Here are some mortgage tips for first-time buyers!

The more you know about mortgages, the better prepared you’ll be. Here are some mortgage tips for first-time buyers, including:

• Know your credit score. The credit score can be a big key to knowing how much buyers can afford and how much interest they’ll be paying. Home shoppers should be encouraged to check their credit report and FICO score before even starting the homebuying process. 
• Estimate how much can be borrowed. Lenders generally don’t like to see a monthly housing payment—one that includes taxes and insurances—that’s more than 28 percent of a pretax income. The percentage threshold often cited for total debt—which includes the mortgage payment—is then no more than 36 percent. Some lenders will offer differing percentages but these are the most commonly used. 
• Gather the docs. Buyers will need documents showing their income, employment situation, identity, and more when applying for a mortgage. Encourage them to start collecting their latest tax returns, bank and brokerage statements, pay stubs, W-2s, Social Security card, marriage license (if applicable), and contact numbers for their employer’s HR department. 
• Get pre-approved. A preapproval is similar to a full mortgage approval and can be submitted with an offer on a home. It shows the seller the seriousness of the buyer, who has already secured financing to purchase the house. Add up closing costs. Closing costs generally range from 2 to 3 percent of a mortgage principal amount. Make sure your buyers factor in closing costs to their overall homebuying budget.

WHAT WILL 2012 BRING FOR SOUTHERN CALIFORNIA REAL ESTATE?

Well, gee, let me get out my crystal ball and take a look... No it isn't meant to be a completely flippant statement, but at this point, everyone is guessing, if they're honest about it. But we can make some pretty good calculations, and estimations based on what's actually happened and inventories. First of all, you must remember that home ownership is about a whole lot more than a cash investment. Yes, it's a hedge against inflation (more on that below), and yes, it's the only investment where you can leverage your cash on such a large transaction. Those points alone should make real estate attractive. But houses were never meant to be ATM's, as many have sadly discovered, and they were not meant to be flipped as fluently as trading stocks, which still others have discovered. But for the long term buy and hold mentality, it's hard to beat real estate. And, that philosophy was just discussed by 3 economists in the New York Times in the December 31st Business section. But home ownership is much, much, more. It is where you raise your family, it is your sanctuary, and it is a quality of life embedded in your investment. But maybe most importantly, it's a way to protect your housing dollar from ever rising again...EVER. To find out what next year will look like? Read the whole newsletter, and you should get a pretty good idea. A summary statement might be, look for the beginnings of the turnaround, for prices to bottom out by 2nd quarter, interest rates to stay killer for at least 6 months, and the overall economy to do its part, as it's projected to grow about 4% this year (last year was approximately 2.7%).

WHERE WILL HOUSING PRICES GO THIS SPRING?

This column is not about to make serious predictions, but there are some indicators worth noting. First of all, the slough off of foreclosures last year due to moratoriums and fraudulent robo signing issues should be off the radar and allow foreclosures to ramp back up. That should mean more competition with the short and equity seller, as well as some pent up listing activity of people who didn't want to list during the holidays. The first and second quarter is always when you see the most listing activity. Following are 4 brief statements by various entities about spring pricing. Zillow believes we not see a bottom in prices until the first quarter of 2012. Standard and Poor thinks prices will drop 5% in the next few months. JP Morgan Chase believes prices will depreciate 6% to 7% over the next 6 months. Barclays says prices will fall 7% by the end of the first quarter of 2012. One thing everyone seems to be in agreement on: housing prices will bottom out by mid-2012 and then stay flat, bringing this down market to an end. A long recovery may be in the offing, but it will be hard for buyers to stay on the sidelines with current pricing and interest rates. Don't be fooled by a house that MAY decline another 2%-3%, but be stuck with a higher interest rate on the loan that more than eradicates any savings on the housing price.

WHERE IS THE SILVER LINING?

The silver lining in real estate is always the future: because the future is where the pent up demand is heading. If you think this overly optimistic, think about the following...
Trulia conducted a survey with Generation "Y", trying to determine future buying trends. One of the questions asked was whether or not they believed in home ownership as part of the American Dream. A staggering 65% said "Yes!" In fact, it was integral to their future plans for family and investment. So where are they? Many are living at home, saving money, and waiting. In fact, the number of young people living with parents in 2003 was approximately 4 million. By 2007 that number had increased to 4.7 million. This year that number is 5.9 million. That's a lot of people who intend to buy, when you figure out 65% of that number. That doesn't include move up buyers of Generations "X" and "Y" who are already in the market. And it doesn't consider the retiring of the "Boomers" and the transfer of wealth. As this year progresses, there will likely be ups and downs. But we planning for an optimistic year ahead. Why not?

HOMEOWNERSHIP: REPORTS OF ITS DEATH ARE EXAGGERATED

This headline was posted by the KCM Crew, authors of a blog for a real estate website called, "Keeping Current Matters."  It's a great name for a blog, because in real estate, keeping current does indeed... matter.  The above mentioned article randomly addresses the many negative articles regarding real estate, many of which have been published in local southern California papers.  This newsletter, although not political, strongly disagrees with scare tactics and negative ploys designed solely to sell papers.  After numerous recent articles all playing on the word, "scary", a pun on the Halloween holiday, let's level the playing field with some real numbers and let you, the discerning and intelligent reader, make up your own mind. 
 
Local papers would have you believe that the sky is, in fact, falling; real estate will never recover and will never be the same. More on that later, with some real numbers that are a little sobering.  But first, homeownership itself; is it dwindling?  Is it, "on its way out?"  Hardly.  In fact, pick up a copy of the recently released Fannie Mae 2011 3rd quarter National Housing Survey.  Both Generation Y (birthday mid-1970's to mid-1990's) and Generation X (mid-1960's to mid-1970's) have stronger beliefs in the importance of homeownership than those of the general population... yes that would be the boomers, and boomers have loved real estate.  It seems clear that as the economy improves, so will housing demand.

BUT DON'T BELIEVE THAT THERE IS NO DEMAND FOR HOUSING NOW

In fact, local associations of Realtors and Multiple Listing Data indicate that inventory is quite low.  Part of the reason sales have slowed is there simply isn't enough saleable product out there.   In this type of market, there will always be properties on the market that are technically available inventory, but simply have too many problems to overcome.  They need a particular type of buyer.  These properties can make it appear there is more inventory than is actually "saleable."  Frankly, it is surprising that people who can buy, have chosen to back away from the market because of predictions of a triple dip.  It's a "cost vs. buy" analysis.  If you believe in home ownership, its tax deductions, its features of durability and stability for yourself and your family, then prices coupled with interest rates should make for a fairly attractive picture.  Yes, prices could go down, but what it actually costs you, may never be better.  Also loan programs could change and availability could change, since lending has been very volatile.  But what won't change is the historic and undeniable return on investment that occurs in real estate every 10 years.  Sometimes the cycle is shorter; sometimes the downturns (such as this one) are annoying.  But check on a property, any property, and see what it sold for in 2000, and what its value is today, in the midst of our worst downturn.  REMEMBER THE PROMISE OF MORE ON THE TOPIC, "REAL ESTATE WILL NEVER RECOVER?..."
 

            REAL ESTATE AS A LONGER TERM INVESTMENT SINCE 2000

        DOW +6.7%        S&P -12%       NASDAQ -30%       REAL ESTATE +43%

HOW TO REPAIR YOUR CREDIT AND IMPROVE YOUR FICO CREDIT SCORE

Info from www.MyFico.com

It's important to note that repairing bad credit is a bit like losing weight: It takes time and there is no quick way to fix a credit score. In fact, out of all of the ways to improve a credit score, quick-fix efforts are the most likely to backfire, so beware of any advice that claims to improve your credit score fast. The best advice for rebuilding credit is to manage it responsibly over time. If you haven't done that, then you need to repair your credit history before you see credit score improvement. The tips below will help you do that. They are divided up into categories based on the data used to calculate your credit score.

3 Important Things You Can Do Right Now

1. Check Your Credit Report – Credit score repair begins with your credit report. If you haven't already, request a free copy of your credit report and check it for errors. Your credit report contains the data used to calculate your score and it may contain errors. In particular, check to make sure that there are no late payments incorrectly listed for any of your accounts and that the amounts owed for each of your open accounts is correct. If you find errors on any of your reports, dispute them with the credit bureau and reporting agency.
   
   Read more about Disputing Errors on Your Credit Report
2. Setup Payment Reminders – Making your credit payments on time is one of the biggest contributing factors to your credit score. Some banks offer payment reminders through their online banking portals that can send you an email or text message reminding you when a payment is due. You could also consider enrolling in automatic payments through your credit card and loan providers to have payments automatically debited from your bank account, but this only makes the minimum payment on your credit cards and does not help instill a sense of money management.
    
3. Reduce the Amount of Debt You Owe – This is easier said than done, but reducing the amount that you owe is going to be a far more satisfying achievement than improving your credit score. The first thing you need to do is stop using your credit cards. Use your credit report to make a list of all of your accounts and then go online or check recent statements to determine how much you owe on each account and what interest rate they are charging you. Come up with a payment plan that puts most of your available budget for debt payments towards the highest interest cards first, while maintaining minimum payments on your other accounts.

WHAT WERE THE ACTUAL NUMBERS

The total number of sales for Orange County in November (the most recent complete month available) was, 2,257, which was down 1.8% from October.  That is a reasonable, seasonal, decline.  It was also down 10.7% from November 2009, which seems like a lot, but if you look at the year-to-date average number of sales of 2,545, there is only a -0.7% differential.  There were 1,407 single-family resale, 614 condos, and 236 new homes.  The last statistic on new homes is worth mentioning because it is a 27.6% increase.  Why does this matter?  Building demand leads to building permits, leads to hiring in construction, the one job sector that is most sluggish in So Cal.  In other words, demand for new homes is a sign of recovery.  The lead price range is still the entry level under $400,000, which had 938 sales.  The slowest price range was from $600,000 to $700,000 with only 196 sales.  The reason for this may be as simple as there is a shortage of properties in that price range because the over $700,000 bracket was fairly healthy with 438 sales.  Notices of Default were up slightly (4.5%) over October, but still down 16.1% from November '09.  Foreclosures are way down, but this is a goofy number as banks have made it clear they have stalled the process on many of their distressed properties.  The number of distressed properties on the market (short sale, or bank owned) remains steady at approximately 39%, which is lower than the peak of the recession, when that number was as high as 56%.

DEMAND FOR HOMES DROPS 12%...PENDING HOME SALES UP?...WHO DO YOU BELIEVE?

There was an article written by the OC Register's Jonathan Lansner that was rather pessimistic, citing that a report by Steve Thomas at Altera Real Estate, as of December 9th said, "After remaining the same for the better part of a month, demand dropped by 12% (in the past two weeks)."  My problem with this article was the headline.  If you read on in the quote by Steve Thomas, himself a real estate broker, the statement clarifies itself, "For the remainder of the year and the first few weeks of the New Year, demand will continue to drop. This is cyclically the slowest time of the year for Orange County real estate."  The headline leads you to believe that real estate is once again plunging, that things may become dire once again.  The actual article is merely talking about a cyclical moment in the market, that is experienced every year in varying degrees.  Two weeks later on December 31st, The National Association of Realtors reported that, "the number of people who signed contracts to buy homes rose in November, the fourth increase since contract signings hit a low in June. "  In fact, its index of sales agreements for previously occupied homes increased 3.5%.  So, who do you believe?  The NAR would obviously know the number of contracts being signed and that would seem to be a worthy statistic.  No one is saying the market is healthy.  But demand plunging?  It would not seem to be the case.

AcCORDING TO 3 REPORTS, IT MAY JUST BE BETTER IN 2011

At the end of 2010, already becoming a distant memory, were some confounding signs in the economy.  As the holidays continued, retail and durable spending was up, but how could that be in our sputtering economy?  Although the recession had supposedly officially ended, most economists agreed that recovery would be very sluggish until 2012.  At the heart of that disposition was the issue of jobs.  Where were the jobs?  Well, out on December 31st were the three reports by Chapman University, Cal State Fullerton, and UCLA, weighing in on jobs, unemployment, income growth, building permits, US GDP, and 10-year treasury.  All reports on all fronts were positive, with the most anemic growth coming in the builder sector, with very slight growth on building permits.  All three see job growth between 18,000 and 24,000 but with most improvement coming in the second half of the year.  They all see unemployment plunging below that 9% mark that has plagued any serious recovery.  Income growth will rise between 3.6% and 4.8%.  UCLA's report had an interesting comment, "Accelerating economic conditions should be observed by mid-2011 as consumers increase their spending to reload on worn-out durable goods and businesses hire more workers to meet rising demand for goods and services.  The outlook for an expansion of the workforce shows momentum building into 2012.  While the public sector remains weak, the private sector will do all the heavy lifting regarding 2011."  The gist would seem to be, expect gradual improvement, and yes, the recovery has really begun this time.  How does all this effect real estate?