Showing posts from April, 2023

Shopping Mortgage Rates

Nobel Prize recipient, Richard Thaler, in his research into seemingly irrational economic behaviors, "found that consumers generally search too little, get confused while evaluating complex alternatives, and are slow to switch from past choices, even if it costs them." "Why are consumers leaving money on the table?" Based on this behavior, a borrower securing a mortgage might depend on their existing banking relationship or a single referral from a friend or agent rather than shopping multiple lenders. When shopping for a lower mortgage rate, consider that not all lenders share the same business practices.   Some may lure unsuspecting borrowers to a rate, knowing full well that they cannot deliver on it.   After making a loan application and supplying information necessary for approval, they reveal that the rate is not available for "whatever" reason. They're counting on the borrower wanting to get into the home because the closing dat

Who Benefits from Selling a Home "As Is"?

A person's decision to sell their home comes with a lot of other decisions causing an owner to stress or procrastinate.   Early in the process, the owner will consider selling the home "As Is" to avoid the looming issues that accompany selling a home. From a seller's standpoint, "as is" means the buyer will purchase the home in its current condition without asking for any repairs.   While it is convenient for the seller to take this approach, the normal trade out is the property will not result in the highest possible sales price. Regardless of how the home is sold, the seller is required to disclose all defects which include repair history, condition of systems and appliances, water damage, pest infestation, radon, and other things that affect the value and livability of the home. From a buyer's point of view, they may think there is something wrong with the home which could result in them avoiding the home completely or making a substantial

A Lesson on Housing from the 80's

Doing nothing may be a lot more costly than doing something.   With rates twice what they were in 2021 and the first half of 2022, many buyers are sitting on the sideline.   For some, it has to do with not being able to afford the home they want at today's mortgage rates and for others, it is not willing to accept that the low rates that were available are not only gone, but may never be available again. In the late 70's, rates were around 10% and in the early 80's went up to 18%.   Interestingly, many buyers went ahead and purchased at those record level highs and refinanced a few years later when rates came down.   By the end of the decade, prices had continued to increase so that buyers had a significant equity in their home. Tenants who waited for the rates to go down didn't see savings because the price of homes had gone up.   More importantly, they missed the opportunity to build equity in their home through amortization and appreciation. If you pu

Tell Me More About Closing Costs

There are fees and expenses associated with mortgages that must be paid by the closing date for closing costs, and pre-paid items, in addition to the down payment.   These amounts can vary according to the type of loan, mortgage company, customary practices of the area, and the terms of the contact. According to Freddie Mac, the amounts could vary between 2-5% which is considerable.   Most buyers want a more specific number and that can depend on the conditions mentioned previously. For buyers, the largest amounts are loan origination fees which is usually one percent of the amount borrower, points paid by buyer which are one percent or more of the mortgage amount, owner's title policy if paid by the buyer, and the pre-paid items mentioned above. Certain types of mortgages allow the seller to pay specific closing costs for the buyer with full disclosure in the sales contract.   For example, all the buyers' closing costs can be paid by the seller for VA mortgages