Archive for the 'Home Loans' category

...and interest rates and housing prices are rising!

The American Dream..."Baseball, Hot Dogs, Apple Pie and..."

Work hard, and have a family.  The government and banks will help you buy a home that's affordable.  Live a good wholesome life, retire and leave your debt-free home to your kids. 

The American Nightmare...

Work hard, and have a family.  Buy a home you may not be able to afford, then have your wages drop or worse - lose your job, and lose your home!  Then realize you will have little or nothing left to give to your kids when you're gone.

The tax law subsidizing home ownership has and does help us have and enjoy the American Dream, the 'Apple Pie'.  Now, some say we've had too much pie, that it costs too much, it 'makes us fat' or worse, it kills us...

Recent propsals to remove ingredients from our Great Americal Apple Pie Recipe would result in loss of a fixed rate mortgage and removal of the IRS tax deduction of mortgage interest and real estate taxes on your primary residence..both are no better than a plain baloney sandwich!

The Obama administration released a proposal this past Friday that would make major changes to the U.S. housing finance system; restructuring it to reduce its dependence on federal subsidies.  Fannie Mae, Freddie Mac, and the Federal Housing Administration currently finance more than 90% of mortgages. 

The plan is to slowly put Fannie and Freddie out of business by gradually reducing the value of the loans they can guarantee and raising the prices they charge lenders. Plans will also require larger down payments from borrowers. The Treasury secretary, Timmothy F. Geithner, has indicated he expects these changes to take 5-7 years to fully implement, stressing that the housing market will dictate how slowly or quickly the agencies close.

So do we have to dream a new dream?  Go on this kind of fiscal diet?  Will we ever eat Great American Apple Pie again? 

Don't worry!  Home ownership has been and should be the engine that helps drives this country.  History has shown that in the long run, property values increase. 

Housing, like many other businesses, is cyclical- and despite the fact that there have been some bad patches,  no one should change this system without either coming up with an alternative plan, or make changes over a long period of time and include some protections for certain situations/owners.  If not, housing will devalue once again, and this time, there will be many who will be "under water" who would not have been of these changes dp come about.  At best they may have to change their lifestyle, be locked into staying in their homes that they cannot afford and worse yet, they could lose their homes.  

We do not want to see people on the street trying to find the Great American "Apple Pie" that is no longer available to any of  us.

Here is more of what may be coming:

New York Time - Shockwaves on the housing market?  

FORTUNE - Earthquake, are we really capable of handling this change to the mortgage industry?

Earlier this year, renowned economist Karl E. Case wrote a summation of the housing crisis and the 'Great Recession' in the form of a poem called, 'Reflections on the Housing Market'.

Dr. Case is the Professor of Economics at Wellesley College, a Founding Partner of the real estate research firm Fiserv Case Shiller Weiss, Inc., and he also co-developed the Case-Shiller Home Price Index, which is the most widely referenced source of housing market prices in the U.S. today.  

Dr. Case was one of the economists that predicted the current collapse of the U.S. housing bubble.  In his poem below, he writes about the early indicators of the troubles to come, the crisis as it unfolded, the effects the collapse is still having today.

He closes the poem by acknowledging that markets will correct themselves in time, no matter what, and calls for politicians to work towards a solution to the problems created by the housing bubble collapse.       

Do you agree with Dr. Case's summation?  What do you think politicians can do to 'help find solutions'?  Share your thoughts in the comment section below.  

Reflections on the Housing Market
By Karl E. Case

"For the last few years, we have shed many tears
Living through a recession.
The economy's broke and it's not a joke,
When we talk of another depression.
Fifteen million without a job,
Foreclosures and banks that fail,
401K's became 201K's,
And everything's up for sale.

How can it be? What didn't we see
That led to all of this trouble?
There is little doubt that the proximal cause
Was a bursting housing bubble.
But other than that, who can we blame?
And what do they lament?
Millions of people contributed to
This hundred-year event."

Read the full poem by Chip Case.

The collapse of the housing bubble really emphasizes the importance of  investing in a home that has intrinsic value to you and to future buyers.  If you need help finding a Boston property you can feel confident in investing in, you can rely on the experience and knowledge of a Boston Realty Advisor to help you find the ideal Boston real estate to meet your needs.

Last night Boston Realty Advisors' CEO David Friedberg, lobbied Congressman Barney Frank for another housing tax credit program based on the success of the First-Time Buyer Tax Credit Programs of 2009!

He also talked about a new Boston property plan for HUD (Housing and Urban Development) similar to those from the early 70's which created housing for the moderate and poor while creating 1,000's of jobs for the Bay State.

 

Boston Realty Advisors is pleased to announce that Vivian Zottola has joined our team as a Residential Sales Associate, representing buyers and sellers.

Vivian has lived in Boston for over 20 years, giving her a great understanding of the city’s various neighborhoods and real estate market. She attended Suffolk University, receiving her undergraduate degree in Economics, and then received her graduate degree in Communications Management from Simmons College.  

•      Compare the rent vs. buy numbers
• Learn how to protect your interest
• Review the overall buying process
• Overview of Boston market trends
• Closing cost credit offer
• Complimentary pre-approval     

By Michael Ciavarini, Boston’s Certified Mortgage Planner

WASHINGTON DC - FHA like the banking sector, must also maintain capital ratios [reserves]. With the increased popularity of FHA in the absence of other alternative products they now insure about 30% of all new loans. FHA is nearing the limits of loans they can make based on their capital ratio [reserves]. In an effort to fix this problem, FHA will be raising their upfront mortgage insurance premium fees (UFMIP) from 1.75% to 2.25%. Additionally, they have requested approval for an increase in the monthly fee as well. They will also limit the high Loan-To-Value (LTV) financing to borrowers with a 580 credit score; a score under 580 will now require at least a 10% down payment (note: most lenders will not finance under a 620 FICO).

Definition

FHA - the Federal Housing Administration is not a bank. It is an insurance company that insures loans funded by the US Treasury. FHA is not a tax payer funder agency. It is self funded by the borrowers Up Front Mortgage Insurance Premium (UFMIP). What this article is saying is FHA needs to raise this figure if they are to insure more loans.

Ratios - what the article is referring to is the amount of reserves FHA has in relations to the amout of loans they are insuring.

Example

There are two types of Mortgage Insurance in play on every FHA loan.

1. UFMIP (Up-Front Mortgage Insurance Premium)

2. MIP (Mortgage Insurance Premium)

UFMIP is calculated currently as 1.75% times the base loan amount thus for a $350,000 loan the UFMIP is:

$350,000 * 1.75% = $6,125 which is at 4.875% $32.41 per month.

This amount can be paid in cash by you or the seller as a seller concession at closing or added to your base loan amount and financed as part of the loan as most do. Where does this money go you ask? To the United State Treasury to build reserves used to pay on defaulted FHA insured loans. This is FHA’s reserves. This premium is now going up 0.5% which in this example is:

$350,000 * 2.25% = $7,875 which is at 4.875% $41.68 a month

Thus the increase for this borrower is $1,750 or at 4.875% $9.27 a month. Increases are never a good thing but the impact to you the borrower is tolerable for the opportunity to put less down.

To offset the cost have your seller buy your rate down an eight of a point. Now the increase is free for you.

For information on how an FHA loan works or a seller concession give me a call and I will walk you through it.

Michael Ciavarini is a Certified Mortgage Planner for GuaranteedRate Inc.,  and a Radio Personality on Boston Money Matters talk shows. This strategy and his others have been featured on WBZ TV 4 News. Michael is a YouTubber, Blogger, Videographer and the creator of the V-PMP (Video-Personalized Mortgage Plan) which are revolutionizing the way Real Estate is presented, financed and sold. To view Michael’s videos visit his blog at http://BostonMortgagePlanner.com and subscribe to his RSS feed. 

Feel free to contact Michael at: mikec@bostonmortgageplanner.com, tel (617) 532-3972 preferred.

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