Peter Middleton

1. Don't buy if you can't stay put.

If you can't commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner - even in a rising market. When prices are falling, it's an even worse proposition.

2. Start by shoring up your credit.

Since you most likely will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover.

3. Aim for a home you can really afford.

The rule of thumb is that you can buy housing that runs about two-and-one-half times your annual salary. But you'll do better to use one of many calculators available online to get a better handle on how your income, debts, and expenses affect what you can afford.

4. If you can't put down the usual 20 percent, you may still qualify for a loan.

There are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a down payment as small as 3 percent of the purchase price.

5. Buy in a district with good schools.

In most areas, this advice applies even if you don't have school-age children. Reason: When it comes time to sell, you'll learn that strong school districts are a top priority for many home buyers, thus helping to boost property values.

6. Get professional help.

Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Look for an exclusive buyer agent, if possible, who will have your interests at heart and can help you with strategies during the bidding process.

7. Choose carefully between points and rate.

When picking a mortgage, you usually have the option of paying additional points -- a portion of the interest that you pay at closing -- in exchange for a lower interest rate. If you stay in the house for a long time -- say three to five years or more -- it's usually a better deal to take the points. The lower interest rate will save you more in the long run.

8. Before house hunting, get pre-approved.

Getting pre-approved will you save yourself the grief of looking at houses you can't afford and put you in a better position to make a serious offer when you do find the right house. Not to be confused with pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history.

9. Do your homework before bidding.

Your opening bid should be based on the sales trend of similar homes in the neighborhood. So before making it, consider sales of similar homes in the last three months. If homes have recently sold at 5 percent less than the asking price, you should make a bid that's about eight to 10 percent lower than what the seller is asking.

10. Hire a home inspector.

Sure, your lender will require a home appraisal anyway. But that's just the bank's way of determining whether the house is worth the price you've agreed to pay. Separately, you should hire your own home inspector, preferably an engineer with experience in doing home surveys in the area where you are buying. His or her job will be to point out potential problems that could require costly repairs down the road.

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The delinquency rate on U.S. mortgage loans hit an all-time high in the second quarter, but the pace of growth for the rate slowed, a possible sign the mortgage crisis may be beginning to turn the corner.

Data provided by credit reporting agency TransUnion shows the ratio of mortgage holders who are 60 days or more behind on their payments increased for the 10th straight quarter, to 5.81 percent nationwide for the three months ended June 30.

That's up 65 percent, from 3.53 percent, in the 2008 second quarter.

Deliquency of 60 days is considered a precursor to foreclosure, because of the difficulty homeowners would have coming up with two back payments to bring themselves current.

While the deliquency rate hit a new high, however, the increase from the first quarter to the second was 11.3 percent. In the two prior quarters, the rate jumped nearly 16 percent.

That slowdown may be a good sign, said FJ Guarrera, vice president of TransUnion's financial services division. "We have reason to be cautiously optimistic," he said.

While there's no way to know exactly why the pace of growth is slowing, Guarrera said, it appears that programs aimed at helping distressed homeowners from both the government and mortgage lenders are beginning to help. In addition, he said, consumers are being more careful with their spending.

For the second quarter, Nevada, Florida, Arizona and California remained the four states with the highest deliquency rates, mirroring the locations where foreclosures are the highest. Nevada's deliquency rate spiked to 13.8 percent, from 11.6 percent in the first quarter and 6.63 percent in the 2008 second quarter.

In Florida, the delinquency rate rose to 12.3 percent, from 11 percent in the first quarter, and 6.47 percent in the 2008 second quarter.

TransUnion culls its database of 27 million consumer records to produce the statistics.

North Dakota and South Dakota remained the states with the lowest deliquency rates. North Dakota's rate actually edged down a hundreth of a percent, to 1.5 percent. Ohio, Idaho and Connecticut also saw decreases from the first quarter to the second.

Guarrera saw particular importance in the statistics for Ohio, where deliquency edged down to 4.57 percent from 4.58 percent in the first quarter.

The Ohio rate remains up substantially from the 2008 second quarter, when it stood at 3.77 percent, but the quarter-over-quarter decline, while small, was significant, he said.

"I believe this is a precursor to recovery," Guarrera stated, noting that the recession was felt first in the Rust Belt and Sun Belt states. "We see this as a really good sign."

Not all of the news was positive, Wyoming and Utah, two states that have been far from the center of the foreclosure crisis, saw their deliquency rates jump the most, to 2.85 percent and 4.68 percent, respectively. Guarrera noted both states has a small populations, so results can be skewed by small changes.

TransUnion still expects the mortgage deliquency rate to keep rising, but now expects the national rate to top out just under 7 percent around the end of the year. That's a slight revision from earlier in the year, when the company predicted the rate would go past that mark.

Nevertheless, it's going to take about a year before the rates start to fall across most of the country

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Affordability, low interest rates, tax credits, and higher conforming loan rates are combining to boost sales in California, far above last year's sales.

That could bode well for the rest of the nation if the saying, "as goes California, so goes the nation," rings true.

Statewide, home prices in May were down an average 32 percent for houses and condos combined, according to the latest numbers from the California Association of Realtors (CAR).

"There's a lot of activity in the low end right now, but with the conforming loan limit at $729,750 the $600,000 to $800,000 price range has really picked up too,"

CAR's "First Time Buyer Housing Affordability Index" for the Monterey region was up to 71 percent during the first quarter of 2009, compared to 31 percent a year earlier.

Statewide, the numbers were 69 percent during the first quarter this year and 46 percent a year ago.

The index measures the percentage of households that can afford to purchase an entry-level home.

DiBenedetto said there should be more activity in the lower end, but banks are holding foreclosures due to industry mergers and a legally mandated moratorium.

That's true for most of the state.

A 90-day foreclosure moratorium, effective June 15, 2009, is designed to get lenders to try harder to keep borrowers in their homes. Under the new law, loan companies have to prove they tried to modify loans of struggling homeowners before they can begin foreclosing. Otherwise, lenders must give homeowners a three-month reprieve before they begin foreclosure.

Interest rates have become more cooperative, trending lower during the first weeks in July. Freddie Mac reported July 16, the average rate was 5.14 percent on conforming, 30-year fixed rate mortgages.

"We don't know how long they can stay this low. One tick up and you can be priced out of the market," DiBenedetto said.

DiBenedetto said buyers include first-timers cashing in on tax credits, a maximum $10,000 for the state and $8,000 from the federal government.

By mid-July, California still had $33 million of $100 million to allocate for first time home buyers who purchase new homes. Unfortunately the $100 million may already be spoken for. The state had also received applications for more than the $100 million in the fund.

The federal government offers a maximum $8,000 tax credit to first time home buyers who purchase any resale or new home.

CAR said the share of first-time buyers statewide is up to 38 percent this year, compared to only 19 percent last year.

"Buyers are beginning to realize that the combination of favorable home prices, historically low mortgage rates, and first-time home buyer tax credits, may not align again for many years," said CAR President James Liptak.

CAR's "2009 Survey of California Home Buyers" said 68 percent of buyers said price decreases motivated them to buy a home, while 39 percent reported low interest rates helped them move to a better location. Twenty-three percent claimed the likelihood that rates will move up as another motivating factor to buy.

The survey also found the large number of distressed properties on the market was more of a motivating factor than in recent years.

Forty-nine percent of all buyers purchased a home through a traditional market sale, while 38 percent purchased a bank-owned property. However, buyers found REO or bank-owned property purchases were more difficult in terms of obtaining financing, compared with a more traditional transaction.

DiBenedetto also said investors are a growing segment of buyers now that home prices are low enough to make purchases viable cash-flow rental properties.

"I would tell buyers it's a good time to buy,"

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Homeowners who hope to avoid foreclosure are increasingly working with banks to sell homes for less than their unpaid mortgages.

These deals, called "short sales," allow lenders to avoid the long, expensive process of foreclosure and give sellers a chance to maintain better credit records by not losing their homes.

About 11 percent of national transactions in June were short sales, according to the National Association of Realtors. The Realtors Association of Northeast Wisconsin doesn't track those numbers locally, but President K.C. Maurer said they're on the rise.

"From what we read and what we're seeing on the market, they're becoming more popular," he said.

Under a short sale, homeowners must show they can no longer afford house payments or be in pre-foreclosure status, must show financial hardship and have an offer to buy. Lenders also look at whether the value of the home has fallen below the amount owed.

Lenders then consider whether to accept the reduced price, as well as whether to hold the current homeowner responsible for the difference.

For instance, if a homeowner owes $100,000 on a home and a buyer offers $80,000 in a short sale, the lender may decide to accept the sale rather than go through a foreclosure, which can take six to nine months. The lender also considers whether the original homeowner should pay back the $20,000 difference from the sale.

To streamline the process, some lenders pre-approve homebuyers so when an offer comes in, the paperwork is ready, he said.

The Bank of Luxemburg did about three short sales in the past year, President John Slatky said. His bank doesn't do 100 percent financing for mortgages, he said, which may make it easier for people to pay off loans.

If a customer asks to make a short sale, in most cases the bank will work out a deal for the original homeowner to pay off the rest, he said.

"In situations where they don't have the capacity, say a spouse passed away or something happened, we're going to end up writing it off," Slatky said.

His bank is small enough that it works one-on-one with borrowers so short sales can be handled in a reasonable amount of time, he said.

Hundreds of struggling local homeowners could benefit, she said.

Nearly 370 property owners in Brown County were more than three months behind in mortgage payments as of last week, Solo said.

"Short sales definitely (are) a better option for them," Solo said. Done properly, a short sale should take no longer than two months, she said.

The federal government recently launched a program aimed to help homeowners avoid foreclosure.

The plan will streamline the short sale process and standardize documentation, according to the National Realtors Association. It also will offer borrowers who complete short sales $1,500 to help with moving expenses and will provide cash incentives to lenders who have second liens on the property for giving up those claims.

The program is open to homeowners who don't qualify for another loan modification.

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La Jolla, CA.--The number of foreclosure proceedings started against California homeowners fell slightly in the April-through-June period compared with the prior three months, but remained higher than last year. The dip from earlier this year occurred as lenders and their loan servicers took time to revise procedures and priorities in an environment of continuing home price depreciation, economic distress and mortgage defaults, a real estate information service reported.

Lenders sent out a total of 124,562 default notices during the second quarter (April through June). That was down 8.0 percent from the prior quarter's record 135,431 default notices, and up 2.4 percent from 121,673 in second quarter 2008, according to MDA DataQuick.

"There is a perception that the housing market is dragging along bottom, that it probably won't get much worse, and that the lenders need to get serious about processing the backlog of delinquencies, either with work-outs or foreclosure. We're hearing that some lenders and servicers are doing just that, hiring more people to do the necessary paperwork. That means the foreclosure numbers will probably shoot back up during the third quarter," said John Walsh, DataQuick president.

The median origination month for last quarter's defaulted loans was July 2006, the same as during the first quarter. A year ago the median origination month was April 2006, so the foreclosure process has moved three months forward during the past 12 months.

"Either the mid 2006 loans were particularly nasty, or lenders and servicers haven't kept up with new delinquencies. Looking below the surface statistics it appears likely that it's both," Walsh said.

The lenders that originated the most loans that went into default last quarter were Washington Mutual, Wells Fargo and Countrywide. Along with Bank of America and World Savings, they were the most active in 2006. Their default rates are all below 10 percent, far below the rates of Argent Mortgage (55.1 percent of loans resulting in a default notice), WMC Mortgage (54.6 percent) First Franklin (51.8 percent)and New Century Mortgage (50.8 percent).

Many, if not most, of the loans made in 2006 are owned and/or serviced by lending institutions other than those that made the loans (mortgages are often sold off after the initial lender originates the loan, and are often serviced by a different entity). Many of the originating lending institutions no longer exist. The "servicers" pursuing the highest number of delinquencies last quarter were JP Morgan Chase, BAC Home Loans Servicing and Mortgage Electronic Registration Systems.

While most first quarter 2009 foreclosure activity was still concentrated in affordable inland communities, there were signs that the foreclosure problem was intensifying in more expensive areas. The state's most affordable sub-markets, which represent 25 percent of the state's housing stock, accounted for more than 52.0 percent of all default activity in 2008. In first quarter 2009 it fell to 47.5 percent, and last quarter it dipped to 45.0 percent.

On primary mortgages, California homeowners were a median five months behind on their payments when the lender filed the notice of default. The borrowers owed a median $12,911 on a median $345,000 mortgage.

On home equity loans and lines of credit, borrowers owed a median $4,152 on a median $65,700 credit line. However the amount of the credit line that was actually in use cannot be determined from public records.

San Diego-based MDA DataQuick is a division of MDA Lending Solutions, a subsidiary of Vancouver-based MacDonald Dettwiler and Associates. MDA DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Notices of Default are recorded at county recorders offices and mark the first step of the formal foreclosure process.

Although 124,555 default notices were filed last quarter, they involved 122,829 homes because some borrowers were in default on multiple loans (e.g. a primary mortgage and a line of credit). Multiple default recordings on the same home are trending down, DataQuick reported.

Mortgages were least likely to go into default in San Francisco, Marin and San Mateo counties -- the historical norm. The probability was highest in Merced, Riverside, and Madera counties.

Trustees Deeds recorded, or the actual loss of a home to foreclosure, totaled 45,667 during the second quarter. That's up 4.7 percent from 43,620 for the prior quarter, and down 27.9 percent from 63,316 for second-quarter 2008. They reached a record 79,511 during last year's third quarter before dropping because of a new state law that slowed the entire foreclosure process and lenders' temporary policy changes (e.g. a temporary foreclosure moratorium).

In the last real estate cycle, Trustees Deeds peaked at 15,418 in third-quarter 1996. The state's all-time low was 637 in the second quarter of 2005, MDA DataQuick reported.

There are 8.5 million houses and condos in the state.

Foreclosure resales declined slightly as a market factor, accounting for 50.1 percent of all California resale activity last quarter. It was 57.8 percent the prior quarter, a year ago it was 40.1 percent. Foreclosure resales varied significantly by area, from 6.3 percent in Marin County to 78.3 percent in Merced County.

Notices of Default (first step in foreclosure process)
houses and condos

* includes additional counties

Trustees Deeds Recorded (signal homes were lost to foreclosure)
houses and condos