Buying opportunities, for those looking for bargain deals, are still good and should extend well into 2010 and 2011. Housing starts according to the Commerce Dept. have come in lower than expected for 2009.

One would naturally think, as home builders attempt to reduce inventory, that home prices would stabilize. To a certain extent they have stabilized albeit temporary.

First time home buyers who have been sitting on fences, automobiles and motorbikes are now out in force trying to take advantage of the $8,000 tax credit set forth by the U.S. government. Ironically, the tax credit is due to expire on November 30'th. This small flood of home buyers has temporarily created a high demand in low to middle income housing which in turn has created more competition among investors seeking cheap deals on foreclosures and HUD homes.

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There are many risks when it comes to property investment as a business. I think sometimes people, especially investors forget the steps involved when obtaining a loan and how this process may open them up for risk. There are many concepts to understand mostly because the bottom-line is determined by capitalization (CAP) rates, return on investments (ROIs), and other net operating incomes.

It makes sense that people overlook the smallest detail when financing a property. It doesn't really matter "why" the loan is needed, if you are seeking a conventional loan from your neighborhood bank or turning to private lenders or hard money; it is still very important that you pay careful attention to the loan you are being offered. I understand you are concerned with flipping the property as quickly as possible; but in doing so you are not as attentive to the type of loan. And thus you find yourself in high-risk situation. Often times brokers may steer you into high-risk deals since they may have pegged you to be a risk-taker.

This opens you up to a different class of loan and areas of predatory lending practices which may incur high fees and other terms or conditions that are not always explained up front. Sometimes loans that allow you to flip properties are called rehab loans as they use hard money via private lenders. This not only means steeper interest rates but an area of lending that is not strictly regulated by the federal or local governments. These hard money loans only work to your benefit when they can get you out of a deal quickly. In other words, these loans only serve the lender because of the amount of leverage that increases the return.

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 This current talk of financial bailout suggests that as a result mortgage rates will fall allowing a surge in home buying especially for first time buyers.  Still one must wonder how long this will last but also what are the long-term impacts for the housing market?  Right now it feels like the lending industry is distressed but this may not be true for very long.  The banks at risk of failing just need to time to recover and it will actually be consumer confidence that drive the economy back to being fruitful again.

There just seems to be a lot flux in the market, organizations don't know if they are coming or going.  This is a period of acquisition and consolidation.  Lehman Brother's is on the auction block, AIG's failure has brought the issue of bailout into the limelight and Bank of America, of course, will remain standing, buying up new pieces for their vast umbrella like Merrill Lynch.  This week has been historic and shocking for the experts even to say, they don't know what should happen.  That's tough.  While so many people grasp this concept, many are putting their ducks in row and wonder if this is a right time to even think about buying a home or new car.  I believe people are hesitant this week but this will change once there is direction and leadership toward resolution.  This is what some experts have to say about the future of home buying:

How does the latest fallout from Wall Street influence mortgage lending rates?  Well, let's take a look.  We can only hope.  In the interim rates will more than likely go down because there is a lot shuffling going as the dust settles and investors look for safety nets in this uncertain market.  Upon many experts advise, this is a time to put our money in real estate investment or income property.  As of last week the 10-year notes went down which means that the yield also decrease but this makes for new opportunities.  Experts expect mortgage rates to follow this trend because historically they usually follow suit.  Expect rates to drop further as more news brakes.  Just within the last week Bankrate.com commented that the 30-year fixed rate was 5.78% down from 6.08% of the previous week.  Just to compare, this rate was 6.5% in August.

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 For a while now, many can spectulate the trouble started at the tail end of 2006 with the mortgage industry busy, the American economy has been struggling, facing uncertain times.  Many understand the historic significance of last week but the implications of a federal bailout has yet to hit home.  With the annoucement that the Federal Reserve will aid the ailing AIG with an $85 billion rescue package, the details seem murkey as more politicians throw in his or her two cents of how this bailout will work and impact the economy.  While the bailout does not favor AIG, the company must hand over 80 percent control of the organization's future business dealings, this new bailout and the status of future bailouts remains in the balance and hands of the federal government who stepped into save the mortgage giants Fannie Mae and Freddie Mac not too long ago with a $100 billion package.  Where this differs and many fail to see a need to save AIG is that Fannie and Freddie were already government controlled and sponsored by federal dollars.  Why should the federal government step in and save a stockholder owned company?  What I am trying to say is that this bailout of finance giants has been a popular trend, starting with a $30 billion loan to Bear Stearns in February.  It is a trend we will see more of and possibly a part of the Federal Reserve's strategy to save the American economy.  I believe many who are struggling to make ends meet, living pay check to pay check, the working class and even the upper class, when push comes to shove and with a cold winter on the way, wish that the Federal Reserve would give the American people a loan.  That $300 incentive check just did not cut it.

While AIG must pay the Federal government back or risk losing control of its interests, many are concerned with the level of government involvement and bascially, the bottom line, who really will be paying for the bailouts?  Is Washington really to blame for this mess?  What about corporate accountability and the management of these organizations?  Something is rotten in Denmark as Shakespeare wrote in Hamlet.  Really it does not add up.  It is cause to worry of how this can be avoided in the future but also how this will impact the American people over the years to come. Many will argue that this has been a long time coming that part of the issue has been a faillure to tighten lending practices and that the subprime market has lead to the downfall of the whole market.  Truly companies like Countrywide should have known better instead of living high on the hog.  We could have avoided a lot of trouble today with bad loans.

So should the federal government step in and save companies riddled by bad behavior in the market place?  This whole crisis begins and ends with the practice of predatory lending and we've known it since before the mortgage buble burst.  As said above, not only Countrywide but other banks allowed their lending practices to be too flexible allowing many under qualified borrowers to purchase items like homes and cars.  Many brokers pushed such products on people who otherwise should not have been buying in the first place.  Many did not look at the full picture and mainly the issue of repayment.  Now the market is suffering due to underperforming loans or bad loans.  Still the bank is at fault, they should have never allowed such practices to continue but they were leveraging on the risk involved as long as the portfolio was performing well, the bank was making money on subprime products.  Now the current situation prevents this demographic of people with blemished credit from establishing any credit and only the prime customers (A & B paper) will prevail.  Many will have to learn to live without or forget about keeping up with the Jones because there will just not be any loans out there for these customers.  It is unfortnate because this takes aways from sales people's commission salaries and many people of these professional will be out of work.  Truly this is why so many people have never believed in the concept of credit in the first place.  It creates a vicious cycle. 

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There are different ways to structure real estate transactions that involve seller financing to benefit all parties.  Of course the seller has concerns of protecting their property and the need for regular repayment.  The following scenario explores this option in detail.

You know that your local market has many rental properties in the inventory and you have found one that meets your needs.  You will be purchasing from a seller who is greatly motivated because the property has been on the market longer than a year.  The property has an existing long-term fixed rate first mortgage with a balance of just $100,000.  Your plan is to buy the property, rent it out and hold onto it as a long-term return on investment property.  You know that the home is worth about $150,000 and the seller has it priced at a discount of $120,000.

The offer is as follows.  You want to put $5,000 in cash as a down payment but also allow the seller to keep the title in their name with their first mortgage with only a balance of $100,000.  The seller must also consent to taking a second lien loan for the remaining $15,000.  This transaction may seem like it only benefits the buyer and the seller is left with all the risk.  However due to the current lack of home sales in your area, the seller is motivated to continue the arrangement of the sales price, your down payment amount, and also is okay with you taking over the monthly payment for the first lien mortgage because they want to see the property sold in the long run.  What bothers most sellers about this type of transaction and what makes it risky for them is that you are not assuming the existing loan.  It still remains in their name but the title work protects them for your default.  Still there is the concern of the loan remaining in their name and the $15,000 second lien is also risky for them should you fall into hard times but the goal of the sold property remains a common interest for all parties.

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The so-called days of the mortgage boom are over causing a certain amount if disbelief among industry professionals.  Like a bad hangover from Saturday night wild party, those who gained from historic low interest rates and flexible lending products that spawned the real estate boom at the turn of the millennium, are now slowly waking to reality.  The once profitable sub-prime market is now close to extinction as many institutions known as great powerhouses are no longer in the business to originate loans.  While Wall Street may have had a say in rating these companies poorly, the ones who catered to a specific clientele should have seen a shift coming especially when the funding is no longer available.

So what is the big deal anyway?  All this hoopla has many asking, what is a subprime loan anyway?  How does this influence the mortgage industry? So okay, a subprime mortgage is a real estate loan given to a consumer with less than perfect credit and little or no down payment available.  One must keep in mind the majority of loans in a financial institution's portfolio does not consist of these types of loans but during the mortgage boom, many consumers took out these types of loans as a means of affording the American Dream of homeownership.  These loans broke down the barriers to home ownership because of their flexible lending parameters.  What this has now lead to be a marketplace upside down in loans not considered "A" paper but B, C, D and F translating into a high-risk venture?  As home values have risen so has the risky nature of these loans still being unpaid or falling behind.

So how did the bubble burst so badly, one is also wondering?  As subprime became a more popular loan product, so did the practice of selling it to the consumer become more flexible.  More and more lenders approved borrowers with not only less than perfect credit (small blemishes) but also those with poor track records including larger debit issues like previous foreclosure and automobile repossessions.  What further compounded the issue is the lenders sales device of enticing the poor credit customer by offering homeownership programs with minimum documentation needed known as "stated-income" or "no doc" loans.

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Understanding the fundamentals of finance known as the time value of money is key in real estate investment. Such causes as inflation make the real value of a dollar less in the future than it is worth now. Because of this principle, buying property outright in cash does have its drawbacks, financially speaking, because another use of that cash may actually benefit the investor in the future more than it would if it was expended in an immediate purchase.

 When an investment is made using funds that have been borrowed, we call this activity leveraging. It is the expressed intent of the investor to make a return on the investment. If a $100,000 property were to appreciate 10% over a 12-month period, its value would be $110,000. The return on investment (ROI) would correspond to its appreciation of 10%, not including the costs of selling the property.

For those investments made with borrowed money, the resulting ROI is actually a much higher percentage of the out-of-pocket investment. Should the investor contribute $10,000 in the purchase of a $100,000 property, and capitalize the remaining $90,000 in financed funds, a 10% increase in the value would still yield an increased equity of $10,000. However, the ROI is 100%, because of its basis on the actual out-of-pocket investment of $10,000 made by the investor. Essentially, the investor doubled his investment! Of course, in financing the remaining $90,000, costs associated with financing interest would diminish the actual yield. As a way of allaying these financing costs, a good strategy would be to rent the property to generate revenue.

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Like holding your breath underwater, homeowners facing foreclosure are desperate for air. While the solution of coming up and taking a breath seems simple, the work needed to get out of water can be a challenging journey. Many struggling homeowners face the journey of avoiding foreclosure and seek help to prevent it, thus beginning the quest loan workouts and restructuring.

When the pressure of foreclosure begins to mount, the goal becomes as clear as a ray of light on a cloudy day. Fix the loan. It is at this point where the journey becomes a cat-string game, the excitement of lenders dangling the string (loan details, interest rates) over the cats (borrowers) heads and the cat making desperate attempts to grab hold of the string and gain composure once again. Essentially, avoiding foreclosure comes down to numbers and the fact that what is best for the borrowers is often not in the best interest of the lenders.

With that in mind if you are feeling the pressure of foreclosure mounting down on you, the first step you need to take is having a discussion with your lender, sit them down and talk numbers. While with your lender present your financial situation. Show the lender details about your income, where your money is being extended to, and what your family spends on food, clothing, car payments, credit card debt, and student loans. Homeowners also need to present copies of their pay stubs, bank statements, and utility bills to back up their claims. Homeowners will need to make some changes in order to stay in there homes, so say goodbye to premium cable packages and give up your expensive habits because it is time to buckle down.

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Not only can your credit history be found in your report, but it also contains personal information that should remain confidential, like your SSN, full name, current address and tenure, and past addresses. 

 A credit report's main purpose is to list all of the financial activity for any one person, encompassing all or most of their lives.  Any financial relationships, be it a credit card, mortgage on a house, HELOC, student loans, and car notes.  It may even list any layaway accounts that are open.

For each of the credit accounts, the credit report also details information about outstanding balances and the high-water marks of previous balances.  Payment history, which may be the most telling piece of information, is also provided to those organizations that are receiving this report.  Those with exemplary credit payment history will be acknowledged in the report, as well as any blemishes like late payments and the circumstances pertaining to late payments.  If the credit account is either current or behind schedule, the credit report will reflect its current status.

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