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Year in review 2012
This year we talked about the historic low mortgage interest rates, the bottoming out of real estate values along with the benefits and pitfalls of refinancing, and the importance of making sure you have all your paperwork in order for the loan process.
We began this year with mortgage interest rates around four percent then watched them slowly drop throughout the year to the low three percent range by November.
The combination of low rates and real estate values have increased the home buying affordability index along with allowing homeowners the ability to save money by lowering the rate on their current mortgage (assuming they have the equity in their home or qualify for one of the available special refinance programs).
The Federal Reserve stated they will do what they can to keep interest rates low for the foreseeable future.
Have we hit bottom yet?
Since the beginning of the financial crisis of 2008-09 every year we heard that we have reached the bottom when it comes to real estate values. In 2012 it looks like we really may have hit bottom. Low inventory of homes available for sale and multiple offers on some properties are good signs.
This year we have seen real estate values rise for the first time in several years.
In some parts of the country there is a shortage of homes for sale and prices are rising as a result of simple economics; supply and demand. There are always business and real estate cycles and home values never rise forever nor decline forever. I think we all agree we have seen enough of the declining part of this cycle.
Many homeowners took advantage of the low mortgage rates by either lowering their monthly payments or shortening the term of their loan.
The Federal Government expanded the Homeowner Affordability Refinance Program known as HARP and HARP 2.0 (available if your loan is eligible and owned by Fannie Mae or Freddie Mac) to include loans with unlimited loan to values. In other words, you could refinance even if you are way upside down. They also announce the Attorneys General Refinance Program as part of a $25 billion settlement with the big banks. Call your current lender to see if you qualify for one of these programs.
Underwriting standards remain tight; therefore, regardless what you may think about your financial situation it is a good idea to get preapproved for a loan prior to your home shopping, especially with the frequent changes to lending guidelines.
This will help make the loan process a bit smoother and hopefully a little less stressful.
The required documentation
Try not to shoot the messenger, your home mortgage consultant is trying to help you get your loan approved and navigate through all the, eh-hem, stuff you need to provide in order to successfully approve and close your loan.
I know some of requirements may border on what we may think as excessive, but you have to remember we have done a 1080 (yes, pendulum swinging 180 degrees not just once but several times) in regards to what you need to provide for a loan approval, from fogging a mirror to now just about everything (no body searches yet!). I expect to see this (tight lending standards) continue for the foreseeable future with the slow release of the financial regulations that are due to be implemented over the next few years.
The good news
This combination of low inventory, low mortgage rates and tight credit standards, may actually help for a continued, slow, but steady housing recovery and lead to sustainable housing price increases without the speculation and price frenzy of the past.
So much for the end of the world predictions and as we get closer to the fiscal cliff not sure if it will really be a cliff or just a speed bump. Stay tuned!
Wishing you all a happy, healthy and prosperous New Year!
Doug Magit is a home mortgage consultant at Wells Fargo Home Mortgage, serving his clients nationwide for over 20 years. He can be reached locally at 760-914-0674, toll free nationwide at 800-520-2050, via email at douglas .firstname.lastname@example.org, or by visiting www.wfhm.com/douglas-magit. Information in this report is the personal view of writer and does not necessarily reflect the views of Wells Fargo Home Mortgage or the Mammoth Times. It is for your personal use.