The Fed reiterated once again that their Mortgage Backed Security (MBS) purchase program…the program that has helped keep home loan rates low for much of the last year…will end on March 31, 2010 as previously stated. Here’s the lowdown on what this means, and all the latest news impacting home loan rates and the markets.

Last Wednesday during their regularly scheduled meeting of the Federal Open Market Committee, the Federal Reserve kept the Fed Funds Rate unchanged. But history has shown that when the Fed has left rates too low for an extended period of time, there is a price to be paid, via higher inflation. Yet if the accommodation is removed too early, it can derail an already fragile recovery. The Fed continues to walk this tightrope, trying to get it “just right.”

Along with this decision, the Fed emphasized and reminded that their MBS purchase program will still end on their already revised deadline date of March 31, 2010. Why is this significant? Let’s look at the numbers from last week to get an idea. The Fed purchased $16B in MBS in the latest week bringing the year-to-date total to $1.087T. This means there is $163B left to purchase before March 31, which in turn means the Fed will purchase about $11.5B on average each week through the end of the buying program. This is less than half of what the Fed was buying regularly throughout 2009 and a 1/3 less than what the Fed has been buying in recent weeks.

So why does this point to higher rates around the corner? When there is lots of supply and diminishing demand, the price of that item will subsequently go down – it’s Economics 101. So, when Bond prices start to decrease from the diminishing demand of the Fed’s purchases, home loan rates will naturally be likely to increase.

There is much give and take involved in negotiating a property purchase. That’s why it’s important to have a checklist of what you want to get out of the deal as a buyer. Bear in mind, the home must be appraised and the lender will be looking at the fair market value on a given property. Since property values fluctuate, your Real Estate Agent should do a comparative market analysis so you are aware of what the trends are for the area in which you are shopping. This will give you an idea as to whether the seller’s asking price is realistic. You will also want to know how long the property has been on the market, and if any price reductions have occurred during that time.

Make sure your Real Estate Agent is on the same page with you so he/she is able to represent you properly. You also want to know that you are working with an agent that is experienced in representing the buyer. Not all agents have the ability to provide strong representation for both a buyer and a seller. If you have not yet selected a Real Estate Agent to represent you, my team and I can provide you with contacts that have a proven track record of success with our clientele.

Remember a good deal is mutually beneficial.

The seller will also have a wish list of what they want out of the negotiation. Listen attentively to determine what their hot buttons are. You can use this information to leverage what you want out of the deal at some point along the way.

Find out if the seller has a deadline. Perhaps they have already purchased their new home, or have to relocate because of a commitment to a new employer. Find out what the seller’s current mortgage balance is and use this to your advantage.

On the other hand, if the seller wants to move because they can’t manage upkeep on the home, or don’t want to invest in repairs, these problems will be passed on to you. If you are prepared to go into a deal that involves a fixer-upper, there is an FHA financing program designed to provide funds for both purchase and repair. My team and I can provide you with more information on FHA loan programs and secondary financing.

You would also want to know if the seller is planning this move because there are problems in the neighborhood. Take a walking tour of the area and ask the residents what the neighborhood is like. You can also ask the local police department about the crime rate, or check the local newspaper for crime listings. Don’t be afraid to ask questions.

When the seller is intent on getting their way on a certain point, make sure you are getting something in return. Typically the built-in amenities such as the dishwasher and garbage disposal will stay with the home. You can negotiate other items in exchange for something that ranks high on the seller’s wish list. Be prepared to split the difference so everyone involved is satisfied with the negotiation. A win-win situation for both the buyer and the seller is critical to a smooth close.

Keep it simple and be direct, but above all, know that my team and I are here to assist you.

Call me directly for a free consultation

The Benefits of a Professional Consultant

Choosing the right lender is a key element to managing your mortgage. As a mortgage consultant, my goal is not just to provide you with a loan, but also to help select the one most beneficial to you and your long-term goals, and then, help you manage that debt over time. There are not many lenders out there who provide this type of personalized service.

My job is just beginning when your first loan closes. I will continuously monitor rates on your behalf, and stay in touch with you to make sure we remain on target with your financial goals.

Seek Pre-Approval

What’s the difference between pre-qualification and pre-approval?

Pre-qualification is the starting point in your search for mortgage financing. A quick snapshot is taken which includes income, existing debt, savings, length of employment, etc. All of these factors will then be analyzed to determine your loan eligibility.

Pre-approval is written documentation that shows you have the support of a lender who is willing to finance you. It means an underwriter has reviewed your loan application. Based on your income, debt ratio and savings, the underwriter provides the dollar amount you are eligible to borrow. Now you can shop around for houses that fit into that loan amount category.

Here is the nice thing about the pre-approval: It gives you the leverage to shop as a cash buyer! With a pre-approval in hand, you now have the power to negotiate. The seller will take your offer much more seriously knowing you are already approved by a lender. Pre-approval can also shorten the time it takes to close, making even a lower bid attractive to sellers who are seeking to move quickly.

What will my monthly payments be?

The amount of your monthly payment depends on what loan program you choose. We like to provide our clients with an easy-to-read spreadsheet that narrows their choices down and compares different loan programs that meet both current and long-term goals. You will have the opportunity to select a program you feel comfortable with before you make an offer on a home.

What does it cost to get pre-approved?

Pre-approval is FREE! You have absolutely nothing to lose and everything to gain.

Give us a call to begin your pre-approval process. We have a network of Real Estate professionals ready to provide you with excellent service!

Call me directly for a free consultation.

There’s been a lot of talk about extending the First Time Home Buyers Tax Credit lately.

Senate leaders released more details about their compromise on the home buyer tax credit today. Among other things, the deal would give the IRS more authority to spot cheaters in advance and set an $800,000 price limit on all homes eligible for the credit.

The existing $8,000 tax credit for first-time home buyers (meaning those who have not owned a home in the previous three years) expires after Nov. 30.

The compromise would extend the existing credit and create a new $6,500 credit for move-up buyers. Both types of buyers must sign a binding contract to purchase a new or existing primary residence between December 1, 2009 and April 30, 2010. Buyers would have until June 30 to close the deal.

Move-up buyers will be eligible if the home they are leaving has been their principal residence for five years or more.

The cost of the newly purchased home may not exceed $800,000 for new or move-up buyers. There is no partial credit for homes over $800,000, said Sen. Johnny Isakson, R-Ga.

The income limits for all buyers would rise to $125,000 for single returns and $225,000 for joint returns, up from $75,000 and $150,000 respectively, under the current program.

Isakson, one of the sponsors of the credit extension, whether $6,500 will motivate existing homeowners to go to the time and expense of buying a new home or whether it will simply reward people who would have moved anyway.

His answer: “We’ll find out.”

He said the rationale is for the move-up credit, since a move-up buyer purchases one home but vacates another, doing nothing to mop up excess inventory.

“The problem is not inventory,” said Isakson, a former real estate executive. “It’s that buyers are sitting on the sidelines.”

The move-up credit “makes two sales where there was none,” creating a “tremendous economic effect,” he said. “The timber, carpet, appliance industry, all of those people are affected when you have some vitality and robustness come back to the real estate market.”

Under the compromise, which Isakson said is being added as an amendement to a Senate bill extending unemployment insurance, buyers who purchase a qualifying home in 2010 would be able to claim the credit on their 2009 income tax return.

Home buyers would not have to repay the credit as long as they live in the home as their principal residence for at least 36 months. There is an exception to this rule for members of the Armed Forces, military intelligence or Foreign Service who are on qualified official extended duty. In addition, military personnel who have been deployed overseas for 90 days or more in 2008 or 2009 would have until April 30, 2011, to claim the home buyer tax credit.

The compromise also includes anti-fraud language that gives the Internal Revenue Service authority to do greater oversight during the processing of the return rather than waiting for an audit. The amendment requires the taxpayer claiming the credit to be 18 or older and requires a HUD-1 settlement statement to be attached when claiming the credit.

Those new rules are designed to crack down on what appears to be fairly common abuse of the tax credit. To claim the existing credit, taxpayers must fill out an IRS form and attach it to their tax returns, but do not have to provide any documentation proving they really bought a home or met other rules.

In a recent report, the Treasury Inspector General for Tax Administration said the IRS lacks some “key controls” to “prevent an individual from erroneously or fraudulently claiming the credit.” It found 19,351 electronically filed 2008 tax returns that claimed credits for homes that had not yet been purchased. It also found 73,799 taxpayers who claimed the credit who appeared to have owned ownes within the last three years, in violation of the rules. It also found 582 taxpayers younger than 18 receiving the credit, with the youngest being 4 years old. Contract law generally prevents children younger than 18 from being bound by a contract.

Isakson said the full Senate will probably vote on the unemployment extension bill, which includes the home buyer credit, next week. If it is approved, it will move to the Assembly, which “could agree to the amendment or disagree and send it to a conference committee.”

It’s staggering when you think about the cost of living, especially if you’re a renter and not a home owner. If you are currently paying $1,000 a month for rented housing, then over the next three years, your property management company will effectively have reaped $36,000 of your hard earned cash! You’re paying their mortgage when you could be building equity in your own property.

What if I don’t have the money to buy a home right now?

There are many loan programs available that offer low and no down payment options. Some programs permit gift money as a down payment, and often sellers are willing to make a contribution to your purchase if they want to sell the home quickly.

There are many benefits of home ownership to consider, most of all, tax deductions. Let’s take a look at how advantageous this can be as a homeowner:

How much is tax deductible?

Tax deductions vary, but the IRS has laid out solid rules. They also have several tax publications full of helpful information worth taking the time to read. Publication 530, Tax Information for First-Time Homeowners, is very thorough, as is Publication 936, Home Mortgage Interest Deduction. For quick reference, you can refer to Tax Topics 505, Interest Expense, and 504, Home Mortgage Points.

These publications often refer to local and state guidelines, so you may want to consult a CPA to answer all the questions that arise from reading these materials. Here are a few tips you should know up front:

Real Estate taxes are deductible on a primary residence. Real Estate taxes are paid at settlement or closing, or through an escrow account.

Mortgage interest is deductible on a loan to purchase, build or improve your home. Your lender will provide you with a Mortgage Interest Statement (Form 1098) to list the total interest paid during the year. This should include any deductible points paid for that year.

Pre-paid interest is deductible in the year it is paid. At the close of a real estate transaction, borrowers usually pay for the interest on their loan that falls between the closing period and the first of the next month. Mortgage payments are made “in arrears” so when a loan is closed mid-month, there is interest due to the new lender which must be paid in advance.

If you are building a home, the interest on the construction loan is deductible. The construction period cannot exceed 24 months prior to the date that you move in if you claim this as your primary residence.

Call me to discuss your specific needs and we’ll find the program that’s right for you.
We have a variety of low down payment and no down payment programs available.

[contact-form]

Here are the statistics that will give you an idea of how the market is doing in your area.

The stats are the percentages of the houses that are in escrow compared to the total

number of houses in the market per area.

Here are the numbers for the week ending 9/13/08.
The following is considered the rule of thumb:

Buyers market if: Less than 25% of the houses in inventory are in Escrow

Sellers market if: 25% or more of the houses in inventory are in Escrow

Class 1= Single Family Homes Only as of 9/13/08:

Zone % of listings in escrow Active # of Listings

1 South County 25.8% 687

2 Santa Teresa 30.7% 115

3 Evergreen 27.3% 429

4 East Valley 29.4% 731

5 North Valley 36.8% 253

6 Milpitas 35.7% 126

8 Santa Clara 28.3% 210

9 Downtown 29.0% 313

10 Willow Glen 19.1% 250

11 South San Jose 31.3% 396

12 Blossom 34.2% 239

13 Almaden 18.5% 110

14 Cambrian 34.5% 175

15 Campbell 24.3% 174

16 Los Gatos 17.6% 168

17 Saratoga 18.6% 131

18 Cupertino 29.7% 109

19 Sunnyvale 41.3% 122

INVENTORY CHANGE

FOR THE THIRD QUARTER OF 2008

(AREAS 1 through 23, that is: Gilroy through Sunnyvale)

Class 1 Properties:

Overall Change from 6/28/08 to 9/13/08:

__________________________________________________________________

Class 2 Properties:

Overall Change from 6/28/08 to 9/13/08

Has the Housing Market Hit Bottom??!! Did you know most home buyers miss the market turn by 6 months?! Don’t miss out on your opportunity to buy with record low rates and record low prices….. and ton’s of inventory to choose from!!!!!

The signs are there. Ignoring them will cost you tens of thousands of dollars.

Watch and find out how!

Click here to view the embedded video.

Click here to view the embedded video.

Click here to view the embedded video.

“Hindsight is only a decision viewed through the lens of experience”

-By Brian Rodgers

This quote is so true for me. I’ve heard, and even said, that hindsight is 20/20, but it’s really a skewed vision based on what previous decisions we’ve made to get us to that moment of reflection.

Have you had a “defining moment” or vision of clarity, or even a little bit of doubt lately? Comment below and tell me YOUR story.