Good Afternoon,
Happy New Year to you. I hope it’s started off good and you’re back into the swing of things. Now is the time for those resolutions. Mine is to be more productive and informative and your help in succeeding at both would be greatly appreciated. In the meantime, cross your fingers tonight for Notre Dame!
On today's call: Markets, Housing, Investment Properties, Interest Rates
Since the last time I sent out an email, the markets have really been on a roller coaster, thanks to the (partial) resolution of the fiscal cliff. Last week saw a sharp rally, ending with the highest S&P 500 closing level in 5 years. The markets are down today however and investors are now looking ahead to fourth-quarter earnings results along with other fiscal cliff issues which have not been resolved, especially the tax codes. Look for these issues to dominate market direction in the next few weeks.
In housing, the big news announced today is that Bank of America is most likely done with servicing mortgage loans. Their 2008 purchase of Countrywide has been an on-going nightmare and they are still trying to get out from underneath the debt. This week the Consumer Financial Protection Bureau could release its final form of the “qualified mortgage rule,” or the “ability to repay rule.” This “QM” will determine the lending standards that lenders will have to follow in order to avoid legal ramifications when extending credit to borrowers. The banking industry has been afraid of this rule as it’s expected that the standards will be even more restrictive to credit lending than they are now. The Mortgage Bankers Association has been working with Congress for a while now on a more lenient version. This rule has gone under the radar thanks to some of the bigger issues of the day, but its final form is much anticipated; hopefully it’s not too over-the-top. Stay tuned...
Purchasing a property in order to rent it out is a great way to invest money, create more tax benefits, and hopefully receive passive income. As with many lending guidelines, the rules for buying an investment property have gotten tighter. In general, if the property is a 1 unit residence (including condo), the minimum down payment is 20%. If the property is a multi-unit (2 to 4 units), the minimum down is 25%. For those looking to purchase a new home and keep the current one as a rental, it’s difficult to use this income for qualification. You have to have 30% equity in that home, and provide a signed lease agreement along with a copy of a cleared security deposit check. Otherwise, you’ll have to qualify with both payments. The “instant landlord” ideology is pretty much a distant memory now. You’ll also be required to show reserves that cover each payment for a minimum of 2 to 6 months, depending on the situation. Lastly, if the subject property is the primary residence, there is no restriction on how many financed properties you can own. If the subject property is a second home or investment, you’re allowed to have 4 financed properties. Exceptions can be made for 5-10 properties, but the aforementioned down payments increase 5% each. Just some “FYI” for all the potential investors out there...
Interest rates took a beating last week, up .125% to .25% thanks to a very strong stock market and sharp declines in bonds. The 30 year is trying to float at 3.5% but it’s very volatile right now. We are in the process of signing on another lender whose Jumbo rates are out of this world: 30 year fixed below 4%! Should be up and running in a couple weeks.
Please feel free to contact me with any questions or needs.
Have a great week......
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