GETTING OFF THE FENCE
According to Scott Dixon, president of the real estate division of Network Communications Inc., in the real estate market, inventory and selection are good, home prices remain flat and sellers are motivated and more likely to work with buyers on price. So whether you are a first time buyer, looking for a move-up home or hoping to downsize, now is a good time to make a decision.
Interest rates are not going to double this year, but they are going to continue inching up. The more rates go up, the more people will feel the pressure to make a decision about buying. This is a great thing for the real estate market, for home buyers and for home sellers.
NEW RULES, REGULATIONS, AND RESTRICTIONS
So, what is the bad news? New and pending regulations in repsonse to the mortgage lending crisis mean new loans and refinancing will be more complicated, more time-consuming and more expensive. Expect higher fees, higher mortgage insurance payments and bigger down payments. This means that there will be fewer 0 to 5 percent down-payment loans. Instead, there will be more 10 percent down requirements.
The federal government is also working to shrink its footprint in the housing market. During the lending crisis of the last few years, the federal government has guaranteed more than 9 out of every 10 new mortgages. The Obama administration said earlier this year that it wants to move more mortgages back to the private sector. The administration plans to gradually reduce new loans made by the federally controlled lenders popularly known as Fannie Mae and Freddie Mac. Meantime, the Federal Housing Administration (FHA) will be strengthened but won't take over the market share left by Fannie Mae and Freddie Mac.
Some of the regulations took effect late last year. Others, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, take effect this spring and later this year. Additional rules take effect in 2012, and others are still in development. All in all, the sooner you act, the more likely you are to dodge at least some of the new and upcoming requirements. This could mean less hassle, and more smooth sailing, which is always a good thing.
The new rules are intended to protect consumer, hut they also are incredibly confusing and contradictory. It is guaranteed that the cost of doing a mortgage is going to increase and it will be a longer process on top of that. Borrowers will have longer to review all of the disclosures in their mortgage loan; however, this means that they will need a longer lock-in period for the interest rate, which costs more money.
Most borrowers want to know two critical things: their total monthly payment and how much cash they will need to bring to the table at closing. But the new three-page-settlement forms that replaced the former one-page form don't break down this information. As for refinancing, most people who could and should refinance did so by the end of 2010. When rates hit 5 and 1/4 percent in December, refinancing ground to a halt. If you decide to do refinance, just allow for more time - just as you'll need to do for a mortgage. The days of getting it all done in a week are long gone.
SUMMARY & KEY POINTS:
- Fewer loans from the federal lending programs popularly known as Fannie Mae and Freddie Mac
- Higher fees for Fannie Mae and Freddie Mac
- Gradually increasing down payments for Fannie Mae and Freddie Mac loans to 10%
- Higher mortgage insurance payments on FHA loans
- Higher credit scores required to qualify for the FHA's most favorbale loan terms
- Longer disclosure forms
Citing Karen Haywood Queen's article "What's up with real estate? in The Costco Connection. p 27. April 2011.