To learn a little more about mortgages and how they work,
Harmonious Home Adventures
, 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!
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
I'd be honored to help you, too!