Tallahassee Real Estate Blog

Good Deal … Bad Deal … We’ll See

Fannie Mae and Freddie Mac had a good day yesterday, did you?

Overall, I think Tallahassee had a good day with this bill being signed by President Bush yesterday. Tallahassee is a town that historically is very active in loans guaranteed by Fannie Mae and Freddie Mac (government loans) so the fact the financial reinforcement has been provided means that Tallahassee home buyers will have their “normal” sources of mortgage funds. Read the rest of this entry

If you are in the market for a new mortgage loan, whether for buying a home or refinancing a home, then you might have run across a term that is causing great confusion in the real estate market today. The term that I am referring to is “Declining Markets.”

What Is A Declining Market And How Does It Affect Me?

Whenever I want to know something that relates to the mortgage industry, I ask a great mortgage loan officer that I know, Joe Kupiszewski, of Century 21 Mortgage. So I went to Joe this morning and asked if he could brief me on “declining markets” and he gave me a bevy of information. What I hoped to provide was a declining market definition, but what I learned is that it really is not that important anymore. And as Joe so clearly put it, it is confusing

Joe provided me with the latest word from Fannie Mae, but added “The problem is that while this is the latest word, it is not the final word. The big rub comes in from the mortgage insurance companies, which makes sense. After all, they are the ones insuring the first loss position. The last paragraph of page two of the attachment sums up Fannie Mae’s positions very clearly.Their terms: Maximum 97% Loan to Value (LTV) on conventional/conforming loans regardless of the market with their proprietary Desktop Underwriter (DU)/Automated Approval, and 95% LTV maximum financing if the loan is underwritten outside of DU (manually).”

O.K. You got that?

I believe what Fannie Mae is now saying is declining markets are no longer an issue with them, though they might be with the mortgage insurance company. So I asked Joe for a little clearer explanation on what Century 21 Mortgage could do and he responded: “If you are able to put down 10% or more and have decent credit, conforming is the way to go. If you are not, I would give a serious look at FHA. VA is still going at 100%, but the borrower must qualify through prior or present service in the military. You may be able to find 95% financing on conventional, but it could very easily disappear before you get to close.

FHA/HUD has also raised their guidelines. I still see lenders claiming 560 FHA in my spam folder every day, but 2 months ago, they were at 520.  We are at 580 MINIMUM and that will have to be on an exception basis. Further, FHA recently announced tiered pricing so it is no longer a one size fits all product - both good and bad.  The differences are not huge, but they are creeping in.”

My Conclusion On Declining Markets And The Mortgage Market

• Most real estate markets in the U.S. are declining, therefore the term “Declining Market” has little or no real meaning anymore.
  
• Fannie Mae is working hard to work out of this mortgage market mess.
• Most mortgage lenders are fair and honest, but there are those that send “spam” and make promises on terms that they cannot ever deliver.
• You need to work with a mortgage lender that you can trust. Period.

For those of you who have read this and have a thirst for more information, you can download the lastest word on declining markets from Fannie Mae. Good luck and have a strong cup of coffee handy!

As a reminder for those who subscribe to the Tallahassee Real Estate Blog by email, some embedded pictures and videos might not be appearing in your email and you might need to click the title header to go to your browser where all will be visible.

Keep checking out the Tallahassee Real Estate Blog every day for updates that include charts, graphs, and analysis of the Tallahassee real estate market.

If you like this Article then please subscribe to my blog through a full RSS feed, or you can . You will be able to stay informed about the happenings in the Tallahassee Real Estate Market. You can also subscribe to this blog and have it delivered by Email.

Joe Manausa is a real estate investor and the Broker and Co-Owner of Century 21 First Realty. He can be reached via e-mail through the Tallahassee Real Estate Website or catch his latest writings on the Tallahassee Florida Real Estate Blog , or by calling (850) 386-2001.

Just over three months ago, I wrote a blog article in the Tallahassee Real Estate Blog that examined the relationship between Home Prices and Interest Rates in determining the time to buy a home. It has been the source of numerous comments and debates in several real estate forums on the Internet.

If you refer back to that article, I suggested that future rising interest rates would make a cheaper house less affordable. While I figured that it was highly likely home prices would be falling, I knew that rising interest rates would leave most buyers with higher monthly payments. Sure enough, mortgage interest rates are rising, as you can see in the chart below.

So, even if you are not thinking about buying a Tallahassee home, you might want to look into refinancing your home. Back in April, I wrote a blog titled When Should A Mortgage Be Refinanced? This could be a good reference to review before contacting a real estate mortgage lender.

On another note, here are some of our most popular features on the Tallahassee Real Estate Web Site:

• Full Tallahassee MLS Property Search (Data provided by the MLS)
• Complete Access to Homes For Sale In Tallahassee without annoying registration
• A new and growing Tallahassee Neighborhoods and Subdivisions map and information service
• A near-daily view of the market provided by the Tallahassee Real Estate Blog
• Tallahassee Real Estate Market Information delivered by a full RSS feed
• Tallahassee Real Estate Market Information delivered by E-Mail
• Home buyer resources including a Free Tallahassee Home Buyer’s Guide
• Home seller resources including a FREE Tallahassee Home Pricing Analysis
• A new Free Tallahassee Relocation Tool, whether moving to or from Tallahassee
• A constantly updated Tallahassee Real Estate Market Report
• A Tallahassee real estate career evaluation tool that will let you know if real estate is right for you
• A First Time Tallahassee Real Estate Buyer’s Guide that answers critical questions
• Much, much, more from the top Tallahassee Real Estate Company

As a reminder for those who subscribe to the Tallahassee Real Estate Blog by email, some embedded pictures and videos might not be appearing in your email and you might need to click the title header to go to your browser where all will be visible.

Keep checking out the Tallahassee Real Estate Blog every day for updates that include charts, graphs, and analysis of the Tallahassee real estate market.

If you like this Article then please subscribe to my blog through a full RSS feed, or you can . You will be able to stay informed about the happenings in the Tallahassee Real Estate Market. You can also subscribe to this blog and have it delivered by Email.

Joe Manausa is a real estate investor and the Broker and Co-Owner of Century 21 First Realty. He can be reached via e-mail through the Tallahassee Real Estate Website or catch his latest writings on the Tallahassee Florida Real Estate Blog , or by calling (850) 386-2001.

You might not be aware of an important decision that the United States Senate will be considering in the next few days. This decision will determine whether or not housing consumers will be able to get fair, safe and affordable mortgage credit, which of course is a major part of the health of the national housing market.

Current loan limit increases for FHA, Freddie Mac, and Fannie Mae are due to expire at year’s end. There is a major push by many groups to make these loan limits permanent in order to restore investor confidence and stabilize mortgage markets and the entire economy as well.

While this is definitely national news, it also hits us close to home in the Tallahassee real estate market. You see, many Tallahasseans have relied on these government insured loans over the past twenty years (and longer, but before my time…). Except for the boom market years of 2004-2006, these were the typical loan programs that we saw utilized in our sales in the Tallahassee real estate market.

So, what can you do? Send a letter to your Senators. The House of Representatives has already voted to do so, but the Senate has reduced the maximum limit in its bill. Our economy is heavily tied to the housing market and we need to follow the lead of the House of Representatives.

How Do You Do IT?

Follow this link and fill out your name and address. It will generate a letter and email it for you if you wish, or allow you to modify it and print it for snail mail. It takes less than a minute and you’ll be doing your part to maintain your own home’s value.

The Senate needs to keep the higher loan limits in place for 2009 and beyond.

Here are the letters that I have sent to Senator Bill Nelson and Senator Mel Martinez.

June 12, 2008 07:50 PM

Subject: Make Higher Loan Limits Permanent for FHA, Freddie Mac & Fannie Mae

Dear Senator Nelson,

As your constituent and a REALTOR, I urge you, as a Member of the Senate, to support making permanent the FHA, Fannie Mae and Freddie Mac loan limits in the bipartisan Economic Stimulus Act, signed by President Bush last February. The legislation raised the maximum loan limits in high cost areas to $729,750 but it expires on December 31, 2008. The limits help homeowners in 240 counties in 26 states and can help get our national economy back on track.

The House-passed housing stimulus bill, H.R. 3221, makes the $729,750 limits permanent. Senate bills cap the limits at $550,440. Our 1.2 million members applaud the progress the Senate has achieved, but strongly believe that the final bill must include the House bill’s loan limits.

The national mortgage market meltdown dramatically raised the cost and reduced the availability of mortgages in my market. Higher limits are helping to revitalize local housing markets, providing safe, fair and affordable mortgages for our state’s homeowners. The limits are also helping to stabilize our entire economy. Higher limits simply reflect market realities in high cost areas. A lower limit unfairly penalizes citizens based simply on geography.

Drastically reducing the temporary limits at year’s end to the Senate cap of $550,440 will push our fragile housing and credit markets back into turmoil. We need permanent limits of $729,750 to stabilize our housing markets and help citizens of every state — not just residents of high cost areas. Please support making the $729,750 loan limits permanent.

Sincerely,

Joe Manausa

2138 Amanda Mae Court , Tallahassee, Florida 32312

June 12, 2008 07:50 PM

Subject: Make Higher Loan Limits Permanent for FHA, Freddie Mac & Fannie Mae

Dear Senator Martinez,

As your constituent and a REALTOR, I urge you, as a Member of the Senate, to support making permanent the FHA, Fannie Mae and Freddie Mac loan limits in the bipartisan Economic Stimulus Act, signed by President Bush last February. The legislation raised the maximum loan limits in high cost areas to $729,750 but it expires on December 31, 2008. The limits help homeowners in 240 counties in 26 states and can help get our national economy back on track.

The House-passed housing stimulus bill, H.R. 3221, makes the $729,750 limits permanent. Senate bills cap the limits at $550,440. Our 1.2 million members applaud the progress the Senate has achieved, but strongly believe that the final bill must include the House bill’s loan limits.

The national mortgage market meltdown dramatically raised the cost and reduced the availability of mortgages in my market. Higher limits are helping to revitalize local housing markets, providing safe, fair and affordable mortgages for our state’s homeowners. The limits are also helping to stabilize our entire economy. Higher limits simply reflect market realities in high cost areas. A lower limit unfairly penalizes citizens based simply on geography.

Drastically reducing the temporary limits at year’s end to the Senate cap of $550,440 will push our fragile housing and credit markets back into turmoil. We need permanent limits of $729,750 to stabilize our housing markets and help citizens of every state — not just residents of high cost areas. Please support making the $729,750 loan limits permanent.

Sincerely,

As a reminder for those who subscribe to the Tallahassee Real Estate Blog by email, some embedded pictures and videos might not be appearing in your email and you might need to click the title header to go to your browser where all will be visible.

Keep checking out the Tallahassee Real Estate Blog every day for updates that include charts, graphs, and analysis of the Tallahassee real estate market.

If you like this Article then please subscribe to my blog through a full RSS feed. You will be able to stay informed about the happenings in the Tallahassee Real Estate Market. You can also subscribe to this blog and have it delivered by Email.

Joe Manausa is a real estate investor and the Broker and Co-Owner of Century 21 First Realty. He can be reached via e-mail through the Tallahassee Real Estate Website or catch his latest writings on the Tallahassee Florida Real Estate Blog , or by calling (850) 386-2001.

In today’s tough real estate market, where Sellers seem to far outnumber Buyers, it is important to have a complete “bag of tools” when you desire to sell a home in Florida.

Creative Financing - A Required Skill For Realtors

Today, I will focus on an instrument that is fairly common on Wall Street that we do not see very often on “Main Street,” and that is the Zero Coupon Bond. For those readers who do not invest their money in bonds, I will briefly define a zero coupon bond as an investment that generates no monthly payments, but rather accumulates interest and is repaid in full, plus interest, on a future maturity date. If you would like a much better definition of the zero coupon bond, just follow the link preceding this to the Wikipedia site.

So, how do we apply the zero coupon bond to selling a home in the Tallahassee real estate market?

The best way to explain this is with a real world situation in which two excellent Century 21 Realtors were able to creatively sell a home that had been on the market for a rather long-time.

We had a home on the market (names and dollar amounts have been changed to protect the sensitivity of the transaction) listed by our office which had been listed by a previous office for nearly one year. The Sellers (Mr. and Mrs. Seller) were in desperate need of a sale, as they had already committed to moving out of the Tallahassee real estate market. They owed $400,000 and felt they needed at least $50,000 to purchase their new home in the next market. While they had a $600,000 appraisal on their home, they had failed to get it sold while listed previously at $575,000.

We explained to Mr. and Mrs. Seller that they were seeking to sell their home to a very tiny portion of the home buyers in Tallahassee. With our median sales price being less than 1/2 of what they were seeking, we felt that the Sellers needed to do some creative marketing and offer creative financing in order to attract more buyers. We have learned that many more buyers exist for a home if we can satisfy one of two problems, cash issues and/or credit issues. A buyer with cash issues has good credit and can afford to make a home payment, he just does not have the required cash to close on the transaction. A buyer with credit issues might have plenty of cash, but might not have the credit to qualify for a loan or might lack the income required to make the entire mortgage payment.

Selling A Home With A Zero Coupon Bond

We offered the Seller’s home for sale at $560,000, but put the word out through our network that creative financing was available. In fact, a buyer could buy the house for $560,000, but have payments as if he had only paid $500,000 for the home! How is this possible….enter the zero coupon bond.

We found a buyer who very much loved the home, but fell short of qualifying for the home due to income restraints. This buyer had very good credit and had sufficient cash to close on the home, but not enough cash + borrowing ability to get it closed. So here is how we structured the transaction:

The Seller was able to walk away with nearly $56K from this sale, more than enough to close on their new home. Additionally, they were able to realize the top amount of money (full asking price) for their home.

The buyers were able to buy more home than they expected, while keeping their payments at a with which they were comfortable.

So what were the terms of the zero coupon bond? The Sellers and the Buyers agreed to $65,000 at 3.25% interest for ten years. That means that the Buyers will owe $89,500 in ten years. Should the Buyers refinance or sell the property prior to that, they will be required to repay the entire principal balance ($65K) plus the accumulated interest at the time of the refinance or sale.

This transaction worked out very well for both parties. We continuously seek to find “win/win” solutions so that we can help Sellers out of their homes by bringing more potential buyers to a market that is currently heavier on housing inventory than it is on active buyers.

As a reminder for those who subscribe to the Tallahassee Real Estate Blog by email, some embedded pictures and videos might not be appearing in your email and you might need to click the title header to go to your browser where all will be visible.

Keep checking out the Tallahassee Real Estate Blog every day for updates that include charts, graphs, and analysis of the Tallahassee real estate market.

If you like this Article then please subscribe to my blog through a full RSS feed. You will be able to stay informed about the happenings in the Tallahassee Real Estate Market. You can also subscribe to this blog and have it delivered by Email.

Joe Manausa is a real estate investor and the Broker and Co-Owner of Century 21 First Realty. He can be reached via e-mail through the Tallahassee Real Estate Website or catch his latest writings on the Tallahassee Florida Real Estate Blog , or by calling (850) 386-2001.

I received a call from a client yesterday seeking my advice on whether or not the client should refinance a property in Tallahassee. After asking the client several questions, my advice was against refinancing until he had a better understanding of how long he would own the property.

Here is how I determined this advice.

Tallahassee Mortgage Refinance - Q & A

• What is the purpose of the refinance? Lower the monthly payment
• How long have you owned the home? Four years
• How long do you plan on owning the home into the future? At least three more years, most likely five or more years.
• What is your current interest rate? 6.25%
• Do you currently pay PMI Insurance? No
• What did you pay for the home? $236,000 four years ago (financed $212,400)
• What is your current payment (Principal and Interest)? $1,308 per month
• What is your current loan balance? $202,000

With that information in hand, here is how I determined my response.

The Tallahassee home will currently appraise for about $275,000. As long as the new loan is kept at 80% loan-to-value (80% x $275,000 = $220,000) or lower, my client can get the best rate program available. Expecting closing costs for this refinance to be about 2% of the loan balance (roughly $4000-$5000), I figured new loan would be his old balance plus $5,000 more which totals $207,000 for the new loan. Currently, I believe the thirty-year fixed rate to be roughly 5.75%, so the new payment (P&I) would be $1,208 per month, a savings of $100 per month. That means his break-even would be fifty months ($5,000 closing costs divided by $100 savings per month = 50 months).

With his break-even being over four years away, and his expectation of ownership being three to five years, I did not feel that increasing his loan amount by $5,000 now would make sense. Nobody really knows for sure how long they will own their home, but making a best-guess is really important in determining whether or not to refinance the property. While saving $100 per month seems like a smart thing to do at present, having to give it all back, and more, in a few years when selling does not seem to make great sense.

In this case, I used the thirty-year fixed rate program, even though the client did not expect to own the home for much longer than five years. This scenario is perfect for a loan program that is fixed for five to seven years and then adjusts, as he will not own the home at the point of adjustment. Unfortunately, the rate differential was not that attractive and the client did not have the confidence level in his expectation of how long he would own the home, so we stayed with the thirty-year fixed-rate program. Do not hesitate to look at other loan programs if you know you will be selling at or near a specific point in the future.


So, if you are considering whether or not to refinance a home in Tallahassee, here are the questions that you need to ask yourself:

• What is the purpose of the refinance?
  
• How long have you owned the home?
  
• How long do you plan on owning the home into the future?
• What is your current interest rate?
  
• Do you currently pay PMI Insurance?
  
• What did you pay for the home?
  
• What is your current payment (Principal and Interest)?
  
• What is your current loan balance?
  

As a reminder for those who subscribe to the Tallahassee Real Estate Blog by email, some embedded pictures and videos might not be appearing in your email and you might need to click the title header to go to your browser where all will be visible.

Keep checking out the Tallahassee Real Estate Blog every day for updates that include charts, graphs, and analysis of the Tallahassee real estate market.

If you like this Article then please subscribe to my blog through a full RSS feed. You will be able to stay informed about the happenings in the Tallahassee Real Estate Market. You can also subscribe to this blog and have it delivered by Email.

Joe Manausa is a real estate investor and the Broker and Co-Owner of Century 21 First Realty. He can be reached via e-mail through the Tallahassee Real Estate Website or catch his latest writings on the Tallahassee Florida Real Estate Blog , or by calling (850) 386-2001.