Q: Mortgage rates have more than doubled recently. When do you think mortgage rates will go down? Kim, Edgewater, NJ A: It’s hard to know exactly if and when mortgage rates will drop after many years of record low rates. Freddie Mac forecasts mortgage rates will drop from an average of 6.8% in the fourth quarter of 2022 to 6.2% in the fourth quarter of 2023 but only time will tell. Thanks for your question, Kim. For more real estate tips and information visit my blog at geraldlucas.com.
continue reading Q: With home prices going up so much, do you think buying a home is still a good investment? Valerie, Linden, NJ A: If you can reasonably afford to buy a home based on your current financial position, it’s difficult to beat the awesome power of leverage when you buy a home with a 30 year fixed mortgage. Mortgage leverage magnifies home appreciation unlike any other asset. You can borrow most of the purchase price for a home which amplifies your cash-on-cash return. Home prices in NJ rise on average about 4-5% annually. So, if you buy a $500,000 home with a 20% down payment of $100,000, the $20,000-$25,000 average annual increase in your home’s value works out to a […]
continue reading Q: I just read that housing affordability just reached a new low. What does that mean? Cliff, Bergenfield, NJ A: The Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home based on the most recent home price and income data. An affordability index above 100 signifies that a family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment. The Housing Affordability Index dropped to 98.5 in June, its lowest rate since 1989. This means that it was more expensive to buy a U.S. home in June than it has been […]
continue reading Q: I’ve been trying to get a mortgage loan for weeks. The mortgage broker I have been dealing with keeps making excuses and I am worried I’m going to lose the house I’m trying to buy. Silvana, Bloomfield, NJ A: An experienced mortgage broker will be familiar with current mortgage products available right now on the market and which mortgage will be best suited for you as a borrower based on your debt-to-income ratio and the preliminary information you provide. An inexperienced or incompetent mortgage broker will ask the same questions over and over again, struggle with simple math and will not be familiar with current mortgage loan products. I suggest you give the mortgage broker you are working with […]
continue reading Q: A lot of people are predicting a recession. If it happens, how will a recession affect real estate home prices? Stuart, Kenilworth, NJ A: Home prices have remained steady or risen during the majority of the last few recessions in the US. High mortgage rates can deter people from buying, but as the recessions of the ’80s and ’90s showed, when mortgage rates rose to almost 20%, high rates don’t mean demand or home prices will fall. What really determines how the real estate market is affected by recession is the impact it has on housing demand and home affordability. Nationally, today’s median income is around 30% of the median home price. In 1980, that number was almost 45%. […]
continue reading Q: Gerald, we signed a contract to buy a summer home last year. We expected the builder would be finished by now, but it has taken much longer than expected. Mortgage rates have gone up a lot. Can we back out and if we do, will we lose our deposit? Dalia, Edison, N A: Home buyers who signed contracts to buy newly constructed homes in 2021 are potentially facing almost double the mortgage payments they may have initially expected because mortgage interest rates have risen from 3% to almost 5.5% as the Federal Reserve started raising short term interest rates. There is always a greater mortgage interest rate risk whenever a real estate transaction takes longer to be completed. Labor […]
continue reading Q: My sister and her husband are in a bind. They fell behind on their mortgage payments when my sister stopped working last year to stay home with their young kids and her husband lost his job around the same time. What should they do? Brenda, Paramus, NJ A: Hi Brenda, the first thing I think your sister and her husband should do is reach out to their lender or mortgage servicing company and find out what options they may offer to assist them. Your sister’s lender may offer forbearance or loan modification assistance that may help them and it’s most beneficial to homeowners to get that assistance as soon as possible when they fall behind on mortgage payments. The […]
continue reading Q: Mortgage rates have been going up recently. Do you think that makes now a bad time to buy real estate? Eric, Livingston, NJ A: When you borrow money to buy a home, higher interest rates reduce the amount of home you can buy. For every 1% increase in mortgage interest rates, your purchasing power as a homeowner declines by 9%. However, higher mortgage rates may present a silver lining in today’s US housing markets. Home prices in most of the US in the last few years have increased at unsustainable levels and low mortgage interest rates have probably exacerbated those home price increases. Higher mortgage rates will make it more difficult for many home buyers to purchase a home, […]
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Q: Gerald, we just closed on our first home. We got a ton of paperwork throughout the process, especially at the end when we finally got the keys. Which of the documents should we keep? Harriet, Belleville, NJ A: I’m going to give you a half dozen home-related documents you definitely should keep in a safe place: Hud-1 settlement statement title policy Deed Survey Mortgage or deed of trust (if you have one) Promissory note (if you have a mortgage or deed of trust) The HUD-1 Settlement Statement is a document that lists all charges and credits to the buyer and to the seller in a real estate transaction–you definitely should keep the Hud-1 from the purchase of your home […]
continue reading Q: Gerald, my brothers and sisters and I inherited my parents house and I just realized my sister has not been paying the property taxes like she was supposed to. I fell behind on my mortgage before and was able to modify my mortgage loan. Can we do the same thing in this situation? Annette, Linden, NJ A: Annette, unfortunately, municipal liens take precedence and subordinate even mortgage liens and the tax lien foreclosure process is faster and much more unforgiving than the foreclosure process is for delinquent mortgages where borrowers enjoy much more consumer protections. My first suggestion is that you get a payoff from the local tax collector where your parents’ home is located so you know exactly […]
continue reading 1.5 million homeowners are 90 days or more behind on their mortgage payments but not in foreclosure. Those who aren’t forced out will still be displaced if selling is their only option, and an estimated 1 in 10 borrowers in forbearance will not have enough equity to sell.
continue reading Q: Gerald, I read that a judge cancelled the eviction moratorium. Can I evict my tenants who have not been paying now? Michael, Orange, NJ A: Yes, that is correct, a federal judge vacated the CDC’s eviction moratorium. With or without that order, you can and should file eviction paperwork if you have tenants who have failed to pay rent or work out a payment arrangement with you. By filing the paperwork now, when landlord-tenant courts open up again, cases should be brought in the order they were filed so it will allow you to get a place in line. It remains to be seen how things will proceed in the very short term after the ruling because the federal […]
continue reading Q: I want to buy a home. Given where home prices are now, I figure I can get more value by buying a home that is in poor condition and needs work. Is there a way to buy a home like that with a mortgage? Steve, Essex Fells, NJ A: Rather than paying high interest rates for an interim loan with short repayment terms and perhaps a big looming balloon payment due on the horizon, HUD Section 203(k) allows homebuyers to buy a house that needs repair or upgrading. Consumer construction loans like 203(k) offer a solution that insures buyers a single, long term, fixed or adjustable rate loan that covers both the acquisition and rehabilitation of a home at […]
continue reading For the first time since July, mortgage rates surpassed 3%.
continue reading Q: Gerald, I want to be a real estate investor but there are no good deals in my market, I don’t have any investment capital or any experience. Adam, Bergenfield, NJ A: Nobody starts out with any experience when they do anything for the first time, Adam. As the philosopher, Lao-tzu said, “A journey of a thousand miles begins with a single step.” If you want to be a real estate investor you have to start. Whatever you set out to do, wherever you want to go, you have no choice but to start from where you are now regardless of your present circumstances. Here’s a little story to illustrate my point: Ed & Mark are friends from elementary school […]
continue reading Q: Gerald, mortgage rates are low but I don’t want to miss out on the lowest rates possible. Is now the best time to refinance my mortgage? Gary, Weehawken, NJ A: If your mortgage has a higher interest rate compared to the mortgage rate you can get now given your credit score and income, then refinancing could be a smart financial move. The truth is that everyone’s personal financial situation is different so it’s best to make decisions based on your personal situation not based on generic advice. Historically, the rule of thumb is that refinancing is a good idea if you can reduce your interest rate by at least 2%, however, many lenders say a 1% savings is enough […]
continue reading Q: Should I refinance now or wait for lower rates? Mark, Babylon, NY A: Fannie Mae and Freddie Mac are adding an additional .5% fee on most mortgage refinance loans that will raise costs for borrowers who refinance to take advantage of historically low rates. The mortgage giants claim that the new 0.5% fee is intended to mitigate their risk associated with projected losses due to the Covid-19 pandemic. Fannie and Freddie don’t originate loans, instead they buy mortgage loans from lenders, then wrap them into securities and guarantee the repayment of principal and interest to investors who buy the securities. The Mortgage Bankers Association, said the fee would raise costs for the typical borrower by $1,400. To avoid the […]
continue reading US home mortgage delinquencies surged to the highest level in 9 years.
continue reading NJ Governor Murphy passed a state law to extend the timeline for governmental permits and approvals for real estate projects that were stalled by the pandemic.
continue reading Mortgage applications rose by 9.3% from a week earlier.
continue reading Prepay January mortgage payment to increase your mortgage deduction this year Real estate investors should make more purchase offers while competition is lighter over the holidays–this will increase the likelihood your offers will be accepted Landlords, protect property’s indoor pipes this month and throughout the winter especially under sinks, in attics and crawl spaces, and on pipes along exterior walls. Pay special attention to basements, where over ⅓ all burst pipes occur. Merry Christmas. Happy Holidays! For more real estate tips and information visit my blog at geraldlucas.com.
continue reading Q: I’m buying my first home. Do I need a pre-qualification, a pre-approval or both? What’s the difference? Emma, Little Falls, NJ A: A pre-qualification is an estimate of what a buyer can afford to borrow to buy a home. A pre-approval is a conditional approval for a mortgage loan based on the documented proof a borrower/buyer supplies. Use a pre-qualification to determine what home price range you should be looking for homes. A pre-qualification is not binding. When you are ready to actually buy a home, get a pre-approval from a mortgage broker (brokers are typically better than banks because they have access to multiple lenders, banks and loan products). Having a pre-approval in hand shows home sellers and […]
continue reading Q: I’m buying a home. Do you think I should get a 30 year or 15 year mortgage. Henry, Kissimmee, Fl A: Great question. You will pay your mortgage off twice as fast and pay considerably less interest with a 15 year mortgage than you will with a 30 year mortgage. However, when you sign a promissory note on a mortgage, you are making a commitment to making regular monthly payments come hell or high water. It’s very difficult to forecast 15 or 30 years into the future and life has a way of throwing unpredictable events and crises at you when you least expect them. In addition, your regular payments associated with your home extend behind principal and interest—they […]
continue reading Q: I am planning to refinance my home. I still have student loans, should I roll my student loans into my mortgage? Peter, Phoenix, AZ A: There are both pros and cons to rolling student loan debt into mortgage debt. Refinancing to eliminate school debt may be advantageous to the extent that student loans typically can’t be discharged in bankruptcy. Also, rolling student debt into a mortgage may allow borrowers to invest more money in tax advantaged retirement plans sooner which results in substantial long term financial benefits. However, there are drawbacks to replacing student loans with mortgage debt like not being able to defer repayment–you can normally defer student loan payments when a life event or circumstance arises making […]
continue reading Q: Where is the biggest risk in US real estate now? Craig, Greenbelt, MD A: The lending market has shifted dramatically over the past few years from domination by big banks to domination by non-banks, financial institutions that only make loans and do not offer deposit accounts. In some ways non-banks are more nimble and can offer more loan products than big banks—housing prices and the housing market would be significantly less dynamic without these non-traditional lenders. In 2011, 50% of all new mortgage money was loaned by the three biggest banks in the United States, by 2016, the share of loans originated by the three biggest banks had dropped to about 20%. The additional systemic risk lies in the […]
continue reading Q: My husband and I are buying our first home. Where will we get the best value for our money? Camille, Pennsauken, NJ A: It’s smart to focus on getting the best value for your money but you have to make sure you don’t skip one of the most important steps in the home buying process. Assuming you aren’t paying cash, your first step needs to be to get pre-approved for a mortgage. The pre-approval process will require examining both you and your husband’s credit profiles which will determine how much money you qualify to borrower from a lender which will determine the price range you can shop for a home in. If you get pre-approved early, you can fix […]
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Investigate and correct mistakes on your credit report BEFORE you apply for a mortgage.
continue reading Q: Gerald, what’s your 2018 forecast for the Real Estate Market? Cindy, Scotch Plains, NJ A: Happy New Year to you, Cindy and to everyone in my real estate insider family! Cindy, there is no “real estate market,” every local real estate market is unique and different. However, there are characteristics of my local market in North Jersey that you are seeing in many other places. One characteristic is low housing inventory–this is why home prices have been edging up so fast in so many places, because there simply isn’t enough available housing for sale to meet demand for a variety of reasons. I see no significant increase in residential family construction this year so I expect inventory levels to […]
continue readingIf your mortgage lender pays your real estate taxes from an escrow account, make sure the real estate taxes you claim on your return matches the number on Form 1098 your mortgage lender sends you-Form 1098 will report any real estate taxes you paid.
continue readingWhen you pay for an oil tank scan on a property you are going to buy, have the company you hire determine whether the tank is actively in use. If the tank has been taken out of service, you should request all documents relating to the tank closure including town permits and contractor reports. These documents will prove the tank was closed properly according to regulatory guidelines.
continue readingAlways get at least a 5 year guarantee on a new roof before you make the final payment on it.
continue readingReal Estate Tip: Most of the best real estate deals will involve properties that are in need of repair. In order to capitalize on these rehab deals, you or someone you work with will need to know how much time and money are required to renovate these properties. -Gerald
continue readingAlthough mortgage rates remain at historic lows, lending standards for home buyers remain stringent. New regulations intended to prevent risky mortgages from entering the market will keep underwriting standards strict. With average FICO credit scores for conventional loans well above 700, establishing and maintaining good personal credit has never been more vital to obtaining a mortgage loan. -Gerald Click here for the original article!
continue readingIt’s a good idea to have at least one exit strategy when you buy any asset especially one as expensive as a house. Nobody can predict the future, but you can and should think about how you would deal with a job transfer, job loss, an extra mouth to feed or some other unexpected life event. If you had to sell, do you have enough money to pay closing costs and transfer fees? Would you be able to rent your property if you needed to? If so, what is the current market rent and would the monthly rent cover your mortgage payment and other housing-related expenses? There are no guarantees in life, but in real estate as with most financial […]
continue readingYour mortgage must be secured and recorded to be tax deductible. If you borrow from a big financial institution to buy a home like most of us do, you shouldn’t have to worry about your lender making sure their collateral is safe and your interest payments are deductible. Your lender should send you a statement every year indicating the amount of mortgage interest you paid—it’s a good idea to check that statement to make sure it matches the scheduled interest to be paid for that year on your mortgage loan’s amortization schedule. There are some politicians who have recently suggested we reconsider the powerful mortgage interest deduction that property owners benefit from. Eliminating or restricting the mortgage interest deduction would […]
continue readingIn addition to bank account cash deposits, you must be careful about all your credit card purchase activity for the few months before you close on your mortgage. A big purchase like a car for example, may affect your debt-to-income ratio which could derail a mortgage approval. As a precaution and part of your mortgage planning, I suggest you ask your mortgage broker or banker exactly what activities may spoil your mortgage confirmation; avoid all those activities until your mortgage is approved AND funded! -Gerald Click here for the original article!
continue readingThe ultimate cost of owning a house unfortunately goes well beyond the initial money required to purchase a home. There are regular maintenance, upkeep and replacement costs you’ll have to pay for over time, particularly if you do not purchase a new home. Home ownership is a worthy goal and in order to maintain your home, make certain you put aside enough reserves to pay for unexpected repairs and replacement of major items like a roof. In order to do this, it’s a good idea not to spend your last dime when you purchase your property–leave some money left over for unanticipated costs which almost always occur. -Gerald Click here for the original article!
continue readingThe new micro-housing trend seen in cities across America underscores broader demographic changes that will affect the US economy and urban real estate markets for many years to come. More than 2/3rds of all households have no children and housing demand in general is becoming more concentrated in areas where there are jobs. In addition, people are living longer and seniors normally require less living space after they retire. Smaller households require less living space which is why this micro-housing trend will continue. -Gerald Click here for the original article!
continue readingThis letter sent by 13 Senators, one of whom is my Senator from New Jersey is a welcome sign that at least some of our representatives in Congress are paying attention to something other than raising money to get re-elected. While encouraging private growth in the mortgage market is an admirable goal, as the saying goes: the road to hell is paved with good intentions. Lowering the Freddie Mac and Fannie Mae loan limits may turn out to be a dangerous experiment that we can ill afford right now in the middle of an encouraging yet fragile real estate recovery. -Gerald Click here for the original article!
continue readingYour credit score has an enormous influence on your ability to borrow money to buy a home or even to qualify to rent an apartment. Your credit score also has a profound impact on many other aspects of your life like the qualifying to get a job, qualifying to get student loans, car loans or credit cards as well as the amount of interest you’ll ultimately pay on those loans. There’s only one true credit score that is used by lenders to decide whether you qualify for a home loan, a car loan or some other kind of credit–that one true credit score is your FICO score; FICO stands for Fair Isaac Corporation. Proof of the fact that your FICO […]
continue readingDefaulting on your mortgage payments is rarely what you have in mind when you buy a property—but if you don’t have the money, then you can’t pay. As the saying goes, you can’t get blood from a turnip. The good news for people who did default on their mortgage during the financial crisis is that there are lots of other people who found themselves in this identical position. With millions of people in the same unfortunate situation, it’s in the best interest of both banks and the federal government to find a responsible way to lend to previously foreclosed-upon homeowners who have since recovered financially. It will most likely take more time and require more paperwork to get approved for […]
continue readingYou should always have a home inspection contingency in a real estate contract you sign to protect yourself from unforeseen problems with a property like termites, a leaky underground oil tank or major structural defects. In a hot real estate market where there is lots of competition between buyers, people often get frustrated are often tempted to cut corners just to win a bid and make a home purchase–this is a huge mistake that may come back to haunt you later. You have the most control in a transaction when you buy, if you waive the inspection contingency in real estate contract you sign, you may end up stuck purchasing a property with major problems that make the property uninhabitable […]
continue readingGerald Lucas was recently seen on NBC, CBS, ABC and FOX network affiliates around the country as an expert guest on the TV show, America’s PremierExperts® Jersey City, NJ – October 11, 2013 – Gerald Lucas, Managing Director of Performance Property, LLC., was recently featured on the hit TV show “America’s PremierExperts®” which aired on NBC, CBS, ABC and FOX network affiliates around the country. “America’s PremierExperts®” host Nick Nanton interviews the best business, marketing and financial minds from around the world. In the interview, Gerald described how he accidentally began his career as a real estate investor and how he has shared his knowledge and many years of experience with hundreds of his students throughout the United States and […]
continue readingHeadlines like RED HOT HOUSING MARKETS are compelling and attention-grabbing, but it’s important not to lose sight of the fact that banks are still saddled with tons of foreclosures and pre-foreclosure properties. Because there are still so many homeowners upside down on the mortgages or behind on their mortgage payments, banks are deliberately manipulating housing inventories giving the impression that a housing recovery is happening. Ultimately, income drives everything and a long sustained housing recovery is not going to happen until the economy and people’s incomes start rising again. Do your homework and get intimately familiar with your local real estate market because every residential real estate market is different—each local market has its own property characteristics, its own regulations […]
continue readingBy the reducing the waiting period for a government-backed mortgage, this new FHA rule change represents a huge benefit to homeowners who’ve experienced financial hardship and found themselves unable to meet their mortgage obligations. The welcomed change incentivizes homeowners in mortgage default to resolve their current financial hardship quickly rather than languishing in pre-foreclosure limbo. The rule change should help homeowners in crisis to get back on the road to financial solvency and homeownership more quickly which is a boon for the real estate industry, the banking industry as well as the overall US economy. -Gerald Click Here to Read The Original Article!
continue readingProper due diligence is critical to making wise real estate buying decisions. While nobody can predict the future, you should always take the time to do your homework before you sign a purchase contract to buy real estate. Unexpected surprises that can affect your property are not limited to homeowner association documentation. Towns, gated communities and condominium associations may also have rules or ordinances that can have an enormous impact on your real estate investment. Here are 5 additional questions you should answer before you buy a property: 1. Are there any deed restrictions on the property you want to purchase? (Control) 2. What is crime rate in your property’s neighborhood? Are there any registered sex offenders in the neighborhood? […]
continue readingQ: I’m a new landlord. I’m preparing to rent out an apartment in my new property. A friend of mine told me to avoid section 8 tenants. Can I refuse to rent to a tenant if he or she gets section 8 assistance? John, New Brunswick, New Jersey Gerald: Hi John. In New Jersey you cannot discriminate based on a person’s source of income, thus refusing to rent your apartment to a tenant because they receive section 8 assistance would certainly violate that rule. Landlord tenant laws vary a great deal from place to place, so always consult the rules in the area where your property is located. As a landlord, it’s best to have a thorough written rental policy […]
continue readingIf you’re paying cash, you can buy a home the day after you short sell your property. You can also qualify for a home loan again soon after a short sale in some cases in two years or less. Short sellers normally have to wait for a period of time after closing a short sale to qualify for a new mortgage loan, but the time frame and requirements vary depending on the type of loan and the down payment they are able and willing to pay. For a conventional loan, the higher the down payment a buyer is willing to pay after a short sale, the shorter the amount of time that is required to wait to qualify for another […]
continue readingAre you eligible to apply for a short sale even if you’ve already tried to modify your mortgage loan? Your effort as a borrower to short sell your property should never appear to be a strategic default to your lender. A strategic default is a decision by a borrower to stop making payments on a debt despite having the financial ability to make the payments. Banks don’t like to approve short sale applications when it looks like a borrower can pay but simply chooses not to pay.
continue readingWhen debt is closing in on you, it’s natural to want to get away and run for cover. Unfortunately, when you deliberately dodge your mortgage lender, you reduce the number of choices you have and you give your bank more control over your future.
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