Federal Reserve Chairman, Ben Bernanke expects rates to stay exceptionally low for an extended period.  Bernanke cited high unemployment, "subdued inflation trends & stable inflation expectations" as reasons for keeping federal funds rate near zero. 

This is good news for our spring and summer market.  Now is the time to think about getting your home ready to sell.  Buyers are still trying to take advantage of the first time home buyer tax credit.

Taken from the Wall Street Journal- November 24th 2009

Home resales leaped in October, rising far more than expected as a fat tax credit offset fears about joblessness.  Sales of existing homes increased by 10.1% to a 6.10 million annual rate from 5.54 million in September, the National Association of Realtors said Monday. Inventories kept shrinking. Prices fell, but the NAR said the decline was the smallest in more than a year. 

The 6.10-million rate was the highest since February 2007. Economists surveyed by Dow Jones Newswires expected a 2.3% increase in sales during October, to a rate of 5.70 million.

"Many buyers have been rushing to beat the deadline for the first-time buyer tax credit," NAR economist Lawrence Yun said.

Aside from the tax credit, low prices and mortgage rates have drawn in buyers, concerned as the U.S. unemployment rate climbed in October to 10.2%. The NAR reported the median price for an existing home last month was $173,100, down 7.1% from $186,400 in October 2008. The average 30-year mortgage rate was 4.95% in October, down from 5.06% in September, Freddie Mac data showed.

September sales rose 8.8% to 5.54 million; the NAR originally reported sales for that month jumped to 9.4%, to 5.57 million. Existing-home sales, year over year, were 23.5% higher last month than the level in October 2008.

The October surge in sales follows a very disappointing housing sector report last week showing U.S. construction tumbled in October to the lowest point in six months. A reason for the sharp, unexpected drop might have involved uncertainty over a government tax incentive for home buyers that had been due to lapse in November.

Congress extended the tax credit earlier this month through April, a move seen fueling sales and construction into the new year.

Inventories of previously owned homes decreased by 3.7% at the end of October to 3.57 million available for sale. That represented a 7.0-month supply at the current sales pace, compared to 8.0 in September.

Regionally, sales in October compared to September rose 11.6% in the Northeast, 14.4% in the Midwest, 12.7% in the South, and 1.6% in the West.

Of the 6.10 million in overall U.S. sales, 30% were distressed, which includes foreclosures. That compares to a range of 45% to 50% in months during late 2008 and early 2009.  (Bater, 2009, The Wall Street Journal)

Key points regarding short sales:

**Homeowners who owe more than their homes are worth don't automatically qualify for a short sale.

Here are a few things that will be required to proceed with a short sale.  The borrower will be asked to prepare a financial worksheet, a hardship letter, bank statements, paycheck stubs and tax returns.

There is a one page document that your Real Estate Broker can go through with you to determine if you are a candidate.

A homeowner does not need to be in default to consider a short sale.  Lenders may suggest a loan modification first.  If that is not possible, then the short sale comes in to play.

The biggest mistake homeowners make is waiting until they are 3 month or more behind in mortgage payments.  If you are in trouble, call your lender immediately.  Over 60% of homeowners who have been foreclosed upon, did not even contact their lender.

You may have heard statistics on short sales that are not encouraging.  As time progresses, more lenders are having a shorter turn around time.

A short sale effects your credit score for approximately 2 years and a foreclosure stays with you for 7 years.

Most importantly, call a Real Estate Broker who has experience in negotiating short sales.  They will be able to guide you through the process.

RE/MAX Ranked as Top Real Estate Franchise

National Survey Places RE/MAX Ahead of all Competitors

Denver, CO (Vocus/PRWEB ) October 21, 2009 -- RE/MAX International Inc. has joined the exclusive ranks of the most successful franchise chains in the world, after being named to the Franchise Times Top 200. RE/MAX made its debut in the number 12 position in the 2009 ranking, in front of all other real estate competitors, and in the company of such top franchises as McDonalds, 7-Eleven and Marriott Hotels.

"The RE/MAX Network continues to grow because we offer so much value to our franchise owners," says Margaret Kelly, CEO of RE/MAX International. "Global brand recognition, the industry's most extensive educational resources, and all the support our offices need to be productive and successful. We like to tell our owners, that at RE/MAX, you're in business for yourself, but not by yourself."
   
Since the beginning of 2009, nine countries have joined the RE/MAX Network and RE/MAX International has sold nearly 400 franchises worldwide. RE/MAX has an international presence in more than 70 countries, more than any of its competitors.
The Franchise Times honor is the second time this year that RE/MAX has been recognized in the franchise community. In January, RE/MAX was the highest ranked real estate franchise in Entrepreneur Magazine's 30th Annual "Franchise 500 Survey," a tribute the company has received in nine out of the last ten years.
   
RE/MAX has also been recognized as one of the "Top 25 Franchise Opportunities" by Hispanic Enterprise, and one of the "Top 50 Franchises for Minorities" by the National Minority Franchising Initiative.
And, in 2009, for the third year in a row, RE/MAX was ranked on the list of America's "Top 10 Military Spouse-Friendly Employers," according to Military Spouse Magazine.

The Franchise Times Top 200 is an annual financial snapshot of the 200 most successful U.S.-based franchise companies as measured by worldwide sales. The complete list of honorees appears in the October issue of Franchise Times.

For information on RE/MAX International visit: www.remax.com or www.joinremax.com
For more information on the Franchise Times Top 200, visit: www.franchisetimes.com

About RE/MAX International, Inc.:

RE/MAX was founded in 1973 by Dave and Gail Liniger. From a single office in Denver, Colorado, it has grown into a global network of nearly 100,000 Sales Associates in more than 70 countries, an international presence greater than any of its competitors.

RE/MAX has been honored as the leading real estate franchise for 9 of the last 10 years in the oldest and most respected ranking, "The Franchise 500 Survey," published by Entrepreneur Magazine.

Today, all the home listings in thousands of cities and towns can be found at www.remax.com, which is the most visited real estate franchise web site.
(ComScore, Jan.-June 2009; Compete.com, Feb. 2008-June 2009; Hitwise, Jan.-June 2009)

RE/MAX International is proud of its Premier Community Citizenship, which has raised over $100 million for deserving organizations like Susan G. Komen for the Cure, Children's Miracle Network and The Sentinels of Freedom Foundation.

Contact:
    
Shaun White
Vice President, Corporate Communications
RE/MAX International, Inc.
Direct 303-796-3405
shaunwhite (at) remax (dot) net

The RE/MAX Network continues to grow because we offer so much value to our franchise owners Global brand recognition, the industry's most extensive educational resources, and all the support our offices need to be productive and successful. We like to tell our owners, that at RE/MAX, you're in business for yourself, but not by yourself.

Everything you need to know about the $8000 Home Buyer Tax Credit!

http://www.youtube.com/watch?v=qeDp_w3oiqg

Mortgage rates hold steady

As investors try to assess the pace of economic recovery, interest rates are not moving much - and aren't expected to in the near term.

NEW YORK (CNNMoney.com) -- Home mortgage rates were nearly unchanged from the previous week as investors weigh better-than-expected corporate earnings against the record volume of debt the government is selling.

The average 30-year fixed mortgage edged up to 5.56% from 5.55% the week prior, and the 15-year fixed dipped to 4.88% from 4.89%, according to the weekly national survey from Bankrate.com.

Last week, mortgage rates were nearly unchanged, as well. "Mortgage rates remain range-bound as investors sort out uncertainty about the economy, corporate earnings, and the future path of interest rates," the report noted.

Mortgage rates move in tandem with Treasury yields. In particular, the 30-year fixed mortgage rate tracks the benchmark 10-year Treasury yield.

Investors tend to buy up Treasurys, or government debt, in times of economic uncertainty, or when Wall Street is struggling. Uncle Sam's debt is considered an ultra-safe investment. Meanwhile, when Wall Street is on a run, investors dump Treasurys for more attractive yielding investments.

The Treasury market is also being affected by the record volume of debt the government is selling to fund its stimulus efforts. The onslaught of supply pushes debt prices lower, which pulls yields higher. Bond prices and yields move in opposite directions.

In an effort to contain the rise in debt yields - and thereby mortgage rates as well - the government launched a debt buyback program. But analysts have argued that the program is not big enough to make a significant difference in rates.

"With the Treasury issuing large blocks of debt, investors are now seeking clarification on whether the Federal Reserve will extend the program of government debt buy backs to keep a lid on long-term interest rates including fixed mortgage rates," the report said.

Bankrate also conducts a forward-looking survey by asking a panel of mortgage experts to predicts which way the rates are headed over the next 30 to 45 days. The consensus is mixed: 38% say rates will fall, 31% say rates will rise, and 31% say rates will remain unchanged.

Even though mortgage rates have been climbing higher, they remain significantly below this time last year.

The average 30-year fixed mortgage rate was 6.7% at the same time last year, which means that a $200,000 loan would have had a monthly payment of $1,290.56. At the current rate of 5.56%, the monthly payment for the same loan would be $1,143.12, $147 less than last year.

Adjustable-rate mortgages were slightly higher, the report said, with the average 5-year ARM ticking up to 4.95% from 4.93% last week

Many people who are considering buying their first home can be overwhelmed by the myriad of financing options available. Fortunately, by taking the time to research the basics of property financing, homeowners can save a significant amount of time and money. Having some knowledge of the specific market where the property is located and whether it provides incentives to lenders may mean added financial perks for buyers. Buyers should also take a look at their own finances to ensure they are getting the mortgage that best suits their needs. Read on to find out which financing option may be right for you.

Loan Types
There are several mortgage loan types; these are differentiated by loan structure and the agencies that secure them.

1. Conventional Loans
   Conventional loans are fixed-rate mortgages that are not insured or guaranteed by the federal government. Although they are the most difficult to qualify for due to their requirements for criteria such as down payment, credit score and income, certain costs, such as private mortgage insurance, can be lower than with other guaranteed mortgages.
   
   Conventional loans are defined as either conforming loans or non-conforming loans. Conforming loans comply with the guidelines set forth by Fannie Mae or Freddie Mac. These stockholder-owned companies create guidelines, such as loan limits - $417,000 for single-family homes, for example - because they package these loans and sell securities on them in the secondary market. (To find out what happens to your mortgage in the secondary market, read Behind The Scenes Of Your Mortgage.)
   
   A loan made above this amount is known as a jumbo loan and usually carries a slightly higher interest rate because of the lower demand for loan pools with these loans in them. Non-conforming loans, usually provided by portfolio lenders, have guidelines that are set by the particular lending institution underwriting the loan.
   
   
2. FHA Loans
   The Federal Housing Administration (FHA), part of the U.S. Department of Housing and Urban Development, provides various mortgage loan programs. An FHA loan has lower down payment requirements and is easier to qualify for than a conventional loan. FHA loans are excellent for first-time home buyers because in addition to lower upfront loan costs and looser credit requirements, they allow down payments of as low as 3%. FHA loans cannot exceed the statutory limit. (For more on this type of loan, see Insuring Federal Housing Authority Mortgages.)
   
   
3. VA Loans
   The U.S. Department of Veterans Affairs (VA) guarantees VA loans. The VA does not make loans itself, but guarantees mortgages made by qualified lenders. These guarantees allow veterans and service people to obtain home loans with favorable terms, usually without a down payment, and in most cases they are easier to qualify for than conventional loans. Lenders generally limit the maximum VA loan ($417,000 in 2008, $625,000 in Hawaii, Alaska, Guam and the U.S. Virgin Islands). Before applying for a loan, request eligibility from the VA. If you are accepted, the VA will issue a certificate of eligibility to be used in applying for a VA loan.
   
   In addition to these common loan types and programs, there are programs sponsored by state and local governments and agencies, often with the goal of increasing investment or home ownership in certain areas. (For further reading, see Shopping For A Mortgage.)

Equity and Income Requirements
The pricing of home mortgage loans is determined by the lender in two ways, each of which determines the creditworthiness of the borrower. In addition to checking the borrower's FICO score from the three major credit bureaus, lenders will require information to determine two standard statistics, which are used to set the rate charged on the loan. These two statistics are the loan to value ratio (LTV) and the debt-service coverage ratio (DSCR)..

LTV is determined by the amount of actual or implied equity that is available in the collateral being borrowed against. For home purchases, LTV is determined by dividing the amount being borrowed by the purchase price of the home. The higher the LTV, the more expensive the loan will be because the lender believes there is a higher risk of default. The idea here is that the more money the borrower is putting at risk (in the form of a down payment), the less likely he or she is to default on the loan.

LTV also can contribute to loan costs by determining whether a borrower will be required to purchase private mortgage insurance (PMI). PMI insulates the lender from default by transferring a portion of the loan risk to a mortgage insurer. Most lenders will require PMI for any loan with an LTV greater than 80%, meaning any loan where the borrower will have less than 20% equity in the home. The cost of mortgage insurance and the way it is collected are usually determined by the amount being insured and the mortgage program being used to obtain the loan. (For more on PMI, read Six Reasons To Avoid Private Mortgage Insurance and Outsmart Private Mortgage Insurance.)

For the most part, mortgage insurance premiums are collected monthly with tax and property insurance escrows, and are supposed to be eliminated automatically after the loan has been paid down to a point where LTV is equal to or less than 78%. It may also be possible to cancel PMI once the home has appreciated enough in value to give the owner 20% equity and a set period of time has passed, such as two years. Some lenders, such as the FHA, will assess the mortgage insurance as a lump sum and capitalize it into the loan amount.

There are ways to avoid paying for PMI. One is not to borrow more than 80% of the property value when purchasing a home; the other is to use home equity financing or a second mortgage to obtain the funds needed above 80% LTV. There are many programs that allow for this, but the most common is called an 80-10-10 mortgage. The 80 stands for the LTV of the first mortgage, the first 10 stands for the LTV of the second mortgage, and the third 10 represents the equity the borrower has in the home. Although the rate on the second mortgage will be higher than the rate on the first, on a blended basis it should not be much higher than the rate of a 90% LTV loan and for most people it will be cheaper than paying for PMI.

This is an exceptional alternative for borrowers who wish to pay off their homes early because they can accelerate the payment of the second mortgage and eliminate that portion of the debt quickly. As a rule of thumb, PMI should be avoided if at all possible because it is a cost that has no benefit to the borrower.

The debt service coverage ratio (DSCR) determines a borrower's ability to pay the cost of the mortgage. By dividing a borrower's monthly net income available to pay mortgage costs by the mortgage costs, lenders can assess the probability that a borrower will default on the mortgage note. Most lenders will require DSCRs of greater than one. The greater the ratio, the greater the probability that a borrower will be able to cover borrowing costs and the less risk the lender takes on. The greater the DSCR, the more likely a lender will negotiate the loan rate because even at a lower rate, the lender receives a better risk-adjusted return. For this reason, borrowers should try to find any type of qualifying income they can when negotiating with a mortgage lender. Sometimes an extra part-time job or other income-generating business can make the difference between qualifying or not qualifying for a loan or receiving the best possible rate.

Fixed vs. Floating Rate Mortgages
Another thing to consider when shopping for a mortgage is whether to obtain a fixed-rate or floating-rate mortgage. A fixed-rate mortgage is one where the rate does not change for the entire period of the loan. The obvious benefit of getting a fixed-rate loan is that the borrower knows what the monthly loan costs will be for the entire loan period. However, a floating-rate mortgage, such as an interest-only mortgage or an adjustable-rate mortgage (ARM), is designed to assist first-time home buyers or people who expect their incomes to rise substantially over the loan period. (To learn more, see Mortgages:Fixed-Rate Versus Adjustable-Rate.)

Floating-rate loans usually allow borrowers to obtain lower introductory rates during the initial few years of the loan, allowing them to qualify for a larger loan than if they had tried to get a more expensive fixed-rate loan. Although the benefit can be great, these loans entail a substantial risk for those borrowers whose income does not grow in step with the change in interest rate. The other downside is that in most cases, the rate change is not known at the outset of the loan because it is usually pegged to some market rate that is determined in the future.

The most common types of ARMs are a one, five or seven-year ARM. The initial interest rate is normally fixed for a period of time after which it is reset periodically, often every month. Once an ARM resets, it adjusts to the market rate, usually by adding some predetermined spread (percentage) to the prevailing Treasury rate. Although most ARMs by contract can only increase by so much, when an ARM adjusts, it can end up being more expensive than the prevailing fixed rate mortgage loan to compensate the lender for having offered a lower rate during the introductory period. (To learn more about the risks involved with adjustable-rate mortgages, read ARMed And Dangerous.)


Interest-only loans are a type of ARM in which the borrower is responsible for only paying mortgage interest and not principal during the introductory period until the loan reverts to a fixed, principal-paying loan. Such loans can be very advantageous for first-time borrowers because only paying interest significantly decreases the monthly cost of borrowing and will allow one to qualify for a much larger loan. However, because the borrower pays no principal during the initial period, the balance due on the loan does not change until the borrower begins to repay the principal.

Borrowers must weigh the benefit of obtaining a larger loan with the risk. Interest rates typically float during the interest-only period and will often adjust in reaction to changes in market interest rates. Borrowers also have to contend with the risk that their disposable income won't rise along with the possible increase in borrowing costs. (Interest-only loans can be beneficial, but for many borrowers they represent a trap. Read Interest-Only Mortgages: Home Free Or Homeless?)


Conclusion
If you're looking to find a home mortgage for the first time, there are a few things that can be done to reduce the difficulty of sorting through all the financing options. The best approach is to put some time into deciding how much home you can actually afford and then finance accordingly. Homeowners who can afford to put a substantial amount down or who have enough income to create a high coverage rate will have the most negotiating power with lenders and the most financing options. Those who push for the largest loan will undoubtedly receive a higher risk-adjusted rate and then may have to deal with adjustable-rate mortgages and private mortgage insurance. A good mortgage broker or mortgage banker should be able to help steer you through all the different programs and options, but nothing will serve you better than knowing what you want and what you can ultimately live with.

I'm often asked if this is a good time to buy a home. Some clients are concerned that home prices may fall further than they have already. They are assuming that the best course of action is to wait for the bottom in the market and then buy. The problem with this approach is that you don't know where the bottom is until you see it in the rear view mirror, meaning until you've missed it!

Home prices are one factor in determining your cost of ownership, but so are interest rates and financing availability. Even though interest rates have gone up in the last six months, they are still near historic lows. Since your monthly mortgage payment is a combination of paying down your principal and paying the interest owed, if home prices come down a little further but interest rates go up, it could cost you even more to service a mortgage on an identical home!

While a home is a major investment, it is also the center of your personal life. It's important to live in a home that reflects your taste and values, yet is within your financial "comfort zone." To that end, it may be more important to lock in today's relatively low interest rates and low home prices, rather than to hope for a further break in prices in the future.

Please give me a call if I can be of any assistance in determining how much home you can afford in today's market.