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.

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Commercial real estate crisis a buyer opportunity

There may just be some great deals to be had for commercial property investors. Is now a good time to start a business?

One mans loss is another's gain, with commercial real estate that  old adage holds true as well. With prices dropping and more foreclosures in the commercial real estate sector and incentives for employers and business expansion coming about it just may be. 

“Here come the real estate vultures”

“(Fortune Magazine) -- These are tempting times for real estate bargain hunters. Whether it's the tony house down the street with an asking price that keeps dropping or office space at a deep discount, if you have the means, there are deals to be had. Individual investors snapping up foreclosed houses have helped boost home-sale figures sharply in recent months (although prices have remained depressed). And now some real estate investment trusts are raising money to fund acquisitions of distressed commercial properties.”

By Michael V. Copeland 
June 22, 2009
Fortune Magazine Full Article here

“Distress among commercial real estate mortgages in New Jersey is intensifying”

“with more properties in the state going back to the lenders. Some industry insiders say a crisis may be in the works if the economy continues to falter.

You’re certainly seeing an increasing rate of foreclosures, and of lenders taking back properties,” said David Bernhaut, executive vice president at the East Rutherford office of Cushman & Wakefield, a commercial real estate brokerage. “It’s distress that everybody feels and senses.

New Jersey currently has nearly $3.6 billion of distressed commercial assets, according to Real Capital Analytics, a New York-based research and consulting firm. Distressed assets include those in foreclosure or bankruptcy, have been restructured or modified, or have been taken back by the lender through foreclosure. “

So can now be a great time for the commercial investors to begin peaking their heads out? I would say that it depends on your financial ability to maintain the property if it should experience a lower than normal occupancy for a while.

“Lenders are currently lending at a 50 percent to 65 percent loan-to-value ratio, compared to 70 percent or 75 percent five years ago, said Kenneth Pasternak, chairman of KABR Real Estate Investment Partners LLC, a Paramus-based opportunistic real estate investment fund. Meanwhile, real estate is being appraised at values that are off by 25 percent of what they were five years ago, he said.”

 

Source: NJ Biz Article by Evelyn Lee 11/9/09
Full Article here: Fearing a commercial Real Estate crisis

This may just be putting current owners between a rock and tight place presenting the kind of opportunities and deals investors generally look for.

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