Knowing what you owe, before you owe

In the wake of the economic collapse in 2010, the Dodd-Frank reform law was passed by U.S. legislators to tighten lending standards and make mortgage details more transparent to borrowers. Before the collapse, some lenders extended offers that were not truly feasible, and verbiage in the closing documents was often confusing to borrowers, causing them to gloss over important details.

By August 2015, however, the documents should be shorter, simpler and easier to understand. At least that is the hope of the Consumer Financial Protection Bureau, which is implementing the new, streamlined disclosure forms to erase some of that existing confusion.

Do you know and understand all of the mortgage term details agreed upon in your loan? If any information in the federal, state or lender disclosures is unclear or ambiguous to you, be sure to ask your loan originator or processor to clarify. Our goal is always to make the process as simple and pain-free as possible for you, the borrower, while complying with federal guidelines. Any way we can help you better understand your mortgage is our responsibility to you.

For more information on the new disclosure forms, read here. http://www.latimes.com/business/la-fi-new-mortgage-forms-20131120,0,5291252.story#axzz2lDx1ayf9

October jobs report better than expected. What does that mean for mortgages?

Numbers of U.S. jobs created in the past year - figures from the Bureau of Labor Statistics.

An important economic report was released on Friday that had an immediate impact on mortgage interest rates. The U.S. jobs report for October revealed that employers added 204,000 new jobs, well above the 100,000 expected. In addition, the number of job creations for August and September was revised higher by 60,000. The unemployment rate ticked up to 7.3 percent from 7.2 percent and was in line with estimates. The Labor Force Participation Rate (LFPR), a measure of how many people are looking for work, fell to 62.8 from 63.2 and remains at 35-year lows. It's important to note that in a recovery, the LFPR should be moving higher, not lower. Overall this was a good report for the U.S. economy but moved interest rates higher because an improving jobs market can lead to inflationary pressures and signal the end to the Federal Reserve's quantitative easing program.

The Fed's current quantitative easing program continues to help keep home loan rates attractive. The Fed has been purchasing $85 billion in bonds and treasuries each month to stimulate the economy and housing market. The Fed has said that its decision regarding when to taper these purchases will be dependent on economic data. If economic data in the coming weeks is strong, like the jobs report was, the Fed could discuss tapering its purchases in its December meeting of the Federal Open Market Committee. This could have a big impact on home loan rates heading into 2014.

Yet home loan rates remain attractive compared to historical levels and now remains a great time to consider a home purchase or refinance. And perhaps now is the perfect opportunity before interest rates move to higher levels. 

All economic news released last week was not rosy. Consumer spending - the main driver of the U.S. economy - fell to 1.5 percent, the slowest rate in three years. This is one reason the strong jobs report was significant: If consumers aren't confident about their jobs or are out of work or underemployed, spending will continue to be soft. That would not a good sign for the U.S. economy moving forward but may ensure a longer period of low mortgage interest rates.

Go long or short? Either way, don't go for broke

In other words, choosing between a 30-year or 15-year mortgage

 

Peyton Manning about to go long. (Photo by Doug Pensinger/Getty Images)

Making decisions on how to pay off your mortgage can seem more stressful than playing quarterback in the pocket sometimes. New rules have made the process more complicated than ever, but with proper guidance and support, you can feel confident in choosing the right plan.

The rate difference between 30-year and 15-year mortgages has widened by about 0.75% up to a full percentage on average, making the shorter-term interest rate look much more attractive to homeowners. If you are aiming to live debt-free by retirement, opting for a 15-year mortgage can be a great way to accomplish that goal.

But take a long look at your finances before signing up for payments you can't afford. Keep in mind investments and other expenses you may have down the road to avoid getting underwater on payments.

Ask yourself these five questions to manage your mortgage plan as successfully as Peyton Manning covers the field.

http://www.usatoday.com/story/money/personalfinance/2013/11/07/30-year-15-year-mortgage/3446437/

ARM vs. fixed-rate mortgages: Which is better bang for your buck?

Conventional wisdom may have given you the idea that adjustable-rate mortgages, or ARMs, are ill-advised gambles as opposed to the safer, more stable fixed-rate mortgage loans. However, there are several factors to consider before choosing which loan makes more sense for you.

How long do you intend to stay in your current home? If you plan to relocate in less than 10 years, a 5-year or 7-year ARM could be a great deal for you. For example, if you apply for a 5-year ARM, your initial rate will be locked in for the first five years (generally out of a 30-year overall term).

Most of the time, you can qualify for a substantially lower ARM interest rate compared to the lowest fixed rate available to you. If you then sell the house after five years, you will have saved thousands of dollars on monthly mortgage payments compared to 30-year fixed monthly payments.

In addition, there is no crystal ball telling where interest rates could go in the future. If, five or seven years down the road, rates happen to drop lower than when you initally locked the loan, your ARM will also adjust lower, saving you more money.

Of course, rates could also move the opposite direction, increasing your ARM payment...but then, why not refinance again? Remember you have the freedom to refinance your mortgage whenever you choose, opting into either a fixed-rate or ARM loan.

Still unsure? Consult a Vertex loan advisor to decide what plan might work best for you.