Carol Phillips Keller Williams Real Estate Consultant

What's In the Foreclosure Prevention Plan

2009-02-21T14:01:00.001-05:00

The Obama administration recently released its long-awaited plan to stem foreclosures. It's organized into three categories:

1.) Help for home owners making their payments but at risk of default and foreclosure. Home owners with a Fannie Mae or Freddie Mac loan would be eligible to refinance as long as their mortgage doesn't exceed 105 percent of the home's current market value. Currently owners need to have at least 20 percent equity. Potential impact: 4-5 million households.

2.) Help for home owners already in default and in need of loan modification. For lenders that voluntarily agree to lower a borrower's payment so that it makes up no more than 38 percent of the borrower's income, the government would share the cost of lowering the mortgage burden to 31 percent of income. Incentives to lenders to participate include a $1,000 payment. Borrowers can receive up to $1,000 as an incentive to stay current on their new mortgage. Still in the works is a proposed provision that would allow bankruptcy judges to require loan modification (known as a cramdown) as part of a household's restructuring. That provision requires legislation by Congress. Estimated potential impact: 3-4 million households.

3.) Doubled resources to Fannie Mae and Freddie Mac. To encourage investors to buy the secondary market companies' mortgage-backed securities, the government explicitly backstops them to up to $400 billion, twice the current amount.The plan does not provide help to investors or to home owners who are in trouble with a second home, nor does it apply to homeowners whose mortgage is part of a private-label mortgage security that is not backed by Fannie Mae or Freddie Mac.

Hopefully the administration's proposed plan, combined with provisions like the $8,000 first-time home buyer tax credit in the just-enacted American Recovery and Reinvestment Act, will help minimize foreclosures, shrink housing inventory, stabilize home values, and move the country closer to an economic recovery.

Source: REALTOR® Magazine Online

US Foreclosures Reported Down 26%

2009-02-11T10:29:00.000-05:00

Foreclosures across the U.S. fell sharply in January from a month earlier, with many of the hardest-hit states seeing big drops in the number of homes repossessed by lenders, according to foreclosure-listing service ForeclosureS.com.
"Efforts last year by government and industry to lay the groundwork for housing recovery finally are yielding the hoped-for slowdown in the foreclosure hemorrhage," said ForeclosureS.com President Alexis McGee. She noted Fannie Mae (FNM) and Freddie Mac's (FRE) foreclosure moratorium before the holidays, big lenders striving to amend loans and states taking steps to slow foreclosures.
The drop from December comes despite rapidly rising unemployment and continued tightness in the credit markets, which makes it tough for consumers to refinance existing loans.
The U.S. Foreclosure Index fell 26% in January to 72,694, the lowest number of completed foreclosures since April. Pre-foreclosure filings, which are an indicator of future completed foreclosures, dropped 12% during the month.
California, which is considered the epicenter of the housing crisis and has been one of the hardest-hit markets, saw foreclosures drop 31% in January to their lowest level since December 2007. January's total was less than half of September's, when the state's index peaked and state legislature adopted a law to slow foreclosures.
Florida's foreclosures fell 22%, while Nevada's dropped 20%.
Texas and Michigan, which saw completed foreclosures drop 28% and 52%, respectively, nevertheless posted increases in pre-foreclosure filings during January.
Last week, the National Association of Realtors reported its index for pending home sales posted a surprise gain in December, a further sign that property is moving in distressed markets. But high inventories are forcing prices lower, and falling prices are discouraging purchases.

Five Reasons to Buy a Home This Year

2009-02-09T19:27:00.001-05:00

Courtesy of Amy Hoak and MarketWatch.com

People are afraid to buy a home in times like these, with the economy tanking and home prices continuing to fall. But if you're brave enough to stray from the herd, you might be in for the home-buying opportunity of a lifetime.
Ask for price reductions, improvements, closing costs -- whatever -- and the seller, desperately trying to get a contract, is very likely to work with you, said Jay Papasan, one of the authors of the book "Your First Home." When the market starts improving, your negotiating power starts to diminish, he added.
"People can get a lot of what they need and almost all of what they want today," Papasan said. "Once a few people get off the fence, there's safety in numbers and you lose your leverage."
If you're qualified to buy a home now, the purchase makes sense for your situation and you're prepared to live in that home for at least five years, there are five reasons why you may be headed for a great deal:

1. Affordability is better than ever

According to the National Association of Realtors' housing affordability index, homes were more affordable in December than at any other point since the group started the index in 1970. The affordability index is a measure of the relationship between home prices, mortgage interest rates and family income.
John and Julie Chilman, for example, recently have been able to stretch their dollars in the Las Vegas area. The listing price for the five-bedroom home they're buying was $265,000; they offered $250,000.
"Our Realtor was like 'Yeah, pipe dream. Like they're going to take that,'" John Chilman said. "And all they did was counter $255,000... and they're paying all closing costs." The home had lingered on the market, and was listed for $310,000 just six months ago, he said.
In Las Vegas, prices have fallen 50.7% from their peak and are now where they were in the second quarter of 2002, according to data from Clear Capital, a real estate valuation and data provider for banks and investment firms.
Housing prices are down and mortgage rates remain low, but home buyers should be aware that they're in it for the long haul. MarketWatch's Amy Hoak reports. (Feb. 5)A report from Moody's Economy.com, released this week, predicted that house prices will stabilize by the end of this year, even though the Case-Shiller house price index will fall another 11% from the fourth quarter of 2008. By the end of the real-estate downturn, prices will have fallen by double digits, from peak to trough, in almost 62% of the nation's 381 metro areas, according to the report. In 10% of the areas, declines will be more than 30%.
Not all markets have experienced huge drops, however, so it's wise to take a look at how far prices have fallen in your area. The Office of Federal Housing Enterprise Oversight's Web site has a house price calculator that can help. Visit the calculator.

2. You have a large inventory to choose from

In many places it is taking months to sell a home, creating loads of inventory -- from new homes to existing homes to foreclosures. There was a 12.9-month supply of inventory in December given that month's sales pace, according to NAR.
A large selection gives buyers more choices and drives down prices. And home sellers have gotten the picture.
It's fair to say that home sellers have become "increasingly desperate," Papasan said. "People who have had for-sale signs in the yard for six months are starting to become in tune with the reality of the situation," he said. Buyers can take advantage.
But if you put off a purchase until inventory shrinks substantially, you might not get as good a price, said Eddie Fadel, author of the book "Don't Rent, Buy!" And be forewarned: It's nearly impossible to time the exact bottom of the housing market and even if you do there's no guarantee you'll make a killing.
"You buy for quality of life... don't buy on speculation," said Duane Andrews, CEO of Clear Capital. "I wouldn't buy a home expecting the housing market to rebound quickly in the next 10 years," he said, adding that he expects moderate gains in values when the turnaround does happen.
Historically, real estate appreciates about 5% a year over the long term, said Nancy Flint-Budde, a Salem, N.Y.-based certified financial planner. But as the country crawls out of a recession, many markets probably won't see huge home-price gains any time soon.

3. Builders are offering big discounts

Home builders are getting even more aggressive with their pricing.
In fact, Fadel recommends looking at completed new homes first because builders are offering such steep discounts. Plus, you'd have a warranty not only on the home itself, but also on the home's appliances, he said.
"[Builders] want to save their credit, save their brand, save their reputation and clear out inventory," he said. "They can go buy cheap land today with that cash."
His advice: Walk in with a preapproval for a mortgage, make an offer, then walk away without making a deal if you have to. Chances are, a builder will call back and reconsider that offer rather than let a potential buyer get away. Read more on the outlook for home builders in the spring sales season.

4. Mortgage rates are historically low

It's not just the price of the home that will affect affordability; mortgage terms will also affect your monthly payments. These days, rates are very attractive for conforming loans, those that can be purchased by mortgage agencies Fannie Mae and Freddie Mac. (The current limit is $417,000, although that can rise as high as $625,500 in high-cost markets.)
Earlier this year, rates on the popular 30-year fixed-rate mortgage hit a level not seen in decades, and rates have stayed relatively near that low for weeks. This week, the 30-year fixed-rate mortgage averaged 5.25%, according to Freddie Mac's weekly mortgage survey.
More mortgage help could also be on the way. Last week, President Obama said that his new economic plan, which Treasury Secretary Timothy Geithner is set to unveil Monday, would help lower the cost of mortgages for home buyers, although he did not give specifics.
But low rates don't mean lenders are handing out mortgages easily. You'll need good credit, a substantial down payment and a willingness to document your income in order to qualify for those great rates, if you can qualify at all.

5. You can get a federal tax credit

There's currently a federal credit of up to $7,500 for home buyers who haven't owned a home in at least three years. The credit needs to be paid back, although the repayment feature is removed in the economic stimulus plan that passed in the House of Representatives.
That extra cash will come in handy: The average first-time home buyer spends about $6,000 in the first six months of owning a home, said Flint-Budde.
The National Home Builders Association is pushing for more help for home buyers, including an even bigger tax credit -- the Senate in its version of the economic stimulus bill is proposing a $15,000 credit. And both NAHB and the National Association of Realtors want the incentive to help all buyers, not only those who are becoming homeowners for the first time.
Waiting for further federal developments, however, might sap a buyer's negotiating power, as more people get back into the market and competition returns, Fadel said.
"The more Washington gives, demand will increase," he said.

5 Real Estate Myths

2009-02-05T18:00:00.003-05:00

Barbara Corcoran recently appeared on the Today Show to explain the five biggest myths that are prevalent in the real estate market today.She makes some great points that fly in the face of the conventional wisdom we're hearing in the media right now. You can watch the video for the details, but Corcoran makes these points:

1. Sellers are not desperate.

2. You shouldn't bank on waiting for prices to stop falling before you buy. You will ultimately end up paying more in the long run.

3. It is, in fact, possible to get a mortgage with less than 20% down.

4. It's not a bad time to sell a house.

5. shopping around for a better mortgage rate when you refinance is probably not worth the aggravation.

Mortgage Options

2009-01-31T05:59:00.002-05:00

There are hundreds of mortgage products out there, so be sure to find the right one for your needs. Your lender will be the best person to help you assess your situation and help you with your financial strategy. Before you get prequalified, however, ask yourself these questions:
- What are my current monthly obligations and bill?
- How long do I plan to live in this house?
- Where do I see myself in five or ten years?
- Do I have to or want to make home improvements?
- Do I want to keep cash on hand for other investments?
- Can I take financial risks?
- Do I want to be debt-free?

Now that you have a reasonable picture of your financial philosophy, shop around and evaluate your options. Don't rush into the first loan offer you get. I can provide references of great loan officers I have worked with before, but feel free to look around!

If you don't like debt and risk, you may want to stick with conventional loans with fixed rates and shorter terms, making big down payments and extra principal payments whenever possible. If you go with a 30-year mortgage, you could refinance after 10 years. You could get a lower rate and dramatically reduce your principal balance in a shorter period.

If (and ONLY if) you can afford and feel comfortable taking financial risks, and have both the assets and credit score to back it up, you can get the best deals. Consider mortgage products that allow you to pay the least amount of cash while still satisfying your loan obligation. Consider these:
1. Choose a longer loan term, such as 30 years or more. The longer your amortization period, the lower your monthly payments would be, but the more interest you'd pay. If you borrow $100,000 at 8 percent interest over 30 years, you would pay $164,000 in interest along with the principal by the end of the term. Your mortgage payment would be $733 a month. A 15-year mortgage, in contrast, would require a $955 monthly payment.

2. Skip the down payment and go for an "80-20" loan. A standard loan funds the first 80 percent and a second loan with higher interest rates finances a 20 percent down payment. This option also gets rid of private mortgage insurance, or PMI, which is typically required for homes bought without 20 percent down payments. PMI protects the lender in the event that a borrower defaults on a loan.

3. Consider an adjustable rate mortgage (ARM) if you want to keep some cash or take advantage of a low interest rate. The rate is fixed for the first few years, then begins floating. But BE AWARE of market conditions - if rates rise, so do your payments. This option makes sense for serial relocators, who don't plan to be in a home for more than five years. A three or five-year ARM lets you make low payments and gets you through the typical mortgage cycle. If rates drop, you can refinance. If rates rise, you can sell. The number of times the rate is adjusted and the period between adjustments vary.

4. Interest-only mortgages also let you keep more cash. They do not require principal payments during an initial period, typically three, five or 10 years. After the initial period, borrowers must begin repaying principal over the remaining life of the loan. By comparison, a traditional amortizing loan requires principal and interest payments from day one, with more of the monthly payment going to interest in the early years and to principal in the later years.
Homeowners can lower their monthly payment by 20 percent to 25 percent by skipping principal payments in the early years, but they must be prepared for a big jump in payments when the interest-only period ends. A lower initial monthly payment may also allow you to qualify for a bigger home loan. The downside? When housing prices fall (as they recently did) you could end up owing more on your home than it's worth.

To qualify, you normally must have good credit or pay a slightly higher fee or interest rate.
Balloon payment mortgages are short-term, fixed rate loans which involve small payments for a certain time period and then one large payment (the balloon payment) for the remainder of the loan. If the home you want appraises for more than the sale price, you may be able to borrow up to that appraised value to cover closing costs.

Here are more tips for finding the right home loan:
- Use mortgage calculators and other tools that let you see exactly how much you'll have to pay under various scenarios.
- Shop for the best rates from both local banks and national lenders. Consider working with a mortgage broker.
- Decide if you're willing to pay for points to get a lower interest rate, or take a higher rate to keep closing costs down.
- Combine different loan features to create a loan that's comfortable for you.
- Factor in costs like property taxes, insurance and homeowner's association fees. Will your lender hold these in escrow?
- Ask about alternative loan terms, such as 20 years. They exist though many lenders don't advertise them.

Please let me know if you need any more specific information or need to get names of lenders to get your process started!

Real Estate Introduction

2009-01-27T17:04:00.000-05:00

As a real estate specialist in Northern Virginia, and fellow neighbor, I'd like to introduce myself. My name is Carol Phillips and I am one extraordinary real estate consultant.

If you've been thinking at all about any type of change in your housing situation, let me know. It can be moving up, downsizing, changing locations, renting, refinancing, etc. You name it, and I can help you! I can assist you with finding the best homes, best financing, and provide you with tips on creating value or selling your current home.

Feel free to call me at (571) 214-8449 or send me an email at carol.phillips@kw.com to start working with one of the best!