"Open House" - Maryland Real Estate Blog

Your House is Not an ATM

As we near the end of this incredible buyer's market and head into a renewed period of  housing appreciation, there is something I need to get off my chest.

Your house is an investment in your future.  Something that should be nurtured and cherished for years and years.  As your home increases in value over the next several years, make me one promise.  Do not extract equity for trips, cars, paying of credit card debt, or any consumer purchase.  If there is one thing we should all have learned from these last few years of housing decline is that we can never predict the ups and downs of any investment.  During the years of prosperity, leave it alone and enjoy it from a far. 

I've sat down with so many homeowners over the last several years who could not sell their home because they owe more than the house is worth.  Some folks simply bought their house at the top of the market and were victims of the decline.  Others, however, who had bought earlier in the decade or sooner, used their equity for fun.  They were now stuck in a home they no longer wanted or could afford.  Some are sticking it out, many have gone to foreclosure and others sold and had to bring money to the settlement table to satisfy their debt. 

I hope this makes sense!  If not, don't be afraid to ask.

Are Interest Rates About to Rise?

Federal Reserve Bank of New York President William Dudley says the central bank will scale back its purchases of mortgage-backed securities late next month. While interest rates likely will climb when the program ceases, the extent of the rise remains to be seen.

Dudley says the Fed will act if rates spike too much. Still, analysts worry that the end of the MBA purchase program and expiration of the home-buyer tax credit, along with higher premiums and tighter underwriting of FHA mortgages, will work together to stifle home sales and price stabilization in the coming months.

Source: Inman News (02/08/10)

Loan Modifications Hit Credit Scores

Applying for a mortgage modification and being in a months-long trial period can devastate a home owner’s credit score.

Under the government plan, troubled borrowers can have their mortgage payments reduced to 31 percent of their pre-tax income. They are first put in a trial modification for several months to test whether they can meet the requirements of the new mortgage.

Borrowers who were previously current on their mortgages will see their FICO scores fall about 100 points while they are in the trial period, according to the Treasury Department. Borrowers who were previously late or missed payments will see their scores fall more, the government says.

The longer a borrower is in the trial period, the greater the impact on their credit scores, Once the modification is approved, the borrowers’ mortgage credit status will be listed as current and that should improve their scores, the Mortgage Bankers Association explains.

Even so, the delinquency remains on credit reports for up to seven years and can make getting credit for something else like a car difficult and expensive, borrowers report.

Source: CNNMoney.com, Tami Luhby (12/28/2009)

Census: Americans Stayed Put in 2009 - National News

Fewer Americans moved in 2009 than any other year this decade, the U.S. Census Bureau reported this month.

Population also grew less this year than any other year since the turn of the 21st Century. It reached 307 million on July 1, up less than 1 percent from a year earlier, the bureau says. About 850,000 people immigrated from other countries, down 15 percent compared to 2006.

The losers in this trend included Florida, which lost 31,000 people to other states, a first for the Sunshine State, which used to be No. 1 in attracting new residents. "The middle of the decade's huge surge to the Sun Belt stopped on a dime," says demographer William Frey of the Brookings Institution.

Demographers say real estate is one of the big reasons people are staying put. "People are trapped," says Yi Zhao, senior forecasting coordinator for the Census Bureau in the State of Washington. "They can't sell their house or they have a hard time getting credit for a new one."

Source: USA Today, Dennis Cauchon and Paul Overberg (12/23/2009)

How to be a Victim of the Federal Government While They are Trying to Help You

Let's say you have a 730 credit score, an established credit history, and over $20,000 in cash. Let's say you want to buy a house and are approved to purchase a home over $200,000. Let's say you make an offer on a condo around $150,000 and get a great deal to include all of your closing costs, a reduced price and other favorable terms. You are very excited about the purchase of this home and can't wait for a pre-Christmas settlement.

Then along comes the big intrusive monster; the Federal Government. For the purposes of this blog we will call them Grendel.

The $8,000 tax credit, while a great opportunity for many of my clients, may not be the best way to help the housing problem. I believe we would all be better served if Grendel would make an investment in easing lending guidelines. Obama has asked banks to lend more money, but isn't investing anything into helping them do so. Also, rumors have it that the Federal Housing Administration (FHA), the government organization responsible for backing today's most viable first time home buyer loan, is poised to make lending of their backed mortgages more difficult over the coming months.

In the example above, this buyer was unable to secure a conventional mortgage because the tightening of guidelines didn't allow her to use lottery winnings as part of her required money needed for the transaction. Plan B: We try for an FHA backed mortgage. Because of a complicated and unnecessary red tape scenario with Grendel, my buyer isn't able to purchase this property with that mortgage either.

This is a HIGHLY qualified buyer who can't purchase a home well within her price range. There is something wrong with this picture. Before the housing market will turn around, mortgage guidelines have to be at a place where people who SHOULD be able to buy are able to secure a loan. The housing inventory has been shrinking over the last few months, but it still remains near record levels. Want housing prices to go up again? Then the inventory must be shrunk. Want the inventory to shrink? More potential buyers need to be eligible to receive financing. I'm not suggesting that my two year old be able to get a mortgage (like 2004-2006), but easing the guidelines a little, could have a dramatic effect on getting this market turned around faster.

My two cents . . .

This blog entry was written by Jim Ellis of Re/Max Elite Realty in Baltimore, MD. Jim can be reached at jim.ellis@remax.net.

 

Mortgages Becoming Easier to Obtain - National News

In some parts of the country, borrowers with good credit are more likely to be able to borrow 95 percent of the purchase price than they were just a few months ago.

In Florida and other troubled markets credit remains tight and mortgage companies continue to scrutinize property appraisals, which makes it difficult for some borrowers to get financing. But in most areas of the country where prices are stabilizing or falling only slightly, standards are relaxing.

“We are starting to see...moderation," said Neil Librock, head of credit risk for Wells Fargo & Co.

Source: The Wall Street Journal, Ruth Simon (12/19/2009)

MORTGAGE RESCUE SCAMS: TOP 10 WARNING SIGNS

The U.S. Department of the Treasury has issued a consumer advisory detailing common mortgage modification scams. It pays to be aware of fraudulent tactics that con artists may use to lure distressed homeowners into their trap.

1. “Pay us $1,000, and we’ll save your home.” No legitimate counselor will require you to pay such a large sum before they do any work for you.
2. “I guarantee I will save your home – trust me.” Unrealistic promises are a key tip-off that an arrangement may not be legitimate.
3. “Sign over your home, and we’ll let you stay in it.” This is a dangerous proposition: signing over your home gives another person the power to sell the house or evict you, and you’ll still be liable for the mortgage.
4. “Stop paying your mortgage.” Never stop paying your mortgage unless you have contacted your mortgage lender directly!
5. “If your lender calls, don’t talk to them.” You should keep in close touch with your lender, as their understanding of your situation is crucial to a satisfactory resolution.
6. “Your lender never had the legal authority to make a loan.” False arguments like this are meant to convince you that you are not obligated to pay your mortgage. Don’t fall for them!
7. “Just sign this now; we’ll fill in the blanks later.” Never sign anything you haven’t read in detail and clearly understood, and don’t let anyone pressure you into signing.
8. “Call 1-800-Fed-Loan.” It’s easy to make a scam look like part of a legitimate government program. Call your lender to see if you qualify for federal assistance—which does not require you to pay high fees.
9. “File for bankruptcy and keep your home.” Bankruptcy only stops the foreclosure process temporarily. Stop paying your mortgage, and your lender will eventually foreclose upon your home.
10.  “Why haven’t you replied to our offer? Do you want to live on the streets?” High-pressure tactics are a sure sign of shady business practices. Legitimate foreclosure counselors never treat a client in such a way.

If you guys ever have questions about mortgage issues, don't hesitate to call me.  I am always available as a free service to any of you if you are having problems or need help.  Don't get swindled!

I can be reached at 410.569.4663 or jimellishomes@comcast.net.

Happy Holidays!

The Ed Norris Show

Friday morning, June 12th, at 7:30 AM, I will be appearing on The Ed Norris Show.  The show is rated #1 among radio talk shows in the Baltimore area and can be heard at 105.7 FM.  Can't listen on the radio?  Go to www.1057thefan.com to listen for free on line.  Thanks for your support.

Jim

Jim can be reached at 410.569.HOME (4663) or email jim.ellis@remax.net

Huge Improvement to 1st Time Home Buyer Tax Credit

On May 12th Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development, announced that all FHA consumers will be allowed to use the $8,000 tax credit as their down payment.  In the original version, first time home buyers could only redeem their tax credit when they filed their returns in 2010.

Donovan says FHA’s approved lenders will be permitted to “monetize” the tax credit through short-term bridge loans. This will allow eligible home buyers to access the funds immediately at the closing table.

FHA requires a 3.5% down payment.  Which means you could buy a house just under $229,000 and not have to bring any cash for a down payment.  Most sellers are willing to pay most or all closing costs for buyers.  Therefore, you could possibly buy a house needing little or no cash.

Update: Sunday May 17 - HUD has removed this update from their website as all of the details have not been ironed out.  I will keep you all posted as this evolves.  It is not going away, but HUD was premature with their announcement.  All of the red tape must be ironed out.  Stay tuned . . .

Jim

You can reach Jim at Jim.Ellis@ReMax.net or 410.569.4663.

First Time Home Buyer Seminar Video

From time to time I will be posting video blogs.  Sometimes it is hard for me to convey my thoughts in words and I think that you would all be better served with a video.  Check out my first video post about my upcoming seminar series for first time home buyers:

Click Here to Register for the Seminar