Austin Texas Mortgage News:  Good News/ Bad News.   Which do you want first?

The good news:   Mortgage rates are really good.   Even if rates go up in the next 3-6 months, it’s better to buy now than before the “credit crunch.”     Read the rest of this entry »

This is one realtor’s perspective on the recent mortgage credit crisis.  

http://www.mortgagenewsdaily.com/12212007_Mortgage_Rate_Freeze.asp

People prefer fixed rate Home loans.

Preference for fixed-rate mortgages Fixed-rate mortgages are definitely the “loan of choice” by today’s homeowners seeking a refinance mortgage. About 85 percent of refinance mortgages in recent months have been fixed-rate loans, according to Freddie Mac, a major government-sponsored buyer of existing mortgages. Those applications include many homeowners who initially had a hybrid ARM (adjustable-rate mortgage). “Mortgage rates on 30-year fixed-rate conventional conforming loans have become more favorable to applicants of refinance loans,” Freddie Mac reported. “The difference in rate between fixed and adjustable rate loans has narrowed. Also, although the spread between the 30-year fixed-rate and 15-year fixed-rate mortgages has not moved significantly in recent months, more borrowers replaced their 15-year fixed-rate mortgages with 30-year fixed-rates when they refinanced.” The report also shows that refinancing into the 30-year fixed-rate mortgage among borrowers who originally had an ARM loan has been increasing. However, fewer borrowers who originally had a balloon mortgage are switching into a 30-year fixed loan, many opting instead for an ARM or hybrid mortgage. The proportion of borrowers who originally held 30-year fixed-rate mortgages and are now applying for a refinance mortgage of the same type has remained about the same in recent months.

Check out this article in August’s Businessweek magazine: 

http://www.businessweek.com/magazine/content/07_33/b4046601.htm

My two cents:   The recent mortgage mess is a lot like  hurricane Katrina.   It was the perfect storm caused by lots of different factors.   While many people are still pointing fingers as who’s to blame–the same result has happened.  

Good people lost their homes.

This businesweek article addresses the mortgage mess in greater detail–but here’s the short version for you non-readers.  Don’t use the builder’s in-house mortgage company or any “in-house” service like appraisal or title.   Let the builder build the home then let other professionals do their jobs so you–the buyer–benefits in an open, honest market.

Since the in-house lender is working for the builder–not you–you are almost guaranteed to get the wrong mortgage.  Or if you happen to get lucky with the right loan program, you almost always pay too much. 

 Think about it:   What would you say to me if I were your doctor and I told you “if you don’t use my pharmacist brother to fill this prescription you’ll pay double for this office visit.”

You’d probably tell me to take a long walk off a short pier–but in the real estate world this type of “deal” happens all the time.   It’s called business as usual. 

Builders say “”If you don’t use our “preferred lender”–we’ll take away your incentives of 10K–you’ll pay more for this home.”   I mean, c’mon.   If the builder requires 10K down (earnest money) and then offers you 10K in “incentives” they are sorta just giving you your money back–and  requiring you to use their in-house people for everything:  

 I’m not anti-builder-there are lots of good builders our there.  But I am against the blackmail tactic many production builders use when they tell buyers “Use our mortgage and title company or pay more!”

 So here are my suggestions:  

Don’t pay a builder more in earnest money than you’d pay if you were buying a re-sale home.  Always use an outside lender and always order your own appraisal.  Ordering your own appraisal or review appraisal could easily be the best money you’ve ever spent. Not to mention title, you absolutely want to use an independent title company. 

(Regarding title: I won’t go into it too much here but just email me and ask me “what’s the difference between improved and unimproved taxes and how could this effect me at closing?”) 

The builder won’t let you use independent lenders, appraisers, title?  Find a better builder.   Shake hands. Leave. 

Like usual,  I learned this lesson the hard way.  If I had ordered my own appraisal on my first investment property it would have saved me $32,000.  $350 to save $32,000. 

I could have paid for my entire college education had I paid $350 for my own review appraisal. 

Lesson learned.  Ouch.