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Does it Matter Which Lender I Use?

Yes, and it matters more than you think. Buying a home will likely be the largest financial transaction of your life. Do you want to trust a random person on a website or at an 800 number, or someone you can call anytime (including evenings/weekends on their cell phone) or even meet with in person?

I am representing 2 buyers on transactions that close in the next few weeks. One is using a local mortgage broker and the other a large national lender. I also just had a transaction close with one of the big banks.

Here’s the main difference I have experienced with these different lenders – how well they communicate what’s going on with the loan. The local lender sends a weekly update on the loan; she also calls or emails relevant information as they come up. I was notified immediately when the appraisal came in (whereas the national lender never told us it was in or approved, we had to call repeatedly to learn that). With the national lender and the big bank, I had to reach out to both of them if I wanted any information. And it was hit and miss if a phone call or email was returned.

The most important question, of course, has to do with whether the lender can close the loan on time. While the big bank did close on time, it wasn’t because of their efforts. The bank wanted to extend closing; however, the buyer was adamant about the loan closing on time and between her and the escrow officer, they made it happen.

While I’m fairly confident the national lender will close on time, they are saying they wish they had more time (they already have 35 days). Local lenders are closing loans in as short a period as 10 days; 35 days should not be necessary.

You know the phrase “buy local,” let’s expand that to “mortgage local.” With the connection you make with the local mortgage officer (and with national lenders, there may be many different people you work with), you are more likely to have a smooth transaction. Plus, our local economy benefits when you mortgage local.

For a list of recommended lenders, contact me at jamie@jamieflaxman.com or 206-790-0081.

Mortgage Updates

Changes are coming to the mortgage arena.

Short Sales

If you had a short sale at least 2 years ago and have 20% down, you’ve been able to obtain a new mortgage. Fannie Mae is changing the rules (and Freddie Mac will likely follow) as of August 16th. Now you’ll need to wait 4 years after a short sale before you can obtain another mortgage. If you’re currently in the 2 year+ period and are buying a home, you’ll need to close by August 15th.

Interest Rates

As you may have heard the economy is improving. The jobs reports have been great. As a result, the Feds are leaning toward reducing bond purchases in October. When this happens, it’s likely interest rates will increase. Even 1/2 percentage increase in interest rates will affect your buying power.

For every $100,000 that is mortgaged at 4.25%, you will pay approximately $492/month in principal and interest. When mortgage rates increase half a percent to 4.75%, your monthly payment increases $30 to $522. On a $100,000 mortgage that’s not significant, but on a $500,000 mortgage, that’s an increase of $150/month.

Let’s take this further.

With prices on the rise and multiple offers the norm, that $500,000 budget you may have may instead now be $477,000. Let me explain. You have $100,000 for a down payment. Your lender has approved you for up to a $500,000 home ($400,000 mortgage) at 4.25% interest, with a monthly payment of around $1,968 in principal and interest.

Interest rates are now 4.75%, a half percent increase. Your lender only approves you for the same $1,968/month payment. You can now only afford a $477,000 mortgage (with the same $100,000 down payment). Your buying power has decreased $23,000 or 6%.

For every half a percent that interest rates increase, your buying power decreases by approximately 6%. Your $800,000 buying power becomes $762,000. If interest rates continue on an upward trend, your buying power will continue to decrease.

Please feel free to contact me at 206-790-0081 or jamie@jamieflaxman.com for further explanation.

First Time Home Buyer Class

Are you considering purchasing your first piece of real estate? Whether it be a single family home, townhouse, or condo, this buyer class may be for you.

The class will go in depth on both the buying process and on how to obtain a mortgage. You will also learn about down payment assistance programs, where if you earn less than $97,000 per year you may be eligible for no-interest, no monthly payment loans from the state. This course meets the requirement for Washington State Housing Finance Commission down payment assistance programs, including the Mortgage Credit Certificate (MCC) program. The course instructed by Ryan Niles from Cornerstone Home Lending and me.

Two classes are scheduled this summer: Sunday, July 27th and Sunday August 24th. Both classes will run from 10am-3pm and will be in the Wallingford neighborhood.

The course is free and there is no obligation to use our services. We ask that you bring a sack lunch. Please sign-up in advance by contacting me at jamie@jamieflaxman.com or 206/790-0081. For more information on down payment assistance programs, please go to the Washington State Housing Finance Commission website.

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