The Trouble with Mortgages

August 4, 2008

Have you been looking for a new home lately? If you are one of the lower numbers of Americans looking for a new home and a new mortgage, you might be in for a surprise. New mortgages have gotten more difficult to secure as the housing sector fights to eliminate the defaulting mortgage disasters that have dictated the market activity lately.

While new mortgages might be more scarce, the long-term impact of more stable mortgages cannot be underestimated. Much of the trouble in the housing market currently is due to poor choices by uneducated home buyers and shady practices by lending businesses who were looking for a quick profit without regard to the overall impact these unstable mortgages would have on the economy.

The recent troubles of Freddie Mac and Fannie Mae are in direct result to the ailing mortgage market. Borrowers are paying for the mistakes of others by paying roughly 10% more in monthly mortgage costs. Why the higher costs for people that have not defaulted on their own payments? These additional costs are the answer to the lack of confidence in the real estate market. In other words, not only are new mortgages more scarce, they cost more as well, doubly hitting new home buyers. Unfortunately, these negative aspects do nothing to stimulate the stagnant real estate market as a whole.

The cost of borrowing money has increased as businesses like Fannie Mae and Freddie Mac have had to borrow money in the bond market to pay for the current mortgages they have received from lenders. As the negative financial situation of Fannie Mae and Freddie Mac sustains, the additional costs are filtered down to lenders looking to establish a new home mortgage. Also, as it is more expensive for Fannie Mae and Freddie Mac to obtain mortgages, it will increase overall mortgage rates as well.

Last summer, the 30-year, fixed-rate mortgage was roughly 1.5% higher than the yield on a 10-year Treasury note. Now, the rate is about 2.5% points and have increased .3% since late June alone as a reflection of the troubles of Freddie Mac and Fannie Mae.

More and more lenders are tightening their standards, either because of their own reluctance to get brought into the current mortgage mess or because of new government standards that will most likely dictate the new regulations. Some of the new standards include escrow accounts for taxes and a more thorough review of the future home buyers income and ability to pay the full mortgage payment each month. As more and more lenders are scared they will lose mortgages, they are demanding that current applicants provide a very clean and precise application to avoid future complications.

Initially, when the mortgages problems began, the government called on Fannie Mae and Freddie Mac to help with assisting lenders whose loans were defaulting. Now with the questionable status of the Fannie Mae and Freddie Mac government sponsors, there is a risky and worried feeling in the marketplace, calling into question the ability of these sponsors to help lenders at all.


Will Home Owners Insurance Protect Your Home in a Storm?

June 30, 2008

The news has been filled with stories on environmental disasters lately. As more and more storms roll over the country, citizens in the coastal communities and in the Midwest alike are asking the same question: Is my house safe? And if not, will my home owners insurance cover me for my house value?

For most people, their home is their biggest source of financial equity and the biggest part of their portfolio. To lose a home in a vicious storm not only puts the family on the street, it can be financially devastating as well. Many homeowners are overly confident in their home insurance and the coverage it provides. But will your home insurance really protect you and your home after a storm devastates your property?

Mudslides are typically covered by the standard home owners insurance policy. After all, mudslides are often associated with California, but nowhere else in the country. However, many homes that live on the banks of rivers are in direct threat of losing their home to a mudslide after a tremendous storm with flooding. If your home washes away in a mudslide, you can effectively lose everything, even if you have been a patient and conscientious insurance payer for decades.

Look to see what your home insurance coverage provides. Many standard home owners insurance programs do not take floods, mudslides and earthquakes into account, meaning that if the home is damaged this way, their home value will not be covered.

One of the biggest reasons why home owners insurance does not cover these possibilities is due to the risk factor. Many homes are not located in high risk areas where a mudslide is probable and for this reason, the insurance companies do not want to take on the coverage. Secondly, this type of insurance coverage can be very costly and expensive. If you live in an area that does not have the risk of mudslide and the addition coverage is expensive, chances are you will forego that coverage. And just like that, if your home floats off the riverbank and down the river, you will have lost everything.

Ask your home insurance provider about potential options with your coverage. There are some insurance companies that will offer flood insurance at a discount rate for homes that are not located within a flood zone. You can potentially get coverage for just a few hundred dollars a year and eliminate that risk for your property.

Another smart option is to talk with the experts. Get a mud engineer to come out and look at your property. If you are located on a river bank or on the side of a mountain or hilly area, you might be concerned about mudslides in general. Have an expert come to your property and do an analysis on the mud and soil located under and around your home. With his or her results, you can make a more educated decision about the likelihood of a mudslide happening to your property and adjust your insurance coverage accordingly. Of course, if a mudslide is more likely than you thought, you might want to consider moving!

What is My Property Worth and Who Will Buy My House

April 23, 2008

It is happening again. Every three to five years the real estate market goes through another cycle and pessimism creeps into many. When the market is going down is it mostly caused by demand for new houses falling. The continuation in falling housing prices changes the psychology of home buyers so they stop buying. This process further decreases home prices and the real estate market.

Recent surveys by many consumer groups are reporting that consumer confidence is decreasing, foreclosures are rising and homes fore sale are sitting on the market longer. This all plays into the psychology of home buyers. People do not want to purchase a home if the value is going to continue to decline.

So, what does this mean for the average home seller? Well if you do not have to sell you are in good shoes. You can wait for another two to five years for the market to bottom, then wait for another three to five years for the market to come back up, then sell. So if you can hold out for seven or so years in your current home, you are in ok shape.

The major problem is life happens and for what ever reason people need to sell their house. Could be divorce, lingering foreclosure, job relocation, family issues, ready to cash out of an investment, health issues, the list goes on.

For those home owners who need to sell, you are in a harder home selling situation. You can not afford to wait for seven or so years for the real estate market to come back around. The good news is there are still ways in this slow real estate market for you to sell your house and move on with your life.

It doesn’t matter if your home is over financed or you have lots of equity. There are still home selling solutions that can solve your particular selling need. The first question you are probably asking is how can I sell my house if I have no equity. Well for this reason professional real estate investors exist in every major city in the nation.

Professional real estate investors exist throughout the country to solve complicated real estate problems. Yes they do have to make a profit to keep their business running but that does not mean they are going to steel your house. Many professional long term real estate investor just want to add to their real estate portfolio and hold properties for long term.

As a home seller in this real estate market I know you have other questions like how do I find out how much my house is worth, or how much is my property worth?

Well, probably the largest benefit from contacting your local real estate investors or home buyer is to find out how much your house is worth with no obligation to sell your house. In fact you can input your information over the internet and receive a home value and offer in less than 48 hours.

So the first step in find a solution to your home selling need should be to contact your local home buyer who is an active buyer in your neighborhood to determine your best selling solution. They will give you a free, confidential, no obligation offer for your house and you will know how to move forward.