Image via Wikipedia

Just released, the First Time Home Buyer Tax Credit has changed.  Yes, already!  The fund, at only $200 million dollars, will not last very long and you had better know the new rules to take full advantage of it.

The $200 million dollar fund  still allows a credit amount of 5%  or a maximum credit of $10,000, whichever is the lesser amount, based on the final sales price.  A very substantial credit!

Previously, the first time buyer was required to have the seller of record sign the tax credit form 3549a  prior to submitting the application for the credit.  However, on June 1st , changes were made for First Time Buyers of previously owned homes.

According to an email I received from Colleen Graves of Lawyers Title in Southern California, a popular Escrow and Title company, chosen by financial institutions selling their bank owned (REO, Foreclosures) properties throughout California,…

….“if you are buying a previously owned home, resale not new construction, then you simply need to provide the basic sale information including the final HUD1 and the seller signature is not required as previously understood.”   For my client, who just closed on an REO property, this was great news.  Motivating the all too robotic foreclosure minion to get that seller of record signature in time, was not an appealing thought.

The seller required signature rule remains in place for First Time Buyers purchasing  new construction properties though.

Taking advantage of the First Time Home Buyers tax credit is the only path for many potential First Time Home Buyers to purchase homes in the Golden State.

Does your home purchase qualify for a first time home buyer tax credit?  If you have not owned a home in the previous three years and you plan to live in it as your primary residence…yes! it qualifies.
Another important rule regarding the tax credit form 3549a is that it must be submitted no more than 2 weeks following the close of escrow.   This can become difficult considering the form cannot be submitted prior to the close of escrow due to the HUD1 requirement.

The HUD1 (final closing statement) must be submitted with the form 3549a causing the buyer and buyers agent to be  ‘on their game’.  If your agent is not aware of the new requirements you could lose your chance to take advantage of this tax credit by submitting the application too late or incomplete.

When you are interviewing agents, to help you buy your new home, ask them if they are current on the ever changing laws, regulations and opportunities in the real estate market place.   Some of the recent changes are: multiple agency disclosures,  purchase contract change, short sale addenda and tax credit availability.

Related articles by Zemanta

• Realtors Want Congress to Tweak Tax Credit Timeline  blogs.wsj.com)
• Will loss of tax credit discourage home buyers?  sfgate.com)
• New Home-Buyer Credits Aim to Replace Expired Fed Plan  time.com)

131 Millrich Dr.  this Los Gatos house sold for nearly 1% less than the asking and 411 Clearview Dr., a townhome, sold for nearly 5% over the listing price !

A reminder that ’sweet spotting’ your asking price will always pay off.

The good news….neither property was a short sale.

2 Los Gatos Houses sold this week,

131 MILLRICH DR, Los Gatos 95030 (Los Gatos)Single Family Home 3 bed(s) Baths: 4|1 bath(s)   SqFt: 2,593  Lot: 9,100 sq ft

List Price: $1,449,000     Sold Price $1,332,000.00

______________________________________________________

411 CLEARVIEW DR, Los Gatos 95032 (Los Gatos)Townhouse  3 Beds, 2|1 Baths:  SqFt: 2,122 Lot: 2,220 sq ft

List Price: $749,000 Sale Price: $780,000

Assoc. Fee: $428

We see a crossroads ahead…one where the buyers in the Los Gatos Real Estate Market aren’t in the driver’s seat.    Could this mean the homes for sale are in a Seller’s market?

Remember…

Spring is coming and the end of the $8000 First time buyer’s credit is there waiting.   I wonder if will  lead to more vigorous sales?…bidding?

Rismedia reported this weekend…

The Department of Housing and Urban Development (HUD) said it’s taking a closer look at 15 mortgage companies to determine why they had such high rates of problems with FHA insured mortgages.

Can I answer that?  Lending to anyone who could fog a mirror tends to do that.    I told you Fannie Mae was getting a spanking before this new investigation.

“Each loan on this list will be thoroughly examined and we will track down the reasons why it failed. Once we determine the causes, we will look to see whether there is a need for further review or remedial action. We want to send a message to the industry that as the mortgage landscape has shifted, we are watching very carefully and that we are poised to take action against bad performers,” Donohue said.

I wonder if this has anything to do with the fact Fannie Mae is approving foreclosure without notifying banks.

I don’t think Ken Donahue has tried to actually apply for a Home Purchase loan lately.  In our local Los Gatos and Santa Clara County Real Estate market it is very difficult.  The symptoms have passed.

I am glad to see someone is checking up, but if it does not relieve distressed markets,  DON’T BOTHER!  It’s  glaringly obvious focus on future Real Estate recovery measures, rather than looking back,  is the best medicine.

Below are the companies that received subpoenas from HUD’s Office of Inspector General:

-First Tennessee Bank N.A., Memphis, Tenn.
-Alethes LLC, Lakeway, Texas
-Security Atlantic Mortgage Co., Edison, N.J.
-Pine State Mortgage Corporation, Atlanta.
-Birmingham Bancorp Mortgage Corporation, West Bloomfield, Mich.
-Alacrity Financial Services, LLC, Southlake, Texas
-Assurity Financial Services, LLC, Englewood, Colo.
-D and R Mortgage Corporation, Farmington, Mich.
-Webster Bank, Cheshire, Conn.
-Mac-Clair Mortgage Corporation, Flint, Mich.
-Americare Investment Group, Inc., Arlington, Texas
-1st Advantage Mortgage, Lombard, Ill.
-American Sterling Bank, Independence, Mo.
-Sterling National Mortgage Company Inc., Great Neck, N.Y.
-Dell Franklin Financial LLC, Columbia, Md.

I bet these companies end up walking away from the testimony with more bailout money.  Want to bet?

The new law allows a long-time resident of the same main home to claim the homebuyer credit if they purchase a new principal residence. To qualify, eligible taxpayers must show that they lived in their old homes for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home. The IRS has stepped up compliance checks involving the homebuyer credit, and it encouraged homebuyers claiming this part of the credit to avoid refund delays by attaching documentation covering the five-consecutive-year period.

what you can and cannot deduct as a homeowner

Get your taxes done FREE

Great short Video Explanation of Credit

Buying a home means you need to understand your credit score better and how it weighs in and out of your favor.

With all the misguided information flying around about loan modifications understanding these myths will prevent some misteps.

“Many Americans hold mistaken beliefs about credit scores,” cautioned  Ethan Ewing, who heads the free online consumer portal at Bills.com. “Misinformation on television and in hearsay from friends and neighbors only compounds the problem.”

Here are the top 10 commonly held myths surrounding credit scores:

Myth #1: A credit score is a credit report. The credit report is a detailed listing of all debts and payments, going back throughout an individual’s entire payment history, Ewing explained. For each entry, it shows the creditor’s name, amount owed, the highest balance owed, the available credit, whether the account is open or closed (and who closed it), the number of late payments and whether the account is in default. A credit score is a number between 300 and 850 that is based on complex formulas incorporating all the data in the credit report.   Most homes for sale in Los Gatos yield many offers so, you need to have the best credit score.

Myth #2: Those who are not in default do not need to check their credit report. Everyone should check his or her credit report at least once a year (quarterly is not a bad idea in today’s market) to be sure the report contains no erroneous information. Visit www.annualcreditreport.com for a free, no-obligation copy of the report.

Myth #3: Checking a credit report damages credit. Reviewing your own credit information has no effect on a credit score, Ewing said. Neither does a credit report review by a prospective landlord or employer.  Lenders will look, unfavorably, if you have had more than 3 credit reviews by lenders in recent weeks.  Try to do online research for a lender before you apply.

Myth #4: Everyone has one credit score. Credit score calculations are compiled using data from three different credit scoring agencies (Equifax, Experian and TransUnion). The resulting scores might vary slightly among the three agencies if they have slightly different information, but they will be similar.

Myth #5: Married couples share a credit score. If all of a couple’s accounts are joint, their scores will likely be similar, but each individual maintains a unique credit record and credit score. On the flip side, after a divorce, ex-spouses need to follow protocol to have creditors remove either party from a joint account.

Myth #6: Shopping for a loan destroys credit. It is true that “hard inquiries” – examinations of a credit score in preparation for extending credit can have a small negative impact on credit. However, credit bureaus take into account that consumers might inquire about a loan from multiple mortgage companies or auto lenders.

“If multiple inquiries are received from the same type of lender within a 14-day period, the credit scoring companies do not count each inquiry against the borrower,” Ewing explained. But credit card account inquiries to open new accounts are counted individually.

Myth #7: To improve a score, close unused accounts. An important component of a credit score is available credit, or the unused credit that has been offered (on a credit card, for instance) but not used. Closing unused cards removes those available balances from the equation and can actually lower a credit score. Today, some banks are automatically lowering limits or closing accounts to reduce their own credit exposure. Individuals whose debt load is manageable should not experience an extreme effect on their scores.

Myth #8: To boost credit quickly, just pay off bills. Credit scores reflect performance over time. Scores will not change overnight.  This is the worst myth of them all.   One of my clients did just that, without conferring with me, and dropped their score by nearly 60 points.   They failed to qualify for the FHA mortgage they applied for.    Working together we will get them in the front door of their new home sometime in the next few months.

Myth #9: For a fee, vendors can fix a bad score. Again, credit scores show historic behavior. Be cautious about companies that claim to “fix” or “repair” credit.

“You yourself can remove inaccurate information,” Ewing said. “Beyond that, be aware that some companies send credit scorers a deluge of letters asking that they verify – and in the process, remove all past negative information. If and when truthful finance information is verified, however, it will quickly return to the credit report.”

Myth #10: Never get help – it is too hard on credit. It is true that credit counseling, debt settlement and bankruptcy all can cause significant black marks on a credit report.

“If you are in real trouble, however, you can and should seek help,” Ewing urged. “Which option you choose will depend on the severity of your situation. Credit counseling can help to manage bills, and lower interest rates and monthly payments to creditors. Debt settlement firms can negotiate to lower the principal amount of your debts, typically providing a faster path to debt freedom than credit counseling. Bankruptcy, an even more serious alternative, should be discussed with a bankruptcy attorney.”

“Credit is important, but knowing the truth about credit might be even more important,” Ewing concluded. “Before taking action that might hurt or help your score, check your facts to be sure your actions will help your financial picture.”

]]> http://michaelrobertshomes.com/2010/01/07/home-buying-credit-myths-debunked/feed/ 1 http://michaelrobertshomes.com/2010/01/06/fannie-is-to-move-faster-on-reo-sales/ http://michaelrobertshomes.com/2010/01/06/fannie-is-to-move-faster-on-reo-sales/#comments Wed, 06 Jan 2010 18:17:05 +0000 Michael Roberts /?p=1201 Fannie Mae has adopted a new policy in which it may accept offers to purchase homes it has repossessed without notifying loan servicers.

Loan servicers may be required to reimburse Fannie Mae for a loss if it turns out the original mortgage on the home did not meet its eligibility or underwriting requirements.

Fannie Mae previously allowed servicers 15 days to turn over loan files for review if there was a question over whether a mortgage on a repossessed property met Fannie Mae’s requirements. Loan servicers then had the option of trying to find a better offer for the property or buy it themselves rather than reimburse Fannie Mae for any loss.

To speed up sales of foreclosed properties, Fannie Mae says after beginning the property disposition process by obtaining opinions on the market value of a repossessed home and listing it with a real estate broker, it may now accept a purchase offer without first notifying the servicer, whether or not a final decision has been reached with respect to the review.

“If, after completion of the review, Fannie Mae determines that the mortgage loan did not meet its eligibility or underwriting requirements and Fannie Mae has incurred a loss by selling the property, the lender will be required to fully reimburse Fannie Mae for its loss,” the company said in a bulletin to loan servicers.

In its most recent quarterly report, Fannie Mae said it had 72,275 REO properties on its books at the end of September, up 7 percent from a year ago. The company acquired 98,428 homes through foreclosure during first nine months of 2009 — 40,959 in the third quarter alone — and sold 89,691.

Fannie Mae’s sister company, Freddie Mac, reported REO inventory totalling 41,140 homes at end of September, up 46 percent from a year ago. The company acquired 24,375 home during the quarter, and sold 17,941.

In its most recent monthly summary, Fannie Mae said the serious delinquency rate (loans three or more months behind in payments or in the foreclosure process) on single family home loans it owns or guarantees jumped to 4.98 percent in October, up from 1.89 percent the same time a year ago.

Additionally, Freddie Mac’s single-family portfolio delinquency rate rose to 3.72 percent in November, up from 1.52 percent in November, 2008.

This may increase foreclosure activity in the near term and help get this housing issue off the news block.

The median price of a home in California experienced its first year-to-year gain in over two years during the month of November, as the California housing market continued recent trends in terms of prices, supply, and sales. The monthly median price crossed the $300,000 threshold in November with a median of $304,520, up 2.4 percent from the October median price of $297,500 and up 5.8 percent from $287,880 a year earlier. The situation has improved greatly from a year ago during the worst of the financial crisis, when the median price had registered 41.3 percent year-to-year decline.

This supports the conclusion

After a 59 percent peak-to-trough decline, the California median price has increased 24.1 percent from a trough of $245,170 that occurred in February 2009.  The increase in price has been sustained by a combination of lean supply and high demand, the latter triggered by historically high affordability (See November article). By comparison, the NAR national median price for existing single family homes, which experienced a 29 percent peak-to-trough decline, has increased by 4.7 percent from its trough of $164,200 in January 2009 to $171,900 in November 2009.

This has been obvious in the Bay Area market, especially affluent areas such as Los Gatos and Cupertino.

Nine consecutive month-to-month increases in the California median price have been the result of the lean inventory conditions throughout the year. The MLS-based unsold inventory index for California has averaged 4.8 months since the start of the year, well below the 7 month long run average. (See the October article for an analysis of the relationship between MLS-based unsold inventory, defaults, and foreclosures). By comparison, the national unsold inventory index for single family homes has averaged 8.4 months over the year. Inventory levels in both California and the US have trended down for most of the year.

As for sales, California returned to pre-peak levels of sales in late 2008 and sustained them throughout 2009. With sales of 536,720 homes in November, the market was 4.6 percent lower than the October sales figure of 562,400, but 4.7 percent above the November 2008 figure of 512,840. Sales throughout the year have averaged 545,600, compared with the pre-peak monthly average over the 2000-2002 period of 537,300 homes. Over the 2000-2002 period, US sales of existing homes averaged 4.8 million homes, compared with the low- to mid-4 million range of sales that the national market experienced from late 2007 until late this year when sales

The year-to-year increase in the California median price is the latest sign of turnaround from the dire circumstances facing the statewide housing market a year ago. Its foreclosure problems notwithstanding, California’s housing market appears to be ahead of the national market, both in terms of hitting bottom and in demonstrating important signs of market stability and improvement.

A) We all know that pricing is the most important part of marketing your home for sale.

B) A willing buyer and seller are key to executing a sale and buyers set market price for everything.

Right? Not so fast.  We have experienced a climate change in the entire real estate market specifically, Los Gatos and comparable San Jose neighborhoods.

Today, the appraisal has become a problem for some.  Just look at Los Gatos  homes for sale they are like a floating iceburgs…. some underwater.  The appraisal issue has created some warming and chilling.  Why appraisals? It’s called HVCC (Home Valuation Code of Conduct).   Basically, it means a buyer’s lender will have little, if any, persuasion in the appraiser’s valuation.   Cooling home prices and heating up debate.

When the Poole family wanted to make an offer on a home recently they were surprised I suggested a number much lower than the listed price.  It was obvious to me the home was poorly priced.   Due to the HVCC issue the appraisal came back even lower!  This was great news for us and terrible news for the seller.

Appraisals are now ordered and obtained through appraisal firms who then distribute the appraisal orders to their list of appraisers. The chosen appraiser may not be familiar with the Los Gatos Real Estate market, the surrounding neighborhoods in Cambrian or the broader San Jose Real Estate Market that they are being asked to evaluate.  Real climate change.

Should you ask your Real Estate Agent to provide a market analysis to help set a Los Gatos ‘market price’ for you?  Yes, but not any “agent” will do anymore.

In the end the appraisal will make or break the pending sale.

A market analysis report provided by an agent is derived from the MLS and misses a few appraisal factors as part of the equation.  Alternatively, an agent who provides BPO (broker price opinion) to lenders will have experience using a more accurate formula as opposed to an ordinary agent’s market analysis.

Lenders order BPOs from qualified Broker/Agents, as an analysis tool,  for refinancing, loan modifications, short sale approvals and foreclosure pricing.   Using a Broker/Agent, who is qualified to provide lenders this kind of  information is a better choice.

So what do you do?

• Interview several Realtors to help you ‘range’ your price.
• Request contact information from their past clientele.  Not simple ‘textimonials’.
• Choose one who provides 3rd party resource material as part of their pricing quote.
• Try to find a Realtor who is a BPO provider and request their BPO documentation that supports their familiarity with your neighborhood.

Using these simple tips alongside a common sense marketing approach will help you price your home realistically.  Remember,  the appraisal will ultimately define the selling price and it is of enormous importance to get it right from the start.

How would you feel if you accepted a “pie in the sky offer” to only have the buyer’s lender not grant loan approval?  You would probably go off like Mt. Vesuvius and that won’t help the climate change debate.

I can give you a value

23 mistakes you better avoid

Realtors Lie?

If you were current when your short sale is made you have every chance of buying a new home according to the new guidelines from the Department of Housing

from FHA guideline-

Borrowers are considered eligible for a new FHA-insured mortgage if, from the date of loan application for the new mortgage

• All mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale, and

• All installment debt payments for the same time period were also made within the month due.

Lenders are not allowed to approve  a new home purchase  if…

from the FHA guideline-

-Borrowers in default on their mortgage at the time of the short sale (or pre-foreclosure sale) are not eligible for a new FHA-insured mortgage for three years from the date of the pre-foreclosure sale. Lenders may make exceptions to this rule under certain circumstances.-

Another caveat is that if you are simply trying to take advantage of the market a new FHA insured mortgage will not be approved-

Borrowers are not eligible for a new FHA mortgage if they pursued a short sale agreement on his or her principal residence simply to
• take advantage of declining market conditions, and
• purchase, at a reduced price, a similar or superior property within a reasonable commuting distance.
Reference: For detailed information on converting existing principal residences into rental properties, see 4155.1 4.E.4.g

You can download the guidelines in a PDF format below here download FHA Guideline PDF

The median price of a home sold in the county rose 9.9 percent compared to a year ago to $494,400 in November, according to MDA Dataquick, the second straight month of year-to-year increases.

The number of homes sold also rose 47.2 percent to 1,649 in Santa Clara County.

“The latest stats show just how much the Bay Area market has changed in a year,” said John Walsh, MDA DataQuick president.

The question I hear most is…”Has the market bottomed out?”

If this price trend continues for another quarter I will answer with a firm, yes.   For now,  let’s agree that the prices are not falling and the inventory is very low especially,  in the Los Gatos Real Estate Market.  This usually means higher prices, not to mention, the low 4.8% 30 year fixed mortgage rates available.

The typical monthly mortgage payment that Bay Area buyers committed themselves to paying was $1,639 last month, down from $1,665 the previous month, and down from $1,695 a year ago reports Dataquick.

That’s 52.2 percent below the current cycle’s peak in July 2007.   What a steep slide.  It’s true that more streamlined Short Sale process will balance the severely discounted REO closings to help further the trend too.

Looking forward to 2010?

related stories

Fannie Mae needs help

2008-2009 chart

Fixer Upper Fix