The tide will come back in for the Real Estate Market

If you are worried that the Real Estate market is over, I think you need to draw on a simple metaphor. The tide goes out and the tide comes in. You need to trust that the tide will come back in. Nothing ever stays the same and something in the universe is always at work. The Real Estate market will come back. It has gone down before and come back, it will do it again. The savvy investor will be out buying, the rest will wait and see what happens. What will happen is that values will go up and the ones who were waiting to see what happened will wish they didn't.

Don't wait to buy real estate, buy real estate then wait.

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What Interest rates have to do with the current housing market

Over the last few weeks the Subprime mortgage market has been devastated if not killed off. We have seen multiple companies go out of business. Large players such as Novastar, New Century and even First Magnus have gone into bankruptcy. Even Countrywide the nation’s largest mortgage lender is teetering on financial disaster. We are now seeing the impact of these high risk loans play out in the real estate market as well as on Wall Street. The panic over the liquidity in the mortgage markets has definitely spilled over into the real estate market in a big way. If you look at the run the real estate market had in 2004 & 2005, the market force in the market was the availability of multiple loan programs and low interest rates. Low interest rates made it cheaper to buy a home than to rent. In this time many people were buying homes on first lien home equity lines. If you look at the prevailing rates for these home equity lines, they were around 4.25%. If you compare the same rate for that mortgage today you would be at 8.25%. Not only was money cheap but you could even buy a home with no money down and no proof of income, employment or assets. No documentation loans made it easy for anyone with high credit scores to obtain a mortgage. Many of these buyers had no business buying a home. They could buy because they could. The rules for lending have changed. That type of borrower will no longer be able to obtain this type of financing. You must now demonstrate your ability to repay your mortgage.

What does all of this mean to the current real estate market? Since the Subprime meltdown, mortgage companies have pulled back on the types and loan to values of mortgages they are offering. It is no longer enough just to show up at the closing table with your good credit score. You must demonstrate your ability to repay the loan. The no documentation or liars loans, as they are often referred to have disappeared. The 100% financing loans have also begun their recession. Borrowers will now have to have some skin in the game. Many of these high risk loans had borrowers bring no money down to the transaction. If things get bad, there is nothing to loose. Walking away from the situation is easy. It is true that you will end up with a foerclosure on your credit report, but the impact is still less than a bankruptcy. If you have put a down payment down on a property, a borrower would be more inclined to try to work it out and try to keep the property rather than to just walk away.

If I am selling my home what does this mean to me? What it means is that the pool of buyers has shrunk considerably. The tighter the lending guidelines get, the fewer buyers there will be to potentially buy your home. You might expect to see the value of your home drop as well. It is just simple economics. As demand goes down and the supply goes up, your home becomes worth less. If you don’t need to move don’t. If you do, you may want to consider renting. Real Estate cycles don’t last forever and it is likely market conditions will change in a few years.

If I am a buyer what does this mean to me? If you are in a position to buy, you may not have a better time to purchase a new home. With low interest rates, lower property values and anxious sellers abound, you may not find a better time to buy for years to come. There are still many programs that will allow you to buy with no money down. You may want to talk to your real estate agent about negotiating a seller to pay for your closing costs. Many Fannie Mae loan programs will allow a seller to pay for up to 6% of your closing costs. This would be enough to pay all of your costs and even buy your interest rate down to a more attractive rate. Sometimes the best time to buy is when nobody else is. The deals of a lifetime could possibly be right under your nose. At some point you need to give up the fact that this in not 10 years ago, it is now and these are the market conditions. You may kick yourself in another 10 years and say why didn’t I act then. Following the flock may not get you want and it may not be prudent. Trust you gut and make your move. Life is risky, but owning property over the long term is usually a winning proposition.

For more information on Fannie Mae 100% financing please visit GetPrequalified.com. While you are there you can check your credit and find other valuable financial services to assist you in the home buying process.

DebtFreeDave
Mortgage Broker

No money down financing may be dead in some states due to declining real estate values

If you live in an area that appraisers are checking off declining market on their appraisal report, your underwriter may reduce your property appraised value by 5%. Fannie Mae and Freddie Mac will also take 5% right off the top. If a loan officer is telling you that they can get you 100% financing you may want to ask them a few more questions. Ask them if you are going to get dinged 5% for a declining market. You best bet for getting a home these days is to have some money down in the transaction.

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Citibank lowers their loan limits to 85% LTV

Citi Mortgage a division of Citbank will be lowering their Max loan limits to 85% Loan to Value. Declining markets deemed by Citi Mortgage are in Arizona, Colorado, Maryland, Ohio, California, Washington DC, Florida, Massachusetts, Michigan, Pennsylvania, Tennessee, Virginia, Nevada, New Jersey and West Virginia. Not all counties are subject. You will need to check your Citi Mortgage executive to see if you county is excluded in each of the states listed above.

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Did Fannie Mae put your home in a Declining Market Status?

Across the country property values have done a free fall while some areas have remained relatively stable. In Maricopa County Arizona, Fannie Mae has declared this county a declining market. What this means is that every appraisal that they look at, they are going to cut the value of the appraisal by 5%. What this means now is that you will have to have to put money down if you want to buy a home. They will no longer do 100% financing. If you are trying to refinance, you better have equity in your home or they will no longer look at you.

There are portfolio lenders out there that will still do one hundred percent financing, they just charge a higher rate for it. US Bank still offers 100% financing in areas that are deemed declining by Fannie Mae, you can expect to pay about 1.25% higher rates over conventional lenders that sell their loans to the Fannie Mae and Freddie Mac corporations.

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