Why is the rate I see advertised always different than the rate I get?
December 28, 2011 by Nevin Williams · Leave a Comment
Why is the rate I see advertised always different than the rate I get?
You really didn’t think you were actually going to get that rate did you?
Best way to start this conversation is by telling you that companies want to advertise their absolute lowest rate. The rate advertised is available however few people meet the minimum requirements to get that low rate. 12 day lock period, 60%LTV 760 FICO score etc.
You should also know that no two borrowers are alike. If your neighbor got a higher rate than you it doesn’t necessarily mean he got a bad deal. Several factors are considered when determining what you get as a final interest rate. We call these factors: Risk based adjustments. These adjustments are made based on the amount of risk that is being taken by the lender.
The most common risk based adjustments are:
- Loan to value
- Debt to Income Ratio
- Credit Score
- State the property is located
- Loan amount
- Combined Loan to Value
- Escrow waiver
- Lock period
- Cash out
All of these will either raise or lower the cost of your loan.
*Your neighbor may have had a high debt to income ratio whereas yours was low so that could have raised his interest rate even though you both may have the same credit rating.
Here is an example of what adjustments look like on a mortgage rate sheet
The word Agency means Fannie Mae and Freddie Mac. These are the companies aka “GSE’s” that buy the loan from your bank. They impose many of the adjustments you see and end up paying for.
The numbers to the right are what we call “pricing” adjustments, meaning the rate can remain the same but it will cost the customer more or less money to get it.
The numbers you see are in percentages. Example: .125 means a cost of .125% of the loan amount. A minus sign in front of the number means a credit, so -.125 means a credit back to the borrower of .125%.
Example:
$200,000 loan amount .125% would be $250 cost to the borrower and -.125 would be a credit of $250 to the borrower to get the quoted interest rate.
If you have a lot of these adjustments it will push the cost of the rate you are targeting higher or lower.
Lastly, you need to know that rates do not remain the same. They can and often do change throughout the day. It is not uncommon to have rates change more than once during a workday. This adds to the reasons why the rate advertised may not be what you get.
Click here to understand how rates change. Click here to contact me with any questions.
Where Does My Earnest Money Go?
March 28, 2010 by Nevin Williams · Leave a Comment
Hey, I gave my real estate agent a $5000 Earnest Money Deposit check… Where does that money go?
A basic and very obvious question that most First-Time home Buyers ask once their purchase contract gets accepted.
According to Wikipedia:
Earnest Money – an earnest payment (sometimes called earnest money or simply earnest, or alternatively a good-faith deposit) is a deposit towards the purchase of real estate or publicly tendered government contract made by a buyer or registered contractor to demonstrate that he/she is serious (earnest) about wanting to complete the purchase.
When a buyer makes an offer to buy residential real estate, he/she generally signs a contract and pays a sum acceptable to the seller by way of earnest money. The amount varies enormously, depending upon local custom and the state of the local market at the time of contract negotiations.
An Earnest Money Deposit (EMD) is simply held by a third-party escrow company according to the terms of the executed purchase contract.
For example, there may be a contingency period for appraisal, loan approval, property inspection or approval of HOA documents.
In most cases, the Earnest Money held by the escrow company is credited towards the home buyer’s down payment and/or closing costs.
*It’s important to keep in mind that the EMD may actually be cashed at the time escrow is opened, so make sure your funds are from the proper sources.
The Process:
- Earnest Money is submitted to an escrow company with the accepted purchase contract
- At the close of escrow, the EMD is credited towards the down payment and / or closing costs
- If there are no closing costs or down payment, the EMD is refunded back to the buyer
Who Doesn’t Get Your Earnest Money:
- Selling Real Estate Agent – A conflict of interest
- Sellers – Too risky
- Buying Agent – They shouldn’t have your money in their account
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Related Articles – Closing Process / Costs
What Does Title Insurance Protect Me From?
March 28, 2010 by Nevin Williams · Leave a Comment
By including title insurance when purchasing property, your title insurer takes on accountability for legal expenses to defend your property title, should it ever be challenged.
Many different occurrences can come into play to warrant the need for title insurance.
The title company responsible will then take on the legal expenses to defend the property for as long as you are in possession of an interest in the property under the title.
If the defense is not successful, you will be reimbursed for any loss of value of the property.
Common Things Title Insurance Covers:
1. UNDISCLOSED HEIRS, FORGED DEEDS, MORTGAGE, WILLS, RELEASES AND OTHER DOCUMENTS
2. FALSE IMPRISONMENT OF THE TRUE LAND OWNER
3. DEEDS BY MINORS
4. DOCUMENTS EXECUTED BY A REVOKED OR EXPIRED POWER OF ATTORNEY
5. PROBATE MATTERS
6. FRAUD
7. DEEDS AND WILLS BY PERSON OF UNSOUND MIND
8. CONVEYANCES BY UNDISCLOSED DIVORCED SPOUSES
9. RIGHTS OF DIVORCED PARTIES
10. ADVERSE POSSESSION
11. DEFECTIVE ACKNOWLEDGEMENTS DUE TO IMPROPER OR EXPIRED NOTARIZATION
12. FORFEITURES OF REAL PROPERTY DUE TO CRIMINAL ACTS
13. MISTAKES AND OMISSIONS RESULTING IN IMPROPER ABSTRACTING
14. ERRORS IN TAX RECORDS
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