What exactly is APR, and how does it affect you?

APR is the acronym for Annual Percentage Rate, which will be different,
and higher, than the interest rate that you were initially quoted for a loan. APR is essentially the annualized cost of credit, and takes into account the  upfront costs such  as points, closing costs, and prepaid interest. Once you lump those additional  costs together and deduct that from the amount you are borrowing, the interest  rate is recalculated with your same monthly payment less those additional costs, thereby increasing the actual interest rate you are paying.

Let's say for the sake of argument that you were quoted an interest rate of 5% for a $500,000 loan that is to be amortized over a 30 year period.

Your monthly principal and interest payments would be approximately $2,684.11 You would actually pay back almost the full loan mount over the life of the loan.  (the total is $966,278.27 for those inquiring minds) If you paid two points to  obtain the loan and an application fee of $400, plus pre-paid interest in the amount of $1500, then technically you have paid $11,900 for the opportunity to do business with the bank. If that is the case, the monthly payment is actually calculated on the $500,000 less the $11,900 that you have already paid. Your principal balance  remains unchanged, and your payment also remains unchanged, so the interest rate is then calculated on $488,100. If you are paying $2,684.11 on a loan amount of $488,100,  then the interest rate under those circumstances works out to be 5.014%

he Truth-in-Lending Act requires that all creditors, including banks  and other financial institutions  provide a borrower with a loan's total finance  charges and annual percentage rate. These two pieces of information will give you the information and knowledge you'll need to compare the  offerings of various lenders. Remember, interest rates are only  comparable when they've been calculated in the same manner.

How can you save money on closing costs?

You  get your Truth in Lending Statement from the bank and it says your closing costs are WHAT???? Yes, that piece of paper can certainly be a shocker, but here are a few ways that you can save thousands on closing costs, and try to relax, that number is intentionally high.

The bank estimates a number of fees at worst case scenario, such as your attorney costs- so the first thing to do is to look at those figures.  They may not coincide with your legal fees.  They may also include POC fees. ( P.O.C. means Paid Outside of Closing)  and that most likely, you have paid aready, so subtract those fees off the total

Did you know that the actual day of the month that you purchase your home also affects your closing costs?  That's right!

• Tip: 1:  If your mortgage payment will be $4,000 for example,  the day that you close can affect your closing costs by up to $4,000. If you know that the bank collects mortgage  payments for the month ahead, then it would make sense to you that if you close on the 2nd of the month, the bank (in this example) would require $3733. for the remainder of the month at closing. If you closed on the 30th of the month before, that same line item charge would be less than $134.  There's over $3,600 savings just  because you closed on your purchase 3 days earlier.   

You may have heard that you are supposed to close at the end of the month- now you know why. A few times, I have had clients that needed to close in the first few days of the month, and they would have incurred that big expense. What I will tell you is sometimes, but not always, you can negotiate  with the bank to NOT take this amount at closing. The result would be that your first mortgage payment would be due  the 1st of the next month, instead of the first of the following month .

Then, there are pro-rated taxes. The bank likes to have a two month share of taxes in escrow, even though the taxes are included in your actual payment, which leads me to my next closing cost cutting measure:.

• Tip: 2:  Each town collects taxes from the bank in their own manner- some collect every 6 months, some collect every 3 months, and here's where it can get somewhat complicated.  If you are closing on a home in the most inopportune month of the cycle in a town where tax collections are made from the bank every six months,  the bank will require more of an escrow (holding account) at closing.

In some cases , there  can be  7 months worth of taxes to  include in your closing statement.  Closing on the same house in a different month  will only cost 3 months of taxes in advance. If the monthly taxes work out to be $500 per month, which is still fairly cheap, your timing alone on this item alone can save you $2,000  in this minimal scenario.  When every penny counts, speak with your mortgage broker to discuss the tax collections and anticipated closing costs for the town that you are planning to move in.  Most realtors do not know about this cost-saving measure, and to be honest, I only found this out about 15 years ago- so talk to your mortgage broker or your attorney regarding  when is the most cost effective time to close on a home in the town(s) that you are interested in moving to.

• Tip: 3: Fuel costs.  If the home you are purchasing has oil heat, or propane heat, there will be a storage tank for the fuel on the property. You re-imburse the seller at market rates for the fuel that is left in the tank. So kindly ask the seller NOT to fill up the fuel tank(s), and only have the minimum delivery if they are low. New clients can often work out a deal with a fuel company, and I can almost guarantee you that the price you pay for fuel will be less than what you will need to re-imburse the seller for. Depending on the size of the tank, your estimated  re-imbursement costs can save you upwards of $500 at closing.

As always, consult professionals regarding the purchase or sale of your home. We are available 7 days a week, nights and weekends, and you can even set up an appointment online for the date and time that's most convenient for you.

Should you go a mortgage broker or a bank for your home loan?

You may have been doing business with a particular bank for many years, you know the people at your branch, so it's only natural that  you would think that  your bank would give you a great deal on your home loan, right? NOT NECESSARILY SO.

There is a belief out there that mortgage brokers charge you more  for a loan than banks do. NOT NECESSARILY SO.

There is a big difference between getting a loan from a mortgage broker as opposed to a bank, and I will put it in simple terms. A bank may have 4 or 5 products (loans) to choose from. The Mortgage Officer at the bank will do his best to place you in one his bank's loans. The problem is, the bank only has 4 or 5 options. A Mortgage Broker typically works with 25 or more banks, and probably has over a hundred different  types of loans. This  increases your odds exponentially of getting a loan that's perfectly tailored for you. So when it comes time to get a loan, get a referral for a good mortgage broker- they can be worth their weight in gold.

I have a network of mortgage professionals that specialize in different types of loans, one that is certainly just right for you. I get no referral fees or special perks from any mortgage brokers- just great service for my clients, so when you are ready, I will be happy to refer you, if you need it.


Pre-qualified or Pre-approved for a home loan? There IS a difference!

Whether you are a home buyer or a home seller, you must have heard those two terms many times. Real estate agents sometimes use those two terms interchangeably, and they ARE NOT THE SAME! There's a world of difference between the two! The number of steps, and the amount of effort between the two vary greatly, and the one you choose to pursue can make every difference in the world as it pertains to your transaction.


Here's why one is better than the other-

Getting pre-qualified can be as easy as making a 10 minute phone call. It's certainly a good idea, and it's actually a first step towards pre-approval. The only things you need to do to obtain a pre-qualification is to call your lender or mortgage broker, tell them your income, how much downpayment you have, and what kind of debt you have. They will take those figures and calculate an approximate purchase price based on the inofrmation that you have given them, taking into account the current interest rates, and how good you feel your credit is. Your representative may not always request or run a credit report before he/she gives you a price range.

A pre-approval, on the other hand is much more detailed.  You'll submit tax returns, allow the lender to obtain a credit report, and fill out an actual mortgage application. You can do this even if you do not have a property in mind. When you locate a property, most of the submission process has already been completed, and the lender only awaits property specific details, such as a contract of sale, annual taxes, property condition, and an appraisal for the  house. 

The bottom line: If you are a seller, and you have two offers in front of you at the same price, and you are trying to decide which one to take, unless there is some type of extenuating circumstance, I would work with the pre-approved buyer. It makes better sense- a pre-approved buyer is a better prospect than a pre-qualified buyer for reasons stated above. If you are a buyer, go ahead and get prequalified NOW, if you are out looking at homes, and haven't already done so.  Once you are prequalified, begin the pre-approval process so you don't get into a situation where a buyer looks better than you do "on paper"because they have completed additional legwork.





Make sure you check all of the fees for your loan!

I usually do a rate check on Monday and Friday mornings, but I decided to check them today and  give you an update. Generally, you see interest rates that range from bank to bank, and from credit score to property, etc., but one very important item  remains wherever and whenever you look. By the way, today's rates can vary anywhere from about 3.75% for a 15 year loan  to 4.75% for a 30 year fixed rate  loan. Another  variable to that  is the fees, and all the fees produce your APR (Annual Percentage Rate) That's why you can look at an annual interest rate and see that the APR is  higher. That means that the rate actually ends up being more with all the fees associated with that loan. The bank will take points, for example, (and other up front fees) , which in effect reduce the amount of the actual loan, although the payment stays the same. When that is done, the new rate reflects the same payment spread out over the term of the loan, which is why the APR can be higher.

Here is a link to an online banking resource for your own overview of the rates.