When you’re buying your first home, establishing the mortgage financing can be a dizzying experience. Fixed rate mortgages seem to many like the best option, but mortgage financing is not a one-size-fits-all financial decision. Before you make a decision either way, find out what you need to know about fixed rate mortgages. Then, make a decision as to whether it’s the right financing option for you.
Same Mortgage Payments
Fixed rate mortgages offer a sense of comfort to most homebuyers because borrowers know the interest rate and monthly mortgage payments stay the same month after month. For example, if you purchase a home today using a 30 year fixed rate mortgage and your monthly mortgage payment is $1,200, you know that for the next 30 years your mortgage payment is going to be $1,200 (if you even have the mortgage for the next 30 years).
Interest vs. Principal
One of the biggest downsides of a fixed rate mortgage is that the majority of the monthly mortgage payment is made up of interest - interest that you are paying to the lender, meaning you end up paying far more than 100% of the principal balance of the mortgage in the form of interest. A borrower doesn’t really start to chip away at the principal portion of a fixed rate mortgage until about the halfway point. For a 30 year fixed mortgage, this means you’re not reducing a significant portion of your principal balance until about 15 years into it and for a 15 year mortgage, principal reduction starts at about the seven and a half year mark.
There is no doubt that the fixed rate mortgage offers a sense of safety and security to borrowers. On the other hand, how secure can you really feel when you realize a fixed rate mortgage has you paying twice the amount of the price of your home when all is said and done?
Sunday, January 31, 2010
What You Need to Know About Fixed Rate Mortgages
Tuesday, January 26, 2010
How to Buy Mortgage Notes
When you think of a mortgage, you probably think of it as a way to finance the purchase or refinance of a home. Mortgage notes, however, can also be an investment option where you may be able to earn a return on your investment. Buying mortgage notes may also be referred to as hard money lending or private mortgages, where personal money is being used to fund the financing of a property. In exchange for buying mortgage notes, you receive monthly principal and interest payments on the amount of the note until the note is paid in full.
Find and contact a mortgage note broker. Mortgage note brokers or private mortgage brokers act as liaisons between investors looking to buy mortgage notes and borrowers. Use the yellow pages of your local phone book to locate and contact a local mortgage broker to see if they have any mortgage notes for sale.
Write up and sign a legal contract and promissory note. When you find a mortgage note or notes you want to buy, have an attorney draw up a legal contract between you as the mortgage note buyer and the borrower or seller of the mortgage note. A real estate attorney can draw up the contract as well as the promissory note for the transaction, which both the borrower and buyer must sign and agree to before it becomes a legally binding agreement between the two parties.
Establish and fund the escrow account. After all of the terms and conditions of the mortgage note purchase are in writing, you as the buyer must establish and fund the escrow account. This is the account where you deposit the money you’re loaning to the borrower for the real estate purchase. The account is managed by a third party so that the doling out of the funds from the account is fair and equitable and in accordance with the terms of the written legal agreement.
Receive your returns on your investment. Each month, on a quarterly basis or in accordance with the terms set forth in the written agreement, you receive your checks from the escrow account, which is principal and interest on your mortgage note investment. This occurs until the note comes due and is paid in full.
Tips
The rate of return for a typical mortgage note can run anywhere from 12% to 15% for a mortgage note buyer.
The escrow account is also the depository for the monthly payments made on the mortgage by the borrower. When it’s time for the mortgage investor to receive his monthly payment, the funds are disbursed from the escrow account as well.
Thursday, January 21, 2010
How Your Real Estate Agent Should Work with You
The transition away from face to face and more to online transactions and communication has caused many business professionals to forget how to deal with clients face to face. One of the hardest hit professions of the syndrome may be real estate agents. If you’re transitioning from an online to a face to face relationship with your real estate agent, it may leave you wondering how this relationship should shake out.
Communication is a Skill
Communication is a skill you can learn, but is necessary for a real estate agent to have in order to form a successful relationship with clients. How comfortable you feel with dealing with a real estate agent the first time you meet with them can dictate whether the agent winds up with a sale at the end of the process. Make sure that the agent is calling you and emailing you to keep you abreast of the situation throughout the process as well.
Emotions are Part of the Process
When you’re buying or selling a home, it can be a very emotional process. A professional and experienced real estate agent understands and expects this from clients. Panic, fear, uncertainty, and joy are but a few of the emotions that may make an appearance during the process. This is where good people skills come in handy when working with a real estate agent because a good agent knows how to deal with these emotions and not allow them to get in the way of the end-result – buying or selling the property.
Agents Work with You, Not for You
Working with a real estate agent means that you have access to professional help and advice when buying or selling a home. An agent should work in a way that is in your best interest, but it’s important to remember that the agent is human and can only control so much of the process. A professional real estate agent should do everything in their power to satisfy a client’s needs, but jumping through hoops is not really part of the job description.
Working with a real estate agent on your real estate transaction is a professional interaction, but the relationship has plenty of personal and emotional touch points. When choosing a real estate agent, make sure you feel comfortable with the person because it may be someone you’re working with for months to come. While their professional experience is a factor that should play into your decision, you need to find the balance between their professional and personal experience in order to make it a truly enjoyable process.
Thursday, January 14, 2010
Pennsylvania Sets its Sights on 11,000 Homebuyers
The Federal government has instituted programs to help stimulate the housing market and the economy as a whole. Individual states such as Pennsylvania have also instituted programs to help local housing markets and the local economy receive stimulation of its own.
The governor of Pennsylvania announced a $1.2 billion mortgage program, which is the baby of the U.S. Treasury, the Pennsylvania Housing Finance Agency, Fannie Mae and Freddie Mac, with the intention of making home ownership more affordable for 11,000 homebuyers in the state of Pennsylvania. Not only does the program help residents of the state but it also helps to boost the state economy.
The implementation of the program is expected to provide $50 million in seed money to fund construction loans for the building of approximately 450 new homes. New-home construction requires contractors, workers, builders and other construction related workers, so the program is also responsible for creating new jobs, which is another booster shot to the local economy. State programs like this are spreading across the country and contributing to the recovery of the state itself and the country as a whole.
Tuesday, January 12, 2010
Las Vegas is High Rolling in Housing Too
As 2009 came to a close, it had many analysts reviewing the standings of home sales around the country. The results for the Las Vegas area were positive, revealing that the Las Vegas housing market is high rolling with a 44% increase in home sales from the beginning of 2009 as compared to the end of 2009.
From October to November of 2009, the home sales in Las Vegas dropped by 5.5%, according to a MDA DataQuick report, which is an information provider based in San Diego. MDA DataQuick suggests that the major increase in home sales is attributed to the usual characters such as a decline in prices, low mortgage interest rates and the availability of the federal tax credit for first time homebuyers.
The resale of foreclosure homes populated the housing market in Las Vegas, but this phenomenon too seems to be coming to a close. According to MDA DataQuick, 64.2% of the homes and condos sold in Las Vegas in November were the resale of foreclosures. This number is down from October levels of 66.8% and November levels of 68.1%. Las Vegas foreclosure re-sales saw an uptick in April 2009, but every month since then the sale of foreclosures has declined.
In November 2006, 5,803 homes sold in Las Vegas, which is the highest sales volume in recorded history for the area. By November of 2009, new and existing home sales was at 4,787, which is the second highest number in recorded Vegas history and celebrated the 15th consecutive month that home sales have increased since the previous year.
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