Will Home Mortgage Rates Hit 20%? Maybe...

If you have read the book "The World is Flat" by New York Times Columnist Thomas Friedman you know that every country on our shrinking globe is connected. If you haven't read it, I strongly recommend it; it a Great Read. If you have no interest in reading it, stop now, go to Taco Bell get dinner and come home to watch Cops!

Currently mortgage interest rates are near record lows. First Time Buyers should be stampeding to take advantage of the low rates and the government incentives. The question is: Will These Rates Last? I found this CNBC clip on YouTube and it does a Great Job of explaining why these rates may not last. It even suggests that mortgage rates could escalate quickly and housing prices could be driven sharply higher by inflation. This would be a double whammy to home buyers.

If this happens and you took advantage of today's low prices and great mortgage rates, it will be time for THE HAPPY DANCE! If things go up modestly, as we all know they will, you will still feel pretty puffy chest about your decision.

Wayne

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Despite what Mick Jagger Says, TIME is NOT on YOUR SIDE

Early in their career, the Rolling Stones had a hit song “Time in on your side”. In the ballad Mick croons that if you just wait, things will work out. This may not be the case if you are a 1st time home buyer or a home owner that needs to make a move.

The assumption is that mortgage rates, which are ridiculously low compared to historical standards, will remain at this level or even go lower. As a result, you may think you can take your own sweet time and the deal will only get better.

HELLO! You are not buying a flat screen TV where prices have been driven down by improvements in manufacturing and greater supply. You are buying a home, and for most people it is bought by borrowing money in the form of a mortgage.

Right now home buyers have an unprecedented opportunity to buy a home with mortgage rates hovering around 6%.  If your last name is Rockefeller or you have an Uncle Loey who will lend you the dough at 4% as long as you don’t report it on your taxes, go play some wWii bowling otherwise you need to sit up and take notice.

When we manage to navigate our way out of this financial quagmire mortgage rates are predicted to go up. The current low mortgage rates are there to stimulate sales in the housing sector. The housing sector provides jobs directly or indirectly to many parts of our economy; when it’s sick, the entire economy is sick. Once the heath of the housing sector improves, the smart money is that Mr. Bernanke and his trusty crew will raise interest rates to keep inflation in check.

There is one school of thought that if the Chinese stop buying our US Treasury Bonds that rates would increase DRAMATICALLY! Checkout my Friday post for a great insightful video.

Wayne

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R U a 1st Time Buyer - Get Your $8,000 - Watch This Video

Many of my clients these days are buying their first home. The financial types fully understand how the First Time Buyer credit works and what they will get, but the subject is somewhat confusing if you don’t deal with finances on a daily basis.

Checkout this short video (click here). It explains how the tax credit works, and if you qualify.

TIP: If you owned a home previously, but currently do not own a home, you may qualify as a first time home buyer.

Happy viewing

Wayne O'Day

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A STORMs a BREWING for First Time Home Buyers

I am currently working with a delightful young lady named Julie who has a plan and is going places. She is trying to buy her first home; a condo in Crestwood, Oak Forest, Tinley Park. Orland Park or Mokena Illinois. While we have been able to find several nice condos in her price range, the obstacle we are encountering is that the condo developments are not approved for a  FHA loan.


For the past 2 years, EVERY one of my first time buyers bought their home using a FHA (Federal Housing Authority) loan. The reason is quite simple, you can buy a home with just 3 ½ % down versus 10% with a traditional loan. Buying a single family home is not a problem, but condos are a horse of a different color.

All condos have associations and condo declarations (rules and regulations for the owners). It is standard practice for many declaration to give the condo association the “First Right of Refusal” which provides the association the option to buy the condo right our from under a prospective buyer. While I have never seen this happen, in over 25 years, FHA deems this discriminatory and will not lend on a condo if this clause is present in the decs. It wasn’t a problem a few years ago when banks would gladly lend you 100% to buy anything you wanted if you could fog a mirror.

Effective 11/2/09 FHA is eliminating the rule on “First Right of Refusal”. BUT DON”T GET EXCITED! In its place FHA is passing on to each individual lender, the burden of getting a condo project FHA approved. Lenders will need to spend money to analyze, package and submit condo developments to the FHA for approval. Once the lender obtains approval, they will be able to write FHA loans in that development. Other lenders who want to make FHA backed loans in that development will need to go through the same process to get the condo development approved for their company. The process will be done lender by lender; development by development. It is going to take some time.

This whole process will eventually get sorted out. But in the meantime, get ready for a long cold winter in the condo financing market.

I’m working hard with Julie to find her a great condo before November 2nd; I don’t want to hold back this rising star.


Wayne O'Day

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Chief Economist Warns - Mortgage rates could RISE SHARPLY

October 9, 2009


By Lawrence Yun, Chief Economist

There is no delight in watching the budget deficit soar. The $1.4 trillion deficit in the completed 2009 fiscal year to September is the highest ever in the U.S. in sheer dollar figures, and the highest since the Second World War if measured in relation to the overall economic pie. It's a huge burden to the future generation and could easily cause interest rates to rise much sooner and quite sharply. Washington needs to come out with a credible plan to reduce the deficit over time.

To read the entire article go to
http://www.realtor.org/research/economists_outlook/commentaries/demand1009

For a truly great deal on a Fabulous Short Sale Executive Home in Abbey Woods, Frankfort, go to www.TheODayTeam.com and scroll through the featured listings until you find20740 Abbott Ct. We will be having an open house on Sunday 10/11/2009 from 1pm to 3pm.

Secret - Find your Best Home Deal in Today's Market

To find your Best Deal on a house in Orland Park, Tinley Park, Palos Heights, Homer Glen Illinois or any of the southwest suburbs you MUST READ THIS.


Today, homes for sale can be grouped into one of three broad categories:
     1) Foreclosures
     2) Short Sales (Pre-Foreclosures)
     3) Traditional Sellers

The relevant question is where can you get the absolute best deal? Having been a real estate broker for more than 25 years, here’s my take.

Foreclosures are perceived by the average home buyer to be the VERY BEST DEAL because in many instances, there are CHEAP. The reality is that they are priced at market for their location and condition. If the foreclosure is an abused property (and many of them are) the price must be low to attract a buyer that is ready willing and able to undertake a renovation of the property. If you are handy and have a bucket of cash, a foreclosure may be your best deal. These deals can be closed in 30 – 45 days.

Short Sales are homes that are being foreclosed on. The owners cannot continue to make the mortgage payment. From the banks perspective, “the first lose is the best lose.” The bank is willing to take less that what they are owed to not have to go through the expense of foreclosing, taking possession, maintaining and reselling the property. You can expect a Short Sale to sell 5% to 10% below comparable houses on the market. You are thinking Voila! I found the answer. Not so fast Cowboy. A bank is losing money when they agree to a short sale. With the number of short sales banks are dealing with, they need to assure their stockholder and investors that they are taking the smallest lose possible on each and every deal. Short Sales offer some of the best prices on nice homes. Remember in many cases, the owner is still in the home and caring for it. The downside is that the bank can drag these transactions on for 3 to 7 months and there is NOTHING that you, your agent or your attorney can do to close one of these deals in 30 days. To take advantage of a short sale, you need to have time and patience and hope that your mortgage rate does not rise before you can close on the house. If you don’t have the time, don’t buy a short sale.

Traditional Sellers provide some of the absolute best deals for the average home owner. The prices of these homes have been driven down by foreclosures and short sales. For these homes to sell in today’s market, they MUST be perceived as a GREAT DEAL. Motivated sellers are primping their homes like a 16 year old girl going to a dance. They are painting, re-carpeting and fixing their homes to make them stand out. When they are priced at market, they provide really nice homes at great prices.

THE ANSWER: It’s Dealer’s Choice. Pick the category that fits your “Time” and “Money” situation. Happy House Hunting.

Wayne O'Day
The O'Day Team
Premiere Plus Realty - Orland Park IL

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