Category Archives: finances

Mortgage Rates….Staying Low or Rising???

I wanted to ask people out there whether they feel interest rates are going to stay around 5% or rise?  I have had so many of my buyers get great interest rates with FHA loans.  It just amazes me how long they have stayed low.  If you listen to all the lenders ho are advertising they are saying to take adavantage of these “All Time Low Rates”, because they will not be here long.  When I heard this again today on the radio, I thought to myself, who knows?  I think you have to listen to the economists to understand. 

I think for the rates to rise the Obama adminstration needs to be worried about inflation.  However some economist, “moringstar analyist” are saying we are looking at a Double Dip.  This means that we are going to see home prices fall again, because the current adminstration has not been able to create enough jobs to prevent the double dip.  There is not enough income to support any price increases.

Anybody have any comments on what you think the interest rates will do?  Just a real estate agent trying to better prepare my clients for the future.

New Guidelines for FHA Loans

The FHA (Federal Housing Association), who currently does about 30% of the current loans in today’s market, is changing a few of their rules and fees.  Three years ago, FHA loans made  up about 2% of the loan market.  One of the reasons that the FHA makes most of the loans now is that they only require the buyer to put 3.5% down to purchase a home.  With only 3.5% down, the FHA can also ask the seller to pay up to 3% in closing costs.  The catch to these loans is that they are not cheap and they require the buyer to carry PMI (property mortgage insurance) to protect the risk of such a low down payment.

The changes are as follows:

  • Increase FHA insurance premiums
  • Increase upfront cash by the borrower
  • Focus on enforcement and lender accoutability
  • Reduce the maximum seller concessions from 6% to 3%
  • Raise the minimum FICO score to qualify

I think these could be good changes — the FHA is trying to make sure that the buyer is more strongly qualified so that we don’t end up with people buying homes that they can’t afford.  If a buyer only puts 3% down and gets 6% back in closing costs, they are basically coming up with no cash.  Buying a home takes more than just a down payment; you also need to maintain the home which, overall, is more expensive monthly than renting.

We need to take accoutablility for our expdentures…

The Government Bailout

Well congress signed the $700 billion bailout bill and put the government in charge of stopping this economic crisis.  This document started as a 3 page legislation and now is over 400 pages long!  This legislation gives Paulson wide latitude to buy any assests, from any firms, and at any price.  Essentially, this allows him to decide which companies will be rescued and which will be left to flounder.

The money will be released in segments, with $250 billion available immediately and $100 billion more released upon White House certification that it is necessary. Congress wil be given 15 days to object before Paulson or his successor receives the next $350 billion.

The senate also tacked on a separate measure that extends or renews dozens of tax breaks for businesses and consumers, including a provision to prevent the alternative minimum tax from adding thousands of dollars to the tax bills of more than 20 million households next April.  It is unclear how the program will affect the the federal deficit, which is already approaching record leveles.  Because the money will be used to buy assets that can theoretically be sold for a profit, the nonpartisan congressional budget office has conculded that it was impossible to judge the program’s costs.

What do you think about this Government Bailout? Is this going to help our declining home sales?  I have been so busy with buyers entering the market, I am having a hard time seeing the economy as bad as the government paints the picture.

Foreclosure Prevention Funds are Coming!

Bank of America and Countrywide Financial have announced they are providing $35 million for neighborhood preservation and foreclosures prevention programs in communities across the U.S.

In San Diego County, some non-profit groups will receive funding for counseling families who are losing their homes.  The need is widespread.  Within the county, April was the 37th consecutive month of year-over-year increases in foreclosures and notices of default, the begining step toward foreclosure.  There were 1,413 residential foreclosures throughout the county in april, a 35% increase from March but a rise of nearly 170% over April 2007.

Lets just hope that BofA, who bought troubled Countrywide, will continue to modify the loans of people who are in danger — to STOP the foreclosures.  These foreclosures are having a huge affect on families, and their communities, who are losing their biggest investment; their home.

Both Countrywide and BofA realize they have a strong responsibility to help these communities and neighborhoods by helping individuals and families keep their homes.

Don’t forget there is counseling out there if you need it, and you should always consult with your lender before you decide to do anything.

 

Problems with Short Sales

I was emailed a question from a buyer who is purchasing a home through the Short Sale process. It is not uncommon for the seller to want to get as much money out of the house as possible.  Read what the buyer wrote, below.

“I made an offer on a short sale, and quicly found out — the day after getting approval — that the seller removed and sold 3 appliances that were included in the purchase agreement (built-in microwave, oven, and dishwasher).  The deal has started off rough.  The seller will not be able to replace these items or replace them with new ones since they are in a financial crunch, but they did offer to tack it on as a credit. We are uncomfortable with this since there is no guarantee that the lender will approve it as the agreement already states a 2% credit before this happened.  Isn’t that asking a lot from the lender?  And not giving us the house as we initially agreed, is this a breach of contract?”

My Answer to this question:

Were the appliances in the home when you made the offer? If so then the sellers are in breach of contract. The CAR purchase contract clearly states; anything attached to the home is included in the SALE (page 3, paragraph 8B) and part of the contract.

You may want to speak to your lender about the credit. The lender that I use allows up to a 6% credit, depending on the home and the amount in the downpayment. Credits are always a case-by-case decision by the lenders. 

This is the problem with Short-Sales and Foreclosures in this market. You are dealing with people who are financially strapped and in a hard place. Most of the foreclosures I am showing to my buyers don’t have a freestanding oven/range — they are frequently removed by the sellers.

Hopefully your realtor is handling this for you and your purchase will continue. That is the advantage of working with a professional Realtor.

Are Gas Prices Squeezing your Daily Life?

How many of you are feeling the squeeze at the pump?  There are many surveys out there that reveal that high prices at the pump have made us change are daily routines.

I know for myself I now watch where I drive, and try to squeeze things together. 

According to a Poll by USA Today, Americans are driving less for the first time in nearly three decades, squeezing family budgets and causing major shifts in driving habits.  Not only are people cutting back on their driving, but also on their spending.  I think we all believe that these prices are here to stay.  8 out of 10 doubt that these prices are temporary. 

How are you changing what you do on a daily basis?  Is it affecting your shopping, trips, and activities for this summer? 

…Just something that’s been on my mind, and it’s changing what I do this summer.

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