Ivan and Delores Eichers are among thousands of people who fall each year for offers that promise to help them avoid foreclosure but that leave them with none of the equity they had built up in their property. Their situation matches one of the three common models of [tag]foreclosure fraud[/tag] the [tag]National Consumer Law Center[/tag] described in a report on the problem. The number of foreclosures nationwide soared 42 percent in 2006 to 1.26 million, said RealtyTrac, a company that tracks foreclosures. That creates opportunities for more foreclosure fraud, although the exact number of cases is hard to determine.

The Eichers thought they were taking out a $1,700 loan to help them pay the roughly $4,700 in back payments they owed on their mortgage. They learned too late they had signed their house over to Mid-America Financial Investment Corp. and agreed to lease their home from Mid-America when they accepted that loan. Although the couple no longer owned their home, the mortgage remained in their names, so they made their $554 payments on the loan through Mid-America, along with monthly fees of at least $100. A second scheme described in the report involves consultants charging high fees to help homeowners out of trouble but never delivering the promised services. A third involves an agreement where a homeowner knowingly signs over his or her home and agrees to buy it back over time, but the terms of the agreement make it nearly impossible for the homeowner to succeed. (more…)

f you are adverse to new ways of thinking about your mortgage and building wealth, don’t read “[tag]Untapped Riches[/tag]” by Susan and Anthony Cutaia. This new book will challenge your thinking about mortgages. Instead of making extra mortgage principal payments to own your home and investment properties free and clear as fast as possible, the mortgage broker authors advise never paying off your mortgage and building wealth instead.

This book is not for typical homeowners who think it’s smart to pay off their home loans as fast as possible. Instead, the husband and wife co-authors explain why interest-only, so-called “[tag]option mortgages[/tag],” and even[tag] negative-amortization mortgage[/tag]s cut monthly mortgage payments, enabling borrowers to acquire more properties. Contrary to what most mortgage advisers suggest, the Cutaias are big advocates of using the leverage of borrowing and periodic [tag]refinancing[/tag] to use tax-free cash to acquire more properties. They recommend interest-only adjustable-rate mortgages (ARMs) with maximum payment increase “caps,” and making 20 percent cash down payments to obtain 80 percent loan-to-value mortgages. The book’s themes are (1) minimize your mortgage payments, (2) maximize the use of leverage and the use of compound interest, and (3) pay yourself first before you pay the bank. (more…)

Finding the right [tag]NC home mortgage loan[/tag] provider is complicated enough, but when you buy a house from a builder who has an in-house lender, the complications multiply. The builder wants you to use his [tag]North Carolina lender[/tag], and will offer significant inducements to do so. This puts many buyers in a quandary as they realize that the inducements must be weighed against the likelihood that the builder’s lender will overcharge them. Offering inducements is legal if it is done properly. A builder cannot post a sale price of $290,000 and raise the price to $300,000 if a buyer insists on using his/her own lender.

In developing a strategy for dealing with a builder pushing an in-house loan provider, it is useful to know where the builder is coming from. He expects to make money on the lending operation, but the main reason for having a preferred lender is to provide assurance that home sales won’t fall through because of lack of financing. The builder wants to avoid investing significant marketing dollars in finding a buyer who then leaves him at the altar because his loan doesn’t come through. This won’t happen with his in-house lender because of some prior arrangement with the builder. While the arrangement can take many forms, the thrust of it is that in the event that a loan to a buyer can be closed only at a loss, the loan will nonetheless be made, since the profit margin on the house will more than cover it. (more…)

For the American mortgage market, it could be the hottest buzzword of the year: suitability. That’s because Congress has a new top legislator for mortgage matters, Rep. [tag]Barney Frank[/tag], who believes that “you shouldn’t lend (home buyers or [tag]refinancers[/tag]) more than they can afford to pay back, and you don’t lend them more than their house is worth.” Frank, a 14-term Massachusetts Democrat, is the new chairman of the [tag]House Financial Services Committee[/tag] — the primary originator of banking and mortgage-related federal legislation. In an interview, he made it clear that a top priority this year will be enactment of a [tag]nationwide lending-standards law[/tag] designed to protect consumers from deceptive, unfair and predatory mortgage practices.

With foreclosures rising and many credit-stressed homeowners facing imminent rate resets on controversial “payment-option” and other adjustable-rate loans, pressure is building on Capitol Hill for tougher rules for [tag]mortgage brokers[/tag] and lenders. A recent study by the Center for Responsible Lending predicted that as many as 1 of every 5 subprime borrowers who took out reduced-payment, low-documentation mortgages between 1998 and mid-2006 could ultimately lose their homes because of steep payment increases and penalties they can’t handle. Proponents of a suitability standard would require loan officers — whether mortgage brokers or retail lenders — to make certain that applicants are financially capable of handling a particular loan before and after payment increases, and that they fully understand the cons as well as the pros of the mortgage type they select. (more…)

For the American mortgage market, it could be the hottest buzzword of the year: suitability. That’s because Congress has a new top legislator for mortgage matters, U.S. Rep. Barney Frank, who believes that “you shouldn’t lend more than [homebuyers or refinancers] can afford to pay back, and you don’t lend them more than their house is worth.” Frank, a 14-term Massachusetts Democrat, is the new chairman of the House Financial Services Committee, the primary originator of banking and mortgage-related federal legislation.

In an interview, he made it clear that a top priority this year will be enactment of a nationwide lending-standards law designed to protect consumers from deceptive, unfair and predatory mortgage practices.

With foreclosures rising and many credit-stressed homeowners facing imminent rate increases on controversial “payment-option” and other adjustable-rate loans, pressure is building on Capitol Hill for tougher rules for mortgage brokers and lenders.

A recent study by the Center for Responsible Lending predicted that as many as one of every five subprime borrowers who took out reduced-payment, low-documentation mortgages between 1998 and mid-2006 could ultimately lose their homes because of steep payment increases and penalties they can’t handle. (more…)

A spike in loans to [tag]cash-strapped home buyers[/tag] is raising concerns that more trouble may lie ahead for the housing market. The Center for Responsible Lending predicted last month that one in five [tag]subprime mortgage[/tag]s initiated in the past two years will end in foreclosure, kicking 1.1 million homeowners to the curb and costing them a total of $74.6 billion.

Subprime loans target borrowers with low incomes or poor credit, charging higher rates for the risk. Increasingly, these loans contain risky provisions to get people into a home, such as adjustable rates or initial teaser rates that don’t even cover the interest charges. In the worst cases, lenders offer credit without verifying income or assessing if borrowers can keep up with payments, the CRL report said. “Lending got overly eager in the past several years, and we’ll see the ill effects of that over the next several years,” said Mark Zandi, chief economist at Moody’s Economy.com, which supplied data for the study. (more…)

Brian and Lisa Wilcock looked at mortgage interest rates four years ago, did the math and came up with a plan: Because they intended to move in three years, they’d [tag]refinance[/tag] their [tag]30-year fixed-rate mortgage[/tag] into a [tag]three-year adjustable-rate mortgage[/tag] ([tag]ARM[/tag]) at a lower interest rate and save hundreds of dollars a month. The lower rate shaved $375 off the [tag]mortgage payment[/tag] on their Rochester Hills home. But four years later, they’re still in their three-bedroom, split-level house and have no plans to move. Their introductory rate of 4.37% reset last year, with a 1.25% cap that spared them the full brunt of the interest rate increase. But that’s set to expire in April when the ARM resets to a rate that will likely be above 6%.

Just five years ago, [tag]adjustable-rate mortgages[/tag] carried interest rates so low they allowed homeowners like the Wilcocks to lower their monthly mortgage payments by hundreds of dollars. First-time home buyers flocked to the loans as well, since they allowed often cash-strapped first timers to afford a larger house. “There are more people now than ever with adjustable-rate mortgages,” said Greg McBride, senior financial analyst at Bankrate.com. “The problem — and you could see this coming a mile away — is that interest rates have increased and those same borrowers are coming up for a rate increase.” If a homeowner in 2004 got a three-year ARM at 4% on a $250,000 loan, the monthly mortgage payment was $1,150. That payment today would increase to $1,500 monthly, lenders said. And figured at an interest rate of 7.5%, the payment would increase $509 more per month. (more…)

For the last six years, I have lived in my mother’s house to take care of her, as she is very senile. I have been making the [tag]mortgage payments[/tag] and paying the [tag]property taxes[/tag]. However, when I had my [tag]income taxes[/tag] prepared last year, I was told I am not entitled to these deductions because my name is not on the title and my mother’s name and Social Security number are on the mortgage. Is this true? –

The reason you are not entitled to claim those itemized deductions on your personal income tax return is you have no legal obligation to make those payments. You may have a moral obligation to help your mother, but that doesn’t count with the IRS. However, this problem is easily solved. If your mother is capable of signing a [tag]quitclaim deed[/tag], she can add your name to her title, perhaps by [tag]holding title in joint tenancy[/tag] with right of survivorship. Her name still remains on the title but now you will be legally obligated for those payments you have been making and can claim them as itemized deductions on your personal income tax returns. (more…)

[tag]Selling a home[/tag] is no easy task, and it’s even more difficult when you’re trying to sell in the dead of winter — when the weather is bad, the days are shorter and greenery is in short supply. There are good reasons for selling in the winter, however — namely, less competition. But you still have to work hard to attract the best customers. According to Bankrate.com, it’s all about staging. Here are Bankrate’s tips for presenting your home in the best way to snag those winter buyers. Keep walkways and driveways clear of snow and ice. You may not have to mow the lawn or trim the shrubs, but in the winter, consider this duty your “yard work.”

Present a warm and cozy home. Make sure the temperature is comfortable and not too cool for visitors coming in from the outside. Turn on gas fireplaces if you have them. Show during “high-daylight” hours and make your home as light as possible. Clean blinds and curtains and keep them open during daytime showings. Put the highest wattage bulbs in amps and fixtures, and turn the lights on when you show. And wash your windows — even a little bit of grime gives the impression that the home isn’t well cared for. Set the mood with a little soft background music and some pleasant smells. Light a few [tag]candles[/tag] that give off a nice scent, such as vanilla. Just don’t overdo it — you don’t want people to think you’re trying to mask a bad smell. (more…)

After several years of a [tag]booming real estate market[/tag] – one that was decidedly to the seller’s advantage – the industry has taken a swing in the opposite direction in recent months. [tag]Higher interest rates[/tag] and a greater inventory of houses is pushing the market in the buyer’s favor. This means that enterprising individuals ready to make a purchase may come away with more than just a good bargain.

To entice people to take out mortgages in spite of rising interest rates, some lenders and builders are offering special programs. Many home builders are using “buy-down” programs, in which they buy down a mortgage by two percentage points in year one and one point in year two. This can lead to substantial savings. But watch out for deals that offer flashy savings early on but sucker-punch you later during the loan term. Pre-payment penalties or early termination fees may be in store for those who don’t do their homework before signing on the dotted line. (more…)

Although the newer mortgage products allow almost anyone to buy or refinance a house, consumer groups say the loans often contain land mines hidden in the fine print. Consumer advocates say the loosened standards are putting more people at risk as loans originally designed for sophisticated individuals are being marketed to far-less-savvy borrowers.

[tag]Alternative mortgage loans[/tag] were first developed for a handful of people with promising long-term earnings potential: young lawyers destined to make partner, doctors finishing medical school or stock brokers who get large commission checks several times a year. But as housing prices have surged, outstripping wages in the most expensive markets, alternative financing has become a popular path to homeownership. These new loans come in many forms. “[tag]Nontraditional[/tag]” mortgages allow borrowers to pay only the interest on the loan or even only a portion of the interest each month, without being required to pay down the principal. Nationwide, more than a third of borrowers who got loans in the first nine months of 2006 got nontraditional loans, up from about 2 percent in 2000, according to First American LoanPerformance, a real estate information firm. (more…)

In past decades, many people have been trained to think that a 30-year fixed-rate mortgage is the only way to go when it comes to getting a mortgage. They look negatively on [tag]adjustable rate mortgage[/tag]s ([tag]ARM[/tag]s) because they fear the adjustable part. But there are advantages to having an ARM and times where a long-term fixed-rate mortgage doesn’t really make as much sense.

An ARM, or adjustable rate mortgage, is similar to a 30-year fixed-rate mortgage in that it is also amortized over a 30-year period. But it’s usually for shorter-term situations and generally carries a lower interest rate than fixed-rate mortgages. So if you’re trying to keep your interest rate and payment low, an adjustable can be a sensible choice. And since it’s a short-term mortgage, it’s useful to have a lower rate and payment if you know you’re only going to be in your home for less than 10 years–especially when most American families generally move within nine years or less. (more…)

Americans continue having difficulties paying their mortgage obligations, with December [tag]foreclosure rate[/tag]s above the 100,000 mark for the fifth straight month. The number of homeowners entering into some stage of the foreclosure process in December was 109,652, down 9 percent from November but up 35 percent from December 2005, according to RealtyTrac. [tag]Adjustable-rate mortgages[/tag], especially [tag]subprime ARMs[/tag], continue to drive the spike in foreclosures: many of those loans are due to reset in 2007, and many of the loans written in 2006 are performing less well than in previous years.

Another contributor is that some lenders tried to maintain business in a slower market. To do that, some relaxed their underwriting standards, approving more marginal borrowers for loans. Interest rates were also higher for the year, putting additional strain on borrowers. Doug Duncan, chief economist for the Mortgage Bankers Association, estimates that $500 billion to $800 billion in loans outstanding went to borrowers who may face difficulties. “Some of that,” Duncan says, “would go into foreclosure.” A sustained increase in the number of foreclosures could accentuate the decline in the housing market, according to Duncan. “It could take longer to work the inventory down,” he says. (more…)

Americans continue to move from [tag]adjustable rate mortgages[/tag] to fixed-rate programs, or take advantage of today’s low long-term rates by refinancing their current [tag]fixed-rate mortgage[/tag]s, as evidenced by this morning’s Market Composite Index, released by the Mortgage Bankers Association (MBA). The Index, which measures and compares mortgage loan application volume from week to week, showed that overall refinance activity increased 6.3 percent for the week ending January 12.

“With nearly $400 billion in adjustable rate mortgage set to adjust in 2007, we still expect the strong [tag]refinance[/tag] trend we’ve seen the last four months to continue,” says Bob Walters, chief economist of Quicken Loans. Purchase activity surprisingly tapered however, dropping seven percent following last week’s double-digit gains. “December’s employment numbers were higher than expected, and long-term interest rates remain near their lowest point in more than a year. Jobs and interest rates are two of the most significant factors influencing people’s decision to buy or refinance a home, so the dip in purchases was unexpected” (more…)

The Web frontier for [tag]vacation-home owners[/tag] is vast and continuing to grow as they tap into new resources to market their properties. And networking Web sites can offer a support network for owners navigating the apparently bump-filled rental market. “Making a video is so much better than trying to put all that into words.” Mr. Gilbert has two videos, both on [tag]YouTube[/tag] and [tag]Google Video[/tag]: One showcases the house and some of its features, like the brand of mattresses in the home. The other focuses on the community, [tag]Bear Trap Dunes[/tag], which has three golf courses and two swimming pools.

Any vacation-home owner is likely to confess that marketing the house to renters is only half the battle. And, perhaps the easy half, once you read through the postings on Lay my Hat (www.laymyhat.com). The site allows vacation homeowners to hash out the apparently neverending string of problems that arise when renting out their second home. Owners vent about problem guests, like those who complain about the lack of ketchup and mayonnaise in the refrigerator or refuse to obey the no smoking policies. Some get advice on larger issues, like what to do when an hour before a renter arrives the electricity in the house fails. The solution, wrote one poster, is to light candles and “gets lots of drinks” for the guests. (more…)

Recent years have seen a flurry of proposals and legislation directed toward [tag]predatory mortgage lending[/tag]. The focus, however, has been almost entirely on loan originations. Aside from a few well-publicized lawsuits, predatory servicing has attracted little attention, yet in many respects it is more vicious, and the adverse consequences are more far-ranging. The loan origination market is a minefield for borrowers, to be sure, but they do have choices. Exercising intelligence and care, and with a little homework, they can find a loan provider who will treat them fairly. When the loan is closed and shifted to a servicing agent, however, the borrower’s choices disappear.

An incentive to provide good service doesn’t exist at all for specialized servicing firms who have nothing to sell. Such firms will not get more customers by improving service quality — only higher costs — nor will they lose customers if they provide poor service. Their incentive is to generate as much revenue as possible from borrowers. It is hardly surprising that such firms figure so prominently in discussions of predatory servicing. Predatory servicing could be reduced or eliminated by legislation that restricted the sale of servicing contracts, or gave borrowers the right to change servicers. However, these would be drastic changes that would be very difficult to enact. The alternative is to identify predatory practices and make them illegal. (more…)

American home buyers and refinancers are dis-[tag]ARM[/tag]ing at a rapid pace. Freddie Mac’s newly-issued survey of adjustable rate mortgages found that the ARM share now stands at just 25 percent, down from 33 percent in 2004. In the mid-1980s, by contrast, ARMs were the most popular financial tool for buying a house, with a 62 percent market share.

Who wants to risk potentially wrenching rate increases every year for the life of the loan when they can lock in peace of mind and predictable monthly payments with today’s low long-term fixed rates? Almost nobody, according to Freddie Mac chief economist Frank Nothaft. That’s why traditional one-year ARMs represent a tiny sliver of the ARM market itself. Most adjustables closed last year were some form of “hybrid” offering an initial period where the rate and payments are fixed — typically for three or five years — followed by a conversion to a one-year ARM for the balance of the term. Freddie Mac’s annual ARM survey found that barely half of all mortgage lenders who offer ARMs even bother to sell the traditional one-year model. That’s the lowest offering rate in 23 years, and a portent of where the one-year adjustable may be headed, absent fundamental changes in capital markets interest rate patterns. (more…)

An elderly homeowner who wishes to continue living at home can get access to money that doesn’t have to be repaid until he or she sells the house or dies. The upfront costs of the [tag]reverse mortgage loan[/tag]s are high, and they are not recommended for those planning to sell their house in the near future. Paiva’s closing costs were $13,325, which included a payment of $5,760 for mortgage insurance from the [tag]U.S. Department of Housing and Urban Development’s Federal Housing Administration[/tag]. [tag]FHA[/tag] insures an estimated 90 percent of reverse-mortgage loans issued in the United States. Most borrowers roll over the loan costs into their balance to keep their initial outlay of cash to a minimum.

To be eligible for a HUD-insured reverse mortgage, borrowers must be at least 62 years old. The amount that can be loaned depends on the borrower’s age, the amount of equity, and the interest rates. Loans insured by the government cannot exceed a certain limit currently $362,000, according to Peter Bell, president of the National Mortgage Lenders Association, even if the value of the house is much higher. Uninsured loans are offered at higher amounts, and at higher costs. In the fiscal year that ended September 30, 2006, 76,351 federally insured reverse mortgages, also known as [tag]home-equity conversion mortgage[/tag]s, were issued, up 77% from the previous fiscal year, White said. In Rhode Island, the number of reverse mortgages increased from 198 to 338. As the b[tag]aby-boom generation[/tag] begins to retire, the numbers are expected to grow. (more…)

At risk of oversimplifying, credit standards in the conventional market range from A+ to D-, and within that range, FHA would be about B- or C+. FHA credit requirements overlap the higher levels of [tag]subprime[/tag] requirements. A good illustration is the underwriting rules applicable to a prior foreclosure. With exceptions, FHA won’t accept a loan applicant who has had a foreclosure within the prior three years. Subprime lenders may have a three-year rule for their best credit grade, but the period scales down by degrees and might be only one year for the lowest grade.

Similarly, the maximum ratio of total debt service to income acceptable to FHA is 41 percent, which is generally high relative to prime standards, but well below what passes in the nonprime sector. A borrower who meets [tag]FHA credit standards[/tag] will usually do better with an FHA loan than with a subprime loan, despite having to pay a mortgage insurance premium. The rate will be lower, the [tag]borrower[/tag] will have access to a large menu of mortgages, and there are no prepayment penalties. Most [tag]mortgages[/tag] in the subprime market are [tag]2-year adjustables[/tag] with large margins, which means a high probability of a rate increase after two years, and they have prepayment penalties, usually for three years. (more…)

[tag]Freddie Mac[/tag] 23rd Annual [tag]Adjustable Rate Mortgage[/tag] ([tag]ARM[/tag]) Survey released last week contained few surprises. The three major findings were: a decline in the market share of ARMs as savings from these loans as compared to fixed rate loans shrank; greater lender discounts to entice borrowers into taking out ARMs; the increasing popularity of hybrid ARMS relative to one-year adjustables.

The survey was based on data collected over a three day period in December. Commenting on the results Frank Nothaft, Freddie Mac vice president and Chief Economist said “The Federal Reserve increased short-term interest rates during the first half of 2006, raising the federal funds target from 4.25 percent to 5.25 percent. This contributed to a rise in short-term interest rates relative to long term rates. This phenomenon is reflected in mortgage pricing as well as with products that re-price more frequently showing the largest increase in interest rates.” As an example he pointed out that first-year rates on one-year ARMS rose about 0.3 percentage points over the year while the 5-year hybrid increased 0.2 percent and the long term ARM (10/1) and [tag]30 year rate[/tag]s were virtually unchanged from the same time period a year earlier. (more…)

If you are a typical U.S. homeowner, you think about the mortgage once a month, when you write the check, put it with the payment coupon in the envelope and drop it in the mail. About 66 percent of all U.S. homeowners follow this ritual every 30 days. The rest don’t, because they own their houses free and clear. Most of these are 65 years of age and older, which makes perfect sense because some of these people have lived in their houses longer than 30 years, while those who have bought into an active adult community or a condo in the city have used three decades of accumulated equity to pay cash.

More [tag]mortgages[/tag] were originated in 2003 than ever before — a total of $4 trillion, with $2.5 trillion in [tag]refinancing[/tag] and the rest loans for purchase. That year also saw the lowest mortgage rates in 40 years, leading millions of homeowners to refinance. For most of 2003, the contract interest rate for 30 year fixed mortgages was close to 5 percent; today, the rate is under 6.2 percent. [tag]Home mortgage debt[/tag] in 2003 was $7 trillion, and grew to $8.2 trillion in 2004, according to the Fed’s Flow of Funds data. Purchase originations also reached records in 2004 and 2005, but refis fell below the 2003 record level. The MBA said its own data show an even greater proportion of outstanding loans from recent years than what the AHS reports. By the lenders’ groups reckoning, 86 percent of outstanding loans have been originated since 2000, and 80 percent since 2002. For subprime loans, an even-greater proportion — 75 percent — have been originated since 2003. (more…)

Cash-challenged seniors who want to stay in their own homes have kept [tag]reverse mortgages[/tag] high on the public radar. But not everyone thinks they’re such a good idea. In general, a reverse mortgage converts home equity into cash in several different ways, ranging from monthly payments to an equity line to one-time payouts _ or a combination. The amount you can borrow varies according to your age, the value of the home, current interest rates and loan fees. Reports suggest reverse mortgages can be a source of ready cash when it’s needed, similar to other investments. But taking out a reverse mortgage isn’t a no-brainer. Candidates for these mortgages should consider both the benefits and the drawbacks before jumping in.

To qualify for a reverse mortgage, you must be at least 62 years old. Younger borrowers can’t cash out as much equity as older borrowers. Since banks are repaid when the house is sold, it’s quite possible a lender might have to carry the note for 20 to 25 years or more. For that reason, a 79-year-old is a much more attractive loan candidate from the bank’s perspective. Depending on where you live, the proceeds from a reverse loan could prove a barrier to qualifying for Medicaid, which counts loan proceeds as an asset. Although each state differs in the fine print, untapped equity in the home is not considered an asset in determining [tag]Medicaid eligibility[/tag], as long as it’s owner-occupied. Recent federal legislation placed the home exemption ceiling at $500,000. (more…)

“What type of borrower finds it advantageous to take an [tag]FHA loan[/tag]?” The answer to this question is a little different today than in 2000 when I first addressed it because FHA’s market niche is smaller. This reflects developments in the conventional sector that have not been matched by FHA, including the growth in popularity of loans with [tag]no down payment[/tag], [tag]interest-only monthly payment[/tag]s, and option ARMs. Reflecting these developments, FHA’s market share fell from about 15 percent in 2000 to about 5 percent in 2006.

FHA credit requirements overlap the higher levels of subprime requirements. A good illustration is the underwriting rules applicable to a prior foreclosure. With exceptions, FHA won’t accept a loan applicant who has had a foreclosure within the prior three years. [tag]Subprime lenders[/tag] may have a three-year rule for their best credit grade, but the period scales down by degrees and might be only one year for the lowest grade. Similarly, the maximum ratio of total debt service to income acceptable to FHA is 41 percent, which is generally high relative to prime standards, but well below what passes in the nonprime sector. (more…)

Think you know what you can afford as a [tag]first-time home buyer[/tag]? Grab a calculator and run those numbers again. There’s a lot more to a mortgage payment than the loan amount and [tag]interest rate[/tag]. Extras such as property taxes, mandatory structural insurance and [tag]private mortgage insurance[/tag], or [tag]PMI[/tag], can add as much as 30 percent to 50 percent to your monthly payment. If you don’t realize that going in, you could end up shopping for too much house or falling in love with a home that’s really more than you can afford. Many of these costs will vary with the home, the location, the type of loan and the amount of your down payment.

Some components you want to consider: [tag]Homeowners insurance[/tag]: “A good rule of thumb is $3 for every $1,000 of the loan amount annually,” says Jennifer Gavre, Wachovia mortgage banking executive for Georgia. So that $200,000 home would cost you about $600 a year. Typically, you’ll pay a year in advance at closing, and the next year’s premium will be equally divided among your payments. That 0.3 percent rule of thumb was blown away in hurricane-prone areas after the catastrophic 2004 and 2005 seasons. Homeowners on the Gulf Coast can expect to pay two to four times as much. [tag]Flood insurance[/tag]: If you live in a flood-prone area (usually termed “100-year flood plain”), your lender will likely require you to have insurance that covers flood damage. The cost will vary based on how close you are to flood-prone areas. Figure about $150 to $200 per year, says Gavre. Again, you’ll pay a year in advance at closing, then next year’s premiums will be divided into your monthly payments. (more…)

If you [tag]buy or sell a house[/tag] in the coming year, say Charlotte real estate pros, you’ll be even more likely to work with a team of specialists instead of with a single [tag]general agent[/tag]. Cindy Chandler, president of the N.C. Association of Realtors, predicts the move toward specialists will accelerate rapidly. The real estate business today is more sophisticated than it used to be, she said, requiring more detailed work. Financing options are more varied and complicated. And, of course, Charlotte and other urban markets are growing rapidly.

General agents also face more competition from lower-cost listing services and are seeking ways to add value for their clients. Agents at large general firms in urban areas will need to specialize, said Chandler, a Charlotte commercial broker who also works as a consultant and educator. They’ll focus on a particular area, price range or type of housing. “(Agents) no longer have the luxury of being generalists,” she said. “From [tag]affordable housing[/tag] to a home in Eastover to a condo in the Vue uptown — there’s just no way you can get your arms around all that.” (more…)

It’s easy to point your finger. It’s also much easier to point that finger when there’s so much damning evidence. [tag]Non-prime mortgage loans[/tag] issued to borrowers are being foreclosed upon at accelerated rates. Non-prime mortgage lenders are closing their doors as fast as they can because they can’t afford to buy back the crappy loans they made. What’s a buy-back? There are two basic forms of buy-backs; [tag]default and fraud[/tag]. From a default perspective, there are two types; a first payment default and a general default where the owners go into [tag]foreclosure[/tag] and the lender takes the house back.

A first payment default means that someone simply didn’t make their first house. The time frame for a first payment default is about 60-90 days or so. Remember, when you go to a closing, you’ll pony up for some prepaid interest which in effect is your first payment, but when it comes time to actually mail in the first mortgage check it never arrives. It was never mailed because the borrowers didn’t make the payment. Another reason for a buy-back is an agreement between the original lender and the current investor that if a note goes into foreclosure during a specified period of time or there was fraud discovered, the loan gets pulled and shipped back to the original lender. Non-prime or not. (more…)

Just after the holidays, I decided to preview a few homes in the area to see what’s available in my market area as we approach the new year. What I found is a phenomenal selection of houses with various amenities and value adds. What was disheartening was the apparent lack of market knowledge of either the agent or the unwillingness of some [tag]real estate sellers[/tag] to get with the program on how much their homes are worth.

A quick [tag]comparative market analysis[/tag] of the five-acre property revealed that an identical home with the same lot size sold three months ago for $74,000 less than this seller’s asking price. Where is the owner coming from? Why did the agent even take the listing? Agents working in a buyers market need to look at solds in the last 60 days — no further back. Then take a temperature on the pending sales — which houses are drawing contracts? More than likely there will be a correlation between the houses priced low enough to draw offers and the pending sales. In addition, compare tax assessments and the sold prices. In today’s market, more than likely, the sold prices will be substantially under the[tag] tax assessment[/tag]s. The above houses provide a good example. The cheapest, but newest house is priced $59,000 under the tax assessment. Meanwhile, the other two properties are $39,950 and $84,000 over their tax assessments. (more…)

The [tag]North Carolina Banking Commission[/tag] recently proposed stricter guidelines for state regulated brokers, bankers and lenders offering nontraditional loans. Minnesota has already tightened its lending guidelines on the loans and recently notified more than 3,000 state-licensed residential mortgage originators of the changes. To date, 19 states and the District of Columbia have at least warned state-regulated lenders about the hazards of [tag]nontraditional mortgages[/tag], indicating new federal guidelines for federally regulated lenders are already trickling down to state regulatory offices.

The rules are designed to curtail the rise (during the past housing boom) in the risky business of “nontraditional,” “alternative,” “exotic,” even “toxic” mortgages, including interest-only, payment-option, piggy-back, stated-income (no-doc) and other types of [tag]adjustable rate mortgages[/tag] (ARMs), as well as some home equity loans. The high-leverage products can be useful, allowing borrowers to buy a home (or qualify for a larger, more expensive home) they perhaps couldn’t afford with a standard, fixed rate loan (FRM). However, the rapid growth in the use of nontraditional mortgages, especially among the population of less creditworthy borrowers has alarmed regulators who have begun to mandate that lenders tighten requirements for those who want the loans. (more…)

Now that January 1 and the resolution hype are behind us, take time to set SMART GOALS for 2007 and guarantee that you have a terrific real estate year — a year in which dreams turn into reality for yourself and your family. Resolutions are statements of behavioural improvement that usually focus on ending bad habits like smoking and over-eating. Goals are projected, desired results that can guide daily actions and decision making toward significant improvements in any, or all, aspects of life.

Define your eventual success. Create vivid, detailed, clear written descriptions, so you know exactly where you are headed. Do you want to own waterfront property or acreage in a location of your choice? Do you want your real estate to generate income? If so, how much? Continually, keep your goals “top of mind” by displaying and carrying key words written on small cards, but don’t share all the details until your goal is achieved. Breakdown the goal into doable steps. Know how you will benefit from each. How many real estate properties, each with its own reasonable amount of appreciated value, stand between you and the [tag]waterfront, rural or income property[/tag] you desire? Would shared [tag]ownership[/tag] of some or all of this [tag]real estate[/tag] accelerate your progress? (more…)

Whether you already have a mortgage or you plan to buy a house in the next year, here are seven [tag]mortgage tips for 2007[/tag]. 1. Review your mortgage _ does it still fit your circumstances? Interest rates change, children are born and grow up, sometimes you need to fix up the house and sometimes you need to move on. Life events can trigger changes in the way you pay for your house. “Every year,” says Dan Hanson, who oversees the retail branches for Countrywide Home Loans,” say, ‘What’s going to happen this year?’ Do I have a child who, in a year, is going to college? Are we going to have a child, maybe add a bedroom or have to move?’” The answer might make you go mortgage shopping.

For example, let’s say you own a house and plan to move in a couple of years because your family is going to grow. Consider [tag]refinancing[/tag] into an [tag]adjustable-rate mortgage[/tag] with a low initial rate that lasts three years (a “3/1 hybrid ARM”). That initial rate probably is lower than the rate you’re paying now and the same with the monthly payments.

Hanson believes that you should ask yourself periodically: “Is my [tag]interest rate[/tag] higher than the market today? Would it make sense to refinance, to take cash out? Would it be a good idea to get a [tag]reverse mortgage[/tag]? How much is my house worth?” (more…)