Real Estate Tips

Mortgage Rescue Plan

President Barack Obama’s massive housing and mortgage industry rescue played to mixed reviews yesterday among a sampling of New Hampshire real estate and mortgage lending experts.

Getting the most early attention the day after the plan was unveiled was a provision that will allow homeowners whose homes are valued at less than their mortgage balances to refinance at lower interest rates. To qualify, the loans must be backed by Fannie Mae or Freddie Mac and mortgage balances must be no more than 105 percent of value of the property.

A current rule of the two government-sponsored entities requires equity to be at least 20 percent higher than the loan value before a mortgage can be refinanced. That provision would be lifted.

Kurt Strandson, president of Radiant Mortgage, Inc., of Hooksett, said the new provision “leaves out a lot of people,” especially when closing costs and escrowed money is included in the loan principle.

Overall, said Strandson, while details will not be revealed until March 4, “I have not seen anything in it so far that really sticks out as a means to help the amount of people that it was speculated to have accomplished.”

Real estate broker Karen Coulters of Weare said further loosening of current rules to allow refinancing for mortgages that exceed 105 percent of property values would be “dangerous.” She said “a lot of people who are in a good position” could say, “Why don’t I just default on mine because if people are getting a break, then why am I making my payments on time?”

On the other hand, Coulters and Realtor Paul Sargeant of Bedford wondered if the overall plan could in some cases use taxpayer money to artificially prop up homeowners who could not afford their homes in the first place.

“There is some truth to that,” Coulters said, adding however, “I want people to stay in their homes and I want them to get as much help as they can get to prevent them from being out of their homes.”

“I do want us to be careful,” said Sargeant. “I don’t want to put off the inevitable as far as these folks who may be in trouble. If they are in trouble, are they in trouble because they lost a job or because they got in over their heads?”

Quentin Keefe, president of Regency Mortgage Corp. of Manchester said the plan is on target.

“It would be great to be able to help everybody” by broadening the refinancing limits, he said, “but we’re already starting to complain in this country about the amount of money being spent. This one initiative is $75 billion. Where do you have to go? Where do you stop?”

According to The New York Times, the Obama plan could ultimately cost taxpayers $275 billion. There is $75 billion in direct spending to prop up teetering mortgages in an attempt to keep people in their homes and about $200 billion in additional financial backing for Fannie Mae and Freddie Mac.

“My initial reaction is all in all, I like it,” Keefe said. “The key to turning this economy around is housing. We need to stabilize values and I think this will begin to do that.”

He said the plan will at least partially “stem the foreclosure problem, which will do nothing but help.”

Keefe said that by refinancing loans at lower rates, “if we can bring these people’s rates down and free up $100 or $200 a month in real cash flow to them, they are going to go out and spend it.”

Sargeant, general manager of Better Homes and Gardens/The Masiello Group of Bedford and president of the New Hampshire Realtors Association, added, “Any time that we can avoid somebody going into foreclosure, it’s probably a good thing.”

He said that the new plan, combined with the stimulus package and its provision for a $8,000 tax credit for first-time home buyers, “is going in the right direction. It’s a good start.

“Despite all this bad news,” said Sargeant, “this still is a great time to buy. Prices are down, inventory levels are there, financing is good, the rates are very good. Tough times sometimes create opportunities for others.

“But there are those who genuinely need the help. And we have to humanize it a little bit, too,” he said. “A foreclosure is a tremendously emotional process and a huge disruption for a family.”

Strandson said he was also concerned that the plan does not increase Fannie Mae, Freddie Mac and Federal Housing Administration loan limits, which were extended in mid-2008 but returned to their traditional lower levels on Jan. 1.

“Why wouldn’t they extend those loan limits?” he asked. “That doesn’t help stimulate the housing market. That hurts it.”

Strandson said the plan also “does not address the ability for servicers or investors to help people in non-conforming and jumbo mortgages.

Making An Offer

Determining Your Offer Price

When you prepare an offer to purchase a home, you already know the seller’s asking price. But what price are you going to offer and how do you come up with that figure?

Determining your offer price is a three-step process. First, you look at recent sales of similar properties to come up with a price range. Then, you analyze additional data, such as the condition of the home, improvements made to the property, current market conditions, and the circumstances of the seller. This will help you settle on a price you think would be fair to pay for the home. Finally, depending on your negotiating style, you adjust your “fair” price and come up with what you want to put in your offer.

Comparable Sales

The first step in determining the price you are willing to offer is to look at the recent sales of similar homes. These are called “comparable sales.” Comparable sales are recent sales of homes that compare closely to the one you are looking to purchase. Specifically, you want to compare prices of homes that are similar in square footage, number of bedrooms and bathrooms, garage space, lot size, and type of construction.

If the home you are interested in is part of a tract of homes, then you will most likely find some exact model matches to compare against one another.

There are three main sources of information on comparable sales, all of which are easily accessed by a real estate agent. It is somewhat more difficult for the general public to access this data, and in some cases impossible. Two of the most obvious information sources are the public record and the Multiple Listing Service.

Having an experienced Real Estate Agent is key to determing what kind of offer will be accepted.

Home Buyers Tax Credit for 2009

There has been a lot of information in the news lately about the Home Buyer’s Tax Credit. There has also been a lot of information. Here are the basics of it:

• The tax credit is for first-time home buyers only.
• The tax credit does not have to be repaid.
• The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
• The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.
• Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

For prospective home buyers this means that if you buy a home this year you are going to get $8000 to help replenish your savings after making a down payment, or $8000 for home improvements (especially energy improvements which are also tax decuctible, more on that later), or $8000 for whatever else you decide you want to use it for.

This is an incredible incentive the government is making to stimulate the housing market, contact me to start looking for your first home today!

To see all the details please visit: http://www.federalhousingtaxcredit.com/