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Ask Our Broker The Ins & Outs of
Up-and-Down
RATES
Across the board, loan
I need to move out of state, rates are higher than
and my home can’t stay vacant. they were just a year
ago. Keep these factors
What kind of sale can I do?
in mind as you look for
Q: I owe $138,000 on a house, plus $22,000 on a the best loan – and rate –
second trust. I’ve lived here for two for your budget
years. The property is worth about
$140,000. I must move; my broker can-
BY CHARLES SCUTT
not find a renter; I don’t want a seller CTW Features
leaseback; and I’m concerned that my
broker will not renew the listing when WHAT’S THE BEST TYPE of
it runs out. I currently am getting job home mortgage loan to choose
offers out of state, but I can’t leave this house empty in the current housing down-
or else I’ll default on my homeowner’s insurance. turn? Will interest rates contin-
ue to tick up? Should you wait
Would a short sale make sense in this situation? for a rate drop? Indeed, the
mortgage market is beset by
A: With a short sale you’re asking a lender to take a loss. questions these days, especially
This raises a question:Why should a lender lose money on considering the tighter restric-
your property? The lender would not get some of the profit tions being imposed on bor-
if the value increased. rowers lately and the gradual
uptick in rates.
Since you’re getting job offers, an approach to lenders According to Freddie Mac’s
might work like this:The lender will take back the proper- latest Primary Mortgage Market
ty if you will agree to a personal loan for the unpaid bal- Survey, the average 30-year,
ance.This will make it difficult for you to buy elsewhere fixed-rate mortgage has moved
and a short sale can impact your credit, but given a range up from 6.18 percent in early
of tough choices this may be the best option. January to 6.69 percent in late
July. Last year at the same time,
Have an attorney or legal clinic contact the lender on the 30-year fixed rate averaged
your behalf. Make sure your lawyer first looks at the listing roughly the same, at 6.72 per-
agreement, as well as the loan papers. cent.
Morgan Brown, COO at
Q: Our son and daughter-in-law are on the verge Bright beauty:The right light brings warmth and utility to any room in the home.
New Day Trust Mortgage,
of foreclosure. They presently have a $200,000 mort- Orange County, Calif., says
interest rates have returned to
gage, with a $1,200 monthly mortgage payment, the highs of 2006 due to sever-
excluding taxes. Since my daughter-in-law just

Illuminating Décor
al factors, including the Federal
recently had our second grandchild, she has gone Reserve raising short-term
back to work but is not getting much income. Is interest rates in an effort to
there anyway we can lower their monthly mortgage stem inflation in the economy
payments? and the decrease in foreign
Don’t let a lack of lighting knowledge leave you lost in the dark investment in our mortgage
bonds.
A: Possibly.When you say they are on the “verge of fore- “The fluctuation in rates
closure” do you mean they have one or more missed mort- BY KIT DAVEY and tour each room of your home, checking for over the past year has been
gage payments? Do they face higher monthly costs each type of lighting. Look for dark areas or shad- driven by secondary market

because their loan is resetting?
It costs big money to foreclose; by some estimates
lenders lose perhaps $40,000 on each foreclosure – even
after mortgage insurance kicks in. If your son and daughter-
in-law have a lender who is in any way lucid, the lender
will not want to foreclose, thus they or their attorney
should contact the lender immediately and ask if it is possi-
ble to modify the mortgage terms. A loan modification is
not possible with all loans because of the way in which
they have been packaged for investors, but in many situa-
See ASK OUR BROKER, Page 2
H
ave you ever had dinner in a room that was
so poorly lit you weren’t sure if you were
being served a salad or an entree? Or the
lights were so bright that you felt like you were
being interrogated? Lighting that is too dim or blasts
you with a hot spotlight not only is annoying but
diminishes the beauty and function of your home. By
understanding and applying the basics of proper
lighting you can bring warmth, beauty and utility to
any room.
TYPES OF LIGHTING
There are three basic types of lighting: ambient,
task and spot lighting.To assess the use of all three
in your home, wait until nightfall, turn on the lights
ows and for uncomfortably bright areas. investors who have different
Ambient light is a diffuse, warm light that fills a tolerances for both interest
room and casts no shadows.This type of illumina- rate and credit risk,” says Keith
tion should be sufficient to allow you to move safe- Conner, vice president of con-
ly through a room, have a conversation or watch sumer lending at MetLife Bank,
TV comfortably.Ambient lights can provide enough Bridgewater, N.J.“Their invest-
light to read or work at a desk, but they may need ment decisions and demand for
to be supplemented. Ceiling fixtures generally do specific types of mortgage
not provide sufficient ambient lighting.Ways to pools to purchase versus the
provide or augment this type of lighting: supply available drive volatility
• A pair of matching table or floor lamps, with throughout any given day.”
white or off-white shades and three way bulbs, Ask David A. Podgursky, a
placed to either side of the sofa, or on either side Miami, Fla.-based mortgage spe-
cialist, and he’ll tell you that
See LIGHTING Page 2 See RATES Page 2

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 LIGHTING
CONTINUED FROM PAGE 1
of a bed.
• Torchieres placed in one or
two corners of the room.
• Wall sconces (those that do
not require installation by an
electrician come with a cord
cover and can be plugged into
the nearest outlet) may be
screwed into the wall near a
reading chair, by a piano or a
desk.
• Recessed lights placed at
carefully spaced intervals, supple-
mented with one or several of
the above. Be aware that this
type of fixture requires installa-
RATES
CONTINUED FROM PAGE 1
rates have shown their ebb and
flow just like stocks or any other
freely moving market index.
“They’ve ticked up some and
back down.Actually, there hasn’t
been anything huge and breath-
taking for the year, despite the
panic of the media’s ‘foreclosure
crisis’ and ‘subprime meltdown.’”
In the current rate climate,
Brown says that most buyers “are
best served by longer periods of
fixed interest rates. Homeowners
who plan on being in their home
for 10 or more years should con-
sider a long-term, fixed-rate mort-
gage, such as a 30-year fixed –
particularly if they are on a fixed
income, such as Social Security or
a pension.”
First-time homebuyers, or
homeowners who don’t plan on
being in their home for more
than 10 years, however, could
consider an adjustable-rate mort-
gage as a way to save money, says
Brown.“An ARM with a five-,
seven- or 10-year fixed period
provides the combination of
lower payments, compared to a
30-year fixed, along with the sta-
bility of a longer-term loan that is
tion by an electrician, can cast
unflattering shadows and should
be controlled by a dimmer.
Task Lighting illuminates the
area where you read, work or
eat.The height of the lamp is
very important – too high and
the glare of the bulb is irritating,
too low and the fixture may
block your view or provide inad-
equate lighting.Table and floor
lamps can double as ambient and
task lighting when placed next
to a reading chair or on a desk.
Clip-on lamps, small table lamps
and pharmacy lamps all are good
sources of task lighting. Pendant
lamps and chandeliers are tradi-
tional sources of light over eating
areas.
Spot lighting is used to draw
just right for homeowners plan-
ning on moving at some point in
the not-so-distant future.” Be
aware, though, that ARM pay-
ments can spike very highly after
their introductory period.
When it comes to picking the
best mortgage loan for your
needs, Carolyn Warren, author of
“Mortgage Rip-Offs and Money
Savers” (Wiley & Sons, 2007), says
to remember that time, not rate,
is your biggest enemy.“Don’t be
driven by fear,” she says.“I’ve seen
too many people take the 30-year
fixed rate because they were
afraid [payments] might go up,
when the rate hikes wouldn’t
affect them anyway.”
Additionally,“buyers should
look at real estate purchases with
a long-term view of five years or
more,” Brown says.“By using that
mindset, they can ensure that
they will be making an invest-
ment based on long-term gains
that make the impact of small
interest-rate changes negligible.”
Ultimately, Podgursky says,
there is no cure-all loan program.
“The only true way to pick a pro-
gram for a borrower that fits their
needs is to sit down with a
licensed mortgage professional
and look at the options. Some
people have gotten caught in the
middle of the loan process with
attention to or highlight an area
or object, such as a piece of art-
work. Use spot lighting only if
you have adequate ambient light-
ing.Track lights, recessed lights
with fittings to direct the light in
a certain direction, picture lights,
and tabletop spots are useful in
drawing attention to wherever
they’re pointed.
BUDGET LIGHTING
If your analysis indicates you
need more light and you’re on a
budget:
• Scrounge around for some-
thing unusual - a teapot, a cow-
boy boot, flowerpot, antique oil
lamp, a trumpet, a wine bottle, a
vase or an olive-oil can – add
lamp guts and convert it into a
an unexpected rate hike, and
some are better off locking into a
fixed rate right from the get-go -
and some aren’t.Those who
aren’t or who choose not to have
taken a calculated risk against a
choppy market.”
As for what to expect in the
coming months, Conner says that
mortgage shoppers should antici-
pate a certain level of interest-
rate volatility.
“For those who are concerned
about continued increases, they
should think about locking in a
rate as soon as possible when
applying for a fixed-rate mort-
gage,” says Conner.“Consumers
should also take the time to look
at all the available options to
determine which option is the
best that fits a person’s unique
needs.”
As inflation cools and housing
begins to drag significantly on
overall economic growth, many
pundits are predicting that the
Federal Reserve will have to cut
interest rates at some point to
stimulate the economy and pre-
vent it from tipping into a reces-
sion, Brown says. He predicts that
we will see an interest-rate cut
either in this fourth quarter or
the first quarter of 2008, as hous-
ing continues to be a drag on the
economy.
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new light source. Most hardware
stores carry all you need to make
a lamp.
• If your lamp is fine, but the
shade is shot, replace it. Or, if the
shade has a smooth surface, try
decoupaging it with pictures
from magazines, squares of fab-
ric, leaves, cut-out shapes traced
from cookie cutters, antique fruit
labels, etc.
• Remove or tie back window
treatments that block the natural
light; add strategically placed mir-
rors.
• If you are patient and prac-
tice the Zen of shopping, you
can find inexpensive fixtures at
flea markets and garage sales.
And brake for all yard sales.
© CTW Features
Conner, on the other hand,
says that it doesn’t appear that
mortgage rates,“which are typi-
cally tied to the 10-year part of
the treasury curve, will rise or fall
by a significant margin over the
next 12 months. Buyers will need
to manage their expectations and
accept that rates have moved up
this year.”
Taking a big-picture approach,
Conner says that the vast majori-
ty of buyers eventually will regain
their confidence in the housing
market and take advantage of
today’s historically low rates.
“Freddie Mac has tracked
mortgage rates since 1972, and
the lowest and highest reported
yield on a 30-year, fixed-rate mort-
gage has ranged from 5.83 per-
cent to 16.63 percent,” says
Conner.The current reported
yield of under 7 percent is still
historically very attractive, he
says.
Bill Lyons, CEO of Lei
Financial, San Diego, agrees.
“Potential borrowers should
not be concerned about the rate
market,” he says.“Rates are still at
a historic low.This is just part of a
business cycle. Home values will
eventually go up again and rates
will eventually go down again.”
© CTW Features
Ask Our Broker
CONTINUED FROM PAGE 1
tions a lender may be able to change some mortgage
terms before matters get out of hand.
Be aware that the lender properly wants to collect as
much interest as your son and daughter-in-law originally
agreed to pay, so they must demonstrate that their need
is real and that the lender could suffer a significant loss if
there is a foreclosure. In today’s environment, with so
many foreclosures, many lenders will at least listen to
borrowers who share their distress.
Q: After turning my former home into a rental
18 months ago, I’m concerned about the time limit
to sell. I understand you must live in the home for
two of the last five years. With our local market so
sluggish now, should I keep the property as a
rental and pay the 15-percent capital gains tax
later or unload now? Is there a way not to pay a tax
on my profits?
A:You could defer the tax (but not eliminate it) with a
1031 tax exchange. Or, you could hold the property for
the long term (the real long term) and make it part of
your estate.When you die, the property would be
received by your heirs at its stepped-up value and there
would be no capital gains tax.
However, if you sell now and meet the requirements
for the residential capital gains write-off, then there
would be no tax on the first $500,000 in profits if mar-
ried, $250,000 if single. For most owners this is a better
option than an exchange, which really puts you into the
real estate business, or thinking about estate planning,
which may not be appealing for a variety of reasons.
For details, see a CPA or other tax professional.
The real issue, though, is your local market.While it
may be slow today, if you bought a number of years ago
you are likely, in most areas, to still have a substantial
profit. If you sell now and lock in your profit you will
then have lots of cash in a weak market.This could be a
negotiating advantage if you want to acquire another
property – not something to overlook if the local rental
market is strong.
© CTW Features
Need real estate advice? Peter G. Miller, author of “The
Common-Sense Mortgage,” would love to hear from you. Send
your questions to peter@ctwfeatures.com. Due to the volume
received, not all letters may be answered.