Mortgage News

Already, rental vacancy rates have dipped below the 10% mark, where they had been lodged for most of the past three years. "The demand for rental housing has already started to increase," said Peggy Alford, president of Rent.com. "Young people are starting to get rid of their roommates and move out of their parent's basements." By 2012, she predicts the vacancy rate will hover at a mere 5%. And with fewer units on the market, prices will explode. Rent hikes have averaged less than 1% a year over the past decade, according to Commerce Department statistics, adjusted for inflation. Now, Alford expects rents to spike 7% or so in each of the next two years -- to a national average that will top $800 per month. In the hottest rental markets, the increases will likely top the 10% mark annually for the next couple of years.

This is a sharp change from the recession, when many Americans couldn't afford to live on their own. More than 1.2 million young adults moved back in with their parents from 2005 to 2010, said Lesley Deutch of John Burns Real Estate Consulting. Many others doubled up together. As a result, landlords had to reduce prices and offer big incentives to snag renters. Now that the recession is easing, many of these young people are ready to find new digs, mostly as renters, not owners. Plus, millions losing their homes to foreclosure are looking for new places to live. Apartment developers may not be able to keep up with this heightened demand, which will force prices upwards, according to Chris Macke, a real estate analyst with CoStar, which tracks multi-family housing trends...q Source: CNN/Money.com

Remodeling may seem passé as the economy strives to recover from the crisis, but research findings along with insider’s expectations show it is anything but. Far from a stagnant activity it is “poised for growth.” That is the main finding of the latest report by the Joint Center for Housing Studies at Harvard University, which indicates growth after a double-digit decline that followed the 2007 peak of the industry. Research findings indicate that everyone from homeowners, investors, and real estate owned managers are ready to take action in the next few years. JCHS said remodeling expenditures could increase at an inflation-adjusted 3.5% average annual rate, which is lower than the pace seen during the housing boom, “but sharply recovering from the recent downturn.” And as the industry starts to “return to a more typical pattern of growth,” its main characteristics will also change. If in the past remodeling was driven by higher-end markets, going forward, demand in lower-end markets also will generate considerable demand. In the next five years, “the focus of remodeling spending will shift from upper-end discretionary projects to replacements and systems upgrades. Source: NationalMortgageNews.com

If you're into bottom-fishing, now may be the time to start trolling for real estate. At least that's the advice of Michael Corbett, author of Before You Buy: The Homebuyer's Handbook for Today's Market. "I'm pretty comfortable saying that five years from now, people are going to be saying, 'Damn, if I had just bought in 2011,' " said Corbett, who is also host of the "Mansions & Millionaires" segment on the syndicated TV show Extra. "Prices are bumping along the bottom and rates are really low," he said. "When you have those two together, you have the perfect buying opportunity." Housing prices may not have hit rock bottom, Corbett acknowledged. But he thinks that people who wait to find the market's bottom are likely to miss out on current low rates.

And rates can be every bit as important to the cost of a deal as price. You might think you can snag a great deal by lying in wait, hoping that the owner of a $500,000 listing will get desperate enough to accept $450,000. But if rates rise 1% during the time you wait, you'll end up shooting yourself in the foot. Assuming you finance $400,000 of the purchase price of that home, the 1% difference between a 5% and a 6% loan will cost you more than $90,000 over the life of a 30-year loan. "It's hard to tell where the bottom of a market is, until prices start going up," said Dianne Patton, a consumer real estate specialist with Coldwell Banker Real Estate. "But the stars are aligned for buyers right now." Source: LATimes.com

We have undergone a credit crisis in America. This is a crisis that has taken away many home financing alternatives. However, Americans are not without home financing alternatives. It is time to take a good look at an old standard—FHA financing.

For years, FHA was the standard for first time buyers, immigrants and those with credit issues. During the real estate and subprime boom, FHA financing shrunk from over 25% of the loans in America to well under 5% of the market. But now the government has moved to make FHA more attractive. Congress passed a bill to raise the FHA loan limits in many parts of the country.

Even without these modifications, here are some of the advantages of FHA…

A Low Downpayment. Generally the downpayment on an FHA mortgage is very affordable as compared to conventional financing. The down-payment required is less than 5.0%. A total of 3.5% cash is required from the borrower’s owner funds to be invested in the total transaction, inclusive of closing costs.

A Liberal Gift Policy. FHA borrowers virtually do not have to come to the transaction with any liquid assets in savings. All money may be provided by gift from a relative. Relatively all conventional lending requires that a certain amount of the borrower’s funds belong to the borrower through savings amassed some time before the transaction takes place. FHA also requires no cash reserves left in the bank after settlement. Keep in mind that prudent underwriting standards may very well require savings and cash reserves after closing.

More Lenient Qualification Standards. FHA requires less income to qualify for a mortgage. The standards allow a housing payment which is 31% of a borrower's gross monthly income and total debt service which is 43% of a borrower's gross monthly income. By contrast, most conventional programs have ratios of 28% and 36%. FHA also allows a prospective borrower who does not qualify to add a related co-borrower to the application--and this co-borrower does not have to live in the home.

FHA also does not require a minimum credit score to qualify for a mortgage, though there is a very liberal standard for those who are making a minimum down payment. It should also be noted that many lenders that purchase or make FHA loans do have minimum credit score standards.

FHA ARM Program. The FHA one-year and 3/1 adjustable mortgage programs are very popular because annual adjustments are limited to one percent each year, as compared to most conventional adjustables which have caps of two percent each year. For example, this means that the 3/1 adjustable can only increase one percent at the start of the 4th year. Also, the lifetime cap on these FHA adjustables is five percent, while most conventional alternatives have a six percent limit.

FHA Loans Are Assumable. FHA remains as one of the few programs to allow assumption of adjustable and fixed rate mortgages at the same rate and term as the original loan. This is a major advantage when you are trying to sell your home in a high-rate environment. Note that the assumption must be accomplished by an owner-occupant that is credit-qualified.

FHA Has No Maximum Income Limits. Though FHA loans are limited as to a maximum loan amount, there is no maximum income limitation. Many conventional first time buyer programs that allow a minimum downpayment, also limit the maximum income level of the borrower.

FHA also has programs to help homeowners improve their properties (rehabilitation), refinance their present mortgage and even reverse mortgages for seniors. Put it all together and you have a program that packs a lot of punch with first-time homebuyers or other low-to-moderate income Americans. If you are in the market to purchase a home or refinance your present home, you should look seriously at an FHA mortgage as an alternative. Contact us if you would like more information on whether FHA might be the right option for you..q

What features do buyers want today and in the future? The answer: smaller, more energy efficient homes. The average size of a new single-family home in 2010 was 2,377 square feet, down from 2,438 square feet in 2009 and down from the peak of 2,520 square feet in 2007 and 2008, according to U.S. Census Bureau data presented by Rose Quint, assistant vice president of survey research for NAHB at the International Builders’ Show in Orlando. And the trend will only continue, Quint said, with the 2015 new home size currently projected at 2,150 square feet with fewer bathrooms and smaller garages.

It’s hard to say whether home sizes will decline to 1970 levels of 1,500 square feet. But Quint says she believes smaller sizes are here to stay based on demographics. The U.S. population was 310 million as of April 2010. That’s expected to rise to 322 million in 2015 and continue to climb up to 422 million by 2050. The population is also getting older and more diverse. In 2010, 25% were over the age of 55, which is expected to grow to 31% by 2050. This rising segment of older home owners will not want to care for huge spaces, Quint said. Then you have Generation Y buyers who are very energy conscious. “People are coming to realize, ‘Let’s buy what we need,’” said Quint...

Source: Realtor Magazine

The purchase of a home is the goal of the vast majority of Americans. That is why home ownership is often referred to as “The American Dream of Home Ownership.” Two-thirds of Americans have taken advantage of the tax benefits, government programs and the economic benefits of owning to become home owners. Even in the past few years when the real estate markets have not been as “hot,” millions have taken advantage of the buying opportunities to become a home owner for the first time. With lower home prices and low mortgage rates, homes have become more affordable than they have been during the past generation.

One area that keeps many Americans from reaching this goal is the difficulty of qualifying for a mortgage. The same weak real estate market that has caused homes to be a bargain has caused lenders to scrutinize loan applications as they have never done before. Tighter credit standards are certainly an obstacle today but the good news is that potential homeowners can take positive steps to make sure they have a better chance of qualifying for a mortgage.

There are several areas for you to focus upon that can help you get in position to qualify for a mortgage to purchase your first home or even move up if you are already a homeowner...

Your credit score. Today, a low score can be a cause of rejection or, at the least, add to the cost of owning a home. It is important to start by finding out your score and, if it is low, coming up with a plan of action to raise your score. With the right plan, the good news is that anyone can raise their score. Did you know a low score can cost you hundreds of dollars per month even if you are a renter? If you don’t know your score or don’t know what your score means with regard to obtaining a mortgage, contact us and we will help you find out as well as help you set up a plan of action to raise your score.

There are many reasons for low scores, including late payments, outstanding judgments, tax liens and more. Sometimes the information contained on your report is riddled with inaccuracies and/or information that was reported is in non-compliance with laws meant to protect the consumer.

Your monthly debts. Many can’t purchase because they have too many debts. This problem also exacerbates the process in other ways as too many debts can help to lower your credit score and make paying a mortgage or even rent more difficult. It is important to come up with a plan to lower your debts. Paying down debts is actually a science and undertaking the task without advice can cost you thousands of dollars. Again, we can help determine how your debt load may be affecting your qualification for a mortgage as well as setting up a program to help you get your debts paid down.

This process starts by budgeting and minimizing excess spending. Certainly, if you are thinking about purchasing a home, you should hold off on major expenditures such as purchasing a new car or furniture. Concentrate instead on paying off existing debts.

Cash reserves. Most home purchases require a down payment as well as the payment of closing costs. There are many programs that may help you minimize your need for cash. For example, there are programs for active military and veterans and programs for those with low-to-moderate income.

Regardless of these programs, having cash reserves after you purchase the home is important for qualification standards and it is prudent to have reserves for emergencies at all times whether you are a homeowner or renter. Of course, the first step in building reserves is minimizing your debts. As you can see, all of these factors are related.

Income documentation. Many Americans do not keep good records, especially with regard to the money earned by those who are self-employed or have other sources of income that vary such as tips or commission. Keeping track is very important because mortgage programs today require detailed documentation of income. This means keeping copies of checks, receipts, tax returns and more.

For many who don’t qualify, this process may seem daunting. Yet, if you are truly committed to improving your financial situation, the rewards are well worth it. Contact us for an analysis of your situation and to determine how we can help you change factors affecting your qualification for the home of your dreams...q

The average homeowner has a net worth that is about 41 times greater than that of a renter, according to a report from the National Association of Realtors®. Homeowners' net worth averaged between $150,000 and $200,000 this year, according to the NAR.
The trade group for Realtors® said homeowner equity accounts are a substantial part of that net worth. NAR based its research on results from a 2007 Federal Reserve Survey that provides a snapshot of family income and net worth in conjunction with basic demographic makeup. The Fed survey is conducted once every three years. Homeowner net worth back in 2007 was 46 times greater than that of renters, reflecting the economic conditions before housing price declines and a decreasing equities market. The average net worth of a homeowner was above $200,000, while the average net worth of a renter in 2007 was $5,000. It is interesting to see that while many media outlets have questioned the advantages of purchasing in today’s markets, the numbers supporting owning are quite clear...

Source: Housing Wire

Freddie Mac analysts point to five features that they believe will likely characterize the 2011 real estate markets:

 Advantageous home loan rates. With Fed observers expecting the central bank to keep the federal funds rate at its current target range of 0% to 0.25% for most or all of 2011, advantageous rates will be a feature of the 2011 market. Thirty-year fixed-rate loans are likely to remain below 5.0% throughout the year, and initial rates of 5/1 hybrid adjustable-rate loans will likely remain below 4.0% in 2011.

 House prices have hit bottom. Prices are likely to begin a gradual, but sustained recovery in the second half of 2011.

 Housing will remain affordable. With affordability high, many first-time buyers will be attracted to the housing market next year, likely translating into more home sales in 2011 than in 2010.

 Refinances will dwindle. Many eligible borrowers have already refinanced. While fixed-rates are likely to remain low, they will move up gradually.

 Delinquency rates will decline. Based on the last several business cycles, the share of loans that are 90 or more days delinquent or in foreclosure proceedings generally crests within a year of the start of the recovery in payroll employment. Payrolls began to rise last January, and by the spring delinquency rates had begun to fall...

 Source: Freddie Mac

You have heard this decree time and time again in the media: “Real estate as an investment is doomed.” Despite such negative connotations which make good news stories but are not scientifically based, the American Dream continues to be aligned with home ownership. We have come to realize that not everyone has the financial wherewithal to own a home. However, more than 60% of American’s own their own home and the latest statistics released by the National Association of Realtors shows that the average homeowners net worth is forty times that of renters.

Today we will present data about the future that is based in real evidence instead of hype one way or the other. We will start with a historical view of home prices. According to the census bureau, the median value of homes adjusted for inflation quadrupled in the 60-year period from 1940 to 2000.

Here are the numbers:

Adjusted for Inflation:

1940: $30,600

2000: $119,600

Not Adjusted for Inflation:

1940: $2,938

2000: $119,600

It should be noted that even though home values have dropped precipitously in the 2nd half of the past decade, this happened after a significant run-up during the 1st half of the decade. Thus, prices are still significantly higher today than they were in the year 2000.

Now the important question. Are enough people going to purchase homes in the future in order to support the price of housing? There is no doubt that several factors have slowed housing sales. Some of these factors include:

¨ Lower household formulation. Part of this factor is due to slower population growth and part is due to families “doubling” up. Less Americans are having babies, more children are living with their parents and even divorces are being postponed because of the present economic situation.

¨ Over-supply. With a “shadow inventory” of somewhere between three million to eight million homes being held by banks in the process of foreclosure, there is no doubt that there is presently an over-supply in the market. This has provided many with great buying opportunities.

These are very real concerns. However, we must point out that real estate is not a short-term investment. That is why we provided such a long term historical perspective. True, homes may not appreciate in the next year or perhaps for the next few years. But what about two decades from now? To answer this question, we must review the most significant demographics.

Population Growth. Despite the recession, the Census Bureau reports that the population of America grew almost 10% in the past decade. That was an increase of over 26 million people. The Census Bureau also has released population projections that show the population reaching almost 430 million by the middle of this Century. That is an addition of almost 130 million people, which was almost the size of our whole country in the 1940s. Will this cause the need for 40% more homes? Perhaps not, as much of this growth will come from immigration and immigrants do not tend to purchase homes, at least for some years after arriving. Even if the need is for 25% more homes, this is a staggering number which does not include replacement of the housing stock which becomes outdated.

Back to household formulation. The growth rates today are projected to be lower because of the slow economy. For example, growth is projected to be “only” from 12-14 million in this decade, according to the State of the Nation’s Housing by Harvard’s Joint Center for Housing Studies.

The economy is a temporary factor. As growth picks up, birth rates and immigration should increase and more children will leave the nest and form households. Even those who are foreclosed upon (the shadow inventory) will need homes to live in as renters. They will not all live in apartments. This means that lower homeownership rates may not translate into lower housing demand.

Finally, one should not discount the true benefits of owning a home which are not governed by the finances. A home gives a family security and a sense of permanence. If you keep up the payments, no one can tell you to move. You are able to pick the neighborhood and the best places to live are where people own their own homes. In other words, the American Dream is not tied only to the investment of dollars but to emotion as well.

Home affordability remains near 10-year highs, according to the 2nd edition of the Administration's Housing Scorecard released today by the US Department of Housing and Urban Development (HUD) and the Treasury Department. The July scorecard is the second aggregate of housing initiative reports.

"The housing market is performing better than the predictions made over a year ago," said HUD assistant secretary Raphael Bostic, in a statement. "We're absolutely not claiming victory, but due to the Obama Administration's efforts, improved home affordability is continuing to provide opportunities for prospective, qualified, homebuyers, while promising neighborhood stabilization efforts are helping hard hit neighborhoods start to recover."

More than 7.2 million homeowners refinanced under historic low rates since April 2009, saving a total estimated $12.9 billion, according to the scorecard. Nearly 3 million borrowers restructured their home loans, including through modification, since April 2009, twice the rate of 1.24 million foreclosures during the same time period...q

Source: Housing Wire