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Home Sales to be Tested this Winter

Despite recent figures showing that house prices have increased for the last three months, concerns for this winter are starting to appear that housing may be in for a deep freeze. Three main factors are at the focal point of the debate: the tax credit expiration, default and distress sales and artificially low interest rates.  One or a combination of the three could slow down home sales and shift home prices downward.

In the Tri-Valley of Northern California, the area that Loan Mitigation Advocates has our headquarters, default and distress properties have been waning. The last few months have seen less foreclosure and short sale properties come on to the market.  Six months to over a year ago, these default and distressed homes where primarily found in the lower to middle price ranges. Many of the homeowners in this price range had secured subprime mortgages which later resulted in big problems and consequently led to foreclosures and short sales. Now, things are beginning to shift away from the lower to middle priced homes.  More homes at the middle to upper price ranges are expected to become default and distress sales according to a recent New York Times article.  “Plenty of pain yet to come,” said Joseph Shapiro, chief United States economist for MFR.

At Loan Mitigation Advocates, we are always trying to stay abreast of current market trends.  In talking to homeowners, we have identified that some homeowners at the higher price points have been more equipped financially to survive the downturn in the market.  Despite job losses or reduction in income, they have been able to live off savings or the liquidation of stock for a longer period of time.  Some have been able to adjust their lifestyle while others have found jobs to replace lost income. However, for those who have not been able to overcome their hardship, they are faced with the grim reality that their life savings is being wiped out.  They may be left with no choice but to consider giving up their home to short sale or foreclosure.

On top of the potential for more default and distressed sales, another factor that could weigh in on home sales is a rise in Read more

Focus your attention on CREDIT

Credit has been making headlines recently and is quite a serious subject.  With many homes turning to short sales and foreclosures, some homeowners don’t realize the huge impact that a short sale or foreclosure can have on their credit and subsequently their future buying power.

In a recent article by Strategic Equity, Dave Muti, author of “Mortgages:  What You Need to Know,” was asked how a credit score is calculated and tips for increasing it. The Fair Isaac Corporation created the most common credit score used today – the FICO score.  It ranges between 350 and 850.  The higher the score, the better the interest rate you can secure.  720 is the credit score threshold that you don’t want to drop below in order to secure the best rates.  If you drop below 500, you may not even be able to secure a mortgage.

The following are five critical credit criteria reported in the article:

1. Payment History – This pertains to your track record for paying your bills. It makes up 35% of your score. Essentially, this means paying your bills on time. A mortgage “late” is much more serious than a credit card “late”
2. Credit Ratio – How much you owe is 30% of your score. Just because you owe less does not translate to having a better score.  This score is determined between the various types of credit you have opened (see #3 below). There needs to be a balance between how much you owe and how much you have available to you.  Having too many credit cards can be a negative and having only one could be as well. The goal is to have a lot of credit available to you, and to then use that credit, while at the same time not maintaining a high balance.
3. Credit Type – The type of accounts you have makes up Read more