Best Financial Calculators Online

January is the perfect time for reviewing your financial goals. Some of us are still reeling from the holidays and tax season is still not in full swing. Which makes going over your finances and perhaps scheduling a family finance meeting a good idea in this time of year.

Here's a good calculator for checking your net worth. Bankrate.com has been my favorite site for this time of year because they have the best calculators available online. You are free to come up with any scenario in your head and see it in black and white, including refinancing and extra payments on your mortgage.

Another one for rent versus buy is here. If you're wondering if buying or renting a home - especially in this market - gives you the best return for your money, you might want to plug in some numbers here in the New York Times rent versus buy calculator.

This next one is not really a calculator, but it does help immensely if you're a landlord and wanting some basic comps around your rental. Think you're charging too little or too much? Check out the Rent-o-Meter.

Along the same line, here's a good calculator for what your investment property will yield you and if you should consider buying a rental home. This does require some research of your own regarding annual appreciation and inflation but it does tell you cashflow over the first 5 years and the annual addition to your net worth. Worth a look!

Market Predictions for 2008 - a Mortgage Perspective

The mortgage expert on Sacramento Real Estate Gal, Huck Ferrill, has the following to say regarding home prices in 2008. This is an extract from a larger newsletter, but worth reading. For the most part, I agree with him.

Read on:

I think 2008 will be a mixed market for the first half (including some more foreclosures), beginning price recovery in the second half. Here’s why:

Prices have already shown some stabilization, albeit at lower levels. The last half dozen appraisals I’ve seen were 5-7% HIGHER than their selling prices. One property selling in Roseville for $225,500, appraised for $275,000 last week, for example. Higher end prices, greater than $750,000, while having showed some softness, have held up pretty well, primarily because there isn’t the plethora of bank owned properties at those levels.

Credit for financing purchases and refinances has been available all along, albeit from fewer lenders, and it has been relatively inexpensive (6-7% range). Stated income loans are available to those with good credit. 100% financing to $417,000 is available to those with good credit, documentable income, but no money. Financing to $5,000,000 is available (both stated and documented income) to those with good credit and either equity or cash for a down payment. Investor financing is available to 90% (75% stated income with good credit).

FHA reform now moving through Congress will provide financing to at least $417,000 for those with less than excellent credit (or no credit in some cases) to finance the purchase of a home, with as little as 1.5% down payment.
VA financing remains available to 100% at excellent rates.

Many of the major lenders have agreed with the President to freeze rate resets for 5 years, on many of the outstanding loans, that would have caused more foreclosures. This act alone may slow the rate of foreclosure, so that bank owned inventory begins to drop.

So, in sum, the opportunity and the means to capitalize on it are in place. I suggest that if you’ve ever wanted to own rental property, buy more of it, invest in another residence, or if you know anyone wanting to buy their first home or rental property, now is a great time to start looking because these opportunities come and go, often rather suddenly and sooner than we like.

I'm a First Time Homebuyer. What Loans are Available to Me?

The obvious answer is any loan that's available to any buyer, but since the most frequent challenge that we see with first time homebuyers, is that they have little or no money for a down payment. So for purposes of this article we're going to focus on programs that allow for 100% financing of the purchase price.

CONVENTIONAL PROGRAMS

In general, these programs are limited to properties selling for $417,000 or less, and there are are number of them with names like "My Community, Flex 100, Home Possible" or any number of proprietary names that various lenders might attach to them. All of them will finance 100% of the home's purchase price with a single loan, and all have very similar requirements-a minimum FICO score of 620, ability to document one's employment and income history for at least two years, minimum (sometimes no) reserve requirements, etc. They also will allow the home to be purchased "as is" in most cases, as long as the home is in reasonably good condition as determined by the appraisal. This is extremely beneficial if one is trying to buy one of the plethora of bank owned properties currently on the market. By the way, there are some real bargains out there now-the last six first time homebuyer transactions I've worked on, appraised for 5-7% MORE than they are being purchased for! Also, in most cases, the seller is allowed (and usually is willing) to pay up to 3% in buyer's closing costs.
An example of a typical payment for a $200,000 home looks like this:

$200,000 loan @ 6.5%, 30 year fixed $1264.14 principal and interest monthly
mortgage insurance @.59% 98.33
property taxes 208.33
homeowners insurance 58.33
TOTAL $1629.13

FHA LOANS

The typical FHA loan requires a 3% down payment and the maximum loan is about $264,000 in the Sacramento area, but the down payment can be a gift from a relative or, more importantly, can come from an additional ACCESS loan for 7% of the purchase price. That's enough to pay the required FHA down payment and all buyer's closing costs! Another advantage to FHA is that they have no minimum FICO score requirement. In fact, it's possible to obtain a loan even if there are NO accounts on the buyer's credit report. In those cases we will obtain rent ratings, ratings for utility or telephone accounts, car insurance payments or anything else the buyer has been paying regular monthly payments on. We've even used memberships in gyms for ratings!
Here's how an FHA ACCESS payment would look on the same $200,000 first time home:

$203,000 loan @ 6.5% 30 year fixed $1246.53
FHA mortgae insurance @ .5% 80.96
property taxes 208.33
homeowners insurance 61.61
$14,000 ACCESS loan @8.5% 20 year fixed 121.50
TOTAL $1718.93

That's a little higher payment than the conventional one above, primarily because the down payment and closing costs have been financed in this example. Great loan for those with FICO scores less than 620 however!

VA LOANS

Originally developed for veterans returning from WWII, this program administered by the U. S. Department of Veterans Affairs, is THE program for the qualified military veteran or in some cases, the widow of a military veteran! It provides a federal guarantee for a loan to finance 100% of the purchase price of a home up to about a $260,000 maximum and is generally available to active or discharged veterans with more than six months active service. If discharged the discharge can be any discharge that is "other than dishonorable." The benefit runs for the life of the veteran and can be reused multiple times over a lifetime. It has put literally millions of first time homebuyers into their first home! One of the other beauties of this program is that while it has a "VA Funding Fee" built into the loan, it requires NO mortgage insurance.
So check out the VA payment on our $200,000 home:

$204,300 loan @ 6.5% 30 year fixed $1291.32
property taxes 208.33
homeowners insurance 59.59
TOTAL $1559.24

I'll bet it would cost about that much to rent some of the $200,000 homes I've seen lately and one would have to put up first, last and security deposit, etc. Better to get the seller to pay closing costs, not have to go in with any money, and own the home!

There are other ways to finance all of a home purchase, CalHFA, CalVet, CalPERS, etc. all with their benefits and drawbacks, but the three above are the basics. Better for the reader's eyes (and my typing fingers) if we end here for the moment....

How Real Estate is Appraised and Home Value Determined

It all comes down to one word: comps. Well, okay, maybe two - market comparables. When you call a Realtor to come and tell you what your home is worth, the first thing we do is pull up market comparables.

Market comparables are nothing but homes that are similar to yours, with the same square footage, bedrooms, baths, and so on and have been built close to the time yours has been and - this one is very important - have sold or are active listings in a one mile radius around your property. These houses are the raw data we begin with.

The sold properties usually give us a low to high range within which your property is located. If you have recently remodeled your house with expensive materials (Corian countertops throughout and a granite fireplace for example) we would price the home at the higher end of the market range. If the home has deferred maintenance, it would go on the lower end.

Even more important than the sold comparables however, which were more commonly noticed when the market was going upwards, are the active listings on the market right now. While you might be able to price your property on the high end if you have remodeled, you are limited by your competition which are the active listings.

This balance between actives and solds give us a pretty good idea of what a house will sell for. Of course, no one knows for sure the exact price because the market (read: the buyer) will determine that.

Want to know the value of your property? Drop me an email with the address and I'll be happy to pull up some close comparables!

First Time Home Buyers Activity Picks up in Sacramento!

This is a post by my guest mortgage professional, Huck Ferrill. He promises to write more and I will be introducing other professionals I work with on a continuous basis as well, so bookmark this site and check back often!

Meanwhile, here's what Huck had to say:

First time buyers are coming out of the woodwork in the last couple weeks. I did about 8 pre-qualifications last week and $700,000 (2) worth of live purchase applications yesterday alone. Most of them said that prices were low enough that it was time to try to buy something. One of yesterday's buyers is involved in multiple offers on a North Highlands house. That's been how recoveries have started in the past. Good sign.

Those of you waiting for good news on the real estate front, hope this helps!

Fun with Real Estate Numbers

I had promised last week there were more revealing numbers to be found. Well, they're here. I've always maintained that there is a lot of information out there, but really it's only information that touches you the most personally that counts.

Warren Buffett doesn't care that the market's going down if he's secure in his own investments. And that's really the message I've been trying to get to people that write in with bad news every week.

I wish you would take it to heart.

Here are some numbers to make you happy.

With a little research, I found out that one my rental properties was bought in 1977 for $25,000. The same family held it for 28 years or so until we bought it in 2005 for $258,000. Today it is worth $260,000. Yes, not much appreciation in the past few years, but overall for the last 30 years, it has appreciated on an average at 8% a year. (On the total price, NOT the money invested. That's an important difference to remember!)

Surely, that's kept way ahead of inflation.

Here's another example: my husband bought his first home (from HUD) in 2000 for $55,000. Today it is worth $230,000 and is rented out. The total price appreciation on that home since 1995 (that's as far back as county records will go for that house) is 11% - and we're not even figuring how much the return is on the amount invested by my husband ($5000 - again, a very important difference.)

Hey, just trying to be conservative here and pointing out to the fact that I'm being conservative.

Sure, there are maintenance costs and other repairs to be made but there's also the various tax benefits that offset our income to this day.

The fact remains that real estate is a solid investment any way you look at it. And market downturns like the one we're having today is when you should be looking to buy.

Inherent Value

I was watching the CNBC rerun of the special "The Millionaire Inside" and while I loved and hated a lot of what was said, one principle stuck out at me as a very good rule of thumb. I believe it was Phil Towne talking about his way (and Warren Buffet's way) of picking stocks.

He said, "Find out what the company is worth and then wait for it to go on sale." Simple, right? That's the beauty in this principle.

Here's how it applies to real estate: Find out how much it would cost to build a similar home in the Sacramento neighborhood you're looking at. You can easily get this information from a contractor or an insurance company in terms of a dollar per square foot amount. Then, find out the value of the plot. Adding them will give you the inherent value (or underlying value) of the house. Then, wait for it go on sale. Which means, if the price the home is being offered for on the MLS is under what it would cost to build it, you buy it. If not, you don't.

If it sounds that simple, it is! But your math has to be accurate and there is no substitute for due diligence.

Another thing, as with stocks, the general rule of thumb is, if there is any negative publicity in regards to accounting, you walk away from it, no matter how attractive the deal looks. With real estate, that could translate into the local economy, job prospects in the area, socio-economic change and so on. Remember: you can make projections only with stability. Any sudden changes (in this respect) are bad for investing.

You have to be able to trust the groundwork to make future projections.

Mortgage Rates on the Rise

The Bee reported that real estate is going to cost our Sacramento home buyers a little more now that interest rates have been on the rise. The average interest rate on a home mortgage is now 6.53% - and that is for a 30 year fixed rate. Last week, the same rate for a 30 year fixed mortgage was 6.42% This might be an indication that the buyer's market is beginning to come to an end. Or is it?

Here's what I found: To buy an average home in Sacramento costs about $300,000 all statistics aside. With a 20% down payment if you got a mortgage fixed for 30 years at 6% your monthly payments would be $1438.92 (without impounding for taxes and insurance. However, if interest rates crept up to 7% that same home with the same down payment would cost you about $150 more a month to purchase at monthly payments of $1596.73 Whether that seems like a fair trade to you to own real estate in Sacramento is for you to decide.

However, home prices are still low and there are bargains to be found out there, especially if you are searching for bank-owned properties and are willing to build some sweat equity.

Will you be a Millionaire?

I have an assignment for you. With all the talk about how much real estate appreciates (or does not appreciate) over time all over the United States, it is becoming more important that we know how much it appreciates in our own neighborhood. So here's your job, homeowners: FIND OUT THE AVERAGE APPRECIATION OVER THE LAST 30 YEARS IN SACRAMENTO.

Answers next week! They might just surprise you... and help you make retirement plans.

Why You Must Read Financial News

Because no one cares about your money as much as you do.

I'm tired of people talking about millionaires like it's an unattainable goal. If you have a plan and find a way to stick to it, you can have a million. Chances are, all your problems won't be solved.

But I read somewhere that in the path toward becoming rich, it's not what you have that matters as much as who you become. I'm learning that's true.