REBOUND OR DOUBLE DIP? DOTZOUR’S 2011 FORECAST

 

REBOUND OR DOUBLE DIP? DOTZOUR’S 2011 FORECAST

COLLEGE STATION (Mays Business School) – As much of the nation ponders whether the country is in rebound mode or headed for a “double-dip” recession, Real Estate Center Chief Economist Dr. Mark Dotzour sees definite signs of hope for the economy.

“There are signals that the economy is trying to turn the corner,” Dotzour said. “Consumer confidence has increased from a year ago, and consumer spending has resumed its relentless upward trajectory.”

He says the most important positive indicator is that corporate profits have rebounded.

“In a free-market, capitalistic system like America, profit growth is the key indicator,” he said. “When profits are growing, companies hire employees. When profits flatten, they stop hiring. When profits fall, they start to fire people, and they keep on firing people until profits start to increase again. Clearly, most businesses have right-sized their firms sufficiently to regain profitability.”

So why aren’t they hiring people?

“The answer is uncertainty: uncertainty of capital gains and income tax rates; uncertainty about the cost of health care and the possible increase in energy costs due to ‘cap and trade.’ The prospect of new and increased government regulation makes it hard for business to see clearly into the future,” he contends.

Dotzour points out that businesses can buy insurance against risk, but there is only one way to “insure” against uncertainty–and that is to hoard cash.

“There is now nearly $3 trillion sitting in cash on business balance sheets,” he said. “They have much more capital then the Federal Reserve, the FDIC, Fannie Mae and Freddie Mac combined.”

To read more, visit the Mays Business School website.

REBOUND OR DOUBLE DIP? DOTZOUR’S 2011 FORECAST 

COLLEGE STATION (Mays Business School) – As much of the nation ponders whether the country is in rebound mode or headed for a “double-dip” recession, Real Estate Center Chief Economist Dr. Mark Dotzour sees definite signs of hope for the economy. 

“There are signals that the economy is trying to turn the corner,” Dotzour said. “Consumer confidence has increased from a year ago, and consumer spending has resumed its relentless upward trajectory.” 

He says the most important positive indicator is that corporate profits have rebounded. 

“In a free-market, capitalistic system like America, profit growth is the key indicator,” he said. “When profits are growing, companies hire employees. When profits flatten, they stop hiring. When profits fall, they start to fire people, and they keep on firing people until profits start to increase again. Clearly, most businesses have right-sized their firms sufficiently to regain profitability.” 

So why aren’t they hiring people? 

“The answer is uncertainty: uncertainty of capital gains and income tax rates; uncertainty about the cost of health care and the possible increase in energy costs due to ‘cap and trade.’ The prospect of new and increased government regulation makes it hard for business to see clearly into the future,” he contends. 

Dotzour points out that businesses can buy insurance against risk, but there is only one way to “insure” against uncertainty–and that is to hoard cash. 

“There is now nearly $3 trillion sitting in cash on business balance sheets,” he said. “They have much more capital then the Federal Reserve, the FDIC, Fannie Mae and Freddie Mac combined.” 

To read more, visit the Mays Business School website.

Jumbo Loans for More Expensive Homes

If you are looking for a larger home, you most likely will need a larger mortgage.  If you need to borrow more than $417,000, a jumbo or blended jumbo mortgage may be your best option.  Jumbo mortgage programs can give you the extra borrowing power you need, but the costs and guidelines may differ from those that apply to standard mortgage loans. 

Jumbo mortgages are often described as “non-conforming” loans.  This term applies to any mortgage that does not conform to the standard underwriting guidelines set by Fannie Mae or Freddie Mac, the two government-sponsored agencies charged with providing funds to the mortgage industry.  The guidelines, which must be met for a loan to be guaranteed by one of these two entities, set the limit for single-family home mortgages at $417,000 for 2006 ($625,500 in Alaska and Hawaii).  This limit is adjusted annually.

 Jumbo mortgages usually carry a higher interest rate than conforming loans.  Because of the larger loan amount, and because the loan can’t be guaranteed by Fannie Mae or Freddie Mac, the lender absorbs a greater degree of risk.  Also contributing to the lender’s risk is the fact that homes secured by jumbo mortgages may be more difficult to sell than less-expensive homes.

 If the higher interest costs make jumbo mortgages unappealing, but you still need to borrow more than the conformation loan limit, you do have another option.  One relatively common variation of the jumbo loan is known as a “blended jumbo” mortgage.  This financing method allows you to take out a fixed-rate mortgage up to the loan limit, along with an adjustable-rate second mortgage to cover the difference.  The resulting “blended” payment is often lower than what would be required for a jumbo mortgage of the same total amount.

 While the lowest possible dollar amount of a jumbo loan is uniform among lenders (just a dollar more than the Fannie Mae and Freddie Mac loan limit), the highest possible amount is not as distinct.  Different lenders are willing to absorb different levels of risk, and establish their own “ceiling” for jumbo mortgage.  In addition to differentiating between conventional and jumbo loans, many lenders have a separate category for “super-jumbo” loans.  Where the line is drawn between jumbo and super-jumbo, and how the costs and loan requirements differ, also depends upon the lender.  Before you apply, ask what category your desired loan amount fits into.

From Application to close

 

From Application to Closing

 

 

Once you’ve submitted your mortgage application and received a decision, the steps leading up to your closing will be unfamiliar. We want you to know what to expect.  Prior to closing on your new home, you’ll need an appraisal, a home inspection, home insurance and title insurance.

PreApproval

Upon application credit check, and submission of your supporting documentation, your lender will have discussed what you can qualify for and have a preliminary plan for financing. It is preliminary because you may find a home at a different price or the rates may change.  Your lender will be ready to issue a Conditional Approval letter upon the location of a home on which you’d like to make an offer.

Finding A Home

At this point, you’ll go home searching based on our preliminary financing plan. Your Realtor may want basic information on the financing plan as the Purchase contract does require some of this info.  Once you have a home you’ll provide the lender with a contract.

Your Option Period

 

Your contract will give you an Option Period to get additional information on the home and decide to continue with the purchase. This usually includes your inspections and time for the Realtors and Sellers to get you information such as the survey, restrictions, and other info.

Appraisal

Upon the completions of your Option Period and your decision to proceed with the purchase, the lender will order an appraisal from a professional appraiser to determine the value of your home.  Most loan programs require an appraisal to make sure the sale of the property would provide enough funds to repay the mortgage balance.  This protects the lender in case of default, and can also help you make sure you don’t overpay for the home.  An appraiser will give a professional assessment of the property’s value based on a number of factors, including:

• Square footage, overall condition, special features and amenities

 

• Home improvements

 

• Property location

 

• A review of the sales prices of comparable properties that have sold recently in your area.

 

Home Inspection

A professional home inspection can help put your mind at ease by identifying any potential issues with the home.  In some cases, a home inspection may be required as part of your loan approval process.  A home inspector will give a professional assessment of the property’s physical condition and notify you of any existing or potential problems.  At minimum, the inspection should cover all the home’s major systems and structural elements, including the foundation, electrical system, heating and cooling systems, insulation, roofing, plumbing and all exterior features.

You should make every effort to be present during the inspection, so you can see any problems first hand.  Accompanying the inspector can make the inspection report easier to understand, and you may even get some valuable maintenance tips. Your Realtor can make suggestions on Inspectors.

Home Insurance

Home insurance will protect the investment you’ve made in your home.  Your policy will compensate you for damage done to your home or its contents by natural hazards such as fire and wind and will protect you from liability if someone is injured on your property.

Before you close on your mortgage, you’ll be required to show proof that you have purchased home insurance.  Your lender will probably require you to purchase a minimum amount of coverage, usually equal to your loan amount.  You may, however, want to purchase a larger policy to make sure you’re protected from additional losses.

Title Insurance

There are two types of title insurance:  one protects the lender and one protects the borrower.

Title insurance is purchase as protection from claims against your ownership of the property.  Such claims may be made by undisclosed spouses, heirs of previous owners, creditors holding liens against previous owners or other parties.

Your lender will most likely require you to purchase a title policy, which will cover their interests in the property.  It’s up to you to purchase a policy to protect your interest in the home.  Your home mortgage consultant will be able to recommend a title insurance company who can provide additional information about the policies available in your area.

What does a Percent in rate cost you?

What does a percent in rate cost you?
30 Year Fixed Rate Mortgage
Mortgage Amt.		Interest Rates / Monthly Payment
		5%		6%		7%		8%		9%
$100,000		$536.82		$599.55		$665.30		$733.76		$804.62
$110,000		$590.50		$659.51		$731.83		$807.14		$885.08
$120,000		$644.19		$719.46		$798.36		$880.52		$965.55
$130,000		$697.87		$779.42		$864.89		$953.89		$1,046.01
$140,000		$751.55		$839.37		$931.42		$1,027.27		$1,126.47
$150,000		$805.23		$899.33		$997.95		$1,100.65		$1,206.93
$160,000		$858.91		$959.28		$1,064.48		$1,174.02		$1,287.40
$170,000		$912.60		$1,019.24		$1,131.01		$1,247.40		$1,367.86
$180,000		$966.28		$1,079.19		$1,197.54		$1,320.78		$1,448.32
$190,000		$1,019.96		$1,139.15		$1,264.07		$1,394.15		$1,528.78
$200,000		$1,073.64		$1,199.10		$1,330.60		$1,467.53		$1,609.25
$210,000		$1,127.33		$1,259.06		$1,397.14		$1,540.91		$1,689.71
$220,000		$1,181.01		$1,319.01		$1,463.67		$1,614.28		$1,770.17
$230,000		$1,234.69		$1,378.97		$1,530.20		$1,687.66		$1,850.63
$240,000		$1,288.37		$1,438.92		$1,596.73		$1,761.03		$1,931.09
$250,000		$1,342.05		$1,498.88		$1,663.26		$1,834.41		$2,011.56
$300,000		$1,610.46		$1,798.65		$1,995.91		$2,201.29		$2,413.87
$350,000		$1,878.88		$2,098.43		$2,328.56		$2,568.18		$2,816.18
$400,000		$2,147.29		$2,398.20		$2,661.21		$2,935.06		$3,218.49
$450,000		$2,415.70		$2,697.98		$2,993.86		$3,301.94		$3,620.80

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shopping for a Mortgage?

If you are shopping around for a mortgage and can’t find your lender, or more specifically Loan Originator, on the internet then “red flags” should be popping up all over the place.  If a Loan Originator is still in business today then they have probably been successful enough to hang on through the last 18 months of the most turbulent mortgage market we have ever seen.  My challenge to you, is that as an informed consumer you demand to work with a professional Loan Originator, not someone who just gets by with being a good salesperson.  A professional is concerned in doing what is in your interests, not theirs, and providing you with education, strategies and options that will give you the most benefits.  That .125% in rate difference or $500 lower in closing that you are being “promised” versus getting good guidance and advice could very well cost you tens of thousands of dollars when you least expect it - I see it a lot, even today unfortunately.  That is why “Googling” the Loan Originators you are considering working with and understanding what value they will offer you may just be the most important aspect of getting a mortgage today.

IS THE ORIGINATION “POINT” DEDUCTABLE?? YES! The IRS says so!

IS THAT ORIGINATION POINT ON YOUR HUD-1 DEDUCTIBLE?  READ THE IRS WEB SITE AND THE ANSWER IS PROBABLY YES, YES, YES.

YOU’D BE SURPRISED HOW EASY THE IRS WEB PAGE IS TO READ.    

Agents and loan officers sometimes advise buyers and sellers about the deductablity of the certain items on the HUD-1. 

For instance, home buyers often ask their real estate agent or loan officer questions about detectability of closing costs.  Sellers ask too, but not as often.  Buyers often depend on the detectability of mortgage interest to bridge the gap between renting and buying.  Clearly, the higher the income, the more valuable the tax deduction is to a home buyer. 

DON’T GIVE TAX ADVICE.  Send that buyer to the IRS web page and let them read the section on HOME MORTGAGE INTEREST AND POINTS.  However, many agents and loan officers make the mistake of telling buyers that the discount point is deductible but that the “origination fee” is NOT.  WRONG!!  

THE ORIGINATION FEE or point IS DEDICTABLE.   That’s from the IRS.

Read the IRS Instructions for Points. 

http://www.irs.gov/publications/p936/ar02.html#en_US_publink1000229936

WARNING TO CONSUMERS AND ALL.  THIS MATTER IS COMPLICATED AND I RECOMMEND READING THE IRS WEB SITE.  The Devil is in the details.

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Points

The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a home mortgage. Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points  (emphasis added).

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~ 

ATTENTION HOME BUYERS!  Don’t ask your real estate agents or loan officer for tax advice.  Consult your accountant or the IRS web page.  It’s in plain English and very helpful. 

Let’s get this matter cleared up once and for all.  A POINT IS A POINT IS A POINT.  A point is ONE PERCENT of the loan amount.  An Origination Fee is a POINT. 

Save your HUD-1.  The points, all of them, even if paid by the seller are deductable for you.  You can find that on the IRS site too. 

Your accountant is the last word on this so be sure you address this with them.

Why do people refinance?

why do people refinance?

• To retire existing liens
• For making repairs and home improvements to property
• To obtaining a reduction in interest rate
• To pay off a mortgage subject to a balloon payment
• To consolidate credit card debts
• To obtain cash for financing family related expenditures such as a College education, etc.
• Improving cash flow
• Taking advantage of tax benefits
• Debt consolidation
• Eliminate Private Mortgage Insurance premiums
• Shorten term of mortgage possibly with similar payments

Bi-weekly Mortgage Payments

Accelerated weekly and bi-weekly payments:

Accelerated weekly and accelerated bi-weekly payment options are calculated by taking a monthly payment schedule and assuming only four weeks in a month. We calculate an accelerated weekly payment, for example, by taking your normal monthly payment and dividing it by four. Since you pay 52 weekly payments, by the end of a year you have paid the equivalent of one extra monthly payment. This additional amount accelerates your loan payoff by going directly against your loan’s principal. The effect can save you thousands in interest and take years off of your mortgage.  The way you do this is to make a payment and 1/12 each month.

Most lenders will set you up on this program for a fee, but there’s no need to do that.  A little discipline will do the same thing.  HOWEVER, if you’re not the type to do this consistently–then set it up for the fee–You’ll still save money.

Identity Theft #4 (continued)

What if it happens to you?

Knowing what to do once the crime has been committed is crucial in minimizing the damage and putting your accounts and credit status back in good-standing as quickly as possible.  If you become a victim, just knowing what steps to take can save you from many wasted hours and dollars when dealing with the situation.  If you or someone you know has been a victim of identity theft and would like information about how to erase the effects of identity theft, ask me for a free copy of – CREDIT SAVVY – “How To Erase the Effects of Identity Theft in 10 Days” – written by Edward Jamison. Mr. Jamison is the founder of Jamison Law Group, P.C., and is an attorney who specializes in consumer credit, identity theft and numerous software products tailored to the mortgage industry. Jamison is a nationally recognized expert on credit scoring.

The Federal Trade Commission offers a more in-depth report including the explicit steps to take in the event you are a victim of Identity Theft.

http://www.ftc.gov/bcp/conline/pubs/credit/idtheft.pdf

Call us for a complete review

Our team is here to help you… we can do a complimentary identity theft check for you today, by pulling your credit report and analyzing each line to ensure no fraudulent tradelines have been opened or activity has taken place. So please call our office or reply to this email, and we’ll get started right away.

Where to find more information:

http://www.consumer.gov/idtheft/index.html

http://www.ojp.usdoj.gov/ovc/help/it.htm

http://idtheft.about.com/

http://www.privacyrights.org/index.htm

http://www.ncjrs.gov/spotlight/identity_theft/facts.html

Rates Down again…

If you haven’t refinanced or are thinking of buying, I saw 4.5%  (4.61APR on $200K) this am for a 30 year.  This is not for everybody–you must be a #1 borrower with 740 Ficos, equity and job stability-  My first house was at 13.5% fixed!!! Call if I can help.