Why buyers don’t have to rush to get low rates

34452646_SInterest rates are on the rise, but that does not mean you must rush right now to purchase a home. Interest rates move slowly, and even with an increase, you’re still seeing historically low rates.

How low?

You can get a 30-year fixed-rate mortgage with an interest rate of less than 4 percent. Ten years ago, in 2006, that same loan carried a 6-percent rate. If you go back 10 more years, to 1996, the rate was over 8 percent — you don’t want to go back to the 1980s, when rates never dipped below 9 percent and climbed as high as 18 percent.

Yes, rising rates make it a little more expensive to borrow money, but those same rates also pay you more on your savings. So if you’re squirreling away funds for a down payment, the increased interest payoffs may almost negate the higher mortgage payments.

Plus, there are more important factors for you as a buyer than what the financial markets are doing. You need good credit, a strong income and savings beyond a down payment.

Also, know what’s going on in your housing market. Are properties languishing on the market, or are sellers fielding multiple offers above asking price? If things are slow, you should prepare to move forward with a mortgage loan, as you’ll have a chance to find a property that matches your criteria and budget. If houses are going under contract before they hit the multiple listing service, there isn’t as much urgency — your market is already extremely competitive and waiting to get your finances in order won’t mean a missed opportunity to get a great deal.

Rates haven’t moved too much, but they will eventually. Talk to your lender and figure out a strategy that gets you a competitive rate without rushing you into a decision.

Connecting with today’s consumer: The New Buyer Path

By John Seroka and Dave Zitting

36660765_SThe complexity of the sales and marketing process is at an all-time high. This heightened level of complexity has evolved to where it is today – beginning with the Internet going public back in 1995. Yet the skill and knowledge level of many marketing departments, especially in the mortgage industry, has not kept pace.

Many marketing professionals continue to try and force-fit their marketing strategies to align with an outdated buyer path known as the “sales funnel.” The theory behind the funnel is that a consumer, who could be investigating a mortgage lender begins with the many companies they are aware of, and as they move closer to making their final decision, companies are subtracted and narrowed down to the one that will win their business. Along the way, marketers communicate a variety of messages, customized to speak to wherever they might be in the funnel.

This funnel, developed in 1898 and still used today, articulates four stages: awareness, interest, desire and action.

Here’s how it works.

In the “awareness” stage, a potential borrower may be aware of many lenders that can provide home financing. This awareness was developed by companies leveraging “push” marketing tactics that include magazine ads, billboards, TV ads, direct mail and other items.

In the “interest” stage
, a borrower realizes they have a need to investigate certain mortgage companies they feel could meet their needs. So, they naturally subtract those that may be too far away, don’t resonate with them, and those that family or friends may have never used or didn’t come recommended to them by a trusted source.

In the “desire” stage, the borrower narrows down the options to one or two.

Next, they take “action” and choose a company to work with.
This progression seems logical, so what’s the problem? The problem is this: the Internet has ushered in a new dynamic that makes the funnel completely irrelevant – unless you live in the mountains or off the grid where you have refused access to any modern technology.

Let me explain …

The funnel does not take into account how people today interact with the Internet before they decide to work with you and fill out an application. It is focused on a push marketing methodology.

Studies show that 87 percent of consumers now travel a less linear, more complex pathway to a decision to do business with you. This is due to the availability of so much information on the Internet. Not adjusting your sails accordingly means you’re simply turning a blind eye to today’s reality.

So, if the funnel is outdated, what is the new buyer path to purchase?
It’s called the “purchase loop.” It’s defined as a “loop” because it is non-linear and allows for consumers to enter into the path at different points and even bounce around between various points depending on how they think and make decisions on an individual level. Where the funnel was designed for the masses, the loop is designed for individuals. This is a critical distinction to understand so you can make sure you create content on the web that’s necessary to elevate your brand according to individual mindsets.

Within the purchase loop, there are several states of mind the buyer can experience. These include openness, realized want/need, learning, seeking of ideas/inspiration, research/vetting and finally the post-purchase mindset.

Let’s take a look at each of these states of mind and how to accommodate them.

Openness:
When a consumer is in this state, they may not even know they need to take a look at home-financing options. But they are open if they come across information that strikes their curiosity.

For example, a consumer comes across an article that informs them that there’s a lot of home inventory on the market and now could be a great time to negotiate a great deal on a new home. That might inspire the consumer to look at whether they could qualify for a home loan and how much they could borrow.

How would they come to this conclusion? By coming across a piece of content that strikes their curiosity, like an infographic, video or a blog post.

Realized want/need: In this mindset, a consumer starts checking out the housing inventory online and then realizes that they will need to look at financing options. So, they run off to Google and type in “mortgage loan options for first time home buyers.” If your company is to appear in the first page of the results, make sure you have a competent SEO strategy in place.

Our consumer probably hasn’t come to the conclusion they need a low down payment loan yet. So they will seek more information by entering other keywords or phrases and may then come across some piece of content entitled “5 Mortgages That Require No Down Payment or A Small One.” Maybe you even give the option of filling out a form to download information that might be helpful to your prospect.

Learning: Our consumer begins to understand that there are a number of options available to them depending on their specific circumstances, so they are receptive to learning more from you because they filled out that form earlier. So, you might follow up with them by emailing information that further explains the different options available and how you may be able to help.

Seeking of ideas/inspiration: Now our consumer is in the mindset of looking for ideas and inspiration because they are seeking content that will motivate them to continue down the path. Helpful content at this stage may include case studies or testimonials from clients who, because they worked with you, had a positive outcome.

Research/vetting: In the Research and Vetting phase our consumer realizes they will be purchasing a home. So, it would be good if you could offer them information on rates, fees or a mortgage calculator to help them make the decision to work with you.

Post-purchase mindset: In the post-purchase mindset, the new borrower will decide whether or not to recommend your company to others or decide whether they will do business with you again. They may provide you with a rating on Facebook, Yelp, or any number of venues.

This model takes into consideration a person’s EMOTIONS (very important) and understands the process isn’t linear – that a person can bounce from one stage to another.

As I mentioned before, the purchase loop really came into being because of how we, as a society, use the internet today. If you think about each one of these purchase states, great brands provide some type of content, be it blogs, videos, infographics and more to help the process along. And this is the key to connecting with today’s consumer!
- See more at: http://www.seroka.com/connecting-todays-consumer-new-buyer-path/#sthash.RZhs63HL.85EnKfEI.dpuf

This post was co-authored by Dave Zitting, CEO, Primary Residential Mortgage and John Seroka, Brand Consultant and Principal in the Los Angeles office of Seroka, a full-service brand development and strategic communications firm specializing in the mortgage industry. and was originally published in California Mortgage Finance News, a California Mortgage Bankers Association publication.

The first step you should take toward your new home

3486735_SVisiting open houses in your dream neighborhood is a fun way to spend your weekends, but it won’t get you closer to your goal of buying property. When you’re serious about purchasing your first home, you need to know how much money you’ll have to spend. That’s why you should talk to a lender and get prequalified or preapproved for a mortgage loan.

What’s prequalification?

The lender will perform an initial evaluation of your creditworthiness. You provide your income, debt and other relevant financial details, and the lender will crunch the numbers to figure out how much money you might be able to borrow. Of course, the lender hasn’t confirmed any details of your financial situation, so the prequalification number is just a rough estimate.

What’s preapproval?

A step closer toward a mortgage application, loan preapproval means you go through the full mortgage-application process. Fill out the paperwork, and the lender verifies your income, employment history, credit report and other details. Then the lender will decide what interest rate you’re eligible for and how much you could borrow.

Does that mean I have a loan?

Being preapproved or prequalified for a mortgage loan doesn’t guarantee anything. You still could fail to secure a mortgage loan for your desired amount or terms. However, both processes let an expert give you a sense for how much money you could have to work with. And a buyer with a prequalification or preapproval letter from a lender may be more appealing to sellers.

Before deciding where to put the couch in your dream home, talk with a lender. He or she will help you make sure your home-buying aspirations line up with your financial situation.

The mortgage that could double your down payment

3871040_SMost lenders require a down payment equal to at least 20 percent of the purchase price for a conventional loan. Anything less and you’ll have to pay private mortgage insurance (PMI).

But what if you don’t have the funds to put down 20 percent? One option is a piggyback mortgage.

Three parts, one mortgage

Also called an 80-10-10, the piggyback mortgage is made up of three things. There’s the first or main mortgage loan, which is usually for 80 percent of the sales price. The next piece is a second mortgage for 10 percent of the sales price. It’s also referred to as a second mortgage, home equity line of credit or home equity loan. The final part is your 10 percent down payment.

The good and the bad

You already know that a piggyback mortgage can help you avoid PMI on your loan. So, what’s the disadvantage of this type of loan?

You’ll pay closing costs on both loans. Also, the second loan will have an adjustable rate that’s likely to be higher than the first loan’s rate, so climbing rates will hit your checkbook. Piggyback mortgages usually require a high credit score than other low-down payment options, such as a Federal Housing Administration loan. But these disadvantages can be overcome with some careful planning and the counsel of your lender.

A piggyback mortgage isn’t right for everyone — each borrower’s situation is unique. However, it’s a great option to consider if you’re a strong mortgage candidate who’s a short on the down payment.

Take advantage of mortgage related tax deductions

2830656_SIf you’re looking at taking out a mortgage to buy a home, refinance an existing loan, or remodel your property, you will want to analyze all the relevant monthly costs. When you’re calculating the loan costs and other expected expenses, remember to consider the potential tax benefits.

The National Association of Realtors estimates that home owners save an average of $3,000 annually in taxes due to deductions related to mortgages and property tax. Make sure you factor potential savings from the many available deductions into your buying decision.

Mortgage interest
You may know that interest paid on a mortgage is tax deductible. But did you realize that mortgage interest on a refinance, a home­ equity loan, or a home­ equity line of credit may be deducted as an expense?

Discount points
If you paid points to lower your interest rate, those may be deducted for the year in which they were paid. Discount points on a refinance are also eligible for tax benefits but must be amortized over the life of the loan.

PMI
You can deduct private mortgage insurance for a primary residence and a vacation home, as long as you don’t rent out the second home.

Property taxes
Taxes you pay on the real estate you own can be deducted from your federal income taxes.

These items are just some of the ways you can reduce your tax burden when you take out a mortgage loan. The statement you receive at your loan’s closing will show you what is allowed to be used on your tax return. Some items will be tax-deductible while others will count as personal expenses.

While your lender can certainly help you understand the financial implications of your borrowing decision, it’s always a good idea to visit with a tax professional who can analyze your situation.

Keep an eye on your credit report

9182720_SImagine that you’ve scrimped and saved for a down payment, worked hard to pay your bills on time, and found the perfect home that’s in your budget. It sounds like the perfect set up for a happy ending.

But then you submit your mortgage application, and the mortgage lender says that you don’t qualify for a mortgage loan with your poor credit. You get a copy of your credit report and realize that someone stole your identity and ruined your credit score with unpaid debts.

Do you think that scenario is far-fetched? Well, the IRS reports 2.7 million people in 2014 had their identities stolen. But if you stay on top of your credit report, you’ll know when something is amiss—before it gets out of hand. The best part is that you can check your credit report for free.

Each of the three national credit-reporting companies—Equifax, Experian and TransUnion—is required by law to provide you with a free copy of your credit report once a year at your request.

How many reports you request and when you make those requests is up to you. If you’re just checking your credit periodically, spacing them out can help you monitor any changes. If you know you’ll be applying for a mortgage loan soon, you might choose to get all three at the same time. Comparing all three can help you look for errors or address problems.

Go to www.annualcreditreport.com. This is the only website authorized by the federal government to provide the reports you’re entitled to receive. You’ll be required to provide some personal information to confirm your identity.

Monitor your credit report to ensure that there aren’t any surprises when you apply for a mortgage loan. It’s a free process that only takes a few minutes.

The requirement of title insurance

36413931_SDuring a property sale, the title company will perform a search, combing public records to verify the property’s chain of ownership and any issues that might affect whether title can be transferred to another owner. You wouldn’t want to purchase a home only to learn that the seller didn’t have the right to sell it to you or that the property is subject to liens for unpaid taxes.

This due diligence usually catches any problems and enables the seller to present a clean title of ownership. But what if the title company misses something? That’s why title insurance was created.

Title insurance comes in two flavors: the lender’s policy and the owner’s policy.

As the name implies, the lender’s title insurance policy protects the amount they let you borrow. This policy goes with the mortgage, so if you refinance, you’ll need another one.

The owner’s policy stays with the property and protects you, the owner, if someone makes a legitimate claim to your house.

Most lenders require that you purchase a lender’s policy, but owner’s policies may be optional, depending on your location. Who pays for these policies—buyer or seller—is subject to negotiation or may be established by normal business practices in your area.

Is it likely that a contractor will emerge and claim you owe him thousands of dollars that the previous owner didn’t pay? Probably not. But that’s the nature of insurance—it’s a waste of money until it’s not.

Different states have different regulations regarding title insurance. Check with your mortgage company to understand what you’re required to purchase and the best options for your situation.

What you should know about VA loans

11278885_SAs many as one third of home-buying veterans don’t know there’s a loan product designed just for them!

After 70 years of success, you would think that every veteran and active-duty service member would know about the Department of Veterans Affairs home loan program. Given that stat, it’s not as surprising that there are myths about VA loans. Here are a few.

Myth: They’re issued by the VA. Nope. Any lender who participates in the VA program can handle your loan, but the Department of Veterans Affairs is not a lender—it just guarantees the mortgage loan.

Myth: You have to pay PMI. Also not true. Unlike FHA loans, VA loans do not require private mortgage insurance, which saves borrowers a few hundred dollars per month.

Myth: You can only get one. Not only can you use this earned benefit over and over again, you can in certain cases have more than one VA loan at the same time

Myth: They require excellent credit. Not really. VA loans are typically less stringent about credit scores than conventional loans. In this regard, VA loans are similar to FHA products, which also approve borrowers with lower credit scores.

Myth: You can’t get one if you’re overseas. If you grant power of attorney to your spouse, or someone else, to act on your behalf in a transaction, you can use a VA loan to buy a home. Your spouse is the only person who can satisfy the occupancy rule, but if you’re serving overseas, you could get an extension to occupy the home.

If you’re eligible for a Department of Veterans Affairs mortgage loan, find a qualified lender. These products have been helping veterans and active-duty service members borrow funds for homes since the 1940s. Make sure you’re getting your full, earned benefit.

Up and coming areas in which to invest

45070128_SBuying a property in a popular area can cost a lot of money. If you plan to stay in your home for a few years, it might be worth it to look for an up-and-coming ZIP code—before it gets hot.

While luck plays a role in determining which area to invest in, there are signs that indicate a neighborhood might be headed in that direction. Here are some things that can help you find a place where future prices could appreciate considerably.

Portable toilets

Where there are portable toilets, there are construction workers building homes and remodeling others. Not every home renovation signals an explosion of a neighborhood, but several projects in a rundown or less-desirable area could indicate things are on the rise. 

Transit investment

Light-rail stations and other transit hubs aren’t built in places where there isn’t demand. Plus, nearby public-transit options usually increase a property’s value. Watch a community’s transit planning and look for properties around scheduled projects.

Bars, shops and restaurants

Notice lots of new commercial activity? Hip bars and trendy boutiques don’t usually open in places that won’t attract any customers. If you notice construction on these types of businesses in one area, look at what’s available for housing.

These signs don’t prove that a neighborhood is poised to take off, but they point you in the right direction. A real estate professional or other property advisor can further analyze the market you’re interested in and help you make a better informed decision.

When you do find a property to buy, your lender can point to appropriate products, such as a Federal Housing Administration 203k loan, which lets you borrow enough to buy and rehab a neglected house.

Unauthorized Email

This morning you may have received an email from me that I had no knowledge about. The list of people who received it came from my contact list off one of my social media pages. Please disregard and delete it, and I am truly sorry if this caused you alarm. My team at PRMI is in contact with the social media site to rectify this “hack” of my contact list so it doesn’t happen again.