Sub-prime Loans, Short Sales and Low Mortgage Rates
After reading article after article about the current mortgage rates and about many potential buyers who are still sitting on the fence about buying a home, I was inspired to write this blog post.
Although the media does a good job of informing us of the fed rate cuts and daily mortgage rates they have also unfortunately, done a good job of focusing on the negative about the real estate industry. This in turn, affects everyones perception of buying and selling their homes in this market.
Yes, we have had a sub-prime mortgage crunch over the past several months and it looks like as if it will get worse by the end of the year. Many buyers were sold these sub-prime adjustable rate mortgages and/or 100% interest only mortgages several years back are now set to readjust. These readjustments to the buyer's interest rate will hike their payment sometimes hundreds of dollars per month. Many homeowners will not be able to afford their new house payment thus considering selling, short sale or worse…foreclosure. That is one of the reasons why our Atlanta inventory is so high.
Yes, this all sounds horrible but keep in mind that sub-prime mortgages are held by less than 10% of homeowners. Most sub-prime loans will never go into foreclosure and the foreclosure rate on prime loans is only 0.6 percent.
First, I would like to address that there are options for homeowners in this situation. Did you know that you can call your “loss mitigation” department with your lender or bank? I would always recommend calling your lender to discuss what options may be available for you. They may be able to do a “work out” where they agree to lock your current payment for a specified period of time or lock your interest rate. You can also consider a “short sale“ where the bank agrees to take less than you currently owe on your mortgage. Choose a REALTOR who is experienced in “short sales” to assist you in negotiating with your lender. I previously worked as a “loss mitigater” and familiar with this process. Just do “something” versus “nothing” if you are in this position.
Second, keep in mind that because we have so much inventory and reduced prices on homes in the Atlanta area, this is a perfect time for buyers to be looking for a new home. No, you may not get top dollar for your current home if you have one to sell first, but just think of the deals available on the other side of the transaction when you go to purchase. It will all wash out in the end.
And how about you first time home buyers. There has never been a better time to purchase. It is a strong “buyers market” when there is a lot of inventory, and interest rates are at historical lows hovering around 6% or lower.
What are you waiting for?