Interest rates in Scottsdale are truly remarkable this month.

Jay Thompson, aka “The Phoenix Real Estate Guy”, published an update to his interest rate chart a couple days ago showing interest rates at 4%, the lowest rates in the 40 years tracked here by FreddieMac.

Personally I can share that the last two contracts I received for listings now under contract had “not to exceed rates” quoted at 4.25% and 4.375%. One was an FHA loan, and the other was conventional.

Really quite amazing and one of the reasons that buyers are still out looking for homes and writing contracts during the last two weeks of December. This is typically a pretty quiet time of the year for real estate in Scottsdale, but not this year.

And as I shared last week, Phoenix area real estate agents are very optimistic about the coming months. And if you’d like to get a better handle on what’s going in the world of home finance nationally, I recommend The Mortgage Reports by Dan Green.

The consensus from my Mastermind meeting yesterday was that 2012 is going to be a strong year in real estate, and the lenders present didn’t really see much of an increase in interest rates, until after the election. Another agent mentioned that he’d listed a record number of homes in December. With the low interest rates, minimal home inventory, and voracious home buyer demand, I do believe that the first half of 2012 will be quite remarkable.

All we need are more homes to sell.

So, if you’ve been thinking about listing your house, and need a market update, just call or email.  It’s a complimentary service, and will give you info you need to decide whether now is a good time for you to sell.

photo credit: TheTruthAbout

Matthew Maret, of Bell Mortgage shared the following chart, showing the impact of bankruptcy, foreclosure, short sales, and loan modifications on a buyer’s ability to qualify for a home loan. Basically, the facts about how long home buyers must wait before obtaining financing. As you can see, loan type (Conventional, FHA, and VA), plus circumstances have a significant impact on the time frames.

If you have any more questions, please give Matthew a call:

Matthew Maret, NMLS 275125
480-753-6100 EXT 2412
www.mattmaret.com
mmaret@bellmortgage.com

Disclaimer:  Please note that this is information being passed on from a lender with much more knowledge about the loan pre-qualification process and potential penalties.  ALWAYS seek appropriate legal and financial counsel when considering your real estate options.  For any reader considering a short sale, please read the MARS disclaimer on the lower right hand corner of this page.

photo credit: TheTruthAbout

Here’s some research you will want to read if you or someone close to you is considering a loan modification, short sale, or walking away from their property.

Impact on Consumer VantageScore Credit Scores Due to Various Mortgage Loan Restructuring Options

This study evaluates the effect of various mortgage programs on consumers’ VantageScore® credit scores, along with other consequences homeowners potentially face if unable to make timely mortgage payments: short sale, foreclosure, or bankruptcy.

Key findings in the study include:

• Consumers should try to get a loan modification before falling seriously behind on payments.
• Certain loan modifications can positively impact the credit score.
• Bankruptcy has the most significant impact on a consumer’s credit score and will have an impact for a minimum of seven years.
• Credit scores can be raised fairly quickly when a consumer gets current on all debts and stays current for at least nine months.

The study only covers the impact on one type of credit score, but the detailed information is helpful in understanding better how lenders look at significant financial events in today’s challenging real estate market.

The first two charts in this report answered a question that I’m asked very often:  “What are interest rates doing?”  And you will see, that they are amazingly low, currently 4.21% for a conforming 30 year loan!

And if you look at the history of interest rates from 1972-2009, you will see that these rates are all time lows in this era.

One of the lenders that I spoke to during break said that there are so many people refinancing that it’s been taking longer to get home purchase loans approved and processed.  She said that Wells Fargo was refocusing on home buyers, to get their loans completed first.

Click on Center Stage: Local Market Data and you will see the full 7-page report that includes the charts above, as well as others that track unemployment, home appreciation, and home affordability. The report is just charts, so it’s a fast read covering some good information.

Related Posts:

• FHA Streamlined 203(k) Loan Program: An option for home buyers to renovate home before move in
• Specialized Home Loan Program for Doctors, Dentists, and Other Medical Professionals
• The Perfect Storm
• Tips to Make Sure Your Home Loan Closes on Time

The HUD.gov web site contains a wealth of information about the FHA Streamlined 203(k), and describes the program as follows:

FHA’s Streamlined 203(k) program permits homebuyers to finance up to an additional $35,000 into their mortgage to improve or upgrade their home before move-in. With this new product, homebuyers can quickly and easily tap into cash to pay for property repairs or improvements, such as those identified by a home inspector or FHA appraiser.

Many buyers and real estate agents seem to shy away from it because they think that there’s a lot of work involved.  I know that a project plan and estimates are required, but the buyer I was working with seemed quite comfortable with the process. As his agent, I did have to go to the property several more times than is typical, to meet the buyer and the contractors he was getting quotes from.

A few of the highlights from the Wells Fargo marketing brochure caught my attention:

• The Streamlined 203(K) renovation loan simplifies the process of getting a mortgage that includes the cost of minor renovations.
       – A speedy process helps you buy and repair a home sooner. 
       – Reduced fees leave more money in your pocket. 
       – Easier guidelines save you time and trouble.
• Removes The Roadblocks Of An FHA Loan – Perhaps you’re considering an FHA loan but the home you’re looking at has septic issues, rot damage,water damage,mold, lead base paint or termite damage.The seller would have to correct those conditions before you could receive approval on an FHA loan.
• With the Streamline 203(K), you simply get an estimate to have the issues corrected, finance the cost in your loan amount and have the work done after closing.
• Renovation loan options give homebuyers and owners the financing power to:
       – Repair
       – Remodel 
       – Improve
• Multiple Choices. Owner-occupied or investment financing for 1-4 units is available.
• Ample Funds. Loan amounts are based on up to 110% of after improvement property values.

Doug Henriksen, the Wells Fargo Home Mortgage Consultant, for this buyer, sent me this list of allowable renovation repairs:

• Roofs, Gutters, Downspouts
• HVAC Systems
• Plumbing, Electrical Systems
• Existing Flooring
• Minor Remodeling such as kitchens-no structural repairs
• Interior and Exterior Painting/Siding
• Weatherization including storm windows, doors, insulation, weather stripping, etc.
• Appliances- New/No limit
• Handicapped Accessibility
• Lead Base Paint Abatement/Stabilization
• Repair, Replace, Add Exterior Patio/Porch
• Basement Refinishing and Remodeling does not require structural repairs
• Basement Waterproofing
• Window and Door Replacement
• Septic and Well Systems/Repair and Replace

And then went on to describe the process:

• Recommended to get home inspection
• Submit renovation estimates from a qualified contractor or Nationally Recognized organization (Home Depot, Lowes or Sears) along with loan application.
• Appraisal ordered and provide appraiser with renovation estimate to determine value after renovation is completed
• Contractor to supply a written proposal of work to be performed
• Contractor’s approved if not nationally recognized  like Home Depot etc…
• Loan underwritten and closes as normal
• Renovation money is available at close, 30% distributed to contractors for supplies and the remaining when work is completed or if using nationally recognized company (Home Depot, Lowes or Sears), no draw is required, money is fully disbursed
• Work must begin in 30 days from close and must be completed no later than 4 months

In this era of short sales and foreclosures, manysellers are not making repairs, most often selling a property in “as-is” condition.  For instance, I have a really cute, updated short sale listing in Dobson Ranch where the second air conditioner needs to be replaced.  The sellers do not have the funds for this repair.  In my mind, this house is a perfect candidate for the FHA 203(k) loan. The rest of the home appears to be in very good condition, the roof is less than 5 years old, but the buyer needs about $3,500-4,000 to replace the AC unit. Being able to fold the cost of the replacement unit into the home purchase loan is a solution that would work for many buyers in this price range.

I have another foreclosure listing under contract, where the buyer is also using a FHA 203(k) loan. This particular property really does need some major renovation, but was priced with room for the buyer to do so.  Where an investor may have cash on hand for a project like this, a first-time home buyer usually does not. In this particular property, the buyer will be correcting some plumbing issues, installing fixtures in a guest bath, putting in appliances in the kitchen, painting, and most definitely replacing the very spotted and smelly carpet.

The FHA 203(k) loan helps the buyer who’s found the right home that needs a little or lot of work (up to $35,000), and even for sellers that don’t have the cash for repairs needed to complete a standard FHA loan.  Ask your lender about this program, and if you need a few names of lenders that I’ve worked with, please call or email.

photo credit: TheeErin

I had a client who used the Bank of American Doctor Loan program a couple years ago as she transitioned from medical school to her residency.  It was perfect for her situation.

In the email I received earlier today, the Bank of America sales manager called this program new, so I imagine they’ve done some refining in this tight lending market. There are restrictions, but from a high-level, the program provides the following:

The Bank of America Doctor Loan is for residents and licensed, practicing doctors, including dentists and other eligible medical professionals. This home loan offers significant advantages for these buyers, including:

• As little as 5% down on mortgages up to $850,000 (some limitations apply)
• Employment start date up to 60 days after closing allowed
• Student loan debt not included in total debt calculation
• Financing for attached or detached single-family residences, PUDs and condos

If you have a relationship with Bank of American already, contact your branch for details.  If not, let me know and I will pass on the contact information that I have.

• A “Perfect Storm” of low purchase prices and historic low interest rates
• Compare this example:
  $250,000 purchase price at 4.5% (which recently closed)
  Versus
  $250,000 purchase price with a 6% rate (possible interest rate in 2011)
• The projected payment would jump from $1,267 to $1,499! (an increase of over 18% )
• If you believe house values will fall further, consider this: if you were to purchase this exact home for $225,000 at 5.5% (assuming taxes, insurance, and HOA were the same), your projected monthly payment would still be higher at $1,278!
• Therefore, from a payment perspective, IF the market dropped an additional 10%, it would still be a lesser monthly payment to pay the higher sales price at the lower interest rate.

I like playing with numbers, so I thought Mike’s scenario was a perfect way to lay out the situation in today’s real estate market.  If you want to talk through your scenario to see if now might be a good time for you to finance a home, call Mike directly.