How Picking Up The Telephone Can Reduce The National Foreclosure Rate

By Todd Abelson NMLS #180858 on .

Call for help on your mortgage BEFORE missing a mortgage payment

“Foreclosure” is the legal process by which a bank repossesses a home from a borrower and, according to RealtyTrac, 1 out of every 100 homes were in some stage of the foreclosure process in 2007. 

This figure is astounding because foreclosure is expensive to both homeowners and banks.  Both parties have an interest in avoiding foreclosure but the process has to start with the homeowner — banks are just too big to start it themselves.

Every mortgage statement has a 1-800 phone number on it.  If you’re about to fall behind on your mortgage payments, make a phone call first.  When you call the toll-free number, a customer service representative talk about your repayment options, or help you design a work-out plan to get your mortgage back to current.

Banks know that more than 80 percent of all foreclosures result from one of the following:

  • Job loss/reduction in salary
  • Medical issues
  • Divorce
  • Death

These are life events that draw compassion from banks.  They understand that bad things can happen to people. 

However, the other 20 percent of foreclosures are the result of an inability to sell, an unwillingness to pay, and budget mismanagement.  These reasons are not as acceptable to the banks.

But when a homeowner fails to forewarn his lender of a missed payment, the lender assumes the worst.  It puts the homeowner in the 20 percent category. This makes a work-out plan much less likely and can quickly lead to foreclosure and a loss of the home.

Lenders want to avoid foreclosure as much as homeowners do.  If you’re a homeowner and you’re facing trouble with your mortgage payment, give your lender a call in advance and try to work it out.

If you never call, you can’t possibly get help.

(Image courtesy: Countrywide Financial)

Good News for Pima County Arizona – FHA Loan Limits Increase

By Todd Abelson NMLS #180858 on .

fhaThe FHA maximum mortgage limits for Pima county Arizona have been increased. The new mortgage limit for a single family home in Pima county is now $316,250.

This is good news for the Tucson housing market!

An FHA loan allows potential home owners to purchase a home with only 3% down. The seller can contribute up to 6% of the buyers closing costs. Plus the buyer can get 100% of the down payment as a gift from a family member. So it is possible for someone to buy a home with an FHA loan with NO money out of pocket.

Below is a break down of the new FHA loan limits as of March 6, 2008.

  • One – Family – $316,250
  • Two-Family – $404,850
  • Three-Family – $489.350
  • Four-Family – $608,150

Both Tyler and Todd are FHA experts and have helped many Tucson folks purchase a home using FHA financing. Give us a call today so we can help you purchase a home with as little as 3% down.

For more information visit www.hud.gov

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The Right Question: “How Much Do I Want To Spend On Housing Each Month?”

By Todd Abelson NMLS #180858 on .

By focusing on a home's payment instead of its list price, home buyers exert more control over their short- and long-term financial goals.

One of the most popular questions that home buyers ask real estate and mortgage professionals is “How much home can I afford?”

It’s a normal question to ask, but it’s not the most effective way to plan your finances. 

Banks will almost always approve you for a home loan in excess of your household budget.

The more appropriate question is: “How much do I want to spend on housing each month?” 

By focusing on a home’s payment instead of its list price, home buyers exert more control over their short- and long-term financial goals.  List price is only one piece of the monthly payment puzzle. 

The cost of owning a home month-after-month is the sum of multiple expenses:

  1. The mortgage payment
  2. The real estate taxes on the property
  3. The condo/management fees to an association (if applicable)
  4. The cost of homeowner’s insurance
  5. The cost of mortgage insurance (if applicable)

In other words, because monthly payments are combination of costs, buying a home based on its list price does very little to help plan a budget.  A home selling for $300,000, for example, may cost a homeowner anywhere from $1,800 to $3,000 monthly.

This is why “How much do I want to spend on housing each month?” is a better starting point than “How much home can I afford?”. 

Home affordability comes from more than just the list price.

Recession or Inflation? Even Fed Members Don’t Know For Sure.

By Todd Abelson NMLS #180858 on .

With Friday's jobs report looming, mortgage markets are especially skittish about whether the economy is in a recession, or facing inflation.

With Friday’s jobs report looming, mortgage markets are especially skittish about whether the economy is in a recession, or facing inflation.

Four Fed speakers Tuesday did little to quell the debate:

  • 9:00 A.M.: Fed Chairman Bernanke stayed on message that foreclosures and falling home values are dragging down the economy.
  • 10:00 A.M.: Fed Vice Chairman Kohn said that banks will “face challenges” but will not fail en masse.
  • 1:00 P.M.: Federal Reserve Governor Mishkin said that deflation is more concerning to him than inflation
  • 1:00 P.M.: Dallas Fed President Fisher said fighting inflation is more important than fighting recession.

Four speeches, four different perspectives. 

The speakers’ mixed messages confused market participants and, as a result, mortgage rates varied wildly from hour to hour.

The confusion was so great that several mortgage lenders had to shut down their rate lock desks on three separate occasions Tuesday to re-price rates to the “new” market.

That’s a highly unusual occurrence and the market’s volatility underscored the uneasiness exiting in mortgage markets lately.  Without a clear picture of where the economy is headed, investors are left to guess (and they’re not very sure of themselves).

Friday’s job report may add some clarity, but until Friday comes, consider locking a mortgage rate if you see one you like — it probably won’t stick around for very long.

What High Oil Prices Mean To Mortgage Rates

By Todd Abelson NMLS #180858 on .

Oil closes at an all-time high, creating inflationary pressures

After briefly exceeding its all-time high, oil closed Monday at $102.45. 

Rising energy costs can lead to inflation because American Business eventually passes on its higher costs to American Consumers.

When consumers have to spend more money for the same amount of product, it’s called “inflation”. 

Another way to look at inflation is like an erosion in the value of a dollar.

The presence of inflation causes mortgage rates to rise because mortgage debts are repaid in dollars.  If those dollars are losing their value, the rates tied to those debts have to increase to “cancel out” the erosion.

This is why mortgage rates spiked Monday.  As oil prices rose, the fear of inflation grew larger.

Over the next few weeks, expect mortgage rates to be highly sensitive to oil prices.  As oil prices rise, mortgage rates should, too.  As oil prices fall, mortgage rates should follow.

(Image courtesy: New York Times)

As The Fed Funds Rate Falls, 30-Year Fixed Mortgages Rise

By Todd Abelson NMLS #180858 on .

Since the Fed began cutting rates five months ago, mortgage rates on 30-year fixed mortgages are higher, as are jumbo mortgage rates.

Federal Reserve Chairman Ben Bernanke testified to Congress Wednesday, alluded to further rate cuts to support an ailing U.S. economy.

Already, the Federal Reserve has lowered the Fed Funds Rate by 2.250% since September 2007.

The graph at right comes from the Wall Street Journal and it highlights a very important correlation between the Fed Funds Rate and mortgage rates.

The correlation is that there is no correlation.

Since the Fed began cutting rates five months ago, mortgage rates on 30-year fixed mortgages are higher, as are jumbo mortgage rates.  ARMs, however, are lower.

Especially noteworthy is how 30-year fixed rates started to spike as the Fed cut rates through January.  Another half-point cut in March could have a similar impact.

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EyeOnMyLoan

By Todd Abelson NMLS #180858 on .

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The EyeOnMyLoan concept was developed by Tyler Ford and Doug Olson. EyeOnMyLoan was the first web-based status reporting tool for loan officers to communicate to the borrower, Realtor®, escrow officer and mortgage team. It allows everyone involved with the loan transaction to be informed about the progress of a loan. Anywhere. Anytime.

Email updates and alerts are sent to all those involved throughout the loan process.

Tyler and Todd use EyeOnMyLoan. Our clients and agents save time and are continually updated in regards to the status of their mortgage from start to finish by accessing www.EyeOnMyLoan.com.

EyeOnMyLoan allows Tyler and Todd to live up to our Missions and Values which you can read by going to www.tucsonmortgages.com.

How Is Housing Doing? It Depends Who You Ask?

By Todd Abelson NMLS #180858 on .

The OFHEO paints a different picture from the Case-Shiller Index

Yesterday, the Office of Federal Housing Enterprise Oversight released its fourth-quarter housing data. 

The OFHEO report color-coded each state according to its annual price changes.  The states shown in red lost value, and everyone else gained.  Overall, the OFHEO measured a 0.8% national increase.

Also hitting the wires yesterday was the Case-Shiller Home Price Index. 

This report focuses on the 20 largest metropolitan statistical areas in the United States and painted a much more grim outlook for housing.  According to Case-Shiller, prices declined 8.9% nationally.

Both reports are imperfect but one notable difference is that the OFHEO report measures all 291 MSAs in the United States and its data showed that two-thirds of them appreciated last year.

Once again, this just reminds us: real estate is a local phenomenon.  Every market is unique with its own price trends, independent from the rest of the country.

Real Estate Term: Earnest Money

By Todd Abelson NMLS #180858 on .

When a buyer and seller reach agreement on a home sale, the buyer typically puts a small amount of money into a trust account.  This up-front deposit is more commonly known as earnest money.

When a buyer and seller reach agreement on a home sale, the buyer typically puts a small amount of money into a trust account. 

This up-front deposit is more commonly known as “earnest money”.

A sales contract’s earnest money requirement will vary from contract to contract.  It can be as high as 10 percent of the purchase price and could be as low as $500; earnest money is a negotiable item between buyers and sellers.

Some factors that can influence earnest money amounts include:

  • Market conditions: Stronger markets often call for more earnest money
  • Buyer economics: First-time buyers often give less earnest money
  • Seller psychology: Skeptical sellers often ask for more earnest money

No matter how large or how small, however, earnest money is supposed to give the seller a sign of good faith that the buyer wants to purchase the home. 

To this end, earnest money can be forfeited if the buyer later “backs out” of the deal, or breaches the terms of the purchase agreement. Breaching, however, is infrequent. 

This is because most purchase contracts are written with buyer-focused “outs” called “contingencies”. 

A typical contingency is that the seller must provide a clean title policy to the buyer, or that the buyer must secure financing prior to given date, or that the home must pass a satisfactory inspection.

If any of these contingencies cannot be met, the purchase agreement is voided and earnest money returned to the buyer.

When contingencies are met, however, earnest money becomes a deposit and is applied directly to the buyer’s bottom line at settlement.  If the buyer is expected to have $50,0000 for the closing, for example, the true bottom line is $50,000 minus the earnest money deposit.

Earnest money customs vary from state to state, city to city, and even locale to locale.  Be sure to ask your real estate agent and/or real estate attorney for professional counsel before signing purchase contracts. 

The earnest money you save may be your own.

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