Real Estate

According to House Representative from California John T. Doolittle’s website, new legislation is in the works to stop dozens of banks from lending to illegal aliens.

One would think that with the potential 5 or 6 percent commission to be made in a now-slower market that real estate brokers would be jumping at the chance to show G places, but some have been bewilderingly slow toeven return calls. So it was a refreshing change of pace when I responded to an ad for a place in Yonkers--just north of the Bronx and the city line--and the broker responded promptly and proactively to my inquiry.

If as well as paying your mortgage you are also paying off a number of unsecured debts such as credit cards, charge cards, personal loans etc. you are probably paying too much every month. Interest rates on home loans are generally much lower than those on unsecured debts. Have you considered Debt Consolidation? By consolidating all your unsecured debts in with your outstanding mortgage your monthly payments can be significantly reduced.

A foreclosure is a legal process where the bank or other creditor takes control of the collateral for a promissory note in default. This collateral is a parcel of real property, and the lender either sells or repossess this property. The process is slightly different from state to state, but there are basically two types of foreclosure, judicial and non-judicial.

Fannie and Freddie subsidize the real estate mortgage market by buying mortgage loans originated by banks and other lending institutions. They also package mortgages and sell them to insurance companies, pension funds, and other financial institutions as mortgage-backed securities.

Getting prequalified for a mortage determines how much you can afford to pay for your home. It allows you to act as quickly as possible when you find the right home, especially when there are other interested buyers. Very importantly, it also shows the seller that you are serious about purchasing the property and that you are able to afford it.

Chapter 7: Shopping for and securing the Best Mortgage Terms

When you're ready to put your property on the market, you want to get the most qualified buyers to take notice. This is especially the case if you have already purchased another property or need to relocate within a short time span. Rather than spending days bickering over a fair selling price or financing terms, you may want to draw those who are ready to do business, so you can finalize the deal as soon as possible. If that's the case, here are some tips that can help to attract those who are ready to sign on the dotted line.

A real estate agent, who is professional can help you to negotiate all of these questions. Once you have narrowed down your options, made a decision about the type of home you’re looking for and at what monthly mortgage payment, and at what financing terms. After these steps have been completed it is time to begin looking for a home. Most Realtors are able to send you listings on a daily basis. This way, as soon as a new property comes on the market, you will know about it as soon as possible and be able to see the property in a timely manner. In this market, even though it is slowing down considerably, it is still important to see the home first. And if you like the home put your offer in as expeditiously as possible.

Compare the mortgage terms and interest rates offered by various mortgage lenders. Even a slight difference in your interest rate can add up to thousands of dollars over the length of your mortgage. A pre-approval from the lender of your choice will not only give you added confidence when shopping for a new home, but could give you added leverage when bargaining with the seller. A pre-approval will let you know the exact amount you are approved for and will save you time after your offer has been accepted by the seller.

Mortgage Brokers are companies that originate loans with the intention of brokering them to wholesale lending institutions. A broker has established relationships with these companies. Underwriting and funding takes place at the wholesale lender. Many mortgage brokers are also correspondents, which is why many of them also claim to be mortgage bankers.

700-719 – Able to obtain favorable financing terms

Exactly what is a home equity line of credit or HELOC? A home equity line of credit, which lenders and mortgage brokers refer to as a HELOC, is a different kind of home loan. An equity line has different rates and terms from a conventional first mortgage. In a standard home loan, or mortgage, your monthly payments cover both the principal loan and the interest you are charged.

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.

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): ...

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.

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.

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).

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.

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 the card. When a cardholder accumulates 5,000 points a check for $50 will be sent to the cardholder which can be used to pay down a mortgage balance (or for any other use). Interestingly there is not limit on how much can be earned (I’ll bet a box of donuts this changes very soon).

FNMA: The Federal National Mortgage Association is a secondary mortgage institution which is the largest single holder of home mortgages in the United States. FNMA buys VA, FHA, and conventional mortgages from primary lenders. Also known as "Fannie Mae."

Had the buyer of the home done a home inspection prior to the purchase, surely a competent home inspector would have uncovered this problem and repairs could have been requested by the buyer. Further the seller should have disclosed the condition of the heater in the disclosure documents if there was no heat present in the home. Also there's a good chance that the buyer's real estate professional might have noticed this during his walk-through inspection of the property prior to close of escrow.

Today more and more borrowers opt for No Money Down Purchases. And more and more lenders are creating programs specifically for this purpose.

A No Money Down purchase is where a borrower receives 100% financing for the purchase of a home. This can be in one loan, or in a combination of two loans (a first mortgage and second mortgage or HELOC) so the borrower does not have to make any down payment.

Some things to know about No Money Down Purchases:

* Many people opt to purchase with no money down even though they have adequate reserves to cover a down payment if they chose to do so. With interest rates as low as they have been, it often makes more sense to borrower the money at a low rate, and you use cash to pay off other bills or spend on something with a higher return. Also, interest on a mortgage is generally tax deductible.

* Even though you are not making any down payment, there still will probably be closing costs that you may be obligated to pay. To avoid paying some or all of the closing costs, you may want to consider asking for seller concessions. If seller concessions are allowed, the person selling you the home can pay for some or all of your closing costs. With concessions and the right loan program, it may be possible to go to the closing table and buy your home with no money out of your pocket!

* A conventional second mortgage or Home Equity Line of Credit (HELOC) can be used along with a first mortgage to potentially reduce total monthly mortgage payments (as opposed to one loan for 100%) and prevent the need for mortgage insurance.

This summer, Bill Wagar makes his second trip to France. Only this time, the World War II veteran is traveling on his own dime.

Wagar, 82, is paying for the trip with a reverse mortgage, a loan available to people age 62 and older that converts their home equity into cash. Wagar, a recent widower and General Motors Corp. retiree, said he plans on retracing the steps he took on Omaha Beach while serving in the Army.

"I've been retired for 20 years and living on a fixed income. I do all right, but I wanted to do some things I didn't have the cash to do," the Livonia man said. "I don't plan on remarrying, and I have no plans to move out. For me, this works out well."

Be careful when responding to advertisements about bill consolidation. If they are about home mortgages, refinancing or equity lines of credit, that's one thing. But they actually may be about bankruptcy. Don't get involved with bankruptcy unless you understand what it means and have evaluated all your other options.

The Federal Trade Commission (FTC) cautions consumers to read between the lines when faced with ads in newspapers, magazines or even telephone directories that say:

“Consolidate your bills into one monthly payment without borrowing.�

“STOP credit harassment, foreclosures, repossessions, tax levies and garnishments,�

“Keep Your Property.�

“Wipe out your debts! Consolidate your bills! How? By using the protection and assistance provided by federal law. For once, let the law work for you!�

You’ll find out later that such phrases often involve bankruptcy proceedings, which can hurt your credit and cost you attorneys’ fees.

If you’re having trouble paying your bills, consider these possibilities before considering filing for bankruptcy:

* Talk with your creditors. They may be willing to work out a modified payment plan.
* Contact a credit counseling service. These organizations work with you and your creditors to develop debt repayment plans. Such plans require you to deposit money each month with the counseling service. The service then pays your creditors. Some nonprofit organizations charge little or nothing for their services.
* Carefully consider a second mortgage or home equity line of credit. While these loans may allow you to consolidate your debt, they also require your home as collateral.

Second mortgages are a good financial instrument for homeowners considering debt consolidation or home improvements. Here's a short explanation of a second mortgage. Click on the link for the entire explanation.

A second mortgage is a loan that is secured by the equity in your home. When you obtain a second mortgage loan the lender will place a lien on your house. This lien will be recorded in 2nd position after your primary or 1st mortgage lender's lien, hence the term second mortgage.

A second mortgage is also sometimes referred to as a home equity loan. There is no difference between a home equity loan and a second mortgage. These are just two different terms for the same subject.

A second mortgage can either be a fixed-rate loan or an adjustable-rate credit line. Interest rates and loan program terms will vary from lender to lender so it is important to shop around and compare before committing to any one offer.

Confused about how to get a loan for your dream house? The folks over at Miami Real Estate Agent have put together an easy-to-use checklist that will help.

Shopping for a mortgage can be quite an overwhelming experience. Especially if you are a first time home buyer and have little to no knowledge about the loan process. If you have shopped online you have already found hundreds of mortgage sites quoting low ball rates for every loan term under the sun. One would think that if you just spend a few hours online you will find the lowest rate available and receive the best deal. This is not rarely the case. Don't play the interest rate game without a load of information, Read this first!

If you are cash strapped, a negative amortization loan might do the trick. But make sure you understand how it works. You might start with a negative amortization loan and then refinance your home when you have better cash flow.

I just learned about something really devious called a negative amortization mortgage (or any other type of loan). As Dr. Don explains:

Negative amortization means that your loan balance is increasing instead of decreasing. With a negative amortization loan, when your monthly payment on an ARM (adjustable-rate mortgage) isn't enough to cover the interest expense and principal payment, the shortage is added to your loan balance.

Say, for example, than in a normal mortgage your monthly payment is $2000. Of that, $400 may go towards paying off the principal and $1600 may go towards paying interest on the loan. With a negative amortization mortgage your monthly payment on the same size loan could be $1200 instead of $2000, but each month the entire $1200 would go towards paying interest -- and an additional $800 could be added to your principal. Thus, at the end of each month you owe more on your house than you did at the beginning of the month.

Our mortgage calculator doesn't calculate adjustable rate loans. You might want to try another calculator (the advertising bar at the top usually has other mortgage calculators). Here's a brief explanation of an ARM.

The Adjustable Rate Mortgage (ARM) It is often referred to as an ARM. The interest rate charged on this loan is pegged to an index. If the index changes, the rate will change accordingly. The index could be pegged to the following: Treasury Bill Rates, The Prime Rate, Libor, 6 month CD rate and the average rate for loans closed, called the Federal Housing Finance Boards National Average Contract Mortgage Rate. The indexes are usually published in the newspaper.

The ARM initially offers low rates to attract people to this type of loan since the initial rate is low. From here, the rate could go higher. There are several components that go in to calculating an ARM.

Our mortgage calculator works for fixed rate loans. You should understand what it means to get a fixed rate or a variable rate loan. Here's info on fixed rate loans.

The seller accepted your offer and the lender approved your loan application. So what type of mortgage do you pick given the choices in the market today? There are quite a few considerations: What is your future earning potential, how long do you plan to keep the house and where do you think interest rates are going. Finally, how big should your mortgage be? The basic rule is the annual upkeep of your property (mortgage payments, utilities and insurance) should not exceed 30% of your gross annual income.

Fixed Rate Mortgage This is the most common type of loan. The loan is repaid with monthly payments of principal and interest over a fixed term. The interest rate stays the same over the life of the loan. The term can be 10, 15, 20 or the popular 30 year term. In this type of arrangement, the interest is front loaded. In the first few years of the loan, interest will be paid down. It’s only later that you will start building equity.

A fixed rate mortgage is ideal for those who plan to stay in there houses for a long time.

Zawodny has a full series on his experience buying a house. I don't think he included the mortgage calculator, but there's a great one on this blog. Here's the part where he signs closing documents. Things didn't go smoothly.

On Tuesday we finished up nearly all the paperwork necessary for be to become the owner of the new place. That involved, among other things, going to an office of First American Title to sign about a billion documents, most of which contained redundant information. When I got there, I began looking over the paperwork. The first thing I noticed is that their one page estimate of how much money I'd owe for closing did not match the estimate I had previously seen. This one was about $4,000 more. That's a problem because I already had a cashier's check (got it that morning) made out for what I believed to be the proper amount. After hunting thru the other paperwork I figured out the bug. It was a stupid typo. Someone had transposed a few numbers when copying them off a Washington Mutual document. They seemed to think I had paid over $4,500 for a home appraisal (it was really $250). I brought this to the attention of the First American person who was there to work with me. She was surprised by this and set about calling to figure out what to do. Shortly after, my realtor arrived and I told her what happened. She explained that the copy I had seen earlier via e-mail was the corrected one. She had spotted this error and got it corrected earlier in the day before I ever knew. But the brain-trust at First American didn't bother to up the updated version in my packet.

I agree with the sentiment expressed. For a link to the Mortgage Professor and lots of info on Mortgages and Mortage Calculators, click the link above.

The Mortgage Professor

This site keeps getting better and is a tremendous resource for buyers and sellers.

This site has a great glossary of economic terms related to Home Mortgages. I've included the "A" section, but click above for the rest of the alphabet.

Economic Terms Glossary by Mortgage Refinance Info

Adjustable-rate Mortgage (ARM): A mortgage loan with an interest rate subject to change over the term of the loan. The interest rate is tied to the performance of a specified market rate, such as the cost of funds index calculated by the 11th District of the Federal Home Loan Bank Board, or the yields on one-year or six-month U.S. Treasury securities.

Amortization: The paying down of principal over time. In a typical mortgage loan, the principal is scheduled to be paid off, or fully amortized, over the term of the loan.

Average Hourly Earnings: A monthly reading by the Bureau of Labor Statistics of the earnings of hourly plant and nonsupervisory workers in the private sector. While the AHE excludes salaried workers (unlike the employment cost index), it is available each month with only a brief lag. Released by BLS as part of the Employment Situation release, the report is generally issued on the first Friday of the month for the prior month.