Posted on January 22, 2009
Welcome to the Mortgage Blog. My name is Denelle Geibel and I am the owner of Cascade Mortgage located in the Park Center Building just north of Riverfront Park. I have been in the mortgage industry for over 13 years and have seen a lot in those years. I cannot think of a time when there has been as much change in a short amount of time as we have seen in the past 18 months. Oftentimes, information being distributed by papers and the media are either confusing or misleading. I will provide the most current, and more imporantly, accurate, information available. It is my hope to use this blog as a gateway to our complex industry . I welcome responses and open-discussions on any topics.
To start out, I am adding a few items relating to interest rate locks, First Time Homebuyer Tax Credit and new Fannie Mae appraisal requirements.
When do you lock an interest rate and for how long?
New applications being take across the US are at a 2-year high. The low interest rates we have seen this past month are the number one reason. If refinancing makes financial sense for you, then NOW is the time to do it. For many, this is the case and they are taking advantage. So what's the pitfall? When do you lock in the rate and what happens if you don't close within the lock period?
First, when do you lock? That is the million dollar question. As I tell my clients, you will know when interest rates have hit bottom, when you are looking back at what the rate WAS. You never know when it was the lowest until it has gone up. At some point in time you must get in the market and buy and that means locking your rate. The best advice I can give anyone is know who locking in the rate; not when to lock the rate. Now is not the time to go to the internet or the family friend. Go to someone who has been in this industry and understands what moves the market so they can provide you with quality advice. Take a look at the terms of the new mortgage on the day you decide to move forward and decide if they are what they need to be. If they are, and your lender feels the market may move in a negative direction, lock and be done. Sure you may have been able to secure a better rate but the chances of getting a worse rate are just as good.
Second, how long do you lock in the rate? That is another question that your mortgage professional should be able to advise correctly. They should know the approximate time table for underwriting review, appraisal review, submitting additional documents and closing. Factor this information in with processing and rescission period and you will come up with the time needed to complete the loan. Keep in mind the borrower also will play an important role in this. If they delay providing documents or appraisal inspections, this could prevent the loan from closing on time. You must remember the clock starts ticking the day it is locked. For a purchase, always several days to a week after the closing date to allow for a slight delay. Now what happens if the lock expires before the loan closes? One of three things:
1. If current rates are better, you get to keep the rate you locked
2. If current rates are worse, you get the new rate or you pay to keep the original locked rate.
3. Or you may be able to extend your original rate for an additional fee
Each lender has a different set of rules that must be followed as it relates to expiring locks. It is very important to understand your lock period and what options will be available to you if the lock does expire BEFORE you lock in your rate. Your lender should provide you with a lock commitment form that will detail when the lock will expire. -
First Time Homebuyer Tax Credit
I have been fielding numerous calls on the First-Time Homebuyer Tax Credit enacted last year with the passing of the HR3221 bill.
First time home buyers may receive a tax credit of up to 10% of the purchase price of the home (not to exceed $7500). This is a "tax credit" meaning that you receive the credit (if you want it) after you file your income taxes. For example, this means that when you file your taxes in 2009 and you owe $5,000 to Uncle Sam and you qualify to have a tax credit in the amount of $7,500; you would receive a refund of $2,500. However, this is a refundable credit (aka interest free loan) that must be paid back each year to the IRS (when you file your taxes) over the next 15 years.
If you sell your home before the tax credit is repaid to Uncle Sam, then the full amount is due or if your property that you received the tax credit for is no longer your primary residence (i.e. you convert your home to a rental).
This credit does not apply if the first time home buyer is buying a home from a relative. This tax credit is only available for purchases made between April 9, 2008 and July 1, 2009 for adjusted gross incomes of up to $75,000 ($150,000, if married, filed jointly) and phases out up to $95,000 ($170,000, if married, filed jointly).
Friendly reminder: I am not a tax professional, Always consult with your CPA, financial or tax advisor. - Denelle
Fannie Mae and Freddie Mac Change the Appraisal Process
Freddie Mac and Fannie Mae will implement a revised Home Valuation Code of Conduct beginning May 1, 2009. In an attempt to increase the reliability of appraisals, the revised code builds on existing seller-servicer guidelines and will apply to lenders that sell single-family mortgage loans to Fannie Mae and Freddie Mac.
One major difference in the code is that lenders will be required to order appraisals from one central clearing house, which will in turn select an appraiser. The down side of such a process is that lenders will have little to no communication with the appraiser, which means there won't be an opportunity to have a discussion or touch base with appraisers before they go out to appraise the house. The new code is intended to help assure that borrowers, home buyers and secondary mortgage market investors receive fair and independent property valuations.
In some areas, lenders have already implemented these changes, and in the next few weeks and months, more will have to begin the process.
This is just one more change in our industry and I don't expect it to be our last. Please call me if you have any questions or comments! - Denelle
