Geoffrey's Blog

I rode my bicycle with Lance Armstrong

Davis Family Lending, LLC — Tue, 27 Oct 2009 15:35:48 -0500

I rode my bicycle with Lance Armstrong this weekend, and many of you helped me do that. This past weekend was the LiveStrong Challenge in Austin, TX that many of you graciously donated towards the team we put together to ride the event. Seven of us from the Frisco Cycling Club (FCC) raised $3310 and rode for our teammate's brother as he lost his fight to cancer 2 years ago. Our teammate is Jeff Ellis and he, I and a few others were the driver behind getting the FCC to where it is today- a community focused cycling club that has a larger goal than just riding a bike. Jeff's brother Tom was diagnosed with cancer but did not let that slow him down and he and Jeff road many miles and events together. I was proud to be part of this group and can't wait for next year, maybe you will join the club and ride with us?

Upgrades

Davis Family Lending, LLC — Tue, 27 Oct 2009 15:33:25 -0500

Over the past few weeks, we've been talking about what kind of improvements can help add real value to your home in today's market. I'm not sure about you, but with four children ages five and under, Julie and I don't have a ton of time to figure out what will appeal to the masses.

So how do you figure out what's hot and not? Since we have still have an array of model homes in the area it's good to go check out the price range in which you would sell your house as well as one level up. For instance, if you think you'd want to sell your home for $250k, it would be a good idea to see what builders are offering in that range and the $300k range. This will help you understand what's standard at that price range and what you have in your home that would be noted as an upgrade. By looking at the next price bracket, it will also give you some ideas around what you can do to help make your home feel like a more expensive home helping to give you an edge over a new home.

Some great places to find the location of model homes in your area is move.com which includes a new home search engine that will help link you to builders' sites. Another way to see what homes in your range offer is by checking out what's currently listed on Realtor.com. Finally, home improvement and design sites, like those listed below, will help you give you ideas around current trends and some things you can do to improve your home.

HGTV, Southern Living, Fine Living and Home and Design

Best of luck in all your home improvement efforts-let me know how it goes.

Race Across the Sky

Davis Family Lending, LLC — Thu, 15 Oct 2009 08:25:51 -0500

That is the title of a documentary about this year's Leadville 100 bicycle race. You may remember reading the news that this year Lance Armstrong won the event. It will be shown on October 22nd at 7pm Cinemark Plano West location. Shown just a few days before the Austin LiveStrong ride and yes, you can still join the FCC team or donate to us.

The date this move is shown is a special milestone for Lance. His cancer was diagnosed on October 2, 1996. "October 2, 1996. The day it all changed. The day I started never to take anything for granted. The day I learned to take charge of my life. It was the day I was diagnosed with cancer." -Lance Armstrong

Geoffrey Davis
FCC President

FriscoCycling.com

p.s. 3 Days on the Track- come watch or race, October 16th, 17th and 18th

p.p.s. There are 4600+ names on this survey via Bike Texas, you there?

National Night Out

Davis Family Lending, LLC — Mon, 12 Oct 2009 17:36:25 -0500

Tuesday, October 13th is a big day here in Frisco. It's the day that Frisco residents participate in National Night Out. Local residents are encouraged to get out of their houses, and into their neighborhoods, to connect and have some fun together. While we'd normally have our Tankard Fellowship on Tuesday, we're going to move this month's fellowship to Monday, October 12 at 8:30p. This way we can still connect with each other as well as participate in our local National Night Out activities.

Geoffrey Davis

Davis Family Lending, LLC

214-975-1266- fax

214-529-9622- cell

www.DavisFamilyLending.com

God grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.

Keith Cunningham is Live in Frisco, TX.

Davis Family Lending, LLC — Mon, 12 Oct 2009 17:34:34 -0500

Keith Cunningham is Live in Frisco, TX. November 12, 2009, 8AM - Noon. Keith is an internationally-known speaker who has appeared with industry giants including Harv Eker, Brian Tracy, Tony Robbins and Robert Kiyosaki. Robert Kiyosaki, author of the best-selling Rich Dad, Poor Dad, acknowledges Keith in the forward for his "financial wisdom and inspiration."

Geoffrey Davis

Davis Family Lending, LLC

214-975-1266- fax

214-529-9622- cell

www.DavisFamilyLending.com

God grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.

Tell me what you really think honey

Davis Family Lending, LLC — Mon, 12 Oct 2009 17:32:26 -0500

Over the weekend we had an awesome event for the Frisco Cycling Club (FCC). A day at Frisco Fire Safety Town. If you have not been there yet you need to click here, find their hours and take your kids over. Also they will have a large trick or treat event on October 23rd from 6-9, a free event for the City of Frisco.

I feel compelled to share with you a new term Julie coined this weekend. It was before we left for the event and I had my FCC t-shirt on, she mentioned it would be a better for me to leave it untucked. Many of you might have heard the term, "muffin top" when your jeans are a bit tight. Julie called my look a "wrap around porch". Seams I have been away from the bike a bit too long and am an easy target. It was so bad I literally had a nightmare about that term last night. So if you see me eating unhealthy foods, please remind me to go and work out later.

Geoffrey Davis
214-529-9622

Davis Family Lending, LLC

Here are some notes from my friend and Frisco City Councilman's day on the bike.

Davis Family Lending, LLC — Mon, 12 Oct 2009 17:08:08 -0500

Here are some notes from my friend and Frisco City Councilman's day on the bike. He made me a promise to be in a Frisco jersey the next time he rides a bike. I have some cycling friends (you know who you are Geoffrey Davis and Bill Woodward) who have been trying to get me out to join them in the Frisco Cycling Club. Problem is, I only ride a bike around the neighborhood with my kids and probably have never gone further than a few miles.

I was invited to represent Frisco in the Make-A-Wish 100 wish Bike Ride (Maher Maso was out of town....how convenient!). This was a first year event to raise money to grant 100 wishes and over 1,000 cyclists turned out. They had mapped out a 10 mile course for myself and Plano Mayor Phil Dyer and McKinney Mayor Brian Loughmiller. Members of the Legacy Riders club rode with us for encouragement.

After the 10 mile marke, my rider coaches challenged me to make the 30 mile mark. The last mile felt like it was straight uphill but well worth the struggle. It was a great event and I hope it can kickstart me to finally join the Frisco Cycling Club on some rides!

Geoffrey Davis

Davis Family Lending, LLC

214-975-1266- fax

214-529-9622- cell

www.DavisFamilyLending.com

God grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.

Where are we in the market today?

Davis Family Lending, LLC — Mon, 12 Oct 2009 17:03:58 -0500

Last week I was able to attend a seminar featuring Steve Harney, one of the leading experts in the real estate industry. I was invited by one of my good friends - Sammy Garner. Sammy and I are in the same industry and have been friends for years. He was kind enough to not only invite me but to provide my ticket because he knew there would be information of value for us both.

A secondary benefit of the seminar was the opportunity to sit at the table with a Plano real estate legend - Mike Brodie of Keller Williams. Mike is not only a speaker and seminar presenter on real estate issues; he is also one of the best producing realtors in the North Texas market.

According to Mr. Harney, in 10 years there will be people sitting down and talking about the market of 2009...saying that 'I could have done it....I should have done it'...talking about 'if I had bought that house'....Basically he's saying that prices are at their low and at some point they will begin to head back up, maybe not tomorrow, but pretty soon. He believes that there are many properties that are very distressed and that now is one of those times that people should buy so that in ten years they can be looking at the investment that they made instead of a missed opportunity. He said that in six months agents will be looking back at the help they had in selling houses from the tax break the government has given and from the low interest rates. It is an unbelievable time to be in real-estate and the agents in the business today should see an unbelievable year.

In discussing foreclosures, Mr. Harney said that 20% of Texas homeowners' value is under water. In other words, one in five Texans' home value is below their mortgage amount. The percentage is even worse nationwide: in 35% of occupied homes the mortgage is now greater than the value. He spoke at length about foreclosures and said that he has found that 25% of the homes that have gone into foreclosure have been strategic foreclosures. In other words, these are people who have made their mortgage payments without a hitch for years but have recognized that they are now so upside down in their property that it becomes a good business decision to allow it to go into foreclosure. His studies are showing that the higher the person's FICO score is, the more likely that they will make such a strategic move.

Mr. Harney's advice for Realtors was that they should strive to be the 'expert' in their market and be able to answer the questions about foreclosure, short sales, etc. Although it will be a challenge to predict the future of real estate, it is important for them to be the people with all the answers. Steve's view is that Realtors and the housing industry will have the largest impact on the economy for 2010, let's hope he is right!

Geoffrey Davis

Davis Family Lending, LLC

214-975-1266- fax

214-529-9622- cell

www.DavisFamilyLending.com

God grant me the serenity to accept the things I cannot change, the courage to change the things I can, and the wisdom to know the difference.

Had the swine flu yet?

Davis Family Lending, LLC — Wed, 07 Oct 2009 12:23:25 -0500

One thing you will learn when you go in for the test, they never really say if you have it- just that you tested positive for influenza and that is one of the strands. So we received an e-mail from Lucas school on Monday warning that many of the children at the birthday party that weekend were showing flu like symptoms. Sure enough, Tuesday evening comes along and he has a temp of 104 deg. Our pediatrician also gave a prescription for our 2 year old as a preventative measure. Lucas had a tough 1st day of us quarantining him in the upstairs game room but then came to love the freedom he had over the remote and his toy choices, always good to not have to share with your younger brother. All are well, healthy and awaiting the next new bug to hit the schools.

Geoffrey Davis
214-529-9622

Davis Family Lending, LLC

We're making some maintenance related repairs in addition to considering several updates.

Davis Family Lending, LLC — Wed, 07 Oct 2009 12:22:11 -0500

Last week I mentioned that Julie and I have a home that has hit the 10-year mark-which means that it's officially no longer a "new" home by Frisco's standards. We're making some maintenance related repairs in addition to considering several updates. I solicited feedback a few weeks ago and have received some great responses that I wanted to share.

Jeff Cheney of Keller Williams has some advice, as well as suggesting home owners reference available online resources, to help them understand the potential rate of return on various improvements.

According to HGTV, five improvements deliver the best returns:

*102%: Minor Bathroom remodel which includes updating such things as replacing flooring, reglazing the tub, replacing fixtures/lighting and updating shower doors.
*100%: Landscaping
*98.5%: Minor Kitchen remodel, which includes refacing/refinishing existing cabinetry and updating things like appliances, countertops, sink/faucet and wall finishing
*95.5%: Exterior improvements, including paint, siding and updating an entry
*93.5%: Attic space to bedroom conversion

One may ask that if you can't get all your investment back, why bother to even make the updates? Similar to good home maintenance, buyers expect well priced homes not to need a ton of work. If the perception is that it will take hours to remove Aunt Nellie's wallpaper, replace the shag carpet and refinish cabinetry buyers will be looking for a pricing discount commiserate with the effort and cost of updates.

Cheney offers words of caution to homeowners around what kind of return you can expect for your neighborhood. "Homeowners should keep in mind any home that is over-improved in relation to the surrounding homes is unlikely to yield a high rate of return. It's important to note that if you have the most expensive home on the block, your investment will probably not return as much as the upgrading of a less expensive home nearby."

This is right in line with last week's article that discussed that highly specialized, and often costly, improvements will not always deliver a strong return. Instead, consider the price range and general features of homes in your neighborhood before making any significant updates. While you should certainly makes changes to fit your lifestyle and preferences, it's always a good practice to take a hard look at what percentage of the money spent on these modifications you would see should you ever have to sell.

Next week, we'll talk about what typically does give you the best return on investment and the rate of return you can generally expect.

Who here has a Twitter account?

Davis Family Lending, LLC — Tue, 29 Sep 2009 11:22:12 -0500

Who here has a Twitter account? How often do you check who is following you? You might be surprised and a bit disgusted to see some of the folks who latch on to you. I don't know if it is a computer driving this or an individual, but once a week I find a rather- "shady account" following me. My note to you, check your Twitter followers from time to time and you may have to remove a few.

Frisco Cares Golf Classic

Davis Family Lending, LLC — Tue, 29 Sep 2009 11:20:30 -0500

Frisco Cares Golf Classic, October 8th. Frisco Cares Children's Clinic was created in 2005 to address the growing healthcare needs of uninsured children in Frisco and surrounding communities. Frisco Cares is a low-cost health clinic for uninsured children, 18 and younger, living in or attending school in Frisco, Celina, Prosper, or Little Elm.

Home Upgrades

Davis Family Lending, LLC — Tue, 29 Sep 2009 11:19:26 -0500

Julie and I have a home that has hit the 10-year mark. As many of you know, for whatever reason, homes begin to have issues and start to look a bit dated around that time. A few weeks back I solicited feedback from local realtors around what updates provide the most impact for resale purposes. While many of the changes we'd be looking to make wouldn't be done solely for resale, we always like to consider what would give us the best return as one never knows what may happen in the future.

Brian White of Coldwell Banker says, "Most people are aware that kitchens and baths impact value the most but also cost a lot of money." Instead, Brian recommends considering what you can comfortably do yourself to help control costs. Since labor is often a major component of kitchen and bath work, the more your willing to do (e.g., demolition, tile) the more you can save. He also suggests looking for things that have the most "space coverage" such as paint, new flooring or anything that will impact a substantial amount of visual space or square footage in your home.

Brian also offers words of wisdom to home owners on things that don't add value that one might think do, including:

*Highly specialized or taste specific items that would be highly valuable to a few but not to most home buyers. Brian's examples, which made me laugh, included things like fancy wallpaper, Australian Coastal sea shell sinks, rare Botswana bathroom tile or gold lame curtains from Micheal Jackson's wardrobe. While these might be highly valuable items to the current owners, they are likely to have no value for home buyers.

*Items such as new roofs, HVAC, hot water heaters (especially tankless), although completely necessary, are seen as maintenance items rather than things that increase the value of your home. Home buyers expect these to be present and in good condition on any well maintained home.

*Pools are also something that typically does not give a good return on investment. If home owners are lucky, they might get 50% back on what they spent. It also doesn't make your home worth more the way one might think. If there is a similar house down the street, with a better lot and no pool, they can get as much or more for their home because the lot is better.

Given Brian's advice, my take-aways are that home owners should consider the general appeal of any updates they make. This doesn't mean you should not make your house your own, but it's important to recognize that the more specialized, and personal, your updates are they more likely you are not to receive a good return on your investment or turn-off potential buyers should you have to sell.

Next week, we'll talk about what typically does give you the best return on investment and the rate of return you can generally expect.

This is getting ridiculous.

Davis Family Lending, LLC — Tue, 29 Sep 2009 11:17:27 -0500

This is getting ridiculous. In the past 2 weeks, two of the appraisals we received back for loan transactions we are working on fell short of the estimated value. Please read about what this HVCC law has done to the loan process and consider signing the petition on that site. Your home value might be next.

Hope next week goes better with this system. Just having the hardest time with this new law- are you also?

The below article I wrote and wanted to share with you:

Davis Family Lending, LLC — Tue, 29 Sep 2009 11:16:03 -0500

The city of Frisco has been following a Hike & Bike Master Plan that was developed in 2002. In 2007, the Frisco Cycling Club (FCC) heard that the Master Plan was being amended and that there was a possibility that designated roadways might be eliminated. This was a major concern for members of the Frisco Cycling Club.

While researching the Master Plan, members of the Frisco Cycling Club found that the bike lanes provided in the plan were not cohesive or destination oriented. They did not allow for the establishment of logical bike routes of 5 mile, 10 mile etc. throughout the city and surrounding area. There was also a concern with the development of the Panther Creek roadway and the city recommendation to eliminate the designated street path.

This lead to members of the Frisco Cycling Club attending the City Council meeting that had this item on the agenda. During that meeting the FCC agreed with the city on the issue of the street path on Panther Creek because it would not have segued into a roadway due to the right of way access that was available. Also at that meeting, George Purefoy, City Manager of Frisco, asked city staff to include members of the Frisco Cycling Club as advisors on the re-working of the 2002 Hike & Bike Master Plan.

Members of the FCC developed a comprehensive plan for the establishment of bike routes throughout the city and submitted it to the Parks and Recreation Department. Subsequently, they worked with the Parks and Rec staff to refine the plan and submitted it to the Zoning Commission which approved it and sent it to the City Council. The Council also approved the final plan.

One component of the new plan is a 5 year implementation period. The first part of the plan to be implemented has been the 300 Share the Road signs that you see on the roadways today. The FCC members are very appreciative of the interest and quick action of the Parks & Rec staff and the members of the City Council for all they have done to make the signage a reality.

When asked about the effectiveness of the signs, Geoffrey Davis, President of the Frisco Cycling Club, asked members of the club if they felt safer with the signs. Jeanne Patterson answered: "The signs are a great way to remind motorists that cyclists have a right to be on the roads. Plus, with so many new people moving to Frisco, this is a great way to introduce the best roads for cycling to the many cyclists moving here." Matt Vonderahe replied: "Do I feel safer when riding? Absolutely. Those roads feel like sort of a safe zone where drivers and cyclists both receive a 'public service announcement' in the form of the signs. Sharing the road means just that and we as cyclists must hold up our end of the relationship and be courteous, safe and obey the laws." The note from Clint Richardson said, "Having the signs posted provides a visual reinforcement to the driving public of the rights of cyclists to use the roadways and a sense of legitimacy when cyclists are encountered by motorists on these roadways.

Frisco is a great city to live in but to also get involved with, city staff is eager to have opinions and help from the citizens. I am looking forward to the next 4 years of the implementation of the redesigned Hike and Bike master plan. It will be great to have the family all out for a ride soon!

Here is my buddy Ned Overend

Davis Family Lending, LLC — Sat, 26 Sep 2009 11:07:53 -0500

Here is my buddy Ned Overend (and Weekly Reader) after he took 4th place in the Single Speed World Championships held in Durango, CO last week. 1000 folks from around the World raced in this crazy event. Still find it odd all the strange get up's these riders will wear. Ned stands with Jackie Phelan (on left), an icon in the sport of mountain biking.Here is my buddy Ned Overend (and Weekly Reader) after he took 4th place in the Single Speed World Championships held in Durango, CO last week. 1000 folks from around the World raced in this crazy event. Still find it odd all the strange get up's these riders will wear. Ned stands with Jackie Phelan (on left), an icon in the sport of mountain biking.

Where Do I Sign?

Davis Family Lending, LLC — Tue, 15 Sep 2009 14:57:21 -0500

I am a member of a trade group called National Association of Mortgage Brokers (NAMB). It is an association, like every industry has, that helps to keep the playing field correct and competitive in this market, at least that is my explanation for them. Recently, laws changed on how appraisals can be ordered for residential home loans. Something called the Home Valuation Code of Conduct (HVCC) was introduced a bit ago- just a horrible idea and plan. And it is costing homeowners Billions. This link takes you to a page that has more detail and a petition provided by the NAMB, if once you realize the negative with this new legislation and want to help us make a change, then please sign!

Who was this Paul Harris Guy?

Davis Family Lending, LLC — Tue, 15 Sep 2009 14:52:57 -0500

How about the founder of Rotary in Chicago, IL on February 23, 1905.

Mr. Harris was a young attorney, new to the area and anxious to connect and become more involved with the community. He, along with three other men, founded the Rotary Club of Chicago in 1905. The first meetings of the new group rotated between the offices of the four founders - thus the name Rotary and the wheel logo. When the membership grew too large for their offices, the meetings moved to a restaurant, very much like Randy's Steakhouse where my Frisco Sunrise Club meets at today.

The organization that he began over 100 years ago is dear to my heart and I am proud to be called a Rotarian. It is also a special club for me as my grandfather was a Rotarian, my father is a Rotarian as are my father-in-law and grandfather-in-law. A nice long family history. I hope my children will also enjoy the camaraderie and community involvement it has provided me.

So now we know about Paul Harris, but what is a Paul Harris Fellow? Anyone who contributes or in whose name is contributed a gift of $1,000 or more to the Annual Programs Fund of Rotary may become a Paul Harris Fellow. Each new Paul Harris Fellow receives a commemorative certificate, a Paul Harris Fellow pin, and a medallion. And a month ago I became a Paul Harris Fellow. My friend and fellow club member has given generously over the years and he shared his points with me and a few others, giving us this high distinction in the club. I will be forever in his debt and hope that over my years of service I, too, can give this gift to a member in the future.

You Made My Day!

Davis Family Lending, LLC — Tue, 15 Sep 2009 14:46:56 -0500

2 weeks ago I shared that I was joining some friends and set to participate in the Austin bicycle ride that is promoted by Lance Armstrong's Foundation. I have made my goal for sponsorship and wanted to thank you all who participated and took the time to donate. Thanks so much!

Sure- you can add to it but maybe enter the ride for yourselve! Love to see more bike riders in the world

Wish 100 Bike Rally

Davis Family Lending, LLC — Sat, 12 Sep 2009 21:08:30 -0500

Notes from an e-mail for an event around the corner: Wish 100 Bike Rally to be held in Plano, Texas on Saturday, October 3rd, I would like to invite you and the other members of the Frisco Cycling Club to be a part of history by participating in this inaugural rally benefiting the Make-A-Wish Foundation of North Texas. The mission of the Make-A-Wish Foundation is to grant the wishes of children with life-threatening medical conditions to enrich the human experience with hope, strength and joy. Wish 100 is planned to be a fun day of exercise, good food, and camaraderie for a great cause.

Speaking of Homes

Davis Family Lending, LLC — Tue, 01 Sep 2009 11:25:23 -0500

Over the next few Weeks I want to chat a bit about what you should or should not do to your home. With Julie and I watching a fair amount of TV while feeding the twins- we find ourselves on the design channels mostly. One theme we see on the shows that help you sell is that after the stager helps get the home ready for the market- the sellers want to stay. The experts all agree that most homeowners during uncertain economic times will choose to stay in their home and remodel vs selling. So what projects should you do and will they help or hurt your values if and when you do sell? As the season is changing here in Frisco and the weather cooling off, Julie and I are ready for our 1st project of taking out the one side door we have and replacing that with French doors that both open and side windows to brighten the kitchen. Those doors open to a side patio and the long term goal is to frame that in as a screened patio but for now, just the doors. So what will a project like this add or take away from the Davis value? Check back next week.

House for sale

Davis Family Lending, LLC — Tue, 01 Sep 2009 11:23:56 -0500

In 2003 I was able to handle the mortgage financing for my sister and brother in law as they bought a larger home in Dallas so they could have more room for the boys. This place is awesome and only a few blocks away from Richardson Bike Mart's Coit store location. But with their boys off to and out of collage, time for these empty nesters to downsize. Wait till you see the back yard and the study- just a great house and well off the main streets but so close to every thing. Now, when they sell I wonder if we can have them move in with us so they can help us with all of our kids.

I did it again

Davis Family Lending, LLC — Tue, 01 Sep 2009 11:22:20 -0500

I took on more than I should and need a bit of help. Many of you know that Julie and I meet at the 1st Lance Armstrong event called Ride for the Roses down in Austin TX. So, when my buddy asked me to join him this year to ride it- I quickly said yes. Then remembered that I now have 4 kids and planning a weekend away on my own could be a tough sell but Julie was all for it. Hopefully you might open this link and send me $5 towards my fundraising goal. Or, join us on the team and come down to ride with me and Lance.

Does Church Come Up When you Talk With Others?

Davis Family Lending, LLC — Tue, 25 Aug 2009 09:49:23 -0500

The other day a friend told me that he has noticed my habit of asking people where they go to church. He finds it uncomfortable to speak of his church in a business setting. Somehow it has always been easy for me to invite people to St. Philips and I never hesitate to do so.

Perhaps it would be best to illustrate this with a story. Eric Austin and I participated in the Frisco Chamber of Commerce Leadership Frisco class #10. We were part of a 16 person group who spent 9 months touring the city of Frisco and learning the ins and outs of the city government and social service agencies. Eric and I talked about our church at times and before the class finished, four families had visited St. Philip's drawn to it by nothing more than conversations between the two of us and our invitations to them to drop in any Sunday. One family whom I invited visited on a Sunday when both Clay and our assistant priest both happened to be away. Clay's wife, Jill, gave the sermon that day and did a wonderful job but, of course, she is not Clay and I had promised him Clay! I'll admit I was a little concerned but when I called him a day or so later he said, "It was just great! The minute we got in the car, our children (5 and 3 years old) asked if they could come back because they said it was great!"

The best thing about inviting people to St. Philip's is that I know the level of hospitality extended to them will make them want to return. St. Philip's members are proud of their church, inspired by their priest and his teaching, grateful for the sense of community their church provides and anxious to share what we have with others.

So welcome to St. Philip's Frisco. We look forward to your visit.

Why an ARM?

Davis Family Lending, LLC — Tue, 25 Aug 2009 09:46:58 -0500

The other day I read in Scott Burns' column in the Dallas Morning News as a reader was asking about ARM's. I like to read what Mr. Burns has to say on all subjects but do listen more when he gives mortgage advice. The reason: I have yet to read him give bad advice.

ARM style loans came out in the 1980's here in the States when the interest rate market was through the roof. You might be surprised if you ever move overseas and want to purchase a home. ARM's are very popular in the United Kingdom and elsewhere. An ARM has a fixed and an adjustable time line. They are available for 1 year, 3 years, 5 years, 7 years and even 10 years. Those numbers represent the length that the loan will be fixed. After that time, the interest rate can either go up or down depending on the details of that ARM program. Most ARM's are amortized over a 30 year loan period. Each ARM has what is called a margin and an index. A margin is a number given by the lender that stays with the loan and helps calculate what the rate will be during the adjustable timeframe. An index is what that the ARM follows. It could be the LIBOR 1 month, 6 month or 1 year; the MTA; or one of the Treasury options. Now for the complicated part: an ARM will have a floor and a ceiling with limits as to how much the rate can go up or down depending on the index to which the loan is tied. Some say no more than 2 points up or down at the first adjustment and no more that 5 total, but all of those details vary and you want to know all of that information before you get to the closing table.

For example, you are in a 5 year ARM and the 5 year's are up. A few months before the anniversary date would be a good time to dig out the closing papers that the title company gave to you as they have all the details you need. Minor details will be on your monthly mortgage statement but the real info lies in the papers. You want to look and see what your margin, index and details are so you can decide if staying in that loan at time of adjustment is the correct move. Say you are in a loan with a 2.25% margin (most are) and follow the LIBOR 1 year index. Head to the internet to find out what that index is trading. At the time of this writing it was 1.381%. Add that to the margin and your new rate will be 3.63%. Now look at the details. If your beginning rate was 5% and your contract says that it may move no more than 1% up or down, you would have a 4% rate for that next 12 months. Repeat those steps each year, making sure that the index is not trading in a way that would make your rate unbearable.

The person in the above example made a good move by picking the ARM program as their rate dropped, but what about if we were not in a falling rate environment? What if, while in that loan, their FICO score dropped as did their home value, making a refinance impossible? ARM's are never the problem; it is the details and the knowledge that goes with them. Just like anything else in life, buyer beware and know what you are getting into.

Have an ARM story you would like to share with me? Send it over. I'd love to hear it.