What Will A Low Rates Economic Stimulus Program Do For Me?

What Will A Low Rates Economic Stimulus Program Do For Me?

There has been talk out of Washington, D.C. lately about offering Low Rate Fannie Mae and Freddie Mac real estate loans to stimulate the economy. The banter has centered around the idea of 4.5% interest rates. That certainly will initiate action, but one must look at the situation realistically to ascertain how it will affect you.

There are no actual details now as there are no programs, its just talk. Some ideas have been floated, and it is important to know the limitations that are being considered for this program if you are basing your immediate real estate plans on it. Re-fi’s are presently excluded, you won’t be able to refinance your existing higher-priced loan at that low rate. In fact, there is talk that it will only be for first time home Buyers.

Regardless of who can qualify, what does it mean for those who do? Here are some examples to illustrate in dollars what the percentages mean to a Buyer: A $200,000 loan at 4.5% would cost $1,013 monthly. Just a few weeks ago loans were around 6% and that same loan cost $1,199, or $186 per month more! Another way to look at it, if you qualified for the $1,199 payment, and rates go to 4.5% you can buy $36,655 more house if you are so inclined.

So it sounds like a good idea to wait for the low rates, right? Well… maybe. Rates are really pretty good right now. We had a customer lock in a loan this week at 5.2%, or just $84.85 more monthly than the 4.5% rate would cost. Is it worth the wait to see if: 1. The lower rates do, in fact, materialize, 2. You qualify for the program(s) they offer, and 3. The property you want qualifies for the program(s).

Our Advice: If the real estate loan economic stimulus program becomes a reality, and you qualify, it is important to remember that there are people just like you out there that will also benefit. That means you will probably have competition for the home you want to buy since most of the first time home Buyers will be in the same price range that you are in, $120-300,000. That is already a very active segment of the market in which homes that are priced right are selling, some with multiple offers. The Rate Stimulus program will not only generate additional buying competition, it could make owners “proud” of their property to the extent that they adjust their price upwards. That is part of the intent of the program, to stop the real estate price freefall.

Prices and interest rates are great right now! If you are considering buying work with your agent to identify your true wants and needs, and what is available in the market for you to buy. You will likely be wonderfully surprised. After that… take action! Don’t wait for something that might not be forthcoming – control your own destiny and future emotional and financial happiness. When it comes to choosing professionals to assist you with your real estate needs… Experience is Priceless! Lisa Wetzel & Jim Valentine, RE/MAX Realty Affiliates, 775-781- 5472.

Are Lenders Still Impacting the Market?

Yes, lenders are still having an impact on real estate values and sales. The numerous bank-owned properties throughout Carson Valley are continually driving down the neighborhood values because of the banks’ lack of maintenance on their properties. The dry lawns, weed forests, and other value-sapping deficiencies resulting from lack of care and a vacant property are driving down the values of entire neighborhoods.

There are other, less obvious lender impacts in our market that are also having a major impact in sales as they affect a borrower’s ability to qualify. These involve major changes that are new policies or procedures. They can range from allowable debt/income ratios being lowered, to a higher FICO score requirement. Those are usually known to a borrower at the beginning, but we have seen changes in the middle of a loan process. The more subtle, less publicized ones are the ones that will trip you up.

Consider the new Fannie Mae and Freddie Mac rules that apply when buying another home before selling your old one. Historically, the Buyer generated a lease agreement for the existing home and was allowed to use 75% of the lease income to offset payments on that home. Two months of cash reserves were typically required. The New Rules require a borrower with a home in escrow, but not sold, to qualify on their ability to carry the payments on both homes, no lease income or rental survey income is allowed.

If the new home is a second home, the borrower has to show the ability to carry both payments and have six months PITI on both properties in documented reserves. If you are buying a rental property you can use 75% of the rental amount, but now you must provide documented evidence that you have at least 30% equity in the property. Additionally, there are detail requirements that must be complied with, i.e.- you have to provide the receipts of the security deposit from the tenant, and the deposit into your account. If you have less than 30% equity the rental income won’t count to offset your payment, you must now have six months reserves for both properties.Our Advice: Don’t let the details stop you if you want to buy a new home. We recommend, however, that you don’t experiment with lenders. We have many good, seasoned, honest lenders in our Carson Valley that will work with you, protect you, and perform for you allowing you to achieve your objective. A new lender doesn’t know where the roadblocks in the process are. Your process will be one continual surprise resulting in an exceptionally frustrating experience if your lender isn’t seasoned. The seasoned lender will take you through the process addressing each hurdle like a hurdler. Lenders today are working to minimize the risk to the investor. That has resulted in a new industry which is much like the old industry … you have to truly qualify to borrow. If you qualify … proceed with confidence and don’t let the hurdles bother you along the way.

Professionals in our industry have rarely been as important as they are now. The major wealth in the world has been largely accumulated via real estate. These are good investment times, don’t let the hurdles keep you from your goal. Get with a good hurdler and have confidence in achieving your goals. Your lender, escrow officer and real estate agent are more important to you than ever before in these exhilarating times. Experience is Priceless! Lisa Wetzel & Jim Valentine, RE/MAX Realty Affiliates, 775-781-5472, carsonvalleyland@hotmail.com, visit our websites at carsonvalleyland.com or carsonvalleyland.net .