Prime Rate Credit

To rent or to own, that is the question on many 20 and 30 something year olds right about now. With the home buying market still at a buyer’s advantage, it’s still a good time to buy a home, but the sellers market is still struggling amidst a lot of uncertainty in the housing market, and plummeting prices.

But, what are some of the reasons that many young people do not opt to buy homes right away nowadays, as was customary back in the day?

Well, I for one, considered a few things. Renting meant that I didn’t have to worry about maintaining the structure of where I lived, nor the grounds. If something major went wrong like with the heating system, AC units, or hot water heaters, all I had to do was call my landlord who was ultimately responsible for the upkeep of the home and property, not me.

Another consideration was that I did not have to pay property taxes. However, you do have to consider that many times property taxes are a tax deduction at the end of the year.

What about the fact that when you own you don’t have to answer to a landlord, or that you can also usually decorate and garden however you’d like. These things are very appealing. To have a house, there are so many little expenses that you have to consider before you can figure out if your budget allows for home ownership or not.

What is mortgage reform? Well, I think since the amount of bank foreclosures on homes that the owners simply cannot pay for is alarming to many, and has been so bad in these past few years, that it is drawing attention on Capitol Hill from lawmakers who are concerned that people are being sold mortgages that the mortgage companies are not looking at the risk assessment thoroughly enough.

Also, they are looking at curbing and eliminating something called predatory lending, which is basically where mortgage lenders are “preying” on those that they know have a high chance of defaulting on a loan who do not have adequate income or a higher than desired debt to income ratio, just in order to get more mortgages and get their numbers higher.

Here’s the scary figure that prompted this congress interest : National foreclosure rates supposedly jumped about 47% in March from just one year ago. That was just two short months ago, and the new figures aren’t mentioned yet, but those are some very startling figures.

The problem many say congress is having in weighing in on this complicated issue is figuring our who all the players are and considering any legislations effects that may be unintended, and for that, lawmakers have to understand the complex mortgage industry, which many say is not an easy task. However, they still want to step in where public interest is at stake, so they are really looking at a catch 22 situation here if you ask me.

We all have heard personal stories that are pretty close to home about someone who had their home foreclosed by the bank they borrowed the money from for their monthly mortgage. But why have these stories significantly increased, and why is everyone walking on eggshells when they go to buy a house now, for fear they are “getting in over their head”?

Well, a friend of ours was over last night, and he had an interesting theory of why the rate of home foreclosure has gone up. First of all, what is a foreclosure? Well, a home foreclosure is when you have not made your payments for a designated amount of time to your mortgage lending institution, and they exercise their right to do what’s called foreclose on your home loan.

They legally seize your property and you are basically forced to move out of your home because you could not make your monthly payments. Fair enough, right? The bank has lost money on you, and you are essentially backing out of a contract that you signed (numerous, headache-inducing documents) saying and promising that you are going to repay this loan in good faith.

When you don’t pay, or are unable to pay, the bank has the right to seize your home and property and put it up for sale to try to gain the money back that they have lost by you breaking your financial obligation with them.

And now, back to my friend’s theory. He thinks that one of the primary reasons were these ARM mortgage loans, where the rate is variable, not fixed. When the rates were low, everything was great, the people who had the Adjustable Rate Mortgage were paying lower payments, maybe even lower than what they expected.

But when the interest rates went up, many people’s mortgage payments were going up in the hundreds, monthly and many people just simply could not handle this huge wrench being thrown into their financial situation, and were not able to make the newer astronomical payments thanks to the high interest rates. The mortgage they calculated in their minds as a feasible payment for their monthly budget was suddenly blown out of the water. This is a huge consideration if you’re thinking about gettin an ARM for your mortgage loan.

According to most real estate analysts and forecasters, the once boom market that saw a crash landing during 2006, is starting to stabilize. Nationwide, single family home prices should rise an average of 3.5% in 2007.

If you’re in the market and looking to buy, look for homes that have been up for sale for at least 90 days. When you decide to make a bid, make it for 10% lower than the asking price. Also, get on a good mortgage calculator and figure out what your payments will be before you make a bid so you can judge what will fit best in your budget. Don’t forget about those fun closing costs and all the other expenses that go along with moving too!

If the seller won’t move at all on the selling price, look at other areas that can be negotiated and keep in mind that negotiations can be made right up until closing time. Make sure to get a fixed rate mortgage when buying so the payment won’t inflate over time.

If you’re selling a home, do your research and see what other sellers in the area are listing their homes for. You’re better off to set your price on the higher end when setting your initial price. This way, you can negotiate your price at a later date if you need to.

When looking for a broker, there are full-service brokers who charge 6% commission on the selling price. There are also discount brokers or the possibility of making a deal with a full-service broker on the percentage of the commission.

Prep and stage your home for the market. Landscape, clean out closets and declutter your home for presentation.
Another trend of interest is the smaller energy efficient homes are gaining in popularity.

The quality of homes and not the quantity of square footage in a home is taking precedence. Keep this in mind when buying and thinking about resale value.

What’s happening in the mortgage industry today can only be described as financial disaster. Mortgage companies that specialize in lending money to customers with poor credit histories have done no favor to the economy on a personal level for individual families. On a larger scale, these companies are scrambling for financing and finding their own lines of credit cut.

When the housing boom was in full gear, an individual that had trouble making their high interest payments could either sell their property or refinance their mortgage. As the housing market slowed, home values declined and the borrowers were left owing more on their mortgages than their homes were worth.

Foreclosures have now hit an all time high. According to the Mortgage Bankers Association, the percentage of payments that were 30 days or more past due has jumped to 4.95 percent in the October to December quarter.

For the families faced with foreclosure, the results are devastating. Even if their credit histories were tarnished coming into the mortgage, they are now facing the loss of their home and possible bankruptcy. Counting payments or figuring payment info on a mortgage calculator should be everyone’s first step in figuring out what they can realistically afford on an ongoing basis.

New Century Financial Corporation, who is the nation’s second largest subprime lender, has stopped accepting all new loan applications. Until recently, they were able to package the loans up and sell them. This company’s stock has declined in the past month from $30 per share to $1.66 per share on March 12th.

As a result of the mortgage mayhem, some lawmakers are looking into setting higher standards to avoid risky, high interest mortgages which have been made to people with poor credit histories. Members of the housing coalition are hoping to work with the banks to refinance risky loans and help people avoid foreclosure.

A well known, what we call “subprime” mortgage lender by the name of New Century Financial Corp has filed for bankruptcy and announced that it will be letting go thousands of employees and trying to cut expenses in other ways in an effort to make them more appealing to potential buyers. Apparently business isn’t going so well in the subrpime mortgage lending market?

With all the measures against predatory lending going on lately, and the negative publicity that many lenders have suffered through due to high foreclosure rates (which means they overestimated client’s abilities to pay them back, most likely in an effort to drum up more business), it’s really wrecked havoc on quite a few, previously solid mortgage lending institutions.

The company, which is said to be the second largest subprime mortgage loan lender in the US, like many other mortgage lenders who miscalculated risks, has seen some very volatile markets right now, due to poor decision making on the lenders end to assume responsibility for loan repayment, as well as increasing rates on ARM mortgage loans, which the unforseen spikes in interest rates have made it nearly impossible for some borrowers to make substantially larger payments as of late.

The housing industry hopefully will be on an upturn here over the next few months, and definitely over the next few years, as the mortgage lending and housing industry as a whole has fallen on some very hard times thanks to a poor economy as well as low consumer confidence and purchasing power. Come on economy - we need you to pick up the pace!

Well, almost. New homes being built, as in from the ground up, such as Ryan and Drees homes and other contracted-out homes being built from scratch, are apparently at a low point right now, assuming they’re even worse than existing homes being sold, which is pretty dismal seeing as though the existing home sales market is dreary as of now as well. But some are saying there is currently a turnaround going on, and our realtor apparently agrees with that sentiment, saying that he has already noticed an upturn in the amounts of activity he has going on for his home listings.

The weather has been partially to blame for this setback, because this winter so far has been extremely mild in the way of temperatures, and now the weather has really turned frigid and snowy in much of the northeast and midwest, making new home construction and things like apartment building construction almost impossible to accomplish.

It might be a really great time to buy a new home right now though. Because of the big slump in new home construction, many builders are offering great incentives to buy homes from them such as free media rooms, finished basements and other upgrades that would normally cost thousands of dollars. Some are even offering special financing deals, which can tally up to thousands and thousands of dollars in savings when the mortgage term is all said and done. It’s something to think about.

As I explained to you all in the last few posts, I am currently going through the first time home buying experience, and boy oh boy, what a ride it has been! Now, don’t get me wrong, up until now it’s been a somewhat smooth process, but we’ve had to deal with some less than thrilled sellers who feel they did not get the price the house is worth, and we’re dealing with not getting everything we want from them, but that is to be expected I guess in this market when almost everyone probably feels their house is being sold for less than it’s “worth”.

One of the things that surprised us in this whole home buying and house shopping experience, and something that I really should have read up on before I delved into the whole process wholeheartedly and not really knowing much about the mortgage process, is that you should really shop around for your mortgage before you even start shopping for your home. Check a mortgage calculator to make sure the monthly payments will fit in to your budget comfortably.

The reason for this somewhat counterintuitive order of things is that most people (like us) find a house that may or may not be out of their price range, or the range of a mortgage loan that a mortgage lender is willing to give them based on their income. Shopping for the mortgage beforehand not only gives you a solid idea about the price range you should be shopping in, but it also may give you a little more bargaining power, if you are preapproved for a certain loan amount. Just remember, shop for the mortgage first, then home shop - it really is probably the smartest order to do things in.

This is an interesting spin on credit card debt. Some people are taking their high interest debt, in the form of high interest mortgages or ARM’s, which are Adjustable Rate Mortgages, which tend to be adjusted to the detriment of the home owner when the financing interest rates are going up in general.

Some people are taking their home equity loans and transferring them to low APR credit cards or special credit balance transfer card offers so they can both save money on their interest rate (if that’s the case, it’s not always the case for every mortgage loan necessarily).

This type of practice may become more common as the prime rate for mortgages shifts and banks and mortgage lenders are forced to increase the rates, especially on adjustable rate mortgages. Heck, if you have an offer for a low apr balance transfer credit card, and you’re looking at a low apr versus paying thousands of dollars in interest, then I can’t blame you for picking the card over the equity loan!

I am going through a possible home buying process right now. In other words, I’ve applied for a mortgage. It’s the first time I’ve done so, and I’m finding that it is very wise that we saved up a decent nest egg before we plunged into this process, since there are several hidden fees that you don’t even think about and to go in to the buying process, or even the mortgage loan process without having a couple thousand dollars (at least) at your disposal could leave you poor for a few months!

There is the loan application fee - ours was $275. I wouldn’t have thought of that one at all, but that’s an extra fee I guess for the costs of the mortgage lender processing your loan, which I have to say does require a decent amount of paperword on both ends. Then there are the closing costs. I think this one may depend on the cost of the loan you are applying for. Ours happens to be in the coupld grand department, and that was just another cost I had heard about, but didn’t necessarily think about in my head as an extra expense to save up for (Thank God I did though).

Then there are the home inspection fees and appraisal fees. You’re looking at another couple hundred dollars for each of these. See how much this home buying process can drain your account quicker than you can say “bureaucracy”? It’s best to go into it financially prepared, and I feel very blessed that we have been able to do it the right way as first time home buyers.