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It's Back to the Basics - Mortgage Products Are Changing

by The Pat Wattam Team
When Bob Dylan wrote “The times, they are a-changing,” he probably wasn’t talking about home mortgages. But current trends are signaling a shift in the industry, back to mortgage basics.
Not unlike other industries, the mortgage industry is naturally cyclical. After the heated Market of recent past, things have started to even out, much like the swing of a pendulum over time. Right now, it’s swinging back to the basics.
What this means for consumers is a change in mortgage products and guidelines this year, with an emphasis on traditional mortgage products, such as a fixed rate for 30 years. The more risky sub-prime market has virtually disappeared, and while variable rate mortgages are still available, demand for them has been greatly reduced.
The changes bode well for consumers, since traditional mortgages are safer and rates are relatively low at present. Mortgages are now focused on solid long-term fundamentals that are sustainable, limiting the risk for both the home buyer and lender. In effect, the mortgage industry is shifting back to a less-frenzied market reminiscent of five years ago, where pragmatism was more acceptable.
Today, lenders are tightening loan requirements. Those with spotty or little credit who would fall into the sub-prime category will find it harder to land a mortgage. The good news is that the Federal Housing Association (FHA), which insures loans with as little as a 3% investment, takes a more common sense approach to underwriting. While credit score is a factor, underwriters have the authority to manually review a buyer’s situation to see if it meets FHA’s guidelines. Underwriters can take into account borrower re-established credit history or alternative credit history for those with no credit scores. For example, borrowers may qualify for an FHA loan as little as 2 years after a discharge from bankruptcy.  This change is helping push through more loans with a new, more simplified process. In addition, the federal government has kept interest rates at near historic lows, keeping the cost of mortgages down. 
While the 80/20 loan combo is all but evaporated, there are still loans out there for borrowers with no down payment. Generally these borrowers must have good credit and employment history. There are even 100% loans with no PMI (private mortgage insurance) both on conventional loans and another popular program in our area, Rural Development. Rural Development loans are available in any parish considered rural, which in our area includes all of Ascension and Livingston parishes. Because of hurricanes Katrina and Rita, you can even do a Rural Development loan in East Baton Rouge Parish as long as the property is outside the city limits of Baton Rouge until 8/29/08. 
One of the biggest changes in the market is the absence of investment buying. The housing boom of recent past was fueled by speculative buyers who sought to buy properties that would be then sold or flipped for a handsome profit. The leveling of home values and, in some areas, a drop in prices have made this activity less profitable, therefore practically eliminating it.
Instead, consumers are buying homes for the more basic reasons: because they need a good roof over their head. Home buyers are more interested in details such as the location, proximity to schools, and the right mix of bedrooms and bathrooms. Most important is that current home buyers expect the cost of monthly payments to be realistic for their financial situation and lifestyle.
In today’s changing environment, it is important to have a lender that can not only help borrowers decide which program best fits their needs but can also help counsel who can’t get a mortgage now on what steps to take so they can in the future.
In the end, it’s a good time to buy a home if you plan on staying put for more than two years and are moving for the more basic reasons: a new job, closer to school, a bigger family, etc.  
What does this mean if you’re selling a home? Although the market isn’t yet balanced – the amount of sellers still out-numbers the buyers—there are buyers out there, just less of a frenzied rush to buy now. With hopes of inventories stabilizing in the near future, sellers have something to look forward to, for the times, they are a-changing.
By Leslie Lovett, Branch Manager with Market Street Mortgage in Baton Rouge

Credit Industry and the Impact on the Baton Rouge Real Estate Market

by The Pat Wattam Team

Are the problems  lenders are experiencing with the sub prime loan Market going to affect our real estate market in the Baton Rouge Area?  The obvious answer is both YES and NO!  YES, in that people who were marginally qualified will not be able to get a  home loan easily, and NO because those same people will be able to get a home loan once they do what they need to so that their credit score will be acceptable.  I am still able to find 100% financing, no document loans, and such for people who have good credit scores (over 700).

One of the things we have discussed on my team is making sure we take our marginal buyers to the lender to get them prequalified in person so that we all know what has to happen in order for this person to buy a house - like we used to do 20 years ago! 

The other thing we have learned is that each lender has different investors so if one client is turned down by a lender, we don't just stop there but see if anybody else can do the loan.  It is VERY important right now to get credit approved before house shopping if your credit isn't perfect.  Will put you in a much better position as a buyer.

The rules on sub-prime loans are changing daily so we are going back to using FHA and VA loans again.  They offer more leniency for the buyer who may have a debt to income ratio that is a bit high, and offer low down-payments also. We are also sending a lot of buyers to get the BOND money (until it runs out) and we expect to see more and more of those issues coming available over the next year.

If you ever have any questions about the mortgage industry and how if might affect you personally, don't hesitate to give me a call.  We'll try to help you figure out the best product for you!  Call me any time at 225-298-6900.

Real Estate Update for the Greater Baton Rouge Area

by The Pat Wattam Team

It seems that people are getting more and more concerned about our real estate Market.  It is interesting to note that a perception can  become a reality if enough people believe it!  Let's be clear!  Our market, counting all 11 parishes that our MLS services, is up over 6% from the end of July last year until the end of July this year.  This is trending back to a normal market that we have pretty much always experienced here in the Greater Baton Rouge Area ever since I went into real estate almost 25 years ago!  Of course, the exception is the oil bust in the '80's.

I just returned from a quick trip to Las Vegas and Phoenix for a Steve Vai concert, and while there met up with some fellow REALTORS.  To hear their stories and to look at our market is like, as my Mom would say, "daylight and dark".  Houses ARE talking longer to sell, there is some concern about the number of new construction homes in Ascension and Livingston Parishes, and with all the new apartment complexes being built.  Do we have enough people coming in this market to absorb all of these units?  I think that still depends on New Orleans.  We don't have the influx as we did during the year after Katrina, but I still get calls weekly from people who have decided to sell their house in New Orleans and move to Baton Rouge! 

Keep tuned right here for my market updates and you will be the first to know if this market starts to take a turn down!   We still expect a strong market for the next several years!

And, as always, if you have any questions about your specific situation, just give me a call at 225-298-6900!

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Pat Wattam
RE/MAX First, Independently Owned and Operated
4750 Sherwood Common
Baton Rouge LA 70816
Office Direct: 225-298-6900
Office Main: 225-291-1234
Fax: 225-295-1234

RE/MAX First
Each Office Independently Owned and Operated
Main: 225-291-1234

Licensed by the Louisiana Real Estate Commission