No-cost loans and how they work

How can people do a no-cost loan, there must be a gimmick. No cost loans are they for real? True No fee loans or true no cost loans are done by many mortgage brokers, banks, mortgage lenders. When you borrow money you usually have to pay appraisal fees, title insurance, title closing costs, bank processing fees, flood insurance checking. These fees add up to $1200 -$2500 depending on the bank and the size of the loan. So how can somebody do a no cost loan?
Here is how they work. Loan officers, banks, mortgage brokers make more money the higher the rate they sell you. For example at 4% they may make get 1% of the loan amount. So at 4.25% they may make 1.4% of the loan amount and at 4.65% they may make 2% of the loan amount.
So lets use the example above on a $200,000 loan. If your Michigan mortgage person does a 4% loan for you they make 1% of $200,000 or $2000 that is split between the company for overhead and the mortgage person.
Now if you have $2000 in closing costs they can give you a rate of 4.65%. They make 2% of $200,000 or $4000. They take $2000 of that money to pay the closing costs out of their pocket. That is how a no cost loan works. It is also how one bank or mortgage broker may have lower closing costs than somebody else. They are taking some of their commission to pay your closing costs.
Is it worth doing a no cost loan? Let's say you have a 5 1/8% loan on $200,000 with a payment of $1088.97 a month that you got last year. Your mortgage person offers you a 4.65% no cost loan with a payment of $1031.27 that does not cost you a dime or raise your mortgagebalance. You save $57.70 a month! You would save $20,772 over the life of the loan. It is a no brainer.
But let me play the devils advocate here. Why wouldn't you do the 4% loan? I this case I would if I had the $2000 in closing costs and I did not have to roll it in. The payment on 4% is $954.83 a savings of $123.04 a month which means it would take 16 1/2 months to break even. Are you going to stay in the house for over 16.5 months. Then it would be worthwhile to do the lower 4%. The payback time is different for every loan and every percentage rate.
You have to work the numbers when offered a no cost loan. Ask your mortgage person for the full fee loan too. Then make a decision after you run both payments and figure the payback time. Many times it is not worth it to refinance but it might make sense to reduce your payment if it does not cost you a dime.
For more on Michigan mortgages, credit scoring, and Michigan real estate feel free to go to my website www.russravary.com Have a great day!!! Russ Ravary

Fed drops rates again

The Fed drops it rate again, and it had no effect on the Michigan mortgage interest rates today. 30 year Mortgage interest rates are still below 6% but have not dropped dramatically for any length of time. Hopefully in the next month we will see rates slowly creep down. There are a lot of people out there that could use a break to get their adjustable rate mortgages changed into a fixed rate mortgage.

If you have an adjustable rate mortgage you should contact a mortgage person. They can check the value of your Michigan Home to make sure a bank will even loan against the house. Many homes have lost a lot of value making it impossible to refinance. Also the loan officer can put you on a watch list so when the rates do come down that you will be notified. It may make sense for your neighbor to refinance at 5 3/4% where it may not save you any money because you had a lower rate than he did before. You may need it to come down to 5 3/8% before it makes sense to do it. A No-closing cost loan may make sense for you. Email me at info@russravary.com to find out when it would make financial sense for you to refi and to be put on a rate watch list. For more on Michigan mortgages and Michigan homes for sale go to my website www.russravary.com

Have a great day. Russ Ravary

Why rent, when you may be able to buy

If you are renting the main question you should ask yourself is "DO YOU WANT TO GET AHEAD IN LIFE?" It is a fact that people who own houses are wealthier than people who rent. When you buy a home it is like a forced savings plan. Each month you make a house payment some of the money goes to reducing the amount you owe on the house. The longer you pay the more you are paying off the house without your payment going up!

If you have rented for a year, wouldn't be great to know that $1000 of that money you paid in rent was your money, your asset, your wealth. Well sorry RENTING DOESN'T WORK THAT WAY, BUT BUYING A HOME DOES! If you are renting in Southeastern Michigan and would like to find out whether you can buy a home feel free to contact me at info@russravary.com or visit my website www.russravary.com for lots of great buyer tips and first time home buyer advice. We can help you plan, or get started right away to buying a home of your dreams. We even help you straighten out your credit if you have past credit issues.

Credit and buying your own home

Building your credit is a important step in buying a home. With banks tightening the credit guidelines it is more important than ever to get your credit report and go over it with a professional. A mortgage person, a loan officer, a bank loan officer are all people that can help you get a credit report and get you started on clearing up your credit.. All of us should help you, after all we want you to come back and use us.

Bad credit is nothing to be ashamed of. Most of us go through it at one time or another. I had bad credit when I was younger, but I climbed out of it. If you live in Southeastern Michigan and want to buy a home I will be glad to sit down and go through your credit report line by line. I can help your clean it up so you can buy a Michigan home. It is not hard, it just takes a little time.

The most important thing is to get started today to see what your credit report looks like. Once you know what your credit is, then you can take the steps needed to get starting toward owning your own home. You may have great credit and be able to get pre-approved for a home right now. Call me today on my cell at (313) 310-9855 or office (734) 414-3261 or email me at ourmortgageguy@yahoo.com For more on Michigan credit scoring or Michigan mortgages feel free to go to my website http://www.russravary.com

Have a great day "your local Michigan mortgage specialist" Russ Ravary

Fed rate and mortgage rate there is a difference!

I had a great dialogue on Active Rain.com with another Real estate agent about the difference between The Fed Rates and the mortgage interest rate.
So the Fed cut the rate.

Difference between the fed rate and mortgage interest rates.

How does a ¾ of a percent drop in the Fed rate affect us? So many consumers think that the Fed Rate is the mortgage interest rate. It is not the same thing. It is one of the most misunderstood things in the mortgage industry. The ¾ of a percent drop in the Fed rate may or may not affect the mortgage interest rate. The Fed rate and the mortgage interest rate are two separate rates. If one goes down it does not mean the other goes down too!
The Fed rate you hear so much about if the Rate the Federal government gives on overnight loans from bank to bank. We as consumers do not get that rate. Mortgage interest rates are determined by market conditions. Some of the things that affect the mortgage interest rates are:
How well the bond markets is doing? especially the 10 year bond market
How well the stock market is doing
Are the housing starts down?
Are unemployment numbers down?
How is the economy?
Are the numbers that came out today high or lower than expected?

Generally speaking mortgage interest rates get better because the stock market is doing worse and people are investing more in the bond market. It is many times an inverse relationship. If the stock market is doing good then mortgage rates are doing bad. That is generally what happens. If unexpected bad news such as higher unemployment numbers, lower housing starts, bad economic news usually results in better interest rates. Inflation, great economic news makes interest rates to go up.
So the bottom line is that a ¾ of a percent drop in the Fed rate does not correlate to a ¾ of a percent in mortgage rate. In fact sometimes when the Fed drops its rate the mortgage rate may not change at all. I have even seen it go up on occasion. Eventually some of the Fed rate percentage drop does affect the mortgage interest rate.
Think of it this way people rush to buy "safer" investments like bonds when there is bad economic news. Investors are looking for the best rate of return. So if they think the stock market is not the best place to be. There is more money in the bond market and sometimes lower rates.
The above is a brief generalization of what happens with mortgage interest rates. It is a complex item. It could take a novel to truly explain everything that affects it and how it affects it in different market conditions.
So what you need to take away from this is that:
1) The fed rate is not the mortgage rate.
2) That the mortgage rate is determined by market conditions especially the bond market.
3) The mortgage rate changes daily reacting to market news and conditions
4) If we as "mortgage experts" could predict interest rates we would be rich just like we would be rich if we could predict the stock market.
There is a point that adjustable rate mortgages should come down, along with credit card rates and home equity loans. The point that I am making is that because the Fed lowered the rate 3/4% does not mean it is going to be a 3/4% of a rate drop in mortgage rates. Tuesdays mortgage rates did not change much. Some banks didn't change at all so changed a 1/8% of a percent. Not 3/4%
Mortgage interest rates almost never correlates or exactly match the fed rate drops. Like I said sometimes I have seen them go up the day the Fed lowers their rate. In fact that is the case this week. Rates are now higher on Friday than one Tuesday when the Fed rate was cut.


The Fed rate and the mortgage interest rate are not directly correlated. The fed rate is a just one of the many factors. It is not the most important by any means. It is more market conditions that influence mortgage interest rates. The price of 10 year bonds influence it more than anything.
Take example Wednesday. Mortgage Rates did drop this morning down 3/8% from Monday's rate. So just comparing the Fed drop to mortgage rate that was just 1/2 of the fed rate drop. But what is even more interesting is what happened this afternoon is that rates jumped back up because the Dow was up. Every bank repriced. I have gotten fifteen emails stating the rates changed. . So tomorrow morning mortgage interest rates may look like they never changed even though the Fed dropped their rate 3/4%
Today's low rates were there for about 4-5 hours!

Like I said, I have seen too many times when the rate was there for a few hours or for a day. I called the borrower to inform them and then they didn't make a decision the same day. And then the rates were gone. It is a tough thing to tell a borrower that they waited to long. I know people that were waiting for it to go lower in 2003 and ended up with a 5.875% rate instead of a 5.375% rate. They didn't make a decision quick enough. When you loan officer calls sometimes you have to make a quick decision. There are lots of loan officers that will tell you horror stories of people not wanting to lock a rate and then upset that they didn't.
During 2003 there were times when the Fed lower the rate and the mortgage rate actually went up. That is because sometimes the market has already figured in the Fed's drop and other market conditions outweighed it.
I hope this explains it a little better. If a consumer and real estate agent is more informed about the mortgage process the higher the comfort level they will have. Your home is your biggest investment. Hopefully the rates come back down a little for all the people that need to get out of their adjustable rates. We all want them to keep their homes and help stabilize our economy a little more.
For more mortgage and real estate information and to search Oakland County real estate, or Southeastern Michigan homes for sale go to my website www.russravary.com Have a great day! Russ Ravary

Lower mortgage rates this week

Hello Michigan,

Many people do not follow the mortgage market. Here is the latest update. Mortgage rates for 30 year fixed mortgages have dropped below 6% in the last few weeks. The people that this might be good for:

For people with adjustable rate mortgages this may be an opportunity for you to refinance and lock in a fixed rate. It may even pay to lock in a rate now if you are a year or two out.

For people who bought a home last year, mortgage rates are much lower right now. If you put money down you may be able to refinance and save money. You can even do a no-cost loan and save a substantial amount of money over the 30 years. It may not cost you a dime.
If you want to find out how much you can save or whether you can refinance to a lower rate feel free to call me on my cell at (313) 310-9855 or email me at ourmortgageguy@yahoo.com Feel free to visit my website at www.russravary.com for more mortgage information, or credit scores, credit info.

Reducing your mortgage payment

So you got the notice in the mail that for $150 you can sign up for a mortgage reduction plan. They say they can CUT UP TO 7 YEARS OFF YOUR 30 YEAR MORTGAGE. The plan most likely calls for you to send in half your mortgage payment every two weeks. This is called a bi-weekly mortgage reduction plan.

THIS PLAN WORKS!!!!! If you break down the plan it works like this. What you are actually doing is making 13 payments a year. There are 52 weeks a year. So if you send in a payment every 2 weeks you are sending in 26 payments. So if you are sending in 26 payments every 2 weeks (26 divided by 2=13 payments) it is 13 full payments.

No, you are not sending it directly to the mortgage company usually. What the company that is promoting this is doing is having you send in the first ½ payment then holding it until you send in the second ½ payment. Then the company sends it in to your mortgage company. For this there is a $150 upfront fee and usually a $3 charge per payment. So it cost you sometimes $75 a year. Check out the charges.

Is it a good deal? Yes if you do not have the discipline to do it yourself. It pays off your mortgage quicker.

BUT YOU CAN DO IT YOURSELF AND AT NO COST! If you just send in an extra 1/12 of a payment each month you will do the same thing. Let’s say your mortgage is $1800 a month. If you sent in 1/12 ($150.00) of your mortgage payment added to your regular payment. ($1950) you should cut off about 7 ½ years. So instead of a 30 year mortgage you should be paid off in about 22 ½ years. And you did not have to pay a middleman.
Every extra little bit of money that you send in with you payment will reduce how long you will pay on your mortgage.

For more mortgage information free free to go to my website www.russravary.com

Low mortgage rates

In the last week rates have dropped below 6%. Mortgage applications in the last week have risen because of the better rates. It is a great time for people who bought last year. Many people that bought last year have rates over 6% and now is a great time. You may be eligible for a no-cost loan or you may just be able to lower your payment.

Also if you have an adjustable rate that is due to expire, it may be the time to look at refinancing. It is a time to think about refinancing your adjustable rate. The bottom line is look at both the costs, the payment, and the APR. For more on Michigan mortgages feel free to go to my website www.russravary.com
My website is full of useful information on Michigan real estate, search Oakland County real estate, Start your Michigan Condo Search, buyers tips.

Have a great night and feel free to contact me with any mortgage or real estate questions.

Russ Ravary

How to fight your michigan taxe assessment

Fighting your Michigan taxes
I will be blogging about fighting your tax assessment quite a bit the next month. Tax notices will be coming out next month. With home values falling in Southeastern Michigan you may be able to reduce your tax burden. But every homeowner that has bought a house in the last 10 years should be checking it out whether they are paying too much.

Many people do not know how to read their property tax statement. This is another item they should teach in school but they do not. It is important and people get confused about the statement. Your home is one of the biggest investments you make so reducing the taxes makes sense if the city is overcharging you.

There are 2 numbers on your Michigan property tax notice. One is the state equalized value (SEV) and the other is taxable value. State Equalized value is the 1/2 of the value the local assessor places as the cash value or fair market value of your home. Taxable value is the actual number that the municipality uses to figure how much your taxes are. Taxable value x your Millage rate = amount of taxes you owe. Normally the taxable value number is lower than the SEV.

Look at your statement. See the two numbers (Taxable value and SEV). Sure the assessor thinks your house is worth a lot. But times both the taxable value and SEV by 2. The taxable should be lower or equal to the SEV.
In order to make it worthwhile to reduce your taxes, homes in your area should be selling less that the taxable value times 2. For example. Your tax statement reads taxable value as $115,500 and the SEV as $163,750. The assessor thinks your house is worth $325,500 (163,750 x 2) but you are only being taxed on the value of $231,000 (115,500 X 2). In order to reduce your taxes in this instance, homes comparable to yours would have sold less that 231,000. You need comparables to prove to the board of review and the Michigan tax tribunal that they should reduce your taxes.
For more on how to fight your taxes, steps and timeline involved in fighting your taxes, and understanding your tax bill go to my website www.russravary.com The information is in a yellow box on my home page. Click on the section you want to know more about.
Have a great night! Russ Ravary

Closing Credit cards and home equity loans is sometimes bad

Did you know that your credit score could drop if you close out unused credit cards. The credit bureaus figure out how much you owe and how much available credit you have. The more you owe the lower your score will be.

For example you have a Visa card that you do not use. It has a $25,000 limit. With all your credit card bills, mortgage, car bills you owe a total of $ 193,625 You have a home equity line and other credit cards that are not up to their limit. You have available credit of 280,000.

The credit bureau looks at 193,625/280,000. You have $86,375 in available credit

If you closed your home equity line and a credit card you now have 193,625 in debt and only 200,00 total credit.

The credit bureau can see you are about maxed out. They lower your credit score because you are a bigger risk.

Sometimes older people have tremendous credit scores because their mortgage is about paid off, they have credit cards but not much is on them. And they have a long history. They have a large amount of available credit so their score is higher.

For more on Michigan real estate, mortgages, credit and credit scoring feel free to go to my website www.russravary.com

Michigan property taxes to high?

Fighting Your Michigan Taxes

Fighting your Michigan Property tax assessment

So you think you are paying too much in property tax. How do you know that you are? First of all, do you understand the difference between your state equalized value (SEV) and your Taxable Value?Remember you are not appealing the taxes, you are appealing the assessment, the SEV. By appealing the SEV you reset the SEV and the taxable value. It should be in your best interest for years to come.

Difference between SEV and Taxable Value
Your SEV is determined or set when there is a change in ownership of the property. I.E. when you buy the property the SEV is "reset" by the assessor to the current SEV. The state equalized value (SEV) is 1/2 the cash value of the property. (Or market value). The assessor usually determines what the SEV is by using comparables that have sold over a 2 year period. Just because you bought the house at $200,000 doesn't mean that the SEV will automatically be $100,000. The SEV value of the house may be above or below the purchase price. In the buyers market of 2007 & 2008 I am seeing many SEV's higher. That home with a $200,000 purchase price may have a SEV of $260,000.

After you buy your home then taxable value will become more important. There are two numbers on your tax bill. SEV and 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 home 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. Remember inflation on the house can be negative so sometimes taxable value and SEV can go down.
The first year you are taxed on the SEV value and then from then on you are taxed on the taxable value.

The idea of Proposal A was to limit the huge increases in property value so people would not be forced out of their home because it was worth so much. Proposal A would average out the increases in your property tax.
So after the first year the number you need to pay attention to is taxable value. That is how your taxes are determined. The taxable value times your cities millage rate will equal the amount of tax you owe. In a rising real estate market your SEV will be much larger than your taxable value. The reason for that is that taxable value can only increase the lesser of 5% or inflation where SEV is similar to the market value. In most cases if a person has lived in a home for many years the SEV will be much larger than the taxable value.
*Millage rate explanation
*More on Millage rate explanation
*Oakland County Millage rates
*Wayne County Millage Rates
*Livingston County Millage rates
*Michigan Millage Rates
So in order to reduce your taxes you must be able to reduce your State Equalized Value (SEV) below your taxable value or it is not worth fighting for.Fighting your taxes will take time, and maybe a little money. You have to remember the tax system and the municipalities want to keep the taxes as high as possible to keep their revenue up. So sometimes you will not win the tax fight. Sometimes the boards of review are a rubber stamp to say "NO" forcing you to take it to the next higher level. The system is set up to protect the assessment and the burden of proof is upon you. You must get the facts to change your taxes.

For the steps on How to fight your Michigan Property taxes, How to lower your Michigan Property tax assessment feel free to go to my website www.russravary.com and visit my millage rate explanation or fighting Michigan taxes.

Declining market stigma in Metro Detroit

What a beautiful day in the Metro Detroit.. 60 degrees in January. What a few hours and what a change it will be. That sums up the mortgage market from last year to this year. Banks are taking tremendous beatings on foreclosures. I have seen three homes in the last day that the bank is going to lose over a $100,000 on each one. The banks have tighten the guidelines, charging more if you don't have great credit. Now to get the best rate you have to have a 680 credit score or better.
You can still get approved for a mortgage but an 100% mortgage in Metro Detroit is just about gone. Many banks have identified or categorized Southeastern Michigan real estate as a "declining market" What the banks are saying is that homes in Southeastern Michigan are most likely going to continue to go down in price. To protect themselves most banks now won't lend 100% in Michigan because the house may be worth less in a year.
The bottom line is that buyers are going to need to have a down payment if they want to buy a home. Now is the time to start saving for a down payment whether you are thinking of buying next month or next year. The more you save the better your interest rate will be.

If you want more information on mortgages or buying a home go to my website www.russravary.com You can contact me at info@russravary.com or call me on my cell to help me plan your purchase.

Changing Mortgage market

Changing Mortgage market
Everybody knows that the mortgage market is changing, but here is a little update. Most of the banks are now doing even higher "hits" to high loan to value (LTV) loans based on credit scores. Loan to value means how much you owe compared to how much the house is worth. For example if you owe $160,000 and the house is worth $200,000 then your Loan to value (LTV) is 80%. Normally the banks give hits for anything over 80%. The higher the loan the higher the "hit" "Hits" are something most borrowers never even know about, but that is figured into how your rate is determined.
What is new in the last few months is that the lower your credit score the higher the hit. It can affect your rate up to 3/8 of a percent. Now the mortgage market is truly making a difference between good, better, and best credit scores. So it is more important than even for borrowers and consumers to keep on top of their credit.
For more information on mortgages go to my website http://www.russravary.com/ You can search for Novi real estate or Plymouth real estate for free. Or search for any Southeastern Michigan homes for sale without giving any information.