How a lease option could benefit both buyers and sellers.
Ken Go (888) 822-5363
It would appear the market is changing, these changes will require both seller and buyer to adapt. The seller must realize that there will be more competition in the marketplace as more homes hit gets listed “For Sale”. Price will start to play a bigger role than the condition and location. Expect to see more listing prices being reduced and expired. Buyers have to realize they are not going to “steal” any homes as far as pricing goes. At least not yet, because now the buyers are still out there looking but taking their time and they have more choices.
The idea came to me when I have a caller who asks for my advice to see if I could lower his payments by refinancing his property. Here is their situation, they purchase a property less than a year ago with no money down, and got a two (2) years fixed rate mortgage that they could not afford from the start. Their loan agent promised them that they could refinance and get their payments down within a year. Two things happened here when that loan agent said that statements, one is either that person is so smart that he or she could predict what will happen to interest rates and home values within a year or that person is flat out just saying that to close this loan. You figure it out, on top of all this the loan carries a prepayment penalty for both loan.
Anyways, I calculated his options and checked the property value. I am hitting a brick wall, cant do any better on his payments due to interest rate now are higher. The property value has not risen enough to make a 90% combined loan to value due to the prepayment penalty to be added to the loan balance.
I then remembered that I have a client who is currently working on getting their credit cleaned up and in the process of saving up money for closing cost. T hey makes over $9000.00 a month and can afford$3000.00 payments. I heard a light bulb lit up in my mind and thought that maybe somehow I could put both of them together and make it work for both.
I am suggesting to the owner of the property to sell because even if I can help him with refinancing, in six months time he would be back in my office asking me to do the same for him and now he would live mortgage to mortgage sacrificing just to be above water. I then called the callers who are currently trying to save money and work on improving their credit and see if they might be interested in a lease option to buy. How this works is, they would take over the existing payments of the seller without going thru an escrow; a lease contract is signed thru an agent for a minimal fee paid by either the buyers or sellers. Without having to apply for a new loan, once agreed the buyers can move in and continue making payments for the sellers until a given time on the contract. Then should the buyers apply for a new loan to release the sellers from the mortgage responsibility.
Facts about lease options for sellers:
1. The seller might be able to avoid paying a prepayment penalty if the contract due to be exercised after the prepayment period.
2. The seller depending on the contract might walk away with some money.
3. The seller needs to monitor the payment of the buyers because the loan is still under the sellers name until the buyer refinances the loan.
4. The seller minimizes commission and closing cost paid to agents and escrow companies.
Facts about lease options for buyers:
1. The buyers will be able to avoid having to qualify for a loan regardless of credit situation, because they might just need to take over the existing loan of the seller.
2. The buyers will be able to avoid paying high fees for closing cost.
3. The buyers must be able to afford the payments of the mortgage, tax and insurance to be proven to the seller to avoid delayed payment on the mortgage loan.
4. If the buyers have poor credit but can afford the mortgage payments, they would have the time to re-establish their credit prior to applying for a loan in the future to fully own the house outright.
As easy as it sounds, this might be a harder task than meets the eye. The match has to be perfectly beneficial for both parties. A lot of communication would have to be going on even after the contract has been exercised.
Warning: Be careful with applicants just wanting to take over your payments and move in. They could move in sign a contract with you, but never pay the lender and you will be responsible as far as the lender is concerned because they never took out a loan under their name. If they did, it would not be called a lease but a regular conventional transaction.
Advise: Employ a professional to handle and negotiate the transactions and ask for some kind of good faith deposit to show interest from the buyers. Remember, they should be releasing the sellers from the payments only but not the responsibility.
Please contact me for your inquiries, I will be more than happy to assist you in anyway I can. Call me at (888) 822-5363 or write to Kennethgo@verizon.net. Sincerely.
Monday, May 22, 2006
Monday, May 01, 2006
Mortgage rates going higher
Control your interest rates from rising.
Ken Go (888)822-5363
Consumer credit rates
Extra costs due to your interest rates rising will stretch consumers and those with bad credit will suffer the most! We all have benefited from a booming economy with low interest rates and rising property values, but this could bring a rude awakening for the unprepared.The combination of high gas prices, higher energy costs, interest rates on the upswing and troubling levels of debt and credit use could spell catastrophe for many. If you have debts, you need to get them under control right away. Credit spending has become a bad habit for everyone. It’s easy to fall behind on payments and get into big trouble especially when you mix in unexpected personal problems. If you have credit card debt or significant balances on your lines of credits then I urge you to consolidate them immediately. Don’t procrastinate combine your mortgages if you can, consolidate these bills now into a second mortgage and improve your cash flow instantly!Today on CNN, they are talking about credit card companies seriously considering raising minimum credit card payments from 3% of the outstanding balance. What is going to happen to your budget if they do increase your minimum monthly payments on your credit cards to 4% or maybe even 5%?Can you afford paying $200, $300, $500 or maybe even 1,000 more each month?Hopefully they will not go through with it and things will remain as usual, but what if they go ahead with it. How are you going to survive? My suggestion to you is, pay off these credit cards today! Consider consolidating them into a second mortgage.
Home Mortgage rates
If you have a home mortgage that is adjustable or will adjust in the next couple of years. You should seriously consider converting your loan to a fixed rate mortgage. Here are some changes in the index market just within the last six months. 11th District COFI indexes went from 2.972 to 3.604 (21% increase), LIBOR went from 4.0882-4.8260 (18%), One Year Treasury from 3.77-4.91 (30%). If you don’t know what these indexes are, you are to get yourself educated. These indexes are the vehicle wherein your adjustable rate mortgage programs are tied to. Even if you loan is fixed for two years, they have indexes that will come to place once your second year anniversary comes to the picture. “After the limited initial periods end, the monthly payment for the holder of this nontraditional mortgage must increase-even if interest stays flat-and the size of that increase can be very substantial,” Comptroller of the Currency John C. Dugan said. Make your move to try to weight your option to convert your adjustable rate to a fixed rate mortgage.
If you have a line of credit on your home, that rate has gone up one full percent just six months ago, should you be worried. Yes, of course, try to either combine that into one loan or refinance your line of credit to a fixed rate second mortgage. I am terrified when I have talk to several readers not realizing that they could have gotten fixed second mortgages when they were applying for a loan. Your best options for second mortgages are if your credit is up to the lenders par and you have some equity in the property.
There are many variables that can influence the rates on long-term debt instruments, but an understanding of key economic indicators can provide clues to the future direction of interest rates.
Gross Domestic Product (GDP) – the output of goods and services produced by labor and property located in the US – and is the most important indicator.
Consumer Price Index (CPI) – is a measure of the average change over time in prices paid by urban consumers of a fixed market basket of consumer goods and services. Tied to inflationary concerns.
Producer Price Index (PPI) –is a family of indexes that measures the average change over time in the selling prices received by domestic producers of goods and services.
Payroll Employment – The government's employment report provides employment, hours and earnings estimates based on payroll records of business establishments. The payroll employment is the most significant indicator of current economic trends each month
Unemployment Rate - The government's employment report provides information on the unemployment rate and the number of unemployed persons by occupation, industry, duration of unemployment, and reason for unemployment.
Consumer Credit - Consumer credit data tracks debt levels for auto financing and commercial banking credit and are considered a fairly good indicator of consumer spending. Consumer credit report is generally considered to have little impact on interest rates.
Housing Starts - Housing starts is one of the leading economic indicators. A higher-than-expected increase in housing starts triggers economic growth and is considered inflationary, causing bond prices to fall and yields and interest rates to rise. Likewise, decline or declining trend in housing activity slows the economy and can push it into a recession, causing yields and interest rates to fall.
Getting yourself informed at all times is a great way to determine your next move, timing is key to anybodies success in this ever changing world we live in. Good luck, thanks again for all your inquiries, for further assistance please call me at (888)822-5363 or write to kennethgo@verizon.net.
Ken Go (888)822-5363
Consumer credit rates
Extra costs due to your interest rates rising will stretch consumers and those with bad credit will suffer the most! We all have benefited from a booming economy with low interest rates and rising property values, but this could bring a rude awakening for the unprepared.The combination of high gas prices, higher energy costs, interest rates on the upswing and troubling levels of debt and credit use could spell catastrophe for many. If you have debts, you need to get them under control right away. Credit spending has become a bad habit for everyone. It’s easy to fall behind on payments and get into big trouble especially when you mix in unexpected personal problems. If you have credit card debt or significant balances on your lines of credits then I urge you to consolidate them immediately. Don’t procrastinate combine your mortgages if you can, consolidate these bills now into a second mortgage and improve your cash flow instantly!Today on CNN, they are talking about credit card companies seriously considering raising minimum credit card payments from 3% of the outstanding balance. What is going to happen to your budget if they do increase your minimum monthly payments on your credit cards to 4% or maybe even 5%?Can you afford paying $200, $300, $500 or maybe even 1,000 more each month?Hopefully they will not go through with it and things will remain as usual, but what if they go ahead with it. How are you going to survive? My suggestion to you is, pay off these credit cards today! Consider consolidating them into a second mortgage.
Home Mortgage rates
If you have a home mortgage that is adjustable or will adjust in the next couple of years. You should seriously consider converting your loan to a fixed rate mortgage. Here are some changes in the index market just within the last six months. 11th District COFI indexes went from 2.972 to 3.604 (21% increase), LIBOR went from 4.0882-4.8260 (18%), One Year Treasury from 3.77-4.91 (30%). If you don’t know what these indexes are, you are to get yourself educated. These indexes are the vehicle wherein your adjustable rate mortgage programs are tied to. Even if you loan is fixed for two years, they have indexes that will come to place once your second year anniversary comes to the picture. “After the limited initial periods end, the monthly payment for the holder of this nontraditional mortgage must increase-even if interest stays flat-and the size of that increase can be very substantial,” Comptroller of the Currency John C. Dugan said. Make your move to try to weight your option to convert your adjustable rate to a fixed rate mortgage.
If you have a line of credit on your home, that rate has gone up one full percent just six months ago, should you be worried. Yes, of course, try to either combine that into one loan or refinance your line of credit to a fixed rate second mortgage. I am terrified when I have talk to several readers not realizing that they could have gotten fixed second mortgages when they were applying for a loan. Your best options for second mortgages are if your credit is up to the lenders par and you have some equity in the property.
There are many variables that can influence the rates on long-term debt instruments, but an understanding of key economic indicators can provide clues to the future direction of interest rates.
Gross Domestic Product (GDP) – the output of goods and services produced by labor and property located in the US – and is the most important indicator.
Consumer Price Index (CPI) – is a measure of the average change over time in prices paid by urban consumers of a fixed market basket of consumer goods and services. Tied to inflationary concerns.
Producer Price Index (PPI) –is a family of indexes that measures the average change over time in the selling prices received by domestic producers of goods and services.
Payroll Employment – The government's employment report provides employment, hours and earnings estimates based on payroll records of business establishments. The payroll employment is the most significant indicator of current economic trends each month
Unemployment Rate - The government's employment report provides information on the unemployment rate and the number of unemployed persons by occupation, industry, duration of unemployment, and reason for unemployment.
Consumer Credit - Consumer credit data tracks debt levels for auto financing and commercial banking credit and are considered a fairly good indicator of consumer spending. Consumer credit report is generally considered to have little impact on interest rates.
Housing Starts - Housing starts is one of the leading economic indicators. A higher-than-expected increase in housing starts triggers economic growth and is considered inflationary, causing bond prices to fall and yields and interest rates to rise. Likewise, decline or declining trend in housing activity slows the economy and can push it into a recession, causing yields and interest rates to fall.
Getting yourself informed at all times is a great way to determine your next move, timing is key to anybodies success in this ever changing world we live in. Good luck, thanks again for all your inquiries, for further assistance please call me at (888)822-5363 or write to kennethgo@verizon.net.
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