Archive for the 'Mortgage and Finance' Category
3 Choices When Facing Foreclosure
April 22nd, 2008 Categories: Mortgage and Finance
The bad news is foreclosures are on the rise here in Wake County, just like they are in most of the country. The good news is the rate of increase is not nearly as bad here as in most other real estate markets.
Even though we are doing better than many areas with regards to increases in foreclosures, the sad part is that good people are still facing this problem right here in our local communities. If you are behind on your mortgage payments, and don’t think you have the ability to get current, you have three choices.
Let Your Home Go Into Foreclosure
This is not a good choice. Your credit can be ruined for 7 years. You will not be able to buy anything on credit for a very long time. You could end up still responsible to the bank for the costs of foreclosing on your home. Debt collectors will follow you wherever you go in their efforts to collect the outstanding balance.
By the way, the banks really do not want to foreclose on homes. It costs them a ton of money each time they do it. It’s a lose-lose proposition for homeowners and banks alike.
If you let your home go into foreclosure, it’s too late. No one can help you at that point.
Renegotiate Your Mortgage
Depending on the circumstances, you might be able to renegotiate the terms of your mortgage. The key thing to remember here is that banks really do not want your home. They are not in the real estate business. They are in the banking business.
If you want to stay in your home, this might be a good option. Most of the time it can be done with minimal damage to your credit. Much of this will depend on how many payments you miss before seeking help.
Ask for help early. I have experience with renegotiating mortgages and will be glad to try to help. Just give me a call, but please call as soon as you realize you’re in trouble.
Negotiate a Short Sale With the Bank
If there is no way you can afford to stay in the home, then a short sale may be a viable solution. This is where you find a buyer for your home and negotiate with the bank to settle for less that what is owed on the loan. If you are successful, the bank accepts the offer and your credit report shows several late payments followed by a satisfied in full remark.
If all goes well, you will walk away with your credit in far better shape than it would be as a result of foreclosure, and you will not owe the outstanding amount to the bank. I have experience with short sales too. Again, just call me and I’ll try to help. Just don’t wait too long. Call as soon as you realize there is a problem
Don’t be too proud to ask for help
I’ve had several past clients contact me recently to ask for advice for people they know who are at risk of losing their homes. More often than not I get these phone calls after many payments have been missed and the bank has hired a collection firm to start hassling the homeowner. I cannot over emphasize how important it is to reach out for help sooner, rather than later.
If you, or someone you know, is facing possible foreclosure, call me or email me as soon as possible. Foreclosure is the very worst choice, out of the three available to you, that you could possibly make. Anybody can get in a jam. Asking for help is always the best choice.
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Breaking News - 100 Percent Home Mortgages May Be a Thing of The Past
March 19th, 2008 Categories: Mortgage and Finance
I have had two lenders tell me today that 100% loans are all but gone. They are advising anyone who is looking to finance 100% of a home purchase in the near future to check with a lender to see how this impacts your individual situation.
It seems the issue is with Private Mortgage Insurance (PMI) providers. As of early this week, the only remaining 100% PMI provider is Genworth. All of the other PMI providers are only issuing insurance for 97% of the purchase price. The word on the street is that Genworth will go to 97% maximum soon.
Another spectulation on the street is that FHA will soon unveil a 100% financing program. The caveat here is the FHA loan limits. Even though they were increased to $259,000 for Wake County, many home buyers have needs above that price point. When you take the move by the PMI providers, and the recent increase in FHA limits, an FHA 100% program makes sense.
As credit continues to tighten, it makes more sense now than ever before to talk to your lender and Realtor advisors early in the process. Give me a call at 919-602-7000 if you are within 90 days of wanting to be in your next home.
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FHA Loan Limits Increase For The Triangle Home Buyers
March 17th, 2008 Categories: Buying a Home, Mortgage and Finance
Great news for home buyers in the greater Raleigh area… FHA loan limits have been increased significantly!
Here are the new FHA loan limits by county:
- Wake and Johnston $295,000
- Durham and Chatham $331,250
This is a significant increase and long overdue. The old limit for Wake County was $224,200. Kind of low considering the average home price was $261,000 for the period since Jan 1, 2008.
I do have to say that the amounts seem without much rhyme or reason. The average home price in Durham County is $196,000, while Chatham County is $317,000. Why are these two grouped together at $331,250 by FHA?
Consistency and logic notwithstanding, the increases in FHA loan limits for the Triangle area is a very good thing. Here are just a few of the benefits of an FHA loan.
- Low down payment
- Down payment can be a gift
- Non-occupant co-borrowers are allowed
- No price adjustment for credit score
If you need the name of a good lender who can provide FHA financing, call me. I know some of the best in the business.
Search for Triangle area homes for sale
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Lender Tricks - Watch Those Hidden Fees
November 13th, 2007 Categories: Mortgage and Finance
When selecting a mortgage company to finance that new Raleigh home, be sure to make your comparison carefully. Buying a home requires most people to get a mortgage. If you don’t get a mortgage very often, it can be a little confusing. Or maybe a lot confusing. Mortgages have lots of moving parts. There are a bunch of fees and costs that are typically accounted for at closing. These costs vary from lender to lender and comparing offers from mortgage companies is not always easy.
Here’s an example of what I’m talking about. I just had a client select the builder’s “preferred lender” primarily because of some closing costs they were going to pay for them. As always, I recommended a lender who I know and trust to take care of my client. The quick comparison my client did between the two lenders resulted in a $1,000 advantage to go with the builder’s recommendation.
The offer from the builder’s preferred lender was for $1,000 of lender paid closing costs. After applying for the loan, the client asked me to look over the good faith estimate and let them know if everything looked okay. The rate was in line with what is currently available. All the usual fees were present and accounted for. Then I noticed, shall we say, an unusual item that caught my eye.
The $1,000 lender paid closing costs had turned into $1,146. Hey, when an amount someone is going to “give” you is larger than expected, that’s a good thing, right? Not in this case. I immediately began looking to see if I could figure out why this was such an odd amount.
It turns out there was another odd amount on the good faith estimate. The loan origination fee was 1.56%. Hmmm, why wasn’t this amount 1.5%? Or better yet, what wasn’t it 1%, which it is most of the time? Well, a quick check of the math revealed that 0.56% of the loan amount was exactly $1,146.
So, what had actually happened here was the lender had taken an extra $1,146 from my client and simply given it back. The original $1,000 closing costs that the lender offered to pay did not exist. It never existed. It was my client’s own money.
Maybe even worse than that is the fact that this lender has much more to loose by disappointing the builder that he does by disappointing my client. One loan versus many loans. They don’t call him preferred for nothing.
The moral of this story is; Remember that old saying… “If it sounds too good to be true, it probably is.” Or how about the one that goes, “there’s no such thing as a free lunch.” Okay, enough with the old sayings already. You get the point. Be careful when making comparisons and seek the advice of someone you trust.
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Is Another Quarter Point Rate Cut Good for Raleigh Home Buyers and Sellers?
November 1st, 2007 Categories: Mortgage and Finance
Well, it ain’t bad, that’s for sure! The Raleigh real estate market is holding it’s own, regardless of a slowdown in relocation buyers. Anything that can help people relocating to Raleigh sell their homes in other markets is a good thing for us. But, I wonder just how much this will really change anything?
The impact on mortgage interest rates is yet to be determined, but at the very least the move by the Federal Reserve to cut short term rates by a quarter point takes away any upward pressure that may have existed. There is no question that this move by the Fed is aimed directly as shoring up the shaky national housing market.
There is, however, another interesting piece of data that was released yesterday. The Commerce Department reported that the national gross domestic product (GDP) was up 3.9% for the quarter. Hmmm, have we ever had a cut in short term rates with such a healthy expansion in output? My guess is that even though the GDP number was really good, the Fed is more concerned that the declining housing market is significant enough to douse any inflationary flames that may get sparked in other parts of the economy.
So what does the rate cut mean locally? Not much really changes. Mortgage rates might track down a little. We’ll have to wait and see. Just last week a client got a 5.875% rate on a 30 year fixed mortgage. Nothing wrong with that!
Like I said at the beginning of this article, the best thing that could happen for us locally is for the situation to improve nationally. Although local showings and sales are down a bit right now, if the relocation buyer were to come back we would likely be right where we should be.
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Option ARM Loans - If You Have One You Need to Read This
October 24th, 2007 Categories: Buying a Home, Mortgage and Finance, Real Estate Tips
I’ll have to say that in all my years of selling homes in the Raleigh area, I do not remember any client using an Option ARM to finance their purchase here locally. I guess I must deal with a more conservative group of home buyers. So what is an Option ARM and what should you do if you have one?
The “what is it” part of that question is more difficult to answer than the “what should you do if you have one” part. Let’s talk about what it is first. It is a very creative loan product that allows the borrower to choose from multiple payment options including an option to pay zero principle and only a portion of the interest. This payment option, called negative amortization, actually allows the loan balance to increase as payments are made. Sounds a bit scary to the more financially conservative among us, doesn’t it?
No need to discuss any of the other payment “options” because they are all totally boring, like paying interest AND principle which will reduce your loan balance. So why in the world would someone want to choose a loan payment option that results in increasing the balance owed? The obvious answer is to have a lower monthly payment. How much lower? I’ve seen examples where the payment could be cut in half! How would you like to only pay $1,200 for your $2,400 mortgage? Tempting, huh?
This might make sense if you were in a market where the value of the home is increasing at a much greater rate than the negative amortization is increasing your loan balance. If that scenario is sustainable, and you plan to sell the home in a few years, I guess you could come out ahead in terms of cash flow. The problem is this idea of the value of the home increasing is not sustainable. Just ask some of my clients in California and Florida.
According to an article in the Wall Street Journal, Countrywide is about to face yet another crisis; this time it involves Option ARM loans. The best estimates are that the default rate has more than doubled for these types of loans which made up $93 billion, or 19% of their volume for the year 2005. Keep in mind that these borrowers were not classified as subprime.
What should you do if you have one of these loans? If you live in an area where your home has not decreased in value, refinancing might be a pretty good choice. You see, the value of your home is important even if you do not plan to sell. If you need to refinance, and your home has decreased in value while the loan balance has stayed the same or actually increased, you might not be able to qualify for the new loan.
If you want the name of a good lender to talk to about your situation, give me a call and I will connect you with someone who is trustworthy.
Always remember, especially when it comes to financing something as large as a home purchase, if it sounds too good to be true, it usually is. And also remember you simply cannot detach the financing process from the home buying process and expect to get the best possible results. Every single one of my consultations with home buyers in the Raleigh area includes a thorough analysis of financing options with one of my lending partners. Finding your dream home and messing up the financing can quickly turn your dream into a nightmare. Get all the facts, look at all your options, and seek wise counsel.
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How to Avoid Foreclosure on Your Raleigh Area Home
October 2nd, 2007 Categories: Mortgage and Finance
US forclosure rates have increased at a staggering rate and unfortunately Raleigh home owners don’t seem to be immune. Foreclosure can de devastating and take years to recover from. Many people get caught in the trap of believing this is the only way out, when in fact there are usually more options available. Here are a few things every Raleigh homeowner who thinks they may be facing foreclosure, or knows someone who will, should know.
The banks do NOT want to foreclose on your home. Bank are in the business of lending money and collecting interest as it is paid back over time. Banks are not in the real estate business. Foreclosing on a house is an expense and a hassle for a bank. I’ve always heard that the typical costs for a bank to complete the foreclosure process is about 20% of the value of the average home. A typical $200,000 home will cost the bank about $40,000 to go through the foreclosure process. In this case they would net only about $160,000. If they financed the house at 100%, that’s a $40,000 loss.
You may have a deficiency judgment filed against you. When the bank cannot sell the house for an amount sufficient to cover the unpaid mortgage balance, they are allowed by law to file a deficiency judgment for the balance against the borrower who defaulted.
Foreclosure damages your ability to find another home. Your credit score and credit report are more important now than ever before when attempting to finance a home purchase. A foreclosure can stay on your credit report for years and prevent you from owning another home. Renting is not always a good alternative either. The typical landlord collecting rent is looking to make a profit and will charge a rent that is greater that his mortgage payment to accomplish this. Also keep in mind that you will loose the tax advantage of deducting interest payments and you will no longer be building wealth in the form of real property equity.
So, what are the alternatives? The first thing to keep in mind is that the clock is ticking. The time to seek out alternatives is really not after the foreclosure notice has been received.
Seek credit counseling. If you don’t understand your options well enough to make an informed decision, it is always a good idea to seek professional advice. The US Department of Housing and Urban Development (HUD) maintains a list of HUD approved credit counseling agencies. HUD can be reached at 800–569–4287. I also work with several lenders locally who can put you in touch with a reputable credit counselor.
Ask for a Special Forbearance. If you have had an unavoidable change in your financial position, such as unexpected medical expenses or a decrease in wages, the bank may be sympathetic to your situation. Remember, they do not want to foreclose because they usually loose money when they do. Many borrowers may qualify for a new payment structure that will allow them repay the lender in a more manageable time frame that is agreed to by both parties.
Investigate the FHA Insurance Fund. FHA borrowers may qualify for assistance from HUD. There is a special insurance fund that in some cases can make a one time payment to bring a mortgage up to current status. Visit www.hud.gov/foreclosure to find out if you qualify for assistance from this fund.
Refinance your home. Seems obvious, but you might be surprised at the number of individuals who wait until it is too late to pursue this option. If you have an Adjustable Rate Mortgage (ARM) that is beginning to index your payment upward, you may qualify for a fixed rate mortgage, or some other program, that can lower your monthly payments and buy you some breathing room.
If you think you may be at risk of foreclosure, remember, you usually have options. The bottom line is don’t wait until it’s too late. The bank would probably rather get a phone call from you explaining that there’s a problem, rather than finding out by noticing you’ve missed your last two payments.
| Discussion: 2 Comments »
Interest Rates Are Down - Now May be the Time to Make Your Move
September 19th, 2007 Categories: Mortgage and Finance
You probably heard that the Federal Reserve cut the Fed Funds Rate yesterday. This is the first time this critical rate has been lowered in over four years! What does this mean to home buyers in the Raleigh area?
It means a couple of things.
- the cost of financing a home purchase is now lower that it has been in quite a while
- If you have (or need) a Home Equity Line of Credit (HELOC) the Federal Reserve just put a little extra money in your pocket
There will be another Fed meeting in six weeks and there is much uncertainty about what the possible outcome might be. If you are anywhere close to being ready to purchase a Raleigh home, give me a call right away at 919–602–7000 and I will put you in touch with one of the mortgage lenders I deal with to discuss how to take advantage of this great opportunity.
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The Mortgage Meltdown and the Raleigh Real Estate Market - Part 3 of 3
August 29th, 2007 Categories: Mortgage and Finance
In Part 2 of this series I discussed the impact of the mortgage meltdown on clients wishing to buy a home in Raleigh and surrounding areas. Today’s final installment will cover what this means to the average Raleigh home seller. I will also attempt to address the reaction of financial markets to the mortgage meltdown and speculate on whether we’re done, or if there is more bad news to come.
Selling a Home in Raleigh
The Raleigh real estate market is very good right now. Forbes magazine reports that Raleigh is the #1 seller’s market in the country. Well prepared, professionally marketed Raleigh homes that are accurately priced are easily selling in 4-6 weeks. Some even quicker. Let’s talk about why the ability of Raleigh home buyers to obtain financing changes things for sellers.
If you’re selling a home in Raleigh, the effects of the changes in the mortgage industry on you is much more subtle that it is for home buyers. The agent you choose to represent you and how up-to-date he or she is on this topic has become critically important. Home sellers and their real estate agents must now look at the financing terms on offers in a very different way.
Section 5 of the North Carolina Offer to Purchase and Contract will now require closer scrutiny to know if an offer to purchase your home is a good one, or not. Talk about good timing! This form was actually revised in July 2007 and now makes following the progress of a borrower’s attempt to obtain financing much easier. Unfortunately, the new form is not mandatory until November 1st.
I’ll be doing an article on the changes to our forms in the next few weeks, but for now just know that regardless of which form is used, any disclosed condition that is marginal should be a red flag. Buyers who are not being encouraged by their agents to deal with a well known and trusted lender, or who have not been recently qualified may not know they cannot obtain the home loan they need to complete the purchase of your home.
A good, recent pre-qualification letter must be submitted with all offers. By the way, pre-approval would be better. Much better. Pre-approval means that the buyer’s financial position has been more carefully considered and documented by the mortgage lender and all that remains is final underwriter approval and successful appraisal of the property. On the other hand, pre-qualification simply means that a credit check was performed and the buyer gave the lender a believable story. Consider requiring pre-approval on all offers.
The bottom line for Raleigh home sellers is that they and their agents must very closely examine the financing information disclosed in section 5 of the offer and ask plenty of questions if anything is unclear, or looks suspicious.
You might also be thinking that the pool of possible home buyers is reduced because some are now unable to obtain financing. Marginal buyers will be shut out of the market. The good news is this is a very small group. The Raleigh real estate market does not seem to be slowing down as a result of this. It’s really a matter of risk management for Raleigh home sellers now more than anything else.
Is the Worst Over?
The financial markets have reacted in large part with fear to what has gone on in the past months. Mortgages are bought and sold in secondary markets and many business entities own various pieces of them. The investment community has been selling and avoiding companies with known exposure to risks from mortgages. No surprise there.
I believe that once the mortgage origination industry can demonstrate that the new rules have mitigated the future risks, investors will once again turn their attention towards the lucrative secondary markets. The question is how long will this take?
I think we will live with the current conditions for a while. And for all of us here in the Raleigh real estate market, we will be okay with this as long as we exercise caution where necessary on both the buying and selling side.
Expect a lot more detailed questioning from your real estate agent and mortgage lender. Questions are good. They get people talking about possibilities and making better choices. Realtors upholding their fiduciary duties to clients have been asking questions all along. It’s just more important now than it was before.
Related Articles
The Mortgage Meltdown and the Raleigh Real Estate Market – Part 1 of 3
The Mortgage Meltdown and the Raleigh Real Estate Market – Part 2 of 3
| Discussion: 4 Comments »
The Mortgage Meltdown and the Raleigh Real Estate Market - Part 2 of 3
August 27th, 2007 Categories: Mortgage and Finance
The Raleigh real estate market has definitely been affected by by recent changes in the mortgage industry. As a result, buying or selling real estate in Raleigh has changed too. Much confusion exists. We need a better understanding of what this means to the local buying and selling public.
In Part 1, I discussed what the mortgage meltdown is and what has changed in the mortgage industry. So what does this really mean to someone wanting to buy a home in Raleigh, North Carolina? What about someone selling a home? Today, let’s talk about the more obvious one… home buyers.
Buying a Home in Raleigh
In the previous article, I listed several things that have changed for borrowers applying for a home loan. Two big ones were:
- A good credit score is more important than ever
- Full documentation is required where it may not have been in the past
A more difficult to define change is the somewhat limited availability of 100% financing. Loans not requiring a down payment are still available, especially for conforming clients with good credit scores and full documentation. If either of these two elements are lacking, 100% financing may not be an option for borrowers.
The bottom line is that anyone seeking a loan to buy a home in Raleigh, or anywhere else for that matter, needs the advice of a mortgage professional now more than ever before. The rules have changed since you last purchased a home. I can promise you that.
Does this mean you might not be able to get a home loan in today’s environment? The only way to answer that question is to seek professional advice. For some, nothing has changed. There are still lots of financing options for home buyers. The sooner you discover those options, the better choices you can make. If you need the name of a good, reputable mortgage lender, send me an email or call me at 919-602-7000 and I’ll be glad to recommend someone.
The real estate agent you choose to represent you is also a decision you should make very carefully. The degree to which your agent has his or her mind around this new mortgage environment is critical to your home buying success.
In Part 3 of this series you will read about how savvy home sellers and their agents will be carefully considering the validity and associated risks of the financing terms in any offers they receive. The North Carolina Real Estate Commission considers terms of finance to be a material fact and requires accurate and complete disclosure. Your Raleigh real estate agent must be a skilled negotiator and capable of putting together an offer that will be accepted. Especially when there are competing offers. Unlike many other areas around the country, we still have that scenario here in the Raleigh market.
Your real estate agent must also have the guts to insist that you spend some quality time talking about your options with a good mortgage professional. Beware of the agent who puts you in their car and drives off to show you homes without a high quality initial consultation session that includes this conversation with a lender. Or at least requires that conversation as the very next step in the process.
Be sure to stop by the next day or two for the final installment in this series where you will learn the implication of all this for home sellers. We will also spend a little time expanding on the reaction of the financial markets and do a little speculating on whether we have seen the worst, or if there is more unraveling to come.
Be sure to click on the comments link below and get involved in the discussion. I’d really like to hear your thoughts!
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The Mortgage Meltdown and the Raleigh Real Estate Market - Part 1 of 3
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