July 14th, 2007 by George

From the Post & Courier

Latest article about Summerville Homes

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July 8th, 2007 by George

From wikipedia

Subprime lending, also called “B-Paper”, “near-prime” or “second chance” lending, is a general term that refers to the practice of making loans to borrowers who do not qualify for market interest rates because of problems with their credit history. Subprime loans or mortgages are risky for both creditors and debtors because of the combination of high-interest rates, bad credit history, and murky financial situations often associated with subprime applicants. A subprime loan is one that is offered at a rate higher than A-paper loans due to the increased risk. Subprime lending encompasses a variety of credit instruments, including subprime mortgages, subprime car loans, and subprime credit cards, among others.

Subprime lending is typically defined by the status of borrowers. A subprime loan is, by definition, a loan made to someone who could not qualify for a more favorable rate. Subprime borrowers typically have low credit scores and histories of payment delinquencies, charge-offs, or bankruptcies. Because subprime borrowers are considered at higher risk to default, subprime loans typically have less favorable terms than their traditional counterparts. These terms may include higher interest rates, regular fees, or an up-front charge.

Proponents of the subprime lending in the United States have championed the role it plays in extending credit to consumers who would otherwise not have access to the credit market. But opponents have criticized the subprime lending industry for predatory practices such as targeting borrowers who did not have the resources to meet the terms of their loans over the long term. These criticisms have increased since 2006 in response to the growing crisis in the U.S. subprime mortgage industry, wherein hundreds of thousands of borrowers have been forced to default, and several major subprime lenders have filed for bankruptcy.

Criticisms of subprime lending

Our capital markets operate on the basic premise of risk versus reward. Investors taking a risk on stocks expect a higher rate of return than do investors in risk-free Treasury bills, which are backed by the full faith and credit of the United States. The same goes for loans. Less creditworthy subprime borrowers represent a riskier investment, so lenders will charge them a higher interest rate than they would charge a prime borrower for the same loan.

To avoid the initial hit of higher mortgage payments, most subprime borrowers take out adjustable-rate mortgages that give them a very low initial interest rate of around 4%. But with annual adjustments of 2% or more per year, these loans typically end up charging around 10%. So a $500,000 loan at a 4% interest rate for 30 years equates to a payment of about $2,400 a month. But the same loan at 10% for 27 years (after the adjustable period ends) equates to a payment of $4,470. A 6-percentage-point increase in the rate caused an almost 100% increase in the payment. Ouch!

source: http://www.fool.com/investing/value/2007/07/10/the-skinny-on-subprime.aspx

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July 3rd, 2007 by George

Let me start off by saying… I am not tax expert. I know I pay them, I get good services because I pay them, and they are inevitable. Here is a little information regarding what you can expect.

Once a year, it comes in the mail. The value of your property is X, you owe Y.

Click here to check out the details of the sample tax bill.

Taxes on your home depend on the value of your home, for example:

If you are a Charleston county resident, you can get a 4% assessment rate, versus the normal 6%, if you meet certain conditions. The form can be picked up at your local DMV. More information regarding the special rate can be found here.

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June 30th, 2007 by George

Selling Agent: So you have spoken to the lender?

Buying Customer: Oh yes, I received the approval the other day. Everything is in order Ms. Agent.

Selling Agent: Great! Well let’s close this out and put you in your new home.

A few days later…

Selling Agent: Ummm, Mr. Customer, I thought you said you were approved? You were merely pre-approved and now it looks like you are not going to actually be approved.

Buying Customer: Ummm, aren’t they the same thing. Approved is approved.

Selling Agent: Approved is approved, Mr. Customer. But, pre-approved is not approved!
It has happened many times before. A customer has their pre-approval letter in hand, only to learn the bitter taste of rejection down the road.

So what is the difference between an pre-approval and an approval?

Pre-approval

• shows seller that the buyer has had their credit evaluated by a professional. The information is entered into the underwriting system and an automated result is produced… Yay or Nay. There is no documentation provided to the lender at this time, therefore, the buyer typically provides the information verbally, over the phone, online, or in-person.

Approval (finito, the end goal, you are here!)

• Everything is verified. Pay stubs,W-2’s, stock holdings, collateral, everything that is put together for the lender. Here an underwriter will sign their name to the loan after everthing is reviewed and the result is the green light.

So, if you have only talked with someone over the phone, and they said you are qualified for $135,000 and they provide you with a letter, this is a pre-approval letter. Believe me, you will understand that an approval is not nearly as easy and painless. Be prepared to find documentation. No time like the present to start keeping a folder filled with those old paystubs.

Time to buy a shredder!

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June 26th, 2007 by George

Jeez, I really despise writing that check every month for rent. None of the money goes to work for me, but merely goes to pay off my landlord’s mortgage. Not to mention, the appreiciation the landlord is seeing month-in and month-out on the property.

But, am I actually paying too much for rent, comparitively speaking? What are others in my area paying? Are there better deals out there that I don’t know about? Am I just wasting my money every month, when I could purchase a home and put my money to work for me?

Well, Rentometer has come to your aid. The rentometer website is a visual tool to help you decide just that.

Input your information into the rentometer homepage…

Simple input, simple interface. A few seconds later you get your results.

The results give you a range of rent rates in your area of interest. Low, High, and the median, and then compare what you are paying to those numbers.

Drawbacks:

• The rentometer does not account for your particular location. Remember, you get what you pay for.

• The rentometer does not account for number of bathrooms.

• The rentometer is only as good as the information entered into it. It is only an approximate average of rent costs, and is not definitive, due to its drawbacks.

• The rentometer does not account for amenities: pools, fitness centers, etc.

• The rentometer is geared towards renters, therefore, you can imagine where their funding comes from.

But, for a cool visual tool and information resource, rentometer does it’s job. However, that being said, you still have to decide is it better to rent or buy (see dontrenew.com’s blog post on this matter).

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June 24th, 2007 by George

I’m looking to buy a home. I can go to realtor.com, look at the listings available in my area of interest, find a home I like, and request a showing.

But, who will be showing me the house? The answer is… the seller’s agent.

This is where a potential conflict of interest can occur. The seller’s agent has a fiduciary obligation to the seller and is required to look after their best interests. This is where the conflict of interest can arise. If the seller’s agent is obligated to the seller, who is looking after your interests? Sure there are roles, termed dual agency, for example, that can be put into place, but is the best manner of approach?

Why not hire someone who will look after you and your interests in a potential transaction? By hiring a buyer’s agent, you have someone who as the same fiduciary obligation to you and is required to do what is best for you, exclusively.

What are the benefits of hiring a buyer’s agent if you are looking to purchase a home?

1. The buyer’s agent is paid by the seller. That’s right, you get someone who is experienced, ethically bound, and is working for you, yet you don’t have to pay them anything. The seller is contracted to pay a commision (e.g. 6%), which will be split by the seller’s agent and the buyer’s agent.
2. The buyer’s agent is experienced in the home buying process. That means, when you have questions, (What are the HOA dues?, What am I financially obligated to at closing?, What is an ARM?) you have a direct pipeline to those with the answers.
3. The buyer’s agent works for YOU! Therefore, let them do what they know best, for you. No need to get swamped in a mountain of paperwork, frustrated with learning the system, or putting your trust in people who may not have your best interest at stake. A signed contract will make this enforceable, and if you are unhappy with their performance at the end of the contract, you can either go with another agent, or work alone.
4. The buyer’s agent has access to all homes for sale. They know your likes and dislikes, which can save you time in weeding out certain homes that don’t fit your criteria.

The buyer’s agent is experienced, paid by someone else, and works for you. Why not use their knowledge in the home buying process?

You can find some additional information on the dontrenew.com website here

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June 23rd, 2007 by George

     OR    

dontrenew.com was established for that very question.

Should I buy or should I continue to rent?

There are pros and cons to both, and only you can decide what is appropriate for you.  Let’s take a look at what some of these pros and cons are:

Buying Pros

• Historical uptrend in appreciation of real estate values
• Tax deductions provide huge incentives
• Place to call home
• Housing market set for rebound
• You are not paying someone else’s mortgage for them
• Seller are providing tons of incentives right now

Buying Cons

• Finances can become over-extended
• Risk of ownership

Renting Pros

• Rental rates typically a little lower than a mortgage payment
• Financial commitment is typically one year or less
• Risk of ownership is avoided

Renting Cons

• No chance of gaining appreciation of homes value
• No tax deductions
• You are paying someone else’s mortgage for them
• Rental rates continue to rise
• No sense of ownership

Well how do you decide which is best for you?  Its a financial decision for most people (while others may move frequently due to work, etc.).

1. Most importantly, Run the numbers - use dontrenew.com’s Buy vs. Rent calculator to decide what makes more sense
2. How long are you planning to live there?
3. What is your gut feeling?  What is your sense of ownership?

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June 21st, 2007 by George

Homebuying fees… where to begin. Let’s start at the beginning. And since I just went through all of this, representing myself, who better to take a renter thinking of buying or a first time buyer through it all?

I bought my first house earlier this year. My wife and I were so very proud! It is such a great feeling when you are sitting at that closing table and signing your name 74,345 times (did I mention I at least got a nice pen out of those signings?). The American Dream, as it is so termed, and it is fitting (Congress has even funded an initiative titled The American Dream). We are proud of our house. But… let me tell you about something that will make you wonder, is this really the American Dream?

A little thing called the settlement statement…

What all is contained on the settlement statement?  Everything you can think of, and plenty more you can not.

• Points and/or origination fees
• Escrow fees/prepaids
• Homeowner’s insurance
• Lawyer fees
• Private mortgage insurance (PMI)
• Recording fees
• Title search fees
• Credit report fees
• and on, and on, and on
• (read more here)

You need to be sure your lender is doing you justice.  Warehousing fees, markups, etc. may just be another way for the lender to pad their pocket.  When you get your HUD statement (be sure you review it prior to closing), make sure you go through it with a fine tooth comb.  If you are not sure what you are looking at, have someone qualified to take a look at it for you, or talk to your lawyer for the transaction.  They are typically unbiased and are experts when it comes to the buying/selling of a home.

When I received my HUD statement, the night before closing, there was over $2,000.00 worth of errors on it.  Panic began to settle in.  It ended up that taxes were credited to the seller when they should have been credited to me (which was an oversight on the lawyers part) and there were a couple of extra fees from the lender that should not have been there.  The point is to check and double check, after all, it is you who are writing the check.

 Some other savings tips:

• Appraisals, credit reports, & title insurance fees should be the same from lender to lender
• Your lender may be willing to drop or discount some fees
• Try to close your mortgage near the end of the month (which will save you money on prepaid interest)
• Negotiate, negotiate, negotiate!  You can have the sellers pay part or all of your closing costs!

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June 20th, 2007 by George

Maybe…

• You haven’t heard
• Didn’t know any better
• Didn’t really care

But if zillow has it’s way, you will hear, know and care. But at the same time, the way it’s being touted, you may think the endtimes are here and the rapture is upon us…

“Zillow has created a real estate revolution” - Fortune Magazine, Feb 2007

Zillow was created in 2006 by a couple of former Microsoft execs who also founded the little website expedia. They wanted to create a real estate website that can give people valuations. As you may expect, many real estate agents were not too eager to support this idea, because that is part of their service to you that is often referenced.

But really, what is zillow, how is it different and what can it do for you?

Zillow is unique for a few reasons:

It is a website designed to be beneficial to sellers, buyers, owners and professionals

You can take an area/city/town and look at the average real estate prices prices (e.g. North Charleston, SC) by going to the map& search function

134k in North Charleston, 133k Ladson, etc. - averages

When you do a search of a specific area, different colored flags (red, blue, yellow) represent homes that are for sale, have sold or…Make Me Move

Make Me Move is a homeowners opportunity to tell the world “Hey, my house is not for sale (at this time), but if you offer me $X dollars, I will move right on out!”

Make Me Move:

One of the coolest features that Zillow has is it’s Zestimate. This is where you can spend some time being an online voyuer.

When I look at an area at street level, Zillow will give me a Zestimate of the homes value in that area.

Its important to note that these Zestimates are just that, zestimates… I mean, estimates.

As the Wall Street Journal said in a February 2007 article, “when Zillow is bad, it can be terrible — off the mark by more than 25% on one in 10 homes. In one case it was off by $2 million.”

Check out Zillow.com. Spend some time on the website searching areas of interest to you and get a feel for the values of the area. You can see what neighboring areas are worth (which can help or harm the value of the area you’re looking at) and if you are in the ballpark with your budget. Zillow, just another tool to help you in the homebuying process.

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June 17th, 2007 by George

I was surfing youtube the other day, looking for real estate videos and information. What I wanted to watch was something more than the typical talking head, who just sat there explaining:

• how his method is better that everyone elses,
• how flipping homes is so easy,
• how he can make you a millionaire, without ever leaving the couch,
• if you just send him $495.00 for his informational video tapes…,
• with the placement of “tiny little classified ads in hundreds of newspapers”, you can become RICH,
• etc, etc, etc, ad nauseum

(On a side note, it’s amazing what these tiny classified ads can do for you… Even the Federal Government has taken note and erased the deficit using this money making system…)

When, suddenly, I ran across a very cool video added by speculativebubble. What he did was use an index of home prices (adjusted for inflation) that was created by Yale economist Robert Shiller

speculativebubble used this index in a roller coaster simulation as a means of visualizing the trends year over year.

Be sure you stick around at the end, as the roller coaster gives a final turn to see the ride you have just been on. It will be interesting to see how this video gets updated over the next few years, what ups & downs we will be apart of.

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