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Hey "Fence Sitters"--Why buying and selling NOW matter! The dangers of increasing of interest rates!

by Eric Stark - Senior Mortgage Consultant

 

Waiting to buy a home between now and even a few months from now can cause a buyer to incur thousands and even tens of thousands dollars in additional interest on a loan over time.  While home prices are the highest they have been in years thanks to a rebounding economy, new buyers and sellers are losing a net benefit of this increase as a result of increasing interest rates.  For example, in early May, interest rates were as low as 3.25% on a 30 Year Fixed.  By the end of June, they were at 4.5%.  If you were borrowing a $300,000 mortgage, that would equate to the following loss in payment in interest:

 

May 2013

Rate3.25%

Mortgage:  $300,000

Principal and Interest$1,305.62

Interest Paid over 1 Year:  $9,750blog-rising-interest-rates

 

June 2013

Rate4.5%

Mortgage:  $300,000

Principal and Interest$1,520.06

Interest Paid over 1 Year:  $13,500

 

As you can see, the payment INCREASED by $215 a month.  That is the equivalent of losing $50,000 in purchasing power/loan amount.  That means that someone’s whose maximum sales price range of $300,000 can now only qualify for $250,000.  On top of that, they cost themselves over $3,750 in additional interest per year.  In 5 years, that’s almost an extra $20,000.  In 10 years, that close to $40,000.  So quite a lot over the life of a loan. 

 

Even if prices somehow go back down, let’s say by $20,000, but interest rates still increase even by half a percentage, you’re still losing money over the net sales gain in price on a home versus extra cost in rate.  So for example, see below:

 

June 2013

Rate 4.5%

Mortgage:  $300,000

Principal and Interest$1,520.06

Interest Paid over 1 Year:  $13,500

 

 

January 2014

Rate5%

Mortgage:  $280,000

Principal and Interest$1,503.10

Interest Paid over 1 Year:  $14,000

 

The payment might be slightly smaller on the principal and interest, but your interest over the life of the loan is more.  So you lose in the end even though you had a borrower less.  You still paid more.

What this shows us is that as rates climb, in order for buyers to purchase in the higher price point categories ($300,000 and more), sellers are going to have to reduce their costs to bring more offers in the mix.  On top of that though, when the seller goes to buy their new home, they are going to lose more out of their pocket because they are paying more interest over time.  So the time to sell is now while the market is good and rates can still afford a few more buyers in that price range.  Waiting for later can only cost sellers more in every part of the equation. 

 

 Eric Stark

Senior Mortgage Consultant

C: 770-231-1230

F: 678-264-1577

1000 Mansell Exchange West, Suite 270

Alpharetta, GA. 30022

Eric.Stark@Supremelending.com

Mortgage Application

NMLS# 450821  GA# 36837

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Found on the September 2013 episode of the NE Atlanta Real Estate Book! Pick one up at your local grocery store!

http://www.realestatebook.com/agents/usa/ga/marietta/bruce-ailion/3000026960

 

Georgia is the Most Expensive State to Operate a Car

by Bruce Ailion

Georgia is the most expensive state in which to own and operate a motor vehicle at $4,233 annually, according to a new survey. Bankrate.com, a personal finance web site, tallied the cost of insurance, gasoline, taxes, fees, and car repairs in all 50 states.  This amount is comprised of $1952 in taxes and fees, $1,129 in Gasoline, $767 in Insurance and $385 in repairs.


Georgia,  is so expensive because  its sprawling development causes computers spend a great deal of time in their cars.  This is compounded by the lack of public transportation options causing travel delays over crowded roads.

“Those long commutes lead to above-average gasoline costs and insurance rates," the web site said.  Forbes ranked Atlanta 7th in the nation for daily work commutes at 34.3 minutes each way, 82% of these involving a single driver,

Georgia also has the highest state auto taxes and fees in the nation.

Rounding out the top ten most expensive states are California ($3,966), Wyoming ($3,938), Rhode Island ($3,913), Nevada ($3,886), Arizona ($3,886), Kentucky ($3,626), Massachusetts ($3,625), Virginia ($3,622) and Nebraska ($3,571).

One of the first things a savvy home shopper does PRIOR to starting a serious home search is to explore mortgage options.  Bruce Ailion is an experienced Realtor that will encourage buyers speak with a lender and get "pre-approved."  This benefits all parties involved by ensuring that prospective buyers can actually qualify for a mortgage on the homes they're interested in.  Failure to do so can cause frustration and disappointment for any agents or buyers who naively regard today's stringent mortgage process as a minor detail to be addressed after a sales contract is accepted.  No one likes surprises during the purchase process!  


Two terms that are often (and incorrectly) used interchangeably are "pre-qualified" and "pre-approved".  While their exact meanings will vary by lender, in most cases a pre-qualification is far less desirable and less clearly defined.

A Pre-Qualification typically means a buyer has spoken with a lender (who may or may not have pulled a credit report) and verbally discussed employment, liabilities, payment histories, and assets.  Actual verification of assets, income, and credit may not occur with a pre-qualification, and an automated underwriting system (Desktop Underwriter or Loan Prospector in most cases) likely has not been run.  While better than nothing, a Pre-Qualification remains entirely dependent on a far more thorough process of verification and examination of a borrower's credit, assets, and income.  At best, it's a "probably."

A true Pre-Approval, on the other hand, entails a strict review of the client's credit, down payment capacity, income, and asset documentation.  Credit reports are thoroughly dissected, rather than just credit scores verified.  Veteran loan officers run prospective buyers though underwriting engines if they have any doubts concerning debt ratios, derogatory credit items, or employment history/income verification.  Once the system returns an approval, it too needs to be read in detail, as it will list specific requirements for final loan approval.  A lender who bases his pre-approval on mere credit scores and underwriting engine approval without fully examining it, risks his reputation and the satisfaction of the other parties involved.

Unfortunately, the ambiguity between Pre-Approvals and Pre-Qualifications can cause mismanaged expectations.  For example, a client that came to me recently, saying he was pre-approved with another lender, and that his salary was $X/yr.  He had already identified a home and written a sales offer.  His debt ratios were tight, but, based on the information he provided, he met Fannie Mae's requirements.  Once his W2, paystubs, and tax returns were received, it became apparent that his "salary" included a number of incentives and other non-guaranteed items.  When I said we'd need to verify that the extra income was likely to continue with his employer, his comment was "the other loan officer didn't ask me to break my income down."  He also had two liabilities on his credit report that didn't show monthly payments, and needed to be determined.  When asked about those, he remarked that the prior lender hadn't mentioned them. Ideally, these issues are caught early enough in the process to address them, if not,  they can result in extra processing time that delays closing.

If all parties involved are aware of the distinction, it helps everyone play their role to the best of their ability.  The listing agent who calls the mortgage originator to ask if the buyer's income and asset docs have been examined clearly understands the differences between pre-qualifications and pre-approvals.  Conversely, the originator who contacts the Realtor can better manage expectations by clearly defining their pre-qualification or pre-approval process.  Even clients, armed with this information, can request a thorough pre-approval rather than a cursory pre-qual, and play a role in ensuring the best possible handling of their transaction.

Buying real estate property by obtaining a mortgage – Some steps you need to follow

by Audric Stevens- Financial and Contemporary writer


Do you want to buy real estate property? Well, if yes, then you need to have sufficient money for it. Possibly, you will not have the lump sum amount and thus, you require obtaining a suitable mortgage. These days there are several lenders who would offer you the loan at a reasonable rate. Thus, make sure you take out the mortgage rate at a low rate so that you can pay it off on time.

5 Steps to purchase real estate with a mortgage loan

 

You may take out a mortgage loan for purchasing real estate. Read on to know about the 5 steps for it.

 

  1. Know the exact value of your property - While searching for real estate is a daunting task, you should still buy one for yourself. It is important that you know the actual price of your real estate property. This will enable you to obtain the right mortgage loan for purchasing your property. Thus, you will be able to pay off the loan within the definite time period.

 

  1. Compare between the different home loans - When you want to obtain a home loan for your real estate, you should make it a point to compare between the different home loans. Since the different loans have different rates, try to choose the one that is affordable so that you may be able to repay it on time. Thus, you can live safely on your property.

 

  1. Shop for as many lenders as you can - If you come across a lender who will offer you the mortgage loan as per your requirement, you should not stop looking for the other lenders. Try to shop for as many lenders as possible so that you get to know what the different lenders are offering to the customers. This will enable you to take out the loan from a good lender.

 

  1. Seek help of a real estate expert - If you do not know much about real estate market, you probably will not be able to understand which property you should buy. As such, you can seek help of a real estate expert who will guide you through the entire process. He will also suggest you some good property that may suit you the best.

 

  1. Hire an agent to choose the right home loan - You may appoint an agent who will help you find the right loan for buying your real estate. You need to talk to your agent and tell him about your exact requirement. Since he deals with innumerable customers everyday, he will be able to suggest you with the most suitable mortgage. You will have to pay a certain amount of fees to your agent for helping you find the right property.

 

If you want to purchase real estate property but don’t have the needed bucks, see that you take out the right loan. Thus, you will have to follow the above-discussed steps in order to buy your real estate with a home loan.

 

Audric Stevens is a financial expert and a contemporary writer. He is involved in various online activities through which he imparts financial lessons to people with diverse needs. In addition to that, he is closely working with the ‘debtconsolidationcare community’ at the moment that has several interesting and prudent financial tips for people to use. If you like this article please follow us here.




 

Real estate mortgage tips for the novice home buyers- Strike the best deal

by Audric Stevens- Financial and Contemporary writer

Who doesn’t dream of owning a home in the heart of America? In fact most Americans nurture the dream of homeownership but very few are able to realize it. If you too have the same dream of buying your own home and let go of the hassles of renting an apartment, you’re not alone as there are hundreds of people who are going through the same situation. Buying a home can become an intimidating and a daunting task if you’re not aware of the steps that you should take in order to grab a home loan within your means. Home mortgages are secured loans that you have to take out by pledging your home as collateral to the loan and hence if you fail to make timely payments on your home loan, you will run the risk of losing your real estate property to a forced foreclosure. Here are some vital essentials that you need to take into account while buying a home in the United States of America.

  • Give a glance at your credit score: The most important document that the mortgage lenders will check is your credit score. Your credit score is a 3-digit number that speaks about your financial health, the way you’ve managed your finances in the past and whether or not you have a good and positive record of making timely payments. If you have a good credit score, it is most obvious that this will imply that you’ve been regularly making your payments in the past. But when you have a poor credit score, this will speak against you and will therefore bar you from getting a new line of credit at an affordable rate. So, improve your scores before approaching a mortgage lender.
  • Repay debts to reduce your DTI ratio: Apart from the 3-digit credit score, the DTI ratio is something that is also checked by the mortgage lenders.  The debt-to-income ratio gives the lender a ratio between your gross monthly income and the total monthly expenses that you make from your income. The more is your DTI ratio, the lesser will be your chances of snag a mortgage within your means. Therefore, you should either pay off your debts immediately or look for ways to boost your income in order to lower your DTI ratio. Take this step before approaching a mortgage lender.
  • Save enough money for paying the exact money down: You should save enough money for paying down the exact amount while taking out the mortgage loan. The required down payment is 20% of the loan amount that you’re taking out and unless you pay down the exact amount, it won’t be possible for you to avoid paying the PMIs or the Private Mortgage Insurance payments. The insurance payments will unnecessarily increase your monthly payments and therefore you should try to avoid it by saving enough money for the down payment.

Therefore, when you’re all set to seal the deal with a mortgage loan, you should take into account the above mentioned points. Don’t forget to test your shopping skills by getting multiple quotes from multiple lenders as without this you might just end up with the wrong loan. Compare the interest rates, closing costs and monthly payments before choosing the final one.

 

 

HOW TO WIN MULTIPLE OFFERS WITHOUT LOSING YOUR SHIRT

by Bruce Ailion

Low inventory and rising prices have created a situation where multiple offers in hot markets are increasingly common. When prices are rising and new listings are priced using 3-6 month old comparable sales, the new inventory is often underpriced.  Educated brokers and buyers understand this and quickly offer list or better.

Large investors and local investors, expecting prices to again reach their 2006 peak are buying everything in sight, perhaps creating a new speculative bubble.  This creates a challenge for buyers. In addition to the standard methods, buyers must employ outside the box strategies listed below to succeed in multiple offer situations.

The most critical step to succeed in multiple offer situations is to be an “All Cash” buyer presenting a proof of funds statement with your offer.  Many sellers are as concerned that the buyer will close as they are about the price.  If you do not have cash in the bank, show a fully approved loan subject only to appraisal.

If possible, evaluate the property’s condition and waive inspections prior to making your offer.  If the systems are old, the roof is old, or the siding is damaged, take that into account in your offering price.  Homes with unknown conditions, code violations, termite evidence, missing wiring or plumbing, mold, shifting walls or foundation problems or other red flags are valid reasons to avoid the home or negotiate an inspection period, but keep it short 3-5 days. Offer to provide the seller the inspection report.

Provide adequate earnest money in the form of certified funds.  Many offers will include $1,000 or $2,000 of earnest money so to strengthen your offer consider offering a 10% or 20% earnest money deposit.  Higher amounts of earnest money communicate to the seller your intention to close and financial strength.  If you decide not to purchase this property, you can always attempt to recover your earnest money through litigation.  This litigation would be to establish the earnest money was a penalty, not a reasonable approximation of the seller’s actual damages.  Most sellers will settle rather than hire an attorney to fight to retain the earnest money.

Present a clean contract; avoid too many contingencies for example: a spouse or partner’s approval, attorney’s approval, seller providing a warranty, a survey, or leaving or repairing certain items.  These items may make the difference to the seller saying no to your offer over another.

Do not request the seller pay closing costs.  Find an affordable attorney or title company to represent you.

When responding, provide everything in the form the seller requested.  Corporate sellers that have specific forms and specific timelines and requirements.  They will reject your offer if it is not completed in full and as instructed. Additionally, their agent may not even be required to present incomplete offers even if it is the highest.

Know the value of the home.  Make your best offer.  You may not have a second chance.  This may be well above list price.  Consider an Escalation Clause; if two offers are deemed to be equal state you are willing to increase your offer by X dollars to break a tie with an equal offer.  Often 1% of the purchase price is a guide especially if you are in love with the home, provided you are not willing to lose this home over 1%.

Permit your offer to be held as a back-up for 10, 15, 20 days.  It is not uncommon for the high bidder to make an irrational bid and not deliver earnest money or stop payment. The seller may accept a higher bid with an inspection, financing, or appraisal contingency that fails early on in the contractual period.  A seller might want or need a back-up buyer.  This is especially true if they went out and contracted non-contingent on a new home.

Offer to close quickly, 10 to 14 days for vacant homes.  Sellers are concerned about liability, theft, holding costs and hazards with a vacant home.   Offer to close at the seller’s convenience with occupied homes.  Be flexible if the seller needs to find a new home, provide them that time.

Have your Bruce Ailion is an experienced Realtor communicate with the seller’s agent to get as much information about the number of offers, range of offers, and time limits in a multiple offer situation.  Have your agent request to be present if the agent is presenting the offers in person.

Communicate your offer prior to the deadline but not too far prior.  Sometimes the listing agent will shop your offer seeking a slightly higher from a preferred client or agent or a competing agent in their office may see your offer.  CONFIRM THE OFFER WAS RECEIVED.

If possible try to meet the seller and make a positive personal impression, develop a warm relationship.  Meet the five nearest neighbors, make nice, and enlist them in promoting your offer and their desire to have you as their neighbor.  These people may be long-time friends and still in contact with the seller even if the seller has moved.  Let them know you plan to live in the home verses leasing it to a tenant.  If you plan to paint, landscape, improve, be active in the community, have children their ages, went to the same college, or share similar interests, don’t keep that a secret.  Develop an advocate.

Follow up persistently.   Sellers may take a while to respond but that shouldn’t mean you remain in the dark.  Ask for an answer either way.  I like to ask if my buyer was the highest so we can move on if we weren’t.  Then I ask if we were close.  If so, I communicate that the buyer and perhaps we make a higher offer.  Many sellers will consider higher offers even after the deadline. 

In hot markets the goal is to get any home at all without paying too much over today’s real market price.  Many markets, including mine, are seeing 5-10 offers the day a property hits the market, as many as 70-80 offers within a week for You can search the available properties on our website that are underpriced.  Some agents will purposely underprice new listings to draw multiple offers.

For an owner occupant or the small time investor offering more than the big players in a “best and final” round there may be harsh consequences.  They are essentially paying the future price today.  As we learned in the 2006, that price may not be higher than what we paid and may in fact be lower.

To summarize, a 62 year old couple was walking alone the beach shore.  They found a lantern and cleaned off the sand, a genie appeared and for releasing her granted the couple two wishes.  The wife said I wish I could take a first class two year cruise around the world.  Instantly two tickets appeared in her hand.  Then she asked honey what do you wish for?  He said I wish I had a wife 30 years younger than me, instant he was 92 years old.  As a final piece of advice when making best and final offers, be careful what you wish for, you might get it.

Atlanta is now one of the Hottest Markets in the US.  The window to buy at 1998 to 2002 prices is closing fast.


Bruce Ailion,  

RE/MAX Greater Atlanta

An Atlanta Real Estate Expert Serving Clients Since 1979

CRS, CRB, ABR, MSRE, CDPE, e-PRO, ESQ

Certified Residential Specialist

Certified Real Estate Broker

Accredited Buyers Agent

MS Real Estate and Urban Affairs

Certified Distressed Property Expert

Certified Investment Agent Specialist

203K Certified Specialist

Attorney

2050 Roswell Road

Marietta GA 30062

404-978-2281  Direct

404-386-3682  Assistant Robin

678-760-6266  Buyer’s Agent Adam

770-973-9700  Office

bruce@locationlocationlocation.com

www.LocationLocationLocation.com

 

 

Bruce Ailion Quoted in CBS Money Watch article!

by Bruce Ailion
By  Constantine von Hoffman / MoneyWatch/ December 13, 2012, 6:45 AM

Investors fuel U.S. housing recovery

David McNew/Getty Images

(Moneywatch) Even as U.S. economic growth stutters, the housing market is showing real signs of a rebound: home prices are up, pending sales and constructing activity is rising, and the number of existing homes for sale continues to drop. The big question, amid slow job growth and stagnant personal income: Will it last?

If the housing upswing does continue, it will likely because of the trend's unique characteristics, with investors, more than consumers, sustaining momentum.

The indicators of a housing recovery are both plentiful and nationwide. According to the most recent Fiserv Case-Shiller data, the real estate market during the spring and summer this year was the strongest since the peak of the housing bubble in 2006. Other green shoots for housing:

 

  • Fiserv reports that average U.S. home prices have increased 1.2 percent since summer 2011
  • Home prices were up in more than one-half of the 384 metro area markets in the second quarter of 2012
  • Many of the biggest price increases have been in markets hardest hit by the housing crash, including Phoenix (14.5 percent), Detroit (11.6 percent) and Miami (6.9 percent)
  • Home prices in October rose 6.3 percent over a year ago, according to research fire CoreLogic
  • Pending sales of existing homes were up 5.2 percent in October, according to the National Association of Realtors
  • Overall housing inventory is down 22 percent year-over-year and probably at the lowest level since the early 2000s, according to DeptofNumbers.com

Despite the positive signals, analysts are tempering their enthusiasm, nothing that the recovery in housing is only relative to the calamity that befell the real estate sector during the financial crisis.

"Yes, the housing market is in a recovery," says Rick Sharga, executive vice president of Carrington Mortgage Holdings, a loan servicing firm. "All the metrics are pointing in the right direction -- pending sales, sales of new and existing homes, price appreciation, and housing starts. Delinquency and foreclosure rates are both trending down. But it's not an explosive, booming recovery. It's a recovery in the sense that it's better than the horrible numbers we've seen over the past few years."

What makes the upturn in housing unusual is that it is mostly being fueled not by consumers buying a first or even a second home, but by investors scooping up distressed You can search the available properties on our website. This is one result of the Federal Reserve keeping its prime interest rate so low. That drives down the cost of mortgages, but also makes it harder to get a good return on things like savings accounts and traditional investments like bonds. So hedge funds, private equity firms and other investors looking for a better return on their capital have moved aggressively this year to buy single- and multi-family homes.

"I am not seeing an increase in buyers," says Mike Orr, director of the Center for Real Estate Theory and Practice at Arizona State University's Carey School of Business. "I am seeing a reduction in supply as the primary cause of the recovery. Investors represent about one-third of buyers, owner-occupiers and second-home buyers are the other two-thirds. They are all competing for a smaller pool of homes for sale. In particular the pool of bargain bank-owned or short-sale homes is much smaller than last year."

Investors differ from ordinary home buyers in two notable ways: They can pay cash for You can search the available properties on our website and they buy in bulk. This is a major reason for the slowly rising home prices and diminishing housing stock.

"It's clear that the bulk sales to investors have reduced the property overhang in for-sale property, which is a positive," says Stuart Gabriel, director of UCLA's Ziman Center for Real Estate. "It's helped in absorbing that inventory, which has helped stabilize the market. It's obviously put a floor under prices."

Investors are also behind much of the new home construction because they are providing funds to regional homebuilders, which continue to have difficulty getting loans from banks. In both cases, they expect to earn income by renting the houses over the next five to seven years -- when they assume prices will be much higher -- and then to sell them when the housing market is strong. 

"We've got an environment where the availability of mortgages has never been tighter," says Rob Simmons, former chief financial officer of online brokerage E-Trade Financial. "This is creating opportunity for investors to come into market and provide a bridge until the jobs market and other things improve enough so that individual buyers can start buying again."

While the flood of investor money into housing has helped boost residential real estate across the nation, some people worry about the impact of so many absentee landlords in local markets.

Such investors "are not familiar with values, often do not view the property, and have little experience in the repair costs and management costs in the local market," says Bruce Ailion of RE/MAX Greater Atlanta. "In my market, private equity and hedge funds are driving up prices."

Yet given how far home prices have fallen since the bust -- roughly 30 percent from their 2006 peak -- few expect those costs to be the main barrier to sales anytime soon. For now, tightness in the credit markets remains the chief constraint on sales and prices, as lenders tighten standards for borrowers.

© 2012 CBS Interactive Inc.. All Rights Reserved.

Americans Squeezed by Higher Rents, Tight Credit

by Bruce Ailion

Americans Squeezed by Higher Rents, Tight Credit

By Michelle Conlin and Melanie Hicken

Thu Jul 5, 2012 1:01pm EDT

(Reuters) - One night last spring, David Hall returned home to his studio apartment outside Boston to learn that his monthly rent had spiked from $725 to $995.

It would be much cheaper for the maintenance manager to buy a nearby starter house than to stay put. But his mortgage broker told him that while his credit score was good, it was not high enough to meet banks' tough standards, he said. "I know if I walk into a bank, they are just going to laugh at me," Hall says. "So I'm stuck." He is not alone.

Five years after the housing bubble burst, the United States is in the midst of a housing affordability crisis. Home prices have fallen a third from their peaks, but many Americans cannot benefit because they cannot get a mortgage. With credit tight, many consumers have no choice but to rent. Others who can afford to buy are also renting, because they view real estate as a lousy investment. As demand has increased, rents in some cities have jumped by double-digit percentage rates.

Rents rose 1 percent to record highs in the second quarter from the prior period, according to real estate research firm Reis.

Just 4.7 percent of U.S. apartment units are vacant, the lowest level since the fourth quarter of 2001. Low vacancies are likely to push rents even higher, Reis said.

People with lower incomes have long struggled to find affordable housing, but many in the middle class are now hurting, too. Most personal finance experts recommend allocating no more of 30 percent of family income to housing, but nearly 40 percent of Americans are paying more than a third, according to the U.S. Census Bureau's American Community Survey. In New York City, one-third of households are spending more than half their pay on rent.

"We have falling incomes, rising rents and nothing but substantial upward pressure on those rents," says Chris Herbert, director of Harvard University's Joint Center for Housing Studies. "And nothing in the cards suggests it will turn around anytime soon."

PARADISE LOST

Today's housing market is a buyer's paradise.

It is now cheaper to buy a home than it is to rent in virtually every major city in the United States, according to John Burns Real Estate Consulting.

But for many in the renter class, buying even a modest home is impossible because financing is so hard to secure.

Lending for home purchases hit a 12-year low of $404 billion last year, down from $1.4 trillion in 2006, according to trade publication Inside Mortgage Finance. That means mortgage credit is tighter than it was even before the housing boom.

This year, lending is expected to drop even more, according to Inside Mortgage Finance.

A recent Morgan Stanley research report states that the average credit score is 762 for a consumer securing a mortgage backed by government-sponsored enterprises like Fannie Mae. But 65 percent of Americans have scores below 750.

In other words, a disproportionate number of mortgages are going to people with unusually good credit. A perfect score is 850, and anything below 660 is considered subprime.

"Basically, access to credit for borrowers with less than spotless credit is severely limited," the Morgan Stanley report states. "A good chunk" of U.S. households are "cut off from mortgage credit on this count alone."

For people who can get mortgages, rates are at their lowest levels in several generations. Add that to the cheap home prices, and houses are at their most affordable since at least 1970, when the National Association of Realtors began tracking this metric.

Normally, high affordability translates into higher sales. And the housing market is showing some signs of recovery - the S&P/Case Shiller index of home prices had its third consecutive monthly gain in April. Last week, the NAR said pending home sales had matched a two-year high in May.

But any recovery has been tepid. The NAR said existing home sales had declined 1.5 percent to a seasonally adjusted annual rate of 4.55 million in May from 4.62 million in April. That is 34.2 percent above the July 2010 bottom of 3.39 million, but far short of the 5.5 million pace that the NAR considers healthy.

"Home sales have just barely picked up from their cyclical lows, and that's because there are still constraints to borrowing," said Moody's Analytics economist Celia Chen.

Part of the lender pullback has to do with the stringent regulations Washington put in place after the housing crash, says Michael Fratantoni, vice president of the Mortgage Bankers Association. These rules put more of the losses from bad mortgages onto lenders, instead of investors or government-sponsored enterprises.

Then there is the climate of unstable home prices and a shaky labor market: "There's a risk that even a borrower with moderately good credit may fall behind," Fratantoni says.

Consumers who cannot buy must rent, and that is where many Americans are feeling the pressure. A rent index from real estate data provider Zillow shows year-over-year gains for 70 percent of the U.S. metropolitan areas, while its home value index rose in only 7.3 percent.

In the 12 months ended in May, rents rose 14 percent in San Francisco and 11 percent in San Jose, California, according to Zillow. Last year in Minneapolis, they spiked 11 percent even as home values sank 8 percent.

Only a few years ago, landlords in cities like San Francisco and New York were tossing in a month or two of free rent, sometimes with parking, to lure tenants into signing leases.

Today, applicants are showing up at apartment viewings with copies of their unblemished credit reports and letters of recommendation from bosses and prominent friends, in the hopes of snatching up a place to rent.

Equity Residential, one of the biggest apartment owners in the United States, has more renters with high credit scores than ever, Vice President of Operations David Santee said on an April conference call with analysts.

Demand for apartments is also higher because many potential buyers in their 20s and 30s want to stay flexible - home ownership is not as attractive as it was to earlier generations.

Still, plenty of people would prefer entry into the ownership class. Last spring Rosemary Wynder, a physician order specialist, found her rent shooting up. She decided to buy a house.

But a bank glitch in February had caused one late car loan payment, dinging her credit score. The Utica, New York, resident has been unable to straighten out the mistake, and five banks have rejected her for a mortgage.

"I've been crying," says Wynder. "I've been praying."

Best rates - At 60 year lows!

by Bruce Ailion

Mortgage rates declined slightly enough to officially hit new all-time lows. Some perspective is in order though. Certain lenders' rates are unchanged on the day, and some are even slightly higher, but the average moved lower. The improvements from yesterday were seen in the form of lower borrowing costs for those same rates. Bottom line: Best-Execution remained at 3.625%, but just got a bit more affordable.

I am often asked is this the best time to lock in a mortgage interest rate?  I am reminded of the limbo and the question “how low can you go?”. Rates simply just can’t drop much more from here.  For more than 60 years there has not been a better time than now.

The possibility of a sharp upward spike in response to unpredicted or unscheduled events remains a risk.  The risk/reward matrix for floating a historic bottom is generally negative.

Today's BEST-EXECUTION Rates

  • 30YR FIXED - 3.625%
  • FHA/VA -3.5% - 3.75%
  • 15 YEAR FIXED - 3.00%
  • 5 YEAR ARMS - 2.625-3. 25% depending on the lender

 

Displaying blog entries 1-10 of 17

Contact Information

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The Ailion Team
RE/MAX Town and Country
14205 Hwy 92, Suite 109
Woodstock GA 30188
404-978-2281
678-760-6266
Fax: 404-480-8448

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www.zillow.com/profile/Bruce-Ailion/Reviews/