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Interest Rates And First Time Homebuyers

by Samia S. Morgan

First time homebuyers are at a great advantage in our current real estate market. Large inventories of homes to choose from, amazing prices and mortgage rates that are at an all time low. However, what many first-time home buyers are not aware is they may not be able to take advantage of the best rates advertised. Here’s why…

Loan History

Even if you are not currently carrying a large amount of outstanding debt, lenders look at loan history, especially large installment payments. They do this to see if you have shown responsibility in handling a large loan. On-time payments and prompt pay-off can be an indicator of how you will perform as a borrower in the future. Many first-time buyers have not established a strong payment history, which can make it difficult in getting that first mortgage without higher rates and fees.

Small Down Payment

First time homebuyers can be at a disadvantage as they do not have a cash profit from selling a previous home to offer as a substantial down payment. With lenders now tightening their restrictions and usually requiring 20% down this large sum of money can be difficult to obtain. Without the downpayment you will probably see a higher interest rate. Larger mortgages come with higher interest rates, and loans with small percentages down are seen as higher risk to the lender. Many lenders will charge a higher rate based on their assessment of the loan’s risk.

Negotiating Skills

First-time borrowers should make the time to shop around for mortgages. You should also do your homework and become familiar with mortgage terminology, different loan packages and options, FHA programs and creative ways to secure your loan. Many first-time buyers are unaware of the many options available to them and lack the experience to negotiate better terms.

Finally, make sure that your credit score is up where it should be (above 700) and that you have steady income from a reliable employer. Both of these criteria will make a significant difference in your interest rate.
 
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Don't Overlook Details When Closing

by Samia S. Morgan

With so many beautiful homes on the market today and at amazing prices, it can be easy to find the home you have always wanted. However, it is vital to not overlook the details and inspect for potential flaws. Your potential new home should be thoroughly inspected top to bottom, before you get to the closing table.

The professional home inspection should reveal most defects in the home and this will be your opportunity to revise your offer or negotiate the repairs into the deal.

Make sure that your offer includes a contingency for a home inspection. The home inspection will reveal significant defects with foundation, plumbing, electrical and damage if the home has any of these problems. The savvy home buyer will also test other features in the home that may not be a part of the inspection.  Check appliances, sprinkler systems, garage doors, and wet areas (for mold or water damage) and get a pest inspection. Your state may also require seller disclosures, in which the sellers must list any problems with the home.

Material facts are an important part of seller disclosures. A material fact can be any defect or situation that can impact the buyer’s decision to move forward on the purchase or the price and terms of the property sale. Structural defects, property taxes, fire or flood damage and a death in the home are examples of material facts.

It is easy to get caught up in the excitement of purchasing a new home, but don't be in such a hurry to close that you overlook flaws that can cause headache and extra expense down the road.

 

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Do You Know Your Debt To Income Ratio?

by Samia S. Morgan

If you are obtaining financing to purchase a new home, it is important to understand that your lender will look at what is called a debt-to-income ratio. Of course your lender will look at various different aspects of your financial situation but this is an important aspect and the loan could be denied if the ratio is too high. Below is more information on why is it important to you and how it effects your financing.

What the debt-to-income ratio means is that lenders will do a comparison of the money you earn to the money you owe. It includes credit card debt, existing mortgages, auto loans, and any other personal debt.

Your mortgage lender will look at your Debt-To-Income (DTI) to evaluate your ability to afford your new mortgage. You should have a good idea of what your DTI ratio is before you approach a lender or consider buying a new home.

You ultimately want to achieve a low DTI ratio. A high number means that you have less disposable income and less ability to maintain the home once you purchase it. With foreclosures at an all time high, lenders are not willing to assume any additional risk in lending.

Most lenders seek DTI ratios in the 20-36% range or lower, with no more than 28% of debt dedicated to the mortgage itself. While some lenders will consider higher ratios, DTIs in the upper 30% range are considered high risk.

There are several different calculators available online to help you determine your ratio, and you can always check with your financial institution for guidance on determining your DTI ratio.

Here’s a simple formula:

  1. Add all your monthly payments (mortgage or rent, car, credit cards, any other debt payments)
  2. Add your gross income (before taxes), bonuses, alimony, or any other outside income and divide by 12
  3. Then divide the total number in (1) by the final number in (2)
  4. The result is your DTI ratio


Whether you are ready to buy a new home or are just interested in your financial health, it’s a good idea to know your DTI and understand the steps to lower your ratio and become as close to debt-free as you can.

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Mortgage Rates Remain At Record Lows

by Samia S. Morgan

Even with a sluggish real estate market, there is good news for homebuyers. Mortgage rates are and have remained steady and are still at a record low.

Qualified buyers can find rates as low as 4.375% for a 30-year fixed FHA loan. 15-year fixed FHA loans are being obtained at 4.5% with zero origination fee. 5/1 ARM FHA rates are at 3.5%

On a daily basis, FreeRateUpdate.com researches over 2 dozen wholesale lenders' rate sheets for brokers. They locate the most accurate and lowest rates available to those borrowers who are qualified.

The recent drop in stocks have caused the mortgage-backed securities prices to increase which push the mortgage rates down. Most of this is due to investors moving towards safer investments such as bonds.

If you are doing your research on the best rates available,  check out Google's mortgage results to compare available rates from various lenders. 

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Eventhough the official start of Summer is a few weeks away, homeowners all over the Bay area are already in the midst of home projects and lawn care. Below are some tips to help you get your home in tip top summer shape.

  1. Lawn tools and care – make sure your lawnmower and other lawn and garden tools are in good working order. Its a good idea to have a tune up and your blade sharpened. Adding fresh oil and fuel is also a good idea. Consider colored flowers and plants that will provide color in small spaces or on patios if you have limited garden space.
  2. Clean up patio furniture and your outdoor grill, wash your windows and tidy up walkways. Now is the perfect time to create an outdoor living area for your family and friends. String lights or simple lanterns can also be affordable ways to add nice interest to your porch or patio. If you have a pool, make sure your filter systems and pumps are clean and ready to operate at full steam.
  3. Treat for pests – find a reputable pest control company to do a general treatment for summertime bugs like spiders and mosquitoes; invest in citronella candles and family friendly bug spray.
  4. Have your AC system serviced – it’s a good idea to have a semi-annual checkup before the real heat of summer puts pressure on your HVAC system.
  5. Make sure your home is energy efficient – check weather stripping and window seals and make sure that none of that cool air inside is escaping outside; keep your temperatures moderate in the house so that your systems don’t go into overdrive during the hottest part of the day.

Enjoy the treats of long summer days – both indoor and outdoor comforts and pleasures. Summer always goes fast!

 

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Dealing With Loan Denials

by Samia S. Morgan

Obtaining financing for a new home can be a challenge in this difficult economy. Many mortgage lenders have tightened their requirements. However, it is important for homebuyers to realize that it isn't always the lenders fault. Of course they would like potential customers to assume that they will be approved but the loan industry is a very risky one right now and they have to protect their assets. 

Many potential homebuyers are finding that their application has been denied, so if you have been denied recently or in the past for a loan, it's time to take control of the situation. Educate yourself, ask questions and do your research to help change that NO answer to a YES answer! Here, to help you out are some suggestions.

  • Consider a co-signer if your income simply is not high enough to qualify for the actual loan. The co-signer's income can possibly be considered as an amount towards your loan regardless if the person is living with you or helping you pay the actual bill. In many cases, the cosigner might also be able to compensate for your low credit. It is important however to understand that there are risks for your cosigner and if you default on your mortgage, the lender can actually in turn go after your cosigner for the full amount!
  • Wait it out.  Sometimes the best advice you can get, especially if the conditions in the housing market is slow or the economy is bad, is to simply wait. Oftentimes when conditions improve in the economy, the lenders will be more willing to let you "borrow" the money for your loan. While you are waiting, you can take this time to work on your credit score. While you are waiting, home prices could also drop!
  • Consider a less expensive property. We all want what we want, but you might have a better chance of being approved if you switch to a less expensive option. For example, if you wanted a house, but you cannot wait and you cannot qualify for the loan, you might consider switching to a smaller home or to a town home instead. Later on down the line when your financial situation improves, then you can trade up the property and move to the location and home you really want to.
  • Apply with a different lender. The world is full of lenders, if you don't like what one says or you get denied - try someone else! However, if every single lender you go to denies you, you should become aware that it is for a reason - in fact, if they all list the same reason then you will know what you need to fix.  Use common sense and stay away from predatory lenders. We have heard some pretty scary stories about these places - so just don't do it. You could literally be signing your life away.

Keep in mind that if you are denied, keep trying and work on your credit and then in a few months try again! With a little time, patience and understanding, you could be able to turn the situation around to your favor!

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Deciding Between Two Houses?

by Samia S. Morgan

Shopping for a home can be an exciting time, but when house hunting you may find two houses in which you cannot decide which one is the right one. It might be that you have found what seems like two perfect homes and deciding between the two can be a difficult decision.

Purchasing a home is a major decision and shouldn't be taken lightly, so it is a good idea to approach it rationally and not be guided by emotion, which can be easier said that done.

Making a decision may at times be necessary if the seller has received multiple offers. Start the decision process by making a list of your needs as well as the pros and cons of each house.  Some things you'll want to compare include:

•Which neighborhood offers the most benefits? If the two homes you are looking at are in different neighborhoods, evaluate the pros and cons. Perhaps you have children and need to be close to schools or parks or even other families with children. Also consider the proximity to shopping, restaurants as well as your work commute, church, and other services? Are the streets maintained? Do homeowners landscape and maintain their homes nicely? How long will  Don't forget to inspect the other homes in the area, are they well maintained?

•Do your research on the crime statistics in the area. You can get this information from the local police or sheriff department.  You might find theft or vandalism to be more prevalent in one area than another.

•If you have children who are in school, having a good school system is an important aspect to consider in your decision. You can find school ratings, reviews and test scores at Greatschools.com to help you make the decision that is right for you.

•In your list of pros and cons be sure to identify the specifics of the house and your current and future needs. Does the home have enough room? Is the layout what you want?st. Then, rate how each house measures up to each need on your list.

If you are still having difficulty deciding, it is a good idea to visit  each home at least two more times, at different times of the day to get a feeling for how the house and neighborhood look and feel. It can be a difficult decision but you want to make sure you are comfortable as it is one of the largest decisions you will make.

 

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Home Equity Loans And Taxes

by Samia S. Morgan

Home equity loans are a great way to access the equity in your home and provide you with extra funds to pay off debt, remodel or even for a vacation. Most homeowners don't know that there are also some tax benefits in doing so as well.

 There are two basic types of home equity loans.  One type is a traditional loan where you borrow the whole amount of the loan, then pay it back with specified monthly payments over a specified term.  The second type is a Home Equity Line of Credit (HELOC) where you obtain a fixed line of credit based on the equity of your house.   Typically with this type of loan you only pay interest on the amount that you borrow, and your monthly payments may vary also.

The interest is deducible up to the purchase price of the house plus any improvements.  Many people mistakenly think that all real estate related interest is deductible.  Several years ago the held true but tax reform has since been passed. However, for most people the tax deductions are still substantial, but you may want to consult a tax professional to determine how much you can deduct in your specific case.

However, even if the interest is not deductible, the savings associated with the lower interest rates charged on a home equity loan, will still be beneficial to pay off other higher interest credit cards or other loans.

It is important however to do the math and be responsible when considering these types of loans. Many homeowners found themselves in trouble when they borrowed against the equity in their home and then when housing values declined, they owed more than the house was worth.

Understanding Mortgage Points

by Samia S. Morgan

When researching mortgage financing, potential homebuyers will often receive quotes from lenders that include both loan rates and "points." Many people are unaware as to exactly what is a point?

A point is a fee equal to 1 percent of the loan amount. For example, A 30-year, $200,000 mortgage might have a rate of 6 percent, but come with a charge of 1 point, or $2,000. A lender can charge 1, 2 or more points. There are two kinds of points: discount points and origination points.

 •Discount points:These types of points are really prepaid interest on the mortgage loan. Because, the more points you pay, the lower the interest rate on the loan and vice versa. Borrowers typically can pay anywhere from zero to 3 or 4 points, depending on how much they want to lower their rates. The advantage to this type of point is that it is tax-deductible.
 
 •Origination fee: This is charged by the lender to cover the costs of making the loan. The origination fee is deductible if it was used to obtain the mortgage and not to pay other closing costs. The
IRS specifically states that if the fee is for items that would normally be itemized on a settlement statement, such as notary fees, preparation costs, and inspection fees, it is not deductible.
 

There are many different factors that will effect whether or not you pay points as well as how many. The amount of money you have to put down at closing as well as how long you plan on staying in your house can be a factor. If you plan to stay in your home for a while, it may be worth reducing the interest rate by paying points. Be sure to have your lender carefully explain these fees if you have any questions.

 

Local Earth Day Events

by Samia S. Morgan

On April 22nd we celebrate Earth Day, which is a day designed to inspire awareness and appreciation for the Earth's environment. This year's celebrations mark the 40th anniversary of this day of observance of the need to protect the earth. The San Francisco area offers many different events to celebrate Earth Day. Below are some of the exciting events planned in the area!

   The Marine Science Institute's "Earth Day on the Bay!"This event is on Saturday, April 17, 2010 from 8 am - 5 pm. This all day event is filled with family-friendly events geared towards providing fun, memorable, and meaningful experiences to bond you with San Francisco Bay, and the planet. Last year was was a tremendous success, and this year promises to be their biggest and best yet.  If you like music, mud and sea creatures, you are bound to have a great time! Create ocean crafts, enjoy our special presentations, or head out on the Bay on one of our four trips aboard our Research Vessel, the Robert G. Brownlee!

SCA San Francisco Earth Day Project
On April 24, 2010 9:00am - 12:00pm in San Francisco, CA. Join the Student Conservation Association (SCA) and the Golden Gate Audubon Society for day of fun projects in San Francisco. On Saturday, April 24, we will be joining Golden Gate Audubon Society at Harding Park in San Francisco. Get your hands dirty removing non-native invasive plants, and building trail to improve your city parks. Meet SCA members and alumni, SCA supporters, community members and SCA staff. of Where: Harding Park, Sunset & Lake Merced Blvd, San Francisco, CA 94132. Register for the San Francisco Earth Day Service Event at
http://www.thesca.org/events/sca-san-francisco-earth-day.

Green Festival Event
On April 10th and 11th , over 225 visionary Speakers and Artists to motivate you, more hands-on workshops to keep you participating in the process, and more planet-friendly choices to help you activate your goals every day – all in a more intimate setting! Join Mayor Gavin Newsom to learn more about the Bay Area's new clean energy economy. Visit the Fair Trade Pavilion to learn how fair-trading your home, workplace and community with foods, home furnishings and textiles can make a world of difference. At the Green Design Pavilion, explore sustainable innovations within your budget that will help you make the most of your home and work environments. Don’t miss the Eco Fashion Show presented by Hi-Def Creations, Inc.—a showcase of the Bay Area’s eco-conscious fashion designers, make-up artists and hairstylists. Visit the Green Kids' Zone throughout the weekend to find activities and storytelling for the whole family.

 

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Photo of Samia S. Morgan, Inc. Real Estate
Samia S. Morgan, Inc.
dba Samia Realty Group
BRE# 00967165
San Mateo CA 94403
650-678-3633