How The Stock Market Rally Changed Mortgage Pricing For The Worse

Mortgage rates unexpectedly increased Wednesday afternoon as the U.S. stock market staged a late rally. 

By the end of the day, the Dow Jones Industrial Average was up 1.9 percent, or 247.77 points.

This is a typical pattern. 

When stocks are moving higher, investors want to ride the wave and look for sources of cash.  Often, bonds serve as that source.

Now, remember that mortgage rates are based on the price of mortgage bonds.  When bond are in demand, bond prices increase and the associated rates fall.  When bond are being sold — as what happened yesterday — prices decrease and that pushes mortgage rates higher. 

That’s what happened yesterday.

As the DJIA added 150 points in the last two hours of trading, mortgage rates rapidly worsened.  If you locked your rate in the afternoon, it may have been markedly worse than if you locked in the morning. 

Mortgage rates are expected to be at least 0.125% worse when the markets open this morning.

How Credit Cards May Be Replacing Home Equity As A Funding Source

As mortgage guidelines loosened between 2002 and 2006, homeowners often used their home equity to retire credit card and other consumer debt.  They did this by increasing the size of the mortgage and taking “cash out” from their home.

As you’d expect, this type of mortgage transaction is called a “cash out” refinance.

Well, now that mortgage guidelines are tightening, it’s growing more difficult for a homeowner to engage in this type of home loan. 

Mortgage lenders are restricting the total amount of equity that can be withdrawn from a home, usually as a percentage of the home’s value.

This may be one reason why the amount of credit card debt is rapidly increasing among Americans. 

Throughout May and June, for example, credit card balances increased 12% and 8% respectively even as consumer spending remained relatively flat.

Therefore, we can hypothesize that Americans — unable to “cash out” from their homes — are putting more money on their credit cards and slowly reaching their collective credit limits (upon which the borrowing stops).

When the borrowing stops, spending stops, too, and this has the impact of slowing down the economy. 

A slower economy, of course, reduces inflationary pressures and that makes the U.S. dollar stronger to international investors.  That strength, in turn, creates buying pressure on mortgage bonds which pushes mortgage rates down for everyone.  Naturally, lower rates encourage more borrowing.

Yes, it’s a cycle.  And it’s one worth watching.

New Homes “Sold” Is Not The Same As New Homes “Closed”

With this morning’s New Home Sales report, markets will get a look at the number of newly-constructed homes sold in July. 

The figure is expected to be in the 825,000 range.  This is lower than June’s 834,000 figure.

But — as always — there is more to the story.

When the Census Bureau reports on New Homes Sales, it only counts the number of new sales contracts written.  Specifically, New Home Sales doesn’t measure what happens to contracts after they are signed. 

So, for each buyer that rescinds his contract or does not qualify for financing, the New Home Sales data is over-stated by 1.

A “new home sale” may cancel before closing for a multitude of reasons, including:

• Buyers can’t sell their old homes and can’t get financing
• Buyers are angry when developers reduce price on similar properties
• Mortgage products are no longer available for the buyer’s borrowing profile

According to RealEstateJournal.com, cancellation rates were as high as 40% for big builders in November 2006.  We can only theorize that the number has since increased as home sales slow overall and the mortgage product menu shrinks.

In other words, today’s New Homes Sales data is somewhat irrelevant to the overall U.S.  housing market.  It only measures contracts being written, not contracts being closed.

The Census Bureau even acknowledges this on their Web site.

Selling Your Current House – Part 7 of Buying Your Home

Choosing A Listing Agent

Wether you are local or relocating to Georgia, you’ll probably need to sell as quickly and efficiently as possible. Most people can’t afford to buy a new home until they sell their current one. A good home sale starts in the same place as a good home purchase – with a top-notch real estate agent.

I Don’t Know A Top-Notch Realtor

Start by asking your mortgage professional, friends, family, and co-workers for recommendations. Pay attention to the “For Sale” signs on homes in your area. Research the Internet, read mortgage and real estate bloggers, look through the ads in the paper to see if there are a couple of names that appear consistently.

As you get your list of prospective agents together, you’ll want to select a few to interview. You need to be comfortable with your agent. They’ll be an excellent resource for you to help you get the most out of your home sale. Make certain you have an aggressive listing agent who knows your market, can price your home well, and will work at marketing your home.

Sprucing Up For Buyers

If you’ve been putting off any small cosmetic jobs around the house, now’s the time to do them. Touch up the paint and repair any minor holes or cracks. You want to show people that your home is well maintained. Pay special attention to the outside front of the house and the front entryway. Those areas have the biggest emotional impact on potential buyers. If you have a place to store little-used items, get them out of sight. Clutter and excess stuff make your home look smaller and unappealing. And finally, clean the house from top to bottom – especially bathrooms and kitchens.

Previous posts in this series:

• Hunting For Your New Home – Part 1  
• Choosing The Right Real Estate Agent – Part 2
• Getting The Right House – Buying A Home – Part 3
• Home Financing Options – Part 4 of Buying Your Home
• Applying For Your Loan – Part 5 of Buying Your Home
• Preparing For Closing – Part 6 of Buying Your Home

Why Private Mortgage Insurance (PMI) Is Suddenly Popular

Suddenly, Private Mortgage Insurance is back in vogue.  If only by default. 

The story background is well-documented in this Bankrate.com article from 2002.  The article is five years old, but it still raises some salient points.

What the article doesn’t highlight is that second mortgages such as home equity loans are typically sold to Wall Street, bundled in with sub-prime and “near-prime” loans. 

Today, as the number of buyers for these higher-risk loan pools shrinks, some mortgage lenders have stopped offering second mortgages in order to reduce their overall lending risk.

PMI payments tend to be higher than their piggyback counterparts, but The Tax Relief and Health Care Act of 2006 narrows that gap using tax deductibility.  The act grants itemized deductions for some private mortgage insurance (PMI) and government mortgage insurance (MIP) expense premiums paid in 2007.

For all loans originated in the 2007 calendar year, mortgage insurance is tax-deductible provided that two tests are met:

1. The homeowner’s household income is $100,000 or less in 2007
2. The home loan is for a primary or secondary residence

For households earning more than $100,000, the deduction is phased out to the tune of 10% per $1,000 of additional income until it reaches 0% at $110,000

So, if a single person earns $90,000 in 2007 and buys a home using MI, the MI expenses are tax-deductible in 2007.  However, there’s a catch!  Because the tax code is due to expire December 31, 2007, there is no guarantee that the MI will be tax-deductible in 2008.

As always, talk with your tax professional about how tax deductions work and whether you qualify for a PMI deduction. 

As the number of mortgage products continues to shrink, PMI will continue to grow in popularity.  The graphic/poll above will shift, too.

(Image courtesy: LendingTree.com)

Preparing For Closing – Buying Your Home – Part 6

This simple, five-step walk-through to loan closing will help you understand the procedure and give you an idea of what to expect.

1.Appraisal

As your lender, I will find a professional appraiser to determine the value of the home you want to purchase. The appraisal will provide an estimate of the home’s value by comparing it to others that have recently sold in the area. Lenders generally require an appraisal to ensure that the property backing the loan will cover the loan amount in case of default.

2. Home Inspection

A professional home inspection is recommended for every homebuyer. In some cases, a home inspection may be required as part of your home financing approval process. At minimum, the inspection should cover all the home’s major systems and structural elements, including the foundation, electrical system, heating and cooling systems, insulation, roofing, plumbing, and all exterior features.

3.Title Insurance

There are two types of title insurance: one protects the lender and one protects the borrower from claims against your ownership of the property.

Such claims may be made by: undisclosed spouses, heirs of previous owners, creditors holding liens against previous owners, or other parties. Most lenders will likely require you to purchase a title policy, which will cover their interest in the property.

It’s up to you if you would like to purchase a policy to protect your interest in the home. Both your Realtor and I will be able to recommend a title insurance company who can provide you with additional information about the policies available in your area.

4. Homeowners Insurance

Did you know that most mortgage lenders, at closing, require proof that you’ve purchased homeowners insurance?

In the event of a loss such as a fire, tornado, or burglary, homeowners insurance can pay for damages to the home, as well as for costs to repair or replace contents. If the home is damaged and becomes uninhabitable, homeowners insurance can cover additional living expenses for a period of time while your home is being repaired. Homeowners insurance can also protect you from loss if someone is injured or their personal belongings are damaged while on your property.

5. Closing

At your closing, you’ll go through all the final steps of securing your new loan. The most important thing to know is that all closing costs must be paid in full at this time. By working closely with the closing attorney, I will find out exactly how much you’ll have to pay at closing and make sure no last second surprises affect your closing.

Previous posts in this series:

• Hunting For Your New Home – Part 1  
• Choosing The Right Real Estate Agent – Part 2
• Getting The Right House – Buying A Home – Part 3
• Home Financing Options – Part 4 of Buying Your Home
• Applying For Your Loan – Part 5 of Buying Your Home

______________________________

For assistance with your mortgage needs, please call Tony Gallegos.

Tony Gallegos
The Georgia Mortgage Cicerone
(404) 519-4399 (cell)
fagallego@yahoo.com (email)
To learn more about Tony Gallegos <Click Here>

The Week In Review (August 20, 2007) : What To Watch For

Again last week, financiers failed to answer the major question dogging Wall Street: What is the “right” risk model to use for mortgage lending?  The models of the past are being proven to have been wrong.

So, why do risk models matter? 

Because the basic tenet of lending states that the riskier the loan, the higher the interest rate that should be charged on the loan.  If the risk is unknown, then there can’t be an interest rate. 

If there can’t be an interest rate, then there can’t be a loan.

This is one of the reasons why a few lenders chose to stop making loans last week.  The decision wasn’t made because the companies are going bankrupt, it’s because they can’t determine what their loans’ interest rates should be. 

Sometimes, the safest course of action for a bank is to sit on the sidelines until the market finds direction.

With very little data hitting the wires this week, expect markets to move wildly in response to Hurricane Dean’s damage toll, stock market activity and public statements from the Federal Reserve. 

If the Fed signals that the economy is slowing down because of the credit markets or if the storm causes more damage than is expected, expect mortgage rates to fall as inflationary pressures will subside. 

Inflation is the enemy of mortgage bonds so less inflation means higher bond prices (and lower mortgage rates).

Why The Mortgage “Crisis” Is Not A “Crisis” For Everyone

Another day, another batch of Gloom-and-Doom stories in the news.  Remember to keep a level head — the media’s job, in part, is to sell newspapers and capture eyeballs.  Using the word “crisis” repeatedly is one way to meet that goal.

A few facts to keep it all in perspective:

1. There are still BILLIONS of dollars being lent to homeowners every single day.
2. In May, 98.3% of full documentation, “prime” conforming and jumbo mortgage payments were not 60 days late
3. In May, 99.5% of full documentation, “prime” conforming and jumbo mortgages were not in default

In other words, there is still a very low default for borrowers willing to submit tax returns, W-2s, bank statements, and other financial data along with their loan application.  This represents the large percentage of American homeowners and is why the mortgage “crisis” is not so bad for most people.

The credit market troubles with home loans are more “inconvenience” than “crisis” and, so far, are limited to those that are self-employed, are highly commissioned, have poor credit history, and/or are unwilling to document their financial world to a mortgage lender.

If you are feeling in any way overwhelmed, reach out and contact me for further insight, advice and opinion.  You’ll get better perspective from an industry insider than an industry reporter.

Source
Jumbo concerns in real estate markets
Amy Hoak
CBS MarketWatch, August 14, 2007, 6:00 P.M. ET
http://www.marketwatch.com/news/story/rates-jumbo-mortgages-rise-though/story.aspx?guid=%7BFDE8DFF0-86F7-4C4D-A217-877912918B6E%7D”>

Is Your Loan Officer Incorrectly Reading In Which Direction Mortgage Bonds Are Moving?

As we discuss over and over again, mortgage interest rates are determined by the price of mortgage bonds.  Nothing else, and nothing more.  The challenge in that truth is that mortgage bond pricing is not very accessible to the general public. 

This includes the press.

As a result, the media tends to use a government bond called the “10-Year Treasury Note” as a mortgage rate indicator because it tends to move in the same direction as mortgage bonds. 

Not knowing any better and making matters worse, a lot of loan officers also use the 10-Year Treasury Note as a benchmark.  This is dangerous to their clients.

Look at the data from yesterday (as of 11:20 A.M. ET):

• 10-Year Treasury Note: + 53 basis points
• 30-Year 6.000% Mortgage-Backed Bond: - 19 basis points

If you were watching the 10-Year Treasury Note today, you’d think that mortgage rates would be decreasing over the course of the day instead of increasing. 

This same divergence has occurred several times in August and — for people watching the wrong indicator — may have led to costly rate lock errors.

The only security to watch with respect to mortgage rates each day is the price of mortgage-backed securities.

A Few Good Reasons To Ignore Your Mortgage Prepayment Penalty

 

Industry trade magazine Inside B&C Lending pegs the 2006 dollar volume of new sub-prime loans at $640 billion.  According to the Real Estate Charts chart above, 78% of those dollars were in 2-year adjustable loans.

A loan of this variety is often called a 2/28 (“two twenty-eight”).

A 2/28 originated in 2006 will reach its first adjustment period sometime in 2008.  Adjustments on sub-prime loans are typically 3% at the first adjustment, and 1.5% every six months thereafter until the “cap” of 7% above the original rate is reached.

Looking back to 2003-2006, a homeowner facing an upward adjustment in his mortgage rate could usually just replace the existing home loan with a new one, thereby avoiding the upward adjustment altogether.  This is commonly called “refinancing” your home. 

At present, though, this is a much more difficult proposition; there are considerably fewer mortgage products available for sub-prime borrowers to use. 

With fewer available products into which to change, the homeowner with an adjusting mortgage may have no choice but to swallow the higher rate after the two-year fixed rate period ends.

If your home loan is among the 78% of 2/28s originated in 2006 — even if you have a pre-payment penalty — it may be time to call your loan officer just to check out your options. 

Paying a little bit extra today on a new loan may be better than paying a lot on an adjusted mortgage tomorrow.

Applying For Your Loan – Part 5 of Buying Your Home

Information And Documentation

As your mortgage planning professional, I will walk through the application process with you. It’s a simple question-and-answer interview to complete the application. We can usually pull most of the information from your credit report and just have you validate it. The amount of information you’ll actually need to provide on your own isn’t overwhelming.

The documentation you’ll be required to produce can vary, depending on the type of loan program you need, your credit, and the size of your requested loan in relation to your income and the home’s value. If you’re an excellent credit risk and your loan request is relatively small, your application for certain products may breeze through with very little documentation required.

What Happens Next

Once pre-qualified, one of my team members will send you a commitment letter detailing the conditions of your loan approval and documenting any requirements you’ll need to meet prior to closing. At the same time, the team members will order an appraisal, if one is required. At this point, you’ll have the option to lock in your interest rate or float it. Discussing these options is very important.

Floating The Rate:

You’ve applied for your loan but you’ve also decided to wait before committing to an interest rate, perhaps because you think interest rates stand a chance of going down in the short-term. Your loan can stay in a float status up until five days before closing, in most cases.

Locking In:

You and your lender commit to a range of interest rates for a specified period of time, up to 360 days for new construction loans. During that period, your interest rate range has the ability to be protected. If you close on the loan during that period, you get the rate. If you go beyond the lock-in period without closing, your loan will revert to a “float” status and be priced again based on current market rates. The rate range you get may be lower, higher, or equal to your lock-in rate range.

There are also some reasons why a rate could change even during a lock-in period. For instance, a change in your credit profile could occur, you might decide to change your down payment, or you might change your mind on how many discount points you want to pay.

Whether you decide to float or lock, you’ll be taking a calculated risk. It’s a tough decision, and you’re the only one who can make it. Talk with me to get an idea of what interest rates have been doing recently. You should also find out if there are any economic events coming up that could affect mortgage rates in the short term.

However, ultimately the decision is yours.Previous posts in this series:

• Hunting For Your New Home – Part 1  
• Choosing The Right Real Estate Agent – Part 2
• Getting The Right House – Buying A Home – Part 3
• Home Financing Options – Part 4 of Buying Your Home

______________________________

For assistance with your mortgage needs, please call Tony Gallegos.

Tony Gallegos
The Georgia Mortgage Cicerone
(404) 519-4399 (cell)
fagallego@yahoo.com (email)
To learn more about Tony Gallegos <Click Here>

Atlanta Listed on Forbes “The Best Cities For Young Professionals”

The national honors keep pouring in for the Atlanta area.

Forbes has placed Atlanta on its list of  “Top Cities for Young Professionals.”

According to Forbes:

“If you’re a recent graduate looking to jump-start your career, New York City isn’t the only destination you should consider.”

Listed below are the top five cities:

1. New York City
2. San Francisco
3.  Atlanta
4. Los Angeles
5. Washington, D.C.

With this #3 ranking, the diversity the area provides and afforbablity of housing compared to the other listed cities, one can see a surge of recent graduates and young professionals moving to our beautiful area.  

______________________________

For assistance with your mortgage needs, please call Tony Gallegos.

Tony Gallegos
The Georgia Mortgage Cicerone
(404) 519-4399 (cell)
fagallego@yahoo.com (email)
To learn more about Tony Gallegos <Click Here>

The Week In Review (August 13, 2007) : What To Watch For

After all the volatility and talk of a global crumble, all of the major U.S. stock indices posts gains last week.  It just goes to show you what a strange roller coaster ride we’re all on.

Last week, the market bounced its way through:

1. The Fed’s press release stating that inflation is still a concern
2. Central banks around the world injecting gobs of cash into the global economy
3. A French bank halting withdrawals in several funds until the “true” value of the assets can be determined
4. Bleak outlooks from several high-profile U.S.-based lenders

And none of those items were based on scheduled economic data releases.

This week, by contrast, hosts a bevy of economic growth predictors that will hit the wires.  Continuing with today’s Retail Sales report, mortgage rate shoppers will get no rest from the recent see-saw action. 

Tuesday and Wednesday feature six releases between them, Thursday holds three, and Friday is capped with the University of Michigan Consumer Sentiment survey.

Until mortgage bond risk is re-valued by Wall Street, though, expect the data’s normal importance to be somewhat muted.  Rates should respond more to external factors like the ones we saw last week.

______________________________

For assistance with your mortgage needs, please call Tony Gallegos.

Tony Gallegos
The Georgia Mortgage Cicerone
(404) 519-4399 (cell)
fagallego@yahoo.com (email)
To learn more about Tony Gallegos <Click Here>

(Image courtesy: Pacific National Exhibition)

Home Financing Options – Part 4 of Buying Your Home

 Which Option Is Right For You?

Today it seems there are as many different types of home financing as there are different types of homes. While loan choices are normally a good thing, consumers need an experienced and ethical mortgage professional to help them navigate the confusing and muddied waters of mortgage financing.

Why? Because on the surface some loan programs sound like the best thing since sliced bread, yet lurking under the hood are loan terms or costs that are not apparent nor the appropiate fit for you and your family.

While I strive to provide one of the widest selections of home financing options available in the industry, your particular needs are first and foremost when formulating a mortgage plan for you.

Whether you’re all set to buy or just trying to figure out what you can afford in your new location, I can help. Wether you are moving across the street or relocating from the west coast to Georgia, I can help you make all the right choices. My team can customize a mortgage to your unique needs, drawing from one of the industry’s broadest selections of products.

In addition to all the conventional loan options, we offer special programs that overcome obstacles such as credit issues, hard-to-document income, or lack of savings. Whatever your financial profile, as a Professional Mortgage Planner with 20 years experience, my team can help you capitalize on purchase opportunities through faster approvals, higher loan-to-value (LTV) ratios, and streamlined processing. We also have an attractive menu of innovative programs that include new construction financing, specialized options for homes that require renovation, and programs designed specifically to benefit your particular needs.

Payment Alternatives

Several decades ago, lenders required homebuyers to provide a 20% down payment as protection against the possibility of the homebuyers defaulting on their loans. The invention of mortgage insurance for home purchases made with less of a down payment means that today’s lenders can offer a variety of low and no-money-down options.

That’s useful for a range of buyers such as:

• First-time buyers who don’t have the funds to invest.

• Buyers who want to keep their investment whole and use less cash upfront for their purchase.

• Buyers who need to use their cash for renovations or other move-related expenses.

Whatever your financial reasoning, there are a number of ways to finance your down payment. I can work with you to structure a home financing package that takes into consideration your total financial outlook.

Previous posts in this series:

• Hunting For Your New Home – Part 1  
• Choosing The Right Real Estate Agent – Part 2
• Getting The Right House – Buying A Home – Part 3

______________________________

For assistance with your mortgage needs, please call Tony Gallegos.

Tony Gallegos
The Georgia Mortgage Cicerone
(404) 519-4399 (cell)
fagallego@yahoo.com (email)
To learn more about Tony Gallegos <Click Here>

What’s The True Risk In Mortgage Lending? It’s Anyone’s Guess Right Now.

Any security — stock, bond, or otherwise — has a specific risk associated with it.  Based on that risk, an investor decides whether or not the price is worth paying.  If the security is a “good value”, an investor will buy it.  If not, the investor will pass.

Until recently, mortgage bonds were considered a good value because the risk of the investment was relatively low compared to the reward (i.e. interest rate). 

If you’re wondering why markets are in disarray right now, it’s because the risk tagged to the mortgage bonds was dramatically underestimated.

Hindsight, as they say, is 20/20.

When homeowners began defaulting on home loans at a quicker pace than was expected, the risk attached to each mortgage bond increased.  Higher risk should mean higher return, but investor doesn’t have the right to change a homeowner’s mortgage rate.

As a result, the “reward” on mortgage bonds moved below the risk on which they were originally priced.  The bonds, therefore, are a losing bet and the investors either (a) tries to sell the bond at a lower price, or (b) holds the less valuable bond and hopes for a rebound.

The bigger problem in the markets is that — at least so far — the financial models used to determine mortgage “risk” were proven wrong.  Until new models are tested and “approved”, markets will continue to literally guess what a mortgage bond should be worth. 

This is the major reason why markets have gyrated wildly in August.  Investors have no idea what the true value of their mortgage bond investments is/will be.

______________________________

For assistance with your mortgage needs, please call Tony Gallegos.

Tony Gallegos
The Georgia Mortgage Cicerone
(404) 519-4399 (cell)
fagallego@yahoo.com (email)
To learn more about Tony Gallegos <Click Here>

Getting The Right House – Part 3 of Buying Your Home

 Know What You Want And Need

Before you start looking for a house, think about what’s most important to you. If you have a family, include everyone in this process and consider their priorities. While it’s unlikely you’ll find a house that satisfies every item on your dream list, it will help you and your real estate agent to know what’s most important.

In addition to your family’s basic needs and desires, you should also write down any strong preference you have about home styles, exterior finishes, and other aesthetics. If you absolutely don’t like the flow of ranch-style houses or the size of rooms in Tudors, make a note of it. Your edited wish list will make it much easier for a real estate agent to find the perfect house for you.

Depending on available housing stock, how “hot” the market is, and how much you have to spend, you may need to make some concessions in order to purchase a home. Making a purchase, even if nothing on the market entirely fits your wants, is recommended. From an economic standpoint, it’s important to make some compromises and take the leap. Once in your first home, and given time, it will be easier to move up later on.

Make The Most Of House-Hunting Trips

There never seems to be enough time during house-hunting trips, so having a clear and concise idea of what you’re looking for is a great help. It’s also extremely important to clear up any areas of disagreement before you visit your new location. You don’t want to waste valuable house-hunting time working out differences of opinion.

If your time is limited, it’s a good idea to spend most of your trip looking at different areas, rather than focusing on looking at houses first. If you only have a couple of days to look, spend the first day and a half looking at areas and the last half-day looking at houses. When you find an area you’re especially interested in, try to visit the area at several different times of day. A neighborhood that looks good at noon may have a totally different feel at night.

A house-hunting trip is also a great time to test out various commuting lengths in the Atlanta area to get an idea of how far you’ll be willing to travel every day in your new location. Let your real estate agent know the location of your new office before you arrive and discuss your maximum commuting time. That way, your agent can create a search radius based on that location and your maximum preferred commute time. Remember to think in terms of minutes, not miles, when you’re establishing your commuting preference. Distances can be deceiving. A 30-mile commute in one area may actually take less time than a 10-mile commute in another area.

When you begin your search in a new area, it’s common to feel overwhelmed by the choices you find. Considering all of the different housing alternatives available to you is a good idea.

Existing Resale Homes

This is the easiest, fastest way to find a home – and they have some great advantages. These are just a few of them:

• Mature trees and landscaping.

• Established neighborhoods with devoted long-time residents.

• More likely to be closer to metropolitan areas than new homes.

• More room to negotiate price and terms than a new home.

• No waiting for building to be finished before you can move in.

As with just about anything in life, there are also some possible drawbacks to an existing resale home. For instance, if previous owners haven’t made certain upgrades over the years, you may find that the house doesn’t have a lot of the things today’s building codes require new houses to have (e.g., a good number of grounded electrical outlets).

Newly Built Homes

This is the choice that gives you the greatest amount of control over getting exactly what you want. Here are some other advantages:

• Conform to today’s building codes.

• Reflect the latest in modern architecture and layout.

• More energy efficient in design.

• Have the ability to be customized fairly easily.

• Can offer the opportunity to build friendships based on sharing the new-to the-neighborhood experience with other newcomers.

This option also presents the greatest possibility for inconvenience. Longer time lines, cost overruns, and delayed move-in dates can all be part of building a new home. Plus, you may also have a period of time where you’ll need temporary housing while waiting for the home to be completed.

Renovating An Existing Home

Renovation is an excellent choice if you find a house that “could be perfect, if only….” By adding a bedroom or remodeling a kitchen, a so-so house can become the home of your dreams. This is especially attractive from a financial standpoint if you can move into the house and live there during renovations. This path also offers a way to go if you’re handy with home repair and can’t quite afford the area you’ve chosen.

Previous posts in this series:

• Hunting For Your New Home – Part 1  
• Choosing The Right Real Estate Agent – Part 2

A Web Site Made Just For Your Street

“If only I knew what my street was like before I bought the house!”

Ignore the statewide statistics, forget the city figures.  Phooey to the neighborhood.  Reinforcing the notion that all real estate is local, meet Street Advisor, the definitive guide to America’s many streets.

Unfortunately, there just hasn’t been enough helpful information catalogued just yet to make Street Advisor a powerful force.  That doesn’t mean you can’t be the first, of course. 

Participate in the Local Expert program, or just share what you for the fun of it. Leave comments about your block’s restaurants, upload photos of the streetscapes, and write about recent real estate sales activity.  As Yelp is to local businesses, Street Advisor is to, well, streets. 

Stop by and add to your street’s official Street Advisor review.

Choosing The Right Real Estate Agent – Part 2 of Buying Your Home

Once I provide you a Pre-Qualification Letter I’ll will be happy to recommend a few real estate agents who can help smooth your transition into the new neighborhood. Your real estate agent can:

• Help you establish what you want in a home.
• Search the Multiple Listing Service (MLS) and other resources for homes that match your needs.
• Show you appropriate homes.
• Provide valuable information on communities, comparable values of neighboring homes, tax rates, and building code regulations.
• Help you formulate an offer on the home you want to buy.
• Act as an intermediary between you and the seller, smoothing the negotiating process.

Interview at least two or three real estate agents over the phone. Tell them what you’re interested in and ask if they can provide some additional information about area schools, taxes or some other special interest. Then see how quickly they respond and how accurately they follow your request.

In addition to having experience in the area where you hope to buy your home, the real estate agent you choose should be easy to talk to and show that he or she understands your wants and needs.

Once you’ve selected a real estate agent, stick with that agent even when you’re looking at homes listed by others. Your real estate agent will cull through the local listings and is familiar with the homes available in your chosen area, even if they are listed by another real estate agency. Contacting a different real estate agent simply because you’re attracted to a home with a “For Sale” sign or advertisement listing their name is counterproductive when you’ve built a level of familiarity and trust with your selected agent.

Choose Your New Neighborhood

Location is an extremely important factor in determining your long-term happiness with your new home. The right real estate agent should be able to give you a lot of information in this area. Here are a few things to think about on your own, so you’ll be able to discuss them with your agent.

• Do the schools meet my needs?

• Is the commuting time acceptable?

• Are there good public recreation areas nearby?

• Will I like the nearby grocery stores or services? Am I willing to drive out of my way regularly if I don’t?

Previous posts in this series:

• Hunting For Your New Home – Part 1  

Hunting For Your New Home – Part 1 of Buying Your Home

 Is It Better To Rent Or To Buy?

Owning your own home is like having a savings account that you can live in. Every month, the payment you make on your mortgage increases your share in the home asset. Money paid for rent simply evaporates each month. Plus, research has shown that real estate has proven to deliver a highly reliable increase in value compared to other types of investing. If you’re renting, those reliable returns are going into your landlord’s pocket – not yours. When you add in the federal tax deductions for mortgage interest and real estate taxes, homeownership becomes an even more attractive idea.

There are, however, some advantages to renting. If you need to move frequently, if you’re not at a stage of your life where you want to commit to the responsibilities or costs of maintaining a home, or if your future income is extremely uncertain, renting may be the best option. Just don’t assume that renting is more affordable than owning. In fact, sometimes owning actually costs less.

Get An Edge – Get Pre-Approved First

If you’ve made the commitment to buy, the first step in any home purchase should be becoming preapproved. That means you know exactly how much you can afford to spend on your new home. And, you won’t waste time and energy falling in love with properties that are out of your price range.

A preapproval or commitment letter from an experienced mortgage professional is essential and also makes you a VIP Buyer in the eyes of real estate agents and sellers. You’ll have an edge over the competition because sellers will know that you’re a serious, committed buyer whose financing won’t fall apart.

If you’d like to become preapproved for your home loan, call 404-519-4399, contact and I will be happy to get you started.

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Larry Gallegos- Serving the mortgage needs of Kennesaw, Marietta, Roswell, Smyrna, Powder Springs, Dallas, Acworth, Woodstock, Douglasville, Hiram, Austell and Atlanta.

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Making English Out Of Fed-Speak (August 2007 Edition)

The Fed left the Fed Funds Rate unchanged again today for the ninth time in a row after 17 consecutive hikes.

The Fed once again highlighted inflation containment as its chief concern while noting that pressures on the economy appear to be moderating. 

This is good news for holders of home equity lines of credit and credit card debt — both products’ interest rates are based on Prime Rate, a derivative of the Fed Funds Rate.

Not surprisingly, the Fed also gave a nod to the recent gyrations in stock and bond prices, although it did not state whether that is a strength or weakness to the overall economy.

Mortgage rates were flat after the Fed’s fairly neutral remarks.

Source
Parsing the Fed Statement
The Wall Street Journal Online
August 7, 2007
http://online.wsj.com/mdc/public/page/2_3024-info_fedparse_shell.html

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Tony Gallegos - Serving the mortgage needs of Kennesaw, Marietta, Roswell, Smyrna, Powder Springs, Dallas, Acworth, Woodstock, Douglasville, Hiram, Austell and Atlanta. Subscribe to The Mortgage Cicerone:

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