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After foreclosure: How long until you can buy again?
NEW YORK (CNNMoney.com) -- Walking away from a mortgage you can still afford to pay has consequences; everyone knows that. Your credit score is shot and it can be impossible to get credit.
Some homeowners, no doubt, believe that the credit score hit is worth getting out from a deeply underwater mortgage. They may owe, say, $500,000 when their house value is only valued at $350,000. And, they figure, there's no way it will ever be worth what they owe so it's better to get out from underneath the burden.
After default, they reason, they can raise their FICO scores by paying all their bills on time and eventually finance another home purchase.
Don't count on it.
While homeowners who default due to economic hardship, such as a job loss or divorce, normally must wait two to five years before buying a home again, walkaways may face double that time.
"It could be well over seven or eight years before [walkaways] are able to obtain a mortgage to buy a home again," said Jay Brinkmann, chief economist for the Mortgage Bankers Association.
"Credit scores are only one component of a complete credit decision," Brinkmann said. "[In these cases] credit scores are not a good indicator of their willingness to continue to pay their mortgage."
But future underwriters will scrutinize their records very closely, and if they find no precipitating factors leading to the defaults -- no job loss, no health issues --the repaired credit score won't overshadow the black mark of a walkaway.
"If you made a strategic decision to default on paying your mortgage, it will work against you," said Bill Merrell of the National Association of Review Appraisers and Mortgage Underwriters.
Merrell, who teaches underwriting, said banks are looking at several factors in determining whether to grant mortgages: the amount of money borrowers have in the bank; employment histories; payment history.
However, banks may be far more lenient if the default resulted from factors somewhat beyond the borrower's control, such as from local economic problems. "They'll give you more consideration if it's job related," he said. But, he added, banks look at strategic defaults "very negatively."
That said, it's not impossible to get a loan. Banks still want to make interest payments, so they might be willing to gamble with a walkaway.
"It might be a little more difficult for them to borrow, but [banks'] drive for market share -- to profit from making loans -- will trump that caution," said Keith Gumbinger, of the mortgage information publisher HSH Associates. "I don't think we'll see a full denial."
It's hard to foresee the state of mortgage lending six or seven months from now, let alone seven or eight years into the future. So lenders may look at applications from one-time strategic defaulters and say, "Yes, they walked away but it's a whole different market now," according to Gumbinger.
Even so, lenders may require more from borrowers who walked away than those who didn't.
"To the extent they could get a mortgage," said Brinkmann, "they can count on needing a heavy down payment."
The lenders may ask for 30% down or more. That would provide enough collateral cushion that the bank could get all or most of its money back in a foreclosure.
Strategic defaulters might also be charged higher interest rates, even above the levels other borrowers with similar credit scores would receive. 
For Your Clients: 5 Tips to Save Money for First-Time Home Buyers
May 25, 2010—Those who missed taking advantage of the first-time buyer tax credit but who are still planning the purchase of their first home, continue to have a wealth of opportunities in today’s marketplace. A few smart steps can save first-time buyers thousands of dollars. Here is a look at some of the ways how:
1. Don’t buy if you don’t plan to stay
If you can’t commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner – even in a rising market. When prices are falling, it’s an even worse proposition.
2. Start by shoring up your credit
Since you probably will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover.
3. Choose carefully between points and rate
When picking a mortgage, you usually have the option of paying additional points- a portion of the interest that you pay at closing- in exchange for a lower interest rate. If you stay in the house for a long time- say three to five years or more- it’s usually a better deal to take the points. The lower interest rate will save you more in the long run.
4. Hire a home inspector
A home inspector can let you know if you’re about to buy a lemon of a house or warn you about potential problems. At best, you can move into the house confident that it’s in good shape; at worst, the inspector’s report can let you back out of the deal if the house has major, unexpected problems. Most typically, the home inspection can allow you to negotiate the home price to account for necessary repairs.
5. Get professional help
Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Look for an exclusive buyer agent, if possible, who will have your interests at heart and can help you with strategies during the bidding process.
6. Bonus Tip: Be patient
Buying a home is one of the largest purchases most people will make in their lifetime. The key to avoiding buyer’s remorse is to be completely comfortable before signing on the dotted line.
End of Home Buyer Tax Credit Unlikely to Deter Most Real Estate Buyers
April 29, 2010—The expiration of the 2010 Home Buyer Tax Credits on April 30 is unlikely to put off Americans looking to purchase homes who believe now is a good time to buy and are confident that home prices will rise according to a survey released by Prudential Real Estate and Relocation Services, Inc., a Prudential Financial, Inc. company. The survey of 1,000 Americans between the ages of 25-64 with at least $35,000 household income was conducted during April 15-20, 2010.
More than 90% of consumers believe that the home buyer tax credits have helped both first-time home buyers and the U.S. housing market overall. Among consumers actually shopping for homes, 65% believe that the end of the tax credits will have little or no effect on their interest in purchasing a home.
While consumers remain unsure about the direction of the housing market, the survey reveals that they are optimistic about real estate values with 46% of consumers expecting real estate prices in their area to increase over the next year. Just 12% expect prices will decline. Over the next five years, 79% expect real estate prices to increase, with 20% expecting prices to increase substantially.
“The survey underscores the key role the federal home buyer tax credits played in stimulating residential real estate market activity and the U.S. economy,” said James Mallozzi, chairman and chief executive officer of Prudential Real Estate and Relocation Services, Inc. “It also shows that most consumers believe the market has hit bottom and are more optimistic about the future.”
Survey respondents identified concerns about rising mortgage interest rates and unemployment as the most important factors affecting their decision to purchase a home, along with more stringent lending criteria and fewer mortgage-backed securities purchased by the Federal Reserve. The expiration of the tax credits placed lowest on their list of concerns. Among those who have recently purchased a home, 61% cited low mortgage interest rates as “very important” to their decisions – an amount greater than either the tax credit or even cheaper prices. The 66% expecting interest rates to rise underscores potential headwinds for the market.
“The tax credits clearly helped stimulate the market when consumer confidence was low and housing inventory was high,” said Earl Lee, president, Prudential Real Estate and Relocation Services, Inc. “While the tax credit expiration is a concern for many, the bigger issues now are the availability and cost of financing as well as if they will have a job.”
Despite the significant downturn in the real estate market, the survey underscores that the dream of homeownership and the perception that owning a home is a good investment remain intact. Among current renters, 75% still believe owning their home is a better long-term choice for their needs than renting.
The majority of consumers also believe that homeownership is a better investment than individual stocks or bonds (75%), mutual funds (72%), or savings accounts (74%).
“The real estate market is precariously balanced. Consumers are clearly motivated to take advantage of the opportunities the current low interest rates and prices afford,” Lee notes. “While the market is picking up in terms of sales and confidence, and the majority still believe that owning a home is a good investment, the outlook for the market remains highly dependent upon the direction of the economy overall.”
Signs of Stabilization in U.S. Real Estate Market – Home Price Reduction Levels Drop 26 Percent
April 29, 2010—Trulia.com, smart real estate search to help you make better decisions, recently announced that 20% of current home listings have been reduced in price at least once, compared to 27% in April 2009, representing a 26% decline nationally. Trulia was one of the first companies to issue national price reduction reports and is available to provide historical data on trends taking place as early as April 2009.
“With such a dramatic drop in home price reductions over the past year, we’re beginning to see early signs of stabilization in the housing market on a national level, as well as locally in certain markets,” said Pete Flint, Trulia co-founder and CEO. “As the federal stimulus comes to an end this month, coupled with expected increases in interest rates and foreclosures, the next few months will be very telling for whether the U.S. housing market can be self-sustaining over the longer-term. Trulia will continue to track price reductions going forward as an indicator of health in real estate market.”
In April 2009, Trulia first started tracking price reductions, both nationally and for the 15 major U.S. cities. Of the original 15 cities, those hit earliest and hardest have experienced huge decreases in price reductions compared to the previous year, including Las Vegas (54%), San Diego (52%) and San Francisco (45%). Seattle was the only original city to see a significant increase in price reduction levels with a 15% spike compared to the previous year.
In addition to seeing fewer homes reduced in price, the current report shows several cities have seen significant decreases in the percentage amount slashed off of the original listing price compared to the previous year. New York and San Francisco both saw discounts on home prices drop by more than 30% compared to April 2009.
On the other hand, several cities actually experienced increases in the average price reduction. Houston, Denver, Seattle and Phoenix all saw double-digit percentage increases compared to April 2009.
Whichever form of feng shui you choose, be consistent and practice one school at a time. If it does not give you the results you seek, feel free to try another.
Feng shui is based on respecting the gifts of life and the world around us. Much of feng shui is simply good common sense, sound architectural design and intuition. Geography, ecology, meteorology, astronomy, interior design, ancient Chinese philosophies such as Taoism, Buddhism, and folk beliefs that have survived thousands of years are all a part of the mix.
Here are some general feng shui guidelines:
A classic feng shui location looks like an "armchair"; that is, it should have a high hill for a back, two smaller hills in front, and a wide view, preferably of water, in front.
You should always walk up to your site rather than down to it.
Front and back doors in your home or business should not line up, as chi will just rush through without bringing its benefits to you and your family.
Your building should not be located at the end of a "T" intersection created by two intersecting streets, nor should it be in the cradle of a "Y" (one street that becomes two streets).
The footprint of your building should be basically square or rectangular as these represent balance. Avoid awkward angles.
If there is a water element such as a river or stream on your property, it should be slow-moving and located in front, symbolizing wealth coming towards you, rather than in the back, meaning that wealth is flowing away.
The area in front and behind the main entrance of your home or office should be unobstructed to facilitate a good flow of chi.
The main bedroom should be located past the horizontal center line of the house for strength, support and protection.
All doors and windows should open freely, whether you use them or not.
Avoid properties near power towers, transformers, schools, churches, government and other institutional buildings, hospitals, burial grounds, cemeteries and mortuaries.
Do not have a bathroom or toilet next to or in front of the main entrance so as to be visible as you enter your home. Also do not have a bathroom on the second story directly above the main entrance. Any of these positions portend calamity.
A structure created with good architectural design built with ecology, topography and conservation in mind, with a clean traffic flow and good air circulation, reflects the principles of good feng shui.
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