My Blog

Mortgage Lock-In

1/13/2020

Mortgage Lock-in

1/13/2020

A mortgage lock-in is a lender's agreement to hold a specific interest rate for a stated period for a loan at the prevailing market interest rate.  This provides the borrower some protection against the interest rates going up during the lock period.

If you think the rates are going down, the advantage would be to "float" and take advantage of the lower rate.  If you think the rates are going up, you could lock when you apply or when the application is approved.  Some buyers are marginally qualified at the current rate and if the rates go up, it could keep them from buying the price home they want or must make a larger down payment.

The lender will require the borrower to pay a fee for the lock-in.  It could be a flat dollar amount or a percentage of the loan to be made.  Usually, the longer the rate lock period, the higher the fee will be. 

The agreement should include the terms you've locked in such as the mortgage rate, points and other costs, the lock's effective and expiration dates, the cost of the lock itself, and any options that may be available.  As with any contract, it should be in writing to avoid misunderstanding.

The risk in a lock-in is that if the rates go down, you won't be able to take advantage of it unless there is a "float down" clause in the agreement.  If so, you must advise the lender that you want to take advantage of it.  You may incur additional costs to rewrite the lock-in.

Locks can be anywhere from 15 to 60 days.  Your lender can advise you how long it should take to get it approved and close the loan.  If it doesn't close on time, the lender may extend the lock for free, charge an additional fee or a percentage of the loan.

Mortgage brokers act as middlemen for the lender and borrower.  It is important to know who is locking the rate because generally, a mortgage broker cannot write the lock but has to obtain it from the lender.

For more information, see the Federal Reserve Board's Consumer Guide to Mortgage Lock-Ins.

In case of an Emergency

1/9/2020

In Case of an Emergency

Published on 1/6/2020 & modified on 1/9/2020

Imagine having an emergency in your home and needing to find something that will solve the problem.  You need to be able to put your hands on it quickly. 

A fire extinguisher hung in a conspicuous place, easy to reach, is a prudent precaution.  Everyone in the house should know where it is and how to use it if it is necessary.

A water meter key could easily divert another kind of household disaster assuming it could quickly and easily be found and if a person knew how to use it to shut off the water to the home.

With household water pressure generally below 100 pounds per square inch, a significant amount of water can still be dispersed into a home if a pipe were to burst.  That amount of water can do drywall and floor damage, as well as cause losses to electrical appliances like TV's, clothes, furniture and other things.

While some houses may have a main shutoff valve separate from the meter, the question would be if all of the occupants knew where it was and how to operate it.

Purchase a water meter key from a local hardware or box store and learn how to use it.  Once the meter is open, a wrench is needed to close and open the valve.  Some water meter keys have a wrench on the other end of the key making a separate wrench unnecessary.

Consider hanging the water meter key next to the fire extinguisher so that both are easily found.  Training the responsible parties in the house is also necessary to minimize damage.

Fixed Rate Payment Change

1/7/2020

Fixed-rate Payments Change

1/7/2020

Deciding between a fixed-rate mortgage and an adjustable-rate is one of the choices buyers make when getting a loan to purchase a home.  While the rate remains constant for the term of the mortgage on a fixed-rate loan, it does not mean that the payment will remain the same.

Most lenders require borrowers to include the monthly amount of the property taxes and insurance with each principal and interest payment.  The lender wants to be certain that the taxes are paid, and that the property is insured to protect their collateral for the loan.

The funds are held in escrow so they can be paid when they are due.  Periodically, the lender will audit the escrow account to see if there is enough money available.

If the taxes or insurance increase, the total payment will have to increase to cover the additional expense.  Once the lender determines there is not going to be adequate funds to pay the taxes and insurance, they can give the borrower the option to deposit additional funds to cover the shortage in the escrow account.

The borrower may choose instead to pay a higher payment that will accumulate by the time the expenses are due to equal the amount.

It is worth verifying the taxes and insurance premiums to see that the lender is using the correct amounts in case a mistake has been made.

Who Are The First-Time Home Buyers?

1/6/2020

Who are first-time homebuyers

1/6/2020
Who

Why A Home Works For You

1/2/2020

Why a Home Works for You

1/2/2020

Equity in a home is the difference between what the home is worth and what is owed on the home.  As the property goes up in value, the unpaid balance is going down with each payment being made.  These dynamics are working in different directions to make the equity grow.

Leverage, the use of borrowed funds to control the investment, is another dynamic working in favor of homeowners. $9,975 invested in a certificate of deposit at 2% for three years would be worth $10,586.  The same amount invested in the stock market at 7% would be worth $12,220.  Using the same $9,975 to purchase a $285,000 home that appreciates at 2%* annually would have an equity at the end of three years of $41,350.  All three examples have compound growth but only the home uses borrowed funds.

Buying a home requires money for a down payment and closing costs, good credit and the income to pay back the loan.  Even if a person has all three of these requirements, sometimes, they are not sure if it makes sense to buy rather than rent.  A Rent vs. Own comparison can show you the financial advantages without considering the tax benefits.

Most homeowners will say that their home is the best investment they have made.  Not only in the satisfaction of owning their own home, where they can raise their family and a place to share with friends but also as a strong financial decision.

 

*Core Logic reports national home prices are up in October 2019 by 3.5% year over year and predicting 5.4% for 2020.

What's Keeping Buyers Out of the Market

12/26/2019

What's Keeping Buyers Out of the Market

12/26/2019

60% of buyers paid for their down payment by saving according to the 2019 Profile of Home Buyers and Sellers, recently released in San Francisco at the National Association of REALTORS Convention.  The most difficult step in the process was saving for a down payment cited by 13% of respondents.

51% of those surveyed mentioned student loans as the main deterrent to saving.  Credit card debt was mentioned by 45% which is up from 37% in 2018.  Car loans were stated by 38% which is up three percentage points from the previous year.

Childcare was cited by 16% of the people which was one percentage point less than 2018.

The median years of debt delayed home buyers from saving for their down payment or buying a home was stated as four years.  That is up from three years mentioned by buyers in 2018.

Anticipating the Cost of a Home

12/26/2019


The largest expenditure a buyer has when purchasing a home is the down payment which can range from zero for veterans or 3.5%, 5%, 10% and 20%.  With mortgages come closing costs which can be another 2-4% and must be paid at settlement in cash.

Most mortgages require an escrow account to pay the property taxes and insurance when they are due.  Generally, the lender will require one to three months of taxes and one month of insurance so they can be paid before the actual due date.

First-time buyers should be aware that they'll need this amount of funds available to purchase a home.  Unlike tenants who are not responsible for repairs, homeowners are, and it is necessary to be able to pay for them when they're needed.

Newer homes will need less repairs and older homes probably, more.  At some point, components like the furnace, air-conditioner and appliances will need to be replaced which could crush a homeowner's budget if they are not expecting them.

Homeowners should expect between one and four percent of the value of the home in annual repairs.  The age and condition of the home and whether some of the items have been replaced will help assess the anticipated expenditures. 

Components

Estimated Life

Dishwasher

9-10 years

Refrigerator

13 years

Furnace

15-25 years

Air-conditioner

8-15 years

Stove top

13-15 years

Oven

15 years

Compactors

6 years

Water heater

8-12 years

Faucets

15-20 years

 

A $175,000 home with 2% estimated repair expenditures would be $3,500 a year or about $300 per month.  Some years, it may not run that much and other years, it might be more.  By anticipating the maintenance expenses, a homeowner is more likely to handle things when they arise.

Another way to handle the risk of unexpected repair expenses would be to purchase a home warranty.  For $500 -700 a year, repairs and sometimes, replacements will be handled by the protection plan.

Call me at (503) 238-1700 for a list of trusted protection plans available in our area.

Homes Sold With An Agent

12/20/2019

89% homeowners sold with agent

12/20/2019
89%

Help With Your Refrigerator

12/19/2019

Help with Your Refrigerator

12/19/2019

Refrigerators may save your leftovers and produce, but they can spend energy at the same time.  Refrigerators typically account for 13 percent of energy bills, the second-highest expense after air conditioners. It's one of the only things in your house that is never turned off.

According to the FDA, refrigerators should be kept at about 40 degrees and freezers should be kept at zero degrees. If you don't have a thermometer, make sure your temperature dial is set to its midpoint. Keeping your unit at these standard temperatures can save from paying extra for a temperature that's just a few degrees cooler. If possible, it also helps to situate your fridge as far away from your oven and dishwasher as you can because the heat from those appliances can impact its efficiency.

Refrigerators release their own heat from condenser coils, where the refrigerant is cooled. When these coils get dusty or are clogged with dirt or pet hair, they're not able to release heat properly and it must work harder to stay cool. The coils should be cleaned at least twice a year.

Occasionally clean the door gasket using a toothbrush and some mild soap or a baking soda solution to keep dirt and food residue from damaging or weakening the seal. You can test the strength of the gasket's suction by shutting the door on a dollar bill. It should hold the dollar bill tightly.

A full refrigerator is more efficient than an empty one. Make sure the air can circulate between items though, and don't block any vents. When you're saving those tasty leftovers, always let them cool off before putting them into the refrigerator so as not to introduce any warm temperatures to the environment.

An efficient refrigerator will keep your stomach and your wallet happy.

Personal Finance Review

12/18/2019

Personal Finance Review

12/18/2019

Even if Benjamin Franklin never actually used the expression "a penny saved is a penny earned", the reality is that it has been a sentiment for frugality for centuries.  He did say: "Beware of little expenses; a small leak will sink a great ship."  At the end of the day, it is not about how much you make as much as it is about how much you keep.

The first step in a personal finance review is to discover where you are spending your money. It can be very eye-opening to have a detailed accounting of all the money you spend.  Coffee breaks, lunches, entertainment, happy hour, groceries and the myriad of subscription services you have contribute to your spending.

This revelation can lead you to obvious areas where savings can be accomplished.  The next step is to dig a little deeper to see if there are possible savings on essential services.

  • Get comparative quotes on car, home, other insurance.
  • Review and compare utility providers.
  • Review plans on cell phones.
  • Consider eliminating the phone line in your home.
  • Review plans on cable TV, satellite for unused channels and packages or receivers.
  • Consider entertainment alternatives for cable like Hulu or Netflix.
  • Review available discounts on property taxes.
  • Consider refinancing home ... lower rate, shorter term or cash out to payoff higher rate loans.
  • Consider refinancing cars.
  • Call credit card companies to ask for a lower rate. 
  • Consider transferring the balance from one card to a new card with a lower rate and then, pay off the balance as soon as possible.
  • Review all the automatic charges on your credit cards ... do you need or still use the service?
  • Discover late fees that are regularly being paid and eliminate them.
  • Review all bank charges for accounts and debit cards; determine if they can be reduced or eliminated.
  • Pay your bills on time and avoid all late fees.
  • Monitor your bank account and avoid over-draft charges.
  • Some companies have customer retention departments that can lower your rates to retain your business.

A strategy that some people use is to report their credit cards as lost so new cards will be issued.  When they are contacted by the companies to get a valid credit card, they can determine if the service is still needed.

The money you save can ultimately help you in the future for a rainy day, an unanticipated expense, a major life event or retirement.  Cutting back now will give you more later, possibly, when you need it even more.  Tennessee Williams said "You can be young without money, but you can't be old without it."

Page:  of 000  |