In 1971, the numbers for everything seemed to be much lower. The average house cost $25,000, the average car cost about $3,500, and the interest rate on a 30-year fixed mortgage was 3.31%
Today prices are much different, with that house costing the average citizen over $225,000, and that car coming in at $28,000… but that mortgage rate is just as low today as it was over 40 years ago. (more…)
After the home ownership bubble burst, banks put draconian rules in place for home lending that shut many people out of the market. Not only did home buyers need a 20% down payment to qualify, but they also had to have a credit score of at least 760. Few people could hit those lofty requirements and either failed to meet one or the other. Despite a time of record low mortgage rates, the majority of potential buyers just couldn’t qualify for a mortgage, which kept the housing market in the doldrums for years. This year that all may be finally changing. (more…)
When you’re caught between a financial rock and a hard place, you might not be able to make your mortgage payments. You may find yourself having to make a choice: face foreclosure or sell your home. Foreclosure is the worst thing that can happen. You’ve lost your home and tarnished your credit in the process. You can try to sell your home before it goes into foreclosure, but if the market value of the home is lower than what you owe on the mortgage, you’ll still be in hot waters with the bank. If this is the case, you have another option: a short sale. (more…)
Are you underwater on your home and having trouble selling it short? A new program designed to help underwater homeowners may finally give you relief from your mortgage debt. On March 1st, those who own homes that are worth less than what they owe on them will finally have another option besides a short sale: a deed-in-lieu. While the program is heavily regulated, it stands to help many get out from under a house so they can get out of debt, rebuild their credit and move on with their lives.
The horror of an Adjustable Rate Mortgage (ARM) during the height of the recession has scared many into never again opting for an ARM. Families were delighted prior to the recession to be able to “buy more house” by opting for an ARM instead of a fixed rate mortgage, thus lowering the monthly payments. However, when the economy nearly crashed, families found themselves struggling to make higher payments as loans payments adjusted upwards. Many of those creative financing loans, like ARMs, resulted in massive foreclosures. However, the housing crisis is over and prices are starting to rise, as well as interest rates. Now some people are asking: Is it time to take another look at ARMs? (more…)
While prices are dropping on single family homes, the cost of actually housing your family is rising. The reasons for this are many: tight mortgage lending regulations, unemployment or underemployment, rising rental costs, and adjustable rate mortgages with underwater homes that increased payments. (more…)
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The recession has made it clear that if you can’t pay your mortgage for 30 years straight, you’re at risk of foreclosure. This has caused a backlash of people refinancing to lower terms, like 15 years, or buying houses with cash and avoiding banks all together. The 30-year mortgage was never meant to be part of an American nightmare, however, and most experts still believe in it and here’s why. (more…)
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Banks have had their share of the blame during the recession as many Americans are still stinging over problems in the housing market. While demand for housing dropped and foreclosures rose due to unemployment, banks were seen as complicit in the housing crash due to the ease of obtaining a house (whether you could afford it or not) and the “robo-signing” scandal. Since banks are in the business of turning a profit, it has never been an option to forgive a bad loan. Now, the Obama administration has stepped into make it easier for underwater homeowners, those that owe more on their mortgages than they are worth, to be able to obtain relief via a new home financing program that gets the banks on board first.
Banks have not whole-heartedly embraced the programs, but despite that 40 states have signed up to take part in the program. Even though the sign-on deadline has passed already, there is great hope that with 40 states participating it can still be a step in the right direction. The amount of funds available to banks and distressed owners depends on the number of states that sign up. If all 50 states came on board, the pool of money would be $25 billion. Some larger key states, like California and New York, are still not in agreement, but the plan is still in its very early stages. Negotiations continue for these states and others, like Florida and Delaware, despite the deadline having passed. It is expected some agreement can be reached.
What It Means
For underwater homeowners, the new program would provide them with $20,000 of relief to pay off the principal of an underwater mortgage upon refinancing. States that agree to the deal will get immunity from federal prosecution for their role in the housing crash. Homeowners would still have the option to pursue proceedings against banks, but are less likely to do so if they obtain relief. More people would be able to stay in their homes and refinance to more appropriate levels. The program offers help for those currently at risk of foreclosure, but can do nothing for those who already have lost their homes during the housing crisis.
Oversight and Management
The new rules put in place for this program mean better oversight and management. In keeping with President Obamas ideal of a “fair shake,” they will be responsible for communicating better, not causing delays, and providing contracts that are equitable. Banks aren’t as happy with the new agreement as it still leaves them open for further legal issues. However, mortgage services and states will be off the hook as long as they abide by the new rules and promise to help about 1 million people who are estimated to be underwater on their mortgages. This in turn can lead to more confidence in the market and a stabilization of housing prices in the most hard-hit areas. Once the housing market recovers, it will be the last sign that the recovery is in full throttle and the U.S. economy is headed towards prosperity once again.
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In 2009 the administration started the “Home Affordable Refinance Program” HARP to stop the tidal wave of homes being foreclosed on. The idea was to let homeowners refinance at lower rates, however many could not qualify for the program, therefore the HARP had to be revised. (more…)
Buying a house is a huge decision, and not one to be taken lightly. There are so many things to consider when you are buying. After you have chosen the house you want to buy (a huge task in itself), you must figure out how you will finance your new castle. Don’t worry, it’s not as painful as everyone makes it seem once you know a few helpful tips to getting your first mortgage. (more…)