Jerry Mueller (Jerry Mueller Real Estate) Real Estate Broker/Owner



Jerry Mueller
location_on Bethany Beach, DE — Jerry Mueller Real Estate
Get to Know Jerry Mueller

Jerry Mueller is Broker Owner of Jerry Mueller Real Estate.  He has been helping buyers and seller with their real estate goals since 1983 in both Delaware and Maryland.  Jerry along with his wife Carol run a hands on Real Estate company giving their signature very best personal and professional real estate services.  We look forward to helping you from the beach to the bay and all inland towns.  No matter what your interest, a beach home, a beach home that you want to rent also, investment property, commercial property, or a vacation rental Jerry Mueller Real Estate is looking forward to helping you.

At Jerry Mueller Real Estate we are all about real estate. We want our web site at to be your total resource center for all your real estate needs. Our BUYERS CENTER is for those of you are interested in buying real estate we have mls quick search capability for all of Delaware, Maryland's lower shore, and parts of PA and NJ. If you cannot find the property you are searching for or need our help with suggestions to meet your needs you can fill out the request form or e-mail us or give Jerry Mueller a call at 302-745-1418 his direct line. Also if you are buying real estate make sure you check out our on-line special Buyer's Broker Advantage Program that will enable you to save thousands when buying through Jerry Mueller Real Estate. There are many resources in our buyer's center including information on 1031 tax deferred exchanges and cash flow analysis.

Our SELLERS CENTER is for those of you that are interested in selling real estate we have an on-line special Listing/Sellers Advantage program that will enable you to save thousand when selling real estate with Jerry Mueller Real Estate. Check it out along with our Marketable Difference at Jerry Mueller Real Estate. There are many resources in our Sellers Center that will help you get all the information you need when selling real estate.

If you are interested in listing your home for rent or interested in renting a home, whether 1 week, a whole season, or year around our rental center has all the information you need. Now our tenants can book on line and pay on line with their credit cards through our secure servers. Our Rental Center at Jerry Mueller Real Estate offers both our owners and tenants our signature very best personal and professional services.

For REALTORS, we have a REALTOR CENTER that offers REALTORS training, services and products to make your business more successful. Easy to use contact management system a 35% referral network nation wide, to training for Auction Method Marketing. Check out how Jerry Mueller Real Estate can add tools and services for your success.

Our AUCTION CENTER is all about the American Auction Marketing Association and how they can help buyers, sellers, builders, and REALTORS, meet the challenging marketplace today. Get all the information you need about Auction Method Marketing and check out our current auctions

Our SPORTS CENTER is for those who are interested in booking tennis and golf clinics, lessons, and golf and fishing junkets. You can book your clinics, lessons and junkets on line and pay on line and also it will take you to our RENTAL CENTER where you can book your accommodations. We also have provided you with lots of information about tennis, golf, and fishing in our area.

Our AREA INFO is really comprehensive. We want to give you all the information you need about vacationing, moving, or retiring here. Information about schools, hospitals, restaurants, shopping, grocery stores, post offices, doctors, dentists and when you visit our AREA INFO you will see so much more...

Check out our buttons and links of services; please complete the information forms and sign up for our informative on-line newsletters. Enjoy our free quick search mls databases for all of Delaware and the Maryland Eastern Shore. For Sellers we offer a free market report on your property. Everyone should visit our state of the art RENTAL CENTER and AUCTION CENTER. Finally we welcome your feedback. Let us know any questions and comments or any information that you need that you could not find here. Thanks for visiting and as always we appreciate your business.

Renting vs. Buying

When should you rent?

Tired of seeing the same scenery over and over again, do you want something different? Find all the help you need at the Jerry Mueller Real Estate website using the convenient search tools. It allows you to search by location and property features. Rent the perfect house with Jerry Mueller Real Estate. Renting offers numerous advantages. Find out what they are:

You are new in the area and you are unsure where to buy. If you have just relocated in the area than renting is the best option for you . Take your time to learn about the area without being rushed to take a decision. Perhaps you re seeking for along term vacation or a seasonal home. Vacation and seasonal home may seem a great an idea , but it doesn't take long for your vacation to become to turn into a working one. Then there are also security issues to consider, the ever increasing taxes and insurance plus the inability to take vacations in different locations. Find your perfect seasonal home and change the scenery every year with the Jerry Mueller Real Estate rental services. You like to have maintenance and repairs handled for you. Home ownership entails responsibility and can be rough on the budget , mostly with large unforeseen repair. Save your time and money by leaving it to the hands of the landlord. Renting allows you to spend your free time in any way you want rather than taking care of the lawn, pest control and so on and so forth.

Realistic Budget when buying your first home

One the most frequent mistakes made by first time home buyers is setting a realistic budget when buying a home. However it is very easy to under estimate the true costs of owning a house especially if this is your first time. The following list will provide you the necessary information to estimate the true costs of house ownership:

Mortgage, property taxes, insurance and PMI or private mortgage. Even if your mortgage has a fixed rate, your property taxes and insurance will likely continue to increase year by year. Therefore you must plan ahead so you don't have any surprises in the future. Utilities. One of the benefits of renting is that in most cases the price of utilities is already included in the monthly rent, but once you buy a property all these bills will be sent to you individually. Therefore you must call local service providers in advance to determine what you will pay for the services in the area. Tools and Appliances. Another benefit of renting is not having to do your own maintenance and repairs plus the use of the laundry room. You do not have to put money apart so that you can buy a lawn mower, washer and dryer and other basic tools and maintenance tools for your first home. And you won't impress the neighbors by moving in a leaving your yard in a mess because you cannot take care of it.

How to calculate the cost of home ownership.

So you have decide to buy a home. If this is your first time you may not be aware of the full cost of owning a house, when calculating the affordability and desirability of buying a home versus renting a home. To compare renting versus buying, use the following checklist to calculate your personal affordability index.

When visiting online search engines, like our website, use convenient mortgage calculators to get an estimate of the monthly mortgage payment. Remember, that the terms of mortgage may change depending upon you're your down payment, duration of loan and interests payment. In addition to the mortgage payment, another thing to consider when buying a home is the PMI or the private mortgage insurance if you don't put at least 20% down on the property. To get a rough estimate of PMI approximate 01 percent or .05 percent to .10 percent of your monthly payment. Homeowners insurance and property taxes. Call and get estimates from at least three insurance brokers in your area to find out how much insurance will cost. Don't assume you will pay what the former owners pay for insurance. Your credit rating and other factors can influence your insurance premiums. Maintenance and Repairs. Decide in advance if you will be doing it yourself or hiring others. Many people who are familiar with renting a condo or apartment are not used to spending their weekends or evenings mowing the lawn or cleaning the pool. Plan on budgeting approximately 10 percent of the total cost of your home each year towards maintenance and repairs. You won't use it all at once: Some years will require only a few small repairs or maintenance items, but other years you may eventually need to replace a roof or make large repairs to AC/Heat units.

To rent or to buy- that is the question.
Owning your house is a great idea that offers numerous advantages, but there are times when it is better to rent that to buy. Still confused? The following quiz may help sort things out.

Yes or No?

I intend to remain in the same location for more than five years? It is often better to rent a home rather than buy if you don't intend to live in the house for at least five years.

Yes or No?

I enjoy home maintenance, lawn care and other household tasks.

Home ownership requires upkeep and maintenance so either budget the cost of having someone else handle it for you or reconsider ownership.

Yes or No?

I desire the privacy and ability to do what I want with my own property.

While home ownership does allow additional freedom there are often deed restrictions, zoning, Home owners associations and other restrictions on what you can do with a given property. Understand what you are buying in advance to make sure it meets your needs.

Cash Flow Analysis and After Tax Perspective

At Jerry Mueller Real Estate we are all about Real Estate. As professional real estate practitioners and consultants we are well versed in 1031 tax deferred exchanges and Cash Flow Analysis and After Tax Perspective.

Having a diverse investment portfolio is the best defense against the various ups and downs of different market places. It is a good idea to have mutual funds, bonds, maybe some stocks, and real estate investments.

The best part about investing on the lower shore of Delaware is the enhancement to you and your families quality of life as well as having a sound real estate investment. There is nothing better then to have several reasons for owning a property. You can rent it, you can use if with your family, your children can use it when they go to college, your rent it in the summer season and use it in the off season, the options are wonderful.

Real estate investing is also viable. Like all investing there are risks involved so letting the professional real estate practitioners and Jerry Mueller Real Estate help you get all the information you need will help to eliminate some of that risk. Along with our outstanding Rental Center (hyper-link) we also can assist you with a cash flow analysis. Here is a link to our cash flow analysis, if you need help working with the form simply give us a call and we are here to help you.

Be sure to check out our Buyers and Sellers online preferred programs where you can save thousands when purchasing and selling through Jerry Mueller Real Estate.



Jerry Mueller Real Estate is a full service real estate company that can help you buy and sell real estate in Bethany Beach, Rehoboth Beach, Dewey Beach, Fenwick Island, and all inland communities in Delaware.  We can also help you with all your real estate needs in Ocean City, Maryland and all inland communites too.  We will be able to show you all the benefits of buying property near the beach, and if this is a second home that you want to also rent we will be able to show you a cash flow analysis with an after tax perspective that will show you all the tax saving benefits of home ownership at the beach along with the wonderful quality of life this area has to offer.  We are able to help you with high end beach and bayfornt properties to affordable properties inland.  This area is also a destination for retirement and relocation from the large metropoliten areas.  We will be able to show you all the benefits of why Delaware is one of the top 5 retirement states in the nation, with low real estate taxes, no sales tax, low vehicle tax, no state tax on pensions, and more.  Delaware is also a corporate friendly state and Jerry Mueller will be able to help you will all your commercial real estate needs.  Jerry Mueller is also a real estate auctioneer and if you are interested in accelerating the sale of your home we can also help you with that.  Jerry Mueller Real Estate has a wonderful rental center that can help you with their vacation rentals at the beach, and also with year around and seasonal rentals.  Jerry Mueller Real Estate also offers a Buyers Advantage Program where buyers can save thousand of dollars when they buy a home using the services of Jerry Mueller Real Estate.  Jerry Mueller Real Estate looks forward to helping you.

15 Reasons Why You Should Choose Delaware

1. Sussex County offers a relaxing, coastal resort lifestyle with many beautiful beaches, state parks and sport clubs.

2. Delaware was designated as the "Most Tax Friendly State for Retirees" by Kiplinger�s Personal Finance Magazine, in November 2006.

3. Delaware is one of only five states that have no Sales Tax. The states with no sales tax are as follows:

Alaska Delaware Montana New Hampshire Oregon

4. Delaware has no Estate Tax (a.k.a., Inheritance Tax, Death tax). Delaware�s Estate Tax is equal to the state death tax credit under federal estate tax law. Since this credit has been eliminated from 2005 through 2010, there is no Estate Tax Imposed by the Delaware.

5. Delaware has also no real property or personal property taxes. No state�level tax imposed.

6. Delaware ranks 13th State with highest one-year home appreciation % change for a year ending March 31, 2006, with a 5-year appreciation rate of 72.2%, 26 �year appreciation rate of 389.6%!

Top 13 States With Highest one-year Appreciation Percent Change in House Prices-quarter Ending March 31, 2006

Rank State 1-Year Quarter 5-Years Since 1980 1 Arizona 32.81 3.80 93.48 309.80 2 Florida 26.62 4.29 111.53 363.74 3 Hawaii 24.99 5.04 58.62 315.93 4 Oregon 20.96 3.80 58.62 315.93 5 District of Columbia 20.84 1.47 124.01 518.60 6 Maryland 20.46 3.17 101.33 409.35 7 Idaho 20.30 3.32 50.92 216.16 8 Washington 19.37 3.82 56.40 346.67 9 California 19.19 2.54 115.21 524.09 10 Virginia 18.12 2.69 83.40 350.58 11 Nevada 17.10 2.88 106.10 309.56 12 New Mexico 15.88 2.80 45.33 203.17 13 Delaware 15.59 2.58 72.24 389.57   United States 12.54 2.03 57.28 293.78

7. Delaware ranks as the 9th fastest growing state. With 1.6% increase in population.

U.S. State Population Estimates & Changes

State July 1, 2005 July 1, 2004 Change 2005 to 2005 National Ranking of States United States 296,414,807 293,656,842 Number 2,453,562 Percent 0.9376802 Population Estimation Change 2004 to 2005 July 2005 July 2004 Number Percent         Nevada 2,414,807 2,332,898 81,909 3.5110408 35 35 8 1 Arizona 5,939,292 5,739,879 199,413 3.4741673 17 18 4 2 Idaho 1,429,096 1,395,140 33,956 2.4338776 39 39 21 3 Florida 17,789,864 17,385,430 404,434 2.3262813 4 4 1 4 Utah 2,469,585 2,420,708 48,877 2.01912 34 34 15 5 Georgia 9,072,576 8,918,129 154,447 1.7318319 9 9 5 6 Texas 22,859,968 22,471,549 388,419 1.7284923 2 2 2 7 N. Carolina 8,683,242 8,540,468 142,774 1.6717351 11 11 6 8 Delaware 843,524 830,069 13,455 1.62095 45 45 33 9


8. Delaware ranks as number one nationally in the percentage of land continuously conserved for agriculture with 6.4 percent or 82,317 acres. Delaware is first in per capita spending on farmland preservation at $124 per person too.

9. If you have never been before a property owner in Delaware and you are a first time buyer, you may qualify for an exemption of.75% of Sussex County transfer fee and recording fee for the deed and mortgage, which normally is 1.5% of the purchase price.

10. In 2006, Delaware is one of only six states receiving a triple-A for the state�s bonds, from 3 of the major bond agencies (i.e., Fitch Ratings, Moody�s Investors Service and Standard and Poor�s). Delaware has been earning triple-A ratings for three years consecutively, the highest rating awarded by the nationally recognized rating services. This ratings show how Delaware has taken a fiscally responsible approach to managing state government and, having the lowest assessment of repayment risk, allow Delaware to borrow money at the lowest possible interest rate, thus finally saving Delaware Tax payers money. Bonds are in a great demand and are tax-exempt for federal and Delaware income interests.

11. The University of Delaware was also ranked as one of the nation�s top colleges by the World Report and US News, "American Best Collages 2007," ranking UDel 67th. Here are some general facts about the College: founded 1743; undergraduate enrolment 19,939; tuition and fees $7,740 in-state, $18,450 out-of �state; room and board $7,366; with endowment of $1,001,074,864.

12. Delaware has the cleanest beaches as, it�s beaches were ranked the nation�s cleanest of the 29 coastal and Great Lakes states surveyed by The Natural Defense Council�s "Testing Waters 2006 - A Guide to Water Quality at Vacation Beaches."

Rank of States by Percent of Beach Samples Exceeding the National Standard in 2005

State Rank (least clean to most clean) Percent Total Samples Beaches National - 8% 114,955 3,700 Mississippi 29 22% 1,257 222 Louisiana 28 18% 949 35 Wisconsin 27 16% 4,403 127 Delaware 1 <1% 378 21


13. Delaware is also one of only nine states that have little or no income tax on trusts.

Trust Tax Friendly States - States with little or no income tax on trusts

Alaska Nevada Texas Delaware Ohio Washington Florida South Dakota Wyoming


14. Delaware is one of only 23 states allowing trust to last for generations.

Alaska Idaho* Nebraska Utah*** Arizona Illinois New Hampshire* Virginia Colorado Indiana New Jersey Washington*** Delaware* Maine Ohio Wisconsin* District of Columbia Maryland Rhode Island Wyoming*** Florida** Missouri* South Dakota  


Delaware ranks as the thrid least tax burdensome state in the United States

State & Local Tax Burdens by State's Ranking - Projected for Calendar Year 2006

State Tax Rank (least to most burdensome) Tax Burden as a Percentage of Income Tax Burden Per Capita Income Per Capita United States - 10.6% $4,072 $38,376 Alaska 50 6.6% $2,598 $39,499 New Hampshire 49 7.3% $3,136 $42,707 Delaware 48 8.4% $3,426 $40,964 Maine 1 13.5% $4,719 $34,935


Sources: (1) Tax Foundation and Bureau of Economic Analysis (2) Office of Federal Housing Enterprise Oversight, House Price Index (3) U.S. Department of Commerce, U.S. Census Bureau, released December 22,2005 (4) Natural Resources Defense Council, "Testing the Waters 2006 - A Guide to Water Quality at Vacation Beaches." (5) JP Morgan Private Bank (6) Trusts and Estates < December 2004

*Favorable tax treatment is more assured in these states.
**Florida trust duration 360 years, Washington 150 years.
***Utah, Wyoming limited to 1,000 years.

Marketable Difference

At Jerry Mueller Real Estate we are all about real estate. Thinking outside the box to market your property is key to getting the desired results for you. We use a variety of marketing tools that enable us to give you our signature very best personal and professional services. Here is a list of those tools that are the marketable difference only available at Jerry Mueller Real Estate.

A state of the art web site that attracts thousands of buyers with our quick search capabilities and high search engine rankings. State of the art Featured Properties page for your listing with unlimited photos. State of the art Video technology and professional editing so that potential buyers can view your home as if they are walking through it, this video technology also enables the view to physically see all the features and benefits of your home and community and town. Target Marketing using broadcast e-mail technology that reached hundreds of thousands of buyers, and Realtors in the mid Atlantic region. Specialized letter writing to target markets and buyers. Custom exit strategies to get properties the maximum exposure to get the desired results, Sold! E-commerce on our web site to attract a variety of buyers. State of the art e-commerce booking and paying on line for our Rental Center and our Golf & Tennis Package Center to attract a variety of Buyers. Creative Print advertising State of the art MLS search capability from our web site for the entire state of Delaware, the Maryland Eastern Shore and 17 other counties in PA & NJ again attracting more and more buyers. Our comprehensive web site that has all the information that home buyers and sellers need keeping buyers at our site longer. Our signature personal and professional real estate services providing you with all the information you need.

 Understanding Changing Markets

A big challenge facing home buyers and home sellers today is understanding changing markets. My father once told me he invested in Otis Elevator because he went on the theory that what goes done must do up. My father never did all that well in the stock market.

I cannot speak to all market places such as stocks, or bonds, or commodities because that is not my specialty, however I have been a real estate agent and broker since 1983. And I have seen several changes in the real estate market place over that time period. And as a student of history I also am familiar with historical changes in real estate markets since 1908 when real estate agents started to form an association which is now known as the National Association of REALTORS.

The biggest challenge in understanding changing markets is to recognize signals in the economy and market that trigger such changes. In recent history we say real estate start to appreciate over a 6 year period. Although is was dramatic culminating to an all time high in 2005, it was gradual over the 6 year period. Those who sold in 2000 and 2001 could not have known that they could have gained larger sales if they waited to 2003 or 2004. It simply does not work that way. It takes the gradual sales to lead to the all time high. Those who bought in 2005 could not have known that they were buying at the peak of the real estate market and that after 2005 economic conditions began to change along with other factors and real estate values have declined from the all time high.

So it is also true with Otis Elevator that what goes up must come down. When purchasing real estate there is a check list everyone should ask themselves. First and foremost is why I want to purchase a property. Never ever should anyone purchase a property to "flip" the property for a gain. That is not to say that some have been lucky with such a risk. However today I am seeing more of the unlucky ones who took such a gamble. Real Estate in general is a long term investment, that will show a reasonable gain over time.

The reasons to purchase a home are:

Primary Home. Now when purchasing a primary home be sure of your job security, and that the location is good for going and coming home from work. Also be sure the home meets your needs. And always get a reliable home inspection, to be sure that what you are purchasing is not a pig in a poke. Second Home. Now the American Dream. First the American Dream was to own a home. Now the American dream is to own a primary home and a vacation home. When purchasing a vacation home first and foremost make sure you can afford it. We can help you to qualify for purchasing a primary or second home at Jerry Mueller Real Estate. Also have a back up plan to rent the home when you are not using it as much as you thought you would. At Jerry Mueller Real Estate we have a wonderful rental center and we will be able you help you understand about all the various rental programs we have. Investment Property. Investment property is for the purpose of getting a return on an investment, and having a viable tax shelter. And that some day in the future selling the home at a reasonable gain. Be sure that when you purchase an investment property the numbers work for you on the property you are purchasing. At Jerry Mueller Real Estate we will be able to calculate your cash flow analysis. The purpose of purchasing an investment property is to rent it at a reasonable rate of return. Lots and Land. There is no tax advantage when purchasing lots or land, other than doing a 1031 exchange when selling. So it is always best to purchase lots and land for cash. When purchasing lots and land to build on, extreme caution must be taken. There are lots of factors that can increase building costs by not getting all the information about the property you are purchasing. At Jerry Mueller Real Estate we will be able to explain all the details about purchasing lots and land.

If you are a seller it is always a good idea to sell in a sellers market. And not to sell at the top of the market, however if you as a seller are able to dictate the price and terms of the sale and are satisfied with those terms then it is definitely a great time to sell. If you as a seller cannot dictate the price and terms then only sell if you have to. It is best to rent the property during this marketplace and wait until you can be satisfied with the results. If you are a buyer just the opposite. It is best to buy when as a buyer you can dictate the price and terms of a purchase. And if the property is in the location you want and the price and terms make sense with your financial condition and needs then you will be able to make your best deal. If you cannot buy in a buyers market then it is a good time to take a look at the market place in it's entirety. How long has the sellers market been in place, are prices not making sense and is the risk to high. These are all red flags that were becoming obvious in 2005 going into 2006. The sellers that wanted to sell during that period who had the most success, dropped their prices quicker then other sellers. That was a huge successful strategy that helped sellers get a reasonable gain and get out before prices fell more even below what they dropped to get their property sold. The other side for buyers is to ask how long has the market been declining. Especially for investment properties and second homes.

Probably the worst place to get your information is from the TV news. By the time they report anything it is already trailing the play. At Jerry Mueller Real Estate we will be able to give you all the information you need to buy and sell real estate. We will be able to offer you our signature very best personal and professional real estate services.

Jerry Mueller


Mortgage Information

Common Mortgage Loan Types

Fixed Rates

A conventional fixed-rate mortgage offers you a set rate and payments that do not change throughout the life or "term", of the loan. A conventional loan is fully paid off over a given number of years, usually 15, 20 or 30.

A portion of each monthly payment goes towards paying back the money you borrowed, the "principal", and the rest is "interest". Any money paid into the value of the house, including your down payment, is known as "equity" in the home. For instance, if your house is worth $100,000 and you owe $65,000 on your mortgage, then you are said to have 35% equity in your house.

Temporary Buy-Downs

"Buydowns" usually refer to a borrower "buying down" the interest rate on a loan. This is the same concept as paying "points" on a loan, except that points buydown (or up) the rate of a loan over the entire term while a buydown is usually only a temporary reduction.

A temporary buydown on a loan is achieved by lowering the rate for the first few years, starting out at a lesser amount and gradually rising to the original loan rate. Of course, because the loan rate is lower for the initial few years, so are the payments. To make up this loss of funds to the lender, the buydown usually consists of extra monies paid up front to the lender when the loan closes. In return, the lender will let the borrower "qualify", or meet the criteria for the loan, at the new, reduced rate.

An example of a temporary buydown on a loan is a 2/1 Buydown. Assume we have a 30-year conventional loan with an interest rate of 9%. A 2/1 buydown would make the interest rate for the first year of the loan equal to 7%, the second year 8% and 9% from then on. The borrower could qualify for the loan (under some loan programs) as if it were a 7% loan.

Balloon Loans

This is a special type of conventional, fixed-rate mortgage with a much shorter term. In a balloon mortgage, the terms and payments are usually the same as their conventional loan counterpart, but the balance is due in full on the loan at the end of a specified, much shorter term.

For example, a seven-year balloon mortgage would be calculated to have the same payments as a 30-year loan, with the borrower paying the same amount in interest and principal each month. However, at the end of seven years whatever balance is left on the loan is due. At this point, the borrower may either pay out the loan in full or refinance with a new loan.

Balloons are often priced better than conventional, fixed-rate mortgages because of the certainty to the lender of the mortgage term.

Adjustable Rate Loans (ARM's)

An "ARM", or "Adjustable Rate Mortgage" has a fluctuating interest rate and the potential for changing payment amounts. In most ARM mortgages, the interest rate on a loan is fixed for a certain number of years and then allowed to fluctuate in sync with current economic factors.

An ARM is of value to the lender because the risks of lending money in a changing economy are passed on to the borrower. In exchange, most lenders are able to offer a lower initial interest rate to the borrower in exchange for their assumption of this risk.

Adjustment Period

This is the predetermined period for which the rate of an ARM is adjusted. For instance, a 3/1 ARM has a fixed rate for the first three years of the loan and is then adjusted once every year through the term of the loan to reflect the current economic conditions.


This is a limit specified in the ARM loan for individual and cumulative interest rate adjustments. An example of this is a 2/6 cap, which allows the interest rate on your ARM loan to go up or down by no more than two percent every adjustment period, and has a total limit of six percent for cumulative changes. Therefore a 2/6 cap on a 5% ARM will allow a maximum rate of no more than 11%.


The measurement, or basis, that lenders use to adjust the interest rate on an ARM. ARMs are usually quoted with a "teaser", or first-year rate, and then expressed as an index plus a margin. For instance, a 5/1 ARM may be advertised at 5% with a 2.5% margin over the U.S. 30-year bond index. This means that your first year's rate would be 5%. The second year, the rate would be 2.5% plus whatever the 30-year bond rate was, such as 6%, making your rate through year five equal to 8.5%. In year five, your rate is adjusted again, this time to 2.5% plus the current 30-year bond rate, now 7%, making your new rate equal to 9.5%.

Negative Amortization

This occurs when the combination of interest rates adjustments and payment caps result in a monthly payment that does not cover the interest portion of your loan. In this case, the difference would be added back to the total amount you owed on the loan, thus making a "negative amortization" to the mortgage.

Convertible Adjustable Loans

Convertible ARMs offer the borrower the option to convert the loan from an adjustable-rate to a fixed-rate at specified times during the term of the mortgage. This option is attractive to many buyers who may wish to take advantage of current low interest rates, but want the security of a fixed-rate loan in the future. Be aware of any costs associated with the conversion of the loan.

Questions to Ask When Considering an Adjustable

What would the interest rate be today if the rate were fully adjusted, based on the current value of the index? Is there a prepayment penalty? How long before the interest rate can adjust? By what amount can the rate adjust at that time? At the next adjustment period? Over the life of the loan?

Locking In Your Interest Rate

In most cases, the terms you are quoted when you shop among lenders represent the terms available at the time of the quote. Therefore, you should not rely on the terms quoted to you when shopping for a loan unless a lender is willing to offer a lock-in.

Rate Lock-In is a lender's promise to hold a certain interest rate and a certain number of points for you, usually for a specified period of time, while your loan application is processed. Depending upon the lender you may be able to lock in the interest rate and number of points when you file your application, during processing of the loan or when the loan is approved. A lock-in that is given when you apply for a loan may be useful because it's likely to take your lender several weeks or longer to prepare, document, and evaluate your loan application. During that time, the cost of mortgages may change. But if your interest rate and points are locked in, you should be protected against increases while your application is processed. This protection could affect whether you can afford the mortgage. However, a locked-in rate could also prevent you from taking advantage of rate decreases.

It is important to recognize that a lock-in is not the same as a loan commitment. A loan commitment is the lender's promise to make you a loan in a specific amount at some future time. Generally, you will receive the lender's commitment only after your application has been approved. This commitment usually will state the loan terms that have been approved, how long the commitment is valid, and the lenders conditions for making the loan.

Will You Be Charged for a Lock-In?

Lenders may charge a fee for locking in the rate of interest and number of points for your mortgage. Some lenders may charge you a fee upfront, and may not refund it if you withdraw your application, if your credit is denied, or if you do not close the loan. Others might charge the fee at closing. The fee might be a flat fee, a percentage of the mortgage amount, or a fraction of a percentage point added to the rate you lock in.

Lenders may offer different options in establishing the interest rate and points that you will be charged, such as:

Locked-In Interest Rate-Locked-In Points

Under this option, the lender lets you lock in both the interest rate and points quoted to you. This option may be considered to be a true lock-in because your mortgage terms should not increase above the interest rate and points that you've agreed upon even if market conditions change.

Locked-In Interest Rate-Floating Points

The lender lets you lock in the interest rate, while permitting or requiring the points to rise and fall (float) with changes in market conditions.

Floating Interest Rate-Floating Points

The lender lets you lock in the interest rate and the points at some time after application but before closing. If you think that rates will remain level or even go down, you may want to wait on locking in a particular rate and points. If rates go up, you should expect to be charged the higher rate.

How Long Are Lock-Ins Valid?

Usually the lender will promise to hold a certain interest rate and number of points for a given number of days, and to get these terms you must close the loan within that time period. Lock-ins of 30 to 60 days are common. But some lenders may offer a lock-in for only a short period of time (for example, 7 days after your loan is approved) while some others might offer longer lock-ins (up to 120 days). Lenders that charge a lock-in fee may charge a higher fee for the longer lock-in period. Usually, the longer the period, the greater the fee.

The lock-in period should be long enough to allow for closing, and any other contingencies imposed by the lender. Before deciding on the length of the lock-in, you should find out the average time for processing loans. You'll also want to take into account any factors that might delay your settlement. These may include delays that you can anticipate in providing materials about your financial condition and, in case you are purchasing a new house, unanticipated construction delays, credit problems to be addressed, etc.

What Happens if the Lock-In Period Expires?

If you don't close within the lock-in period, you might lose the interest rate and the number of points you had locked in. This could happen if there are delays in processing whether they are caused by you, others involved in the settlement process, or the lender. For example, your loan approval could be delayed if the lender has to wait for any documents from you or from others such as employers, appraisers, termite inspectors, builders, and individuals selling the home. If your lock-in expires, most lenders will offer the loan based on the prevailing interest rate and points. If market conditions have caused interest rates to rise, most lenders will charge you more for your loan.

How Can You Speed the Approval of Your Loan?

Much of the information required by your lender can be brought with you when you apply for a loan. This may help to get your application moving more quickly through the process. So when you first meet with your lender, be sure to have the asked for items, and respond promptly to your lender's requests for information.

Refinancing - What You Should Know


If you are a homeowner who was lucky enough to buy when mortgage rates were low, you may have no interest in refinancing your present loan. But perhaps you bought your home when rates were higher. Or perhaps you have an adjustable rate loan and would like to obtain different terms.

Should you refinance? This refinancing tip will answer some questions that may help you decide. If you do refinance, the process will remind you of what you went through in obtaining the original mortgage. That's because, in reality, refinancing a mortgage is simply taking out a new mortgage. You will encounter many of the same procedures-and the same types of costs-the second time around.

Would Refinancing Be Worth It?

Refinancing can be worthwhile, but it does not make good financial sense for everyone. A general rule is that refinancing becomes worth your while if the current interest rate on your mortgage is at least two percentage points higher than the prevailing market rate. This figure is generally accepted as the safe margin when balancing the costs of refinancing a mortgage against the savings.

There are other considerations, too, such as how long you plan to stay in the house. Most sources say that it takes at least three years to realize fully the savings from a lower interest rate, given the costs of the refinancing. (Depending on your loan amount and the particular circumstances, however, you might choose to refinance a loan that is only 1.5 percentage points higher then the current rate. You may even find you could recoup the refinancing costs in a shorter time.)

Refinancing can be a good idea for homeowners who: Want to get out of a high interest rate loan to take advantage of lower rates. This is a good idea only if you intend to stay in the house long enough to make the additional fees worthwhile. Have an adjustable rate mortgage (ARM) and want a fixed-rate loan to have the certainty of knowing exactly what the mortgage payment will be for the life of the loan. Want to convert to an ARM with a lower interest rate or more protective features (such as a better rate and payment caps) than the ARM they currently have. Want to build up equity more quickly by converting to a loan with a shorter term. Want to draw on the equity built up in their house to get cash for a major purchase or for their children's education.

If you decide that a refinancing is not worth the costs, ask your lender whether you may be able to obtain all or some of the new terms you want by agreeing to a modification of your existing loan instead of a refinancing.

Should You Refinance Your ARM (Adjustable Mortgage)?

In deciding whether to refinance an ARM you should consider these questions:

Is the next interest rate adjustment on your existing loan likely to increase your monthly payments substantially? Will the new interest rate be two or three percentage points higher than the prevailing rates being offered for either fixed-rate loans or other ARM's? If the current mortgage sets a cap on your monthly payments, are those payments large enough to pay off your loan by the end of the original term? Will refinancing a new ARM or a fixed-rate enable you to pay your loan in full by the end of the term?

What Are The Costs of Refinancing?

The fees described below are the charges that you most likely will encounter in a refinance.

Application Fees

This charge imposed by your lender covers the initial costs of processing you loan request and checking your credit report.

Title Search and Title Insurance

This charge will cover the cost of examining the public record to confirm ownership of the real estate. It also covers the cost of a policy, usually issued by a title insurance company that insures the policyholder in a specific amount for any loss caused by discrepancies in the title to the property. Be sure to ask the company carrying the present policy if it can re-issue your policy at a re-issue rate. You could save up to 70 percent of what it would cost you for a new policy.

Lender's Attorney's Review Fees

The lender will usually charge you for fees paid to the lawyer or company that conducts the closing for the lender. Settlements are conducted by lending institutions, title insurance companies, escrow companies, real estate brokers, and attorneys for the buyer and seller. In most situations, the person conducting the settlement is providing a service to the lender. You may want to retain your own attorney to represent you at all stages of the transaction, including settlement.

Loan Origination Fees and Discount Points

The origination fee is charged for the lender's work in evaluating and preparing your mortgage loan. Discount points are prepaid finance charges imposed by the lender at closing to increase the lender's yield beyond the stated interest rate on the mortgage note. One point equals one percent of the loan amount. For example, one point on a $75,000 loan would be $750. In some cases, adding them to the loan amount can finance the points you pay. The total number of points a lender charges will depend on market conditions and the interest rate to be charged.

Appraisal Fee

This fee pays for an appraisal that is a supportable and defensible estimate or opinion of the value of the property.

Prepayment Penalty

A prepayment penalty on your present mortgage could be the greatest determent to refinancing. The practice of charging money for an early pay-off of the existing mortgage loan varies by state, type of lender, and type of loan. Prepayment penalties are forbidden on various loan including loan from federally chartered credit unions, FHA and VA loans, and some other home-purchase loans. The mortgage documents for your existing loan will state if there is a penalty for prepayment. In some loans, you may be charged interest for the full month in which you prepay your loan.


Depending on the type of loan you have and other factors, another major expense you might face is the fee for a VA loan guarantee, FHA mortgage insurance, or private mortgage insurance. There are a few other closing costs in addition to these.

In conclusion, a homeowner should plan on paying an average of 3 to 6 percent of the outstanding principal in refinancing costs, plus any prepayment penalties and the costs of paying off any second mortgages that may exist. One way of saving on some of these costs is to check first with the lender who holds your current mortgage. The lender may be willing to waive some of them, especially if the work relating to the mortgage closing is still current. This could include the fees for the title search, surveys, inspections, and so on.

The information contained in this refinancing tip is intended to help you ask the right questions when considering refinancing your loan. It is not a replacement for professional advice. Talk with mortgage lenders, real estate agents, attorneys, and other advisors about lending practices, mortgage instruments, and your own interests before you commit to any specific loan.

Step By Step: The Loan Process


This occurs before the loan process actually begins, and is usually the first step after initial contact is made. The lender gathers information about the income and debts of the borrower and makes a financial determination about how much house the borrower may be able to afford. Different loan programs may lead to different values, depending on whether you are qualified for them, so be sure to get a pre-qualification for each type of program you are suited for.


The application is actually the beginning of the loan process and usually occurs between days one and five of the loan. The buyer, now referred to as a "borrower", completes a mortgage application with the loan officer and supplies all of the required documentation for processing. Various fees and down payments are discussed at this time and the borrower will receive a Good Faith Estimate (GFE) and a Truth-In-Lending statement (TIL) within three days that itemizes the rates and associated costs for obtaining the loan.


Processing occurs between days 5 and 20 of the loan. The "processor" reviews the credit reports and verifies the borrower's debts and payment histories as the VODs and VOEs are returned. If there are unacceptable late payments, collections for judgment, etc., a written explanation is required from the borrower. The processor also reviews the appraisal and survey and checks for property issues that may require further discernment. The processor's job is to put together an entire package that may be underwritten by the lender.


Lender underwriting occurs between days 21 and 30 or sooner. The underwriter is responsible for determining whether the combined package passed over by the processor is deemed as an acceptable loan. If more information is needed, the loan is put into "suspense" and the borrower is contacted to supply more documentation.

Mortgage Insurance

Mortgage insurance underwriting occurs when the borrower has less than 20% of the loan amount to put towards a down payment. At this time, the loan is submitted to a private mortgage guaranty insurer, who provides extra insurance to the lender in case of default. As above, if more information is needed the loan goes into suspense. Otherwise it is usually returned back to the mortgage company within 48 hours.


Pre-Closing occurs between days 25 and 30. During this time the title insurance is ordered, all approval contingencies, if any, are met, and a closing time is scheduled for the loan.


Closing usually occurs between days 25 and 45 of the loan (depending upon the designated length of your escrow). At the closing, the lender "funds" the loan with a cashier's check, draft or wire to the selling party in exchange for the title to the property. This is the point at which the borrower finishes the loan process and actually buys the house.

What Are Closing Costs & What to Expect

Closing is a process that begin weeks before closing, and follows an outline set largely by a buyer's original offer to the seller of the house. That sales contract , once the seller signs it, covers the key elements of the settlement or closing.

Types of Closing Costs

Charges for Establishing and Transferring Ownership. These include title search, title insurance and related escrow fees. Amounts Paid to State and Local Governments. These include city, county and state transfer taxes, recordation fees, and prepaid property taxes. Costs of Getting a Mortgage. These include appraisal, credit checks, loan documentation fees, notary charges, loan origination, underwriting, commitment and processing fees, hazard insurance, interest prepayments, and lender's inspection fees.

Title Insurance

When it comes to houses, providing clear title is not simple. Moreover, your lending institution will not give you a mortgage loan on a house unless you can prove that the seller owns it. The proof comes in the title search.

In many parts of the country, public records affecting real estate title are spread among several local government offices, including recorders of deeds, county courts, tax assessors, and surveyors. Records of deaths, divorces, court judgments, liens, and contests over wills (all of which can affect ownership rights) also must be examined. An escrow or title company, a lawyer, or other specialist may carry out the title search. In addition to a formal title search, your will require a title insurance policy. The policy guards the lender against an error by whoever searched the title. Let's say, for example, that a long-lost relative of the seller turns up with indisputable evidence that the relative - and not the seller - holds legal title to the property. Though it should have been found in the public records, the relative's claim was missed somehow. Errors are rare, but they do occur.

The cost of the policy (a one-time premium) is usually based on the loan amount, and is often paid by the purchaser. There's nothing, however, to keep you from asking the seller, during your negotiations, to pay part or the entire premium. The title insurance required by the lender protects only the lender. To protect yourself against unforeseen title problems, you may also want to take out an owner's title insurance policy. Normally the additional premium cost is only a fraction of the lender's policy, but this can vary from area to area. Some final advice on keeping title insurance costs low: if the seller owned the house you are buying for only a few years, check with a title company. If you can obtain a re-issue rate, the premium is likely to be lower than the regular charge for a new policy.

Government Imposed Costs

While there is no way to avoid paying these taxes, you may be able to lessen your share of the bill. Try shifting some or all of the cost to the house. But remember, you must do this when you make your offer to purchase the property.

Processing Fees

Imposed by your lender, this charge covers the initial costs of processing your loan request.

Appraisal Fee

This fee pays for an independent appraisal of the home you want to purchase. The lender requires this opinion or estimate of the market value of the house for the loan.

Origination Fees & Discount Points

The origination fee is charged for the lender's work in evaluating and preparing your mortgage loan. Discount points are prepaid finance charges imposed by the lender at closing to increase the yield to the lender beyond the stated interest rate on the mortgage note. The greater the discount points paid, the lower the interest rate. One point equals one percent of the loan amount. For example, one point on a $100,000 loan would be $1,000. In some cases - especially with refinances - adding them to the loan amount can finance the points.

Mortgage Insurance

Buyers who make down payments less than 20 percent of the value of the house may be required by lenders, and by law in some states, to take out mortgage insurance. The policy covers the lender's risk in the event the buyer fails to make the loan payments. Premiums are typically paid annually from an escrow or reserve account, or in a lump sum at closing.

Insurance: Homeowners & Hazard

A form or protection against physical damage to the house by fire, wind, vandalism and other causes. Your lender will expect you to have a policy in effect at closing.

Assumption Fee

This is charged when you are taking over or assuming an existing mortgage on the house. The size of the fee will depend on the lender, but it may range from several hundred dollars to one percent of the loan amount.

Home Inspection Fee

An analysis of the structural condition of the property by an engineer or consultant, and for termite inspections.

Various Expenses Between Buyer & Seller

Some of the adjustments may involve large amounts. Local property taxes, annual condominium fees and other lump-sum service charges, for instance, may be split between you and the seller to cover your respective periods of ownership for the calendar year or tax period.

How to Anticipate Closing Costs

With such a long list of potential charges at settlement, it is important to know what to expect. Your mortgage lender is required to supply you with a Good Faith Estimate of all your closing costs within three business days of your application for a loan. In addition, a statement of your actual costs should be given to you at or before settlement. Within the same three days, the lender is required, under the Truth in Lending Act, to provide you with a disclosure estimating the costs of the loan you have applied for, including your total finance charge and the Annual Percentage Rate (APR). The APR expresses the cost of your loan as a yearly rate. This rate is likely to be higher than the stated interest rate on your mortgage because it takes into account discount points, mortgage insurance, and certain other fees that add to the cost of your loan.


Jerry Mueller Real Estate real estate company for sales and rentals and auctions in Bethany Beach, Rehoboth Beach Delaware and Ocean City, Maryland. Your Neighborhood Real Estate Boutique REALTOR