A mortgage loan officer stopped by the office last week to speak at our sales meeting.  His subject was the “Mortgage Market Meltdown: What it Means to You.”    The speaker was Scott Matuk of First Community Mortgage, and one of my recommended lenders.  He said that if the mortgage market was compared to a hurricane, it would be a Category FIVE because not only is the market affecting the economy of the U.S., but it’s also have a huge impact on Europe, Asia, etc.  In the last two weeks alone, $2 TRILLION has been lost in the market.

There were several factors that caused this huge mortgage problem, including: subprime and alternative lending practices (anyone with a heartbeat could generally qualify for a home loan and AltA was for people with good credit but had other issues).  These loans accounted for between 40 and 70 percent of all loans in 2005-06 and this appetite brought loose underwriting practices.  Then reality set in and we learned many folks had bad credit for a reason – they couldn’t pay back the money they borrowed.

As this began happening, mortgage backed securities – those giants who typically buy loans that free lenders to loan even more – start backing out of purchasing them.  Or if they do take the loans, they pay the loan companies less for them.  This practice either shorted the liquid assets of lenders or stuck them with high-risk loans.  Eventually they were unable to cover the losses from delinquent loans.  So the consumer is maxed out and unable to repay.  The securities industry is no longer willing to buy subprime and AltA loans from lenders.  And the subprime lenders have no more equity to support the loans, causing the perfect storm.

For the real estate industry, it means there are fewer potential buyers, increasing inventory, increasing foreclosures, and increased pricing pressure.   The good news is that although more exotic, weird mortgages are going away, there are still plenty of loans available for buyers.  Typically, these are conforming loans and government backed loans such as Fannie Mae, FHA and VA.  But buyers are cautioned to not get too comfortable. 

If you are planning to buy a home in Smyrna, LaVergne, Nashville, or the surrounding area in the next six to twelve months, have your credit score pulled now to see if your credit is okay.  Talk to a lender like Scott (who can be reached at 500-5276) who can counsel you on what you can do to increase your credit score before you’re ready to buy.  Even loans for people with 720 scores may no longer be available, so this is vital.  You should be prepared to bring your tax returns, W2 forms, bank statements and pay check stubs when you go for a home loan … this means that you are getting a fully documented loan and those are the loans that are still available.

If you are a seller, you must get real about the price of your home.  No “I’m going to price it $5,000 higher than it’s worth so I’ll have room to negotiate.”  Price it at what your agent believes is fair market value, not what you think it’s worth.  Your agent has access to what’s happened with home prices and they do not take lightly the home price they recommend!   Scott said that sellers could also consider seller-held second mortgages for buyers… I’ve always advised my sellers to steer clear of these, but maybe this scenario is worth talking about.  BEWARE of the non pre-approved buyer.  If you get an offer, make sure the purchase contract states that they must have a financial commitment letter from their lender within five days of binding.  If they do not provide this, the contract becomes void. 

Finally, rest assured that most bank-backed mortgages will be okay.  Get a loan through someone who is controlling the decision – be a bit more cautious of someone who is sending your loan application to a land far far away for approval.  And remember, ALL loans will be credit score driven in the foreseeable future.   For everyone, routine credit monitoring should be just like your annual physical.  Every year, review yoru credit.  If you are considering buying or selling, start your credit review process three to six months in advance.  Get your financial house in order.   Good luck!

Reprinted with permission by Kathy Tyson.

I always recommend to buyers to have a home inspected before clossing, for both existing homes and new construction.  There are thousands of little things that can go wrong in a home and a home inspection will protect the buyer from getting a lemon.  It’s easy to find a home inspector – we have brochures at my office containing information from reputable inspectors.  Home inspection prices range from $250 to $450, depending on the size of the home.  Inspectors examine the heat/air units, operational appliances, crawl space (for mold, rotting support beams, etc.), attic ventilation, the roof, and much much more.

There was an interesting article today on MSNBC.com titled Don’t Get Burned by Shoddy Home Inspection.  It’s defnitely worth your time to read.

Photo credit: Attic to Basement Home Inspection, LLC.

Welcome to my first official entry on my new web site!  I am a licensed real estate agent with Bob Parks Realty, LLC, your source for real estate in Rutherford County, Nashville, and surrounding areas.  Please come by often for updates on real estate in middle Tennessee!

Charming, renovated home in popular Crieve Hall subdivision.  Finished basement.  Gleaming hardwood floors, updated kitchen with island.  stone fireplace, corner lot, carport and deep basement garage.  Beautiful trees!  Roof is two years old and HVAC is four years old.