We just sent out the first issue of our e-newsletter THE LOAN REPORT and it seems to have met with a positive reaction so we wanted to make it available on our blog. Please feel free to let us know what you think!
THE LOAN REPORT November 2006
The Market At a Glance
Rates stayed fairly steady during the second week of November. In it's Primary Mortgage Market Survey, Freddie Mac revealed rates averaged 6.33 (traditional 30 year fixed rate) for the week ending Nov. 9th. That rate is up .02 from the previous week, and is down from an average of 6.36 the same time last year, according to the same survey.According to RealtyTrac, an online marketplace for foreclosure properties, there will be a 17% increase in the number of homes in some stage of foreclosure over last quarter. This represents a 43% increase over the same time last year. James Saccacio, CEO of RealtyTrac had this to say:
"What our third quarter research appears to be showing is that the first wave of adjustable rate mortgages is having a negative impact on the number of homes going into foreclosure. With the volume of these loans -- more than $1 trillion of them due to adjust over the next 15 months -- this is a trend that definitely bears watching."
Keep an eye on the Refinancing Market!!!
In the Spotlight: Fall 2006 finds the Portland metropolitan area with a good supply of houses in all price ranges. According to www.househuntnews.com, prices in the Portland area are up 10-15% from the same time last year. This reflects the fact that home appreciation has leveled out at about 5%, down from the previous rate of 10%. Homes are staying on the market a little longer, but sellers are still getting 95-100% of their asking price.
Asking The Right Questions
(Part 1 of 3)
Since this is the first issue of our newsletter, we thought it best to go over what should be the first consideration when seeking to obtain financing for any Real Estate. It's a question that 9 out of 10 of our clients haven't given any serious thought to, which is understandable because they don't see the rate sheets every day which means they don't see the big difference it can make to them. It's something that anyone who is trying to sell you a loan should ask. In fact, if they don't ask, they are not giving you the level of professional service you deserve because the answer to this question will define the success of your transaction. And if you don't consider your financing a "win or lose" proposition, keep reading.
So what is this most important of questions? Drum roll please:
"How long do you want to own the property?"
Now you may be thinking we have over-sold this seemingly innocuous question. Stick with us, you may re-think your position.
A little shameless self-promotion: This is among the first questions we ask of any new potential client. The reason we ask it is because this isn't the "black and white" world of Wally and the Beav anymore. You don't just go down to the bank, talk to the guy you have known for years and fill out whatever paperwork he hands you. People shop for everything now, which has produced a fierce brand of competition that is prominently on display in the mortgage industry. When one lender comes out with a "hot new product", you can bet the others will follow suit within two weeks. It will have similar features, a different twist and some catchy name that tries to imply it is groundbreaking.....heck, it may even save the free world!
The result of all this competition is that there are more loan products out now, and each one is geared toward a specific demographic. These products have different terms, and some have different periods for which your payment is fixed. This "fixed period" can affect your rate in a big way. Here is an example of how the "fixed period" you select can affect a typical credit situation. John and Sally have credit scores of 685 and 693, respectively. They want to buy a house for $200,000 and they have $40,000 down (20%). They have good income and one liability; a car payment. John serves in the Armed Forces and will likely have to move in the next 3 years. Given John and Sally's credit rating, income and debt, they qualify for the following loan terms:
A 30 yr fixed rate loan at 6.125% APR
An Adjustable Rate Mortgage (ARM) with a fixed period of 7 yrs at 5.88% APR
An ARM with a fixed period of 5 yrs at 5.75% APR
An ARM with a fixed period of 3 years at 5.63% APR
You can see a difference in the rates...but it really doesn't seem that much. Let's look at the difference in payment for their loan amount of $160,000 at those loan terms (payment amounts exclude taxes and insurance):
30 yr fixed payment is $973/mo
7 yr ARM payment is $947/mo
5 yr ARM payment is $934/mo
3 yr ARM payment is$922/mo
So the difference between the 30 yr fixed payment and the 3 yr ARM payment is $51/mo. That is $1836 difference for the total of the three years that John and Sally will live there before they likely have to move. Now, most people prefer the security that comes with a 30 year fixed payment. When we have asked people what kind of loan they were interested in, the answer more often than not is "30 year fixed." It's understandable....no one wants to experience a sudden and drastic jump in their mortgage payment. But, would John and Sally's lender have been serving them well if they had not told John and Sally of the potential for savings due to the shorter fixed term? This example could be considered modest as the differences between long term notes and short term ones fluctuate all the time. And the difference in payments is only exacerbated as the loan amount increases. What's more, lenders frequently announce price breaks for certain loan programs which can make an even bigger difference.
So make sure you at least spend some time seriously thinking about the length of time you want to own the property. Even if it only saves you $51 a month, that's money that could be put towards retirement, college savings, etc. Let's face it, today that's an extra tank of gas every month! Your lender should explain these things to you so that you can make the decision that's right for you. It doesn't take much talent to sell a 30 year fixed mortgage to someone who asks for one. Your lender really needs to take the time to get to know your specific situation and help you design a financing strategy that makes your home not just a necessity, but part of a successful financial future.
We would like to thank you again for taking the time to read our newsletter. If you have any comments or suggestions, please feel free to contact us at jason@excelfundinginc.com. And of course, if you have any questions or would like to discuss your financing needs, we are always open and always happy to help!
THE HOME TEAM at Excel Funding, Inc.
Jason Hillard 503-799-4112 jason@excelfundinginc.com
Barbara Hentges 503-348-5040 barbara@excelfundinginc.com
Sara Ferrell 503-319-5389 sara.ferrell@cascadeaccess.com
See us online at: http://activerain.com/thehometeam http://www.wannanetwork.com/THEHOMETEAM
Working Together For You.
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