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.