Housing Crisis to End in 2012 as Banks Loosen Credit Standards (Maybe)

While I certainly don’t expect to see any major improvements in the local housing market this year (with respect to average sales prices or price/sqft), I also don’t anticipate any drastic declines. Elk Grove currently only has 238 Single Family Residence listings available on the market (this includes equity sales, short sales, and bank owned homes- one house on one lot).  Couple this with the fact that there are currently 855 Elk Grove Single Family Residence listings in contract (this includes homes listed as short-contingent, pending, and pending/bring backup), and you’ll realize that we are actually seeing the pendulum swing back in the direction of this being a seller’s market! This is NOT to say that prices will sky-rocket. However, the simple laws of supply and demand still apply. There are more buyers out there looking to purchase homes in Elk Grove than there are listings. We’re seeing a lot more bidding wars over competitively priced homes and the average “Days on Market” time before listings are going into contract has dropped substantially.  Dare I say it? Stabilization may be on the horizon.

01/24/2012BY: KRISTA FRANKS Printer Friendly View

Capital Economics expects the housing crisis to end this year, according to a report released Tuesday. One of the reasons: loosening credit.

The analytics firm notes the average credit score required to attain a mortgage loan is 700. While this is higher than scores required prior to the crisis, it is constant with requirements one year ago.

Additionally, a Fed Senior Loan Officer Survey found credit requirements in the fourth quarter were consistent with the past three quarters.

However, other market indicators point not just to a stabilization of mortgage lending standards, but also a loosening of credit availability.

Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.

Banks are also loosening loan-to-value ratios (LTV), which Capital Economics denotes “the clearest sign yet of an improvement in mortgage credit conditions.”

In contrast to a low of 74 percent reached in mid-2010, banks are now lending at 82 percent LTV.

While credit conditions may have loosened slightly, some potential homebuyers are still struggling with credit requirements. In fact, Capital Economics points out that in November 8 percent of contract cancellations were the result of a potential buyer not qualifying for a loan.

Additionally, Capital Economics says “any improvement in credit conditions won’t be significant enough to generation actual house price gains,” and potential ramifications from the euro-zone pose a threat to future credit availability.

 

See Actual Article Here.

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You Have Seven Options…

As a three-time certified Short Sale “Specialist,” my specialty is helping struggling home owners avoid foreclosure.  If you’re upside down on your home and you need to make a move you essentially have 7 options to choose from.  More often than not people find that a short sale is ultimately their best solution, however, it’s important that you educate yourself on all of your available options before choosing which is best for you.  If you have questions about how all of this might apply to you, please feel free to give me a call and set up a consultation.  I’m more than happy to discuss your unique situation in person.

Your 7 Options to Choose From Are:

  1. Pay down your mortgage, and sell the property.  This is an option if you have money to spare.  We can sell your home and you pay the difference between what your house sells for and what you owe your lender(s).  The positive to this is you can keep your credit intact.  The negative is that you need disposable dollars to do this with.
  2. Short Sale your property.  A short sale is where we sell your home for less than what you owe.  We need to negotiate with your lender(s) to accept less than what you owe.  Note: There can be tax ramifications depending on if you have a recourse or non-recourse loan. I can explain the difference if you give me a call.  The positive is that you can pay off your loan(s) without any money out of your pocket.  It’s important to realize that in the state of California, there is a law in place (SB458) that protects the home owner from any further recourse/liability once the lender(s) have accepted a short sale, AND you cannot be required to provide a cash contribution as a condition of acceptance of your short sale. The negative depends on how many payments you missed.  It can reduce your credit score 50-150 points.*
  3. Walk Away and allow your property to be foreclosed.  This is a situation where you just walk away from your house.  You can still have negative tax consequences and it can affect your credit by approximately 250 points.  In most cases, a short sale is a better option.*
  4. Bankruptcy.  Sometimes you will be advised to file bankruptcy.  In a lot of cases, people will suggest this because they do not know about other options as mentioned above.  This should be a last resort.  It can affect your credit by approximately 400 points and your credit for for the long-term.*
  5. Deed in Lieu of Foreclosure.  This is a situation where you basically hand the keys over to your lender.  In most cases, the last thing your lender wants is the property back, and if they do, it is normally prior to foreclosure.  At this point, your credit is probably already negatively affected by multiple missed payments.  If you were current with your payments, why would your lender take the property back?
  6. Loan Modification with your Lender.  This is a situation where you want to stay in your property, but can’t afford your current payment(s).  The lender might renegotiate interest rates or reduce your payment and add it on to the back end of your loan.
  7. Rent.  You can rent your property out until the market turns upwards.  In most cases, there will be a negative between the rent you’re able to collect and your loan payment(s).  Most of the experts feel this market will take 2-4 years to turn-around, though I feel those figures may be overly optimistic.  You should be prepared to rent out your property long term and create a budget worksheet to see if you can realistically afford to be compensating for the difference in your mortgage in addition to the cost of rent for your own home stead.

*Reductions to credit scores are estimates only.  Individual situations will produce varying results.

From the first time home buyer to the savvy investor – from the seller with equity to the seller underwater and needing options – I am here for you.


What Makes For A Winning Offer?

 

 

 

1. Get pre-approved

Before writing an offer – and ideally before you even begin your search – meet with your bank or other financial advisor; the one who will be giving you your mortgage, and get pre-qualified or pre-approved. When it’s time to put forth an offer, the seller will know it’s serious.

As you can see by reading other posts on my blog, I often refer Monica Jones with RPM Mortgage as excellent Certified Mortgage Planner.  You can actually apply for your pre-approval online at MortgagesByMonica.com.

2. Understand the local context

List prices are often subjective. Look to your Better Homes and Gardens® Real Estate sales associate to advise you on pricing strategy. In the end, it’s important that you know the real estate situation yourself to determine if the property is fairly priced, based on comparable, recently sold properties. There’s no rule of thumb that says going in under asking is expected. Market conditions will dictate the selling price. Keep in mind that homes will also occasionally be under-priced to attract multiple offers. This circumstance may call for a bid over the initial asking price.

3. Understand and adjust to the seller’s interests

Asking the right questions prior to writing an offer can often make the difference between an accepted offer and a stalled negotiation. Some contract terms may be of great significance to the seller, whereas only a slight inconvenience for you. Should the seller want to rent the place back, for example, for a few days or weeks after escrow, your written flexibility on the move out/in date could close the deal in your favor.

4. Make a strong deposit part of your offer

You’ll want to submit an earnest money deposit when writing an offer, payable to a reputable escrow company, to be delivered by your agent no more than three business days after the acceptance of the offer. Even when delivering an offer below asking price, offer a large deposit if possible, and it will pay dividends in the end. Down payment strategies however may vary. In some areas, a smaller deposit is the norm. Regardless of location, a higher deposit will most likely strengthen your negotiating power.

5. Provide an appropriate time for the seller’s response

Time is of the essence once you decide to take the plunge, especially regarding a newer listing in which the risk is high that other buyers will potentially submit offers. Typically, the seller is given until 5PM on the third day from receipt of the offer to respond, unless you write in a different date and time. If the offer is strong, speed up the response time. Your Better Homes and Gardens Real Estate sales associate can advise you on what strategy will work best.

Prepared Home Buyer 101

In today’s market, potential home buyers need to be prepared for the stringent guidelines enforced by mortgage companies.  If you have any concerns about your ability to qualify for financing contact Monica Jones today at MortgagesByMonica.com or call her at 925-339-1764.  She is always my first go-to person in the lending arena, and she will happily guide you through the process of credit repair.

From the first time home buyer to the savvy investor – from the seller with equity to the seller underwater and needing options – I am here for you.

Mortgage Rate Update!

One of the many ways I strive to serve my clients is by surrounding myself with an outstanding team of professionals with your best interest in mind.  I have the utmost respect for Monica Jones as an expert in her field.  Below is a a mortgage rate update from Monica.

The message to take home here, is that home ownership is affordable, more-so now than ever before!  Take a look at the estimated payment per $1,000 loaned for a 30 year fixed mortgage!  That means if you’re looking for $200,000 loan your payment will only be around $1,028 per month! Or just $514 per month for a $100,000 loan! (There’s a good chance that’s less than your rent)

Even if your credit isn’t great, Monica and I may be able to work with you to improve your Fico scores enough for you to qualify.  Call me today!

From the first time home buyer to the savvy investor – from the seller with equity to the seller underwater and needing options – I am here for you.

Mortgage Interest Rates for Fixed and Variable Rate Mortgages* as of Friday, 28th January, 2011:

Term

Conforming

APR

Payment per $1,000

Jumbo

APR

Payment per $1,000

ARM

Reset Term

30 Year Fixed

360

4.625%

4.663%

$5.14

4.875%

4.892%

$5.29

15 Year Fixed

180

4.375%

4.412%

$4.99

4.500%

4.516%

$5.07

5/1 ARM

360

3.750%

3.786%

$4.63

4.125%

4.141%

$4.52

60

3/1ARM

360

3.250%

3.285%

$4.35

3.625%

3.640%

$4.56

36

*rates are subject to change due to market fluctuation and borrower’s eligibility 

Why have I seen lower rates advertised on TV? Rate Lock Duration

Lock durations can vary from mortgage financing, but most lenders lock in the interest rate for 60 days from the date the loan application is submitted.  As long as the loan is closed within that lock-in period, the lender honors the agreed upon interest rate.

Some consumers are misled by advertising that quotes unrealistically low rates based on 15- or 30-day lock durations.  This is called ‘short-pricing.’  The lender basically knows the borrower doesn’t have time to meet their conditions and have all the necessary paperwork in order withi that brief time period.  As a result, the lender is not obligated to honor the low rate that was listed in their advertising.

For simple refinance transactions, a 45-day lock-in period is more realistic.  For purchase transactions, which are typically much more complex, you’re much safer going with a 60-day lock, even though the interest rate might be a little higher than the rate you see quoted on billboards and the internet.

Borrowers should make sure they have a written rate lock agreement, and allow themselves a reasonable amount of time to close their loan.  Monica prefers to lock all clients as soon as their application is filed, rather that gamble with predicting short-term interest rate movement.  My team and I focus more on assisting clients with long-term goals and management of their mortgage debt to secure strong  financial future.