71% of Borrowers Do Qualify for a Purchase Loan

October 2nd, 2010 by Robert Hogg

As the economic crisis continues to slowly heal its wounds, the reports of the effects on our society is in the media every day. The housing market and mortgage market seem to be the hardest hit in this down turn that appears to be dragging on for months. While this solemn state of affairs engulfs each one of us into a state of depression, there is good news on the forefront. According to these new statistics, there are a large number of borrowers that still have acceptable credits scores. In fact, 71% of borrowers do qualify for a purchase loan.

As reported by Zillow, according to Fair Isaac Corporation, the creator of the FICO score, 29.3% of today’s borrowers have a credit score below 620 which makes them unable to borrower money for a purchase mortgage. Anyone with a credit score below 620 is very unlikely to be able to obtain financing. Even if this group of people had a large down payment, they would most likely not be able to obtain a mortgage. On the other hand, the good news is that 47% of today’s borrowers have scores above 720 and a total of 71% are able to borrow. Higher credit scores are awarded with the best interest rates available.

Due to tight credit standards and stricter underwriting guidelines, many borrowers today are being turned away from obtaining a mortgage. Years ago, these same borrowers were turning to sub-prime mortgage products as their only financing option. At that time, many of these same borrowers would have qualified for FHA loans but opted for sub-prime instead. In fact, prior to the introduction of sub-prime, there were only FHA loans available to these borrowers. Now, with FHAs exposure in the mortgage market so pronounced, they, too, are further tightening their lending guidelines making it difficult for this 29.3% group of people to obtain a mortgage.

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Mortgage Refinance: 71% of Borrowers Do Qualify for a Refinance
More people have been choosing to clean up their credit and pay off credit cards as credit card interest rates have increased. This is a positive move in an effort to increase their credit scores and make them more eligible to buy a home. Although people have been cutting back other spending while doing this and growth of the economy has suffered, they are becoming responsible spenders. As this movement continues, the percentage of borrowers that are credit worthy and able to buy should increase over time. Just as it took many years for this turmoil to occur, it will take time for the benefits of these actions to be seen.

Although the number of borrowers that are unable to obtain a mortgage may seem high, earlier studies show that nearly 20% of the population had FICO scores below 620 in 2002 when the unemployment rate averaged around 5.7%. Considering the fact that we have just gone through the Great Recession followed by a very slow economic recovery and a very high unemployment rate, this new percentage of 29.3% is not so frightening. Reflecting on the fact that 71% of borrowers do qualify for a new home loan, things may just improve when borrowers realize that they are in this category and able to take advantage of historically low interest rates.

***CORRECTED 9/29 AT 11:35 AM- ZILLOW FOUND 71% OF BORROWERS QUALIFY FOR A PURCHASE LOAN, NOT A REFINANCE

Mortgage Predictions for 2010

December 5th, 2009 by Robert Hogg

A collection of mortgage-related predictions for 2010.

Credit Requirements loosen up.  Scores aren’t deemed as important as the credit history and circumstances behind such matters.  The human element is re-introduced.

Upfront Mortgage Brokers/Bankers aren’t a sales pitch, but a reality.  Personally, I never understood why the concept was so narrowly defined that it became the sales pitch that it now is.  Who are they comparing themselves to, the “Back End Bend You Over” Brokers/Bankers?  When a home, anyone’s home, is on the line, “Upfront” should be the norm … not the catchphrase of the day.

Credit education begins to be taught at a young age, let’s say well before eighteen.  When you start driving a vehicle whose weight measures in tons, your knowledge of how to gain financing for said vehicle weighs even more.  Creditors make money off of ignorance.  I don’t mind anyone making money.  I just mind anyone being ignorant.

Your house is your home.  It’s not an ATM Machine.  Enough written.  Now go and put up those Christmas lights.
Regulations on the Mortgage Industry continue to do everything but collect dust.  They are implemented!  And then one day, some smart chap in Eastern Pennsylvania proposes that they remain consistent across the board.

Federally Chartered Banks have to follow the same rules as Joe & Chico’s Mortgage Outlet on the Eastside.  If you want competition, provide an even playing field … you’ll get it in droves.

Pre-Approvals will not replace Charmin for wiping the vertical smile below the small of your back.  Along with a full application, all supporting documentation will be collected and reviewed before addressing the streets with one’s ability to purchase a home.

Interest Rates remain stable and relatively low.  House prices do the same.  What becomes of this is a flurry of late-night Real Estate “Get Rich” schemes that take in as much money as it would take to bail out our collective debt-load.

Thanks to Jason Sardi for the inspiration.

House and Senate Extend Homebuyer Credit

November 6th, 2009 by Robert Hogg

The House has passed the bill to extend and expand the Homebuyer Tax Credit on Wednesday, and yesterday the Senate approved the bill overwhelmingly. It is expected to be signed by President Obama within days, perhaps as early as today.  Here is a brief outline of the new, improved changes of the tax credit law, courtesy of the Oregon Association of Realtors:

Below is a summary of the new modifications in the extension and expansion of the tax credit:

1)  The $8,000 tax credit will be extended and available for first-time purchases before May 1, 2010.

2)  A new $6,500 tax credit will be available for repeat buyers who purchase between December 1, 2009, and May 1, 2010. To qualify for this provision, buyers must have used the home sold or being sold as a principal residence consecutively for 5 of the previous 8 years.

3)  Prospective purchasers with binding contracts in place as of April 30, 2010, will be allowed an additional 60 days to complete the transaction.

4)  Income limits are expanded to $125,000 on a single return and $225,000 on a joint return.

If you’d like to see a detailed, point-by-point comprehensive list of all the specific changes and their applicability to your situation, by all means just let me know.  I’m only a phone call or email away.

What It Means:

1)  For Buyers:  Duh :^).  This should be a “slam dunk” decision if you’re thinking of buying a home — you’ll never find a better time. I know several of the finest, most experienced, honest and trusted realtors in the city who would be happy to answer your questions, counsel you regarding the best house for you to buy and have fun in your search!  Just ask!

2) For Repeat Buyers (Want to buy but need to sell and put off selling because of the market?):  NOW is the time to reconsider.  This may indeed be a wonderful window of opportunity for you.  Homes are generally priced 10-20% less than they were a year or two ago, interest rates are at historic lows, and if you meet the criteria for repeat buyers, you’ll be GIVEN $6500 on top of all that.  If we’re not at the “bottom” of the market, we’re probably pretty darn close and I’m not expecting any significant changes any time soon.  We do know that prices have continued to decline the last few months and almost all economists, both local and national, expect that as recovery occurs, it will be a very slow climb back upward.  So, if you’re thinking your home will sell for MUCH more, IF at all, in just another year or two, you’re likely in for a big disappointment.  So why not make the move now that you can get a $6500 gift on top of everything else and, while you’ll “take a hit” on the home you sell, you’ll also get a Bargain on the home you buy.

Home Sales Prices Soar in September

October 23rd, 2009 by Robert Hogg

By ALAN ZIBEL, AP Real Estate Writer Alan Zibel, Ap Real Estate Writer   – 10/23/09 9:15 am PDT

WASHINGTON – Home resales in September clocked the largest monthly increase in 26 years as buyers scrambled to complete their purchases before a tax credit for first-time owners expires.

Sales jumped 9.4 percent to a seasonally adjusted annual rate of 5.57 million last month, from a downwardly revised pace of 5.1 million in August, the National Association of Realtors said Friday.

That pace was the strongest in two years and beat Wall Street forecasts. Sales had been expected to rise to an annual rate of 5.35 million, according to economists surveyed by Thomson Reuters.

“There’s a mini-boom going on in the housing market,” said Thomas Popik, who conducts a monthly survey of real estate agents for Campbell Communications, a research firm.

Nationwide sales are up nearly 24 percent from their bottom in January, but are still down 23 percent from four years ago.

Prices, however, continued to be dragged down by foreclosures and short sales, where the mortgage exceeds the sales price. The median price last month was $174,900, down almost 9 percent from $191,200 a year earlier, and slightly lower than August’s median of $177,300.

The inventory of unsold homes on the market fell about 7 percent to 3.63 million. That’s less than an eight-month supply at the current sales pace, and the lowest level since March 2007.

Sales rose around the country, especially in the West, where they grew 13 percent from a month earlier. Foreclosure sales are booming in cities like Los Angeles, San Diego and Las Vegas.

First-time homebuyers and investors are snapping up those homes and taking advantage of low mortgage rates. These buyers can also take advantage of a tax credit of 10 percent of the sales price, up to $8,000, if the sale is completed by the end of November.

The tax credit is so important to some buyers that they are adding a clause to their contracts, allowing them to back out if the sale doesn’t close by Nov. 30. However, economists note that bargain-priced foreclosures and low mortgage rates are making a big contribution to the sales boom.

“We think the housing market has touched bottom and it is now only a matter of time until home prices stabilize — something that we anticipate to occur in late 2010,” wrote Joseph LaVorgna, chief U.S. economist at Deutsche Bank.

Prices could fall further because rising unemployment leads to more foreclosures. The jobless rate, currently at 9.8 percent is expected to rise as high as 10.5 percent next year, causing more people to fall behind on their mortgages.

“There’s more supply that’s going to come into the marketplace,” said Stan Humphries, chief economist at real estate Web site Zillow.com. “That additional supply will outpace demand.”

With concerns about the housing market still prominent, Congress is considering several proposals to extend the tax credit for first-time buyers. Senators Johnny Isakson, R-Ga., and Christopher Dodd, D-Conn., want to extend it through June 30, and expand it to include all home buyers, at an estimated cost of $16.7 billion.

Realtors and homebuilders are loudly in favor, arguing that the tax credit is crucial to get the housing market back on its feet.

“We are not there in terms of removing the consumer fear factor,” said Lawrence Yun, the Realtors’ chief economist.

However, some analysts say the tax credit may not be as critical to the housing market as real estate agents suggest. “The group has an incentive to talk up the effects of the credit as it is urging Congress to extend it, and it therefore may be exaggerating the credit’s effects,” wrote David Resler, chief economist with Nomura Securities.

One potential roadblock to an extension also emerged this week. There are concerns that some of the 1.5 million applications for the tax credit are fraudulent.

At a hearing on Thursday the Treasury Department’s inspector general for taxes questioned the legitimacy of some 100,000 claims for the credit, potentially including some illegal immigrants and 580 people under 18. The youngest taxpayers to apply for the credit were 4 years old.

Home sales pick up, but prices dip

October 22nd, 2009 by Robert Hogg

Portland, Oregon home sales increased by 9.8 percent last month in comparison to the same month last year. Pending sales rose by 34.1 percent. The increase is seen as largely a result of the $8,000 tax credit for qualifying first-time home buyers, an offer that expires on Nov. 30th.

The market inventory has also become healthier with enough homes on the market to meet demand for 7.6 months, down from 19.2 months in January.

While sales increased, home prices declined by 8 percent in September compared to the same month last year, according to the Regional Multiple Listing Service.

The median sale price for the year fell by 9.5 percent to $241,400 in September, in large part because recent activity has been at the lower end of the market.

Source: Portland Business Journal