The Phoenix Real Estate Advisor

Here’s an interesting article that I thought you might like to ready!

When buying a home, it is helpful to determine the type of home you’d like and how much you can afford, before beginning your search. Most lenders allocate approximately 28% of your gross monthly income to housing expense. Housing expense includes principal, interest, taxes, and insurance (PITI). To get an idea of how much you can afford to pay each month for a house, multiply your gross monthly income by 28%.

When coupled with current outstanding loans, the total for your debt service should not exceed 36% of your gross monthly income. Some lenders may have slightly more liberal requirements or lower interest rates which may increase your purchasing power.

Lenders price ARM’s (Adjustable Rate Mortgages) to work for certain customers. They make sense if you plan to live in a house for only a couple of years, for example. If you’re staying longer, fixed-rate loans are better for locking in a low rate.

Preapproval
Some mortgage lenders take the guesswork out of applying for a loan by figuring out for you the amount you can afford to borrow. They then give you a printed document stating the maximum mortgage amount you qualify for. Mortgage preapproval establishes your price range and strengthens your buying position by letting the seller know that you have already been approved for the loan.

Current Tax Laws
Mortgage interest, property taxes, and loan fees, or “points,” are currently tax deductible. Points are generally deductible in the year paid. A point equals 1% of the mortgage amount. If you are in the 28% tax bracket, this is equivalent to receiving a 28% discount on your mortgage interest and property taxes.  During the first years of the mortgage your tax savings are especially high because most of your monthly payment goes toward loan interest.

Closing Costs
Some lenders today can now offer first mortgages at no closing cost. Out of pocket expense is limited to the down payment and beginning escrow accounts for taxes and insurance. Some limitations may apply. You can usually improve your interest rate by paying a point or two at the closing. This is a good idea if you plan on staying at least 4-5 years in your home.

To determine your monthly mortgage payment, find your interest rate in the rate column below. Then move across to the column that indicates the term of your loan. That number is the interest rate factor. Multiply that number by the number of 1000’s you plan to finance. (If you’re financing $100,000, multiply by 100.)

Mortgage Payment Guide  –   Factors per $1000

 INTEREST      30 yr TERM
     6.00              6.00
     6.125            6.16
     6.50              6.33
     6.75              6.49
     7.00              6.65 
    

Jermey sent over an update today that I thought you might like to see. It’s good to have a good resource for this type of information and I’ll continue to pass along info as it comes!

There is some new news on what the “new” tax credit for buyers will look like and there are some interesting developments related to the Mortgage Modification Plan we mentioned yesterday.

TAX CREDIT

First, the homebuyer tax credit is structured a bit differently in the $789 billion version of the Stimulus Bill.  The latest version has the credit at 10% of purchase price up to a maximum of $8,000.  It is set up for first time homebuyers that purchase between January 1, 2009 and November 30, 2009.  Buyers will only have to repay the credit if they sell within the first 3 years.  The income limits where “phase-out” starts to occur are at - $75,000 for single filer and $150,000 for married filers.  I don’t have the “phase-out” details yet.

MORTGAGE MOD PLAN

One major mortgage servicer just  announced that they will put the brakes on all new foreclosures for the next 3 weeks.  The reasoning behind this is that they feel that the Treasury will be able to produce the new mortgage modification plan within that 3 week period and hopefully some of their troubled homeowners can be spared.

I’ll be sure to keep you posted as this all develops.

Your Trusted Advisor, Jeremy House, C.M.P.S.

Good afternoon, this is a long one so please hang in there with me… there is a lot going on!

Today was Stimulus and “TARP II” day!  Before I jump into that, I want to give a quick snapshot on how this yet again historic day is moving our mortgage rates.  Due to the lack of solidarity of both plans and the minimal details being released, skeptical investors have pulled money out of the stock market (Dow down 400 currently) and shoved it in the longer term bond market.  This is what is giving us our second day in a row of better mortgage rates.

That being said here is where we are at, or should I say what we know so far J :

TARP II (Bank Recovery) –

$1.5 Trillion Total

$500 Billion from Private Cap some of which will come from remaining funds from the original TARP (Trouble Asset Relief Program)

Buy illiquid securities including mortgages

Idea is to support Consumer and business lending

All banks will undergo “stress” test to see if they can survive tough economic times and if passed they are eligible for Government funding from this plan

Taxpayers will receive dividends and securities from banks involved in program

Banks will be required to be “more” forthcoming about what they will do with the Government funding they receive and will accept restrictions on executive compensation

TALF – part of plan that is still in the works – leverage money up to $1 trillion to “kick start lending” with new loans

Will also use some funds to buy Mortgage Backed and other AAA securities – would help mortgage rates

Details on another $50 billion to help “troubled” homeowners (on verge of foreclosure) will be release later by the Treasury
Stimulus Plan – 

The latest and greatest version which was passed by the Senate (61 to 37) is set at a total of $839 billion

$293 Billion is in the form of tax relief

$546 Billion is in the form of spending measures

The next step in the process is for the Bill to be reviewed by House and Senate members and for an agreeable version to be passed.  There are some key differences to be ironed out including some protection from AMT (Alternative Minimum tax) for higher income earners and home buyer credits for those buying this year (Senate in favor of both).  The next 24 hours should allow enough time for these issues to be mulled over and hopefully a consensus will be reached.  However, it is entirely possible that it may drag out a bit longer than that.  We will be sure to keep you posted.
Please let us know if you have any questions or if there is anything that we can help you out with!

Two big news stories out today!

1.Pending Sales are up 6.3% (highest since Sept of 2008) – on the heels of existing home sales being up 6.5% (cutting inventory to just over 8 months nationally)!!

2.The government will include provisions in the Stimulus package to push mortgage rates down to 4%. 

The first is a fact – and a great one at that!  There have actually been limited communities reporting slight appreciation.  The second story is yet to be seen.  As activity continues to pick up as a result of low low prices and low low interest rates, it is no mystery that even lower interest rates would help get some buyers off the fence and into the buying mood.  Right now it’s a bit early to bank on the Fed “influencing” mortgage rates down to 4%.  It is important to remember that the Government doesn’t “control” Mortgage Rates.  However, with their billion dollar mortgage bond buys they sure have done their share of pushing them down to the current 5% - 5.5% range in early 2009.

If you think back to a year ago, buyers would have been overjoyed with these types of rates.  It is too soon to tell and sell the 4% whispers we are hearing again.  I can tell and sell you that the one and only way that mortgage rates will go that low is if the Fed steps in and purchased mortgage backed securities more aggressively than they have been.  At that point sustainability becomes the question – how long can the Fed hold rates down or how much $$ do they have? 

All in all we are still seeing some of the lowest rates in history right now, and coupled with the low prices out there it is a great time to buy.  BTW - the latest little increase we have seen in rates is seemingly coming to an end.  Look for the end of the week to provide some relief in mortgage rates.

I wanted to share a few pieces of good news with you.

The past two days have produced a few surprisingly positive pieces of news.  The first came yesterday by way of the  Existing Home Sales Report.  Expectations were for 4.4 million and the actual data came in at 4.7 million cutting down the standing inventory number we all love so much (not J ).  Much of this is likely due to the lower interest rate environment we are in right now.  Speaking of low rates, the Fed is in the middle of a 2 day meeting that will determine their rate cut/hike decision and more importantly their continued policy on purchasing mortgage backed securities.  Their recent purchases have influenced the secondary market and pushed mortgage rates lower.  Right now, the bond market is up 44 bps which means mortgage rates are currently improving!  Tomorrow’s Fed Statement will have a big impact on the market and we will be sure to let you know what they say.

Another interesting piece of news out of California today reported that foreclosure notices were down over 20% in the 4th quarter when compared to quarter 3 and were down 7% when compared to last year.  We are certainly not in CA, and according to the latest poll Phoenix is atop the list of declining home prices (CA had 3 cities in top 20) but this is still a significant piece of news and something to keep an eye on.

The troubling news is that of continued layoffs around the country and that of course “as jobs go, so goes housing” so in the long run this is at the heart of all we are dealing with. Please let me know if you have any questions, or if there is anything we can help you with!
Your Trusted Advisor,      Jeremy House, C.M.P.S.