Recently we’ve had questions about the new government program, HARP (home affordable refinance program).  HARP is another program rolled out to help struggling home owners lower their interest rate and stay in their home. It’s designed for people who need to refinance and lower their monthly payments, but due to declining property values, have been unable to do so. Eligibility requirements and more information can be found at the link below.

http://www.makinghomeaffordable.gov/programs/lower-rates/Pages/harp.aspx

In addition to HARP, the government has rolled out other programs including HAMP (home affordable modification program) and HAFA (home affordable foreclosure alternatives). These programs are designed to give incentives for home owners who participate in a short sale or a deed in lieu of foreclosure. I’ve also included the link to the eligibility requirements for those programs as well.

http://www.makinghomeaffordable.gov/pages/default.aspx

More information will be coming regarding the HARP program, so stay tuned. Anecdotally, we’ve had little success with lenders being willing to allow the home owner to participate in HAFA or HAMP and receive the $3,000 incentive. Most of the time we are seeing that lenders are denying HAFA and HAMP and most sellers are opting for a traditional short sale.

It’s a Great Time to Buy Oregon Real Estate!...

Why buy now?

• Historically Low Interest Rates
• Large Amount of Inventory
• Motivated Sellers
• Amazing Deals to be Found
• Time to think about the future, invest in real estate.

Reasons to Buy a Home

• Pride of Ownership.

• Appreciation- Even though real estate has ups and downs, over time the real estate appreciates well and typically home prices double about every ten years

• Mortgage Interest Deductions (see www.irs.gov for more information and exclusions)

• Capital Gain Exclusion, the money that you make when you sell is tax free is you live there as your primary residence for 3 of the last 5 years

• Most of a person’s accumulative wealth in their life time comes from the equity in their house

Why you need a Realtor

• As a buyer - hiring a REALTOR costs you NOTHING; the seller pays the buyer's agent commission

• We sell all homes, we are a cooperative MLS. You don’t need to call the agent on the sign

• You get access to all homes - and you are fully represented and protected, even if you buy from an unrepresented seller

• The agent on the sign, or in the model home...works for the seller, not YOU

• Your REALTOR brings with them access to a broad team of professionals which can include home inspectors, title and escrow experts, as well as various contractors/inspectors

First Things First-What do I do to buy a home?

• You need to get pre-approved. A lender will help you determine your comfort with monthly payments, how much you are approved to buy, etc.

• Use someone local, get a referral from your agent or a friend or family member to a lender

• Pre-approval letters are absolutely vital when shopping for a home and making an offer, especially in this market with stricter regulations on lending

• Start searching for homes with us- the fun part! Identify wants vs. needs within your budget.

• Identify homes you want to investigate further and make a decision

• Make an offer. Your agent can help you decide on a price range to make the offer in. This will be based on comparable sale, active listings, etc.

• Inspections- Always get an inspection. It is absolutely vital to know what you’re getting into when you’re purchasing a home. Think of it as a $300-400 insurance policy

• Appraisal- the bank will order the appraisal to make sure that the property is in good lendable condition and that the purchase price and the bank’s valuation of the property are in line.

• Signing vs. Closing. Oregon is not a table funding state, so when the buyer’s loan documents are issued and signed at the title company, the docs will go back to the lender for a final underwriting review. Once the final review is complete, the lender will fund the loan and it will get recorded at the county, only then does the buyer actually own the house

• Keep in mind, this is a very brief overview of what to expect when buying a home. There are a lot of behind the scenes things that take place, so work with a great agent and lender and you will avoid a lot of stress!

When mortgage interest rates rise by 1 percentage point buyers lose 10% of their purchasing power.

For example,

If a buyer can afford a mortgage payment of $1,000 per month, in today's market with a 4.5% loan they can borrow $200,000 for their mortgage.  Assuming the buyer puts down a 20% down payment this translates into a $250,000 home purchase.  If the buyer waits until interest rates rise to 6.5% but wants to keep the mortgage payment still around $1,000 the loan amount would drop to $160,000 - so with the same $50,000 down payment the home purchase price would need to be $210,000 or less.  At 8.5% the affordable mortgage amount plummets to about $130,000. That is quite a difference in the type of home that you can purchase.

Mortgage Interest Rate history, as tracked by Freddie Mac since 1971, seems to indicate that we can ?reasonably expect to see rates easily in the 8.0% - 9.0% range again, creating a large negative impact on ?potential buyers purchasing power.

So what does this mean…This might possibly be the greatest time to purchase a home or investment property. Not only will you be taking advantage of lower property prices, you’ll actually be purchasing more home for you money with rates being as low as they have been as of late.

With the current state of the economy, interest rates are going to have to rise at some point to compensate for inflation. Take advantage of the rates while they are still historically low and purchase much more home for your money.