Friday, October 12, 2007


With the media telling us 'The Sky is Falling', should you rent, or should you buy? Let's take a minute to find out - SHOULD I RENT, OR SHOULD I BUY?

Thursday, October 11, 2007


Bank of Albuquerque Mortgage What Are Piggyback Loans? Depending on the lender or broker you’re talking to, Piggyback loans are also called: a. Combo Loans b. 80/10, 80/15, 80/20, 75/25 loans Piggyback loans combine a 1st mortgage (usually 75 - 80% of the appraised value, to avoid PMI), with a “piggyback” 2nd mortgage (usually 10%, 15%, 20% or 25% of the appraised value). Both loans are closed at the same time, and through the same lender (at least in our case). Because the loans are closed at the same time through the same lender, usually the closing costs on the 2nd mortgage are minimal. Remember, because you have two mortgages, you will have two mortgage payments instead of one. What's the Advantage of a Piggyback Loan? Piggyback loans can be used effectively in three different ways: 1. Avoiding PMI charges. This is far and away their most popular use. PMI insurance is charged on any conventional 1st mortgage loan that exceeds 80% of the appraised value. By keeping the 1st mortgage amount at 80% or less, and taking out a 2nd mortgage for the remainder, you avoid the PMI charge. 2. Avoiding Cash Out Penalties on Refinances. Beginning in 2003, Fannie Mae and Freddie Mac increased the loan costs on any refinance that used part of the proceeds to pay off a 2nd mortgage or for other purposes, if the LTV exceeded 70%. Again, by taking out a 1st mortgage for 70% of the appraised value, and doing a piggyback 2nd for the remainder, you avoid the cash out penalty. 3. Splitting a Jumbo loan into two non-Jumbo loans. Jumbo loans (loans in excess of $417,000) usually carry higher rates than non-jumbo loans. By taking out a 1st mortgage just at $417,000, and doing a piggyback 2nd for the remainder, you avoid paying the higher jumbo rates on either mortgage. Note that in all the cases above, it is not always beneficial to do a piggyback 2nd. It depends on a number of variables, such as: a. The rate on the 2nd mortgage. Second mortgage rates are almost always higher than 1st mortgage rates. b. The proportion of the loan that is 1st mortgage vs 2nd mortgage. As a general rule, the more of your loan safely contained in the (lower rate) 1st mortgage, and the less contained in the (higher rate) 2nd mortgage, the more beneficial a piggyback loan is. c. The PMI, cash-out penalty and/or Jumbo rate charge. The exact cost of whatever it is you’re trying to avoid. What Are the Types of Piggyback Loans? The first mortgage is just a normal 1st mortgage, fixed, ARM, etc. But the 2nd mortgage, depending on the lender and program, can come in two different flavors: a) A fixed rate for a specified period of time, just like your first mortgage, or like a car loan. Usually but not always, the 2nd mortgage will be for a shorter term than the 1st mortgage. b) A line of credit, where the rate and monthly payment vary depending on your balance, just a credit card account. For information contact: Bank of Albuquerque Mortgage Lisa Crain Phone: (505) 837-4214 Fax: (505) 855-7316

Wednesday, October 10, 2007


Improvement in Mortgage Market Bodes Well for Housing in 2008 WASHINGTON, October 10, 2007 - Conditions in the mortgage market are improving for consumers, which should help to release some pent-up demand in early 2008, according to the latest forecast by the National Association of Realtors®. Lawrence Yun, NAR senior economist, notes that widening credit availability will help turn around home sales. “Conforming loans are abundantly available at historically favorable mortgage rates. Pricing has steadily improved on jumbo mortgages since the August credit crunch, and FHA loans are replacing subprime mortgages,” he said. Yun said it’s important to place the current housing market in perspective, and that 2007 will be the fifth highest year on record for existing-home sales. “Although sales are off from an unsustainable peak in 2005, there is a historically high level of home sales taking place this year – a lot of people are, in fact, buying homes,” he said. “One out of 16 American households is buying a home this year. The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates and positive job gains.” He emphasized all real estate is local with naturally large variations within a given area. “Markets like Austin, Salt Lake City and Raleigh have been outperforming recently and will continue to do well next year,” Yun said. “Other areas like Denver and Wichita will likely move up in the price growth rankings due to very positive local economic developments.” Existing-home sales are expected to total 5.78 million in 2007 and then rise to 6.12 million next year, in contrast with 6.48 million in 2006. New-home sales are forecast at 804,000 this year and 752,000 in 2008, down from 1.05 million in 2006; a recovery for new homes will be delayed until next spring. “A cutback in housing construction is a positive sign for the market because it will help lower inventory and firm up home prices,” Yun said. Housing starts, including multifamily units, are likely to total 1.37 million in 2007 and 1.24 million next year, down from 1.80 million in 2006. NAR President Pat V. Combs, from Grand Rapids, Mich., and vice president of Coldwell Banker-AJS-Schmidt, said, “Housing is still a good long-term investment, and we’ll be seeing a broad, modest improvement in home prices in 2008. With widely varying conditions, the best advice for consumers is to consult a Realtor® in their area to learn about local market conditions because supply and demand can change from one neighborhood to the next.” Existing-home prices will probably slip 1.3 percent to a median of $219,000 in 2007 before rising 1.3 percent next year to $221,800. The median new-home price should drop 2.1 percent to $241,400 this year, and then increase 1.0 percent in 2008 to $243,900. The 30-year fixed-rate mortgage is expected to average 6.4 percent for the next two quarters and then edge up to the 6.6 percent range in the second half 2008. Additional cuts expected in the Fed funds rate will help to keep mortgage interest rates historically favorable. Growth in the U.S. gross domestic product (GDP) is estimated at 2.0 percent this year, below the 2.9 percent growth rate in 2006; GDP is likely to grow 2.7 percent next year. The unemployment rate is forecast to average 4.6 percent this year, unchanged from 2006. Inflation, as measured by the Consumer Price Index, is expected to be 2.8 percent in 2007, compared with 3.2 percent last year. Inflation-adjusted disposable personal income will probably increase 3.6 percent in 2007, up from 3.1 percent last year. The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries. ____________________________________ National Association of Realtors, Press Release 10/10/07 To keep updated on all information about the Albuquerque, New Mexico real estate market, contact Linda at 440-7200 or

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