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Category: Mortgage Tips
Why Michigan Mortgage Rates Dropped in 2019
March 2019 was the best month for Michigan Mortgage Rates in a Decade! Rates dropped the sharpest they had in a single month since the mortgage meltdown which led to a recession in the late 2000’s.
This is great for anyone that is buying a home or looking to drop their mortgage rate. Many are wondering why rates dropped and will they go up or down.
Why did mortgage rates drop in Early 2019?
The slow economy in Europe is a factor resulting in lower mortgage rates. With the effect of Brexit causing uncertainties for business and long term investment plans, Europe’s economy has been suffering.
When major global economies are halted, investors demand more predictable investments like bonds and mortgage backed securities which create lower mortgage rates.
The Federal Reserve Decided to Leave the Federal Fund Target Range Unchanged
The Federal Reserve does not directly set mortgage rates however they do have a major effect on them. The Federal Funds Rate is the rate at which banks can borrow money from Federal Reserve Funds.
Banks use this rate to base interest rates on loans. If banks can borrow money cheaper, they can lend it out in the form of mortgages and other loans at lower interest rates.
The Federal Reserve released its policy statement showing that they do not expect to hike Federal Reserve Rates for the rest of the year due to the slower growth in the economy.
This caused Treasury Yields to Fall which helps mortgage rates. The Treasury Yields dropped to levels not seen for 10 years which could indicate a future recession.
Home Sales Decline and Housing Inventory Increased
The National Association of Realtors (NAR) reported that the seasonally adjusted rate for sales of existing homes dropped 4.9% in March 2019 from the previous month and were also down year over year 4.7%.
NAR also confirmed that home inventory increased from 3.5 to 3.8 months’ worth which indicates slowing home sales. Although sales appear to be slowing, this may be due to the 3.8% increase in median home sales prices.
Jobs Report Numbers Low
While the real estate market shows strength, job grown has dwindled. The headline nonfarm payrolls may have disappointed some with only 20,000 new jobs.
The average since taking the survey from 1939 is 125,000 new jobs created. This is the worst number in job growth since September 2017 when two major hurricanes hit.
US Trade Deficit Worst in 10 Years
Recent reports show that the U.S. trade deficit jumped to $59.8 billion. This is the largest it’s been in the last ten years. The uncertainty with Chinese trade tariffs have had a negative impact on US manufacturing and exports.
Will Mortgage Rates go Up or Down?
The million dollar question from all people considering a mortgage is, “Will Mortgage Rates go Up or Down?” If this were easily predictable then everyone would not be wondering this.
There are several factors pushing upward on mortgage rates for the long term. Progress in the US / China Trade Negotiations, Brexit decisions postponed, Oil Prices Rising, the US stock market hitting record highs; these all are negative forces on mortgage rates.
Mortgage Rate Lock Advice
No one can predict the future with certainty. My advice to my friends, family and clients is to review benefits of locking in a mortgage rate or refinancing right now.
- If it makes sense do it!
- Do not wait or you will be late!
- No one can predict Mortgage Rates!
If your mortgage rate is over 5%, now may be a great opportunity to drop into the 4’s for a Conventional 30 year fixed mortgage or even 3’s for a 15 year home loan.
With upward pressure on mortgage rates, it is a risky gamble to wait to see if they will go lower. If the numbers make sense and add benefit then take advantage of it immediately!
Why Conventional Loans are Better than FHA Loans
Conventional Loans are home loans that conform to the underwriting guidelines set by the Government Sponsored Entities, Fannie Mae and Freddie Mac. In the past, conventional loans were only for elite borrowers that had 20% or more for their down payment. Times have since changed opening up great new programs for low to middle income earners and first time homebuyers.
Why are Conventional Loans Better than FHA Loans
Conventional Loans are now an affordable option for those without the highest credit scores. Mortgage Interest Rates are currently in a tighter spread. By this I mean that the best creditor borrowers and the lower score borrowers will have an interest within 1% to 1.5% of each other.
This is helped by programs like Fannie Mae’s HomeReady Loan and Freddie Mac’s HomePossible Loan. These programs limit the loan level price adjustments (LLPAs) which increases the par offering rate. These programs also allow first time homebuyers to buy a home with only 3% down while FHA requires a minimum down payment of 3.5%.
In the past, Private Mortgage Insurance (PMI) rates would also be absurdly high for lower score borrowers seeking Conventional mortgages. With the competition between PMI companies, mortgage insurance rates have dropped significantly in the past few years. This allows Conventional loans to be very competitive with Government Insurance Loans like FHA mortgages.
Related: See our Conventional Mortgage Calculator
FHA Mortgage Insurance Cost May Cost More than Conventional Loans
Conventional loans may be a better option for homebuyers than FHA Mortgages because of the mortgage insurance savings. On Conventional loans, there is typically a monthly PMI fee if a borrower does not put a 20% down payment towards their purchase. FHA has a similar fee plus an up front charge.
Related: See our FHA Mortgage Calculator
FHA Mortgage insurance VS Private Mortgages Insurance
| FHA Mortgage Insurance | Private Mortgage Insurance |
| Required on all Loans | Required on conventional mortgages with less than 20% down |
| Two Types of mortgage insurance | May be dropped once loan to value is under 78% |
| Cannot be removed if down payment is less than 10% | What is an FHA Up Front Mortgage Insurance Premium? |
| May be more expensive | Many options for PMI payments |
| Offers Reduce Premiums for First Time Homebuyer Programs |
FHA Loans charge two types of Mortgage Insurance Premiums (MIP). There is Upfront Mortgage Insurance Premiums (UFMIP) which are payable to HUD at close. The UFMIP is calculated as a percentage of the original loan amount. This fee is currently set at 1.75% of the base loan amount. For example, If you borrower $200,000, the FHA UFMIP added to your loan amount is $3,500. This is an extra expense not found on Conventional Loans.
What is an FHA Annual Mortgage Insurance Premium?
The Second type of Mortgage Insurance on FHA Loans is Annual Mortgage Insurance Premiums (MIP). This calculation varies based on loan-to-value and loan term but is as high s .85% of the original loan amount. For example, if you borrowed $200,000 the annual MIP would be $200,000 * .0085 = $1,700 which is split up over 12 months and added to your monthly mortgage payment. In this example, your payment would increase by $141.67 for MIP.
April 2013, FHA made a major change which started the shift away from this loan type. They changed the way annual FHA mortgage insurance fees were charged by making FHA Mortgage Insurance Premiums payable for the life of the loan. In past years, it would drop off under certain circumstances similar to Conventional Loans when your loan was paid under 78% of the home’s value.
Conventional Loans are more Attractive to a Seller than FHA Financing
In many areas of the country, there is a shortage of homes for sale which creates a sellers market. This means that sellers can be more picky when accepting offers from buyers on their homes.
When a buyer is making an offer with FHA financing, a seller may be reluctant to accept due to additional requirements for the home’s conditions compared to Conventional Financing. Having a Conventional Loan Pre-Approval may make the difference from getting your offer accepted or getting rejected by a seller.
Why Would Anyone Still Do FHA Loans over Conventional Loans?
There are certain circumstances where FHA finance may be a better option than a Conventional Loan.
FHA Loans with Down Payment Assistance
Many Mortgage Down Payment Assistance Programs (DPA) work only in conjunction with FHA financing. If a borrower does not significant funds available or down payment, DPA programs may help the buy a home.
FHA Loans Allow for Lower Credit Scores
Conventional Loans have minimum credit score requirement of 620. If a borrower has a credit score lower than this, FHA financing may be the only option. Currently FHA allows for credit as low as a 530 with a 10% down payment or as low as 580 with only a 3.5% down payment. Many borrowers with a credit score lower credit scores may have no problems qualifying for FHA financing when Conventional loans are not an option.
FHA Loans Have Shorter Wait Periods Than Conventional Loans
FHA loans have shorter wait periods for major life events such as bankruptcy or foreclosure.
- FHA loans only require a 2 year wait period from Chapter 7 Bankruptcy while Conventional requires 4 years.
- FHA requires a 3 year wait period for foreclosures while Conventional Loans require 7 Years.
- These wait periods may allow a borrower to buy a home with FHA financing while conventional is not an option.
FHA Loans allow for Higher Debt To Income Ratios than Conventional Loans
A borrower may be better off with an FHA loan over conventional financing if they have a high Debt To Income Ratio.
- Conventional Loans typically require a borrower to have a Debt-to-Income (DTI) of 45% or less to qualify with a maximum DTI of 50%.
- FHA is more flexible with higher debts allowing a maximum of 56.9%. Borrowers with higher debts may only qualify for FHA Loans.
FHA Streamline Refinance
If a borrower already has an FHA Loan but does not have a significant amount of equity in their home, they may qualify for a rate reduction through an FHA Streamline Refinance. This loan type may allow them to drop their rate and payments without an appraisal or documenting income and with little to no costs. This is a program unique to FHA financing and can help a borrower that purchased their home when their credit scores were lower but have since improved.
Summary of Why Conventional Loans are Better Than FHA Loans
With the current guidelines set by FHA, Fannie Mae and Freddie Mac, Conventional Loans may be a better fit for buyers than FHA loans. Conventional loans offer lower down payments of only 3% for first time homebuyers while FHA loans require 3.5% down. Mortgage insurance may be significantly cheaper on Conventional loans versus FHA loans. Lastly, submitting an offer with Conventional Financing may be more attractive to sellers over an FHA Pre-Approval.
To get more information on what loan type maybe the best fit for your situation, call a licensed loan officer today at 800-555-2098 or request information below.
Top 3 Myths About Using a Mortgage Broker
Mortgage Broker Myth #1
One of the biggest myths of using a Mortgage Broker is that they do not have control of the underwriting process. Many retail lenders and banks claim this because they have employees that underwrite the file whereas a mortgage broker works directly with the end investor to underwrite the file.
Retailers claim they can go directly to the underwriter and have them clear any unusual conditions however the retail underwriters are typically more cautious because they have to underwrite to the end investor’s standards and sell the mortgage to them after closing. If they make a mistake, the end investor may refuse to purchase the loan.
Local Mortgage Brokers have a choice on which bank or end investor they want to send their loans. If one does a poor job by not clearing the loan quickly, the mortgage broker may choose to no longer do business with them. This forces underwriters to remain accountable and nimble on clearing conditions.
If a retail loan officer at a bank or direct lender is having difficulties clearing the conditions on their loan, they have no other options because they are held captive to their once underwriter which is the only option they have.
Mortgage Broker Myth #2
The second myth about using a mortgage broker is that they take longer than a retail lender or a bank. According to the January 2019 Ellie Mae Mortgage Origination Survey of many major banks and lenders, the average time to close a mortgage is 45 days!
Using a mortgage broker, the average closing time is 21 days which is less than half of the retails and bank lenders. Taking over 30 days to close a loan with a mortgage broker would be uncommon or the result of 3rd party issue.
Mortgage brokers operate more quickly because all they do is mortgage loans. While banks may have other services such as auto loans, credit cards and checking accounts, these are distractions from closing mortgages quickly!
Mortgage Broker Myth #3
The third mortgage broker myth is that mortgage brokers cost more than banks and retail lenders. This could not be further from the truth!
For nearly all loans that mortgage brokers close, there are zero origination fees. This means no underwriting fee, no origination fee and no processing fees. For many banks and lenders these fees could be thousands of dollars that are charged to the clients and add to the cost of buying a home.
Mortgage brokers have access to the lowest rates in the mortgage industry. As a mortgage broker, they receive wholesale rates from the end investors. Generally speaking, mortgage brokers have low overhead and thinner margins which allows them to pass huge savings on to their clients. Lower costs and overhead result in lower than average rates.
Why to Use a Mortgage Broker
With mortgage rates on the rise, consumers are becoming more aware of high rates and fees that are charged by large retail lenders and banks. By simply getting a 2nd quote from a local mortgage broker, a client could save thousands of dollars on the up front costs of their mortgage and tens of thousands of dollars over the life of their loan by getting a lower interest rate.
Mortgage Brokers: Low Rates, No Fees, Quick Closings.
Mortgage brokers are mortgage experts that specialize only in home loans. They work directly with the end investors to close loans quickly and efficiently and pass on low rates and, for most loans, zero lender fees!
To speak with a mortgage broker, give us a call today at 800-555-2098 or request information below!
How to get the Best Mortgage Loan
When it comes to home loans, there are hundreds of loan programs and options that you may want to consider. Many first time home buyers do not know where to start when they want to buy a home. It is overwhelming to most people who do not have experience buying a home or getting a mortgage. The good news is, a loan officer can be your tour guide to help you get the best mortgage loan.
A loan officer’s job is to review your financial situation and provide home loan options. They will help to narrow down mortgage programs that do not fit your goals and also ones that you may not be eligible for. Here are the basic categories that you should review with your loan officer to get the best mortgage for your situation.
What Mortgage Program is the Best?
There are several loan programs that you can apply for including Conventional Loans, FHA Loans, VA Loans, USDA Rural Development Loans, Jumbo loans, and Portfolio Loans. Each loan program has its pros and cons.
Related: Conventional Loan vs FHA Loan vs VA Loan vs USDA Home Loans
You may not be eligible for some programs. VA Loans, for example, require that you have served in the military. If you haven’t served, then this would not be a loan option for you. Conventional loans typically require higher credit scores and are more rate sensitive to lower credit scores. USDA RD Loans, have income limits and restricted areas where you can purchase.
As you can see it is nearly impossible to quickly learn all the ins and outs of each program when you are buying a home. A loan officer can help offer options on what loan program may be the best fit for your situation.
What Mortgage Term is the Best?
Once you decide on what mortgage program will be the best fit for your situation, you will need to decide on a mortgage term. Loan terms range anywhere from 10 years to 40 years for some programs. For most loan programs we could even offer a 17 year loan or a 27 year mortgage based on your goals. The most popular mortgage option is a 30 year mortgage.
Many financial advisers recommend a 15 year fixed rate mortgage. This allows you to get a great rate and pay off your mortgage quickly. Typically loan rates are lower for shorter term loans. The downside is that the monthly payment will be higher the shorter your loan term is.
A traditional 30 year mortgage term has low payments but most of the payment goes directly to interest for the first several years. Many people are shocked at how little their loan balance goes down after a year or two of mortgage payments.
Be sure to ask your loan officer what mortgage term is best for your goals.
Include Escrows or Waive Escrows?
When you get a mortgage you may have the option to include escrows into your mortgage payment. An escrow account is a savings account held for you by your mortgage servicer that is specifically for paying the property taxes and home owners insurance on your home.
Typically, government insured mortgages including FHA, VA and USDA require you to have an escrow account included with your mortgage.
Conventional loans may allow you to waive escrows. This means that you would be responsible to pay your own taxes and home owners insurance bills when they become due.
Many people like escrow accounts for the ease of payment. It is one less thing homeowners need to worry about when buying a home. On the other hand, some people would rather waive escrows and keep their own savings where they can earn interest and be more in control of their funds.
Fixed Rate or Adjustable Rate?
A major choice to consider when getting a mortgage is if you would rather have a fixed rate or an adjustable rate. Most homeowners choose to have a fixed rate that does not change for the life of your loan. This gives predictable payments and certainty that your payment will not adjust.
Other homeowners wish to choose an adjustable rate mortgage, commonly refereed to as an ARM Loan. Typically ARMs start off with a lower rate which is locked for a set number of years (3, 5, 7, or 10 years). Once the initial fixed period is up, the rates are subject to adjustments to the LIBOR or other indexes. If the rates go up, your mortgage payment goes up. If the rates go down, your mortgage payment goes down.
Choosing a fixed rate is thought to be a more safe and secure loan option. ARMs should be carefully considered for financially savvy homeowners. Be sure to ask your loan officer about ARM Loans if you are interested otherwise a fixed rate mortgage is most likely the best choice.
What Interest Rate Should I Pick?
Lastly, when getting a mortgage, you have to pick a mortgage rate. Many people do not realized that they have options for different mortgage rates. Once you select all of your other mortgage details, your loan officer will present your mortgage rate options.
When it comes to mortgage rates, you also need to consider the fees associated with getting the loan. Typically, the lower the rate, the higher the fee. Conversely, the higher the rate, the lower the fees.
Should I Pay Discount Points?
If you want the lowest rate possible, you can certainly request a rock bottom interest rate but be prepared to pay discount points for a rate lower than the market rates.
If you want to make sure you are having the lowest costs to get a mortgage, then you may want to consider a slightly higher interest rate. Picking a higher rate may allow you to have no lender fee or even receive a lender credit that will apply towards other closing costs and pre-paid items like taxes and insurances.
Deciding what rate and fee combination can seem difficult, but your loan officer can help you do a break even analysis to compare the time to break even on your investment of paying points for lower rates.
Lets look at an example: If you were to pay 2 points on a $100,000 loan for a lower rate, this would cost you $2,000 in extra closing costs. By getting the lower rate, lets say you save $50 per month.
To find your break even point, you will divide your extra costs of $2,000 by your savings of $50 which would give you 40 months, or 3.33 years to break even on your up front investment.
If you plan on staying in the house for 5 years, then you will save more than your costs therefore paying points may make sense. If you plan on selling your home in 2 years, then you would not benefit from the up front investment and you would be better off taking the higher rate with lower fees.
There are many factors to consider to get the best mortgage for your situation. It is not as easy as simply picking the lowest rate. Be sure to work with a trusted loan officer that can help review all the mortgage programs to get you the best mortgage for your situation.
For more information on home loan programs or to review the best loan for you, request information below or call a loan officer at 800-555-2098.
Doctor Home Loans In Michigan
Are you currently in, or recently completed a medical residency or fellowship? Our Doctors’ Loans exclude student loans from your debt-to-income ratio! Call us today at 800-555-2098 and let us discuss your options!
Benefits of Doctors Loans in Michigan
Doctors can now easily qualify for a mortgage without including student loans in the debt to income ratios. Let’s face it, becoming a doctor costs a lot of money. Most doctoral graduates have hundreds of thousands in student loans which may prevent them from becoming home buyers. With our Michigan Doctor Loan Program, recent graduates can stop renting and buy a home.
- Up to 97% Financing
- No Monthly PMI
- Free Appraisals for all loans that close by December 31st, 2018 (credit given up to $525)
- Student Loan Deferment up continue at lease 12+ months from closing date
For more information on our Physician’s Mortgage Loan, call us at 800-555-2098 or request information below:
8 Tips for Moving with Pets
Free Conventional Appraisals
We have some exciting news! Conventional Appraisals are now FREE for new loans submitted to us from 08/26/2018 that close by 12/31/2018!
Free Conventional Purchase Loan Appraisals
If you are buying a home, then take advantage of the our Free Appraisal program to keep up to an extra $525 in your pocket when we take care of the appraisal expense. Saving money for your down payment and closing costs can be a hurdle for some home buyers. This is just another way that Riverbank helps to make buying a home affordable for all.
Free Conventional Refinance Loan Appraisals
Many of our clients are finding now as the perfect time to refinance their mortgage. Refinancing with a conventional loan, you will be able to take advantage of our Free conventional appraisal program. Refinance benefits include:
- Drop PMI
- Lower your Interest Rate
- Refinance to a 15 Year Mortgage
- Consolidate High Interest Debt
To get started with a refinance mortgage with a free appraisal call us at 800-555-2098
Free Appraisal Eligibility & Requirements
- Conventional Loans Only
- Eligible for New Applications Submitted on or after 08/28/2018.
- Loan Must Close on or before December 31st, 2018.
- Eligible Property Types: Single Family Residences, 2 Units, 3-4 Units, Site Condos, Condos, PUDs (Manufactured Homes Not Eligible)
- 640+ Credit Scores
- Appraisal Transfers Not Eligible
- Program Not Available on Portfolio Loan Products
Not all will qualify. For more information, simply complete the form below or call a loan officer at 800-555-2098.
GENERAL DISCLAIMER: Program may not be available for all clients applying for conventional financing. Free Appraisal Promotion will be applied as a credit to the borrower’s closing costs on the final closing disclosure as a reimbursement of the appraisal fee limited to a maximum of $525. Appraisal rush fees will not be reimbursed. Loans that do not meet the requirements for this promotional program listed above will not be given this credit and must pay the cost of their own appraisal expenses as required by standard lender requirements. Loans that do not close, for any reason, including withdrawal or denial, will not be given the appraisal credit advertised. All loans must close by the December 31st, 2018 deadline to take advantage of this promotion. Loans that do not close by this date will not be given the promotional credit.
Breakdown Your Credit Score
When buying a home, your credit score is an important factor in your home loan approval. It is important to know what is on your credit and what credit score you have when applying for a mortgage.
While, the exact scoring models are proprietary and not released by the credit bureaus to the public, credit experts have determined the weight of each factor that determines your credit score.
Related: Buying a home with Bad Credit may be possible with FHA Home Loans. We accept applications down to a 580 credit score!
What Makes up your Credit Score
Payment History
Paying your bills on time is the most important factor for your credit score. Weighted at 35% of the total score, paying bills late can devastate your credit rating.
Amounts Owed
Credit to Debt ratios are the second most important factor which is weighted at 30% of the overall score. The good news about this is that it is a quick and easy fix to improve your credit scores. For example, if you have a credit card with a $500.00 limit and you owe $490.00, it is essentially “Maxed Out” which reflects poorly on your credit rating. Paying down this debt to under 30% of the limit ( $150 or less in this example) would boost your scores quickly!
Length of Credit History
The length of time you have had accounts open is the next rating factor. At 15% of the credit rating, the credit bureaus know that maintaining long credit relationship with banks and lenders proves that you are a good credit risk and positively affects your score. For this reason, it is important to keep old credit lines open even if you are not utilizing them.
New Credit Inquiries
Having your credit pulled is an necessary evil when applying for a mortgage. What is not necessary is having it pulled by 10 different institutions for different credit types. If you apply for credit cards, auto loans, and mortgages over a short period of time, your credit rating may drop.
Types of Credit
The final major category that determines your credit score is the types of credit that you hold. Long term investments such as a mortgage can positively impact your credit. If you only have revolving credit such as credit cards, your credit depth is shallow and may not give you the highest credit scores possible.
Click here to Download Our Credit Tip Flyer!
How to Improve your Credit Score
There are simple techniques to improving your credit scores. It is important to monitor your credit from time to time and make sure all of the information is accurate. If there are errors, you can dispute the information directly with the bureaus to have it corrected. It is not suggested that you do this before or during the mortgage process as it may cause delays.
Additionally, paying down revolving account balances can quickly boost your credit scores. While there are no magical fixes to your credit, there are several best practices that you should do to increase your credit score.
Tips to Improve your Credit Rating
- Correct inaccuracies on your credit
- Pay all your bills on time.
- Do not apply for too many lines of credit.
- Do not max out credit cards.
- Keep older credit lines open.
Contact a mortgage expert today by calling us at 1-800-555-2098 or simply apply online below. We are happy to help!
Hundreds of Mortgage Options
As local mortgage experts, we are here to help all types of families. We do mortgages. Only mortgages. We do not offer auto financing or credit cards. This allows us to be experts at what we do and have many types of mortgage options for all financial situations.
If you have a unique financial situation, there is no better spot to get a loan than a local mortgage broker. We can shop rates and mortgage programs at multiple banks and underwriting companies at once. This insures that you will receive the best mortgage package available for your situation.
Low Rates. Low Costs. Expert Advice
To get expert advice, call us at 1-800-555-2098 or simply apply online below. We are happy to help!
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