1. Develop a Trust Relationship with your Lender
Lifetime Mortgage Strategy. Finding a lender who can assist you with your purchase should be an easy task. Finding a lender you TRUST is much more difficult. Mortgages are complicated and there are many strategies/options that you can leverage to place you into the correct loan. You will likely have more than one mortgage in your lifetime. You will likely have a variety of situations/conditions in which applying for a loan. Developing a lifetime relationship with your loan officer you trust will help you develop long-term strategies for such an important asset!
2. When can I lock?
You can lock in the interest rate any time - but only one time. Mortgage rates rise/fall like stock prices every day, so it is impossible to predict tomorrows interest rate. Global news events while you are sleeping can affect the tomorrows rates. Working with your loan officer to understand the current trends, upcoming news events and can help you implement an effective locking strategy. Locking at the absolute bottom of a rate cycle is only accomplished (with luck) by a small percentage of applicants. However, an effective strategy can help you lock very close to the bottom.
3. How is LO compensated?
As a loan officer, I want you to have the lowest interest rate! I have no other financial incentive. A loan officer is compensated based upon your LOAN AMOUNT NOT the interest rate. A negotiation for a better rate between a Loan Officer and client has largely be legislated out of the process by national laws.
In order to achieve the best rates:
- Time your lock as best as possible.
- Review different lender credit options with the rates.
- Consider different loan programs that meet your lifetime goals.
4. Refinance one ARM to ARM
If you have chosen a Fixed ARM loan, there is a period of time where your rate is fixed. At any point while your rate is fixed and rates are similar, a refinance to another Fixed ARM is a good idea. Many people extend the length of time that their rate is good for by refinancing into a new ARM loan.
Example: You have a rate of 3.50% and you in Year 3 of a 7 Year ARM. If today's 7 Year is at 3.50% (or better), it makes sense to do a Cost-Free refinance (i.e. pay no transactional costs). You extend the Fixed term another 7 Years. From the time you started, you will have achieved 10 Years at 3.50%.
This is a very good choice for many people as they do not anticipate needed the security of the fixed rate from years 11-30.
5. Eliminate FHA Insurance
FHA is a great program that allows you to finance a home with as little as 3.50% down payment. They also “charge” a mortgage insurance premium for that benefit. The easiest way to eliminate the FHA insurance is to refinance out of the FHA loan into a conventional loan.
6. Debt Consolidation
Mortgage Debt is “Good Debt” because it is tax deductible. If you need to consolidate debt from credit cards or other sources, a mortgage is a good avenue to do this. Your overall debt does not change. But, you are moving the debt to a tax advantaged mortgage. Often your credit scores will increase as a result of paying off consumer debt.
7. Act Quickly (see when to lock)
The mortgage process can take weeks to complete. There may be many requests for documentation, disclosure signings or decision on rate locks. Make sure you Act Quickly when these requests are made! Rates move quickly! Disclosures start mandated timelines, etc... Getting your loan application to the finish line will be much easier with quick action!