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Thinking of a Vacation or Retirement Home? Buy It Now


 

Newton, MA.  real estate, Realtor, Newton, MA

 

 

Thinking of a Vacation or Retirement Home? Buy It Now

by The KCM Crew on September 19, 2012 · 0 commentsWhen the economy was exploding in the early 2000s, many of us began to dream about purchasing that vacation home on the lake or securing a home in a more appropriate location for our retirement years. However, with the booming economy came skyrocketing house prices. Many of the homes we fell in love with quickly became out of reach financially. Perhaps we should take a second look at these same homes today.

With prices dropping by over 30% in some markets and with interest rates at historic lows, this may be the perfect time to do what we and our families have always dreamt of doing – buying that second home. Let’s look at the numbers.

Back in 2006 we may have seen the ‘perfect’ home but the $500,000 price tag was just out of reach. Today, we could probably get that home for $400,000 (if not less). We also would be financing it at the current mortgage rate instead of the rates available six years ago. The table below shows the difference in impact on our family’s finances:

Not every family is in the financial position to take advantage of the tremendous opportunities the current real estate market offers. But, if yours is, this may be the time for dreams to come true.

 

 

More Borrowers Are Opting for Adjustable-Rate Mortgages


More Borrowers Are Opting for Adjustable-Rate Mortgages

The New York Times
By LYNNLEY BROWNING
Published: March 17, 2011
IN the years since the financial crisis, adjustable-rate mortgages, or ARMs, with their low initial interest rates that changed over time, have been considered riskier than fixed-rate loans and shunned by most buyers. But these days more people are being persuaded to give the loans a try.

This time around, lenders are rolling out more conservative ARM products — without the gimmicky extra-low “teaser” rates that adjust every six months, or the “pick-a-pay” and “option” features that allow borrowers to pay less than the monthly interest, only to be hit with a huge bill down the road.

Those ARMs were hallmarks of the subprime mortgage boom that fueled the soaring rate of mortgage defaults and home foreclosures nationwide.

“An adjustable now is basically a prime product,” said Michael Moskowitz, the president of Equity Now, a lender in New York. “There’s definitely a comeback in their popularity.”

Bank of America, for example, had nearly twice as many ARM transactions last month as it did a year ago, according to Terry H. Francisco, a spokesman, and ARMs now account for 10 percent of all its home loans.

Mortgage brokers and lenders say the loans most in demand are the “5/1” and “7/1,” in which the initial interest rate is fixed for the first five or seven years — after which many homeowners typically think about selling or refinancing anyway — then adjusted annually at a capped rate toward a maximum level.

In contrast to fixed-rate loans, whose interest rates never change, ARMs start out at one rate and then adjust typically once a year at a capped rate, often two percentage points, based on changes in the interest-rate indexes to which they are tied. The adjusted rates can go up or down, and the total increase over the life of the loan is capped.

According to Stephen Habetz, the vice president of DRB Mortgage, the lending division of Darien Rowayton Bank in Darien, Conn., the maximum caps are around 6 percent above the initial rate.Bankrate.com said the initial rate for a 5/1 ARM in the New York area averaged 4.04 percent as of Wednesday, compared with 3.74 percent nationally. For 7/1 ARMs, the average was 4.74 percent, versus 4.10 percent.

Starting rates are usually one to one and a half percentage points below those of 30-year fixed-rate loans.

But one catch is that getting an ARM may now be harder.

Last summer Fannie Mae, the government buyer of home loans, said lenders must qualify borrowers on either the initial rate plus two percentage points, or on the full index rate to which the initial rate is tied, whichever is greater.

Back in 1994, ARMs were used for around 70 percent of all home purchases, according to a study by the Federal Reserve Bank of New York released in December. By early 2009, after the onset of the financial crisis, the share had fallen to 2.3 percent, the study showed, but as of April 2010, it had climbed to about 4 percent.

Freddie Mac, another government-buyer of loans, said in January that it expected the share of ARMs for home purchases to rise to 9 percent this year.

Among those borrowers choosing adjustable-rate mortgages are buyers of property costing more than the $729,750 limit at which Fannie Mae and Freddie Mac will buy back loans from lenders, said Mary Boudreau, the owner of Penfield Financial, a mortgage broker in Fairfield, Conn. (Without the government buyback, fewer lenders are willing to make these “jumbo” loans, which carry interest rates one or two points above those of conventional loans. The Fannie and Freddie limit is set to drop to $625,500 in October.)

With an ARM, the savings can be significant. Sean Bowler, a loan officer at DRB Mortgage, said someone borrowing $500,000 with a 5/1 ARM at 3.5 percent would save $42,507 in the first five years, before it adjusts, compared with a 30-year fixed-rate loan of 5.25 percent. A 7/1 ARM at 4.125 would save $38,330 over the first seven years.

A version of this article appeared in print on March 20, 2011, on page RE9 of the New York edition.

 

Myth: Newspapers Sell Houses


Myths: The Earth Is Flat and Newspapers Sell Houses

by THE KCM CREW on NOVEMBER 16, 2010 · 22 COMMENTS

in FOR SELLERS

It is amazing how masses of people can believe something that is absolutely untrue. The greatest example of this is that at one time the vast majority of people believed the world to be flat. Today, we want to debunk another commonly held belief – that newspapers sell houses. Somehow this notion gained believability even though the facts consistently prove it to not be true.

We should know what methods perspective purchasers use to find the home of their dreams when we are selling our house. That would enable us to develop the best marketing strategy to attract a buyer. The National Association of Realtors (NAR) has just released the 2010 Profile of Home Buyers and Sellers*. This report is recognized by most as the best compilation of data on today’s buyers and sellers because of the enormous amount of data available at NAR’s fingertips.

Let’s look at the actual search habits of today’s buyers as reported by NAR:

It might interest everyone to know that less than 2% looked in newspapers, magazines or home buying guides when starting the search process. What do most buyers do?

We can see that buyers today want to explore their options online (combined 47%) or check with industry professionals (combined 27%). You might be ready to argue that the use of the internet is a new phenomenon over the past year or so. However, the report looks back over the last nine years. Though it is true that the percentage of those using the internet has dramatically increased (from 8% to 37%), it might interest you to find out that even back in 2001 only 9% of buyers found their home through print media (again, that number is now 2%).

If you want to develop a great marketing strategy to give your house maximum exposure, forget newspapers and look toward the internet. Where on the internet? The NAR report breaks down the most searched web sites this way:

The buyer is attracted to the type of sites that have the greatest number of listings. These sites are normally generated by the real estate industry. You should make sure your home is on as many of these sites as possible. That will give you the best chance of attracting your buyer.

Bottom Line

Print media never was a great way to market a house for sale and its effectiveness is diminishing each year. Meet with a local real estate professional and put together an internet marketing strategy worthy of your home.

* NAR members can get further analysis & download the complete report here.