A recap of the 2011 real estate market and the top 4 real estate New Year’s financial Resolutions with real estate and personal finance advice

Over the past 18 years that we’ve been writing this column, we’ve offered New Year’s Resolutions for home buyer and home sellers, plus New Year’s Financial Resolutions that everyone can use to start their year off right.

Let’s start by recapping what’s happened in the world of real estate and then move on to some specific resolutions we think will help buyers and sellers move the ball forward.

Unfortunately, we’ve had another very difficult year in real estate. And while we believe that the housing market will start to stabilize in 2012, looking ahead we can see it could be another very difficult year for home sellers, agents, appraisers, mortgage lenders, home inspectors, and title and escrow companies.

But if you’re buying a home to live in or as an investment, 2012 looks like it’ll be another terrific year.

Here’s a recap of what’s happened this year in the real estate market:

• Roughly 25 percent of homeowners are underwater or are nearly-underwater with their mortgages, according to third quarter of 2011 data from CoreLogic.
• New home sales remain at near record-low levels, with only an estimated 310,000 new homes sold in 2011.
• Home prices haven’t moved much at all, and are still declining in some states. Overall, a number of surveys found that home prices fell by another 3 percent in 2011.
• The overall number of households has shrunk by millions during this Great Recession. The trend for families to double or triple up continues.
• Millions of homes have received foreclosure notices this year more than a million homeowners were foreclosed on in 2011. Next year, lenders are expected to process some of the foreclosure backlog, putting another million or more homeowners into foreclosure.
• Mortgage interest rates fell in 2011 to historic lows. As we went to press, you could get a 30-year loan for less than 4 percent, a 15-year loan at less than 3.25 percent and a 10-year loan for less than 3 percent. All of this assumes you have excellent credit and at least 20 percent equity in the property.
• Despite ultra-low interest rates, millions of homeowners remain in financial jeopardy, unable to afford their payments, and unable to refinance because of declining or negative equity in their homes.
• Starting December 1, 2011, the federal government introduced a new and improved version of the Home Affordable Refinance Program, more readily known as HARP 2.0. Up until now, just 70,000 homeowners who are underwater with their mortgage have been able to refinance under HARP. Supposedly, this new and improved program will encourage lenders to do more in this area. Most housing experts are not optimistic that this version of the program will work better than the original version. And as with all of the Making Home Affordable programs, it is entirely voluntary for lenders.
• There’s still no consensus on what to do about Fannie Mae and Freddie Mac. Nearly a year ago, the government was required by law to introduce a plan on what to do with these secondary market behemoths. But political infighting and the depressed housing market has kept any new ideas from taking root.

Once again, we’re starting a new year with a less than optimal housing market outlook. Still, if you’re hoping to buy a home in 2012, here are a few New Year’s resolutions you might want to make:

1. Pull a copy of your credit history and credit score. Mortgage lenders have become extremely conservative and restrictive in deciding which mortgages will get funded. Lenders will pull credit scores from each of the three credit reporting bureaus, Equifax,
Experian, and Trans-Union, and then use the middle score to determine your loans interest rate and terms. You need to know that information ahead of time. Go to AnnualCreditReport.com and receive a free copy of your credit history and then pay for your credit score (about $9). You can also go to each credit reporting bureau or MyFico.com. and purchase a copy of your credit history and score, if you’ve already used up your freebies.

2. Practice good credit behavior. Lenders regard those borrowers with a credit score above 780 as their best borrowers. Unless your credit score is above that level, you should work on eliminating any errors, and practicing good credit behavior so that your credit score rises. The best thing you can do? Pay your bills on time and in full each month. The next-best thing you can do is maintain four open and active lines of credit. Each credit reporting bureau offers good credit behavior tips for free on their website or, you can go to MyFico.com. (Full disclosure: I contribute real estate posts to the Equifax Finance Blog, where Equifax’s credit experts blog about credit trends and information.)

3. Shop around for the best loan. Even though the Federal government is backing more than 90 percent of all the loans through Fannie Mae, Freddie Mac, FHA, VA, and USDA, it pays to shop around. Make sure you talk to at least four or five lenders before you sign your application, including a “big box” lender, a small local lender, a credit union, a mortgage broker and an online lender. Use the information you glean from each lender to negotiate one against the other and get a great deal for yourself. Yes, you’re allowed to negotiate with lenders and ask them to give you a better deal.

4. Create a great home buying team. Whether you’re buying investment property or a home to live in, you’ll want to create a team of real estate professionals who can help you find the right property, at the right price, on the terms, without any headaches. Home buyers will want their team to include a great real estate agent, mortgage lender, real estate attorney, tax preparer (with experience in investment real estate if you plan on buying real estate as an investment), and real estate inspector to start. Residential real estate investors will want to add a 1031 exchange professional and commercial (if appropriate) inspector to the mix.

Having the right team in place will go a long way toward making your dream of homeownership come true.