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Steve Quintana's Blog

By Steve Quintana | Agent in Albuquerque, NM
  • Time To Trade The Lease For A Mortgage?

    Posted Under: Home Buying in Albuquerque  |  May 3, 2012 1:12 PM  |  163 views  |  No comments

    This week, the U.S. Census Bureau announced that in the first quarter of 2012, the American homeownership rate hit its lowest level in 15 years. During the housing boom, millions more Americans bought homes, bumping the rate to nearly 70 percent. Now, that buying spree has been replaced with millions of foreclosures, and most of those gains have been lost.

    As the homeownership rate keeps falling, it has also become a very good time to buy a house. Very low interest rates, courtesy of the Federal Reserve, and falling prices are making it even cheaper to buy a house these days. Meanwhile, rents are rising around the country.

    Ibeliz Rosa, 34, says she's been noticing the prices. Rosa works for a state adoption agency in Boston and her husband is a police officer. She says her landlord is raising her rent again this summer, up to around $1,600 a month for a two-bedroom apartment, and with two young kids, it's starting to get crowded.

    "Our rent is like a mortgage right now," Rosa says, "so that also motivated us to get the goal that we wanted, which is a single home."

    The couple has been approved for a loan through the nonprofit housing lender NACA and is in the process of buying a three-bedroom ranch house in a suburb outside Boston. Rosa says the house has a nice big backyard.

    The Rise And Fall Of Homeownership Rates

    Yearly first-quarter percentages for the U.S.

    American Homeownership Rates

    Source: U.S. Census Bureau

    Credit: Melanie Taube / NPR

    "I had a yard when I was growing up and I loved it," she says. "So I wanted a yard for the girls to be able to run free."

    The American dream of owning a home appears to be alive and well, and, in most places, it's a good time to buy again.

    "For big swaths of the United States, it now makes sense to buy and not rent," says Mark Zandi, chief economist of Moody's Analytics.

    Nobody wants to see a return to the reckless lending days of the housing bubble, which boosted homeownership to an unnatural level, but the question going forward is this: Must the country return to its 1995 pre-bubble rate of around 64 percent homeownership? The rate has already fallen back to 65.4 percent.

    NACA CEO Bruce Marks doesn't think so. He says lending standards have gotten too tight since the housing crash. "We've gone too far to the other extreme," he says.

    According to Marks, millions of renters who are able to afford rental payments — especially as they've risen — should be able to qualify for home loans. So far, though, foreclosures are outnumbering first-time homebuyers, so the homeownership rate keeps falling.

    http://www.npr.org/2012/05/01/151771766/time-to-trade-the-lease-for-a-mortgage?ft=1&f=1001

  • Seniors comment on how their homes served them

    Posted Under: Home Buying in Albuquerque  |  May 3, 2012 6:18 AM  |  160 views  |  No comments

    “My wife and I bought our home in 1967. We raised a family and paid off our mortgage. It’s going to be the only real asset we will pass on to our kids. But really, that house IS our family- all the memories. Buying a house is the best thing a family can do.”

    “We paid $29,000 for our home in 1969. It’s worth about $500,000 now. We should have sold it for $600,000 a few years back, but still, it was a great investment.”

    “We refinanced our home twice- once for improvements and once to pay for our kids’ college education. It was the only way we could have afforded college in 1985. I can’t imagine how people pay for it today.”

    “When my husband passed here years ago, I took out a reverse mortgage to help make ends meet. I was also able to give some money to my granddaughter to use for a down payment on a new home for her family. I like seeing the results of my giving, while I am here to enjoy it.”

  • Benefits of 15-year mortgage hard to beat

    Posted Under: Home Buying in Albuquerque, Financing in Albuquerque  |  May 2, 2012 10:24 AM  |  169 views  |  No comments
    Why those lured by smaller payments on 30-year loan should reconsider

    The case for 15-year fixed-rate mortgages has never been stronger because, in the post-crisis market, the rate advantage over the 30-year has never been larger. The rate advantage is about 0.875 percent, whereas prior to the crisis, it was 0.375 percent to 0.5 percent.

    Consider two $100,000 loans, one a 15-year at 3.125 percent and the other a 30-year at 4 percent. The respective payments are $696.61 and 477.42. After 15 years, the borrower with the 15-year loan has paid $39,454 more but is out of debt whereas the borrower with the 30-year loan still owes $64,543.

    But there is a counterargument. A disciplined borrower can choose the 30-year loan and invest the difference in payment between the 30- and the 15-year loans, in that way offsetting the higher interest rate on the 30-year loan. Some financial planners recommend this approach to their clients as part of a program to build wealth faster.

    The challenge in making such a program work is that the rate of return on the invested cash flow must exceed the rate on the 30-year loan by an amount that depends on how much higher the 30-year rate is than the 15-year rate.

    For example, in 2006 when I first looked into this issue, I used rates of 6 percent and 5.625 percent on the 30- and 15-year loans. I found that over a 15-year period, the cash flow savings had to yield 7 percent, or 1 percent more than the rate on the 30-year loan, to just offset the higher interest rate on the 30-year loan. This can be termed the break-even return on the cash flows. To come out ahead, the borrower has to earn a return above the break-even return.

    I recently repeated the exercise using rates of 4 percent on the 30-year loan and 3.125 percent on the 15-year. With these rates, the break-even return is 6.15 percent, or 2.15 percent higher than the rate on the 30-year loan. The larger rate spread between the 15- and 30-year loans increases the difficulty of developing a profitable reinvestment strategy.

    The challenge looms even larger if the borrower holds the mortgage for less than the 15 years I assumed. The break-even rate is higher over shorter periods because the difference in the rate at which the 15- and the 30-year loans pay down the balance is largest at the outset and declines over time. The shorter the period, the higher the reinvestment rate must be to offset the larger difference in balance reduction.

    Average mortgage life today is somewhere between five and 10 years. At 10 years the break-even rate rises to 8.02 percent, and at five years, it jumps to 13.69 percent -- a whopping 9.69 percent above the rate on the 30-year loan.

    These calculations assume that the borrower makes a down payment of 20 percent or more. If the down payment is less than 20 percent, the borrower must pay for mortgage insurance, and the premiums are higher on the 30-year loan.

    For example, if you put down 5 percent and pay standard insurance premiums, the break-even rate rises from 6.15 percent to 7.01 percent over 15 years, from 8.02 percent to 9.56 percent over 10 years, and from 13.69 percent to 16.88 percent over five years. Note: All the break-even rates shown above are derived from calculator 15b on my website.

    These required returns are forbiddingly high for any borrower who would invest the cash flow savings by acquiring financial assets. There is no way a borrower can earn such returns without taking very large risks. Most borrowers probably fall into this category.

    But there are some borrowers for whom the cash flow reinvestment strategy might make sense. One is the borrower who is eligible for but not currently utilizing IRA, 401(k) or other qualified tax-deductible or tax-deferred plans. Borrowers who use their cash flow savings to invest in these vehicles, who would not do so otherwise, can earn a very high rate of return because of the tax benefits. If the borrower's employer makes matching contributions, the return is even higher.

    A second category of borrowers who can earn a very high rate of return are those with high-cost debt. A borrower paying 18 percent on credit card balances earns a return of 18 percent by paying down the balances.

    In my 2006 article on this topic, I argued that borrowers who have not fully exploited all tax-advantaged investments, or who have high-rate credit card balances, are unlikely to have the iron discipline required to invest the cash flow savings on their mortgage month after month. But the financial planners who wrote me argued that they have developed special plans for borrowers in such situations that provide the discipline that is required. But until I see such plans along with evidence that they work, I will remain skeptical.

    The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.

    By Jack Guttentag
    Inman News®

  • Ivy Zellman says We have Found the Bottom

    Posted Under: Home Buying in Albuquerque  |  May 1, 2012 10:16 PM  |  161 views  |  No comments
    Every day there seems to be more positive news about the real estate recovery. We attempt to give you two things in this blog:
    1. The actual data that indicates where the housing market is headed
    2. Quotes from analysts who have scrutinized this data

    Today, we want to give you a quote by Ivy Zelman which appeared last week in a Wall Street Journal article Stunned Home Buyers Find the Bidding Wars Are Back.

    “We very much believe we’ve hit bottom.”

    Why is the quote from Zelman important? She is an industry expert consistently recognized by Institutional Investor, Greenwich Associates, StarMine and The Wall Street Journal as an industry-leading analyst. She has been nicknamed ‘Poison Ivy’ for her harsh positions on housing over the last several years. Now, Zelman is calling a bottom and projecting prices to moderately increase in the next twelve months.

    Again, another expert on housing is calling a bottom; another bear turns bull.

  • 6 Ways to Get a Good Mortgage

    Posted Under: Home Buying in Albuquerque, Financing in Albuquerque  |  April 30, 2012 1:30 PM  |  215 views  |  No comments

    Finding an affordable house is no longer a problem but qualifying for a mortgage can be. Six tips to getting a mortgage and a good rate.

    Put your credit on ice. The higher your credit score, the lower your rate: The best rates go to those with a 760 or more, says credit-score expert John Ulzheimer.

    So keep that plastic in your wallet (and don't apply for new cards or other loans) for at least three months before you go loan shopping. One large balance -- even if it's paid off at the end of the month -- can ding your score by 20 points or more.

    Ask for time. Most sales contracts give you only 10 days to nab a loan or the seller can move on. Negotiate for an additional five to 10 days to give you some room to shop around.

    Get at least six quotes. Rates on a 30-year fixed conforming loan can vary at least as much as a quarter of a percentage point. Get quotes from national lenders at mortgagemarvel.com and find out what your local credit union or regional bank is offering as well. Inquire about fees; while lenders aren't required to give you a good-faith estimate of closing costs (which average 2% of the loan balance) until you actually apply, some will provide it if you ask.

    Match the lock period to the loan. You now need 60 days or more to close a loan, says Wharton professor and mortgage expert Jack Guttentag of mtgprofessor.com, and getting an extension on a lock will cost at least a couple hundred dollars. Ask your lender how long it's taking to close loans like yours -- and don't lock for less.

    Opt for an ARM. If you know you're not going to be in a house for more than seven years, adjustable-rate mortgages can mean big savings, says Guttentag. The monthly payment on a $300,000, seven-year ARM at the recent rate of 3.23% is $1,302, vs. $1,455 for a 30-year fixed at 4.13%.

    Talk to a broker. Those who need a jumbo loan or have an unusual situation (say, you're self-employed) will get the best deal from a mortgage broker who has access to and experience with a lot of lenders. Find a fee-only one at upfrontmortgagebrokers.org.

    (MONEY Magazine) --

  • Are You Ready to Be a Cemetery Neighbor?

    Posted Under: Home Buying in Albuquerque  |  April 26, 2012 11:00 PM  |  161 views  |  No comments
    Not only are today's home buyers more receptive to living adjacent to cemeteries, say real estate agents, some are even proactively seeking out these locations.

    Large, open cemeteries that allow for peaceful strolls are especially popular, rather than densely populated graveyards.

    "The views are great," remarks agent Steve Castellon of New York. "The taboo is gone."

    Besides the beautiful landscaping, a lot of people like having cemeteries for neighbors because that means that there will not be additional development going up next to them.

    Source: "Are Daily Real Estate News | Thursday, March 29, 2012 You Ready to Be a Cemetery Neighbor?" CBS New York (03/27/2012)

  • Foreclosures: What About the Children (Part 2)

    Posted Under: Home Selling in Albuquerque, Foreclosure in Albuquerque  |  April 26, 2012 1:45 PM  |  256 views  |  No comments

    Yesterday, we reported on the adverse impact foreclosures have had and will continue to have on the children of this country. Today, we want to talk about how parents can soften the effect.

    If you can’t keep your house, you must decide how to leave and determine the impact of your decision on your children.

    From a financial standpoint, short sales are always the better option. From a pure family situation (both your family and the families in the neighborhood), you must also make a decision.

    If you allow your home to go to foreclosure, you have two choices: move and leave the house vacant or stay and wait to be evicted.

    The first option leaves your neighbors with an empty house and all the challenges which that creates for a neighborhood. The second choice can create even more stress for you and your children as you wait for the day an official knocks on your door demanding you and your family leave immediately.

    In contrast, the short sale process allows you to work with the bank and pre-determine the day you will move. The new owners usually move in the same day. Your family moves with a plan and you don’t leave the neighborhood with the headaches associated with a vacant house on the block. There is a level of dignity in this type of move that almost never takes place during the foreclosure process.

    You may have heard of the nightmares that have surrounded short sales in the past. However, there is a new army of both real estate and mortgage professionals who have now been trained on the short sale process. They can help you. Reach out to them today.

    In most cases, a short sale will be the right thing for you, your children and your neighbors’ children.

    by The KCM Crew on April 25, 2012

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