Jan

24

What Is A “G-fee” And How Does It Effect Your Mortgage?

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Fee Increase to Impact Home Loans!

No one likes to see that but it is happening. In December 2011, Congress reached a last-minute deal to fund the payroll tax cut extension. The payroll tax extension will provide a 2% tax reduction for individuals making up to $106,800. However, like so many things in our tangled economy, there’s a flip side. In this case, the tax cut deal has a rippling effect that will impact the mortgage world.

Here’s what’s happening and what it means to home loan rates:

What is happening and why? To put it bluntly, the passage of the payroll tax cut extension is being funded via a mandate to Fannie Mae and Freddie Mac (the nation’s largest providers of mortgage money) to increase their guarantee fees or “g-fee’s” by at least 10 basis points on the rate. So rather than giving a par rate of 4.00%, for example, the par rate is now increased by at least 10 basis points, or approximately 4.10%. But as you probably knowhome loan rates are priced and offered in .125% increments, so this will most likely impact the consumer by .125% in rate.

Whether you agree or not on the politics behind this cost being passed along to folks who are taking out mortgages, the Congressional Budget Office recently estimated that the increase will ultimately pay for about $35.7 Billion of the cost of the payroll tax extension.

What exactly is this “g-fee”? The guarantee fee or “g-fee” is an amount charged by mortgage-backed securities (MBS) providers, like Freddie Mac and Fannie Mae, to help protect against credit-related losses in the overall mortgage portfolio. In other words, it acts a lot like insurance and helps lower the overall risk which means home loans can be offered at terrific interest rates to borrowers that have good – but not perfect – credit.

What exactly is the impact of the rate increase? For example, for a $200,000 home loan, the increased g-fee (assuming a .125% increas e in rate) would equate to $250 more per year in interest, or $7,500 more over 30 years. Someone buying or refinancing a home can certainly choose to buy down the cost with cash up front – but most folks will not do this.

Who will this impact? The change will impact all new borrowers of Fannie Mae and Freddie Mac loans. The bill will also impact Federal Housing Administration (FHA) loans by increasing the annual mortgage insurance premium that borrowers pay by one-tenth of a percent.

When will it start? Officially, the increase to guarantee fees will begin on April 1, 2012. However, the increase is already starting to be seen in rate sheets right now, since home loans being originated now will likely not be closed, pooled and securitized until Apriland therefore will need the increased g-fee priced in earlier.

How long will this be in effect? The increase will be effective through October 1, 2021.

The bottom line is that the g-fees will be going up and this will impact homebuyers looking to obtain a home loan through Fannie Mae, Freddie Mac and FHA.

The good news is that home loan rates are still at historic lows right now, and it’s a great time to purchase a new home or refinance. If you or anyone you know has any questions, please call or email!

Published courtesy of Tony Auffant via PlatinumPro Marketing

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Jan

13

When “The Prophet” Says Buy – Buy!

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John R. Talbott, previously a Goldman Sachs investment banker, is a bestselling author and economic consultant. When it comes to the housing market he is also a prophet. When housing prices started to skyrocket in 2003, he published The Coming Crash in the Housing Market correctly warning us that a real estate bubble was forming. Then in January 2006, he called the absolute peak of home prices in the US by releasing a new book, Sell Now! The End of the Housing Bubble.

Mr. Talbott, the person who accurately predicted the housing bubble and its bust, now has a new prediction – IT IS THE TIME TO BUY A HOME! In a recent article, Homes – Buy Now!, Talbott simply explains:

“I have been waiting for more than five years to offer this advice. It is now time in most cities across the country to buy a new home or refinance your existing home with thirty-year fixed rate mortgage debt.”

He goes on to explain that his conclusion is based on four different metrics, all of which favor buying today:

Home Prices Relative to Peak Prices During the Bubble
Home Prices Relative to Construction Costs or Replacement Costs
Home Prices Relative to Incomes and Rents
Home Prices in Real Terms, Not US Dollar Terms

Bottom Line
If the person who called the real estate bubble and its bust says now is the time to buy, we believe it is time to buy.

Article Courtesy of Steve Harney Inc.

[My addition to article]
If you’re gainfully employed, have money saved for a down payment and can qualify for a mortgage, I say – now is the time to buy. If you need to find out if you qualify for a mortgage, call me for a great referral to one of the best mortgage bankers in the business! (631)881-5959

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Dec

21

The Biggest Real Estate Sale In History

Filed Under Buyers, Sellers, Sellers & Buyers | 1 Comment

That’s what is happening right now. We are in the biggest real estate sale in history. What I’m about to share with you is basic information that may help you understand exactly where we are in the market.

First, let me say that this is not an advertisement for you to call me and buy a house. None of my articles are, but this one started off like that’s what it’s going to be. Again, it’s not. However, this information is so strong, you’d have to be an idiot, not to want to pick up the phone and call me or a friend you know who’s a real estate agent.

Now, let’s get to it. When you talk with friends, you probably talk a lot about prices dropping and mortgage rates being low. If you’re in the market to buy a home, you’re especially talking about this. But what you may be missing is the affordability of homes. Of course, unemployment in the country is high so this is all relative to whether or not you have a job or are secure in your current one, but I digress.

In New York and Long Island, the house payment to income ratio is around 30% less than the 30 year average. What does this mean? It means that owning a home is cheap right now. Of course, we’re talking about Long Island here, where taxes are nuts, but I always like to say, “you get what you pay for”. I’ve lived in other states and let me tell you, I’d rather pay higher taxes to live here, than in another state where you can’t get a decent slice of pizza! Mama Mia!!!

Again, I digress.

The point is, it’s not about low mortgage payments or lower prices. It’s these things that make up the opportunities that are waiting for you to seize.

When compared to median income, if you’re monthly mortgage payment is only 13% of your total income, yes, that’s really unbelievable. I know that the median income on Long Island is much higher than the national average and I know home prices are higher as well, but I’d have to take a guess and say that in comparison to monthly mortgage payments, we’re probably averaging around 20% to 25% on the average.

To own a home on Long Island and have 3/4′s of your income free to pay for things other than your mortgage and own real estate…it’s a no-brainer.

I’d like to take a line from Crazy Eddie (the guy in those commercials years ago)…”It’s insaaaannnneee!”

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Nov

15

74 Good Things to Know About Long Island Real Estate

Filed Under Buyers, Sellers, Sellers & Buyers | Comments Off

With all the doom and gloom we hear everyday on the news (which I don’t watch but hear from others), it’s important to know (or hear) a good thing now and again. While the Long Island real estate market has been deflated significantly, there are some bright spots.

One little tidbit that I know you’re not hearing anywhere else can be summed up with one number. 74.

Daily Closings

That’s pretty encouraging considering all you hear on the news or from friends and family is, “Nothing’s selling out there” or “There are no buyers”.

That’s incorrect. 74 people buy a home everyday on Long Island and that’s impressive.

If you want more information like this or you’re asking yourself why you can’t sell your home, then call me and I’d be glad to share with you our current obstacles on Long Island, that are weighing down prices overall.

I have a FREE conference call on the Market coming up on December 1 at 6pm. Contact me for details. It’s about the Long Island real estate market.

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Oct

28

Will The 30 Year Mortgage Disappear?

Filed Under Buyers | 2 Comments

The federal government is reconsidering their involvement in the home mortgage process. They plan to still ‘guarantee’ certain mortgages. However, they appear to be redefining what they consider a ‘qualified purchaser’. They are discussing stricter lending guidelines in four different areas:

The type of mortgage
The minimum down payment
The debt ratios of the buyer
The FICO score of the purchaser

Today, I want to look at #1.

It appears that there is at least conversation about eliminating the 30 year fixed rate mortgage which has been a staple in this country’s housing industry for some time. Some in government want to duplicate the mortgage process of other countries. In Canada, for example, they don’t even have 30 year fix rate mortgages available. The vast majority of Canadian home loans have a 25 year payout but the interest rate is renegotiated every five years. If rates go down, you will wind up with a lower rate. If rates go up, you end up paying a higher rate. If you want a fixed rate mortgage for 25 years you pay a rate approximately two percentage points higher than the going rate at the time of your closing.

Would the same happen in this country? Last week, Housing Wire quoted Janis Bowdler, senior policy analyst at the National Council of La Raza:

“Without some form of Fannie Mae and Freddie Mac, replacements to support these popular loans, many first time borrowers will be shut out.

“Without that guarantee lenders would not offer 30-year fixed-rate mortgages, at least not at rates the average person could afford. Yes, some would be available but not for the average family but for those with a large amount of inherited wealth they can put to a large down payment.”

Why Is This Important?

You probably want to set your housing expense at the lowest number possible for the longest time possible. This may be the appropriate time to lock-in your long term housing expense as three things seem possible, if not likely, in the future:

Mortgage rates will increase from current historic lows
The 30 year fixed rate mortgage may disappear
Rents will return to historic norms of 3% annual increases

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keep looking »

Jan

24

What Is A “G-fee” And How Does It Effect Your Mortgage?

Jan

13

When “The Prophet” Says Buy – Buy!

Dec

21

The Biggest Real Estate Sale In History

Nov

15

74 Good Things to Know About Long Island Real Estate

Oct

28

Will The 30 Year Mortgage Disappear?

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