The Price of a “No-Cost” Loan

Some home buyers who may be concerned about paying high closing costs might be tempted by a “zero-cost” or “no-cost” loan option, which requires no cash outlay, but typically adds a half percentage point to the rate.  These loans tend to be most beneficial to buyers planning to have the loan for less than five years.

KEEP THIS IN MIND

• One of the primary differences between a no-cost loan and similar loans is that no-cost loans do not tack on closing costs to the balance, but instead increase the rate.

• With no-cost loans, third-party fees including the appraisal, credit report, title insurance, recording, and the use of a mortgage broker are paid by the lender. The fees, including the amount the broker is being paid, are disclosed on the closing statement.

• Home buyers who bypass a broker and work directly with a lender may encounter less transparency, as loan officers are not required to disclose the amount the bank is making on the loan.

• Borrowers weighing their loan options are advised to use a mortgage amortization calculator to compare the costs for a conventional loan compared with a no-cost loan. To compare costs using an amortization calculator, visit our web site at http://www.SDCoastProperties.com/MortgageCalculators.

San Diego's 15-month Price Increase Ends

San Diego County's housing market, which led the country in price increases for 15 straight months, has turned negative in August and the rest of the nation's housing markets also seemed to stumble.

The Case-Shiller Home Price Index for San Diego dropped a slight 0.6 percent from July to August, the first downturn since May 2009.

San Diego wasn't alone. Fourteen of the other 20 major markets also were down month over month. The overall index for the 20 metro areas was down 0.2 percent after four consecutive months of increased prices.

However, on a year-over-year basis, San Diego was up for the 10th straight month by 6.9 percent and the national index was up the seventh time by 1.7 percent. This was San Diego's smallest year-over-year change since January's 5.86 percent.

Where Do Most People Want to Live?

If you could live in any state, except the one you live in now, what state would you choose to live in?

The Harris Poll has asked this question every year since 1997. While California tops the list of most popular states to live in among Echo Boomers (now ages 18 to 33) and Gen Xers (ages 34 to 45), Hawaii is the top pick for Baby Boomers (ages 46 to 64) and Matures (ages 65 and over). Among Echo Boomers, Hawaii drops out of the top five.

Here are the top-10 states across the age groups:

1. California
2. Hawaii
3. Florida
4. Colorado
5. Arizona
6. North Carolina
7. Oregon
8. Texas
9. New York
10. Washington

Source: Harris Interactive (10/19/2010)

San Diego Housing Prices Down

San Diego County’s median home price slipped to $330,500 last month as demand cooled in the wake of the end to buyer rebates, MDA DataQuick reported Monday.

The median was 1.9 percent lower than August’s $337,000 but up 1.7 percent from year-ago levels.

It was the smallest year-over-year rise since October last year and confirmed what many economists have been saying — prices may soften in the next few months.

How Your FICO Score is Calculated

Here is a list of five factors that will explain how the credit bureaus calculate FICO scores and tips to help you improve your credit.





Payment History - How you pay your bills makes up 35 percent of your FICO score.  It goes without saying that paying your bills on time will have a positive impact on your credit score, while paying bills late or not at all will have a dramatically negative impact.  Even paying one bill late will cause your FICO score to take a hit, so make sure you're paying your bills on time.  If you've made mistakes in the past and haven't always paid your bills on time, don't worry.  If you change your ways and pay on time, your FICO score will eventually reflect that. 

Debt to Income Ratio - The amount of debt you have versus the amount of money you earn makes up another 30 percent of your FICO score. Your debt-to-income ratio (DTI) shouldn't exceed 36 percent. This means that your debt load should not be more than 36 percent of your monthly gross income.  If you're looking to improve your credit score, you should work on reducing your debt as much as possible.

Credit History - The length of your credit history makes up 15 percent of your overall FICO score. The credit score formula calculated by FICO will reward a history of using credit wisely. That's why older adults generally have higher credit scores than people in their twenties because they have had credit lines open for a longer period of time.

Credit Applications - The number of credit accounts you apply for has an impact on your credit score as well. This factor makes up 10 percent of your credit score.  Applying for many credit cards at one time signals that you are trying to get access to a lot of credit that you may not be able to pay back. You will help improve your credit score by applying for credit only when it's appropriate.

Types of Credit - The types of credit accounts makes up the final 10 percent of your credit score. The FICO credit formula weighs your credit accounts differently. For instance, a revolving credit account is weighed differently than an installment loan like a mortgage. Having diverse credit accounts, while maintaining good payment histories, will help increase your credit score in the long run.

Most- and Least-Promising Metros for Investors

Local Market Monitor, a North Carolina firm that measures the potential for price appreciation in real estate markets with more than 200,000 residents, recently evaluated markets for conservative investors. It identified the best metros as those with signs that prices are stabilizing. It also named markets where prices are still falling as “dangerous.”

Here are the 10 most-promising areas for conservative investors:

1. Tulsa, Okla.

2. Oklahoma City, Okla.

3. San Diego-Carlsbad-San Marcos, Calif.

4. Albany-Schenectady-Troy, N.Y.

5. Indianapolis-Carmel, Ind.

6. El Paso, Texas

7. Winston-Salem, N.C.

8. Cincinnati-Middletown, Ohio-Ky.-Ind.

9. Worcester, Mass.

10. Louisville-Jefferson County, Ky.-Ind.

The top 10 most “dangerous” areas are:

1. Ocala, Fla.
2. Lakeland-Winter Haven, Fla.
3. Reno-Sparks, Nev.
4. Orlando-Kissimmee, Fla.
5. Deltona-Daytona Beach-Ormond Beach, Fla.
6. Port St. Lucie, Fla.
7. Las Vegas-Paradise, Nev.
8. Boise City-Nampa, Ind.
9. Prescott, Ariz.
10. Cape Coral-Fort Myers, Fla.

Mortgage Rates Fall to 4.27 Percent

Rates on 30-year mortgages fell to the lowest level in decades for the ninth time in 12 weeks, pushed down by traders anticipating a move by the Federal Reserve to pump more money into the economy.

The average rate for 30-year fixed loans dropped to 4.27 percent, mortgage buyer Freddie Mac said Thursday. That's the lowest on records dating back to 1971, and down from 4.32 percent the previous week.

The average rate on 15-year fixed loans, a popular choice for refinancing, dropped to 3.72 percent from 3.75 percent. That was lowest on records dating back to 1991.

How to buy a home at a $100,000 discount

With nearly 150,000 foreclosed homes on their books, Fannie Mae and Freddie Mac are trying to reduce their growing inventory of repossessed properties, offering home buyers tremendous purchasing opportunities.

An analysis by SmartMoney magazine found that home buyers could save $100,000 on the price of a home by purchasing a foreclosed home owned by Fannie Mae or Freddie Mac as opposed to a similar fair-market property just a few blocks away.

Fannie Mae’s homebuying program, which requires down payments as low as 3 percent on 30-year mortgages also can help buyers save money. However, buyers should note, smaller down payments generally translate into higher monthly mortgage payments.

Another bonus to purchasing a Fannie Mae-owned home, the company doesn’t require private mortgage insurance, which most lenders require for buyers who put down less than 20 percent.

Unlike many foreclosed properties, which usually require many repairs, Fannie and Freddie generally repair items such as leaky roofs and damaged electrical work, and often handle small projects like replacing appliances that are broken or missing, replacing old carpet, or fixing damages left by the former owners or vandals. Additionally, Fannie Mae’s properties come with an optional mortgage that includes extra financing up to $30,000 for repairs and improvements.

Buyers of Freddie Mac homes who plan to be owner-occupants –those who plan to live in the home and not use it as an investment property—have the advantage of viewing properties 15 days earlier than investors who often pay all cash and buy up foreclosed properties before owner-occupants have a chance to view them.

JPMorgan Chase Stops Foreclosures

A second major mortgage lender, JPMorgan Chase, has stopped foreclosures so it can review the loan documents for errors.

These moves are likely to slow the foreclosure crisis even more, making long-drawn out process drag on for several more years, several foreclosure analysts are saying.

In any case, an increased number of lawsuits are likely. Many foreclosed home owners will be looking to sue their lenders alleging errors in documents.

GMAC Mortgage was the first big lender to pause foreclosures while it reviews past files.

There have been several suits agains mortgage lenders based on whether the MERS clearing house actually transferred the note with the mortgage. A judge in California and another judge in Kansas held that the transfer was invalid and reversed the foreclosures in favor of the homeowners.