Car companies advertise the low monthly payment, rarely the price. They think consumer don’t care what they pay only the monthly, so they charge a lot. It’s time to wake up. Same with buying a house. Monthly payment is important, but at what price. With PMI (private mortgage insurance) you can pay a smaller down payment and a large upfront premium for PMI. Plus you pay a higher mortgage interest rate and a PMI monthly payment. Here is an example: Sale price: $225,000, the yearly payment of interest and PMI is $10,800. With 20% down payment your yearly payment of interest (no PMI) is $6,300. That’s a difference of $4,500 per year. True, the down payment to avoid PMI is 20%, well, start saving or line up a relative for a loan to avoid PMI. You save $4,500 a year times 30 years.
Archive for September, 2012
Here is a no lose proposition. Find a property you want to buy, research the sales history through the tax records. Along with similar houses in the neighborhood, what would the selling price have been in 2007/2008? What about 2000/2001? and 1990/1991? If you can buy at or below 1991 prices, live there until it is worth the same as 2001, you will make money on the house. If you make $250,000 or less on the sale, it is a tax free gain. These are things wealthy people know and take advantage of.
‘Pre Approved’ Short Sales mean nothing. When you see this advertised it is not a guarantee, nor does it mean the sale will be quick or smooth. It does suggest the short sale process has been initiated, and maybe, just maybe in four to nine months you might close. It all depends on what the bank wants to do and when.
Also, ‘Pre Approved’ mortgage letter. A buyer brings you a contract to buy your property and they have a Pre Approved letter from the mortgage company. This means nothing, other then the mortgage process has been initiated. In this case, the seller needs to contact the mortgage lender direct and continue to follow up to understand the process.
Currently banks own or will own through upcoming foreclosures over 8 million houses. If house values go up, the banks inventory would be worth more, plus there would be less foreclosures. You would think that is what their goal would be. The Federal Government is flooding the banks with liquidity, yet the banks are holding down the housing market by making it tough & expensive to get a mortgage. Last year, the banks processed 7.1 million mortgages — a 10% drop from 2010 — and the lowest level in 16 years. When the banks start loaning, everybody benefits. We have been waiting five years for them to solve their own problems, but unfortunately they still don’t get it.
We are seeing year to date an increase in home sales, home prices and decreasing inventories. These trends continue. The one that has not started yet is ‘Interest Rates’. While I called for a bottom in rates last October, they did move up only to again test those lows this summer. With all of the other trends in tact, it is only a matter of time before mortgage rates start there upward trend. The Fed is attempting to keep low rates by buying $40 billion dollars a month, but that pales in comparison to the over $9 trillion mortgage market. The Fed controls the short term rates, but the market place controls the long end, ie; 30 year mortgage rates.
With the announcement today of the Federal Reserve decision to start buying $40 billion in mortgages each month until they see improvement in the economy, jobs, and real estate, who benefits? First the mortgage companies they buy from because they get fresh cash to offer new mortgages, which they receive commissions. Wall Street traders must benefit, they bid up the Dow Jones Average over 200 points today. Others that benefit will be anyone in real estate industry such as; agents, title insurance companies, appraisers, etc. Buyers also benefit from the lower interest rates. And who does not benefit? The owners of real estate which have no mortgage and do not plan on buying or selling, this represents 33% of all homeowners. The renter that plans to keep on renting, this represents 33% of all families. But the biggest loser of this decision, are the ones that will have to pay taxes to pay off the Federal Debt. This $40 billion a month is printed or borrowed and adds to the nations debt of $16 trillion. Funny, no one seems concerned about the long term effect, just help me today and we will worry about the debt later.
this is becoming a very standard procedure when you receive multiple offers on your property. The Seller should never, ever, sign your name to two contracts for the same property trying to get either party to increase their offer. In the past, it was recommended you pick one and counter offer, then wait for a response. Today, the Highest and Best offer method is being used. When you receive more then one offer in a short period of time, let all buyers know there are multiple offers and set a deadline, normally 48 hours for each buyer to resubmit to you their ‘Highest and Best’ price. This competition will net you more and give all parties an equal chance to purchase.
The governments Home Affordable Refinancing Program, designed to help ‘under water’ homeowners refinance, may be expanded. 519,000 homeowners used the HARP program to refinance this year. Under this refinance program the homeowner must still qualify and pay all normal closing costs, except no appraisal is needed. So basically, you are underwater and you roll the closing costs into the new loan. In the end, you now owe more money on your property and you are more under water then before. The advantage is that you have a lower interest rate and normally a lower payment. Mortgage brokers make their large fees from these refinances, so they love them. FSBO.com recommends you get at least three mortgage brokers to give you a Truth In Lending form. This disclosure form is required by Federal Law and we find the mortgage brokers hesitate and delay giving you the form. Do not give out your social security number and pay for anything until you have this form. By receiving multiple disclosure, you can compare interest rates, closing costs, etc.
Why? Because after losing 70 percent of their business in the housing crash, the nation’s home builders are rebounding strongly, and housing starts have shown sustained growth over the past year. The demand is there; but not the workers. Now it takes longer to build and labor costs are increasing.