Posts Tagged ‘refinance’
Questions My Clients Are Asking…
Wow, with the New Housing Plan has come a ton of new business - both buyers and sellers are getting in on the action, and we are seeing the Denver market pick up at an unbelievable pace. Case in point, the listing we put on the market last week already has a contract pending, and it had multiple offers for the list price. So, if you have been sitting on the fence and waiting for the perfect time to buy or sell, jump down and join the fun - that time is NOW.
Of course, with the changes put in place by the Stimulus Plan, there are a ton of questions that our clients are asking…here are just a few:
- Should I refinance now, and will the New Housing Plan help me out even if I have never missed a mortgage payment?
The answer is maybe. I like this summary from the New York Times:
Removing a limit on refinancing for “responsible homeowners”
4 million to 5 million households.
The bill will remove the current restriction on Fannie Mae and Freddie Mac that prohibits them from guaranteeing refinancing on mortgages valued at more than 80% of the home’s value. This will allow many more homeowners to refinance at lower rates.
Who may qualify
- Example
- Today A family’s home value drops to $400,000 from $475,000. The loan balance at $337,460 is now more than 80 percent of the home’s value, making it difficult to refinance under current rules.
- Under the proposal The family can refinance to a rate of 5.16% from 6.50%, which would save $331 a month and $3,968 a year.
Who doesn’t qualify
- Those holding loans not owned or guaranteed by Fannie Mae or Freddie Mac.
- Mortgages above a certain threshold — $417,000 for single-family homes in most areas and $729,750 in higher-priced regions.
- Those whose outstanding mortgage debt exceeds 105% of their current home value.
Helping renegotiate loan terms for “at-risk homeowners”
3 million to 4 million households.
The bill creates incentives for lenders to modify the terms of subprime and other loans. Participating lenders will reduce payments to no more than 38% of borrower’s income, with the government matching further reductions down to 31%.
Who may qualify
- Example
- Today A family’s home value has fallen to $189,000 from $230,000 and its loan balance is $214,016. Job loss has reduced household income and loan payments can’t be made.
- Under the proposal The family could modify the mortgage for five years, so that payments are manageable. This would save $406 a month or $4,870 a year.
Who doesn’t qualify
- Mortgages above a certain threshold — $417,000 for single-family homes in most areas and $729,750 in higher-priced regions.
- Homes that are not owner-occupied.
- Those who apply more than three years after program’s start.
There is also a good Question and Answer sheet posted on the US Treasury website: http://www.treas.gov/initiatives/eesa/homeowner-affordability-plan/ConsumerQA.pdf
- Are there areas in the Denver Metro that haven’t decreased in value over the past year?
Absolutely. There are neighborhoods that have increased in value over the past year - and that are projected to keep on doing so. Highlands, Berkeley, Sunnyside, Wash Park, Congress Park and Cheesman are just a few of the places where it’s still rare to find foreclosures - and still solid areas to invest in and live.
- Is it still possible to make a profit by flipping?
Of course, but you have to be super smart about it. You have to be careful about what you pay for the property, how much you put into it, how long you hold it, and how you price it to sell. There is a ton of competition for great investment proeprties, so the best thing to do is set up an automatic search that will send you new listings the day that they hit the market. If you see something that looks like a good investment, don’t wait - make an offer. And create a net sheet that will allow you to project your profit so that you can budget for the flip accordingly.
To refi or not to refi, that’s a serious question
Well, we found a renter for our house - the cute little ranch that we may be a tiny bit upside down in because we finished the basement while we were living in it and did a bunch of other upgrades, and then decided to move to a bigger place. I posted a few pics on Craigslist and got over 30 very interested responses! The first lady that cam to see it was fantastic, and she is going to be very happy living there, I know it!
I am so, so glad that we decided to feel out the rental market before selling while prices are low - I honestly was out of the loop as far as rentals were concerned in that area - and we are almost able to cover our mortgage even with the hike in interest rate that we had to take last year with our refi, in order to get my Grandpa, who co-signed on the house for us a few years ago, off the deed so that he would not have to stress over it.
But I have been wondering - should we do another no-cost refi and try to lower the payments even further so that we don’t have any monthly cost to keep the house on top of the rent that we receive? (more…)