HOMEFRONT
NOVEMBER, 2008
REALTOR NEWS
What The Federal Buyout Means For
Real Estate before it all spirals into oblivion.
Lately, it seems as if we are living through his- It’s not a bailout. It’s a buyout.
tory every day. Not since the Great Depres-
sion has the United States seen such turmoil in A bailout is when you give a corporation money
the financial markets. What started in the sub- while forgiving its debt. A buyout is when you
prime mortgage industry has now bled over come in to save the day—but there is an asset to
into Wall Street. be traded.
Too much money lent to too many people who The latter is what the U.S. Government has
couldn’t afford to pay it back is a surefire recipe passed: supplying funds to take over the mort-
for disaster. Now it’s time to pay the price. gages on real estate property. Real estate proper-
ties are assets. Therefore, by definition, this is a
Some analysts are even comparing what’s going buyout.
on now to the stock market crash of 1929.
However, there is one major difference be- The government could do quite well on this deal.
tween then and now—we aren’t even close to Think about it. They step in, take over loans that
being in the same economic hole our great are in trouble, and refinance them at a lower rate.
grandparents fell into back then. It’s a win-win situation.
Case in point: The $700 billion bailout (or is it a Ultimately, there is always money to be made in
buyout?) passed by lawmakers is a giant sum of mortgages. Even if government restructures
money, the equivalent of which was not avail- these mortgages, we all know that real estate is
able in 1929. still the best long-term investment.
Today, we are better prepared to handle such And now, thanks to this historic buyout—not
challenges as they arise—partly because we’ve bailout—we have a golden opportunity to
learned from history. When the Great Depres- rebound in a big way. It may just be the in-
sion began, there was no backup. The U.S. credible booster shot the real estate industry
Government was in a much more “hands-off” needs.
position than today. ING
C OP
Y OU
After four (or more) years of unsupervised ARE OUR
TH
WI L
ERFU
lending, exotic loans, predatory practices, and
the ensuing subprime mortgage meltdown, the W OND ???
HER
government is finally taking measures to step in W EAT
JAY M.
Cell 425-260-0715 jay@jayagoado.net
Office 206-230-5129 www.jayagoado.net
Fax 425-818-7898
JAY M. AGOADO ,GRI
7853 SE 27th St Suite 180, Mercer Island WA 98040
MORTGAGE MISTAKES Cell 425-260-0715
Office 206-230-5129
How to come up with a down payment
Fax 425-818-7898
Zero-down mortgages are fading as lending rules jay@jayagoado.net
tighten. If you lack the cash to get into that new home,
consider these 9 options along with some buying www.jayagoado.net
strategies.
The chief advantage of a down payment today is sim-
ply the ability to qualify for a loan, as only a handful of
so-called zero-down loan programs still exist. Yet
down payments have other benefits, too.
The more money you put down to buy a home, the
smaller your monthly payments will be.
A down payment becomes a homeowner's instant eq-
uity when the purchase closes, and that equity can be
borrowed against with a home-equity loan or line of
credit. Guidelines to qualify for these loans have be-
come much stricter, however.
Many first-time homeowners are "surprised by the true
cost of owning and maintaining their home." So you
should keep some reserves rather than allocate every
dollar to their down payment. Some loan programs
require cash reserves for this reason.
Other benefits of a down payment include:
• Borrowing less money to buy the home.
• Getting a lower interest rate.
• Paying less for mortgage insurance.
Avoiding mortgage insurance altogether if the down
payment is at least 20% of the home's purchase price.
How to get a down payment ...Here are 9 ways to
do it:
• Set up an automatic saving plan.
• Get a gift from your parents, grandparents, other
relatives or friends.
• Sell a car, boat, motorcycle, collectibles or other
assets.
• Liquidate stocks, mutual funds, savings bonds or
other investments. A down payment needs to be "sourced and seasoned". That
• Allocate your income tax refund. means the lender needs to know how you obtained the funds
• Take a loan from your 401(k) retirement plan and and that you've had control of those funds for at least several
repay yourself with interest. months.
• Withdraw funds from your 401(k) plan, subject to
taxes and penalties. Gifts and seller's concessions are acceptable, up to the per-
centage allowed by the loan program, but borrowed money
• Collect on a loan that you made to someone else. can't be used as a down payment , as it is debt that has to be
Get a bonus from your employer. repaid, unless it is borrowed against real estate.
I welcome your phone calls, emails, comments, and questions regarding all of your
real estate needs. I am never too busy to help you in any way I can.