Posted by: dimitritimm | June 1, 2011

Consider a Vacation Home for Fun Times, Investment Returns

Glorious summer days at the lake…the grandkids frolicking at the shore…or a warm fireplace as you wait for the perfect powder at your ski retreat. A vacation home builds memories and it can be a great investment.

In most vacation hot spots, second-home prices are at five-year lows. Some in California and Florida can be had for 47 percent below their 2006 price. Bargains are likely to be available within a couple of hundred miles from where you live.

* There’s more to a vacation place than fun and up-front bargains. In the future, the home will be an appreciating asset. Economists say prices are already rising and will continue to rise for at least the next five years.

* The home is a better deal if it’s rentable. The rental potential puts money in your pocket, but it also increases resale value.

* The typical vacation property rents out about 17 weeks a year, according to Ask a property management company how much comparable properties rent for by the week. While the rent won’t pay all your expenses, it will help with the mortgage, utilities, taxes and maintenance.

* You will meet and become friends with an entirely new group of people when you own a vacation home. Lifelong friends are made with neighbors and in the community.

* You’ll have tax benefits. Rent it out for less than two weeks, and you won’t have to report the income to the IRS.

* If you rent the home for two weeks or more, you can deduct operating costs, such as maintenance, cleaning, mortgage interest and property tax. You allocate the write-off between personal and rental use.

* As with any rental property, distance is important. Less than 200 miles from your primary home is best.


* When the property is classified as a second home, you’ll get about the same interest rate and terms as on a home loan, according to HSH Associates.

* If you need the rental property income to qualify for a mortgage, it will be classified as an investment property. The down payment will be higher and the interest rate will be about 1 percent more.

Posted by: dimitritimm | May 3, 2011

Four Ways to Spice Up an Open House

Open houses are a great way to meet potential clients, and showcasing the home in an attention-getting way can cement potential sellers’ confidence in the Realtor.

1. Take advantage of branding opportunities. Water bottles on hot days with a custom label can be a great source of advertising. A picture of the house with contact information on the bottle is not only fun, but a way to keep both the home and the Realtor in the mind of the visitor after the open house.

 2. Go beyond the basics with food. You may have heard the age-old technique of baking cookies in the home to infuse it with the scent of homemade treats. However, food at an open house can be another way to stand out. It can encourage people to stay longer and strike up a conversation. Think outside the box – ice cream, chocolate fountains with strawberries, or lattes from an espresso machine.

 3. Don’t forget the music. Having music softly playing enhances the atmosphere and detracts from an empty feeling in the home and makes it more inviting. Soft jazz or other non-lyrical music can be played from an iPod and dock system. Have it centrally located so the music is heard throughout the home.

4. Consider the early evening A recent Realtor Magazine article suggested holding open houses not only on Sundays, but during twilight hours. This way, people can visit the home directly after work, expanding the potential buyer pool.

Posted by: dimitritimm | March 30, 2011

Low rates and terms may soon be history

Mortgage industry changes: Low rates and terms may soon be history

You are going to be hearing a lot about restructuring the mortgage industry in the next months and years.

But the bottom line for home buyers is buy now and get financing in place by as early as May. The great terms of recent years will soon be gone, and probably gone forever.

Experts say you will probably never again see down payments in the 5 percent range (even now becoming harder to find) or 30-year fixed rates under 5 percent.

The median down payment in nine major U.S. cities rose to 22 percent late last year. This was the highest requirement since 1997 on properties purchased through conventional mortgages, according to a Wall Street Journal report.

In many areas, however, a down payment of only 10 percent of the mortgage amount could be available for people with high credit scores.

The lowest down payments are still offered by the Federal Housing Administration, FHA. They will finance a home with a 3.5 percent down payment.

But a recent Obama Administration white paper on the mortgage industry hints that this very low down payment might change as the federal footprint in the mortgage market shrinks.

According to CNN Money, Congress will be considering raising FHA down payment requirements, approving higher insurance fees for FHA mortgages, and changing rules for ‘qualified’ mortgages.  This could mean higher interest rates for consumers and higher down payments, perhaps up to 30 percent.

With its low down payment requirements, low interest rates, and lower credit score requirements, FHA now has a 30 percent market share in the mortgage arena but plans are to reduce its activity to just 10 percent.

Administration officials say the planned process could take some time, but it might include phasing out federal backing of Fannie Mae and Freddie Mac. Since the mortgage crisis began, the government has bailed out the federally backed entities to the tune of $150 billion.

Posted by: dimitritimm | March 24, 2011

5 Rules for Mortgage Insurance Tax Deductions

President Obama has signed a bill that has extended the tax deduction of mortgage insurance through 2011. Here are the rules to remember in regards to this tax deduction: 1. Your purchase or refinance loan must close before Dec 31st, 2011. 2. Household income must be $100,000 or less to get the full write off of the insurance premium. 3. The amount of the write off is reduced by 10% for every $1000 over $100k, with it phasing out at $109,000. This means if you make over $109k as a household you can not write off mortgage insurance. 4. It applies to your primary home and one other residence that the tax payer uses. 5. All forms of mortgage insurance qualify for this. So if you have a FHA or conventional loan, they qualify. If you have paid upfront mortgage insurance with a VA, FHA or USDA loan you can also use this as a tax deduction. The amount is just divided over a 7 year period. The above is not intended as tax advice. Seek out a tax professional for advice about mortgage insurance deductions.

Posted by: dimitritimm | March 16, 2011

To Own or To Rent?

Purchasing a home requires a thoughtful decision. For some, leaving a rented apartment is difficult due to its financial flexibility; however choosing homeownership can be financially rewarding.

Here are some things to keep in mind when considering buying a home:


Don’t Wait Until It’s Too Late
Buyers sitting on the fence while waiting for the “prices to go down” will miss out on long-term appreciation gains and possible tax advantages.

A Smart Investment
Renting does not provide equity benefits. Make your money work for you by building equity in your own home and benefiting from possible tax advantages* as a homeowner.

Good News!

High Inventory
There is currently a greater selection of homes for sale on the market. Sellers are motivated and many homes are priced to move! That means you have a better chance of finding the home that best fits your lifestyle and needs.

Motivated Sellers
Because the market is moving more slowly, some sellers may be highly motivated to participate in special financing programs such as buying down the interest rate on your loan. This makes homeownership much more affordable than you think.

Finding the Right Loan For You
A loan consultant can provide you with a wide selection of mortgage options that have payment structures to best suit your individual needs. As a full service mortgage banker and broker, Princeton Capital can offer many loan options along with competitive pricing. They have greater control in the decision making process from start to finish, so your loan can close faster with more flexible terms.

Posted by: dimitritimm | March 14, 2011

This Week’s Market Commentary

March 14, 2011

This week brings us the release of five relevant economic reports along with an FOMC meeting for the markets to digest. A couple of the week’s reports are considered highly important, as is of course the FOMC meeting.

The first thing on the calendar is the Federal Open Market Committee (FOMC) meeting Tuesday. It is widely believed that the Fed will make no change to key short-term interest rates at this meeting, but the post-meeting statement will be watched closely for any indication of when they will make a move. Generally speaking, the bond market wants to hear that inflation is not an immediate concern and that key rates will be kept at current levels for the near future.

If the statement reassures traders that the Fed will not be raising rates anytime soon and that inflation remains subdued, we can expected the bond market to thrive and mortgage rates to move lower late Tuesday. However, if the statement hints of a move in key short-term interest rates sooner than later, or if inflation is becoming a point of concern, afternoon bond selling will likely lead to higher mortgage rates.

The Labor Department will post February’s Producer Price Index (PPI) early Wednesday morning. This important index measures inflationary pressures at the producer level of the economy. If the index shows a large increase, inflation concerns will rise, making long-term investments such as mortgage-related bonds less attractive to investors. This would lead to higher mortgage rates Wednesday morning. Current forecasts are calling for a 0.6% increase in the overall reading and a 0.2% increase in the core data.

Thursday has the remaining three economic reports scheduled. February’s Consumer Price Index (CPI) will be released early Thursday morning, which measures inflationary pressures at the very important consumer level of the economy. Its results can definitely have a huge impact on the financial markets, especially long-term securities such as mortgage-related bonds.

It is expected to show a 0.4% increase in the overall index and a 0.1% rise in the more important core data. If we see weaker than expected readings, bond prices should rise and mortgage rates would likely fall Thursday.

The next data will come mid-morning when February’s Industrial Production report is posted. This report measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.6% increase from January’s level. A decline would be considered extremely favorable news for bonds and mortgage rates because it would indicate manufacturing sector weakness and a broader economic recovery is more difficult if manufacturing activity is slipping.

The Conference Board will post its Leading Economic Indicators (LEI) for February late Thursday morning. This index attempts to measure economic activity over the next three to six months. It is considered to be moderately important, but likely will not influence mortgage rates unless the CPI matches forecasts and this report shows a large variance from expectations. Current forecasts are calling for a 0.9% increase, meaning it is predicting that economic activity will likely expand rapidly in the coming weeks. A decline would be considered good news for the bond market and mortgage rates.

Overall, look for Thursday to be the most important day of the week due to the CPI release, but Tuesday’s FOMC meeting can also heavily influence the markets. Wednesday may also be an active day for rates with the PPI on tap. Friday will probably be the calmest day for mortgage rates, but it appears there is a good possibility of seeing plenty of movement in rates the next several days.

Posted by: dimitritimm | March 8, 2011

This Week’s Mortgage Rate Market Commentary

Tax Calculator and PenThis week brings us the release of three economic releases for the bond and mortgage markets to digest along with 10-year Treasury Note and 30-year Bond auctions.

All of the data will be posted the latter part of the week. Only one of the three reports is considered to be of high importance to the markets, so several days will likely be influenced more by stock trading and other factors than the economic news of the day.

January’s Goods and Services Trade Balance is the week’s first economic data. It comes early Thursday morning and gives us the size of the U.S. trade deficit. It is the week’s least important piece of news and likely will not influence mortgage rates much. Current forecasts are calling for a $41.5 billion trade deficit during January, but we will need to see a large variance from this estimate for the news to influence bond trading enough to affect mortgage pricing.

There will be two reports posted Friday morning. The first is at 8:30 AM and is the most important of the week. This is when the Commerce Department will post February’s Retail Sales data. It is extremely important to the financial markets because it measures consumer spending. Since consumer spending makes up two-thirds of the U.S. economy, data that is related usually has a big impact on the markets. This month’s report is expected to show an increase in sales of approximately 1.0%. If Friday’s release reveals a larger than expected increase, the bond market will likely fall and mortgage rates will move higher as it would indicate economic growth. If it reveals a much smaller than expected increase, I expect to see bond prices rise and mortgage rates improve Friday morning.

Also on tap Friday is the University of Michigan’s Index of Consumer Sentiment for March at 9:45 AM. This index gives us a measurement of consumer willingness to spend. If confidence is rising, then consumers are more apt to make large purchases. This helps fuel consumer spending and economic growth. A drop in confidence will probably hurt the stock markets and boost bond prices, leading to lower mortgage rates.

If the index rises, indicating that confidence is rising and spending will likely follow, we may see mortgage rates move higher late Friday morning. It is expected to show a reading of 76.5, which is would be a noticeable decline from February’s final reading 77.5.

Overall, it will likely be another active week in the mortgage market. Friday will probably be the most important day of the week with the Retail Sales report due, while the calmest day could be tomorrow or Tuesday, depending on the stock markets.

Posted by: dimitritimm | March 5, 2011

Credit Score Resources

Do you know your FICO credit score?  If you are looking to purchase a home, be sure to look into your credit score well in advance.

Today’s market is competitive, with more cash buyers investing in property and multiple-offer transactions. Are you in the 700 range? 600 range?  You will need some time to find out your score and work on improving it if need be. Check out the below sources to help you assess your credit situation.

Four Good Sources of Credit Information

Here are four websites worth visiting, if you want to learn more about your credit reports and scores:

  1. — This site is owned by the company that created the credit-scoring model used by most lenders. The education tab is especially useful.  Take a look at the forum where you can post questions.
  2. — This website is jointly owned by the three credit-reporting companies (TransUnion, Equifax and Experian). This is where you should go to request your free reports. This is the only site that is regulated by the Federal Trade Commission.
  3. — This website is useful to find out why a “free” credit report is offered, but then they try to “charge” you for additional things.  This is a marketing practice in wide use and this website can tell you more about it.
  4. — This site offers credit tips and it explains the mortgage process. You can compare rates, use a myriad of calculators and check out their “news and advise” tab for pertinent news information each week.

The four sites listed above will help you get started on your home buying adventure.

Posted by: dimitritimm | February 28, 2011

Slow and Steady the Markets decide which direction to go…

What are you doing for breakfast tomorrow? It is National Pancake Day (who knew?) and IHOP will be offering a free short stack of IHOP’s buttermilk pancakes in an effort to raise awareness and funds for Children’s Miracle Network Hospitals and other local charities. Ahead of that you can measure the value of your time waiting in line versus the cost of the pancakes: 7AM-10PM.

Only one bank was shut down Friday: Valley Community Bank (IL), and the FDIC, acting as receiver, set up a purchase and assumption agreement with First State Bank, Mendota, Illinois, to assume all of the deposits of Valley Community Bank. Did someone mention compensation? One note said, “This lender says if you select the borrower paid compensation model, the seller can pay for the broker’s origination costs. The credit must be sufficient enough to cover all our origination. The borrower can then select a rate to cover all remaining 3rd party costs. I found this interesting since I initially believed seller could not cover our origination.” Interest rates are… doing ok.

Friday trading volume was a little lower than the recent average, and the 10-yr note’s yield closed around3.42%. Although the trend in rates seems to be higher, it was a good week as the 10-yr’s price improved by about 1.25 and MBS prices improved nearly a point (.125-.250 on the day). In fact, on Friday stocks improved, the dollar rallied, and Treasuries improved – all on one day! This week we have a full platter of economic news. Today we’ve already had Personal Income and Personal Consumption/Spending (+1.0% and .2%, respectively); later we have the Chicago PMI and Pending Home Sales. Tomorrow is Construction Spending and February’s ISM Manufacturing Index. Wednesday is the ADP number and the Fed’s Beige Book, Thursday is Jobless Claims and some productivity and ISM numbers. And then on Friday we’ll see the latest unemployment data points, with Nonfarm Payrolls expected up about 180k and the Unemployment Rate to move to 9.1% from 9.0%.

One can still expect markets to be subject to events in Africa and the Middle East – the situation is still very volatile. Tomorrow and Wednesday Ben Bernanke will give his semi-annual monetary policy report to the Senate Banking Committee and the House Financial Services Committee. The 10-yr is currently unchanged at 3.42%, and MBS prices are also about unchanged.

Posted by: dimitritimm | February 20, 2011

Reforming America’s Housing Finance Market

A Summary View of Treasury and HUD’s Report, “Reforming America’s Housing Finance Market” On February 11, Treasury and HUD issued their report on the Administration’s plan to reform America’s housing finance market. As further detailed below, the report: (1) lays out certain principles regarding the role of the government in the housing market, (2) asserts the need to wind down Fannie Mae and Freddie Mac (over time), and (3) sets out three high level proposals to restructure housing finance going forward.

Key Principles: • Private markets should be the primary source of credit • Four key criteria that all plans must be measured against: access to mortgage credit (and decent rental housing), incentives for investment in housing, taxpayer protection and financial and economic stability • Requiring private capital to come ahead of any government guarantee is a way to reduce taxpayer risk that arises whenever the government stands behind a loan • The government’s primary role should be “robust oversight and consumer protection,” assistance for low and moderate income owners and renters, and “carefully designed support for market stability and crisis response”

All financial institutions must hold more capital and adhere to conservative underwriting standards. Basel Three standards will include requirement for banks to hold more capital against higher risk mortgages. • Borrowers must hold more equity in their homes (larger down payments) • Securitization will play a major role … but will be subject to risk retention and tougher disclosure standards • There must be a level playing field regarding capital, oversight and accounting standards for all participants in the housing market • Reform requires more than just winding down GSEs; must implement Dodd Frank (including QRM), and fix mortgage servicing and foreclosure processing • As part of servicing reform, report specifically mentions need to reduce conflicts between first and second liens. Mortgage docs should require disclosure of a second, and consideration given to giving first lien holders the right to restrict subsequent seconds • QRM rules will be finalized in 2011 and effective in 2012 Goals of Reform: • Reduce government support and wind down GSEs to make room for a strong, private mortgage market • Fix fundamental flaws in the mortgage market to protect borrowers, ensure transparency for investors and increase role of private capital • Effectively target government support for affordable housing Causes (“fundamental flaws”) of the Crisis: • Lack of consumer protections allowed risky and predatory mortgage products to flourish. Consumers steered into unaffordable products, speculators bet on rising house prices … and widespread defaults resulted once prices fell. • Large parts of financial system were unregulated – entities “forum shopped” for weakest regulation; securitizers and investors were virtually unregulated • Securitization chain lacked transparency, standardization and accountability. Falling standards masked by lack of transparency. • Inadequate capital to absorb losses • Servicers unprepared to handle higher defaults and foreclosures • GSEs suffered from structural flaws (lack of capital, inconsistency of public-private mission and implied government guarantee), management that took on excessive risk to win market and earn profit, and a weak regulator • GSE affordable housing goals were ineffective, but were not the cause of their down fall Winding Down Fannie and Freddie: • Goal is to bring back private capital and reduce taxpayer risk • Key levers to wind down: increased guarantee fees and increased down payment requirements • In follow up, Administration stated that a 10% down payment requirement would be part of the longer term strategy to wind down Fannie and Freddie • FHA pricing will also increase … 2012 Federal budget will call for 25 bp increase in annual premium. Goal is to ensure that GSE and FHA pricing reflects actual risk … and in turn help private market to compete. • GSE and FHA loan limits to revert to pre-HERA levels on 10.01.11. Jumbo loans should be done via private market. • GSEs will be “encouraged” to seek credit loss protection from private insurers “and other capital providers.” • Wind down portfolios Restoring FHA to traditional role: • As GSEs are wound down, Administration will coordinate changes to FHA programs to “ensure that the private market – not FHA – picks up the new market share.” • FHA should be a “targeted provider” of mortgage credit for low/moderate income borrowers and first time home buyers. Creditworthy borrowers with “incomes up to the median level for their area” must have access to FHA insured loans. • Loan sizes will fall lock step with GSE limits. Further decreases for FHA loan limits will be considered. • Administration looking at other ways to reduce risk exposure of FHA • FHA will consider lowering maximum LTV for qualifying mortgages • FHA must have more flexibility to adjust fees and programs • Note that there is also brief discussion of FHLB reform, including consideration of a covered bond market Approaches to Housing Market Reform: • Administration rejects a fully private or fully nationalized approach • First option is privatized – government’s role limited to FHA, USDA and VA for narrowly targeted borrowers o Minimizes distortions in capital allocations o Reduces moral hazard o Materially reduces taxpayer exposure to losses o Cost of mortgage credit for most borrowers would increase o Small/community lenders would be at competitive disadvantage o Limits ability of government to ensure market liquidity during any crisis o Doesn’t entirely eliminate moral hazard … investors could still believe government would step in to avert/resolve crisis • Second option is privatized with limited government guarantee in times of crisis o Government backstop would kick in only to ensure access to credit during market crisis o Could affect backstop via pricing (price so high that will only be purchased when needed) or could only be offered when markets are stressed o Gives government more ability to ensure credit during crisis o Minimizes distortions in capital allocation, reduces moral hazard and taxpayer risk o Cost of mortgage credit still likely to be fairly high • Third option is privatized with government offering catastrophic reinsurance in second loss position behind private capital o Government would reinsure mortgage backed securities offered by private mortgage guarantee companies. Mortgages would be subject to specified underwriting criteria. o Government reinsurance pays only if issuer is insolvent. Government gets paid a premium for the reinsurance. o Likely results in lowest cost of credit for mortgage borrowers o Should be attractive to private capital o Potential for small/community banks to compete o Government able to ensure liquidity during crisis o But, could distort capital allocation. Does increase moral hazard and taxpayer risk o Oversight of mortgage guarantee companies and adequate pricing of reinsurance will be key to the success of this model Sources: U.S. Department of the Treasury/U.S. Department of Housing and Urban Development, “Reforming America’s Housing Finance Market”, 02.11.11

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