Live in Lakeforest

FALL LEAVES BRING FALLING INTEREST RATES

The news in the papers, financial websites, and money blogs this month has us pondering interest rates and refinancing again. First, 30-year mortgage interest rates continue their historic drop, reaching an average low of 4.125 percent. It’s difficult to predict if those rates will continue to go down or start to creep up, but we know one thing for sure:  These rates could mean a lot of savings for homeowners. Then there’s the news about the Obama administration’s plans to help struggling homeowners refinance their mortgages. This program would help homeowners with government backed loans refinance to more favorable terms to keep their homes. Finally, home prices have seen a slight increase this spring – rising by as much as 3.5 percent. This good news means some homeowners may actually have equity in their homes again as the value of houses climbs. All this news about loans and refinancing got us thinking: Is now a good time to refinance your home?  Who Can Refinance?

These days, not everyone can refinance a home – nor does it make sense for everyone to refinance. The main reasons to apply for a refinance are to lower monthly payments, secure more favorable loan terms, or consolidate debt. If you already have a low interest rate, good loan terms, and a manageable monthly payment, you may be better off leaving your mortgage alone. Most people assume homes that are underwater, meaning you owe more than the home is worth, aren’t eligible for refinancing. However, many programs, both governmental and non-governmental, work specifically with homeowners in this situation so they can take advantage of today’s low rates. The standard rule of thumb for homeowners considering refinancing used to be  that, unless you can lower your interest rate by at least one percentage point, the refinance doesn’t pencil out financially. With “No-Cost” loans often available today, this is no longer the rule. If you’ve maintained good credit and would like to lower your monthly outlay, ditch some less-than-desirable loan terms or get out from being underwater, refinancing now might just make perfect sense. Interest rates are at historic lows, and banks are ready to work with refinancing applicants.

Refinancing Advantages

The main advantages of a home refinance don’t change much, no matter the state of the housing  market. There are really three main reasons to seek a refinance. 1. The top reason to refinance is to lower your monthly payment by securing a lower interest rate. Right now, 30-year mortgage interest rates are averaging about 4.125 percent. Rates can go lower if you refinance into a 15 or 20-year loan instead. We don’t know where rates will go in the future, but they can’t get much lower.

2. The second reason you might try to refinance your home is to secure better loan terms. During the housing boom, many homeowners got themselves into interest-only, adjustable rate mortgages.

At the time, this loan option made sense as home values kept rising. In today’s housing market, a fixed-term loan that locks in today’s low interest rates makes more financial sense for homeowners and allows you to pay off your principal balance, not just interest. Now could be an especially good time to refinance if you are in a 5, 7, or 10-year adjustable rate mortgage. You don’t want to get to the end of that loan and suddenly face skyrocketing interest rates. Also, if you’re underwater on your home, any refinancing option that lowers your payment or helps you gain equity in your home is better than your current mortgage.

3. Lastly, many homeowners use a refinance to consolidate debt, either from a home equity line of credit or credit cards. Rolling these debts into your mortgage secures a better interest rate and lowers the total amount you’ll end up paying for these debts in the long run. the refinance by the amount your monthly payment is reduced. The answer tells you how many months it takes to break even.

However, a better way to determine whether now is a good time to refinance is to figure out how much the refinance will save you in overall interest expenses. You want to capture enough savings in interest expenses to offset the closing costs. A lower interest rate can certainly lower total  interest expense, but so can refinancing into a loan with a shorter term – 15 to 20 years, for example. This move can save you tens of thousands of dollars over the life of your loan. A shorter loan term means your monthly payments will increase, but if you can afford the additional cost you can save yourself a bundle of money in the long run.

 Next Steps

Talk to my lending partner, Tom Testerman at (949) 422-4497 to learn about whether a refinance makes sense for you right now. You could save yourself a bit of money right before the holidays arrive – there are only so many shopping days left!

HELP. I’ve fallen and I can’t get up!

The U.S. just lowered the size of mortgage it will guarantee.  The current conforming loan limit, which determines the maximum size of a mortgage that the Federal Housing Administration (FHA), Fannie Mae, and Freddie Mac can buy or guarantee–expired Friday, Sept. 30. 

Beginning Oct. 1, the conforming loan limit was decreased to $625,500, from the current $729,750 limit, though the majority of counties fell far below the $625,500 maximum.

Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers.

The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) estimates that more than 30,000 California home buyers statewide will be impacted by the change to the conforming loan limits.

I prepared you for this event for many months.  What does this mean to you?  If you need to sell a home in the $600K range, your pool of qualified buyers is now smaller.  Be sure to put your home on the market in October before the price decreases in the next few months.  If you have a home in the 400’s or 500’s.  It is likely that your value will decrease a bit later as a result of buyers being able to buy larger homes under the new $625,500 conforming loan limit.  I expect that SFR homes under $400,000 will not be as affected.  Buying a condo?  Prices recently fell as a result of most communities losing their FHA approval.  If you don’t have a decent down payment, please call me and I will explain your options and see if I can help.

Troubled homeowners, beware of ‘mass joinder’ lawsuit invitations

As some of you know, I was appointed last year to the Orange County District Attorney Real Estate Fraud Advisory Committee.  We meet at the D.A.’s office quarterly to discuss real estate fraud trends and how to protect the consumer and catch the perpetrators.  The article below touches on one of the current frauds that has hit Orange County.

What financially strapped homeowner wouldn’t want to join other troubled owners in a last-ditch effort to save their homes from foreclosure? But beware of unsolicited mailings inviting your participation in a “mass joinder” lawsuit as a way to do so.

Mass joinders can be just another way to separate desperate borrowers from their money — as much as $5,000 or more in upfront fees, according to the St. Louis Better Business Bureau. The bureau warned earlier this year that the mailings are the latest twist in scams that promise to force lenders to modify the loans of borrowers who no longer can afford their house payments or who owe more than their homes are worth.

Now, California has sued 14 entities, including several law firms and individual attorneys, accusing them of working together to defraud perhaps millions of people nationwide through the deceptive marketing of mass joinder lawsuits.

It is believed the defendants sent about 2 million pieces of mail to homeowners in at least 17 states. It is not known how many borrowers fell for the alleged ruse, but the California Department of Justice estimates the defendants’ take from the operation to be in the millions of dollars. 

To read the rest of the article.  Click below:

http://www.latimes.com/business/realestate/la-fi-lew-20110925,0,448398.story

Weekly Fraud Alert: FBI mortgage fraud website

From foreclosure frauds to subprime shenanigans, mortgage fraud is a growing crime threat that is hurting homeowners, businesses, and the national economy.  The FBI has developed new ways to detect and combat mortgage fraud, including collecting and analyzing data to spot emerging trends and patterns.  Check out the FBI’s latest news and information about mortgage fraud at http://www.fbi.gov/about-us/investigate/white_collar/mortgage-fraud/mortgage_fraud.

Are Home Prices Headed Up or Down?

Yesterday I received an email from a client who is on vacation in another country.  He said that he heard that prices were still going down and was concerned about the value of the Orange County condo he was about to close escrow on.  I wrote him sent him the MLS printout of two model match homes which closed escrow in the last two weeks.  They were not as nice as his and sold for the same price he was buying his for.  I reminded him that prices are not only local, but they vary by price range and style of home.  For an example, $800,000 homes in Orange County may be falling while 3-bedroom $290K to $450K homes are stable and may be slightly climbing.  One bedroom condos are a deal as buyers can often skip 1-bedroom housing and go straight to 2 or 3 bedroom properties because of the current extremely low prices.

First Team’s  friends at Keeping Current Matters bring home the point that news on the real estate market can be conflicting and confusing.  It also brings to light once again that real estate is extremely local and that you must get to know your market place by talking to a professional that knows what the local trends are.  That’s what I specialize in. Stats can even vary from city to city and complex to complex, so before you jump to conclusions about the state of real estate – dive deeper into the story and get the facts so you can answer the question…Are Home Prices Headed Up or Down?

Here are two headlines that appeared in print last week:

LA Times: Case-Shiller Home Price Index Hits New Low 

Forex: CoreLogic: Home Price Index Increased 0.7%

In the Los Angeles Times story, David Blitzer, chairman of the S&P index committee, was quoted as saying:

“This month’s report is marked by the confirmation of a double-dip in home prices across much of the nation. Home prices continue on their downward spiral with no relief in sight.“

In the secomd article, Forex quotes Mark Fleming, chief economist for CoreLogic: 

“While the economic recovery is still fragile and one data point is not a trend, the month-over-month increase based on April sales activity is a positive sign.”

The Case Shiller and the CoreLogic price indices are both very well respected. How can they come to seemingly opposite conclusions? There are two reasons for this. 

1. Each Index Has a Different Lag Time

Each report is actually looking at data from different periods of time. Therefore, they are not technically comparing apples to apples.  Read the rest of the story:

http://ftemerson.wordpress.com/2011/06/06/are-home-prices-headed-up-or-down/

Federal Retreat on Bigger Loans Rattles Housing (and how this affects home sellers)

We have been consistently driving home the fact that NOW is the time to buy.  There are changes coming soon that will affect loan amounts and may close opportunities for some who need that extra leverage to buy up into a larger/more expensive home.  This article by David Streitfeld of  the NY Times goes into a bit more detail on what is on the horizon.  Fact of the matter is…if you are waiting to purchase your home, you may wait yourself out of one completely. 

By summer’s end, buyers and sellers in some of the country’s most upscale housing markets are slated to lose one their biggest benefactors: the deep pockets of the federal government. In this seaside community of pricey homes, the dread of yet another housing shock is already spreading.

“We’re looking at more price drops, more foreclosures,” said Rick Del Pozzo, a loan broker. “This snowball that’s been rolling downhill is going to pick up some speed.”

For the last three years, federal agencies have backed new mortgages as large as $729,750 in desirable neighborhoods in high-cost states like California, New York, New Jersey, Connecticut and Massachusetts. Without the government covering the risk of default, many lenders would have refused to make the loans. With the economy in free fall, Congress broadened its traditionally generous support of housing to a substantial degree.

But now Democrats and Republicans agree that the taxpayer should no longer be responsible for homes valued well above the national average, and are about to turn a top slice of the housing market into a testing ground for whether the private mortgage market can once again go it alone. The result, analysts say, will be higher-cost loans and fewer potential buyers for more expensive homes.  Read on:

http://ftemerson.wordpress.com/2011/05/12/federal-retreat-on-bigger-loans-rattles-housing/

Lake Forest: Housing Market about to take off?

There are so many conflicting views on the real estate market right now.  Adding to the mix, Mike Castleman, CEO of Metrostudy, a real estate data provider, is predicting that we are now heading into a significant housing shortage that is very likely to drive up home prices.  His logic comes from tracking construction.  With so few new homes available or under construction, once sales return to a near-normal level, we may experience a serious shortage for a period of time.  For more on the story and today’s interest rates, click on link below:

http://ftemerson.wordpress.com/2011/04/04/weekly-mortgage-watch-29/

Don’t Buy a Home in Lake Forest…

…Until you grasp the 4 Stages of Wealth Building as a Homeowner. 

Continuing the effort to bring you news you can use, this blog post by Dean Hartman sums up money matters and real estate in a nutshell…

One of the primary objectives of owning a home is to let the home appreciate over time and become a pillar of a family’s financial strength.

But before we can discuss “wealth”, we need to identify the stages to get there.

http://ftemerson.wordpress.com/2011/03/24/the-4-stages-of-wealth-building-as-a-homeowner/

Lake Forest Has Less Vacant Homes. Good news for Investors.

As real estate investors, my husband and I always invest in Lake Forest properties.  One of the reasons is because the rentals we purchase always rent out very quickly.  This is because Lake Forest is conveniently located close to Irvine’s businesses but offers more affordable housing prices for tenants.  Basically, you get an extra bedroom when you buy in Lake Forest compared to purchasing in Irvine so it pays off for investors on the purchase side as well.

Irvine has 5.7% property vacancies, while Lake Forest’s vacancy rate is only 2.6%.  To look at more of Lake Forest’s demographics, click on link below and then give me a call to get started on Lake Forest being a part of your financial plan.  http://bit.ly/fYkHEp

New Rules for First-Time Home Buyers

If you have been following me for a while, I have been talking about big changes coming down for first time buyers.  Here is a great article that summarizes what I have been preaching:

Without a house to sell , first-time home buyers have had a field day in the depressed housing market. Until recently, anyway. A series of new rules, regulations and policies have changed the landscape, making buying that new home harder and more expensive.

Not long ago, first-time buyers accounted for 40% of home sales. Now they’re down to 29% and falling, experts say, as first-time buyers confront a steady accumulation of rising fees, costs, and rates. This month, fees on most new mortgages will rise by up to 0.50%. In April, fees on small-down-payment mortgages, a first-time buyer favorite, will spike. Meanwhile, more lenders are requiring larger down payments, and new proposals from the Obama administration call for mortgages to become more expensive and limited in size.

The new fees and higher barriers to entry are all a response to the sweeping mortgage losses of the last several years. Banks and other lenders lost billions of dollars on subprime and other risky mortgages, and some must now buy back bad loans they sold to Fannie Mae and Freddie Mac. To cover those losses, banks and the agencies are raising fees on new mortgages, says Keith Gumbinger, a vice president at HSH Associates, which tracks the mortgage market. Also, from the perspective of lenders and the government, making it harder and more expensive to get a mortgage will deter or cull the riskiest borrowers and minimize defaults.

But taken in total, all this reform means the window of opportunity for first-time buyers may be closing…http://www.smartmoney.com/personal-finance/real-estate/new-rules-for-firsttime-home-buyers-1299539050817/