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The Times, They Are A Changin’

October 28, 2011

By Dick Baker

This is not your parents’ real estate market!

Just as Bob Dylan’s lyrics warned us decades ago, “The times, they are a-changin’.”

Having plied the real estate trade in the Toledo area for more than 4 decades and as co-owner of the region’s largest real estate company, I am more than a casual observer from a historical perspective.  Let me share just a few thoughts about how our industry and the local marketplace have changed.

As a kid Realtor, a 20% down payment was pretty much expected, unless you had such squeaky clean credit that you could pass the scrutiny to qualify for 90% financing, requiring Private Mortgage Insurance.  Anyone remember MGIC?  3% down payments have been common lately, and less than that leading up to the mortgage market disasters of a few years ago.

Many vivid memories come from the previous worst market I’d seen, the early 80’s when interest rates not only went double digit, they went to the high teens!  Do people understand today’s opportunities? Long term fixed rate mortgages have been found starting with a “3”!  The conventional wisdom in those early 80’s was that only a riverboat gambler would consider an adjustable rate mortgage.  “Wisdom”, a misnomer.

Long ago most sellers wouldn’t even consider FHA and VA offers, since they took months to close and appraisals typically came back with lengthy laundry lists of repairs if you hoped to close.  Now those loans make up the majority of mortgages!

And those “short sales” we hear so much about today . . . we’d never heard the term before.

Clearly, times have changed, but never before have I seen some of the opportunities that exist in today’s market.

I would be remiss in these musings if I didn’t end with additional lyrics from the song of singer/songwriter/philosopher/economist Dylan quoted above:

“Come senators, congressmen, Please heed the call; Don’t stand in the doorway, Don’t block up the hall…”

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FHA financing now available down to a 500 credit score

January 31, 2011

By Ann Newman

If you’ve been hearing the buzz that Wells Fargo is now offering FHA financing down to a 500 credit score, let me confirm that it’s true! For the right buyer, the 600 credit score has now been lifted with some additional parameters.

  • Down payment - for credit scores of 580-599, a 5% down payment is needed. For scores between 500 and 579, 10% is needed.
  • Debt to Income Ratio - FHA has always been flexible with the debt to income ratio. When going to a lower credit score, though, they’re requiring ratios similar to what a conventional loan would want (31%/36% required).
  • Limits on seller contributions - the seller contribution is limited to 3%.
  • No gift funds - the down payment has to be the buyers own money.

FHAs existing rules on judgments, collections, bankruptcies, etc. still apply. For many buyers, though, this lightening of the requirements is a HUGE win. If you have buyers previously turned down because there score was too low, give me a call! I’d be happy to help them see if this might be their time to buy after all.

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Survey Results – Is now the right time to buy?

December 20, 2010

By Ann Newman

Nearly eight out of 10 respondents believe buying a home is a good financial decision, despite ongoing challenges with the economy and housing market. That’s according to the 2010 National Housing Pulse Survey, an annual report released by the National Association of Realtors.

The survey, which measures how affordable housing issues affect consumers, also found job security concerns to be the highest in eight years of sampling, with 70% of Americans saying that job layoffs and unemployment are a big problem in their area; eight in 10 cite these issues as a barrier to home-ownership.

Despite economic uncertainty, 68% of those surveyed still believe now is a good time to buy a home; while that number is down from last year (75%), it’s up from 2008 (66%) and 2007 (59%). Lower home prices and record-low mortgage interest rates may be attracting buyers to the housing market—more than one-fourth of renters said they are thinking more about buying a home than they were a year ago. Sixty-three percent of renter respondents said that owning a home is a priority in their future, and nearly 40% said it was one of their highest priorities.

Lower home prices have improved affordability. In fact, the percentage of renters who are worried that the cost of housing is getting so unaffordable that they will never be able to buy a home has decreased steadily since 2007, from 63% to 57%.

The good news is that Americans are seeing more stability in the real estate market. Nearly seven out of 10 believe that home values have stabilized in their area; the same number expects home sales to remain about the same through the end of the year.

While nearly seven out of 10 say it’s harder to sell a home in their area today than it was a year ago, it’s less of a concern from last year when the number was 10 percentage points higher. This is most likely the result of lower home inventories.

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Don’t forget to add a new house to your Christmas wish list…

December 10, 2010

By Emily Yerkes

You can get into a new home with as little as 3.5% down, rates are still under 5%!

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VA Loans- Differentiate Your Property with Assumable Financing

November 15, 2010

By Ann Newman

Did you know that VA loans are fully assumable and can be assumed by either a veteran or a non-veteran?

Assumable financing can differentiate a property and increase marketability as rates increase.

Here are some other great reasons to use VA:

Low Rates and No Down payment Option

•VA loans feature less-demanding down payment, debt, income and closing-cost guidelines that can help make it easier to qualify for financing.

•VA does not require Private Mortgage Insurance.

•VA allows the seller to pay for all closing and pre-paid costs.

VA Refinance Flexibility

• Provides a streamlined process that enables you to enjoy a simplified loan experience.

• Allows you to take cash out for major purchases, renovations or other large expenses.

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Interest rates: Floating vs. Locking

October 20, 2010

By Greg Cepek

As we’ve all seen, mortgage interest rates remain at or near all time lows.  While it’s normal for everyone to want the lowest rate we all need to remember they have the potential to shoot back up, typically at a much faster pace, than they trickle down.  Most lenders offer borrowers the option to “lock” in the interest rate once a purchase agreement is in place which secures that rate during the time it takes the loan to process.  The other option borrowers have is to “float” the rate, meaning the processing of the loan begins but the rate might be higher or lower when the customer finally decides to lock it in.

I always recommend my clients lock their rate once the contract is in place.  I’ve seen too many times over the years where a borrower decides to float it and then within a few days or weeks the rate is much higher than where it was originally.  It’s always better to settle for a great rate, as they are today, even if they go down slightly after you lock it in than to be stuck with a much higher rate you will be stuck with for the next 30 years if they shoot up as you are floating the rate.

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Is Equity really Rising?

October 6, 2010

By Emily Yerkes

So, all that we have been hearing lately is how terrible the market has been doing and how foreclosures are rising.  While it hasn’t gotten much publicity, the Federal Reserve’s latest “flow of funds” statistical report on the nation’s finances found that homeowners’ net equity holdings have increased by 17.1% from the first quarter of 2009 through the second quarter of 2010, ending last June 30.

How is this possible?  Home prices may be up modestly in some parts of the country over that period of time – even double digits in a handful of the most volatile markets.  However those percentage gains are being measured against the shell-shocked lows of late 2008 and early 2009. Statistically, even the slightest increase in depressed median prices can look impressive.

So why doesn’t it seem like our own personal equity holdings have done this well?  The simple answer is the Fed’s rising equity finding is mainly good news for residential real estate; however the increase is not attributable solely to positive events.  The Fed makes its’ basic calculation the same way homeowners would:  You subtract your total mortgage debt from the estimated market value of your home; the remainder (if you have one) is your net equity.  The Fed has access to information about mortgage debt holding of banks and non-bank lenders, and uses a variety of governmental and private real estate data sources to obtain their quarterly values across the country.

There is no dispute that a 17% increase is a move in the right direction at the very least.  Values of homes are no longer on the downgrade nationwide and household debt loads are decreasing.  None of this necessarily helps the people still stuck with homes that are underwater or those who have lost their homes to foreclosures.  But for everyone else that cares about real estate, the latest Fed numbers suggest that the equity crash is over and a rebuilding with smarter credit habits is underway.

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FHA is launching a refinance opportunity for Underwater Homeowners

September 28, 2010

By Ann Newman

In an effort to help underwater homeowners who owe more on their mortgage than the value of their property the department of HUD is adjusting their refinance program.   In short if a borrower is current on their mortgage and does not currently have an FHA mortgage, they can ask that their current lender write off at least 10% of the unpaid balance to qualify for a new FHA mortgage.

FHA Commissioner David H Stevens stated:

“We’re throwing a life line out to those families who are current on their mortgage and are experiencing financial hardships because property values in their community have declined. This is another tool to help overcome the negative equity problem facing many responsible homeowners who are looking to refinance into a safer, more secure mortgage product.”

To facilitate the program, the US Department of Treasury will be providing incentives to those who have an existing second lien who agree to reduce or eliminate their liens.

For more information about the program, visit here.

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Has your confidence in housing as an investment been shaken?

September 16, 2010

By Dick Baker

If not, you probably haven’t been paying attention for the last few years.  But that can be said about virtually ALL real estate markets.  The values of your home and mine here in Toledo, Ohio, have declined in recent years, but hasn’t that been the case with everyone’s 401(k) as well?  My own opinion (which is worth what you’re paying for it) is that it would be a great mistake to look at housing primarily as an investment.  Our homes were never intended to be piggy banks from which we could periodically extract some equity to spend on lavish items. 

So why should we be bullish on housing?  Lots of reasons.  Most basically, our homes are our shelter, and that has great value.  You can’t live in your stock portfolio. Others pay rent for their shelter, and their rent is gone forever.  But we also buy homes for other great reasons – they may be in a neighborhood or school systems that we prefer, or an easy commute to our employment.  When you own your home, you don’t have to ask permission from a landlord before making alterations. And home ownership still enjoys favorable tax treatment (but keep an eye on Washington!).

Warren Buffett, who knows a thing or two about investing, is well known for this concept (sorry I don’t know the exact quote) – when others are running scared, that is the time to be bold.  If anyone questions whether that time is now for housing, I would offer one more extremely important factor that should tip the scales toward buying – mortgage interest rates are the lowest that I have seen in my 42 years at Danberry!

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Interest Rates vs. Closing Costs
By Valerie Suelzer

The most common question most mortgage consultants get is “What is your rate?”  While this is obviously a very important question there is much more to that question than most people think.  I equate it to someone calling a car dealership and asking “How much is your car?”.

Interest rates can vary tremendously, depending on the answer to some of these questions of the potential borrower:

1)  What is your credit score?

2)  How much is your down payment?

3)  What will your loan size be?

4)  FHA or Conventional Loan?

5)  What mortgage term do you want – 30, 20, 15 or 10 year?

6)  Do you want a fixed rate or adjustable rate?

7)  If you are shopping for a mortgage are you being quoted with paying any points and if so, how many?

These are just some of the questions that need to be asked to answer “What is your rate?”.

When comparing one lending institution to another it is critical to get a Good Faith Estimate or as some call it, a Loan Cost Illustration, which will break down not only the rate and terms you want but will also itemize your closing costs and escrow deposits.  Many times when customers are shopping for an interest rate all they want to know is the rate, but they never ask how much the closing costs would be.  As the interest rate goes down the closing costs typically go up.

A borrower could call Bank A and they might quote a rate of 4.5% for a 30 year fixed term and then call Bank B and be quoted 4.25% for the same fixed rate and term.  Initially, they might think it’s a no brainer to go with Bank B with the lower rate.  However, since they didn’t ask about the closing costs they don’t know that Bank B’s closing costs are $7,000 compared to Bank A’s closing costs of $2,200.

This is why it’s imperative to know the answers to these question when shopping for a mortgage and always ask for a Good Faith Estimate or Loan Cost Illustration.

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