Posts Tagged ‘mortgage loans’

Intero Insider: Borrower Creditworthiness Improves to Best in 12 Years

By Gino Blefari | November 7th, 2012 0 Comments

Very often in real estate you have to look past the headlines to get the real news of what’s happening in the housing market. As the Federal Reserve Bank of Atlanta released borrowing data this past week it gleans from the Home Mortgage Disclosure Act (HDMA), I was reminded of this as I dug deeper into it.

At first glance, the data shows that fewer mortgage loans were made in 2011 (the year in which the data comes from) than in 2010. The 7.1 million home mortgage loans made in 2011 was a 10% decline from the previous year and the lowest since 1995 when 6.2 million loans were reported in the HDMA data.

But what’s interesting is that this actually represents a clear turning point for the market. The reason is because at the same time, the HDMA data showed that current home buyers appear more creditworthy on average than at any point in the past 12 years. In fact, the median credit score of mortgage borrowers has risen about 40 points since the end of 2006, the researchers said.

In a nutshell, this means we have more qualified buyers (in terms of credit history and score only) than we had at any point during the housing boom. That may not have meant that much during the boom because lending standards were more lax. But today, standards are tight and have remained one of the biggest obstacles standing between would-be buyers and their dream homes.

More creditworthy borrowers means more lending can happen. And that is fantastic news for housing markets that may still lag in demand.

In addition, the proportion of loans denied remained unchanged at 23% in 2011. Not fantastic news, but not bad either since we’re not seeing that number increase.

Call it a silver lining or call it inevitable – but the improving creditworthiness of borrowers was a needed component to the housing recovery. Lax standards became such the norm during the boom that the years that followed created a bit of shock for many borrowers. Also, lenders were hurting so much that they couldn’t take a chance on risky borrowers. That message seems to have taken hold in a grand way.

This baseline stability of borrowers is like a healthy tree root from which our market can grow. And I for one am happy about that!

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Intero Insider: How to Save $67,960 on Your Next Home Purchase

By Gino Blefari | August 18th, 2011 0 Comments

Standard & Poor’s downgrade of the U.S. debt rating this month sparked speculation about what the effects would be on stock, bond and key interest rate markets. A lot of conversations centered around the prediction that interest rates for mortgages would increase dramatically, damaging an already delicate housing recovery.

So far, the opposite is true. We’re talking down, down and down again. In the tumultuous days following the S&P downgrade, rates on 30-year fixed-rate mortgages fell to 4.32%, according to Freddie Mac’s Primary Mortgage Market Survey.

I realize I’m the CEO of a real estate company so you’d expect me to say this: But, now truly is an opportune time to borrow money for real estate if your finances are in a solid, healthy state. Borrowers who lock in super low rates stand to save a substantial amount of money over the life of a mortgage.

Take this example: A borrower with a $450,000 30-year mortgage with a 4.3% interest rate would have a monthly payment of $2,227 and pay a total of $351,692 in interest. If their rate on their fixed-rate mortgage had been 5%, they’d pay $2,416 a month and $67,960 more in interest over the 30 years.

Substantial!

Could rates go even lower? Who knows? Seriously. We don’t know. However, S&P also downgraded Fannie Mae and Freddie Mac, which means borrowing could get more expensive for the mortgage giants. That increase likely gets passed on to consumers.

Even if you refinanced last year at an average 5.5%, a rate drop to below 4.5% is worth a check-in on the math of refinancing. When rates really do start moving up, you don’t want to look back and think “I wish I’d…”

Interest rates really do matter. So if you are on the fence or if you’re an agent with buyers who are on the fence, do some math to see your/your client’s total savings. It’s as good a time as any to borrow money. Talk to your mortgage advisor today!

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2011 Mortgage Interest Rate Predictions by Rick Soukoulis, Western Bancorp CEO

By Teressa Francis | April 20th, 2011 0 Comments

This Intero Insider – Video Series brings you Rick Soukoulis, CEO of Western Bancorp’s insight and projections on 2011 mortgage rates, the effects of the Japan crisis on our market and the potential after effects of a possible U.S. Government shut down.

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Ah, Loan Contingency Periods, aka Scrutiny on Your Bounty

By Ed Gory | August 18th, 2010 0 Comments

One of the most critical things when getting your mortgage to purchase a home is the loan contingency.  Speaking from recent experience, and understanding the new reality of overly scrutinizing lenders, here are Ed’s must-know things when it comes to loan contingencies:

Don’t Take Shortcuts

Firstly, please, please, please, work with a mortgage lender who has a proven record of being able to secure a loan.  This has got to be one of the most important to-do’s before you go out shopping for a home.  This is as important, and may even be more important than the loan rate you lock in.

Yet, with still so many choices out there – direct lenders, mortgage brokers, etc. – you may ask yourself, how do I find a good one?  The best source, I’ve found, is to get recommendations from friends, relatives, or trusted realtors.

A good lender who’s truly looking out for your best interest should ultimately be able to tell you what you can and cannot afford.  A great lender will go above and beyond to get the job done.

Do Your Homework

Where are your downpayment funds going to come from? From your own savings? Cashing out some WebVan stock? A gift from your solvent parents?  Whatever the source of your funds, you have GOT to make sure you let your mortgage lender know early on in the process.  Any  funds that are NOT coming directly from your own savings, might be subject to major scrutiny by the lender – and you may find yourself having to provide a boatload of documentation showing where the money’s coming from, or, in the case of a gift, additional scrutiny on whoever was giving you the money.  And of course, as Murphy’s Law would have it, that kind of scrutiny can very well happen at the 11th hour when you least expect it, probably right before you’re supposed to close escrow.

Final Thoughts

Be realistic about your loan contingency period. Don’t put it at 14 days if you’re not 110% positive that your lender can do it. Better to be conservative and ask for more days than you think you’ll need.

Be sure your lender knows of any red flags during the contingency period. Find this out early on in the process. Continually ask your lender what the current conditions to close (CTCs) are, and are they being met.

Remove your loan contingency as close to on time as possible. No one, particularly the sellers and the sellers’ agent, get more stressed out when loan contingencies aren’t removed on time.

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Are Bank Owned and Short Sales Always a Good Deal?

By Russ Boyd | January 25th, 2010 0 Comments

All home buyers have one thing in common: Everyone wants a great deal. The buying public seems to think that “great deal” equals foreclosure, short sale or bank-owned property. The truth is that these properties may appear to be bargains, but in many cases you could be buying someone else’s problems. So the real issue is whether the foreclosure, bank owned or short-sale property you’re considering is a bargain or problem. If you’re looking for a bargain property, here are some key issues to consider:


1. What is your time line for purchasing?
You may find the perfect short-sale property, and the seller may accept your offer. The challenge is that you don’t have a deal until the bank approves the short sale. At many large lenders, a single short sale processor may have hundreds of files to handle at one time. I’ve experience delays of up six to get an offer approved. The wait can be extremely frustrating and it can also be costly.

For example, months from now the offer made today you may be too high or to low. Also, interest rates are more likely to go up rather than down during the coming year. And, just because the seller has accepted your price, it doesn’t mean the bank will. You will have a better shot at buying a short sale where the bank has preapproved the sales price. It still may take a long time to close, but not as long as it would if the price was not preapproved.


2. Are you prepared to be in a multiple-offer situation?
You’re not the only one looking for a “bargain.” Many buyers are searching for distressed properties and the approval process takes so long, multiple offers are common. The sellers agent or lender will not tell you about the details of other offers.


If another offer comes in at a higher price and at better terms, the bank is obligated to take the best offer. If the property is a short sale, the seller’s signature on the document merely opens the negotiation – it does not finalize it. Furthermore, the seller/lender may continue to market the property even after they have signed a contract with you.

3. Ask the agent if the seller participated in the “Cash for Keys” program
The best candidates for good bargains are those properties where the sellers are still occupying them. Many banks have a program called “Cash for Keys.” This program pays the owners of foreclosure and short-sale properties money to keep the owner from trashing the property when they move out. It’s not uncommon for disgruntled owners or tenants to remove or damage appliances, plumbing and electrical systems. Cash for Keys is designed to minimize these behaviors.


4. Beware of tenant occupied and vacant properties
It’s never a good practice to purchase a property without doing a physical inspection. Also, be sure you have stipulated the right to make a final inspection prior to closing.  This is especially important with distress sales.  Also, if the property is tenant occupied be sure the contract states the property must be delivered to you vacant.  Trust me, you don’t want to be responsible for evicting a tenant.   Also, the longer a house stays vacant, the more likely it is that problems will develop.  Not only vandalism, but rats and mice are more likely to move into vacant properties. Rodents can chew through the wiring and generally wreak havoc with the home’s electrical systems.


5. Is the deal more important than your lifestyle?
A property can be a great deal in terms of the price, but is it worth it if it’s in a poorly rated school district or if you end up with an extended the commute? A “bargain price” won’t make up for a poor floor plan, airplane, train or traffic noise or the occasionally whiff of the sewage treatment plant? When you purchase, it’s important that you take all of these issues into consideration rather than focusing exclusively on the price. A property with any of these types of problems will be harder to sell in the future.

As you can see, it’s important to consider the price in conjunction with the quality and the convenience of your lifestyle once you move in.

Of course there are good distressed property deals out there. Nevertheless, don’t limit your search. Keep in mind that, depending on the neighborhood and price range, anywhere for 10 to 50 percent of the sales may be distress sales. This means that 50 to 90 percent of the available homes are likely occupied by owners that are maintaining their homes and in better neighborhoods. In the long run, they may be a much better bargain.


A true bargain is when you find a home in the neighborhood and price ranges that fits your lifestyle. A house you will be proud to call home.

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Moving at the Speed of Opportunity

By Russ Boyd | January 11th, 2010 0 Comments

You’ve probably heard the old saying “You Snooze, You Lose!” I’m told that the line came from the character known as George Owens on the 80’s sit com, “Mr. Belvedere.”

I think the words spoken by “George Owens” say a lot about where some “homebuyers” are relative to this market. Hopefully that’s not you.

Some people are sitting on the sidelines…taking a wait and see attitude, waiting for the market to “change,” hoping that some of the perceived risk will be reduced by more stable credit and mortgage markets, and wishing that just one more piece of positive news would filter out of the media to convince them to become active and take action.

Well, guess what? It just isn’t going to happen that way. Not if you want to capture the market at the bottom, at least. Let me explain why, and how to avoid “staying sidelined,” so you are in the right position to capture current opportunities.

Imagine for a moment that you are attempting to merge onto the freeway, where traffic is moving at 65 miles per hour -  now picture yourself coming to a stop.

Being behind somebody that stops on an on ramp waiting for the “right opportunity” can be scary, yet I imagine it’s happened to all of us at one point or another.

So, when you’re at a standstill, how hard it is to find just the right opening between the rapidly moving cars. You know how hard it is to get your car to go from zero to 65 miles an hour in a very short distance and merge into flowing traffic. It’s not easy.

Now, picture yourself in this same situation – only this time, you continue moving down the on-ramp, and, once you find the right opening to merge, you join effortlessly into the moving traffic.

Simply put – it’s hard to find an opening when you are standing still. You know this – but did you know that this principle is not just a question of physics – it’s a question of money and opportunity? And did you know that it applies to many would be home-buyers?

Movement creates opportunity. It invites new things to happen. Movement means you are ready to take action – that you are responding and adapting to the changing marketplace.

As the market continues to evolve we are past the time to watch, to wonder and to wait. Now is the time to pay attention! Watch what’s happening, and look for your opportunity. Believe me the growing positive statistics, like those at our Market Activity website, www.bayareamarketmetrics.com reveal that there are plenty of buyers ready to jump at the right opportunity. Remember, if you are sitting on the sidelines, all you can do is watch.

But what about those that “just got lucky”, right? Well here’s how people get “lucky”, they (1) they get into motion, (2) they get their financing lined up, (3) they find a great agent who welcomes their business and they start looking for the right home (4) They make an offer that fits the circumstances, (5) and THEN they “get lucky”. In other words, they are people willing to move at the “speed of opportunity”.

Remember, just like you can’t easily merge onto a highway from a dead stop -  neither can you find the best home buying opportunity unless you are moving at the “speed of opportunity.”

If you want to move at the “speed of opportunity”, a good place to start is understanding the current level of market activity. Our Bay Area Market Metrics Report can be viewed at www.bayareamarketmetrics.com.

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