KMS Blog

But if you wait 6-12 months from now to read it, you will get $125.  So what will it be, read now or read later?

• Read now: You get $100, but are out $25.  Can you handle not having the extra $25?
• Read later: You get $125 (not bad return on investment if you wait the 6-12 months).  You have to wait 6-12 months and could miss out on opportunity to use that $100 (Christmas is right around the corner, folks).

• Read now: You know you are going to get $100.
• Read later: You are taking a risk of waiting in that I do not go into bankruptcy, die, leave the county, etc.

• Read now: Hey, you get $100.
• Read later: Your intel tells you it is a safe bet to wait it out.

Okay, so I tricked you into reading this far... there is no money to be given out.  No one is going to get $100 or even $125 for reading this.  (That means: "CONGRATULATIONS!  You just got $0.00, zilch, nada, nothing.)  I am using it as an analogy.

So what am I comparing it to?  The real estate market!!!

• Buy now: You are getting a good deal.
• Buy later: You could get a better deal.  (What if the market improves despite what the media says?)

• Buy now: Mortgage rates are still low.  Underwriting for mortgages is still fair.
• Buy later: Rates could go up.  Underwriting for mortgages could go through another tightening of the belt.

• Buy now: You are doing your part to improve the economy.
• Buy later: You are helping keep the economy down.

• Buy now: Prove the media cannot control us.
• Buy later: You might as well just put a crown on the media, bow to it, and while your at it, bend over and let them keep giving it to us and keep letting them control our lives.  (Wow, I sense a little hostility towards the media coming from me.  Let's see, because of them saying the bubble is going to burst, the market is only going to get worse, etc, people have followed suit.  Who are we to say the media does not know what it is talking about?)

So what do you say, buy now or buy later?

Lake County mortgage companies (except for one lone company) are a no show at the Leesburg Area Chamber of Commerce Business Expo ’07 presented by Leesburg Regional Medical Center and The Villages Regional Hospital with Chamber Alliance Chambers: East Lake, Eustis, Lady Lake, Mt. Dora, South Lake, Tavares, and Umatilla hosted by Lake Sumter Community College this past Thursday (October 18, 2007.)

The media has told the story over and over now… mortgage lenders and companies closing their doors, the real estate market is at its worst, and so on. However, Knightlines Mortgage Servces, LLC makes its presence known that it is still in business and not going anywhere any time soon. While other companies are struggling to keep their lights on, Knightlines is out with a mission to market itself to the local community with a positive attitude on today’s real estate and mortgage markets.

Owner and principal broker, Jason Price, is trying his best to counter the media hype of a declining market by blaming the media for the current market conditions. “When something bad happens, the media is there to make a story out of it. If the media keeps telling us that the market is going to get worse, then buyers are going to continue holding out for even lower prices; prices that can’t go any lower because many sellers are already at their break even point. If the media one day said, ‘The housing doom and gloom has ended and is making a come back,’ buyers would be buying again in fear the house they have been eyeballing might go back up in price. But then again, if the media started reporting good news, it would be out of a job.”

Is it a self-fulfilling prophecy that the media has placed on us? Are we destined to live our lives and base our housing futures on something that the media has made us to believe as being true?

If the expo is a sign of the times, it won’t be long before Lake County has no mortgage companies for buyers to turn to when it comes time to buy. But for now, Knightlines Mortgage Servces, LLC is not giving up the fight to keep the community positive in that there is life after this so-called death in the real estate industry and that things are already starting to improve within certain communities and within the commercial sector.

It's the big day.  Knightlines Mortgage Services, LLC has made your dream a reality.  You have been waiting for this day since your offer was accepted.  Your hands are sweating from both nervousness and excitedness.  That is right, it is closing day.

You sit down at the closing table with all the other parties; the realtors, seller, title agent, and us, your mortgage broker.  Then something catches your eyes, a stack of papers so thick you wonder what forest died for your house.  You start to feel overwhelmed knowing that soon you will have to sign those documents.  You have heard stories about how so and so should have read the papers before they signed them.  You begin to wonder, "Will I have time to read these, or am I just going to have to take their word?"

Well, here is a quick guide as to what is typically in a closing packet:

Most title companies will start with a document called the HUD-1 Settlement Statement.  This document (looks like a ledger) shows all the monies involved with the transaction.  It shows lender fees, title fees, government fees.  It shows who is paying what and what is being paid off.  This is the Bible when it comes to monies.  If the fee is not on there or money is being asked for or distributed without being listed, do not go any further.  Make sure that every penny that is exchanged is documented on this document.  If they will not put it on the HUD-1, then chances are what they want to do is not legal.  Also, it is a good practice to bring the Good Faith Estimate that your broker provided to compare the estimates to the finals.  They should be relatively close.  If not, again ask questions.

Now that we got the biggest problem out of the way, let's start with the deed.  The Deed is the document that transfers title of real property from one owner to another. The deed should contain an accurate description of the property being conveyed (often referred to as the legal description), and be signed according to the State laws where the property is located. The deed will be sent to you after the closing agent officially records the deed at your local government office.

The Mortgage is not the actual loan, but rather the lien on the real property that gives the lender the right to take the property by foreclosure if you default on the loan. It states yours and the lender's legal rights and obligations including your responsibility to make your mortgage payments (principal and interest) and pay real estate taxes and insurance on time.  So when you apply for a mortgage, you are really applying for a new lien to be placed on the house.)

The Note is the actual loan.  It is a legal document that acknowledges a debt and a promise to pay according to the agreed terms of the loan. It also recites the penalties and steps the lender can take if you fail to make your monthly mortgage payments.

The Truth-in-Lending Statement is a required document by the Truth-in-Lending Act.  This document breaks down the monthly payments over the term of the loan, notifies you if it is an adjustable or fixed mortgage, if there is a pre-payment penalty, and shows the APR.  The APR is a means to where a borrower can compare apples to apples.  It is an expression of the true costs of the loan expressed in terms of a percentage.  The closer the number to the actual interest rate, the less fees you are paying over the term of the loan (this includes interest).

The Mortgage Servicing Disclosure Statement lets you know whether the lender has history of selling the mortgage to another lender to service the loan.

The Initial Escrow Statement (if you are escrowing) itemizes the estimated taxes, insurance premiums and other charges anticipated to be paid from the escrow account during the first twelve months of the loan. It lists the escrow payment amount and any required cushion. An Annual Escrow Statement must be also delivered to borrower once a year.  If you are not escorwing, you will sign an affidavit stating such in place of signing this document.

Now, that was not so bad... those are the basic documents that you will come across.  There will be other documents that you will need to sign, but most are disclosures specific to your state and/or lender.  In some case, you may have already signed most of them when we first had you sign the application package.

If for any reason when the signing agent is going over these documents and you have a question, do not be afraid to speak up.  You have just as much to loose as you do to gain with this closing.  It is better to err on the side of caution, than to just accept what you do not understand.

Knightlines Mortgage Services, LLC has taken its transparency policy to the next level by offering a flat fee mortgage program.

What is transparency? Transparency is full disclosure. Many mortgage companies and their loan officers/brokers disclosure only what is required by law to disclose. One of the items that is not specifically required under "full" disclosure is that of Yield Spread Premiums (YSP). YSP is a fee paid by the lender to mortgage companies for the charging of a higher interest rate to a borrower. Many companies and their loan officers/brokers opt out on disclosing this fee to their clients. Often times, this fee is only mentioned at the closing table by the settlement agent. And even then it is quickly dismissed because of the fact it is marked as a "Paid Outside of Closing" fee from the lender. Borrowers are left in the dark that this fee is indirectly paid by them as a result of the mortgage company selling them a loan with a higher interest rate.

Some mortgage companies disclose a range in what could be paid out in YSP to them. Often times, a borrower can find this on the Good Faith Estimate of Costs or on the Mortgage Broker Fee Agreement. The fee is usually expressed as a "Paid Outside of Closing" fee and expressed a percentage ranging from 0-4%. This is a step in the right direction, but it is still not a full disclosure of the exact amount to be paid.

In October of 2007, the State of Florida is going to force all mortgage brokerage businesses and correspondent lenders acting in the capacity of a brokerage and their loan officers/brokers to become 100% transparent. Borrowers must be provided in writing a disclosure of the exact fees paid to the company by the lender. This disclosure is to be given within 3 days of knowing the exact fee, but not less than 3 days prior to closing.

When does the company know how much it will make? This is a very simple answer. The minute a company locks your rate, they will know how much YSP they will receive.

This amendment to Florida Statute 494 will open the eyes of many borrowers on just how much mortgage companies charge both directly and indirectly to their clients.

Knightlines Mortgage Services, LLC has always believed in full disclosure of its fees. Because of this, we have already been in compliance with the new laws. As a result of the competition now being forced to do what we have been doing, we are making a bold move to adopt a philosophy that is often frowned upon by many in the mortgage industry: a flat fee service.

Many companies charge points, hide fees, or raise the rate to get paid in YSP. With our flat fee program, borrowers will know upfront exactly what the loan will cost them. There are no hidden fees. There is no YSP. No YSP equals the lowest possible rates to borrowers (or “Par” rates).

Knightlines Mortgage Services, LLC will also offer to its clients an option that only a small handful of companies nationwide offer. This option is to use YSP for its original purpose: a way to pay closing costs. We will offer our borrowers the option to take a higher interest rate and use any proceeds obtained from an YSP to pay closing costs or put towards a down payment. We will not use the YSP to pay ourselves. In fact, if for some reason there is no true Par Rate (0 YSP), we will automatically credit those fees from the YSP to the borrowers closing costs.

With all that is happening in the mortgage and real estate industry, Knightlines Mortgage Services, LLC will continue doing what it can to ensure that its clients receive the best in service, fees, and rates. Being honest and upfront with our clients is what keeps us in business. By adapting our current philosophy to the flat fee service, we know that we will be miles ahead of our competitors and that our motto will still hold true: Financing the Way It’s SUPPOSED to Be!

The Best Mortgage IS a Fixed Rate Mortgage

When shopping for a mortgage, one can easily become overwhelmed with all the different mortgage programs that are out there: Fixed Rates (FRM), Adjustable Rates (ARM), Hybrids, etc.

The problem that consumers face is "which mortgage is the best?"  The answer to this is: the best mortgage program is that program that best suits the individual's needs.  But how does one know which is the best, if one is not up on all the different types of mortgages?

Well, let's break mortgages down to their very basic levels: rate and term.  Rate is the interest rate that one pays to bank.  Rate is determined by risk.  Term is the length of time that a loan is paid back.  Term is also the length of time that the rate remains fixed (We will call this the rate term).  The longer the rate term; the great the risk; the higher the rate.

Now, let's assume that all mortgages are FRMs and paid back over a 30 year term.  Why?  Most everyone understands the concept of a 30 year FRM: the rate is fixed for 30 years and paid back over 30 years.  So, what this means is the 6 month, 1 year, 3 year, 5 year, 7 year, and 10 years ARMs are now all FRMs and paid back over 30 years.  The rate is fixed for that period of time which is mentioned.

Going back to our basics, the longer the term the higher the rate.  The 6 month FRM has a lower rate than the 10 year FRM.  So, why would one take one of these shorter terms versus a longer term?  The answer is simple: they have a general idea as to their future (they plan to move, add on, build a pool, refinance to take cash out, etc).  The reward for planning ahead: a lower interest rate.

Even if a person is uncertain of where they will be in the future, if they use statistics, they can get a lower rate.  Statistics show that the average homeowner refinances every 3-5 years and sells around 7 years.  Let's say someone wants to be conservative on the 7 year figure, they can go for a 10 year FRM.  They still will have a lower rate than that of the 30 year FRM.  But, there are those still that do not even want to consider the risk of what happens after that 10^th year of the FRM.  For them, the 30 year FRM is best.

Now that I opened the can of worms on "what happens after the rate term expires," I will make a couple quick, simple answers.  Assuming one misjudged their future expectations of their mortgage, they have a couple options.

1. Refinance and base the new mortgage on the new expectations
2. Refinance and jump start the expectations
3. Ride out the adjustments.

Ride out the adjustments? Yes, after the rate term has lapsed, the rate may/will adjust.  Every lender has different ways of capping what your rate can change, but they all have the same calculation on determining what the rate will be: Margin + Index.  Margin is a fixed amount.  It is the amount the bank charges to put it simply.  Index is an adjusting rate that is determined by market factors.  Enough said on this.

When does one let it ride?  Simple answer: rates have dropped.  Think back a couple years when rates were at record lows.  One could have been in a 3 year FRM that was about to adjust.  Instead of refinancing, one could have seen a drastic drop in their rate just by letting their rate ride.  Even with a fixed margin, rates dropped low enough for those individuals to enjoy a lower rate without the need to refinance.

So what is the best mortgage for you?  The best mortgage is the FRM that has the rate term equal to your future goals timeline and the amount of risk you are willing to take.  Now, there are variations to these FRM programs, so please call Knightlines Mortgage Services, LLC to determine which program best meets your needs.