Locking a mortgage rate? What you need to know.

If any of you have ever obtained mortgage financing, and then had your rate increase before closing, you may have wondered why the rate changed. You may have even wondered why the person who quoted you the rate deceived you when they may not have intentionally done so. You see, I always make it a practice of full disclosure and choice. 

In general, rates quoted are what are known as floating rates. Floating rates, are unlocked and unprotected rates subject to market conditions, and are the lowest quoted mortgage rates. When your rate is not locked, you are, in effect, “playing the market”.  That means, if you were able to close in 12-15 days, the rate quoted would be the rate you would get ASSUMING that the market remained stable. 

What is unknown when you lock a rate is: Are you going to go past your rate lock? Have rates moved up?  If yes, you may have to incur extension fees in order to keep your rate. If rates moved lower then you are usually allowed to keep your original locked in rate. 

Practically, if the stars align, it is quite possible to close in 15 days on a purchase or refinance, but typically, especially on a purchase, you may take longer.

Why? 

Simply because:

1. There are so many parties involved who have their own schedules (two attorneys, two real estate brokers, one mortgage company, a seller and you the buyer) 
2. There is the possibility that the inspection will reveal items that you may want to negotiate on (going back and forth eats up time), 
3. Title issues may come up such as inherited seller judgments or collections that need clearance before you can close, 
4. or your own schedule may derail you from closing within the rate lock period.

Locked in rates are slightly higher than floating rates, but you avoid market risk, and, as long as you close within the rate lock period, you know what you are getting from the beginning until closing. 

When you qualify for a mortgage, you have to meet underwriting guidelines which take into consideration a qualifying rate.  If you are a borderline applicant, you may have just squeaked by on your approval. Should rates go up, you may lose your commitment, have to reduce your loan amount, or be forced to "buy down" the rate in order to qualify which can run into thousands of dollars. 

In summary, when you lock the rate, and close in the specified rate lock time, you are protecting your mortgage payment, mortgage commitment qualifying loan amount, and shielding yourself from potential rate increases due to market condition changes and/or Lenders raising their rate to stave off excess mortgage applications.

Note: the industry has now implemented TRID. Before closing on your new loan, the lender must send you a Closing Disclosure (CD) 3 days before you close. You will need to lock your loan at least 3 days before closing. Keep this in mind when you lock your loan because if you wait the day before you close to lock your loan, you will not close the next day, but 3 days later because new disclosures have to be sent and may start the clock again.  You may even jeopardize your rate lock.

I suggest, if you choose to wait to lock your rate, that you do so no later than 5 days before closing or earlier if possible to give yourself a cushion.  

Knowing before owing can save you thousands of dollars.  My philosophy is to always set expectations so that there are no disappointments or surprises - which not only helps when it comes to rate quotes - but in all aspects of life as well.

Let us remember

I sit here in my office going about my daily business of assisting those who need mortgage financing. I glimpse at the right corner of my screen and there it is, the reminder that today is September 11^th. My eyes tear as I think back to where I was 14 years ago on that horrific day of unforeseen unimaginable tragedy. My thoughts are mixed. On one hand I feel a sense of guilt, grateful for my family’s outcome, and on the other hand, I am terribly sad and heartbroken for those families that lost their loved ones - the unbearable loss of heroes and friends on that fateful day.

I remember like it was yesterday. My wife, who was five months pregnant with our first child, was working as an attorney for the New York Department of Housing directly across from City Hall.  I was working from home when the phone rang. “Carl, my building shook what should I do?” My wife was on the phone. “They are telling us to stay.” I responded, “get out of there NOW!” Shortly thereafter, the second tower was hit. My pregnant wife made her way and walked from downtown Broadway to 58^th street and 5^th where my Mother waited for her to take the train to Queens. My wife told me how nice and caring strangers were to her on her walk to safety. Ironically, disasters usually bring out the goodness in New Yorkers.

I don’t ask why this happened because I am just a human being who cannot even fathom a just reason. I can remember this day along with the rest of the world, and mourn the memory of those that we lost way before their time. 

Remembering just does not seem enough. It seems too trite. I believe that the souls of those who left us on that day are looking down at us and waiting for something positive to come from their deaths. I would imagine that they might be wondering why in times of disaster and tragedy, people unify, and are helpful and respectful of one another, and yet, one day goes by and we return to our old ways. How soon we forget.

I asked myself, and now I ask you, how can we show those that we lost that tragic day, that we have learned and changed for the better because of their sacrifice. I would venture to say that we, at the very least, should also have to make some sort of earthly sacrifice. The sacrifice of self. We have to change our behavior and actions and remember and honor those that we lost that day. It sounds easy, but true change for the better is not.

May I make a humble suggestion? In the memory of those that left this earth on that Day of Sept 11^th let us try to:

·                  Be respectful to one another and our loved ones

·                  Not judge others

·                  Make time for friends and family

·                  Give the benefit of the doubt

·                  Be inclusive

·                  Be kind, caring, and courteous and…..

To always remember Sept 11^th as the day that sparked unity and love in NYC, the United States and the peaceful nations of this earth. We honor all those that left us that day. I am hopeful that they are looking down at us with the confidence and optimism that we will do our best to make sure that their souls remain perpetually at peace.

Variable or Fixed: What’s Your Mortgage Pleasure?

Sorting through mortgages involves making a lot of critical choices.  One of those choices may be deciding between between a fixed- or variable-interest-rate mortgage financing. Fixed-rate mortgage payments are fixed throughout the life of the loan whereas adjustable rate mortgages a/k/a variable rate mortgages a/k/a ARM’s can have rate and payment changes at certain set intervals.  The adjustable mortgage interest rate is calculated using an index plus a margin, which means payments could move up or down depending on prevailing interest rates. In addition, there are payment caps, annual caps, and lifetime caps. The most common indexes to which the interest on adjustable-rate mortgages is pegged are the 1-Year Constant Maturity Treasury Index, The Cost of Funds Index, and the London Interbank Offered Rate Index. Caps and margins vary.

Fixed-rate mortgages rates and payments remain constant despite the interest-rate climate. They generally have higher initial interest rates than variable-rate mortgages.  In an increasing rate environment, they are a borrower’s choice. Should rates move lower, borrowers with a fixed rate mortgage would have to refinance in order to take advantage of lower rates which may involve closing costs, and additional paper work.

The initial interest rates and payment on ARM’s are often lower than fixed rate products with the rate and payment subject to change (up or down).   ARM’s may allow borrowers to take advantage of falling interest rates without refinancing, and rollover refinancing strategies can be implemented so that the average of the rate over a period of time is cost effective (although never guaranteed).

So what’ll be?  Fixed or adjustable?  Think about the following broad considerations before choosing:

1. How long do you plan to stay in the home? If you plan on living in the home a short time, you may want to consider a variable-rate mortgage. With a shorter time frame, the loan rate will have less time to move up or down and risk is minimized
2. Where are interest rates headed?  If interest rates are historically low, it may make sense to consider a fixed rate. On the other hand, if interest rates are higher than historical averages, it may make sense to consider an ARM. Should rates drop, your payment and rate may also.
3. What are the terms of the ARM? When does the rate and payment adjust?  How frequently can the rate be adjusted? Are there annual and lifetime caps? Is there a limit on how much it can be adjusted in each period?
4. Could you still afford your monthly payment if interest rates were to rise significantly? How would it affect your finances if your payment were to rise to its lifetime limit and stay there for an extended period?

Buying a home is a major commitment. Selecting the most appropriate mortgage for your short and long term goals may make that long-term obligation more manageable.

Finding Motivation at Work

Did you ever stumble into work, Monday morning, in a sleepy kind of groggy state of mind? You sit there thinking about your relaxing weekend with five straight days of the office grind staring you in the face?

Does your boss or manager motivate or inspire you to achieve your personal best, or the opposite? How do you keep your engagement up and your professional goals on track?

Take a look at these tips to stir up the motivation within you:

1. Begin your day with a positive thought. Set one positive goal for the day to motivate you toward success.
2. Get clear on the end goal. Think about why you do what you do.
3. Make learning your goal. Accept that no one is perfect and mistakes are an opportunity for learning. Move away from results-oriented thinking and focus on the overall learning.
4. When you feel better physically, you work better and stay motivated. Exercise regularly, and eat healthy. 
5. Expand your knowledge base by reading new books – books that can help you with new ideas which get your mental gears turning and can spark motivation. 
6. Maintain a positive outlook about your current job. Avoid negative discussions at work, so you remove doubt for even being there.
7. ...Finally… Take pride in your accomplishments. When you are parked for 7+ hours per day at work, it becomes pretty clear that this is an important part of your day and your life? Treat your job, whatever it may be, with pride and witness your motivation & your success soar! Even if what you do is not your ideal job, there is a reason why you are doing it…focus on that reason, and while you are at it, might as well make it a joyful, pleasant experience.  Keep in mind, you always can explore a multitude of options to change your life while being positive in your current situation.

Thoughts from a Mortgage Genius: PENNY-WISE AND DOLLAR FOOLISH JUST DOESN'T MEAN MO...

Thoughts from a Mortgage Genius: PENNY-WISE AND DOLLAR FOOLISH JUST DOESN'T MEAN MO...: Penny-wise and dollar foolish  just doesn't mean money I recently had a long discussion with a friend about having to provide for...

PENNY-WISE AND DOLLAR FOOLISH JUST DOESN'T MEAN MONEY

Penny-wise and dollar foolish 

just doesn't mean money

I recently had a long discussion with a friend about having to provide for our families and the amount of money we need to earn in order to sustain ourselves and provide for our families. The conversation then turned to attending our children's programs in school during working hours.

It took me a long time to be able to distinguish between what's really important and what is secondarily important. I never thought that I would leave work in the middle of the day to be in my preschooler’s graduation into kindergarten.

Yet I do.

I never thought that I would spend the early morning listening to my daughter’s presentation instead of being at work,

yet I go.

I never thought that I would derail my disciplined and organized schedule of production in order to drive my son to school so that he doesn't have to carry a project that he worked so hard on, that might have gotten ruined on the bus,

yet I did. 

I'm not patting myself on the back for doing these things that for right now my kids take for granted and hopefully years from now will appreciate - for I do these things out of love for them.

As a mortgage professional we have to generate deal flow for as they say "we reap what we sow."

It takes a lot of thinking and managing stress in order to mitigate the "making a living - worry" and a conscientious effort to put family in the forefront in terms of our personal and/or business time.  Sometimes we rationalize to ourselves that we have to make money for them and that money is important to buy them what they need.

We know that money is important for their future so we can pay for the school that they may attend, so that we can retire in comfort and not be a burden to our children. I will not deny, that practically speaking I always think about this, rumination is the term, and it is not easy to subjugate those thoughts. I know many times I should be in my office producing so I can pay the bills and sleep at night. Then all of a sudden I get ready to leave the house and my four-year-old turns and says to me "can you come to see me in my play daddy?"

What can I do? My practical thoughts disappear and my unbounding love for my child surfaces and I say to myself "What will he remember - that I closed another mortgage deal or that I was at his play?” (He may remember that I didn't close another mortgage deal if I can't buy him what he wants!).

I am not the Carl Guzman I used to know and love - the analytical careful calculator brain able to make practical intelligent bottom line monetary decisions. I have become dollar foolish so to speak, but in the context of family I have learned it's better than being "penny wise." 

No cause for real panic ... just a possible slight inconvenience

Will the New Mortgage Disclosures Delay My Closing?

The answer is NO for just about everybody.

For mortgage applications submitted on or after August 1, 2015, lenders must give you new, easier-to-use disclosures about your loan three business days before closing.  This gives you time to review the terms of the deal before you get to the closing table.

Many things can change in the days leading up to a closing.  Most changes will not require your lender to give you three more business days to review the new terms before closing.  The new rule allows for ordinary changes that do not alter the basic terms of the deal.

Only THREE changes require a new 3-day review:

1. The APR (annual percentage rate) increases by more than 1/8 of a percent for fixed-rate loans or 1/4 of a percent for adjustable loans. (Lenders have been required to provide a 3-day review for these changes in APR since 2009.)  A decrease in APR will not require a new 3-day review if it is based on changes to interest rate or other fees.
2. A prepayment penalty is added, making it expensive to refinance or sell.
3. The basic loan product changes, such as a switch from a fixed-rate to adjustable interest rate or to a loan with interest-only payments.

NO OTHER changes require a new 3-day review:

There has been much misinformation and mistaken commentary around this point.  Any other changes in the days leading up to closing do not require a new 3-day review, although the lender will still have to provide an updated disclosure.

For example, the following circumstances do not require a new 3-day review:

• Unexpected discoveries on a walk-through such as a broken refrigerator or a missing stove, even if they require seller credits to the buyer.
• Most changes to payments made at closing, including the amount of the real estate commission, taxes and utilities proration, and the amount paid into escrow.
• Typos found at the closing table.

How to Hire the Best Property Manager

How to Hire the Best Property Manager

For all investors this is a good read. I would also like to bring to your attention that if you have at least 5 investor units, and they could be owned in any variety combination 1-4, condo, SFR and in any states not neccessarily in the same state, and would like to free up some cash, please call me. we have a great program that will blanket thos units and allow you to cash out.