Posted by Peggy Farber on 9/17/2014

The first step in home buying is getting a mortgage. Many home owners also find themselves in a maze when they start the refinance process. Navigating the mortgage process can be confusing. There is so much to know between rates, types of mortgages and payment schedules. Avoiding making a mistake in the mortgage process can save you a lot of money and headaches. Here is a list of the biggest mortgage mistakes that potential borrowers make. 1. No or Low Down Payment Buying a home with no or a low down payment is not a good idea. A large down payment increases the amount of equity the borrower has in the home. It also reduces the bank’s liability on the home. Research has shown that borrowers that place down a large down payment are much more likely to make their mortgage payments. If they do not they will also lose money. Borrowers who put little to nothing down on their homes find themselves upside down on their mortgage and end up just walking away. They owe more money than the home is worth. The more a borrower owes, the more likely they are to walk away and be subject to credit damaging foreclosure. 2. Adjustable Rate Mortgages or ARMs Adjustable rate mortgages or ARMs sound too good to be true and they can be. The loan starts off with a low interest rate for the first two to five years. This allows the borrower to buy a larger house than they can normally qualify for. After two to five years the low adjustable rate expires and the interest rate resets to a higher market rate. Now the borrowers can no longer make the higher payment not can they refinance to a lower rate because they often do not have the equity in the home to qualify for a refinance. Many borrowers end up with high mortgage payments that are two to three times their original payments. 3. No Documentation Loans No documentation loans or sometimes called “liar loans” were very popular prior to the subprime meltdown. These loans requires little to no documentation. They do not require verification of the borrower's income, assets and/or expenses. Unfortunately borrowers have a tendency to inflate their income so that they can buy a larger house. The problems start once the mortgage payment is due. Because the borrower does not have the income they are unable to make mortgage payments and often end up face bankruptcy and foreclosure. 4. Reverse Mortgages You have seen the commercials and even infomercials devoted to advocating reverse mortgages. A reverse mortgage is a loan available to borrowers age 62 and up. It uses the equity from the borrower’s home. The available equity is paid out in a steady stream of payments or in a lump sum like an annuity. Reverse mortgage have can be dangerous and have many drawbacks. There are many fees associated with reverse mortgages. These includes origination fees, mortgage insurance, title insurance, appraisal fees, attorney fees and many other miscellaneous fees that can quickly eat at the home’s equity. Another drawback; the borrower loses full ownership of their home and the bank now owns the home Avoiding the pitfalls of the mortgage maze will hopefully help you keep in good financial health as a home can be your best investment. .





Posted by Peggy Farber on 9/10/2014

It is a great time to be a real-estate investor. If you are looking to jump in the investor market low home prices and low interest rates make this a great time. According to Zillow.com. the real-estate market is starting to recover: U.S. houses lost $489 billion in value during the first 11 months of 2009, but that was significantly lower than the $3.6 trillion lost during 2008 and things only continue to look up. While the timing may be right, you will need to have all your ducks in a row. An investment purchase is different than your typical purchase. Consider your options. Have a strategy and know what kind of investor you would like to be. Ask yourself if you want to be a landlord, or are you planning on flipping or restoring and reselling properties. What types of properties are you interested in? There are many choices from land, to apartment buildings, residential housing and other commercial real estate. Partner with experience. Real estate agents experienced in investment property deals know what to look for in a deal. You may also want to consider asking a more experienced real-estate investor for advice. If you plan on becoming a landlord make sure to familiarize yourself with the local laws regarding being a landlord. Location, location, location. If you buy a property with hopes of renting it out, location is key. Homes in high-rent or highly populated areas are ideal; stay away from rural areas where there are fewer people and a small pool of potential renters. Also, look for homes with multiple bedrooms and bathrooms in neighborhoods that have a low crime rate. Also think about potential selling points for your property. If it's near public transportation, shopping malls or other amenities, it will attract renters, as well as potential buyers if you decide to sell later. The more you have to offer, the more likely you are to please potential renters. Have capital lined up. Speak to potential lenders or a financial planner about what you will need for assets and cash flow. You will need to have enough assets to handle the ups and downs that could come with investing. Most experts suggest a fallback of about six months of mortgage payments for landlords. You will need this in case or vacancy or repairs. If you're planning to fix up a home and sell it, you will need reserves to cover the costs to maintain the home while it is on the market. Becoming a real-estate investor is much different than being a residential homebuyer. A buying decision is a business decision not one based on emotions.





Posted by Peggy Farber on 8/13/2014

To lock or not to lock that is always the question. If you are shopping for a home loan or refinancing a mortgage, your mortgage lender will require you to lock your rate on the amount borrowed no later than five days prior to closing. Locking a rate guarantees the interest rate for a set period of time. The decision to lock or not is a question of timing your purchase or refinance with the market. Consumers can get in trouble with a rate lock because there is a deadline on when escrow needs to close. Borrowers should comparison shop loans considering the mortgage rate locks vary in time length. If you are unable to meet the deadline the costs can accumulate. Here are some common options: 15-day lock: Is the “lowest-cost rate” available. The loan needs to be approved by underwriting to take advantage of this lock. 30-day lock: This is the fair market rate and is most commonly used for interest rate locking upfront before loan approval. 45-day lock: Used for transactions taking longer, whether the loan is approved or not. 60-day lock: Can be used in circumstances where the loan is prolonged. This option does not usually offer the best interest rate for the consumer. Interest rates can vary by as much as 0.25 percent on the longer rate locks compared against 30-day and 15-day rate locks. The bottom line, the longer the lock, the more risk the lender takes and the slightly more costly the loan.    





Posted by Peggy Farber on 8/6/2014

Rates are low, prices are right, and now is a perfect time to think about investing in real estate. Many would-be investors think real estate is a way to quick riches. Rapid monetary returns are usually not the case. However, the rewards can be substantial if you are willing be patient, do the necessary homework, and make a few good decisions along the way. Before you start investing in real estate, here are a few things to consider: • Start small: Don't go large on your first investment. Take on a smaller investment first so you have the opportunity to make some mistakes that won't cost you large amounts of money. Investing is a learning process. • Don't overpay: Do your research on your potential investment. Do full a full property evaluation; research the location, have a home inspection, and look into any liens and owed taxes. Always conduct an in-depth property analysis before negotiating any terms. • Consider the margins: Paying the bills on an investment property is different than paying for your personal residence.  When you buy an income property to rent, you're calculating how the income (rent payments) will help pay the mortgage and operating costs. • Know your partners: Having a bad partner could be your biggest downfall. Try to team up with a more seasoned real estate investor to learn the ropes. It is also important to be comfortable with your partner. Like all other businesses, real estate investing, requires a well thought out plan if you want to succeed. Weigh all the risks involved in real estate investing and develop a plan on how you will manage and overcome them before you get started.