Offers to purchase a home are most often accompanied by a check, a.k.a. the “Earnest Money Deposit” or “EMD”. The reason for this deposit is for buyers to “put your money where your mouth is”. It’s another way of saying that you’re “earnestly” intending to purchase the property.

Now the amount of the deposit is a different story. The larger the deposit, the more the seller is convinced that you really want the property. When the market is “hot” and there are multiple offers on the table, the deposits are usually larger than in today’s buyer market.

In a buyer’s market, the deposit can often be 1% of the sales price or as little as a couple thousand dollars, but you have to be careful. If it’s a must-have property, you may elect to increase your earnest money to show that you are a serious buyer. On the other hand, you don’t want to put down too much of a deposit because if you have a change of heart, you may risk losing it.

Once the contract is ratified, the earnest money deposit is put into an escrow account (sometimes interest bearing depending on closing date) at one of the listing or selling real estate brokerages. Most deals close and the earnest money funds are applied towards the buyer’s down payment and/or closing costs. If these isn’t a required down payment and closing costs are covered by credits (such as a seller subsidy or buyer agent rebate) sometimes the buyer will receive a check back from the title company for the earnest money with interest, if any.

Some sellers think that if the deal falls through, the earnest money deposit is automatically forfeited. Some buyers think that if the deal doesn’t close, they automatically get their deposit back. Needless to say, neither one is always true. Even when the failure to close is the buyer’s fault, the seller doesn’t have a “right” to the deposit as a way to punish the buyer. Nor does the buyer automatically get the entire deposit back, even when they are not at fault. It depends whether or not their are any contingencies still active and also whether they are reason for default.

If something goes wrong early in the deal, the seller may choose to return the deposit without a problem. However, if things go smoothly later in the transaction, both parties usually use common sense and negotiate a fair solution. 

99% of the time, an issue regarding the EMD is routine for a qualified professional real estate agent. The issue might be new for you, but many agents have run into an EMD situation in the past and should know how to resolve the issue fairly.

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Not everyone can resist a great deal when they see it. However, when one is put right in front of our face, we have a tendency to not believe it. It’s out of human instinct that something inside of us needs reassurance. It’s those of us who recognize and take advantage of the bargain that are the real winners. So as home prices have fallen in the Northern Virginia real estate market, those people on the fence who are thinking of owning a home are beginning to notice.

The stars are aligning and different factors are making this a good time for first-time buyers to consider owning a home because they don’t have the issue of selling their home to buy another one. With that said, home prices are low and there is a plethora of inventory to choose from. Some people even say it’s been too difficult because of all the choices they have. People are often finding three or four homes they like and are stuck on making a decision. Another factor that comes into play right now is the relatively low interest rates surrounding us. Not to mention the increasing number of foreclosures and bank-owned properties out there. Now you can afford more home for your money with these types of property.

Even with everything pointing in buyers favor, there still is that fear issue. You have people concerned that prices will keep falling. That little thing inside make them uncertain. Something has them scared about 1% depreciation in the next year. You have to look at the long-term appreciation for this kind of an investment.

The best advice for those first-time home buyers looking to own a home is go talk to a lender about financing and then contact a HomeZill agent for any questions you may have. If your credit score is low then you’ll end up paying a higher interest rate and if you plan on living in the home for 2-3 years then maybe you should postpone buying a home. But first look into an FHA insured loan which does not have a credit score requirement.

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By now you have all heard that the real estate market has been the slowest in recent years.  However, this is not a bad thing.  It means that there are nicer houses for the DC Metropolitan area buyers. 

The area that is pulling down the national economy is Northern Virginia.  The home prices are being affected by the increasing number of foreclosures.  This means that there are homes that are priced well below what they are worth.   It’s been hard for homeowners to sell their home because the foreclosure next door is $80,000 less and is in the same condition or at least close to it.  The median home price around the region in 2007 was $420,000.   DC Metropolitan area home prices were down 11% in a year ago in January according to the Standard & Poor’s/Case-Shiller index. 

Each of the numbers are measured differently.  Case-Shiller and similar indexes use statistical models to determine how the prices of physically similar houses change over time.  However, median price data shows actual sales prices disregarding any physical characteristics. The difference between the two types of price measurements suggests that buyers were likely to be spending about the same amount as they would have in the recent past but were getting more home for the money. The region is still one of the most expensive in the country, even with slow home sales. The priciest jurisdiction last year was Arlington, where the median price of a single-family house or townhouse was $580,000, up 3 percent. Medians in neighboring Alexandria and Fairfax County also remained above $500,000, though they were down from 2006.

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30 yr fixed mtg		5.62%		5.89%
15 yr fixed mtg		5.09%		5.22%
5/1 ARM		5.73%		5.70%
30 yr fixed jumbo mtg		7.16%		7.05%
5/1 jumbo ARM		6.50%		6.22%

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The big news today has been the collapse of the 5th largest investment bank, Bear Stearns. Their stock plummeted last week and into this morning trading. To avoid bankruptcy, JP Morgan Chase and the Federal Reserve bailed them out…When they structured the deal over the last two days they were worth an estimated $236 Million, Friday they were estimated to be worth $3.5 Billion. So you can see the gigantic swing…Ouch!

In other news, today has actually been a good open for the mortgage market. I strongly believe that we will start to have more activity in the DC Metro area marketplace. The news in the Capital Markets on the other hand is not good; but new FHA (Federal Housing Administration) limits increasing is phenomenal news!

The conventional conforming limit has also changed with the stimulus package to $729,750 in our general MD/DC/VA area. The target pricing date of the new Fannie Mae / Freddie Mac limits are estimated to go into effect by April 1st, 2008 ~ No it’s not an April Fools joke! Now don’t get me wrong- I think this is going to create more options to take advantage of the new “Jumbo Conforming” for folks that have a large down payment and good credit…the rate is more than a full 1% better, however, there are many more restrictions on this program vs. the new FHA loan product.

For example, the minimum credit score you need for Jumbo Conforming is a 660 / If you finance more than 80% on one loan you need a 700 score. The down payment required is going to be at a minimum 15%. The reason it’s not that great is due to the “declining market” area restriction (which is basically everywhere except for some parts of MD and some parts of DC, call to inquire), So you have to reduce the Maximum allowable LTV / CLTV (Loan to Value / Combined Loan to Value) by 5%. If you are an investor trying to take advantage / or buying a second home you better think twice-the required down payment is going to be 40 - 45% into the deal! Again, “Ouch!”

In a nutshell, it’s going to be great with someone that has 20% down, good credit and buying a primary home. If this is you, you’re in great shape!

***Now the FHA loans BY FAR are going to have a greater impact for buyers in Northern Virginia and Washington DC. FHA loans will assist buyers who don’t have a lot of cash to put into the deal. It’s going to bring in a large pool of people in the coming months! You don’t have to be a first time home buyer either.

Some attractive highlights with the new FHA mortgage are as follows:

* Lower credit scores typically allowed
* There is NO “declining” market policy that they follow
* Down payment is lower than a normal conventional type loan ~ FHA only requires 3% into the transaction…
* Gift Funds are allowed, even for entire down payments!
* You can have a parent on the loan as a “non occupying” co-borrower (they don’t live in the property) to pool assets together to help with debt ratios and the overall picture
* 6% seller subsidy (seller concessions) is allowed.
* ARMs and Fixed products available

Another point to mention is that there still exists the “Nehemiah” product (I can do this type of loan and have done many in the past). Basically this is a product that assists the buyer with the 3% down payment. It comes from the seller as a seller credit. There was a motion to strike this down; however, this was unsuccessful and therefore is still available and active. So don’t think that if you don’t have the 3% down that you’re out of luck…It is St. Patty’s Day remember…get it from the seller.

Any questions? Call your lender of choice- me!

Dave Anzueto | Vice President | 703-883-9587 | Apply online www.davidloans.com

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I wanted to share this article about buying a home right now from Time Magazine with you all:

Famed Money Manager is perhaps best known for his timeless wisdom that you can beat the pros by focusing on stocks of companies where you either work or shop or have some other edge. But a more relevant Lynchism today is this gem: Ignore the headlines.

That’s no easy thing. How do you tune out all the chatter and ink on recession, housing, subprime woes, the credit crunch, rogue traders, insolvent bond insurers, $100 oil and nukes in Iran? It’s enough to make you sit on your thumbs and wait before making any big moves. But what, exactly, are you waiting for?

There has rarely been a moment in history when you couldn’t scare yourself into doing nothing. And yet, as Lynch observed nearly 20 years ago, “in spite of all the great and minor calamities that have occurred … all the thousands of reasons that the world might be coming to an end–owning stocks has continued to be twice as rewarding as owning bonds.”

A top reason to not buy stocks, in Lynch’s view, is if you don’t already own a home–in which case, that should be your first investment, since an owner-occupied home is nearly always profitable. Through a spokesman, Lynch reaffirmed these views to me–housing debacle and all.

When prices are falling, few people have the discipline to buy stocks, a house, gold, art or any other asset. But those who do pull the trigger excel in the long run. As John D. Rockefeller famously said, “The way to make money is to buy when blood is running in the streets.”

And the streets are stained crimson. Start with stocks. They have been pummeled this year. GDP braked sharply last quarter, and there has been plenty of panic about a recession. The Federal Reserve is slashing short-term interest rates at the fastest clip in decades. But if you stick to your steady, diversified plan while everyone else is retreating, you will be happy years from now. For one thing, Fed rate cuts always lift the economy eventually, and the stock market typically starts responding just as headlines get gloomiest. Sure, the market could fall again before recovering. But the recession may be half over already–or we may avoid one altogether. You just never know.

As for housing, certainly some skepticism is in order. Formerly sizzling markets in Florida, Nevada, Arizona and California probably haven’t seen the worst headlines just yet, though they may well be close. And “jumbo” mortgages, those more than $417,000, are likely to remain artificially high for a few more months while banks work through their credit issues.

But let’s say you are emotionally ready to be a homeowner. You have good credit, plan to stay put for five years and have been waiting for the perfect entry point. It’s time to get serious–before an inevitable rise in interest rates wipes out your advantage. “The thing that will make home prices stop falling is the very same thing that will push mortgage rates higher,” says Jim Svinth, chief economist at mortgage firm Lending Tree. So anything you gain by a further drop in prices might be offset by rising financing costs.

Consider a typical home that sells for $218,900. You put down 20% and get a 30-year fixed-rate mortgage at today’s rate of 5.5%. Monthly principal and interest come to $994.31. Let’s say that 12 months from now the same house goes for 10% less, or $197,010. But by then the recession is history and the Fed is jacking up rates to stem inflation. If mortgage costs rise a point, to 6.5%, your monthly payment would be $994.94 and you’d have saved nothing. Meanwhile, home prices might steady and sellers might become less willing to negotiate. And you have spent a year living someplace you’d rather not be.

It’s more complicated if you must sell before you can buy. But that logjam won’t persist forever–and if it appears you’ll be trapped for a few years, try to refinance at today’s lower rates. Risks always seem most acute when the headlines give you ulcers. But that’s exactly when you should think long term–and get off your thumbs.

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