Avoid Making Serious Home Buying Mistakes...
Before you start actually looking for
the home that you want to buy, you should get
educated about the process, learn.... What the
market trends are for the area your looking for
How to "select" a Buyers Agent
How to get a full pre-approval for a mortgage...
and then start actually viewing potential houses
or condominiums to buy!
"I'm Brian M. Summers and I'd like to personally invite you to my next Home- Buyer Seminar!
Brian M. Summers
Lending Manager
919-641-9151 -cell
brian.summers@alerafinacial.com
www.alerafinancial.com
Alera Financial
Home-Buyer Seminar
HOW TO BUY A HOUSE IN TODAY'S MARKET
Details.
Date: Wednesday, Nov 19th 08
Time: 12:00 Noon-1:30P.M.
Location:
Coldwell Banker Real Estate
7011 Fayetteville Rd Suite 200
Durham NC 27713
Presenters & Speakers:
Brian M. Summers, Lending Manager
Guest Speakers:
Top Realtors, Appraisers Closing Attorney's & Home Inspectors from the Durham /Raleigh area's
Alera Financial
z Seminar Outline z
· What's Happening with Real Estate Prices?
· What's Happening With
Interest Rates?
• Mortgage Payment Examples
• Who's Buying
• Benefits Of Home Ownership
• Is This A Good Time To Buy?
• Home-Buying Process
• Home Loan Process
RSVP by Monday Nov. 17th -919-217-3009
As Home Prices Fall, Costs of Financing Continue to Rise
Can we talk about risk based pricing?
In the simplest of terms, risk based pricing is a system where the interest rate and/or fees paid for a mortgage vary based on the characteristics of both the borrower and the loan itself.
Some borrowers are more likely to default. Some loan types, such as those with lower down payments, cost the lender more when they go bad. It really is a straightforward system designed to equitably align the costs and rewards for banks and borrowers by assigning a rate that, as accurately as possible, reflects the risk of default.
It's a nearly universal practice in mortgage lending, and whether you know it or not, the rate you are carrying right now probably included at least one adjustment to the rate or fees you were charged.
There are, quite literally, dozens of variables that can impact the price, or rate on a given mortgage, but the two most important are loan-to-value (equity in the home), and credit score. Generally speaking, the higher the credit score, and the lower the loan-to-value, the better your rate.
I bring all this up because with defaults and losses on the rise (Freddie Mac lost $821 Million dollars last quarter) Fannie Mae is changing their risk based pricing fees, or "hits." At Fannie, these are known as LLPA's or Loan Level Price Adjustments, and this is actually the third such adjustment since November of last year. Take a look at this graphic (click to biggify), straight from a document called Updated Adverse Market Delivery Charge and Flow Business Pricing Requirements, which was released on Monday, right here. I can think of no better way to illustrate how down payment and credit score interplay to drive the rate you actually get.
I've marked this up to illustrate what has changed since the last adjustment by Fannie. Some are for the worse (in red.) Some were for the better (green). The negative numbers are credits, positive numbers are fees. It's important to understand that the items in the chart are not adjustments to the rate, but to the price of a loan at any given rate. Adjustments can be paid (OR credited) in a lump sum, up front, as part of your closing costs, or as a slightly higher (or lower) rate.
Here's a prime example of how the specific characteristics of the loan, AND the borrower can impact the cost of financing. For example, if someone with a credit score of 685 puts 15% down on a purchase, there is a .5% price adjustment. This means you can pay .5% of your loan amount up front, or take a rate that is .125% higher. If that same person had a credit score of 675, the adjustment balloons to 1.5% of the loan amount, or .375% higher in rate. On a $200,000 loan, that's a difference of $2000 up front, or $38.00 per month over a 30 year term.
The moral of the story: Even as home prices fall, the cost of financing those homes will steadily rise, especially if you have imperfect credit and lack a big down payment.
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October 17th- October 31st
*Rate Ranges not intended for contract writing purposes or for customer use. Existing Home Sales: (Earth to NAR) Tighter Lending Standards are Not the Problem Another ugly print from the National Association of Realtors, who've today released the August existing home sales numbers:
Despite the ugliness, the contraction does seem to be decelerating a bit, so there is a sliver of good news here. Predictably, tighter lending standards are held out as the culprit (emphasis ours):
This is, excuse my French, utter bunk. The idea that "obtaining a mortgage right now is all but impossible" seems to be seeping into the national consciousness, aided and abetted by mainstream media and press releases like this, so let's push back on this notion a little. I would argue that mortgage lending standards remain very reasonable, and that the problem is not "overly tight" standards, but that we are reaping the whirlwind caused by lending standards that were far too loose for far too long. Stay with me on this. The loose lending era stimulated a lot of artificial, unsustainable demand, which drove prices way out of line with any reasonable market fundamentals. It is the aftermath of this era - too much supply and not enough legitimate demand - that's driving prices down and putting many homeowners upside down on their mortgage, not tighter lending. No amount of yearning for the ridiculous-redefined-as-reasonable lending standards of three years ago will fix that. Those days are thankfully gone, they aren't coming back, and we'll be lucky if we escape the whole mess with an intact financial system. [quick aside: It is also amusing that an organization so quick to blame the Media for "talking down" the real estate market is essentially trying to convince the public that mortgages are so hard to get you shouldn't even bother to try, when that really is not the case. I'd argue this hurts demand, and does not help their cause.] Now, lending standards have tightened, for sure, and the cost of borrowing for some (still creditworthy) borrowers has increased, but just as a for instance: Here's a snapshot of what a typical (average credit, has a job, with a non-excessive amount of consumer debt) owner occupant borrower can do to finance a home in the Triangle: She can purchase a home, using conventional 30 year fixed rate financing, for 5% down.
If she happens to be a first time buyer, she can get a reduced interest rate and up to $10,000 in targeted down payment/closing cost assistance. With the exception of Jumbo financing, in any of the above cases, even assuming the very worst (but still acceptable) credit profile, our borrower would be hard pressed to pay more than 6.75% for a 30 year fixed rate, and if she had good to very good credit, a rate of 6% or less is in play. Hell, with an FHA, the down payment does not even need to be hers - it can be a gift from a relative. Now I ask you, in reading the above, does this strike you as an "overly tight" lending environment? And to the Realtors in the audience: Don't be afraid to let your clients know that getting a mortgage is not as tough as they may have been led to believe. Come on in, the water is fine. Features for the month of November! 1. Any realtor that purchases or refinance their personal residence with Alera Financial in the month of November will have the commitment fee and appraisal fee waived saving you an additional $850.00 of closing cost! 2. Alera Financial will provide a free one year AHS Warranty for all 1st Time Home Buyer that closes a home with Alera Financial! 3. First Time Home Buyer Seminar held at the Durham County Library call for dates and times with Alera Financial. Get your buyers PRE-APPROVED Have your best week ever! Brian
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Born Again: When will you be eligible for a mortgage after a foreclosure or short sale?
Did you miss the fact that foreclosure filings were up 71% in the third quarter?
This makes it a good time to remind everyone of the rules that govern when and how you'll be eligible for a mortgage after you've been foreclosed, surrendered a deed, or negotiated a short sale.
For borrowers with a foreclosure, short sale, or deed in lieu of foreclosure on their credit history, the following timelines apply before they'll be eligible for a conforming, conventional mortgage (Fannie Mae/Freddie Mac):
Foreclosure: 5 years from completion date, minimum 680 FICO and 10% down for 7 years, investment property, second homes, cash out refinances not allowed for 7 years.
Deed-in-Lieu of Foreclosure: 4 years, at least 10% down required for 7 years.
Short Sale: 2 years. 4 years for Freddie Mac
For what it's worth, under FHA rules your buyers have to wait two years before they are born-again.
Goes without saying that if you do wind up with a foreclosure (or one of it's close cousins) on your record, unless you handle the period after the foreclosure properly by re-establishing credit - no easy trick with a serious derogatory on your record - and accumulating a sizeable down payment, you are likely to be renting for a long, long time.
Or, another way to look at this: At some point in the next five years, buying may look really cheap, and you'll be locked out of the game.
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Weekly Rates |
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October 10th- October 24th
*Rate Ranges not intended for contract writing purposes or for customer use. |
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Behind on Mortgage: What is a Delinquent Borrower to Do?
I've posted this once before, but given the number or search queries, emails, and phone calls we are getting asking the question posed in the title, I thought it was worth re-posting a summary of David A. Smith's excellent advice on what to do if you are, or are in danger of, falling behind on your mortgage payment.
Read the whole thing, there is a lot of insight on WHY these steps are important, but here are the high points, quoted directly, from the piece:
1. Announce the problem - in writing. Don't wait for the lender to come calling - once you know you're going to miss a payment or two, tell your lender this.
2. Come clean on your financial resources. When queried about your circumstances, come clean....Most people who can't pay hide assets, fib about their situation, or at the very least hem and haw. Few things create more credibility than owning up to the situation - and credibility is one of your most precious assets.
3. Figure out what you can pay. Even if you can't make full payments, you can make some partial payment. Figure out what it is. Tell the lender that.
4. Make regular partial payments. Even if you can't pay 100%, pay something - every month. And make it the same amount. That regularity is soothing to the lender, and establishes a baseline that adds to your credibility.
5. Keep detailed records of everything. Not only should you keep copies of all your correspondence to the lender, keep the lender's back to you. Judges and others are very sympathetic if you come in waving a sheaf of communications where you show you were a responsible borrower, trying to get the lender's attention, and the lender just kept sending you form notices.
6. Find a real person inside the lender. Companies are abstract entities; job titles are uniforms we put on each morning and doff each evening. In between, a company is represented by individuals...Your goal is to puncture the anonymity barriers...
7. Propose rescheduling your debt, including lowering your mandatory payments. You're delinquent, you can't pay everything you owe, but you're paying something. You're seeking a piece of paper, signed by you and your lender, which specifies a breathing interval.
8. Explore refinancing. Loan payments have two elements, interest and principal. Both of them can change - meaning lower - in a refinancing.
9. Offer to chip in new equity. A lender facing a bad loan assumes that (a) the property will be her only good collateral, and (b) before she can get to the collateral, she'll have to spend a bunch of money getting the borrower out of the way. If a lender thinks there's new equity capital that can come in - from family, friends, or government, in short, from anywhere - that's an automatic differentiator in your favor.
10. Look for financial help. Fortunately for the United States, we have a widely distributed network of assistance providers, particularly for homeowners. Credit counselors are one starting point; so are federal, state or local housing finance agencies all over the country.
11. Sell the property. Eventually, and sometimes even when all the preceding things are going on, you may wish to list the property for sale. If you do this, only good things can happen: You may get an offer that covers your debt and allows you to recoup equity, If you are marketing the property and you can't get anyone to take it off your hands, that too is great evidence you can use to persuade your lender to give you a workout respite.
12. Consider bankruptcy. Sometimes nothing works. Sometimes the right answer, financially ugly though it may be, is to let the property go. However, as I wrote 18 years ago in my second bout with workouts (my first was in 1976), there are some unusual times when bankruptcy is the best survival strategy.
I hope that these steps can be useful for you and you clients.
Features for the month of October!
1. Any realtor that purchases or refinance their personal residence with Alera Financial in the month of October will have the commitment fee and appraisal fee waived saving you an additional 850.00 of closing cost!
2. Alera Financial will provide a free one year AHS Warranty for all buyers during the 10 day Coldwell Banker Sale that closes a home with Alera Financial!
3. Dinner at Ruth Chris for three agents on Alera Financial. Get your buyers PRE-APPROVED
Have your best week ever!
Brian
Making the Grade: Raleigh/Durham Housing Market Gets a "B"
If you haven't noticed, discussion of the housing market has been relentlessly focused on price (average sales price, median sales price,) price direction, and units. And for good reason - they are useful and telling numbers. But price movements alone do not tell the whole story. Particularly if we are talking about the overall health of our real estate market, and especially it's long term prospects for recovery.
In that case, the focus on price/units as the sole measure of the housing market is a little like diagnosing a patient with a influenza as terminally ill because they've spiked a fever.
Which is why I am pleased to see this piece from Finance & Commerce's Burl Gilyard on a recently released housing market study: The new "Homeowners' Market Fundamentals Index," from Montana-based Redfish Emerging Markets LLC, ranks 185 U.S. metro areas, and the Raleigh/Durham areas comes in at an honorable 13th/20th place.
Mark McGlothlin, CEO of Redfish, noting that Raleigh/ Durham still gets a solid (and inspiring) "B" grade.
Though the grade doesn't put us on any sort of honor roll, we do appreciate the studies attempt to look forward and weigh factors beyond simple price/unit metrics: The Redfish rating system weighs five factors: population demographics, job growth, local economic development, single family market "metrics" and the health of the rental market.
McGlothlin said that Raleigh and Durham were helped in the rankings by the increasing population growth, a encouraging job outlook and the current supply of homes and condos available for sale on the market.
"I tell you what helps Raleigh/Durham the most ... jobs," McGlothlin said. "Job growth creates population growth, which drives housing demand." You can find the full study, and more information on it's methodology right here: Homeowners' Market Fundamentals Index[Redfish Emerging Markets]
This weeks Interest Rates:
October 3rd- October 17th
30 Yr. Fixed Rate
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Conv 30 yr Fixed |
6.250 - 6.625 |
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Conv 15 yr Fixed |
5.875 - 6.250 |
|
FHA 30 yr Fixed |
6.250 - 6.750 |
|
Conv 5/1 yr ARM |
5.750 - 6.625 |
|
JUMBO 5/1 ARM |
5.750 - 6.250 |
Features for the month of October!
1. Any realtor that purchases or refinance their personal residence with Alera Financial in the month of October will have the commitment fee and appraisal fee waived saving you an additional 850.00 of closing cost!
2. Alera Financial will provide a free one year AHS Warranty for all First Time Home Buyers that closes a home with Alera Financial!
3. Dinner at Ruth Chris for three agents on Alera Financial. Get your buyers PRE-APPROVED
Have your best week ever!
Brian
Alera Financial 7011 Fayetteville Street Durham NC 27713
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