Edwin Gerace

NOTES AND CONVERSATION ABOUT MORTGAGES IN TODAY'S ENVIROMENT

NOTES AND CONVERSATION ABOUT MORTGAGES IN TODAY'S ENVIROMENT. (June 1, 2009)

What are the largest changes that face the Home Buying process?

One of the biggest changes for buyers looking for a conventional mortgage in today's market is the importance of their credit score. Just two years ago it was an all or nothing system. If you were approved for a conventional loan you got the same rate whether your credit score was 620 or 740. Now the difference in rate for these two buyers would be more than a point or cost the 620 buyer 3 discount points to get the same rate as the 740 buyer. Also, buyers with less than a 660 credit score no longer qualify for mortgage insurance, requiring them to be able to put down 20%. This is the primary reason FHA loans are becoming more popular. If a borrower qualifies, there is no minimum credit score and everyone gets the same interest rate. The FHA loan limit for most of SC, including the Columbia Metro Area, is $271,050; so buyers needing a larger loan need to do their homework upfront and make sure there are no errors on their credit report which could be impacting their score.

What are interest rates going to do in the future?

It is always dangerous to try and predict which way interest rates will go, but generally they will increase as the economy improves. Most people think the FED sets mortgage rates and expect rates to go up and down based on FED policy. This is not true. Rates are impacted by the FED's action, but are actually determined by the bond market. If the stock market is improving, investors shift money from the bond market to stocks. This requires bond sellers (Fannie Mae & Freddie Mac) to offer higher yields to sell their bonds that they must then pass on to the end consumer in the form of higher rates. So to answer your question, if the economy has really started to turn the corner, we can expect rates to rise as well.

When is a good time to refinance your home?

Assuming that the only reason a borrower is considering refinancing is to lower their rate, there is a pretty simple calculation to determine whether it is a good time or not. The first question is always "how long do you intend to keep the property?" Once you determine this, you simply divide the cost of the new loan by the monthly payment savings to establish the break even period. If this is a shorter time frame than how much longer they intend to own the property it is probably a good financial decision. An example would be someone with a $200,000 mortgage thinking about refinancing from a 6% rate to a 5% rate. The monthly savings would be approximately $125 month and the closing costs without points would be around $2500. This borrower would break even in only 20 months, so most borrowers would benefit from this refinance. It can be a little harder to determine if the borrower wants to pay off other debts, include renovations, or drastically reduce or increase the pay off time of their current loan. Most mortgage professionals will be happy to assist someone with the decision without any charges.

Has the loan approval process over last 90 to 120 days on loans changed?

The process is definitely taking longer and more documentation is being required than at any time in the last ten years. Borrowers need to be prepared for this upfront and realize the importance of getting the process started as early as possible if they are trying to achieve a specific closing date. The reason it is taking longer is two fold. As the mortgage industry was shaken to its core over 2007 and 2008, many lenders began to lay off thousands of support personnel or failed all together. By the end of 2008 there were approximately 60% fewer lenders and workers in the mortgage industry. At this time mortgage rates fell to their all time lows, creating a rush of business. This coupled with legislation giving first time buyers tax credits and an improving economy left lenders overwhelmed with business. Still reeling from losses the last two years and leery of the duration this business surge would last, most lenders decided not to bring on more employees due to training times and costs. The new requirements in credit policy also added to delays. The more documentation that is required, the longer it takes to be reviewed in underwriting. Fewer people, more business, and more documentation requirements caused some loans to take 60 days or more to get approved. The good news is that most lenders have now increased staffing and improved efficiencies so that most purchase loans can be closed in 30 days. You should still expect 45 to 60 days on refinances, but this should improve too if rates continue to rise.

Are there any True 100% financing programs out there?

In general there are no longer any 100% loans available. A few exceptions are Rural Housing and VA loans, but these loans are only available on certain properties or for military personnel. FHA has the lowest down payment requirement of the non-income restricted loans at 3.5% and can be used by qualified borrowers up to $271,050 in most of South Carolina. Borrowers should also do their homework on any available down payment assistance programs. Most of these are available to first time borrowers at or below the median income and work well in conjunction with FHA loans. Another good option for buyers needing 100% financing is to consider buying a HUD foreclosure. These can be purchased with $100 down using a FHA loan. Credit scoring is very tricky to predict for even the most seasoned loan officer, much less the general consumer, but there are a few things buyers should know. Revolving credit balances should be below 50% of the limit and preferably below 30% of the limit. Judgments and collections do hurt a credit score, ironically though, if they are over two years old it may be better to leave them alone unless it is required for loan approval. Inquiries do not have near the impact most people think as long as they are not excessive. One thing most people don't realize is that borrowing from finance companies actually hurts your credit score even if you make your payments on time. Finally, anytime you open a new loan your score will go down until you establish a payment history. So if you are thinking about getting a mortgage it is advisable to hold off on getting any other new credit. This is some great information put together in Partnership with Kip Murphy with Bank of Amercia and Edwin Gerace of Russell and Jeffcoat.

Kip Murphy is a loan officer with Bank of America Home Loans with over 10 years of experience in the Columbia market. He has helped 100's of buyers over this time. At Bank of America he has the tools, products and support to help anyone from first time buyers to someone needing a jumbo construction loan. Give him a call or email him today if you need any information about getting a mortgage loan. He can help with purchases or refinances in 48 of the 50 states. Kip Murphy , Loan Officer, Bank Of America Home Loans, O: 803-216-7488, C: 803-920-3470, F: 866-429-1636, E: Robert.K.Murphy@Bankofamerica.com

Edwin Gerace is a realtor with Russell and Jeffcoat Realtors with over 10 years of expierence in the Columbia market. He has help buyers,sellers and builders over the years reach thier real estate desires. Feel free to call or email him about real estate. Visit him on othe web at http://www.edwingerace.com/ or visit his blog at http://www.edwingeracesrealestateblog.com/ . Contact him at 803-609-7653 cause with Ed You Win.

I have been thinking about writting this for 3 months, and so I did post my thoughts about team work and the desire to be a winner. This post will come as a surprise to all that know me and my true college passion for University Tennessee.

In January, NCAA basketball champion Florida Gators were defeated by USC Game Cocks with no time on the clock. The last minutes played out in a storybook ending. The players were on the foul line thinking of how to win the game as a team. Holmes whispers to Fredrick, "Go long!" The best foul shooting player was on the line with 3.3 seconds on the clock and Florida was up by 1. He had a 1 and 1 attempt. The first shot bounced off the rim and the USC player grabbed the ball with authority and hurled it down the court to his team mate that had heeded his command to "Go long". His team mate caught the ball and took one step placing the ball in the net as the clock ran out. Those spectacular few minutes showed what a team has to do to win... Remember, there is no "I" in team. That is what we as individuals and citizens of our country must do to impact the lives of others.

Click on the picture for the full video

Edwin Gerace

LETTER TO RICHLAND COUNT Y COUNCIL ABOUT BANNING REAL ESTATE SIGNS

My name is Edwin Gerace and I work with Russell and Jeffcoat Realtors. I am writing you to voice my opinion about the current sign ordinance being debated. I would like to request you consider working with the real estate community in regards to the sign ordinance. Together I believe we can come to a resolution, the real estate community and the county.

Taking away signs on Two Notch Road will have a serious impact on the community. Locally speaking, agents are spending less money in newspaper ads and more money on in other mediums. A big piece of that are signs. Did you know that statistically speaking a buyer is seven times more likely to buy a home if he drives buy a home than if he reads about it in a newspaper or magazine. Without signs those drive by's won't happen. If those homes don't sell it means they stay on the market longer and generally sell for less money. If your neighbor lists his home and gets little drive by traffic he will reduce his home due to lack of exposure. Your neighbors reduced sale becomes your comparable sale when you go to sell and reduces the price of your house. Realtors right now are trying to put as many tools in their tool belt as possible to sell homes. They are trying to change what has happened in our recent economic times. Please don't make agents work with one arm tied behind their back. Taking away signs will do just that.

Below is a solution proposal from me (not the view of anyone but me):

•· ALL signs ( Including Church, Political, Non Profit, Real Estate, and others) erected in Richland County can be up no earlier than 8am on Friday and must be removed by 8am Monday. Signs to be defined as "Bandit Signs, or Directional Signs.

•· All signs in County to have a county sticker (provided by County) these stickers to be sold for 25 cents. (This is not a profit center)

•· Political signs will be exempt from time stated above but will not be exempt for any other requirement listed

•· Non Profit events will be exempt from time stated about. Event signs can not be up no longer than 1 week prior and must be removed 24 hours after event

•· Signs with out stickers will be subject to $100 fine per sign.

•· Signs not removed by 6pm on Sunday can be removed by county. Sign owner forfeits sign and sticker

•· Persons can buy a page of stickers or just one depending on the need

•· The County has the right to remove any signs in right of ways or that are damaged or laying on ground due to neglect or other reasons

RESULTS

• This will make ALL persons accountable for policing their own signs.

• Signs will be picked up, if not they are subject to rules above. Owner looses signs and has to purchase another sticker and sign.
• Businesses that cover intersections with no stickers will be fined accordingly.
• Signs lying on ground will be disposed.

I urge you to work with the real estate community regarding this issue. Thank you for listening and for your support.

Edwin Gerace

Russell and Jeffcoat Realtors

www.609sold.com

803-609-SOLD

My Blog

When watching, listening or reading the news one point becomes painfully clear. The scriptwriters for the news have no new message. They have no imagination, no creativity and no new ideas. Only one writer is needed because they only say one thing ... the sky is falling.

At our company awards breakfast last week it was apparent that some of us had not gotten the gloom doom sky is falling memo. It was a room full of optimism, new ideas and hope for a bright future. Yes, we are in uncharted waters but it is times like these that bring out the winners. People are attracted to hope and optimism. I am doing well this year but I have to adapt my business plan each day to changing and challenging news. If something in my plan isn't working then I find another avenue to success. Don't waste valuable time lamenting about the "good old days". Even if they were good old days, they are gone, so get over it and move forward. No one wants to work with a depressed pessimistic realtor when buying or selling their home. I am neither depressed nor pessimistic. I see some amazing opportunities for me and my clients.

Winners are the ones that see opportunity in most any situation. Winners like swimming in uncharted waters for the challenge it presents. Winners are optimistic!

For more information about your market or any market conditions dont hesitate to call 803-609-SOLD or email mail@609sold.com

Edwin Gerace, CSP,ASR,CGREP

As a top producing agent in the area, I am struggling to get a grasp on our "new" economy. My friend said it was like Star Trek's Enterprise, "going where no man has gone before". The economy we are in and the reasons we are here are new, and the outside factors (international dependence) are new as well. There are a few things about the new economic environment I have observed:

I am currently working with several qualified homebuyers. That fact should translate to several lucky sellers. Surprisingly, that is not the case. My buyers made an excellent offer but were driven away due to the seller's warped perception of the market. I am not implying that all sellers must work with all buyers, but in this current economic climate, the consumer should understand that this kind of market is unprecedented. In Lexington and Richland County, as in other parts of the country, sellers have to face the fact that retail values are now set by the buyer.

Sellers need to understand the definition of Mark-to-market valuations as it applies to real estate. Mark-to-Market methodology of assigning a value to a home position is based on the current market price (what a consumer will pay). Example Bank of America Stock bought for $15.00 a share a year ago is now trading for $5, 00 a share. What is the Market Value? It is $5.00, since that is what people will buy it for.

Looking at the economics of Lexington and Richland County, they vary drastically from the rest of the state. An important economic factor such as state unemployment increased to 8.4% in November 2008. This is half a point above the revised rate of 7.9% in October and the highest rate since September 1983. South Carolina has been one of the hardest-hit states in terms of unemployment during the recessionary period of the past year. The lowest unemployment for the state is Lexington County (6.0%) followed up by Beaufort County. Richland County was near the lowest in unemployment (7.2%).

In the 1970's there was little change in house sales. In the early 1980's there were deep cuts in housing sales. In the early 1990's there were medium cuts in housing sales. In the 2000's there was a spike in housing sales. Some factors that will cause these numbers to change will be left up to the consumers, who must strengthen their balance sheets with slower spending and greater saving. I feel reduced consumer spending will produce a significant drag on economic growth throughout 2009. Although the economic growth may be slower, the consumer belt tightening should increase savings providing down payments and funds for buying homes. It will take some time to see the desired effects of consumer savings on the real estate market, but it will come.

Stocks, bonds, and 401K are down, but statistics show that values of the average portfolios are in the same value as in January 1999 and January 2004. That indicates that we had a lot of growth and the values are correcting themselves. Another variable that is dropping is amount of inventory in new construction. There has been a large decrease in building of spec homes throughout the country. I can only speak for what I know in the Columbia, SC market. Builders are doing what they can do to decrease current inventory. Banks are doing what they can to limit them in the amount of loans they will give to builders. Consumers are shopping for deals in new construction and resale's. My concern in the area of new construction is homes that are not 100% . The homeowners struggle to find financing to complete and warranty it. Time will tell on this issue.

With all of the negatives previously mentioned, the silver lining to this dark cloud for the consumer is this current market offers the best opportunity in the last 5 years to buy a home. The reasons it is a great time to buy are: First there is more inventory to choose from now than there was ever before. Then pricing and condition become weighted more than ever, which will separate homes between on the market and sold. Secondly if you want to move up and are concerned that your present home won't sell for what you want, don't worry. For example your home is worth $100,000 last year; you are only able to sell your home for (90%) $90,000. Your loss is $10,000. Your move up home is listed at $150,000 you get it for $135,000 (90%). Doing the math, your net to the good is $5,000. Moving up in a buyer's market works for move up consumers. Thirdly if you qualify for the Federal Tax Credit of $7,500, in most circumstances, it covers your down payment and closing cost. The benefit to that credit is it can be taken in Tax year 2008 or 2009. The form needed is IRS Form is IRS Form 5405.

In conclusion with great interest rates, volume of inventory and people willing to work with buyers makes now the time to buy! That is why my local Home Builders have created, Build Now Buy Now Campaign to encourage homeownership. There is also a great campaign to help the economy stimulus called A plan to fix Homeownership First. Are you ready to buy a home?

Edwin Gerace ,www.609sold.com, www.EdwinGeracesRealsestateBlog.com