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Kevin Fase's Blog

Informative & Current Real Estate News

By Kevin Fase | Agent in Grand Rapids, MI
  • The QM Announcement and What It Means to Real Estate

    Posted Under: Home Buying in Grand Rapids, Financing in Grand Rapids, Property Q&A in Grand Rapids  |  January 14, 2013 6:19 AM  |  175 views  |  No comments
    Locking Your Loan400For over a year, we have been reporting on the impact that the new regulations being created for the Qualified Mortgage (QM) and the Qualified Residential Mortgage (QRM) would have on the housing market. Last week, the Consumer Finance Financial Protection Bureau (CFPB) announced its rules for a qualified mortgage. Let’s take a look at what it will mean to housing.

    Let’s Begin with ‘Simplified’ Definitions

    The idea of a QM is to assure the “ability to pay” — what standards a bank must follow to make sure a borrower has the ability to make the mortgage payments before offering a loan. An over-simplified explanation would be “the things a bank can’t do”.

    The idea at the center of QRM is to determine the standards that a buyer must meet before getting a mortgage. An over-simplified explanation would be “the things a buyer must do”.

    What Happened Last Week?

    The CFPB issued their QM rules which will be effective January 10, 2014. The rules determine the limits on the loan types which can be offered by banks, the fee structures which can be charged by banks and other such issues. (For more details, you can download the 7 page summary  or the 804 page full document issued by the CFPB).

    The biggest news impacting a potential mortgage applicant is that the allowable back-end-debt ratio was set at 43% which is more lenient than the discussed 36% limit. The back-end-ratio is explained by Investopedia as:

    “A ratio that indicates what portion of a person’s monthly income goes toward paying debts. Total monthly debt includes expenses such as mortgage payments (made up of PITI), credit-card payments, child support and other loan payments. Lenders use this ratio in conjunction with the front-end ratio to approve mortgages.”

    This will result I more buyers still being able to qualify for a mortgage.

    What DID NOT Happen Last Week?

    The QRM rules were NOT released. The QRM rules will be set by several different Federal agencies, such as the FDIC, Federal Reserve Board, FHFA, HUD, and OCC. These rules will be announced later this year and may include:

    • A maximum “front-end” monthly debt-to-income ratio (which looks at only the consumer’s mortgage payment relative to income, but not at other debts) of 28 percent;
    • A possible 20 percent down payment requirement in the case of a purchase transaction
    • New minimum FICO scores established

    These QRM rules will also have a big impact on future lending. We will try our best to keep you abreast of any updates.

  • Was 2012 a Better Year for Real Estate Than 2011?

    Posted Under: Market Conditions in Grand Rapids, Home Buying in Grand Rapids, Home Selling in Grand Rapids  |  December 11, 2012 6:18 AM  |  210 views  |  No comments

    There are still those questioning whether the housing market is truly making a comeback. We have decided to graph home sales over the last two years based on the National Association of Realtor‘s Pending Home Sales Report. We believe the graph removes all doubt.

    The methodology for the report as per NAR:

    “The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.

    The index is based on a large national sample, typically representing about 20 percent of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months.

    An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales; it coincides with a level that is historically healthy.”

  • Short Sales vs Foreclosures: the Seller

    Posted Under: Home Buying in Grand Rapids, Foreclosure in Grand Rapids, Credit Score in Grand Rapids  |  July 23, 2012 5:06 PM  |  233 views  |  No comments

    This week, we are looking at the advantages of a short sale over a foreclosure from five different perspectives: the Sellers’, the Neighborhoods’, the Banks’, Prices and the Children. – The KCM Crew

    Short SalesReal estate professionals are handling an increasing number of distressed properties. Which is a better alternative for the seller – short sale or foreclosure? Here are the advantages of doing a short sale:

    It allows a more dignified exit from the home.

    In a foreclosure, an official eventually comes to the home and tells the occupants to leave – immediately. In a short sale, the seller knows the closing date and can prepare in advance for the move. In many cases, their neighbors, friends and family needn’t even know of their financial difficulties.

    The seller could possibly avoid a deficiency judgment.

    In almost all distressed sales, the bank can legally go after the seller for the difference between the loan amount and the selling price (known as a deficiency judgment). Most banks will release the seller from this obligation in a short sale process.

    A short sale has less of a negative impact on their credit report.

    Once a short sale is completed, the sellers begin to clean-up their credit report. The timeline can be much longer as a foreclosure proceeds through the process.

    (For more on this go to: Short Sale vs. Foreclosure: A Short Sale Always Wins)

    The seller can return to homeownership more quickly.

    If a family allows the house to go to foreclosure, it may take 5-7 years to again qualify for a mortgage. In the case of a short sale, the timetable can be 2-4 years.

    There is a ticking clock on tax relief.

    There is currently legislation, the Mortgage Forgiveness Relief Act of 2007, ensuring that homeowners who received principal reductions or other forms of debt forgiveness on their primary residences do not have to pay taxes on the amount forgiven. This legislation is set to expire at the end of the year.

    (For more information: Mortgage Forgiveness Debt Relief Act: Will It Be Extended?)

    Tomorrow, we will look at the impact of a short sale compared to a foreclosure on a neighborhood.

  • Some Points About Points

    Posted Under: Home Buying in Grand Rapids, Home Selling in Grand Rapids, Financing in Grand Rapids  |  July 5, 2012 6:40 AM  |  235 views  |  No comments

    Points About PointsOne of the more frequent topics discussed between loan officers and borrowers center around discount points.

    “What are points?”
    “Should I pay points?”
    “What about NO points?”
    And so on…

    So today, I decided to give you some information and some things to consider:

    • First, a definition- Discount Points are pre-paid interest that allows a borrower to lower their interest rate on monies borrowed. Because points are prepaid interest and mortgage interest is tax deductible, points are tax deductible in full in the year you pay them when you use the proceeds of the loan to purchase a home. (Consult your accountant for rules concerning points on refinances.)
    • As an example, paying a point (one point is equal to one percent of the loan amount) may lower the rate on your 30 year mortgage .25%. To give some practical numbers to it:
        • On $100,000 loan, one point would be $1000.00.
        • The difference in your monthly payment from a 4% rate to a 3.75% rate on a 30 year fixed rate loan would be $14 ($478 vs $464).
        • Are you better off spending $1000 today to save $14 a month? It will take you nearly 6 years to make your money back. For most, it’s easier to find $14 a month than to save $1000. On the other hand, if you expect to have this loan for 30 years, your $1000 expense will wind up saving you over $5000.
    • Next, talk to your loan officer about ACTUAL prices. The old guideline of 1 point for .25% in rate doesn’t hold true every day or at every price point or at different times of the month or year. Mortgages are bundled together and sold in packages called MBSs (Mortgage Backed Securities). These MBSs often are bought and sold before there are loans to fill them up. A given company may have projected (and committed to deliver) a certain volume of loans at a particular rate. To attract these loans as their deadlines approach, they may offer a “deal”. There are times when a lender can make more money selling a 3.75% Note than a 3.875% Note because of other commitments. Ask your LO the different costs (in points) you would have with different rates. Then, calculate the time needed to recoup the monies.
    • Often, I have advised clients closing toward the end of the year to pay points because they can “get back” a good portion of the cost quickly if they file their tax returns early. The theory is you can spend $1000 and get the benefit of it but, after your refund, maybe you really only spent $750.
    • Many deals today are structured with seller’s concessions wherein the seller (as an inducement to get you to buy their home) offers to pay all or some of your closing costs. At time of contract signing, there is an estimation of what that will be. Whether your contract says a flat dollar amount or a percentage, there is often a few extra dollars available at time of closing. A few days before closing, you should ask your LO for a more accurate number because you may have a few bucks the seller can pay to secure you a lower rate.  If you don’t do it, the seller just walks away with more money than they agreed to.
    • Also, you can pay non-round numbers in points to achieve your objectives.  It is not unusual to see loans today with 1.045 points or.781 points. For the lender, it’s about the yield that arises from the combination of rate and points.
    • Lastly, points can work in reverse. Rather than paying them, you can “create” them for your own use. That is really what a lender-paid closing costs loan is. You pay a higher rate so the lender can then sell that loan for more money. The lender then makes the additional money available to you to spend on closing costs.

    Pricing on your mortgage is complicated yet understandable. Take the time to look at it from multiple angles. Use your LO as a resource/advisor. That is where the good ones can add tremendous value. Most people only ask about rate and closing costs. Go deeper to get the real answers.

  • Should I Wait To Sell My House?

    Posted Under: Market Conditions in Grand Rapids, Home Buying in Grand Rapids, Home Selling in Grand Rapids  |  July 3, 2012 6:42 AM  |  257 views  |  No comments

    confusion4There have been more and more reports showing that the housing market is beginning to recover. This has caused angst among some homeowners who are considering whether or not to sell their house in the next several months. With the market showing signs of life, the question becomes should they wait to sell because prices may be about to increase.

    The data proves that sales are increasing nicely. However, there is no consensus on home prices yet. At the National Association of Real Estate Editors conference in Denver at the end of June, Lawrence Yun, chief economist of the National Association of Realtors (NAR) said:

    “This time next year, there could be a 10% price appreciation. I would not be surprised to see that.”

    During the same week, Morgan Stanley came out with a housing report that stated where they believed housing values were headed over the next eighteen months:

    “We estimate a drop of 5-10% more.”

    Which direction are prices headed? As we previously stated, there are opinions on both ends of the argument.  

    However, if we look at the Home Expectation Survey, which asks a distinguished panel of over 100 economists, investment strategists, and housing market experts to give their 5-year expectations for future home prices in the United States, we see the average cumulative appreciation expected by the end of next year (2013) is only .9%.

    Should you sell now or wait? Does it make sense to delay your move for 18 months in order to get less than a 1% increase in your selling price? Only you can answer that question.

  • Short Sale Assistance for Military Families

    Posted Under: Market Conditions in Grand Rapids, Home Buying in Grand Rapids, Home Selling in Grand Rapids  |  July 2, 2012 7:40 AM  |  234 views  |  No comments

    Military CoupleMilitary families have just been given help to sell their homes when forced to move because of their service. Permanent Change of Station (PCS) orders often require quick moves and can create hardship for military homeowners who are underwater on their mortgages and therefore cannot sell their home without taking a loss. Homeowners who receive (PCS) orders now will be eligible to sell their homes in a short sale even if they are current on their mortgage. Previously, many service members felt their only option was either to maintain financial obligations on two residences or to default on their mortgage.

    Under the new policy, Fannie Mae and Freddie Mac will not pursue a deficiency judgment or any cash contribution or promissory note from members of the military with a change in duty station for any property purchased on or before June 30, 2012.

    Edward J. DeMarco, Acting Director of the Federal Housing Finance Agency (FHFA) explained:

    “It is in everyone’s interest for the men and women serving in our armed forces to focus on the important job they are doing defending our country, rather than worry about the maintenance and leasing of a property in another jurisdiction.”

  • Experts Say Housing Prices Are About to Turn

    Posted Under: Market Conditions in Grand Rapids, Home Buying in Grand Rapids, Home Selling in Grand Rapids  |  June 26, 2012 6:33 AM  |  242 views  |  1 comment

    Home and MoneyEach quarter, Pulsenomics surveys a

    “distinguished panel of over 100 economists, investment strategists, and housing market analysts regarding their 5-year expectations for future home prices in the United States.”

    Here are the results of their latest survey:

    Price appreciation/depreciation expected over the next five years:

    2012:   -.4%

    2013:   +1.3%

    2014:   +2.6%

    2015:   +3.2%

    2016:   +3.5%

    The average pre-bubble (1987-1999) annual appreciation was 3.6

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