Mortgage
• November 17, 2010

A couple of years ago, if a homeowner was offered a jumbo-sized mortgage for a home in Washington for 4.375% they would beg for the loan to be locked. In fact, the customer would probably think the mortgage loan officer was misquoting his or her rate sheet. But that was 2009. Today clients sometimes let greed take over. A lot of borrowers are taking their time in making the decision to move forward in anticipation of even lower rates.

Remember 2008 – 2009? The sky was falling. Banks were failing by the hundreds. The Treasury Department headed by Henry Paulson, formerly of Goldman Sachs, launched the TARP program under President George W. Bush in order to stabilize the financial system.

Fast forward to the recent midterm elections. Democrats lost the House to the Republicans because many voters believed that among other things that the Democrats were the architects of TARP and that TARP did not work. TARP did pass with the help of Democrats and TARP did salvage the banking system. In fact the Government may make a profit from TARP.

The country is climbing out of the deep recession slowly. The recovery is proving to be a slow one that will take time. In reaction to the slow pace of the recovery, the Federal Reserve Bank announced “Quantitative Easing 2,” or “QE2,” which entails the buying of $600 billion dollars of Treasury bills in order to stimulate the economy by keeping Treasury prices at lower levels. With the stimulus program, the Feds also are attempting to keep interest rates down.

In early November, before the Treasury started its pre-announced buyback, rates reached the lowest levels that the markets have seen since the 1950s.

Unfortunately, even when interest rates hit new lows, perspective mortgage clients can let greed take over. Some folks are always hoping for still lower rates. There are a few reasons why rates have moved higher since the Treasury buyback was announced.

First, everyone on Wall Street and elsewhere knew what the Federal Reserve and its Chairman Ben Bernanke were planning on doing. The prices of the 10-year Treasuries and those of the mortgage market reflected the anticipated program. Others are talking about the potential inflationary effects of a devalued dollar.

Since the buy back program was announced, the rate on the 10-Year Treasures has gone up and interest rates have also ticked up.

Interest rates should stay in a relatively narrow range for the near term. If you can save hundreds
of dollars now, go ahead and pull the interest rate trigger. Your next worry will be how to spend the money you will be saving.

Bill Starrels lives in Georgetown and is a mortgage loan officer. He can be reached at 703 625 7355 or by email, bill.Starrels@gmail.com

Ask the Realtor
• October 6, 2010

Dear Darrell:
I hear the city shuts down in August and there is no point in trying to sell my house then. I don’t want to miss a possible buyer, but I also don’t want the hassle of open houses, etc. if no one is going to be looking. What’s the best time of year to sell?
— Lloyd L., Woodley Park

Dear Lloyd:
As with most things, it depends. It is questions like yours that make me long for a different personality, one which was certain of everything. So I could just say, “Don’t put your house on the market in August. The city is dead then.” But being who I am, I don’t see this as an either/or question. Yes, the market is traditionally slower in August, and people are traditionally away on vacation, and it is traditionally hot and humid.
However, when is the last time anyone found the current world traditional or predictable? It isn’t! And neither is the real estate market. There are plenty of potential buyers who don’t go away in August, maybe because they are saving their money, or are gearing up for the fall, or any one of a myriad of reasons.
The old real estate adage, “it only takes one buyer,” is never better applied than in this situation. No one knows when that one buyer will come along. There is one thing for certain, however: if your house is not for sale in August, no one will make an offer on it in August.
What it boils down to is how you feel about the process of having your house on the market. If it really stresses you out, and you aren’t in any rush, then you can afford to wait. But if you really want to sell, I encourage you to meet with your realtor and come up with a plan which will allow you to have your house on the market without stress. For instance, you don’t have to have open houses. If your house is being marketed through the usual channels, your realtor will get to the potential buyers. And when a buyer wants to see your house, all you have to do is get things straightened up.
My advice is to put it on the market now and begin looking for your buyer!

Darrell Parsons is the managing broker of the Georgetown Long and Foster office and abides by Equal Housing Opportunity regulations. Have a real estate question? E-mail him at darrell@lnf.com. He blogs at georgetownrealestatenews.blogspot.com.

Ask the Realtor
•

Dear Darrell,
I am working with a Realtor to buy a house. He keeps asking me for more and more of my financial information. I like working with him and think he is a good agent, but am a little put off by having to give my financial particulars. I also don’t want to be rude by telling him this is private and that I don’t want to share it. Is it common for agents to request this sort of thing?

Amanda R.

Dear Amanda,

Without knowing exactly what the Realtor is asking you for, it’s a bit hard to answer your question. But assuming the Realtor is asking questions related to the resources you have available for purchasing a property, these are legitimate questions. Part of the work of a good Realtor is to educate his client. There are a couple of ways to go about this when discussing financial information. One is for the agent to ask the questions (as is happening in this case). Another is for the agent to encourage you to talk with a mortgage broker who can tell you about a wide variety of loan programs which might be suitable for you. Either way, it is important for you to understand the costs of buying a home—the immediate costs and the long term costs. As evidenced by the huge number of people who have gotten into trouble because they were overextended financially, it is critical that you be certain that you have both the cash (down payment and closing costs, etc.), and the income to support the monthly mortgage cost. If you are uncomfortable giving this information to your agent, you can certainly give it directly to a mortgage broker, and that person can counsel you on financial matters. If you don’t know a mortgage broker I suggest you talk with friends or ask your agent for a recommendation or two. One other very important aspect of this process is that in light of the recent systemic financial problems, lenders are being far more cautious. This makes the process longer, and requires a fair amount more documentation and review. Your agent no doubt knows this and is probably trying to help you get your ducks in a row early on, so that when you find the property you want, you will be prepared to make an offer and move forward.

Ask the Realtor
• September 8, 2010

Dear Darrell,

I know you are probably predisposed toward someone buying rather than renting, but it seems to me that buying now is not a good idea since it looks like house prices are still dropping — at least that’s what I seem to be hearing and reading. Why do realtors keep telling me it’s a good time to buy? — Steve A.

Dear Steve,

I’m not necessarily predisposed to sales as opposed to rentals, but there are actually at least a couple of good reasons to buy now. I know there is the general idea that one shouldn’t buy before the market hits bottom. That’s good advice, but the only way to know when the bottom is reached is when one is looking back at the bottom. So it is a guess, and it involves other factors, the most important of which is mortgage interest rates. Even if one were to guess right about the bottom of the market, the interest rates at that time probably would have risen, and the advantage of buying at a lower price would be wiped out by higher cost of the mortgage. I say this with trepidation, but I see signs here and there that things are beginning to stabilize. Also, what you are reading is typically national news rather than local news. In fact, D.C. has fared better than most areas, and the bottom here will be different than the bottom elsewhere.

In the case of realtors who are suggesting it’s a good time to buy, I would quiz them about why they believe that to be a good idea. I’d ask them to go over the numbers with you so you can actually see whether it makes sense for you at this time or not. Also, renting is great in some ways, but it isn’t perfect either. If you decided to buy, keep these three things in mind: location; don’t overpay; buy what you can afford.

Darrell Parsons is the managing broker of the Georgetown Long and Foster office and abides by Equal Housing Opportunity regulations. Have a real estate question? E-mail him at darrell@lnf.com. He blogs at georgetownrealestatenews.blogspot.com.