Displaying blog entries 331-340 of 348
Well, with the Feds bailing out these two institutions it means REDUCED RATES!
Buyers, take advantage right now because it may be the best possible senario with low rates and BIG inventories!
Recent rates have dropped to 5.875% for 30 year fixed!!!!!
Don't hesitate!
Many home buyers are going for FHA loans vs. conventional loans recently. In fact, over the past six months FHA lending has doubled!
Major changes are happening in FHA. The big difference will be in the insurance premiums and interest rates for the loans. If you are a high risk borrower your premiums will be higher and your interest rate higher. This of course is based on your FICO score (credit score). If you have a good FICO score you will pay a lower premium (currently 1.5% of the loan which is rolled into your total loan package)
Low FICO score will pay 2.25% fee
High FICO score could pay 1.25% fee.
Depending on your downpayment and FICO scores there are many variables with rates and fees. So, game has changed again. This is significant because the FHA program has been the same for nearly 75 years. This model is more in line withthe similar PMI (private mortgage insurance.
In any case, look for new FHA rates to appear on the horizon. These changes will start this summer.
Here is some more credit squeezing news. On August 8th of this year Freddie Mac is clamping down on invertor loans. The limit for multiple owner investment units will be a total of four vs. the ten they currently allow. Cash out refis on rental units will also be eyeballed closely with a high probability of higher interest rates.
An even larger looming problem is the PMI or private mortgage insurance issue. PMI is required when a downpayment is less than 20% of the total purchase price. Investor loans in declining or depressed markets will be completely out of luck, in other words, no PMI, no loan if less than a 20% downpayment. Shades of the 1980's! When I first started selling homes on the mountain we could not sell anything without at least 20% down because the lenders would not provide PMI for buyers in our area.
What does this mean as a buyer or seller in the markets of Government Camp, Rhododendron and Welches? So far we have not been declared a "distressed" or "declining" market for real estate sales so we have dodged that bullet. What it does mean is that there will be a shrinking pool of investment purchasers with credit restrictions and the probability of higher interest rates on those loans.
What will the credit crunch bring to today's market in the Welches, Rhododendron, Government Camp and Brightwood area?
1. Reduced equity lines of credit.
2.Removing subprime and Alt-A loans completely
3.Higher fees for loans that lenders do make.
Lending practices of the years 2002-2007 are over.
Results:
Builders will be building smaller homes.
Lenders will be lending much less money.
Buyers will be saving home and borrowing less.
Fewer buyers, fewer loan products, and higher loan costs create an even more competitive market for sellers and lowering prices through that competition to sell.
I read a recent article about Jumbo loans in California. The temporary raised loan amount rate in the California market is $730,000 vs. $417,000 for our area. Lenders are reporting that it hasn't exactly helped the situation because rates on these loans are at least a point higher than stated rates on a 30 year fixed. In other words, if the rate quote is 6% for a 30 year fixed, a JUMBO loan, one over $417,000 locally would be around 7% and possibly more. Jumbo loans have had stricter qualifying conditions and good credit is a must.
These loans are sold to pensions funds and other secondary markets who are spooked from the sub-prime disaster. Therefore they are requiring tougher standards for the buyer qualification AND a higher interest rate. Well, the Californians are not rushing in to get these loans for new home purchases nor refinancing as the feds thought they would who raised the temporary limits to help things "move along".
We have seen the impact here in our local market from Government Camp to Welches and Rhododendron. The market above $500,000 has slowed substantially. There have been three sales in the past seven months in the over 500K range for single family homes.
The Grand Lodges Condos in Government Camp are now closing and should produce several sales substantially over the barrier.
Agents in California feel it will take a year or so for Jumbo rates to come down. We'll see more movement, and sales when they do but until then, buyers will need great credit to even qualify for these Jumbo loans and count on at least 1% higher interest rates than the sub 417K conventional loans.
Ever hear of this? New York state attorney general Cuomo has come up with a proposal that Freddie Mac and Fannie Mae (the companies that buy most of the conventional loans) will be agreeing to. This Code will basically protect consumers from the "conflicts" where appraisers have been pressured into "over appraising properties-inflating values" which is one of the reasons we are in this mess of the housing/foreclosure market.
The requirements of the act are: that mortgage brokers cannot select appraisers, lenders cannot use "in house" staff appraisers and lenders cannot use appraisal companies they own or control.
This takes the conflict out of the system and protects consumers. This is also one way states may have slipped their toe into the Federally regulated bank, savings and loan, and credit union systems that are completely monopolized and regulated by the FEDS.
Many buyers of homes are familiar with HELOCS or Home Equity Lines of Credit. This has been a convenient way for homeowners with equity to borrow money against their homes for vacations, college expenses, home improvements, second homes, or just unexpected expenses. This convenient home ATM is going into "shut down mode" with the following big banks sending "freeze" letters out due to falling home prices in many areas of the country. Here is a list of some of the larger banks implementing this policy:
Countrywide
Bank of America - HELOC Freeze
Countrywide - HELOC Freeze
Chase - HELOC Freezes
CitiGroup - HELOC Freeze under review
National City - HELOC Freeze
Suntrust - HELOC Freeze
USAA Federal Savings - HELOC Feeeze
Washington Mutual - HELOC Freeze
The credit crunch is on and the impacts of this will be severe for many home sellers in our area. Our home values have not fallen as far as many parts of the country but this inconvenience will impact many second home buyers.
Lets face it, the media has beaten down buyer confidence in the housing industry to small sized orange juice pulp. It's the herd mentality again. The rush to Dot Com stocks, crash, the run to real estate investing, crash, and now the touting of "it's going to get even worse in housing" syndrome.
Opportunities are passing buyers by right now. Historically low interest rates, a huge glut of properties and many motivated sellers? Sounds like a buyers nirvana to me.
Tthe IRS is taking a serious look at what is happening with 1031 tax exchanges. If you do an exchange your chance of an audit just went up. The IRS promises a new exchange auditing program soon. Minnesota will audit all 1031 exchanges starting this year.
What is this all about? Well, the IRS took a good look at six large exchange companies and discovered a whopping 875 million dollars in lost revenue due to sloppy paperwork and a lack of enforcement for incomplete or illegal tax exchanges. That is a lot of money for tax strapped states and feds to potentially get their hands on. That is probably the tip of the ice burg if you look at all the other small exchange companies!
Be prepared for all states to change their laws on how the exchangers or intermediaries are regulated. Laws are changing in many states requiring the exchangers to be "licensed, and bonded". Eventually, this will mean fewer exchange companies and much higher fees.
HELLO BUYERS
In case you haven't noticed, interest rates plummeted to under 5.5% for 30 year fixed rates. The Fed meeting for "economy" control produced incredible opportunity for buyers who want to get in the market and act now for some of the best rates we've seen in FIVE years. If you've been sitting on the side lines, get off the bench.
BIGGER BONUS!
Greater inventory to choose from! Talk about the best of both worlds....low rates, a buyer's market, increased inventory: if this isn't a Buyer's Nirvana I am not sure what is.
Displaying blog entries 331-340 of 348
