One More Chance To Lock In the Lowest Rates in Mortgage History!

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Does it sound like you have heard this story before? “Buy now, interest rates have never been lower” or “Refinance to get today’s low, low rates” are words many of us in the mortgage industry have been preaching for months now. In fact, the first time I mentioned this to my clients and audience was back in 2010.

Well the news has changed and it’s changed for the better. Rates are even lower. For the countless happy homeowners that are now living in their dream homes enjoying a monthly payment so low that it almost seems impossible, it was the deal of a lifetime. And for the countless others that ignored the signs our market was showing and neglected to get a refi on their home or buy up – they are now saying “I coulda, shoulda, woulda”.

It’s not too late.

Today, interest rates are even lower than they were in 2010 when I first told you about the three ways you can get a loan. So whether you are interested in a No Cost, Low Cost or Full Closing Cost loan – the stakes have changed and the scales are tipping in your direction! Don’t waste time and end up wishing you locked in great rates while you still could. Do it today. Qualified buyers could be getting rates as low as 4% on a 30-year fixed or even an amazing 3% on a 15-year. Now that you know you want to take advantage of this unbelievable time to buy up or refinance in America – call me today so I can analyize your profile and give you the personal advice you need to move forward. In the meantime, here’s some advice I’ve been doling out for some time now:

1. No Closing Cost Refinance

Like the title says, it means you the borrower do not pay closing costs. The next question is who is paying them? Indirectly you are. By taking an interest rate slightly higher than the market rate, the broker can use the "Premium" in the interest rate to pay all your costs. For the purposes of this example, let's take a look at how this “no cost refinance” works.

For this example only, let’s use 4.875% as lowest rate 30 Year Fixed Rate Loan available today and 5.125% as lowest 30 Year Fixed Rate Loan offered with no closing costs and a loan amount of $400,000. The lower rate will include $2,400 in closing costs. The higher rate will allow me, the broker, to pay all your closing costs of approximately $2,400 in addition to leaving enough gross revenue to cover office expenses and overhead.

2. Low Closing Cost

This is a combination of the “No Closing Cost” and “Full Closing Cost” options. By taking an interest rate slightly higher than the market rate, the lender or broker can use the "Premium" in the interest rate to pay a “portion” of your closing costs.

For this example only, lets use 4.875% as lowest 30 Year Fixed Rate Loan available today and 5.0% 30 Year Fixed Rate offered with low closing costs of $1,000 and a loan amount of $400,000. The lower rate will include $2,400 in closing costs. The higher rate will allow me the lender, to pay a “portion” of your closing costs of approximately $1,400 in addition to leaving enough gross revenue to cover office expenses and overhead.

3. Full Closing Costs

Like the title says, it means you, the borrower, pay closing costs of approximately $2,400. For this example only, let’s use 4.875% as lowest 30 Year Fixed Rate loan available today and you the borrower will pay the $2,400 in closing costs.

Now look at the monthly payments:
$400,000 Loan Amount * payments exclude taxes and insurance
30 year fixed rate loan program (same criteria works for 15 and 20 year fixed rate programs)

4.875% = $2,117 monthly P&I

5.0% = $2,147 monthly P&I

5.125% = $2,178 monthly P&I

Compare: 4.875% v 5.125% (No Closing Costs)
Monthly savings: - $2,117 – 2,178 = $61 lower payment by selecting the 4.875% rate.

Now look at the total costs divided by the savings: $2,400/$61 = 39.3 months or 3.28 years to break even. That means after 3.28 years, the lower rate and paying the closing cost would have paid off.

Compare: 4.875% v 5.0% (Low Closing Costs)
Monthly savings: $2,117 – $2,147 = $30 lower payment by selecting the 4.875% rate.

Now look at the total costs divided by the savings: $1,400/$30 = 46.7 months or 3.88 years to break even. That means after 3.88 years, the lower rate and paying a “portion” of the closing cost would have paid off.

Another factor to take into consideration is the loan to value ratio of the new loan to your home's value. If for example, adding closing costs to your loan puts you into a higher loan to value bracket, you may opt to go with the lower closing cost or no cost option. Or if you have to pay private mortgage insurance by adding in closings cost, you may opt to go with the low or no closing cost option.

After all is said and done, you don’t want to walk away from a closing and regret your decision, or fear that it will negatively impact your pocketbook in the long run. Therefore, precautions and future planning must be executed to ensure you receive the best deal possible.

Not everyone grasps the “closing costs” concept very well, and there are lots of other elements of your home financing that can add up quickly, but I am here to help. If you have any questions about your home or are looking to purchase in the near future, contact me at 402.301.4500 or email me anytime at terry@terrywilliams.com.

Why So Many Home Buyers Are Buying Now and Choosing Not to Regret It Later

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Almost everyone involved in the real estate industry has been shouting out loud and clear that this is the best time to buy – EVER. And it has remained so for some time now. But as things look up, prices begin to rise and consumer confidence gets stronger – what is the impending impact on our market?

Leveling Out Home Prices Expected to Rise By Early Next Year

The good news keeps on getting better as many markets across the nation are seeing a slight increase in home prices. In fact, some areas are already experiencing significant jumps in home prices – otherwise expected to hit the rest of the country beginning in 2013. Analysts are predicting an increase of anywhere from two to four percent or more next year with steady inclines thereafter. This comes at a time when there has already been a national increase of 1.4% in home prices in January 2012 versus the final quarter of 2011.

Foreclosures Quickly Dipping to Welcome Lows

One of the biggest downward drivers of the market has been the vicious cycle of a weak economy coupled with vast numbers of foreclosures to hit the housing market. This has finally begun turning around with a decline in foreclosures by the end of 2011 of as much as 15% compared to the previous year. Not only that, the dip in distressed sales has been picking up more recently, according to the Mortgage Bankers Association, with the most decline occurring in the last quarter of 2011. An increased number of foreclosed properties are expected to hit the market within the next six months as a result of banks unloading shadow inventory in the wake of the recent robo-signing scandal settlement. Despite the expected spike in foreclosures the overall market outlook is forecasted to improve.

Interest Rates Expected to Climb Soon

One more reason for buyers to buy sooner than later is the fast-changing interest rates. It seems that the rock bottom lows have been surpassed and interest rate averages have begun to climb, albeit slowly. The Mortgage Bankers Association predicts an increase to about 4.5% on average across the nation by the end of this year.
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These changes, while occurring relatively slowly for now, will have a strong impact on the positive future of our market in 2013 and beyond. The biggest lesson to take away from this though is that the prospect of buying a home for pennies on the dollar will not last much longer. People that are in the market to buy a home in the near future should seriously consider taking the plunge now, before it’s too late.

Tax Fairness Proposed to the Senate By President Obama – Understanding the “Buffett Rule”

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The primary focus on the newly proposed tax fairness proposal is that the middle class should not be penalized by way of the wealthy benefitting from lower tax brackets.  In other words, just like progressive tax systems amount to a somewhat higher tax bracket for higher income earnings for Americans earning below $1 million annually – the same should apply for wealthy individuals.  The Buffett Rule encompasses the simple principle that any household with annual earnings of $1 million or more should not pay a smaller share of their income taxes than as compared to middle class family earners.  In short:  everyone should pay his or her fair share of income taxes.

As reported on the official White House website, approximately 55,000 millionaires are paying a lower tax rate than millions of Americans with average middle class incomes.   In fact, the tax bracket of about 18% has hovered for the last fifty plus years with no change whatsoever in the income tax required by average earners in the nation.  Conversely, wealthy individuals have seen a steady decline on the amount owed on income taxes, with a starting average percentage of about 50% in 1960 to about 25% in the present day.  The numbers are even more staggeringly low for mega-millionaires.

Present-Day Tax System

As reported by the IRS, there were 22,000 taxpayer households that earned at least a million dollars in the 2009 tax year, all of whom paid below 15% of their income in federal taxes. What’s more, nearly 1,500 of these people enjoyed having no income taxes at all on those incomes. Recently the number two person on Forbes’ list of wealthiest persons, Warren Buffett, realized that his was a lower tax bracket than that of his secretary!  This is the current tax system but according to President Obama it must be changed to reflect a more balanced and fair tax system.

Little change has occurred over the past 50 years for middle class earners, with an average increase in 2010 to 16% versus the 14% average income tax paid by the same in 1960.  The insignificant change in wealthier Americans’ income tax has sparked growing awareness of the possibilities should there be more balance and fairness across the board.

Proposed Changes to Current System With Buffett Rule

The single biggest change that is proposed with the Buffett Rule is that anyone earning more than $1 million in a given tax year should not be allowed to pay a smaller share of their income – especially as compared to middle-class households.  Furthermore, taxes should not be increased at all for the 98% of American households that earn under $250,000 per year.

By limiting how much the wealthy and extremely wealthy are able to tap into tax loopholes that make it easy for them to pay far less in income tax than their middle-class counterparts, the Buffett Rule would engage all earners to pay according to their earnings level. The benefits of this new system would immediately be felt throughout the country, reverberating positivity in the economy and the chance for a return to strong economic growth.  The money saved by tax breaks currently received by the county’s most well-off households would serve to improve education, health care systems, defense departments, social security administration and more.  Not only that, Americans could expect to see a reduction in our national deficit rather than increasing debt.
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There is much controversy on the Buffett Rule.  What do you think?  Do you feel that Americans earning more should continue to be allowed tax breaks on that income?  Or do you feel that it depends on whether or not earnings are used for basic survival versus personal gains?  I invite you to weigh in on this topic with your comments below.