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Renovation loans were on my mind this 4th of July

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We hope you enjoyed a safe and invigorating Independence weekend!

Saturday night during the Riverside show a gentleman leaned toward me and dare-told me why I love fireworks so much.  The reason he said was they offer the ideal combination of fear and love.  We fear the boom.  We love the multi-colored lightening.  Wow, I said, and then I remembered how I just thought they looked cool.  And then he added:  all things become the most attractive when they appeal to our dreams and stimulate what we want.

And that is what I needed to hear.  The holiday recharge I needed.  That is what we want to provide on every real estate deal.

That is why people love to buy houses.

That is why I want to promote our renovation loans.  They make existing inventory more attractive – if we can show how these homes could become more attractive.  If we stimulate our buyer’s wants, we can then re-model a home in a way that appeals to them.

 

Brooklyn-Brownstone-Kitchen-Before-After1

So, a short list for considering a renovation deal:

1.      Determine your client’s goals and inspiration.

More details = more accurate planning. Chances are they’ve already spent time on Pintrest and Houzz anyway, so this shouldn’t be too hard.  Get them organized into a folder, binder, whatever, but get organized.

Now we need to make sure the budget and the location of the house supports the value of the visual stimulus they have created.

2.      Gather bids & references.

Make sure you gather at least 3 renovation bids.  You have to know your numbers before you make an offer.  If I were reviewing an offer to contract on real estate, I would want to see the renovation figures to determine if the offer is realistic.

Check all references, and that should be at least 3 from each contractor.  This could be the most important step, where they will find the best way to reduce their overall risk for the money they will spend. The small amount of time it takes to check 3 references could save the time it takes to re-do a project.

(Search NARI online. The National Association of the Remodeling Industry has local chapters throughout the country and are an excellent source for qualified contractors in our area.)

With jumbo loan renovations (up to $150,000 in construction costs), you are going to need architectural plans.  We often see architect-prepared blueprints that are over-designed and not sensibly matched to the project’s budget. To avoid this, recommend that the architect prepare a conceptual sketch and that they confirm the design with his, her or your qualified remodeler.

3.      Confirm these changes with an appraiser.

So, your client wants to gut a perfectly good kitchen instead of adding a second bathroom? An appraiser will help you echo the same sentiments in “dollar amount” that you try to get across to them: how do we add “sales approach” value to this home?  

Consider getting your own square footage appraisal to confirm exact measurements.  You may need it to update the courthouse records.  A square footage appraisal can be had for as little as $100, and allows you to open a conversation with an appraiser.

4.      Coordinate financing.

Are your clients able to use cash for this renovation? Or, would they prefer to compound earnings in the money markets, and instead borrow the money at historically low mortgage rates.  Borrow low, invest high, right?

We offer renovation options with every loan type we do.  If renovations are small, we can simply escrow for a fast closing.  If the job is large, we do jumbo renovations up to  $1.5 million in loan amount.

Or – maybe they are considering a line of credit.  Renovation loans offer one time closings, lower overall fees to interest rates and higher loan to values in most comparisons.  And the borrower gets up to 30 years to re-pay, or as little as ten.

5.    Call me for clarification – then go shop.

At the end of the day, your client’s objective is usually more cosmetic than it is structural.  We have to step up our game and guide the process in a successful manner.

Similar to the fireworks this holiday, it is important to enjoy and participate in special things.

 

 

 

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Copyright 2015 John Regur All Rights Reserved – Originally Posted at: Tulsa Oklahoma Mortgages – John Regur

Posted in: Remodeling

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When Do Interest Rates Go Up in Tulsa, OK?

When Do Interest Rates Go Up in Tulsa, OK?

When do interest rates go up in Tulsa, OK?

Everybody is talking about interest rates, particularly about how they will move and when to lock your rate in.  So, how do interest rates move?

It all starts with securitization.  That is when a bunch of individual mortgages are put together into a giant pool of loans.  That pool of loans is further segmented down into mortgage bonds, which themselves are classified based on their risk profile – from AAA rated bonds (the lowest risk class) to unrated bonds (or “junk bonds”,the highest rated risk).

Every day, Mortgage Backed Securities are traded, just like stocks – and like stocks, Mortgage Backed Securities are very volatile.  Today they moved up and down all day, as they do every day.  Now the price of these bonds, and the mortgage rates that are tied to them, move a lot like a teeter totter.  When price goes up, rate goes down, and vice-versa.  To monitor these price movements, charts are used like this one:

candle

This chart is called a Japanese Candle, and we use these charts to identify and forecast patterns in the bond price movements.  These patterns have all kinds of  cool “industry” terms, like “downward breakout”, “triple-bottom” and the “double top”.  Some prefer to see an “inverted hammer”, especially if it is a lead toward a “heads and shoulder pattern”, which can be an indicator for a Stochastic Crossover.  But here is the juxtaposition of it:

Green is Good and Red is Bad.

Anytime you see green on this chart, bond prices are going up and rates are going down.

The point here is that bond prices change constantly and mortgage rates simply follow those prices.

So what can we monitor to stay in front of these price changes?

Well that leads to a big debate in the lending industry:  The Ten Year Treasury vs. Mortgage Backed Securities.

Depending on what your read and depending upon who you talk to, many Tulsa, OK, mortgage companies may tell you that the 10yr Treasury is the preferred index for monitoring the direction that mortgage rates are headed towards in the coming weeks.  But since most rate locks are in regard to a short term consideration, say 30 to 45 days lock periods, I find this method flawed.

There is a huge difference between the 10 Year Treasury and Mortgage Back Securities.  Primarily, there are three:

  1. Maturity – such as 10 year vs. 30 year, or variable factors
  2. Risk – such as default or prepayment
  3. Correlation – short and long term relationships between factors

This is boring stuff, but the point is 10Yr Treasuries and Mortgage Back Securities often diverge, meaning while one is going up the other is going down.  If you want to know the value of Apple Stock, you cannot just look at technology indexes or, let’s say, Microsoft stock.  If you want to know the value of a specific stock, you have to watch that specific stock.  The same principles should hold true to the 10Yr Treasury and Mortgage Backed Securities.

Now, that is not to say that we don’t need to understand 10Yr Treasuries, because Mortgage Backed Securities are competing for the same investment dollar.  And by that I mean that the economy as a whole has an impact on the prices of mortgage bonds.  Depending on what employment is doing, or gas prices or the stock market – all of these have an impact on the pricing of Mortgage Bonds.

The one thing we should really try to avoid is the media.  The mortgage related news is several days behind, at best.  When mortgage rates are improving I often will see negative headlines.

So how do you lock into the lowest rate possible in Tulsa, OK?

Contact me, and let’s get ready to be ready.  The more we can do to get your credit score over 740, the better the rate.  The more we can do to complete document your loan, the shorter lock period we will need.  Remember, we can’t lock until we are ready, so quickly we must get ready.

Copyright 2014 John Regur All Rights Reserved – Originally posted at: Tulsa Oklahoma Midtown Mortgages – John Regur

Posted in: For Buyers

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