Can You Still Buy Without a Fixed Mortgage?

Buying a house doesn’t necessarily require getting a 30-year, fixed-rate mortgage.

More and more people are exploring alternative financing plans as it gets harder to get a conventional bank loan.

Here are some creative ways to pay for a home, according to some financial experts:

  • Securities-backed loans. The lender gives the borrower 80 percent of the value of his stock portfolio. Then the lender holds the stock for between three and 10 years while charging a 3 percent to 5 percent interest on the loan. At the end, the borrower gets his original shares back. Both win if the stock has increased in value.
  • Two-step mortgages. This fixed rate mortgage is amortized over 40 years, but the payment schedule is adjustable.
  • Constant-amortization mortgage. Buyers start with a higher payment, but the loan is constantly re-amortized, so principal is reduced faster than with a conventional loan.
  • Family loans. In the most successful arrangements, the family puts the agreement in writing and the lender charges the borrower a rate of interest high enough to pass IRS scrutiny, thus avoiding any gift tax.
  • Assuming a mortgage. Buyers interested in purchasing a house in the pre-foreclosure stage might ask the lender if they can assume the mortgage. In some circumstances this can be a good deal.

Source: Forbes, Matt Woolsey (01/26/09)

10 Cities Boasting Mini Sales Booms

Some cities that were hardest hit by the real downturn are experiencing mini sales booms.Las Vegas real estate properties are down 28 percent in price, but sales of homes are up 15 percent.

Motivated buyers accounted for 64 percent of Las Vegas sales in October, says Radar Logic, a derivatives firm. That’s the highest rate in the country.

“There’s a pretty active housing market, it’s simply at a lower-priced inventory,” says Michael Feder, chief executive of Radar Logic. “And there are now bidding wars taking place over homes in foreclosure.”

Phoenix and San Diego are reporting similar experiences.

“We’re clearing out the bad news,” says Kiva Patten, a director at Merrill Lynch specializing in housing derivatives.

“By the end of 2010 – that’s where we’re calling the bottom in the forward market. You’re going to get a small price appreciation in 2011,” says Patten. “It’s not like the turn is 10 percent per year, it’ll be something like 3 percent or 4 percent.”

Here are the cities where experts say it makes the most sense to buy now.

  1. Las Vegas
  2. Sacramento, Calif.
  3. San Diego, Calif.
  4. Los Angeles
  5. Detroit
  6. Phoenix
  7. San Francisco
  8. Washington, D.C.
  9. San Jose
  10. Atlanta

Source: Forbes, Matt Woolsey

 

Buyers Increasingly Suspicious of Foreclosures

Fewer buyers are willing to consider purchasing foreclosed property than they were seven months ago, according to a study commissioned by Trulia.com and RealtyTrac.

Seven months ago, 54 percent of adults surveyed said they would consider purchasing a foreclosed home. In November, only 47 percent of adults say they’d buy a foreclosure.

The chief turnoff is perceived risk, with 80 percent of those surveyed citing hidden repair costs, a tricky buying process, and the possibility that the neighborhood will lose more value and drag the property down with it.

To compensate for these risks, 75 percent say they expect at least a 25 percent discount and 30 percent say they would only buy if there is a 50 percent discount compared with a comparable home that isn’t in foreclosure.

Other findings:

* 56 percent of single/never married adults were at least somewhat likely to consider purchasing a foreclosed home, down from 60 percent in April.
* 43 percent of married adults were at least somewhat likely to consider purchasing a foreclosed home, down from 50 percent in April.
* 42 percent of divorced/separated/widowed adults were at least somewhat likely to consider purchasing a foreclosed home, down from 50 percent from April.

Source: Trulia.com

Weather Delays Some Louisiana Home Closings

Some closings in New Orleans were delayed by the impending hurricane, mostly because buyers waited until the last minute to secure a homeowner’s insurance policy.

Robert Bergeron, president of Crescent Title, said about a third of the company’s closings were delayed. Most of the delays involved insurance issues, but in a few cases the buyers had language in their sale contract allowing a delay in the event of a hurricane.

But most real estate professionals – and buyers – were savvy enough not to be delayed, says Glenn Gardner, president of operations at Prudential Gardener.

“Since Katrina, people have needed time to shop around to get the best price for their insurance and get it bound way ahead of time,” Gardner says. “For the most part, they already had their insurance set up before Gustav was a threat.”

Source: Times-Picayune, Kate Moran 8/30/

Getting a Mortgage Tougher for Buyers

Difficulty in landing a mortgage is keeping many buyers out of the market.At the peak of the housing boom, about 20 percent of the mortgage market was subprime, and nearly 20 percent was “Alt-A loans” or “A-minus” loans, typically offered those with good credit but with high debt-to-loan ratios or little or no proof of income.Both categories are now nearly extinct. That means about 40 percent of the residential mortgage market has all but disappeared, according to David Olson of Wholesale Access Mortgage Research and Consulting.

“The underwriting has really tightened up,” Olson says, “Before, if you could fog a mirror, you got a loan. Now, that’s not the case.”

Nationwide, practitioners say they are encountering more potential buyers who can’t get financing.

“Buyers come in with confidence, and once they have talked with a lending practitioner, it’s like they’ve been hit over the head with a ton of bricks,” says Dean Moss, an agent at Keller Williams Fox and Associates Realty in Chicago.

A study conducted using data from a Reno, Nev., multiple listing service, found that about 30 percent of sales haven’t closed after 90 days. Practitioner Guy Johnson, who analyzed the data, suggests that buyers stay on top of their loans, checking in with their lender frequently to make sure the loan for which they’ve been approved is still the same.

“A loan commitment letter,” he adds, “isn’t really as solid as it once was.”

Source: USA Today, Anna Bahney (08/05/2008.