My Real Estate Blog

In the whirl wind that surrounds the home buying and mortgage process, how can a consumer be sure that they are working with the right lender? I mean there are so many choices…here’s some things to consider:
What type of company is it?
There are mortgage brokers, mortgage bankers and banks/credit unions. Mortgage brokers have been hamstrung by many of the recent regulatory changes and typically lack the actual ability to approve and/or lock a loan. Banks are usually limited in program choices and hamstrung by tighter underwriting. Mortgage bankers have the financial stability and direct lending capability of the bank coupled with the wide product menu and expertise of the mortgage broker. From a global perspective, I see mortgage bankers as a clear winner.
How does the company operate?
Many people are dismayed when they find out where their loan is processed or underwritten….or where the appraiser is from. It is important to work with a company (and their affiliates) who understand the nuances of your local market. Asking the questions up front can save you headaches down the road.
What about the individual loan officer?
Your relationship with your LO (and their processor) becomes the most important ingredient to a successful transaction. How well do they educate you about the process, the requirements…the factors that determine your approval or the interest rate you will get? Many LOs are “order takers”. Others are weak in follow up or communication. This is difficult to determine on your own which is why the referral from another person who used them or your real estate agent has far more value than most people know (until it’s too late).
Too many people stay focused on quoted rates and fees and neglect to see the whole picture of what is needed from a lender. Look for great communication, superior information and education, understanding of the local market and someone who looks at your application as something more than a number. Be prepared to pay a little more to get a better experience (even though it might not cost you any more)….in the long run, lowering stress can be more important.
  

Houses Underwater: The Tide Is About to Rise
Posted: 14 Sep 2011 04:00 AM PDT

Two separate housing reports came out in the last week which discussed different challenges facing the current real estate market. The first was CoreLogic’s Negative Equity Report and the second was JP Morgan Chase’s Home Price Monitor. Each report delivered some difficult news. However, if you piece both reports together, we can see future challenges are in store for home values.
Negative Equity
When a home’s current value is less than the existing mortgage on that home, the house is said to be in a ‘negative equity’ situation (other terms used to describe this situation are ‘underwater’ and ‘upside down’).  The CoreLogic report stated:
“…that 10.9 million, or 22.5 percent, of all residential properties with a mortgage were in negative equity at the end of the second quarter of 2011… An additional 2.4 million borrowers had less than five percent equity, referred to as near-negative equity, in the second quarter. Together, negative equity and near-negative equity mortgages accounted for 27.5 percent of all residential properties with a mortgage nationwide.”
This is important because studies show that people in a negative equity situation are more likely to default on their mortgage payments than people who have equity in their homes.
Home Prices
Many experts believe that housing prices will soften through this winter. According to an article in HousingWire, analysts from JP Morgan Chase announced in their recent Home Price Monitor:
“Home prices could dip another 6% to 7%, before hitting rock bottom in early 2012.”
Let’s Combine the Information
The CoreLogic report said there are an additional 2.4 million households with less than 5% equity. The JP Morgan Chase report said that prices will drop another 6 to 7% in the next six months. That leaves an additional 2 million+ homes in the near future that will be faced with the decision to pay (or not pay) the mortgage payment on a house no longer worth the amount of that mortgage.
Bottom Line
History has shown that a percentage of those 2 million+ homes will enter the distressed property category as some families decide it no longer makes sense to pay their mortgage. Any increase in short sales or foreclosures will impact prices in an area.