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Understanding Points, Rates and Fees

Not only do you have to understand what type of mortgage you should choose, you have to understand the costs associated with your mortgage. All of these costs will be paid upon closing your mortgage.

Purchase Points

Purchase points, also known as a "buy-down" or "discount points," are an up-front fee paid to the lender at closing to buy-down or lower your interest rate over the life of the loan. Each point is equal to one percent of your total loan amount. If you have a $100,000 loan, one point would equal $1,000. The more points you buy, the lower your interest rate, but the more money you'll need at closing.

How do you decide whether you should buy points and if so, how many? Well, the decision should be based on how long you plan on living in your home and what you can afford to pay each month toward your mortgage. If you plan on living in your home for more than five years, it's probably a good idea to purchase points. The longer you live in your home, the more you can save on interest over the life of the loan.

Interest Rate

When you get a mortgage, you are charged an interest rate.this is the rate which the lender charges you for using their money to buy a home. It determines how much your monthly payments will be. Generally speaking, the higher the interest rate, the higher your monthly payment.

Mortgage interest rates change constantly.daily, even hourly. If you speak to a lender and are quoted a specific interest rate, that's not to say you'll necessarily get that rate when you close on your loan. Not unless you formally lock-in that rate with the lender.locking in an interest rate will guarantee you get your loan with a particular interest rate. Lenders will allow you to lock in for 15, 45 or 60 days. But the longer you lock in, the more expensive it will be, since it's more of a risk to lenders.

Fees

There are always fees associated with getting a mortgage, these fees cover the cost of processing and underwriting the loan. These fees can include charges for ensuring the title to the home is free and clear; paying for a land survey; or paying for a home appraisal which gives you the estimated value of the property (lenders require an appraisal to close on your mortgage).

Deciding which mortgage to get may depend on what each lender does because different lenders may charge different amounts. Some may charge lesser closing fees to lure you in, but may charge you a higher interest rate, which means you may pay more in the long run. But everyone has different needs.you may or may not be able to afford to pay more at closing and are willing to pay more over the long term.

Before it comes time to close, do your homework, make sure there are no hidden fees, and ask your lender lots of questions so that you understand all the costs involved with your mortgage.

*Please consult your tax advisor.

Abraham Martinez

Dream Terra Realty, Inc.

www.MartinezGlobalOnline.com

Homemade Men

A SURVEY OF 100 powerful men in all career sectors, conducted for the luxury-lifestyle monthly Class, found that 7 in 10 attributed their success to their mothers. Among the men highly loyal to their moms are George W. Bush and Prince Charles.

FHA Special Programs

AMERIDREAM
The AmeriDream program offers gift funds up to 10% of the home's purchase price which do not have to be paid back. Buyers must agree however, to return any funds that are not used toward down payments or closing costs and to return the funds if the sale of the home does not close on the scheduled closing date.

NEHEMIAH
The Nehemiah program is a Private California Non-Profit Organization that offers down payment assistance programs to qualified first time and repeat homebuyers. This programs offers free gift funds to be used toward down payments and closing costs for homes purchased through eligible FHA loan programs.

HOUSING ACTION RESOURCE TRUST
The Housing Action Resource Trust (HART) Program is a 501c(3) non-profit Housing and Community Development corporation that helps potential homebuyers purchase homes by offering down payment assistance programs to those with low and moderate incomes.

CONSUMER DEBT SOLUTIONS, INC.
Depending on the seller's contribution toward a home purchase, Consumer Debt Solutions, Inc. (CDS) can gift up to $10,000 of the final sales price of a home. Since all the money awarded is in the form of gift funds, it does not have to be paid back.

PARTNERS IN CHARITY
The Partners in Charity (PIC) is a non-profit corporation that offers financial assistance through programs for qualified low and moderate income homebuyers. Down payment and closing cost assistance is provided as gift funds from 2% to 10% of the home price.

Abraham Martinez

Dream Terra Realty, Inc.

info@martinezglobalonline.com

What’s in a Number?

It seems everyone – homeowners, buyers, sellers, and investors alike – have been wondering what’shappening to home prices. Are they falling, rising, or stabilizing? But consumers may be confused over sometimes contradictory reports. For example, why does NAR’s monthly median home price index tend to be higher than recent prices reported in the Case-Shiller index? The details are in the data.

Case-Shiller tracks 20 metro areas; many of these are in California and Florida. It also gives greater weight to more expensive homes – a price decrease in a $1 million home is 10 times greater than a decrease in a $100,000 home. NAR metro price series tracks 150 metro areas, and all home values are treated equally.

Where Have All the Buyers Gone?

Household formation just isn’t what it used to be. Over the past two years, net job gains have increased by 4.3 million, according to both company payroll data and household survey data, and U.S. aggregate personal income has risen by $1.4 trillion. Such gains should have translated into about 2 million additional homeowners, yet only 600,000 new households were created during that time. Over the same period, housing affordability has actually improved. Still, many people have evidently doubled-up with additional roommates or have moved back with parents and family members. Why? NAR’s economists believe that buyers are hoping to time the market, waiting for lower home prices and interest rates. Foreclosure worries are also having an effect.

Construction Spending Fell by 1.7% in January, More Than Expected

Spending on construction in the United States fell 1.7% in January, according to published today by the Department of Commerce. Economists consulted by MarketWatch were expecting a fall of 0.7%. In year terms, spending on construction fell by 3.3% this month. Moreover, it has revised downwards the figure of the previous month, from a fall of 1.1%, a fall of 1.3% in December.

Beware Bad Advice About Foreclosure

A very disturbing and potentially damaging trend seems to be emerging in several real estate markets across the country. Especially those markets with flat or even declining values.

The trend seems to be born from both desperation and greed and it could create so many headaches, heartaches and financial troubles down the road that they all can't be mentioned in this article.

The trend? Well, it seems that some very less than scrupulous folks have resorted to promoting foreclosure to people wishing to move and having trouble selling their current homes.

Did you read that right? People promoting foreclosure? It can't be true.

It is. Here's one example.

Word on the street is that smart real estate agents out there are urging clients to take advantage of lower prices by "moving up" homes – moving to a much more expensive home. That makes perfect sense and now is the time to do it. You can actually make a nice "home equity" profit by moving to a more expensive home.

The problem is that these folks have a current home to sell before they can move up. And in some markets it may take months or even years to sell their current home. Not many homeowners are willing to pay for two homes at the same time. They've heard the horror stories of their friends who are stuck with two mortgages. So more often than not, these folks wait to sell their first home before buying another.

As a result of the slow market and people reluctant to hold two mortgages, a few "rogue" agents hungry for a commission are instructing people to move and just forget about their old house should it not sell in a reasonable time. Just walk away and don't worry about it, some say.

That's what happened to Christopher Kaufman of Farmington Hills, Michigan when he considered selling his condominium and moving to a bigger house.

"I knew homes, and especially condos, were moving slow in my neighborhood. I told my agent point blank that I refused to carry two payments," Kaufman said. "Her reply took me by surprise. She told me to take advantage of the down market, buy the new home, and just stop paying on the condo. I couldn't believe my ears. She was actually instructing me to go into foreclosure. Her reasoning was 'what do you care, you'll already have your next house?' She basically was telling me it wouldn't make any difference."

Bad advice.

Here's what may happen if you go into foreclosure:

1. You lose all equity you've built in your home
2. Your foreclosure will stay on your credit report for 7 - 10 years and may damage your credit
3. You may not be able to get another mortgage until your credit is repaired
4. You may have trouble getting other loans, such as automobile and even student loans
5. You may still be held accountable for the debt of the foreclosure, including income tax obligations
6. Even when you do again finally qualify for mortgages and other loans, you will probably pay a higher rate and therefore have a higher payment than someone with undamaged credit.

It's not worth it. Foreclosure is a terrible thing for you, your community, the mortgage company, and the economy in general. Advice to voluntarily go into foreclosure should be taken with a big grain of salt. Well, make that a truck of salt.

Let's all hope this greedy practice of giving people really bad financial advice stops soon or people may be paying a high price for that bad advice - for years to come.

Existing Home Sales and Home Prices Drop

The National Association of Realtors (NAR) announced that existing home sales - including single-family, townhomes, condominiums and co-ops - decreased 0.4% in January, when compared to the previous month's sales. According to the report, January was the slowest month for home sales since the report's inception in 1999.

The report also showed that unsold home inventories increased to a 10.3 month supply, even as median home prices dropped nearly five percent.

Bob Walters, Chief Economist for Quicken Loans, says despite the seemingly gloomy numbers, there may be some light at the end of the tunnel.

"Tighter credit guidelines continue to contribute to the ongoing weakness in the housing market, but there are some positive developments on the horizon," Walters said. "Today's report shows that the market is beginning to correct itself, with prices falling to levels that will soon begin attracting home buyers and investors alike."

"Additionally, with the White House calling for higher conventional loan limits, we should see some easing of credit guidelines in the next 30 to 60 days, enabling more people to qualify for financing to help reduce the current inventory of unsold homes. This is especially true in markets with high home prices that stand to benefit from a relatively low long and short-term rate picture," Walters concluded.