Mortgage Calculator

I have sensed that we were in the midst of a bubble in housing for some time now. Most of my experience was anecdotal until a few months ago. I have recently heard stories of people receiving bids on $400,000 and $500,000 properties, condominiums mind you, $80,000 over the asking price. I chalked it up to a hot market (Bay Area) and low interest rates.

But when you attempt to rationalize the empirical evidence, it becomes clearer that things as they currently stand are unsustainable in the short term. The Federal Reserve has been tightening interest rates since June and recently changed their language toward an inflationary bias. This has caused all sorts of negative market reaction.

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Now what is the flip side of the equation – most sellers are having a hard time selling homes because they are pricing their homes correctly – they are dropping prices but that does not help most buyers in the real world – a better strategy would be to give aggressive seller concessions / down payment assistance to make the house “best on the block” without wasting any money on renovations thinking a new kitchen (that adds another couple of thousand dollars to your cost of the house) will move the house faster.

I always thought that his concept works phenomenally well with our kind of business – you know like buying really low, fixing it and flipping it at full market value – if you have $30,000 to $50,000 in equity after repairs – you have enough room to underestimate repair costs, give generous seller concessions, help with down payment assistance, buy appliances, pay bird dog fees and still makes tons of dough at the end of the day.

Insurance against a loss by a lender in the event of default by a borrower (mortgagor). A private insurance company issues this insurance. The premium is paid by the borrower and is included in the mortgage payment.

Both candidates for Virginia Governor this year, Lt. Gov Tim Kaine (D), and former Attorney General Jerry Kilgore (R) have competing plans to deal with problem of the skyrocketing property taxes that voters are paying on their homes. What are the plans?

Based on PMI's Risk Index model, as of January 2005, the average risk value of the 50 largest Metropolitan Statistical Areas (MSAs) is 161. This implies that on average, there exists a 16.1 percent probability of an overall house price decline, as measured within the next two years and across the 50 largest housing markets.

The winter 2005 average risk value decreased sequentially, quarter-over-quarter, by 13.4 percent. As of autumn 2004, PMI Risk Index data showed that the average risk value of the 50 largest MSAs was 186, which implied an 18.6 percent probability of an overall house price decline, measured within the next two years and across the 50 largest housing markets.

Analysts at PMI have attributed the average decrease to improving nationwide economic conditions indicated by generally lower regional unemployment rates and increasing (or less negative) job creation. Eight of the nine MSAs ranked at the top of PMI's Risk Index, but did experience a substantial increase in risk. For these markets, another quarter of record home price appreciation has further dented home affordability even at mortgage rates close to historic lows. As affordability for these MSAs drifts lower, this signals a further misalignment of home prices with long-term economic fundamentals causing the probability of a two-year price decline to escalate.

Rising mortgage rates have now crossed a threshold.

Mortgage company Freddie Mac says 30-year mortgage rates have climbed for the sixth straight week and are now averaging more than six percent for the first time in eight months. This week's survey puts the average for 30-year fixed-rate mortgages at 6.01 percent, up from 5.95 last week.

A competing report from Bankrate-dot-com has rates taking an even steeper jump, to 6.15 percent.

"What's happening with rates is hurting the seller worse than it is the buyer, and home prices will flatten out if not go a little lower," said Bob Long, president of the Georgia Association of Mortgage Brokers.

That's the feeling among industry experts who have marveled over housing's vibrancy — all the way through the 2001 recession as well as the economy's recovery. Powered by low mortgage rates, sales of both new and previously owned homes clocked record highs four years in a row — from 2001 to 2004.

This is Money's mortgage calculator works out how much you can borrow.

Meanwhile, new-home sales in February soared by 9.4 percent — the biggest increase since December 2000_ as still-attractive mortgage rates lured buyers, the Commerce Department said in a separate report.

The over-the-month increase boosted sales of new homes to a seasonally adjusted annual rate of 1.2 million. Sales posted solid gains in all parts of the country in February. The pickup comes after sales dropped by 8.6 percent in January as bad weather kept house hunters and prospective buyers indoors.

Home sales, which posted record highs last year, are expected to slow this year as mortgage rates move higher. Still, analysts believe the housing market should remain in good shape.

The median sales price of a new home — where half sell for more and half sell for less — rose to a record high of $230,700 in February.

Bait and switch. You know the term. It is most commonly used when a retailer advertises a great sale on a large screen television or new car. When the buyers flock to his store, that item is sold out or the ad was a mistake. However, the retailer has something “almost as good” that he will let go at a steal to make up for the confusion. Well this practice is rampant in lending as well.

Here are two examples of mortgage bait and switch.

A borrower commits to a mortgage under a set of terms: a certain interest rate, a fixed or adjustable mortgage with a specified frequency and method of adjustment; length of loan; and so forth. Then, at the closing table, the borrower realizes that the loan documents specify a higher rate, more frequent adjustment, a five year note with a balloon or other terms to which he was sure he had not agreed.

Help is available to borrowers who have claims against their lenders for violating the Truth in Lending Act and other laws regulating credit transactions. Such violations may be a defense to a mortgage foreclosure. If there is a violation, you may be able to void the mortgage and apply 100% of your payments to principal. You may also be able to recover money damages.

If the answer to any of the following questions is "yes," please arrange for a professional auditor to review your loan documents (including demand and collection letters, correspondence, and any account histories or monthly statements).

These authors seem more comfortable drawing from a deep and abiding set of principles culled from experience. Mom teaches bankruptcy law at Harvard Law School; daughter is a former consultant and HBS grad. Together they wrote the The Two-Income Trap: Why Middle-class Parents Are Going Broke, a brilliant book detailing the vast changes in the personal finance landscape of the past two decades. The rules have changed profoundly, they argue, for most Americans. Paying for the essentials of life, such a mortgage and health care has become a more difficult challenge for myriad reasons, among them a different attitude about lending standards.

Shopping for a new home can be one of the more challenging tasks you decide to take on. People buy real estate for many different reasons - build equity...stop renting...be able to pursue a hobby (like drumming or sculpture) without bothering neighbors...show off their collections...house their "toys" (think ATV's and boats)...or any one of a thousand others.

It's fun and exciting to work with buyers as they explore new home possibilities. But - it can also be frustrating and discouraging for you if some basic homework hasn't been done before you start the hunt.

So - to make the process a little easier, here are some tips to consider before picking up the classifieds, surfing the web or calling a Realtor(r): ...

In most cases, you will come out ahead by sticking to a 30-year payment schedule and investing your extra money in a market-matching index fund.

Traditionally Australian investors have thought along the lines of property as a tangible savings account with a helping hand (e.g. rent). Thankfully property investment can be orders of magnitude more powerful than that simple scenario by changing a few commonly held beliefs.

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Piggybacks and mortgage insurance are two common ways of getting a home loan with a down payment of less than 20 percent. When a buyer borrows more than 80 percent of the home’s value, lenders deem that loan riskier. Some lenders cushion themselves from that risk with mortgage insurance, which reimburses the lender for costs associated with foreclosure. The lender is the beneficiary of a mortgage insurance policy, and the borrower pays the premiums.

A few years ago, lenders began marketing piggyback mortgages aggressively. A piggyback loan works this way: You get two home loans _ a primary mortgage for 80 percent of the purchase price, and a higher-rate secondary mortgage (the piggyback loan) for the rest of the borrowed amount. Piggybacks appeal to homeowners because the combined monthly payments usually add up to less than the monthly payments on a single loan with mortgage insurance.

Having to pay closing costs for two loans erases some of the advantage of piggybacks, but they still tend to be cheaper in the short run. What about the long run? The answer differs for each homeowner’s situation because it depends on the interest rates, the pace of home appreciation and the length of time the borrower plans to own the house. Ask the mortgage lender or broker to give you a side-by-side comparison, possibly with the help of a calculator on the Web site of the Mortgage Insurance Companies of America, the industry’s trade group.

Donohue says the really intriguing use of a jumbo reverse mortgage comes in the field of estate planning. In this scenario, a wealthy couple withdraws equity from their home, reducing the value of their estate. They make a gift of money to children or grandchildren through 529 college savings plans or outright gifts.

They also fund an irrevocable insurance trust that buys life insurance on their lives. The trust ownership keeps the insurance out of their estate, and when the couple dies, their children receive the life insurance proceeds tax free. They can then pay off the reverse mortgage and keep the house. Or keep the life insurance cash, plus whatever equity is left after the house is sold and the reverse mortgage is repaid.

As mortgage rates jumped this week, borrowers got nervous and they applied in greater numbers for adjustable-rate loans.

The benchmark 30-year fixed-rate mortgage rose 13 basis points to 6.00 percent, according to the Bankrate.com national survey of large lenders. A basis point is one-hundredth of 1 percentage point. The mortgages in this week's survey had an average total of 0.30 discount and origination points. One year ago, the mortgage index reached its lowest point of 2004, at 5.41 percent.

The benchmark 15-year fixed-rate mortgage rose 15 basis points to 5.56 percent. The benchmark 5/1 adjustable-rate mortgage rose 11 points to 5.41 percent.

However, a redeeming quality of this book is the author's Real Data Calculator, which is available free from his company Web site at www.realdata.com. This valuable mortgage calculator can print a mortgage amortization chart, showing monthly principal and interest allocations, total interest paid and the loan's current balance.

January’s employment by the Bureau of Labor Statistics reports that employment in the mortgage industry hit an all time high of 489,400 full time employees. But, mortgage and non-mortgage broker jobs were 123,100, the lowest number since September of last year.

This is in line with the estimated 30-60% decrease in overall broker activity that has been reported during the most recent quarter.

Long-term mortgage rates have risen for the fifth straight week.

Freddie Mac says the average 30-year fixed-rate mortgage was 5.95 percent, up from 5.85 percent last week. One-year adjustable-rate mortgages averaged 4.20 percent, down from last week's 4.24 percent.

PowerCore provides mortgage brokers and their affiliates with sophisticated software without the expense and hassle usually associated with automation. Instead of purchasing and maintaining expensive networks, mortgage brokers ("parent branches") and their affiliates ("net branches") access programs and data over the Internet using a network belonging to an "application service provider" (ASP). Instead of a large up-front cost, there is a monthly fee based on the number of loans processed.

Being able to use the mortgage interest deduction on your income taxes does reduce taxes paid but it isn't, in and of itself, a reason to keep your mortgage. That's especially true in the later years of a mortgage, when most of the monthly payment is going toward the repayment of principal and less and less money is paying interest expense. You can input you loan balance, interest rate and remaining loan term in Bankrate's Mortgage Calculator and have the calculator run an amortization schedule that will show the remaining interest expense and the interest expense year over year.

The statewide median price paid for homes and condominiums in February was $407,000, up 21.1 percent from $336,000 the same month a year ago and up 1.8 percent from $400,000 in January, real estate research firm DataQuick Information Systems said Wednesday.

Sales of new and resale homes in February totaled 41,800, down 1.2 percent from January, but up 3.5 percent from 40,400 the same month a year ago.

Despite some economists' projections, the state's housing market continues to run hot due to low mortgage interest rates, which have made it possible for buyers to qualify for a home loan, and persistent demand for housing, real estate analysts said.

Licensing of mortgage companies' individual sales representatives can play a major role in a newly launched effort to reduce or eliminate the number of housing foreclosures in Pennsylvania caused by predatory lending practices.

Also important in the battle against the rising tide of foreclosures is better access to accurate loan information, and additional advance notification for homeowners facing loan defaults, says Greg Simmons. He is a Pittsburgh-area member of the advisory panel that participated in a new report on the problem unveiled Wednesday by the state Department of Banking.

"Right now, mortgage companies are licensed, but their sales representatives are not," said Simmons, program manager for anti-predatory lending for the Pittsburgh Community Reinvestment Group. "A bad sales representative can move within the company from one office to another, unless that representative is licensed, which would allow the department to revoke his or her license."

Fannie Mae provides several calculators to help you evaluate the components that factor into buying a home and getting a mortgage.

The Fannie Mae True Cost Calculator� lets you compare different types of loans in terms of monthly payments, tax implications, closing costs, and other fees. It gives you the Fannie Mae True Cost Rate, which is the total cost of a mortgage loan -- including all costs and fees -- expressed as a percentage rate per year. You can calculate this rate over the full term of the loan or for the number of years you plan to hold the loan.

PMI mortgage insurance now refuses to insure more than $350,000 of risk in speculative markets like San Jose/San Francisco.

New house sales plummet 9.2% in January nationwide, while median prices fall 13%.

Speculators now account for 25% of all purchases, and an additional 13% are vacation houses, making market very likely to go into free-fall when they all sell.

This winter's sales volume in Santa Clara County is only 44% of what it was last summer, the worst ratio in at least 10 years. Prices are already down every month for Nov, Dec, Jan, and Feb.

Real estate, the Atlas that carried California to economic well-being in 2004, may no longer be able to support economic recovery, a report warned today, predicting an end to the state's red-hot housing market.

The study, written by the UCLA Anderson Forecast, said the housing sector has been maintaining the California economy, but its current growth path both in building and in prices is "clearly unsustainable." UCLA Anderson issued two reports, one on the U.S., one for California.

Rough times are likely ahead for both the California and U.S. economies, according to the Anderson Forecast. California's real estate market is cooling, the report said, and that could spell the end to California's recovery.

The forecast noted that half of the private-sector jobs created in California in the last two years are connected in some way to real estate. Property values in the last years shot up a jaw-dropping $1.7 trillion, equivalent to about 35 percent of the total personal income in California since 2001.

"Try to get concessions from sellers before you enter serious negotiations," Eldred said.

In a friendly and offhand manner, you might say something like, "Have you thought about a lower price? Have you thought about including the drapes and washer and dryer?" he said. To your surprise, the seller might say yes, but if not, don't push it at this point.

Don't nitpick. Don't walk through the house pointing out flaws or sneering at paint and rugs. Assure the seller that your building inspector also won't nitpick because sellers, especially those with older homes, are afraid of inspections, Benson said.

This approach puts the seller at ease, but do tell the seller upfront that you're aware of obvious serious flaws--an ancient furnace or a leaky roof--and that these will be reflected in your offer. Sellers will be more willing to accommodate on price at the beginning as opposed to being shocked by an inspector's report later on.

If your elderly parents need additional income, how would they make the monthly payments on a home equity credit line? Although the interest rate will be a little lower than for a reverse mortgage, they would probably have to borrow more money each month to make the monthly payments. Eventually, they will use up their credit line. However, with a senior-citizen reverse mortgage there are no monthly payments, nor can the homeowners outlive their equity. The accrued principal and interest come due when both your parents either move out of their home for longer than 12 months, sell, or they both die. Then the home is sold, the reverse mortgage is paid off, and the remaining equity goes to their heirs. But the up-front reverse-mortgage fees can be substantial. For this reason, unless you expect at least one of your parents to live in the home at least five years, a reverse mortgage is usually not a good financial idea.

While the bank that's handling the end loan has no problem changing the total of the end loan to reflect the actual construction cost of the house—fortunately the original construction price wasn't at the upper limit of what we could afford—the construction loan, which is based on the quotes you have from before the price increase that happened as you were building the house, IS FIXED. There are check points that you have to reach. When you reach those points you're handed a check, not for the amount that you've actually had to expend, but for the amount set down in the draw schedule.

Know what I'm sayin' here?

I do understand the reasoning behind this. It keeps unscrupulous individuals from running out and buying a new Mercedes with funds that are meant to be spent on building a house. But, when a home owner/builder can provide you with documentation detailing exactly what has taken place and why. And when the whole world knows that one sheet of plywood has doubled in price. And it's perfectly clear this cat isn't walking around showing off his **boucoup bling**, isn't there some way to cut him some slack and give him some of the cash he needs to proceed with finishing the house? (I mean honestly, isn't this really the goal here?)

Consensus market opinion presently holds that the yield curve is too low and too flat. The following from the latest Investment Outlook by Bill Gross:

While typically the yield curve flattens as the Fed marches upward, it does so by intermediate and long yields going up less than short rates. What they call bull flatteners (long rates going down) are as rare as Ahi tuna that never hits the grill. How then to explain it, and is there an irrationality to this market that speaks to overvaluation or perhaps even a bubble?

Gross then explained that the low bond yield and flattening curve are caused mainly by (1) Asian Central Banks recycling their Dollars into US Treasuries to suppress their currencies and (2) the carry trades of speculative hedge funds.

What I find most curious is no one mentions the simple reason that may be bond yields are low because the underlying US economy is weak. Just maybe the US economy is on the verge of rolling over (see Confounding The Experts - A Gutsy Bond Bull). Maybe it's because the US economy is so highly leveraged that it simply cannot handle high long rates (see US Credit Situation).

According to PMI Mortgage Insurance,

Of the country’s 50 biggest cities, homeowners in San Jose stand the greatest chance of seeing their homes plunge in value . . . San Jose, Oakland, and San Francisco are three of the top five MSAs at the top of the risk index list.

The housing bubble in California may finally be ending. We Americans are spending every dime we come across, so much so that our savings rate this year may be the lowest since the Great Depression. With all these adjustable-rate mortgages, housing costs are going to rise in the coming years. While nominal household incomes in some California markets are up a nice 6-7% over 2003, they’re stagnant (and thus in real terms, they’re falling) in other housing-bubble cities like San Jose, Las Vegas, Phoenix and Washington, DC.

We're in the process of refinancing our mortgage, hoping to save a couple hundred bucks a month. It looks good so far, but one major obstacle is home value; if we don't own at least 20 percent of the value of our home, we have to pay private mortgage insurance (PMI), which eats about half of our savings from refinancing.

PMI is evil. It protects the lender from the expense of foreclosing on the property if you default. In other words, your bank thinks you might not be able to pay every month, so they're going to make you pay extra up front. Great, huh? We avoided PMI the first time around, even though we only put 5 percent down, by doing two mortgages -- one for the 15 percent to reach 20 percent (that loan was small enough to avoid PMI) and the second for the remaining 80 percent (which didn't get hit with PMI because we had the 20 percent).

After a home is sold the listing brokerage inputs the sold criteria into the Metrolist data base. This criteria includes the sale price of the home, interest rate of the mortgage and concessions made regarding the sale.

What is being overlooked by many brokerages are the sales concessions. A trend of late is to offer to pay the buyer's closing costs and sometimes a portion if not all of the downpayment (legally up to 5% for FHA loans).

While sellers have been offering incentives for a long time, it seems only lately that the incentives have become large enought to skew the statistics. While it is true that all the stats are not 100% correct, enough data is being reported correctly, that the trend for a neighborhood can be detected.

Lowy, Martin. 1991, High Rollers: Inside the Savings and Loan Debacle, Praeger Publishers, New York.

Good account of the S&Ls collapse detailing all of the business particulars. See notes below for bibliographic use.

The recent collapse of the Bank of Ephraim supports this point. This was a 99 year old bank from another part of Utah that operated a branch in the polygamist community of Hilldale, Utah for the last 9 years.

My understanding is that the collapse involved the kiting of mortgage loans. Polygamists, of necessity, build large dormitory like homes. They do most of the work themselves. To finance this, they obtain construction loans: low interest short-term loans used by builders to cover costs prior to sale of the building. The catch with construction loans is that you generally can't live in the structure until the loan is paid off, usually by the sale of the finished structure. This stipulation was apparently being treated loosely. The scam worked like this: 1) obtain a construction loan to expand an existing home, 2) start work, 3) quietly move family members into the unfinished parts of the structure, 4) plead distress and claim that the work cannot be finished without a new loan, 5) use the new loan to pay off the old loan, and return to step 2.

A mortgage broker is an independent real estate financing professional who specializes in the origination of residential mortgage loans. Mortgage brokers normally pass the actual funding and servicing of loans on to "Wholesale Lending Sources." A mortgage broker is also an independent contractor working with (on average)as many as 40 lenders at any one time. By combining professional expertise with direct access to hundreds of loan products, your broker provides the most efficient way to obtain financing tailored to your specific financial goals.

U.S. interest rates on 30- and 15-year mortgages rose to their highest levels since last August, according to a report issued on Thursday by mortgage finance company Freddie Mac.

U.S. 30-year mortgage rates rose to an average of 5.85 percent in the week ended March 10 from 5.79 percent in the previous week. It was the highest level for 30-year mortgage rates since a matching 5.85 percent in the week ended Aug. 12, 2004.

Fifteen-year mortgages also rose in the latest week, to an average of 5.38 percent from 5.33 percent. It was the highest level since 5.40 percent in the Aug. 5, 2004, week.

For years there has been talk about the end of the typical real estate agent. Internet marketing, 2% brokers, etc. Now, here comes a real threat. Home Depot is testing selling sell your own home kits in seven southern states. The kit itself is no big shakes, but the $12.95 price gets you a listing on Owners.com, which claims to be the largest for-sale-by-owner site with more than 5 million customers.

I’ve been waiting for this. There are already affiliation programs with credit cards and mortgage companies for reductions in application fees and the like but now you can earn points to be applied to your mortgage simply for shopping. United Financial Mortgage has joined forces with MBNA in issuing a MasterCard that will earn one point for each dollar spent on all retail purchases charged to t