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How to Purchase Bank-Owned Homes and Properties

Have you been wanting to cash in on the latest mortgage crisis? If you know how to buy one of the many bank-owned homes and properties on the market, you can make a killing!

With all of the recent foreclosures and bank-owned homes on the market today, it's a great time to get a great deal. Many of these bank-owned homes are available for an incredibly low price if you know what to do to get your hands on one. Follow these steps to get a great house at a great price!

1. Call the real estate agents and the banks in your local area. These places typically have a list of foreclosed properties and bank-owned homes in the area. You can even start your search by visiting the websites of local real estate agents and searching the Multiple Listing Service, or MLS, on their site.

2. Search through the public records. The public records are usually located at City Hall or your county's courthouse and you can find financial information about the houses that you are interested in. This is where you will find out how much is owed in back taxes and if the property or home has any liens placed against it. Many of these expenses will be tacked on to the price of the house so you will need to make room in your purchasing price for these fees.

3. Crunch the numbers. Once you have decided on a property or a few potential properties, start doing some calculations so you can get the best deal. Determine how much the bank would have to sell the property for in order to come out even. Consider any repairs that need to be done in order to bring the house to code. Then, subtract the total of these fees and costs from the home's estimated value. That will give you a good price to start at when it comes time to negotiate a deal.

4. Contact the lender that owns the home you decide on. You want to speak with someone in the asset management department, the REO department or the bank-owned homes department. The name of the department varies by bank, but make sure you speak with someone who is involved with the homes that the bank owns. Ask to make an appointment so you can take a tour of the home or property you have chosen.

5. Start the negotiations. Once you have found a home that you want to purchase, make an offer to the bank. Typically, you will be dealing with the person who you spoke with when taking a tour of the home. Don't start the negotiations too low, but keep in mind the extra fees you will need to pay for repairs, liens and back taxes. Ask to have a purchase agreement written up and make sure the contract is agreeable before signing it.

Bonus Tip: Try to find a bank or real estate company that has many foreclosed or bank-owned properties available. They will usually be more willing to give you a bargain just to get it taken off their accounting books.

Five Facts about Reverse Mortgages

There are many myths and misconceptions going around the mortgage industry about reverse mortgages. Here are five important things you should know about them when deciding if one is right for you.

Reverse mortgages are becoming more and more popular among senior citizen homeowners because of the freedom and convenience that they offer. Basically, reverse mortgages allow homeowners to withdraw equity from their home in order to supplement their income. As a result, seniors who participate in a reverse mortgage have more money for bills and for enjoying their years in retirement.

Three Types of Reverse Mortgage

There are three basic types of reverse mortgages that senior homeowners can take advantage of.

The single-purpose reverse mortgage is the least expensive and it is designed for homeowners with a moderate income. Unfortunately, it is not available in all states.

Proprietary reverse mortgages are more expensive than a traditional home loan but there are no restrictions on income, medical requirements or purpose.

Federally-insured home mortgages are very common and they are backed by HUD. If a homeowner chooses this type of reverse mortgage, however, the federal government requires them to go through counseling where a qualified counselor will explain the obligations of the mortgage to the homeowner. The homeowner must receive a \"certificate of counseling\" before their loan can be processed.

Payments

Payments for your reverse mortgage can be made to you in several ways. Many homeowners take their payment as a lump sum. Others prefer to receive a monthly payment for as long as they live in the house. Still others choose to take cash advances while leaving the rest of the money in the bank. Homeowners involved in a reverse mortgage can choose either of these options or a combination of them to suit their individual needs.

Qualifying for a Reverse Mortgage

Generally, any homeowner over the age of 62 can qualify for a reverse mortgage as long as they own their own home. If the homeowner does not own the home outright, they must pay off the mortgage with the funds from the reverse mortgage. The home they get the reverse mortgage on must be their primary residence, too.

Repayment

When a homeowner has a reverse mortgage, they are not responsible for repaying the loan as long as they live in the home. However, they are still responsible for other expenses incurred as a homeowner, including property taxes, insurance, repairs and maintenance.

End of the Reverse Mortgage Loan

A reverse mortgage ends when the homeowner either sells the house or passes away. In some instances, the reverse mortgage may also end when the homeowner is no longer able to live in the home for at least 12 consecutive months. This often occurs when the homeowner moves into an assisted living facility or when they move in with a family member because they can no longer take care of themselves. The home can then be sold and the loan can get paid off by using the proceeds. If the homeowner has died, the heirs can refinance the home with a traditional mortgage or they can receive the money left over once the mortgage has been paid off with proceeds from selling it. If the proceeds of the sale do not cover the mortgage, the lender simply absorbs the loss.

Mortgage Rates Dip Slightly in First Week of 2010

30-year fixed mortgage rates dropped from 5.14 to 5.09% this past week according to the Freddie Mac Weekly Mortgage Survey.

The average rate on a 30-year fixed mortgage dropped from 5.14% to 5.09% according to data from Freddie Mac. This is consistent with data from the BestCashCow rate tables which show average 30-year mortgage rates moving from 5.211% to 5.143%.

Averages though aren't actual mortgages. I like to check and see what rate is actually available. Since I live in Massachusetts I check Massachusetts mortgage rates. Below I compared the best rate I could find on a $200,000 mortgage with 0 points:

This Week Last Week

Rate: 4.875 5%

Points: 0 0

Fees: $1,058 $1,995

I'm not sure why the fees (closing costs) went down so much over the past week. It's the same lender AimLoan.com so I'm going to give them a call to check it out. Perhaps mortgage refinance demand has slowed as rates have risen so banks are cutting fees?

The 15-year FRM this week averaged 4.50 percent down from from last week when it averaged 4.50 percent. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.44 percent this week, flast from last week's 4.44 percent. The 1-year Treasury-indexed ARM was flat, averaging 4.33 percent again this week.

WeeklyMortgageRates-12-31-2009

The rates above are just averages. To find the best mortgage rates in your area, visit the BestCashCow mortgage rates tables.

30 Year Mortgage Rises, Ending 2009 Above 2008 Levels

The average rate on a 30-year fixed mortgage rose to 5.14% this week according to data from Freddie Mac. That's higher than the 5.10% rate at this time last year.

The average rate on a 30-year fixed mortgage rose to 5.14% this week according to data from Freddie Mac. That's higher than the 5.10% rate at this time last year. This is consistent with data from the BestCashCow rate tables which show average 30-year mortgage rates moving from 5.193% to 5.211%.

I checked the Massachusetts mortgage rate tables and found one 30-year fixed rate mortgage at 5% with no points. The closing costs were $1,995 which seemed a bit steep for me (these rates are changing constantly so if you click and don't see the rate it must have changed). The table shows that including points there are still some APRs below 5%. Check mortgage rates in your area.

The 15-year FRM this week averaged 4.54 percent with an average 0.7 point, up from last week when it averaged 4.45 percent. A year ago at this time, the 15-year FRM averaged 4.83 percent.

The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 4.44 percent this week, with an average 0.6 point, up from last week when it averaged 4.40 percent. A year ago, the 5-year ARM averaged 5.57 percent.

The 1-year Treasury-indexed ARM averaged 4.33 percent this week with an average 0.6 point, down from last week when it averaged 4.38 percent. At this time last year, the 1-year ARM averaged 4.85 percent.

As the chart below shows, there is now a divergence between short term mortgage rates, which have remained low, and longer-term rates, which have begun to spike up. This trend is consistent with a widening yield curve as longer-term maturities begin to respond to inflation fears and the Fed beginning to end its quantitative easing program. That is, the Fed is slowing the programs it ran to bring down lonter-term rates. At the same time, the Fed is keeping its short term benchmark, the Fed Funds rate at 0, keeping short term savings and lending rates stuck to the floor.

Weekly Mortgage Rates - 12-31-2009

These rates are still low by historical standards but they're moving up and will probably continue to do so over the next six months.

The rates above are just averages. To find the best mortgage rate in your area, visit the BestCashCow mortgage rates tables.

Housing Has Further to Fall in 2010 According to Mark Zandi

Mark Zandi, the chief economist of Moody's Economy.com predicts that we are not through the housing correction yet. According to him, housing will fall 5-10% more nationally and as much as 30% in places like Miami and Las Vegas.

This matches data from the S&P/Case Shiller report that came out today that showed that housing was showing weakness in many markets. While the rate of decline has slowed, prices are still coming down. Zandi cites several reasons for why he believes housing hasn't hit bottom:

1. Zandi estimates more than 2.4 million additional foreclosures will hit the market in 2010, depressing prices and increasing inventory.

2. Unemployment at 10% and above erodes consumer confidence and prevents many from purchasing a home or affording the one they live in.

3. Policymakers are beginning to scale back their support for the housing market. The Fed is winding down its purchase of mortgage-backed securities and the Treasury will eventually end its home buyer tax-credit.

4. Mortgage rates are going up.

Read the entire analysis and see how your city is projected to do in 2010.

Home Prices Declining But At Moderating Pace in October According to S&P Case Shiller Home Price Indices

The rate of decline has declined, but it has still declined. Or, put another way, housing prices are still declining on a year-to-year basis, but that rate of decline has slowed.

Data through October 2009, released today by Standard & Poor’s for its S&P/Case-Shiller1 Home Price Indices, a measure of U.S. home prices, show that the annual rate of decline of the 10-City and 20-City Composites improved compared to last month’s reading. This marks approximately nine months of improved readings in these statistics, beginning in early 2009.

The annual returns of the 10-City and 20-City Composite Home Price Indices, declining 6.4% and 7.3%, respectively, in October compared to the same month last year. All 20 metro areas and both Composites showed an improvement in the annual rates of decline with October’s readings compared to September.

“The turn-around in home prices seen in the Spring and Summer has faded with only seven of the 20 cities seeing month-to-month gains, although all 20 continue to show improvements on a year-over-year basis. All in all, this report should be described as flat.” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s.

“Coming after a series of solid gains, these data are likely to spark worries that home prices are about to take a second dip. Before jumping to conclusions, recognize that the one time that happened at the beginning of the 1980s, Fed policy saw dramatic reversals, which is very different from the stable and consistent Fed policy we have today. Further, sales of existing homes – those included in the S&P/Case-Shiller Home Price Indices – have been very strong in recent months, working off the inventories of houses for sale. At the same time, housing starts remain weak, fears that the market will be swamped by a wave of foreclosures are heard and government programs aimed at the housing market will expire in the first half of 2010."

I'm still on the negative side. The housing market faces some pretty strong headwinds for the foreseeable future. Mortgage rates are going up and the 30-year mortgage rate just crossed the 5% mark for the first time since early October. We'll see how that impacts home sales and prices. In addition, the Federal Housing Administration, which has helped to subsidize the housing market via low down-payment loans is running out of money. Once the government eliminates the homebuyer tax-credit it will also be interesting to see how real estate sales fare.

I don't think prices are going to plunge from this point, but I also don't think homebuyers and owners should expect a sharp bounceback to pre-recession levels. The days of get rich quick from buying a house are over.

Some areas are rebounding nicely. San Francisco has reported seven consecutive months of positive returns, San Diego has reported six and Los Angeles and Phoenix are close behind with five. While the two Composites were flat, seven of the MSAs reported positive monthly returns for October and two of those -- Phoenix and San Francisco -- were greater than +1.0%. Looking at the annual statistics, both Minneapolis and Portland are no longer reporting double-digit declines. Denver and Dallas are nearing positive territory with their annual figures at -0.1% and -0.6%, respectively.

Las Vegas remains the one market that has not seen a glimmer of hope so far this year. Prices have declined for 38 consecutive months, with a peak-to-trough reading of -55.4%. It is now barely 5% above its January 2000 level. This compares to its peak in August 2006, when the average home price was 135% above that same level.

Fannie Mae's HomePath Provides Special Financing on Foreclosed Properties

Fannie Mae has gotten into the foreclosure game with a program called Homepath. The program provides special financing on select foreclosed properties from certain lenders. Fannie Mae has set up a website at homepath.com where it lists properties that are participating in the program. I checked Massachusetts and there were hundreds of condos and houses available.

The benefits of the program are:

  • Low down payment and flexible mortgage terms (fixed-rate, adjustable-rate, or interest-only)
  • You may qualify even if your credit is less than perfect
  • Available to both owner occupiers and investors
  • Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employer
  • No mortgage insurance*
  • No appraisal fees
  • Also eligible for HomePath Renovation Mortgage (see details below)
  • HomePath Mortgage financing is available from a variety of lenders - both local and national.

Find lenders with the best mortgage rates and find out more about a HomePath® Mortgage by checking lenders on the BestCashCow mortgage rate tables.