Get Real Estate Blog: Salem Oregon Home Trends and Relocation Information

Each business has it’s acronyms.  Real estate, I think,  has more than any other business.  I think we like speaking in code to sound important and impressive or something.

I can just see an agent with a Salem Oregon home buyer.

“Hey that’s an REO over there. It has HDW, FR, LR, DR, and DLB.”

“Great what’s the FMV and my PITI?”

The latest acronyms to permeate the real estate world are HVCC, HERA and HOEPA.    I’m a firm believer that when you think people are smarter than you, just throw out a few acronyms to show how smart you are….just kidding, for those of you that may stumble upon this post and not know that I have a very dry, sarcastic sense of humor.

Despite the fact that we now have these extra special acronyms to banty around, they do impact buyers and sellers of real estate in the Salem Oregon area.  Because we seem to be in a place where there is no such thing as too many rules, some new real estate rules have been made with regard to lending and appraisals.  I won’t go into all the details except for how it impacts you.

In the Salem Oregon area we have typically done 30 day closings.  Because of new rules and underwriters being super cautious our closings have been closer to 45 days for the past few months.  Now because of the new HERA rules, closings may take 45-60 days.  What this change does is require waiting periods in lending for various things.  Essentially time for a buyer to look over things and make sure they are comfortable with the disclosures they are being given AND they match what they were told from the get go.  What this means is that there will be delays due to these mandated time frames.

Buyers need to be aware of these mandates as do sellers.  Longer close times, means the house is off the real estate market for a much longer period of time. It is even more imperative that Salem Oregon sellers look over buyers as carefully as possible to ensure that if they are going to take the house off the market for 60 days, the buyer is really strong.   Quick and good communication is going to be even more imperative as small changes in the APR for a buyer trigger new disclosures and waiting time frames.

It is extremely important due to these rules that buyers work with lenders that have excellent communication sills. It is also imperative that buyers and sellers work with local Salem real estate agents that are on top of these new rules.  This is not the time to work with an agent that does real estate “on the side.”

If you go up to interview a Salem Oregon agent and you say “tell me about HVCC, HERA, and HOEPA, and they say “huh?”  It’s time to move on…

(that would be to me by the way…c’mon you didn’t expect at least one shameless plug in here for business?)

Apparently, Aumsville Oregon missed the real estate memo letting them know that the market stinks everywhere.  Really it is supposed to be horrible everywhere per the media.  This small town seems confused because their current inventory is a mere 3.8 months.  Apparently no one sent, or those Aumsvillians?  Aumsvillites?  didn’t read it because 3.85 months of inventory is considered a seller’s market (4-6 months inventory is neutral).   What’s up with that?

Their 2nd quarter sales volume has remained fairly steady through this recession.  If you look at the 2nd quarter data for the decade you can see the nice bump during the bubble time.  Now it looks deceptive, but Aumsville is so small that when a subdivision like Highberger Meadows goes in, it makes a huge difference in the real estate market.  The new construction homes sold fairly well in this quarter.  The prices are great for the size and amenities AND Aumsville qualifies for the USDA loans which is one of the very few 100% financing programs.  Close to Salem, qualifies for 100% financing, has a nice new subdivision…what’s not to like and buyers seems to think so as well.

Unlike the Salem Oregon real estate market, the Aumsville market has been hovering around 6 months of inventory for a while.  This plunge in inventory is a little bit of a surprise, but not totally unexpected.   Not sure it will stay in a seller’s market for the whole year, but probably a neutral market.   If you want to see homes that are currently on the Aumsville real estate market, you can search for homes here.

You may remember I wrote a post about how you could use the $8,000 tax credit as a down payment for a Salem Oregon home with a “new plan” that was announced, only to retract it 24 hours later.

So…in order to make things “easy”…cough, cough… for first-time home buyers the government had an announcement about this subject.  So what’s the deal?

The tax credit has been approved on FHA loans, but wait…you can’t use it towards the 3.5% down payment part when you actually purchase a house.  So essentially you can use it for closing costs, BUT you can’t get the credit early and do that because that would be fraud.

Jeff Belonger wrote a really good post on this, so I’m just sending you to his post to explain it all.  In true government fashion, it is so convoluted and difficult, that well bottom line…you should just take the tax credit when you file your taxes.

The other day, I wrote a post about how HUD was going to allow first time home buyers with FHA loans to get a “bridge type” loan on their tax credit so they can use it as a down payment.

That has since been retracted.  Personally, I am not surprised.  It would take a while to get a program like that in place and the tax credit is only good through the end of this year.

So…never mind.

Go back to your regularly scheduled Salem Oregon house hunting program and forget that they ever said that.

Down payment assistance programs, lovingly called DAP’s by we in the real estate industry, were nixed as of Oct 2008.  Between asking sellers to pay for closing costs and then having the seller’s “gift” them down payment monies, many home buyers were getting into FHA home loans for nothing out of their pocket.

The backlash was huge.  “We need to make sure home buyers have some skin in the game people said. ” No more down payment help.  Zilch.

Now, if you are a Salem Oregon home buyer doing an FHA loan, you can use the tax credit as the down payment for the house.  Announced today, FHA will do a “bridge loan” of sorts so that home buyers can take their tax credit at closing instead.  So, if you are a home buyer planning to do an FHA loan, you can now use that money as part of your 3.5% down payment.

I will post more as details emerge for the Salem Oregon area.

Amy left this comment on one of my posts about the Salem Oregon real estate market and it seemed like it would be a good post.  Amy asked:

What’s the state of the financing market? We hear so much bad news in the media, but I see people buying homes, cars, etc. What is the expected/usual/average down payment required, what is the limit of income to debt ratio, etc?

Some people all scared about there being no financing, but it seems like that is just less financing for those who likely couldn’t afford it anyway; a return to perhaps the days my parents used to speak of where you had to have a down payment of some sort, have a good balance of debt to income, etc.

Question 1:  The state of the financing markets.

Lenders are still hurting and are “hoarding” money to shore up their books.  Many lenders are raising fees for loans to make up losses.  Loan origination fees used to be 1% and now 1.5% is pretty common.  Underwriters are scrutinizing loans like there is no tomorrow right now.  This is not a bad thing, but in the past underwriting would take 2-4 days and now it is not uncommon to her underwriters taking 2-3 weeks to look at and evaluate a borrower.

Money is there for borrowers, it is just tight.

Question 2: Down payment requirements

There are only two loan programs that do 100% financing right now and that is the VA (Veteran’s administration) loans or the USDA Rural housing loans.  Many buyers are going with the FHA backed loan which is a 3.5% down payment requirement.

Lenders love to see a 20% down payment.  You can still do 10% down and there are a few 5% down conventional loan programs but the PMI (Private Mortgage Insurance) payments have gone up from what I am hearing.

Question 3: Loan to value ratios

Ideally your entire debt should not be more than 35% of your income. That’s your entire debt so that includes car payments, credit card payments, etc.  I also suggest that working parents include their daycare costs in that number as well.  Failure to do so will make living very difficult. If you try and buy a home with a higher ratio than that, it is very possible that the underwriter will say no.

I have had a few clients get loans with slightly higher ratios, but they are the rare breed these days.

Comment:  Lack of financing

There is financing.  If someone has low credit scores and no money then, no, they won’t qualify for financing.  Not everyone should buy a home.  In my opinion, if you are renting and you can’t afford to save any money for a down payment, then you should NOT buy a home.

Purchasing a home is not just about the mortgage payment itself.  You have to maintain a home which costs money.  If you don’t have money to stash away for a down payment, you don’t have money to maintain your home.  That is not a good combination.

So…yes, you are correct that there is indeed financing for people that have saved their money and are financially sound.  We are back to the way it has been in the past.  Work hard, save your money, and then purchase a Salem Oregon home.

The Wall Street Journal had an article recently about the increase in lending guidelines for purchasing a condo. Now, normally you wouldn’t think that would be such a big deal here in Salem Oregon because we don’t have a lot of condos, but…here is what the article stated.

The government-backed mortgage-finance company stopped guaranteeing mortgages in condo buildings where fewer than 70% of the units have been sold, up from 51%. In addition, the company won’t back loans for sales in buildings where 15% of current owners are delinquent on association fees or where more than 10% of units are owned by a single-entity.

This will impact our local Salem Oregon condo market because we have The Meridian, Church Street Condos, and The Rivers all for sale right now.  I don’t know for certain, but I don’t think any of them are at 70% sold.  This could be a problem for those developers as lenders may be leery to lend on those projects without the guarantees of Fannie Mae.

This is an unfortunate situation for our local developers.  The condos are a nice addition to the rejuvenation of our downtown area, and this just makes it harder to pull developers into projects.  With lending criteria changing on a daily basis, the rejuvenation and livability of our downtown area may be put on hold as developers have to assess the risk of engaging in large projects.

If you are considering a condo purchase here in Salem, Oregon contact me to get on a condo list, or start your search for condo units here.

Oregon vets are fortunate to have a great home loan program here.  The Oregon Department of Veteran’s Affairs…okay, say that 10 times fast…has a wonderful program: the ORVEThome loan program.   I can say this from personal experience, since I had several veteran buyers here in the Salem Oregon area  last year who used this program.  I wish all lenders could be as good as these guys…

How does it work?

The qualifications are pretty basic.  You have to be

•  a post Vietnam vet or discharged from the military within the last 30 years.
•  honorably discharged
• qualify for what you want to buy..you still have to be able to pay the mortgage and have good credit.

What is it?

• Buyers need to only put down 5%.
• There is a lifetime maximum loan of $417,000.  So you would have one house loan of
  $200,000 then sell and get another loan for $217,000, or just buy a house once for $417,000, but then you wouldn’t qualify for the program anymore.
• The house has to be a primary residence.  
• The home needs to be in Oregon.  
• Unlike VA loans, these do NOT require the seller to pay any closing costs, but the seller can
  contribute closing costs.

Honestly, if you are a military person here in the Salem Oregon area that has been discharged from the military, this program is for you.  The ORVET staff and underwriters are great to work with and make purchasing a home easy for a vet…the way it should be.

If you need the name of our local Salem Oregon ORVET mortgage broker you can contact Mike Malowney at MMalowney@windermere.com, then give me a shout to help you with your home
search.  

Just a couple of days ago I wrote about the new home buyer tax credit that was passed as part of the American Recovery Act.

I saw this great little chart on the National Association of Realtors site that quickly summarized the differences for you.  The common misperception I am hearing from buyers is that if they haven’t purchased a home in 3 years, then they qualify, but the tax credit if for people that have not OWNED a home in the past three year.  So, if you have owned your home for 5 years, and are selling now…you are not eligible for the tax credit.

$7500…$15,000…$8,000…

I didn’t write about the tax credit before because it seemed to change by the hour as to what it would finally look like.

Here is what is written in the full summary provided by the House Ways and Means Committee…

• The 10% tax loan with a maximum of $7500,  from last year,  will become an $8000 tax credit as of January 1, 2009.  So if you closed on a house in 2008, you have the tax loan which is repayable within 15 years, or upon sale of the home.
• Only homes purchased after January 1, 2009 are eligible for the $8,000 tax credit, but must be purchased before December 1, 2009.
• If the home is sold within three years of taking the tax credit, so during 2012, then the tax credit will be recaptured.  So if you buy a house this year, get relocated in two years, then you will need to repay some or all of that tax credit.  Sorry folks don’t know all the details about that.
• The income cap remains.  Individuals making under $75,000 and couples under $150,000 are eligible.
• It appears that the definition of home buyer is one that has not purchased a home within the past three years.

So that is the muddle that is the current tax credit.  If you have questions about whether or not you are eligible I would check in with a CPA.