IMPACT ON REAL ESTATE 7 BUSINESS

Manipulating the Mortgage Market

Undoubtedly the days of "cheap" mortgages and easy money are at least, for now - decidedly over. Just thinking about how to buy or sell a home in today’s market seems like a Herculean task. And, if you're one of the tens of thousands of homeowners facing foreclosure, the prospect of hanging onto your home probably seems even bleaker. This is simply a move from housing boom to housing bust. While it won't be easy, there are ways to navigate in this turbulent housing market. Keep hope alive and do not despair.

Buyers

Before you begin searching for a house, talk with your accountant about how much real estate you can afford, and ask him/her to tally the total cost of buying a house in a particular neighborhood and then speak with a reputable broker to confirm that your credit score is high enough to qualify for a mortgage.

Over the past year, lending requirements have tightened and credit thresholds have increased across the board. A first-time home buyer who doesn't make a down payment is required to have a credit score of 740. A year ago, a similar buyer could score 100 points below that and still qualify. As for down payments, those 0 percent-down deals will be harder to find. For first-time buyers, a down payment of at least 5 percent is common. If they receive assistance from family members, the down payment can range from 10 percent to 20 percent.

If you have a high credit rating and cash on hand, then you're really in good shape. There's little competition today, a whole lot of inventory, and mortgage rates are still in the single digits. The average interest rate is approximately 6.5 percent and 6.85 percent. Buyers with good credit scores should consider the traditional 15 - and 30-year mortgages.

Those with low credit scores should postpone the house search and focus on improving their credit standing. The biggest mistake a person with bad credit could make is to apply for a subprime interest-only loan. Instead, consider renting. It'll help you create a good rental history; give you time to raise your credit score, and help you shop for an affordable mortgage in the future.

Sellers

Pricing your home right is of utmost importance when trying to stand out from the competition. A buyer should not get boxed into a corner when negotiating a price. One thing to remove from your mind is the amount your home was worth last year.

If your mortgage is higher than the value of your house, consider holding onto your house and renting it to a potential buyer with an option for the renter to buy. Or allocate a portion of the monthly rent toward a down payment on the house. This way, you're putting the renter in a scenario where he or she is motivated to buy it.

Also, consider throwing in some personal items to sweeten the pot. For example, if you're moving to a condo, you probably won't need your lawnmower. Some sellers even offer to pay the buyer's closing costs, or to complete a portion of an unfinished basement to make the sale a bit more attractive.

Lenders

The most effective way for a homeowner facing foreclosure to navigate out of the morass is to communicate with the lender. Lenders will be a lot more willing to work with you if you call them before you miss a mortgage payment. Lenders can offer various options before late fees and attorney fees kick in.

Homeowners, who undergo a serious illness or divorce, should also have some luck making arrangements with their lenders. Bottom line, the lender is not in the real estate business. Their goal is to get paid.

Lenders might consider converting a loan from an adjustable interest rate to a lower fixed rate, or they may enter into a forbearance agreement, which relieves the homeowner of his or her mortgage. payments for up to 12 months. Typically, this offer is given to individuals who lose their jobs or are unable to work because of a work-related injury. The 12 months are then tacked on to the end of the mortgage period when the homeowner should ideally have a better handle on their finances. Regardless of your credit standing, be aware of overaggressive lenders.

If you simply can't afford the payments, your best bet is to put the house on the market. In turn, your lender will probably lower your payments for a 180-day period. However, if you're at an immediate risk of foreclosure, it may be best to conduct a short sale where the lender agrees to a lower payoff figure than the actual amount due on the house. For someone in financial trouble, this is a much better option than ruining your credit record with the foreclosure process.

Be Careful

Are you noticing a lot of "for sale" signs up in your neighborhood? You're not alone. Several parts of the U.S. are being flooded with houses. If you are in this unfortunate position, you may be feeling desperate, but steer clear of the random rescue companies that may contact you. This could be a scam; these firms claim they can stop your foreclosure immediately, if you sign documents appointing them to act on your behalf. In reality, you're probably giving up the ownership of your property.

While the thought of losing your home is a scary one, don't allow fear to paralyze you into inactivity. Call your lender; it is the best course to hold on to your home. Keep a level head although the road is rough. Do not lose heart.

"It is always better to have information and not need it than to need it and not have it."

All your Real Estate Questions can be directed to:

EDGAR HENRY
Licensed Real Estate Broker
(718) 469-8131