April 14, 2010 Newsletter
The market is starting to improve and many realtors are feeling the effect of the pent up demand and the first time home owner incentives. Hopefully the government will extend the $8000.00 credit to keep the interest level high.
Rates are still around 5.0%, and are still incredibly attractive. As rates go up, look closely at the separation between fixed 30 year loans and 5/1 ARMs which may become more appealing in the coming months.
Everything in the marketplace cycles around and returns. Several years ago when buying a first home was more difficult as the rates were higher, we saw shared equity agreements with helping parents or investors assisting buyers in acquiring a home. In the current market I see a need for homeowners in trouble seeking ways to keep their home. This is an opportunity for a would be investor to get into the market, without some of the pitfalls of owning rental property. If for example the homeowner has income, but due to unforeseen circumstances is having trouble making their payments, a deal could be structured where the investor assists the homeowner, allowing them to stay in their home. The advantage to the investor is they don’t need to find a tenant, and they have a motivated partner, who has an interest in the property, and maintaining the residence. Structuring the deal so it doesn’t violate the new rules on foreclosure prevention will require the assistance of a professional. The structure of the deals will vary according to the situation, but now is a perfect time to move into the market. We have clients who would be open to co ownership with an investor in order to keep their home.
Assumptions will also be back in fashion in the coming months. As property values come back and sellers want to move up, their homes with existing FHA and VA loans at low interest rates will be strong selling points. We may also see the return of wrap around mortgages, were the equity needed for the assumption will be borrowed.
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