Why is An Appraisal ordered?

by Yvette Betancourt

An appraisal can be ordered for many reasons. See the top four reasons why an appraisal is ordered on a property. 

Is Lending's post-2008 Guidelines Hurting The Current Economy?

by Yvette Betancourt

Historical Low Interest Rates...Great deals on the market.... Best time to buy.... Yes, we've heard it all about this rare great housing opportunity for those who qualify.  Just recently, mortgage buyer Freddie Mac said that the average rate on a 30-year fixed rate fell to a record low of 3.4 percent.  The Federal Reserves have been working hard this year to encourage more borrowing, spending and refinancing.  It works. I'm very motivated to buy if it wasn't for one big obstacle.  The Bank.  

Banks are now requiring higher credit scores, stricter income documentations (ie. signed documentations from your employer to verify your current and future employment), and larger down payments before approving for loan.  

Don't get discourage.  The Feds are well aware of the challenges for home buyers and homeowners.  During the central bank's October meeting, the Fed may purse more bond purchases, making home-buying more affordable, in the months ahead.  Rumor has it that a new program could be announced next month in December 2012.  There is no guarantee at this moment, if the Feds could make home buying more affordable, my concern is the fine print.  

Federal Reserve Chairman Ben Bernanke said that the housing has shown signs of recovery this year.  Still, construction activity, sales and prices remain lower than they were before the crisis.  20 percent of mortgage borrowers remain underwater, meaning that they own more on their mortgage than their home worth.  

Only time will tell what the choices Freddie Mac and The Feds will make in the months ahead.  In the meantime, I'll keep filling up my "Home Sweet Home" piggy bank.  

Source: MercuryNews.com

Low Appraisals are Complicating Selling and Refinancing Homes

by Yvette Betancourt 

The appraisal process has become a challenge, especially for homeowners who are looking to secure historically low interest rates.  Let's not forget the challenges of a low appraisal for home buyers purchasing with a loan. 

N.A.R. (National Association of Realtors) conducted a national survey to real estate agents  and found that a low appraisal has caned a contract to be canceled (11%), contract was delayed (9%), and a contact renegotiated to a lower sale price because of a low appraisal valuation (15%).  

But Why?

Some appraisals are being conducted by large appraisal management companies who may not be experience in the neighborhood.  In Los Angeles, a one-mile radius in Valley Village, CA will include homes from affluent Studio City and up-and-coming North Hollywood which has drastic home values.  

What can be done if you are caught in a low appraisal fiasco?

If your property has multiple offers, ask the appraiser to note the number of bids in the report to show that the market is appreciating and the amount of interest in the property.  This may or may not work but it's worth a shot.

Remember that an opinion of the appraiser doesn't always determine the sale price.  It's the data.  

If you are a home buyer and a home you are in escrow in has a low appraisal, the lender will cap the loan and the difference (if you are to continue with the purchase) is on you, the home buyer. 

In the end, the appraiser isn't the bad villain in these situations.  For the most part, they are trying to do the best work they can.  Its the location and it's current local market that makes the difference.  If you have a high number of foreclosures and REOs in your area, this will cause problems, especially there aren't homes similar to your property.

Source: latimes.com/business/realesate

Top 4 Reasons to Refinance

According to the Mortgage Banker association, the average American refinances his or her mortgage every four years! 

Here are the top four reasons why a home owner refinances. 

1.  Get a lower interest rate - The homeowner is swapping a higher interest rate for a lower one.  

2. Switch your mortgage type - If you have an adjustable rate mortgage (ARM) that offered great low introductory rates, but those rates are about to increase. The opinion to change to a fixed-rate mortgage will give you a consistent monthly payment.  Or if you have attractive low rates for an ARM, then you could switch to an ARM.

3.  Build home equity faster - If you can pay more toward your monthly mortgage payments. Either by refinancing from a 30 year fixed to a 15 year fixed, you can reduce your interest charges and pay off your home quickly.  Or if you don't want to refinance, you can pay against your principal by making additional payments each month. 

4. Take cash out - Pulling equity out of the home in the form of cash but you add to your principal in the process.  Example: Joe has a home worth $500K, and he owes $300K on his mortgage and has $200K in equity.  By refinancing his existing loan, and his mortgage will look like this: $500K home value, $400 mortgage and $100 in equity.  

However, is Refinancing right for you?

Before contacting a lender, ask yourself these questions:

How long will I be in my home? General rule of thumb is that unless you are planning to stay in your home at least another five years, then refinancing may not make sense.  You usually "break even" at the five year mark which means you have paid for the costs to refinance. 

Is there a prepayment penalty on my current mortgage?  Many mortgages carry a penalty if you pay off your existing mortgage.  Ask your lender if your mortgage has a prepayment penalty.  

Will my tax savings be reduced?  If you claim mortgage interest on your tax return, refinancing to a lower rate will mean that you'll have less mortgage interest to deduct.  Check with your tax advisor.

Can I build equity faster?  For a shorter-term mortgage might make sense for someone who can now make greater monthly payments than when they originally financed.   

Can I reduce my monthly payments? 

Can I cash out some of my equity? 

Remember, refinancing helps many homeowners stay in their homes for less money, or give them cash out they desire, but just make sure you do the math and understand how the new loan will affect you.