If you are looking to finance the purchase of a home or refinance an existing mortgage, now is a great time to secure your interest rate.  Here’s why…

One score and 19 years ago, 7.63% was the rate on a 30 year fixed, conforming mortgage.  Today, mortgage interest rates sit a four decade low..  The chart below shows the 30 year fixed, conforming interest rate history from 1971—since the Federal Open Market Committee (FOMC) has been tracking this rate—to September 2010.  Source data for this chart can be found at www.federalreserve.gov.

Excluding the high interest era of late 1979 through late 1985, the average 30 year fixed mortgage interest rate during the time period is 7.99%.  Currently, a conforming, 30 year fixed rate mortgage can be had at a 4.00%.  If you are looking to finance the purchase of a home or refinance an existing mortgage, now is a great time to secure your interest rate.

To fully grasp the benefit of securing financing while this low mortgage interest rate environment lasts, let’s compare the amount principal and interest in a monthly payment on a $400,000 mortgage at 4.0% and at 7.99%.

On a $400,000 30 year fixed mortgage at 4.00%…

On a $400,000 30 year fixed mortgage at 7.99%…

Notice how much more principal applies to the 4.0% mortgage as compared to the 7.99% mortgage; $576.33 vs. $268.94 on the first payment.  The following pie charts show the payment allocation of principal and interest for the full 30 year term of these mortgages.

The 4.0% mortgage reduces the principal balance faster, builds equity faster and ultimately, helps the household build a strong financial foundation more quickly than any other time over the past 40 years.

To discuss your eligibility for obtaining financing to purchase a primary home, a vacation home, or a piece of residential investment real estate, you’re welcome to contact me at jedt at bankerspref dot com.

1.  Don’t Make Any Purchases Until You Close Escrow

Yes, I know you will need furniture or appliances for your new home, but don‘t buy it until you’ve closed escrow, now matter how enticing the offer is.  Your lender will run your credit multiple times during the escrow process and any major credit hits or even inquiries from a new credit company will be bad and could increase your monthly payment.

Even using some cash could cause questions by your lender because they look at all of your financial picture when determining whether to give you a loan, and then what the interest rate will be.

If something happens unforeseen, such as your car is totaled and you must buy a new one, talk to your lender before doing anything.  They will advise you on the best way to accomplish this is.  Follow their advice to the letter.

2. Don’t Make a Job Change Unless It’s a Big One

Your job history, and salary history are all key to the decision making process of your lender.  Don’t make job changes unless you’ve been transferred or are taking a new job in a new community with an equal or higher salary and can show your offer letter to the lender.

3. Buying a For Sale By Owner?  Don’t Give Your Deposit Directly to the Seller.  Open Up an Escrow Account.

The purpose of an Escrow Account is to hold funds for the purchase of a property with a neutral third party to the transaction.  This is something you want to do whether you have found your dream house with me, as your Realtor, or by yourself with someone selling their home directly to you.  Protect your money.  You have no way of knowing if the seller is honest and really owns that house until a Preliminary Title Report is run for you.  If you are representing yourself to a private seller, only show a photocopy of your good faith deposit to them with your offer.  Once they have accepted your offer, go to a local Title Company and open up your escrow account.

4. Don’t Get Emotional.  This is a Business Transaction.

I have been known to place my hands on the face of my clients and gently reminded them to keep their emotions out of the process.  Sure, it’s hard, but this is likely the biggest financial purchase you will have made in your lifetime.  This is a business transaction not an emotional purchase.

Houses cost hundreds of thousands of dollars, if not millions of dollars, and you must think clearly.  Once your heart tells you “this is the one”, stop and think clearly.  I like to tell my clients to find everything wrong with the house after they’ve fallen in love with it.  It is so important to know what it is you are buying so stop, look and listen.

5. Don’t Forget to Order Your Utility Services

This may sound too simple, but you need to get all of the utilities into your name and ready to go for transfer to you on the day you close escrow.  This includes PG&E, telephone, cable, water, and garbage.  If you’re buying a condo, some of this doesn’t apply, but your trusty agent can tell you who your utility vendor is and how to do it, just in case you don’t know.

6. Don’t Forget to Order Fire Insurance

It’s a good idea to have your insurance agent selected before entering into an escrow because your lender requires this information.  The only exception is if you’re buying a condo and then it’s not a requirement.  But, if you’re smart, you will take out a policy to integrate into the master fire insurance policy of the condo association, so you will be covered, just in case.

7. Don’t Become Friends with the Seller

I don’t care if they have things to sell you, keep everything neutral and professional between the two of you.  Getting too cozy with the seller could be trouble.  Sure you need to know the little qwerks of the new house, and a walk-through with them showing you how to work things is always encouraged, but if you are using an agent, have them go along with you.  Keep everything business like.  You won’t regret it.

8. Don’t Panic if the Appraisal Comes in Low

In today’s market, it’s getting harder for an appraiser to really appraise property at market price.  If you are buying a house that is in a neighborhood with a lot of Short Sales, it is possible to have the appraisal come in lower than your contracted offer.  Don’t panic.  Let your agent talk to the seller’s agent and see if you can renegotiate your contract.  If the seller is unwilling to do this, and you have an appraisal clause in your contract, you can walk away and keep all of your good faith money.  If you don’t have that clause checked in your contract, you will either have to come up with cash to make up the difference, or hope the seller will renegotiate.  If they won’t your contract binds you to complete the sale and if you decide to walk away, you can forfeit up to 3% of the offer price.

Keep a cool head.  You can always request a second appraisal by a different appraiser. Appraisals are done by human beings and vary because of that.  It’s easier to pay for a second opinion than to try and come up with the additional cash or to walk away.  Try that first before doing anything else.

9. Don’t Do it By Yourself!

Everyone thinks it’s easy to buy real estate.  They have little knowledge of the laws, the contracts, or the conditions that must be met during real estate transaction.  There really is a value to what we do as Realtors.  In today’s tough market, lenders come and go, title companies are closing, and the rules are changing almost weekly.  Don’t try to do this by yourself.  Your agent’s job is to protect you from making mistakes and helping to make sure all conditions of your contract are met on time.

If you want to buy a For Sale By Owner (FISBO), hire an attorney to take care of your transaction.  It might be the smartest investment you make in protecting yourself from a law suit.  But, be aware, not all attorney’s are able to do a real estate deal because they aren’t doing it day in and day out, so they aren’t aware of the latest requirements.  Caveat emptor.

10. Don’t Ignore Any Lender Requirements

In today’s lending environment lender’s are asking for more and more.  Buying a home is an intimate process for you financially so understand that they may come back and ask for additional proof of funds, job, credit or who knows what else.  If your parents are helping you, they will ask for a letter from them.   It is critical that you meet every requirement and meet it on time.

If you follow the rules you’ll win the game.  The prize?  Your new house.

Sold!

Today is Friday and the end of another work week.  This weekend will find Open Houses waiting for you to visit and hopefully you will want to buy one for your family.  With everything that has gone on in the lending world lately, you may be asking yourself, “Can I buy a home now?  Is
there any money out there to lend to me? ” Can I afford to live in San
Mateo County?

I’ve got good news for you.  The short answer is “YES!”.

1. Yes, if you have money to put down.
2. Yes, if you have good credit.
3. Yes, if your FICO score is above 700.
4. Yes, if you are willing to go through an amazing detailed look at your finances by your future lender, their underwriter and anyone else who needs to justify
   that loan.
5. Yes, if you go to the Bank of America.
6. Yes, if you have a good Loan Broker.
7. And, Yes if you take your time and have already sold your first house and are ready to move.

The good news is that the Bank of America can even move on a loan in as short a period of time as three days!

Call Us

Get out there this weekend and go through those Open Houses.  Your new home is waiting for you.  I am here to help you buy it.  All you have to do is call me.  650-696-2820.  Yes, Yes, Yes!