Don’t Move Money Around…

When a lender reviews your loan package for approval, one of the things they are concerned about is the source of funds for your down payment and closing costs. Most likely, you will be asked to provide statements for the last two or three months on any of your liquid assets. This includes checking accounts, savings accounts, money market funds, certificates of deposit, stock statements, mutual funds, and even your company 401K and retirement accounts.

If you have been moving money between accounts during that time, there may be large deposits and withdrawals in some of them.

The mortgage underwriter (the person who actually approves your loan) will probably require a complete paper trail of all the withdrawals and deposits. You may be required to produce cancelled checks, deposit receipts, and other seemingly inconsequential data, which could get quite tedious.

Perhaps you become exasperated at your lender, but they are only doing their job correctly. To ensure quality control and eliminate potential fraud, it is a requirement on most loans to completely document the source of all funds. Moving your money around, even if you are consolidating your funds to make it "easier," could make it more difficult for the lender to properly document.

So leave your money where it is until you talk to a loan officer.

Oh…don’t change banks, either.

Do not Make A Major Purchase…

… any major purchase that would create debt of any kind. This includes furniture, appliances, electronic equipment, jewelry, vacations, expensive weddings…

…and automobiles, of course.

As you can see below there are many predictions that say housing will remain in doldrums for much of 2010 with continued price declines and foreclosure activity hanging over the market.  Investors fear that the Feds are just printing money as a means of staving off further deterioration in housing and other sectors. Bad and ugly.
 
Yes prices will continue to be under pressure particularly in the mid to upper price brackets but there is much evidence that at the entry level prices and inventories relative to sales are firming. Good.
 
We will have a slow start in the first quarter relative to how strong things were in the fall of 2009 but with the tax credit deadlines coming up this spring we expect sales will strengthen. Good.
 
Most predictions are that jobs will recover slowly over the next two to three years so no one is predicting that employment will add measurably to the housing recovery. Ugly. Add on expected tax hikes (Congress forgot to extend Bush era tax roll backs) and even the most bullish forecasts are for weak recovery.  Bad to ugly in the near term.
 
But - the worst for housing is in the past and leading brokerage firms and sales professionals have made their adjustments.  The best will rise and have a strong year in 2010.

5 Reasons why this is the BEST market to upgrade!

Have you thought about getting that bigger, better house in a better neighborhood?  

NOW IS THE TIME!

Whether you need more space, want to upgrade your location, or for any other reason, the current real estate market presents a unique opportunity to capitalize by trading up! 

5 reasons why this is the best market to trade up!

1. You will make money NOW on the trade!  

Here's how this works. You currently own a home that was worth $500,000 three years ago, and now it's worth $350,000 (that's right, it's gone down 30%!).  You may be thinking, I've lost $150,000, right?  Wrong!  

What you do is go out and sell your home and purchase the home of your dreams for $700,000.  That house, three years ago, was worth $1,000,000 and you probably couldn't have afforded it.  By buying it now, what you've just done is bought your new home at a $300,000 discount!  Just like that, on the trade, you've made $150,000!  This doesn't even take into account the money you'll save on property taxes because you're paying taxes on a $700,000 house, and not on a $1M house.

2. ... AND you will make money LATER when you sell your new home!

OK you've listened to my advice, bought that new home of your dreams and traded up. YES!  Fast forward five years and the real estate market has gone up 20%.  Let's take a look at what has happened.  Your old home is now worth $420,000, for a $70K gain over today's value.  Your new home is worth $840,000, or $140,000 more than when you bought it today.  Just like that, you've made an extra $70,000 on the trade!

3. You can likely buy a house you otherwise could not have afforded, and may not be able to afford again!

Going back to my example above, you probably couldn't have afforded that $1M house three years ago when you bought your home.  You also may not be able to afford it again in 3 - 5 years when the market rebounds. If you've been dreaming about a bigger home or one in a nicer area, now is really the time to capitalize.

4. It's much easier to trade up in a down market than in an escalating market!

I've had clients say that they will trade up when the market "goes back up."  Let's take a close look at that.  Let's say that 5 years from now, the market is back up 20% from today's values.  You then sell your home for $420,000 and your dream home is now worth $840,000.  You've gained $70K on your home (from today's values) BUT your dream home is now worth $140,000 more!  That means that, by waiting, you've now spent an extra $140K to buy that house!

5. You'll probably get a better house by trading up in a down market!

The current market presents some very unique opportunities.  In most areas, inventory is pretty high and buyers have a lot of great choices.  By shopping in this market, you can really get the home of your dreams and take your pick of all the inventory available.  In most cases, you can get a good deal on a great property in a terrific area.

The bottom line is that if you can afford it, now is a terrific time to upgrade!  Interest rates remain at historic lows and there is plenty of financing available.

Pending home sales rose 3.6 percent from May to June, marking five consecutive months of gains for the first time since July 2003, the National Association of Realtors said.

The gains were spurred by low interest rates and affordable home prices, and were strongest in the South (7.1 percent) and West (2.9 percent), NAR said. Month-over month gains in NAR's pending home sales index were more modest in the Midwest (0.8 percent) and Northeast (0.4 percent).

Looking back a year, the index was up 11.6 percent in the Midwest, 8.9 percent in the South, and 5.8 percent in the Northeast. In the West, however, NAR's pending home sales index was down 0.2 percent from a year ago.

A monthly rise in home prices and somewhat higher mortgage interest rates led to a "modest decline" in affordability in June, NAR said, but another index measuring affordability "remains very favorable."

Although the median existing single-family home price in June was $181,600, a family earning the median income of $60,700 could afford a home costing $289,100 with a 20 percent down payment and 25 percent of their gross income devoted to mortgage payments.

NAR has complained that recent increases in the pending home sales index have not been providing all of the expected boost in closed transactions in subsequent months, in part because appraisals often come in under the contracted sales price.

The group has blamed the situation on new rules for appraisals conducted on loans slated for purchase or guarantee by Fannie Mae and Freddie Mac, and called for their suspension.

Fannie and Freddie's regulator, the Federal Housing Finance Agency, and many appraisers and appraisal management companies, say market forces, not the new rules, are more often the reason valuations come in below the contracted sales price (see story).