Wednesday, September 10, 2014
Buying vs. Renting--in a word: Wealth!
Click HERE for a great article as to why homeowners are in general more well off than renters. Food for thought! Bo
Friday, May 9, 2014
Renting vs. Owning--a quick commentary
I was reviewing a contract for a gentleman purchasing an in-town townhome in the $300's; his mortgage was going to be about $1700 with Dekalb taxes and it seemed like a killer deal. While he will probably pay some monthly HOA dues, I know that there are older homes in our area (Brookhaven) that can be purchased in this price point that would NOT require HOA dues. What is the point of this commentary? He moved out of an upscale apartment complex because his monthly rent on a 2 Bedroom/2 Bath apartment with less than 1300 square feet was going to be $1625 per month! OUCH!
I am just using this example to give you pause to think about why you're renting (if you are...). If you pay rent, it goes to the landlord. If you pay your own mortgage, your asset is (hopefully!) appreciating and your balance is dropping. If you do your homework, you can find something much larger than 1300 square feet for a lower monthly cost. Yes, you may have more to upkeep but the tax benefits alone may make it worth it! Regardless, I continue to be blown away by renters who pay such high amounts when financing is so inexpensive!
With that being said, move quickly! Rates are still low; inventory is still tight. BUT rates WILL go up and there will always be houses out there--you just have to dig!
I am just using this example to give you pause to think about why you're renting (if you are...). If you pay rent, it goes to the landlord. If you pay your own mortgage, your asset is (hopefully!) appreciating and your balance is dropping. If you do your homework, you can find something much larger than 1300 square feet for a lower monthly cost. Yes, you may have more to upkeep but the tax benefits alone may make it worth it! Regardless, I continue to be blown away by renters who pay such high amounts when financing is so inexpensive!
With that being said, move quickly! Rates are still low; inventory is still tight. BUT rates WILL go up and there will always be houses out there--you just have to dig!
Tuesday, October 1, 2013
One way the shutdown could hurt the mortgage industry
Take a look at this document from the Mortgage Bankers Association; this explains how mortgages could be affected by a prolonged shutdown. One client's thoughts said that we're probably good for the next few weeks but if this lasts longer, month-end closings could be affected! Yikes!
Click HERE for the article.
Click HERE for the article.
Friday, August 30, 2013
Why Good Credit is important for loan rates.
I stole the following from a newsletter I received from a realtor friend, Byron Williamson (click here for Byron). This is great info about WHY it's important to maintain good credit! THANKS, Bo
There's a big difference between having an excellent credit score of 740 and the riskier low score of 620.
Not only will the home buyer with the low score have a higher interest rate and mortgage payments, but the closing costs will be more as they pay points to the lender so they can get a lower interest rate.
Lower score pays more for same rate
Consider a $300,000 conventional loan with 20% down on a $375,000 home. To get a 30-year fixed rate of 4.65 percent (under recent market conditions), a borrower with a 620 credit score would need to buy 3 discount points, at a cost of $9,000, according to Joe Parsons, a senior loan officer at PFS Funding in Dublin, CA. But a borrower with a 740 credit score could get the same rate by paying only 0.25% in points, or $750.
To get around the cost of paying points, most borrowers will accept a higher interest rate and slightly higher monthly payment. In the scenario above, a 740 credit score would allow them to pay no points for a loan at 4.875% interest and a $1,588 monthly mortgage payment.
To get the same loan rate, a borrower with a 620 credit score would have to pay 2.75% points, or $8,250 more in closing costs, Parsons said. As an alternative, they could go with a higher mortgage rate - the highest being 5.25% for a $1,657 monthly payment - but even then would still have to pay 0.7 % in points, or $2,100 in this scenario.
Having a good, bad or mediocre credit score can be the difference between getting approved for a loan or having to wait on the sideline to improve your credit.
"If somebody is just right on the cusp, picking up five to 10 (credit score) points may save them $1,000," Parsons says.
Savings, income won't lower your rate
Other than buying down the rate, there's not much more than improving their credit score that someone with a score of 650 or less can do for a conventional loan. Additional assets will help someone qualify for a loan, but they won't get them a lower interest rate.
"Mortgages are generally income based, they're not asset-based," Herb Ziev, a residential mortgage loan originator in Plano, Texas says. "Low credit scores mean higher default rates on home loans".
"It doesn't really have to do with how much money you have, or how much money you make," Ziev says. "It really has to do with risk."
For someone with a low credit score, compensating factors such as having a high amount of savings or having a high-paying job can help make them approvable for a loan, but they won't help get a better interest rate, says Greg Cook, a lender who specializes in helping first-time buyers.
A home loan approval is based on the totality of a borrower's financial profile, Cook says. This includes consistent, verifiable income and a demonstrated ability to save, along with a credit score. The down payment and credit score have the two biggest effects on a loan rate, with a higher down payment needed if a borrower has a low credit score, he says.
Improving your score
The best way to get around a low credit score - and thus a high home loan rate - is to improve the credit score, which can take time, loan experts say.
For someone with a lot of credit cards and credit card debt, a credit score can increase by 70 to 80 points by paying off the cards, he says.
"Sometimes it's as simple as going back and negotiating if you have an outstanding collection," Cook says.
Six to 12 months of paying down credit balances and not having late payments will significantly affect a credit score, says Cyndee Kendall, regional sales manager in Northern California in the mortgage banking division at bank of the West.
Having a high percentage of credit balances to available credit can be fixed in a month by paying down credit balances, Cook says. The ratio should be 30 percent or less, he says.
A borrower can have three different credit scores from the three credit reporting agencies, but lenders usually use the middle score.
Borrowers with low credit scores have the most to gain by improving their scores, Kendall says.
Easier approval on FHA, VA loans
First-time buyers with low credit scores can get FHA and VA loans that aren't dependent on credit scores, though credit history is taken into account, Kendall says. For an FHA loan, a credit score in the low 600s is as low as they can go to get a loan, Ziev says.
"They can get a better interest rate," Cook says of borrowers of the federal government's backing of FHA loans, "but they're going to have to improve their credit score."
What shouldn't be done to improve a credit score is to get rid of credit cards entirely, experts say, though not using them for awhile is a good idea if it can help the user pay off the balance quicker. It's almost a Catch-22, but you need credit to get more credit.
"If you've got no credit history, then people aren't going to give you credit," Ziev says.
(note: Mortgage rates may change rapidly. All rates cited above are based on market conditions at the time of the conversation)
There's a big difference between having an excellent credit score of 740 and the riskier low score of 620.
Not only will the home buyer with the low score have a higher interest rate and mortgage payments, but the closing costs will be more as they pay points to the lender so they can get a lower interest rate.
Lower score pays more for same rate
Consider a $300,000 conventional loan with 20% down on a $375,000 home. To get a 30-year fixed rate of 4.65 percent (under recent market conditions), a borrower with a 620 credit score would need to buy 3 discount points, at a cost of $9,000, according to Joe Parsons, a senior loan officer at PFS Funding in Dublin, CA. But a borrower with a 740 credit score could get the same rate by paying only 0.25% in points, or $750.
To get around the cost of paying points, most borrowers will accept a higher interest rate and slightly higher monthly payment. In the scenario above, a 740 credit score would allow them to pay no points for a loan at 4.875% interest and a $1,588 monthly mortgage payment.
To get the same loan rate, a borrower with a 620 credit score would have to pay 2.75% points, or $8,250 more in closing costs, Parsons said. As an alternative, they could go with a higher mortgage rate - the highest being 5.25% for a $1,657 monthly payment - but even then would still have to pay 0.7 % in points, or $2,100 in this scenario.
Having a good, bad or mediocre credit score can be the difference between getting approved for a loan or having to wait on the sideline to improve your credit.
"If somebody is just right on the cusp, picking up five to 10 (credit score) points may save them $1,000," Parsons says.
Savings, income won't lower your rate
Other than buying down the rate, there's not much more than improving their credit score that someone with a score of 650 or less can do for a conventional loan. Additional assets will help someone qualify for a loan, but they won't get them a lower interest rate.
"Mortgages are generally income based, they're not asset-based," Herb Ziev, a residential mortgage loan originator in Plano, Texas says. "Low credit scores mean higher default rates on home loans".
"It doesn't really have to do with how much money you have, or how much money you make," Ziev says. "It really has to do with risk."
For someone with a low credit score, compensating factors such as having a high amount of savings or having a high-paying job can help make them approvable for a loan, but they won't help get a better interest rate, says Greg Cook, a lender who specializes in helping first-time buyers.
A home loan approval is based on the totality of a borrower's financial profile, Cook says. This includes consistent, verifiable income and a demonstrated ability to save, along with a credit score. The down payment and credit score have the two biggest effects on a loan rate, with a higher down payment needed if a borrower has a low credit score, he says.
Improving your score
The best way to get around a low credit score - and thus a high home loan rate - is to improve the credit score, which can take time, loan experts say.
For someone with a lot of credit cards and credit card debt, a credit score can increase by 70 to 80 points by paying off the cards, he says.
"Sometimes it's as simple as going back and negotiating if you have an outstanding collection," Cook says.
Six to 12 months of paying down credit balances and not having late payments will significantly affect a credit score, says Cyndee Kendall, regional sales manager in Northern California in the mortgage banking division at bank of the West.
Having a high percentage of credit balances to available credit can be fixed in a month by paying down credit balances, Cook says. The ratio should be 30 percent or less, he says.
A borrower can have three different credit scores from the three credit reporting agencies, but lenders usually use the middle score.
Borrowers with low credit scores have the most to gain by improving their scores, Kendall says.
Easier approval on FHA, VA loans
First-time buyers with low credit scores can get FHA and VA loans that aren't dependent on credit scores, though credit history is taken into account, Kendall says. For an FHA loan, a credit score in the low 600s is as low as they can go to get a loan, Ziev says.
"They can get a better interest rate," Cook says of borrowers of the federal government's backing of FHA loans, "but they're going to have to improve their credit score."
What shouldn't be done to improve a credit score is to get rid of credit cards entirely, experts say, though not using them for awhile is a good idea if it can help the user pay off the balance quicker. It's almost a Catch-22, but you need credit to get more credit.
"If you've got no credit history, then people aren't going to give you credit," Ziev says.
(note: Mortgage rates may change rapidly. All rates cited above are based on market conditions at the time of the conversation)
Friday, February 8, 2013
Golf and taxes
I am not a golfer. In fact, my standard joke is that I am a failure as a lawyer because I don't play golf. I have played about 4 times; with about a 90 for 9 holes for each 'outing'. Again, I obviously don't play golf. I am also not an Econ major but I love to dabble, as evidenced by this blog. I have to share an amazing article with you about what 'real' taxes cost. Please click HERE to read an article about Phil Mickelson's complaints about taxes. Pretty interesting read and shows how horrible our taxes really are. (then again, if you want to 'share the love' and steal from the 'evil rich' then this article will make you giddy--not me!).
Cheers, Bo
Cheers, Bo
Friday, June 29, 2012
More unintended consequences with Obamacare
I was intrigued to read this article about Obamacare affecting the Restaurant industry. Kind of makes you think... this is only the 1st article I've seen of its nature; I expect we'll see more of the same (or we'll experience more of the same). Ouch...
Saturday, March 3, 2012
Obama: Fuel Efficient Cars to the Rescue! Bo: HA!
I read this article today, noting that Obama is touting fuel efficient cars are 'the answer' to rising gas prices. Actually, lower gas prices would be the answer I am looking for. Let's put this into perspective here...
I am the 'greenie' in the family. I conserve water when I am able, recycle everything I can, turn off lights when I leave the room and keep the house cooler in winter and warmer (somewhat!) in summer. Likewise, if I had it my way, I'd have a lovely $25K solar array on my roof so the power company would owe ME credits on my summer cooling bills but the problem there is that I don't have $25K to make that happen!
I realize that we need to conserve energy and natural resources. I also realize that energy alternatives will be our future. HOWEVER (and this is a biggie) this is TODAY and NOW. Right now gas prices are too high; families are going to make proper choices with this new reality--do I go shoppping or do I fill up my tank so I can get to/from work? That's the TRUE reality today. Using ME as a case study, tell me how the new fuel efficiency standards are going to help ME? Oh, you say I need to buy a new car for that to happen? Sorry, that's not in the budget! SO now what? I am stuck paying for expensive gas! I cannot run out and buy that Gucci edition Fiat 500 (or better yet, an Abarth) or even a cool little Kia Soul like the other dancing hamsters.
No, while we are blessed to have 3 vehicles, the reality is something different than what Obama seems to realize. My commute? It's 57 miles a day. I can't change that (and remember that most of that 57 mile run will be spent sitting still or rolling at 5-10 MPH. As a closing attorney, I often close loans out of my office. Roundtrip to my Alpharetta client is around 38 miles (plus that lovely $1.00 in tolls on GA 400) but at least that's at speed-limit (or higher) speeds most days. What about those cars? 2 of the 3 take PREMIUM fuel and the other is a minivan that averages (on a good day) 19MPG. So what am I to do? NOTHING! I am expected to shell out almost $4 for premium and over $3.50 for regular. So again, how are those fuel efficiency standards helping ME? Cash for clunkers? No thanks. While the 1999 SUV has over 165K miles it's still running great; the 2000 sedan has over 151K and is still going strong. That 2009 minivan is the 'child' of our automotive family and is nearing 30K but no matter what we are unfortunately tied to the fuel pump.
So again I ask our current administration--what is that fuel efficiency doing for me? What does it do for 'Bubba' and his pickup? That single Mom with a car as old as mine? A working family who can afford only one vehicle? It does NOTHING for us all!
Why is gas so expensive? OIL prices are going up! Why are oil prices going up? Besides commodities brokers and Wall Street speculators (shame on you!) at last check the middle east is a mess and demand is through the roof in China and all over the world. How can you decrease prices? By lowering demand (NOT going to happen) OR to increase supply! Gee Bo, how can we increase supply? Why ask Obama why he didn't approve the Keystone XL pipeline (POLITICS of course!)? That would have increased supplies. What about drilling in ANWAR in Alaska? Again blocked by politics! Even though drilling today wouldn't result in oil production for at least a decade, it would put the world on notice that there are other sources coming on-line and as a result prices would DROP. But again, let's make the environmentalists happy at the expense of our National Security (yes, our SECURITY).
Bottom line, YES we need OPTIONS. But NO, right now gas prices are too high--a better Prius or a Ford Fusion Hybrid (41 MPG!) would be nice but that's not the answer. Not for right now, this second. More supply = lower prices! Give us more options for production!
I am the 'greenie' in the family. I conserve water when I am able, recycle everything I can, turn off lights when I leave the room and keep the house cooler in winter and warmer (somewhat!) in summer. Likewise, if I had it my way, I'd have a lovely $25K solar array on my roof so the power company would owe ME credits on my summer cooling bills but the problem there is that I don't have $25K to make that happen!
I realize that we need to conserve energy and natural resources. I also realize that energy alternatives will be our future. HOWEVER (and this is a biggie) this is TODAY and NOW. Right now gas prices are too high; families are going to make proper choices with this new reality--do I go shoppping or do I fill up my tank so I can get to/from work? That's the TRUE reality today. Using ME as a case study, tell me how the new fuel efficiency standards are going to help ME? Oh, you say I need to buy a new car for that to happen? Sorry, that's not in the budget! SO now what? I am stuck paying for expensive gas! I cannot run out and buy that Gucci edition Fiat 500 (or better yet, an Abarth) or even a cool little Kia Soul like the other dancing hamsters.
No, while we are blessed to have 3 vehicles, the reality is something different than what Obama seems to realize. My commute? It's 57 miles a day. I can't change that (and remember that most of that 57 mile run will be spent sitting still or rolling at 5-10 MPH. As a closing attorney, I often close loans out of my office. Roundtrip to my Alpharetta client is around 38 miles (plus that lovely $1.00 in tolls on GA 400) but at least that's at speed-limit (or higher) speeds most days. What about those cars? 2 of the 3 take PREMIUM fuel and the other is a minivan that averages (on a good day) 19MPG. So what am I to do? NOTHING! I am expected to shell out almost $4 for premium and over $3.50 for regular. So again, how are those fuel efficiency standards helping ME? Cash for clunkers? No thanks. While the 1999 SUV has over 165K miles it's still running great; the 2000 sedan has over 151K and is still going strong. That 2009 minivan is the 'child' of our automotive family and is nearing 30K but no matter what we are unfortunately tied to the fuel pump.
So again I ask our current administration--what is that fuel efficiency doing for me? What does it do for 'Bubba' and his pickup? That single Mom with a car as old as mine? A working family who can afford only one vehicle? It does NOTHING for us all!
Why is gas so expensive? OIL prices are going up! Why are oil prices going up? Besides commodities brokers and Wall Street speculators (shame on you!) at last check the middle east is a mess and demand is through the roof in China and all over the world. How can you decrease prices? By lowering demand (NOT going to happen) OR to increase supply! Gee Bo, how can we increase supply? Why ask Obama why he didn't approve the Keystone XL pipeline (POLITICS of course!)? That would have increased supplies. What about drilling in ANWAR in Alaska? Again blocked by politics! Even though drilling today wouldn't result in oil production for at least a decade, it would put the world on notice that there are other sources coming on-line and as a result prices would DROP. But again, let's make the environmentalists happy at the expense of our National Security (yes, our SECURITY).
Bottom line, YES we need OPTIONS. But NO, right now gas prices are too high--a better Prius or a Ford Fusion Hybrid (41 MPG!) would be nice but that's not the answer. Not for right now, this second. More supply = lower prices! Give us more options for production!
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