Archive for October, 2013

The banks are so easy to figure out

Monday, October 28th, 2013

When interest rates are trending higher, the banks move very slow hopefully to get you to pay a higher mortgage interest rate. When interest rates are trending lower, the banks move very quickly to close at the higher rate. True cases:

Property 1: Under contract Sept 15, 2013 with closing date of Oct 30, 2013. The buyer was qualified, the appraiser went out quickly to the property and the settlement statement/HUD! was approved by lender Oct 25th and sent out to all parties. In the past you sometimes saw the HUD1 for the first time at closing.

Property 2: Under contract Sept 25, 2013 with closing date of November 27, 2013. The buyer was qualified, the appraiser went out quickly to the property and on October 24th the bank notified everyone they need to close on Oct 30, 2013. A whole month early.

These fast paced moves by the mortgage companies are just the opposite of what we have seen in the past two years. In the past two years the complaints have rolled in with the mortgage companies delaying things, asking for updated documents they already had, asking for a second appraisal, and many times not returning phone calls. One of two things are happening or maybe both. With the lowering of interest rates they want to lock in mortgages they quoted 30-45 days ago or with refinancing business slowing down, they want to hurry up and close so they can lay off workers in their mortgage departments before the end of the year. Either way, the banks just play with the money to their advantage not yours.

The window stays open

Wednesday, October 23rd, 2013

After trending higher for the past six months, mortgage interest rates have suddenly dropped to a four month low. Why? You have the government shutdown to thank. After a 16 day shutdown, FHA & VA will takes months to catch up from it’s back log of mortgage applications. The QE Taper will be delayed until next year. This is good news for buyers of real estate.

Last week the 30 year rate went from 4.46% to 4.39% and the 15 year rate went from 3.53% to 3.51%, lowest since June. On a $180,000 mortgage your payment of principal and interest would be $900. On a 15 year mortgage your payment would be $1,287.

Buyers need to jump at this opportunity. Next year mortgage rates and home prices will be higher. I stand by my forecast in a recent blog.

20% down payment 15 year mortgage is best plan

Thursday, October 17th, 2013

Your equity grows faster because you pay much less interest rate expense and fees. On a $200,000 home that works out to be over $100,000 you would save. Why buy a house, well, if you plan to stay in an area for five years or more you can build equity (savings) while making the monthly payment. In the past 20 years it has been fashionable to pay as little down payment as possible. Either you want it this way or that is all you have to spend. Here is a comparison:

A. FHA 3% down payment, you pay: 1.monthly mortgage insurance premium 2. FHA funding fee 3.higher interest rate 4.25%. On a $200,000 home, your monthly payment with PMI is $1,061 and total interest paid is $148,722

B. Conventional 30 year mortgage w/20% down you pay 4.125%. On a $200,000 home, your monthly payment is $ 775 and total interest paid is $119,158

C. Conventional 15 year mortgage w/20% down, you pay 3.25%. On a $200,000 home, your monthly payment is $1,124 and total interest paid is $42,368

You need to understand the payment you are making is part interest and part principal. The principal is your money. The more principal you pay monthly the less total interest you pay over the life of the loan. It’s like a savings account. For those that only have the 3% down payment, have the mortgage set up as two separate mortgages, one representing 17% and the other a conventional 80%. Then pay off the 17% mortgage as fast as possible. Here is a payment calculator.

Entering the seasonal slow time of year

Tuesday, October 15th, 2013

As we approach the slowest time of year to sell your property, this is between Thanksgiving and New Years Day. Current Sellers need to make some decisions. Do I keep my property on the market, do I drop the price or do I change my marketing plan? Those thinking of selling need to decide, do I start now or wait until the first of the new year? Here is what I know. In the last two months of the year there are fewer buyers looking to buy a house. Buyers have the same dilemma, do I start looking now or wait until the new year. Here is what sellers need to understand, while there are fewer buyers out there, the one’s that are looking are usually very motivated to buy now! Either from moving to your area, or having sold their current home, motivated buyers are out there. The other important item is that there is less competition from other sellers. If you wait until the first of the year there will be many more properties going on the market. Act now, act smart, price your property correctly (see blog for help) and while you will have fewer buyers knocking on your door, the ones that due knock need to buy now. Work with them and get your property sold.

Got a buyer, now what?

Friday, October 4th, 2013

This has been a pretty good year for selling by owner. Buyers have been looking all year and with the increase in mortgage rates the buyers are signing contracts. Now what? For sellers, that means a few more things must fall into place. First, the buyer has a pre qualification letter, but does your house qualify. Here is a list of possible items the seller will have to deal with:

1. Home inspection: the buyer hires a home inspector to check the property for maintenance issues, heating/cooling/electrical issues, code issues, mold/moisture/roof/insulation issues, etc. If problems come up the buyer may insist you correct all items or they will back out.

2. Home appraisal: most contracts these days contain an ‘appraisal contingency’. If the appraisal comes in below the contract price, you may have to lower the sale price or the buyer may back out.

3. Title work: a title company will research the properties title to make sure there are no liens or encumbrances on the title and to verify who is the legal owner. Back property taxes, Federal tax liens, water bills, mechanics liens, etc are very common problems.

4. Mortgage company: the pre qual letter means the buyer is qualified for the loan, subject to verification. It takes the mortgage company several weeks to verify income, employment and debt of the buyer. Hopefully this all goes smooth, but some times it does not.

5. Buyer remorse: This is quite common considering the purchase of a home is the largest financial decision most people make in their life time. From contract acceptance to closing dates takes many weeks. This gives the buyer plenty of time to think about what they are about to do.

6. FHA/VA/FNMA: Most properties are bought using one of these government agencies. These agencies come up with more items the seller has to deal with. Right now with the government shut down, the mortgage pipeline is about to come to a screeching halt.

In the end, most properties under contract do close. Both buyer and seller need to keep a positive attitude.