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Shelby Bateson's Blog

By Shelby Bateson | Broker in Portland, OR
  • Mortgage Pre-approvals – what do they mean and how are they computed?

    Posted Under: Market Conditions in Portland, Home Buying in Portland, Financing in Portland  |  August 13, 2013 10:29 AM  |  784 views  |  No comments
    Home financing pre-approvalsWhen you go to a lender for a pre-approval, several factors are used to determine how much house you can afford to buy; income, job stability, credit scores, debt, debt ratios and more. You are issued a pre-approval based only on the information the lender has and best guesses about the information they don’t have.

    Debt ratios have become increasingly important since the last recession. They are the best indication a lender can get about your ability to repay the mortgage. Ratios are often expressed as numbers like 36/28.

    • 36 represents the amount of your total monthly payments relative to your monthly income; this includes your estimated mortgage payment plus all other monthly credit obligations such as car loans, credit card debt, student loans, etc. (By the way, if you have deferred student loans, this the monthly payment is estimated and included in your debt ratio.)
    • 28 represents the ratio of your proposed monthly housing payment (including taxes and insurance) relative to your income.

    Both numbers must be in line with the lender requirements in order for you to qualify for a mortgage.

    A pre-approval is a starting point for lenders and realtors alike. It is based more on the estimated monthly payment relative to your income than the actual purchase price. As a realtor we have a lot more to consider in addition to the pre-approved loan amount and/or purchase price.

    A pre-approval is not a commitment to lend. Because the actual property you are going to purchase is usually an unknown, lenders have to make some “best guesses” about actual costs associated with your loan. Usually they will guestimate taxes based on average taxes for a property of a stated value, but the actual property taxes can be considerably different than the estimate.

    Tax assessments in the Portland metro area are largely based on square footage of the house and land value more than on the amenities in the house you choose. A 1500 square foot house upgraded to the hilt in a prime location can still have a relatively low tax assessment as compared to the house next door with 2400 square feet that is not as upgraded. To make matters even more confusing for buyers, moving just a few blocks can greatly affect the tax bill, because while county tax rates are fixed, smaller municipalities within a county often have special assessments that are added to the county tax assessment. (For example, within Clackamas county, taxes in Lake Oswego or Milwaukie are higher than those in Oregon City or Canby).

    Know your monthly payment comfort level

    As a buyer, it is important to be realistic about your monthly payment comfort level.

    You should be working with your realtor to make sure that all monthly costs associated with your purchase are calculated to keep your payments within your comfort level. This is especially important when your search spans multiple municipalities where tax assessments can vary widely, homes can be located in flood zones, and condos and town homes and have associated HOA fees.

    Condo shopping can be tricky due to HOA fees can that can vary depending on the amenities offered by the project. If you are using FHA financing, your realtor needs to know this because not all condos developments are approved by HUD for FHA loans.

    Failed sales after pre-approvals are UP this year!

    Because lending guidelines have become so strict, failed sales after pre-approvals have been on the rise this year. Your realtor needs a lot of information from you to help us ensure that your pre-approval results in a closed sale rather than a failed sale.  

  • Rate increases could signal the return of a “buyers’ market” for home buyers

    Posted Under: Home Buying in Portland, Financing in Portland  |  July 17, 2013 1:57 PM  |  903 views  |  1 comment

    Since mortgage rates began to rise in the last two months, many prospective home buyers have stepped away from the real estate market hoping that a slowdown in housing will force banks to lower interest rates.

    The truth is that a relative slow down in the housing market could work in the buyers’ favor by eliminating a lot of the competition.

    Just a year ago, home inventories were high while mortgage rates were at historical lows. But there were few buyers out there, so those who ventured into the market got great deals. They were able to offer low and get some great deals.

    Too many people focus on rates rather than the prize

    If you’re one of those people who focus on mortgage rates rather than the house you want to own, you’re probably looking in the wrong place. It is true that higher interest rates will reduce your buying power, but rather than walking away from the market altogether hoping this will force the banks to lower rates, why not focus on your end goal – a great new home for yourself and your family.

    we're seeing more price reductions since rates started to riseWith less competition out there for the same houses, you Mr./Ms. Buyer have more bargaining power. This may be a great time to find a house that meets your needs without the worry of bidding wars and sellers who refuse to budge on their price because they think there is a better offer just around the corner. It’s important to remember that most people list their homes for sale because they want or need to sell and usually as quickly as possible.  For the first time since this recent housing boom got under way just a few short months ago, we are actually seeing a lot of price reductions rather than competing offers.

    Get out there and find your home before the competition gets comfortable with higher mortgage rates

    Remember these recent rate increases may or may not be permanent.  The one thing that is certain is that if rates should drop again, you won’t be able to  cash in on that drop unless you have an accepted offer in place and a loan in process.

    So, get out there and keep looking. You may just get a great deal on your dream home.

     

  • Portland metro housing market wrap January - June 2013

    Posted Under: Home Buying in Portland, Financing in Portland  |  July 17, 2013 1:46 PM  |  889 views  |  No comments

    Some buyers step away from the housing market due to recent rate increases

    As rapidly rising mortgage rates surprised prospective home buyers, many found themselves stepping back and re-evaluating whether these rate increases would become permanent and if so, if they could afford to buy the type of home they had anticipated just a few short weeks earlier.

    Some buyers bit the bullet in June and continued with their purchases, while close to 10% canceled existing contracts.

    housing boom gives way to rising rate fearsIn the Portland metro area, there was a 6.4% decrease in closed home sales in June as compared to May 2013, but still a significant increase over June 2012. Pending sales also dropped more than 5% for June, but increased more than 15% over June 2012.

    The most remarkable indicators are:

    1.       Fewer people requested home tours in the month of June,

    2.       Housing inventory rose in June (the first such increase since this housing boom began late last year.) Current inventories stand at 2.9 months, up from 2.5 months in May 2013.

    3.       The average sales price rose to $302,700 – up from $265,900 just a year ago.

    4.       Buyers of lower priced homes has leveled off while buyers of homes priced at $700,000 and up is on the rise.

    If rates and inventories continue to rise, will housing prices and rates decrease again?

    Housing prices nationwide have hit 7 year highs across the country! This means that in many areas around the country, prices have topped those seen before the market crash of 2007!

    This trend is not unique to the Portland metro area. It is being mirrored throughout the country where sales numbers dropped an alarming 10% nationwide for the month of June.

    Did the banks act too quickly in raising mortgage rates?

    Perhaps the banks realize they have gotten a little ahead of themselves with the very rapid mortgage rate increases as rates did pull back a bit today.  Some of the bigger banks are quoting rates at and below 4.5% for 30 year fixed rate loans, while other lenders are quoting rates as low as 4% today.

    It is always important for buyers to remember that rates are still near historic lows. Mortgage rates above 5% are the norm historically, and in fact it was just 3 short years ago that mortgage refinances were thriving so that home owners could cash in on 5% rates!

    Rate volatility returns to the housing market

    It didn’t take long for most of us to get used to rates below 4%. Now it seems that rate volatility has returned to the market so it’s important to be vigilant and keep your eyes open to watch trends.

  • Be wary of mortgage rates and terms that sound too good to be true

    Posted Under: Home Buying in Oregon, Financing in Oregon  |  July 9, 2013 4:41 PM  |  1,101 views  |  1 comment

    Rising mortgage rates have given way to advertised rates and terms that sound like great deals. There are “lenders” advertising rates that are about half the going rate being announced by reliable sources such as bankrate.com, and this should raise some red flags in your minds.red flag

    For those of you loan shopping here are some important rules of the road to remember:  teaser mortgage rates
    1. Read the fine print

    If most of the big banks and mortgage lenders are quoting 4.25% for a 30 year fixed rate loan, does it make sense that a competitor is able to offer 2.75% for the same loan?

    That 2.75% may be a “teaser rate” good for only a short time, or it could be the 10 year rate.

    • Beware of any lender who tells you that you don’t qualify for the initial quoted rate (for a plethora of reasons) – This is the old bait and switch routine, and while you may decide to continue shopping elsewhere, you may have already paid fees to this lender.
    • Make sure you are talking the same language. Is the advertised rate for 30 year fixed? Or is it for a variable rate or short term loan?
    • Is this a buy down rate? If so, how much will you have to pay to buy the rate down? Remember that every point is 1% of the loan amount.
    1. Upfront fees: Bona fide lenders are no longer permitted to ask for application fees – so run if a lender mentions application fees to you. The only initial fee they are allowed to charge is the cost to pull a credit report.
    2. Once you have negotiated rates and fees with a lender, be sure to lock that rate AND get it in writing. Once again we are hearing of buyers going to sign documents only to find that the rate on the documents doesn’t even resemble the rate and terms they were discussing with their lender. If you get to the title company and find the rate and terms are different than what you expected you may find yourself stuck between the proverbial rock and a hard place. You have already paid an earnest money deposit, an inspection fee, a credit report and the appraisal (this is probably about $2000 out of pocket expense at a minimum) that you will lose if you do not sign the documents.

    It’s important to remember here that your contract is between you and the seller – not the lender. You can walk away from the lender but not from your contract without suffering the penalties you have agreed to. Many sellers cannot and/or will not agree to postpone closing for another month while you re-negotiate a new loan, if in fact rates have not risen during the interim.

    When in doubt talk to a professional familiar with loan documentation who can help you interpret the fine print.

    You might also like to read:

    Mortgage rates likely to rise again this week

    Rising mortgage rates are pricing Portland home buyers out of the market

    Home buyers beware of flipped houses

    Ten common first time home buyer mistakes

  • Mortgage rates are likely to rise again this week

    Posted Under: Home Buying in Portland, Financing in Portland  |  July 8, 2013 12:34 PM  |  964 views  |  No comments
     
    mortgage rates climb 2013

    Mortgage rates are closely tied to the yield on the 10 year Treasury bond. As the yield to investors rises, mortgage rates tend to follow suit. With the good jobs report last Friday showing that businesses added 195,000 new jobs in June (40,000 more than expected), the yield on treasury bonds jumped .25% which signals that a similar increase in mortgage rates could follow this week. In fact, some local lenders are already quoting 4.875% on 30 year fixed rate loans today.

    The chart above pretty clearly shows that mortgage rates have been rising pretty significantly for the last 2 months. When rates first started moving up in May, most financial analysts believed this was just a blip and that if it continued, the increases would be slow and steady.

    Mortgage rates hit a 60 year low in early May of an average of 3.35% nationally. Since then the rate of increase has been surprising, and not in a good way for home buyers.
    Two weeks ago, rates had risen more than a full percentage point to an average of 4.46%. Last week we saw a bit of a pullback from that high, but Wall Street is celebrating the jobs report this week and it looks like another rate increase is on the horizon. At the rate we are going, it is very possible that 5% mortgage rates may be here by the end of the summer, if not earlier.

    Buyers need to remember that the increases will affect with their buying power and check back with their lenders for new pre-approvals, especially if those pre-approvals are more than 60 days old. 
  • New scams targeting new home owners

    Posted Under: Home Buying in Portland, Financing in Portland  |  June 17, 2013 4:44 PM  |  1,083 views  |  No comments

    With the real estate market booming, it was inevitable that the scammers would come out in force finding new ways to take your money as soon as you move into your new home.

    mailboxesAs a new home owner, you will find yourself literally deluged with mail from many businesses competing for your business. While much of this mail is legitimate, some definitely is not. You will get all kinds of advertising from landscapers, gardeners, insurance companies, remodelers, etc. Sure you already purchased home owners insurance, but that doesn’t stop other insurance agents from trying to compete for your business. As for other solicitation, if you recently purchased a new home, odds are that there are changes you will want to make to spruce up your house to make it your own.

    Check out your mailers because many will offer discounts on products you may want or need, either immediately or in the near future.

    But, beware of mail that seems suspect. It has recently been reported by KGW news that there is a new scam out there implying that you need to purchase the deed to your home! The charge is minimal - only $87 - $89 to get your deed. According to KGW, there are two companies in question called Records Recovery Services and Local Records Office.

    "Whats really tricky is the way these bills are presented," said Kyle Kavis with the Better Business Bureau. "They have deadlines on them and tiny little disclaimers so it’s not clear and evident that it's just a solicitation."

    The truth is that you should have a copy of your deed in that packet of paperwork you got from the title company when you signed all your documents, and a copy of the recorded deed will be sent to you a few weeks after your loan closes, at no additional cost to you. Be sure to put that recorded deed in a safe place because you might need to produce it when and if you sell your home later on.

    When in doubt about advertising you receive, check with your realtor before sending anyone money. Realtors do keep up with all the latest news, changes in regulations, etc., and your realtor will help you sort out what you may want or need from the junk you can just toss.

     If you haven't yet purchased a new home, you might find the following article helpful:

    Ten common first time home buyer mistakes

    If you’d like to keep up on all the most up to date news about the Portland metro real estate markets ad financing news, sign up for my newsletters and have the news delivered directly to your email inbox.


     
  • How to correct errors on your credit report

    Posted Under: Home Buying in Portland, Financing in Portland, Credit Score in Portland  |  June 17, 2013 4:22 PM  |  469 views  |  No comments

    Did you know that approximately that approximately 1 out of every 4 credit reports have errors on them.  While not all errors are damaging, most errors can cost you.  In spite of the fact that we don’t hear as much about ID theft lately, it still remains the NUMBER ONE crime out there. While you very likely make every effort to be diligent about shredding and making all your payments on time, you can still be victimized.  I personally have been a victim of ID theft 3 times during my life.  Even Ben Bernanke was a victim of ID theft.  It can happen to you.

    When you are applying for credit, every error can be used against you. 

    Following is a list of some common errors:

    1.  A parent or child’s mortgage or other credit obligation is reported on your report as yours (even if your names are not exactly the same).  While this type of error may not damage your score, it will count as a debt obligation against you.  If you are being held responsible for a large mortgage payment, it is likely that you will not qualify for your own mortgage payment if you are trying to buy a house.
    2. A paid off debt is reported as still owing.
    3. A collection has been filed against you for a debt that was never yours.  One of the most common forms of ID theft is using a fake ID to get cell phone service.  These people will use the phone service until it is shut off for non-payment, and then get another false ID to get new service.  The end result is usually small collections for cell phone service that was never yours.  I have heard of people battling this type of error and never getting it dismissed, because it is very hard to prove.  In most cases, unfortunately, I recommend you just pay it and get it off your record as soon as possible, especially if the debt is small.  Unfortunately, because the debt is small, it is unlikely you will ever learn of it until you apply for credit.
    4. TV cable or satellite service is often left on after someone moves out of a house or apartment.  Until the service is actually shut off, the service provider will report the delinquency under the current resident’s name.  This is another one of those hard to fight bills – but is usually more easily resolved than the cell phone.
    5. Blatant ID theft with multiple creditors is actually easier to solve, but again, if the amounts are small, you may not know about them until your credit is pulled.
    6. A debt has been discharged through a bankruptcy, for instance, but is still showing as unpaid.
    7. Collection agencies are very irresponsible about reporting paid collections, and court systems are equally negligent about reporting paid in full judgments. 
    8. Creditor delays in posting your payments can result in showing up on your report as 30 days late.

     ID theft protection is important: the number one tool to protect your credit

     I recommend to everyone that you purchase some type of ID theft protection.  I am not referring to the protection on your homeowners insurance, because this is simply coverage to reimburse you for charges that aren’t yours.  You should have some type of monitoring service, such as that offered by banks, or other private entities.  Preferably this service should be monitoring your credit 24/7 and sending you an alert when there is a new inquiry, an unusual charge, or a new line of credit opened in your name.

    If you don’t want to pay for a copy of your credit report, you do have the right to get a copy from each credit bureau once a year, FREE.  Also, you can get a free copy of your report from http://www.annualcreditreport.com.  You will have to pay for your scores, but at least you can see what is being reported.  AND, be sure to cancel after you get your free report, or you could be charged monthly for continuing service. 

    Most mortgage lenders can pull a report for you, but expect to pay $15 – $20 for the report. This is a very comprehensive report, much more comprehensive than those you will get from the credit bureaus and it will include all three of your scores as well.

    Correcting errors on your credit report yourself

    If there is an error on your report, it’s really not all that difficult to get them corrected yourself.  Remember that while errors are too common, it’s your responsibility to make sure the information being reported is accurate.

    1. Contact the creditor that is reporting the erroneous information. This has to be your first line of attack. But, if you get no satisfaction this way, the next step is to go directly to the credit bureaus.
    1. Though the bureaus do share information, often the information on the reports differ because many creditors report to only one of the three bureaus.

    The fastest easiest way to dispute an credit report error is online

    Online dispute sites for the 3 credit bureaus:

    My experience has been that with a little effort you can get most errors corrected pretty quickly with minimal effort.

    Once a dispute is submitted you should receive a response within a few days acknowledging that your case is being investigated.  If you do not hear from the credit bureau within 30 days, follow up.  After your report has been corrected, you should receive an updated copy of your corrected credit report. 

    One final note:  If you find, after a dispute or incorrect challenge of an item on your report, that you are indeed still responsible for a debt (especially an unpaid collection), NEVER pay by phone.  Be sure to send some form of payment that will serve as a receipt, in the event that you do not receive a receipt from the creditor, such as a personal or certified check. Most banks will issue a check for you, as part of their bill pay service. In this case, your bank will stand behind you in verifying date and amount paid.

    You can never be too careful these days.   

    Looking for more great tips and news about real estate and financing, sign up for my newsletter, and have it all delivered directly to your email inbox.

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