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The businesses that are dependent on the availability of qualified home buyers for their market base need to be looking past immediate market conditions toward available opportunities. In my own metropolitan area, I have dozens of clients that are qualified for homes in the $125,000 to $225,000 price range. Yet with the area’s property shortages, there are precious few available and no new construction of consequence.

Whether interest rates go up or not, there are currently large numbers of qualified buyers in the marketplace which are underserved. Without new construction in their price range and housing shortages in many markets, they have few buying options. In order to continue their success of recent years, businesses in the homebuilding industry should look at these market opportunties as the source for future growth.

Large suburban home building firms can drive many aspects of the market and increase prices at will. Smaller builders often try to compete. The problem…………most times they can’t. Their answer……………find different market, fill another niche.

Look at the mortgage industry. Lenders found that they have to offer more loan choices to a larger selection of borrowers in order to maintain the volume they needed to be successful. Builders need to think the same way. Sometimes local governments will require builders to build homes in specific price ranges within a given area versus allowing the builder to build at whatever price the market will bear.

Without this type of direction, in many areas of the country, the builders drive the market and the prices. They would do well to take a page from the lenders’ books, and offer a wider variety of housing options for a broader range of homebuyers.

Americans want to own homes……………….it’s part of the American dream! There are more lending options and, therefore, more qualified buyers than ever before. Builders, large and small, should realize that their long-term success is more secure if they meet the needs of those buyers.

Recent analysis of the US real estate market concluded that

during the past 5 years residential property alone has increased in value by almost 50%.

While it is good for homeowners who can quickly increase equity, it presents problems for buyers whose salary increases don’t keep up. There are instances where growing families, needing to “buy up” to a larger home. They sell homes which have substantially appreciated during their ownership, only to find the net profit isn’t enough for them to afford a larger home, because of the quick jumps in property values in their area.

Housing prices across America have been rising steadily for the last several years and, in many locations, they’ve increased exponentially. The average price of a home in the US is $268,000, up from June of 2004’s $209,000, an increase of 23%. This overall average is small compared to market areas where housing prices have increased over 75-100% in less than a year.

At the same time, median income levels have only increased 3 to 4% for most families of 4 according to census reports. The median income for a family of four in 2004 was $65,093 which would make the average today around $67,500 annually.

When you add to that higher fuel costs, which increase costs of goods and services across-the-board, you find higher housing prices can quickly outstrip the buyer’s ability to purchase. Additionally, housing shortages have created a seller’s market for builders who, given the choice of building a $150,000 starter home and a $450,000 upgraded home on the same piece of property, will build the more expensive home because they make more money for relatively the same costs.

In my own metropolitan area, I have dozens of clients that are qualified for homes in the $125,000 to $225,000 price range. Yet with the area’s property shortages, there are precious few available and no new construction of consequence. If there is potential for a real estate “bubble” to burst, I believe it will be driven by the fact that there are fewer and fewer buyers who are able to purchase at the increasingly higher prices sellers are putting on properties.

To achieve balance in any area, you have to avoid extremes on either side of the scale. With low interest rates and flexible loan programs, more people are able to purchase homes than ever before. However, unemployment rates and/or salary levels won’t continue to support exponential increases in housing prices.

Next: Is the real estate boom missing some markets?

Created by Congress in 1938, Fannie Mae is the nation’s largest source of financing for home mortgages. A private, shareholder-owned company that works to make sure mortgage money is available for people to purchase homes. Fannie Mae describes it’s goal as “helping more families achieve the American dream of homeownership.”

Fannie Mae, as the largest underwriter and purchaser of mortgage loans, has set the standards within the mortgage industry for conventional lending. If you are purchasing a new house, no matter what lender you get financing through, the criteria you must meet in order to qualify for the loan has been established by Fannie Mae. Exceptions are niche market loans that are not eligible for re-sale to Fannie Mae.

Lenders and brokers access Fannie Mae’s underwriting guidelines via their web-based “Desktop Originator”. With the ability to submit a loan application directly into Fannie Mae’s automated underwriting, the time in which it takes a loan to be processed and closed has shorten considerably. Getting a mortgage used to take months, now it can be done in just a few weeks.

We [Fannie Mae] are in the American Dream business. Our mission is to tear down barriers, lower costs, and increase the opportunities for homeownership and affordable rental housing for all Americans. Because having a safe place to call home strengthens families, communities, and our nation as a whole.

Since 1938, we have helped put more than 66 million families into homes of their own, and as long as more Americans continue to dream of a safe place to call home, we’ll keep working with our partners to make it a reality.

More Americans own homes today than at any other time in history. Fannie Mae is working to expand homeownership opportunities by joining with lenders and community partners to create products and technologies to reach underserved communities, so that more people can own their own homes.

A real estate CLOSING can be defined “as a torturous process designed to induce cramping in a home buyer’s hands by requiring their signature on countless pieces of documentation that nobody has ever read”.

Or, “the process whereby the sale of a property is consummated with the buyer completing all applicable documentation, including signing the mortgage obligation and paying all appropriate costs associated with the sale”. All the costs, fees and payments related to completing the purchase transaction are outlined on the settlement statement (HUD-1 form). The settlement statement is the document detailing the final financial arrangement between a buyer and seller and the costs paid by each.

Many home buyers are confused by the numerous individual fees that appear on their Good Faith Estimates as well as their settlement statements. Additionally, buyers perceive all the fees as closing costs: they’re not.

There are fees that are considered “prepaids”. These are charges for taxes, insurance, etc. that you pay at closing in advance of when they are actually due. They are then held in escrow by the lender until they come due for payment. At the time property taxes or homeowner’s insurance premiums are due, the lender pays the amount due from the buyer’s escrow account. This saves the buyer from having to keep up with paying these fees when they come due each year since an amount of each month’s mortgage payment is put into escrow to cover these costs.

Fees that are considered closing costs are all appropriate costs generated by the sale of property which the parties must pay to complete the transaction. Costs may include appraisal fees, origination fees, points, lender fees, attorney’s fees, title insurance, recording fees and taxes. Anytime during the mortgage process, if you are unsure of what a fee is for or why you are paying it, ask your loan officer to explain it to you.

As you plan for closing on a new home, you can always prepare by buying one of those little squeeze balls and begin exercising that signature hand. Just picture Richard Simmons, to the sound of some oldies classic, and squeeze…….one and two, squeeze, three and four, come on, everybody……..feel the burn!

Are you conflicted, unclear as to the direction mortgage interest rates will take? Do you wonder if Greenspan’s conundrum will continue?

Frankly, your guess may be as good as those who routinely predict these things. I’ve seen opinions indicating rates are going to skyrocket upwards to those believing bond yields will send them even lower. Overall, my best guess is mortgage rates will continue to remain reasonably stable. Why? A number of reasons.

As financial markets anticipated a higher level of economic growth, 30 and 15 year fixed rates rose during the past two weeks. Essentially, 30 year rates rose from 5.62% to 5.66% while 15 year rates went from 5.20% to 5.25%. Still, those rates are almost a half point lower than the average rates of a year ago.

The gearing up for greater growth in the economy may have been, ultimately, somewhat premature, as the softer-than-expected inflation rate report failed to boost the market.

“A further rise [in fuel prices] could cut materially into private spending and thus dampen the rate of economic expansion,” said Greenspan.

With crude oil prices averaging around $60 a barrel and showing no signs of decreasing, higher gas prices will continue to strain the budgets of both businesses and individuals. The effect is overall higher costs on all products and services which could prevent further expansion and growth in some areas of the economy.

Greenspan also said that low long-term interest rates have “continued to provide a lift to housing activity.”

During the past several years, one of the strongest areas of economic growth in this country surrounded the housing market. Low rates and flexible loan program options gave many Americans their first opportunity to buy homes. Homeownership provides a foundation for a stronger, more stable economy.

With this in mind, I believe that interest rates dropping to new record lows is unlikely, at the same time, I also feel that even as the market improves and the economy continues to stabilize, long-term rates for mortgages will remain steady and affordable.

In order to help citizens protect themselves from identity theft, California and Texas have passed legislation that allows individuals to freeze their credit history with each of the three credit bureaus. There are mixed reviews from various camps on whether or not this will actually benefit consumers, however, many other states are proposing similar legislation.

Fraud experts and consumer advocacy groups are praising the legislation as being a much needed first step towards arresting the ever-increasing incidents of identity theft in this country. Realtors and lenders are claiming that this type legislation will ultimately be detrimental to consumers by making credit more difficult to get.

The problem of identity theft in this country is not only major issue, it’s one that won’t go away. The same technology that allows individuals to get credit almost instantaneously is the technology that supports opportunity for identity theft to occur.

A bipartisan group of Senators has recently introduced a proposal for new legislation which is designed to protect Americans from identity theft. At first glance, it appears to be similar to the legislation passed by California and Texas. However, it does require that businesses collecting and sharing individuals personal data begin bearing more of the burden of preventing identity theft or face fines and penalties.

A review of the proposed legislation and further updates on this topic will follow in later posts.

With Hurricane season in full swing, many homeowner’s may find themselves addressing damage from storms. It’s common for homeowner’s that live near rivers, waterways or the ocean to have coverages for flooding, storms, etc. However, with the strength of recent storms and their increasing movement inland, they are devastating areas previously untouched by their effects.

That being said, since almost all lenders require homeowners to purchase and maintain hazard insurance on their properties, now would be a good time to review your coverage. By definition, a hazard policy is insurance covering damage to a property caused by hazards such as fire, wind and accident.

If you live in a flood plain, you would have additional coverage, called a rider, to protect in the event of a flood. If don’t live in a flood plain, but experience flood damage as a result of an unexpected storm, you may not be covered.

I recommend getting your policy out and reviewing it. Be sure you know what coverage your policy provides and in what circumstances you will need additional riders. Call your insurance agent and discuss options with him/her. Know in advance what coverage you will have available in the event of a storm. If additional coverage is necessary, then you can make an informed decision about what you need in order to protect your home investment.

In a real estate transaction, earnest money or deposit on the contract for sale is made to a home seller or their representative, usually a real estate agent, to secure an offer to buy the property. It is required for the contract to be valid or ratified. The amount of the deposit is up to the buyer, although in some areas or situations, there are expected standards for the amount.

The earnest money is held in escrow by either the seller or the seller’s representative until closing. At the close of the sale, the money is transferred to the closing agent and deducted from the total amount the buyer must have available to complete the sale.

It is recorded on the settlement statement (HUD-1) under Amounts Paid By or In Behalf of the Borrower and subtracted from the Gross Amount Due from Borrower. Therefore, the borrower is credited with having paid that amount toward the purchase in advance of closing.

Should the terms of the contract for sale not be met by the seller, the earnest money deposit is returned to the buyer. If the terms of the contract for sale are not met by the buyer or he decides to withdraw his offer, the earnest deposit is subject to forfeit.

When I tell mortgage applicants that, if they’re in credit counseling, they are less likely to qualify for a home mortgage, they are agast!

Since most consumers seek credit counseling in an effort to improve their credit worthiness, it is clear that the information given to them at the onset by credit counselors, fails to provide an accurate understanding of the process.

After hundreds of complaints from consumers about misleading and/or high-pressured sales tactics which included significant fees and poor education, the IRS has revoked the tax-exempt status of four nonprofit credit counseling agencies. An IRS official also indicated that they are reviewing the status of many more of these nonprofits who offer credit counseling services.

This brings to fore the many misperceptions of consumers seeking debt-relief through credit counseling. The counseling services may reduce some of the high-interest rates you are paying on credit cards, but the counseling services don’t improve your credit rating. In reality, once you sign on for credit counseling, your credit is further damaged and it can prevent you from qualifying for a loan.

Many mortgage companies will not extend credit to anyone that is in credit counseling and, often, for a specified time after leaving the counseling service. It can effectively impact your qualification for a home mortgage just like bankruptcy.

If you wish to improve your credit or seek debt-relief you should carefully investigate all options and be confident that you understand the benefits as well as the consequences of credit counseling through any fee-based agency.

Low interest rates in recent years have given more and more individuals the opportunity to purchase a home. Home ownership, part of the American dream, fuels a strong economy.

However, due to shortages of available housing in some areas and other economic factors, real estate prices have soared upward, even as interest rates went down. The lower rates and newer, flexible mortgage programs, such as interest-only and pay option ARMs (a type of adjustable rate mortgage), continued to allow people the ability to buy homes, despite rising real estate prices.

Now that interest rates may begin to rise and increased housing costs show no signs of slowing, it becomes questionable if homeownership will still be possible for the average American.

Fannie Mae’s response to this scenario was the announcement on June 1st it will begin buying 40-year mortgages from lenders. The 40-year programs function just like a 30-year product, the payments are simply spread over an additional 10 years.

Will it be cost effective? Consider that a $250,000 mortgage at 5.75% for 30 years is $1458.93 P&I per month. The same $250,000 mortgage for 40 years at 6% (40-year rates are generally .25 point higher than 30-year rates) is $1375.53 per month. The savings? A mere $83.40 per month.

As few people keep a mortgage for 10 years, let alone 30, I doubt it will make a big difference in the long run. However, as I have cautioned before, it is still imperative for each individual interested in homeownership to carefully evaluate their personal debt threshold.

You still have to be clear about what you can afford and what you can’t. Whether the payments are over 30 years or 40, successful homeownership will depend on your being able to make those monthly payments comfortably no matter what other financial obligations arise.