Provided By Realty Times
The Zillow Home Value Index fell 26% since its peak in June 2006. That’s a greater decline than seen in the Depression-era years of 1928 to 1933.
According to Zillow.com, "November marked the 53rd consecutive month of home value declines, with the Zillow Home Value Index (ZHVI) falling 0.8% from October to November, and falling 5.1% year-over-year.”
But the news isn’t all bad. If you’ve gathered around the office water cooler to catch up with colleagues, maybe you’ve noticed a bit of optimism blossoming. it’s not just a feeling, it’s real. According to Zillow Research, the economy is improving. The improvement is expected to gradually increase "household formation and consumer confidence”. But the housing market may still face greater declines due to "excess inventory of homes, high negative equity and foreclosure rates, and weakened demand due to elevated unemployment,” reported Zillow.com.
However, if you’ve been watching, waiting, and wondering, when to buy ... . Now’s the time to take note. While no one has a crystal ball to predict what will happen with the housing market, some experts are reporting that an uptrend will occur later this year. They’re basing their beliefs on the job market (some predictions indicate it will improve half-way through this year), and "Homebuilder exchange traded funds are above their 200-day moving averages,” according to ETFTrends.com
If all these things have you confused, a simple way to look at real estate is to understand your specific needs, wants, and long-term goals. Do you need a place to live? Are you planning to stay in your home for at least a couple of years? (Most buyers live in their home on average seven years). Does owning your home matter?
Have you saved money for a downpayment?
Answering these questions will help point you in the right direction. Assuming that buying a home is the best scenario for you, how can you rest easy that you’re getting the best price? Ah, the $64-million question. You can’t.
Timing the market is like trying to win the lottery. There is no absolute way to know when it’s the bottom of the real estate market. That’s why you must know your specific needs, wants, and long-term goals.
If your needs include a home to live in for a lengthy period of time, then homeownership will likely rank higher on your priority list. If building credit, potential of appreciation–yes, there is still appreciation–especially when you buy a sensibly priced home in a good location. However, the appreciation may be slower and not shoot up into the double digits that we saw in some areas.
Consider this, with high inventory, sellers are motivated. You can scoop up a home at a perfect price and you can minimize your potential for low appreciation. If you choose a home that is in the lower-tier of prices (and still within your target price), your home will be less vulnerable in down markets and better situated in up markets because the higher-priced homes help elevate your home’s value.
Homeownership has many benefits including tax deductions, the opportunity to make your own creative changes to your home, and the potential for income if you later rent it out.
If you have more questions about buying a home, give us a call at 972-772-7000 or email us at rockwall@kw.com.
Friday, February 11, 2011
Wednesday, February 9, 2011
Reverse Loans
Provided By The Sun News
Reverse mortgages allow seniors to use their home equity while staying in their homes, but have been criticized for their high upfront fees, among other things.
A new loan has hit the market, however, offering sharply lower start-up costs in exchange for a tighter limit on the amount that can be borrowed.
"It opens up new options for people to think about in terms of how they tap their equity as a retirement resource," said Barbara Stucki, vice president of home equity initiatives at the National Council on Aging.
The Federal Housing Administration isn't talking publicly about it, but the agency may be getting ready to lessen the upfront costs of reverse mortgages for some borrowers.
The Federal Housing Administration will offer a new type of reverse mortgage that will be more affordable, the agency announced this week.
Mark your calendars. The Van Ripers have moved up the date of their mortgage-burning party. When the couple purchased their St. Paul, Minn., home in 2005, they locked in a 6 percent interest rate for 30 years.
With fixed mortgage-interest rates at an all-time low, it might seem as if real estate offices should have house hunters lining up, ready to sign on the dotted line.
Growing pessimism over the weak economic recovery pushed mortgage rates to the lowest level in decades for the seventh time in eight weeks.
Even with these lower costs, advisers say older homeowners should be cautious about reverse mortgages, because the loans can use up the value of their homes, and because in some cases, salesmen have persuaded them to put the loan proceeds into unsuitable investments.
The new loan, called the Home Equity Conversion Mortgage Saver, charges an upfront insurance premium of 0.01 percent of the value of the home - a fraction of the 2 percent charged by the traditional Home Equity Conversion Mortgage. Both HECMs are insured by the Federal Housing Administration, which backs the vast majority of the reverse mortgage market.
On a $400,000 home, a borrower who chooses the Saver would pay $40 in upfront insurance premiums, compared with $8,000 on a regular reverse mortgage.
The tradeoff is that less money is available to the homeowner - 10 percent to 18 percent less, depending on the age of the borrower.
At recent interest rates, a 72-year-old owner of a $400,000 home could borrow up to $192,875 under the HECM Saver, compared with $246,398 under the traditional HECM, said Peter Bell, president of the National Reverse Mortgage Lenders Association, a trade group representing about 400 lenders. The lower borrowing limit means the FHA is less likely to lose money on the loan, making the smaller insurance premium possible.
At the same time, many of the private lenders that make these loans have sliced their origination fees, Bell said. While in the past, they charged origination fees totaling thousands of dollars - on top of the insurance premiums - many lenders have now cut or waived the origination fees. They have been able to do that because investors are paying a premium for securities backed by reverse mortgages, Bell said.
Because lenders' origination fees vary, it pays to shop around among lenders for the best deal, Stucki advised. "A few percentage points in the cost of the loan or service fee could make a big difference," Stucki said.
While the start-up costs on reverse mortgages have dropped, the annual insurance premium has risen, from 0.5 percent of the outstanding loan balance to 1.25 percent. That has been necessary to protect the FHA from losses during the housing market's meltdown.
Reverse mortgages used to have only adjustable interest rates, but the FHA recently added a fixed-rate option. While many borrowers like the idea of knowing the interest rate won't rise, experts caution homeowners to think twice. To get the fixed rate, the homeowner must take out the full loan amount as a lump sum, and will be paying interest and insurance on all of it, even if only a small amount is needed.
"Most people would be better served with the adjustable rate, because they don't have to take all the money upfront," said Susanna Montezemolo, a vice president with the Center for Responsible Lending. She also pointed out that elderly homeowners who suddenly have a large pool of money can be targeted by salesmen selling potentially unsuitable financial products, such as deferred annuities.
Montezemolo said that homeowners should not take reverse mortgages lightly.
"They're an option for someone who is cash-poor but equity-rich, and can't meet living expenses," she said. "For people who want to tap into their equity to have a vacation or something, it becomes a very expensive vacation if you start adding up all the fees."
Before signing up for a reverse mortgage, homeowners should consider whether it's even a good idea to stay in the home, both Montezemolo and Stucki advised. Though older people are often strongly attached to their homes, many would be better off moving to smaller places with no stairs, where someone else shovels the snow and mows the lawn.
"People with health conditions need to be very thoughtful about whether this makes sense for them," Stucki said. "Staying in a house that's too big, too old or unsafe just doesn't make any sense."
Selling a home, of course, is not necessarily cheaper than getting a reverse mortgage, since a real estate agent's fees, moving costs and other expenses will run to thousands of dollars.
Do you need more home loan advice? Give us a call at 972-772-7000 or email us at rockwall@kw.com.
Reverse mortgages allow seniors to use their home equity while staying in their homes, but have been criticized for their high upfront fees, among other things.
A new loan has hit the market, however, offering sharply lower start-up costs in exchange for a tighter limit on the amount that can be borrowed.
"It opens up new options for people to think about in terms of how they tap their equity as a retirement resource," said Barbara Stucki, vice president of home equity initiatives at the National Council on Aging.
The Federal Housing Administration isn't talking publicly about it, but the agency may be getting ready to lessen the upfront costs of reverse mortgages for some borrowers.
The Federal Housing Administration will offer a new type of reverse mortgage that will be more affordable, the agency announced this week.
Mark your calendars. The Van Ripers have moved up the date of their mortgage-burning party. When the couple purchased their St. Paul, Minn., home in 2005, they locked in a 6 percent interest rate for 30 years.
With fixed mortgage-interest rates at an all-time low, it might seem as if real estate offices should have house hunters lining up, ready to sign on the dotted line.
Growing pessimism over the weak economic recovery pushed mortgage rates to the lowest level in decades for the seventh time in eight weeks.
Even with these lower costs, advisers say older homeowners should be cautious about reverse mortgages, because the loans can use up the value of their homes, and because in some cases, salesmen have persuaded them to put the loan proceeds into unsuitable investments.
The new loan, called the Home Equity Conversion Mortgage Saver, charges an upfront insurance premium of 0.01 percent of the value of the home - a fraction of the 2 percent charged by the traditional Home Equity Conversion Mortgage. Both HECMs are insured by the Federal Housing Administration, which backs the vast majority of the reverse mortgage market.
On a $400,000 home, a borrower who chooses the Saver would pay $40 in upfront insurance premiums, compared with $8,000 on a regular reverse mortgage.
The tradeoff is that less money is available to the homeowner - 10 percent to 18 percent less, depending on the age of the borrower.
At recent interest rates, a 72-year-old owner of a $400,000 home could borrow up to $192,875 under the HECM Saver, compared with $246,398 under the traditional HECM, said Peter Bell, president of the National Reverse Mortgage Lenders Association, a trade group representing about 400 lenders. The lower borrowing limit means the FHA is less likely to lose money on the loan, making the smaller insurance premium possible.
At the same time, many of the private lenders that make these loans have sliced their origination fees, Bell said. While in the past, they charged origination fees totaling thousands of dollars - on top of the insurance premiums - many lenders have now cut or waived the origination fees. They have been able to do that because investors are paying a premium for securities backed by reverse mortgages, Bell said.
Because lenders' origination fees vary, it pays to shop around among lenders for the best deal, Stucki advised. "A few percentage points in the cost of the loan or service fee could make a big difference," Stucki said.
While the start-up costs on reverse mortgages have dropped, the annual insurance premium has risen, from 0.5 percent of the outstanding loan balance to 1.25 percent. That has been necessary to protect the FHA from losses during the housing market's meltdown.
Reverse mortgages used to have only adjustable interest rates, but the FHA recently added a fixed-rate option. While many borrowers like the idea of knowing the interest rate won't rise, experts caution homeowners to think twice. To get the fixed rate, the homeowner must take out the full loan amount as a lump sum, and will be paying interest and insurance on all of it, even if only a small amount is needed.
"Most people would be better served with the adjustable rate, because they don't have to take all the money upfront," said Susanna Montezemolo, a vice president with the Center for Responsible Lending. She also pointed out that elderly homeowners who suddenly have a large pool of money can be targeted by salesmen selling potentially unsuitable financial products, such as deferred annuities.
Montezemolo said that homeowners should not take reverse mortgages lightly.
"They're an option for someone who is cash-poor but equity-rich, and can't meet living expenses," she said. "For people who want to tap into their equity to have a vacation or something, it becomes a very expensive vacation if you start adding up all the fees."
Before signing up for a reverse mortgage, homeowners should consider whether it's even a good idea to stay in the home, both Montezemolo and Stucki advised. Though older people are often strongly attached to their homes, many would be better off moving to smaller places with no stairs, where someone else shovels the snow and mows the lawn.
"People with health conditions need to be very thoughtful about whether this makes sense for them," Stucki said. "Staying in a house that's too big, too old or unsafe just doesn't make any sense."
Selling a home, of course, is not necessarily cheaper than getting a reverse mortgage, since a real estate agent's fees, moving costs and other expenses will run to thousands of dollars.
Do you need more home loan advice? Give us a call at 972-772-7000 or email us at rockwall@kw.com.
Monday, February 7, 2011
Winter Storm Safety
Provided By Realty Times
Winter weather can be relentless. Ice, snow, and sleet in their many forms mean homeowners can find themselves homebound.
Outlined below are ten easy steps that can help your family make it through a winter snow-in.
1. Keep warm: Temperatures can drop well below zero during major winter storms. If your electricity fails, do you have a backup plan to keep warm? Blankets, warm clothing, and firewood are all great things to have on hand.
2. Water: We can survive on limited food, but we and our pets must have water. Have bottled or jugged water on hand in the case of emergency.
3. Non-perishable food: If you go without electricity, you may find yourself being unable to store food. Stock up on non-perishables before a big storm. And then buy plenty of fruits and vegetables that can keep without refrigeration.
4. Crank radio: You may need to listen to emergency announcements. Crank and battery-powered radios are an essential.
5. First-aid kit: Alcohol, bandages, anti-bacterial ointment, burn salve, and basic pain killers (aspirin and acetaminophen) are staples of a well-stocked first-aid kit. Also be sure that prescriptions have been filled prior to any big storm system.
6. Sidewalks: Be sure to have a snow shovel and a bag of sand on hand before any big storm. You'll need to clear your driveway as well as sand your walkways. There is nothing worse than taking a spill on ice.
7. Candles and lighter/matches: If lights are out, you'll still need candles or a flashlight to find your way around. Plus, candles offer a great ambiance, even when you're stuck inside!
8. Entertainment: Movies, cards, board games, and books can all make the time pass quickly.
9. Sleds: Okay, this isn't a necessity. But nothing brings out the wish for a sled more than a perfectly snow covered hill. Plan ahead and you'll be ready for some great family bonding.
10. Travel: If you must venture out, be sure you have a full tank of gas, a blanket/sleeping bag, water, and kitty litter. Why kitty litter? If you get stuck, kitty litter may offer enough grit for tires to gain traction.
Use these simple tips to make your next snow day successful. And above all else, be sure to stay off icy roads and inside your home when weather is bad.
If you need more tips on staying safe this winter give us a call at 972-772-7000 or email us at rockwall@kw.com.
Winter weather can be relentless. Ice, snow, and sleet in their many forms mean homeowners can find themselves homebound.
Outlined below are ten easy steps that can help your family make it through a winter snow-in.
1. Keep warm: Temperatures can drop well below zero during major winter storms. If your electricity fails, do you have a backup plan to keep warm? Blankets, warm clothing, and firewood are all great things to have on hand.
2. Water: We can survive on limited food, but we and our pets must have water. Have bottled or jugged water on hand in the case of emergency.
3. Non-perishable food: If you go without electricity, you may find yourself being unable to store food. Stock up on non-perishables before a big storm. And then buy plenty of fruits and vegetables that can keep without refrigeration.
4. Crank radio: You may need to listen to emergency announcements. Crank and battery-powered radios are an essential.
5. First-aid kit: Alcohol, bandages, anti-bacterial ointment, burn salve, and basic pain killers (aspirin and acetaminophen) are staples of a well-stocked first-aid kit. Also be sure that prescriptions have been filled prior to any big storm system.
6. Sidewalks: Be sure to have a snow shovel and a bag of sand on hand before any big storm. You'll need to clear your driveway as well as sand your walkways. There is nothing worse than taking a spill on ice.
7. Candles and lighter/matches: If lights are out, you'll still need candles or a flashlight to find your way around. Plus, candles offer a great ambiance, even when you're stuck inside!
8. Entertainment: Movies, cards, board games, and books can all make the time pass quickly.
9. Sleds: Okay, this isn't a necessity. But nothing brings out the wish for a sled more than a perfectly snow covered hill. Plan ahead and you'll be ready for some great family bonding.
10. Travel: If you must venture out, be sure you have a full tank of gas, a blanket/sleeping bag, water, and kitty litter. Why kitty litter? If you get stuck, kitty litter may offer enough grit for tires to gain traction.
Use these simple tips to make your next snow day successful. And above all else, be sure to stay off icy roads and inside your home when weather is bad.
If you need more tips on staying safe this winter give us a call at 972-772-7000 or email us at rockwall@kw.com.
Friday, February 4, 2011
Home Refinancing Basics
In recent years, millions of homeowners have taken advantage of low rates and refinanced their mortgages. This article describes the advantages and possible pitfalls associated with a "refi."
Provided By Yahoo! Finance
Before You Start:
•Remember that refinancing to reduce debt can be a smart move, but refinancing in order to borrow more for consumer purchases (car, vacation, etc.) could set you back significantly.
•Read the fine print on your current mortgage to learn whether you'll be assessed penalties or fees for "getting out" of that loan early.
•Make sure you know whether you have a fixed or variable interest rate and what the terms are.
Home Refinancing Basics
In recent years, Americans seeking to take advantage of low interest rates have lined up to refinance their mortgages. In fact, refinancing hit an all-time high in 2003, and remained high in both 2004 and 2005, according to the Mortgage Bankers Association of America.
But while it's true that refinancing has the potential to help you reduce the costs associated with borrowing money to own a home, it is not necessarily a strategy that makes sense for every individual in every situation. So before you make a commitment to refinance your mortgage, it's important to do your homework and determine whether such a move is the right one for you.
To Refinance or Not
The old and arbitrary rule of thumb said that a refi only makes sense if you can lower your interest rate by at least two percentage points for example, from 9 percent to 7 percent. But what really matters is how long it will take you to break even and whether you plan to stay in your home that long. In other words, make sure you understand - and are comfortable with - the amount of time it will take for your overall savings to compensate for the cost of the refinancing.
Consider this: If you had a $200,000 30-year mortgage with an 8 percent interest rate, your monthly payment would be $1,468. If you refinanced at 6 percent, your new monthly payment would be $1,199, a savings of $269 per month. Assuming that your new closing costs amounted to $2,000, it would take eight months to break even. ($269 x 8 = $2,152). If you planned to stay in your home for at least eight more months, then a refi would be appropriate under these conditions. If you planned to sell the house before then, you might not want to bother refinancing. (See below for additional examples.)
Remember: All Mortgages Are Not Created Equal
Don't make the mistake of choosing a mortgage based only on its stated annual percentage rate (APR), because there are a variety of other important variables to consider, such as:
The term of the mortgage - This describes the amount of time it will take you to pay off the loan's principal and interest. Although short-term mortgages typically offer lower interest rates than long-term mortgages, they usually involve higher monthly payments. On the other hand, they can result in significantly reduced interest costs over time.
The variability of the interest rate - There are two basic types of mortgages: those with "fixed" (i.e., unchanging) interest rates and those with variable rates, which can change after a predetermined amount of time has passed, such as one year or five years. While an adjustable-rate mortgage (ARM) usually offers a lower introductory rate than a fixed-rate mortgage with a comparable term, the ARM's rate could jump in the future if interest rates rise. If you plan to stay in your home for a long time, it may make sense to opt for the predictability and security of a fixed rate, whereas an ARM might make sense if you plan to sell before its rate is allowed to go up. Also keep in mind that interest rates hovered near historical lows in recent years and are more likely to increase than decrease over time.
Points - Points (also known as "origination fees" or "discount fees") are fees that you pay to a lender or broker when you close the deal. While a "no-cost" or "zero points" mortgage does not carry this up-front cost, it could prove to be more expensive if the lender charges a higher interest rate instead. So you'll need to determine whether the savings from a lower rate justify the added costs of paying points. (One point is equal to one percent of the loan's value.)
How Much Would You Save?
A homeowner with a 30-year, $200,000 mortgage charging 8% interest would pay $1,468 each month.
A Closer Look at Mortgage Fees
Using data collected during 2003, researchers at Bankrate.com determined the average fees charged to consumers who borrow money to buy a home. Based on a loan of $180,000, the fees broke down as follows:
Average Lender/Broker Fees
Administration fee: $336
Application fee: $205
Commitment fee: $498
Document preparation: $194
Funding fee: $228
Mortgage broker fee: $839
Processing: $320
Tax service: $73
Underwriting: $269
Wire transfer: $31
Third-Party Fees
Appraisal: $327
Attorney or settlement fees: $445
Credit report: $29
Flood certification: $17
Pest & other inspection: $68
Postage/courier: $45
Survey: $174
Title insurance: $605
Title work: $200
Government Fees
Recording fee: $76
Various taxes: $1,339
Stick With What You Know
Finally, keep in mind that your current lender may make it easier and cheaper to refinance than another lender would. That's because your current lender is likely to have all of your important financial information on hand already, which reduces the time and resources necessary to process your application. But don't let that be your only consideration. To make a well-informed, confident decision you'll need to shop around, crunch the numbers, and ask plenty of questions.
Summary:
•The decision to refinance should only be made if the long-term savings outweigh the initial expenses. To calculate your break-even point, divide the cost of the refi by your monthly savings. The resulting figure represents the number of months you will need to stay in the home to make the strategy work.
•Don't select a new mortgage based only on its annual percentage rate.
•Also evaluate the term of the loan, whether the interest rate is fixed or variable, and the relative merits of paying up-front fees in exchange for a lower rate.
•Your current lender already knows you and has your financial information on file, so you may be able to get a better deal that way, instead of going to a new lender.
•To get the best possible refinancing deal, you'll need to shop around, crunch some numbers, and ask a lot of questions.
Checklist:
•Shop around and conduct a detailed cost assessment (with a financial professional, if necessary) to identify which mortgage offers the greatest financial benefits.
•Read the entire contract before signing. Don't let anyone pressure you or rush you to make a hasty decision.
•If refinancing results in lower monthly payments, use those savings to pursue other important goals, such as preparing for retirement and college costs.
If you are stuck between making the decision to refinance or sell your home, give us a call at 972-772-7000 or email us at rockwall@kw.com.
Provided By Yahoo! Finance
Before You Start:
•Remember that refinancing to reduce debt can be a smart move, but refinancing in order to borrow more for consumer purchases (car, vacation, etc.) could set you back significantly.
•Read the fine print on your current mortgage to learn whether you'll be assessed penalties or fees for "getting out" of that loan early.
•Make sure you know whether you have a fixed or variable interest rate and what the terms are.
Home Refinancing Basics
In recent years, Americans seeking to take advantage of low interest rates have lined up to refinance their mortgages. In fact, refinancing hit an all-time high in 2003, and remained high in both 2004 and 2005, according to the Mortgage Bankers Association of America.
But while it's true that refinancing has the potential to help you reduce the costs associated with borrowing money to own a home, it is not necessarily a strategy that makes sense for every individual in every situation. So before you make a commitment to refinance your mortgage, it's important to do your homework and determine whether such a move is the right one for you.
To Refinance or Not
The old and arbitrary rule of thumb said that a refi only makes sense if you can lower your interest rate by at least two percentage points for example, from 9 percent to 7 percent. But what really matters is how long it will take you to break even and whether you plan to stay in your home that long. In other words, make sure you understand - and are comfortable with - the amount of time it will take for your overall savings to compensate for the cost of the refinancing.
Consider this: If you had a $200,000 30-year mortgage with an 8 percent interest rate, your monthly payment would be $1,468. If you refinanced at 6 percent, your new monthly payment would be $1,199, a savings of $269 per month. Assuming that your new closing costs amounted to $2,000, it would take eight months to break even. ($269 x 8 = $2,152). If you planned to stay in your home for at least eight more months, then a refi would be appropriate under these conditions. If you planned to sell the house before then, you might not want to bother refinancing. (See below for additional examples.)
Remember: All Mortgages Are Not Created Equal
Don't make the mistake of choosing a mortgage based only on its stated annual percentage rate (APR), because there are a variety of other important variables to consider, such as:
The term of the mortgage - This describes the amount of time it will take you to pay off the loan's principal and interest. Although short-term mortgages typically offer lower interest rates than long-term mortgages, they usually involve higher monthly payments. On the other hand, they can result in significantly reduced interest costs over time.
The variability of the interest rate - There are two basic types of mortgages: those with "fixed" (i.e., unchanging) interest rates and those with variable rates, which can change after a predetermined amount of time has passed, such as one year or five years. While an adjustable-rate mortgage (ARM) usually offers a lower introductory rate than a fixed-rate mortgage with a comparable term, the ARM's rate could jump in the future if interest rates rise. If you plan to stay in your home for a long time, it may make sense to opt for the predictability and security of a fixed rate, whereas an ARM might make sense if you plan to sell before its rate is allowed to go up. Also keep in mind that interest rates hovered near historical lows in recent years and are more likely to increase than decrease over time.
Points - Points (also known as "origination fees" or "discount fees") are fees that you pay to a lender or broker when you close the deal. While a "no-cost" or "zero points" mortgage does not carry this up-front cost, it could prove to be more expensive if the lender charges a higher interest rate instead. So you'll need to determine whether the savings from a lower rate justify the added costs of paying points. (One point is equal to one percent of the loan's value.)
How Much Would You Save?
A homeowner with a 30-year, $200,000 mortgage charging 8% interest would pay $1,468 each month.
A Closer Look at Mortgage Fees
Using data collected during 2003, researchers at Bankrate.com determined the average fees charged to consumers who borrow money to buy a home. Based on a loan of $180,000, the fees broke down as follows:
Average Lender/Broker Fees
Administration fee: $336
Application fee: $205
Commitment fee: $498
Document preparation: $194
Funding fee: $228
Mortgage broker fee: $839
Processing: $320
Tax service: $73
Underwriting: $269
Wire transfer: $31
Third-Party Fees
Appraisal: $327
Attorney or settlement fees: $445
Credit report: $29
Flood certification: $17
Pest & other inspection: $68
Postage/courier: $45
Survey: $174
Title insurance: $605
Title work: $200
Government Fees
Recording fee: $76
Various taxes: $1,339
Stick With What You Know
Finally, keep in mind that your current lender may make it easier and cheaper to refinance than another lender would. That's because your current lender is likely to have all of your important financial information on hand already, which reduces the time and resources necessary to process your application. But don't let that be your only consideration. To make a well-informed, confident decision you'll need to shop around, crunch the numbers, and ask plenty of questions.
Summary:
•The decision to refinance should only be made if the long-term savings outweigh the initial expenses. To calculate your break-even point, divide the cost of the refi by your monthly savings. The resulting figure represents the number of months you will need to stay in the home to make the strategy work.
•Don't select a new mortgage based only on its annual percentage rate.
•Also evaluate the term of the loan, whether the interest rate is fixed or variable, and the relative merits of paying up-front fees in exchange for a lower rate.
•Your current lender already knows you and has your financial information on file, so you may be able to get a better deal that way, instead of going to a new lender.
•To get the best possible refinancing deal, you'll need to shop around, crunch some numbers, and ask a lot of questions.
Checklist:
•Shop around and conduct a detailed cost assessment (with a financial professional, if necessary) to identify which mortgage offers the greatest financial benefits.
•Read the entire contract before signing. Don't let anyone pressure you or rush you to make a hasty decision.
•If refinancing results in lower monthly payments, use those savings to pursue other important goals, such as preparing for retirement and college costs.
If you are stuck between making the decision to refinance or sell your home, give us a call at 972-772-7000 or email us at rockwall@kw.com.
Wednesday, February 2, 2011
8 Tips for REO Foreclosure Offers
Provided By About.com
Lots of savvy home buyers want to hit the jackpot and buy that REO foreclosure, many of which are often under-priced. When banks price REO foreclosures under the comparable sales, multiple offers are often the response. This means you could be up against stiff competition for that bank-owned home.
It's not unusual for some REO foreclosures in Sacramento to receive 15 or 20 offers. Sometimes the bank will throw out all but two offers and then ask the selected buyers to resubmit what is called "Highest and Final" offer. Sometimes the bank simply accepts the best offer at inception.
If you're wondering how you can make your REO offer shine above all the rest and be the winning offer, here are a few tips to help you select the right price and terms:
1) Get the Property History of that REO Foreclosure
Ask your buyer's agent to find out the bank's purchase price on the Trustee's Deed or Sheriff's Deed. Generally, it is noted on the document itself, which you can get from the tax rolls or a title company. Compare that price to the price the bank is asking.
Look at the amount of loans that were once secured to the property. Somewhere between the original mortgage balance(s) and the foreclosure sale price is the amount the bank will accept, if the home is under-priced.
2) Determine Comparable Sales for the REO Foreclosure
In many cases, the list price has little bearing on the value of the home. The market value carries the most weight. If you are up against competing offers, other buyers will offer more than list price.
•Look at the last three months of comparable sales, a mini CMA, for that neighborhood to determine how much this REO foreclosure is worth. Try to use only those homes that most closely match the REO regarding square footage, number of bedrooms, baths, amenities and condition.
•Look at the pending sales. Ask your agent to call the listing agents of those pending sales to try to find out the accepted offer price. Some will share that information and some will not.
•Look at the active listings. Those are most likely the listings other buyers will use to formulate a price because they are the only homes those buyers actually tour.
3) Analyze Listing Agent's REO Sold
Most REO agents work for one or two banks. Some listing agents are exclusive listing agents for REOs, and they do not list any other type of property. Since REO agents deal in volume, they typically apply the same pricing principles to all their REO listings.
•Ask your buyer's agent to look up the listing agent in MLS.
•Run a search using that listing agent's name to find the last three to six months of that agent's listings.
•Pull the history of those listings to determine the list-price to sales-price ratio. If most of those listings are selling for, say, 5% over list price, then you may need to offer 6% over list price, and vice versa.
4) Ask About Number of Offers Received for that REO Foreclosure
If there are no offers on the REO home, you can probably offer less than list price and get your offer accepted. However, if there are more than two offers, you will most likely need to offer above the asking price.
If there are 20 offers, bear in mind that some of those offers might be all cash. Banks like all cash offers. If you are obtaining financing, then you may need to increase the price on your offer to be considered.
5) Submit Preapproval Letter
It goes without saying that you do not want a prequal letter. You want a preapproval letter. Get preapproved from your choice of lender in advance.
Moreover, get preapproved by the lender who owns the property. Do not expect to use this lender for your loan, but submit the prepproval letter from this lender, along with the letter from your own lender. Banks don't trust other lender preapprovals but trust their own departments.
6) Don't Ask the REO Bank to Pay for Repairs / Inspections
Sometimes banks will pay for repairs, but typically will not agree to do so at the offer stage. If there are problems found during a home inspection, renegotiate after your offer has been accepted.
7) Shorten the Inspection Period
If other buyers ask for 17 days, for example, to conduct inspections, and you ask for 10, you will be deemed the more serious buyer.
8) Offer to Split Fees wit the REO bank
Some banks will not pay transfer fees, for example. If the buyer offers to split those fees, the bank will feel more amenable to accepting the offer. Same thing for escrow fees.
Many banks negotiate discount fees for title insurance. If the bank will pay for the owner's policy, the ALTA policy might cost a bit more. But it's still a good idea to let the bank choose title if you want your offer accepted.
Consider the Appraisal Consequences
If you offer over list price, bear in mind that the appraisal will need to substantiate that price. If you find yourself dealing with a low appraisal, you have options, so don't despair. Remember, the bank will most likely run into this problem with the next buyer who obtains financing.
Are you interested in purchasing an REO? Give us a call at 972-772-7000 or email us at rockwall@kw.com.
Lots of savvy home buyers want to hit the jackpot and buy that REO foreclosure, many of which are often under-priced. When banks price REO foreclosures under the comparable sales, multiple offers are often the response. This means you could be up against stiff competition for that bank-owned home.
It's not unusual for some REO foreclosures in Sacramento to receive 15 or 20 offers. Sometimes the bank will throw out all but two offers and then ask the selected buyers to resubmit what is called "Highest and Final" offer. Sometimes the bank simply accepts the best offer at inception.
If you're wondering how you can make your REO offer shine above all the rest and be the winning offer, here are a few tips to help you select the right price and terms:
1) Get the Property History of that REO Foreclosure
Ask your buyer's agent to find out the bank's purchase price on the Trustee's Deed or Sheriff's Deed. Generally, it is noted on the document itself, which you can get from the tax rolls or a title company. Compare that price to the price the bank is asking.
Look at the amount of loans that were once secured to the property. Somewhere between the original mortgage balance(s) and the foreclosure sale price is the amount the bank will accept, if the home is under-priced.
2) Determine Comparable Sales for the REO Foreclosure
In many cases, the list price has little bearing on the value of the home. The market value carries the most weight. If you are up against competing offers, other buyers will offer more than list price.
•Look at the last three months of comparable sales, a mini CMA, for that neighborhood to determine how much this REO foreclosure is worth. Try to use only those homes that most closely match the REO regarding square footage, number of bedrooms, baths, amenities and condition.
•Look at the pending sales. Ask your agent to call the listing agents of those pending sales to try to find out the accepted offer price. Some will share that information and some will not.
•Look at the active listings. Those are most likely the listings other buyers will use to formulate a price because they are the only homes those buyers actually tour.
3) Analyze Listing Agent's REO Sold
Most REO agents work for one or two banks. Some listing agents are exclusive listing agents for REOs, and they do not list any other type of property. Since REO agents deal in volume, they typically apply the same pricing principles to all their REO listings.
•Ask your buyer's agent to look up the listing agent in MLS.
•Run a search using that listing agent's name to find the last three to six months of that agent's listings.
•Pull the history of those listings to determine the list-price to sales-price ratio. If most of those listings are selling for, say, 5% over list price, then you may need to offer 6% over list price, and vice versa.
4) Ask About Number of Offers Received for that REO Foreclosure
If there are no offers on the REO home, you can probably offer less than list price and get your offer accepted. However, if there are more than two offers, you will most likely need to offer above the asking price.
If there are 20 offers, bear in mind that some of those offers might be all cash. Banks like all cash offers. If you are obtaining financing, then you may need to increase the price on your offer to be considered.
5) Submit Preapproval Letter
It goes without saying that you do not want a prequal letter. You want a preapproval letter. Get preapproved from your choice of lender in advance.
Moreover, get preapproved by the lender who owns the property. Do not expect to use this lender for your loan, but submit the prepproval letter from this lender, along with the letter from your own lender. Banks don't trust other lender preapprovals but trust their own departments.
6) Don't Ask the REO Bank to Pay for Repairs / Inspections
Sometimes banks will pay for repairs, but typically will not agree to do so at the offer stage. If there are problems found during a home inspection, renegotiate after your offer has been accepted.
7) Shorten the Inspection Period
If other buyers ask for 17 days, for example, to conduct inspections, and you ask for 10, you will be deemed the more serious buyer.
8) Offer to Split Fees wit the REO bank
Some banks will not pay transfer fees, for example. If the buyer offers to split those fees, the bank will feel more amenable to accepting the offer. Same thing for escrow fees.
Many banks negotiate discount fees for title insurance. If the bank will pay for the owner's policy, the ALTA policy might cost a bit more. But it's still a good idea to let the bank choose title if you want your offer accepted.
Consider the Appraisal Consequences
If you offer over list price, bear in mind that the appraisal will need to substantiate that price. If you find yourself dealing with a low appraisal, you have options, so don't despair. Remember, the bank will most likely run into this problem with the next buyer who obtains financing.
Are you interested in purchasing an REO? Give us a call at 972-772-7000 or email us at rockwall@kw.com.
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