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

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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

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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HUD FHA Condominium Complex Approvals

I’ve been coming across this issue more and more lately so decided to write this article to address the issue of condo complexes being approved so that would be buyers can use an FHA loan to fund the purchase.

 
Since condominiums are becoming more popular across the country, I think this information will be helpful to you if you are new to FHA or if you are in need of a refresher on condominium requirements.

There are two types of condominium approvals for FHA:

• Full project review and approval by HUD
• Spot loan review and approval by the lender

To check see if a condo complex is HUD approved for FHA loans the first step would be to determine the name of the condominium project and conduct a search at HUD’s website to see if the project is currently approved. You’ll need to go to https://entp.hud.gov/idapp/html/condlook.cfm where you can search by condo name, condo id, alias name, city, state or zip code.

If the search concludes that the project is not currently approved, your mortgage rep would want to do one of two things:

1. Determine if the property is eligible for spot loan review and approval or
2. Determine if it’s best to gather project documentation and submit to the HUD Homeownership Center that oversees the jurisdiction of the property for full project review and approval.

For Spot Loan Approval
To proceed with spot loan approval, you would want to refer to Mortgagee Letter 1996-41 which explains spot loan approval requirements. You will find a spot loan questionnaire/checklist attached to ML 96-41. You will need to have an officer of the condominium project’s homeowners association or a representative from the company that oversees and manages the association complete the spot loan questionnaire as early in the process as possible. With the completed spot loan questionnaire, you will need to obtain a copy of the association’s most recent annual budget and you will need to obtain a copy of the certificate of insurance for the subject unit of the project. The association must have appropriate insurance coverage for the common areas and exteriors of the buildings within the project.

Most lenders also require a copy of the condominium declarations and bylaws to be submitted with the questionnaire, annual budget and certificate of insurance for the subject unit. You will want to check the specific lender procedures for spot loan approval because some lenders actually employ their own department for project reviews and approval. Most underwriters are able to determine project acceptability at the same time they underwrite the rest of your credit package but there are a few that differ in their processes. Make sure you’re clear up front on the exact process with the lender of choice.

One thing worth mentioning that you will not find within the Mortgagee Letter or the questionnaire: To be eligible for spot loan approval, the project must consist of no less than four units. This eliminates two unit duplexes and three unit triplexes which have been zoned as condominiums from being eligible for spot approval.

For full project review and approval
For cases where a particular originator has the potential to land a number of deals within the subject project, HUD advises pursuing full project approval. You will find full condominium project requirements at CFR-234.26(i) and also in HUD handbook 4150.1 Chapter 11. Each HUD Homeownership Center has their own specific project review process so you will want to be clear on what to include in your project submission, where to send the documents and to whose attention you need to address the documents.

For more information about purchasing or selling a home call
Marivic GMAC Real Estate
www.MarivicRealty.com
Local: 732-650-9911
Toll Free: 1-866-745-GMAC(4622)
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New Program offers up to $5,000 cash to qualified buyers as Downpayment

NJ Housing Mortgage Finance Agency Offers Cash Advance for First-time Buyer Down Payment Costs

Program offers up to $5,000 cash to qualified first-time home buyers

The New Jersey Housing Mortgage Finance Agency (NJHMFA) is offering cash payments of up to $5,000 for qualified first-time home buyers to help defray closing costs or satisfy down payment requirements and help new buyers to get into the housing market.

The loan, offered as part of NJHMFA's "Prefund" program, would function like a cash advance against the $8,000 tax credit being offered to first-time buyers who purchase a home between April 8 and December 1 of this year. In its simplest terms, purchasers would be provided with the payment as a loan and would be required to repay the advance when they receive their federal tax credit.

"This is a powerful incentive that will allow potential first time home buyers to actually enter the market because this cash advance will help them meet down payment requirements or pay for closing costs that might otherwise be an obstacle to a first-time buyer," said Jarrod C. Grasso, RCE, executive vice president of NJAR®.

The cash advance is available to first-time home buyers who:

* Arrange their financing through the NJHMFA. (Obtain a list of participating lenders by calling (800) NJ HOUSE)
* Are qualified for the tax credit offered as a part of the federal stimulus program
* Pledge to apply the proceeds of their tax credit to repay the cash

View the full details of the NJHMFA's First-Time Home Buyers Tax Credit Loan Program (TCLP).
http://www.state.nj.us/dca/hmfa/consu/buyers/ownprg/tclp.html

Contact us for help or more info:
MARIVIC GMAC REAL ESTATE
Office: 732-650-9911
Toll Free: 866-745-GMAC (4622)
www.MarivicRealty.com