Archive for February, 2010

Mortgage Rates Fall and Hit New Low for 2010

The 30 year rate fell from 4.97 to 4.93 this week. Overall rates have been pretty stable. In fact during all of 2010 30 year mortgage rates have stayed between 4.93 and 5.09. This is the 2nd week in a row where rates have fallen. The current rate of 4.93 is the lowest rate reached in 2010 and is somewhat near the all time low of 4.71 reached on December 3, 2009.

The other major mortgage products fell as well this week. The 15 year dropped from 4.34 to 4.33. The 5 and 1 year arms dropped from 4.19 to 4.12 (5 year arm) and 4.33 to 4.23 (1 year arm). Below are rates from the weeks from Jan 21, 2010 to Feb 18, 2010

Feb 18, 2010

30-fixed 4.93 15-fixed 4.33 5 ARM 4.12 1 ARM 4.23

Feb 11, 2010

30-fixed 4.97 15-fixed 4.34 5 ARM 4.19 1 ARM 4.33

Feb 04, 2010

30-fixed 5.01 15-fixed 4.40 5 ARM 4.27 1 ARM 4.22

Jan 28, 2010

30-fixed 4.98 15-fixed 4.39 5 ARM 4.25 1 ARM 4.29

Jan 21, 2010

30-fixed 4.99 15-fixed 4.40 5 ARM 4.27 1 ARM 4.32

Aug 20, 2009

30-fixed 5.12 15-fixed 4.56 5 ARM 4.57 1 ARM 4.69

In addition to rates it’s also helpful to look at mortgage payments. We took today’s rates and using our mortgage calculator widget we translated them into a mortgage payment on a 200k loan. We also did the same thing with rates from February 4 and August 20th (6 months ago)

Feb 18

30-year $1065.1

15-year $1512.66

5-year ARM $968.71

1-year ARM $981.53

Feb 04

30-year $1074.86

15-year $1519.78

5-year ARM $986.22

1-year ARM $980.37

Aug 20

30-year $1088.35

15-year $1536.12

5-year ARM $1021.7

1-year ARM $1036.07

While rates and payments have fallen from what one would have seen 2 weeks ago the drop has been slight. A 200k mortgage payment is $9.76 less than what one would have seen 2 weeks ago for a drop of slightly less than one percent. Compared to 6 months ago a mortgage payment is $23.25 less for a drop of 2.13 percent.

So what is our advice to people looking for mortgage? Most lenders are still pretty strict on qualification. It’s probably best to get your credit score early on in the process to see if there are any problems that could stop you from getting a loan. Waiting until you find the home of your dreams to discover a credit problem that could take 3 months to resolve is far from ideal.

What do we see on the horizon? There is not too much room for mortgage rates to fall further. In fact it’s extremely doubtful that rates, currently at 4.93, will fall below there all time low of 4.71. On the other hand the general expectation is that in a year rates will hit 6 percent. So long term we are expecting rates to increase. In the short term it’s hard to know where rates are going but they are more likely to rise drastically than to fall drastically.

Ki writes frequently about mortgage trends. His website covers real estate in Austin Texas. It also provides a mortgage rate widget and a mortgage calculator widget.

Clever Tips on Decluttering Your House

If you’re plagued with clutter and need some tips on how to get it under control, you’ve come to the right place. Some of the most common clutter issues involve incoming mail, collections of sentimental items and seasonal decorations. Many also struggle with what to do with clutter in closets, home offices and unused bedrooms. Extra furniture can be a problem, and laundry rooms and attics are clutter magnets. Some clutter involves areas that are sight-unseen, so they are easier to not address.

First, let’s deal with incoming mail. Two rules to incorporate are open mail daily and touch it only once. When you get home from a hard day’s work, open the mail. Toss the junk mail, put all bills in the bill box and all correspondence you must respond to in an envelope marked “correspondence.” If you are limited on space and pay bills at the kitchen table, create envelopes for each of the categories and keep them in one area always for quick easy access.

For attacking clutter in other areas of your house, use the “How do you eat an elephant?” method. The answer is, “One bite at a time.” Your goal will be to target the most prominent areas that everyone sees in the house, first. Work your way through the home one room or area at a time.

Begin by clearing all clutter in the room into one trash bag or box, regardless of the items. Remove anything that does not have a purpose in that room or area. Once the clutter is cleaned out, sort it into the following categories and put into labeled trash bags or boxes:

* Trash

* Charity

* Store

* Repair

Ask yourself the following questions while sorting:

* Can I throw this away? If you have no immediately use for it, toss it.

* Do I have an immediate use for this item? If so, put it use right now.

* Is this a sentimental item from generations? If so, either give it away to your children or store it in a plastic container marked family treasures.

* Is it something I can use now, but needs repair? Don’t delay, schedule a date and time on your calendar that you will either repair it yourself or take it to be repaired.

If you want to keep extra furniture that is causing clutter problems, either rent a storage unit or ask a friend or relative to store it for you. When you are finished with each room, take the trash out immediately, so that you aren’t tempted to bring it back in, again. Make it a goal to work on one room an hour every weekend until you are finished with it, then move on to the next. Get the family involved and make it a fun event. The benefits are that you could create some memories and some habits that will stick.

Donate the charity items on the way home from work, so that they don’t stick around. For items to be stored, buy plastic see-through containers and sort them into specific seasons or holidays, type of items and anything else that will help organize them. Label them, accordingly.

After finishing the entire house, determine to go through the home once a month to clear clutter. Schedule it on the calendar monthly, so that it doesn’t ever revert to its former cluttered condition. Take charge and you’ll begin to gain a sense of pride as you see your clutter disappear and order take over.

Ki lives in Austin Texas. His site provides information and statistics on Austin Texas real estate along with a graphical search of the Austin MLS. Monthly updates are posted on his blog covering Austin real estate and the national market.

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Mortgage Rates Continue to Flatline

The 30 year rate fell from 5.01 to 4.97 this week. What’s been interesting over the last month is that although we are still in a period of economic uncertainty rates have stayed amazingly flat. Since January 14th 30 year rates have stayed between 4.97 and 5.06. We are starting to see more volatility in the other mortgage products though. The 15 year dropped from 4.40 to 4.34. The 5 year arm dropped from 4.27 to 4.19 and the 1 year arm rose from 4.22 to 4.33. Below are rates from the weeks from Jan 14, 2010 to Feb 11, 2010

Feb 11, 2010

30-fixed 4.97 15-fixed 4.34 5 ARM 4.19 1 ARM 4.33

Feb 04, 2010

30-fixed 5.01 15-fixed 4.40 5 ARM 4.27 1 ARM 4.22

Jan 28, 2010

30-fixed 4.98 15-fixed 4.39 5 ARM 4.25 1 ARM 4.29

Jan 21, 2010

30-fixed 4.99 15-fixed 4.40 5 ARM 4.27 1 ARM 4.32

Jan 14, 2010

30-fixed 5.06 15-fixed 4.45 5 ARM 4.32 1 ARM 4.39

Aug 13, 2009

30-fixed 5.29 15-fixed 4.68 5 ARM 4.75 1 ARM 4.72

So what is going on with rates? It seems that although the economy is on uncertain ground with a potential recovery swaying in the balance not much is actually happening. In general things are not getting worse and things are not getting better. The lack of movement in the mortgage market is relatively good news for potential mortgage seekers. Although rates are above all time lows they are still low by historical standards. Having the 30 year rate be below 5 percent was unheard of just a few years ago. So in addition to mortgage rates it’s always interesting to look at mortgage payments. Using our mortgage calculator we determined the mortgage payment on a 200k loan. We took rates from February 11th, January 28, and August 13th to do the conversion. Below are the results.

Feb 11

30-year $1069.97

15-year $1513.68

5-year ARM $976.86

1-year ARM $993.26

Jan 28

30-year $1071.19

15-year $1518.76

5-year ARM $983.87

1-year ARM $988.56

Aug 13

30-year $1109.36

15-year $1548.44

5-year ARM $1043.29

1-year ARM $1039.68

As we can see over the last two weeks mortgage payments have not moved much with the 30 year payment dropping by 0.11 percent.

So what is our advice to those looking for a home? First I would start looking at credit reports earlier on. Banks are still pretty picky and relatively small problems can increase your eventual mortgage rate and stop your loan from being approved altogether. In addition, I would lock in earlier rather than later. It’s hard to know what rates are going to do over the next month. There is a good chance they could stay flat but if they see some volatility its more likely they will move up rapidly than move down rapidly. In fact the chance of them moving below 4.7 is pretty low. Looking more long term the expectation is that rates are going to be higher in the next few years. So although the rates are lower it’s probably best to avoid the 1 and 5 year arms.

Ki works, and lives, in Austin Texas. His website has thorough descriptions of Austin Tx real estate. His site also has a free mortgage calculator and a mortgage rates widget.

More Home Owners Walk Away From Their Loans

“Underwater” has become the popular term for a mortgage loan that is higher than a home’s current market value. According to a recent New York Times article, as many as 4.5 million Americans find themselves in this predicament. That is like every home in Los Angeles plus every home in Boston being underwater. Research has found that when the home value falls to below 75 percent of the home loan, people seriously consider defaulting on the loan and just walking away from the house.

This is not a decision made easily, especially when a person can afford to pay the mortgage each month. This is largely a recent phenomenon, something people wouldn’t have considered just a couple of years ago. The reason for contemplating such an unreasonable option as walking away from a debt obligation is that high mortgage payments are not building any equity.

The Obama administration’s loan modification program that was meant to combat underwater mortgages and runaway interest rates has done little to address either. It was intended to help millions of homeowners, but the reality is that it has helped a fraction of that number. Banks are not very sympathetic to choices that they consider homeowners made willingly and are largely unwilling to reassess or modify loans.

The line between a bank foreclosure and an owner-initiated default is fine, at best. They both ruin credit. Certainly not all of those 4.5 million homeowners are going to walk away, but one estimate puts the number around 17 percent. Also according to the New York Times article, the projection is that 10 percent of all homeowners will be in this predicament by the end of the year.

“The overwhelming bulk of people who have negative equity stay in their homes and keep paying,” said Michael Barr, assistant Treasury secretary for financial institutions. In other words, people talk about it, but the reality of uprooting the family and ruining their credit is too much risk for most people. These days a credit score is used for more than getting a credit card or a mortgage loan. Credit scores and history are used by potential employers and even graduate school programs to evaluate candidates.

As sales of previously occupied homes took a bigger than expected drop in December, the state of the housing industry remains unclear. Over the last two years, home values have fallen an average of 30 percent across the country, but more than 50 percent in some markets. The median home sales price is now around $180,000, which is a 1.5 percent gain from a year earlier and the first yearly gain since August 2007. For those homeowners drowning in negative equity, home values are certainly not rising fast enough. Swimming away from an underwater mortgage could become a popular sport.

Ki has lived and worked in Austin, Texas for over 10 years. He has a comprehensive understanding of Austin Texas real estate. His website offers a free search of properties in the Austin MLS. His site also has a blog covering Austin real estate.

Determining Whether to Refinance Your Mortgage

With interest rates near all-time lows, it is tempting for many to refinance their home loans. Before you find yourself in the throes of refinancing, you’ll need to determine several things.

* Are payments for PMI included in your current home loan schedule? If have you paid, at least, 20 percent on the principal of your mortgage, your lender is required by law to remove the PMI.
* Do you owe more on your home than it is worth? If you probably will not be approved for a refinance loan. The exception is the Home Affordable refinance program. If you want more information, do a search on the Internet for the program.

There are many reasons homeowners want to refinance their mortgages, and some might be to:

* Lower your monthly payments.
* Lower your interest rate.
* Combine unsecured debt to lower your interest rate on credit cards.
* Get cash out by loaning more than the balance due to upgrade your home, cover an emergency medical situation or pay for college for the kids.
* Refinance an adjustable rate mortgage (ARM) that is coming due.
* Remove the PMI from your loan, which will definitely lower your payments.

Keep in mind that if your goal in refinancing is either to obtain a lower interest rate or lower your monthly payments, you will restart the clock on your mortgage. When applying for a new loan, you need to decide the preferred duration of your new home loan. The most common are 10-, 15-, 20- or 30-year fixed rate notes. The fewer years on the note, the more you will save. You can save .7 percent or more on your new note. That can add up to thousands of dollars over the life of your loan.

All things considered, do you still want to refinance? If you can save money, there’s no reason not to. Interest rates have remained steady in the 4 percent range for some time now. That will save you loads over the period of a 30-year loan, even if your original mortgage was only a couple of points higher. You will have to pay closing costs, though. Depending on who you are lending from, there may also be administration fees or other fees required. A down payment will, most likely, be required, too.

If you want to avoid a down payment, you may want to consider getting a Fannie Mae or Freddie Mac loan for refinancing. You typically don’t have to come up with a down payment with either. Regardless of where you obtain your home loan, be sure to request all fees that will be included in the note. Get all fees in writing from each lender prior to making your decision. Before making the final decision to refinance, add up all new fees and closings. Divide that by the monthly amount you will save on your new loan. This will tell you how many months it will take you to recoup the charges for your new loan. Ideally, you want them paid off within a year.

If you will be living in the home much longer than it will take you to recoup the charges, then it will be to your advantage to refinance. Your final task will be to check out the lender’s reputation. Does it have any industry memberships or certifications? If so, check with the organization as to the business’ reputation. Also with the Better Business Bureau (BBB) and your state’s attorney general’s office. Compare all the company reputations, fees and interest rates. Select the one that stands out from the rest.

Ki’s works and lives in Austin Texas. His website brings a free search of Austin homes for sale to future homebuyers. Additionally, there is detailed information about Austin real estate. His website also has information on mortgage rate trends and a Austin real estate blog.

Avoid These Mistakes When Flipping a Home

Experienced home flippers know that there are pitfalls to any promising piece of property, and avoid the most obvious ones. You can, too. Learning from others’ mistakes can result in huge rewards if you find you are ready to start a home flipping business.
The following are pitfalls and mistakes to avoid and how to work some of the situations to your advantage.
1. If your financial situation is not healthy, don’t start flipping just yet.
If you do not have the following necessities in place, put flipping on the back burner for now:
* Full-time job.
* Income that allows you to put away 10 percent of your monthly income for savings or retirement.
* Six months of income already put away in either a savings account, CD or some other form of liquid holding that draws interest.
* Account separate from your savings or CD with $10,000 for repairs on your future investment.
* Potential investment partner or partners.

2. Don’t use a stated income loan, better known as “liar loans.”
Stated income loans were created to help individuals with variable income qualify for home loans – e.g., small business owners or those who work sales commission jobs. Very little or no proof of income is required for stated income loans; although, they typically charge a higher interest rate to cover the risk.

3. Don’t be untruthful on your loan application.
It is a federal crime to lie on a loan application. You may get the loan, but, if you are caught, you face charges of mail fraud, wire fraud, bank fraud and possibly others. Common fallacies submitted on mortgage applications include an overstatement of income, understatement of debts, and a commitment to live in the home as the primary residence.

4. Don’t start without a business plan.
If you don’t have a personal financial budget, create one. Then, create a business financial budget that indicates how much you have set aside and what you can allocate out of every paycheck for repairing future properties. If your business plans falls short of savings for repairs, wait to flip until your finances are healthier.

5. Don’t take on too many projects at once.
Start with one property. Once you get your feet wet with a successful flip, go on to another one. Don’t get in over your head with too many properties. Unless you have partners who are committed to jumping in with both feet with you, it will be in your best interest to proceed cautiously.

6. Don’t buy a home site unseen.
Never, ever, buy a home site unseen. It doesn’t matter if it is located in the classiest part of town, the asking price is lower than half of what area homes go for and the seller is willing to pay your closing costs. Simply put, don’t do it.

7. Don’t buy a home with structural problems.
Structural problems, like a leaky basement or cracks in the foundation, are an invitation to huge out-of-pocket expenses. Even if you have an expert assess the situation and a licensed contractor who is willing to do the work, but still allow you a healthy profit, you don’t know that the job won’t still turn south on you once you sign on the dotted line. Don’t dive into that pond of possibilities.

8. Don’t buy the property unless you can afford to carry the mortgage if doesn’t sell quickly.
Unless you have monthly income that covers all your expenses and can pay for another mortgage, ignore that flipping itch for now.

9. Don’t quit your day job.
You find THE home that is going to net you a pretty penny, one that will pay your salary for a year, and you think, “I can quit and do this full-time!” Think again. You may net a year’s salary from the flip; however, you may not be able to do it consistently. Wait until you see that you have the knack for turning properties at a significant profit, and then consider quitting your day job.

10. Don’t start without a good exit strategy.
Good intentions don’t necessarily develop into dollars. Even if you’ve done all your homework, followed the ten steps to successful flipping and received a great interest rate on your financing, the situation still has the potential to go south. You received the loan you wanted, performed all the remodeling necessary and you’re sure the home will sell the day it hits the market … but it doesn’t. You go through several months of mortgage payments only to find that it simply isn’t selling, no matter how much you cut the price. Do you have an exit strategy? Maybe you can rent the property out, rent it out with the option to buy or have someone else assume the loan with little or no money down. Whether you run into remodeling that will cost you more than you anticipated or other unforeseen problems, you need to consider all the possibilities that could occur and have a good exit strategy.

Austin, Texas is a growing and thriving community. Ki maintains a website to help future buyers move to this community and understand Austin Texas real estate. They can search for homes in the Austin MLS. He also keeps buyers up to date on his blog covering Austin real estate homes and statistics.