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  Thu Jun 06

Fixed Rate Doesn't Mean Fixed Payments

This is one of the best times to get a fixed-rate mortgage. A fixed rate simply means that the mortgage lender charges you a fixed rate of interest that doesn't ever change over the life of the loan.

If you get a fixed rate of 4.00 percent, you will be paying four percent in interest until you sell the home. At such a low rate, it's unlikely you'd refinance.

You can see how much you pay in interest in an amortization schedule. The longer you pay on a fixed rate, the more interest you pay down because your interest payment is front-loaded into the beginning years of your loan schedule.

 

The longer you own your home and pay on your mortgage, you'll see that a greater percentage of your monthly payment goes to reduce principal, helping you to build equity or ownership in the home.

An adjustable rate mortgage is initially lower than a fixed rate, but the loan will adjust periodically according to market rates after one year, three years, five years, or whatever you and the lender have agreed to.

The danger is that the new adjusted rate could become too expensive for you, especially if it adjusts higher every year. Part of your terms can include ceilings that limit the number of times and the amount your loan can increase. Adjustments can add as much as two percentage points more to your interest rate, or as much as several hundred dollars more to your monthly payment.

Rates first hit historical lows in 2011, and have retouched those lows several times since. Any time the national average for fixed rate mortgages is below four percent, that's a gift to homebuyers. Adjustable rates are certain to be higher down the road, making fixed rates a lower risk.

Even with a fixed rate mortgage, your monthly payment can change in other ways. You may decide to roll the costs of your mortgage into your loan, in which case you'll be paying the APR rate because the loan amount is higher, yet is still being compressed into a 30, 15 or ten-year term, depending on your loan.

Another way your monthly payment can change is by adding private mortgage insurance (PMI). If you put less than 20 percent of your home's purchase price as a down payment, lenders will require that you pay for PMI. Rates on PMI vary, but you can expect your payments to rise by 0.3 percent to 1.2 percent of the loan amount.

Last, your monthly payments can include escrows for hazard insurance and for property taxes. You should receive a statement from your insurer when it's time to renew your insurance, and your lender will divide the annual amount into monthly payments.

Your property tax authority will send you a new statement annually, usually in the spring or early summer. If you're basing your future payments on what the previous owner paid, you may be in for a surprise. Your tax basis will be based on the purchase price of the home. Most communities limit the amount that the taxing authority can raise property taxes every year.

Mortgage interest, PMI and property taxes are deductible from your income taxes if you itemize, but you still have to make the payments. For these reasons, you want to stick closely to borrowing guidelines such as loan-to-income and debt-to-income ratios.

Your mortgage should be no more than 28 to 32 percent of your gross income or 36 to 42 percent of your income including your monthly debts. That way you'll be able to handle any future changes in your monthly mortgage payments.

   
  Wed Jun 26

GREAT TIME TO PURCHASE

The Housing Market is Doing Just Fine

There are some that think that housing affordability is a challenge. Historically, that’s not true. Others think that home prices are approaching bubble values. If we look back over the last sixteen years, that is also not the case. As a matter of fact, the numbers show that the U.S. residential real estate market is doing just fine.

Here are two articles and excerpts that make this point:

The Housing Market Is Finally Starting to Look HealthyThe NY Times

It has been an excruciatingly long time coming, but the housing sector in the United States is finally getting healthy. Thank millennials and thank homebuilders who are starting to produce more of the starter houses young people demand.”

Why the U.S. Housing Market Is Good and Getting Even BetterThe Street

“Interest rates are so low now that a family can buy the median-priced U.S. home on income of less than $45,000 a year -- about $11,000 less than the median household income. And half of America's houses are cheaper than that.” 
There are those worried that all this positive talk resembles what was being said in 2004 and 2005. Jonathan Smoke, Chief Economist at realtor.com, explains the difference very simply but effectively:
“The havoc during the last cycle was the result of building too many homes and of speculation fueled by loose credit. That’s the exact opposite of what we have today.” (emphasis added)
   
  Mon May 20

Real Estate Info

Common Appraisal Myths

An appraisal is an important part of many real estate transactions. An appraisal is typically done if a buyer requires a mortgage loan to purchase a property. The appraisal is done by an appraiser (who is licensed), and it's based on multiple data gathered during an inspection by the appraiser. When it comes to appraisals, there are many myths or misconceptions around them. Whether you're looking to buy a home, looking to refinance a current mortgage, or you're looking for more information about all that goes into real estate transactions, here are some of the most common myths when it comes to appraisals.

An Appraisal is the same as a Home Inspection

While both an appraisal and home inspection provide important information to all parties, the two are not the same. An appraisal is done to determine the value of a property, generally for the benefit of a lender. The appraiser will inspect a property for improvements and deficiencies but only to determine the overall value of a property. A home inspection, on the other hand, is an inspection, but its main purpose is to look at the 'guts' of a property, assessing the overall condition, and inspecting the major systems, appliances and structure to determine the shape of a property. The appraisal is done to determine the value of a property; a home inspection (which isn't required) is done to determine the overall health of a property.

Assessed Value, Appraised Value and Market Value are all the Same

For many properties and in many states, the idea that the assessed value, appraised value and the market value are equal is understandable. But, in many areas and instances, this isn't the case. Assessed value is determined by an assessor (who works for a city, town or county) and is usually used to levy taxes; if the assessor doesn't actually physically inspect the property, s/he won't know if any improvements (remodeling projects, interior updates, additions, etc.) have been done. The same can also be said if nearby properties have not been reassessed for a long period of time or they don't reflect the area's current real estate market. Appraised value is determined by an appraiser, and is a result of a detailed physical inspection of a property and research done on the neighborhood and any nearby recently sold properties. Market values are consumer-driven and can be influenced by a buyer - if a buyer is willing and able to pay more for a property, then the market value is what the buyer is willing to pay. While all three values can be similar, all three also have the chance of being vastly different.

The Appraiser is Hired by the Buyer

An appraisal is required when a home is being purchased with a mortgage loan; a current homeowner is looking to refinance his/her existing mortgage; or when someone is selling a home to someone that is not an all-cash buyer. The appraisal acts as a security for the lender to understand the value of the property when making the loan decision. Due to federal changes several years ago, although the lender orders the appraisal, the lender does not hire a specific appraiser; the appraiser comes from a 'pool'. For the majority of property transactions, the buyer is responsible for the cost of the appraisal (sometimes a seller will cover the cost of the appraisal, but this is unique, and for the most part the buyer or borrower pays the costs through the lender). There are times when a seller may want to get an appraisal to get an idea of a home's value before listing the property - in this case, the seller would hire the appraiser and pay for the appraisal.

The Appraisal Varies Whether it's For the Buyer or Seller

Typically, an appraiser has no vested interest in the price of a property - s/he doesn't represent any particular person. The appraiser should complete an independent and objective appraisal, simply performing the service of determining a property's appraised value. Appraisals can be done for a number of reasons: insurance, home loans, tax losses, estates, liquidation and net worth. Because of this, depending upon the purpose of the appraisal, the market value and appraised value can vary, but the appraiser does not complete an appraisal in favor of the seller or the buyer.

Appraisers Use a Formula to Determine the Value of a Property

The way in which appraisers determine the value of a property is very detailed. An appraiser will analyze all aspects of a property: location, condition, size, proximity to amenities and other facilities, and s/he will also consider the recent sale prices of comparable properties in the area. Other items that are considered in the appraisal: number of bedrooms and bathrooms and the floor plan functionality. The appraiser does a visual and physical inspection of the interior and exterior of the property. S/he will take into consideration the type of flooring in a home; the materials used in the kitchens, bathrooms, and other rooms; the siding and any other recent upgrades. An appraiser will also consider things that need to be repaired, and other miscellaneous items. Far from a specific formula, appraisers use a lot of data to determine the appraised value of a property and an appraisal can take a number of hours to complete depending on the size of a house and complexity of the property.

 
   
  Sat May 18

WHY SHOULD I HIRE A REAL ESTATE AGENT ?

 Education & Experience

You don't need to know everything about buying and selling real estate if you hire a real estate professional who does. Henry Ford once said that when you hire people who are smarter than you are, it proves you are smarter than they are. The trick is to find the right person. For the most part, they all cost roughly the same. Why not hire a person with more education and experience than you? We're all looking for more precious time in our lives, and hiring pros gives us that time.

Agents are Buffers

Agents take the spam out of your property showings and visits. If you're a buyer of new homes, your agent will whip out her sword and keep the builder's agents at bay, preventing them from biting or nipping at your heels. If you're a seller, your agent will filter all those phone calls that lead to nowhere from lookie loos and try to induce serious buyers to immediately write an offer.

Negotiation Skills & Confidentiality

Top producing agents negotiate well because, unlike most buyers and sellers, they can remove themselves from the emotional aspects of the transaction and because they are skilled. It's part of their job description. Good agents are not messengers, delivering buyer's offers to sellers and vice versa. They are professionals who are trained to present their client's case in the best light and agree to hold client information confidential from competing interests.
 
 

 

   
  Fri May 24

glass

   
  Mon Oct 30

test

They continued, "Well, you may not be stupid or broke. Maybe you already have a house and you don't want to move. Or maybe you're a Trappist monk and have forsworn all earthly possessions. Or whatever. But if you want to buy a house, now is the time, and if you don't act soon, you will regret it. Here's why: historically low interest rates."

 

They were talking about rates hovering around five percent. Today, rates are under four percent for a 30-year fixed-rate loan.

Reason No. 1 to buy now: Rates are low

"Low mortgage rates continue to keep ownership less expensive than renting," said Investopedia. "Even a small change in interest rates has a significant effect on what you'll pay each month and over the life of a 30-year mortgage. Take a $172,000 30-year mortgage, for example ($172,000 is 80% of the median sales price for existing homes of $215,000 after a 20% down payment). With an interest rate of 4%, you would pay $821.15 each month. At an interest rate of 5%, the monthly payment would be $923.33, and at 6%, the payment rises to $1031.23."

Reason No. 2: Rents are high

In many markets, rents are rising to unsustainable levels, reports the National Association of Realtors (NAR). "In the past five years, a typical rent rose 15% while the income of renters grew by only 11%."

The cities with the highest rent increase since 2009 include New York, San Jose, San Francisco, Denver, and Seattle. For the rest of the list, click here, and to see how much more renting can cost you over a lifetime, check out Riskology.

Reason No. 3: Qualifications are easier

During the real estate downturn of the mid-2000s, banks and lenders tightened the reins, and often only the most qualified applicants could get approved. Post-recession, qualifications have loosened. Buyers who can't show solid income and a minimum credit score probably won't be offered a risky interest-only ARM today, however, those with less-than-perfect credit and minimal funds still have options. The Federal Housing Association (FHA) minimums are a 620 credit score and a 3.5 percent down payment.

Reason No. 4: Private mortgage insurance fees are down

Buyers who put less than 20 percent down on their home generally incur a monthly fee in the name of private mortgage insurance (PMI). In January 2015, the government announced lower PMI rates on Federal Housing Administration (FHA) loans, which equates to a savings of about $900 a year. Seventy-five dollars a month may not seem like much, but every little bit helps when you're committing to an investment as large as a home.

Reason No. 5: It's still one of the best investments out there

In fact, some would say it's the very best investment out there.

"Buying a home is the best investment any individual can make. Affordability is still at an all-time high," said CNBC.

Not only as a comparison between buying and renting, but as a measurable asset, homeownership stands up—as long as buyers make a smart decision.

"The largest measurable financial benefit to homeownership is price appreciation," said Investopedia. "Price appreciation helps build home equity, which is the difference between the market price of the house and the remaining mortgage payments."

Reason No. 6: It feels good

You know that pride of ownership thing? It's true. Really. Nothing compares to the feeling of walking into a home that's yours for the first time. Or painting the walls a color other than white. Updating the kitchen. Making it your own. Not worrying about your rent being raised. And, of course, watching your equity grow over time.

   
   
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