Archive for Credit


Understanding the Basics of Mortgages

0 Comments By Mark Logue on May 10th, 2011
Tags: , ,      Categories: Credit, Mortgage

Basic Mortgage Education
One of the main topics in the news over the last three years has been mortgages. There is not a day that goes by where there is not a discussion about foreclosures, short-sales, mortgage fraud, the failure of Freddie Mac and Fannie Mae, adjustable rate mortgages, fixed rate mortgages, interest rates, robo-signing, etc. Yet – earlier this month, the results of a survey conducted by Zillow Mortgage Marketplace shows that nearly half of the home buyers it surveyed were unable to answer basic questions about mortgages or the mortgage process.

Zillow partnered with Ipsos, a global survey-based market research company, and asked 1,005 randomly selected U.S. adults to gauge the level of their knowledge about mortgages and to answer questions about the costs, eligibility, and processes involved in obtaining financing.

Here are their findings:

  • More than half (57 percent) of prospective home buyers who were polled did not understand how adjustable mortgages (ARM’s) work. When asked if interest rates on 5/1 ARM’s always reset higher after five years, the majority of home buyers incorrectly answered yes.
  • More than one-third (37 percent) of prospective home buyers believed that pre-qualifying for a loan means they have secured financing when it is merely the first step in the process where the lender estimates the size of the loan for which a buyer can qualify.
  • Nearly half of all respondents believed that they should always buy discount points rather than recognizing that it is a decision based on factors such as how long the buyer plans to stay in the house.
  • More than two in five (42 percent) of the polled prospective home buyers do not understand that Federal Housing Administration (FHA) loans are available to ALL buyers. Instead, they believe only first-time buyers qualify. Additionally, one-third (34 percent) of the prospective home buyers believe that lenders are required by law to charge the same fees for credit reports and appraisals rather than their being a negotiable item from lender to lender.

I am amazed that, each year, so many people commit to the largest loan of their lives without understanding essential information about mortgages. Well-informed consumers can serve as their own advocates so long as they find themselves reliable, credible sources of useful information, presented in a simple and understandable way.

Sense and Sensibility on Mortgages

0 Comments By Frederick Romley on March 9th, 2011
Tags: , , , ,      Categories: Buying, Credit, Market Conditions

Nick Churton of Mayfair International Realty, the London-based affiliate of Houlihan Lawrence, comments on how the continued reticence of the banks to offer sensible mortgages – other than to those with large deposits – may risk changing the way many look at property ownership.

jane austen Sense and Sensibility on MortgagesIt is a truth universally acknowledged, that a single family in possession of a good mortgage must be in want of a house. Thus a Jane Austen novel on the property market could have begun.

Sadly today there are plenty of families on both sides of the Atlantic wanting a home, especially with affordability at near-record levels, but many can not get hold of a mortgage.

Austen knew a thing or two about property, or at least the importance of owning it. Her novels had much to do with its acquisition. Although her heroines tended towards marriage as a route to ownership, she would have understood about financing a property purchase through borrowing, as her life coincided in the UK with the advent of mutual building societies.

Austen understood that social status played a major role in owning or aspiring to own property. Above all perhaps, she understood that an individual’s or family’s financial circumstances played a pivotal role in determining where and how one lived – and how one was seen to live. She certainly knew the value of a fine location and the benefits that well-proportioned rooms and good natural light bestowed upon occupants.

This understanding seems as apt today as it was when Jane Austen was alive in the late eighteenth and early nineteenth centuries. The desire to house one’s self and/or one’s family comfortably, and the pleasure that a well-designed house gives to its owner – both socially and materially – seem largely unaltered.
But two things have changed. Residential property no longer just demonstrates wealth but also creates it, and thus makes it even more desirable. Also, as far as the UK is concerned, most of the building societies, who traditionally did the lion’s share of the mortgage lending have now been demutualised and swallowed up by large banks. These are not much in the lending mood at the moment. So, with no other way of obtaining a mortgage this is altering the way many must think about owning property. In 2011 this means that, unless the UK government and the banks take urgent steps to reverse the situation, for the first time in over two hundred years it will only be the already well-off who can realistically afford to buy property.

Non-profit-making mutual building societies were created to allow their members to buy property. Banks were created to make money for their shareholders. Building societies were prudent and fiscally responsible. Banks clearly haven’t been, and are a perfect example of pride coming before a fall. To extract themselves from the trouble they are in the banks are now prejudiced against the very people the building societies were formed to assist. Jane Austen could have written a book about it.

Tax Credit Closing Date Extension Approved

0 Comments By Elizabeth Nunan on July 1st, 2010
Tags: ,      Categories: Buying, Credit, Mortgage, Relocation

capital dome 150x150 Tax Credit Closing Date Extension ApprovedThere has been much confusion and misinformation lately regarding the extension of the Homebuyer Tax Credit closing deadline.

On Tuesday, the United States House of Representatives passed  HR 5623, the Homebuyer Assistance and Improvement Act of 2010, by a vote of 409-5.  But the bill still needed to pass the Senate, and it didn’t seem like such a sure thing.

Well, now it’s official.  Last night, on the eve of the deadline, Congress passed the extension of the Homebuyer Tax Credit closing deadline. The bill is now awaiting signature by President Obama. It’s important to note that the extension applies ONLY to transactions that had ratified contracts in place as of April 30, 2010 and have not yet closed.  This legislation is designed to create a seamless extension with the new closing deadline for eligible transactions now being September 30, 2010.  There will be no gap between June 30th and the date the President signs the bill into law.

The National Association of Realtors worked closely with Congressional leaders on both sides of the aisle to enact this legislation. They believe extending the Tax Credit Closing deadline will help provide additional stability to real estate markets across the Country. This extension will likely benefit thousands of homebuyers who, for whatever reasons, were unable to close by the initial deadline of June 30th.

For additional information on the extension visit www.realtor.org/government_affairs

Historically Low Mortgage Rates Fuel Demand

1 Comment By Mark Logue on June 1st, 2010
Tags: , , ,      Categories: Buying, Credit, Market Conditions

It is the beginning of June and I am absolutely amazed that we are still looking at historically low mortgage rates. national average contarct mortgage rate 26 150x150 Historically Low Mortgage Rates Fuel DemandSince January, I have been predicting higher interest rates by the middle of the 2010. What has happened is the average 30-year mortgage rates fell to 4.8% last week from 4.83% the previous week, according to the Mortgage Bankers Association.

Like everyone else, I was bracing for higher interest rates once the Federal Reserve ended its $1.25 trillion in purchases of mortgage-backed securities at the end of March.

Now with fears growing about Greece’s debt woes and whether excessive state borrowing will come to a head in Portugal, Spain, Ireland (the home of yours truly) and even the UK, we are looking at shaky global stock markets,  causing a “flight to quality” in the U.S bond market. The U.S. home buyer is reaping the benefits of  global economic uncertainty and the European debt crisis through amazingly low mortgage rates tied closely to the U.S. treasuries.

LOCK OR FLOAT?

Mortgage rates are at their best levels of the year. Consumer borrowing costs are at the mercy of the stock market right now. If investors continue to have a dim outlook on the global economy, stocks will move lower and mortgage rates will move lower by another 1/8 to 1/4 %. This only occurs if lenders decide to pass on the savings (maybe not with volume at these high levels). On the other hand, if stocks move upward, we will see Treasuries rise and consumer rates will climb. 

Remember, mortgage rates ALWAYS rise faster than they fall. With that in mind, I think that it will take something really bad (yet again) to get these rates to the 4.5% level on conforming loans. I am advising my clients to take advantage of these attractive interest rates and lock in today.

Mortgage Rates on the Move

0 Comments By Mark Logue on April 14th, 2010
Tags: , , ,      Categories: Buying, Credit, Mortgage, Selling

As we all know, interest rates have plummeted to historical lows in recent months. Average long-term interest rates remained below 5% throughout March 2010. That is well below the 6% average that we were seeing in 2008, not to mention the lowest rates seen in decades. All good things must come to an end (clearly not said by anyone from the optimistic Emerald Isle) and we have already seen rates climb over 5% to an 8 month high of 5.25%.

So what does the future hold for interest rates? As I am NOT clairvoyant with a crystal ball I can only look to the past to try and get an indication of what the future holds. History shows that periods of significantly low interest rates are generally followed by sky-high rates.  Case in point: From 1970 to 1972, 30 year fixed mortgage rates hovered around 7.25% before leaping to 10% by the end of 1973. Murphy’s law applies here (Murphy was a well known pessimist in Ireland ), when rates move downwards, it is typically a slow creep to the downside.  However, when rates rise, it is typically violently quick to the upside.

So why are rates rising?

  • Good economic news is one reason that rates are rising: Government debt, a safe bet during the recession is losing its appeal as stocks and corporate bonds are becoming the investments of choice by investors.
  • The Federal Reserve has ended its program of buying Mortgage Backed Securities. When the Fed was buying, rates were in the mid 4% range for most of last year. Today, according to the Mortgage Bankers Association, the national average for a 30-year fixed rate mortgage is 5.31%.

For people putting their home on the market this spring, rising rates may actually be a good thing. Buyers are racing to complete their transaction for two main reasons

  • Buyers want to lock in their interest rate before they go higher.
  • Buyers want to have a signed Purchase Agreement in place before April 30th in order to qualify for the (up to) $8,000 Tax Credit offered by the U.S. Government.

I am expecting a frenzied last two weeks in April as there will be a near panic (in some cases) to meet the April 30th deadline. As a seller, price your home right as you will not have time to “test the waters”. As a buyer, get pre-approved and lock in your interest rate before it is too late.

Homebuyer Tax Credit Extended

0 Comments By Mark Logue on November 10th, 2009
Tags: ,      Categories: Buying, Credit, Mortgage

Good news for homebuyers! On November 6, President Obama signed a bill to extend the Tax Credit for first-time homebuyers through June 30, 2010.

The program also gives current homeowners a tax credit as long as they have owned and occupied a primary residence for 5 of the last 8 years.

For further details and qualifications, contact our mortgage team or view our Thoroughbred Mortgage Newsletter.

 

Mortgages Made Easy

0 Comments By Mark Logue on September 18th, 2009
Tags: , ,      Categories: Buying, Credit, Mortgage

With the expiration of the First Time Home Buyer Tax Credit getting close, the most common question that I am asked is “what are the all the steps in the process of buying a house?” Having been in the mortgage business for close to 20 years now, I have a great deal of experience making this process as painless as possible.

Here’s a quick walk-through on how purchase loans are made.

  1. Loan Search – Seek the advice of an experienced mortgage professional to better understand which financing options suit your needs now and in the future.
  2. Loan Application- Supply the lender with as much information as possible, as accurately as possible.
  3. Documentation- Submit paperwork supporting application. Commonly required items include pay stubs, two years of tax returns, two months of bank statements verifying the source of down payment, funds to close and reserves.
  4. Pre-Approval – This allows you to know how much you can afford to spend on a home and gives you greater negotiating power.
  5. The Search – Now is the time to begin your search. Once the right house is found, the terms of the sale will be negotiated, including the potential terms of the loan being sought.
  6. Inspection – You will need to hire licensed professionals to inspect the property for defects, termites and water damage.
  7. Appraisal – Your lender will require an appraisal of the home you wish to buy. An appraisal determines the marketability of the property relative to the rest of the market.
  8. Title Search – This process reveals any liens against the property. All liens must be cleared before a transaction can be completed.
  9. Processor’s Review – The mortgage processor reviews all the information and sends it to underwriting. (Always be nice to your processor)
  10. Underwriting Review – Underwriters make the final decision as to whether or not a loan is approved.
  11. Decision – The lender issues a letter stating an approval, denial or counter offer.
  12. Clear to Close- Assuming the loan is approved, all terms and conditions of the approval need to be accepted and satisfied by the applicant. The loan is clear to close once underwriting receives the acceptance from the buyer.
  13. Closing – During this step, the final loan and closing documents are signed.
  14. Funding- At this point, the lender sends a wire or check for the amount of the loan to the closing company.
  15. Close of transaction – Documents transferring title will now be recorded with the county.
  16. Congratulations! You now own your new home.  Now begins the most important step of all.  Enjoy your new home.

The Importance of Your Credit Score

0 Comments By Mark Logue on August 21st, 2009
Tags: , ,      Categories: Buying, Credit, Mortgage

What does it mean to you as a prospective buyer?

In the world of real estate, the three most important words are “location, location, location.”  In today’s post sub-prime mortgage world, the three most important words are “credit, credit, credit.”  Today’s home buyer needs to understand the importance and significance of their credit score from a lender’s perspective.

The credit score is an indicator of the likelihood that a consumer will pay off debt without being more than 90 days late.  Credit scores range from a low score of 300 to a high score of 850.  In order to (a) qualify for mortgage financing and (b) get the most competitive interest rate in today’s mortgage world, I recommend that you have a credit score of 700 or above. 

A high credit score means a low interest rate, which can save you tens of thousands of dollars in interest over a 30-year mortgage.

Credit scores should be checked at least once a year.  The three main credit reporting agencies (CRA’s); Equifax, Experian and Trans Union have created a central website Annualcreditreport.com, to allow you to get a copy of your credit report. Many people ask me, “What are the factors that affect my credit score”?  The answer is simple but not well known. To view my full article and to download the full list of credit score factors, click here.