What is “Locking a Loan”?

by Steve Heideman on October 20, 2015

When should you lock in a loan? Is there a “best time”? What happens if rates go down after you’ve locked? What if you change the loan package from 30 years to 15 years? There are consequences for changing your mind after you’ve locked in a loan, and maybe it’s not worth a switch. As it turns out you are able to switch the type of loan package you want even if you’ve already locked, the lender just goes back to the day you said “Lock in my loan” and looks at the rate for the 15 year loan instead of the 30 year you initially locked with. So whatever the rates where the day you tell your mortgage broker “Lock my loan” those are the rates they use. Rates can change daily so your initial quote from a broker might vary slightly, good or bad, depending on getting in your loan application and when you are ready to lock in.

To learn more contact Arizona mortgage broker, Mike Goblet with United Mortgage Financial Group, Inc. at 408-503-3533 or visit us online at http://www.arizonamortgagenews.com


Matt O’Brien: Welcome back to another segment of Arizona Mortgage News. We’re here with our local expert, Mike Goblet of United Mortgage and Financial Group. Good morning, Mike.

Mike Goblet: Good morning, Matt. How are you this morning?

Matt: Fantastic.

Mike: Great.

Matt: Sounds like we’re going to talk about what’s involved in locking a loan.

Mike: One of the other 10 things you really need to know about the mortgage process, locking is obviously an interesting part of that a lot of people feel that when they go to a bank, or they call me and they say, “Where are our rates?” and I give them a quote based upon the generalized information I have.

A lot of people think, “Well, that’s the rate. That’s what they will get.” The answer is only maybe.

Matt: Why is that?

Mike: It’s for several reasons. One, as everyone knows or I think as most people know, rates can change. As a matter of fact, they can change many times within the day. That’s not unusual. In either direction, better or worse, because they’re tied to the stock market.

Until I really take, myself, or a bank takes a complete application, runs the credit, you really aren’t giving anybody an accurate quote. Even then, until the person says, “Lock in that rate,” you’re floated which meaning you’re subject to whatever is happening to the stock market in rates at that moment in time.

I’ve tried to lock people who said, “Go ahead and lock,” and the lender’s locking desk was closed because of a rate change in either direction.

Matt: I see.

Mike: Until you say, “Lock that loan,” and until the loan officer is able to complete that, your rate is floating and subject to the market circumstances.

Now, that being said, the locking process is actually pretty simple. All I really need is the person’s permission to lock, or acknowledgement that’s what they want to do. I don’t need all the documentation to have received it in order to lock.

I can lock with somebody as soon as they say, “Lock in that rate,” and I’ve completed the application.

Matt: What happens if the rate goes down after you lock in and complete the application?

Mike: There’s two things. Once when you lock, it’s important to understand you’ve locked in to that moment in time of wherever any rates are.

That becomes important because a lot of people going through the process will say they start out with a 15year, or even a 30year then want to switch to a 20, or back to a 30, or whatever. What happens is the loan officer goes back to that time and date when the loan was locked and that’s where they get that information.

Even if you changed terms during the process, you’re still locked in to whatever was going on at that point.

Now, to answer specifically your question, what rates drop? A lock means just what a lock means. You’re locked in to that time and date, whether rates go up or rates go down.

There’s a caveat to that and I’m sure many people have heard, “Well, my bank said I could float down if rates get better.” The answer is those programs exist but they’re not without guidelines and cost, as a matter of fact, whether they’re built in to the initial rate, meaning you start out at a higher rate and it lets you float down to a certain level.

Most of what the industry calls floatdowns mean that the parameters are you need to be changing the rate at least the quarter of a percent from where you locked that and that it has an adjustment or a cost of 0.375 percent of whatever the loan amount is. For example, on a $200,000 loan, that’s a $750 adjustment.

Now, when you look at those two caveats, the situation being you really need a dramatic market change, not just some improve in the rates, to take advantage of the floatdown. The type of change that generally never happens within a 30, or 45day period. It happens over along the period of time. The reality of a floatdown is really seldom viable.

Now, it becomes a question as well as what’s your commitment now that you’re locked? In terms of the client, there really is no real commitment. When a loan officer locks somebody, it’s on the good faith belief that that person is going to proceed with the loan.

If that person locks away from a locked loan, there’s no real consequence to that client. There’s no charge that can or should be assessed against that client. There’s no obligation when you lock a loan to continue with it.

If rates do improve and you decide it’s to your benefit to change lenders within the process, you can do that without consequence. That being said, the loan officer does make a commitment. When we do that, we tell our bank or lender, “We’re going to provide you this loan. You’re going to tie up your money until we complete it.”

The bank takes that seriously because you’re tying up their money. People like myself, loan officers and companies that work through those banks, have the commitment of what they call fallout that if we provide too many loans, that fallout don’t go to completion, some lenders will drop those banks, or loan officers, or mortgage companies.

If their fallout becomes to great or maybe they won’t let them lock until all the paper work is in, there’s different consequences, but there are consequences.

Matt: Very good. As in life, there are consequences.

Mike: My real situation that I say just to client is when you lock, don’t look back. If you took a bird in the hand and that should be your real decision, you’re pretty happy with what you got, it was a good program, take it and only look forward, don’t look back.

Matt: Makes sense.

Mike: Finally, when your loan officer has locked you in, they should be sending you what’s called the locked GFE which, by the way, starting next week, that becomes something different called the loan estimate due to the changes in what’s called TRID which I will talk about in the next series.

Starting next week, there are major changes both to what used to be called the good faith and the closing documents that you sign that used to be called the HUD settlement statement. That’s for another day.

Matt: It looks like I got some funky thing going on here. I didn’t realized that that was going on.

Mike: If you didn’t. I thought you were trying to make me smile. You were very successful.

Matt: As always, great segment, Mike. For those that want to get in touch with you, what is the best way to get in touch?

Mike: You can call me at the office at (480)503-3533, call my cellphone directly at (480)220-2329, or you can email me at mike.goblet, at our company initials, @umfginc.com.

Matt: We look forward to you on the next segment, Mike. Thanks for sharing your wisdom.

Mike: I do too. I hope everybody will come back to learn what the changes that are being imposed on the mortgage industry, the consequences it will mean. By the way, like almost anything the government does, they’ll be good sides and bad sides to it.

Matt: As always. Have a great day, Mike.

Mike: You too. Talk to you soon.


Understanding Title Insurance

by Steve Heideman on October 5, 2015

If you own a home you’ve bought Title Insurance, it’s a part of the home buying process. Unlike homeowners insurance that is ongoing coverage, title insurance and the title company works a little differently. Many people don’t understand it entirely just maybe nod their head in agreement or remember they signed the closing papers there. The role of the title company is to check the property for any liens against it and to act as a neutral third party between the insurance company and lender. Incidentally, they also act as a neutral third party holding company at closing between the buyer and the seller. It might seem like a common sense step but we sometimes forget that people commit fraud and leave behind debt or unpaid taxes often. If you fail to have the title checked and cleared then you’d be on the hook for previous owners debt. To learn more about what title insurance and what a title company does contact United Mortgage Financial Group at 480-503-3533 or visit us online at http://www.arizonamortgagenews.com/contact-us/

Matt: Welcome back to another segment of “Arizona Mortgage News Insider Update.” We’re here with our insider, local resident Mike Goblet of United Mortgage and Financial Group. Good morning, Mike.

Mike Goblet: Good morning, Matt. How are you?

Matt: Doing quite well in this fine Arizona weather we have.

Mike: Yes. It’s the monsoon season.

Matt: Yes, indeed.

Our title today looks like a good one. “What Is Title Insurance and Why Is it Necessary?”

Mike: Yeah, title insurance is part of every mortgage transaction, but people rarely understand what it’s about and why it is necessary. I thought it would be a good clarification point.

Matt: Excellent.

Mike: If you’re buying a home, there’s really only one step to the process…excuse me, if you’re refinancing your home, but if you’re purchasing, it’s two step.

Even before we get into those steps, let’s talk a little bit first about the title company and their role. They are designed to be a neutral third party assisting in the transaction. And they end up doing much of the work regarding the title search.

In a purchase, they also provide another role in that as the escrow company between the buyer and the sellers handling the cash. Again, as a neutral third party.

What they do in terms of the title insurance is they do the search for what are called any “clouds” on the title for the ownership of the property. That any liens that might be filed by somebody, they check to see.

Then the title company, they are the ones who issue what’s called a “Loan policy” for the property that assures that the lender, or the new lien holder that number one, there are no clouds on the title and number two, that they are in the first position of that lien.

Matt: Makes sense.

Mike: That’s a consistency to whether it’s a purchase or whether it’s a refinance. But now the next step, if it’s a purchase, there’s also an extended search that needs to be done to make sure going back further in history.

You can picture on a refi, you’re talking about a continuation or retained ownership. There’s lesser things that could have happened to that title. If there’s been different transactions going on, the history needs to be deeper and a stronger amount of research.

Now, in a purchase, this is called an “Owner’s title policy,” and it’s usually paid for by the seller. OK? It’s more in depth and actually costs more, but it’s required before the title company will issue that lender’s policy that insures the lender that they’re in that first position.

The only caveat I might make to that is it seems like in most builder situations, builders usually end up making the new buyer pay for that policy as well. As I said, normally it’s paid for by the seller.

The question is, what are they looking for? And why is this necessary? Well, the obvious is that they’re looking for such things as court filed liens, like a mechanic’s lien for work that may have been done against the property. The mechanic or the person that did the work not getting paid can file a lien.

HOA’s can file liens against homes and properties. Tax liens often happen. These are the most common, OK? And the easiest part.

The title company in its due diligence must go deeper. For instance, they also check that the title and the deed for any omissions or errors. They have to search for fraud or forgery that may have occurred on the policy. Things that we say, “Well, this can’t happen.” No, the mortgage meltdown proved this can happen, and it’s why title policies and the research regarding it become even more important.

But there’s even nuances out there that we never even think about, like conflicting wills against the property that may exist due to just variations that may have happened during the property’s ownership.

Or undiscovered heirs that can come out of the woodwork saying, “I didn’t know about it, and now I have a claim against the property.” The title company will do the research against that, and candidly will even provide an insurance policy, but it’s not the same one that the lender policy is. It’s a separate program that you might want to buy, for instance, as the homeowner, called the “Owner’s policy.”

You can see this can get a little complicated, although at the end, we just go, “No, it’s all clean.” There’s a lot of research that needs to be done to make sure that the ownership of a property is consistent and there’s nothing out…any encumbrances out there that could affect that purchase or the ownership.

Matt: Is this something that the insurance companies do the research on to investigate?

Mike: Well, the title company does the research for the insurance company. Actually, you even remember in a prior dialogue we had here, it’s the underwriter’s job to make sure for the lender that there are no liens, again, that are on there. But the title company is the one who did the work for both the insurance company and the underwriter.

Matt: Got you.

Mike: A lot of people then wonder about the fees. Well, generally it’s a very competitive industry. And the fees are usually very comparable, but title and the choice of title is something you can choose if you want to do the research and pick your own title company. OK?

Usually in a purchase transaction, the buyer’s Realtor chooses the title company. OK? But even sometimes a FSBO transaction or a cash transaction, you’re going to want to use a title company to make sure that everything remains there, whether it’s required or not, because there’s not a mortgage there.

The role of a title company is very important.

Matt: As always.

Mike: Bottom line. It’s a requirement for every new mortgage, even if you’re purchasing, as I said, purchasing for cash you’d be foolish not to get it. I just hope this helps you understand a little bit about what you’re getting for and why you’re paying for it.

Matt: It sure does. Well, if anybody has questions regarding title insurance or just mortgage questions in general, what’s the best way to get in touch with you, Mike?

Mike: Well, obviously you can call me here at the office at 480‑503‑3533. Call my cell phone directly. Happy to talk with you at any time, even after hours. Traditional business hours or weekends. That’s 480‑220‑2329. Or email me at mike.goblet at our company initials, umfginc.com.

Matt: Very good. Thanks for another enlightenment or weekly dose of good information.

Mike: Well, happy to provide. Look forward to our next one. It will be a wrap on the things to know about the loan process.

Matt: Very good. Have a good day, Mike.

Mike: Thanks, Matt. We’ll talk to you soon. I look forward to talking to anybody that has questions.


Understanding the Underwriting process

by Steve Heideman on September 22, 2015

Underwriting: it’s talked about a lot during the mortgage process but what actually do they do? It’s like a mysterious dimension that a pile of all your financial information just floats around in “Underwriting World”, before getting spit out as approved or denied. Mike Goblet, of United Mortgage Financial Group gives the insight of what actually happens behind the scenes and explains what exactly Underwriting is reviewing and looking to see in your file. To learn more or if you have more questions contact United Mortgage Financial Group at 480-503-3533.

Matt O’Brien: Welcome back to another segment of Arizona Mortgage News: Insider Update. We’re here with our resident expert, Mike Goblet of United Mortgage and Financial Group. Good morning, Mike.

Mike Goblet: Good morning, Matt. How are you this morning?

Matt: Not too bad. Surviving the heat.

Mike: There’s a lot of that going on this past week, hasn’t there been?

Matt: Absolutely. We can’t all understand the weather here, but it sounds like you can help us understand a little more about the process of underwriting.

Mike: This is part of the series that we talked about ‑‑ things to understand during the mortgage process. One of the key things, if you’ve ever done a mortgage or heard about them, you hear about underwriting and underwriters almost being a scary terminology in the process.

Matt: Yes, absolutely. They’re usually pinned as the bad guys.

Mike: They’re often perceived that way. I think it’s important to understand their role, and actually, what are they looking for. Essentially, an underwriter’s role covers two areas ‑‑ verification of the applicant and verification of the property.

Now, the underwriters usually fall into what they call the four Cs of underwriting. The Cs are capacity, credit, cash, and collateral. That’s a simple understanding. Now, three of those reflect the applicant, verification of the applicant. Let’s look at each of them.

What does capacity mean? What capacity is, and what the underwriters looks at, is the ability of the applicant to repay the mortgage. That’s really the term that’s used today, the ability to repay. The underwriter goes in. They check first to make sure that the information on the application is essentially correct.

Number two, that the debt‑to‑income ratios of what was said, and versus what we can prove with income and salary, etc., does meet the ability to meet the ratios that are allowed. Does that make sense?

Matt: Makes sense.

Mike: The credit, from that point, once they’ve verified the income, and etc., they will review the credit report. They really look at that in terms of this determines, as we’ve talked about in the past, the risk level of the client.

That, first and foremost, begins with your credit scores. The higher your credit scores, the less risk you are considered, the lower your credit scores, the greater risk you pose. But there are other things on the credit report besides just your credit scores that we get.

They need to look at, is there anything in your history of late payments, etc., that jump out, that say, “This person could be a risk.” Number two, they look at, are there any bankruptcies or anything showing on your credit report? Even though you might have a good score today, but that could influence or impact your ability to qualify for this mortgage.

They go through the capacity, in terms of the ability to repay, the credit report to view the risk level. And then the third C is cash. To make sure that the income, or the cash that you’re saying for the transaction, is available.

For instance, if it’s a purchase, that the money is there, or will be there. That becomes important, because you can’t just come up with cash for a transaction and all of a sudden say, “Hey, I had it under the mattress. And here it is.”

Money has to be seasoned for 90 days to be part of the transaction, or come from sources that are consistent, like a paychecks now coming up, and that will help provide the cash or the sale of a current home so that you have the down payment.

These are the things that the underwriter looks at when it comes to the cash portion of the transaction. The fourth C gets into collateral. What that means is the property itself, the collateral for the loan. This is where the underwriter is actually responsible to review the title.

They don’t go get the title, but they have a title company do that, but they then review it for the accuracy, make sure there are no liens on it, or what are often called “clouds on title,” that could impact the loan to the lender down the way.

They do that. They also then review the appraisal when it comes in to make sure that the appraiser did the appraisal correctly, that if there are any notes made by the appraiser, how that could impact it. For instance, an appraiser might say, “There is a problem with this,” and so the underwriter has to go in and say, “This has to be fixed before we can approve it,” if that makes sense.

Matt:  It certainly does.

Mike:  They go through the appraisal. And then finally, there are other situations about the collateral that they have to verify. That involves the insurance. Pretty simple, the homeowner’s insurance make sure it’s up to date, and that there’s a year’s coverage paid in advance.

Then actually, a fourth thing that many people don’t consider is a flood certification. We often hear from clients saying, “I don’t need a flood certification or the fee attached to it. I’m not in a flood plain.” It’s the underwriter’s job or task to prove that, not just accept it or think that’s the case. They need to prove it.

Part of every transaction, there will be a flood certification that’s necessary to prove it’s not in a flood plain, or if it is, that flood insurance is needed. It’s not a junk fee. Whether it’s shown or covered with the rebates that we talked about in the past, the flood certification is a necessary part of proving the collateral meets all the responsibilities for it.

The underwriter does all this in the viewpoint of, “Can we sell the loan to the secondary market, Fannie or Freddie, or the private investors that they use, and just make sure that the loan is cleared and prepared for that step?”

This is the person that actually does say, “Yup, everything is in order, and we approve the loan,” or, “No, we don’t approve it, and for these reasons.”

Matt:  Got to pay attention to the four Cs, it sounds like. That flood insurance always throws people in Arizona.

Mike:  Actually, the funny part about that, in Arizona, and I get a kick out of this, that actually, if you look at the hundred year flood plain, almost all of Phoenix is in the hundred year flood plain. If we got the rains that are going on in Texas right now, people who didn’t think they were in a flood plain probably end up in one.

Matt:  For sure. Good stuff to know. You don’t really have any influence over the underwriters other than getting your ducks, your four Cs in a row, before you send it that way.

Mike:  Actually, that’s a very important part. Because part of what we do with Jean, my daughter and processor, is really good at working with underwriters and has worked with them through the years.

She knows how to prepare the file for what they will be looking for, ask for things in advance so that we can make the process go smoother for the underwriter, because Jean works with them on a daily basis and pretty well understands what they’re going to be looking for.

Matt:  That’s a great experience to have. That doesn’t come with all the mortgage crew, does it?

Mike:  No, it does not. We take everybody’s loan very personally and try to make sure that it will get approved when we think it will, at the very beginning, and help the underwriter understand, “This is why it makes sense.”

Matt:  Excellent. This was, as always, great information. If people do have questions about the underwriting or mortgages in general, what’s the best way to reach out to you, Mike?

Mike:  You can call the office, here, at 480‑503‑3533. You can call my cell phone directly at 480‑220‑2329, or email me at mike.goblet at our company initials umfginc.com.

Matt:  Excellent. Stay cool, Mike. Thanks again for another good segment.

Mike:  You, too, Matt. Have a great day. Look forward to the next one.

Matt:  Sounds good.

Mike:  Have a good day.

Matt:  Bye‑bye.


Understanding The Appraisal Process

July 20, 2015

The appraisal of your home is a necessary part of the mortgage process.  It also might be the least understood part.  A lot of nuances are involved of the appraisal process and can be confusing to many people.  The appraisal takes into account square footage, lot size, pool, extra buildings on the land, etc.  It’s […]

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Choosing the Right Rate and Program

July 1, 2015

There are a lot of different things to consider when selecting a mortgage.  It’s not as easy as “I’ll take the lowest rate today.”  There are things your loan provider should ask you as everyone’s situation is different and their goals in owning a home are different.  You may have done your “homework” and decided […]

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Debt-To-Income Ratio – Part 4

June 25, 2015

On this episode of Arizona Mortgage News: Insider Update, Mike Goblet, of United Mortgage and Financial Group discusses DTI.  DTI is Debt-to-Income Ratio. It has to do with how much money you make versus what your bills are. Pre‑mortgage meltdown, people used to be able to do things like just stated income.  Unfortunately, with the […]

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Two Acronyms to Learn – LTV & PMI – Part 3

June 18, 2015

In today’s episode, resident Arizona Mortgage expert Mike Goblet  talks about some tricky acronyms – LTV & PMI. LTV is “Loan to value.” LTV is one of the key elements in determining a mortgage and what the rate will be.   LTV stands for the percent of ratio of money you are borrowing versus the value […]

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Qualifying for a Mortgage – Part 2

June 10, 2015

If you want to qualify for a mortgage in Arizona, the best place to start is at United Mortgage Financial Group. First, there is an application.  Then, a credit report is pulled to determine your eligibility and DTI.  DTI is debt to income ratio which should not be more than 38%.  Once everything is reviewed, […]

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The Impact of your Credit Scores – Part 1

May 28, 2015

The first of a 10 part series on what you need to know about mortgages. Today, Mike Goblet talks about the impact your credit score has on qualifying for a mortgage.  Banks use your credit score as the first determination of risk you pose to them of defaulting.  It becomes the foundation for the whole […]

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How To Shop For A Mortgage

May 11, 2015

The first thing you should always do when you start looking for a mortgage, is to shop for it. Checkout other lenders and see what the programs are.  Don’t ever assume the first offer your getting is likely to be your best offer.  It is important to get to the bottom line.  To do that, […]

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3 Questions You Need To Ask When Trying To Decide To Buy or Rent!

April 29, 2015

There are three questions that everyone should ask when thinking about renting or buying. 1. How long do you think you’ll be in that place that you’re going to move into? If you’re only going to in your new home for two years or less, in most cases, it’s probably more beneficial to rent than […]

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3 Reasons Why the First Half of 2015 Will Be The Best Time to Buy a Home or Refinance

January 21, 2015

If you are in the market to buy a new home, now is the best time to buy. All indications point to the first half of 2015 being the best time to buy a new home or refinance. With rates now close to the lowest levels they were in 2013, makes it better in terms of […]

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Changes to Fannie Freddie that may help Home buying easier for many people in 2015

January 9, 2015

Some changes have come into effect for 2015 that might make home buying easier in the Phoenix area. Earlier this year Fannie and Freddy changed their guidelines that almost all lenders use. Which is, they allow gift money from a family member to be used up to 100 percent of the down payment. So, for […]

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The 3 Most Important Things A New Home Buyer Should Be Doing Before Beginning To Look!!!

October 16, 2014

There are things people should be doing before making the decision “I want a new home.” There are things that will make the process easier for them, to help them overall in finding the right home, and equally as important, the right mortgage product. It is important before you even begin to look to: Know […]

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New Changes in Guidelines if you have had a recent Short Sale

September 24, 2014

In August of 2014 this year, Fannie May changed their guidelines. For homeowners who have had a short sale, in the past, the guidelines made homeowners wait two years if the were putting down 20 percent and four years if you were putting down 10 percent.  However, this August, the guideline has now been changed to […]

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Learn: When Choosing a Higher Interest Rate Can Give You a Lower Monthly Payment

September 2, 2014

It is an interesting concept – save money every month at a higher interest rate?  That doesn’t make sense.  Mike Goblet of United Mortgage Financial Group of Phoenix Arizona explains how. When choosing a higher interest rate, you can do those things, including giving you a lower APR. However, to get the lower rate, you […]

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What are the Advantages of a VA Mortgage?

July 24, 2014

Being a veteran provides a lot of benefits that the government supports. One of the real advantages that has been around for many, many decades has been the VA mortgage loan.  The VA loan is one of the best programs out there.  The pricing is significantly better with a VA loan than that of a […]

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Why Don’t Banks let you choose your own rate?

July 8, 2014

Wouldn’t it be nice to choose your own rate?  Well, you can.  In this edition of Arizona Mortgage News, local expert Mike Goblet of United Mortgage and Financial Group discusses what banks provide you during the mortgage process and why being armed with information prior to getting a mortgage can save your thousands of dollars. […]

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Getting Down Payment Money Just Got a Little Easier

June 27, 2014

In the past, obviously, one of the biggest problems that people have had is saving enough money for the down payment. Particularly, for first time home buyers, that’s a big obstacle. As home prices have risen, the amount of money that’s needed has always gone up proportionately as a result and become an obstacle for […]

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Forecasting 2014 Mortgage Rates

February 13, 2014

In the last edition of Arizona Mortgage News, local expert Mike Goblet of United Mortgage and Financial Group covered the changes in qualified mortgages.  Today he addresses, among other things, what will happen to rates in 2014. The short answer: rates are going to go up. In this video, Mike will shed light on why, […]

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