What In the World Is Going On In the World?

The economic situation is getting worse day by day… or is it? In this jumbled mess, where do we turn for good, honest information? The reality is the media dramatizes the information they disperse to make for a good story. Drama and trauma sells.I am a home owner, a working woman, an investor, a consumer, and a future retiree who, just like you, needs good information in order to make sound decisions about my finances. Luckily, as a realtor, I have access to factual information and knowledgeable contacts who let me know what is really going on – no over exaggerating, no sugar coating, just the good honest truth.

As your real estate expert, I pass this information along to my clients.  Every week for the next month or so, my weekly e-mail forum, Brenda’s HouseBlend will be dedicated to a question that I have gotten from one of my clients. The topic of the week may be mortgages, credit scores, banking, even ways to save money on home maintenance – just something someone was concerned about, and I wanted to pass the information along to others.  If you’d like to receive messages like the one below, post a comment to let us know!

Are Lenders “Out” of Loans?
I have gotten several calls and e-mails recently from many of you who are worried about what is going on with the lending industry. If you listen to the news you will hear phrases like, “…when loans are available again.” or “Now that you can’t get a loan…” This is just plain untrue. I have been writing contracts through this financial crisis and getting loans for my clients without a problem.

The truth about loans:

• Loans are available, but lenders are being more discriminating
• Interest rates are very good and hovering around 6% or lower in some cases
• Loans are being driven by good credit scores

Who has challenges getting a loan?

• Poor credit, low credit scores
• No money to put down
• More than four homes (investment funding is being limited to four homes)
• Self-employed individuals that have a hard time proving income

Down Payment Requirements:

• Less than $417,000 – 5% down (the days of the 100% loans are gone)
• $417,000 - $650,000 – 10% down
• $650,000 and above – 20% down
• Investors (more than one home) – 20% down

In fact, if you have been a renter, now is a great time to buy. We are undoubtedly in a full-fledged buyers market so houses are priced to move. Interest rates are low. It all depends on your particular situation and needs. We work with some great lenders who can answer any questions you may have about the current market as well as the options for your circumstances. 

The Beginning of the End of Super-Low Mortgage Rates?

There are several factors that indicate that home buying will be increasing which in turn will help fuel a recovery of the housing market.

The National Apartment Association recently conducted an online poll in which results showed 17 percent of renters plan to purchase their first home within the next year; 41 percent of the 2,041 respondents planned to be home owners within two years.  Only 31 percent planned to still be paying rent five years from now.

The past six months have seen a drastic drop in mortgage rates, however fixed-rate mortgage rates rose to 6.32 percent, the highest it has been since October.  Following the months of aggressively dropping interest rates, many feel that the Fed will be forced to raise rates back up.  If interest rates rise, so to will mortgage rates.

According to a press release by Freddie Mac, Frank Nothaft, Freddie Mac vice presient and chief economist said that, “Mortgage rates jumped this week after a number of Federal Reserve officials, most notably Chairman Bernanke and Vice Chair Kohn, expressed concern over a threat of inflation.” We may very well be seeing the beginning of the end of the super-low mortgage and potential buyers may realize that with rising rates, now may be the time to jump in. Nothaft added, “Moreover, pending home sales for April unexpectedly rose by 6.3% and mortgage applications for home purchases … were also up last week.”

In Real Estate, What Does LTV Stand For?

LTV stands for Loan To Value, and it reflects the percentage of a sales price that is borrowed by a borrower. For example, if a program allows for an LTV of 95%, and the sales price is $100,000… the borrower may borrow up to $95,000. FHA is a great program for those with limited funds, because it allows for a LTV of 97%.

On a standard 30 year fixed amortized jumbo loan (over $417,000), a borrower can borrow the following:

- loan amount from $417,001 to $650,000 has an LTV of 90% with a credit score of 660

- loan amount from $650,001 to $1.5MM has an LTV of 80% with a credit score of 680

- loan amount from $1,500,000 to $2MM has an LTV of 80% with a credit score of 700

- loan amount from $2,000,001 to $3MM has an LTV of 70% with a credit score of 720

Let’s look at an example:

You like a house with a sales price of $900,000, and you want to put 10% down. This would leave you with a loan amount of $810,000 and an LTV of 90%. As you can see from the above, a loan amount between $650,001 and $1M requires an LTV of 80%. You will need to find another 10% to put down for a loan amount of $720,000, or find another house.

Another example:

You  like a house with a sales price of $750,000 and want to put 10% down. This would leave you with a loan amount of $675,000 and an LTV of 90%. This also won’t fit in the bulleted points above, however, you are very close to the $650,000-and-below tier. Instead of forcing you to come up with another 10% for a 20% down payment, you will only be required to come up with an additional $25,000 to get to the $650,000 tier, which only requires a minimum down payment of 10%.