Not only have 30-year fixed mortgage interest rates been at or below 4% since November 3rd, they also hit an all-time low this past week at 3.87%.
 
Buying a median priced home a year ago:
   Price:  $180,000
   Interest Rate:  4.81%
   Monthly Payment:  $884  (assuming 80% LTV)

Buying a median priced home now:
   Price:  $174,900
   Interest Rate:  3.87%
   Monthly Payment:  $781  (assuming 80% LTV)
  

If you are looking to finance 100% of the purchase price of your new home, it may still be possible.  Please note that each of the loan types below have limitations and requirements that may not make you or your property eligible -- but all of them deserve research if you are interested in a 100% loan.

FHA Loan + 3.5% Gift
If you have access to 3.5% of the purchase price as a gift, you may be able to combine that with a 96.5% FHA loan to acquire an effective 100% loan -- even though you won't be paying back the gift.

BB&T's Community Homeownership Incentive Program (CHIP)
These mortgages through BB&T do not require a downpayment nor a PMI payment. 

Veteran's Administration (VA) Loans
These loans can be up to 100% of the purchase price and are available to qualified veterans, active duty, reserves and National Guard personnel.

USDA Rural Development Loans
The property you are purchasing must be eligible (based on location) and you must qualify (based on income) -- you can check both of those details here.  Of note, the processing of these loans can be quite slow -- after your mortgage goes through underwriting with your lender, it then must be submitted to USDA for review and approval. 

I am not a lender, but I'm happy to answer any general questions you might have about the process of becoming pre-approved, some professional lenders in the Harrisonburg and Rockingham County area, etc.  Feel free to call me (540-578-0102) or e-mail me to discuss your financing scenario.

Wow!  It's been a long time (70 years) since short term interest rates have been this low!
  

Yesterday I pointed out that monthly housing costs have declined 28% since 2007 because of modest declines in median sales prices and significant declines in average mortgage interest rates.  But let's make it a bit more specific....

The first townhouse pictured above was sold in 2007 for just $100 more than the median sales price at the time, and your monthly housing cost would have been $1,096 if you financed 80% of the purchase price at the average interest rate of 6.21%.

The second townhouse pictured above is for sale now for only $159,200, and would require a monthly housing cost of only $719 -- again, assuming you financed 80% of the purchase price at today's average interest rate of 3.99%.

This is quite a dramatic difference (-34%) in housings costs, and hopefully helps to illustrate the wonderful opportunities for buyers in today's market!
 

How much does it cost on a monthly basis to buy the median price home in our area, assuming 80% financing?  Today, that adds up to a $791 monthly payment.  That marks a dramatic 28% decline since 2007 when the monthly payment would have been $1,094.

The decline in median sales prices over the last few years (from $195K to $175K) combined with the decline in interest rates (from 6.2% to 3.9%) has brought average monthly housing payments down to very affordable levels.

Again, the graph above (click here for a more legible PDF) shows the mortgage payment including principal, interest, taxes and insurance (PITI) assuming 80% financing at November's average 30-year interest rate, and assuming Harrisonburg's real estate tax rate ($0.59 per $100).
 

Yesterday's Daily News Record had a thorough look at buying vs. renting from a variety of perspectives.  Here are a few (long-ish) excerpts....



HARRISONBURG — Chris and Kate Kelty had no plans of jumping back into the housing market a year after selling their townhouse.

The couple with three young children figured they'd remain renters for a few years while building back up money for a down payment.

Then they watched mortgage rates start plummeting. After a bit of number-crunching, the Keltys switched gears.

"We realized, oh, my Lord, it makes a lot more sense to start thinking about buying," Kate Kelty said. "It was kind of a no-brainer."

In August, the Keltys closed on a 2,500-square-foot home west of Bridgewater for $230,900.

Their mortgage is $1,300 a month through a USDA Rural Development loan. Kelty, 32, said that's about how much renting a similar-sized house in the area would cost.




A good deal on a home in the county near Rockingham Memorial Hospital enticed Chris Foster, 25, to buy his first house in early October for $220,000.

His mortgage payments are about $200 more per month than what Foster shelled out as a renter, but he doubled his living space while adding a garage and a finished backyard.

"I had a goal all along to purchase sooner rather than later," said Foster, a pharmaceutical representative. "This was kind of a perfect storm, so to say."




Record-low mortgage rates have made buying a more attractive option for some renters. Interest rates on the average 30-year loan are hovering around 4 percent.

"It would be difficult for renters to not strongly consider buying a home," said William Haithcock, chief executive officer of the Harrisonburg-Rockingham Association of Realtors.


Those were just some excerpts, so be sure to read the full article online if you have a subscription.  Of course, as usual, buying doesn't make sense for everybody, but it is becoming a much more compelling option for many these days.
 

Average 30-year fixed mortgage interest rates are now below 4.0%.  Wow!  I have shown houses to quite a few people over the past two weeks who are seriously considering a housing transition because of the extraordinary opportunity provided by these record low interest rates.
 
Are you considering a move?  Talk to a lender (ask me if you need references), and let's start exploring your opportunities.
 

Come October 1, 2011 the loan limits for FHA mortgages will be reduced in many parts of the country.  Some would have you believe this will be disastrous for the housing market....



But will there really be that much of an impact on the housing market because of these new loan limits?   Alan Zibel at the Wall Street Journal explores this, wondering whether the changes really matter....



Beyond the possibility that these changes might not even matter much nationally, it's also important to note that....

• Only 2% of FHA borrowers in Virginia would be affected.  Of the 39,055 FHA loans issued during 2010, only 909 of these loans (2%) would no longer be issued based on adjusted loan limits in various areas in Virginia.  (source)
    
  
• The FHA loan limits are not changing in Harrisonburg and Rockingham County.  The current FHA loan limit for Harrisonburg and Rockingham County is $277,150 for a single family home.

Look up the loan limits in your local area by clicking here.
 

How low can they go?  Mortgage interest rates (on 30-year fixed rate mortgages) dropped again yesterday per Freddie Mac's Primary Mortgage Market Survey.  The national average for a 30-year fixed rate mortgage is now 4.12%.  Wow!

If you're planning to buy sometime in the next few months, now would be a GREAT time to lock in a mortgage interest rate!
 

If you hear something about the housing market on the news, it will likely mention the big (bad, scary) problem of foreclosures.

Things you may have heard could include:

• The next wave of foreclosures is going to be huge!
• There are millions of homes as a part of a "shadow inventory" -- that were foreclosed on by the bank, but that have not yet been put on the market for sale.
• Mortgage delinquencies are on the rise.
  

Here's what you really need to know:

• Foreclosures are highly concentrated in just a few states.  52% of the foreclosure inventory in the second quarter of 2011 was in only five states.
• Harrisonburg and Rockingham County (and Virginia) foreclosure rates have always been much lower than most areas of the country.
• Harrisonburg and Rockingham County foreclosures are declining.
  

So, yes, foreclosures are a problem nationwide, but significantly less so in Harrisonburg and Rockingham County.
 

The downgrade of the United States' credit rating sure helped mortgage interest rates!  Wow!  The average rate on a 30 year fixed rate mortgage is now 4.15%.

This is certainly a great time to lock in a rate and buy a house.  You will likely be locking in your housing costs to the lowest possible point they could be for the near-term future given both low interest rates and low median home values.
 

While rates could still swing back upward, thus far rates have just continued to decline after the downgrade of the United States' credit rating.


Source:  Freddie Mac
  

After interest rates climbed nearly a full percentage point (4.2% to 5.0%) between October 2010 and February 2011, they have started to decline again over the past several months.  April 2011 marks the second straight decline down to the current average of 4.8%.

Please note that you may be able to obtain an even lower interest rate than the average rates shown above depending on your credit score and other details of your finances and home purchase.  Current rates offered via WellsFargo.com include:

• 30-Year Conventional Fixed Rate = 4.625%
• 30-Year FHA Fixed Rate = 4.50%
• 15-Year Conventional Fixed Rate = 3.75%
• 5-Year Adjustable Rate = 3.00%

The current adjustable rate (3.00%) is a great opportunity if you suspect you will only be in your house for 3-5 years! 
 

Buying a condo at Founders Way couldn't be any easier! 



As of this week, Founders Way Condos are approved for FHA financing.  These spacious condos have wonderfully open floor plans with 2 or 3 bedrooms, and start at only $149K. 

Buyers at Founders Way are often attracted to:

• brand new one-level living at a low price point
• all exterior and grounds maintenance is performed by the condo association
• high speed internet and expansive cable package at a low cost through the condo association
• open floor plan (some with lofts) that provide a very different feel than a two-story townhome

Current incentives also make it a great time to buy at Founders Way:

• Free upgrade to granite countertops in the kitchen
• The builder will pay your association dues for the first year
  
• The builder will pay up to $3,000 of purchaser's closing costs if the buyer uses Oguz Sengul at Wells Fargo (540-438-8899, oguz.sengul@wellsfargo.com)

But the BIG NEWS is that financing is now a breeze --- either with a conventional loan, or an FHA loan --- with as little as 3.5% down.   Find out more by contacting Oguz Sengul at Wells Fargo at 540-438-8899 or oguz.sengul@wellsfargo.com.

Find out more about Founders Way:

• Visit the Founders Way web site 
• View photos of Founders Way
• View floor plans at Founders Way
• Come visit us on Saturday or Sunday between 1PM and 3PM
• Call me at 540-578-0102 or e-mail me
  

 

As of today, you can obtain an amazing 3.625% interest rate on a 5/1 adjustable rate mortgage through FHA.  Until recently, I had thought that 30 year fixed rate mortgages were the only product offered through FHA, but Oguz Sengul  pointed out that FHA also offers a 5/1 ARM.

A "5/1 ARM" is a mortgage that has a fixed rate (3.625%) for five years, and then can adjust once every year.

If you anticipate only being in your home for 3, 4, 5 or 6 years, this can be a fantastic loan program to consider!
 

Three times in the past three weeks I have been in real estate related meetings when someone asked "So, how much do you have to put down on a mortgage these days, twenty percent?"  Each time my jaw dropped, and I explained that the down payment on a purchase can be as little as 3.5%....and sometimes as little as no down payment at all.  Their jaws then dropped, as they asked questions along the lines of "but, I thought it was nearly impossible to get a mortgage these days" and "but, what about reforming the mortgage market after all the crazy loans that were issued?"  These are reasonable questions and objections, which I then discussed with them, but what I hoped stuck with them is that you don't need to wait to buy until you have 20% of the purchase price as a down payment.

At this point it is important to note that having 20% as a down payment is not at all a bad idea –it is certainly something to be strived for – but it shouldn't necessarily limit your purchasing decision.  If home prices declined over the next few years, a larger down payment (for example, 20%) would help you to avoid getting stuck in a house with a mortgage you could not pay off in order to sell.  A 20% down payment can also lower your mortgage payment, as you will be financing a smaller amount, and you should not have to pay mortgage insurance in addition to the principal, interest, taxes and insurance.  Despite these benefits, however, waiting to purchase until you have a 20% down payment can significantly change when you are able to buy a house, particularly if you are a first time buyer.
 
Are there really loan programs that only require a 3.5% down payment?  The most frequently utilized loan program these days is the FHA loan program, which is underwritten by the federal government and only requires a 3.5% down payment.  The federal guarantee of the loan allows lenders to offer you lower interest rates, which makes the monthly payment more affordable to you.  Many (or most) first time buyers utilize the FHA loan program, however it can be used for mortgages up to $277,150 in Harrisonburg or Rockingham County.  

Isn't it difficult to get a mortgage these days?  A few years ago, it was said that if you had a pulse, you could get a mortgage.  Indeed, there were mortgage programs where your lender did not need to verify your income, nor your assets, nor your employment, etc.  It is certainly more difficult to get a loan now if that is our basis of comparison, however new mortgage guidelines are not absurdly strict.  Most people with reasonably good credit and with steady, predictable income can obtain a mortgage with reasonable terms.  One of my clients recently asked me whether a significant portion of contracts fall through these days as a result of buyer not being able to obtain financing – thankfully, this is not seen too often in our area.  If you are wondering whether you can obtain a mortgage, talk to a bank or mortgage company to quickly and easily be pre-qualified.  If you're not sure who to talk to, start by speaking with a Realtor, who can certainly give you some recommendations on reliable, professional lenders in the area.

What about mortgage reform?  It is true – there were some wild and crazy things happening in the mortgage market over the past several years, and new guidelines are now in place (and being put in place) to attempt to ensure that we will not travel down those roads again.  Despite these new guidelines, however, it is still possible for hopeful buyers with a reasonable amount of income to obtain a mortgage without too much of a hassle, without too much cost, and with very favorable terms.

What is next in the mortgage market?  Interest rates are still phenomenally low compared to the past several decades, so opportunities abound to buy and obtain a fantastically low fixed interest rate on your mortgage.  Many people predict that interest rates will rise as we continue through 2011, though many people have predicted that for the past several years without any great supporting evidence after the fact.  It is important to note, however, that changes to the mortgage market may be coming down from the administration.  Current plans are in the works to re-vamp how the mortgage market works, which some argue will increase mortgage costs to consumers.  

Each of the three people who presumed that a 20% down payment was required these days is a very smart person – but each of them had an incorrect assumption about the current state of the mortgage market.  If you are considering buying, or refinancing, don't make a decision based on your assumptions, or based on what your neighbor or friend tells you.  Talk to a mortgage professional who can accurately explain your options and help you find the best path for your future.
  

Good news -- it won't be a problem if you don't have a 20% down payment.  Some people think that you need a 20% down payment these days, since financing guidelines have become so much more restrictive over the past year or two.  That's simply not the case.

The FHA loan program is an excellent example of a low down payment loan option that many buyers are using these days.  You can purchase a home with as little as 3.5% of the purchase price as a down payment.  Furthermore, your closing costs and/or your down payment can be a gift.

The VA loan program (available to qualified veterans, reservists, and active-duty service members) requires no down payment and your closing costs can be a gift.

For more information about FHA loans or VA loans, read more on the Government Loans section of Wells Fargo's web site.

Again -- remember -- you don't need a 20% down payment to buy a house these days.  If you'd like to talk more about your buying situation, feel free to contact me at 540-578-0102 or scott@HarrisonburgHousingToday.com.

First --- let's be clear --- I'm not accusing smart people of sometimes being dumb.  The title of this post is actually a quote from a smart person last week.  She said something along the lines of "Wow, it's amazing how dumb smart people can be sometimes".

I quickly translated "dumb" into "uninformed about specific topic areas" --- which she thought was a gesture of politeness, but I really think it is a fair judgment of what she was describing.

Again, she's quite a bright person, but....

• She was surprised to hear that there were still loan programs where buyers only had to put down 3.5% of the purchase price.  She assumed that most purchasers had to put down 20% of the purchase price.
  
• She was surprised that most people with some savings, a decent job, and good credit were still getting mortgages these days.  She assumed the tightening lending requirements meant you had to have near-spotless credit, lots of savings and a high income in order to qualify for a mortgage.
• She was shocked and horrified to get a notice in the mail that her credit score was just over 800, as she thought they went up as high as 1600. 
  

What's going on here?  How can this very smart person be so "dumb" (or uninformed) about these significant financial matters?

Bottom line -- if you only participate in something every 5 to 8 years, it's probably not reasonable to think you'll know and retain the intricacies (or even the basics) of that content area during the 5 to 8 (or more) years in between such events. 

If you bought a house today, you'd likely have learned during the process of doing so that you could have as little as 3.5% of the purchase price to use as a downpayment.  Will you retain that information for the next 5, 8, 12 years until you buy your next home?  You might, but you might also hear lots of news reports over the next three years about changing (tightening) lending requirements and then start to assume that these low downpayment programs no longer exist.

If you bought a house 12 years ago and were told that you had a credit score of 800, and that it was excellent, would you remember that today (12 years later)?  Or might you forget that the range is between 300 and 850?

Now realizing that smart people can be dumb (uninformed) about specific topic areas, what can we conclude?  Consumers should remember to not make any assumptions, and to ask questions even if they seem like they are dumb questions.  Professionals (Realtors, lenders, etc.) should remember that consumers might not necessarily know the basics of what is required for a mortgage, or what good credit looks like. 

Have questions yourself?  Don't worry, I won't think you're dumb -- I'll happily help inform you about an area of information that you probably had no need to be aware of until recently.  Call anytime (540-578-0102), or send me an e-mail: scott@HarrisonburgHousingToday.com.
 

The Preston Lake Trustee Sale took place today (February 3, 2011) at noon, and drew quite a crowd of Preston Lake homeowners, developers, attorneys, Realtors, and neighboring landowners.  Here's an overview of where things stand....

Local History in the Making:  It's not necessarily the good type of history, but this was the first major subdivision --- and hopefully the last --- to be foreclosed on in the Harrisonburg area.  Many other areas across the country have seen multiple large subdivisions be foreclosed on, but until today, Harrisonburg had been unscathed.  The timing of the development of this subdivision is likely what led us to today's events, as the development began just as the housing market began to slow dramatically.

Only One Registered Bidder:  Only one individual registered as a potential bidder at the sale (by showing his deposit check to the Trustee, and providing his name), though he did bid during the auction, likely because of the opening bids from Wells Fargo.

Only One Actual Bidder:  There was only one actual bidder....Wells Fargo.

Surprise Rowhouse Auctions:  In addition to the 120+ acres of land at Preston Lake that were auctioned off today, four rowhouses were also auctioned separately.  This was not specifically advertised -- if it had been, I think we would have seen some actual bidding take place.  Each of these rowhouses are at a different stage of completion, but each at least has the shell completed.  The opening bids from Wells Fargo were as follows, and these are the prices at which they are taking back the properties:

• Lot 9C -- $270,600
• Lot 10B - $39,960
• Lot 11C - $157,760
• Lot 12C - $79,080

A Hefty Price For 120+ Acres:  It wasn't too surprising that there were not any bidders for the 120+ acres of Preston Lake, as Wells Fargo's opening bid was $3,500,000. 

The Common Areas:  The attorney representing Wells Fargo also indicated that the common areas would be deeded to the Property Owners Association.  The Association will still exist, and owners will still make payments to it to support the maintenance of the common areas and other common amenities of the neighborhood.

What Happens Next:  In theory, within 30 days, Wells Fargo will close on their purchase of the four individual rowhouses, and the 120+ acres of Preston Lake.  The attorney representing Wells Fargo commented to me afterward that he thinks there is a 90% chance that the sale will proceed to closing and that Wells Fargo will be the new owner.  After Wells Fargo owns the property, he indicated that they would sell the four rowhouses individually, and seek to sell the remaining 120+ acres to a new developer.  It is unclear what price they will ask for the remainder of the subdivision (likely lower than $3.5M), and it is unclear what price they will eventually take for the remainder of the subdivision (likely lower than $3.5M).  Wells Fargo's attorney also indicated that while they will attempt to sell the entire undeveloped section of Preston Lake as a whole to one developer, it is also possible that they would sell the property as individual lots or sections of lots.  Wells Fargo has done this with other subdivisions around the country that they have foreclosed on, though it is not their goal.

Wells Fargo is interested in money:  This should come as no surprise, but Wells Fargo's goal in being the new owner of the undeveloped areas of Preston Lake are to try to recoup as much as possible of the money that they have invested in the subdivision.  They won't, thus, try to unload the property for development into a mobile home park -- they will be marketing it and working to sell it for its highest and best use.  This does not mean that the development plan won't or can't change -- but they will be trying to recoup as much money as possible, and thus will be trying to sell it to a developer who has the a positive (and profitable) vision for it.

Those Pesky Lawsuits:  The developer of Preston Lake (Richard Hine) had filed a lawsuit against Wachovia (now Wells Fargo) --- and Wachovia had responded with a countersuit.  Per the attorney representing Wells Fargo, both of those lawsuits will go away once the sale closes, and the property is taken back by Wells Fargo.

A Community United:  If anything, the turmoil and uncertainty over the future of Preston Lake seems to have drawn its residents closer together as a community.  Most of the owners were in attendance at the sale, and then went as a group to Cally's afterward to have lunch.  There seems to be solidarity and general optimism (as much as is possible) amongst most (or all) of the owners.  They still seem to thoroughly enjoy their homes, and each other, which is a positive sign for the future of the community.

Have Questions?  If you have questions about Preston Lake or the foreclosure proceedings, I'm happy to try to answer them (540-578-0102, scott@HarrisonburgHousingToday.com), or you can contact Peter Barrett of Kutak Rock, LLP, who is the attorney representing Wells Fargo.  You can reach Mr. Barrett at 804-343-5237 or peter.barrett@kutackrock.com.

I'm not suggesting that the real estate market has stalled out in Harrisonburg and Rockingham County, but in talking to someone in another part of the country (thanks for the insight, Laura!) we came to a realization that some markets have stalled out -- and it's not clear what will get them started again.

Laura and I realized that some markets are stuck in an endless loop:
Buyers can't buy because comps aren't available to support appraisals......because buyers haven't bought......but buyers can't buy because comps aren't available to support appraisals............

Some would be quick to blame lenders --- why are they holding back the market?  Buyer X wants to buy a house from Seller Y, and has written a contract to do so at a particular price.  Why then, is the lender denying the loan on the basis of the appraisal? 

Well, it's actually quite reasonable for the bank to want and need to protect their interest.  If they are going to invest $250k in a mortgage on a $300k purchase, they'd want to know if the house was only worth $200k.  If that were the case, they would have made a poor investment, and their collateral (the house) would not sufficiently cover their investment should the borrower stop making payments.

But you can likely see why this is frustrating for buyers and sellers alike.  Even though it is reasonable for a lender to want to know (via an appraisal) that a house has a particular value --- if a buyer and seller have agreed to terms, and the buyer is not overpaying for the house, why must the entire process be stopped in its tracks simply because there aren't any comps available to support an appraisal.

Here is a specific (though fictional) example of what this might look like, in a subdivision in Anytown, USA:

2008 sales prices: $250k, $255k, $260k, $255k, $250k, $255k, $255k, $255k
2009 sales prices: $250k, $245k, $245k, $245k
2010 sales prices: no sales!

Then, when a buyer and seller agree on a sales price of $225k in early 2011, they certainly think that everything should go quite smoothly with the transaction.  But if the lender can't find any comparable sold properties in the past 6 to 12 months that support , they will likely deny the loan on the basis of the appraisal. 

What are the buyer and seller to do?  How does a market get started again after a very slow spell, given that appraisals are required for loans to move forward, and that comparable sales are required for appraisals???