President
SIRVA Mortgage
With the credit crunch tightening product guidelines, the down payment requirements have made a significant impact on qualifying for a loan. The no and zero down payment products have been eliminated; consumers that previously qualified for 5% down now qualify for 10% down.
Mr. Smith has a small amount of savings he could use for a down payment, not nearly the 10% down he was approved for at the beginning of his relocation.
As credit tightening continued, products like second mortgages and Home Equity Lines of Credit have been significantly reduced and in many cases eliminated from purchase transactions. These products would typically assist the buyer by providing combination loans (e.g. 80/10/10) piggybacked with a first lien loan as a way to decrease payments, avoid mortgage insurance and provide a lower Loan to Value on the first loan.
Private Mortgage Insurance is still a viable way to provide a less than 20% down payment loan, but mortgage insurance guidelines have also changed and now require higher credit scores and higher premiums. With the combination of falling home sale values decreasing the amount of money available for a down payment, higher down payment requirements, time constraints and more costly mortgage insurance—many transferees are left confused, frustrated and experiencing less satisfaction during the relocation.
Mr. Smith’s situation has a happy ending. He qualified for a 3% down payment with a FHA loan. The monthly payment and down payment requirements fit his budget and he was able to close on his new home on time.
His co-worker Mr. Jones completed a short sale on his home sale and faces other challenges we will discuss next time.
If you would like more information about FHA loans, you can call one of our loan counselors at 800.531.3837.
The question we left off with is when should I buy?
The answer, Now! I know that is the simple, easy answer, but it’s true. We have talked about rates continuing to be historically low and how there are plenty of products available in the mortgage market. So what is holding you back? Market timing? Are you trying to time the bottom of the market? If so, stop. Like guessing stocks, the bottom of the real estate market will be reported months after it happens.
There have been major price adjustments that have taken place in most markets. Are we at the bottom, maybe? For many, this is close enough to the bottom and the opportunity to buy smart is now. There are great deals out there. Foreclosures and forced sales have provided wonderful price discounts and incentives in all home value ranges. Incentives include, seller paid closing costs, reduced rate programs, airline miles, paid principal and interest payments, high definition television sets, builder upgrades and even automobiles.
The fact is housing has become more affordable and bargain prices and incentives have given many consumers an opportunity to be smart about buying. I think the time is now. What do you think?
Relocating employees face challenges other buyers don’t. We will explore those issues next.
We last left you with the question, “How would you, the great American consumer, buy that house?"
Even though there has been many changes in the real estate and mortgage market this past year, this is still a good time to buy a house. Home prices are starting to level off; interest rates continue to be low and financing is still available for most people, albeit different from what you may have experienced in previous years.
With all the changes to the lending criteria the past nine months, the conventional mortgage is still the preferred mortgage program and provides financing for the majority of home buyers, with a wide variety of products, solutions, rates and down payment options. Conventional financing allows choice and consumer confidence during this transitional time.
In high cost markets, typically served by jumbo mortgage products, many areas designated as high cost are eligible now for lower conforming interest rates thanks to a provision in the government stimulus package. This designation could save you hundreds of dollars off a monthly mortgage payment.
FHA financing has made a come back and is not your father’s FHA. The product’s qualifying and rates fit many consumers that may have been shut out of the conventional market due to down payment, credit or debt obligations. In addition, down payment grants are available through many sources to relieve down payment requirements. FHA products will grow substantially in acceptance and consideration this year.
For our veterans, VA financing is still abundantly available and can relieve many obstacles for veterans who want to purchase a home.
Despite all you have heard, most consumers have financing options available to them. Which leaves us with the question, with so many financing options to choose from, when should I buy?
A recording of The Fundamentals of Relocation Webinar session is now available. This session will provide a brief history of the industry, and a broad overview of the relocation process, including a review of the terms and concepts most common to relocation policy development and implementation. The discussion will include household goods and temporary living options, the home sale process based on IRS Revenue Rulings, and industry trends such as lump-sum benefits and high-cost area assistance.
View the Webinar
The last time we met, I posed the question, “with so many people buying houses over the last several years and the tightening of credit, who is left to buy a house?"
The answer…
You are. The great American consumer. You see--we can’t help ourselves, we must have more. Consumers are always looking for better, newer, larger. We must keep up with the Jones’s. Our spending has kept this economy rolling for 15 years. Through high interest rates, dot com bubbles, terrorist attacks, elections, even liquidity crunches--we keep spending. Our confidence may wane, but it never disappears.
Right now we wane. The news has not been good, we have turned cautious. We seem to be waiting on the sidelines for someone to tell us it is "OK" again. Let’s face it, real estate became too expensive. Prices got away from us and speculation took over. An adjustment was needed, and our free market responded. So have some patience. The market continues to flatten, as we see with residential investment spending declining for the first quarter 2008 approximately at the same rate as the fourth quarter of 2007, indicating that the rate of decline is leveling off. The Federal Reserve has dropped rates one last time to spark spending and to demonstrate confidence in the banking system, in an effort to say this bank crisis is behind us. Additionally, building permits actually increased in April. Soon the news services will start to say the worst is over and it is OK to come out and buy again. And you will. You will buy that house for sale, the great American consumer.
So now the question becomes how will you buy it?
fundamentals of relocation webinar
Thursday, May 22, 2008
1:00 p.m. EST (10:00 a.m. PT)
Speaker: David Barlow, SCRP, GMS, Senior Vice President, Client Support Services, SIRVA
Duration: One hour
This "relocation 101" webinar is designed for new relocation professionals, procurement managers and supply chain managers who would like an overview of relocation fundamentals, and for anyone who wants to stay current with the latest policy trends and best practices.
This session will provide a brief history of the industry, and a broad overview of the relocation process, including a review of the terms and concepts most common to relocation policy development and implementation. The discussion will include household goods and temporary living options, the home sale process based on IRS Revenue Rulings, and industry trends such as lump-sum benefits and high-cost area assistance.
Register at https://van.webex.com/van/j.php?ED=91994767&RG=1
Details for joining the session will be included in the registration confirmation e-mail
Seems for sale signs are everywhere. We all know it takes longer to sell a house now, added to this real estate slow down is tighter credit guidelines due to the “credit crunch." Loan programs that offered a wide range of financing solutions are gone, 100% financing products have disappeared. Several mortgage insurers are not insuring loans with less than 5% down. Jumbo loan rates are considerably higher than conforming loan rates driving mortgage payments for these loans out of reach. Speculators and investors have all run off, foreclosures are popping up everywhere with no end in sight. Daily, consumers are hit with news on falling real estate prices and declining markets that have driven reality and fear into the minds of consumers. Those that may want to buy up cannot afford to since they are in a zero or negative equity situation or due to the stormy economy do not have the confidence to buy.
With so many people buying houses over the last several years and the tightening of credit, who is left to buy a house?
I would be interested in your opinion, just click on the comment link below.
