To Refi or Not to Refi....that is the question.

With interest rates for 30 year mortgages amounts lower than 5%, thousands of home owners are eager to lower their monthly household expenses by refinancing their mortgage.
Banks are overwhelmed to say the least with mortgage applications, about 80% of which are for refinancing. How should you go about making the decision to refinance or not? It can be a tough call. Here are some key points that might assist you in the decision.
· If you have a loan with a prepayment penalty which were popular in 2004 and 2005, refinancing can result in steep penalties. Be sure to check with your current lender or read through your mortgage documents to see if one of these prepayment clauses exists.
· Be familiar with the present value of your home. In Oakton, we have seen the majority of homes selling for close to the assessed value. Given the crunch that Fairfax County is in right now, those assessments have been dramatically reduced further reducing the most recent sales prices of homes in our neighborhood. If you need to refinance a mortgage that is more than 80% of your homes current value, you will have to wait until values increase. I would be more than happy to visit your home and provide a fair market value analysis of your home.
· Lending terms are much stricter than a few years ago. The lackadaisical manner in which Banks were lending in 2004 and 2005 drove the demand for housing as well as home prices to extreme levels. Those same lenders are now tightening their belts to avoid further defaults and foreclosures. What this means for you and me is that the requirements for financing have reverted back to pre 2000 standards and then some. Be ready to provide 2 years of tax returns, 2-3 months of bank statements and employment verification is back on.
· Will it payoff in the long run? Unless your current lender is offering one of the no cost refinancings on existing mortgages that are out there, there will be closing costs incurred. To save closing costs, ask your lender if they will consider renegotiating the terms of your existing mortgage without going through a formal application process. Refinancing requires the deed to be recorded again. There will also be settlement charges and lenders fees. Ask whatever lender you are dealing with for an estimate of these expenses. Also ask for the estimate of your new monthly payment (with insurance and taxes included – otherwise known as PITI). Subtract the new payment from your current payment and divide that amount into the total amount of expenses that are associated with the new loan. This will give you the exact number of months that it will take you to recover the expenses associated with the refinancing. For example: Let’s assume that the costs associated with the refinancing will be $5000. if your current monthly payment is $5,000 and your new monthly payment is $4,000, it will take you 5 months to recoup the costs.
· If you are in a position to refinance, start by contacting a lender. Grab a glass of wine and have a good movie ready so that your wait time on the telephone will not seem to be such a waste of your time. The banks are understaffed and are bombarded by heavy call volumes as a result of the low interest rates.
The bottom line is that mortgage rates are at a historical low and like most of us, I do not have a crystal ball to determine when they will be this low again. It is an opportunity to reduce your monthly household expenses for the long run. For questions about this article, please contact me at 703-856-5405 or krisbsellshomes@aol.com.

New Fed Efforts to Jump Start Lending

On Tuesday November 25, 2008, the Federal Reserve and Treasury Department committed up to $800 billion to unfreeze credit for homebuyers, consumers and small businesses. The newest programs are designed to jump start lending by the nation's banks and put money in the hands of consumers. Immediate results were seen, as rates on 30-year mortgages dropped a record 1-1/8 percentage points on Tuesday.


As part of the plan, the Federal Reserve will purchase up to $500 billion of mortgage-backed securities backed by Fannie Mae, Freddie Mac and Ginnie Mae, as well as up to $100 billion in direct debt issued by the three government-sponsored mortgage finance firms. This action is being taken "to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets," according to a Federal Reserve statement.
Additionally, the Federal Reserve Bank of New York will loan $200 billion to holders of securities backed by consumer debt, such as credit card debt. This should make consumer credit more affordable and allow consumers to spend more freely, thus strenghthening the overall economy.

These new initiatives are aimed directly toward improving the real estate market and overall economy, and freeing up more mortgage money for home purchases.

This reinforces my thoughts on the current market. Now is a terrific time and golden opportunity to buy a home. Take advantage the the week's current interest rates which have fallen below 5.5%.

Weekly Market Update from the desk of

Steve Arsenault...............

This publication has a tendency to be written with technical jargon; however, this week's edition should be easier to read. It addresses the new loan modification program for 'at risk' homeowners going into effect December 15, 2008. This program is intended to help homeowners who are more than 3 months behind on their mortgages owned by either Freddie Mac or Fannie Mae.

If a homeowner has less than 10% equity in their home, they may be eligible for a note modification. These modifications are intended to reduce mortgage payments to 38% of the owners gross monthly income. There are 3 ways the mortgage payments are going to be lowered:

(1) Increase loan term to 40 years
(2) Reducing the interest rate
(3) Deferring a portion of the principal repayment

This program is intended to help hundreds of thousands of homeowners in jeopardy of going to foreclosure.

Rates continue to remain low. Below are rates available for the weekend:

30 Year Fixed Rate (<$417K) - 5.875% with 1 point
30 Year Fixed Rate (>$417K) - 6.125% with 1 point
FHA/VA - 30 Year Fixed Rate - 6% with 1 point

Please feel free to contact me in regard to the post above or any other information that I might be able to provide.

Steve Arsenault
sarsenault@weichertfinancial.com

You can buy a house with less than 20% Down

One of the common reasons that homebuyers remain on the sidelines is that they think they need to have a 20 percent downpayment in order to get a mortgage. This is not always the case and you might be pleasantly surprised at your options.

Recent statistics from the National Association of Realtors show that the number of first-time buyers is increasing. It is common knowledge that most first-time buyers don't have large downpayments, so they couldn't possibly all be putting 20 percent down.

Low-downpayment loans are still readily available. Weichert Financial is solid and strong and has recently made mortgage loans with as little as 3% down.

It remains a great time to buy and good loans with low downpayments are still available, despite what you might have heard. Remember, Weichert has the financing to provide a mortgage for the homes we sell. For more information, please contact Steve Arsenault at 703-359-6592 or sarsenault@weichertfinancial.com.

The Holidays can be a great time to show your home.

Family, cheer, warmth- these are some of the memories and feelings the holidays conjure up and they are, not coincidentally, the best possible feelings to create when showing your home. Holidays offer the seller so many options for making a home perfect for the buyer: Special lights, holiday smells, cozy fireplaces, and festive decorations. Remember, though, the motto for sellers is 'stay simple.'

• Use modest lighting and decorations inside and out.
• If you have a Christmas tree, consider buying one size smaller than you usually buy. Arrange a few simple gifts with matching wrapping paper under the tree. Make sure there is no extravagant display of gifts or toys under the tree. Store furniture that is displaced by the tree.
• For all decorations, smaller and simpler is better.
• Favor natural materials such as real pine branches and pine cones for wreaths and other decorations, and shun plastics or bright, big decorations. Avoid blowup decorations outside.
• Decorate your home with fragrance. Bake bread or cookies. If this is impossible, try light holiday fragrances such as vanilla or cinnamon. Avoid heavy pine smells.
• Clean thoroughly your fireplace and make sure a small, crackling fire is going during walk-throughs. Pay special attention to the temperature of your home. Make sure the home is lightly warm, not so toasty that potential buyers can't stand to wear their coats.
• Make sure all your window blinds and curtains are open for day showings. This means the windows themselves must be perfectly clean. Buyers are comforted in knowing that a home has been maintained well.

If you have any questions on preaparing your home during the holidays, please feel free to give me a call at 703-856-5405 or send an email to kris@krisbsellshomes.com.

It might be a good time to revisit your personal credit.

If you're planning on buying a home in this great housing market, you'd better start checking your credit reports now. There may be some surprises waiting for you. Given the credit crisis, some credit-card companies are reducing credit limits on some borrowers. For some people, that may drag down their credit score even if they have been diligent about their finances. Here's why: A major factor in calculating a person's credit score is credit utilization (how much of your available credit you use) according to Fair Isaac (as in credit-quality FICO scores). When your total available credit shrinks, the percentage of credit that is being used goes up, and that can do some damage to your credit score regardless of how well you've kept up on payments.
If you plan on buying a new home in the next year, there are five things you can do to keep your credit looking as good as possible, according to Fair Issac’s:

• Check your credit report: Find out if there have been changes to your account limits, and make sure there aren't any errors. Look for any negatives on your report (most negative items should be removed after 7 to 10 years).
• Keep the balances low: About 30% of your score is based on a ratio of the amount that is owed on active cards to your available credit. Utilization on individual cards is key; getting close to the limit on one card will reflect negatively on your score. Pay down balances as much as possible.
• Keep accounts active: Accounts get closed when there is no activity on them for a while. Make small purchases on cards a couple of times a year, then pay them off right away, to keep accounts active and your available credit up.
• Pay your bills on time: This should an easy one, but could prove challenging if you run into hardship. Contact the credit-card company as soon as possible if you're having problems paying your bill. Payment history counts for about 35% of your credit score.
• Avoid new cards: Store cards are tempting when they offer discounts at the register, but don't bite. Applying for that card will have a negative effect on your score short term.

If you have questions about your credit score, Steve Arsenault at Weichert Financial Services can help. With the new “Credit Assure” Model, he can potentially help you improve your credit and perhaps qualify you for a program or better rate that you may not otherwise have been eligible for. Ask us how! We are here to help!

Weichert Financial Services-Weekend Update

From the desk of Steve Arsenault...

Rates have remained relatively stead this past week, given the high volatility within both the equity, mortgage and general credit markets. The government control of the GSEs (Freddie Mac and Fannie Mae) has resulted in a return to 'responsible' lending. Freddie Mac is leading the way by prohibiting the sale of any Freddie Mac mortgage with debt-to-income ratios in excess of 45% slated for deliver in 2009. Fannie Mae is expected to follow-suite shortly. Restrictions are also now being imposed on Government loan programs, such as FHA and VA. Maximum debt-to-income ratios are being restricted to 50% going forward. Despite the obvious restrictions on certain higher-risk borrowers, these actions should increase the likelihood of future repayment for new GSE loans. This may also increase confidence in investment in the credit markets for mortgage loans, possibly resulting in a new infusion of investment in the Mortgage Backed Securities (MBS) markets.

Also, new loan limits have been established for 2009. The Conventional Conforming loan amount will remain at $417K. The new high cost Conventional Jumbo loan limit has been set at $625K (previously $729,750). The maximum FHA loan limit will also be $625K.

Below are rates available over the weekend:

30 Year Fixed Rate (<$417K): 5.875% with 1 point
30 Year Fixed Rate (<$625K): 6% with 1 point
FHA/VA: 6% with 1 point

If you have any questions or would like more information, please feel free to contact me at:(703) 359-6592.