LA Digs - Northeast LA Real Estate Blog

Here is some information on adjustable rate mortgage loans that came from a lender in our area:

Today I wanted to discuss what an ARM (Adjustable Rate Mortgage) loan is and how it works for buyers.   On Friday I locked in a 7/1 ARM at 2.625% for a client of mine. What I realized, while talking through this loan, is that few Realtors, even fewer borrowers, and, sadly, even few lenders really know how ARMs work and why they are still a good product option.   Unfortunately, after 2007, many products,  like the old ‘option-ARM’ , got grouped together and labeled as ‘liar loans’, ‘predatory loans’, or just plain bad products. That’s NOT the case. With the average Californian staying in their home for 7 years and the average American keeping their home loan for just over 5 years, does it really make sense to pay a higher rate premium to lock into a 30 year mortgage?   The answer is maybe. For our client who knows they are going to be selling or refinancing, for any reason, within the next 5-10 years, a 7/1 ARM may be the right product for them. Simply explained, 7/1 means that the loan is ‘locked’ at a specific interest rate for the first 7 years, the adjustable once a year after that.  The payment is still set up on a 30 year amortization schedule, so from day one the client is paying down principal.  Additionally, the program usually has what’s known as 2/5 rate caps.  This means that after the 7^th year, the client’s interest rate can only go up a maximum of 2% per year with a lifetime cap of 5% over the start rate. So, for the client I locked in on Friday at 2.625% - who knows he is leaving the state in 5 years – this is the perfect loan for him.  He is saving $300 a month over the 30 year fixed option, he is completely locked in for 7 years, and if for some reason he gets stuck with the property or turns it into a rental, his maximum adjustments will be 2% per year with a max rate of 7.625% in the 10th years. A 5/1, 7/1 or 10/1 ARM definitely isn’t for everyone.  With 30 year fixed rates so low, I generally recommend a 30 year fixed rate as the #1 option.  However, for certain clients, a fully amortized ARM may be the right answer. If you have more questions about these type product, give me a call.

Scott Groves Loan Officer  - Team Lead Prospect Mortgage 1660 Hillhurst Ave| Los Angeles| CA 90027 225 S. Lake - 3rd Floor | Pasadena| CA 91101

cell (818) 679-5188 |  e-fax (877) 808-9569

NMLS ID #365178

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This is probably the most common question I am asked as we launch into an exciting new year in real estate. Everyone is happy to be done with 2009 and to look forward with hope to a much better year. The most common answer I hear from various experts is that, in general, don't expect much different from last year. I think it's better than that in our special corner of the LA area.

Here is my personal experience so far since the beginning of this year, a bit over 3 weeks.

I've taken two listings, one of which hasn't come on the market yet. Sellers are seeing that the prices aren't necessarily as dismal as this time last year, so it might be a good time to sell and figure out a good next step. I've been on about 9 listing appointments and several of them may decide to move forward in the next month or two. I also opened escrow with some people who have been looking hard for many months.

Of the two listings in Eagle Rock that I have on the market now, we are having a good turnout at our open houses. That means over 30-40 people at the $699,000 listing at 5320 Rock View Terrace at each the last 3 open houses. Yesterday was the first open house for 4902 Wiota, listed for $429,000, and we had over 60 people!

So the first-time buyer crowd is out in force for the under $500,000 price range, with good interest for higher price ranges as well. And we don't have just looky-loos walking through (though you are always welcome at my open houses), we have serious talk of offers at both properties.

The First-Time Buyer Tax Credit deadline of April 30, 2010, is having a positive effect both on buyers and on sellers. I think there is a real urgency to take advantage of that opportunity, so buyers are about to have a better choice of interesting properties to consider. The inventory is extremely low right now as properties are being snapped up.

For you homeowners who have been in your primary residence 5 of the last 8 years, you have a very brief opportunity for a tax credit as well.  Check out my previous blogpost at http://www.tracyslarealestate.com/federal-tax-credit-for-home-buyers-expanded-and-approved-for-eagle-rock-home-buyers. You can also go to www.federalhousingtaxcredit.com for the complete information.

But whether or not you qualify for tax credits, this year is starting off with an active real estate market fueled by relatively low interest rates and prices higher than last year, but lower than the peak. Opportunity is everywhere!

Many people are asking if now is a good time to buy real estate, especially those who have lost money and equity in the recent mortgage crisis. Bernice Ross lays out an excellent analysis of how buying for the long term is a hedge against inflation http://www.inman.com/buyers-sellers/columnists/berniceross/breaking-down-buy-vs-rent?page=0%2C1. There are many other important reasons to consider as well, though they aren't as easily quantifiable.

Pride of ownership is key to this discussion. And I don't just mean that when you own, you take better care of your property. That tends to be true, but in a way it's all about self-expression. My home is an extension of me”my accomplishments, my creativity, my style. Whether you have an architect design your home from the ground up to your specifications, you buy a home in a development , you have an historic home that has all the original details preserved, or you buy a starter home that needs a lot of work, you will imprint something about you and your personality on that property, even if it's only on the inside. Home tours and open houses are popular because so many of us love to see what other people have done with their homes.

Pride of ownership is also about civic involvement, security and freedom. As homeowners, we have more of a stake in our communities. If a new commercial development threatens to change the character of our neighborhood, we are much more likely to show up and protest, or vote, or question how it will affect our property values. It even affects how likely we are to pick up litter from the sidewalk. If we feel like the sidewalk is ours, we'll pick up the trash. Otherwise, the city should be doing it.

If you have ever gone door to door for a community issue, the most common response from the non-property owner is Oh, I'm just renting here. Most renters have a temporary feeling about their home”and they should, because the landlord can ask them to move out. Even in a rent-controlled area, there are ways to move a tenant out. If you own your own home, it is yours to keep as long as you make your payments and pay your taxes. That means a great deal to many of us.

At the end of the day, with any rent vs. buy analysis, if you own your home free and clear you have a place to live regardless of its value and if you rent you don't. Many of us are a long way from being mortgage-free, but small steps taken every day move us forward on the path to freedom.

There are 25 active listings today, October 7, 2009, priced from $129,000 for a gutted fixer that requires a cash offer to $825,000 for a 4 bedroom home with a pool located above Hill Drive. Most of these properties have been on the market over 2 weeks, some over 6 months. The field is open for a well-price home that is in decent condition in a good location, folks. Call me…

I can't say it better than this mortgage broker did, so check out Janet Guilbault's blog here:
http://activerain.com/blogsview/1051983/3-2-1-LIFTOFF-Prevent-Failure-to-Launch-Help-Your-Kid-Buy-A-House-This-Year

It's a great opportunity for us parents as well as the kid. How else could we take advantage of the 3.5% down payment possibility that FHA offers? To qualify for FHA, you have to intend to occupy the property as your primary propertythat's the kid part. Plus, you can have a non-occupant co-signerthat's you. If you buy units, as long as your child lives in one, you can do that, too! The First Time Buyer Tax Credit is a bonus. If you do an equity-sharing partnership with your kid, you both can prosper. This is not coddling your kid so much as creating a dynamic investing machine.