Should I Wait for House Prices to Drop?

A question that many buyers have been asking is whether they should buy a house now, or wait until prices drop.

Guest blogger, George Kennedy, of Wells Fargo Home Mortgage, offers some thoughts in his post.

Should I wait for prices to drop?

The question should not be whether or not house prices will fall, but whether your purchasing power will fall. A slight increase in interest rates can cost you tens of thousands of dollars on the life of your loan.

Take a look at the following example. A $250,000 loan at today’s 30 year fixed interest rate of 4.75% will have a monthly payment of $1,304. If the interest rate should rise to 5.5%, the same $250,000 house will have a monthly payment of $1,419. That is an increase of $115 per month. Over the life of a 30 year loan that is nearly $42,000.

So, the real question to ask is this….Do I think it is more likely for that house to drop in price $42,000 or that interest rates will rise by .75%?

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Thank you, George! Contact me for more information on Baltimore house values, and what an increase in interest rate versus a lower price can mean for you.

Two Week Foreclosure Freeze

Fannie Mae and Freddie Mac are freezing foreclosure proceedings on homes from December 20, 2010-January 3, 2011 in an attempt to join in the holiday spirit for those who will lose their homes.

What they will prevent is people being evicted from their homes during this time period, hopefully allowing families to spend one last one together in them.

CNNMoney.com also interviewed Bank of America executives, who state that this is a practice they tend to follow each holiday season. Wells Fargo and JP Morgan Chase do as well. According to the article,

With the number of bank repossessions amounting to around 100,000 a month recently, the temporary reprieve could affect tens of thousands of borrowers in default.

That is a large number of people who could possibly have more time together.

The eviction process is the last step in the foreclosure process where the house has already been either sold at auction or been repossessed by the bank. The occupants of the house must either leave on their own at that point or face eviction.

So, a number of residents in foreclosure will get a few more weeks to breathe.

If you are facing foreclosure in Baltimore, please contact me. There may be other alternatives!

Two More Good Reasons that Now is a Good Time to Buy a House

Yesterday, I posted the top three good reasons why now is a good time to buy a house from a publication from Keller Williams Realty International entitled “7 Reasons Why Now is a Great Time to Buy a Home” . Today, two more good reasons why a buyer should buy now!

To recap the top three reasons to buy a house:

1) Homes have never been more affordable.

2) Mortgage rates are at rock bottom and won’t stay there forever.

3) Prices are trending back up.

Numbers 4 & 5:

4) Sellers are Motivated. There are more houses on the market than there are buyers. This creates a ”Buyer’s Market”. This is where we are now in the Baltimore real estate market as well as the rest of the United States. Across the US, the average supply is 12.5 months, meaning that for all of the homes currently on the market, it would take over a year to sell them all. What does this mean for buyers? Sellers who need to sell, NEED TO SELL. They may take a reduced price, or give concessions to make their home stand out above the rest and get it sold faster.

Short sales and foreclosures have been adding to this mix, with 32% of home sales since the beginning of 2010 being distressed. So many sellers are making their homes nicer, with lower prices, to attract buyers to their homes. What buyers may have had to compromise on before, many don’t have to now!

5) Lenders are Back in the Game. After awhile of very strict lending standards, and some banks not lending at all, many are now reentering the purchase market. Standards are still strict, and much more documentation is required of buyers, but if you have steady income, decent credit, and can afford payments, banks most likely are going to give you a loan! My friends from both Wells Fargo Home Mortgage and First Mariner Bank tell me they have many more programs opening up to so many more buyers than even a month ago. This shows the confidence these lenders have in the marketplace!

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With the extremely low interest rates right now, low house prices and high number of homes on the market, plus these two important reasons of sellers being motivated and lenders more willing to lend money, now could be the best time possible to buy a house in Baltimore. Contact me and I will help!

Maryland New Power of Attorney Law October 1, 2010

Beginning October 1, 2010, a new Power of Attorney law will go into effect to protect those who live in the State of Maryland.

T Jeremy Loomis, of Wells Fargo, shared this information with me, and that the State of Maryland stated the purpose of this new law is an effort to “protect principals from misuse from various parties.  New specific statutory language will need to be included in all Maryland POAs.”

Jeremy also shared with me a sample new power of attorney that a title company partner sent to him.

My title company partner, David Kramer, who is an attorney and runs Castle Title, today said that one of the major differences is that the new power of attorneys (POA) needs two witnesses, one of whom can be the notary signing the document.

The good news is that he states that POA’s in effect prior to October 1, 2010 are grandfathered in with this law, so changes do not need to be made on those to be compliant. You will want to check with your attorney, or contact David to be certain as to whether yours would be grandfathered.

If you are buying or selling a home in Maryland, and must use a power of attorney for any reason, make sure you are aware of the new laws and verbiage that needs to be a part of settlement.

Contact me for more information about how to sell a home in Maryland with a power of attorney.

New Fannie Mae Credit Score and Debt Ratio Requirements for Conforming Loans

Beginning December 12, 2009, Fannie Mae will have new requirements on credit scores and debt ratios for all of their conventional loans.

Prior to this change, the lowest credit score a borrower could have for this type of loan was 580. The new lowest score is 620. This is not negotiable, even if you are putting 20% down!

The other change is that the maximum debt ratio for this same 20% down borrower cannot be more than 45% of their income in order to qualify for the loan. Again, this is not negotiable.

Fannie Mae is a government controlled finance company who provides many of the mortgages offered to buyers through lending institutions. Part of the reason that these new requirements cannot be changed is that it uses an automated system to qualify or reject, so it is not a human making those decisions.

Fannie Mae made these determinations after studying what types of borrowers have been most defaulting on their loans. In this Reuters article, spokesperson Brian Faith had this to say:

“Loans to people with credit scores below 620 fell seriously behind at a rate approximately nine times higher than other loans purchased in the same period, Fannie Mae spokesman Brian Faith said. Loans taken out by borrowers with lots of debt also suffer higher levels of serious delinquency, he said.”

So what does this mean for the Towson homebuyer? If you are getting a conventional loan, you must have at least a 620 credit score and only 45% debt-to-income ratio.

Please note this does NOT affect FHA home loans or loans not provided by Fannie Mae, though as T. Jeremy Loomis of Wells Fargo Home Mortgage notes, Freddie Mac tends to follow Fannie Mae’s policies very quickly, so he expects to see these changes come through there soon, with most other institutions following their lead.

I want to thank Jeremy for this information, as he provided this to a large group of REALTORS(R) in his Continuing Education Course at the Greater Baltimore Board of REALTORS(R) earlier this week. Please also note, many lending institutions have already instituted this new policy to be in compliance for loans closing after December 12, 2009.