A Home for the Holidays

Buying a Home now could save you $$$!

We are heading into the holidays season and the prospect of a new year filled with goals and business plans. So is now the right time to buy? Well interest rates say "YES!" Rates have been hovering below 4% on a 30 year fixed and even lower for 15 year and ARM loans. Buyers and sellers negotiate year round and this may be your chance to snatch up a real deal. Keep these tips in mind when shopping for a new home during the holiday season:

1) Market time-How long has the home you're eyeing been on the market? Sellers may be more negotiable to not carry mortgage debt into the next year. In addition, looking at comparable sales over the past few months may give buyers the leverage they have been waiting for.

2) Home Inspections-Looking beyond the decorative lights and tree trim. Insuring a home is in optimal condition will save you money in repairs later down the road. A home inspection is always a wise choice!

3) Home Loans-Now is a great time to buy with interest rates hovering below 4% on a 30 year fixed. The combination of pricing and interest rates may really make the season merry and bright! Agents may also negotiate closing costs on your behalf which could trim your out-of-pocket expenses and leave more $$$ for your new home.

It is our opinion that it's always a good time to buy as real estate remains the top investment for over 62% of Americans polled who still think it's a good investment over the next ten years. Click here for the article in REALTOR.com. The biggest takeaway from the article, "Don't buy more house than you can afford." 'Tis the season for deals and real estate is no exception.

Finding a Great Real Estate Agent

What Does a Great Agent Mean to your Family?

Finding a great real estate agent can take some work. Sure it's easy enough to receive a referral from a friend or neighbor, but have you interviewed agents to find our who measures up? Hiring a great agent can mean the difference in paying closing costs or not. It can determine the price you ultimately pay for your home. Here are some tips in interviewing real estate agents:

1) Agent Profile-Most agents have a website. Checking out the agent's website and profile online can be very important in determining if that person is a match. Do they handle Short Sales if your a seller in distress? Have they worked with First Time Homebuyers and FHA loans? Having an agent that understands his/her business is a tremendous help and can assist in educating you on a process they have already been through.

2) Negotiation-This can be an art or an act of war. Does the agent have experience negotiating? Some agents have chosen to advance their skills and become "Certified Negotiation Experts" through courses offered to enhance and deepen their knowledge. A good negotiator should understand what is important to you and do their best to achieve maximum results.

3) Licensing-Although you may not think this is an issue. It is. An agent must be licensed through the State of California and be listed under a brokerage. An active license means the agent has complied with mandatory testing and licensing procedures in order to practice real estate including understanding fair lending and ethics. You can chech the Department of Real Estate. Click here.

4) Creative Solutions-In tight lending markets, it's good to have an agent on your side that understands how to creatively solve issues. Ask your potential agent, when is the last time you creatively solved a financing problem? Does this happen often? Do you work with a lender currently that gets transactions closed?

A real estate agent can more than earn the 2-6% commission they received or just collect a paycheck. Make sure your agent is working for you.

5 Tips for Refinancing a Home

With how strict lenders have been in reviewing borrowers income, assets and financial history, we have heard many potential borrowers ask if lenders are still refinancing home loans? The answer in a nut shell is "Yes" but be prepared to provide more documentation than your last refinance. Some tips to keep in mind:

1) Prepare your financials ahead of time-Lenders want to see 1 full month of pay-stubs (30 days) to verify your salary including overtime, bonus and commissions. Having both your W-2's and tax returns available for the past two years is wise even if they have not been requested from the lender yet. Many banks are referring back to your tax returns 1106 Itemized Deductions to verify what expenses you have deducted and removing this from your income.

2) Create a Schedule of Real Estate if you own multiple properties-This will save time and questions from all parties involved down the road. A Schedule of Real Estate can be on a spreadsheet or simply written out in a Word Document but should contain the following: Property Address, mortgage balance, mortgage payments, lender(s), taxes/insurance and estimated value.

3) Credit Score-It's a good idea to pull a free credit report ahead of time. Annual Credit Report offers a one time free credit report every year. Click here to obtain. Once you review there will be no surprises when the lender pulls your report and receives your score. The lowest middle score of all borrowers is the one that lenders use to determine your interest rate.

4) Interest Rates-The market is volatile and changes every day. Unless a lender "locks" your loan, interest rates will continue to move. Ask your lender for a range of interest rates and compare with your current interest rate.  Most homeowners want to save a minimum of 1% on the rate to recover the costs involved in the refinance. It's not a bad idea to consult your tax advisor on what points or fees might be deductible on your taxes. Most savy brokers can offer a range of interest rates from the lowest possible rate available to higher rates which may include a credit towards your closings costs. Always ask!

5) Appraised Value-Because banks currently use Short Sales/Foreclosures as comparables this can put a damper on your refinance dreams if values in your neighborhood have dropped. However, the HARP loan can assist especially since the cap is being removed, meaning even if your home is upside down by over 125% you may still be eligible. Lenders are awaiting programs details. Stay tuned!

Everyone has a different loan scenario, please do not hesitate to contact us with questions regarding home loans. We would be happy to assist you in finding the right fit.

Creative Financing

Downtown Attached Homes-September 2011

Downtown Attached homes are down in the number of units sold along with the median price from a year ago. In September 2011 64 units were sold with a median price of $324,500 and a YTD median price of $335,000. A year ago last September 2010 the median price was $374,950 with a $334,00 YTD median price. So is now the time to buy? With interest rates still at historic lows and prices slightly down, the answer is YES! 

There was a great article in the SDAR Newsletter for October by atorney Robert Muir on Equity sharing. He outlined equity sharing arrangements that benefit both sides and are often used when loans are harder to obtain. Although interest rates are very low right now, qualifying is tough as everything is scrutinized and reviewed over and over again. Equity sharing allows the owner-investor who usually provides all or most of the down payment and their good credit and the buyer or owner-occupant to live in the property and pay the mortgage, taxes and insurance including maintenance and split the appreciation or loss at a later date. There are risks involved and both parties should consult an attorney and/or tax advisor to discuss their options and handle the paperwork involved.

Creative financing can assist both buyer and investor in a challenging market. We assist our clients in finding solutions to buy now!

Top Do's and Don't for Short Sales

Short Sales: Tips for a Smooth Sale

Although there are an abundance of Short Sales on the market right now with hot properties priced accordingly receiving multiple offers, it's no wonder that buyer question making an offer on Short Sale Listing. Can they really win and outbid cash buyers? Here are some useful Do's and Don't for both buyers and sellers:

1) DO-Find the right agent! Many agents hire third party negotiators to handle the paperwork, phone calls and the lenders online system for managing Short Sales-Equator. This isn't all bad if the agent is really busy handling tons of Short Sales and they need the assistance. However, they should be trained and proven closers of Short Sales. There are many pitfalls to Short Sales, obtaining the listing is only half the battle. The Short Sale can be delayed if the foreclosure date is not extended, if the Earnest Money Deposit is not in at escrow, and if the lender uses Equator and the agent is not familiar with it. ASK for referrals and testimonials from past Short Sale clients and find out how your lender handles Short Sales so that when you request this info. from your agent, you recognize the response.

2) DON'T-Take everything and the kitchen sink. Some items like the refridgerator and the washer/dryer can be negotiated for sale to the new buyers. If they aren't interested in purchasing them consider taking them with you to your next home or sell them on Craigslist to make a few extra bucks. Typically what is attached stays. If you have sentimental items or elaborate fixtures, curtains, etc. discuss replacing them before you show the home to potential buyers and snapping the pictures for the listing.

3) DO-Be proactive! Both buyers and sellers should keep a journal of phone and email correspondence with both the lender and the agent(s) to insure everyone is doing their part to get the property closed.

4) DON'T contact your agent every day. It's important to check-in with your agent but probably not ten times a day. Let your agent know up front how often you want updates: twice a week, once a week? These are standard communication timelines unless a document or item is being requested fromt the lender.

5) DO remain positive throughout the transaction. It is a tough decision to Short Sale. Your agent should be with you every step of the way, guiding and answering your questions. Ask your agent about credit counselors, tax advisors and anyone else on their team that may assist you in rebuilding your credit for a future home purchase.

West Coast Living Real Estate Group handles Short Sale Transactions and is very familiar with bank standards and guidelines for using Equator and other online resources for contact. You receive personalized attention as the owner(s) assist you every step of the way.

Credit: How Important is it?

Does the FICO Credit Score Determine My Rate?

Borrowers are looking for answers when it comes to lenders evaluating their credit reports. Which score doe the lenders really use? How is the score determined? There are many factors to consider on the credit report and we won't dive into all of them today. However, I will touch on some key points that determine the score and how you can raise the score to qualify for the best possible mortgage rate and save on interest long term.

• Credit Scores factor in your current debt and liabilities as reported by three major credit bureaus: Equifax, Experian and TransUnion. These scores are used to determine how a lender perceives you when applying for a mortgage loan. They are important because a lender reviews the report in an attempt to gauge you past, present and future. It's like looking into a crystal ball and trying to determine how strong and trustworthy a borrower is by their history.
• The Score-The actual credit score factors in how long you have held an account, if the payments have been made on time and the amount of the actual amount you have used. For example, if a credit line is extended for $1,000 and you currently owe $999 to the creditor, this actually lowers your score because most of the extended credit is used up. In plain English, lenders want to see you have the cards and use them, but not use to much where you overextend yourself and cannot pay.
• Is no credit good credit? You might think paying off all of your debt before getting a mortgage loan is the best thing to do and it is as long as you don't close out all of your liabilities. Lenders look for 3 active credit cards. They want to see the credit bureaus are reporting every month even if it is a $0 balance. It demonstrates you have the ability to maintain credit.
• My credit score is bad, how can I raise it? If you have collections, settle them and pay them off. Contact the creditor(s) and work out a deal or seek professional credit counseling to make manageable payments. This will take some time usually up to a year after you have paid them off for lenders to consider your loan application. This is not always the case especially if you have credit accounts in good standing but are struggling on one or two.
• Credit Analyzer and Rapid re-score-After applying for a mortgage loan, a loan officer or broker may have the ability to analyze your credit to determine if debt is paid down or off that it increases your credit scores. Keep in mind this does not always work and should be used to increase the middle score since this is the one lenders use on the loan application. A possible re-score can be completed.

Are Renters Spending More Than Homeowners?

Renters Expenses Increase Over Homeowners

According to an article today on REALTOR Magazine, the answer is YES! Rising rents have forced renters to outspend home owners. The article states since 2005, home owners housing expenses have climbed only slightly from 31.9 percent of their household budget to 33.2 percent. During the same period, renter's expenses have jumped from 35.6 percent to 38.4 percent. These numbers were provided by CoreLogic U.S. Housing and Mortgage Trends in October.

With FHA financing and the low 3.5% down payment along wtih very attractive interest rates, currently in the high 3% range, it's easy to see how home owners are making out on their mortgages. With a new year on the horizon and tax time rounding the corner, it may be a good time to jump in while home prices and interest rates are smokin' hot!

HARP Relief Refinance Program Extended

Borrowers Seeking HARP Refinance have until 2013

According to a Press Release issued today by the Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac have announced HARP changes that aim to reach more borrowers. Under the current HARP Program, borrowers are eligible to refinance with loan to value (LTV) ratio above 80%. So far the program has assisted many borrowers seeking to refinance at today's low rates who owe more on their home than the current market value. Some of the new benefits to borrowers include:

• Reducing risk-based fees for borrowers refinancing into shorter term loans and lowering fees for borrowers
• Removing the current 125% LTV ceiling for fixed rate mortgages insured by Freddie and Fannie.
• Eliminating a property appraisal when there is an Automated Valuation that provides a good estimate.
• Extending the HARP program until Dec. 13, 2013.

FHA Purchase Highlights

FHA Highlights for Buyers

Although lending remains tight in most markets, FHA provides a great resource for both First Time Homebuyers and buyers that have not purchased within the last three years. The HUD website provides answers to many FHA related questions and can put you in the drivers seat for purchasing a home. If you are curious about a condo development and if the building is FHA approved, contact us! We can look that up quickly and let you know if you can purchase FHA. Highlights of working with an FHA loan include:

• Down Payment-3.50%
• Non-Occupant Co-borrowers ok!
• 1-4 unit dwellings including Single Family Residences, Condo's, and Planned Unit Developments.
• 100% of down payment and closing costs may be gift funds.
• Fixed and ARM loan options available
• 6% seller concessions (you can use these towards closing costs including property taxes and homeowner's insurance)
• 640 minimum FICO score
• Loan amounts as high as $625,500 with only 3.50% down payment!

Loan Modifications: Is Anyone Getting Them?

Separating Fact from Fiction on Loan Modifications

According to most lenders, any changes to the original terms of your loan is considered a loan modification. A modification can include anything from a lower interest rate, longer term, reduced principal reduction or a combination of these financial adjustments to your original loan and payments. Wtih tough economic times, high unemployment and an election on the horizon, why aren't more banks/investors approving loan modifications? We separate fact from fiction:

Question: Can anyone qualify for a loan modification?

Fact: Anyone can apply for a loan modification but not everyone will qualify. The banks have a matrix and/or system they use to determine eligibility. They request similar documents to when you purchased or last refinanced the property including but not limited to: two years tax returns, W-2's, pay-stubs, bank statements and a financial statement. Some banks require a hardship letter or explanation for the loan modification request.

Question: I have an approved loan modification but it's temporary. Will they give me a permanent modification?

Fact: Depending on the banks guidelines after a history can be shown that payments are being made on time and according to the note, a permanent modification may be granted.

Question: My income is much less than when I originally qualified. Will this automatically disqualify me?

Fact: Not necessarily. The bank is looking at your current debt-to-income ratio. They want to insure you're both in need of a modification and can afford the new payments. I have heard many lenders state they don't want to set clients up for failure.

Given the tight bank guidelines for loan modifications, how many have we seen be completed? Honestly, less than a handful. Many homeowners we have discovered were already very late on making their payments or had a high debt-to-income ratio and didn't qualify. For more information and details regarding Homeownership Programs to assist distressed homeowners, please contact us at (619) 640-6611.