Potential Buyers' Fears Addressed

by Ellen James Martin -

Oct. 12, 2008 12:00 AMUniversal Press Syndicate

They are a couple in their early 30s. They have stable jobs, a down payment in the bank, and an intense desire to escape their cramped apartment for a home of their own.

In fact, the couple have already picked out their ideal property - a sprawling ranch-style house on a full acre. Plus they are convinced this is an opportune time to buy.

Still, the couple are racked with doubts and have yet to make a serious bid on the property. Are they crazy to consider buying in so tumultuous a real-estate market?
Read more...



Richard's opinion


The stars are aligned for Buyers with plenty of homes for sale in good condition, at low prices, and with low interest financing. You may be saying..." Great, but the market is bad. Home prices are still falling and they may fall a lot more in the next few months, so why rush? I'll wait until the prices are at rock bottom. If I buy now I may loose my money." That is a seemingly logical thought on first view. You will only know when the bottom is hit when the market starts going back up, so timing is going to be pure luck.

To evaluate whether that is true for you, you must check your numbers.

RENT- How much am I paying? Will it go up? By how much? How many years have I been renting? How much total money did I spend on renting in my lifetime so far (this shocks most people)?

TAXES- How much did I pay last year? How much will it be this year (estimate)? Do I have any tax breaks (ie: IRA, 401K etc). If I have an IRA, 401K etc, how is it doing in the stock market right now? Did I loose any money? If so, how much? Do I want to put all of your eggs in one type of investment basket?

Now that you have checked your numbers, you are now ready to figure out why owning your own home now may really be the smart move right now. Here are some advantages of home ownership:

LEVERAGED ASSET

This means that owning a nice 3 bedroom, 2 bathroom, home with a 2 car garage, fenced yard in a good area worth $250,000, may require a down payment of 3% of the purchase price ($7,500.00) and maybe closing costs of 2% ($5000.00- but I have had success on getting sellers to pay this for buyers). To have $250,000 of assets in your IRA, 401K mutual fund, you need $250,000. You also can't live in your mutual fund or stocks.

TAX SAVINGS

For a 30 yr fixed interest rate loan of $250,000 @6% with 3% down payment ($7500.00) your monthly payment would be $931.42 plus property tax (deductible) and homeowner insurance. For someone in a 25% federal tax bracket savings would be about $232.82 per month/ $2,794.26 per year. Your net monthly payment to own your home would be about $698.60 plus property tax (deductible) and homeowner insurance. You will also save more money on your AZ State income taxes too.

LOAN REDUCTION

Each payment reduces your mortgage balance on what you owe.

APPRECIATION

As the real estate market goes up in your area, so does your home values, and without having to do anything to your home.



That is the one-two-three-four knock-out punch of the advantages to your personal wealth building by owning your own home. At any given time, some or all of these four parts are working in your favor.


There is a # five punch.... Investor Benefits

That is what your landlord investor is doing by charging you rent every month. After you own your first home to live in, if you bought one or more other homes for investments, you would be receiving the rent and getting even larger tax breaks from the Government and even more money in your pocket. That is for another blog post.



To get your personal RENT vs OWN comparison, contact me today.



***Consult your financial advisor for financial, legal, and tax advice.

Happy House hunting!



Richard

How We Got Here: It's Housing, Stupid

by Chris Isidore
Thursday, September 18, 2008
CNN/Money.com

The Wall Street crisis has been caused by plunging housing prices. So despite the billions of dollars being thrown at the problem, experts say more trouble lies ahead. The nation's financial system is in the midst of a massive shakeup and many on Wall Street and in Washington are pointing fingers and looking for someone to blame. But in the end, it all comes back to one issue - housing. Read the rest of the story...

Richard's commentary...

This story does not mention the huge greed factor nor the lack of government regulation of the financial institutions making these risky "bets" on the housing market. Many mortgages only required a "breathing person". "Yes I work a minimum wage job but I am telling you that my income is $200,000 a year", and that is almost what many of the lenders wrote down. Because the home was collateral for the loan...no worries...we will just take it back on foreclosure and sell it to someone else for a profit....because home prices will ALWAYS GO UP.

What nonsense!!! Real Estate is and always will be cyclical with ups and downs with the overall trend upward. Now there is a large downturn in home values and the financial institutions that bet wrong are going down the tubes.

A little common sense here from common people. Would you just give a property as valuable as your home to someone who told you he made a lot of money but did not show you with proof and with none of his/her cash in the deal? Would you sell your car to someone you did not know who just told you he would pay you but offered no proof that he/she could and drove off into the sunset with you holding a worthless piece of paper? Of course not. Then why did the financial institutions do that? And who is accountable for it?

When Franklin Roosevelt was President during the Great Depression of 1929-1941, Financial Institutions were divided up into commercial banks, savings and loans, insurance, stocks & bonds, real estate....distinctly separate and not allowed to compete in each other's business. Banks could not sell life insurance, Stock Brokers could not have checking accounts and other bank functions...you get the idea.

Then in the 1980's and continuing to now, deregulation was the mantra. Get the government out of business and let the market take care of itself. Now all Financial Institutions seem to be intertwined and offering the same services chasing the same consumer/investor dollar. Now greed and the need to have ever increasing unrealistic profits to push up their share prices on Wall St.

Well, the market has spoken. Many of the very wealthy and influential that were involved in causing this fiasco escaped without loss before the big melt down and may actually be receiving Gov't handouts as well. We the average taxpayer are going to pay for many years for this in many ways.

What to do now??

Get out there and buy your home or investment property now before the coming credit crunch knocks you out of the market with higher interest rates and much tougher qualifying standards. Rates are low, prices are affordable, there is a great selection of terrific deals, and it is still easier to get a good fixed rate FHA loan.

Get moving before you miss out...It's a Buyer's Market now!! The sellers are the ones crying that the market is bad. Think about it....act on it!!

Here are a couple of free resources for you to get started in finding a great deal on a home.

Go here to get access to the Real "Rock Bottom" Priced Home Deals
Many of these homes are great condition and are move in ready.

Are you good with a hammer?, get priority access to low priced "Fixer Uppers"
on the "Fixer Upper Hot-List"

Free Report: "How to Stop Renting and Own Your Own Home"

Got a comment, thought or opinion? Post it on this blog. That is what its for.

Tough Housing Market Complicates Divorce

by Elizabeth Razzi Friday, August 15, 2008
provided by BankRate.com

Divorce is rarely an easy process. But falling home values and sluggish real estate sales are combining to make it particularly difficult right now.Couples aren't fighting over who gets to keep the house. They're scrambling to get away from the burden of it.

It's too soon to see the trend reflected in official statistics; the most recent marriage and divorce numbers compiled by the National Center for Health Statistics date back to 2005 -- just when real estate markets started to turn down from their boom years.
Read more...

"Richard says..."

This is a tough one on several levels but I will stick to the Real Estate issues. I am not Dr. Phil or Jerry Springer, which ever way things are working or not working out. If you are married and bought together in AZ it is usually community property. If you had a committed relationship and had purchased together with both names on the loan and deed, there were different ways to take Title. (Consult a qualified attorney for answers to your specific situation)

If one of you can keep the home and buy out the other with a promissory note and make payments to the other party, that is one option. You could rent it out or get a boarder for a while to help with the payments.

With the promissory note, it could be arranged through a Title Company with an escrow account. The advantages are that the ownership interest of the party that moved out and is receiving payments will be recorded and records will be kept. The parties never have to meet or mail a check directly to the other. When the other party is fully paid off, the quit claim deed is executed and recorded. The house was not sold and both parties benefited from it and did not have credit issues from a forced sale of the home.

Option 2 is to sell the house somehow. You may have to actually pay a check at closing to clear you existing mortgage loan, especially if there is no equity. There is the Short Sale option, which means that real financial hardship must be proved to the lender with financial statements, tax returns, budget records and more. A qualified Realtor that is experienced in Short Sales may be a valuable asset here.

Option 3 is to let it go into Foreclosure. That will greatly harm both party's credit scores and seriously hamper both financially in starting over. Give it careful thought here. Option 1 may work the best. Selling a home normally is an expensive proposition taking up as much as 11% of the Sale Price. That money could be put to better use in your respective pockets to assist both parties in moving on and rebuilding their lives.

To help you know what questions you should ask and how to arrive at the right answer for your specific situation, a FREE special report has been prepared by industry experts entitled "Divorce: What You Need to Know About Your House, Your Home Loan and Taxes". Read it today.

Do you need help in finding a more affordable home? When you are buying a home, having current and accurate knowledge of what area homes are listed for is important. Our best buy service enables you to get priority access to the hottest new listings so you can beat out other buyers and negotiate to get the most home for the least amount of money.

Are you interested in learning more about buying homes that are Short Sales or Foreclosures? Distress Sales resulting from bank foreclosures, short sales, court orders, and probate often represent a great way to get a fantastic deal on a home.

It's not easy for the average homeowner to find these deals, because you have to keep scouring the paper and the Internet to see when one comes up. Or you can pay a huge monthly fee to an expensive foreclosure subscription service and receive the same property lists as hundreds of others.

When you receive this free, no obligation service, you're automatically plugged in to the most current list of Foreclosure Properties on the market, in the price range and area that interests you. This FREE, no obligation service, "Foreclosure Weekly Report" will save you a lot of research and running around.

That's all for now. I welcome you posting any questions or comments about this and any other articles on my Blog.

Have a Great Day,

Richard

FHA Officials Seek to Ban Seller-Assisted Payments

FHA Officials Seek to Ban Seller-Assisted Payments
By MICHAEL CORKERY and MICHAEL R. CRITTENDENJune 10, 2008; Page A13

Federal housing officials are trying again to ban seller-assisted down payments on federally insured mortgages, amid concerns about mounting losses tied to these loans.
Read the complete story... http://online.wsj.com/article/SB121306712046559817.html?mod=RealEstateMain_1

Richard says....

It is going to be much harder for you to buy a home whether new or resale when this loop hole for hard-working people like you is closed.

Here is what this means to you as a Buyer

1. You will need lots more cash to buy a home. The required 3% FHA down payment. That’s $6000.00 of YOUR CASH for a $200,000 home, $9000.00 for a $300,000 home.
   (FHA loan limits are around $350,000 now, not just for the low end of the market.). Have you got $10,000 cash saved to buy a home now? How long will it take for you to save it?
2. It must be your money and you will have to prove it. No gifts from family, friends, builders or charities will be allowed. More background checks of your bank account activities looking for large unexplained deposits. If you are purchasing an Investment property, you will have to come up with more cash for the buying end.
3. Missed opportunity to have Home Seller pay the 3% down payment for you.
   Your housing costs will increase faster if you are renting. Landlords will take advantage of that and quickly raise rents.
4. Renters don't receive tax saving benefits, equity build-up, and price appreciation of home ownership, your landlord gets them and your rent too.
5. It is harder to save for the down payment with no tax breaks and ever increasing rents.
   

What to do about it.

Assess your personal situation.

1. If the home seller paid your down payment and closing costs and you could keep your money in your account, could you buy a home now?
2. Could you afford the monthly payments necessary? Remember that you may be elilgible for some big tax breaks with deductability of mortgage interest and property taxes (consult your tax/ financial advisor for details).
3. Do you have steady employment and income that can safely cover your house payment?
4. Would you like to have fixedmonthly payments for up to 30 yrs into the future, or will you be willing to pay your landlord more rent every year for the next 30 yrs? What would the rent be then?
5. Do you want to set down roots and own a home to start with? Maybe renting is right for you now.
6. Most homeowners are way ahead of renters in wealth accumulation in addition to home equity.
7. If you needed money for your children's education, retirement or emergency needs, home equity has been a very useful source of funds.

Just a few things to consider....

A new free report by Real Estate Industry experts has been prepared entitled "How to Stop Paying Rent and Own Your Own Home". It has already helped dozens of local renters get out from under their landlord's finger, and move into a wonderful home they can truly call their own. You can make this move too by discovering the important steps detailed in this FREE Special Report.

Got a Real Estate question??? Ask a Real Estate Expert.

Feel free to call me or leave a response to any of my articles by posting your comments.

Thank you and have a Great Day,

Richard

Home Buying Experts Warn - Builder Loan Fine Print Could Cost You Thousands

RISMEDIA, May 22, 2008-The home loan packages offered by builders are often touted as being very convenient. But when it comes to evaluating the true benefits the picture is often quite different, according to the home buying specialists at the National Association of Exclusive Buyer Agents, (NAEBA). Recent difficulties in the mortgage marketplace bear this out.”Mortgage shopping can take a significant level of sophistication. In addition, negotiations with a builder’s mortgage company can sometimes be stressful and costly,” stated Barry Nystedt President of NAEBA. “Home buyers still need to compare the builder’s loan offerings to what is available on the open market. Complications arise when the buyer becomes obligated to the builder’s lender without being able to compare the rates and fees other lenders may offer months later when the home is complete. Read more...

Richard says...
This article highlights the very real problem posed when home buyers think that walking into a new builder development to buy a home is the same as going to the grocery store to buy a can of peas. The builders agent works for the Builder...not you the home buyer. His/her job is to get the most money out of your pocket as ethically possible and make the most profit for the Builder.

Builders make additional profits from you, the new home buyer, by using their recommended lenders and their recommended Title Companies. Is that a surprise to you? Do you think maybe having a savy Realtor that understands the New Home Market and knows how to negotiate with Builders would be a smart thing to do? In most transactions, the Builder will pay your Realtor his/her fee, not you. You may ask....if that is the case, won't I get a better deal if I don't have my own Realtor represent me? It will save the Builder 3 to 6 % on my home price. It sounds logical. But...you don't know the Real Estate business. Please re-read this article. I also recommend reading all of the other articles posted to this Blog as well.

Read this new FREE report, Ten Secrets Every New Home Buyer Should Know for more information.

Got an opinion? I'd love to hear about it. Post your comments now.

Happy Househunting :-)

Housing affordability best in four years

Tuesday May 20, 1:23 pm ET By Les Christie, CNNMoney.com staff writer

With prices crashing around the nation, home price affordability has improved dramatically in many U.S. cities.
As a result, 53.8% of all new and existing homes sold nationwide during the first three months of 2008 were affordable to families earning the median household income of $61,500, according to the latest Housing Opportunity Index released Tuesday by Wells Fargo and the National Association of Home Builders (NAHB). Read more...

My Commentary:
If you have been sitting on the fence waiting for prices to fall even lower, NOW is the time to beat the crowd. When the crowd gets out there, the best deals will already have been snapped up. The remaining sellers will be much tougher on helping you with your downpayment and closing costs. Remember just a few years ago, everyone was frantic to buy a home, like it was the last train out of town, even a crappy fixer upper at crazy prices. Don't let that happen to you this time.

Find homes for sale from ALL Real Estate Companies that match you are looking for here.

Get your Free Report on How to Stop Paying Rent and Own a Home the smart way.

Got a comment? Post it. I'd love to hearwhat you think about this or any other articles.

Have a great day,

Richard

Bargain Hunters are Boosting Home Sales Now

An Article on the front page of USA Today on April 17, 2008 suggests now is the time to get out there and buy a home, especially if you are a first time buyer. I could not agree more. It is a great Buyer's Market. A word of caution... When more and more of these "Get out and Buy Now" articles appear in the media, other potential Buyers will start getting the message. Then your advantage of being there first WILL BE LOST and may cost you BIG MONEY.


Home sellers are reading and watching the media too. They will get stubborn on price and terms. That will cost you BIG MONEY. The time to move is now, before the rest of your potential Buying competition finds their own Realtor and gets Pre-Approved for a home loan. The Summer is the busy season and 2008 promises to be better than the last two years.


I suggest two things to make the most profit on your home purchase:


#1 Read this article and

#2 Contact me or any other competent Realtor and Lender to find out how you can get in now and get a great deal on a home.

Read the complete story in USA Today

Find the GREAT Home Deals here!

Best regards and Happy House-hunting,

Richard Pomisel, Realtor
Dan Schwartz Realty Inc


Toll Free (24hr Hotline) 1(800)474-2841

Direct (602)214-1166

eMail: Richard@Pomisel.com

Federal Reserve Rate Cuts, Do Not Necessarily Mean Lower Interest Rates

(Additional reporting by Emily Kaiser in Washington and Caroline Valetkevitch in New York, Editing by Andrea Ricci) Copyright 2008 Reuters

We have seen the Federal Reserve cut rates again and may soon do so one more time. As a result, many mortgage applicants are calling their mortgage representative and expecting a lower interest rate. Others who have been waiting to refinance are puzzled as to why mortgage rates have not moved lower during recent five Fed rate cuts. In fact mortgage rates are now higher than they were before the Fed began cutting rates in January. This is difficult to explain to many consumers who have watched a 2.5% reduction by the Fed with no benefit in mortgage rates.



Is a Fed rate cut really good news for mortgage rates? The facts may be surprising. The Fed can only control the Discount Rate and the Fed Funds Rate. This is very different from mortgage rates. A mortgage rate can be in effect for 30-years, a rate that is set by the Fed can change from one day to another.



Another common mistake is in thinking that 30-year Treasury bonds or 10-year Treasury notes are directly pegged to mortgage rates. Those are government securities that are backed by the full faith and credit of the U.S. government and have no direct effect on mortgage rates. So what are mortgage rates based on? As it turns out the answer is mortgage-backed bonds known as Mortgage Backed Securities (MBS). Bonds issued by Fannie Mae and Freddie Mac (MBS) and the trading performance of those bonds will determine the direction of mortgage rates.



Finding the catalyst that causes mortgage bonds to move will give you the keys to finding out what makes mortgage rates rise or fall. We know that inflation will always be a negative for any long-term bond because it eats away at the future returns. Since the bond will pay a set amount over a long period of time, that amount will be less valuable if inflation is high.



Over the past several years, one catalyst that seems to be working in the opposite direction of MBS prices is the Nasdaq and broader stock market. As bond prices rise, interest rates fall. As bond prices fall, interest rates rise. As the Nasdaq moves higher, bond prices move lower causing interest rates to rise. As the Nasdaq declines, mortgage bonds benefit, causing mortgage rates to fall. Additionally, and unlike common opinion, Fed rate cuts have had virtually no direct effect on mortgage rates. Moreover, it appears that since Fed rate cuts act to stimulate the Nasdaq, they have a negative effect on mortgage rates.

Aaron says....

The bottom line is that it appears mortgage rates will get better if the Nasdaq sells off and will get worse if the Nasdaq rallies. So it is not necessarily what the Fed does that affects mortgage rates, it's how the Nasdaq and broader stock market interprets the Fed's action that will ultimately influence the direction of mortgage rates.



This is because money managers and mutual fund companies typically keep funds in either stocks or bonds with very little in cash. If stocks are in favor, money is pulled from bonds, causing bond prices to drop and interest rates to rise. When stocks are being sold off, the money is then parked into bonds, which improves bond prices and causes interest rates to decline.



A closer look at the five rate cuts by the Fed this year shows that mortgage bond prices deteriorated after each Fed rate cut. This means that mortgage rates rose after the Fed had cut rates while many consumers were expecting their mortgage rates to decline.



Worse yet are the consumers who missed the opportunity to obtain a lower rate because they mistakenly waited for the anticipated Fed action to cut short-term rates, thinking that longer-term mortgage rates would decline as a result. Predicting the future is tough, so nothing is written in stone.



Keep an eye on the Nasdaq, and keep in mind that the best rates may be behind us. But, mortgage rates are still low and could have some quick dips so make the most of them while they last. Posted by Aaron Brown, Loan Advisor, Flagstar Bank

What do you think about this issue or any other? Post your comments. Any questions? Just Ask the experts.

Read this special report prepared by Real Estate industry insiders, "Homebuyers: How to Save Thousands of Dollars When You Buy".

Rental Strategies - 5 Basics to Remember When Renting Out a House

RISMEDIA, March 10, 2008—Renting out a house isn’t rocket science, but there are some basic rules that should be followed to increase your chances of success: Continued >

Richard says...

I receive many inquiries from investors and home sellers who for one reason or another can not sell their homes right now by the usual means of cashing out and moving on. Renting can be a very good money making strategy if done right and getting all of the ducks in a row.

If you keep your present house as a rental, you may still be able to finance and buy your next home. The rental property income is considered when obtaining financing on your next home. If it is rented out at the same price as your payments, it is a wash. If for more than your expenses, then it is added income on your financial statement. There are additional benefits to owning rental properties but I won't get into them at this time.

Most horror stories I have heard about rentals is related to not following sound practices as outlined in this article and taking short cuts. These "time and money saving" short cuts can ultimately be a very costly financial and legal disaster to the novice landlord.

Some things to consider are...

1. Proper cleaning of the property is very important. Have you gone to rent or buy a home with dirty bathrooms and an oven with crusted food in it? "Next" is what most reasonable people would say.
2. Know what the rents are for similar properties in your area. This is business. Get your numbers. Your property is competing with others in the area. Make sure you are priced right. Buyers of any product or service look for value in what they are paying their hard earned money for just as you do.
3. Do some creative marketing and get the word out that you have a nice property for rent. There are many creative and inexpensive ways to do this.
4. How about not screening prospective tenants properly? This is a big one. Yes, it costs a few bucks but....would you like to trust your home (expensive investment) to a deadbeat or have it turned into a meth lab ? Have a non-refundable application fee cover this expense. Large apartment complexes do, so why not you?
5. Know and follow the laws relating to landlord and tenant rights. Have a well written lease agreement in place. Yes they are renting your property, but you can not do anything you want to tenants. Treat your tenants with fairness and respect. They are putting money in your pocket. They are not the enemy. They may be the perfect buyer for your property in the future.

If you have any questions on any real estate subject matter, feel free to "Ask a Real Estate Expert".

Have a profitable day,

Richard Pomisel

New Tax Breaks a Relief to Homeowners

New Tax Breaks a Relief to Homeowners -- Three tax laws enacted in December promise help for homeowners. Homeowners found three attractive tax breaks among their holiday presents, thanks to the federal Mortgage Forgiveness Debt Relief Act of 2007, which was enacted in December.

Richard says....

If you think you fall within the catagories of the three tax laws, consult with your legal and financial advisors ASAP. The sooner you work the numbers and take appropriate action, the better your outcome usually is. If you are facing foreclosure....OPEN YOUR MAIL from your mortgage lender and contact them. They DO NOT WANT TO OWN YOUR HOME in many instances and may work with you to keep your home. If they say no, then you know where you stand. Find out how to sell your home fast and for top dollar.

If you have any questions about the article, feel free to call or email me and my group of Real Estate experts.

Have a Great Day :)

Richard Pomisel GRI, e-Pro
Dan Schwartz Realty Inc
Richard@Pomisel.com
Toll free 24 hrs 1(800)474-2841

First Time Home Buyer Guide to Taxes

First Time Home Buyers Guide to Taxes -- If you bought your first home last year, you'll need to know about all the deductions you can use as you prepare your first tax bill as a homeowner.

My Commentary

Read this article for more details and consult your financial advisor. Home ownership has tax advantages that are very valuable. Do you know anyone thinking of buying a home that can benefit from this information?

A new free special report entitled "How To Stop Paying Rent and Own Your Own Home" has already helped dozens of local renters get out from under their landlord's finger and move into a wonderful home they can truly call their own. It doesn't matter how long one has been renting, or how insurmountable the financial situation may seem. With the help of this report, it will become suddenly clear how you really can save for the down payment and stop wasting thousands of dollars on rent.

Have a Great Day,

Richard Pomisel, e-Pro, GRI

Toll Free- 1(800) 474-2841

Richard@Pomisel.com

Bernanke: Fed ready to act aggressively

Bernanke: Fed ready to act aggressively

January 10, 2008 1:21 PM ET

WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke said on Thursday the U.S. economy's prospects were worsening because of a weak housing sector and credit market turmoil and said the central bank was ready to act aggressively to bolster it.

"In light of recent changes in the outlook for and the risks to growth, additional policy easing may be necessary," Bernanke said in remarks to a housing and finance group.

"We stand ready to take substantive additional action as needed to support growth and to provide adequate insurance against downside risks," he said.

Analysts welcomed Bernanke's forthright acknowledgment of the dangers faced by the economy, which many fear could fall into recession.

"I think he's come to terms with the fact that while inflation may be a concern down the road, he has to take care of the train that's coming at him right now, which is the fear of a recession," said Angel Mata, managing director of listed equity trading at Stifel Nicolaus Capital Markets in Baltimore.

Bernanke cited several factors including higher oil prices as well as lower stock prices and falling home values that he said was bound to hurt consumer spending this year.

"Incoming information has suggested that the baseline outlook for real activity in 2008 has worsened and the downside risks to growth have become more pronounced," Bernanke said.

U.S. stock markets surged after Bernanke's comments, while the dollar remained weaker against a basket of currencies as investors concluded that the Fed would aggressively lower interest rates at its end-of-month policy-setting meeting.

The Fed's policy-setting Federal Open Market Committee holds a two-day meeting January 29-30. Bernanke's comments reinforced market expectations that it will cut interest rates a half percentage point.

He said last Friday's employment report, which showed only 18,000 jobs were created in December, was a clear sign of mounting economic risks. "Should the labor market deteriorate, the risks to consumer spending would rise," Bernanke said.

(Additional reporting by Emily Kaiser in Washington and Caroline Valetkevitch in New York, Editing by Andrea Ricci)

Copyright 2008 Reuters

My Commentary:

For those people who are thinking of purchasing their first home or those desperate to refinance out of an adjustable rate mortgage, interest rates are likely to improve. Recent development since the release of this article (see above) strongly suggests that the Fed’s will lower interest rates by 50 basis points later this month. Currently, the prime rate (Wall Street Journal) is at 7.25%, which would decrease to 6.75% if implemented this month.
It is important for me to point out that with lower interest rates on the rise, borrowers may still find it difficult for loan approvals. Fannie Mae/Freddie Mac has tightened up the guidelines over the last several months due to an increase of foreclosures/short sales.
A person looking for loan options can expect a bank/lender to determine interest rates and approval mostly on credit scores and monthly debt income. If your average credit score is 620 to 680, you are likely to have a higher interest rate on a conforming conventional loan. However, the expected rate reduction would still look attractive for anyone who is in that situation.
The good news is that government sponsored loans (non-conventional) such as FHA are starting to be more recognizable to the public. The FHA loan offers excellent interest rates and terms to those who may not have the best or lack of credit profile. The FHA loans limits are expected to increase to the maximum conforming loan amount, which is $417,000.00.
The bottom line is that Mr. Bernanke must continue to act aggressively with the real estate industry to prevent a potential danger of a recession. We must continue to be positive in 2008 and be smart with our decisions whether it is in real estate, retirement, or monthly spending.

Aaron S Brown Loan Advisor - Flagstar Bank Aaron.S.Brown@flagstar.com
888-760-8383 Ext: 130