Real Estate is on sale like never before.
You know this already.  Most people won’t take advantage of these prices because they can’t see what’s happening around them through the haze of the negative news media and the scare of some impending global gloom and doom. Be that as it may, the fact remains that you could buy your next home, a move up in your own market, for a more favorable price than at any other time in the last 10 to 15 years in most of the country.

Rates are very favorable.
Rates today are very low, at an average of around 4.25% (15 year) or 4.75% (30 year) as of this writing.  Even if rates hits 7% in the next 24 months, that is still historically very low. The biggest determinant of making money in real estate is NOT the interest rate you get on the mortgage, but it never hurts if you get a low one. The government has made it artificially beneficial for home buyers to make a killing in this market. Artificial, that is, unless you actually lock in one of these low rates for yourself! If you do that, then the benefit becomes very real for you. In the face of potentially rising future rates and home prices, you can set your fixed-loan terms today and hold onto them long into the future.

Renters are plentiful.
I’ve asked more than a dozen clients to take what I call the “Craig’s List Challenge.” Take a picture of your own home and put in on Craig’s List “For Rent.” Choose a payment that is a little more than your mortgage payment(s) and list only your email address as a way of taking requests. Do this only if you are actually considering renting out your home. I bet you have no less than five requests inside of a few days.

The point of this exercise is to show you that you have options other than selling your home. Because of the tightening lending standards today, many good people are just a year or two from getting qualified to buy their own home. They can rent from you while they work on their finances. They might even buy your home from you in the end saving you even more money.

But I’m not the Landlord type.
Now may be just the time to join the growing crowd of landlords who are not the landlord type. I’ve never heard one rental-home owner say, “I always wanted to be a landlord when I grew up.” They generally have other motives.

Let me runs some motivational numbers for you. Let’s say you purchase a nice home for $100,000 at a deep discount from a bank or on a short sale. You finance it using a 15-year fixed-rate mortgage at better than 5%, and with taxes and insurance your payment is just over $1000 per month. Then you rent it to a family with kids who will take very good care of it for $1100 per month. You have to spend $2000 per year for maintenance and miscellaneous expenses, but for the most part this is running at a break-even for you.

15 years from now your rental is paid for and generating $1500 per month in rent (assuming normal inflation).  After taxes, insurance and maintenance, you are netting $12,000 per year.

Using very little of your own money, and taking advantage of ideal market conditions, you’ve created a long-term passive income stream for you and your family.

Now, lets add up all four of the above realities.
An even easier way to buy a rental home is to turn your home into a rental and purchase another home for yourself. This kills two birds with one stone. You were planning on “moving up” by now anyway, and you get to make/keep a great investment (your home) in the mean time.

What are you waiting for?  The timing may be perfect.

Real Estate is on sale like never before.
You know this already.  Most people will not take advantage of these prices because they cannot see what is happening around them through the haze of the negative news media and the scare of some impending global gloom and doom.  But be that as it all may be, the simple fact still is that you could buy your next home, a move up in your own market, for a more favorable price than at any other time in the last 10 to 15 years.

You do not need to sell your current home to make this happen.  You can very conveniently manage your current home to produce income that if used to eliminate the mortgage will eventually net great passive income for you.  At today’s prices and interest rates you can reasonably purchase another home for yourself and pay off your existing home inside of the next 15 years.

Rates are very favorable.
Rates today are very low at an average of around 4.5% (15 year) or 5.0% (30 year).  Even if rates hits 7% in the next 24 months, that is still historically very low.  The biggest determinant of making money in real estate is NOT the interest rate you get on the mortgage, but it never hurts if you get a low one.  The government has made it artificially beneficial for home buyers to make a killing in this market.  Artificial that is, unless you actually lock in one of these low rates.  If you do that, then becomes very real for you.  In the face of potentially rising future rates and home prices, you can set your fixed loan terms today and hold onto them long into the future.

Renters are plentiful.
I have asked more than a dozen clients to take what I call the “Craig’s List Challenge”.  Take a picture of your own home and put in on Craig’s List “For Rent”.  Choose a payment that is a little more than your mortgage payment(s) and list only your email address as a way of taking requests.  Do this only if you are actually considering renting out your home.  I bet you have no less than five requests inside of a few days.

The point of this exercise is to show you that you have options other than selling your home.  Because of the tightening lending standards today, many good people are just a year or two from getting qualified to buy their own home.  They can rent from you while they work on their finances.  They might even buy your home from you in the end saving you even more money.

But I’m not the Landlord type.
Now may be just the time to join the growing crowd of landlords who are not the landlord type.  I’ve not met one person who owns rental homes that have always wanted to be a landlord when they grew up.  In fact I’m pretty sure of it.  They generally have another motive.

Let me runs some motivational numbers for you.  Let’s say you purchase a nice home for $100,000 at a deep discount from a bank or on a short sale.  You finance it using a 15 year fixed rate mortgage at better than 5% and with taxes and insurance your payment is just over $1000 per month. Then you rent it to a family with kids who will take very good care of it for $1100 per month.  You have to spend $2000 per year for maintenance and miscellaneous expenses but for the most part this is running at a break-even for you.

15 years from now your rental is paid for and generating $1500 per month in rent.  After taxes, insurance and maintenance, you are netting $12,000 per year.

You used very little of your own money by taking advantage of ideal market conditions,  to create this long term passive income stream for yourself and your family.

An even easier way to buy a rental home is to turn your home into a rental and purchase another home for yourself.  This kills two birds with one stone.  You were planning on “moving up” by now anyway and you get to make/keep a great investment in the mean time.

What are you waiting for?

Investment purchases in the third and forth months of this year slowed almost to a halt.

Joedy Patrick, a local Real Estate Investor and owner of Entrust Great Lakes, a self-directed IRA plan administrator (his group allows investors to purchase real estate inside their IRAs to avoid or defer taxation – reach him directly at 517-980-5143) agrees that investors by and large have opted to wait until the stimulus money has worked itself out of the system (unless the deal is really good).

Foreclosure is the name of the game on a couple of levels.  First, these are the deals that are attractive to investors because they can get homes at a deep discount.  Second, it is the presence of these deals that keep the total market low into the future, which keeps them from reaping the reward from selling the properties.

This is the tricky part – both of the following statements are true:

~As soon as property values here in mid-Michigan (or where ever you are) start to rise, you will see fewer foreclosures.

~You will not see property values begin to rise until you see foreclosure numbers begin to return to normal (very low) levels.

Investors know that property values will rise again.  The question is when?

Let’s say that you and I each buy a similar home in the same neighborhood for the same price.  I make my purchase this summer and you make yours in 2012, two years from now.  Later – let’s say 2015 – we each sell our home for twice what we paid for it.  We both got the same return on our investment yet your annual return was better than mine because you only had your money in for three years and mine was tied up for five years to get the same amount of profit.

Now, renting the homes in the meantime can equalize these a bit, but many investors are looking to sell the home in the next five to ten years for a profit rather than be landlords for an extended period of time.  The perfect deal is made at the bottom just before the market begins its incline.

They need to buy the home right, that is, for a low price.

They need to manage it well. Money put in covers money paid out each year.

They need to sell it for a profit as soon as possible OR hold it for income if rents received justify keeping the home longer term.

Investors understand supply and demand, so they did not want to compete with the frenzy of homebuyers who were after free money that was not available to them as investors.  They are now looking at making purchases again.

The message for buyers is this: now that the stimulus money is gone, you’ll get a better deal.  Buy Now.

Why NOW is a great time to buy…

1. It’s a Buyer’s Market.

And it has been for some time. With fewer dollars chasing more houses, inventories remain high, prices low, and sellers motivated. Timing the bottom of the market is next to impossible, and even if you hit the precise bottom, there’s always the interest rate to consider. So while you’re waiting for the market to hit bottom, rates may be up and wiping out your gains. But if you’re keeping an eye on both prices and rates, you’ll see that right now just about everything favors the buyer.

2. Mortgage Rates are at Historic Lows.

Buying a house has never been more affordable, but it’s not just prices that are low—mortgage rates (the cost of borrowing all that money) are also at a decades-long low. Keep in mind that low rates don’t necessarily mean easy credit. Lenders are wary—looking for good credit scores, hefty down-payments, and established income before they’ll extend credit. But if you qualify, the terms are excellent.

3. Builders are Motivated Sellers.

Like the rest of us, builders are in survival mode, and survival means protecting the essentials—credit, brand, and reputation. So home builders are offering steep discounts in order to unload their inventories. This is an opportunity for the buyer to be aggressive. A low-ball offer is more likely to be accepted when the seller is more motivated by the desire to stay in business than by profit.

4. Federal Tax Credits Have Been Extended.

Both first-time and repeat buyers today have considerable tax-credit opportunities—until the end of 2010, at least (there is a phase-out provision, so check the dates). The first-time home buyer credit of $8,000, originally slated to end November 30 of 2009, has been extended, and a new credit of $6500 is now available to repeat-buyers who have lived in their current home for 5 consecutive years out of the last 8. Designed to jump start the market, these incentives won’t be around forever. So that low-priced home you’re considering is now on sale, and for a limited time only.

5. The Cost of Renting is NOT Dropping.

While house prices are dropping, rent prices have remained fairly stable. We’ve seen the uncertainty in what has always been perceived as a solid investment—home equity. But all investments require uncertainty (it’s called risk, and it’s what allows for a return). The renter, choosing zero risk, is also choosing zero return. Today’s historically low prices and rates allow the renter to move into more house than ever before, and begin to build equity while doing it. There’s simply never been a better time to move from renter to home owner.

So if home ownership is a part of your plans, it may make sense to take action now. After all, it may be a long time before we see all of these elements align like this again.

That new debt just might put the breaks on your mortgage application process. It might not kill the deal, but it might. Or it might just slow everything down and send you through another round of paperwork. Lenders, now more than ever, are looking for stability in their customers’ financial lives. So before you buy that hog (or take on some other big life change) consider these to-be-avoided, attention-getting events…

New Debt. Lenders like debt-averse folks (as long as they’re willing to go into mortgage debt, that is), and taking another financial burden at the same time you’re buying a new house doesn’t exactly shout conservative. Of course, big-purchase potential seems to abound at new-house time (appliances, furniture, renovations). That doesn’t matter. WAIT. If you can avoid the temptation, you’ll avoid increasing your debt-to-income ratio, the “back-end” ratio, as we call it.

New car lease. Oddly enough, new car leases are very popular with people moving into new homes. Maybe they just think it’s time for change all around. But leasing a car is no different than going out and buying one because it has the exact same effect on your back-end ratio. So wait on the lease. Your old car will fit into your new garage just fine.

The Job Change. Lengthy employment suggests stability, responsibility, and security—top-spot traits on any good-customer profile. Even a promotion bringing more income can be a liability if it suggests risk. Now, you don’t always have the luxury of postponing a promotion, but you can postpone quitting your job and enrolling in community college to “find yourself.” At least for a few weeks. Yourself will wait. It’s not going anywhere.

Packed paperwork. Keep close at hand any and all files and papers that have anything to do with your finances. Yes, it’s a strong temptation to box up all that stuff for the moving van, but if a new round of paperwork has to be initiated or a number substantiated, you don’t want to make matters worse by adding to the delay. There’s plenty of delay built into the process without your contribution.

Gifts. On an FHA loan, a gift as a source of funds is acceptable, but only from a blood relative, so make sure the relationship is documented. The idea here is that no funds have originated from any debt-increasing source, that the gift is truly a gift.

Tax returns. Yours have been filed over the past three years, right? Tax returns aren’t collected at application, but they are randomly checked thru the 4506 IRS tax form. Unless they’re needed for an MCC credit or a self-employed / commissioned borrower, returns are only checked for a “filed” status. But an un-filed return can halt the process real quick.

Bottom line? Go static. Put all major life changes (those you can somewhat control, anyway) on hold. Keep in mind that the mortgage application process is not a fixed snapshot of your financial life. Think of it more as surveillance footage watching you right up to closing. So go along quietly, responsibly, like you always have, sign your papers, and then go change careers or buy a motorcycle.

First, some short-term fixes:

1. Correct errors in your report. Your credit score is based on the information in your credit reports, and like any other complicated collection of little facts, some of it will just be plain wrong. So look for errors on things like…

• negative items that don’t belong to you—late payments, charge-offs, collections
• credit limits reported lower than your actual limit
• accounts listed as anything other than “current” or “paid as agreed” that either aren’t yours or have been paid on time and in full.
• accounts listed as unpaid that were included in a bankruptcy
• negative items older than 7 years (10 for a bankruptcy)

2. Look for goodwill. Your lender might agree to erase that late payment if you’ve been an otherwise good customer. Requests like this need to be done in writing.

3. Dispute old items. Here you’re banking on the inefficiencies in a system. Credit bureaus will investigate your dispute over an old item—say, a collections account over a bill you thought was unfair. The smaller and older the account, the less likely it will be verified by the collection agency. Lenders that have merged with another company also run into tangles when tracking back on old records.

4. Check your credit card limits. Your scores might be artificially low if your lender is showing a lower limit than you’ve actually got. Most credit-card issuers will quickly update this information if you ask.

Longer-term fixes:

1. Pay down your credit cards. Paying off your installment loans (mortgage, auto, student, etc.) can help your scores, but not as dramatically as paying down — or paying off — revolving accounts such as credit cards. While most debt gurus recommend paying off the highest-rate card first, a better strategy here is to pay down the cards that are closest to their limits. Lenders like to see a big gap between the amount of credit you’re using and your available credit limits. Getting your balances below 30% of the credit limit on each card can really help.

2. Use your cards sparingly. Racking up big balances can hurt your scores, regardless of whether or not you pay your bills in full each month. What’s typically reported to the credit bureaus, and thus calculated into your scores, are the balances reported on your last statements. (That doesn’t mean paying off your balances each month isn’t financially smart — it is — just that the credit scores don’t care.)

4. Get out that old but still active card. The older your credit history, the better. But issuers may stop updating your activity if the card goes unused for too long. The accounts will still appear, but they won’t carry as much credit-scoring weight as your active accounts. Try making a small purchase every few months on these types of cards, being sure to pay it off in full each month.

3. Ask your lender to “re-age” your account. For example, if the account is still open, the lender might erase previous delinquencies if you make a series of 12 or so on-time payments.

And some DON’Ts:

1. Don’t ask a creditor to lower your credit limits. This will reduce the gap between your balances and available credit, which could hurt your scores.

2. Don’t make late payments. This is especially true if your score is healthy. In fact, the better the score, the bigger hit you’ll take for a late payment.

3. Don’t consolidate your accounts. Applying for a new account or transferring balances to a lower limit card can bring your scores down. Think smaller balances on a few cards (with higher limits), rather than a big balance on one.

4. Don’t apply for new credit if you already have plenty. Credit improves with age. At least that’s how credit reporting sees it.

So, to get that credit score up where you need it, you can take some steps today that may get you immediate results. You can also start putting into place some longer-term strategies and habits. Stick to the diet. You’ll be better off for it.

Article excerpt:

Senator Isakson believes lawmakers will eventually move to extend the credit in one form or another. “I don’t believe either this administration or the current leadership would look November 30 in the eye and let this thing die,” he says. White House spokesman Robert Gibbs said this week that the administration is evaluating the credit’s impact and will make a recommendation to the president, the Associated Press reported. The outlook for an extension appears to have brightened. Scott Talbott, a top lobbyist at the Financial Services Roundtable, put the odds of its extension at 50-50 earlier this week, but he said that the chances improved to 75-25 after Reid endorsed the six-month extension.

-Read the entire article here-

My two cents:

I am among what I hope is a growing number of people involved in the Real Estate Industry who are NOT in favor of the credit and “free money for some.”  The reality is that $8000 given to a relative few will cost all of us much more than the estimated $100 billion it will end up having cost the US Government when this is all said and done.

Thinking logically:

1.  The free market sets prices of homes.

2.  The government gives $8000 to some people who buy some homes.

3.  This has increased sales demand.

4.  Any increase in demand, while it exists, will always increase prices (or slow price declines).

5.  Next, the goverment does one of two things:

a)  Ends the credit at some point.  This will cause all housing values to drop by around $8000 more than they already are (even for those who just paid $8000 more for their home to get the credit). Or,

b)  Continues to give credits to some people who buy homes – forever.  This would be the only way to make sure that prices don’t adjust back to their former price; but then it would soon become “normal” and would no longer stimulate future home sales.

I think that (a.) will be their choice (at some point).

When the article says that they will be “evaluating the credit’s impact” they must be ignoring the greater impact of the total cost of the credit in their evaluation.  The cost is greater than just paying back the money.  The higher cost is the cost of entitling people.

Entitlement is something we’ve all felt already with respect to the credit already. After all, we think to ourselves:  “they can’t take that away now?!”.

The cost of entitlement is devastating and should be avoided at every turn.  Lets get it out of our thinking, out of our politicking, and out of our conversations with each other.  It will kill our ability to think clearly.

The Facts are these:

1.  Mid-Michigan is a great place to live and work.

2.  Home prices around here are making it very easy and attractive to own a home.

3.  There is a lot of expansion in the business, insurance, technology and education sectors that says we will be a growing region.

Whether or not the credit is extended, buying a home in Lansing right now is a very good idea for most people who are thinking about doing it.

One of the financial magazines I read weekly is Business Week. It can be a little bit politically charged, but depending on who’s writing the economics ‘short’, it can be very good.

This week’s is written by Peter Coy. Google his name and you’ll find him to be a bit pessimistic on the economic recovery and not quick to get on band wagons that others are riding. His is a level-headed report of the facts, and he doesn’t generally over play his theories. Just the kind of guy you want to hear good news from.

The article I’m referring to – linked here – will not disappoint you. It explains simply and clearly why Bernanke is so committed to a VERY low rate standard.

His reason in a nutshell:  The economy at large has a ton of excess capacity right now, which will take a long time work through. What do we mean by capacity? You see it practically as high unemployment and high inventory of homes on the market. Both examples are resources that are more plentiful, more in “supply” than we need. It will take a lot of economic growth just to work through what is already here and to use up this excess.

Another reason for extra capacity is the recent rise in productivity. The productivity numbers rose again this month, though they were expected to remain flat. So, not only do we have an excess in resources, we;re also getting more efficient at producing them. This will create slow growth in the economy, in Big Ben’s opinion, and support for his theory is growing.

Take five minutes and read the article. You might also consider who you know who might appreciate this information.

Some concluding thoughts:

WHAT IF BERNANKE IS RIGHT?
Then we’ll have slow economic growth and keep interest rates low for some years to come. We can live with this. Let’s be honest – putting our Lansing hat back on – we’ve been living with it for some years already. But here is where we might see light on the horizon – a bright spot. It may just be Mid-Michigan’s turn for moderate jobs growth. If this happens while the rest of the country (world) is lagging, then we could have both rising home values AND low rates. Let’s not be too much the ‘realists’ to think this couldn’t happen.

WHAT IF BERNANKE IS WRONG?
Then the economy at large heats up, rates rise sooner – not a lot, most likely, but sooner. AND our 401k’s rebound again. We can handle this too! Even if he’s wrong, 1982 inflation and rates are not a likely event based on the slow growth expectations.  At least not for a while.  Most of us who need a fixed rate will get one while they’re low and few will remain by the time anything wild happens.

WHY IS THIS IMPORTANT TO ME?
If you are buying a home or refinancing a mortgage right now, then you should still consider a fixed rate.  Mostly because they’re very low right now (see my blog 24/7 for daily averages).  If you are currently in an Adjustible Rate Mortgage, you should get some advice as to what to do.  Your rate will likely be very low for the next few years.  Let’s not allow fear or greed to dictate these decisions.  A good level-headed decision based on the facts of your situation and the realities of your goals is what is needed.

LAST THOUGHTS
Let’s also be very honest with ourselves. As “smart” as Mr. Bernanke is, he does not know or hold the future.  Only time will tell if his contributions were beneficial. He’s helping us navigate right now, and I am thankful for that, as am I thankful for all like him who are in positions of great weight and difficulty. I would urge us to remember the phrase written ON our money when we think ABOUT our money:  “IN GOD WE TRUST”.  After all, low rates, housing credits, and three shifts running at General Motors will all pass away in time.

Here’s just a sample of the latest:

• Single-housing starts for August are up 7% and it looks like they’ll post the first double-digit annualized gain after 13 straight double-digit declines, that’s quite a swing.

• Market home prices are up nationwide, somewhere between 2.7% and 7.3%, depending on whose numbers you trust (Freddie on the low side, Clear Capital on the high).

• The nearly record low rates last week boosted mortgage apps up by 17%.

• We’re enjoying 6 straight months of pending sales increases.  In Lansing, we’ve already closed as many transactions as we did all of last year.

• Consumer confidence ratings are up—and in all categories: current conditions and short-term outlook in both the economy and labor markets.

So the indicators that we’ve been watching so intently, so nervously over the past two years seem to be settling in to a healthy rhythm. And that’s good.

And though we may never be as complacent as we were a few years ago, that’s probably good too. In fact, maybe those were the dark days—when we thought nothing could go wrong…maybe. Either way, I’m ready for some sunshine.

I thought about these things when I got an email this week describing a sales technique banks are using with potential mortgage clients. In a nutshell, they’re arguing that if you originate your loan with a broker, there’s a very good chance you’ll have your closing delayed due to the re-disclosure provisions of Reg Z; whereas a bank, unhindered by such nuisances, can get you to closing quicker. Therefore—by this logic—banks are the better bet.

hmmm…This is clearly folly. So do I answer it? Or do I let it go?

At the risk of “being like him myself” and just adding to the noise, I’m going to answer it because there’s more to this than an argument between banker and broker. There’s also the client whom these rules are meant to protect.

As I pondered how to respond, my first thought was—naturally—defensive. After all, I’m a broker, and them are fightin words. But then I thought, hang on. Rather than turn this into a mud fight, this might actually be an open door for re-emphasizing how a good broker is still your client’s best option.

Let’s start with Reg Z. The re-disclosure piece to TIL (truth in lending) was intended to prevent the bait and switch. You know how it works. A client is informed early in the process about the rate and certain fees (the bait), but when she sits down at the closing table, lo and behold, they’ve changed, gotten bigger, multiplied even (the switch). Most people don’t walk away from the table at this point, and that’s why the practice has been so lucrative.

A couple of observations…

1.  The law was meant to protect consumers from a dishonest practice. So why originate a loan with someone exempt from it? The incentive to be as truthful as possible as early as possible on disclosure of all the costs involved lies not with the bank LO who’s exempt from this part of Reg Z, but on the broker whose livelihood depends on compliance with it. Your client has a stronger basis for trust with the one who has the stronger incentive for full disclosure.

2.  Brokers who used such practices were also those likely to push b-grade paper, and those guys are gone. If your broker has survived the shake-out of the industry, then you’re most likely dealing with someone who’s been doing things right and above-board. Banks haven’t experienced the same “refining” effect of the housing crisis that mortgage brokers have. And if such brokers have survived, there’s a good chance that they’re doing it as bank LOs.

A couple of strong arguments aside from Reg Z considerations…

1.  Speaking of survival, you might not realize just what keeping the doors open has entailed for me—and brokers like me—over the past few years. Those still standing went through something like this:

• 3 hour state-administered test on everything from calculating APR to TIL to past laws pertaining to the mortgage-lending industry
• An audit of accounting books, procedures, financial position, and a random audit of ALL files (closed and withdrawn) from the past 36 months
• A net worth requirement at all times of $70,000 liquid cash in a bank

…and no bank LO can say any of that. Don’t hear me wrong. There are good, conscientious loan officers working out of banks, but they simply haven’t proven their professional commitment to the industry in the same concrete, measurable ways.

2.  And this may get to the heart of the matter better than anything else–By definition a broker provides flexibility that a bank LO just can’t. When my client is declined a loan from Lender A, I find out why, look for a remedy, help my client make adjustments, and then move on to Lender B. And I can do the same for Lenders C,D,E,F,G,H…you get the idea. But a NO from the bank is a NO to that client. No loan, no mortgage, no house, not from us anyway.

I hope that you can hear in this, and in all of my letters and blog posts and emails, that this is not just a “job” for me. It has been and continues to be a crucial part of my life’s purpose. Bringing excellent advice, service and rates to the mortgage industry—as low as it has stooped in the past—is what I do. And I’m not going anywhere.

I’m no Solomon, but I do know the mortgage lending business. And while banks are promoting their Reg Z exemption as an advantage and calling it wisdom, a closer look shows such thinking for the folly that it really is.

Does that mean you should dump your home and rent? Not at all. In fact, if you’re renting now, this may be just the right time to cross over into home ownership.

Some things to consider:

1. Affordability. Prices are very low, but there’s good evidence out there that we’ve seen the bottom and are now starting back up. We may spend some time at this level, we may not, but it’s not likely that we’ll go any lower.

1. Rates have hit an all-time low in the past week. Again, we may be here (or very near it) for months. We may not. But no one’s expecting rates to go much lower.

1. Tax credits. Included in Obama’s stimulus plan is an $8,000 tax credit for first-time homebuyers. This is a credit, not a deduction like mortgage interest, so it represents real tax savings. The program is scheduled to end Dec. 1 of this year, and while it’s likely to be extended, there’s no guarantee of it.

1. Reality. You’re less likely to believe that buying home is an air-tight investment, and more likely to see it for what it is—a chance to own the house you live in, make it your own, grow deep roots, and then look forward (15 years? 30 years?) down the road to no more payments.

So while conventional wisdom may be going through a revision, there’s still plenty of good wisdom out there today that says home ownership is a good thing.

Let’s look over these latest stats and just breathe deep for a minute…

• Single-family starts and permits up. The most depressed segment of the real-estate industry over the past two years, homebuilders, are pulling permits again. Single-family starts are up almost 2% and at the highest levels since last October. Permits for single-family construction are up 6%. That’s 6 of 7 monthly increases for 2009 (March showed a slight downturn).

• Mortgage apps jumped 4% for a 3^rd straight week of increases. The recent drop in rates should see this statistic holding.

• Pending home sales index shows an increase for the fifth consecutive month, the first such streak in six years. A still-glutted inventory will feed this trend for a while.

• NAR’s Housing Affordability Index has the Midwest at a whopping 188, down from an incredible 206 for last month. (The HAI is set against a value of 100, which means that a median-income family can exactly qualify for a mortgage on a median-priced, single-family home. A value of 200 means the same family could “afford” twice as much home.) We need to be careful with this one: affordability is being driven—the larger part of it, at least—by the record number of short sales and foreclosures. So it’s great for buyers, but not a great sign of overall economic health. Look for this one to slip back as the next indicator, home prices, improves…

• Home prices nationwide are on the rise. This is one economic indicator that everyone wants to see rebound as it’s our best sign that the market as a whole is on the mend. Great housing affordability is fine, but no business thrives by holding an indefinite fire sale.

So the encouraging news is beginning to show some consistency to it. And though we’re still being warned that we may bounce along at these levels for some time, still, there’s a sense that we can, at last, stop holding our breath.


home mortgage Lansing

If you’re buying a home or refinancing after July 30 of this year, things just got a little more complicated. But don’t worry—it’s all intended for your good. Broadly speaking, the Federal Reserve Board is trying to help you be better informed. Specifically, it hopes to:

• Improve the disclosure of your loan’s APR to better capture fees and settlement costs
• Require lenders to show how your APR compares to the average rate for borrowers with excellent credit
• Require lenders to provide final Truth in Lending Act disclosures so that you receive them at least three business days before loan closing
• Require lenders to show how much your monthly payments might increase for adjustable-rate mortgages
• Prohibit payments to a mortgage broker or a loan officer that are based on your loan’s interest rate or other terms
• Prohibit a mortgage broker or loan officer from “steering” you toward transactions that are not in your best interest in order to increase compensation

For you, the consumer, these are good protections. But keep that in mind when these protections come to you (primarily) in the form of processing-time requirements, some of which may try your patience…

1. Lenders must provide estimates of mortgage loan costs within 3 business days of the application. This is called early disclosure. No fees (except a reasonable fee for a credit report) may be collected before disclosure.
2. A 5-day period after application must elapse before appraisal costs can be collected.
3. A 7-day waiting period is required between early disclosure and closing.
4. An additional 3-day period must be added before closing if APR changes by more than an eighth of a percent.
5. A 4-day period is required between the day the appraisal is given to the borrower and closing.

It may look to you more inconvenient than it actually is. Many of these requirements overlap each other, so the process isn’t lengthened all that much. But if looks complicated, you’re right—it is. But your loan officer should know these ins and outs well (it’s in my best interest since I’m the one on the hook if I screw up).

Either way, it’s helpful to the whole process if you’re better informed on how the Feds are keeping you better informed.