August 21, 2017
The right answer is not always obvious, and Orion’s brokers are there to help their borrowers and remind them to do homework before starting. Ask yourself these questions:
1. Does a client want a fixed rate? Interest rates on mortgage have increased since the election of Donald Trump, but not excessively. Over time, interest rates are expected to increase further but 30-year mortgage rates are still very low. If a client has a variable interest rate, now might be the time to lock in a lower rate. But the bottom line advice doesn't change: Keep the term as short as possible to save the most money.
2. How Long Has the Client Been in the Property? And How Long Do They Plan to Stay? If a client has only had their mortgage for a few years, our brokers know that the mortgage balance has not reduced by much. And if they continue to refinance every five years, the balance will barely budge. If refinancing, make sure the client plans to stay in the home long enough to get the benefit of amortization. Frequent moves and refinancing activity can make owning a home a worse economic decision than renting.
3. Can the Client Qualify? Although it is starting to get easier to qualify, mortgage standards remain tight. Typically, the three most important parts of an application would be the credit score (above 660 is optimal), LTV and debt-to-income ratio.
4. Does the Client Have the Cash to Cover Closing Costs? Closing costs are not small. Some closing costs can be financed, subject to the LTV. If someone is trying to reduce the monthly payment, that might be just fine. If the goal is to save money, Orion is the right place to come as we keep closing costs low.
5. Has the Client Shopped for the Program with the Best Mortgage Rate? When shopping for a mortgage, your Orion AE can help determine what information to gather to ensure you obtain the lowest rate.
Remember that lowering a monthly payment and saving money are not the same thing. By lowering a client’s monthly payment, you are likely increasing the total cost of owning the home. Orion will help you do the math and fully understand how much more the home will cost. If a client is having difficulties paying their current mortgage payment, refinancing could be a good way to adjust to a new economic reality.