As a professional lender I am constantly searching for new sources of information I can use to educate my clients.  I have gone through numerous packets of information and assembled information from more sources than I care to quote.  As a first time buyer you have the right to have all of your questions answered, and to feel comfortable with the home buying process.

All of my informative packets and flyers are now obsolete.  Your First Home is an educational book for first time home buyers that is thoughtful, detailed and says all of the things I've been trying to say in a very accessible way.

I highly recommend this informative book to any First Time Home Buyer that may be considering buying a home.  It will not only address your concerns, but it will instill in you the confidence you require to move forward with the purchase of Your first home.

The book is available from your real estate agent and covers everything from costs of closing, to financing options, to equity appreciation and beyond.  I want to give a special "Thank You" to Guy Lofts, The Real Estate Guy for showing me this incredibly valuable resource for my clients.

If you are considering buying a home and want more information go to www.realestateguy.com to request a copy of the book.  You'll be glad you did!

There was recently a leak from somewhere in the treasury reporting the treasury may be working on a plan to push mortgage rates as low as 4.5%.

This means a mortgage in Madison, WI or anywhere in the United States would be offered at a historically low interest rate.  The goal of the program is of course to stimulate buyers, to bring them "off the fence" if you will.

There is a ton of "buzz" about this, rumors, a lot of misinformation, and consumers need to know a few things.

First, the Treasury has not pledged to institute this program.  They may create this program, and if they do, there is not a timeline for it yet.  Second, even in the article the program was quoted as a First Time Home Buyers purchase product ONLY.  This means that though rates, which are set by market conditions, not the treasury, could follow for refinances, there is no indication of such as of yet.

Soooo...here we are.  It sounds good, everyone wants it, but please do not let a rumor, that has not been oficially credited or discredited, make your decision!  I've locked consumers at incredibly low interest rates this week, and a few of those people are "waiting" for the 4.5% rates.

Last week, when rates dropped significantly it was as a result of the Treasury announcing a program to buy mortgage backed securities(mbs).  The result was a large increase in consumer confidence, and the announcement had results as intended.

As of writing this blog the treasury has still not released any verbiage on exactly how or when this program would be implemented, investors are still in the dark.  We can learn then from these Treasury actions, that this market is so volatile that simply getting on the news and announcing a direction can cause large market movements in this economy. 

If you are a consumer, and you are holding off on locking that rate because you could 4.5%, you at least need to know it is not likely to happen.  You are taking a risk, you are gambling.  The program as it sits right now is for First Time Home Buyers.

If you are looking at a refinance, consult with your loan officer.  See if you can put in a longer lock on your loan if you feel the rates will come down that low.  Rates are incredible right now, and you could miss your opportunity.  There are 19 reasons to refinance, now is the time!

Finally, I want to emphasize something Jeff Belonger has been emphasizing forever.  Your mortgage is not about you rate, it is about your payment.  If the $50 or $100 is going to make or break you you have more problems than your interest rate. 

Don't miss your chance waiting for something that may never come.  If rates do get to 4.5%, you'll be saving a whole 1% and may want to refi again!  I'll leave you with this, before the story broke late last week, what did you think about your 5.5% opportunity?

I am almost out of space for this one, however, depending on interest I may schedule another seminar shortly after.  This is a hot source of business right now, if your phone isn't "ringing off the hook" right now you can't afford not to know how to negotiate with banks and go after pre-foreclosure listings.

Below is a detailed explanation of a 2-1 rate buydown for a 30 year fixed mortgage, and how it can be advantageous for a builder/broker to offer this program to a potential buyer. 

Basically, a 2-1 buydown means the note rate on the loan is "bought" down, 2% for the first year, 1% for the second year and for years 3-30 the loan "caps," at it's fully indexed market rate.  This loan is particularly appealing to those borrowers skeptical of the current mortgage market. 

Taking a loan significantly lower than the current market rate in effect opens a 3 year window with which the borrower has time to refinance should the rates come back down.  If rates do not drop, or if they go up the buyer has the peace of mind of knowing he/she has the lowest available interest rate at that time.

This loan would appeal to a prospective buyer who may have just taken a new position, relocated or graduated from College.  The buyer may have a guaranteed wage increase within two years, making this 2-1 buydown very attractive as he/she can buy the home he/she wants now, and make the fully indexed payments later.

This mortgage should not be confused for an Adjustable Rate Mortgage, it is simply a 30 year fixed with graduated payment for the first two years.  The borrower is qualified at the fully indexed rate, and the rate can never go above the market rate set at lock in.

The cost can be paid any number of ways.  The seller can offer the buydown as a buyer incentive, it can be paid by a DPAP or gift, or it can be paid by the lender.  The difference in payments is staggering, especially on larger loans.

I am including an example below of the savings a borrower will realize on a $300,000 mortgage at a note rate of 6.5%. 

In this example the total cost of the buydown to the lender, borrower, or seller would be $6,827.64.  This cost can be split between the lender and seller as well.

In contrast, for simplicity's sake let's say the seller offered a $6,827.64 reduction in costs as an incentive to the buyer.  For the Seller's bottom line there is no difference between the price reduction and the buydown, but a 30 year fixed mortgage of $293,172.36 at a market rate of 6.5% leaves the buyer with a payment of $1,853.05/mo.

For a buyer that is not concerned with the rate, or the initial payment on the home, the cheaper sales price yields a larger savings over the 30 year period ($15,534.00).  However, most homeowners refinance their home at least once, most every 3-5 years, and you are this homeowner, you would never realize the reduction in sales price cost wise like you would the buydown.

Clearly we are talking about two different borrowers here.  One is skeptical of the market or new to the housing market, the other is an experienced borrower who may choose not to refinance.  In these two cases, different loan options will yield different results for the two buyers, however knowing these options and being able to take advantage of your options means you are an empowered buyer!.

We're fortunate here in Dane County to have several State and local agencies providing Down Payment Assistance to eligible First Time Home Buyers that qualify.  Affordable housing and Dane County are not always synonymous terms, so many of these agencies have been created to try and bridge that gap, to make rental housing and home ownership affordable for those families making less that the county median income here in Dane County.

One of the most important programs here in Dane County is offered to eligible first time home buyers in the form of a deferred payment loan in the amount of $9,000.  Dane County Housing Authority (DCHA), provides their HOME loan to eligible applicants with annual income under 80% of county median income.  With the median home price in Dane County hovering around $190,000, this loan is enough to provide the 3% down payment required by most First Time Home Buyer programs and to cover that first time buyers closing costs.

The loan is required to be paid back upon non-owner occupancy, cash out refinance or upon future sale.  DCHA also requires the home buyer has 1% of their own funds into the transaction.  This could be in the form of earnest money, prepaid homeowners insurance, an inspection paid for by the borrower, or the borrower can pay closing costs or make a 1% down payment.

The loan is available for purchase of a duplex, condo or single family home.  To be eligible you must be a first time home buyer and be working with a loan program that qualifies for DCHA HOME funds.

I have used the program several times with great results.  Many deserving homeowners, who may be ready for home ownership but may not be able to save for the down payment and closing costs, have found DCHA to be their helping hand.  The administrators of the program are HUD certified housing counselors, and a home buyers education course is required for the program.

Since 2000, DCHA has provided 142 down payment/closing cost loans to first time buyer households at or below 80 percent County Median Income (CMI).  In addition, approximately 2000 households(roughly 250 annually) have completed the DCHA First Time Home Buyer courses since 2000.  DCHA hosts and coordinates 16 pre-purchase course annually and was a founding member of the Homebuyers Roundtable of Dane County.

If you are a Real Estate Professional looking for more information regarding DCHA click here.  If you are a home buyer and you want to know if you qualify for HOME funds for down payment assistance please contact me to take a quick mortgage application and discover what your options are.

The link below is an article written by Meg Sullivan, outlining the research done by two UCLA economists that argue Government Intervention makes recovery from a depressed economy worse, not better. 

I found it pertinent to note now as the argument has never been more relevant.  Certainly we are facing two different situations, and different circumstances.  Unions and Corporations that played a role in the recovery from the Great Depression (or lack thereof) have been replaced by struggling job markets and credit strapped banks, but the central issue remains the same, will Government Intervention hurt or help our economy recover?

The Economists argue that FDR's New Deal policies led to increased labor wages, and increased unemployment, while the elimination of anti-trust prosecution led to collusion and an increase in the costs of goods of services.

If you aren't sure where you stand on the stimulus package, or the Government Intervention in the market this article is a good place to start.  Clearly whatever happens, much care needs to taken to be sure that the Government does not in effect hinder the natural recovery process of the markets.

I'm reminded of a quote: "If we choose to ignore history, we are doomed to repeat it."

I am certainly not going to promise you any priceless wisdom on this issue, nor will I pretend to understand the economy to the point where I could sustain a coherent argument either way, but I find it interesting that once researched thoroughly, the Man credited for getting our Country out of it's largest economic crisis, may in fact have been responsible for prolonging it!

Use your voice, speak your mind, and follow your heart...

http://newsroom.ucla.edu/portal/ucla/FDR-s-Policies-Prolonged-Depression-5409.aspx?RelNum=5409

The following housing states are for both Madison, and for Wisconsin as a whole.  Some markets may be down but Madison is a perfect example of how all Real Estate markets are local.

Between 2003 and the time of writing this blog, Home prices in the Madison MSA have increased 29.8%, compared to 28.2% for the rest of the state.  Nationally prices have declined, but here in Madison ytd our home prices have appreciated 1.2%.

In our MSA, the average home price is $227,400, higher than any other MSA in Wisconsin, and Wisconsin as a whole.  If you had purchased a $200,000 home in Madison 5 years ago, your equity appreciation alone would be worth $54,000!

Madison has very stable employment, the largest non-farm sector of which is Government.  This is partially due to our large University.  The State and Local government employ 23% of the Madison MSA non-farm workers.  Trade, Transportation, Utilities, Professional and Businesses Services are the next largest employers.

Employment in the Madison MSA is expected to grow .4% in 2008, which is greater than the State and National trend.  It is expected to be .4% in 2009, 1.6% in 2010 and 2.3% in 2011.

If you are still on the fence about buying here and laying down your roots, don't wait too long.  Nationally pending home sales have increased 7.2%.  New construction permits and housing starts are down, and current inventory numbers just released show the inventory is coming of the market, partially due to sellers and banks reducing purchases prices for buyers.

All of these stats point to the turnaround of the buyers market.  Prices are stabilizing, inventory is disappearing and at least in Madison, we are experiencing growth. 

Please do not wait for the bottom to make your decision, because when the bottom comes, you will have already missed your opportunity to take advantage of the buyers market.

I wanted to shine a little light on an amazing program that does not get much promotion, the FHA Good Neighbor Next Door home loan.  This is a program to help borrowers who are employed in Law Enforcement, pre K through 12^thgrade Teachers, (Public or Private Schools) Firefighters and Emergency Medical Technicians (EMT's).

The highlights of the program are as follows:

A borrower that falls into one of the categories listed above, is eligible to purchase a HUD foreclosure at a 50% discount from the list price.  This means an incredible buying opportunity for anyone in these categories that intends to purchase and occupy the property as their primary residence for at least 3 years.

To be clear, this is not a "fix and flip" program.  HUD requires owner occupancy for a minimum of 3 years with this program and imposes strict penalties should the owner occupancy rule be broken.  Borrowers are required to sign a "silent second" mortgage on the property at closing securing the other 50% of the equity should the terms be violated.

The Good Neighbor Next Door Program only reqires a $100 down payment!  Closing costs and prepaid items will still be the responsibility of the borrower. 

Other highlights of the Good Neighbor Next Door Program:

• Eligible borrowers must live in the area they are purchasing the HUD property
• To purchase a HUD property through the program you must be working with a Realtor (you may work with your own agent, or we will recommend an agent for you)
• Only single family homes/condos qualify, no duplex or triplex, etc...
• No first time home buyer requirement
• Earnest money of at least 1% is required

For more information, contact me, for a pre-approval consultation.

Premier Financial Solutions, a company I work very closely with and a company that has done a great service for several of my clients was recently featured on a local news story here in Madison.

Premier works both on credit history, removing credit errors and repairing credit, and on credit education, preparing their clients to maintain their credit worthiness in the future.

I wanted to share this with you, in hopes that if you are one of the many prospective homebuyers that are either on the fence, or have been denied for a mortgage due to your credit history you will contact a reliable professional like Premier and myself, and work towards your families financial future.

To contact Premier Financial Solutions go to www.thecredityoudeservewisconsin.com.

Many, many, many homeowners have found themselves forced to make a tough decision, to feed their family or to keep a roof over their head.  And if you're one of these people or have a friend or family member that can just no longer make it you know it's a painful embarrassing situation to be in.

I'm talking to clients on a weekly basis in this situation, "I could make my payment until my Husband lost his job" is what you're saying, or "I thought I could refinance out of my ARM when my home appreciated and now I owe more than my home's worth!" 

Some people did just buy too much house, or made a bad financing decision.  I'll be the first one to tell you the blood from this mortgage crisis is on every ones hands.  The Presidential nominee's will tell you the lenders ripped you off, and the media will blame it on the economy.  The bottom line is the bank is guilty or creating the product, and the banker is guilty for selling it wrong, but in the end the consumer is just as guilty for signing the papers.  And now WE'RE ALL paying the consequences.

If you are in this situation, and you don't want a foreclosure to ruin your credit for 4 years (5 very soon) and your chances of getting a conventional loan, consider a better option, a SHORT SALE.

A short sale is what occurs when you communicate to your mortgage servicer your need to get out of your financial obligation on the home and the servicer agrees to approve a sale on the property for less than what is owed, forgiving the remaining debt.  It is a better option than foreclosing for most servicers because it is very expensive and time consuming for them to foreclose on your house, and in most cases the short sale will net them more proceeds in the end.

I work with a network of full time Real Estate Agents that are experienced in working with foreclosures, negotiating short sales for sellers and writing offers for buyers looking for a good deal.  If you are unsure of how to negotiate a short sale yourself, or you would like more information regarding the process or even how to purchase a short sale please contact me and I will refer you to an experienced Real Estate Agent to help you navigate your situation.

You have options, if you cannot negotiate a short sale you may qualify for loan modification.  A loan modification can be negotiated either by the seller or by a company specializing in modifications (for a fee).  You may be able to freeze, or reduce your interest rate for a period of time if you have yet to receive a foreclosure notice.

The worst thing you can do is nothing!  There are still good people here to help!