Archive for Purchase
Great News on USDA Home Loan Funds
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On July 27th, H.R. 4899, Supplemental Appropriations Act, 2010, passed in the U.S. House, and was signed by the President on July 29th.
Contained in this legislation is the authority needed to raise the guarantee fee in the USDA Section 502 Guaranteed Rural Housing Program to an amount not to exceed 3.50% of the loan amount. This change in the guarantee fee has already been referenced on USDA Rural Development loan approvals (RD Form 1980-18) that were issued “subject to Congressional action.”
This legislation also increases the funding authorization level for the USDA Section 502 Guaranteed Program to an amount that is sufficient “to meet the remaining fiscal year 2010 demand.” Therefore, no additional funding shortfalls in the program are expected for the remainder of fiscal year 2010.
With the passage of this legislation that addresses the current funding lapse in the USDA Section 502 Guaranteed Program, USDA Rural Development will begin the implementation process; which will eventually lead to the elimination of the “subject to Congressional action” language on loan approvals that has been in effect since May 27th . Following the completion of all of the Agency’s internal requirements, USDA Rural Development is then expected to announce the restoration of funding for the USDA Section 502 Guaranteed Program.
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Why You Absolutely Need to Buy A Home Now
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History Shows That Now is The Best Time To Buy
In 1971 Housing Affordability was at its highest prior to this year. Meaning that this is the best time possible to buy.
Let’s Talk Affordability
The chart below plots two things: National Association of Realtors Affordability Index (green line) and 30 Year Fixed Rates (blue line). As you can see on the far right side you have the highest Housing Affordability and the lowest Rates. So, you have the lowest prices, lowest rates, and highest affordability.
What About the ’80′s?
In the period of 1979 to 1984 you have some of the highest interest rates on record. Yet, still a lot of people purchased homes during that period. The people that bought homes during that time did well 15 – 30 years later. My Mother purchased her first home during that time period even though rates where in the 12′s to 18′s. In 1982 Housing affordability was at its lowest ever. Inflation kicked in 1975, and rates continued an upward trend through 1979. So, the Gap between housing affordability and Interest Rates was very wide, the widest of record.
The Best of All Scenario’s
Today we have a very wide gap as well, but in a good way. Presently because interest rates are so low, home prices are low, and housing affordability is up, the overall risk is greatly reduced. If the risk was so great in 1982 and homebuyers did okay, how can someone look at the chart today and say that it is riskier than in 1982.
What About the Negative News?
That’s the best part if you are a homebuyer. Trulia recently release a report Showing Sellers Continuing to Slash Home Prices. This means you are getting an even better price on an already reduced house. The Department of Housing and Urban Development (HUD) just released there July report card, “The Obama Administration’s Efforts To Stabilize the Housing Market and Help American Homeowners.” This report card shows continued affordability in the U.S. Market.
Historic low rates continue to promote affordability: Families continue to benefit from the lowest rates in history on 30-year fixed mortgages. Since April of 2009, record low rates have helped more than 7.2 million homeowners to refinance, resulting in more stable home prices and $12.9 billion in total borrower savings.
Simple supply and Demand suggest that since there is not as great of demand now, compared to during the tax credit, housing prices will decrease thus further increasing the affordability (Read Better Deal!) There are still large amount of houses on the market and many more still in foreclosure. Both Federal Housing Finance Agency and Standard and Poor’s believe that House Prices are showing signs of stabilizing.
What do you think housing prices and interest rates will do in the next 12 months?
If you are looking to purchase or refinance please give me a call or email Jeremiah so we can get the process started. I’d be happy to get you started.
Rates and APR: What Do They Tell You
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What is the difference between the interest rate and the A.P.R.?
You’ll see an interest rate and an Annual Percentage Rate (APR) for each mortgage loan you see advertised. The easy answer to “why” is that federal law requires the lender to tell you both. By showing both this can lead to confusion, especially to those First Time Homebuyers.
The Federal Reserve wants the APR to be a tool for comparing different loans, which will include different interest rates but also different points, fees, and other terms. The APR is designed to represent the “true cost of a loan” to the borrower, expressed in the form of a yearly rate. The problem is that there are many costs associated with a loan, that are not considered in APR.
What Fees Are Included In The APR?
- Loan Origination Fee
- Loan Discount Fee
- Other Lender/Broker Fees (Application, Underwriting, Processing, Tax Service Fee, etc.) – Anything paid to the broker or lender or affiliate of the broker or lender
- Odd Days Interest
- Mortgage Insurance Premium
- Title Closing Fee
While APR was designed as an attempt to make it easier to compare loans, it’s sometimes confusing because the APR includes some, but not all, of the costs associated with a mortgage. And since the federal law that requires lenders to disclose the APR does not specifically declare what goes into the calculation, APR’s can vary from lender to lender and loan to loan.
What Fees Are Not Included In The APR Calculation
- Escrow Setup
- Appraisal Fee
- Title Insurance
Let’s Throw Adjustable Rate Mortgages In The Mix
The APR on an Adjustable Rate Mortgage (ARM), a loan tied to a financial index, like a 5/1 ARM, assumes the index will never change. The interest rate on an ARM is composed of the index and margin. Because of the underlying assumption that the index will not move over the life of the loan, the APR can be grossly under or over stated on an ARM depending upon if the index moves up or down over the life of the mortgage. ARM’s loans were created because the Bank does not have to assume the interest rate risk of a Fixed 30 Year Mortgage, allowing the consumer to get a slightly lower rate, and assume the risk that rates will rise. These financial indexes have always moved over the course of a 30 year mortgage thus making the APR a difficult tool to compare a fixed rate mortgage to an ARM.
So, APR’s are at best inexact. The lesson is that APR can be a guide, but you need a mortgage professional to help you find the truly best loan for you.
Show What Should You Do?
You as a consumer need to look at two things when considering a mortgage loan
- The front end costs associated with obtaining the loan, not just those deemed pre-paid finance charges, and thus included in the APR calculation
- The interest rate, and the total cost of the loan over time.
Here is a Comparison of two different mortgages, both 30 year fixed rate mortgage.
The first mortgage has an APR of 5.03%, and the 2nd has an APR of 5.25%. So, if you were to choose a loan simply based on the APR the typical choice would be the 1st mortgage; however, if you will be staying in the home less than 90 months (most loans are only held for 60 months) then the best choice is Loan 2, because the total cost is cheaper.
Make sure you are dealing with a mortgage professional that doesn’t just throw rates and fees at you over the phone. I’ll take the time to prepare a total cost illustration and determine that the loan you select meets your long term objective.
Home Shopping The Smart Way
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When shopping for a home, there are quite a few things that can snatch your attention. When you look at a home, it’s very easy to fall immediately in love with it. New homes are clean, decorated perfectly, and many are what you pictured in your dreams. If you don’t shop the smart way though, you’ll end up like many other home owners and find faults shortly after you move in.
Look at the Size of Rooms
When you look at your potentially new home, you’ll want to check and see if you can fit your furniture in the way you want. A lot of homes these days are configured so that the furniture will only fit in one position. Often times, this leaves a television or other device in a weird location, sometimes making your furniture nearly impossible to fit through the doors. This is surely something to bear in mind, as you certainly don’t want to have to buy entirely new furniture.
Think of Your Family Now and in the Future
You’ll also want to be sure that you get the right home for yourself and your family. Even though you may be a young couple now, you may want to get a house with enough room in case you decide to have kids later on down the road. If you don’t get a big enough house and end up having to move, you’ll find that moving with kids is a hard task indeed. If you have babies when you move, you’ll find moving to be even more difficult.
Once your children start to leave home, you may want to look into getting a smaller house. The choice is entirely up to you, and what will work the best for your needs. Anytime you purchase a house though, you’ll want to think about the size of your new home and consider the future needs of your family as well. This way, you’ll have everything covered for years to come and won’t have to look into getting a new home.
Look at the Extras
Things like a pool and a hot tub may be a great thing to have, although you should look into the money that regular maintenance will cost you as well. There are a lot of things that may be great to have along with your home, although you should always look at long term costs before you purchase.
Location
Some prefer to live out in the country, while others prefer the city life. Some prefer to be close to stores and such, while others prefer to be miles and miles away. The location of a home is very important, and in most cases will have a big impact on the price. Living in the city will cost quite a bit of money, although a home out in the country can cost just as much if there is a lot of land included with the property. Keep in mind that location is very important for a USDA Home Loan.
Whenever you decide to buy a house, there is a lot of things that you’ll need to consider. Buying a home is no easy feat, with a lot of things you’ll need to decide on. If you give yourself enough time and plan out your budget and the type of home you want, you’ll have plenty of time to make that very important decision. You never want to rush the process, as you could end up with a home that is less than perfect. If you take your time and look at several different houses, you’ll end up in your dream home before you know it.
Buying a Home For Your Family
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The very best and most enjoyable reason to purchase real estate is having a home in which your family will live and grow together. There is a lot of fun involved in finding the perfect place for you and your family to call home. There is also a great deal of stress involved as well and that should not be overlooked.
Some things to keep in mind when searching for the perfect property for your family are the following:
1. Find a Realtor: Finding a realtor or buyer’s agent that you are confident has your needs, desires, and best interests at heart. Your realtor can prove to be a lifesaver when you’ve reached the final hours before closing and the sky looks as though it’s going to fall. Your realtor can help you find the home that you simply cannot see your family living without.
2. Establish a Budget: Once you’ve found a real estate that you trust to help you find a home for your family it is time to identify the things that are absolute necessities in your search and those things you can live without. The most important thing to decide upon is a budget that you are comfortable living with.
3. Identify Your Property Needs: Once you’ve established a budget you need to decide the features that are important to meet the needs of your family. The number of bedrooms, bathrooms, square footage, and yard space. Do you need a fenced in yard or a basement? These things are important as they do affect the comfort and in some cases safety of your family.
4. Determine Your Neighborhood: Another important thing that must be considered when purchasing a home for your family is the neighborhood. This is more important than many people may realize. It is well worth having a smaller home in a neighborhood that is poised for growth rather than a larger home in a neighborhood that is in the state of decline or on the verge of the state of decline. Crime rates in the neighborhood and the school district are other things that need to be considered as well before deciding to view a potential home.
5. Look at Several Properties: You should also take the time to look at several properties before deciding on one property over another. The more properties you see, the better the chances are that you will actually find the one perfect property for the needs of your family home. The more homes you see the more you will learn about your likes and dislikes. You will also get ideas about possibilities and things that can be added on to the home you eventually select. Regardless, the more homes you see, the more choices you have when the time comes to make a decision.
6. Decide on an Offer Price: Never offer the asking price right away. Even if you are willing to pay the full asking price, offer something a little lower and allow some negotiating room. Be sure, if you truly want the house in question not to be insulting with your offer but make the offer just the same. Some things you may want to consider when you make your offer is how quickly you are likely to need a new roof, new flooring, new heating or air conditioning, and countless other improvements that may need to be made on the property. Each of these things costs money and they add up over time. If everything is fairly recent and in good working order you may want to consider that when making your offer as well.
You will find many houses along the way but few will reach out and impress themselves upon you as home. Those are the ones you should consider long and hard. Weigh the options, the prices, and your likes and dislikes. If you do all of this you should be well on your way to the home of your dreams.
