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Can Increased FHA Loan Limits Help Washington County Sellers?

by Jeremy Larkin

I've been away a few days and apologize for not getting this info up quicker.  This is fantastic news for residents of any county in the Nation, and specifically for Washington County buyers.  For a complete list of limits for all Utah counties, click here: https://entp.hud.gov/idapp/html/hicostlook.cfm

The FHA was established in 1934 to help borrowers, particularly those with low incomes, purchase homes by guaranteeing banks that those loans would be repaid should the borrower default. But the agency's loan limits have generally lagged behind those of Freddie Mac and Fannie Mae and as home prices climbed dramatically and lenders with looser underwriting standards proliferated the agency became less and less of a player in the mortgage market.

As a matter of fact, FHA insured loans have been mentioned as a possible escape hatch for borrowers who may be unable to make payments on their current adjustable rate mortgages when their interest rates reset over the next year, but that plan has its' challenges.

FHA financing is NOT the same as subprime financing.  It provides financing to borrowers with some credit issues and lower down payments, but it requires documentation of income and strives to prevent “payment shock” where a buyer jumps from a low rental payment to a high mortgage payment

This is good stuff, and in addition to the benefit of current mortgage rates (which I commented on HERE), this will allow many more buyers to realize the dream of home ownership in 2008. 

As a specialist in working with expired listings, I have been asked multiple times in recent weeks, "can this increase help sellers in Washington County?" The jury is still out. The real challenge lies in the fact that according to Lawrence Yun, chief Economist for NAR, as many of 80% of today's Buyers are also SELLERS trying to sell their current home before being able to buy. Ouch.

I better start out with the following disclaimer: I KNOW you are all thinking, "but Jeremy, of course you want us to buy now....you're a dirty Realtor!".....

And yes, you'd THINK that was the case, but I'd like to hope that I'm above car salesman-like sales tactics, and if you are thinking about buying Washington County Real Estate for investment or to live in long term, you'd better pay attention to this post, and in more detail, the Time Magazine Article titled "Ignore the Headlines...."

On one hand I can't see this market not declining further, yet John D. Rockefeller made the following logic famous when he said: "The way to make money is to buy when blood is running in the streets."  And running it is!

Allow me to share the following excerpt from the article:

Consider a typical home that sells for $218,900. You put down 20% and get a 30-year fixed-rate mortgage at today's rate of 5.5%. Monthly principal and interest come to $994.31. Let's say that 12 months from now the same house goes for 10% less, or $197,010. But by then the recession is history and the Fed is jacking up rates to stem inflation. If mortgage costs rise a point, to 6.5%, your monthly payment would be $994.94 and you'd have saved nothing. Meanwhile, home prices might steady and sellers might become less willing to negotiate. And you have spent a year living someplace you'd rather not be.

To make matters worse, you'll have just spent 1 more year in a place you don't like! 

Here it is - read it and give me your thoughts!

http://www.time.com/time/magazine/article/0,9171,1713483,00.html 

 

 

Historic Fed Rate drop cuts both ways for Borrowers...What about you?

by Jeremy Larkin

FIrst of all, I'm NOT a mortgage specialist, so what you get here is my best summary based on personal research. (meaning you might want to stop reading now if you really appreciate authoritative mortgage commentary!) On the heels of its surprise rate cut of .75 basis points last week, the Federal Reserve cut key interest rates again, the fifth straight cut since September 2007.  In short, economic data suggests the US is on the brink of recession, and the Fed is acting accordingly.

Who benefits from this cut?
I am LOVING this cut as a HELOC borrower! If you have a loan that is directly tied to the Prime Rate, you will see an immediate benefit. Home equity lines of credit (HELOCs) and variable rate charge cards are the types of loans that will have an interest rate reduction on their next statement.

What does this mean for long-term rates?
Long-term mortgage rates could actually increase after yesterday's cut, based on historical performance and recent trends. Wierd to some, I know, but it's just the way it is.

How does the economic stimulus package fit into the picture?
The economic stimulus package from Congress and the White House could be a double-edged sword for borrowers. Combined with recent Fed actions, the package could create inflation and bring about higher long-term interest rates.

On the positive side, conforming loan limits are likely to be raised from the current $417,000 to upwards of $625,000. This means great potential savings for purchase and refinance candidates who live in high-cost areas across the country.

The reality is that as always, "timing the market" is next to impossible, and if you want to know a little secret - some of the most savvy investors I know are on the lookout for purchases to hold long-term RIGHT NOW. As far as economic stimulus goes, I'm not seeing immediate improvements in the local market, so the jury is still out.

Is it time to invest in Real Estate? $50.5 Trillion says yes.

by Jeremy Larkin

 

My Dad handed me a newspaper article yesterday that he had picked up from the Denver Post while travelling across the country. He warned me that it would be upsetting. "Geesh, why would $50.5 trillion in debt be upsetting, Dad?"

$400,000 - the amount the average US household owes toward that debt.  Isn't that amazing? If you think I'm just making it up, go here http://www.denverpost.com/perspective/ci_7344870 to read the interview with David Walker who is currently on his "Fiscal Wakeup Tour" across the country, trying to "wake people up."

If you don't want to read the whole article, let me sum it up for you: Forget about your Social Security, Medicare, etc - it's all drying up in the not too distant future. Which means that we'd all better find a way to build up our own nest egg, right?

I know the whole world is concerned about real estate right now. Yet let me point out that in Washington County we have RECORD inventory, motivated sellers, and phenomenal interest rates. It could be the perfect storm for buying up investment properties, which have always been great long term investments.

Timing the market is impossible, by the way. Kind of like when you hear Jim Kramer talk about the next greatest stock pick on TV, it's too late.

Just food for thought. Pick up a good little rental, let the Tenant pay your mortgage, and hang on for the long-term cash out? It beats planning on your share of $50.5 trillion in debt doesn't it?

WHAT ARE YOUR THOUGHTS?

Displaying blog entries 1-4 of 4

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Photo of Jeremy Larkin - The Larkin Group Real Estate
Jeremy Larkin - The Larkin Group
Keller Williams Realty
50 E 100 S, Suite 300
St. George UT 84770
435.767.9886
Fax: 435-359-5085

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