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.

Lower Your Monthly Payments With Refinancing That Doesn’t Require an Appraisal!

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So many homeowners today are finding themselves in a situation where they are underwater and they can barely stay afloat.  For those that have financing under the umbrella of the FHA or VA, there may be some better days ahead.  If you are the owner of a home that is worth less than what you owe on the property, there may be some welcome relief in store for you through something called “streamline refinancing”.

Minimal Investigative Processing During Application

The single biggest relief this provides homeowners (other than there being lower payments at the end of the process) is that the refinancing process does not entail the same rigorous scrutiny as before when the original mortgage application was being processed.  Streamline refinances offer the unique advantage of having no income, asset or employment verifications – leaving the homeowner with a lot more breathing space and flexibility.  Since the program is only available to homeowners that are current and have never been delinquent on their loan, the idea is that if they are able to afford making payments at the present higher rate, they will likely be able to afford new, lower payments.

No Need For An Appraisal

The fact that these types of refinancing applications do not require an appraisal in order to be approved provides welcome relief for homeowners sitting on properties that have experienced a substantial dip in value over the years since purchase.  In fact, that is one of the most prevalent reasons homeowners neglect to seek assistance in the first place.

Quick Processing With No Cost to Homeowner

The “fast” in “fast-track” comes from the quick processing of these refinance applications.  Unlike the grueling process of regular mortgages, lesser paperwork plus an already-established payment history with the lender allows lenders the capability to quickly manage the paperwork and processing.

As an added benefit of the program, borrowers are able to get away with even less out-of-pocket expense when lenders either pay most of the closing costs in exchange for a slightly higher interest rate or if closing costs are rolled into the loan balance.

Program Requirements 

There are some basic requirements that must be met in order to qualify for streamline refinancing and as long as the homeowner meets them there are better chances for lower payments and ultimately being able to keep their home long-term.

The mortgage must currently be insured by the FHA in order to qualify. Also, there can be no delinquency on the mortgage and the payments must be current.  Finally, the borrower’s monthly principal and interest payments must be lower as a result of the refinance.  Something to be aware of is that once you refinance under this program you will not be able to cash in on the equity of the home.  There are other rules to be aware of as well, all accessible on the HUD website.

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With this program there is new hope for countless Americans that have been struggling to successfully keep their homes afloat.  Underwater properties are definitely a major concern for many homeowners that bought their properties during the real estate boom years and are enduring the harsher times of today.  But with a little discipline (make sure to keep your payments current!) you can see a future with your home in it.

For more information on how you can qualify and apply for streamline refinancing, contact your Realtor today.

With Market and Interest Rates Down – Does That Mean Property Investment Is a Good Idea?

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So many people are wondering these days whether it is a good time to invest in property.  It’s no secret that interest rates are at an all-time historic low and when combined with the low housing prices we are still seeing these days, more and more people are considering real estate investment.

How can you tell if it is the right thing for you?  And if you do decide you want to venture into buying property for the sake of investment, how do you go about it and what type of dwelling makes the most sense? 

The answer is largely dependent on your individual investment goals.

Overall Appreciation Perfect for Long-Term Security
The easiest way to enjoy significant returns on investment is through the purchase of a single-family home.  Historically more popular, these properties are easier to rent out, entail less day-to-day management and they can be assumed as primary residence at any given time the investor would so choose, providing an added sense of security.  Home values do appreciate with time and single-family homes typically rise in value faster than other rental property types.

It is important that the property is located in a desirable location and also that it is easily rentable.  Your Realtor can assist you with an analysis of the area’s statistics in term of rent versus buy situations as well as a look at what other similar properties are renting out for.

Slow and Steady Monthly Income
Rental units that comprise of anywhere from 2 to 12 (or more) family units within the property are perfect for monthly real-time cash flow. While they may not appreciate as much as single-family homes, they provide the comfort and safety net of steady monthly income.  If increased cash flow is the goal then opting for multi-unit rental properties may be the best route to take.

Demographics play a key role in determining your investment.  For instance, if you live in a college town then a rental home near the college or downtown would be ideal for many senior or grad level students that prefer easy access yet quality housing.  Conversely, resort homes are also attractive and as long as they are located near some tourist attractions you may be able to yield decent rental income. Rental units in big cities are also popular in the more bustling areas of town.

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Given the increase of rental units and investment properties being rented out, there has been an influx of property management companies set up.  Ideal for the silent investor or someone that does not have a lot of time to put into the actual management of properties, property management companies handle anything from market analysis, finding and screening tenants plus managing the move-in process to handling day-to-day affairs like collecting rent or property maintenance.

If you can afford it and have investment goals that line up with some of the returns that are apparent with property investment, contact your Realtor to get a feel for what is available out there.  This is definitely a very interesting time to pursue an investment property.