Thursday, December 10, 2009

Brett Mills: Frequent Asked Questions.

Q: How do I know how much house I can afford?

A: Generally speaking, you can purchase a home with a value of two or three times your annual household income. However, the amount that you can borrow will also depend upon your employment history, credit history, current savings and debts, and the amount of down payment you are willing to make. You may also be able to take advantage of special loan programs for first time buyers to purchase a home with a higher value. Give us a call, and we can help you determine exactly how much you can afford.

Q: What is the difference between a fixed-rate loan and an adjustable-rate loan?

A: With a fixed-rate mortgage, the interest rate stays the same during the life of the loan. With an adjustable-rate mortgage (ARM), the interest changes periodically, typically in relation to an index. While the monthly payments that you make with a fixed-rate mortgage are relatively stable, payments on an ARM loan will likely change. There are advantages and disadvantages to each type of mortgage, and the best way to select a loan product is by talking to us.

Q : How is an index and margin used in an ARM?

A : An index is an economic indicator that lenders use to set the interest rate for an ARM. Generally the interest rate that you pay is a combination of the index rate and a pre-specified margin. Three commonly used indices are the One-Year Treasury Bill, the Cost of Funds of the 11th District Federal Home Loan Bank (COFI), and the London InterBank Offering Rate (LIBOR).

Q : How do I know which type of mortgage is best for me?

A : There is no simple formula to determine the type of mortgage that is best for you. This choice depends on a number of factors, including your current financial picture and how long you intend to keep your house. Casa Financial Services, Inc can help you evaluate your choices and help you make the most appropriate decision.

Tuesday, December 8, 2009

Don't Buy it.

No matter what I do, no matter where I go I keep hearing the same old thing – “Don’t buy it!” It seems that the general consensus out there is that we’re in the middle of a mortgage meltdown and that prices have dropped so low that you’d be crazy to purchase a home right now. Now, I have to tell you – I just don’t understand this logic. I know that I’m just a simple guy, old submarine sailor, top ten Mortgage Broker, but I thought that the whole point was to buy low, betting that the asset would increase in value, and then sell high? There has to be a reason for all of this craziness?

Maybe it’s the media? I appreciate the media and all their quality updates regarding the current Brangelina situation, I just don’t think that too many of these so-called Experts really understand what type of market we’re in. Contrary to popular belief, this is not a “Buyer’s Market”. A Buyer’s Market would mean that there are so many properties on the market, that demand is low which forces the Seller to lower their price in order to attract and win the offers of those qualified Buyers. On the other hand, we can’t really call this a Seller’s Market either. A Seller’s Market means that there are so few properties on the market that Buyers have to compete to win what few properties are out there. The market we are currently in is actually more of an Auction where there is plenty of inventory, and plenty of Buyers, just quite a bit of competition for the premium properties so the Buyer with the highest bid win the property – plain and simple.

Or maybe it’s the Governments fault with all of their meddling, bailouts, foreign policy, and obvious disdain for the working man? Oh wait, then why would the Fed have dropped rates to a historic low? Or why would they have initiated an unprecedented Buyer Credit to make it easier for Buyers to get in on these deals – and then extended the program into 2010? Have we stopped to even think about what the average working man/woman has at his/her disposal? With only 3.5% down, or 0% down for active/inactive Military, you can successfully bid on and purchase a great home to start and/or raise a family. Not only can you do this with little to no money down at all, but you can borrow the remainder of the balance at lower rates than what existed during the so-called mortgage boom. Cost per square foot is at an all time low, along with record low interest rates, add up to huge savings for Joe Middle Class.
No, I think the reasons so many people make bad choices, or no choice at all, are Fear and Denial. Seriously, how can it be that I’ve been doing this job for a decade and yet almost every single time that I bring up the subject of home ownership I usually get a negative response like “Oh, I can’t afford it.”? My question to this obviously uninformed person is “How do you know?” What seems like a fairly simple question sparks massive emotion, denial, anger, and then amazement – amazement that what they pay in rent is normally more than what they would pay in mortgage for the same square feet. The Fear is that if they actually take the time to figure out what is available, then they might actually have to change their thinking and stop living in Denial.

Now that I’ve gotten all of this off my chest, and believe me I’ve wanted to unload these thoughts for a while; I’ve come to realize that I actually agree with all of those people that keep saying “Don’t Buy It!!” Except what I no longer want to “Buy” is all the bad advice from the doom and gloom, rumor monger, world is gonna end, don’t take a chance, people that we’re all so familiar with that hold us back in so many ways. In fact, the next time I read a news story spouting doom and gloom, or overhear someone advising another to stay out of this market; I’m only gonna have one thing to say – “Don’t Buy It!” because Joe Middle Class can finally get in on home ownership, raise a family in a nice home, and stop paying rent that’s only building someone else’s fortune