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Sandy-damaged home prices slide, as other LI areas see upturn

Sandy-damaged home prices slide, as other LI areas see upturn

   Home prices on Nassau County’s Sandy-damaged South Shore fell nearly 19 percent in the second quarter from a year earlier, even as most other parts of Long Island began to emerge from the real estate downturn.

Homes along Nassau’s South Shore fetched a median price of $298,700 this spring, down from $367,500 a year earlier, according to a second-quarter report to be released Thursday by the appraiser Miller Samuel and the brokerage Douglas Elliman. The number of sales in the area fell by nearly 18 percent year-over-year, to 173.

On Suffolk’s South Shore, not including the Hamptons, home prices were flat year over year at $275,000. Suffolk wasn’t hit as hard by the storm.

In contrast to Nassau’s South Shore, the county’s northern coast posted gains this spring. The median price along the Gold Coast rose year-over-year by 6.4 percent, to $715,000, and the number of sales jumped by 15 percent, to 594.

Across Long Island, the median home price ticked up by 1.4 percent year-over-year, to $355,000, and the number of sales increased by 15 percent, to 5,281. Those figures exclude the East End.

The report uses data from the Multiple Listing Service of Long Island and other sources.

“It seems like people are buying more on the middle of the Island now, or more on the North Shore,” said Jason Schlomann, a West Sayville-based associate broker with Charles Rutenberg Realty. “Anything not on the water seems like it’s moving quicker.”

The effects of the Oct. 29 superstorm were twofold, said Jonathan Miller, chief executive of Miller Samuel. First, a stigma has settled on the storm-damaged areas, with potential buyers nervous about getting hit by another severe storm.

In addition, homeowners face increased costs due to higher insurance premiums, more difficulty getting loans, the need to rebuild, and the likelihood that municipal tax revenue will decline as property values fall, Miller said.

“Many were too optimistic that this would last a quarter or two and it would be over,” Miller said. It is likely to take a year or two for the South Shore’s housing market to stabilize, and that’s if there are no more major storms, he said.

Another devastating storm, he said, “would likely imply greater long-term costs and an extension of that stigma.”

Lori Chaplin is among the Nassau South Shore homeowners who have seen sharp drops in sale prices. She and her husband listed their waterfront home in Massapequa for $699,000 last October. A few weeks later, Sandy swamped the home. Now they’re asking $350,000. A young couple signed a contract to buy the home, but the deal fell through last month when they couldn’t get a construction loan, Chaplin said. Now the Chaplins plan to demolish the home.

“The land alone is worth $347,000,” Chaplin said. “It’s waterfront property. We just want to get the right person to come in, probably with cash, and there’s not that many people with that much cash lying around.”

With some homeowners still fighting to get insurance settlements, the South Shore of Nassau remains pockmarked by boarded-up homes, said Maria Aramanda, broker-owner of Gull Realty in Long Beach.

“They’re not selling, unless you’re getting a fire sale where builders are coming in and buying up five to 10 houses for a very, very low amount,” she said.

The cost of elevating the South Shore’s most vulnerable homes to make them more stormproof will be significant, said Joe Moshé, broker-owner of Plainview-based Charles Rutenberg Realty. However, those rebuilt homes are likely to get bigger and better, he said.

“The smart people will rebuild on stilts and the other people will take their chances,” he said. “Ultimately, even with that expense, those areas are going to come back because they’re oceanfront. It’s a matter of putting in the extra money.”

Schlomann expressed skepticism about whether New York’s federally funded Sandy relief effort would help much. Long Island is due to get an initial infusion of nearly $194 million in federal funds to help communities rebuild.

“Saying it is one thing,” Schlomann said, “and actually getting the money to homeowners is a totally different thing.”



Originally published: July 24, 2013 9:51 PM
Updated: July 25, 2013 9:18 AM

Photo credit: Newsday / J. Conrad Williams Jr. | The sales price of homes in south Nassau
that were damaged by superstorm Sandy are down about 19 percent


Posted in For Buyers, For Sellers, Homeowners, Listings, Real Estate News | Leave a comment

Selling a House? Don’t Overprice It

HiRes (6)There is no doubt that the housing market is coming back nicely. What, if anything, could slow down the current momentum? We believe it may be sellers’ over exuberance when it comes to pricing. There is little doubt that house prices have appreciated over the last twelve months in most regions of the country. However, with both the inventory of homes for sale and interest rates increasing, we have to be careful to not over judge what the market can bare.

Trulia just reported that asking prices have jumped dramatically and the increase is accelerating:

  • Year-Over-Year prices jumped 10.7%
  • Quarter-Over-Quarter prices jumped 4.1% (16.4% annualized)
  • Month-Over-Month prices jumped 1.5% (18% annualized)

No expert is expecting home prices to shoot up 18% in the next twelve months. If anything, price appreciation may slow as rates and inventories increase. Investors will begin to slow their purchases and the first-time buyers expected to take their place will be working within a pre-set budget in many cases.

Buyers’ Purchasing Power

Let’s look at an example: A young couple is looking for a home and have predetermined that their budget will only allow them to spend $1,000 a month on a mortgage. At today’s mortgage rate of 4.5%, they could afford a $200,000 mortgage ($1,013 principal & interest). However, if rates jump to 5%, they would have to lower their mortgage amount to $190,000 in order to keep their monthly payment where they need it ($1,020). At 5.5%, the mortgage would need to be no more than $180,000 ($1,022).

The Impact on Prices

This decrease in buyers’ purchasing power will have an impact on home values going forward. We do not believe it will cause a decrease in prices. However, we do believe it will likely cause current rates of appreciation to slow.

If you are thinking about selling your home, don’t get carried away with current headlines about home price increases that have taken place over the last twelve months. Instead, call a local real estate professional. They will be best prepared to explain where prices are headed over the next six months.


by The KCM Crew on July 15, 2013

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Is 2013 the right time to buy a house?

Is 2013 the right time to buy a house?


Have you noticed it yet? The growing murmur out there, getting louder every week, bubbling up in newspapers, on TV, and on news sites, and it’s telling you … to buy a house in 2013.

OK, maybe that’s a bit of an exaggeration, but there are definitely a lot of experts (and non-experts) suggesting that now is the right time to buy a house — that is, in 2013. And that murmur may soon turn into a deafening roar. So let’s look at the questions you need to ask to determine whether 2013 is really the best time to buy a house.

Is Buying a House Right for You Right Now?

We’ll discuss the numbers in a second, but before we do that it’s important to get one thing straight: No matter what the national economic and housing market trends indicate, it only makes sense to buy a house if it meshes with your current place in life and your future goals.

For example, if you have a stable career and a job that pays enough to cover your living expenses (with some leftover for emergencies/retirement), and in addition you plan on being in the same place for 3-5 years or expect you could rent the house out if you were to move away, then you are probably in a good position to consider buying a house in 2013.

On the other hand, if you can’t imagine giving up your mobility, if you can’t count on having a steady income, or if you have substantial credit card debt or student loan debt (or are struggling to pay your bills each month) then it might not make sense for you to buy a home at this time.


Are Mortgage Rates the Best in 2013?

So let’s say you’ve decided that now is a good time for you personally to buy a house. The next question is whether it’s the right time financially. A big part of the answer has to do with interest rates. Lower interest rates are always better, obviously, because they save you money — even an interest rate that is 1% lower could save you $50,000 or more over the course of a 30-year mortgage.

And if you can lock-in a low rate with a fixed-rate mortgage (rather than an adjustable-rate mortgage) that’s even better.

So the question is, are interest rates low right now? The experts say yes. This graph shows average mortgage interest rates over the past 30 years:

Interest rate graph via St. Louis Fed

As you can see, rates are currently at about 3.5% which is lower than at any other point in the past three decades. So clearly, it’s true that this is an opportunity to lock in low interest rates. But do we have any reason to expect them to increase in the near future? That’s hard to say. Some experts have been predicting inflation and rising interest rates for the last few years and it hasn’t happened yet. These kinds of predictions are notoriously difficult to get right. However, it’s probably not a bad idea to assume that these rates will increase at some point in the future.


That still doesn’t leave us with a complete picture though, because we haven’t looked at housing prices yet.

Are Home Prices the Best in 2013?

If you’ve been paying any attention to the news for the past five years, then you know about the housing market crash that coincided with (and partly caused) the global financial crisis that began in 2008. But have housing prices rebounded already, or are they still low? It depends on which city and neighborhood you’re talking about, of course, but we can get a sense of the national picture from this graph of the Case-Shiller index:

Case-Shiller graph via Wikipedia (click to enlarge)Case-Shiller graph via Wikipedia

The graph is a measure of housing prices adjusted for inflation. As you can see, prices are still much lower than they were at the peak of the housing bubble. That doesn’t mean they couldn’t drop further in the coming years — or that they’ll ever return to their highs of the mid-2000s — but it is an indication that you should be able to get a reasonable price if you decide to purchase in 2013. The really important thing is to pay attention to housing price trends in the area you hope to buy a home (you can use sites like and to track prices for specific houses and neighborhoods). That data will be relevant to your decision more than the national data.

And remember, life contains many surprises, and if we learned one thing during the housing market bubble and crash, it’s that you should not bank on housing prices going up.

Are You Ready for the Work (and Cost) of Buying a House?

If you’re still thinking this is a good year to buy a house, be sure you understand the amount of work it will require and the upfront costs that you’ll need to pay. When you buy a house, it takes a lot of effort to (A) find the house you want, (B) make an offer and negotiate with the seller, and (C) go through the closing process. Even once you have the house, you may have to make repairs on certain items.

You will also need to have enough money to cover the closing costs, and you’ll need to be financially prepared for the regular costs of owning a home, which include property taxes and maintenance expenses.

With that said, 2013 may be the right time for you to buy a home. And if you think through the decision carefully and do the things that are necessary before buying a house, then you are more likely to have a positive experience. Good luck!

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How to qualify for the best mortgage rate

How to qualify for the best mortgage rate



These factors altogether help determine your mortgage interest rate.


You see advertisements for those historically-low mortgage interest rates everywhere. So naturally, you figure it’s time to refinance or apply for a new mortgage. But once your application is accepted, you realize your interest rate is one – or even two – percentage points higher than the national average. What happened?

In a nutshell, the lender thought you were a risk. That’s because one way to look at your mortgage interest rate is that it’s a representation of how much of a risk a lender believes you to be: the higher the risk, the higher the cost of borrowing the money.

The natural next question is: What makes for a low-risk mortgage applicant? Well, we spoke to some experts to find out. So read on to see what it takes to qualify for those super-low mortgage interest rates.

Criteria #1: Credit Score of 740 and above

When a lender is deciding whether or not to let you borrow tens or even hundreds of thousands of dollars, they kind of want to know that you’ll pay it back. And for lenders, your credit score is an indicator of how risky lending you money might be – and therefore, how high or low your interest rate should be.

So what’s in a credit score? Credit scores run from 300 to 850 – and the higher the better, according to myFICO. “You get better rates with a better credit score. The higher the score the better the rate,” says Jim Duffy, a mortgage banker with Cole Taylor Mortgage.

But just how high does your score need to be to get the lowest interest rate? He says that to get the best rates you’ll want a score of 740 or above.

“Anything below 740 and you’re going to be paying a little bit extra,” he says. And if you’re wondering what that “extra” can amount to, it really depends on how low the score is. It can be as much as half a percent for a 620 score, but as little as an eighth of a percent or less for a score of 700, Duffy says.

Criteria #2: Debt-to-Income Ratio of 40 Percent or Less

You’ve heard the saying, “the more you make the more you spend,” right? Well, that could be a problem for your interest rate if your spending is driving your debt-to-income ratio up. You’re not sure what that is, you say? You might want to become familiar with it, because it’s important to your potential lender.

Your debt-to-income ratio is basically the amount of your gross monthly income that goes toward paying debt, says Justin Pritchard, a financial planner who writes’s banking and loans column. So, say you and your spouse make a gross income of $6,000 per month and your debt is a total of $1,800 per month. Your debt-to-income ratio is 30 percent ($1,800/$6,000=.3). Pritchard says that your debt-to-income ratio typically needs to be 40 percent or lower to qualify for a mortgage, and lower percentages could mean lower rates.

Why? “Because lenders want to see that it’s easy for you to pay off the loan,” Pritchard says. “They want to know that you can suffer a setback, or get a pay cut, or take on more debt and still make your payments, versus somebody who’s spending 50 percent of their monthly income just to pay off debt.”

And if you’re wondering what lenders consider as debt, a general rule is that it’s anything that ends up on your credit report, says Duffy. Common things include credit card, auto loan, and personal loan debt. Your future mortgage payments (should you qualify for the loan), will also get factored in, he adds.

[Click to compare rates from multiple lenders now.]

Criteria #3: Consistent Job Stability

Not surprisingly, lenders like stability. After all, they’re deciding whether or not you can consistently pay a mortgage back, month after month, for years on end. So if you’ve been stable and consistent when it comes to your career, lenders could reward you with a lower rate.

And Pritchard says that the longer you’ve stuck with a career, the better, because it suggests stability. But don’t fret if you’ve changed jobs a few times. As long as the positions are in the same industry and have been consecutive, you can still qualify for the best interest rates, says Chris L. Boulter, president of Val-Chris Investments, Inc., a California company specializing in residential and commercial loans.

So, how long is long enough to be working in the same industry? At least two years is a must, Pritchard says.

On the other hand, “If you’ve had a disruption [i.e., have been fired or unemployed for a month or more] in your career in the last two years, the likelihood of you being able to qualify for the most favorable rates is extremely low,” Boulter says.

Criteria #4: At least 20 percent equity

If you think about equity from a lender’s point of view, here’s what you would see: the more equity the homeowner (you) has in their home, the less risk the lender assumes.

To see why, first let’s define equity. It is the market value of your home minus any remaining mortgage balance. So, if your home is valued at $500,000 and your remaining mortgage balance is $400,000, you have 20 percent equity in your home. This essentially means that you own 20 percent of your home, and the lender owns 80 percent.

So how does this translate to risk? Basically, if the home’s value declines by up to 20 percent, you would lose money if and when you sell. But if the value of the home plummets 21 percent or more, the lender could potentially lose money instead, since the lender owns the rest of your home after that 20 percent.

In other words, if your home value went down by 21 percent and you sold the house or defaulted on the loan, you would lose $100,000, but the lender would also lose $5,000 (1 percent of $500,000 equals $5,000). So, if you only have 10 percent equity, your mortgage lender is “closer” to losing money because the market only has to decline by half as much (10 percent) before they are at risk.

And here’s a newsflash: Lenders don’t like to lose money.

So you need to have, in most cases, a minimum of 20 percent equity in your property to get the best interest rate, Boulter says.

On a purchase, this means making a 20 percent down payment. On a refinance, this means having 20 percent equity and only taking out a mortgage for 80 percent of the market value of your home.

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Thinking about buying? Why it could cost you to wait..

Below is a article from KCM Blog, It shows what happens to your payment if a few things happen….

Buying a House: The Cost If You Waited

by The KCM Crew on July 8, 2013 ·

We often talk about the potential cost of waiting to buy a home. Today, we want to look at the actual cost for someone who waited over the last year. We used a 10% increase in house values as prices have gone up by double digits in the country on average. We looked at approximate mortgage rates last year compared to this year. Here is the impact on a monthly mortgage payment (principal and interest):


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Mortgage rate rise pressures LI house hunters

 Jack Shaffer, 56, a financial planner from Brooklyn, is looking to move to either Queens or Nassau County with his wife Susan, left, daughter Amanda and son Andrew, hoping to take advantage of historically low interest rates with a new home purchase. (June 30, 2013)

The recent sharp rise in mortgage interest rates is forcing some Long Island house hunters to trim their budgets or scramble to put more money down.

The surge in mortgage rates will cause the most pain among first-time home buyers and others at the lower end of the market, local experts say. Higher rates cause monthly payments to grow, and can prompt lenders to decrease the size of loans.

Rates for 30-year fixed mortgages jumped last week to an average of 4.46 percent, the highest in two years, up from 3.93 percent the week before, mortgage giant Freddie Mac reported. The record low was 3.31 percent in November 2012. In early May the rate was 3.35 percent.

Rates have risen because investors worry the Federal Reserve’s efforts to stimulate the economy and hold down long-term rates may end soon.

Jack Shaffer, a Lake Success financial planner who is shopping for a home in Nassau County or Queens, said the higher interest rates still strike him as a good deal. However, he said, he and his wife might need to pull more from savings or buy a less expensive house. “You kind of sugarcoat it in your own mind — ‘Oh, it’s only a point,’ ” Shaffer said. “A point can make a lot of difference.”

Home prices haven’t fallen, real estate agents said, though they are likely to take a hit if loan rates exceed 5 or 6 percent.

For now, shoppers are competing to snap up homes, brokers said. “It’s still cheap money,” said Andy Yakubovsky, manager at Century 21 Prevete-Bastone in Massapequa.

There were 17,412 homes for sale on Long Island in May, down nearly 20 percent compared to a year earlier, according to the Multiple Listing Service of Long Island.

Business has been a bit brisker at Bethpage Federal Credit Union as borrowers try to lock in rates before they rise further, said chief executive Kirk Kordeleski.

The Long Island Housing Partnership in Hauppauge fielded more calls than usual last week from first-time buyers seeking mortgage counseling, said chief executive Peter Elkowitz. “They were all waiting to see how low interest rates would go and how low prices would go,” he said.

Some first-time buyers “may disappear back into the rental market,” said Claudia Cesare of Signature Premier Properties in Huntington.

Many buyers have switched in recent weeks from fixed-rate to cheaper adjustable-rate mortgages, said Bob Moulton, president of Americana Mortgage Group in Manhasset. Such mortgages typically hold rates steady for periods of three, five, seven or 10 years, after which rates vary with the market.

A few buyers are “buying down points,” or paying an up-front fee to get a reduced interest rate. Others are taking out “piggyback loans” or home equity loans to help fund the purchase.

However, buying down points does not always pay off, and rising home equity loan rates could cause problems for borrowers, Kordeleski said: “What seems like a good deal now could be not nearly as good a deal a few years from now.”

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Mortgage Basics – Which is better: More or Less Down?

Although many experts will say it’s wise for income earning folks to have a large mortgage because of the low rates and tax deduction, it’s not right for everyone. Here are some things to think about:

Private Mortgage Insurance (PMI).  PMI is a monthly fee that the borrower pays if the first trust loan exceeds 80 percent of the purchase price. Since a lower down payment results in a statistically higher risk to the lender, PMI insures a portion of the loan to reduce the risk to the lender. Thanks to creative lenders, however, a borrower can still put as little as no money down and avoid PMI by taking out two loans. Ask your loan officer about loan packages with no PMI, sometimes called “piggy-back” financing.

Monthly payment “comfort level”.  This is a very important issue. If you have good credit and income, most lenders will qualify you for a larger loan amount than your would want. The first thing you should do is assess your personal spending and saving habits and try to come up with the maximum mortgage payment that would fit into your budget.

Taxes.  Understand the benefits of mortgage interest and real estate tax deduction. Since you will own the home, you will be able to deduct all the interest and taxes you pay on the home. Consult a tax expert on these issues, but it’s important to get an idea of how much of a tax break you will receive if you own the home. This will help you decide your mortgage amount.

Opportunity costs.  Analyze the “opportunity cost” of a large down payment. In other words, if you put down 20 percent, or $44,000, what are you giving up? Is the $44,000 earning a good rate of return? Do you have to sell securities and pay capital gains taxes to liquidate the money? Get an idea of how much it will cost you to put down $44,000.

Other debts.  Take into consideration other debt you may have. For example, if you are carrying substantial credit card debt, it would probably be better to pay the cards off instead of putting down a large down payment.

Hopefully this is a start in the right direction when determining how what mortgage balance you should carry.


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Home inspection cost should never deter prospective buyers

FEMA inspector Bruce Grass performs an assessment of

Photo credit: AP | FEMA inspector Bruce Grass performs an assessment of the home of James Shene. (Sept. 14, 2011)

From a 15-foot boa constrictor holed up in the dark to a house ready to collapse in a stiff breeze to electrical wiring that bursts into flames at the flip of a switch, home inspectors have seen it all. And those horror stories could be yours if you don’t have a home inspected before you buy.

“Getting a home inspection is the best money a buyer spends, even if they end up not buying the home,” says Dominic Cardone, a regional vice president for the National Association of Realtors.

While some buyers might balk because of the extra cost, spending a few hundred dollars to get a home inspected could save you thousands in the long run.

Marvin Goldstein, former president of the American Society of Home Inspectors, or ASHI, recalls one new home he inspected in the Philadelphia area that had passed a city inspection, even though it had no toilets and was plagued by “incomplete, improperly done work. There was $75,000 worth of work needed” — not exactly pocket change for a buyer.

In most home-purchase offers, it’s customary to include a clause making the transaction contingent on the findings of a home inspection.

If the inspection reveals real problems, what happens next depends on the contract. “It’s done differently in different contracts across the country,” Cardone says. The seller may cover repair costs; the buyer and seller might split costs; the seller might credit the buyer money to make repairs; or the seller might reduce the price. If they can’t come to terms, the buyer can walk away from the agreement.

As home inspectors will point out, what you don’t know can hurt you.

Blaine Illingworth, an ASHI director in the Philadelphia area, has had more than his share of animal encounters while doing inspections. In the crawl space of one Pennsylvania house, “I came face to face with a 15-foot boa constrictor. It’s amazing how fast you can crawl backward.”

The snake had gotten loose a couple of years earlier, and the owner thought it was dead, not residing under his house.

Another time, Illingworth says he saved a family from carbon monoxide poisoning. The sellers thought they had the flu. Instead, he found a raccoon sleeping in the chimney, blocking the flue.

Claude McGavic, executive director at the National Association of Home Inspectors, or NAHI, recalls inspecting a 1920s Florida home. “From outward appearances, it looked fine.” A closer look showed termites had devoured the wooden framing, leaving it held together by the plaster on the walls. “I could have pushed it over,” McGavic says.

Illingworth recalls inspecting a home owned by an electrical engineer, who proudly announced that he had wired the house himself. Unfortunately, he had used the wrong type of wiring. “Everything was brown or black and crispy. I can’t understand for the life of me why it hadn’t burned down yet.”

Water heaters also can be dangerous things, as Bill Jacques, ASHI’s president, found when inspecting a home in the Charleston, S.C., area. Water heaters have a pressure-relief valve attached to a drain line channeled outside. If it overheats, the valve opens, draining water so the tank doesn’t explode. In this case, the homeowner had substituted a turkey baster for a drain line. “It would have blown the turkey baster away,” spewing hot water, Jacques says.

A typical inspection takes several hours and looks at things such as the heating and air-conditioning systems, plumbing, electrical system, and roof. Specialty inspectors can check for mold, radon gas and energy efficiency, McGavic says.

If repairs are needed, hire a licensed contractor. That way, there’s a paper trail that the work has been done. And Jacques recommends having the home reinspected to make sure the repairs were done properly.

In many parts of the country, a home inspection will cost a few hundred dollars, and the price is influenced by the age of the home, its square footage, and how far the inspector needs to travel, Jacques says.

Mortgage rates leaped for the second consecutive week during the week of June 6, 2013 on hints that the Federal Reserve may soon taper its quantitative easing program, which includes massive purchases of mortgage-backed securities.

The 30-year fixed-rate mortgage rose 11 basis points to 4.1 percent. A basis point is one-hundredth of 1 percentage point.

The 15-year fixed-rate mortgage rose 7 basis points to 3.28 percent. The average rate for 30-year jumbo mortgages, or generally for those of more than $417,000, rose 7 basis points to 4.27 percent.

The 5/1 adjustable-rate mortgage rose 12 basis points to 2.93 percent. With a 5/1 ARM, the rate is fixed for five years and adjusted annually thereafter.


Published: June 11, 2013 4:42 PM

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Mortgage Basics – Mortgage Brokers Vs. Mortgage Bankers: Which Do You Choose?

Can your mortgage broker get you the best interest rate on the planet? Or will you use a mortgage banker to provide your residential financing? Maybe your credit union could offer the best rates. Doesn’t anyone get their mortgage from their own bank, anymore?

According to the Mortgage Bankers Association, in 1999 9.7 million mortgages were issued for properties with one to four units. While the most recent figures are unavailable, in 1997 says the mortgage banking group 56 percent of all loans were originated by mortgage companies, 25 percent came from commercial banks, and 18 percent were from thrifts, largely savings and loan associations. So-called “others” (including credit unions) were responsible for less than 1 percent of all loan originations.

These numbers have changed over the years. While thrifts once dominated the home mortgage market, their share of loan activity has fallen from almost 50 percent in 1980 to 18.3 percent in 1997. The big winners have been mortgage companies which now dominate the marketplace.

Okay, so what’s the difference between a mortgage broker and a mortgage banker?

In general terms, the distinctions look like this:

A mortgage broker, says the National Association of Mortgage Brokers, is “an independent real estate financing professional who specializes in the origination of residential and/or commercial mortgages.” There are, says NAMB, approximately 20,000 mortgage banking firms nationwide.

In essence, mortgage brokers know where the money is. Rather than lending their own funds, they lend money from other sources such as banks, pension funds, insurance companies, and savings and loan associations. They attempt to find competitive mortgage pricing from various mortgage companies, insert their markup, and ask for that profit at closing. The theory is that because a mortgage broker has access to multiple lenders, they have the ability to shop for the best rates.

A mortgage banker is different. A mortgage banker, says the Mortgage Bankers Association of America, is “an individual, firm or corporation that originates, sells and/or services loans secured by mortgages on real property.” In other words, there are cases where a mortgage banker lends its own money, and other cases where it acts like a mortgage broker and lends money from other sources.

I have experience from both sides of the aisle.

I learned the residential lending business in 1989 as a mortgage broker in Southern California while for the last 6 years I’ve worked as a mortgage banker.

As a broker, I would receive an endless stream of rate sheets from various wholesale lenders, each offering rates for given mortgage products. Every day, I would pore through the rate sheets and determine who had the best rate. I soon determined that most lenders, while not having the exact same rates, were still very close — sometimes within 1/100th of a percent of one another.

Now, as a mortgage banker, I watch my pricing every day, and I’m always going to be competitive. Most lenders are. They have to be to stay in business. The difference here is that the mortgage will be issued from my company’s bank account.

So, okay, I know the question you want to ask: Is it better to get a loan from a mortgage broker or a mortgage banker? Fess up David, which is better?

My answer is, all things being equal, there is no difference.

If you can obtain the same loan at the same rate with the same fees, it really doesn’t matter if your loan is brokered or not. It’s not important that someone uses their own money to fund your loan or if they get it elsewhere as long as you get what you were promised.

Which to choose? Just go on the Internet or pick up the phone and contact mortgage brokers, mortgage bankers, commercial banks, S&Ls, credit unions, and any other financing source you can find. See who has the best program for you and see how rates and terms compare.

In the past few years we’ve seen that mortgage bankers, banks, S&Ls, and credit unions often act as mortgage brokers. Conversely, many mortgage brokers now carry their own bank lines of credit to act as a mortgage bankers. When they make mortgage, they will then immediately sell the loan to another mortgage company, many times right at your closing table.

What’s happening is that the distinctions among traditional lending sources are beginning to blur, and it matters not where you get your mortgage, just as long as you get what’s best for you.


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What Happens When Interest Rates Rise?


Freddie Mac released its U.S. Economic and Housing Market Outlook for June showing the effects rising interest rates are having on certain markets around the country and the overall housing recovery.

• Interest rates for 30-year, fixed-rate mortgages have risen about 0.5 percentage points over the past several weeks and are expected to hover around 4.0 percent during the second half of 2013.

• With rising mortgage rates, expect a sharp decline in refinance volume in the second half of this year; refinance originations are expected to total about $1.1 trillion in 2013, down from $1.5 trillion in 2012.

• At today’s house prices and income levels, mortgage rates would have to be nearly 7 percent before the U.S. median priced home would be unaffordable to a family making the median income in most parts of the country.

“The recent upturn in interest rates is sparking fears among some that the nascent economic and housing recoveries will be choked off before they produce sustained growth. However, with the exception of high-cost markets, which are already challenged with affordability, house prices in most of the country are very affordable,” said Frank Nothaft, Freddie Mac vice president and chief economist. “So while rising interest rates will reduce housing demand, rates would have to increase considerably more before the reduction in demand for home purchases would be substantial. Nothing in the recent trends suggests that we need to fear a major slowdown. A gradual rise in interest rates will not derail the recovery, and are an indication that the overall economic situation is improving.”
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