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How to shop for the best mortgage rate

September 15, 2014 By Roy Hernandez Leave a Comment

Mortgage rates haven’t moved much this year, and the good news is they’ve been stuck at historically low levels. But the bad news is that may be about to change.

Both home prices and mortgage rates are expected to move higher as we head through the fall, and that makes shopping for the right mortgage all the more critical. While various groups report national mortgage rate averages each week, the rates you get can vary dramatically from that average, depending on what product you choose and how you shop. So how do you get the best rate? We asked some of the top mortgage professionals across the nation for their top tips:

Craig Strent, CEO of Maryland-based Apex Home Loans:

“Don’t overpay for your mortgage. One of the biggest mistakes home buyers make is to take a 30-year, fixed-rate mortgage when they don’t need it.”

The 30-year fixed is the most expensive of all mortgage products because the rate is the highest and you’re paying for the longest time. Choose a product that matches how long you expect to be in your home. If it’s just five years or less, then a 5/1 adjustable rate mortgage (ARM) which is fixed for five years will be a much cheaper option. If you’re conservative, try a 7/1 or 10/1 ARM. The rates on all of these are lower than the 30-year fixed and can save you thousands of dollars over the life of the loan.

“Don’t be fooled by points”

Points are an upfront payment of interest in exchange for a lower rate. This boosts your closing costs and makes the rate appear to be artificially low. This can make sense if you’re going to be in your home for a very long time. If you’re not, then the savings you’re getting in the lower rate over time is never going to make up for that higher cost upfront.

“Don’t fight the documentation requests”

A great rate can turn into a bad one if your rate lock expires or you have to pay for an extension. Get your financial house in order before you even apply for a loan. Documentation requirements can be arduous these days, but fighting them will get you nowhere as most are institutional and are not going to be waived.

“Beware of hidden fees and loan level pricing adjustments”

Artificially low advertised rates may come with additional points or closing costs. Be sure to review a full breakdown of closing costs before committing to a lender. If your property is a condo, your loan is cash-out or you have a lower credit score, your rate will rise, so make sure you give all your information to the lender up front, so that lender can give you an accurate quote.

Dan Green, publisher of themortgagereports.com in Cincinnati:

“You can shop by rate or shop by fees, but you can’t shop for both at the same time.”

Decide your strategy first, what makes the most sense for you financially, and then stick to the plan.

“You don’t have to ‘save 1 percentage point’ for a refinance to make sense.”

That strategy is a relic from our grandparents’ generation, when loan sizes were much lower, less than $100,000, and when closing costs could run 10 percent of the loan size or more. Think in terms of monthly savings—not interest rate reduction. If your savings offsets the costs, then go for it.

“Always compare the zero-closing cost mortgage”

Zero-closing cost mortgages are sometimes available for as little as 12.5 basis points (0.125 percent) added to your mortgage rate. Your payment might rise $30-50 per month, but you’ll eliminate $4,000 in closing costs or more. Again, this depends on how long you intend to hold the loan.

Logan Mohtashami, senior loan officer of California-based AMC Lending Group:

“Don’t make the mistake of pricing out lenders on different days”

Get a few lenders in place and price them out all at the same time. Rates can vary even hour-to-hour, so you want to get the best comparison possible.

“Don’t let multiple lenders run your credit score”

This can actually damage your score. Get one credit report done, a three-merge score, where one lender pulls Experian, Transunion and Equifax all together and your loan is based on the middle FICO score.

—By CNBC’s Diana Olick.

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4 Reasons to Buy Before Winter

September 10, 2014 By Roy Hernandez

It’s that time of year, the seasons are changing and with them bring thoughts of the upcoming holidays, family get togethers, and planning for a new year. Those who are on the fence about whether now is the right time to buy don’t have to look much farther to find four great reasons to consider buying a home now, instead of waiting.

1. Prices Will Continue to Rise

The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report released recently projects appreciation in home values over the next five years to be between 11.2% (most pessimistic) and 27.8% (most optimistic).

The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates Are Projected to Increase

Although Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have softened recently, most experts predict that they will begin to rise later this year. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison projecting that rates will be up almost a full percentage point by the end of next year.

An increase in rates will impact YOUR monthly mortgage payment. Your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.

3. Either Way You are Paying a Mortgage

As a recent paper from the Joint Center for Housing Studies at Harvard University explains: “Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

4. It’s Time to Move On with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise. But, what if they weren’t? Would you wait? Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe it is time to buy.

Bottom Line

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

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How to Sell a Home in the Summer

August 4, 2014 By Roy Hernandez

10 Sizzling Summer Home Selling Tips

Home selling in the summer is often a bit more tricky than home selling during other times of the year. For example, spring time selling is the most popular time to put your home on the market. The second best time of the year to sell a home is in the autumn. Summer ranks in meager third position.

Why is Summer Not the Optimum Time to Sell a Home?

Summer is good for a lot of things, but home selling is not necessarily one of them. In fact, if you don’t have to sell in the summer, you might get more for your home if you wait until fall. Why? Because in the summer

People go on vacation
Kids get out of school and require attention
Summer activities distract

There’s just too much going on during the summer to pay close attention to home selling. Most sellers would rather wait until everything calms down in the fall.

If You Must Sell Your Home During the Summer

Not everybody can wait until fall, though. Sometimes people need to sell during the months of June, July and August. They might be transferred to a new job in another state or be experiencing other pressing “life” issues that could necessitate an immediate sale. Here are a few things you can do help attract a summertime buyer who might be leaning instead toward lying in a hammock and sipping lemonade.

Mow the Lawn Twice a WeekDon’t ask me why but grass grows faster in the summer. Don’t explain it to me, either, because I don’t want to think about photosynthesis or chlorophyll. Your hair grows faster in the summer, too. Every other lawn cutting, try mowing on the diagonal to add dimension and curb appeal.
Create Summer Curb Appeal Curb appeal is what makes fairy-tale land leap from the pages of a landscaping book and into your front yard. Curb appeal creates lust, happiness and contentment. Trim the bushes. Plant flowers. Scatter mulch. Paint your house number on the curb. Sweep the walk. Make your entrance welcoming and warm.
Decorate With Summer-Influenced Accents Look around your yard for color inspiration. White is a pure summer color. Vivid blues have a calming affect. You can sweep away the cobwebs of winter by replacing accent pillows or throw rugs with brighter, summer hues.
Bring the Light Inside If you have heavy drapes, remove them. They tend to make rooms look smaller anyway by encroaching on space. Pull all your blinds to the top and tape the strings underneath. Consider tie-backs if you don’t already have them for holding open lighter drapes / curtains. The only time you would leave blinds closed is if there was an undesirable element on the other side of the window, i.e. a neighbor’s trash can, and even then, open them slightly.
Go With the Flow of Summer Due to daylight savings in most states, it stays light outside longer. Some people like to skip out of work early on a Friday. You might find buyers are more interested in touring your home in twilight hours, just after the dinner hour.
Move the Home Outside Where I live, in Sacramento, it doesn’t rain in the summer. We can move perfectly good living room furniture to the back yard. Not only does moving out furniture free up more room inside the home, but it creates an outdoor living space with items you already own. It’s an illusion created for a buyer that says yes, you can own this lifestyle, too.
Deliver the Sparkle Gold or silver or brass or pewter? Doesn’t matter. Mix them, if you like. Old rules don’t apply. Metals are summery. Vases, picture frames, mirrors, utensils, goblets, hanging planters to garden gnomes.
Supply Summer Treats and Drinks For me, in California, summer means red-and-white checkered tablecloths, potato salad, hot dogs and mustard and roasted corn-on-the-cob. Every part of the country has its own summer food traditions. In Maine, summer might mean juicy blueberries and clams. Fill the sink with ice cubes and chill bottled water for guests.
Utilize Natural Scent Sparingly Sometimes, people go hog wild with the air fresheners. Vanilla is a popular scent but it can overwhelm sensitive noses. Try filling the air with natural fragrances such as those from cut roses or honeysuckle vines.
Control the Air Temperature The only thing worse than a stuffy room on a hot day is a hot room. Circulate air. Even if you have to place floor fans about the home, keep the air moving. Turn down the AC to a notch below your comfort zone if the air outside is hotter than your comfort zone. Not so cold that your visitor’s arm hair stands up. But chilly enough that they don’t want to go back outside. Compliments of Elizabeth Weintraub, DRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.[gravityform id=”13″ name=”Have a question or comment?”]

Housing inventory jumps 11.8%. How does this affect you?

July 7, 2014 By Roy Hernandez Leave a Comment

Good news for buyers in the upper end of the buying spectrum. Properties are staying on the market longer and inventory is UP. Meanwhile, lower end buyers are having a tough go of it with smaller inventory and rising prices.

After plunging throughout 2012 and for much of 2013, and rising only modestly through the beginning of this year, the inventory of all for-sale homes nationwide spiked in May, jumping 11.8% year-over-year according to Zillow (Z).

But most of those gains in inventory were made among homes priced in the middle and top one-third of home values, according to Zillow Real Estate Market Reports.

The number of homes available for sale in the most affordable price bracket, those homes most sought by first-time homebuyers, fell year-over-year in 28 of the nation’s largest metro areas analyzed by Zillow.

“It’s good to see overall inventory rising. It’s likely that many would-be sellers have decided to capitalize on recent home value gains, particularly as the pace slows, and list their home for sale now in order to move into a new home while mortgage interest rates remain low,” said Zillow chief economist Stan Humphries. “But persistent inventory constraints at the low end of the market continue to make it a tough environment for first-time and lower-income homebuyers. Low inventory and high demand can lead to rapid price spikes, which make homes even more difficult to afford for many buyers. Hopefully the inventory gains we’re seeing in the middle and upper tiers of the market will begin trickling down to the most affordable homes soon.”

The total number of homes listed for sale on Zillow in May was up 4.3% over April, and has risen month-over-month in each of the past three months on a seasonally adjusted basis.

Overall inventory of for-sale homes was up year-over-year in 506 (78%) of the more than 600 metro areas analyzed by Zillow. Large metros where inventory has increased the most include Las Vegas (up 51.5% year-over-year), Washington, DC (up 45.7% year-over-year) and Riverside, Calif. (up 42.7% year-over-year).

In addition to low numbers of affordable homes for sale, first-time and lower-income homebuyers armed with traditional financing are also competing with all-cash buyers at the lower end of the market. Zillow reported last week that in 27 of the top 30 metros analyzed by Zillow, more than one third of all sales of the lowest-priced homes were made with cash. In three of the top 30 metros – Tampa, Detroit and Miami – more than 80% of all sales in the lowest price bracket were cash deals.

National home values in May were up 0.1% from April to a Zillow Home Value Index of $172,300, and have now risen for 28 consecutive months.

Year-over-year, U.S. home values rose 5.4% in May, the slowest annual pace of appreciation in more than a year. For the 12-month period from May 2014 to May 2015, national home values are expected to rise another 2.9% to approximately $177,321, according to the Zillow Home Value Forecast.

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OC Home Prices Continue Upward in May

June 26, 2014 By Roy Hernandez Leave a Comment

Home prices continue upward. Equity home sales near 90 % all home sales.

LOS ANGELES (June 23) – Higher home values continued to fuel more equity home sales, which have made up more than 80 percent of all home sales for the past 11 consecutive months. Meanwhile, pending home sales fell in May as investors pulled out of the market due to higher home prices, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.

Distressed housing market data:

• The share of equity sales – or non-distressed property sales – rose further in May, rising to 89.2 percent, up from 88.4 percent in April. Equity sales have been rising steadily again since the beginning of this year. May marks the 11th straight month that equity sales have been more than 80 percent of total sales. Equity sales made up 78 percent of sales in May 2013.

• The combined share of all distressed property sales continued to decline in May, primarily due to a drop in REO sales. The share of distressed property sales was down from 11.6 percent in April to 10.8 percent in May. Distressed sales continued to be down by more than 50 percent from a year ago, when the share was 22 percent.

• Twenty-seven of the 41 reported counties showed a month-to-month decrease in the share of distressed sales, with 11 of the counties recording in the single-digits, including Alameda, Marin, San Diego, San Luis Obispo, San Mateo, and Santa Clara counties — all of which registered a share of five percent or less.

• Of the distressed properties, the share of short sales dropped to levels last observed in late 2007 at 5.6 percent, down from 5.9 percent in April. May’s figure was nearly a third of the 14 percent recorded in May 2013.

• The share of REO sales fell in May to 4.7 percent, down from 5.3 percent in April and from 7.6 percent in May 2013.

• The supply of inventory increased for equity sales and REO sales in May. The Unsold Inventory Index for equity sales edged up from 3.6 months in April to 3.7 months in May, and from 2.3 months in April to 2.4 months in May for REO sales. The supply of short sales dipped from 4.4 months in May to 4.3 months in April.

Pending home sales data:

• California pending home sales fell in May, with the Pending Home Sales Index (PHSI)* dropping 3.4 percent from a revised 114.1 in April to 110.1 in May, based on signed contracts.

• Pending sales were down 10.6 percent from the revised 123.2 index recorded in May 2013. The year-over-year decline in the PHSI was the first double-digit decline in three months. Pending home sales are forward-looking indicators of future home sales activity, providing information on the future direction of the market.

Charts (click link to open):

• Pending sales compared with closed sales.
• Historical trend in the share of equity sales compared with distressed sales.
• Closed housing sales in May by sales type (equity, distressed).
• Housing supply of REOs, short sales, and equity sales in May.
• A historical trend of REO, short sale, and equity sales housing supply.
• Year-to-year change in sales by property type.

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Mortgage Rates Falling, So Where Are Home Buyers?

June 11, 2014 By Roy Hernandez Leave a Comment

Mortgage rates have fallen close to their lowest levels in nearly a year, but housing demand hasn’t budged much yet.

Freddie Mac FMCC -1.36% reported Thursday that the average 30-year, fixed-rate mortgage rose to 4.14% this week, up from 4.12% last week but down from 4.4% just two months ago. This puts rates at roughly the same level seen in late October 2013 and again last June, when rates were zipping up as investors braced for an end to the Federal Reserve’s bond-buying programs.

But even with low rates, mortgage applications have been soft, according to a separate report from the Mortgage Bankers Association, a sign of still muted demand for home loans.

What’s going on?

First, a longer view helps. True, mortgage rates are low—as low as they’ve been in almost 12 months. But in the same way that shoppers may not be lured by “low prices” at a department store that is always advertising a sale, mortgage rates at 4.1% may not be seen as a steal by buyers who lived with rates that were even lower for all of 2012 and the first half of 2013—especially considering that prices have moved higher.

Put differently, which change is more dramatic—a decline in interest rates from 5% to 3.5% over the two years beginning in February 2011 or the decline from 4.5% in January to 4.1% in May?

Given the time it takes for home purchases to come together and the fact that the decision to purchase a home isn’t purely rate-driven—buyers also must weigh what’s for sale, their family and job situation, etc.—it could take a while to see what effect, if any, the recent drop in interest rates has had on demand.

So do rates really matter? At the margins, yes. They’re a key component of a borrower’s monthly payment. And often the first conversation between a real-estate agent and a potential buyer—”How much are you willing to spend?”—can be influenced quite a bit by mortgage rates, provided the buyer isn’t paying entirely in cash.

What does this payment picture look like right now? The monthly payment on the median-priced U.S. home fell from $673 in February 2011 to $552 in September 2012 as interest rates fell. Interest rates stayed low through May 2013, but the average payment rose to $586 as home prices ticked up. (These calculations assume a 20% down payment on the national median home value as calculated by Zillow).

After interest rates jumped last summer, that average payment bounced to $674 in September 2013. Rising prices and, especially, higher rates eroded the affordability gains of the previous 2½ years in a matter of months. Payments haven’t budged much since then. Modest declines in interest rates have offset modest gains in home prices.

Some look at this and say: wait a minute, a 4.5% mortgage is still an insanely good deal. Why would a rise in rates to levels that are still quite low hurt housing demand? One possible explanation: the overall level of rate matters over the long run, but the speed with which rates rose last year could have dented demand in the short run.

Several economists have argued recently that mortgage rates increases played an important role in last year’s sales slowdown. In part, that’s because activity received a larger boost when mortgage rates were falling from 2011 to 2013 than previously anticipated, wrote Goldman Sachs economists Sven Jari Stehn and David Mericle in a recent report.

The Goldman analysis suggests that the slide in mortgage rates between 2011 and 2013 increased residential investment—the primary measure of housing’s contribution to GDP—by 5 percentage points. “As this tailwind dissipates going forward, the trend in housing activity might be somewhat lower than previously assumed,” they write.

Last year’s mortgage rate increase accounts for nearly half of the difference in expected housing growth and the lower, actual growth, according to a separate analysis published last week by economists at the Federal Reserve Bank of Cleveland.

This isn’t to say that the cold winter and the rate jump are the only reasons housing has slowed down. Low rates and prices may have spurred the release of pent-up demand throughout 2012, as home prices began to rise. This one-time benefit, together with aggressive home purchase by investors (also a temporary phenomenon), could have given false signals about the true health of the demand side of the market in 2012 and 2013.

Moreover, incomes have showed little growth, meaning that it will be harder for more buyers to buy homes if prices continue to rise absent some gains in wages or even bigger declines in financing costs. Sales are also being restrained by low levels of homes for sale, which is pushing prices higher. Some would-be buyers don’t have enough equity to sell their current home, while others have high levels of student debt.

WSJ by Nick Timiraos