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Mortgage Tips

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U.S. Residential Sales Expectations Hit 8-Year High

Residential sales in Seattle—in fact, all real estate dealings anywhere—remain the most local of commercial transactions. If your house is in San Francisco, a price spike in suburban Newark is probably of little interest, unless you plan on moving anytime soon. Even so, the new projection for overall U.S. residential sales had to perk up area homeowners’ interest.

The “best home sales market in eight years” was the forecast—along with “mortgage originations that will likely rise” and “larger gains in newly built home sales.” Puget Sound residential sales may make up but a tiny fraction of the data contained in CoreLogic’s analyses and data announcements, but any local homeowners looking for a strong spring market couldn’t help but be buoyed by last week’s prognostications.    

 The basis for the surprisingly robust residential sales prediction was supported by a number of other data sources which have gradually confirmed solidification of the overall economic picture. With many economists agreeing that the U.S. economy “is poised to grow by close to 3%” this year, a heightened level of housing demand is bound to result. If that mark is achieved, it would be for only the second year in a decade. Gains in employment (in the 3-to-3½ million person range) are also expected.

The improving economic projection for 2015 was ascribed to three forces. The halving of energy prices which began last summer was deemed “unlikely to jump back up this year.” Anyone who’s been enjoying the freefall in prices at the pumps will appreciate the immediate impact that has on family wallets.

The second positive force is psychological, and very real. The rise “in consumer and business manager confidence” in the recovery has been widely noted: the Conference Board (“up 4.9 points”); U.F.’s Confidence Index (“the highest reading in 10 years”); Small Business Optimism Index (“3rd highest reading since 2007”).

CoreLogic’s third factor was one that hasn’t been much talked about until now: governmental. Apparently, tax receipts have been stronger than expected, freeing state and local governments to spend more. That’s an unexpected economic stimulus—and of a kind that should be more welcome than some of the previous “let’s just create more money” variety.

CoreLogic puts residential sales growth in the area of 5%. Will our Puget Sound numbers match those projections? One reason to think so is the local mortgage rate phenomenon. Rates remain tantalizingly low—but apt to begin creeping upward. That’s the kind of spur to home buyers that is apt to work as effectively as merchants’ “limited time sale” technique: tick! tick! tick!

If you have been delaying wading into the local residential sales arena until the time is right, 2015 certainly looks like that time has arrived. I’m standing by to help you take advantage of the many opportunities this spring market is offering. Why not give me a call?

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Simple Steps to Reduce Your Bainbridge Island Mortgage Costs

Mortgage rates may rise or fall this spring (lately they seem to be falling!)—but that needn’t prevent you from saving even more money when it’s time to structure your own Bainbridge Island mortgage. The underpublicized fact is that mortgage rates are only one of the factors that affect how much you wind up paying. No matter what happens to mortgage rates in 2014, here are some keys to making mortgage decisions that result in significant savings:

Tailor the term

Evaluate your budget and see whether it is possible to increase the amount of your monthly payment. By increasing monthly repayments, you reduce the term of your Bainbridge Island mortgage. Over the course of the loan, this can save tens of thousands of dollars.

Refinance for five years instead of two

The interest you pay on a refi loan isn’t the only cost. The origination and other fees can easily end up costing four figures. It’s a numbers game: simply calculate the anticipated savings from refinancing, then subtract the amount of the fees. The difference tells you your net savings…and demonstrates why one of the easiest ways to grow those savings is to refinance less frequently.

Change to biweekly 

Changing to biweekly payments instead of monthly payment can save you more than small change. The reason is on the calendar: there are 52 weeks in a year, but only 12 months. If you make 26 1/2 payments every year, that equates to 13 monthly payments. It’s a stealthy way to make an additional month’s payment every year without really noticing it. When choosing a loan, opt for one where the bank allows you to choose biweekly payments (as long as they don’t want to charge an additional fee). Also request that the extra payments be deducted from the principle.

Improve your credit score

On this count, every mortgage guru sounds like a broken record. Although the average quoted mortgage rate may rise or fall, that’s not necessarily the rate that you pay. Your FICO score is the primary determinant of your mortgage rate. The difference between a good FICO score and a bad one can be significant, so get a copy of your credit card record and challenge any damaging inaccuracies. Lenders want to see a long history of paying on time with a mixed use of credit.

 Mortgage rates on Bainbridge Island will almost certainly increase in the future because they’re still well under historical averages. But there are plenty of steps you can take to cut thousands of dollars from your ultimate Bainbridge Island mortgage costs. And if you are ready to buy a house on Bainbridge Island this spring, contact me today—I’m ready to show you what’s coming up at your price point!

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For the Self-Employed, Getting a Loan Takes Planning

You don’t have to tell anyone who is self-employed that there are extra costs that go with the benefits. In addition to the long hours and weight of responsibility that come with the job description, getting a home loan has always added special challenges. Now that we are into the new Dodd-Frank era of federal oversight, some of the changes warrant an early heads-up.

The 2010 legislation that went into effect on January 10 created the Consumer Financial Protection Bureau, with the function of tightening the rules lenders follow in order to discourage the issuing of mortgages that borrowers can’t be reasonably expected to be able to repay. To deliver on that worthy purpose, more proof and more paperwork will be required to support the income claimed on loan applications (here you might well be hearing an imaginary smacking sound from self-employed persons reading this and whacking their foreheads—paperwork is the bane of the self-employed).

If you are your own boss and getting a loan on Bainbridge Island is on your horizon, take heart! Just because it may be more difficult to apply for home loan doesn’t mean it’s impossible.

The new lending rules describe eight specific factors lenders should verify and document before advancing home loans. They includes the borrower’s assets, credit history, employment status and other debt obligations. The penalty for lenders who fail to do so adequately is that they may be legally liable if a borrower proves unable to repay.

For the self-employed, the extra burden can come with the requirement that borrowers be able to show consistent income (hear that forehead-smacking sound again?) The general rule is that borrowers be able to provide at least two years’ worth of personal tax returns. Since self-employed people getting a loan on Bainbridge Island often have perfectly valid reasons for fluctuating annual incomes, it’s vital to talk with a broker and lender as early as possible to establish the taxable income level needed to qualify for a loan.

That talk should cover other areas. For instance, self-employed people have greater flexibility than most when it comes to reporting deductible expenses on their income tax forms. Since those same deductions result in lower net incomes, that can be problematical when it comes to getting a loan. One way to counter that problem is to demonstrate that the expenses incurred were used to buy things that will improve their business in the long term. Another approach is demonstrate that similar expenses are not likely to re-occur (particularly apt when a business is just starting up).

If you are among the self-employed—and plan on getting a loan—planning is key.  Get your ducks in a row now so the loan process doesn’t derail you later. It’s never too early to call me as an early resource before we get to move on to the fun stuff—your home search!  

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Sooner or Later, Fed Changes Impact Bainbridge Home Loan Rates

On January 6, the Senate confirmed Janet Yellen to head the Federal Reserve’s Board of Governors, making it the first time ever that a woman has led the nation’s most important financial institution. In some respects, it makes her the most powerful woman in the United States.

As with every personnel change in the Fed, Yellen’s rise has fostered plenty of concerns about the direction the Federal Reserve will take under her leadership. Since it’s the institution that determines the federal funds rate—which in turn dictates how much businesses and individuals pay for their loans—any change in Federal Reserve policy has a significant impact on our Bainbridge Island home loan rates. Sooner or later, those rates affect just about all of us. 

So, what clues do we have about the direction Ms. Yellen is likely to lean? One came just before the financial crisis. Before the financial meltdown, Yellen expressed concerned. In 2005 she is quoted as saying, “Analyses do indicate that house prices are abnormally high, that there is a “bubble" element, even accounting for factors that would support high house prices."

Last year was an excellent one for Bainbridge Island real estate, yet according to the Standard & Poor’s Case-Shiller Index, national housing prices are still 20% off the peaks set in 2006. Research from real estate website Trulia shows that U.S. housing is still 4% undervalued (compared with a 39% overvaluation reached at the 2006 peak). Happily, Yellen, an early identifier of the previous housing bubble, has not expressed similar concerns about today’s real estate market. 

In 2012, the Federal Reserve’s previous leadership announced an unemployment threshold of 6.5% as the point at which it would consider raising interest rates. During Yellen’s first testimony as Chairman, she stated that the Federal open market committee would likely keep interest rates near zero well past that mark. In Yellen’s view, the recovery in the labor market is far from complete. As evidence, Yellen pointed to 7.1 million people who are mired in part time work but who would prefer full time jobs—and to the 3.6 million people who have been unemployed longer than six months.

For Bainbridge Island home loan rate watchers concerned that a rise in rates might dent real estate values, the new Chairman has sounded some reassuring notes. In her recent address to the Committee on Financial Services, Yellen explicitly stated that she expects “a great deal of continuity in the FOMC’s approach to monetary policy.”  That could mean that interest rates for local home loans might gradually rise, it’s not likely to be precipitous.

The bottom line: dramatic rises in interest rates are unlikely under Yellen’s watch, but those considering getting a home loan who have not yet taken advantage of still low interest rates might do well to consider doing so.

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Bainbridge Island Mortgage Rates Rise—But What’s It Mean?

Right now, mortgage rates in Bainbridge Island (as in the rest of the nation) are higher than they’ve been for 15 months—a trend that’s likely to continue. We have to wonder about the impact higher Bainbridge Island mortgage rates will have on home sales in the coming year.

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First, some perspective. If mortgage rates do increase in 2014, it’s no ‘done deal’ that home buyers will be put off—nor that a wave of foreclosures will follow. The reason? By past standards, interest rates will still be low, even at the 5½% predicted by the N.A.R. Any hike in mortgage interest rates are coming off the historical 3.52% set in the spring of last year. Consider: most of us were paying mortgage rates between 7 - 8% throughout the 1990’s! 5½% looks like a fire sale compared with those.

Factor Two: surprisingly, a projected rise in interest rates is not predicted to dampen the enthusiasm for acquiring property. The Mortgage Bankers Association predicts that home sales will increase nationally by 10% in 2014. I have no doubt that some Bainbridge Island first time homebuyers could be waylaid by rising interest rates—after all, a 1% increase in mortgage rates equates to approximately a 10% rise in monthly payments. But overall, buyers who can meet the current lending standards should still be able to afford to own. Given the cost of the renting alternative, they may decide they can’t afford to pass up the right house at the right price.

Additionally, there is a strong argument that the principal effect of rising interest rates is less likely to be on Bainbridge Island home sales than on refis. The Mortgage Bankers Association predicts that refinancing demand will drop by half in 2014 (when you chart that kind of number, it looks like a cliff!). Many homeowners will already have locked in last year’s interest, so they certainly won’t be interested.

Any drying up of the refinancing business may have yet another effect. There could be a follow-on effect as lenders start loosening their lending criteria to attract new business. First time buyers that have been locked out of the market until then may (we are now two after-effects later, so this has to be a ‘may’) find themselves suddenly eligible for a home loan.

Given the healthier economy and falling unemployment, the outlook for the Bainbridge Island housing market in 2014 has reason to look positive. Thinking of selling your home this spring?  Now’s the time to call me to discuss timing!

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Rise in Real Estate Prices Slows — and That’s Good News!

The future of real estate prices in Bainbridge Island is always a matter of keen interest to area homeowners. So it’s important when the latest national numbers in the Case-Shiller Index show that the rate of rise in real estate prices has begun to slow.

Bainbridge Island homeowners should be pleased!

“WHAT?” you may well be thinking. If the rise in national or Bainbridge Island real estate prices is slowing down, why in the world would that please homeowners? The answer is only a little bit convoluted.

The fact is, the recent remarkable leaps in real estate prices had some knowledgeable observers shaking their heads. The Business Insider even headlined, “These Home Price Gains are Not Normal, Sustainable, Or Believable.” Business Insider was reacting to the previous three straight months’ real estate price appreciation “above 10%.” They speculated that a large number of foreclosures now being recycled at more normal price levels had created an artificially high growth rate.

That’s why slowing down a little would mean a more normal market — and more reliable growth statistics. Other conditions make that story easy to accept:

While interest rates have risen slightly, at today’s rates, borrowing is still notably inexpensive. The increase in investor participation (they tend to pay in cash) also reflects the more conservative lending environment.

By the end of the financial crisis, construction in many parts of the country had fallen sharply, leading to a tight housing inventory. The shorter supply caused additional pressure on real estate prices.

Another factor: rising rents. Whenever the economy performs well, rentals reflect it, in turn stimulating Bainbridge Island real estate prices. The economy may not be as robust as we’d wish, but its positive direction plus the stock market’s rebound have combined to support value growth.

What to expect from real estate prices in Bainbridge Island this fall? Going forward, I would expect to see a continuation of gains at the slightly slower rates we are beginning to register. If that’s the case, anyone looking to re-enter the residential market should find that now is the time to start looking…and offering. Call me to discuss your own outlook!

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Bainbridge Island Mortgage Rates and the Summer Holiday Connection

After such a long time remaining at the lowest levels anyone can remember, Bainbridge Island mortgage rates have been climbing out of the cellar. No one who was paying attention expected them to stay at the almost unbelievably low levels they’d held for more than a year, so that was anything but a surprise.

But for Bainbridge Island home shoppers and sellers, it is the future of mortgage rates that is most important. Because mortgage rates are the basis by which monthly payments are calculated, knowing what to expect in their movement would enable anyone to make the best decision about whether now is the time to buy or sell — or whether even a short delay might mean the same monthly outlay could buy more house.

Experience teaches that literally no one can accurately predict those rate movements, but I thought I’d look for some of the most current advice on the matter to see if they could supply any enlightenment. The answer (certainly more predictable than the rates) was…not really.

Recently, Mortgage News Daily had what you’d have to call the typical take. After headlining “Mortgage Rates Slightly Lower For Third Straight Day,” they admitted that the national rates, while under July 23rd lows, were reflecting “a detachment from the financial market data.”

In other words, the lower mortgage rates didn’t follow any rational reasoning that their correspondents could discover. Further explanation followed, but wasn’t much more helpful for making any predictions. “Quiet days and quiet weeks have a sort of inertia in that the higher and lower boundaries of rate movements are fairly well entrenched unless [blah blah blah]… which happens because of low volume and low participation.”

In other words: it’s Summer. Nothing (or anything) might happen when the financial traders are off on vacation. Another interpretation: if you’re intending to buy or sell a home in Bainbridge Island, the hope that waiting will yield improved mortgage rates is unlikely to give you much more than a 50-50 chance. 

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What Makes a Great Mortgage Broker on Bainbridge Island?

Getting a mortgage on Bainbridge Island these days can be more involved than in years past, not least because their historically low rates make them so desirable. That loan can make or break a fantastic deal — the kind of deal you don’t want to lose when you come across it! Central to the process of getting a mortgage is your mortgage broker…but how do you know when you’ve found a great one?

These are some of the qualities I believe most often point to the answer: 

  • Truly outstanding mortgage brokers get tons of referrals from previous clients and their real estate agents…while other less well-appreciated or experienced brokers must constantly solicit new business. BUT (a very important ‘but’) that is not to say that a mortgage broker who solicits isn’t perfectly well qualified; simply, if you have selected a broker through his marketing, be sure to ask for a few recent references — and speak with them!
  • Getting a mortgage often obligates as much as a third of a household’s income, so it’s vital that it fit properly into the overall financial picture. A great mortgage broker asks the right questions to find a product that best fits your long-term goals, even when they aren’t the easiest ones to ask.
  • The rules governing mortgage transactions have changed significantly in the last few years — and they were plenty complicated to begin with. Learning much of the process on the fly is part of the challenge facing brokers who are new to the field. When you are getting a mortgage on Bainbridge Island, if you suspect yours will be anything other than a straightforward process, it may be best to look past a newly licensed broker. An easy way to learn how much experience your broker has is to inquire about his work experience over the last 10 years.

Getting a mortgage on Bainbridge Island can be complicated, but it’s often decisive for your real estate transaction. I’ll be happy to introduce you to some of my proven local favorites. It’s one way we’ll be ready to go when we find you the perfect house!

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Missed Mortgage Payments Can Attract Scam Proposals

 

When natural disaster strikes, you can be certain that two groups will soon be there: the Red Cross — and scam artists. Unfortunately, the same holds for turmoil of all kinds.

Bainbridge Island homeowners who have missed mortgage payments should be aware that, in addition to getting their accounts back on track as soon as possible, they should be prepared to be targeted by unethical operators.

Missed mortgage payments can cause a Bainbridge Island homeowner’s name to appear as ‘arrears’ on public tax records: it’s one way unscrupulous characters locate their victims. That can set off an onslaught of solicitations through the phone, mail, and possibly even at the front door! Normally level-headed householders can be misled by the prospect of a quick fix, especially since stress levels can be high. Knowing the telltale signs that a mortgage scam is in the offing can stop it before it gets far.

One indication is any ‘cure’ that requires a large up-front payment to the mediating agent. Likewise, any proposal that involves repayment to anyone other than the lender — no matter how convincing the reasons offered — is not likely to be authentic.

In one devious mortgage scam, the agency tries to convince you to sign over ownership of your property with the promise that you will be able to rent it back in a “lease-to-own” arrangement. That may sound convincing since some banks are experimenting with a similar option. But anyone other than the mortgage holder who proposes that you sign over the property deed or title to them is probably not working in your best interest. Likewise, an agency that seeks your power of attorney should raise another red flag — in this case, the agency could have the power to circumvent your wishes.

If you’ve missed mortgage payments in Bainbridge Island, your first action should always be to talk to a reputable attorney and financial advisor to sort out your available options. If selling your home is one — either by conventional or short sale — it’s my job to help make accomplishing that easier. Don’t hesitate to contact me with your private real estate needs.

 

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3 Cheerful Tax Facts for Bainbridge Island Home Sellers

 

This year April 15 falls on a Monday —for many, that undoubtedly bodes ill for the weekend preceding. Tax time may be the leading contender for everyone’s least favorite time of year, yet there are some potential breaks of sunlight shining through the tax time overcast. Most of us know these already, but it’s still encouraging to remember the substantial advantage that Bainbridge Island home sellers stand to gain:

  • Most Bainbridge Island home sellers who have owned and lived in their primary residence for at least two of the preceding five years can exclude $250,000 of any gain (up to $500k for those filing joint returns). This is a gigantic incentive for homeownership. The major exception comes for those who have taken this deduction within the previous two years.
  • You may be able to deduct losses from an income property, though home sellers may not deduct losses from the sale of their primary residence. Why not? Ask the rule-makers!
  • Special rules are likely to apply to Bainbridge Island home sellers who received the one-time First Time Home Buyer Credit when they bought their property. This is another area where you should seek qualified tax advice; one example is the special consideration that may be granted for those who have not previously deducted all the points paid for their mortgage. Details are in IRS Publication 523 — at last check, the rules are unchanged (the ‘Recent Developments’ heading is refreshingly empty).

This all goes to reinforce the point that Bainbridge Island home sellers should always be sure that they leave none of homeowners’ tax benefits on the table. Uncle Sam provides them to encourage taxpayers to behave in ways they believe to be beneficial to all of us: home ownership is decidedly one of those.

As always, be sure to consult your tax professional for all major moves. And when you’re ready for a real estate professional, I’m here to help every step of the way! 

 

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