Dennis Balthazor

New home sales surge to 2-year high; prices rising

2012-07-09T15:21:00Z

New sales of single-family homes soared to a seasonally adjusted annual rate of 369,000 in May, reaching their highest point since April 2010, according to the government.

Sales were 7.6% above April's 343,000 rate and 19.8% above the 380,000 level reached in May 2011, according to the Commerce Department. The measure had dipped 1.1% last month from March.

The median sales price of new homes sold in May was $234,000, up nearly 2% from April and a 5.6% boost from last year.

Compared with last year, sales in all regions were up. From April, the Northeast enjoyed 36.7% more sales, but the Midwest slumped 10.6% while the West tumbled 3.5%.

The housing market has been squeezed by more demand than supply. Inventory of new homes for sale rose for the first time in more than a year to 145,000.

The new data add another layer to the ongoing debate over the status of the real estate recovery. Last week, research showed builders breaking ground on fewer homes in May but requesting the most permits in nearly four years. Home-builder confidence is still weak but home prices are turning around. Mortgage rates are at record lows.

Lack of Los Angeles Home Inventory Creates Bidding Wars.

2012-07-09T15:15:00Z

Would-be buyers are packing open houses and scrambling to make offers on properties before they are even listed. Bidding wars are erupting. And real estate agents are vying fiercely to represent the few sellers that do exist.

Housing inventory has sunk to levels not seen since the bubble years. The number of American homes with a "for sale" sign hit 2.5 million in April, the lowest number for an April since 2006, according to the National Assn. of Realtors.

David Dennick, who lives in Echo Park and works as a television editor, has been searching for a home with his wife, Denise, for about two months. The couple have already bid on three properties. They are hoping to find a home for less than $525,000, which is $25,000 more than they originally had hoped to spend.

"It is much more competitive than we thought," said Dennick, standing in the entrance of an Eagle Rock open house on a recent Sunday. "It is just frustrating because we thought we would really be able to buy a house; we are a middle-class family."

The sharp drop in inventory along with rock-bottom interest rates have helped stabilize even some of the hardest-hit markets, including the Southland, Las Vegas, Phoenix and Miami. Some real estate professionals are concerned that the lack of inventory might turn off potential buyers, stifling the recent recovery in home sales.

The much-predicted foreclosure wave that was expected to dump more homes onto the market has not materialized. Fewer borrowers are entering default, and banks are better managing the properties they do have on their books.

In addition, professional investors bankrolled by private equity firms and hedge funds are pouncing on bank-owned homes, often turning them into rentals.

A dearth of new construction also is constraining supply. In April — the most recent month for which figures are available — the number of completed new single-family homes available for sale stood at 46,000, the lowest level since the Census Bureau began keeping track in 1973. Some 70,000 were under construction, also near historic lows.

The inventory problem has been exacerbated by the plunge in home prices since the go-go years. Many people who bought at the top of the cycle are so deeply underwater, they can't get the price they need to sell and are therefore not bothering to put their homes on the market.

"We know negative equity holds back home sales, but it also holds back the listing of sales," said Sam Khater, an economist with CoreLogic, a company that tracks the mortgage market. "Today it is holding the market back."

The lack of available homes is maddening for those consumers who thought 2012 would be the year to buy.

In Southern California, inventories have plunged over the last year. The number of homes listed for sale in April fell 35% in Los Angeles County and was down 42% in Orange, 39% in San Bernardino, 42% in Riverside, 53% in Ventura and 43% in San Diego counties, according to online brokerage Redfin.

The number of days a home sits on the market has also decreased, meaning properties are selling faster. For the entire six-county Southern California region, the median number of days a home sat on the market fell to 33 last April from 43 the same month a year earlier.

Eddie David and his wife, Tiana Rezac, have felt the unexpected shortage firsthand. The two were sure they would buy a house this year until they tripped into the perplexing new housing reality. After being outbid on three different properties in neighborhoods from the Westside to Atwater Village, they shelved the search.

"With the downturn, it seems like there are a lot of people who have been waiting in the wings to pounce, and because the rates are low, there is just a lot more competition," David said. "There were multiple offers. We tried to get in on a couple other homes, and even though it had been just a week or two weeks, it was just too late."

Alex Gruenberg and his wife, Kristina, both 27, lost out on a home that ended up going for $30,000 more than they offered. The recently married couple have new jobs in the area and are looking for a pedestrian-friendly neighborhood with decent dining options.

They are now trying to find homes before they are listed.

"We are really learning that there is sort of an inside element to that," Gruenberg said. "Things are going in days."

Glenn Kelman, chief executive of Redfin, said the recovery remains tentative but the market has grown competitive because sellers feel they have time on their side, while buyers feel a sense of urgency given low interest rates and relatively cheap prices compared with the bubble years.

"It is a precarious situation, but the real issue is that nobody wants to sell a house right now," Kelman said. "So now we have classes for our real estate agents on how to win a bidding war."

Record Low Freddie Mac Mortgage Rates!!

2012-07-09T15:13:00Z

Fixed-rate mortgages dropped to record lows again this week, with lenders offering the 30-year loan at an average of 3.62%, according to housing finance giant Freddie Mac.

That was down from the previous record low of 3.66%, set during the last two weeks. Freddie Mac, which has been conducting the weekly survey since 1971, said the 30-year loan has hit or matched a record low in 10 of the last 11 weeks.

Lenders were offering the 15-year fixed-rate mortgage at 2.89% this week, down from 2.94% a week ago and also a record low.

The starting interest rates for adjustable-rate mortgages also were at or near record lows this week, Freddie Mac said.

Freddie Mac said borrowers would have paid on average 0.8% of the loan amount to the lenders to obtain the 30-year loan at the record low rate and 0.7% of the amount on the 15-year loan.

Freddie Mac surveys lenders across the nation early each week. It asks about the terms they are offering on loans of up to $417,000 to borrowers with good credit and 20% down payments for home purchases or at least that much equity in their property if they are refinancing.

Borrowers in such circumstances often can find slightly better rates if they shop around. And they also can obtain lower rates by making additional payments known as discount points to their lenders.

Pre-Qualified vs. Pre-Approved: What You Must Know

2012-04-24T15:59:00Z

Knowing the difference between getting prequalified for a loan, and preapproved for a loan equips you to have the right information at the right time.

Getting pre-qualified for a loan gives you an idea of how much you might qualify to borrow. You have not actually applied

for a loan and the mortgage lender has only your word on your income, assets and liabilities. None of your information has been verified, the loan amount is in no way guaranteed. You may be given a pre-qualification letter that merely states you are likely to be approved for a mortgage. Getting a pre-qualification is generally very fast and you can even pre-qualify for a mortgage online in only a few minutes.

Getting pre-approved means that not only have you given the mortgage lender information on your income, assets, and liabilities, but your information has been checked and verified. The mortgage lender may also have pulled your credit report to learn about your credit history and credit-worthiness.

Getting a pre-approval letter means that you are likely to be approved for a mortgage and also states the amount for which you may be approved. It carries much more weight than a pre-qualification letter.

It's important to remember that you are not guaranteed to get a mortgage if you are pre-approved or pre-qualified. Many things can happen during the process—some lenders may give out pre-approval letters without actually verifying your information or a borrower may not give completely accurate information about his situation. Written by ForSaleByOwner staff

Who's Buying Homes in 2012? Boomers and Busters

2012-04-24T15:55:00Z

Can housing upsize and downsize at the same time? Absolutely. Despite the sluggish real estate market, two age groups continue to be active: Younger buyers are bent on upsizing, while older empty-nesters are keen on downsizing. Here's who's buying now...and why.

A growing number of young adults are tired of cramped apartments and condos, and they want to upgrade to more spacious town houses and single-family homes. At the same time, the huge baby boom generation is ready to downsize from large single-family homes to maintenance-free condos and town houses.

Typical of the upsizing trend are Angela and Nate Tomaso. The arrival of a baby created the need for more space. In mid-February, they will move from a two-bedroom condo to a new three-bedroom town house at Lexington Park in Des Plaines. "The town house is 2,000 square feet, 600 square feet larger than our condo," Angela said. That should be enough crawling space for their baby boy. "His name is Brooklyn; we're a big baseball family," she added. Their condo will not be put up for sale but will be rented. Another couple with a growing family in mind are Bill and Kendra Fiorito.

They have upsized in a big way, moving from a 1,200-square-foot condo in Schaumburg to a 3,700-square-foot single-family home in Inverness. "This is it. This is where we're going to raise our family," said Bill. They were looking for new construction in an area with good schools and found what they wanted in a two-story house by Meritus Homes at Creekside at Inverness Ridge.

"We have a great open floor plan, four bedrooms and back up to a nature preserve," he said.

Moving up can be easier than moving down, mainly because downsizing empty-nesters have a house to sell. "We tried to sell our house in Barrington for three years," said Jay Santeler. He and his wife, Gail, lived there 18 years. The youngest of their four children is in college. "The big house was costing big money in taxes and maintenance, and we weren't using all that space." Finally, they sold it and moved from 5,000 square feet to 2,500 square feet in a three-bedroom town house at the Heritage of Palatine Brownstones, a development of R. Franczak and Associates in Palatine.

"We love it, and it simplified our lives," he said. "We have lower taxes, less maintenance and it's great walking to downtown Palatine." "While the 65-plus age group may be trading down in floor area, they still prefer high-quality design and amenities," said Stephen Melman, director of economic services for the National Association of Home Builders.

Many older buyers prefer one-level living, and that trend is backed up by a recent survey: "Builders report that construction of one-story houses increased from 34 percent in 2007 to 43 percent in 2010," Melman said. However, the pace of upsizing and downsizing is being affected by economic factors, said John McIlwain, senior fellow for housing at the Urban Land Institute in Washington, D.C. "First-time buyers are being constrained by the challenges of making a down payment and tight financing," McIlwain said. "Boomers not only are concerned about selling their old house but also about their retirement finances. They are buying very thoughtfully."

On the other hand, boomers are looking forward to new construction after living in older houses for years. Downsizing is much more than an economic move. "We had to throw out 25 years of our lives to move from a 3,500-square-foot house to a 2,000-square-foot condo. It was emotionally and physically daunting," said Asher Bronfeld. He and his wife, Ellen Garber Bronfeld, bought a three-bedroom condo at Optima Old Orchard Woods, a 691-unit, three-tower complex in Skokie. "The children were grown, and we both were looking forward to high-rise living," Asher said. "We didn't need all the space in a single-family home. It had two rooms we used less than 10 times a year." Bronfeld said it took almost eight months to sell their two-story home in Northbrook. "Selling is all about price. If you're motivated, you'll sell."

He added that condo living does require some adjustments, but a major positive is maintenance-free living. "Now when there's a 20-inch snowfall, I don't worry." "Moving down is definitely a trend with the huge boomer market," said Suzy Kogen Friedman, president of KZF Development. "Our duplexes and town houses at Meadow Ridge in Northbrook appeal to buyers moving down from much larger houses in the surrounding North Shore area. They are tired of keeping up their old homes, and like the gated feature."

Price declines have benefited first-time buyers. "We've been in a buyer's market for the last five years, and now first-time buyers can afford neighborhoods with the best schools," said a real estate agent Emery Moorehead with the Koenig & Strey office in downtown Northbrook. His advice to first-timers is to pick the best school district they can afford.

"Don't shy away from foreclosures and short sales because the house is not perfect. Even mold can be fixed," he said. "There are a lot of opportunities for suburbanites to move down in Chicago because of the glut of condos." Some 2,500 new condo units remain unsold in downtown Chicago, said Gail Lissner, vice president of Appraisal Research Counselors in Chicago. Lissner noted that potential buyers have been putting off decisions for a long time, but "at some point people will start to move on with their lives," she said.

When that happens, she thinks first-time buyers will be especially motivated by need, such as a growing family. For suburban empty-nesters, moving down to a city condo previously was a popular lifestyle choice and could gain steam again. One Chicago builder has moved down to entice move-up buyers. Paul Bertsche, president of CA Development, downsized the lineup of his single-family homes at Edgebrook Glen and Mayfair Crossing from a range of 3,600 to 5,000 square feet in 2007 to 1,700 to 3,600 square feet now. "We did it with the same room count by reducing wasted space in hallways and other areas. Because of the corresponding price reductions, we now appeal to buyers moving up from apartments and condos," Bertsche said.

Though definitely upsizing, Chicago's professional athletes are watching the bottom line, said Moorehead. Before embarking on a career in real estate, he was a tight end on the Chicago Bears 1985 Super Bowl roster and had a 12-year NFL career. "Million-dollar homes seem expensive even to highly paid young athletes. Many buy less expensive residences in Lake County rather than on the North Shore," he said.

Housing market still weak: Fewer existing homes bought in March

2012-04-24T15:52:00Z

Warm weather doesn’t always bring good news. An unusually toasty winter may have poached sales of previously owned homes from March, denying it the expected springtime boost.

Consumers bought 2.6% fewer existing homes – pushing the seasonally adjusted annual rate down to 4.48 million from February’s 4.6 million, according to the National Assn. of Realtors.

In the West, sales were down 7.4% from February and 0.9% from last March. The median price, now $198,300, is 1.6% higher than that of a year ago.

There were still signs of health: A third of the buyers were first-timers. Fewer of the properties were deeply discounted foreclosures – 29% of the total compared with 34% in February. The median price for previously owned homes was $163,800 – up 2.5% from that of a year earlier.

The supply of available homes shrank 1.3%, and prices are showing signs of stabilizing. And March’s existing home sales are 5.2% stronger than they were at the same point last year, according to the realtors group.

“The recovery is happening, though not at a breakout pace,” said Lawrence Yun, the association’s chief economist, in a statement.

But concerns still remain that the strong numbers from earlier this year, which resulted in the best winter for existing home sales in five years, may not lead to sustained improvement but, instead, weakness.

Mortgage rates are inching higher, according to a Freddie Mac survey Thursday. Home sales in California fell in March, the California Assn. of Realtors said earlier this week.

There’s still room for optimism, however. Rising consumer confidence suggests that Americans may feel more ready to buy property. Builders filed more permits to construct new homes than at any other point in the last 3.5 years.

California home sales drop, but prices climb in March

2012-04-24T15:49:00Z

While the pace of California home sales declined in March, the median home price in the state increased for the first time in 16 months.

Sales of existing, single-family detached homes, seasonally adjusted, was 505,360 in March, a 4.5% drop from February and a 2.3% drop from the same month in 2011, according to a survey by the California Assn. of Realtors.

Meanwhile, the statewide median price for an existing, single-family detached home reached $291,080 in March, a 9.2% increase from the February median price of $266,660, according to the association. The March median price was also 1.6% above the price for March 2011.

Real estate officials say the median price increased statewide thanks to a significant jump in most regions, including the San Francisco Bay Area, where prices surged 9.1% in March, over the previous month. The prices rose even higher in the San Mateo and Contra-Costa regions, the report said.

In the Los Angeles Metropolitan Area, the median price increased 4.5% in March, compared with February, and 1.3% over March 2011.

"Tight inventory and robust home sales, particularly in the San Francisco Bay Area, fueled the substantial increase in the March median home price," said association president LeFrancis Arnold.

FHA Waives 3 Yr. Wait Time for Short Sellers..

2012-02-21T16:01:00Z

FHA has financing for homeowners who are short selling their home and wants to repurchase another home after the short sale is approved and completed thru their current lender.

There are a number of home owners who will qualify for this program by meeting the "extenuating circumstances" criteria.

If marketed correctly.....this loan program will deposit commissions into your bank account; by persuading those homeowners to "list" with you ..because YOU have a lender that can provide financing for their next property.

In other words...there will be "life (home ownership) after foreclosure" following their short sale".

The caveats are:

1) They must be current on their mortgage and all other credit obligations for the 12 months prior to the actual short sale completion date.

Editor Note: Contrary to popular belief ..a "short sale" in and by itself is a not a credit score killer! The damage to a borrower's credit score by the number of lates incurred during the "ramp up" to the short sale.

Also note...there is absolutely no discernible difference between a "short sale" and a "foreclosure action" (or loan mod for that matter) in the eyes of an underwriter.

FHA/Fannie/ Freddie see all 3 events listed below as equally negative to each other ....thus triggering the 3 year "wait time":

a) Loan modifications

b) Short sales and deed -in-lieu

c) Foreclosures

2) Home owners must document "hardship" as defined by:

a) Job loss and subsequent job transfer/ relocation... (a new stream of income will be needed to qualify for the new loan).

b) Catastrophic medical bills (and/ or possible death) incurred by a member of the borrower's "nuclear family" (i.e. co signer of the current mortgage..child...spouse..or other dependent as listed on the borrower's tax returns).

3) They must be downsizing and relocating. Buying a bigger home across the home will not fly.

4) Their current lender(s) must be willing to approve the short sale of their current residence.

5) Their credit scores need to be above 620 and any outstanding collections (usually medical bills) need to be paid THRU ESCROW (ONLY) at COE.

Lending limits for FHA loans - By CALIFORNIA County

2011-12-09T22:10:00Z

County Name

Single Family

Duplex

Tri-plex

Four-plex

ALAMEDA

$625,500

$800,775

$967,950

$1,202,925

OAKLAND-FREMONT-HAYWARD, CA METROPOLITAN DIVISION

ALPINE

$463,450

$593,300

$717,150

$891,250

NON-METRO

AMADOR

$332,350

$425,450

$514,300

$639,150

NON-METRO

BUTTE

$293,250

$375,400

$453,750

$563,950

CHICO, CA (MSA)

CALAVERAS

$373,750

$478,450

$578,350

$718,750

NON-METRO

COLUSA

$271,050

$347,000

$419,425

$521,250

NON-METRO

CONTRA COSTA

$625,500

$800,775

$967,950

$1,202,925

OAKLAND-FREMONT-HAYWARD, CA METROPOLITAN DIVISION

DEL NORTE

$271,050

$347,000

$419,425

$521,250

CRESCENT CITY, CA (MICRO)

EL DORADO

$474,950

$608,000

$734,950

$913,350

SACRAMENTO--ARDEN-ARCADE--ROSEVILLE, CA (MSA)

FRESNO

$281,750

$360,700

$436,000

$541,800

FRESNO, CA (MSA)

GLENN

$271,050

$347,000

$419,425

$521,250

NON-METRO

HUMBOLDT

$327,750

$419,550

$507,150

$630,300

EUREKA-ARCATA-FORTUNA, CA (MICRO)

IMPERIAL

$271,050

$347,000

$419,425

$521,250

EL CENTRO, CA (MSA)

INYO

$369,150

$472,550

$571,250

$709,900

BISHOP, CA (MICRO)

KERN

$271,050

$347,000

$419,425

$521,250

BAKERSFIELD, CA (MSA)

KINGS

$271,050

$347,000

$419,425

$521,250

HANFORD-CORCORAN, CA (MSA)

LAKE

$271,050

$347,000

$419,425

$521,250

CLEARLAKE, CA (MICRO)

LASSEN

$271,050

$347,000

$419,425

$521,250

SUSANVILLE, CA (MICRO)

LOS ANGELES

$625,500

$800,775

$967,950

$1,202,925

LOS ANGELES-LONG BEACH-GLENDALE, CA METROPOLITAN D

MADERA

$271,050

$347,000

$419,425

$521,250

MADERA, CA (MSA)

MARIN

$625,500

$800,775

$967,950

$1,202,925

SAN FRANCISCO-SAN MATEO-REDWOOD CITY, CA METROPOLI

MARIPOSA

$322,000

$412,200

$498,250

$619,250

NON-METRO

MENDOCINO

$373,750

$478,450

$578,350

$718,750

UKIAH, CA (MICRO)

MERCED

$271,050

$347,000

$419,425

$521,250

MERCED, CA (MSA)

MODOC

$271,050

$347,000

$419,425

$521,250

NON-METRO

MONO

$529,000

$677,200

$818,600

$1,017,300

NON-METRO

MONTEREY

$483,000

$618,300

$747,400

$928,850

SALINAS, CA (MSA)

NAPA

$592,250

$758,200

$916,450

$1,138,950

NAPA, CA (MSA)

NEVADA

$477,250

$610,950

$738,500

$917,800

TRUCKEE-GRASS VALLEY, CA (MICRO)

ORANGE

$625,500

$800,775

$967,950

$1,202,925

SANTA ANA-ANAHEIM-IRVINE, CA METROPOLITAN DIVISION

PLACER

$474,950

$608,000

$734,950

$913,350

SACRAMENTO--ARDEN-ARCADE--ROSEVILLE, CA (MSA)

PLUMAS

$336,950

$431,350

$521,400

$648,000

NON-METRO

RIVERSIDE

$355,350

$454,900

$549,850

$683,350

RIVERSIDE-SAN BERNARDINO-ONTARIO, CA (MSA)

SACRAMENTO

$474,950

$608,000

$734,950

$913,350

SACRAMENTO--ARDEN-ARCADE--ROSEVILLE, CA (MSA)

SAN BENITO

$625,500

$800,775

$967,950

$1,202,925

SAN JOSE-SUNNYVALE-SANTA CLARA, CA (MSA)

SAN BERNARDINO

$355,350

$454,900

$549,850

$683,350

RIVERSIDE-SAN BERNARDINO-ONTARIO, CA (MSA)

SAN DIEGO

$546,250

$699,300

$845,300

$1,050,500

SAN DIEGO-CARLSBAD-SAN MARCOS, CA (MSA)

SAN FRANCISCO

$625,500

$800,775

$967,950

$1,202,925

SAN FRANCISCO-SAN MATEO-REDWOOD CITY, CA METROPOLI

SAN JOAQUIN

$304,750

$390,100

$471,550

$586,050

STOCKTON, CA (MSA)

SAN LUIS OBISPO

$561,200

$718,450

$868,400

$1,079,250

SAN LUIS OBISPO-PASO ROBLES, CA (MSA)

SAN MATEO

$625,500

$800,775

$967,950

$1,202,925

SAN FRANCISCO-SAN MATEO-REDWOOD CITY, CA METROPOLI

SANTA BARBARA

$625,500

$800,775

$967,950

$1,202,925

SANTA BARBARA-SANTA MARIA, CA (MSA)

SANTA CLARA

$625,500

$800,775

$967,950

$1,202,925

SAN JOSE-SUNNYVALE-SANTA CLARA, CA (MSA)

SANTA CRUZ

$625,500

$800,775

$967,950

$1,202,925

SANTA CRUZ-WATSONVILLE, CA (MSA)

SHASTA

$273,700

$350,350

$423,500

$526,350

REDDING, CA (MSA)

SIERRA

$304,750

$390,100

$471,550

$586,050

NON-METRO

SISKIYOU

$271,050

$347,000

$419,425

$521,250

NON-METRO

SOLANO

$400,200

$512,300

$619,300

$769,600

VALLEJO-FAIRFIELD, CA (MSA)

SONOMA

$520,950

$666,900

$806,150

$1,001,850

SANTA ROSA-PETALUMA, CA (MSA)

STANISLAUS

$276,000

$353,300

$427,100

$530,750

MODESTO, CA (MSA)

SUTTER

$271,050

$347,000

$419,425

$521,250

YUBA CITY, CA (MSA)

TEHAMA

$271,050

$347,000

$419,425

$521,250

RED BLUFF, CA (MICRO)

TRINITY

$271,050

$347,000

$419,425

$521,250

NON-METRO

TULARE

$271,050

$347,000

$419,425

$521,250

VISALIA-PORTERVILLE, CA (MSA)

TUOLUMNE

$331,200

$424,000

$512,500

$636,900

PHOENIX LAKE-CEDAR RIDGE, CA (MICRO)

VENTURA

$598,000

$765,550

$925,350

$1,150,000

OXNARD-THOUSAND OAKS-VENTURA, CA (MSA)

YOLO

$474,950

$608,000

$734,950

$913,350

SACRAMENTO--ARDEN-ARCADE--ROSEVILLE, CA (MSA)

YUBA

$271,050

$347,000

$419,425

$521,250

Fixed Rate FHA Loans Information

2011-12-09T22:08:00Z

Home ownership rates in America continue to increase at a steady rate due in a large part to the implementation of FHA home loans more than seventy years ago. Over the years, FHA has helped Americans gain the financial independence that comes with owning a home. By creating jobs and reasonable mortgage rates for the middle class, financing military housing, and producing housing for the low income and the elderly, FHA has helped Americans become some of the best housed people in the world with over 73 million Americans currently owning their own homes.

HOW IT WORKS

By serving as an umbrella under which lenders have the confidence to extend loans to those who may not meet conventional loan requirements, FHA's mortgage insurance allows individuals to qualify who may have been previously denied for a home loan by conventional underwriting guidelines.

FHA loans benefit those who would like to purchase a home but haven't been able to put money away for the purchase, like recent college graduates, newlyweds, or people who are still trying to complete their education. It also allows individuals to qualify for a FHA loan whose credit has been marred by bankruptcy or foreclosure.

NUTS AND BOLTS

The most popular FHA home loan is the 203(b). This fixed-rate loan often works well for first time home buyers because it allows individuals to finance up to 97 percent of their home loan which helps to keep down payments and closing costs at a minimum. The 203(b) home loan is also the only loan in which 100 percent of the closing costs can be a gift from a relative, non-profit, or government agency.

Insurance on FHA mortgages are often rolled into the total monthly payment at 0.5 percent of the total loan amount which is roughly half of the price of mortgage insurance on a conventional loan. After five years or when the loan balance reaches 78 percent, the additional mortgage insurance is typically met and therefore drops off the total monthly payment.

GUIDELINES

It is not necessary to meet a minimum income requirement in order to qualify for a FHA loan but debt ratios specific to the state in which the home will be purchased have been put into place to prevent borrowers from getting into a home they cannot afford. This is done through a close analysis of income and monthly expenses.

30-year fixed mortgage rate hovers at 4%

2011-12-09T22:04:00Z

The mortgage engine seems stuck in low.

For five straight weeks, Freddie Mac's survey of the rates offered by home lenders for 30-year loans has averaged at or below 4%.

The most recent Freddie survey came out Thursday at an even 4% — a level that would have seemed hallucinatory not so long ago. That was before the Federal Reserve pulled out the interest-rate stops to support the economy.

The 15-year fixed loan average, at 3.3%, also remains in record-low territory, and Freddie Mac said the start rates on adjustable mortgages have dipped to all-time lows.

Something else also appears to be low, despite the record rates — the desire for new home loans.

A Mortgage Bankers Assn. count of applications showed an 11.7% decrease last week even after adjusting for seasonal factors such as the Thanksgiving holiday. The previous MBA weekly survey also had shown a decline as the latest wave of refinancings began to subside.

A Fed report this week on regional economic conditions described residential real estate markets as generally sluggish. But the report also said the economy expanded at a moderate pace in 11 of the Fed's 12 districts — a fact that provided encouragement to Freddie Mac economist Frank Nothaft.

"The extraordinarily low mortgage rates of the past month may provide a needed spur to housing activity," Nothaft said in the latest Freddie Mac release.

scott.reckard@latimes.com

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Lower credit scores slow housing recovery by thwarting sales

2011-12-09T22:00:00Z

Reporting from Washington—

How big a whack did your credit scores take during the grim years of economic distress after the housing bust? Was it 20 points, 50 points, 100 points — or maybe no drop at all?

These are key questions for millions of potential home buyers who hope to qualify for mortgages and current owners looking to refinance. New research from a major credit-risk evaluation company suggests that the drop in huge numbers of Americans' scores was dramatic

FICO (formerly known as Fair Isaac Corp.), which developed and markets the eponymous score that dominates the home mortgage field, found that in 2008-09, about 50 million consumers in this country saw their FICO scores plunge more than 20 points. Nearly 21 million of these lost more than 50 points. Many lost 100 points or more because of severe delinquencies.

During the same period, lenders and investors began ratcheting up their standards for acceptable scores and to extend special preferences in fees and interest rates to loan applicants who rank among the highest scorers. Among these developments:

•Loans originated for purchase or guarantee by the two dominant home loan investors — government-run Fannie Mae and Freddie Mac — now carry average FICO credit scores in the 760 range and above, record highs for both companies. That's good for them, but not necessarily for you if you need a loan. (FICO scores range from 300 to 850; higher scores indicate lower risk of default.)

•Even new mortgages being insured by the Federal Housing Administration — traditionally the fail-safe financing refuge for first-time buyers with modest incomes and less-than-perfect credit histories — now have average credit scores slightly above 700.

•During the housing boom years of 2004-06, by contrast, a score of 620-640 was adequate to earn you a good mortgage rate and terms at Fannie Mae and Freddie Mac. The FHA often approved loans in which the FICO scores were in the mid-500s.

Earlier FICO studies found that the deepest score declines — creating the toughest challenges for obtaining new credit on affordable terms — have been among borrowers who ranked among the credit elite. Homeowners with scores in the high 700s may have lost as much as 130 points when they fell three months behind or more on loan payments. They might have lost as much as 160 points when they negotiated a short sale with their bank and as a result had unpaid deficiency balances left over.

Score bruises and wounds from past years are probably affecting the ability of consumers to get a new mortgage or buy a house. In a survey released before Thanksgiving, the National Assn. of Realtors reported that large numbers of sales contracts are falling apart because of financing issues — would-be buyers having difficulties meeting lenders' increasingly stringent requirements, including credit — among other factors.

Contract failures were reported by 33% of realty agents in the study, according to the association, a big spike over the year before when just 8% of agents reported cancellations. Although other factors may also be at work, credit problems stemming from 2008, 2009 and 2010, combined with lenders' higher FICO requirements, clearly are retarding the housing recovery by thwarting sales.

Part of the reason: Although FICO scores are dynamic and constantly changing, they can take extended periods to recover, much like a body that has suffered severe trauma.

In research released this year, FICO estimated that a homeowner with a 720 score who falls 30 days late on mortgage payments can take as much as 30 months to recover the 70 to 90 points that were lost in the process. And this assumes the owner gets current on all debts, keeps balances relatively low on credit cards and generally becomes a model user of credit. For homeowners with higher scores in the 780 range to start, the same 30-day delinquency — with a loss of 90 to 110 points — can take 36 months to cure fully.

What does this all mean to you if you're one of the 50 million who lost significant credit score points during the last several years? You should be in rebuilding mode if you seriously want another mortgage. As a more immediate alternative, though, keep the FHA in mind. Though the average FICO scores of its customers have never been higher, the FHA still accepts scores in the upper 500s and is more open than other financing sources to hearing about "extenuating circumstances" — unexpected job loss, medical problems, divorce and other issues — that caused your credit score to plunge in the first place.

Priced Well, Will It Sell?

2011-10-06T15:30:00Z

Tracking the local real estate market is practically a hobby for Yetta Levitt of central Florida. And she has always bought and sold houses by owner, saving thousands in commissions.

But even the formidable talents of Levitt were challenged by the merciless Florida real estate market when she decided it was time to sell her family’s large waterfront house and downsize to a smaller house nearby.

Levitt was one of four winners in ForSaleByOwner.com’s “Is Your House Priced Right?” contest, which invited homeowners around the country to submit short essays explaining what they thought their houses were worth, and why. The prize package included an appraisal to find out once and for all what the house is worth.

Levitt’s meticulous process started in September 2009 with a formal appraisal. Verdict: $698,000. She put the house on the market at that price. After all, the rise in local foreclosures would not affect a house bordering water and overlooking a nature preserve, with a pool and other amenities beloved by outdoorsy Floridians?

Homeowners often underestimate the impact of foreclosures. But especially in markets dominated by foreclosures, such as Florida, all property values are affected.

That’s what Levitt discovered. The house did not sell. In March 2010, Levitt dropped the price 20% to $558,000. “Initially I was reluctant to admit that foreclosures and short sales should factor in. Then reality dawned and I realized, you can’t avoid using distressed sales as comps,” she says. “I’ve always bought and sold by owner, over 25 years, my own homes and for my mom. In all that time I would have been highly offended by a 20% discount. But, it is what it is.”

Even that splash of cold reality didn’t move the house. What did it take? Tune in later this week, or cut to the chase.

Most homeowners still faring well, with positive equity

2011-10-06T15:23:00Z

Reporting from Washington—

Negative equity and underwater homeowners are frequently in the headlines, but what about positive equity in Americans' homes?

Is there much of it left after the wealth-killing recession and real estate bust? Where is it? Who's got equity? You might be surprised.

A new study, conducted by mortgage and real estate data firm CoreLogic for this column, found that there are substantial reserves of positive equity across the country. CoreLogic maintains the largest database on home loans — 42 million active accounts, more than 80% of all existing mortgages — with information supplied regularly by lenders and servicers.

First some basics on equity. The Federal Reserve estimates that at the end of June, Americans held $6.2 trillion in equity in their homes. This was down sharply from $13.2 trillion in 2005. Roughly 1 of every 3 homes is mortgage-free, according to federal and industry estimates.

Among owners who have mortgages, according to CoreLogic, 48.5% have at least 25% equity stakes in their properties. Roughly a quarter of owners with mortgages — 24.6% — have more than 50% equity.

At the other end of the spectrum, 22.5% of owners are in negative equity positions, burdened with houses worth less than their mortgage balances.

Where do owners have the highest equity holdings? Two states with very different economic profiles top the list — New York, where 48.8% of owners have greater than 50% equity positions, and Hawaii (43.7%). Both states also have exceptionally low incidences of negative equity. Connecticut, Massachusetts, Pennsylvania, the District of Columbia and New Jersey all have equity positions far above the national average. In the District, for example, 35.1% of all owners have 50% equity in their homes or more. In Connecticut it's 37%, Massachusetts, 36%, and New Jersey, 34.6%.

Sam Khater, senior economist for CoreLogic, says that states with high equity levels tend to be relatively affluent — or at least have sizable pockets of affluence — plus relatively low levels of mobility and in-migration. They also did not experience rampant construction booms on suburban land tracts during the years 2003-07, or heavy use of zany financing. They saw appreciation in real estate values, but not double digits a month as occurred in some parts of the country.

California exhibits not only the stable, relatively affluent, low-construction characteristics of high-equity areas but also has wide swaths that saw the reverse.

"It's kind of a barbell state," said Khater, with above-average numbers of owners holding 50% equity or more — typically in or near coastal cities — combined with large numbers of owners in deep negative equity, clustered in the interior counties and the Central Valley. While 26% of California owners have 50% or greater equity stakes — above the national average — nearly 1 out of 5 owes 20% to 50% or more on their mortgages than their home value.

The states where people tend to have the least favorable equity positions aren't hard to guess. Just 7.5% of Nevada owners have equity of 50% or greater. At the other extreme, 30% have mortgage debt that is 50% or more than their property values. Almost 58% of all Nevada owners are in negative equity positions, according to the CoreLogic data.

Arizona has the second-worst situation on negative equity, with 49% of owners underwater, followed by Florida with 45%. But unlike Nevada, Florida and Arizona have higher numbers of owners who still have solid equity holdings. In Florida, more than 1 of every 6 owners have 50% or higher equity. In Arizona 1 of every 8 does.

A handful of states that never saw the unrestrained price run-ups experienced in Nevada or Florida, and that have large numbers of owners with hefty equity positions, nonetheless have substantial numbers of underwater owners.

Virginia, with a sizable population of affluent owners in the northern suburbs bordering Washington D.C., has a negative equity rate of 22.8%. Maryland, which has a rate of equity-rich ownership above the national average, also has an above-average rate of negative equity — 23.5% of owners are underwater.

What to make of all these numbers? Equity holdings declined virtually everywhere during the real estate and mortgage busts, but $6 trillion-plus of it is still out there. Most owners are still faring relatively well in terms of home equity — they've got at least 25% stakes or nearly that much.

You just don't hear about it.

kenharney@earthlink.net

Distributed by Washington Post Writers Group.

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Mortgage rates set fresh record low, Freddie Mac says

2011-08-24T17:31:00Z

Mortgage rates tumbled to the lowest level in the history of Freddie Mac's weekly survey, with 30-year fixed-rate home loans being offered this week at an average 4.15%, down from last week's 4.32%.

Freddie Mac said in its weekly report that loans with variable interest rates also hit record lows, as did shorter-term fixed-rate loans. The 15-year fixed-rate loan, a popular choice with people refinancing their homes, was being offered at an average rate of 3.36%, down from 3.50% last week, Freddie Mac said.

The survey includes loans made with minimal payments of fees and points to lenders. The borrowers getting 30-year loans this week would have paid 0.7% of the loan amount in upfront fees and discount points, and borrowers would have paid 0.6% of the loan amount for the 15-year fixed loans, Freddie Mac said.

The rates, available to the lucky folks who have weathered the recession and housing debacle in solid financial shape, are the lowest since Freddie Mac's survey began in 1971 -- and almost as low as anyone can recall.

Long-term fixed-rate mortgages backed by the Federal Housing Administration averaged 4.08% for a several months in 1950-51, according to the National Bureau of Economic Research. FHA loans, which have additional costs, are available to people who are greater credit risks than those in the Freddie Mac survey.

Long-term mortgage rates tend to track the yield on the 10-year Treasury note, which has tumbled in recent weeks as investors bailed out of the stock market and loaded up on Treasuries, seeing them as a less-scary investment option.

The Freddie Mac survey's previous low for the 30-year loan was 4.17%, recorded last November after the Fed said it would buy $600 billion in Treasury securities, creating demand that drove down the 10-year T-note's yield.

This week's drop in loan rates came on the heels of the Federal Reserve's announcement last week that it expected to keep short-term interest rates low for at least two more years because of the economy's faltering recovery.

Despite the low rates, the housing market remains sluggish. About 70% of all home-loan applications in the first half of this year were for refinancings, not home purchases, Freddie Mac economist Frank Nothaft said.

Freddie Mac surveys lenders across the nation each week from Monday through Wednesday, asking them for the combination of rates and fees they are providing on popular mortgages.

The rates are available only to borrowers with solid credit, enough verifiable income to support payments and a 20% down payment for a purchase or 20% home equity for a refinancing.

Well-qualified borrowers who shop around often obtain slightly better rates, and it's possible to lower the rates further by paying additional upfront fees known as discount points.