A Minute with Megan about Mortgages

Mortgages can be intimidating and confusing! Megan is here to answer the hard questions for those who are ready to take the leap and buy their first home. From where to start, who to go to, and what to look out for – Megan has the answers.

What’s the deal with interest rates?

Mortgage interest rates are historically low when compared to decades past. However, this may not last long. With a growing economy and positive job reports coming in, we can expect the Federal Reserve Bank to continue to gradually raise interest rates for the future. Generally speaking, interest rates are directly tied to the bond market. When bonds are strong, rates tend to improve. Conversely, the opposite is true when looking at the stock market. The more successful the stock market is, the more interest rates tend to increase. The most recent jobs report in June of this year (2018) was positive, and therefore it is assumed we can expect more rate increases as this year comes to a close and into next year as well. The average interest rate on a 30-year fixed mortgage is in the upper 4% range and moving towards a 5% interest rate.

How easy is it to buy in this market?

The current housing market is certainly playing in the seller’s favor. Very low inventory has led to a rise in bidding wars, limited time on the market followed by quickly going under contract, fewer contingency offers being accepted, fewer seller concessions and contributions towards closing costs, higher down payments, and buyers going above asking price for the purchase. Because inventory is lower, sellers can be more selective of the buyers they accept. In a market where a house can go on and off the market before a full week has passed, it is important to have a pre-approval letter from your lender. It is equally important to have someone you can count on to provide the insight you need for making a home offer and purchase in a timely manner.

Who should I borrow from?

A local lender can provide the personal touch and friendly support, as they work solely in your best interest. Local lenders can provide an in-house team that completes the processing and underwriting of your loan under one roof, which allows for a smoother transaction and streamlined approach to the loan process. Expertise is key! It is not a requirement for all loan officers to be licensed in the state of Florida, but any loan officer working in a private mortgage company (i.e., not a bank) must be licensed. Mortgage loan officers working in private mortgage companies also must complete continual training and education each year, holding them accountable for the knowledge needed to assist you in the purchasing process.

Buying can be expensive, should I just rent?

Housing prices in Tampa Bay, and nationwide, have been increasing with mortgage rates. The lack of inventory and increasing prices have contributed to an expensive rental market, due to the demand for housing. Interestingly enough, the increase in rental prices has made it a more cost-effective option to buy a home, especially in the long-term. The monthly mortgage payment on a property can often be less than the rental price for the same property. A knowledgeable mortgage loan officer can help you explore which options best suit your budget, finances, and credit.

But what about the monthly payment?

Commonly, the biggest concerns voiced by homebuyers are their monthly payment. The interest rate certainly plays a part in the monthly payment and is a reason many people choose to refinance. Besides refinancing, there are several things you can do to pay down your mortgage or decrease your monthly payment. Making one additional mortgage payment each year will reduce your thirty-year mortgage by approximately five years. Similarly, making bi-weekly payments on your mortgage equates to one extra payment each year, and will also reduce your mortgage by approximately five years. Each of those extra payments is applied directly to your principal, reducing the amount of money going to the interest side of the following payment.

I need TMI on the PMI.

A key way to make your monthly payment as low as possible is to get rid of private mortgage insurance (PMI). Buyers who cannot make at least a 20% down payment when purchasing a home are required to pay PMI. After two years you can request that the mortgage insurance be dropped if you can demonstrate that your loan-to-value ratio (the amount you still owe on your mortgage versus the amount your house is worth in the market) is 80% or lower. This may have occurred because your home is worth more than it was when you purchased it, you could have paid down your principal to that percentage, or a combination of the two. Mortgage insurance automatically drops once this ratio drops to 78%. This can end up saving you hundreds of dollars a month depending on your loan amount.

How do I know I’m getting the best deal?

An important point to remember is the saying,

“There’s no such thing as a free lunch.”

If something seems too good to be true, it probably is. An example is if a lender offers to pay for your closing costs. You could be paying for those closing costs by way of a higher interest rate, meaning you would be financing that amount over the life of your loan. In the end, you could end up paying quite a bit more than if you had paid those closing costs yourself. Another example is when a lender offers you a rate which is far below anything else you have seen elsewhere. In this instance, you may be paying for that low rate in points or other fees, which could greatly increase the amount of money you need to bring to closing. That is not to say that in specific instances these options are bad. For some people it may make sense based on their goals or needs. Seek out an honest mortgage loan officer who is transparent about what they are offering you, and who will take take the time to answer every question you may have.

Okay, you’ve convinced me. Who should I talk to?

The key to a successful purchase is having someone who can help you find the option that works best for you and your situation. Every situation is unique, and there are often several different options that would work for you depending on your goals. In addition to finding someone you trust to help with your mortgage, it is important to have a realtor who can help you find your perfect home and be a resource for you in the buying process. I enjoy helping people with financing their homes and contributing to a happy life moment. Purchasing a home is one of the biggest, and most expensive, decisions of your life. It is important to make sure you are in the hands of someone who has your best interests in mind. I would love to help! My goal is to be your mortgage loan officer for life, not just for today. You can always expect 110% from my team! Our mantra is to always demonstrate the best customer service and to put the client’s needs above all else.

– Megan Rindone