ChrisCrocker

Who Charges These Closing Fees?

I read a great post today from a colleague "in the know". Shawn Von Talge at Professional Mortgage Group. He was discussing the different factors that create the total cost for the closing on a purchase or a refinance. The title of his comment was "Hand in the Cookie Jar", and I think its pretty fitting. He described how there are several entities that perform different functions in order to protect the interest of the buyer, the lien holder (usually a bank), and the community at large.

One thing I always advise my clients on is the logic behind the underwriting and funding process. You have to put yourself in the banks shoes for a little bit. By granting the borrower an approval, the lender is saying "what we know about you (credit worthiness, ability for repayment, and intent) and what we know about the collateral (usually the property), we feel comfortable assuming that degree of risk to let you rent our money". And that's all any loan with interest is . . .renting money. But they also have to protect their interest in the event of any unforeseen circumstances. Because in the big picture, if this borrower defaults, the lender is left with the house. And to be on the up-and-up, they use impartial 3rd parties to verify or perform services so that every one is playing to the same sheet of music (so to speak). So, there will always be fixed costs associated with any transaction. No way around it.

I always grumble when i see advertisements saying, "the No Closing Costs Home Loan". It simply doesn't exist. But any good mortgage broker can arrange a "No Out-of-Pocket Expense Home Loan". Two very different things. That's why its important for brokers to get an idea of the big picture for their clients. an understanding of their short and long term goals. "No Out-of-Pocket Expense" can be a great benefit to some, where paying a little more at closing may yield a bigger benefit in the long run.

Anyway, I encourage you to See Shawn's comments, and share some of your experiences.

Professional Mortgage Group, Inc.: Hand In The Cookie Jar

Zillow.com has launched . . . Again.

There has been an increasing trend in Real Estate and Residential Finance to give buyers and sellers easier access to real estate tools through technology. Some have been welcomed and some have been demonized. Zillow.com is another tool in this trend. Zillow.com is an internet based company that has developed, what they consider to be, an encompassing site that will lets you determine the market value for your home. There are several services similar, but Zillow.com has a few technological features to make it a big player in the national market.

Don't rush out to refi just yet. These values are based on public information obtained through county and state information. So in some cases, Zillow.com may be a little off. But, its a good place to start. Zillow.com is also full of great resources for both Buyers and Sellers. I consider it to be a pretty good, non-partisan, resource to learn more about every aspect of residential real estate. Everything from how to get pre-approved for a mortgage to how to negotiate with your selling agent.

A couple of neat features from Zillow.com. . .the "Make Me Move" listing. This is a place where you can list your house for sale. They say "everything has a price", well that is exactly what this feature is. "Make Me Move" the free and easy way to tell others the price you'd be willing to sell your home for, without actually putting it on the market. It's that magical number you just can't refuse. Once you set your Make Me Move price, potential buyers can contact you anonymously via e-mail. Then it's up to you whether or not to sell your home. Try it out! You can remove your Make Me Move price at any time. Thinking about selling soon? Use "Make Me Move" to start gathering interest from potential buyers.

Also, If you believe your value to be way off (according to Zillow.com) you can submit to them reasons to justify a re-value determination. Things like additions/improvements to the home, new schools or amenities in the immediate area, or comparable sale around you.Again, I don't consider Zillow.com to be the final word in determining the value of your home. There are several sources that will be used to determine the offer price by buyers, realtors, or lenders. But Zillow.com is another good resource to educate yourself and help you achieve your real estate goals.

Look around Zillow.com and post your comments here

What to Do When a Builder Offers to Find You a Loan

This is a good article for anyone who has ever been instructed to use a mortgage program from a builder or developer. As I explained below, there are many incentives available to help sell existing new construction homes. But never forget to do your homework. Click on the link below to see an article from The Wall Street Journal:

What to Do When a Builder Offers to Find You a Loan

Comments?

What to Expect in a Buyer's Market

All we hear on the news today is that the market has made a quick change from a sellers market to a buyers market. But what does that exactly mean, and what does that mean for our customers/borrowers?

Well for the past few years, property values have been rising. Combine that with low interest rates, and it creates a growing market. This has given a lot of developers and builders more opportunity to create more product (more homes) in the growing marketplace. Different areas of the country have varying degrees, but in Mid Mo, we are seeing a lot of builders that have been continuing to build, build, build in order to maintain a line of credit. But builders can't keep building forever unless those homes sell.As the saying goes, "a house is only worth what someone is willing to pay". Sure, you can get appraisals to determine a market value. But ultimately, the home is only worth what someone is willing to pay for it. So, when rising property values price a majority of buyers out of the market, and inventory (homes) continues to increase, it creates a surplus of homes. If you can remember back to your first "Econ" lesson. . .what happens when there is too much supply and too little demand? Prices fall. Long story short, we should expect some builders to either reduce their prices or create more incentives to sell their existing homes. Look for things like "Free UpGrades", "Seller Paid Closing Costs", "Free Homeowners Association", Etc. I've even seen some builders throw in Plasma TV's and moving trucks. But in the simplest terms. . .Builders will make several different concessions in order to sell these homes. Hence, a Buyers Market.

Another area to consider. . . current homeowners. Some of these homeowners took advantage of the low interest rates of the recent past to purchase new homes or refinance their existing. Some of these homeowners used Adjustable Rate Mortgages (ARM's) which had low rates locked for the first 3, 5, or 7 years of the loan. The problem is that those ARM's are getting ready to adjust and in some cases can adjust as much as 2.0%. Example: taking a payment of $1265.00 up to $1540.00. In some cases, this prices that homeowner out of their own home. That homeowner will either have to refinance again, in hopes of getting a lower rate (which are still available) or absorb that increase. Some may even decide to sell their home and downsize into something more affordable. These are the people who will take a hit. Because, not only are they competing with builders and existing inventory, but more than likely, the value of that home may have decreased due to the surplus of housing. In extreme cases, they may even owe more on their home then they can sell it for.I know this post may seem lengthy, but it certainly deserves some attention. Most Real Estate Professionals are creating ways to counteract this trend or their working to produce programs to ride the buyers wave. What ideas have you seen? Your comments are welcomed.

PMI May Be Tax Deductible

Check out the attached article. The House and the Senate have passed the Tax Relief and Health Care Act of 2006. What does that mean to homeowners? Buried deep in the bill is a provision to make Private Mortgage Insurance (PMI) tax deductible. What is PMI? Private Mortgage insurance is insurance for the bank. Unless you have 20% for a down payment, most lenders will require you, at your expense, Private Mortgage Insurance. This insurance serves no benefit to the homeowner. It only benefits the bank. It's insurance that will cover any loss to the bank in the event of foreclosure. The hook? It is usually an additional $150 to $175 per month, on top of your monthly mortgage payment. AND it is not tax deductible. Well, those days may be numbered. The Act's next stop is the presidents desk. If he determines that PMI should be tax deductible, you'll see more and more loan programs to maximize this benefit to borrowers.

Mortgage News Daily Article

This Blog will bring you business

I just saw a good article that gives a good description of how blogging, and building a blogging network, can bring you more business. This can be applied to all areas of real estate. Check out:

Agents That Blog

As a matter of fact, this site is soon launching a devoted section to locate blogging agents.

Just an FYI

Just a heads up. You'll see more and more links, podcasts, and other media to continue to make this page as useful as possible. Currently, I have links down the right hand side to Mortgage News Daily. This menu will keep us up to date with the latest headlines from that site. Mortgage News Daily is a good resource for mortgage and real estate professionals, but there is also a lot of good news for customers too. I encourage you to click on any of those stories that look interesting.

Also, I'll keep an eye out for interesting video too. The one below was put together by the National Association of Mortgage Brokers as an ad to better describe the responsibilities and advantages of using a mortgage broker.

Keep your comments coming. Thanks,

What are closing costs?

One of the most common questions throughout the loan process is "What are the closing costs?" First I think people need to understand what "Closing Costs" accounts for. And believe it or not, the definition of what closing costs actually account for varies. The majority of brokers will define "Closing Costs" to include all prepaid items. Prepaid Items are things you must pay for in advance associated with the purchase of the home. Things like tax and insurance reserves or odd days interest. Technically these are not costs, per say, but these reserves are usually required by the lender. So, "Closing Costs" include every expense associated with the transaction. These expenses come from several directions. Those directions can include the lender, the appraiser, the homeowners insurance, the local taxes, home inspectors, realtors, title company, and title insurance company.

Typically, closing costs will range between 3.0% and 6.0% of the amount financed. And just like your interest rate, closing costs are usually higher for more difficult or risky loans than that of someone who has excellent credit and a down payment. Most conforming loans with down payments will be at or slightly below that 3.0%, where Subprime loans with no down payment can expect to be closer to the 6.0% mark.

What does a Mortgage Broker do for you?

Welcome to Mid MO Mortgage Advice

This Blog has been created as an informal medium to answer any type of mortgage question or scenario. With all the mortgage and real estate activity over the last few years (increasing home values, construction boom, refinances, debt consolidation, second homes, investment properties), mortgage programs and opportunities are rampant. And like any other industry, there are opinions from every direction. Let's use this venue for a no-holds-barred Q and A. Please submit any questions or queries you would like addressed. Be as specific as you like.

As moderator, let me explain my background. I am a Senior Mortgage Broker at Professional Mortgage Group still very active in the real estate industry. I have nearly 10 years experience with every facet of residential real estate finance. I have helped borrowers and investors all over the country, but I am never surprised by the unique questions and scenarios presented by my clients. Which brings me to the purpose of my blog. My goal is to de-mystify some of the complicated aspects of securing financing for your new home. The dream of homeownership doesn't have to be complicated.

So, I welcome and invite you to contribute or question any problems, successes, or aspect of real estate finance. Anything from pre-qualification to closing, we can address in an open and unbiased forum. All real estate professionals are welcome to contribute. Title Agents, Appraisers, Realtors, and Lenders, are all invited to bring their experiences here.

Thanks in advance, I look forward to your input.

Your moderator,

Chris Crocker