My New Blog

Foreclosures might not be as appealing as they once where … Fannie Mae’s new bright idea is to thank.

Sure, you can get a good deal once the home is Bank owed. But news from Fannie Mae earlier this week is scarring the bejezzus out of me. So what has changed?

Fannie Mae, the largest purchaser of mortgage backed securities in the country has changed guidelines with Announcement SEL-2010-07 on May 27, 2010 to state that they will NOT purchase any homes that where foreclosures UNLESS the former owners redemption period has expired.

Redemption period: In real estate terms, a redemption period is the time frame a former owner is given to reclaim their property after it has been reposed by the bank. The reason you rarely hear about home owners reclaiming their homes is because it takes a HUGE amount of money. The former owner would need to pay all fee’s, past interest and pay off the former amount due … needless to say this number can be huge! Unless your winning the lottery, its not likely going to happen. The redemption period in Oregon is 180 days.

So how is this going to affect you? Most banks that lend money want to keep their portfolio’s (All the loans they made) sellable to large investors like Fannie Mae. If Fannie states that they will not buy a loan until after the redemption period, then these banks could end up servicing these mortgage loans longer than anticipated. It’s always a good rule of thumb for banks to keep their portfolio fluid in case they need free up some money. In the end, many banks could decide to not lend on these property's because they might be forced to service them for a period of time. And if these last 3 years serves as our measuring stick ... I would venture a guess that most of the large banks will not want to take the risk.

Saving grace might be that many times a home is on the market for months before it sells. The redemption period starts when the home is reposed by the bank, so some bank owned homes could already be beyond there redemption period, in which case Fannie Mae is back in the picture.

For more on this please see Announcement SEL-2010-07

Summer buying

With the summer Sun also comes a entirely new group of home buyers … “Honey, it’s sunny and there are open houses everywhere, let’s just look around.” The “beginning of the end” as they say it. So what do people need to know before they get pumped up to tour?

1. The Bottom: There is no way to know when we will hit this imaginary bottom everyone is talking about. So just think about the market as fluid. Prices are lower now than they were a year ago, which means great deals are out there.

a. Selling in a market like this is not as hard as you might think. Yes, you will not sell it for as much as you would have in 2006, but if you are buying again, as long as you buy smart, the lost equity will wash with your new home purchase. It’s just money in your left pocket being moved to the right.

2. Get realistic about home Value’s: I’m working with a handful of buyers right now that seem to think they can low ball every homeowner … a few of them paid the price of a Tax credit because of their unrealistic expectations.

a. Most homes are marketed by a realtor who wants it to sell. (remember they don’t get paid for taking the listing, only for selling it) So the price should be close to its CURRENT market value. Yes, there are exceptions to this rule, but 99% of the time you will not get a 20% discount. In some cases, smart realtors will even get their home owners to list a home under its value to get it moving.

3. Shortsale and bank owned homes can be a pain: If you are under no time constraints and would like to pursuit a shortsale or bank owned home, this is what you need to know.

a. Be patient, these types of purchase’s can take a while. I have worked with buyers who have waited MORE than 6 months to get a Counter offer. I have also seen it just take a day or two.

b. If you want a good deal, don’t limit yourself to short sale and bank owned homes. Last year, the 3 deals I thought where best came from a traditional motivated seller.

4. Don’t wait to get Pre-Approved: There are still great and flexible loan products out there for qualified borrowers. You are not doing anyone justice by waiting to get pre approved.

a. Do not be one of the buyers who incorrectly assume they can buy, only find out that they are a few months away from qualifying. Time is the cure for all things financial. Your loan officer should be able to help you create a plan for homeownership if you are not qualified yet.

b. Make sure when you get pre-approved, it’s from someone local who you trust. I am constantly picking up the pieces after an “Online” mortgage company dropped the ball. Loan officers that you call on a 1800 number are ORDER TAKERS, not mortgage professionals. A lot can go wrong if you’re not working with someone who understands your local market.

If you are looking to get pre-approved, please feel free to contact me.  We will have an answer back to you within 24 hours.

Tax Credit Extension for Service Members Through 2011

In November with HR 3548 – Tax credit for First time and repeat buyers was extended, there was an additional provision which was designed to help the deserving members of our Armed Forces.

Who Qualifies? :

ü Member of the “uniformed” Service

ü Members of the Foreign service of the US

ü Employee’s of the intelligence Community

ü Extended Duty Military (“Official orders outside the United States for at least 90 days during the period of 12-31-08 thru 5-1-2010)

What does it include? :

The full tax credit is extended to April 30^th 2011; contract must be signed by this time and close before June 30^th 2011.  This is for both the $8,000 and the Move up $6,500 credit. 

For more information please feel free to contact me.

How to Choose a Realtor

It’s interesting to hear the stories from buyers and sellers on how they met the realtor they are working with. What is also interesting is how many times the relationship turns out poorly because the client did not properly interview their agent. THAT’S RIGHT, I SAID INTERVIEW! So how do you go about this process? Follow these simple steps to determine if the realtor you’re working with is the right one for you.

In no particular order:

1. Buyers agent or listing agent.

a. Listing agent to sell your home: A realtor who can market themselves online WILL have a leg up when it comes to selling your home. YES, every realtor that takes your listing will plop it in the MLS, but what else are they going to do to market it? An MLS entry takes about 35 minutes for a trained agent, so there is time for them to put forth more effort. Some things I would want are: Private Webpage for your listing that includes a virtual tour, 360 Panoramic Views, Walkscore, postings to all of the major online portals, Zillow, Tulia, Craigslist, Kajiji, Backpage. Green flyer or consistent flyers for my sign and at least 1 open per month. Call capture or text capture system sign rider.

b. If you are a buyer, then just make sure they are providing you with a comprehensive search engine and that they are monitoring the market for the homes that meet your criteria. Being flexible and patient is important for your buyer’s agent, because the buying process can be stressful!

2. Communication is the key to any good relationship: Above all else, I believe that your agent should be someone that you enjoy being around. It becomes much less stressful to work with someone you can have candid conversations with. They also should be accessible via email or phone. Let’s not be unreasonable about our expectation for a returned call, but same day seems reasonable to me.

3. Career Realtor: An agent who makes a living selling real estate is very different then one that does this part time for vacation money. Simply ask, how many hours per week do you work? If the answer is 30+ they are likely a full time agent. It does not always matter how long they have been in the industry, some of the best and most outside the box thinkers I know are Tech Savvy high school dropouts that became awesome realtors.

4. Ask for a referral: There is no better place to start looking for an agent then by asking the people you know and trust. Real estate is a 100% commission sales job, so make sure you do your best to take care of the agents who took care of your friends and family.

5. Have your own agent: If you are a buyer, it is in your best interest to have a buyer’s agent. The agent whom represents the listing should not also represent the buyer. Many realtors can take both sides and work honestly and ethically, but there is no way to be sure. It is just easier if you hire your own agent so that there is no conflict of interest.

All agents are NOT created equal. I have worked with, interviewed or met with over 300 realtors in my career and I can tell when a realtor is very good at their job. If you need a good referral for a realtor let me know and I can refer you to a realtor I feel is a model match for your needs.

Side note: Realtors waste a lot of time driving buyers around. Many times the research you need to do as a buyer can be done on-line by using the system they provide. After you have seen everything available you should have a better idea of what your needs are. Communicate these needs and only look at homes you would be interested in. This will save you and your realtor a lot of time.

If you would like to begin looking at homes online NOW using the most advance inline search site, please click on the lick below. The Scouting Report gives you the information other sites are designed to hide.

Mortgage Interest rates are affected by inflation concerns, which the Fed tries to keep in check, our National Gross Domestic Product and Unemployment rates. For the most part interest rates are influenced by supply and demand. When the economy is solid and forecasts look good, interest rates rise. When the economy gets more weak and there is less spending, interest rates go down. GDP is the measurement of our consumer spending and the amount of spending is directly effected by to how many people are unemployed. But interest rates are also influenced by what the Federal Reserve, also known as “The Fed”, does and where the fed funds rate is set.

Short-Term & Long-Term Rates

The federal funds rate is the interest rate charged when banks lend funds to each other. This is what we call a short term rate. The maturity of short term rates is less than 2 years. When the Federal Open Market Committee changes the Fed funds rate, it affects mortgage rates which are tied to short-term interest rates, such as home equity loans and adjustable loans. As a result of short-term rates falling, people traditionally borrow and spend more. And as most people know from econ 101, spending more and leed to inflation and that is something the Federal Reserve wants to keep in control.

Long-term interest rates carry a maturity longer than 10 years. For example: 30-year fixed rate mortgages. However fixed rate mortgages also be affected by short-term rates, because long terms rates can rise when there is speculation about increased inflation. Over the last 7 years the Feds started raising short term rates in an attempt to control inflation. In the end, this presented opportunity to home owners who had adjustable rate mortgages to refinance into a more stable and fixed rate loan. Rates on most home loan products remain at historically low levels.

What does this all mean? Well in my world, it means that it’s better to lock then float …. Hoping that rates will go down based on any preconceived notion or report is mortgage suicide. My best advice about rates is: if you’re fine with the rate and the payment, than lock your loan and move forward happy that you did not experience the bad side of the alternative. In any case, it is important to understand some of these market dynamics because a lack of understanding can sometimes cost you a lot of money. That’s why I get paid to do what I do, so that you don’t need to become a forecasting economist before getting your next mortgage.

If you would like to learn more about mortgage interest rates, call me at (503) 929-4615.

If you think I’m pulling your leg, think again. Welcome to the Fannie direct loan “HomePath”. This is perhaps one of the most flexible loan programs we have seen in 3 years … possibly only outdone by the USDA rural home loan. Unfortunately it is even MORE property restricted then USDA is. This loan is only eligible for homes that are Fannie Mae owned.

So why is this loan so unique? Let’s recap our headline in bullet point format so we look professional.

• As little as 3% down
• No mortgage insurance
• No appraisal required
• Owner Occupied AND Investors eligible
• Some homes Eligible for a HomePath Renovation loan

Less down than FHA.

Fannie Mae has created 2 categories for your down payment qualifications. Standard and Flex.

Standard: Minimum down payment is going to be 5% for this loan type because it is tied to today’s “Normal” Conventional financing guides. Because there is no MI, we don’t need to worry about those special “Declining Market” mortgage insurance guidelines.

Flex: The flex follows more closely suit to the old school my community 97% program. This was a great loan when MI companies would cover it. Again, no MI means no overlay. The Flex will require slightly higher credit scores and a small increase in rate. It’s only fair; you get to keep 2% of your down payment.

No Mortgage Insurance

This may not mean much more to you then some additional savings every month. But for someone in my line of work, this is a GODSEND! Mortgage insurance has grown to be quite a deal breaker over the last 24 months. Constantly changing guidelines, appraisal rejections and declining markets make closing loans with MI a big pain in the neck.

So you might ask, “Why does Fannie Mae close the loan with no Mortgage Insurance? Doesn’t a mortgage insurance policy decrease the lenders risk?” The official reason is not stated. Well it might be, but I didn’t look hard enough to find it. What I suspect is because Fannie Mae already owns the home, they figure that the worst that can happen if someone stops paying is that they get to own the home again. In the interim between foreclosing on Buyer 1 and Buyer 2, they can collect a bunch of interest. Makes sense to me. Wonder why other servicing companies are not following suit?

No Appraisal Required

So this can be a good and a bad thing. If they offered Fannie Mae HomePath Refinances I would be rich. Affirmation of the week: They will create a Fannie Mae HomePath Refinance program .. They will create a Fannie Mae …

The Good: No appraisal means you save money. It also means that you do not risk the delay HVCC can cause or the possibility that the appraisal will get shot down and stop you from buying your dream home.

The Bad: You may not know the homes true value. Are you paying too much? Even though it’s not a loan requirement, it might be in your best interest to pay for an appraisal out of pocket so that you can be sure value is supported. If this is THE home, then value is just a number and who cares. But if you are buying as an investment, spend the $450 so you can be sure you are investing wisely.

Owner Occupied and Investors Welcome

Not many other products will allow for an investor to finance up to 90% of the purchase price of a home. But if you are an investor and you need this style of niche product, maybe begin your search with HomePath eligible properties. There are a few pricing adjustments for both investment and 2^nd homes. But after reviewing the perks, these considerations seem more than fair.

The HomePath logo at the top of this page is clickable .... If you would like to see all the HomePath homes in your area, click this link and begin your search.

If you would like more detail about this or any other type of loan product, please feel free to contact us. You can also apply online for this loan program at www.PortlandHomeLoanExpert.com/loanapplication

So the question remains, how low can it go? This question is not one that can easily be answered.  In reality anyone who claims to know the answer is purely speculating because this economy is unlike any we have seen before. 

My philosophy is live for now!  With this in mind we have to determine what we know now.

What we know

1.  Housing prices are cheaper overall then they have been in 4 - 5 years.  Some deals can be found that bring us back to nearly 90's pricing.  Many sellers who are experiencing economic hardships are motivated to sell their homes and move on with life.  See the attached chart for more information.

2. Sell low, buy low.  Many of my clients have been reluctant to reduce the price of their homes.  What needs to be remembered is that if you sell your home in a down market with the intention of buying again, you also get to buy in a down market. This can lead to a "wash" in your equity position.  For example, one of my clients sold their home for $250,000, even though it was listed originally at $300,000. She then bought a $300,000 dollar home originally listed for $375,000.

3.  Short Sales and Bank owned homes are becoming more and more available for the buyer who is patient enough to wait.  If you can afford to wait 2-3 months to buy your home, short sales and bank owned properties offer potentially great savings.  Just remember that this process can take some time and for first timers can be especially hard. No one likes waiting for an answer to such a large questions. (Will you marry me? … Let me get back to you in 3 weeks)

4. Interest Rates are the lowest they have been in 50 years and there are still plenty of loan programs to choose from.  My other website is a great resource for people interested in leaning more about the available loan programs.  www.PortlandHomeLoanExpert.com.  If you would like to see how much home you qualify for please feel free to let me know. Pre-approvals are always free and with no obligation.

5. First timers can qualify for an $8,000 dollar tax credit which does not need to be paid back!  This is a dollar for dollar refund of anything you may owe at the end of the year or cash in your pocket.  For more information please consult my web page under the First Time Buyers tab.

6. Do you love the home? Then why are we making such a big deal about $10,000 dollars in purchase price? Even if you did “wait” for the bottom what are you chances of finding it? There is no easy button telling you that it has arrived.

My interest in investments, real estate and finance begun after a special gift from my favorite aunt.  She sent me a copy of Robert Kiyosaki's book Rich Dad, Poor Dad.  For those of you who have not had the pleasure of reading this book I highly recommend it!  It not only changed my mindset about investing, but also in the fundamentals of how cash flow's.  This is very important information if you want to thrive in our "down" market. 

Below you will find an article written by Mr. Kiyosaki that can help put this market in a different perspective .... Enjoy!

Smart Investing Amidst Real Estate Mania

By Robert Kiyosaki

In early summer of 2005, I sent a warning to the Rich Dad community that the real estate market was cooling down. After all, we know that all booms go bust eventually, and every party comes to an end.

While many readers thanked me for the words of caution, many others sent me hate mail. An angry real estate broker called me and said, "Are you trying to ruin my business?"

The angry readers should draw insight from something Warren Buffett said: "For some reason, people take their cues from price action rather than from values. What doesn't work is when you start doing things that you don't understand or because they worked last week for someone else."

The sage of Omaha sums up pithily: "The dumbest reason in the world to buy a stock is because it's going up."

Personally, I would say, "The dumbest reason to buy anything is because the price is going up." Yet that's what people do when they invest. They generally don't buy high-priced things when they shop.

Fools Rush In

For example, if Safeway had a sale -- 25% off everything in the store -- the supermarket would be swamped. Yet, when the stock market or real estate market has big discounts (often called a crash or a burst bubble), that same shopper runs away from an asset sale. Instead, they wait until prices are high and other fools are bidding them up further to finally buy.

I estimate that 90% of all investors invest for price movement, not value. If prices begin to escalate, as they did in real estate from 2000 to 2004, amateurs turn pro and begin buying real estate to flip -- for example, buying a home for $200,000 and then selling it for $250,000 a few months later.

Most stock market investors do the same thing. In investor language, flipping is known as "the greater fool theory of investing" -- you're buying something not to own, but in the hope of selling it to someone who's a greater fool than you.

The Coming Crash

We all know a real estate crash is coming. The problem is we don't know when.

One of the more popular predictions floating around is that investors are now moving out of real estate and back into the stock market. Another prediction, which I think is valid, is that the real estate market is set to crash because of the high costs of building materials.

But such rumors only affect those investors who, as Buffett says, "take their cues from price action rather than from values." During such periods of high prices and volatility, it's even more important to pay attention to value, more than price.

Yet, it's one of the toughest things to do -- stop and focus on value -- especially when prices are volatile in either direction. It's difficult to resist the urge to sell when prices are dropping and buy when they're rising.

The Best Time to Buy

Take market crashes. I love them because that's the best time to buy -- finding true value is a lot easier during such periods. And since so many people are selling, they're more willing to negotiate and make you a better deal.

Although a crash is the best time to buy, the market's high pessimism also makes it a tough time to do so. I remember buying gold at $275 an ounce in the late 1990s. Although I knew it was a great value at that price, the so-called experts were calling gold a "dog" and advised that everyone should be in high-tech and dot-com stocks. Today, with gold above $500 an ounce, those same experts are now recommending gold as a percentage of a well-diversified portfolio. Talk about expensive advice.

My point is that this current period is a tough time to buy or sell. Real estate is high, interest rates are still relatively low, the stock market is rising, the U.S. dollar is low, gold is high, oil and gas are high, and there's a lot of money looking for a home.

So the lesson is: Now, more than ever, it's important to focus on value, not price. When prices are low, finding value is easy. When prices are high, value is a lot harder to find -- which means you need to be smarter, more cautious, and resist your knee-jerk reactions.

A final word from Warren Buffett: "It's only when the tide goes out that you learn who's been swimming naked." In my opinion, there are many naked swimmers, especially in the real estate market.

Rate Tornado

By Michael Neef

The only way to describe the current climate of interest rates is to compare them to another natural disaster. Much like Tornadoes, volatile Interest rates are hard to predict. Usually by the time a tornado hits the news, the worsted of the storm is over. In 2003 we had a few perfect storms and few ready homeowners where able to score interest rates as low as 4.5%. However these windows of opportunity were at best 2 hours long and only the prepared survived. Stock up your cellar, lock down the doors and find your religion because it’s storm season.

So what can home owners/buyers do to prepare for historicly low rates this year?

1. Find your religion: Every home owner has different view and goals for their home. Do you want to lock yourself in the same storm cellar for 30 years or are you planning on upgrading a few years down the road? Structuring your loan correctly has become more important then ever with so many family struggling to make ends meat.

2. Find a Mortgage Professional that is interested in your goals: A good Mortgage Professional can break down the cost of each loan and give you a cost analysis of each program. They can also explain to you the advantages of each program and explain where each loan will provide the most benefit.

3. Stock the cellar before the storm hits: Filling out an application and having a Mortgage Professional structure it correctly before your rate is locked can take hours or even days. If you wait until rates drop to begin the process you may have missed your chance. A loan cannot be locked with out a complete application, so even if it is months before rates hit your desired range or you find your Dream home, get the application in to be prepared.

4. Set a bottom line: If rates drop and you have not already created a fail safe mechanism to act immediately, you may be too late. A lock agreement should be established with your Mortgage Professional in writing. Too many times homeowners miss their opportunity to secure a better mortgage because they could not be reached or they were indecisive during the short window of opportunity. Details of the lock agreement should include a specific program, rate and cost; ex: ”If 30 year fixed rates hit 5% at a cost of 1%, LOCK ME IN!”

Its time to prepare for your future; so don’t get caught out in the rain with other victims in this market place. Unlike the weather mans ability to accurately predict weather, volatile rates are the one storm we can count on this year.

For more information, please feel free to contact me.