It's the end of the year

Posted: Nov 14, 2006 9:22 PM

It's almost here, the millennium? No, that was more than 1/2 a decade ago. Hard to believe how fast the years are going, but the nice thing is that the best part of the year is always the last. Whoever designed it that way should get a medal. My years always drag in the winter, start picking up a little speed in the spring, slow up with the heat of the summer and those long summer days (with a little bit of luck I can get 36 holes in and still enjoy the nights), and then start moving again as football permeates our beings. And then of course, the holiday seasons arrive and we know another year is in the books.

Some things happen every year that we can count on at this time. One, we are all another year older or will be in the next six weeks. Secondly, we have all broken at least one and probably all of our new year's resolutions from late December 2005.

Our college team has lost at least one game and the season is winding down to a precious few games (excluding Ohio State, Michigan, Rutgers and whoever else I can't think of). Editors note: My team has lost five games and could easily make it seven. We certainly know whose fault that is and maybe this will be the end of his regime.

Another known is Fannie Mae and Freddie Mac will decide on the new conforming loan limits for 2007. The limit for single family homes in 2006 was $417,000. I am projecting the new limit for 2007 to be between $425,000 and $450,000, and we will know in the next few weeks. When I first entered the business in 1989, the limit then (or for 1990) was $191,000, so we have really seen a major raise in conforming loan limits over the last 16 to 17 years – over 200%! There is a higher conforming limit for duplexes, tri-plexes and four-plexes. These limits are $533,850, $645,300 and $801,950 respectively. They also have higher limits in Hawaii and Alaska.

Conforming loans are those that conform to the rules of Fannie Mae and Freddie Mac and generally are at least .25% lower in rate than jumbo loans. Jumbo loans begin where conforming loans leave off: $417,001. Presently Hawaii and Alaska have conforming loans that have a limit that is at least $500,000. Many states, including California and New York, have been working with Congress to get their maximum loan size as high as Hawaii and Alaska. It seemed as if it was going to happen last year, but no movement as yet.

The increase in the rate is a reflection of the year-to-year increase in the average (mean) selling price of a single family home (October to October). If you were to apply for a new mortgage loan now and wanted to lock into the maximum conforming loan limit, you would be locked at $417,000. If, in the next few weeks, the limit is raised, most lenders will allow you to raise the lock up to the new limit if you wish, as long as it falls within the guidelines of the loan program.

Now that we know your age, your ability to stick to a promise to yourself, your college football team, and your knowledge and/or interest in the way the majority of mortgage loans made in this country adjust their loan limits, it is time to look into the mirror and gaze into the future – that is January 2007. January is a cold hard month, even in the warm states, because it is when our monetary indiscretions come home to roost. Actually, they are brought to us by the mailman, or woman, who should know better, but appear to put job above the well being of their fellow man, or woman. Here it comes: they bring us the BILLS.

I bring this up because it doesn't have to be that way. You could do the holiday season with cash. The only problem with that statement is that it is currently too late to plan that unless you root for one of the aforementioned three teams and put a heavy bet on them to win the national championship. And that doesn't happen until early next year anyway. So back to the problem. You could sell something like your house, car, furniture or anything that might go quickly on EBay. I can't expand on this thought because I have never sold anything on Ebay, but I apparently know at least 1000 people who now specialize in this and have contacted me to use their services.

Most people just reach for their plastic and tell themselves it will be paid off in January and that's that. That is great, if it happens, but from my vantage point it rarely happens. Maybe one in 1/2 million people on a good year. Why do you think you see so many credit card ads: "What's in your wallet?"

If you have a house this shouldn't happen. Although I am not a big fan of home equity lines of credit (Helocs), they sure beat the heck out of credit cards. For one thing, they give you tax deductible interest, at least up to $100,000, and the rates are as much as three quarters less than credit cards. They cost little or nothing to set up and you can pay them back and the interest stops! I want to make one point very clear. I am not suggesting you borrow to pay for the holiday season. I am only suggesting that if you are going to borrow, you do it through your home and quit ruining every new year with the additional financial burden you place upon yourself with the use of credit cards.

Just remember they are the most expensive installment debt in the world.

I hope your holiday season turns out to be a great one. I hope all your wishes come true. I hope that your new year is really a "new" year and that all your problems will soon be behind you. And I hope that someone can read between the lines and apply to be our new head college football coach so I can actually use my season seats instead of giving them away all year long. Oh, and Santa, could we also beat the cross-town rival at least one time this century?