The Buyers Edge in the Seattle Market

On Friday July 6th 2007, Elizabeth Rhodes published an article in the Seattle Times titled "Scales tip in favor of homebuyers": http://seattletimes.nwsource.com/html/businesstechnology/2003776992_homesales06.html

As far as newspaper headlines go, the past couple of months have certainly been an interesting time for the mortgage industry. What is helpful to understand is that it is a pendulum and it does swing.

With appreciation taking off like a rocket in 2006 in the Seattle area, affordability became a rising concern. Local home owners could sell their home for quite a bit more than what they had purchased it for; but then again their new home cost quite a bit more than they had planned on.

New home buyers relied on creative financing to get their foot in the door, and depended on appreciation to bring them in for a safe landing. (And a safe landing it was with Washington's forclosure rate at less than half of the national average.)

Now- appreciation is slowing as houses stay on the market a little longer. Sub-prime financing is no longer as available- but perhaps this buyers market will help to even out debt to income ratios so that they are less needed.

A turn towards being a buyers market does not seem to signify that it is a bad time to sell.
Lawrence Yun, senior economist for the National Association of Realtors was quoted:
"I'd still characterize the Seattle market as being healthy — one of the few in the country. And in terms of price appreciation, no one else is doing better."

This sounds like a win-win to me.

Seattle seminars available about home mortgages

Open mortgage is now holding 2 seminars about home mortgages!
Every 3rd Wednesday at 6PM:
Mortgage Basics:
Everything you wanted to know about loans but were afraid to ask...

Join us on the 73rd floor of the Columbia Tower to go over the fundamentals of mortgage financing. Designed for the first time homebuyer as well as the experienced property investor, Mortgage Consultant Bre Loughlin combines experience and humor to discuss the mortgage market and understanding loan fundamentals. This class is designed to help you make the best investment decisions when you are purchasing or refinancing your home.

Where: Open Mortgage Seattle office 73rd Floor of Columbia Tower
What: Mortgage Basics
When: 6pm to 7pm (30 min. presentation & 30 min. Q&A session)
Dates: Wednesday July 18th
Wednesday August 15th
Wednesday September 19th

Please RSVP to: info@openmortgageseattle.com

AND

Divorce and Mortgage Investments:
Building your own home for your new future

Join us on the 73rd floor of the Columbia Tower to discuss obstacles and options related to home mortgages in the challenging time of a divorce. Mortgage Consultant Bre Loughlin combines experience and humor to deliver the information and answers you need about dividing equity, protecting your credit, keeping your home, and investing in a new property.

Where: Open Mortgage Seattle office 73rd Floor of Columbia Tower
What: Divorce and Mortgage Investments 101
When: 6pm to 7pm (30 min. presentation & 30 min. Q&A session)
Dates: Wednesday August 1st
Wednesday September 5th
Wednesday October 3rd


Please RSVP to: info@openmortgageseattle.com

There is a time for Superman and there is a time for Clark Kent

Superman is dangerous. He battles seemingly unstoppable villains only to miss sure catastrophe by a hair. Victory was always dependant as much on timing and risk as his amazing power. Superman could not plan for the future as he was never sure how long he could tempt fate.

Superman wanted to be Clark Kent. Stable and steady and looking to create a life that had a future that could be foreseen.

The housing market over the past few years has created a climate for property investors to act like Superman. High risk mortgages were available, and when it seemed the fast rate increases would lead to certain financial disaster, the appreciation of the property and low mortgage rates provided for a narrow escape.

Now, as a home buyer, it is time to be Clark Kent.

OK- I don't know very many people who wanted to be Clark Kent for Halloween. Everyone wanted the cape and the blue suit with the built in muscles. But we are looking at slower appreciation and higher mortgage rates- timing will not provide for colossal victories based on narrow escapes.

Plan for your future with your home investments. When you are searching for a home- look for a place that you want to live in for some time. Make sure that your mortgage payments allow for you to save money. Life is a series of unexpected events around a few planned ones, and those unexpected events often cost money. Your home will appreciate over time and will become the foundation of your lifestyle and your future investments. Protect your investment by making sure your mortgage payment does not become your Kryptonite!

Rates on 30-Year mortgages highest in 11 months

What I would like to start this post off with is saying this; it looks like there may be a ray of hope for mortgage bonds. Yesterday we saw them get a foothold- and we might see the first improvements in five weeks moving forward.

Many of our clients have heard me talk about the dissapointing state of bonds, and in turn rates, these past weeks.

Here is an article by Martin Crutsinger, Associated Press, summarizing recent events:

"WASHINGTON — Rates on 30-year mortgages rose for a fifth straight week, hitting the highest level in 11 months as prospects dimmed further for possible rate cuts from the Federal Reserve.
Mortgage giant Freddie Mac reported Thursday that 30-year, fixed-rate mortgages averaged 6.74% this week. That was up from 6.53% last week and marked the biggest one-week rise in 30-year rates in more than three years.

The five consecutive increases have pushed 30-year mortgages to their highest level since they were at 6.80% for the week ending July 20, 2006.

"Mortgage rates moved sharply upward this week," said Frank Nothaft, Freddie Mac's chief economist. "These moves parallel rising yields on Treasury securities as concerns about inflation pressures and continuing strength of consumer and business spending have dimmed hopes for an interest rate cut."

The benchmark 10-year Treasury bond hit a five-year high of 5.295% on Tuesday, sending tremors through Wall Street as investors worried that rising interest rates could further depress the housing sector and also harm corporate profits.

All mortgage rates tracked by Freddie Mac showed increases this week.
Rates on 15-year, fixed-rate mortgages, a popular choice for refinancing, rose to 6.43%, up from 6.22% last week.

Five-year, adjustable-rate mortgages averaged 6.37%, up from 6.24%.

One-year, adjustable mortgages rose to 5.75%, up from 5.65% last week.

The mortgage rates do not include add-on fees known as points.

Thirty-year and 15-year mortgages each carried a nationwide average fee of 0.4 point. Five-year, adjustable mortgages carried a fee of 0.5 point while one-year ARMs had a fee of 0.7 point.

A year ago, rates on 30-year mortgages stood at 6.63%, 15-year mortgages were at 6.25%, five-year adjustable-rate mortgages averaged 6.23% and one-year ARMs were at 5.66%."

Divorce and your home

I was just speaking with one of my clients who had spent the past 5 years rebuilding his credit after a difficult divorce. There are so many details surrounding a divorce that something as big as your mortgage may not get the attention needed to protect you financially.

Divorce is a time of great financial hardship and credit challenges. We are here to help you.

Here are some common questions:

"What if I would like to stay in my home?"

During a divorce, moving may sound like the last thing someone would like to do. It is important to take into consideration is the size of the home, utilities, payments, and family needs. The person interested in staying in the house will now be entirely responsible for the house payment, taxes, insurance, upkeep, maintenance and other related bills. A divorce may also bring new expenses such as child support and legal fees.

It is vital that mortgage payments are made on time to protect your credit and your ability to invest in your future. After looking at your total expenses vs. your total income you find that you are unable to maintain the monthly mortgage payment, there may be re-financing options available.

Be sure to assess your financial situation before you fall behind. We are happy to help you with financial planning, and with finding mortgage options that will help protect your credit and investment power.

"How is shared home equity handled?"

The equity in your home needs to be determined by an appraiser- call us if you need a recommendation and referral. The appraised value less the eventual costs of selling equals the equity to be split between the parties. This is the amount you will be obligated to give to your ex-spouse. Know that any money contributed to a home from pre-marital assets must also be accounted for in determining the final division of equity.

Know that with the divorce, your spouse may put a marital lien on the property or there may be a court ordered mandate for distribution of the equity. This means that you will likely have a specified amount of time to obtain the funds needed to give the ex-spouse their portion of the equity. This can be done by cashing out the equity in the home with a new mortgage, selling the home or by using other assets you have to "buy out" their stake in the home.

If you choose to stay in the home, you have two financing options to pay your ex-spouse. You can either refinance your home to get cash out, or you can obtain a new second mortgage or home equity loan. This is where you will want the advice of mortgage professional.


“What if I am the one leaving the home?”

It is important to know that even though the divorce decree awarded the home to one spouse, the other spouse is still obligated for this debt in the eyes of the mortgage company. A Quit Claim Deed will not remove a name from the title. It only eliminates that name from the title of the property, but not from the mortgage loan. The benefit of a Quit Claim Deed is that if the spouse on the title passes away, the property will go to his or her heirs rather than to the ex-spouse.


“How might this scenario impact my credit –and what can I do?”

Unfortunately for many, divorce is a time of great financial hardship and credit challenges. Whoever is listed on the title is obligated on the mortgage until it is paid in full or refinanced. It is imperative that the person responsible for the payment remains current. One possibility you have to remove your name from obligation is to contact the company which currently holds your mortgage, and ask to do a “Qualifying Name Delete Assumption.” This process will leave the existing loan in place, but would relieve the non-occupying spouse from their obligation on the loan.

Please feel free to contact us directly with any questions you may have concerning your mortgage, or financial options relating to your home loan.

http://www.openmortgageseattle.com/

Fine Print: Points May Be Included

Bankrate: Read the fine print

There are a lot of things that I do like about Bankrate. The layout is very user friendly and they have an informational section called 'Mortgage Basics' that I think is spot on.

Most importantly, I like the concept. Their tag marketing line is "Comprehensive. Objective. Free." I am passionate about educating people on the Mortgage Market and was very optimistic about a 3rd party publishing accurate information about what rates and lending packages would be available based on daily and weekly market values.

'Objective' to me (and the dictionary) means unbiased, or based on facts. Unfortunately, what I am finding on this side falls well short of objectivity: I have found the current incarnation of Bankrate misleading and advertisement driven.


Rates quoted on Bank Rate can only be attained by purchasing points; opening the door to bait-and-switch tactics used by many brokers and lenders. Also- I tried to use a rate comparison tool they offer. Instead of comparison results, I was introduced to advertisements from companies such as 'Lower My Bills' and 'Amerisave'.

Examples:

Bankrate posts a 'National Mortgage Rates' section. At a first glace I would expect it to reflect somewhere around a rate I could expect if I had relatively good credit:

What visitors see is a 6.09% average rate on a 30 yr fixed mortgage. For those of us who keep a constant watch on mortgage bonds we know a few things:

In very small light print it says "Rates may include points.' The misleading part is that it should read as 'These averages include points.'

Today- a rate of 6.09% would be possible if:

You paid about 3-4 points (3.4% of your mortgage loan amount), had a credit score of 700, and put 20% down.

Mortgage rates are based on mortgage bonds- period. The best rate available today if you have a down payment, great credit, is about 6.375%. If a bank had no employees, no phones, no Internet, and no office (eg- no overhead expenses) they might be able to give to a rate at cost: about 6.125%- but they'd have a heck of a time calling or emailing you with terms.

This is misleading and sets unattainable expectations. An honest broker would not try to offer you a rate of 6.09% without disclosing that you would have to pay about 2 points

If they had been objective and posted the national rate average that the average consumer closed with (all credit scores, all down payment scenarios) we would be looking at a number much higher.

But brokers can submit any percentage on a Good Faith Estimate and can offer any percentage they can dream of: Because rates can be purchased with points. Because the lowest rate offer has a chance of soliciting business. Because there is a time line on when you have to sign paperwork on the property you would like to purchase, and if a higher rate and previously undisclosed fees appear on your closing loan documents right before your house closes- chances are you will sign anyway. Because so much has been invested up until that point.

If Bank Rate truly was objective, they would post an average rate that consumers closed with, and alert their visitors to carefully question companies and brokers posting low rates to solicit business.

What seems to always get in the way of objectivity is often the need to generate revenue. Bank Rate, like any company, has to make money themselves. Maintaining a website takes a team of developers, and strategic marketing so that you know who they are and how to find them.

The question, 'Who is paying the bill' seems very apparent when you try to use any comparison tools offered on the site. For instance- 'Compare Mortgage Rates' provides you with a nice advertisement with each question you answer to produce your quote.

It's difficult to provide truly objective information when someone with a very specific agenda is paying your bill.

This post is not meant to tear Bank Rate to pieces- the concept is terrific and badly needed for people looking to compare mortgage loan companies. But the end product is misleading, and I fear possibly damaging. Even since legal action has been filed, it seems that Bankrate seems to be a sound off for bait-and-switch business tactics.

Many of our clients are putting everything they have into this very important investment. There is no room for higher than expected monthly mortgage payments due to unforeseen rate increases and fees disclosed only in the 11th hour. We give good faith estimates that include worst-case-scenario rates and expenses so that they are informed, prepared, and protected at the closing table- no surprises.

We believe that this is the way it should be and look forward to the day when this is made a standard practice within our industry.

Seattle Real Estate- Standing on solid ground

As of today the Seattle housing market is appreciating at around 13% (Seattle Times- May 20th, 2007) and the average 30-year fixed-rate mortgage (FRM) has landed at about 6.51%.

...I almost want to type this a second time just because it feels good.

But after watching the fate of property values in states such as Florida and California, and hearing the constant warnings of an increasing number of foreclosures nationally- doing a happy dance may seem as inappropriate as doing 'the sprinkler' at your great aunts' funeral.

But truly- Seattle's average appreciation for the past 5 years has been around 9%. Last year's 16% appreciation would naturally have to slow- but the question has been, will the bubble burst?

In an earlier posting I took comfort in a quote published by the Seattle Times by Lawrence Yun, senior economist at the National Association of Realtors. The projections are that Seattle-area prices will continue to climb this year. Keeping in the double digits will be a difficult feat if attainable.

No matter where you are located; when you are in the financial position to purchase the house that meets your standards of investment and living- it is the right time to buy.

What about rates? Another headline favorite these days entails increased mortgage rates.

The stock market has been hot these past few weeks, enticing investors from bonds to stocks. This inevitably is what results in increased rates on mortgage loans.

As of June 1st- the average 30-year fixed rate mortgage moved to it's highest rate in 6 months.

Alright- that sounds bad.

Until you realize that this rate is still a quarter-percentage point below last year at this time.

The rates fluctuate by an eighth of a point one way or another nearly daily. Depending on what types of loans different lending institutions are trying to attract- we've been looking at an average rate of 6 to 6.35% on 30-year fixed rate mortgages for credit scores >700 for a very long time (at least the past two years if not more). Slight adjustments in rates are making headline news, I think, because there is not much more to write about.

Rates are consistent, and local property values are projected to continue to appreciate.

If you are dreaming of a new home, we encourage you to make that dream a reality because as far as we can see- you will be standing on solid ground.