- About Us
- Your Total Resource
Often is the question asked, "What's up with paying for a property in cash?", albeit in slightly more technical language. For buyers, the market is tough right now, as there's not a lot in the way of inventory, and sellers often receive multiple offers, especially in parts of the 580/680 area. Many real estate agents suggest that buyers make a cash offer in order to make themselves seem more competitive and improve their chances of having their offer selected.
Buyers have a few options when it comes to making an offer. They can pony up cash by writing a check and backing it up with statements that disclose the balance of their accounts. They can get pre-approved, which involves having their down payment verified with asset statements; employment verified with W-2 forms, pay stubs, and tax returns; credit reviewed; and loan reviewed for underwriting. They can also be "pre-qualified," meaning that all of that same documentation has been reviewed but not underwritten.
Our Landmark Advisors tell borrowers that the last option, despite its somewhat reassuring moniker, poses certain risks to a borrower's deposit. If the buyer puts down 20%, for instance, and the appraisal comes back lower than the price upon which both parties agreed, the buyer is faced with a situation where they have to come up with more money, pay private mortgage insurance, or convince the seller the lower the price. Such a scenario can become even more complicated if the seller refuses to deviate from that agreed upon price and the buyer doesn't have that extra money and can't qualify if they have to pay private mortgage insurance. In this particular case, the buyer could potentially lose the deposit.
Cash payments do indeed make for an attractive buyer, but the wise would-be homeowner understands the difference between a cash offer, being pre-approved, and being pre-qualified along with the risks carried by their various options. Be sure to ask your Landmark Advisor their thoughts!
This is a frightening statistic, probably one of the most worrisome in recent years: 25% of mortgage bankers and Realtors in the country are on medication for mental illness. That is scary - it means that 75% are running around untreated. The problem? I can’t remember which part of the statistic I fall into?
Darned rates - will they ever go back down and help the folks who didn't lock a few weeks ago? Probably, but let's figure out three reasons why rates have moved up in the last few weeks
First, the sentiment towards Europe continues to brighten - this risk is easing out of Europe. Granted, much of the population is on vacation, but there were three critical speeches/communiqués published in the last 1.5 months out of the EU that have led analysts to believe that the prospect of a material monetary response to the European debt crisis is very possible, something that has never occurred since Greece first became an issue back in 2009.
The second is the impression that the U.S. economy is not falling off a ledge. It has been over a year since S&P downgraded this country, and rates have done nothing but go down - hardly the mark of a country in serious trouble. Housing appears to have stabilized, the jobs market is not strong, but it is not weak either, and many individual statistics show that things are slowly growing.
The third is that given U.S. inflation is low, and job market is stable, the odds of the third round of Quantitative Easing (QE3) are declining. In other words, things aren't great, but they are not bad enough for further Fed easing and another push for lower rates.
That being said, the "looming fiscal cliff" is an issue - politicians created it, so politicians very well may postpone it.
Kids are back in school ..drive safely.
The Treasury Department is preparing to revamp the terms of its nearly four-year-old financial backing of Fannie Mae and Freddie Mac in a bid to allay investor concerns that the companies could one day exhaust their federal lifelines. What does that mean?
Changing the terms of the Treasury's financial backing for Fannie and Freddie Mac impacts many things. The new terms will accelerate reducing the holdings of the two agency mortgage companies, and will require the companies to pay the government any quarterly profits they earn. Prior to this new system, Fannie and Freddie were paying a 10% quarterly dividend payment to the U.S. Treasury.
This maneuver should be beneficial for mortgage originators, homebuilders and government debt in the near to mid-term, as it will delay more substantial reform of the two giant government-seized firms. This change in policy is likely at least partially designed to promote China's continued purchasing of U.S. Treasury bonds and agency issued residential mortgage backed securities.
But our Landmark Advisors have been asked by their clients, "What does mean for me?" Most believe that the move will help keep Fannie and Freddie in business for a longer period of time, thereby helping mortgage rates. Why would that happen? Foreign investors recognize the names of Fannie and Freddie (and FHA), feel more comfortable owning those securities, and create demand for them. This in turn helps keep rates low.
Returning to the larger picture, while Fannie & Freddie have made profits in recent quarters, they have had to pay such large dividend payments to the Treasury every year-nearly $19 billion between them-that they continue to borrow money from the Treasury in certain periods, even when running a small profit. They lend stability to the market, and that helps. Ask your Landmark Advisor for more information on the role of Freddie Mac and Fannie Mae in today's lending environment.
Landmark Mortgage Group is a division of Opes Advisors and licensed by the CA Dept. of Real Estate, Real Estate Broker license 01458652 and NMLS 235584. Equal Opportunity Lender.