Monday, April 30, 2007

Why so much interest?

Why is my payoff higher (what I owe to the bank) than my last months statement balance?

Did you know when you pay May's mortgage payment you are actually paying the interest for April. So when you send in your May payment it pays from April 1 to April 30th. It is one of the few things you buy in life where you are not paying up front.

But don't worry the bank always gets their full amount. When you sell or refinance, the bank gets all of their interest at the end. Let's say you are refinancing your mortgage and you are closing on May 9th. Let's assume you already made the May payment. You still owe 9 more days of interest on the loan. So they will prorate the interest for 9 days. So lets say the balance as of May 1 was $195,000 and your interest rate was 5 .375% (I must of gotten you that rate during the refi boom... it is such a good rate for a 30 year fixed)

So $195,000 X .05375 (interest rate) = $10,481.25 (interest you would pay this year)
S0 take the $10,481.25 divide it by 365 days in a year = $28.71 (interest you pay per day)
Then $28.71 X the 9 days(when you close on May 9) = $258.44
258.44 + (the balance on May 1) $195,000 = $195,258.44 That's what your payoff would be to the bank.

The lender always gets their money. There is no way around it if you are selling your home, or refinancing. They get every penny to the last day.

So remember when you make this months payment it is actually for last months interest.

Any questions go to my website www.russravary.com and email me. Or get my phone number from my website and give me a call. Lots of good mortgage and real estate information there.

I hope that if somebody in your family has cancer may it go in remission.

Russ Ravary

Saturday, April 28, 2007

Plan your mortgage

Well foreclosures were up 47% in March. Don't let that happen to you. If you are just planning to buy a home. Be one of the smart ones. Just because somebody will allow you to borrow 50% of your income doesn't mean you should.

50% of your income to go towards your house payment is too much. You are going to be house poor. You want to be in the 35% range. The only reason you should be stretched out that far is that you are going to get big raises in the next few years. Or you are a young professional like a doctor and you know for sure your income is going to rise dramatically.

28-38% used to be the range that banks would loan you. The banks like you to have reserves (savings). Do you have savings in the bank? Do you have 6 months to a year of savings to pay all your bills? For example do you have enough to pay all your credit card bills, car payments, cell phone bills, utility bills and house payments and taxes.

The good borrowers do, they have back up so they can pay their bills even in bad times. That's how they keep their good credit rating. I'm not saying you shouldn't buy a house if you don't have that much saved. What I am saying is that is what you want to strive for. Live within your means, feel relaxed, be able to take vacations, be able to help your kids through college, be ok if your have medical problems in life. You don't want to be that Walmart greeter. Sure it is ok to be the Walmart greeter at 70 years old because you want something to do, but it is a whole different thing to have to go to work so you can afford your house payment or be able to eat.

Too many people want the big beautiful house and the fancy cars. But think how embarrassed you would be to tell your family and friends that you lost your house in foreclosure. Be one of the smart ones in life. Once you start on this path you will be glad you did.

So when you are out shopping for a mortgage, don't ask how of a house can I buy. Instead figure out yourself what payment can you afford comfortably. Then ask your mortgage professional the interest rate and how big of a house that payment can buy.

May unexpected money come your way this week. For more mortgage information and Michigan real estate information go to www.russravary.com

Russ Ravary
"your real estate and mortgage specialist"

Wednesday, April 25, 2007

PMI mortgage insurance

What is PMI and why do you have to have it?

PMI is Private Mortgage Insurance. It is insurance that a lender or bank makes you get when you borrow over 80% of the value of the home. The more you borrow over 80 % the bigger the risk you are. So the bank makes you take insurance out to cover their risk.

The more you borrow the higher the PMI. Different banks determine PMI differently based on the type of loan, the length of the loan, and the percentage of loan as compared to the purchase price of the home. This is called LTV ( loan to value). If you borrow 95% as compared to 85% the PMI is going to be higher on the 95% because you are a bigger risk.

The only way you can get rid of PMI after you get it is to refinance out of it or pay your principal balance down on the loan to 78%. You cannot get an appraisal showing that the value of the home went up. (Even if the amount you owe is only 78% of the market value of the home). The only exception to this is if you did capital improvements to the home such as an addition. Then you have to document the improvements and get an appraisal done. Many times the bank requires you to use their appraiser or an appraiser on their approved list. So you are going to have PMI for at least 5-10 years usually.

So before you get a loan with PMI look at all your options. Some banks and lenders offer a loan with a higher interest rate where the PMI is built into the price. (There is no actual PMI but you are paying a higher interest rate). Or you can split your loan into 2 parts. You can do an 80% loan and then do a 2nd mortgage for the rest.

Let’s say that you want to borrow 95% on a purchase price of a $200,000 home.
You would be borrowing $190,000 total. You would split the loan into an 80% 1st mortgage of $160,000 and a 2nd mortgage of $30,000. You are still borrowing the same amount but split into two loans. The first mortgage is usually at a good rate and the 2nd mortgage is at a slightly higher rate.

When you borrow over 80% of the value of the home (or purchase price). You have three choices.
1) One loan with PMI
2) One loan with a higher rate that basically has the PMI built into the rate
3) Two loans. A first mortgage and then a 2nd mortgage with a slightly higher rate.

PMI is usually not tax deductible but in 2007 it was. It will be up to the law makers on how long it will stay tax deductible.
The bottom line is that you need to have your mortgage person (i.e. Russ Ravary) run the scenarios for all three. The one with the least expensive payment is usually the way you want to go. That is if PMI is still tax deductible, the lengths of the loans are the same, and the rates are fixed. (sometimes the rates on the seconds can be variable, be sure it is a fixed rate)

If you want more information on mortgages go to my website Michigan mortgages www.russravary.com. To to search Michigan homes in the privacy of your home at your convenience go to www.russravary.com

May your work week fly by and your weekend seem to last forever.
Russ Ravary
"your one stop mortgage and real estate specialist"

Wednesday, April 18, 2007

Time to start saving

I'm a big cheerleader for new home buyers to try to save money before they buy a home. I want you to be able to afford the home. I want you not to go into foreclosure.

In the past few years to many people bought homes with no money down and no savings in the bank. Hello, home ownership takes money!!!!! What happens if the furnace breaks down, or the roof leaks. Where are you going to get the money? Homes cost a lot of money. Ask anybody. All homes are money pits. You can throw all the money in the world into a home and it will disappear.

Mulch the flower beds, put flowers in, change a light fixture, fix the running toilet, or the dripping faucet. All of these things are going to cost you $25.00 just to get you started. If you lived in an apartment or with Mom and Dad you complained to management and it was eventually fixed.(Maybe) Well now it is up to you to get it done. You may be able to fix it yourself, or with a friend's help, but you may have to pay to have it fixed. You need money, not the VISA card. You don't want to bury yourself in debt. You might even have to buy the tools to fix the problem.

Do yourself a favor. Save 2 or 3 months of your projected mortgage payment with taxes and insurance as a back up. They had a word for it "a rainy day fund" It's not new but many people in foreclosure never had one or bothered to think about it. There is no reason to lose your house if you plan ahead. (Unless you have health problems and or unable to work)

I would rather not have your business today if you have the ability and foresight to save your money for a safety net. There is lots of good homes out there at a reasonable price. Homes are not going up in price in the near future. Save your money, get a good deal on a home. You'll thank yourself later as some of your friends, family, or co-workers are losing their houses.

If you have questions on what a home payment will be contact me at my website www.russravary.com I will be glad to figure out your mortgage payment and what it will cost you to get into a home.

If your troubles seem insurmountable ask a friend or loved one to help you solve them.
Russ Ravary

Monday, April 16, 2007

My rate is going up what do you do?

If you just received a letter in the last few months informing you that your interest rate is going up then you don't want to wait. Call your local mortgage person, or myself www.russravary.com and start checking into it. You should never give out your social security number to more than 2 or 3 lenders. Preferably you want to meet them in person.

If you have your credit run by more than 2 or 3 lenders you have a chance of your credit score dropping. Your credit score drops because there is too many inquiries. It signals that you are getting more credit. It drops because it is an unknown. How much credit do you apply for. If you applied to four different credit card companies for 4 different cards of $10,000 each and you ran them up. Then you are a credit risk. The credit bureaus have no way of telling what you are doing. So they lower your score until they know. They don't know if you have been turned down, if you are shopping for a good rate, are in trouble financially, or what.

Find out if you can refinance and fix your rate. Go over the different scenarios with the lender.

May this week bring you good news.
Russ Ravary "your friend and mortgage consultant for life"

Friday, April 13, 2007

Millage Rates in Michigan

Here is more on millage rates in Michigan.
The first year you are taxed on the SEV value and then from then on you are taxed on the taxable value. Taxable value can rise up to 5% or inflation which ever is less. But remember inflation on the house can be negative so sometimes taxable value and SEV can go down.

In a market where property values are rising SEV becomes less and less important to you after the first year because the taxable value should be less than the SEV. Usually when you are buying a house you will notice that if somebody has lived in the house a long time the taxable value is much lower than the SEV. That is because of Proposal A limits the increase in taxes per year. The estimated market value according to the state has risen faster than the taxable value. Proposal A saved us money!

However if values fall as they are now the assessor should lower the SEV. (they should but they don’t always do it because the city loses tax revenues). Let’s say you bought it for $300,000 in 2005, then the SEV is $150,000 in 2005. The assessor may say that the house is now worth 145,800 now so your taxes will go down in 2006. So let’s say you bought the home in 2005 at the peak of the housing market. Now two years later your house is worth less. It should reflect that in your SEV and taxable value. They both should have gone down.

The way you have to fight it is first get your facts. You need houses that have sold in the neighborhood and in the city that are comparable to yours. I.E. roughly same square footage, roughly same age, same style. They need to have sold for less than what your bought yours for and what your taxable value is. You need more than one house to support your claim. The more houses you have and the closer they are to your home the better chance you have of getting the assessor to agree with you and reduce your taxable value. Then you have to call the assessor’s office and find out the procedure to protest your taxes. Sometimes you can only do it once a year, sometimes you have to put it in writing, sometimes you have to go in front of a board.

It is worth the hassle! It will save you money for years to come when you get it corrected.
Want to figure out what your taxes are going to be? Here is the formula :

Value determined by assessor divided in half = SEV (State equalized value)

SEV X Millage rate = taxes

For example a you are buying a $400,000 house in Brighton. Let's say the SEV by coincidence corresponds to the purchase price. So the assessor estimated the house value at $400,000 too. So $400,000 X 50% = $200,000. So SEV is $200,000

$200,000 X .0361558 = $7,231.16 a year in taxes.

Two things to remember SEV can be less or more than the purchase price of the home or the offer that you are going to put in. But you are most likely going to pay based on the SEV unless you fight it with the tax board or assessor after you move in ( usually when you get your tax bill).

Remember this is only for homesteaded taxes. A homestead exemption, now known as a principal residence exemption may be used by a person who owns and occupies a home as their principal residence. If this is true, the person may claim an exemption from the 18 mills levied by local school districts for operating purposes. Again in English - Homesteaded taxes are a reduction in taxes based on that you use a home for your primary residence.

So Non-homesteaded taxes are on vacation homes, rental properties, and investment properties.

If you are not living there full time, you can not claim it. You cannot claim one house, and your wife, claim another. If you claim a homestead in another state you can not claim it here. If you try to cheat the state and they catch they can take away the homestead deduction on all your homes and make you pay back the taxes you should have been paying and penalty interest.

If you wish to search Michigan Homes or need more information on mortgages or real estate in Michigan go to my website http://www.russravary.com/
I hope this information on millage rates helped you. Russ Ravary

Wednesday, April 11, 2007

Michigan millage rates

People are generally confused when they get their tax statements or trying to figure out millage rates. I even have to explain it to real estate agents in the office.

Millage rates are different for each city and even different within that city because of different school systems inside that city. For example Dearborn Heights has six different school systems inside the city. So according to what city you live in, where you live within that city, and what school system your kids will go to will determine your millage rate. Canton has one school system and one millage rate, Brighton Township has 3, Livonia has 2.

There is a winter millage rate and a summer millage rate. They usually call winter taxes city taxes and summer taxes county taxes. There are different assessments on your property that add up to your winter and summer rate. For example a portion goes to the county (for the different county projects and maintenance of county buildings and roads). A portion goes to the school system, some may go to the library, some may go to roads, some may go to different projects the city is funding, etc, etc…. Remember when you voted last time and you voted for or against a tax increase for the schools. Well that would have increased the millage rate. To impose a higher rate some of them are voted on, some do not have to be voted on.

There are 2 numbers you need to know when figuring out your taxes. One is SEV, which means state equalized value. The state estimates what your house is worth. SEV is normally determined by your city or township assessor. It is 50% of what they believe the house is worth. For example if the assessor thought your house is worth $250,000 then your SEV will be 125,000 ( I will get into how to fight a bad SEV)

The second is taxable value. Proposal A of 1994 changed the way taxes were determined. Instead of increasing taxes based on 50% of actual cash value, commonly referred as SEV (state equalized value) now after the first year you buy a property taxes are based on taxable value. If a property is not acquired during that tax year then the increases in taxable value are limited to the lesser of five percent or inflation. So boiling that down in English the first year you buy a home the taxes are based on SEV. The second year the taxable value is SEV plus the lesser of five percent or inflation. The first year you are taxed on the SEV value and then from then one you are taxed on the taxable value. More on Millage rates next time. To see what your Wayne county millage rates, Oakland county millage rates, Livingston county millage rates is go www.russravary.com

I will continue on about millage rates and determing them in my next blog.

If you just want to search Wayne county homes, or search Livingston county home, or search Oakland county homes then it is easy and free on my site with no log ins or information requested from you. Surf for homes when ever and where ever you want.
May lady luck be with you today!
Russ Ravary

Saturday, April 7, 2007

FHA Mortgages

I believe a FHA Mortgage is great for most first time home buyers that do not have 5% or more to put down. The reason I say this is that they allow people with past bruised credit to buy a home. They allow people with limited credit history to buy a home. They allow you to buy a home with very little down and allow the seller to pay closing costs. And the best reason a FHA mortgage is great is that the rates are good. You are not usually going to pay an exorbitant rate!
FHA is home buyers program that allows you to get a good rate if you had bad credit in the past. FHA usually wants you to have good credit for the past year. FHA loans are sometimes the stepping stone between bad credit and excellent credit.
If you are thinking of buying a home whether it is the first time or you have bought homes before I would ask your mortgage person about them. It may be the way for you to go and get into a home at a great rate. Visit my Michigan mortgage information page for more information or email me at my website http://www.russravary.com/ to see if I can get you a great rate.
Hug your children just for no reason and tell them how much you love them.
Russ Ravary

Tuesday, April 3, 2007

No Money Down Purchase

Are you thinking of buying a home but you have no money to put down? There are still no money down mortgages. What that means to you is that you can actually still buy a home and not have any money in the bank or need money for closing. And it is perfectly legal!!! The banks will lend you the money at a higher interest rate (not much higher than normal).
The banks categorize you, the new home buyer as a higher risk since you do not have money, so they charge a little more. You will have to have good credit in this market to get a 100% financing loan.
Do you know what closing costs are? There are fees associated with closing on a home. You have to pay the seller of the home back for taxes he paid in advance, you have to pay for an appraisal, bank fees, and title costs. Depending what state you are closing in those costs can range from $1500 -$3000. But don't worry those costs can be covered too if you have a good real estate agent. Your real estate agent can put in the purchase agreement that the seller will pay 3% of the selling price towards your closing costs. You can actually buy a home with no money what so ever!!!
However it is better to put money down to buy a house. You will get a better rate, and most of all you will truly feel home ownership because you have something invested. You can get an FHA mortgage with only 3% down! I will go into that in my next blog.
If you are interested in finding out whether you qualify to buy a home, go to my web site on Oakland County Homes www.russravary.com You can email me from the site or fill out one of the many forms for information.
Also if you want to Search for Michigan homes free go to the site. Or click on search for Michigan homes free.
Drive safely and if you break a traffic law by accident may there be no policeman around to give you a ticket! Russ Ravary