Tips for Buyers
Is This Investor Heaven?
Thursday, April 29, 2010
It’s real close.
Today’s real estate market is about as close as many investors will get to ‘heaven’ until that moment when we stand in front of the Pearly Gates and Saint Peter reviews our earthly activities.
Prices are at the lowest levels since 2005, interest rates are low, and the number of potential renters in the marketplace is at an all-time high!
Let me put into perspective what you may be missing -
through March 31, 2010, our office at 1411 North Highland Avenue closed 400% MORE sales than we did during the same three month period in 2009 and UP 158% when compared to 2008 sales. BUT - our dollar volume of sales closed during the first three months in 2010 was DOWN 1% when compared to dollar volume during the same period of time in 2009.
ARE YOU PAYING ATTENTION? We closed on four times the number of sales in the first quarter of 2010…but our dollar volume was still down 1%. That has got to get your attention!
Investors are coming out of the woodwork and are buying homes that were selling for far more a few years ago and then fixing them up and re-selling some and keeping a number of them in their investment portfolio. (Don’t forget - you can put investment real estate into your IRA! See our blog posted on March 1, 2010.)
Questions? We have the answers!
- Scott Askew
Posted in: Intown Atlanta Real Estate News
Seven Questions To Ask The Lender Of Your Choice
Thursday, February 25, 2010
Unless you have enough cash to cover the purchase price of a property you want to buy, you’re going to need to get a mortgage. But how do you select the lender, much less the loan program, that will work best for you?
We suggest you ask the following questions when you talk with (interview) various lenders. If you do not like the answers given, continue shopping until you find a lender whom you feel comfortable. But, also remember to be nice! You may discover your expectations cannot be met and the first lender you spoke with actually is the best fit for you!
1) What kind of loan is best for me?
First of all, know that a lender needs to ask you a lot of questions before they can answer your question of “which loan is best for me?”. Also, don’t be shy! Ask the lender to describe the pros/cons concerning:
Fixed Rate Loans (The principal and interest payment does not change over the amortization period of the loan. The only thing that would alter the payment amount due to the lender might be interest and/or tax escrow amounts and perhaps Private Mortgage Insurance [PMI]. Fixed rate loans will typically charge an interest rate greater than the initial rate offered by Adjustable Rate Mortgages [ARMs].)
Adjustable Rate Mortgages (The initial interest rate is typically lower than a fixed rate, but the interest rate and resulting payment amount will change each, pre-determined, adjustment period. [One-year and three-year are most common.]
Interest-Only Loans (Run like the wind! [in our opinion] This type of loan has gotten a lot of people in trouble over the last few years. Only go here if you have a very good understanding of the financial marketplace.)
2) What is the Interest Rate?
The interest rate quoted will be the ‘simple interest rate’, not the ‘Annual Percentage Rate’ (APR). The APR is a fairly complex calculation that includes the simple interest rate and many of the fees received by the lender in the way of ‘closing costs’. So our recommendation is to focus on the ‘simple interest rate’ and find out about ‘closing costs’ and ‘discounts points’, etc. separately.
Also, make sure you find out the answers to the following when you discuss an Adjustable Rate Mortgage (ARM):
What is the Index? (The basis used to determine the future increases or decreases of your interest rate (Cost of Funds Index and Average of One-Year T-Bills are two of the more common indexes.)
What is the Margin? (The lender’s Profit Margin or ‘spread’ that is added to the ‘index’ to determine the resulting simple interest rate charged.)
What are the ‘Caps’? (The maximum amount your interest rate can fluctuate each adjustment period AND during the life-time of the loan. [ You will hear “1 and 3” for example; which means your rate can change, up or down, a maximum of one percent each adjustment period, and a total of three percent, up or down, over the lifetime of the loan.)
What is the interest rate the Caps are based upon? (Sometimes we hear of a lender who bases Caps on an interest rate different [usually higher] than the initial rate quoted. So ask this question just to be on the safe side.)
3) What are the Discount Points and Closing Costs?
“Discount Points” are an optional, up-front, expense that is used to lower the interest rate charged. (Many refer to Discount Points as ‘interest paid up front’.) Each ‘point’ is the equivalent of 1% of the loan amount and will ‘buy down’ the mortgage’s interest rate anywhere from 1/8 of a percent to 1/4 of a percent, dependant on the type of loan and amortization period. Currently, with interest rates so low, it is rare that we see someone willing to pay cash up front to lower their interest rate. However, if you do pay Discount Points, they are fully tax deductable.
“Closing Costs” is a term we use to lump in many additional fees that go to the lender and other closing-related services such as the appraisal, credit report, recording fees, escrow establishment charges, the Lender’s Title Policy, closing attorney fee. The lender’s commission, or ‘origination fee’, accounts for a majority of the closing costs.
Do not be shy to ask for explanations of some fees that will show up that we often refer to as ‘junk’ or ‘garbage’ fees. A lender may be willing to waive a few fees in order to keep your business!
An estimate of these fees is duly noted on the “Good Faith Estimate”, which federal law requires lenders give you.
4) If I make a loan application, how long will it take for me to receive my Good Faith Estimate?
The Real Estate Settlement and Procedures Act (RESPA) requires lenders to give you a “Good Faith Estimate” which shows all the costs associated with the loan for which you are applying. Currently, lenders are not required to guarantee the Good Faith Estimate. However most reputable lenders do tend to honor what they give you unless there are changes to the loan, who the third-party vendors are (for example - closing attorney and the appraiser), or changes were made to the Purchase Agreement after the initial estimate was calculated. (It is a good idea to hold on to the Good Faith Estimate and have it with you at the closing table in case there are discrepancies. This heightens the chances the lender will adjust charges to come closer to, or meet, the original estimate.)
5) Is there a pre-payment penalty for the loans being quoted?
It is rare that we see a pre-payment penalty. If the lender says there is a pre-payment penalty, we suggest you look for another lender.
6) Can I lock in my loan interest rate at time of application?
Interest rates do fluctuate. If you think rates will get higher after you make your full loan application, you may want to lock in your rate. However, lenders are not required to allow you to lock in your rate, and, if you do lock in your rate then interest rates move downward, do not expect lenders to also allow you to receive the lower rate, although some lenders will allow you to have a ‘one-time-drop privilege’.
Most lenders will require you to have negotiated a binding Purchase and Sale Agreement before they will lock in your rate
Also, when interviewing lenders, ask if the lender charges a fee for locking in rates, how long a lock-in is good for, and to give you the lock-in in writing.
7) How long will it take to get loan approval after I make loan application?
Today, we are finding lenders can process a loan in 30 to 45 days on average.
YOU control a lot of this aspect of getting a loan. You must be organized and able to get to records needed by the lender (two years tax returns; current pay stub; all account numbers and mailing addresses for ALL credit cards held in you name regardless if these are rarely, if ever, used accounts; etc.) Also, notify your employer that you are making a loan application and you sure would appreciate them turning around the VOE (Verification of Employment) quickly!
Ask the lender what potholes might be lying in wait and how can we avoid these problem areas!
- Scott Askew
Posted in: Intown Atlanta Real Estate News
Federal Programs to Help Homeowners Avoid Foreclosure
Wednesday, February 03, 2010
In February 2009, the Obama Administration announced “Making Home Affordable”, an initiative designed to help homeowners avoid foreclosure. Making Home Affordable includes the following three programs: Home Affordable Refinance Home Affordable Modification Foreclosure Alternatives
Home Affordable Refinance
Borrowers who are current with their mortgage but feel they cannot refinance due to declining home values may consider Home Affordable Refinance. Under this program, borrowers may refinance 30 or 15 year, fixed-rate loans.
Eligibility criteria are:
1) The Property must be Owner occupied
2) The Property must be a one -to- four-unit home
3) The existing mortgage must be owned or backed by Fannie Mae or Freddie Mac
4) The existing mortgage must have a loan-to-value (LTV) ratio above 80% but not more than 105%
5) The borrower must be current with their existing mortgage payments
6) The borrower must have enough income to support the new mortgage payments
The website for Making Home Affordable is: http://www.MakingHomeAffordable.gov Go there for more information and to use the easy-to-use, online tools to assess whether or not you meet their eligibility criteria.
Home Affordable Modification
Homeowners struggling to stay current with mortgage payments because of a change in income or other financial hardship, may seek a loan modification via Home Affordable Modification. Home Affordable Modification is a voluntary program with participation from major mortgage servicers, including, but not limited to, Chase Financial, GMAC Mortgage, Countrywide, and Wells Fargo.
Eligibility criteria are:
1) The Property must be Owner occupied
2) The Property must be a one -to- four-unit home
3) The existing mortgage must have an existing principal balance that is equal to or less that $729,750 for one-unit properties
4) The existing mortgage must have been originated on or before January 1, 2009
5) The existing mortgage payments must exceed 31% of the borrower’s gross monthly income
6) The borrower must be at risk of imminent default, or in default
Again, the website for Home Affordable Modification is: http://www.MakingHomeAffordable.gov If deemed eligible, qualified borrowers are put on a three-month trial period with a modified interest rate and mortgage payment. If the borrower is successful in making payments, the participating mortgage servicer executes an agreement that lowers the interest rate to a fixed rate for five years with caps that will allow the rate to stay at a low rate for the remaining life of the loan.
Foreclosure Alternatives
For borrowers who meet the eligibility criteria for Home Affordable Modification but do not qualify for a modification, Foreclosure Alternatives may be considered. Under this program, borrowers and mortgage servicers are provided incentives, and documentation is standardized, to help facilitate short sales.
Incentives are:
$1,000 for servicers for successful short sales
$1,500 for borrowers to help with relocation expenses
Up to $1,000 toward the cost to pay off junior lien holders to release liens
Other features of this program are:
Depending on market conditions, 90 days up to one year to market and sell the property
No foreclosure may occur during the marketing period specified in the short sale agreement.
Mortgage servicers may not charge fees to borrowers for participating in Foreclosure Alternatives
For more information, go to http://www.treas.gov
- Scott Askew
Posted in: Intown Atlanta Real Estate News
FILING FOR HOMESTEAD EXEMPTION IN 2010
Tuesday, January 26, 2010
Filing for one’s Homestead exemption is easy and saves you money, every year you own the property as your primary residence, on your real estate taxes! Many Counties send you paperwork that allows you to file without going to the courthouse. But if you have misplaced their correspondance, here’s what you need to know:
Most Counties require Homeowners to provide their Warranty Deed book and page, proof of residence, social security numbers, driver’s license and car tag info.
Below is where to go for more information and/or to file:
Fulton County - deadline is April 1, 2010 404-612-6440
http://www.fultonassessor.org/Forms/HtmlFrame.aspx?mode=content/Exemptions.htm&taxyear=2007&ownseq=1&jur=&LMparent=180
DeKalb County - deadline is March 1, 2010 404-298-4000
http://web.co.dekalb.ga.us/taxcommissioner/index.asp?pg=homestead
Gwinnett County - deadline is March 1, 2010 770-822-8800
http://gwinnetttaxcommissioner.manatron.com/Tabs/Property/HomesteadExemption.aspx
Cobb County - deadline is April 1, 2010 770-528-8600
http://www.cobbtax.org/Forms/HtmlFrame.aspx?mode=content/Exemptions.htm&LMparent=189
Clayton County - deadline is April 1, 2010 770-477-3311
http://www.co.clayton.ga.us/tax_commissioner/exemptions.htm
Cherokee County - deadline is April 1, 2010 678-493-6122
http://www.cherokeega.com/departments/department_section.cfm?displaySection=Homestead%20Exemptions.txt&departmentid=30
Henry County - deadline is April 1, 2010 770-288-8180
http://www.co.henry.ga.us/taxcommissioner/PropertyTaxExemptions.shtml
Posted in: Intown Atlanta Real Estate News