Sarasota Mortgage Rates | The Mortgage Skinny

Subprime mortgages have now been credited for bankrupting well over 110 lenders and seriously damaging operations at many major mortgage firms. They’ve reportedly wiped out 5 hedge funds, tens of thousands of jobs, and have led to millions of foreclosures with millions more on the way. And, as if that weren’t enough, subprime mortgages are also blamed for massive volatility in the stock, bond, credit, futures, and real estate markets here in the US and around the globe. Some say losses in the mortgage securities market alone could reach hundreds of billions of dollars this year.

This means that, for any Americans looking to buy, sell, or refinance a home, they are confronting a very different market from the one that existed just 6-12 months ago.

How did this happen?
The recent real estate boom was fueled by a period of record home appreciation and historically low interest rates. Banks, in order to compete, loosened guidelines and began offering more funding to more borrowers through riskier, non-conforming or “exotic” mortgages.

These ideal lending conditions persisted for several years, supported by high demand, historical real estate data, home prices, and massive trading volume/profits on mortgage-backed securities and other financial instruments on Wall Street.

Then, in 2006, a slowdown in real estate led to a deterioration of home values, an increase in inventories, and ultimately to today’s tightening of credit guidelines, leaving many investors unable to sell or refinance out of their existing positions. Many Americans who had tapped into their equity were suddenly tapped-out and overextended as home values fell. Foreclosures followed in record numbers and a re-valuation of mortgage bonds and other financial instruments created the credit/liquidity domino effect we’re now experiencing.

Unfortunately, it’s going to get a lot worse before it gets better. According to the latest estimates, over 2 million subprime and Alt-A adjustable rate mortgage (ARM) holders will face payment increases of up to 30%-100% when their loans reset in the next 2 to 18 months. These loans make up less than 40% of the total mortgage market, but the negative effects, as we have seen, of increased foreclosure activity can have a ripple effect throughout the industry and around the globe.

What does this mean to you and your mortgage?

Sellers: If you’re planning on selling your home, be prepared for an even smaller pool of qualified buyers. While some experts predict a settling of this credit crisis over the coming year, tightened credit guidelines and diminishing mortgage products could knock out as many as 15%-30% of potential qualified buyers. Now is not the time to sit and wait for the best possible price. Have a serious talk with your real estate agent. Having experienced buying/selling transactions in your area, he or she can help you price your home accordingly. He or she can also help ensure that your buyers are pre-approved and stay pre-approved throughout the entire transaction.

Buyers: Get pre-approved by your mortgage professional. While there are a lot of great deals out there, getting credit is becoming tougher and tougher, and it’s taking longer and longer to complete a transaction. Remember, what you qualify for today could change tomorrow in a volatile market. For those looking to refinance, keep this in mind. There is no time to delay! Communicate with your lender. Don’t do anything that could negatively affect your credit, and make sure you get all your documentation in on time.

ARMs Borrowers: If your ARM is scheduled to reset in the next 2-18 months, you need to schedule an appointment with a mortgage professional right away. Whether your ARM is subprime, Alt-A, or even if you have a pre-payment penalty, don’t let a default or foreclosure situation sneak up on you. Did you know that your monthly payments can increase anywhere from 30% to 100% once your loan resets? At the very least, give yourself the peace of mind of knowing what your adjusted payment will be.

Borrowers with less-than-perfect credit: Each week it seems lenders are shedding more and more mortgage products. Many lenders have stopped offering No-Doc loans and are reducing all forms of Stated-Income loans. While it might be challenging, borrowers with credit issues need to see a loan expert. Often they have credit repair resources and other strategies to help you reach your financial goals.

Finally, there’s an important concept to embrace: all markets, while cyclical in nature, are self-correcting, be it credit, real estate, stocks, or bonds. For the last 6 or 7 years, real estate was booming and riding high. The correction we’re experiencing now – while it seems harsh and could get much worse – is, in a sense, “natural” and directly related to the extremely loose guidelines and perhaps overzealous lending and leveraging during the boom cycle.

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Well, we all know the economy is going through some issues, and being in the mortgage business we’re always hoping things will change.  The key to staying successful in this business is keeping a positive attitude and making yourself an expert.  You want to be the GO TO person when someone has a question about financing, and the reason why I’m saying this is because you need to learn about Foreign National lending.

Foreign Nationals are buying real estate over here in the U.S. for two reasons.  For one, their currency has an exchange rate that almost doubles the U.S. Dollar.  Right now the Euro is worth just over $1.50 and in the Pound is currently worth just under $2.00.  So for an English investor to come over here and purchase a $200,000 home, it really translates into them buying a $100,000.  Why wouldn’t a European come over here and buy a beautiful second home they can visit at anytime?  Their money is worth double the amount… if they want to go to Disney world and spend $100 on tickets, it really means they’re only spending 50 pounds.

Another reason why Foreign Nationals are coming over to the U.S. and buying real estate is because it’s a buyers market.  Homes that were selling two years ago for $400,000 are now listed for $250,000 and will most likely go for less than that.  This is the type of market where the old saying “The poor get poorer and the rich get richer” except this translates into countries.  Right now the U.S. is in a lot of debt and the government is trying to fix this but it’s not something they can do over night.  In the mean time other countries are coming over and buying property, businesses, etc. at a discount price and in turn will cash them in when the time comes for a higher profit.  It’s all relative. 

 Here’s the way I look at Foreign Nationals and the Mortgage Market:  Yes, I know home values are going down, and yes I know a lot of home owners are losing a lot of money, but the only good thing coming out of this is First Time Home Buyers, Investors and Foreign Nationals.  As long as they are buying up the market, it’s going to create transactions that fill the pockets of Real Estate Agents, Mortgage Brokers, Banks, Title Companies and this in turn will create more spending which will boost the economy.  Every little bit helps!

If you’re in the Real Estate world and wondering why it’s important to look at the Foreign National world, just know they’re going to continue to buy, and you might as well be a part of the transaction.  Now is the time for them to buy and they’re not even hesitating to stroke a check.  This is their market!

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If you’re having a tough time making your monthly mortgage payments then read the rest of this article and maybe you will be able to figure out how to make ends meet.  There are 6 different decisions you can make in order to make ends meet.  Some of them may be very difficult to make but in order for you to make the right decision you need to have no emotion.  I know it’s extremely tough to have no emotion when you’re deciding if you should keep your home or not but having no emotion will be better for you in the long run.  Below are the 6 decisions you may need to make:

1. Re-negotiate your monthly payment with the bank.  I’ve heard a number of people have tried to do this and have not succeeded, but more recenently banks are starting to open their ears.  I just heard a story about a CPA who was working out new monthly payments with his clients mortgage companies and coming up with great results.  Supposedly he helped lower his clients interest rate down to 2% which allowed his clients to keep their home. 

2. Refinance your loan.  If you are in a situation where you have a high monthly mortgage payment due to a high interest rate and you have enough equity left in your home to refinance, then I highly suggest this.  This may not be a choice for some homeowners because they are in a situation where they owe more on the home than it’s worth.

3. Sell and Cut your Losses.  A great way to get rid of your monthly payment is to sell your home and cut your losses.  If you have money in the bank to pay for these losses then this is an option.  If your home is worth more than what you owe on the home, then this is a great option as well.  This isn’t a great option if you owe more on the home than what it’s worth and you don’t have any money in the bank to pay for your losses.

4. Short Sale.  Short selling your home in today’s market is the best way to cut your losses if you can’t do any of the above.  A Short Sale consists of presenting your bank with a contract that is below market price and asking if they would be willing to accept the contract and close out your lien without putting a deficiency lien against you for the difference.  With the way the market is going, banks are more likely to accept a short sale.  A number of banks are dealing with a lot of foreclosures which consists of a lot of fees for a bank, so doing a short sale cuts out a lot of these fees.  More than likely if they don’t accept a short sale it will result in foreclosure which is extremely costly.

5. Foreclose.  Foreclosing on a property is probably the worst thing you can do.  But if you have no other option, then foreclosing is definitely a way out.  If you read my previous article about foreclosing than you know exactly why you shouldn’t.  Your credit score will go down, it costs the bank a lot of money, and the bank has 4 years to put a deficiency lien against you which may cause you to be in the same position years down the road. 

6. Bankruptcy.  Bankruptcy is not a bad decision if you have no other way out and there is no light at the end of the tunnel.  Filing a Chapter 7 Bankruptcy will wipe away all your debts and is basically be the end of the story.  In today’s world it’s tougher to qualify for bankruptcy, you either need to have an income below the median income or you need to be qualified as insolvent.  Either way, once you have qualified your creditors can no longer contact you and your assets will be divided between the creditors.  The creditors can not put any lien against you and you are officially working with a clean slate.  Only problem with this is your credit score drops dramatically and you’ll have a tougher time qualifying for credit cards, auto loans, and mortgages.

None of these decisions are something you want to make.  But depending on your situation it may be something you have to make.  As I’ve said before, I don’t reccomend you making a decision this big without first consulting an attorney or CPA. Every situation is different so contact someone who can review yours and help you make the right decision.

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I’m sure a number of you maybe visiting this website because you were wondering about Foreclosures and what the consequences may be.  I’m not an expert in Foreclosures but I have some information about some of the problems you may run into if you decide to foreclose.  Before you decide anything, please consult a lawyer or someone who specializes in foreclosures.  It is too big of a decision to make just by reading some blogs or some articles posted by authors who don’t know your situation.

The number one disclaimer I’ve heard from consumers and realtors I’ve been working with is do not foreclose.  It may sound great that you’re going to be getting rid of your debt and wiping yourself clean of the monthly payments of that investment home or primary home you once loved.  But it could end up costing you more in the end.  Banks are in a tough market right now especially with a number of their customers in default and with a large number of properties currently in foreclosure.  They’re doing whatever they can to prevent a customer from foreclosing.  It costs a bank quite a bit of money to foreclose.  Think about it…. obviously a bank is getting the home back because the customer couldn’t sell it in today’s market and couldn’t rent it out for a profit.  The bank then has to auction the property off, and a lot of times they don’t get what the customer owed.  So they’re taking a loss for that, and then they have to pay for all the lawyer fees.  It’s just a miserable situation, and the number one cause for these large banks to shut their doors.

 So as a consumer what is the big deal with letting the bank take the fall?  The big deal is that the bank then has four years to come back and hit you with a lien.  So for the first year or two you may think you’re smooth sailing, but in reality you have an addition two years to worry if you’re going to get hit with a deficiency lien.  In the long run you may be in the same situation as you were before, so make sure you think long and hard.  Like I said before, consult a lawyer who specializes in foreclosures because not all situations are the same.

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If you’re thinking of buying a home, now might be the right time! Interest rates have fallen below 6.00% to start the year in 2008 which is below 2007’s national average of 6.44%.  Mortgage rates have always been known to fluctuate but it seems as though 2008 is starting out strong.

The unexpected and steady decline in rates could help cushion the home sales for 2008 by making mortgage payments more affordable.  With the decline in home values, now is the time for first time homebuyers to purchase.  With an interest rate of 6.00% and a home valued at $150,000, a monthly mortgage payment would cost $899 for Principle and Interest.  Most renters can afford this and can now have the opportunity to own and not ever have to deal with landlords again.

With interest rates as low as they are today, it’s also giving current home owners a chance to refinance out of their current situations.  Many Americans are dealing with fluctuating ARMs (Adjustable Rate Mortgages) that are coming due and it’s causing their monthly payments to increase which then causes many to forclose.  Lower interest rates could not have come at a better time especially with the estimate of $1.2 trillion in ARM loans scheduled to reset to higher rates this year.

Lower interest rates help the economy, it gives first time homebuyers the opportunity to own, it gives current home owners the opportunity to refinance into better situations, and all of this causes more spending in the economy.   My advice would be to call your Mortgage Consultant and ask to get an annual mortgage check up.  If you’re not currently satisfied with your situation, then now is the time to make some changes and save! 

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Few things are as devastating as losing your home. Sadly, it’s not always inevitable. In many cases the foreclosure could’ve been avoided with some outside help.

You are in a unique position to advise your clients in financial matters. If you know that a client is on the path toward foreclosure, take the time to show them how it can be avoided. First, remind them of some of the hidden difficulties that will arise if foreclosure occurs.

Finding a new home. Don’t let your clients believe that it will be better to let the foreclosure happen, because after they lose their home, they will still need to find a new place to live. All too often, the price they will need to pay in rent will be almost as high if not higher than their current mortgage payment. Remember: The owner of the property needs to make his mortgage payment, too, so he’s going to charge a rental payment that’s higher than his mortgage costs.

Deficiency judgment. It’s not uncommon that the sale of the home is insufficient to cover the remainder of the mortgage. When the property has been damaged, or market values have dropped, the owner may end up with a bill in the tens of thousands for the difference.

Despite what many people think, most lending institutions are not anxious to foreclose. It’s a last-ditch effort to recover their money and minimize their losses, and it’s an incredible hassle. Most lenders would rather avoid it, if possible. There are multiple sources for help that your client should be aware of, and most lenders will be happy to hear that their clients are going to try to keep their home rather than just await a foreclosure.

Housing Counseling Agency. The US Department of Housing and Urban Development maintains a list of HUD-approved counseling agencies. Have your client call (800) 569-4287 to find the agency nearest them

FHA-Insurance fund. FHA borrowers may qualify to have HUD make a one-time payment to bring their mortgage current. See www.hud.gov/foreclosure for more information on the requirements to qualify.

Different mortgage program. Have them talk to a loan officer about the possibility of refinancing their mortgage to a more affordable program.

Special Forbearance. Many borrowers can qualify for a new payment structure if they’ve had an increase in their cost-of-living, such as unexpected medical expenses, or a decrease in wages. This payment structure will allow the owner to repay the lender in a given time frame.

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