AVP/SR. Mortgage Loan Originator
Alaska USA Mortgage Company
Phone: 360-679-5633 / 360-969-5550
License: NMLS#304060 / CL-157293
Starting Over: Real Opportunities in 2009
2008 was one of the toughest, most volatile years our financial systems have ever experienced – but we don't have to tell you that. In some way or another, everyone has felt the effects of this global financial crisis. So, let's skip the painful details. Let's avoid as well the impossible task of trying to predict the end of it, and let's try something different. Let's spend the first month of 2009 looking at solutions to the mortgage and real estate markets – actual viable solutions that you can use right now to help turn things around. If you're a homeowner or looking to be one in 2009, keep reading. You'll be glad that you did.
Face Your Fears
In 2008, one could argue that the biggest market movers were not just the credit crunch or a pending global recession. It was fear, a sweeping lack of confidence that suddenly gripped everyone, from major financial companies and individual investors, to consumers and governments alike. The result was not only the unprecedented financial turmoil that we're not going to discuss in this article, but also an amazing opportunity for those who aren't afraid to face that fear as the real estate and mortgage markets begin to turn – and they will turn. Perhaps they already have.
For instance, mortgage rates are currently the lowest they've been in a generation, and home prices have dropped significantly in many areas. For new buyers and homeowners looking to save on monthly payments, this is great news. Homes you might not have been able to afford just 2 or 3 years ago are now well within your reach at a rate that makes much more sense than renting, in many instances. What's more, the Federal Reserve, the Treasury Department, and even the Federal Deposit Insurance Corporation (FDIC) are using all of their tools to address the ailing economy, which many experts believe could lead to even lower rates in the near future.
For homeowners with enough equity, this means now may be the time to lock in a low rate. At the time of the writing of this article, the Mortgage Bankers Association reported that mortgage applications jumped 2.9 percent in one week in December, 77% of which were refinances with an average interest rate of 5.18% for a 30-year fixed and an average rate of 4.93% for a 15-year fixed mortgage.
If the experts are wrong and rates increase, you made a great deal. If the experts are right and rates continue to drop, just ask your mortgage professional about a "no closing cost loan". This type of loan allows borrowers to lock in today's low rate and to refinance again if the rates fall further. Just make sure there's no prepayment penalty if you're not going to stay in the home long enough to recoup your investment.
The Waiting Game
While it may not be the right time to try and flip a home for a quick profit, if you're planning on a longer-term investment, it makes a lot of sense to take advantage of this rare combination of discounted prices and lower rates – especially for first-time home buyers.
Did you know that a $7,500 tax credit is now available to first-time home buyers? This special tax incentive was created as part of the Housing and Economic Recovery Act of 2008 to help stimulate the housing market, and yet very few people seem to know about it. This program provides qualified first-time home buyers (anyone who hasn't owned a home in the last 3 years) a tax credit of up to $7,500 on either the 2008 or 2009 return. Add this to the list, and waiting any longer to jump in on today's buyers' market just doesn't make a lot of sense.
There are, of course, income limits and other qualifying factors involved in this special tax incentive, but call the mortgage professional who supplied you with this issue of YOU Magazine and run the numbers. See what makes sense for your individual goals and needs.
Sure, home prices could drop even further, but they could just as easily begin to increase again in the next few months – no one knows for sure. But for those looking to refinance, playing the waiting game could prevent you from moving forward if home prices do continue to show weakness and your home fails to appraise. More importantly, you need to review your credit now, and make sure there are no issues that will force you to miss out on a great deal.
With increasing default rates for mortgage and other consumer debt, great credit management is rewarded with the lowest rates available and higher rates can be expected for others. Take a look at your credit report. Experts state that errors can be found in over 80% of all credit reports which can impact your FICO scores. In many cases, the information can be easily corrected but the time to discover an error is not within 30 days of an expected closing. Be prepared, act early, and seek advice and direction where warranted.
It's important to note that mortgage rates are based on the performance of mortgage-backed securities (MBS) and rates can change several times throughout the course of a single day. In fact, MBSs have been so volatile recently that movements in the markets that used to take weeks or months now take only days or even hours to make.
The best path to follow is to complete a loan application with an experienced mortgage professional you trust, someone who has experience and access to up-to-the-minute MBS data. Agree on a target rate beforehand and authorize him or her to lock it in when he or she deems appropriate. If rates reach that level or appear to be going higher, he or she can lock it for you without having to track you down first to get your permission.
Remember, buying a home is the largest, most important investment most Americans will ever make. But it is also unlike any other investment available today. After all, you can't live in a mutual fund, and you can't raise your children in a money market account. Buying a home is still the best long-term investment you can make today – the turmoil of 2008 doesn't change that fact. And by buying or refinancing now you could be getting in near the very bottom of the market.
Well, that's not exactly true. From about 2000 to 2007, increasing home prices made financing a home very easy for just about anyone. Even for borrowers with a low credit score, mortgages were available with no down payment, and some programs didn't require any documentation at all.
Those days are gone. The exotic mortgage products that fueled the last real estate boom no longer exist, for the most part. Also missing from the mix are "sub-prime" loans. Until stability is seen in the housing markets, don't expect these to return.
Today's mortgage market looks more like it did ten years ago, before the rise and fall of exotic mortgages and the sub-prime collapse. That means you will have to have a good credit score, be able to fully document your income, and, with the exception of some government loan programs, you will likely need to put some money down.
The good news is that there are options available to help you overcome these challenges and take advantage of today's buyers' market. Yes, credit standards have tightened a bit, but with a solid credit score, home financing is absolutely available and affordable to everyone. Documentation will definitely be required, and expect that you will have to provide your last two years' tax returns, W-2s, paystubs for the most recent 30 days, and three months bank statements.
The following are highlights of a few mortgage programs that will help you succeed in today's market. Print out this material and review it with your trusted mortgage professional for full details on each program.
FHA Streamline Refinances
FHA 203(k) Mortgages
Normally, when you want to purchase a fixer-upper, you first have to secure financing to buy the home, then secure additional financing to repair the home. These short-term loans can be expensive and difficult to obtain. With an FHA 203(k) loan, the borrower can get just one mortgage loan to finance both the acquisition and the rehabilitation of the property, making this program ideal for purchasing foreclosed properties at major discounts.
These loans are a bit more complex, especially for first-time buyers and refinancers (there's also a "streamline" version of this program), but it's definitely a viable option if you're looking to make homeownership even more affordable in 2009.
But don't be fooled by the "rural" part. You don't have to live on a farm or in the country to utilize this amazingly affordable program. In fact, there are a surprising number of qualifying areas in both large and small states and cities, so this is definitely an option that's worth investigating if you're looking to buy a home – and here's why:
There are some important residential, marriage, and other qualifications that need to be considered, so talk to your mortgage professional for more information on VA mortgages and any of the programs mentioned in this article.
License AK# 157293 Washington Consumer Loan Company license# CL-157293 California Residential Mortgage Lending Act, License# 4131067
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Oak Harbor, WA 98277
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