Quick video blog to consider whether you should buy a house now, or wait a year for things to stabilize.

If you were asked to make an investment in which you were told you would never see your money again, how much would you invest?

If you put money in a savings account each month, and the bank guaranteed you that you could never withdraw the money again, would you keep depositing checks?

If your savings account was only available to keep your bank from losing money, but you could still lose money, would you keep money in that savings account to protect your banker?

If you put money in an account that was guaranteed to never pay you more than 0% interest, would you want to save your money in that account?

What if the money in the 0% account could lose money, even if it couldn’t gain money?  How much would you put there?

What are these horrible accounts I am talking about?

Did you guess Home equity?

Think about it -

• When you make a big down payment on a house, you don’t get paid money each month by the bank for that, do you?
• When you send in extra principal payments, does the banker pay you interest?
• If your home loses value, does the bank lower your mortgage balance, or does your ‘Home equity Savings Account’ disappear?
• If you have a lot of equity, does that make your house go up in value?

Down Payments, Home equity and mortgage repayment or early payments are all questions regarding where you should store your wealth over the long term.  Equity in your house doesn’t make you safer or wealthier – it just sits there.

Big down payments are safe for the banker – not you!

Of course, you pay interest on money you borrow, but that is a choice – you can pay interest, and store your money elsewhere, or not pay interest, and maybe keep the bank from losing money.

Make sure your mortgage provider asks a lot of questions about down payment amounts and home equity before you structure your mortgage.

If you already are in a mortgage, get an annual checkup to make sure your mortgage is helping you to succeed financially, rather than helping the bank succeed.

Mortgage markets improved last week in low-volume trading.

Between Monday to Thursday, Wall Street focused on the upcoming jobs reports and mortgage markets gained while traders jockeyed for position. Mortgage rates drifted lower through Thursday afternoon. But, then, after a better-than-expected Non-Farm Payrolls report Friday morning, mortgage markets — and mortgage rates — reversed.

Overall, mortgage rates dropped last week, but only by a small margin. Rates were best Thursday afternoon.

It was the second consecutive week in which mortgage rates fell.

Last week was also interesting in that both stock markets and bond markets improved, proving that rates don’t always rise when stock prices do. 455 of the S&P 500 companies posted gains last week.

If you’re shopping for a home or a refinance, though, don’t rest on your laurels. After Friday’s big sell-off, this week opens into a major headwind and, plus, the Federal Reserve’s support for mortgage markets ends in just 3 weeks.

This week, without much data to influence traders, the upward momentum in rates may have little cause to temper. We’ll see the Consumer Confidence numbers on Tuesday and Retail Sales on Friday.  Beyond that, there’s not much else.

After last week’s performance, conforming mortgage rates in North Carolina may be poised to rise rather sharply. If you’re waiting for the right time to lock your rate, it may have been this past Thursday. Consider locking your rate early this week to protect against further rate hikes.

You are probably aware that the first time home buyer (FTHB) credit of $8,000 ends soon – contracts must be signed by April 30th and close by June 30th.  A few rules that you may not be aware of:

1. For homes purchased after November 6th, single filers with modified adjusted gross income in excess of 125k (225k for married filers) cannot take the credit.
2. The income threshold is lower if the home was purchased prior to November 7th (phase out starts at 75k for singles and 150k for married couples).
3. If you move within three years of buying the home, you have to pay the credit back.

You do have the ability to choose which year to take the credit.

• If you were a FTHB in 2009, you can elect to amend your 2008 return or claim the credit in 2009.
• Similarly, if you are a FTHB in 2010, you can elect to claim the credit in 2009 or 2010.

This rule offers flexibility if you go over the income threshold in one year, but not the other.

If you have lived in your current home for 5 of the past 8 years, you can claim a credit of $6500 using the same rules that apply to FTHB’s, above.

I’m not a huge fan of the governments decision to spend our money this way, but, I do think you will do a better job spending the $6500 /$8,000 than they will, so go ahead and enjoy the cash if you are buying a house!

The foreclosure filing statistics are shocking — over 300,000 homes were served last month alone.  However, the real number depends on where you live.

As reported by RealtyTrac, just 4 states accounted for more than half of the country’s foreclosure-related activity last month.

• California : 22.7 percent of all activity
• Florida : 14.9 percent of all activity
• Arizona : 6.7 percent of all activity
• Illinois : 5.7 percent of all activity

Just because foreclosures are concentrated geographically, that doesn’t make them less important to homebuyers in Charlotte and around the country.  There’s been more than 1.4 million foreclosure filings in the last 12 months and that’s a figure that can’t be ignored.

Distressed properties now play a role in one-third of all home resales.

Therefore, if you’re in the market for a foreclosed home, here’s a few things to keep in mind.

1. Properties are usually sold “as-is” and may not be up to living standards. Be sure to physically inspect the home before buying it.
2. The home has to meet living standards to use normal FHA or COnventional financing.
3. Buying a home from a bank is rarely as streamlined as buying from an individual homeowner. Be prepared for delays form the selling bank that can delay closings.
4. Some foreclosures aren’t listed for sale publicly.  A real estate agent may be able to access more foreclosure inventory.

In order to use the federal homebuyer tax credit, you must be under contract for a home by April 30, 2010 and closed by June 30, 2010.  That doesn’t leave much time to find a bank-owned home and make it to closing.  If you’re serious about buying foreclosures, it’s probably best to start your search soon.

You need to get your credit score to at least 740 in today’s economy.

If your credit score is not a 740 or higher, you will pay more for things like home loans, auto loans, credit cards, insurance. The extra costs of all these things will make it very difficult to have extra money left over.  A lower credit score is like a stealth tax that takes away your ability to save more, spend less, and possibly, even earn more.

The main reasons people have lower than a 740 credit score:

1. High balances on credit cards
2. Late payments
3. Collection accounts from old medical claims
4. Collection accounts from utility bills that their college roommate was supposed to pay
5. Not establishing credit

Ongoing things to do:

• Keep your credit card balances as low as you can
• Keep your credit limits high – don’t close accounts, and don’t lower your limits
• Pay your bills on time

If you have old collection accounts, touching them is going to hurt your credit.  If you aren’t planning any major borrowing in the next year, let’s go ahead and clean them up.  Paying off an old collection account will not immediately improve your score, in fact, your score will likely drop for a few months.  The credit scoring model treats recent derogatory credit more harshly than old stuff.  So, if you pay off a collection, it makes it appear recent and brings down your score.

Even if “it’s not your fault”, paying a collection that your old insurance company or roommate was supposed to pay, is far better in the long run than being right.  Take the hit, write the check, and over time, that old collection will fade from memory, and more importantly, from your credit report.

If you are thinking of buying a house or car this year – don’t touch old collection accounts! Stirring up the past will lower your score and will cost you more to borrow.  Make the important purchases first, then go back and clean up the old stuff on your credit.

When people tell me they “are working on their credit”, I usually wince, as what they are doing is hurting them.  People normally close accounts (Bad), pay off old collections (bad), and lower limits on existing credit cards (bad).  If you need to “work on your credit, have a mortgage professional who understands the credit scoring model help you create a plan for success.  Call me if you want to talk it over and don’t have someone else to work with.