And the Beat Goes on…

Yes… We are still here! The market turmoil has created some casualties in big lending institutions – we have lost a few on our list!!! Our business remains in good health as the market changes. Buyers and sellers have changed considerably in the last year. Sellers are becoming frustrated and a little fearful ( Thankyou media!!!) and sometimes are in denial. Since we had such a run-up in prices over the last few years, the resulting correction was inevitable. The correction in the market as well the re-assessment of risk in the mortgage market, will actually help the market in the long run. Unfortunately, there are many who have got caught in the middle who will suffer greatly in the short run!!! Buyers are having a harder time financing homes with some of the more aggressive programs, such as high-leverage loans, option ARMS, etc. Programs are still out there but take a little longer to find, and guidelines have tightened considerably. Spec builders have been hard hit in particular and profits have dried up or even disappeared. The good news is that there are still loans available if they are willing to move into their spec homes for awhile. One option is to refinance into an option ARM. Option ARMS allow a minimum payment option every month that is usually around half of a regular 30 year amortizing loan payment, thus allowing a builder  to have less cash going out each month. This way they are able to ‘weather’ the storm and not lose property and or their credit!!! The flip side of this is that these loans can negatively amortize (if you make minimum payments), so the loan balance can grow substantially.  These loans usually offer up to 4 different payment options on every mortgage statement: A) Minimum payment , B) Interest only payment, C) Fully amortizing 30 year (principle & interest), and D) a 15 year amortizing payment. There also is another choice of making one of these payments plus an additional amount that you choose in order to have complete control of your equity. They are adjustable loans and can adjust monthly or have different periods of time that are fixed such as 3yr, 5yr, 7yr, etc. They are generally not well understood, and require a more financial savvy borrower (or loan officer who will explain fully how they work).

The flip side of the pain that some sellers are going through is the buying opportunities that abound now. There are so many great deals out there for a buyer who understands the market. Many buyers have been sitting on the fence for awhile, wary of falling prices and everything else the media shoves in our face! For the savvy buyer this is a fantastic time for deals, because they understand the real estate market has cycles, and buying after the market corrections leads to great profits. Real estate is and always has been a long-term investment. It may be a few years before we have another surge in prices but it’s coming, and there are some gems to be had right now.

Refinancing Dos & Donts

Here are some tips to avoid putting your financial future at risk!

 Do not wait too long!!! Lenders loan money based on risk. If you are getting into a bind and don’t feel secure, chances are good that lenders will feel the same about lending money to you! Seek professional help-a good mortgage broker can guide you in this.

Lenders look at many things to evaluate their risk.

#1 Credit Score-pretty obvious!

#2 Percentage of balances on your accounts relative to your limits-not so obvious. This can affect your score signifigantly!

#3 Liquid assets-they are mostly concerned with CASH in the bank

#4 Other assets- real estate, retirement accounts, stocks & bonds,etc.

#5 Income- your ability to repay debt

Do seek help- talk first to a dependable mortgage broker, before signing up for a ‘credit repair’ program. These tend to be expensive (this usually doesn’t help you get out of a financial bind!) and many lenders will not loan you money until you are completely done with the program. A mortgage broker should be able to show you how to raise your credit scores in most cases. If a mortgage broker can not help you, then it may be appropriate to do credit repair.

Do not get overwhelmed and sink into denial

Waiting for ’something to happen’ will surely end up with you losing your home, your credit or both, never mind your sanity!

As time goes by, so do your options . There are myriads of loan programs available to fit almost anyone-the sooner you decide to do something, the greater your options. Almost anyone can get a loan as we hear everyday in the advertising world! The real question is, how much are you willing to pay in interest??? The rates you pay are directly related to the risk the lender takes in loaning you the money.

Do periodically check your credit scores (all three of them). You can get 1 credit check per year without dinging your credit score. Your credit score is your financial report card-keep your scores up & you will be rewarded with great rates & programs! Remember also that sometimes your credit report will contain erroneous entries, and the credit bureaus are not quick to remove derogatory items. There are ways to fix this quickly, but it can be costly.

Do make payments on time and keep an eye on your balances and limits. Lenders like around 40% of your limits or less. If your balances are getting high, don’t continue charging or waiting!

Do not cut up your credit cards!!! Keeping your credit scores high entails actually using your credit cards and other accounts responsibly. If there is no use, lenders can not see if you are a good credit risk! Sometimes you can raise your score by actually opening another account, thereby lowering your balances relative to your limits. Everyone’s situation is different, and there are many variables involved, so try not to be your own doctor!!