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Understanding The Difference Between the Federal and Mortgage Interest Rates

Understanding The Difference Between the Federal and Mortgage Interest Rates

On Sunday, March 15, 2020, the federal government cut the federal interest rates down to zero percent. This is the second federal rate cut in response to the Coronavirus crisis. Mortgage rates are not directly tied to the federal interest rates. However, the mortgage interest rates will be affected by moves that investors make and other factors. 

Federal Rates Cuts and Other Economic Stimulation Activity

The government is fearful that the economy will fall into a deep recession if they don’t make moves to stimulate it. That’s why they lowered the federal interest rates to zero. There is more economic stimulation legislation that should help during this COVID-19 crisis, as well.

Bonds and Other Safe Assets

Many investors have been buying bonds and other safe assets as a result of the federal interest rates cut. The 10-year Treasury note has been pushed to new lows. 

Quantitative Easing Program

The government has also initiated a $700 billion program to help ease some of the economic hardship that Americans are facing. Part of this program, the federal government’s Coronavirus Aid, Relief and Economic Security (CARES) Act, states that all adults will receive $1,200 and an additional $500 for each child. They are currently finalizing the details on how to distribute this money to the American people. 

Emergency Lending

They have also cut emergency lending rates to .25 and have extended loan terms to 90 days. This will help in an emergency.

Stock Prices

Stock prices are falling at record speed. They should recover long-term; however, people may need to cash them in and tap into their investments just to pay day-to-day living expenses. Hopefully, the money people will receive from the easing program will be spent and put back into the economy to help.

Foreclosures and Evictions

The federal government has passed legislation that foreclosures and evictions cannot be filed for now. This will help homeowners and tenants keep their homes during these trying times.

Student Loans

The federal government is also being more lenient with student loans. They originally stated that students would pay interest only and not have to keep paying down their principle. Now they are stating that no federal student loan payments are required until further notice. 

Credit Cards

Cutting the federal interest rate should also make credit card interest rates go down. Americans are advised to call their credit card companies to see if their interest rates have been lowered. 

What’s Happening to Mortgage Rates?

Mortgage interest rates have fallen to historic lows. The economic activity indicates that mortgage interest rates will fall even more. The mortgage rates are typically tied to the 10-year Treasury note. The hope is that people will still purchase houses. The real estate industry has been deemed an “essential” industry during the Coronavirus pandemic. The 2020 spring real estate market started off strong in January, February and the beginning of March. Now, with many “stay at home” orders in place it has slowed down. There are still many people who have to find a place to live or sell their homes for one reason or another. 

First Time Home Buyers

The group of millennials that are now turning 30 years old, make up the largest percentage of first time home buyers. These people tend to take more risks. They are out on the front lines purchasing homes at great mortgage interest rates right now.

Investors

This is a great time for investors to add to their real estate portfolios. Money is extremely cheap to borrow right now. Also, rent prices continue to increase.

Adjustable-Rate Mortgages

Adjustable-rate mortgages (ARMs) are the most closely tied to the federal interest rate cuts. Most variable rates are tied to the prime or London interbank offered rate (LIBOR.) This means that the people who have variable interest rates will see reductions to their mortgage bills.

The government is hopeful that the emergency cuts in the federal interest rates and the historically low mortgage interest rates will stimulate the economy and keep the United States from a recession. The government and banking is working hard to ensure that the COVID-19 pandemic doesn’t economically affect Americans in the long run.

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How To Treat Your Home Like You Treat Yourself

How To Treat Your Home Like You Treat Yourself

Today I want to talk about how you can treat your house like you treat yourself by performing a wellness check on it.

In this business, I see all kinds of home issues every day. I could write a book with all the stories I’ve seen. However, one story from a few years ago sticks out. 

The inspection process had just begun on my client’s future home, and everything was going fine until the home inspector came out of the crawlspace. In North Carolina, the crawlspace is the last place the home inspector usually checks. When he came out, he told us that 50% of the floor joist and the sill plate were rotten. He also said that the crawlspace’s main support beam was bad.

The good news was that it was repairable and the house would still be structurally sound. The bad news was that it ended up costing thousands of dollars to repair. All of this could have been avoided with a $300 vapor barrier in the crawlspace.

This story illustrates why I think it’s so important for homeowners to order an inspection before placing their home on the market. Even if you’re not planning on selling, this is still a good idea.  A licensed professional will look at your home from top to bottom and alert you to any potential issues, which could save you tens of thousands in repairs, not to mention keep you safe.

 

Ordering a home “well-care check” can save you tens of thousands in repairs, not to mention keep you safe.


Home repairs are much easier to remedy when they’re caught early on.
Also, it’s much more convenient to take care of such problems before you’re in the process of selling your home. 

I work with a fantastic inspector named Fred Herndon and I asked him if he would do something to help out those of you who need a home “well-care check”. He said that he will knock 10% off the price of a home inspection for anyone who mentions me when they give him a call at 919-280-1682 or send him an email to [email protected]

If you have any other questions for me in the meantime, don’t hesitate to give me a call or send me an email as well. I look forward to hearing from you soon.

How You Can Put Down Less Than 20% and Avoid PMI

How You Can Put Down Less Than 20% and Avoid PMI

How can you make a down payment of 20% or less and avoid PMI?

To start, you must have really good credit. In other words, your credit score must be in the high 700s. There’s a strong correlation between your credit score and how much mortgage insurance you pay—stronger than the correlation between your credit score and your interest rate. 

For example, let’s say you purchase a house for $230,000, you put down less than 5% for a conventional loan, and you have a credit score in the 700s. In this scenario, your PMI will be a little over $2,600. Lenders have different programs for all types of buyers, and if you have good credit, there are plenty of options available to you, but in this case, you have three choices in terms of what you can do with that PMI. 

First, you can take that entire $2,600 sum and add it into your loan. In effect, you would finance it, but you wouldn’t pay it on a monthly basis, which would leave your regular monthly payment at about $1,056. Second, you can just pay it monthly, which would increase your monthly payment to $1,105. Lastly, you can pay the $2,600 sum up front with your 5% down payment, which would decrease your monthly payment to $1,044. 

This was an actual scenario one of my clients faced recently, and she chose option No. 1. Keep in mind, though, that this is a simplified scenario because with each option there will be different interest rates and cash-to-close amounts, depending on which programs your lender offers. 

Whether you have good or bad credit, there are all types of programs available to you, so the best thing you can do is talk to a good lender and find out which one best suits you. To find a good lender, reach out to your Realtor and have them help you. Odds are, they work with plenty that they’d be happy to recommend to you. 

Here at Real Estate Experts, we work with an excellent selection of lenders that we can put you in touch with, so if you’d like to know more about this topic or you have any other real estate questions, feel free to give us a call or send us an email. We look forward to speaking with you. 

Picking The Right Realtor For You

Picking The Right Realtor For You

When a whole lobster was presented at the table of a restaurant, the customer noticed there was only one claw on it.  He asked what happened to the lobster and the waiter said, maybe he lost a fight with another lobster.  The customer replied to the explanation by saying “then, bring me the winner.”

There are approximately 1.3 million REALTORS® in the U.S.  The July 2019 Existing Home Sales annualized about 5.4 million units with a listing side and a selling side that totals 10.8 million transactions.  That means that the average number of units sold per agent is 8.

In any given market, 20% of the agents are selling 80% of the homes.  260,000 agents are selling 8,480,000 or an average of 32 transactions sides.  Some markets are dominated by 10% of these successful agents selling 90% of the market.  If that were the case, 130,000 agents are selling 9,720,000 or an average of 75 transactions sides.

Which Realtor Do You Want Representing You: The Choice is Very Important

The question you should ask yourself is who do you want representing you in the purchase or sale of the largest asset that most people have?  Do you want an average agent, or do you want a powerhouse agent who can provide you the best advice, avoid issues that can cost time, and maximize the results that you expect and deserve?

Finding the right property is listed as the most difficult experienced by buyers (56%), according to the Home Buyers and Sellers Profile, together with the paperwork (20%) and understanding the process and steps (16%) makes these the most important areas of expertise needed when evaluating your agent.

An agent provides valuable services for buyers and sellers during the transaction that can make a difference in finding the “right” home or buyer, negotiating the best terms, and closing on time.  The answers to the following questions can help you decide who to work with in your next purchase or sale.

  • Describe your experience in real estate?
  • What are your personal sales stats compared to the market? (For sellers, list price to sales price ratio, days on market; for buyers, average # of houses shown and closure rate)
  • Describe your strategy to accomplish my needs?
  • Do you have references and/or reviews?
  • What makes you different than your competition?
  • Can you help me find the other professionals and vendors?
  • What is your fee and who pays it?

Who is Real Estate Experts and What Do We Have to Offer?

At Real Estate Experts, we listen to your wants, needs and goals.  This is the first and most important step is helping you buy a home you will love or sell your home.  For more information, request our Sellers Guide and Buyers Guide.

Also look at our web site to learn how Real Estate Experts works with home buyers and why you should list your home for sale with Real Estate Experts.

5 Reasons You Don’t Need a Buyer’s Agent?

5 Reasons You Don’t Need a Buyer’s Agent?

Do you actually need to work with a buyer’s agent? Actually, yes, but let’s discuss five reasons some people don’t think so.

Since the advent of the internet, buyers have a wealth of information at their fingertips. With that said, this could lead some to falsely assume they don’t need a professional agent by their side during their home search. Truthfully, though, forgoing this kind of representation is a major mistake. 

If you still don’t believe me, though, allow me to share five signs you (supposedly) don’t need a buyer’s agent:

  • You believe that working without an agent will save you money. Though many cite this as their reason for not hiring a Realtor, the truth is that working with an agent won’t cost you a dime. In North Carolina, sellers pay the commission fees for both agents.
  • You love stress. If you want to feel confused at every step of the way while buying your home, then working without an agent is a good way to do so. If you’d prefer a smooth, seamless transaction, however, you’ll definitely want to hire professional help.
  • You think the internet is the only resource you need. As I mentioned earlier, many people assume that the information they find online will be enough to guide them through a transaction on their own. Unfortunately, this isn’t so. Having the information is one thing, while knowing what to do with that information is another. Professional agents will be your best resource if you’re hoping for a stress-free transaction.
  • You don’t think you need the help. Some buyers don’t realize just how many steps go into the real estate process. When you consider everything that must be taken care of during your house hunt and beyond, though, it becomes quickly apparent that you will need expert help. Professional buyer’s agents have handled transactions like yours several times before, so you can be sure they know what they’re doing.
  • You are a fantastic negotiator. Real estate deals involve a lot of negotiating. And even if you happen to be a skilled negotiator in other spheres, chances are that you don’t have the level of real estate-related knowledge necessary to hold your own against the seller’s agent.

The bottom line is this: Many of the “reasons” people offer as to why they don’t need a buyer’s agent aren’t reasons at all. If you want a seamless real estate experience, professional representation is crucial.

If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.

The Ins and Outs of NC’s Due Diligence Period

The Ins and Outs of NC’s Due Diligence Period

The North Carolina Offer to Purchase and Contract is also often called a due diligence contract. We have a due diligence period, and within this time frame, a buyer can terminate a contract for any reason. It doesn’t have to be because of a bad inspection, loan, or other obvious problems.

When an offer in North Carolina is made, there are two important dates and two important checks that accompany all the terms and conditions of the offer:

The first date is the due diligence date; this is the time frame in which the buyer does all of their investigations concerning the property, including home inspections and loan processing. Again, regardless of your reason, you can cancel your contract at any time—as long as you do so on or before the due diligence date.

The second date to remember is the closing date. Everything in our contracts is negotiable. Typically, we see closing dates set about two weeks after the due diligence date, but it can be longer. The due diligence period is, on average, three to four weeks, depending on how competitive your offer is; the shorter the due diligence period, the better it is from a seller’s perspective.

Now let’s talk about the money:

In our market, the earnest money deposit is usually about 1% of the purchase price.

On the other hand, the due diligence money can range anywhere from $500 to $2,000 or more, depending on the price of the house and whether you’re in  competition with other buyers for the same house. If a buyer terminates a contract before the due diligence date, the only money that is at risk is the due diligence money; your earnest money will come back to you unequivocally. So when you’re making your offer, you need to think through the process and consider how much money you’re willing to lose if you end up terminating the contract.

If you go all the way to closing, the due diligence and the earnest money deposit both come back to you at closing as part of your down payment.

The only way a buyer can lose everything—both the due diligence AND earnest money—is if you say that you’ll buy the home, but then cancel the contract AFTER the due diligence date. That’s considered a breach of contract, and you’ll receive neither of those deposits back.

When you’re interviewing prospective Realtors, talk to them about the due diligence process and what it means for you, because it’s different when looked at through a buyer’s eyes and a seller’s eyes.

At Real Estate Experts, we’re more than happy to discuss this period with you. All you have to do is reach out to us, and we’d be happy to help.

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