With Daniel Lotter, Owner of Tri Star Funding, Your Colorado Mortgage Headquarters.
Everyone wants a crystal ball to be able to get a read on what’s happening right now in the universe of home loans, where rates are headed, and what’s happening with Colorado Mortgages. In this and other articles in this series, we’ll present a discussion of both the market as well as mortgage programs that are enabling Colorado home buyers to move into their own homes every day.
For this installment, I’ve spent some time getting a few answers from a veteran in the lending industry right here in Colorado Springs: Daniel Lotter, President of TriStar Funding. In our meeting, Daniel started off by saying:
The good news is that rates remain relatively low. Although new regulations over the past eighteen months have steadily increased the processing requirements for Colorado Mortgages, mortgage products are also evolving to meet the needs of home buyers.
Daniel continues, “From the consumer standpoint, the choices of different mortgage loan products as well as the prospects of getting approved for a loan have improved a bit in the past several months. This is very good news. Around a year-and-a-half ago, national and Colorado lenders had become incredibly picky as a result of the housing correction – there for a while a person may have been justified in saying, “only the perfect need apply.” After the housing “down cycle” many loan programs simply evaporated. While some risky products such as Alt A and Stated Income arguably needed to go away forever, other types of discontinued loan products really did help worthy buyers get into homes. Therefore, part of the recent improvement is the addition of programs serving a wider variety of borrowers.” (For a look back to 2011 and what was happening then, click here.)
The trend in home mortgage interest rates is moving slightly upward over time, but not the significant movement upward that was feared might happen in a housing recovery. The increasing rates have had an interesting effect: borrowers with less than perfect credit are slowly being welcomed back by mortgage lenders. Additionally, as the government seeks to distance itself from mortgages more and more, private sources of funding are also coming back into the mortgage market.
Many choices exist from conventional to FHA to VA. Check back in the future for new articles detailing these loan types and some of the many sub-categories of each.
Here’s the biggest takeaway for you, the Colorado Mortgage borrower: if it has been a few years since you purchased a home, the paperwork side of things has increased. Be prepared to write at least a letter of explanation or two for any warts on your credit report. These days, even the simplest thing has to be documented. On the surface it may seem insulting, but in the end the current system works! Having to explain a thing or two does not mean you won’t get that mortgage, just that you might have to work a little for it. Still, the opportunity to buy a home using someone else’s money probably should have always required more than being able to fog a mirror. So we’d have to say the increased regulations and guidelines are good for the Colorado housing industry in the long run. Do we really want another bubble because anyone with a pulse can be approved for a mortgage?
So, what’s a mortgage lender in the first place?
We’d like to offer a bit of insight into just exactly what a lender is. Broker, mortgage company, bank, what is the difference? They are all the same, right? From a standpoint of mortgage rates, one could argue that this is true. However, when comparing available programs and fees, the differences can be quite substantial. Therefore, contrary to popular belief, all lenders are not the same. There are three basic types for the purposes of this article:
1. Banks have great name recognition and trust. They can be competitive on rates, but have less flexibility on the fee side of your purchase. (These fees are usually substantial and should not to be taken lightly.)
2. Many “mortgage companies” are simply correspondent lenders of those larger banks. They sometimes have fewer products than their affiliate banks offer. They may be able to offer a bit more flexibility on fees than the banks in some scenarios. They offer an environment that might be slightly more casual than the “bank experience.” They are often very adept at marketing and promotion, utilizing name recognition as a component of trust and assurance.
3. True mortgage brokers generally have more mortgage product offerings from an array of investors or affiliate lenders. As a result, they can offer you a greater choice of loan types that are more tailored to your unique needs and situation. Mortgage brokers have access to a virtually unlimited set of products and grant a good deal more flexibility on many aspects of fee structure. They generally offer a very casual environment, but are fully capable of packing substantial value into both the rate and fee side of your Colorado mortgage. Your loan application can be plugged into the absolute most compatible product and shopped to several different back-end investors. So what is a back-end investor? Simply stated, they are the party actually “funding ” your mortgage. And in the end, these back-end investors are crucial as they are the link to Wall Street and the source of the cash that enables you to say to your guests, “welcome to our home.” So let’s not stone the evil investors just yet!
Daniel also says: If you have the opportunity to go FHA or VA, now is the time to do it. The reason is that Conventional mortgage rates are on the rise. Even though the economy is improving slowly, rates on Conventional mortgages are on the move upward because of instability in the bond markets, to which they are more closely tied. (No one knows just how long the government will continue to pour money into the secondary mortgage markets.) Standing opposite the up-trend in Conventional mortgage rates is VA and FHA. VA and FHA have held more steady for the past months while Conventional rates have risen an average of ¾ points higher. Finally, Daniel says, please don’t get fooled by commercials advertising an unbelievably low fixed rate. That may mean that it will be at a fixed rate for three to five years, but then will rise to that current market rate. (There is little doubt in anyone’s mind that the rates will increase by that future point, probably substantially.)
The bottom line is that an informed Colorado Mortgage Shopper is always better off than someone who failed to take the time to educate themselves. Please don’t be that person who responds solely to an advertisement or simply calls the number on the first business card you are handed by a friend or even a well intentioned agent! This is too important! Consider living with YOUR home mortgage in terms of payments, understanding all the aspects, your rates, your fees, and your convenient closing, viewed in terms of paying monthly for 30 years, based on today’s quick and easy decision…. looking at it that way, it just does not make sense to “phone this one in.” Please get educated on all the important aspects of your mortgage, precisely so that you can live with no regrets.