Monday, July 18, 2011
Friday, April 29, 2011
The Power of Bona Fide Pre-Approval
While most mortgage lenders offer a form of “pre-approval” for a loan, Princeton Capital is one of the few lenders anywhere that can do an actual fully underwritten loan pre-approval. With our banker and broker business model, pre-approvals for loans are not conditional on multiple minutiae of a transaction.It is difficult to overestimate the power of a real loan pre-approval and its role in a successful real estate transaction. Pre-approvals make the seller of a house more comfortable about the offer, and in a competitive market, this can make all the difference.
According to Bay Area Realtor Larry Miller of Coldwell Banker, standard practice in the area is that a loan pre-approval accompanies any offer on a home. When the pre-approval comes from Princeton Capital, he is able to give the seller complete confidence that buyer is, in fact, qualified and the transaction will be able to close. Not so with many other pre-approvals, which are not fully underwritten and thus are only worth the paper they’re printed on.
“If a seller is looking at two different offers, they can feel much more confident with the Princeton Capital one,” said Miller.
The difference between the loan pre-approvals the real estate agent sees from other loan companies and from Princeton Capital is the reliable commitment of the latter that the buyer does indeed qualify.
Looking over pre-approval letters from three diffferent companies, one of which being Princeton Capital, Miller pointed out the extensive conditions on the other letters – one of which included more than eight conditions under which the”pre-approval” was not guaranteed.
“How much confidence can this give you?” asked Miller, in reference to the extensive conditions and lack of guarantees on one pre-approval letter.
A true pre-approval from Princeton Capital gives homebuyers a huge competitive advantage when making an offer on a home, because sellers can be completely confident that the buyer is indeed able to purchase the home, speeding up the transaction and ensuring its success.
Wednesday, April 13, 2011
Wednesday, April 6, 2011
Lower Loan Limits Expected in October
At the beginning of the mortgage meltdown a couple of years ago, Congress enacted emergency legislation raising the limits on High Balance Conforming Loans.
These loans are designated “conforming,” meaning lower interest rates and typically a slightly easier transaction to get approved and closed when compared to Jumbo (or non-conforming) financing. The High Balance variety is only available in designated high cost areas, like the San Francisco Bay Area.
Currently the “temporary” limit on these loans is $729,750. This means that if you put 20% down on a $900,000 home, you can get a conforming loan in the amount of $720,000. Effective October 1, 2011 the emergency legislation expires and is not expected to be extended. This lowers this High Balance Conforming Loan to $625,500.
So, what does that mean to you? If you buy the same $900,000 home and put 20% down, your loan will now be considered a Jumbo loan. Rates on Jumbo loans are typically 1-1.5% higher, so if today you could get that loan for, say, 5% your payment would be $3865.12. The same loan amount using the Jumbo rates would be 6-6.5%, bringing your payment to $4550.89. Over 30 years, that totals over $246,000! The other option would be to put a larger down payment on the property, to the tune of nearly $100,000.
The important thing to note is that if you are looking for a loan to purchase a home, or refinance the one you already have, now is the time to move forward. The limit will remain at the higher point until the first of October, giving home buyers the spring and summer seasons to purchase a property before the high limits are gone.
To find out what the current loan limit is in your area, you can access the Fannie Mae website to see a county-by-county spreadsheet.
According to Alan Russell, a local mortgage professional, “The higher limits have really helped people get into homes here in the Bay Area. Once those limits reduce, there will be fewer options for those trying to get into the real estate market. I’ve been talking to all my buyers and giving them fair warning that the time to move is definitely now.”
These loans are designated “conforming,” meaning lower interest rates and typically a slightly easier transaction to get approved and closed when compared to Jumbo (or non-conforming) financing. The High Balance variety is only available in designated high cost areas, like the San Francisco Bay Area.
Currently the “temporary” limit on these loans is $729,750. This means that if you put 20% down on a $900,000 home, you can get a conforming loan in the amount of $720,000. Effective October 1, 2011 the emergency legislation expires and is not expected to be extended. This lowers this High Balance Conforming Loan to $625,500.
So, what does that mean to you? If you buy the same $900,000 home and put 20% down, your loan will now be considered a Jumbo loan. Rates on Jumbo loans are typically 1-1.5% higher, so if today you could get that loan for, say, 5% your payment would be $3865.12. The same loan amount using the Jumbo rates would be 6-6.5%, bringing your payment to $4550.89. Over 30 years, that totals over $246,000! The other option would be to put a larger down payment on the property, to the tune of nearly $100,000.
The important thing to note is that if you are looking for a loan to purchase a home, or refinance the one you already have, now is the time to move forward. The limit will remain at the higher point until the first of October, giving home buyers the spring and summer seasons to purchase a property before the high limits are gone.
To find out what the current loan limit is in your area, you can access the Fannie Mae website to see a county-by-county spreadsheet.
According to Alan Russell, a local mortgage professional, “The higher limits have really helped people get into homes here in the Bay Area. Once those limits reduce, there will be fewer options for those trying to get into the real estate market. I’ve been talking to all my buyers and giving them fair warning that the time to move is definitely now.”
Monday, March 28, 2011
Weekly Market Commentary
This week brings us the release of five reports that are considered relevant to mortgage rates but some of the data is considered to be very important and one is arguably the single most important data we see each month.We also have two Treasury auctions that have the potential to swing bond trading enough to change mortgage rates. There are events that are relevant to mortgage rates, or at least have the potential to be, each day of the week, so we can expect to see a fair amount of volatility in the markets and possibly mortgage rates the next few days.
The first is February’s Personal Income & Outlays report early this morning. This data helps us measure consumers’ ability to spend and current spending habits, which is important to the mortgage market because of the influence that consumer spending- related information has on the financial markets.
If a consumer’s income is rising, they are more likely to make additional purchases in the near future. This raises inflation concerns, adds fuel for economic growth and has a negative effect on the bond market and mortgage rates. Current forecasts are calling for a 0.3% increase in income and a 0.5% rise in spending. Smaller than expected increases would be ideal for mortgage shoppers.
March’s Consumer Confidence Index (CCI) will be posted late Tuesday morning. This index gives us an indication of consumers’ willingness to spend. Bond traders watch this data closely because consumer spending makes up two-thirds of our economy. If this report shows that confidence is falling, it would indicate that consumers are more apt to delay making large purchases. If the report reveals that confidence looks to be growing, we may see bond traders sell, pushing mortgage rates higher Tuesday morning. It is expected to show a decline from February’s 70.4 reading to 65.0 for March.
The biggest news of the week will come early Friday morning when the Labor Department posts March’s Employment report, giving us the U.S. unemployment rate and the number of jobs added or lost during the month. This is an extremely important report to the financial and mortgage markets. It is expected to show that the unemployment rate remained at 8.9% and that approximately 185,000 payrolls were added during the month. A higher unemployment rate and a smaller than expected payroll number would be good news for bonds and would likely push mortgage rates lower Friday morning because it would indicate weakness in the employment sector of the economy.
The Institute for Supply Management (ISM) will release their manufacturing index late Friday morning. This index gives us an important measurement of manufacturer sentiment by surveying trade executives and is one of the more important of this week’s data. A reading above 50 means more surveyed executives felt business improved during the month than those who said it had worsened.
This month’s report is expected to show a reading of 61.2, which would be a small decline from February’s reading of 61.4. This means that analysts think business sentiment remained fairly close to last month’s level. That would be neutral news for the bond market and mortgage rates. A noticeable decline would be favorable for rates while an increase would be negative.
In addition to this week’s economic reports, there are two relatively important Treasury auctions that may also influence bond trading enough to affect mortgage rates. There will be an auction of 5-year Notes Tuesday and 7-year Notes on Wednesday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. However, strong sales usually make bonds more attractive to investors and bring more funds into bonds. The buying of bonds that follows usually translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET auction day, so look for any reaction to come during afternoon hours.
Overall, I expect to see the most movement in rates either Tuesday or Friday. Friday is the most important day of the week with the employment numbers and ISM index being released, but we will likely see a fair amount of movement in rates Tuesday also. I am expecting tomorrow or Wednesday to be the calmest day of the week, but we should still see some changes to rates those days. In general, it will probably be a pretty active week for mortgage pricing. Accordingly, it would be prudent to maintain contact with your mortgage professional if still floating an interest rate.
Thursday, March 24, 2011
5 Rules for Mortgage Insurance Tax Deductions
President Obama has signed a bill that has extended the tax deduction of mortgage insurance through 2011. Here are the rules to remember in regards to this tax deduction:1. Your purchase or refinance loan must close before Dec 31st, 2011.
2. Household income must be $100,000 or less to get the full write off of the insurance premium.
3. The amount of the write off is reduced by 10% for every $1000 over $100k, with it phasing out at $109,000. This means if you make over $109k as a household you can not write off mortgage insurance.
4. It applies to your primary home and one other residence that the tax payer uses.
5. All forms of mortgage insurance qualify for this. So if you have a FHA or conventional loan, they qualify. If you have paid upfront mortgage insurance with a VA, FHA or USDA loan you can also use this as a tax deduction. The amount is just divided over a 7 year period.
The above is not intended as tax advice. Seek out a tax professional for advice about mortgage insurance deductions.
Tuesday, March 22, 2011
Points vs. No Points
Advantages of Paying Points
- Points paid on a purchase transaction are a tax deduction in the year of the close of escrow
- Paying points can dramatically reduce the interest rate on the loan
- Lowering the rate lowers the payment, lowering the income needed to qualify
- A lower rate saves the buyer thousands of dollars over the life of the loan
- There’s never been a better time to buy down a rate
- Historically .50 point lowered the rate by .125%
- Now .50 point lowers the rate by nearly .20%
Thursday, March 10, 2011
What Google’s New Algorithm Means for Real Estate
According to Google, 11.8% of search queries are significantly different after this not-so-subtle change in the formula.
What does this have to do with real estate? Real estate searches typically benefit most from what are referred to as “long tail searches” – searches with phrases, such as “homes for sale in San Mateo near downtown.”
Now these long-tail search queries will be treated differently by Google’s algorithm, though exactly how this will play out is unclear at this point. Real estate is an industry particularly affected by this change due to the nature of online searches regarding it, which tend to be pretty specific.
According to a recent press release, Google implemented the changes to their system in order to hamper content-farm sites (internet spam sites looking to gain traffic that lack quality content).
“This update is designed to reduce rankings for low-quality sites—sites which are low-value add for users, copy content from other websites or sites that are just not very useful. At the same time, it will provide better rankings for high-quality sites—sites with original content and information such as research, in-depth reports, thoughtful analysis and so on,” stated the official Google release.
The major takeaway from this is that paid-for SEO (search engine optimization) is becoming less reliable, especially in the real estate field, and creating quality content is the most important thing with online marketing.
Subscribe to:
Posts (Atom)