Friday, January 13, 2012

The Power of Assumability



by Dean Hartman on January 12, 2012

One of the rarely touted advantages of people taking FHA mortgages today is the fact that they are assumable. What that means is, when the FHA homebuyer of today is looking to sell his home, a qualified purchaser can “take over” their loan.
Most people believe that interest rates will return to a “normal” range (between 6.5% and 7%) in a couple of years. When you assume a mortgage, the terms remain the same. This means that a buyer five years from now can enjoy a 4 – 4.5% mortgage by assumption rather than the 6.5% – 7% mortgage they would get without it. Since most people buy homes based on how the monthly payment fits into their personal monthly budget, this is extremely impactful.
As an example, a $300,000 loan at 4% today carries with it a $1,432.25 principal and interest payment on a 30 year fixed mortgage. If offered for sale in five years, the purchaser could assume the $271,858.56 balance with the same $1,432.25 payment and remaining term of 25 years. The total payments over the 25 years would be $429,675.
Compare that to a new $272,000 loan at 6.5% for 25 years, which would carry a monthly payment of $1,836.56 (over $400 more a month than the assumption and more than $120,000 more over the 25 year term).
At 6.5% for 25 years, to wind up with the same payment as the assumed mortgage, our borrowers would only be getting $212,000…$60,000 LESS!

The point here is that, when rates go up, homes with assumable mortgages will have more value and will sell at higher prices because they are more affordable. As an additional bonus, the closing costs on assumable mortgages are significantly less (especially here in New York where NYS Mortgage Tax is such a large component of closing costs).
The borrowers must be credit-worthy of course (have good credit, qualifying income, and necessary assets to close), but they would have to be credit-worthy to get a new mortgage too!
Besides the multiple other reasons to obtain an FHA mortgage (low down payment requirements, extended income ratios, lower credit scores, and easier sourcing of funds), there is another perk. In the future, there is a good chance that you may be able to sell your home for more money because of the FHA loan’s assumability.


Joe Naccarato, Broker, Realtor
Top Performer Award Recipient 
Allen Tate Realtors
Tel. 704.953.0183
Do you know someone buying or selling anywhere? I can help them! Please give them my phone number!

Wednesday, January 11, 2012

People Are Buying Homes AND GETTING MORTGAGES!



by The KCM Crew on January 11, 2012

Many believe that very few houses are selling and that almost no one can get a mortgage. We want to let everyone know that neither of these assumptions is true. Recently, the National Association of Realtors (NAR) released their Existing Homes Sales Report. According to the report there are, on average, 12,109 homes selling in the United States EACH and EVERY DAY! That means that approximately 12,000 houses sold yesterday, approximately 12,000 will sell today and approximately 12,000 will sell tomorrow. So the thinking that homes aren’t selling just isn’t true.
Another interesting fact in the report was that 72% of these transactions were accompanied by a mortgage. That means that approximately 8,719 people qualify for a mortgage on a daily basis in this country.
There are over 12,000 homes sold and over 8,000 mortgages granted every day. The real estate market is doing better than many believe.


Joe Naccarato, Broker, Realtor
Top Performer Award Recipient 
Allen Tate Realtors
Tel. 704.953.0183
Do you know someone buying or selling anywhere? I can help them! Please give them my phone number!

Monday, January 2, 2012

5 Top Real Estate Stories in 2011



by The KCM Crew on January 2, 2012

In 2011, we experienced one of the most volatile housing markets in American real estate history. Things we never anticipated happened. Events we were sure would take place didn’t. Today, we want to review the five headlines we think had the biggest impact in 2011.

1.) Interest Rates remained at historic lows

In order to help stabilize the economy in 2010, the Fed took certain actions which kept mortgage rates at or near historic lows (approximately 4%). Most felt this would be a short term tactic and once abandoned would result in rates returning to long term averages (6-7%).
However, the government has continued to support lower rates with the hope of fostering a recovery in the housing sector. The 30 year fixed rate mortgage (as measured by Freddie Mac) stood at 4.77% to begin 2011. A month later, it was over 5% and many, including us, believed this was the beginning of rates returning to normal levels. Instead, rates continued to fall ending 2011 at 3.91%.
The lower rates along with great prices have had a favorable impact on home affordability leading more buyers to enter the market.

2.) Sales up over 2010

At the beginning of 2011, we all realized that a year-over-year (Y-O-Y) comparison of home sales would not be a true “apples to apples” comparison as home sales at the beginning of 2010 were bolstered by the Home Buyers Tax Credit. Likewise, comparing home sales over the summer would not be a fair comparison as many sales in 2010 were dragged forward so that buyers could take advantage of the credit. However, many thought Y-O-Y comparisons would again be useful later in 2011 as the impact of the 2010 tax credit waned. Yet, the National Association of Realtors (NAR) Existing Homes Sales Report shows that over the last three months sales have increased quite nicely. The October and November reports each showed a Y-O-Y gain of in double digits and the December report gain was 12.2%. These numbers showed closed sales were increasing even though more contracts were falling through.

3.) Contract cancellation rate surges

Probably the most troubling trend to emerge in 2011 is that the number of sales contracts that are cancelled before closing has skyrocketed in the last year. The cancellation rate has jumped from 9% in August 2010 to 33% each of the last two months.
Some of the increase can be attributed to the higher level of difficulty in distressed property transactions. However, NAR also says cancellations are caused largely by “declined mortgage applications or failures in loan underwriting from appraised values coming in below the negotiated price.”

4.) Foreclosures were delayed

The robo-signing debacle of late 2010 caused a delay in many foreclosures entering the market. It DID NOT prevent the banks from continuing to put homes into the foreclosure process. The delays jut prevented banks from repossessing the homes and putting then up for sale as REOs (foreclosures owned by the banks).
For most of 2011 the banks and the state governments worked on a set of standards that would be enforced before a bank could repossess the house. They are currently working on a settlement to be paid for those homes that where foreclosed on without the proper paperwork.
As these procedures and settlements are completed, more and more of the backlog of distressed properties will come to market. Distressed properties sell at a discount. They will have a substantial impact on the prices of all houses in the region.

5.) Prices move up then down

 Many experts expected prices to continue to slide downward as we entered 2011. However, a large inventory of distressed properties was held back (see #4). That turned out to be good news for prices as supply decreased throughout the year and demand increased in the second half of the year. That actually caused prices to ‘bottom out’ and ten nudge upward in the late summer and early fall.
As the foreclosed properties again began to enter the market in the last quarter, prices again began to slip. Most believe this downward trend will continue through the first half of 2012.
We spent today looking into the rearview mirror. Tomorrow, will share some of the trends we think we will see in 2012.


Joe Naccarato, Broker, Realtor
Top Performer Award Recipient 
Allen Tate Realtors
Tel. 704.953.0183
Do you know someone buying or selling anywhere? I can help them! Please give them my phone number!