Tuesday, July 27, 2010

Refinancing Mortgage Often Smart - Even if You Have to Pay

Many homeowners are looking into refinancing as mortgage rates have fallen to record lows.

At the height of the housing boom, refinancing was doubly rewarding: You could lower your monthly payment and extract some cash to spiff up the kitchen.
With mortgage rates at record lows, refinancing still offers the promise of lower monthly payments. But forget about that Sub-Zero refrigerator. Instead of taking cash out, you may have to pay cash upfront when you refinance.

Here's why: If the loan-to-value ratio of your new loan is above 80%, a lender will probably require you to pay private mortgage insurance, which could wipe out the benefits of reducing your interest rate. You may also be ineligible for the lowest rates.

Suppose, for example, that you bought a home several years ago, when fixed mortgage rates were 6%. You paid $200,000 and put $10,000 down. You currently owe $180,000, but your home's value has declined to $160,000. To refinance to a lower rate and avoid private mortgage insurance, you'd probably need to put in $25,000 to $30,000, says Bob Walters, chief economist for Quicken Loans.

"You're going to pony up what is probably the equivalent of another down payment," says Keith Gumbinger, vice president of HSH.com, a mortgage publishing firm.

In the first quarter, 18% of borrowers who refinanced paid cash as part of the deal, according to Freddie Mac. Cash-out borrowers represented 28% of refinanced loans. Over the last two quarters, the percentage of cash-out refinanced loans hit the lowest level since Freddie Mac started analyzing the loans in 1985.

As long as rates remain at record lows, the trend toward cash-in refinances will likely continue, says Frank Nothaft, chief economist for Freddie Mac. Freddie Mac will release figures for the second quarter on Wednesday.

A good investment?

Interest in cash-in refinancings isn't limited to homeowners with unfavorable loan-to-value ratios, says Anthony Hsieh, chief executive of LoanDepot, an online mortgage lender. Most of LoanDepot's cash-in borrowers have plenty of equity, and are primarily interested in accelerating the payoff of their loans, he says. Many are shortening their 30-year loans to 20, 15 or 10 years, he says.

Often, these are people who didn't lose their jobs or homes during the downturn, and still have good credit scores, Hsieh says. They have some extra money, but don't trust the stock market, and are tired of earning abysmal rates on low-risk investments.

"You have consumer psychology coming out of a very challenging recession, low (mortgage) rates, and a lack of options for putting your money to work," he says. "All of that together created a perfect situation where cash-in really makes sense."

But before you write a check to a lender, sit down with a calculator and figure out whether the savings from a cash-in refinancing are worth the cost. What you need to consider:

•How long you plan to be in your home. With a conventional refinancing, borrowers often recover their upfront costs in a few months. But with a cash-in refinancing, it could take you much longer to get your money back, Gumbinger says.

Most borrowers will need to stay in their homes for at least five years before the investment starts to pay off, he says.

•Where you'll get the money. If you have money in a bank account earning 1% or less, you could earn a better return by buying down your mortgage rate, Walters says. Suppose you have a 6% rate on a $200,000 mortgage and pay $20,000 to lower it to 4.75%. You'll save $2,300 a year, which is a much better return than you'll get from your bank, Walters says. "If you have the means, the math makes a lot of sense."

But having the means to pay down your mortgage is key. You shouldn't deplete your emergency fund to lower your mortgage principal, Hsieh says. Lenders are much more reluctant to approve cash-out refinanced loans than they were a few years ago, so you may not be able to get that money back out if you need it, he says.

And while your home may look like a safer place to invest than the stock market, buying down your mortgage isn't risk-free, Gumbinger says. If the value of your home declines and you have to sell, the amount you spent to buy down your mortgage could disappear.

"Are you going to be there long enough at the very least to get your money back?" he says. "That's your primary consideration."

By Richard M. Hackett for USA TODAY

Thursday, July 8, 2010

Tax Credit Extension - the Latest

What Good is an Extension without a Loan Approval?

The deadline for the homebuyers "tax credit" due to expire June 30 has been extended to September 30. Not only is the extension great news, but interest rates have fallen over .375-.50% since the end of April according to Freddie Mac.

This could effectively reduce a buyer's monthly payment over $600-800 a year on a $200,000 30-year fixed rate loan!

Unfortunately, for the estimated 180,000 homebuyers this extension impacts, their closing was held up by the lender. Some of the reasons may well be legitimate and some unfortunately may not be.

If you know someone who has had difficulty getting their loan closed, call me. Just because someone has been unable to get a loan closed so far does not mean that it may not be able to close. What's more, we closed a lot of loans in May and June for people who submitted their application after the Tax Credit's April 30th contract deadline.

I'll review anyone's situation and offer my opinion on what their options might be - no cost or obligation.

NOTE: the Homebuyer's Tax Credit extension only applies to people who were under contract by the initial April 30th deadline. Homebuyers who entered into contracts after April 30th remain ineligible for the tax credit.

Thursday, July 1, 2010


New Search Engine Optimization Technology Ready to Revolutionize Real Estate Industry

The real estate industry has seen a huge number of changes over the past 20 years with the advent of pagers, cell phones and the Internet, and a new one coming out now for search engine optimization will do the same thing with how agents market themselves online in 2010 and beyond.
Since 1999, the real estate industry has seen less than 1% of home sales come from the Internet to over 80% in the last 2 years. The changes keep coming, and real estate agents and brokers are doing their best to keep up by creating websites and search engine rankings to get to where the buyers are coming from.
Agents spend thousands of dollars and more to pay for SEO work and marketing to get first page rankings for a few major keywords in Google, Yahoo and other major search engines. Pay-per-click offers some traffic, but the costs can get expensive, and many agents are not happy with the results they get.
All of that will be changing very soon as a new IDX/MLS search engine marketing system begins to hit the real estate industry over the next 12 months. It is a new "SEO" technology that will revolutionize the real estate industry one more time and enable real estate agents in the middle to low productivity class to compete with the "whales."
What is it?
It is a technology that breaks down an agent's IDX feed and creates thousands of Web pages all targeting long tail keywords and adds them to their website.
Why is it powerful?
Because over 70% of all keywords typed into Google looking for real estate are long tailed keywords. Long tail keywords are normally 6-7 plus word searches for real estate like:
"2 bedroom condo for sale in la jolla"
"gated home for sale in del mar"
"3 bedroom oceanfront condo for sale san diego"
Compared to short tail keywords where most agents are bunched up like:
"san diego home for sale"
"san diego real estate"
"san diego condo for sale"
This technology first grabs up hundreds of long tailed keywords and then begins to also pull short tailed keywords over time.
When agents start getting hundreds of Web pages ranking in Google, they are going to start seeing much better results in the form of home sales, plus the long tailed keywords normally convert into a better quality lead since the searches are much more specific.
Why will it revolutionize the real estate industry?
1. Because it is going to put agents using it at a huge advantage against agents and brokers who do not. Agents who have hundreds of pages ranking in Google will start getting better results than agents with a handful or couple of keywords. It is no longer about who can spend more, but rather where you are spending your marketing dollars that matters. The costs are low enough so anyone can afford it, which levels out the playing field for agents.
2. It is a technology that goes after where the vast majority of searches are being done online (long tail keywords) -- and it is very affordable. After reviewing data last week from Google Analytics, the total number of long tailed keyword searches amounted to 80% of the total searches being done. Most agents and SEO experts do not realize how many searches being done are coming from these long tailed keyword phrases. Considering the fact you can create a couple thousand pages and target hundreds of keywords for $600 makes this affordable to the everyday agent looking for ways to maximize their marketing budget.
Also consider the options that most real estate SEO companies offer now which is "spend $2,000 to $5,000 for search engine optimization and get 3-5 keywords on the first page of Google." The cost is much cheaper than traditional SEO packages, and the results are greater because relevant data from the listings in the MLS is being used to provide the content and pages are not created from scratch. You are not just ranking in Google for 3-5 keyword phrases but rather "hundreds" of keyword phrases, which when added together become significant.
The long tailed keyword pages will eventually get rankings for short tailed keyword phrases after doing long term link building. This is a much cheaper way to get results than what the vast majority of companies are charging.
3. This is a low cost form of SEO which targets hundreds of keywords and creates a massive blanket of Web pages which are attached to the agents existing website. You keep the website you have and add thousands of pages to it. The option for starting with a new website is available as well, but many agents have had the same website for years and are happy with it, so this creates a cutting edge way to add to it and keep building it out.
How many companies offer this type of service?
The fact is there are a few companies who have versions of this technology, but they either charge $5,000 for the build out or they simply take the MLS data and paste it on the Web pages. This is not as effective as re-writing all the title lines and anchor text for each listing and re-classifying it for multiple categories.
This new technology is different because it re-writes all the title lines and anchor text, and it classifies the listings according to how they are being searched for. This puts the content on static Web pages for search engines while still staying compliant with the MLS boards on how the information can be displayed.
It updates all the pages and listings as the MLS data updates and is able to transfer ASP data into static feed data and create the static feed data on the fly for anyone who is tech-savvy. If you do not understand that, do not worry since all you need to know is that 1) it works very well and 2) it is cheap to get started. A couple thousand Web pages can be created for $600.
Because most companies simply copy the data, they can only offer the content to one agent per market place because, if they build it out for anyone else, it would be duplicate content. This new technology can spin and re-write the data so that Phoenix -- as an example -- could have 3,000+ agents all with different Web pages and content.
Not MLS limited -- What do you mean?
The fact is that other companies who offer similar versions are limited to offering this service only to areas where they can get an MLS feed. With over 900 MLS boards around the country, this is very limiting since each board has different costs and access to vendors making this a real big pain to deal with. This technology can use the MLS feed when available or use Google Base, if the MLS provider is too expensive or difficult to work with. This means that this service is available anywhere in the United States and Canada.
A few large website companies are now looking at using this technology for their clients since many website companies need something to keep their cancellation rates low and also something to give them an edge over their competition. Agents who are tired of pay-per-click and poor results with other forms of marketing are starting to invest in setting up these massive Web page grids and pull in more buyers off the Internet.
The sooner you can put it to use, the faster you will see the power of this technology and how effective it is as a low cost way to target Internet buyers and traffic and start expanding the number of home sales and search engine exposure you are getting. For more information on this new SEO service for real estate agents and mortgage lenders, check out the Real Estate Marketing Nerds website or e-mail info@multimediaicon.biz.

By: Sean Callahan, www.rismedia.com