What is a Pre-emptive Rate Lock, and How Long Should I Wait to Get One?

Industry authorities agree: interest rates are expected to gradually keep climbing, despite recently passing the federal budget deadline. Borrowers that are getting ready to apply for home loans shouldn't wait for a change in the tide, according to a recent article in the New York Times.

It is in your best interest to buy now while rates are relatively low.  According to Keith T. Gumbinger, the vice president of the HSH, "The likelihood is that rates will move higher rather than lower in the coming weeks."  Trying the market is not advisable, especially if it is currently at a place that you can make a transaction work.

Your best option is to establish a pre-emptive rate lock sooner rather than later, to ensure you are getting the best rate.

So, what is a "Pre-emptive Rate Lock"?

Inventories Have Returned to Normal - But What is Normal?

While housing inventories are still 13.4% lower than they were list year, it is still much closer to what is considered a balanced 6-month-supply market, according to Real Estate Economy Watch and the recent RE/MAX report.

In September, home sales were up 10.7%, and the median price of these homes ($185,000) was 12.2% above the median price of homes last September.  This makes 20 consecutive year-to-year increases for the month of September.

These moves mark a shift towards stabilization, and normality.  However, if you are a homeowner waiting for the market to return to normal, we would like to note that based on historical and currnet trends, this is "normal".  What we can remember, in our recent memory of the real estate market over the last 10 years, is an anomaly relative to how the market operates.  Waiting is not likely to be more beneficial in the long run, as the market is now at a stable place for most to begin exploring opportunities.

What Increased FHA Loans Mean For Homebuyers

The Federal Housing Administration is set to increase their loan limits, which should give a large helping hand to U.S. home buyers.

The loan limits now span up to $729,750 in a good portion of U.S. counties.  This is great move forward from the FHA, especially considering their loan reduction back in 2011.

Here are some FHA tips, courtesy of Ron Euliano over at Bridgeview Bank Mortgage. 

What can an FHA mortgage do for home buyers?

An FHA mortgage provides a few advantages that loans by Freddie Mac or Fannie Mae do not.

• Buyers can have as low as a 3.5% downpayment
• "Looser" mortgage underwriting standards, in comparison to other loan backers
• FHA loan can be acquired 12 months after a foreclosure, short sale, or bankruptcy
• You can borrow more money from your bank with an FHA loan than with a conventional one

 

Do you qualify for the Home Affordable Refinance Program?

1 in 5 homeowners nationwide qualify for the Home Affordable Refinance Program (HARP) - the program backed by the government in 2009, designed to help homeowners who owe more than the worth of their home and are current on their payments refinance to either a lower interest rate or more stable mortgage.

According to Zillow Blog, HARP has improved vastly since its creation.  It is now significantly easier for homeowners to qualify.

Have you tried to refinance in the past, but were turned down by your lender?
It's worth taking a second look now.  The expanded eligibility requirements very likely may help you qualify.

See if You're Elligible for HARP:

Pending Home Sales Declined this Fall

Pending home sales in August slowed, according to RISMedia.  The sparseness of home inventory, paired with rising interest rates and home prices can be the prime suspects, the National Association of Realtors (NAR) states.

The chief economist of NAR, Lawrence Yun, stated that this was an anticipated decline, especially following the increased levels of sales of existing homes at the end of this summer.

"Sharply rising mortgage interest rates in the spring motivated buyers to make purchase decisions, culminating in a six-and-a-half-year peak for sales that were finalized last month. Moving forward, we expect lower levels of existing-home sales, but tight inventory in many markets will continue to push up home prices in the months ahead."

In the Midwest, we saw a decline of 1.4% from 111.6 in August.  This is, however, 13.8% higher than we found this number last August.

The Top 6 Ways Hiring a Real Estate Professional Will Save You Money

The real estate market can be an intimidating place, even for the most experienced buyers and sellers. And for most people, purchasing a home is the most significant financial investment they make in their lifetime. Ultimately, hiring a real estate professional puts more money in your pocket, even after spending money on commission. If that's true, why would a consumer decide to go it alone?

In general they don't. Approximately 90% of home buyers and home sellers both hire a professional to assist them in their transaction.

Here are the top 6 ways that real estate agents are invaluable to your process.

1. Negotiation

Whether or not you feel well versed in the ins and outs of real estate, having a real-estate agent there to fight your battles for you can pay HUGE dividends in the end.

A real estate agent's job, first, is to know the real estate market. They should know approximate home values in a neighborhood, and more so, they should know how to analyze the data to recognize trends. You don't want to be the one holding the bag on a $400,000 purchase to find that the market dropped 10% within a year of buying. That's $40,000 in the toilet.

Currently in the Northeastern Illinois, according to Midwest Real Estate Data (MRED LLC.), the average home sells for somewhere around 94% of its original list price. A good Realtor can negotiate, on average, about 97% of the list price (we get even more), for a 3+% improvement on return just on face. (Of course it's more complicated than that, 97% of the correct list price might be far more than 94.5% of a poorly priced home.)

Our buyer clients also save money through strong negotiation skills. MRED says that Prudential Rubloff, @Properties, and Dream Town Realty's clients pay about 95% of original list price when buying a home, where Baird & Warner's clients only pay 93.2%. There are many, many variables that account for the difference (neighborhood, average purchase price, etc.), but the point is there's a difference even amongst represented buyers, imagine the challenges for an unrepresented one?

Finally, a Realtor's job is to act as a sort of buffer between the two negotiating parties, diffusing often very heightened emotional states of parties on both sides of the fence. In these sort of situations, it is your realtor's job to specifically negotiate the facts, and present your interests in the best possible way.

Already they have more than earned their commission, but we're not done.

The Cost of Remodeling - What Pays Back the Most?

Shows like HGTV's Love it Or List It depict all of the merits of remodeling, especially when it comes to increasing the value of your home.

While it is true that the cost of remodeling has dropped 10-15% in the past 5 years, be careful.  In almost all cases, the amount of money that you will invest in a remodeling situation will be greater than the amount of value it will add to your home when you plan on selling it.

Take a look at Remodeling Magazine's figures.  Back in 2005, homesellers earned back, on average, 82.5% of the money spent on renovation projects.

In 2011-2012, however, it has greatly diminished to a mere 57.7% on average.

So what does this mean?  Are renovations not worth it?