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What Kind of Mortgage Fits Your Needs?

No matter the state of the economy, each year the number of new mortgages underwritten reaches millions of homeowners.  Some are buying for the first time while others are downsizing or upsizing.  When rates drop, like they did over the past 2 years, many people seize the opportunity to refinance their home loan.  However, how do people decide on which mortgage to use for their specific need?  An online survey conducted by HSH.com points to some of the factors that influence consumer decisions.

Most Important Factor

It should come as no shock that the most important factor is the interest rate.  Regardless of the type of loan, the size of the loan or the customers home state, everybody is trying to get the best rate for their home loan.  In the survey mentioned above over 45% stated that the rate was the top factor for choosing a loan.

Other items, such as the length of the term and the fees also ranked high in the survey, but none was as vital as the rate.

Deciding How Much to Use for Down Payment

The ability to make a down payment equal to 10%-20% of the home’s price will give the borrower a range of products to choose from.  A large down payment and a solid credit score will usually allow a borrower to qualify for a conventional loan which has the best interest rates.

For borrowers that have a smaller down payment, their options will be limited to FHA, USDA or VA for qualifying veterans.

Choosing the Right Term

With rates at an all-time low many borrowers are actually paying more attention to the term of the mortgage loan as part of the decision process.  While the traditional fixed rate of a 30 year loan remains quite dominant more and more people are looking at different adjustable rate products.  Those borrowers that have refinanced in the past 2 years have often chosen to go down to a 15 or 10 year term in order to drastically cut down on their total interest pay back while also paying off the home sooner.

Brokers Still the Top Choice

When looking for the right mortgage loan a number of people still prefer to use the services of a mortgage broker over a local bank or credit union.  In the survey mentioned earlier over 30% of respondents claimed that they sought the services of a broker rather than another type of lender.  Since brokers typically have access to multiple lenders they can offer any type of mortgage loan and get the best rate too.

Obviously, none of these factors discussed the two biggest items facing a borrower; are they happy with the home and can they afford the mortgage payment?  Beyond those two items, the guidelines mentioned above should help any new borrower pick a loan that is right for their situation.

Additional Mortgage Info:
Home Mortgage Loans

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Exciting News! FHA Is Allowing People that Suffered through Recent Economic Hardships to Apply for a Home Loan with the FHA Back to Work Program.

In the not so distant past people had to wait 3 years or more after suffering through a financial hardship. Bankruptcy, foreclosures and other major financial disasters would sideline people for a number of years before they could buy a house again. However, all that has changed with the FHA Back to Work Program.

Previous Guidelines

For years the FHA program has helped people finance the purchase of a home with a modest 3.25% down payment. In general, the FHA rules for credit and employment history were more forgiving than conventional loan guidelines. However, there were strict rules about waiting a significant length of time after filing bankruptcy, losing a home to foreclosure, getting a loan modification or a deed-in-lieu.

New Guidelines

The Back to Work program waives waiting periods based on certain hardship situations. People that have suffered through the following types of problems are no longer forced to wait multiple years to apply for an FHA loan

* Bankruptcy (either Chapter 7 or Chapter 13)

* Short sale of previous home

* Foreclosure

* Modification of previous mortgage

* Sale of a home due to pre-foreclosure status

* Deed-in-lieu

Due to the recession of the past few years the government has given FHA the ability to relax their rules in order to help people qualify for home loans. Now people will only have to wait 12 months.

Meeting the New Qualifications

For borrowers that have faced a hardship like the ones described above they will need to meet a few qualifications.

First the borrower will need to prove that their current financial condition is recovered from the impact of the financial hardship.

Second, the borrower will need to provide proof that their income declined by a minimum of 20% for 6 months or longer. This can usually be shown by presenting federal tax returns and the supporting W-2 forms.

Finally the borrower will have to agree to complete a counseling session aimed at educating home buyers.

In addition to these items the borrower must re-establish their credit. This does not mean that the scores must be 700+. However, once the hardship has ended the borrower will need to have good payment history on all credit accounts in order to prove that they are able and willing to make their monthly obligations.

Types of Borrowers

The Back to Work program can be used for people buying their first home as well as people buying their second, third, fourth, etc. home. It can also be used with the FHA 203(k) program for people that wish to renovate or modernize a home. Even people that are currently in a Chapter 13 plan could be approved for the FHA back to work program. The court will have to grant permission for the loan and the borrower will have to meet the other requirements.

The recent recession has hit a lot of people and left a lasting impact on them. The Back to Work program is aimed to help these people put the past behind them and return to the stability of owning a home.

Additional Mortgage Information: Mortgage Home Loans Financing

The three big options for homeowners are short sales, loan modifications and refinance. What have you seen that actually worked?

Options: Refinance, Loan Modification, Short sale.

Refinance

Basics: Refinancing is when you are paying off your old loan with a new loan with lower interest rates.

• The goods: This option is suitable for those who plan on staying in their home for awhile and/or those who are in an adjustable mortgage rate situation and want to solidify a fixed interest rate.

• The bads: You will be paying closing costs when you refinance and in order to refinance, you must have equity in your home.

Loan Modification

Basics: A Loan modification is typically when you modify the current loan to make payments more affordable via lower interest rates and/or extending the duration of the loan (30yr to 35yr).

• The goods: Loan mods can be a means to prevent foreclosure when you are delinquent on payments. Lowering payments could result in a more affordable living situation.

• The bads: Back in 2010, the Today Show reported loan mods helped only 5% of applicants. Yes, it does lower payments and prevent foreclosure but it does not lower the 5 hidden costs of homeownership. The home may still be above your affordability level. In the long run, a loan mod would prolong the problem and not fix it as you are simply extending the term of the loan thus paying more payments/interest and not building equity.

Short Sale

Basics: A Short sale is when you sell your property for less than what is owed and negotiate the difference with your lender.

• The goods: A short sale allows the homeowner to walk away from their home and in most cases, be forgiven of the remaining balance owed to the lender(s). Normally there are taxes involved with the forgiven balance. However, until the end of 2013, the Mortgage Forgiveness Debt Relief act grants immunity on primary residences.

• The bads: A short sale will put a ding on your credit score and it will take about 90-120 months to complete one.

These are just the basics but would love to know what your experience is on each of these options.

Thanks

www.seattleshortsaleblog.com

Loan modifications are a popular option most homeowners turn to when they are struggling with mortgage payments. It isn’t a secret however that it hasn’t worked as well as we hoped. The idea of “modifying” your current loan to create a more affordable payment plan seems enticing but do these popular loan modification programs actually work? Let’s looks at the data.

Don’t get me wrong, loan modifications do work for certain homeowners. Statistically, it is not for the majority. Mortgage Metrics Report reveals only 47.7 percent of the estimated 2.9 million loan mods are current or paid in full since 2008.

*excerpt from dsnews.com

“About 7.1 percent are currently less than 60 days delinquent; 14.2 percent are 60 or more days delinquent; 7.7 percent are in the foreclosure process. Lastly, 7.3 percent have already been foreclosed.

The OCC reports higher success rates among particular types of modifications. For example, the agency finds greater success among HAMP modifications. However, the OCC notes, “more restrictive qualification criteria restrict the number of borrowers who may qualify for a HAMP modification.”

Do you know of any friends or family who is successfully using a loan modification? What have you heard?

Peter

www.seattleshortsaleblog.com

Barack Obama was elected for his second term as president of the United States and now it’s time for action especially in the distressed housing sector which has affected millions of Americans around the nation. Both houses of congress unanimously agree that the mortgage forgiveness debt relief act is a good policy and support an extension. However, there is no concrete evidence of an extension yet which will be detrimental to all distressed homeowners. How and when will this policy be extended?

What happens if there is no extension Jan. 1, 2013?

If you are involved in a loan modification, short sale, or a foreclosure, you will be liable for taxes on the forgiven amount because it is deemed as income. This is not a small tax liability. An example would be, if you owe $150,000 on your home and it sells in a foreclosure auction for $100,000, the amount remaining of $50,000 would be taxable income. If you are in the 25% tax bracket, you will have to pay the IRS $12,500 in taxes on the foreclosure.

Expecting struggling homeowners to be burdened with this tax liability after losing their biggest asset, would leave the homeowner in a dire financial crisis. Obama’s FY2013 budget proposal does include the extension of this act to 2015 but we are coming close to the expiration of this policy (Dec 31, 2012). Homeowners are now panicking and the National Association of Realtors as well as numerous realtors around the globe are participating in a call to action to extend this forgiveness act asap.

I believe the extension of this act will be extended. However, when and how are the questions that are up in the air. More than 50,000 homeowners go through foreclosure monthly. What should a struggling homeowner do when they are in pre-foreclosure and not sure of when this act will be extended?

Solutions: Short sales are still the best answer

Now that Obama has been elected, we are assured via his FY2013 budget that the forgiveness act will be extended. If you however lose your home to foreclosure after the expiration and before the extension, it could mean tens of thousands of dollars owed to the IRS post foreclosure, loan mod, or short sale.

If you are in at risk of foreclosure, I strongly suggest you begin trying to qualify for a short sale and get your short sale started right away. This way, you will be able postpone your foreclosure date and initiate your short sale which will take typically 3-6 months to close.

This would be your smartest financial move for your situation because you are avoiding a huge tax liability, avoiding a foreclosure which would be detrimental to your situation, and walking away from your home without being vulnerable of pursuit by your lender post foreclosure for the remaining balance.

Hope this helps

Peter

VA Mortgage Program Has Good News for Veterans and Their Families

Photo credit: Tony Fischer Photography via photopin cc

Many years ago the United States decided it was a good idea to offer housing benefits for our veterans that were not attainable to other classes of people. The men and women who sacrificed time away from their families and risked their lives in defense of our country deserved the chance to buy a home with attractive features. As time has marched on and the needs of veterans have changed, the VA Mortgage program has made some changes to appeal to even more qualified borrowers.

Spouses of Deceased Veterans

Before the new law, spouses of deceased veterans could only apply for a VA mortgage if the veteran passed away during active duty defending our country or if the veteran passed away due to a disability sustained during duty. However, if the spouse can show that the veteran suffered from a disability sustained during duty for a minimum of 10 years prior to their death, the spouse can now apply for the VA mortgage.

Funding Fee for Certain VA Loans Waived

People in the military are no stranger to paper work. With every VA loan that is approved there is a fee associated with the loan. This funding fee provides money for the new crop of loans, avoiding the use of taxpayer's money.

If a veteran learns that they are eligible for disability pay due to their physical exam prior to discharge then they are allowed to waive the funding fee from the VA mortgage. Previously, a veteran had to receive actual disability pay on a regular basis before the fee could be removed.

Beyond Fixed Rate Loans

Fixed rate mortgages are great for people who are reasonably confident that they will stay in a certain home for many years. Having the mortgage payment set in stone offers stability for the homeowner. However, there are some people, such as veterans and active duty personnel, which may be on the move in a few years. For these people, getting an Adjustable Rate Mortgage (ARM) can make sense. They save money by getting a slightly lower interest rate that is fixed for 3 or 5 years. The new law makes it possible for eligible borrowers to apply for an ARM through the VA mortgage plan.

More Flexibility for Military Families and Individual Parents

For as long as the VA mortgage program has been around, one of the main requirements to the loan has been the veteran's occupancy. A VA loan states that the veteran must live in the home as their primary residence after the loan is completed. The veteran is given some time to move in to the new home, but the requirement is there. For military families in which both spouses are active duty, this can be impossible. Even harder for families that have only one parent who is serving in the military.

The Camp Lejeune act makes it possible for the children of the veteran to meet the requirement of occupancy. This means that dependents can live in the home purchased by their parent or parents through the VA mortgage while the parents sacrifice their time away from loved ones serving our country.

Assuming an Existing FHA Loan

Most mortgages have a requirement that the loan must be paid in full when the property is sold. However, FHA offers a different option to the seller and buyer. It is possible for the buyer to take over the existing FHA mortgage from the current property owner. This is a very enticing offer for someone that has a mortgage with a great interest rate. Here are the guidelines for an assumable FHA mortgage.

photo credit: 401(K) 2012 via photopin cc[/caption]

Review Existing Loan

The first thing you should do as a potential buyer is review the existing loan documents. Any loan that originated prior to December 1 in 1986 is allowed to go through a “simple assumption” procedure. This means the buyer does not have to qualify for the FHA mortgage. For loans that were originated on after the December date, the buyer will have to qualify for the loan just like any new borrower.

Negotiate a Price with the Seller

Most sellers would like to receive a large part of the equity they paid in to the mortgage over the years since they originated the loan. The price you can negotiate is really dependent on your ability to deal and the seller’s motivation for getting rid of the home. One thing that must be clear; the buyout amount given from buyer to seller cannot be financed in to the existing FHA mortgage. This is money that needs to be paid either in cash or with a loan separate from the mortgage.

It may be possible to convince the seller to finance the buyout amount. This would mean that you have two loans to repay in order to purchase the home.

Talk to a Mortgage Lender

Since you will likely have to qualify for an FHA mortgage loan, it is advisable to talk to a lender experienced with FHA loans. The lender can review your credit file, determine your monthly income per FHA guidelines and find out if you qualify for the loan.

Determine Current Loan Status

You need to find out if the current property owner is up to date on their mortgage payments. If there are any late payments, those payments are transferred to the new buyer. This can be rectified by either paying the amount necessary to get current or requesting a modification of the loan.

Inquire About Down Payment

Since FHA asks for a down payment equal to 3.5% of the price, this rule will apply to someone assuming the loan. In this case, the 3.5% is based on the existing loan balance.

If you are approved for the loan, you may proceed with the closing process. You should ask the lender to contact a local title agency to research the title to ensure there are no liens on the property other than the FHA mortgage. Additional liens will have to be paid in order to transfer the deed in to your name as owner.

A ray of good news shined through the ominous clouds of the fiscal cliff this past week stating that the Mortgage Forgiveness Debt Relief Act has officially been extended. Through this act, homeowners who are involved in a short sale, foreclosure, or mortgage restructuring are able evade a significant tax bill.

However, the storm is not anywhere near from over. The recent fiscal cliff deal was a small step of progress but the federal deficit still needs to be resolved which calls for more budget battles ahead. Could we be seeing our last Mortgage Forgiveness Tax Relief Act extension in 2013?

Only hours before the end of year 2012, congress was able to strike a deal to avert the fiscal cliff. Fortunately, this included the extension of the debt relief act which is now set to the new expiration date: December 31, 2013. It is official and the proof can be found in the IRS Website or in the American Taxpayer Relief Act of 2012 Bill.

Homeowners are very fortunate to get one extra year of opportunity to short sell their homes. Congress realizes that without this extension, numerous homeowners would be devastated with critical financial conditions. Although, the extension of the various tax cuts alleviated our impending tax increases momentarily, our government is also in a bad financial position in that it has a debt ceiling issue to deal with and the $1.3 billion dollars in taxes that they lost through the extension of the act may be a provision that our government may not be able to continue in our future budgets.

We may get a better forecast in a couple of months as a debt ceiling battle in Congress may occur and more budgets will be established.

What are your thoughts on this? Do you believe we will get an extension beyond Jan 1, 2014?

Glendale Short Sale Help

Glendale, California – Is your loan with a large Bank/Lender, for instance Chase, Well Fargo, Bank of America or Citibank? In contrast, these Banks/Lenders usually do not make the FINAL decision on your Glendale Short Sale.

Here are the reasons why:

The vast majority of the time, the banks/lenders are working as a just the servicing company. They’re handling the loan for an “Investor” or third party.

Click here to discover how other sellers successfully did a short sale and avoided foreclosure.

The third party owner will most likely be a corporation, a pension fund, a Wall Street firm, or split up amongst sometimes thousands of individuals in what’s called MBS (Mortgaged Backed Securities)

The owner, or Investor, can also be a government backed or sponsored entities…for instance, Fannie Mae & Freddie Mac. These entities are called GSEs (Government Sponsored Entities).  This is essential, in most cases, because you can contact these entities if your servicer refuses your short sale.

What to find out if Fannie Mae or Freddie Mac own your mortgage loan? Click here! We have ways to find out who the Investor is on your mortgage loan if your home is NOT owned by Fannie Mae & Freddie Mac. Click Here, and fill out the short form to the right of the page and one of my team members will give you a call…we have multiple ways of figuring out who the investors are and how to get a hold of them. Usually, they will reassess your short sale…all you have to do is present your case and make sure that they are aware of your concerns and let them know absolutely why they should accept the short sale offer.

I’ve noticed that the Investor will generally do a much better job of assessing the short sale offer…especially, because it’s their money. Once their review is complete, they will usually approve the short sale offer and make sure that the servicing company is well aware of the acceptance. This has been especially helpful when the servicing company has asked for a contribution from the buyer and/or seller, when they want to issue the seller a promissory note or a deficiency judgment.

There has been many times where the negotiator at the servicing company will just reject the short sale for no good reason. There have been other times where the negotiator has asked for irrational demands…like an offer on the home for above fair market value.

You may ask why in the world someone would do this. Well? It could be multiple reasons…for instance; they may get compensated with a bonus for obtaining an offer and successfully closing the short sale for a higher price than what the property is worth.

Do to this, they might turn down a short sale offer that otherwise might have been approved. When this happens and the property forecloses, the Investor usually nets a much lower amount back, once the home is sold as a REO.  It becomes a lose, lose situation for all parties involved including the investor. The servicing company is the only one that usually wins regardless of the property foreclosing or closing through a short sale. Their servicing agreement allows them to collect everything that’s owed to them by the investor on the property; which puts a lot less money into the investor’s pockets.

This might be a surprise to many of you, but this does happen quite often. If you feel like this is happening to you, find out who the investor is and make sure they are aware of what’s happening with the servicing company. I’ve personally been able to get multiple short sales approved by bypassing the servicing company and going directly to the investor when the servicing company does not cooperate.

I can help you short sale your property and never pay the bank another penny. Send me an e-mail at CMe4Homes@JenniferEscobar.com will contact you for a free consultation.

When we talk, I will explain how the process works in detail and answer any questions you may have. Or, if you prefer, you can call me at (818) 335-7078

Discover how other sellers successfully completed a short sale and request a free consultation by clicking here.

Want more information about a California Free Loan Modification? Our FREE Loan Modification Services will help you get a loan modification approved with your lender.

Click Here for more information regarding my FREE LOAN MODIFICATION SERVICES!

Thanks for reading my blog post, Jennifer Escobar.

The Jennifer Escobar Team @ Qwest Real Estate

Phone: 818-335-7078              Email: CMe4Homes@JenniferEscobar.com

Website: www.TheJenniferEscobarTeam.com

Glendale California Real Estate | Short Sale Specialist | Short Sales | California Free Loan Modification Los Angeles Short Sale Specialist | Los Angeles Short Sale | When to short sale in Los Angeles | Los Angeles Short Sale Taxes | Why Short Sale in Los Angeles | Los Angeles Short Sale Requirements | Los Angeles Short Sale Guidelines | How does short sale work in Los Angeles | Los Angeles Mortgage Short Sale

Jennifer Escobar Specializes in FREE California Loan Modification Help to Southern California distressed homeowner’s who are seeking FREE CA Loan Modification assistance in their pursuit of a Loan Modification in Southern California. Furthermore, Jennifer Escobar also Specializes in Short Sales and has successfully listed, marketed and successfully negotiated hundreds of short sales in Southern California. Jennifer Escobar is a Short Sale Specialist successfully negotiating short sales in Glendale, Burbank, Granada Hills, North Hollywood, Sunland, Tujunga, Sylmar, Van Nuys, Valley Village and Lake Balboa. Glendale Loan Modification Help, Glendale Short Sales, Glendale Short Sale Realtor, Short Sale Realtor. Glendale CA Short Sales. Glendale Realtor. North Hollywood Loan Modification Help, North Hollywood Short Sales, North Hollywood Short Sale Realtor, North Hollywood Realtor. Granada Hills Loan Modification Help, Granada Hills Short Sales, Granada Hills Short Sale Realtor, Granada Hills Realtor. Burbank Loan Modification Help, Burbank Short Sales, Burbank Short Sale Realtor, Burbank Realtor. Van Nuys Loan Modification Help, Van Nuys Short Sales, Van Nuys Short Sale Realtor, Van Nuys Realtor.

Bank of America is Offering To Pay Off Second Mortgages?|Carson|  Leesa Hammond

As part of the National Mortgage Settlement, Bank of America announced on Friday that it is in the process of  mailing approximately 150,000 letters to their pre-qualified homeowners offering to cancel their second mortgage.  The intention of Bank of America is to help improve the financial position of the homeowner by decreasing their monthly payment obligations and potentially creating an equity position in the property. Bank of America began mailing these notices to their qualified borrowers in July and will continue through December 2012. The letters will notify eligible homeowners that the full balance of the second lien mortgage will be forgiven and the lien removed and cleared.  The borrower does have the option to call the bank to decline the offer within 30 days of receiving the letter.    Hmm... isn't that interesting.

What is the criteria to have the second mortgage forgiven?

• Mortgage must be owned and serviced by Bank of America
• Eligible borrower must be severely delinquent
• Second mortgage must meet certain threshold of delinquency or property value criteria
• Does not matter who owns and services the first lien mortgage
• Only borrowers who receive the mortgage elimination letters are eligible

Downsides for the borrower:

• Unless you received second lien mortgage forgiveness letter, customers can not request to be part of the program
• If the borrower is currently in foreclosure the elimination of the second mortgage will not stop the foreclosure from proceeding
• Possibility of a tax liability, there are some exceptions  – always check with your tax advisor

Good news:

• Bank of America will report the account paid and closed on the borrower’s credit report
• Bank of America will NOT pursue the homeowner for a deficiency judgment

Bank of America will continue to help customers who are in need of assistance with their mortgage. Contact Bank Of America's customer call center or by visiting them on the web to find out about other available programs.

mrsleesa@gmail.com

Leesa Hammond

Century 21 Amber

(310) 890-4439

Bank of America is Offering To Pay Off Second Mortgages??? | Carson| Leesa Hammond

Bank of America is Offering To Pay Off Second Mortgages??? | Carson| Leesa Hammond

Bank of America is Offering To Pay Off Second Mortgages??? | Carson| Leesa Hammond

Bank of America is Offering To Pay Off Second Mortgages??? | Carson| Leesa Hammond

According to records HAMP has failed at generating the initial guaranteed 3 to 4 million permanent loan modifications. Actually HAMP has surpassed its one millionth trial or permanent mortgage modification between June 2010 and July 2012. The Treasury reports that 770,834 borrowers either did not qualify for the program during that period, or failed to finish a 90 day trial. Additionally, 229,185 permanent modifications redefaulted after making the first three consecutive monthly payments during their trial process.noticeable it’s one millionth failing this drop. HAMP is the acronym Home Affordable Modification Program.

According to the Treasury assessments that one in three HAMP trial modifications are unsuccessful and the permanent modifications typically are put into another bank modification program, and nearly 16 % of all temporary or "trials"  end in the property being foreclosure.

So why the huge failure? One reason has been attributed to many of the servicers staff appear to be improperly trained and show a negative  attitude when speaking with distress homeowners. It has also been reported that management by Treasury of the big financial institutions in complying with HAMP.

It has been projected that only one third (1/3) of the initially approximated 3 – 4 million property owners will get support. With a price of over $75 billion dollars. It indicates that the cost of this programs to us taxpayers is roughly $75 thousand dollars per assisted homeowner.

Only time will tell if the system was worth it.

Is the HAMP Program Considered A Failure? |Carson |Leesa Hammond

Is the HAMP Program Considered A Failure? | Carson | Leesa Hammond

Is the HAMP Program Considered A Failure? | Carson | Leesa Hammond

Is the HAMP Program Considered A Failure? | Carson| Leesa Hammond

Is the HAMP Program Considered A Failure? | Carson | Leesa Hammond

Differences Between FHA and Conventional Mortgages

Across the land the vast majority of home buyers use either a FHA or a conventional mortgage to purchase a property. While these loans are similar in a few ways, there are some pronounced differences. Each one has benefits that cater to a particular group of buyers. Understanding how they are different and which one is best suited to different circumstances will help buyers feel more informed about their financial situation.

FHA Loan

FHA stands for Federal Housing Authority. This agency does not make the loan itself. Instead, they insure FHA loans that are offered by approved mortgage lenders. The lender is protected in the event the borrower does not repay the loan.

FHA is committed to providing basic, conservative loans. A large number of their deals are fixed rate loans even though FHA does allow for adjustable rate mortgages.

Conventional loan

A loan that is not insured by FHA is most likely a conventional mortgage. Mortgage brokers, banks, and credit unions offer a wide variety of conventional loans. Conventional loans have more unique offerings such as interest only type of deal or a combination of a first and second mortgage used for a purchase.

Down Payments

One of the major differences among the two types of loans is the requirement for a down payment. FHA will allow buyers to pay 3.5% of the home's price as a down payment. The money used for the down payment may come from cash on hand, savings, retirement accounts or even a gift from a relative.

For conventional loans, the normal down payment is 20% of the home's value. However, there are quite a few loans that will allow a 10% or 5% down payment. The money used for the down payment must come from the borrowers own funds such as savings, investments or retirement accounts.

Private Mortgage Insurance

Both the FHA loan and conventional loan requires private mortgage insurance (PMI) if the buyer makes a down payment that is less than 20% of the purchase price. This insurance is designed to protect the lender if the loan is not repaid in full.

With a conventional loan, the PMI will be in place until the loan balance is paid down to 80% of the home's value. Typically, the PMI amounts for a conventional loan are higher than a FHA loan.

For an FHA loan, there is a fee charged at the time of the loan closing as well as a monthly amount paid with the loan payments. The monthly amount is enforced until the loan amount reaches 78% of the home's value.

Credit Score Requirements

Conventional loans have usually been reserved for customers with the highest credit scores. Due to the problems faced by the mortgage industry over the past several years, this fact is even more true today. Conventional loans rely heavily on standard credit reports offered by the major credit bureaus. Most conventional mortgages are approved by a computer system and reviewed by underwriters.

On the other hand, FHA loans will allow a slightly lower credit score. In addition, FHA will allow underwriters to go beyond the computer system and make approvals based on a borrower's complete file. Items like residence history, rental history and stable job history can persuade some FHA lenders to approve a loan for people who have scores that are slightly less than perfect.

https://www.youtube.com/watch?v=KqMxoNoy_hQ&feature=player_embedded

Are you in pre-foreclosure or can foresee yourself in foreclosure status in the near future? You are not alone my friend. There are government sponsored HUD counselors available for you in your area who can help you explore your options and choose the best one for your particular situation. Do this immediately as waiting may be consequential to your situation.

However, one option that HUD counselors may not discuss with you but is worth exploring if you are in pre-foreclosure is the “Produce The Note” strategy.

A few conventional options to stop foreclosure and stay in the home would be a refinance, modification, and a forbearance plan. The two popular exit strategies to avoid foreclosure would be a deed-in-lieu or the popular option, a short sale. Your HUD counselor should explain all of these options to you and recommend a particular plan depending on your specific financial situation.

One strategy to delay foreclosure which is not known or often discussed is the “Produce The Note” strategy. What this strategy entails is, the homeowner, whose home is in a foreclosure process, asks their banks to produce the original loan documentation when they purchased the home. It’s quite simple but surprisingly, a high number of banks are not able to come up with this information thus homeowners can delay banks from foreclosing on their property. There are no guarantees for this strategy as they may be able to “produce the note” but it is certainly worth giving it a try.

By using this strategy, some homeowners were able to stall their foreclosure process for years but keep in mind that delaying is not necessarily solving the problem. Choosing a short sale for your home will help you recover your financial situation much sooner than waiting and simply enjoying the free rent. A wise decision would be to exit the property on good terms with your current lender so you can have the chance to purchase a new home with your next lender who is able to see how you performed with your previous home mortgage.

Have you heard of the produce the note strategy? I would love to know what you have heard about the idea.

Peter

Understanding Specific Requirements of Appraisal for FHA Loans in Wisconsin

The all-time low mortgage rates combined with affordable home prices have generated a huge growth in business for FHA mortgages. People considering their first home need to understand the specific appraisal requirements for FHA loans in Wisconsin.

Basics of FHA Appraisal

In a nutshell, an FHA appraisal is a conventional appraisal with additional requirements. The goal is to identify any potential repairs that would need to be completed within the next 24 months and have those items addressed before the loan is closed.

It is important to note that an appraiser does not review a home to the depth of a home inspector. A home inspection is still a good idea for a home, especially if it is 5+ years old.

FHA Appraisal Caveats

Only appraisers listed on the FHA approved roster are allowed to inspect homes and complete the evaluation. Before an appraiser is assigned to review a home a FHA case number will be assigned to the loan. The appraisal is valid for the next 90 days. The lender or borrower may change during that time period without the need for a new appraisal.

Any home that has undergone a conventional appraisal within the last 90 days will still need a FHA case number. In addition, the home must be re-inspected to verify FHA specific items. Here is a list of the items:

• Confirm no existence of drainage or water damage
• Ensure water pressure is adequate for the home without any leaks
• Any exterior and interior lead-based paint must be inspected to identify peeling, chipping or cracking
• Identify exterior access for each bedroom
• Insure the minimum 18” egress and ingress from the lot line to the building
• Test the heater to ensure proper working condition as well as air conditioner
• Ensure electrical outlets are in every room and in working order
• Test the fan/hood over the oven for proper working condition
• Ensure screens are present on roof vents and no more than three layers of roof material
• Determine that the electric box has at least 60 amp
• Properly note existing wiring that is exposed as well as cover plates missing from electrical boxes
• Do a brief inspection of crawl space and attic

Any issue found on the interior portion of the home needs to be either repaired or replaced. On the exterior part of the home any issue needs to be repaired or removed.

Specific Areas of Importance

Of the items mentioned above three seem to get the most attention; water problems or drainage issues, lead-based paint and the ingress/egress points. Concerning the ingress/egress points, common problems occur with homes that have a garage touching the lot line. This prevents the homeowner from accessing the exterior wall of the garage in order to paint. If this is the case the neighbor may be asked for an easement in order to grant the homeowner access.

Consultant Required for 203(k) mortgage

Buyers that are approved for a FHA 203(k) mortgage need to understand that the appraiser will be working with a consultant. The consultant must be approved by FHA. This individual will inspect the home and determine the necessary repairs and improvements and formulate an estimated cost. The appraiser will inspect the home and ensure that the consultant has properly identified all necessary repairs in order to conform to the FHA guidelines.

The Mortgage Debt Relief Act of 2007 is set to expire!!

The window is closing rapidly on one of the most important tax-relief provisions enacted by Congress during the housing crisis to help financially strapped homeowners. Time is running out to Short Sale your house. Although the 2007 law that allows taxpayers to exclude from income the amount of debt that is forgiven or canceled by their lenders doesn’t expire until Dec. 31, it’s likely to take every bit of the coming months to persuade your bank to either foreclose or allow you to sell your house for less than it’s worth (Short Sale).

While owners who are struggling to hold onto their homes shouldn’t throw in the towel solely because of the pending tax bite, it is certainly something to consider.

Under the tax code, borrowed money need not be reported as income because you have an obligation to repay. But if the lender subsequently cancels what you owe, the IRS requires that you report that debt as income because the duty to repay it no longer exists. So, if you owe $250,000 and your lender forgives $50,000 of that debt in a $200,000 refinancing, that $50,000 is considered income. If your combined federal and state marginal tax rate is 36 percent, you would owe $18,000 in taxes.

Under the Mortgage Forgiveness Debt Relief Act of 2007, though, taxpayers are allowed to exclude from income the discharge of debt on their principal residence when they do a short sale— at least until 2013.

So when your lender agrees to a short sale, there is no tax on the difference between the selling price and the amount you owe. When your lender forecloses, there is no tax on the canceled debt. Even when you refinance at a lower loan balance, there is no tax on the difference between what you owed on the old loan and what you now owe on the new one.

But unless Congress extends the law — and there is no indication lawmakers are even thinking about that — all residential mortgage debt relief that takes place on or after Jan. 1, 2013, will once again be considered taxable income.

Why worry about this now, Because the timelines on debt forgiveness decisions by lenders are absolutely horrendous.

Of course, each state has a different timeline. But the shortest is 463 days in Minnesota, according to Lender Processing Services. So the tax absolution window may already be closed for foreclosures.

There are no hard-and-fast numbers when it comes to short sales or loan modifications. But they also can be long, drawn-out transactions.

According to a nearly year-old survey by Equi-Trax Asset Solutions, a Santa Barbara, Calif., analytics company, it can take anywhere from four to nine months for underwater borrowers to persuade their lenders to sign off on a deal in which the lender will net less than what the borrower owes (Short Sale).

Eighteen percent of the 600 agents polled said short sales can be closed in less than three months if the stars line up just right. But almost 10 percent said these transactions require more than 10 months to complete.

There are many factors besides a tax break to consider when deciding whether to give up your house. What will a foreclosure or short sale do to your credit score? How long will you be precluded from buying another house? Will the extra income push you into a higher tax bracket? How long will it take before the amount I owe is on par with what is owed? Is it worth being tied down to one property for many years or should I just short sale and be back in the market within 2 years and probably buy more house for way less.

Consequently, as always when it comes to such matters, you should consult a tax professional before making any decisions.

At Trinity Homes & Investments we discuss all available options with our clients before deciding which course of action to take.  Our mission is to find dignified solutions to foreclosure.

Sad story. A client told me last February that she was not able to make the payments on her $750,000 home loan. The house is now worth about $400,000 and this person wanted to get a loan modification and get the principle reduced. I can not tell you how many times I hear this story and how few times I have heard that there actually was a principle reduction. Actually I can tell you how many times I have heard of a principle reduction, once.

Ok, so it is bad enough that banks have been unwilling to reduce principle but things can get worse. My client received a Notice of Default last February and at that point she decided to try to to get the loan modification. In November she was finally offered the loan mod, which she turned down because not only did she not get the pricnciple reduced, but all the missed payments and late payments were added on to the back end of the mortgage.

So on Dec 20th she got a Notice of Trustee Sale and on Dec 26th signed a listing agreement to short sale the Redwood City  home. Here's the problem. While getting an offer before the sale date of Jan. 12th would be hard, but possible, the Mortgage Servicer, Carrington Mortgage said no deal. THEY DO NOT POSTPONE TRUSTEE SALES FOR SHORT SALES.  That is harsh. Not only that but in order to do a HAFA Short Sale and get the auto postponement you need to initialte it 60 days before the Trustee Sale Date.

So now, this person is going to have her home foreclosed. I am very sorry for her, but maybe someone can learn a lesson from this.  

Do not put your head in the sand!!!!! If you can not make your payments do something the first month it happens, not a year later. If you have a change of circumstances, lose your job, get divorced, your loan resets, have a health problem, do something right away. If you want to keep your home and can make payments if they are lowered then apply for a loan mod. Don't do it after you get the notice of default, because by then it may be too late. Some banks will allow you to postpone a sale up to 3 days before the sale, but not all. If you can not make payments and need to short sell, do it right away, not at the last minute. Don't take chances with your financial future.

If you have any questions about buying or selling short sales in San Mateo or Santa Clara County please feel free to contact me.

Marcy Moyer

Keller Williams Realty

www.marcymoyer.com

marcy@marcymoyer.com

650-619-9285

D.R.E. 01191194

I have been getting several calls regarding loan modifications. I would like to help these people because they trust me and their are a lot of scam artist out there. My question is -- Has anyone had luck with the bank paying for you to help the home owner with loan modification? Or is the only way to do it is to have the home owner pay me for my services. 

Any help would be greatly appreciated. 

Jesse 

I have read several news and Blog pieces about 2012 being the bottom of the market and how the best time to purchase a home is now. In good conscious I cannot sit idly by without voicing my opinion.

The news and columnists have based their analysis on the low number of inventory currently on the market for sale and the fact that it is 22% less than this time last year. They further site a 30% increase in property searches on Realtor.com which is one of the top search websites where consumers make purchase decisions. The reporters further substantiate their point by stating that interest rates are the lowest they have been since the great depression. Well folks, I am here to let you in on a few things. I am a distressed property real estate broker and live in the numbers and happenings on the ground. Last year alone I personally closed $17 Million in real estate. More than three quarters of my sales were short sales and bank owned property sales. My job revolves around tracking properties that have defaulted on their mortgage payments and listing the property for sale before it ends up in foreclosure. When properties do end up going to foreclosure the banks also contacts me to sell the properties back into the marketplace as a bank owned property. This is also known as a REO (Real Estate Owned) property.

In dealing with the lenders on a daily basis I have the ability to see how many mortgages are current or behind in any part of California. The numbers are staggering! One in three properties in San Diego County is currently underwater (owe more than what the property is worth).
Many of you may have heard of the “Mortgage Debt Relief Act of 2007” which is set to expire at the end of 2012. This means that anyone wanting to do a short sale has until the end of this year to get it done to avoid the enormous tax and deficiency implications. As homeowners scramble to do short sales, the banks are absolutely inundated with files. Banks have increased their loss mitigation departments to handle the amount of short sale requests as the deadline draws near.

So to shed further light on the subject of a “recovery,” I would have to say that the reason there is a 22% decrease in inventory on the market for sale is due to the “Robo-signing” debacle which simply held up the foreclosure process for a few months. Furthermore, the lenders have started issuing three month extensions to foreclosure sale dates rather than the standard 30 day extensions. The numbers are artificially adjusted to modify the supply and demand ratio. Also, the news columnists have stated that the average nationwide sales price has started increasing and the market is recovering. This is not quite correct because the number of higher end distressed sales has dramatically increased. In other words, if 100 homes sell at $200K and 900 homes sell at $500K, the average home price may have increased.  However, what they are not saying is that the home that is currently selling at $500K was purchased in 2005 for $900K.  See how they are messing with the numbers. Just because the average nationwide sales price has increased, does not mean we are recovering.

So I would maybe agree that the lower end has reached the bottom whereas the middle and higher end have room to fall.  Far be it from me to state that 2012 is the “Big Housing Recovery.” New young families or recent college graduates will also add to the lower end recovery as they will need to purchase in this range.

The number of Baby Boomers now wanting to downsize will further hamper the prices of the middle and higher end as they add to the supply. There are currently 30 million Americans in this segment of the market.

The FED made an error in judgment a month ago when they stated interest rates would remain low through the end of 2014, which took away the immediate driving force to purchase now. If interest rates would remain low for an extended period of time, why would anyone be in a hurry to purchase when they know how much shadow inventory the lenders are sitting on?

As the world has become a global economy, few have shed light on the fact that China has begun their housing crisis with more than half the cities reporting huge decreases in home prices. This may have an influence on our economy further down the road as this may affect the cost of consumer goods locally.

Gas prices are at an all-time high and could further contribute to inflation and gyrations in the consumer price index.

Unemployment is still stubbornly above 8% and steam rises from the printing presses at the Fed.

I don’t know folks. Recovery 2012?  I am not so sure. And over the years I have learned that in the long run it pays to be honest rather than bending a situation for personal gain. There is a reason I am renting right now. Though the rents are higher, cash will soon be back on the thrown to be crowned King. Don’t be in any hurry to purchase unless you find a great deal.

This is my honest humble opinion.

In a briefing by Credit Suisse this week, the financial giant’s opinion was that reducing principal balances of underwater mortgages is a risky idea that has not been shown to keep underwater borrowers from later defaults.  In my practice as a Florida real estate lawyer, that opinion flies in the face of borrower sentiment.  The guiding force in the Credit Suisse statement seems to be the “moral hazard” argument, coupled with statistics about the failure of principal reductions helping homeowners.

As reported by Bloomberg News, Dale Westhoff on behalf of Credit Suisse said that of the 11 million “underwater” homeowners, about 6.5 million have never missed a payment and 2 million more are making on-time payments after delinquency.  He said that widespread principal reductions may drive defaults much, much higher as borrowers seek the aid.  But he also said that such wholesale principal reductions have never been done before and the associated risk is unknown.  Furthering that argument, he said that if principal reductions are offered, it may create the concept that the lenders are guaranteeing the value of homes.

Others don’t share the same view.  I for one find that 50% of those that seek my assistance have decided that without a meaningful principal reduction, they are merely overpaying rent and having a debt obligation as well.  This sentiment was predicted as far back as 2001. [See my article A HOME WITHOUT EQUITY IS JUST A RENTAL WITH DEBT]. 

While Fannie Mae and Freddie Mac maintain a no principal reduction policy, New York Federal Reserve Bank President William Dudley said this month that without a significant turnaround in home prices and employment, a substantial portion of deeply underwater home loans (as in Florida) will ultimately default absent a realignment of principal to market value.  This concurs with the findings I make in my office everyday by speaking with troubled borrowers.

Will the argument that principal reductions will bring out a flood of applications for similar aid hold true – I think the estimates of that flood are probably understated! - At least here in Florida.

The problem has been quantified by specialists as needing to avoid 8 to 10 million more distressed property sales through the application of principal reductions.  Although some programs for “short refinancing” are in effect, with 125% caps that is not enough in the hardest hit states – where the market value drops are far greater and the bulk of the problem loans exist.

From the macro viewpoint, short sale guru (as in billion dollar bets that the mortgage bonds would fail) Greg Lippmann wonders what the big deal is – since investors write down their portfolios anyway and have been doing business like this for years.

 It seems to me that writing down the loan at the borrower level will have the added benefit of lowering losses on the loan underlying the mortgage bonds, therefore stabilizing that market.  Without the help to the first tier borrower – the homeowner – the homeowners’ later default simply makes the foundation upon which the bonds are created subject to disintegration.  If we don’t see principal reductions then this is going to be a very slow recovery.  If we do see principal reductions we are liable to experience “non-qualified” borrower revolt and a new era of lending and doing business a very different way.

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Copyright 2012 Richard P. Zaretsky, Esq.

Be sure to contact your own attorney for your state laws, and always consult your own attorney on any legal decision you need to make. This article is for information purposes and is not specific advice to any one reader. Richard Zaretsky, Esq., RICHARD P. ZARETSKY P.A. ATTORNEYS AT LAW, 1655 PALM BEACH LAKES BLVD, SUITE 900, WEST PALM BEACH, FLORIDA 33401, PHONE 561 689 6660 RPZ99@Florida-Counsel.com - FLORIDA BAR BOARD CERTIFIED IN REAL ESTATE LAW - We assist Brokers and Sellers with Short Sales and Modifications and Consult with Brokers and Sellers Nationwide! Shortsales@Florida-Counsel.com Website www.Florida-Counsel.com.

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