Moderator: Welcome to the Online Home Buyers Conference, where experts answer your questions on several topics related to new home buying. Our guest this afternoon is Andy Horowitz. Andy, thank you for joining us. It is anticipated that the Federal Reserve will raise interest rates this week. What do you think the impact will be on mortgage rates?

Andy Horowitz: It has been widely anticipated that the Federal reserve is going to raise rates at its meeting on March 21, the rate increase that has been predicted by most experts is a quarter of one percent hike in the fed funds rate. This rate increase will have a more dramatic effect on shorter term mortgages such as adjustables, rather than impacting longer term mortgages, which are the more common loans in the marketplace today. This rate increase has already been priced into the mortgage market, so it should have little or no impact on mortgages.

Seat Pleasant, MD: What are the advantages of being pre-approved? Does this mean I have the money prior to finding the home of my choice OR is it a review of my credit to inform me of what I am eligible for once I find a home?

Andy Horowitz: There are many advantages to being pre-approved for a loan. It gives the buyer a better idea of how much home they can afford, as well as giving them a certain degree of negotiability. The buyer who is pre-approved basically is a cash buyer making the seller think a little more about your offer. When a buyer is pre-approved they are given a commitment letter from our organization which takes away the mortgage stipulation of an agreement of sale. It is very beneficial and most realtors recommend getting pre-approved.

Alexandria, VA: I don't have good credit, but never filed banktcrupcy. I am now more responsible than when I got my first credit card. How can I buy a townhouse, or is it hopeless?

Andy Horowitz: It is not hopeless, it actually is a little bit easier now then it has been in the past. Mortgage companies are now a little more understandable of circumstances and are more willing to work with clients with credit problems. This type of question might be better solved by calling in and speaking directly over the phone, rather than through a chat. If you would like feel free to call (800)-784-1331 and I will make certain that you are put on with the right person. Ask for Marci she is the best.

Burke, VA: In the DC metro area, renting is more expensive than buying. In addition, the high cost of living makes saving up for a down payment extremely difficult unless one is near the top of the corporate ladder. There are many types of mortgages available, but they are difficult to sort through unless one is a financial wizard. What advice do you give first time buyers that have little or no money for the down payment, other than save up the down payment?

Andy Horowitz: There are many programs for 1st time home buyers which require minimal down payments. These programs are at very competitive rates and offer you the opportunity to buy. Most first time home buyers are in the same boat, and searching for the right program might seem like an overwhelming task. Seek a mortgage company you are compfortable with and let them do the leg work for you.

Paris, France: I have purchased a new condo in northern Virginia, but the estimated completion date is not until July. Of course that is not a guarantee. What would you advise someone looking for a mortgage but the settlement date is four or even five months away to do?

Andy Horowitz: With a settlement date that far away, you are put into a position of needing an extended lock in period. We have many programs which will enable a buyer to lock in an interest rate, whcih even include float down options.

Baltimore, MD: Great show, perfect timing for me -we are getting preapproved in anticipation of buying a home-. Have you ever heard of a 5 1 ARM, and if so what does it mean?

Andy Horowitz: a 5/1 arm is a(n) adjustable rate mortgage. The interest rate for the first 60 months is locked in at a reduced rate. at the end of the 60th month the loan will adjust to a one year adjustable. this loan usually comes with adjustment caps which inhibit the size of the adjustment. I was a fan of these loans until the fed started to raise rates, now a 30 year mortgage might be more attractive.

Bowie, MD: I am alot confused about interest rate vs. points. I am looking to put down 20% of my purchase price, should I be looking for low interest rate AND low points?

Andy Horowitz: Depends on how long you anticipate being in the home. the general rule is that if you pay three points you had better be in the home for at least seven years. Right now we are actually recomending clients go with 0 point deals as we believe that interest rates over the next several years may come down.

Dupont Circle: Thanks for taking our questions, Mr. Horowitz. Take this fact pattern: A college graduate leaves school and inconsistently starts paying off her school loans. They go into default and 4 years later when she purchases a new car she starts to pay them off - regularly and timely for over 18 months. She is late on no bills and as a matter of fact the largest of her three loans are about to leave default status and be removed as delinquent from her credit report. Her other two loans are approximately $6,000 -total- and they are being paid timely also. Her annual income is approx. $55K. Should she -a- purchase a house and roll her student loans into her mortgage, -b- Pay off the two small loans -thereby removing them from her credit report-, then purchase, rolling the larger one $12K into her mortgage or -c- wait a couple of more years for the smoke to clear. I have no money for a downpayment preferring instead to send as much money as possible to my creditors.

Thanks in advance for your assistance.

Kimberly

Andy Horowitz: Most mortgages will not allow the rolling in af any other loans. The recommendation would be to go for a low down-payment loan, possibly FHA which is more forgiving of credit issues and requires a low down payment. You should be able to buy now with what you have described, would like to discuss a little further

Baltimore, MD (again): So with a 5-1 arm, in the 61st month, is the mortgage rate locked in for only another 12 months? Does this process repeat every 12th month? And so am I correct in assuming in this current market, the adjustment would probably continue upwards?

Andy Horowitz: in most cases yes, you can check around for convertible arms, which would allow you to convert to a fixed program during the adjustable term. Usually at a premium to current market rates.

Seat Pleasant, MD: Is pre-qualification something my real estate agent can-will assist me with? If I don't like the agents loan officer-s- can I find my own? What about shopping for a loan on-line? What are the advatanges-disadvatanges to doing so?

Andy Horowitz: The realtor will try to send you to mortgage companies they are comfortable with. Unfortunately sometimes these lenders do not offer the most competitive rates. Absolutley shop around for the best possible rate, this is a long term investment.

Raleigh, NC: I've seen different calculators on how much home one can afford and they seem a bit high -e.g. I can afford more home than my budget could handle-. I am very conservative in nature. What is the general rule of thumb or formula based on income, fixed expenses, etc...?

Andy Horowitz: unfortunately there is no general rule any longer. The old rule used to be one weeks paycheck should be your mortgage payment. Mortgage companies will allow for higher ratios if there are strong compensating factors. If you are conservative, the most important thing you should do, is tell your loan officer how much you want to spend a month for a house, keep it in a range comfortable to you. The one thing most people are afraid of is being bricks rich and cash poor. Don't put yourself in this position, because a loan officer or realtor said you can afford it.

culpeper,va: What is the best mortgage for a first time buyer?

Andy Horowitz: There is no one best program, you should speak someone in a little more detail to go over what might be best for you.

Gaithersburg, MD: I am thinking about buying a piece of property and having a house built. How do i go about buying the property and getting the money to build the house. I currently own a house now that i would be selling.
Thanks for any suggestions you might have !!

Andy Horowitz: This actually would be a question that I would defer to one of my loan officers, I have basically turned him into a construction to perm specialist, if you like call (800)784-1331 and ask for Tom. Sorry

Silver Spring, MD: I'm getting married in September, we want to purchase before the wedding, is it possible to do such a thing since we are not married yet? How does it look to a mortgage company to puchase and not be married?

Andy Horowitz: Congrats. It is not a problem to buy beforehand, and mortgage companies have no problem with the purchase. After you are married though talk to your title company and change the deed over.

Landover, MD: If you get prequalified but have not actually found a house, should you lock in the interest rate?

Andy Horowitz: Witht the market being as volatile as it has been, I would lock in a rate if the company offers a lock and shop program

Newtown PA: Does purchasing a rental property differ from purchasing a residentail property in reference to rates?

Steve M.

Andy Horowitz: Just in terms of minimum down payments, as well as interest rates. The rates are usually a little higher for investment properties.

arlington, va: While I see your response that the anticipated rate increases are already priced into the current mortgage rates, will the lenders reap the benefit of the rate increase hysteria to raise points tomorrow? It comes down to wondering if today--instead of tomorrow--is the day to lock in a loan. What is your feeling about the direction the likely rate increase will drive the rate-point combination on mortgages?

Andy Horowitz: I actually don't believe that mortgage rates will be adversely affected by the rate hike, the market is more affected by the data used by Mr. Greenspan and prices off that. This week the only bump in the road might be the durable goods number Friday morning

Fairfax, VA: What are your thoughts on a 80-15-5 or 80-10-10 loan program?

Andy Horowitz: Good programs for the right buyers

Washington DC: I went to a mortgage broker affiliated with a realtor - and am pre-approved. Is there any advantage to shopping around and talking directly to the banks? Will the banks openly talk about their best products under the Community Re-Investment Act - or do you have to prompt them? Thanks!!

Andy Horowitz: It depends on what kind of interest rate that you were offered by the broker. A lot of times brokers do not have access to CRA programs, so it might be to your advantage to contact the local banks

Arlington, VA: I saw a really low interest rate on something called a 1-year COFI ARM with a 3.95% interest rate, but a 7.921% APR. Why is the interest rate so low? For what type of buyer is this loan designed for? I know that COFI stands for Cost of Funds Index, but not much more than that. The monthly payment, at least for one year looks quite low compared to te other, more conventional loans. What happens after one year? Thanks.

Andy Horowitz: COFI loans are for the more advanced buyer/investor. There is a lot of information that needs to be explained and it would take more time. At the end of the session if you would like you can ccall me and I will go over them with you (800)784-1331.

Washington, DC: My partner and I earn over $180,000 annually and want to purchase a home in Washington. Are there lenders we can who specialize by working with prospective home buyers who have less than stellar credit? We'd like to get "pre-approved" before starting the search process.

Andy Horowitz: Buyers with less than stellar credit are still able to buy, It is not a problem to get you preapproved so that you are a little more comfortable going out to search for the right home. As I previously stated Marci in my office specializes in these programs and should be able to get you in your home.

Herndon, VA: I'm in the final negotiations of buying a new home - currently under construction. The builder claims he can offer better terms since he's selling me the townhouse than a mortgage co. Is this usually the case? Should I bother approaching other lenders?

Andy Horowitz: Definitely check around for better deals as far as mortgages are concerned. Builders sometimes can offer better rates by having locked up forward commitments. for argument sake a 30 year mortgage today closing in 60 days would be 7.375 % 3 points or 8.125 % 0 points.

Alexandria, VA: Comparing loans, rates and points is extremely confusing to me. Does a simple evaluation formula or tool exist? Is the APR estimate safe to use when evaluating multiple loans?

Andy Horowitz: If there is one I haven't heard of it. depending on what the source of the APR's is, if it a listing out of a newspaper, sometimes those numbers are slightly inaccurate. The easiest was is to ask the mortgage company for a good faith estimate as well as a Truth in Lending, of all costs. this should give you a close idea of the APR. The good faiths should be comprable although some lenders have been putting down a lot of TBD or POC charges on their estimates. Remember just because they are listed under this method does not mean that you don't have to pay them.

Alexandria, VA: If you have been pre-approved by one mortgage company, can you get pre-approval by another?

Andy Horowitz: Although I don't actually recommend being pre-approved by a lot of different lenders, It does not have a negative impact on the buyer. If you are uncomfortable with your lender or discover that they are not as competitive with their rates as you thought then absolutley apply elsewhere

Arlington, VA (again): Do you have a website? If so,please give us the address. Thanks.

Andy Horowitz: Lighthousemtg.com

My email is Andy@lighthousemtg.com

Crystal City,VA: How much flexibility do the "loan officers" have vis a vis home mortgage rates and points? I see widely varying points for the same rates, and as much as a 1 and 1-2 per cent variance in the basic rate between lenders, and wonder if there is some negotiable range within each financial institution that mirrors the market. I mean, if my mortgage loan officer quotes me "10 percent and 5 points," is there room for a savvy purchaser to respond with the fact that xyz offers the same rate with 2 points and have reason to anticpate any positive response?

Andy Horowitz: If your loan officer quotes you 10 percent run. There is a wide range of rates available, the main reason is that some mortgage companies can work off thinner margins than others. You would be surprised in most instances it is not the bigger banks of the world either

Arlington, VA: Is there any benefit to going with a major bank vs. a smaller mortgage co.?

Andy Horowitz: Actually the bigger banks are generally not competitive as far as rates are concerned. They just keep bringing in business because of their size and reputation. You would be amazed at the number of buyers who do not shop rates.

Philadelphia PA: In the near forseeable future, do you see interest rates coming back down to 7 percent?

Andy Horowitz: My crystal ball broke the beginning of last year, but I do believe that Interest rate will come down to the 7 % range in 2-3 years time.

Washington, DC: I am buying a condo in DC. What would be my most beneficial move: paying a 10% down payment and financing at higher rates, or putting 20% or more down and borrowing from from 401K in order to get a lower mortgage rate. I am in my mid 20's

Andy Horowitz: By borrowing against you 401k you lend yourself the money at a lower rate than if you were to go with an 80-10-10 type program. you avoid the PMI insurance and save yourself money over the life of the loan. I would borrow against a 401k to take advantage of both scenarios

Silver Spring, MD: Hello, I am in the process of assuming a mortgage at 6.5% for my first home. Is there anything that I should consider when assuming a mortgage?

Andy Horowitz: Not at all, that is a great rate take advantage of the low rate

Washington, DC: My coworker declared bankruptcy awhile back and is planning to purchase a home. What advice can you offer her? She really seemed optimistic about getting the home. Is that realistic?

Andy Horowitz: The first thing your coworker should do is contact a mortgage company and get preapproved. The Bankruptcy is in the past and should not be a problem now.

Rockville MD: We are planning to purchase a new house in the summer of 2001. When she we seek to get preapproved for a mortgage and what steps should we take to shop for the best deal? Also, how do we find a buyer's agent?

Andy Horowitz: If you are not planning on buying until 2001, you should consult a mortgage company later this year if not early next year. Doing anything now is too far in advance. As far as buyers agents are concerned just check the local realtors

Washington, DC: I've heard that I can finance the down payment of my FHA loan to meet the minimum and avoid mortgage insurance. Is this really an option I could consider?

Andy Horowitz: On FHA mortgages you have to pay MIP monthly as well as paying the upfront MIP, this can be financed in the loan and generally is.

Landover, MD: What are float-down rates?

Andy Horowitz: A float down rate is usually used in combination with an extended lock loan. Generally what a lender will allow you to do is float down when youare within a certain time frame to current 60 day pricing.

Andy Horowitz: It has been a pleasure answering as many questions as time permitted. If I was unable to answer your question or you have followup questions please feel free to call me at (800)-784-1331, or email me at Andy@lighthousemtg.com. You can also visit us at Lighthousemtg.com.

Moderator: That's all the time we have. Our thanks to Andy Horowitz, Lighthouse Mortgage, NFNS and all who participated. Join us tomorrow, same time, for a discussion with the president of Southbridge about planned communities. See you then.