Don’t be fooled by adjustable rate mortgages!

December 16th, 2014

3/1, 5/1, 7/1 adjustable rate mortgages offer a lower interest rate the first year, thus a lower monthly payment. But, don’t be fooled. Each year the interest rate changes and at the end of the term, either 3, 5 or 7 years there is a balloon payment. Balloon payment means you owe the entire balance right now. If you are confident rates won’t move much or that you can quickly sell the property, here are some historical facts:

Interest rate moves- Federal Reserve raised short term interest rates from 8.85% in August 1980 to 20% in January 1981 (less then six months). Other countries move their short term rates even quicker, for example; this week Russia raised their short term rates from 10% to 17%. Our country has not seen this is a long time, but it could happen.

Home values- Baby boomers had gone the last 40 years confident that their real estate holdings are guaranteed to always go up. Well, they did until 2009. That myth was proven wrong.

To avoid future problems and pressures, lock in today’s low interest rates with a 15 or 30 year fixed mortgage. Avoid buying a property that is over the appraised price or the real estate agent added their commission to the price, which means you are paying more.

3% down ‘Full Doc’ loans are back

December 9th, 2014

FNMA announced they are now backing 3% down payment, full documentation loans, to first time home buyers. FNMA said: “Our goal is to help additional qualified borrowers gain access to mortgages”. Freddie Mac also announced a similar 3% down payment program called “Home Possible Advantage”. Both companies have been major players in the mortgage business for many years, but both were hurt with the sub-prime mortgage melt down. In the past five years, FHA has backed 80% of all new mortgages. With this added liquidity, buyers will have more options to buy their new home. This is good news for people that want to buy or sell a house. This will end up being bad news for those investors that have purchased properties to rent out. You will start to see less renters next year as the renters turn into buyers.

Fannie Mae

Year end quick facts

December 2nd, 2014

Existing home sales: after four years in a row with under 5 million homes sold, 2014 will be the 2nd year in a row of over 5 million homes sold.

Inventory of homes on the market: after four years in a row of over 2 million homes on the Market for sale, 2014 will be the 2nd year in a row of under 2 million homes for sale.

Mortgage down payment: 3.5% down payment needed for a FHA mortgage. Over 75% of new loans this year used the FHA program. New programs coming by the year end through FNMA and Freddie Mac will require only a 3% down payment.

Mortgage interest rates: 4.1% 30 year and 3.2% 15 year. These are the best rates if your credit score is 740 or higher. New FHA standards require minimum of 580 credit score. The mortgage rate depends on your credit score.

Home Equity Lines of Credit (HELOCs): with home values up, over $67 billion in HELOCs in 2014. The most since 2009.

These facts all point to a positive real estate market in 2015.

This theme will be the biggest debate in 2015

November 3rd, 2014

Rent or Buy

Rent versus Buy a home. The foreclosure and bank owned properties are now behind us. Low interest rates have been low for so long now that everyone has gotten used to them at these levels, so I guess that must be the new normal. Home values have come back and builders are building. So what now?  How about the new trend? More renters then buyers. This is music to the ears of all the investors that have bought millions of residential homes over the past few years. After all, renting them out was the main purpose for buying in the first place. Now, the investors dreams have come true. With more renters then buyers, what do you think is going to happen? That’s right, rents are increasing. This will continue until the renters decide they are being taken advantage of. At that point they will start a new trend: ‘First-time buyers are back in the market’. Today’s report that first-time buyer this year represents the lowest level in nearly three decades-just 33 percent of all homes sold. The experts are starting to debate the reasons why and this discussion will be a major topic next year. I remember the first book I read after graduation, ‘The 25 wealthiest people in American History’. I discovered that they either made their money from real estate or once they accumulated wealth from banking, shipping, railroad, etc., they invested their money into real estate. Eventually the renters will figure that out. More updates to follow.

How much do you spend on a house payment?

October 10th, 2014

What percent of your income goes to pay rent? Is it 10% or 20% or 30% or more? How does that compare to a house payment? Your house payment depends on the price of your house and mortgage amount. There is a wide range of prices for the same size house depending on where you live. Coastal areas and the Northeast are much higher then the Midwest and South. Affordable housing and a good job market tends to attract younger workers. Demographic researchers describe those born between 1977 and 1992 as ‘Millennials’.  The ‘millenials’ population in certain markets keep increasing. Jobs and affordable housing are key reasons. Here are a few of the affordable places to live:

Metro area Payment/Income Home price Income
Augusta,GA 10.52% $64,100 $37,561
Fayetteville, NC 13.14% $97,500 $45,742
Atlanta, GA 13.98% $111,600 $49,200
Jacksonville, FL 13.99% $99,000 $43,621
Philadelphia, PA 14.06% $81,675 $35,801
Baltimore, MD 14.35% $90,000 $38,655
Little Rock, AR 14.81% $122,000 $50,768
Columbus, OH 15.26% $125,000 $50,502
Omaha, NE 15.35% $128,000 $51,392
Milwaukee, WI 15.62% $108,000 $42,611

Your buyer needs a job

October 7th, 2014

well, there is good news on this front. 4.84 million job openings are available right now. That is the highest number since January, 2001, according to the U.S. Department of Labor. Workers moving to your area to get a new job means motivated buyers. Workers getting new jobs for higher pay means they can afford to buy a larger home. For those buyers getting new jobs, they better hurry to lock in the low mortgage interest rates. The Federal Reserve has kept rates very low for a very long time for only one reason. They want unemployed workers to get jobs. Lowering the unemployment rate has been their main reason for keeping rates low. Improvement over the past six months now has the national unemployment rate at 5.9% (lowest since July, 2008). This has opened the window for mortgage rates to rise. We have said many times, once rates start to rise, they will rise very quickly.

‘Comps’ problem is slowly going away

September 25th, 2014

Comps - short for comparable sales in the real estate industry.  For the past few years as real estate sales and sales prices have improved, getting your house to appraise for the sales price has been a problem. Comps used by appraisers were hard to find, since sales from 2009 and 2012 had been minimal. Plus those sales quite often were bank foreclosures or short sales and the prices depressed. Now, we are finally seeing a comeback of sales prices for the appraisers to use. This problem is going away. Good news yesterday from the home builders. Not only were their sales up 18% from July and 33% above one year ago sales. Most importantly, the sale prices increased 2% from July and over 10% from one year ago. These sales all help when getting your property sale to appraise. Federal Reserve manufactured low mortgage rates mean nothing if your house does not appraise. We look forward to these trends continuing as the real estate industry continues to improve.

FSBO Appraisals

Want a faster, smoother closing? use a Credit Union

September 17th, 2014

Credit Unions are not-for-profit organizations that are owned by their membership. Using a credit union, as opposed to a publicly owned/traded, for profit bank, your money is federally insured through: the National Credit Union Share Insurance Fund (NCUSIF).  Over the years I have found credit unions easier to deal with since you have a real person to talk with and they make their own decisions. With the large banks, the person you talk with always has to check with someone else. We recommend you meet with a local credit union, get their information and have it ready for your prospective buyer. I find their interest rates, closing costs, and closing time are all superior to the large banks.

FSBO Credit

Happy Labor Day

August 29th, 2014

You work hard for your money, right? Let’s celebrate Labor Day by saving some of that hard earned money! How about $30 off any new #FSBO property listing? Use code laborday30 at checkout online - Expires 9/2/14 and valid only on new property listings.

FSBo Labor Day

selling FSBO is like a job interview

August 17th, 2014

Have you been on a job interview lately? or are you in the position of interviewing new applicants for a job? Either way you know what is expected and you know what makes a difference. Here is our thoughts: a. plan and be prepared b. look sharp c. be sharp d. expect the unexpected e. present your strength f. ask questions. This list could go on and on. Let’s look at these and compare them selling your property:

Plan and be prepared: job applicants research the company they have an interview with. Buyers do research (mainly online) of your house and neighborhood before actually contacting you. You need to do your own research to see what is online. Google your street address is a good start.

Look sharp: what to wear and how to look is the first item on most lists when going on an interview. You need to know what your house needs to look like prior to buyers coming by. We highly recommend going out to the street and taking a photo. Then get on the front porch and take a photo of the front door. Once in the house, take a photo of the first room you see. Study your photos. These make the first impression for the buyer and if they don’t look good, the buyer will turn around and walk out.

Be sharp: be ready to answer questions and be knowledgeable of the topics discussed. With your property, be ready to answer questions regarding schools, shopping, home repairs done recently, etc.

FSBO Job Interview

Expect the unexpected: When being interviewed and you are asked a question that you do not know the answer. What do you do? Obviously do not guess, be honest with a reply like: ‘I will surely learn the answer’ or ‘I can research and I will have the answer’. With home buyers they may ask about ’school bus information’ or ‘handicap questions’ or ‘mold, radon or termite items’. Same thing, assure them you can research and have the answer for them.

Present your strength: What is the number one reason you should be hired for the job? With your property, what is the number one reason to buy your house? For each buyer it may be different and you need to find out as quickly as possible. Is it the right school district? Is it the size of the master bedroom or formal dining room? Is it the flat backyard? Is the the price versus the others for sale in your neighborhood?

Ask questions: Interviewing is a two way street. Not only does the employee need to fit the job requirements, the employee must also fit the needs of the applicant. With the home buyer, you should be asking them about: financing ability, occupancy, motivation for buying in your area, etc.

Know what is needed and you can do it ‘FSBO’