Everyone knows the jumbo loan market has been out of whack for nearly 18 months. “jumbo” loans, those amounting to more than $417,000, took it on the chin when mortgage investors stopped buying subprime and alternative loans. For that reason, jumbo rates can be as much as 1.50 percent higher than conforming rates. Historically, jumbo rates were only about a quarter of a percent higher than a conforming rate, but this new spread has kept many out of the housing market: especially those that I call, “just jumbo.”So what exactly is “just jumbo?” It’s a loan amount that just exceeds the conforming limit of $417,000 and typically reflects a sales price in the $500,000–$600,000 range. Many local markets offer homes in this price category, but the marked difference in rate from conforming to jumbo is slowing down sales. What is the difference in payment between a conforming loan at 6 percent and a jumbo loan at 7.50 percent? On a $500,000 jumbo loan, mortgage payments jump from $2,997 to $3,496 a month. That’s almost $500 more!Fortunately, with some changes in strategy, we can put a major dent in that increase in payment by buying a property with two loans — a first mortgage and a second. With the first mortgage at or below the conforming limit, the second mortgage then eliminates the need for private mortgage insurance, or PMI. And still, with only 10 percent down on a $500,000 sale.
For example, let’s say we have a sales price of $500,000 and you put 10 percent down. With a jumbo loan at 7.50 percent, the monthly payment on a 30-year note is $3,146 plus a PMI payment of about $188, for a total of $3,334. Using a 40 percent debt ratio means that you need to make about $9,700 per month to qualify.Now, let’s make the first mortgage for $400,000 at 6 percent (conforming) with a second mortgage at 7 percent on a $50,000, 30-year note. The mortgage payments would be $2,398 and $332 respectively, for a combined total of $2,730. That’s a savings of over $600 per month, and now the income to qualify is almost $1,500 less at $8,200 per month! Do you think that has an impact on affordabilty? I do.Here's another idea: sellers can carry back that second note to provide some additional income, providing an even better second rate for the buyer!
Written by David Reed, author of Mortgage 101 and Mortgage Confidential.
Every year, RISMedia and REAL Trends release two of the real estate’s most comprehensive surveys: the RISMedia Power Broker Report and the REAL Trends 500. Both surveys rank the largest residential real estate brokerages in the U.S. based on both transaction sides and sales-dollar volume, and these reports are frequently used as referral tools and are referenced by thousands. This year, Keller Williams stormed onto the lists with a very strong showing.
KW offices dominated the Power Broker Report – with more offices listed in their top 700 list than any other franchise brand. The survey also named Keller Williams Realty as the industry leader in terms of number of agent teams. And, 102 KW offices were listed in the Companies to Watch section – making up 55% of the total list!
As for the Real Trends 500, which lists the top 500 brokerages in the nation, Keller Williams Realty had the second highest amount of offices listed both transaction sides and sales volume, among the top franchise brands.
Even further proof that it's always a great day at Keller Williams!
To find out more about these lists, visit RISMedia’s Website or REAL Trends’ site.
The Fed did this! The Fed did that! Rates are up! Rates are down! Aaaagggh! Okay, now exhale. In turbulent economic times the media can’t wait to report what interest rates are doing. Pundits prognosticate, forecasters forecast and soothsayers sooth. When should you buy a home based upon interest rates and when is it the right time?
The fact is that interest rates, while important, have little impact when it comes to buying a home. Alright, alright, I’ll admit: it’s important…but it’s not a deal-killer.There is a fixation on what rates are doing. A fixation on what rates will be in the future and what rates were in the past. I’ve heard potential home buyers tell me, “I’m not sure I want to buy now because rates are ¼ percent higher now and I think I’ll wait.” I say, “Wait for what?” I say let’s not look at the rate but instead concentrate on what that rate actually represents … your monthly payment.Let’s look at what an interest rate move of ¼ percent really does to a $200,000 mortgage. Say a 30-year interest rate at 6.00 percent “jumps” to 6 ¼ percent. Shall we sit on the sidelines, thinking such a move is suddenly unaffordable? No. The payment on a $200,000 loan “jumps” by about $32 a month! Now let’s get a bit more draconian and look at a ½ percent increase and the monthly payment increases by $64. Putting that into daily financial terms, $64 is about a tank of gas. While not insignificant, it’s hardly a reason to stay on the sidelines of home ownership. Right now, buyers should have more urgency than ever. Home prices have declined enough to make buying more affordable than it's been in recent memory and interest rates (whether at 6 percent or 6 1/4 percent) are historically low. It's time to act.Are rates important? Sure they are. But are they the end-all? Heck no. Interest rates over the past few years have been in a very tight range, with few major swings. Just remember what interest rates represent, your monthly payment, and pay less attention to the headlines.
You’ve watched the news and read about it in the papers. You know, the “credit crisis” and how buyers need 20 percent down in order to buy a home? And even if you have 20 percent down, lenders aren’t making loans anyway. So, why bother, right? Wrong!We’re right smack in the middle of what just might be the biggest disservice ever perpetrated on potential home buyers. It seems the press just can’t get enough of all the gloom and doom in the housing industry. The fact is that mortgage money is as available today as it was a year ago and loans are being made this very moment with little or no money down. And, no, platinum credit isn’t required. You just need to know where to look. Who are these lenders? They’re right down the street.Federal Housing Administration (FHA) loans are exploding onto the mortgage scene; recent estimates are that one out of five mortgages are FHA loans. FHA loans never went away, their reemergence is a result of the collapse of the sub-prime market. FHA doesn’t technically have a minimum credit score, although, in practice, lenders won’t approve an FHA loan with a credit score below 500. But that’s a far cry from the notion that an 800 score is the only thing lenders care about.The best part? FHA only requires 3 percent down. 3 percent. And that 3 percent can come in the form of a gift or grant. FHA borrowers only need to have $500 in a transaction. All the while, FHA mortgage rates are as good or better than their conventional counterparts.Low or no down payment, extremely competitive rates and easier qualifying. No wonder FHA is moving up the charts! Please contact me if you would like more information about FHA loans or help getting into your first home.
