Thursday, March 31, 2011

Mortgages: Is What You Believe Actually True?

Mortgages: Is What You Believe Actually True?

What if everything you believed to be true about mortgages, wasn’t actually true after all? Would you rather know now or later? In my experience, I have come to understand that many, if not most, clients come ‘pre-conditioned’ by what has long been termed “conventional wisdom”. For generations, people have been told that when buying a home, they should:
  • Make a big down payment
  • Obtain a fixed-rate-mortgage; 15 years if you can afford it
  • Make additional principal payments whenever possible
  • Pay off your loan as quickly as you can
People see a mortgage as a “necessary evil”- one that they should be afraid of and try to eliminate as soon as they can. And while the concept of being mortgage-free may seem attractive on the surface (and may have been an acceptable strategy in the past), we no longer live in the same world that our parents and grandparents did. Unlike previous generations:
  • We will not have the same job for life. Most people will have five to six different careers. That simple fact will preclude most people from a company pension as part of a retirement strategy.
  • We cannot realistically count on Social Security to exist in its current form. Either your benefits will have to be reduced or pushed off to later years to enable the fund to remain solvent.
  • We won’t have “Mortgage Burning Parties”. People live in their homes on average just seven years now and, because of refinancing, their mortgages will only last 5 years.
Ultimately, we have to appreciate that we live in a very different world and that the tactics and solutions of the past no longer fit the challenges of the present or future. I believe we have an obligation to custom design our clients’ mortgage in a way to enhance cash flow, minimize income taxes and help implement alternative strategies to protect their assets and create wealth.
I know clients can make better choices if they are armed with the understanding that every dollar applied to the principal of their mortgage (through down payments, regular mortgage payments, and even pre-payment strategies) is NOT the strongest fiscal strategy. When you pay down your mortgage, the BANK is in a less risky position. Whose risk is increasing? YOURS!
I have seen clients apply money towards their principal balance of their 5% tax-deductible mortgage, while carrying 18% non-deductible credit cards. Why not get rid of the revolving debt? I know you need discipline to actually save the money you would normally apply to lower your mortgage balance. However, I promise you that good mortgage professionals can show you the power of separating the equity from the home; the increased liquidity, the phenomenon of compounding interest and why the actual rate of return on home equity is 0%.
I imagine many will dispute my contentions here, but they are mathematically proven. If you have discipline, there IS a better way to manage your finances. Explore them and decide for yourself.

Monday, March 14, 2011

Are we seeing signs of recovery?

Another UCLA Anderson Forecast came out, reporting that the economy is growing and employment should soon pick up steam. But this somewhat pessimistic group of West Coast economists feel housing will continue to lag behind other sectors. Nonetheless, they see a "modest" recovery in housing starts, up 12% this year, then hitting 1 million in 2012 and approaching 1.5 million in 2013, thanks to pent-up demand.

The Economy is Growing

Monday, March 7, 2011

FHA Update

Remember FHA has announced the increase of their Monthly Mortgage Insurance.  It will go into effect on April 18th.  If you're considering an FHA loan in the next 45 days or so you need to act now.  On a $200,000 loan, your payments will increase by approximately $41 a month.  Be sure to get your case number ordered before April 18th.

Call me TODAY if you need to be Pre-Approved.


Tuesday, February 15, 2011

Utah Mortgage Consumers are paying the price

Unfortunately Mortgage consumers are again, having to pay the price of the recent economic crisis.  As part of ongoing efforts to strengthen the FHA capital reserves, and to help push private money back into mortgages, the FHA came out with a new premium structure for FHA-insured mortgage loans increasing its annual mortgage insurance premium (MIP) by a quarter of a percentage point (.25) on all 30- and 15-year loans starting in mid-April. (The upfront MIP will remain unchanged at 1.0 percent.) The increase adds $30 to the average borrower's payment and in total is estimated to add $3 billion annually to the FHA's Mutual Mortgage Insurance Fund. It is the second increase since October.

Also HUD has just revised their "Net Tangible Benefit" to consumers when trying to do a streamline refinance.  They will now require a total of a 5% reduction of principle, interest, and the annual mortgage insurance premium or refinancing from an Arm to a fixed rate mortgage.  Keep in mind the new streamline refinance will require the annual premium listed above.

Tuesday, February 1, 2011

Will home prices fall or rise in 2011?

Here is a great article that talks about the overall picture on what drives a housing market.

"According to the local MLS the median sales price of a home in Salt Lake County peaked in the third quarter of 2007 at $256,000.  Prices then drifted down over the next three years to $230,000 in second quarter 2010. However, the rate of price decline has narrowed substantially in the past two quarters. 
Prices will likely be unchanged through the first two quarters of 2011 with perhaps slight gains in the third and fourth quarters.  Continued price pressure from foreclosures and short sales will prevent upward movement in prices in 2011.  In the end, any meaningful rise in home prices depends on a pick-up in housing demand, which will require an improvement in the job market, higher levels of household growth and fewer foreclosures.  These conditions will gradually be satisfied over the next few years but in the meantime housing prices are likely to remain stable, with more downside risk than upside potential. (2.1.11) "

Monday, January 31, 2011

Not Everyone Should by a house.

We'd all like to live the american dream by purchasing a home.  The simple fact is, not everyone should be buying a home.
Here are some factors to consider when making a move. Reasons to rent: 
• Staying five years or less.
• Low upkeep costs.
• A way to try a neighborhood before buying.
• Security deposit and upfront rental fees are much lower than a mortgage down payment and closing costs.
• No risk of foreclosure.
• No property taxes. And no home insurance, although you need personal property insurance.
Reasons to buy: 
• Mortgage rates are still low, and in many cities home prices are a bargain. (It now is more affordable to buy than rent a two-bedroom home in 72% of the nation's 50 largest cities, says, a real estate search engine.)
• Tax benefit in the mortgage interest deduction.
• Equity will start building when the market rebounds.
• Intangible benefits, such as a place to raise a family. The ability to paint and make other changes unless bound by home association rules.

Monday, January 24, 2011

Is your Loan Officer Legally giving you advice?

"According to the Utah Division of Real Estate, 2010 began with 9,027 mortgage licensees. Only 5,200 of those licensees transitioned onto the database by the May 31, 2010, deadline. Of the 5,200 licensees in the system, only 2,000 have requested renewal and met requirements."

I'm a Licensed Associate Lending Manager here in the state of Utah. I take great pride in running an honest business, and educating each and every client on how to improve their overall quality of life through home ownership. This article simply shows you we're going through a cleansing process in our industry which is well overdue.

Please reach out to me if you have any lending questions, and or real estate needs.