Will Higher Loan Costs Hit Today?
January 12, 2009
News on the mortgage front from people I trust - Fannie Mae’s new fee structure is about to work its way through the system, and some have predicted your rate and closing costs will be higher starting today.
Remember, it’s for Fannie Mae backed loans only - no FHA or VA, jumbo, or niche/portfolio loans.
So what’s this increased costs all about? Dan Green of the Daily Mortgage Report explains further here.
In a nutshell, Fannie Mae introduced risk-based pricing and it is about to come into effect. If they think you’re a bigger risk, you have to pay more to get the loan. More or less. So if you’re looking at a lender’s published rates, they may or may not apply to you because the lender now has to assess your risk level and adjust pricing for Fannie Mae loans.
Might be a good time to call your lender and check those rates and fees if you’re looking to buy a home and have a pre-approval in hand.
Evaluating a Home Loan Pre-Approval
January 2, 2009
Question from the audience:
Lender X is offering a 4 month pre-approval, free lock, and a onetime float-down after the lock. Obviously, I would like to lock into current rates. I’m trying to figure out when to get pre-approved and lock. I don’t want to lock in too soon by starting a 4 month period that I won’t be able to buy in, but I don’t want to wait too long and miss rock-bottom rates.
Let’s see if I’m understanding that correctly.
A 4 month pre-approval? Is no guarantee that the loan will still be around in 4 months, unless I misunderstand. If a loan program goes away, it goes away, no matter how long you were pre-approved for it. Most Sellers are going to want a pre-approval that is less than 30 days old anyway.
Free lock - I’d expect that for locks 30 days and less. You can sometimes get 45 day locks for free too. So unless they’re locking for a very long time…
One time float down… oh, during the lock interval? What kind of lock interval are we talking about anyway? Closings here are 30-45 days, you don’t need special long locks unless you’re building from scratch, usually.
Maybe we’re not talking about the same thing when you say "pre-approval." A pre-approval is just pulling credit, showing debts and assets. You can get one in 20 minutes from just about any lender. Go ahead and get one. When you make a final decision, at least you’ll know what kind of loan you can qualify for and they can refresh dates and recheck program qualifications quickly if they need to when you make offers. There should be no charges for a pre-approval, unless they take $35 for a credit report or something. And if they do, demand a copy of the credit report so that you can take it to the next guy if you want to shop loans.
Noticed you didn’t mention any kind of costs. What is the lender charging to originate the loan? What kind of rate do you get for those costs? You need to look at the entire package: what does this loan mean in terms of money now and money every month for the next 30 years?
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