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$300 Billion in FHA Assistance Available Now

By Tonja | October 24, 2008

Beginning today, eligible borrowers can refinance into a new loan that they can afford through FHA’s Hope for Homeowners program. Last July, Congress approved FHA to insure up to $300 billion in new loans through the program targeted to struggling families trapped in mortgages they currently can no longer afford. 
The program offers government insurance to lenders who voluntarily reduce mortgages for at-risk homeowners to at least 90 percent of the property’s current value.  In addition, lenders must waive any penalties or fees, and help pay for the origination and closing costs of the new loans. On the new FHA-insured loan, borrowers will share equity with FHA on a sliding scale, to help the government recoup its expenses.

Who is eligible?
Hope for Homeowners maintains FHA’s long-standing requirement that new loans be based on a family’s long-term ability to repay the mortgage. Borrowers must meet the following eligibility criteria:  

  • They must be owner-occupants;
  • Their mortgage must have originated on or before January 1, 2008;  
  • Their mortgage debt-to-income must be at least 31 percent;
  • They cannot afford their current loan;
  • They did not intentionally miss mortgage payments;
  • They have not been convicted of fraud; and
  • They do not own second homes.

What should a homeowner do to get started in the program?
1. Contact a local, HUD-approved housing counseling agency at HUD.gov;
2. Contact the HOPE NOW Alliance at 1-888-995-HOPE; or
3. Contact an FHA-approved lender to get the refinancing process started.
The FHA-approved lender will determine the size of a loan that a borrower can reasonably repay and that meets the requirements of the program.  If the current lender or mortgage holder agrees to write-down the amount of the existing mortgage and make the new loan affordable, the FHA lender will pay off the discounted existing mortgage. 

What kind of loan will homeowners receive?

  • 30-year, fixed rate mortgage; 
  • Maximum 90 percent loan-to-value ratio;
  • No prepayment penalties;
  • $550,440 maximum mortgage amount;
  • Extinguishment of any subordinate liens; and
  • New home appraisals from FHA-approved appraisers.

Borrowers will pay an upfront premium of 3 percent of the original mortgage amount and an annual premium of 1.5 percent of the outstanding mortgage amount.  Any additional costs incurred by FHA will be reimbursed by Fannie Mae and Freddie Mac. 

Is every lender required to participate?
No. The program is completely voluntary for lenders, investors, loan servicers, and borrowers. FHA will be encouraging lenders to write-down the outstanding mortgage principal balances to 90 percent of the new value of the property.  In many cases, reductions in principal will cost lenders less than the losses associated with foreclosure.
FHA estimates that the Hope for Homeowners program will assist 400,000 borrowers through September 30, 2011. 
More information about this program may be found at www.fha.gov.
This article is of a general nature and is not intended to address any specific legal or ethical situation.  Information for this article was obtained from Greater Las Vegas Association of Realtors (GLVAR) website.
 

 

Posted in Loans | No Comments »

Long Beach, CA: Second Mortgage Assistance Program

By Tonja | October 20, 2008

The Long Beach Housing development Company (LBHDC) offers a program to promote neighborhood stabilization through increased home ownership opportunities, specifically for the benefit of persons and families of low- and moderate-income.  This program is the Second Mortgage Assistance Program.  The second mortgage assistance is in the form of a secured subordinate mortgage with contingent, deferred interest.  The loan proceeds are used toward the purchase price of a single-family residence, condominium, or townhome located within the City of Long Beach Redevelopment Project Areas.  The maximum purchase price for this program is $332,500 for condominiums/townhomes and $500, 650 for single-family homes.

The Long Beach Housing Development Company’s Second Mortgage Assistance Program is designed to be gap financing.  The loan among is computed as the difference between the purchase price and the sum of the largest first trust deed mortgage deemed affordable to the borrower and borrower’s down payment.  The interest rate is contingent, deferred interest in the form of equity sharing equal to the percentage which the Second Mortgage Assistance represents of the original purchase price, reduced for each full ear which the borrower owns and occupies the property. All interest is forgiven after 30 years of continuous occupancy.      There are no fees to the borrower for this loan, but the borrower must contribute 1% of the purchase price from their personal funds as a down payment.  Any down payments funds in excess of 1% may consist of any combination of gifts, grants or unsecured loans.

The borrower requirements are:

  1. Must be a first-time homebuyer: have not owned a home in the last three years.
  2. Borrower must live or work in Long Beach or show evidence of a job offer in Long Beach at time of application.
  3. The borrower must complete an 8-hour Homebuyer Education Class.
  4. The borrower must qualify for a 30-year fixed rate, first trust deed mortgage, in an amount not less than 30% of the purchase price, from an institutional lender approved by the LBHDC.  Co-signers are limited to those that will reside in the property.

For more information on this program, go to www.lbhdc.org

Posted in Loans, 1st Time Homebuyers | No Comments »

Why is Your Credit Score so Important?

By Tonja Demoff | October 10, 2008

The credit scoring model seeks to quantify
the likelihood of a consumer to pay of debt without being more than
90 days late at any time in the future. Credit scores can range
from a low of 300 and a high of 900. Most consumers have credit
scores that range between 400 and 800. The higher the score, the
better it is for the consumer. A higher score can translate into
and lower interest rate and save the consumer money.

Only one out of 1,300 people in the
United States have a credit score above 800. These are people
with stellar credit rating that get the best interest rates. On
the other hand, one out of every eight prospective home buyers is faced
with possibility that they may not qualify for the home loan they want
because they have a score falling between 500 and 600.

Read the rest of this entry »

Posted in Miscellaneous | No Comments »

PAINT IS THE BEST INVESTMENTS SELLERS CAN MAKE

By Tonja | October 8, 2008

If you’re selling a home, real estate specialists suggest you repeat this mantra: paint-paint-paint. Now, more than ever, a seller has to be fanatical about the appearance of the house.  And painting gives you one of the best returns on your investment. 

Spend a few hundred dollars on paint and brushes and it could yield you thousands at the settlement table when the property sells.  Or, it could mean the difference between selling or not selling your home.

When there is a large inventory of homes on the market, there’s a great likelihood the buyer will take the home in tip-top shape before he’ll even consider buying the older house.

All things being equal, a home with the right sort of freshly painted walls will sell faster and for a better priced than one where the painted walls are tinted, dark, or discolored.  For sellers, painting should be right up on top of the list-along with being neat and tidy.  Still, not all paint jobs will be equally valuable.  Painting your rooms pink, yellow, lavender or Kelly green could hurt rather than help you sell.  And painting them blue could actually drive buyers away, psychologists say.  That’s because, to much of the population, blue is a depressing color inside a home. 

A neutral off-white is the right choice.  When you choose a white paint with a hint of beige, which is a true off-white, you’re selecting a color that will neither offend nor conflict with a prospective buyer’s furnishings.

The universal color to paint a house is two coats of shell white.  Unfortunately, it’s not always easy to tell by name alone whether you have selected a true off-white that is tinted (no matter how subtly) with gray, blue, purple, gold, green or another color that makes matching difficult.

Suppose your rooms are light green and buyer has a red sofa.  That way you would be forcing them to paint your house before they move in.  Nobody wants to do that.  Off-white walls also make your interior seem bigger.  A 10-by-10 room of shell white will look larger than a 10-by-10 room done in blue, pink or yellow.  When it comes to painting a property that’s for sale, consider these pointers: Select the paint carefully.

Because of the confusion related to paint terminology, you can easily make the wrong color choice if you don’t buy through a dealer who can assist you with the purchase.  Look for a dealer-owned or well-informed clerk who can distinguish one paint from another. 

The store should also help steer you to paint with the right finish.  Flat latex paint is a popular and attractive choice but becomes easily soiled.  Semi-gloss is fine for walls in the bathrooms, kitchens or smaller areas that get dirty frequently, because semi-gloss is easily cleaned.

But painting large wall areas– such as living, dining or family rooms– in semi-gloss paint is considered a poor idea.  The problem with semi-gloss on interior walls is that light reflects off the surface and you can see all the imperfections.

Fortunately, paint buyers now have a third choice– A nice compromise between flat and semi-gloss paint.  Paint with an “eggshell finish” should give you much of the beauty of flat latex paint by still allowing you to keep the walls clean while your home is on the market.  This could be particularly important if there are small children in your home.

Eggshell paint may be a couple dollars more per gallon but it’s worth it because it’s washable.

Don’t think it’s too late to paint because your home has already been listed for sale.  Soon after a home has gone to market, many a seller becomes aware that it’s not presenting well.  Often the awareness comes from comments left by agents and prospects that have trooped through.

Ignore feedback about the condition of your walls at your own peril.  Most buyers can’t envision how the house would look when the walls are painted, so an explanation about how little work would be involved for the new buyer to paint would do you little good.

The wise thing is to limit buyers’ access to your property until you can get the paint job done by a professional or do the work yourself.  There’s no point having would-be buyers come through while painting is in progress.  With furniture and floors covered with tarps, it’s hard to tell how the place would look.  And the odor of paint gives many people headaches.

Posted in Home Selling | No Comments »

WHAT IS TITLE INSURANCE?

By Tonja | October 6, 2008

Title insurance is a guarantee that you are getting something for your money when you buy real property.  Title insurance assures owners they are acquiring marketable title.  It is    designed to eliminate the risk or loss caused by defects in title from the past.  Title insurance provides coverage only title problems which were already in existence at the time the policy was issued.  Many kinds of title defects are so serious that they can render title unmarketable. It is title insurance you purchase when you acquire real property, which protects you from these defects.
Title insurance protects the buyer and lender involved in the real property transaction against incompetent past action, clerical errors, some having signed off an earlier deed, incorrect marital status, undisclosed heirs, improper interpretation of wills, signing by anyone without authority, a minor’s signing, or possible forgery in the entire past chain to title signatures.  Title insurance, like other types of insurance, affords protection to the insured by guaranteeing that the insurer, the title insurance company, will reimburse him for actual loss or damage under the conditions specified in the policy.  Unlike other insurance policies, title insurance insures against conditions that already existed rather than against those that may occur in the future.

The Title Search
Title companies work to eliminate risks by performing a search of the public records or through the title company’s own plant.  The search consists of public records, laws and court decisions pertaining to the property to determine the current recorded ownership, any recorded liens or encumbrances or any other matters of record which could affect the title to the property.  When a title search is complete, the title company issues a preliminary report detailing the current status of title.

The Preliminary Title Report
A preliminary title report contains vital information which can affect the close of escrow.  The preliminary report contains ownership of the subject property, where the currents owners hold title, matters of record that specifically affect the subject property or the owners of the property, a legal description of the property, and a plat map. 

Why do I need to purchase Title Insurance?
The property you are purchasing may have a past with a lot of shady dealings, forgeries, divorce claims, or other peculiarities.  There ais no way you can be absolutely certain that this seller or any of the previous sellers ever held clear title to the property and legally transfer it over to you. Even though an owner has a deed and the right to possess the land, he might have a clear title because there may be a defect or a cloud on it that he doesn’t even know about. 

To protect yourself from any such claims out of the past, you should secure title insurance, something which is available in every state except Iowa, for almost every conceivable kind of interest in real estate, including lease holds, rights under a contract of sale, airspace, rights and easements, and mineral rights.

To protect yourself from any such claims out of the past, you should secure title insurance, something which is available in every state except Iowa, for almost every conceivable kind of interest in real estate, including leaseholds, rights under a contract of sale, airspace, rights and easements, and mineral rights.       

You must have title insurance if you going to borrow any money on your property.  Your lender will want to protect his interest in the property which secures his loan to you by requiring a policy for his own protection.  This will insure himself against any previous claims made on the property by legitimate claimants.  You will need a policy to also protect you. Neither you nor the lender want to learn after the sale that you have no rights to the property at all. The lender knows that you will not repay the money he has lent you to buy a property unless you are legally entitled to that property.  You should also purchase title insurance if your real estate transaction is an all-cash deal.  A grant deed by itself does not necessarily give clear title to a property.  There may be outstanding claims and rights that cannot be determined from the deed alone. 

Although you are protected under your purchase agreement against certain damages, only the seller liable to you for those damages, whereas under a title insurance policy, the title company assumes that liability.  If you are not insured and you have to proceed against the seller for any defect in title or any breach of the purchase agreement, you will have to pay the legal expenses.  Those legal fees have to be paid prior to judgment and even though you win the judgment, you might not be able to collect it.  You might not be able to locate the seller or he might not have the money to pay you.  You could be left with a worthless piece of paper.  On the other hand,   if you have title insurance, it will pay your legal fees and provide you with coverage for any losses included in the policy, up to the policy limits.


  

 

Posted in Miscellaneous, Home Buying | No Comments »

NAR Summary of Key Provisions of H.R. 3221 - The Housing Stimulus Bill

By Tonja | September 29, 2008

 I recently wrote about the Modification of Section 121 of the IRS Code as part of the The Housing and Economic Recovery Act of 2008.  Here is the summary of the act published by the National Association of Realtors on 8/22/2008.

H.R. 3221, the “Housing and Economic Recovery Act of 2008,” passed the House on July 23, 2008, by a vote of 272-152. On Saturday, July 26, 2008, the Senate passed the bill by a vote of 72-13. The President signed the bill on July 30, 2008. The bill includes the following provisions:    

  • GSE Reform – including a strong independent regulator, and permanent conforming loan limits up to the greater of $417,000 or 115% local area median home price, capped at $625,500. The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).
    View 2009 FHA and GSE loan limit estimates (PDF)      
  • FHA Reform – including permanent FHA loan limits at the greater of $271,050 or 115% of local area median home price, capped at $625,500; streamlined processing for FHA condos; reforms to the HECM program, and reforms to the FHA manufactured housing program. The downpayment requirement on FHA loans will go up to 3.5% (from 3%). The effective date for reforms is immediate upon enactment, but the loan limits will not go into effect until the expiration of the Economic Stimulus limits (December 31, 2008).
    View 2009 FHA and GSE loan limit estimates (PDF)
    FHA Reform Chart (PDF)      
  • Additional Property Tax Deduction – HERA provides a one-year benefit that will be available to all homeowners. Under current law, property taxes are deductible only if an individual itemizes his/her deductions on Schedule A of their tax return. The new provision will permit a deduction of up to $500 ($1000 on a joint return) for all individuals who utilize the standard deduction and do not itemize. Instructions will be provided on the 2008 tax return when it is distributed at year-end. 
        
  • FHA foreclosure rescue – development of a refinance program for homebuyers with problematic subprime loans. Lenders would write down qualified mortgages to 90% of the current appraised value and qualified borrowers would get a new FHA 30-year fixed mortgage at 90% of appraised value. Borrowers would have to share 50% of all future appreciation with FHA. The loan limit for this program is $550,440 nationwide. Program is effective on October 1, 2008.
    FHA Foreclosure Rescue Chart      
  • VA loan limits – temporarily increases the VA home loan guarantee loan limits to the same level as the Economic Stimulus limits through December 31, 2008. 
  • Risk-based pricing – puts a moratorium on FHA using risk-based pricing for one year. This provision is effective from October 1, 2008 through September 30, 2009. 
  • GSE Stabilization – includes language proposed by the Treasury Department to authorize Treasury to make loans to and buy stock from the GSEs to make sure that Freddie Mac and Fannie Mae could not fail.
  • Mortgage Revenue Bond Authority – authorizes $10 billion in mortgage revenue bonds for refinancing subprime mortgages. 
        
  • National Affordable Housing Trust Fund – Develops a Trust Fund funded by a percentage of profits from the GSEs. In its first years, the Trust Fund would cover costs of any defaulted loans in FHA foreclosure program. In out years, the Trust Fund would be used for the development of affordable housing. 
        
  • LIHTC – Modernizes the Low Income Housing Tax Credit program to make it more efficient. 
        
  • Loan Originator Requirements – Strengthens the existing state-run nationwide mortgage originator licensing and registration system (and requires a parallel HUD system for states that fail to participate). Federal bank regulators will establish a parallel registration system for FDIC-insured banks. The purpose is to prevent fraud and require minimum licensing and education requirements. The bill exempts those who only perform real estate brokerage activities and are licensed or registered by a state, unless they are compensated by a lender, mortgage broker, or other loan originator. 
        
  • Modification of $250,000/$500,000 Exclusion – The sole real-estated related “pay-for” among the tax incentives modifies the $250,000/$500,000 exclusion of gain on the sale of a principal residence. Beginning in 2009, the exclusion, as it applies to a second home (or rental property) that is converted to a principal residence will be allocated. When the second home is sold, any gain attributable to use as a second home (or rental property) will be taxed at capital gains rates. Any gain attributable to use as a principal residence will remain excludable, up to the $250,000 and $500,000 limits. A formula is provided for computing the proper treatment of these gains.
    View some examples that illustrate the application of this new rule (PDF)        

     

     

     

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Modification of Section 121 of the IRS Code

By Tonja Demoff | September 23, 2008

The Housing and Economic Recovery Act of 2008 that was recently passed included many positive things for buyers and sellers of real estate.  One of the downsides to this act is the amendment of Section 121 of the Internal Revenue Code which generally allows homeowners to sell real property owned and lived in as their primary residence and exclude from their taxable income up to $250,000 in capital gains per homeowner, and up to $500,000 in capital gains for a married couple filing a joint income tax return.  Homeowners are required to have owned and lived in the real property as their primary residence for at least a combined total of 24 months out of the last 60 months (two out of the last five years) in order to qualify. 
Beginning in 2009, the full tax-free exclusion can no longer be taken when there was any non-qualified use of the real property prior to it being lived in as a primary residence.  Non-qualified use includes use as a second home, a vacation home, or as a rental or investment property.  The longer the property was held for investment the great the impact will be on the amount of capital gain that can be excluded from taxable income.  For example, homeowner owns a property for ten (10) years holds it as a rental property for the first eight (8) years and then converts to their primary residence for the last two (2) years.  The non-qualified use period is eight (8) years and the qualified use period is two (2) years.  This homeowner can exclude 2/10ths of the total actual capital gain from their taxable income. 
There are three (3) exceptions to the non-qualified use provisions under the new requirements under Section 121.

  • The first exception is that homeowners can move out of their primary residence and convert it to any other non-qualified use such as second home or rental and till qualify for the full tax free exclusion un Section 121.  They still must qualify for the other requirements under Section 121 when the sell the property.  They must have owned and lived in the property as their primary residence for the two (2) out of the last (5) years.

The Revenue Procedure 2005-14 still applies where the homeowner can also complete a 1031 exchange to defer any balance of capital gains above the 121 exclusion treatment.

  • The second exception involves those homeowners affected by qualified official duty such as military service.
  • The third exception involves unforeseen circumstances.

Posted in Legislative Issues | No Comments »

Financial Freedom Seminar System™ Approved in New York

By Tonja Demoff | September 12, 2008

Financial Freedom Seminar System™ is a unique and hugely profitable franchise received approval from New York in August.  Financial Freedom Seminar System™ has been designed as a turnkey operation to help real estate professionals become the expert in real estate in their own backyard.  This one of its kind franchise is based on an educational and action oriented training program that generates leads and provides multiple streams of income.
This franchise was created so that the franchisee has all the tools, resources and a step by step seminar format needed for a successful business.  In addition to the tools and resources, the franchisee receives ten (10) full days of classroom training as well as access to additional web, audio and field trainings.
Tonja Demoff created this system over five years ago to prove to the real estate industry that agents must know real estate not just how to use the MLS and write contracts to pass back and forth between each other.  She say, “Too many real estate professionals earn too little because they simply don’t receive training on how to run their business and passing a licensing exam doesn’t make them an expert in real estate.  Agents could quadruple their income and create 70% more free time if they would implement a business system that supports their goals, intentions and lifestyle.”
This is a fabulous franchise for any real estate professional wanting the edge that sets them apart from the others.  With this business they become the expert by providing the education that the consumer greatly desires.  From those consumers come dedicated clients.  Income is made by providing services to these clients.  This is only one of the ways the franchisee can earn income.  There is HUGE income potential through the over 100 affiliate relationships. 
To find out more information about the Financial Freedom System™ go to www.backyardwealth.com
 

Posted in Miscellaneous, The Company | No Comments »

The First Time Homebuyer Tax Credit

By Tonja Demoff | September 4, 2008

The Housing and Economic Recovery Act of 2008 was signed by the President on July 30, 2008. One of the provisions, the Homebuyer Tax Credit, gives a first time buyers up to $7,500 tax credit if they purchase before July 1, 2009. First time homebuyer is defined as, “a buyer who has not owned a principal residence during the three-year period prior to the purchase”. When you consider the recent reports from NAR stating that home sales are on the rise, this would be the best time for first time homebuyers to buy.

Here are some features of this incentive:
In order to receive the tax credit you must have purchased your home between April 9.2008 and July 1, 2009. Purchase being the closing date. The home may be a single family, townhome, condominium, manufactured home or a co-op.
You must also meet income requirements. The full amount of credit is available for individuals with adjusted gross income of no more than $75,000 ($150,000 for married).

The tax credit is ten (10) percent of the cost of the home up to $7,500. The tax credit is claimed on the federal income tax return. Homebuyers who believe they qualify for the tax credit are permitted to reduce their tax withholding according to the National Association of Home Builders (NAHB). Buyers can adjust their withholding amount on their W-2 via their employer or through their quarterly estimated tax payment. IRS publication contains rules and guidelines for income tax withholding.
This is a tax credit, therefore it must be repaid. The repayment period is 15 years without interest or when the home is sold if there are sufficient capital gains from the sale.

The NAHB gives this example, “A home buyer claiming a $7,500 credit would repay the credit at $500 per year. The home owner does not have to begin making repayments on the credit until two years after the credit is claimed. So if the tax credit is claimed on the 2008 tax return, $500 payment is not due until the 2010 tax return is files. If the homeowner sold the home, then the remaining credit amount would be due from the profit on the home sale. If there was insufficient profit, then the remaining credit payback would be forgiven.”

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Protecting Your Investment: Being a Good Landlord

By Tonja Demoff | September 2, 2008

It is essential that you are a responsible landlord to protect your income-producing property. This consists of more than just collecting the rent. Here are some tips for being a competent landlord:

1. Understand the Fair Housing Laws.

2. Screen your rental applicants; check their references.

3. Make sure you have everything in writing, such as the rental application, rental or lease agreement and house rules. The tenants need to know exactly what they are responsible for.

4. Routinely check your property to make sure it is kept clean and secure. Make sure the property is free of clutter and the landscaping is maintained.

5. Make sure you have adequate insurance to include property and liability.

6. Handle repairs promptly.

7. Make sure you do not violate your tenant’s privacy; check with your state’s laws regarding notice of entry.

8. If you are unable to manage your own property, carefully screen property managers to ensure you have a qualified manager.
For more information on property management, visit our website at http://www.ashorebet.com

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