Bankrate Study Shows Holes in Mortgage Planning

A recent study by Bankrate.com shows that nearly 36% of homeowners don't know what kind of mortgage they have.  Sadly, this doesn't surprise me too much.  Every day we get at least one call to the office from a person who says they thought they had a fixed rate loan but it is now adjusting and payments are going too high. 

The real problem is not just that these people don't know that their mortgage wasn't fixed but that in almost every instance these people really NEEDED a fixed rate loan.  Most of these people are credit challenged and things really haven't changed for them in the last two or three years.  It's sad to think that many people in this situation may now lose their homes because the market has changed the guidelines making these loans available have tightened. 

The moral to this study is if you're not sure what type of loan you have find out ASAP! Feel free to give my office a call and I can review all of your paperwork with you.

Historic Fed Move Cuts Both Ways for Borrowers

Hot on the heels of its surprise inter-session rate cut of 75 basis points last week, the Federal Reserve cut key interest rates again, the fifth straight cut since September 2007. In its statement last week, the Fed said it had decided to cut the federal funds rate "in view of a weakening of the economic outlook and increasing downside risks to growth." In other words, economic data suggests the US is on the brink of recession, and the Fed is acting accordingly.

Who benefits from this cut?
If you have a loan that is directly tied to the Prime Rate, you will see an immediate benefit. Home equity lines of credit (HELOCs) and variable rate charge cards are the types of loans that will have an interest rate reduction on their next statement.

What does this mean for long-term rates?
Long-term mortgage rates, the lowest we've experienced in years, could actually increase after today's cut, based on historical performance and recent trends.

So if you're waiting for long-term rates to fall further, don't count on it. Your best chance to lock in the lowest rates since 2005 is now. Getting your application in process now will allow you to capture a great rate before it's too late.

What REALLY moves mortgage rates?
Fixed-rate mortgage rates aren't directly tied to Fed interest rate moves. Instead, they tend to follow in the direction of other long-term government bond yields, such as the 10-year Treasury, which historically moves in accordance with the economic outlook and in advance of Fed actions. The performance of Mortgage Backed Securities, issued by Fannie Mae and Freddie Mac, is what really determines long-term mortgage rates.

How does the economic stimulus package fit into the picture?
The economic stimulus package from Congress and the White House could be a double-edged sword for borrowers. Combined with recent Fed actions, the package could create inflation and bring about higher long-term interest rates.

On the positive side, conforming loan limits are likely to be raised from the current $417,000 to upwards of $625,000. This means great potential savings for purchase and refinance candidates who live in 20 high-cost areas across the country.

What should you do next?
If you're unsure how the rate-cut or the proposed legislation affects your mortgage, don't worry, you're not alone. There's no one-size-fits-all answer. Give us a call right away. We'll review your mortgage and see what, if anything, can or should be done to make the most of your individual financial goals and needs.

The Mortgage Planning Process

The mortgage planning process is different than the typical "shopping for a mortgage" experience. The typical shopping for a mortgage experience includes: Wasting your valuable time trying to save $25/month by comparing rates, fees and closing costs among different lenders. Wasting your valuable time trying to baby-sit the mortgage company you've reluctantly chosen to work with. Being promised one thing and then getting something different. Being "sold" on one mortgage product over another. The mortgage planning relationship is about you: Receiving valuable financial advice and guidance that can literally save you hundreds of thousands of dollars. Trusting a professional who is committed, qualified and equipped to deliver what they promise. Experiencing a "concierge" level of service when you are in the market to buy a home, refinance your mortgage or make cash flow changes to enhance your lifestyle. Implementing a defined financial plan of action in helping you achieve your life goals and dreams. Maintaining an ongoing high trust relationship with a team of financial advisors who can help you make necessary changes in your debt, cash flow and home equity planning strategies. This is a relationship, not just a transaction. As such, it requires a defined system of accountability in order to work effectively. The Mortgage Planning Process consists of the following five steps: 1. Establish and define the client-planner relationship. Mortgage Planner Should: Ask you for information about your financial situation and your time frame for results and success. Gather all the necessary documents before giving you the advice you need. Clearly explain or document the services they will provide to you. Explain how they will be paid and by whom. Unless you are willing to pay a flat fee for mortgage and real estate equity advice, mortgage planners are typically compensated through a commission structure set up with the lenders they work with.   You Should: Clearly explain how financial decisions are made in your household and include all the key decision makers in consultations with your mortgage planner. Be prepared to share personal and financial information with your mortgage planner in order for them to be able to advise you on how best to achieve your goals. 2. Analyze and evaluate your financial status. The mortgage planner should analyze your information to assess your current situation and determine what you must do to meet your goals. Depending on what services you have asked for, this could include analyzing your credit situation, real estate equity, debt situation and cash flow.

 

3. Develop and present mortgage planning recommendations and/or alternatives. The mortgage planner should offer mortgage planning recommendations that address your goals based on the information you provide. The mortgage planner should go over the recommendations with you to help you understand them so that you can make informed decisions. The mortgage planner should also listen to your concerns and revise the recommendations as appropriate. 4. Implementing the mortgage planning recommendations. You and the planner should agree on how the recommendations will be carried out. The mortgage planner may serve as your "coach," coordinating the whole process with you and other professionals such as CPAs, CFP® professionals, attorneys, Realtors, builders, insurance professionals and other qualified advisors. 5. Monitoring the mortgage planning recommendations through a quarterly or annual mortgage and equity management review. You and the mortgage planner should agree on how you will both monitor your progress toward achieving your goals. During this review, your mortgage planner can adjust their recommendations, if needed, as your life changes. Most often, this process involves periodic assessment of: Your fluctuating cash flow needs. Changing market interest rates and mortgage strategies. Income and career alterations. Family changes including: Children's financial needs. Caring for elderly parents. How your real estate equity and investments are performing from both a cash-flow and "internal rate of return" perspective.

MythUnderstandings”--Think Like a Millionaire

 

Demystifying Real Estate Investing

Overcoming the misconceptions that keep you from investing in real estate

Most people who aren't investing in real estate are being stopped by doubt and fear. They may want to invest in real estate, but each time they consider taking action, they come up with an obstacle or a core belief that keeps them from moving toward their dreams.

According to The Millionaire Real Estate Investor by self-made millionaire and real estate investor Gary Keller, most successful real estate investors have had to overcome certain beliefs that later proved to be unfounded. Some of these beliefs center around the way they view themselves as investors, and the others are focused on beliefs about investing. By addressing these doubts and fears, and recognizing that they're unfounded, you'll eliminate the major barriers to becoming a real estate investor.

• Personal Myth #1: "I don't need to be an investor. My job will take care of my personal wealth." Truth: History indicates that few jobs pay enough to create true financial independence. Financial wealth building depends on another vehicle.
  
• Personal Myth #2: "I don't need or want to be financially wealthy. I'm happy with what I have."
  Truth: Financial wealth offers greater opportunity to care for yourself and others, and that is something most everyone wants and needs.
  
• Personal Myth #3:
  "I can't do it."
  
• Truth: You don't know what you can or cannot do until you actually try.
  
• 
  
• Investing Myth #1: "Investing is complicated."
  
• Truth: Investing is as complicated as you make it.
  
• Investing Myth #2:
  "All the best investments require knowledge most people don't have."
  
• Truth: Your best investments will always be in areas that you can or already do understand.
  
• Investing Myth #3:
  "Investing is risky. I'll lose my money."
  
• Truth: Investing and gambling are not the same thing. Investing, by definition, is not risky.
  
• Investing Myth #4: "Successful investors can time the market."
  
  
• Truth: Timing isn't about being in the right place in the right time. It's about being in the right place all of the time.
  
• Investing Myth #5:
  "All the good investments are taken."
  
• Truth: Plain and simple, every market, in every time, has its share of good investments.
  

 

There's nothing more powerful for keeping you out of action than fear and doubt. By seeking the truth, rather than relying on unfounded beliefs that lead to fear and doubt, you can overcome your greatest obstacle and get closer to achieving your dreams.

If you're interested in investing, but you have doubts about whether or not investing fits in with your current financial program, it's best to consult with a qualified and reputable Mortgage Planner who can assess your financial situation and put you on a plan that targets your goals. As with any financial program, gaining clarity on the facts is always the best place to start.

 

 

 

Think Outside the Box

After enduring a year of fluctuating interest rates and mortgage industry trends, current and potential homeowners are opting to think outside the box, the 'big box' that is. They are relying on their local lending agent, instead of online big box lenders, to provide the best mortgage products and interest rates to fit their needs.

Over the next year, industry experts predict that each home purchase and mortgage arrangement will be as unique as the people purchasing the home. Home buyers are seeking out their local mortgage brokers in order to ensure they obtain a variety of lending options that will fit their lifestyle and budget. These unique buying and lending options not only allow home buyers to take advantage of the rates and products that match their current and future financial situations, but it also provides a level of flexibility that might not be available through an online-only lender.

Below are a few advantages to consider when purchasing loans from your local lending agent:

Competitive Rates
A couple of years ago interest rates were at an all time low, meaning home buyers could receive the best loan rates from just about anyone in the mortgage business. Now that local and big box lending agents share the same pool of wholesale lenders, both are able to offer the same mortgage products and rates. But, unlike big box brokers, local brokers have the ability to offer an additional set of geographic specific lending options which may better fit a borrower's niche market.

Easy Access
In order to ensure a speedy lending process, it is important to work with a broker who is accessible. By using a local mortgage broker instead of an online big box lending agent you can ensure you have personal first-hand access to the people underwriting your loan. Having the ability to phone or meet your broker and underwriter will help keep your loan on track towards quick approval.

Customer Service
Home buyers often find it comforting to know that their broker can meet with them in person as they guide them through one of the largest and most important purchases of their lives. This level of personalization allows the local broker to accurately evaluate the borrower's financial situation and provide superior loan options and customer service. A local mortgage broker's knowledge of the surrounding real estate and their dedication to offering flexible, innovative loan and payment options ensure you receive a loan that fits your specific needs.

Understand the Market –Shop With Confidence

Rates go up rates go down. In case you haven't been paying attention, the market has been very volatile lately. Every day it seems as if it's an absolute crapshoot as to where rates will be for that day. The good news is that rates are still low by historical standards.

Over time, small changes can add up to thousands of dollars so it's important to have at least a basic understanding of what drives interest rates and how the market works. My goal for my clients is that they know the answers to some basic questions so that they can understand how the market works and they can be armed with the right questions when they go shop for a loan. Unlike a lot of my competition I actually encourage shopping.

Here are some of the questions we give our clients:

1) What are mortgage interest rates based on?
The only correct answer is Mortgage Backed Securities or Mortgage Bonds, NOT the 10-year Treasury Note. While the 10-year Treasury Note sometimes trends in the same direction as Mortgage Bonds, it is not unusual to see them move in completely opposite directions. DO NOT work with a lender who has their eyes on the wrong indicators.

2) What is the next Economic Report or event that could cause interest rate movement?
A professional lender will have this at their fingertips. For an up-to-date calendar of weekly economic reports and events that may cause rates to fluctuate, visit www.suewoodard.com and hit the green MMG Weekly banner - this is a copy of our weekly newsletter, let us know if you want to be added to my weekly distribution list.

3) When Bernanke and the Fed "change rates", what does this mean. and what impact does this have on mortgage interest rates?
The answer may surprise you. When the Fed makes a move, they can change a rate called the "Fed Funds Rate" or "Discount Rate". These are both very short- term rates that impact credit cards, Home Equity credit lines, auto loans and the like. On the day of the Fed move, Mortgage rates most often will actually move in the opposite direction as the Fed change. This is due to the dynamics within the financial markets in response to inflation. For more information and explanation, just give us a call.

4) Do you have access to live, real time, mortgage bond quotes?
If a lender cannot explain how Mortgage Bonds and interest rates are moving in real time and warn you in advance of a costly intra-day price change, you are talking with someone who is still reading yesterday's newspaper, and probably not a professional with whom to entrust your home mortgage financing. Would you work with a stockbroker who is only able to grab yesterday's paper to tell you how a stock traded yesterday, but had no idea what the movement looks like at the present time and what market conditions could cause changes in the near future? No way!

Be smart... Ask questions. Get answers!
More than likely, this is one of the largest and most important financial transactions you will ever make. You might do this only four or five times in your entire life. but we do this every single day. It's your home and your future. It's our profession and our passion. We're ready to work for your best interest. www.jeffnunley.com    

America's Balance Sheet Moving Again as House Equity Falls – Todd Ballenger

The net worth of U.S. households hit a record high $58.6 trillion in the third quarter of 2007 according to the Fed's Flow of Funds report. This is surprising, when you consider that net equity in homes declined in the third quarter for the first time in 16 years. Growth is at further risk in the current quarter. We often speak about managing assets and liabilities and how they tend to move in different uncorrelated cycles.  As house prices drop, growth in stock and mutual fund holdings drove the gain in wealth this past quarter for most Americans.

Net Wealth

Borrowing grew 7.9% from last year - the slowest growth in borrowing since the start of 2001.

Asset grew 7.4% last year. While borrowing is growing faster than assets, the level of assets is larger than borrowing, so there was still a balance sheet increase in wealth.

Household assets continued to grow at a rate of about $5 trillion per year.  Growth in the total value of stock and mutual fund holdings by consumers increased by more than the net equity in real estate for the fourth consecutive quarter and by the largest amount since the first quarter of 2004.

Shifting Demand For Money

Consumers are shifting the nature of their borrowing. As standards have tightend for mortgages, overall borrowing by consumers using credit grew by over a percentage point over the last year to 5.3%. If consumer continue this trend of moving to harder money, they'll increase their debt and lose tax benefits associated with most mortgage borrowing, further creating their own version of the current credit crunch.

Real Wealth May Drop

Housing wealth is likely to decline further. Many believe that the OFHEO 1.8% growth for the year through the third quarter is off, as they use lower priced homes and exclude jumbo properties, which according to NAR and Case-Shiller studies were much lower in the same quarter.

Time To Think Different

Equities are expected to slow in the shorter term, and a decrease in real house values will continue to put pressure on cash flow and spending habits as loan reset to higher interest rates.  A shift is possible as people see housing stall, investment slow, and find the only way to really impact their savings may be to actually save more (meaning spend less).  While this isn't appealing to most, it may be a simple fact of the forces that are lining up... and as we say the timing for good financial education of spending and savings habits around the consumer assets and liabilities will be more valuable than ever.