IS THIS YOUR FIRST TIME?

According to the National Association of Realtors over 50% of homes purchased in March were by first-time home buyers. This is great for the ex-renters and our economy to get us back on the right track. Overall housing inventory dropped by 1.6% by the end of March creating an upswing in sales as buyers are starting to jump off the fence. This in large part is due to the fact that home prices have dropped over 12% from this time last year. Rates are very low and there is plenty of money even if you have less than perfect credit. As of this posting a 30 year FHA fixed loan with a 625 credit score is running around 4.875%. However, if this is your first home, you might want to consider a couple of things before you sign a contract.

1. Are you ready to take on the responsibility?
2. After your total closing costs do you have a couple of months expenses in reserves?
3. How stable is your job?
4. Have you considered extra homeowner expenses?
5. If gas prices rise will it be a budget buster?
6. Do you have extra money to pay down your credit card balances?

Remember even though home prices might be low do you have the reserves to pay for maintenance. Make sure you get a home inspection and a home warranty so that you know what you are getting into. The $8,000 tax credit should kept in reserve to help cover expenses that may arise. Be a Boy Scout and always be prepared.

CAN FHA HELP ME SELL MY HOME EVEN THOUGH IT NEEDS UPDATING?

One of the most exciting opportunities for homebuyers today is Foreclosures and Short Sales. In my market you can typically pick-up a home for a deep discount if you look at these properties. The big problem is that these properties normally need work and most people do not have the money to repair them out of pocket.

Back in 2005 FHA saw this problem and developed the 203k( Streamline) limited repair program. This loan permits homebuyers and those refinancing to borrow up to an additional $35,000 into their mortgage to improve or upgrade their home.

The following is a list of rules that apply:

1. Purchase or Refinance of 1 to 4 units properties.
2. Must be owner occupied.
3. Property must be at least 1 year old.
4. Total loan amount cannot exceed FHA limits.
5. Landscaping not allowed.
6. Cannot be used to repair structual damage.
7. 2 Appraisals are required.

The following is a list of common 203k improvements:

1. Kitchen & Bathrooms.
2. Decks & Patios.
3. Flooring.
4. Basement finishing.
5. Roofs.
6. Painting.
7. Home Theaters.
8. Handicap Accessibility.
9. HVAC systems.
10. Appliances.

By using this program it creates alot of wins. The buyer gets a great deal on a home that is tailored to suit their needs. It employees the contractor industry. If it is a Short Sale it keeps the sellers from going into Foreclosure. If it is a Foreclosure it helps minimize the banks losses. Most importantly it helps increase the Neiborhoods property value. Remember If you are looking for a deal on a property that you can make your own this is your program.

WAYS TO SPEND YOUR TAX REFUND

For most of us Tax day has come and gone. According to our President, most Americans recieved a refund. I am glad for the ones who did because I had to pay. Now the question becomes what to do with your windfall. Here are some of my thoughts.

1) Since we are Americans, the most generous country in the world, give to a charitable cause. We have recently been working with a innercity church who ministers to the homeless.
2)Pay down your credit cards. Most people think they should pay down the highest rate first. I subscribe to paying off the smallest balance then cutting that card up.
3)Increase your emergency fund. Most experts agree that everyone should have at least 3 months of total expenses into a seperate money market account. Once you have 3 months put away forget about it. Rainy days come to everyones life.
4)Increase your childrens college fund. Tuition has increased substantially and will probably continue the upward trend.
5)Buy something MADE IN AMERICA and give it to someone else. I believe that the more good deeds you do the better your life will be.

This is only a few things, but after all how large can your refund be?

TWO INDIANA COUNTIES REPORT INCREASED SALES IN FEBRUARY

I would like to thank Laura Gillis for contributing this article.

As you read this report,remember the basic principal of supply and demand. As supply decreases, price increases. We are still in the market where supply is decreasing, but prices have not yet increased in all areas.

More than 1,600 Central Indiana homes pended in February, with two counties reporting significant increases compared to the same period last year, according to pending sales statistics compiled by F.C. Tucker Company. Madison County posted a 14.7 percent increase, and Boone County sales rose 11.4 percent.

Availiable homes for sale in the nine-county region dropped 14.3 percent in February 2009 with 15,377 homes on the market, 2566 fewer homes than in February 2008. Three counties experienced significant inventory declines. Shelby County experienced the greatest decrease in inventory at -23.4 percent, followed by Marion County with -20.4 percent and Hendricks county at -17.2 percent.

The continual drop in inventory is a good sign for the overall market," said H. James Litten, president of F.C. Tucker Company's Residential Real Estate Services Division. "It's a strong signal that our local market is strengthening."

Tucker's data also indicates that one Central Indiana county - Johnson County - saw an increase in average home prices for the second consecutive month, compared to January and February of last year. Homes in Johnson County sold for an average of $141,208 in February 2009, compared to $135,178 in February 2008, a 4.5 percent increase in the average home sales price.

Conditions have been improving for home buyers," said Litton, " Improved affordability, low interest rates and the first-time buyer tax credits are catching the attention of buyers who may have otherwise waited on the sidelines". 

DON'T GIVE A BAND AID TO AN AMPUTEE

This week the President unveiled his plan to help the distressed American homeowner. This plan is like giving a band aid to an amputee. The $75 BILLION dollar bail out is not going to fix the root of the problem. The real problem is that the banks need to get rid of their toxic assets. If the government wants to help our economy they would set up a National Bank, and buy these troubled mortgage loans for 60% of the loan amount. This would give the banks the capital they need to make good loans.

This program should also stipulate that if the banks unload these assets they have to put the money back into the communities in new loans. Our tax dollars should not be used to help banks buy other banks. Any industry that gets any tax dollars should not be able to donate to any government official. Allowing Citibank to give Barney Frank money and not expecting something in return is like putting a case of scotch in front of Ted Kennedy and expecting him not to crash in to a river.

The foreclosed properties could be released in a number of ways. One of my favorites is to discount VA loans to veterans in the form of 2% lower interest rates than FHA . The men and women who serve our country deserve a cost effective house to call home. They should be able to purchase the government foreclosures for a deeply discounted price. If they are disabled due to military service they should be able buy a home with a 2% loan and the money to make it handicap accessible. I also feel they should be able to go to a state school free of charge. If it was not for our veterans we would not be free.

The government could release the homes slowly to organization's like Habitat for Humanity. The Habitat group not only makes the new homeowner work on their home, but also requires that they go thru classes on budgeting and personal finance. Something that I believe should be taught in High Schools across the country. A portion of these homes could be discounted to High Schools and Community Colleges to raise money. The schools could have classes lead by trades and business people in carpentry, plumbing, electrical, mortgages, insurance and real estate. The kids could acquire skills that could help them land jobs after they graduate. They could learn about budgeting, fund raising, finance, insurance, selling as well as the trades. After the home is sold the school could take the profit and buy another.

This program could be called the Heroes and Education plan. It could also be extended to teachers, nurses, police and firemen. All of the end users should be required to complete a personal finance program as well as be required to work for a number of hours  repairing other homes. This disposition method should not be used by appraisers in calculating home values. This program should not lower the non participant neighbors home value.

My last thought is that we need to honor those that protect and educate us. We need to be responsible and hold ourselves accountable for our actions. We need to stop being so negative and THANK GOD for all that he has given us. Remember we are Americans and we can do anything.
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Do you Qualify for the new Foreclosure Prevention plan?

The President today released his fix to help millions of Americans stay in their homes. The initial price tag is a mere $75,000,000,000. This program is broken down as follows:

1)Loan Modifications- This is where your mortgage contract is changed to usually drop your interest rate and or increase your payment time. 

To qualify you have to do the following.

A)Demonstrate a hardship ( loss of job, sickness, etc.).

B)Owner occupied homes only.

C)Fully document income.

D) Jumbo loans do not qualify.

The lender will look at your situation, if you qualify, lower your payment to know more than 31% of your gross income. In other words if your gross monthly income is $10,000 a month your mortgage payment could drop to $3100. To sweeten the deal borrowers that pay on time could get up to $1,000 a year for the first 5 years.

The second part is to help those homeowners who cannot refi due to dropping property values.

Right now if you owe more than your property is worth you cannot take advantage of these historically low rates. This program allows lenders to refinance you up to 105% of your property values. Recently you could not refi unless you had 20% equity. This is also for the owner occupied, non Jumbo loans that can prove income and assets. As always if you have any questions about this or anything else mortgage related email me. chris@themtgmaster.com 

Weekly Mortgage Advisory

This week our Fed Chairman will deliver his semi-annual testimony on the state of the economy late on Tuesday. Look for Mr. Bernanke to address the Banking and Housing crisis specifically and their impact on the overall economy. February's Consumer Confidence Index is also released on Tuesday. This index measures our willingness to spend. Consumer spending makes up two-thirds of our economy. The bond traders are expecting a drop in confidence from 37.7 in January to 36.0 this month. The lower the number the better it is for interest rates.

FHA TO THE RESCUE

The government sponsors great mortgage programs thru the Federal Housing Administration (FHA) which are, in turn, insured by the Housing and Urban Development (HUD). What does this mean to you?-- A lower interest rate because the loan is backed by the government. Back during the Great Depression, the government felt that if they made home ownership more affordable, more people would buy thus spurring economic growth. This effect was wide reaching, not only did it help banks and builders, but it also created jobs and increased product development and upgrades in household items. Today-- like back then-- these programs can be used to help more people purchase or refinance their existing home loans at a much lower rate.

FHA can be used for a variety of situations:

• 95% cash-out refinance
• 1-4 unit owner occupied properties
• No APPRAISAL required for FHA STREAMLINES
• Credit scores as low as 600
• Allows gift funds
• May be assumable to next buyer

With the FHA loan limits at $207,050 (Marion & Hamilton counties IN.) available to home buyers and people wanting to refinance their existing mortgages, it is time to explore these programs again. 

In summary the main goal of FHA is to help people buy homes. Qualifying for a FHA loan is not as hard as one might think. The first step is to contact a FHA specialist to see if and how much you qualify for, before you shop for a house. If you are a seller you might think about advertising that you will pay the buyers closing costs instead of dropping your price.

YOU MIGHT NEED A LOAN MODIFICATION IF.....

You might need a loan modification if you answer yes to any of the following.

1. You have missed 1 or more mortgage payments.
2. You are on an adjustable rate mortgage (ARM).
3. You owe more than your home is worth.
4. You are in foreclosure.
5. You have been turned down for a refinance.

If you answered yes to any of the above questions you should look at doing a loan modification.

A loan mod is a change in one or more of the terms of a loan allowing the monthly payment to decrease. Here are some facts of what a loan mod can do for you.

• Loan Modifications stop foreclosure and reinstate the loan that is being modified.
• This is a long term solution for rising interest rates or other hardships that are threatening to overwhelm the families budget.
• Adjusting the terms of a mortgage that make it possible for the family to make payments thereby staying in the home.

If this is something that you or a friend is facing have them contact a professional in this field. Going straight to the bank can end up costing you both time and money. Remember the lender is out to minimize his losses. One last comment;

You might need a loan modification if  YOUR LENDER HAS YOU ON SPEED DIAL.

FORECLOSURE vs SHORT SALE -Round 1

 

According to the Mortgage Bankers Association - Every 3 Months more than 250,000 Americans enter into Foreclosure. This number is growing faster and faster, month by month. The purpose of this article is to talk about options when you can no longer afford your home and cannot sell it for what you owe on it.

Foreclosure

 The following is what can happen once the bank takes your home back.

• Foreclosure stays on your credit report for 10 years.
• Increase the costs of insurance and future credit purchases.
• Decreases your credit score by up to 300 points.
• Lowers your neighborhoods property values making it harder for them to refi.
• Keeps you from getting a new conventional home loan for 5 years.
• Increases your chance for divorce by 30%.
• Makes it harder and more expensive to rent a home.
• Makes it more difficult to get a new job since employers are now pulling credit.
• Increases the lenders cost and time (I know this is the least of your concerns, but these costs are passed on to other Americans making it more expensive and harder to qualify).
• The lender may put a judgement on you for the balance and  associated costs.

If you find yourself in this situation there is a better alternative.

Short Sale

According to Wikipedia, a Short Sale is when the lender agrees to discount a loans balance due to economic or financial hardship of the homeowner. The reality is, if you purchased your home during the last 5 years, and put less than 20% down, you probably owe more than you can sell it for. A short sell creates a win-win-win situation.

Win for the homeowner: The homeowner will normally be allowed to stay in the home during the short sale. They may be able to qualify for a new home within 2 years. Credit will be hurt, but normally not as bad as a foreclosure. If they work with a qualified short sale specialist they normally walk away without any judgements or tax liabilities. Most importantly they are able to keep some self-respect that is normally stripped away by the foreclosure process.

Win for the lender: The lenders number one job is to maximize profits and minimize losses. By doing a short sale they are able to turn a non performing asset ( no mortgage payments coming in) to a performing asset(new loan) in a shorter time frame. The less non performing assets they have the better they look to their investors and auditors. A short sale is usually in better shape which costs less to repair & less to maintain. When negotiating with lenders, remember their main job is to get as much money from the distressed  homeowner as possible. 

Win for the buyer: The buyer is usually able to purchase the home lower than market value. I have a client that was able to purchase a home for $205,000 that sold 3 years earlier for $309,000. The best thing is the appraisal came in at $235,000 so he has equity already built-in. Short sales are an incredible opportunity for buyers who work with a qualified short sale team.

The bottom line is if you are facing tuff economic times you are not alone. Do not give up, remember to reach out to a friend. If someone reaches out to you, remember to listen and help where you can. If you know anyone who is facing foreclosure have them contact me for help.

WHY HAS MY HOME NOT SOLD YET?

The following are some of the reasons why it is still on the market after 6 months.

TOO MUCH STUFF- If you visit a builders model you will notice the lack of clutter. The less stuff you have the larger your home appears. Rent a large storage unit and fill it with the following:
Half of your clothes (if you have not worn it in a year either give it away or store it).
Most of your dishes, glasses, silverware pots and pans (Kitchens sell homes).
Everything in your garage except the lawn mower ( never show with cars in your garage).
All but 4 toys for each child (keep these out of site)
Most of your personal pictures.
At least one piece of furniture from each room.
REMEMBER LESS IS MORE.

YOUR CURB APPEAL - You never get a second chance to make a first impression. Spend time and money making your outside look Norman Rockwellish. Make sure all of your lights and door bell work. Clean, Paint or Replace anything that does not look new. In the winter have everything that is hard surfaced cleared of snow. In the summer have a well manicured green lawn with lots of colorful flowers.

YOUR HOME IS NOT CLEAN - Your home should look like it belongs in a Mister Clean commercial at all times. Bathrooms, Kitchens and Garages are what need to be white glove. Have your carpets cleaned by a pro. Never have anything on any counters except a bowl of colorful fruit in your kitchen. Always air out your home in the mornings and bake cookies right before a showing.

WRONG PRICE - Your house is not worth what it was last year, period. The housing market does not care what your neighbor's sold for last year. Hire an appraiser to give a true market value. If you ask for a short form it will cost around $150. If you really want to sell, drop that price by 5% and advertise as such. If you owe the bank more than your appraised value and you do not have the cash too make up the difference, you are in the need of professional help.
Consider a Short Sale. That will be the topic of my next posting.

How would you stimulate the economy?

How do you feel about the so called stimulus package? Here is a list of things that I would have liked to have seen.

 1) Eliminate capital gains taxes. 

 2) Lower mortgage rates to 4.5%.  

 3) Give 50 Billion to the first car company who can build a $20,000 electric 4 door sedan that goes 100 miles without a recharge. (I would give a set of steak knifes to the one who comes in second).

 4) Increase Military pay by 25%.

 Tell me what you would have liked to have seen.