Dissolving Fannie Mae, Freddie Mac may hurt borrowers
Source: The LA Times
What will the proposed elimination of Fannie Mae and Freddie Mac mean for consumers? In the absence of a government guarantee, experts contend that mortgage rates are likely to rise, and the widespread availability of 30-year mortgages would be jeopardized. Economists at Moody’s Analytics estimate the average mortgage borrower would see interest rates increase by one-half to three-quarters of a percentage point.
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Asking Mom and Dad for Cash to buy that Home
Source: Wall Street Journal
Loans from family members could go the extra mile in making a down payment, but financial experts say parental help is most useful when it comes as a gift rather than a loan during the mortgage application process. A family loan may not be viewed favorably by a lender and could lead to disqualification for a mortgage since the loan is considered unsecured debt. Read the full story.
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Putting borrowers into higher-rate mortgages still occurs, U.S. says
Source: The Los Angeles Times
A lawsuit filed recently by the Consumer Financial Protection Bureau indicates that “upselling” remains a pressing concern due to hidden, backroom ploys. “Upselling” leads mortgage applicants into higher-cost terms that increase the lender’s profits, and this abusive practice was banned by the Federal Reserve Board in 2011. Read the full story
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For Buyers, only the most fit will survive and succeed in purchasing a home – those with excellent credit and a sizeable down payment can compete with Investors paying all cash. According to C.A.R.’s 2013 Home Buyer Survey, 96% of buyers use the internet to find a home and 70% of those use their smartphones to do so. Not a laptop, not an i-Pad…. their phone. That is a significant change in how buyers shop for homes. Other factors Buyers will face in order to compete include:
- Tighter lending standards with 85% of buyers obtaining 30-year fixed loans (they have to put more “skin” in the game than before)
- Higher Down payments; the average is now 25%
- Rising interest rates
- It takes longer to find a home due to lower inventory of houses on the market ( average of 9.8 weeks)
- Instant Text notifications from Listing sites allow buyers to “jump” on a new listing before others,
- In multiple offer situations you will need to add a “cover story” page to your offer that makes you unique and appeals to the Seller’s emotional side.
Yet there is good news on the horizon. As the number of lower-priced homes available on the market begins to decline, Buyers will find the competition leveling out as Cash Investors rarely delve into properties that are priced over $500k.
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