4 Reasons to Not Use APR When Comparison Shopping

With mortgage rates at all-time lows, are you thinking about refinancing your home? 

If so, then it’s important to comparison shop, regardless of whether you’re looking for a conventional loan, FHA loan or some other type of loan. However, if you’re like most homeowners, you may not know how to comparison shop for a loan. 

The one thing you definitely don’t want to do is to shop by Annual Percentage Rate or APR. APR is supposed to represent the annual credit cost, plus interest, broker fees, points, origination fee and mortgage insurance premiums owed. While it’s supposed to help you determine the “true cost” of financing a home over a 30-year period, it’s an artificial number calculated by a formula determined by the government. However, the real “true cost” for financing is determined by adding the loan amount, the interest paid over 30 years, and the closing costs.  

The 4 reasons why you don’t want to APR as a comparison tool: 

1.    APR is based on a 30-year loan divided into equal payments each month. Most people don’t keep a loan for 30 years.

2.    Different lenders use different APR calculations – either adding or subtracting certain figures from the equation. This way a lender can manipulate an APR to look lower.

3.    APR doesn’t take into account all mortgage-related fees, such a title fees, credit report fees, mortgage application fees, late payment charges, title insurance, property appraisals or document preparation.

4.    While APR is useful for fixed-rate mortgages, it doesn’t work for adjustable-rate loans. APR is based on 30 years of equal payments. Adjustable-rate loans can change from year to year, depending upon the market and fluctuations in the economy. Since lenders can’t accurately predict whether the rates will go up or down, they guess. And if the APR is a guess, how can you reliably comparison shop?

Since everyone’s situation is different, comparison shopping by choosing the lowest APR may not provide you with the best loan option. Next week we'll discuss the right way to comparison shop for a mortgage.

If you’re still confused about APR, contact a knowledgeable mortgage broker. We’ll be happy to explain how APR works, as well as take a look at your individual circumstances to help you find the right loan for your needs.

5 Hot Remodeling Trends

With the soft economy, many homeowners are deciding to stay in their homes rather than selling at lower prices. So they’re turning to remodeling instead.

The National Association of Home Builders expects 9% growth in the $280 billion remodeling market this year. Contractors around the country say they’re already hearing from homeowners wanting to remodel. However, rather than large-scale, whole-home remodels, homeowners are opting for smaller projects.

Five of the hottest renovation trends include:

1.    Extended family suites. Now that baby boomers are growing older, more and more families are deciding to live together these days as a lower-cost option rather than assisted-living care. Therefore, contractors are seeing more demand for in-law suites or apartments built as either a new addition alongside the main home with a connecting door; or as a basement renovation. On the opposite end of spectrum, the soft job market has resulted in more grown children (and their families) moving back in with their parents, which also calls for creative remodeling solutions.

2.    Customized kitchens. Families nowadays want kitchens with larger pantries or utility rooms, open shelving, and/or island units for more storage, plus larger eating and family areas for additional space for family dinners and other get-togethers. Other features offer convenience and/or energy savings, such as induction and gas stovetops, French door refrigerators, European spray pullout faucets and deep single bowl sinks.

3.    Backyard getaways. With the price of gas and less overall spending money, families are traveling less and electing to “vacation” at home. So outdoor living spaces are still a popular home improvement. Frequent upgrades to outdoor entertaining areas include pools with rock and waterfall features; pool houses with restrooms and shower facilities for guests; extra storage areas for pool supplies and other outdoor equipment; outdoor kitchen areas; and multi-leveled decks. Sun room additions are also a popular indoor/outdoor living feature.

4.    Spa bathrooms. Homeowners want to create a relaxing, mini-spa like environment in their homes. Renovations include dual rain shower heads, deep Jacuzzi soaking tubs, quartz and granite countertops, and soft, multi-colored mood LED lighting.

5.    Pocket offices. Since most people today use laptops and other mobile electronic devices, they don’t need a formal home office or den. So, more homeowners want small home management areas, known as “pocket offices.” These small offices are often located near the kitchen or family room and feature a built-in work surface and storage area with a pocket door for easy access. They make perfect areas for paying bills, managing the family calendar or downloading recipes.

If you’re thinking of renovating your home to incorporate some of these newest trends or just want to update the overall look of your home, talk to one of the loan specialists at Grandview Lending. We’ll listen to what you want to do and help you find a remodeling loan that’s right for your plans.

Building a Good Relationship with Your Realtor

Are you on the market for a new home? If so, you’ll probably work with a realtor during the home-buying process.  

According to the National Association of Realtors, 79% of homebuyers use a real estate agent when buying a home. And there are good reasons why a high percentage of people use a realtor. A knowledgeable real estate agent can save you time since he/she has access to more resources than you do in finding available properties that meet your specific criteria. Plus, an experienced realtor can help you negotiate various factors during the buying and mortgage process.  

But you need to start the relationship with the right mindset. Because if you don’t treat your realtor with respect and professionalism, you run the risk of: 

• Delaying the buying process.
• Losing out on buying the right home at a great price.
• Having your agent drop you as a client.      

Here are some tips to consider when building a relationship with your realtor:

1.    Commit to working with one agent. A real estate agent devotes a considerable amount of time and money working to find your dream home – searching listings, scheduling home viewings, and taking you to see homes. The last thing an agent wants is for you to be working with other realtors. Show your agent some common courtesy and loyalty by working exclusively with him/her.

2.    Get preapproved for a mortgage first. It can be a huge waste of everyone’s time (you, your agent, the selling agent and the home seller) to look at homes out of your price range. Therefore, show your realtor some respect by finding out what you can afford before you start your search.

3.    Keep the lines of communication open by being honest with your agent. Don’t lie to him/her about your finances, your credit score, or if the home will be a vacation or rental property. Your agent wants to work with you and can help you find a solution if you’re just truthful.

4.    Remember you’re on the same team. Your agent is looking out for your best interest. So provide him/her with all of the information he/she needs to help you find your dream home. In return, your realtor can guide you through the whole home buying process, including: looking at homes, choosing a home, negotiating on your behalf, handling the paperwork, helping you find a qualified home inspector and/or lender, and making sure the closing goes smoothly.

By following these guidelines, you’re on your way to building a successful relationship with your real estate agent – one which results in finding the home of your dreams.

When you’re ready to find a mortgage loan, contact a reputable mortgage broker, like Grandview Lending. We can take the confusion out of the lending process and provide you with the help you need.

Survey: Homeownership Still Preferable to Renting

Even though home values are down nationwide, the majority of Americans surveyed by Fannie Mae in the fourth quarter of 2011 continue to want to own versus rent their home. Nearly two-thirds of Americans currently renting homes want to buy a house at some time in the future.

Americans, across all education levels and demographic groups, think it makes more sense to own rather than rent. Safety and the quality of local schools still are the top reasons for buying a home.

“In spite of the impact of the housing crisis on home values and homeownership rates across the country, Americans by and large still hope to become homeowners,” said Doug Duncan, vice president and chief economist of Fannie Mae. “Some may not be financially positioned to own a home in the near future, but Americans may begin to revisit that aspiration as employment and household balance sheets improve over the coming years.”

Renters specifically cited the following factors keeping them from buying a home now:

·         Poor credit

·         Bad economic times

·         The complexity of the mortgage process

Compared to mortgage borrowers, renters consistently think it would be difficult for them to get a home. They cite financial issues as the main reason why they cannot buy a home.

Other findings include:

·    African-Americans and Hispanics think it would be difficult for them to obtain a home mortgage, regardless of income level.

·       Renters who have lower levels of education think it’ll be harder for them to buy a home compared to people with higher education levels.

·       Hispanics and lower income Americans don’t think they’re getting enough information about home loans to make an informed decision.

While Americans with higher education and income levels think buying a home is a safe investment, only 63% of Americans believe homeownership has the highest investment potential.

Future improvements in employment and personal finances, a pickup in interest rates in response to stronger economic growth, and stabilizing home prices may lead Americans to become homeowners versus renting in the future.

If you’re ready to stop renting and buy a home, contact Grandview Lending. We’ll work with you to explain the home loan process and evaluate your current situation to determine the right lending solution based on your circumstances.