All posts in Mortgage Education 101

Have We Hit A Bottom In The Housing Market?

by Justin Miller on January 30, 2012 in Mortgage Education 101 with No comments

There is no way to tell and I am not in the business of calling a bottom.  What I do know is that in Fort Lauderdale and South Florida home prices are extremely attractive, rates are low, and rents are rising.  If you feel secure with your job, have money saved, and will hold onto the house for at least 10 years now might be the best time to buy.  Remember, every 1% increase in an interest rate it reduces your buying power by 11%.

In an interview with Robert Shiller when asked about whether we have hit bottom he said “When people phrase is that way, they say ‘we’ve reached the bottom.’ That suggests that we have the expectation of a major turning point right now. But I don’t see that. I don’t see any reason to think that prices are going to start heading up dramatically now. We do have some good news. Permits are up. Notably, the National Association of Homebuilders Housing Market Index is up and that’s a forward-looking index. But it’s not up very much. If you look at the rate of change it looks dramatic but it’s still at a low level.”

I feel he hit it right on the nose.  It’s a really good interview and I highly recommend reading it.

To Mortgage or Not To Mortgage: That Is The Question

by Justin Miller on January 28, 2012 in Mortgage Education 101 with No comments

I have heard so many people talk about getting a 15 year fixed mortgage versus a 30 year fixed mortgage or buying cash.  I am sure you have heard me quote Ric Edelman in the past about the reasons to carry a big, long mortgage and he’s correct.

In this article, “Don’t rush to pay off your mortgage,” I think they describe it best by saying “When it comes to home loans, we’ve become a nation of debt-a-phobes.”  It is easy to think that leverage is bad after experiencing the worst downturn since the Great Depression but it’s not when used correctly.

“You could save a lot of interest by choosing a 15-year loan over a 30-year — about $63,000 after taxes on a $200,000 loan for someone in the 28 percent tax bracket. But ask yourself whether you can really afford the higher monthly payment — in this case, $1,420 versus $955. Have you maxed out your 401(k) and built up an emergency fund? Paid off credit cards? Funded insurance policies and, if you desire, college savings? If you haven’t, choose the 30-year loan. And if you have, choose the 30-year loan anyway and put the difference between the two payments in a savings or investment account. You’ll build up a nest egg that might keep you afloat (and in your house) if you lose your job or get sick. The strategy requires discipline; setting up automatic payments helps.”

A mortgage is a financial tool when used correctly and you can build a larger net worth by taking out a bigger and longer mortgage when putting your leftover monies to work elsewhere.

Why Mortgage Deals Die?

by Justin Miller on January 26, 2012 in Interest Rates, Mortgage Education 101 with No comments

I hate to keep copying and pasting content but KeepingCurrentMatters.com does such a great job. As I have mentioned so many times before the interest rate is not the most important part of your mortgage.

I have seen estimates stating that 29% of deals that go to contract and require a mortgage, don’t close. That number boggles my mind. It means that even after a buyer and seller come to terms on a sale (not an easy feat these days), 3 out of 10 transactions fall apart. What are some of the more common reasons?

  • Appraisal issues – In many markets, we are still seeing declining values. Appraisers are in a difficult position, and with so many transactions (including seller’s concessions to assist buyers with closing costs) values aren’t always coming in at sales prices.
  • Short Sales not being approved by the current lender – With so many sellers owing more than their home is worth, buyers’ proposals need to be sanctioned by the lender (who will be receiving less than they are owed). Some of the offers are too low, but often, the lender isn’t local and they really don’t know what the property is worth today.
  • Bad pre-approvals from the loan officer – Today, loan officers who are not reviewing tax returns, analyzing bank statements, and asking for detailed explanations and documentation on credit blemishes, are truly hurting the customers. Issuing pre-approvals based on the representations of the customer is reckless and a cause for dismay later.
  • A lack of transparency – Whether it’s a seller or agent not disclosing property issues, or a buyer trying to sneak things by an underwriter, too many people think they can cut corners. That is not the world we live in anymore. Everything is uncovered. Being honest in the beginning, gives you the best chance to overcome obstacles.

It is clear by the numbers that closing loans can be more difficult today. However, with proper planning and integrity, many of the challenges can be dealt with early and successfully. Agents documenting values of the homes, loan officers doing complete reviews of the loan profile up-front, and everyone telling the truth helps get deals to a successful conclusion and avoids horror stories.

What Value Does Your Mortgage Banker Add?

by Justin Miller on January 25, 2012 in Mortgage Education 101 with No comments

This is such an important question especially when buying or getting a mortgage in Fort Lauderdale and South Florida due to so much fraud.  The article below title “What Value Does Your Loan Officer Add?”  does a very good job of going through this.  The mortgage advisor part is especially important because your mortgage should be used as a financial tool.  It’s not just an interest rate:

So, when borrowers shop for loans on the old “price/product/service model”, how does a consumer differentiate between loan officers?

  • Ask for referrals – If you have a friend, co-worker, or family member who had a good lending experience, ask who they used. Talk to people who deal with multiple lenders (real estate agents, attorneys, accountants, etc.) and leverage their comparative experience into making good choices. Loan officers who earn referrals typically go beyond price/product/service.
  • Seek out a mortgage advisor – Even today, with limited loan programs, there are many factors to consider when choosing the right mortgage. Your future income, the length of time you expect to be in the home, and your risk tolerance should be discussed before ruling out adjustable rate mortgages, for example.
  • Look for transparency – Demand a lender who freely and competently discusses rates and likely rate movements. Don’t buy into the idea that rates are conjured up in a mysterious way. Rates are derived by activities in the bond market and your loan officer should be able to explain, in layman’s terms, the factors that affect rates and upcoming events and economic reports, as well as, the most likely impact they will have.
  • Accessibility of information – Are you looking for printed materials and/or videos to guide you through the process? How about online workshops or home buying seminars?
  • Seek out a resource – You may need other professionals when buying a home (from insurance people, to home improvement people, to legal help). A good loan officer has a network of high quality referral partners to help you.

Shopping For A Mortgage

by Justin Miller on January 3, 2012 in Interest Rates, Mortgage Education 101 with No comments

I have written about this topic many times and that the days of shopping for a mortgage are gone.  Making sure you are dealing with an expert and someone who is honest is what is most important.   Jack Guttentag who writes a lot of mortgage related articles and an industry expert seems to agree with me now. 

In his article “5 Truths About Mortgage Shopping” he states that “I confess that it took awhile before I realized this myself. Over the years, I wrote several articles on “how to shop for a mortgage,” which I am now in the process of revising. The corrected title will be more like “how to minimize the loss from having to select a lender without knowing that lender’s price.”

He goes onto to say “The textbook analysis of competition assumes that buyers can buy at the prices quoted by sellers. In the mortgage market, however, lenders have no obligation to lend at the price they quote until they lock, which may take days or even weeks. In the meantime, the quoted price is very likely to change with the market, which is very volatile. Quoted prices are reset every day and sometimes during the day. ”

Unfortunately in the Fort Lauderdale and South Florida real estate and mortgage market there is a lot of fraud and some will quotes interest rates that don’t yet exist to try and get your business.  This is why the interest rate you quoted doesn’t matter, it’s what you are locked in at that does.  I highly recommend reading his article.

 

5 Things To Do Now When Buying A Home

by Justin Miller on December 15, 2011 in Mortgage Education 101 with No comments

This is a great Blog post from Trulia.com that is a must read for anyone who is buying a home.  Buying a home is very involved and document intensive when it comes to getting a mortgage.  If you want to alleviate some stress then you need to plan in advance preferably a month or 2.

If you fail to plan then you plan to fail and that is so true when it comes to buying a home and getting a mortgage in the Fort Lauderdale and South Florida area.  It is a unique market here and you need to surround yourself with professionals from the Mortgage Banker, to the Real Estate Agent, to your Real Estate Attorney.

All too often a buyer shops for the cheapest Mortgage Banker and Real Estate Attorney.  You get what you pay for in life and this is the largest asset and liability you will ever have.  You wouldn’t want to look for the cheapest Financial Planner, Doctor, Dentist, etc.  Don’t do it when buying a home.

Should You Buy or Rent?

by Justin Miller on November 28, 2011 in Mortgage Education 101 with No comments

There have been a lot of good articles of late showing that it is better to buy than rent right now because homes are so affordable.   I agree that it is a great time to buy depending on your situation.  There is a great article titled “How To Know Whether It’s Time To Buy” that gives the 6 things you need to consider to determine whether you should buy or rent.  Those include:

  • Examine the housing market – it all depends on where you are buying.  Although Fort Lauderdale and South Florida prices have fallen it is still location, location, location.
  • Consider additional costs – there are additional costs when owning a home such as insurances going up and maintenance
  • Look into the future – will your job still be where you are living or will you have to move?
  • Look into your personal future – do you plan to own for more than 5 years? 
  • Consider your personal finances – how much can you put down?
  • Think about opportunity costs – is it better to put less than 20% down?

Here is another good article on buying versus renting from The WSJ title “Stronger Lure For Prospective Home Buyers.”

Don’t Believe Everything You Read

by Justin Miller on November 23, 2011 in Mortgage Education 101 with No comments

Mark Twain said “if you don’t read the newspaper you are uninformed and if you do read the newspaper you are misinformed.”  You have to be very careful of what you read online.  Not only is there incorrect information but there are scams too. 

The federal organization overseeing the administration of funds from the 2008 bailout has cracked down on alleged scams that used Bing and Yahoo to lure vulnerable homeowners with ads for bogus mortgage modification deals….. Full Article

You need to make sure you are working with an expert and someone you feel you can trust.  The days of needing to shop for a mortgage are gone in my opinion.  If you are worried you aren’t getting a good deal then you should stop working with that person.  No matter what product or service you are buying you can always find someone or something cheaper but keep in mind you are giving something up, quality, advice, honesty, etc.  That is especially true in Fort Lauderdale and South Florida seeing as we are the top in the country for mortgage fraud.  A mortgage isn’t just an interest rate and is actually far from it.

5 Things That Can Ruin A Real Estate Transaction

by Justin Miller on November 10, 2011 in Mortgage Education 101 with No comments

This is one of the best posts I have ever read pertaining to why so many deals fall apart from KCMBlog.com and it happens all the time in Fort Lauderdale and South Florida:

1.) When Loan Officers issue pre-approvals without reviewing the relevant bank statements, pay stubs, and tax returns. We all know that virtually every loan program requires these documents and that underwriters examine them closely.

Loan Officers should obtain these documents and address potential challenges (like large deposits, payroll deductions, and unreimbursed expenses) up front. Issuing a pre-approval without a real analysis has resulted in a lot of avoidable heartache.

2.) When real estate agents don’t meet the appraiser at the house armed with comparable sales to support the selling price. Today, a home’s value has to be validated twice – to the buyer and to the lender’s appraiser. Good agents know that it is easier to establish the best value while the appraiser’s opinion is being formed (as opposed to getting the appraiser to reconsider later).

3.) When problems arise (and they do) and people bury their heads in the sand. Nothing gets “snuck by” anymore. There are so many checks and balances in the process now that nothing is hidden. Being honest up front gives everyone the best chance for the best outcome.

4.) When people think they know more than they do. Agents who think they are mortgage experts or loan officers who think they are appraisers, are some examples. It’s hard enough to keep up with one area of the business at an expert level. More than one? Very rare indeed.

5.) When non-real estate attorneys get involved in real estate transactions. Whether it’s arrogance or laziness, I have seen too many deals get messed up because people used their business attorney to buy a home.

Anything bother you that can be avoided?

10 Reasons To Buy Versus Rent

by Justin Miller on October 18, 2011 in Mortgage Education 101 with No comments

Now has never been a better time to buy and get a mortgage in Fort Lauderdale & South Florida.  Although I have mentioned the reasons throughout many different posts I could not have done a better job than Florida Realtors Association did.

Make sure to read, “Top 10 Reasons to Own Rather than Rent.”

If I were to pick the #1 reason to own a home is because it’s a lifestyle.  “You live in a neighborhood: You and your neighbors take pride in the local schools, roads and more – and you work together to build a friendly community.”

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