Preparing to Be A Homeowner Again

Tara-Nicholle Nelson writes in Inman News:

Homeowners facing foreclosure seem to be desperate to buy again. ... My advice is almost always this: Slow down! Most legitimate loan programs now impose a three-year-plus waiting period after a borrower loses a home to foreclosure, even if they would otherwise qualify for a mortgage based on their credit score, income and assets. Here are my four suggestions for how you can wisely use that waiting period to recover from a foreclosure -- these steps also do double duty in terms of setting you up for success and sustainability the next time you buy a home.

 Here are the 4 steps to buy again after foreclosure | Inman News.

Congress Votes to Increase the Limit of FHA Mortgages

By Chris Moles
Brokerage Counsel
Intero Real Estate, Inc.

In October of this year, the limits for FHA loans dropped from $729,750 to $625,500. As a result, the National Association of Homebuilders and the National Association of Realtors® have estimated that 5.3 million homes lost their eligibility for conforming loans and nearly 670 counties saw their loan limits decline.

In a victory for the real estate industry, Congress has voted to restore the former limits. The bill was signed by President Obama on November 22nd.

The Politics

A number of interest groups have pushed for more free-market policies and against government support to the housing market. Those groups, which include the Club for Growth and Heritage Action for America, play a large role in the House Republican conference and can influence campaign funding. As a result, 101 House Republicans voted against restoring the limits. 20 House Democrats opposed the measure as well.

Those members of Congress who opposed the provision seized on the FHA’s annual actuarial report released earlier this week, which said the agency has a 50 percent chance of needing to seek taxpayer aid to bolster its insurance fund. Many fear that federally backed loans are a root cause of the current housing crises. They claim these loans allow buyers to purchase more house than they can realistically afford and they claim the loans force taxpayers to take risks that private lenders avoid.

As a result, many in Congress want to restrict the role of government in housing by reducing the limits that the government will insure mortgages.

The Result

This legislation restores the federal loan limits to their pre-October levels and extends the threshold through 2012.

From our house to your house...

U S Becoming "Rentership Society" Reports Morgan Stanley

Morgan Stanley released a report just a few weeks ago saying now is a great time for institutional investors to snap up distressed single-family homes and turn them into long-term rental units. The company says the properties don’t compete with the classic apartment rental property, so investors don’t have to worry about cannibalizing their multifamily rental investment portfolios to take advantage of the huge opportunities in single-family rental property ownership. What’s more, Morgan Stanley doesn’t see this shift to rentership as a temporary waypoint while the country sorts out its housing problems; it sees this as a fundamental shift in how the United States will define itself into the future. Watch the video, then read the full article.

Getting Your Home Ready to List

Here's an article from Realty Times with tips for getting your home ready to list for sale. The one I particularly like is about bathrooms: "The bathroom is one area to really take a close look at before you list your home... If your grout is worn or dirty, spend the money to get it cleaned and sealed or do it yourself. This can be a tedious task but it will help when it comes time to sell your home. Get rid of any countertop clutter like electrical cords and items that somehow wound up in the bathroom but have no reason to be there. Add a couple of mildly fragrant candles and roll your towels (like the hotels do) and set them on a counter or in a basket; it'll give it that welcome feeling -- like visiting a spa." Here's the complete article.

Interest Rates Go Even LOWER!

There's just not much more to say. If you aren't a homeowner and have a job, you should be one. If you already own a home with a mortgage, you should be looking into refinancing. Really!

Full article.

Navigating a Home Loan

In an article from the The New York Times, the topic of closing costs is explained, with emphasis on how to handle high closing costs.

Closing costs can increase the price of a home by as much as $10,000, sometimes more. Borrowers who are “cash-poor” can ask for assistance, or talk to their lender about a lender credit toward closing costs.

Some lenders advertise that if borrowers agree to accept a mortgage interest rate from a quarter to a full percentage point higher than they would ordinarily qualify for, they can receive credit toward their closing costs.

These mortgages are sometimes called no-closing-cost loans, though the term is misleading. The credit usually covers only fees charged by the mortgage broker or bank, like the loan origination fee, the underwriting expense, and the appraisal. That generally leaves title insurance, mortgage-recording taxes, insurance, and escrowed taxes to cover.

The amount of credit depends on total closing costs and other loan details. Generally, for every one-eighth of a point increase in interest rate, borrowers receive a credit worth half a percentage point of the principal amount.

While these mortgages can be helpful to some, borrowers should carefully review all the details. There are pluses and minuses to these loan types. A downside is the higher rate and monthly payments remain in place through the life of the loan.

Doing a side-by-side comparison of loans with and without the credit can be helpful.

Why Home Values Are So Misunderstood

Home values – it's a topic we hear about a lot in the news, and one of great concern to home buyers and sellers, but one I feel many people gravely misunderstand. A survey released last week from Zillow underscores this misunderstanding.

The survey's headline reads: "42% of Home Buyers are Unrealistic About Home Value Appreciation," and goes on to explain that despite the recent economic downturn and volatility in the nation's housing markets, 42% of those surveyed said they believe home values typically appreciate by 7% per year.

On a national level, home values declined for five consecutive years during the downturn. Historically, in a "normal" market, home values tend to appreciate at an average 2-5% per year. What is it that creates such an unrealistic view on home values – even now as much of the economy is still suffering?

Psychology of ownership: I think part of the reason home buyers are so optimistic about values appreciating is because they truly believe in the value of home ownership. In their minds, owning a home is the ultimate economic security, and one that will return financial value to their lives in many ways. Because it is so valuable to them, they feel like the numbers on appreciation move faster than historically they have.

Leftover boom mentality: Many buyers today witnessed the insane appreciation seen during the 10-year housing boom. News headlines constantly read crazy stats like "California home values up 20% from a year ago." I think that collectively, we got used to this and quickly lost sight of history, which shows home values increasing at a much slower pace.

In a fast-moving society, home ownership is a slow means of financial gratification. However, even the stock market requires 10+ years to truly profit for the average investor. But you'd never know that by the programs you see on TV and the offerings of being able to pick and trade stocks online while you eat lunch.

I think it's important as real estate service providers to give consumers the context around home values and what is so-called "normal." Home ownership is a long-term investment that should be made first and foremost as a way to provide a stable place to live, then secondly as a way to create financial security. We can't let consumers assume that buying a house is their ticket to retirement, just like we can't let them assume that values will continue to decline forever.

A house is a different kind of asset than other financial investments. You can't unload a house like you can with other investments. And home values only really matter when it's time to buy or sell anyway. I say we promote the true value of owning a home as what it was always meant to be: owning your own home, the place you live, the place where you build a family and create your life's memories. If its value appreciates in the process (which, historically, it normally does over the long-term), then that's great. But keep those expectations in line with reality and don't make any buying decisions based on what you think the resale value will be a year from now. That's just the kind of boom mentality that got us into this mess in the first place.

We Can Sell Anything ... if the price is right...

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