Sacramento Real Estate, Prepare for the Eye of the Storm!

Real Estate in the Sacramento and surrounding areas will see the eye of the storm of Foreclosures over the next 24 months.

I was privileged to be a part of a conference call with Brian Brady, America’s Mortgage Broker, where he outlined what to expect in the months ahead with Real Estate and the Mortgage Industry.

This is not meant to alarm but to inform so that you can better prepare and know what to anticipate in the Real Estate and Mortgage Lending fields.

Here is what I gleamed from Brian and those that attended. This storm is a category 5 and will have devastating results. Like with any storm, it is vital to prepare and be aware of its approach.

The adjustable loans that were handed out like candy will have all surfaced their ugly heads during this time. This phenomenon is not just prevalent in Sacramento and the surrounding areas but all over the United States and overseas.

This is an ugly time in our history but it will pass. There is wreckage in its path where home owners will be forced to start again and prices of homes will go down, yet again. It is a cleansing of the Real Estate market and Mortgage Lending.

Along with this storm is the Mortgage Melt-down. This storm that is fast approaching our Sacramento Real Estate area, is the repositioning of Mortgage Loans. Fewer home buyers will qualify for loans in the coming year.

Higher FICA score cut offs and no loan exceptions will prevail. Which means, that there will be fewer Home Buyers that will qualify for a loan.

Wallstreet is not buying loans and this effects everyone. You ask, what does this mean to me? Good question.

If you are a Seller, be armed with this information. Don’t sell your house before you get a loan approval to purchase elsewhere. You may find yourself with the new restrictions unable to purchase a replacement home. If you don’t have to sell, then don’t.

Homes for sale must be priced downward, since there will be fewer home buyers who will qualify, otherwise you will not sell. If you want to sell your house, you must be aggressively priced for the “Real Estate market.” Since most home buyers will be unable to obtain full loans, Sellers may need to be creative and carry-back paper.

Home Buyers, it is not the time to sit back and wait, you may find that you are out of the Real Estate market all together. Fewer of you will qualify for a loan. Many loan programs will no longer be in existence and with the credit changes, you may find yourself out of the Real Estate market all together.

For those with stated income, loans will be more expensive even with 720 and higher FICA credit scores. With 115 Mortgage companies out of business so far this year, Wall Street not purchasing loans and tightening of lending practices, many home buyers will not qualify for loans.

The day of 80/20 loans will be fewer and far between and there will be no exceptions.

PMI is deductible for most homeowners, earning less than $100K for loans originated in 2007.  It is likely but not definite that the deductibility will be extended for loans originated next year.  Please check with a Tax Specialist (like a CPA or EA) for a definitive answer.

Also, there is a FHA Reform bill in the House, 1852, FHA Reform Bill 5121 that if passed;

• will increase the current limit on FHA mortgages for higher cost areas
• revise current condominium requirements
• make more availability for seniors on reverse mortgages
• increase loan maturity to 40 years in order to lower home owner payments
• and give more flexibility in setting down payment requirements.

To sum up, if you are a home buyer thinking of purchasing a house, I would personally get going on this while you can and get qualified with a reputable Lender. With all the tightening of loans, it may become an impossibility or very costly to you the longer you wait.

If you are a Seller, make sure that your Realtor gets the Home Buyer Lender approval before accepting any offers on your house. Double check the Lender approval for that Home Buyer. There’s nothing like finding out that the Lender has gone out of business and there is no one to fund the loan. Be diligent.  Keep track of the Mortgage Lenders that have gone out of business at Implode-o-Meter.

The storm is fast approaching!

Realtors, make sure that your Home Buyers have loan approval before taking them out to show houses. No point in wasting your time or theirs. Full underwriting approvals last 60–120 days, make sure your Home Buyers have the documentation letter prior to showing them houses.

For those Homeowners who have an adjustable loan and plenty of equity, you may want to talk to your Lender now, about refinancing out of that adjustable loan. Consult a reputable Lender for advice.

Hang-on tight, if you don’t have sell, don’t. After the storm passes, the Banks will want to see one-year of stabilization and then we may see the Banks ease up a bit.