By Alan Rosenbaum, CEO/Founder GuardHill Financial Corporation
In my 23 years at the helm of GuardHill Financial Corp., I am grateful to have been able to, and continue to, steer clients time after time in a direction that most benefits them and makes the most sense for their personal circumstances. Homeowners and buyers should consider their options carefully before choosing a mortgage product – make sure that product benefits you more than the bank.
30Year Fixed Rate Mortgages vs. Alternatives
Have you noticed that many banks have been pushing fixed rate mortgages? The reason is, the interest rate the bank collects on a 30 year is much higher than on a 5/1 ARM or a 10/1 ARM. For most homeowners, 30 year fixed rate mortgages are unnecessary because homeowners do not hold their mortgages for more than 5 to 7 years due to refinancing, selling or paying off early. The banks benefit for 5-10 years knowing that the odds are heavily in the banks’ favor.
For the protection of the borrower, mid-term and long-term ARMs have caps. There are caps after the initial period and each year after that, as well as a lifetime cap which reduces the exposure of the change.
Even if rates increase after the initial change, homeowners are usually prepared for the change, and they realize that it was better to save the money in the early stages, when they needed the cash more and their incomes were less. If buyers are concerned that their future income will be less, and that they will not satisfy the mortgage through refinancing or selling, then they should focus on a higher cost fixed rate.
Previously Rejected Mortgage Applicants Should Try Again
While we are evolving with the spring towards more of a purchaser’s market, many haven’t considered the opportunities that have been right in front of them these past couple of months.
Now is the time to get back into the market. Rates are still near the bottom and homeowners should take advantage by buying their new home now or refinancing their existing home before rates move higher again (which they will). When rates drop, they move slowly. When they rise, they move very quickly, so it is wise and prudent to lock in now.
Over the last 7 years, mortgage applicants were being rejected in record numbers. Some reasons were low appraisals, under 720 Fico scores, volatile income; etc. Also, numerous condos were being rejected because of investor concentration, insufficient reserves, expiring flood insurance; etc.
Over the last year, mortgage specialists have been more successful in securing great financing terms for these previously denied applicants. Portfolio lenders are back on the scene lending pragmatically.
Choose Your Mortgage Specialist Wisely
Realtors and homebuyers need mortgage professionals who can assist them in getting the tough deals done. When it comes to condos, foreign buyers and investors, mortgage specialists have the upper hand in being able to draw from a multiplicity of lending sources and generate competitive fast approvals. Qualifying the borrower and the building (condo or co-op) are the true first objectives.
Many traditional lenders cannot lend in a number of well-known and established buildings, much less the newer, smaller and less capitalized ones. Buildings are commonly rejected by banks because of a lack of reserves, high investor concentration, litigation, etc. A mortgage specialist can identify these issues up front and resolve them to avoid anxiety, embarrassment, or the loss of the deal.
In the past few years, so many people couldn’t refinance despite historical lows, because the appraisal on their homes was low, they had a questionable credit score or their building was not approved by a bank. Today, rates are still at all-time lows. You might have been rejected a year or two years ago, but today you can be approved. Rejections aren’t set in stone; with the right mortgage specialist, homeowners are more comfortable coming back into the marketplace. It should be every mortgage professional’s mission to help their customers which will promote a healthier economy for all.