Smart Real Estate Investing

Mortgage Rates

It has been reported that borrowers of color are 30% more likely to receive higher mortgage rates for home loans than white borrowers.

African-Americans and Latinos are 30 percent more likely to receive higher mortgage rates for home loans than white borrowers despite similar credit scores and risk factors, according to a study published Wednesday by The Center for Responsible Lending.

The Center for Responsible Lending's study found that African-Americans and Latinos face different levels of pricing disparities when compared with white borrowers. African-Americans were more at risk when the subprime mortgages included a prepayment penalty. African-American borrowers were 31 percent more likely to receive a higher rate on a subprime fixed home mortgage while they were 15 percent to 16 percent more likely to pay more to take out an adjustable rate mortgage.

African-Americans also faced pricing disparities when it came to refinancing their existing homes. Two-thirds of refinancing loans include prepayment penalties, putting African-Americans at a significant disadvantage to their white counterparts. The study found that lenders tended to offer African-American borrowers 34 percent higher rates on fixed-rate refinance loans and 17 percent higher on ARM refinance loans.

Similarly, Latinos were 45 percent more likely to receive a higher fixed loan rate if they were seeking a sub-prime loan and between 29 percent and 37 percent more likely to pay more for an ARM. The study didn't find any significant statistical disparity in receiving refinance loans.

The latest study follows in the wake of a Federal Reserve report last September that analyzed 2004 data provided by the Home Mortgage Disclosure Act (HMDA) and highlighted alleged discriminatory practices by around 200 lenders, including 100 banks. The study sparked outrage among minority advocates and propelled increased scrutiny of mortgage lenders by government agencies, such as the Department of Housing and Urban Development.

New York Attorney General Eliot Spitzer filed one of many lawsuits last year attempting to garner more information from the banking industry on its lending practices. That probe was temporarily derailed after the Office of the Comptroller of Currency and an industry group called the Clearing House Association sued Spitzer for overstepping his authority. A federal judge in New York last July refused to force banks to turn over their data.

Speaking on CRL's conference call to discuss the study's finding, Natalie Williams, chief of Spitzer's civil rights bureau, said the office will issue a brief to the Second Circuit Appeals Court in June arguing for disclosure of bank information. The brief will be in response to a recent filing by the OCC attempting to block Spitzer's appeal.

"We sincerely hope that the Office of the Comptroller of the Currency investigates loan pricing disparities at the banks it regulates with the same vigor with which it sought to stop our inquiries," she said, adding that the pricing disparities have a wide impact on the U.S. economy.

Hilary Shelton, director of the Washington bureau of the NAACP, said the unfair pricing disparities hinder economic growth for minorities by making it more difficult for minority families to purchase a home and start on the path to building personal wealth.

"When African-American and Latino families are steered into higher-cost loans, this path to security is made steeper," he said. "That means that it's even harder for families of color to build equity for their future. It's even harder to send their children to college and it's even harder to send their children to college and it's even harder to build wealth for the next generation."

Real Estate ... Washington

As forecasts for housing price growth have cooled for most of the country, they are calling for surging values in the state of Washington.

The median home price in Wenatchee, a small city in central Washington, is set to grow at 16.7 percent from June 2006 to June 2007. Other bright spots: Mount Vernon (14.5 percent), Olympia (13.1 percent) and Yakima (12.8 percent).

For the United States overall, forecasters expect just 5 percent growth.

It is said that although price growth has been steady in Washington, it has not been outstripping the economic fundamentals.

Real estate has been pretty much balanced in the Northwest while many others have been sellers-markets for years.

Solid fundamentals
Much of the future strenght has been attributed to job growth in Washington. Microsoft announced it's hiring 10,000 more people. Boeing is hiring. The anomaly of historic low mortgage rates drove prices for the past few years. Job growth will drive them for the next few. Job growth in the area was 3 percent last year, double the rate for the United States as a whole. It is expected to slow a little this year but to still be strong.

Some of the effect has been attributed to a bit of lag before trends reach Washington. Washington took off after California and the East Coast did. In addition, home ownership in Washington trails the rest of the country; a strenghtening job market could lead renters to start buying. The home-ownership rate is 64 percent, versus 70 pecent in the rest of the country.

Demand will also come from population growth, now 1.8 percent, nearly twice the national average. Much of the population growth consists of people with means. Researchers find that those moving to our state tend to be well-educated, higher-income professionals ... these folks add to market pressures by bidding up the price of available housing," Davis wrote in a recent report.

Washington is among the top 10 of states in attracting more domestic migration than they lose to other states. About 30 percent of the in-migration comes from California. For them, housing is a bargain. They come with cash and buy houses twice as large as they left behind.

In Seattle, for example, Washington's most expensive city, the median home price in the fourth quarter of 2005 had reached $360,000. But Los Angeles prices were at $525,000 and San Francisco's were a whopping $825,000. Seattle prices are forecasted to growth 10.5 percent during the next four quarters.

Other Washington areas with high projected growth are coming off a lower base -- the median home price in Olympia, for example, was $199,000 at the end of 2005. In Wenatchee, it was $185,000.

Manged growth
Some of the strength has also been attributed to a growth management act passed in 1990. It established boundaries for individual cities; they had to focus their development efforts within those limits. That helps preserve farmland and open space and increases the density of populated areas so service delivery, such as water supply, garbage collection and highway construction, can be done more efficiently.

Although that may have a salutary impact on Washingtonians' quality of life, it also curtails the land available for development and so drives up prices.

There is a movement among builders and developers to try to ease these restrictions so as to increase the stock of affordable housing. But until that happens and if Washington's fundamentals remain robust. Washington real estate housing market should continue to outperform most of the rest of the country.

How to get rich in real estate

To succeed in a tough real estate conditions, you've got to change your strategy. Owners, sellers and buyers have been found to be making smart moves in three very different situations.

Home sales are slowing. Condo prices are slipping. Sellers can't get their asking prices. And even real estate bulls are now waving the caution flag.

If you're expecting a short-term gain, a Columbia University professor has recommended that you should be looking elsewhere. He not long ago argued that land shortages and rising populations would translate into ever-rising prices in "superstar" cities like New York and San Francisco.

Clearly, it's time for a re-think, whether you're mulling over buying, selling, refinancing or remodeling a home or investment property. Or if you're just wondering, whehter your house is still worth what you think it is?

The short answer: It depends on where you live. If you reside in one of the past decade's popular locations along the coasts or in the Southwest, brace yourself. Prices there were powered by two kinds of fuel: low interest rates and the willingness of buyers to pay up for the American dream.

That tank is almost empty.

In Los Angeles today, the median dream goes for 10 times the median income. That's unsustainable no matter how creative banks are in coming up with new hybrid loans.

With fewer people buying but plenty still hoping to cash out, prices in the most expensive markets could drop 15 percent in the next year, if mortgage rates rise another point.

It has been reported that prices will flatten in most ex-popular towns this year, and next year will be worse. A lot of markets - particularly those where prices have increased dramatically compared with income - will see drops by late 2007.

Those declines are expected to range from a few percentage points in Boston to as much as 20 percent in Miami and Las Vegas, The more unhinged prices are from local incomes, the more likely a fall.

That doesn't mean, however, that real estate is about to crash across the United States.

First, if you live someplace that hasn't gone wild - think Atlanta or Philadelphia or just about anywhere in the Midwest or Texas - you'll see slower rates of increase, but losses aren't likely. There are sizable parts of the nation's housing market that will be just fine.

Second, a strong economy and job growth should hasten a return to a normal housing situation in which prices rise just a bit faster than inflation. Since World War II, notes Stiff, housing and the economy have moved largely in sync.

Then, starting in 2002, the Federal Reserve's rate cuts in the wake of the tech meltdown and 9/11 kept home prices rising even as the economy stalled. Now, as the housing cycle unwinds, the rest of the economy will keep growing. That puts a floor under prices and will let housing and the economy sync back up.

The caveat, of course, is that if the economy falters, housing will really start to look overvalued.

So what do you do? If you've got a place you like, a mortgage you can handle and no plans to move or build a new wing, relax. But if you're active in the market, or you soon might be, rethinking is indeed in order.

Refinancning and lowering monthly mortgage payments

An interest-only loan gives you the option of paying just the interest , or paying interest and as much principal as you want in any given month. The interest-only option is available for a fixed number of years, and always in the initial years of the loan. Interest-only loans can be traditional fixed-rate mortgages or adjustable rates.

How Interest-Only Loans Work:
If you choose to make the interest-only payment one month, that month's payment is lower than it would be had you made the principal and interest payment. Your interest rate may or may not be lower than a traditional mortgage, but you will have the option of choosing your payment. Sophisticated homeowners know that having this type of payment flexibility is one of the smartest ways to manage your personal finances.

Refinancing from a traditional home loan into an interest-only loan has become popular because it gives you control over your cash flow. This example illustrates the payment flexibility of refinancing a $200,000 mortgage to an interest-only loan.

$200K @ 5.75% Interest-Only Payment.............$958.00

$200K @ 5.75% Principal and Interest Payment....$1,167.00

Cash flow difference is $209.00 a month.

Refinancing to an interest-only loan is a good choice for anyone looking to make their money work harder for them. For instance, making interest-only payments and putting the difference into an investment which brings a higher rate of return. Traditional mortgages offer no such option.

But there are other things you can do with the extra cash you can have every month:

You could pay down high-interest credit card debt.
Save for your children's college tuition.
Buy or lease a second family vehicle.
Increase your home's value by making home improvements.
Set aside money for a rainy day.
Depending on your existing loan balance , refinancing to an interest-only loan could get you access to thousands of dollars over the course of several years to put to use as you think best.

An interest-only refinance may also be a good option for people who expect to be in their homes for less than the interest-only period.

The Truth About Interest-Only Refinancing.
A big misconception about interest-only refinancing is that if you're not paying down your loan's principal every month, you're not building home equity. That's not necessarily true. Homes in the U.S. have been appreciating between five and six percent a year. Chances are that even if you're not paying down principal, appreciation is building equity in your home for you.

There are times when it makes sense to refinance your mortgage. It’s important to have a clear financial objective in mind so that you’re more able to choose the most appropriate loan. Ultimately, the decision is up to you to decide when it’s best for you to refinance, based on your individual financial situation.

Refinance from an Adjustable Rate Mortgage (ARM) to a Fixed-Rate
It's important to consider what mortgage rates are doing. Since mid-2004, the Federal Reserve has raised interest rates several times and is expected to keep raising rates in the near future. This means that if you have an adjustable rate mortgage (ARM) , it may adjust to a rate that's higher than a fixed-rate mortgage . Now might be a good time to consider refinancing to a fixed-rate loan.

However, you must also consider the amount of time you plan on being in your home. If you’re only going to be in your home for a few more years, it may make sense not to refinance out of your ARM. If you’re going to be in your home longer than seven years, it might be a smart move to refinance to a fixed-rate mortgage.

Refinance from a Fixed-Rate Mortgage to an ARM
Again, you need to consider how long you plan on being in your home. Many people move within nine years so it may not make sense to pay a higher interest rate for a 30-year fixed-rate mortgage when you’re not going to be in the home that long. Doing so may be costing you money. Consider refinancing to an ARM instead — you’ll get a lower rate and lower your monthly mortgage payment.

Lower Your Monthly Mortgage Payment

A drop of just one half to three quarters of a percentage point in interest can lower your monthly payment. If you don't refinance, you may be paying too much every month for your loan, and that's never a good financial move. There are a few different ways you can lower your monthly mortgage payment.

First, you can simply refinance to a lower interest rate. A lower rate generally means a lower monthly payment.

Second, you can change the term of your mortgage. For instance, if you have a 15-year mortgage, you can lengthen the term to 30 years. Since the balance of your mortgage is spread out over a longer period of time, your payment is lower. However, if you have a 30-year mortgage and one of your financial goals is long-term savings, you may want to consider shortening your term to 20 or even 15 years. Your payment will be higher, but you will pay much less in interest over the life of the loan, saving you thousands of dollars in the long run.

The third way to lower your payment is to refinance to an interest-only loan. Basically, with an interest-only loan, the minimum amount you are required to pay is the amount of interest for a certain period of time, though you can pay as much principal as you like. But you get the flexibility to pay less if you need or want to divert your money elsewhere, such as contributing to your 401k or saving for your child’s college tuition.

Use our refinance calculator to see how you could lower your monthly mortgage payment.

Getting Cash from Your Home
The equity you have in your home can act like a savings account that you could access through a home equity loan or a cash-out refinance . This is usually done when you want to finance an important home improvement, pay for college or pay off high-interest credit card debt. Whatever your reason, this may be the right option for you.

Consolidating High-Interest Credit Card Debt
The difference between credit card debt and a mortgage can, financially speaking, mean thousands of dollars. Why? Because unlike your mortgage, the interest you pay on a credit card is not tax-deductible and you pay a higher rate than you would on your mortgage. Because of this, credit card debt is often referred to as “bad debt” whereas your mortgage is considered “good debt.” Using your home equity to pay off your high-interest credit card debt can save you money in the long run. Using your home equity, rather than your credit cards, to finance expensive purchases can also be a smart move. Be sure to consult your tax advisor.

Deciding on when to refinance your mortgage will depend on the circumstances of your situation: how long you’ll be in the home, what your financial goals are, whether interest rates are dropping, etc. It’s up to you to decide if it’s right for you.

Mortgage Cycling - A Powerful Mortgage Technique For Dramatically Paying Down Any Mortgage 10 Times Faster Without Changing Your Current Mortgage Provider


Homeowners are finding out how to shave off up to 20 years from their 30-year mortgages with Mortgage Cycling, a recently developed mortgage loophole. Mortgage Cycling reveals how homeowners can build up their equity 10 times faster than using traditional methods or bi-weekly mortgages without changing their current mortgage provider.

Mortgage Cycling Revealed by Craig Romero reveals how current homeowners can pay off their 30-year mortgage in as little as 10 years.

Mortgage cycling is a unique way of manipulating your payments to drastically pay down any mortgage 10 times faster then conventional methods. Mortgage cycling works with any type of mortgage whether you have a ten, twenty or thirty year mortgage.

After over 4 years of development and testing Craig Romero a senior mortgage analyst shows homeowners how to build up to $14,000 in equity their first year and up to $45,000 equity in only 3 years.

Smart homeowners know that to make their mortgage a positive investment they need to build up their equity fast... while decreasing the amount of interest paid to the bank or mortgage holder.

Mortgage Cycling allows them to do this without changing their current mortgage, refinancing, or using a bi-weekly service. Imagine what you could do with over 20 years of mortgage savings in your bank account? For once you could cheat the banks from taking your hard-earned money and be able to re-invest it into your family.

Homeowners across the country are reporting great results using Craig Romero's Mortgage Cycling system.

One customer writes 'Craig, What an amazing concept. I never would?ve believed your plan would really work. Sorry, I'm just not that easy to convince. Guess who's laughing now? I'll have my mortgage paid off in 10 measly years plus $390,287 in equity. I don?t know of anything else that could have done this for me. Mortgage Cycling is Hands down the most valuable information a homeowner could have. Highly recommended'.

Numerous other testimonials on file reveals how he has helped countless others with their dreams by paying off their 30 year mortgage in 1/3 the time while building up their equity 10 times faster then a bi-weekly mortgage or other conventional methods.

So powerful are Craig's techniques that he has recently had his Mortgage Cycling system registered as patent-pending so as to protect it from copycats.

To read further about Mortgage Cycling and how-to save literally thousands of dollars on your home mortgage visit:

http://www.wisemortgageinfo.com

Craig Romero is a Senior Mortgage Analyst and well re-known author of two successful books "Homeowners Hidden Fortune" and "Biweekly Mortgages Explained".

Million Dollar Real Estate Investing

It never pays to get caught up in group hysteria, especially when it comes to real estate investing.

Read on if you are a buyer, seller or speculator...

Conditions vary from town to town, and no national stats can give you a clear picture of what's happening in your neighborhood. So don't let headlines spook you into making a costly mistake.
Even simple steps can make a big difference in the price you buy or sell a house.

Each day brings fresh evidence of peaking home prices. But, with the right strategies, sellers can still command top dollar.

If you are a seller

Price it right
The worst mistake a home seller can make in a softening real estate scenario is to overprice a home. Even putting a high price on your home to test the prices for a few weeks (with the notion that you can always lower it later) is a bad idea.
Be certain that you are pricing it right - Start by checking out your rivals: similar homes for sale in your neighborhood. But the numbers that you really want are the actual prices comparable homes have sold for recently - an analysis that any good real estate broker will prepare. And don't cling to memories of what houses were commanding six months ago; if your area has seen a slowdown in sales, you're not going to get top dollar.

Set the stage
In a faltering scenario you need to stand out. That's where something called staging comes in - that is, sprucing up your home in a way that encourages prospective buyers to envision themselves living there.
The first step is to rent a storage locker and fill it with all that clutter from the attic, basement, and garage. Also remove any furniture that makes your home look overcrowded. And you may want to sweep your house clean of such personal items as wedding photos, framed diplomas, or children's fingerpaintings - it's difficult for prospective buyers to see your home as their castle if your family's signature is all over it. Tone down unique decor. That nude oil painting hanging in the foyer may turn off buyers. Rooms painted in unusual colors should be redone in neutral tones. Curb appeal is equally important. So slap a fresh coat of paint on the door, hang a wreath, hide the garbage cans, and plant flowers along the walkway.

Hire an agent
You may hate the idea of parting with 6 percent of your home's value, especially when you're facing the prospect of getting less than you dreamed of. And with the Internet making do-it-yourself sales easier than ever, you may be tempted to dispense with an agent. But in a tougher environment, selling tactics are everything, and an experienced agent--that is, one who didn't recently jump into the real estate gold rush - can be invaluable in helping you price your home correctly and in getting it noticed by prospective buyers. An agent can also steer you through the tortuous sales process and keep a deal on track when the inevitable glitches crop up.

So are there ways to save on those steep commissions? Any real estate professional will tell you that fees are always negotiable. But just as investors with hefty portfolios often pay smaller percentage fees to their advisors, sellers of high-end homes have the most leverage when it comes to commissions.

If you're a speculator ... get out now
In 2005, investors accounted for 28 percent of the housing scene, up from 23 percent in 2004, according to the National Association of Realtors. But the game of buying a home - or two or three or 17 - holding it for a bit, and then flipping it for a handsome profit has pretty much played itself out.

If you are a buyer

Don't let the asking price be your guide
Many sellers are clinging to bloated pricetags that are based on what homes were fetching at the peak rather than what's realistic today.

To gauge local conditions, you want to know how many houses are for sale and how long the average house has been sitting on the sale today vs. a year ago. Once you focus on a particular house, get the same report on comparable dwellings that an agent would give a seller. It costs you nothing, and it can save you from placing more money on the table than you should.

Take your time
In the heat an upsurge, home shoppers committed to properties within minutes of touring them. Although sellers still have the upper hand sometimes, in most, time is on your side. You can make good use of it by getting to know your target buyers intimately. Some of the things you can use the extra time to delve into more deeply: the school system; zoning issues that could change the value of homes in the coming years; the job picture; and recent property tax increases, as well as the outlook for more.

Once you're ready to make an offer, again, don't be hasty. Hire a professional to conduct a careful inspection, and follow up by getting estimates for dealing with any problems he uncovers - repairing a leaky roof or replacing an old furnace. All this is part of the cost of carrying a house, and you need to factor it into your budget before you know what you can really afford to pay.

Ask for goodies
Sellers who won't budge on the asking price may be willing to make other concessions. This is especially true when you're buying from homebuilding companies, which need to keep prices stable to avoid angering recent purchasers. To move product these days, they're throwing in all sorts of upgrades.

Even if you are not moving:

Just because you aim to watch the next real estate cycle from the comfort of your living room doesn't mean you don't need a plan. Here are three things to keep in mind as mortgage rates rise and prices soften.

Keep an eye on your mortgage
If you hold an adjustable-rate mortgage, you may be in for a shock. Interest rates have been climbing sharply, which means your monthly payment could jump by several hundred dollars at the next adjustment unless you are smart and taking advantage of Mortgage Cycling.

Study the terms of your ARM -- they vary widely. If you'll soon face a big hike, this may be a good time to switch to a fixed-rate loan. As for recent hints that the Federal Reserve may be ready to end its string of rate hikes, don't expect mortgage rates to start drifting downward anytime soon. The economy looks strong, and oil is putting upward pressure on prices.

Don't bank on your house to fund your retirement
If you've owned your home for five years or more, you may be sitting on a substantial gain. But don't use that as an excuse to ease up on retirement savings. For one thing, future appreciation is likely to be much more modest. Historically, residential real estate has outpaced inflation by a little more than a percentage point each year -- hardly enough to pay for two decades of sunset years on sun-filled links. So max out on your retirement contributions and consider any future real estate profits an extra cushion.

Keep your cool - If you're in the real estate game for the long haul, you're going to be fine. Your home, after all, is really a place to rest your head. So look past any current softness.

In the latest sign of the cooling real estate market, luxury home builder Toll Brothers reported a sharp drop in the value of its contracts and lowered its outlook for the homes it will build this year.

The suburban Philadelphia-based builder reported that while its fiscal second-quarter home building revenues rose 18 percent to about $1.4 billion, signed contracts plunged 29 percent to about $1.6 billion in the period ending April 30.

Toll Brothers (Research) also said that its cancellation rate was 8.5 percent in the quarter, up from its historic level of 7.0 percent. The company said it now expects to complete between 9,000 to 9,700 new homes in its current fiscal year, which ends in October. That's down 200 homes from its earlier target.

They are now apparently entering our ninth month of slower sales in most of their markets. Speculative buyers are no longer fueling demand; instead they're putting the homes they've recently acquired back on the market or are canceling contracts in mid-construction."

The company says the larger supply on the market is driving down new home prices.

Additional supply is also coming from speculative homes started by other builders, as well as from their 'non-spec-buyer' cancellations. Much of the oversupply described above is now being aggressively discounted by others.

New home sales reached record levels in 2005, with the Census Bureau reporting nearly 1.3 million new homes sold, and new home starts and building permits have stayed strong this year. But builders have been reporting a much softer market in recent months, and the building boom has led to a large supply of new homes on the market.

At the end of March there were 128,000 completed new homes for sale, according to the government report, up 22 percent from the year-earlier reading. Homes under construction which are for sale are also up 21 percent to 313,000.

It has also been reported that nearly one builder in five saw an increase in cancellations, and nearly 75 percent are seeing greater inventory of new homes available for sale in their markets.

Earlier this week another home builder warned its current quarter and full-year earnings would fall short of forecasts, sending its shares and those of most of its competitors lower. Toll Brothers says it will report results and give new guidance on May 23.

Real Estate Search

Homestore Inc, has rolled out its new real estate search-engine Web site, Move.com, as part of a long-term strategy that’s expected to drive more traffic to REALTOR.com.

The new Web site capitalizes on the way people find information online today—through search engines, Homestore executives say. Move.com is a real estate-specific search engine that allows Internet users to find existing homes, new homes, and rentals. The site replaces Homestore.com, HomeBuilder.com, and RentNet.com.

Realtors will continue to receive basic listings at no charge, and FSBO listings will still be excluded from the site. In addition, several product initiatives will soon launch on REALTOR.com. Among them is a “Featured CMA,” a lead-generation tool that emphasizes the REALTOR brand and provides instructions on how consumers can make their home worth more.

Westlake Village, California based Homestore operates REALTOR.com, which allows consumers to search roughly 2.5 million home listings. Homestore is in the process of changing its company name to Move Inc, a name that unifies the company’s strategy of providing a platform for connecting consumers with real estate practitioners, home builders, rental property owners, and other move-related advertisers before, during, and after a move, officials say.