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Much ado about mortgages.

by Michael Marsden

The current banking and mortgage news is scaring the bejesus out of lots of people. I personally think things will settle out just fine. Yes there will be some adjustments, some buyers will have to do some more work improving credit scores, increase savings, and the like. However, those able to document income and assets, have a fairly decent credit score, and a decent down payment can still get financing at a decent interest rate. There are creative ways and programs to save hundreds a month doing mortgage buydowns. This can be seller or buyer funded...but in the current market its mostly a cost to the seller. Because the secondary market for jumbo's went south, rates for them went north. I've heard rates quoted for 30 year fixed at 8.25%.

 

Here's an example. A buyer last week could qualify to buy a $629,000 home at a 6.5% rate with 20% down. His payment: $3,185. At the current rate of 8.25% his payment jumps to a whopping $3,780 per month!! Just under a $600 increase in a split second. Now he qualifies to buy a $529,000 house. A $100,000 dollar loss of buying power and to this person..a big drop in size, location, condition, and quality or a combination therein.

 

But we can right this wrong and create a win-win deal to boot! The seller listing at his home at $629,000 can agree to pay approximately $15,000 in points to the buyer's mortgagee and buy that high 8.25% rate down to 6.5% and give him back both his buying power and lower payment. Win! The seller gets the $614,000 at closing (gross), $629,000 less $15,000 in seller paid points. Win!

 

Its deals like this that can keep sales from tanking. It just takes a little thinking and effort for agents to to understand how financing really works, how its priced, and what mechanisms can be applied to get someone into a home. Or better yet, a home they never dreamed that could afford.

 

I will close with some bullet points to parse of the state of the mortgage biz and to help understand what's been happening: • Lender guidelines on Alt-A loans have become more strict. • These Alt A loans include "No income verification" loans given to borrowers with credit scores in the low to mid 600 range.. • Last year these loans represented 17% of all loans originated. • Mainly, investors on Wall Street like Hedge funds, stopped buying these loans. • The absence of the secondary market to sell these loans forced lenders to stop offering these types of loan products. • Look for more FHA and government or Fannie Mae backed programs in the near future. • Jumbo ARMs are quite attractive if you can't fund a buy down or don't expect to be in the house long term. Thanks for reading...s

Jim Kramer on TODAY

by Michael Marsden

Jim Kramer said on the Today show this morning, Friday, 10 August 2007, said that of the 14 million people who bought a home between 2005 and 2007 there are an unprecedented number of people walking away from those homes, other than the 1930s. The Federal Reserve can change that....the Federal Reserve has done nothing and they don't seem to care. Bernanke could change that by lowering the interest rate or injecting some liquidity into the system. This fed derived problem should be solved by the fed and homeowners should come first. Kramer thinks that if Wall St. needs to take some punishment they should. Its the homeowners that should be the primary focus...not worrying if some trading desk is losing billions. We're lucky that our area of the country seems to be less affected than other areas..but this problem is a large one and we should all pay attention. This administration has demonstrated incompetence at every turn when you look back, so why should any appointees, like Bernanke, be any more competent or concerned for the greater population of our country? It would be a first if that happened.

8 Mile River Watershed

by Michael Marsden

Did you see the news from WASHINGTON, DC - Congressman Joe Courtney announced today that the House of Representatives has passed his bill, H.R. 986, the Eightmile Wild and Scenic River Act, with a bipartisan majority and the support of the entire Connecticut Congressional delegation. The final vote was 253-172. That’s good news for us who live in this area and appreciate what an incredible blessing we have in that largely unspoiled watershed!

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