Friday, November 21, 2008

What Makes Me Scream!

Nothing makes me scream louder than Mortgage Professionals telling people that mortgage rates are tied or linked to the 10 Year Treasury Bill. Plus hundreds of "Talking Heads" in the media believe and say this as well.

NO THEY ARE NOT!!!!!!!!!!!!!!!

The last 2 days of trading make my point as the 10 Year Treasury Bill is up over 400 basis points in price as the yield has plummeted over 1/2% to 3.01%. On Thursday, the 30 Year Treasury Bond's yield or rate dropped .64%.

But, in the last 2 days the 6.00% Fannie Mae 30 year bond has gained a grand total of 11 basis points in price!!! And mortgage rates have remain unchanged. You see mortgage rates are directly correlated with the sale of mortgage bonds and nothing else.

If your Mortgage Professional ever says that mortgage rates are tied or linked to the 10 Year Treasury Bill, please please tell them that they are wrong. Then, hire a Mortgage Professional who knows the TRUTH and can advise you the best.

Posted on November 21, 2008

Wednesday, November 19, 2008

It's Not A Waiter's Market


On Tuesday NAR, the National Association of Realtors released their third quarter report on real estate sales in every MSA in the country. The headline for Denver was "prices drop 11% in the last year!" Watch out the sky is falling!

Now, let's look at the facts. Yes, median prices dropped 11% from September 2007 thru September 2008. But, what's happening recently? For the 3rd quarter prices were unchanged from the 2nd quarter. And prices actually rose .7% in the 2nd quarter. That's two quarters in a row of good news!

Almost all of the 11% drop occured in the 4th quarter last year when prices dropped 9.5% in those 3 months.

Home prices are firming up in Denver and the Case-Shiller Index reveals that March 2008 was probably the bottom of the market here in Denver. It's a buyer's market, NOT a waiter's market!

Saturday, November 15, 2008

EZ Way To Calculate Your Mortgage Payment

Currently, 30 year fixed mortgage rates have been at or hovering around 6.00% for most of the year. With rates exactly at 6% today here is how to calculate your monthly mortgage payment--

Every $10,000 you borrow costs you $60 a month.
Every $100,000 you borrow costs you $600 a month.

Thus, if you borrow $220,000 on your new mortgage your principal and interest payment will be $ 1,320 approximately. Now this payment does not include your payments for property taxes, homeowner's insurance or mortgage insurance if needed.

Most people are surprised by how little money they save if they put an extra $10,000 down. This is why I normally recommend you keep YOUR money in the bank and not in your house under the mattress. Keep your money where it is safe and you can get to it in an emergency such as illness, death, or job loss.

Don't forget this maxim: It's better to have and not need, then to need and not have.

Denver Market One of the 7 Best

According to Smart Money Magazine November 2008 issue they named Denver one of the 7 most promising cities for a real estate rebound in the near future. I would agree.

In the magazine they quoted the PMI Group’s quarterly risk survey which might be the best risk assessment survey in the business and here is what they said,

“According to PMI’s ‘Risk Index,’ which estimates the odds of prices falling in a given market, at least 65 percent of the nation’s 386 metro areas have less than a 10 percent chance of seeing lower prices two years from now." Denver’s risk is under 2%!

I believe there is a lot of pentup demand in Denver from homeowners who want to move up or to a new neighborhood. 2009 could be a great year for home sales in Denver.
To read the story yourself, click below

http://www.smartmoney.com/Personal-Finance/Real-Estate/Now-for-the-Good-News-on-Home-Prices/

Friday, November 7, 2008

Why My Job Is So Tough

Back in the pre-historic ages of mortgage lending, June 2007, mortgage lending was so easy. I remember in early 2007 a new on-line lender appeared that allowed people to close their own mortgage by themselves without a Loan Officer or Mortgage Professional. It was deemed so easy to get a mortgage that anyone could do it and save money at the same time. It was like self checkout at the grocery store.

This week I have been working with a young lady who is a recent college graduate and she has a good job and some money saved. Should be easy? Wrong! Her problem is she has been part of the Secret Witness Protection Program from the credit bureaus, meaning that she does not exist with them, because she has not credit and no credit score.

So, I add her Dad as a co-borrower with her on her FHA mortgage. Her Dad has great credit, lots of money, and a very high income. Their loan is approved through FHA's on-line mortgage approval software called Total Scorecard.

My work is done right? Not anymore! Many banks won't accept FHA's approval of the loan because she has no traditional credit or credit score. Loan denied.

Thankfully, a few banks will let us compile non-traditional credit for her if we can. By doing so this will certify that she is a good credit risk. If this does not work, I will go to Plan C which contains a little secret that I know that will help her greatly within 30 to 60 days and get her loan approved then.

I keep telling myself that all this difficulty means job security for me. What do you think?

Alarming Changes From Experian and TransUnion

This week I had a client who pulled his own credit reports and credit scores from all 3 credit bureaus. What alarmed me is that Experian and TransUnion are apparently using a new credit scoring model with consumers that is NOT compatible with traditional credit scores that we as a mortgage company use.

Both Experian and TransUnion are using a new model for scores where the range of scores is 500 to 990; whereas, we use scores that range from 300 to 850.

For this client his credit score with these 2 bureaus were 842 and 852 which is considered a “B” grade in these models. Thus, I don’t know what his credit scores are with my model and my model is what is used in our industry.

Thus, I would recommend that you do not PAY any money to Experian and TransUnion for their credit scores with them as these scores are nearly worthless in my opinion.

Take Advantage of Banks While You Can


In October the inventory of unsold homes in Denver plummeted by 20.1% from October 2007 inventory levels. This October there were 23,120 unsold homes available; last October there were nearly 29,000 homes for sale in the Denver metro area.

Somewhat surprisingly the number of homes placed under contract in October was only down 3% from October 2007 levels as 4,504 homes were placed under contract. For all the rotten economic news in September and October I expected that this number would be down by 20% or more. But, people are still buying homes in Denver. Why? Prices have dropped and there are some incredible deals out there.

Speaking of prices, the average price of a single family home is down 13.6% from October 2007 and the median price is down 12%. Why are prices dropping? The majority of the reason is the mix of homes selling. Last year less than 1% of homes in Denver sold for under $100,000. This year homes selling for under $100k make up 15% approximately of all home sales. Plus, on the top end, there are very few homes selling that are priced above $750k. Thus, both the average and median prices have dropped.

Personally, I think there is a lot of pent up demand for people and families wanting to move who have chosen to sit still right now. Second, once these bank owned properties at super low prices, begin to make up a much smaller percentage of our home sales (say under 5%), I believe home prices will rise very quickly here in Denver. Currently the average home price is $250k and I think it will quickly rise back above $300k in the next 3 years.

Baron Rothschild a very wealthy businessman in the early 1800’s in London said, “you buy when there’s blood in the streets.” And the banks are bleeding. Go and take advantage of them. It’s your chance.