FHA is about to get a little more expensive

If you are shopping for a home and plan on utilizing the FHA’s 3.5% mortgage program, you might not want to wait too long to solidify your purchase.  FHA has announced its plan to increase its mortgage insurance premium by .1% in 2013.  Currently, FHA borrowers pay an Up Front Mortgage Insurance Premium (UFMIP) of between 1.20 and 1.50%.  The other change that has yet to be confirmed, is the talk of making mortgage insurance (MIP) permanent on all FHA loans.  Currently, if your mortgage balance were to get to 78% of the purchase price and/or you’ve made 60 timely payments on your mortgage, you could see your MIP fall off your loan.  If the proposed change were to take place, new borrowers would see the MIP stay on their loan for the life of that loan.

FHA mortgages are a vital part of the housing market.  Since mortgage insurers of conventional loans require a 680 credit score and can be expensive, even at that score, the lower credit score requirement and lower down payment option make FHA a very important mortgage program, especially for first time home buyers.  So in short, if you are in the market to purchase a new home, or maybe even considering a refinance, don’t hesitate too long and take the lower mortgage payment that you can get today.

FEMA Map for RI

Today, FEMA declared three counties of RI as disaster areas.  What that means for anyone who is in the process of a mortgage, whether for purchase or refinance, and had your property appraised prior to Hurricane Sandy, your mortgage lender will probably be looking for a reinspection of the property, to ensure that the property is still in good condition.  This is not only to protect the lender, but the potential homeowner.  If you're purchasing a home, it's in your best interest for this to happen so that if the storm did result in damage to your future new home, the seller's insurance has to cover the repair.

Fear of Lender Buy Backs

If you're in the process of a purchase or refinance mortgage, here's a great explanation of what you might be attempting to overcome.

CNBC Video on Fear of Mortgage Buy Backs

When refinancing, consider lowering the term as well

Many borrowers are taking advantage of today’s record low rates to refinance and reduce their mortgage payments, but have you ever considered reducing your term as well?  Applying for a new, lower rate AND dropping the number of years on your mortgage can and will reduce the overall amount you pay for the life of the mortgage.

Consider this.  A homeowner who bought their house 2 years ago and financed $200,000 over 30 years at a rate of 5% has a principal and interest payment of $1073.64.  If they were to refinance to a new 30 year mortgage at 3.5%, their new payment would be about $898.09, depending on pay-off and new closing costs rolled in.  That’s a savings of $175.55 per month.  Not bad.  But now consider the same refinance, but for 25 years.  The same rate would result in a payment of $1001.25 for a savings of $72.39 per month.  Doesn’t sound like much until you look at the fact that the new 25 year mortgage also got rid of 3 years of the mortgage payment.

If that borrower kept the original mortgage they had, they would pay over $360,000 over the course of the remaining 28 years.  By refinancing to a new 25 year mortgage, they not only save the $72 per month, the overall payment over the life of the new loan is $300,375.  That’s a savings of over $60,000.

So, when considering a refinance, consider the lower term as well.  Many are utilizing this option and will be greatly rewarded for it in the years to come.

Want a lower rate? Better act fast!!

Even with the last week’s weaker than expected job report, which would generally lead to rates staying as is, if not moving slightly lower, you can expect rates to tick up a bit starting this week.  The reason is a bit complicated and technical, but here’s the long and short of it.  While factors such as credit score, down payment (for purchases), equity position (for refinances), and term (30 year, 15 year, etc.) will affect your rate, there are other factors from the investor’s standpoint, that will affect it as well.  One such factor is called the guarantee fee, otherwise known as the “g-fee.”

A guarantee fee is a fee charged by entities such as Fannie Mae and Freddie Mac.  They help pay for things that happen behind the scenes of a mortgage transaction.  Mortgage lenders “pool” loans together and sell them in blocks.  They will also sell the servicing of a loan to another entity.  This simply means that just because Bank A collects your payments, Lender B still owns your mortgage.  Things like this are a cost to lenders and they pass this off in the form of an adjustment to interest rates.  Hence, the g-fee.

The FHFA (Federal Housing Finance Agency) is increasing this fee, partly in hopes of making Fannie Mae and Freddie Mac a less attractive option for those in the market for a home loan.  The FHFA’s adjustment to the g-fee goes into effect on November 1, 2012, but lenders are preparing for that by adjusting rates starting this week.  The reason for this is that if you start a new mortgage application today, by the time you loan closes and funds, the lender will be trying to securitize your loan with Fannie or Freddie at the time the new fee is in place.  Rates could look as much as .25% higher this week, although the jobs report of last Friday is keeping things tame at the week’s open.

How do you combat this?  Apply now if you’re in the market for a refinance.  If you’re purchasing, shop around with a few lenders.  Know you credit score when you call to avoid too many credit inquiries.  This will keep you in a position of being an educated and qualified borrower.

Don't go buy that new furniture just yet!

When soon to be new home owners find out that their mortgage application is not only approved, but clear to close, they think they’re in the clear for having inquiries on their credit report and/or obtaining new accounts.  Often, a new account will be something like a large furniture or appliance store, or worse, that new car you wanted to buy prior to applying for a mortgage.  What you may not be aware of is, the lender will be pulling your credit report again, just before closing.  It’s part of a process called the “Loan Quality Initiative”  so the report is commonly referred to as an “LQ” in the industry.

The initiative was designed to ensure that loans that go to closing are of the highest quality.  Higher quality loans means less bad loans down the road and less burden on the tax payers.  It also helps to keep interest rates lower, since there is a lesser need to recoup lost revenue on the part of Fannie Mae or Freddie Mac, who are securitizing these loans.

So what do you, as a consumer, need to be aware of and practice as a mortgage applicant? Easy, don’t run up any new debt or even inquire into it until you’ve closed your loan.  A credit inquiry on your LQ will result in your lender asking for a letter stating why your credit was pulled and that you haven’t actually been granted new credit.  You also want to make sure that you don’t actively use your existing credit and increase the balances, or more importantly, the minimum monthly payment.  Significant changes to your credit profile or amount of your monthly liabilities can turn an approval into a denial.  The LQ will provide information on any changes in your budget and when the numbers are recalculated by an underwriter, if there is new or increased liability on the part of the borrower, the debt ratios will increase and if they go over the maximum allowed by the guidelines of the loan you’ve applied for, your approval will be switched to a denial.

The best thing to do is simply be extra careful with your credit during the loan process.  Waiting just a few days to make that big purchase will only ensure that your loan stays approved, and this goes for a refinance as well.

Why can’t we close our mortgage in 30 days?!!

With rates under 4% for quite some time now, the amount of activity in the mortgage world has been vigorous, to say the least.  Home prices coupled with these rates have dramatically increased the number of purchase mortgage applications.  Add in the economic programs of HARP 2.0 and FHA Streamline Refinances and the number elevates to tremendous numbers.

This influx of activity not only has lenders at capacity, but title companies, appraisers and closing attorneys as well.  Closing a mortgage in 30 days isn’t impossible, but it’s rare.  You almost need a “perfect storm.”  You need to be, what I like to call, a “submission friendly” borrower.  The amount of documentation needed to get a mortgage processed is cumbersome, to say the least, both on the part of the borrower AND the lender.  In recent years, the amount of disclosures required for a mortgage application has practically doubled.

A couple of the new disclosures create delays in the process due to their time sensitivity.  A lender is not allowed to order an appraisal until the borrower has provided an intent to move forward with the loan.  This is a disclosure within the application package.  Once this item is signed, then and only then, can the lender order the appraisal though an appraisal management company.   The processing of the payment for this appraisal cannot take place for three days after the intent is signed and the appraiser isn’t going to perform the appraisal until he or she knows they’re getting paid.  Once the appraisal is done, if there are no issues, you’re looking at a 7-10 day window to get the report.  So we’re already into the process by about two weeks.

The “submission friendly” borrower will provide all of the items asked for, such as W-2’s, pay stubs, bank statements, etc.  Anything missing will delay the file from even being looked at by an underwriter.  If there are complete files in line for the underwriter, those will be looked at first.  With the current influx of files coming in, an incomplete file will never be “next.”

Once the file does reach the status of “Clear to Close”, about 15 to 20 days later, the closing department still needs to do their checks and balances.  They need to verify that the APR from the initial application has not changed and that the loan complies with all federal laws to protect the borrower as well as the company.  If any changes are necessary, the file needs to be redisclosed and there is a mandatory three day waiting period.  Preparing the loan for closing generally takes 48 hours.

While it is still possible to close a loan in 30 days, it’s better not to get your hopes up and consider the fact that 30-45 days is the expectation.  It’s a small price to pay for a smoother transaction to secure something that will last 30 years.

You’re pre-approved! Now, go buy a house, but don’t do it alone!

You’ve sought the knowledge and professionalism of a mortgage originator to get pre-approved for a mortgage.  You now know what the current rate is, you know how much you need for a down payment and closing costs, and you’ve got a letter in your hand that says you can buy a house for $XXX,XXX.  Now you’re ready to go “house shopping.”  But you’re not working with a realtor.  WHY NOT?!!

Many home buyers, especially first time buyers, don’t realize that the seller of a home pays the realtor’s commission.  That means that if realtor Joe Smith has a house listed with a 6% sales commission, he is willing to split that commission with any realtor that brings a buyer to the home.  So if you’re working with realtor Mary Jones, she brings you to Joe’s listing and you buy it, Joe splits the commission with Mary.  Mary will assist you with negotiating the price, filling out the proper forms, recommending an inspector, and most importantly, Mary knows the laws necessary to make sure you are legally protected as a home buyer.  Joe does know them as well, but Joe’s responsibility and first obligation is to his seller, so while you may think it’s ok to just call the agent whose name is on the sign in front of a house, you still want someone working on your behalf and yours alone.

If it turns out you don’t like the house that Joe has listed, you can have Mary do a search on the MLS for the specifics of a house you have in mind and in your price range.  If you want three bedrooms, two bathrooms, fireplace, swimming pool, finished basement, etc., Mary can look that up in the MLS and get you a list of houses that meet your wants and needs.  You may think that you can do that yourself with the internet, but if a house goes on the market today, it may not hit the internet for a day or two.  In the meantime, another buyer who is working with a realtor will get to see it before you and might beat you out on the home of your dreams.

Summing up, you wouldn’t try to get your mortgage without seeking the help of a qualified professional, don’t do it when you’re ready to buy your home.  The service is literally free and priceless!

Are today's guidelines tighter?

There are some who would argue that today's mortgage guidelines are too tight to allow the average person to buy a home.  Are they?  When compared to the guidelines of 2006, one could argue that to be the case, while others would use the rebuttal that the guidelines of 2006 were too loose.  Either way, there’s no denying that houses are selling.  From time to time, I like to pass on this statistic and the slide below shows that, in fact, homes are selling and at an average of 12,466 per day across the country, according to the National Association of Realtors (NAR).  And of those, just under 9000 were buyers who obtained a mortgage.  That’s and average of  nearly 9000 people getting a mortgage every day in this country.

Yes, it is not as easy as it once was to purchase a home, but there should be some level of work involved in accomplishing the American Dream.  Having good credit vs. marginal credit, having a down payment vs. no money down, proving you have a job vs. fogging a mirror, etc.  This is the old “skin in the game” theory.

The real estate market is such that the environment is creating an opportunity for first time home buyers to realize home ownership at a lesser monthly payment than renting.  With today’s prices and interest rates, the monthly payment on a mortgage can be less expensive than a rental.  Take into account the tax write off and you’ve got an even better scenario.  Surveys being done by experts are proving that the opportunity is now.

In any event, if you're considering a purchase in the near future and haven't spoken with a mortgage expert, it's never too early to do that.  It's also a great way to test them.  If you let them know you are looking to buy somewhere down the road and they don't give you the time of day because you're not buying now, that's a good indication of the service you'd get down the road.  I hear that all the time.  "You're the first person who would talk to us about this."  You also want accurate information about the process.  I can't tell you how many times I've heard someone say "My uncle told me I should do this" or "My cousin told me it was supposed to be this way."  Mortgage guidelines have changed a lot over the last couple of years and probably since your uncle or cousin went through the process.  Get the facts now and maybe even see what your credit report looks like.  You may need to "tidy up" in that department before being able to buy.  An educated consumer is the best defense against those "tighter guidelines."

Trying to catch the market at the bottom can get you bitten in the same place

Often, I hear potential home buyers commenting on how they’re waiting for the market to bottom out before buying a home.  But what is the indicator that the market has bottomed out?  Truth be told, you don’t know until it’s already happened.  So do you roll the dice and hope you catch it at the very bottom, or do you find something you like, get a comfortable price, payment, and interest rate now and not sweat the fact that if you had waited, you could have save $12 a month on your payment?

The fact of the matter is, no one knows when the market will, has, or did bottom out.  We know that prices are at record lows, as is mortgage rates.   Waiting for the market to “bottom out” has been a process that has bitten more people in their bottom than afforded them the opportunity to get a better deal.  So many things can happen in that time that you’re waiting.  Rates could go up.  The market could turn around.  The house you had your eye on could get scooped up by another buyer.  And the list goes on and on.

The phrase “There’s never been a better time to purchase a home” has been used over and over for the past year or more.  There’s a reason for that.  Rates are very low and have remained steady for at least a year.  Prices are stable and actually already negotiable, so why wait for that?  Even if you were to luck out and get a slightly better deal on rate or price, is it really worth the risk of losing out on your dream home?  I’ve seen the fail too many times.  So if you’re in the market to purchase a home, whether it be your first home, a move up home, or you’re downsizing, get off the fence and pull the trigger.  In the long run, you will be glad you did.

Success with HARP

I have a friend who likes to use the line “No one’s perfect, not even a perfect fool.”  Well, for those who think the government can never do anything right, here’s an example of them getting something done well.

The Home Affordable Refinance Program (HARP) was designed to help homeowners with a Fannie Mae or Freddie Mac based loan refinance into a lower mortgage rate and payment, regardless of their current equity position.  After the recent real estate meltdown, many homeowners were left with less and in some cases no equity in their home, even though they may have put down 20% when they bought their home.  When you don’t have 20% equity, mortgage companies require Private Mortgage Insurance (PMI).  Well, if you put down 20% and the value of your home went down, traditional financing would require you to incur PMI on any new mortgage you obtained.  That meant that if you were trying to refinance to a lower rate, but didn’t have 20% equity anymore, your savings was negated by the need for PMI.

HARP was designed to take that obstacle out of the way and it’s working.  Recently, I uploaded a borrower’s application to refinance where they were “underwater” (Wall Street’s term for owing more than your home’s current value).  When I loaded in an estimated value of $300,000, the program told me that Fannie Mae’s data felt that the home value was more in line with a value of $256,000, but they were going to use my figure and the borrower could waive the appraisal.  These borrowers are going to not only save $330 a month, they are going to save $450 on an appraisal fee.  The system works!

How can you tell if your mortgage is backed by Fannie Mae or Freddie Mac?  Here are a couple of sites where you can check.

                www.fanniemae.com/loanlookup   (or call 1-800-7FANNIE, 8am to 8pm EST)

                www.freddiemac.com/mymortgage  (or call 1-800-FREDDIE, 8am to 8pm EST)

You can get all the info on qualifications and guidelines at the Making Home Affordable website program page, contact your current mortgage provider, or me.

Rent vs. Buy - Start Packing!

There are studies being done right now that are telling us taht people who are on the verge of buying a home need a little extra explanation as to why right now is the right, if not best, time to buy a home.  It is cheaper, now, to buy a home that it is to rent a home.  The chart below illustrates the flow of mortgage payments as compared to market rents since 1988.  For the first time in that time period, the payment on a mortgage for a median purchase price is actually less than it is to rent.  And let's not forget to consider the tax write off you get as a homeowner paying mortgage interest and property taxes.

As you can see, when the market hit it's height in price and interest rate, it made more sense, from a budget stand point, to be renting.  But now that the home prices and interest rates are at their current levels, the opportunity to own a home has never been better or more affordable.

A recent report done by TD Bank shows that the aspirations of young people to own their own home are still very much alive.  A majority of renters between the ages of 18 and 34 WANT or intend to buy a home. 

They're just afraid.  Of what?  Let's face it, the media doesn't sell advertising if they report sunshine, lollipops and rainbows.  Fear sells and one of the number one categories of reporting in today's news and media outlets is the "housing crisis."  Does it still exist?  Depends on who you ask.  For the purpose of this post, let's focus on the young, soon to be First Time HomeBuyer.  You have some money saved up (FHA requires a down payment of 3.5% of the purchase price and for those who qualify and wish to purchase in a rural area, the USDA still has a No Money Down program), home values are incredibly low, interest rates are at an all time low, and rents just keep going up.  You have a small family started, you need more room, and the landlord is telling you that you can't paint your daughter's room pink or you can't put that little swing set up in the yard.  Meanwhile, there are homes that you can afford, at interest rates that will allow you to pay less than your current rent.  It's time to start packing.  The quality of real estate and mortgage professionals has increased over the last several years due to attrition, licensing requirements, and plain old fashioned hard work and professionalism.  They're out there waiting to serve you and put you into a home you can afford.  Now is the time!  Don't be afraid!

FHA’s version of HARP

Many qualified borrowers who have a mortgage owned/serviced by Fannie Mae or Freddie Mac are taking advantage of the new revisions to the Home Affordable Refinance Program (HARP).  Those qualified borrowers are able to refinance to today’s lower interest rates without having to get an appraisal done.  What this means is that those home owners can refinance to a lower rate, regardless of their equity position, so if they are “Under Water” (Wall Street’s term for owing more than what your home is worth), you can not only refinance to a lower rate, you’re not required to have mortgage insurance (PMI) if you don’t have it now.

Home owners with an FHA mortgage have always been able to obtain a refinance without an appraisal as part of the Streamline Refinance process, but HUD has recently come out with a new guideline that, in a way, ties in with HARP, at least as far as the required date that you closed your current mortgage.

Provided your current FHA mortgage received it’s FHA insurance endorsement (usually within a couple of weeks after closing) prior to June 1, 2009, you are not only eligible to obtain today’s low fixed rates, you are also eligible for reduce mortgage insurance.

FHA mortgages always require mortgage insurance, regardless of the down payment.  In April of this year, FHA increased the cost of that insurance.  The Up Front Mortgage Insurance (typically rolled into the loan) increased from 1.00% to 1.75% of the loan amount.  The monthly mortgage insurance (the MI portion of your monthly payment) went from .55% to either 1.20% or 1.25% depending on your down payment.  The new guideline for borrowers with endorsements prior to June 1, 2009 is that the monthly mortgage insurance remains at .55%, but the Up Front is a mere .10%.  Compared to someone purchasing with a new FHA mortgage, that’s a substantial difference.

With FHA rates ranging from 3.50 – 4.00% given the day and market conditions, refinancing with a streamline refi can save hundreds of dollars.  And since FHA streamline mortgages don’t require an appraisal, you’ll save time as well as money.  Not sure when your loan received it’s FHA insurance endorsement?  Your current lender or the company you’re applying with can get it for you.  Refinance today, reduce your monthly mortgage payment and then take the savings out into the world to stimulate our economy!

Nobody's giving out mortgages......oh really?!

There still seems to be a belief in today's real estate and mortgage market that it's difficult to get a mortgage.  While the days of no income or asset verification are definitely gone (at least for the time being, hint, hint), a well documented, well qualified, borrower can certainly still get a mortgage with a low interest rate and reasonable closing costs.  If you're one of the many who were fortunate enough to get a mortgage with less than perfect credit, no money down, and now income or asset verification, then yes, you would be of the mind set that no one is lending because no one is lending to those borrowers anymore, not that they should have in the first place.  But with last years sales numbers in the U.S. being what they were (an average of over 12,000 homes sold per DAY and just under 8000 requiring a mortgage), this year's numbers are shaping up to prove that there's not only never been a better time to buy, there's never been a better time to get a mortgage either.

As always, we go to the National Association of Realtors (NAR) to get the sales data and according to their records, we're averaging OVER 12,000 homes sold per day in the U.S. and of those homes sold, just over 8000 required a mortgage to purchase (for those of you still wondering, the others were cash buyers).  Home prices are still at a record low, as are interest rates.  As was stated in my previous entry, owning a home today is probably less expensive than renting, especially when you take into account the tax write off at the end of the year.  So if you're in the market to purchase a home and someone is telling you "You'll never get a mortgage today", it's probably them that can't get one.

Rent vs. Buy

A recent article in Forbes Magazine highlighted findings in a report done by Trulia, where it was determined that in 98 out of 100 of the major metro areas of our country, it is actually less expensive to buy a house than it is to rent one.  And, in the other 2 areas, what Trulia found is, when you factored in the mortgage interest deduction on your taxes, for someone who is itemizing on their tax returns, it is actually cheaper to buy versus rent.  When you factor that in, in 100 out of 100 major metro areas, it makes more sense to purchase a home, rather than rent one.

With rents projected to consistantly increase, if you've been considering buying, now is the time!!

Interest rates and sales prices of properties are still at one of the lowest points in history.  Get pre-approved so you not only know what you can afford, but so that you have the negotiating power in an offer/counter offer situation.  Get aligned with a realtor who knows your area.  DO NOT try to buy a home without utilizing the expertise of a licensed real estate professional.  You don’t pay them, the seller does, so why wouldn’t you use this free service!  There’s never been a better time to own a home!

Gift of Equity - The Hidden Asset

Some young, first time, homebuyers have been fortunate to have family members assist them with a down payment to purchase a home.  Savings, checking, stocks and mutual funds are different forms of assets.  Many people don’t know that when they purchase a home from a relative, there is a guideline that allows for the equity in the home to be used as an asset and therefore, a down payment.  There are two different ways this is done.

Buying from the owner occupied relative (FHA guideline)–

If you are purchasing a home from a relative that lives in the subject property, you can get financing of up to 96.5% of the sales price.  Therefore, as long as there’s 3.5% equity, you can buy this property with no money out of pocket.

Buying from the non-owner occupied relative (FHA guideline)–

If you are purchasing a home from a relative who does not live in the subject property (ie, rental property) the maximum financing on that transaction would be 85%, so there would need to be 15% equity in the property to be able to purchase this with no money out of pocket.

For conventional financing, any gift of equity that is less than 20% would require the borrower to invest 5% of their own funds.  A 20% gift of equity would require no out of pocket investment towards the down payment.

So when purchasing a home from a relative, investigate these options before finalizing the transaction.

Revising Paid Collection Accounts From Your Credit Report

While collection agencies and the collection departments of creditors like to put those overdue and unpaid accounts on your credit report to light a fire under you to get you to pay the bill, but once you've paid it, there are no mechanisms in place to force those agencies to update your balance or information, once you've paid the bill. At this point, it's up to you, the consumer, to get this information updated. I say "updated" as opposed to "removed" because the information will stay on your credit report for at least seven years. You can get it to reflect a balance of $0.00, but it is still part of your credit "history."

Once the account has been paid off, you will need to contact any and all of the credit agencies that are reporting the account. The three major reporting agencies are Equifax, Trans Union, and Experian. The account may be only appearing on one of these company's reports, so it's up to you to find out who is reporting it. You can get a free copy of your credit report, once a year, from ANNUALCREDITREPORT.COM. This is the ONLY authorized source for the free report that you are entitled to by law. You can get all three reports from this site and know just who is reporting what, to which bureau. You may or may not have to contact all three bureaus as a result of this search.

At this point, you would need to write a letter to each bureau and let them know that you paid the account in full and would like the erroneous information updated to reflect a zero balance. It is important to include your full name, correct mailing address, and social security number in the letter. You will also need to enclose a copy of your photo ID. The agencies will not process your request without the copy of the photo ID.

After mailing in the listed information, you may first receive an acknowledgement of the request. Do not be alarmed by a letter that states "We cannot process your request with the information provided." This simply means that the agency will contact the creditor to verify the information. Don't worry, they're looking into it. You will at some point, receive a letter that states "We have concluded our investigation of the matter and the results are as follows...." and you will see that they have either removed the information, or been told that the information was accurate. More times than not, the information will be updated properly, if in fact, you've paid off that account.

It's as simple as that. Writing the letters only takes a few short minutes and the length of time to get a response can take anywhere from 2-4 weeks. There are "Credit Repair" companies, that will charge you to do this and get it done in less time, but if there's no need for a quick reply, why pay for it. I once asked a woman who owned one of these agencies why people would pay for such a service when I have seen it done for free and her response was a good one. She said "People can cut their own grass, but they still hire landscapers." If you take a little time and pride in your work, you too can get this information updated for free and end up with a better credit score.

Contact any of these agencies for more additional information:

Equifax Information Services

P.O. Box 740241

Atlanta, GA 30374

800-685-1111

Experian

P.O. Box 2002

Allen, TX 75013

888-397-3742

Trans Union

P.O. Box 1000

Chester, PA 19022

866-887-2673

Rick Masnyk is the manager of the North Smithfield, RI office of E Mortgage Management and is licensed with the Nationwide Mortgage Licensing System (NMLS) under license number 8621.

Warren Buffett: It’s Time to Buy Real Estate

Warren Buffett appeared live on CNBC’s Squawk Box last month. During the interview, he was asked about the current real estate market and whether he felt now was the time to buy.

His response was rather emphatic and has been used as a headline in hundreds of articles since the interview:“If I had a way of buying a couple hundred thousand single-family homes I would load up on them.”

However, throughout the interview, he addressed the market from a few angles. Here is what he said:

Why invest in real estate now?
“It’s a way, in effect, to short the dollar because you can take a 30-year mortgage and if it turns out your interest rate’s too high, next week you refinance lower. And if it turns out it’s too low, the other guy’s stuck with it for 30 years. So it’s a very attractive asset class now.”

Is buying your own home better than investing in stocks right now?
“If I knew where I was going to want to live the next five or 10 years I would buy a home and I’d finance it with a 30-year mortgage… It’s a terrific deal.”

Should we buy multiple houses?
“If I was an investor that was a handy type and I could buy a couple of them at distressed prices and find renters, I think it’s a leveraged way of owning a very cheap asset now and I think that’s probably as an attractive an investment as you can make now.”

Over the last couple of months, there have been more and more financial analysts coming to the same conclusion: It’s time to buy real estate.