Rates WILL Rise a Good Reason to Buy Now?

This article is related so can be considered as a follow up to the last article “If You Don’t Buy a House Now, You’re Stupid or Broke. The answer to that question is… Well that it really depends on you and your debt to income ratios and ability to repay and previous repayment history of debt.

Lenders are subject to extreme scrutiny at the moment. Above average defaults can have drastic consequences and no lender is immune. This has led to over the top caution and excessive documentation and underwriting requirements.

It is what it is, so we’ll have to deal with it and only deal with mortgage reps on top of their game and don’t make promises they can’t keep!

FYI Rates continue to be at or near historic lows.

Given the eternal optimism that is inside all of us we believe the low rates are here to stay (or go lower yet) but think again.  The writing is on the wall for higher rates next year!  With the Fed buying approx 80% of all mortgage loans now, they will stop doing this by March, and there are few other buyers at current price and interest rates.

As the Federal Housing Administration (FHA) considers  raising the minimum credit score requirement for new borrowers to reduce risks to the single-family insurance fund, Fannie Mae (FNM: 1.04 +13.04%) has increased the minimum borrower credit score from 580 to 620.

Brian Faith, a Fannie Mae spokesperson confirmed the minimum hike, adding that the adjustment reflects a careful analysis of borrowers’ ability to repay their mortgage obligations over the life of the loan.

Faith said “Our experience with recently delivered loans with credit scores below 620 is that they reached a level of serious delinquency at a rate approximately nine times higher than other acquisitions during the same period.”

Fannie also reduced the allowable debt-to-income (DTI) ratio to 45% when executing loss mitigation efforts under the Home Affordable Modification Program (HAMP). Under HAMP, the US Treasury Department provides allocated capped incentives to servicers for the modification of loans on the verge of foreclosure.

Faith said that “high DTI ratio loans also have higher levels of serious delinquency. “In other words if you have a lot of debt and keep stacking it on with new cars, credit card bills and other investments and leveraged to the hilt, maybe you shouldn’t be buying a home until you pay down some of that debt first.

It’s not enough to help borrowers buy a home – we must also ensure that they can stay in the home over the long term. Repeat business through ill-gotten gains is rare, immoral and unethical, at least in my book.

Contact us today for a free consultation to see if home ownership may be in your future.

www.MarivicRealty.com
2056A Lincoln Highway
Edison, NJ 08817-3330
Office: 732-650-9911
Toll Free: 1-866-745-4622

Located Across from The Pines Manor & Crowne Plaza Hotel in the Nixon Plaza Shopping Center where the Labonbonniere Bake Shoppe

Click here for Door to Door Directions

If You Don't Buy a House Now, You're Stupid or Broke

Have you read this article yet? It was featured in Business Week. 

My first thought, wow! That’s blunt and kind of rude, a very harsh statement. But the writer, Mark Roth, uses this  head turning title to get your attention to make excellent points for those who are on the fence.  Namely that interest rates are at an all time low, in fact, the lowest in 40 years. He noted that in the late 70s, rates hit a high of 18%!

Can you ever imagine buying a house at 18%?  I  can't fathom the thought however not all too long ago in the grand scheme of life my parents did it, as probably yours depending on your age, as of this writing I’m 37.

Most of my friends and people buying homes in this generation either bought a home using an FHA loan in the 6%-9% range depending on how good or bad their credit was. Imagine having excellent credit and only being able to fetch a best rate of 17-18%, that’s just nuts, but possible to happen again in the not too distant future. 

In the 80s rates dropped from 12% to 9%, many people were thrilled, while most peoples reaction today today would be more like WHAT!!!! Well if you were previously at 17% or 18% you’d be dancing in the streets at the opportunity to refinance at those low by comparison rates. We’ve had it pretty good for so long now that most people can’t imagine rates so high these days.  

Generation X'ers probably would never dream of purchasing a home above 7% given all we’ve ever known are super low rates between 5% – 6%. Mr. Roth points out the history of previous interest rates as well as their impact on purchasing power. I happen to agree with his prediction that as the economy becomes more stable, interest rates WILL rise to hedge inflation as it wildly spins out of control thanks in part, a big part due to out of control government borrowing and spending. Heck even our country’s credit rating is in danger of losing its triple AAA credit rating.  I’ll make the prediction that by this time next year, rates will have risen at least 1%-2% higher than today.

Now let’s keep in mind if rates go up as expected, refinancing at a lower rate should not be counted on given the history and how long it may take in years for rates to even begin to fall without further government intervention.

These numbers are just examples but lets just say the average sale is $250,000. Assuming a 5% down payment at 5% interest on a 30 year fixed, your monthly principal and interest payment would be $1275.  If rates rise to 7%, your payment increases to $1580/month. 

Some buyers may be on the fence because they fear prices may drop further. Consider this. If there is a 10% decrease in price and the $250,000 falls to $225,000 in one year, but you wait to purchase and the interest rate rises to 7%, your payment will be $1422.  You spend more money per month plus at the higher interest rate, you pay more interest over the life of the loan.  Real estate appreciation is always a cycle and as the economy stabilizes, values will level out. 

Data being analyzing by many of the trend trackers are having the experts already saying this is happening in many markets and that this will occur by 2014 in many states. Making a home purchase is still a decision that should be weighed carefully, being a home owner is not for everyone. Some people with poor credit and personal financial habits or others with other reasons should probably remain renters. One important consideration will depend on how long you plan to stay in the home.  

Mark Roth summed up the article, "What I'm trying to impress upon everyone is that if you are planning on being a homeowner now and/or in the foreseeable future, or if you are looking to move your family into a bigger home, then pay more attention to the interest rates than the price of the home. If you have a steady job, good credit, and the down payment, then you really are being offered the gift of a lifetime." Depending on where you live I’d also have to add that you should also take into consideration funds from additional sources such as local government down payment and closing cost grants as well as the federal home buyer tax credit currently being offered while it lasts and not wait until last minute this time. The government will not be extending it again, this time they will actually have a phase out plan giving people plenty of opportunity to take advantage without just yanking the offer away.

Marivic GMAC Real Estate specializes in helping families make good decisions. We do NOT think you are stupid or broke if you don't buy a house right now.  But if you are considering purchasing a home and would like a FREE consultation, we'd love to sit down with you and help you weigh your options and direct you to a qualified, caring mortgage professional that will help you with the numbers.

www.MarivicRealty.com
2056A Lincoln Highway
Edison, NJ 08817-3330
Office: 732-650-9911
Toll Free: 1-866-745-4622

Located Across from The Pines Manor & Crowne Plaza Hotel in the Nixon Plaza Shopping Center where the Labonbonniere Bake Shoppe

Click here for Door to Door Directions

Tax Credit Boosts October Home Sales 10.1%

A last minute rush of home purchases by first time home buyers wanting to take advantage of the expiring federal housing tax credit was the cause of home sales far exceeded expectations last month, surging to the highest level in 2 1/2 years.

The National Association of Realtors said Monday that home resales rose 10.1 percent to a seasonally adjusted annual rate of 6.1 million in October, from a downwardly revised pace of 5.54 million in September.

The tax credit of up to $8,000 for first-time owners was originally set to run out on Nov. 30, but Congress renewed it earlier this month and broadened its reach. Now even existing home owners who have owned their current homes for at least five years can now claim a tax credit of up to $6,500 for a home purchase. To qualify, buyers must sign a purchase agreement by April 30.

The Realtors report on October home sales reflect offers made before buyers knew the tax credit would be extended. "There was a lot of rush and hurry to complete sales" before the deadline.

Home sales are likely to drop over the winter as buyers hibernate for a few months without the looming tax credit deadline making this winter possibly the best time to begin shopping for a home. 

With a large inventory of homes for sale and limited time for sellers to sell with the threat of foreclosure hanging over their heads, there just may be some spectacular deals to be had and many options to choose from with little competition from other buyers.

The new deadline means that we're going to see some good activity coming out of the spring.

Sales, which were nearly 24 percent above last year's level, had been expected to rise to an annual pace of 5.65 million, according to economists surveyed by Thomson Reuters.

The median sales price was $173,100, down 7.1 percent from a year earlier and off 1.6 percent from September.

In addition to lower prices, mortgage rates have been hovering around 5 percent since the spring, largely because of government intervention. That has helped restore housing affordability in large swaths of the country.

The inventory of unsold homes on the market fell about 4 percent to 3.6 million. That's a 7 month supply at the current sales pace, and close to a healthy stock of about six months.

Over the summer, the housing market started to rebound from the worst downturn in decades, aided by aggressive federal intervention to lower mortgage rates and bring more buyers into the market.

But experts forecast that prices will fall again. Most say they will hit  a new low next spring, perhaps falling another 5 to 10 percent, as more foreclosures get pushed onto the market.

But the government support can't last forever. For example, the Federal Reserve is likely to curtail its effort to push down mortgage rates next year. If rates then rise too high, it would make home purchases less affordable and dampen housing demand.

"When we do kick those crutches out from under the housing market, will it be able to stand on its own?" said Mark Fleming, chief economist with real estate information company First American CoreLogic. "It's really hard to tell."

A record-high 14 percent of homeowners with a mortgage were either behind on payments or in foreclosure at the end of September, the Mortgage Bankers Association said last week. The worst damage is still concentrated in the states hardest hit from the start: Florida, Nevada, California and Arizona. Together, they accounted for 43 percent of new foreclosures.

So what does this mean for New Jersey home buyers? It’s hard to say but not being at the top of the foreclosure list of states could possibly mean we’ve hit bottom or already very close, couple that with very low mortgage rates and buyers will need to decide if now just may be the optimal time to make a purchase or wait to see if prices drop a little more and risk higher interest rates in the spring.

The great news is New Jersey has several local state, county and federal finance assistance programs available that could add up to $20,000 in home purchase discounts in the form of government grants. (depending on your location, price, income etc. and of course the knowledge of these programs available by your realtor and mortgage representative.)

Whenever your ready, Marivic GMAC Real Estate will be here to keep you informed and let you decide, remember we’re here to help.

www.MarivicRealty.com
Local: 732-650-9911
Toll Free: 1-866-745-GMAC(4622)
Facebook Blog: www.realrep.com

This article is based on excerpts of a 11/23/09 story by ALAN ZIBEL
AP Real Estate Writer. Additional story contributions from Victor Kaminski Broker of Record of Marivic GMAC Real Estate.

Why NOW is a Good time to Buy?

Below is a neat little video explaining why it’s a good time to buy real estate now courtesy of Lennar Home Builders.

For any real estate questions and for all your real estate needs contact us any time.

Marivic GMAC Real Estate
www.MarivicRealty.com
Local: 732-650-9911
Toll Free: 1-866-745-GMAC(4622)
Facebook Blog: www.realrep.com

First Time Home Buyer Grant Money Available in NJ

New Jersey Smart Start Program

1st Time Home Buyer Grant Program

Another reason now is the best possible time to be a home buyer in New Jersey.

The State of New Jersey has a grant program called HMFA's 1st Time Buyer Mortgage Program, aka Smart Start Grant Program. This program is designed to be used in conjunction with SMART GROWTH. This means the property must qualify as well as the buyer.

The first time home buyer grant program offers up to 4% of the purchase price in the form of a second loan to first time home buyers or people who haven't owned a home in the last (3) three years.

The loan is actually from grant money from the state of New Jersey at a 0% interest rate for the life of the loan and the best part is the loan is forgivable meaning the longer you stay in the house you don't have to pay it back.

See program guidelines for details, this article is only for meant to introduce you to the program. Program availability is not garanteed and terms must be verified with the source offering the grant, in other words "Don't Shoot the Messenger".

Both the home and the buyer must qualify for the New Jersey Smart Start program.

To see more information on the program and to find out if the community you are buying in is qualified, check out this link: http://sgl.state.nj.us/

For questions on how to obtain HMFA Smart Start down payment and closing cost assistance, please call them directly at 1-800-NJHOUSE and then call our office to help you find your dream home. At least you can work with us after providing you with the info that all these juicy programs are available. ;-)

Marivic GMAC Real Estate

1-866-745-GMAC (4622)

The beauty of this program is that the buyer does not have to repay the 0% interest 2nd loan for money toward down payment or closing cost until they sell the property. The best part is this is a forgiving loan meaning the longer you stay in the property, the less you need to repay, if you stay in the home for 5 years, you don’t need to pay back the 2nd loan at all.

Click here For all the Details about the NJ Smart Start Program

$8,000 First-Time Homebuyer Tax Credit H.R. 3221

UPDATE: The Tax Credit has been Ammended...

Unfortunately with all the So-Called Stimulus spending President Obama has been doing, both him and the reigning Democrats in congress shot down the Republican efforts to put a shot of stimulus directly into the Housing Market. The Republicans suggested changing this tax credit to one that does not have to be repaid and it should be raised to a more stimulating $15,000.

This suggestion was shot down but after the National Association of Realtors (NAR) launched their political action committee call to action from all Realtors to write their local politicians, the huge response led to the Dems approving a modified version of this stimulus suggestion ending in a lower $8,000 Tax Credit but also amending the provision to one that does not have to be repaid. I suppose it's better than nothing!

$7,500 First-Time Home Buyer Tax Credit

Credit Expires June 30, 2009

Bill Number H.R. 3221

Now is a Great Time to Buy a Home!

The tax credit is only temporary so now is not the time to dilly dally. With prices the lowest they've been in years, the interest rates are still low, the government offering all kinds of incentive to stimulate our economy why wouldn't you want to buy now?

Why now is the Best Time to Buy a Home?

• Low interest rates wont last forgever!
• First Time Home Buyer Tax Credit Expires July 1st 2009!
• Government investing Billions of Dollars to stimulate the economy!
• Programs like NJHMFA 1st Time Home Buyer Grant Program aka NJ Smart Start Grant

Yes now is a great time to be a home buyer, here is just one example of the benefits of home ownership and why it's a good thing.

Overview
The Housing and Economic Recovery Act of 2008 (H.R. 3221) signed into law by President Bush in July 2007 offers first-time homebuyers a tax credit equal to 10% of the cost of their home up to $7,500. This tax credit is available to first-time homebuyers who purchase a home in the United States as their principal residence on or after April 9, 2008, and before July 1, 2009.

To qualify as a first-time homebuyer, you cannot have owned an interest in a principal residence in the past three years from the date of the qualifying purchase.

To qualify for the full amount of the tax credit, you must not earn no more than $75,000 if filing as Single or Head of Household. If filing a joint return, the buyers may have a combined income of no more than $150,000. There is a phase out of the credit if reported income is more than $75,000.

The tax credit allows you to deduct the credit from your total tax liability for the year in which the credit is taken. Also, the tax credit is “refundable,” meaning that the taxpayer can receive a tax refund if the credit is greater than the estimated liability.

This tax credit must be repaid. However, the repayment period is 15 years unless the home is resold before the end of that period, and there is no interest on the amount of the credit that is received. Repayment of the credit begins two years after the credit is claimed and is repaid in increments of 6.67% per year of the credit amount.

Essentially, the tax credit is a 15-year interest free loan from the government. Money today is worth more than an equal amount of money in the future, making the tax credit a fantastic opportunity that any first-time homebuyer cannot afford to miss.

First-Time Home Buyer Tax Credit at a Glance

• The tax credit is available for first-time home buyers only.
• The maximum credit amount is $7,500.
• The credit is available for homes purchased on or after April 9, 2008 and beforeJuly 1, 2009.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.
• The tax credit works like an interest-free loan and must be repaid over a 15-year period.

Marivic GMAC Real Estate agents are here to help, call us with any questions you may have no matter where in the United States you may live. We have affiliate offices all over the globe. 1-866-745-GMAC (4622) and have agents on staff specializing in all areas of real estate from Residential to Commercial, New Construction to Vacation & Resort Properties, Pre-Foreclosure, Short Sales, Estate Sales, you name it we do it!

Home Buyer Resources
Buying a home can be complicated, but fortunately a lot of expert advice is available to help people navigate the experience. These online resources can help make the process smoother.

• Buying and Owning a Home Freddie Mac
• Buying a Home Department of Housing and Urban Development
• The Home Buying Process Federal Housing Administration
• FHA Loans Federal Housing Administration
• Homeownership Resources Fannie Mae
• Home Loan Learning Center Mortgage Bankers Association
• Move.com NAHB’s official new homes listing site
• Home Loan Guaranty Services Dept. of Veterans Affairs
• State and Local Home Buyer Assistance ProgramsHousing Publications from the Federal Citizen Information Center Most in PDF format
• Consumer Information from NAHB NAHB.org
• Mortgage information from the Fed Federal Reserve Board
• Home Financing Information from the FTC Federal Trade Commission

Additional Resources:
FAQ - Frequently Asked Questions about the Program
Official Government for the First-Time Home Buyer Tax Credit Program
Download the Bill H.R. 3221 in PDF format

Visit the Library of Congress and search for Bill Number H.R. 3221.

Further information can be found at http://www.federalhousingtaxcredit.com/ or http://www.irs.gov/. This information is provided for general awareness only, and is not intended for the purpose of providing legal, accounting, tax advice or consulting of any kind. Please consult with your tax professional for complete details.