~ FINANCING ~
SALES IN A TIME OF FINANCIAL CHANGE
“Should I buy now even if prices may go down again?”
The answer is you should buy a home for the stability of owning a tangible investment that you can use and enjoy and improve for yourself. You shouldn’t buy a home that alters your life style so much that you no longer have one. You shouldn’t try to project short term prices in the market. Look at a home as a long term investment and plan on keeping it for at least 4.5 years.
Reputable lending is critical at all times. I recommend a visit to your bank or federal credit union and an interview with Terry Gordon at First Funding in Campbell.
Terry is readily available and can answer preliminary questions over the phone. He won’t waste your time or money if he can’t do what you want. I outsource a lot of my real estate business to Terry because he works as both a financial analyst and money manager. Terry’s ethics, understanding of the market and spreadsheet wizardry leaves me free to do what I do best – market.
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• California Housing Finance Agency
• Mortgage Revenue Bond Programs
• Mortgage Credit Certificate Programs
Knowledge of these programs will provide tax relief to help make your new home more affordable.
If you find yourself asking questions about your ability to make the payments on your home or what the status of your equity is, there are no substitutions for good legal or tax advice. The only source that’s free is the realtor, and I have a wealth of information and contacts to help. Do not believe the media when it encourages defaulting. Once you are in default the bank is in control of your financial future. Although there are legal remedies for reinstallment as late as 5 days before an auction, it is better to discuss options before default. Market value is based on location and condition. The best source to determine what your home is worth today is your realtor. Buyers are still in competition for entry level housing, and home locations in good school districts and close to jobs. Although it’s difficult for everyone, these times are also an opportunity for change.
WHEN IS A SHORT SALE APPROPRIATE?
When facing financial hardship, you can save yourself valuable time and stress if you begin looking immediately to rebuild your credit and financial health. Don’t wait for the aftermath. And don’t wait for years to begin planning your path back to good credit and home ownership.
Doing a short sale, even if you are in a bankruptcy, is a huge step in the right direction if you plan to rebuild your credit and own a home again. At the very least it will keep you from waiting more than 24 months, in some cases, as opposed to 5-7 years.
Currently, a foreclosure stays on your credit for 7 years. Bankruptcy remains 7 to 10 years, depending on what chapter you file under. The major Credit Reporting Agencies do not release to the public how they calculate credit scores. There are ways out there to simulate how events like bankruptcy and foreclosure factor in to your score. Typically a settled account such as a short sale or a credit card settlement, will affect your credit score negatively for 12 months. After the first year, these simulators suggest the negative impact diminishes.
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LOAN MODIFICATION OR SHORT PAY-OFF:
The government’s relief programs are not easy to navigate and you and your home must fall within fairly strict guidelines. The HAMP (Home Affordable Modification Program) clarifies loan modification guidelines.
Borrower eligibility is based on
• likelihood of delinquency
• the existing mortgage payment is greater than 31% of gross monthly income
• full documentation by the borrower
• primary residences only
• the lenders approval that a regular refinance will not work
What does this mean: the lender will do everything to spend your equity. The best case scenario is applying for relief with a short pay-off of the loan or doing a short sale without being too delinquent. You may be able to buy a more affordable hone immediately.
If eligibility requirements for HAMP are met, the monthly mortgage payment is adjusted to
• 31% of borrower’s total pretax monthly income by:
• Reducing the rate to as low as 2%
• Extending the term of the loan up to 40 years
• Deferring a portion of the principal as a balloon payment and waiving the interest on the deferred amount – this is important for couples where one job has been lost
HAFA (Home Affordable Foreclosure Alternative)
This program allows borrowers who can’t loan modify through HAMP to receive pre-approved short sale terms releasing the borrower from future liability for the debt. In some cases a new home may be purchased immediately or a moving check of up to $5000 may be awarded the borrower. The holder of the second loan is provided incentive to release their hold on the property. It also puts the foreclosure process on hold. We have submitted a package and stopped auctions the next day. It also provides financial incentives to borrowers, servicers and investors because MOST of the real estate business is being done outside of the limited government programs.
And we are one step ahead. Fireside Realty aligned with a real estate group of retired lawyers and investors who will buy NON-owner occupied properties and prevent deficiency judgements. Yes, because if you are in default on an investment property, you may not only lose your home but you may have a tax liability. Tax liabilities if your primary residence was refinanced to make consumer purchases outside of your purchase loan may also be subject to tax consequences.
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Short sales under the new guidelines are taking less time to process. Professionally packaged and submitted a short sale decision may occur in under 60 days. Any changes made after the approval may result in delays so proper and accurate packaging is critical to move the process forward.
FOR REFERENCE ARTICLES ABOUT ANY OF THESE MATTERS
Contact Me »Sandy Kay
Sellers, this may be a time to downsize. The baby boomers retire in a few years and being ahead of the curve may be the answer to secure your future. If we are facing economic difficulties then having more cash until we get through this volatile fourth quarter of the business cycle may be a prudent move. Everything that goes up must come down but it will go up again. A sale now may mean the ability to recapture equity later through another less stressful purchase.