Archive for June, 2010

Advantages and Disadvantages of Reverse Mortgages

Reverse mortgages are a relatively recent product on the lending scene. The approval process is somewhat abbreviated compared to a traditional home loan, but there are some conditions and requirements that make a reverse mortgage unique to other home loans.

What Is a Reverse Mortgage?

It is a home loan that enables the homeowner access to the equity built up in the home. Some borrowers prefer a lump sum when taking out equity. Others choose to receive monthly payments. No payment is required on the reverse mortgage until the homeowner dies, sells the home or vacates the home for more than 12 months – e.g., to go into an aged care facility. At that time, the reverse mortgage must be paid off, either through the sale of the home or reimbursement from loved ones who will be taking possession of the home.

Am I Qualified?

The primary prerequisites for a reverse mortgage are that borrowers be 62 years of age or older and have equity built up in their homes. The U.S. Department of housing and Urban Development (HUD) requires that the borrowers of these mortgages obtain financial counseling from a HUD-approved third party prior to finalizing the note. Upon release of funds, the previous mortgage must be paid off. In most cases, borrowers may use the funds leftover from the equity of the home in whatever way they wish.

What Are the Advantages?

The greatest advantage of is that the borrower has full access to the equity built up in the home. With medical costs at all-time highs and diminished medical for seniors, many take out a reverse mortgages to pay for ongoing medical bills that are not covered by Medicare or Medicaid. Others do not have extended family to leave their estate to, so they take out these mortgages for vacations and other recreational activities and products, so that they may enjoy their twilight years.

In the past, seniors often agreed to a reverse mortgage without understanding the consequences. The results were devastating to many when they realized they had little or nothing left to pass on to their children. HUD now requires all those considering a reverse mortgage to undergo financial counseling, so that seniors understand exactly what they are getting into prior to agreeing to a mortgage.

What are the Disadvantages?

There are many disadvantages of a reverse mortgage. Many seniors have worked hard all of their lives to achieve financial independence and provide a legacy and inheritance for their children. Although having access to the equity in the home will provide greater financial opportunities, the legacy and inheritance will be impeded upon and diminished.

Some homes are not qualified, and other homes must adhere to strict requirements – e.g., a mobile home must sit on a concrete base, among other constraints. Astonishingly, lenders can lawfully charge loan origination fees up to $6,000. Interest continues to accrue on the loan for the remainder of the homeowner’s life, or until the home is sold, and is added to the lien on the property through the reverse mortgage agreement.

If you are considering a reverse mortgage, talk to your family members first. Include your children in the discussion. There may be other options you can pursue without having to tie up your home in a loan that will reduce the equity you’ve worked so hard to build up in your home.

Ki graduated from college in Austin Texas, and never left. He created a website to provide information on the Austin real estate market to future buyers. Anyone can search homes in the Austin MLS on his site. He also writes a blog looking at trends for Austin Texas real estate.

Recipe for a Successful Real Estate Investment

There are a few wants that home buyers perceive as needs when shopping around for a home. As you’re shopping for your next home, you may not have any idea how long you will live there as you may need to sell at some point. With that in mind, consider some practical features potential home buyers look for when buying their next home. That way yours will be positioned for quick sale if or when you decide to put it on the market in the future.

Basic Functions

When you bought your first home, things like central air, a newer roof and a fenced in yard may not have been tie-breakers or even something you thought were important. As you progressed to other homes, however, it probably became more evident that certain offerings in a home are basic to your family’s needs. Functions like air conditioning, a basement, a back yard/fenced yard are now often aspects that buyers shopping for their next home require. Other basics you’ll want included in your next home purchase are a newer roof and central heat and air system. Bypass a home with any system over 15 years old, unless it’s a bargain and you can afford to upgrade. Although ten years will do, five years or less is the ideal, which will help mitigate negotiations in the future sale of your home.

Stellar Storage

Don’t know if you’ve noticed it, but buyers like their storage space. That includes a double- or triple-car garage, walk-in master closets and additional storage areas – the more storage the better. If your next home doesn’t have an abundance of storage space, but fulfills the other needs of your family, build a large shed in the backyard. That may suffice for extra storage needed by the next buyers of your home; although, attics can also be transformed into living space and storage.

Green Living

If you’ll be building your next home, instead of buying an existing one, consider home builders that build green. Eco-friendly trends receive high marks from almost half of the nation’s consumers shopping for their next home. There are green products that can be used to build the structure of the home. Central air and heat units come in conservative models that limit emissions. Solar panels absorb energy and translate it into energy for use in the home. Energy efficiency is the order of the day, and the trend seems to be taking off.

Location, Location, Location

Sorry, someone had to say it. Although living next to a railroad tracks may not bother you, it is not the ideal for many of today’s home buyers. Does the home sit on a four-lane busy city street or back up against businesses? Does the neighborhood consist mostly of retirees, or are there predominantly younger families living there? Are there huge power lines or airports in the immediate area? These are a few of the questions you’ll want to ask when shopping for your next home. Consider safety, neighborhood amenities and close proximity to schools and neighborhood parks. A family often has different needs than seniors or a single person when it comes to services available in the immediate location of a home.

Ask your realtor questions about available services, the demographic of the neighborhood and neighborhood amenities. Find out from your realtor what the most sought-after features are in the real estate market in which you are shopping. Always consider resale when buying your next home, and diligently research the area. Do it effectively, and you’ll set the stage for a recipe for a successful real estate investment.

Ki maintains a website, which works as a clearinghouse of information on Austin Texas real estate. There, future homeowners can search available Austin homes. Ki has worked with Austin buyers for over three years. He also maintains a blog for people that want to keep up with the market and activity for Austin real estate.

Mortgage Rates Drop to All Time Low

Rates have been relatively low over the last month. This week, they are in the news by falling to a new all time historical low.

The 30 year rate fell from 4.75 to 4.69 this week. Two weeks ago the 30 year rate was sitting at 4.72. What’s interesting is that over the last month, when a lot of people have been talking about how rates are about to start rising, we are instead breaking records with mortgage rate lows. We mostly concentrate on the 30 year rate because it is the most widely used mortgage product. But in addition to the 30 year rate hitting an all time low the 3 other major mortgage products all reached new all time lows as well. The 15 year dropped from 4.20 to 4.13. The 5 and 1 year arms dropped from 3.89 to 3.84 (5 year arm) and 3.82 to 3.77 (1 year arm). Below are rates from the weeks from May 27, 2010 to Jun 24, 2010

Jun 24, 2010

30-fixed 4.69 15-fixed 4.13 5 ARM 3.84 1 ARM 3.77

Jun 17, 2010

30-fixed 4.75 15-fixed 4.20 5 ARM 3.89 1 ARM 3.82

Jun 10, 2010

30-fixed 4.72 15-fixed 4.17 5 ARM 3.92 1 ARM 3.91

Jun 03, 2010

30-fixed 4.79 15-fixed 4.20 5 ARM 3.94 1 ARM 3.95

May 13, 2010

30-fixed 4.93 15-fixed 4.30 5 ARM 3.95 1 ARM 4.02

So in addition to looking at mortgage rates it’s also helpful to look at mortgage payments. We took today’s rates and translated them into a mortgage payment for a 200k loan. We also did the same things with rates from May 13th.

Jun 24

30-year $1036.07

15-year $1492.43

5-year ARM $936.47

1-year ARM $928.5

May 13

30-year $1065.1

15-year $1509.62

5-year ARM $949.07

1-year ARM $957.13

So although rates were already pretty low on May 13th today a payment on a 200k loan is about $30 less a month for a drop of a little less than 3 percent.

So what is going to happen over the next few months? Its certainly possible rates could fall a little more and we could break some new records with mortgage rates. I would be surprised if rates fell below 4.25 unless the economy went into a significant tailspin. On the other hand once the economy recovers rates should increase rapidly. And in inflation spirals out of control I could see rates jumping into the double digits.

Ki is a broker working in the Austin Texas real estate market. His site has information on mortgage trends from a mortgage rate widget to a free mortgage calculator. He also provides a search for Austin tx real estate.

Mortgage Rates Fall To .01 Points Above All Time Historic Low

The 30 year rate fell from 4.79 to 4.72 this week. This is the lowest point this year. The previous low was 4.78 reached two weeks ago. What is more interesting is that the all time low is 4.71 so just .01 points lower than current rates.

Looking at other rates the 15 year dropped from 4.20 to 4.17. The 5 and 1 year arms dropped from 3.94 to 3.92 (5 year arm) and 3.95 to 3.91 (1 year arm). These are all time lows since we have good tracking data for these mortgage products.

So would it make sense to look at some of these other mortgage products since they are at all time lows? Personally I would still avoid the 5 and 1 year arm. Since mortgage rates in general are so low it makes sense to lock in for as long as possible. Below are rates from the weeks from May 13, 2010 to Jun 10, 2010.

Jun 10, 2010
30-fixed 4.72 15-fixed 4.17 5 ARM 3.92 1 ARM 3.91

Jun 03, 2010
30-fixed 4.79 15-fixed 4.20 5 ARM 3.94 1 ARM 3.95

May 27, 2010
30-fixed 4.78 15-fixed 4.21 5 ARM 3.97 1 ARM 3.95

May 20, 2010
30-fixed 4.84 15-fixed 4.24 5 ARM 3.91 1 ARM 4.00

May 13, 2010
30-fixed 4.93 15-fixed 4.30 5 ARM 3.95 1 ARM 4.02

Nov 26, 2009
30-fixed 4.78 15-fixed 4.29 5 ARM 4.18 1 ARM 4.35

So rates are one thing but it’s also informative to calculate mortgage payments. We took today’s rates and calculated a mortgage payment on a 200k house. We also did the same thing with rates from May, 13 2010 and rates from November, 26 2009.

Jun 10
30-year $1039.68
15-year $1496.47
5-year ARM $945.62
1-year ARM $944.48

May 13
30-year $1065.1
15-year $1509.62
5-year ARM $949.07
1-year ARM $957.13

Nov 26
30-year $1046.91
15-year $1508.6
5-year ARM $975.7
1-year ARM $995.62

So compared to a month ago a mortgage payment is $25.42 less a month for a drop of 2.45 percent. While that is not a huge drop it is considering rates from last week were already pretty low.

So what is going to happen moving forward? As always it’s hard to tell. If the economy continues to have a rocky recovery I would expect that rates will stay at current levels and possibly break down to new all time lows in the next few months. If the economy starts to rebound we should see mortgage rates move higher perhaps much higher. Over the next 6 months while it’s hard to know which way mortgage rates will move if they move up they could move up substantially while if they drop they do not have much room to fall.

Ki works, and lives, in Austin, Texas. His website has information for future purchases of Austin Tx real estate. It also has mortgage rates widgets and free mortgage calculators. It also has a Austin Tx real estate blog with news and information.

Jobs in the Mortgage Industry

Foreclosures and short sales dominate the real estate market in many U.S. cities; although, the numbers seem to be evening out in certain areas. It takes manpower to process the increased workload for the mortgage industry and many companies are hiring. Not only does the lending industry need people to handle the new workload, there are various levels of employment required to run companies in the mortgage industry.

It is impressive how many different types of businesses are involved in the mortgage trade. Several related venues include banking and finance, mortgage and lending, credit unions, escrow companies and real estate agencies. Property appraisers, home inspectors and title companies are also involved in the mortgage industry. Survey and insurance companies play a part in the mortgage approval process.

Mortgage Process

If you want to logically figure out the different jobs that work in mortgage, it would be helpful to understand the mortgage process. In many circumstances, a mortgage begins when someone wants to buy a home. In a typical home buying situation, a buyer contacts a real estate agent to buy a home. The agent often will have the buyer become pre-approved for a home loan through a mortgage company, bank, credit union or some other lending institution prior to hunting for a home. After the pre-approval letter is received, the agent helps the buyer find a home.

When the buyer finds a home he wants to purchase, usually the next step is for the buyer to choose an escrow company that will secure the down payment until closing. Sometimes the title company is also the escrow company. The buyer is, then, responsible for selecting a title company to conduct closing on the home, a home insurance provider, home inspector and any other inspectors required by the lender. The chosen lender will initiate an appraisal and survey on the home, inspections will transpire and the buyer will eventually close on the home.

Job Requirements and Qualifications

As you can see from the process, there are a variety of groups that conduct work in the mortgage industry. Regardless of the area in which you choose to work, you need to find out what qualifications are necessary to apply. A certain level of education may be mandated or a specific certification. Real estate agents, brokers and professionals are almost always required to obtain a license to operate in a specific state. To obtain a state license, they must take and pass specific type classes and pay for a license and access to a multi-listing service, along with maintaining a certain amount and type of continuing education credits.

If you decide to work in a bank as a loan officer, you may have to start as a bank teller and work your way up. Title company managers may have a degree, some higher education or training in financial or legal matters. Assistants that work for title companies don’t always have to have specific education. It all depends on the requirements set forth by the title company. Home inspectors, surveyors and appraisers often have to have a license from the state in which they work, which may include taking specific trade classes and serving a certain number of years as an apprentice.

Determine the job(s) in which you are interested in the mortgage industry, and make inquiries at specific businesses for which you are interested in working. Ask the businesses what the requirements are for the positions you are interested in. Tailor your education and future experience based on the information you are provided, and you will be well on your way to obtaining a job in the mortgage industry.

Ki lives in the Austin area, where he enjoys biking the hill country. His website compiles information on available Austin Texas real estate. His site has a interactive search of the Austin MLS along with a blog with analysis of Austin real estate with frequentely updated information.