Via Claudette Millette - Metrowest Mass Buyer Broker (The Buyers' Counsel):

A recent survey by the National Association Realtors showed some surprising results in the ever-changing habits of home buyers.  

An eight-page questionnaire was sent out to over 100,000 consumers who had purchased a home between July 2008 and Jun 2009.  They were asked to rank the usefulness of certain information sources typically used by Realtors® to market homes. 

The best news is that for the first in years, the real estate agent has come out on top. When asked which information sources they found to be useful consumers ranked as follows: 

 

• Real estate agents 81%
• The Internet 77%
• Yard signs 42%

Open houses came out low in the ranks with 10% of buyers finding them to be very useful and 25% said that they were somewhat useful. 

But where are buyers actually finding the homes that they eventually buy? 

• 36% found their homes on the Internet
• 36% discovered the home from a real estate agent
• 12% from yard signs

Happily, the most effective methods for selling a home are also the least expensive. Only 4% of buyers said they found their homes via newspapers, home books, magazines and television.  

Many of us still find open houses to be a good way to meet the public as well as an effective way to expose homes to buyers. 

But according to this latest survey - consumers, apparently, do not agree.

Copyright 2010 - Claudette Millette, Broker, Owner, The Buyers' Counsel 

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Via Jeff Belonger -- The FHA Expert.com -- FHA Loans -- FHA mortgages - USDA loans (Infinity Home Mortgage Company, Inc):

 

When is it a good time to buy a home?

Important interest rate info below. Please read ...

 

 

First time homebuyers have been blessed with low mortgage interest rates and the first time homebuyer tax credit.  We have heard so many times in the last 12 months that now is a great time to buy. But is this true?  So when is it a great time to buy as a first time home buyer or even a regular borrower?

Let me keep it simple.  The best time to buy a home is when you are ready to buy. It should not be an impulse, for those that buy when they are sad or happy. Or just because your friend or neighbor bought a house. Or to keep up with the Jones's.

In the last 2 years, buyers have been very lucky with low interest rates in the high 4's to mid 5's and because of the first time home buyers tax credit. What it comes down to is knowing the future and the what ifs. No, I don't have a crystal ball, but the writing could be on the wall. Let's explore some.

 

 

 

The Federal Reserve implemented a plan to help keep mortgage interest rates low. It was a way to keep buyers' fears low and hopefully to help stimulate the economy.  Here is a press release from Nov. 2008 - Federal Reserve announcement in buying mortgage-backed securities & GSE's - This was the original plan. What is the plan now?  There is news that this plan will come to a halt. And I feel that all buyers and anyone related to the real estate market, should know now and not later. And not be told as it is actually happens.

So what does this all have to do, especially with first time homebuyers?  I hate to be the bearer of bad news, but this needs to be talked about and now. Interest rates could climb higher in the next several months or so. 

 

 

 

Is time running out to buy a home?

 

 

No, time is not running out. People will always buy homes.  But it should come with careful consideration and planning. And much of this planning should come from a very knowledgeable loan officer.  You should not just buy because you could get a tax credit or because mortgage rates are low.

Here is a question and answer fact sheet put out by the Federal Reserve. FAQs: Purchasing Direct Obligations of Housing-Related GSEs - And here is an excerpt specifically stating the Feds backing out the direct obligations.

 

 

 

 

 

 

 

 

Lastly, you have the first time homebuyer tax credit which is due to expire with homes under contract by April 30th, and that close before June 30th. Detailed information on the home buyers tax credit can be found here : Tax Credit for home buyers -

 

Summary :  There should be no need for panic. I wanted to supply information and educate, because if you a serious first time homebuyer or any other type of buyer, you should not be sitting on the fence, waiting for interest rates to drop or home prices to drop even further.

One fear of mine is that we could see rates go up as high as 7% by the end of the 3rd quarter. Let's just play devils advocate and say they go from 5% to 6%. On a $250,000 loan, your payment would go from $1,342.05 to $1,498.88 a month.  That is a monthly difference of $156.83.  That turns out to be a grand total of $1,881.96 a year.

 

 

 

 

Again, I don’t believe in negative news to instill fear and or panic. But I do believe that many should be aware of this. If you are a serious buyer, just don’t be caught with your pants down or listening to someone else that might not understand the value of our economic issues.

And keep in mind that you don't need 20% down or credit scores above 700.

Please read : FHA loans with 3.5% down  &  Rumors why FHA loans are bad 

 

 

 

                    

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For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags!

 

 

Copyright © 2010 by Jeff Belonger of Infinity Home Mortgage Company, Inc

Via Mortgage Support Services:

We get a lot of questions about debt-to-income ratios these days.  Here are the underwriting guidelines for the various types of loans: 

Conventional (non-government) loans:

• If the loan is underwritten manually (by a person), the debt-to-income ratio (DTI) is 36%.  If the borrower has strong compensation factors, the DTI can be as high as 45%.  Compensating factors include such things as very high credit scores, large down payment, large amount of reserves (money in the bank), etc.
• If the loan is underwritten by the underwriting software that is available to some lenders, the DTI ratio is 45%, and it can go as high as 50% with strong compensating factors.
• IMPORTANT NOTE:Individual lenders are allowed to impose their own, more restrictive DTI guidelines on top of Fannie Mae's, so make sure you are using a lender who does not do that.
• SUPER IMPORTANT NOTE:Private mortgage insurance companies impose their own, more restrictive DTI guidelines on top of the lender's guidelines and Fannie Mae's guidelines.  At the moment, 41% is the maximum allowable DTI at most private mortgage insurance companies.  Their guidelines change constantly, so this needs to be checked every time a loan is originated.
• In the old days, there were two DTI ratios for conventional loans - one for the housing expense ratio and one for the total expense ratio.  Fannie Mae no longer uses two DTI ratios.

FHA loans:

• Unlike Fannie Mae, FHA uses two DTI ratios.  The front-end DTI ratio (housing expenses) is 31% and the back-end DTI ratio (total expenses) is 43%.  This only applies if the loan is manually underwritten.
• If the loan is underwritten by the software FHA provides to some lenders, then the ratios are not specified.  It depends on credit scores, down payment, reserves, etc.  We commonly get approvals from the software for ratios of 40-46% for the housing ratio and 50-55% for the total expense ratio.
• Lenders are allowed to add their own, more restrictive guidelines on top of FHA's, so it is wise to use a lender who does not.
• Mortgage insurance is not an issue with FHA ratios because FHA insures the loan.  There are no additional restrictions for mortgage insurance with FHA loans.
• If a borrower is using alternative credit (they have no credit scores and are using other trade lines to establish credit - rent, utilities, etc.), then they are restricted to the manual underwriting guidelines - 31% front-end and 43% back-end.

VA loans:

• VA only uses one, total expense ratio as well.  It is 41% if the loan is underwritten manually.
• If the underwriting software that VA supplies to some lenders is used, then the DTI ratio is not specified.  We typically see loans approved with DTI ratios in the 45% - 55% range.  It all depends on credit scores, reserves, etc.
• Lenders are allowed to add their own, more restrictive guidelines on top of VA's, so check with your lender before assuming VA's guidelines can be used.
• There is no mortgage insurance with VA loans, so there are no additional restrictions related to mortgage insurance.

Via Sandy Shores, Melbourne/Palm Bay FL, Brevard County Real Estate & Investing (M & M Real Estate Inc. www.SandyShoresMelbourne.com):

We see them all the time, those houses listed for sale that need a good cleaning.  The carpets need to be shampooed, a room or two needs a coat of paint.  The yard needs a good mowing and the bushes need to be trimmed back.  The house needs some of the junk cleared out of it.  Box it up and get rid of it.  The house is unkempt and/or poorly maintained. It may be like this for any one of a number of different reasons: divorce, family illness, elderly owners or a death.  Or the owners just may not be the tidiest people on the block.

The buyer walks in, takes one look, and cuts $5000 off the price for painting. Hey, wait a minute, only one room needs to be painted.

They cut $5000 off of the price for new carpeting. Wait, the carpets just need a good cleaning.

The house is in a state of disarray.  Another $5000 because the house is poorly maintained.  Wait, nothing a good cleaning wouldn't take care of.

The buyer walks back outside, the lawn in not cut, nor have the bushes been maintained.  There goes another $5000 off the price of the home. 

The buyer begins to get nervous. Then, the buyer thinks about it a while longer. Well, if all these things haven't been maintained that I CAN see, what deferred maintenance is there on this home that I CAN'T see? 

What else is wrong with the house?

What about the big ticket items? Has the A/C been serviced and the filters been regularly changed?

What about the roof?  Maybe there are leaks that I can't see.

Have the appliances been kept in good working order?  

What about the electric and the plumbing? 

What hasn't been taken care of over the years that will break after I buy this house? 

It's valid thinking and these are very real concerns when looking at a home in less than desirable condition.

Then the thinking becomes, these sellers are desparate.  They need someone to take this property off their hands.

If the buyer makes an offer on this poorly maintained property, it typcially will be a low one. 

Or what if the buyer just says, 'Oh forget it, I don't want to buy this place.  There are just too many things wrong with it." 

The buyer walks away.

This home may sit on the market for many months, unsold. 

How different would this scenario have been if those rooms had been painted, the clutter had been removed, the carpets had been cleaned, and the lawn and bushes had been properly mowed and trimmed BEFORE this home went on the market?

Sandy Shores REALTOR®, Melbourne/Palm Bay FL Real Estate

Brevard County, Florida's Space Coast Real Estate & Investing

I specialize in Residential, Investment & Relocations.  We have a team of professionals that can help  with your Short Sale.

I buy, sell, rent, own and manage Investment Property

 

Via Lenn Harley, Homefinders.com, MD & VA Homes and Real Estate:

THE FINANCING CONTINGENCY OF A CONTRACT CAN BE PLAYED LIKE A STRADIVARIUS!

The FINANCING CONTINGENCY can make or break a Contract of Sale.  Read it carefully.

You may just have to eat that mortgage rate!? Make it a tasty one. by Alan May is loaded with great information for agents.  Alan writes about the fnancing contingency with a focus and good tip about owner financing.

THE FINANCING CONTINGENCY DOES NOT ALWAYS PROTECT THE BUYER.  I have found by reviewing hundreds of contract prepared by agents that the financing contingency is one of the most neglected and least understood paragraphs in the Contract of Sale.  

Many agents believe that the financing contingency gives the buyer an easy way out of a Contract of Sale simply because the buyer fails to get loan approval.  That's not always accurate.  The financing contingency cannot be exercised if:

• The buyer has misrepresented their financial ability to obtain a mortgage.
• The buyer has misrepresented their funds to close.
• Through actions of the buyer, financing a new vehicle, etc., the credit picture has change and the buyer is no longer qualified.
• The buyer has not cooperated with the loan process.

In all of the above causes of loan denial, the seller has a claim on the Earnest Money Deposit. 

WHAT INTEREST RATE TO PUT IN THE FINANCING CONTINGENCY?  Suppose the buyer has a pre-approval letter than states that the buyer is qualified for a $300,000 loan at 5%.  Would you enter 5% in the financing paragraph? 

YES, if you're the buyer's agent.  Further, you'd cross your fingers and hope the seller accepts the financing contingency with an interest rate of 5%.  Sadly, if the buyer's qualification is marginal and interest rates increase while the loan is in processing and the rate was not locked, they are not likely to get through underwriting.  I pays for buyer's agents to understand the buyer's financial profile and avoid writing on homes in price ranges up to the limit of the buyer's highest qualifying range.  If rates are falling, the risk in minimal.  However, if rates are rising or volatile, the contract is at risk.

However, if you're a listing agent, you'd advise your seller to counter the 5% to a higher rate, perhaps 5.5% or 6%.  Advising a seller to accept a contract with 5% would mean that, if rates went up,the buyer may not be able to close.  If the buyer is only qualified for $300,000 @ 5% and rates go up, the buyer wouldn't be qualified and could exercise the financing contingency. 

THE FINANCING CONTINGENCY CAN ALSO PROTECT THE SELLER.  It only makes sense that, if a seller receives and offer with a price of $300,000 accompanied by a pre-approval letter that has a 5% rate, the listing agent might recommend that the seller counter the interest rate in the contract to 5.5% or 6% or even 6.5% if settlement is more than 45-60 days future.  This is a safe practice for Short Sales.  A careful analysis of the buyer's financial statement is recommended if they are customary in your market.  At the very least, a discussion with the buyer's loan officer to determine if the buyer can qualify at a higher rate protects the seller.

WRITING OR ACCEPTING A CONTRACT for a buyer that is marginally qualified puts the buyer and seller at risk.  When agents understand the intricacies of the financing contingency, neither the buyer, seller nor agents will be faced with a loan denial. 

As mortgage financing becomes more difficult, it's important for Buyer's Agents and Listing Agents to pay close attention to the financing contingency and make sure that the buyer is well qualified.

                                   

"The offer is good but the buyer's lender's letter is written to today's interest rate.  If interest rates go up, the buyer could exercise the financing contingency.  I recommend that we counter the interest rate in the contract to 1% higher." 

All information is deemed reliable but is not guaranteed.