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Eight Tips for Landing a Mortgage

2009-04-17T15:46:53-04:00

Sure, home loan rates are lower than they've been in 30 years. But now you need to navigate a maze of credit standards and conditions

By Christopher Palmeri

Washington is doing all it can to get money flowing again in the housing sector. At around 5%, 30-year mortgage rates are at levels that haven't been seen in, well, 30 years.

If you want to buy a home or refinance your existing loan, money is there. But would-be borrowers face new challenges they didn't have during the housing boom. These include much tighter credit standards, fewer types of loans, and sinking property values that erase home equity. To figure out how to surmount some of these obstacles, we asked mortgage bankers and other real estate professionals for their tips on how to get a loan approved.

Here's what they said:

1. Go to the Government

Bank of America (BAC) does it. General Motors (GM) does it. Even AIG (AIG) does it. For home buyers, the biggest source of new loans has been government programs such as those run by the Federal Housing Administration (FHA) and the Veterans Administration (VA). You can get such loans from almost any lender. Government-run programs will accept borrowers with lower credit scores and allow them to put as little as 3.5% of the purchase price down. There are local loan limits that knock out high-end home purchases, however. And borrowers will pay slightly more than with conventional lenders, due to mortgage insurance requirements.

2. Get Your Paperwork Ready

No-documentation, low-documentation, stated-income, and "liar" loans are now—thankfully—relics of financial history. Gather all that documentation you hate to share. You'll need to bring bank statements, brokerage statements, W-2 forms, and tax returns. Then, contact a lender to get prequalified for a new home purchase. That will help in your house hunting because you'll know how much you can afford and you'll look better to sellers who'll know you have the financial firepower to close.

3. Get Out of That Adjustable-Rate Loan

With rates lower, it's an excellent time to ditch those hybrid, optional-payment, adjustable-rate loans that will likely have you paying a lot more down the road when interest rates rise, if they haven't done that already. "If you're looking long-term, rates are so ridiculously low, I would do everything in your power to get refinanced," says David Reed, a mortgage banker in Austin, Tex., and author of An Insider's Guide to Refinancing Your Mortgage. "Get into a fixed-rate loan and get that [adjustable] equation out of your head."

4. Consider Paying Up Front to Lower Rates

With home prices sliding, having enough equity to qualify for the lowest rates can be an issue. David Kittle, a mortgage banker in Louisville, and chairman of the Mortgage Bankers Assn., says one of his customers recently missed qualifying for the lowest rate because an existing $7,000 home-equity loan knocked her from having 30% equity in her home to having 25% equity. By paying a $900 fee up front—0.25 points, in industry jargon—she was able to get the loan that dropped her rate from 6.5% to 5%.

5. Boost Your Credit Score

Credit scores matter more than ever, says Jason Bloom of Elliot Bay Mortgage in Bellevue, Wash. A few points weren't a big issue during the boom. Now they can make a significant difference in your payments. Bloom says some steps you can take to improve your score are as simple as making sure you don't have more than one-third of your maximum borrowing capacity outstanding on one credit card. Rather than cancel that old Macy's (M) or Chevron (CVX) credit card you've left lying around, use them to make a few purchases. "I consider that like rotating your tires," Bloom says.

6. Keep Making Those Payments

There's a school of thought that if you want to get your present lender to lower your payment—what bankers call a loan modification—the best way to get their attention is to stop making payments. Don't do it, says Valerie Saunders, a mortgage banker in Clearwater Beach, Fla. Missing a payment by more than 30 days can have a huge impact on your credit score. You are much better off at least trying to refinance or negotiate a lower rate without being delinquent. "Your credit is something you control," Saunders says. "A loan modification is something you can't."

7. Use the Web

Scott Happ, who runs the MortgageMarvel.com search site, figures there are now 1,000 lenders, from the Hudson Valley Federal Credit Union to Citigroup (C), that will give you rate and fee quotes online. Even so, Happ says, still try your local banks or, if you're refinancing, your present lender. "They're likely to know you best," Happ says.

8. Don't Get Too Excited

Even with the recent dip in rates, if you're thinking of refinancing you may find it easier just to keep your present loan. If your home fell in value, you may not have enough equity to qualify for the cheapest rates. If you've got an interest-only loan from a couple of years ago, notes Jeffrey Gundlach, chief investment officer of the TCW fund family, refinancing into a fully amortizing loan will likely increase your monthly payments.

Palmeri is a senior correspondent in BusinessWeek's Los Angeles bureau.

Abraham Martinez

Monica Camacho

Cell: (954) 614-4171

Home Business Realty

martinezglobal@gmail.com

Water Taxi Ride

2009-04-17T13:16:28-04:00

While catching a water taxi you get the opportunity to see Ft. Lauderdale's magnificent inland waterways, stately mansions, mega yachts, homes of the rich and famous and Port Everglades. This house was used in the movie 'Cape Fear'. Originally uploaded by cliff1066

To take full advantage of Flickr, you should use a JavaScript-enabled browser and
install the latest version of the Macromedia Flash Player.

Yellow Ledbetter

2009-02-19T22:59:45-05:00

Abraham

Increasing Seller's Property Value

2009-01-22T23:13:47-05:00

Understand first of all that there IS a difference between price and value. Price is the amount you are asking for the property. Value is buyer perceived, and this perception of value is influenced by many factors such as location, features, condition, comparison to other purchase option, etc. By attending to details that can have a positive impact on the value, sellers can significantly increase their chance of attracting qualified buyers willing to pay the asking price.

Some tips to achieve a positive impact on value are:

Perceived size impacts value, even more so than actual square footage. Open floor plans make a room feel bigger than larger spaces with smaller rooms. Showing property that is furniture free, or at reduced clutter, helps to make the space feel bigger.
Vacancy increases sale-ability. Property is easier to show and easier to sell, and quicker to take possession of when it is vacant at the time it is offered for sale. Evidence of problems to take possession of the property -- such as encroachments, or tenants who wont allow buyer tours -- negatively impact value. Vacancy also helps the buyer walk through the property imagining ownership. Sellers should remove personal trinkets and family pictures as well as being conveniently absent during a buyer tour.
Cosmetics are important.
- Fresh paint will always add more value than it costs.
- Clean or new carpet/flooring adds more value than it costs.
- Landscaping adds more value than it costs. At the very minimum, make the entrance area neat.
- If you can, add some colorful flowers and new sod.
Take care of the obvious! The spot on the ceiling from the roof leak takes thousands of dollars from the perceived value and the offer price.
Condition affects value. Do a seller's home inspection to identify and fix the problem BEFORE closing. No point holding up your check a few extra days; plus a failed buyer's inspection could cost you the sale. Buyers will often bargain down your asking price to accomodate for property condition and repairs.
If you can, remodel/update the kitchen and master bathroom. These two areas have a big impact on home buying decisions.
Strategic renovations impact value and your bottom line. Don't spend more money to renovate the place than you can recapture in value on the sales price.

Abraham Martinez

martinezgrand@gmail.com

Stabilizing Real Estate is Key

2009-01-22T22:57:27-05:00

EMILY C. DOOLEY TIMES-DISPATCH STAFF WRITER
Published: January 13, 2009

Stabilizing the real estate market is key to ending this financial crisis, a banking executive told the World Affairs Council of Greater Richmond.

John A. Allison IV, chairman of BB&T Corp., spoke to about 200 people at the Omni Richmond Hotel last night.

Allison, 60, spoke about the financial crisis, its causes and possible cures.

"Nothing is as important as stabilizing residential real estate," Allison said.

He said government policies -- from the Federal Reserve, Fannie Mae, the Securities and Exchange Commission and others -- were at the root of the problem.

Other contributors: A lack of market discipline and a policy of increasing homeownership, which led to a spike in subprime lending.

"We built too many homes, we built too many big houses, we built houses in the wrong places," Allison said.

And when big investment firms, mortgage companies and banks began to fail, the $700 billion bailout inflated concerns, affecting matters more.

"We needed a correction," he said. "What we didn't need was a panic."

Allison, a native of Charlotte, N.C., started with BB&T in 1971. He retired as chief executive at the end of last year, after 19 years at the helm. During his tenure, the firm made more than 60 acquisitions to become the 14th largest financial holding company in the nation, according to BB&T.

The banker said one way to clear the real estate market would be to create tax credits open to all, no matter the income level.

He suggested the creation of a $150 billion tax credit that allows homeowners to take deductions for deflation, Allison said.

He also advocated a 10 percent tax credit on real estate purchases, available on a first-come, first-served basis for a limited time. Only newly completed or homes under construction would be eligible. The goal would be to clear the housing glut, he said.

Mortgage lenders also should go back to originating loans and holding onto them, rather than selling them off to be lumped into bigger pools of debt.

"When people take the risk and hold the risk, they have better accountability," Allison said.

He also said more accountability is needed, from individuals, corporations and the government.

"We need to restore discipline," he said. "Save more, spend less."

Abraham Martinez

martinezgrand@gmail.com

SPANISH CORNER / Obama No Tiene "Bola de Cristal" Para Saber Cuándo Empezará la Recuperación, Pero Anticipa Un 2009 "Muy Difícil"

2009-01-16T13:49:59-05:00

El presidente electo de Estados Unidos, Barack Obama, no sabe cuándo empezará el país a recuperarse de la grave crisis que padece y advierte que a pesar de las medidas que pueda adoptar en sus primeros meses de mandato 2009 será un año "muy difícil". Además, menciona por primera vez algunas estimaciones que apuntan a que la salida de la crisis podría costar hasta 1,3 billones de dólares.

En una entrevista al diario 'The Washington Post', el presidente electo aseguró que no tiene una "bola de cristal" para saber cuándo se verán los primeros síntomas de recuperación y que "nadie" puede saberlo en estos momentos. "Pero incluso con todo lo que estamos haciendo, creo que todavía podemos anticipar que 2009 va a ser un año muy difícil", advirtió.

Obama insistió en que hay "casi total unanimidad" entre los economistas en que el gasto público ayudará a recuperar empleos a corto plazo, y añadió que ya hay quienes estiman que el plan de estímulo costará hasta 1,3 billones de dólares. Así, reiteró que el gasto directo del gobierno aportará los mayores beneficios para salir de la crisis y que seguirá trabajando con sus asesores para alentar el consumo.

El Senado liberó ayer los 350.000 millones de dólares correspondientes a la segunda parte del plan de rescate financiero aprobado por la Casa Blanca en septiembre pasado, y los demócratas en la Cámara de Representantes hicieran público ayer un plan de estímulo y recuperación consensuado con Obama de 825.000 millones de dólares.

Por otro lado, volvió a defender la necesidad de construir una nueva regulación del sistema financiero que inspire "claridad" y "transparencia", y aunque apoyó una nueva legislación para facilitar el derecho de los trabajadores a sindicalizarse, consideró que hay otros caminos para lograr los mismos objetivos sin molestar a los empresarios.

"Si seguimos perdiendo en torno a medio millón de puestos de trabajo al mes, entonces no habrá empleos que defender desde un sindicato, así que mi primer foco de atención tiene que seguir centrándose en las prioridades económicas que he venido mencionando" en las últimas semanas, añadió el presidente electo.

Obama dedicó una buena parte de la entrevista para explicar cómo quiere reformar el sistema de la seguridad social y de los seguros médicos, en un país con unos 45 millones de personas sin cobertura médica, aunque reconoció que el Gobierno deberá "controlar" este tipo de programas sociales para que haya una recuperación económica a largo plazo.

El presidente electo adelantó que antes de presentar su primer presupuesto al Congreso, convocará una cumbre sobre responsabilidad fiscal en la que uno de los temas centrales de la discusión serán los programas sociales, tras subrayar que su primera tarea será trabajar para reactivar el empleo y el mercado bursátil.

NUEVA YORK, 16 (del corresponsal de EUROPA PRESS, Emilio López Romero)

Abraham Martinez

martinezgrand@gmail.com

Best Times to Buy

2009-01-14T08:35:39-05:00

A Conventional wisdom says that you need to stay in a home a minimum of five years to ensure that you recoup your purchasing costs. But with some markets soaring, this advice doesn't always apply.

It's All About the Market

Market conditions play a huge part in any decision about when to buy. Housing market values have varied widely from region to region in recent years. While the Florida market has seen meteoric rises in home values, Ohio has seen its real estate prices go into negative territory in the last year.

Do not buy high and sell low - if your market is softening or has hit its peak and is heading south, you may want to wait on your purchase.

The magazine Smart Money has created a worksheet to compare the costs of renting vs. buying using market appreciation calculations to determine at what point you come out ahead. Plugging in the price, down payment, your income bracket, interest rate, and current market appreciation rates, the worksheet will break out what you will gain.

For example, say you were to buy a $400,000 house in Boulder, Colorado and you estimate the market will soften from the current 11% appreciation to about 9 percent annually. If you stayed in the house three years, you would recover $88,750 in equity at the end of that period; if you stayed five years, you'd realize $120,360.

It's All About You

The top three reasons people file for bankruptcy are change of job status, divorce, and unforeseen health expenses. If you face any of these challenges and don't have a financial cushion, this may negatively impact your ability to pay a mortgage. Big life events dictate your readiness to buy now or to wait for a little more stability.

Signs you should not buy right now:

Will you be moving within the next five years?
Will you be having kids soon?
Will you be making a job change?
Have you recently filed for bankruptcy or is your credit score below 630?

If you answered yes to any of these questions, or you are experiencing other life-changing events like illness, marriage, divorce, or breakup, you may want to wait.

Your Financial Future

Aside from life events contributing to your decision, getting your financial house in order before you begin your home search is key. Even with all the programs available for buyers with a low-or-no down payment, if your debts are growing steadily and you don't foresee an increase in your income, you are putting yourself in greater financial risk by taking on a mortgage.

With only a few exceptions, many loans for people who are still repairing their credit or recovering from bankruptcy carry higher rates than those available once your credit is in better shape. So the question comes down to this: Do you buy now, before prices appreciate higher than you can afford, but do so with an expensive loan? Or do you wait and repair your credit, then get a favorable loan, and pay more for your home?

That's the sort of analysis you need to go over with a financial counselor or mortgage broker before you start hitting open houses.

Ways to Cushion the Blow

On the other hand, if you are willing to buy a home that needs a bit of work and, over time, you can afford to get it done, your home could appreciate faster, strengthening your financial position. If you are willing to take on a roommate or renter, you can also soften the expense of a mortgage, which almost always costs more than rent. Buying a home is a risk, and it's worth asking yourself hard questions about what you're willing to do to protect yourself from getting in over your head.

If you answered "no" the life-change questions, and have the down payment or equity from your current home, you still need to look at interest rates and at how buying affects your taxes. You can't time the stock market, but you can time interest rate hikes, as they are a little easier to predict. If they are going up fast, you can jump in before they rise too far; if they are already high, you will have to calculate how refinancing in the future affects your budget.

What to Do First

If you are anxious to get moving, be patient. You have a few things to do first:

Go to open houses - get the lay of the land
Talk to a mortgage broker to get pre-approved
Interview agents (You may want to find an agent at the same time as you look for a mortgage broker - a good agent can recommend reputable brokers and help you make sense of the terms of the loan)
Review credit report and scores with mortgage broker to determine if any repairs are needed
Use Zillow.com to find info on neighborhoods that interest you and then use the Home QandA feature to ask current homeowners

Abraham Martinez

martinezgrand@gmail.com

Understanding Points, Rates and Fees

2009-01-05T08:47:17-05:00

Not only do you have to understand what type of mortgage you should choose, you have to understand the costs associated with your mortgage. All of these costs will be paid upon closing your mortgage.

Purchase Points

Purchase points, also known as a "buy-down" or "discount points," are an up-front fee paid to the lender at closing to buy-down or lower your interest rate over the life of the loan. Each point is equal to one percent of your total loan amount. If you have a $100,000 loan, one point would equal $1,000. The more points you buy, the lower your interest rate, but the more money you'll need at closing.

How do you decide whether you should buy points and if so, how many? Well, the decision should be based on how long you plan on living in your home and what you can afford to pay each month toward your mortgage. If you plan on living in your home for more than five years, it's probably a good idea to purchase points. The longer you live in your home, the more you can save on interest over the life of the loan.

Interest Rate

When you get a mortgage, you are charged an interest rate.this is the rate which the lender charges you for using their money to buy a home. It determines how much your monthly payments will be. Generally speaking, the higher the interest rate, the higher your monthly payment.

Mortgage interest rates change constantly.daily, even hourly. If you speak to a lender and are quoted a specific interest rate, that's not to say you'll necessarily get that rate when you close on your loan. Not unless you formally lock-in that rate with the lender.locking in an interest rate will guarantee you get your loan with a particular interest rate. Lenders will allow you to lock in for 15, 45 or 60 days. But the longer you lock in, the more expensive it will be, since it's more of a risk to lenders.

Fees

There are always fees associated with getting a mortgage, these fees cover the cost of processing and underwriting the loan. These fees can include charges for ensuring the title to the home is free and clear; paying for a land survey; or paying for a home appraisal which gives you the estimated value of the property (lenders require an appraisal to close on your mortgage).

Deciding which mortgage to get may depend on what each lender does because different lenders may charge different amounts. Some may charge lesser closing fees to lure you in, but may charge you a higher interest rate, which means you may pay more in the long run. But everyone has different needs.you may or may not be able to afford to pay more at closing and are willing to pay more over the long term.

Before it comes time to close, do your homework, make sure there are no hidden fees, and ask your lender lots of questions so that you understand all the costs involved with your mortgage.

*Please consult your tax advisor.

Abraham Martinez

Home Business Realty

martinezgrand@gmail.com

How Does Escrow Work?

2008-12-30T23:37:17-05:00

If you've ever made an informal bet with a friend, you may have asked a third person to hold the money until the wager was resolved. When you take out a mortgage to buy a home, you're doing something similar by opening an escrow account.

How it works

When you put money in escrow it is held by a neutral third party (called an escrow agent) who works for both the lender and the borrower. The agent's role is to carry out the instructions agreed upon by both parties. The money is released when all the terms of the agreement are met. Escrow can be involved in anything from multimillion-dollar building projects to purchases made on online auction sites.

When it's used

When your mortgage closes, your lender will usually require you to open an escrow account to cover property taxes and homeowner's insurance. You'll make an initial deposit, followed by payments to the account every month. (Usually these are added to your regular mortgage payment.) The escrow agent will then release these funds as your taxes and insurance premiums come due.

Its purpose

The idea is to protect the lender by ensuring that you pay your taxes and insurance on time. If you default on your property tax, for example, your municipality can put a lien on the house, which would make it difficult to sell. Or if your house burns down and you've neglected to pay the insurance, the lender would be left with no collateral.

How you benefit

Escrow can benefit borrowers by helping them spread insurance and tax expenses evenly over 12 payments. For example, assume your yearly property taxes are two payments of $1,000 each, and your insurance is $400 annually. If you paid these directly, it would mean three large payments a year; your escrow costs, however, would be a manageable $200 a month.

Escrow payments

Your escrow account will have a built-in cushion -- if you miss a payment, the lender must still be able to pay your accounts on time. However, federal law prohibits lenders from requiring more than two months. expenses in escrow. And because your tax and insurance costs will change slightly from year to year, the lender will review and adjust your escrow payments annually.

When escrow may be waived

In most states, the money you place in an escrow account earns no interest for you. For that reason, many borrowers prefer to pay their taxes and insurance directly. Lenders may agree to this if your down payment is more than 20 percent, although some will raise your interest rate slightly to compensate. Once you agree to putting funds into an escrow account, however, it is difficult to cancel it, so make sure you fully understand the arrangement before your mortgage closes.

Abraham Martinez

Home Business Realty

martinezgrand@gmail.com

A Bad Time to Become an Entrepreneur?

2008-12-23T22:05:49-05:00

THE BONOBO IS one promiscuous monkey. Bonobos have sex to say hi, to work out disagreements, prior to eating and, occasionally, to procreate. Which is to say, in the mind of a bonobo, there's no bad time to have sex.

And in the minds of the founders of Bonobos Inc., a New York maker of men's pants, there's no bad time to start a business. That's true even when the economy has a headache. It helps that Bonobos is run by two MBAs who look like gods, work in an airy loft and reek of cool. But the point could be the same for someone making a superior extruder.

Founders Andy Dunn, 29, and Brian Spaly, 31, wanted to solve a couple of sartorial problems common to men: "diaper butt," the unbecoming pouch of material under the derriere; and clown shoes, an unflattering optical illusion brought on by tapered-leg slacks. Bonobos sells pants it claims fit better than those of competitors like Banana Republic and targets men who don't like to shop at stores, which, last we checked, is most of them.

Unhappy with how his own pants fit his athletic physique, Spaly, a Stanford business-school student at the time, borrowed a girlfriend's sewing machine to fix them. "I was learning to sew the seat of my pants by the seat of my pants," says a smiling Spaly. Soon he was buying bolts of material, making pants and selling them out of his trunk to classmates. His 12-page market research report — which proved that men weren't happy with their pants — scored him two course credits and two professors as investors.

There was, however, the matter of timing. Spaly and classmate Dunn launched their online business in October 2007, joining a crowded field just as the retail industry went on life support. It hadn't occurred to them that it was a lousy time to start. "Guys are going to need pants, not Ferraris," says Spaly. Apparently so: Benefiting from word of mouth and some fashion press, they sold $12,000 worth of trousers the first month. They say they're now grossing $160,000 a month, with customers as far away as Dubai and New Zealand.

Turns out that even in a downturn, the number of business start-ups is pretty constant, hovering at around 640,000 a year. Economic slumps typically last six months, so they don't tend to affect entrepreneurial plans that have been years in the making. Nor is the start-up success rate hurt by the vagaries of the business cycle, says Brian Headd, economist at the Small Business Administration.

There are actually advantages to starting up in tough times. You get a year or two to iron out kinks before the buying climate picks up, notes Bob Goodson, president of YouNoodle, a San Francisco-based entrepreneurial networking site. Overhead costs are lower, commercial space is easier to find, and there's less competition for talent. Bonobos, for example, was able to save up to 15 percent on salaries for junior staff, and found associates willing to work 30-day trial periods without permanent job offers — which would have been impossible in a hot economy.

And who says money isn't available in a credit crunch? Loans may be harder to come by, but investments from venture-capital funds have stayed constant at around $30 billion a year. Bonobos' execs are arranging their second round of financing and say they're oversubscribed for the $1 million they seek. Sure, not everyone has the advantage of a top-flight MBA. But then again, these guys came up with pants. A monkey could do that.

By Dyan Machan

Abraham Martinez

martinezgrand@gmail.com