Have You Heard of PACE for Energy/Water Savings?

Keeping Cool

The Property Assessed Clean Energy Program, or PACE, makes it possible for an owner to finance certain improvements and pay for them via an assessment on the owner's property.
There are a wide range of conservation improvements allowed and which vary by program, but most PACE programs include  improvements such as solar panels, energy star rated core plumbing systems, duct replacement, electric vehicle plug-in stations, pool circulating pumps, water heaters, and furnace.  They work in conjunction with a local public agency, and are available for both residential and commercial properties.

To be eligible, the homeowner must be current on property taxes, with no judgment liens or federal or state tax liens, not in bankruptcy, can't be delinquent on any mortgages or late on property taxes (some exceptions), and there are limits based on the mortgage percentage value of the property.


Property tax liens associated with the homes underlying the security, which are meant to fund energy-savings measures, are senior to all other liens - including mortgages on the properties financed by Fannie Mae and Freddie Mac (which currently finance close to 90% of US mortgages).  Read more at Reuters.  Since they don't like not being in first lien position, the Federal Housing Finance Agency (FHFA) ordered Fannie and Freddie to avoid financing mortgages on homes with PACE liens already on them,  Generally, all loans following FHFA guidelines must obtain consent before being allowed to enter into a PACE program, or the lender may declare the loan in default if owner does not pay off the lien. These conditions also affect refinancing as well, especially if the loan was obtained after July, 2010.

Homeowners who may find that PACE works well for them are:

• Those who have sufficient equity or whose improvements are not that costly and therefore, would not have difficulty paying off the lien if they need to sell or refinance their home
•  Those who intend to remain in their homes for the duration of the assessment and do not plan to refinance 
•  Those whose PACE program will offer to subordinate the PACE lien in circumstances beneficial to the homeowner.

HERO

Certain PACE programs, such as the HERO PACE program are now offering to subordinate their liens in certain instances, generally for a fee.  If the PACE lien is subordinated the buyer may be able to enter into a PACE agreement and obtain consent from a conventional lender.  Homeowners in areas with HERO PACE programs should inquire with the entity. Not all cities have approved this program; according to their site, HERO programs are locally available in the cities of Carson, Bellflower, City of Industry, Hawthorne, Lomita, Garden Grove, Huntington Beach, Fountain Valley, Stanton, Westminster, Cypress, to name several.  Long Beach, Los Angeles, or Lakewood are not included at this time. 

California FIRST

This program  appears to cover Long Beach and other areas, but an address must be entered in order to find out. Their criteria and financing terms are available on the site.

FHA

Energy Efficient Mortgages have been around since the 1990s, and may work for the owner with an FHA loan. Contact an FHA lender for more information. 

Secondary Financing

Another alternative is a home equity line of credit, for people with enough home equity, which may provide some tax advantages, including lower interest rates than the PACE programs. This type of loan would automatically be paid off in sale of a home.

Similar to solar panels, any PACE lien must be disclosed to a prospective buyer and will most likely be found in the preliminary title report given to a buyer. The seller may be in the position of having to pay off the lien in order to sell, depending on the circumstances involved.

And, a property owner should always first consult with a tax advisor regarding their own circumstances before accepting any of these loans. Interest paid on PACE liens may not be tax deductible but there may be a capital gains benefit based on the improvements.

Appearances are Important, But Housebuying Involves More Than Looks

Everyone has heard of "flips". They were often foreclosed houses or condos bought, usually by an investor or some legal entity for the purpose of "fix and sell".

 

Often, they have updated or completely remodeled interiors that usually include granite countertops in the kitchen, new ceramic tile flooring in the baths plus new shower and tub tiled walls, all new sinks and toilets, stainless steel (or brushed stainless look) appliances in the kitchen, new paint, new carpet or newly refinished floors, sometimes new landscaping outside, maybe a new garage door, and if you're really lucky, a new roof.  What's not to love?   Anyone could get excited about moving into a new home that has that new look that will not need work for quite a while.

But since most buyers are obtaining financing (all cash buyers are about 30% of the market overall), the loan people have requirements.

What You Need to Find Out Before Making An Offer:

Did the seller acquire this property less than 30 days ago? If you're a "regular" buyer with standard financing, you will be locked out of making an offer on this property UNLESS is it a Fannie or Freddie property, owned by a state or government agency, an approved non-profit which handles HUD REOs or one connected to "Neighborhood Community Stabilization Program".

If the seller has owned the property up to 90 days, and the new sales price is 20% or more higher than what the seller paid for the property, then there are more issues: There must be a second appraisal (on top of the first one by the buyer's lender), not at the buyer's expense, but at someone else's, which could be another $500 to be paid up front when it's completely unknown if the two appraisals can somehow agree with each other (and many times appraiser don't agree with each other); additionally, another property inspection must be performed and paid up front by the loan officer.   THEN, copies of all work performed by the seller in renovation must be produced, which only a very caring property flipper will probably have on hand. Remember, property flips are often financed by short term loans by sellers who have never lived in the property and have no attachment to it, and whose disclosures to the buyer will probably be very minimal.  And even if you find a loan officer willing to front another $800 up front, this will not all be accomplished in a 30-day escrow. 

After 90 days? You're good to go.

Who the seller is, the length of time it's been on the market, these are very critical to know before an offer is made. And then the buyer will have to realize that should any items be called out on the home inspection by your inspector (there is no such thing as a perfect home), the seller almost always will refuse to do any additional repair because it's "already been done".  Perhaps, but anything your lender notes on the appraisal(s) will be critical before the loan can close, and if the seller refuses, you may decide to walk. 

SO, let your agent help you with finding properties that will meet your buying and lender criteria. Professional help can save you a lot of time and wrong directions.

Top Ten Legal Mistakes Home Sellers Make-Part III

Verifying the buyer's finances.

The standard contract form used by California REALTORS says that the buyer must provide verification of their financing and/or funds to close within 7 days after the contract is entered into.

But why wait until then? The seller shouldn't have to find out a week later to find out the buyer may not have the upfront pre-approval, or that there may be some other doubts. The buyer's motivation should be such that he or she is ready to provide all that information with their offer to the seller, and in fact, the seller may have required their agent to request this in the MLS listing.  It only makes sense to find out as much as possible in the beginning, at least that one contingency can be out of the way. All too often, it turns out the buyer can't get a loan when it's time to fund. There are underwriting issues, or appraisal issues, that may come up that were unforeseen by the buyer, but sometimes not enough of the right questions were asked in the beginning. 

So why overlook the easy things up front, such as having your agent contact the buyer's lender for a direct conversation, and getting copies of statements (via the buyer) showing source of funds if it is not submitted with the offer? And, does the buyer currently own other property that he's not selling that could impact financing; or, is their source of closing funds in a liquid account? Seven days after a contract is entered into is not the time to learn about some uncertain source of buyer funds or fuzzy loan approval, the seller should want to know as much as possible beforehand.

These are just some of the reasons for verifying the buyer's finances up front. For more questions, please contact me or visit www.juliahuntsman.com.

6 Don’ts After You Apply For A Mortgage

I learned a long time ago that “common sense is NOT common practice“. This is especially the case during the emotional time that surrounds buying a home, when people tend to do some non-commonsensical things. Here are a few that I’ve seen over the years that have delayed (and even killed) deals:

1. Don’t deposit cash into your bank accounts. Lenders need to source your money and cash is not really traceable. Small, explainable deposits are fine, but getting $10,000 from your parents as a gift in cash is not. Discuss the proper way to track your assets with your loan officer.
2. Don’t make any large purchases like a new car or a bunch of new furniture. New debt comes with it, including new monthly obligations. New obligations create new qualifications. People with new debt have higher ratios…higher ratios make for riskier loans…and sometimes qualified borrowers are no longer qualifying.

Prime Opportunity for Investing/Buying in the Southern California Residential Market

In August, 2011, the California statewide median price for a single family home was approximately $297,000, an estimated 7% drop in price from 2010, BUT an 8% increase in sales volume from one year ago, per California Association of Realtors.

The lowest median single family home price in California in our current cycle was $274,000 in 2009; and $303,010 in 2010.   Los Angeles County median price for a single family home in 2009 was $333,920 and for 2010, up to $346,840.

And yet, current distressed property sales continue to make up 40%-50%, and more, of local markets, with a recent huge increase in foreclosure properties within the last month.  These trends show how opportunities will continue to bring more investors and more private money into the market. Traditional financing, i.e., FHA and FNMA, has introduced some types of requirements that discourage the present pool of buyers, that private investors with money to lend are entering the marketplace, because they believe that property values have hit the lowest point in most areas. 

There is a need for the rehab and re-sale of distressed properties in disrepair, yet traditional financing doesn't offer that vehicle for those with the goal of "buy, fix and sell." Investors who don't fit the box for traditional financing avenues do have these private money alternatives that may work for them:

• one-year loans for flip properties--no pre-payment penalties
• stated income applications for flip properties
• loan amount to be based on 60% of private lender's determined value of property
• also available are constructions loans based on "repaired" value of property
• on site appraisal and photos may not be required

Interest rates for these short term investor loans are higher than standard FNMA-type financing, however, they are also a vehicle which is more lenient on the borrower's prior financial events (i.e., short sale, foreclosure issues), and they are geared towards the eligibility of the property, and the case-by-case history of the borrower.
If you are looking for opportunity in the investor property market for 1-4 residential units, contact me for more help on finding the property and the financing!

What Will the Loan Amount Reduction to $625,500 Do to Local Markets?

Today I was contacted by a Los Angeles Times housing market reporter covering the market on new loan amounts coming into effect soon.  It's really hard to say exactly what the outcome will be, but one thing is certain: California really doesn't need any more uncertainty or instability in its housing market.  Legislators elsewhere really do not seem to be very concerned, probably because the vast majority of them do not have a home to sell in California.

Single family homes in the high end market of 90803 and 90814 may feel the cut in loan amounts to $625,000. Currently there are 145 active listings, 113 of which are over $625,500 (the new loan amount starting October 1st).  Between June 1 and August 31, 26 homes sold over $729,750 (the current limit on conforming loans), and 24 sold under $625,500, while 16 sold between the two loan amounts.  That represented 25% of the total 66 homes sold in that time period.

Currently, of the 145 active listings, 113 are listed over $625,500 (just using the loan amounts as the dividing line for the sake of discussion), 95 are listed over $729,750--meaning 18 are in the critical area in between.  Currently, 26 homes are in escrow, all over $625,500--but would the 8 in the critical area under $729,750 be buying in the future at a higher interest rate?  The homes in escrow (26) of the 145 active listings shows that the seller in this area currently has about an 18% chance of selling in the current loan market. 
Now, along with an already competitive situation in the high-end market, what will the future bring with a jump up in interest rate for the new jumbo loan amount?
See more at http://longbeachrealestate.blogspot.com/2011/07/change-may-be-coming-in-loan-amounts.html

But, there is more, not to be discussed here: the QRM, or qualified residential mortgage which basically could turn the conventional loan market at all levels into a one-size-fits-all 20% down payment.

Lower Loan Limits and a Higher 20% Minimum Down Payment?

Without an extension or permanent change enacted by Congress, loan limits will decrease from $729,750 to $625,500.  Couple that with new demands for a minimum 20% down payment for conventional loans and strict debt-to-income ratios, and there could be a very sad situation.

In many states these changes may not change too many people's lives.  But in California where the market has for years been higher than other areas of the country, those changes could be critical, decreasing ability of buyers and sellers to purchase and sell, and hurting the recovery of our market. There are 27 California members of Congress who have spoken out against these changes. Everyone should know how their homebuying or homeselling future could be impacted by these changes, and possibly be shut out of the market.

And to make matters more confusing, there have been alternate proposals, and different ideas of what defines a Qualified Residential Mortgage, meaning those mortgages that could be exempt from the new rules. While it may have started with good intentions, these new rules, if passed into law, could have unintended, unknown effects.



Common (and Costly) Mistakes Borrowers Make

Getting a mortgage can be daunting, especially when there’s a lot of your hard-earned money at stake. It’s critical to spend a few hours researching how a mortgage works (or at least as much time as you’d spend researching a vacation or a car purchase) before you begin the process. Unfortunately, nearly half of prospective home buyers don’t understand essential mortgage information, according to a recent mortgage survey conducted by Zillow Mortgage Marketplace. This lack of basic knowledge is likely leading borrowers to make costly mistakes. Here are some of the most common mortgage misunderstandings, and how to avoid them. My comments are in italics--Julia.

Buying Mortgage Discount Points – Nearly half ( 45 percent) of those surveyed in the Zillow poll believe they should always buy discount points when obtaining a mortgage. However, because mortgage discount points have an upfront cost that can be recouped through a lower interest rate over the life of the loan, the decision should depend on how long you intend to own the home. In some cases, you may not plan to remain in the house for long enough to break-even after buying points. A discount points calculator can help you do the math.

Not Monitoring Rates - Mortgage rates can change multiple times throughout the day, similar to how stock prices fluctuate. But more than half (55 percent) of the people polled thought rates were set one time each day. To get the optimum rate, it’s important to monitor rates and talk to different lenders. When you compare various rates make sure you are comparing the exact same loan. I find prospective buyers with loan quotes or pre-approvals obtained 6 months or one year ago, thinking the terms will still apply! No, they probably won't.

Contacting Just One Lender – Many buyers believe lenders are required by law to charge the same fees for credit reports and appraisals. One-third (34 percent) of survey respondents do not understand that lender fees are negotiable and can vary by lender. Borrowers can save money by reaching out to several lenders and comparing rates and fees. Online services which allow for comparisons to various lenders can be a helpful start, but your story may not quite fit the online scenario which are generalized estimates. And trying to change lenders in the middle of your escrow may not be possible, so you should do your homework up front.

Not Considering Various Loan Options - Many people may automatically avoid certain loan products, like Adjustable-Rate Mortgages (ARMs) because they don’t understand how they work. For example, when asked if interest rates on 5/1 ARMs always reset to a higher rate after five years, the majority of those polled (57 percent) said yes. In actuality, after five years, the rate could increase or decrease, meaning that there’s a possibility for a borrower’s monthly payments to go down. Whether an ARM makes sense for you depends on your personal situation such as your appetite for risk and how long you plan to live in the home. As you consider different loan products, ask your lender to go through the worst-case scenarios to avoid any surprises during the life of the loan. This can be a very helpful step, along with being open-minded to hear and consider ALL possible options for you.

Not Knowing Basic Terms – As you begin to think about securing home financing, you may hear terms like "FHA loans" and "pre-qualification" get bandied around. According to Zillow research, many people don’t know what those terms mean. Forty-two percent of prospective home buyers thought only first-time buyers could qualify for FHA loans, and 37 percent believed if they pre-qualify for a loan it means they’ve secured financing. Familiarize yourself with basic mortgage terms before reaching out to a lender. Most importantly, don’t be afraid to ask your lender, or even your real estate agent, lots of questions about the loan throughout the process.  To"pre-qualify" for a loan does not mean you've secured financing, and neither does "pre-approval" (the preferred step to take), because loan approval is still ultimately contingent upon all the necessary lending steps being taken to fund the loan at close of escrow, including appraisal.

See article at Real Estate Insider News:  Common (and Costly) Mistakes Borrowers Make

How To OutBid the All Cash Buyer

The real estate markets in many areas, and not just in the United States, have much to be thankful for in the all-cash buyer. The all-cash transaction will be able to avoid a buyer's loan and appraisal requirements, in a market where appraisals alone have held up -- or killed -- some transactions completely. Appraisal issues, due to guideline changes, have eased up a little, but this does not lessen the desirability of the all-cash buyer in the eyes of the seller. This is especially true for "difficult" properties, such as major fixers, and condominiums in HOAs where the association may have other legal or financial challenges, including too many owners who haven't paid their monthly dues on time.
But it's a knife that can cut both ways. Some all cash buyers traditionally have believed that the seller will sell for a lower price in order to avoid a buyer's loan process. While that strategy may apply for certain cases, sellers are still just as concerned as ever about their net cash at closing. In a tougher market however, some sellers do prefer to get to a faster closing if they can accept the buyers terms. Buyers with loans who are attempting to compete with all-cash buyers should take a look at the percentages below, and also learn the specific neighborhood where they are likely to compete. The National Association of Realtors states that all-cash buyers made up 33% of all buyers in February, 2011. In 2010, the total was 59% nationally.

All Cash 1st Quarter 2011 Closings for Single Family Homes and Condominiums:

• Long Beach (23%) - 155 Cash out of 665 Total:  $254,091 average price, up to $1,800,000.
• Cerritos      (23%)  - 19 Cash out of  84 Total:     $382,210 average price, up to $990,000.
• Seal Beach   (32%) - 8   Cash out of 25 Total:      $440,706 average, up to $800,000 .
• Lakewood   (9.59%) -  17 Cash out of 163 Total:  $330,173 average, up to $500,000.
• Huntington Beach (20%) - 69 Cash out of  344 Total:  $452,409 average, up to $1,500,000. 

Therefore, buyers need to prove their strength to the seller, because if your seller has a lot of equity in their property, they are less likely to be interested in a "low-ball" cash offer.

Before shopping for a new home, go to a recognized lender and get completely pre-approved, by allowing your credit to be run and submit all requested to documentation to the loan officer.
Learn what the list-to-sell percentage is in your neighborhood of interest so that you can make a good offer that applies to the true value of the home.
Submit your lender's pre-approval letter and contact information with your offer.
Write in a strong deposit amount, at least 2% or higher, with your offier--this shows your commitment to the seller.
Understand the terms and conditions which may be associated with a short sale or and REO property: they are not the same negotiating experience as with an equity seller.
Be prepared to act quickly--you may not have days to decide if you want the property or not.
Have the patience and fortitude to keep looking if you lose an offer in the beginning, but asking some questions up front through your agent may help to avoid the worst calamities, and may help you find out what's important to the seller. If you can be flexible, your chances may improve.

And also remember, sometimes the cash deals fall apart also.

Homeowner Affordability and Stability Plan Loan Terms

There is a lot of confusing information about loan modification opportunities, plus the additional fact that unqualified companies or individuals are attempting to take advantage of borrowers. Before you go with an offer you receive in the mail, please get a second opinion by calling up a known lender or contacting a bank officer, or your REALTOR. There are modification programs for both FHA and conventional loans, the following applies to conventional loans. So here, courtesy of Prospect Mortgage in Irvine, is better information and a link to a government website:

The Homeowner Affordability & Stability Plan

On February 18, 2009, President Obama announced his Homeowner Affordability and Stability Plan. The plan has two primary components:

Low-cost Refinancing. To be eligible, the loan on the property must be owned or securitized by Fannie Mae or Freddie Mac. These loans cannot exceed 105% of the home’s current market value. The Fannie Mae and Freddie Mac loans will have no prepayment penalties or balloon payments. There are no refinance cash-outs. Borrowers who are currently delinquent or have been 30 days overdue more than once during the past 12 months will not qualify.

Loan Modification. If you wish to inquire about a loan modification, you may contact the company that is currently servicing your loan. To be eligible, homeowners must be at risk of default or foreclosure. Qualified participants must also have experienced financial hardship, including loss of income, a significant increase in expenses or an interest rate that will reset to an unaffordable level. Monthly mortgage payments (including principal, interest, taxes, insurance and homeowner's association dues, if applicable) must exceed 31% of gross monthly income. The unpaid principal balance on the home loan must be equal to or less than $729,750 for one-unit properties (there is a higher limit for two- to four-unit properties).
If there’s a second loan, only the first mortgage is eligible for a modification, and it must have been originated on or before January 1, 2009. Qualifying loans include those owned or securitized by Fannie Mae or Freddie Mac. The government is working on getting other loan servicers to participate by offering substantial incentives.

If you want to find out if your loan is owned or securitized by Fannie Mae, you can call 1-800-7FANNIE, or visit www.fanniemae.com/loanlookup. Freddie Mac may be contacted at 1-800-FREDDIE, or by visiting www.freddiemac.com/mymortgage.
To learn more about the Homeowner Affordability and Stability Plan, visit www.makinghomeaffordable.gov.

Homeowner Associations and Fannie Mae Loans

Effective March 1, 2009, Fannie Mae is implementing changes to their condo financing guidelines “in light of the current condo market and the need to mitigate risk on condo loans”. Some of these changes may affect a buyer’s ability to obtain conventional condo loans for new and established condos, and have consequences for condo sellers, principal residence buyers and investor buyers in condominium projects.

Whether you're a buyer or a seller, it will pay to consider these issues in advance of buying or putting your condo on the market. You are more likely to attract a strong buyer if your HOA meets these guidelines, and if you are an investor buyer, you especially would want to find out the nature of ownership in a project if you're obtaining a loan, and even if you're a cash buyer, you would probably want to anticipate your future selling situation. Underwriters/lenders do review association documents during escrow, and these are some of the things they're measuring.

According to FNMA, these guidelines may be modified on a case-by-case basis, but here are the basic guidelines for established HOAs:

• No more than 15 percent of the total units in a project can be 30 days or more past due on the payment of their condominium/association fee payments.
• Fidelitybond/fidelity insurance required for new and established condominium projects with more than 20 units-- thus ensuring that homeowner association funds are protected.
• The borrower must obtain a “walls-in” coverage policy (commonly known as HO-6 policy) unless the lender can document that the master policy provides the same interior unit coverage. The HO-6 insurance policy must provide coverage in an amount that is no less than 20 percent of the condominium unit’s appraised value.
• No single entity (the same individual, investor group, partnership, or corporation) may own more than 10 percent of the total units in the project.
• The homeowners association must have at least 10% of its budgeted income designated for replacement reserves and adequate funds budgeted for the insurance deductible.
  

So You Want to Pay Off Your Mortgage Faster?

Like these guys, we would all like to find a way to save money. But what will it cost?

Today I received a nice letter from my mortgage lender inviting me to pay off my loan 61 months sooner by making payments twice a month. I would save thousands of dollars in interest. I couldn't agree more. All I have to do is enroll in a special plan where half of my regular monthly payment would be taken directly from my account, for a total of 26 drafts a year, which would be sent to my mortgage lender. On the second page of the mailer, there's a nice chart showing my remaining balance for the next 29 years, the new plan balance, and the equity growth I would gain each succeeding year until the entire balance would be paid off at the end of year 24.

But--couldn't you just pay more principal when you want to? Why does this plan want $375.00 from me to set up automatic withdrawals? First of all, you don't have to pay anything extra to pay down your principal, and second of all, $375.00? Didn't that used to cost $150.00 or so for those who were actually willing to pay for the service? That's probably because the people at the outside insurance agency which sets it up want their cut, too.

Paying principal down is good, but right now, I need that $375.00 for gas. I can just write in an extra amount in the principal column on the monthly statement for free.

Long Beach long beach real estate 'Voice this!

Why Buy a Home in Today's Market? It's Getting More Affordable

The $168 billion package signed off on by President Bush earlier this week increased the maximum conforming loan limit up to as much as $729,750, or 125% of the median price. Conforming loan limits are generally set on a statewide level (as opposed to FHA limits which are more local)--HUD has 30 days to determine those loan limits, but this morning the feedback is that for Los Angeles and Orange Counties, the maximum limit may be set! The information should be available by next week. (3/3/08 NOTE: limits may now be set on a county basis, and Los Angeles and Orange Counties may receive the highest loan limit.)

Buyers, it pays to pay attention right now and make plans for yourself. With new rates coming into effect in the very near future, you want to be prepared to take advantage of those lower, former "jumbo" rates which will reduce the monthly payment.

_________________________________________

So, with a little help from C.A.R., "Why Buy a Home in Today’s Market?"

1. Interest rates on long-term, fixed, and adjustable mortgages are at historically low levels. The rate on a 30-year, fixed mortgage is hovering just below 6 percent, while, by comparison, interest rates were hitting 8 percent and higher during the last market downturn in the late 1990s, and were between 10 and 12 percent at the height of the last housing boom in the 1980s. Lower interest rates make it easier to qualify for a loan, and your monthly payments are more affordable.

2. No one can put a price on the intrinsic value of homeownership. Home prices also reflect financial worth and, the good news is, across California the median sales price for a single-family home has been consistently rising for several decades. The projected median home price for a single-family home in California in 2008, for example, is $553,000. By comparison, the median price in 2000 was $241,350; $193,770 in 1990, and $99,550 in 1980. (source: C.A.R.) Also, "The percentage of households that could afford to buy an entry-level home in California stood at 33 percent in the fourth quarter of 2007, compared with 25 percent for the same period a year ago", according to a report released 2/19/2008 by C.A.R..

3. The length of time a home remains on the market before it is sold has increased from roughly two weeks in 2004 to between eight and nine weeks in 2007. With more homes on the market for longer periods of time, you have more choices when it comes to selecting a home today.

4. The multiple-offer frenzy that dominated the latest housing boom has subsided, and there is less pressure on today’s home buyers to outbid one another. REALTORS® in California reported that in 2007 only 28 percent of homes sold had multiple offers, compared with 57 percent in 2004. (source: C.A.R.)

5. The credit industry crisis that has made securing a home loan difficult for many has led to heightened scrutiny of mortgage lenders. As a result, state and federal agencies have created protections for home buyers that were not in place a year ago.

Buying a home in today’s market may be challenging, particularly for those with credit problems or little saved to put toward a down payment. But there are many factors impacting the current housing market that make buying a home today a viable option.

the above article courtesy of California Association of Realtors.

For a new site to set your own search, register at http://www.longbeachrealestate.listingbook.com/.

Long Beach long beach real estate 'Voice this!

How Today's Rate Cut Affects You

Quote of the day:

"Long-term rates, such as those for mortgages, don't respond directly to the Fed's short-term rate moves. Sometimes, mortgage rates move in the opposite direction when the Fed reduces the federal funds rate. But more often than not, mortgage rates eventually follow the Fed's lead. That might be one of the motivations of the central bank, (Richard DeKaser, chief economist for National City Corp) says -- "to help the housing market by lowering the refinance rate on many resetting mortgages. That makes it easier for people confronting resets, which we know are rampant right now, to achieve more affordable rates."

If you have a Home Equity Line of Credit, that will be favorably affected. But keep on eye on mortgage rates, because taking a cue from last week's volatility where there was an almost-unheard-of-three-quarters-of-a-percent movement in one day, you could definitely save money.

Long Beach long beach real estate 'Voice this!

What Does the Rate Cut Do For You?

Whenever the Federal Reserve increases or decreases rates as it did today, it means different things for different people. The winners will be people with good credit scores because the better your score, the better interest rate you receive. This means that if you have an adjustable rate mortgage, it's a really good time to refinance into a fixed interest rate mortgage. It's also a really good time to look for a new home--your payment will be lower with lower interest rates.

The other reason your credit score is so important is not just the rate you'll qualify for, it's the type of loan available to you. I'm including this somewhat pessimistic article (to appeal to the conservative among you) on today's rate cut, how it affects mortgage rates, and tighter lending standards compared to those of 2-3 years ago which have made certain loans out-of-reach that were once available for borrowers with lower FICO scores. At the same time, FHA loans (usually made with a very low down payment) are on the table with the Senate-passed FHA Modernization Act for an increase in loan amount to assist first-time buyers. There are in fact numerous first-time buyer programs available. In fact, the Los Angeles Times and the California Association of Realtors are hosting a free first time homebuyer fair at the Los Angeles Convention Center in April, 2008.

So if you're looking to refinance or purchase for the long term, you may have a great opportunity at this time.

Long Beach long beach real estate 'Voice this!

FHA Loan Bill May Increase Loan Limits

The FHA Modernization Bill passed by the United States Senate on December 13 will bring changes that have been fought for long and hard. FHA loans are currently limited to $359,900 in Southern California (loan amounts are regionally based), and 3% down on top of a $359,900 loan amount does not meet most of the housing market in this region. Per California Association of Realtors, "the U.S. Senate on Dec. 14 approved legislation designed to modernize the Federal Housing Administration’s mortgage insurance program by increasing loan limits, and helping troubled borrowers with subprime loans refinance into federally insured mortgages." "The bill, which has the support of the Bush administration, also would reduce the required minimum down payment for an FHA-insured loan from 3 percent to a flat 1.5 percent of the appraised value of a home. "

If passed, new FHA loan features will also streamline condo purchases, and increase loan limits to $417,000 (the current conforming loan limits for non-FHA loans). Expect these changes to be taking effect in January after the final issues are worked out between the Senate and the House.

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Guidelines for the Interest Rate Freeze

Today's news and guidelines on loans eligible for the interest rate freeze:

According to the New York Times, the goal of the President's plan is to convert as many subprime ARMs as possible into "more sustainable loans." However, the freeze applies only to borrowers who:

Took out their loan between January 2005 and July 2007 and whose rates are set to increase between January of 2008 and July of 2010; and
Have less than 3% equity in their homes; and
Are current on their payments (or no more than 60 days behind); and
Are able to handle their current lower rate, but will not be to handle a higher payment.
Analysts estimate that the plan will help between 240,000 to 250,000 borrowers.
The freeze is a voluntary agreement on the part of lenders, so no legislation is required for this plan. Analysts note, however, that congressional approval would be necessary in order to increase current FHA loan limits.


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Interest Rate Freeze on Adjustable Rate Mortgages

More to follow, but today's news, and it should be good news for many people, is that rates for loans initiated January 1, 2005 through July 30, 2007 will stay put. If your rates were scheduled for a "reset" between January 1, 2008 and July 31, 2010, the preliminary information, to be announced tomorrow, is that your present rates will not go up per your original schedule on your loan documents, but will remain where they are. If there is also a .5% drop in long term rates on the 11th by the Federal Reserve, this should indeed be good news for borrowers. There are specific terms to this agreement, of course, and two of them are most likely going to be that this agreement between the Bush Administration and the lending industry applies to those who are current on their loan payments and those who have owner-occupied loans. Click here for more information.


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You Can Lose Out by Waiting To Buy

I decided to make my post on another blog a subject for today. A reader comment at another blog prompted me to respond. The reader's reference was to Option ARM's and that they would wait to buy a home instead of getting this type of loan. which received so much bad press recently in the media. These are not the only available loans, although electronic media would have you believe that according to their massive single-topic coverage agenda. Good advice to prospective home buyers is the same now as 10 years ago--educate yourself as to your loan options, that may mean speaking to more than one broker, or asking a broker to draw up 2 or 3 scenarios for you based on different factors, such as interest rate, down payment, 15 or 30 or 40-year loan, interest-only, FHA or conventional, 1st-time homebuyer plans, down-payment assistance plans. If you first speak to your REALTOR, he/she could save you time and energy in your early loan-shopping stages by discussing some basic terms and strategies.

"Have you tried to find a loan that would work for you that’s NOT an option ARM? Option ARM’s by the way are very workable loans for the right buyer, but have you looked into a buydown loan, for instance. They were going back in the 90’s during the recession and have come back again. Essentially, part of your loan interest is pre-paid (a negotiable item with the seller if you ask) and you save money on your initial payments for the first 2-3 years before you come up to the regular 30-year fully indexed rate you agreed upon in your loan. The market is still good on numerous loan options, the key thing is having a good FICO score, but still, FHA loans (if you fit in its loan amount cap) are a good route to go if you have a score as low as 580, just know they look at you and all your risk factors and there are going to be letters of explanation for your situation. FHA loans have PMI, but that PMI is now tax deductible. Then there’s 80/10/10 conventional loans. And last, but not least, seller carrybacks are re-emerging, again a negotiated item but very successful with the right seller. So don’t close the door until you’ve looked into all the corners!"

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Attractive Loan Options

A lot of people are taking a look at the Best Places to Live lately.

First time buyers should know that there are programs returning to the loan market that have not been very active for some time. California's Housing Finance Agency has an excellent program which offers several features depending the buyer(s). In the past, the income caps on such programs were often too low to assist many buyers, but on this one, Los Angeles County guidelines allow over $80,000 annual income for up to two buyers, with higher amounts for 3 or more buyers and more units. The interest rates are more competitive than regular conforming loans, and there are features allowing for assistance in closing costs payments and down payment coverage through this program. And, this loan is available for a FICO score as low as 620, pretty unusual in today's loan environment.

FHA loans are still bound by the same loan limits--there has been a push to increase the loan limit for California due to the higher market. They also have a variety of features for down payment assistance and closing costs, however, HUD, this month, just disallowed the seller from helping on the buyer's down payment as their tracking showed there was a much higher default on this type of loan (this kind of assistance has never been available on conventional loans). But all the other loan options remain the same, including government sponsored assistance, employer assistance, and down payment from a relative. FHA loans require PMI which previously was not tax-deductible, however that changed as of January 1, 2007, making FHA loans more "user-friendly". They already have the advantage of having extremely competitive rates with certain programs. FHA loans basically have more liberal lending guidelines, including not using FICO scores (but they do look at the overall buyer risk profile), because their sole purpose is to assist buyers in need.

This IS a good time to be a buyer; and, if you're waiting for the market to come down before you buy, keep in mind that most buyers and sellers are about 2 years behind the market, so by the time you think it's a good time to buy, the market could have changed already. And real estate prices are local, so for updated information on pricing for an area you're interested in buying or selling, feel free to contact me for a market analysis.

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