Monday, December 17, 2018

The Mortgage Bankers Association released their weekly Mortgage Application Data Report showing that overall application volume declined by 6.6%. Applications to Purchase a home were down 6.0% and Refinances decreased by 7.0%. I assume that this is no real shock for anyone who has been reading my articles or watching the bond markets since early January.

The 30-year fixed mortgage rate has quickly soared to its highest level since April 2014, according to the latest “Primary Mortgage Market Survey” released by Freddie Mac. Yes, the damage is done, and there is no turning back. Unfortunately, mortgage rates are more likely to get worse before they get better. The 10-year U.S. treasury is quickly approaching 3.00%. This is therefore an opportune time to share some insider tips on getting below market rates, which are available to almost anyone.

Lower Your L-T-V

The ”LTV” is a term used to describe the loan-to-value of how much is financed against a home’s value. The higher the LTV, the more that is leveraged on the home; A lower LTV means more “equity” in a home. Lowering the LTV not only helps reduce certain penalties and adjustments that are added to loan level pricing but also might help lower the loan amount and gain the benefits thereof.

Decrease Your Loan Term

Another convincing way to lower your mortgage rate is to consider shortening the length of your loan. The 30-year mortgage is traditionally what most mortgage applicants choose, but that should not always be a given. Financial institutions incentivize and prefer mortgagors who repay their loans more quickly. Taking out a 15-year, 10-year, or any loan term less than the 30-year mortgage will almost assuredly lower the interest rate you’ll pay. Similarly, we offer “customizable terms” which would let you choose any year for your loan term. This will in turn reduce the overall cost (interest) of the loan.

Paying Points

Points are typically taboo in the mortgage world. Surely no one wants to pay excess fees when getting a mortgage. There are “origination points” that mortgage companies charge as a cost of obtaining a mortgage – those are the fees that you want to minimize. Then, there are bona-fide discount points that are paid to obtain a lower rate. Each point is equal to 1% of the loan amount - and paying a point typically lowers your ongoing interest rate by 0.125%. However, depending on the bank, depending on the day, depending on the market, depending on the program – the “buy-down” is sometimes more lucrative than that. There are certain instances when there is tremendous ‘bang-for-buck’ that can truly make paying the points a very worthwhile investment. The typical loan officer or online portal cannot generally maximize those opportunities.

Personalized Rates

One of the greatest conveniences and innovations in mortgage banking is the availability of online real-time mortgage rates directly to consumers. With the touch of a few keys a ‘mortgage shopper’ can obtain rate quotes in seconds. The biggest problem is that the rates being provided are for general applicants, without taking into consideration the unique attributes that distinguish each candidate. For example, internally, we utilize the latest technology and algorithms that can offer personalized and customized rates to each of clients. The result provides them with better rates and upgraded pricing whenever possible.

Deal with a Decision Maker

As outlined in the examples above, mortgage rates are very multifaceted, and are contingent on many variables. No one has an exclusive on low mortgage rates, and there is limited wiggle-room on rates once they are issued. However, depending on the organization, there might be layers of management and hierarchy that influence the rates and terms being offered. Sometimes dealing with a manager, a direct-broker, an owner, a principal is more lucrative and financially beneficially to a consumer than dealing with a random field loan officer.

For the remaining 5 “insider tips” to help get a better mortgage rate, please email me directly. I will be happy to share those, as well as other suggestions and ideas that can help anyone benefit despite this volatile marketplace.

Special shout out and birthday wishes to Rabbi Elie Zwickler.

By Shmuel Shayowitz

Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker, and direct lender. Approved Funding is a mortgage company offering competitive interest rates as well specialty niche programs on all types of Residential and Commercial properties. Shmuel has over 20 years of industry experience including licenses and certifications as certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. He can be reached via email at [email protected]