Mortgage Updates

What is the definition of a declining market?  How can it affect you?

A declining Market is by definition a geographic area where the sales values of homes havegone down consistently over the previous 12 month period.  Unfortunately many California counties now fall into that category.  The areas where we see this is in the "housing bubble" areas. 

When there is declining value, investors are less likely to buy or make loans at the (normal) maximum loan to values.  If you are shopping for a home this means it may be likely that you will need to come in with 5% more than you had originally planned, or your Private Mortgage Insurance (PMI) will be a bit higher.

If you are planning to refinance the same would hold true.  Let's assume that your house appraises for $450,000.  You would like to do a rate and term refinance (just looking for a better rate or to get our of your ARM).  If you are paying off a $405,000 loan (90%) the mortgage insurance for your new loan will be based on a 95% LTV.  This means that your payment will be higher by approximately $50.58 based on a monthly MI calculation with good FICO scores.  Additionally, lenders may be increasing the rate or points paid to get the loan... due to the increased risk. 

So, why are you still interested in buying a home? - Especially when there may be a further erosion in values?  The reason we will continue to buy houses is because we want to make them our homes.  That is the difference.  We want to own our home.  Put down roots.  Have our kids grow up under our own roof, paint the walls, make the basket ball hoop permanent.  A house is so much more than an investment. 

My husband and I started selling real estate in the mid 70's.  Our kids were young, and we moved "up" three times in five years.  We have now been in our home for over 28 years.  There is a sense of stability and roots for our children and grandchildren.  Great-grandparents in their late 80's live wthin a few miles. There is community.  The little ones love to hear stories about their parents adventures on our property.  Is this for everyone, perhaps not. But, over a period of time every home value goes up and down, then up again.  So, it isn't today's value or tommorow's perceived value that home ownership is all about.  It is about community, neighbors, friends, family having a place to call your own.  A condo, a single family home or a ranch... downtown, midtown, suburbia or a county property, and if the value doubles over the years, wow.  If not, well you will still have equity and a place to call your own. - And, Uncle Sam helped you make the payments through smart tax deductions!

So, when is the best time to buy a home?  It is always now.  The sooner you start the better an opportunity you have to get ahead of tightening guideline policy changes.  You can lessen the tax bite, take advantage of great seller "contributions" and secure an ownership interest in the great American dream.