10 Tips for Finding the Best Deal on Your Mortgage

Most people will need a mortgage to buy a home. That means that not only do you need to shop for a home, you need to shop for a home loan. But a survey of 2013 borrowers by the U.S. Consumer Financial Protection Bureau found that almost half of borrowers didn’t shop around before settling on a mortgage.

They should. In fact, you may find more loans to choose from than you do houses.

“Definitely shop around,” says Valentin Saportas, CEO and co-founder of MortgageHippo, a Chicago-based online mortgage application service that links buyers with mortgage brokers. “Don’t just go with the first option that you get. Being able to save even a little bit of money in your monthly payment definitely adds up.”

You should start looking for a mortgage professional before searching for a house. You want to make sure your credit is in order because mistakes can take months to correct. You also want to know how much house you can afford. You can run calculations online, but a good mortgage professional will better help you determine which loan is the best fit for you.

Finding the best deal on a mortgage can be a challenge because fees and rates change daily, sometimes more than once a day.

Whether you’ll get the best deal from going directly to a bank, a mortgage lender or a mortgage broker often depends on your situation, the mortgage pro handling your case and what’s being offered at the time. That means talking to actual people on the phone or in person, not just filling out an online form.

“There’s way too many variables in mortgage lending today to automate or streamline,” says Casey Fleming, author of “The Loan Guide: How to Get the Best Possible Mortgage” and a mortgage broker in the San Francisco Bay Area. “The online piece is nothing but a lead generation tool, and they hand it off to a real mortgage lender. The money comes from the exact same place, and the same people are involved.”

You can buy a home with as little as 3 percent down — and nothing down if you’re a veteran. But if you put less than 20 percent down, you’ll need private mortgage insurance (or the Federal Housing Administration equivalent) in most cases, which can add roughly $100 to a monthly payment on a $100,000 home.

To find a mortgage professional, start by asking friends, colleagues, relatives and your real estate agent. You might also ask any finance professionals you work with, such as accountants or financial advisors. If you’re a member of a credit union, ask there. Some credit unions and local banks do their own mortgage lending and others contract with brokers. Call the banks where you have accounts.

In general, banks have the fewest options available because they offer only their own products, but they may be more flexible if they’re lending their own money — and they may make a deal if you have substantial assets. “You could get a really good offer, but you have to dangle the assets,” Fleming says.

Mortgage brokers offer the largest number of options, since they can shop your loan among many lenders. “If your loan can be done, a broker can find a place to do it,” Fleming says. “My opinion is to go to a really honest broker. Without doubt, they are going to have access to better pricing than anyone else.”

While the rates and fees offered by lenders are usually comparable, lenders that see a slowdown in business may offer better pricing, and a good broker will grab those deals.

The difficulty of the mortgage process, including the need to gather reams of paper documents, is one of the reasons for the growth of lending that occurs at least partly online. “Customer service doesn’t just happen on the phone or in person,” Saportas says. Once MortgageHippo links the borrower with a broker, the parties can decide how they want to communicate.

SoFi, a lender based in San Francisco, bills itself as the first lender to provide prequalification with any device, including a smartphone. “We believe that we are the only one able to offer a personalized quote within one minute on any device,” says Dan Macklin, co-founder and vice president of business development. “That’s proving popular with the younger generation.” Humans in California also are available if you prefer a phone consultation. “We like to think it’s automated but with a human touch when you need it,” he says.

Here are 10 tips for getting the best mortgage deal:

Compare apples to apples. When you get quotes from companies, don’t look at just the interest rate. Look at the rate and all the fees, including points, origination fees and any other fees charged by the lender. A “no-fee” loan just means the fees are included in the rates.

Ask to see the Good Faith Estimate worksheet, not just the GFE. Many people consider the current Good Faith Estimate, required by law, to be confusing, and it is being replaced August 1 with what consumer advocates hope will be a more useful document. Until then, ask for the complete worksheet, and make sure it itemizes all the fees.

Interview the actual person who will handle your loan. That could be a mortgage broker, a bank employee or a loan officer. Ask about experience and qualifications. Is the person licensed (required for brokers but not bank employees)? Does he or she belong to the National Association of Mortgage Professionals or your state’s mortgage professional association? Ask for references and look at reviews online. “The company does not matter as much as the originator,” Fleming says. “Even good companies hire really bad people.”

Plan for costs that are not charged by the lender. Additional costs include title insurance, real estate transfer taxes and required escrows for property taxes and homeowner insurance. In some states, shopping for closing agents can save several thousand dollars, while escrow or closing costs are minimal in other states.

Make sure the lender offers the program that is best for you. Not all lenders offer FHA, VA or USDA Rural Development loans. Down payment requirements, loan-to-value ratios and credit requirements also vary by lender.

Get your free credit report before you start. This will not allow you to put your feet up on the desk and demand the best terms, as one commercial suggests, but it will let you know where you stand. “Just because you have a 700 credit score doesn’t put the ball in your court,” says Donald Frommeyer, chief executive officer of the National Association of Mortgage Professionals and a loan originator at American Midwest Bank in Indianapolis.

Give the loan officer all details about your situation when asking for quotes. People who are self-employed, have suffered a foreclosure or recently changed careers especially need a good loan officer. “One of the toughest things for me is to tell a customer, ‘Hey, I really can’t help you,’ but I always have a potential solution,” Frommeyer says. “I don’t like to pull credit on somebody until I talk to them about what I can do.”

Do you want to pay more upfront or get a lower interest rate? If you’re planning to keep the loan for 30 years, it may make sense for you to pay more upfront to get a lower rate. If you plan to sell or are going to refinance in a few years, it may not.

Ask about what documents will be required. All mortgages require significantly more documentation these days. Find out what’s required, and be prepared to provide it.

Know who you’re dealing with when you fill out an online form asking for rates. Will you get phone calls from mortgage brokers trying to gain your business? Will you get quotes online or via email? Most online forms require you to provide significant personal information before giving you quotes (and no one can provide an accurate quote without knowing your credit store). Will the service pull your credit once you fill in the form or wait until after you have talked to someone? Both MortgageHippo’s and SoFi’s automated systems rejected our freelance writer with good credit with no explanation, while a human broker would likely have suggested making a larger down payment or choosing a less expensive home.

5 Signs it’s Time to List Your Home

To Sell or Not to Sell?

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From RISMedia 4/27/15

famhomesellIf you’re like me, thoughts of putting your home on the market and moving up, down or out of dodge all together periodically float through your mind. These days, there’s extra incentive given the inventory shortage in most regions of the country—some areas are even experiencing bidding wars.

“After back-to-back years of a robust housing recovery, we are continuing to experience another year of a shortage of inventory of homes for sale,” reports Phil McBride, COO of John L. Scott Real Estate in the Northwest. “With a large backlog of homebuyers, multiple offers on new listings are the norm. We are seeing approximately 90 percent of sales activity in the market areas and price ranges where we are experiencing the shortage/low inventory, which is sending prices upward.”

National statistics bear this out. According to the National Association of REALTORS®, total existing-home sales increased 6.1 percent in March—the highest annual rate since September 2013—however, the housing supply has only experienced a modest increase, just 2 percent above a year ago. Long to short—it’s a seller’s market.

Still, choosing to sell is a big decision—a decision that requires the careful weighing of a variety of factors, both lifestyle and financial. To help sort things out, here are five telling signs that now just might be the time to finally put your home on the market.

  1. You’ve outgrown your space—really. This is usually the number-one reason that gets me thinking about moving up to a bigger home. I get anxious trying to find sleep spaces for overnight guests or frustrated by my overcrowded closet. But truly needing more space is about more than that. Do you have kids outgrowing shared bedrooms? An in-law moving in? A new virtual work opportunity that requires a home office? These are the life events that really necessitate a bigger home—not the inability to curb one’s shoe-buying habit.
  2. Your neighborhood is booming. While home sales and values are improving at a healthy yet gradual rate on a national level, you may find yourself smack-dab in the middle of a hot market. Pay attention to those “Recently Sold” postcards in your mailbox and talk to those neighbors plunking down For Sale signs in their yards. Contact your local real estate professional and check out comparable sales. If homes are selling above listing price and you’ve been on the fence about selling for a while, now might be a wise time to take the leap.
  3. You’re letting things go. Remember when home improvement projects and landscaping chores were fun? When you’d spend hours happily painting, planting and hammering away? Well, if that’s a distant memory and your grass is knee-high and the porch railing’s rotting, this may be a sign that you’re ready to move onto a maintenance-free way of life. Realize that the more you let things go around the house, the more money you’ll have to invest to get it ready for market or worse, you’ll have to drop the price to get it sold. So honestly evaluate if it’s time for a home that offers a simpler, less work-intensive option.
  4. Your equity is back. Many of us didn’t even consider selling for many years based on the fact that our equity evaporated during the housing crash. But don’t stay stuck in that mindset. The fact is, increasing numbers of homeowners are returning to positive equity. According to Corelogic’s Third Quarter 2014 Equity Report, 94 percent of homes priced at $200,000 and above have positive equity. So do some research and have your home reappraised. You may find that your equity is back and that selling is an option again.
  5. Your life has changed. An important life change can trump all other reasons to sell your home. Growing or shrinking families, a new job with a new, long commute, retirement, divorce, etc., are cause to seriously consider moving on to a home that makes more sense for life as you now know it. Ultimately, a happy home is one that’s in sync with your current phase of life. Make sure you find the right fit.

Drought Face Lift?

Drought face-lift: California paints

lawns green

Cy Bodden from the San Diego company LawnLift sprays their Grass Paint product onto a lawn on May 12, 2015 during a severe drought in San Diego and California

 

Escondido (United States) (AFP) – The heat is stifling, the soil dry as a bone, and a new law in drought-stricken California restricts sprinklers.

But far from saying farewell to their beloved lawn, some Californians are coping with the drought by… painting it green.

With a simple squeeze of a spray gun, dried-out yellow grass regains its lush green color before the eyes of its proud owners.

It is a kind of make-over which is becoming increasingly common among home-owners in California, which is now in the fourth year of a historic drought.

Paula Pearson, who lives in Escondido, just north of San Diego, is one of those who has turned off her sprinkler faucet. She took the plunge after governor Jerry Brown announced unprecedented water-saving measures in April.

Unsurprisingly, her lawn rapidly turned yellow. But she is determined to fight against nature.

“If I wanted yellow I’d throw rocks down there. Green grass is supposed to be green in my opinion,” said Pearson, her eyes protected by shades from the dazzling midday sun.

“I love it! This is the color of my grass when I water it every day. I absolutely love it. I am thrilled,” she told AFP.

– A way of life –

The first time she heard about the possibility of painting her lawn, she laughed — before admitting, maybe it could be a good idea.

Neat houses with green front lawns are a traditional part of American culture and the landscape in suburbs across the country.

Taking care of your garden is a question of pride — and can impact on home prices.

“We want to have a perfect lawn, it’s a reflection of you,” said Jim Power, founder of LawnLift, a company specialized in painting grass.

“It’s like if your car is dirty all the time, or your house is messy all the time, or if your lawn is overgrown or dead. It just shows that you don’t take care of things. People want it to look nice and it’s an instant fix to that problem.”

California’s extreme drought also has made many homeowners swap their lush lawns for desert plants like cacti or agaves, which need hardly any water.

Some California cities have offered financial incentives, like Los Angeles with its “Cash for Grass” rebate scheme, which offers homeowners $1-2 for every square foot of grass replaced with water-efficient landscaping.

In San Francisco they have an “Ugliest Yard” contest, the winner of which gets a yard makeover featuring drought-tolerant and native plants.

But Power says classic lawn-based yards can survive the drought.

“We had similar drought conditions in the 1970s — people ripped out their lawns and then lawns came back. So lawns are here to stay,” he said.

– Like magic –

Wasting no time, a Lawnlift employee gets to work in Pearson’s yard by mixing up a potion of water and natural pigments which bring to mind cosmetics used by women every day.

Within minutes, the dessicated lawn is rejuvenated before its owner’s astonished eyes.

“I love it! This is the color of my grass when I water it every day. I absolutely love it. I am thrilled,” she said.

The product is non-toxic, lasts for 12 weeks and is water-resistant — even if the lack of rain is the main threat to California’s gardens.

Power acknowledges that his company is cashing in on the drought, in particular over the last 12 months.

“Sales from last March to this March have easily doubled and in fact we are 150 percent higher than last year and we attribute most of that to the drought,” he said.

California is not the only market for his products: he also sells in Canada, and a few weeks ago made a $15,000 sale to Algeria.

“Most people that buy the product are looking for an instant cosmetic fix to their lawn problem. They don’t want to look at a dead lawn every time they leave the house and come back to the house.

“They want to look at a green lawn,” he said.

Renting vs. Buying: HOA Fees May Make Renting More Appealing than Buying

~Interesting Case for Renting~

house-keysRecent results from Trulia’s Rent vs. Buy Report reveals that purchasing a home with a traditional 30-year mortgage and 20 percent down payment is cheaper than renting, but additional fees from the homeowner association (HOA) can make renting seem more appealing especially for New York and Honolulu residents whose HOA fees are considerably higher. Trulia also has a tool called the Rent vs. Buy Calculator that allows consumers to compare renting and buying costs using whatever data they chose to enter such as prices, rents, or HOA fees.

“If you are a homeowner association member, you need to factor in your HOA fee into your monthly housing costs,” Ralph McLaughlin, housing economist at Trulia wrote. “What these fees cover varies, but they can include everything from landscaping and maintaining public spaces to utilities and cable TV. The fee amounts also vary and, in some areas, you might have to pay a lot.”

The New York and Honolulu metro areas have medium HOA fees of $575 and $438 per month. Fort Myers, Florida; Riverside, California; and Miami, Florida finish up the top five with median HOA fees between $310 and $356. HOA costs can be the deal breaker on whether to buy or rent in markets like these.

According to the report, buying a home is still a cheaper option than renting in all 100 largest U.S. metro areas. Purchasing a home is 35 percent cheaper, a 2 percent increase from last year, and the growth of home prices has soared over rents nationally.

Additionally, there are two more statistics that appeal to homeownership that are mentioned in the report data. First, the 30-year fixed-rate mortgage rate has decreased to 3.87 percent as of April 15, a fall from last years’ rate of 4.5 percent. Second, the home price gain was only 3.9 percent, not a huge jump from last years’ gain of 3.7 percent in rentals. These two trends have made homeownership an even more affordable and appealing option compared to renting.

Under the assumption that buyers will get a 3.87 percent mortgage rate on a 30-year fixed-rate loan with 20 percent down, will stay in the home for seven years, and also itemize their federal tax deductions and remain in the 25 percent tax bracket, buying is 35 percent cheaper than renting nationwide.

Top Five Locations Where Homeownership is a Tougher Choice

  1. Honolulu, HI,
  2. San Jose, CA
  3. Lancaster, PA
  4. Sacramento, CA
  5. San Francisco, CA

Top Five Locations Where Homeownership is an Easier Choice

  1. Sarasota, FL
  2. Fort Myers, FL
  3. Baton Rouge, LA
  4. New Orleans, LA
  5. Miami-Fort Lauderdale, FL

Millennials and the Housing Market

Take a look at these two articles on how Millennials are affecting the housing market

 

How Millennials Living With Parents Are Affecting the Housing Market

 

Study Shows Millennials Pose Less Credit Risk than Gen Xers or Boomers

The Road to Recovery: 4 Factors That Affect Home Prices

 

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From RISMedia 5/11/15 
 

recoverWith housing on a steady path to recovery, home prices have risen approximately 20 percent in the last three years, according to the Federal Housing Finance Agency (FHFA) and Standard & Poor’s (S&P) Case-Shiller house price indices – and both consumers and industry professionals expect that upward trajectory to continue this year.

The anticipated increase is the result of intersecting economic indicators – macro-level factors painting the big picture that is today’s housing market.

So what’s impacting prices these days?

Wages and Inflation – As much as the economy’s improved, a recent RealtyTrac analysis illustrates disconnect between house price growth and wage growth. Between 2012 and 2014, home prices increased by 17 percent; wages, in contrast, increased 1.3 percent – a 13 to 1 disparity. Furthermore, home prices continue to outpace inflation rates, growing twice as fast in 2014, according to S&P.

But inflation rates as they stand likely affect home prices indirectly, argues renowned economist and Nobel Laureate Robert Shiller. Because pay increases often boost perceptions of buying power, inflation may have a greater impact on consumer confidence, which, in turn, could ignite housing activity.

Interest Rates and Inventory – Inflation rates, however, do tend to influence interest rates. While it’s reasonable to assume rising mortgage interest rates equal falling house prices, in truth, there’s little evidence of a causal relationship between the two. In fact, higher mortgage rates have a tendency to predicate a decrease in purchases, rather than a dip in prices, concludes Mark Palim, Fannie Mae Vice President, Economic & Strategic Research Group.

That said, interest rates do play a role in overall affordability. In many markets, today’s rates have significantly propelled demand.

“The biggest factor in price gains has been the current low interest rates spurring demand,” says Gabe Sanders of BlueWater Real Estate in Stuart, Fla. “And our low inventory, which makes buyers willing to spend more, since they can’t find enough available lower-priced properties.”

In Sanders’ market, prices on the lower end have risen much more than those of mid-range homes, with the largest gains seen under $400,000 in Martin County and under $200,000 to $250,000 in St. Lucie County. This demonstrates what many nationwide are experiencing – escalating prices, due to a shortage of affordable listings, have adversely tipped the scale, especially for first-time homebuyers.

To counter the lack of inventory and rise in prices, new construction gains are essential, says Lawrence Yun, chief economist for the National Association of REALTORS®. Post-crash, single-family construction has been slow to pick up steam, primarily because of construction costs that fail to meet buyer expectations.

Demographics – In addition, generational shifts have historically affected demand and moved prices in the housing market. Currently making waves are baby boomers and millennials, though many of the latter have been priced out due to statistically lower incomes and sluggish wage growth. And like toppling dominos, too few first-timers bodes ill for move-up buyers or those seeking to relocate.

International interest can also drive home prices, particularly in luxury markets. In Beverly Hills, Calif., global demand, coupled with the area’s high-end status and pleasant climate, impacts prices considerably, says Endre Barath, Jr. of Berkshire Hathaway HomeServices California Properties.

“Prices in the 90210 zip code are trending upward and are getting close to an all-time high,” Barath says. “Looking at the current rate of sales versus the current inventory, we are still in a seller’s market, but getting close to a balanced market.”

Oil Prices – Another distinct market trend could also affect home prices in the near future. Following the decline in oil prices, markets with oil economies, such as Texas, Louisiana and Oklahoma, may see home prices drop at the end of this year and into 2016, Trulia reports. Conversely, non-oil-producing markets, particularly in the Northeast and Midwest, may see a boost in prices. These findings mirror oil and home price fluctuations since the 1980s.

While there are many more variables factoring into the equation, house prices remain subject to these predominant large-scale influencers. I put it to our readers – where do you think prices are headed?