Mortgage Info

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INDEX	CURRENT	PREVIOUS
11th District COFI	1.469%	1.484%
1 Year Libor	0.780%	0.790%
MTA Index	0.295%	0.312%
Prime Rate	3.250%	3.250%

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FULL DOCUMENTS

90% < $417,000
85% to $729,750 SFR Only
80% to $1,500,000
70% to $3,500,000
60% to $6,000,000
*FHA Guidelines 96.5% $729,000 (1-2 units)
*LTV Guidelines subject to change

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OFFER/COUNTER OFFER

Jumbo Fixed Rate not to exceed 7.000%
Jumbo ARM Rate not to exceed 6.500%
 

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Most frequently asked mortgage questions:

1. What is a rate lock? -- A rate lock is an agreement between a borrower and a lending institution where the lending institution guarantees a certain interest rate will be used in the promissory note between the borrower and lender. The lending institution is promising if the borrower meets the lender’s criteria for obtaining a certain type of loan, then a fixed rate of interest, as specified in a written interest rate lock certificate delivered from the lender, will apply to the loan. The interest rate lock is only good for a limited period of time, which means the loan being processed must be ready to fund before the time period expires in the lock.

2. How large of a down payment do I need? The answer to this question depends on the price range of the homes you are shopping for. If the home is under the maximum dollar amount that FHA will guarantee for a specific geographic area, then loans are available with as little as 3.5% down payment. Currently FHA will only insure loans up to $729,750 in the Los Angeles County area. Once the loan moves above this key threshold then a home buyer will have to put more money down to buy a home. A good rule of thumb is a buyer will have to put down 20% to purchase a house when the loan amount exceeds $729,750.

3. How expensive of a home/mortgage can I afford? The quick answer is, you can afford what your income will allow you to afford. Mortgage loans used for the purpose of purchasing a residential one to four unit properties use what is called a DTI ratio to underwrite the loan. DTI is Debt to Income ratio. Most lenders require a DTI ratio of 45% or less. This means your total fixed debt payments must not exceed 45% of a borrower adjusted gross income.

4. What is LTV? LTV is “loan to value”. LTV is a ratio that is calculated by taking the mortgage loan amount and dividing it by the value of the property. Lending institutions set forth guidelines that disclose the maximum LTV they are willing to lend under a certain loan product. It is important to know the LTV required for a mortgage product offered by a lender. Knowing the LTV allows you to calculate the required cash down payment to purchase a house at a given price.

5. What is a Good Faith Estimate and how does it help me? A GFE is a standardized federal form that discloses a total of all fees charged to a borrower in a real estate transaction that contains a mortgage loan. The GFE has not only mortgage lender fees, but also title fees, escrow fees, and transfer tax fees. The current GFE form mandates that all real estate transaction fees including fees a mortgage lender charges be disclosed on the form. On a refinance transaction, the GFE only discloses fees that are charged to a borrower solely for the purpose of refinancing the mortgage loan. On a purchase transaction, the GFE contains all fees related to the real estate transaction in addition to lender fees.

6. How does the rate of interest determine the amount of mortgage loan I can borrower? The higher the interest rate the higher the monthly payment will be. The higher the payment is, the more income you need to afford the payment. When a lender pre underwrites a loan, a borrower will often ask how much they can afford to borrow. In order to answer that question, a lender must determine the amount of monthly income a borrower makes. Once the income is determined, a lender can back into the maximum payment that a borrower can afford. Once the maximum payment is determined, a lender can back into the maximum loan amount. The maximum loan amount is a function of the interest rate used. Example, if the maximum payment is $2,000 per month, then a 6% interest rate allows a maximum loan of $333,583. At a 5% interest rate, the maximum loan amount is $372,563.

7. What are points? A point is a percent of the loan amount that is charged to a borrower either by a lender or a broker. If a lender charges the points, it is called a discount point. Discount points are paid to a lender to lower the interest rate. If a Broker charges a point, then the point is paid to the Broker as a commission for services of originating the mortgage loan

8. What is PMI or MI? PMI stands for Private Mortgage Insurance. MI stands for mortgage insurance. If a home buyer puts down less than 20% down payment on their home purchase, they will be required to pay mortgage insurance. The purpose of the insurance is to compensate a mortgage lender for the loss the lender experiences if the loan goes into default and the lender is forced to foreclose on the property.

9. What is my fico score? Created by the Fair Isaac Corporation, FICO is the best-known credit scoring system in the United States. Based on the information in your credit report, your FICO score is calculated using complex, proprietary formulas that weigh the amount of debt you carry relative to your available credit, the timeliness of your payments, the type of debt you carry, and a great many other factors to assign you a credit score between 300 and 850. The top 20% of credit profiles receive a score over 780 and the lowest 20% receive scores under 620. Lenders use your credit score to assess your credit risk, or the likelihood that you will default on a loan and offer the best -- or lowest -- interest rates to credit applicants with the highest scores.

10. How does a loan officer or mortgage broker earn money originating a loan for a buyer/borrower? There are two ways a loan originator can earn money originating a mortgage loan. The first way, is a mortgage lender will pay a loan originator money, or commission for bringing the loan to that particular lender. As of April 1, 2011 lender paid commissions must not be associated with the interest rate or loan product a borrower receives, it will only be based on the size of the loan. The second way a loan originator is paid is directly by the consumer. The consumer and the loan originator can negotiate a fee the loan originator will charge for the service of originating the loan. As of April 1, 2011, a loan originator is prohibited from collecting a fee from both a lender and a consumer.

 

Please contact Jeff Donovan at 310-858-7096 or jeff@mofinancial.com for more information.