Look For Gifts This Holiday Season

Interest rates are the lowest they have been all year,
right now!

Every year during the holiday period, I find that
borrowers don't want to engage in business between
Thanksgiving and New Year's.

With the distractions of the season, and their focus
on the fun things, many borrowers fail to recognize
that there are opportunities to improve their home
loan situation.

30-year fixed rate conforming loans (up to $417,000)
are currently running about 5.0%, with favorable
credit scores and with sufficient equity or down
payment in the home.

There are plenty of borrowers, maybe even you, that
could benefit greatly if we were able to obtain those
terms for them.

Be aware that when you hear about interest rates in
the media, or even if you are getting loan quotes
from lenders, that there are a number of moving parts
that affect the terms being quoted to you.

It's called risk-based pricing. And if the lender is
not asking you sufficient questions, you may find that
the loan quote is overly optimistic, and that you may
be set up for disappointment.

Let's take a look at some of the moving parts that need
to be explored to provide you with reliable information:

Loan-To-Value (LTV) Ratio:

The larger the loan is in relation to the value of the home
will create higher risk situations for the lender. You
will find that the interest rate and loan fee combination
will be higher for the higher risk categories.

For example, if the loan is 60% or less of the value of
the home, the pricing is very favorable. There will be
incremental increases in the loan fee charged at a specific
interest rate if the loan request falls between 60%-65%,
65%-70%, 70%-75% and 75%-80%. If the loan request is
higher than 80%, the lender will typically require private
mortgage insurance. This mortgage insurance will replace
the lender's need for increasing their fee for the higher
risk, because they now will have insurance for the higher
risk.

Credit Scores:

When we obtain a credit report, we usually are able to
obtain information and scores from the three major bureaus:
Equifax, TransUnion, and Experian. The lender will usually
use the middle of the three scores for evaluation purposes.

In today's market, a score above 740 will allow us to fit
within the most favorable pricing model. As with the LTV
model, there will be incremental increases in the loan
fee for a specific interest rate if the score falls between
720-739, 700-719, 680-699, 660-679, 640-659 and 620-639.

Loan Points:

In the past, before the mortgage market upheaval, it
was common for lenders to offer "no point" or even
"no point, no cost" loans. The market factored in a
value for interest rate changes. On a 30-year fixed
rate loan, a good rule of thumb used to be that for
adding a loan fee of .50 points, you could save .125%
in interest rate. This scale worked both directions,
so that if you wanted to do a "no point" loan, your
rate would be approximately .25% higher than if you
were willing to pay 1 point in loan fee.

In today's environment, lenders are assessing higher
risk to loans where the borrower puts as little into
the transaction as possible.

Lenders are no longer willing to offer "no point" loans
with such a small differential to the interest rate.
As an example, taken from today's rate sheet, an interest
rate of 5.0% is available at a loan fee of .25 points,
but to obtain a "no point" loan is at 5.125%. So, the
market is saying that .125% in interest rate is only
worth about .25 points in loan fee. This requires
a credit score of 740, with a LTV at 80% or less.


When you combine these factors, there is a huge range
of interest rate and fee quotes that a borrower could
encounter. A loan request of 80% with a credit score of
630 will be significantly higher than a 60% loan with a
credit score of 740.

If you are not advised of this information when you are
shopping for your loan, there is every likelihood that
the interest rate and fee that is finalized for you will
be more expensive than the original "quote".

So, if you are hopeful to obtain 30-year or 15-year fixed
rate financing, and maybe get away from an adjustable
rate loan that will be coming up for recast in the near
future, don't go through the holidays without checking in
with me.

A small investment of time to get paperwork started will
allow me to discuss locking in the loan for you, and
working toward completion in January.

What a great way to start the New Year - giving you some
peace of mind about your mortgage payments!

Happy Holidays.

A Special Announcement and A Correction

First, the Special Announcement:

After 19 years with Mike Dunn + Associates, I have a
new company with whom I am working.

Mike Dunn decided to merge his operations with Rancho
Financial Mortgage Center in Rancho Bernardo, and most
of us who served as loan originators with Mike, also
made the move effective December 1.

My new contact information will be:

Rancho Financial Mortgage Center
16456 Bernardo Center Dr.
Suite 201
San Diego, CA 92128

Office: 858-451-0620
Cell: 619-846-4322
E-mail: dbrennecke@roadrunner.com

Rancho Financial offers the full array of mortgage
brokerage choices that I have previously enjoyed, and
they also offer mortgage banking relationships with
GMAC, Suntrust, CitiMortgage, Amtrust, Chase, Wells
Fargo and Flagstar Mortgage. As a mortgage banker,
they offer expedited service with these lenders
for underwriting, loan document preparation, and
funding of the loan.

In addition, I have access to more extensive FHA
and VA programs.

Please make sure to give me a call with any of your
loan scenarios and I can see how my enhanced product
and service options can assist you in closing your
next transaction.


Second, the Correction.

Last issue I announced the changes to the FHLMC and
FNMA conforming loan limits, and I misinterpreted the
memo that I read.

Currently, the conforming limits are $417,000 for a
single-family home. Until the end of the year, the
Stimulus Act created a category commonly called
conforming-jumbo which allows loans to be created
up to $697,500 in San Diego, and FHLMC and FNMA can
purchase loans to that temporary limit.

I interpreted the announcement that the new conforming
limit for San Diego will be going to $546,250, and
that the conforming-jumbo category was expiring.

In fact, the conforming limit is remaining at $417,000.
In San Diego, the conforming-jumbo limit is set at
$546,250 for 2009.

The reason this makes a difference to you is because
there are underwriting and pricing differences that
can exist between the conforming and conforming-jumbo
loan programs.

So, as we offer mortgage loans through 2009, we will
still have three general categories of lending options:
conforming (up to $417,000), conforming-jumbo (between
$417,000 and $546,250 in San Diego), and jumbo loans
(those above $546,250 in San Diego).

As I've mentioned previously, there are limited choices
for jumbo loans at rates and fees that most would find
acceptable. The 30-year and 15-year jumbo fixed rate
loans are particularly expensive due to investor
reluctance to purchase these loans.

Explore any loan scenarios with me before you make a
final decision. My resources may be able to help yousave significantly.