Westlake Village Real Estate Blog

Archive for the ‘Market Update’ Category

Refinancing? Don’t forgot about the appraisal! Just like home buyers, appraisers are human. Here’s a great article from the Wall Street Journal giving tips to help solidify the appraisaed value of your home:

Ten Tips for High Value Home Appraisals

And, of course, the same advice goes for appraisals when you are a home seller.

The latest government initiative will allown some hoemowners to refinance their mortgages even if they are “upside down.” The program applies to homeowners who have no late payments in the last six months and no more than one late payment in the last year. Sound to good to be true, and for many, it is. The mortgage must be held by either Fannie Mae or Freddie Mac, government entities that purchase loans (not FHA, by the way). To find out if your loan is owned by one of these federal entities (not the entity that receives your payments), go to Fannie Mae or Freddie Mac.

Don’t jump for joy yet, however. Even if you your loan is held by Fannie or Freddie, if you also have an equity line or a second trust deed, your chances for refinancing are not good unless you can pay off this second loan.

Many people think that if their mortgage balance equals or exceeds the market value of their home, they cannot get new financing. Actually, they may be wrong. If your loan is owned by one of the three big government entities – FHA, Fannie Mae or Freddie Mac – you might be eligible for a “streamline refi.” (Remember: these programs do not hold loans that are higher than $417,000 or $729,750, depending on when you got your loan.)

Questions to ask yourself: First of all, are you a mortgage holder in good standing? If you have never missed a payment, have excellent credit and the underlying owner of your loan is one of these government programs, you may be in good shape. If you have one of these loans plus a second trust deed, the task may be tougher or impossible.

What to do: Call your loan servicer – the company you make your payments to – and ask if Fannie, Freddie or FHA holds your loan. If so, ask to speak with the department that could discuss refinancing.

Next, ask if FHA, Fannie or Freddie is the underlying owner of your loan. You have a legal right to know this. If the answer is yes, discuss refinancing the loan. You cannot “shop’ the loan between servicers (again, the name of the company on the mortgage statement) but you may be able to do a streamline refinance without an appraisal.

What NOT to do: Do NOT ask for a loan modification if you want to find out about refinancing. These two departments don’t know what the other is doing, and the “loan mod” folks have no incentive to forward your inquiry. (In fact, they have very little incentive to process your loan modification, which explains why only some 1,350,000 loan modifications had been approved by March of last year.)

Botton line: A streamline refi is worth a try if you meet the basic criteria.

In accordance with the Housing and Economic Recovery Act of 2008, the “temporary” high-balance loan limits are set to expire on Sept. 30. The new “permanent” high-balance conforming loan limits for a single-family residence will be $625,500 in Los Angeles County and $598,000 in Ventura County. HUD has recently notified lenders that all loans using the old limits must be delivered and insured by the Sept 30 date. That means cut-off dates have been moved ahead. FHA loans must be submitted by July 15th and funded by Aug 15th. Conventional, Fannie Mae/Freddie Mac loans must be submitted by Aug. 1 and funded by Sept. 15.

For more information on how this will affect your home-purchasing power or the pool of buyer who can buy your home, please contact me.

Here are excerpts from articles published last week by two of the country’s iconic financial publications: The Wall Street Journal and Forbes Magazine.

The Wall Street Journal: Why It’s Time to Buy

“Despite all the gloom, there are growing indications that it is a good time to buy… The long-term benefits of homeownership remain very much intact. For now, at least, you can deduct the mortgage interest on your taxes-a big perk for people in higher tax brackets. You get to paint your walls any color you wish, without having to clear it with a landlord. And assuming you can buy a home for about the same price as you can rent one, buying will give you the ability one day to live rent-free. Come retirement time, a paid-off mortgage means your monthly expenses are significantly reduced, and you have a chunk of equity to play with.”

Forbes Magazine: 9 Reasons to Buy a House Now

“If you’re planning to buy a house right now, the next few months may be the best time to buy… With a convergence of the factors (mentioned in the article) all of which are favorable to the prospective home buyer, there may not be a better time to buy than right now. It’s a buyer’s market, but like everything else in life, the bargain deals won’t last.”

Bottom Line: When the Wall Street Journal and Forbes have articles saying now is the time to buy, maybe it’s time to buy.

When it comes to deciding weather to buy vs. rent, most people make this decision by comparing monthly payments. If the rent payment would be cheaper than the payment on a home, many decide it would be cheaper to rent. This approach, however, fails to take into account a number of other factors:

• In purchasing a home with today’s low 30-yr fixed rate, you are locking in a permanent monthly payment for 30 years. In contrast, rent payments will increase with inflation. A rent payment of $1,000 today could be $1,125 in 5 years (using annual increases of 3%).

• After consulting their tax advisor, most home buyers can reduce their withholding taxes – based upon the deductibility of mortgage interest, property taxes and PMI. Renters have no such deductions.

• For each $100,000 in loan amount a home owner’s principal balance will have decreased $8,171 over 5 years (for example, a $300,000 loan will have decreased to $275,487 in 5 years). Couple that with property appreciation of 2% per year and you have increased your equity to $49,243 (and that is not even counting your down payment).

• Add to this the fact that the current hosuing market has caused purchase prices to decrease, and many homeowners have had to sell in dsitress and then find a rental home. This has created higher demand for rentals coupled with a higher rate of home affordability.

While renting has traditionally been more affordable than buying, when you look at the supply and demand factors above and add the missed opportunity for appreciation and higher quality of life that homeownership brings, homeownership makes more and more sense.

Sources: Bronwyn Stanisch, Prospect Mortgage, and Economic Focus, 2/28/11.