Time and time again, homebuyer wannabes state that the
reason they are still fence-sitting is that they don't want to end up in the
same trouble the last generation of homeowners did.
Well, there's a very slim chance of that happening, given
the changes in the market climate: Homes are at rock-bottom prices (not
sky-high), and mortgage guidelines are so conservative it is nearly impossible
to even find one of the zero-down, quick-to-adjust, stated-income mortgages of
yesteryear.
With that said, though, there is a handful of rules
today's homebuyers and homeowners can follow to dramatically minimize the
chances they will ever face losing their homes:
1. Never a borrower or a lender be. OK, so maybe NEVER is
strong, but you'd be surprised at how many foreclosed homeowners actually
bought their homes with conservative loans and at low prices many years ago,
but got into trouble taking new mortgages and pulling cash out at the top of
the market (then not being able to refinance or make the adjusted payment at
the bottom).
Today's homebuyers can avoid this fate by starting out
their home owning careers with some ground rules in place around borrowing
against their homes.
A good (albeit conservative) place to start is this rule:
Decide not to borrow against your home equity for anything but well-planned
home improvements.
Here's another one: Whatever you do, don't borrow against
your home to lend money to someone else.
Many homeowners over the years have borrowed to make an
"investment" in a friend's business or to lend money to a child or a
parent. Borrowing against your home's equity to make an investment in a
business you know nothing about is a complete gamble with your home. Don't do
it.
2. Stop financial codependency. Related to the rule of thumb
about borrowing to lend is this change of the bad habit of financial
codependency. This comes up the most
often when homeowners borrow money against their home or tap into their
emergency cash cushion (leaving themselves unable to make their mortgage
payments if they lose their job, etc.) to help an adult child make their own
mortgage payments or bail them out of another crisis situation. It also comes
up where one spouse supports another spouse's habit of overspending, debting,
under earning, gambling or even substance abuse, and ends up going into a
financial hole as a result. Over time, these cases can create the temptation or
even desperation to further leverage your home, and can run through a savings
account, leaving the homeowner exposed and vulnerable in the face of a temporary
disability, job loss or recession. There are a number of powerful books on the
market about how to cease being codependent including the Melody Beattie
classic, "Codependent No More," but many people struggle to recognize
they even have this issue until it's too late. Here's a hint: If you regularly
use money to protect a loved one from the natural consequences of their
behavior, you are engaging in codependent behavior.
3. Stay conscious.
Going on money autopilot, without occasional check-ins, is the root of many
financial woes. Many money experts recommend automating your monthly payments
so that your recurring bills are paid on time, every time. And almost any
homeowner will vouch that there are few bills that seem to come up as
frequently as your mortgage! The problem
is that once you automate your payments, it's very easy to fall into the habit
of simply ignoring your actual statements -- and they may contain information
that flags issues before they snowball into serious problems. A homeowner recently realized that through no
fault of her own, and despite never having missed an auto-payment, her home was
facing foreclosure -- all because the bank had somehow erroneously started
crediting her payments to someone else's mortgage account! Also, financial autopilot mode can support
habits like over spending and over debting; the minimum payments may always get
made without much attention from you, but the overall balances will rear their
ugly heads and possibly pose a threat to your ability to pay your mortgage, in
the event you ever face a job loss, medical bills or other financial crisis.
4. Do your own math before you buy. Only you can know the
full extent of your non-housing-related financial obligations and values.
Things like catch-up retirement savings, tithing and charitable giving, private
school tuition, medical costs and the like can take big chunks out of your
monthly budget that your mortgage pro is not accounting for when he or she
tells you how much of a mortgage you're qualified to borrow. So, before you ever speak with a mortgage
broker, it's up to you as a responsible buyer and adult to get a very clear
understanding of your own personal income and expenses, assets and priorities,
and to use that knowledge to decide how much you can afford to put down and to
spend monthly for a home. An increasing
number of buyers doing this, and actually choosing to buy a home that costs
much less than they are technically qualified for.
5. Don't buy a house to fix a family or psychological
problem. In Alcoholics Anonymous, they admonish addicts to avoid what they call
"pulling a geographic" -- moving to a new neighborhood or town to try
to run from your problems and bad habits.
They caution against expecting the move to solve the problem on the grounds
that, in the words of mindfulness guru Jon Kabat-Zinn, "wherever you go,
there you are." If you have bad habits in Chicago, moving to L.A. doesn't
purge the bad habits -- only working on the actual dysfunction itself will do
that. There's a real estate-specfic
version of pulling a geographic, which is called "pulling a
residential." This is where people buy a home or buy a new home in an
effort to cure a deeper family or psychological issue; sort of like that old
(and equally bad) idea of having a baby to try to save your marriage. If your children are fighting because they
lack personal space, that's one thing. But if there are deeper issues going on
with your children, your family or your relationship (even your relationship
with yourself), do not fantasize that owning a home or moving up is going to
automatically solve them. In fact, the
opposite is often true: The larger the financial and maintenance obligations
that come with a home, the more a mortgage and property taxes can add strain to
already troubled relationships.
Inman News®
Monday, February 27, 2012
9612 White Castle Drive in the News
Wednesday, October 26, 2011
Bargains Abound: What Are Buyers Waiting for?
With low home prices and ultra-low interest rates, the housing market is offering “perhaps the best deals of a generation,” notes a recent article by Bloomberg Businessweek.
Since the housing boom of 2006, home prices have fallen about 31 percent. Also, mortgage rates have been hovering at record lows for the past few weeks (4 percent range or even lower on 30-year fixed-rate mortgages, according to Freddie Mac’s mortgage market survey).
“It’s hard to see the possibility of losing on a home purchase right now, with these mortgage rates,” says economist Dean Baker. “Prices may go lower, but not by much.”
The article notes the following scenario: Buying a $300,000 home with a 4 percent mortgage rate and a 20 percent down payment would mean a $1,145 monthly payment. The Mortgage Bankers Association recently predicted that home prices may fall another 3.5 percent by mid-2012 but mortgage rates will increase by a half-point. So for that same loan under that scenario, a home would sell for $289,000 while the monthly mortgage bill would be $1,171--only a $26 difference.
For those who can qualify for a mortgage, "playing the waiting game" won't result in much gain, Nariman Behravesh, chief economist at IHS in Englewood, Colo., told Bloomberg Businessweek.
Daily Real Estate News
Tuesday, October 25, 2011
Since the housing boom of 2006, home prices have fallen about 31 percent. Also, mortgage rates have been hovering at record lows for the past few weeks (4 percent range or even lower on 30-year fixed-rate mortgages, according to Freddie Mac’s mortgage market survey).
“It’s hard to see the possibility of losing on a home purchase right now, with these mortgage rates,” says economist Dean Baker. “Prices may go lower, but not by much.”
The article notes the following scenario: Buying a $300,000 home with a 4 percent mortgage rate and a 20 percent down payment would mean a $1,145 monthly payment. The Mortgage Bankers Association recently predicted that home prices may fall another 3.5 percent by mid-2012 but mortgage rates will increase by a half-point. So for that same loan under that scenario, a home would sell for $289,000 while the monthly mortgage bill would be $1,171--only a $26 difference.
For those who can qualify for a mortgage, "playing the waiting game" won't result in much gain, Nariman Behravesh, chief economist at IHS in Englewood, Colo., told Bloomberg Businessweek.
Daily Real Estate News
Tuesday, October 25, 2011
Friday, February 18, 2011
Mardi Gras 2011
Mardi Gras officially began tonight with the Conde Cavalier Parade. The weather was beautiful and a perfect evening to be in Downtown Mobile.
Below is a link to the Mardi Gras 2011 Parade Schedule.
Did you know that Mobile is home to the very first Mardi Gras celebration? That's right, Mardi Gras began in Mobile, not New Orleans, in the year 1703. Thousands of people come to Mobile each year to enjoy the sights and sounds of Mardi Gras. There are magnificent floats, live marching bands, and lots of trinkets, beads and treats thrown by the riders who are dressed in satin, sequins and glitter. Enjoyed by all ages, it's a funfilled two week celebration. Over 60,000 folks crowded the streets of downtown tonight.
Wednesday, August 25, 2010
20 Year Mortgage vs 30 Year Mortgage
Buyers with the ability to stretch a little might consider a 20-year fixed-rate mortgage instead of the traditional 30-year, suggests CBS Money Matters’ financial adviser Ray Martin.Martin points out that a $200,000 mortgage with a 30-year term and an interest rate of 4.75 would have a monthly payment of $1,043 and the total interest over the life of the loan would be $175,600.The same mortgage with a 20-year term at 4.5 percent would have a monthly payment of $1,265 with total interest over the life of the mortgage of $103,670.Young home buyers planning to have children will have their 20-year mortgage paid off by the time their kids enter college, a big financial advantage, Martin points out.
CBS, Ray Martin
CBS, Ray Martin
Monday, August 23, 2010
MORTGAGE RATES DROP TO NEW LOWS
Fixed mortgage rates have maintained recent lows or set new ones for more than two months now, sinking to 4.42 percent on 30-year loans for the week ended Aug. 19. The rate is down from 4.44 percent last week and is the lowest ever recorded since Freddie Mac launched its survey almost 40 years ago. The fixed 15-year average also hit a new low, at 3.9 percent; while five- and one-year adjustable-rate mortgages remained flat at 3.56 percent and 3.53 percent, respectively.
The Wall Street Journal, Amy Hoak
The Wall Street Journal, Amy Hoak
YOU CAN KEEP YOUR GOOD CREDIT DURING THIS RECESSION - IF YOU KNOW THE SCORE
People are having to make tough financial choices today, but many don't have to wreck their credit scores if they know how the system works, according to credit expert Eddie Johansson, president of Credit Security Group."With the same amount of money, you can make decisions that kill your credit score or ones that keep your score - or at least give you the ability to rebuild your score quickly later," he said. "Most people have wrong or little information about how the system works, and that's a big reason scores go down when difficult decisions are made during a recession."Johansson advises major financial institutions and consumers on the FICO credit score model used by most lenders in deciding the borrower's risk and interest rate. He described three common misconceptions that needlessly lower credit scores.Misconception #1: Paying late didn't hurting my credit since I'm caught up now.Johansson said recent late payments are the credit score killers he sees most often. "It's great that you caught up," he said, "but it doesn't change the fact that you paid late. Anything other than 'paid as agreed' on accounts on your credit report hurts your score."Misconception #2: Dollar Amounts Matter in Credit Scores.An example of bad credit score advice here is "pay the highest bill first," Johansson said. "Dollar amounts don't matter in FICO scoring; ratios and recency do. The effect on your score is the same for a $1 late payment as a $1,000 late payment. The fewer late payments on your credit report, the higher your score - regardless of their dollar amounts," he said.Johansson emphasized the importance of paying all your bills on time, every time. However, he says that if you must pay late and want to avoid damage to your score, pay the accounts that report to credit bureaus first. You can find this information by getting a copy of your credit report.Misconception #3: Closing Credit Card Accounts Helps Your Score.If you cancel a card, you may have just thrown away your chance to increase your score by continuing to build on years of positive credit. "Very long term positive account history can really boost your score," Johansson said. "It's best for your score to keep cards open and active, using them for small purchases. Next best is to just keep them open so you can build your score back up quickly by using them later."Don't Make a Bad Situation Worse.In tough economic times, people often buy more on credit than they usually would. The amount they pay in interest on these purchases is largely determined by their credit scores. Poor decisions that lower scores combined with an already tight budget can be very costly, making money problems worse than they have to be. "What we're trying to do," Johansson said, "is help people get through these tough times with as little financial damage as possible. This is best for them, for lenders and for our economy."Johansson emphasized that lower credit scores may be unavoidable for some, and that credit scores are not the only factor to consider. "However," he said, "good credit is an important part of financial security and must be considered when making the best long-term decisions. Having the right information is necessary to make good choices - now more than ever."
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