Senor Schmutzig
Footballguy
Congrats @Chadstroma. You have been a wealth of knowledge for myself and anyone else that happens to stumble across this post. You are always quick to respond and help out anyone who asks. Much appreciated.
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Mortgage Rates (5 Viewers)
- Thread starter MechEng
- Start date
Congrats @Chadstroma. You have been a wealth of knowledge for myself and anyone else that happens to stumble across this post. You are always quick to respond and help out anyone who asks. Much appreciated.
Chadstroma
Footballguy
Thank you bud. This reminds me of something I have been dwelling on this morning. I have always approached my banking/financial services/lending career with the idea that I would just help people and the money would figure itself out. Giving my knowledge and advice freely has always been a part of that regardless of whether it benefited me or not. I have "missed" out on a lot of money over time by telling people to do something else that was in their best interest over my own monetary interests. I could be a wealthier man in bank accounts but I would feel poorer in spirit. The good thing is that over time I have accidentally found out that it pays itself back.
Two days ago I talked to a vet who started working with Rocket until a broker he is friends with (but not licensed in IL) told him to talk to me. We chatted and eventually had to explain that I am in a sort of limbo period where I have to wait for my licensing to move over to the new brokerage. I told him if he needed to get going now that I could refer it to one of my colleagues but if he wanted to wait a couple of days then I could assist. He asked me how it would impact my commission and I told him that I appreciated him asking and that it would be a big difference to me. He decided to wait. Now, as long as I deliver as a competent MLO, I likely have a customer for life that will refer people to me essentially because I was 'caught' thinking about his best interest and not mine.
I have found over the years (accidentally really) when you are honest, genuine, seek the best interest of the people you interact with and know what are you are doing it develops strong trust. I have to admit that I am proud to be the FBG for mortgage stuff whether it benefits me (I have helped more than a couple FBG's with loans) or not (I have connected many more FBG's to other brokers and never saw a penny from it) or just giving information and knowledge.
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Senor Schmutzig
Footballguy
A long time ago, a mentor of mine told me that people buy from people they know, like AND trust. It doesn't have to be all three, but when it is, it tends to work in the best interest of both parties.
Desert_Power
Footballguy
Awesome stuff Chad!
Chadstroma
Footballguy
Well... I got the third one down... just got to work on the other two.
Zegras11
Footballguy
In the second quarter of this year, 48.1% of mortgaged residential properties were deemed equity-rich, according to a recent US Home Equity & Underwater Report. This means that the combined estimated amount of loan balances secured by these properties was no more than half of their estimated market values. In Q1 of 2022, that number was 44.9% and 34.4% in Q2 of 2021.
This Q2 increase means virtually half of all mortgage payers are in the equity-rich territory – the highest percentage on record. At the same time, just 2.9% of mortgaged homes were considered seriously underwater in Q2 of this year – the lowest percentage recorded. The second quarter improvement in home equity was due mainly to soaring home values. And even though home price appreciation seems to be cooling because of higher interest rates, it's expected that homeowners will continue to build their equity for the remainder of the year
This Q2 increase means virtually half of all mortgage payers are in the equity-rich territory – the highest percentage on record. At the same time, just 2.9% of mortgaged homes were considered seriously underwater in Q2 of this year – the lowest percentage recorded. The second quarter improvement in home equity was due mainly to soaring home values. And even though home price appreciation seems to be cooling because of higher interest rates, it's expected that homeowners will continue to build their equity for the remainder of the year
Chadstroma
Footballguy
It is another point of data that tells me that we will not see a drop in values like some predict (some hope for). People are just so focused on 2008 but have no clue on the fundamental and massive differences. The quality of lending, the demand/supply, the equity most households have, and more.
We are seeing price drops and those running around like Chicken Little think that is proof that they are right. However, there are two things... first, it is seasonally the time values drop and houses stay on market longer. Yes, we are seeing this more than usual but that comes to the second point which is the analogy I use is this "When you are driving 180 mph and slow down to 90 mph, that is a huge decrease in speed.... but you are still speeding!" we are far from seeing home values declining anywhere near what we saw in 2008.
Chadstroma
Footballguy
Copy and paste from my Linkedin post today about 2-1 Buydown....
A big recent push that we have seen in mortgages is the 2-1 Buydown. The 2-1 Buydown is a temporary reduction of the interest rate in the first two years of the loan in exchange for a fee or points paid upfront paid by seller.
As interest rates rise and retail mortgage lenders struggle to stay relevant compared to brokers, this seems to be the next big marketing push. There is nothing wrong with a 2-1 Buydown and brokers can use them as well. However, make sure to review all your loan options and even more importantly, work with a mortgage broker as a par rate for a mortgage broker may be similar to the 2-1 Buydown rate of a retail lender.
Finally, keep in mind that expectations are that rates will be significantly lower than they currently are in the year or two which would allow for a refinance.
Overall, spending money up front may not be a good solution. It is important to work with a broker that can walk you through all your options and not just be sold a trendy marketing gimmick in order to hide high rates/cost.
A big recent push that we have seen in mortgages is the 2-1 Buydown. The 2-1 Buydown is a temporary reduction of the interest rate in the first two years of the loan in exchange for a fee or points paid upfront paid by seller.
As interest rates rise and retail mortgage lenders struggle to stay relevant compared to brokers, this seems to be the next big marketing push. There is nothing wrong with a 2-1 Buydown and brokers can use them as well. However, make sure to review all your loan options and even more importantly, work with a mortgage broker as a par rate for a mortgage broker may be similar to the 2-1 Buydown rate of a retail lender.
Finally, keep in mind that expectations are that rates will be significantly lower than they currently are in the year or two which would allow for a refinance.
Overall, spending money up front may not be a good solution. It is important to work with a broker that can walk you through all your options and not just be sold a trendy marketing gimmick in order to hide high rates/cost.
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fruity pebbles
Footballguy
What’s the cost and how far do you usually buy down?
Chadstroma
Footballguy
It is arbitrary and depends on the lender. The first year is the lowest, second year goes up a bit and then third year plus is the regular rate. The big push on it from retail is that it kinda hides the poopy rates they have and it is great marketing to realtors as a way to avoid price drops (lower commission to realtor) by taking sellers concessions and using those to pay. With the high expectation of significantly lower rates in the next 1-2 years, I think for most people it isn't something to consider. Take the price reduction or money towards costs and look towards a refi later.
Chadstroma
Footballguy
Posting in my FB business page and linkedin tomorrow....
Occupancy Fraud: The Most Common Mortgage Fraud
Occupancy fraud is simply when a borrower states that they will occupy the property that they are buying as their primary residence but actually will not live there. The borrower states this at application and signs documentation at closing confirming that it will be their primary residence. The general requirement is to occupy the property within 60 days and live there for 12 months.
The reason people may attempt occupancy fraud is that there are better rates, lower down payment requirements and generally more favorable conditions for primary residences than there are for second homes and rental properties.
There are a number of potential consequences for committing occupancy fraud. The mortgage lender could demand the mortgage is paid in full or foreclose on the property. It is possible for the FBI to investigate and receive fines and even imprisonment. Further, getting legitimate mortgage loans in the future may prove to be difficult.
Real estate agents and mortgage loan officers that aid or simply know about the occupancy fraud and do nothing to prevent it can face revocation of their licenses for life and like those committing fraud they could face fines and prison time.
There may be some exceptions depending on the loan and circumstances such as with VA where a spouse occupies the property while the service member is elsewhere or before the 12 month period is up getting an out of state job promotion and needing to move. The initial intent is an important factor but things can happen in life that change. If there is a legitimate change to your life circumstances after living in a property then it is important to work with your lender to move forward the right way.
A multi unit property may be purchases as an owner occupied so long as one of the units is actually occupied by the borrower as their primary residence.
There are some exceptions that allow a property as a owner occupied purchase but the borrower does not live in the property. For example, if a parent or legal guardian wants to buy a home for their child as owner occupied and not live there as long as the child can not work or does not have sufficient income to qualify for a mortgage on their own. This also works for a child who wants to buy a home for their parent as long as that parent can not work or does not have sufficient income.
Occupancy Fraud: The Most Common Mortgage Fraud
Occupancy fraud is simply when a borrower states that they will occupy the property that they are buying as their primary residence but actually will not live there. The borrower states this at application and signs documentation at closing confirming that it will be their primary residence. The general requirement is to occupy the property within 60 days and live there for 12 months.
The reason people may attempt occupancy fraud is that there are better rates, lower down payment requirements and generally more favorable conditions for primary residences than there are for second homes and rental properties.
There are a number of potential consequences for committing occupancy fraud. The mortgage lender could demand the mortgage is paid in full or foreclose on the property. It is possible for the FBI to investigate and receive fines and even imprisonment. Further, getting legitimate mortgage loans in the future may prove to be difficult.
Real estate agents and mortgage loan officers that aid or simply know about the occupancy fraud and do nothing to prevent it can face revocation of their licenses for life and like those committing fraud they could face fines and prison time.
There may be some exceptions depending on the loan and circumstances such as with VA where a spouse occupies the property while the service member is elsewhere or before the 12 month period is up getting an out of state job promotion and needing to move. The initial intent is an important factor but things can happen in life that change. If there is a legitimate change to your life circumstances after living in a property then it is important to work with your lender to move forward the right way.
A multi unit property may be purchases as an owner occupied so long as one of the units is actually occupied by the borrower as their primary residence.
There are some exceptions that allow a property as a owner occupied purchase but the borrower does not live in the property. For example, if a parent or legal guardian wants to buy a home for their child as owner occupied and not live there as long as the child can not work or does not have sufficient income to qualify for a mortgage on their own. This also works for a child who wants to buy a home for their parent as long as that parent can not work or does not have sufficient income.
Senor Schmutzig
Footballguy
Chadstroma
Footballguy
A few headwinds are pushing rates up in the recent week and they highlight companies issuing debt and good economic data. It has been a nasty week or so for rates.
Chadstroma
Footballguy
Rates have continued the upward trend.
Looked at my current loan (refi’d to 15 year almost a couple years ago) and while the monthly payment isn’t crazy different, the total interest paid is a lot different. The monthly payment is 33% which might be a lot dollar wise in some cases, but 25% LTV my case makes it manageable. The total interest paid over the 15 years is triple, which makes sense based on the rate but it’s basically the same as what I paid for3 of 4 years for my first son’s college. One half payment away from done for him. Two more, 
.
.
-OZ-
Footballguy
It’s almost funny looking at the first few posts of this thread. 5.5% was an historically great rate back then.
Chadstroma
Footballguy
My first house the mortgage was 6.375% and that was a great rate then.It’s almost funny looking at the first few posts of this thread. 5.5% was an historically great rate back then.
I have a FB group that is centered on improving credit scores but also has a focus on buying homes as most are there for that and well that happens to be another specialty of mine. I keep touchiing on how you don't not buy a home because of rates. If you can qualify for the home you want then buy it. Interest rates will come back down again and then you can refinance and get the savings.
Once the Fed is successful in getting inflation in control which means they successfully killed the economy, then they will switch hard to the other side to revive the economy and rates will come back down. Perhaps even lower than they were before.
Orange&Blue
Footballguy
My first house the mortgage was 6.375% and that was a great rate then.It’s almost funny looking at the first few posts of this thread. 5.5% was an historically great rate back then.
I have a FB group that is centered on improving credit scores but also has a focus on buying homes as most are there for that and well that happens to be another specialty of mine. I keep touchiing on how you don't not buy a home because of rates. If you can qualify for the home you want then buy it. Interest rates will come back down again and then you can refinance and get the savings.
Once the Fed is successful in getting inflation in control which means they successfully killed the economy, then they will switch hard to the other side to revive the economy and rates will come back down. Perhaps even lower than they were before.
I would be concerned about that happening if you are anticipating that happening in less than 5 years. Maybe eventually, but not for a while.
Chadstroma
Footballguy
I always tell everyone that I don't have a crystal ball so I could be wrong. I also say that how much and how long is something I am reluctant on. I intake a lot of information regarding rates and I have a high level of confidence that rates will be significantly lower than they are right now within a 2 year time frame.My first house the mortgage was 6.375% and that was a great rate then.It’s almost funny looking at the first few posts of this thread. 5.5% was an historically great rate back then.
I have a FB group that is centered on improving credit scores but also has a focus on buying homes as most are there for that and well that happens to be another specialty of mine. I keep touchiing on how you don't not buy a home because of rates. If you can qualify for the home you want then buy it. Interest rates will come back down again and then you can refinance and get the savings.
Once the Fed is successful in getting inflation in control which means they successfully killed the economy, then they will switch hard to the other side to revive the economy and rates will come back down. Perhaps even lower than they were before.
I would be concerned about that happening if you are anticipating that happening in less than 5 years. Maybe eventually, but not for a while.
Orange&Blue
Footballguy
Hope you are right.I always tell everyone that I don't have a crystal ball so I could be wrong. I also say that how much and how long is something I am reluctant on. I intake a lot of information regarding rates and I have a high level of confidence that rates will be significantly lower than they are right now within a 2 year time frame.My first house the mortgage was 6.375% and that was a great rate then.It’s almost funny looking at the first few posts of this thread. 5.5% was an historically great rate back then.
I have a FB group that is centered on improving credit scores but also has a focus on buying homes as most are there for that and well that happens to be another specialty of mine. I keep touchiing on how you don't not buy a home because of rates. If you can qualify for the home you want then buy it. Interest rates will come back down again and then you can refinance and get the savings.
Once the Fed is successful in getting inflation in control which means they successfully killed the economy, then they will switch hard to the other side to revive the economy and rates will come back down. Perhaps even lower than they were before.
I would be concerned about that happening if you are anticipating that happening in less than 5 years. Maybe eventually, but not for a while.
-OZ-
Footballguy
That last part seems unlikely imo, Granted I’m an amateur. Do you really see the rates approaching 2% for a 30 in the somewhat near future?My first house the mortgage was 6.375% and that was a great rate then.It’s almost funny looking at the first few posts of this thread. 5.5% was an historically great rate back then.
I have a FB group that is centered on improving credit scores but also has a focus on buying homes as most are there for that and well that happens to be another specialty of mine. I keep touchiing on how you don't not buy a home because of rates. If you can qualify for the home you want then buy it. Interest rates will come back down again and then you can refinance and get the savings.
Once the Fed is successful in getting inflation in control which means they successfully killed the economy, then they will switch hard to the other side to revive the economy and rates will come back down. Perhaps even lower than they were before.
Chadstroma
Footballguy
I am not betting my money on that but one of the guys that I listen to the most about the future of rates had expectations of this but to be fair, I have not heard touch base on this for a bit so it is possible he had adjusted his forecasts.That last part seems unlikely imo, Granted I’m an amateur. Do you really see the rates approaching 2% for a 30 in the somewhat near future?My first house the mortgage was 6.375% and that was a great rate then.It’s almost funny looking at the first few posts of this thread. 5.5% was an historically great rate back then.
I have a FB group that is centered on improving credit scores but also has a focus on buying homes as most are there for that and well that happens to be another specialty of mine. I keep touchiing on how you don't not buy a home because of rates. If you can qualify for the home you want then buy it. Interest rates will come back down again and then you can refinance and get the savings.
Once the Fed is successful in getting inflation in control which means they successfully killed the economy, then they will switch hard to the other side to revive the economy and rates will come back down. Perhaps even lower than they were before.
Significantly lower in the next couple of years enough to refinance? I am extremely confident of that.
Chadstroma
Footballguy
Rates are just getting clobbered today. Nasty ugly. I think I will take the rest of the day off.
Rustoleum
Footballguy
Sorry man, but thanks again for referring me to a guy for my state. Wasn’t the best time to refi, but circumstances dictated it (divorce) and I‘m grateful it was quick, a better rate than. I hoped for, and super smooth from end to end. Got it done before this latest round of hikes which is really making me feel better.
Keep treating everyone with the honesty and customer service you keep showing in here and I’m confident you will weather any industry downturns.
Keep treating everyone with the honesty and customer service you keep showing in here and I’m confident you will weather any industry downturns.
Chadstroma
Footballguy
Thank you very much for the very kind words. I very much appreciate it. I am done working for banks and getting my hand slapped for doing the best for the consumer so if I am doing mortgages it is broker or bust. I love being at UMortgage and we are growing with hiring while everyone else is cutting staff.
Nate is a good one for sure (and a bit of a Tik Tok star too). UMortgage is focused on building relationships, getting things done quickly and easily while delivering hard to beat rate/cost.
Yea... not the best timing for rates but you can't exactly time a divorce for mortgage rates. If the plan is to be there a while, you likely will have a chance to get that down a bit on the not too distant future.
Chadstroma
Footballguy
UWM’s Mat Ishbia on future of the broker channel
At AIME Fuse, Ishbia said "This is a market for winners"October 1, 2022, 9:18 pm By Flávia Furlan Nunes
What do the next 15-18 months look like for the broker channel? According to United Wholesale Mortgage (UWM) CEO Mat Ishbia, who rallied brokers at the Association of Independent Mortgage Experts (AIME) Fuse conference in Las Vegas on Saturday, the next year and a half will be a proving ground that will level set the market for brokers, and only some will come out winners.
In an interview with HousingWire after his presentation, Ishbia provided more context to his comments, especially on UWM’s aggressive pricing strategy and its impact on mortgage lenders’ decision to leave the wholesale channel.
UWM in June launched the ‘Game On’ pricing initiative, slashing prices across all loans by 50 to 100 basis points.
“Game On pricing has no impact on where people exit the market. Their business model was not good, they’re not committed to the broker channel, and that’s fine,” Ishbia said.
He added: “The broker community is stronger than ever. So, it’s got nothing to do with that. That’s just the business model that isn’t in a great position. And so they make those decisions.”
The wholesale space, like other channels, has been affected by surging mortgage rates and shrinking origination volumes. But stronger competition has made rivals exit or plan to exit the channel to focus on more profitable business divisions.
On the list are rivals such as loanDepot, Mountain West Financial, AmeriSave, Point Mortgage Corporation, Stearns Wholesale (owned by Guaranteed Rate) and Finance of America’s forward wholesale business.
The latest victim is American Neighborhood Mortgage Acceptance Company LLC (doing business as AnnieMac). The company posted on its website last week, “As a result of worsening market conditions, it has made the difficult decision to cease wholesale operations effective October 31, 2022. “The company suspended new loan submissions at 5:00 PM EST on September 27, but it will honor all existing policies and procedures.
Market share
According to Ishbia, lenders leaving the space have no impact on his forecast for the wholesale channel to achieve 33% market share by 2026. AIME estimates that the wholesale channel currently has 23% market share.Meanwhile, an Inside Mortgage Finance’s (IMF) analysis of first-lien mortgage originations shows the broker channel accounted for just under 15% marketshare from April to June, with retail at 61% and correspondent at 25%. The data shows that brokers originated $94 billion in the second quarter, down 16% from the first quarter.
“All those lenders have no impact on it (marketshare) at all,” Ishbia said. “As long as you have lenders out there, brokers are fine. These lenders have zero impact on the brokerage, and we will hit all those goals.”
During his session at the AIME event, Ishbia said that his “Game On” pricing strategy is an investment that will continue moving forward amid its mindset to grow its business.
“It’s not designed for competitors to like me,” he said. “I’m not trying to survive, I’m trying to thrive.”
Ishbia also unveiled three initiatives during his presentation, including an alternative to the traditional lender title process, called TRAC. The other two initiatives are UClose 3.0, a platform that will allow brokers to choose from three closing options, and Safe Check, a soft-pull credit check to get an appraisal waiver pre-check before submitting their loan without initiating trigger leads to brokers’ competitors.
ActionJackson68
Footballguy
I've got to think that construction companies will be taking it on the chin for the foreseeable future as the cheap re-finance cash-out money dries up. I imagine this will accelerate the worsening of the economy.
Maybe after they work off their 2-3 year backlog.
Chadstroma
Footballguy
Being your handle is KGB and being what Russia is doing now.... I feel like this could be a trap
but then again, someone could abruptly pull up in a non descript van with the side door flying open and a guy in all black wearing a mask could say "home loan borrowers are inside" and I would say ok and jump in. Sending a PM. 
Chadstroma
Footballguy
They have been living high on the hog for the last few years. There is still a lot of pent up demand and home builders are still building because again, there is still much demand over supply. I have several projects that I started to get price quotes on and then gave up on because the prices quoted and the time frame of starting work was all just so silly. The economy is in a recession... the only question for me is how long and how deep will it be while the Fed fights inflation before they feel like they go it under control and flip switch back the other way and do things to spur the economy which will drive rates down.
I posted this on my Linkedin profile which generated a decent back and forth with another fellow : https://www.linkedin.com/feed/update/urn:li:activity:6982773885909831680/
Housing supply will not significantly outpace demand in the coming decade, despite a significant number of baby boomer homes coming onto the market every year, said Gary Engelhardt, the author of a recent report from the MBA's Research Institute for Housing America.
Baby boomers downsizing, moving to other homes or passing away account 4.4 million existing homes for sale annually, which is closely matched by demand from a growing population and younger-generation households, meaning there is minimal excess, according to the report.
"Based purely on changing demographics and population growth, there is enough homebuyer demand to meet most of the existing inventory that will come onto the market over the next decade and beyond from older homeowners," said Engelhardt.
In a recent survey of professionals, a majority of respondents consider that monthly inventory levels will average 1.5 million homes by the end of 2024, returning to supply levels not seen since 2019.
While 51% of survey respondents believe that this level will be reached by 2025, others are less optimistic. Of those surveyed, 18% do not anticipate a return to 2019 supply level until 2030 at the earliest, boosted by Gen Z homebuyers entering the market.
What does all this mean? It means that you should not expect a market crash. The vast majority of data points to strong demand and not a lot of supply. That means housing prices are unlikely to fall significantly even with the headwinds of higher interest rates.
Chadstroma
Footballguy
Big announcement for credit changes that impact mortgage lending.
The FHFA, the government agency that oversees the companies that make up conventional mortgage loans, is now allowing them to use FICO 10T and Vantagscore 4.0 replacing the older classic FICO versions of 2,4 and 5. Along with this is that lenders will no longer be required to perform a trimerge (pulling all three credit bureaus) but only a bimerge (picking two of the three).
THIS WILL NOT HAPPEN OVERNIGHT. It is likely to take a couple of years before this change becomes the standard. This will also most likely mean that government backed mortgages will follow and adopt the same FICO 10T and Vantagescore 4.0 as well they have followed in the past.
There are some major differences with FICO 10T to the older FICO versions. The first major difference is that what the T stands for which is “trending”. I use to explain a credit inquiry as a screen shot of your credit movie. With FICO 10T, credit will be looked at as more like a clip of your movie taking a whole scene and using it to compile the score. The scene will be 24 months worth of your credit and will look at the trends of how you used credit over that period of time. It will also now have a memory of your credit utilization as well over that period.
Another major difference is that self-reported tradelines, such as rent and utilities, will be a factor to the credit scoring while they were excluded with the classic FICO 2, 4 and 5 versions currently used for mortgage applications.
FICO 10T also reduced the negative hit for medical collections versus non-medical collections and does not penalize for paid off collections.
Areas where FICO 10T will be tougher with are late payments and delinquencies. Also using a consolidation loan to pay off credit card balances may actually negatively affect credit while previously it would be beneficial if the credit utilization was high.
With authorized user accounts, the newer FICO scoring models have minimized or eliminated the benefits of ‘creditpiggybacking’ so these may not be as impactful with the new scoring.
As mentioned, this will take some time for changes to be made but if you are expecting to buy in the a time frame of a year or more you will want to keep this in mind and start working your credit towards the new models.
The FHFA, the government agency that oversees the companies that make up conventional mortgage loans, is now allowing them to use FICO 10T and Vantagscore 4.0 replacing the older classic FICO versions of 2,4 and 5. Along with this is that lenders will no longer be required to perform a trimerge (pulling all three credit bureaus) but only a bimerge (picking two of the three).
THIS WILL NOT HAPPEN OVERNIGHT. It is likely to take a couple of years before this change becomes the standard. This will also most likely mean that government backed mortgages will follow and adopt the same FICO 10T and Vantagescore 4.0 as well they have followed in the past.
There are some major differences with FICO 10T to the older FICO versions. The first major difference is that what the T stands for which is “trending”. I use to explain a credit inquiry as a screen shot of your credit movie. With FICO 10T, credit will be looked at as more like a clip of your movie taking a whole scene and using it to compile the score. The scene will be 24 months worth of your credit and will look at the trends of how you used credit over that period of time. It will also now have a memory of your credit utilization as well over that period.
Another major difference is that self-reported tradelines, such as rent and utilities, will be a factor to the credit scoring while they were excluded with the classic FICO 2, 4 and 5 versions currently used for mortgage applications.
FICO 10T also reduced the negative hit for medical collections versus non-medical collections and does not penalize for paid off collections.
Areas where FICO 10T will be tougher with are late payments and delinquencies. Also using a consolidation loan to pay off credit card balances may actually negatively affect credit while previously it would be beneficial if the credit utilization was high.
With authorized user accounts, the newer FICO scoring models have minimized or eliminated the benefits of ‘creditpiggybacking’ so these may not be as impactful with the new scoring.
As mentioned, this will take some time for changes to be made but if you are expecting to buy in the a time frame of a year or more you will want to keep this in mind and start working your credit towards the new models.
Chadstroma
Footballguy
HUGE drop in rates today. Pricing loans from yesterday to today with over 100 bps improvement.
Senor Schmutzig
Footballguy
@Chadstroma
Hey Chad, hope all is well with you and the family.
I have a question regarding HELOC. I own a home that we built a few years ago that is worth between $1.7m-$2m. For those of you wondering, I can only live here because we built it ourselves and prices have gone up considerably here in SoFla over the past two years. I couldn’t afford to buy my own house right now if I wanted to….but that’s a different story. I currently owe around $450k on it so conservatively, I have at least $1.2m in equity.
My wife and I may have the possibility of going through the buy and build process again only this time it would be as an investor/builder. We have done it once and it worked out pretty nicely, hence the equity we have in our home so we are thinking about the possibility of doing it again only this time we would sell it when complete versus moving in as our primary residence.
Realistically, what % of homes equity are banks willing to provide as a HELOC? I would like to have access to at least $500k of my current equity if possible to use to purchase the land. I would then get a construction loan to build. When complete, we would sell the house and pay back both loans. I looked at my credit union, and they max out their HELOC’s at $150k.
At 30k feet, it seems possible but I know there is more to the process so I’m just trying to figure out if this is even a possibility or a pipe dream.
EDIT - Just looked at my current mortgage company and they will provide a cash-out refinance which is what I absolutely DON’T want to do as I have a 30-year 2.625% mortgage on it. I’m not touching that.
I get it that this is probably not the best time to be getting a large loan due to interest rates but if I can clear $250k-$400k in profit for 18 months of making my money work for me, I may take that risk.
Hey Chad, hope all is well with you and the family.
I have a question regarding HELOC. I own a home that we built a few years ago that is worth between $1.7m-$2m. For those of you wondering, I can only live here because we built it ourselves and prices have gone up considerably here in SoFla over the past two years. I couldn’t afford to buy my own house right now if I wanted to….but that’s a different story. I currently owe around $450k on it so conservatively, I have at least $1.2m in equity.
My wife and I may have the possibility of going through the buy and build process again only this time it would be as an investor/builder. We have done it once and it worked out pretty nicely, hence the equity we have in our home so we are thinking about the possibility of doing it again only this time we would sell it when complete versus moving in as our primary residence.
Realistically, what % of homes equity are banks willing to provide as a HELOC? I would like to have access to at least $500k of my current equity if possible to use to purchase the land. I would then get a construction loan to build. When complete, we would sell the house and pay back both loans. I looked at my credit union, and they max out their HELOC’s at $150k.
At 30k feet, it seems possible but I know there is more to the process so I’m just trying to figure out if this is even a possibility or a pipe dream.
EDIT - Just looked at my current mortgage company and they will provide a cash-out refinance which is what I absolutely DON’T want to do as I have a 30-year 2.625% mortgage on it. I’m not touching that.
I get it that this is probably not the best time to be getting a large loan due to interest rates but if I can clear $250k-$400k in profit for 18 months of making my money work for me, I may take that risk.
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Senor Schmutzig
Footballguy
I’ll call them on Friday and see what they say. Been with them 30 years. Maybe they will shoot the lock off their wallet and pony up.
dkp993
Footballguy
What rate on your heloc? (If you don’t mind me asking)
Zegras11
Footballguy
it's adjustable. Think it's at 6 right now.
Chadstroma
Footballguy
Typically banks and CU's go up to 80% CLTV and there are often caps on the total line amounts available. Based on the numbers you gave the CLTV will not be an issue for you but line caps may be. Many banks and CU's tend to have a max line amount of $250K though this is totally up to the lender so you might find someone with a higher line available. Often, the max CLTV will be lowered for a higher line amount (CLTV = combined loan to value).
I don't do a ton of equity lending but I do do some. Essentially, when it is a vanilla HELOC it is best to shop some good CU's as your best option since they will beat out a broker on pricing all day long. The HELOCs I do are about filling a need the CU's and banks typically do not do such as lower credit scores, higher DTI, higher CLTV, higher line amount, closing faster, etc where getting the best rate isn't the goal. I think the highest line amount I have available to me is $500K.
My wife's bank has branches in FL. I don't recall what their max line amount is and she is out (had chemo infusion today) but I can ask tomorrow. They certainly would have a better rate than what I could do. Other than that, poke around at a few CU's and banks around you to see what they may do. It is certainly possible based on what you have shared here, it would really be mostly about getting the best terms for you.
-OZ-
Footballguy
I was surprised to see my mortgage get sold last month to M&T bank. They don’t appear to have an app like UWM does. The statement indicates auto draft will continue so this should be seamless.
I wonder how much of a loss UWM took here, the rate is almost 1/3 the current rate.
I wonder how much of a loss UWM took here, the rate is almost 1/3 the current rate.
Senor Schmutzig
Footballguy
Thanks for the response Chad and Happy Thanksgiving to you and yours. This is the time of year when having family around really counts.
Chadstroma
Footballguy
There was no loss. They didn't own the loan to begin with (Fannie Mae or Freddie Mac do if conventional). They sold the servicing rights to M&T (that is the first time I heard them buy). So... when UWM did the loan, in a couple of months the actual loan is sold to Fannie or Freddie and then Fannie/Freddie pays UWM to service the loan (deal with you and collect your payment). UWM decides that X amount of loans is too much for them to service and or want more immediate capital and or bet that the loans will payoff earlier than later and then sell them to another lender for whatever X amount of months worth.
Chadstroma
Footballguy
She wasn't 100% sure about FL but they go to $1 million in IL so likely same for FL. If you want, you can shoot me your contact info and then she can have someone from one of her branches reach out to you tomorrow and discuss to see if it works for you.
-OZ-
Footballguy
Thanks. VA loan, if that matters.
Chadstroma
Footballguy
It still gets sold to an aggregator who securitizes them into a MBS. Basically same thing just not Fannie or Freddie.
-OZ-
Footballguy
would it be worth checking M&T for HELOC rates or does that really matter? I’m probably just going to sell I bonds in March or use the M1 equity loan (5.75%, flexible) but we’re remodeling our bathroom in March.
Chadstroma
Footballguy
There is no advantage in the HELOC being at the lender with the mortgage. I have never seen any special pricing on the HELOC for having the mortgage with the lender and it won't make anything easier. When I worked for banks and had people tell me "we though it would be easier since you have our mortgage here too" I didn't correct them but just said "I would be happy to help."
I’m probably just going to sell I bonds in March or use the M1 equity loan (5.75%, flexible) but we’re remodeling our bathroom in March.
For your vanilla HELOC looking for the best deal, you want to hit up some CU's and community/small banks. These are typically where you will find the best deals on HELOCs
dkp993
Footballguy
Thanks Chad. For us uneducated, what is a good deal? I currently have a HELOC that was set up by the broker we used when we bought the home a little over a year ago but it’s not with the CU I bank with (and have for 20+ yrs). Im thinking of making a switch but don’t really know what to look for especially with a HELOC transfer. ThanksThere is no advantage in the HELOC being at the lender with the mortgage. I have never seen any special pricing on the HELOC for having the mortgage with the lender and it won't make anything easier. When I worked for banks and had people tell me "we though it would be easier since you have our mortgage here too" I didn't correct them but just said "I would be happy to help."
I’m probably just going to sell I bonds in March or use the M1 equity loan (5.75%, flexible) but we’re remodeling our bathroom in March.
For your vanilla HELOC looking for the best deal, you want to hit up some CU's and community/small banks. These are typically where you will find the best deals on HELOCs
Chadstroma
Footballguy
HELOCs are usually variable rate products (though there are products that allow you to fix rate in some way out there). The things you want to look at are the rate which is expressed as Prime + (I doubt you can find - these days) so, Prime +.25% would be whatever prime is plus .25%. Then what fees, so usually annual and any application/closing fees. Annual fees are pretty standard. Most loans will have minimal or no application/closing fees. The other thing you want to keep an eye on is the pre-payment penalty. In this case, that means if you close the line within a period of time you will be charged a fee. Most will have this especially if there were no application/closing fees.
You prob are looking for Prime + 0 as you best out there. And then look to get the least amount of fees.
Keep in mind, often they will give introductory rates which is great and all but don't compare an introductory rate to the real rate.
Pole Cat
Footballguy
Looking for some help. Wife and I are moving from San Diego to DC in July, and planning to put our house on the market in March (VA loan 2.25). Took a quick trip to DC this weekend and found a great house with an assumable VA loan at 2.6. We’d love to jump on it, but not sure if we can make it work before selling our current property. We have ~400k in equity in our current house. Thanks!
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