In December 2015, HME teamed up with the first grade class at Holy Nativity School to decorate and stuff stockings that will be used as tray favors for Kapiolani Medical Center for Women and Children.
Hawaii Mortgage Experts, Hawaii’s largest mortgage brokerage, is truly dedicated to helping their clients obtain the best possible mortgage. Founded by husband and wife team Don and Deanna Butler in 2008, Hawaii Mortgage Experts has become the gold standard for integrity, professionalism, expertise, and customer service.
“We work very hard for our business, team, and clients. We make sure that our advisors are given all of the tools and resources possible to help improve the financial position of our clients by giving them access to great products at great prices,” says Don Butler, Chief Executive Officer. “Knowing that we’re saving our clients thousands of dollars over the course of their loan makes us all feel really good about our work. Offering so much to our clients along with having expert company support and streamlined systems promotes a very positive work/life balance.”
Mortgage brokers save homebuyers time and money by shopping various lenders on their behalf. “We are not limited to the constraints of one bank,” Butler continues. “We search both the local and mainland lenders to help customers find the best possible loan to meet the client’s financial goals.” Hawaii Mortgage Experts does many types of loans ranging from conventional, VA, FHA, USDA, and Jumbo home loans. They are one of the few providers with the knowledge, experience, and expertise to handle everything from the simple and straightforward loans to the very complex applications.
Hawaii Mortgage Experts is built strong with a team of 32 can-do professionals who remain focused on staying ahead of the curve. The team works hard and plays hard too. The goal, Butler says, is to have a well balanced life.
The company offers incentive pay, bonus trips, great company events, matched 401k plans, health care, and vacation benefits. A flexible work schedule also helps employees accommodate personal and family needs, while ensuring that the work still gets done at the highest level.
“Our large number of repeat clients and customer referrals speaks loudly to the great job we do,” Butler notes. “Everyone within HME truly enjoys helping clients find the best loan to fit their financial goals while providing access to rates that are routinely cheaper than our competition. Our success is driven by helping more people save more money. Having such a positive approach to business is at the root of why Hawaii Mortgage Experts has become one of the Best Places to Work!”
In December HME partnered with Family Programs Hawaii to host a toy drive for foster children in our community. In addition, we also volunteered at Family Programs Hawaii annual Christmas party where we hosted a record breaking 1,272 keiki and 822 parents in the foster care system!
Hawaii Mortgage Experts Proudly Sponsors Wounded Warrior Project and the Excel Soccer Club (shown below with the 2014 UH soccer team).
Wounded Warrior Project is a veterans service organization that offers a variety of programs, service and events for wounded veterans of the military actions following the events of September 11, 2001. It operates as a nonprofit 501C organization with a mission to “honor and empower Wounded Warriors” of the United States Armed Forces, as well as provide services and programs for the family members of its registered “alumni,” as its registered veterans are called.
HME sponsored a half page ad in 2013 and 2014 for the Wounded Warrior Project run in the Hawaii Business Black Book Edition. This Black Book is edition is renown in Hawaii’s Business Community as it offers executive biographies of Hawaii’s top 250 companies. With Hawaii’s most affluent and influential business company executives reading and keeping this special issue this will likely large donations to Wounded Warrior Project. We are honored to be able to help drive donations and support for the Wounded Warrior Project.
Excel Soccer Club helping out at the 2014 UH Women’s Soccer Game
It’s obviously easier to picture the process of estimating value on an existing property in a neighborhood that has a history of home sales, but the task of determining the value on new construction projects does pose some challenges.
Appraisals on homes that haven’t been built yet generally require the contractor and home buyer to supply more documentation in order to get a more accurate estimate of the property’s value.
The main purpose of this article is to give an overview of the appraisal process for a home buyer that is building a home vs purchasing standing inventory.
For some, building a new home can be both exciting and overwhelming. Watching a project transform from idea to completed home with a front yard, white picket fence and a custom red front door is a rewarding experience.
Even if you are paying attention to all of the information from the beginning, there are still several details that have a tendency to catch even experienced builders off guard.
Game time decisions have to be made as cabinets and corners line up differently than the initial drawing could show, flooring doesn’t match the wall colors, or the sun hits a window the wrong way at dinner time.
While the last minute updates may cost you more money, they might also have an impact on the value of the property.
What Does An Appraiser Need For New Construction?
The plans or construction drawings are usually done by your builder or architect. It lays out the floor plan of your home, sizes of rooms and square footage of your home.
They should include a floor plan layout, front elevation, real elevation & side elevations, mechanical and electrical details.
Specifications / Descriptions Of Material –
A “Spec” sheet has the type of construction materials you will be using. For example, whether your home will be built with standard 2 x 4′s or 2 x 6′s.
It also contains the type of insulation, roofing and exterior products that will be used in the construction, as well as floors, counter tops and appliances for the inside dressing.
Cost Breakdown –
The document that breaks down all of the costs associated with the construction, including land, building materials and labor.
A lender can generally provide you with blank forms for the spec and cost breakdown if your builder does not have them.
Plot Plan –
Shows where your home will sit on the site, any accessory buildings, well and septic locations, if applicable, and the finish grade elevations and direction of the drainage.
Once the lender has obtained the above information from you, they will forward a copy to the appraiser. It is the appraiser’s job to determine what the future value of the home will be once it is completed, per your plans, specs & cost breakdown.
Even though an appraiser will use the cost approach in the appraisal report, it is not the value that will ultimately be used by the lender. The market approach to value, which uses existing sales of homes similar in size, quality, construction and location is the most common approach that lenders want for new construction.
The more complete and detailed your plans, specifications and cost breakdowns are, the more accurate your appraisal will be.
Once your home is complete, the appraiser will be asked to go out and inspect the home. They will report back to the lender what they have found, whether your home was completed according to the plans and specifications originally given, and if the value is the same as originally given in the report.
Sometimes the value has to be adjusted due to changes that were made during construction which may have affected the value of the home.
Frequently Asked Questions:
Q: Where can I obtain a set of plans?
Most builders have basic plans they work from, and make modifications specific to their clients’ needs. When building a custom home, it’s generally a good idea to work with a reputable architect.
Q: Is there a form I can use for the list of specifications?
Yes, HUD has a generic form that most lenders use and it will give the appraiser most of the details they need to complete your appraisal. Anything not listed on this form can be added by you separately on an additional sheet.
Q: Can I use my contract with the builder for the cost breakdown sheet?
In most cases, the lender will accept the contract, however, they will want the builder to provide a cost breakdown to ensure that the builder has accurately bid your home.
While the basic Rule-of-Thumb for acceptable credit history is a minimum of four trade lines documented on a credit report, there are alternative methods of building a credit picture that an underwriter can use to make a decision for a loan approval.
For potential home buyers with little or no credit history, keeping records for 12 months of paying bills on time is essential for mortgage loan approval. In fact, loan officers will appreciate receiving proof that you have paid a variety of accounts regularly and on time. Even if you do not have a credit history, or your credit report isn’t as good as it could be, this may enable you to get a mortgage.
The industry term for this is “thin credit.”
Some loan types, namely FHA and USDA, will accept alternative credit sources in order to establish proof of financial responsibility.
Alternative credit is unreported to the bureaus, but will still be verified and can be instrumental in a home loan approval.
Those with thin credit don’t usually have bad credit, but have just not had an opportunity to build enough traditional credit, such as bank/store credit cards, auto loans, etc.
Alternative Sources for Building Credit:
- Rental History – Canceled checks and letter from property management company
- Medical Bills – 12 months of statements from medical billing company showing paid as agreed
- Utilities – power, gas, water, cable, cell phone
- Auto Insurance
- Health / Life Insurance – as long as it’s not auto-deducted from pay check
We can preach communication, service and education all day long, but it’s our ultimate goal to earn your trust so that you can be confident in our ability to successfully lead you through this complex mortgage process.
Since mortgage rates can change several times a day, the following questions will help determine whether or not your lender truly knows what to look for so that they can provide you with the best rate once you’re in a position of locking in your loan:
Who determines mortgage rates, and what are they tied to?
Mortgage interest rates are determined by the pricing of Mortgage Backed Securities or Mortgage Bonds. The media often implies mortgage rates are based off the 10-year Treasury Note, which is incorrect.
While the 10-year Treasury Note has been known to trend in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions.
How often do mortgage rates change?
Mortgage rates may change throughout the day, however they only change on days when the Bond markets are trading securities since mortgage rates are based on Mortgage Bond prices.
Think of a Mortgage Bond’s sales price similar to that of a Stock that trades up and down during the course of a day.
For example – let’s assume the FNMA 30-Year 4.50% coupon is selling for $100.50. The price is 50 basis points lower from the previous day’s closing price of $101.00.
In simple terms, the borrower would have to pay an additional .50% of their loan amount to have the same rate today that they could have locked in the previous day.
Mortgage Bonds are largely affected by various market forces that influence the changing demand for bonds within the market. Some of the key economic factors that have the greatest impact are unemployment percentages, inflationary fears, economic strength and the overall movement of money in and out of the markets.
Like stocks, most fluctuation is caused by consumer and investor emotions.
What do you use to monitor mortgage rates?
There are several great subscription based services available to monitor Mortgage Bond pricing.
The key is to make sure the lender is aware they should be monitoring Mortgage Bond pricing, such as the Fannie Mae 30-Year 4.50% coupon… and not the 10-Year Treasury Note or the news media.
It is a common misconception that when the Federal Reserve implements a rate cut it is immediately correlated to a reduction in mortgage rates.
The Federal Reserve policy influences short term rates known as the Fed Funds Rate (“FFR”). Lowering the FFR helps to stimulate the economy and increasing the FFR helps to slow the economy down. Effectively, cutting interest rates (FFR specifically) will cause the stock market to rally, driving money out of bonds and creating potential for inflation.
Mortgage Bond holders need to obtain a higher rate of return on their money if inflation is increasing, thus driving up mortgage rates. With the Federal Reserve Board meeting every six weeks, this is an important question to ask. If your lender does not have a firm understanding of this relationship, they may leave your rate unprotected costing you thousands of dollars over the life of your mortgage.
Do different programs have different interest rates?
Conventional, FHA and VA loans can all carry different rates on a 30-Year fixed mortgage. FHA and VA loans are insured by the Federal Government in the event of defaults. Conventional mortgages are insured by private mortgage insurance companies, if insurance is required.
Typically, FHA and VA loans carry a lower rate because the investor views the government backing as less of a risk. While rates are usually different for each program, it may be more important to compare the monthly and overall cost during the life of the loan to determine which program best suits your needs.
Why is an Adjustable Rate Mortgage (ARM) rate lower than a fixed rate mortgage?
An Adjustable Rate Mortgage (ARM) is usually fixed for a specific period of time. The period is typically 6 months, 1 year, 3 years, 5 years or 7 years. The shorter time period the rate is fixed, the lower the interest rate tends to be initially.
This is due to the borrower taking the future risk of increasing interest rates. The only instance where this would not be true is when there is an inverted yield curve where short-term rates are higher than long-term rates.
Why are rates higher for different property residence types?
Mortgage interest rates are based on risk-based pricing. Risk-based pricing allows adjustments to par pricing for risk factors such as; FICO scores, Loan-to-Value percentages, property type (SFR, Condo, 2-4 Units), occupancy (Primary, Vacation or Investment) and mortgage type (Interest Only, Adjustable Rate etc).
This allows the investors who lend their money for mortgages to receive additional compensation for taking additional risk.
If the borrower encounters a financial hardship, are they more likely to make the payment on the home they live in or the one they rent out?
Related Mortgage Rate Video:
Lower mortgage rates is a common misconception that is perpetuated by the mainstream media when the Fed makes an announcement of lowering rates.
However, when the Fed cuts interest rates, mortgage rates can actually increase.
According to Wikipedia:
The Federal Reserve System (also known as the Federal Reserve, and informally as the Fed) is thecentral banking system of the United States.
This system was conceived by several of the world’s leading bankers in 1910 and enacted in 1913, with the passing of the Federal Reserve Act. The passing of the Federal Reserve Act was largely a response to prior financial panics and bank runs, the most severe of which being the Panic of 1907.
Over time, the roles and responsibilities of the Federal Reserve System have expanded and its structure has evolved. Events such as the Great Depression were some of the major factors leading to changes in the system.
Its duties today, according to official Federal Reserve documentation, fall into four general areas:
- Conducting the nation’s monetary policy by influencing monetary and credit conditions in the economy in pursuit of maximum employment, stable prices, and moderate long-term interest rates.
- Supervising and regulating banking institutions to ensure the safety and soundness of the nation’s banking and financial system, and protect the credit rights of consumers.
- Maintaining stability of the financial system and containing systemic risk that may arise in financial markets.
The Federal Reserve controls two key interest rates in this country:
These are overnight lending rates used by banks when they lend money to each other.
When these rates are low, money is cheaper for banks to borrow, and that “cheap” money spreads throughout the economy.
The aim of the Federal Reserve in its interest rate policy is to either speed up or slow down the economy. In times of economic downturn, the Federal Reserve will cut rates to help create a boost. Conversely, in times of heavy inflation, the Fed will raise rates to help slow down the economy.
That’s it; speed up or slow down….no tricks.
When the credit crisis began to spiral in 2007, the Fed cut rates dramatically in hopes of jump-starting the economy. The Fed keeping rates near zero is an indication that the economy is moving along at a steady pace. If the economy improves to the point where inflation starts to creep up the Fed will begin hiking rates.
The Fed and Mortgage Rates:
Mortgage rates are tied to mortgage bonds, which are traded every day on the secondary market just like stocks.
Bonds are often considered a safer investment than stocks since they yield a constant rate of return.
During times of market turmoil, investors sell their stock holdings and move into bonds (called a “flight to safety” in financial jargon).
Conversely, when the economy is booming, investors move their money away from bonds and into stocks to take advantage of the upswing in the economy.
Remember, The Fed cuts interest rates to boost the economy.
When investors see this boost, they sell their bond holdings and move into stocks.
This movement causes the rates on those bonds to increase naturally as the bonds have to attract new investors with higher rates of return.
As a result, we see mortgage rates increase.
So, the next time you hear the Fed cutting interest rates, don’t assume mortgage rates will simply follow suit. The rate cut is simply meant to boost the economy, which moves money from bonds to stocks, and causes mortgage rates to rise.
Many people believe that interest rates are simply set by lenders, but the reality is that mortgage rates are largely determined by what is known as the Secondary Market.
The secondary market is comprised of investors who buy the loans made by banks, brokers, lenders, etc. and then either hold them for their earnings, or bundle them and sell them to other investors. When the secondary market sells the bundles of mortgages, there are end investors who are willing to pay a certain price for those loans.
That market price of those Mortgage Backed Securities (MBS) is what impacts mortgage rates.
Typically, investors are willing to accept a lower return on mortgage backed securities because of their relative safety compared to other investments.
This perception of safety is due to the implied government backing of Fannie Mae and Freddie Mac and the fact that the Mortgage Backed investments are based on real estate collateral. So, if the loan defaults there is real property pledged against potential losses.
In contrast, other investments are considered more risky, specifically stocks which are based on earnings and profit vs real property. The movement between the two investment vehicles often dictates mortgage rates.
Why Do Mortgage Rates Change?
Mortgage rates fluctuate based on the market’s perception of the economy.
Stocks are considered riskier investments, and therefore have an expected higher rate of return to compensate for that risk. When the economy is thriving, it is presumed that companies will perform better, and therefore their stock prices will move higher. When stock prices move higher – MBS prices generally move lower. Mortgage Backed Securities, however, thrive when the economy is perceived as not doing well. When investors forecast a faltering economy, they worry that the return on stocks will be lower, so they frequently engage in a ‘flight to safety’ and buy more secure investments such as Mortgage Backed Securities. Mortgage rates are actually based on the yield of those Mortgage Backed Securities.
Bonds are sold at a particular price based on their value in relation to other available investments. When a bond is sold it yields a certain return based on that original purchase price. As the prices of the MBS increases because investors seek their safety, the yield decreases. Conversely, when investors seek the higher returns of stocks and the MBS are purchased in lesser quantities the price goes down. The lower price results in a higher yield, and this yield is what determines mortgage rates.
How Would I Know if Rates are Expected to Go Up or Down?
When the economy is growing or is expected to grow, stocks will likely become the more favored investment.
When investors buy more stocks, they purchase fewer MBS, which drives the price down.
When the price of the MBS is lower, the yield increases.
Since mortgage rates are based on the yield of the 30 Year MBS, you would expect rates to increase in this environment.
When the economy appears to be slowing or is doing poorly, investors typically move their money out of the stock market and into the safety of the MBS.
This drives the price of these investments higher, which results in a lower yield.
Since mortgage rates are based on the yield of the 30 Year MBS, you would expect rates to decrease in this environment.
Since these market variables and expectations change multiple times as economic reports are released throughout the course of a week, it is not uncommon to see mortgage rates change several times a day.
Understanding how rates move is not necessarily as important as having a loan officer that is equipped with the technology and professional services to track and stay alerted at the precise moment rates make a move for the better or worse.
When shopping for a new mortgage loan, you may notice an Annual Percentage Rate (APR) advertised next to the note rate. The inclusion of an APR is actually mandated by federal law in order to help give borrowers a standard rule of measurement for comparing the total cost of each loan.
The APR is designed to represent the “true cost of a loan” to the borrower, expressed in the form of a yearly rate to prevent lenders from “hiding” fees and up-front costs behind low advertised rates.
According to Wikipedia:
The terms annual percentage of rate (APR) and nominal APR describe the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a loan, mortgage, credit card, etc. It is a finance charge expressed as an annual rate.
- The nominal APR is the simple-interest rate (for a year).
- The effective APR is the fee+compound interest rate (calculated across a year)
The nominal APR is calculated as: the rate, for a payment period, multiplied by the number of payment periods in a year.
However, the exact legal definition of “effective APR” can vary greatly, depending on the type of fees included, such as participation fees, loan origination fees, monthly service charges, or late fees.
The effective APR has been called the “mathematically-true” interest rate for each year. The computation for the effective APR, as the fee+compound interest rate, can also vary depending on whether the up-front fees, such as origination or participation fees, are added to the entire amount, or treated as a short-term loan due in the first payment.
What Fees Are Typically Included In APR?
- Origination Fee
- Discount Points
- Buydown funds from the buyer
- Prepaid Mortgage Interest
- Mortgage Insurance Premiums
- Other lender fees (application, underwriting, tax service, etc.)
Since origination fees, discount points, mortgage insurance premiums, prepaid interest and other items may also be required to obtain a mortgage, they need to be included when calculating the APR. Fees such as title insurance,appraisal and credit are not included in calculating the APR.
The APR can vary between lenders and programs due to the fact that the federal law does not clearly define specifically what goes into the calculation.
What Does APR Not Disclose?
- APR on a loan tied to a market index, like a 5/1 ARM, assumes the market index will never change. But Adjustable Rate Mortgages always change over the course of 30 years.
- Balloon Payments
- Prepayment Penalties
- Length of Rate Lock
- Comparison between loan terms – EX: A 15-year term will have a higher APR simply because the fees are amortized over a shorter period of time compared to a similar rate / cost scenario on a 30-year term.
APR Comparing Examples:
- Bank (A) is offering a 30 year fixed mortgage at 8.00% APR
- Bank (B) is offering a 30 year fixed mortgage at 7.00% Note Rate
Easy choice, right?
While Bank (B) is advertising the lowest Note Rate, they’re not factoring in the origination points, underwriting / processing fees and prepaid mortgage interest (first month’s mortgage payment), which could essentially make the APR much higher than the one Bank (A) is advertising. So Bank (A) may show a higher rate due to the APR, but they could actually be charging a lot less in total fees than Bank (B).
Before lenders and mortgage brokers were required to state the APR, it was more difficult to find the truth about the total borrowing costs of one loan vs another. When comparing mortgage rates, it’s a good idea to ask your lender which fees are included in their APR quote.