Maybe not the confidence-instilling phrase you want to hear from the guy you're trusting to finance the largest asset you'll likely ever own, representing roughly 70% of our net worth (on average). But in the current topsy-turvy financial market where the next big announcement is anybody's guess, it really is just that.
Instead of focusing on what I don't know, let's consider what I do:
"Now" continues to be an incredibly smart time to buy a home. Many of the reasons are real estate related and I'll let you talk to your Real Estate professional for those points while I touch on the financial reasons:
For first-time home buyers, there are down payment assistance programs; a $7,500 tax credit; an opportunity to contribute substantially toward retirement. And there are a lot of homes to choose from.
For move-up buyers, there are HUGE benefits to buying up in a down market -- I did say I was going to stick to the finance questions but this one is such a huge benefit it at least deserves honorable mention. And there are a lot of homes to choose from.
Contrary to many of the messages in the media, there are plenty of mortgage lenders out there! And, surprise surprise, they want to make new loans, that's what they do! They're being more cautious these days, justifiably so with the increase in loan defaults. That may translate into borrowers putting more focus on their own credit history, spending habits, and maintaining a comfortable "debt-to-income ratio" and less focus on finding out the absolute maximum they can qualify for, but maybe that's not such a bad thing...
The long and short of it is that there are good loans to be made, there are people who want to buy homes, and there are people who want to sell homes so they can also buy. Our local economy is healthy, our housing market is stable. Let's keep the national statistics in perspective and take the local headlines in stride, and rely on trusted professionals in real estate, lending, accounting, financial and retirement planning to give us the real story.
If you don't have a professional in one of those areas, ask another professional who they would recommend, because our referrals carry our names, too.
By the way -- it really is the best time in many, many years to buy a home!
Showing posts with label mortgage market. Show all posts
Showing posts with label mortgage market. Show all posts
Tuesday, September 23, 2008
Wednesday, July 30, 2008
The Housing and Economic Recovery Act of 2008 (queue the music: Dun Dun DUN!)
On Wednesday morning, President Bush signed into law what has been deemed as the most significant housing-related legislation we've seen in more than a generation. Sounds big, and let me tell you -- it is. In fact, the 600+page bill was short only on brevity.
Here are a few highlights that will likely affect consumers most directly, compiled from press releases by the National Association of Realtors (http://www.realtor.org) and the Mortgage Bankers Association (http://www.mbaa.org).
Hey, did I mention the bill was over 600 pages?
Highlights:
FHA to the (Foreclosure) Rescue! FHA would insurance borrowers with problematic subprime loans. Borrowers would share future appreciation with FHA but they get a 30year fixed FHA loan and get to keep their house! May be a good alternative to foreclosure.
FHA: Permanent increase of the FHA loan limit. My estimation is $522K for the Seattle/Bellevue/Everett MSA -- that is not confirmed but if I'm right I get to say 'I told you so.' Would become effective January 1st, 2009.
The minimum down payment requirement for FHA is bumped up .5% to 3.5% but it is not clear to me when this would become effective (hopefully not retroactive 10 years ago when I bought me first home on an FHA loan).
FHA Seller-funded down payment assistance (often referred to as Nehemiah, one of the 3rd party facilitators) would be prohibited, effective October 1st 2008. That is already being contested but HUD has been after this program for years, so stay tuned on that one, may be too close to call.
Fannie Mae/Freddie Mac loan increases to the same level as FHA, effective Januray 1st.
VA loan limit temporarily increased to $567,500 for our area, through the end of this year.
Tax incentive -- this one is interesting: a $7,500 re-payable credit for those who qualify on home purchases between April 8th, 2008 and June 30th, 2009. If you qualify and take the credit, you would pay it back over the next 15 years. For those of you who don't have a calculator handy, %7,500 divided by 15 equals $500. No, I didn't perform that calculation in my head. Although if they had made it repayable over 10 years I would've been all over that one.
There is much more to it of course (Fannie Mae/Freddie Mac reform and oversight, Truth in Lending Act additional disclosures, Loan Officer Licensing to name just a few and I really mean just a few), but those were the highlights that caught me eye.
So how does this all apply to you? Depends on whether you're buying a home. If you are (and you should be), chat with your Loan Officer (which should of course be me) about any potential impact on your loan scenario.
As always, my comments are purely my opinion and shold in no way be taken as fact or the opinion of others. Thanks for reading!
James Wirth is a Senior Loan Originator licensed by the Washington State Department of Financial Institutions under Loan Officer License Number 510-LO-34536. His Blog can be found at http://mymortgageplan.blogspot.com and he can be reached directly at:
James Wirth
Landover Mortgage
Cell/Direct: (425) 501-4749
Office: (425) 977-2244 Ext. 1002
Fax: (866) 215-1749
Email: Jameswirth@landovermortgage.com
Web: http://www.landovermortgage.com/jameswirth/
Here are a few highlights that will likely affect consumers most directly, compiled from press releases by the National Association of Realtors (http://www.realtor.org) and the Mortgage Bankers Association (http://www.mbaa.org).
Hey, did I mention the bill was over 600 pages?
Highlights:
FHA to the (Foreclosure) Rescue! FHA would insurance borrowers with problematic subprime loans. Borrowers would share future appreciation with FHA but they get a 30year fixed FHA loan and get to keep their house! May be a good alternative to foreclosure.
FHA: Permanent increase of the FHA loan limit. My estimation is $522K for the Seattle/Bellevue/Everett MSA -- that is not confirmed but if I'm right I get to say 'I told you so.' Would become effective January 1st, 2009.
The minimum down payment requirement for FHA is bumped up .5% to 3.5% but it is not clear to me when this would become effective (hopefully not retroactive 10 years ago when I bought me first home on an FHA loan).
FHA Seller-funded down payment assistance (often referred to as Nehemiah, one of the 3rd party facilitators) would be prohibited, effective October 1st 2008. That is already being contested but HUD has been after this program for years, so stay tuned on that one, may be too close to call.
Fannie Mae/Freddie Mac loan increases to the same level as FHA, effective Januray 1st.
VA loan limit temporarily increased to $567,500 for our area, through the end of this year.
Tax incentive -- this one is interesting: a $7,500 re-payable credit for those who qualify on home purchases between April 8th, 2008 and June 30th, 2009. If you qualify and take the credit, you would pay it back over the next 15 years. For those of you who don't have a calculator handy, %7,500 divided by 15 equals $500. No, I didn't perform that calculation in my head. Although if they had made it repayable over 10 years I would've been all over that one.
There is much more to it of course (Fannie Mae/Freddie Mac reform and oversight, Truth in Lending Act additional disclosures, Loan Officer Licensing to name just a few and I really mean just a few), but those were the highlights that caught me eye.
So how does this all apply to you? Depends on whether you're buying a home. If you are (and you should be), chat with your Loan Officer (which should of course be me) about any potential impact on your loan scenario.
As always, my comments are purely my opinion and shold in no way be taken as fact or the opinion of others. Thanks for reading!
James Wirth is a Senior Loan Originator licensed by the Washington State Department of Financial Institutions under Loan Officer License Number 510-LO-34536. His Blog can be found at http://mymortgageplan.blogspot.com and he can be reached directly at:
James Wirth
Landover Mortgage
Cell/Direct: (425) 501-4749
Office: (425) 977-2244 Ext. 1002
Fax: (866) 215-1749
Email: Jameswirth@landovermortgage.com
Web: http://www.landovermortgage.com/jameswirth/
Tuesday, February 19, 2008
"Come Again?"
Re-posted from contribution made to Seattle Avenue Newsletter.
As I was ferrying my two youngest back home on my lunch break the other day after picking them up from my wife at her Dentist appointment, I tuned in to AM 1000 to catch some financial news and see how the market was responding to the 1/2 point move by the Federal Reserve.
To my dismay and utter bewilderment I sat staring blankly at a red light, perplexed by the mortgage market commentary being offered by an Economics guru from one of our state universities. I really couldn't believe my ears.
Asked a series of questions by hosts Manda Factor and Bill Yeend, the Economist's responses were dismal at best. Here's my recollection of his comments (in a nutshell, referred to below as "IANS"), and my response to each:
Question: Is now a good time to refinance?
Economist (IANS): Well, maybe, IF you can qualify, but most people won't, based on the credit crunch.
James: Come again? The 'credit crunch' is not even applicable for many borrowers. There have been changes to loans that allowed for no or low down payment, low credit scores and no or low-income documentation; however, for the majority of borrowers, if you qualified 12 months ago you qualify today.
For programs that have been affected, it usually means that I sit down with the borrowers and we put a 2-to-6 month game plan in place to help them prepare. We put a budget together; we identify ways to improve credit profiles. We put the horse squarely in front of the cart.
I don't mean to sugar-coat changes in the credit and mortgage markets, but in all too typical fashion they have been grossly over-exaggerated.
Question: But aren't rates a historic lows?
Economist (IANS): Well maybe but banks just aren't making the loans. They are advertising low rates but when you go into to lock the rates you don't qualify.
Come again? Humor me for a moment, but why would banks spend hundreds of thousands of dollars advertising rates if they didn't plan on offering those rates to customers? I don't even know what else to say to that.
Question: What about the FOMC lowering the Fed Funds Rate, won't that help borrowers?
Economist (IANS): Well, the banks are just going to sit on those funds to increase their liquidity, so it won't help the consumer.
Come again? I may be oversimplifying this, but the whole point of the Fed lowering that key rate is to pump additional funds into the system so the banks WILL make more loans. The reason banks get one rate and charge a higher rate is so they can make a profit. If they don't lend it out, they lose money because they are paying interest on those funds and that doesn't help the banks or us.
Someone once said you can't believe everything you hear. Well shucks, I guess they were right!
As I was ferrying my two youngest back home on my lunch break the other day after picking them up from my wife at her Dentist appointment, I tuned in to AM 1000 to catch some financial news and see how the market was responding to the 1/2 point move by the Federal Reserve.
To my dismay and utter bewilderment I sat staring blankly at a red light, perplexed by the mortgage market commentary being offered by an Economics guru from one of our state universities. I really couldn't believe my ears.
Asked a series of questions by hosts Manda Factor and Bill Yeend, the Economist's responses were dismal at best. Here's my recollection of his comments (in a nutshell, referred to below as "IANS"), and my response to each:
Question: Is now a good time to refinance?
Economist (IANS): Well, maybe, IF you can qualify, but most people won't, based on the credit crunch.
James: Come again? The 'credit crunch' is not even applicable for many borrowers. There have been changes to loans that allowed for no or low down payment, low credit scores and no or low-income documentation; however, for the majority of borrowers, if you qualified 12 months ago you qualify today.
For programs that have been affected, it usually means that I sit down with the borrowers and we put a 2-to-6 month game plan in place to help them prepare. We put a budget together; we identify ways to improve credit profiles. We put the horse squarely in front of the cart.
I don't mean to sugar-coat changes in the credit and mortgage markets, but in all too typical fashion they have been grossly over-exaggerated.
Question: But aren't rates a historic lows?
Economist (IANS): Well maybe but banks just aren't making the loans. They are advertising low rates but when you go into to lock the rates you don't qualify.
Come again? Humor me for a moment, but why would banks spend hundreds of thousands of dollars advertising rates if they didn't plan on offering those rates to customers? I don't even know what else to say to that.
Question: What about the FOMC lowering the Fed Funds Rate, won't that help borrowers?
Economist (IANS): Well, the banks are just going to sit on those funds to increase their liquidity, so it won't help the consumer.
Come again? I may be oversimplifying this, but the whole point of the Fed lowering that key rate is to pump additional funds into the system so the banks WILL make more loans. The reason banks get one rate and charge a higher rate is so they can make a profit. If they don't lend it out, they lose money because they are paying interest on those funds and that doesn't help the banks or us.
Someone once said you can't believe everything you hear. Well shucks, I guess they were right!
Thursday, July 26, 2007
Current state of (Home Finance) affairs
MARKET UPDATE
The roller coaster ride that is today's real estate and mortgage market continues to loop, turn and spiral in unexpected (or expected, depending on which site of the debate you listen to) ways.
Is "Mortgage" becoming a bad word? IMHO (in my honest opinion, according to my kids), the answer is an affirmed "no."
Mortgages above 80%, however, are changing dramatically and we may very quickly find ourselves without 2nd mortgages as we know them.
For those that are a little newer to the home buying market: 2nd mortgages in their most recent iteration have allowed home buyers to pay a little higher interest rate on a separate mortgage above the traditional 1st mortgage that went up to 80% of the value of the home.
The good ol' days saw the remaining 20% (or even more if we stretch back a little further in time) as the required down payment in order to qualify for home financing. More recently, Private Mortgage Insurance often called MI or PMI (for one company's site, go here, or a general definition, go here) and the aforementioned 2nd mortgages have been available to provide the means to finance a greater percentage of the value of a home, up to- and sometimes over- 100% of its value.
Well times they are a-changing. The news has been replete with the shake-up of the subprime (trickier, unconventional loans or lower credit scores) market and the affect has 'trickled up' into the conventional market affecting how borrowers qualify for loans and the options they have with regard to financing more than 20% -- regardless of income or credit score. The latest change that's happening even as I type, is with regard to 2nd mortgages being, in many cases, pulled completely off the table.
The "why" for this is tricky to summarize because there are a number of things affecting this. The short answer is that the majority of lenders out there sell the loans they make on the secondary market, and the buyers willing to purchase those loans have stopped buying them.
Are 2nd mortgages completely gone? Let me set the stage, and then I'll answer that question:
The term "mortgage" (for the definition, go here) loosely means that it's a loan secured by a house -- there's a 'lien' on the property for a certain amount. The lender is extending financing terms in exchange for a secured interest. When the loan is paid off, the 'lien' is removed and full ownership interest is transferred to the homeowner. In the case of a 2nd mortgage, the lien is in 2nd position, behind the 1st mortgage.
So now we have a firm grasp (or possibly we're just holding on by our finger tips but at least we're holding on) on what a mortgage is and the difference between the 1st mortgage and a 2nd mortgage. The 2nd mortgage is more exposed in the event the homeowners stop paying the loan -- the reason it's even allowed is because of the historical average appreciation level of 6% per year. If the homeowners (who have turned the interest over to the lender so they could finance the home) stop making payments, the lender can auction the home off and even if there were two loans on the property, the home would have hopefully appreciated enough to recoup the amount financed by both lenders.
Enter Stage Right, a slowing market and rising foreclosure- or at least default- rate (go here for a June Seattle Times article about why to distinguish the two). That higher level of risk for the lender in 2nd position, and in this market with many loans over the past few years going to higher-risk scenarios has created a severe lack of interest in buying these 2nd mortgage loans. By higher risk I'm referring to lower credit scores and higher debt-to-income (DTI) ratio borrowers (borrowers who had more of their money going to their monthly payments than was traditionally accepted), with little or no money in the bank to fall back on. And don't even get me started on all of the ill-advised adjustable rate mortgages
The panic has now set-in, founded or not, and we're experiencing a mass exodus from the largest portion of the 2nd mortgage market: loans involving a loan-to-value or LTV (for a def. go here) of more than 80%, regardless of credit score, income level, etc. Bar-none.
How about some good news, yeah? The long and short of it (ok, maybe more the long) is that now is still a great time to buy. So what if loan programs are moving around -- this is a dynamic marketplace and lenders are reacting to the changes in the market in order to remain competitive.
There are still options that will allow you to finance more than 80% of the value of a home. PMI that I mentioned earlier will still do it, and there are still some 2nd mortgage companies that, for the time being, offer higher LTV financing. AND, interest rates are still historically low, sellers are motivated and at least in our market here in the greater Seattle area, current appreciation has cooled slightly giving buyers a chance to catch their breath.
Now that you've had a little rest and are prepared with a better understanding of current conditions courtesy of yours truly...
What are you waiting for?!?!? Give me a call so we can discuss your options and get you pre-approved and out there buying a house.
Operator is standing by. --James
The roller coaster ride that is today's real estate and mortgage market continues to loop, turn and spiral in unexpected (or expected, depending on which site of the debate you listen to) ways.
Is "Mortgage" becoming a bad word? IMHO (in my honest opinion, according to my kids), the answer is an affirmed "no."
Mortgages above 80%, however, are changing dramatically and we may very quickly find ourselves without 2nd mortgages as we know them.
For those that are a little newer to the home buying market: 2nd mortgages in their most recent iteration have allowed home buyers to pay a little higher interest rate on a separate mortgage above the traditional 1st mortgage that went up to 80% of the value of the home.
The good ol' days saw the remaining 20% (or even more if we stretch back a little further in time) as the required down payment in order to qualify for home financing. More recently, Private Mortgage Insurance often called MI or PMI (for one company's site, go here, or a general definition, go here) and the aforementioned 2nd mortgages have been available to provide the means to finance a greater percentage of the value of a home, up to- and sometimes over- 100% of its value.
Well times they are a-changing. The news has been replete with the shake-up of the subprime (trickier, unconventional loans or lower credit scores) market and the affect has 'trickled up' into the conventional market affecting how borrowers qualify for loans and the options they have with regard to financing more than 20% -- regardless of income or credit score. The latest change that's happening even as I type, is with regard to 2nd mortgages being, in many cases, pulled completely off the table.
The "why" for this is tricky to summarize because there are a number of things affecting this. The short answer is that the majority of lenders out there sell the loans they make on the secondary market, and the buyers willing to purchase those loans have stopped buying them.
Are 2nd mortgages completely gone? Let me set the stage, and then I'll answer that question:
The term "mortgage" (for the definition, go here) loosely means that it's a loan secured by a house -- there's a 'lien' on the property for a certain amount. The lender is extending financing terms in exchange for a secured interest. When the loan is paid off, the 'lien' is removed and full ownership interest is transferred to the homeowner. In the case of a 2nd mortgage, the lien is in 2nd position, behind the 1st mortgage.
So now we have a firm grasp (or possibly we're just holding on by our finger tips but at least we're holding on) on what a mortgage is and the difference between the 1st mortgage and a 2nd mortgage. The 2nd mortgage is more exposed in the event the homeowners stop paying the loan -- the reason it's even allowed is because of the historical average appreciation level of 6% per year. If the homeowners (who have turned the interest over to the lender so they could finance the home) stop making payments, the lender can auction the home off and even if there were two loans on the property, the home would have hopefully appreciated enough to recoup the amount financed by both lenders.
Enter Stage Right, a slowing market and rising foreclosure- or at least default- rate (go here for a June Seattle Times article about why to distinguish the two). That higher level of risk for the lender in 2nd position, and in this market with many loans over the past few years going to higher-risk scenarios has created a severe lack of interest in buying these 2nd mortgage loans. By higher risk I'm referring to lower credit scores and higher debt-to-income (DTI) ratio borrowers (borrowers who had more of their money going to their monthly payments than was traditionally accepted), with little or no money in the bank to fall back on. And don't even get me started on all of the ill-advised adjustable rate mortgages
The panic has now set-in, founded or not, and we're experiencing a mass exodus from the largest portion of the 2nd mortgage market: loans involving a loan-to-value or LTV (for a def. go here) of more than 80%, regardless of credit score, income level, etc. Bar-none.
How about some good news, yeah? The long and short of it (ok, maybe more the long) is that now is still a great time to buy. So what if loan programs are moving around -- this is a dynamic marketplace and lenders are reacting to the changes in the market in order to remain competitive.
There are still options that will allow you to finance more than 80% of the value of a home. PMI that I mentioned earlier will still do it, and there are still some 2nd mortgage companies that, for the time being, offer higher LTV financing. AND, interest rates are still historically low, sellers are motivated and at least in our market here in the greater Seattle area, current appreciation has cooled slightly giving buyers a chance to catch their breath.
Now that you've had a little rest and are prepared with a better understanding of current conditions courtesy of yours truly...
What are you waiting for?!?!? Give me a call so we can discuss your options and get you pre-approved and out there buying a house.
Operator is standing by. --James
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