Weekly Real Estate Update (May 8, 2009)

It's BOTH A Buyer's And Seller's Market!

If John Carlson Can't Sell Your Home, No One Can!

I have a very select group of realtors that I trust and work with in different areas of Southern California, and John Carlson of Prudential California Realty happens to be at the top of that list. Why? Not only is he consistently ranked in the Top 10% among Realtors in Santa Clarita Valley because he knows what the heck he's doing (after 20+ years in the biz, he's a seasoned pro), he doesn't pull any punches (he'll tell you you're crazy if you expect your homebuying or home selling experience to be a bed of roses in these times of stringent lending guidelines) and he treats people who work with him like family (he's like the incourigible uncle who has a neverending stash of corny one-liners and practical jokes.)

John has a major problem these days though. With the buyer's market being as hot as it is, he needs more listings. So if you're thinking of selling your home and you're in the Santa Clarita or San Fernando Valley area, give John a call. If he can't sell your home, no one else can!

Buy A Home Now Or Wait?

So, you're waiting to buy till prices drop, huh? Let me guess. Your brother's girlfriend's uncle's podiatrist's wife's half-brother who owns a home of his own told you that it's more prudent to wait till the end of the year because homes are going to be priced so low that you'll probably be able to snap them up at the 99 Cents store or Big Lots come Christmas time.

Hmmm. I would think that a prudent reason for not buying now, is if you don't qualify at the moment (either you're waiting for your bankruptcy discharge to reach its 2-year anniversary, still saving up for a down payment or had the misfortune of being laid off, etc.).

If you do qualify however, here's something to chew on: U.S. house prices unexpectedly advanced in January, according to a report from the Federal Housing and Finance Administration on Tuesday. The report showed a 1.7% month-over-month increase in U.S. house prices following a downwardly revised 0.2% decline in December.

The largest increase came in the South Atlantic region, reversing a sharp decline the month prior, where home prices were up 3.6%. In the East North Central region, prices were up 3.9%.
Only one region saw a decline in house prices - the Pacific, where prices were down 0.9%. House prices in the West South Central region were flat. On an annual basis, house prices are down 6.3% from January 2008.

But wait! Even in the Pacific (specifically California), where it did show a 0.9% decline, as far as our own neck o' the woods is concerned, in December, home sales jumped 55% in Santa Clarita and 78% in the San Fernando Valley.

When you're thinking, "Should I buy now or wait ?", you need to be aware that it's not just all about the home prices either. Unless you've got a bank account as fat as Brangelina's, if you're a first-time homebuyer, chances are, you need a little help in the down-payment-and-closing-costs department to close the deal.

I had clients who could have qualified to become homeowners back in 2008, and reap the tax benefits of homeownershi, but chose to wait. Well, here's just a few changes that happened while they were waiting:

• Those who didn't have enough down payment money could have availed of Down Payment Assistance Programs like Nehemiah, Ameridream and Cal-HFA before these went bye-bye in late 2008.
• The minimum down payment last year for an FHA loan was 3%. Today, it's 3.5%.
• Mortgage Insurance Premium last year cost 1.5% of the total loan amount upfront, and .5% every month. Today, it's 1.75% and .55%.
• Borrowers with scores below 580 still had a fighting chance to get an FHA loan last year. This year, most lenders are exercising their option of extending credit only to those with a credit score of 600 and above.
• Last year, someone whose debt-to-income ratios were over the 43% maximum for FHA loans could get an exception (even if their debt-to-income ratios were in the high 50's with compensating factors). This year, you'd be hard-pressed to find lenders giving exceptions to anyone who exceeds 50%.

Inspite of tightening lending guidelines, people are still buying homes because they know that the market's going to turn (It always has, and it always will.) What you buy for $250,000 now has a pretty good chance of earning a fair amount of equity over the next several years (when you buy at the lowest point in the market, and lock yourself into rates in the 4's and 5's, it's a no-brainer). John D. Rockefeller famously said, "The way to make money is to buy when blood is running in the streets." Unless you've been under a rock the last 18 months, the streets are stained crimson with short sales, foreclosures and sellers who are willing to bend over backwards on price negotiations.

My two-cents' worth is this: If you're thinking of selling in two years with the intent of making moolah, you either need to build yourself a time-travel pod and go back 2003 and stay there, or you need to put the crackpipe down. Odds are, you're going to end up with a loss. However, if you can afford to make the purchase now and you plan to be in the house for at least five years, buy now.

Can I still qualify for an FHA loan even if I don't have any credit history?

Neither the lack of credit history nor the borrower's decision not to use credit may be used as a basis for rejecting your loan application.

FHA recognizes that some prospective borrowers may not have an established credit history. The Federal Housing Administration (FHA) has long permitted mortgage lenders to establish a borrower s credit history through nontraditional means, including the compilation of performance on rental payments; utility bills; telephone and cellular phone services; cable television service; payments to local stores, etc. This practice is appropriate when the borrower has insufficient trade lines with Equifax, Experian, or TransUnion and a credit bureau score cannot be derived.

Mortgage lenders also may use nontraditional credit verification to augment thin-file credit reports where a credit score was generated but based on only a few trade lines.

However, nontraditional credit reports may not be used to enhance any poor credit history on a traditional credit report.

Stop This Homeowner Insanity Already!

IF YOU'RE ALREADY A HOMEOWNER...

... and you have a 30-year fixed rate (or even a 10-year fixed rate) and you have no intention of selling your home in the next five years, STOP WHINING ABOUT HOW YOUR HOME HAS GONE DOWN IN THE VALUE. Your rate ain't changing for a loooooong time, and even if your value has gone down, you're still going to be making the same payments you're making now, and if you're comfortable with those payments, I see no reason why you should be crying like a banshee.

IF YOU'RE A HOMEOWNER AND YOU DON'T HAVE ENOUGH EQUITY TO GET CASH OUT...
... it's not the end of the world. Live within your means, get a second job to pay for your needs and wants. Your house is NOT a giant ATM machine. It never was, to begin with.

IF YOU'RE A HOMEOWNER AND YOU DON'T QUALIFY FOR A REFINANCE TO LOWER YOUR RATE...
...don't walk out on your house just yet. You need to look into FHA loans first. If that doesn't work, have a loan modification company (I refer people to American Modification Agency, since they're the only one out there that's fully licensed and bonded, and approved by the three credit bureaus) work with your lender on making your payments more affordable. If that doesn't work, there are investors looking to buy your home (I work with a company that specializes in buying properties lickety-split). If all else fails, there are affordable litigation options that allow you to stay in your home for less than your current mortgage payments.

Stop This Homebuyer Insanity Already!

Aaaarghhh!!! Stop this insanity already!

This post may be a bit more blunt than what you're used to coming from me, but some things just have to be said.

IF YOU'RE A HOMEBUYER AND YOU DON'T HAVE MONEY FOR A DOWN PAYMENT...

... you're basically going to be SOOL (S**t Out Of Luck) come October 1st if you don't have a signed purchase contract and preapproval in place because seller-funded Down Payment Assistance is out the door on October 1st.

... keep your fingers crossed that they'll reinstate seller-funded down payment assistance programs but don't get your hopes up. It's better to err on the side of caution on this one. In the meantime, start looking toward your 401k, employer and family members for down payment assistance instead.

... just to put it into perspective, a 3.5% down payment on a $200,000 purchase is $7,000. At the very least, see if you can get your employer or family member to give you even half of that, and then go sell some stuff on eBay, or a garage sale, or get a part-time gig to come up with the rest.

... and you want to buy a single-family residence with a nice yard, WAKE UP! Unless the 'rents had the cha-ching to give you a brand-new, smokin' sportscar for your 16th birthday, your first vehicle probably wasn't a BMW either. If all you can afford the first time around is a condo or a townhome, deal with it. Chances are, owning your own condo unit or townhome is going to be a heck of a lot better than throwing your money away on rent every month. You can always buy a bigger, better home when your earnings catch up with your lifestyle wishes.

... keep in mind that before all the No Money Down loans happened, people did have to put at least 20% down. The straight-up No Money Down days are OVER!!!