Dani McDonough & The McDonough Group

Rate versus Price Reduction

danimcdonough — Tue, 18 Jan 2011 23:40:22 +0000

Rate versus Price Reduction

Since the Fed’s Mortgage Backed Securities purchase program ended, the markets have seen much more volatile price swings…and rates overall are off their lows. For potential buyers who are waiting to see if home prices come down a little more, that means the wait could well cost you more money in the long run.

Let’s look at an example to see why. Say a home buyer wants to buy a home that costs $300,000. But the buyer wants a better deal on the home, so she delays a transaction until the home is reduced by $10,000. If, in the meantime however, rates were to rise .75% to 6.00% and the buyer financed 90% of the purchase price, the amount of total payments over a 30-year term would be over $35,000 more than paying the $300,000 purchase price and locking in the 5.25% interest rate.

In other words, the buyer would save $10,000 only to end up paying $35,000 more.

Now these prices and rates are just for the sake of example. But the point is that home prices are already very affordable…and rates are still low for now. So in the end, waiting for a home price to reduce may end up costing you much more than you expect if rates rise.

*Rates are subject to change due to market fluctuations and borrower’s eligibility.
**2011Conforming and FHA loan limits: up to $567,500**

Filed under: Uncategorized

Five Common Mortgage Misconceptions Explained

danimcdonough — Fri, 11 Sep 2009 06:22:39 +0000

The national mortgage industry has experienced unprecedented change during the past two years, which has resulted in a number of popular consumer misconceptions regarding the availability of home financing.

Mortgage Misconception #1: “There’s no money available for home loans.”

While it’s true that the recent credit crunch temporarily affected the mortgage markets, the 2009 credit market has progressively improved for homebuyers.

In fact, many established homeowners have already seized upon the opportunity to refinance to lower interest rates. These refis prove that savvy consumers can do more than survive in a tough market – they can improve their long-term financial outlook and save thousands over the life of their home’s financing.

Mortgage Misconception #2: “The days of low down payments are gone for good.”

While it’s true that “no money down” loans are almost exclusively restricted to VA loan qualifiers with full entitlement, FHA loans with down payments beginning at 3.5% are available and popular. Some FHA loans allow borrowers to use gift funds from family members, friends or employers to help cover the down payment.

Mortgage Misconception #3: “Buying a home in a high-cost area is almost impossible.”

Real estate prices on the West Coast have traditionally been some of the highest in the nation, which translated into a need for a large percentage of non-conventional Jumbo loans over $417,000.

Although jumbo loan figures fell in 2008, similar to many other financial statistics, perhaps surprisingly, they’ve made a comeback in the first quarter of 2009. According to a recent issue of Inside Mortgage Finance®*, the Jumbo sector’s production figures were up 109% over the 4th quarter of 2008. While credit requirements for Jumbo loans have become somewhat more restrictive, they’re still available for qualified borrowers.

Mortgage Misconception #4: “In today’s market, closing on a loan is difficult and complicated.”

The majority of loans closing in 2009 are no more complex than they were in the past. Keep in mind, even in boom times, there were still a great number of disclosures and necessary paperwork associated with closing a conventional “full doc” loan. This hasn’t changed.

Although first time homebuyers may find the process a bit overwhelming a first, the truth of the matter is, most of this paperwork is mainly designed to protect the consumer. A reputable lender will take the time to go over all closing documents with buyers before the day arrives, making the experience as fulfilling and exciting as any other major life event should be.

Mortgage Misconception #5: “Low interest rates are a thing of the past.”

Even though mortgage rates are beginning to creep upwards, today’s numbers are still some of the lowest in years. As of August 5th, 2009, Bankrate.com’s weekly Interest Rate Roundup reported that the average 30-year fixed rate for mortgage lending rose nine basis points, to 5.65%* – still a highly competitive rate.

Posted in Great Mortgage News, Straight Talk about Mortgages

Favorable Mortgage Financing

danimcdonough — Fri, 06 Feb 2009 21:44:01 +0000

Let Me Show You How to Save More Money

YES YOU CAN…OBTAIN FAVORABLE MORTGAGE FINANCING,
EVEN IN THESE UNCERTAIN TIMES
People with good credit, equity, and money for a down payment
need expert guidance to navigate our current ever-changing mortgage and real estate markets. You are smart about how you spend your money and even smarter about saving and investing.
Why should you pay a higher rate, even if you can afford it?
You can receive a better rate with our suite of in-house mortgage products and broker-out options as well. Either way, you’re covered.

As 17+ year veterans (and survivors) of the mortgage business,
our team is uniquely equipped to help you. We respect the
fact that you worked hard to get where you are today,
and it would be our honor to help you save more of your money.

Our company is over 140 years old and our mortgage professionals are amongst the finest in the industry. Please do call upon us for prompt, professional and personal service that you can count on.

There’s no place like home…

Dani McDonough
The McDonough Group
www.TheMcDonoughGroup.com
phone (206) 251-7976
fax (206) 217-5414

Posted in Uncategorized

How To Challenge Your Property Taxes

danimcdonough — Fri, 06 Feb 2009 21:23:41 +0000

In escrow, now is the time we start seeing some (not all) 2009 property tax assessments show up in title reports when working on transactions. Do not be confused. These are in fact 2009 assessments that were formulated in 2008. The new assessments for 2010 are what this post is about. What? 2010? But I need relief now! Sound odd? That’s how taxes are done.

And, a snippet from the Snohomish County Assessors office:

Snohomish County updates all taxable real and personal property assessed values annually as of Jan. 1^st of each year. The next update will be mailed for most properties in June of 2009 and the assessment date will be as of Jan. 1^st of 2009. The 2009 assessments will be used to calculate property taxes owed in 2010.

Since real estate market values have been dropping, it’s high time to put some change back into your wallet where it belongs. The links below are for the assessor’s offices and the forms needed to submit to challenge/petition your property tax bill.

There have been very few conversations I’ve had with recent clients that have not circled back to “the market.” I don’t bring up “the real estate market,” the client does. A few times I have mentioned that they may want to take the time to fill out the forms and petition the property tax bill. Cool, they say. How do I do it? Here’s how:

Find out what property type you have: is it a rambler? How about a Tudor? Two story with basement? Or, a garage house like The Tim’s (couldn’t resist Mr. Ellis)
Go to Redfin, or Estately website or any other website that posts sales data that is searchable by your zip code, neighborhood or any other mechanism. Or, call your Realtor and have them pull comps (comparable) to see if they can find a few homes that have sold that would be a good case to show the assessors that they need to humbly reconsider the property tax valuation, downward.
Always spy on what sales comps are in your neighborhood.
When valuations drop, get moving and petition your tax valuation.

Being complacent will cost you money. Take the time to do this. Typically (check your own county assessor rules & regulations) you must file your appeal/petition by July 1st or within 60 days after receiving your tax assessor notice (see your county petition rules).

I did this and saved $1,000 per year for the 2009 tax year. That’s nearly $100 off my monthly mortgage payment (for those that include tax impounds in your monthly mortgage payment).

King County Assessors appeal process. If you look to the upper right of the King County website page, there is a PDF document download “Petition” link.
Snohomish County Assessors appeal process via The Board of Equalization. Click the forms/Petition download forms once in the website.
Pierce County Board of Equalization. See the link for the PDF form/petition.

On a side note, it is pretty tough for anyone to not be personally impacted by this difficult economic and employment environment we find ourselves in, either by knowing of someone or a family member with job loss or equivalent (or impending job loss), but it is important to keep in mind that if you have the means to reach out and support them, do it. The smallest thing can help reduce someone’s stress. It could be me or you that needs it next.

Posted in Uncategorized

Choosing the Best Loan

danimcdonough — Sat, 24 Jan 2009 02:03:03 +0000

There are many types of mortgage programs available. Determining the right type of loan for your circumstances depends upon several factors:

	*	Your current financial picture
	*	How you expect your finances to change
	*	How long you intend to keep your house
	*	How comfortable you are with the possibility your mortgage payment may change in the future

When considering loan programs, the first decision is usually whether you prefer a fixed-rate mortgage or adjustable-rate mortgage (ARM). For example, a 15-year fixed-rate mortgage can save you thousands of dollars in interest payments over the life of the loan, but your monthly payments will be higher than a 30-year fixed-rate, or most ARMs. An adjustable-rate mortgage may start out with a lower monthly payment than a fixed-rate mortgage, but your payments could increase when the interest rate changes.

The comparison table below can help you determine your preference. Once you decide, visit the fixed-rate mortgage or adjustable-rate mortgage sections of my site to learn more about the features and benefits of fixed-rate or adjustable-rate loan programs.

Fixed-Rate Mortgage

Adjustable-Rate Mortgage

I am comfortable with a monthly payment that may vary.

I believe interest rates are going to decrease.

I believe current interest rates are low.

I plan to stay in my home for more than five years.

I plan to stay in my home for less than five years.

Instead of a more expensive home, I want the lowest possible payments.

I’m interested in avoiding PMI with a combine second mortgage.

I’m interested in a low down payment loan program.

I’m interested in a VA loan.

I’m building a custom home.

My loan amount will be greater than $417,000.

I’m interested in an FHA loan.

Posted in Uncategorized

Seattle Voted #1

danimcdonough — Fri, 21 Nov 2008 21:54:04 +0000

It’s tough all over, but some say these 5 cities have the best chances for speedy recoveries.

By Dorothy Pomerantz, Forbes

Top 5 cities most likely to rebound

1. Seattle

2. San Francisco

3. Washington, D.C.

4. New York

5. Los Angeles

If you’re a homeowner seeing property values plummet, look to the commercial real-estate market for solace. It might tell you which areas will recover fastest — and which will likely remain weak.

The Urban Land Institute recently asked 700 real-estate professionals to name the best (and worst) places to invest in commercial real estate in the coming year. Those surveyed included private developers, real-estate agents and real-estate investment trust executives. Their answers also apply to the residential market, since the single-family-home sector typically follows the economy. As wages go up and there are more jobs, more people can buy homes, pushing prices up.

The best cities in which to invest are those that are considered gateways to international investment, have vital downtowns where people can forgo cars and don’t have a glut of condos or office space.

These traits landed Seattle the No. 1 spot on the list. No city scored above a 6.15 on a scale of one to nine (one being an abysmal place to invest and nine being excellent).

Seattle is “a diversified market, has a good base of business and is becoming a 24-hour city,” says Stephen Blank, senior resident fellow, finance, at the Urban Land Institute. “It’s going to be in a good position to come back.”

The city is suffering from the loss of Washington Mutual and the downsizing of Starbucks, but Boeing and Microsoft are still strong. Apartment vacancies are low and there aren’t too many new buildings going up, meaning the market won’t be oversupplied. The same is true of retail space.

San Francisco comes in second, with a 6.12. The “City by the Bay” learned from the 2001 tech crash not to overbuild. There is a reasonable supply of office and apartment space, which should limit vacancies. San Francisco’s port is also expected to help the city during the downturn as Americans continue to rely on Asian imports.

Washington, D.C., New York and Los Angeles round out the top five.

Of course, there’s no guarantee that an improved commercial market will lead to an improved home market. However, investors have a better chance of seeing home prices rise in fundamentally strong markets like Seattle than in struggling cities like Detroit.

It landed at the bottom of the list, scoring a 2.24. Detroit has been reliant on the car industry, which is rapidly shrinking. Other businesses are unlikely to fill the void in the next few years, which means the city will be hit hard by further economic struggles.

New Orleans also lands near the bottom with a score of 3.33. The city has been losing businesses to Houston, Dallas and Atlanta since Hurricane Katrina hit in 2005.

The other cities at the bottom of the list — Columbus, Ohio; Milwaukee, Wis.; and Cleveland — suffer from dying industries and lack of tourist appeal.

Recent attempts to turn downtown Milwaukee into a thriving 24-hour city haven’t been enough to protect it from the coming downturn. Increasingly picky investors are expected to favor higher-quality port cities over Midwest towns.

And while Columbus has the potential to become a major shipping hub for goods traveling cross-country, that revitalization may have to wait for a stronger economy and a government focused on improving the nation’s roads. For now, prospects are dim.

Posted in Uncategorized

Navigating the Turbulent Mortgage Marketplace

danimcdonough — Fri, 26 Sep 2008 23:06:12 +0000

What exactly is the problem today with banks, financial institutions and the financial markets?

Problem #1 – Over-Leverage

During the last several years, financial institutions borrowed more money to engage in their business activities than at any point in the history of the United States banking industry.

If a 30 dollar asset prices fall by just 3% ($1 in this case) the financial institution’s equity in the investment asset is wiped out and they need to raise more funds to restore their 30:1 leverage ratio! When you hear about “capital requirements”, that is exactly what it means. In other words, financial institutions need to raise more funds in order to meet their minimum capital requirements of having $1 of equity for every $29 of leverage. Every time asset prices fall, financial institutions need to raise more money to maintain their minimum capital requirements. Now here’s the billion dollar question: where are the financial institutions going to get the money from?!

Yep. You guessed it! They are forced to sell even more of their investment assets!! If they sell off their investment assets, prices decline even further due to supply and demand. After all, prices always decline when there are more sellers than buyers in any marketplace. This creates a downward spiral in prices, causing the financial institution to sell even more assets into an already depressed market. A bad situation quickly becomes even worse and that is exactly what has been happening among financial institutions since July 2007.

There are two other ways for financial institutions to raise funds:

-Sell stock in their company or merge with a larger institution

-Borrow more money

Problem #2 – Lack of Liquidity

Financial institutions will continue to try and raise funds to meet their obligations and continue running their businesses. Although it is scary to think of the various doomsday scenarios that could result from the high leverage and the lack of liquidity, these worst case scenarios are unlikely to occur for two main reasons:

Foreign investors and governments, sovereign wealth funds and other large investors have too much invested already in the US to allow the US financial markets to collapse. If the financial markets and institutions collapse, these investors would lose enormous amounts of capital. Not only that, but their own economies would crumble because US consumers would no longer be able to afford to purchase their products. Therefore, foreign investors are likely to continue being an important source of funding for US corporations and banking institutions.

The Federal Reserve has been very active in providing liquidity to financial institutions throughout this crisis and will likely continue to do so.

Problem #3 – Ineffective Regulation

The financial industry regulatory structure in the United States is, to a large degree, over 100 years old! Various government officials have proposed certain reforms that are currently in the process of being considered and debated. Although the reform process has started, it will take several years to fully reform the regulatory structure of the US financial markets. As a participant in the CMPS Institute I have been very active in helping to reform and shape the future of the US financial regulatory structure.

Conclusion:

It is always advisable to consult with a Certified Mortgage Planning Specialist TM (CMPS®) when navigating today’s turbulent mortgage and real estate marketplace. As a CMPS® professional, I am committed, qualified and equipped to help you evaluate your options!

Standardizing the mortgage planning process through participation with the CMPS community of experts.

Dani McDonough, CMPS ®

Posted in Straight Talk about Mortgages Tagged: finanical markets, mortgage, real estate

Green Mortgages

danimcdonough — Mon, 18 Aug 2008 19:03:27 +0000

Green Mortgages Equal Larger Loans and Efficient Homes

Tired of heat and energy prices skyrocketing out of your budget? Now you can do something about it…and your mortgage can help!
Energy-efficient improvements, such as installing double-paned windows and additional ceiling insulation, can save you money every month, not to mention pay for themselves in the long run. But how do you come up with the cash to pay for those projects up front or to buy a slightly more expensive house that already has them? One way is with a “green mortgage.”
What is a Green Mortgage?
Green mortgages actually come in a couple of different formats. Officially these loans are classified as either Energy Efficient Mortgages (EEMs) or Energy Improvement Mortgages (EIMs).
An Energy Efficient Mortgage essentially allows you to purchase a home that is already energy efficient – even if the price of that home is larger than you would normally qualify for under your debt-to-income ratio. Energy Improvement Mortgages, on the other hand, allow you to take out a larger loan to make energy efficient repairs and improvements to a house that is not currently rated as energy efficient.
The main benefit of both of these mortgages is that they help you to qualify for a larger loan amount and help make it possible for you to live in a better, more energy-efficient home. The basic principle behind this type of financing is that the money you save from the more efficient home will offset the larger mortgage payments.
Qualifying for a Green Mortgage
To qualify for a green mortgage, you typically need to have a Home Energy Rating conducted. This rating provides the lender with an Energy Savings Value, which is the estimated monthly energy savings and the value of the energy efficiency measures.
Depending on your unique circumstances, you may qualify for a conventional, FHA, or even a VA green mortgage. Each type of loan is designed to fit specific situations and, therefore, each loan has specific requirements that must be met.
You can learn more about the differences between conventional, FHA, and VA green mortgages at the Energy Star website. And for more details about green mortgages in general, visit the HUD website.Whether you’re looking to add energy-efficient improvements to your current home or want to purchase a new energy-efficient house, green mortgages offer benefits that are definitely worth looking into. Call today to discuss your options in more detail.

Dani McDonough, CMPS®
Certified Mortgage Planning Specialist
First Horizon Home Loans | Magnolia
Phone 206.251.7976

Selling Green Homes

danimcdonough — Thu, 31 Jul 2008 00:58:48 +0000

Selling Green Homes:

How to Turn Green Features into Assets that Sell Homes

Green Homes are becoming the hottest new trend in homebuilding today, but what does that mean to a Realtor, and how can you capitalize on it?

Come learn how green features, including site development, resource utilization (energy, water and waste reduction), light, indoor air quality and the aesthetic benefits of green features can be translated into assets that sell. The instructor, Brenda Nunes, is the developer of an award winning Built Green TM Home at Suncadia, a member of the Master Builders of King and Snohomish County Built Green TM Executive Committee, as well as a member and supporter of several other Built Green TM programs and committees.

This Clock Hours Course is FREE of charge and attending Real Estate Agents will earn 3 clock hours upon completion of the class.

Thursday, August 7th — 9:00 a.m. to 1:00 p.m.

Where:

The Q Café, 3223 15th Avenue West (just south of the Ballard Bridge) For more information, or to R.S.V.P.,
please contact Dani McDonough at (206) 251-7976 or email dani@danimcd.com

Waiting to Buy may be the Wrong Strategy

danimcdonough — Fri, 20 Jun 2008 23:36:06 +0000

The biggest risk for today’s home buyers is interest rates not price depreciation. Yes, home prices are under pressure and there is inventory in the market, but waiting to define a “bottom” in a real estate downturn that is 24 months old and where prices have already adjusted, is very difficult.

The bigger issue and real risk to buyers are interest rates. A sudden rise in interest rates can easily erase the benefit of finding a home at a “bargain”. Long term interest rates are directly impacted by the health of our economy and inflation. If the economy if struggling or if there are rising expectations of inflation, long term interest rates will rise. Both of these factors are at work in the market.

Why are rising interest rates so “bad” for me? Because most people finance the purchase of their home and any increase in interest rates will decrease what you can borrow. The impact is significant. Here’s an example:

During the past 45 days (May 1, 2008 to June 15, 2008) interest rates on 30 year fixed mortgages have increased up to 0.75%. Now, this doesn’t sound like a large increase until you examine the impact on a borrower. A 0.75% increase in interest rate for a borrower who qualifies for a $400,000 loan would reduce their qualification to $369,900. This is a decrease of -7.6%. Unless the home has depreciated 7.6%, or the seller cuts you a “deal”, you’ve lost by waiting. You’ll qualify for less or pay significantly more in interest over the term of your loan by waiting.

No one can accurately predict the future of real estate values, but historical trends tell us that over the long term, real estate is a great investment. In addition, prices have already adjusted in many markets. If you are considering buying a home, now is great time. Interest rates are still relatively low and the risk of rising interest rates is real.