Rum and Real Estate – Episode 10

Low interest rates are making many clients consider a refinance. How, when and under what circumstances should you refinance? I offer some tips and rules of thumb on how to think about whether a refinance is right for you. It’s not just about the interest rate.

Rum of the day: Botran Aged Rum from Guatemala!

Stay Positive and Love Your Life,

David Madaffari, Realtor

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New Rule Renders Pre-Approvals USELESS

In the name of consumer protection, the CFPB has issued a rule stating that lenders can’t require income documentation before handing out pre-approvals.

…What?

http://fast.wistia.net/embed/iframe/2539hb80fp%20

The video does go on to explain that the net effect is probably not going to change much because of buyer behaviors, but the rule itself is misguided and not grounded in any financial reality.   It is a very funny but informative read.

Because remember, the government ALWAYS knows best when it comes to YOUR money.

David R. Madaffari, Realtor
Keller Williams Realty – First Choice
Office: 225.744.0044
Cell: 225.772.3283 (DAVE)
37325 Market Place Dr. Ste D
Prairieville, LA 70769
www.DavidMadaffari.com
Each office independently owned and operated

REO Property Sales 2014 – East Baton Rouge

Today let’s look at the Baton Rouge REO property sales bought with CASH.  As I stated yesterday, 2013’s average discount for these properties was 88% using cash.  That proved to be a magic number for my investor clients as all of our deals fit right at that number.  So was 2014 any different?

The average List to Sold price ratio was 89% in 2014.  A slight uptick from 2013, but still a great number to keep handy when thinking about what your investment should be.   The average days on the market is also only 76 days, which means these properties are being snatched up a high rate.

After the last three days worth of data, my advice to investors and homebuyers is to work with what the banks are giving us.  Since we know that the list prices tend to be at or near market value, we can reasonably expect them to go no lower than 88% of their asking price when paying cash.   Buyers using financing should also try this tactic as well – after all, they prefer to sell to owner-occupants.

I hope this series has helped educate those looking to make offers on properties like these.  While it does happen, offering 50%-60% below market value is not typically an effective way to win bids in a hot foreclosure market.

David R. Madaffari, Realtor
Keller Williams Realty – First Choice
Office: 225.744.0044
Cell: 225.772.3283 (DAVE)
37325 Market Place Dr. Ste D
Prairieville, LA 70769
www.DavidMadaffari.com
Each office independently owned and operated

Alternative Ways to Payoff your Mortgage Early

Everyone gets them when they buy a new home – the inundation of marketing that comes in the mail touting their bimonthly or biweekly plans to pay off your mortgage faster than the term of 30 or 15 years.  While paying off your mortgage early is always a good thing, simple math will help you determine if the plans marketed to you will actually help you reduce your term significantly.  The article below describes each “plan” and then suggests a very simple alternative that will make you go “Aha!”

Alternative Ways to Payoff Your Mortgage Early

To simplify it even more, just make one extra full payment each year – 13, instead of 12.  On that 13th payment though, be sure to make it clear you want it applied to the principal only.

Sincerely,

David R. Madaffari, Realtor
Keller Williams Realty – First Choice
Office: 225.744.0044
Cell: 225.772.3283 (DAVE)
37325 Market Place Dr. Ste D
Prairieville, LA 70769
www.DavidMadaffari.com
Each office independently owned and operated

Adjustable Rate Mortgages Making a Comeback

I saw a post by a fellow agent on Facebook asking our opinions on the below article from the Wall Street Journal.  It talks about how Adjustable Rate Mortgages (ARMs) are seeing more interest from borrowers, but lenders insist that instead of focusing on subprime borrowers, they are marketing to the “jumbo” loan market.

Adjustable Rate Mortgages Make a Comeback – WSJ

I believe these loans still have a place in our market, even for non-jumbo borrowers.  For example, I refinanced my own home to a 5-year ARM loan in 2012- where the interest rate is fixed for 5 years before adjusting each year.  I locked in a paltry 2.75% interest rate for 5 years, cutting my interest rate 45%.  I now save $414/month on my mortgage, and the cap is 7.75% once it starts adjusting.  Even if it got that high I wouldn’t be paying any more than I already was when i bought the house, probably STILL less.  And with 5 years of a 2.75% interest rate, more of my payment is going towards principal and NOT interest.

It does beg the question – has the media lambasted the ARM loan to a point where consumers don’t even consider them without knowing the details?  With a good down payment and a short-term window, ARM loans are a great way to save money.  You can get them in 3, 5, or even 7 year terms, all with lower fixed rates than conventional financing.

What are your thoughts?

David R. Madaffari, Realtor
Keller Williams Realty – First Choice
Office: 225.744.0044
Cell: 225.772.3283 (DAVE)
37325 Market Place Dr. Ste D
Prairieville, LA 70769
www.DavidMadaffari.com
Each office independently owned and operated

100% RD Income Limits Raised for Baton Rouge Area

Recently, we learned that the income limit for the RD loan was raised, from $74,750 to $76,350.  Sure, it may seem like $1,600 increase is not that much of a difference, but for all of those folks who have been right on the edge of eligibility are now within the limits of a 100% loan!

RD Income Limits Chart

Just about everyone knows that Ascension and Livingston Parishes qualify for the RD loan, but there are areas of EBR that qualify, like Central and Zachary.  Amazingly, the far southeast corner of the parish is also eligible, including popular Azalea Lakes, Hoo Shoo Too lakes and Mallard Crossing.  To be quite honest I have no idea how they pulled it off, but for buyers it means they can get into one of those areas with little or no money down.  You can enter addresses and see if a home is eligible here, and then if your adjusted gross income (after deductions) is at or below $76,350, give me a call and let’s get started!

David R. Madaffari, Realtor
Keller Williams Realty – First Choice
Office: 225.744.0044
Cell: 225.772.3283 (DAVE)
37325 Market Place Dr. Ste D
Prairieville, LA 70769
www.DavidMadaffari.com
Each office independently owned and operated

New Mortgage Rules Affecting Buyers

Below is a summary of the new mortgage rules that went into effect as of January 10th.  These rules, among other things tighten up lending rules and create some more standards across the board for lending.

Summary of New Qualified Mortgage (QM) Rule | realtor.org.

Under the guise of the Consumer Financial Protection Bureau, these rules are touted as protecting the consumer from predatory lending.  However, I can’t help to think that they actually do the opposite – they protect the lender from the consumer.  These rules do nothing to help buyers get a loan, and in fact makes it much harder.  What it does do is help lenders package and sell “safer” mortgages easier to investors.   Meanwhile, I have already seen two cases of my own hard-working clients being adversely affected by these rules – going from qualified to unqualified with the turn of a calendar day.

In the long run, I can see more buyers saving money for down payments and cutting their credit use in order to buy a home.   No one ever said living on cash was a bad thing and maybe should strive to be like our grandparents, then – save money for a down payment and don’t overextend credit unnecessarily.  It worked for them, why shouldn’t it work for us?

David R. Madaffari, Realtor 
Keller Williams Realty – First Choice
Office: 225.744.0044
Cell: 225.772.3283 (DAVE)
37325 Market Place Dr. Ste D
Prairieville, LA 70769
www.DavidMadaffari.com
Each office independently owned and operated