Wednesday, October 31, 2007


Fed cuts key rate another quarter-point

By Sue Kirchhoff, USA TODAY
WASHINGTON — The Federal Reserve cut a key short-term interest rate by a quarter-point to 4.5% on Wednesday, seeking to support troubled financial markets and shore up the collapsing housing sector.
It was the second time in two months the central bank's policymaking Federal Open Market Committee reduced rates. The Fed on Sept. 18 slashed the federal funds rate, which is what banks charge each other for overnight loans, by a larger-than-expected half-a-percentage point to 4.75%.

Read the Article on USA TODAY

Monday, October 29, 2007

So, you found an article taped to your iPOD, “Psst…Tell Your Kids that Buying a Home Is Easier than They Think!” Part II

Just out of school and considering buying your first home? You’ll be surprised how easy it can be to qualify for a loan. Too often, the newly minted workforce doesn’t realize the confidence lenders have in their ability to be responsible homeowners.

Ok, so Mom and Dad told you that you need to buy a house. You've graduated from college and you're earning a decent income. Even though you don't feel like it most of the time, you are officially all grown up. But you ask yourself, "I'm only twenty-four years old, who would possibly loan me money to buy a house?"

First time homebuyer programs are established with flexible guidelines to attract – you guessed it –first time homebuyers! You are in a great position to buy a home provided you have established some history of decent credit. Even if you don't have traditional lines of credit to show for yourself, you may have established non-traditional credit and not even realized it. Do you have utilities, a cell phone and cable bill in your name? Have you paid them on time for 12 months? Then you have established non-traditional credit. Granted, many of you already have a credit card or gas card in your name. That's why Dad wanted your name on it, too. Good thinking on his part. At the time, you were just excited to get the credit card "for emergencies." It didn't even occur to you that you were establishing a good credit history.

Most lenders want to see at least a year under your belt earning income. The majority of new job workers are making at or under the median income limit for their area. There are those that beat the curve, but then, if you're making that much money on your first job, you don't need a first time homebuyer program. You can probably take another route to your first home. Also, recent graduates can get credit for having a diploma. If you have a diploma and an employer who is willing to verify that you earn what you say and are likely to continue on with them, then you're good to go -even without a year's employment history to show for yourself.

Some lending programs ask that a borrower have maintained an excellent rental history, preferably a two year history. But, you don't get penalized if you have been living at home. Especially, if home is in the same city that your school is located. You are simply asked to provide explanation as to how you managed to live rent free. Sometimes, Mom and Dad have to provide a written statement. They're probably willing to do that to get you out of the house and off the payroll.

What about a down payment and closing costs? Most programs will allow a seller to chip in 3% of the sales price toward your closing costs. This allowance can cover most if not all of your closing costs. Your realtor simply needs to be aware that you need this concession so she/he can negotiate it with your purchase contract. And how much do you have to come up with for a down payment? How about $0? Nearly all first time homebuyer programs are designed for empty pocket consumers with potential to earn more and maintain good credit. Some programs don't require you to have any reserves in the bank. Since so many first time homebuyers live on a budget, these programs allow for the reality of life. And you can be rewarded for being a conscientious consumer with lower than average interest rates being available to you.

You may be ready to buy your first home and not even know it. A good mortgage specialist will pre-qualify you, find out what you can afford or what your comfortable paying. Then, you just have to find the right home. It's easier than you think!

Because you can, visit: Home loan Knoxville TN

Monday, October 22, 2007

Series Part I Psst…Tell Your Kids that Buying a Home Is Easier than They Think!

We encourage our kids to plan for their future, but we seldom include buying a first home sooner than average as a path to building that future. Let them know buying a home is easier than they think.

Most of the people who read this column are not first time homebuyers. The fact of the matter is many of you that are first time homebuyers and reading this article are relatively mature individuals who are fighting off your commitment fears of being tied to a mortgage. But there is a huge segment of the population that could buy their first home, yet it doesn’t occur to them to do so. Who are these people? Well, it’s your 24 year old son or daughter, new to the work force, and is throwing away money on rent somewhere. Encouraging your children to buy a home when they are young is some of the soundest financial advice you can give them. Equity in a home is an easy way to grow one’s portfolio with very little investment. But the fact of the matter is it doesn’t occur to most of us to encourage the younger generation to buy early in their lives. And trust me, it rarely occurs to our kids themselves to consider buying a home in the early twenties. They are more concerned with buying a new Halo 3 for their Xbox.

Why do so many people miss the boat on this opportunity? It could be they plan to be in the area for only a short time because they will job hop to advance their career, thus viewing a mortgage as “too permanent.” I counter to simply sell the house when you move. Or maybe they expect their income to double or triple over the next three years. I say buy a home now, then upgrade to a new home; sell or rent the old house. Investing in real estate is a proven, safe and solid return on investment. And with the right combination of credit history (or a history of paying utilities, cable and your cell phone on time) and no money down, you or someone you care about can start investing in the future.

When Junior starts his new job at the company and 401(K) is available, he’s been informed by his folks, boss or peers to enroll and contribute at least a little something to it with every paycheck. Yet, he is rarely counseled quit renting that apartment for $750 a month and buy a $75,000 house. Where will he come up with the money to do it? There are multiple options for first time buyers that allow for 100% financing. Get the seller to kick in closing costs (up to 6% of sales price with some products), and one can close on a loan and bring no funds to the table. If your home value appreciates 4% in the next year, that’s a nice return on a no cash investment.

For some time, I’ve considered writing this series for first time buyers to let them know buying a home is easier than they think. But, the more I thought about it, the more I realized the advice I would offer would most likely not reach my target audience. So parents, it is up to you to supply your kids with this last little bit of advice and help to set them free to further establish their independence in this world. Clip this article out and tape it to their iPOD or the steering wheel of their car – someplace it will get noticed.

I think for most of us who have been through the experience, our first home buy was a very daunting experience. There are so many choices and unknowns - it can be overwhelming. In this series, I will try to break it down the process into small logical steps and make it easier understand the steps involved in financing your first home. Where do you start? That is perhaps the easiest part. Our newly established worker should first make a list of all his or her debt obligations such as student loans (unless deferred), car payments, credit card debt, etc. Hopefully at this age, this will be a small list. Then add what you think amount you could afford for a mortgage. Take that amount and divide it by your gross monthly income. If you come in at 43% or less, you’re in business. If you have something in your savings or checking - great. If not, don’t let it deter you. You have options.

Contact a mortgage specialist to drill out the details and find a good realtor who knows your market for housing you can afford. What next? Get ready to tell your landlord “Adios!.”

Because you can, visit: Home loan Knoxville TN

Sunday, October 21, 2007

For Sale by Owner (FSBO)), what do I need to know?

FSBO or For Sale by Owner can be a hugely successful endeavor and can save you money. But to be successful, this endeavor must be executed correctly. Below are a few tips that may help you be successful in this venture.

Price the Home Correctly: It is crucial that you research and place the correct price tag on your home when selling it. A reputable real estate agent is the first person to contact to help appraise your home. Many agents won’t lend you the time of day to assist you with this aspect since they aren’t listing your home. But a good agent will do it for you with no strings attached. They realize that their business is based on reputation and referrals. They may not get this listing, but you may want them to represent you in your next home purchase. Or your cousin may need a good realtor’s help in the future. Do your homework. Find similar homes in your area and compare their price tags. Are the homesas attractive as yours? Are they as large as yours? Pricing the home correctly is crucial.

Use your time: A FSBO property allows you to place your home on the market for the maximum price to see if it sells quickly. If you have a deadline to sell your home, market it yourself well in advance of this deadline. Later, if you feel you need a realtor’s help, you haven’t painted yourself into a corner. You still have time to market and sell the property correctly.

Market the Home: Make it easy for people to know more about your home without investing too much time. Put a For Sale by Owner sign in the front yard with contact numbers. Put a brochure with information out front so people can pre-screen the information and not waste your time. Talk to your local paper or other FSBO’s and investigate whether placing an ad in the local paper has had results. Different markets yield different results. Consider hosting an open house, but make sure you get the information out to the right market.

Put Your Home’s Best Foot Forward: You want to make sure your home sends the right message to prospective buyers. People have to be able to see themselves in that home. What is the first impression when driving up to the home? What’s the feeling inside? Take measure to provide maximum curb appeal. You want to make sure people want to come inside the house. The outside of your home should entice them to do so. The interior should be clean, airy and free of clutter. Try to make the home smell good and pack away personal effects that remind prospects someone else lives there. The realtor that helps you determine a market price should be able to make suggestions in this area that will make your home more marketable.

Is Your Prospect Qualified?: Make sure your buyer is pre-qualified before entertaining their offer. You can request that a preferred mortgage lender you trust or another reputable lender provide this service. If a person isn’t qualified to buy your home, you don’t want to lose valuable marketing opportunity to attract other prospects. Do not take verbal offers seriously. A serious prospect will sign a contract and provide earnest money as a show of good faith. Make sure you are using a legal contract and that it is executed properly and protects your interest. Again, that real estate agent who helped you earlier or an attorney may be a good idea at this juncture. A well executed sales contract is worth its weight in gold.

Of course all of the above is based upon my personal opinion and experience. Use these thoughts for informational purposes only. And good luck selling your home!

Because you can, visit: Home loan Knoxville TN

Thursday, October 18, 2007


If you've ever been through the home buying process before, you know that the Good Faith Estimate is one of the most important documents you will review to make a decision about your home financing. Oftentimes, you may request this document from multiple lenders and get completely different looking paperwork and figures. But in essence, there are only a few key factors you should focus on when comparing these documents.

One the these key factors to compare, bottom line, is the amount of closing costs you are being charged. I once had a customer who told me that he was quoted a 6% rate with no discount points and no origination fees. My good faith estimate also had a 6% rate, but I was charging a 1% discount fee charge. I asked to see his good faith estimate from the other lender. The other lender had inflated the closing costs to make up the money that would otherwise have been collected by a discount fee.

Clever, but not necessarily upfront. When it was all said and done, my total costs were cheaper by almost $400. What it boils down to is all secondary market lenders have access to basically the same rate. We just package it differently. By charging my customer the discount fee upfront, my customer earned the benefit of the tax deduction afforded this charge. So, lesson number one, if a quote is completely out of the ballpark from what someone else is quoting, there is probably a good explanation behind it. It's possible that they can really offer something out of the ordinary once in a while, but doubtful.

The other key factor to compare is the payment, but don't get caught up the escrow portion of the payment. Your escrows will be what they will be at closing. No lender has control over what you decide to pay for homeowner's insurance or what your county taxes are. Lenders simply guess at that figure. So, in general, you shouldn't focus too much on "pre-paids." They are what they are, and will be finalized when you get to the closing table. When looking at a payment, it is more important to compare the principal and interest and if applicable, mortgage insurance portions of the payment breakdown. As I said before, your escrows payments (taxes, insurance) will be finalized later.

You should never have to have your credit pulled before someone gives you a good faith estimate, nor should you pay for the estimate. Some lenders will require the aforementioned in hopes of "tying" you to them. The best advice is to find someone you like and trust when shopping for a mortgage. You want someone who will take care of the details and whom you can depend upon.

Because you can, visit: Home loan Knoxville TN

Monday, October 15, 2007


“Should I lock my loan? Are the rates going up? Are the rates going down? What’s the market supposed to do in the next week?” These are questions that every experienced loan officer has been asked by his or her customers on various occasions. I’ll tell you one thing, if I had a hard and fast answer to any of these questions, I would be reading a book on my own private yacht in the Mediterranean Sea. And my butler would be asking me what I wanted for lunch.

Here’s the deal on locking in your loan. Typically a standard lock is for 30 days. This time frame gives all parties involved in the transaction adequate time to complete their responsibility in the loan process. If you are closing within 30 days, you should probably go ahead and lock your rate, provided you are comfortable with the terms quoted to you. What if the rate goes down .125%? I counter and ask what if the rate goes up .125%? Are you willing to risk it?

If you are happy with your payment, then I advise you to lock in the rate. Your mortgage lender will give you a picture of the general trend of interest rates, or you can research it for yourself. Find the loan payment amount you are aiming for and focus on this issue to lock your loan. I’ve seen it happen plenty of times: everyone speculates the rates are going down, but the next day you see a .25% increase. Of course the converse does happen at times, but I haven’t seen it happen as much!

I’ve had customers who have checked with me every day to see where the rates are and I’ve never seen this vigilance result in a significant rate improvement. Not to say it can’t happen, I’m just relaying the odds from personal experience that it won’t. But, if this course is what my customer is most happy taking, I’m just as happy to update them daily till they feel comfortable locking. But keep in mind it’s a gamble. If it was easy, there would be a lot of folks on the beach with their butlers. It is very difficult to predict short term movements in the market. Try it for a few days just for fun, and you’ll see what I mean.

When a loan is locked, your mortgage company has made a commitment to provide a product at that note rate to its secondary market source. If the rates go down, you still are expected to close at your locked rate. If the rates go up, you still expect to close at your locked rate. A lock represents a commitment from the customer and the lender. So, find your comfort zone and lock your rate. Spend your time worrying about what you’re going to do with all the money you saved on your refinance or how you are possibly going to get boxes packed in time to move in two weeks!

Because you can, visit: Home loan Knoxville TN

Saturday, October 13, 2007

Knox County and Surrounding Area Housing Market – Tell Me Something Good!

It seems lately, I regularly view or hear some negative report connected to the mortgage industry, and sometimes, home sales. There is a gloomy cloud hanging over this industry. But the truth of the matter is things just aren’t that bad in Knox County and the surrounding area housing market.

I watch television every morning when I am getting ready for work and without fail, I regularly view some negative report connected to the mortgage industry, and sometimes, home sales. I see the same thing in the newspaper, magazines, on the web, etc. You get the picture. There is a gloomy cloud hanging over this industry. But the truth of the matter is things just aren’t that bad in our neighborhoods.

If you check the statistics listed at Knoxville Area Association of Realtors (KAAR) website, people are still buying homes, selling homes and obtaining mortgage financing. In July of last year, there were 1644 homes financed. This year July saw 1547 homes financed. Not off by much. Also, the average time on the market for a newly listed home only went up from 79 days to 88. Just 9 days longer to sell your home on average. Not that big of deal. And most positive, the average price (in the thousands) of a home increased from last year from $227.8 to $236.4. According to the Office of Federal Housing Enterprise Oversight (OFHEO), 131 of 287 metro cities recorded decreased housing prices. The Knoxville metro area showed a 2nd quarter increase 2.29% and yearly increase of 7.85%.

I think numbers will be a little bit worse in the third quarter, but not compared to the national scene. Even with the barrage of negative reporting we swallow, this area of East Tennessee seems to be moving right along. The same is true for our neighbors in Asheville and Charlotte. The same cannot be said for California, Florida and Nevada.

In my opinion, the constant national media coverage of areas where markets have gone sour weighs on the minds of your average local homeowner/homebuyer and accounts somewhat for the decline in the market, however slight it may be. But, the average East Tennessean didn’t finance their current home with a 1 month pay option Adjustable Rate Mortgage (ARM) with 100% financing (that’s a loan which the interest rate can adjust after one month – slightly risky). Most likely your neighbor obtained a 30 year mortgage and proved their income. They are not in foreclosure right now. And if you are local and did get an Adjustable Rate Mortgage, chances are you have equity in the house and can easily refinance with no closing costs and obtain a reasonable fixed rate.

Subprime lending is affecting the current market, and yes, this area did have its share of subprime loans that are now in default. The newly tightened lending guidelines will all but right these wrongs to a large degree. And I should say that I don’t think that these guidelines are such a bad idea. Why not insist established homeowners put a little money down on a new home purchase and provide a decent credit history, lending credence to the promise of repaying the largest debt they incur?

Oh, and of note to first time buyers - you still have access to great rates and 100% financing. You just have to come up with the documentation to prove to a lender that you’re worth the risk. And for most of you, that’s just not going to be a problem.

Because you can, visit: Home loan Knoxville TN

Dazed and Confused: What Kind of Private Mortgage Insurance (PMI) Should You Choose?

Private Mortgage Insurance, Lender Paid Mortgage's all very confusing. By learning the terminology, its meaning and then asking the right questions, you can determine what makes the most financial sense for you.

So, you’re putting less than a 20% down payment on the house you are buying and you are getting a conventional loan. Your lender has given you the option of paying a monthly private mortgage insurance (PMI) premium or offering you a higher rate where the lender pays it, known as lender paid mortgage insurance (LPMI). Which scenario is better for you? You’re confused and don’t really understand it all; you’d prefer to just have the decision made for you rather than weigh the options yourself. However, if you don’t consider all the options, you could be making a financial mistake.

PMI protects the lender against default and is required on loans that are deemed higher risk If you are investing less than 20% of your own money into a home, a lender considers it easier for you to walk away from your debt obligation if you find yourself in a pickle and can’t pay your mortgage. Your lender can buy/pay your mortgage insurance for you, but to do so, they charge you a higher rate plus a profit margin. To make a decision as to which route to take, you need to weigh the pros and cons.

You have more interest to deduct on your taxes because of your higher rate when you have LPMI. But if you and your spouse make $100,000 annually or less, or individually you make $50,000 annually, your monthly mortgage insurance is deductible. Depending on your tax bracket, the higher interest rate may or may not benefit you. You should crunch the numbers or ask your accountant’s advice.

PMI automatically terminates when your loan to value (of the original property value) reaches 78%, and but you can request it terminated when it reaches 80%. Some lenders will allow you to terminate the insurance when the appreciated loan to value reaches 80%. So, how long are you keeping this loan? Will you be paying down the principal balance rapidly? Is this your forever home and your forever mortgage rate? Then perhaps LPMI isn’t such a hot option. You can review an amortization schedule when making this decision to figure out just what payment will get you to that target loan to value (LTV). If you know that you will be making extra principal payments regularly, your lender should be able to help you analyze that scenario as well. However, if you’re going to be in the house a short time, than LPMI might just be the way to go.

Finally, just look at your basic payment both ways. Which way is more affordable for your current needs? The pricing on these products fluctuates. One product may be cheaper than another based on loan amount, term, down payment and other factors. You may also qualify for a second mortgage to make up the remaining 20% down payment and avoid private mortgage insurance altogether. What works best for your needs?
When considering your options, discuss your plans with your lender. Consider the above points and discuss them with her/him. By doing so, you should be able to clear the fog and make an educated decision

Because you can, visit: Home loan Knoxville TN