With interest rates dipping below 5% there has been a spike in refinance applications. There are a lot of homeowners that have second mortgages. While borrowing money below 5% is extremely cheap it does not always mean that it makes financial sense to consolidate your second mortgage into a new first mortgage.

For one a lot of people use the HELOC or “home equity line of credit” sparingly and may not max it out. They may pay it off sooner so combining it with a new first does not always mean it is the right choice. And for some people combining the two makes sense in their financial situation.

If you fall into the category of people that it makes sense to leave their second mortgages alone it does not mean that you cannot refinance. You can subordinate your second mortgage. What that means is that a request is made to your second mortgage holder asking them to subordinate their position or in other words remain in second lien position on your title. It does not always mean that they will agree to do so. In most instances they will. The subordination allows you to refinance your first mortgage and have it recorded on your title and then the second mortgage holder will still be in “second” position on the title.

You have to be approved from the new first lien holder as well as get an Ok from the second mortgage company to subordinate. Once the second company receives the necessary info they need to ok the process you can close on your refinance. Depending on the lender the subordination process can take anywhere from 1-3 weeks.

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While the Connecticut housing market may not be as bad as some of the “ground zero states” of the housing meltdown it is certainly on the decline. The state has heavy ties from a population stand point to the financial markets especially in Fairfield County and the insurance sector in Hartford and its surrounding areas.   

Late last week The Warren Group, the Boston based publisher of The Commercial Record  reported a 26.6 percent drop in single family home sales as well as a 16.2 percent median price drop between November 2007 and November 2008.

It will certainly be interesting to see what the years’ end figures will be. Being a mortgage broker I see appraisals on a regular basis and in some towns the prices have been flat but that is mainly due to a lack of sales in that respective town.  In some instances I have seen sharp declines and in speaking with several appraisers that cover the state they are reporting the same thing.

Below is a brief look on a Town by Town basis:

 Town                 07 sales-08 sales            Median price 07-08

Ansonia Homes sold 14-7 -50%              Price $236,650 - $190,000 -19.71%

Bridgeport Homes sold 40-33 -17.5%     Price $235,950 - $168,500 -28.59%

Derby Homes sold 4-4 0.00%                  Price $260,500 - $249,000 -4.41%

Easton Homes sold 4-10 150%                Price $618,750 - $577,500 -6.67%

Fairfield Homes sold 46-19 -58.7%         Price $598,000 - $615,000 2.84%

Milford Homes sold 41-22 -46.34%         Price $355,000 - $261,250 -26.41%

Monroe Homes sold 17-16 -5.88%           Price $439,000 - $423,750 -3.47%

Oxford Homes sold 5-13 160%                 Price $363,400 - $345,000 -5.06%

Seymour Homes sold 8-6 -25%                 Price $241,250 - $263,500 9.22%

Shelton Homes sold 27-16 -40.74%          Price $375,000 - $327,500 -12.67%

Stratford Homes sold 26-24 -7.69%           Price $264,950 - $266,950 0.75%

Trumbull Homes sold 28-22 -21.43%        Price $423,000 - $362,500 -14.3%

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Yes I said USDA mortgages. USDA, as in the United States Department of Agriculture. The program is an Agency backed loan to induce loans to Aid Rural Development. Even now is 2009 this mortgage still is offering a NO MONEY DOWN option.

It was created by the USDA to boost home ownership in rural areas. The terms are not the easiest to meet but here is a highlight of some of the terms to qualify. The borrower’s income cannot exceed 115% of the median county income; the loans themselves are restricted to areas of low population hence why they are rural type loans. Typically total residents cannot exceed 25,000.

There are some restrictions. The loans can go up to 102% financing. The 2% over 100% is the USDA insurance that can be financed and meant to cover any loan losses by the USDA. There is also no mortgage insurance associated with these loans which make them far more attractive than FHA loans if you fall into the criteria to qualify. I do not know how long these loans or programs will be around but if you think that you qualify, it would be wise to inquire sooner rather than later. As always you can contact me at the office 203-838-6760 or by e mail matt@eversleycapital.com

A reverse mortgage is a loan that enables older homeowners (62 or older) to convert part of the equity in their homes into tax-free income without having to sell the home, give up title, or take on a new monthly mortgage payment.  It must be an owner occupied primary residence and you must have equity in your home.   How much money you can get depends on a few factors, including your age, the value of your home, the amount of built-up home equity, and interest rates at the time of origination.    You can typically estimate the amount of equity you can take would come close to your age.  So, typically (depending on interest rate) a 70 year old person would be able to borrow up to approximately 70% of the appraised value of your home.   You can borrow the money several ways – a Lump Sum cash distribution, predetermined monthly payments, a line of credit to draw on based on need or a combination of monthly payments and a line of credit.    As of January you can now use a Reverse Mortgage to Purchase your retirement home.   You can never owe more than the value of your home and your responsibility is to keep the taxes and insurance paid and maintain the upkeep.    The reverse mortgage becomes due when the borrower dies, permanently moves out or sells the home.  

 The reverse mortgage is a lien on the property same as a regular mortgage. The difference being the lender pays you, not the other way around.    All reverse mortgage borrowers are required to obtain a certificate they have attended an approved counseling class prior to starting the process.  Understanding what you are getting into is important.  The greatest misconception is that the bank will own your home.  

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Anytime that you are purchasing a home or refinancing your mortgage you will need an appraisal. The appraisal is also referred to as a URAR (Uniform Residential Appraisal Report) the cost ranges anywhere from 350.00 for a single family home or condominium to 500.00 for a multifamily property.

 The purpose of the appraisal and the reason it is required is to ensure that the value of the home is there for both the borrower and the lender.  The appraisal is a comparative look at the home that you are buying or refinancing compared to other similar homes in the neighborhood. The range that is typically used is a mile radius surrounding your home. Homes with similar square footage, bedroom and bathroom counts, amenities etc. are used as comparables against your home’s value.

 Actually the appraisal is the most important part of getting your financing. Other than needing to qualify income wise to be able to secure financing ultimately the bank or lender is basing your financing around your home. Your home is used as collateral for the bank or lender so the appraisal is very important in that aspect.  This is why some lenders will not lend on what we will refer to as “unique” properties. For example log cabin homes or contemporary homes. Ultimately the home itself is all the bank has to fall back on if the loan defaults and if it is a log cabin style home for example and that is not common to your area some lenders will have a hard time lending on these properties. Mainly because if the loan defaults the lender then needs to proceed to sell or liquidate that home and if it is “unique” it would be much harder for the lender to do that.

There are many viable reasons to inquire about refinancing your current mortgage

Lowering your monthly payment:  The most common reason we choose to refinance. You have taken a mortgage when interest rates were higher and lowering the rate will lower your monthly payment.

Changing amortization: By far the most common and preferred amortization is a 30 year mortgage. At some point you may want to lower the term to pay the mortgage off faster. Let’s say a 20 or 15 year mortgage. The payments will be more per month than a 30 year mortgage but you will be saving yourself a ton of money in interest by shortening the term

Consolidating debt: It does not always make sense to do this. In some cases wiping out all your credit card debt etc and lumping everything into one new mortgage will lower your monthly payments drastically. But keep in mind you are taking that debt and stretching it over a 30 year time frame. You just need to weigh options if it really makes sense to stretch that debt over 30 years.

Consolidating a First and Second Mortgage: In today’s market this will become less common, mainly because second mortgages are for one much harder to come by. However if you do have a first and second mortgage combining the two of them will sometimes make financial sense. Especially since second mortgage rates are usually higher than first mortgage rates.

Changing the term: If you are in a adjustable rate mortgage and you can secure financing at the same rate or less changing from a adjustable rate mortgage to a fixed rate mortgage may be prudent. And is certainly a viable reason to look to refinance.

One thing is certain; in 2009 it will still be a buyer’s market. The most recent stat that I have seen is Fairfield County and that is an 18 month inventory of existing homes. That is a good amount of inventory and could very well be a good indicator that 2009 may not shape up to be any better than 2008. As optimistic as I am or want to be stats are stats and that is a huge inventory.

If you have been waiting on the sidelines as a Real Estate investor 2009 may very well be your year for the taking. I personally believe that we still have some downside to the housing market here in Connecticut. However with the vast inventory of homes and some research there are some incredible buys out there. I have personally seen homes that had sold close to 300k at their peak and being short sold for fewer than 100k.

The equity markets started out the New Year on positive footing although there was little news out there to trade on. The Dow Jones opened trading on January 2, 2008 and closed that day at 13, 043. On January 2, 2009 the Dow Jones started the first trading day of the year at 8,772. Looking back at 08’ the equity markets certainly had a rough time of it. I think 2009 will be bumpy however I do not think that it will be as volatile as last year. I also do not put much faith in a huge rebound of the Dow. I am optimistic that by year’s end we will hopefully be past the half way point of this financial meltdown and am looking at 2010 to be a better year for the equity markets.

Mortgage rates are AWESOME. They are the lowest that they have been in over 50 years. 30 year fixed rate mortgages have been under 5% now for close to a month. Refinance business has been strong but as good as rates are there are still several problems standing in the way. For one the housing market is still declining making it very difficult to get the appraised values that would be needed to make refinancing an option for some. Two is unemployment. It is hard to be able to qualify for a lower mortgage payment when you are not employed. I think for at least the first half of 09’ that rates will remain low. It would be in the Fed’s best interest to see that happen. I truly believe that employment is going to be the key to making the turning point of this mess but I also believe that low rates will also be helpful.

I have posted earlier on Loan Classroom how mortgage rates are derived. A combination between the MBS (Mortgage Backed Securities) and the Ten Year Treasury Bond. Here is a chart of the Ten Year Bond.

I think that we can see the 10 Year Treasury stay in the low 2.00% range for some time. So I am optimistic that we will see rates stay in the low 5 to under 5% range for a while.

Selling Real Estate in this environment is tough. If you are a seller you have to be patient, you also need to be realistic. Although I see values going lower still you need to find a good Realtor. If you are using a Realtor to sell your home he or she should be able to give you a plethora of info on your local market including expected turn times of homes sitting on the market. If they cannot or are not ready to sit down and go over this with you, look for a new Realtor. You also may want to be creative when listing your home in 2009. That could mean painting rooms, keeping the house extra clean when being shown and also staging your home. I have posted several blogs on helping you sell your home in 2008. One specifically on staging your home. You should also ask your Realtor for their advice on what might help sell your home.

In 2009 all things considered I think we are still going to have a tough go at it. Patience is going to be the key as is creativity. There are still a lot of hurdles to overcome but I am optimistic that coming into 2010 we will be sitting in a much better position than we are starting 2009 in.  

Purchasing a home in Connecticut? Call us today to get pre-approved 203-838-6760

In today’s current market the choice is actually really simple. In times to come when the real estate market gets its footing back and the economy and equity market finds some stability I may change my opinion on this topic but as it stands today the answer is without a doubt or second guess a 30 year fixed!

In a different time and different market the answer would be different and seeing as the reason I am here every day pounding the keys is to help educate borrowers, we will look at what the pros and cons would be.

30 YEAR FIXED MORTGAGE: Is your plain vanilla choice. The rate is fixed for 30 years, it never changes and you will know what your payment will be for the life of the loan not including taxes and insurance if you have an escrow account.

-Typically fixed rate mortgages are a little higher than say an adjustable mortgage. Usually anywhere from a 1/4 to a 1/2 percent higher.

ADJUSTABLE RATE MORTGAGE (ARM): There are only several scenarios in my opinion that make sense for any borrower to choose and ARM for a mortgage.

-One: if you have no intention and are fairly sure that you will be in the home that you are financing for a short period of time. And a short period of time is anywhere from 5 years or less, and then an ARM may be a viable choice

-Two: if you are purchasing a home for an investment and planning on flipping the home or rehabbing the property and selling it. You will have your mortgage and property for a short period of time and an ARM may be a viable option

-Three: if you are doing construction financing and your lender offers an ARM as an option for your construction loan you may want to take advantage of it. The reason being most construction loans require that you find or secure an end loan once the construction is complete. So in this case the term of the loan again is a short period of time.

 Applying for and shopping mortgage rates in CT is a click away www.EversleyCapital.com

From January of 2008 to January 2009 30 year fixed mortgage rates have been as much a roller coaster ride as the economy and stock market. Below is a weekly look at where rates have been in the past year.

Weekending	30 year FRM
1/4/2008	6.07
1/11/2008	5.87
1/18/2008	5.69
1/25/2008	5.48
2/1/2008	5.68
2/8/2008	5.67
2/15/2008	5.72
2/22/2008	6.04
2/29/2008	6.24
3/7/2008	6.03
3/14/2008	6.13
3/21/2008	5.87
3/28/2008	5.85
4/4/2008	5.88
4/11/2008	5.88
4/18/2008	5.88
4/25/2008	6.03
5/2/2008	6.06
5/9/2008	6.05
5/16/2008	6.01

Weekending	30 year FRM
5/23/2008	5.98
5/30/2008	6.08
6/6/2008	6.09
6/13/2008	6.32
6/20/2008	6.42
6/27/2008	6.45
7/4/2008	6.35
7/11/2008	6.37
7/18/2008	6.26
7/25/2008	6.63
8/1/2008	6.52
8/8/2008	6.52
8/15/2008	6.52
8/22/2008	6.47
8/29/2008	6.40
9/5/2008	6.35
9/12/2008	5.93
9/19/2008	5.78
9/26/2008	6.09
10/3/2008	6.10

Weekending	30 year FRM
10/10/2008	5.94
10/17/2008	6.46
10/24/2008	6.04
10/31/2008	6.46
11/7/2008	6.20
11/14/2008	6.14
11/21/2008	6.04
11/28/2008	5.97
12/5/2008	5.53
12/12/2008	5.47
12/19/2008	5.19
12/26/2008	5.14

Applying for and shopping mortgage rates in CT is a click away www.EversleyCapital.com

Depending on where you live your taxes are either semi annually or quarterly. When you are purchasing or refinancing you have two options. Have the taxes included in your mortgage payment in which case you would need to start what is called an escrow account or pay them yourself. Side note on this if you are putting down less than 10% on a purchase or have less than 10% equity in your home when you refinance you must with most lenders escrow.

If you choose not to escrow and pay your taxes yourself you will get a bill from your town tax collector at the time they are due.

If you choose to have your taxes included in your mortgage payment you will need to start an escrow account. Let’s use for example the home that you are purchasing has a yearly tax bill of 6,000 annually. And the town collects on a semi annual basis. At the closing you will need to bring money to deposit with the lender in an escrow account on your behalf. Typically 6 or 7 months of taxes up front. So you would need 3,000-3,500 to have escrowed.

How the escrow account works is the lender holds that money in what is referred to as an escrow account on your behalf. It typically bears some interest although do not get too excited about the rate of return, it is next to nothing but at least something. That money will sit there until your tax bill is due. When it is due the lender will disperse the money needed to pay your property tax bill.

So once you have established your escrow account you will pay the lender a portion of your taxes that will be due each month with your mortgage payment. For example 6,000 for annual taxes is 500 a month.

The reason this is done and offered is most people want the flexibility of paying their tax bill spread out over a year rather than having a mortgage payment and a tax installment due the same month twice a year. January and July if your taxes are semi annual. This allows the borrower to pay less and have the lender hold the money in escrow and disperse the funds to the town or city when the tax bill is due. And you the borrower need only worry about making the monthly payment.

Applying for and shopping mortgage rates in CT is a click away www.EversleyCapital.com