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Consider Total Costs When Mortgage Rates Rise

                       

Price is only one cost related to buying a home. Unless you are paying all cash for your home, you'll need a mortgage loan. Rates are going up, and the terms of your mortgage loan will impact how much your home costs on a monthly basis as well as how much you pay in interest over the life of the loan.

There are a number of things that impact the interest rate including the kind of loan you are getting such as FHA, jumbo or conventional, whether your rate is fixed or adjustable, how good your credit scores are, and how much money you are putting down so that the lender can lend you less money.

The best way to lower the borrowing costs of your loan is to have your credit in pristine condition. Lenders are requiring credit scores of at least 700 to obtain the best rates, and in some cases, higher scores are needed. In other words, the loan rate that you see advertised may not apply to you and your situation.

Jumbo loans for upscale homes are above normal qualifying limits, so their rates are higher.

Conventional loans require 20% down as payment from the borrower, while FHA and VA loans require less, but they may cost more in other ways. For example, FHA loans require private mortgage insurance, and they have more exacting requirements for the condition of the home.

Loans with less than 20% down cost more than loans with 20% or more down. That's because the lender is assured that the borrower is less likely to walk away from a large cash investment. If you put less than 20% down, you may have to obtain mortgage insurance with the loan, so that the lender is paid in case of a default. Your mortgage insurance should end when you've been in your home for at least five years or if home values have risen giving you approximately 22 percent equity.

First, choose a fixed rate or an adjustable rate. If you plan to be in your home less than three to five years, an adjustable rate might be preferable, but if you aren't certain, a fixed rate is better.

The most expensive loan is a 30-year fixed rate mortgage, but the advantage is that the cost of your loan won't go up, because the rate is secure, although you may pay more as time goes on for property taxes and hazard insurance. If you want a shorter term, your rate will go down and you won't pay as much in interest, but your monthly payment will be higher. However, more of your payment will go to reducing principle in a shorter term loan.

If you can qualify for a $360,000 home at 5%, your P & I (payment and interest) would be $1,933. But when interest rates fall, you can afford "more house." At 4%, you could qualify for a $400,000 home and your P& I would be $1,910.

Explains the National Association of REALTORS® Chief Economist Lawrence Yun, mortgage interest rates are likely to move higher. "The long-term mortgage rate generally gets its cue from the 10-year Treasury borrowing rate, because most mortgages get retired within 10 years from people moving to buy a new home or because of refinancing," says Yun. "The 30-year Treasury has already started to move up, and the 30-year mortgage rate will soon follow the upward trend."

It's better to buy a home and let it lose a little value that can come back later, than to pay more for an interest rate that can't be lowered.


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Posted by Cheryl Talbot ABR,GRI,e-PRO,SFR on May 29th, 2015 1:04 PMLeave a Comment

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May 28th, 2015 2:48 PM

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Posted by Cheryl Talbot ABR,GRI,e-PRO,SFR on May 28th, 2015 2:48 PMLeave a Comment

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Your Rights Shopping For A Mortgage Loan

 

When you shop for a mortgage loan, you have certain rights that are guaranteed by The Real Estate Settlement Procedures Act (RESPA). RESPA is a consumer protection statute from the Department of Housing and Urban Development (HUD).

RESPA is designed to help you be a better shopper during the home buying process. Knowing your rights before you enter into any loan agreement will help you get the best loan possible. You have the right to:

Shop for the best loan for you and compare the charges of different mortgage brokers and lenders.

Be informed about the total cost of your loan including the interest rate, points and other fees.

Ask for a Good Faith Estimate of all loan and settlement charges before you agree to the loan and pay any fees.

Know what fees are not refundable if you decide to cancel the loan agreement.

Ask your mortgage broker to explain exactly what the mortgage broker will do for you.

Know how much the mortgage broker is getting paid by you and the lender for your loan.

Ask questions about charges and loan terms that you do not understand.

A credit decision that is not based on your race, color, religion, national origin, sex, marital status, age, or whether any income is from public assistance.

Know the reason if your loan was turned down.

Ask for the HUD settlement cost booklet "Shopping for Your Home Loan".

Lenders offer different mortgage products depending on your credit scores, income-to-debt ratio, payment histories, how much you want to borrow and the term of the loan.

Ask your lender to show you the advantages and disadvantages of each loan product so you can choose the best one to suit your needs. When you make your choice, be sure to compare the same product with the same product offered by at least two other lenders.


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Posted by Cheryl Talbot ABR,GRI,e-PRO,SFR on May 22nd, 2015 10:11 AMLeave a Comment

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Buying a Home is 35% Less Expensive than Renting!

Posted: 18 May 2015 04:00 AM PDT

Buying a Home is 35% Less Expensive than Renting! | Keeping Current Matters
In the latest Rent vs. Buy Report from Trulia, they explained that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage throughout the 100 largest metro areas in the United States. The updated numbers actually show that the range is from an average of 16% in Honolulu (HI), all the way to 55% in Sarasota (FL), and 35% Nationwide!

The other interesting findings in the report include:

  • Interest rates have remained low and even though home prices have appreciated around the country (3.9%), they haven’t greatly outpaced rental appreciation (3.7%). “In the past year, these two trends have made homeownership even more affordable compared with renting.”
  • Some markets might tip in favor of renting if home prices increase at a greater rate than rents and if – as most economists expect – mortgage rates rise, due to the strengthening economy.
  • Nationally, rates would have to rise to 10.6% for renting to be cheaper than buying – and rates haven’t been that high since 1989. 

Bottom Line

Buying a home makes sense socially and financially. Rents are predicted to increase substantially in the next year, so lock in your housing cost with a mortgage payment now.

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Posted by Cheryl Talbot ABR,GRI,e-PRO,SFR on May 18th, 2015 4:20 PMLeave a Comment

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The Road to Recovery: 4 Factors That Affect Home Prices
Posted on May 11 2015 -  
   

recover

With housing on a steady path to recovery, home prices have risen approximately 20 percent in the last three years, according to the Federal Housing Finance Agency (FHFA) and Standard & Poor’s (S&P) Case-Shiller house price indices – and both consumers and industry professionals expect that upward trajectory to continue this year.

The anticipated increase is the result of intersecting economic indicators – macro-level factors painting the big picture that is today’s housing market.

So what’s impacting prices these days?

Wages and Inflation - As much as the economy’s improved, a recent RealtyTrac analysis illustrates disconnect between house price growth and wage growth. Between 2012 and 2014, home prices increased by 17 percent; wages, in contrast, increased 1.3 percent – a 13 to 1 disparity. Furthermore, home prices continue to outpace inflation rates, growing twice as fast in 2014, according to S&P.

But inflation rates as they stand likely affect home prices indirectly, argues renowned economist and Nobel Laureate Robert Shiller. Because pay increases often boost perceptions of buying power, inflation may have a greater impact on consumer confidence, which, in turn, could ignite housing activity.

Interest Rates and Inventory - Inflation rates, however, do tend to influence interest rates. While it’s reasonable to assume rising mortgage interest rates equal falling house prices, in truth, there’s little evidence of a causal relationship between the two. In fact, higher mortgage rates have a tendency to predicate a decrease in purchases, rather than a dip in prices, concludes Mark Palim, Fannie Mae Vice President, Economic & Strategic Research Group.

That said, interest rates do play a role in overall affordability. In many markets, today’s rates have significantly propelled demand.

“The biggest factor in price gains has been the current low interest rates spurring demand,” says Gabe Sanders of BlueWater Real Estate in Stuart, Fla. “And our low inventory, which makes buyers willing to spend more, since they can’t find enough available lower-priced properties.”

In Sanders’ market, prices on the lower end have risen much more than those of mid-range homes, with the largest gains seen under $400,000 in Martin County and under $200,000 to $250,000 in St. Lucie County. This demonstrates what many nationwide are experiencing – escalating prices, due to a shortage of affordable listings, have adversely tipped the scale, especially for first-time homebuyers.

To counter the lack of inventory and rise in prices, new construction gains are essential, says Lawrence Yun, chief economist for the National Association of REALTORS®. Post-crash, single-family construction has been slow to pick up steam, primarily because of construction costs that fail to meet buyer expectations.

Demographics - In addition, generational shifts have historically affected demand and moved prices in the housing market. Currently making waves are baby boomers and millennials, though many of the latter have been priced out due to statistically lower incomes and sluggish wage growth. And like toppling dominos, too few first-timers bodes ill for move-up buyers or those seeking to relocate.

International interest can also drive home prices, particularly in luxury markets. In Beverly Hills, Calif., global demand, coupled with the area’s high-end status and pleasant climate, impacts prices considerably, says Endre Barath, Jr. of Berkshire Hathaway HomeServices California Properties.

“Prices in the 90210 zip code are trending upward and are getting close to an all-time high,” Barath says. “Looking at the current rate of sales versus the current inventory, we are still in a seller’s market, but getting close to a balanced market.”

Oil Prices – Another distinct market trend could also affect home prices in the near future. Following the decline in oil prices, markets with oil economies, such as Texas, Louisiana and Oklahoma, may see home prices drop at the end of this year and into 2016, Trulia reports. Conversely, non-oil-producing markets, particularly in the Northeast and Midwest, may see a boost in prices. These findings mirror oil and home price fluctuations since the 1980s.


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Posted by Cheryl Talbot ABR,GRI,e-PRO,SFR on May 15th, 2015 12:59 PMLeave a Comment

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May 15th, 2015 12:50 PM
The Difference Your Interest Rate Makes [INFOGRAPHIC]

Posted: 15 May 2015 04:00 AM PDT

The Difference Your Interest Rate Makes [INFOGRAPHIC] | Keeping Current Matters Some Highlights:
  • Even a small increase in interest rates drastically impacts your budget.
  • Securing a mortgage now while rates are still low means you can get more house for your money.
  • Spend your money on your dream home, not on interest.

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Posted by Cheryl Talbot ABR,GRI,e-PRO,SFR on May 15th, 2015 12:50 PMLeave a Comment

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May 13th, 2015 3:31 PM

Attaining the American Dream: The 5 Financial Reasons to Buy


Attaining the American Dream: The 5 Financial Reasons to Buy

Posted: 11 May 2015 04:00 AM PDT

Attaining The American Dream: The 5 Financial Reasons to Buy | Keeping Current Matters
We have reported many times that the American Dream of homeownership is alive and well. The personal reasons to own differ for each buyer, with many basic similarities. Eric Belsky, the Managing Director of the Joint Center of Housing Studies at Harvard University expanded on the top 5 financial benefits of homeownership his paper - The Dream Lives On: the Future of Homeownership in America. Here are the five reasons, each followed by an excerpt from the study:

1.) Housing is typically the one leveraged investment available.

“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”

2.) You're paying for housing whether you own or rent.

“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.”

3.) Owning is usually a form of “forced savings”.

“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

4.) There are substantial tax benefits to owning.

“Homeowners are able to deduct mortgage interest and property taxes from income...On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”

5.) Owning is a hedge against inflation.

“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition.”

Bottom Line

We realize that homeownership makes sense for many Americans for an assortment of social and family reasons. It also makes sense financially. If you are considering a purchase this year, contact a local professional who can help evaluate your ability to do so.

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Posted by Cheryl Talbot ABR,GRI,e-PRO,SFR on May 13th, 2015 3:31 PMLeave a Comment

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5 Tech Questions that Seniors Should Ask When Interviewing a Real Estate Agent


5 Tech Questions that Seniors Should Ask When Interviewing a Real Estate Agent | Keeping Current Matters

We are pleased to have Nikki Buckelew back as our guest blogger for today’s post. Nikki has extensive experience working with seniors and is the Founder & CEO of the Senior Real Estate Institute. Enjoy! – The KCM Crew 

If you have not bought or sold a home in a few years (or maybe decades) it is likely that there are more than a few new trends in real estate that you will encounter as you begin to interview real estate agents.

One particular trend now common among many real estate brokerage firms is called the practice of “going paperless.” This can be a bit scary for some people, especially senior adults who are not accustomed to using computers in their personal or professional lives.

If you are one of the many with reservations about the paperless process, you will want to talk with your agent about any concerns or questions you have. In this article we have provided some basic information about the paperless process and some key questions to ask your real estate agent.

How your agent handles your questions may just help you determine if he or she is the right agent for you!

What does it mean to go paperless?

Going paperless simply means that instead of printing out every contract, form or disclosure for your signature, you may be asked to sign certain documents electronically.

This could mean:

  1. Typing your name into a designated field included in a form (received via email)
  2. Signing your name on a digital touchpad (laptop, netbook, smartphone, etc.)

While some have experienced this type of technology before and are perfectly willing and comfortable using it, others are not. Frankly, the first time I was asked to sign a real estate document electronically via email I was a bit perplexed and required some guidance.

If you have not been exposed to this type of technology, it can seem a little overwhelming, especially if introduced to it in the midst all of the other things going on during a move. This is why it’s important to educate yourself on the front end, mitigating potential delays, avoiding unnecessary frustration, and preventing surprises down the road.

Here are 5 simple questions you should ask before you ‘sign on the dotted line’

1. How do you typically communicate with your clients (phone, email, text, instant messaging, etc.)?

Good agents know that the best method (and frequency) of communication is the one that best serves the client, so getting this agreed upon early in the relationship is paramount — for both you and the agent.

If you want to communicate strictly by phone, be sure that you and your agent agree on the protocols for leaving and returning messages, hours of availability, and which phone numbers are best for certain times of day. Similar discussion around email, text messaging, and other modes of communication should be had as well, if that is your desired method of information delivery.

2. What method(s) do you use for getting client signatures?

The goal here is to find out your options. Many agents are still in the conversion process of going paperless and they are more than willing to use “more conventional” methods of getting signatures.

Some may be required, however, by their respective brokerage firms to utilize only paperless systems. If this is the case, ask the agent to show you examples of the types of things that may be asked of you during the course of working together.

If after a quick tutorial, you aren’t comfortable with the electronic signature process, it’s “OK” to choose an agent who can better accommodate your preferences.

3. Can you assess my devices to insure they are compatible with the systems you use?

Even if you are completely prepared to enter the paperless world with no reservations whatsoever, it can only be done if you have the right equipment. Before agreeing to a paperless process, ask the agent to do a “test run” using a non-official/non-binding document on your system to insure its functionality.

4. Will you provide technical support if I am not “techy” and need some help?

My dad (self described “non-techy” and proud of it), has a computer, printer, smart phone, email address, and wifi. He does not, however, have the faintest idea how they work or how to pull up attachments in his email.

When he decided to purchase a new home this past year using a reverse mortgage, the lender was located out of state, which meant everything was done via email — electronically. Needless to say, I was dad’s tech support in this situation. If you do not have a trusted advisor who can help you with troubleshooting potential technology issues, make sure your agent or their staff is capable, patient, and willing to personally walking you through the steps.

5. Are you flexible if I choose to use phone and paper over electronic communication and documentation?

Options are the key. While some agents are extremely flexible in how they deliver their services, others may be married to a very specific process or style. Insure the agent you are considering is willing and able to do what is right for you, based on your comfort level, knowledge, and ability.

Bottom Line

It goes without saying that it is critical to have the conversation with your real estate professional about their paperless processes and communication methods.

Not only will doing so put your mind at ease regarding unfamiliar territory, but it may also provide your agent with necessary information so he or she can serve you more effectively.


 


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Posted by Cheryl Talbot ABR,GRI,e-PRO,SFR on April 30th, 2015 11:26 AMLeave a Comment

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April 29th, 2015 12:01 AM

Housing Market: Freddie Mac Remains Optimistic


Housing Market: Freddie Mac Remains Optimistic | Keeping Current Matters

The April 2015 U.S. Economic & Housing Market Outlook from Freddie Mac revealed that they are optimistic about the real estate market in 2015. As a matter of fact, the sub-title of the report was “Great Expectations”.

What made Freddie Mac so optimistic? Here are a few highlights from the report:

“For the remainder of the year we should see a resumption of solid economic growth and acceleration in housing activity. Notwithstanding a disappointing March jobs report the acceleration is already underway.”

“With spring upon us, housing markets are poised to accelerate and we expect the best year for home sales since 2007. Despite harsh winter weather to start the year, home sales through February are only off from the 2013 pace by 7,000 sales... Pending home sales were up 3.1 percent in February to the highest level since June 2013. This marked the fourth consecutive month for rising pending home sales showing positive momentum in general for the housing market.”

Their projections…

“By the end of the spring home buying season in June, we should be well above the pace of home sales for any year since 2007.”

“We are as optimistic about trends in housing markets moving forward as we have ever been since the depths of the Great Recession.”

Regarding prices…

“Due to strong growth, we are expecting house prices to increase 4.0 percent in 2015.”

But there were some warnings…

On available supply:

“With low mortgage rates, improving labor markets, and rising demand, one key issue for housing over the next two years will be the lack of supply of for-sale and for-rent homes.”

“Many metro areas that have seen robust job growth and population increases are facing shortages of available for-sale inventory.”

On interest rates:

“However, by the end of the year long-term interest rates should only increase modestly, ending the year at about 4.3 percent for the 30-year fixed rate mortgage.”

Note: Freddie Mac worded this as being not that crucial. However, a 4.3% mortgage rate is about a .75 increase over current rates.

Bottom Line

Things are looking good for the real estate market. If you are thinking of selling, contact an agent to discuss how this applies to your neighborhood.


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Posted by Cheryl Talbot ABR,GRI,e-PRO,SFR on April 29th, 2015 12:01 AMLeave a Comment

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April 28th, 2015 11:58 PM

Does Homeownership Make Sense Financially?


Does Homeownership Make Financial Sense? | Keeping Current Matters

Everyone knows the social advantages of home ownership. However, some question the financial benefits of owning a home. Three recent studies shed some light on the issue.

RealtyTrac recently released a report comparing home price appreciation to wage growth over the last two years. The study revealed that home price appreciation has outpaced wage growth in 76% of U.S. housing markets during that time period. By how much? Here is a graph showing their findings:

Home Prices vs. Wages | Keeping Current Matters

And we all know the importance of home appreciation in determining the net wealth of most American families. Merrill Lynch just issued a report covering the issue. Their findings are shown here:

Average Home Equity | Keeping Current Matters

It obviously makes financial sense to be a homeowner.

But, does it make sense to buy now?

The survey company Pulsenomics just issued their findings on the cost of owning versus the cost of renting. They compared historical averages to the cost you can expect to pay today.

Buying vs. Renting | Keeping Current Matters

The cost of buying is far below historical averages. Renting is another story.


Posted in:General
Posted by Cheryl Talbot ABR,GRI,e-PRO,SFR on April 28th, 2015 11:58 PMLeave a Comment

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