Monday, April 25, 2011

Buyers “on the fence”? Here are the facts! - The Paul Paterakis Power Team - RE/MAX Showcase

The past lending practices caused the mess we are currently in; new and pending regulations are making the process of getting a mortgage a lot more time consuming and costly: expect higher fees, larger down payments and higher insurance premiums.

Forget the no money down, they will be looking at ten (10) percent minimum. They want the Home Buyer to have real “skin in the game.” In the past the Feds guaranteed nine out of ten loans; going forward we will see a major reduction and the buyer will have to qualify the old fashion way: on their own strength. Fannie Mae and Freddie Mac will be restructured but don’t expect the Federal Housing Administration(FHA) to replace them.

On April 1, 2011 most of the “Dodd-Frank Wall Street Reform and Consumer Protection Act”
went into effect with more coming out in the fall and in 2012. Right now is the best time to buy
and get a mortgage before the process is much harder and expensive.
Regardless of regulations and costs, the buyer only has two basic questions: how much per
month and how much do I have to put down. Both of them are going up and will stay there for
the foreseeable future; isn’t time to get off the fence today?

A final quick recap:

• Fannie Mae and Freddie Mac are going through major changes and complete restructuring since the Feds want to reduce their “lending” position to very little.
• Whatever loans will be made with Fannie Mae and Freddie Mac as the back-up will result in much higher monthly insurance fees and higher total monthly payment.
• Some down payments currently at three (3) percent will be a thing of the past; look for a down payment (minimum) around ten (10) percent in the near future.
• FHA loans in general will cost more to build up reserves in case of default on the note.
• Credit score: like it or not, it’s controlling the loan and its interest rate
• More and more paperwork, disclosures, verifications; the ease of a loan in the past is gone, be ready for delays and a lot more time needed to complete the process.
• The sixty-day-lock will need to be longer, causing a higher cost for the longer period of time that the lender has to set aside the loan amount while not collecting interest on it.

Besides the financing part of the home, buyers now (and going forward) have the best inventory of
homes for the lowest prices in decades. Buyers…now is the time!

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