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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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Don’t Forget the Trees

When you’re buying a home, it’s common to consider the kitchen, bathroom, living space, and other indoor amenities, but don’t forget the outside, especially the trees.

Trees are a bigger part of real estate than you may think. For one thing, you may find that you prefer older neighborhoods, and established trees are a big part of the appeal of these areas.

Trees also affect property values: well-cared-for, mature trees add value, whereas poorly maintained trees can be a significant detraction. According to the International Society of Arboriculture, a tree’s value is based on four factors: tree size, tree type, tree condition, and overall tree location based on its functional and aesthetic purposes.

Residential lots with good trees are a wise investment because landscaped homes are more valuable than non-landscaped homes.

It’s not just about how the house looks, either. Rising energy costs are a concern these days—you can use trees to save on energy. Well-placed, established shade trees are a good way to keep the sun away from your home and lessen your cooling needs during our long Texas summers. It’s difficult to quantify the savings due to many variables, but savings can approach or surpass 10% of a summer electric bill.

Trees don’t just provide relief in the summertime, either. Consider a species like cedar for use as a windbreak from the cold northern air that blows during winter. You may find that you can enjoy similar savings from keeping that wind off your home during the heating season.

There are benefits to large trees, but there are maintenance issues and cost to consider, as well. What’s the tree’s life cycle? Is it healthy and in a smart place? Will the tree need trimming? Also, remember that trees spread out underground as much as they do above ground, so consider the proximity of the tree to the home’s foundation and underground plumbing.

Additionally, pruning or removing trees, especially large ones, can be dangerous work. Work of this nature should be done only by those trained and equipped to work safely in this environment.

Even when weighed against the cost of purchase and maintenance, trees are an important consideration in a real estate transaction. Strategically placed trees can improve energy efficiency in both the summer and winter, make your home more desirable, and have a positive environmental impact.

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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Planning Your Move

Planning your move

As you put your home on the market, the next step is planning the logistics of your move. There are many things to consider, but the item to tackle right away is choosing a reputable moving company. You can ask friends, relatives, and your Texas REALTOR® about their experiences with and recommendations for moving companies.

Keep in mind that many people move between May and September when they’re children are out from school. If you can’t avoid this peak moving time, be sure to call to schedule your move far in advance.

Moving day can be stressful, but thinking ahead and being prepared can make the process run more smoothly. Make sure you’re on hand to answer questions the day the movers are packing your belongings into the moving truck. As a driver does an inventory of the home, walk through with him to verify that he is accounting for everything. It’s also imperative to sign the bill of lading, which is the contract between you and the mover, which will allow for claims to be made and will legally ensure that everything is accounted for when the truck reaches its destination.

A few other helpful tips include not packing your jewelry and other valuables like family heirlooms, antiques, and silverware. It’s better to take these items with you than place them on the moving truck. Also make sure you keep important papers with you like school records, birth certificates, passports, closing papers, and mover estimates. These documents are very hard to replace if lost in your move.

Finally, consider using different colors to designate which boxes go to which room. You can use a red sticker for the living room, green for the kitchen, etc. When the moving truck gets to your home, you can have these colors on the doors of the respective rooms so that the boxes can quickly and efficiently be unpacked.

Texas Association of Realtors®

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Making a Good Offer

When you’ve finally found your dream home, making an offer is the next step. Make sure you’re working with a buyer’s agent, so you know you have someone looking out for your best interests. A buyer’s agent will help get the best deal possible, assisting you with negotiations, paperwork, and the myriad other details involved buying your dream home.

When coming up with an offer amount, keep in mind that some sellers may get offended with an offer significantly lower than their asking price. Though their selling agent should counsel them not to let emotions get in the way, some people will see your low offer as a personal insult. That doesn’t mean you shouldn’t make an offer substantially lower than the asking price. Perhaps you think that’s the fair value of the property. Just know that you may not hear back from the seller.

Many times a seller receives more than one offer at a time, and it’s up to you and your buyer’s agent to make your offer look as attractive as possible. After coming up with your offer price, you must also determine how much earnest money will accompany your offer. This money is used to show the seller that you are serious about purchasing the home and acts as a “good faith” deposit.

There are other ways to make your offer attractive. Talk with your Texas REALTOR® about the best game plan for making your offer look at appealing as possible.

Texas Association of Realtors®

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Understanding the Lingo – Comps

So, you’re selling your home and every single Texas REALTOR® you interviewed to list your home has mentioned “pulling comps”.  Not wanting to appear uniformed, you just nodded your head and played along.

So what is a comp? Simply put, a comp, short for comparable, is the primary set of data used in determining the value of your home.  Comps give you data from all the recently sold property in your neighborhood.  Some of the different data you see might be the age of the house, the square footage, and most importantly, price. Your Texas REALTOR® may use these data to create a Comparative Market Analysis for you.

In any real estate market, the more recent a comp, the more accurate it is. Obviously, the availability of recent comps depends on how active the market has been in your area.

Generally speaking, the most significant comps are those that are closest to your address. This does not account for differences such as one house having a view of the lake, which will add value, or a home backing up to a railroad track, which will detract from the value.

Price per square foot is a significant and well-tested method of comparison, although straight comparison can be deceiving. You can see a big discrepancy if, for instance one property has been neglected and another of exactly the same size, just two doors down, has been well cared for.

Lot size is a factor as well. A 2,400 square foot house on a four-acre lot may sell for quite a bit more than an identical house on a .33-acre lot.

Other factors may include nearby amenities, traffic concerns or access to a main road, landscaping and curb appeal, and the general condition of the exterior of the house—such as the driveway, roof, chimney, or fence.

In the end, it comes down to what the buyer’s bank’s appraiser says the property is worth. That appraiser may use comps to generate his appraisal, but banks or lenders do not take comps into account when considering the amount to loan the buyer; they will only consider the appraisal.

The point is this—there are many factors to sift through when evaluating comps. If you have questions, your REALTOR® should be able to decipher these data and explain the methods she used in pricing your home.

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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