Finding a Loan on Zillow category archives

Freddie Mac just released their quarterly Refinance Report, which shows that half of borrowers who refinanced a conventional loan during July-September 2009 lowered their mortgage rate by at least 17 percent, or 1.1 percentage points below their old rate.  The accumulated savings from all of these refinances amounts to $3 billion over the first year of the new loans.

What’s driving people to refinance their homes?  Historically low mortgage rates. 

Current mortgage rates are significantly lower than they were just a few months ago. Today’s average 30-year mortgage rate of 4.78 percent is now 77 basis points (or 14 percent) lower than it was in June, when the 30-year fixed mortgage rate was at 5.55 percent, the highest level this year.

That means that on a $200,000 loan (assuming a home value of $250,000), the monthly principal and interest payment would now be $1,046.91 versus $1,141.86 for the same loan in June, saving the borrower $94.95 per month, or $34,182.00 over the life of a 30-year loan.

If you are thinking about refinancing, now is a great time. An easy way to shop for a mortgage is through Zillow Mortgage Marketplace.

• Submit an anonymous loan request, and receive unlimited custom quotes from lenders.  On average, borrowers receive 26 quotes within seconds. 
• Sort and filter quotes by APR, rate, fees, monthly payment, lender rating, distance to the lender, or True Cost, which incorporates interest rate, fees, points, and time into one easy-to-compare number.
• Use the interactive Break-Even graph to determine how long you need to live in your home to offset the cost of refinancing.  This graph also show the cumulative savings that will occur over the life of the new loan.
• After comparing quotes side-by-side and reading lender reviews and ratings, you decide which lenders to contact…they don’t call you.

I have found that few things in life separate the sheep from the goats men from the boys efficient from the not-so-efficient like the free market does.

Earlier this week, I received an email from the people at Zillow saying that they were making changes to their Zillow mortgage marketplace and were going to start to charge lenders for each contact with borrowers and my first thought was:

“Well, this oughtta be fun to watch”.

I think it might be the social scientist in me that casually enjoys watching people squirm whenever a perceived “big change” is announced - whether it is a global, national, corporate or maybe even just a marketplace change.

It has been my experience that whenever change occurs, there is almost always a group of people who thinks change is “fun” - no matter what it is - and finds a way to adapt to the change and continue on with life. It has also been my experience that there is also a group of people who resist change and can’t figure out why they never end up on the good end of the changes.

If you enjoy seeing both sides (and everything in between), be sure to follow the debate about the recent changes Zillow announced and how people are reacting to them.

What This Change Means For You: The Consumer

If you are a consumer, be sure to put Zillow on your Holiday greeting card list. They did you a big favor by making sure that lenders are valuing your contact - in fact… they are making your interest and qualifications a “market”.

If you are interested in a loan, have good credit, good income, good assets and want to buy a $500,000 house do you think you are more valuable to speak with than someone who has lousy credit, no money and wants to find out how to use the $8000 tax credit to buy a house?

Of course you are.

So now the lenders on the back end are going to be actually “bidding” for that interest and hoping that you contact them.  When you do contact them (hint: if I were you, I would contact one of the ones who has a stellar reputation), then they will be charged.

Just a hunch here, but I wouldn’t be surprised if Zillow doesn’t start out segmenting you as a customer and assigning a different value to you based on certain criteria, they will over time.  Which will only help the process.

I know, I know - it still remains to be seen just exactly how much money Zillow will be willing to pay lenders to talk with people who have lousy credit and no down payment (that was a joke) but one thing is almost certain:

Now that there is a price-tag that lenders are going to be paying each time you contact them - you as a consumer have an even higher chance of getting the best service from your loan officers working right here on Zillow.

Or, maybe I should say it like this: It seems to me that if a lender has to pay $100 for you to talk to him, you have a better chance of getting his/her full attention than if they didn’t have to pay anything for you to talk to them.

Or at least that is where I always try to put my mouth… where my money is.

Zillow Mortgage Marketplace recently launched a unique Break-Even Point graph on every loan quote borrowers receive from lenders.  This graph helps borrowers who want to refinance determine their “break-even” point, which is when they would start saving enough from a new loan to offset the costs of refinancing.

After anonymously submitting a refinance request, borrowers are presented with custom quotes from a network of thousands of lenders.  When borrowers click on an individual quote to get more information, they can view this new graph which indicates how long they need to live in their home to offset the costs refinancing.

In addition, the graph shows the cumulative savings that would occur over the entire life of the loan.  Borrowers can use the interactive feature to scroll across the graph to see the accumulated savings in each year.

On Zillow Mortgage Marketplace, the average borrower gets 24 quotes in 6 seconds.  With the launch of this new feature, Zillow calculates and creates an interactive Break-Even Point graph on each refinance quote instantly, something that would be very difficult for borrowers to do manually.

Given the historically low mortgage rates we’ve seen this year, refinancing a mortgage is something that many homeowners are considering right now.  This new graph helps borrowers quickly and easily compare the break-even point on all the refinance quotes they receive to determine which loans make the most financial sense for them.

If you are looking to refinance and want to try it out, submit a refinance loan request — anonymously — on Zillow Mortgage Marketplace.

President Barack Obama recently proposed that all lenders offer “plain vanilla” mortgages so consumers could understand the loan terms and the risks associated with the mortgages.  The proposal includes creating a Consumer Financial Protection Agency that would be responsible for these and other laws that help consumers make better decisions.   This proposal met strong opposition by the lending industry for trying to impose too many rules and limiting the flexibility of lenders.

“Under Obama’s plan, a new government agency would be established to monitor the fine print on such products as mortgages and credit cards. The Consumer Financial Protection Agency would require that lenders be up front about the cost of their products and offer customers a standard low-risk alternative.“

On Zillow Mortgage Marketplace we focus on consumer advocacy in a slightly different way.   Instead of limiting what lenders can do, our goal is to educate borrowers on the risks and benefits of each loan program so they can make the right decision themselves.  We have created a number of tools to educate consumers on how to compare mortgage types, analyze the risk associated with different loan programs, and find a trustworthy mortgage lender.

Here are some of the tools we built and why we think they are important:
•    Monthly Payment Graphs – each quote has a graph showing what the monthly payments will be over the life of the loan.  For adjustable rate mortgages, we always show the worst case scenario so borrowers can clearly see any risks associated with the mortgage.
•    True Cost – this calculation shows the interest and fees costs of all loans over any time period.  This helps borrowers compare prices for quotes across all of the different loan programs.
•    Comparison Page – compare all loan details in an apples-to-apples fashion across multiple quotes in one place.  Quotes are completely accurate and show all ARM details including margins, caps, and index.
•    Cumulative Costs Graphs – these graphs show the total cost of the loan over time so you can see how much you will end up paying in interest, insurance, and fees.
•    Lender Ratings – every lender on Zillow Mortgage Marketplace is held accountable for their actions and customer service through borrower ratings.
•    Mortgage Calculators and Help Articles – we created a whole library for consumers so they can figure out how much they can afford and the best way to repair their credit.

Helping consumers make better choices is extremely important to us.  If you have ideas for other tools or features that you think would help educate consumers, please let us know.

Refinance requests on Zillow Mortgage Marketplace are up 20% so far this month versus August.  The chart below shows that lower mortgage rates appear to be driving this spike in demand.

In an effort to continute to prop up the financial markets, the Federal Reserve’s policy-setting panel just announced that it plans to continue purchasing mortgage-backed securities into next year.  This activity should help to keep mortgage rates at low levels.

So with rates this low, now is a great time to see if it makes sense to refinance.

Zillow Mortgage Marketplace today launched two unique graphs and tables on every loan quote borrowers receive from lenders.  These graphs give borrowers an unprecedented amount of information presented in a dynamic, visual way that allows them to fully understand the details of each quote, including the makeup of payments over the life of the loan, and how much they will pay in cumulative costs over time. 

Payment Schedule 

The payment schedule graph shows the payment for the first month for every year of the loan. By hovering over any bar, borrowers can see how much of the monthly payment will go toward the principal, interest and mortgage insurance (if applicable). Clicking on any of these payments expands the year to display the complete monthly payments for that year. Clicking again returns borrowers to the year-by-year view.

Below the graph, a detailed amortization table lists the total monthly payment (also broken out by interest, principal, and mortgage insurance), the outstanding principal, and the interest rate for every month throughout the life of the loan. 

Cumulative Costs

The cumulative costs graph allows borrowers to see how their principal grows relative to the interest, fees and mortgage insurance over the life of the loan. Hovering over any year will give the cumulative costs paid up to that year.  This graph enables borrowers to see the grand total they will pay over time.  The table below the graph breaks down the costs paid each year throughout the life of the loan.

To use these graphs to find the right loan for you, simply submit a loan request on Zillow Mortgage Marketplace, and then click through to see the Quote Details on the quotes you receive from lenders.

When comparing mortgage quotes, most borrowers focus on two important factors: interest rate and lender fees.  While these two numbers together describe the cost of a mortgage, making apples-to-apples quote comparisons can be difficult because every quote may have different rate and fee trade-offs.  Should you choose the mortgage with a 0.25% higher rate but $1,000 less in fees?  Or should you pay a point for a lower rate?  This decision can become even harder when you receive 40 or more competitive quotes on Zillow Mortgage Marketplace.

The Problem with APR
An initial solution, the Annual Percentage Rate (APR), was devised as way to help borrowers compare quotes.  However, the APR calculation for Adjustable Rate Mortgages (ARMs) assumes interest rates remain constant at their current level and loans are held full-term.  Since rates vary and loans are held only for 3 to 4 years on average, these assumptions can be misleading and may cause borrowers to select an unnecessarily expensive loan.   What borrowers need is an accurate cost calculation based on the amount of time they plan to keep their loan.  For example, a lower rate with higher fees may make the most sense if you keep a loan for 20 years, but a higher rate with low fees may be a better way to go if you are only staying for 4 years.

True Cost
The best way to directly compare quotes is to look at the actual price of the loan (interest paid + upfront fees) over a specific time period.  This True Cost comparison is what we now offer on the custom Quotes Received page in Zillow Mortgage Marketplace.  You select how long you plan to keep your loan, and we calculate how much you will pay in interest and fees over that time.  True Cost incorporates interest rate, fees, points, and time so you can compare loans apples-to-apples!  Since True Cost allows you to identify the cheapest loan over the selected time period, we think it is the best way to start your loan shopping experience.

Remember, even with the new True Cost column, you should still filter out loan quotes with monthly payments or fees you cannot afford.  You should also consider your risk tolerance (learn more about ARMs) and the reputations of the lenders providing your quotes.  Help articles, lender ratings, and lender profile pages on Zillow Mortgage Marketplace continue to be great resources for helping you decide which loan is best for you.

Notes regarding True Cost:

• True Cost does not include principal because principal is not an outright cost, but rather, it is equity that you will likely get back when you sell your home.
• The calculated interest amount for ARM loans assumes the worst case interest rate scenario.  This means ARM loans will look worse after their initial fixed period ends.
• If you select different years in the True Cost drop-down, you will notice the quotes with the lowest True Cost may change due to their combinations of rate, fees, points, and loan program.

There have been a number of questions in Zillow Advice recently about the difference between pre-qualifications and pre-approvals.  This article attempts to provide a brief explanation of each and directions for getting started.

Pre-Qualification
A pre-qualification is getting an estimate of how much you can afford for a mortgage payment.  You typically provide self-reported income and debt information to a lender and they give you an estimate of the amount you can borrow.  Since the information you provided is not verified by the lender, the pre-qualification does not carry a lot of weight.  However, this discussion can be very informative and useful for buyers.  Another option is to use free calculators to find out how much you can afford.

Pre-Approval
Getting pre-approved means a lender has pre-approved you to borrower a certain amount of money. Pre-approvals are more significant than qualification letters because lenders spend the time to verify your credit, income, employment, and assets.  This includes a credit check.   Approvals are very important when shopping for homes since they make you a serious buyer.  Real estate agents and sellers are more willing to deal with buyers who have preapprovals because they know they can afford the house.

Keep in mind that pre-approvals are not guarantees for a mortgage.  Lenders still need to consider property appraisals and re-confirm information before they fund a specific home.

Getting Pre-Approved
To get pre-approved, you can talk to any mortgage broker or banker.  Start by filling out a loan request on Zillow Mortgage Marketplace or by selecting a lender in the lender directory.  You can then ask them to pre-approve you for the desired amount.  When you are ready to get your mortgage, you can either go back to the lender who pre-approved you or complete another loan request on Zillow to compare rates again.  Remember, you do not need to get your mortgage through the person who pre-approves you.

Learn more about pre-approvals and required documents.

Requests for purchase loan quotes were up 12% in June vs. May, and up 230% since the start of the year, signifying what could be good news in the number of people who are shopping for homes.  Zillow Mortgage Marketplace saw more than 32,000 requests for purchase loans in June versus just under 10,000 in January.

Meanwhile, requests for refinance loans were down -36% in June vs. May, and down     -28% from the start of the year.  This is attributed to a rise in mortgage rates in recent weeks.  Today’s average rate for a  30-year fixed loan is 5.35%, up from as low as 4.96% in May.

Today, the Obama administration announced an expansion of the Making Home Affordable plan, which gives homeowners with loans owned or guaranteed by Fannie Mae or Freddie Mac an opportunity to refinance into more affordable monthly payments.

Housing and Urban Development Secretary Shaun Donovan announced that the program now covers homeowners who are current but up to 125% underwater on their mortgage.  Previously, only those homeowners who were 105% underwater qualified, so this opens the door to a significant number of additional people who need help.  According to our analysis of the Q1 Zillow Real Estate Market Reports, that means up to 36% of all homeowners with mortgages, or 20.1 million households, could now potentially qualify for the plan.  However, a requirement for this program is that the loan must be backed by Fannie Mae or Freddie Mac.  Check if your loan is backed by Fannie or Freddie here.

It seems that the official Making Home Affodable Web site, however, still has the old 105% number on their refinance eligibility tool.  Hopefully someone will update this soon.

If you are underwater on your mortgage, a great way to find someone who may be able to help you refinance is by submitting a loan request–anonymously–through Zillow Mortgage Marketplace.  Your request will be posted to the marketplace, where thousands of lenders can assess your situation and provide you with custom quotes if they are able to help you.