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Mortgage Rates Continue To Drop, Individuals Still On The Sidelines
Published
by
Heindrick
on December 14, 2008
in New Home loan
. 0 Comments

 For the sixth week in a row, mortgage rates on 30 year fixed loans improved as interest rates continued to fall below the 5.5% marker. About two months ago in October, homeowners were looking at about 6.5% for a similar 30 year fixed mortgage. Many are wondering if lower mortgage rates will be the cure for this struggling housing market, but over the past few days, and interesting effect has occurred. As homeowners welcome these lower mortgage rates, individuals are actually staying on the sideline and putting their mortgage plans on hold just in case rates drop even further.

One issue that has been heavily speculated is the possibility of conforming loans from Fannie and Freddie dropping below the 5% mark. This move would certainly stir up mortgage activity, but the recent anticipation has ironically slowed down current mortgage activity. 

As potential homebuyers sit on the edge of their seats, waiting for these heavily discounted mortgage rates, many have put ongoing deals on hold in hopes of getting a better deal. Although many might be willing to wait a week to see if mortgage rates drop by almost a full percentage point, it’s important that you don’t lose sight of time and the deal in front of you.

Then there’s also news of a 4% mortgage rate from James Lockhart himself-of course, no specific timeline was given. Although nothing has happened yet, the anticipation is torturing many homeowners who are currently on the fence with their mortgage decisions. One issue worth noting is that it is currently unclear whether these lowered mortgage rates will be offered strictly to new purchases, or to both purchases and existing mortgage refinances. Purchases below $417,000 should see the most benefit as they meet the confirming guidelines of Fannie and Freddie. With homebuilders and banks stuck with large inventory of homes, the incentive to discount purchase interest rates has taken top priority.

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Home Equity Loans

Mortgage Tip - Keep An Eye On Unemployment Trends Around Your Home
Published
by
Heindrick
on December 11, 2008
in New Home loan
. 1 Comment

So far, many of the mortgage problems that we’ve been facing have been related to weak lending and toxic mortgages. Unfortunately, one of the issues emerging as the new catalyst for housing troubles is the rising unemployment rates.

Last week, the U.S. Labor Department released its monthly report showing “the worst monthly job losses in a generation“. One of the serious concerns is that these unemployment rates could trigger the next foreclosure wave to occur.

California Unemployment Rates - 8.2 Percent in October
In California, we’re facing two serious issues. First of all, the statewide unemployment rate rose to 8.2 percent last month, compared to last year’s 5.4 percent. Secondly, California continues to have serious budget issues which threaten the future outlook of many state employees.

Inside the report, the jobless rates for college-educated individuals rose from 2.2 percent to 3.1 percent. In addition, the jobless rate for individuals with technical backgrounds also rose from 3.3 percent to 5.5 percent. In a SacBee column, the chief economist for the Mortgage Bankers Association correctly noted that these are the folks most likely to own a home.

Home Buying Tip for Bargain Hunters
For those of you considering a home in this market, I’m sure that most of you have shifted to some degree of the bargain-hunting mode. One of the serious concerns for these bargain hunters has been timing the market and finding the best deals on the surplus of discounted homes. With these current unemployment rates and future expectations, it’s a worthwhile consideration to examine the unemployment trends surrounding your home’s area.

As more and more of these Prime and Alt-A mortgage holders face problems, it’s not just the low-income housing neighborhoods that will face more foreclosures. As for timing the market, be wary of any neighborhoods that seemed to have leveled off. With the recession expected to get worse, it wouldn’t be surprising if there was a momentary pause as we shift from troubled toxic mortgages to more serious issues involving the problems of unemployment.

On a side note, keep in mind that today’s mortgage lenders will be looking for job stability. In addition to stricter mortgage guidelines, prospective homeowners need to ensure their employment history remains in tact. In general, most mortgage lenders like to see you with your current employer for at least 2 years; and the same goes for your income. If you’ve changed jobs within the last two years or have had inconsistent income, reinforcing your other mortgage qualifications would be a good move. Compensating factors such as the size of your down payment or the amount of assets you hold could help convince your mortgage lender that you are credit worthy.

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Home Equity Loans

Pending Home Sales Decline, Analysts Interpret Data as Semi-Stable
Published
by
Heindrick
on December 10, 2008
in New Home loan
. 0 Comments

 National Index of Pending Home Sales Numbers Decline
This Tuesday, the National Association of Realtors released their report of pending home sales statistics for October. According to the index, the numbers posted a .7% decline compared to September’s results, and a 1% decline compared to last year’s October.

Even with the slight decline in home sales activity, analysts commented that the results were actually “remarkably stable…despite the turmoil in the economy”.  Remember, just a few months ago in August, there was a momentary spike in activity as mortgage conditions slightly improved. With speculation of mortgage interest rate deductions, we may just see another spike in home sales activity quite soon.

California, Western Regions, and Select Areas Post Positive Numbers
Despite the decline in overall statistics, a few areas posted positive numbers in this October’s report. The Western Region actually showed a 17.4% improvement compared to the activity levels of last October. Specifically, the association made note of these healthy gains in areas such as California, Las Vegas, and also Florida.

While the numbers may show stability and healthy gains, it’s also important to remember what’s driving these activity levels. In parts of California for example, we’re home to some of the steepest price declines throughout the nation. As a result, it’s no wonder that bargain hunters and investors are coming from every angle to pick up some of these properties throughout California. So while these numbers show positive gains in terms of sales transactions and activity, it’s also worth noting the correlation between these “gains” and the hardest-hit markets in terms of price declines.

The Full Report from the National Association of Realtors can be seen here.

 ”¹The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.”

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Home Equity Loans

Could Lower Mortgage Rates Be In the Future For California’s Homeowners?
Published
by
Heindrick
on December 8, 2008
in New Home loan
. 0 Comments

 Lower 30 Year Fixed Rates
If the Treasury Department follows through on expectations to buy additional mortgage backed securities from Fannie and Freddie, analysts are expecting mortgage rates to drop a full percentage point. This would mean that the interest rate for a 30 year fixed mortgage could near the 4.5 percent levels - a possibility that would certainly increase mortgage loan activity.

The anticipation is based on the idea that the Treasury is hoping to restore confidence back in mortgage backed securities, which would lead to the plunge in mortgage interest rates. As banks would feel more confident in making more loans, more consumers would also reap the benefits of the government’s help. If you’ve been following the recent $700 billion government bailout, you’ll understand why so many consumers have been outraged that most of the help has been directed to the financial companies.

California Homes and Jumbo Financing
For residents and potential homeowners in California, one thing to remember is that not everyone will be able to reap the benefits. Due to Fannie and Freddie’s loan limits, the two numbers to keep in mind are $417,000 and $625,500. These will be the conforming and jumbo loan limit restrictions during 2009 respectively. Currently, the max loan limit may still be $729,750 for some lenders, but that will soon expire on December 31st. These loan limits determine whether or not your mortgage can be guaranteed by Fannie and Freddie. For those above the limits, it may be harder to find financing at such discounted mortgage rates.

A Word of Caution
I know 4.5 percent mortgage rates will be enticing, but it’s also important to make sure you don’t get overexcited. While the rate and payment savings would be hard to ignore, a significant problem that we are seeing today are people stuck with homes that couldn’t afford in the first place. 

In general however, lower mortgage rates will be a welcomed change as it would help stir up activity in our slumping housing economy.  The decision is expected to come out soon, and many homeowners and potential buyers have already held back on their housing decisions. The change won’t cure market overnights, but it will bring more of the government “bailout” directly to Main Street - a move that’s been long awaited by anxious consumers.

If you need more information regarding some of these interest rate changes, try out our mortgage broker directory to find an agent in your area.

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Home Equity Loans

Is Housing Really More Affordable in California? Or Are We Just Too Familiar With Prices From The “Bubble” Years?
Published
by
Heindrick
on November 26, 2008
in New Home loan
. 0 Comments

Is Now The Right Time To Buy A Home?
As sliding home values seem to be the trend in California, many potential homebuyers are wondering if now is the right time to buy. To be honest, if you ask a Realtor or loan agent that question, I’m sure you’ll get a few “It’s always a great time to buy!” cookie-cutter responses. With median home prices in California dropping almost 30% in some areas, it’s probably a better question to ask if housing is actually becoming more affordable.

Homes Are More Affordable, Compared to the Bubble Years
With the holiday shopping season right around the corner, think about the last retail “sale” you saw claiming huge discounts and spectacular savings. You know what I’m talking about–the big and bold 25 to 50 percent off signs hung from every storefront. Unfortunately, some of these huge “discounts” and “sales” are based off the retailers pumped up prices and MSRP.

To some degree, the same can be said of housing within California. You look at all the media and housing reports claiming discounted homes, but if you think about what prices these discounts are based off, you may be surprised at what’s considered a “discount”. By now, most have agreed that home prices in the past years, the bubble years, were supported by lax lending and exotic mortgages. So as home prices keep falling, these huge discounts can be claimed because our reference price are those from the inflated bubble years.

Impulse Shopping and Buyer Emotion
Just like the big discount signs hanging from retailers in the holiday seasons, these housing “discounts” have drawn in their share of interested buyers. While there are definitely great bargain homes to be found in California, I think it’s important to stay calm and avoid this excited buying impulse.

Even If It’s Cheap, Can You Afford it?
Although falling prices means cheaper homes, cheaper homes don’t guarantee affordability for potential home buyers. Even if prices are coming down, buyers should consider how they will be able to pay for these discount homes. With mortgage lending tighter compared to recent years, consumers should make sure their debt to income ratios and qualifying assets meet lender’s qualifications. While the discounts may be enticing, the bottom line remains whether or not you can actually afford to pay for the home.

If you’re considering one of these discount homes, don’t just focus on the “discount” itself. Do a bit of research on the surrounding area, analyze the local housing trends, and compare your “discount” home with others in the area.

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Home Equity Loans

California Mortgage Rate Market Update
Published
by
Heindrick
on November 19, 2008
in New Home loan
. 1 Comment

Steepest Price Declines Fall in California Cities
According to the National Association of Realtors, the median price for homes in the United States dropped an average of nine percent from last year. In addition, a third of all home transactions involved homes with mortgages in default.  Unfortunately, three California cities took the spotlight as having the worst decline nationwide. San Bernardino, Sacramento, and San Diego all suffered losses greater than 35% in value.

Bargain Hunters Eyeing the Worst Hit Markets
With foreclosures and mortgage defaults taking its toll on U.S. home prices, bargain hunters have wasted no time. Particularly in the hardest hit markets, some realtors have started seeing multiple offers on such properties. Multiple offers would usually be an indication of market strength and give hope to a “bottoming” of the housing market. However, analysts agree that while mortgages have suffered because of toxic loans and risky lending, the problem of unemployment and the economic downturn will continue to take its toll on home prices.

For those who are curious about these bargain homes, buyers have been exploring the routes of short-sale properties, foreclosures, and REOs in an attempt to purchase below market valued properties. As for financing, FHA has recently filled the credit void, while some bargain hunters or investors save enough capital for larger down payments.

Mortgage Applications For Residential Home Loans Decrease
According to the Mortgage Bankers Association application index, home loan applications for purchase and refinances fell 6.2 percent. The individual gauge for purchases fell 13 percent, while their refinancing gauge rose 2.6 percent. This translates to a 49.9% of total applications seeking a refinance, compared to the last statistic of 45.5%.  Despite a decline in recent mortgage rates, most individuals are simply unsure of the housing markets right now. In addition to their studies, home builder’s confidence fell to a record low, while building permits fell to its lowest levels since 1981.

It looks like it’s going to be a pretty tough Christmas, but one thing worth pointing out is the popularity of these bargain homes. It’s no secret that prices have been falling here in California, and many are taking advantage instead of sitting on the sidelines. If you were in the market for a home, now could be the most affordable time to buy. Of course, once you decide to step foot in this market, you’ll see why people are going crazy trying to time this “bottom”. The best thing you can do is make sure your finances are in order so that you’ll be ready when that time does come.

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Home Equity Loans

Mortgage Reform Finally On Its Way – Now What?
Published
by
Heindrick
on November 16, 2008
in New Home loan
. 0 Comments

Near the end of October, California legislators demanded mortgage reform from Governor Schwarzenegger.  While bailouts and loan modifications help solve the housing crisis of today, most agreed that mortgage reform would be necessary to prevent another mess in the future.  Recently, Steve Preston of the Department of Housing and Urban Development shed some light on the issue by reforming a key document of the mortgage process.

A New Good Faith Estimate
Individuals looking for a new home or to refinance their existing mortgage can expect to see changes in the good faith estimate; changes that would help eliminate confusion and explain the mortgage details clearer. Currently, borrowers must deal with different lenders having different good faith estimate documents. While some already have trouble understanding the mortgage terms themselves, different sets of documents make it even more difficult to find the best deal. Sometimes it can be hard enough avoiding the worst deal! In response, HUD has developed a standard three page good faith estimate, in hopes of establishing a universal and understandable mortgage summary.

Sneek a Peek at the new 3 page Good Faith Estimate

Within the document, mortgage shoppers can find key mortgage details such as closing costs summary, prepayment penalty disclosure, fixed or adjustable interest rates, and other terms of the loan. In addition, HUD has attempted to simplify the details of how mortgage brokers often get paid by the lender in the form of yield spread premium (YSP).

Don’t Expect To See Changes Till January 1st 2010

Most are welcoming this change as it helps to level the playing field in the consumer’s best interest. However, it’ll be about a year before this new standard is being implemented. According to HUD, lenders need this time to train and update operating procedures. In the meantime, proponents of mortgage reform see this change as only the beginning.

Take the Initiative and Protect Yourself
The goal of mortgage reform is to inform consumers and help avoid unscrupulous lending. Unfortunately, deceptive individuals will always be around and reform like this always seems one step behind. The truth is, you are the best source of protection when it comes down to securing the best mortgage. As protective as the laws may be and as honest as your loan agent may seem, the truth is no one will care more about your finances more than yourself.

While changes like these make the details of a mortgage more obvious and transparent, exploring these details on your own do much more to protect you.  To get you started, here are three steps you can take to avoid getting taken advantage of during the mortgage process.

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Home Equity Loans

Credit Crisis Survival Tip – Give Your Mortgage Lenders Stronger Appraisals
Published
by
Heindrick
on November 14, 2008
in New Home loan
. 1 Comment

How much do you think your home is worth? According to a survey performed by Zillow last month, over 62 percent of Americans mistakenly thought their home’s value increased or remained the same when in fact the opposite was true. Interestingly, the recent credit crunch has shown mortgage lenders are having just as much trouble placing a value on your home. In response, stronger appraisals are being required to ensure higher quality mortgages and more accurate home values.

Declining Home Values
In California, home values have been plunging across zip codes throughout the state. To help address this problem, lenders want stronger appraisals with more recent comparable sales. You can’t expect to qualify if you can’t prove your credibility; in this case, lenders want to see how mortgage worthy your home truly is.

3 Steps to A Stronger Appraisal
1. Realistic Comps. If you’re talking about a three bedroom-two bath 1600 SqFt home, lenders won’t care about the five bedroom-four bath 2300 SqFt home two blocks down. Lenders consider comparable sales of homes that are similar. If the homes aren’t similar, they’re not realistic and they’re not real “comps”.

2. Fresh Comps. Who cares if the house down the street sold for $X amount 11 months ago; this market is a financial roller coaster ride and lenders are just as scared as you. Foreclosures, short sales, and REOs have shown how sensitive home prices can be and today’s lenders cannot afford to make the same mistakes. Unfortunately, the same goes for homeowners. Before this mortgage crisis, lenders would sometimes accept appraisals with comps dating back as far as 12 months. Nowadays, you’d better tell your appraiser to include comps within 90 days.

3. Multiple Comps. Strength in Numbers. So you’ve got realistic comps and they’re fresh? Great! Now make sure you have more than just one. Lenders love stability and the more comps you provide, the more solid your appraisal appears. Your broker or loan agent can find out how many comps the lender would like to see, but it is ultimately your responsibility to press the appraiser to meet these requirements.

Realistically, most of these suggestions may seem out of your hands at first. I mean, you can’t magically create stronger comps and your appraiser is likely doing all he can to give you the strongest appraisal. But, keep these suggestions in mind because this is what mortgage lenders are keeping a close eye on nowadays. Home values are still shaky and lenders are just looking for some form of assurance - give them that assurance with stronger appraisals.

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Home Equity Loans

Changes Coming in 2009 For Mortgages in California
Published
by
Heindrick
on November 11, 2008
in New Home loan
. 0 Comments

Aside from the new Obama Presidency, there are going to be a number of changes made in the mortgage industry coming in 2009; many of which will already start affecting potential homeowners and borrowers. In the upcoming weeks, you’ll start to see lenders preemptively limiting loan guidelines to prepare for the changes to come next year. Since the average mortgage loan process ranges anywhere from 3-6 weeks, you can expect lenders to make the necessary changes to ensure these loans fund in time before the changes are made. In particular, the two changes worth mentioning are the increase of larger down payments requirements and expiration of increased loan limits here in California.

Increased Loan Limits To Expire - Conventional and FHA Mortgages
The temporary increase of loan limits to $729,750 has been welcomed here in California because of our higher media home prices, especially in regions such as the Bay Area and parts of Southern California. In particular, these higher loan limits allowed people to finance more of their home without having to suffer the penalty of typical “jumbo” loans.  By 2009, the highest loan limit for California backed by the government will be $625,500 in specific high cost areas. The same will go for FHA insured loans, with the high cost limit set at $625,500.

Although the changes will be made nationwide, residents of California should pay special attention to these changing mortgage limits.  Even with declining home values, it can still be quite easy to surpass this cap of $625,500. If you happen to exceed these limits, you’ll face a few troubling issues. First of all, you’ll have a harder time securing a home loan in general since your loan is simply beyond the government limitations. More importantly, when you do find a loan, you’ll be paying more on your monthly mortgage payment. Lenders place greater risk on these jumbo loans and typically increase the mortgage rate to make up for this risk. Quite soon you may find yourself paying in the range of 7% for a 30 year fixed loan where you might have only paid 6% currently.

FHA Larger Down Payments Requirement
Another change that we can expect is the increase of FHA down payment requirements to 3.5% as opposed to the current 3%. The difference of .5% may be marginal, but it is another thing to keep in mind. You may find lenders expecting 3.5% from potential homebuyers quite soon as they factor in the time it takes to find a home.  Recently, the FHA has also done away with their down payment assistance programs as analysts concluded these loans were more likely to default.

Dropping home prices and already tight guidelines make some of these changes seem less of a big deal, but for those looking to squeeze by, now may be the time to get their foot into the door.  There are likely to be even more changes expected by next year, but for the time being these two were the most anticipated changes for 2009. For more information, you can find a lender in your area by using our mortgage broker and lender directory.

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Home Equity Loans

California Mortgage Survival Guide - Who’s Left Out There?
Published
by
Heindrick
on November 3, 2008
in New Home loan
. 2 Comments

In an October 2008 Senior Loan Officer Opinion Survey conducted by the Federal Reserve Board, about 70 percent of the domestic responders agreed that they had tightened lending standards on prime mortgages. For nontraditional mortgage loans, about 90 percent agreed that they had tightened up their lending standards on these types of loans.

In a recent post of mine, a commenter responded to the jump in California home sales activity and asked “How are these people getting financed?” Today, I’ll take a look at the alternative routes many individuals have resorted to given this current credit slowdown. Most of these alternatives are nothing new or exotic; they have been set in place for awhile, each displaying their own strengths during this tough time.

A Word of Caution - Please Read Before Continuing
First of all, if you’re not truly qualified, forget about it. While low down payment and low credit financing are still available, the days of stated income and misrepresentation are over. If you are looking to finance a home, take a look at yourself before you go out looking for lenders. Make sure your credit is in tact and that your debt to income ratios will make sense. Alternative financing is available, but many lenders have learned from their past mistakes and are unlikely to make them again.

New Home Loans - Think FHA
FHA has emerged quite strongly ever since the credit slowdown, picking up a significant amount of slack left by other lenders. Especially here in California, with the changes in FHA’s loan limits; the modernization of FHA has made it a possible route for mortgage financing. FHA still offers low down payment options and low credit financing; as low as 3% down payments and 580 FICO scores. The difference is that FHA is mostly traditional 30 year fixed mortgages and pays heavy attention to your debt to income ratios. There are exceptions to each of these cases, but FHAs manual underwriters will look for compensating factors to make up for it.

Want to Refinance - Check out Mortgage Modifications First
A popular route that many have discovered is the idea of modifying your existing mortgage rather than refinancing into a new loan. With refinances harder to come by due to tightening mortgage standards and declining home values, mortgage modification provides a balance point for borrowers and lenders. While more lenders are accepting the notion of mortgage modifications, the process is still a bit uncharted and can take a significant amount of time. However, loan modifications can allow changes to interest rates or even principal balances. Each lender will have their own policy, so it is best to check with your specific lender when exploring loan modifications.

Alternative Financing - Explore Credit Unions
Credit Unions have been around for a long time, and with so many brand name banks having trouble issuing loans–some credit unions have been able to fill the void. These nonprofit or not for profit organizations have suffered right alongside many banks, but a lot still show strength since many avoided the subprime mess. An article by the Daily Bulletin stated that credit unions were showing stability in this crisis and are offering opportunities to attract new members with their fixed rate mortgages. In California, there are over 500 credit unions in the League of California Homeowners serving over 10 million people.

It’s definitely a tougher time looking for financing, but alternative options are still around us. For even more options, use our mortgage directory to find a lender in your area.

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Heindrick So

About the Author:

Heindrick So is a mortgage consultant at a local Bay Area Real Estate Brokerage - specializing in residential wholesale lending.



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