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The real estate downturn of the mid-2000s is mostly over and the market is heating up, with prices rising in all over the U.S. In Wisconsin, the real estate market might be even healthier than in other locales, with new and existing home prices expected to rise 2.4 percent by early 2016. It might just be the perfect time to buy, but before you make any offers, you need to do a little planning to make sure you can pay out over the long run, especially if it's your first home.

Get Your Financial Ducks in a Row

Do you have good credit? Do you know what good credit is or the factors that affect your credit? Have you had late payments, bankruptcies, judgments or other liens? If the answer is yes, the first step is to work on your credit score and report. Up until just recently, access to your credit score and full report was granted after putting down credit card info for a "free trial." that you would have to cancel right away to avoid a costly fee. Now, you can access your score and report for free, so there's no excuse for not knowing what's happening with your finances. Your FICO scores are ordered separately, usually for a nominal fee. Check it for discrepancies or old information. Much of the time you can contact the lender directly to resolve these issues. Or, contact the bureau and use their dispute resolution process. Most mortgage loan programs require a 640 score or higher, so fixing errors or having old information removed can make a big difference.

Do You Have Funds?

Do you have money for a down payment or closing costs? If not, how long will it take you to save? Start now. Make a commitment to stash funds away each month to help you meet your goal. Some loan programs are still available for 0% down but watch out for those; if the market should falter again you don’t want to owe more on the home than it’s worth. It also goes without saying that you want to refrain from big purchases that require credit, such as buying a new car, until after the home purchase process is over.

Are You Homeowner Material?

Owning a home is touted as a big factor in achieving the American dream, but it's not for everyone. Ask yourself:

Am I prepared for expenses like home repairs and landscape maintenance? Am I at risk for job relocation? Am I able to stay in one place for three to five years?

Talk to a Lender First, Not a Realtor

Resist the urge to call your realtor first. Instead, speak with a lender or two to find the best program. There are many loan products and even more lending institutions so it's worth shopping around for the lowest rate. A good lender will also advise you on the best ways to protect your credit while you a preparing to buy a house, which might include ID monitoring and credit report monitoring to ensure that someone else isn't using your good credit or your identity while you working on purchasing your home.

Use a mortgage worksheet to keep track of the information you receive from various lenders. It can be a dizzying amount of numbers and differences so keeping them in one place is important. When you are within 60 days of purchasing, your lender will issue a pre-approval letter for the amount you qualify for. Now you can call your Realtor and look for your dream home.

Effective October 1, 2013 U.S. Department of Housing and Urban Development (HUD) has announced the following changes to their Federal Housing Administration (FHA) Short Sale requirements:

• Eligibility Requirements: To successfully complete a short sale under the FHA short sale program, the borrowers must meet the following requirements:
  • They cannot list the property with or sell it to anyone with whom they are related or have a close personal or business relationship.  In legal terms, it must be an "arm's-length" transaction.  Any knowing violation of the arm's-length requirement may be a violation of federal law.
  • Your mortgage must be in default, on the date the short sale transaction closes.
  • Before closing, any additional liens against the property must be released. A lien holder who demands a payment to release its lien must submit a written statement, and an agreement to release the lien if that amount is paid.
• Financial Hardship Validation Requirement: For a standard preforeclosure short sale sale, servicers must use a Deficit Income Test (DIT) to determine a homeowner's financial hardship.  The IRS Collection Financial Standards will be used to verify homeowners expenses not reflected in their credit report.  Only owner-occupied properties are eligible for the standard preforeclosure sale.
• New Streamlined Short Sale Option: Homeowners eligible for a streamlined short sale may not be required to submit financial information or have a financial hardship.  Principal residences, second homes, investment properties and service members who have received Permanent Change of Station (PCS) Orders are potentially eligible.
• Property Appraisal: The appraisal of your property should be completed within approximately ten business days.  After the appraisal, the short sale file will be updated and prepared for review.  In some cases, approval may be required by the investor and/or FHA, which may take more time.
• Cash Contribution: As a new condition, you might be required to make a final payment (sometimes called a cash contribution) before or at closing.  This payment will reduce the deficiency balance.
• Borrower's Incentive Compensation: If you are an owner occupant, acting in good faith, and successfully selling your property, you may be eligible for an incentive of up to $3,000.  If you are required to make cash contribution, you are not eligible for this incentive.
• Short Sale Contract Addendum:
  • The revised FHA short sale addendum must be signed and dated by all parties.  Under this addendum, all parties agree that the subject property must be sold through an arm's-length transaction.  An arm's-length transaction is defined as a short sale between two unrelated parties that is characterized by a selling price and other conditions that would prevail in an open market environment.  Also, no hidden terms or special understandings can exist between any of the parties (e.g., buyer, seller, appraiser, sales agent, closing agent, and mortgagee) involved in the transaction.
• Action Required: Review the Short Sale FHA Program guides located on the Agent Resource Center:
  • FHA Preforeclosure Sale FAQs
  • Tips to Efficient FHA Preforeclosure Sales

To review additional information about FHA requirements, please log on to www.hud.gov. Questions can be directed to Short Sale Customer/Agent care at 1.866.880.1232.

HOME Consortium Down Payment Assistance

The HOME Consortium home ownership assistance program helps families afford a home of their own by providing deferred loans. The DOWN PAYMENT ASSISTANCE LOAN (DPA)program provides eligible home buyers with a forgivable loan of up to $5,000 to be used for down payment and/or closing costs. Funds are for buyers purchasing in Waukesha, Jefferson, Washington or Ozaukee counties.

The program is funded by the HOME Consortium’s annual allocation of funds provided through the U.S. Department of Housing and Urban Development. Eligible homebuyers must reserve funds through a participating lender of their choice who will receive a loan commitment from the HOME Consortium program administrator.

DPA loan is provided as a five-year forgivable loan, meaning that as long as the property remains the borrower’s primary residence for five years the loan is forgiven and no repayment is due. If the property is sold, title is transferred, ceases to be the primary residence, or there is a cash out refinance a partial repayment of the loan would be required. The loan is forgiven 20% for each full year. The HOME Consortium down payment forgivable loan may be combined with other down payment assistance programs available through the state, Federal Home Loan Bank, HUD or other personal or non-personal sources.

For additional information on maximum purchase price limits and eligibility please visit their site at:

http://www.homeconsortium.info/home/home-ownership-assistance/

Need help finding the perfect home? We would love to help! Take a moment to fill out the home buyer questionnaire below:

My Next Home

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.

Your Credit Score
When you foreclose on a home your credit will be altered for about 5+ years, to say the least. However, when you do a short sale your credit is also affected, but for a much shorter time period and less damage is done. The truth is there is no concrete answer as to how many points it will affect your score. Every person has his or her own FICO and each individual’s score will vary. What I can tell you is the late payments are typically what have the major affect on a borrower’s credit. Most people are usually able to qualify for a new loan and buy a new home within 2 years after a short sale vs. the 5+ years if you were to go into foreclosure. Since everyone is different it’s best to consult with a credit repair-person or your real estate professional in more detail.

FAQ’s
Why don’t I file Bankruptcy?
Short Sale vs. Bankruptcy – When faced with foreclosure many people tend to turn to bankruptcy as an option of solving their problem. Now there is a large difference many of the “professionals” fail to tell you. Filing for bankruptcy will consolidate your debt and can wipe out your liabilities, but it will not save you from having a FORECLOSURE put onto your credit report. Instead, now you will have both a bankruptcy and a foreclosure on your credit. If you plan on eventually turning back your property you WILL STILL HAVE A FORECLOSURE ON YOUR CREDIT REPORT. Trying to conduct a short sale while in bankruptcy can hold up the process, but it is not impossible. It will just take some more paperwork. My best advice is to consult with a great bankruptcy attorney prior to making any decision should you have additional debt you are unable to control besides your property. One key point to keep in mind is if your home is the only debt that is creating an uncontrollable situation for you then a short sale option is most likely your best bet vs. a bankruptcy. If you have other uncontrollable debt then a bankruptcy might also be needed in addition to a short sale. You should consult with a bankruptcy attorney should this be the case.

What do I do after a short sale?
After your short sale, the stress of your housing payment is extinguished and it’s time to get back on track to restoring your credit. Many people will rent for a while until their credit is fixed and then it’s time to get back into another house. With the right team of people working for you, you will be in a new house before you know it.

Mona Salem 310.925.4782 | Michelle Rosca 562.552.9600 | Long Beach Short Sales

Having problems with short selling property or a reverse mortgage in a probate?  Please contact us.

A short sale happens when a lender is willing to accept a lower pay off on a loan than what is currently owed. In a short sale, the borrower will owe more on the property than the home is worth at its current state, however, a short sale happens only when a homeowner qualifies through some kind of hardship.

The National Association of Realtors and the U.S. Department of the Treasury are collaborating to help Realtors better assist distressed homeowners who are struggling to Selling Your Home Through a Short Sale - Avoid Foreclosure.

Realtors who attend upcoming Making Home Affordable "Help for Homeowners" outreach events, sponsored by the Treasury Department, will learn insights to help them navigate the short sale process and have the opportunity to meet directly with loan servicers on their clients’ behalf for assistance with difficult transactions, according to a statement.

"As the nation’s leading advocate for homeownership and housing issues, Realtors are working hard to keep more people in their homes, and when a family is absolutely unable to keep their home, Realtors specializing in short sales, short sale specialists are there to help homeowners by facilitating a loan modification or short sale," said NAR President Moe Veissi, broker-owner of Veissi & Assoc. inc. in Miami.

"Help for Homeowners" community events will take place throughout the year; the first sessions are in Miami today and Tampa, Fla. on Feb. 24. Additional events are scheduled in Chicago, Indianapolis, Los Angeles, and Sacramento, Calif.

The sessions for real estate professionals are not open to homeowners, but borrowers who are in financial distress and concerned about losing their home to foreclosure are encouraged to attend the free homeowner sessions. Homeowners who are having difficulty paying their mortgage will be able to meet one-on-one with loan servicers and housing counselors to explore foreclosure prevention options and work toward solutions to their mortgage problems. Real estate professionals are encouraged to invite homeowners and their clients to the events and are welcome to accompany their clients in conversations with the servicers.

The Opland Group Specializes in Real Estate Sales, Luxury Home Sales, Short Sales in;  Bexley  Columbus  Delaware  Downtown  Dublin  Gahanna  Grandview Heights  Granville  Grove City  Groveport  Hilliard  Lewis Center  New Albany  Pickerington  Polaris  Powell   Upper Arlington  Westerville  Worthington

Bank of America is making a process change that will reduce the processing time and improve customer service for HAFA Short Sales (Home Affordable Foreclosure Alternative Program) that are submitted with an offer.

The proposed change goes into effect Dec. 1, 2011, and impacts all short sales submitted with an offer in which the homeowner is eligible for the Home Affordable Foreclosure Alternative (HAFA) program.

When a short sale is submitted with an offer and the homeowner is HAFA eligible, we will no longer halt work on the file while waiting to contact the homeowner. HAFA eligible homeowners are no longer required to call our Short Sale Customer Care to indicate whether they will participate in the program.

Instead, real estate agents specializing in short sales can indicate a homeowner's HAFA interest by submitting the necessary documents to Equator within 14 days. During that 14-day window, the short sale will continue moving forward. By the end of the 14 days, if we have not received the requested HAFA documents, we will continue to process the file as a traditional short sale.

This change is being made because we are transitioning the processing of all HAFA short sales with an offer from our outsourced vendor partners to Bank of America associates. A Bank of America specialist will be able to seamlessly transition a file from our traditional process to the HAFA process, thus improving customer service and the borrower and agent experiences. Homeowner's and agents should be aware that Bank of America's outsourced vendor partners will, however, continue to process all short sales submitted without an offer.

Action required:  

Short sales initiated on Equator.com that receive a HAFA eligibility message no longer require homeowners to call Customer Care to confirm their interest.

-  If homeowners wish to participate in HAFA, agents must submit the requested documents within 14 days.  (Note: the 14-day period begins the day the HAFA solicitation letter is mailed to the homeowner. Agents can obtain the date of the letter from homeowner.) 

-  If you are unclear about which documents to submit, contact your short sale specialist via Equator messaging. 

Additional Recommendations:

Homeowners interested in understanding the benefits a HAFA short sale, including the $3,000 relocation incentive at closing are encouraged to review HAFA Program or the HAFA education guide to learn more.

Bank of America also has put together a HAFA Eligibility FAQ for interested homeowners