How will the Federal Reserve Raising Interest Rates Impact You?

On December 16^th,  2016 Chairman Janet Yellen announced that The Board of Governors of the Federal Reserve (Head of the Bank of the Banks) were raising interest rates. 

http://www.federalreserve.gov/newsevents/press/monetary/20151216a.htm

Chairwoman Janet Yellen is the first woman to hold this position. Chairwoman Yellen took over the position from Ben Bernanke and was sworn into her office on February 3^rd, 2014 after the senate confirmation in January 2014.

The Prime Rate adjusted in sync with the announcement.  However, most of the loan market already expected this and mortgage interest rates had risen about 0.25% in the 10-14 days before the announcement in anticipation, so there was actually little movement in long terms rates at the time of the announcement.

But, what does this mean for you? What does this mean for your clients? What is the actual cost?

The Federal Reserve has already raised interest rates by 0.25% and plan to continue raising rates 0.25% until next December so there will be a full 1% increase in interest rates. That doesn't sound like much, but for most people it actually adds up. Take a $300,000 home for instance. For each 0.25% increase in the interest rates on a $300,000 loan, that's an extra $43.56 a month. So over, the next year, if you are buying a $300,000 and the interest rates go up by 1%, that's an extra $174.24 a month in interest you'll be paying. That's easily a student loan payment, a car payment or a nice dinner out. If you look at it on an annual basis, it's over $2,090 a year in additional interest costs, which is over $10,400 over the next five years!!  Now, you may think, well, that’s more of a tax deduction for me since it’s interest. Be sure to check with your CPA to see how that change will really impact your bottom line. But I say, a penny earned is a penny save, and even more important, $2,000 saved is by buying now is free money!

So, if you are considering buying a home, do it now! Get pre-approved and start planning now.

These interest rates are for the purposes of example only.  You are not guaranteed these rates, you may or may not qualify for a loan.

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How do interest rates really impact your buying power?

What can you really buy for your money?  Well, it depends on where you are buying and what type of property you are buying. This can vary greatly from state to state as well as from the city to the suburbs. I'm a big proponent of considering your future housing needs as well as your current financial situation before you decide to get pre-qualified and start your new home hunting. There are so many factors to consider, such as how long you are going to stay in your area, do you plan on starting or growing a family and how much disposable cash you have for a down payment.

Obviously, the lower th einterest rate, the more home you can buy. But by how much?  Well, for a $300,000 loan, the principal and interest payment for a 30 year fixed rate of 4.0% is $1432.25.  For every change in 0.125% in interest rate, the monthly payment changes by $21.54.  Not as much as you thought, huh?  Yeah, people tend to be a bit over dramatic when it comes to interest rate. In my humble opinion, the most important thing to consider is, "Can you afford the payment comfortably?"

There's also a great article today that addresses that, On The House:  On mortgage rates and what gets people to buy

These interest rates are for the purposes of example only.  You are not guaranteed these rates, you may or may not qualify for a loan.

For more information, pick up my #1 Best Selling Book at ElysiaStobbeBooks.com

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TRID! What does it mean to you?

TRID execution is quickly approaching!  What is TRID? TRID stands for TILA (Truth-In-Lending) RESPA (Real Estate Settlement Procedures Act) Integrated Disclosure. TRID was delayed earlier this year, pushed back from an August 1, 2015 start to this week.

What does this mean to you? TRID brings with it additional timelines designed for consumer protection and new forms. Expect your home purchase process to slow down a bit. From what I'm hearing, expect the typical closing time to slow from 30 to 45 days.

On October 3, 2015, new documents will replace the GFE and HUD-1. The GFE will be replaced by the Loan Estimate. The HUD-1 will be replaced by the Closing Disclosure.

For more information, pick up my #1 Best Selling Book at ElysiaStobbeBooks.com

For more mortgage tips check out our website www.bestmortgagebook.info
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Published again! Here are 5 Common Rent To Own Mistakes You Don't Want to Make courtesy of Ivestopedia

Published again! Here are 5 Common Rent To Own Mistakes You Don't Want to Make.
http://www.investopedia.com/articles/personal-finance/083115/avoid-5-most-common-renttoown-mistakes.asp

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Will the Federal Reserve Raise Interest Rates This Week? What does this mean for you?

This is a big week for economic news, particularly when it comes to interest rates. This Wednesday and Thursday, The Federal Reserve will meet to decide if the economy is stable enough to raise interest rates. The Federal Reserve has chosen NOT to raise short term interest rates for the last 7 years. Yes, 7 years!  Why is there a buzz that The Fed will raise interest rates now? There are several signs that our economy has stabilized, the first of which is the unemployment rate. There's lots of buzz on this regarding if the unemployment numbers are accurate or not. The biggest concern is that people who are unemployed are no longer counted in the statistics after six  months. So, if you have been unemployed for six months and 1 day you are not included in the unemployment numbers. That's some funny math.

Binyamin Applebaum wrote an interesting article for the New York Times, published today
entitled The Fed's Policy Mechanics Retool for a Rise in Interest Rates. Binyamin's article has some great points about how The Fed's plans may affect lending and our economy.

Seems to me if you are in the process of purchasing a home or refinancing, it's a good time to lock your interest rate!

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Should You Buy an Investment Property or Invest in a REIT?

How do you decide if you want to be a landlord or not? Well, there are several things to consider...first of all, how active do you want to be in your investments? How active should you be in your investments? If it's not your full time job, you still need to pay attention to your investments. This includes your stocks, bonds, retirement accounts, real estate investments, etc, where ever your money is kept. If you don't pay attention to it, who will? If it's not your full time job, even more reason for you to check in. This can be weekly, monthly or daily depending on what vehicle(s) you invest your money into. I have a third party property management company handle my rentals and I check in with them at least once a month. In addition, I review the #'s every month to make sure we are on track with rents and renewals. You may need to do this more or less depending on your preference, number of rentals and if you use a property management company or not. For the stocks that I actively trade, I check on daily. I also spend a few hours every month on my asset allocation and overall performance.

So, what does this mean to you? You need to do what is best for you. How much time do you have to devote to your investments? Do you want to add real estate to your investment portfolio? According to Barron's recent article, "The Allure of Mortgage REITS" by Amey Stone some REITS are paying up to 12% annual yields and the are on sale right now for deep discounts. So, this begs the question, if you can get 12% returns with little or no time investment, why would you build your own real estate portfolio?

A REIT can offer you a (hopefully) diverse portfolio. This can be across property types such as commercial or residential single family homes or multi family. Or  it could be spread among properties in various markets across the country. Some REITS are traded like stocks, some require a minimum investment and can be difficult to get out of, so do your homework.

If you buy your own real estate investment properties you have a few models to choose from...buy and hold, fix and flip or a combination there of. Things to consider include available cash, available time, access to general contractors and  construction teams (if you are considering fix & flip), opportunity to leverage, return on investment goals and much, much more. You can start with one rental or 2nd home that you rent out when you're not using it, see if you have a taste for being a landlord and go from there.

I don't suggest you jump into either real estate investing or a REIT without doing your homework. Real estate can be an amazing investment and it's not for the faint of heart.I hope you find this information thought provoking. If you have questions email me at info@bestmortgagebook.com.

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How Does Oil Impact Interest Rates?

How does the economy impact interest rates? Oil, stocks, bonds, Federal Reserve Chairman Yellen, flying monkeys...how do these factors play out in regards to interest rates? This is a hot topic right now, as reported by CNBC's Trading Nation this morning.

Well, you can watch a plethora of TV shows, read a ton of newspaper and blog articles. Or you can consider interest rate as merely one factor in your choice to buy a home.

I think that interest rate is an important factor while considering whether or not you will purchase a home. However, there are several other critical items to ponder. Obvious questions to ask yourself would be, "Can I afford the total monthly payment?" "What other bills may come up that I'm not anticipating?" "Will I need a new car in the near future, how much will that payment be?"

In addition to the economic piece of the equation, I think this is a very personal decision.  I know that sounds obvious, but just as important as how hot the real estate market is or is not or where interest rates will go, is an individual's plans for the future.

I believe there are at least two sets of questions that we should ask ourselves when considering the purchase of a home. The first set of questions has to do with a person or family's plans. Am I going to stay in this city, this state, this neighborhood for 1-2 years?  3-5 years?  How is my job stability? Do I love my job?  Can I work from anywhere? Am I single or engaged? Am I planning on growing my family?

The second set of questions has to do with the economics. What do I need/want in my housing? Can I rent a luxury apartment or do I need a 4 bedroom house? What's the cost of renting vs. buying? What's the cost per square foot of renting vs. buying? Does it cost more or less to rent than to buy? Any excellent licensed loan originator as well as real estate agent should be able to help you with this calculation in your local area. Basically you take your total estimated monthly mortgage payment including property taxes, home owners insurance and any monthly home owners association or condo fees and compare it to the cost to rent something similar in location and size. To make it more complex, factor in your down payment and estimated closing costs spread over the time you think you will be in that location as well as any interest deduction your CPA thinks you would benefit from by owning. Other factors to consider are leverage and appreciation.

Grab our new kindle version of my #1 Best Seller on Amazon. You can get it for FREE for a limited time if you have Amazon Prime or Kindle Unlimited or it's just $2.99 and that's a steal too!

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How Can Knowing Your Mortgage Options Help You?

Rich Rosa, co-founder and co-owner of Buyers Brokers Only, LLC asks “Is a Lack of Understanding About Mortgages Holding Back Home Buyers?”

Possibly….this is one of the reasons I wrote my book. The mortgage process is confusing to say the least and whether you’ve never applied for a mortgage before or have multiple mortgages, the more you know about the process, the better. I believe that an educated consumer is our best client. An educated consumer asks better quality questions and is more comfortable discussing and exploring their loan options.

Most people don’t know how much home purchasing power they have, how much to expect for closing costs (varies by state), or how much paperwork is involved when applying for a home loan. Most people have no idea the difference between loan programs from bank to bank, lender to lender, or broker to broker— or what the differences are between the main types of residential mortgage providers. Most people have no criteria for choosing a lender, the type of loan to seek, or how much down payment is best for them. For example, are their differences between the types of property that may affect down payment?

The mortgage industry is packed with nuance, which can lead to confusion for the consumer. While trying to buy a home, you may have people from many different professions telling you what you should do and how to make decisions—who should you listen to in which situations? Your most personal financial information is critical to the mortgage process and yet do you know who you are sending it to? What about mortgage insurance? Why is it required and when?

The two questions I most often hear are: “What’s the payment?” and, “What’s the interest rate?” While these questions are important, there are several other questions that are just as critical: what is the right loan type for me; is there an up-front funding fee for this loan; what are the differences in available mortgage insurance; how will property type restrictions affect my loan; what are the pros and cons of this loan; what is the down payment requirement with this loan choice over another; what are the closing costs associated with each loan type; and, who is allowed to pay the closing costs? Successfully navigating the maze of questions, regulations, and requirements ultimately leads to a mortgage closing.

Email me at info@bestmortgagebook.com for my Free Checklist “Questions to Ask When Selecting a Lender”.

For more information on loan documents, read my #1 Best Selling Book on Amazon

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The Fun and Excitement of Loan Documentation - Ok, its Not Really Exciting, More of a Necesary Evil

Teresa Mears of U.S. New & World Report, Money has written a great article about the documents needed when applying for a loan.  Thank goodness someone else is talking about this! I can’t emphasize enough how much documents impact your loan timeline as well as your loan approval.

While this may seem more boring and makes you want to Stick A Fork In Your Eye, documents can make or break your loan. With documents, the devil is in the details. You will submit your asset accounts (checking & saving accounts, money market, IRA, CD, 401K, 403B, brokerage accounts, etc.)— any accounts you plan to draw money from for your down payment and closing costs. Supplying the proper documentation in the correct form can save you days of frustration and loss of time. The clock starts ticking when you sign a sales contract and everyone is working hard to get you to closing; so, if you do not respond quickly to document requests, you are not only risking your mortgage and your binder, you are also making it very difficult for the lender to finalize full approval for your loan. Also, if you cut corners and do not send documents in the proper form, you are burning time. Sending incorrect documentation can burn up several days—a day for the request, another day sending incorrect documents, another day the lender has to request correct documents… and so on.

If you want to be a proactive participant in your loan process, pay attention to what is requested and what you send. Failure to provide the correct documentation for loan approval will stop the loan process. If you are not able to provide the requested documentation for the underwriter, sorry to say, you will not be approved for the loan. I was working with a client last year that sent a scanned copy of his wife’s driver’s license that was illegible. After months of requesting a clear and legible copy of the driver’s license, we finally received a clear copy and were able to move forward. Thank goodness! Something as simple as taking a picture of your driver’s license with your smart phone and emailing it to your lender is a silly thing to hold up your loan closing.

Be prepared to get lots of documents and you will save yourself time and mental anguish. I once had a client that was wondering why his loan was not closing quickly. We had asked the borrower again and again for the documents, but he just said he couldn’t find them. Unfortunately, as much as I despise paperwork, if the underwriter needs it to approve your loan, you must provide it. If you need help with the document format or where to find some documents, just ask your lender. They should be happy to help you. If not, get a new lender!  Email me at info@bestmortgagebook.com for my Free Checklist “Questions to Ask When Selecting a Lender”.

Many of the documents you are asked to supply, such as a driver’s license or photo ID, are required by law. If you have questions about the document requests— wonderful!— I can’t preach enough about staying informed. Just make sure to ask your questions right away to keep the momentum going towards full approval and a fast closing. As you’ll see in more stories below, just a little attention can save tons of time and contribute to the smoothest loan process possible. Although everyone is working for you via the fees you pay them, they are also human beings working to get you a lump sum of money that you would not have otherwise. Keep in mind that all of these people want your loan to be approved and they have the best intentions in being your advocate for loan approval.

For more information on loan documents, read Chapter 11 in my #1 Best Selling book on Amazon.

For more mortgage tips check out our website www.bestmortgagebook.info

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