Bridge Loans - Making Buying a New Home Easier

With a Bridge Loan you can buy or build your dream home now, before selling your current home.

A Bridge loan eliminates the need for a contingency clause, requiring the sale of your current home, you can start building or move into your new home now!

Sell without the stress and maximize your cash flow.
This program gives you the time you need to efficiently market and sell your current home.

No need to liquidate other assets to meet down payment requirements.
using equity from your existing home toward the purchase of your new home, the Equity Bridge loan allows you to avoid liquidating other assets to make the down payment.

Pay down your new loan, and lower your payments without refinancing.
Once your current home is sold and you repay the Equity Bridge loan, you may want to use any excess cash to pay down the new mortgage(s).

For more information or to apply for a bridge loan call Paul Cantor, TrustMor Mortgage Co. at (804) 433-1510.

Weekly Mortgage Rate Commentary

Mortgage rates climbed higher last week on news that inflationary pressures could be heating up. The release of the minutes from the last Federal Reserve meeting also helped propel mortgage rates higher. It noted that once the economy appears to be in better shape the Fed may need to rapidly raise interest rates. While we may still dip into recession, the Fed's continued fight to add liquidity to the credit markets, the now signed economic stimulus package, and the debate beginning on another stimulus package does raise the probability that the economy will heat up in the not-too-distant future. Unfortunately, all this effort will likely create additional inflation.

This week again has the potential to see mortgage rates move significantly in one direction or the other. The first revision to 2007's 4th quarter GDP is due this week. Expectations are for a slight revision higher. A downward revision could calm bonds and help push rates back down. The Consumer Confidence Index is also due. If moods are stilling souring, rates could push downward.


Paul Cantor is a mortgage planner at TrustMor Mortgage Co., in Richmond, VA. He may be reached at (804) 433-1510 or on the web at www.PaulCantor.com

Weekly Mortgage Rate Commentary

Cupid's arrows might have been flying around everywhere last week - but little love came calling for the Bond market. First, Retail Sales for January were far better than expected - which was good news for Stocks, but as money flowed into Stocks, and out of Bonds. Federal Reserve Chair Ben Bernanke gave his semi-annual testimony to the Senate Banking Committee last week. While he stated that the Fed stands ready to provide further stimulus to the economy if needed, he believes the US is neither in a recession, nor will go into one this year. Some of the week's data backed his words. Retail sales data came in higher than expected, and Industrial Production numbers showed minimal change. All of this, along with the passage of the economic stimulus package, resulted in long-term mortgage rates moving upward.

We start this week off with the release of the Consumer Price Index. Given all the recent effort to stimulate the economy, a spike upwards in the CPI could easily spook the markets and drive mortgage rates upward in fear of expanding inflationary pressures. Alternatively, a drop in the CPI could give the Fed additional flexibility in cutting rates again. The minutes from the Fed's last meeting also come out this week; any hints of future rate cuts will push rates downward.

Understanding Fixed Rate Interest Only Mortgages

Fixed rate interest-only loan, home buyers choose their monthly payment and either qualify for more home, or have more cash in reserve for investment, paying down higher-cost debt, or making home improvements. This is not a negative amortization product, your principal balance will never increase!

Interest-Only Loans Offer:

Potential for lower monthly payments: for the first 10 years of the loan you can opt to pay interest only-plus any portion of the principal you wish. The opportunity to afford your dream home-buy up to 25% more home with Interest-Only monthly payments. Tax deductibility benefits, a wealth of money-management opportunities, with savings for other investments, including high-yield and tax-deferred savings or maximizing your retirement contributions. Pay off high-interest, non-tax-deductible debts, home improvements, tuition costs, or a dream vacation

Here's how it works:Take advantage of this innovative approach to home financing and realize the double benefits of more affordable payments plus improved cash flow. Each month you choose the payment amount. You can make the minimum interest-only payment in order to maximize your available cash for other uses or allow you to qualify for more home at a payment you can afford. Or you are free to pay down any portion of the principal you wish--it's your decision. Either way, your principal balance will NEVER increase.

Paul Cantor, CMPS is a mortgage planner with a practice in Virginia at TrustMor Mortgage Co. He may be reached at (804) 433-1510 on on the web at www.PaulCantor.com.

Weekly Mortgage Rate Commentary

Last week economic news was mixed, with the ISM Services Index plummeting to its lowest point in its ten-year history. However, Factory Orders ticked up nicely and weekly jobless claims dropped. While we did not get any convincing evidence one way or the other about the economy, the major economic stimulus package has passed both houses of Congress and will be signed by the President. While there is debate on how effective the package will be, the elements regarding conforming mortgages will be very interesting to watch.

The item that seemed to have the biggest impact on mortgage rates last week was from Dallas Fed President Richard "Loose Lips" Fisher's off the topic comment made during a speech in Mexico City: "Monetary policy acts with a lag. I liken it to a good single malt whiskey or perhaps truly great tequila: It takes time before you feel its full effect. The Fed has to be very careful now to add just the right amount of stimulus to the punchbowl without mixing in the potential to juice up inflation once the effect of the new punch kicks in. ...My dissenting vote last week was simply a difference of opinion about how far and how fast we might re-spike the monetary punchbowl. Given that I had yet to see mitigation in inflation and inflationary expectations from their current high levels...I simply did not feel it was the proper time to support additional monetary accommodation.". This comment caused havic in the bond market resulting in home mortgage rates to increase by about 0.125%.

Next week heats up a bit with three very significant items. Retail sales data will give provide a glimpse at how consumers started off spending in 2008, and Industrial Production will provide some manufacturing insight. An unexpected spike in either could push rates up a bit. The most important event of the week is likely to be Fed Chair Bernanke's semi-annual testimony before the Senate. If he hints that inflation is under control, meaning more cuts are likely, rates will trend downward.

Paul Cantor is a Mortgage planned and a pricipal of TrustMor Mortgage Company in Richmond Virginia. He may be contacted at 804-433-1510 or on the web at www.PaulCantor.com.

New Conforming Loan Limits - The Real Story

The US Senate passed an expanded version of HR 5140 – an economic stimulus package that includes a temporary increase in the conforming loan limits from $417,000 to as high as $729,750 in high cost areas. The two things you must know in order to determine if you are in a high cost area:

1. You must know the formula. If 125% of the local area median home price exceeds $417,000, the temporary loan limit would be that 125% of the median home price with a cap of $729,750.

2. You must know the median home price in your area. According to HR 5140, the Secretary of Housing and Urban Development will publish the median house prices within 30 days. The Public Affairs office of HUD was asked if there is anything definitive to reference in the interim, and they said, "no." The Wall Street Journal published median house prices recently, and you may want to reference this information to get an idea of which areas will exceed the $417,000 limit.

Here are some examples of average home prices in Virginia:


Lynchburg: $146,071
Richmond $232,536
Roanoke $151,288
Virginia beach / Norfolk $241,535
Washington, D.C. Metro $434,718

Looking at these numbers, only the Northern Virginia area will see higher conforming loan limts of up to $543,398.

To check the numbers in other areas go to The Wall Street Journal.


I will continue to keep you informed!


Paul Cantor is a pricipal of TrustMor Mortgage Company in Richmond Virginia. He may be contacted at 804-433-1510 or on the web at www.PaulCantor.com.

Weekly Mortgage Rate Commentary

Last week was another frenzied week for financial markets. While the debate still rages over whether we are in, or are entering into, a recession, there was plenty of ammunition for both sides in the debate. Our first look at GDP for the 4th quarter of 2007 came in at a weaker-than-expected 0.6%. Consumer Confidence dropped again, and January appears to have started with a net loss of jobs in the US. On a more positive note, Orders for Durable Goods popped upward, and the ISM Manufacturing Index moved over 50, which indicates that manufacturing is expanding. The unemployment rate ticked down to 4.9%, and we all know that January's lost jobs could be revised into gains in next month's report. The Fed also knocked another '/2 point from both its interest rates, and continues to pursue other means of shoring up the credit markets and stimulating economic growth.

With little data due this week, we could see rates settling down and not moving as much. However, given current conditions, signs of a strengthening economy may push mortgage rates up quickly.

The Federal Reserve Lowers Interest Rates AGAIN... What Does This Mean?

In order to answer this question, it is helpful to understand the four major interest rates that are affected by the Fed:

Discount Rate (currently 3.5%) - the interest rate that banks pay when they borrow money directly from the Fed. The rate has been largely symbolic in the past because banks prefer to get short term financing by:

· Issuing "commercial paper" – these are short term IOUs of typically one to ninety days that are sold on the open market to Wall Street investors. Interest rates on these short-term loans are often better than the discount rate offered by the Fed.

· Borrowing money from other financial institutions using the Fed Funds Rate as illustrated below. In most cases, this rate is also better than the discount rate offered by the Fed.

· Borrowing money using the Fed's new "Term Auction Facility" that allows Banks to bid anonymously on what interest rate they want to pay when they want to borrow money from the Fed.


Fed Funds Rate (currently 3%) - the interest rate that banks pay when they borrow money from each other here in the US. This rate is also determined by the Fed because banks in the US are part of the Federal Reserve System. You see, the Fed's main role is to maintain "monetary stability" by keeping a close eye on the flow of money throughout the economy. One way they do this is by regulating the interest rates that banks charge each other for short term funds.

LIBOR Rate (One Month LIBOR is currently 3.14%) – the London Interbank Offered Rate (LIBOR) is the interest rate that banks pay when they borrow money from other banks anywhere in the world (primarily in the international wholesale money market based in London). There are various types of LIBOR rates including the 1 week LIBOR, 1 month LIBOR, 6 month LIBOR, and 1 year LIBOR; these are the rates banks would pay if they want to borrow funds for 1 week, 1 month, 6 months, etc. Although the LIBOR rates are determined by the financial markets at any given time, they are very closely related to the Fed in that LIBOR most often changes when the market anticipates that the Fed will change their Fed Funds Rate. LIBOR is the base rate that is used on most adjustable rate mortgages (ARMs) in the US and large corporate / commercial loans. The reason LIBOR is used most often for US adjustable rate mortgages is because LIBOR is really the most accurate measure of a bank's cost of borrowing funds since most banks do business internationally these days.

Prime Rate (currently 6%) – the Fed Funds Rate + 3; this is the base rate that is used for most consumer loans such as credit cards and home equity lines of credit, as well as most small business loans. Like the LIBOR, the Prime Rate is also tied to the Fed Funds Rate.

So there you have it.

You see, as the Fed lowers the Fed Funds Rate, the business and consumer-based interest rates of LIBOR and Prime will also go down as illustrated above. The Fed would be reluctant to continue lowering rates if they feel that businesses and consumers would start borrowing and spending so much money that inflation will go up significantly.

Remember, the Fed's main goal is to "maintain monetary stability" by keeping a close eye on the flow of funds in the US economy. It would be reckless of them to artificially encourage too much borrowing and spending as this would only artificially drive up asset prices and cause money to lose its purchasing power. This phenomenon is known as "inflation." The good news, however, is that inflation seems to be under control based on some of the latest economic reports.

How does the Fed affect mortgage rates?

Well, if you have a home equity line of credit based on Prime or short term ARMs based on LIBOR, you should see an immediate reduction in your interest rate in the coming weeks. However, if you are considering a fixed rate loan or longer term ARM with a fixed period of 3, 5, 7 or 10 years, rates on those types of loans are not directly related to the Fed. Instead, these rates are closely tied to the Mortgage Backed Securities that trade on the bond market. For more on how this process works, please reference the article entitled, Saga of the US Mortgage Industry.

With all this in mind, it is more important than ever to work with an experienced mortgage loan officer, who can decipher market conditions and help you make informed decisions in today's volatile market. A good mortgage professional can look at Fed decisions and economic reports that are coming out and help you make the right mortgage choices. Whether you have or are considering an ARM or a fixed rate loan; whether you are buying, selling or refinancing a home; whether you are dealing with a primary, vacation or investment property; now is the time to be dealing with an expert.