Feb
18
No Country for Mortgage Brokers
Filed Under mortgage | 3 Comments
Over the weekend I finally caught the movie, No Country for Old Men. It’s critically acclaimed and several friends recommended that I go see it. At times the movie was boring and slow. At times it was quick witted and interesting. However, most of the time nothing about the movie made sense.
In the current mortgage landscape nothing makes sense.
I still get several refinance requests from the internet where people are shopping and getting quoted rates that haven’t existed in years. Moreover, to get a loan closed today is much more difficult than ever before. So for anyone to do a loan at the lowest possible rates doesn’t make any business sense.
Some requests are for home purchases by real estate investors. Every day lenders are limiting their risk by limiting what a mortgage broker can and cannot submit. Every day programs are disappearing. There are very few high risk loans available. It’s only a matter of time before buying a home with no money down will become extinct.
Most of the inquiries I get are questions. Simple questions such as “Is now a good time to refinance?” or “Will not paying my bills hurt my credit?” The people who ask these don’t give me any information about themselves just a name and an email. That’s like asking your optometrist (eye doc) “Do I have ocular degeneration?” without having him/her/it look at your eyes.
Just like the movie, No Country for Old Men, there is no end in sight to all the madness.
Jan
1
Rent vs. Own
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Most people after deciding to leave the security of the nest start off renting. Our incomes are limited, we have little or no money saved, and little or no credit. Buying a home right out of the gate is usually not a realistic option, so renting, for a couple of years makes sense.
Lets say you move into an apartment and a year later you want to move, you now have to come up with enough money out of pocket for closing costs and down payment. If you had purchased a home instead of renting and after say a year you wanted to upgrade to a bigger or better home than you will be able to sell and use the equity of the home for the down payment on the new home and cover closing costs as well.
When sending your son or daughter off to college, consider buying an apartment instead of renting one or paying exorbitant dormitory / residence hall fees. The appreciation over a four year period has helped pay for more than a few our clients’ tuition bills.
With no money down financing and seller assists of closing costs it is often possible for someone to buy a home for less cash out of pocket than would be required to rent a similar property. A renter must usually come up with first and last months rent along with cleaning and security deposits which could total thousands of dollars. This shatters the myth that you must have a large amount of cash saved in order to buy a home.
OK, now a couple of years have passed. Ask yourself these questions, in the last two years have I:1. Had the same job?2. Paid my rent on time? 3. Established any credit?4. Received a pay increase?5. Put any money into savings? If you can answer yes to at least the first three questions, ask yourself this! “Why am I paying my Landlords Mortgage”?
Real estate is still the best investment anyone can make. Many people who rent seem to think they cannot afford to own. Years ago that statement may have been true, but in today’s market with low interest rates and numerous 1st time homebuyer programs, in many cases the statement should be - can you afford NOT to own. Your rent money is just a liability, you get nothing in return for your investment. The principal portion of your mortgage payment is investing in something that will gain value, and becomes an asset. The interest portion of your mortgage payment is tax deductible! The property taxes you pay are tax deductible! And in the first year of homeownership any points you paid are tax deductible! Think again about how much you are paying for rent each month and then contact me to find out if now is the right time for you to become a homeowner!
If you are concerned about the added expense and time required to maintain a home, there are many options available that will minimize this risk. Many communities have townhomes that are maintained by Homeowners Associations. Your only responsibilities are for the inside of your property. There are many advantages to this type of arrangement:
-You can pick out and own your own appliances.-You can paint and decorate how you wish.-You decide what floor coverings are used - Carpet, Hardwood, Ceramic tile.-You are not responsible for cutting grass, roofing, landscaping.-In many instances you have your own garage for parking.-No more annual rent increases.-Some communities have community pools and parks that are shared by the residents.-You can choose to have control over what is offered in your community by becoming a member of the Homeowners Association board of directors. Typically you will pay a small assessment fee on a monthly basis to the homeowners association for the services they provide, and it is not unusual for the assessment combined with your mortgage payment to be less than what you currently pay for rent.
Renting versus owning is a personal preference and is a great housing solution for certain people in certain situations. However, most financial advisors agree that renting is not a wise solution to ones housing option for the long term.
One of the best advantages of owning a home is the tax deduction on the interest. This alone could save you thousands come tax time.
Why would you throw away thousands and thousands of dollars every year on apartment rent or renting a house when you could own a home for the same amount of money? When you pay rent you’re building equity for your landlord. If you pay $750 a month, that’s $9,000 a year that’s just wasted. You’re never going to see that money again.
A borrower who decides to buy as opposed to rent is going to be better off in the long run. I have explained to many of my clients that the increase of property values is a great reason to buy because instead of throwing your money away on rent for which you have nothing at the end of the year if you purchase the property value increase will put you ahead of the game when they get ready to refinance possibly for cash out or sell the home outright.