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Risk Determines Rate

Apr 2nd, 2012
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Regardless of what a lender quotes on mortgage rates, the actual rate paid by a borrower is based on a number of variables. Lenders determine whether to loan money and at what rate based on the risk involved with the transaction.

Factors that increase the risk that the loan will be repaid will proportionately increase the interest rate charged to the borrower. If the risk becomes too high, the loan will not be approved. Some of the most important considerations:

Loan amounts – conventional loans for more than the conforming limits set by Fannie Mae are considered jumbo loans and generally have a higher interest rate. Many loans in the Destin and South Walton markets exceed those limits.

FICO score – the lowest interest rate is reserved for the highest credit scores; the lower the score, the higher the rate borrower will pay.

Occupancy – borrowers occupying a home as their principal residence are considered a better loan risk than second homes and investment properties.

Loan purpose – purchase transactions generally have the lowest interest rate while refinancing a home is often higher. Real estate purchases for use as second homes or for investment (as is so common for this market) will command a higher interest rate and higher down payment requirements as well.

Debt-to-Income ratio – a borrower’s monthly liabilities divided by their gross monthly income develops a ratio that helps lenders to assess the borrower’s ability to repay the mortgage.

Loan-to-Value ratio – the lower the percentage of the loan to the appraised value of the property will generally lower the interest rate.

Any combination of these factors could limit a borrower’s ability to secure a mortgage at the rate initially quoted. Being pre-approved by a trusted LOCAL mortgage professional is the best way to know what rate you can expect to pay. We say local because many properties in this market are considered non-warrantable. Only certain lenders have investors for properties so designated. The “banker back home” is unlikely to have any sources for financing properties in Florida. Please call us for recommendations!

A reader asks: What can I do if a seller changes her mind about selling after I contracted to buy her house?

Mar 27th, 2012
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If the seller refuses to participate in the transaction after signing a legally binding sales contract, you may have a claim for damages. It has everything to do with the language in your sales contract, and we have never seen one that gives either party the right to arbitrarily change their minds and back out of the deal.

We will forward the names and contact information for some good local real estate attorneys that can give you further guidance.

For more on this topic, visit www.DestinFloridaRealEstate.com or email us at smith@realtor.com

What makes the better deal today, a foreclosure or a short sale?

Aug 17th, 2011
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Although either can make an excellent investment, both have pros and cons. The foreclosure inventory has been somewhat depleted this year, making these properties more difficult to obtain. Short sales are much more plentiful, but can take an extensive period of time to complete.

 

The foreclosure inventory is low mostly the result of the robo-signing debacle of 2010.  Many of the nation’s lenders chose to curtail their foreclosure activities while reviewing their processes and procedures. There is a great deal of “shadow”  out there, and it is just a matter of time before these properties start hitting the market. Some lenders are even considering interim options such as long term rental agreements to deal with the issue of abandoned properties.

 

The best advice is to develop a relationship with a Realtor that specializes in such properties because the best deals do not last long. Investors represent more than 50% of the buyers in certain market segments and are rapidly scooping up the best deals.

 

For information on Destin, Ft. Walton Beach, Seaside and Emerald Coast  short sales, bank foreclosures and general real estate topics, please visit www.FloridaBrokers.com  , www.DestinFloridaRealEstate.com  or email us at smith@realtor.com

How to improve your credit score?

Jul 22nd, 2011
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If you are turned down for a loan, what to do? A provision of the Dodd-Frank financial reform law that went into effect last week mandates that should you be denied a loan, the lender must provide you with an “adverse action” notice that will include your credit score as well as explain why you were turned down.

 

Many factors can affect your credit score such as paying your bills on time, how much debt you have, your available credit limits, length of credit history and applying for new credit. The reason given for your denial will help assist you in improving your score. For more information on factors that impact your credit score,  you can visit: http://www.federalreserve.gov/consumerinfo/fivetips_creditscore.htm

 

For information on general real estate topics, short sales and bank foreclosures, please visit Ed and Terri Smith at http://www.FloridaBrokers.com

or email us at smith@realtor.com

Emerald Coast Schools Excel

Jun 30th, 2011
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Florida Department of Education says that even with an increase in writing standards, the grades of Florida’s public schools remained relatively stable. Statewide, more than seventy five percent of Florida public schools are considered “high performing”.

Okaloosa and Walton County schools have typically scored well above state averages in terms of performance. In fact, of the final scores thus far, Okaloosa and Walton have garnered nearly straight A’s, with only three B’s reported!  Just another reason that the Emerald coast is a great place to live, work and raise a family!
http://schoolgrades.fldoe.org/default.asp

For more information on area schools and real estate topics, visit Ed and Terri at www.DestinFloridaRealEstate.com

   

Brighter in Florida

Jun 24th, 2011
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According to Florida Trend, the revenue at the 150 largest public companies and the 200 largest private companies in the state rose more than 8.5%, which is a reflection of the improving economic climate in Florida. The Florida Trend article went on to state that new home constuction continues to lag due to lower resale prices and “a glut of supply”. Of the 13 private companies showing the biggest drop in the rankings, 10 are real estate related.

Consistent with that assessment,  new construction simply cannot compete with resale pricing here in the Destin and Emerald Coast real estate markets. You can buy a great home today for much less than the replacement cost, i.e., cost of construction.

For information on short sales, bank foreclosures and general real estate topics, please visit www.FloridaBrokers.com  or email us at smith@realtor.com

Housing Affordability Hits New High

Jun 15th, 2011
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According to a report issued by the National Association of Homebuilders and Wells Fargo, housing affordability hit a new record high this year, surpassing the previous high set in fourth-quarter 2010. In fact, it is the highest level recorded in the more than 20 years the index has been in existence.

In a nutshell, this means that nearly 75 percent of the homes sold in the first quarter of 2011 were considered affordable, based on the national median family income of $64,400. To put the significance in perspective, the index had never even hit 70 percent before 2009. 65 percent was rare.

Property insurance companies seeking increases

Jun 13th, 2011
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More than a dozen insurance companies have asked Florida regulators to approve rate increases. Despite five years with no hurricanes, more requests are expected as insurers line up like cattle at the trough. Should rate increases be approved, it would affect inland markets like Tallahassee and Orland as well as the coastal communities like Destin and Rosemary Beach. Former health care CEO Governor Rick Scott is more sympathetic to the insurance industry than was his predecessor Charlie Crist.

For more information on real estate related issues, visit Ed and Terri Smith at http://www.DestinFloridaRealEstate.com

We are buying a short sale in Destin. Why are we required to agree to not re-sell it for 90 days after we close?

Jun 9th, 2011
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Many lenders are requiring that such restrictions be imposed on the sale of their distressed properties to help eliminate mortgage fraud. Some lenders are now requiring a twelve month prohibition on the re-sale of their distressed properties.   
 
According to Freddie Mac’s Fraud Investigation Unit http://www.freddiemac.com/singlefamily/preventfraud/spotlight.html , if you contract to purchase a short sale and re-sell it (have it under contract) for more money prior to taking possession, you have committed mortgage fraud.
 
For information on short sales, bank foreclosures and general real estate topics, please visit http://www.floridabrokers.com   or email Ed and Terri Smith at  smith@realtor.com 

News From Washington

May 24th, 2011
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Our Congressional leaders have been busy. In response to the national real estate mortgage debacle, Congress is attempting to enact legislation that would increase down payment requirements on most home loans. The proposed Qualified Residential Mortgage (QRM) rules would require among other things a minimum 20 percent down payment on home purchases. Further proposals would increase FHA down payment requirements from 3.5 to 5 percent.
 
The problem with these proposals is that they do not address the root causes of the mortgage debacle that they are intended to counteract. These proposals, if enacted, would only serve to limit home ownership and retard an otherwise promising (albeit slow) recovery.
 
We have seen little if any correlation between down payment requirements and mortgage defaults. Many of today’s defaulting mortgagors had placed large down payments when they purchased. Many who purchased with little or no down payment whatsoever have made their payments on time, every single month.
 
As we said, these new proposals do nothing to address the real problem, which was the lack of reasonable qualification guidelines. The liar (no-income-verification) loans, stated income and option ARMs allowed anyone that could pass the mirror test to obtain a home loan. Congress, always seeking to further their façade of stalwartness, now acts to close the proverbial gate “after all the cows are out”. While we never advocate debt, it is a necessary evil in the national real estate equation. We are hopeful that sanity will ultimately prevail.
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