by Melinda C. Whiteman
posted January 14, 2009
This article is written to help you, the seller, buyer, investor or those facing possible foreclosure; I hope this insight will help in understanding what changes are in the market to date, and where you should be heading if your ‘inner microphone’ is trying to tell you something important with regards to real estate.
Firstly, remember to trust yourself, and if you are contemplating your first purchase, selling your existing home, upgrading to a larger or downsizing to a smaller property, investing in land, or facing the possibility of foreclosure, remember several important factors: firstly, any of these changes in your life will create space for a new life story. Secondly, know something good comes from change. Thirdly, have positive beliefs and a sense of optimism. Remember how strong and capable you are. Know that it’s important to have a good team around you.
The good news is that despite facing tough economic times in 2009, there are some very positive aspects to real estate in the present market and by the end of 2009 we should be looking at more optimistic times. There is no doubt that this is the time to purchase real estate, and it’s a good idea to make your purchasing decisions sooner than later as we already are starting to see price stabilization in most markets. Those who make savvy purchases now should fare quite well in the long term.
Homebuyers are in a position to negotiate and make favorable deals. Rates on a 30-year fixed mortgage loan is at its lowest level since 1971 spurred by the Federal Reserve’s plan to buy back $500 billion in mortgage-backed securities from Fannie Mae, Freddie Mac and Ginnie Mae.
Refinance activity continues to be strong. To qualify for the best rates, consumers still face requirements of a 720 credit score along with 10 – 20% equity in their existing homes. If you are investing or need to sell your existing home to consider a new purchase, buyers can bide their time for now because rates are expected to remain at attractive levels, around 5%, through most of 2009. Remember, however, that lenders are and will be busy processing many new loan applications.
Before you start your application process, you should gather all the necessary paperwork beforehand; the lender will require proof of your earnings, a clear picture of your total monthly income and expenses, and long-term obligations such as alimony or child support if you are self-employed.
Shop carefully for your loan by comparing all costs and terms. On the positive side, with the number of lenders vying for your business, new and better deals are always appearing. For example, the minimum a buyer needs to get an FHA loan is 3.5%; FHA is one of the best avenues for buyers at this time. The loan limit is $271,050. The down payment can be a gift. Non-occupant co-borrower’s are allowed. The minimum credit score is 580. For a conventional loan, the rate is 5.375% for 30 year, and 5.25% for a 15 year loan. For VA, a 30 year is 5.625%, and a THDA 30 year, is 7.1% with no money down.
At the same time, home builders are pushing Congress to approve a stimulus to jump-start the housing industry. The Tennessee Home Builders Association is discussing a plan called Fix Housing First as part of a national campaign to convince Congress to make changes for a tax credit of up to $7,500 for first-time homebuyers. The tax credit, which must be repaid over 15 years, is provided during the buyer’s next tax return instead of at closing and is available for homes purchased between April 9, 2008 to June 30, 2009. The housing stimulus money would go directly to buyers and sellers, not to builders or real estate agents.
Builders are calling for eliminating the repayment of the current tax credit, providing a tax credit of up to 10% of a home’s purchase price or up to $10,000 in the Chattanooga area, and making the credit available at the time of closing. They are also lobbying to expand the program to all buyers, not just first-time buyers, and setting a below-market, 30-year fixed rate mortgage. Fix Housing First also supports a proposal by the Federal Deposit Insurance Corp. to prevent foreclosures.
Now, let’s talk about foreclosures. Let me say here that each one of us is equipped with a ‘change muscle’; a part of us that knows how to change, is made for change, and can get you through any change, even the hardest you can imagine. You are smarter, stronger and more imaginative than you have ever been told. The core of the human spirit comes out during times of change and transition. One must evaluate change, its consequences and the steps involved, and only then, make a clear and smart decision. Remember that foreclosure is a legal Process, not an event. Remember, it’s important to have a good team around you. Borrowers who are at risk have missed three payments or more, own and occupy their home, and have not filed for bankruptcy.
The Troubled Assets Relief Program, or TARP, was approved by Congress for providing assistance to financial institutions for modifying those delinquent mortgages. If you have not yet missed your payments, until the end of January 2009, borrowers can reduce their interest rate, extend the life of the loan or defer payments on part of the principle under the Streamlined Modification Program. It is during this juncture that homeowners will want to contact a qualified realtor to help sell your home before you enter into the foreclosure process, if you are facing eviction. Realtors know that banks prefer and were designed to be in the business of lending, not owning, real estate, and they will work with you and your real estate agent. Just face facts as early as possible and get the ball rolling…you will be relieved that you did.
Foreclosed homes hurt homeowners by depressing their property values, and lower the sales price of new and existing homes, so it is to all of our benefits to avoid foreclosures if possible. Also remember, that declaring bankruptcy often hurts more than it helps.
The times we are living in require a healthy dose of financial common sense. Here are some further helpful hints we can all benefit from for the year ahead: Take off the rose-colored glasses and be on your guard at all times to make correct and responsible financial decisions. Keep up with your credit card payments on time so as not to jeopardize your FICA score which is a prediction of your credit risk. If you are having trouble making those credit card payments, don’t use them. Don’t forego your health-insurance premium, or your life insurance premium. If your corporation matches your own contribution to your retirement account, continue to invest every month up to the point of the match. If you cannot afford the monthly mortgage payments on your home and have no possibility of staying current, let the house go and try to find a rental that makes good sense until you get on better footing.
Live within your means. If you’re an entrepreneur, prepare for a slower economy or possibly going out of business. Face the possibility early on to be able to make realistic choices. Say ‘no’ to your children out of love if need be for purchases; in doing so, you teach them the understanding of financial responsibility and self-empowerment, show them that ‘things’ never define you. Do not ever be afraid of what other people will think about you.
For all of us, we live in communities. It’s so important to be as generous as possible in helping others during these difficult times. Generosity comes in many forms: a kind word, donating items, and charitable donations. If you find that someone is in need, open your heart not close it out of fear that this too could happen to you. Count your blessings before you open your eyes in the morning, be an inspiration. Take action and take care of yourself; have a clear and strong intention and follow it through with a plan.
Melinda C. Whiteman is a realtor-associate broker with Keller Williams Realty, and can be reached at mindiwhiteman@aol.com or 664-1600.
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