Robert Earl is here to assist you in finding your next home.
- No need to call each agent about their listing.
- No need to search multiple web sites looking at out of date, unavailable listings.
Robert Earl can show you any home listed in the MLS system, any New Homes Community, any For Sale by Owner Home, any property. Serving as a Buyer’s Agent, Robert Earl can act as your “Representative” throughout the home buying process.
“I will work with you to ensure that you get the home that meets your wants and needs for the best possible terms – period.”
Information for Home Buyers in Northern Virginia
A Video about Buying a Short Sale – Explaining the Time Line
Timing the Market can and will cost you thousands
It’s no secret the U.S. has been in a real estate tailspin since June 2006. More than one-fourth (27 percent) of single-family homeowners are now in negative equity, which means their homes are worth less than what they owe on them. As a result of dropping home values, we are all caught in a sort of real estate limbo: homeowners are waiting on the sidelines to sell and home buyers are trying to time the bottom, waiting for the ultimate rock-bottom bargain. All of this leads many to wonder: “when will the bottom happen?” When will this frozen real estate landscape begin to thaw?
What many people don’t consider is that home prices are only one factor in how much a home will actually cost per month. The other major factor to take into consideration is mortgage rates. And, guess what? Mortgage rates are rising. So, if you’re timing the market for home prices to hit rock bottom, you’d better pay attention to that other part of the puzzle: mortgage rates. In fact, if you’re a buyer trying to time the bottom, you could end up with bigger monthly payments the longer you wait. Here’s why:
Case Study: 100 Main Street
To illustrate why timing the bottom is risky, Zillow’s research arm recently analyzed the relationship between mortgage rates and home value declines and how they impact your monthly mortgage payment. With that analysis serving as our inspiration, we applied it to a fictional home we’ll call 100 Main St. and found that even as the home’s value depreciated over time, the actual monthly mortgage payment increased due to rising interest rates.
We assumed that 100 Main St. was worth $300,000 at the beginning of the analysis and we calculated its depreciation based on the U.S. Zillow Home Value Index, which measures the median value of all homes. We used historic mortgage rates from Zillow Mortgage Marketplace. For future projections, we used Zillow Chief Economist Stan Humphries’ forecast that national home values would fall another 5-7%, and Freddie Mac’s forecast that 30-year fixed mortgage rates would reach 5.7% by 2012.
Purchased Nov. 1, 2010 vs. Jan. 1, 2011: $63 More Per Month
If 100 Main St. was worth $300,000 on Nov. 1, 2010, and was purchased at a 30-year fixed rate of 4.1% with a 20% down payment, it would have cost a buyer $1,159 a month. But if the buyer had waited even a couple of months for home values to fall further, they would have ended up with a mortgage payment of $1,222 a month, or $63 more. Despite the 1.8% hit to the home’s value, the mortgage rate increase to 4.7% would have counteracted that. (See graphic below)
Purchased in 2012: $126 More Per Month
What if you wait even longer for home values to decrease? Based on Freddie Mac’s forecast that mortgage rates will reach 5.7% by Q1 2012 and Zillow’s projection that home values will fall another 5-7% this year (we used 6% for our analysis), you will still end up paying more for a house. Although the home will be worth $23,000 less than it was in November 2010, the higher mortgage rates will leave the buyer with a monthly payment of $1,285, which is $126 more per month than if 100 Main St. was purchased 14 months prior.
We’ve always advised consumers against trying to time the market bottom and even economists don’t agree when it will happen. What’s most important for consumers is to control what they can: their finances and their knowledge base. Take the time to figure out your financial situation and use mortgage calculators that will help you estimate how much home you can afford. Since mortgage rates change on a daily basis and can vary from lender to lender, make sure to shop around on sites like Zillow Mortgage Marketplace to find highly competitive mortgage rates. When you do purchase your next home, make sure it is a place you can see yourself living and affording for the next five to seven years. And remember, even if mortgage rates do climb to 5.7 percent, they are still historically low and home prices in many areas are as affordable as ever.
Buyer Update – Feb. 2011 – If you have been sitting on the fence trying to decide whether to buy a new house, you should act soon. New loans are starting to get costlier.
The mortgage market is facing pressures from new laws and regulations, still-declining home prices and the ongoing need for government-owned mortgage players to shore up their finances. The Mortgage Bankers Association predicts mortgage originations, which reached $3 trillion in 2005, will be less than $1 trillion this year, the lowest level since 1997.
“The price of mortgage money is going to go up, and the availability of mortgage money may also be impinged,” says Keith Gumbinger, vice president at HSH Associates, which tracks mortgage data.
The silver lining is that the rate for a 30-year fixed loan is hovering around 5% for those with good credit. That is up about a percentage point from last year’s lows but is still an attractive rate by historical standards, though expected to keep climbing as the economy improves.
Home prices in some areas are still falling, but they are bottoming out or firming up in others. It may not be the perfect time to buy a home—but better mortgage options today may be a worthy trade-off to the possibility of lower prices tomorrow.
Still not convinced? Consider the following:
• New costs.Fannie Mae and Freddie Mac, which provide liquidity to the mortgage market by buying mortgages and selling securities backed by them, are adding new fees to loans to people with the best credit and raising existing loan fees. Freddie’s new fees start March 1, while Fannie’s kick in April 1.
Neither Fannie nor Freddie have been assessing fees on most loans for borrowers with credit scores above 720, even if the down payment was small. But citing a need to address risk and price their services appropriately, they will assess a fee of 0.25% to 0.5% of the loan value on borrowers with credit scores of 720 or higher who put down less than 25% of the purchase amount. The current fee for those with credit scores of 700 to 719 who put down less than 20% of the purchase price will double to a full percentage point of the loan value from half a point.
Brokers expect the higher fees will translate into slightly higher mortgage rates.
In addition, the Federal Housing Administration, saying it needs to bolster its capital reserves, is raising its required annual mortgage-insurance premium for FHA loans by 0.25% of the loan value. As a result, FHA loans—which are aimed at first-time home buyers and those with moderate incomes—will include an upfront mortgage insurance payment of 1% of the loan amount and an annual premium of 1.1% to 1.15% when the increase goes into effect on April 18.
For regular loans, private mortgage insurance—which is required when you put down less than 20% of the home’s value—is tougher to get than it once was. Generally, it is available only for buyers who make a down payment of at least 5% and have a credit score of 700 or higher.
• Dodd-Frank fallout. The Consumer Financial Protection Bureau, established by the Dodd-Frank financial overhaul, opens its doors for business in July and is expected to take a close look at how interest rates and closing costs are disclosed to borrowers. That could create new costs that lenders are likely to pass along to consumers. In addition, a Federal Reserve rule that takes effect April 18 will change how mortgage brokers are paid, a move intended to curb practices such as steering home buyers to higher-cost loans.
The new rules, which limit the kinds of compensation brokers can receive, have brokers in a tizzy. The brokers claim the changes will raise mortgage costs and put some of them out of business, shrinking the market. How it will play out isn’t clear, but given both the changes and the Fannie and Freddie pricing, mortgage prices may vary more than usual, say those in the industry—making it wise for borrowers to shop for rates even more aggressively.
• More restrictions. Earlier this month, the Obama administration proposed a wide-ranging overhaul of the mortgage market, including phasing out Fannie Mae and Freddie Mac, requiring a down payment of at least 10% and reducing the share of FHA loans, which are almost 30% of the market now, up from a historical market share of 10% to 15%.
In addition, the administration recommended letting Fannie and Freddie loan limits for high-cost areas fall back to $625,500. The limits were temporarily increased to $729,750 in 2008 when the market for “jumbo” loans—those above the loan limits—all but disappeared, and that increase is now scheduled to expire Sept. 30. (The $417,000 loan limit for homes in most other markets would remain the same.)
What those proposals will mean depends on where you live. In Manhattan, where the average home price is still around $1 million, a drop in the loan limit means more buyers will need jumbo mortgages, says Melissa Cohn, CEO of Manhattan Mortgage Co. Those currently have rates that are about half a percentage point higher than conventional loans.
