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WASHINGTON — The Federal Reserve signaled Wednesday that a full economic recovery could take nearly three more years, and it went further than ever to assure consumers and businesses that they will be able to borrow cheaply well into the future.
The central bank said it would probably not increase its benchmark interest rate until late 2014 at the earliest — a year and a half later than it had previously said.
The new timetable showed the Fed is concerned that the recovery remains stubbornly slow. But it also thinks inflation will stay tame enough for rates to remain at record lows without igniting price increases.
Chairman Ben Bernanke cautioned that late 2014 is merely its “best guess.” The Fed can shift that plan if the economic picture changes. But he cast doubt on whether that would be necessary.
“Unless there is a substantial strengthening of the economy in the near term, it’s a pretty good guess we will be keeping rates low for some time,” he said.
The Fed has kept its key rate at a record low near zero for about three years. Its new time frame suggests the rate will stay there for roughly an additional three years.
The bank’s tepid outlook also suggests it’s prepared to do more to help the economy. One possibility is a third bond-buying program that would seek to further drive down rates on mortgages and other loans to embolden consumers and businesses to borrow and spend more.
Information obtained from the Calif. Asso. of Realtors with permission.
Article printed in the Mercury News and A.P. Jan. 25, 2012.
Last year, more than two million people were turned down for home loans, according to federal data, often because the applicants didn’t meet certain lender requirements or because their applications were incomplete or otherwise problematic. With lenders’ underwriting criteria becoming more strict in recent years, it’s important buyers know the most common triggers for mortgage-loan rejection.
- Insufficient income: Lenders want to be sure borrowers can afford to make the mortgage payments. Lenders typically look for at least a two-year track record of income, which could hurt those who have changed jobs recently.
- Cloudy financial picture: Generally, total debt payments, including the mortgage, cannot exceed 45 to 50 percent of a borrower’s adjusted gross monthly income. Overtime and bonuses are included only if the borrower has worked for the same employer at least two years, and has a history of receiving them.
- Poor credit: Lenders typically reject applicants with FICO scores below 620.
- Low appraisal: One of the predominant reasons buyers are turned down for home loans is because the appraisal on the property is too low.
- Property problems: Sometimes issues turn up within a house, like a major repair or safety issue that needs to be addressed, before an application can be approved.
- Information mix-ups: Approximately 12 percent of new mortgage applications were denied because of unverifiable information or incomplete credit applications, according to the Federal Financial Institutions Examination Council.
Housing affordability increased in California in the second quarter as prices dropped from the same period a year earlier, according to the Calif. Assoc of Realtors.
Fifty-one percent of California households could afford a single-family home priced at the median, according to the CAR. That was an increase from 46% during the same period last year, when buyer tax credits fueled the market and pushed up prices. Affordability decreased from the prior quarter, but that was due to seasonal variations that pushed up prices.
Potential buyers needed to earn a minimum annual income of $63,080 to qualify for the purchase of a home priced at the state’s median, $293,580, which is the price at which half the homes sold for more and half for less. The house payment on that purchase, including taxes and insurance, would be $1,580, the group reported, assuming a down payment of 20% and an effective composite interest rate of 4.85%.
During the second quarter, affordability fell in the priciest parts of the state. San Bernardino County was the most affordable in the state, with a rate of 77%, while San Mateo County was the least affordable, with only 21% of households in the state able to afford that county’s median-priced home, the group reported.
That’s great news, so it’s now time we all buy instead of rent. Call me if you need help.
This information was obtained by permission from the Calif Assoc of Realtors.
Short sales – a real estate transaction in which the homeowner needs to sell the property, but owes more on the mortgage than the home currently is worth – continue to dominate the housing market, but these real estate transactions aren’t for everyone.
- Typically with a short sale, the homeowner is underwater and has experienced a financial hardship such as a job loss. To limit the damage to his credit rating, a homeowner may attempt to work with his lender to negotiate a short sale. Not only must the bank approve of the short sale itself, it also must agree to the price, since the bank will accept the difference as a loss.
- Unlike foreclosures, in which the owner has walked away and the bank is looking to unload a vacant – and sometimes vandalized – property, a short sale isn’t a distressed home that will sell at an extremely low price. According to data from RealtyTrac, short sales typically sold for nearly 10 percent less than the market price in the first quarter of 2011, whereas foreclosures sold at an average discount of 35 percent.
- Home buyers wanting to purchase a short sale must have patience. In most cases, when a buyer makes an offer on a house, he receives a response from the seller within a few days, or even hours. With a short sale, the bank must approve of the sale and bank representatives are overloaded with cases. It may take 30 days or longer for a buyer to receive a response from the bank.
- In a traditional real estate transaction, it is common for a home buyer who currently owns his home to make his offer contingent on selling his current home. In short sales, most banks will not approve an offer that is contingent on the buyer selling his current home, as too many things can go wrong.
- Banks also typically won’t consider short-sale offers that have inspection contingencies in them, so buyers can either do an inspection prior to making an offer or get no inspections.
- Even with the challenges associated with short sales, buyers don’t have too avoid these transactions. Being prepared ahead of the time and working with an experienced REALTOR® can help buyers avoid frustration and surprises down the line.
In anticipation of the expiration of current loan limits on Sept. 30, 2011, Bank of America has decided to stop accepting conventional and government applications for loan amounts that will exceed the permanent loan amounts. The deadline to submit loan applications was July 1.
According to an email from Bank of America, conventional loans that exceed the permanent loan limits will now be required to use non-conforming programs.
Barring Congressional action, the maximum FHA, Fannie Mae, and Freddie Mac conforming loan limit will decline to $625,500 beginning Oct. 1, 2011, from the current $729,750 limit, though the majority of counties will fall far below the $625,500 maximum. The conforming loan limit determines the maximum size of a mortgage that FHA, Fannie Mae, and Freddie Mac government-sponsored enterprises (GSEs) can buy or guarantee.
Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers.
This information was obtained from the Calif. Asso. of Realtors, and used with permission.
Our Realty World cameras video taped almost every major city in Northern California. This should help you learn more about the city that you may want to move to. Just click the city you are interested in. Please enjoy the show.
I look forward to helping you in anyway I can.
Alameda, California – http://www.youtube.com/watch?v=umg9CUVhcm0
Albany, California – http://www.youtube.com/watch?v=UHtBnoRUEe8
Berkeley, California – http://www.youtube.com/watch?v=99hulMyHn50
Blossom Valley, California – http://www.youtube.com/watch?v=-NnhW9Aa8qo
Campbell, California – http://www.youtube.com/watch?v=0vW1XRohxnA
Carmel, California – http://www.youtube.com/watch?v=d_fv8raJvJs
Cupertino, California – http://www.youtube.com/watch?v=-t5-VBa-xDI
Dublin, California – http://www.youtube.com/watch?v=TrCa7J8vseY
Emeryville, California – http://www.youtube.com/watch?v=nIVFzcKDqJM
Fremont, California – http://www.youtube.com/watch?v=GxBg9z_aZX0
Gilroy, California – http://www.youtube.com/watch?v=zpIcevWc1T0
Hayward, San Lorenzo, California – http://www.youtube.com/watch?v=hj-9Q44DxoE
Livermore, California – http://www.youtube.com/watch?v=wIceLQhYBeo
Los Altos, California – http://www.youtube.com/watch?v=NGbdSewOpzs
Los Gatos, Monte Sereno, California – http://www.youtube.com/watch?v=xjz7pIcPVnI
Milpitas, California – http://www.youtube.com/watch?v=L70mGkUN-Ug
Monterey, California – http://www.youtube.com/watch?v=L5tAE6JFD9I
Morgan Hill, California – http://www.youtube.com/watch?v=zMtQmrp20-8
Mountain View, California – http://www.youtube.com/watch?v=UMRVDVYCNZE
Newark, California – http://www.youtube.com/watch?v=2G5FT6SGeio
Oakland, California – http://www.youtube.com/watch?v=3okcJIUIlwI
Palo Alto, California – http://www.youtube.com/watch?v=FkJBK3-R_Aw
Piedmont, California – http://www.youtube.com/watch?v=ErZ_obcGb54
Pleasanton, Sunol, California – http://www.youtube.com/watch?v=voAFmyM3NGw
Salinas, California – http://www.youtube.com/watch?v=R-EYkmN7WR8
San Jose, California – http://www.youtube.com/watch?v=dcK3X9J-awU
San Leandro, California – http://www.youtube.com/watch?v=OAu1Up1PNnw
Santa Clara, California – http://www.youtube.com/watch?v=AnmCscnxXKs
Santa Cruz, California – http://www.youtube.com/watch?v=o1_mh1uLlF8
Saratoga, California – http://www.youtube.com/watch?v=kESZB-7tyeg
Sunnyvale, California – http://www.youtube.com/watch?v=_LcGBiK7e1Y
Union City, California – http://www.youtube.com/watch?v=zFXiAOe1Yck
Due to recent struggle in the real estate market, it’s now more difficult to get approved for a loan. Underwriting standards have tightened, meaning that borrowers need higher credit scores, more income and larger down payments in order to qualify. But that doesn’t mean you can’t buy a new home. Here are the biggest hurdles to home financing and what you can do to overcome them:
Higher credit score requirements – although you may get approved with a 620 credit score, you likely won’t get the most favorable interest rate and fee. The solution?? Contact all three credit reporting agencies—Equifax, Experian & TransUnion, by calling 1-877-3222-8228 or going to www.AnnualCreditReport.com . Once you get your credit reports, check all information for accuracy. If you find any discrepancies, report it to the credit company immediately.
Greater scrutiny of income & assests – mortgage lenders have to verify your information, so be prepared when you apply for your loan by having documentation that supports your income & assets. Have copies of tax returns, paystubs, bank statements and any investment accounts.
With a little preparation, you’ll be able to take advantage of today’s low interest rates and reasonable home prices…and buy the home of your dreams.
The Calif. Assoc. of Realtors (C.A.R.) released the results of a statewide survey on short sales and the challenges REALTORS® face in working with lenders and servicers.
The most frequent problems REALTORS® cited in working with lenders and servicers during the short sale process include unresponsiveness, onerous procedures, and long processing delays. The survey also found that fewer than three of five short sales close in California, illustrating the complexity and difficulty of navigating lenders’ and servicers’ short sale procedures.
“The lack of standardization, long approval process, and lack of lender approvals are hampering what should be a 45-day short sale process,” said C.A.R. President Beth L. Peerce. “Instead we’re hearing the typical response time for lenders is at least 60 days, and in many instances, their response time exceeds 6 months.”
It’s important to work with experienced real estate agents. So call me with your real estate questions. I’ve been helping clients since 1985.
California home sales rose in January, marking three consecutive monthly increases and posting their highest level since May 2010, while the statewide median price declined to its lowest level since June 2009, according to data C.A.R.
“With lower home prices and rates edging up from their historic lows of late last year, prospective home buyers should consider the opportunities in today’s market,” said C.A.R. President Beth L. Peerce.
California home sales rose 5.1 percent in January compared with December, to a revised pace of 520,080 units. Sales also increased 2.5 percent in year-over-year comparisons, marking the first year-over-year sales increase since May 2010. The statewide sales figure represents what would be the total number of homes sold during 2011 if sales maintained the January pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.
The statewide median price of an existing, single-family detached home sold in California was $278,900, down 8.6 percent from a revised $305,020 in December and was down 2.0 percent from the $284,600 median price recorded for January 2010. The January 2011 median price was the lowest since June 2009, when it was $274,640.
Here are 5 more ways you can reduce the risk of having your identity stolen.
- Click with Caution. When shopping online, check out the website before entering your credit card number or other personal information.
- Check your bills and bank statements. Open your credit card bills & banks statements right away. Check them carefully for any unauthorized charges and report them immediately. Call if your bills don’t arrive on time…it may mean that someone stole your mail or changed your contact info to hide fraudulent activity.
- Stop pre-approved credit card offers. Those make a tempting target for identity thieves who may steal your mail. Go to: www.optoutprescreen.com .
- Ask Questions. Ask questions whenever your asked for personal information that seems inappropriate for the transaction. Ask how that info will be used or if it’s shared with others.
- Check your Credit Report. One of the best ways to protect yourself is to monitor or credit history. You can get a free report every year for free from each of the three credit bureaus. One source is: www.annualcreditreport.com .
I hope this information is helpful for you.
You can find more information about cyber security and safeguarding your personal information at the California Office of Information Security: http://www.cio.ca.gov/OIS/
