Some home buyers who may be concerned about paying high closing costs might be tempted by a “zero-cost” or “no-cost” loan option, which requires no cash outlay, but typically adds a half percentage point to the rate. However, some financial consultants say these loans tend to be most beneficial to buyers planning to have the loan for less than five years.
MAKING SENSE OF THE STORY FOR CONSUMERS
One of the primary differences between a no-cost loan and similar loans is that no-cost loans do not tack on closing costs to the balance, but instead increase the rate.
With no-cost loans, third-party fees including the appraisal, credit report, title insurance, recording, and the use of a mortgage broker are paid by the lender. The fees, including the amount the broker is being paid, are disclosed on the closing statement.
Home buyers who bypass a broker and work directly with a lender may encounter less transparency, as loan officers are not required to disclose the amount the bank is making on the loan.
Borrowers weighing their loan options are advised to use a mortgage amortization calculator to compare the costs for a conventional loan compared with a no-cost loan. The Federal Reserve provides an amortization calculator on its Web site at www.federalreserve.gov.
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Archive for the ‘Real Estate News’ Category
The Price Of “No-Cost” Loans
Tuesday, November 2nd, 2010Home Buyers Still Waiting OnThe Sidelines?
Thursday, October 28th, 2010Potential home buyers still waiting on the sidelines for home prices or interest rates to decline further might want to consider that conditions for buying a home are better today than at any time in recent history.
The average rate for a 30-year, fixed-rate mortgage for the week ending Oct. 21 was 4.21 percent and 3.64 percent for a 15-year-fixed, according to Freddie Mac. By comparison, the average 30-year-fixed mortgage was 5.09 percent in January and approximately 6 percent two years ago.
In August, the median price of an existing, single-family home in California was $318,600. At this week’s 4.21 percent rate for a 30-year-fixed mortgage, the monthly principal and interest payment on a median-priced home in California would be $1,555 – likely the same or possibly less than the amount paid monthly in rent.
Some Ideas To Help With Credit Fitness To Take Advantage Of Low Interest Rates
Monday, October 11th, 2010Many home buyers now and into the foreseeable future will face tight lending standards and the need to improve their credit score to get pre-qualified or pre-approved for mortgages. START NOW with the following steps for some speedy credit repair to gain lender approval and the best possible rates:
Credit Card Wisdom
-Paying revolving credit cards down is generally more beneficial than, for example, paying down student loans, mortgage or auto loans.
-Always leave a 30% or higher gap between what you owe on the card and the card’s limit. Lenders look for this minimum gap.?-Use cards with care even if you pay off balances each month because depending upon statement dates, the lender may see big balances.
-Pay down the cards closest to their limits first for speedier credit repair. The lending bank will then see the “gap” it wants to see.?-Do not ask a creditor to lower credit limits. Generally, carrying smaller balances on several cards is better than one large balance on one card.
-Check your credit card limits to make sure the report is correct. Limits may not be reported on all cards.?-Never make a late payment on credit cards or any loan.
Protesting Items
-Protest any unjust negatives, such as late payments, collections that are not yours, and any items not reported as “paid as agreed,” if you paid on time and in full.
-Protest items listed as unpaid that were included in a bankruptcy, and items older than seven years (10 for bankruptcy).
-Focus first on the larger, newer negatives listed on the report.
It is important not to worry about smaller items like incorrect address information or an old employer listed as current. This is, of course, unless there is the possibility of identity theft or the file is mixed with someone else’s.
Any increase in credit card balances or other credit purchases (car, motorcycle, RV, boat, furniture, etc.) can change your credit score and will increase your monthly debt. Your total monthly debt is used to determine your ability to qualify for a loan. A higher monthly debt will lower the amount of your loan qualification.
What Is An Appraisal?
Monday, October 4th, 2010An appraisal is an experts opinion of the value of the property.
Simply put, an appraisal is an informed estimate of the value of a property. It’s the number lenders refer to when deciding how much money to loan on a specific property.
The seller of a home will probably have a real estate agent, who will use a CMA (Comparative Market Analysis) to determine a realistic asking price for the home. While the information is useful, the lender will look to a specialized, local third-party professional to provide the “official” home valuation report. And that professional is… you guessed it …the appraiser.
Arriving at that final appraisal figure is no easy task — to be accurate, an appraiser needs an educated, trained perspective and understanding of all of factors that have to be carefully weighed with respect to the state of the real estate market in that specific area.
The type of area: Is it part of a development? Or is it stand alone acreage?
The recent sales prices of comparable homes located nearby
The average sales time of this type of property in that area
The proximity to desirable schools and public facilities
The appraiser will tour the home as a potential buyer would tour the home. Clean, updated, well-maintained homes will appeal more to buyers – and chances are, they’ll appeal more to the appraiser as well.
First impressions aside, for his analysis the appraiser will generally consider only permanent fixtures and real property — that is, property that’s permanently dug into, or set upon, land. So, a building is real property — a couch is not. Added touches, like sconces or other added fixtures, are nice but do not count toward the appraiser’s assessment.
After taking stock of the real property, the appraiser estimates the square footage of the home. GLA (Gross Living Area) is calculated by measuring the exterior of the home. The appraiser will note the GLA and then will look to calculate actual living area space. So that means he deducts the measurements of non-living areas, such as garages or covered porches. (Although, surprisingly, finished basements are calculated separately from the above-ground GLA.)
All said and done, depending on the size of the property, an appraisal should take anywhere from 15 minutes to 2 hours. Buyers (and lenders) can typically expect a report within a few business days.
And who pays for the appraisal? Although the Lender arranges for the Appraisal, the buyer pays the bill. For an average home, that’s usually around $300 to $500.
Reverse Mortgages Yeahs and Nays
Thursday, September 30th, 2010Some parents are warning their kids not to bank on inheriting the homestead. Why? Because some parents are considering a reverse mortgage. Such mortgages may not be beneficial for everyone, but their popularity is definitely on the rise.
Reverse mortgages are based on the home’s current value, borrower’s age and existing interest rates. Borrowers can choose to receive loan proceeds in a single, lump-sum payment, as periodic predetermined payments, a line of credit or both.
Possible YEAHS of a Reverse Mortgage
•A reverse mortgage has no fixed due date.
• No repayment is required as long as the home remains the borrower’s principal residence.
• Loans become payable upon death, sale, ceasing to live in the home or failure to keep taxes, insurance or maintenance current.
• Borrowers cannot be foreclosed on.
• Reverse mortgages are nonrecourse loans. The amount owed can never exceed the selling price.
• Borrowers continue to hold title to the property.
• There are flexible payment options.
• Loan proceeds are not taxable.
• Underwriting and approval do not depend on the borrower’s current income or employment status.
• Would-be borrowers are required to meet with an independent financial counselor prior to getting a loan.
• The lender’s lien on the property is removed if the lender fails to make loan advances according to the agreement.
Possible NAYS of a Reverse Mortgage
• Homeowners must be at least 62 years old, own their home outright or have high home equity.
• Reverse mortgages provide around 65 percent of the home’s value. Loan-to-value ratios as high as 80 percent may be available to older homeowners, but higher closing costs and fees and shorter life expectancy offset some of this advantage.
• When the borrower dies, the loan and all accrued interest and costs become due and payable, typically necessitating the sale of the home. Heirs wanting the house must repay the entire amount due, which could be greater than the home’s value at the time. Inheritance planning is tricky.
• Relatively high up-front costs mean borrowers need to stay in the home longer (at least ten years) to make the loan financially attractive. This disadvantage has been offset by some lenders eliminating origination fees, setting aside service fees or both.
• Borrowers are responsible for all other ownership costs.
• Homes can be foreclosed on if borrowers cease to live in them for 12 consecutive months or default on any obligation, such as maintenance, taxes or insurance.
• Borrowers may be targets for aggressive sales pitches for other expensive and potentially inappropriate products or services.
• Reverse mortgages are fundamentally different than forward purchase mortgages or home equity loans. Generally, reverse mortgages have more complicated terms and conditions.
Before making any decision regarding a reverse mortgage talk to a qualified and trusted mortgage and tax advisor.
Housing Remains Highly Affordable for Sixth Consecutive Quarter
Thursday, September 16th, 2010Bolstered by favorable interest rates and low house prices, housing affordability remained near its highest level nationwide for the sixth consecutive quarter since the series was first compiled nearly two decades ago, according to the National Association of Home Builders/Wells Fargo Housing Opportunity Index (HOI) released today.
The HOI indicated that 72.3 percent of all new and existing homes sold in the second quarter of 2010 were affordable to families earning the national median income of $64,400. The index for the second quarter was slightly more affordable than the previous quarter and almost equaled the record-high 72.5 percent set during the first quarter of 2009.
Until 2009, the HOI rarely topped 67 percent and never reached 70 percent.
“Homeownership is within reach of more households than it has been for almost a generation,” said NAHB Chairman Bob Jones, a home builder from Bloomfield Hills, Mich. “Interest rates continue to hover at historic low levels, the economy is beginning to rebound and with house prices starting to stabilize, conditions are beginning to draw home buyers back into the market, which is a positive step on the path to recovery.”
Syracuse, N.Y., was the most affordable major housing market in the country, edging out Indianapolis-Carmel, Ind., which had held the top ranking for nearly five years. In Syracuse, 97.2 percent of all homes sold were affordable to households earning the area’s median family income of $64,300.
Also near the top of the list of the most affordable major metro housing markets were Detroit-Livonia-Dearborn, Mich.; Youngstown-Warren-Boardman, Ohio-Pa.; and Buffalo-Niagara Falls, N.Y.
Among smaller housing markets, the most affordable was Springfield, Ohio, where 96.6 percent of homes sold during the second quarter of 2010 were affordable to families earning a median-income of $56,800. Other smaller housing markets near the top of the index included Mansfield, Ohio; Bay City, Mich.; Monroe, Mich.; and Lansing-East Lansing, Mich., respectively.
New York-White Plains-Wayne, N.Y.-N.J., continued to lead the nation as its least affordable major housing market during the second quarter of 2010. There, 19.9 percent of all homes sold during the quarter were affordable to those earning the New York area’s median income of $65,600. This was the ninth consecutive quarter that the New York metropolitan division has occupied this position.
The other major metro areas near the bottom of the affordability scale included San Francisco-San Mateo-Redwood City; Santa Ana-Anaheim-Irvine, Calif.; Los Angeles-Long Beach-Glendale, Calif.; and Honolulu, all metro areas that have lingered among the bottom rankings for several quarters.
San Luis Obispo-Paso Robles, Calif., was the least affordable of the smaller metro housing markets in the country during the second quarter. Others near the bottom included Santa Cruz-Watsonville, Calif.; Ocean City, N.J; Santa Barbara-Santa Maria-Goleta, Calif.; and Napa, Calif.
Real Estate Market Offers Bright Spots
Monday, September 6th, 2010The end of the tax credit hit with full force in July.
Realtors’ association economist Lawrence Yun acknowledged the downturn, but also offered perspective. “Since May, after the April 30 deadline, contract signings have been notably lower,” he said, “and a pause period for home sales is likely to last through September.” Still, Yun said, annual sales are expected to reach five million in 2010 because of the healthy activity in the first half of the year. “To place that in perspective, annual sales averaged 4.9 million in the past 20 years, and 4.4 million over the past 30 years.”
In July, the nation’s median price rose 0.7% over July 2009, to $182,600. The median is the middle value; half the homes sold for more, half for less.
Yun insisted that record-low mortgage interest rates, now averaging 4.5% would encourage the wary to get back into the hunt.
In fact, rate-conscious buyers are active in the market these days. They waited for rates to dip, more eager to save thousands over the life of their mortgages than to snag a one-time tax credit available only to qualified buyers. Buying a house is a long-term investment, and finding the right property and great loan over 30 years may be more important than $8,000 up front
San Diego County Home Prices Up For 12 Straight Months
Tuesday, July 6th, 2010San Diego County Home Prices Up For 12 Straight Months according to last Wednesdays San Diego Union Tribune coverage in the Business section, only San Francisco’s market rose more. This is in keeping with history of price points over the years. San Francisco always seems to lead the way in prices. This being our observation over many years and not addressed in the article.
California will continue bumping along and doing fine while the rest of the nation will have its’ ups and downs. The rest of the country is not a direct indicator of our prices. That is something I have learned over the years and this article certainly takes nothing away from that feeling or conclusion. If you would like to see results in your particular zip codes of interest, email them to me at rob@robdennyhomes.com. I’ll get you a comparison going back 12 months or more!
Seven Things All Borrowers Should Know About FHA Loans
Monday, July 5th, 2010
Seven Things All Borrowers Should Know About FHA Loans as talked about by FHA Pros, LLC, a national FHA condo approval service, has developed a list of facts speaking to the top misconceptions associated with FHA loans in order to help home buyers better navigate an already confusing market. FHA loans are mortgages issued by qualified lenders and insured by the Federal Housing Administration (FHA).
1. FHA loans are not only for lower-income borrowers. FHA loans are available to everyone. There is no maximum income restriction associated with FHA loans, but borrowers do need to substantiate income and assets by submitting proper documentation.
2. FHA loans are not only for first-time buyers. Many people believe FHA loans are available only to first-time home buyers, but this is not the case.
3. FHA loans are not just small loans; in fact, loan amounts can be as high as almost $800,000. The government recently raised the maximum loan amount from its original cap of $362,790 to $793,750 as a way to help stabilize the housing market. The amount a buyer can borrow varies from county to county.
4. FHA loans are not affiliated with the section 8 housing program. While both programs are administered by the U.S. Department of Housing and Urban Development (HUD), FHA loans have nothing to do with low-income subsidized housing. FHA loans are simply mortgages insured by FHA. This insurance provided by the federal government allows lenders to lend more freely by assuring them that they will be repaid in the event of default. Most traditional lenders, including Wells Fargo & Co., JP Morgan Chase and Citigroup are able to provide FHA loans to their customers.
5. FHA loans are often more affordable than conventional loans. While FHA loans typically offer the same interest rates as other loans, borrowers benefit from a much lower down payment of as low as 3.5%.
6. FHA-approved condo developments are more desirable to buyers. With 87% of home buyers indicating that they plan to use FHA loans, condo associations that are not FHA approved are missing out on a significant pool of prospective buyers. Under rules in place since February 2010, an entire condominium development must now apply to HUD and be granted FHA approval before a buyer can purchase a unit in an association with an FHA loan or before an existing unit owner can refinance into an FHA loan.
Due to the general unwillingness of today’s lenders to extend credit with respect to conventional loans, many borrowers find that FHA is their best bet. Lenders don’t mind lending when the federal government (FHA) assures them of repayment.
Homeowners associations (HOAs) should note that although FHA-insured mortgages might be easier to obtain, they are not “risky” loans, due in large part to the strict “full documentation” requirements placed on borrowers. Individual buyers or sellers can initiate the approval process or current owners can encourage their HOA to apply.
7. FHA loans are assumable. In addition to lower down-payment and credit-qualifying requirements as compared to conventional loans, FHA loans are assumable. This means that when a seller with an FHA loan sells his or her property, the loan and its financing terms (interest rate) may be transferred to the new buyer subject to qualification.
Will you use FHA financing to purchase your home? Do you have more questions about FHA? Contact Rob Denny today at rob@robdennyhomes.com or visit my website www.robdennyhomes.com.
Happy 4th Of July!
Sunday, July 4th, 2010Happy 4th Of July! There’s nothing like to celebrating the day of our Independence with family and friends. Here’s some facts about the 4th from the US Census Bureau -
1. Thirty places nationwide have “liberty” in their name.
2. Eleven places have “independence” in their name.
3. Five places adopted the name “freedom.”
4. There is one place named “patriot” — Patriot, Indiana.
5. There are five places called America.
6. There’s a 1-in-6 chance the beef on your backyard grill came from Texas. The Lone Star State is the leader in the production of cattle and calves.
7. The Lettuce in your salad or on your hamburger probably was grown in California, which accounts for nearly three-quarters of USA lettuce production.
8. The value of fireworks imported from China is $128.8 million, representing the bulk of all U.S. fireworks imports ($135.6 million).
9. “The British are coming! The British are coming!” These days, this cry applies to tourists rather than “redcoats.” Nearly 5 million tourists from the UK visited the United States in a recent year, more than from any other country except Japan.
10. The dollar volume of trade last year between the United States and the United Kingdom was $74 billion, making the U.K. our sixth-leading trading partner today.
Have a Happy, fun and safe 4th of July!