Nationally communities still reeling as foreclosure rates rise and as mortgage defaults and foreclosures continue to rise, the impact is spreading well beyond those who are losing their homes. Fortunately majority of Texas, especially the Austin & san Antonio markets, seem to not be feeling the sub-prime collapse as much as the rest of the nation. The Texas market diversed cities comprised of various industries, business climate and housing growth patterns points to Texas being less effected by the current housing market than any other state in the U.S. God Bless Texas!

In sub-divsions and communities across the nation, national news is reporting that local governments are coping with shrinking tax rolls, lenders are saddled with more foreclosed homes than they can sell and empty homes in many neighborhoods are being abandoned, stripped out, or even vandalized.

Like everything associated with the nation’s housing crisis, the fallout from foreclosures is very local, a fact confirmed by hundreds of e-mails from readers in msnbc.com’s Gut Check America. Some regions appear to have escaped relatively unscathed. But in hard-hit states like California, Arizona and Florida, readers report that some neighborhoods are becoming virtual ghost towns.

In Las Vegas, Nevada, “some subdivisions are three quarters vacant, and lots of homes have been abandoned by their owners, and many people are going into bankruptcy. Parts of California are reporting the same foreclosure rates.

Others report a different kind of isolation; many of those losing their home to foreclosure are reluctant to confide in family or friends until the process is complete. Some neighbors are unsure how to respond while others continue free lawn services on neighboring properties to do everything they can to hold property values.
In Mobile, Alabama, there are many reporting that neighborhoods was dotted with “growing weedy yards, windows with papers taped to them and broken. There are about five or six such homes in my post-World War II subdivision. And these are NOT expensive homes!”

With consumer confidence at a 15 year low there is little help on the horizon nationally, and Texas can only hope to ride out this mortgage crisis before feeling any severe reprecussions of the mortgage fallout. 

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Federal Reserve Chairman Ben Bernanke told Congress Thursday that America’s economic outlook has deteriorated and signaled that he was prepared to cut rates as needed to stimulate the econonmy.

Bernanke said the one-two punch of the housing and credit crises has put much pressure on our struggling economy. Hiring has slowed and people are likely to tighten their belts further, as they are pinched by high energy prices and watch the value of their homes.

Is a recession pending? The forecast for the economy has worsened in recent months, and the downside risks to growth have increased,” Bernanke said. “To date, the largest economic effects of the financial turmoil appear to have been on the housing market, which, as you know, has deteriorated significantly over the past two years or so.”

Unsold homes have piled up and foreclosures have climbed to record highs.
Given all the dangers facing the economy, the Fed “will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks,” he said, indicating additional rate cuts were likely.

Bernanke appeared with Treasury Secretary Henry Paulson and Christopher Cox, chairman of the Security and Exchange Commission, amid increasing concerns that the economy may be drifting into recession.

The Federal Reserve, which started lowering a key interest rate in September, recently turned much more aggressive. Over the span of just eight days in January, it slashed rates by 1.25 percentage points — the biggest one-month rate reduction in a quarter-century. Economists and Wall Street investors believe the Fed will cut rates even more at its next meeting in March and probably again in April.

“Our economy is clearly in trouble,” said the committee’s chairman, Sen. Christopher Dodd, D-Conn. Restoring investor and consumer confidence, he said, is critical “if we are going to get back on our feet again.”

Bernanke said his forecast is for the economy to continue to endure a “period of sluggish growth.” That would be “followed by a somewhat stronger pace of growth starting later this year” as the effects of the Fed’s rate cuts and a newly enacted stimulus package begin to be felt. The $168 billion package, which includes rebates for people and tax breaks for businesses, was speedily passed by Congress last week and signed into law on Wednesday by President Bush. Analyst predict that will will continue to see Texas mortgage rates drop in the coming weeks and remain low for most of 2008.

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There are many reasons to refinance, but did you know that there are three different types of refinance mortgages. These include a Fixed-Rate Mortgage, an Adjustable-Rate Mortgage, and a Cash-Out Refinance. Texas mortgage refinance can provide you and your family with extra money and ease the tension that debt may be causing you.

Like shopping for a new home loan, it is also important to shop for a replicable refinance broker. It is imperative that you feel comfortable with the loan terms and your choice of what type of refinance mortgage to go with.

Refinancing can become expensive, but knowing why you are choosing to refinance and knowing the opportunities to be had for you, can at the end of the day, result in immense savings for you and your family.

Now let’s take a closer look at the three different types of refinance mortgages discussed in the paragraph above.

Fixed-Rate Mortgage:

Homeowners that plan on being in their home for an extended period of time or till the end-of-time should have or refinance to have a fixed-rate mortgage.

Refinancing your adjustable-rate mortgage to a fixed-rate mortgage might be the way to go for you. Adjustable-rate mortgage interest rates can slowly increase over time, leaving you with a massive house payment that you may not be able to afford. Refinancing this adjustable-rate to a fixed-rate mortgage, will assure you that your rate is steady and there will be no financial surprises from a striking increase in interest rates in the years to come.

If you currently already have a fixed-rate mortgage, you can refinance your existing loan for a shorter term. This will ultimately increase your mortgage payment, but in the end you are paying more of the principle loan amount and less towards interest. When doing this, you increase the equity you have in your home. This can be a great leverage to have someday.

Adjustable-Rate Mortgage:

ARM which stands for an adjustable-rate mortgage, can be very eye-catching to new homeowners looking for a lower interest rate and house payment. An ARM can fluctuate from time-to-time, increasing your mortgage payment. Unlike a fixed-rate mortgage, an ARM typically offers a lower interest rate for the risk involved in carrying this type of variable mortgage.

If you plan on living in your home for only a few years, if you plan on an increase in revenue, or if the fixed rate is soaring, this is a great option for you. It offers a lower mortgage payment for the time being.
Another advantage of going with an ARM is that it typically doesn’t charge prepayment penalties if you should decide to refinance later down the road.

These benefits sound outstanding, but they can go bad real fast, mortgage payments can increase dramatically due to interest rates, and you may become in jeopardy of loosing your home. It is important to understand the advantages and disadvantages of this type of variable-rate loan.

Cash-Out Refinance:

Cash-out refinance involves taking the equity that you have accumulated over the years out of your house. The process entails a new hefty mortgage, which will pay off the existing one, and places extra money on the table. The money can be used as you wish.

Let’s say your home is worth $100,000, and you owe $25,000. The homeowner might be able to get a new mortgage of $75,000. They would then need to pay off the existing $25,000 balance, which leaves them with $50,000.

Having a larger mortgage payment can cause problems if you are not prepared. The homeowner must carefully weigh the risks and they should talk to a mortgage broker that they can trust for advice.

Whatever your reason is to refinance, make certain that you are confident in your decision with the type of refinance you choose and its terms.

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A good faith estimate is extremely important when shopping lenders for your home loan. A good faith estimate is a piece of paper showing the buyer what can be expected for them to have to pay at closing. It is important to remember that this is only an estimate and does not hold up in closings. You will receive a HUD-1 prior to closing which should be a more accurate estimate of what your closing costs will be. The Real Estate Settlement Procedures Act (RESPA) requires a lender to supply you with a good faith estimate within three days of receiving your loan application. The RESPA has itemized the document into sets of codes to help the buyer understand the fees. This typical form is a projected way for you to shop texas mortgage brokers and compare the sets of codes provided from each lender. As a good judgment, when shopping around for mortgage lenders you should compare at least two different good faith estimates.

Shopping and comparing lenders can become very confusing. Good faith estimates usually look similar at a glance, but if you take a closer look, the lenders may not list the same fees the same way. One lender may charge a fee for something that another lender does not, or the fee may be excessive in comparison. If you see something like this, or if you see a fee that you do not understand, ask questions. You are entitled to understand this document; my advice is to keep asking questions until you get a response that you understand. Buying a home is a major decision in your life, the costs can add up quickly.

The chart below shows the itemized set of codes that the RESPA has created.  For further information on each fee, visit my related article on What you should know about Home Closing Costs at http://www.lonestarfinancing.com/blog/2007/11/13/what-you-should-know-about-home-closing-costs/. This article is  a breakdown of the individual fees involved in the closing of your home, what fees you should look out for, and which fees you might be able to negotiate.

Good Faith Itemized Codes

• 800 - ITEMS PAID IN CONNECTION WITH LOAN:
  • 801 - Origination Fee
  • 802 - Discount Fee
  • 803 - Appraisal Fee
  • 804 - Credit Report
  • 805 - Lender’s Inspection Fee
  • 806 - Mortgage Insurance Application Fee
  • 807 - Assumption Fee
  • 808 - Mortgage Broker Fee
  • 810 - Tax Related Service Fee
  • 811 - Application Fee
  • 812 - Commitment Fee
  • 813 - Lender’s Rate Lock-In Fee
  • 814 - Processing Fee
  • 815 - Underwriting Fee
  • 816 - Wire Transfer Fee
• 900 - ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE:
  • 901 - Interest for days
  • 902 - Mortgage Insurance Premium
  • 903 - Hazard Insurance Premium
  • 904 - County Property Taxes
  • 905 - Flood Insurance
• 1000 - RESERVES DEPOSITED WITH LENDER:
  • 1001 - Hazard Ins.
  • 1002 - Mortgage Ins.
  • 1004 - Tax & Assmt.
  • 1006 - Flood Insurance
• 1100 - TITLE CHARGES:
  • 1101 - Closing or Escrow Fee
  • 1102 - Abstract or Title Search
  • 1103 - Title Examination
  • 1105 - Document Preparation Fee
  • 1106 - Notary Fee
  • 1107 - Attorney’s Fee
  • 1108 - Title Insurance
• 1200 - GOVERNMENT RECORDING AND TRANSFER CHARGES:
  • 1201 - Recording Fee
  • 1202 - City/County Tax/Stamps
  • 1203 - State Tax/Stamps
  • 1204 - Intangible Tax
• 1300 - ADDITIONAL SETTLEMENT CHARGES:
  • 1301 - Survey
  • 1302 - Pest Inspection

For further information on each fee, visit my related article on What you should know about Home Closing Costs. This article is a breakdown of the individual fees involved in the closing of your home.

Rachel McGuire
Austin Mortgage Broker

© 2007 Lone Star Financing - Texas Mortgage Lenders

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Most people don’t realize the hidden costs of homeownership, nor do they even consider the hidden potential. Owning your own home can become quit expensive. There are hidden costs that you don’t think about when you are signing papers at your closing. These hidden costs can become intense, but your new home is an investment, if you realize it or not. In the example below we will look at a house that was bought in 2001 for $150,000 in the Austin, Texas area. Today the house is accessed by the state for around $169,000. The market value for this house is around $241,000.

These first two costs we are going to discuss are of taxes and insurance. No matter where you live you can expect to pay these two costs. These are inevitable and just come along with homeownership.

1. Taxes – Each year you are required by the state you live in to pay property taxes. The more expensive your home, the greater the property taxes. In the example from above, these homeowners pay about 2.1% of the accessed value of the home in taxes each year. This may seem like a lot of money, but being a homeowner has its advantages. You receive an income tax break each year for owning a home. The tax break is usually around the same amount that you pay in during the beginning of the loan as most of your payment goes towards interest. Thus, you get to offset your income by the amount of interest you pay on your mortgage. In our example, the total taxes paid for 2007 is about $3,500. Claiming a Homestead Exemption is also a nice benefit you can claim as long as you intend to live in the house you are buying.
2. Insurance – Insurance protects your property. Your bank or mortgage company may advise certain premiums that they feel you need to safeguard your investment. There is a replacement value set on each home stating what the insurance company thinks the house would be worth if they had to replace it. For the house above, the replacement value is about $210,000. The homeowners of this house pay about .7% of the replacement value in insurance premiums each year. Today, the total insurance premiums paid for 2007 is about $1,400.Now let’s talk about other possible costs associated with owning a home. These are the hidden cost mentioned above required for home upkeep. Homeowners can usually assume to pay about 1% of the purchase price for improvements each year. This is about $1,500 a year for the Austin, Texas home. Here is a list of where the main chunk of your money will be going.
3. Utilities – You can expect to now have to pay for utilities such as gas, water, electric, cable, and maybe even a land line.
4. Appliances – For the most part, homes usually come with a stove, microwave dish washer, but you may have to purchase a refrigerator and a washer and dryer. Don’t forget that these things do break down and it is your responsibility to replace them.
5. Repairs – This is the main upkeep of your home. Repairs are what keep your house afloat. There are usually cosmetic things, but if you don’t keep up with them, like a roof for example, you can then have major problems. A leaky roof can ruin your entire house.
6. Landscaping – This is a key element to this puzzle. Curb appeal is what brings a potential buyer into your home to take a further look. This is something you are constantly taking care of. Matured plants are always a plus.
7. Pest Control – This expense is something your house may not need, but before purchasing your home, you need to make sure to get a termite inspection.

Now let’s take a closer look at your new investment. On average you can assume that your home value will increase about 5% per year. For the Austin, Texas home, it has increased about 7% each year. The graph below depicts the profit of the example home over a seven year period. This can be higher or lower depending on your home, the area in which your home is located, and the upgrades you have done due to the hidden potential. As you can see, there is a substantial profit over just seven years. If you consider the taxes to be a wash due-in-part to an income tax break, the profit is even greater.

As you can see, owning your own home can be a great investment.  In the example I described above, the owner of this home has a cash flow benefit of approximately $84K over renting during the 7 year period we analyzed.  Now you are able to see why the hidden costs of homeownership can obviously mean potential. 

Rachel McGuire
LoneStar Financing

© 2007 Lone Star Financing - Austin Mortgage Brokers

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