Fort Lauderdale Mortgage Interest Rates Update: June 10, 2011

Mortgage-backed securities, which move interest rates, are moving lower today after getting hit hard yesterday which is bad for interest rates.  Interest rates paying NO POINTS in Fort Lauderdale and South Florida are as follows today on a $250,000 purchase price, 740 credit score, 25 day lock period, primary residence, single family detached home, with escrows are:

•  4.625% on a 30 year Conforming fixed rate mortgage with 20% down (APR 4.72%)
• 3.875% on a 15 Year Conforming Fixed rate mortgage with 20% down (APR 4.033%)
• 4.375% on a  30 year FHA fixed rate mortgage with 3.5% down (APR 5.265)

On a Jumbo loan with a loan amount under $850,000 putting 20% down paying no points with the same parameters as above interest rates are at 5.25% (APR 5.301%)

Call or email me for interest rates on Adjustable Rate Mortgages (ARMs) in Fort Lauderdale and South Florida

Your Fort Lauderdale Mortgage Banker Wants To Say “YES!”

The timing of this article couldn’t be better because my main goal going forward is to educate everyone involved in the real estate transaction about what is needed for a loan and how we as mortgage professionals don’t want to ask for it as much as a borrower doesn’t want to give it.  But it has to be done.

The sooner we all accept this the smoother the transaction will go.  It’s hard enough getting an FHA or Conventional loan in Fort Lauderdale and South Florida to have to add arguing back and forth about why something is needed.  There is a reason for everything, believe me.

Many don’t understand why a borrower’s tax transcripts are pulled and why it must be done or why they must be stamped by a local IRS office.  It’s because you can give me a tax return with higher income and get that return Amended or file a different return with less income and a larger tax refund.

Make sure to read this Blog post “Does Your Lender WANT to Say “Yes?”

Fort Lauderdale Mortgage Interest Rates Update: June 8, 2011

Mortgage-backed securities, which move interest rates, are improving once again today which is good for interest rates.  Interest rates paying NO POINTS in Fort Lauderdale and South Florida are as follows today on a $250,000 purchase price, 740 credit score, 25 day lock period, primary residence, single family detached home, with escrows are:

•  4.625% on a 30 year Conforming fixed rate mortgage with 20% down (APR 4.72%)
• 4.375% on a  30 year FHA fixed rate mortgage with 3.5% down (APR 5.265)

Call or email me for Jumbo Rates  and Adjustable Rate Mortgages in Fort Lauderdale and South Florida

Fort Lauderdale Interest Rates at a 2011 Low

Every Thursday Freddie Mac releases their Primary Mortgage Market Survey which shows average interest rate for the week ending.  If you dig into and read the actual report you will see that it is always with paying points and broken down by regions.  With anything you read you need to make sure to read the whole article, not just the headline.

By only reading the headline and not understanding the report you could get yourself in trouble.  Remember, this news is something that has already happened.  Yesterday mortgage-backed securities, which is what moves interest rates, rallied like crazy for the better.  Right now, mortgage bonds are down 47 basis points which in english means whatever rate you got at the end of the day yesterday now will cost you your loan amount times .0047 so on a $100,000 mortgage that is $470 extra.   The reason not knowing much about this survey can hurt you is if you quote it and on Thursday mortgage bonds get a lot better you might get the savings passed on to you.  Yes , there are dishonest people.  I don’t mean to be negative but this is why it is important to know what you are quoting. 

You will see for Fort Lauderdale and the Southeast that the rates ended a tad higher than the rest of the US at 4.57% versus 4.55% paying .6% in points.

An Adjustable or Fixed Rate Mortgage For Your Fort Lauderdale Home?

There was a really good article in The Wall Street Journal this weekend called “Home Loans: A Call to ARMs?” that mentions how the spread between the interest rates on a 30 year fixed and a 5 Year Adjustable Rate Mortgage (ARM)  is an 123 basis point (1.23%) difference is on pace to be the widest it has been in 8 years. 

That is very enticing but you need to be very careful if you are to take on an ARM especially when interest rates are at historic lows.  You never know what the future holds and unless you are 100% certain you will be able to pay it off in that time period I would suggest getting a fixed rate loan.  Some are calling for further declines home values in Fort Lauderdale and South Florida and if you can’t sell your home or pay it off you could be in trouble.  Remember though, every 1% increase in interest rates reduces your buying power by 10% so even if home values do drop your low interest rate can offset that decline if it in fact does occur. 

Also, it depends on what your loan amount will be.  On a $100,000 mortgage it isn’t as big of a difference in your mortgage payment as it would be for a $300,000 loan.  Every borrower’s situation is different.  You are not your neighbor or someone else you spoke to that did or got such and such on a loan.  

Here is how a 5/1 ARM works: After the first five years, rates typically adjust each year and can move either up or down. During the sixth year, the maximum amount they can increase by is 5 percentage points. Each year after that the rate can move by 2 percentage points, as long it doesn’t surpass the loan’s maximum lifetime cap, which is 5 percentage points above the initial fixed rate. That means the lifetime cap on a loan made today at 3.4% would be 8.4%.

Getting a Mortgage on a Condo in Fort Lauderdale

If you are looking to purchase a condominium in Fort Lauderdale or South Florida you need to make sure you are dealing with a mortgage professional who is an expert and going to educate you on the process.  Your mortgage banker or broker needs to make sure the condo is warrantable according to Fannie Mae & Freddie Mac’s guidelines or to check to see if it is an FHA approved project.

Let’s start with getting a Conventional loan on a condo in Florida.  It is easiest if you are putting down 25% on a primary residence or 30% on a 2nd home because you will get what is called a Limited Condo Approval which requires getting less documentation to get it approved and it doesn’t require the condo project to have 10% of it’s budget in reserve and a few other items.  Just because the 10% reserve requirement isn’t needed for the loan doesn’t mean it’s not important.  You need to know that if there is an assessment of some sort you will be responsible for paying it out of your pocket. 

You can get financing on a primary residence on a condo in Fort Lauderdale and all of Florida for as little as 5% down but you will have to go through the full condo approval process which requires a full condo questionnaire, a copy of the budget, and the condo documents.   Currently, you will need at least a 680 middle credit score and a debt to income ratio under 41% which is much more restrictive than FHA or if you are putting down 20%.  Although you really shouldn’t be above that percentage on your debit to income ratio regardless of what is allowed.

Some of the main items that can disqualify a condo building from Conventional financing are as follows:

• If 15% or more of the unit owners are 30 days or more behind on their condo association dues
• If there is litigation (there are some exceptions)
• If anyone investors owns more than 10% of the units
• If more than 50% of the units are investment properties
• Not enough Fidelity bond coverage
• If there is a rec lease
• The list goes on…..

In order to get an FHA loan it will need to be on FHA’s Approved Condo list.  If it is not an FHA approved condo you have to get the how condominium project approved which is very involved and can take 6-8 weeks with FHA.

An FHA or a Conventional Loan for Your Fort Lauderdale Home?

I have written about this in the past and showed you how you can save more money by going with a Conventional loan over an FHA loan.  The reason is that FHA has a one time Upfront Mortgage Insurance Premium (UFMIP) charge of 1% of the loan amount and the monthly mortgage insurance is more costly.  In Fort Lauderdale and all of Florida you have to have a higher credit score in order to get a Conventional loan with less than 20% down which is typically a 680 middle credit score.  In order to get the cheapest monthly mortgage insurnace premium you will want a 720 or higher middle credit score. 

Another advantage of the Conventional loan is that a seller and their listing agent tend to like a buyer to be getting Conventional financing over an FHA loan.  I do not pretent to be a real estate agent so make sure to always consult one.  If you need a referral for a great real estate agent just give me a call or send me an email.

The one advantage of an FHA loan over a Conventional loan other than the fact that FHA’s loans aren’t as credit score driven is that they are assumable.  That means as long as someone qualifies they can take over your loan.  This could come into play for someone who is buying now with interest rates at historic lows and when they go to sell in 5 to 10 years it is possible that they could get a premium on the sale of their home depending on how high rates are at that time.  This is speculation but I think a buyer should be aware of this option and this is the job of their mortgage professional to make them aware. 

I feel if you can get a Conventional loan that it is probably the better option for a buyer but everyone’s situation is different so it should be viewed on a case by case basis.

Fort Lauderdale Mortgage Shopping

So many have been told and believe it is best to “shop around” for a mortgage and when doing that they are looking at the interest rate and closing costs.  Times have changed in my opinion and what might have been the case or what you are told doesn’t hold true today.  Just as at one point in time a credit score indicated a borrower’s willingness to pay and we have seen so many people with perfect credit stop paying their mortgages.

I have a friend who is buying a property outside of Florida and asked me to look over his estimate to make sure he is getting a good deal.  I looked at it and the rate was competitive and fair and the fees were normal.  He asked me if he should “shop around” and my question to him was whether or not he thought the person who gave him his estimate was knowledgeable and trustworthy.  He felt she was so I said there is no reason to call anyone else because it’s just going to confuse you and you are going to get stressed out having other people call you about your mortgage.

The next day he called me to tell me he called another mortgage professional and they said that the lender paid mortgage insurance counts as seller contributions and I explained that was not the case.   He helped to validate my point, calling someone else did nothing but confuse and stress him out.

I cannot stress enough how important this is.  There is so much more involved in a mortgage that you should be worried about then just your interest rate and closing costs.  It is even more difficult to determine what to do if you are trying to get a mortgage in Fort Lauderdale or South Florida because there is so much fraud.  That is all the more reason to follow my advice.

Take Out A Big, Long Mortgage In Fort Lauderdale

I try to give the best advice I can to my clients anytime I speak to someone about a mortgage in South Florida.  I feel you never want too much money tied up in any one asset.  With interest rates at historic lows you can put your money to better use along with making sure you have 6-12 months of money set aside in reserve, make sure you are always maxing out your retirement, and the list goes on.

The reason I think for most it is better to take out a 30 year fixed rate mortgage even though the interest rate is a little better on a 15 year fixed is because you can always make a 15 year fixed payment on a 30 year fixed mortgage but you can’t make a 30 year fixed payment on a 15 year fixed mortgage.  The future is too unpredictable and you never know if you need to replace something, put a new roof on, etc.  There are additional costs that come with owning a home.

The article below from the New York Times points out how people just aren’t saving enough to get their 401(k) match which is crazy.

Of the two million 401(k) participants evaluated, 39 percent were not saving enough to receive their employer’s full matching contribution (or they weren’t saving at least 5 percent of salary in companies with no match), up from 33 percent in 2008. Younger workers are even more likely to give up the free cash: 47 percent of participants under age 40 did not save enough to receive the full match, compared with 53 percent of workers under the age of 30.

http://bucks.blogs.nytimes.com/2010/10/06/workers-not-saving-enough-to-get-401k-match/

Your Estimated Mortgage Payment

All too often I see estimates that borrowers get from other mortgage originators that have the taxes and insurance estimated way too low.  I don’t know about you but I don’t want to see the best case scenario.  I don’t necessarily want to see the worst case scenario but shouldn’t the mortgage professional be good at estimating what the payment will be?  You would think so.

In South Florida it is hard to estimate what the taxes will be since the first year or so are based on the seller’s current tax rate however we shouldn’t be concerned so much with what it will be for a short period of time but what it will be going forward.  Right now the tax rates are relatively low because property values have come down.  It is best to use 2% of your purchase price to calculate what your taxes will be once they are reassessed based on your purchase price.  If you want to be more accurate you can use Broward County Property Appraiser’s tax estimator, http://bcpa.net/TaxCalc.asp, but make sure to read the disclaimer because your purchase price may not be market value.  I tell all of my clients to make sure to call or email me with the address of the property that they are looking to purchase so I can put together a new estimate based on the seller’s current tax rate. 

The other tricky estimate is the homeowners insurance because it is going to depend on the age of the property, the age of the roof, if there are shutters, hurricane proof glass, etc.  You will want to make sure to get a wind mitigation inspection which costs around $150 to help reduce your yearly insurance premiums.  It is best to use 1.25% to 1.5% of the loan amount.  Even if you are not in a flood zone it isn’t a bad idea to have flood insurance so I would suggest adding another $400/year to your estimate. 

This shouldn’t be something you as a consumer should ever have to worry about if you are dealing with a mortgage professional but unfortunately sometimes you just don’t know who you are dealing with and if they are trying to make their estimate look good versus their competitors.  Be careful.