Homeowners Turn to Alternative Options Amidst Financial Market Turbulence

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With stocks down, home prices down, foreclosures up and nothing really changing too rapidly, homeowners all over the country are stressed and for good reason.  They have no idea where the market is really headed. It seems that at times home sales are on the rise while at other times stocks plummet, the cost of gasoline skyrockets and the unemployment lines stay put.

What is the right thing for a homeowner to do in order to protect their investment?  How can people get through this tumultuous time without a hitch and ending up on top?  To answer these and other questions, here is a list of things that have crossed many homeowners’ minds lately and what you can do if you find yourself in the same situation.

Am I Paying Too Much for My Current Mortgage?

Homeowners that wonder if the cost of their mortgage is too high considering the really great rates out there right now – are in for a big treat.  The savings from a refinance can add up to tens of thousands of dollars when you lower your interest rate by just a few points. This is very much doable for a lot of mortgage holders that are stuck with higher rates even from just a few years ago.  What’s more is that Obama recently announced an incentive for homeowners with previous mortgages to refinance, lowering both their one-time private insurance fee and the monthly PMI payments.

How Can I Use My Mortgage As a Financial Tool?

Today’s amazing interest rates hold a lot of promise for homeowners and those looking to get into a new home for the first time.  As Warren Buffett said, now is the best time to buy single-family homes as they are among the best asset class to have.  If you find yourself in a less-than-desirable mortgage you can change it with a move to a lower rate and either a 15-year or 30-year fixed rate mortgage.  It is important to look at the cost of your home rather than just the initial price of your home.

Is Now Really the Best Time To Buy a Home?

When you combine the fact that interest rates are as low as they are with home prices also being lower than they have been in years – you get a strong buyers market. This could not be a better time to buy a home because the ultimate cost of your purchase will be hundreds of thousands less than if you were to buy with what were considered low rates just a few years ago. Since the market has been lurking in unknown territory for a number of years there is no way to tell when today’s historically low interest rates will begin to climb again or when the market will once again shift to sellers’ advantage.

How Can I Combine My First and Second Mortgages?

Unfortunately many homeowners are bogged down with not one, but two mortgages that are very difficult to handle in today’s tough economic times.  One possibility is to eliminate both mortgages and create a single payment but it is not a simple feat.  Loan consolidation of two mortgages depends on many factors and it requires a detailed look at things like the term left on each loan, the number of years lived in the home, its value and your income range.
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If you have questions about your mortgage or would like to explore your options through a customized consultation with me, I welcome hearing from you and look forward to the opportunity!

What’s a Real Estate “Short Sale” and Why Should I Buy One?

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The best way to explain a short sale is with an example:

Assume a homeowner has an unpaid loan mortgage balance of $200,000, but the property will sell for only $175,000. The lender holding the mortgage agrees to sell the house for the $175,000 amount, which, of course, leaves it “short” of the full amount of $200,000. Thus, the name “short sale!”

Obviously, lenders don’t like short sales since they’re not in business to lose money. But such situations do occur for various reasons often related to “hardship” situations. Examples include:

• Permanent injuries
• Financial insolvency
• Job layoffs, etc.

This is a sad situation for the homeowner, but it does offer an opportunity for you to pick up a bargain. However, there are several potential downsides you should be aware of before you make an offer.

Pitfall 1: Allow time for the lender’s decision.
Once your offer is accepted by the seller, the contract will be sent to the seller’s lender for approval. This process can take anywhere from 2 to 12 months, and there’s oftentimes no way to know beforehand exactly how long the lender will take.

Pitfall 2: The lender is under no obligation to accept the short sale.
Often times, lenders will come back with a counter of a higher price, or will sometimes reject the offer outright. There is no way to know beforehand exactly what the lender is thinking. This risk can be reduced by pre-qualifying the seller and making sure he or she has a genuine hardship, and by making sure you offer close to market value.

Pitfall 3: The seller must be committed to the process.
A great deal of paperwork and commitment will be required of the seller. There have been cases where the seller does not complete everything that is necessary and causes the lender to reject the deal. Additionally, there have been cases where the seller backs out to declare bankruptcy. Make sure the seller is committed to the process before you begin!

Summary

You can pick up great bargains in the short sale market, but you have to be very knowledgeable and very patient! And, as mentioned earlier, there are risks and often times you will face disappointment. Hiring a professional realtor who has experience with the ins and outs of short sales can help reduce these risks.