Archive for February, 2009
WHAT IS YOUR REFI BREAK EVEN POINT?
February 28th, 2009 categories: Market Trends
Your break-even point is the amount of time it will take to recapture the cost of your refinance with lower monthly payments. There is no general rule for a maximum pay back period–three years or less is probably reasonable. This is assuming you will keep you mortgage that long.
If you can get a genuine zero cost refinance, of course your break-even point is immediate. A genuine no cost refinance has no up front money and your loan and your interest rate stay the same.
To figure your break-even point exactly, divide the total cost of your refi by your monthly savings on your mortgage payment. This will give you the number of months required to recoup the cost of the refi. If your current loan has an adjustable rate or if your new loan will have a longer or shorter term, the break even point is more complicated. Other things to consider are will your new loan require mortgage insurance? Are you willing to pay points to lower the interest rate? Do you want some equity for credit cards or a car loan?
One important last word–Lenders and mortgage brokers are all saying that borrowers should absolutely, positively get a fixed-rate mortgage. If your present loan is an ARM, it might be worth some money to change it to a fixed-rate.
Related Articles: Must Haves For A Mortgage Application, 2-09; Home Affordability And Mortgage Rates, 2-09
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MY LENDER SAID NO!
February 28th, 2009 categories: Buying
According to the Mortgage Bankers Association about half of all mortgage applications are being denied now. Don’t curl up in a corner and suck your thumb–there are some things you can do that might result in getting the loan.
- First step is find out WHY. According to federal law, if you make a formal application, you are entitled to a formal rejection–an adverse action norice. This notice should give you the reasons why you were turned down. If it isn’t the value of the home, your debt load or your work history might be the reason. If it is your credit, the adverse action notice should name the credit reporting agency that provided the data for the lender’s decision. This is according to Federal Trade Commission rules.
- Fix it. You may be able to borrow the money at a higher rate or by paying points. If you need to reach your desired monthly payment, you may need a certain rate, especially if you are refinancing. If you are not far from the qualifying mark, try reapplying–you may be approved.
- Try other lenders–one lender may approve what another denied. Try a small bank–they may be more flexible. A credit union is another good option.
- Try, try again. The Mortgage Bankers Association is predicting that 30-year fixed loans will be near the 5 percent range in 2009. If that is the case, you have time to try again.
Please feel free to call me at 312-981-2360 if you have questions.
Related Articles: Must Haves for a Mortgage Application, 2-09; Home Affordability and Mortgage Rates, 2-09
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TIME IS NOT OF THE ESSENCE!
February 28th, 2009 categories: Buying
A foreclosed home can offer a great deal of value for the money–and the foreclosed home can be a risky venture as well. Here is a summary of a few of the more common kinds of foreclosures.
- Short sales–when a homeowner knows that the value of their home has fallen below the amount owed on their mortgage. Many lenders will agree to accept the proceeds of the sale of the home and forgive the balance of the mortgage. Critical to this process is finding an agent who knows how to handle the sale–if their are two mortgages both lenders must be dealt with.
- In-foreclosure properties–similar to short sales except court approval is required. The buyer needs to be sure of what has to happen and exactly whose signatures are needed.
- REOs–This is probably the easiest of the foreclosed properties to deal with. The lender has taken the property back and has to maintain and repair the property. The lender will frequently sell the property for less than the remaining mortgage amount just to get it off their books. Some real estate experts feel that savings range from 5 to 25 per cent.
- Auction–the property is publicly auctioned off to the highest bidder. Research is essential to buying at auction. A title search is a splendid idea. Your competition will be professionals who represent the lender and other investors. Research the property thoroughly before the auction. One requirement may be a certified check for a percentage of the purchase price and the balance may be due the same day or in a few weeks.
One would think that the banks would be eager to get rid of the properties they have in foreclosure–this is not the case. If you have a time deadline, foreclosed properties are not a good idea. The auction is the exception to the rule by the nature of the process. For an investor or someone who does not have to sell their present home, there are some very good bargains out there. Time is not of the essence.
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DO REALTORS HAVE FUN?
February 23rd, 2009 categories: Buying
Indeed we do! In December my neighbor Joyce asked me if I would like to do a pretend search for a condo. The idea is that Joyce, her daughter Grace, and I would go out and look at a few condos and then they would decide which one suited their needs best and use the results for an article in the Homes section of the Sunday Chicago Tribune. Oh–did I mention that my neighbor is an editor with the Chicago Tribune? On a bitter, bitter January Saturday, Grace, Joyce and Ruth went condo conjecturing. Grace is an absolutely delightful neighbor (and so is Joyce!)–she took copious notes in a notebook just like her mother’s notebook. To read the article click here.
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MUST HAVES FOR A MORTGAGE APPLICATION
February 20th, 2009 categories: Buying, Real Estate Finance
Here are a number of things lenders look for when a potential home buyer applies for a mortgage:
- Credit score. Credit scores are figured from data supplied by Experian, TransUnion, or Equifax. A few months before you apply for a mortgage, get a report from each of the agencies–you are entitled to one free report from each of them each year. By getting your report early, you will have the time to correct any errors.
- Debt-to-income ratio. This figure is the applicant’s monthly payment obligations divided by his or her gross monthly income. Lenders usually want the mortgage payment to be 28 per cent or less of your monthly income. The lender will undoubtedly want all kinds of account numbers, the current balances and the minimum monthly payments for all credit accounts–credit cards, car loans, child support, etc, etc.
- Income verification. W2 forms for the last two years will be needed and all other income information such as rental income, pension, interest or dividends, Social Security, self-employment income. You will probably have to furnish pay check stubs, federal income tax returns and bank statements.
- Proof of employment. You’ll probably be asked for the names, addresses and telephone numbers for your employers for two years. Self-employed applicants should expect to produce tax returns and business records for three years.
- Earnest money. In Chicago the customary percentage is 5 per cent. We are seeing some earnest money deposits of thousands of dollars instead of a percentage. The earnest money is held in an escrow account that bears minimal interest–usually barely enough for the buyer’s lunch on moving day. The earnest money is applied to the down payment when the sale goes through.
- Down payment. This is the difference between the purchase price and the mortgage amount. The down payment is the buyer’s equity in the property. A large down payment makes the mortgage smaller and can mean a lower interest rate and smaller closing costs.
- Closing costs. This is a miscellaneous grab bag of costs–the amount can vary widely. Your loan origination fee, credit report fee, appraisal fee, pro ration of taxes (and condo assessments if the new home is a condo), title insurance and title search fees, legal fees, recording fees–your checkbook will feel like it is bleeding in a bowl of piranhas! Your attorney can help you with the amount a few days before closing
If you have any other questions about applying for a mortgage or if you want help looking for that new home, please call me at 312-981-2360
Related Articles: Home Affordability And Mortgage Rates. 2-09; Buy Now First Timers, 1-09; First Time Buyers Down Payments, 1-09
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OH! MY ACHING BACK!
February 19th, 2009 categories: Market Trends
If cooking is giving you a backache, consider looking at the ergonomics of your kitchen. We don’t usually think about ergonomics in the kitchen-ordinarily we think of ergonomics in the office or factory but the same principles can be used at home.
- Think how much easier it would be to use two ovens side by side rather than the standard one over the other double oven. With the over and under oven, usually neither one is the right height. Of course you need more space for side by side ovens.
- Your refrigerator can also be a source of back strain. It is probably better to buy a refrigerator with the freezer storage on the bottom and the refrigerator storage on the top–that way the most used items are at the top and more accessible. Be careful of very large refrigerators that have extremely heavy doors. Small refrigerator drawers in other kitchen areas can also help with storage.
- The dishwasher can also be a back strainer–think about dishwasher drawers on either side of the sink. That would really eliminate the bending over that you have to do with a standard dishwasher.
Do give your aching back some consideration when you plan your new kitchen!
Related Articles: To Remodel Or Not To Remodel, And When?, 12-08; Safety First At Home, 1-09; The Skinny On New Appliances, 2-09.
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STAIN STAIN GO AWAY
February 18th, 2009 categories: Market Trends
All of us from time to time accidentally do something that causes a messy stain. More than likely none of my suggestions will restore that ugly piece of cloth to pristine beauty. Time is of the essence in treating stains. Remember, heat can set stains and make them much more difficult to remove.
- A good beginning step is soaking the item in a gallon of warm water with a tablespoon of liquid dish detergent and a quarter teaspoon of ammonia for a few hours. After rinsing in fresh water launder normally with a bit of bleach. Be careful about detergents containing bleach when you use ammonia–bleach and ammonia are a deadly combination.
- Cool water and carbonated water work well on blood, cement, cosmetics, crayon, food stains, ink, milk.
- White vinegar solution–half cup of white vinegar combined with a half cup of water. Use on alcohol, blood, coffee, tea, food stains.
- Ammonia solution–2 tablespoons ammonia in one cup of water. Use on all of the above.
- Wine and other alcoholic beverages respond well to a heavy dose of salt and a cold water scrubbing. When the stain goes away, rinse and launder normally.
Be sure that the stained fabric will tolerate water–of course if the item is ruined unless the stain is removed you don’t have a lot to lose.
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OUT WITH THE OLD – IN WITH THE NEW – SLOWLY!
February 16th, 2009 categories: Lifestyle
WOW! How exciting–you are moving into your new home. Naturally, perfection is your goal. Get rid of ALL the old stuff starting with the carpet–maybe new wood floors? And all of that trashy old furniture–off with its head! All new–that’s the look you want starting with the paint on the walls and the floor covering–ALL NEW!
Before you overload your credit cards perhaps a bit of thought should go into the process. You have just gone into debt for many, many thousands of dollars. You might ask yourself what’s a few thousand more to make my new home look perfect? It is very easy to let your self get into the “need” mind set rather than the “want” mind set.
Before you assume more debt take a deep breath and make a list of everything you could possibly want to have in your new home. Then divide the list into two sections, NEED and WANT. Next prioritize the two lists–do you need a new refrigerator? The refrigerator would probably take priority over a new couch. So you would place the fridge on the NEED list and the couch on the WANT list.
There are a lot of ways to make your new home fresh and bright–a fresh coat of paint is a good place to begin. Many people are slip covering old furniture until they can afford new–way cheaper than replacing the pieces. Just living in your new home will give you ideas for your lists–finding out how YOU use the space. Take your time and plan carefully so that your new home is a true reflection of you. Remember your mama saying “Haste makes Waste”? When you do buy–buy the best you can afford. Quality lasts.
If you would like to talk to me about Chicago real estate, please call me at 312-981-2360.
Related Articles: The Skinny On New Appliances, 2-09; Paint The Blahs Away!, 2-09
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THE SKINNY ON NEW APPLIANCES
February 13th, 2009 categories: Lifestyle
Replacing appliances is an expensive project when you look at the purchase price. If you break the cost into a per day figure, it’s a lot more encouraging. Of course we are talking about the per day cost of owning–not the per day cost of operating. When you replace your appliances, be sure to look for the Energy Star label.
- For example let’s talk about a refrigerator. Given a purchase price of $1,000 and ownership time of 15 years your refrigerator will cost you 18 cents a day. Just divide 5,475 days into $1,000. Not bad for ice cubes and cold milk for 15 years. Somewhere in or on the fridge there is a yellow label that tells you what the energy cost of the appliance will be for 12 months. Of course if that winsome little girl shown in the picture keeps the door open too long, it will cost much more.
- Stoves are a bargain too–they usually last from 15 to 25 years and they consume energy in a range of 12 cents to 35 cents an hour. Convection ovens have astounding energy ratings.
- Even if dish washing is your therapy, a dishwasher will last between 8 and 12 years and costs about 60 cents a load–and can save you bushels of time.
- The newer front-loading washers are much more energy conserving that the older ones. A washer lasts from 10 to 12 years and a dryer will last from 10 to 15 years. They both cost about 50 cents a load.
The most important thing you can do is to look for the Energy Star Label.
Related articles: Save Energy Through TV Watching, 2-09; Compact Fluorescent Light Bulbs 101, 1-09; Energy Drains–Let’s Get Rid of Them, 1-09
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A HUNTING WE WILL GO–STRESS FREE!
February 12th, 2009 categories: Buying
A few simple actions can make looking for a new home relatively stress free. Probably the first step is to choose a Realtor–that person should be someone you trust, someone who will be totally honest with you. You should talk to your Realtor frequently and openly. The following suggestions will help smoothe the home hunting process.
- Get pre-approved by a lender. Have a copy sent to your Realtor. This will give you the dollar amount for your new home. You may want to spend less if you feel the monthly cost of housing will be uncomfortable–too few dinners out, no Starbucks in the morning–figure out what is essential for your happiness and feelings of well being and adjust your housing costs accordingly.
- Make a list of must-haves and would like to haves–for instance is having a condo with a washer and dryer an essential for you? Make the list as specific as possible and the list should include the areas that you find most desirable, second most desirable and would not live there if you gave it to me. Give this list to your Realtor also make copies that can go with you to every listing.
- Find out how many properties you can see without going brain dead–four is a good place to start. Some people are in overload after two or three and others can see ten or twelve in a day.
- ORGANIZE–typically you will have a listing sheet for each property–staple this sheet to your wants and needs list that you have checked to see how the property matches up. There will also be neighborhood information, maps, public transportation information–on and on and on. Typically a large folder or envelope can help you keep like pieces of paper with like pieces of paper–some people like to use a three-ring binder with divisions for different kinds of information.
- Your Realtor can e-mail listing to you so that you can weed out the impossible from the possible before you even view a property. Most listings today have interior pictures that are extremely helpful. Drive around the neighborhoods you find most desireable at all times of the day and week–you might be surprised!
- Buying a new home is a reflective process–your wants and needs liist may change–just let your Realtor know if it does.
Related articles: Home Affordability And Mortgage Rates, 2-09; Buyers–Make It A Smooth Move, 2-09
Would you like the help of a Realtor with twenty years experience–if so, just call me at 312-981-2360.
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