Archive for November, 2009

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How to Save to Buy a Home

Friday, November 27th, 2009
by Phoebe Chongchua

It can be one of the hardest things to do — save money for your first home. But now, more than ever, there’s incentive to buy. Government housing tax credits have been extended and that’s sparking buyers’ interest.


Reports show that U.S. homes sales increased 10 percent in October to the highest level since February 2007. The tax credit, less expensive homes, and lower mortgage rates are being credited. However, while the government is helping to support the purchasing of a home, many Americans still can’t afford to buy one.

“Most Americans are spoiled. Most Americans spend a lot of money on discretionary items,” says Eric Tyson, co-author of Home Buying for Dummies, 4th Edition. “What it really comes down to is you have to be motivated to look at where are you currently spending money and what discretionary spending can you cut off,” says Tyson.

So how do you get in a position to buy a home? For some the process can seem nearly impossible. First-time homebuyers are often fearful they’ll never be able to accumulate a down payment now that stricter guidelines are being enforced for taking out home loans.

Tyson says to look over your finances and see where things can be cut back a little. For instance, maybe you have a gym membership that you really use only a few times a month; does that justify having it? Another big area to find savings, especially for single people, is the dining out category. “Some people spend an enormous amount of money eating out,” says Tyson. Tyson says if you really want to save, take a look at the car you’re driving. “I argued 15 years ago that you should only pay cash for a car and that you should not take out an auto loan or a lease. My first publisher argued that’s not realistic. … Well, if you’re trying to save for your retirement or trying to save for a house and you go out and buy a $30,000 car by taking out an auto loan, that’s insane—you can’t afford it,” says Tyson. Still, he says most Americans continue to take out auto loans, “and they do it because they can’t afford the car and that’s just crazy. What you’re doing is borrowing against future income to be able to drive a car that’s more expensive than what you can really afford.”

“A severe recession as we’ve been through recently is a wake-up call and it forces people to realize that they can’t continue to spend this way,” says Tyson.

Tyson says he sees people who spend an enormous amount of money on things like sporting events and while he understands their passion, if they’re trying to save for a home, something must go. “I’m not saying to cut it all out but how about cutting half of it out. It comes down to trade-offs.” Another trade-off might be to watch some of the events on TV rather than go to them. This brings us to the point of seeking savings in your utility bills by bundling cable, Internet, phone or maybe even cutting down to the bare essentials of channels. “Shop anew for services and see if you can combine them under one company and get discounts for doing so,” says Tyson.

Have you checked your cell phone bill lately? A lot of times those charges add up very quickly. “People are wasting an enormous amount of money [in this area] because of the Web surfing, the downloads, and the text messaging,” says Tyson.

The bottom line is saving for a home is a very personal experience—what one person is willing to give up another person may not. If you keep your goal set on purchasing that home then you’ll find the effort to get there is not nearly as difficult and you’re likely to find that there are more places to cut costs than you realize.

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Find a home in Houston and get a VA or FHA Approved Mortgage in Houston

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Mortgage Rates Down to New Record Low

Wednesday, November 25th, 2009

By Holden Lewis • Bankrate.com

Another week, another record low for mortgage rates.

The benchmark 30-year fixed-rate mortgage fell 6 basis points to 5 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point.

That’s the lowest rate on the 30-year fixed in the history of Bankrate’s weekly mortgage index, which began in September 1985. The index’s previous all-time low had been set last week.

The mortgages in this week’s survey had an average total of 0.44 discount and origination points. One year ago, the mortgage index was 5.97 percent; four weeks ago, it was 5.35 percent.

The benchmark 15-year fixed-rate mortgage fell 1 basis point to 4.47 percent. The benchmark 5/1 adjustable-rate mortgage fell 4 basis points to 4.54 percent. That’s the lowest it has been since Bankrate began collecting 5/1 ARM rates at the beginning of 2005.

The good news is that mortgage rates are so low. The bad news is that unemployment is high and rising, causing more homeowners to fall behind on their mortgage payments. As a result, it’s harder to get a mortgage because lenders are tightening their underwriting standards — for example, requiring bigger down payments and scrutinizing borrowers’ finances.

A good news/bad news dichotomy exists in home prices and sales. This week saw the release of the S&P/Case-Shiller home price indexes for September and for the third quarter. Depending on how you looked at the data, you could conclude that house prices were rising or barely rising or falling.

In Case-Shiller’s national index, prices were down 8.9 percent in the third quarter, compared with the third quarter of 2008. In Case-Shiller’s index of 20 big metro markets, prices were down 9.4 percent from the third quarter of 2008.

But things look different when you look at what’s happening lately. In those same 20 big metro areas, prices went up 0.3 percent in September. But they had risen at faster — 1.2 percent — in August. With house prices, the foot let up on the accelerator in September.

Generally, prices have been rising in the last six months, says David M. Blitzer, chairman of the index committee at Standard & Poor’s. But, he adds, “the gains in the most recent month are more modest than during the seasonally strong summer months.”

Of the big metro areas, San Francisco and Washington, D.C., have had price gains for six months in a row. Las Vegas is on the other end of the scale: Prices there have fallen 37 months in a row in the S&P/Case-Shiller index.

Tax credit drives sales

Another widely watched indicator is the National Association of Realtors’ report on existing home sales, which came out this week. It showed a robust increase in home sales in October. Sales were up 6.6 percent in October compared with September. Adjusting for seasonal factors (typically, sales slow down in October), the annual pace of home sales rose 10.1 percent in October.The Realtors’ chief economist, Lawrence Yun, attributes the sales increase to the first-time homebuyer tax credit, which originally had been scheduled to expire at the end of this month. Many buyers rushed to beat that deadline in October, Yun says.

Yun’s theory is reinforced by what happened to prices. Even though sales were up in October, home prices were down. Normally, you expect prices to rise when there’s an increase in sales. But first-time homebuyers tend to buy less-expensive houses. Sales of starter homes were up and sales of McMansions presumably were down, so the price of a typical home fell, too.

Nationally, half of the houses resold in October cost more than $173,100. That’s a 1.7 percent decrease from September’s median price of $176,000.

The Realtors’ data imply that the Midwest is pulling out of the housing slump faster than other regions. In the Midwest, the median resale price fell just $600 in October, compared with November, to $146,600. And compared with a year earlier, house prices in the Midwest were actually up 1.1 percent — the median price in October 2008 was $145,000. The Midwest was the only one of the four regions that had a year-over-year increase in median home price.

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See Today’s Current FHA Rates in Texas

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Why Jumbo Loans COST You More

Tuesday, November 24th, 2009

So you’ve found your dream home, your offer just got accepted, and now you’re ready to rock n roll by starting on the loan and securing your rate on a Jumbo Mortgage.

Then you hear what the rate is. Yikes!

You ask your loan officer, “Listen buddy. You’re website says 5%! Why are you telling me its 5.75%, huh? You trying to screw me or what???”

“Well, Ma’am. This is a Jum…”

“Shut it, Skippy. Let me speak to your manager!”

Take a long, deep breathe before you bite the banker’s head off and get the poor kid fired.

Jumbo Mortgages are a little bit different of a beast. If you’re in the market for this type of loan, I’d like you to call 100 loan officers and ask them why Jumbo Rates are higher than any other mortgage product.

99/100 will tell you, “Ma’am- its a bigger loan amount so it involves more risk. That’s why the rate is higher.”

THIS IS WRONG!

The real reason is because of the mark-up that Wall Street charges to underwrite, securitize, and sell these types of loans.

The 2 biggest mortgage lenders are Fannie and Freddie, and because they develop HUGE pools of loans under their conforming limits of $417,000, they get charged a “wholesale rate” if you will when the go to sell them.

Think about this for a moment.

If you go to Target and buy a bag of Doritos to throw into your kiddos’ lunches, you’re going to pay retail. If you buy that same bag at Sam’s or Costco, you will buy more (bulk), but you will spend less on each individual bag.

The same thing happens with mortgages. Fannie and Freddie have alot more of mortgages that they can sell to the secondary market (Wall Street), so they don’t have to pay as much in fees.

A Jumbo mortgage is in some ways a “boutique item.” Jumbo loans are not provided by FNMA and FHLMC, rather by private investors do. I mean, not EVERYONE wakes up and buys a $4 million dollar condo in Manhattan. There is less supply and because of this, the fee assessed on this smaller pool of loans is higher, and the incremental cost per loan is more- thus…Why Jumbo Loans cost more to do.

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For more information on Jumbo Loans in Texas, feel free to contact us today.

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What Rates Are Doing Today

Tuesday, November 24th, 2009

When looking for the best Texas mortgage rates , its very important to work with someone who follows the bond and MBS (Mortgage Backed Securities) markets. Now all this may sound like mumbo jumbo, so contact us if you need an easier clarification, however, basically from here on out, I will try to give out a quick daily/weekly update on what’s going on with rates in respect to both markets and whether you should lock or float.

Here’s what’s going on today:

Today’s 4.5 FNMA bond opened up at 2.0625, and currently we are testing the second level of resistance and are up about 6 basis points (bps). Rates are REALLY REALLY good right now, and if you have a refi or purchase transaction going on, I would suggest locking in today and NOT risking “a better deal”. Based on the 200 day moving average (200 DMA), it looks like rates will most likely be going up soon. As for how much, there’s no telling- which is why I am advising all transactions to be locked and loaded now.

Best,

Tommy

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Buying A Home on a Deadline

Monday, November 23rd, 2009

By Amy Hoak, MarketWatch

CHICAGO (MarketWatch) — House shopping usually slows down in the winter, as people put their home searches on hold to trim the tree, buy presents to put under it and avoid the chilly weather.

This winter, however, might be different, thanks to the extended — and expanded — first-time home-buyer tax credit.

“We’re going to see far more interest in the fourth quarter than we generally do because of the tax credit,” said Heather Fernandez, vice president of Trulia.com, a real estate search engine. Traffic surged on the site on Nov. 5, the day Congress approved the credit extension, she said.

The new law extends the tax credit for first-time home buyers and opens it up to some existing homeowners as well: The credit is now 10% of the home price, up to $8,000 for first-time buyers and up to $6,500 for repeat buyers. Read more about the home-buyer tax credit on the Internal Revenue Service’s Web site.

All buyers must have a binding contract on a house in place on or before April 30. The sale must close on or before June 30.

To be considered a first-time home buyer, an individual must not have owned a home in the past three years. And to be eligible, existing homeowners need to have lived in the same principal residence for five consecutive years during the eight-year period that ends when the new home is purchased. The credit is only for principal residences.

Income limits have risen as well. According to the IRS, the home-buyer tax credit now phases out for individuals with modified adjusted gross incomes between $125,000 and $145,000, and between $225,000 and $245,000 for people filing joint returns.

Will credit spur more buyers?

The inclusion of move-up buyers might inspire homeowners to take action and list their house if they’ve been putting it off, said Carolyn Warren, a Seattle, Wash.-based mortgage broker and banker and author of the book “Homebuyers Beware.”

“If somebody loves their home, it’s not going to entice them to sell. If they’ve had it on the back of their minds and really would like to move up, it might push them into doing it sooner than later,” Warren said.

The credit isn’t expected to have as large of an effect on move-up buyers as it has on first-time buyers, according to the Campbell/Inside Mortgage Finance Monthly Survey of Real Estate Market Conditions. The maximum tax credit is about 4% of the average purchase price for first-time buyers, but about 2% of the average purchase price for move-up buyers.

“We estimate that the first-time home-buyer tax credit will result in a 10% increase in home sales from March through November of 2009,” said Thomas Popik, research director for Campbell Surveys, in a news release. “We’d expect the effect of the proposed tax credit for current homeowners to be about half as large — from December until the tax credit expiration in the spring of next year, it might be 5% of 3 million transactions, or about 150,000 incremental home sales. Incremental sales to first-time home buyers could be an additional 300,000, for a total of 450,000 incremental sales due to the tax credit extension.”

Tips for buyers

Interested in buying a home and claiming the home-buyer tax credit? Below are five tips:

1. Don’t procrastinate

Get searching now. Getting an early start will give you a better chance of finding the right house before the credit deadline.

“Go out and start as soon as possible. There will be people waiting until the end,” said Pat Lashinsky, chief executive of ZipRealty, a residential real-estate brokerage firm.

When first-time buyers thought the credit would expire Nov. 30, people scrambled to find properties in September and October, he said. In some cases, “there wasn’t inventory that fit people’s needs,” he said. In Phoenix, Chicago and parts of California, for example, some properties even had multiple bidders, Lashinsky said.

Before you start house hunting, get preapproved for a mortgage, said Eddie Fadel, a Miami-based mortgage banker and author of the book “Don’t Rent, Buy!” And do a realistic assessment of what you can afford.

Buyers who have to sell an existing home should price it aggressively from the beginning to drum up interest and get a buyer as soon as possible, Fernandez said.

2. Don’t count on another extension

The credit won’t be available forever, Fadel said. If you want to take advantage, be sure to make that spring deadline.

“This is a medication for the housing crisis. Once the patient — which is the housing market — cures, there will be no medication needed,” he said.

3. Mind the interest rates

Mortgage interest rates are low right now, but will likely rise next year, Warren said. Higher rates will affect your monthly mortgage payments, thus the affordability of the house you are buying.

“It’s pretty universally accepted that rates will be higher next year. What is unknown is how fast and by how much,” Warren said.

Average rates on the 30-year fixed-rate mortgage have been hovering around 5%, but when the government stops buying large amounts of mortgage-backed securities, rates could rise, she said. The Federal Reserve plans to end its purchase program in March.

4. Communicate with your lender

Throughout the process, make sure you’re communicating with your lender regularly; if there’s a piece of documentation you’re asked for, get it turned in as soon as possible, said Doug Heddings, a New York-based real estate agent with Charles Rutenberg Realty. Good communication is important in making sure the loan closes on time.

And think twice before pursuing a short sale if you want to make the credit deadline. That’s where someone sells a home for less than what he or she owes on a mortgage, with permission of the lender. The process can be lengthy and unpredictable because the homeowner’s lender has to approve any deal, and can be complicated when there is a second mortgage associated with the property, Warren said.

5. Don’t take shortcuts

Don’t forgo any of the steps you would normally take just to make the tax-credit deadline. Make sure the house is a good fit for your needs and get a home inspection, Lashinsky said. Skipping steps could cost you in the long run.

“Don’t let the tax credit get you to make a decision to buy a house that you wouldn’t otherwise want to buy,” he said. “Don’t shortcut the process to get the tax credit.”

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If you have any questions regarding the revised tax credit, feel free to call the best Houston mortgage lender for details.

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2010 Home Buyers Tax Credit

Wednesday, November 18th, 2009

Here is official information on the Homebuyer Tax Credit extension.

First Time Homebuyer Credit general information on IRS.gov

http://www.irs.gov/newsroom/article/0,,id=204671,00.html

First Time Homebuyer Credit Questions and Answers on IRS.gov (This page includes Q&A broken out by basic questions, 2008 purchases, 2009 purchases and scenarios.) http://www.irs.gov/newsroom/article/0,,id=187935,00.html

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Mortgage Rates STILL Low!

Wednesday, November 18th, 2009

Mortgage Rates Hold Near Six Month Lows. Still Locking Loans

by Victor Burek –

In a volatile session, mortgage rates ended yesterday’s session unchanged as a small rally in benchmark Treasuries helped support the MBS market.  Following weaker than expected economic data in the morning, rates rallied. However as profit taking took place later in the day, early session strength was lost and MBS prices returned to opening levels.  Overall, even though prices moved about a relatively wide range, rates remained unchanged on the day.

The Mortgage Bankers’ Association this morning released their weekly applications index. This data tracks the weekly change in the amount of mortgage applications at major lenders.   An increasing trend is positive for the economy in two ways.  First, more home purchases leads to more home construction and consumer spending as the home buyer buys items to fill the new home.  Second, higher amounts of refinancing  should also lead to higher consumer spending as homeowners refinance to lower rates and lower payments giving them more money to spend into the economy.   The report shows that purchase applications have fallen again down 4.7% following last week’s plunge of 11.7%.  The refinance activity posted a modest 1.4% increase following the prior week’s 11.3% increase as homeowners rush to lock in low mortgage rates.

Besides the mortgage application data released by the MBA, we also received a read on housing construction from the Commerce Department, Housing Starts.  This data totals the number of new homes that construction has started on an annualized basis.  More home construction leads to more construction jobs and increased spending as goods are bought to build and furnish new homes; as such, MBS generally move higher with a lower reading while the stock market likes to see increasing housing starts.     More importantly, this report  totals the number of homes where a building permit has been issued.   Recent reports have indicated a bottoming of this data, economists surveyed expected this report to continue that trend.

The report indicated that home builders are breaking ground on much fewer homes than expected.  Housing starts plunged almost 11% to a yearly pace of only 529,000.  Housing permits also came in considerably lower than expected at 552,000 after last month’s annual pace of 575,000.

The final report to hit  news wires this morning was the Consumer Price Index.  This report measures the change to the average price level of a fixed basket of goods and services purchased by consumers which represents the rate of inflation.   All recent reports have shown inflation to be of no concern today and that trend was expected to continue.   Like the PPI report we received yesterday, this data gives us two readings, overall CPI and the core CPI.  The core reading strips out food and energy prices due to their volatility.

The report indicated that consumer prices rose 0.3% in October, this  followes a 0.2% rise last month. The core rate moved higher by 0.2%, matching last month’s increase, both slightly higher than expected.   On a year over year basis, overall consumer prices are down 0.2% while the core rate shows a 1.7% increase in consumer prices, which is within the Fed’s comfort zone.

Reports from fellow mortgage professionals indicate that mortgage rates are unchanged from yesterday.   This keeps the par 30 year conventional rate mortgage in the 4.625% to 4.875% range for well qualified consumers.  To secure a par interest rate you must have a FICO credit score of 740 or higher, a loan to value at 80% and pay all closing costs including an estimated one point loan origination/discount/broker fee.  If you are seeking to access equity in your home, you should expect either higher closing costs or a higher interest rate.

Is everybody who is closing in the next 30 days locked yet?

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For today current VA, FHA, USDA, Jumbo, Home Equity, Refinance Rates, contact your Texas Refinance Lender today!

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How WE Avoid Delays with Regulation Z

Tuesday, November 17th, 2009

I have been getting a lot of inquiries from Realtors lately asking me how I always manage to avoid the unnecessary delays after the implementation of Regulation Z, so I figure I’d write a quickie on streamlining the processes and getting everyone to closing on time.

Couple of things we do differently than other lenders:

  • I always re disclose GFE and TIL as soon as we get Underwriting Approval Back. At this point, we have already requested and received a preliminary HUD with exact title fees.
  • We have a compliance department set in place to specifically check for an variances above the .125% tolerance.
  • I let all clients know ahead of time that we are going to re disclose at this specific time so there are no surprises.

You will find a lot of mortgage companies/lender/banks (I REALLY wish I could name some) that pop up with 11th hour delays.

There’s 2 reasons I do what I do.

A. To make the client happy
B. To NOT to be the person that makes “the phone call” telling everyone we will have to wait another week before closing

With the new 2009 RESPA rules (which SUCK by the way) coming out, our compliance department has also been working tirelessly to launch a process that makes it easier for us, the Realtor, and most importantly, YOU, the client. With changes come confusion, and with confusion comes delays- and we ALL know delays cost MONEY!

It’s time you work with a Houston Mortgage Lender that knows what he’s doing so that we can keep that money in YOUR pocket! :)

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2009 RESPA Rules

Monday, November 16th, 2009

The U.S. Department of Housing and Urban Development’s (HUD) Mortgagee Review Board (MRB) will “exercise restraint in enforcing new regulatory requirements under the Real Estate Settlement Procedures Act (RESPA)” for the first four months of 2010, the agency announced Friday.

The MRB instructed its staff to exercise such restraint in considering an action against Federal Housing Administration (FHA)-approved lenders that have demonstrated that they are making a good-faith effort to comply with RESPA’s new requirements. The new requirements take full effect beginning Jan. 1, 2010.

HUD is asking other federal and relevant state enforcement agencies to exercise the same 120-day restraint in enforcement for non-FHA originators and other settlement service providers that demonstrate the good-faith effort to implement RESPA’s new rules.

In determining whether a mortgagee has made a good-faith effort, MRB staff will consider whether the mortgagee has relied on the new RESPA rule and other written guidance issued by HUD, and the extent to which the mortgagee has made sufficient investment and commitment in technology, training and quality control designed to comply with the new rule.

“We will work with those who are making an honest effort to work with us as we implement these important new consumer protections,” says HUD Secretary Shaun Donovan. “While we will not delay implementation of RESPA’s new requirements, we are sensitive to the concerns of the industry as it integrates these new rules into their day-to-day business practices.”

In October, several trade groups wrote to HUD Secretary Shaun Donovan and FHA Commissioner David Stevens urging HUD to provide a reasonable implementation period before compliance becomes mandatory.

“Despite the best motivations of HUD…we are headed for a mortgage market train wreck on the tracks of RESPA compliance,” wrote the groups, which included the Mortgage Bankers Association and the American Bankers Association.

SOURCE: Department of Housing and Urban Development and mortgageorb.com

If you are looking for a great Mortgage Lender in Texas feel free to contact us today!

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Results of the FHA Audit

Friday, November 13th, 2009

Well the results of the fha audit are in and they’re NOT good.

A while back I wrote a blog regarding the dire matter at hand explaining how FHA works and what to expect in the near future.

Well, after the audit, FHA’s current Capital Reserve came back at 0.53% when in fact they are SUPPOSED to be at 2% as mandated by Congress. This money (kind of like an emergency fund if you will) is used to cover “anticipated losses” for the near future.

The Federal House of Administration also holds what is called a Financing Account. Now THIS is used to cover “Actual Losses”.

At the moment, both of these accounts hold about $31 billion, or about 4.5% of the Congressionally mandated 2%.

So what does all this jargon mean and is it good or bad?

Well, both.

Its bad because if Congress MANDATES you to hold a minimum amount in your “savings account”, and you don’t, it is jeopardizing the integrity of the actual program itself. What makes you think that you don’t have to follow the order from above and what kind of image does this portray to the general public? If a government agency isn’t following the rules, why should YOU?

The rule is put into place for a reason. A Senator didn’t just finish his brisk run in the park, go to his morning “secret handshake tutorial”, then walk into HUD and say, “Ya, Peter, let’s go ahead and make the reserve requirement 2% today. I’m feeling FRIS-KAY!”

There’s a REASON the Mafia fell apart folks- because they didn’t follow the rules!

What’s next? TPS reports?

On the other hand (and it’s not that big of a hand), between FHA’s Reserve AND Financing Account, they have enough money to meet the 2% requirement. I guess somehow this is OK and puts everyone’s mind to rest.

Now, what happens when THAT fund diminishes? Is another “Account” going to pop-up when “FHA hits the fan” to smooth over Congress’s approval?

Yes, its good that they HAVE money, but I don’t believe it should be used as an excuse. It’s exactly like maxing out a credit card. “Oh Bruce, don’t worry, we have ANOTHER ONE!”

Tommy’s 2 Cents:

The point of all this to demonstrate that measures need to be taken NOW to ensure that FHA’s Reserve requirement is met. I understand that this account is for “anticipated losses” and there is money somewhere for actual losses, however the rule needs to be followed or else we are all putting in danger a program that has saved EVERYONE’S butts, as it was originally intended to do so. I certainly do not want to be part of the crowd that overlooked this and said, “Oh, it’ll be fine. They have money.” We have overlooked A LOT of things in the past 5 years, and I for one do not want to see another bust.

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