The Real Estate Geeks: Mandatory Loan Fees Keep Borrowers From Getting Their Absolute Lowest Rate

Conforming mortgage rates may be posting all-time lows this week, but that doesn't mean you'll be eligible for them. You may have already called your loan officer and found this out the hard way.

It's because of a federally-mandated mortgage-pricing scheme known as "loan-level pricing adjustments".

In effect since April 2009, loan-level pricing adjustments are changes to a loan's base rate and/or fee structure based on that loan's inherent risk to Wall Street. It's similar to auto insurance pricing adjustment in that a sports car, all things equal, will cost more to insure than a comparably-priced minivan.

More risk, more cost.

In mortgage lending, loan risk can be loosely grouped into 5 categories. Mortgage applications featuring any of the five traits are subject to price adjustments:

1. Credit Score (i.e. the borrower's FICO is below 740)
2. Property Type (i.e. the subject property is a multi-unit home)
3. Occupancy (i.e. the subject property is an investment home)
4. Structure (i.e. there is a subordinate/junior lien on title)
5. Equity (i.e. mortgage insurance is required by the lender)

Furthermore, loan-level pricing adjustments are cumulative.

A 3-unit investment home will face larger adjustments than an owner-occupied 3-unit home, for example. It's these adjustments that explain why you may not be eligible for the rates you see advertised online and in the newspapers -- your particular loan may be subject to this risk-based pricing that raises your mortgage rate and closing costs.

The government's loan-level pricing adjustment schedule is public information. See what your lender and how your loan quote is made at the Fannie Mae website. Or, if you find the charts confusing, just call or email your loan officer for help with interpretation.

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Take Care, Melissa Bayles (714) 720-2555 & "Chip" Richard Esajian (714) 272-5369 The Real Estate Geeks

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The Real Estate Geeks - Household Finances : Which Bills Should I Pay First?

Morning television can be "light", but as far as personal finance interviews go, this Suze Orman segment from The Today Show is loaded with practical financial planning advice.

Titled "What Should You Do First?", Ms. Orman addressed the real-life, money management conundrums households face, such as:

• Should I pay off credit card bills, or create an emergency cash fund?
• Should I pay off student loan debt, or pay off credit card bills?
• Should I save for a child's college tuition, or save for my retirement?

In 5 minutes, the segment covers a half-dozen scenarios like the ones above, explaining what to do, and why to do it.

Ms. Orman's style may not interest you and financial advice is rarely universal, but the piece is worth watching.

Watch the clip on the NBC website.

 

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Take Care, Melissa Bayles (714) 720-2555 & "Chip" Richard Esajian (714) 272-5369 The Real Estate Geeks

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The Real Estate Geeks - How To Improve Your Home's Indoor Air Quality

An EPA study shows that close to dozen common air pollutants are 2 to 5 times more concentrated indoors versus outdoors, regardless of whether the home is is located in Rural America, or in an industrial zone.

The cause is volatile organic compounds, more commonly known as VOCs.

VOCs are gases emitted from certain liquids and solids including paints, cleaning supplies, pesticides, air fresheners and permanent markers, among others. In the short-term, can cause respiratory irritation. In the long-term, VOCs can lead to "Sick Building Syndrome", cancer and other illnesses.

There are a number of ways to keep VOC levels in your home to minimum and the EPA published some tips to help with home health safety. The advice includes:

1. Meet or exceed all product label precautions
2. When buying paints and chemicals, don't buy bulk. Buy only what you need. Dispose of the rest.
3. If a product label says "use in well-ventilated area", move to the outdoors or use a fan

VOC levels can remain elevated for long periods of time even after the VOC-generating activity is completed.  Therefore, take care to protect your home and your health.

Read the EPA's complete guide to volatile organic compounds on its website.

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The Real Estate Geeks: Was The Pending Home Sales Report Really That Bad? It Depends Who You Ask -- Buyer Or Seller.

The Pending Home Sales Index plunged in May 2010, just one month after the expiration of the federal home buyer tax credit program.

The Pending Home Sales Index is now at a record-low level.

A "pending home sale" is an existing home under contract to sell, but not yet closed. According to the National Association of Realtors®, 80 percent of homes under contract close within 60 days.

Because of this timeline, we can expect the summer's Existing Home Sales to be weak, too. With fewer homes going under contract, fewer homes can close.

On the surface, May's Pending Home Sales Index looks like terrible news for housing. And, if you're a seller, it just might be. But, if you're a buyer, the story reads differently.  Just consider the market conditions. 

A broad look at the housing market shows:

1. Home supplies are rising in most markets
2. Home sales are falling in most markets
3. Mortgage rates are at all-time lows

In other words, in most markets, more sellers are competing for fewer buyers, and the "winning" buyers are financing their homes at the lowest rates in history.

It's an excellent time to be a home buyer.

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