that has a dollar bill in their wallet. Take out a dollar bill out of your wallet right now and read the top of the bill, yes I said bill. You read “Federal Reserve Note” and what is a note? A note is debt. Our monetary system is based on you believing that the dollar in your wallet is worth something or backed by something which it is not other than your full faith in our Government. 

The Government Shutdown is nothing compared to the debt ceiling debate, which is due to come to fruition by October 17th. This debate will be in the congress’ hands again and the politics that will be flying around will sound like 2 sides fighting over the direction of the country and essentially it is. One side will say that Government spending is too high and that they need to limit Government spending and the other side will say Government spending has nothing to do with the national debt ceiling and the Congress will need to raise the debt ceiling so the US does not go into default and they will deal with the debt later. This is the same argument that they had 6 months ago when they voted to extend the debt ceiling. This is like telling your credit card company you can’t pay them right now and that you need an increase in your credit limit to get by. How many times do you think your creditors will go for that? Well our Government believes that you will believe that forever. The problem is that, although the ignorant American people might continue to be snowed by that, but how about China who we owe a few trillion to, how long will they put up with it? This is the problem as I see it, and I don’t have a solution unless spending is cut, and Government growth is cut, or taxes are raised, or all the above. The actual Government Shutdown right now is actually good for the debt ceiling as debt growth has slowed with all the non-essential Government workers not being paid.

So what is in store for the California Real Estate Market, I believe that this sector of the economy is the safest bet for now and into the future. Real Estate is an asset, which means it can be traded, borrowed against, sold, or bundled. Real Estate as an asset verses cash that can and will increase in value over time, for no other reason than there is only so much Real Estate on earth and you can’t create more of it. Cash will decrease in value over time (inflation), or if people stop believing in the mighty dollar as a means to trade for goods and services. I don’t want to be a pessimist, but I have to be a realist, the Government has to get it’s economic house in order to show the world we can or real bad things could happen.  As always give me your input as well.

Posted by Gregg Mower on October 3rd, 2013 10:21 AMPost a Comment (0)

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September 19th, 2013 11:20 AM

Changing of the seasons once again, and we are experiencing a changing Real Estate Market. The trend for the last several years has been that big institutional funds have been buying Residential Real Estate. With the increase in interest rates that happened in June of this year (2013), we saw a significant slowing in residential Real Estate sales due to the higher interest rates. At the same time we saw the appetite of these big institutional buyers slow. So buy July of this year we saw, for the first time in a long time, demand slow for homes. Thus, we saw more houses coming on the market than were being sold. This has changed the market from a predominantly seller’s market to now a buyer’s market. What does that mean to the potential home buyer out in the real estate market today? It means home buyers have more choices than ever before and will not feel like they have to make offers on properties that may not be exactly what they want.

This has also stabilized the prices for homes. We saw double digit increases in home prices over the last few years. With the demand slowing and the increase in inventory of homes, prices have reached a temporary equilibrium point. I don’t see price going down unless the institutional Real Estate owners decide to dump their properties all at once. That could be disastrous for home owners if the institutions decided to dump all at once, as the increase in inventory would likely cause prices to decrease so the inventory could be sold, very similar to the foreclosure crisis of 2008-2011. Home buyers will also see sellers be more apt to pay some of the buyer’s closing costs, where, in the not so distant past, buyers were paying all the cost of purchasing a home and paying a premium price.

For home seller’s, on the other hand, things will be a little different than what you might have been expecting just a few months ago. When selling your home you will have to price the home at a point that may not be where you would have priced the home in June of this year. As a seller, you will have to do things to your home to make it more marketable. In order to get the highest price for your home you might look to paint, carpet, and do those little things that makes your house shine a little brighter than the house that is listed down the street. Sellers should be prepared to pay some of the buyer closing costs, clear a termite report, and be more open to accepting a lower offer on their home.

All in all we have moved to a more “Normal” Real Estate Market where both Buyers and Sellers are not being rushed to put together deals. Interest Rates have now started a decline again with the Federal Reserve Board stating that they will continue to purchase mortgage backed securities. It is always better to own Real Estate as it is a commodity that cannot be manufactured and there is a limited supply. As always please leave any comments you might have.

Posted by Gregg Mower on September 19th, 2013 11:20 AMPost a Comment (0)

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September 4th, 2013 2:20 PM

The fact the more houses are coming on the market faster than they are selling is a phenomenon that we have not seen in a long time. This is not a bad thing as prices are stabilizing with the decrease in demand and increase in supply of homes to sell. More home buyers will have an opportunity to get their closing costs paid for by the sellers in this market. Although, not great for sellers, in that there will not be multiple offers on homes like there used to be, unless the house is priced correctly for a quick sale. As Agents begin the process of adjusting to the new market conditions, Buyers and sellers of Real Estate also have to also adjust to the changing market conditions.

What does this mean if you are planning on purchasing a home over the next few months? As a home buyer you will find that you are more in control than you were just a few month ago. By in control I mean that you will not have to settle for a house that is not quite what you have been looking for. There will be more choices out there and more motivated sellers. What does a motivated seller mean to you as a home buyer? Well it means that home sellers will be more apt to lower the price or pay buyer’s closing costs. This will allow those folks that don’t have large down payments an opportunity to have the seller pay for closing costs up to 6% of the sales price allowing a home buyer to only have a minimum down payment of 3.5% for an FHA loan.

What does this mean if you are planning on selling your home? It means that it might take a little longer to sell than just a few months ago. If your home is in the affordability range of $100,000-$300,000 you should have no problem selling but you might need to be more patient. If your home is outside the affordability range, over $300,000, you might have to make concessions to potential buyers to get your home sold. As a seller you will have to be more willing to pay closing costs for buyers to entice them to buy your home. Additionally, as a seller you must remember that your home is just that your home and may not appeal to everyone, so you might want to be talking with an Agent that can help you stage your home for sale.

So why has the Real Estate Market changed so rapidly? There are many factors but the single biggest reason is that interest rates have risen from the high 3’s to the high 4’s now and that cuts people’s ability to qualify for a home loan. Interest rates if not kept in check can kill this unstable market as for every 1% rise in interest rates it will cut a buyer’s qualifications, or buying power $60,000-$80,000 for the average income earner.

Posted by Gregg Mower on September 4th, 2013 2:20 PMPost a Comment (0)

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July 9th, 2013 12:28 PM

The question I raise in the Real Estate/Mortgage Business is a simple one. Do consumers prefer to be at a one stop shop where they can get their Real Estate needs, Mortgage needs, Insurance needs, Energy Efficiency needs, Alarms, TV ,Cable, cell services all sold to them from one person? It sure sounds convenient, especially to a first time home buyer where they might not know where to get the services or that they could be provided for cheaper. In today’s ever changing world we are constantly looking for bargains and ways to be more efficient with our time. So why not look at Buying home differently than ever before. Your parents may have bought the home you were raised in 20-30 years ago or more and at the time they used a Real Estate Agent to find them their home negotiated the transaction and probably referred them to a Mortgage Loan officer to do their loan. When it came time to install an Alarm system on their home they called a company they have seen or heard of on TV or the Radio. Their cable was just what was provided in their area, and their cell service they have had since Cell phones came out. When it came time to make their house more energy efficient by installing more insolation, or replacing the old Air Conditioner, windows, or even adding Solar they probably used many companies to provide this for them. What if all they need to do was to call their Real Estate Agent every time they had a need for their home?

This is a concept we are trying to get off the ground. The foundation is the Real Estate itself. Why should a Real Estate Agent be proficient in only finding homes to sell? In today’s world with all the technology and the access to different networks an Agent can be trained in many different areas of service providing, and more importantly an Agent can point their clients in the right direction for service providers in that market place. There are now so many different service providers out there it is sometimes tough to choose the right one for your particular needs.

In a perfect world when a home buyer or an existing home owner goes to purchase or finance their home they should be exposed to services that can come with their home. A good Agent should suggest an energy audit on the home that is generally free. This will expose what the energy bills will be on the home they are buying or for existing home owners it will expose ways to make the home more efficient thus being able to save on their monthly energy bill if they did some inexpensive things to the home or even putting solar on the house and eliminating the bill all together with little or no money out of their pocket. Or when they are financing the home they could use an Energy Efficient Mortgage to do those improvements. Your Agent could also check your current TV service, internet, cell, home alarm system and bundle all this and lower the total bill so that maybe the installation of an alarm system becomes free from the savings. This concept is becoming more prevalent and is saving our client hundreds of dollars a month by simply asking their Loan officer, or Real Estate Agent if they have any suggestions. Yes the Agent will receive a commission from this but the service providers will pay the Agent and provide the services cheaper than the mainstream sources. But by doing so the Agent can negotiate better deals for the client as he or she can reduce the overall commissions and the consumer will get all the premium services from mainstream providers for a reduced monthly fee as the provider is not having to pay for store frontage and additional overhead. This is the future of most services and if a consumer looks for these bundles they can save thousands over time and use that money to pay off their mortgage sooner or get that much needed life insurance policy for the family.

Posted by Gregg Mower on July 9th, 2013 12:28 PMPost a Comment (0)

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June 25th, 2013 11:08 AM

A very good question in todays environment.  We know why rates have risen so maybe if we look at those factors we can deduce that if those factors turn around rates might go back down.  So the first and biggest reason rates have risen is due to the fact the Federal Reserve Chairman Ben Bernanke came out a couple of weeks ago and said that the Federal Reserve (the Fed) would slow down buying Mortgage Backed Securities through the Quantitative Easing Program QE3.  The markets had been watching the unemployment number to get down to 6.5% as was stated earlier in the year as a benchmark for the Fed to start to slow down the purchases of MBSs.  So this shocked the markets, then shortly after that announcement President Obama stated that he would not re-appoint the Chairman after his term was up the end of this year.  This sent the markets into turmoil as markets like to know how monetary policy is going to be and under Bernanke the markets know pretty much what they are going to get.  So this uncertainty in the markets are causing the rates to rise.

So will we see a lowering of rates?  I would say not in the near future as the markets are uncertain and the Fed is slowing its purchase of MBS which creates pressures for rates to rise.  So if you are considering purchasing a home or refinancing you should get it done while the rates are still low.  Now my prediction is not for rates to march up to 10% but level off somewhere in the mid 5's for a time.  If there is any signs of inflation at those interest rate levels then they will rise again.  So in the short term lock your loan in as soon as you can to preserve the rate level in todays world.  Locking in your rate is as simple as asking your Loan officer to do it for you.  He/She will need some things from you before they can lock your loan so be prepared to present all your documents in order to get a lock, and some lenders will want you to have an appraisal done before you lock the loan.  Be patient one good by product of rising rates will be that underwriting should loosen up a bit.

Posted by Gregg Mower on June 25th, 2013 11:08 AMPost a Comment (0)

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June 25th, 2013 11:07 AM

A very good question in todays environment.  We know why rates have risen so maybe if we look at those factors we can deduce that if those factors turn around rates might go back down.  So the first and biggest reason rates have risen is due to the fact the Federal Reserve Chairman Ben Bernanke came out a couple of weeks ago and said that the Federal Reserve (the Fed) would slow down buying Mortgage Backed Securities through the Quantitative Easing Program QE3.  The markets had been watching the unemployment number to get down to 6.5% as was stated earlier in the year as a benchmark for the Fed to start to slow down the purchases of MBSs.  So this shocked the markets, then shortly after that announcement President Obama stated that he would not re-appoint the Chairman after his term was up the end of this year.  This sent the markets into turmoil as markets like to know how monetary policy is going to be and under Bernanke the markets know pretty much what they are going to get.  So this uncertainty in the markets are causing the rates to rise.

So will we see a lowering of rates?  I would say not in the near future as the markets are uncertain and the Fed is slowing its purchase of MBS which creates pressures for rates to rise.  So if you are considering purchasing a home or refinancing you should get it done while the rates are still low.  Now my prediction is not for rates to march up to 10% but level off somewhere in the mid 5's for a time.  If there is any signs of inflation at those interest rate levels then they will rise again.  So in the short term lock your loan in as soon as you can to preserve the rate level in todays world.  Locking in your rate is as simple as asking your Loan officer to do it for you.  He/She will need some things from you before they can lock your loan so be prepared to present all your documents in order to get a lock, and some lenders will want you to have an appraisal done before you lock the loan.  Be patient one good by product of rising rates will be that underwriting should loosen up a bit.

Posted by Gregg Mower on June 25th, 2013 11:07 AMPost a Comment (0)

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