Home Buyers Face Decisions that Affect Their Long-Term Financial Picture

Taking the step into home ownership is one of the most important financial decisions a person will make in their lifetime. There are many factors to consider when embarking on this venture. Literally hundreds of loan programs are available, and it is important to find the one that best fits your personal long-term goals.

 

First and foremost, you must have a mortgage consultant in your corner that is willing to take the time to know what your long-term goals are. Communication is the key factor here.

Curious prospective home buyers sometimes turn to Internet-based services just to see what current interest rates are. But a faceless web site will not take the prospect's future financial planning into consideration or guide the potential borrower through the many nuances of the loan process. When shopping for a home loan, be wary of web-based services that offer programs to reel prospects in with attractive rates that are based upon unrealistic time frames.

If a lender is offering a terrific rate based on a 10-day lock-in period, it is unlikely that the potential home owner would actually be able to find their dream home, get through the negotiation process and win approval from a lender within such a short period of time. This is called short-pricing, and when it comes time to close the transaction, the rate that was originally offered is simply no longer available. As a result, the unfortunate prospect is bulldozed into a loan program with a higher interest rate.

It is highly unlikely that a qualified loan originator whose business is based upon referrals will use unscrupulous tactics such as this to get new customers in the door!

 

Once you have found a mortgage consultant that you feel comfortable working with, lay your goals out on the table because it will have a tremendous impact on choosing a loan program that meets your specific needs. One of the most important factors to consider is how long you wish to borrow the money for. For example, if you know you will only be in the home for five years, it wouldn't make sense to opt for a 30-year loan program or pay points up front to secure a lower interest rate. You would not be in the home long enough to benefit from such action.

Your mortgage consultant should be able to narrow down a selection of programs based on the information that you have provided, and present you with an easy-to-read spreadsheet that clearly defines viable options for your interest rate and amortization schedule, monthly payment and any potential savings you may realize by paying points up front.

 

Moreover, a reputable loan originator will not hesitate to share this information with your tax consultant or financial planner so they may offer additional feedback on your behalf.

 

Home ownership imparts a rewarding vehicle for building wealth and a strong financial future. The mortgage consultant that you choose should be there not only when your loan closes, but should also provide you with ongoing service to assist you in managing that debt over time.

Dubai and Interest Rates

On Friday morning Dubai World, a government owned investment company asked for deferment of payments on approximately $80 billion in debt to various banks and investment companies around the world. Although a relatively small problem in this world of trillions stock markets around the world were rocked by the news. Indeed, it seems that the global financial markets may be more fragile than we had suspected.

As money left the stock markets it flew into dollars and US Treasuries and mortgages. This is actually good news for a couple of reasons. First and most obvious is that when bond prices go up the yields drop. This is good for interest rates on borrowed money like mortgages that no longer have to compete against higher yields driving rates down.

The second, and perhaps more important implication, is that for all the talk of the decline in the dollar as currency of choice and decline in US dominance when push comes to shove the world would still rather be in US dollars and US treasuries than in other secure investment alternatives. This sort of market activity is normal and it is exactly what should happen in times of economic uncertainty. It's nice to see the markets acting like they should when problems occur.

One last word of caution. With all of the investment companies, banks and governments involved in the Carry Trade Dubai's troubles could be the least of our worries. At some point in the very near future inflation will begin to real it's ugly head and rates WILL rise and probably quickly. When this happens all of those highly leveraged trades will have to be unwound and we may have a whole new round of write downs, this time on safe secure holding like treasuries that have been levered up by 10 times or more and rely heavily on a weak dollar. When this happens rates will already be on their way up and this unwinding will exacerbate the problem further and could drive rates higher faster than we would expect.

I don't want to sound doom and gloom here or imply that Dubai's problems are the beginning of the end. Ultimately, they are a small blip that probably got a lot more attention by the market here in the US than they should have because it was the day after Thanksgiving and their wasn't anything else to talk about till Monday or Tuesday when we start getting Black Friday numbers back. Just be cautious and don't get greedy. If your looking for a mortgage or other loan rates are at or near the lowest point they have been in a generation and holding out for an extra 1/4 point is not only foolish but dangerous to your bottom line. Get you loan, put a big smile on your face and enjoy the holidays.

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Why Are Rates So Low?

People call in every day looking for loans. Business is brisk and rates are still really low. Frankly, I was a little puzzled about this most recent rate drop because the data suggests rates should be higher. After all, the Fed has stopped buying treauries while our government continues to borrow money like a shopoholic with a new credit card. At the same time they are also slowing down the purchase of mortgage backed securities and will stop next March. Don’t forget that all this spending WILL cause a spike in inflation and rates MUST go up as a result.

This is all public knowledge so why then are rates down near their lowest level of 2009? The answer lies in supply and demand but not how you may think. In June and July, when rates were up, fewer loans were closed. As a result, as these loans come to market about 3 months later there are fewer loans to available to buy. So even though the Fed has slowed their buying substantially they still made a significant purchase of the AVAILABLE supply of mortgages. Once the current, much higher, volume of loans hits the market supply and demand wins and rates must go higher. The only way this would not occur is if a buyer came in and soaked up the increased supply. This is not likely given inflation concerns and the availability of other well perfoming investments.

So there you have it. Rates will be higher and we can predict with relative certainty when this will occur. Like all markets things don’t move in a straight line so there will be opportunities to lock in on dips in rates as we move higher but expect to see rates in the high fives or low sixes by the middle of next year.

Mortgage Rates Stay Below 5%

Mortgage Rates Stay Below 5%

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Great Video on the Homebuying Process

This is a great recording I had prepared to review the homebuying process. It does a fantastic job of explaing the entire process without getting bogged down in all of the fine details.

Take a few minutes to watch and listen and make sure to pass it on to anyone you know who needs the info.

Jeff

The Million $ Challenge --IMPORTANT

I'm on a mission. Between June 1st and the end of November my goal is to help 125 first time homebuyers get into their own home to take advantage of the $8000 first time buyer tax credit. Why 125 people? Well, if I reach my goal I will have helped to pump one million dollars back into the local economy at the consumer level. (8000X125=1,000,000). Given the current state of our economy I think that if I have the chance to make a difference not just in the lives of the people buying homes but also in the economy at large I need to take up this challenge.

Not only is this a great idea for the economy it's just a great time to buy a home. Rates are down, prices are down and bottoming, sellers are motivated to offer incentives and you get $8000 for buying from the federal government.

This is not an easy task and not one that I can do all on my own. If you know someone who should be buying a home contact me at the office at 541-342-2535 or email me at jeff@evergreenpacificmtg.com. If you're a real estate broker I am looking for 5 brokers to take up the challenge of selling 25 homes between now and the end of November. If you believe you can do it give me a call.

Finally, remember that this credit only lasts till November 30th and it takes time to find a home, negotiate, get a loan and get the home closed. Also, with so many of the listings in short sale this time can be extended by 2 to 4 months. Now is the time to get going.

100% Rural Housing Video

I recently did a webcast on the Guaranteed Rural Housing loan. This loan is about the only loan left that can give almost any person purchasing a home 100% financing. This 30 yr fixed loan has easy qualifying, no prepayment penalties and no monthly mortgage insurance payments. best of all, you don't have to be a first time buyer to take advantage of this great loan.

Watch and enjoy.

Realtor Financing Presentation Ron Quintero

Realtor Financing Presentation Ron Quintero

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What's important About Loan Amount?

What's important About Loan Amount?

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An Open Letter

I recently received a letter in response to an email I sent out promoting a video I prepared on the benefits of buying versus renting. Here is the letter and my response:

Jeff, Thank you for this great video. It is a tough market and I guess if

anyone apart from big investors had a little cash or in fact no cash but

everything else was good could really make some money.

I have often said, " if only we knew that home values would increase in

7 or so years we could really have made some money." but no one is

doing anything.....I am waiting for everyone to "wake up" and the economic

unemployment situation to improve a bit, so there is more of a guarantee.

JS

"JS:

I believe that it is our duty to spread the word and to influence those who most need to take advantage of this great market. I feel that now is absolutely the time to move with courage and conviction and stop buying into the fear mentality. We, the long time professionals, have a responsibility to make things happen! Use this video! Send the link to all of those people you have in your database who are worried about their future. The current economic situation is the exact reason that those people should be buying.

Once this market turns around (and it will) the pent up demand created by this market is likely to cause a huge spike in demand and force bidding wars and price hikes like we saw just a few years ago. Don't ever doubt the cyclical trends in the real estate market. History tells us that this WILL happen. Doubt my words? Just look at Southern California in the mid 1990s. Employment sank, prices dropped like a rock and no one could sell a piece of real estate to save their life. By the late 1990s and all the way until 2005 real estate skyrocketed! Even here in Oregon we had terrible unemployment in the 80s but by 1992 Springfield was posting returns at over 18% per year. This current situation may appear more extreme but you must continue to believe.

Do your clients a favor and make sure they really understand how the real estate market works; how any market works. Make sure they are not like all the others and buy high and sell low. Make sure they understand what we already know in our hearts to be true, that real estate is the best investment and that the most important investment you can make is in your own home.

NOW GO SELL SOMETHING!

 

Jeffrey "

If you've ever wanted to buy real estate either as your own home or for investment there really hasn't been a better time. According to the National Association of Realtors the last two months have been the best time since at least 1970 to buy a home. Now is the time. Call me if you want to get more information at 541-342-2535 or email me at jeff@evergreenpacificmtg.com.

Mortgage Market Update from Our Friends at Mortgage Market Guide

Last Week in Review

 

 

They say no news is good news. But perhaps the more important question this week is will the Fed's news from their latest Federal Open Market Committee Meeting be good news for rates and the economy? Here's what you need to know. Last week, the Fed released their Interest Rate and Policy Statement after their latest regularly-scheduled meeting of the Federal Open Market Committee. While there was speculation ahead of time that the Fed may decide to buy more longer-term Treasuries, which could jumpstart the cycle needed to eventually bring home loan rates down, the Fed did not make any changes to the Fed Funds Rate or their Bond purchase program. The one change from the prior meeting's statement was that the Fed now does not see deflation as a risk. While this is good news, it also means that there could be a real threat of inflation down the road. And remember, inflation is bad for Bonds and home loan rates, so this could have a big impact on rates in the longer term! There was good news in the Personal Income Report as personal income rose in June by its biggest gain in over a year. The increase in income led to higher consumer spending and savings in June. Spending rose for the first time in three months, while the savings rate climbed to its highest level since December 1993 as the chart below shows. ----------------------- Chart: Personal Savings Rate 1990 to 2009 Keep in mind that a high savings rate is a double-edged sword ... it's good to see people saving, but spending is the lifeblood of a strong economy. The Durable Goods Report also brought good news, as did Consumer Sentiment, which was better than expected. Durable Orders came in better than expected for May, led by orders for airplanes and machinery. Although one report doesn't make a trend, the reading is encouraging and may signal that the economic slump is starting to ease. But there was still disappointing news on the housing and job market fronts. Both New and Existing Home Sales came in below expectations and Initial Jobless Claims came in a bit worse than expected, indicating that the job market continues to be weak and slow in stabilizing. After all the news of the week, Bonds and rates managed to break above important technical levels to end the week .25 percent better than where they began with a little help from some solid Treasury auction results. FORGETTING SOMEONE'S NAME IS NEVER GOOD NEWS! CHECK OUT THIS WEEK'S MORTGAGE MARKET VIEW FOR SOME GREAT MEMORY IMPROVING TIPS.

 

Forecast for the Week

 

 

A holiday-shortened week is ahead, but that doesn't mean there won't be any news. Tuesday's Consumer Confidence Report will show us how consumers are behaving based on recent economic news and may indicate if increased consumer spending is likely to continue. There will also be important news to note in Thursday's Jobs Report for June, especially given the mix of good and bad news in May's Report. On the good side, the number of Jobs lost in May was much lower than expected. However, the unemployment rate (which is determined from a different survey) came in higher than expected. As mentioned above, last week's Initial Jobless Claims were worse than expected, so this week's report will be interesting to see. Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. As you can see in the chart below, Bonds and rates were able to break above an important level with help from the Treasury auctions. I'll be watching to see if Bonds and rates are able to remain above this level and improve further. Both the Stock and Bond markets will be closed on Friday, July 3 for Independence Day. Have a safe holiday. Chart: Fannie Mae 4.5% Mortgage Bond (Friday Jun 26, 2009)

 

Debt Consolidation Analysis

Debt Consolidation Analysis

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Alternative Economics

My friend and mentor, Steve Hettema,wrote an article a little while back that I feel really encapsulates what I am trying to do here with "Wealth Matters". In fact, I so wholeheartedly beleive in Steve's message that I joined his National organization of investment clubs, the NSIC, and started my own chapter called The Willamette Investor Group.http://www.willametteinvestorgroup.com. Steve will alos be in Eugene on June 13th for a full day event we have opened to the public (http://OregonBootCampBlitz.com).

To read Steve's article you can go to http://ezinearticles.com/?id=1248224

First Time Homebuyer Tax Credit

Never More Affordable

For the last 39 years the National Association of Realtors (NAR) has been gauging the affordability of homes across the US. Amazingly, the number just released is the best number since the report began. What this means is that this is the absolute best time to buy a home since 1970. Actually, since the report is only 39 years old it is possible, and likely, that this is the best time in nearly 50 years to buy a home. With rates having gone even lower since the report came out affordability is now through the roof and it's time to buy. Take a look at the history of the index and see for yourself what a great time it is: http://www.mortgagemarketguide.com/download/conarchy/Affordability_1970_88.pdf

http://www.mortgagemarketguide.com/download/conarchy/Affordability_1989_2009.pdf

8000 tax credits, low rates and now the most affordable housing market in a generation. GET MOVING!

New Lending Changes to Get You Buying

Two new important changes have happened in the world of home loans. The first and best publicized is the new $8000 tax credit being offered to first tiime homebuyers. Unlike the current credit this one does not have to be paid back if you stay in the home for at least three years. This credit is for home purchases from January 1st till the end of November, 2009 and will give the full $8000 credit to any first time buyer earning up to $75,000 as an individual or up to $150,000 as a couple. However, you do not need to have paid income taxes to receive a credit. This is an improvement over last years attempt at a $7,500 "credit" that was actually a long term interest free loan from the government. The prior credit was a turnoff to many would be buyers because it felt like you were being forced into a situation where you owed the government money for the next 15 years.

The second change comes for investors who own more than four financed properties. As I wrote in my last entry currently both Fannie Mae and Freddie Mac have reduced the number of financed properties a person can have all the way down to four. Although to some people this may sound like a lot of real estate there are tens of thousands of investors who have been taken out of the market at a time when we need well qualified buyers to buy as much of the inventory of available homes as possible. Now, recent changes in these guidelines once again will put the number back up to ten allowing these buyers the chance to buy up the over abundant inventory of homes and help stabilize the market. I would argue that theses people are exactly the kind of people who should be able to take advantage of this market. These are the buy and hold landlords who keep property forever and whose job it is to provide quality housing to tenants. Bravo to Fannie and Frddie for seeing it MY way.

If you've been reading my prior posts you know there are still a couple of imortant changes that need to happen (ie, Seller funded DPAs via HR 600 and the reintroduction of Stated Income loans done the old fashoined way) but these are definitely two important steps in the right direction.

The Problem With Rate Fixing

So I'm sitting here watching Forbes on Fox on a Satuday morning (yes, I have no life) and the talking heads are discusing the newest Republican plan to fix rates at 4%. Fortunately, most of them think this is a bad idea, they just don't know why so let me tell you.

Currently, we have the lowest national average for mortgage rates ever and it will likely be dropping a bit more as the Fed continues buying mortgage backed securities. That said, the lending guidelines that are set by Fannie and Freddie make these rates available onlty to the most deserving of borrowers. The people I help every day have 700 or higher credit scores,a 75% or lower loan to value, a good stable job they've had for years and plenty of assets. These people have a good rate but are looking for a great rate. Good for them but this will not help the housing market or stimulate the economy in any real substantive way. What we need is guideline changes that make acquiring a home easier. So far nothing has been done to fix the real problems and the fixes are readily available and free to implement.

There are three main changes that would create an immediate improvement in the marketplace and serve to stabilize the housing market. The first change that needs to be made is the reauthorization of Seller Funded Downpayment Assistance Plans. Non-proftis like HART, AmeriDream and others have been around a long time and only recently have come under scrutiny. The programs were legislated out on October 1st of last year due to data that indicated a higher default rate among those who use these programs. Much of the data used ny HUD and the Fed has been deemed erroneous however and now there is a movement to bring these programs back. HR600, a new bill in congress, has bi-partisan support and will likely pass. The difference between this law and others is that access to these programs is now limited to a higher quality of borrower. Passage of this bill is critical to getting first time buyers back to buying homes.

The second change that must be made is that stated income loans must come back. Whoa!, you say, weren't these loans the biggest problem? I answer, yes and no. Stated income loans have been around and successfully used for years. Long before anyone could get one of these loans and simply lie about their income these loans were used to help the successful, self-employed borrower with good credit and assets get a 70 to 80% loan. There is a way to do stated loan correctly and the Fed acted irresponsibly by simply outlawing them altogether. Now, successful, well off self-employed people are out of the market. There are 100s of thousands of these borrowers who would buy in this market in a heartbeat if they could. Guidelines can be implemented that keep the market safe and allow these peopke to still get in the game.

Fianlly, we need to allow buy and hold real estate investors, the professional landlords, to buy more property with Fannie and Freddie loans. Currently, guidelines allow these people the have only three financed investment properties and only four total financed properties. Until recently that number was nine. The rationale to the reduction is to lower the risk of the downturn to Fannie and Freddie. However, I beleive there is a way to determine if someone is a speculator or a landlord who buys and keeps real estate and we should allow landlord borrowers who are good at owning and managing real estate to buy up more of the inventory. This step would eliminate many of the vacant homes and would allow the low end of the inventory to get soaked up right away by people whose job is to provide housing for others. Keeping these quality borrowers out of the market is shameful.

Some people will read this and think "isn't that what got us into trouble in the first place?" While on the surface this may be true remember that these guidelines and programs were available long before the current housing/credit bubble and worked just fine when they were implemented with a little sanity and lenders used solid underwriting principals and some common sense. Ultimately, the lending pendulum is going to have to swing back toward a neutral center to get things back on track and no low rate price fixing will help someone who isn't allowed to buy or can't afford a downpayment.