Real Estate Info

A Qualified Mortgage Consultant Can Outline Your Options

Nick Alameddin

EVP, Loanisland

Buying a home vs. renting is a big decision that takes careful consideration, as most mortgage consultants will agree. But the rewards of home ownership are great. For many years, purchasing real estate has been considered an extremely profitable investment. It is an achievement that offers a sense of pride, financial stability and potential tax advantages.

Yes, there are certain responsibilities associated with owning a home. Landlords will often argue the benefits of renting, and for obvious reason. If you are renting, you’re helping them make their mortgage payment.

The numbers are staggering if you look at it this way. If you are paying $1,000 per month for an apartment, and you know your rent will increase 5% every year, then over the next five years you will pay your landlord $66,309. If you are currently renting a house, you may be paying much more than that each month. Either way, you gain no equity by shelling out this monthly housing expense and you certainly won’t benefit when the property value goes up!

However, if you were to purchase your own home or condominium, you would be well on your way toward building equity within that same five-year period. By choosing a fixed-rate loan program, you can have the comfort of knowing that your monthly mortgage payment will never go up. In fact, you would have the option of refinancing to a lower interest rate at some point in the future should interest rates drop, and this would cause your monthly mortgage commitment to go down.

In addition to building equity, there are tax advantages that come into play with home ownership. Depending on your tax bracket, owning a home is often less expensive than renting after taxes. Interest payments on a mortgage below $1 million are tax-deductible, and your mortgage consultant should help you evaluate the tax advantages of various loan scenarios, and share this information with your tax consultant to glean feedback on your behalf.

To find the loan program that is right for you, your mortgage consultant will need to evaluate your monthly household income, current assets and savings, as well as any monthly obligations you may have for credit card payments, car payments, child support, etc. These prequalification factors, along with the report of your credit score, will determine how much house you can afford and what interest rate you will pay for financing. It is also important to let your mortgage consultant know what your future goals are, because this will help narrow down which loan option is the best fit for your long-term needs.

There are many different types of loan programs available, including “low” and “no” down payment mortgage programs. These types of programs require the borrower to provide less than 3 percent of the loan amount as down payment. FHA lenders rule that the mortgage payment, including principal, interest, taxes and insurance (PITI) should not exceed 31 percent of your gross income, and the PITI plus other long-term debt (car payments, etc.) should not exceed 43 percent of your gross income.

Housing is an expense that takes a big bite out of the monthly budget. If you are a renter and feel that “home” is more than just someplace to hang your hat, think about the advantages of purchasing real estate. It may be time to take the step into building your personal net worth as a home owner.

We couldn't have asked for a better Thanksgiving treat than the one we got on Monday: the lowest 30-year fixed-rate in over two years. That's right. For those of you who have been patiently waiting, here's your chance to save anywhere from $5,000 to $7,500 or even more on the mortgage financing you've been looking for. Do not miss this great opportunity to cash in on the lowest rates since October 2005.

Here's why you should act now:

• Monday saw the lowest 30-year fixed interest rate in over two years. However, each time this interest rate reached previous low points, both last year and earlier this year, it began increasing and didn't stop, climbing over 0.50% in the months that followed!
• Fannie Mae and Freddie Mac tightened guidelines, announcing new Loan-Level Price Adjustments. In the first quarter of 2008, most borrowers who have good credit, but have FICO scores below 680, will now be forced either to pay more points at closing or incur a higher interest rate.

The amount that a borrower could be forced to pay, even if they've never been late on a payment, could be as much as 2.00% in points or an interest rate that's 1.00% higher than the going rate.

On a $250,000 home loan, a borrower could have to pay up to $5,000 in order to receive normal market rates! Borrowers choosing the higher interest rate, under the worse case scenario, would stand to lose over $7,500 in just the first three years of the loan.

Choosing to wait could cost you money both in the form of higher market rates and points. This could well be the greatest holiday present you could treat yourself to this year, but only if you act fast!

Call me today for a FREE loan evaluation to determine what we can do to help you improve your financial situation before these great rates disappear.

How many times have you experienced a brilliant revelation while in the middle of something else? Ten minutes later, you go to retrieve it, and it's gone. Or you have a task that you know you must complete, perhaps a phone call at work, but other items keep popping up. The day ends, you pull into your driveway, and realize that you never made that call.

Years ago, George A. Miller wrote an article for The Psychological Review in which he suggested that the number of items a person can keep in their short-term memory is approximately seven, plus or minus two. With everything going on in the world around us, it's no wonder that we forget so many things.

What's the solution? Write it down! Productivity expert David Allen* believes that you should avoid having the same thought more than once, unless you enjoy that particular thought. Our minds are prone to remember items that happened recently or which contain emotional content. Given the choice, we would probably prefer more selective criteria, especially considering the space constraints of our short-term memory. By writing notes, you free your mind to do more productive things such as coming up with innovative new ideas or analyzing existing data.

Allen has also observed that as adults, we often experience ideas somewhere other than where they're to be implemented. Perhaps you've been discussing something with a client, and you have an additional thought while standing in line at the grocery. The reverse can also happen, where you remember that you are out of milk while you're in the middle of a meeting. By writing these thoughts down when you have them, you'll ensure that they'll be acted upon when the opportunity arises.

How should you begin this process? Stock up on working pens, pads of paper, and a location to place these notes at work, at home, and when you're traveling in between the two. The only thing worse than forgetting an idea is writing it down and losing the note, which doubles your anxiety. You're wondering where the note went, prompting fears that other notes have been lost, and you're trying to retrieve an idea which you've already placed in your mental recycle bin. (This bin is emptied regularly, unlike the one on your PC's desktop!)

By documenting your ideas, you will achieve a clear mind and be ready to face even larger challenges!

When it comes to real estate, foreclosures aren't the only big story in the news. Builders and sellers are reportedly offering huge savings and massive incentives in order to pull in buyers and compete in today's marketplace.

Business Week recently revealed that some big builders have been auctioning homes discounted by as much as 50% in selected markets, while other large builders have been providing up to $100,000 in savings and incentives. Many individual sellers are getting in on it, too, by offering incentives like special financing, plasma TVs, vacations, and even motorcycles, cars, and boats.

But, be wary. While there are many sweet deals to be found in today's market, there are also scams, lemons, and unreliable builders, sellers, and industry professionals. Make sure that any deals or incentives you're receiving or providing make sense for your own financial goals and needs. For home buyers and home sellers, this means working with knowledgeable, experienced real estate agents and mortgage professionals you can trust.