Friday, March 26, 2010
Tuesday, February 23, 2010
An Opinion from the Assistant
An Opinion from the Assistant
Pam Gifford, Assistant to Kimberly Gribbin
Before I started working with Kimberly, I use to think that REALTOR®’s and Brokers made too much money… That the fees I had to pay to sell a home was excessive. To pay 6% just to put my home in the MLS was stupid… Why would I as a seller ever agree to such highway robbery?
Until I started working in the Real Estate business I never realized what all went into a real estate transaction. How much education REALTOR®’s need to keep up on all the changes in banking and real estate laws? How much money it costs to maintain their real estate license? How much their insurances cost?
As independent contractors, Real Estate Agents have to pay for their print and advertising costs upfront, regardless of whether the property sells. That’s a lot of color copies at 40ȼ each. They pay for their memberships, National, State and Local dues as well as dues for the MLS system and the lockboxes they place on your house for key security. They also There is print advertising expenses as well as internet/online expenses if they want their sellers home effectively marketed to all resources, Realtor.com, Homes.com, Trulia.com, Zillow.com just to name a few. They also have to advertise themselves as a REALTOR®, so they get the phone call from the potential buyer or seller.
How much it costs in gas to drive clients around all week long? And what about the wear and tear on their vehicles? And the cleaning expenses---have you seen some of their cars? I swear they live in them sometimes. Or how many hours they work to show every client every home they wish.
All of these expenses are justified when the home ACTUALLY sells. What if the home doesn’t sell because it’s not what buyers are looking for today? What if seller doesn't agree about fair market value and over prices and the house expires UNSOLD? Then the REALTOR gets nothing and has spent their money during the process.
Not to mention being on the phone for hours, talking to banks, title companies and other REALTOR®‘s. All in an effort to help get the transaction successfully negotiated and settled. While simultaneously holding the hand of frustrated homeowners who are desperate to sell their house, before they lose it. First Time Home Buyers to be educated on terminology of the real estate transaction. Part of the REALTOR® job is to educate their clients about the home buying processes that will help them see their desires end result----a new home or a sold house.
With this intensely depressed market, short sales are more common. Short sales require more work than the regular real estate transaction. The homeowners despite stories about why they need to sell can way heavy on the hearts of the REALTOR®’s. Sometimes the REALTOR® is called upon to help home owners find refinancing for their existing home so they can afford to keep them. Not all agents just want to sell their home---many are willing to help homeowners understand the loan modification process and see if there is a way for the homeowner to keep their house---at least the REALTOR® I work for does.
I understand that not all REALTOR®’s are alike. A good REALTOR® can make or break the real estate transaction. A well educated agent can successful foresee problems and avoid them leading the property to a successful closing. A good Real Estate agent is worth their weight in Gold, and a bad one is not worth their weight in air.
After working in the business for @ years now I appreciate now what a real estate agent goes through when listing & selling a home or finding that perfect home for their buyer clients.
In my Opinion I don't think they are paid enough---especially today with all of the new rules and paperwork and time needed to get the job done.
When choosing a REALTOR for the sale or purchase the experience of the agent in today’s market matters---what someone did years ago does not mean they are up to date with technology and the products needed to get the job done.
Pam Gifford
Assistant to Kimberly Gribbin
Pam Gifford, Assistant to Kimberly Gribbin
Before I started working with Kimberly, I use to think that REALTOR®’s and Brokers made too much money… That the fees I had to pay to sell a home was excessive. To pay 6% just to put my home in the MLS was stupid… Why would I as a seller ever agree to such highway robbery?
Until I started working in the Real Estate business I never realized what all went into a real estate transaction. How much education REALTOR®’s need to keep up on all the changes in banking and real estate laws? How much money it costs to maintain their real estate license? How much their insurances cost?
As independent contractors, Real Estate Agents have to pay for their print and advertising costs upfront, regardless of whether the property sells. That’s a lot of color copies at 40ȼ each. They pay for their memberships, National, State and Local dues as well as dues for the MLS system and the lockboxes they place on your house for key security. They also There is print advertising expenses as well as internet/online expenses if they want their sellers home effectively marketed to all resources, Realtor.com, Homes.com, Trulia.com, Zillow.com just to name a few. They also have to advertise themselves as a REALTOR®, so they get the phone call from the potential buyer or seller.
How much it costs in gas to drive clients around all week long? And what about the wear and tear on their vehicles? And the cleaning expenses---have you seen some of their cars? I swear they live in them sometimes. Or how many hours they work to show every client every home they wish.
All of these expenses are justified when the home ACTUALLY sells. What if the home doesn’t sell because it’s not what buyers are looking for today? What if seller doesn't agree about fair market value and over prices and the house expires UNSOLD? Then the REALTOR gets nothing and has spent their money during the process.
Not to mention being on the phone for hours, talking to banks, title companies and other REALTOR®‘s. All in an effort to help get the transaction successfully negotiated and settled. While simultaneously holding the hand of frustrated homeowners who are desperate to sell their house, before they lose it. First Time Home Buyers to be educated on terminology of the real estate transaction. Part of the REALTOR® job is to educate their clients about the home buying processes that will help them see their desires end result----a new home or a sold house.
With this intensely depressed market, short sales are more common. Short sales require more work than the regular real estate transaction. The homeowners despite stories about why they need to sell can way heavy on the hearts of the REALTOR®’s. Sometimes the REALTOR® is called upon to help home owners find refinancing for their existing home so they can afford to keep them. Not all agents just want to sell their home---many are willing to help homeowners understand the loan modification process and see if there is a way for the homeowner to keep their house---at least the REALTOR® I work for does.
I understand that not all REALTOR®’s are alike. A good REALTOR® can make or break the real estate transaction. A well educated agent can successful foresee problems and avoid them leading the property to a successful closing. A good Real Estate agent is worth their weight in Gold, and a bad one is not worth their weight in air.
After working in the business for @ years now I appreciate now what a real estate agent goes through when listing & selling a home or finding that perfect home for their buyer clients.
In my Opinion I don't think they are paid enough---especially today with all of the new rules and paperwork and time needed to get the job done.
When choosing a REALTOR for the sale or purchase the experience of the agent in today’s market matters---what someone did years ago does not mean they are up to date with technology and the products needed to get the job done.
Pam Gifford
Assistant to Kimberly Gribbin
Monday, February 22, 2010
Relax and let us process things!
Today's Real Estate market in York Co PA is full of inventory. We have everything available from starter homes for 1st time buyer, 55+ communities, detached single family homes both new construction & re-sales, condos and town homes and McMansions back to the prices of 2005.
The Ready, Willing & Able buyers are out there-they are on-line, attending Open Houses and keeping their Buyer's Agent busy looking at all of the options that exist.
These days, with darkness still early in the evening & 2 feet of snow still on the ground my weekends are slammed.
A busy agent is finding themselves showing different buyers properties all weekend long. On Saturdays-One set from 10-1pm another from 2-5pm then Sunday an Open House from 12-2pm then back out with buyers from 2:30-5pm.
As soon as the showing time arrives - buzz buzz buzz. The Blackberry is notifying me of a new email – It’s a Feedback request for the showing we are at that very moment.
Wow - there goes the email again--another showing feedback request from the last showing. This continues all day.
Before I can get home, eat & see my family for a few minutes buzz buzz buzz again. This time it’s the listing agent personally reaching out --Did you show my property at 123 ABC St today as scheduled? What did your buyers think? Are they writing? The sellers are anxious to know. Please provide feedback.
Hello- can we have a day to process things? We just previewed 5 homes. I DID receive your automatic feedback request-I actually prefer this way of providing feedback. Its non threatening and you can't get defensive when I give honest feedback about price & condition. We need a day to chat, run numbers & see what direction we want to proceed.
Relax-after all its 5pm on Sunday evening. Quite honestly until I am at my desk & looking at our notes I can't really give you a full feedback report.
I do understand at times you may need to reach out to an agent here and there but please give me the chance to respond. AND because we are pulled in so many directions on the weekends please understand this can wait till Monday morning.
Feedback is important for both the Realtor & Seller to know the public opinions of the price & condition. Beside the sold comparables, the feedback and response from the buyers is very important to agents & sellers alike.
Most quality agents that understand we, as REALTORS® work together. We respect each other and are often Sellers agents and want the same courtesy when you show our listings. The majority of us will complete feedback requests, just RELAX a little.
The Ready, Willing & Able buyers are out there-they are on-line, attending Open Houses and keeping their Buyer's Agent busy looking at all of the options that exist.
These days, with darkness still early in the evening & 2 feet of snow still on the ground my weekends are slammed.
A busy agent is finding themselves showing different buyers properties all weekend long. On Saturdays-One set from 10-1pm another from 2-5pm then Sunday an Open House from 12-2pm then back out with buyers from 2:30-5pm.
As soon as the showing time arrives - buzz buzz buzz. The Blackberry is notifying me of a new email – It’s a Feedback request for the showing we are at that very moment.
Wow - there goes the email again--another showing feedback request from the last showing. This continues all day.
Before I can get home, eat & see my family for a few minutes buzz buzz buzz again. This time it’s the listing agent personally reaching out --Did you show my property at 123 ABC St today as scheduled? What did your buyers think? Are they writing? The sellers are anxious to know. Please provide feedback.
Hello- can we have a day to process things? We just previewed 5 homes. I DID receive your automatic feedback request-I actually prefer this way of providing feedback. Its non threatening and you can't get defensive when I give honest feedback about price & condition. We need a day to chat, run numbers & see what direction we want to proceed.
Relax-after all its 5pm on Sunday evening. Quite honestly until I am at my desk & looking at our notes I can't really give you a full feedback report.
I do understand at times you may need to reach out to an agent here and there but please give me the chance to respond. AND because we are pulled in so many directions on the weekends please understand this can wait till Monday morning.
Feedback is important for both the Realtor & Seller to know the public opinions of the price & condition. Beside the sold comparables, the feedback and response from the buyers is very important to agents & sellers alike.
Most quality agents that understand we, as REALTORS® work together. We respect each other and are often Sellers agents and want the same courtesy when you show our listings. The majority of us will complete feedback requests, just RELAX a little.
Monday, February 15, 2010
It is not my fault you can not purchase a house!
All too often I feel as though consumers want to blame us, Realtors & Lenders, as to the reason they can not purchase a house. I have yet to meet a Realtor or Lender who is responsible for a potential buyers credit score, debt to income ratio, lack of savings, lack of job security,etc.
Buying a home is something we earn. We work hard, pay our bills, save for our future and live within our means. It is not an entitlement or something that everyone is granted---it is earned.
While I support the efforts to help bring some stability to the Housing Market I also agree that as a society we need to get back to the basics.
The 1st time Buyers Tax Credit and Tax Credit for repeat buyers is a great opportunity to take advantage of---however they should not be the reason you make such a large investment.
The local programs offered by specific lenders to assist with median or below median income level borrowers are again something to take advantage of but not a reason to purchase. These community & 100% rural housing mortgage programs are there to assist buyers that qualify not to replace some of the loosey goosey lending of days past.
While many sellers find themselves paying the majority of the buyers closing costs remember the seller too has cost involved with selling and that the buyers too have expenses to pay. If the seller is willing to pay some of these expenses on top of their expenses than it is a benefit and not an entitlement.
A buyer has an equal part in this process and likewise and equal responsibility: maintain good credit standing and scores by paying bills on time and managing credit wisely, saving for the down payment and closing costs, having realistic expectations of what is obtainable.
If in the end we are able to negotiate some closing costs assistance from the seller that is a bonus. When many sellers are being conditioned that the buyers are going to ask for this assistance it is not an entitlement and part of the process to being ready to own a home and the responsibility that comes along with such is showing yourself and the lenders that you are credit worthy and ready to handle the many demands of home ownership. Starting the process with savings and a healthy balance of credit management will better assist you with the financial responsibilities that come along with owning a home.
Remember as Realtors and Lenders we are here to assist you and be part of the team----you too are a team member in your own pursuit of Home Ownership!
Buying a home is something we earn. We work hard, pay our bills, save for our future and live within our means. It is not an entitlement or something that everyone is granted---it is earned.
While I support the efforts to help bring some stability to the Housing Market I also agree that as a society we need to get back to the basics.
The 1st time Buyers Tax Credit and Tax Credit for repeat buyers is a great opportunity to take advantage of---however they should not be the reason you make such a large investment.
The local programs offered by specific lenders to assist with median or below median income level borrowers are again something to take advantage of but not a reason to purchase. These community & 100% rural housing mortgage programs are there to assist buyers that qualify not to replace some of the loosey goosey lending of days past.
While many sellers find themselves paying the majority of the buyers closing costs remember the seller too has cost involved with selling and that the buyers too have expenses to pay. If the seller is willing to pay some of these expenses on top of their expenses than it is a benefit and not an entitlement.
A buyer has an equal part in this process and likewise and equal responsibility: maintain good credit standing and scores by paying bills on time and managing credit wisely, saving for the down payment and closing costs, having realistic expectations of what is obtainable.
If in the end we are able to negotiate some closing costs assistance from the seller that is a bonus. When many sellers are being conditioned that the buyers are going to ask for this assistance it is not an entitlement and part of the process to being ready to own a home and the responsibility that comes along with such is showing yourself and the lenders that you are credit worthy and ready to handle the many demands of home ownership. Starting the process with savings and a healthy balance of credit management will better assist you with the financial responsibilities that come along with owning a home.
Remember as Realtors and Lenders we are here to assist you and be part of the team----you too are a team member in your own pursuit of Home Ownership!
Tuesday, December 22, 2009
False Illusions and What You Need to Know
Homebuyer Alert…
For prospective homebuyers who are on the fence about making a home purchase, the next few months represent a countdown of sorts for two reasons.
The first of these, the coming expiration of huge tax incentives, may be a bit more obvious to most borrowers. April 30, 2010 is the last day to enter into a home purchase contract and still potentially qualify for a federal income tax credit of up to $8,000 for first-time homebuyers and up to $6,500 for repeat homebuyers. The credit can be claimed only on contracts that close by June 30, 2010.
Secondly, beyond the waning benefit of the Federal income tax incentive, another form of stimulus will soon disappear, as the Federal Reserve winds down a program that has been keeping home loan rates artificially low.
Rate Alert…
The lowest rates of 2009 were driven down to their attractive levels because of the Fed’s Mortgage Backed Securities (MBS) purchase program. Home loan rates have an inverse relationship with the value of MBS. When these securities trade higher on the market, rates move lower and vice-versa. So when the Fed originally agreed to be a big buyer, it helped provide a market for MBS, which helped keep prices high and, as a result, helped push home loan rates low.
And while the Fed continues that program through the end of March 2010, the reality is that the Fed‘s “extension” was really more of a rationing intended to prevent home loan rates from spiking as the program is phased out. It’s sort of like weaning the market off of its life-saving treatment instead of forcing it to go cold turkey.
Already, some in the media have mistakenly reported the extension of the program through March as good news, telling consumers that rates will continue to decline, and remain low into the spring. This gives a false sense of security that homebuyers and refinancers simply cannot afford.
The problem is…
Those reports do not accurately report what’s going on or where rates are really headed. That can have a very costly impact on consumers who may miss out on historically low rates if they listen to these media outlets.
Here’s what’s really going on…In May 2009, the Federal Reserve's purchases of MBS peaked at an average of $25 Billion per week. As of November, the average weekly purchases dropped down to $14 Billion. At the end of November, the Fed had already used over 80% of the allocated funds for MBS, meaning less than 20% remained to be used over four months.
Making the problem worse is that the Fed now has less money available to purchase MBS while at the same time, the supply of these securities has increased as a result of refinance and purchase activity that was triggered by lower rates.
Why is that important?
As the Fed now has fewer funds to last through the remaining months of the program, its ability to keep rates low will wane.As the Fed's program winds down and ends, we’ll likely see two things happen.
First, we will probably see higher levels of volatility—with rates sometimes shifting dramatically in the middle of the day. That means it is more important than ever for buyers to work with a knowledgeable mortgage professional who has a finger on the pulse of the market at all times and can provide trusted, proven advice.
Second, since MBS will have less support from the Fed, rates are likely to rise over time.
In short, while rates are still very good, they may not be for long.
What should you do to protect yourself?
First and foremost, work with a knowledgeable mortgage originator who studies and monitors the market.
Second, don’t be fooled by media stories that only report the headlines and don’t understand the underlying implications of the Fed’s actions. If you ever hear something in the news but aren’t sure what it means to your situation, Please contact your Financial Advisor to see how the Feds' actions effect you and your financial situation.
Finally, if you haven't yet explored how the current rate environment might benefit you or someone you know, let’s arrange a time to sit down and discuss your unique situation as well as your short- and long-term goals. Remember, rates are still very good, but they may not be for long.
For prospective homebuyers who are on the fence about making a home purchase, the next few months represent a countdown of sorts for two reasons.
The first of these, the coming expiration of huge tax incentives, may be a bit more obvious to most borrowers. April 30, 2010 is the last day to enter into a home purchase contract and still potentially qualify for a federal income tax credit of up to $8,000 for first-time homebuyers and up to $6,500 for repeat homebuyers. The credit can be claimed only on contracts that close by June 30, 2010.
Secondly, beyond the waning benefit of the Federal income tax incentive, another form of stimulus will soon disappear, as the Federal Reserve winds down a program that has been keeping home loan rates artificially low.
Rate Alert…
The lowest rates of 2009 were driven down to their attractive levels because of the Fed’s Mortgage Backed Securities (MBS) purchase program. Home loan rates have an inverse relationship with the value of MBS. When these securities trade higher on the market, rates move lower and vice-versa. So when the Fed originally agreed to be a big buyer, it helped provide a market for MBS, which helped keep prices high and, as a result, helped push home loan rates low.
And while the Fed continues that program through the end of March 2010, the reality is that the Fed‘s “extension” was really more of a rationing intended to prevent home loan rates from spiking as the program is phased out. It’s sort of like weaning the market off of its life-saving treatment instead of forcing it to go cold turkey.
Already, some in the media have mistakenly reported the extension of the program through March as good news, telling consumers that rates will continue to decline, and remain low into the spring. This gives a false sense of security that homebuyers and refinancers simply cannot afford.
The problem is…
Those reports do not accurately report what’s going on or where rates are really headed. That can have a very costly impact on consumers who may miss out on historically low rates if they listen to these media outlets.
Here’s what’s really going on…In May 2009, the Federal Reserve's purchases of MBS peaked at an average of $25 Billion per week. As of November, the average weekly purchases dropped down to $14 Billion. At the end of November, the Fed had already used over 80% of the allocated funds for MBS, meaning less than 20% remained to be used over four months.
Making the problem worse is that the Fed now has less money available to purchase MBS while at the same time, the supply of these securities has increased as a result of refinance and purchase activity that was triggered by lower rates.
Why is that important?
As the Fed now has fewer funds to last through the remaining months of the program, its ability to keep rates low will wane.As the Fed's program winds down and ends, we’ll likely see two things happen.
First, we will probably see higher levels of volatility—with rates sometimes shifting dramatically in the middle of the day. That means it is more important than ever for buyers to work with a knowledgeable mortgage professional who has a finger on the pulse of the market at all times and can provide trusted, proven advice.
Second, since MBS will have less support from the Fed, rates are likely to rise over time.
In short, while rates are still very good, they may not be for long.
What should you do to protect yourself?
First and foremost, work with a knowledgeable mortgage originator who studies and monitors the market.
Second, don’t be fooled by media stories that only report the headlines and don’t understand the underlying implications of the Fed’s actions. If you ever hear something in the news but aren’t sure what it means to your situation, Please contact your Financial Advisor to see how the Feds' actions effect you and your financial situation.
Finally, if you haven't yet explored how the current rate environment might benefit you or someone you know, let’s arrange a time to sit down and discuss your unique situation as well as your short- and long-term goals. Remember, rates are still very good, but they may not be for long.
Thursday, December 17, 2009
THE 5 THINGS YOU MUST KNOW ABOUT BUYING REAL ESTATE AND GETTING A MORTGAGE IN 2010
THE 5 THINGS YOU MUST KNOW ABOUT BUYING REAL ESTATE AND GETTING A MORTGAGE IN 2010
1. NEW Good Faith Estimates take effect- on January 1st, 2010, RESPA(Real Estate Settlement and Procedures Act) which is one set of governing bodies over the real estate, mortgage and title industry is implementing a new 3 page estimate of settlement costs and new settlement statement that all industry providers must use. The goal of RESPA with these changes is to make settlement costs more transparent to homebuyers and home refinancers and at the same time guarantee certain costs to consumers. We do see it as helpful to the industry and consumers however it will take several months for all industry players to get all the working parts of it working smoothly. How could this affect you? Consumer will be more informed however RESPA has implemented very tedious rules for lenders that may cause the need for homebuyers and sellers to be more flexible with a settlement date. Bottom Line: A target date for settlement may become more normal versus a specific day and time for settlement.
2. INTEREST RATES- On March 31st, 2010 the Federal Reserve will end a program in which they have purchased $1.25 Trillion in Mortgage-Backed-Securities(MBS). The reason mortgage rates have been so low in the past 12 months is because of MBS purchases. The Federal Reserve did this to purposely drive down mortgage interest rates to potentially spur more home sales to in turn help the economy return to some sort of normal sooner rather than later. To keep it simple, mortgage interest rates drop when there are a lot of buyers of MBS and inversely mortgage rates go up when there are a lot of sellers in the MBS market. So, if rates went down to around 4.5% APR for the last year because the Federal Reserve was systematically buying $1.25 Trillion of MBS, what needs to happen as they end this program and start to sell their MBS portfolio? If you said rates must go up you are absolutely correct! As the largest investor(Federal Reserve) in the MBS market sells their holdings rates will rise. The biggest question still looming is how fast will the Federal Reserve sell their MBS portfolio after March 31st? The answer to this will be determined by how well the economy does in 2010. Many Federal Reserve members have stated that they understand that they need to be cautious in how fast they sell MBS because if they sell too fast rates could rise dramatically and quickly which would not be in the best interest of overall economic stability. We expect mortgage interest rates to stay relatively low in the 1st quarter of 2010 but will rise significantly by mid year with average rates expected between 6% to 6.5% on 30 year fixed mortgages for the second half of 2010. Bottom Line: It is possible that the next 3 months will be the last time in our lifetimes that we can get a 4.5% APR 30 year mortgage! I would recommend that if you can, buy a home or refinance your current home before the end of April 2010.
3. TAX CREDITS - On April 30, 2010 the tax credit for first time homebuyers of $8000 and the $6500 tax credit for those who have owned a primary residence 5 of the last 8 years will end. Tax credit recipients will have until June 30th 2010 to actually settle on the home purchased. Bottom Line: You must find a home to buy by April 30, 2010 and settle by June 30, 2010 to take advantage of this opportunity.
4. INDUSTRY CHANGES- 2009 saw more than 60% of mortgage companies go out of business and many good mortgage consultants have been forced from the industry as well. More than 60% of mortgage products that existed 3 years ago are gone. The Department of Housing and Urban Development and the Federal Reserve along with State regulatory bodies have forced new and imposing regulations on the mortgage industry on a regular basis throughout 2009 with more coming. A lot of the regulations will eventually be helpful however to have multiple changes and new rules implemented multiple times monthly every month makes for a lot more red tape for consumers to get a mortgage. There is currently a 1271 page document floating through congress that will add even more regulation change to the industry and until lenders know what the rules will ultimately be which appears to be coming in mid 2010, requirements to obtain a mortgage will continue to be tough and get tougher. Bottom Line: Start working on your mortgage options well in advance of choosing a home to purchase.
5. YOU- What can you do with this information to take advantage of the situation for you and your family? Understanding that mortgage rates will be rising at some point in 2010 and that tax credits are due to end by the end of April it is highly recommended that you start looking into your mortgage options as soon as possible. Also, be sure to get educated on all current market conditions. Ask how new mortgage regulations will affect you, ask about tax credit pre-approval, ask for free mortgage pre-approval, ask about buying short sale and foreclosure properties, ask about seller assistance, ask about low and no money down mortgages, ask what you should budget for a housing payment to be safe. Bottom Line: Get educated, search your options now and if you can buy a home before April 30, 2010.
1. NEW Good Faith Estimates take effect- on January 1st, 2010, RESPA(Real Estate Settlement and Procedures Act) which is one set of governing bodies over the real estate, mortgage and title industry is implementing a new 3 page estimate of settlement costs and new settlement statement that all industry providers must use. The goal of RESPA with these changes is to make settlement costs more transparent to homebuyers and home refinancers and at the same time guarantee certain costs to consumers. We do see it as helpful to the industry and consumers however it will take several months for all industry players to get all the working parts of it working smoothly. How could this affect you? Consumer will be more informed however RESPA has implemented very tedious rules for lenders that may cause the need for homebuyers and sellers to be more flexible with a settlement date. Bottom Line: A target date for settlement may become more normal versus a specific day and time for settlement.
2. INTEREST RATES- On March 31st, 2010 the Federal Reserve will end a program in which they have purchased $1.25 Trillion in Mortgage-Backed-Securities(MBS). The reason mortgage rates have been so low in the past 12 months is because of MBS purchases. The Federal Reserve did this to purposely drive down mortgage interest rates to potentially spur more home sales to in turn help the economy return to some sort of normal sooner rather than later. To keep it simple, mortgage interest rates drop when there are a lot of buyers of MBS and inversely mortgage rates go up when there are a lot of sellers in the MBS market. So, if rates went down to around 4.5% APR for the last year because the Federal Reserve was systematically buying $1.25 Trillion of MBS, what needs to happen as they end this program and start to sell their MBS portfolio? If you said rates must go up you are absolutely correct! As the largest investor(Federal Reserve) in the MBS market sells their holdings rates will rise. The biggest question still looming is how fast will the Federal Reserve sell their MBS portfolio after March 31st? The answer to this will be determined by how well the economy does in 2010. Many Federal Reserve members have stated that they understand that they need to be cautious in how fast they sell MBS because if they sell too fast rates could rise dramatically and quickly which would not be in the best interest of overall economic stability. We expect mortgage interest rates to stay relatively low in the 1st quarter of 2010 but will rise significantly by mid year with average rates expected between 6% to 6.5% on 30 year fixed mortgages for the second half of 2010. Bottom Line: It is possible that the next 3 months will be the last time in our lifetimes that we can get a 4.5% APR 30 year mortgage! I would recommend that if you can, buy a home or refinance your current home before the end of April 2010.
3. TAX CREDITS - On April 30, 2010 the tax credit for first time homebuyers of $8000 and the $6500 tax credit for those who have owned a primary residence 5 of the last 8 years will end. Tax credit recipients will have until June 30th 2010 to actually settle on the home purchased. Bottom Line: You must find a home to buy by April 30, 2010 and settle by June 30, 2010 to take advantage of this opportunity.
4. INDUSTRY CHANGES- 2009 saw more than 60% of mortgage companies go out of business and many good mortgage consultants have been forced from the industry as well. More than 60% of mortgage products that existed 3 years ago are gone. The Department of Housing and Urban Development and the Federal Reserve along with State regulatory bodies have forced new and imposing regulations on the mortgage industry on a regular basis throughout 2009 with more coming. A lot of the regulations will eventually be helpful however to have multiple changes and new rules implemented multiple times monthly every month makes for a lot more red tape for consumers to get a mortgage. There is currently a 1271 page document floating through congress that will add even more regulation change to the industry and until lenders know what the rules will ultimately be which appears to be coming in mid 2010, requirements to obtain a mortgage will continue to be tough and get tougher. Bottom Line: Start working on your mortgage options well in advance of choosing a home to purchase.
5. YOU- What can you do with this information to take advantage of the situation for you and your family? Understanding that mortgage rates will be rising at some point in 2010 and that tax credits are due to end by the end of April it is highly recommended that you start looking into your mortgage options as soon as possible. Also, be sure to get educated on all current market conditions. Ask how new mortgage regulations will affect you, ask about tax credit pre-approval, ask for free mortgage pre-approval, ask about buying short sale and foreclosure properties, ask about seller assistance, ask about low and no money down mortgages, ask what you should budget for a housing payment to be safe. Bottom Line: Get educated, search your options now and if you can buy a home before April 30, 2010.
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