Should You Buy When Mortgage Rates are at Record Lows?

This past week, mortgage rates hit a new record low, bottoming out at a 3.79% average for a 30 year loan. A fifteen year mortgage is now at 3.04%. This is compared to rates that were 4.64% and 3.82% a year ago, respectively.

To put that in perspective, if you have a $200,000 home loan, your monthly mortgage payment for a thirty year loan would be $930.78, and on a 15 year loan, you’d only be paying $1,385.01.
That’s pretty low. For many people, these rates would be lower than what you might expect to pay on a similar rental.

When Sarah and I bought our home, interest rates were falling pretty quickly. We got a rate that was under 6% on a thirty year mortgage and were thrilled with how low it was. Today, we could have received a mortgage with the same monthly payments but for an amount tens of thousands of dollars higher. The pendulum really has shifted in favor of the buyer.

These low rates bring about a big question: how low do rates have to be before it’s a good idea to get a mortgage, even if you don’t have a 20% down payment?

This is really a tricky question to answer, because much of the answer has to do with one’s personal ideas about money. There is no good way to “run the numbers” over the long term, because the true answer to this question relies on the future of the housing market in the particular area where you’re buying the house, as well as things like the homeowner’s desire and ability to keep their house in good shape.
Given that we can’t know such things, my perspective is that you should buy when your total monthly cost for owning the home is less than the total monthly cost of renting. Right now, the interest rates are making the home ownership cost quite low.

For example, let’s say you’re looking at buying a townhouse that’s similar to the apartment you’re renting with your spouse. You’re currently renting for $1,200 a month and you pay, say, $25 a month in renters insurance.

If you buy a $200,000 home with nothing down, you’ll be paying $930 a month in mortgage payments, another $80 or so a month in PMI, another $80 a month in homeowners insurance, and another (say) $200 a month in property taxes. That adds up to $1,290, which means it’s a solid deal, but not a great one.
Now, if you buy a $150,000 home with nothing down, your total goes down to somewhere around $970 a month, which makes it a better deal.

In other words, if the total cost of your rental is more than the total cost of home ownership, then you should own. If it’s really close, I lean slightly toward renting, simply because there are usually extra costs in home ownership, such as home repairs and the like. You can no longer just call a landlord.

Right now, the pendulum is about as far toward home ownership as can be, but it’s still not all the way there for everyone. If you’re in an inexpensive apartment and don’t have a down payment saved up, you’re better off staying put.

What about the pendulum swinging back the other way in the future? The possibility of something becoming more expensive in the future is not a good reason to put yourself in a financially risky position today, particularly if your financial position isn’t strong enough for home ownership. If you don’t have a lot of money to spare, leave the risky investments to others and play it safe.

Source

Should I Short Sale My House Or Declare Bankruptcy?

By Orfelia M Mayor, Esq.
You bought your home during the real estate rush a few years ago and now your dream home has turned into an upside down nightmare with adjustable interest rates. The rates are going up while the value of your home is going in the opposite direction. In addition, credit card debt is mounting since credit card companies have been on a mission to raise interest rates to the 25 - 29% level. What's a consumer to do?

Unfortunately, there's not much one can do to stem the tide of today's economic climate. The banks are going to do what they are going to...the credit card companies are going to raise their rates (regardless of your credit history) and to top it off, you never know if your job will be there tomorrow.

When it comes to your home, you do have a couple of options. If you cannot afford the payments on your home anymore, you can try to have the loan modified to a more affordable payment under the HAMP legislation. Banks are moving very slowly in this area and although they are reducing interest rates, they are not forgiving principle and closing the gap between your home's value and what is owed.

Another option is to short sell your home to a buyer. A short sale is when you sell the house for less than what is owed on it. This requires the bank's approval since they are taking a loss on the original mortgage. This process usually takes months and is not always successful. The difference between what you owed on the house and what it was sold for is called a deficiency. Banks will issue you a 1099 Misc for the amount of deficiency and you will have to declare it as income on your taxes. Yes, you will have to pay income tax on that amount. The good news is that until 2012, deficiencies on primary mortgages (your homestead home) are forgiven through legislation that President Bush signed. After 2012, you will have to pay taxes on deficiencies unless the law is extended by Congress.

In a bankruptcy, you can choose to surrender the home and all of your personal liability for the loan amount is forgiven. That includes any potential deficiency between what was owed and what the bank ends up selling the house for. There's no haggling with the bank, no approvals to wait for - no doubts as to what the future will bring. Additionally, filing bankruptcy will eliminate all of your other unsecured debt so you can truly get a fresh start and a good night's sleep.

If you'd like more information on bankruptcy options for eliminating debt, please visit http://www.ombankruptcy.com/

Orfelia M. Mayor, Esq.
Bankruptcy Law Firm of Orfelia M. Mayor, P.A.
Fort Lauderdale, Florida
http://www.ombankruptcy.com/

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Florida is First in Foreclosures

Sometimes, being in first place is not a badge of honor. Take Florida, for example, which currently holds the dubious distinction of being first in the nation in foreclosures.

The Palm Beach Post informs us that close to 1 out of every 5 homes loans in Florida was delinquent in payments by 90 days or more, or was somewhere in the process of foreclosure during this last quarter.

The state has almost 3.5 million outstanding loans, and more than 13% are in trouble. This type of economic behavior does not bode well for a recovery. It also indicates that another large group of foreclosed homes is about to crash into the real estate market with a resounding thud.

This somewhat alarming foreclosure statistic is not being helped by Florida’s other problem, an 11.2% unemployment rate. Experts do not expect employment to alleviate before the second quarter of next year, by which time it will have risen, according to projections, to 11.4%.

While Florida’s foreclosure figures seem high, the reality is, according to the Mortgage Banker’s Association, that 1 out of every 7 loans across the nation is in foreclosure. This is an increase from the 1 out of 10 that began the year.

Florida foreclosure rate is closely followed by Nevada, California, and Arizona. These four states are responsible for 43% of the new crop of foreclosures that is due to hit the market.

In addition, foreclosure filings in October of 2009 showed an 11% increase over those from a year earlier, and are up more than 25% on a year to date basis. According to the Boston Globe, it is not subprime loans that are spurring the foreclosure increase; instead, it is rampant unemployment, which stands at a 26 year high nationally.

Nationwide, the rate of joblessness has moved beyond 10% and expected to rise above 11% before it turns around sometime next year.

What is extremely alarming is a report from the Mortgage Banker’s Association that fixed-rate home loans, which were often made to people with excellent credit, are also falling victim to foreclosure. These formerly credit-worthy individuals are succumbing to unemployment. When faced with a choice of feeding a family or paying a mortgage, food always wins out.

What may be even more disturbing is that the Federal Housing Administration (FHA), which has been holding the housing market together by insuring more than 40% of new home loans, reports that more than 18% of those who hold FHA loans are delinquent by at least 1 payment.

Source: huliq.com

Home Affordable Modification Program

In March 2009, the US government declared an initiative that was set into motion so as to aid homeowners to keep their homes and put off the threat of foreclosure. This program gives each homeowner in financial duress a glimmer of light in an area that seemed so dark and it is called the Home Affordable Modification Plan.


President Obama put this plan into effect this year in order to pull people out of possible financial disaster and keep the economy ticking along. The majority of homeowners who have a mortgage could possibly be eligible and monthly payments will be largely lowered to a point where their mortgage payment fits into their budget.

This fantastic initiative has shown to be a massive break for those homeowners who have come close to losing their house and the government has permitted thousands of dollars to help give both the consumer and the economy a large helping hand.

Who is eligible for this initiative?

Because of the giant number of homeowner's and the fact that the majority of lenders are not suitably staffed, now is the time to jump in and attain help in paying down your mortgage. It will assist you to avert foreclosure and the credit issues that will haunt you for the next umpteen years. There are guidelines put into place that will allow you know if you qualify for the home affordable modification plan.

The main qualification is that you received your current mortgage before the beginning of 2009.

It is imperative that your home be both owner occupied and your primary residence or you will not be entitled. To qualify, the property cannot be an investment and the house cannot be left sitting empty under the terms of this plan. The basics are that the house be your current residence. You will have to document proof of residency with some sort of bill with your name and address on it during the application process.

How much money you make monthly needs to fall into a particular area and guidelines. Talk to a professional ahead of you continuing the process.

Throught the application process, there will be numerous factors being evaluated with your income, expenses and assets being one of the largest parts. Don't rush things and take care to include everything you own that has any true value. If you don't disclose anything you could lead to future problems and keep you from qualifying for this program or government assistance in later years.

Additionally an important point that needs to be made is about those who are currently in the middle of a bankruptcy suit. Don't automatically think that this fact will completely rul you out from this modification scheme. Simply ensure that you are truthful with regards to all that your lawsuit entails at the time of your application.

The initiative will come to an end by December 2012, however all payments will keep going for numerous months after the finish.

The Treasury Department has provided a cash incentive to those who apply early for this plan and make timely monthly mortgage payments. This is a way to encourage people to sign up and the government hopes this will reach everyone that is entitled.

The Home Affordable Modification Plan has been created to make fantastic steps in assisting folks to lower their mortgage payments and put off foreclosure. In the state of our current economy it has taken the burden off many homeowners' shoulders. Now numerous individuals might have a long future with the home they worked so hard for.

Source: CMLC Mortgage