Real Estate Information

If you have been following the financial news, you have probably heard that the Fed has been buying Mortgage Backed Securities and will continue to do so as needed. Unfortunately, some media outlets have noticed the news and mistakenly reported that these purchases will continue to cause rates to drop lower into the summer. However, is that really what it means? No. Bottom line: The Fed's purchase of higher rate coupons will not necessarily help rates to move lower, as their actions do not affect the loans originated at today's low rates. The Problem Is... Many consumers are in situations where they can purchase or even refinance now and save hundreds of dollars a month on their mortgage payments. However, when they hear the media throwing around teases of lower rates ahead, they decide to hold off on making the decision to save, in the hopes of gaining a few more dollars of savings per month if a lower rate came their way. Of course, while they are waiting, rates could turn higher - and this window of opportunity could pass them by entirely. Here is the clincher:  Even if consumers are ultimately able to time the market perfectly and save another few bucks per month, they could still end up losing. That is because while they delayed, they lost the savings each month they could have gained by taking action sooner. In other words, they may have lost hundreds of dollars for every month they waited. So even if they got lucky and obtained the rate they were looking for, it could take years to make up what they lost by waiting. I do not want anyone to miss an opportunity by either waiting or misunderstanding the media headline. Let us talk further on this. Call or email me, and let us discuss what this might mean for you.

Waves of homeowners are rushing to refinance their mortgages. And no wonder: Long-term rates have collapsed to historic lows.  Thirty-year home loans can run as cheap as 5% right now – down from 6.4% as recently as last summer.  By any long-term measure, today's rates are a great deal.  But before you join the party, ask yourself: When does it make sense to refi?  If you are planning to move or even pay off your loan within a year or two, refinancing probably doesn’t make sense because you won't be paying your mortgage long enough for the savings to cover the costs.  On the other hand, in some circumstances, refinancing is pretty much a slam dunk.  If you plan to stay in your home for years, and you are currently in an adjustable-rate mortgage, you should strongly consider a refi. ARM’s can be incredibly unpredictable – the financial equivalent of Russian roulette in today’s economic market, but with multiple bullets. Refinancing into a 30-year fixed-rate loan may not cut your current monthly payments by much, but it gets rid of the risk that those payments may suddenly skyrocket. Generally, if you can earn the costs back within two to three years, and it's a home you're prepared to stay in for much longer than that, it's usually a good thing.  To help you determine whether or not refinancing is a good fiscal decision for you be sure to seek out trusted and respected financial advisor to help you navigate the overall costs, savings and returns before you decide to make any changes.

The drop in mortgage loan limits for conventional financing at the end of 2008 is hurting home sales and trade-up activity in higher price ranges across the country.  Outside of FHA, Fannie Mae and Freddie Mac, mortgages that do not have government backing are still experiencing a credit crunch. Buyers who need jumbo mortgages must pay interest rates that are nearly 2 percentage points higher than conventional financing; as a result, the high-end market is not moving.  All consumers should have access to today’s historically low mortgage interest rates. It’s only fair that all hard-working, tax-paying, successful people who want to purchase a home have equal access to low interest rates regardless of where they live or where they want to buy.  Every segment of the housing market needs a turnaround to spark an overall housing recovery, which will help the economy to begin to recover!

National Association of Realtors

To move the country out of this economic crisis, Congress and the next administration must place significant emphasis on restoring confidence in the housing market.  The housing sector is at the core of the current economic crisis. A renewed, revitalized and robust housing market is essential to generating commerce and helping families build wealth.  To this end, Chairman Barney Frank, D-Mass., on H.R. 384, introduced the TARP Reform and Accountability Act, last week.  The principle focus of the plan is to ensure that the Troubled Asset Relief Program does what it was originally intended to do – end the credit crisis and jumpstart mortgage lending. It is imperative to get TARP back on track by targeting funds for mortgage relief, which will help lower mortgage rates and reduce foreclosures.  Low interest rates are only effective if people can get a loan. Every day even some home buyers with good credit are having trouble getting mortgage loans. We must unclog the housing and financial system; Congress needs to use current TARP dollars to help identify and fix operational issues that are preventing consumers from getting or modifying home loans. These are critical steps that must be undertaken quickly if we are to right our nation’s housing and financial markets.

- National Association of Realtors

I'm often asked if this is a good time to buy a home. Some clients are concerned that home prices may fall further than they have already. They are assuming that the best course of action is to wait for the bottom in the market and then buy. The problem with this approach is that you don't know where the bottom is until you see it in the rear view mirror, meaning until you've missed it!

Home prices are one factor in determining your cost of ownership, but so are interest rates and financing availability. Even though interest rates have gone up in the last six months, they are still near historic lows. Since your monthly mortgage payment is a combination of paying down your principal and paying the interest owed, if home prices come down a little further but interest rates go up, it could cost you even more to service a mortgage on an identical home!

While a home is a major investment, it is also the center of your personal life. It's important to live in a home that reflects your taste and values, yet is within your financial "comfort zone." To that end, it may be more important to lock in today's relatively low interest rates and low home prices, rather than to hope for a further break in prices in the future.

Please give me a call if I can be of any assistance in determining how much home you can afford in today's market.

The Housing and Economic Recovery Act of 2008 was just signed by President Bush with some amazing benefits for first time homebuyers. Call everyone you know who wants to buy their first home (or who hasn't owned one in three years), this is too good to miss - it's a $7,500 tax CREDIT (not deduction but a credit).

If you have not owned a home in three years, you qualify as a first time home buyer. If you buy a home after April 9, 2008 and before July 1, 2009, you qualify for this credit. Call your friends who just bought a home since April 9th and tell them they may take $7,500 off their tax bill if they qualify. It has to be your principal residence, so rentals do not count.

The tax credit is 10% of the cost of the home, up to a maximum of $7,500. This is not an additional deduction that lowers the amount of income to be taxed, it is a tax credit. In other words, you take $7,500 off your tax bill. But there is a catch; the credit you receive now is actually an interest-free loan that must be repaid.

The loan has no interest, and will be paid back over 15 years. You get the credit on your 2008 taxes, but you start paying it back on your 2010 taxes that are due in 2011, so you get at least two years without a payment. You pay back 6.67% of the credit each year, so for a $7,500 credit the payment is $502.50 per year. If you stay put for 15 years, you pay it off with no interest.

What happens if you sell the house? You pay the balance back at the closing. So, you get $7,500 now, and pay the rest of it back if you make money on the sale of your house. What happens if you do not make enough money when you sell your house? They forgive the rest of the debt.

Other restrictions stipulate that you have to buy your first house in three years before July 1, 2009, not have super high income, not use bond financing and buy anywhere in the US.

If you'd like to learn more about this program, please call me!