Tips For Homebuyers in 2009

Tips for homebuyers in 2009:

1. Cash is the new king:
If you can spare the cash, it has a heck of a lot more buying clout now. In the past, people were asked to seek out more liquid investments, for their cash on hand and grab an easy-to-get low-interest mortgage. Now, with the equity markets depressed at the same time that mortgage loans are hard to find, the tables have turned. Those wielding ready cash in a recession are always ahead of the game.

2. Negotiate extras ... and more extras:
While sellers continue to offer throw-ins such as built-in appliances, flat-screen TVs and even cars, the best throw-ins are always the ones that take monetary form. Think of having seller paid closing costs, a year's worth of paid property taxes, repair credits and paid homeowners association dues, to name only a few.

3. Start a down payment fund The goal should be 20 percent:
Set monthly saving goals. Shore up the family budget. Work an extra job if you must. The pain will precede a gain: lower house payments and higher equity in the future.

4. Determine your own home buying budget:
Do this before you start talking with lenders. They will tell you what you qualify for, but only you can determine what you can really afford. Be realistic and work in a buffer for contingencies and negative life events.

5. Clean up your credit score:
You've heard this one before. But now it's more important than ever if you hope to get home financing in '09. Correct reporting-agency errors that may be dragging down your score. Pay your bills on time. Pay down active credit cards, but don't close out paid-off accounts.

6. Research equals savings:
Don't hesitate to do your own research. Go online and scour newspapers and other local sources looking for housing inventory backlogs, the average for-sale time that homes are on the market and average selling prices. Also, be wary of the number of area foreclosures and major-employer layoffs. You'll get a better sense of how much negotiating clout you'll really have and which way the market is moving. Information is power -- in your case, purchasing power.

7. Don't overlook neighborhood issues:
If and when you do qualify for a mortgage, don't overlook these important issues in your exuberance: quality of schools, traffic noise, upcoming zoning issues, neighborhood stability, home turnover, crime levels and the presence of any sex offenders.

8. Watch for foreclosed-property inventory to loosen:
Banks soon will be under greater pressure to cut their losses on property they own through foreclosure and to increase revenues. With a smaller percentage of distressed homes selling at auction, banks are loaded up with more of these nonperforming assets. In major markets, more agents are specializing in prying loose REOs -- real estate owned by banks. Again, cash on hand talks loudest.

9. Look for other looming opportunities:
Can't get a loan? The financial markets should begin to untangle at least a little bit in 2009. The newly Fed-fortified banks will, or at least should, start moving that money. They are banks, after all. But don't expect a return to zero down payments.

Source: Bankrate.com

Mortgage rates take historic plunge

Federal action forces average below 5

The average U.S. rate on a 30-year fixed mortgage fell below 5 percent this week for the first time on record as a government program to buy mortgage-backed bonds lowered borrowing costs.

The fixed rate dropped to 4.96 percent from 5.01 percent a week earlier, Freddie Mac said in a report yesterday. That's the lowest in data that go back to 1971, according to the McLean, Va.-based mortgage buyer.

The 15-year fixed-rate mortgage averaged 4.65 percent, up from 4.62 percent, Freddie Mac said. One-year adjustable rate mortgages, or ARMs, fell slightly in the week to an average of 4.89 percent from 4.95 percent last week.

The Federal Reserve last week started buying $500 billion of mortgage-backed securities to boost prices for mortgage bonds in the hopes that lenders will reduce the interest rates they charge.

No matter how low the rates go, it won't help homeowners who have lost their jobs or seen the value of their property tumble, said Brian Bethune, chief U.S. financial economist at IHS Global Insight Inc. in Lexington, Mass. "The Fed is arm-twisting to get rates lower, but we're 2 million jobs fewer than we were in July and we've seen home prices continue to fall, so we're in a bigger hole," Mr. Bethune said.

Mortgage applications in the United States rose last week to the highest level in more than five years, led by a surge in refinancing as interest rates fell to a record low.
The Mortgage Bankers Association's index gained 16 percent to 1,324.8 for the week ended Jan. 9, the highest level since July, 2003. The group's refinancing gauge jumped 26 percent, and the purchase measure fell 14 percent.

Source: BLOOMBERG