New “High Balance” loan limit rules go into effect on October 1st

Anyone known of someone in need of financing a mortgage loan above the $417,000 conforming loan size? Many unfortunately have been sitting on the fence, not acting on the current increased temporary conforming loan limits, better known as “High Balance” loans, this affects the maximum loan sizes for FHA and Conventional loans.  The maximum loan size will be reduced as of October 1^st (all existing loans must close by 9/30).  For those who had “jumbo financing” (loans above $417,000) with above market interest rates, the ability to obtain a “High Balance” loan can mean the difference between a homeowner saving hundreds of dollars on their mortgage payment every month. There is a huge need for this type of loan that affects many areas in the Northeast.

Since the beginning of the housing market fallout in late 2007, consumer loans above the standard $417,000 maximum loan size have had quite a challenge obtaining financing. The market for any jumbo loans essentially dried up or was so restrictive that no one could obtain financing. This phenomenon contributed to the further plunge in housing prices and more foreclosures for people in all markets. When Congress passed temporary high balance limits in 2008 for certain high priced counties…….which include several highly populated areas in Maryland, to have a maximum conforming loan size loan up to $729,750. The change provided much needed relief for prospective and current homeowners in designated high cost areas around the country.  The mortgage market was certainly helped, certainly not saved, by the ability to provide financing options to those applicable borrowers. Unfortunately, today many politicians and political pundits are calling for government to “get out of the housing sector,” the Government has heeded the call and allowed for this change to go into effect.  With many high priced markets still facing a glut of excess inventory, these changes are expected to add to the difficulties in housing and an already fragile economy.

For a typical purchase or refinance, most banks are requiring high balance loans to be submitted by August 20^th in order for them to get processed and closed by the end of September. Those missing the deadline will be faced with the new high balance loan limits. In Howard County alone the limit is being reduced $65,500 to $494,500. Don’t be one to sit and delay, those missing out may not qualify or be forced to bring a lot of extra money to qualify for a loan.  Many may think Congress will eventually step in and extend the limits. In today’s divided Congress and fears of further “tax payer liability”, I personally wouldn’t be one to count on it. To find out how the changes affect you and your plans, email us to receive more information.

Paying off your loan early makes sense in today’s housing market

The most recent stock market meltdown saw the investment earnings of many Americans decline rapidly since the 2008/2009 stock market crash. Since that time, Americans have also been inundated with a mortgage meltdown, a real estate implosion, and the loss of millions of jobs...many expected never to return. The last three years have changed our buying habits, how we look at debt, and especially how we view retirement. The depression-era belief was that you bought your home and paid it off – owning your home free and clear by the time you retire. Many today (usually financial advisors or investment people) preach the idea of using other people’s money….”the bank” in the form of a mortgage…… in an effort to make greater returns in the stock markets.  Sounds great, right? Except when economists and financial people refer to the last decade in the stock market as the “lost decade” where the markets returned nothing? Or in the last half of 2008 and into 2009 when the markets on average lost 50% of its market value?  Unfortunately, there are just no guaranteed investments anymore…..except when you look to pay your home mortgage loan early.  Taking such an option is a 1^st step to planning for retirement.

Today, homeowners can get near record low mortgage rates. Even if they refinanced a few years ago, the market is quite favorable to reduce the mortgage term to a 10, 15, 20, or even 25 year term. Such an option can save thousands of dollars in compounded interest payments over the life of the loan. When a homeowner pays any additional money per month to principle through a refinance of an old loan to a lower interest rate will save simple interest. However, the compounding effects allow a homeowner to pay their loans early, often saving tens, if not hundreds of thousands of dollars in mortgage payments.

What happens if you are not eligible for refinancing or cannot afford the new payments? Simply paying extra automatically through a direct payment allows homeowners to pay as little as $25 extra per month. Such an extra payment would save over 2 years of mortgage payments on a $150,000 loan over a 30 year term. Others still may want to take paying off their homes earlier through a bi-weekly payment program. Such options allow homeowners to pay their mortgage automatically ever two weeks or 26 times per year, the equivalent of a 13^th mortgage payment every year. Using the same example above, a homeowner would save over 3.5 years. Such an option works quite well….but comes with a catch, since transactions are usually orchestrated with the help of a 3^rd party company, most banks charge an upfront fee ranging anywhere from $295-$595 plus a per transaction fee from every payment. This often can make such an option not worthwhile.

Is refinancing worth the time and effort? Or should I just opt to pay a little more per month?  Determining what is best for each individual is a personal decision that does not fit everyone the same. However eliminating the mortgage payment, usually a family’s largest expense is a key step toward successfully retiring with additional cash flow.  Best of all….as long as the mortgage payments are made consistently and on-time, there is no risk of unstable markets, stock market declines or housing crashes.  Regardless of the decision you decide to pursue, make sure to speak with a qualified, licensed, and experienced mortgage consultant to best analyze your options.

Home Improvements Can Help Today’s Home Sales

Today’s housing market has left many homeowners with few, if any, options available to sell their property. They are suffering from the glut of inventory in their local community caused by foreclosures or they may have purchased their existing home at the height of the market which has now caused their home to be worth much less than they paid for it.  As a result, their ability to sell their home at a competitive price is an unobtainable goal.  Even for those who have equity in their homes, the price declines of the last few years have taken away a good piece of their equity to upgrade and move to the next home.  In these cases, most are required to live in their homes longer and make better use of the space they currently have.  The answer for many----home improvement projects.  Home improvement projects may range from as small as small saving closet organizers to the addition of a bedroom and bathroom, but their benefits are equally important.  Many prospective home buyers are always looking for curb appeal and many big ticket items such as the roof, HVAC, kitchen and bathroom repairs. Many items can be done cost effectively, may be financeable through a home loan or contractor financing, and will help pay for themselves when the home gets on the market, and best of all…..you get to enjoy living with the improvements.

Home projects can vary widely per contractor and region of the country. Some of the most common ones such as roof and windows vary greatly in price. These items unfortunately may be expensive and usually require a contractor. While many are fortunate enough to be capable of completing home improvements projects, but most are not. For those who are in need of qualified plumbers, electricians, or just general contractors, there are many online companies that will set you up with skilled, prescreened, licensed contractors. For those whose large projects are not affordable,  there are many low cost projects such as adding a new coat of paint or getting rid of clutter will markedly improve the ability to sell your home….and still enjoy the improvements while you live in the house!  Now, when improving the homes appearance, first impressions are obviously vital. Therefore no better way they improving the curb appeal. Large scale projects such as patios, walk ways, and high end trees and shrubberies will always be the first thing most people think of.  Fortunately, there are a lot of simpler items such as flowers, wreathes, trimming of overgrown plants, and patching missing grass spots on your lawn that is much more affordable  to make the front yard special.

How do I pay for this all? There are many ways to finance such projects when warranted and the value from the improvement makes such steps worthwhile. When doing home improvement projects, taking out equity from ones home is the most common step and today’s low rates usually make this option the most attractive.  This can be done by refinancing the existing home balance and the costs of improvements into one loan or by taking out a new loan against the home’s value. When this isn’t possible, the home improvements stores or outside contractors often offer low or zero-percent financing options.

Home improvements truly can be a favorable option to sprucing up a home’s appearance. Whether it is simple staging to make a home look more appealing or a full out remodel, all projects will add value to your home.  Confused on what to do first? Realtors generally will provide the best insight on which projects provided the best bang for your budget.  It’s always important to make sure to go into any project knowing it is the right one for your own unique situation.

Credit Repair Companies Overpromise and yet undeliver so frequently

Who among us can say they have found the credit repair company advertisements appealing? Their marketing makes many credit issues seem like they are simple to fix. They are the experts and we “need to call them now for a no obligation analysis.” While preying on desperate families attempting to save their home from foreclosure or “fix” poor credit, many often turn to these credit repair companies.  Often these people assume they have no other choice than to pay exorbitant upfront fees.  And of course, once you make those payments – never will you hear again from those “friendly customer service agents standing by”. More importantly, how can you even confirm these companies have completed the job as promised and resolved the credit issues effectively and accurately? In economic times where the unemployment rate is 9.1% and many more are struggling to keep up with their bills, credit repair companies have been booming and are quite profitable by preying on unsuspecting individuals.  

Credit is a unique and ever evolving industry. The credit standards needed to qualify in today’s credit market is pretty clear, however correcting past derogatory credit lines is not. Pay your bills on time, don’t overuse credit, be careful not apply for too much credit….these are the standard rules that over time will provide a solid credit score. When problems occur and legitimate credit inaccuracies are discovered, the individual whose credit is affected can contact the credit bureaus themselves to fix these issues. Legitimate credit repair companies don’t accomplish anything to individual with credit issues can’t do themselves- and for free! Those who take the time and have the resolve can have the major credit bureaus (Experian, TransUnion, and Equifax) monitor and send emails when individuals apply for credit in their name.  However, improving scores once errors are corrected actually takes time and people should always have the right expectations when undertaking such a task. Too often, these credit repair companies promise is to “erase,” for a fee….often up to $2000 for a derogatory credit item within 48 hours. These types of activity are clearly fraud.  Such schemes have lead in part to individuals qualifying to buy homes under false pretenses, only to have the home lost in foreclosure soon thereafter. This affects the greater economy as a whole due to home price declines, reduced credit standards.

One company offers a free ID repair service when consumers find their identity has been stolen.  The company is AllClear, which is Austin-based monitoring service by Debix, a data security company used by corporations and many government agencies in the US. The service, launched in April 2011 monitors identities through Internet surveillance of thousands of databases, including networks most often hacked by identity thieves. It also reports data breach attacks from companies instantly to its members.  Children are also some of the most prevalent groups of identity fraud victims today as many are truly unaware of an issue for years until they become adults. Figures say around 10% of all children will be victims, according to Bo Holland, chief executive of AllClear.  Fortunately, there are services offering its ChildScan product free to families.  One of these services will scan the child's Social Security number and report on what it finds. You can find this offer here. The free monitoring service can be found here. Other (free) services to help you organize and set up repair your credit from the Federal Trade Commission here.  Understanding the importance of credit, its limitations, and how to most effectively use it is a vital fact of life for the American consumer. No matter how dire the circumstance one finds them in it is never the answer to take costly and often illegal short cuts toward improving one’s credit. Start today with another free option by getting your free, federally mandated yearly credit report. This will be the first step for those looking at getting on top of their credit and correcting any misinformation.  Informed, yet tough financial choices may be difficult to take today, but are vital to long term financial stability and happiness.

Veterans have better options in buying a home

In today’s uncertain real estate economy, many are finding obtaining loan financing to be quite challenging. Loan program guidelines have been reduced and many eligible buyers are sitting on the sidelines because they have no down payment.  Fortunately, with so many military bases located in the Greater Baltimore area and two active wars, many of these individuals are eligible for special Veteran’s Administration or VA Financing. What is so important about VA financing? For starters, eligible applicants are able to qualify with 100% financing (meaning the tremendous down payment hurdle is avoided), no monthly mortgage insurance for having less than 20% equity in their homes, and as good (if not better) rates than some of the comparable Conventional or FHA Loans that others receive. So, who exactly is eligible for such a program?  Well, veterans or their spouses who served on active duty and were discharged under honorable conditions, during World War II and later periods are eligible for VA loan benefits. There’s a lot more to it of course, read here for more on who is eligible.

What’s the down side to such a great program? There’s not much. All eligible people much pay a one-time funding fee which ranges from 0-3.35% of the purchase price of the home depending on the level of eligibility, if the usage is first-time or subsequent usage, and the amount of the down payment used (better terms are also available with more money down!).  In addition, expect to have additional paperwork which includes the standard certificate of eligibility or form DD-214. All applicants still go through the application and qualification process which includes qualifying on the standard income/credit/assets requirements. However, once those hurdles have been obtained, veterans truly do get a valued benefit. Another example is VA Homes where the Veteran’s Administration acquires VA-guaranteed or VA-backed properties, these properties are listed for to all parties.  In addition, third party fees associated with obtaining a loan are very much limited. Origination fees are capped at 1% of the loan size (while the option to pay reasonable discount fees to buy down the rate still remains). Best of all – when rates drop, these loans are eligible to be refinanced through IRRL or Interest Rate Reduction Loan to obtain a new lower rate with little cost involved, very little documentation, and often without an appraisal.

During the days of the housing boom of the last decade, new innovative programs often caused the VA financing options to be overlooked. In today’s market, the VA financing option is a must for those who are eligible. It really can mean the difference of qualifying for a first home, upgrading to a larger residence, or simply reducing your mortgage payment. For more information to see how VA financing may work for you, contact us directly.

Good news for a struggling home finance loan market

Homeowners sitting on the fence about buying a new home or thinking they missed the last rate drop, think again. Mortgage interest rates have dropped for a fourth consecutive week last week. The national average 30 year rate at 4.67% is down 9 basis points from the week before. The numbers are quite favorable and continue to be a bright spot in an otherwise lackluster economic recovery. As consumers are hit with rising gas and food prices leading into the summer season, such news can often make or break homeowners already squeezed with higher payments or those trying to qualify to purchase a new home. Just a quarter percentage drop on a 30 year mortgage can increase purchasing power by approximately $15,000 (based on a 20% down payment). In Maryland, where the average home price is above the national average, people may save thousands per year. Such rate drops can be a vital key to helping stabilize the housing industry that some feel may be facing a double dip housing recession.

There are many homeowners who believe they have more than enough time to take advantage of such market conditions. They think rates will eventually drop down to the all time lows they missed from the last “rate drop cycle”.  Many add that rates just “continue to drop” due to conditions that may be relevant, are hardly the main issues effecting rate movements. In fact, institutional trading by mutual fund bond trades, pension fund investments, foreign governments, and especially Federal Reserve Board Asset Purchase Programs better known as “Quantitative Easing” or QE II, are the largest factors to cause interest rate shifts. People assume Congress will eventually artificially “prop-up” the housing market with more stimulus programs meant to push rates further down. Such assumptions are unlikely because Congress is divided among party lines and voters are more concerned about rising debts than they were a few years ago. The lending industry today is also more prone to reduce programs rather than add them to the options available. In addition, the housing market is faced with slowing sales and falling home prices. Because of these issues, additional opportunities may never be possible. Furthermore, those deemed to be in high priced county areas are about to lose have their expanded loan limits reduced as of September 30^th.  This means that people who have loan balances above the standard limit $417,000 limit and up to $729,750 will have difficulties obtaining loans.

Predicting rates and making assumptions can be quite risky and often times foolish. There are far too many factors that the average consumer….or even real estate/mortgage professional cannot accurately understand.  Those truly looking to take advantage of the important benefits of lower rates must be prepared to take advantage of the opportunity when presented. Timing the interest rate market is a lot like timing the purchase of a stock, it will fail miserable in the vast amount of cases. For most it can be the difference between keeping your home and making it more affordable or having a once in a life time opportunity to upgrade to a better home that more closely meets their needs.  If you think you may benefit from checking into your options, email us today!

Housing market decline means value for some; continued pain for others

The impact of the housing market has impacted people differently. Those who need to sell their homes or are currently underwater have faced never-ending challenges while others are experiencing the bargain of a lifetime. The two issues are created in part due to the country’s biggest banks and lenders owning over 872,000 homes, a number that is almost twice the amount in 2007. The index of home prices is at its’ lowest point since 2002. In addition, a million more homes may fall to foreclosure over the next two years. What was long expected is now confirmed; while many areas of the economy are improving, the housing market is in a double-dip housing recession. Where do we go from here, is there any end in sight? While many lenders are starting to take a loss in an effort to side-step the foreclosure process, the back log of homes remains on the market and is expected to only worsen. Unfortunately, the lenders are often overwhelmed and the system is unable to handle the volume. In reality, the issue comes back to simple economic measures of “supply and demand” and in most markets the lack of demand has helped contribute to the overwhelming supply.

Economic stimulus, low interest rates, and those available “cash buyers” or investors have helped make it more affordable to buy a home than any time in the last decade. In certain markets there are substantial value properties for those in the position to jump into the housing market. For those able to have a job or who are downsizing in retirement have great advantages and live comfortably (financially) in many markets, especially outside of the Northeast. Unfortunately, consumer sentiment is so weak that there simply aren’t enough interested buyers willing to take the plunge to real estate. They believe it is much simpler and more cost-effective to rent. A third of consumer wealth is from home ownership and when prices decline, you have less tolerance for risk. When fewer buyers are willing to buy a home coupled with reduced home prices caused by foreclosures and short sales, the resulting occurrence is the “spiraling effect” downward of home prices.

What is the answer to this major problem? Many certainly have tried their ideas but the problem is growing by the year. Local, State and Federal agencies have tried many stop-gap programs, but the problem is just too large and too costly to repair. Fighting among political party lines has created a stalemate to discover new solutions. Furthermore, budget issues and reduced tax revenues have all but guaranteed there will be no real solution. The banks, in many cases, have proven to be as ineffective and inefficient as government at solving the problem.

What does the future hold in housing? No one really knows. But one thing is for sure – someone will always find a way to make money while others suffer. Regardless of home values that are available, the housing collapse should be a concern for all Americans.