Calif. median home price - December 08: $281,100(Source: C.A.R.)
Calif. highest median home price by C.A.R. region December 08: Santa Barbara So. Coast $875,000 (Source: C.A.R.)
Calif. lowest median home price by C.A.R. region December 08: High Desert $137,560(Source: C.A.R.)
Calif. First-time Buyer Affordability Index - Fourth Quarter 08: 59 percent (Source: C.A.R.)
Mortgage rates - week ending 2/19/09 30-yr. fixed: 5.04% Fees/points: 0.7% 15-yr. fixed: 4.68% Fees/points: 0.6% 1-yr. adjustable: 4.8% Fees/points: 0.5% (Source: Freddie Mac)
Thursday, February 26, 2009
Friday, February 13, 2009
The New Rules of Mortgage Lending
By Les Christie, CNNMoney.com staff writer
February 4, 2009: 1:35 PM ET
NEW YORK (CNNMoney.com) -- If you're shopping for a mortgage these days, it's a whole new world out there. "There have been a huge number of changes over the past few years in mortgage borrowing," said Gibran Nicholas, founder of the CMPS Institute, which trains and certifies mortgage advisors. Of course, many of the subprime loans that helped fuel the housing boom - those that didn't require borrowers to show any proof of income, or that let homeowners make minimum payments - are are simply no longer available. But even buyers looking for a traditional mortgage are now faced with different factors to consider.
Here is what you need to know:
Paying up-front points. Borrowers can pay points - one-time, up-front fees - in order to reduce their mortgage's interest rate over the life of the loan. One point represents 1% of the mortgage value. But they often assume that they should never pay points, according to Alan Rosenbaum, founder of mortgage broker Guardhill Financial. That's a mistake, in his opinion. When interest rates were high, paying points didn't make sense because borrowers were very likely to refinance after rates dropped. They wouldn't hold their original loans long enough to recoup their up-front costs. But now borrowers can get a lot more bang for their buck. The old rule of thumb was that paying one point at closing could lower their mortgage's interest rate by a quarter percentage point or so. "Today the spread is worth a half point to a full point on the rate," said Rosenbaum.
It means paying $2,000 on a $200,000 mortgage at closing can shave as much as a whole percentage point off the loan's interest rate, changing a 6% loan to 5%. That would save $126 a month, and pay for itself in 16 months. Even if the rate were only lowered to 5.5%, that would still save $64 a month, paying for itself in 32 months. Still, not everyone is convinced. Rosenbaum recently had a client who chose a 15-year fixed rate loan at 5.875% with zero up-front points on a $800,000 loan, instead of paying a point to get a 5.375% loan. Had the borrower chosen to pay that point, he would have recouped that cost in about three years, and then gone on to save more than $200 a month for the remaining 12 years of the loan.
Of course, there are caveats. Buyers who are planning to refinance or sell within a few years shouldn't pay points, since the strategy simply doesn't pay in the short term.
Making more than the minimum down payment. If you can afford to put 25%, 30% or more down, should you do it? Most lenders require a minimum down payment of 20%; anything less and borrowers will need to obtain private mortgage insurance. And if a buyer could afford to put more than 20% down, it was generally assumed that they should. The traditional thinking was, "If you have the capital to commit, why not?" said Keith Gumbinger of mortgage research firm HSH Associates. "It will give you a smaller balance to pay off. But now, in light of declining home markets, not everyone would agree with that." High down payments can be wiped out in severely declining markets. Nicholas said he knows of a couple in Arizona who put a whopping $400,000 down on a million dollar house a couple of years ago. That gave them, they thought, a nice home equity cushion should they run into financial trouble. "But prices are down so much, the couple still fell underwater," he said. "It would have been better to conserve that cash in case home prices continue to decline."
Locking in the mortgage rate. Many borrowers choose not to lock in when rates are falling, as they have been, since they assume that the deals will only get better. But that's often a mistake. "We almost always recommend that if you have the numbers that make your deal work, then lock it in," said Gumbinger. His reason: Interest rates tend to jump up much faster than they inch down, meaning that buyers are much more likely to get stuck with a higher mortgage rate than they are to get lower one because they waited. Besides, locking in at the currently very affordable rates can give borrowers peace of mind, which is no small matter when you're trying to buy a house. "You'll sleep better at night," said Gumbinger.
February 4, 2009: 1:35 PM ET
NEW YORK (CNNMoney.com) -- If you're shopping for a mortgage these days, it's a whole new world out there. "There have been a huge number of changes over the past few years in mortgage borrowing," said Gibran Nicholas, founder of the CMPS Institute, which trains and certifies mortgage advisors. Of course, many of the subprime loans that helped fuel the housing boom - those that didn't require borrowers to show any proof of income, or that let homeowners make minimum payments - are are simply no longer available. But even buyers looking for a traditional mortgage are now faced with different factors to consider.
Here is what you need to know:
Paying up-front points. Borrowers can pay points - one-time, up-front fees - in order to reduce their mortgage's interest rate over the life of the loan. One point represents 1% of the mortgage value. But they often assume that they should never pay points, according to Alan Rosenbaum, founder of mortgage broker Guardhill Financial. That's a mistake, in his opinion. When interest rates were high, paying points didn't make sense because borrowers were very likely to refinance after rates dropped. They wouldn't hold their original loans long enough to recoup their up-front costs. But now borrowers can get a lot more bang for their buck. The old rule of thumb was that paying one point at closing could lower their mortgage's interest rate by a quarter percentage point or so. "Today the spread is worth a half point to a full point on the rate," said Rosenbaum.
It means paying $2,000 on a $200,000 mortgage at closing can shave as much as a whole percentage point off the loan's interest rate, changing a 6% loan to 5%. That would save $126 a month, and pay for itself in 16 months. Even if the rate were only lowered to 5.5%, that would still save $64 a month, paying for itself in 32 months. Still, not everyone is convinced. Rosenbaum recently had a client who chose a 15-year fixed rate loan at 5.875% with zero up-front points on a $800,000 loan, instead of paying a point to get a 5.375% loan. Had the borrower chosen to pay that point, he would have recouped that cost in about three years, and then gone on to save more than $200 a month for the remaining 12 years of the loan.
Of course, there are caveats. Buyers who are planning to refinance or sell within a few years shouldn't pay points, since the strategy simply doesn't pay in the short term.
Making more than the minimum down payment. If you can afford to put 25%, 30% or more down, should you do it? Most lenders require a minimum down payment of 20%; anything less and borrowers will need to obtain private mortgage insurance. And if a buyer could afford to put more than 20% down, it was generally assumed that they should. The traditional thinking was, "If you have the capital to commit, why not?" said Keith Gumbinger of mortgage research firm HSH Associates. "It will give you a smaller balance to pay off. But now, in light of declining home markets, not everyone would agree with that." High down payments can be wiped out in severely declining markets. Nicholas said he knows of a couple in Arizona who put a whopping $400,000 down on a million dollar house a couple of years ago. That gave them, they thought, a nice home equity cushion should they run into financial trouble. "But prices are down so much, the couple still fell underwater," he said. "It would have been better to conserve that cash in case home prices continue to decline."
Locking in the mortgage rate. Many borrowers choose not to lock in when rates are falling, as they have been, since they assume that the deals will only get better. But that's often a mistake. "We almost always recommend that if you have the numbers that make your deal work, then lock it in," said Gumbinger. His reason: Interest rates tend to jump up much faster than they inch down, meaning that buyers are much more likely to get stuck with a higher mortgage rate than they are to get lower one because they waited. Besides, locking in at the currently very affordable rates can give borrowers peace of mind, which is no small matter when you're trying to buy a house. "You'll sleep better at night," said Gumbinger.
Monday, February 9, 2009
FIX HOUSING FIRST ACT
The Fix Housing First Act is a part of what the Senate approved last week in their version of the Economic Stimulus Package. The following provides the highlights of this Act:
· Through lower mortgage rates, provides the equivalent of more than a $400 per month tax cut for 30 years to more than 40 million creditworthy American homeowners.
· Provides an additional $15,000 tax credit for the purchase of a new home.
· Includes targeted income and business tax cuts to help create new jobs.
How it Works
4.0 to 4.5% Fixed-Rate 30-Year Mortgages
· New and refinanced mortgages would be available for 4.0 to 4.5% -- providing a monthly savings of more than $400 for the average homeowner’s mortgage payment.
· Banks would issue these lower fixed-rate mortgages on primary residences – both for new home purchases and for refinanced mortgages for responsible homeowners.
· To encourage banks to issue these mortgages, the government will direct Fannie Mae and Freddie Mac to purchase these newly originated loans. Homeowners already holding loans from Fannie and Freddie would also qualify.
· The new, lower rate would be roughly between 4.0 to 4.5% today. The rate would be calculated based upon the historic spread between the 10-year Treasury bill and the 30-year fixed mortgage rate.
· The program would not be for “jumbo” loans.
· These mortgages would be available only until the end of 2010 – the time period of a targeted stimulus.
· The cost of the program is capped at $300 billion, though economists believe it would actually be much less.
$15,000 Homebuyer Tax Credit
· The proposal expands the current first-time homebuyer tax credit to make it more attractive and effective.
· Specifically, the size of the tax credit is doubled from $7,500 to $15,000 (or 10% of the purchase price, whichever is less) and the program is expanded to cover all primary residences and all homebuyers, not just first time homebuyers and vacant or foreclosed properties.
· Available for purchases made between January 1 and December 31, 2009.
· The cost in lost revenue to the government is about $20 billion.
Loan Modifications
· Privately securitized mortgages are at the core of the housing crisis. They account for more than 50% of all foreclosure starts, despite accounting for only 15% percent of all outstanding mortgages.
· This provision could substantially limit foreclosures at an estimated cost between $9B and $12B by:
o Temporarily (for 3 years) compensating servicers who modify privately held mortgages to allowhomeowners facing foreclosure to pay lower monthly payments.
o Temporarily (for 3 years) eliminating legal barriers to loan modification and creating a “safe
harbor” from lawsuits for servicers who act in good faith to do loan workouts.
A Real Stimulus: More Bang for the Buck
· At a cost to taxpayers of only $300 billion, the 4% mortgage plan could provide up to $6.1 trillion in savings to homeowners over the course of the 30-year loans – up to $150,000 for the average homeowner.
· That’s over $5,000 each year they can spend on other priorities for their families – spending that will spur job creation.
Restoring Homeowner and Financial Security
· The economic downturn began with a collapse of the housing market; no stimulus plan will work if we fail to address housing. If we don’t fix that problem, we’ll only be treating the symptoms.
· More than 860,000 properties were repossessed by lenders in 2008, more than double the 2007 level.
· The Fix Housing First Act will bring security to homeowners, thereby stabilizing the housing market and financial markets:
o Increases home sales by lowering costs for new homebuyers, reducing the extensive backlogs of housing inventories
o Decreases foreclosures by allowing eligible homeowners to refinance into more affordable
mortgages and by incentivizing mortgage servicers to do loan workouts
o Helps stabilize housing prices by increasing the number of homes sold and decreasing
neighborhood foreclosure effects
o Helps facilitate loan modifications for struggling homeowners
o Eliminates the uncertainty for the value of securitized mortgages held by financial institutions,
lowering their need to hoard capital and increasing their ability to lend
o Stabilizes credit markets by providing new cash flow to financial institutions
Targeted Tax Cuts to Create More Jobs
· To spur job creation and help struggling families, the legislation also includes targeted tax cuts:
o Help for Families: Income tax cuts for low and middle-income families: a two-year reduction of marginal income tax rates on the lowest brackets, from 15 to 10% and from 10% to 5%.
o Create Jobs, Stimulate Spending: Extension of Bonus Depreciation for 2009: reduces costs of
buying new equipment to encourage business growth, including for small businesses.
o Effectively Utilize Losses: 5-year Carryback of Net Operating Losses: helps businesses that have seen profits turn to losses during this recession.
o Help Our Heroes: Incentives to Hire Veterans: provides a tax credit to businesses that hire
veterans.
o Inject Liquidity into Our Economy: Delayed Recognition of Certain Cancellation of Debt Income: provides targeted tax relief to companies when settling debts with their creditors, which helps save jobs.
o Encourage Investment: Small Business Capital Gains: based on President Obama’s proposal,
eliminates capital gains taxes for start-ups and certain small businesses.
o Infrastructure Investment: Broadband Internet Access Tax Credit: encourages companies to
provide high-speed internet access to areas without such service today.
· Through lower mortgage rates, provides the equivalent of more than a $400 per month tax cut for 30 years to more than 40 million creditworthy American homeowners.
· Provides an additional $15,000 tax credit for the purchase of a new home.
· Includes targeted income and business tax cuts to help create new jobs.
How it Works
4.0 to 4.5% Fixed-Rate 30-Year Mortgages
· New and refinanced mortgages would be available for 4.0 to 4.5% -- providing a monthly savings of more than $400 for the average homeowner’s mortgage payment.
· Banks would issue these lower fixed-rate mortgages on primary residences – both for new home purchases and for refinanced mortgages for responsible homeowners.
· To encourage banks to issue these mortgages, the government will direct Fannie Mae and Freddie Mac to purchase these newly originated loans. Homeowners already holding loans from Fannie and Freddie would also qualify.
· The new, lower rate would be roughly between 4.0 to 4.5% today. The rate would be calculated based upon the historic spread between the 10-year Treasury bill and the 30-year fixed mortgage rate.
· The program would not be for “jumbo” loans.
· These mortgages would be available only until the end of 2010 – the time period of a targeted stimulus.
· The cost of the program is capped at $300 billion, though economists believe it would actually be much less.
$15,000 Homebuyer Tax Credit
· The proposal expands the current first-time homebuyer tax credit to make it more attractive and effective.
· Specifically, the size of the tax credit is doubled from $7,500 to $15,000 (or 10% of the purchase price, whichever is less) and the program is expanded to cover all primary residences and all homebuyers, not just first time homebuyers and vacant or foreclosed properties.
· Available for purchases made between January 1 and December 31, 2009.
· The cost in lost revenue to the government is about $20 billion.
Loan Modifications
· Privately securitized mortgages are at the core of the housing crisis. They account for more than 50% of all foreclosure starts, despite accounting for only 15% percent of all outstanding mortgages.
· This provision could substantially limit foreclosures at an estimated cost between $9B and $12B by:
o Temporarily (for 3 years) compensating servicers who modify privately held mortgages to allowhomeowners facing foreclosure to pay lower monthly payments.
o Temporarily (for 3 years) eliminating legal barriers to loan modification and creating a “safe
harbor” from lawsuits for servicers who act in good faith to do loan workouts.
A Real Stimulus: More Bang for the Buck
· At a cost to taxpayers of only $300 billion, the 4% mortgage plan could provide up to $6.1 trillion in savings to homeowners over the course of the 30-year loans – up to $150,000 for the average homeowner.
· That’s over $5,000 each year they can spend on other priorities for their families – spending that will spur job creation.
Restoring Homeowner and Financial Security
· The economic downturn began with a collapse of the housing market; no stimulus plan will work if we fail to address housing. If we don’t fix that problem, we’ll only be treating the symptoms.
· More than 860,000 properties were repossessed by lenders in 2008, more than double the 2007 level.
· The Fix Housing First Act will bring security to homeowners, thereby stabilizing the housing market and financial markets:
o Increases home sales by lowering costs for new homebuyers, reducing the extensive backlogs of housing inventories
o Decreases foreclosures by allowing eligible homeowners to refinance into more affordable
mortgages and by incentivizing mortgage servicers to do loan workouts
o Helps stabilize housing prices by increasing the number of homes sold and decreasing
neighborhood foreclosure effects
o Helps facilitate loan modifications for struggling homeowners
o Eliminates the uncertainty for the value of securitized mortgages held by financial institutions,
lowering their need to hoard capital and increasing their ability to lend
o Stabilizes credit markets by providing new cash flow to financial institutions
Targeted Tax Cuts to Create More Jobs
· To spur job creation and help struggling families, the legislation also includes targeted tax cuts:
o Help for Families: Income tax cuts for low and middle-income families: a two-year reduction of marginal income tax rates on the lowest brackets, from 15 to 10% and from 10% to 5%.
o Create Jobs, Stimulate Spending: Extension of Bonus Depreciation for 2009: reduces costs of
buying new equipment to encourage business growth, including for small businesses.
o Effectively Utilize Losses: 5-year Carryback of Net Operating Losses: helps businesses that have seen profits turn to losses during this recession.
o Help Our Heroes: Incentives to Hire Veterans: provides a tax credit to businesses that hire
veterans.
o Inject Liquidity into Our Economy: Delayed Recognition of Certain Cancellation of Debt Income: provides targeted tax relief to companies when settling debts with their creditors, which helps save jobs.
o Encourage Investment: Small Business Capital Gains: based on President Obama’s proposal,
eliminates capital gains taxes for start-ups and certain small businesses.
o Infrastructure Investment: Broadband Internet Access Tax Credit: encourages companies to
provide high-speed internet access to areas without such service today.
Saturday, February 7, 2009
Fast Real Estate Facts
Calif. median home price - December 08: $281,100(Source: C.A.R.)
Calif. highest median home price by C.A.R. region December 08: Santa Barbara So. Coast $875,000 (Source: C.A.R.)
Calif. lowest median home price by C.A.R. region December 08: High Desert $137,560(Source: C.A.R.)
Calif. First-time Buyer Affordability Index - Third Quarter 08: 53 percent (Source: C.A.R.)
Mortgage rates - week ending 1/22/09 30-yr. fixed: 5.10% Fees/points: 0.7% 15-yr. fixed: 4.80% Fees/points: 0.7% 1-yr. adjustable: 4.9% Fees/points: 0.6% (Source: Freddie Mac)
Calif. highest median home price by C.A.R. region December 08: Santa Barbara So. Coast $875,000 (Source: C.A.R.)
Calif. lowest median home price by C.A.R. region December 08: High Desert $137,560(Source: C.A.R.)
Calif. First-time Buyer Affordability Index - Third Quarter 08: 53 percent (Source: C.A.R.)
Mortgage rates - week ending 1/22/09 30-yr. fixed: 5.10% Fees/points: 0.7% 15-yr. fixed: 4.80% Fees/points: 0.7% 1-yr. adjustable: 4.9% Fees/points: 0.6% (Source: Freddie Mac)
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