How to nab a low-rate home loan
Getting a new loan can save you a bundle, but cautious lenders will make you jump through hoops. These strategies can help.
(Money Magazine) -- On paper it seems like the perfect time to refinance. The average rate on a 30-year fixed mortgage recently hit a 20-year low when it fell below 5% in mid-March. And the Fed has said that it will spend $300 billion to buy back government-backed Treasury bonds; that will probably keep loan rates low for months to come.
But wade into the mortgage market, and you may quickly feel as if you're trying to grab a dollar in a game-show booth where the money is blowing around: Those ultralow rates are right in front of you, yet maddeningly elusive.
Lenders, grappling with deadbeat homeowners and shifting regulations, have pared back on mortgage products and upped credit requirements. Still, you have a good incentive to try: If you took out a mortgage two years ago, when rates were in the mid-sixes, you stand to drop your rate nearly two percentage points, saving almost $300 a month on a $300,000 loan. Here's how to navigate the roadblocks.
Figure out if you qualify. Nowadays, credit score and equity are king. To land the best rates, you'll probably need a credit score of at least 740, and 20% equity. "Banks are looking for reasons not to lend you money," says Mark Miskiel of Lighthouse Mortgage in Sedona, Ariz.
If you don't have 20% equity, a refi isn't out of the question - President Obama's housing package allows homeowners who owe as much as 105% to receive government-backed loans. To qualify for that program, however, your original mortgage must be held by one of the government-sponsored entities, Freddie Mac or Fannie Mae; you must prove that you can keep up with payments; and you'll get stuck with fees that tack 0.25% to 3% onto your rate.
Get rid of the HELOC. Home-equity loans and lines have become the enemy of would-be refinancers. Before you can close on a new loan, your home-equity lender must agree to "subordinate" the secondary loan (meaning that your primary lender will get repaid first in the event you run into financial trouble). That can take at least a month, says Bob Moulton of the Americana Mortgage Group in Manhasset, N.Y.
One way to speed up the process is to do a consolidation refi through your home-equity lender. If that's not possible, aim to submit the subordination paperwork as you start shopping for a primary mortgage. And know that other lenders may add up to 0.25% to your rate to cash out the secondary loan.
Know where to look. No matter how stellar your credit, you won't get a great rate without doing some serious shopping. That's because every bank is using different standards for underwriting loans, so while you may look like a risky borrower to one, another may welcome you with open arms. In general, says Keith Gumbinger of mortgage data firm HSH Associates, you're likely to get the best rates from small local banks and credit unions.
Unfortunately, if you need a jumbo loan (typically $417,000, but it can go up to $729,750 in high-cost areas), you can kiss those super-low rates goodbye. While jumbos normally run about half a percentage point higher than smaller ones, today the spread is a point and a half.
Pay a point upfront. A point, which equals 1% of your mortgage amount, typically buys you an eighth to a quarter of a percentage point drop in your rate. Today some overloaded lenders are knocking half a percentage point off for those who pay a point, hoping this extra initial cost will deter serial refinancers.
If you're planning to stay put for about five years, it may be worth it. Conversely, consider adding an eighth of a percentage point to your rate to lock it in for 45 days. Banks and lenders are putting a lot more effort into vetting applications, so it can take up to two months to close a loan, vs. about 30 days in the past; you don't want to risk rates' moving against you while you wait. The payoff for patience: a loan you can live with, for a very long time.
Not so long ago, having a pulse qualified you to take out a mortgage. These days lenders are vetting applicants with the ardor of a Senate committee grilling an AIG executive. Here's a summary of what's changed.
Credited to: http://www.cnnmoney.com/
Your Mortgage is Our Commitment------Expect Excellence
Sunday, April 19, 2009
Monday, April 13, 2009
OBAMA SAYS GO REFINANCE
From the desk of:
Rich Storey
Mortgage Advisor
615-260-8028
Obama urges mortgage refinancing
President cites low rates while announcing a loan modification program.
WASHINGTON (Reuters) -- President Barack Obama encouraged Americans Thursday to take advantage of historically low mortgage rates and said his administration was rolling out further phases of its plan to address the housing crisis.
Turning his attention to the U.S. economy after finishing his first trip as president to Europe and Iraq, Obama said more people across the United States could save money by refinancing their loans.
"The main message that we want to send today is, there are 7 to 9 million people across the country who right now could be taking advantage of lower mortgage rates," he told reporters during a meeting with advisers and a group of people who had taken advantage of the lower rates.
"We estimate that the average family can get anywhere from $1,600 to $2,000 a year in savings by taking advantage of these various mortgage programs that have been put in place."
Obama said citizens could check a Web site, MakingHomeAffordable.gov, to see if they were eligible for mortgage refinancing.
"We are in the process of rolling out additional phases to the program," he said, referring to the administration's housing measures.
"We are putting in place a loan modification program, working with banks, working with services that will allow other folks who are closer to losing their home (be) in a stronger position in the future.
Interest rates to go lower?
Meanwhile, the top U.S. housing official said interest rates on typical home loans will continue to fall from their current, record lows.
"I think you will see them continue to come down, based on everything that we're doing, but recognize that they've already started to make a big difference," Housing and Urban Development Secretary Shawn Donovan said on CNBC.
Obama, who spent part of his trip to Europe working on solutions to the global economic crisis, emphasized that the U.S. problems stemmed from the housing sector.
"Obviously one of the triggers of the financial crisis and now the economic crisis that we've suffered is that because in some areas ... housing values got way overheated, in some cases you had a lack of regulation that allowed all sorts of complex financial instruments take advantage of home owners," he said.
"We have seen a collapse in the housing market, a precipitous drop in values, and that led to our problems in the financial markets."
Credited to: www.CNNMoney.com
Rich Storey
Mortgage Advisor
615-260-8028
Obama urges mortgage refinancing
President cites low rates while announcing a loan modification program.
WASHINGTON (Reuters) -- President Barack Obama encouraged Americans Thursday to take advantage of historically low mortgage rates and said his administration was rolling out further phases of its plan to address the housing crisis.
Turning his attention to the U.S. economy after finishing his first trip as president to Europe and Iraq, Obama said more people across the United States could save money by refinancing their loans.
"The main message that we want to send today is, there are 7 to 9 million people across the country who right now could be taking advantage of lower mortgage rates," he told reporters during a meeting with advisers and a group of people who had taken advantage of the lower rates.
"We estimate that the average family can get anywhere from $1,600 to $2,000 a year in savings by taking advantage of these various mortgage programs that have been put in place."
Obama said citizens could check a Web site, MakingHomeAffordable.gov, to see if they were eligible for mortgage refinancing.
"We are in the process of rolling out additional phases to the program," he said, referring to the administration's housing measures.
"We are putting in place a loan modification program, working with banks, working with services that will allow other folks who are closer to losing their home (be) in a stronger position in the future.
Interest rates to go lower?
Meanwhile, the top U.S. housing official said interest rates on typical home loans will continue to fall from their current, record lows.
"I think you will see them continue to come down, based on everything that we're doing, but recognize that they've already started to make a big difference," Housing and Urban Development Secretary Shawn Donovan said on CNBC.
Obama, who spent part of his trip to Europe working on solutions to the global economic crisis, emphasized that the U.S. problems stemmed from the housing sector.
"Obviously one of the triggers of the financial crisis and now the economic crisis that we've suffered is that because in some areas ... housing values got way overheated, in some cases you had a lack of regulation that allowed all sorts of complex financial instruments take advantage of home owners," he said.
"We have seen a collapse in the housing market, a precipitous drop in values, and that led to our problems in the financial markets."
Credited to: www.CNNMoney.com
Monday, April 6, 2009
Good info regarding FHA loans
From the desk of:
Rich Storey
Mortgage Advisor
615.260.8028
Qualifying for a low-down FHA loan
Federal Housing Administration lending is soaring - with good reason. These mortgages are affordable, flexible and available.
NEW YORK (CNNMoney.com) -- Mortgages insured by the Federal Housing Administration can be a lifeline for low-income or high-risk borrowers. These loans have tiny down-payment requirements, competitive rates and easy credit-score hurdles.
In fact, terms are so attractive that some may ask why all home buyers don't use FHA mortgages.
Well, a lot more of them do. Since the housing bust began, FHA lending has soared to account for 20% of the total dollar volume in home loans - up from just 3% in 2006. The number of authorized FHA lenders skyrocketed 500% over the past two years.
"FHA stays active in volatile and declining markets, continuing to make mortgage credit available to borrowers, even when private mortgage providers are withdrawing," said the Secretary of Housing and Urban Development, Shaun Donovan, in Senate Appropriations Committee testimony on Thursday. "During difficult times, it is critically important to have an entity like FHA play this role - offering families access to near-prime rate financing."
FHA loans are especially attractive for homebuyers with steady incomes who cannot scrape together a 20% down payment because FHA lenders will finance up to 96.5% of the home price.
According to Maryland-based mortgage consultant Allen Hardester, the other attractions of
FHA loans include:
A better loan modification program. The agency has a long history of helping borrowers who fall behind on payments. In two-thirds default cases the agency figured out a plan to keep borrowers in their homes. And 90% of those mitigations were still working after two years.
They're cheap to refinance. FHA loans can be easily - and often cheaply - converted to similar FHA mortgages if interest rates drop.
Borrowers with weak or limited credit histories may still qualify. Mortgage applicants can have very short credit histories or a late payment or two on their records and still get approved with low interest rates. There is also no mandated minimum credit score; individuals are judged case-by-case.
Low rates.
For months, interest rates on FHA loans have been lower than conventional loans. Plus, rates don't vary with credit score; you pay the same whether you're a 620 or a 700.
Although these loans target low- and moderate-income Americans, there are no income restrictions. However, FHA does limit the amount that can be borrowed, based on area home values. For example, the most that can be borrowed in a high-cost area such as New York City is $729,750; meanwhile, in Buffalo, N.Y., a purchaser can borrow no more than $276,250. Check the cap limits in your home town.
In addition, borrowers must pay an up-front insurance premium totaling 1.75% of the loan, which goes into FHA's fund for repaying lenders if borrowers default. So if you take out a $200,000 loan, you would need $3,500 at closing, in additional to normal costs.
Otherwise, there are few restrictions to getting an FHA loan. However, there is a perception that they are difficult to obtain. And they once were.
Few lenders would originate FHA loans during the housing boom because the underwriting and appraisal process was so strenuous. "If there was a crack in the sidewalk, they wouldn't approve the loan," said George Hanzimanolis, a mortgage broker in Pennsylvania and past president of the National Association of Mortgage Brokers..
That all changed a few years ago when HUD rethought its guidelines. Now, the process can be nearly as fast and painless as conventional loans.
The one class of borrowers who may be slightly better off with conventional mortgages are ones with very high credit scores who make substantial downpayments. Keith Gumbinger, of HSH Associates, a publisher of mortgage information, said they may save an eighth of a point on their rates.
To find an authorized FHA lender, go to the Department of Housing and Urban Development Web site.
Credited to: www.CNNMoney.com
Rich Storey
Mortgage Advisor
615.260.8028
Qualifying for a low-down FHA loan
Federal Housing Administration lending is soaring - with good reason. These mortgages are affordable, flexible and available.
NEW YORK (CNNMoney.com) -- Mortgages insured by the Federal Housing Administration can be a lifeline for low-income or high-risk borrowers. These loans have tiny down-payment requirements, competitive rates and easy credit-score hurdles.
In fact, terms are so attractive that some may ask why all home buyers don't use FHA mortgages.
Well, a lot more of them do. Since the housing bust began, FHA lending has soared to account for 20% of the total dollar volume in home loans - up from just 3% in 2006. The number of authorized FHA lenders skyrocketed 500% over the past two years.
"FHA stays active in volatile and declining markets, continuing to make mortgage credit available to borrowers, even when private mortgage providers are withdrawing," said the Secretary of Housing and Urban Development, Shaun Donovan, in Senate Appropriations Committee testimony on Thursday. "During difficult times, it is critically important to have an entity like FHA play this role - offering families access to near-prime rate financing."
FHA loans are especially attractive for homebuyers with steady incomes who cannot scrape together a 20% down payment because FHA lenders will finance up to 96.5% of the home price.
According to Maryland-based mortgage consultant Allen Hardester, the other attractions of
FHA loans include:
A better loan modification program. The agency has a long history of helping borrowers who fall behind on payments. In two-thirds default cases the agency figured out a plan to keep borrowers in their homes. And 90% of those mitigations were still working after two years.
They're cheap to refinance. FHA loans can be easily - and often cheaply - converted to similar FHA mortgages if interest rates drop.
Borrowers with weak or limited credit histories may still qualify. Mortgage applicants can have very short credit histories or a late payment or two on their records and still get approved with low interest rates. There is also no mandated minimum credit score; individuals are judged case-by-case.
Low rates.
For months, interest rates on FHA loans have been lower than conventional loans. Plus, rates don't vary with credit score; you pay the same whether you're a 620 or a 700.
Although these loans target low- and moderate-income Americans, there are no income restrictions. However, FHA does limit the amount that can be borrowed, based on area home values. For example, the most that can be borrowed in a high-cost area such as New York City is $729,750; meanwhile, in Buffalo, N.Y., a purchaser can borrow no more than $276,250. Check the cap limits in your home town.
In addition, borrowers must pay an up-front insurance premium totaling 1.75% of the loan, which goes into FHA's fund for repaying lenders if borrowers default. So if you take out a $200,000 loan, you would need $3,500 at closing, in additional to normal costs.
Otherwise, there are few restrictions to getting an FHA loan. However, there is a perception that they are difficult to obtain. And they once were.
Few lenders would originate FHA loans during the housing boom because the underwriting and appraisal process was so strenuous. "If there was a crack in the sidewalk, they wouldn't approve the loan," said George Hanzimanolis, a mortgage broker in Pennsylvania and past president of the National Association of Mortgage Brokers..
That all changed a few years ago when HUD rethought its guidelines. Now, the process can be nearly as fast and painless as conventional loans.
The one class of borrowers who may be slightly better off with conventional mortgages are ones with very high credit scores who make substantial downpayments. Keith Gumbinger, of HSH Associates, a publisher of mortgage information, said they may save an eighth of a point on their rates.
To find an authorized FHA lender, go to the Department of Housing and Urban Development Web site.
Credited to: www.CNNMoney.com
Friday, April 3, 2009
Mortgage Rates Sink Again
From the desk of:
Rich Storey
Mortgage Advisor
615-260-8028
Mortgage rates sink again
Two separate reports show rates continue to march lower in the wake of the government's plan to buy $1 trillion worth of debt.
NEW YORK (CNNMoney.com) -- Home mortgage rates continued to march lower, according to two separate reports released on Thursday.
The average 30-year fixed mortgage rate sank to 5.13%, down from 5.19% the week prior, according to Bankrate.com's weekly national survey.
The average 15-year fixed-rate mortgage fell to 4.73% from 4.80% the week prior, according to Bankrate.com.
Bankrate obtains its data by surveying the top 10 banks and thrifts in the top 10 markets every Wednesday.
Meanwhile, a report from Freddie Mac showed that the 30-year fixed-rate mortgage fell to 4.78% in the week ending April 2, down from 4.85% the week prior. The 4.78% rate is the lowest on record according to the Freddie Mac survey, which dates back to 1971 for that particular mortgage. The 30-year fixed rate averaged 5.88% at this time last year, according to Freddie Mac.
Freddie Mac reports the 15-year fixed rate mortgage fell to 4.52%, down from last week when it stood at 4.58%.
There is a difference in reported rates between Bankrate and Freddie Mac because lending rates are constantly fluctuating and the surveys are conducted at different moments.
The two agencies also report the rates with a different average number of "points," which borrowers can purchase at closing to buy down their lending rates. Therefore, the more points a borrower purchases up front, the lower the lending rate. Bankrate.com's averages have fewer points than Freddie Mac's average.
While rates are already very low, one analyst said that they could potentially dip a little bit more. "They could dip maybe another 20 basis points from where they are, but not a huge amount," said Brian Bethune, chief financial economist at IHS Global Insight.
Bethune also said that he thinks mortgage rates will stay low for a while. "I wouldn't expect them to necessarily jump back up again, but it all depends on the path of the economy."
Mortgage rates follow Treasury rates: No matter which report you look at, the consensus is that mortgage rates are low. The 30-year fixed mortgage rate moves in correlation with the yield on the 10-year Treasury bond. Therefore, lower the yields on government debt weighs on mortgage rates.
"Rates are just coming down as a catch up phenomenon because the 10-year Treasury has come down by 25 to 30 basis points in the past couple weeks," said Bethune. The yield on the benchmark Treasury dropped after the government announced its massive debt-repurchase plan in an effort to encourage lending and spur recovery in the housing market.
The government said two weeks ago that it would be buying more than $1 trillion in debt in an effort to provide liquidity in the credit markets. With the key lending rate already at a range of 0% to 0.25%, the Federal Open Market Committee - the policymaking committee of the Fed that sets interest rates - turned to less traditional means to encourage lending.
"Once we start to see a recovery, the Federal Reserve will start to reverse a lot of its liquidity programs," said Bethune. "We will see rates move up simply reflecting the anticipation that the Fed is going to start to pull liquidity out of the system."
But Bethune said that he expects the economic recovery to be slow, and rates should not move up significantly until 2010.
Credited to: http://www.cnnmoney.com/
Rich Storey
Mortgage Advisor
615-260-8028
Mortgage rates sink again
Two separate reports show rates continue to march lower in the wake of the government's plan to buy $1 trillion worth of debt.
NEW YORK (CNNMoney.com) -- Home mortgage rates continued to march lower, according to two separate reports released on Thursday.
The average 30-year fixed mortgage rate sank to 5.13%, down from 5.19% the week prior, according to Bankrate.com's weekly national survey.
The average 15-year fixed-rate mortgage fell to 4.73% from 4.80% the week prior, according to Bankrate.com.
Bankrate obtains its data by surveying the top 10 banks and thrifts in the top 10 markets every Wednesday.
Meanwhile, a report from Freddie Mac showed that the 30-year fixed-rate mortgage fell to 4.78% in the week ending April 2, down from 4.85% the week prior. The 4.78% rate is the lowest on record according to the Freddie Mac survey, which dates back to 1971 for that particular mortgage. The 30-year fixed rate averaged 5.88% at this time last year, according to Freddie Mac.
Freddie Mac reports the 15-year fixed rate mortgage fell to 4.52%, down from last week when it stood at 4.58%.
There is a difference in reported rates between Bankrate and Freddie Mac because lending rates are constantly fluctuating and the surveys are conducted at different moments.
The two agencies also report the rates with a different average number of "points," which borrowers can purchase at closing to buy down their lending rates. Therefore, the more points a borrower purchases up front, the lower the lending rate. Bankrate.com's averages have fewer points than Freddie Mac's average.
While rates are already very low, one analyst said that they could potentially dip a little bit more. "They could dip maybe another 20 basis points from where they are, but not a huge amount," said Brian Bethune, chief financial economist at IHS Global Insight.
Bethune also said that he thinks mortgage rates will stay low for a while. "I wouldn't expect them to necessarily jump back up again, but it all depends on the path of the economy."
Mortgage rates follow Treasury rates: No matter which report you look at, the consensus is that mortgage rates are low. The 30-year fixed mortgage rate moves in correlation with the yield on the 10-year Treasury bond. Therefore, lower the yields on government debt weighs on mortgage rates.
"Rates are just coming down as a catch up phenomenon because the 10-year Treasury has come down by 25 to 30 basis points in the past couple weeks," said Bethune. The yield on the benchmark Treasury dropped after the government announced its massive debt-repurchase plan in an effort to encourage lending and spur recovery in the housing market.
The government said two weeks ago that it would be buying more than $1 trillion in debt in an effort to provide liquidity in the credit markets. With the key lending rate already at a range of 0% to 0.25%, the Federal Open Market Committee - the policymaking committee of the Fed that sets interest rates - turned to less traditional means to encourage lending.
"Once we start to see a recovery, the Federal Reserve will start to reverse a lot of its liquidity programs," said Bethune. "We will see rates move up simply reflecting the anticipation that the Fed is going to start to pull liquidity out of the system."
But Bethune said that he expects the economic recovery to be slow, and rates should not move up significantly until 2010.
Credited to: http://www.cnnmoney.com/
Thursday, April 2, 2009
The End May Be In Sight.....
From the desk of:
Rich Storey
Mortgage Advisor
615-260-8028
When home prices hit bottom
The end may be in sight - and getting a better sense of when it's coming can help you make the smartest buying and selling decisions.
(Money Magazine) -- Call it the Great Housing Paralysis of 2009. If you're hoping to buy your first home or invest in a second one, you're probably sidelined, unsure when to jump in. If you want to sell, you're thinking it may be better to wait. And even if you don't plan to either buy or sell anytime soon, watching one of your biggest assets tank is about as much fun as being chased by hornets. When will the pain stop?
Nationwide, home prices will bottom out at the end of this year, according to the forecasters at Moody's Economy.com. Median prices will probably fall another 10% on top of the 27% they've plummeted since their 2006 peak. That prediction assumes that President Obama's various recovery efforts - including billions to slow foreclosures and goose bank lending, plus a tax credit to most 2009 buyers who haven't owned in the past three years - will have some effect. If they don't, says Economy.com's Mark Zandi, the bottom could come as late as 2011.
And then? "The recovery will look more like a U than a V," predicts Mike Larson, a real estate analyst at Weiss Research. Translation: After home prices hit their lows, they'll probably stay there for a few years as the economy slowly struggles back to its feet. Prices aren't expected to reach their 2006 levels again for another decade.
Before you reach for the Xanax, think about a few things. First, the nation was in a housing bubble, remember? What's happening now is both inevitable and necessary. Second, if you haven't yet bought your first home, you should be happier than Kate Winslet on Oscar night. Third - and most important - the outlook varies dramatically depending on where you live. If you're in Memphis or Greenville, S.C., for example, the bleeding is almost over. Find projections for when the nation's 100 largest metro areas will hit bottom - and how prices are likely to change in the next 12 months in our Real Estate 2009 list.
As you've heard countless times, you should think of your home primarily as a place to live, not as an investment. And it's nearly impossible to time the bottom perfectly. That said, getting a sense of the price trends in your area can give you the confidence to make decisions that can save you a whole lot of money. For the latest advice on buying, investing, and selling - no matter where you live - read on.
Buyers
Factor in future drops. Buying in one of the areas that is expected to keep falling significantly for another year or more is - how shall we put it? - probably not the greatest idea. If you don't currently own a home, keep renting until your market is closer to its trough (you can find that information on the Real Estate 2009 list).
But if you really want to buy now - for example, you're moving to a city where the available rental housing isn't appropriate for your family - aim to negotiate a deal that factors in this year's expected price drop. For example, if your market is forecast to fall 10%, bid at least 10% less than the home's current value. If the seller refuses, find another house (there are plenty).
Even if you can't score a deal like that, you can console yourself that you'll have a decent shot at making up future price declines (and the thousands you spent in closing costs) as long as you stay put for at least five to seven years.
Consider foreclosures and short sales. If getting a great deal is your main goal, look for foreclosures, which typically sell for at least 20% to 30% less than market value, according to foreclosure-listing website RealtyTrac. Because these homes are sometimes abandoned and stripped, get a contractor to make a free estimate of the time and cost of repairs, and make sure they won't wipe out the amount you'd save.
Another economical option: short sales, in which bankers allow homeowners to sell for less than they owe. They can save you 10% or more. The seller typically still lives in the home, so it's usually in decent shape. One big drawback: The process can take up to six months and can fall apart at the last minute. "If foreclosure is 30 to 40 days away, it's very unlikely that the short sale will happen first," says Glenn Kelman, CEO of Redfin, an online real estate broker. For more see "Snag a Great Deal on a Short Sale."
Be smart about mortgages. Today's rates - averaging 5.2% for a 30-year fixed loan - are steals. They'll probably hover in the 4.75% to 5.5% range all year, says Larson, so there's no need to rush to lock in. (Jumbo loans - those larger than $417,000, or up to $729,750 in certain high-cost areas - average 6.8% and are unlikely to close in on traditional rates this year.) However, because some lenders are requiring more information today, it's taking longer (about 45 to 60 days) for banks to approve loans. To land the best rates with no extra costs, you'll usually need at least 20% down and a credit score of 720 or better. And to qualify for any mortgage, your monthly payments toward debt should eat up no more than 43% of your pretax income; your monthly mortgage, insurance, and taxes should total 31% or less.
Investors
Think tortoise, not hare. Because prices have further to fall in most areas, forget about flipping. You're better off investing in, say, a vacation home, a future retirement home, or a rental property that you're planning to hold for a minimum of five to seven years. Otherwise you run a significant risk of losing money from future price declines, plus closing costs.
Focus on location, location, location. If you plan to rent out your purchase at some point, look beyond the deal. "Many investors are simply looking for where prices have fallen the most, but they also need to look for areas where the economy is still strong and people can find jobs," says Amy Bohutinsky, a vice president at Zillow.com. Many cities with large price drops have high unemployment. Look for areas close to public transportation, a university, or shops and nightlife. "Those neighborhoods will appeal to people in their twenties and thirties who have been waiting and renting," says Bohutinsky.
Get pre-approved. Many lenders still want nothing to do with investors, so you'll face tougher loan requirements than you would have a few years ago. Banks may also limit you to perhaps four outstanding mortgages if you don't have tons of cash on hand. Before you start scouting neighborhoods, get pre-approved for a loan so that you're sure you will qualify.
Sellers
Stop deluding yourself. Ignore list prices and base your asking price on what similar homes in your area have actually sold for in the past three months. "Even six months ago the market was totally different," says Ellen Klein, a realtor in Rockaway, N.J.
No nibbles after 30 days? Drop the price. An even better strategy, says Klein: Right out of the gate, price your home at 10% below what comparable ones have gone for. That may attract more than one bidder, pushing up the final price. If your area is on Real Estate 2009 list and is forecast to fall by double digits in the next 12 months, do whatever it takes to unload now. The longer you hold on, the more the value will erode. The alternative: Stay put.
Spiff up the joint. If your area has lots of foreclosures, it'll be hard to compete on price. But it won't be hard to compete on condition. So make repairs now, then heavily market the fact that your house is move-in ready. Throw in a bigger commission to buyer agents so that they'll show it more often. Also advertise that you have a flexible closing date - even if it means you must rent until your next home is ready. That way buyers who must move in 30 days will know yours is an option.
Get creative. If you absolutely must move out soon and your home isn't selling, consider offering a rent-to-own option, sugests Eric Mangan of ForSaleByOwner.com. A potential buyer pays you a monthly sum to live there. After a set number of months - say, six to 18 - he either has the option to buy or is required to buy. You'll need to pay an attorney about $300 to draft the contract. But at least you'll have money coming in each month to cover some or all of your mortgage payment.
No matter where you live, remember that a year can make a huge difference. If the forecasts prove true, by this time in 2010 about half the metro areas mapped on these pages will have stopped falling. The housing market - slowly, gingerly - will start reviving. At last!
Credited to: http://www.cnnmoney.com/
Rich Storey
Mortgage Advisor
615-260-8028
When home prices hit bottom
The end may be in sight - and getting a better sense of when it's coming can help you make the smartest buying and selling decisions.
(Money Magazine) -- Call it the Great Housing Paralysis of 2009. If you're hoping to buy your first home or invest in a second one, you're probably sidelined, unsure when to jump in. If you want to sell, you're thinking it may be better to wait. And even if you don't plan to either buy or sell anytime soon, watching one of your biggest assets tank is about as much fun as being chased by hornets. When will the pain stop?
Nationwide, home prices will bottom out at the end of this year, according to the forecasters at Moody's Economy.com. Median prices will probably fall another 10% on top of the 27% they've plummeted since their 2006 peak. That prediction assumes that President Obama's various recovery efforts - including billions to slow foreclosures and goose bank lending, plus a tax credit to most 2009 buyers who haven't owned in the past three years - will have some effect. If they don't, says Economy.com's Mark Zandi, the bottom could come as late as 2011.
And then? "The recovery will look more like a U than a V," predicts Mike Larson, a real estate analyst at Weiss Research. Translation: After home prices hit their lows, they'll probably stay there for a few years as the economy slowly struggles back to its feet. Prices aren't expected to reach their 2006 levels again for another decade.
Before you reach for the Xanax, think about a few things. First, the nation was in a housing bubble, remember? What's happening now is both inevitable and necessary. Second, if you haven't yet bought your first home, you should be happier than Kate Winslet on Oscar night. Third - and most important - the outlook varies dramatically depending on where you live. If you're in Memphis or Greenville, S.C., for example, the bleeding is almost over. Find projections for when the nation's 100 largest metro areas will hit bottom - and how prices are likely to change in the next 12 months in our Real Estate 2009 list.
As you've heard countless times, you should think of your home primarily as a place to live, not as an investment. And it's nearly impossible to time the bottom perfectly. That said, getting a sense of the price trends in your area can give you the confidence to make decisions that can save you a whole lot of money. For the latest advice on buying, investing, and selling - no matter where you live - read on.
Buyers
Factor in future drops. Buying in one of the areas that is expected to keep falling significantly for another year or more is - how shall we put it? - probably not the greatest idea. If you don't currently own a home, keep renting until your market is closer to its trough (you can find that information on the Real Estate 2009 list).
But if you really want to buy now - for example, you're moving to a city where the available rental housing isn't appropriate for your family - aim to negotiate a deal that factors in this year's expected price drop. For example, if your market is forecast to fall 10%, bid at least 10% less than the home's current value. If the seller refuses, find another house (there are plenty).
Even if you can't score a deal like that, you can console yourself that you'll have a decent shot at making up future price declines (and the thousands you spent in closing costs) as long as you stay put for at least five to seven years.
Consider foreclosures and short sales. If getting a great deal is your main goal, look for foreclosures, which typically sell for at least 20% to 30% less than market value, according to foreclosure-listing website RealtyTrac. Because these homes are sometimes abandoned and stripped, get a contractor to make a free estimate of the time and cost of repairs, and make sure they won't wipe out the amount you'd save.
Another economical option: short sales, in which bankers allow homeowners to sell for less than they owe. They can save you 10% or more. The seller typically still lives in the home, so it's usually in decent shape. One big drawback: The process can take up to six months and can fall apart at the last minute. "If foreclosure is 30 to 40 days away, it's very unlikely that the short sale will happen first," says Glenn Kelman, CEO of Redfin, an online real estate broker. For more see "Snag a Great Deal on a Short Sale."
Be smart about mortgages. Today's rates - averaging 5.2% for a 30-year fixed loan - are steals. They'll probably hover in the 4.75% to 5.5% range all year, says Larson, so there's no need to rush to lock in. (Jumbo loans - those larger than $417,000, or up to $729,750 in certain high-cost areas - average 6.8% and are unlikely to close in on traditional rates this year.) However, because some lenders are requiring more information today, it's taking longer (about 45 to 60 days) for banks to approve loans. To land the best rates with no extra costs, you'll usually need at least 20% down and a credit score of 720 or better. And to qualify for any mortgage, your monthly payments toward debt should eat up no more than 43% of your pretax income; your monthly mortgage, insurance, and taxes should total 31% or less.
Investors
Think tortoise, not hare. Because prices have further to fall in most areas, forget about flipping. You're better off investing in, say, a vacation home, a future retirement home, or a rental property that you're planning to hold for a minimum of five to seven years. Otherwise you run a significant risk of losing money from future price declines, plus closing costs.
Focus on location, location, location. If you plan to rent out your purchase at some point, look beyond the deal. "Many investors are simply looking for where prices have fallen the most, but they also need to look for areas where the economy is still strong and people can find jobs," says Amy Bohutinsky, a vice president at Zillow.com. Many cities with large price drops have high unemployment. Look for areas close to public transportation, a university, or shops and nightlife. "Those neighborhoods will appeal to people in their twenties and thirties who have been waiting and renting," says Bohutinsky.
Get pre-approved. Many lenders still want nothing to do with investors, so you'll face tougher loan requirements than you would have a few years ago. Banks may also limit you to perhaps four outstanding mortgages if you don't have tons of cash on hand. Before you start scouting neighborhoods, get pre-approved for a loan so that you're sure you will qualify.
Sellers
Stop deluding yourself. Ignore list prices and base your asking price on what similar homes in your area have actually sold for in the past three months. "Even six months ago the market was totally different," says Ellen Klein, a realtor in Rockaway, N.J.
No nibbles after 30 days? Drop the price. An even better strategy, says Klein: Right out of the gate, price your home at 10% below what comparable ones have gone for. That may attract more than one bidder, pushing up the final price. If your area is on Real Estate 2009 list and is forecast to fall by double digits in the next 12 months, do whatever it takes to unload now. The longer you hold on, the more the value will erode. The alternative: Stay put.
Spiff up the joint. If your area has lots of foreclosures, it'll be hard to compete on price. But it won't be hard to compete on condition. So make repairs now, then heavily market the fact that your house is move-in ready. Throw in a bigger commission to buyer agents so that they'll show it more often. Also advertise that you have a flexible closing date - even if it means you must rent until your next home is ready. That way buyers who must move in 30 days will know yours is an option.
Get creative. If you absolutely must move out soon and your home isn't selling, consider offering a rent-to-own option, sugests Eric Mangan of ForSaleByOwner.com. A potential buyer pays you a monthly sum to live there. After a set number of months - say, six to 18 - he either has the option to buy or is required to buy. You'll need to pay an attorney about $300 to draft the contract. But at least you'll have money coming in each month to cover some or all of your mortgage payment.
No matter where you live, remember that a year can make a huge difference. If the forecasts prove true, by this time in 2010 about half the metro areas mapped on these pages will have stopped falling. The housing market - slowly, gingerly - will start reviving. At last!
Credited to: http://www.cnnmoney.com/
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