Posts Tagged ‘Loan’

Direct Lender or Mortgage Broker–What’s the Difference??

Suppose you were in the market to buy a new car. Would you go to a single dealership and expect to find the perfect car at the perfect price simply because you’re buying directly from the dealer? Of course not. It is very similar with mortgages and mortgage lenders.

There are countless mortgage programs based on countless ‘guidelines’ for determining acceptance. The variety of programs and rates varies greatly from lender to lender. Because of this, the odds are very much stacked against you finding the ‘perfect’ mortgage from a single direct lender. Direct Lenders have one group of programs. That’s it.
direct lender mortgage brokerBut why are direct lenders in favor right now over mortgage brokers and mortgage bankers?  One word-SPEED. Since direct lenders are using their own money and their own guidelines (most mortgage brokers will need to go through two sets of guidelines-the bank’s and the investor’s), they can close loans very quickly. They normally have their underwriters in-house. Closing loans quickly (or at least on time) is huge, especially on short sales. When a lender(s) approves a short sale, it has an expiration date. If the transaction doesn’t close by that date, an extension has to be requested (which isn’t always easy to get). That can lead to problems with appraisals, credit reports, and financial statements being outdated.

The advantage of a mortgage broker is that they can choose from the thousands of lenders to select the program that offers the lowest rate for your specific loan. Brokers will counsel borrowers on the loan options available from these different lenders and find the best “fit.” Some people fear higher costs by using a broker as opposed to a Direct Lender. This is sometimes the case. What must be kept in mind, though, is that Direct Lenders make their money off of the interest you pay on the loan– over time,  the amount of interest will far surpass your closing costs. In other words, closing costs must be viewed in relation to your interest rate. In fact, interest rates are more important than closing costs (especially since there are laws in place that prevent excessive loan charges). So sure, sometimes a direct lender offers lower closing costs. The interest rate, however, is rarely lower and that is what will affect you the most over the coming years.

My best piece of advice? Shop around for a loan before settling on one lender.

 

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RyanYourRealtor@gmail.com
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San Diego Housing Market Update August 2014

The end of summer is here and inventory levels (the number of homes on the market “actively” for sale) continues to climb. This San Diego housing market update shows there are currently 8350 active listings in San Diego county, up slightly from 8295 last month.

Activity Snapshot:

One-year change in closed sales

One-year change in median sales price

One year change in homes for sale

-23.7%

8.3%

-4.8%

How's the market 2According to Bankrate.com, interest rates are currently at 4.20% for a 30-year fixed loan. This is well below the historical average of 6% or so, which is great for home buyers. To calculate your potential mortgage payment, go HERE. Finally, as you will see on the chart below, prices are starting to take on a more normal pattern. There are much more modest changes than the previous year, with a 8.3% increase in median prices, compared to over 20% a few months earlier. However, these higher prices are now resulting in a slow-down of the number of homes sold over a year ago.

The San Diego Association of Realtors analyses housing market date for San Diego county every month. Below is their monthly report. The figures combine both condos and townhomes, as well as single-family homes.

San Diego House Market Stats August 2014

Click for full size

For more information on this topic:

619.384.2248
Ryan@RyanYourRealtor.com
Visit my Website: http://ryanyourrealtor.com

Should You Refinance Your Home?

should you refinance your homeWith current interest rates still historically low (4.29% as of the writing of this article), you may want to refinance your home to a lower rate. Here are five questions you should answer before you take the leap:

1. How long do you plan to stay in the home?

It makes a big difference in recouping the cost of refinancing a home loan. If you don’t plan to own the home for at least 3-5 years or more after refinancing, it might not make sense to incur the costs of refinancing.

2. What are the closing or settlement costs for refinancing?

You should expect to pay about the same amount as when you purchased. Expenses will include a new title policy or abstract, a new appraisal, and lender’s fees.

Lenders normally charge an origination fee or a “discount fee”. If it’s a “no-cost” refinance, there’s really no such thing – the fee will actually be rolled into a higher interest rate. Count on your closing costs to be similar to what you paid when you originated your first loan. In other words, it’s a new loan, with all-new fees.

3. What percentage rate are you currently paying?

Mortgage lenders used to only advise refinancing only if you could save two percentage points on the loan. That’s so you can get your closing costs back if you need to sell a year or more later, assuming your home doesn’t go down in value.

But you can refinance by getting as little as 1/2 percent lower than your current mortgage interest rate and still be able to sell within a reasonable time – 3 years or so. What you need to do is figure how long it will take you to pay back your closing costs before selling your home.

You have a $200,000 mortgage, 30 yr. fixed rate, 6% interest, with a monthly payment of $1199 in principal and interest or PITI. Assuming $2,000 in closing costs, you refinance for another 30 years.

At 2 points lower, or 4% interest, your new PITI (principal and interest) is $ 954.83 With a monthly savings of $244.17, it would take you just over 8 months to pay back the cost of the refinance.

At 1/2 % of a point lower, or 5.5% interest, your PITI is $ 1135.58. With a monthly savings of about $64, it would take you a little over 31 months to break even, a good strategy if you plan to stay in your home at least 3 years.

4. What type of loan do you currently have? Do you have a hybrid adjustable rate mortgage that needs refinancing?

Many hybrid loans change from fixed rates to adjustable become adjustable after a year, three years, or five years. If you qualified for the adjustable rate loan originally, but have since increased your income or paid down your mortgage and built some equity, now may well be the time to refinance.

Interest rates have hovered near 5% or lower for well over six years, making it likely that adjustable rates have nowhere to go but up, so it may be a good time to get into a fixed rate.

5. Have your plans or circumstances changed from when you first purchased?

If you are doing well and want to accelerate your pay-off by refinancing to a 15-year term. Additional payments to principal can be voluntarily added to your 30-year fixed rate loan payment, so refinancing is only wise if you can get a much lower interest rate than your current term.

But say your intentions of paying off a 15-year note have changed, due to decreased income, family obligations or some other reason. In that case, a refinance to a 30-year term will ease your payments, but the majority of your note will be to pay interest, with little going toward your principal for several years.

Get professional advice from your mortgage banker or broker, and your financial advisor or tax preparer to help you decide if refinancing is the right answer for you now.

For more information on this topic:

619.384.2248
Ryan@RyanYourRealtor.com

Central San Diego Housing Market Update-March 2014

The spring buying season is here in the San Diego housing market. With sales and price per square foot rising compared to the previous month. This is a normal pattern for this time of year. Homes are continuing to sell at a fairly brisk rate, meaning buyers don’t have long to act on a property they love.

Interest rates have started to slowly creep up near the 4.5% level. They are currently at 4.45%. Inventory levels (the number of homes on the market “actively” for sale) is continuing to stay absan diego housing market updateove the 6000 level for San Diego county. Finally, prices are starting to take on a more seasonal pattern, with much more modest changes than the previous year.

To get the latest figures, I ran an analysis of home figures from the MLS for the central San Diego region (a 7 mile radius). This includes communities such as Mission Valley, Serra Mesa, University Heights, Normal Heights, Hillcrest, Mission Hills,  Bay Park, and Clairemont. The numbers include both condo/townhomes as well as single-family homes.

 Housing Figures-Central San Diego

Date # of Sales Median Sale Price Med Price/Square Ft. Ave Days on Market    
March 2014 589 $481K $377 17
February 2014 464 $437K $365 23
March 2013 770 $422K $331 15

There are currently 6400 active listings in San Diego county, up from 6200 last month. That number should continue rise in the coming months and more people put their homes up for sale.

For more information on this topic:

619.384.2248
Ryan@RyanYourRealtor.com
Visit my Website: http://ryanyourrealtor.com

Top 5 Real Estate Trends for 2014

It’s a brand new year! With the new year, RealtyTimes predicted the top changes in the Californa real estate market, now in effect.

INCREASING MORTGAGE RATESreal estate trends for 2014

Mortgage rates are predicted to rise, but not too far, up to 5% or 5.25% in 2014. The
Federal Reserve will begin tapering soon and the greater the reduction in Federal government purchases, especially of Mortgage Backed Securities (MBS), the more rates are likely to grow.

It’s a great time to buy now because mortgage rates are still below the historical average so if you’re thinking of making a move, 2014 is the perfect time to jump into the market and start looking! With low rates and increasing home values, now’s the time to buy in order to make a smart investment for your future.

Speaking of mortgages, home buyers also need to be prepared for stricter qualifications on home loans. Lenders are now required to prove borrowers’ ability to repay a loan according to new “qualified mortgage” standards. An important statistic to keep in mind is the maximum debt-to-income ratio of 43% that borrowers will need to qualify.  The Federal Housing Finance Agency, which regulates Fannie Mae and Freddie Mac, has also announced plans to reduce the maximum loan limits for conventional conforming loans some time in 2014.

INCREASING HOME PRICES AND VALUES

Predictions show that home values and prices will rise in 2014.  Moderate predictions are clocking in at a 6-8% increase for California markets whereas others foresee a 10-15% increase.

According to Bill Plattos, Execute Vice President of First Team Real Estate, “2013 has begun the upward progression of the real estate market in California. In the next 3 to 4 years prices and sales will continue to rise bringing us back up to a peak.”

FEWER INVESTORS

Investors swoop in when home prices bottom out like they have in the past few years, seeking foreclosed homes and short sales to snatch up.  However, as our economy strengthens and home values come back up in 2014 there are fewer distressed homes on the market to interest investors.  The rise in home values in and upswing in the economy will also make it easier for current home owners who’ve built up equity to afford a down payment and enter the market in search of a bigger and better home to fit their needs.

Fewer investors also means less price competition and fewer bidding wars for buyers shopping for primary residences.  2014 will be the prime time to buy and sell for home owners who are ready to move on to a better neighborhood, larger home or location offering a more convenient commute.

CONTINUED HOME SELLERS MARKET

The seller’s market will continue in 2014 for California and on a national level.  However, it will be much cooler than the one we’ve witnessed over the past two years. “The market will get closer to normal – or as normal as the market can be,” says Plattos. “It will continue to cool and inventory will come up to a moderate level, not too low or too high.”

HOME BUYERS NEED TO START SEARCHING

With the seller’s market leveling in 2014, that means buyers need to be realistic about the home they can afford.   Home buyers, now is the time to start searching the best deals in real estate in order to get the most for your money.

For more information on this topic:

619.384.2248
Ryan@RyanYourRealtor.com

Here’s Why Your Should Buy Or Sell A Home Now!

San Diego homeowners who’ve wanted to sell have loved the recent news of rising home prices (up around 20% from a year ago), easier lending terms for buyers and general economic improvement that encourages house hunting. But will rising interest rates can undercut home prices?

Like buyers, sellers need to get a move on before rising rates make buying a home more expensive. Sellers should be careful not to wait too long. Rising mortgage rates are hardly a crisis, as they’re still low by historical standards, but prospective sellers should keep the rate and price relationship in mind as they plot their strategies.

Historical Mortgage Rates

Historical Mortgage Rates

Unfortunately, it’s impossible to say the exact effect on prices of a 1, 2 or 3 percentage point rise in mortgage rates, as so many factors affect home values. But the principle is simple enough: Rising rates make monthly payments bigger, reducing the maximum buyers can spend. That, inevitably, affects prices to some degree.

Rising rates, of course, also have a psychological effect, causing some buyers to wait for rates to come down and making others give up the search altogether. Others may think they better “hurry up and buy” before rates go even higher. Recent data and trends suggest buyers are pulling back a bit now, disturbed by recent rate increases. But in coming months, many may change their minds, realizing that even if they missed the cheapest deals, rates are still low — and lower than they’re likely to be in a year.

This Mortgage Calculator can help you see the relationship between prices and interest rates.

Here is an example: A person with a $4,000 monthly income could afford a monthly payment no higher than $805. That would support a $134,267 mortgage at a 6% rate. Change the rate to 4.5%, about today’s level for the 30-year fixed-rate loan, and the maximum mortgage jumps to $158,876.

So, if rates were to rise from today’s 4.5% to 6%, a historical average rate, this buyer would have $24,609 less to spend. Looked at another way, a 1.5 point increase in mortgage rate would reduce this buyer’s buying power by about 18%.Mortgage-Interest-Rates-Round-Up-for-Saturday-August-101

If that seems surprising, note that raising the rate to 6% from 4.5% is a 33% increase, producing a much larger monthly payment for a given loan size.

As mentioned, this just illustrates the principle, and it doesn’t mean home prices would fall 18% if mortgage rates rise. For one thing, a seller needs only one buyer, and there may be plenty of others who can afford the home even with higher rates. After all, not every buyer applies for the biggest loan that would be permitted. Those planning to spend less than the maximum may still be able to afford the home with the higher payment.

Today, the would-be seller should be on the lookout for a sweet spot in market conditions. That will be the point at which home prices have gone up from today’s level, but mortgage rates remain low enough to bring lots of buyers into the market.

If price gains start to level off (which it seems like they are in the San Diego market), the seller should probably get the home on the market quickly, or rising rates could shave the sales price.

For more information on this topic:

619.384.2248
Ryan@RyanYourRealtor.com
Visit my Website: http://ryanyourrealtor.com
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