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Warning! If you are serious about buying a home in 2010, you may not have much longer! With the recession of 2007-2009 fading into history, buyers are returning to the real estate market in droves. What most buyers don’t realize, however, are several forces working against them, which can make it difficult to find real bargains in the spring and summer. Here are the five main forces shaping the market earlier this year, and you’d better pay attention to them:
1. Under the provisions of a large stimulus package designed to support the housing market, the Fed has been buying mortgage securities for more than a year to maintain liquidity in the housing market, which has artificially kept rates at sub-5% levels. but supported the rates. , However, this portion of the stimulus ER expires by March, and it is already raising rates in anticipation of the program’s grand finale. What does this mean for the mortgage market? That means come March or April, you won’t find rates in the low or mid-5%. The general consensus of most economists and finance journalists is that by summer time we will have 6% mortgages. What does it mean to you? Get your loan approved and rate locked in by mid-February!
2. With “general market” demand for mortgage-backed securities still very low, lenders will tighten their underwriting guidelines even further. This was previewed in December of 2009, when after FNMA and Freddie all lenders raised credit score requirements for prime mortgages from 20 to 40 points, the FHA raised the minimum score from 595 to 620, and some Lenders set 640 as the minimum score for an FHA or any other government-backed loan. Over the summer, the credit system will probably tighten even further, as banks will have a much smaller market to sell their loans to, forcing them to pick only the cream of the crop borrowers. If you are not one of them, you may need at least 25-30% down, ratio less than 30% and 750 score to have any chance for a home loan.
3. Ignoring buyers, the government passed several new laws in the last two years, of course all under the highly publicized slogan of helping the consumer. In reality, these new laws practically eliminated a mortgage broker as a viable player in the market. The government accused brokers of pushing “creative” mortgage products onto uneducated consumers who could not afford to pay for them, although the reality is that brokers were simply selling products pushed by banks to the public! The truth is that brokers do not offer their products, brokers do not participate in bank board meetings that decide what financial products to offer to the public, brokers only sell what the public demands This. In 2006 brokers were responsible for 60% of all loans originated in this country, by the first quarter of 2010 – less than 5%! Why should you worry about this? Very simple: while enjoying practically unlimited access to trillions and trillions of your taxpayer dollars, banks have been able to eliminate the only serious market force that has kept their mortgage rates competitive over the past decade. With the brokers gone, all loan origination now goes to retail banks with their “friendly and knowledgeable” staff, who don’t give a rat if you buy their mortgage at 7% today or not because they’re backed by your savings deposits. There are overpaid salaries and unreasonable bank fees, and because your only option is to go to another bank’s retail branch, where you will face the same capriciousness and willingness to undercut rates as at the first branch. Consider this: Banks have quietly managed to monopolize a $10-15 trillion market, and their profit per loan (the spread between your mortgage rate and the current Fed rate, which is 0%) is the highest in history. Is. , Now, did you get a thank you postcard from the CEO of your bank last year for helping the banks by giving them some free money?
4. The home buyer tax credit program also ended in April. You must be in escrow by 30th April and escrow must be closed before June, which means in March/April we will see a rush of late comers, last minute buyers especially From trying to take advantage of the program and list of houses. There will be serious pressure from buyers in the 200-400K price range, as we saw in October and November of 2009, before it became known that the tax credit program would be extended. This time it’s different – there will be no more extensions. This was the last expansion, and those who missed the opportunity to take advantage of the event because there was no inventory in the market will try to buy something this time.
5. Traditionally, March is the first month of the official shopping season in San Diego. In my 10 year spreadsheet, March sales show an average of 30-50% increase over the number of sales closed in February of the same year! Trust me this year will be no different. However, those who wake up late and start shopping for a home in March will face very tough competition and will be forced to bid on properties which they will rate fairly, which will attract buyers. Will force him to increase his downpayment or be disappointed. And again finish on the edge.
The housing market has been battered to such an extent that even the most pessimistic are beginning to talk of a metamorphosis. Some people are still talking about some massive “shadow inventory” of homes that banks are supposed to avoid in order to avoid a market collapse and when it finally does, the market will collapse, however. , this thing has been going on since late 2008 and no one knows when and if this list will ever hit the market. Today banks can dump four or five times as much inventory on the market, where homes attract 10-30 offers in the first week, and buyers will just swallow them up and move on.
So, what should you do now to take advantage of this situation with what is left of the perfect bargain hunting season?
1. Pre-qualify your loan now, don’t wait for that tax refund to land in your bank account. If you need to borrow money from relatives for a downpayment, do it, you can pay it back with tax credit money, with your tax refund, or do their laundry for the next 30 years, but pay your loan in full Get the highest possible amount approved and make it available when you make the offer. No one takes your offers seriously today unless you can attach a solid loan approval with proof of funds for the downpayment.
2. Make sure you have a clear idea of what you are looking for and make sure it is realistic. Don’t ask your agent to send you everything from Bonsal to San Ysidro in the 100K to 800K range and expect to work with that agent. Sit down with your agent, outline the areas, types of properties you are targeting, maximum monthly payments including HOA, Mello Roos, property taxes, home insurance, utility bills and anything else that will become your monthly responsibility. Knowing what you want helps you get it four times faster!
3. Use technology to your advantage. There are many real estate websites that allow you to set up an automated search page and receive listings that match your criteria as soon as the listings come on the market, or with any other regularity of your choice. Automated tools like this allow you to have an “unfair advantage” over the majority of other non-tech-savvy buyers and realtors: If you’re the first to know about the listing, you have your advantage before everyone else. benefits to offer.
4. Make offers, more offers and some more offers! In most areas of San Diego in the sub-$300,000 price range you now get 20-30 offers before one is accepted, so be patient, but also be smart about it. Make offers on realistic listings where you have a better chance of getting your offer accepted. If you have an FHA loan, don’t go after an “investor flip” listing, the FHA will not allow this for 90 days after their original purchase date. Do not make offers on short sale listings, where the listing agent sends all offers to the lender and waits six months for the lender to accept an offer, turning the process into a long auction. If the REO listing broker insists on my buyer’s first born child, a DNA test and pre-approval by the lender of the listing broker’s choice, don’t subject yourself to a few REO listings before they’ll even look at your offer. (By the way, whenever the REO agent is asking for pre-approval by their lender, understand that this is done solely to facilitate a sales pitch by that lender, so report it to the California Department of Real Estate.) Complain, tell them you think this is against the spirit of the California AB957 “Buyer’s Choice Act” of 2009, especially if you already have your pre-approval from another lender! If you put in 20 offers on the REO listing So does this mean you get pre-approved by 20 lenders before you even know if your offer is going to be accepted? Sounds ridiculous, doesn’t it?)
5. Be creative! If you can’t get what you want directly, look for other ways to get the same result. Consider using a rehab loan to buy a fixer upper and make repairs, consider buying a smaller home and they add square footage to your desired home size, new construction, lease-options, seller carry-backs or Consider other creative ways to get by. at home. Get familiar with these creative strategies, they just might be your ticket to homeownership today.
This is not the time to procrastinate and wait for your April tax refund before buying a home. Act now, and take advantage of the past several months as the best time to buy a home in decades!
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