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Excerpt from 10 Tips to Snag a Mortgage in 2011
By Holden Lewis, Bankrate.com
Mortgage lenders tightened their standards after the subprime-mortgage mess, and that won't change this year. But mortgage loans can be had. Follow these 10 tips this year to secure a mortgage at an interest rate and under the terms that are right for you. Be sure to visit the website to watch videos and read more about these tips.
1. Have the right credit score.
The best combination of interest rate and points requires a higher credit score than in the past. Before the crisis, the best mortgages came with credit score of 720 or higher. Then the industry went back to basics. Now the best deals often require a 740 credit score.
2. Protect and Preserve your credit.
When mortgage lenders make multiple credit inquiries within a few weeks of one another, those multiple inquiries are treated as one. Yes, it will cause the score to drop. But the hit will likely be minor.
3. Shop Around.
The interest rate is important, but there are other costs to consider, such as discount points and even the type of mortgage loan. When shopping for best rates, compare combinations of discount points and loan types.
4. Know Your Borrowing Limit.
For most borrowers, the FHA caps mortgage payments at 31% of gross monthly income, before taxes. If you earn the median household income of about $4,200 per month before taxes, then your monthly house payment - principal, interest, taxes, insurance, and association dues - should be no more than 31% of that, or $1,302.
5. Don't Reset Your Refi Calendar to 30 Years.
When you refinance a 30-year loan that you've had for five years, pay off the new loan in 25 years. Just ask the lender to amortize the loan for the remaining period of the old loan.
6. Consider a No-Closing-Cost Refi
If you think you can't refinance, think again. You could refinance the loan yet pay little out of pocket in a no-closing-costs refi. With a no-closing-cost loan, the bank charges a slightly higher rate. You end up paying closing costs over time, instead of all at once.
7. Small Down Payment? See the Feds.
Most lenders require borrowers to have down payments of at least 10% of the home's price. In the case of refinances, lenders want borrowers to have at least 10% equity. For borrowers with good credit, the FHA requires a down payment (or equity) of 3.5%.
8. Small Loan? Act Early.
New restrictions on how loan officers are paid take effect April 1. The law forbids lenders from basing loan-officer compensation on interest rates or other loan terms. Essentially, a mortgage broker or loan officer can earn more money only by lending more money.
9. Make an Extra Payment Any Time of the Year.
Perhaps you've heard that making an extra mortgage payment at the end of each year will shorten the repayment time. That's true. But the extra payment doesn't have to come at year's end. An extra payment is effective any time of the year. The important thing is to pay it consistently.
10. Behind on your Payments? See a Counselor.
When late-paying borrowers get counseling, they are more likely to get a mortgage modification, which can reduce their payments.
Monday, January 31, 2011
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Thursday, January 27, 2011
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Excerpt from Nearly Eight in 10 Americans Still Believe Buying a Home Makes Good Financial Sense
Nearly eight out of 10 respondents believe buying a home is a good financial decision, despite ongoing challenges with the economy and housing market. That’s according to the 2010 National Housing Pulse Survey, an annual report released by the National Association of Realtors. The survey, which measures how affordable housing issues affect consumers, also found job security concerns to be the highest in eight years of sampling, with 70% of Americans saying that job layoffs and unemployment are a big problem in their area; eight in 10 cite these issues as a barrier to homeownership.
Despite economic uncertainty, 68% of those surveyed still believe now is a good time to buy a home; while that number is down from last year (75%), it’s up from 2008 (66%) and 2007 (59%). Lower home prices and record-low mortgage interest rates may be attracting buyers to the housing market—more than one-fourth of renters said they are thinking more about buying a home than they were a year ago. Sixty-three percent of renter respondents said that owning a home is a priority in their future, and nearly 40% said it was one of their highest priorities.
Lower home prices have improved affordability. In fact, the percentage of renters who are worried that the cost of housing is getting so unaffordable that they will never be able to buy a home has decreased steadily since 2007, from 63% to 57%.
The good news is that Americans are seeing more stability in the real estate market. Nearly seven out of 10 believe that home values have stabilized in their area; the same number expects home sales to remain about the same through the end of the year.
Monday, January 24, 2011
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Excerpt from Experts Citing Rising Hopes for Recovery
By Sewell Chan, NY Times, Economy
Eighteen months after the recession officially ended, the government’s latest measures to bolster the economy have led many forecasters and policy makers to express new optimism that the recovery will gain substantial momentum in 2011.
Despite persistently high unemployment, consumer confidence is improving. Large corporations are reporting healthy profits, and the Dow Jones industrial average reached a two-year high this week.
The measured optimism is reminiscent of the mood a year ago, when the economy seemed to be reviving, only to stall again in the spring amid widespread fears caused by the debt crisis in Greece and other European countries.
Even so, economists are increasingly upbeat about the outlook, saying that while the economy in 2011 will not be strong enough to drive unemployment down significantly, it should put the United States on its soundest footing since the financial crisis started an economic tailspin three years ago.
The Fed is likely to end its $600 billion bond-buying program in mid-2011, meaning monetary policy might be providing less of a kick to the economy by the end of the year. Officials in the Obama administration also seem to agree that after the $787 billion stimulus last year and the $858 billion tax-cut compromise just approved by Congress, the government’s arsenal of fiscal tools has just about been used up.
Representative Kevin Brady of Texas, the top Republican on the Joint Economic Committee of Congress, said he believed his party’s gains in the midterm elections had bolstered consumer and business confidence, arguing that Republicans have advocated fiscal discipline and opposed onerous regulations and tax increases.
“Consumer confidence seems to be on the upswing and business angst is dropping,” he said. “It hasn’t swung into the confidence column yet, but the negativity is lowering.”
Friday, January 21, 2011
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Excerpt from Top Homebuying, Selling Predictions for 2011
By Tara-Nicholle Nelson, Inman News
During this first holiday season on the road leading out of the recession, American consumers are taking different approaches in their decision-making.
Retailers capitalized on the dichotomy, with one luxury automaker promoting a "Season of Reason" sales event in which buyers were invited to "oversave" for gifts and personal purchases by spending $50,000 or more on a new car (irony, anyone?).
Such split mentalities, so to speak, will be a psychobehavioral theme among certain sectors of real estate consumers in 2011, says my crystal ball. The mindset of homeowners, in particular, will largely go in one of two directions.
Homeowners facing significant negative equity (owing much more on their homes than they are worth) will be increasingly willing to walk away from their homes, cutting their losses and strategically defaulting on their mortgages.
Homeowners who bought at the tail end of the boom will decide to stay put and bloom where they are planted, having lost faith in a "hockey stick" recovery. Similarly, sellers will fall into several distinct mindset camps in 2011.
In the markets that have come out of the recession fairly well and are projected to do well in 2011, some sellers will thaw their self-imposed freezes and list their homes. But they will do so with a greater receptiveness to the market than they have had during the past several years. When their homes lag for 30 days, they'll start cutting prices with less reluctance than before.
Buyers will tend to fall into two major mindset categories. The first category will be the non-urgent buyer in a recession-resistant market who missed the tax credit (yep, they've been looking that long). The non-urgent buyer is only willing to commit to the right property, even if that means they must see 100 homes and make 20 offers to do that.
The other group of buyers will be similar to "transactionally sophisticated" sellers -- very strategic, resourceful and adept with information. These buyers are very aware that their decision to buy a home will need to be a long-term one. They are willing and able to relocate, and they are researching everything from job growth to migration statistics before selecting the town where they will purchase their home.
2011 will truly be a season -- or rather four Seasons of Reason, when it comes to the way buyers, sellers and homeowners approach their real estate decisions, although reason will manifest itself in different ways for different niches within these consumer groups.
Thursday, January 20, 2011
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Excerpt from Taking the Bite Out of Closing Costs
By Jack Guttentag, Inman News
Upfront cash requirements are the single most important impediment to homeownership. First and foremost, cash is required for the down payment, which lenders insist on to protect themselves.
The down payment is a buffer against loss in the event the borrower defaults. It is also a rough indicator of the borrower's financial discipline, in the sense that those able to save enough for a down payment will default less frequently than those who can't.
With Chuck Freedenberg, I designed a simple calculator for determining the option that was least costly to the borrower. It is number 14a on my website.
The calculator indicates that although the lender contribution in my example above increased the payment by more than the equivalent seller contribution, it was not necessarily the less costly option because account must be taken of differences in the loan balance and in tax savings.
In general, a lender contribution is the better option for a borrower with a short time horizon and in a high tax bracket. With a lender contribution, the break-even period for a borrower in the 25 percent tax bracket is about five years, rising to six years if he is in the 40 percent bracket.
Borrowers who expect to have the mortgage longer do better with a seller contribution. But don't rely on these generalizations. The calculator allows you to tailor the answer to the specifics of your situation.
Monday, January 17, 2011
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Excerpt from New Yorkers support Homeownership
By Sal Prividera Jr., New York State REALTOR
REALTORS have long been strong supporters of the federal government's programs to foster homeownership such as the mortgage interest deduction and the recent federal tax credit. And rightly so, as the return on investment is many fold because home buying and homeownership are key drivers for the economy and the over-all quality of life in our communities. The positive impact of homeownership on our society has been long documented by extensive independent research.
NYSAR will be utilizing the findings of its two consumer studies conducted by the Siena Research Institutre (SRI) to continue to demonstrate that New Yorkers desire to be homeowners and support homeownership opportunities. In fact, the data support several of the Journal's points. For example, the NYSAR/SRI New York Homeownership Survey found:
- 84 percent of all New York residents believe homeownership to be a very significant part of achieving the American Dream.
- 81 percent of owners consider their home a comfort and nearly all (97%) are satisfied with owning their home.
- 90 percent of New York homeowners say that "owning my own home makes me proud, it was always something I wanted" and that "my home is where lasting family memories are made."
To read the rest of these interesting results and the conclusion of the article, please visit the link above.
Friday, January 14, 2011
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Excerpt from When Home Prices Will Head Up
By Pat Mertz Esswein, Kiplinger's Personal Finance magazine
The lowest mortgage interest rates in almost 60 years, plus affordable homes in cities where buyers had been priced out for years, should be turning the housing market around. But the market also labors under some heavy burdens: a glut of foreclosures that are dragging down home prices, high unemployment and tight credit. Sales fell off a cliff after the home-buyer tax credit expired. And “foreclosure-gate” -- legal squabbling about the process used to repossess many homes -- postponed the sale of many foreclosed properties and struck yet another body blow to confidence in the housing market.
The home-price plunge has left 23% of mortgage borrowers (out of 53.5 million) underwater -- that is, they owe more on their mortgage than the market value of their home. Unless they can ante up the difference -- an average of $75,000, according to CoreLogic, which analyzes mortgage data -- they can’t sell and they can’t move. Their choices? Stick it out, ask the lender for permission to sell for less than they owe (a short sale), or default.
Now, short sales and foreclosures are the driving force behind continued price declines. Throughout 2010, they accounted for about one-third of home sales, with an average price discount of 26%, according to RealtyTrac. Everyone agrees that more such sales are on the way, but estimates vary.
Thursday, January 13, 2011
Re-casting your mortgage is a little known strategy for homeowners to lower their monthly mortgage payments and save some money on interest without hefty fees or credit requirements of refinancing, according to this NY Times article.
The strategy works by paying off a lump sum of the principal amount and asking to have the monthly payments reset according to the original interest rate and loan terms. The lump sum reduces the principal which lowers the monthly payments and the overall interest owed on the loan. The fee for this is typically only about $150 or more for this service since this is not a new loan, which also means there are no new closing costs or credit checks.
For more details about this interesting strategy, read the rest of the article. Sphere: Related Content
Wednesday, January 12, 2011
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Excerpt from Home Ownership still the Holy Grail
By Real Estate Weekly
Paul Bishop, NAR vice president of research, said the lion's share of buyers view their home as a good investment. "Eighty-five percent of recent home buyers see their home as a good investment, and nearly half think that investment is better than stocks," he said.
The next biggest reasons for buying, identified by all home buyers, were desire for a larger home, 9%; a change in family situation and the home buyer tax credit, cited by 8% each; a job-related move, 7%; and the affordability of homes, 6%. Twelve other categories were 5% or less.
The number of first-time home buyers rose to a record high 50% of all home sales from 47% in the 2009 study, building on success of the home buyer tax credit which began in 2009. The previous cyclical high for first-time buyers was 44% in 1991; records date back to 1981.
The profile shows the median age of first-time buyers was 30 and the median income was $59,900. The typical first-time buyer purchased a 1,540 s/f home costing $152,000, with 93% using the first-time buyer tax credit.
Fifty-eight percent of all buyers are married couples, 20% are single women, 12% single men, 8% unmarried couples and 1% other.
Bishop noted, "A modest increase in the share of single men buyers may result from the home buyer tax credit, but this is the highest share for single men in the history of the study."
Tuesday, January 11, 2011
In an analysis from the NY Times, it seems that the best opportunity to buy a home is without a doubt upon us. According to the article, mortgage rates in 2010 were the lowest in six decades, and that a recent and sustained increase may indicate that consumers can expect to pay more in the new year to buy or refinance a home.
Mortgage rates hit rock bottom in mid-November and since then fixed rates for 30-year mortgages, the most common type of home loan, have steadily risen.
Experts believe that the "The window of low rates could have left us" which means that buying now and into the Spring will probably yield increasingly more expensive purchases. The 4.17 rate last month was the lowest since Freddie Mac began tracking rates in 1971 — as well as the lowest since World War II, according to Weiss Research, a financial analysis and publishing firm.
The Mortgage Bankers’ Association, a trade group, predicts that 30-year fixed rates will inch up to 5.1 percent by the end of 2011 and reach 5.7 percent in 2012.
Read the rest of the article for more detail, but if you are looking for a home it seems more than ever the time is ripe. Sphere: Related Content
Monday, January 10, 2011
Excerpt from Same Sex Selling
By Liana Grey, Real Estate Weekly
As Manhattan gentrified, the borough’s gay population spread out somewhat. “Chelsea boys” still frequent the dozen-plus gay bars, clubs, and gyms between 14th and 34th streets — but point to a random spot on a Manhattan map and odds are it’s LGBT-friendly.
“I always say that every neighborhood is desirable,” said Treglia. “It’s where you feel comfortable, where your friends are.” Like their straight counterparts, Treglia’s gay and lesbian clients are comfortable drifting across neighborhood lines.
Two men he worked with lived in separate apartments on the Upper East and West sides before purchasing a co-op together in lower Chelsea. Following a successful board interview in July, they were invited to the building’s garden party.
The purchase process went smoothly. When the two men finally moved in earlier this month, they had little to complain about.
For unbeatable discounts, a handful of gay couples have headed to Harlem and Washington Heights. “There’s a very strong movement all across the northern neighborhoods,” said Justin Hieggelke of the Real Estate Group New York, who shares an apartment on West 142nd Street with his longtime partner.
Same-sex couples began trickling into the neighborhood over the past decade. “I moved here two years ago,” he said. “All of a sudden — boom, we saw people at Starbucks, at the New York Sports Club.” Add to the mix a growing number of LGBT-friendly hangout spots, and the neighborhood has fast become a gay and lesbian enclave.
“A couple years ago, it seemed like there were couples looking to settle,” Hieggelke said. “Last summer, we noticed younger gay guys moving in. I think that’s strictly an affordability issue; they can’t necessarily afford to live south of here.”
More often than not, apartment complexes develop large LGBT populations by chance. “My building is 40% occupied by gay people,” Hieggelke said. It was a fact he and his partner learned only after moving in and chatting with neighbors; New York State prohibits brokers from advertising the demographics of a building or neighborhood.
Friday, January 7, 2011
A quick graph from Calculated Risk shows how homeownership has fallen in line with the increase in children living with their parents as a shelter from the new economy. When jobs improve, it is expected that these will form a significant pool of demand for housing. Sphere: Related Content
Thursday, January 6, 2011
While the reports for the last quarter of 2010 aren't quite out yet, the article points out that experts say the year ended strong and that they were confident that the New York housing market will remain solid without the help from government incentives. The week leading into Christmas also showed stronger than expected activity.
Read the rest of the article for more details. Sphere: Related Content
The NY Times featured Ward Hill as a hidden gem in a recent article. As the article says:
Many homes have remained in the same families for decades, but as longtime residents either retire away or pass away, Ward Hill has been enjoying an infusion of new residents from all walks of life.
“It’s a real eclectic mix of people, with a lot of artsy people moving in,” said Jody Scaravella, a restaurateur who lives in a renovated Dutch colonial down the block from the Neravandas. “It’s not a boring, homogeneous zone.”
In a terraced garden behind his house, Mr. Scaravella grows produce for Enoteca Maria, the Italian restaurant he owns in nearby St. George. While tending his zucchini in the summer, he said, he is occasionally able to hear live rock music being performed by talented bands at the homes of neighbors who work in the music industry. At other times he hears only the singing of birds.
“Urban bucolic” is how Joseph Carroll, the district manager of Community Board 1, described the area, adding that “it’s economically singular but ethnically diverse.” Sphere: Related Content
Wednesday, January 5, 2011
Here are excerpts from the article...
A pall has settled over the U.S. housing market. The first-time home buyer's credit has dried up, and home prices are down 29 percent from their 2006 peak. On Dec. 9 the latest release of the Federal Reserve's Flow of Funds data shows the value of homeowner equity in the third quarter of this year at $6.4 trillion—52 percent lower than four years ago.
But does that mean it's a bad idea to buy a home? I don't believe so, based on some dispassionate analysis. For the long-term homeowner (or patient investor), a home appears to be one of the better investments around, with minimal downside risk. "Housing is priced to earn its historic real rate of return of 0.5 percent to 1 percent and interest rates are low," says Morris Davis, professor of real estate and urban land economics at the University of Wisconsin-Madison. "Now may be a once-in-a-lifetime time to buy."
RENTING VS. OWNING
Think of the rental and ownership markets as competing for the household shelter dollar. Richard Green, director of the Lusk Center for Real Estate at the University of Southern California, says that equation clearly favors owning. Even more striking, Green says he's "hard-pressed to think of a time when owning on a cash-flow basis looks so reasonable relative to renting."
Take this back-of-the-envelope calculation: Green notes the median U.S. house price is $170,500. The most recent American Housing Survey data (2008) put the median rent at $808 a month and the CPI-Rent index has been essentially flat since then. The cash-flow cost of renting is $9,696 per year. On the homeownership side, Green assumes an interest rate on a 30-year fixed-rate mortgage is 4.5 percent and that the buyer makes a 20 percent down payment. He assumes the buyer could have made 10 percent on the downpayment if it was invested elsewhere, the so-called opportunity cost of capital. Property taxes are 1 percent of house value, marginal income tax rates (state and local) are 25 percent, maintenance costs are 1 percent per year, and amortized closing costs are another 1 percent per year. Taken altogether, the cash cost of owning is $12,162 per year. Looks like renting still beats owning, right?
Not really. The typical apartment is smaller than the typical house, 1,300 square feet for the median rental unit vs. 1,800 square feet for the median home. Thus, owning the median home is about 10 percent less per square foot than renting the median rental unit. "You need no home price appreciation to still be ahead financially with owning," he says. "Your after-tax, out-of-pocket cost of owning is less than the out-of-pocket cost of renting."
There's another trend working in homeownership's favor: "Housing is a hedge against inflation," says Davis. During the inflationary 1970s the annualized real rate of home price appreciation—that is, above inflation—was 4.35 percent for the decade, according to research by Davis and Jonathan Heathcote, economist at the Federal Reserve Bank of Minneapolis. In sharp contrast, from 1960 to 1970 the real annual return was 0.62 percent. Thanks to the potent combination of leverage and inflation, the average homeowner in 1970 earned a total real return on equity of 5 times by 1980.
The housing market bust has taken optimists to the woodshed many times over the past several years. The litany of negatives weighing on the market remains daunting. So the safe forecast remains "Plenty could still go wrong." But real estate market valuations suggest the odds may well favor the intrepid. Sphere: Related Content
Tuesday, January 4, 2011
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Excerpt from Deciding Whether to Buy or Rent
By Antoinette Martin, The New York Times Real Estate
In today’s market, with uncertainty the sole certainty up ahead, the age-old question — rent or buy? — becomes increasingly perplexing.
Yes, said one market expert, after he crunched fresh numbers. Despite unusually severe fluctuations and distress in the New Jersey marketplace, the analyst, Jeffrey G. Otteau, concluded that it is a better deal to buy, as long as one holds on to the property for several years.
“If you buy a good property in a stable community,” said Karen Eastman Bigos, who heads the Towne Realty Group in Millburn, “with today’s bargain prices and interest rates, it is virtually guaranteed that value will rise by more than that.”
But, noted Roberta Baldwin, a broker with Keller Williams Realty in Montclair, not all decisions about whether to rent or buy are made on the basis of finances. “Lifestyle figures in heavily,” she said, “and so does availability.”
Two couples who recently settled in Jersey City — one pair buyers, the other renters — said they had made their choices primarily out of a desire to live in new buildings with easier commutes to Manhattan.
Monday, January 3, 2011
So why wouldn't you shop around for the best deal on what is most likely to be the biggest purchase you ever make in your life? A surprising article from HousingWire.com based off of a Lending Tree survey shows that while 96% of people shop around for prices when they shop for anything, only 40% of people do so when shopping for a mortgage. As the article says "This, according to LendingTree, explains why only 28% surveyed feel confident they got the best possible deal on their loan." Sphere: Related Content