Builders and In-House Lending

The Washington Post article “Beware of Builders Bearing Gifts and Pushing Lending” warns buyers against solely looking at lenders which builders push onto them. While the incentives can seem nice, the buyer needs to make sure that it isn’t coming at a higher cost.

“Taking out the wrong mortgage can be a very expensive mistake over the long term. An expensive mortgage could cost more than the real value of steam jets and granite counter tops. And you wont know if the preferred lender’s offerings are overpriced, whether in terms of interest rates, prepaid interest (known as points) or loan-related fees, unless you’ve already talked to outside lenders.” Read the article here.

The only true and complete way to compare lenders is to get one or several Good Faith Estimates from local lenders. With the Good Faith Estimate, a buyer can go into the model home knowing what their interest rates and payments would be with the outside lender, which provides valuable comparison to the in-house lending companies. With this comparison, a buyer can make sure that the incentives offered by the builder are actually worth using their preferred lender. Even before you look at the model homes, get a Good Faith Estimate.

HGTV's 10 Ways to Increase the Value of Your Home

HGTV lists ten ways to increase the value of a home. Watch the videos here.

Here's a summary I put together of each video:

1. Plan out your remodel. Make sure you balance what you want and what you need so that your remodel doesn't get out of hand.

2. Keep all projects manageable, tackle only one room at a time.

3. Improvements to both décor and fixtures can increase the value of your home. Updated furniture and fixtures show buyers an inviting atmosphere.

4. A clean, clutter-free place not only feels good, it can mean dollars in your pockets when selling a home.

5. Curb appeal counts. Small inexpensive changes to the outside of a home create excitement and interest for buyers.

6. Updated kitchens translate into the maximum return on your money when selling a home.

7. Beautify your bath; minor bathroom remodels will yield major returns.

8. Evaluate your needs. Compare the costs of remodeling your current home vs. buying a new one. Some projects might not need to be tackled.

9. Hire a certified home inspector. You don’t want to run into any unexpected challenges when fixing your home, think of it as a check-up for your home.

10. Paying down the principle on your mortgage now will mean cash in your pocket at closing.

Mortgage Rates Creep Forward for 30-Year Fixed

The Washington Post reports that mortgage rates crept up slightly this past week. Thursday reported an average percentage of 6.17 percent for the week for 30-year mortgages, up slightly from 6.16 the week before. Despite the raise, rates for 30-year fixed-rate mortgages remain close to the low for the year. The stability points towards financial markets trying to decide the direction of the country's inflation and economic growth.

A year ago, mortgage rates were 6.43 percent for 30-year fixed rates.

Read the entire article here.

Foreclosures Force New Charges for Buyers

As foreclosure rates are increasing because of the subprime mortgage meltdown, first time borrowers can face new charges. The new charges, which can include an additional 1-2.5 percent on interest rates, affect 100% loans only for those whose credit score is under 700. Tom Halfpap, a branch manager at National City Bank, warns that if realtors have customers who are already approved for 100% loans, they must check to make sure that the loan can still be done, and if so, the interest rate needs to be locked immediately.

Subprime mortgages, loans given to buyers with risky credit histories, have lead to sky-high amounts of foreclosures across the country. Not only are these foreclosures flooding the market, which creates massive competition for sellers, but now it is affecting the loans which buyers can procure. Loan companies seem to be less willing to risk lending to buyers with 100% loans, and therefore are adding additional costs to said mortgages.

I would like to take this time to reiterate that if you personally have a subprime mortgage, refinancing is an important step to take in order to avoid the sharp increase in payments once the interest rates of your loan changes. Avoid the risk of foreclosure; lock into a 30 year-fixed mortgage rate, if possible.

February 2007 Homes Sales Increase

I found an article in the Washington Post which sights unexpected jumps in the sales of existing homes in February 2007, the largest jump since March 2004. Read the article here.

Personally, I have seen an increase in buyer showings, and contracts on my listings. There are more buyers in the market. Statistics from NVAR (find the statistics here) says that there was a 6.87% increase in February 2007 sales of single family homes, townhomes, and condos compared to February 2006. In February 2007 there was actually 3% more inventory on the market for sale than in February 2006. The reason, I believe, that sales have increased 6.87% is because buyer demand has increased while interest rates are decreasing, despite 3% more homes on the market.

Hi-Tech Home Upgrades

Looking for the latest and greatest home products? From a fingerprint scanning deadbolt, to an oven which can cook a 12-pound turkey in 42 minutes, to residential elevators, MarketWatch.com listed ten new products which caught their attention at the 2007 International Builders’ Show. Click here to take a look at the list that would make any homeowner jealous.

Substaintial Risk with Subprime Mortgages

Subprime Mortgages, mortgages given to home buyers with risky credit histories, allowed buyers to purchase homes in the craze of the market boom of the last few years. The effect? Foreclosure rates are increasing, more than two dozen subprime mortgage companies are closing their doors for good, and home buyers with subprime mortgages are facing significant risk. According to an article by the Washington Post:

“4.95 percent of all home mortgages were delinquent, meaning they were at least 30 days late. The most dramatic rise among subprime borrowers. The survey also showed that lenders initiated foreclosures against 0.54 percent of borrowers – or about one in every 200.” read the complete article here

In my opinion, subprime mortgages are significantly risky for buyers who stretch themselves to the max to do a 3-year interest only ARM. While short term interest only ARMs are wonderful short term deals, buyers face serious danger if they do not refinance before the interest rate jumps. If you are in this situation, I strongly urge you to try refinancing to a 30-year fixed mortgage while rates are still low (around 6.25% today).

Also keep in mind that foreclosure rates are increasing, meaning that there is a higher supply of “bank owned” properties. Bank owned properties compete with sellers when they are selling their home, making it a much more difficult market for sellers.