Jeff Cost

Cincinnati Home Loan

Foreclosure Filings Climbing; 4 States Account For Half Of Nationwide Activity

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Foreclosures per capita October 2011

Foreclosed homes are a hot market throughout OH — and supplies are ramping up.

According to foreclosure-tracking firm RealtyTrac, October’s foreclosure filings rose 7 percent to 231,000 filings nationwide.

A “foreclosure filing” is any one of the following foreclosure-related events : A default notice on a home; a scheduled auction for a home; or, a bank repossession of a home. Because of this definition, a single home can account for up to 3 foreclosure filings — one from each category. 

Because of this, we may glean more relevant insight into the foreclosure market by separating RealtyTrac’s foreclosure report into “event types”.

  • Default Notices : Up 10% from September 2011; Down 31% from October 2010.
  • Scheduled Auctions : Up 8% from September 2011; Down 38% from October 2010.
  • Bank Repossessions : Up 4% from September 2011; Down 27% from October 2010.

These breakdowns suggest that, although improved as compared to last year, the foreclosure market is growing. At least, it’s growing in some parts of the country. We can’t forget that — like everything real estate — foreclosures are a local phenomenon. 

In October, just 4 states accounted for more than half of the country’s foreclosure filings. Those four states — California, Florida, Michigan and Illinois — represent just 26% of the U.S. population.

Even on a per household basis, the figures remain disproportionate :

  • Top 10 Foreclosure States : 1 foreclosure per 341 households, on average
  • Bottom 10 Foreclosure States : 1 foreclosure per 7,434 households, on average

The nationwide foreclosure rate was 1 foreclosure per 563 households.

As a Columbus home buyer, foreclosures are worth watching. They account for 18% of home resales nationwide and, in some markets, can be bought at steep discounts versus a comparable “non-distressed” home. That is part of their appeal, in fact.

But just because foreclosed properties can be a “deal”, it doesn’t mean you should rush to buy one. Buying a foreclosed home from a bank is different from buying a non-foreclosed home from a “person”. The contracts and negotiation process are different, and foreclosed homes are sometimes sold as-is.

“As-is” means “this home may have defects”.

Therefore, if you plan to buy a foreclosed home, talk with a real estate professional first. You can learn a lot about the housing market online, but with respect to writing an offer on a property, you’ll want an experienced agent on your side.

Banks Resume Tightening Mortgage Guidelines

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Mortgage guidelines get tougher

As part of its quarterly survey to member banks nationwide, the Federal Reserve asked senior loan officers whether last quarter’s “prime” residential mortgage guidelines have tightened, loosened, or remained as-is.

A “prime” borrower is defined as one with a well-documented, high-performance credit history; with low debt-to-income ratios; and who chooses to finance a home via a traditional fixed-rate or adjustable-rate mortgage product.

After a 2-year easing cycle, the nation’s biggest bank banks report that they’ve reversed course, and are raising the bar on mortgage approvals.

For the period July-September 2010, 88% of responding loan officers admitted to tightening their prime guidelines, or leaving them “basically unchanged”.

If you’ve applied for a home loan of late, you’ve experienced this first-hand.

High delinquency rates and defaults since 2007 have caused the banks to rethink what they will lend, and to whom. As a result, today’s mortgage lenders scrutinize assets, incomes, and credit scores to make sure that nothing “slips by”.

For today’s home buyers and would-be refinancers, the mortgage approval process can be challenging as compared to how it looked just 18 months ago.

  • Minimum credit scores requirements are higher today
  • Downpayment/equity requirements are larger today
  • Debt-to-Income ratio requirements are more strict today

In other words, although mortgage rates are the lowest that they’ve been in history, fewer applicants can qualify. And, with more the housing market still in recovery, it’s likely that guidelines will tighten again in 2012.

Therefore, if you’re among the many people in Louisville wondering if it’s the right time to buy a home or refinance, consider that, although mortgage rates may fall, approval standards may not.

The best rate in the world won’t matter if you’re not eligible to lock it.

This Holiday Season, Think Twice Before Saving 15 Percent At The Register

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FICO recipeWith Halloween behind us, retailers are in the Holiday Spirit. Businesses know that consumers spent a median $556 on holiday gifts last year and they want this year to be just as strong.

That’s why it’s barely November and, already, Black Friday ads clog our mailboxes and the airwaves. Retailers want our dollars and they’re offering great deals to early shoppers.

There’s one discount a smart shopper should think twice, however — the ever-present “Open A Charge Card Today And Save 15%” promotion. In the short-term, deals like this will save money. 

Over the long-term, however, opening a charge card could cost you much, much more — especially if you plan to refinance your home or buy a new one.

Applying for a charge card can lower your credit score up to 85 points.  

According to the myFICO.com website, as a category, “New Credit” accounts for 10% of your 850 possible credit points, comprising the following credit traits :

  • Your number of recently opened accounts
  • Your number of recent credit inquiries
  • Time elapsed since your recent credit inquiries
  • Your proportion of new accounts to all accounts

Each trait is a negative in the FICO-scoring credit algorithm which means that, with each in-store charge card application, your credit score is likely to fall. How far your score will fall depends on the rest of your credit profile.

Meanwhile, low FICO scores correlate to higher loan fees.

Using a real-life example, assuming 20% equity in a home, for either purchase or refinance, look how loan fees for a $200,000 conforming mortgage change by FICO score :

  • 740 FICO : There will be no added loan costs
  • 720 FICO : You’ll have a 0.250% increase in loan costs, or $500
  • 700 FICO : You’ll have a 0.750% increase in loan costs, or $1,500
  • 680 FICO : You’ll have a 1.500% increase in loan costs, or $3,000
  • 660 FICO : You’ll have a 2.500% increase in loan costs, or $5,000

You can see first-hand how expensive low credit score can be — much more costly than the 15% saved at the mall. That’s why people planning to refinance to today’s low rates and soon-to-be Columbus homeowners, shouldn’t rush to save 15% at the register. 

For people in want of a mortgage, high FICO scores are worth protecting.

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