Archive for the ‘Mortgage’ Category

FOOD FOR THOUGHT FOR FRUSTRATED BUYERS

 | Comments Off on FOOD FOR THOUGHT FOR FRUSTRATED BUYERS

 Many buyers in Silicon Valley are getting fed up of having their offers beaten out by other bidders who value the property higher than them. I’m beginning to hear “We’re going to drop out until the market calms down and we can buy at a sensible price”.

IS THAT A SENSIBLE STRATEGY?

Not in my opinion. When the market calms down it will be because SUPPLY and DEMAND have equalized as they ALWAYS DO. When this happens prices will have leveled off at a higher point, and the number of new homes for sale each week will be stable.            

All of us in the industry know prices aren’t going down and neither are rates! And deep down most buyers know it too.

As it stands, mortgage rates on the Conforming 30-year fixed loans are just over 4% for the best borrowers, up from 3.5% (or lower) in May.  

Many incoming buyers are in payment shock. Combined with higher home prices future buyers are seeing their planned for mortgage payment get higher with the new rates.

So What Does Fannie Mae Think?   

When  Yahoo’s “The Daily Ticker” asked Fannie Mae chief economist Doug Duncan if he felt rates would go down, he said rather bluntly, “We do not”.                                          

Duncan did sprinkle in a little bit of good news as well.

“Mortgage rates have probably increased more than the Fed wanted, seeing that they’ve jumped about 60 basis points (.60%).     

“Some improvements in rates are in the near future because all the bad news the Fed is going to slow its mortgage purchases are built in. 

  “We could possibly see a slight improvement in rates for a very short time”.   

CONSIDER:

A ½ % rate increase in a $500,000 loan will cost an extra $9,000 over 5 years,

The current rate of price increases will level off, but at a higher level.

English: Mortgage debt

English: Mortgage debt (Photo credit: Wikipedia)

The end result of delaying will be a higher price with a more expensive mortgage.

 

Is it Time get back in the hunt!!!

Enhanced by Zemanta

THE MUTIPLE OFFER PROBLEM

 | 1 comment

THE MUTIPLE OFFER PROBLEM

To Bid or Not to Bid?

In Silicon Valley we are now about 12 months into the latest outbreak of “Multiple Offer Syndrome”.

English: This is one of the huge welcoming sig...

English: This is one of the huge welcoming signs for Google plex in the silicon valley. (Photo credit: Wikipedia)

A large majority of homes are currently being listed on Wed, hold Open Houses Sat and Sun, schedule offers for mid week, and are sold to the best of multiple offers by Friday.

The reason for this is very simple.

There are too many Buyers chasing too few houses. This is a direct result of historically low interest rates which will not start rising till early 1014 at the soonest.

As any Economist will tell you, in a free market the solution to this is equally simple. The law of Supply and Demand will automatically correct the problem.

If there is a shortage of any product more of that product will be brought to market.

In this case where there is a shortage of Houses for Sale, prices will be driven up. As this happens more homeowners will decide to sell, and Builders will accelerate getting new homes into the market. Obviously these things do not happen quickly so you can be sure the current price escalation will continue for at least 12 months and then probably just slow down to the historical norm for Silicon Valley i.e. 5% per year.

 

Looking west over northern San Jose (downtown ...

Looking west over northern San Jose (downtown is at far left) and other parts of Silicon Valley (Photo credit: Wikipedia)

If you are a Buyer who has several times lost out to higher bids you might wonder if it’s better to hold off till the market turns.

Consider the following:

Demand will not slow down for at least 12 months.

Each new sale sets a higher price for the next one in the same area.

In 12 months time it’s a near certainty that interest rates will be higher.

When things slow down and you decide to come back into the market you will be paying 12% to 15% more than today. (Based on price increases over the past 18 months in Silicon Valley.

In the meantime you are paying close to cost of a mortgage (which has major tax benefits) for rent which gives those same tax benefits to a Landlord.

Think carefully before holding off.

Enhanced by Zemanta

VANTAGESCORE

 | Comments Off on VANTAGESCORE

FICO logo

Factors contributing to someone's credit score...

Factors contributing to someone’s credit score, for Credit score (United States). (Photo credit: Wikipedia)

There’s a lot of talk about the new Credit Scoring model called VantageScore. Proponents say that it will boost your score and help people with no credit history build a strong credit score.

Here’s the bottom line: don’t waste a single memory cell on it.

Now… the back-story for those those want it:

Until the majority of lenders are using a new scoring model, the FICO score will remain the main credit scoring system out there.

As of right now, major lenders like Fannie Mae and Freddie Mac are not using VantageScore. In fact, I have never heard of a single lender who does use it.

When deciding whether to extend a loan to you, your potential creditors want to know how risky you are. Currently, the model they use to determine your creditworthiness is FICO, and almost exclusively FICO.

So if you want to qualify for a loan, or if you want to qualify for better terms on your existing loans/credit cards, you must follow the FICO model and do things which will improve your FICO score.

Ignore everything else because it will not make an ounce of difference if your lender is not looking at it. All it will do is paint an unrealistic picture of what loan terms you can expect.

I want you to focus on reality. And the reality is this: Almost every lender out there relies on FICO and only FICO when determining a credit score.

NOTE 1: When referring to FICO I mean the credit scoring model used by the 3 major Credit Bureaus, EQIFAX, TRANSUNION, and EXPERIAN.

NOTE 2: Be very careful of anyone claiming to be able to improve your Credit Score. I am aware of many scams but only 3 legitimate services that will actually get it done.

Enhanced by Zemanta

SHORT SALES-THE END??

 | 4 comments

Silicon Valley

Silicon Valley (Photo credit: Wikipedia)

For about 2 years now my market (Silicon Valley) has seen a steady increase in sales prices. This is finally causing changes in Banks approach to Short Sales.

I just had my 1st experience where a Bank (BofA) cancelled a previously approved short sale when they realized that the current value of the property is now higher than the amount of the loan.

They have now re-started the Foreclosure process where they can expect to get all of their money back and not have to take a loss after all.

This also gives the owner/borrower the opportunity to minimize the Credit hit by selling the property before the foreclosure completes, and maybe even get a little money back themselves.

I firmly believe that the age of the Short Sale Specialist is coming to it’s end and all those useless seminars will disappear with them.

However, there

Bank

Bank (Photo credit: 401(K) 2013)

for the home owner who is falling behind  if the Banks begin to think it might be smarter to foreclose and lose a lot less than previously, rather than expend time and effort trying to keep the afloat.

The next 6 month will be very interesting.

Enhanced by Zemanta

FHA BONUS

 | 6 comments

Interest Rates

Interest Rates (Photo credit: 401(K) 2013)

FHA loans with a 3.5% minimum down payment are often the only choice for 1st time buyers.
They get a lot of bad publicity from uninformed sources who compare them wrongly to conforming loans needing much higher down payments.

The reality is that the FHA loan is neither designed, nor sensible, for high down payment buyers.

However it does have one very powerful advantage over the traditional conforming loans; FHA LOANS ARE ASSUMABLE at the same interest rate as they started at.
In future years this may be a very valuable feature when selling the property.

First let’s understand that 1st time buyers in California typically sell that 1st house after approx 5 years.

Now let’s consider what level mortgage interest rates will be at that time, and compare with todays. We will assume a $400,000 FHA mortgage

CURRENT (historically low) 3.5% = $1,796/ month.

FUTURE (5 years)(20 year average) 6.0% =$2,398/month.

SAVING = $602/Month.
Now in 5 years time you are selling your home and have a smart buyer trying to decide which of 2 similar houses is the best deal might they well prefer the one where you can:
1. Buy and take over the existing mortgage which is $602/month cheaper for all time
OR
2. Go through all the hassle of getting a much more expensive mortgage for as long as you own it.
Assuming they sell after a typical 5 year period there is a difference of $36,120!!!.

MAYBE IT’s WORTH FINDING OUT WHICH IS THE BEST MORTGAGE FOR YOU, Not for the loan Agent who did not take the time to explain ALL your options, and the long term implications of each one.

Enhanced by Zemanta

THE DIGNITY MORTGAGE

 | 2 comments

About 6 years ago the greedy incompetent Banks managed to effectively take mortgages back to the Dark Ages. Since then the idea of having mortgages designed in the interest of the Borrower has been totally abolished.

Now at last we are hearing stirrings of intelligent ideas coming from the industry.

BEFORE READING THE REST OF THIS ARTTICLE PLEASE BE AWARE THAT THERE ARE NO SUCH THINGS AS “SUB PRIME MORTGAGES”. THERE ARE ONLY “SUB PRIME BORROWERS”.

Housing advocates are pushing for a new type of loan, called the “Dignity Mortgage,” They are approaching bankers and federal regulators proposing this.

The Dignity Mortgage would be geared to applicants who have rebuilt their finances since losing their homes and or jobs during the past 5-6 years, but who have been able to get steady employment and repaired their credit scores since then.

Despite this it is very difficult to get a regular mortgage from the standard lenders at this time says Faith Bautista, who heads the National Asian American Coalition.

The Dignity Mortgage would target Borrowers who had a good credit history prior to the collapse, and have been able to save at least a 10% down payment since then.

Since it would be a higher risk loan, it would come with a higher rate for a higher risk. For example, borrowers would pay 1.25 percentage points above more creditworthy borrowers (e.g. 4.75 percent if more A+ borrowers were paying 3.5 percent), the Los Angeles Times reports.

However, if borrowers made timely payments for five years, the deal could greatly improve.

“At that point, the extra money they had paid in interest would be used to reduce the mortgage balance, and their rate would be cut to whatever borrowers with sterling credit and 20 percent down payments were charged at the time the loan was made,” the Los Angeles Times reports in explaining the proposal.

Source: “New Type of Subprime Loan Pushed,” Los Angeles Times (Jan. 29, 2013)

Loan

Loan (Photo credit: Philip Taylor PT)

Enhanced by Zemanta

INVESTORS MOVING IN

 | Comments Off on INVESTORS MOVING IN

San Francisco Bay Area highlighted in red on a...

San Francisco Bay Area highlighted in red on a map of California (Photo credit: Wikipedia)

Another sign that Real Estate is fast recovering from its bottoms is that investors, individual and business, are making major moves to capitalize on today’s opportunities all over the Country.
A recent story from Bloomberg covered how Blackstone Group, the largest U.S. private real estate owners, sped up its purchases of homes to try to beat out fast rising prices.
This is a sign for on the fence buyers to start their hunt before the weather heats up and they face more competition than they can handle.
This is just one of the many indicators that point to a continued increase in prices, and proof once again that where the Bay Area leads the rest of the Country will follow

Enhanced by Zemanta

THE RECOVERY

 | 2 comments

In stark contrast to this time last year, the housing market is chugging into 2013 with a head of steam.
Home-listing prices were up 5.1% nationally in December on a year-over-year basis, according to data released Thursday by real-estate listings and data company Trulia. Out of the 100 major metro markets covered by the report, 82 of them saw year-over-year gains. At the end of 2011, asking prices had fallen 4.3%, and only 12 markets had posted positive price changes.
“Prices are going into 2013 with strong tailwinds,” said Jed Kolko, chief economist for Trulia. He cites a general strengthening of the job market, which in turn means more families able to cover a sizeable down payment. An increase in household formation, which is also the product of improving job prospects, and home construction could further bolster demand.
Mr. Kolko notes that the sharpest tightening of inventory is taking place in Western states. Four of the top 10 cities to see the largest asking price recovery were in California, including Oakland, San Jose, Sacramento and Fresno.

MORTGAGE FRAUD ALERT

 | Comments Off on MORTGAGE FRAUD ALERT

English: A sign advertising foreclosure rescue...

English: A sign advertising foreclosure rescue, name and number blanked out following discussion. (Photo credit: Wikipedia)

Despite frequent publicity and legal actions the Fraudsters and Scam Artists are still ripping off vulnerable and financially stressed homeowners with promises to fix their problems for a few thousand dollars up front.

They promise to obtain loan modifications, mortgage relief, and foreclosure rescue. Once the cheque is cashed they are no longer to be found.

There are many services available that legally try to help with these kinds of problems; however, they do not require payment up front which is totally illegal.

THE GOLDEN RULE IS THIS:

ANYONE ASKING FOR AN UP FRONT PAYMENT IS A CRIMINAL TRYING TO CHEAT YOU.

 

 

Enhanced by Zemanta

FIRST TIME BUYER PROGRAMS-Santa Clara & San Mateo Counties.

 | Comments Off on FIRST TIME BUYER PROGRAMS-Santa Clara & San Mateo Counties.

It’s easier than ever for 1st time buyersto to get on the home ownership wagon in Santa Clara and San Mateo Counties.

Official seal of County of Santa Clara

Official seal of County of Santa Clara (Photo credit: Wikipedia)

Each  has a dynamite program which greatly reduces the costs of buying when the buyer has only a small Down Payment (3% for Santa Clara-5% for San Mateo).

In both Counties the program works by providing a very low interest rate Second mortgage for either 17% or 15% of the purchase price. This removes the expensive PMI (Private Mortgage Insurance) with  all it’s costs and bureaucracy.

More information can be found at: www.housingtrustscc.org – for the Santa Clara County MAP Program

www.heartofsmc.org – for the San Mateo HEART Program.

Or drop me an e-mail – bmccord@rwnetwork.com

AND THAT’S NOT ALL.

You can then add the best Federal  Program I know of; The MCC (Mortgage Credit Certificate ) program which provides a substantial IRS Credit. As an example of this it would reduce your Federal Tax Bill by about $240/month on a $400,000 mortgage i.e. $2,880/ year.

NOTE: This is in addition to the normal Tax Relief on Mortgage Interest.

Enhanced by Zemanta