Whether you feel tired of endless house visits, swamped in legal lingo, or disappointed in a failed deal and ready to give up, take a moment to think about the benefits of homeownership.
The first and the most important is the fact that you will be able to furnish and remodel your home to your hearts desire, turning it into the haven you've always dreamed of. There is also the pride of owning a beautiful property. And each mortgage payment you make brings you closer to full ownership and a free of debt future.
Remodeling and retrofiting will also increase the house's value. Through increased value, you will build up equity and the house will start making money for you.
It's true that since you're thinking of buying the house, selling it is probably the furthest thing on your mind. Still, savvy buyers take into account the resale potential.
Also, you might not be aware of the many tax benefits you'll be enjoying as a homeowner. For more information, feel free to email me with your questions or call me to schedule a meeting.
Having some blemishes on your credit report does not mean that you are banned from ever obtaining a mortgage and purchasing a home. Even these days, with the lending industry having gone through so many problems, there are still lenders that are willing to provide mortgages to individuals with less than perfect credit. Many of these lenders offer programs that not only allow people to buy a home, but also assist them in rebuilding their credit.
Subprime LendersThe first step in getting a mortgage when you have poor credit is to obtain a list of lenders that are willing to work with people in your situation. These lenders are typically called "subprime" lenders and are experienced in working with people who have challenging financial situations. They still exist, though they are working under a fast-changing background of regulations and influences.
Finding a few lenders that are available to work with you and choosing the one that is right for you is a time consuming process, but is a necessary step in the home buying process. Finding the lender first will let you know how much financing you will be able to obtain and will let you know what price range you should be focused on.
Some people use the Internet to search for subprime lenders that are willing to finance their mortgage. You can find sites where you can fill out one mortgage application online which is then submitted to multiple lending agencies. This will increase the chance that one of them will be able to finance the loan.
Factors Impacting ApprovalThe approval for the mortgage is based on many factors and not all financing companies are willing to accept all types of mortgage application. Your actual credit score will still play a big role in whether you are approved for financing or not, but the lenders will be willing to take a chance on a much lower credit score than many traditional lenders will be.
Interest Rate ConsiderationsMortgages approved for individuals with damaged or bad credit will typically have higher interest rates than mortgages for individuals with good credit. The higher your credit score, the better interest rate you will receive on your mortgage. Although paying a high interest rate for your mortgage will not make you happy immediately, using the mortgage to repair your credit will get you a better interest rate when you decide to refinance your mortgage down the road. The important thing to realize is that the responsibility of making a deal you can live with, and then keeping up with your obligations under the loan, rests with you. Then you will have the home, the financing, and the interest rate that you desire.
This article was provided by Automated Homefinder of Colorado -- a Boulder real estate company.
Birgit Sandoval is trying to sell six three-family homes in Boston.
To draw buyers, she is offering either to pay closing costs or help reduce a purchaser’s mortgage interest rates.
“The market is slow. Properties are not moving, or they are moving but much slower. The competition is stiff. There are a lot of properties on the market. I’m trying to be creative with selling my properties,” said Sandoval, a Jamaica Plain resident who’s been a landlord for 14 years.
The housing slump and the credit crunch are pushing more home sellers to think like Sandoval.
Sellers either are offering money to temporarily lower mortgage interest rates or full or partial financing to buyers who can’t obtain a mortgage loan. Local brokers say seller financing has become more popular because of the tougher lending environment.
“It is an extremely important part of the marketplace today,” said Richard Cahill, president of Norwell-based Jack Conway & Co.
Since buyers have a larger pool of homes to choose from and builders are offering a variety of perks that sellers can’t, some homeowners are using seller financing to entice buyers. Seller financing also can help borrowers who don’t have a strong credit history and can’t obtain an affordable loan.
Seller financing takes on various forms.
Instead of slashing asking prices, sellers might find it more appealing to “buy down” points, which can cost significantly less than a hefty price reduction. In a buy-down, a seller will place a few thousand dollars into an escrow account attached to the buyer’s mortgage, which cuts the interest rate a buyer has to pay for a fixed period.
“The mortgage buy-down [is something] we’re seeing more and more of, and especially when the seller is saying, ‘I can’t come down in price,’” said Nelson Zide, senior vice president of Whitinsville-based ERA Key Realty Services.
Dropping a home price by a small amount won’t attract a new crop of buyers, added Zide, but an interest rate buy-down could help get the attention of a few more home seekers.
One of the most common interest-rate buy-downs reduces a buyer’s actual interest rate by 2 percent in the first year of the loan and 1 percent in the second. Typically, a seller provides 1 percent of the full selling price for each point. A point is equal to 1 percent of the value of the loan. So if the selling price is $300,000, a seller has to put down $3,000 per point.
The lower interest rate can save buyers thousands on monthly mortgage payments. It also can be a strong incentive for buyers at a time when lenders have raised credit score requirements for loans with the most favorable interest rates and increased other fees.
“Realtors want to cut the [asking] price because they want people to get into the front door. The problem is, you get people into the front door but it doesn’t help them qualify for a loan if they’re marginal. Sometimes it’s best to offer two options based on the buyer and their credit circumstance,” Sandoval said.
The buy-downs have become very popular, according to Mikki Zeitouni, an agent at Gibson Sotheby’s International in Westwood. “A lot of brokers are doing that in our office now,” she said.
Jack Conway & Co. has handled at least a dozen transactions in the last month where the seller offered some type of financing, Cahill noted.
Cahill said the rate buy-downs can be particularly attractive to a first-time buyer who is short on cash and is looking at several homes with similar price tags. A seller who is offering financing can help the property “stand out,” he explained.
‘A Good Situation’
In Middlesex County, there are 13 properties listed for sale in which seller financing is available, according to Lexington-based broker Judy Moore, who is regional vice president of the National Association of Realtors.
“Seller financing has certainly been around for a long time,” said Moore. “We were dealing with it in the 1980s. It was a way a buyer could bridge a gap between what the seller wanted and what the buyer could get a mortgage for.”
Seller financing was common 20 to 25 years ago, when double-digit interest rates were challenging.
But Moore said seller financing disappeared for years when the housing market was strong and buyers had no problems with financing.
“In a good market, you don’t see [seller financing] at all,” she said.
In addition to interest-rate buy-downs, Moore said sellers can provide full or partial financing. In a full financing situation, a buyer can bypass a conventional lender and instead pay the seller monthly mortgage payments.
Sellers who own their home outright and generally don’t need the money from the home sale to pay off mortgage debt or buy another property are more willing to provide that option.
In other cases, sellers can provide a second mortgage to help buyers fill in a financing gap. “It’s one way buyers have been able to afford more than the bank will lend them,” Moore explained.
But sellers have to notify the first mortgage holder. “They want to make sure that their position is not threatened and the value of property isn’t devalued because of the second mortgage,” Moore said.
Seller financing can be beneficial for seller and buyers, according to industry leaders. Buyers can avoid loan origination fees and points, and first-time buyers who can’t qualify for a mortgage can have an opportunity to buy a home and build up equity.
Sellers, on the other hand, can get their property sold and reap financial and tax benefits as well. A seller likely will earn more from the interest rate that is being charged on the loan than from a traditional savings account. The seller also can avoid capital gains taxes because instead of receiving one large sum, he will be receiving smaller payments.
“It could really be a good situation all around if the parties are ethical and they are following the proper steps. They’ve had good legal advice and they’ve followed through on all the agreements,” Moore said.
But real estate experts say such arrangements can include risks.
“Certainly with the subprime market and the credit crunch, seller financing is an attractive way to get around that problem that the perfect borrower may face,” said Sami Baghdady, an Arlington-based attorney who is president of the Real Estate Bar Association.
But Baghdady said sellers should be careful to review buyer’s credit history and employment. “The seller doesn’t obviously want to be in a situation where they have to foreclose on the buyer in a few years,’ he said.
Baghdady said he would advise clients to require a significant down payment – as much as 20 percent – because property values are not appreciated. And he recommends that sellers take out a mortgage on the house.
At the closing, sellers should collect the down payment and give the buyer the deed. The buyer should then sign a promissory note for what’s owed. “So if a borrower didn’t pay, the seller would be able to foreclose,” Baghdady said.
Buyers also should be cautious, Moore said, because the seller retains the property title. So if a seller still has any outstanding financing on the property, the buyer can be at risk of losing the home if the seller doesn’t pay the debt.
“You want to make sure you have a reputable seller,” Moore said.
RISMEDIA, Dec. 11, 2007-Existing-home sales are projected to trend up in 2008, with pending home sales showing a slight near-term rise, according to the latest forecast by the National Association of Realtors (R). However, a recovery for new-home sales is unlikely before 2009.
Lawrence Yun, NAR chief economist, said the worst part of the credit crunch has already worked its way through the data. “The unusual mortgage disruptions that peaked in August were clearly seen in lower home sales that were finalized in September and October, so the market was underperforming,” he said. “Now that mortgage conditions have improved, some postponed activity should turn up in existing-home sales over the next couple of months, and I expect sales at fairly stable to slightly higher levels.”
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in October, increased 0.6% to an index of 87.2 from an upwardly revised reading of 86.7 in September. It was the second consecutive monthly gain, but remained 18.4% below the October 2006 index of 106.8. “The broad trend over the coming year will be a gradual rise in existing-home sales, but because sales are exceptionally low in the final months of 2007, total sales for 2008 will be only modestly higher than 2007,” Yun said.
The PHSI in the Northeast jumped 16.0% in October to 80.6 but is 11.1% below a year ago. In the West, the index rose 8.4% to 87.3 but is 16.9% lower than October 2006. The index in the Midwest slipped 1.4% in October to 85.5 and is 11.7% below a year ago. In the South, the index dropped 7.8% in October to 91.6 and is 25.3% below October 2006.
“The improvement in the Northeast reaffirms a trend apparent for some months now that shows signs of recovery, noteworthy because that was the first region to slump, and the gain in the West indicates some easing of interest rates for jumbo loans,” Yun said. “Lawmakers need to understand that raising the loan limits on FHA and GSE-backed conventional loans will markedly improve mortgage availability.”
Existing-home sales are likely to total 5.67 million this year, the fifth highest on record, rising to 5.70 million in 2008, in contrast with 6.48 million in 2006. Existing-home prices should be down 1.9% to a median of $217,600 for all of 2007, and then rise 0.3% to $218,300 in 2008.
“Home price growth in the vast affordable midsection of America will help raise the national median existing-home price slightly in 2008. I then expect price appreciation to return to more normal patterns in 2009, perhaps rising one or two percentage points above the rate of inflation,” Yun said.
“Even with a modest decline in the national aggregate price this year, it’s important to keep in mind that nearly two-thirds of the metro areas in the U.S. are showing price increases,” he said. “The apparent disparity results from fewer sales in high-cost markets, so a change in the mix of sales is dragging down the national median home price.”
Areas showing healthy price gains include disparate markets such as Gary-Hammond, Ind.; Binghamton, N.Y.; Corpus Christi, Texas; and Spokane, Wash. “We can’t emphasis enough how much local conditions vary, even within a given area, so it’s important for consumers to make decisions based on local market conditions.”
New-home sales are forecast at 788,000 this year and 693,000 in 2008, down from 1.05 million 2006; no sustained improvement is seen for new homes until 2009. Because builders have correctly adjusted production, housing starts, including multifamily units, will probably total 1.36 million this year and 1.16 million in 2008, down from 1.80 million last year. The median new-home price is projected to drop 3.0% to $239,100 for 2007, and then decline another 0.2% to $236,600 in 2008.
The 30-year fixed-rate mortgage is estimated to rise slowly to the 6.4% range by the end of 2008, with additional cuts in the Fed funds rate lowering short-term interest rates.
Growth in the U.S. gross domestic product (GDP) should be 2.1% in 2007, down from a 2.9% growth rate last year; GDP growth is forecast to improve to 2.4% in 2008.
The unemployment rate is likely to average 4.6% for 2007, unchanged from last year, but rise to 5.0% in 2008. Inflation, as measured by the Consumer Price Index, will probably be 2.8% this year and 2.7% in 2008, down from 3.2% in 2006. Inflation-adjusted disposable personal income is estimated to grow 3.1% this year, the same as in 2006, and then grow 2.2% next year.
For more information, visit http://www.Realtor.org.
RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.
RISMEDIA, Dec. 7, 2007-The Mortgage Bankers Association (MBA) released its Weekly Mortgage Applications Survey for the week ending November 30, 2007. The Market Composite Index, a measure of mortgage loan application volume, was 791.8, an increase of 22.5% on a seasonally adjusted basis from 646.3 one week earlier. On an unadjusted basis, the Index increased 51.5% compared with the previous week-which was a shortened week due to the Thanksgiving holiday-and was up 24.2% compared with the same week one year earlier. The changes calculated above are based on revised numbers for the previous reporting period.
The Refinance Index increased 31.9% to 2761.3 from 2093.0 the previous week and the seasonally adjusted Purchase Index increased 15.2% to 464.3 from 403.2 one week earlier. On an unadjusted basis, the Purchase Index increased 37.3% to 373.5 from 272.1 the previous week. The seasonally adjusted Conventional Index increased 21.9% to 1138.4 from 933.5 the previous week, and the seasonally adjusted Government Index increased 27.8% to 214.0 from 167.4 the previous week. The changes calculated above are based on revised numbers for the previous reporting period.
Due to an error by one of the larger reporting companies for the Thanksgiving-shortened week ending November 23, the indices reported in the November 28, 2007 press release have been revised. The seasonally adjusted market composite index for that week was 646.3 rather than the 652.5 originally reported. The refinance index was 2093.0 rather than the 1862.9 originally reported and the seasonally adjusted purchase index was 403.2 rather than the 450.1 originally reported.
The four week moving average for the seasonally adjusted Market Index is up 4.5% to 706.8 from 676.5. The four week moving average is up 3.1% to 431.0 from 418.2 for the Purchase Index, while this average is up 6.7% to 2342.5 from 2196.2 for the Refinance Index.
The refinance share of mortgage activity increased to 56.0% of total applications from 51.4% the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 11.6 from 14.6% of total applications from the previous week.
The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.82% from 6.09%, with points unchanged at 1.07 (including the origination fee) for 80% loan-to-value (LTV) ratio loans.
The average contract interest rate for 15-year fixed-rate mortgages decreased to 5.38% from 5.69%, with points decreasing to 1.12 from 1.13 (including the origination fee) for 80% LTV loans.
The average contract interest rate for one-year ARMs increased to 6.28% from 6.24%, with points increasing to 0.99 from 0.96 (including the origination fee) for 80% LTV loans.
This survey covers approximately 50% of all U.S. retail residential mortgage applications, and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks and thrifts. Base period and value for all indexes is March 16, 1990=100.
For more information, visit www.mortgagebankers.org.
You might not have decided yet firmly to buy a home. Maybe you're searching for more information about the process and evaluating your options. Surely wondering if this is the right time.
And truly, the first question on the mind of many buyers, whether first time or in their second or third house, is: When is the best time to buy? How can I find the best home at the best price? Unfortunately, it is almost impossible to predict the real estate market so you need to take into consideration other factors.
In my experience, the best time to buy is when you have the necessary finances, when you find the home you want at an affordable price, and when you buy for long term. Buying for a short period is risky, because if the market slows down, you could lose money.
Buying a new home is always an difficult time, a personal transaction, so it's best to start as prepared as possible: financially, psychologically and emotionally.
For a free market analysis, call or email me. We could discuss the current market conditions and your options in buying a home. I am here to make your life easier.
The first step toward your new home is finding a real estate agent to help you. Are you ready to make that first step?
Sincerely,Adam Bailey
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