Friday, December 27, 2013

Could Interest Rates Get Buyers Off the Fence?

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Higher interest rates, along with higher home prices, may prompt more home buyers to pull the trigger to act quickly before costs rise even more. Every one percent increase in rates equates to about $30,000 in buyer power. That's a huge variable to keep in mind.

Could Interest Rates Get Buyers Off the Fence?

Though borrowing costs are increasing as interest rates have lifted from their historical lows, some real estate professionals believe the rise may boost home sales.

“It will get people sitting on the fence to decide, ‘We better do something or it’s going to cost us money,’” says Margaret Dixon, a real estate sales associate with Crye-Leike in Tennessee.
At the end of 2012, 30-year fixed-rate mortgages averaged 3.52 percent. Last week, Freddie Mac reported that 30-year rates averaged 4.47 percent.

“A 1 percent increase usually lands around $30,000 in buying power,” says Todd Reynolds, a real estate professional with Goodall Homes. “That’s the difference between a starter home and a bigger home — or a bonus room.”

Higher interest rates, along with higher home prices, may prompt more home buyers to act quickly before costs rise any more.

“They realize the house of their dreams may never be cheaper than it is today,” says Reynolds. “It creates a sense of urgency.”

Economists are predicting that mortgage rates will likely rise to 5 percent or 5.5 percent in 2014.
“Most people realize the [3 percent-range interest rates] are gone, and they’d better be glad to get 4.5 percent,” Jay Bradshaw, an agent in Cumberland, Tenn., told The Tennessean.

Source: “Rising interest rates may boost real estate market,” The Tennessean (Dec. 24, 2013)

Thursday, December 12, 2013

500-page mortgage applications are the new normal

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New mortgage requirements make seeking a mortgage a daunting task. Minimum of two years of tax returns, two month's of bank statements, sourcing of every deposit on every file are just a few things to keep in mind when planning to acquire a mortgage these days. It's best to have your documentation ready before you even apply. Apparently, cash is still king!

 500-page mortgage applications are the new normal

mortgage application file


  @CNNMoney December 12, 2013: 6:59 AM ET


Years after the housing market melted down, lenders are lamenting the loss of thin, sleek mortgage application files.

Once easy to carry in one hand, the average mortgage application file has now ballooned to 500 pages, according to David Stevens, CEO of the Mortgage Bankers Association.

"Since the housing bubble burst, file size has grown steadily and dramatically," said Peter Grabel, a loan officer for Luxury Mortgage in Stamford, Conn.

Just seven or eight years ago, the typical application file ran to about a hundred pages, he said. Some for "no-doc" loans were thin indeed, not much more than a credit report, plus an appraisal and property information

But now files are more jam-packed than ever, with income and asset records, tax returns and other financial documents.

"We now need two years tax returns, two months' bank statements, sourcing of every deposit... on every file," said Grabel.

A middle-income worker financing a median-priced house may get away with just a few hundred pages, but business owners or wealthy people with several income streams can generate paperwork better measured with yardsticks than page numbers.

What gives? After the housing meltdown, tighter rules were put in place, requiring an explosion of disclosures to be included in mortgage applications. Those alone account for nearly 50 pages, said Grabel.

One disclosure even invokes the Patriot Act, the post-9/11 legislation designed to combat terrorists. The Feds require lenders to verify the borrower's identity to make sure they're not suspected of funding or laundering money for terrorist groups.

All this amassing and analyzing of documents costs both time and money. And new mortgage lending rules that are going into effect in January will make it even more complicated.

"New rules require you to triple-check everything," said Jeff Taylor of Digital Risk, a mortgage processing company. "The best thing you as a borrower can do to help yourself is to have all your documentation together before you apply. Get needed items like your credit report and get any errors corrected so you can get through the process as smoothly as possible."

Some of the documentation that's required can seem silly. An applicant may have $1 million in the bank, for example, but if there has been a recent deposit of, say $5,000, he is required to show where that sum came from.

The rationale, explained Grabel, is that Fannie Mae and Freddie Mac frown upon buyers who use loans from friends or family to apply to the downpayment. If borrowers have to repay those private loans, it can make it harder to pay off the mortgage. So every deposit coming into an account has to be accounted for and scrutinized.

The checklist lenders use to manage the application can run three pages long (and is also added to the file). The one Grabel uses has four categories: disclosures, credit package, appraisal package and items needed prior to closing. There are 55 separate boxes to check, covering such items as the good faith estimate, asset statements, and the original appraisal report.

No one ever said borrowing hundreds of thousands of dollars should be easy, but today's requirements are a far cry from the days of the housing boom. "Seven years ago, you signed your name and got your check," said Grabel.

Of course, you can always pay cash instead. That's what Taylor's brother did recently and it certainly simplified the transaction. "There were only three pieces of paper at the closing," said Taylor. 


Tuesday, December 3, 2013

Silicon Beach housing prices surge as techies move in

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Techies moving into the silicon beach areas of Santa Monica, Venice, Marina Del Rey, Playa Vista and surrounding areas. This is driving prices up! It's the new hot, cool space to live. Landlords have benefited with rising rents as well. For homeowners, median price in the area has risen to $925,500 last quarter, 19.2 % higher than in the same period last year.

Silicon Beach housing prices surge as techies move in

Home prices in Santa Monica, Venice Beach and surrounding areas have risen sharply this year, pricing even some tech workers out of that Westside market.

Housing demand from techies causing a price surge in ‘Silicon Beach’ 

As more techies move into the Westside, there are fears that the area -- and especially the eclectic, funky vibe in Venice -- could go from charmingly quirky to overly techie. Above, a bicyclist rides past Google's offices on Main Street in Venice. (Genaro Molina, Los Angeles Times / November 20, 2013)