Transcription of Brian’s Interview By Bruce Depuyt Of News Channel 8
Bruce DePuyt: Hey, everybody. Welcome in on this Thursday here in the nation’s capital. It is great to have you with us today. We’ve got a terrific lineup on tap for you. Let’s turn our attention now to the awesome mortgage rates that are now available to homeowners looking to refinance and to people looking to buy a home. Rates of 3.5% and change are common. The lowest borrowing costs most of us have ever seen and perhaps the best we will ever get.
If you’ve got a loan that’s above 4.5% say, is this the time for you to refinance? Brian Martucci is with us. He’s been a mortgage broker in the D.C. area for more than 25 years.
It’s good to have you back. Thanks for being here.
Brian Martucci: Thanks, Bruce. Sure.
Bruce DePuyt: This is kind of mind-blowing, 3.5%.
Brian Martucci: Or lower.
Bruce DePuyt: Or lower.
Brian Martucci: Yeah.
Bruce DePuyt: So, seemingly, a great opportunity for people who might be renting, thinking about buying, or you own a home with a rate that’s higher than where rates are now, so you refinance.
Brian Martucci: Right. To put it into perspective, I think this is interesting. I have a chart of interest rates that goes back to 1790, the earliest recorded interest rate history, 220-something years. This is the lowest that interest rates have been except for two times in history. All of the 1940’s, a couple of years in the 1950’s, that’s it. Rates were not lower in the Great Depression of the 30’s, none of the 1800’s and none of the 1790’s.
I feel like this is it. This is the lowest they’re going to get. Maybe we’re going to set new precedent and they’ll go even lower. Who knows, but this is worth looking at for almost everybody.
Bruce DePuyt: So, to what extent are you seeing people come forward with loans of 6% or 4.75% or what have you and say, you know what; I want to seize this opportunity, this moment?
Brian Martucci: It’s a flood. This is the interesting thing to talk about. People need to understand when everybody, and I mean almost everybody, rushes to a product or service, it’s going to be difficult. So I think this is important to talk about. You have to make sure that when your lender locks in your interest rate, how long is it for? Is it sufficient? If they lock you in for 45 days, I don’t think anybody can get a refinance through in 45 days now. We’re taking close to 60, so I lock all my refinances in for 60 days. Purchases are getting preference and they can get done in maybe 30 days or close, but the volume is overwhelming and people need to be careful.
Bruce DePuyt: Purchasers are getting preference over refinancing people?
Brian Martucci: Right because purchasers have contracts, deadlines, movers, they have an earnest money deposit up on that contract and if they meet the deadline, so they have to be given a preference. Refinance, these people are in their homes and there’s really no deadline. They just need to get a lower interest rate, so they have to be – not that they’re pushed to the back of the bus and it takes that much longer. They’re getting their loans and they’re going to closing, but it’s important to analyze who is this that’s going to give me this loan? Do I trust them?
People tend to, and it’s human nature, shop price first. What’s the rate? What’s the rate? That’s it. I would put rate second, third, fourth, last. You need to say, “Are you sure you’re going to get this done? Why are you going to get it done? Have you staffed up to meet the demand? How long are you taking? What have your turn times been?” Nobody’s going to make a guarantee, but you need to ask a lot of other questions besides price.
Bruce DePuyt: Especially if you’re buying because you don’t want to get near closing date with things still in flux. If you’re refinancing, yes, a screw up could mean you don’t get to take advantage of the rates as they are at this exact moment.
Brian Martucci: Right.
Bruce DePuyt: I mean, not to say that they can’t be even as good or even better if things blow up. But, for people where timing is a sensitive issue, you don’t want to mess around with someone who can’t get it done.
Brian Martucci: Right.
Bruce DePuyt: Let me open the phone lines because I know folks at home have questions and comments they want to ask and Brian, as always, will do his best to answer them. If you’re watching us live at the 10 o’clock hour, 703-387-1020. That’s our number. Again, 703-387-1020. We’ll go to the phones as your questions and comments come in. And if you do have a thought, don’t wait until the end. Grab an open line now and we look forward to talking with you.
How good are rates right now?
Brian Martucci: Okay. So interest rates vary day by day. I can quote an interest rate one day and somebody calls back three days later and expects that rate and it can change. Normally, it will go down or stay the same, but be aware that rates change every day.
So right now, it depends on what your loan amount is, your credit score. It’s also hard to quote a generic interest rate because if you have a 683 credit score, you may not get 3.875% with zero points on a 30-year fixed which is only eligible for conforming loans which are $417,000 and below. If you have a $500,000 loan and a 692 credit score, you’re not getting 3.875%. So really, there are a lot of variables.
Bruce DePuyt: So that credit number that you’re doing there –
Brian Martucci: The credit score.
Bruce DePuyt: – 683, 692, is that good or mediocre or bad? What is that?
Brian Martucci: 683 is a tiny bit subpar now.
Bruce DePuyt: Okay.
Brian Martucci: Fannie Mae has raised the minimum credit score requirement. You need to have a 740 credit score or higher to get the best interest rate. So if I have somebody at 739, the difference isn’t much. It goes in stages. 721 to 739, there is a tiny bit of an add-on. They call it add-ons. 700-720, there’s a little bigger add-on. 692 might be a little bigger add-on and then there’s a point where you can’t get a loan, say below a 640 credit score.
Bruce DePuyt: All right. Lots more questions for Brian Martucci. A break here. We’ll step aside for a moment. Back though, with more NewsTalk this Thursday right after this.
Bruce DePuyt: Welcome back to NewsTalk. In just a few moments we’ll be visiting with D.C. Council and Michael A. Brown. Right now, though, we want to pick up where we left off. Our look at mortgage rates, currently around 3.5%, perhaps a once in a generation opportunity to refinance at a very low fixed rate. Our guest, Brian Martucci of GetLoans.com®.
We’ll go to the phones momentarily. We’ll talk with [sounds like] Venicia in Landover. We ask you to stay on the line. We’ll be taking your call momentarily. If others of you would like to jump in with a question or comment, our number is 703-387-1020. We’ll get to as many calls, as many of your questions and comments, as we can.
How do you know when it’s advisable to refinance? How much of an improvement over the rate you have now, and I assume we can just take as a given that if you’re in an adjustable rate, if you have an adjustable mortgage now and you have an opportunity to move to a fixed, absolutely jump at that. But let’s say you’re in a fixed now. How much of an improvement do you have to get over your current mortgage rate to refinance at three and change?
Brian Martucci: Well, there’s a lot of old wives tales, if you will. Well, if the rate drops 1% below your current, that’s the time to do it. But scrap all of that. It’s simple math. It’s recapture period. How much am I spending? How much am I saving? If they’re going to charge you $3,500 in closing costs to the lender, the title company and the appraiser and you’re going to save $80 a month, that could be a three and a half year recapture period and maybe it isn’t worth it. If they’re going to charge you $3,500 in closing costs and save you $350 a month and it’s a 10 month recapture period and you don’t plan to move for three to five years, than it’s worth it.
If somebody is offering you a no closing cost loan, they’re not giving away the closing costs for free. They’re building it into the interest rate. So instead of 3.875% with no points, they might be charging you 4.125% or 4.25% with no points and no closing costs. So if there’s $80 a month in savings and no closing costs, maybe that’s worth it to you. No cost, but there is some paperwork hassle to plan to go through as well.
Bruce DePuyt: If you’ve got a 30-year fixed rate loan and now maybe you have 25 years left, the idea of refinancing into a new 30 is going to seem like something bad.
Brian Martucci: Right.
Bruce DePuyt: Yes, you’re saving on your monthly payment, but you’re resetting the clock.
Brian Martucci: Spend more over the long haul.
Bruce DePuyt: And psychologically, people don’t like the idea of doing that.
Brian Martucci: Right.
Bruce DePuyt: Setting aside the issue of do you expect to be in your house, do expect to potentially move? That’s an individual decision people are going to have to answer for themselves. That being put to the side, is it a fairly straightforward mathematical calculation, this issue of resetting the clock back at 30 or back at 20?
Brian Martucci: Right. Well, that really is the issue. You have to decide – and, of course, it’s guesswork because who knows? You may have a job relocation. Something may happen that may force you to change and move, but it’s really the decision, “How long do I think I’ll be here?” and then do the recapture period and is it worth it.
If you think, “I’ll be here for a long time,” well, don’t keep resetting the clock and refinancing and refinancing. You pay way more over the long haul, although you may improve your cash flow in the interim.
So, I’m refinancing somebody right now who’s cognizant of that and he said, “I want a 25 year loan. I’ve been here for 3 and a half years. I’m not resetting the clock. I will die here. I will die in this house,” and that makes perfect sense. He’s not going to save $400 a month on doing a new 30-year loan. He’s going to save maybe $220, but he’s also going to skinny his loan down from 26 and half years to 25 years and still save $220. I think that’s a home run for him.
Bruce DePuyt: We lost our caller. She wanted to know whether it’s possible to refinance after just one year. You’ve gone through the process. You’re one year in, 12 months in. Can you refinance if better rates come along?
Brian Martucci: You can. You can refinance on a no cash-out refinance meaning you’re just refinancing your existing mortgage to get a better interest rate or to fix an ARM to a fixed rate. They call it seasoning. The only time limitation is if you want to refinance and pull cash out, they make you wait six months. But if you’re just refinancing to refinance and get a better rate, any time.
Bruce DePuyt: A lot of people have a home that is worth today less than what they paid for it. How much is that, the appraisal piece of a refinance, how much is that getting in the way of folks being able to do what they want to do and take advantage of these great rates?
Brian Martucci: Yeah. Some, quite a bit. We’re a little bit fortunate compared to the rest of the country, the D.C. metro area is, I think, the strongest real estate market in the nation. But it depends on where you are in the D.C. metro area. You push out further and further into the counties, Calvert County, PG County, Prince William County, the values are tough and I’ve even seen some problems in the District.
Condos, I’ve seen some condos with a little bit of trouble. Somebody who has bought two, three years ago for X and now it’s – maybe they’re not under water, but they don’t have 20% equity anymore and they have to refinance with mortgage insurance and mortgage insurance is expensive. So if you’re going to pay $150 in mortgage insurance to save $200 a month, it probably doesn’t make sense.
Bruce DePuyt: If you have a loan with somebody now, should you go to them first and say, “Hey, you already have my loan. No one knows better than you that we’re making our payments on time,” etc. Do you go to them first?
Brian Martucci: Well, what I hear, and I used to work for a big bank, so I know their policy and what I’ve heard of some other policy is I think the only benefit you get by going back to the existing loan servicer is they might waive a fee, a $400 or $500 document preparation fee. Maybe they’ll waive your appraisal, $450. That’s it. To me, that’s not enough to make an important decision and as I said at the top of the discussion, I can’t stress enough how important it is to pick somebody based on execution and service. It’s hard to get some people on the phone.
There are some institutions, which will remain nameless, that are taking 90 days. Well, you can’t get a 90 day lock-in on your interest rate, so do you not lock in for 30 days and risk what rates will do? Which seemingly, right now, is a safe bet, but who knows. I would rather take bird in the hand, somebody who says, “I can get your loan done in 45 to 60 days. I will lock-in your interest rate for 60 days.” Forget about a waiver of a minor fee or an 1/8th of a percent difference in the rate. What difference does that make if you don’t get your loan or you go through torture to get it?
Bruce DePuyt: How do you find someone who can get it done? Who’s got the wherewithal to bring it in on time and without a ton of stress?
Brian Martucci: Well, I think you have to ask a lot of questions and it seems, with this fast paced life, nobody asks enough questions when you source a service or buy a product. Ask a lot of questions. How long have you been in business? How long has your company been in business? What are your turn times for loan processing and underwriting and getting me to the closing table? Is there any guarantee? They’ll say no, there never is, but I would ask the question anyway. All of this is put in writing. Yes, it is, but it’s good to ask and it’s good to see it. Ask a lot of questions and get some sort of inference for why they’re going to get the job done.
If you’re uncomfortable with the answer, if their answer is, “Oh, well don’t worry,” or, “Oh, just trust us,” or, “We’re getting it done, don’t worry,” that’s not good enough to me. You need some more hard facts and some tough questions and answers.
Bruce DePuyt: We’ve seen changes in the industry as the result of the collapse of 2008, 2009. What role are they playing in the borrowing process now? And I know that the answer is sort of once set of answers for buyers, another for refinancers. Walk us through those pieces of it.
Brian Martucci: Right. Well, the economic implosion, and really seemed to affect the mortgage and real estate world the most, it just made things more difficult for everybody, purchase and refinance, in that there is now an incredibly strict interpretation of rules that have always existed, but maybe weren’t interpreted too strictly, and now there are new rules that have gotten more strict and more strict.
So it’s really complicated to get any loan through. There’s really not a differentiation between purchase or refinance, but across the board, the four sectors of getting a loan, appraisal, credit, assets and income, they’ve batten down the hatches on all of those and the underwriters are really underwriting right now. It’s pretty tough.
Bruce DePuyt: You used to hear about points. Can I presume now that it’s pretty much a standard, don’t pay points. Don’t have that added, just sort of like nonsense fee.
Brian Martucci: Yeah.
Bruce DePuyt: Get the best rate you can with best entity you can and no points.
Brian Martucci: I think so. Most people, we’re so transient here in D.C. and the mid-Atlantic in general and most of us probably across the country, to pay points. Again, it’s comes back to recapture period. Usually you’ll get about 1/4 % rate reduction per one point. One point is 1% of the loan amount. On a $400,000 loan, that’s $4,000 per point and it might save you $60 a month. So you do the recapture period and it’s about five, five and a half years, and that just doesn’t seem to make sense for most of us, certainly not a refinancer. I think the closing costs are expensive enough. You start piling on thousands and thousands of dollars of points; it stretches your recapture period out way too far.
Bruce DePuyt: I don’t want to take you beyond your considerable expertise, but I am curious and I’ll bet people at home are too. When is it going to come back? There are folks who bought at the peak of the market. Not their fault. We only know sort of the ups and downs of any market, housing being one of them. Once we are looking at it in the rearview mirror, and at that point we’re all experts, but it’s too late if you will. For folks who bought at the peak of the market and things have gone south, do you have a gut for when they’ll get back to at least what they may have paid?
Brian Martucci: Right. Well, of course, that’s all speculation, but I do have an opinion. I think that when this implosion happened, and real estate started to get soft arguable in ’06, and then in ’08 things really fell apart institutionally. Every year since ’06, well this is just a blip. Well, it’s going to come back next year. I mean, it’s been coming back every year, really, since ’06 and it’s going to come back next year.
But it’s not in my humble opinion. I think this is really fundamental, structural part of the macro economy and we know those are really serious issues. It’s not coming back next year. It’s a long time, but I think it always does come back. So if you can hang on, I think it’s year. I think it could be three to five years from here. That’s my guess.
Bruce DePuyt: Can people still reach you at email@example.com?
Brian Martucci: They can.
Bruce DePuyt: All right. So, Brian Martucci, who’s been doing mortgage work in this area for 25 plus years, though he doesn’t look it. Reachable online at firstname.lastname@example.org. Thanks for being with us today.
Brian Martucci: Thanks, Bruce.
Bruce DePuyt: Good to have you as always.
Brian Martucci: Appreciate it.
Bruce DePuyt: We’ll step aside here; get you caught up on the day’s top stories and the forecast after this.