We don't really look at our calendars as often as we should.
There are many holidays in May that tend to get overlooked by many of us and i wanted to point out a couple for today.
Saturday, May 19, 2012 was Armed Forces Day. It is easy to get swept
up in the day-to-day minutia of life. Weekends are crazy times filled
with work, errands, family and chores. We often don't stop to think
about those are currently serving in the military or those that have
served in the past unless something happens to grab our attention or we
have family that is, or was, in the military. We must remember that
their job is not an easy one and it is even harder for their spouses and
children. I would like to thank each and every member of our Armed
Forces, both Active Duty and Retired for serving our country. I would
also like to thank their families for their support and their dedication
to keeping our country safe.
Monday, May 21, 2012 is National Waiters and Waitresses day. What
better way to celebrate than to take a Veteran or Active Duty soldier to
lunch? Don't forget to tip your Waiter or Waitress. Even leaving a
little note of thanks if your service is exceptional will go a long way
toward making their day a great one.
With these holidays in mind, I hope you have a fabulous and joy-filled day!
The market has definitely been a “Buyers Market” and not a “Sellers Market” but things are also definitely changing.
The best news is that the changes are happening at a good solid pace
and not shooting up or down suddenly, making it a much more sound market
as a whole. So should you put your home up for sale now or wait?
Positive Signs That The Market Is Changing To Benefit The Seller
- Interest Rates Rising – Interest rates are slowly rising and buyers are thinking they better buy now before rates go up too high.
- Record Low Number of Homes for Sale – Many areas
are seeing record low amounts of homes for sale. In a case of supply and
demand this is a good thing for sellers because with fewer homes to
view a buyer will be more likely to not only look at your home but if
you market it right it could be the home they want.
- Mortgages Slowly Increasing – Lenders are still
tight with lending their money but are beginning to lighten up a bit and
are handing out more mortgages than a few years back when anyone and
everyone got a loan; making the market a sure target for Foreclosures
and bankruptcies. Now lenders are much more strict and are beginning to
see where they were wrong in the past and have learned for the future.
- Unemployment Rates Falling – Buyers are feeling
more comfortable with taking on large purchases such as homes as the
unemployment rates are falling and they’re feeling a little sturdier on
their feet.
- Good Outlook for First-Time Buyers – First-time
home buyers are still lower than desired but with the market changing we
could be seeing more and more first time buyers looking for homes.
- Marketing Techniques Are Getting Better – With
social media and new technology marketing techniques are getting better
and better for agents to market your house. Many are jumping on the
bandwagon and using SmartPhone technology to market to buyers using QR
Codes and Text Messaging when a home in their area goes on the market.
Online tours are no longer just still shots and buyers can view your
home before even picking up the phone to make an appointment to see it
in person, wasting less time for everyone involved.
Have You Been Thinking of Selling But Holding Off Because of The Market?
It may be time to put that “For Sale” sign out if you’ve been
thinking of selling but have held off. Besides the positive signs just
covered there are also positive signs that you can upgrade now to a
newer, bigger home, or if you’re looking to downsize to a smaller place
for retirement, at low interest rates and for some of the best prices
available. The market hasn’t taken a complete turn and at this point
it’s beginning to almost be an “even market” for both parties. This
means that you can still get some very low interest rates and with the
money you make on the sale of your home you can hopefully put down a
substantial down payment; increasing your chances of being financed
without issue.
Getting your home on the market now gives you an edge on the spring
sales increase that you normally see during the season. You will be
getting your home on the market at just about the perfect time as the
atmosphere changes and people begin to look for homes during a typically
trending time for sales increases. Add to this the still low interest
rates and you have a combination of reasons why it could be not only
your time to sell but to buy also.
It’s Time To Get An Agent
With all things pointing towards an increasingly positive market the
time to find your Selling Agent is now. Getting in touch with an agent
will give you a jump-start on getting on the market and give you the
time to get your house ready for sale. Your agent has the ability to
market your home with an expert touch and knowledge that is priceless.
Spring is known for being one of the busiest seasons for home sales and
as sales increase and homes on the market decrease it’s definitely time
to put your house out there!
If you’ve been thinking of buying a home but keep putting it off
because of a variety of concerns have no fear. Although the process may
seem riddled with riddled with potential obstacles many are easily
overcome by doing a little research.
By doing your own due diligence and become educated about the
specifics of the home buying process you will soon see the path to home
ownership is hard as difficult as it first looks.
I Need To Save For A Huge Down Payment – This is not
always the case and the size of the down payment needed is based upon
the lender and the type of loan you get. There are options out there
that offer mortgages with down payments from 20% to zero.
Some government loans, especially VA loans (for Veterans) and some
FHA loans even offer incentives to help new home buyers get into their
home. These include rolling over fees involved that you normally would
have to come up with immediately at your closing in order to purchase a
home. The size of your down payment depends upon the loan, the lender,
your credit, the type of loan you get, and other factors that you should
discuss with your Buyer’s Agent.
If you have a less than perfect credit history there are still
options from lenders that allow you to obtain two loans at once; one
loan is a temporary solution to finding enough money for a down payment.
Some lenders offer a first mortgage which is valued at approximately
80% of the total loan amount and a second mortgage which is for the
remaining 20% of the loan value.
Generally the second mortgage is a smaller mortgage that is offered
with a faster pay-off schedule and because the loans can be a little on
the high side as far as interest rates you can often refinance within a
few years to pull everything together. While these types of loans aren’t
available for everyone and in every area, your agent should be able to
guide you to what may or may not be available to you.
Mortgage Payments Will Make Me House Broke – In many
cases mortgage payments are often lower than what the typical rent
payment is in most areas. Sit down and figure out a budget and then give
that budget to your realtor. Ask them to help you find a home that,
with taxes and insurance, will fall within your affordability range.
You will be quite surprised how many homes are out there that will
end up costing you less or the same as what you’re currently paying to
rent the home you’re in. Add to this that you, as a new home owner, are
building equity and value in your own property instead of your
landlord’s! It doesn’t hurt to find out what the amount you’re paying
now for your house or apartment can buy you in terms of your own home
instead of “renting” a home.
My Credit Rating Isn’t High Enough – While a lot
does depend upon credit ratings and in the current market lenders are
much stricter with lending money to those who are “risks” there are
other options out there. While your Buyer’s Agent is not a miracle
worker, if they’re experience they’re going to be able to come up with
some unconventional options for financing.
There are options where sellers are willing to help the buyer out,
depending on how badly the seller needs to sell their home. There are
also lenders who specialize in hard to finance customers and although
they are most often lending at a higher interest rate they also can
offer re-financing after you’ve proven your ability to maintain good
credit with them after a few years of consecutive, on-time mortgage
payments.
It’s Always Worth A Try
Don’t quit before you even try. Call a Buyer’s Agent and find out the
facts. Work with them to see what options are available to you. There
are various governmental programs that have been made available
especially for new home buyers. Your agent should be able to guide you
from helping you with your budget and the home you can afford to what
lender’s to approach or programs to look into in your area.
If you don’t at least try to see what your options are you will never
know what you could have. You may be surprised and end up being a home
owner sooner than you ever thought possible.
The wonderful weather of Spring and Summer make these months the best
months for selling your home; so if you’ve been debating putting it on
the market this may be the time to make your move.
Add to the fact that this is the best season to sell a home that
homes are finally beginning to sell at much faster rates and it’s
definitely time to consider your options.
The past economic situation has been far from beneficial from a
seller’s perspective. Home sales were slumping, with houses sitting on
the market for 9 months to a year or more in some areas.
Record numbers of home foreclosures and short sales made it hard for a
seller to get top dollar for their home so most simply sat back and
waited unless they were forced to sell for a reason. If you’re one of
those that decided to wait it out before you make your move it may have
paid off for you to be patient.
Homes are beginning to sell quickly with multiple offers in many
areas. The change in the economic system is definitely a positive effect
in the housing market that finally is putting sellers in a better
position to sell their home for the best prices. Check with an agent to
see if your particular area is finally seeing positive moves that
benefit the seller.
Before you just jump into putting the for sale sign up in front of
your house you’ll want to make a plan. First, understand that this is a
fairly good time to buy also because while interest rates are no longer
at record lows they are at very good rates and very enticing to buyers.
Chances are you will not only be a seller but a buyer too; selling
your home to purchase another. So it’s time to make a plan for selling
your home and buying your next house so the entire process goes as
smooth as possible.
- First figure out why you want to sell. You want to make sure that
your reason to sell is very real and something that creates you to be
motivated and committed to the entire process. Think it out before you
make your decision.
- Decide what you want to do once you put your house on the market. Do
you want to sell your home and then look for a house for yourself or do
you want to start looking now for your new home?
- Find an agent you can work with. Your agent can serve as both your
Buyer’s Agent and your Seller’s Agent; meaning they can work with you
both to find a home and to sell your home. To find the agent that fits
your needs interview a couple of agents to see what they have to say and
if they click with you. You have to truly enjoy your agent in order to
make the process a positive one. If you and your agent aren’t clicking
it could be a very long and hard road.
- Prepare your home for selling by first going through your home and
de-cluttering and cleaning out in a first round of getting ready. You’ll
continue to do this over and over, cleaning out and de-cluttering in
stages is best and easiest. Begin this process even before a sign goes
out in front of your home.
- Talk to your Selling Agent and get tips and hints about what needs to be done first. Let the agent guide you with your sale.
- Make the repairs you’ve been putting off; the simple things like
screwing in that loose door knob, painting those nicks in the woodwork,
and fixing that dripping faucet. Start small with your repairs and the
move on to the bigger things that you and your agent feel must be done
to sell the home.
- Determine what your home is worth and what your absolute lowest
price is that you can accept depending upon what you owe, etc. This
step is done with your realtor who will pull up pricing of properties in
the area that are very similar to help determine how much you should
ask.
- If you’re going to be buying a home also then you’ll want to get
prepared as a buyer. Your agent can guide you on mortgages, brokers, and
how to obtain things like Good Faith Estimates. Utilize your agent to
the fullest because they are the professionals who can observe the
entire process of buying and selling your home without bias.
One of the most difficult tasks that a home seller has to deal with is the pricing of their home.
While it is so easy to just add a little mark up to the value that
you originally paid for your home, the housing climate has changed and
such action is not appropriate.
There are several factors to consider when pricing your home.
Ultimately, the value of your house will be determined by a licensed
appraiser. Here are some resourceful tips that can help you evaluate the
price of your home.
Look At Your Property Like Any Other Type Of Property
– First of all, you have to understand the fact that buyers will
usually want to move in right away. They don’t care about the amount you
paid for, or how much time you spent mowing your lawn. They don’t care
about how many wonderful memories you and your family shared in your
home or just how much cash you have spared to get it in the first place.
What they care about is whether the house is worthy of being their
home. Buyers tend to consider improvements you’ve made to the home,
flooring, and information that has inflated the value of your property.
That way, they can incorporate similar projects to get a favorable
return, when they decide to sell.
Get Yourself At Least Two CMAs – It is always
advisable to get a CMA, which stands for Comparative Market Analysis.
You can get this from your realtors. Now, to get the right amount, it is
best to invite at least three different realtors to visit your home and
give you their expert insight regarding the value of your home. While
you cannot solely rely on the CMAs, it is a good thing to have it in
order to get an idea about your competitor’s price. Some realtors might
give lesser value for your home just to intensify a bidding war, while
others may give you a higher quote to try to invite buyers with more
income.
Conduct Market Research – It is also recommended
that you spend time attending open houses within your neighborhood. You
should compare their asking price to yours, based on the amenities,
location, size, etc. If the asking price is the same as yours, do you
think the amenities of that home are comparable to what you offer? If
not then consider increasing the price slightly.
Compute The Price Per Square Foot – It is important
to compute the value of your property per square foot. You can base the
value per square foot on your neighborhoods overall market value, but
this shouldn’t be the sole foundation of your calculation. However, it
could be your starting point. Note that there are a lot of different
methodologies that you can use to get the square footage.
Check The Market Condition – This is one of the most
important things to do. Determine whether the value of the homes in
your neighborhood are appreciating or depreciating.
Are these homes
selling quickly or not? Does the real estate in your area seem more
promising during the winter season, spring, autumn or fall? Is the
national economy showing promising signs of recovery? Are you going to
be selling in a seller’s market or in a buyer’s market? Does local
employment market competitive or are they suffering from staff layoffs?
These are all factors you will need to consider.
Make the Terms Of Your Offer Enticing To Buyers – If
all you want is to sell your property quickly, then it is best to offer
a seller-financing option. This allows buyers to stretch their finances
and move in immediately. A lease-option is more creative and is a more
flexible option.
Mortgage rates have dropped past 4 percent.
For the first time in more than 40 years, data from Freddie Mac’s weekly Primary Mortgage Market Survey shows the average 30-year fixed rate mortgage falling below 4 percent, dropping to 3.94 percent nationwide. It’s the lowest average 30-year fixed reading in the survey’s history.
In addition, Freddie Mac shows the 15-year fixed and 5-year ARM making new all-time lows, too, falling to 3.26% and 2.96%, respectively.
It’s a great time to be shopping for a mortgage or buying a home. Because mortgage rates are dropping, housing payments are dropping, too. As compared to 8 months ago, for every $100,000 borrowed, homeowners now pay $66 less principal + interest each month.
On a $300,000 mortgage, that’s $71,280 saved in 30 years.
Mortgage rates have been lower for several reasons, some of which include :
- U.S. economic growth has been slower-than-expected
- Uncertainty surrounds Greece and the Eurozone
- The Federal Reserve’s “Operation Twist“
In general, demand for mortgage bonds has been high and that’s caused mortgage rates to fall. It should be noted, however, that although the 30-year fixed rate mortgage fell below 4 percent this week, the amount of discount points required to lock that rate rose by 10 basis points, or $100 per $100,000 borrowed.
Homeowners are paying bigger fees for these lower rates. If you plan to move within a few years, these fees may wipe out your low-rate savings.
As you shop for a mortgage, pay attention to more than just rates. Low rates are great, but not when they come with high costs. Talk to your loan officer for help with making a plan than works for you.
Looking to buy a home for sale in the Colorado Springs real estate market? Take advantage of low rates today!
Call Juanita at: 719-229-5770
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144,900, 5 Bedrooms 3 baths, 2252 Total SF
Foreclosure Deal of the Day
COLORADO SPRINGS MLS (AND PIKES PEAK REGION) HOUSING STATISTICS FOR
NOVEMBER 2010:
Nov 2009 Oct 2010 Nov 2010
Total Active Listings: 4,301 5,124 4,746
Total Sales: 794 631 542
Average Price: $ 214,062 $ 240,326 $233,286
Median Price: $ 187,950 $ 200,000 $198,000
Total active listings are up 10.0% over November 2009 but are down 8%
from October 2010. The sales trend continues at a much slower pace than
this time in 2009, down 32% from November 2009 and down 15% over
October. The Average sales continue trending upwards at is up 7% over
November 2009, but down slightly, 3% over October 2010. Median price is
up 6% over October 2009 and down 1% October 2010. The absorption rate
remains high at 8.75 months due to the reduction in sales.
The
media continues to pound the real estate market with doom and gloom
news. With historically low interest rates, buyers are able to purchase
a much larger home than if rates were 1 or 2% higher. It is a great
time to buy or to move up to a larger home.
(Source: Pikes Peak REALTOR Services Corp. monthly PPMLS Statistics)
MLS® Market Snapshot - Home Evaluator
With access to the Multiple Listing Service
(MLS) data I will provide you with what you
need to:
- Gauge how the market is trending
- Find out what sold most recently and
for how much - Understand how homes compete on
price with other properties selling in
the area - View homes for sale with photos to
better assess the market conditions
... and answer any pressing questions you
may have.
SEND ME AN EMAIL AT JUANITA@JUANITASIMKINS.COM TO SIGN UP FOR YOUR PERSONALIZED HOME EVALUATOR FOR COLORADO SPRINGS
On 10/9/09, the House of Representatives voted 416 to 0 to pass the Service Members Home Ownership Tax Act of 2009 [1] which extends the current $8,000 first-time home buyer tax credit for another 12 months for members of the military, Foreign Service, and intelligence corp who served at least three months of qualified overseas duty in 2009. The program is set to expire on November 30th, 2009 for everyone else and the justification for the extension makes sense. If you’ve been serving abroad for our country, it makes it very difficult for you to look for a house and take advantage of the program. Extending it another year certainly makes sense.
At the moment the bill has passed only the House of Representatives, it or a similar bill needs to pass the Senate, then reconciled, then signed by the President before it is law.
“If you are in a conflict zone, you don’t have time to get together with your spouse and family to go house shopping,” says Rep. Ron Kind, a Wisconsin Democrat. Rep. Dave Camp, a Republican from Michigan, expressed similar concerns. “A lot of service members get called overseas at a moment’s notice,” Camp says. “And because of the time limit on the legislation now, they can’t always take advantage of it, not because of anything that they did or didn’t do but because of the unique nature of serving in our armed forces.”
It’s estimated that this will result in an additional 10,000 home sales, likely clustered around military facilities, at no extra cost. It’s revenue neutral because there are other revenue generating provisions included in the bill. The Senate received the bill yesterday and is set to vote on it fairly quickly.
As for the original credit set to expire on November 30th, there are discussions about extending the credit an additional six months.
House Votes to Extend First-Time Home Buyer Tax Credit for Service Members [2] [U.S. News & World Report]
We GIVE BACK to the military as a "thank you" for their service to our country! How, just ask me! Call Juanita at 719-229-5770 today.
Do you know what's under the paint or wallpaper in your home?
Thousands of homeowners nationwide who bought new houses constructed with Chinese drywall are now finding insurers are dropping their policies or send notices of non-renewal.
Experts say those cancellations will become rampant as insurance companies process hundreds of pending claims to have the defective drywall removed or replaced.
At least three insurers have already canceled or refused to renew policies after homeowners sought their help replacing the bad wallboard. Because mortgage companies require homeowners to insure their properties, they are then at risk of foreclosure, yet no law prevents the cancellations.
By Associated Press
P.S. If you've bought a new home and have questions on where the drywall in your home came from, make sure to contact the builder directly. As always, when you need help in buying or selling a home, call a professional Realtor (me).
Your friendly Realtor,
Juanita Simkins
719-229-5770
Extending the First-Time Home Buyer Tax Credit, due to expire at the end of November, is high on the Democratic Congressional to-do list, legislative aides said.After Wednesday’s meeting with President Obama and House Speaker Nancy Pelosi (D-Calif.), Senate Majority Leader Harry Reid (D-Nev.) released a statement that the government should “continue efforts to strengthen the housing market by extending the home buyer tax credit.”Mark Zandi, chief economist at Moody’s Economy.com, who is a consultant to Democrats in the administration and Congress, is advocating extending the credit through August and making it available to all home buyers. He said failure to extend the credit just as more foreclosures enter the market will push housing prices down. Also, on Thursday, the House is expected pass legislation to extend the credit through 2010 for people who have been out of the country in the military, intelligence, or foreign services.Source: The New York Times, Jackie Calmes (10/07/2009)
Buying a foreclosure or bank owned home often is appealing to buyers trying to stretch their dollars. It’s finding a good one can that can be a challenge. Many banks don't want to advertise their homes negatively as "bank-owned" because they don't want to scare off potential buyers.
In some markets, foreclosure inventory is actually down compared with last year as government programs attempt to keep owners in their homes and banks aren’t putting as many homes on the market, Melvin said. That’s making it harder for buyers to snag a foreclosure, and those paying with cash often win a bid over someone who needs financing.
If you’re considering the purchase of a home that is now owned by a bank, it’s also important to know at the outset just how much work you’re in for — and how much it is going to cost you. Many foreclosures are in various states of disrepair; some of the fixes are cosmetic, but some can be extensive.
Those looking for the best deal probably shouldn’t rule out non-foreclosure properties. If buyers set their sights on bank-owned properties they may be in for a surprise as many need a lot of work and sweat equity. Finding a fairly decent foreclosure property with minor work (such as carpet and paint) is not easy to find and when you do find one, expect a buyer frenzy!
An option for finding some of the foreclosure listings is to go straight to the bank.
Lender Web sites, such as those operated by Bank of America, Chase and Citibank, will list the properties the financial institution has reclaimed when borrowers defaulted. To find a list, simply do a Web search for REOs and the name of the lender. Contact information for the property’s listing agents is usually provided for each entry.
For a fee, other sites will hunt down properties for you. RealtyTrac.com, which helps people find foreclosure and pre-foreclosure properties, charges $49.95 a month, after a free seven-day trial. The company also recently launched BankHomesDirect.com, which charges $19.95 per month and lets people search just for REOs.
Foreclosures.com charges $49.95 per month, after a free seven-day trial.
Otherwise, you might want to enlist the help of a really good Realtor (like me!). Someone who works regularly with home buyers searching for the right home to buy in the right area, at a price you can afford.
Something else to consider is the face that lenders aren’t held to the same disclosure requirements as sellers who have lived in the home, mainly because the lender hasn’t occupied the home to notice leaks or other problems. For that reason, an inspection is crucial.
“If there are lessons out of the last couple of years, it’s certainly buyer beware,” said Dan Steward, president of the home inspection firm Pillar to Post, which has a U.S. headquarters in Tampa, Fla.
“We have all heard the stories of people ripping the copper pipe and wiring out … people have literally gone to the light switch, disconnected the wire from the switch box and have pulled the wire through the drywall,” Steward said. Some have ripped out toilets and kicked in walls or left water faucets running before they left the house, often out of anger.
You don’t need to be told the toilet is gone, but an inspector can tell if there is damage 20 feet down the water line because of the way that toilet was ripped out, he said.
Other issues could pop up due to the property being vacant. Large banks will often hire a field service to cut the grass, shovel the snow and winterize a home, yet when homes aren’t occupied it’s harder to catch small problems before they become big ones.
When a place is unoccupied, pests could become an issue. If you were living in a home, a nest of raccoons probably wouldn’t be able to find a home in your crawlspace—not for long, anyway.
The time it takes to complete the sale can vary from lender to lender. In some cases, the process goes smoothly and in other cases, the lenders are disorganized. It depends on who you're trying to do business with!
Your best chance at having an offer accepted and for a quick closing process is to have everything in order before making the offer. That includes having the financing firmed up and writing a clean offer (not asking for new faucets or doorknobs, etc) so that the bank doesn't think you are going to be a pain that they don't have the time for. Most bank-owned properties are sold “as is,” so if there is something you want fixed, it’s best to just factor that into the price you’re offering.
But don’t expect to bargain the listing price way down because banks typically price their properties at a 20 percent to 30 percent discount. If the property has been on the market for a week or two, don’t expect the bank to drop the price; if the listing is older, you might have more power.
Also, don’t be surprised if the bank that is selling the property asks you to get an approval from its mortgage operation; you often don’t have to take the loan from their company, but they may want to get a closer look at your finances to make sure you’re a solid buyer.
If you would like more information on how to buy a home now, especially if you are a new home buyer (haven't purchased or sold in the last 3 yrs) and want to take advantage of the $8,000 tax credit, then contact me today for more information. I promise to give you exceptional customer service, answer any questions you may have and make sure you get the house of your dreams that you can afford. Call or email me today at: 719-229-5770 or email Juanita@JuanitaSimkins.com
I'm looking forward to helping you!
A study of 24 million credit files by national credit bureau Experian and consulting company Oliver Wyman has shown that home owners with high credit scores are 50 percent more likely to deliberately walk away from a mortgage than lower-scoring borrowers.The industry calls these “strategic defaults” and their numbers grew to 588,000 in 2008, double the total in 2007, and well beyond most earlier estimates.The study determined:- Strategic defaulters tend to go straight from paying their mortgages dependably to not paying at all.
- Strategic defaulters are heavily concentrated in negative-equity markets like California and Florida.
- Two-thirds of strategic defaulters have only one mortgage.
- Most likely to default are home owners with large balances and the highest credit ratings.
Piyush Tantia, an Oliver Wyman partner and a principal researcher on the study, said strategic defaulters "are clearly sophisticated” and look on the decision to default as a business strategy. "Well, I'm $200,000 in the hole on my house, and yes, I'll damage my credit," Tantia says of defaulters.
Source: Washington Post Writers Group, Kenneth R. Harney (09/27/2009)
P.S. Don't ditch your mortgage before contacting me. I'm a certified short sale specialist and counsel with many homeowners in the Colorado Springs, CO area on what their options are. Call Juanita at 719-229-5770.
Is the Foreclosure Slowdown Temporary?
Legal entanglements and well-intentioned home-owner-assistance efforts have slowed the pace of foreclosures, but eventually many of these distressed homes will hit the market anyway.
Some observers say these delays are prolonging the housing crisis and creating a “shadow” inventory that will cause more housing market pain.
"There's going to be a flood [of bank-owned homes] listed for sale at some point," says John Burns, a real-estate consultant based in Irvine, Calif.
Burns believes that when the onslaught hits, it will drive down home prices still further. On average, he expects home prices to fall another 6 percent next year.
Ivy Zelman, CEO of Zelman & Associates research firm, estimates that there are 3 million to 4 million foreclosed homes that will hit the market in the next few years. How traumatic the impact will be depends on whether the flow of homes going up for sale resembles "a fire hose or a garden hose or a drip," she says.
Source: The Wall Street Journal, Ruth Simon and James R. Hagerty (09/23/2009)
APR Predators and APR Demystified
First, lets demystify Annual Percentage Rate (APR).
APR was designed to allow consumers to use one standardized number to compare the real cost of each lender's interest rate and it works like this.
If I lend you, $10,000 and, I charge a $500 Bump-ta-Bump Fee, you will actually receive $9,500, however you must still repay me $10,000. APR is my real yield and your real cost on this loan.
We agreed that you will repay the loan at 8% interest on $10,000, HOWEVER you only received $9,500 therefore I will earn more than the 8.0% interest rate I charge on $10,000. In this case, my yield (APR) is 9.799% on the $9,500 you received.
APR is the lender's yield on dollars actually lent ($10,000 minus $500 = $9,500); in this case, the lender's yield (APR) on $9,500 is 9.799%
The $9,500 also represents the Amount Financed in the Truth In Lending (TIL) disclosure.
For those of you who use spreadsheets the Rate Function will find APR. Use the Amount Financed for Loan Amount and use the monthly payment on the actual loan amount.
Fees that must be subtracted from a mortgage loan to properly calculate Amount Financed for APR
Origination and Discount Points Processing and Lender Fees Pre-Paid Interest (Use 15 days when closing date is unknown) Monthly Mortgage Insurance must be added to the payment of all FHA loans and Conventional loans greater than 80% loan to value. The inclusion of Mi or MIP accounts for the large spread between Rate and APR on loans with mortgage insurance. Note: Fees Not used in APR calculation; third party fees such as appraisal and credit.
How Do APR Predators Work?
Many sophisticated borrowers shop interest rates by searching for lowest APR which, if property stated, is the real cost of borrowing. Unfortunately, APR is not always stated properly.
How is advertised APR is misstated?
- Prepaid Interest is not included - most common deception and true on all online Rate sites i.e.: Bankrate.com, Interest.com, Mortgage101.com, ShopRate.com, etc.
- Prepaid Interest is understated - must be 15 days when closing date is unknown.
- MI or MIP is not included in the APR on any online rate sites, Bankrate etc.
- Some lenders do not include MI or MIP on their web sites such as Amerisave.com
- Lender fees are either understated or not included in the APR calculation. This is a tricky one because No or Low Lender Fees does not necessarily indicate a predatory lender. Some lenders charge a higher rate and no points or fees for their so called "Zero Cost" loan. However, the "Zero Cost" rate will always be higher than a rate with points and/or fees.
- Notes to the above:
- there is no such thing as a Zero Cost loan and some states prohibit lenders from advertising Zero Cost Loans.
- The spread between Rate and APR on loans greater than 90% LTV should be at least 0.700%. When it is not... you are being scammed
Rate - Points - Fees are all interdependent
The best way I can explain this is show various Rate - Point - Fee combinations where the lender is making the same gross profit on each combination.
In the examples below, we will use a $200,000 loan amount and Lender gross profit of $1,000, on a day when the Lender's cost for a 5.000% rate is par (0 point).
Best Rate: $1,000 Lender profit in various combinations of points and fees
Rate | Fees | Points | APR | Profit |
5.000% | $1,000 | 0 | 5.044% | $1,000 |
5.000% | $500 | 0.250 | 5.044% | $1,000 |
5.000% | $0 | 0.500 | 5.044% | $1,000 |
Lowest Fees: You pay $0 points and fees and Lender's investor pays the lender $1,000 for the higher rate.
Rate | Fees | Points | APR | Profit |
5.125% | $0 | 0 | 5.125% | $1,000 |
The point here is that lenders design their loans to provide talking points for their sales staff (loan officers). They all require a certain profit margin and it is not important the way the loan is structured as long as the closed loan delivers their margin.
This illustration also points out the value of correctly stated APR as a way of evaluating the true cost of a mortgage loan. For sake of these illustrations, prepaid interest was not used. If 15 days PP was calculated it would have increased each APR by 0.019%.
Reprinted from the FHA guru, Bill Ladewig.