Image by Mad Paperie
Okay. It is officially fall. You can tell, right? It hasn't been over 100 in more than a week!
Even though the daily highs are still 10 degrees above normal, and it seems as though it will never cool off here in north Texas, you know that, eventually, it will. The seasons - such as they are - will cycle and temperatures will drop.

Another rising and falling phenomenon particularly important to the real estate market is interest rates. I recently had a conversation with Jeremy Woodson, a Loan Officer at Fort Worth's own Colonial National Mortgage, during which we talked about mortgages and interest rates. This month's issue is the first part of that conversation.

Buying and selling homes is a complicated process with lots of moving parts. It pays not only to have a good, experienced realtor (that would be me) on your side, but also to get sound advice from people like Jeremy, who know the ins and outs of the financial side.

Thanks for reading!

p.s. - please share Harmonious Home Adventures with friends and family (everyone deserves to love where they live!). Just hit the "forward" button on your email. They can sign up here:
Almost Everyone Needs a Mortgage

Very few people in the world of residential real estate are "cash buyers." Almost everyone looks to a bank or mortgage company to loan them the money to purchase their home. So, it's a good idea to know a little bit about mortgages and how they work.

The idea is simple: the lending institution provides you with some portion of the funds (usually at least 80% of the purchase price) needed to buy the property and you pay the money back to the lender, plus a premium, over time. How much that premium ends up being depends upon the interest rate - that is, the charge for using the institution's money - and how long you take to pay the money back.

Interest rates go up and down according to a whole universe of factors, most of which are way beyond the scope of this piece. The thing to remember is, the higher the rate and the longer the payback period, the more money will be going back to the lender.

Part 1 of Our Conversation with Jeremy Woodson - Mortgages & Interest Rates
Colonial is a home-grown Fort Worth institution providing mortgage, banking, and insurance services to the public.

To learn a little more about mortgages and how they work, Harmonious Home Adventures talked to Jeremy Woodson, a Senior Loan Officer with Colonial National Mortgage.

Jeremy has been in the Real Estate Finance industry for more than 15 years. While he has a particular focus on construction and renovation loans, he is well-versed in all aspects of the home loan universe and particularly enjoys assisting self-employed borrowers.

When you're signing on the line for the most significant loan most people ever take out, you want someone like Jeremy in your corner. He knows his stuff. More importantly, he believes that it's his job to share that knowledge with his customers in a way they can understand. Without that kind of assistance, you can't make good decisions.

We only have space to cover the beginning of our conversation but, if you find it informative and valuable, let me know, and we'll delve a bit deeper in future issues of Harmonious Home Adventures.

HHA: Hi, Jeremy! Thanks for taking the time to visit with us today.

JW: My pleasure. Thanks for asking me.

HHA: When people are in the market for a mortgage, what's the most important thing they need to look out for?

JW: I think the most important thing is having a mortgage lender that they can trust and someone they can communicate with. The mortgage products, themselves, are pretty similar from lender to lender, and as a general rule, most loans are sold to federally backed agencies like Fannie Mae and Freddie Mac. But being able to talk to someone that you trust is very important. That's why referrals are so important in our business. If someone you know has had a good experience with a lender and is willing to recommend them, that means a lot.

HHA: Why is it significant that agencies like Fannie Mae and Freddie Mac are involved in the process?

JW: The first thing people usually are concerned about when they're shopping mortgages is the interest rate they'll be charged. These federal agencies purchase most of the mortgages written, so they essentially set the rates for the different products. That means everyone will be offering pretty much the same rates. If the products are the same, customer service becomes the most important aspect.

HHA: And what's the most crucial consideration when it comes to customer service?

JW: You can run into a lot of challenges applying for and obtaining a mortgage, from credit scores to documentation to title problems and any number of others. Your loan officer needs to be willing to run toward the problems and meet them head-on, rather than run away from them.

HHA: So, what's one of the most significant factors that you consider in recommending a particular type of mortgage to a client?

JW: I think folks need to make an honest assessment about how long they intend to stay in the home. If they are confident that this is their "forever home," then a long-term fixed-rate mortgage probably makes the most sense. If, however, they know that they'll be moving in a few years, whether up-sizing or downsizing or moving to a new city, something like an ARM or adjustable-rate mortgage might be a better choice.

HHA: And by "adjustable rate," you're talking about the interest rate, right?

JW: Yes. As a general proposition, the longer the period of the loan, the higher the interest rate. That's because you're tying up the bank's money so that it's not available for other investments. The longer you keep it out of circulation, so to speak, the more they're going to charge you for doing so.

HHA: So, what kind of time are we talking about? What is the typical length of a mortgage?

JW: Mortgages come in all different lengths, but the ones we typically talk about are 30 years, 20 years, 15, years, and 10 years. A "fixed-rate" mortgage means that the same rate of interest will apply to the loan over its entire life. An adjustable-rate mortgage means that, after some period, the rate will be adjusted to whatever the "going" rate is at the time of the change.

HHA: Can you give us some real-life examples?

JW: Sure. As of today, here at Colonial, the interest rates for fixed mortgages are: 30 years - 3.875%; 20 years - 3.375%; 15 years - 3.5%; 10 years - 3%. Also as of today, you can get a 30 year, 10/1 ARM for 3%.

HHA: What does that mean - 30 year 10/1 ARM?

JW: It means that the length of the loan is 30 years, which normally would be 3.875%, but for the 1st 10 years, you'll pay interest at only 3%. That results in roughly $100 difference in your monthly payments on a $200,000 mortgage. You can see that, if you know you're not going to stay in the house for more than 10 years, the ARM will improve your cash flow situation significantly. And all of that is with no points, by the way.

HHA: Points? What are points, and what do they have to do with anything?

JW: Points are the up-front cost of the loan. When you go on the Internet and see loans advertised for these fantastic rates, generally the rates are so low because the lender is charging points - sometimes 2 or 2 and a half percent of the loan - as up-front costs. So, on that $200,000 mortgage we were talking about, you might be able to buy down the rate by paying 2 points, or $4,000, cash to the lender.

HHA: So, a buyer needs to be careful about those offers.

JW: Right. And that's just one of many ways a trusted loan officer can help.

To be continued ...

That's where we'll pick up the next time we turn to our conversation with Jeremy. There is so much more to cover on this subject, but it's one of the most important things you'll deal with on the way to loving where you live!

Speaking of loving where you live: a few years ago, I had the honor of helping some dear friends find a new home. It required some vision and creativity, which both of them have in abundance. The result was featured in Curbed this month. Please take a look HERE.

I'd be honored to help you, too!

Debra’s experience in home renovation, staging, styling, and redesign sets her apart from the crowd in the Fort Worth area real estate market.

  • Creativity to re-imagine existing spaces for broader appeal.
  • Vision to see opportunities where others see problems.
  • Insight to know what buyers are looking for.

Debra doesn't just listen - she empathizes.
She matches buyers to spaces.

Debra doesn’t just sell property - she maximizes potential.
She helps her clients find harmony in their lives.

You can - and should - love where you live!
Share Harmonious Home Adventures!
Visit Debra on Social Media

Texas law requires all license holders to give the following information about brokerage services to prospective clients:

Click on the above link for the full document
Copyright © 2019 by Debra Barrett - All Rights Reserved