Ways to Reduce Loan Fees

Shopping how to get a lower mortgage rate? Mortgage rates will always be beyond your control no matter what you do. Rates are the function of Wall Street and are usually beyond our control. But you may get the lowest possible rates if you use certain strategies.

Those 4 ways in how to get a lower mortgage rate:

• Achieving a higher credit score.
• Creating a bigger down payment.
• Follow the combination of both the above steps.
• Or picking a better closing date.

Mortgage Rate Locks: Gambles of a Bank

What are rate lock commitments?

They are the promises of a bank to provide a fixed mortgage rate for a definite time period. It is a sort of contract where the lender says “in case you promise to pay back your loan in a certain time period we will fix a constant mortgage rate for you”.

Banks Treat These Rate Locks as a Gamble

This is because the bank is guaranteeing a fixed interest rate today which might not be prevalent later. The more the difference between the rate lock and delivery date, the greater are the chances of misinterpretation by the banks.

In analogy of sports, this is like trying to pick a winner during the beginning of the season as one cannot determine who will win based on the performance of just day one. The predictions get even weaker as the season progresses.

Rate lock commitments usually need either higher fees or interest rates or both with respect to mortgages. It becomes very dangerous when it comes to guessing future mortgage rates so banks hesitate when it comes to this “time risk”. These costs are usually passed on to you by them.

The Different Ways Banks Play the Rate Lock Game:

It is actually very simple. It is the implementation of the basic concept of incrementing the rate locks at the end of every 15 days. You are given the choices of 15 day rate lock, 30 day lock, 45 day rate lock or 60 day rate locks. You are even provided a few other options that you can choose from.

This is where the concept of “time risk” comes in again. With the increase in the duration, your mortgage rate increases.

The basis for the calculations of rate locks is the 30 day rate lock and for a 15 day rate lock, you get 1/8% lower than the 30 day rate lock. Similarly, for a 45 day rate lock it is 1/8% higher and for a 60 day rate lock, it is ¼% higher than the 30 day rate lock.

For example, if you sign a contract this week and set your closing day for 46 days, you will need a 60 day rate lock with a rise of 1/8% of your mortgage rate.

In case you can move your closing date to the previous day, a 45 day rate lock can be chosen with a drop of $28 from your monthly mortgage payment for a $400,000 home loan in Long Beach CA.

Closing Date Should be Chosen Wisely

How to get a lower mortgage rate depends on choosing a better closing date. Also, consider the effect of “time risk”. You get to save more money by reducing your duration

Jumbo Mortgage Rates

If you are looking to purchase a California home in Long Beach,  Rossmoor, Seal Beach or Signal Hill, now is the perfect time to apply for a mortgage. There are a variety of lenders that are offering jumbo mortgage rates, allowing prospective home buyers the opportunity to purchase a quality home. With the slow but sure recovery of the real estate market, both private lenders and banks are assisting qualified borrowers with the best jumbo mortgage rates, allowing for simpler loan guidelines and lower overall rates. By taking advantage of the lowest jumbo mortgage rates available, you will definitely be able to comfortably finance that California dream home that you have always wanted.

Jumbo Mortgage Requirements

There are certain requirements needed in order to qualify for the best jumbo mortgage rates. While jumbo mortgages tend to have easier guidelines and rates, lenders are simply being extra cautious in today’s market, which in turn, is actually very helpful to the borrower, as they have specific criteria they must meet in order to obtain the lowest jumbo mortgage rates. By learning the guidelines beforehand, the borrower will know if they need to repair anything on their credit report as well as if they need to stay at their current job for at least another year before applying. This saves both the borrower as well as the lender time, and the borrower doesn’t have to risk being denied the loan. The specific requirements for obtaining a jumbo mortgage loan are as follows:

• Creditworthiness – In most cases, a borrower must have a FICO score of 740, but there are exceptions where a lender may approve a borrower with a score as low as 700. It is important to keep in mind that the loan may be reduced if the credit score is lower than the requirement.

• Verifiable Income – In yesterday’s real estate market, borrowers could often apply for no-doc mortgages, where they were not required to prove their income. These mortgages caused quite a few problems and led to many foreclosures, so it is highly unlikely that you will not have to prove your current income. This can easily be done with pay stubs and W-2′s from your current job, and for self employed individuals, copies of 1099 tax forms and financial statements can be used to verify your income.

• Down Payment/Cash Reserves – Depending on your particular credit score, your lender may require a down payment as well as proof of 6 months in cash reserves in order to qualify you for the best jumbo mortgage rates available.

• Employment – Two years employment history is usually required of the borrower in order to qualify, and self employed individuals will need to show two consecutive years’ worth of work history through their tax forms and financial statements. It is important to keep in mind, however, that many lenders will consider the entire borrower profile, especially with many people being unemployed or underemployed in the past five years. If you do not have a full two-year work history, you may still qualify.

Qualify for the Lowest Jumbo Mortgage Rates

Living in a beach city like Long Beach or Seal Beach is a dream shared by many prospective home buyers. By taking the proper steps to ensure that your credit is on track and by working with a mortgage lender that specializes in finding their clients the best jumbo mortgage rates available, you will soon find yourself in an amazing Long Beach CA home.