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What Loan is Best For You?

Fixed Rate Loans
Adjustable Rate Mortgage (ARM)
The Margin
Caps
The Adjustments
The Index

Top 10 Reasons to Hire a Real Estate Agent

Education & Experience
Agents are Buffers
Neighborhood Knowledge
Price Guidance
Market Conditions Information
Professional Networking
Negotiation Skills & Confidentiality
Handling Volumes of Paperwork
Answer Questions After Closing
Develop Relationships for Future Business

Full-Service Real Estate Brokers & Agents

Type of Marketplace
MLS and the Internet
Signage
Marketing Materials
Open Houses
Negotiation
Final Sales Price

What Loan is Best For You?

Fixed Rate Loans:

"Fixed rate" means that the interest rate does not change, and therefore the principal and interest payment you make stays the same for the term of the mortgage note. The term refers to the number of years the loan will be repaid in. The note is the official document or IOU that says that you owe the money you are borrowing. The amount you pay to the lender will only vary as the payments for taxes and insurance change. Keep in mind that taxes and insurance may periodically adjust as those expenses change for the respective party.

There are many different terms of fixed rate loans. Most common is the 30 year fixed, but most lenders will accept terms of 25, 20, 15, and 10 years. 99% of Premier Capital Management, Inc. clients will typically do a fixed 30 year loan.

People who choose the fixed rate loan option like the predictability of the payment and never need to worry about a rising interest rate market. But as interest rates come down, they must consider a refinancing of their loan to take advantage of a lower rate and payment in the future.

As you pre-pay a fixed rate mortgage, your payment never changes but the term or amortization period decreases. You can always check your progress by charting your pre-payment on an amortization schedule.

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Adjustable Rate Mortgage (ARM)

An adjustable rate mortgage, also known as a variable rate loan, means that the interest rate is going to move, and if the rate is moving, so is the monthly payment. ARM loans became popular in the late 1980's as fixed interest rates hit a whopping 18 percent. As you can imagine, the housing market was almost paralyzed. People wanted to buy homes, but very few could afford to. So the attractive lower initial rates on adjustable' rate mortgages offered by lenders became very attractive, and actually helped the economy to rebound. Housing plays a pivotal role in how well our economy does.

Because of their shorter terms, a lender can afford to offer these loan products at lower rates, also known as "teaser" rates. These below the market interest rates usually last for a predetermined time, some as short as three months in duration. They are meant to attract the buyers who might otherwise put off their purchase until they perceive themselves to be better qualified to buy.

Standard ARM loans that Premier Lending is able to offer its clients are interest only arm loans fixed for a particular period. These loans are typically fixed for either 5, 7, & 10 years. On rare occasions we will only be able to offer a client with challenged credit a 2 or 3 yr fixed period before the loan can adjust.

The 11^th District Cost of Funds Index was developed to measure the rates paid to depositors on the West Coast. This loan has been popular for loans in the western United States.
LIBOR or London Interbank Offered Rate, has become popular indicator because of its lagging index. In other words, it is not immediately impacted by market changes.
The Prime Lending Rate is the rate that most banks charge their best clients. The prime rate usually changes as the Federal Reserve amends its monetary policy. This index is most common with home equity lines of credit.

Depending on the index they can change daily or in pre set dates. The interest rate will only change as often as the index adjusts. If the index is more volatile that is when you will see more fluctuations with the adjustable rate.

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The Margin

The index is our variable component with an adjustable rate. Added to the index is the margin. When these two are added it completes our fully indexed rate which the payment is based off of. The margin is a fixed number once the loan is in place and will not change. Lenders will pay more with a higher margin. It can also be known as the profit margin.

Caps

This is the maximum rate an adjustable rate can go to. The cap gives the borrower protection in an increasing interest rate environment. No matter what the index and margin add up to the client's rate can never go higher than the cap.

But we cannot forget that the rate is meant to be low for only so long. It is going to go up. And it's the higher rate that keeps a lot of buyers away from this type of loan. In order to make a decision for yourself, it's important to learn how the ARM loans move around.

The Adjustments

There are several different terms available when exploring ARM Loans. The adjustment schedule refers to how often you can expect the interest rate to change. Adjustable rate loans come in all configurations, so I suggest that you ask lots of questions to educate yourself. And they will vary from lender to lender, so don't expect there to be a steadfast rule. But it's not uncommon to see ARMs offered in 1, 2,3,5,7, or 10 year terms. Each "term" refers to a period of time that the loan interest will be set or fixed at a particular rate. For example, a 3 or 5 year ARM will have a fixed rate for 3 or 5 years respectively.

What happens at the end of the initial fixed period? That depends on the loan you are referring to. For example, a 5/1 ARM means that the rate is fixed for the first 5 years, but at the end of the 5 years, the rate will adjust each year. If you are submitting a loan that is an ARM you might want to ask the loan agent that you are working with what the adjustments are.

The good news about these adjustments is that you know about them in advance, so you can prepare yourself for the movement. There are parameters that are also preset, known as adjustment "caps" and "life of loan" caps that restrict the amount that an interest rate can rise or fall. For example, after a 5-1 ARM loan has passed its fixed 5 year portion. The loan can adjust 5-6 percentage points during the first adjustment. After the first year of the adjustment it typically can't go any higher or lower than two percentage points. During the adjustment period you can never go higher than the cap. Remember that each lender has different parameters for these adjustments. If a client asks about it or you want to know call your loan agent for this information.

Reasons why our clients would choose an ARM loan versus a fixed loan.

Lower monthly payment
Client does not want to pay principle. Thus can use the money elsewhere.
Possible lower rate than a fixed loan
Client plans on moving in a short period of time

The Index

Adjustable rate loans will typically adjust based upon the movement of some money source. This money-related item is also referred to as the INDEX. As the value of this index goes up and down, so does the ARM loan rate. The following is a list of the most widely seen indexes use to set payments on adjustable loans.

Treasury Bills, also known as T-Bills, are used as an index to base the common indicator for the movement of adjustable rate loans in the different regions of the country.

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Top 10 Reasons to Hire a Real Estate Agent

With so much information readily available online, clients sometimes ask me, "Why should we hire a real estate agent?" They wonder, and rightfully so, if they couldn't buy or sell a home through the Internet or through regular marketing and advertising channels without representation, without a real estate agent. Some do OK, many don't. So if you've wondered the same thing, here are 10 reasons why you might want to consider hiring a professional real estate agent.

1. Education & Experience

You don't need to know everything about buying and selling real estate if you hire a real estate professional who does. Henry Ford once said that when you hire people who are smarter than you are, it proves you are smarter than they are. The trick is to find the right person. For the most part, they all cost about the same. Why not hire a person with more education and experience than you? We're all looking for more precious time in our lives, and hiring pros gives us that time.

2. Agents are Buffers

Agents take the spam out of your property showings and visits. If you're a buyer of new homes, your agent will whip out her sword and keep the builder's agents at bay, preventing them from biting or nipping at your heels. If you're a seller, your agent will filter all those phone calls that lead to nowhere from lookie loos and try to induce serious buyers to immediately write an offer.

3. Neighborhood Knowledge

Agents either possess intimate knowledge or they know where to find the industry buzz about your neighborhood. They can identify comparable sales and hand these facts to you, in addition to pointing you in the direction where you can find more data on schools, crime or demographics. For example, you may know that a home down the street was on the market for $350,000, but an agent will know it had upgrades and sold at $285,000 after 65 days on the market and after twice falling out of escrow.

4. Price Guidance

Contrary to what some people believe, agents do not select prices for sellers or buyers. However, an agent will help to guide clients to make the right choices for themselves. If a listing is at 6%, for example, an agent has a 5% vested interest in the sale, but the client has a 94% interest. Selling agents will ask buyers to weigh all the data supplied to them and to choose a price. Then based on market supply, demand and the conditions, the agent will devise a negotiation strategy.

5. Market Conditions Information

Real estate agents can disclose market conditions, which will govern your selling or buying process. Many factors determine how you will proceed. Data such as the average per square foot cost of similar homes, median and average sales prices, average days on market and ratios of list-to-sold prices, among other criteria, will have a huge bearing on what you ultimately decide to do.

6. Professional Networking

Real estate agents network with other professionals, many of whom provide services that you will need to buy or sell. Due to legal liability, many agents will hesitate to recommend a certain individual or company over another, but they do know which vendors have a reputation for efficiency, competency and competitive pricing. Agents can, however, give you a list of references with whom they have worked and provide background information to help you make a wise selection.

7. Negotiation Skills & Confidentiality

Top producing agents negotiate well because, unlike most buyers and sellers, they can remove themselves from the emotional aspects of the transaction and because they are skilled. It's part of their job description. Good agents are not messengers, delivering buyer's offers to sellers and vice versa. They are professionals who are trained to present their client's case in the best light and agree to hold client information confidential from competing interests.

8. Handling Volumes of Paperwork

One-page deposit receipts were prevalent in the early 1970s. Today's purchase agreements run 10 pages or more. That does not include the federal- and state-mandated disclosures nor disclosures dictated by local custom. Most real estate files average thicknesses from one to three inches of paper. One tiny mistake or omission could land you in court or cost you thousands. In some states, lawyers handle the disclosures, thank goodness!

9. Answer Questions After Closing

Even the smoothest transactions that close without complications can come back to haunt. For example, taxing authorities that collect property tax assessments, doc stamps or transfer tax can fall months behind and mix up invoices, but one call to your agent can straighten out the confusion. Many questions can pop up that were overlooked in the excitement of closing. Good agents stand by ready to assist. Worthy and honest agents don't leave you in the dust to fend for yourself.

10. Develop Relationships for Future Business

The basis for an agent's success and continued career in real estate is referrals. Few agents would survive if their livelihood was dependent on consistently drumming up new business. This emphasis gives agents strong incentives to make certain clients are happy and satisfied. It also means that an agent who stays in the business will be there for you when you need to hire an agent again. Many will periodically mail market updates to you to keep you informed and to stay in touch.

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Full-Service Real Estate Brokers & Agents

Are Full-Service Real Estate Agents Worth the Extra Money?

Consumers are always looking for ways to save money, and paying real estate commissions can amount to tens of thousands these days. Not an insignificant sum to most people. Is it worth it to hire a full-service real estate brokerage over a discount service? Reasonable question. And the answer is it depends.

Type of Marketplace

If you're in a seller's market right now, homes are probably selling the minute they hit the multiple listing service. A one-eyed sheep with two paws tied behind her back could plop a home into MLS and get an offer. Will it be the highest price you could get?
Buyer's markets exist when inventory exceeds the supply of buyers. In these markets, some homes aren't selling at all. This is where expertise and extra work pays off. Listings that sell at top price are typically those exposed to the most buyers, which are priced well, marketed well and show well.

MLS and the Internet

I cringe when I see new listings hit MLS without a photograph because I know that agents and buyers are passing them over without a second thought. Many multiple listing services accept 8 to 12 photographs nowadays. For that reason, many full-service agents hire professional photographers and shoot double the photos required.

The pros spend considerable time sorting through photos to select those with the most light, the best angles, sharpest contrast & color.
Photos are cropped and resized to accentuate positive attributes.
Each photograph is entered into MLS with a full-length enticing description.

When I see a photograph taken by the multiple listing service instead of a pro or the agent, I also see a lazy real estate agent who doesn't care enough or isn't getting paid enough to properly market her client's property.

Signage

Lots of mom 'n' pop operations and discount brokerages don't spend money on professional signs because they don't believe in it or they can't afford it. Good signage is free advertising. Many full-service firms will advertise:

Main office phone number
Agent's personal cell phone or voice mail number
Web site for more information
Virtual tour links
Specific information that makes this home different from others in the area

Marketing Materials

Full-service companies tend to project quality, and that means four-color flyers and four-color direct mail pieces. The days of hiring neighborhood kids to toss photocopies on neighbors' front steps are gone. Full-service marketing is first class.

Open Houses

Not all homes are right for an open house, but those that are require finesse. This means working the buyers who come through by pointing out impressive features of the home without making the buyer feel oppressed or hounded, and that in itself is an art. It requires the service of an experienced sales person. Many discount brokers refuse to hold homes open.

Full-service agents counsel sellers. They find out what made the seller decide to buy the home and how that moment happened. Then, they employ that knowledge at open houses. For example, suppose a seller said that moment came when she first stood gazing out at the pool. When she turned to her husband and gasped, "I can't believe we can afford to buy this home." Good sales people at an Open would ask buyers to stand in that same spot by the pool. Then, they'd share the seller's first experience verbatim.

Negotiation

Real estate is an extremely competitive business, and there are many agents fighting for the same listings. A full-service agent who wins the listing is probably a good negotiator, a person you want on your side during offer negotiations. Think about it. Agents who can persuade you to pay what they feel is reasonable, will probably persuade a buyer to pay your price. Ultimately, that means more money for you.

Final Sales Price

Sometimes full-service agents lose listings because the seller was promised a higher price based on hot air and a lower commission. It's these listings that often show up in MLS a month later with reduced prices. The amount of the price reductions, not surprisingly, tend to exceed the difference in commissions between the dueling agencies! In these scenarios, sellers received fewer services and ended up losing money on the sale as well.

If you can't decide between an agent who charges 1 or 2 percent less than another, think about how you would feel if you had to reduce your sales price, say five percent, to get the house sold. Ask the agents to show you their last 24 months of price reductions and compare them.

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