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Shorten Your Mortgage

A 15-year fixed-rate mortgage lasts half as long as a 30-year fixed-rate loan. You don’t have to work in the lending industry to know that. But if you guessed that monthly payments on a 15-year loan cost twice as much as on a 30-year loan, you’re in for a surprise.

First off, you can typically get a slightly better interest rate on a 15-year loan. Also, you pay much less interest over the life of the loan and start paying down the principal on your loan balance much sooner. That means you build equity in your home sooner as well. Fore example, with a $150,000 30-year loan at 6.25%, your monthly loan payment would be $924. Your monthly payment on a 15-year loan at 6% would be $1,266. You would pay more than $100,000 more over the life of the loans if you went with the 30-year fixed instead of the 15-year. In fact, after 15 years, you would still owe more than $100,000 on the 30-year loan.

Does that mean you should always go for the shorter term? No. The choice you make will depend on several factors. Can you afford the higher payments? If you have to forego investing in your retirement or can’t afford the lifestyle you want, the 15-year loan does not make sense. Also, if making the higher payments leaves you no cushion for emergencies and large expenses, you are likely better off with a 30-year loan. The amount of time you plan to stay in the home and other factors can factor in your decision as well.

Of course, there are other loans out there besides fixed-rate offerings, and your Texas REALTOR® can help you sort through various loan options and discuss which ones will work best for you.

Texas Association of Realtors®

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New Rules Give Buyers More Protection at Closing

By Kenneth R. Harney, Texas Association of Mortgage Brokers
Saturday, July 18, 2009

If you’re applying for a loan to purchase a primary or secondary home, or planning to refinance, you should be aware of a little-publicized new set of federal consumer-protection rules that takes effect July 30.

Among other key changes, the new Federal Reserve guidelines require lenders to give you initial disclosures of your mortgage costs within three business days of your loan application. If you don’t get them, you can pull the plug..

The rule also prohibits lenders from collecting any fees, except a reasonable charge for checking your credit, until you have been given the loan-cost disclosures. This means no more out-of-pocket, upfront application charges until you have received the truth-in-lending disclosures and an annual percentage rate (APR) calculation of those loan costs.

Since many mortgage brokers and lenders traditionally have collected fees covering appraisal, credit and various other charges at the time of application — sometimes amounting to hundreds of dollars — this will be a significant change in procedure for the lending industry.

The rule also prohibits quickie closings on loans by requiring a seven-day waiting period after applicants are handed their early disclosures or the disclosures are mailed. You will now have up to a week to think about the transaction and decide whether it’s right for you. Final truth-in-lending disclosures are due three business days before closing.

Here’s an even more sweeping change for applications on or after July 30: The new Fed rules require lenders to deliver a copy of the real estate appraisal to you three business days before the scheduled closing on the loan.

In the past, even though federal regulations guaranteed that consumers could request and obtain a copy of the appraisal, lenders and home buyers frequently ignored that right. In fact, many consumers had no knowledge of this right because no one in the home purchase, financing or settlement process told them about it.

Now, the timing of the loan closing itself — which is the financial ballgame for loan officers, real estate agents, and title and escrow officials — will be dependent upon your receipt of the appraisal in advance. The exception will be that the three-day rule can be waived if you don’t think receiving the appraisal is necessary.

Another significant change under the new rules: If the APR on the early truth-in-lending disclosure increases by more than one-eighth of a percentage point (0.125), the lender will be required to “redisclose” — provide you a corrected version and allow you an additional seven business days to consider the transaction before settlement.

What might cause the APR to increase following the initial, early disclosure? Lots of things. If you allowed your initial rate on the loan to float with the market but rates increased, you would need to get an amended truth-in-lending disclosure. Or if the lender got inaccurate estimates of costs from a third-party participant in the transaction such as the settlement or escrow company. Or if unexpected, 11th-hour junk fees materialize.

All of these events, which have been frequent sources of consumer complaints this decade, could force the lender to redisclose loan costs and set back timing for the settlement.

What are some of the likely repercussions of the Fed’s new mandates? First, the traditional approach of aiming in advance for a date-certain settlement target for home loan transactions almost certainly will be affected. Actual closing dates will be more closely tied to lenders’ and settlement agents’ accurate estimates and their ability to deliver disclosures and appraisals by the required dates. For example, if appraisers are backlogged and can’t produce valuation reports quickly enough, settlements will have to be postponed.

Second, the purposes of the rules are to afford consumers better access to and more time to consider key elements of what, for most people, are major financial transactions. There might be fewer instances of last-minute closing-date surprises on fees, where buyers are slammed with hundreds of dollars of charges they never expected. But nobody can say that for sure.

Finally, the rules may well trigger new waves of litigation if lenders and their business partners are not scrupulous in their compliance. There is an aggressive segment of the legal profession that specializes in going after banks and mortgage companies for truth-in-lending violations. Don’t be surprised if you hear of lawsuits seeking cancellation of mortgage deals because timing deadlines were not met or appraisals were not received.

As David Berenbaum, executive vice president of the National Community Reinvestment Coalition, put it in an e-mail comment: “Consumer advocates will closely monitor” compliance with the new Fed regulations, and the lending industry can expect “civil litigation against bad actors.”

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The Truth About Today’s Market

“For most folks, no news is good news; for the press, good news is not news.” – Gloria Borger

You hear the bad news everywhere you turn. It’s on the television, the Internet, the radio and in print headlines. What you don’t hear is the good news about the real estate market.

Bad news sells newspapers and gets high television ratings; therefore, the media has no reason to report the upside of today’s real estate market to the average American. This is where I come in. For example, did you know that approximately 30 percent of homeowners own their home free and clear?

The current market also affords some great opportunities for those looking to purchase a home. First-time homeowners, move-up buyers and investors can all benefit from low home prices, large selection and historically low interest rates.

In addition, the government recently approved a First Time Buyer Tax Credit, up to $8,000, that does not require repayment if the borrower resides in and maintains ownership of the property for at least three years. Regulations do apply and can be reviewed at www.federalhousingtaxcredit.com, or just give me a call and I will be happy to discuss it with you.

Call me to hear more about the good news in today’s housing market. I can’t wait to share it with you.

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Report predicts minimal risk for home price declines in DFW

7/8/2009

There’s a “minimal” chance that DFW home prices will be lower in two years than they are today, according to the latest study by mortgage insurance firm PMI Group.

Dallas and Fort Worth rank among the U.S. cities that are the least likely to see a drop in home prices in PMI Group’s first-quarter risk report.

Dallas’ housing market has only a 3.8 percent risk of lower home prices two years from now. In Fort Worth, the likelihood is 5.8 percent.

That compares with a 65.5 percent risk of overall lower home prices in the 50 largest U.S. cities.

The risk of falling home prices rose in the first quarter in 45 of the country’s 50 largest metropolitan areas, including Dallas and Fort Worth.

Dallas’ home price risk is up from 2.5 percent a year earlier. The Fort Worth risk index moved up from 2.5 percent a year earlier.

[Dallas Morning News]

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Debunking the Myths

Are you aware that a lot of what you know about buying your first home might be wrong? According to a national housing survey conducted by Fannie Mae, there are widespread misconceptions and gaps in consumers’ knowledge of the home-buying process. Here are a few examples:

Forty-four percent of all Texas adults believe they need a 20% downpayment to get into a house. That couldn’t be more wrong. There are programs out there that will allow you to put $500, even $0, down on your first home.
Nearly 40% of Texans believe they need at least five years on the job to qualify for a mortgage. Wrong again! There are many lenders out there willing to qualify consumers with less than two years of employment.

More than 30% of all adults believe they need a perfect credit rating to get into a home. This is also a myth. Lenders today look at more than just your credit score. There are non-traditional methods of analyzing consumers’ credit, and some lenders will even compile a credit profile, varying weight of credit accounts by importance.

The fact is that myths abound in the real estate industry, particularly for consumers who have yet to get their feet wet. Talk to your Texas REALTOR® about what you can do to get into your first home today.

The Texas Association of REALTORS®

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Buyer Tip – Closing Costs

Everyone knows that in most cases you’ll need at least a small down payment to purchase a home … but that’s not all. You’ll also need to come to the transaction with money for closing costs, which can be sizeable.

Your lender is required by the Real Estate Settlement Procedures Act (RESPA) to provide a good faith estimate of your closing costs. This estimate is an itemized list of fees you’ll pay to get a loan.

Mortgage closing costs cover things like appraisals, attorney fees, title insurance, taxes, and other expenses associated with getting a loan.

A property appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property. An appraiser is needed to make this determination.

A survey of the property is usually required to verify that boundary lines for your property, easements, and fences are where they’re supposed to be.

You’re about to buy the home … after that, you’ll own it, right? Well, in some cases, there may be a lien on the property, or some historical dispute to your right of possession. A title search fee is paid to the title company for doing detailed research on the property records for your home. The title company will look at prior deeds, court records, property and name indexes, and many other documents. This is to ensure that there are no liens or problems associated with your ownership of the property.

You’ll need homeowner’s insurance, which covers the costs of rebuilding should an insured event occur. In some cases, your first year’s insurance may be paid at closing.

Other fees that you may see include attorney fees, courier fees, pest inspection, plat drawing, underwriting, flood-zone certification, document preparation, and others.

It’s important to check your lender fees and closing costs carefully, and don’t be afraid to ask for advice … the only bad question is one that you don’t ask. This is where your Texas REALTOR® can really help.

Texas Association of Realtors®

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How is the DFW Real Estate Market?

According to  RECON

Real Estate Center Online News

June 19, 2009

HOUSTON, DFW HOUSING MARKETS SHINE

HOUSTON (Dallas Morning News) – The Brookings Institution has named Houston and Dallas–Fort Worth two of the top housing markets in the country.

Houston ranked first and DFW third among metro areas that have been the least affected by falling home prices.

Home prices in DFW were up slightly in first quarter 2009 compared with those in first quarter 2008, according to the Federal Housing Finance Agency’s quarterly House Price Index.

Of the top 100 metro areas, 38 avoided home-price declines over the last year.

PRESIDIO JUNCTION, WHATS YOUR FUNCTION?

FORT WORTH (Cencor Realty Services) – LNR Commercial Property is finishing infrastructure work on Presidio Junction and beginning vertical construction.

The 300-acre mixed-use development North Tarrant Pkwy. and I-35W will have more than one million sf of retail, restaurants and shops, 1,300 apartment units and 750,000 sf of fitness, hotel and Class-A office space.

Vertical construction has begun on 348 apartment units within the development.

The retail component of Presidio Junction is being handled by the Weitzman Group. Major retailers include a Lowe’s home improvement center.

 SAN ANTONIO ECONOMY OUTPERFORMS NATION

SAN ANTONIO (San Antonio Express-News) – The San Antonio economy has outperformed all of the nation’s largest cities through first quarter 2009, according to a Brookings Institution report.

The city has become accustomed to being labeled a top economy. It recently ranked fifth on Forbes.com’s list of cities most likely to bounce back quickly from the recession.

San Antonio’s economy — driven by sectors such as health care and insurance — has benefited greatly from military expansions and relatively stable housing prices.

The Brookings Institution report measured changes in employment totals, unemployment rates, housing prices, the values of goods and services produced by cities, and other factors.

Other Texas cities listed as top-performing metro areas include:

• Austin (third),
• Houston (fourth),
• Dallas (fifth),
• McAllen (sixth) and
• El Paso (11th).

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First Time Homebuyer Credit

Tax Credit for Homebuyers

First-time homebuyers who purchase homes from the start of the year until the end of November 2009 may be eligible for the lower of an $8,000 or 10% of the value of the home tax credit. Remember a tax credit is very different than a tax deduction – a tax credit is equivalent to money in your hand, as opposed to a tax deduction which only reduces your taxable income.

The tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000. Buyers will have to repay the credit if they sell their homes within three years.

Tax Credit Versus Tax Deduction

It’s important to remember that the $8,000 tax credit is just that… a tax credit. The benefit of a tax credit is that it’s a dollar-for-dollar tax reduction, rather than a reduction in a tax liability that would only save you $1,000 to $1,500 when all was said and done. So, if a homebuyer were to owe $8,000 in income taxes and would qualify for the $8,000 tax credit, they would owe nothing.

Better still, the tax credit is refundable, which means the homebuyer can receive a check for the credit if he or she has little income tax liability. For example, if a homebuyer is liable for $4,000 in income tax, he can offset that $4,000 with half of the tax credit… and still receive a check for the remaining $4,000!

Phaseout Examples

According to the plan, the tax credit starts phasing out for couples with incomes above $150,000 and single filers with incomes above $75,000.

To break down what this phaseout means to homebuyers who are over those amounts, the National Association of Homebuilders (NAHB) offers the following examples:

Example 1: Assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time homebuyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000.

Example 2: Assume that an individual homebuyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2.800.

 

For those tracking the math in the examples above, you may be wondering where the “$20,000″ came from—that is, why you divide “$10,000 by $20,000″ in the first example and “$13,000 by $20,000″ in the second example. Here’s where the $20,000 comes into play:

The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is reduced proportionally for taxpayers with MAGIs between these amounts.

In other words:

• $170,000 – $150,000 = the $20,000 in the first example
• $95,000 – $75,000 = the $20,000 in the second example

Remember, these are general examples. You should always consult your tax advisor for information relating to your specific circumstances.

Homes that Qualify

The tax credit is applicable to any home that will be used as a principal residence. Based on that guideline, qualifying homes include single-family detached homes, as well as attached homes such as townhouses and condominiums. In addition, manufactured or homes and houseboats used for principal residence also qualify.