Foreclosures have become common in the current real estate market. It's a great way to buy a home at a discounted price.

Although homeowners in the neighborhood lose out from the low amount received from foreclosures, potential buyers on the other hand will turn around and improve the property which is a long term benefit for the neighborhood. In this article we discuss some tips you can use when buying a foreclosed home. This will especially be helpful for those buying a foreclosed property for the first time.

Here Are 5 tips To Follow When Buying A Foreclosed Property:

• Pre-approval: Obtaining a pre-approval from a reputable mortgage broker is an essential component to buying a foreclosed property. With pre-approval, the seller will get to know about you being a serious buyer and can afford to buy the property. Free pre-approvals are offered by United Home Loans. Moreover, potential buyers are provided proper guidance through the purchasing procedure.
• Complete an inspection: Investing in foreclosed property is risky and it's so important that you complete a home inspection. And don't let the cosmetics of the home fool you; there are many homes that look nice but have massive underlying problems. Doing an inspection allows you to identify any type of problem that exists in the property, which when not taken care of before the purchase will only become an expenses for you after you close the purchase.
• Not just the price tag:  Homebuyers looking at foreclosed properties are usually focused on one thing; how cheap can we get this property. But there are lots of other things a buyer should consider besides the low price tag. Foreclosed properties at times require updates and additional work, thereby involving more expenses. Does the layout of the home match your needs? Is this an area you want to live in? How far is my commute? It's very important you answer these questions before making an offer.
• Homework: Doing your "homework" on foreclosed properties is crucial prior to moving forward with the purchase of a foreclosed home. For starters, check the surrounding area and make sure its the kind of neighborhood you want to buy a home in. You'll also want to make sure the improvements you are going to make match the neighborhood and that the values in the are support the improvements. Also talk with an experienced loan officer with years of experience to help you better prepare for the purchase. Have the loan officer quote you various mortgage programs so you can decide which is best for you. It's also important to stay on top of current mortgage rates so that you can lock in a low rate.
• Hire a Realtor that has experience with foreclosed properties: This might be fifth on the list but it's one of the most important aspects of buying a foreclosed property. Working with an experienced Realtor can only help you when you go to buy a foreclosed whom. Generally speaking a Realtor will have tons of information about the property and neighborhood so you can make a more informed decision. The Realtor might also have a good idea of what certain repairs will cost.

Are Mortgage Rates Higher For Foreclosed Properties?

Usually not. Conforming fixed rates for the purchase of a new home are the same no matter who is selling the property. If it's a jumbo loan you should be fine too. Where you may run into problems is if the home is completely trashed and to buy it you have to obtain a very specific rehab/construction type loan which generally carry higher mortgage rates than "regular" mortgage terms.

At the start of the month mortgage rates are near all time lows. Fixed mortgage rates are more attractive than adjustable rate mortgages for both refinance and purchase transactions. Overall mortgage application volume has been lower when compared to March and parts of April however it still remains higher than normal.

We're anticipating that mortgage rates will remain low throughout the month of May with 30 year and 20 year fixed rates being the most attractive terms.

The Economic Calendar And Mortgage Rates:

On Friday, May 1st, 2020 the ISM Manufacturing report came in higher than expected. Expectations were for a 36.1 reading however the report came in at 41.5 (last month it came in at 49.1). The report had no impact on mortgage rates. During the first full week of May we have the ISM-Non Manufacturing report, MBA Mortgage Market Index, ADP Employment report, weekly Unemployment claims, and the monthly jobs report.

The monthly jobs report has the potential to impact the direction of mortgage rates in May. Expectations are for non-farm payrolls to come in at 21 million jobs lost during April and an unemployment rate of 16%.

We'll also be keeping an eye on the weekly Unemployment claims. Last week claims declined and the market is hoping that trend continues. A number significantly below 3 million would be considered a positive for the economy.

The Fed And Mortgage Rates:

Many people believe that the Fed controls mortgage rates. However that is simply not true. Mortgage rates originate in the Mortgage Backed Securities (MBS) bond market. The Fed does have an influence over the MBS market and since mid March the power of the fed has been very influential over Mortgage Backed Securities.

The Fed announced they were going to start a new wave of buying MBS bonds to help keep mortgage rates low for homeowners and homebuyers. They also expressed deep concern about the economy which is another positive for the MBS market (bad economic views from the Fed is generally a positive for the MBS market and positive views on the economy are generally bad for the MBS market). 

It's important to avoid using the Fed as a major part of your mortgage strategy. Talk with an experienced Loan Officer and set up a strategy that will best take advantage of current market conditions.

Cash Out Refinance Mortgages:

If you are looking to take cash out of your home then you might want to move forward sooner rather than late. Banks like Wells Fargo and Chase have started to pull back as some lenders no longer offer cash out refinance mortgages. And the ones that still do are coming up with stricter guidelines which is making it harder to obtain a cash out mortgage.

Anyone who has been following mortgage rates from the end of February 2020 until mid March 2020 is probably wondering what is the world is going on with mortgage rates?!?!? Mortgage rates made a dramatic move lower towards the end of February and that continued into March. Then came the all time low mortgage rates for both 30 year and 15 year fixed rate loans.

Then came the decline which started on March 9th and since mortgage rates have been moving higher. For some mortgage lenders they've been moving significantly higher.

How Low Did Mortgage Rates Go?

First off it's important to remember that everyone's loan scenario is different. Not every homeowner qualifies the absolute lowest rock bottom rate; even if you have an 800 credit score. The amount of equity in the property, your debt to income ratio, are you setting up an impound account, the size of your loan, how you plan on qualifying, and what type of property all play a role in the structure of a mortgage.

Just before the move down mortgage rates were already low; 30 year fixed rates were between 3.50% and 4.00% for most transactions and 15 year fixed rates were between 3.125% and 3.50%. Keep in mind that just over a year prior mortgage rates were 1% higher so a 3.50% 30 year fixed rate was very attractive considering where the market was previously.

As we moved into March 30 year fixed mortgage rates dropped to 3.00% to 3.50% and 15 year fixed rates dropped to 2.625% to 2.875% for most transactions.

Needless to say there was a massive wave of loan applications and that created the first big problem for the mortgage industry.

First Major Problem For Mortgage Rates:

On a good day the mortgage industry takes in about $1.5 to $2.0 billion worth of new loan applications. 

Prior to the big move down in mortgage rates many lenders were already receiving significantly more loan applications then they normally would. When March, 2020 loan application volume did a super spike. There were days in which the industry took in $8 to $13 billion worth of new loan applications. Way too much and the industry become overloaded.

Because the industry became overloaded with application mortgage lenders decided to raise rates despite the huge rally in bonds. They did this to slow down the number of applications they were receiving. 

One important fact that most people don't realize; mortgage lenders can only lend so much money. The money they have to lend is not endless.

Second Major Problem For Mortgage Rates:

The second major problem for mortgage rates was that the bond market, specifically the Mortgage Backed Securities market, fell apart after the Fed announced it was going to be buying Mortgage Backed Securities (MBS). Everyone knows what happed in the stock market but for the average person it's impossible to see what was happening the the MBS market. Let's just say it was a total melt down. The pricing of these bonds went down dramatically and as a result you started seeing 30 year fixed mortgage rates in the mid to high 4's. 15 year fixed rates in the low 4's. 

A dramatic difference from the previous weeks.

What Happens Next?

The million dollar question as we near the end of March is "What will mortgage rates do?" 

Eventually the market will settle down which is what we need. Volatility is not something that is good for consumer mortgage rates. The Fed has stepped up their purchases of MBS (largest ever) so that should help bring the market to a more stable range. The timeline for this is unknown but hopefully it's something we see over the next few weeks.

If the market stablize and mortgage lenders reduce the number of applications in process mortgage rates should move lower and remain somewhat stable. 

However don't expect mortgage rates to reach record lows again; at least not any time soon. Even if the bond market is in a place in which lenders would be able to do that they probably will resist. And they're not doing it to be greedy. The main reason would be to make sure they don't get overwhelmed again.

When a mortgage lender is overwhelmed everyone loses. Processing times get significantly longer and the cost to process a loan gets more expensive.

If you have questions for your loan officer about what's going to happen next it's important to have that conversation sooner rather than later. Being prepared and making a plan to lock in when the time is rate could save you thousands of dollars in interest and fees. And make sure you consider all your options since a mortgage transaction has significant financial implications that last years and possibly decades.

When mortgage rates move lower many homeowners look to refinance their current mortgage. The reason for refinancing varies from one homeowner to the next but most will agree the number one motivating factor are current interest rates.

Reasons to consider a refinance include a lower interest rate, a shorter term (going from a 30 year to a 15 year term), or consolidate a first and second mortgage (including a HELOC). An additional reason is to obtain cash out from the property to improve the home or to payoff consumer debt such as credit cards and car loans.

Here is a simple to follow step by step guide to help you navigate the refinance process.

Step 1 - Be Prepared:

Being prepared is essential, in fact it's a must. 

If you are not prepared you could end up paying a higher rate and more in closings costs. The good news is it doesn't take that long and it's a fairly simple process. The first thing you want to do is determine why you want to refinance and clearly understand your current mortgage rate and term.

Have a clearly defined purposed enables you to determine the best corse of action when it come to getting your quotes and picking a mortgage company to work with. Establish why you want to refinance, the pros and cons of a new loan and lastly review your current loan terms to make sure you can make an accurate comparison with the quotes you receive. You'll want to know what your term is (30 year, 20 or 15 year), the interest rate and what your monthly payment is (without property taxes and insurance).

To complete the process of being prepare you'll want to gather your income documentation. If you are an employee that receives a W-2 then you'll want to grab your two most recent W-2s and your two most recent paystubs. If you are self employed you'll want to grab your two most recent IRS tax returns, all pages (don't leave anything out including any K1's you received).

And if you have a mortgage statement for your current mortgage along with contact information for your homeowner's insurance agent then you are in an even better position to move forward.

Step 2 - Brush Up On The Basic Mortgage Terms:

Knowing some of the basic mortgage terms is incredibly helpful.Things like the "1003" (which is the Loan Application, Loan Estimate, PITI, the difference between Discount Points and Origination Fees, what third party fees are and more. Learning these important key mortgage terms will only take ten - fifteen minutes and it could end up saving you hundreds, possibly thousands, of dollars.

Knowing the difference between a fixed rate term and an adjustable rate term is important because these are two very different loan types. Knowing what a pre-payment penalty is means you'll be able to ask a question to see if you'll have to pay a fee if you payoff your loan early. While most people knows their credit score is important to the refinance process; most don't know that their Debt-To-Income (DTI) ratio is every bit important as well.

Having a clear understanding of these terms puts you in a better situation to navigate the process. It also allows for you to ask the Loan Officer more informed questions (more on this below).

Step 3 - Making The Calls:

Contacting a mortgage professional is the next step. 

The best advice I can give is stay away from companies that have a bad reputation. You can use services like the Better Business Bureau, Zillow or Yelp to research the best companies to use. You can also access the NMLS Consumer site which every reputable mortgage company and Loan Officer is licensed through. If a company has below an B rating at the Better Business Bureau website you may want to look elsewhere. To be safe you may want to stick with the companies that have an A or A+ rating.

Find two to four top rated mortgage Loan Officers and then visit their website to find out a bit more about the company. Check out the Loan Officers that are listed and find one that has at least five years of experience. You may want to spend about five - ten minutes checking out his or her profile and reviews on line.

The number one thing to do when you contact a mortgage company:

It's simple; the answer is ask questions and ask lots of questions. 

Now in Step 2 I mentioned you should brush up on your mortgage terminology and this is where it will payoff. Why is asking questions so important? 

One obvious reason is so that you can better understand the quote and service they are providing. But that's not the reason I'm saying this. You should ask questions to test the Loan Officer and see if he or she is a good candidate to work with.

If the Loan Officer is someone who answers you directly, in depth and doesn't rush you then that's a great person to work with. If on the other hand the person "beats around the bush" or seems irritated that you're asking questions then that's your clue to move on the next company.

Part of the job description for Loan Officers is being willing and able to answer questions about refinancing a mortgage. Someone who is not willing to do this really should not for another job. Don't trust your financial well being to someone who is unwilling to do a basic part of their job.

Step 4 - Picking The Right Company:

There are two things to look for when deciding on which company you'll use; who has the competitive rates/terms and do they provide a high level of customer service. Some people would say just go with the lowest quote but the people who say that are missing an important piece to the puzzle. Anyone can quote a low rate at great terms but can they deliver that at closing? Do they exhibit the professionalism needed to ensure the loan closes as expected and on time.

If a Loan Officer doesn't have the ability to provide a high level of service you are taking a risk with your refinance in that you may be left in the dark, not knowing when you are closing and what the terms of the loan are going to be at closing.

It goes with out saying; the mortgage industry benefits from a strong housing industry. So mortgage industry professionals like to keep an eye on trends that are developing in housing (both new construction and existing home sales). A big part of our business in the mortgage industry is devoted to the purchase market.

Heading into 2020 we have some good things working for the housing industry:

• The economy is doing good; not great but good enough to help more people buy homes
• Unemployment is low
• Wages are up just a bit
• Interest rates are low
• Strong demand for affordable housing

All these factors should help make 2020 a good year for the housing industry. 

The Economy, Employment and Wages:

The economy is good and its hard to argue that. Some will say it's great however there are areas of concern and GDP is below 2.00%. The stock market is not great indicator as to how well the economy is doing and one can argue that the rally in Q3 and Q4 was induced by the Federal Reserve with the lowering of rates and expansion of their balance sheet. 

Moving forward all eyes will be on the weekly jobless claims reports and the monthly employment reports. If those reports show a healthy job market that will go along way with keeping mortgage rates low. Inside the monthly employment report is wage data and we need to continue to see that grow to enable greater home buyer purchasing power.

Low Rates And Strong Demand:

Heading into 2020 mortgage rates are at great levels. Both 30 year fixed and 15 year fixed rate mortgage rates are near their multi-year lows which makes it easier for more potential home buyers to enter the market. Provided the Mortgage Backed Security market remains stable we should see mortgage rates remain low compared to 2018 levels.

The demand for new housing is strong as builder optimism is high right now. The fact is we don't have enough homes to satisfy the demand so home values could continue to remain elevated as we move further into 2020.

Mortgage rates originate in the Mortgage Backed Securities market (bonds) and each day investors trade these bonds depending on various things. The economy is always the number one mover of Mortgage Backed Securities but there are other factors and events that shape the trading day/week/month/year. 

Some of those factors include:

• International markets (mainly the European Bond market)
• Important political events and elections
• Trade agreements or lack there of (ie trade war with China)
• Market movement. Strong moves could cause other investors to follow

One thing is for sure; the Mortgage Backed Securities market changes daily....it's never the exact same. It may end up at the same spot in which it began but during the day there is constant movement as traders position themselves. Consumer mortgage rates are directly impacted by these moves. Small moves have little impact (sometimes not at all) and medium - big moves will cause a sizable adjustment to the mortgage rates quoted to consumers.

Today was an interesting day in the MBS market. Right from the opening bell Mortgage Backed Securities were selling off with European bonds. Even after this mornings Chicago PMI report (which came in stronger than expected) MBS continued to sell off. However by late morning/early afternoon things settled down and MBS started to rally along with the 10 year Treasury. The FNMA 3.5 coupon hit a three month high after hours (a positive for mortgage rates).

The big question is why?

Unfortunately there is no simple - easy answer. Once the European bond market closed MBS continued to rally and that rally continued into the "After Hours" trading session. And yes even though the market technically closes you can still trade MBS bonds and US Treasuries.

And by late afternoon six mortgage lenders improved pricing just a bit which is good news for consumers. The movement is something to keep an eye on especially if it continues into next week. Don't expect huge improvements to mortgage rates this week even if the Mortgage Backed Securities market continues to rally. Certain times of the year mortgage lenders are conservative with the mortgage rates they quote and this is one of those times. By early next week mortgage companies will return to a more aggressive rates.

When I ask this question (What moves mortgage rates?) to people 99% of the time it's one of three answers:

• The Fed
• The 10y treasury
• I don't know

And it's not surprising to hear those answers. Most news organizations don't report how mortgage rates originate or what the primary factor behind mortgage rates moving up or down. They just usually assume it's one thing (mostly the Fed) and base their report on that wrong assumption.

The simple answer:

The good news is the answer to what moves mortgage rates is fairly simple and being able to have a decent understanding of it will put you significantly ahead of 99% of consumers. So what is it?

The Mortgage Backed Securities market.

Never heard of it? You're not alone. In fact I would not be surprised if more than 90% of Mortgage Loan Originators didn't know about the Mortgage Backed Securities (MBS) market was. The MBS market is a bond market where investors trade groups of mortgages. When the value goes up; rates move down. When the value of those mortgages moves down; mortgage rates go up.

That's it.

Are there other factors that influence the movement of consumer mortgage rates on a daily, weekly or monthly basis? Sure:

• Application volume
• Lender delinquency rates
• Cost to originate the mortgage

These are just some of the additional factors that go into formulating consumer mortgage rates.

What about the Fed and the 10 year Treasury:

The Fed and the 10 year Treasury have an influence over the Mortgage Backed Securities market but they do not directly impact consumer mortgage rates. And the Fed does not control purchase or refinance underwriting guidelines. There are times when the Fed raises rates and mortgage rates move lower (see December 2018 as proof). 

So next time someone brings up mortgage rates in a casual group conversation you can now step in and provide a little education as to what really moves mortgage rates.

It's been a great year for consumer mortgage rates however as we finish out 2019 mortgage rates are moving higher. And the move is not completely unexpected. Fannie Mae and Freddie Mac fixed rate mortgage programs still offer rates well below the levels seen back during the last three months of 2018. At that time some lenders were offering 30 year fixed rates above 5.00% and 15 year fixed mortgage rates in the mid 4's. Times have definitely changed.

What Will Mortgage Rates Due In 2020:

Great question! Unfortunately there is no easier answer if mortgage rates move lower or higher in 2020. The general industry view point is that mortgage rates should remain steady as the economy sees some improvement in 2020. With the phase one trade deal done along with the UMSCA trade deal many investors and corporations are optimistic that the economy will improve as we move into the the Presidential election year.

But be careful though; there are many instances throughout history in which the Fed, companies and investors were optimistic the economy was going to improve. Look no further than 2018; when the Fed was raising rates and most people believed 2019 was going to be banner year for the economy. It wasn't though; the stock market did well however the economy started to shed important manufacturing jobs; employment slowed along with corporate earnings.

Could mortgage rates move to new lows?

Absolutely but that's unlikely. A number of factors would have to happen to see mortgage rates move to new all time lows. Generally speaking the lowest 30 year fixed rate seen in the last 40-50 years was around 3.375% and the lowest 15 year fixed rate is around 2.75% (zero points, typical closing cost structure). On the flip side there are risks to rates moving back above 5.00%. A stronger economy, increasing wages and higher inflation are all risks to mortgage rates moving higher in 2020.

How To Plan Ahead:

If you are looking to refinance your mortgage or purchase a home it's very important you take the time to plan ahead. Know your credit score, income and debt before you start shopping around for a quote. And it's important to be realistic. If you have less than perfect credit you won't get the best terms and if you have excellent credit know that lenders will offer the best market rates they can but for the most part they won't go below that. It's important to work with a reputable company and a loan officer with a verified history of at least five years in the mortgage industry.

Mortgage Rates Winter 2019:

As we move into the last two months of 2019 it's a good idea to evaluate where mortgage rates are currently at and where they maybe during the winter months. Homeowners looking to refinance a current mortgage or homebuyers looking to purchase a new home are in a much better position to lock in a low rate compared to October, November and December 2018. 

However significant risks remain and there is a chance that mortgage rates may move higher before the end of the year. Here are the biggest risks to mortgage rates heading into November 2019:

• A trade deal with China
• Brexit deal between the UK and the EU
• Improving economic conditions

Trade Deal With China and Mortgage Rates:

In the last couple of weeks we've seen movement on two of the three risks facing mortgage rates. Mid-October President Trump announced a "trade deal" with China that sent bonds (specifically Mortgage Backed Securities) into tailspin causing mortgage rates to move higher after hitting multi-year lows in September.

In the following days it became clear that the "deal" really wasn't a deal. First off there was nothing signed and second the Chinese government stated there was no formal deal and only general agreements about what a deal might look like. Despite the no deal "deal" bonds remained in sell mode and mortgage rates in California and across the country remained elevated.

Brexit Deal and Mortgage Rates:

And just last week a deal between the UK and the EU was struck however it still needs to be approved by Parliament. After the announcement that the UK government would ask the EU for another extension bonds did not improve and mortgage rates remained higher than in previous weeks.

Improving Economic Conditions:

If we see improving economic conditions in the coming weeks we may see mortgage rates move even higher. This is perhaps the biggest risk for mortgage rates heading into November and December. A stronger economy leads to higher mortgage rates and a weaker economy can lead to lower mortgage rates.

Locking In A Low Mortgage Rate:

If you are buying a home or refinancing a current mortgage it's important not to take too many risks when it comes to locking in a low rate mortgage. When it comes to mortgage rates there is a general rule of thumb you should know about: 

Mortgage lenders are quick to raise mortgage rates and slow to lower them.

If mortgage rates look attractive to your current situation then you should not hesitate to lock in terms as soon as you can. For those that are buying a home; is it really worth risking the closing of loan just to save $20 - $50 per month? 

If you're refinancing a mortgage avoid the temptations to try and lock in at the lowest possible level. Most people who do that end up paying more then they were hoping for or missing out all together.

Mortgage Rates:

Looking for the current mortgage rates and/or daily mortgage rate updates?

Our current mortgage rates section is one of the best places you go to stay current with mortgage rates, news that affects mortgage rates and money saving tips.

How To Get The Best Mortgage Rate:

Finding the best mortgage rate is something every home owner and home buyer want to do. The problem is the internet is full of information and it’s hard to know where to start. Here are some simple tips that can save you time and money on your next mortgage transaction.

• Only work with top rated companies (A rating or higher w/ the Better Business Bureau)
  
  
• Only work with a Loan Officer with at least 5 years of experience and a strong reputation
  
  
• Avoid the hard sell. If a Loan Officer is high pressure then his/her offer is probably too good to be true.
  
  
• Ask questions and if the Loan Officer doesn’t answer them directly it’s probably a good idea to find a new Loan Officer.
  
  
• Obtain 2-3 quotes and be realistic. If one mortgage company out of 100 is offering a ridiculously low rate then avoid the trap of thinking that’s were mortgage rates are at.
  
  
• Service - It's true; you can get low mortgage rates with top notch customer service. Avoid the companies that don’t offer both; especially if you’re a first time home buyer. The best first time home buyer guide can help those that are buying a home and need some extra information to help them better understand the process.

Be Patient Even If You Have Limited Time:

I know it’s hard to be patient with locating a mortgage company to work with; especially if you have little to know time.

But when you search for a mortgage company don’t just go with the one that sounds the best; do you research about the company and the Loan Officer to make sure they are someone you want to work with.

It literally takes 5-10 minutes to find out if they are reputable or if they are someone to avoid.

The Most Important Thing:

Ask questions, and then ask more. You can tell a lot about a Loan Officer and mortgage company about how they handle the questions their clients ask.

To get the best mortgage rate work with a company that will answer all your mortgage questions in a timely manner.

Refinancing Your Mortgage:

If you are considering a refinance of a current mortgage then one of your main goal is probably to save money.

Even if you are taking cash out, getting rid of PMI (or MI) or maybe you’re moving from a 30 year fixed rate mortgage to a 15 year fixed rate mortgage...you’ll still want to save money.

Below you’ll find useful tips that could save some homeowners thousands of dollars and might also make your next refinance transaction a bit easier.

And for those of you who are in a super rush and only want the number one tip; here it is:

My best possible tip when refinance your mortgage: Only work with a top rated company (A rating or higher with the Better Business Bureau) and a Loan Officer with at least five years experience (ideally 10+ years).

Tips That Can Save You Money:

Below are money saving tips for your next mortgage transaction.

• Only work with a well respected mortgage company that has at least an “A” rating with the Better Business Bureau.
• Only work with a Loan Officer that has at least five years of experience. Ideally you’ll want to find a Loan Officer with at least 10 years of experience.
• Stay on top of current mortgage rates. Avoid the websites that have “rate tables” and use sites that are highly rates.
• Rarely does it make sense to pay more than one point. When points are involved make sure you recoup the costs of the points within a suitable time frame. Anything longer than 2-3 years comes with risks you may not see the savings from the lower rate that came with a higher cost.
• Don’t do a 15 year year fixed mortgage term unless you are nearly certain you can afford the payment. It’s great to pay off the house early; just make sure that the higher payment is something that works for your budget.
• When you lock in your interest rate make sure you obtain the Locked Loan Estimate from your loan officer.
• When it comes to locking in your rate; never assume it’s locked...get the confirmation in writing.

When doing a refinance it’s important to ask questions and make sure you understand what’s happening. There is a lot going on but it’s absolutely necessary you ask questions to ensure you’re fully informed with the type of loan you are obtaining.

What do you do if your Loan Officer doesn’t like to answer questions?

Find a new Loan Officer.

There are 10's of thousands of Loan Officers out there; if the one you’re working with doesn’t want to answer your questions then find someone that will.

Lastly; if you see a mortgage rate with terms that work for your financial situation please avoid the mistake so many people make.

What’s the mistake?

They wait to see if they can get it slightly lower and usually end up missing out on the terms they could have locked in originally.

Higher The Credit Score - Lower The Rate:

To a certain point this is true; the higher your credit score the lower your mortgage rate will be.

For Conforming mortgage loans a 740 or higher credit score will enable you to obtain the best possible interest. So even if you have a 800 credit score the improvement to your interest rate will top out at 740.

FHA home loans there really is no high credit score - lower rate link however you ideally would like to have a credit score above 580 when it comes to a FHA loan.

In this post I’ll provide information you can use to ensure your credit score is high so that your mortgage rate is low.

Credit Report Tips For A Higher Credit Score:

1. When it comes to your credit cards; always keep your balances below 35% of your credit limit: Having a credit card balance above 35% could negatively affect your credit score if it becomes an on going occurrence. A few months above that level will probably have minimal to no affect on your credit score. If you go month after month at 50%, 60% or higher that starts to really bring down your credit score.
   
   And this is the most important thing for those that pay off/pay down their balance every month: Make that payment PRIOR to the last day of your bill cycle. Credit card provider report to the credit bureaus the balance listed on your statement.
   
   So if you have a credit card with a $5,000.00 limit and receive a bill for $4,750.00, the credit bureau receives that exact information and it appears to them you are maxing out your credit card (even if you pay the bill off in full by the due date).
   
   
2. Number of open credit cards: Some people incorrectly think that if they have no credit cards they’ll have a great credit score.
   
   That is not true.
   
   In fact your credit score will be really low and if you’re trying to refinance your home you’ll rate will be higher then it needs to be. Why? Because for you to obtain a high credit score you need to show the credit bureaus that you can handle credit. If you have no open credit cards how do you expect to show that?
   
   Do you want to have ten open credit cards? Probably not.
   
   Ideally you should have two - four open credit cards with no balances above the 35% threshold.
   
   
3. Credit Report Errors: If your name is spelled wrong, your home address is spelled wrong or any other basic factual information is wrong - correct that as soon as you can.
   
   If there are errors on your credit report such as missed payments you’ll want to correct them as soon as you can.
   
   But what about something that is 5-6 years old and you “think” is an error? Maybe it’s a small collection account or a missed payment on a credit card.
   
   You might be best to just leave it alone.
   
   Negative items like missed payments only stay on your credit report for seven years. Disputing something thats more than five years old will probably turn out to be a waste of time.
   
   Something that old is not hurting your credit score significantly and to remove it you’ll have to prove it was an error on the creditors part.
   
   
4. Credit Report Inquiries: Most people think that every time you have a creditor check your credit your score drops dramatically. That simply is not true.
   
   Credit Bureau’s understand the importance of shopping around so when you look for a new mortgage or car loan; they take that into consideration. 
   
   Does that mean eight - ten companies can check your credit without your score going down a bit? No but three, four or five mortgage (or car) companies checking your credit will have very little to no affect on your credit score.
   
   With respect to credit cards it’s a bit different. Applying for five credit cards at once might bring your score down so when applying for a new card make sure that’s the one you want.

Good Credit Can Save You Money:

Having good credit can save you thousands of dollars when it comes to obtaining a mortgage. Use the above tips to get your credit score as high as possible.

FHA Home Loans:

One of the most well known loan programs in the country is the FHA home loan program. The program started just after the great depression to enable more Americans to become homeowners. The National Housing Act of 1934 was the legislation that created the Federal Housing Authority (FHA).

After WW II the Federal Housing Authority was instrumental in assisting our veterans purchase homes as they returned from war.

Since 1934 the FHA home loan program has allowed over 40 million Americans to become homeowners and currently they have nearly eight million mortgages in their portfolio. 

FHA Home Loans For Purchase and Refinance Transactions:

A homebuyer or a current homeowner can obtain a FHA home loan. The program offers some unique features that make it standout amongst the other well known home loan programs. Mortgage rates for FHA home loans are generally lower than mortgage rates for Conforming loans however FHA home loans come with Mortgage Insurance (MI). 

What is Mortgage Insurance (MI)?

The first thing to understand when it comes to MI is that it's NOT your homeowners insurance. Homeowners insurance covers your home in case of fire or other disasters. 

It's also not your mortgage rate.

MI is an insurance policy that covers the lender for any losses in case you default on your mortgage. There is an up-front fee (that you pay at closing or it's rolled into the interest rate) and then you pay monthly with your mortgage payment.

FHA Loans To Buy A Home:

There are two great things about the FHA Home Loan program when you're buying a home:

• Low down payment (3.5% of the purchase price)
• Poor to Average credit is ok

If you have a 630 credit score and you want to buy a home for $200,000 then you only need $7,000 for a down payment to open the door to getting qualified under the FHA program.

You also need the obvious; employment and enough income to be able to afford the monthly payments.

FHA Streamline Refinance Program:

If you currently have a FHA home loan you are in luck. You have access to one of the best refinance programs in the country (provided you meet the basic qualifications). The main requirement is that your current loan is a FHA loan.

Benefits of the program:

• No appraisal
• No income documentation
• Very fast closing

Who Should Consider the FHA Home Loan Program:

If you have a small down payment (or little equity) and/or less than perfect credit you may want to consider the FHA home loan program. If you have a big down payment and/or great credit the FHA home loan program may not be for you. 

When contacting a Loan Officer be sure to ask plenty of questions so that you are fully informed about your mortgage options.

Higher Oil, Stable Inflation and Lower Mortgage Rates:

It's widely believed that if oil moves higher so does inflation which means mortgage rates move higher as well. And in a very broad general way that is somewhat true.

Are you thinking that whenever oil moves significantly higher so does inflation and mortgage rates?

From December 2018 to April 2019 the price of oil increased significantly however inflation was moderate and mortgage rates moved lower. 

Does this mean we don't need to worry about the price of oil pushing inflation and mortgage rates higher? Absolutely not.

How To Use Oil Price Properly When It Comes To Mortgage Rates:

When making a determination as to the direction mortgage rates will go never use one component in your decision making. Oil prices do not dictate mortgage rates. They can have an influence/impact on mortgage rates but they do not directly dictate the mortgage rates consumers obtain when they apply for a mortgage.

If you are looking to refinance your current mortgage or purchase a home and want to evaluate the direction of mortgage rates then I suggest looking at more than just oil, or just the employment report or just the Fed.

I suggest you look all of those things and more.

But at the end of the day you must understand this important fact; no one can accurately predict mortgage rates. What you can do is make an educated guess based on all the various components to mortgage rates to help guide you in making a determination on when you should lock in your mortgage rates/terms.

Mortgage Rates Are Moving Higher - For Now:

I'm a Loan Officer with over 14 years of experience; I know what consumer mortgage rates are based on (It's not the 10y treasury yield) and my company offers some of the lowest California mortgage rates for both refinance and purchase transactions. 

During the last few weeks of March I was telling everyone and anyone who would listen - lock in your rate if it makes financial sense. The worst thing a homeowner or homebuyer can do is think rates will keep "tanking" (to use CNBC's description) after they made one of the biggest moves down in ten years.

It simply doesn't work like that in the mortgage industry. The easiest way to understand mortgage rates and when they are trending lower is this; two steps forward and 1.75 steps back. 

Mortgage rates rarely move down by more than a .125% and not snap back. So the next time you see home loan rates decrease by .125% or more and you've been waiting to lock in terms - move to lock in terms asap. That leads us to this; will there be a next time and if so when will that happen?

Mortgage Rates Moving Forward:

Predicting mortgage rates is super difficult at best. Why? There are so many moving parts that influence mortgage rates it's next to impossible to say what exactly mortgage rates will do in a specific time frame.

What we can do is make an educated guess and recognize what may prove that educated guess to be wrong.

Will we see home loan rates return to levels seen towards the end of March/the first few days of April 2019? I believe there is a good chance that will happen however we'll have to be patient. Here are the reasons why I believe we'll revisit those mortgage rate lows:

• The Fed - When mortgage rates and general interest rates were moving up late summer/early Fall 2018 signs of an economic slowdown started to appear. When mortgage rates topped 5.00% for some mortgage companies loan application volume dropped dramatically. Based on the Fed's most recent statement I believe they are very aware that the economy can not handle interest rates at the level seen six months ago and they have already announced certain actions which are favorable to keeping home loan rates low.
  
  
• The Economy - We are going on nearly ten years since our last recession. The economy is in last stages of this current expansion and signs of a slow down are starting to appear.

As we move towards the end of April it would not be surprising to see mortgage rates level out and establish a new range (similar to what happened late January). However there is no guarantee that will happen and as I suggest to all my clients: if current mortgage rates make financial sense then do no hesitate to lock in terms and close your loan.