Adjustable Rate Mortgages

I was on www.Activerain.com (another blogging site) this morning and read a blog from a mortgage person recommending or promoting adjustable rate mortgages. He was partially right in some aspects. Yes some adjustable rate mortgages rates are better than a 30 year fixed rate right now. Yes you can save money. Yes if your plans are to move in 3 or 5 years it may be a good alternative.

HOWEVER, ADJUSTABLE RATE MORTGAGES HAVE GOTTEN MANY PEOPLE IN TROUBLE. You have to look at the down side that is possible. Not just at how much you are going to save. You have to think what happens if I can't refinance later on because the rates have gone up. Or you can't refinance because the home value has gone down. ( like right now)

I am an old school person. I believe you should be trying to pay off your mortgage, not have a mortgage when you retire. I believe more in a 30 year fixed mortgage, though there are cases when a Adjustable rate mortgage is okay. An adjustable rate mortgage is okay if you plan on selling before the rate adjusts. But for me to promote them as a great way to no. No way, no how.

For more on Michigan mortgages, Michigan real estate, and Michigan things to do
go to www.russravary.com

Have a great day. Russ Ravary

FHA Refinancing

If you have a FHA mortgage you may still be able to refinance even though your home value has fallen. FHA does streamline refinances. Which means that you may be able to refinance your home without getting an appraisal. What you need to have is good credit for the last year. You may be able to have a few credit blemishes. Take the time and see a mortgage person or Loan officer to see if you qualify.

Too many people assume they can not refi. Take the time and go to a mortgage broker. They usually don't charge to review your situation. The biggest thing is don't be sucked into a higher rate or higher payment. Do not pay high fees or an application fee. There is no sense in giving somebody an application fee if it can not be done. There are many lenders that do not charge an application fee. You can find out whether you can refinance without paying a fee.

There are many options that may be available to you. One that many people are not taking advantage of is calling your existing lender. Call your existing lender to see if they will make your adjustable rate mortgage into a fixed rate mortgage. Some lenders are willing to do that so you do not go into foreclosure.

If you live in Michigan and have a mortgage and would like to go over your options feel free to give me a call at (313) 310-9855 or email me at info@russravary.com For more on mortgages and Michigan real estate go to my website www.russravary.com

Fed drops rates again

The Fed drops it rate again, and it had no effect on the Michigan mortgage interest rates today. 30 year Mortgage interest rates are still below 6% but have not dropped dramatically for any length of time. Hopefully in the next month we will see rates slowly creep down. There are a lot of people out there that could use a break to get their adjustable rate mortgages changed into a fixed rate mortgage.

If you have an adjustable rate mortgage you should contact a mortgage person. They can check the value of your Michigan Home to make sure a bank will even loan against the house. Many homes have lost a lot of value making it impossible to refinance. Also the loan officer can put you on a watch list so when the rates do come down that you will be notified. It may make sense for your neighbor to refinance at 5 3/4% where it may not save you any money because you had a lower rate than he did before. You may need it to come down to 5 3/8% before it makes sense to do it. A No-closing cost loan may make sense for you. Email me at info@russravary.com to find out when it would make financial sense for you to refi and to be put on a rate watch list. For more on Michigan mortgages and Michigan homes for sale go to my website www.russravary.com

Have a great day. Russ Ravary

Fed rate and mortgage rate there is a difference!

I had a great dialogue on Active Rain.com with another Real estate agent about the difference between The Fed Rates and the mortgage interest rate.
So the Fed cut the rate.

Difference between the fed rate and mortgage interest rates.

How does a ¾ of a percent drop in the Fed rate affect us? So many consumers think that the Fed Rate is the mortgage interest rate. It is not the same thing. It is one of the most misunderstood things in the mortgage industry. The ¾ of a percent drop in the Fed rate may or may not affect the mortgage interest rate. The Fed rate and the mortgage interest rate are two separate rates. If one goes down it does not mean the other goes down too!
The Fed rate you hear so much about if the Rate the Federal government gives on overnight loans from bank to bank. We as consumers do not get that rate. Mortgage interest rates are determined by market conditions. Some of the things that affect the mortgage interest rates are:
How well the bond markets is doing? especially the 10 year bond market
How well the stock market is doing
Are the housing starts down?
Are unemployment numbers down?
How is the economy?
Are the numbers that came out today high or lower than expected?

Generally speaking mortgage interest rates get better because the stock market is doing worse and people are investing more in the bond market. It is many times an inverse relationship. If the stock market is doing good then mortgage rates are doing bad. That is generally what happens. If unexpected bad news such as higher unemployment numbers, lower housing starts, bad economic news usually results in better interest rates. Inflation, great economic news makes interest rates to go up.
So the bottom line is that a ¾ of a percent drop in the Fed rate does not correlate to a ¾ of a percent in mortgage rate. In fact sometimes when the Fed drops its rate the mortgage rate may not change at all. I have even seen it go up on occasion. Eventually some of the Fed rate percentage drop does affect the mortgage interest rate.
Think of it this way people rush to buy "safer" investments like bonds when there is bad economic news. Investors are looking for the best rate of return. So if they think the stock market is not the best place to be. There is more money in the bond market and sometimes lower rates.
The above is a brief generalization of what happens with mortgage interest rates. It is a complex item. It could take a novel to truly explain everything that affects it and how it affects it in different market conditions.
So what you need to take away from this is that:
1) The fed rate is not the mortgage rate.
2) That the mortgage rate is determined by market conditions especially the bond market.
3) The mortgage rate changes daily reacting to market news and conditions
4) If we as "mortgage experts" could predict interest rates we would be rich just like we would be rich if we could predict the stock market.
There is a point that adjustable rate mortgages should come down, along with credit card rates and home equity loans. The point that I am making is that because the Fed lowered the rate 3/4% does not mean it is going to be a 3/4% of a rate drop in mortgage rates. Tuesdays mortgage rates did not change much. Some banks didn't change at all so changed a 1/8% of a percent. Not 3/4%
Mortgage interest rates almost never correlates or exactly match the fed rate drops. Like I said sometimes I have seen them go up the day the Fed lowers their rate. In fact that is the case this week. Rates are now higher on Friday than one Tuesday when the Fed rate was cut.


The Fed rate and the mortgage interest rate are not directly correlated. The fed rate is a just one of the many factors. It is not the most important by any means. It is more market conditions that influence mortgage interest rates. The price of 10 year bonds influence it more than anything.
Take example Wednesday. Mortgage Rates did drop this morning down 3/8% from Monday's rate. So just comparing the Fed drop to mortgage rate that was just 1/2 of the fed rate drop. But what is even more interesting is what happened this afternoon is that rates jumped back up because the Dow was up. Every bank repriced. I have gotten fifteen emails stating the rates changed. . So tomorrow morning mortgage interest rates may look like they never changed even though the Fed dropped their rate 3/4%
Today's low rates were there for about 4-5 hours!

Like I said, I have seen too many times when the rate was there for a few hours or for a day. I called the borrower to inform them and then they didn't make a decision the same day. And then the rates were gone. It is a tough thing to tell a borrower that they waited to long. I know people that were waiting for it to go lower in 2003 and ended up with a 5.875% rate instead of a 5.375% rate. They didn't make a decision quick enough. When you loan officer calls sometimes you have to make a quick decision. There are lots of loan officers that will tell you horror stories of people not wanting to lock a rate and then upset that they didn't.
During 2003 there were times when the Fed lower the rate and the mortgage rate actually went up. That is because sometimes the market has already figured in the Fed's drop and other market conditions outweighed it.
I hope this explains it a little better. If a consumer and real estate agent is more informed about the mortgage process the higher the comfort level they will have. Your home is your biggest investment. Hopefully the rates come back down a little for all the people that need to get out of their adjustable rates. We all want them to keep their homes and help stabilize our economy a little more.
For more mortgage and real estate information and to search Oakland County real estate, or Southeastern Michigan homes for sale go to my website www.russravary.com Have a great day! Russ Ravary

Lower mortgage rates this week

Hello Michigan,

Many people do not follow the mortgage market. Here is the latest update. Mortgage rates for 30 year fixed mortgages have dropped below 6% in the last few weeks. The people that this might be good for:

For people with adjustable rate mortgages this may be an opportunity for you to refinance and lock in a fixed rate. It may even pay to lock in a rate now if you are a year or two out.

For people who bought a home last year, mortgage rates are much lower right now. If you put money down you may be able to refinance and save money. You can even do a no-cost loan and save a substantial amount of money over the 30 years. It may not cost you a dime.
If you want to find out how much you can save or whether you can refinance to a lower rate feel free to call me on my cell at (313) 310-9855 or email me at ourmortgageguy@yahoo.com Feel free to visit my website at www.russravary.com for more mortgage information, or credit scores, credit info.

Low mortgage rates

In the last week rates have dropped below 6%. Mortgage applications in the last week have risen because of the better rates. It is a great time for people who bought last year. Many people that bought last year have rates over 6% and now is a great time. You may be eligible for a no-cost loan or you may just be able to lower your payment.

Also if you have an adjustable rate that is due to expire, it may be the time to look at refinancing. It is a time to think about refinancing your adjustable rate. The bottom line is look at both the costs, the payment, and the APR. For more on Michigan mortgages feel free to go to my website www.russravary.com
My website is full of useful information on Michigan real estate, search Oakland County real estate, Start your Michigan Condo Search, buyers tips.

Have a great night and feel free to contact me with any mortgage or real estate questions.

Russ Ravary

Closing Credit cards and home equity loans is sometimes bad

Did you know that your credit score could drop if you close out unused credit cards. The credit bureaus figure out how much you owe and how much available credit you have. The more you owe the lower your score will be.

For example you have a Visa card that you do not use. It has a $25,000 limit. With all your credit card bills, mortgage, car bills you owe a total of $ 193,625 You have a home equity line and other credit cards that are not up to their limit. You have available credit of 280,000.

The credit bureau looks at 193,625/280,000. You have $86,375 in available credit

If you closed your home equity line and a credit card you now have 193,625 in debt and only 200,00 total credit.

The credit bureau can see you are about maxed out. They lower your credit score because you are a bigger risk.

Sometimes older people have tremendous credit scores because their mortgage is about paid off, they have credit cards but not much is on them. And they have a long history. They have a large amount of available credit so their score is higher.

For more on Michigan real estate, mortgages, credit and credit scoring feel free to go to my website www.russravary.com

basic mortgage information

How to stop renting and buy a home of your own your
Are you looking to buy but have no money,
You can buy with no money down your
Looking to re-finance click here ,
Credit & Credit Reports- How do I improve my credit score,-
Have no idea how credit scores work find out how, -
did you know best credit is unused credit, -
tell me everything about a credit report that you can-
did you know that you can get a free credit report-
how to read your credit report - by doing doing these things can hurt your credit,

Different types of Mortgages-
Can you tell about the key elements of a mortgage?-
what is the difference between a home equity loan and line of credit?, -
here are 6 things you should know about mortgages-
here is a general over all view of the different types of mortgages -
What is an FHA , VA mortgage?-
what is the difference between a fixed rate loan and an adjustable rate mortgage?-
what is PMI? -
determine if an adjustable rate mortgage is right for you -
What types of mortgages does Global Mortgage do?
- here are different types of ARMS (adjustable rates loans) and definitions-
did you know that a forty year mortgage payment is about the same as an interest only payment,
Thinking of buying a home and need a mortgage- Do I need to get pre-approved to buy a home? -
What are the benefits or advantages to own versus renting?-
before you raid the 401K for your down payment read this-
what's the difference between pre-approved and pre-qualified?-
Should I should I buy points to lower my rate?-
Can you explain the bi-weekly programs or how to cut the years down, -
I am thinking about taking a home equity to buy stocks, should I?-
I have had a bankruptcy and I want to buy a home

I have been in the mortgage business for seven years now. I have worked in shops that have specialized in hard to do loans, and a shop that specialized in people with good credit (we beat the banks rates and fees day in and day out) So whether you are self employed, have financial difficulties, been in bankruptcy, or have great credit I can help you out with good rates and lower closing costs. My philosophy is to do more loans at a lower price and I will get more referrals. I will make up the money but getting more loans. It has worked for me over the years. I have done over a $100 million dollars of loans for my clients over the years. What that means to you is that I have a lot of experience in doing loans for people with great credit and for people who have had credit problems. So check out what I can do for you. I am the type of person that I will not do the loan just to make money if it does not make sense for you. There are a lot of mortgage guys that will put you into a bad loan just to make money. So if you are looking for a Michigan Mortgage give me a call at (313) 310-9855 or email me at ourmortgageguy@yahoo.com.
FHA Loans General FHA Loan Information

PMI mortgage insurance

What is PMI and why do you have to have it?

PMI is Private Mortgage Insurance. It is insurance that a lender or bank makes you get when you borrow over 80% of the value of the home. The more you borrow over 80 % the bigger the risk you are. So the bank makes you take insurance out to cover their risk.

The more you borrow the higher the PMI. Different banks determine PMI differently based on the type of loan, the length of the loan, and the percentage of loan as compared to the purchase price of the home. This is called LTV ( loan to value). If you borrow 95% as compared to 85% the PMI is going to be higher on the 95% because you are a bigger risk.

The only way you can get rid of PMI after you get it is to refinance out of it or pay your principal balance down on the loan to 78%. You cannot get an appraisal showing that the value of the home went up. (Even if the amount you owe is only 78% of the market value of the home). The only exception to this is if you did capital improvements to the home such as an addition. Then you have to document the improvements and get an appraisal done. Many times the bank requires you to use their appraiser or an appraiser on their approved list. So you are going to have PMI for at least 5-10 years usually.

So before you get a loan with PMI look at all your options. Some banks and lenders offer a loan with a higher interest rate where the PMI is built into the price. (There is no actual PMI but you are paying a higher interest rate). Or you can split your loan into 2 parts. You can do an 80% loan and then do a 2nd mortgage for the rest.

Let’s say that you want to borrow 95% on a purchase price of a $200,000 home.
You would be borrowing $190,000 total. You would split the loan into an 80% 1st mortgage of $160,000 and a 2nd mortgage of $30,000. You are still borrowing the same amount but split into two loans. The first mortgage is usually at a good rate and the 2nd mortgage is at a slightly higher rate.

When you borrow over 80% of the value of the home (or purchase price). You have three choices.
1) One loan with PMI
2) One loan with a higher rate that basically has the PMI built into the rate
3) Two loans. A first mortgage and then a 2nd mortgage with a slightly higher rate.

PMI is usually not tax deductible but in 2007 it was. It will be up to the law makers on how long it will stay tax deductible.
The bottom line is that you need to have your mortgage person (i.e. Russ Ravary) run the scenarios for all three. The one with the least expensive payment is usually the way you want to go. That is if PMI is still tax deductible, the lengths of the loans are the same, and the rates are fixed. (sometimes the rates on the seconds can be variable, be sure it is a fixed rate)

If you want more information on mortgages go to my website Michigan mortgages www.russravary.com. To to search Michigan homes in the privacy of your home at your convenience go to www.russravary.com

May your work week fly by and your weekend seem to last forever.
Russ Ravary
"your one stop mortgage and real estate specialist"

There are millions of Adjustable Rate Mortgages and balloon mortgages that are coming due in the next year or so. Most of my clients are not in that fix. I was always a thirty year fixed or a fifteen year fixed type of guy. I was raised old school in that you pay off the mortgage.

Unfortunately many accountants, stock brokers, and investment people push clients not to pay off their mortgage for tax benefits, and hopefully investments gains. I myself like the security of knowing that my house is paid off and I owe nobody.

Do you know why mortgage people like Adjustable Rate Mortgages besides the low rates for customers? It is not all in the interest of the client. It is in the interest of the bank, or mortgage broker! If you the client gets a 3 year adjustable mortgage then the mortgage person sets himself up for repeat business in 3 years. That means if you do it every 3 years. He could refinance you 10 times and you still would never be paid off!!! Whereas a fixed person is paid off. Sure they paid more in interest but they are paid off. Plus they did not pay closing costs 10 times. 10 X $2000 in closing costs and you still owe money. It is just keeps coming back to the broker. The broker is setting up a retirement plan off of you!!!!

Then there is other problems that come with it. It is happening in Michigan right now. These are things most brokers never told you about. What happens if the value falls and you were close to 80% of the value of your home 3 years ago. Some Home Values in Michigan have plummeted as much as 20% from there highs. The average is 10 -20% in Michigan right now. That means the customer now has to pay PMI, or stay in the adjustable rate mortgage, or sell the house if they can't afford the new payment. Did your broker tell you that! If you want to check your houses value click here. It is not an appraisal but it will give you a general idea of what your house is worth. For more mortgage information, real estate information, Michigan things to do check out my website at http://www.russravary.com/

So the bottom line is that next time you get a mortgage think about the true cost.

What does getting pre-approved mean to a first time home buyer? It means talking to (preferably sitting down) with a mortgage person. You want to bring your last two years tax returns or w-2's with you.
The mortgage person will ask you questions:

about how much you make a year?

where have you been living?,

are you paying rent?,

if so how by check?, by cash?,

how long you have on the job?,

how much savings you have?,

how many other bills do you have?,

how much do they add up to?,

the price range of house you would like to buy?,

how much do you want to put down?,

who is going to be on the loan?,

how big of a payment you want to have?.

They will take the time to pull your credit and look at it. The important things on your credit report is your 3 credit scores, the amount of debt you have, and your actual credit. How many lines of credit do you have, are you paying them on time, do you have any collections?
These are all things a mortgage person looks at.
But do not be scared. There are many people who think and have thought they would never qualify for a house and they own one now. Many people are approved to buy a home with little or no money down. You have to take the time to pre-approved and pre-qualified. Call me at (313) 310-9855 to get pre-approved for a mortgage or go to my website www.russravary.com

What does ARM mean? ARM stands for an adjustable rate mortgage. What is usually means that you have a fixed rate for a specific period then your mortgage interest rate will adjust up or down according to the index. An ARM can be fixed for 6 months, 1,2,3,5,7 or 10 years. Usually you can figure the longer the interest rate is fixed the higher the rate. For example a 1 year arm "usually" has a lower interest rate than a 10 year ARM.
Why would anybody in there right mind choose a mortgage that might go up in the future? The reasons clients choose an adjustable rate are:
1) They want a lower payment. An adjustable rate is usually lower than a fixed rate.
2) They can buy more of a house. If the interest rate is lower on an adjustable rate mortgage, then the payment will lower. For example a buyer may be able to buy a $270,000 home with an ARM at the same payment they could buy a $250,000 home with a fixed rate. Just because of the lower interest rate on the arm.
3) They are planning to move within the time period of the fixed rate. Say a person is going to move in 2 years. They could get into a 3 or 5 year arm at a reduced rate rather than getting a 30 year fixed loans.
Many people got into 4.75% 5 year arms back in 2003. They have saved themselves a lot of money in payments. It has allowed many buyers to get into homes they could not of otherwise have afforded. It has been a great ride for them and the interest rates are still low enough that they will do okay.
The downside of arms is that rates could be much higher at the end of the fixed period. Or like the market we are in now. They houses are not appraising what they were in 2003. So if you were close to having mortgage insurance back then you might have to refinance with mortgage insurance or take a chance and stay in the loan and hope it does not go up too much. For more information on ARMS go to my website www.russravary.com