John Beckett's Real Estate Blog

Faced with plunging property values and rising defaults, lenders are charging borrowers higher mortgage rates and adding fees. Not all of these added costs are set in stone, however. If you’re looking for a loan, vigilant shopping and a little haggling can go a long way toward landing a better deal. Here are five fees to watch out for and how to avoid paying them:

Application fees

Just because an ad says “no application fee” doesn’t mean there’s no fee at the time you submit a mortgage application. Each lender gives different names to its fees, which makes it hard to comparison-shop. Fees paid outside of closing — meaning at the time you submit loan paperwork — typically include an application fee (an average of $252, according to HSH Associates, a mortgage-information company in Pompton Plains, N.J.), an upfront property appraisal ($331) and a credit check ($33). They may be listed separately or lumped together as a “document-processing fee.” To avoid overpaying, ask lenders for a good-faith estimate of mortgage costs. Though lenders are under no obligation to provide one, most will.

The yield-spread premium

One dirty little secret of the mortgage industry is the yield-spread premium. In return for arranging loans with inflated interest rates, some brokers receive fattened payments — referred to as the yield-spread premium — from lenders. Even a slight difference in rate — say, 6.779% instead of 6.495% — amounts to nearly $17,000 in extra interest over the life of a 30-year, $250,000 loan. To avoid getting suckered, ask your broker whether the lender pays a flat rate or a percentage commission based on loan terms. Also, obtain a copy of your credit score and use Fair Isaac’s MyFICO.com to get a realistic estimate for a fixed-rate mortgage based on your score.

Risk-adjusted rates

Getting deemed a risky borrower is no longer just a matter of a low credit score. Lenders now consider other risk factors. Buy in an area that has seen values drop precipitously — such as Florida or Las Vegas — and you can expect a higher rate. The good news is that each lender gives different weight to individual risk factors. So make sure to collect bids from various lenders.

Down-payment penalties

The days of zero down on a mortgage are over. Without a down payment of at least 20%, prospective homebuyers will undoubtedly get hit with a higher interest rate and need to pay for more points. (Each point usually amounts to a fee of about 1% of a mortgage.) Also, if buyers can’t put 20% down, they’ll need to get private mortgage insurance, which typically costs 0.5% of the loan. Shopping around for lenders with more-favorable points and insurance charges can help lessen the blow.

Closing costs

The way closing fees are disclosed is, frankly, quite bad. That’s problematic, considering closing fees amount to 2% to 5% of a home’s price. Location plays a big role, as taxes and other requirements vary by state. Some states require expensive attorneys to oversee the closing process, while others allow a title agent or escrow officer. Ask potential lenders for a good-faith estimate of closing costs. Then check in weekly with whoever is handling the closing to see whether there are any changes in either lender or third-party fees. Here’s how to keep these fees under control:

• Lender fees. Ask which expenses go into each fee, and challenge anything that seems unnecessary or inflated, such as overly high charges for faxing documents or overnight delivery. Be particularly cautious about fees prorated based on the closing date. Such fees are easily miscalculated, especially if the closing date changes.

• Third-party fees. Home-buyers also have to deal with title insurance companies, surveyors and inspectors, all of whom have their own fees. Comparison-shop at other local companies to ensure you’re getting a competitive bid. If you find a better rate, ask the lender to use that vendor instead.

This story was reported and written by By Kelli B. Grant for SmartMoney. Published Oct. 2, 2008

Here are the companies hiring in September:

Aflac
Industry: Sales
Number of openings: 500
Sample job titles: Sales associates
Location: Nationwide

Allied Cash Advance
Industry: Credit union, finance, banking
Number of openings: 78
Sample job titles: Brand manager, district manager, customer service representative, branch team members, branch assistant manager
Location: California, Colorado, Indiana, Louisiana, Michigan, New Mexico, Texas, Virginia, Florida

City National Bank
Industry: Banking, financial services
Number of openings: 141
Sample job titles: Financial sales advisors, relationship managers, residential lending officers, senior mortgage loan underwriters, operations supervisors, policy and procedures supervisors
Location: California, New York

Davaco Inc.
Industry: Retail, restaurant contract services
Number of openings: 500
Sample job titles: Finish-out installers and lead installers, product merchandisers
Locations: Nationwide

Dollar Tree, Inc.
Industry: Retail
Number of openings: 1300
Sample job titles: Assistant store managers, store managers, distribution center associates
Locations: National

Edward Jones
Industry: Financial investments
Number of openings: 400
Sample job titles: Financial advisors, branch office administrators
Location: Nationwide

Oldcastle
Industry: Sales, construction, manufacturing
Number of openings: 500
Sample job titles: Outside sales, plant engineer, skilled labor
Location: Nationwide

Orkin Pest Control
Industry: Pest Control
Number of openings: 138
Sample job titles: Pest control specialist, national accounts sales director, security analyst, network engineer, branch manager trainee, administrative assistant, outbound sales specialist
Location: Nationwide

Securitas Security Services USA Inc.
Industry: Security guard
Number of openings: 300
Sample job titles: Security officer, supervisor, EMT
Location: Nationwide

UPS
Industry: Sales, warehouse and transportation
Number of openings: 500
Sample job titles: Package handler, driver, accounting, inside sales, mechanic, outside sales
Location: 50

Waggoner’s Trucking
Industry: Transportation
Number of openings: 100
Sample job title: Truck driver
Location: Nationwide

More at: http://msn.careerbuilder.com/

As mortgage rates hit a new record low this week, two questions come to mind:

• How low will rates go?
• And when will they head back up again?

The average rate for a 30-year fixed-rate loan fell for the third straight week, to 4.57%, down from 4.58% last week, according to Freddie Mac’s weekly Primary Mortgage Market Survey. The average rate for a 15-year loan was 4.07%, up from 4.04% last week. The 30-year rate is the lowest since Freddie Mac started keeping records in 1971 and the lowest recorded by the Bureau of Economic Statistics since February 1955, when home-loan terms were shorter than 30 years.  The number of refinancing applications rose 9.2% last week, the Mortgage Bankers Association said, as more people who refinanced last year, when rates were about 5.5%, see benefits to refinancing again. The number of applications for home purchases, however, continued to decline.  Why are rates so low? It’s the economy. Amy Hoak of MarketWatch explains, mortgage rates are low because of fears about the economy, both in the United States and abroad. She interviewed Greg McBride of BankRate.com, who said: When investors get nervous, they flock to safe-haven investments such as government debt. Mortgage rates are priced relative to yields on U.S. government debt. The decline on government bond yields has directly benefited the mortgage shopper. And when will rates start to rise? I left my crystal ball in my other office, but the short answer, obviously, is when the economy improves.  David Dessner, director of sales for New York’s GuardHill Financial mortgage company, told said: So keep an eye on when investors start moving their money from U.S. Treasury bonds to other venues. That’s when rates will start to inch up. Remember that the published weekly number is an average gathered nationwide, so the actual rate customers are offered can vary. In fact, mortgage rates offered by a given lender on a given product can change daily, or even several times a day.  The irony of the record-low mortgage rates, of course, is that so few people can refinance or can afford to buy because of the same economic conditions that are keeping rates low. Ted C. Jones, a title company economist in Houston who was interviewed by Holden Lewis of Bankrate.com, has what he calls “a great way to get money in the pockets for people to recover from this economy”: Allow anyone who is up to date on mortgage payments to refinance at the current market rate, even if they owe way more than their home is worth.  If you’re one of the lucky few Americans who have at least 20% equity in your home, a solid income and good credit, you may want to see if refinancing could save you money. Refinancing a $250,000 mortgage from 5.5% to 4.5% would save about $150 a month.  But whether refinancing provides a true savings depends on whether you’ll live in the house long enough to recoup your closing costs, which vary widely across the country.  Is this a good time to buy a house or should you wait for rates to go lower? Or rush now for fear rates will spike soon? This assumes, of course, you have a down payment, a secure job and good credit — things many Americans lack these days.  McBride and other experts  expect rates to rise by the end of the year, but McBride points out that 5.5% is still a low rate, by historical standards. On a $100,000 loan, the difference between a 4.5% rate and a 5.5% rate is $61 a month.  The biggest question to ask is whether this is the right time for YOU to buy a house.

Read at: http://articles.moneycentral.msn.com/SmartSpending/blog/page.aspx?post=1779385&_blg=1,1779072

Her we are back to Thursday which is Real Estate term day. If there is a term you do not understand please send me an email and I will get it answered for you. (john.beckett@sbcglobal.net)

Adjustable Rate Mortgage

An adjustable rate mortgage (ARM) loan that bears interest at a rate that is subject to change and therefore adjustable during the term of the loan on a specified financial index that has been predetermined.

Inclusionary Zoning

An ordinance that requires a builder of new housing to set aside a designated number of units for low and moderate-income people.

Lease With An Option To Purchase

A lease in which the lessee (tenant) has the right to purchase real property under certain conditions such as a stipulated price or within a stipulated time frame either during or at the end of the lease term.

Lease to own

Lease-to-own is a term that refers to renting the home now but including a contract to be able to purchase that specific home in the foreseeable future. This is also refered to as a rent-to-own purchase or a lease purchase. The purchase option, is an option at a option fee agreed to by the parties. This option fee, up to 5% of the current value of the property, is a cost to the borrower since he is getting the benefit of the option. The borrower pays rent, and an additional rent premium that is also credited to the purchase price. If the purchase option is not exercised, the buyer loses both the option fee and the rent premium.

You’re at a disadvantage when you have major house damage or a total loss of your home. You face a home insurance claim process that could easily stretch out for more than a year, require reams of paperwork and leave you exhausted. Here is a look at many of the things that can take people by surprise when they have a large home insurance claim:

1. A claim for a total loss of a house can cost less than rebuilding a damaged house.

Construction from scratch costs less per foot than construction for rebuilding. Often it’s “easier” to fix your problem if your house is simply gone, rather than to try to repair the damaged sections of what’s left. When you start from scratch, you don’t have to incorporate changes that exist with the building, so you have a clean slate. Also, it’s often more costly to retrofit your old house to prevailing code than to start fresh.

2. If you have a mortgage, your insurance checks will be made out to both you and your mortgage bank.

Your mortgage holder is likely listed as a “loss payee” on your home insurance policy, so payments for rebuilding are issued to both you and your lien holder. And don’t expect your mortgage holder to sign over the check to you. Policyholders have to endorse and send the check to the mortgage company, and it will sit in escrow until repairs are made. Mortgage banks typically release the funds back to you in three installments over the course of your reconstruction. Mortgage companies want to be sure your property is repaired before releasing payment to you. As a result, you may have to advance your own money for construction costs until the mortgage company verifies the repairs.

3. Don’t cash any insurance checks marked “full and final settlement.”

In some states, such as California, it’s illegal for an insurer to issue a check like this. You don’t want to cut yourself off from any funds you’d be entitled to if you later discover that not everything has been paid for.

4. Don’t sign a release on your home insurance claim.

This takes the home insurer off the hook for any future payments on your claim. Insurance companies ask the insured to do it when they think there’s a problem or big dispute coming. The home insurance policy does not require the insured to execute a release, so why should you sign?

5. Don’t let your insurance company replace your Pottery Barn stuff with Wal-Mart stuff.

The values of particular items are often disputed in home insurance claims. If you’ve bought expensive items, your insurance company may say it can replace them with very similar items from Wal-Mart or Target. The insured is entitled to be paid for what they had — not a knockoff version of it.

6. Many condo owners have no idea that they need their own home insurance policies.

They think that the condo association’s policy covers their property. However, the association’s policy covers only common areas, typically up to the walls of the condo. If you want your own space and belongings protected, you need an HO-6 home insurance policy. Otherwise, all your belongings, furniture, appliances and cabinets are uninsured. Without an HO-6, you also may have no liability protection if you’re sued for something that happens within your condo, like a slip-and-fall injury.

7. If you’re forced to evacuate, don’t sleep at a shelter.

Your home insurance covers your “additional living expenses” if there’s a mandatory evacuation, including hotels and food — even additional transportation costs. Why sleep on a cot when you could go to a hotel? You don’t realize you have that coverage until you have a loss.

8. After a widespread disaster, insurance companies will bring in company adjusters from out of state who aren’t familiar with local costs.

Adjusters from outside your area may not have a handle on how much electricians, plumbers or other workers charge, or how much it costs to rebuild a house. Often they will rely on a software program called Xactimate, which isn’t very exact if you don’t account for local costs. The insurance company will bring in out-of-state adjusters who are probably not licensed in the state. They’re not as familiar with local building codes. What we saw from the 2007 fires in Southern California was that out-of-state adjusters can’t comprehend that it will cost $800,000 or $1 million to rebuild someone’s house. They can’t comprehend local building values.

9. People regularly settle for less than the total cost of their damages because they are exhausted.

Especially near the end of a complicated claim, such as a total home loss, homeowners just want the process to be over. Even if your policy entitles you to “replacement cost” of your belongings, home insurance companies will initially issue checks for your belongings’ actual cash value. Then, once you’ve replace the items, you must submit your receipts to get the difference between the initial checks and what you actually paid for replacements. In reality, most people don’t go back and submit receipts because they’re so frustrated with the claim, they’re done with it. They’ll settle for less and close the claim and rebuild for less, and the insurance company knows this. Hiring a public claims adjuster can put you on an even playing field with your insurance company. Your insurer may assign three adjusters to work on your claim: one for “additional living expenses,” one for your personal property and one for the building portion of your claim. A public adjuster will be able to explain the process and work on your behalf handling the countless meetings, e-mails, phone calls and paper documents that flow for a large claim.

Read at: http://articles.moneycentral.msn.com/Insurance/InsureYourHome/9-secrets-of-home-insurance-claims.aspx?page=1