Real estate dictionary for homebuyers

Realty Times has published a handy guide to terms likely to be encountered by homebuyers as they make their way through the real estate marketplace.

Normally, I'd send you a link to the article, but it's really a good article and worth being set out in full.  Here it is:

Demystifying Real Estate Terminology For Homebuyers. Written by Kristin Brown on Wednesday, 11 September 2013
                

First-time home buyers can have a tough time sorting through real estate terms spewed by real estate agents, lenders, real estate attorneys and other real estate professionals.

Here's a brief alphabetical glossary of some basic real estate terms first-time home buyers need to know:
Amortization: The repayment of a mortgage in small equal periodic installments of principal and interest, as determined by a payment plan to pay off the loan over a certain amount of time.
Appraisal:An appraiser's assessment of a property's value. A home sale is contingent upon an appraisal for at least the amount of the loan the buyer wants to secure.
Closing costs: One-time costs associated with buying a home, disclosed before closing, but due at closing. The costs can include fees for an attorney, recording, inspections, appraisals, title service costs, even pre-paid homeowner's insurance and taxes.
Contingency: Contractual conditions that must be met before a home sale closes. They can protect the buyer or the seller and can include a satisfactory home inspection, secured financing, adequate appraisal, etc.
Credit Report: A report card of your creditworthiness. Go to AnnualCreditReport.com to get one free credit report, every year, from each of the three credit reporting agencies:TransUnion, Experian, and Equifax. That's three free a year.
Credit Score: A numerical rendition of your credit report that plays a significant role in a mortgage approval, the cost of the loan and other terms of the loan. Get your credit score direct from the three credit reporting agencies.
Down Payment: Cash the homebuyer brings to the deal. A down payment reduces the amount financed by the amount of the down payment and brings equity to the deal. Many lenders require at least 20 percent down to reduce its risk, but various loan programs require as little down at 3.5 percent down.
Earnest Money: A deposit of good faith money, typically included with the offer to buy a house. Earnest money can become part of the down payment.
Escrow account: A lender-held account to which the buyer makes monthly deposits beyond the monthly principal and interest payment. The monthly payments are used to pay the homeowners property taxes and homeowner's insurance. Otherwise the homeowner is saddled with large lump sum tax and insurance payments once or twice a year.
Mortgage: A loan from a bank, mortgage lender, credit union or other lender to finance the purchase of a home. Mortgages vary and can include fixed- and adjustable rate mortgages, conventional loans, larger jumbo loans and loans backed by the federal government.
Points: Sometimes referred to as "discount points" these costs reduce the interest rate and are paid at closing or up front when used. One point is one percent of the mortgage amount.
Pre-approval: An official document and the process by which a homebuyer obtains proof he or she has been approved for a mortgage, pending the home appraisal and other financial contingencies. During the process, the lender verifies the buyer's credit score, income, debts, employment and other factors that go into a mortgage applications. A pre-approval letter says the buyer has been approved for a certain mortgage, again pending contingencies.
Title: A public records document that proves ownership of the property. A title also includes any claims against that ownership. During a home purchase, the buyer conducts a title search to verify the seller is the owner and if the title contains any judgments or liens against it.  [Professionally done for  you by Vested Land Services LLC, ed.]

This list is a small real estate glossary. Talk to your real estate agent if you have questions about other terms.

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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Fannie Mae and Freddie Mac, about to close down shop?

CNBC covers the Fannie Mae/Freddie Mac story.

On a Monday morning five years ago this week, thousands of employees at mortgage giants Fannie Mae and Freddie Mac went to work to find a new boss: The federal government.

Crushed under the weight of thousands of defaulted mortgages and bleeding cash, Fannie Mae and Freddie Mac were put into government conservatorship.

Now, a short five years later, the two are making billions of dollars in profit—profit that goes straight to the U.S. Treasury. Against this backdrop, lawmakers are setting the stage for an epic debate on the future of U.S. housing finance, a future that will likely mean the end of Fannie Mae and Freddie Mac.

That's why the debate over government involvement in the mortgage market is so fierce. Lawmakers are eager to protect taxpayers, but they also need to keep home finance afloat. How do you "wind down" two entities that now back two thirds of the U.S. mortgage market? And how do members of Congress reconcile that goal with the fact that the two are now huge cash cows?

What is the role of government in the mortgage industry?  Post-bailout, should the government take its profits and move on? If the government closes Fannie and Freddie down, who will buy mortgages on the secondary market?

Too many questions?  Read and watch the full CNBC report.

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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Life Without Fannie Mae and Freddie Mac from the New York Times

Where would prospective homeowners and borrowers be without Fannie Mae or Freddie Mac?  That question may become a reality if some have their way and abolish both agencies.

Talk of doing away with Fannie Mae and Freddie Mac is still just that — talk. But as Congress considers whether and how to get rid of these agencies, consumers ought to be aware of how a substantial reduction in the government’s role in housing finance could affect their ability to borrow in the future.

“What’s at stake here is access to mortgages at an affordable price,” said Julia Gordon, the director of housing finance and policy at the Center for American Progress in Washington.

A rise in rates would clearly be on the horizon.

Of course, the Times cannot avoid blaming Fannie and Freddie for the mortgage melt-down of a few years ago.  What the Times studiously avoids saying in its reporting is that Fannie and Freddie opened the money flood gates at the insistence of the Clinton White House and HUD secretary Cuomo.

Read the full article.

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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Reverse Mortgages - bad news ahead?

We have written before about reverse mortgages.  For some seniors, they are a godsend, for others a hellish nightmare. There start-up costs can be great, but their benefits can be just as great.  Yet,

Major changes are coming to the Department of Housing and Urban Development's reverse mortgage loan program as the agency seeks to shore up its finances and better protect seniors.

The Home Equity Conversion Mortgage Program's two products, the standard and saver options, are being consolidated into one program with tighter restrictions and a bigger education component.

The changes are the result of reforms in the Reverse Mortgage Stabilization Act of 2013, passed by Congress and signed last month by President Barack Obama. Last November, the Federal Housing Administration warned that changes in how consumers were using reverse mortgages had strained its Mutual Mortgage Insurance Fund, and the agency faced a $2.8 billion loss from the program.

Well, and so it goes in mortgage land.  Is a reverse mortgage in your future?

Read the full story.

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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Adjustable rate mortgages in the news

Adjustable rate mortgages, ARMs for short, are back in the news at the New  York Times.  The Times loves to tout ARMs as risky, but it’s never quite clear who is bearing the risk—the borrower or the investor.

Because adjustable-rate loans carry more risk, rates on them are lower than those on fixed-rate loans. After an initial period of fixed interest, rates may rise — though such loans also come with a lifetime cap that limits ups and downs.

The “risk” to the borrower is, of course, that rates may rise.  But the pain of that risk is the built-in caps on increase in most ARM loans.  For instance, the commonly used 1 year Fannie Mae note provides for a cap on each adjustment AND a maximum interest rate over the life of the loan.  These provisions are designed to avoid the so-called “interest rate shock” that elected politicians love to speak about.

In any event, is an ARM good for you?  Speak to a qualified mortgage loan officer to find out.  And, importantly, compare the numbers.

Here’s the full article:

The New York Times

August 29, 2013

Risks Aside, ARMs Gain Ground

By Marcelle Sussman Fischler

With mortgage rates inching up and homeowners often refinancing before the end of their loan terms, adjustable-rate mortgages are becoming more enticing to more borrowers.

In July, for example, 6.5 percent of mortgage applications nationwide were for adjustable-rate loans, while a year ago, the percentage was 4.2, according to the Mortgage Bankers Association, which expects demand to continue. “We expect ARMs to increase,” said Matthew J. Robinson, a spokesman.

Because adjustable-rate loans carry more risk, rates on them are lower than those on fixed-rate loans. After an initial period of fixed interest, rates may rise — though such loans also come with a lifetime cap that limits ups and downs.

For some borrowers, the initial savings may be worth the risk. By taking an adjustable-rate mortgage with a 5/1 term (with the rate fixed for the first five years) at 3.21 percent rather than a fixed 30-year jumbo mortgage at 4.69 percent, someone borrowing $750,000 could save $637.68 a month off the $3,885.28 payment, enough to “lease a nice car or more,” Keith Gumbinger, the vice president of the financial publisher HSH.com, said in an e-mail.

After 60 months, the borrower would have paid $54,565.92 less in interest, or $114,181.61 rather than $168,747.53. Kept in a piggy bank, it would be “enough to put your kid through at least one year of a good college,” Mr. Gumbinger added.

The potential hitch is that borrower may need to refinance or sell the home before the fixed portion of the loan ends — or possibly “be exposed to significantly higher interest rates and monthly payments,” Mr. Gumbinger said, “which could wipe out the savings pretty quickly, not to mention causing you budgetary duress.”

According to Freddie Mac’s Primary Mortgage Market Survey, for the week ended Aug. 29, a 30-year fixed-rate mortgage averaged 4.51 percent, while a five-year Treasury-indexed hybrid adjustable-rate mortgage averaged 3.24 percent.

John Aita, a retail sales supervisor for Wells Fargo Home Mortgage in Melville, N.Y., says fewer borrowers these days seem likely to get stuck with a higher rate when the fixed portion of the ARM expires. “People never keep the loans that long anymore,” he said, citing six years as the average. “Either they refinance or they move.”

For first-time buyers who plan to move up to larger quarters as their families grow, or for young professionals whose income will rise in a few years, adjustable-rate mortgages are “a fantastic deal,” Mr. Aita said.

“If you are planning to use the house as a steppingstone and not going to stay 30 years,” he said, “take the adjustable.”

Those planning to downsize after their children go off to college can also benefit.

Six months ago, Beth Zucker, a single mother from Bucks County, Pa., whose twins are 13, refinanced from a 7/1 ARM to a 10/1 interest-only ARM at 3 percent.

She’s not worried about where interest rates will be when the rate adjusts in a decade. “When my twins go off to college,” said Ms. Zucker, who is a financial adviser, “I’m going to sell the house and downsize.”

The most common adjustable-rate mortgages are designated 3/1, 5/1, and 7/1, according to freddiemac.com.

A 3/1 ARM has a fixed interest rate for the first three years. After that, the rate can change annually. A similar rule applies for a 5/1 and 7/1 ARM. If the rates increase, monthly payments increase. And if rates dip, payments may not decrease, depending upon the initial interest rate. Typically, an adjustment “cap” limits how much the interest rate can jump or fall at each adjustment period.

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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