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Category: Mortgages

Temperatures are Rising – It’s Time to Buy Real Estate?

Looking to make a change?


Spring is in the air and temperatures are rising in the Lowcountry! We are enjoying great weather and that changes our mood for the better. We get out of doors more to play and have fun. The temperature also improves the real estate market around this time of year.

Families who have planned to move will start looking for their next home now, so that they can be moved in time for the next school year. They want their children to get acquainted with their new surroundings and meet their new neighbors. We are seeing and increase in people looking for new homes.

Getting in the game early might be your best strategy if you want the best prices and interest rates. Our area, Charleston, SC, has been identified by Moody’s as one of their top 5 areas were home prices will increase in 2010, so this is a great time to take advantage of the market before price begin to rise. Mortgage interest rates are still low, but how long that will last is anyone’s guess.

As real estate professionals,we can help you find the right combination that will put you in the neighborhood you want, in a home that meets your needs, and at a price you can afford. 

Qualifying for A Mortgage

Can you qualify for this home?

Are you looking for a new home? Today’s real estate market can be intimidating and deciding to buy a home for the first time is one of the biggest decisions you will ever make. For most of us it will mean that we will need to apply for a mortgage. That can be a daunting task but it does not have to be if you understand what is important.

Your mortgage broker will help you through the process and will likely help you to understand that there are some guidelines that will be used to determine how much you can borrow. Generally, there are two basics guidelines that your mortgage broker will consider:

  1. Will you mortgage payment fall within 25-28% of your gross monthly income? That payment typically includes principal, interest, taxes and insurance (PITI).
  2. Additionally, your monthly expenses should not exceed 33 to 38%.

I am not a mortgage broker, so these are general guidelines based on my personal experiences. You situation is different and your mortgage broker will help you to understand the specifics in your own case.

Other factors that will decide your ability to qualify for a home loan. Your credit history, income, assets, and the home that you intend to purchase all have a bearing on the amount of loan you can get.

How Much Home Can I Afford?

Can I afford this home?

Before you start looking for your first home, or your next home, you need to be able to answer the question “How Much Home Can I Afford?” Looking for a home before you know that answer can be frustrating and a waste of your time. If you will have to take out a mortgage, you need to determine how much of a loan you qualify to make.

How much of a mortgage you qualify for will depend on a number of things:
  • How much money do you have for a down payment?
  • What is your current income?
  • What is your debt?
  • What other liabilities do you have?
  • What assets do you have?

A home is likely the most valuable asset you will have. It is a big decision and a very important one. Emotions are involved, but this is a business decision and part of your investment strategy. Before you make any decisions, understand what you can afford.

Work with a reputable mortgage broker to determine what size loan you qualify to obtain. Once you take this step you will be able to focus your search on homes that are within your price range. This will save time and energy looking at properties that are beyond your means.


Questions to Ask Your Mortgage Lender

Few of us are in the position to pay cash for our next house. Most of us will need a mortgage. When we apply with a lender we need information about the mortgage and the process of closing a loan. Here are some questions to ask your lender before you apply for your mortgage.


What is the best program for me based on my situation? Why?

How long will it take to process and close the loan?

Will I need Private Mortgage Insurance (PMI)? If so, for how long?

Are there any special underwriting guidelines that you follow?

What is the most popular loan program being offered? Why is it popular?

Who will be servicing the loan?

In six months to a year, what will make this loan look good to me?

What are your standard fees? Are there special fees that I should be aware of?

Are there any escrow requirements?

During the “lock-in” period, what happens if rates go down?

What do you need from me to get the loan approved?

Who will be my contact person during the application process?

You can probably think of many more things you need to know before you apply. Your mortgage consultant should be able to answer your questions and offer you all the information you need to make an educated decision.


Featured Home, Open House, Perfect Price to Buy

You’re invited to an open house on Sunday, February 21 from 2pm-5pm at 242 Kelsey Blvd.  (Directions: From I-526, you will take Clements Ferry Rd North about 2 miles. Turn right into neighborhood, continue onto Kelsey and unit will be on your left. End Unit.)

A great opportunity to affordably own a great little property near downtown and the beaches.  The price was recently reduced to $165,000.  Great mortgage possibilities available through First Federal

Cheaper than renting? Here are some potential monthly mortgage figures worked up by First Federal’s Tricia Eldridge
Conventional 30 year loans with 20% down on the purchase price:
  • 3/1 Year ARM with 3.5% interest = $792.74/ Month
  • 5/1 Year ARM with 4% interest= $830.19/Month
  • 7/1 Year ARM with 4.25% interest= $849.36/Month

Hope to see you at my open house!

Brigitte McElroy

Things to Consider When Applying for a Fixed Rate Loan

I am not a loan officer, or mortgage broker. But as a real estate agent, I have watched as people apply for fixed rate mortgages and noted a few things that should be part of your decision making process when considering a fixed rate mortgage. Here are a few:

  1. What is the interest rate?
  2. How long is the rate quote guaranteed?
  3. What number of points, including loan origination fees, will be charged?
  4. What is the annual percentage rate?
  5. What is the length of the mortgage (repayment term)?
  6. Is the loan assumable?
  7. Are there pre-payment penalties?
  8. Will you need Private Mortgage Insurance (PMI)?
  9. What will your monthly payment be?
  10. What does your monthly payment include? Escrows for taxes, insurance?
  11. What are the estimated closing costs for the loan?
  12. What fees are due at application? Are there other fees to be paid?


Why Are You Waiting to Buy Real Estate?

It seems that every day we read conflicting information about what the real estate market is doing. One day sales are down and the next day they are up. One report tells you that prices are falling and the next report tells you that they have stabilized. It makes you wonder if there is ever a good time to jump into real estate. You are waiting for the perfect conditions when prices are at there lowest and interest rates are low.
If you have already calculated what you can afford in monthly payments, it doesn’t really matter if prices fall are if interest rates rise. What matters is what the combination of price and interest produces as a monthly payment. If price fall and interest rates rise, has waiting for the lowest price reduced your monthly payment?
The median price of homes in Mt. Pleasant, SC has been moving in the range of $214,000 to $229,000 in the last few years. Let’s pick $218,900 as a median price for a 4 bedroom, 2.5 baths home. Mortgage interest rates have been around 5% recently for a 30 year fixed rate mortgage. If you put down 20% your monthly principle and interest payment would be $940. What happens if the price decreases by 5% but interest rates go to 5.5%? Or if the price decreases by 10% but interest goes to 6%?
 Price                  Down 5%                             Down 10%
$207,900                              $197,010

Interest Rate          5.5%                                          6%
Monthly P/I         $945                                         $945

While the price of the home decreased, your monthly payment changed by less than $5.00!
There are great homes available for you and your family. Interest rates will rise. Why are you waiting? Call me for more information.

Will the $8000 first-time home buyer’s tax credit be extended?

Robert Freedman of Realtor Magazine recently sat down with Linda Goold, The National Association of Realtors’ director of tax policy, and Samuel Whitfield, an NAR legislative representative to discuss the possibility of an extension.  The tax credit has been, in Freedman’s words,  “the economic recovery’s workhorse.”  To date, over  1.4 million households have used the credit. Goold and Whitfield both point out that there is bi-partisan support for extending the credit, but the current Dec 1 deadline is quickly approaching. To watch Freedman, Goold, and Whitfield  further discuss of this issue, click HERE.

New Improvements to Tax Credit


WASHINGTON (Dow Jones)–A tax credit currently limited to certain first-time home buyers would expand dramatically under legislation introduced by U.S. Sen. Johnny Isakson, R-Ga.

Under the legislation, any buyer of a home – not just first-time home buyers – would be eligible for a tax credit worth 10% of the purchase price up to $15,000.

A tax credit passed into law earlier this year is worth only $8,000 and is limited to individuals and couples making no more than $75,000 and $150,000 respectively.

The legislation, which Isakson introduced Wednesday, quickly attracted co-sponsors from both parties, including Senate Banking Committee Chairman Christopher Dodd, D-Conn.

A beefed-up tax credit has strong backing from business and industry groups. The Business Roundtable earlier this week launched a campaign recommending the key changes to the credit that are proposed in the legislation. The National Association of Home Builders and the National Association of Realtors have also pushed for an expanded tax credit.

Still, the measure faces an uphill climb in Congress because of its price tag, which is likely to be high. Lawmakers would also have to justify assisting high earners purchase a home.

“One of the biggest problems facing the American people today is an illiquid housing market, a decline in their equity, a decline in their net worth and a depression in the housing market that we are obligated to correct if we possibly can,” Isakson said in a press release.

The legislation would extend the tax credit, which expires Dec. 1, by one year from the date of enactment. Home buyers would be able to claim the credit on their 2009 tax return for purchases made in 2010.

Extremely Cheap Money for Home Buyers

The days of the buy downs are back from their glory years in the 80’s when interest rates were in the teens. Honestly, I was too young to know any of that at the time, but I have heard about the ridiculously high rates of years gone by from many of my more seasoned borrowers.  Their tales of double digit rates are quite shocking considering the highest fannie mae rate for a 30 year fixed I have seen in my 11 years as a mortgage expert was about 8%. NOW, we are seeing as low as 4.5% for a 30 year fixed. Could you imagine getting a rate as low as 3.75%? Well it is happening.

Would you buy a brand-new home if you could lock in an interest rate of, say, 3.63 percent on a 30-year mortgage? Homebuilders who’ve offered to “buy down” buyers’ interest rates hope your answer will be yes.

Interest-rate buy-downs aren’t new. In fact, builders, private home sellers and buyers have long been able to pay an extra fee to buy down the interest rate on a home loan. The extra fee, payable upfront, is priced in “points,” and each point is equal to 1 percent of the loan amount. For each point (or partial point) that’s paid, the interest rate on the loan is reduced by a set amount that’s determined by the lender. Home builders that offer the incentive pay the extra points on the borrower’s behalf as an inducement for him or her to buy a home.



The caveat is that not all buyers can qualify for a buy-down. The guidelines vary from one builder to the next, but a strong credit score and a comfortable down payment often are required.

Buy-downs lure new-home buyers
Buy-downs, upgrades and other incentives are especially important today because the new-home market has been in a slump. Sales of new-built, single-family homes increased 4.7 percent, to a seasonally adjusted annualized pace of 337,000 units in February 2009, compared with 322,000 units in January, according to the U.S. Department of Commerce. But those figures were dwarfed by the February 2008 pace of 572,000 units and the 2005 annual total of 1.2 million new homes sold.

An excess supply of for-sale new homes has been a problem for builders as well. In 2005, the supply was only 4.8 months at the pace of sales in that year. The supply rose to 9.7 months in February 2008 and then increased to slightly more than 12 months in early 2009. That means it would take a year for builders to sell all homes they’ve already constructed at the current pace of sales. Buyers can expect that builders will continue to offer inducements until that standing inventory is reduced.

Many Realtors are taking their prospective buyers to the new construction communities for not just the upgrade and closing costs incentives, but also the rate buy downs. With so many existing homes being upside down and in foreclosure, there just simply isn’t any room left for the seller to buy down the rate or pay closing costs many times. Who doesn’t want a new home anyway?

Buyers who want to take advantage of a builder-paid buy-downs should visit several new-home developments and find out what deals are offered. That’s because not all builders offer this incentive, says Stephen Melman, NAHB director of economic services. In fact, a NAHB survey found that 29 percent of builders offered a buy-down in February 2009. A year earlier, only 16 percent said they offered this incentive. That percentage has fluctuated, yet the trend line has been upward as the housing slump has lengthened.

More than half of the builders said buy-downs were at least somewhat effective in stimulating sales, but 35 percent said they weren’t at all effective. Klinger says an interest-rate buy-down offered by homebuilder Hovnanian Corp. was “not a silver bullet,” but was helpful enough to entice some people off the proverbial fence of indecision into home ownership. Other builders that have offered a buy-down include Toll Bros. and Lennar Corp., neither of which would discuss this program.

Buy-down offers may be limited in scope
Burns suggests that buy-downs are an effective inducement because many buyers tend to focus on affordability and their monthly payment, sometimes even more than they focus on the price of the house.

“Getting the payment down at or below some body’s rent is a very compelling story,” he says.

Naturally, there are trade-offs and restrictions. Buy-downs tend to be offered only in certain states or specific developments or on the purchase of certain models of new homes, rather than across the builder’s entire inventory.

The incentives may be more prevalent in such states as Arizona, California, Florida, Nevada and Texas, where volume-oriented home builders have a sizable presence, Burns says. Buy-downs also are more likely to be offered on completed homes because builders have more flexibility to negotiate on those properties.

Most builders offer a variety of incentives and then limit the total package to a specific undisclosed sum that is often about 3 percent to 4 percent of the sales price of the house, says Melman. For example, if the builder has a figure of $10,500 in mind and the buy-down costs $9,500 in points, only $1,000 will be on offer for other incentives.

That means the upgrades the buyer also wants may be included only at an additional cost, instead of as freebies. As Klinger says, “There is only so much room (to negotiate) in every deal.”

Some content By Marcie Geffner •