Q: Is it still possible to find a good mortgage in light of the housing market mess?
A: Every day it seems like there’s nothing but bad news about today’s housing market. The stock market is going crazy. Nationwide, more sellers and agents are complaining that it’s taking more time to sell homes now than last year because more contracts are falling apart over the financing.
But for the average American looking for a home, the crisis in the subprime mortgage market may actually be good news. Because of the decline of sales, home valuations have declined but interest rates are still historically low. Rates on 30-year faxed loans remain around 6.30 percent.
There is one catch: You have to be a homebuyer with good credit, a low debt to income ratio, verifiable income, looking to finance less than $417,000, the cutoff for jumbo loan, and have a downpayment of at least 3 percent. A 30-year fixed rate loan, insured by FHA, has continued to be safe and reliable and doesn't mask a borrower's true ability to repay the loan.
Q: What is the housing market domino effect?
A: When you hear people talking about the domino effect; they're talking about the problems in the housing marketing which started last year and have continued to deteriorate this summer. Basically, the "domino" effect in the real estate market is when first-time home buyers are shut out of the housing market and that prevents home sellers from move up buys. That means people who are ready to move up to a bigger house aren't able to sell their existing homes to that once reliable market - the first-time homebuyer.
The number of homes for sale around the nation jumped over the past year, according to figures from ZipRealty, a California-based real estate broker. Zip monitors 18 metro-area markets from all four regions of the country. For the 12 months ended July 31, only Boston and San Diego showed drops. Boston's inventory fell 5.8 percent and San Diego's dropped 2.1 percent. The average for the 18 cities was a 19 percent increase in homes on the market, a total of 810,566.
The high inventory numbers may even be an undercount. In slow times, more sellers remove their properties from the market for several months, perhaps spruce it up a bit, and re-list, often at a lower price. In the meantime, the home doesn't count toward the inventory totals.
Much of the inventory in many young Sun Belt cities is in new housing. Developers overbuilt during the boom and, when the slump hit, they were left with large numbers of empty houses built on spec, and many were left vacant by cancellations. In some places, whole streets or subdivisions were unsold; their interiors were not even completed.
The Census Bureau recently released figures showing that the country's homeownership rate had fallen for the fourth consecutive quarter, to its lowest level since 2003. The news fueled fears that the subprime mortgage meltdown, which is also affecting the prime market, could be undermining federal housing policy that, for the past 20 years, has encouraged and promoted the American dream.
The homeownership rate for the second quarter of 2007, according to the Census Bureau's seasonally adjusted estimates, declined to 68.4 percent of 110.3 million housing units that are occupied, compared to 68.6 percent in the first quarter, 68.7 percent in the fourth quarter of 2006 and 68.9 percent in the third quarter of last year.
Some housing economists predict the homeownership rates will dip to 67 percent over the next two years, as lenders continue to tighten their mortgage approval standards.
Some homeowners will be eligible for an additional tax deduction on their 2007 federal income taxes. Through a new federal tax deduction, homeowners will be able to deduct mortgage premiums paid in connection with home acquisition debt on qualified home mortgage insurance.
To qualify for the deduction, a homeowner's mortgage insurance must be provided by either the U.S. Veteran's Administration, the Federal Housing Administration, the Rural Housing Administration or a private mortgage insurance company. Only mortgage insurance premiums paid from Jan. 1 to Dec. 31 are eligible for the deduction. The new deduction is not listed on homeowner's mortgage statements and has not become a well-known deduction among most mortgage companies and public accountants.
Pre-Qualified or Pre-Approved. What's better?
Being pre-qualified for a mortgage helps give you an idea of how much you might qualify to borrow. But since you have not actually applied for a loan, and the lender only has your word on your credit, income, assets and liabilities, a home loan or mortgage amount is not guaranteed. With a pre-qualification, no information has been verified.
The pre-approval goes one step further than a pre-qualification. It is the process by which you are formally approved for a mortgage. When getting pre-approved, you may receive a letter stating how much you qualify to borrow. Your lender will review your credit report and verify all your financial documentation.
Pre-approved buyers have an edge in home purchase negotiations because pre-approval lessens any uncertainties the sellers might have about your financial capabilities.
"Thank you AmeriDream. Because of you, my children can play outside and make as much noise as they like. We have a beautiful home that I’m sure will be the setting of a lifetime of great memories.”
Vicki, Burbank, IL
What occurs once in a minute, twice in a moment, but never in an hour?
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