Wow, Look at Those Mortgage Rates!

The federal government continues to reach into its bag of tricks to stimulate the economy.
Yesterday, the government announced it would buy up $1 trillion of Treasury Bonds and Securities.
This in effect creates $1 trillion of new money in the economy which already lowered the rate of return on long-term government bonds and will also cause a decrease in the interest rates of mortgages.

As I write this, fixed conventional 30 year mortgages are already around 4 5/8%. We should see rates drop as a result of this move with rates already very good, how much lower can they go? We'll see.

With low home prices, incredible interest rates and an $8,000 federal tax credit for home purchases, this is a perfect time to invest in a home.
There will be many people next year that realize they should have taken action and bought a home -- they lost an opportunity of a lifetime.

Will you be one of them?

Recent Mortgage & Foreclosure News

Surveys indicate that 11% of all mortgages are either behind on payments or in the foreclosure process. 6.9% of prime loans, 36% of sub-prime and 16% of Federal Housing Administration insured loans.
Recently many lenders have imposed a voluntary tempirary halt on foreclosures as they waited out the holiday period and then waited to see what the new administration would propose to help reduce foreclosures.
The federal government is looking at several provisions to help stuggling homeowners.

1st Plan:

• For homeowners who can prove they are in danger of losing their homes,
• Interest rates lowered to as low as 2%
• Up to $5K reduction to principal balance
• Lengthen the length of the payback term of the mortgage
• All in an effort to reduce payments to 31% of their income (a magic affordability number in the industry)

2nd Plan:

• Enable refinancing of mortgages for people who owe more than their home's worth (up to 105%)
• Only applies to loans guaranteed by Freddie and Fannie

Lastly, a plan proposed by the Obama administration, called "cram-down" would enable bankruptcy judges to modify mortgage contract terms of interest rate or principal balance for people going through bankruptcy. This has banks and others very nervous as it could raise the costs and the risks for making mortgage loans. With banks, risk = interest rate.

This plan concerns me as I believe it would make it harder for people who should be able to get a mortgage to get a mortgage and also would raise interest rates at a time when we are trying to make homes more affordable.

Stay tuned, more to come!

FORECLOSURE TRENDS

It's a nice surprise, I have been in many foreclosure homes recently that still have the heat and the electricity on. It's much more enjoyable to look at homes that are warm and have lights. Equally or more nice is the agressive pricing, even low pricing that I've seen on some foreclosures lately as banks are looking to just reduce their inventory.

When you buy a home, you want to have the home inspected. It's really not possible to do an inspection if the utilities are off and many banks refuse to pay the costs of "de-winterizing" and "re-winterizing" a home in a foreclosure or bank-owned scenario. So, as a buyer you need to ensure that you write in the PA contract that the bank will have the home de-winterized prior to your inspection.

Additionally, I've seen some tremendous deals lately. Large lake-front homes in the metro area for $500,000 or even less and moderate homes in suburban neighborhoods with steel siding, vinyl windows just needing paint and perhaps carpet for $135K. Some of these sell in multiple offers so you have to be careful when drafting your purchase agreement. For you e-Bay-ers out there, it's almost like sniping. If a home is underpriced, which some of these foreclosures are, you have to be willing to think creatively and offer $7K or maybe $8,650 over the asking price...

Interesting times I tell you. There'll be many people in 1-2 years who wish more than anything that they hadn't waited to buy a home -- low interest rates and tremendous deals. An interesting combination for those bold enough to buy. Sales are up and inventory is down in the Twin City area so some people are getting it.

What are you waiting for?