There has been no shortage of encouraging numbers in recent housing data. New home sales rose 14.8% in April. Existing home sales were up 7.6%. And pending home sales? They were up 6%. Meanwhile housing starts gained 5.8%. And that’s enough of the good news.

The tax credit has expired, so we’re back to reality. And the reality is that the government can’t use tax credits to buy prosperity in the housing market. Not when a record number of foreclosures are waiting around the corner. The little glimmer of hope we saw is about to be overtaken by the grim fact that the housing market is too fundamentally weak to stand on its own.

And homebuilders see the writing on the wall. Yes, housing starts were up 5.8%. But at the same time, housing permits fell 11.5%. And yes, pending home sales rose 6%… but mortgage applications fell 4.1% last week alone. And the unintended consequence of the tax credit: it brought more home sellers to the market… the inventory of unsold homes rose 11.4% in April. Springtime is officially over in the housing market.

And looking ahead, foreclosures will climb. The National Association of Realtors estimates a record 1.1 million foreclosures this year.

Now we have to give credit where credit is due. The tax credit brought an estimated 1 million buyers to the housing market…which no doubt stemmed a lot of foreclosures. So the future could have looked a lot cloudier.

But at the end of the day, sentiment about the housing market is bleak. Strategic defaults continue to climb. Homeowners have reached a point of indifference…that is even worse than anxiety. And there is such a backlog of properties in default that those homeowners will sit expense free in their homes for easily a year before foreclosure proceedings are completed.

Now, don’t be surprised if we see sustained strength in some of the housing data for the next couple of months. It’s no reason for confidence, though. The government’s tax credit required a contract by April 30, and a closing by June 30. Because existing home sales are counted at the time of closing, this data will have a steady run through the June reading. But after that, expect a precipitous drop.

The bottom line: the tax credit may have only succeeded in affecting “the timing, not the total, of home purchases”, according to Barron’s.

And in the midst of all this misfortune, some are still surprisingly upbeat. Toll Brothers (the largest luxury home builder in the country) increased their land holdings for the first time in four years, according to Bloomberg. And Chairman Robert Toll is optimistic, “The past few months’ activity has been driven by an increase in confidence among our buyers”. That may be the case, but, none the less, the company is not immune to the perils of the housing market. They are sitting on $3 billion in inventory, and that inventory will pose a challenge, particularly since volume this year is expected to be just 30% of that of 2005, according to Morningstar analyst Eric Landry.

But it’s not just Toll Brothers. Now is not the time to buy into any housing stocks. As the lingering effects of the stimulus fades, and the glut of foreclosures rises to the surface, we will find another housing low soon enough. Just wait.

Disclosure: No positions

Article written by Brian Rezny

Rent to Own Investing

Some ideas and strategies for real estate investors interested in the rent to own market. Rent to own is sometimes referred to as lease with option to purchase.

1. Use buyer’s purchase deposit or down payment.

If you are following my advice and methods for buying houses, then you’re occupying your houses with either Tenant/buyers or Buyers.

TENANT/BUYER: Rents the house and has the right to buy the house at a preset price. Most of my houses are occupied by tenant/buyers. They put at least 3% down, non-refundable purchase deposit on a sales contract. I prefer 5% down. If they don’t have 5%, I get a promissory note and have them pay extra money each month to build up to 5% as quickly as possible. If they have less than 3% then they may be able to get into one of my “sweat equity fixer upper” houses. Their down payment can be partial supplemented by doing required work to the house before they move in. This is work I would normally hire a contractor to perform so if I don’t have to write a check to fix up the house, the money saved is less cash I need from my tenant/buyer.

BUYER: Puts down 10-15% down and you close with owner financing, typically via a wrap. Or the buyer gets a new loan cashing you out completely, or perhaps you take part of your profit back in a second mortgage.

Every house I buy will be sold to a buyer or occupied by a tenant/buyer. Since I cannot predict which it will be, I get into deals where it does not matter to me either way. Most buyers calling on my ads do not have 10% down or the ability to get a new loan now. It’s much easier finding 3-5% down, so why not buy houses where that will work for you?

Bottom Line: You should be collecting at least 3% down on every house you buy once it’s occupied. If you need cash to do a deal, you have 3% of your “resell” price to commit for cash to seller, holding costs, closing costs, minor repairs and maintenance.

2. Private money or hard money loans.

If you pay cash for a house you’ll never offer more than 70% of the after repaired value less the cost of any repairs. You can borrow 65-75% of the value of a house from a “collateral” lender. The lender will charge you 11% to 16% interest, and maybe 3 to 10 points. They should only be concerned with the value of the property that secures their first mortgage. Many private lenders will offer you interest only loans so all their investment is working for them, getting them a nice return. If you borrow $75,000 on a $100,000 house, 12% interest only payments are $750 a month. You should be able to get more than that each month from your buyer in rental income or from a wraparound mortgage payment. This formula does not work as well on expensive homes.

If the seller owes $50,000 on a $100,000 house, you can sometimes borrow another $25,000 on a second mortgage. Take over the first mortgage “subject to” which will have a better interest rate and no points. This saves you money and allows you to pay more for the house. You can give part or all of the $25,000 to you seller. If they have more equity coming to them, you can give them a 3rd mortgage on this house or a 2nd mortgage on one of your other properties.

3. Deferred down payments.

Take over an existing loan with good terms. Any equity still due to seller can be offered in the form of a deferred down payment. Basically, you will pay the seller the balance of their equity (if any) in a single lump sum payment when you resell or refinance the house down the road. Ideally, there will be no monthly payments or interest. If the seller insists on interest or monthly payments, get a lower price to make it worth wild. This is a “no money down” method. The cash you need for this type of deal comes from your buyer’s new loan, normally 6-36 months in the future.

4. Substitution of collateral.

I am buying a house on Thursday for $153,000. It is worth $165,000-$170,000. I’ll soon advertise it for $179,500 with “flexible owner financing” and enjoy a $26,500 equity spread.

The seller owes $18,000. He has agreed to take $63,000 in cash ($18,000 of which will pay off his lien) and $90,000 in second mortgages on several other properties I own. He wants 6% interest but doesn’t need monthly income. So his interest will accumulate for 5 years. 6% interest, no payments, 5-year balloon on $90,000.

This allows me to tap into equity tied up in my other properties at a low rate, and my seller is happy. He would have put his money in the bank at 1-3%. He is waiting for his mutual funds to come back up so he can get out of them. Good luck!

Here’s the kicker. I am borrowing $130,000 from a “hard money lender” at 10.99% and paying 8 points. I will net $120,000 in cash from that loan after costs. That means I collect $57,000 in cash on Thursday when I buy!

In my audio training course I reveal how to get a guaranteed 35% return on any extra cash you want to invest. That’s what I will do with this extra money.

A couple of weeks ago I collected an extra $24,000 in cash using this same type of method when my tenant/buyer closed on one of my houses.

5. Open an equity line of credit.

Raise cash by borrowing against equity you have in your personal residence or other investment properties. You can also pledge a number of second mortgages you hold as the collateral. Set it up as a line of credit. Use the money to do a deal and pay it back immediately when you sell or occupy the property. You only pay interest on that portion of the credit line you have tapped into.

Last month I setup a $100,000 credit line pledging $130,000 of equity I have acquired through taking back installment land contracts, all-inclusive deeds of trust and second mortgages.

Having this cash readily available allows me to make multiple offers to a seller:

A. All cash for lowest price. My offer price is 70% (maximum) of after repaired value less the estimated cost for repairs.

B. No cash for highest price. My offer is $30,000 less than my planned resell price. The seller gets their equity in the form of a deferred down payment. I take over existing debt “subject to.”

C. Some cash. My offer is somewhere between Offer A and B. The seller gets debt relief and some cash. The more cash, the lower the price.

Would you pay the seller 5% down if you could get an extra 10-15% off the price? You have that opportunity if you have established lines of credit to tap into. This could be a line of credit, a credit card or checking account overdraft protection. Be careful of having too much cash laying around in an operating account. You may be inclined to offer more cash on a deal than you need to, just because you have it.

6. Sell off a house or real estate note for cash.

I have been sitting on one house since February. Ouch! I bought it for $160,000 and I have $10,000 of my money tied up in it, which is unusual. It was on the market for $197,000. For one reason or another I just could not get it under contract. That’s a fair price and the home is in good shape.

I called a real estate agent I have used to buy listed “fixer upper bank owned houses.” I asked the agent to look at the house and tell me what he would market it for if I wanted to dump it fast. He recommended $179,500. I gave him the listing. Within a week I had a contract for $177,000. I decided to slash the price to get this house out of my hair and recapture the money I have into it. Plus I can focus on occupying my other, more marketable houses.

If you have cash or profits tied up in real estate or notes, one way to raise cash is to take some aggressive, proactive steps to liquidate some of those investments. Then put that money to work on better deals.

Written by Richard Roop

How is the Housing Market Doing

Bipolar is what comes to mind when diagnosing the post-homebuyer tax credit market. There are two separate forces pulling it in opposite directions, and experts aren’t yet sure which path the market will take.

On one hand, sales and prices are rising, indicating recovery. On the other hand, so are interest rates and repossessions, which most certainly do not. And then there are the millions of foreclosures that need to be sold but haven’t yet been listed — so-called shadow inventory — that could derail a real recovery if they hit the market in floods.

The prognosis? Negative short term but turning positive by the end of 2010.

“In the short run, I see a mini-collapse,” said Richard DeKaser, an independent housing market analyst and founder of Woodley Park Research who correctly predicted a downturn back in 2005 when he was chief economist for National City Corp.

One of market’s biggest hurdles is getting beyond the lapse of the $8,000 homebuyer tax credit. Thanks to the incentive, buyers scrambled to beat the April 30 deadline, pushing new home sales up nearly 30% in March.

But that just borrowed buyers from later months. And now we face the hangover effect.

“In the months immediately following the expiration of the tax credit, we expect measurably lower sales,” said Lawrence Yun, chief economist for the National Association of Realtors (NAR).

Industry insiders believe the hangover is worthwhile, however, because the credit helped stabilize housing when it most needed help. Home prices have been steadier in recent months, recently experiencing their first year-over-year rise in more than three years.

Still, there are some strong negatives dragging on the market.

1. Interest rates have been intermittently creeping up. Although nobody expects 6% until at least 2011, the days of 4.5% mortgages are behind us.

2. Bank repossessions are on track to surpass a million homes in 2010. But at least foreclosure filings fell in April, the first time since RealtyTrac began reporting.

3. More than a quarter of borrowers are “underwater,” meaning they owe more than their homes are worth.

4. “Strategic defaults” — where underwater homeowners walkway even when they can still afford to pay — accounted for 31% of all foreclosures in March, according to a recent study.

But there is one factor that has experts really scared: homes that are ready to be sold but haven’t been put on the market. Right now, there could be more than 4.5 million homes in “shadow inventory,” according to a recent report by Barclays Capital.

This so-called shadow inventory is a recent phenomenon. In the past, inventory was either tight or it wasn’t. But now, with home prices so low and so many foreclosures on the market, both homeowners and banks have been waiting to put properties on the market.

“These sidelined sellers closely watch the market for signs of a possible turnaround and rush in if there’s a hint of good news,” said Leslie Appleton-Young, chief economist for the California Association of Realtors.

But as more sellers put their homes up for sale, supplies increase, which will depress prices again. Rinse and repeat ad infinitum.

That vicious cycle could cause prices to bounce up and down for years. “I see a saw tooth bottom,” Humphries said. “Prices go up; inventory rises, which sends prices down again. That plays out for three to five years of no appreciation. … Without price appreciation, it leaves more homeowners in negative equity. That’s toxic. Any setback, like a job loss, they go into foreclosure.” 

Real Estate Negotiating Tips

Perhaps there is no greater learning experience than that of observing others. That applies to negotiating too.

Noticing the results others achieve – both good and bad – influence us greatly. It is alarming, however, how we often repeat the mistakes of others rather than learning from them.

Negotiating Tip: Mistakes of Others

Case In Point: Sam Needs a New TV

Sam always had a arrogant attitude. It probably stemmed from his sheltered and privileged life. Being the son of a prominent family and with money far in excess of most of his peers, Sam seemed to demonstrate characteristics most of us would deplore.

Sam needed a new big flat screen HD TV and stopped in at a local appliance store to make that purchase. He was greeted and waited on by Tom who was a high school classmate of Sam’s and also the son of the appliance storeowner. It has been a decade or so since they’ve crossed paths owing to the fact that Sam and Tom ran in different social and economic circles.

Sam barely acknowledged Tom as a former classmate or acquaintance and began immediately to share his need to buy a new flat screen TV. Sam shared that it had to be top of the line and that he wanted the largest discount possible because his family had been such a frequent customer in Tom’s appliance store over the years.

Sam seemed to ignore most of Tom’s remarks detailing the attributes and features of many of the available models meeting Sam’s requirements. Sam cut Tom off abruptly with the request that Tom show him the ‘best unit’ in the store and immediately asked for a huge discount, free delivery and a no cost extended warranty.

Tom, exhibiting great patience, shared that he might have some flexibility on the price but not to the extent Sam demanded. As for the free delivery and no cost extended warranty, neither could be provided at a discounted price.

Sam began to rant about how stores constantly over charge and ignore the ‘reasonable’ requests of good customers.

Let’s leave Sam and Tom at the store and reflect on the negotiating mistakes observed in this situation so far.

Mistake 1:

Sam’s elitist attitude violates every common sense strategy when negotiating. Regardless of one’s station or position, being cordial, respectful and even friendly is crucial to productive bargaining. While we are far from adopting Sam’s arrogant posture, we need to be on guard to avoid words or actions that would impede the building of a productive relationship.

Mistake 2:

Demonstrating intimidating behavior, as Sam modeled, is counter productive to the highest degree. Research shows that the tougher the tactic, the tougher the resistance. Much as Mistake 1 above, intimidating behavior becomes a barrier to that productive relationship crucial to getting that ‘good deal’.

Mistake 3:

Arguing or demanding just doesn’t work. That seemed to be Sam’s core behavior with Tom. Good negotiators know that influencing is far superior and more productive than being confrontational.

Mistake 4:

Sam’s lack of patience and aggressive pace became obstacles to achieving a win-win result. There are many times when we are in a hurry, but effective negotiating requires time and patience. When one party is in a hurry to demand a ‘deal’, the opportunity for any ‘give and take’ (trade offs) is sacrificed.

Truth be told, the Sams of our world have used their high-handed tactics all their lives. In many circumstances they have even been successful using them. But I suspect you are like me and find such behavior revolting and not something we’d even consider.

That said, we need to be ever mindful of the negotiating Sam’s mistakes of impatience, lack of relationship building, recognizing the position of our opponent and ignoring the ‘give and take’ that all negotiations involve.

You and I are not a Sam, but we can still learn from his mistakes.

That is what good negotiators do. They don’t make the same mistake twice or even make it the first time when they can learn from the mistakes of others.

Increase Rent but Keep Tenant Happy

We’ve talked a lot about positive cash flow. By now you should know that $100 is the minimum you need to get out of any property to make it worth your while.

But it would even better if you could get $125, $150 or even $200 in positive cash flow out of each unit each month, wouldn’t it? And what if you could get that guaranteed in a multi-year lease, too?

Sound too good to be true? It’s not. I’ve done it hundreds of times, and so have many of the real estate investors I’ve trained. And you can, too.

It’s called a ‘lease option.’ You may have heard it referred to as ‘rent to own.’ Whatever you call it, it’s a great way to increase your cash flow without increasing your investment of time or money.

In the simplest terms, a lease option is an agreement between you and the tenant that the tenant will buy the home in three to five years. The tenant agrees to a multi-year lease. You agree to set aside a certain amount of rent each month toward their eventual purchase of the home. (Even better if you can offer to provide owner financing.) The tenant thinks you’re doing him a favor – and you’re putting more money in your pocket every month.

Here’s 5 Reasons Why Lease Options are a Smart Idea

Reason #1: You can charge 15 to 20 percent above market rent. Since you’re agreeing to set aside a certain amount each month toward the tenant’s eventual down payment, you need to bump the rent up. Say the market rent for your type of property is $800 a month. You can charge $950 and agree to set aside $150 each month toward the downpayment. Will people go for this? Absolutely. There are tons of people with plenty of ready cash flow and the desire to own, but no savings (or lousy credit). Most Americans are short-sighted and payment driven – they’ll look at whether or not they can afford the rent each month, not what the return will be long term.

Reason #2: You can get a three to five year lease. Dealing with vacancies can be a pain, and it impacts your monthly cash flow. With a regular rental, you can sometimes get a two year lease, but with a lease option you can get a three to five year commitment.

Reason #3: You can get more money up front. With a regular rental, you can ask for the first month’s rent and a security deposit. With a lease option, you can ask for several thousand dollars up front in earnest money – basically, money to show they’re serious.

Reason #4: You’ll get better tenants and fewer headaches. In the lease option agreement, stipulate that you’ll run comps and set the purchase price when they’re ready to buy. Tell them that if they pay their rent on time every month, you’ll discount the purchase price by 5% when the time comes. That’s pretty motivating for a lot of people. Also, lease option tenants will take better care of your property, since they’re planning to live there for awhile and think it’s going to be theirs soon. Many lease option agreements say that the tenant is responsible for all repairs under $500, which can save you from a lot of annoying maintenance calls. Again, that sense of ownership settles in even before the papers are signed – and that can make your job as property manager a lot easier.

Reason #5: You’re in great shape whether the deal ever happens or not. Here’s the little-known secret to lease options: four out of five lease option tenants walk away without ever buying the property. They take a new job, move to a new town, break up with their girlfriend, whatever – and when they do, you get to keep the earnest money, and the extra money you’ve been setting aside each month for their downpayment. Chances are the property is in great shape, and you can find another tenant – or another lease option tenant – quickly. You’ve lost absolutely nothing, and in fact, you’ve gained thousands of dollars – all for probably less effort than you would have put in to a regular lease deal. And if they do buy the property, you’ve still made a profit, on top of the cash flow the property generated for you over the term of the lease.

Lease options don’t work in every case, and you’ll want to make sure you’ve got an ironclad agreement that spells out all the details. But when done right, these deals can be a great addition to your real estate investment strategy.

Written by Russ Whitney

Short Sale Contengency Tip

Recently I found that there are still some short sale listing agents out there who do whatever they want.

According to local MLS rules, upon execution of the contract, the listing agent must change the STATUS of the listing from ACTIVE to ACTIVE CONTINGENT ie. the property is sold pending seller’s lien holder release contingency.

Also, a contract is a legally binding contract between a seller and a buyer. Upon agreement and execution of the contract, the seller has technically sold to the property to the buyer, depending specific performances of the contract.

Should the seller accepts another offer, the 2nd contract should sit in back-up position. Here in Texas, we include a Back Up Addendum along with the contract.

The seller has only 1 property to sell and the seller cannot sell the property twice, each time to a different buyer.

The SHORT SALE Addendum is a great addition to the Texas Real Estate Sales Contract. It specifically said that the buyer must deliver the Earnest Money and Option Fee checks to the respective parties upon execution of the contract. But that’s all the buyer must do until the seller receives a short sale approval from the lender.

Under Paragraph C of the SHORT SALE Addendum, it specifically said that buyers have no other performances on the contract until short sale approval. Paragraph F gives the Buyer the unrestricted right to terminate the contract until as specified under the Termination of Option Period in the Original sales contract.

A Short Sale negotiator’s email with comments, “The offer looks good” does not constitute to a short sale approval, although I agree that it could look promising.

A Short Sale approval must be made in writing with specific conditions spelled out in the letter.

Simply because there is a mortgage insurance on the property does not mean that the short sale approval is automatic.

Sales contracts are written in black and white. Either you do or you don’t. No ifs or buts.

In every effort in getting the property sold, all parties involved must work together. Buyers, buyer’s agent, sellers, and seller’s agent.

It is VERY IMPORTANT that both buyers and sellers understand the contracts they are signing. If they dont, a real estate attorney should be consulted. Hence, hiring an experience short sale real estate agent is crucial in ensuring this process goes with minimal glitches.

Post written by Loreena Yeo

Here’s a novel idea, let’s help the employed, good credit home owners who are making their payments and want to stay in their homes. Let’s help these borrowers save money on their mortgages.

Imagine putting $300 dollars a month into the hands of a person who can actually meet all of their obligations, that $300 would become real disposable spending money. Wouldn’t that help the economy?

We are dumping millions of dollars to support people who are in trouble on their mortgages, in many cases these are people who over stretched, underemployed and really can’t be helped because they never qualified for their mortgage obligations in the first place.

But what about the others…

There are at least three categories of responsible homeowners who deserve some support and cannot get it.  Who are they?
 
1. Five years ago these borrowers bought their first home, they put 20% down,  they had and continue to have excellent credit, income and employment history.  Five years ago the Fannie Mae underwriting engine called DU for desktop underwriter or the Freddie Mac underwriting engine, LP or Loan Prospector approved these borrowers, they had at the time a back end ratio of 65% of their total income.  That was fine, the credit risk was evaluated and the borrowers were approved.
 
Today those borrowers still have perfect credit, have a perfect mortgage payment history, are still employed but now they cannot benefit from today’s low interest rate environment because even with the monthly savings that a refinance will bring them their back end ratio drops from 65% to 59% and that loan is declined. Today the maximum back end ratio allowed is 50%.

With a perfect payment history, do we really believe that these borrowers will stop making their payments when those payments drop by almost $300 a month?
 
2. Borrowers bought a condominium in a 3 unit property with 20% down.  At the time all three units were owner occupied.  Borrowers have again a perfect payment history and good employment and credit.  The other two unit owners in the building tried to sell their condos, when they couldn’t because of the today’s depressed real estate market they choose to rent instead.  Now the remaining owner occupant cannot refinance because the condominium does not meet the new more restrictive guidelines.  2/3 units must be owner occupied.  The remaining owner cannot sell easily either because a buyer will also have issues getting financed because of the condo regulations.

It is also true that a few years ago that same buyer could have purchased in a property with 2/3 units investor owned and gotten the loan approved with a “limited project review” finding, but today they cannot refinance the identical transaction because the condo is no longer acceptable by Fannie Mae or Freddie Mac.

On another, more ridiculous note, we are seeing refinance loans declined because the condo project does not have the utilities that are ‘separately metered’.  Are you kidding me?  This loan was fine when it closed and now because the 3 unit association has one central heating system the loan does not qualify for a refinance?

I appreciate that in the “go go” years of mortgage finance the underwriters may not have read every word on the condo docs, or the appraisal and that some of the loans approved at that time did not meet guidelines but to punish quality borrowers today because of lax underwriting standards in past seems short sighted and unfair.

We will pay $3000 to a homeowner in a short sale to assist with moving costs but we cannot find a way to help a high credit quality borrower save some money on their mortgage because the rules have changed and the building does not qualify.

 
3. Then there are the borrowers whose appraisals don’t come in.  Yes there is the Fannie Mae ‘Refi Plus’ program and the Freddie Mac ‘Home Possible’ program to assist these borrowers but not every one gets approved for reasons we cannot discern. 

What about the borrowers who have a first and second mortgages, there is absolutely nothing we can do for them in this environment if they appraisal comes in too low to roll the second mortgage into the first mortgage.  Second mortgage servicers are still not subordinating their mortgages essentially handcuffing the borrower from any ability to refinance to take advantage of the current market.

Can we make it mandatory that second lien holders subordinate purchase money second mortgages if the credit profile meets certain criteria?  Again, I would suggest that a second mortgage is more secure if the borrower is saving $300 a month on their first mortgage.

There is an easy solution to put more money into our economy, and to secure and stabilize homeownership for those who have proven that they can be successful homeowners: Create a true streamline refinance program. 

If the borrower has a perfect mortgage payment history, remains employed, and meet some general credit score requirement – simply refinance their mortgage no matter what the property value, loan to value or condominium make up.  The servicers have these mortgages already, Fannie Mae and Freddie Mac have these mortgages on their books, and do these mortgage holdings become more risky if we drop the payments for the borrowers?

The large mortgage servicers cannot possibly meet the needs or return the calls of each borrower seeking relief.  The most qualified of those have been left out of the dance and we are doing that part of the population a huge disservice.  We are rewarding consumers who cannot meet their obligations and are over extended and we are completely ignoring the responsible consumers who should be shown some love and appreciation.  Remember these are also the consumers who are paying the bulk of income taxes in this country.

Fannie Mae and Freddie Mac need to create a streamline program, one with very easy processing guidelines, and these refinances should go back to their original servicers so that they do not loose the servicing revenue from their portfolios.  The servicers could pay a flat per loan fee to correspondent lenders or brokers to originate the loans. Streamline the closing requirements to keep the closing costs low, make this a true streamline process so that the originating company can process and close these loans quickly and help millions of American homeowners who have been left out of the conversation but deserve more than anyone to get some reward for their good credit and fiscal management.

Article by: Amy Tierce

The Mortgage Bankers Association (MBA) today released its Weekly Mortgage Applications Survey for the week ending April 23, 2010. 

Michael Fratantoni, MBA’s Vice President of Research and Economics says:

“Purchase activity continues to increase as we approach the end of the homebuyer tax credit program….Purchase applications were up almost 9 percent from a month ago, with a disproportionate share of the increase due to government purchase applications. Government applications for purchasing a home accounted for almost 49 percent of all purchase applications last week.”

The Market Composite Index, a measure of mortgage loan application volume decreased 2.9 percent on a seasonally adjusted basis from one week earlier.  On an unadjusted basis, the Index decreased 1.9 percent compared with the previous week. The four week moving average for the seasonally adjusted Market Index is down 3.1 percent.

The Refinance Index decreased 8.8 percent from the previous weeK. The Refinance Index four week moving average is up 1.6 percent. The refinance share of mortgage activity decreased to 55.7 percent of total applications from 60.0 percent the previous week. The refinance share is at its lowest since August 2009.

The seasonally adjusted Purchase Index increased 7.4 percent from one week earlier and reached its highest level since October 2009. The unadjusted Purchase Index increased 8.5 percent compared with the previous week and was 2.4 percent higher than the same week one year ago. The four week moving average is up 1.6 percent for the seasonally adjusted Purchase Index.

The increase in the purchase index was driven largely by the government purchase index, which increased 11.9 percent from last week on a seasonally adjusted basis, while the conventional purchase index increased 3.5 percent from last

The average contract interest rate for 30-year fixed-rate mortgages increased to 5.08 percent from 5.04 percent, with points decreasing to 0.91 from 0.98 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The average contract interest rate for 15-year fixed-rate mortgages increased to 4.38 percent from 4.34 percent, with points decreasing to 0.93 from 0.98 (including the origination fee) for 80 percent LTV loans.

The average contract interest rate for one-year ARMs increased to 7.03 percent from 6.95 percent, with points increasing to 0.3 from 0.28 (including the origination fee) for 80 percent LTV loans. The adjustable-rate mortgage (ARM) share of activity remained unchanged at 6.0 percent of total applications from the previous week.

No surprises in this data. Purchase apps continue to trend higher as the April 30th tax credit deadline fast approaches. Slowly falling refinance demand  reflects the fact that most eligible fence-sitters already pulled the trigger.

It might be of interest to some that  so many borrowers are applying for low downpayment FHA insured loans. This implies prospective borrowers are looking to put as little down as possible to keep their personal balance sheet as liquid as possible. Either that or they simply just don’t have the reserves on hand to qualify for a conventional 30 year fixed loan. These folks better keep a close watch on local home values…the last thing we need is a double-dip in housing and growth in the number of underwater borrowers.

With that in mind, it is imperative that housing use this tax credit and seasonal momentum to establish a solid recovery foundation. The recuperation of buyer confidence needs confirmation that stabilization is steady.

(Do not read “stabilization” as growth, read as “finding a bottom”)

Written by Adam Quinones

So you are young and in love and you think you have found the perfect nest to while away your lives together. Here are 10 tips that young house buyers should seriously ponder before signing the mortgage documents and taking possession of their dream house.

Dreams when not seriously thought out have a nasty habit of turning into nightmares.

1. You are 25 years old. In 15 years, you will be 40 years old. Wouldn’t you like to have this house paid off and be only 40 years old?
2. The price of buying a FIXER is you have to LIVE in a fixer, and be chained to it on weekends (when you should be out having fun) You are only young once.
3. You can change the ugly carpet, but you can’t change the ugly location.
4. Buying a house should be about making memories, not making money.
5. Believe it or not, the real estate agent knows more about real estate than you do.
6. Buying a house is like having a baby. You forget the labor pains the moment you see the baby.
7. Getting the house before the financing is like getting the cart before the horse.
8. Your friends are just jealous.
9.  Is this house REALLY worth the commute to your job?
10. Psssst! It costs more than just the payment to have a house, and the yard doesn’t take care of itself, either.

Ten tips written by Janet Guilbault

Thinking of buying a home but your credit is bad. Take a look at the mortgage products being offered at Mortgages for Poor Credit.