New Year’s res­o­lu­tions for home­buy­ers

Sun Sentinel Broward Edition - Homespot - Broward East - - REAL ESTATE Q&A -

hous­ing cri­sis has turned around. New monthly fore­clo­sures are down to lev­els last seen in 2008, and new and ex­ist­ing home sales are stronger. Home prices surged mid-year, and now those in­creases are mod­er­at­ing. It’s plenty tough to get a mort­gage -- and it might get a lit­tle tougher, now that the qual­i­fied res­i­den­tial mort­gage (QRM) rules are go­ing into ef­fect.

On the plus side, the Fed­eral Re­serve Bank con­tin­ued to buy mort­gage-backed se­cu­ri­ties and other se­cu­ri­ties to the tune of $85 bil­lion per month dur­ing the year. Will that con­tinue? That de­pends. While the la­bor par­tic­i­pa­tion rate is ex­tremely low, the of­fi­cial rate of un­em­ploy­ment fell to 7 per­cent, the low­est in five years. Still, the true mea­sure of un­em­ploy­ment says about 11 per­cent of el­i­gi­ble work­ers are un­em­ployed. That hurts.

In truth, most fam­i­lies in Amer­ica have tight­ened their belts fur­ther. For them, the re­ces­sion hasn’t ended. Pur­chas­ing power is lower and real in­come has hardly budged. For most Amer­i­cans, this isn’t a Christ­mas of plenty. Judg­ing by our mail, plenty of home­own­ers are hav­ing trou­ble mak­ing their mort­gage pay­ments, even as delin­quen­cies have fallen a bit from all­time highs.

There’s still a brighter out­look for real es­tate now than at any time since 2007, even though new con­struc­tion is stuck around 450,000 units per year, or about half of where it should be -- a de­pres­sion by any stretch of the imag­i­na­tion.

Where does that leave buy­ers? The times aren’t as good as they were a few years ago. Mort­gage in­ter­est rates are at 4.5 per­cent for a 30-year fixed-rate loan, up 1 per­cent or so from last year. And prices are up as well. That means af­ford­abil­ity is down.

As we said last year, mort­gage in­ter­est rates will likely stay low through early 2015, or un­til the econ­omy re­ally starts tak­ing off. Janet Yellen will likely (as of this writ­ing) take over for Ben Ber­nanke in Jan­uary, but she isn’t ex­pected to change much.

If you’re hop­ing to buy a home to live in or to in­vest in dur­ing 2014, here are a few New Year’s res­o­lu­tions: 1. Un­der­stand your credit his­tory and credit score. For bet­ter or worse, th­ese will rule your fi­nan­cial life. You can get a free copy from each of the credit re­port­ing bu­reaus once a year from An­nu­alCred­itRe­port.com, but you’ll still have to pay for your score (about $9). It’s worth know­ing what your score is be­fore you ap­ply for a loan. 2. Find the best loan, on the best terms. That means you’ll have to do your home­work. De­spite the gov­ern­ment se­cur­ing or guar­an­tee­ing nearly all loans through Fan­nie Mae, Fred­die Mac and FHA, banks are of­fer­ing dif­fer­ent terms. Talk to at least four or five lenders be­fore mak­ing a de­ci­sion. 3. Build the best home­buy­ing team. Whether you’re buy­ing in­vest­ment prop­erty or a home to live in, you’ll want to cre­ate a team of real es­tate pro­fes­sion­als who can help you find the right prop­erty, at the right price, on the best terms, with­out any headaches. Think about in­clud­ing a great real es­tate agent, mort­gage lender, real es­tate at­tor­ney, tax pre­parer (with ex­pe­ri­ence in in­vest­ment real es­tate if you plan on buy­ing real es­tate as an in­vest­ment), and real es­tate home in­spec­tor to start. Res­i­den­tial real es­tate in­vestors will want to add a 1031 ex­change pro­fes­sional and com­mer­cial (if ap­pro­pri­ate) in­spec­tor to the mix.

Next week: New Year’s res­o­lu­tions for home sell­ers.

Ilyce R. Glink’s lat­est book is “Buy, Close, Move In!” If you have ques­tions, you can call her ra­dio show toll-free (800-9728255) any Sun­day, from 11a-1p EST. Con­tact Ilyce through her web­site, www. thinkglink.com.

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