Longfellow Nokomis Real Estate Guide

How the low mortgage rates affected my marriage

The last couple of days it's been like watching an exciting auctioneer. Except he's counting backwards and no one knows when he'll stop. 6.75%...6.5%...6%....6.5%...5.0%...6.5%....4.5%...and on and on we go.

Monica Tucker told me rates were so volatile yesterday that Wells Fargo wasn't even willing to quote a rate until yesterday afternoon (Edina Realty Mortgage and Wells Fargo are affiliates).

About 5 months ago I was certain when we hit 5% on mortgage rates we just weren't going to see them that low again. This was a delicious little morsel I got to pull out of my pocket and use to taunt my husband. You see, I am in the real estate business and I am a professional.  I told him it was time to look at refinancing. Our loan is  currently at 6%, and it needed to be around 5% before it made sense for us to pull the trigger. He drug his feet, and it started to creep up to 5.375. Then, it continued to go up. I was convinced we missed our opportunity. I was convinced it was going to cost us an extra $30,000 over the life of our loan because he didn't act fast enough. So, for the last few months, I've taken every opportunity given to me to kindly "remind" him that his cautiousness had "cost" us money. I've used the "I told you so" and the "remember that 5%" and the "haven't you learned your lesson about listening to me?"

Finally, we've locked in on a refinance deal at 4.75%. We're going to float this lock for the next 60 days to be sure the rate doesn't go any lower. Rest assured, we'll both be watching them closely.

For each eighth of a point they go lower, this wife and real estate agent will be eating crow! Now he get's to say "Aren't you glad you listened to me?", and "the tortoise wins the race", and "told you so."

Last night he finally said to me, "You know, I was worried we lost our opportunity to jump in on a lower rate."

We both learned a few valuable lessons:

1) When the opportunity comes along, grab it. Although we're at 4.75% now, we could have been at 5% 6 months ago. It doesn't make sense to gamble the market because even if you're a real estate professional, no one can predict what will happen. It's a shame to pass up a good deal to wait for a great deal, and miss out on both.
2) Be careful about the I told you so's.
3) Always listen to your wife.
4) Crow doesn't taste too bad as long as your laughing about it.

First Time Homebuyer Down Payment Assistance Programs

I don't usually post more than once per day, but this was something I wanted to be sure you knew about. With the new housing bill George Bush signed into law, the down payment assistance programs for first time homebuyers will be going away on October 1, 2008. 

There's a website calling for people to get involved to support the new law that's been proposed to allow these programs to continue.

http://www.dpagroundswell.org/

FHA Loans Make a Come Back!

We are seeing more and more home buyers use FHA loans to purchase their homes. We didn't see many FHA loans over the last 5 years, but in the last year they have made a come back!

Conventional loans are typically now available to buyers who have a 5% down payment. However, if during the appraisal process the appraisal notes the home is in "a declining market", the lender will require an additional 5% down.  So, if a buyer doesn't have a 10% down payment, they'll be looking at an FHA loan.

Like other loan products, FHA loan products have their fair share of critics and advocates. Realistically they aren't the basis of either good or evil. Like all loan products they can be a good choice if you know what it is you're getting. 

There are a few things you should be aware of.

1. If you're the seller there is the potential of an additional $395 dollars in fees you could be required to pay, that the buyer can't pay.
2. The buyer can ask for seller contributions up to 6% of the sale price of the home. Conventional loans cap the seller contribution at 3% of the sale price.
3. The FHA appraisal can result in work orders that you don't typically see with conventional loans. The amount of money the seller is required to put toward these work orders is negotiated up front on the purchase agreement. I've seen recent work orders include a requirement to repair flaking paint, repair the auto-reverse mechanism on a garage door, and replace a dead-bolt on an exterior door that could be only opened on the inside with a key.  These things must be repaired or replaced, and a re-inspection completed before the lender will agree to the loan.
4. If you're a buyer with an FHA loan, your choices with condominiums will be limited to those that have gone through an FHA approval process.  New condominium construction will be even tougher due to builders seldom pursuing the FHA approval process, and the development must be at least 65% sold and limit the number of rentals.
5. If you're a seller, and you're willing to accept an FHA loan, you'll increase the number of ready willing and able buyers who have access to purchase your home.  In this market, the more readily available you make your home, the better the chance you'll have of finding the buyer to purchase it!

Mortgage Fraud Contributes to an Already Sticky Situation

From the FBI website...

This photo is from a condo that was  involved in a mortgage fraud. The appraisal described “recently renovated condominiums” to include Brazilian hardwood, granite countertops, and a value of $275,000.

Minnesota is in the top 10 for mortgage fraud.

A Real Life Re-finance Story

You can't open a paper, read a blog, surf the net, or listen to the radio without being bombarded by real estate news. It's everywhere. Since the Fed has been slashing the rate, and mortgage rates have been so low, there are articles everywhere about refinancing. When should you refinance? How much will it cost? Is it a good move?  The rule of thumb is generally "wait until the interest rate is one point below your current interest rate."

I decided to find out for myself.  I had my husband, a real estate neophyte, fill out a mortgage application online. It took him 25 minutes. Then, I met with the mortgage officer to see what it would mean if my husband and I refinanced our Nokomis home. Yesterday morning I was able to get a rate of 5.375.  This isn't quite one full point below our current mortgage rate so I assumed we would crunch some numbers and decide it wasn't worth it.  I was wrong. 

Here's what I learned in 20 minutes.

• Both my husband and I had a chance to review our credit report...something we should all do at least one time per year.
• Refinancing our mortgage would save us over $200 per month in payments.
• If I continued to pay that $200 per month toward the prinicpal on our mortgage, I would shorten the life of our loan, and build equity in our home more quickly. (Or, we could take that $200 per month and splurge on a guilt-free night out!)
• I would have the option to pull some additional money out of our home (I wouldn't, I choose not to treat my home like a piggy bank).
• It would cost a little over $5000 for us to refinance.
• I wouldn't have to pay anything out of pocket to refinance, I could roll it all into the new mortgage.
• Because we choose to escrow our home owners insurance and taxes, we would pay to have those escrowed again with a new mortgage (this is part of the $5000 I mention above). We would then get a refund from the escrow account on our current mortgage.
• If we lived in our home for 17 more months the refinancing would pay for itself.

While there are some general guidelines about refinancing, it pays to check it out for yourself. With these low interest rates you may have an opportunity to better position yourself financially--and THAT's worth 45 minutes of your time!

Or:

Take a look at the 200 Nokomis Homes on the market

Take a look at the 137 Longfellow Homes on the market

Lisa Dunn
Edina Realty

Crazy Mortgage Market and Rates!

The real estate market is a hot topic right now everywhere from media to the water cooler small talk. We want to keep you up to date and let you in on what’s actually going on. Last week the Federal Reserve dropped the Fed Fund rate by .75 points bringing down the prime interest rate to 6.5%, the largest drop since October 1984. This was done in an attempt to put off a recession which economist state is coming soon and some say is already here. The mortgage rate fell to 5.375% that day. The next day due to additional economic indicators pointing further at a recession, the rates dropped again to 5%, but by the end of the day where back up to 5.25% and by the end of the week they rose to 5.5%. Are you dizzy yet? We are!

The US Treasury has approved a stimulus package to assist in holding off the approaching recession to flood the market with some cash. The package includes a rebate to qualified individuals up to $600 and couples up to $1200. The hope is that people will use this as an incentive to buy. They are hoping the checks will go out by May this year.

The foreclosure rate is at historic highs and the new home market has seen better times. This means that the average home seller is competing with houses priced well below theirs. This has created a buyers market and there are some great buys to be had. There are many buyers and move up sellers that are taking advantage of the many great opportunities available. There has never been a better time to purchase, with low interest rates and the amount of houses for sale it is important for buyers not to wait until the market has turned around because by then it’s too late. You wouldn’t buy a stock the day after it went up 50% and that analogy goes the same with the housing market, by the time it has turned around there will be fewer opportunities available.

   

This might sound like doom and gloom if you are a seller, not so. It is still important that sellers take price into high consideration when they are listing their home. It is also important that in this market your home must not only be in the best condition but in many cases the best priced property compared to the competition as well. There are a lot of buyers out there taking advantage of this market. You may make a little less on your current home but you will make it up on your new home. 

What does this mean to you? Right now is a great time to explore your housing and financing options. If you are considering a move in the next few years you owe it to yourself to see what’s out there now. If you are not thinking of taking advantage of a great move up market, this might be a great time to refinance into a very low 30 year fixed mortgage and save money on smaller payments or a shorter term and pay your home off in half the time. Don’t delay; these great opportunities won’t be around forever. Please call us anytime; we are ready to help you accomplish your housing and financial goals.

Monica Tucker, Edina Realty Mortgage, 651-690-8454.

Home Appraisals More Difficult than Ever!

Fannie Mae announced last week that they are cracking down on appraisals and they are taking a cautious approach in reviewing them. This means it will be a little more difficult if you are purchasing a home with 0% down payment or are refinancing a home after taking out a equity loan or you have a limited amount of equity. Appraisers are also feeling the heat, they will now have negative ramifications (including being blacklisted) if they don't cooperate and become much stricter with their values. There has also been a bill passed in anti-predatory lending that forces lenders out of the appraisal process due to some past implications that some lenders have pressured appraiser into raising property values. Appraisers must also indicate "Declining Market" on appraisals if the neighborhood has too many listing on the market for too long. Some lenders have already labeled the Twin Cities Metro are a declining market. This makes it tough for 1st time home buyers who are looking for 100% financing. If a person is buying a house and it is labeled as a declining market, they will need to come up with a 5% down payment. All is not lost though, FHA has not made this change, so if there is a will, there is still a way.

Please call me if you have any questions regarding this or any other financing questions.

Monica Tucker/ Edina Realty Mortgage/ 651-690-8454 

Fed Rate Cut!

The Federal Reserve and the US Treasury meet this week and dropped the prime interest rate by .75 points bringing it down to 3.5%. What does this mean? Well, your Home Equity Line of Credit loan payments will be going down as well as short term interest rates like car loans and credit cards. The mortgage rates listen to the prime rate and in most cases follows suite, but not always. The mortgage interest rates did fall this week to 5.375% after the announcement on Tuesday. They dropped again to 5% on Wednesday morning due to other economic indicators in the market, but by the end of the day they were back to 5.25%. The rates then rose to 5.5% on Thursday morning. Are you dizzy yet? This is a great indication of the volatility and confusion in the market, between recession talk and inflation talk it is hard to decide who to listen too. The moral of this story is...if you are waiting to purchase a new home or refinance your existing home, don't wait, you could miss out on a great deal!

If you are interested in seeing what your options are in this market, please call me.

Monica Tucker, Edina Realty Mortgage, 651-690-8454 

What are Reverse Mortgages?

A Reverse Mortgage is a home loan that allows a homeowner to borrow against the equity in their home, tax free, with no repayment of the loan as long as they live there.

Who is eligible?

Homeowners age 62 or older who occupy the property as their primary residence. The home must be free and clear of have a mortgage or loan that can be paid off with the Reverse Mortgage. There are no requirements for income, employment or credit.

How much cash can one receive?

The amount that can be borrowed is based on HUD formula that factors in age of the homeowners, interest rate, appraised value and the county of property location.

When is the loan repaid?

A Reverse Mortgage is due and payable when the property is no longer considered the customer's principal residence. The loan must be repaid in one payment- either from the sale of the home or through other resources.

What are the benefits?

The homeowner will always retain ownership and lives in their home as long as they want to or are able. Loan proceeds are not considered income and won't affect Social Security or Medicare. The heirs can keep the home once the Reverse Mortgage is paid. NEVER make a payment or owe more than the home is worth. Can choose to take the cash in monthly disbursements to increase monthly income.

If you are interested in finding out if this is the right financing choice for you, please give us a call!

Monica Tucker/Edina Realty Mortgage

651-690-8454 office/ 612-202-4291 cell/ www.monicatucker.com

Another Rate Reduction?

The Federal Reserve Open Market Committee (FOMC) will be meeting today and tomorrow to discuss the dangers of recession and inflation dangers in the market place. Current data (such as the raising oil prices) are trending to inflationary pressures and less on dangers of a recession. Analysts are prediction the Federal Reserve to reduce the prime rate by .25%. The odds of the Feds cutting the rate by .50% are pretty much squashed but there is a big probability that the Feds will cut rates another .25% at their Dec. 11th meeting for one final push in 2007.

Keep in mind that a Fed rate cut does not automatically mean mortgage rates will improve. The Federal Reserve has direct control over the level of short-term interest rates. The Fed's influence over long-term (mortgage) interest rates is less certain.

Rates are still very good but the market is pretty volatile. It is best to us caution when choosing to lock into a rate or to play the market. Please call if you have any questions about rates, programs, 1st Time Home buyer programs or if you are looking into refinancing.

Monica Tucker, Edina Realty Mortgage

651-690-8454/612-202-4291 cell