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Archive for September, 2008

Since interest rates have a direct relationship with the economy and stock markets you can imagine that interest rates will be affected by this a great deal…and they have. After the news of AIG and Lehman Brothers going under we saw one of the biggest decreases in mortgage rates I have ever seen. We went from the mid 6’s to the mid 5’s in the matter of a couple days. (by the way, rates are still low. Call me if you are interested in refinancing).

However, after the news came out that AIG would be recovered by the government and the new plan for a Bailout of large financial institutions, the stock markets rallied and rates went back up. Not as high as you would think, but back up non-the-less. The main thing is that with the economy where it’s at, we are seeing massive volatility in the marketplace, which directly affects interest rates.

Rates are still low, from a 40 year average standpoint or 5 year average for that matter. With rates hovering today around 6% there is still a great opportunity to refinance your home and take advantage of the market. With the economy on the rise we won’t see rates stay this way forever.

How the Bailout will affect you?

Right now, it is unclear how this will affect the tax payer. Whether or not it will be positive or negative is yet to be seen. The facts are that you the taxpayer will end up paying for any losses that are made from the bailout. You have to remember that this is not a fee or cost that the government is making; they are getting an asset in return for the $700 billion. What they do with that asset will determine how much you and I will pay.

It may come in the form of higher taxes or maybe inflation increasing. One way or another there will be a cost. The positive light of it is that if the U.S Treasury pays less for these assets than what they are worth, the government may end up making a profit on the deal. This would be great for the economy. Plus, as I mentioned in the first section of the article it may help stabilize our housing crunch and help homeowners get back on their feet. One can only hope!

Conclusion…

The best thing to do right now is continue to stay informed. Whether you like it or not this will affect you in one way or another. So stay on top of the information; do some research on how it will affect you.

Feel free to give me a call or send an email if you have any additional questions. I am more than happy to help out.

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By now you have probably heard of the new proposal by the government to allow the U.S. Treasury to buy up to $700 billion in non – performing mortgage assets with the hope that this will help stabilize the credit crunch and help big financial firms move bad loans off their books. So how will this affect taxpayers and the mortgage market?

Even though there are many pros and cons from the bailout, I only want to touch on 3: Housing prices, interest rates and YOU footing the bill.

Let’s first get clear what a “non-performing mortgage asset” is. The best way to put it is a property where the homeowner has a string of lates or has been late within the last 6 – 12 months. You see, when a financial firm has these loans on there books it will hinder there ability to loan money to you…the future borrower.

For every bad loan, they have to keep 8 – 10 times that in the bank. So consider this, if your loan is $300,000 and you default on the payment, the lender now has lost the ability to lend up to $3,000,000 to other borrowers. This is the primary reason for the lenders being in a crunch right now.

How the Bailout will affect Home Prices?

Depending on what the government decides to do with the homes that will be purchased through the bail out, it could have a huge impact on the housing market. There are certain areas across the country that have been harder hit than others and as a result have seen more defaulted mortgages. Naturally the government will own mass quantities of homes in these areas.

If the government decides to work with the homeowner and negotiate the reduction of principle or structure a loan modification to reduce the monthly payment, it could help solve the housing problem very quickly. But clearly it will mean that the government (taxpayers) will end up footing more of the bill.

However, if the government try’s to ride out the housing storm and hope that home values will begin to rise, then we could see the housing crisis play out for awhile. Ultimately, in an effort to assist homebuyers we could see some major changes coming our way very soon. The anticipation is that we will see this help our housing markets growth and begin to increase with the addition of government involvement.

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Have you thought about refinancing but want to hold off until rates go down? Well I’m here to say that they are down! Usually I reserve these emails to give you industry updates or tips and tricks about the mortgage industry and home buying process, but this is more important than all of those things. If YOU own a home and have a mortgage you need to listen to what I am about to tell you.

As of today, 09/16/2008 rates are at 5.5%* on a 30 year fixed loan! What this means is that if your rate is any higher than 6% or in the low 6’s you need to give me a call to refinance. Do yourself a favor and save money every month or replace that adjustable rate mortgage and move into a fixed loan.

You know, I get told a lot “well I don’t want to refinance because my loan term will start over” and for some that may be true but consider this, 15 year fixed rates are at 5.125%** today! So maybe your best move would be to go from a 30 year fixed to a 15 year fixed and pay of your house in half the time!

What are you waiting for, rates wont stay this low forever. I don’t have time to get into the full economics of how the economy works during an election cycle…but let’s just say that history usually repeats itself and these rates will not stay this low for very long.

Give me a call and I can take a look at your individual scenario to show you how much money you would save each month. Or shoot me an email and we can set up a time to go through everything, it only takes a couple minutes and some simple questions to potentially save you a lot of money.

* APR 5.655% ** APR 5.386%, Give us a call today to see if you will qualify for this extremely low interest rate or any one of our hundreds of loan programs. Underwriting conditions apply; Interest rates are subject to market conditions and may change until interest rates are locked. Not a commitment to lend. *Equal Housing Lender. Certain conditions and restrictions apply.

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In the world of companies like MLS 4 Owners and Redfin, the do-it-yourself buyer and/or sellers have been popping up everywhere, worse than the dandelions in my backyard! But does this direction really save you money as once thought?

Well, let’s think about it…if you were to get sued for $300,000 would you protect yourself or hire an attorney to protect you? I don’t even know if I have to ask this question, we all know the answer…you would hire the professional to protect you! So why would you not do the same with the biggest purchase in your life?

From the listing perspective…

Usually what I hear from clients that are listing their home is that they want to save money. On paper this makes sense; with a listing agent costing upwards of 3% plus you have to factor in the buyers agent for an additional 3%, your now forking over a grand total of 6% in fees? Ouch, right! Let’s look at the alternative.

Consider this, on average FSBO (For Sale By Owner) homes sell for an average of 6% less than homes listed by a real estate agent. So using an agent literally pays for itself, not to mention the legal protection that you are receiving through the negotiation process and finalizing the paperwork.

From the Buyers perspective…

Well, this is an easy one…you don’t pay for it! Remember in the previous paragraph I said that the listing agent has to factor in the buyers agent cost, yes…this is your agent if you’re the buyer. So when you buy a home using an agent, the seller is paying your agent! You’ve gotta love that.

Again, since this is no money out of your pocket for this protection, why would you not want it, however, it amazes me how many people still list and buy without an agent. It could get you into serious trouble.

Now, quick plug for me as well, the same applies to using the right mortgage broker. Do you choose to use someone that has withstood the test of time in the industry and has your best interest in mind, not to mention the best programs on the market? Or someone that sits behind a desk and gets paid whether they close your loan or not? I’ll let you decide.

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