27 August 2010 – For those of you that did not read or heed my post last week, congratulations. You have received a reprieve on low rates. Continued abysmal housing data released this week reinforced the belief that we are far from turning the corner on our current economic woes. Existing home sales dropped by a whopping 27.2%. Employment data did improve, but not enough to convince the investing community that the end of the recession is in sight. In response, mortgage rates continued to stay extremely low as continued talk of a double dip recession became the debate de jour.

A SILVER LINING

In the midst of the gloom and doom, I want to take a moment to shine a light on what this data actually means. While your portfolio has taken a beating and the Dow is hovering around 10,000, there are benefits for those who seek them. In the midst of this mess, we are experiencing one of the strongest buyers markets in history. That is not to say that you are going to score a home at some unfathomably low price, but it does mean that you will be able to buy a home at a discount and finance it at unprecedented low interest rates. In short, we are experiencing a perfect storm for homebuyers, which should not be ignored.

HOMEOWNERS CAN PROFIT AS WELL

For homeowners considering a refinance, there is a chance to significantly increase cash flow. While appraisals still remain a challenge, Fannie Mae and Freddie Mac have altered their guidelines allowing homeowners to borrower in excess of 100% of their property value without the burden of mortgage insurance. Like anything of value, however, these benefits are only falling upon the shrewd and savvy borrower who actively seeks the financial diamond hidden in a mountain of bad news and pessimism.

I am recommending my clients lock. Fifteen or more days out, however, as we are far from a full recovery and some opportunity still exists.

June 1, 2010
As of today, Fannie Mae will now be requiring all loan applicants to run a second credit report right before closing on a real estate transaction. Not only will the credit report be required with the original loan application, at closing Fannie Mae will now require a second report to be generated. If the credit score is one point lower than the original score the loan will not be funded.  The loan will then go back to underwriting for further scrutiny. This is serious business for those purchasing a new home and are planning on moving in with new furniture. With this new policy it would be wise not to use any form of credit. For example, do not head out to Costco and run up a large bill and put it on your credit card prior to closing. A larger charge on a credit card can drop your credit score.