An Opportunity of a Lifetime

Warren Buffet says, "A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful." While Mr. Buffet was writing about buying stocks, the same can be said for housing today. Housing issues have permeated the economy both locally and nationally. This week, one index that tracks housing prices, S&P/Case-Shiller Home Price Indices, indicated home values fell the most since 1968, declining 18.5% in December from the year before. Looked at from a different perspective, this means home prices have fallen to levels not seen in six to twelve years, depending on individual markets. Following the Case-Schiller report was the report from the National Association of Realtors (NAR) recently.

The NAR reported that home prices for the month of January fell by 14.8%. The bright spot though in contrast was that the number of homes sold in December increased. Home buyers from coast-to-coast have been buying distressed properties at the rate of 45% of total sales. Recognizing that now is the time to buy, everyone – from those looking to purchase their first home to seasoned real estate investors – is buying homes today. Bruce Norris, the head of an investment group in Southern California, expects to buy at least 100 homes this year as, "This is the buying opportunity of our lifetime."

Fundamentals Point to Strength

The basic fundamentals of the housing market point to higher prices ahead. Almost half of the properties being sold today are existing homes that are either owned by banks or homes on which banks are accepting short sales, allowing them to be sold for less than what is owed. New homes or homes under construction are near all-time lows. The country's demographics point to more potential buyers coming into the housing market than projected inventory in coming years. This all points to higher prices on the horizon as demand will be greater than supply. This is supported by the fact that the inventory of unsold homes fell 2.7% in January. Why Buy Now?

Three very important reasons to buy now are:

• Interest rates are near all time lows;
• Home prices have declined to levels not seen in years; and
• Qualified first-time home buyers are now eligible for up to an $8,000 tax credit.

The mortgage landscape has undergone substantial changes over the past few years.  What may have been a minor "bump in the road" during the home buying process just a couple of years ago could now be the one item the makes or breaks the deal. 

Buyers that are prepared and understand how these changes will impact them may find 2009 to be one of the best years in history to buy a home.  The course I offer at Ocean County College will help you understand the new rules of obtaining a mortgage and will prepare you to buy a home in 2009.  Please contact Ocean County College at 732.255.0404 and join me on Thursday evening March 5th at 6:30pm.

 New Jersey First Time Home Buyers will benefit from the $8,000 Tax Credit contained in the new Economic Stimulus Package.  Combined with record low mortgage rates Ocean County and Monmouth County, NJ should see a boost in home sales during the spring season. 

Key Changes to the Act:

1. Tax Credit increased from $7,500 to $8,000.
2. Credit is no longer required to be repaid as long home is not sold within three years.
3. Expiration date changed to December 1st 2009.
4. Home Buyers who use revenue bond financing such as New Jersey's First Time Home Buyer program and Smart Start Down Payment Assistance will now be eligible for the tax credit.

All of the above changes are in effect for home purchases made between January 1st 2009 and December 1st 2009. 

Another important point to remember is the definition of a first time buyer is someone that has not owned a home in the last three years.  Many clients that sold their homes in 2005 during the height of the housing boom will be surprised to find out that they may actually be eligible for this credit!

203K Streamline Rehabilitation loans are allowing Ocean County residents to finally take advantage of one of the best ”buyer’s market” in a long time.   Whether you are buying in Brick Town, Toms River or Forked River most likely some foreclosures have come across your path during your search for the perfect home.  If only you had the money to fix it up after you purchase it…..

That is where the FHA 203K Streamline Rehab loan will help make your dream a reality.  This loan has all the great features of a regular FHA loan such as low down payments, gift funds as an acceptable source of assets, flexible underwriting guidleines and FICO score requirements along with one other critical component.  It will give you up to $35,000 to do renovations to the home after you buy it. 

Does the home need updating? A new kitchen? Bathroom? Windows?  This loan will allow you to get these item fixed or updated.  You can use up to three contractors to do the work and are not required to use a general contractor which will help save money.

If you add in the $7,500 First Time Home Buyer tax credit you could wind up with as much as $42,500 to turn that foreclosed home into your dream home!

So next time you think to yourself “If this home only had  _______(fill in the blank)” think about the FHA 203 K Streamline Renovation Loan.

Loan Level Price Adjustments(LLPA's) introduced by Fannie Mae and Freddie Mac during 2008 have surprised many New Jersey homebuyers/homeowners applying  for conventional mortgage loans during the recent interest rate drop. 

What is a Loan Level Price Adjustment? 

It is a risk based adjustment determined by the two government agencies mentioned above that is based on a borrower's FICO score and the amount of down payment/equity a borrower has in their home.  This adjustment will increase the interest rate or points a homeowner will pay in the transaction.

Who Does It Impact?

If your Credit Score is less than 740 and you have a down payment less than 25% you will find yourself being caught by one of these adjustments.  As your credit score drops you will have two put more money down to avoid it.  If your score is 719 you would need a 40% down payment to get around it.  The adjustment applies in all 50 states.

What does it cost?

A borrower with a 20% down payment and a FICO score of 739 can expect to pay a slightly higher interest rate or .25 points. The adjustments increase significantly as credit scores drop.  If you have a 659 score and a 20% down payment you could be paying up to 3 points at closing.

How is it Charged?

Through a higher interest rate, origination fees or discount points paid at closing or a combination of the three.  This does not turn into extra profit for your lender because it is a fee charged by Fannie Mae and Freddie Mac. 

If you have a low credit score you may be better off with an FHA Mortgage instead of a Conventional Mortgage.   Find out which one would benefit you most by completing a secure application on my website or giving me a call.