Blog - Leagan Realty

How Does An Interest-Only Mortgage Work?

October 2, 2013 by lizlaurenb Leave a Comment

How Does An Interest-Only Mortgage Work? When you have been researching your different options for a mortgage on your home, you might have heard of an “Interest-Only Mortgage”. What exactly does this type of mortgage mean and how does it work?

Usually when you take out a loan, you must pay back the capital debt (the amount you borrowed) and the interest on that debt. An interest-only mortgage offers a cheaper option for purchasing a property, because you will only be making payments on the interest and not the capital.

Compared to a repayment style mortgage where you are paying down the principle of the loan, an interest-only mortgage will have much lower monthly payments.

However, when you reach the end of the mortgage term with an interest-only mortgage, you will not have paid off any of the original principle of the loan. This means that you will still not be any closer to owning the home than when you started, whereas with a repayment mortgage you would be in full possession of the property.

You will reach the end of the loan term, still owing the lender $250,000 or whatever the value of the house was. Also, if you do not pay off that lump sum at that point, the lender will charge you interest on the entire loan for the full time.

From the description of how it works, it seems like there would never be a good situation for taking out an interest-only mortgage. However, if you are stretched financially and you are desperate to get onto the property ladder it might be a viable option. Some people take on an interest-only mortgage so that they can buy their first home, then when their income goes up they switch to a repayment mortgage.

These types of mortgages are often used by buy-to-let investors, who are able to claim their tax back against the mortgage interest. If this is your goal, you might find this strategy advantageous.

To find out more about mortgages and determine the best option for your needs when buying a home, contact your trusted mortgage professional.

How To Interview An Architect When Building A New Home

October 1, 2013 by lizlaurenb Leave a Comment

How To Interview An Architect When Building A New Home Making the decision to build a home might be one of the biggest you make in your life. You’ve found the perfect plot of land and have a vision of what type of home you want, but you need someone to bring your dream to life.

That means it’s time to start interviewing architects.

Hiring an architect isn’t as simple as just calling up a few and seeing who might have the time.

You’ll want to ensure you choose a professional that understands your design aesthetic, communicates well, can design on budget and has an upstanding reputation.

Below are a few key questions to ask when deciding whom to hire.

Do You Have A Specific Design Style?

When interviewing architects, be sure to ask each one if they have a specific aesthetic and if you can see a portfolio of his or her work. While most are adaptable, they usually all have design themes that recur in their projects.

Whether you want a minimalist structure or LEED certified construction, you’ll want to know they have the experience.

What Is Your Fee?

You’ll need to inquire whether they charge a flat fee for their designs or a percentage of the total building cost. Most architects charge a percentage of the overall cost of your home, usually ranging from 5-20 percent.

This is important to know because it means that for every floorboard installed, you’ll need to add on the architect’s additional percentage.

Do You Provide Project Management Services?

There are many services that architects should include within their contract, such as checking the contractor’s work, making adjustments as the construction moves forward and obtaining lien waivers.

Get a list of what each architect you interview includes in his or her fee. Additional charges can add up and might play a part in who you choose.

Interviewing architects and finding the right professional can make all the difference when it comes to building exactly what you want. One you work well with can make the construction experience extremely pleasant, while a negative relationship can leave you hating your new home.

So do your research and be sure to get references.

What’s Ahead For Mortgage Rates This Week-September 30, 2013

September 30, 2013 by lizlaurenb Leave a Comment

What's Ahead For Mortgage Rates This Week-September 30, 2013 Last week brought a variety of housing related news. Highlights included the S&P/Case-Shiller Home Price Index for July, which showed a 12.40 percent year-over-year increase in national home prices. This was up from 12.10 percent in June.

The FHFA Housing Price Index reading traces home prices on properties securing mortgages owned or backed by Fannie Mae and Freddie Mac. The year-over-year reading for July showed an increase of 8.80 percent as compared to a year-over-year reading of 7.80 percent in June.

Rising mortgage rates and rising home prices have caused some buyers to leave the market, while others are jumping in before mortgage rates move higher. Pent-up demand for homes and short supplies of homes for sale are expected to sustain buyer interest and home prices.

The Consumer Confidence Index for September fell to 79.70 percent for September as compared to August’s reading of 81.80 percent, but was slightly higher than the expected reading of 79.50 percent.

Sales Of New Homes Surpass Expectactions

Sales of 421,000 new homes in August surpassed expectations of 420,000 sales and the revised number of 390,000 sales of new homes in July. A short supply of existing homes for sale is attracting buyers to new homes.

Freddie Mac’s weekly Primary Mortgage Market Survey provided good news as average mortgage rates fell. The average rate for a 30-year fixed rate mortgage was 4.32 percent as compared to last week’s 4.50 percent.

The average rate for a 15-year fixed rate mortgage was 3.37 percent as compared to last week’s reading of 3.54 percent. Discount points were unchanged at 0.70 percent. The average rate for a 5/1 adjustable rate mortgage was 3.07 percent, which was four basis points lower than last week. Discount points were unchanged at 0.50 percent.

Pending home sales fell by 1.60 percent in August as compared to July; the National Association of REALTOR cites higher home prices and mortgage rates along with depleted supplies of available homes as reasons for fewer signed contracts in August.

The West reported a drop of 1.60 percent in pending sales and the Midwest reported 1.40 percent fewer pending sales in August. The Northeast came out ahead with 4.00 percent more pending home sales in August.

Weekly jobless claims were reported at 305,000 new jobless claims as compared to expectations of 327,000 new jobless claims and the prior week’s reading of 310.000. The Federal Reserve recently cited the national unemployment rate of over seven percent as a clear indication that employment levels are not recovering quickly.

Next Week’s Economic News

While few housing and mortgage related reports are set for release next week, the calendar should provide indications of overall economic conditions. On Tuesday, Construction Spending for August will be released. Wednesday brings the ADP employment report for September. This report tracks private sector jobs.

Thursday brings Freddie Mac’s PMMS report of average mortgage rates and the weekly jobless claims report.

The federal Non-farm Payrolls and National Unemployment Reports for September are set for release on Friday.

Before And After Tips When Dealing With A Disaster

September 27, 2013 by lizlaurenb Leave a Comment

Before And After Tips When Dealing With A Disaster Weather patterns across the United States seem to be getting more and more erratic. From tornadoes and earthquakes to flash floods and wild fires, there are many natural disasters that can quickly consume your home without warning.

Because you never know when disaster might strike, it’s best to be prepared.

Disaster insurance is the only precaution you can put in place to ensure compensation for your belongings and get your life back to normal as soon as possible. Below are the tips to take before misfortune strikes.

Create An Inventory

Most insurance agencies prefer if you include photographs of every room, including the insides of closets and cabinets. Shooting a video is even better. Then you can include audio of how much things cost or if they’re one of a kind.

It’s also a good idea to create a spreadsheet with a list of major items and their value by room. Be sure to email these to yourself, so that you can access them anywhere.

Double-Check Your Coverage

Once you’ve inventoried your possessions, then ensure you have enough coverage. Also, speak with your agent to see if there are any supplemental disaster insurance policies he or she would recommend for your region.

Tips To Do After A Disaster Does Strike

Contact Your Insurer Immediately

Call your agent as soon as possible and be prepared for mountains of paperwork. Be sure to ask for the claim number for your region and use it on all paperwork and in every conversation. This will help expedite your claim.

Secure Your Property

It’s your responsibility to ensure your property is secure after the disaster. Be sure to take photographs and video and then cover or stabilize any vulnerable points. You don’t want the insurance agency to have any discrepancies when determining if the damage was done during the disaster or afterward.

Keep A Correspondence Record

You are going to be completely overwhelmed after such an unfortunate event, but it’s important to maintain your wits. Keep a log of every conversation you have with insurance agents. Log the time, name, phone number and the key points of the conversation. This will help minimize the he-said-she-said accusations that can arise during these hectic times.

Hopefully you’ll never have file a disaster insurance claim. However, if you do, it’s best to be as prepared as possible. Create an inventory of your possessions and make sure you have the appropriate coverage. Then if mayhem strikes, you’ll be that much closer to putting your life back together.

4 Quick Tips On Becoming A Young Real Estate Investor

September 26, 2013 by lizlaurenb Leave a Comment

4 Quick Tips On Becoming A Young Real Estate Investor Investing in property at a young age seems like a bit of a daunting prospect sometimes. Most young people don’t have a lot of disposable income, often have poor credit and perhaps even student loans.

When you are in your early 20s, you are not likely thinking about investing in property and are probably focusing on other things. However, investing in property at a young age can bring you a lot of advantages.

It requires a different approach and style and you might be the only one of your peers who is doing so, but you will definitely reap the benefits later on in life. When you invest long-term, you will start building your financial independence.

Some might believe that it is impossible for a young person to start investing so early in life, but investing in your 20s is completely possible.

You are not “too busy”, in fact you will find that you have even less spare time as your responsibilities grow when you get older. You will need a little bit of money to get started, but often you can purchase your first property with as little as 3.5% down.

If you want to get started early, here are some tips that will help you along the way:

Get into very good saving habits from a young age by putting aside your money from first jobs. When you want to take out a mortgage, you will typically need to be able to show savings of 3% of your purchase price.
Maintain a clean credit history and pay all of your bills on time in order to build a great credit rating, so that you can obtain a mortgage with a good rate.
Make the most of technology and social media to learn more about investing in property and to find the best opportunities. You have a wealth of information on investing, all at your fingertips.
Find an older mentor – someone with successful experience who can give you tips on how to choose the right investment.

Another main advantage to investing when you are young is that if anything goes wrong, you will have more time to make mistakes and still recover without affecting your retirement. You have nothing to lose and everything to gain, so why not get started?

Case Shiller Price Index Shows An Annual Growth Rate Of Home Prices

September 25, 2013 by lizlaurenb Leave a Comment

Case Shiller Price Index Shows An Annual Growth Rate Of Home Prices Home prices were still gaining in July, but for 15 of 20 cities included the S&P Case-Shiller 10 and 20-city Home Price Indices, the pace of increasing home prices is slowing down. National home prices rose by 1.80 percent in July as compared to 2.20 percent in June.

Home prices grew by 0.60 percent from June to July on a seasonally-adjusted basis. This was the lowest month-to-month gain since September 2012.

David Blitzer, index committee chairman of S&P Dow Jones Indices, said that higher mortgage rates are hitting the housing market. Mr. Blitzer noted that mortgage rates rose by more than a percentage point between May and the Federal Reserve’s statement last week.

The Fed was widely expected to reduce its monthly bond purchases from $85 billion to $75 billion, but the Fed decided not to reduce its bond purchases as the economy has not recovered sufficiently.

Mortgage Rates Fall

High home prices and unemployment are making it difficult for first-time and moderate income buyers to compete; buyers sitting on the sidelines are eventually expected to add to the demand for homes.

Mortgage rates fell after the Fed’s announcement, but Mr. Blitzer said that the drop in mortgage rates would likely have a temporary impact on housing. He said that the rate of increase [in home prices] may have peaked.

Conditions contributing to the run-up in home prices include a shortage of available homes and pent-up demand among home buyers. As of July, home prices for the Case-Shiller 20-city index increased by 12.40 percent year-over-year; this was the highest annual rate of increase since home prices peaked in 2006.

Home prices in the Case-Shiller 10-city index increased by 12.30 percent annually. In spite of the rapid price gains, July home prices remained 21 percent below their pre-recession peak.

Home prices in all 20 cities included in the 10 and 20 city indices increased on a month-to-month basis, with home prices increasing by 1.80 percent for the 20 city index and by 1.80 percent for the 10 city index.

Home Prices Show Strong Recovery

Las Vegas, Nevada had the highest annual gain in home prices for July with a 28 percent increase. Las Vegas was one of the cities hardest hit by the recession. Annual home prices for San Francisco, California rose by 25 percent, and New York City had the lowest annual growth rate for home prices at 3.50 percent.

The Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, released its home prices report for properties securing mortgage loans owned or backed by Fannie and Freddie. The annual growth rate for home prices was 8.80 percent as of July, but remains 9.60 percent lower than the peak growth rate reported in April 2007.

Highest Existing Home Sales Since February 2007

September 24, 2013 by lizlaurenb Leave a Comment

Highest Existing Home Sales Since February 2007 Sales of existing homes reached their highest volume in almost six years in August. The National Association of REALTORS reported Thursday that sales of existing homes rose 1.70 percent in August to a seasonally-adjusted annual rate of 5.48 million existing homes sold.

This was the highest number of existing home sales since February of 2007.

August’s results exceeded estimates of 5.20 existing homes sold, which was based on July’s unrevised reading of 5.39 million existing homes sold.

The NAR also reported that the national median home price increased to $212,100 in August. This represents a year-over-year increase of 14.70 percent and was the largest annual increase in the national median home price since October 2005.

Sales concentrated in areas with higher home prices contributed to this significant increase in the national median home price.

Homebuyers Increase Despite Higher Home Rates

The reading for existing home sales in August suggests that homebuyers are not shying away from higher home loan rates; it may also indicate that the recent shortage of existing homes for sale is beginning to ease.

August’s higher number of existing home sales was attributed to home buyers anxious to lock in lower loan rates in an environment of rising mortgage rates. Also, economists had expected the Federal Reserve to begin reducing its monthly securities purchases, which did not happen.

Had the Fed tapered its securities purchases, long-term interest rates including mortgage rates, would likely have continued rising. The Fed may have decided not to reduce its monthly securities purchase in an effort to slow rising mortgage rates.

The average rate for a 30-year fixed rate mortgage has increased by more than one percentage point since May. Home buyers may respond to rising mortgage rates by delaying their home purchase to see if mortgage rates will fall, or they may rush to buy a home before rates go higher.

Mortgage Rates Affect Home Buyers In Three Ways:

1. As rates increase, monthly house payments also rise, which can impact affordability for first-time and moderate income buyers.

2. National unemployment rates remain higher than the Federal Reserve’s target rate of 6.50 percent. While home prices are increasing and other facets of the economy are showing improvement, jobless claims remain higher than average.

3. Mortgage credit requirements are strict; this keeps some would-be buyers from qualifying for a home loan.

These factors are offset by high demand for homes and short supplies of available homes and developed lots in some areas.

What’s Ahead For Mortgage Rates This Week — September 23, 2013

September 23, 2013 by lizlaurenb Leave a Comment

What's Ahead For Mortgage Rates This Week – September 23, 2013 Last week’s economic news was dominated by the Federal Reserve’s decision not to taper its $85 billion in monthly securities purchases.

Fed Chairman Ben Bernanke noted in a scheduled statement after the Federal Open Market Committee meeting that economic conditions were not yet adequately improved to withstand any decrease in the federal quantitative easing program.

The Fed also reaffirmed that the target federal funds rate would remain at 0.00 to 0.25 percent until the national unemployment rate reached 6.50 percent and inflation reaches 2.00 percent.

The national unemployment rate was 7.30 percent and the Fed projects that inflation will remain under 2.00 percent through 2015.

In both the FOMC statement and his press conference, Chairman Bernanke repeatedly emphasized that the Fed would take no action to reduce QE until the economy strengthens. No automatic reduction of QE purchases would take place without full consideration of the nation’s economy.

The QE program is intended to keep long-term interest rates low, and the announcement that QE would not be tapered brought mortgage rates down after they had increased by more than one percent since May.

Builder Confidence High, Mortgage Rates Lower

The National Association of Home Builders/Wells Fargo Housing Market Index for September revealed that home builder confidence in housing market conditions remained stable at 58; a reading of 59 was expected. Readings over 50 indicate that more builders are confident about market conditions than not.

Housing starts for August did not reflect the high level of builder confidence and fell short of expectations at 891,000. Expected housing starts were estimated at 921,000. There was good news in that August’s reading surpassed the July reading of 883 housing starts. Building permits for August also dropped to 918,000 against expectations of 955,000 and July’s reading of 954,000 building permits.

Higher labor and materials costs and concerns over tight mortgage credit and rising mortgage rates likely contributed to the lower than expected readings for housing starts and building permits.

Freddie Mac’s Primary Mortgage Market Survey reported that average mortgage rates dropped across the board on Thursday. The average rate for a 30-year fixed rate mortgage fell by seven basis points to 4.50 percent with discount points moving from 0.80 percent to 0.70 percent.

The average rate for a 15-year fixed rate mortgage fell by five basis points from 3.59 percent to 3.54 percent with discount points unchanged at 0.70 percent.

The average rate for 5/1 adjustable rate mortgage was lower by 11 basis points to 3.11 percent. Discount points were unchanged at 0.50 percent. This provides a break for home buyers who’ve been faced with rising mortgage rates and home prices amidst a shortage of available homes in many areas.

This Week

Economic news scheduled for this week includes the Case/Shiller Home Price Index for July, the FHFA Home Price Index also for July. New home sales and the pending home sales index will be released.

Freddie Mac will release its weekly summary of average mortgage rates and weekly jobless claims will also be released Thursday. The week will end with consumer related data including personal income and consumer spending for August along with the University of Michigan’s consumer sentiment index for September.

Quick Tips To Beat Out Cash Buyers

September 20, 2013 by lizlaurenb Leave a Comment

Quick Tips To Beat Out Cash Buyers You’ve been searching for the perfect home for quite a while, and finally, you’ve found it! You get all of your finances in order and place an offer on the house.

However, you’re not the only one that loves the home, because there are multiple offers — and one of them is cash.

Cash buyers are seen as desirable because they’re almost always a guaranteed quick close. They don’t have to borrow money from a bank therefore won’t have any financing hang-ups, which is where a large portion of offers fall through. Don’t worry; not all hope is lost.

Follow the steps below to beef up your offer and get your foot in the door.

Less Expensive Homes

If you’ve put offers in on homes at the asking price and are continually beat out by buyers that are paying more, then you might want to consider looking in a lower price range. This is an especially smart strategy for those living in fast-selling markets. By looking at less expensive homes, you can be the one that puts in an offer over the asking price.

20 Percent Down Payment

Save up a higher down payment for the price range of homes you’re considering. If you can come up with 20 percent, then you’re in a position to wave the appraisal contingency for financing with the bank. The more you have in cash, the better.

Take-It-Or-Leave-It Home Inspection

This means that based on the home inspection, you’ll take the property with all its issues, or you’ll walk away. What you won’t do is ask the seller to waste more of their time and money fixing every little problem that’s found.

Fees

Waive the seller concessions, such as closing costs and the home warranty, and pay your real estate broker’s fees. These extra costs add up in the mind of the seller and will show that you really want the property.

Going up against cash buyers can be extremely discouraging. But, just because they’re dealing in cash doesn’t mean they’ll get the property. Many investors think they can put in a low offer because they’re dealing in cash.

So show you’re serious about a property, follow the steps above and put in your best offer. You’ll be a homeowner soon enough!

Tips For Buying A Home That Your Pets Will Love

September 19, 2013 by lizlaurenb Leave a Comment

Tips For Buying A Home That Your Pets Will Love When you are buying a new home, it is important to take into consideration the four-legged residents that will be living there, as well as the two-legged ones. What things should you keep in mind if you are house hunting and you own a pet?

Layout Of The House

When you are looking at the house layout, think about how it will accommodate your pet. If you have an old dog that can’t climb stairs very well, look for a home that is mostly one level.

Cats like to have little alcoves and quiet spaces where they can hide away. Think about where you would put the kitty litter box or the food bowls so that they would be practical and would not get in the way.

Be sure to also look at the yard. Is it fenced, so that you can let your dog outside to run around? Is there an outside hose that you can use for bathing your pet?

Is there room for a dog house? You might also want to avoid a house near a busy road, in case your pet escapes and runs into traffic.

Pet Friendly Neighborhood

Take a look around the rest of the neighborhood. Do you see that many other people have dogs and cats? Are there a lot of friendly people out walking their dogs? Is there a vet, a pet shop and a dog park nearby?

When they see your dog or cat, do people smile and say hello? A neighborhood full of pet-friendly people is a great place for you and your furry friend to live, because you will feel welcomed. You might even make some new friends to go on walks with!

City Ordinances

It is a good idea to know about the local city ordinances when it comes to cleaning up after your pet. In many places, failing to scoop up your dog’s droppings when taking him for a walk can lead to a very expensive fine! This is a mistake that you don’t want to make when you move into a new home.

Clarify The Rules For Unusual Pets

Most people have dogs and cats, but if your animal companions are a little less common, you might need to check the rules. If you own a goat, chicken, donkey, sheep or any other farm animal as a domestic pet, check with the proper officials about the zoning regulations and ordinances in the area you are buying your home.

These are just a few things to consider on behalf of your pet when you are buying a home. For more real estate advice, contact your real estate professional.