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Paul A. Disegna's Blog

By Paul A. DiSegna | Real Estate Pro in Rhode Island
  • RE/MAX Report: Buyers Face New Challenges - and Opportunities - when Applying for Mortgages

    Posted Under: Market Conditions in Illinois, Home Buying in Illinois, Financing in Illinois  |  December 15, 2011 3:34 AM  |  1,419 views  |  No comments

    RISMEDIA, Thursday, December 15, 2011—

    In a recent study of RE/MAX agents in northern Illinois, agents reported that although this remains a great time to buy a home due to ample inventory and mortgage interest rates at a historic low, earning approval for mortgage financing has become a longer and more difficult task.

    Mortgage interest rates in late November hovered near historic lows, with Freddie Mac reporting that the interest rate for a 30-year fixed-rate mortgage stood at 4 percent while the rate for 15-year fixed-rate mortgages hit 3.31 percent. At the same time, homeowners are willing to negotiate on everything from final sales prices to closing dates and repairs. This means that buyers can expect to pay less for single-family homes and condominiums today, even those in prime locations throughout northern Illinois.

    But there's one challenge that buyers face today: Earning approval for mortgage financing.

    "It used to be that if you could breathe and had a pulse you could buy a home," says Sharon Esslinger, managing broker/owner of RE/MAX Country Crossroads in Viola. "That is no longer the case. Things are tighter, more rigid, today. Getting a loan today requires more patience.”

    According to RE/MAX, the good news is that the most negative rumors aren't true: Mortgage lenders are, in fact, continuing to lend money to qualified buyers. And those buyers worried about credit and down payment requirements also have a solid option in FHA financing, which has steadily become a more popular option among borrowers. But it is true that qualifying for a mortgage loan is more of a challenge today than it was during the height of the housing boom.

    RE/MAX agents in Illinois say that buyers today must be prepared for this new lending reality. Buyers with good credit, solid debt-to-income ratios and the documents to support their income claims will still be able to find favorable mortgage loans, and they’ll find them at historically low interest rates. Buyers just have to be patient and expect to provide a lot of paperwork before closing their loans.

    "This really isn't new. Getting a loan was never a slam dunk back in the pre-boom days," says Mark Zipperer, broker/owner of RE/MAX Edge in Chicago. "You used to be nervous about taking out a loan. You did whatever you needed to do because you were asking for someone else's money. You made sure your finances were in order, you paid down your credit-card debt, you socked away some money and were ready to go. During the boom, all that planning went away. During the boom we joked that we could write a mortgage application for your pet and the lenders would close on it."

    Today, buyers hoping to qualify for mortgage financing at low interest rates must first have a solid credit score. Most conventional lenders today reserve their best rates for borrowers with credit scores of 740 or higher on the popular FICO credit-scoring scale.

    Buyers must also have low credit-card debt and income levels that are not only high enough to cover their monthly mortgage costs comfortably, but that can also be documented with a paper trail. Most conventional lenders today want buyers' monthly debt—including their estimated mortgage payments—to be no more than 36 percent of their monthly income.

    Susan Coveny, broker/owner of RE/MAX Prestige in the Chicago suburb of Long Grove, said that she tells her buyers today that they must be able to document all of their recent significant financial transactions. For example, buyers who received a $2,000 payment into their checking accounts must be able to produce documentation showing that this payment is either an annual bonus check or a gift from their parents.

    "Today, we have to prepare our clients to have all of their financial paperwork in order," Coveny says. "Clients need to make sure that everything is in perfect order. Lenders today want to make sure that buyers are living within their means. They want to make sure that they won't overextend themselves by taking on a monthly mortgage payment."

    It's also important for buyers to have financial reserves, Coveny says.

    "Lenders want to make sure that if buyers lose their jobs, they'll be able to make their mortgage payments for several months as they search for new employment," she says.

    Vicki Geiger, broker/owner of RE/MAX Top Properties in Morris, relies on the many relationships she has formed with mortgage loan officers during her long real estate career to help her clients navigate the new mortgage reality. When her clients have questions about the mortgage-lending process, Geiger recommends one of the loan officers with whom she's formed a relationship.

    This way, Geiger knows that her buyers will receive the best advice possible when it comes to what documentation, credit scores and debt-to-income ratios they'll need to qualify for a mortgage loan.

    "Resourcing is one of the most important benefits that real estate agents can provide to their clients," Geiger says. "I know many excellent lenders. If my clients ask me legal questions; I'd refer them to a real estate attorney. If they have lending questions, I refer them to a knowledgeable loan officer."

    Above all, RE/MAX professionals advise buyers today to be patient during the lending process. Mortgage loans do not close in two weeks. The underwriting process takes time.

    Buyers should not be insulted when their lenders ask them for additional verification. Just ask Lynn Fairfield, broker associate with RE/MAX Suburban in Libertyville.

    She recently worked with buyers who had gotten married in the middle of applying for a mortgage loan. These buyers received a significant amount of money for their wedding, and promptly deposited it into their bank account.

    Their lender wanted proof that the money came from the wedding. He asked for a copy of the couple's wedding invitation.

    "I'd never heard about anything like that before," Fairfield says. "But that's the way it is today. Borrowers need to be ready to verify everything."

    For more information, visit www.illinoisproperty.com andwww.remax.com.

  • How Can Renters Solve the Housing Crisis?

    Posted Under: Market Conditions in Rhode Island, How To... in Rhode Island, Rental Basics in Rhode Island  |  December 10, 2011 10:51 AM  |  1,188 views  |  1 comment

    RISMEDIA, Saturday, December 10, 2011—

    Residential real estate is not rocket science. We know that this housing crisis is:
    1. Explainable – bad lending, mad speculation, wild expectations, government meddling
    2. Isolated – bad mortgages, negative equity, strategic default, government meddling
    3. Temporary – demand for housing always catches up to supply eventually 

    Anyone with any experience and perspective will agree that this market will recover over the next 10 years, but what will this particular recovery look like? Since the root of the problem was unprecedented, the solution might be as well.

    My belief is that renters are going to solve the housing crisis.

    Homeownership rates have fallen by a few percentage points, which has translated into more than four million new rental households in just the past few years. According to the Census, 1.4 million of those were added between July 2010 and June 2011, showing that this trend is accelerating.

    As a result, rental rates are growing at more than 5% per year, and this trend is also accelerating.

    As a result of this, investors are pouring capital into American housing with a long-term mindset, kicking this trend into hyperspeed.

    This crisis will not be solved by enticing home buyers. Their confidence is waiting for unemployment to come down and government to act responsibly, which could take a while.

    But investors are confident right now. Why? Because they see the big picture. Rental demand equals stable cash flow. So what can be done to encourage them?

    How about eliminating archaic waiting periods for investors who want to buy foreclosures? How about eliminating waiting periods for investors who paid cash and want to tap it with a refinance? Today they have to wait months to put that money back to work. Why not eliminate the overall bias against investors in FHA, Fannie Mae and Freddie Mac and require big down payments to make it safe to lend, and lend?

    Better yet, keep your eyes peeled for a private sector player to seize this opportunity to create America’s first national investor mortgage brand. The estimates are that half a million investor loans close every year, and who owns that niche? No one.

    The Martial Arts teach you how to use the weight and momentum of your opponent against them (or so they say in the movies). This is the same thing. This drastic increase in rental demand is a by-product of the foreclosure crisis. Use it against the crisis by turning it into positive cash flow investments for those willing to be confident and take a risk in this environment.

    Burn off that shadow inventory and create housing options for newly minted renters, which will, in turn, stabilize rental rates, and everybody wins. Good credit renters and buy-hold investors will be the heroes at the end of this saga.

    Greg Rand is CEO of OwnAmerica.com and former managing partner of Better Homes and Gardens Rand Realty.

    For more information, please visit www.ownamerica.com.

    RISMedia welcomes your comments and questions. Emailrealestatemagazinefeedback@rismedia.com.

  • Expert Advice: Selling your Home over the Holidays

    Posted Under: Market Conditions in Rhode Island, Home Selling in Rhode Island, How To... in Rhode Island  |  December 8, 2011 4:31 AM  |  922 views  |  No comments

    RISMEDIA, Thursday, December 08, 2011—

    The holidays are fast approaching. Regardless of what denomination you are- the next couple of months are probably going to be more hectic than most as you prepare to conclude 2011 with friends and family. If your home is on the market, this time of year is also particularly tricky. Fortunately there is great advice for those of you looking to get your home sold during the holiday season (And it doesn't include taking your house off the market).

    Regardless of the time of year, most home stagers will advise a seller to remove as many personal items and decorations as possible, "Less is more." This includes photos, trophies, and even your son's gallery of refrigerator artwork. To you this might make your home feel cold and impersonal, but it allows a potential buyer to envision themselves living in your house—thus upping your odds of making the sale. During the holidays it may be tough to keep your holiday cheer in the attic but it is the easiest way to stage your house as spacious, without blocking pathways or seeming cluttered.

    In addition, it is important to remember that certain cultures might find overtly religious décor off-putting and the best way to remain non-offensive is to avoid decorating altogether. Or another option is to exchange your manger for a basket of pine cones and opt for general fall and winter decorations as opposed to those with religious themes. If you must get religious, be strategic in your placement by displaying your menorah on the ledge of a bay window or dangling mistletoe in an arched doorway. Avoid covering up or down-playing selling features that will sell your home like the fireplace, stairs, and windows. In most cases, sellers are better off with a smaller Christmas tree although a tall, skinnier tree is a great way to draw attention to high cathedral ceilings.

    Another vital pointer to remember during the winter is that most potential buyers start their searches on the internet and real estate magazines, so you want to make sure the best possible photos of your home are available, even if it means hiring a photographer. You can also expect less foot traffic due to inclement weather and vacation plans so it might also be useful to create a video tour of your home to allow house hunters a virtual walk through without braving inclement weather.

    Showing your home over the holidays can be tough, but it's also the perfect opportunity to target serious buyers that have more free time for house hunting- especially while your competition might be taking a break. Additionally, December is deadline for those buyers trying to make an investment before the new fiscal year begins.

    Jim Lowenstern is the President of Castles Unlimited in Newton, MA.


  • Economists Predict Positive Growth in 2012

    Posted Under: Market Conditions in Rhode Island, Home Buying in Rhode Island, Home Selling in Rhode Island  |  December 5, 2011 1:49 PM  |  1,007 views  |  No comments
    Frank Hopton
    11 West Park Street
    Telephone: (401) 635-2242Providence, Rhode Island 02908
    Email: fhopton@HearthStoneInspections.comwww.HearthStoneInspections.com

     

  • Recovery: Are We There Yet?

    Posted Under: Market Conditions in Rhode Island, Home Buying in Rhode Island, Home Selling in Rhode Island  |  December 3, 2011 8:56 PM  |  668 views  |  No comments

    RISMEDIA, Saturday, December 03, 2011—

    If you’re a parent, you can relate to the kids in the back seat constantly asking, “Are we there yet?” Invariably, the answer is, “No, not yet.” This time-honored exchange is probably not too different from how people feel about the U.S. real estate market and its slow recovery.

    One day a high-profile report says real estate continues languishing, and then another report shows that home sales are on the rise.

    Where are we? Are we there yet? I feel that U.S. real estate markets are heading in the right direction but at an agonizing pace. Getting back to the car ride analogy, we in real estate are traveling at about 15 mph. At that speed, the scenery doesn’t change much and, since we’re all used to traveling faster, we’re growing impatient.

    So let’s look down the road.

    Indeed, the U.S. economy is searching for balance and I believe we’ll see modest growth in GDP and employment over the next two years.

    Real estate is moving forward as well, and will help drive economic recovery. I base my sentiments on several factors, starting with growing investor activity. We all know that investors typically move first in a recovering market, followed by first-time and move-up buyers. Investors in many markets are snapping up properties at the lower end of the pricing spectrum to capture highly favorable pricing and rental returns. In the process they’re reducing inventory.

    High-end homes are also moving in markets around the country as the wealthy clearly understand that upscale homes cannot be duplicated for their current asking prices.

    Moreover, demographic forces will help breathe life into the mid-range market. Household formation through the “Great Recession” slowed significantly as younger adults in their 20s and even 30s moved back home, and families doubled up with other households. Currently, about 69 million adults, or 30% of U.S. households, reflect this temporary condition.

    Immigration also will continue fueling household growth. With housing starts considerably below normal thresholds, a housing shortage could develop over time.

    Let’s not forget that mortgage rates remain near all-time lows and, with lower home prices in many markets, affordability has rarely been higher. In fact, I haven’t witnessed a better home-buying opportunity in 40 years.

    Today’s buyers will be well served by focusing on whether they can qualify for the surprisingly low mortgage payments and not on whether home prices will slip over the next three to six months. After all, a home is a long-term investment yielding a place to raise a family, live safely and build for the future.

    Are we there yet? Not yet, but the U.S. real estate market is moving in the right direction.

    Earl Lee is the president of Prudential Real Estate and Relocation Services.

    For more information, visit www.prudential.com.

  • Multiple Signs Point to Real Estate Rebound

    Posted Under: Market Conditions in Rhode Island, Home Buying in Rhode Island, Home Selling in Rhode Island  |  November 25, 2011 12:40 PM  |  834 views  |  No comments

    RISMEDIA, Friday, November 25, 2011—

    The past few weeks have showcased numerous signals that the real estate market is on the rise. Recently, we have reported statistics pointing to an industry turnaround, including a 15 percent rise in housing starts in September; a surge in builder confidence in October, an increase in mortgage applications and a slew of regional market improvements across the country.

    A recent Marketwatch story written by Amy Hoak points out that housing markets in the Great Plains, including those in North and South Dakota, Texas, Wyoming, Nebraska, Louisiana and Iowa, are showing the most signs of strength these days, according to a recent report from Veros, a risk management and valuation services firm.

    Hoak notes that Bismarck, North Dakota., is expected to be the strongest market in the country in the year ahead, with housing values appreciating at a 5.6% clip, according to Veros. Other markets projected to be among the strongest in the year ahead include Honolulu; Fargo, North Dakota.; Harrisburg/Carlisle, Pennsylvania; and Pittsburgh. Washington, D.C., and Boston remain strong city markets.

    Hoak writes that while not many markets are fully rebounding, at least a good number of them likely won't see values fall at quite as rapid a pace as in recent years, according to the report.

    "Overall, the recovery in the housing market is limited to just a few markets and is taking a long time to occur. The encouraging news is that many markets are no longer expected to be rapidly declining," says Eric Fox, vice president of statistical and economic modeling for Veros.

    The weakest U.S. markets are in Nevada, inland areas of California, Washington and Oregon, according to the report. The weakest market in the year ahead: Bakersfield, California, where foreclosures have been a huge problem.

    Hoak wraps up the story with words of assurance; While prices aren't on the upswing in many places, at least they're not expected to fall that rapidly in the coming year.

    RISMedia welcomes your questions and comments. Send your e-mail to: realestatemagazinefeedback@rismedia.com.

  • Existing-Home Sales Rise Unexpectedly in October

    Posted Under: Market Conditions in Rhode Island, Home Buying in Rhode Island, Home Selling in Rhode Island  |  November 21, 2011 10:39 AM  |  681 views  |  No comments
    BY: CARRIE BAY Printer Friendly View

    Sales of previously owned homes got an unexpected boost last month while the number of homes on the market continued to decline, according to data released Monday by the National Association of Realtors (NAR).

    The trade group recorded a 1.4 percent month-over-month increase in existing-home sales in October, pushing the annual rate of sales to 4.97 million. NAR’s latest reading is 13.5 percent above the 4.38 million-unit sales pace in October 2010.

    Housing inventory fell 2.2 percent to 3.33 million existing homes available for sale as of the end of October, which represents an 8.0-month supply.

    That’s down from an 8.3-month supply in September. NAR says the housing supply has been trending gradually down since setting a record of 4.58 million in July 2008.

    Distressed homes – foreclosed REOs and short sales – slipped to 28 percent of October’s transactions, down from 30 percent in September. They were 34 percent in October 2010.

    NAR says 17 percent of last month’s existing-home sales were foreclosures and 11 percent were short sales.

    Market analysts were expecting up to a 3 percent drop in overall existing-home sales between September and October. Forecasts ranged between an annual rate of 4.76 million and 4.80 million.

    According to NAR, October home sales should have risen higher than the 1.4 percent the trade group recorded.

    According to Lawrence Yun, NAR’s chief economist, contract failures reported by Realtors jumped to 33 percent in October from 18 percent in September. Only 8 percent of contracts fell through in October of last year.

    “A higher rate of contract failures has held back a sales recovery,” Yun said. “Home sales have been stuck in a narrow range despite several improving factors that generally lead to higher home sales such as job creation, rising rents, and high affordability conditions. Many people who are attempting to buy homes are thwarted in the process.”

    NAR’s report shows the national median existing-home price was $162,500 in October, which is 4.7 percent below October 2010.

    “In some areas we’re hearing about shortages of foreclosure inventory in the lower price ranges with multiple bidding on the more desirable properties,” Yun said. “Realtors in such areas are calling for a faster process of getting foreclosure inventory into the market because they have ready buyers.”

    Yun adds that extending credit to responsible investors would help to absorb distressed inventory at an even faster pace, which he says “would go a long way toward restoring market balance.”

    NAR’s data indicates investors purchased 18 percent of homes in October, while first-time buyers accounted for 34 percent of transactions. All-cash sales made up 29 percent of last month’s purchases.

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