Reasons to Buy Real Estate Now

The “Three Reasons” below is a repost from the pages of REALTOR Magazine online, but essentially is what I’ve been saying for weeks, nay months!

The tax credits expired and everyone climbed under a rock! For a measly $8 to $18K in conditional tax credits buyers were jumping through hoops like they were handing out bars of gold. Do the math on 4% interest over 30 years on a distressed property that you bought for 10% below market. . .

So STOP listening to all the fearmongers and their media puppets screaming that the sky is falling. They’ve all got agendas. Be smart, do your homework and if it makes sense buy a home.

As a point of reference, interest rates on 30-year fixed conventional mortgages went to double digits in late 1978 and peaked at nearly 19% in late 1981. It wasn’t until early 1986 that rates dipped (briefly) below 10% again and were not permanently in single numbers until late 1990. In November of last year (2009) they were right at or just below 5%.

Three Reasons to Buy a Home Now

Stocks are up 50 percent from the March 2009 bottom. Some commodities have risen dramatically. The only asset class left in the cellar is real estate, says Michael Murphy, editor of the New World Investor stock newsletter.

As a result, Murphy is advising investors to buy now for these three reasons:

Desperate sellers: Both home owners and lenders are eager to unload a flood of foreclosed and underwater properties. Buyers with the patience to push through these complex deals can save a bundle.

Little competition: Because most people don’t have what it takes to negotiate their way through short sales and REOs, patient investors are winners.

Low rates: Mortgage rates are at their lowest level in 40 years. If you believe inflation is inevitable, lock in now.

Source: MarketWatch, Michael Murphy (08/19/2010)

Posted at REALTOR Magazine online

For more information regarding this post or other real estate information visit LARealEstateINFO.net or contact Robert Dixon at RE/MAX Palos Verdes Realty, Telephone (310) 703-1848 or email info@robertdixon.net. Content of this or any other post is presumed to be accurate but not guaranteed. DRE License #01828273

Serving the Palos Verdes Peninsula & South Bay Beach Cities, Hollywood and the Hollywood Hills, Silver Lake, Echo Park – Angelino Heights, Los Feliz, the Greater Los Angeles area and Palm Springs.

Interest rate lower still…

Among the list of reasons for buying a home now verses later are historically low interest rates. Even if the market remains somewhat flat or depreciates again, rising interest rates would help to equalize any loss/gain. 
LA Times May 27, 2010
By E. Scott Reckard
Anyone out there still have the old-fashioned notion to retire their mortgage sooner rather than later?
Homeowners able to refinance were finding lenders offering 15-year fixed-rate mortgages at an average of 4.21% this week, according to Freddie Mac — the lowest rate since the mortgage company started tracking the 15-year loan in 1991.
Heavy demand for 10-year U.S. Treasury bonds has pushed their yield to the lowest level of the year. That’s the typical benchmark for fixed mortgages — and boy have rates followed, with Freddie Mac reporting the average for a 30-year fixed home loan falling to 4.78%.

That’s down from 4.84% a week earlier and not far from the record low of 4.71% set back in December.

Since the Freddie Mac survey reflects what lenders are offering, not actual contracts for loans, the rates obtained by well-qualified borrowers are often slightly lower, experts say.

Freddie Mac gathers information about rates available to well-qualified borrowers who make a down payment of at least 20% or have equivalent equity in their homes if they are refinancing. The borrowers in this week’s survey would have paid 0.7% of the loan balance to the lenders in upfront fees and discount points, Freddie Mac said.

Last year, the experts expected residential mortgage rates would be rising by now, as federal housing and home-loan support programs expired, home prices stabilized and inflation became more of a concern.

Then the latest default scare reared its head — this time involving not U.S. home loans but the debt loads carried by Greece and other weaker European economies. And just like that, the flood of money began to the safe haven of debt issued by Uncle Sam.

“Just when we thought we were finally experiencing [the anticipated rate increase] we got the PIGS,” said Stew Larsen, head of mortgage banking operations for Bank of the West, referring to an acronym for the nations Portugal, Italy, Greece and Spain.

For those hungry for lower rates, is this the last big chance to head to the trough?

SHORT SALES: Home Affordable Foreclosure Alternatives Program (HAFA)

Distressed Properties are expected to comprise 50% of the U.S. market transactions this year

New government guidelines designed to streamline the Short Sale process go into effect April 5th. All HAMP lenders and real estate agents working in the rapidly expanding Short Sales market MUST be familiar with these new guidelines. The new program is called HAFA: The Home Affordable Foreclosure Alternative program

According to the National Association of REALTORS®, Short Sales and Foreclosures (REO’s) are the new traditional transaction and as part of my standard real estate business I specialize in helping distressed homeowners’ determine their options. To this end, I am certified by the NAR through their SFR (Short Sale and Foreclosure Resource Certification) program.


Home Affordable Foreclosure Alternatives Program (HAFA)

In 2009, the Treasury Department introduced the HAFA program to provide a viable option for homeowners who are unable to keep their homes through the existing Home Affordable Modification Program (HAMP). The HAFA program takes effect on April 5, 2010—although some servicers may implement it sooner, if they meet certain requirement–and sunsets on December 31, 2012.

Home Affordable Foreclosures Alternatives Program: Guidelines and Forms

HAFA provides incentives in connection with a short sale or a deed-in-lieu of foreclosure (DIL) used to avoid foreclosure on a loan eligible for modification under the HAMP program. Servicers participating in HAMP are also required to comply with HAFA.

A list of servicers participating in HAMP (including HAFA) is available at: Making Home Affordable

HAFA Provisions

•• Complements HAMP by providing a viable alternative for borrowers (the current homeowners) who are HAMP eligible but nevertheless unable to keep their home.

•• Uses borrower financial and hardship information already collected in connection with consideration of a loan modification.

•• Allows borrowers to receive pre-approved short sales terms before listing the property (including the minimum acceptable net proceeds).

•• Requires borrowers to be fully released from future liability for the first mortgage debt (no cash contribution, promissory note, or deficiency judgment is allowed).

•• Uses standard processes, documents, and timeframes/deadlines.

•• Provides the following financial incentives:

•• $3,000 for borrower relocation assistance;

•• $1,500 for servicers to cover administrative and processing costs;

•• Up to $2,000 for investors who allow a total of up to $6,000 in short sale proceeds to be distributed to subordinate lien holders, on a one-for-three matching basis.

•• Requires all servicers participating in HAMP to implement HAFA in accordance with their own written policy, consistent with investor guidelines. The policy may include factors such as the severity of the potential loss, local markets, timing of pending foreclosure actions, and borrower motivation and cooperation.

Source: National Association of REALTORS®

Credit account dispute could stall mortgage application

It sure seems as if there are a lot of tripwires and landmines out there when attempting navigate through the finance market these days.

Many of these measures are established with the best intentions however in the haste to implement safeguards, innocent people suffer and the process of tweaking them is excruciatingly slow… The best defense is to be informed.

Read the piece from the New York Times (below) and if you are working on a mortgage or refinance be sure to check your credit report prior to submitting your loan application. RD

Credit account dispute could stall mortgage application

Fannie Mae and Freddie Mac, seeking to prevent fraud, have been kicking such applications back to lenders for manual underwriting.

Reporting from Washington – Could a little-known and potentially controversial practice by mortgage giants Fannie Mae and Freddie Mac kill or stall your next loan application? Absolutely.
Picture this scenario: You’ve got outstanding credit scores close to 800 and solid equity in your home. All you want is to refinance your mortgage to take advantage of today’s rock-bottom interest rates.

Your application should rocket through your lender’s system and get you a great rate. But your bank says: Sorry, we can’t do your loan. Fannie Mae’s automated underwriting system won’t accept any application where there is a notation in the credit report that a consumer has disputed an account or “tradeline.”

You explain that the dispute — over a medical bill or a credit card charge — was valid. The account was closed. The creditor promised to remove the dispute notation but apparently didn’t. Your loan officer won’t budge. Policy is policy, he says. Your refi application is dead.

What’s going on here? Under the Fair Credit Reporting Act, consumers are guaranteed the right to dispute erroneous information on any account in their credit files. Once a consumer challenges that information, a notation to this effect must be made on the file. As long as it remains, most credit-scoring systems generally will not factor the disputed account into the computation of the consumer’s score.

Does Fannie Mae deny loans to consumers simply because they exercised their legal rights? In an e-mail response, communications director Amy Bonitatibus confirmed that the firm’s automated underwriting system — used by virtually all lenders doing business with Fannie Mae — sends applications with “consumer disputed” items on credit reports back to the lender for what is known as “manual underwriting.”

Bonitatibus said the company does “not prohibit delivery of a loan . . . where the borrower has disputed information” on his or her credit report. Through manual underwriting, she said, “our policy requires the lender to determine and document whether or not the disputed information is accurate and underwrite the borrower’s credit accordingly.”

What’s the practical effect of bucking back applications to lenders for potentially lengthy discussions with applicants and their creditors? According to consumer postings on FiLife, a financial education website, the net result often is that the bank brushes you off and blames it on Fannie Mae.

Christopher Cruise, a Maryland mortgage originator and founding member of the National Assn. of Responsible Loan Officers, said, “There’s no question — when there are lots of other applications and business is good,” applications requiring extra time and research “just aren’t going to move.”

Evan Hendricks, author of the book “Credit Scores and Credit Reports” and publisher of Privacy Times, a newsletter that outlined Fannie Mae’s policy in a recent report, calls it “extremely unfair to honest consumers who are simply doing what they should — challenging misinformation.”

Freddie Mac’s policy on disputed tradelines is broadly similar to Fannie Mae’s, spokesman Brad German said.

Why are Fannie and Freddie so uptight about applications with disputed accounts? Mainly because credit repair companies have been gaming automated systems tied to credit scores by disputing accurate but negative items. When tradelines in a consumer’s files contain a “disputed” notation, most scoring software ignores them for the purposes of computing the score.
A seriously delinquent account that could legitimately depress a FICO score might be taken out of the equation — at least temporarily — if a “consumer disputed” notation is in the file. Fannie and Freddie are trying to protect themselves from fraud.

For the time being, it’s tough luck for all applicants with disputes in their credit files.
Fannie Mae, however, says it is reviewing its policy, so maybe there’s a chance for a change.

Source: New York Times, October 25, 2009 by Kenneth R. Harney