What's Up? Home Prices and Sales of Existing Homes

Hi Folks,
   It's great to report this, but guess what's up? The Federal Housing Finance Agency (FHFA) just released their figures for the June 2012-June 2013 time period, and there was a 7.7% increase in home prices. The big winner was the West Coast, which checked in with a 17% gain, followed by the Mountain Region, at 11%. The slacker was the Mid-Atlantic, including New York, which was only up 2.5%. Additionally, the National Association of Realtors (NAR) released figures for the July 2012 - July 2013 time period, and the median price of a previously owned home popped up close to 14%. As for sales, the sales of previously owned homes jumped by 6.5% last month.

   Know what else? Even with these increases, homes are reasonably valued, and they still have room to increase further. Additionally, it's still cheaper to buy than rent, which also bolsters the opinion that housing prices are still undervalued.

   What's going down? Not mortgage rates. That makes buyers nervous and makes them scramble to take action before the rates increase. A perfect example that John W. Schoen points out in his article on CNBC.com, titled, "Home prices across the US defy gravity, despite rising rates", Mortgage applications for both home purchases and refinancings dropped for a second straight week as rates rose, and he cites the Mortgage Bankers Association. "Demand fell 4.6 percent in the week ended Aug. 16 as the rate on a 30-year fixed mortgage rose to 4.68 percent, matching this year's high mark.". In order for people to keep buying homes, credit needs to stay available, and the post-bubble vice-grip needs to be eased further in order to allow folks to get approved.

   So overall, this is some pretty good news !! What are your thoughts?

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Rob Eisenstein
HomeRun Homes - Rent to Own Homes, since 2002
"Located at the Corner of Technology and Real Estate"
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TAGS: #homeprices #existinghomessales #rates #mortgage applications #refinance #fixed mortgage #credit #bubble

Costly Mistakes When Mortgage Shopping

Welcome Back, Folks,
   Fall has fallen, but it's not the only thing that has fallen.

   The mortgage market is in a baffling state, which has been referred to as "Irony", in comments from Lawrence Yun of the National Association of Realtors® (NAR), a which we discussed in last Friday's Blog Post ("Snapshot of September New Construction and Existing Home Sales"). Yun points to the paradox of historical affordability conditions with more creditworthy borrowers, but contract failures that are at elevated levels, regardless of the favorable conditions.

   Could it be partial accountability on mistakes that the borrowers are making? It's quite possible, and in a recent article on the Inman.com new website, titled, "3 mortgage mistakes you can avoid", Tara-Nicholle Nelson (of rethinkrealestate.com) lists these mistakes along with some suggestions to overcome these personally-set obstacles.

   If your mortgage amount that you owe outstanding is greater than the value of your home, you are considered "upside-down", and if you fail to try refinancing because of that, it's a mistake, says Nelson. She writes that approx 23 percent of all American homes are upside-down, and that you should not feel "trapped" with high interest rates. As a matter of fact, Nelson writes, "multiple options abound for lowering your interest rate and monthly payment if you're upside down on your home loan", and says that banks are increasingly "amenable to simply modify existing mortgages to render them less prone to default and foreclosure", especially if the homeowner is trying to recover from financial hardship. as long as you have not missed any payments, she says that "many banks offer refis on mortgages as much as 25 percent underwater", and also mentions HAMP (Home Affordable Refinance Program) as options. Seek out help from Mortgage professionals to review your options.

   Nelson points to the potential for low satisfaction, low speed, and low assertiveness from just walking into a bank to get a mortgage, however, if you go with a mortgage broker or a private mortgage banker through referrals of your close friends and relatives, says Nelson, "chances are good you'll get someone who understands that the long-term health of their business depends on you and clients like you getting a deal closed in a timely manner".

   The third mistake that Nelson points out is when you think that you are stuck with your mortgage for 30 years, and says that she has head people say they didn't want to buy a home "because they were depressed by the thought of a debt that would last 30 years". She adds the following piece of wisdom: "you control when you pay your mortgage off, and it doesn't take a lottery or inheritance windfall to pay yours off sooner than later", and says that paying a little extra towards the principal can go a long way in shrinking the time it takes to pay off your mortgage.

   To summarize; You do have control and power to make changes to your mortgage, which can have a positive outcome on your entire financial bottom-line. What other mistakes have you seen borrowers make, and what can they do to avoid those pitfalls?

   On a personal note...a very special shout-out to a very special lady. Danielle, Happy Birthday. Love you, honey !

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TAGS: #mortgage #realestate #upsidedown #refinance #interestrate #mortgagepayment #mortgagebroker #bank

Mortgage Anyone? To Dream The Impossible Dream?

Hi Everyone,

   Welcome to another Sizzling Summer Friday!

   Unless you've been living under a rock for the past few years (or you just don't follow the Real Estate Lending market, but if you didn't, I guess you wouldn't be reading this), you know that mortgages and lending has been tight and more stringent as opposed to the pre-housing bubble days.

   In a recent CNN Money article from Les Christie ("Secrets to getting a mortgage with so-so credit"), Christie concurs and says that, "Getting a mortgage can be tough these days -- even people with near-perfect credit have been rejected for loans". Christie points to a conference in which Fed Chairman Ben Bernanke said lending standards for mortgages have tightened so considerably that "the bottom third of people who might have qualified for a prime mortgage in terms of, say, FICO scores a few years ago -- cannot qualify today."

   Is there money to lend? Christie quotes the acting commissioner for the U.S. Department of Housing and Urban Development (HUD), Bob Ryan, who said that mortgage money "is flowing, it's stable, it's tightened from the boom years, but it's there.". "The belief is that you can't get a mortgage at all -- but you can," says Keith Gumbinger, of the mortgage information provider HSH Associates.".

   Christie writes about a loan officer who had a client with a 700 FICO a couple million dollars in assets, and he wanted to refinance. He was rejected! Apparently, his report showed an investment property he could not (housing bust), and had to do a short sale, and that blemish "resulted in an automatic rejection of his refinance application."

   So, are things really that bad?

   "Depends on who you ask", says Brian Willingham, a Loan Officer with FitzGerald Financial Group.

   "Lending has gotten a bad rap lately", adds Christopher A. Potter, a Loan Officer at GuardHill Financial.
  
   "Basically, these days you actually have to be able to afford what you want to buy (and disclose your true income on your tax returns).", says Willingham. Potter adds that now banks, "want to see that you can actually afford it. This is just common sense and will benefit all in the long run.". He also said that it's, "not that difficult assuming that you qualify.", and that people are so used to easy credit standards ("It used to be that all you needed was a pulse to get a loan.", adds Potter).

   Nicole Tucker, a Licensed Texas Real Estate Consultant, says that even though the requirements are tighter that several years ago, "it is not difficult to get a mortgage if a borrower has verifiable and steady employment and decent credit. You do not have to have stellar credit." Willingham continues this point, and agrees that for people with "sufficient, stable income it's a lot of paperwork but it's not "hard" to get a loan.", but adds that if your credit is "poor" and "you don't have a stable work history and stable income, it could be pretty difficult."

   So, on that note - less-than-stellar credit - is FHA still an option?

   In the article from Christie, he quotes Gumbinger as saying that "The FHA is just about as free and easy as it was in the go-go days,". Christie says that the standards are, "flexible and aimed at making mortgage borrowing easier, especially for working-class Americans.". Potter agrees, and says that the "FHA is extremely flexible with credit issues and there are plenty of lenders with "common sense underwriting". Melanie Roussell, a spokeswoman for the FHA, explained that "the agency is willing to overlook a blemish on a credit report -- even a big one -- if other factors are favorable", as written by Christie.

   Tips? Pointers?

   Paul McFadden of The Legacy Group, tells us that the most important thing is "to have all your documentation in order (income and asset information) along with a flexible attitude if letters of explanation need to be written." He summarizes the process as follows; "A borrower needs to work with a great team that would include a loan officer and possibly a realtor to make sure they are approved and their loan closes."

   Have you tried applying for a mortgage? Before or After the Housing Bubble? How was your experience?

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Have a Great Weekend, and Happy Rent-to-Owning !
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Rob Eisenstein
HomeRun Homes Blog: http://blogging.lease2buy.com
HomeRun Homes Websites: http://www.lease2buy.com and http://www.homerunhomes.com

TAGS: #mortgage #loan #credit #refinance #FHA #FICO #HUD #LoanOfficer #RealEstate

Homeowners Unite! How Can We All Save Money?

Hi Folks,

   Happy Mid-Week to you.

   If you're a homeowner, I don't need to tell you how expensive it can be! Every time you turn around there is another expense coming at you, whether it is a break-fix or plain old fashioned preventative maintenance. It is expensive. Recently, Beth Braverman wrote an article for Money Magazine (on CNN Money), titled, "3 ways to save on home costs", which aimed at sketching some broad strokes for homeowners to take.

   For the purpose of our story, we are going to take her 3 sub-topics out of order, and we'll leave the biggest one for last.

   In the article, Braverman suggests to, "Trim the cost of borrowing", and she discusses the extremely low mortgage rates as an example. She suggests that you refinance at the lower rates, but to request a, "good-faith estimate" before you apply, to permit you to lower the closing costs. Jonathan Steele, a RN in Pennsylvania, suggests that you, "Get a 30 year loan and pay off your house in 15 or less", and cautions that you should, "Make sure the loan allows early pay off with out penalty.".

   The second sub-topic that Braverman discusses is that you should "Get a deal on furniture", and shares some tips from Furniture industry author Kimberly Causey, as follows: "When sales slow in the summer, many mom-and-pop shops will make deals to move inventory, says Causey. Ask for 20% off, and don't settle for less than 10%. Gently used floor models can go for 25% off."

   Now, as I mentioned in the beginning, the 3rd sub-topic has the most potential and ways in which homeowners can save, and Braverman refers to this one as, "Negotiate on repairs and upkeep", and from her angle, she says that contractors are, "still facing a slumping real estate market", and "will strike a deal to get your business."

   When posing the question of how homeowners can save costs, a majority of the replies were related to this specific sub-topic. Interestingly, one of the most popular suggestions was in favor of using a "programmable thermostat". Jonathan Steele says that he has had his for over 18 years, and that he owns two houses, and the tenants he has who "refuse" to use these have, "twice the heating bill we have by simply automating the heat turn down when we are gone in the day and asleep at night.". Dianne Martz, co-founder and principal of Sustainable Life Solutions LLC, says that installing and using a programmable thermostat, "can reduce your heating and cooling bill by 10%.", and says that if you already have one, to be sure it's programmed to "turn itself down or off when you're sleeping or at work or school.".

   Timothy G. Wiedman, D.B.A. Division of Economics and Business at Doane College in Crete, Nebraska, also calls the programmable thermostat, "The most cost-effective thing" that he ever did, and adds the following summary: "Believe it or not, that thermostat paid for itself in two months; and over its life, it literally saved thousands of dollars on our winter gas bills."

   A few other tips that were provided to us were regarding the hygienic quest we call, "washing our clothes". Steele says that he bought a front loading washer, which was, "twice the cost of a traditional washing machine". He says that the savings "were in the water", and adds that "when you pay for water coming in, you may also pay for the quantity of sewage going out in some municipality. So saving on the water used can be a double savings." An additional tip comes from Pablo Solomon, an Artist and Designer, who suggests to, "Put up a clothesline", since it is "really" inexpensive, and says that if your neighborhood prohibits clotheslines, "fight the board and get the rule changed."

   So what does it all boil down to?

   Mandy Williams, Author of, "What I Learned About Life When My Husband Got Fired!", suggests, "Thinking Before Spending", which she admits is, "A very basic concept", but says that we are all "guilty of "mindless" purchases that we do without thinking. And definitely without considering the total amount spent over time". She suggests a very simple tip; to , such as "merely to write down everything you spend money on for a week.", using what she calls "Green Sheets". Williams says, "You Are Never to Old or Young to Budget", which she admits is an "Obvious concept", but, "rarely remembered when at the time money is being spent."

   I hope these tips have been helpful. Can you also provide some helpful tips to your fellow readers here?

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Rob Eisenstein
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HomeRun Homes Websites: http://www.lease2buy.com and http://www.homerunhomes.com

TAGS: #homeowners #mortgage #refinance #thermostat

Should We Fear The Qualified Residential Mortgage Definition?

Hi Folks,

   Welcome back, and hope your weekend was great !

   There has been a humongous amount of buzz surrounding section 941 of the Dodd-Frank Act ("Wall Street Reform and Consumer Protection Act of 2010"), which requires, per the National Association of Realtors (NAR) website (Realtor.org), that lenders "securitize mortgage loans to retain 5% of the credit risk unless the mortgage is a qualified residential mortgage or is otherwise exempt (for example, FHA mortgages are also exempt)".

   Why is this so scary?

   The QRM definition is of extraordinary importance because it will determine the types of mortgages that will be generally available for borrowers for the foreseeable future. We look back at the NAR website, which says that the rule, "would (a) drive borrowers to FHA if they do not have 20% down or (b) mean those who couldn’t put 20% down would have to pay up to 3 percentage points more for a loan (for example, 8% mortgage vs. 5% mortgage) or not qualify at all. Even a 10% downpayment QRM would have a negative impact on FHA and the markets."

   Let's get a little bit more granular on this, namely, how this affects new buyers and sellers looking to refinance their homes. This is very important.

   Melanie J. McLane, a Real Estate Speaker and Trainer, says that stats from her trade organization, the NAR, indicates, "two striking things: 1) it will take the average buyer 16 years to save a 20% down payment, vs a 5%; and 2) the risk to the lender going from 95% LTV to 80% LTV is only 6/10 of one percent (less risky).". "The majority of home buyers do not have 20% to put down. Sellers are enlightened to offer creative financing due to low equity, a new attitude may emerge: "if I am about to lose my credit and home, of course you can take over my payments, forget saving 20% for down payment" What you may have as an end result is a nation of people taking over existing loans in lieu of obtaining new financing.", says Dean Wegner, a Mortgage Originator in Scottsdale, Arizona.

   Jeffrey R. Kershner, Managing Broker/Principal with an Illinois Real Estate Company, takes an even granular approach, and says that for a person making "the median household income in Illinois of just over $53,000", that it will take them "9.24 years to save up for a required $40,000 down payment on a $200,000 house; that is with saving 10% after taxes per year. This will greatly increase the age by which first time buyers can enter the market and will adversely affect the middle class."

   Substantial problems for new buyers, which would change the entire market.

   For existing homeowners, per an article by Jon Prior on Housingwire.com, "an overwhelming percentage of homeowners located in states hardest hit by the housing downturn would be shut out of refinancing their mortgage because they do not meet equity standards under the proposed risk-retention rule", according to a study from consumer and industry groups. The story says that a white paper submitted to regulators, "showed existing homeowners would be harmed as well", since, "A borrower must hold 25% equity in the home in order to refinance into a QRM loan and at least 30% equity for a QRM cash-out refinance loan, according to the current proposal."

   Where does this have it's biggest impact? In the story from Prior, he cites data from CoreLogic that, "showed the five states most impacted by the proposed equity requirements are Nevada, Arizona, Georgia, Florida and Michigan.", and says that home values dropped so much in these areas that the study "found two out of three homeowners in these states would not have the necessary 25% equity to refinance. The study also found six out of 10 would not be able to move out of the home and put 20% down on a new QRM." In Michigan, the study showed 64% of Michigan homeowners do not meet the 25% equity requirement, 66% in Florida, 65% in Georgia, 72% in Arizona, and the big one...Nevada...where 83% of homeowners, "do not have 25% equity in their home and would not be able – even if they had never missed a payment – to refinance into a lower-rate QRM loan."

   Prior summarizes that, "In effect, the proposed QRM would penalize families who have played by the rules, scraped each month to pay their bills, kept their credit clean, and saved for a modest down payment," according to the study.

   McLane feels that this is all due to that fact that we are, "over correcting from the early 2000’s when anyone with a pulse got a mortgage to an extreme on the other end now, where you can have perfect credit and offer up your first born child, and they still say either “no” or “maybe, we have to verify something else”. The banks are terrified of examiners, unknown parts of Dodd-Frank, etc.". Wegner feels that this is, "just another step backward for housing and adding to more years of recovery. We understand that risk prevention is critical for lenders going forward but knee-jerk reactions like this without fully understanding the implications are only going to hinder housing."

   Suggestions? Wegner says that the real estate market needs, "expansion in the buyer pool to open more doors to prospective home buyers", and he suggests that they should focus on, "expanding programs to self employed borrowers", since, "1 in 3 Americans is defined as "self-employed" for underwriting purposes and therefore can not purchase a home." He rhetorically asks, "What if they allowed them to go "stated" with 50% down, 750 fico's, primary residence and single family only.", and says that this would easily boost housing 10%.

   What are your thoughts? What would you suggest if you were able to chat with Regulators?

Have a Great Week, and Happy Rent-to-Owning !
Regards,
Rob Eisenstein
HomeRun Homes Blog http://blogging.lease2buy.com
HomeRun Homes Website http://www.lease2buy.com

TAGS: #QRM #NAR #QualifiedResidentialMortgage #FHA # mortgage