Refinancing Your Home Profitably

For homeowners who thought the federal tax refund checks were a nice surprise, you may be a candidate to save a lot more than a few hundred dollars. Fixed interest rates are still at very affordable levels, so it may pay to pull out your mortgage note and do a bit of comparing. Especially if you have an adjustable rate mortgage that is getting ready to go to a higher level. Refinancing may also allow you to avoid becoming a Las Vegas foreclosures statistic!

But before you jump on the refinance bandwagon, here are a few "dos" and "don'ts" that should help in your search for the best refinance option.

· - Refresh yourself with the exact terms of your current mortgage. Know your rate, mortgage balance, monthly principal and interest payment, possible pre-payment penalty and the remaining term. Las Vegas mortgage brokers will have trouble giving you the best advice if he or she doesn't know your current situation.

· - When you get a new mortgage, each monthly payment is divided between interest costs and principal reductions. At first, most of the payment goes to interest, but over time, more and more of the loan is devoted to principal. Refinancing starts the process from scratch, which again means most of the monthly payment goes toward interest. This is not necessarily a bad thing if refinancing means lower monthly payments. Additionally, mortgage interest is usually deductible.

· - Don't get sucked into a "low" rate with high fees. Avoid paying points. One point is equal to 1 percent of the loan amount in cash. If you borrow $200,000, then one point equals $2,000. Generally, if you pay points up front you can get a lower rate--but you have to look at the cost of a point versus the monthly savings from a lower rate. It is rarely advised to pay points to "buy down" the interest rate because of the time it takes to recoup the points. But all situations are different, so a good broker or loan officer will be able to run the numbers and calculate a payback period.

· - Consider a "zero closing cost" option if available in your area. Such loans, of course, have costs--they're just not paid at closing. Instead, you'll likely pay a somewhat higher rate. Lenders around the country offer refinance rates with no points or closing costs. This will enable you to refinance your Las Vegas home without any out-of-pocket expenses or loss of home equity.

· - Think about your objectives before shopping around for a mortgage. Do you want lower monthly payments? A larger loan to take equity out of your house? A shorter-term loan, such as a 15- or 20-year mortgage? If you plan to sell within a few years, what adjustable rate programs are available? Different loans will work best in different situations.

· - Don't take a loan with a pre-payment penalty. These programs can hurt if you pay off the mortgage completely or pay down a large part of the loan early. It's best to have the freedom to pay off the loan whenever you want.

If you want to check in to refinancing your Las Vegas mortgage, give us a call and we will be happy to provide you with information on some of the best local lenders in the city.

Loan Rates - To Lock or Not To Lock, That is the Question!

Borrowers always wonder if they should lock-in interest rates on their new Las Vegas homes when they first apply for a loan--or should they wait and see where the market goes?

That is the question. But there is no sure answer because either choice involves some risk. If you lock now and rates fall, you lose. If you don't lock now and rates rise, you also lose.

Alternatively--and here's the good news--you win by locking before rates rise and you also win by not locking in a market where rates are falling.
What to do?

The first step is to understand how the locking process works. In essence, there is no single lock-in "standard"--a "lock-in" with one lender may be radically different from the lock-in program with another. Here are some issues to check:

What is being locked-in? An interest rate? Or an interest rate and points? Given that "points" are a form of interest, if a rate is locked-in but not points, then the effective rate for the loan can rise before closing if the interest level stays the same--but the number of points increases.

How long is the lock-in? A typical lock-in lasts 30 days, but longer terms may be available.

Is there a cost to lock-in? If you pay a fee for a lock-in and borrow at a different rate or from a different lender, then the lock-in fee will be lost. In some cases, lenders collect a lock-in fee and then credit the money to the borrower at closing. In this situation, there is no additional cost to lock-in if you go through with the loan.

What does the small type say? Some lenders have been known to lock-in rates--unless "market conditions" change; then all bets are off. But ask yourself a question: is there ever a time when "market conditions" do not change? Surely there must be a reason why interest rates change daily if not more often. In this case, the fine print effectively defeats the benefits a borrower wants from a lock-in.

Is there a "float down" option? In this situation you lock-in a rate--say 7 percent and 1 point--but have a one-time option to lock at a lower rate if interest levels and points fall.

What happens if you can't close by the end of the lock-in period? Typically, you lose the rate you reserved. This is not unfair because a lender cannot be expected to hold a given rate indefinitely.
When you lock-in a loan, lenders have one of two choices: They can secure a loan commitment with an investor at the promised rate or they can play the market and hope that by settlement they can get your rate--or better.

But what happens if a lender plays the market and rates go up? The lender loses. The problem is that not all lenders play fair. It doesn't happen often, but some lenders will delay the loan application process past the lock-in period, thus ending their commitment to make the loan.

How can you avoid this problem? Consider Las Vegas mortgage lenders recommended by your broker. An experienced broker will know which lenders have a good record delivering on commitments.

In general, whether you lock-in or not, it's best to be in continual contact with the lender. Make a point to promptly supply all required paperwork, and keep notes showing when you spoke with the loan officer and what was discussed. Get timed, dated and signed receipts for all paperwork you deliver.

So when should you lock-in? There just isn't a single answer that works for every situation. You need to consider general interest trends--and also that no one can predict future rates. At best, a properly-written lock-in can limit exposure to rising rates--and that's not a bad deal.

For more information regarding lock-in agreements for your purchase, just call and we can review the features that can best serve your interests.

Clark County affected by New Fannie Mae Guideline

Just when the Las Vegas homes market was starting to come out of the doldrums, Fannie Mae has put another roadblock in front of many would be Las Vegas homeowners. We had been experiencing a lot more activity over the past month and at the auctions almost every property had actually been put under contract.





Last week Fannie Mae announced a new guideline relating to insuring loans in declining or soft markets. In Clark County, the new guideline requires a 5% reduction in the form of an additional down payment by the buyer on the maximum loan allowed on a residence. This new guideline officially started last week on January 15, 2008 and applies to all loans already in process.

Many banks are enforcing this guideline on all loans, not just conforming Fannie Mae loans of less than $417,000, but also on jumbo loans over $417,000 as well. This guideline does not apply on government loans like FHA and VA.

There is a box on the standard appraisal form called the URAR (Uniform Residential Appraisal Report) that asks the appraiser if the market is "stable," "declining" or "increasing." If the appraiser checks the box on the appraisal report that says the market is "declining," the buyer’s down payment on the selected loan program has to be increased by 5%, even if the appraisal comes in at or over the negotiated purchase price.

For example, the purchase price is $200,000 and you need 100% financing. The appraisal actually comes in at $220,000. Even though the appraisal came in higher, if the declining market box is checked, you still have to put 5% down on the $200,000 purchase price. If your loan program originally called for a 5% down payment, now you will need 10% instead.

Although many lenders are looking at reconciling these types of challenges, today the appraisal of the home means nothing compared to whether or not the community has been stigmatized as “declining.”

Fannie Mae and some national lenders have declared many areas around the country as declining markets. It doesn’t matter what the value of the appraisal is. It’s whether or not the county has been declared as declining that determines how much you can actually borrow. The maximum loan allowed is automatically reduced by 5%-10% in these areas, depending on the loan product.

This means that many more buyers will be revisiting the idea of getting FHA and VA loans in the near future. (Many mortgage brokers don't even have FHA or VA approvals yet as these were not popular programs during the past five years.) FHA currently requires 3% down, but the seller is also allowed to pay that down payment on behalf of a buyer using their Nehemiah program. And VA still allows eligible veterans to obtain a loan on 100% finanacing. For more information on Las Vegas mortgages please contact us at 702-985-7654 and we will be happy to help you find the lender that has the best program and rate for your particular circumstances.