No one likes to see that but it is happening. In December 2011, Congress reached a last-minute deal to fund the payroll tax cut extension. The payroll tax extension will provide a 2% tax reduction for individuals making up to $106,800. However, like so many things in our tangled economy, there’s a flip side. In this case, the tax cut deal has a rippling effect that will impact the mortgage world.

Here’s what’s happening and what it means to home loan rates:

What is happening and why? To put it bluntly, the passage of the payroll tax cut extension is being funded via a mandate to Fannie Mae and Freddie Mac (the nation’s largest providers of mortgage money) to increase their guarantee fees or “g-fee’s” by at least 10 basis points on the rate. So rather than giving a par rate of 4.00%, for example, the par rate is now increased by at least 10 basis points, or approximately 4.10%. But as you probably knowhome loan rates are priced and offered in .125% increments, so this will most likely impact the consumer by .125% in rate.

Whether you agree or not on the politics behind this cost being passed along to folks who are taking out mortgages, the Congressional Budget Office recently estimated that the increase will ultimately pay for about $35.7 Billion of the cost of the payroll tax extension.

What exactly is this “g-fee”? The guarantee fee or “g-fee” is an amount charged by mortgage-backed securities (MBS) providers, like Freddie Mac and Fannie Mae, to help protect against credit-related losses in the overall mortgage portfolio. In other words, it acts a lot like insurance and helps lower the overall risk which means home loans can be offered at terrific interest rates to borrowers that have good – but not perfect – credit.

What exactly is the impact of the rate increase? For example, for a $200,000 home loan, the increased g-fee (assuming a .125% increas e in rate) would equate to $250 more per year in interest, or $7,500 more over 30 years. Someone buying or refinancing a home can certainly choose to buy down the cost with cash up front – but most folks will not do this.

Who will this impact? The change will impact all new borrowers of Fannie Mae and Freddie Mac loans. The bill will also impact Federal Housing Administration (FHA) loans by increasing the annual mortgage insurance premium that borrowers pay by one-tenth of a percent.

When will it start? Officially, the increase to guarantee fees will begin on April 1, 2012. However, the increase is already starting to be seen in rate sheets right now, since home loans being originated now will likely not be closed, pooled and securitized until Apriland therefore will need the increased g-fee priced in earlier.

How long will this be in effect? The increase will be effective through October 1, 2021.

The bottom line is that the g-fees will be going up and this will impact homebuyers looking to obtain a home loan through Fannie Mae, Freddie Mac and FHA.

The good news is that home loan rates are still at historic lows right now, and it’s a great time to purchase a new home or refinance. If you or anyone you know has any questions, please call or email!

Published courtesy of Tony Auffant via PlatinumPro Marketing

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As a professional business owner, I constantly have to refine my knowledge of the market. In doing this, I receive items like the link below, because my company pays for me to be at the top of my game. Of course, as a Licensed Associate Broker and independent contractor, it’s up to me to use these valuable resources and provide them to you and my clients.

Things To Consider If You Are Selling A House simply and effectively explains the current market. As a professional, it is my job to provide options to my clients. So enjoy the pamphlet. It is packed with useful information. No fluff here.

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Mr. Talbott, the person who accurately predicted the housing bubble and its bust, now has a new prediction – IT IS THE TIME TO BUY A HOME! In a recent article, Homes – Buy Now!, Talbott simply explains:

“I have been waiting for more than five years to offer this advice. It is now time in most cities across the country to buy a new home or refinance your existing home with thirty-year fixed rate mortgage debt.”

He goes on to explain that his conclusion is based on four different metrics, all of which favor buying today:

Home Prices Relative to Peak Prices During the Bubble
Home Prices Relative to Construction Costs or Replacement Costs
Home Prices Relative to Incomes and Rents
Home Prices in Real Terms, Not US Dollar Terms

Bottom Line
If the person who called the real estate bubble and its bust says now is the time to buy, we believe it is time to buy.

Article Courtesy of Steve Harney Inc.

[My addition to article]
If you’re gainfully employed, have money saved for a down payment and can qualify for a mortgage, I say – now is the time to buy. If you need to find out if you qualify for a mortgage, call me for a great referral to one of the best mortgage bankers in the business! (631)881-5959

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What will be the causes of this? The answer is high inventory (number of homes for sale) and lower demand (number of people buying homes). While buyers will be out in full force, given the current low mortgage costs, the number of buyers eager to qualify and buy do not come close to the amount of people trying to sell.

Hurdles To Overcome In 2012

Appraisals will be the number one challenge for homeowners, buyers and agents in 2012.

According to the National Association of Realtors, and from experience talking with agents and dealing with this issue myself, 1 in 3 homes in the month of October 2011, had a low appraisal. This represents many obstacles to a successful sale/purchase.

When an appraisal comes in lower than the agreed upon price, unless an arrangement is discussed prior, homeowners are faced with very few options. I personally had to deal with this situation 2 times in September of this past year and one transaction did not work out and the other, the homeowner and the real estate agents, ended up making up the difference in the low appraisal.

The problem with appraisals is, even if the real estate agent prices the home correctly, according to accurate and recent sales in the local area, the appraiser can (and in this market, often will), find comparison properties that reign in the property value lower. Don’t forget, we are in tough economic times and banks are very tight with their lending so there are pressures on appraisers to get good “grades” from their respective lender lists so that they keep getting appraisal orders.

Pricing Projections

Fitch Ratings, which predict real estate prices, talks about the real estate market, dropping another 13%.

While I do not think that prices here locally will drop this much in 2012, due to the current challenges and downward pressures on prices, it is safe to say that Long Island home values will continue to soften throughout the first half of the new year.

I will be doing a full analysis of the current Long Island inventory within the month of January, so please check back soon or you can subscribe to google feedburner for this website, which will send you any new articles I write.

Bottom Line

It’s going to be important for homeowners to hire a very good real estate agent who understands how appraisers value properties and provides sound pricing advice. Along with a marketing plan, the real estate agent of today must have a keen understanding of today’s marketplace.

For more information on how I practice and live the fundamentals of customer service, visit my website www.TMcRealtor.com.

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First, let me say that this is not an advertisement for you to call me and buy a house. None of my articles are, but this one started off like that’s what it’s going to be. Again, it’s not. However, this information is so strong, you’d have to be an idiot, not to want to pick up the phone and call me or a friend you know who’s a real estate agent.

Now, let’s get to it. When you talk with friends, you probably talk a lot about prices dropping and mortgage rates being low. If you’re in the market to buy a home, you’re especially talking about this. But what you may be missing is the affordability of homes. Of course, unemployment in the country is high so this is all relative to whether or not you have a job or are secure in your current one, but I digress.

In New York and Long Island, the house payment to income ratio is around 30% less than the 30 year average. What does this mean? It means that owning a home is cheap right now. Of course, we’re talking about Long Island here, where taxes are nuts, but I always like to say, “you get what you pay for”. I’ve lived in other states and let me tell you, I’d rather pay higher taxes to live here, than in another state where you can’t get a decent slice of pizza! Mama Mia!!!

Again, I digress.

The point is, it’s not about low mortgage payments or lower prices. It’s these things that make up the opportunities that are waiting for you to seize.

When compared to median income, if you’re monthly mortgage payment is only 13% of your total income, yes, that’s really unbelievable. I know that the median income on Long Island is much higher than the national average and I know home prices are higher as well, but I’d have to take a guess and say that in comparison to monthly mortgage payments, we’re probably averaging around 20% to 25% on the average.

To own a home on Long Island and have 3/4′s of your income free to pay for things other than your mortgage and own real estate…it’s a no-brainer.

I’d like to take a line from Crazy Eddie (the guy in those commercials years ago)…”It’s insaaaannnneee!”

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