Who Can't Get a Mortgage Now?

For the average American looking for a home loan, the crisis in the subprime mortgage market may actually be good news.

Not only have home valuations come down, but interest rates are still historically low.  In addition, tightened lending standards stemming from the subprime crisis likely means fewer buyers, pushing down home prices.

The one catch is: You have to be a buyer with good credit, a low debt to income ratio, a healthy down payment, verifiable income, and looking to finance less than $417,000 (the cutoff for so-called jumbo loans).

If you're among the 10 percent of people with credit scores below 620 who need a subprime mortgage, things could get tricky.

If you're not sure whether you would qualify for a mortgage under today's tougher standards, or what your credit score might be, contact us or leave a comment below.  We'll get back to you with answers.

Home Buyers: Save for That Down Payment

As the mortgage meltdown has spread, lenders are demanding stellar credit and proof of income.  Zero-down payment mortgages have almost disappeared.

This means if you plan to buy a home in the next few months, you'll need to put some money on the table.  The Federal Housing Administration offers a 3% down payment loan for low-income and first-time buyers.  But FHA loan limits haven't kept up with home prices in some high-cost areas.  For a private loan, expect to put down at least 5%, and that's assuming you have good credit.  If you want to avoid private mortgage insurance, which will increase your monthly payments, you'll need to put down 20%.

You should invest your savings someplace safe so it will be there when you're ready to buy a house.  But you don't have to stuff your money in a mattress.  Some options:

Certificates of Deposit: CDs are your best choice if you plan to buy a home from six months to a year from now.  With a CD, you can lock in an interest rate that matches your time horizon.

Credit Unions: Credit unions don't advertise much, and you have to be a member to use their products and services.  But if you do a little research, you can find good rates on credit union share certificates which are similar to CDs.

High-Yield Savings Accounts: These accounts, typically offered through online banks, are paying rates ranging from 5% to 5.3%, compared with less than 1% for traditional passbook savings accounts.  If the bank is insured by the FDIC, there's no risk you'll lose your money.

 

These rates could fall, particularly if the Fed decides to cut short-term interest rates.  But you can withdraw your money at any time without penalty — an option that makes these accounts a good choice for people who are looking for a home and need quick access to their money quickly.  CDs, by contrast, offer a guaranteed interest rate, but if you withdraw your money before the CD matures, you'll forfeit some of your interest.

 

Are you trying to save to buy a home?  Have you found a particularly good place to stash your cash?  We'd love to hear your comments.

Selling a Home?  Curb Appeal Means Everything

If you're selling your home, or even THINKING ABOUT it, one of the most important things you must do is to improve the curb appeal of your home.

The exterior of your home is the first item potential home buyers are going to see.  Therefore, there should be a lot of emphasis placed on your homes exterior.  After all, if potential home buyers are turned off by your home's curb appeal, you may never get them inside the home to have a chance for a sale.  Here are a few tips to spruce up your home's exterior:

• Power-wash your siding
• Re-mulch your landscaping beds
• Trim up bushes and hedges
• Add colorful flowers
• Add some cheap bushes in bare spots
• Spot seed your lawn if you have any bare spots
• Water your lawn to "green it up"
• Weed and feed your lawn as well
• Re-paint the siding if needed
• Pick up any lose debris in the yard
• Rake up leaves
• Trim tree branches if necessary
• Keep the yard mowed very regularly
• Edge along your driveway and your sidewalks (makes a big difference)
• Pull out all weeds in landscaping beds
• Waterproof wood patios
• Re-seal concrete patios
• Hide or store away any unsightly or run down outdoor furniture and/or decor
• Repaint or replace your mailbox if necessary
• Clean outside windows
• Make any necessary repairs to siding, roof, flashing, shutters, etc.

This list is only the beginning and only includes the outside of your home.  This list can be as long (or longer) for getting the inside of your home ready to show, but hopefully these tips get you started on that all important curb appeal.

See other Home Selling Tips in the "Home Selling Tips" category of this site for more.

Fed Move Eases Panic

The Federal Reserve's recent move to encourage bank lending has helped ease some of the panic in financial markets, but the underlying problems that led to the seizing up of credit are still there - and obviously won't disappear overnight.

The credit crisis escalated last week, forcing the Fed to cut its little used discount rate - the rate it charges member banks for temporary loans - a rare move for the central bank.

The Fed's decision to cut the discount rate was designed to get banks lending again and reassure the market - and so far that appears to be working.  But for borrowers, the real move to watch is the one when the Fed takes on its more closely watched fed funds rate, a key short-term rate that influences rates on a variety of consumer loans.

Some analysts said it looks more likely now the Fed will cut this rate to keep the credit crunch from becoming a drag on economic growth when it next meets on Sept. 18, or even earlier if there's further turmoil in the credit markets.  The fed funds rate now stands at 5.25 percent.

We'd love to hear your comment.  Did the move by the Federal Reserve do ANYTHING to boost your confidence in a sagging economy?  Leave your comment below.

Owner Financing: Will it Return?

If you're ready to buy a home, the recent turmoil on Wall Street may be further hurting your chances of getting a loan.  Investors are reacting to a mortgage industry crisis not seen in decades.

Some lenders are shutting down, laying off thousands of employees and leaving buyers in the lurch. Interest rates and the terms of loan offers are changing daily. And borrowers with tarnished credit are facing deal-killing loan terms — if they can find a loan at all.

It makes one wonder - Will Owner Financing on a home return just to get property sold as was a trend at one time decades ago?

Of course, the only sellers who could even entertain such an idea are those with no mortgage, and we suspect there are fewer and fewer of these types of homeowners around these days.

If you were selling a home and had no mortgage, would you consider owner financing to a buyer to get your property sold?  We'd love to hear your opinion on this subject.  Just click the comment link below and tell us what you think.