BUY NOW or WAIT

by plano 25. May 2011 07:17

Uncertainty as to whether prices will continue to fall has to be one of the most common causes of buyer procrastination.  Paying too much wouldn't be a smart thing but price isn't the only factor to consider.  Interest rates have as much effect on housing costs as price.

A small increase in mortgage interest rates can offset a significant drop in home prices.  If the price of the home were to come down by 5% but the interest rates were to go up by .5%, the payments might be close to the same.

In the example below, if the price of $175,000 home went down 5% but the interest rate went from 4.75% to 5.25%, the payments would actually be $4.98 more at the cheaper price.  If while the buyer was waiting for the home to decrease 5% and the interest rate increased by 1%, the payments would actually go up by $55.30.

Then, of course, there is always the possiblility that the price of the home doesn't go down but the rate does go up by 1%.  The payments would be $104.58 more per month, each and every month for as long as you have the mortgage on the home.

As a Residential Finance Consultant, I can provide solid information that will help you make better buying decisions.  A home is a place to feel safe and secure, to raise your family, share with your friends and an investment.  It's an investment in your marriage, your family and your future.  You owe it to yourself to check out the real numbers in your market because every market is different.

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Not So Fast Buyers!

by plano 18. May 2011 05:45

One of the challenges buyers are having with financing may be their own understanding or lack thereof.

In a recent survey done by research firm Ipsos for Zillow, a surprising number of incorrect answers to true or false questions were given by prospective buyers.

Over 3/4 didn't realize how the mortgage rate was determined for a borrower thinking that annual income was the most important factor. Other considerations lenders do evaluate are credit score, debt-to-income and loan-to-value ratios.

A variety of myths seem to have influenced some of the common answers such as interest rates are set and released once a day; FHA loans are for first-time buyers only; prequalification commits the lender; lender fees are not negotiable and adjustable rate mortgages always go up.

Buyers' misunderstanding of actual mortgage practices may give some insight into why more of them are not taking advantage of the greatly reduced prices and incredibly low mortgage rates.

While getting solid information about mortgages and being pre-approved from a lender are very important, it is only one step in the home buying process. Success in buying a home in today's unique market should begin with a real estate professional that will coordinate all of the different parts of the transaction including mortgage, title, insurance and inspections.

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Cash-In Refinance

by plano 11. May 2011 13:14

Here's an interesting thought. Instead of pulling money out of your equity when refinancing your home, consider putting some cash into your equity. The strategy would be to get a considerably lower rate and a shorter term than 30 years. It will pay off your mortgage sooner, build equity faster and save lots of money in interest.

If you have some extra cash available, this might be very atteractive compared to what your are earning currently on those savings.

In the example below, the current mortgage is at 5% for 30 years with payments of $939.44. The owner can refinance for 15 years at 3.875%. If he puts $30,000 into the refinance, his payments will be slightly more than the current $1,011.06 but the mortgage will be paid off in 15 years. At that same point, if he keeps the current mortgage, his unpaid balance will be $101,572.88.

In order to have the same payments as the mortgage he is refinancing, he'll need to add $39,764.68 to the refinance.

If you have a goal to get your home paid off and you have some funds available, a Cash-In Refinance may be just the strategy for you.

 

 

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Incentives to Buy

by plano 3. May 2011 19:33

In one of the best buyer markets ever, sellers are not really doing much to encourage purchasers to act now.

Builders offer a variety of incentives such as upgrades, seller-paid closing costs, interest rate buy downs, washers, dryers, refrigerators or big screen TVs.

Interestingly, much of the resale market doesn't employ many of these techniques. According to the latest NAR Home Buyers and Sellers Profile, 56% of sellers are not offering any incentives at all.

25% offer a home warranty which is valuable but at an average cost of about $500, it probably doesn't do much to make the difference in the decision to buy or not.

With the tougher mortgage conditions that exist today, buyers are more discerning and looking for their best opportunity. When homes are similar in size, condition, location and price, the home with the most attractive terms will sell first.

Whether selling or buying, today's complex real estate market requires a professional who can structure a transaction to benefit all parties involved. A Residential Finance Consultant has the tools and information you need to make better decisions.

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