Understanding Rate Locks

 

Talking Points

• The rate lock might be the most complicated issue mortgage borrowers need to understand.
  
    
• A rate lock is a guarantee that the lender will offer the borrower a specific combination of interest rate and points.  A point is a fee or rebate equal to 1 percent of the loan amount.
  
    
• Also essential to a rate lock is a time period, typically 10, 15, 30, 45 or 60 days.
  
    
• A rate lock protects the borrower from rate fluctuations for the duration of the lock period. If market rates rise after the rate is locked, the borrower will still get the lower rate, to the lender's detriment.
  
    
• But there's a downside: If rates fall after the rate is locked, the borrower might not be able to take advantage of that opportunity.

Trust Terminology

These terms can get confusing; here is a breakdown:

Term	Definition
Revocable trust	A trust that can be revoked.
Revocable living trust	A trust that can be revoked and that takes effect during the life of the grantor. Becomes irrevocable at the death of the grantor. Usually made to avoid probate.
Irrevocable trust	A trust that cannot be revoked.
Irrevocable living trust	A trust that cannot be revoked and that takes effect during the life of the grantor.  Usually made to transfer wealth, protect assets, or reduce taxes.
Testamentary trust	A trust created during the life of the grantor, but that takes effect at the grantor’s death.  Usually made as part of a will – for example, a child’s trust made to name a trustee for property left to a minor.

Housing Affordability Hits Record High

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The Housing Affordability Index rose to a record high of 205.9 in the first quarter of 2012, breaking the 200 mark for the first time since recordkeeping began in 1970.

According to NAR, a household earning the median family income of just under $61,000 could afford a home costing $325,500 in the first quarter. That's remarkable purchasing power when you consider that the median cost of an existing home nationwide is $158,100.

Currently, the median monthly mortgage principal and interest payment for a median-priced home would take only 13.5% of gross income.

Commenting on the report, NAR's president Moe Veissi said, "We've never seen better housing affordability conditions or market opportunities than we see at present."

Housing affordability is based on a combination of factors, including the median home price, median family income and the average mortgage interest rate. A composite Housing Affordability Index of 100 is defined as the point where a median-income family household has exactly enough income to qualify for the purchase of a median-priced existing single-family home, assuming a down payment of 20% and 25% of gross income devoted to mortgage principal and interest payments.

Also, conditions for first-time homebuyers have never been better. A companion index measuring the ability of first-time homebuyers to purchase a home rose to a record high of 135.8 in the first quarter. The index is configured differently for first-time homebuyers: an income of 65% median ($39,632), a starter home of 85% median ($134,400), and a down payment of 10%.

According to NAR, first-time homebuyers could afford a home costing $182,500, an amount well above the overall median-price home.

For the year, the Housing Affordability Index is projected to set a record high average of 191.

Compare energy use with neighbors

Tip of the Week: App lets homeowners compare energy use with neighbors
Facebook, the Natural Resources Defense Council (NRDC) and Opower have joined with 16 utilities to launch a social energy app that leverages the Facebook platform to allow people to quickly and easily start benchmarking their home’s energy usage against similar homes, compare energy use with friends, enter energy-saving competitions, and share tips on how to become more energy efficient.

Find out more about the app at: http://opower.com/company/news-press/press_releases/50.

RENT VS OWN

Historically, the cost to rent an apartment has been about 10 percent lower than the after-tax cost of owning a home.  That rental discount began to fall in 2010 and disappeared entirely last year, according to analysts at Deutsche Bank who track housing costs. By the end of 2011, the bank’s research found that the cost to rent an apartment was about 15 percent higher than the cost to own a home.

the AMERICAN DREAM??

WELCOME EVERYBODY TO APRIL ~ QUARTER #2 OF 2012

DID YOU KNOW ITS REALLY, REALLY A GREAT TIME TO BUY REAL ESTATE?

HAVE YOU SEEN THE PRICE TO RENT THESE DAYS?

REAL ESTATE TODAY IS DOMINATED BY TWO TYPES OF BUYERS:

     -ALL CASH INVESTORS.

     -FIRST-TIME HOME BUYERS WITH 3.5% DOWN FHA LOANS.

REVIEW YOUR MONTHLY HOUSING EXPENSES AND CONSIDER THE COST TO OWN VS. RENT.

I WOULD BE GLAD TO GET YOU IN TOUCH WITH A LOCAL MORTGAGE BROKER WITH OVER 30 YEARS OF FINANCING LOANS IN THE BANKING INDUSTRY!

SIMPLY EMAIL REQUEST TO patrick@yourHOMEinvestment.com

TAKE CARE AND BE WELL!

THE AMERICAN DREAM

Home owners are healthier, their kids have less teen pregnancy, get better grades, get better jobs out of college, and marriages are stronger. Home owners are more involved in their community, charities, and they vote. Home ownership adds a ton of social and cultural benefits to this country, and those home owners literally knit us together as Americans.