Real Property Report – California, April 2015 California Median Home Price Soars Past $400,000 Mark Highest Since December 2007 Home Sales Up 9.0 Percent from March CALIFORNIA, MAY 19, 2015 — California single-family home and condominium sales were up 9.0 percent in April 2015. April sales were 37,009 up from 33,946 in March. The increase in sales volume was predominantly due to the 9.2 percent gain in non-distressed property sales that accounted for 83.0 percent of total sales. On a year-over-year basis, sales volumes were up 5.8 percent from 34,995 in April 2014 to 37,009 in April 2015. Regionally, year-over-year sales...
1. Tax breaks. The U.S. Tax Code lets you deduct the interest you pay on your mortgage, your property taxes, as well as some of the costs involved in buying your home.
2. Appreciation. Real estate has long-term, stable growth in value. While year-to-year fluctuations are normal, median existing-home sale prices have increased on average 6.5 percent each year from 1972 through 2005, and increased 88.5 percent over the last 10 years, according to the NATIONAL ASSOCIATION OF REALTORS . In addition, the number of U.S. households is expected to rise 15 percent over the next decade, creating continued high demand for housing.
3. Equity. Money paid for rent is money that you ll never see again, but mortgage payments let you build equity ownership interest in your home.
4. Savings. Building equity in your home is a ready-made savings plan. And when you sell, you can generally take up to $250,000 ($500,000 for a married couple) as gain without owing any federal income tax.
5. Predictability. Unlike rent, your fixed-mortgage payments don t rise over the years so your housing costs may actually decline as you own the home longer. However, keep in mind that property taxes and insurance costs will increase.
6. Freedom. The home is yours. You can decorate any way you want and benefit from your investment for as long as you own the home.
7. Stability. Remaining in one neighborhood for several years gives you a chance to participate in community activities, lets you and your family establish lasting friendships, and offers your children the benefit of educational continuity.
Online resources: To calculate whether buying is the best financial option for you, use the Buy vs. Rent calculator at www.GinnieMae.gov.
Reprinted from REALTOR magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS .
Copyright 2008. All rights reserved.
The HAFA program’s intent from the inception was intended to allow a homeowner facing foreclosure to short sale the property and also provide the possibility of a stipend of money for relocation purposes, once the is was complete. It also provides for monetary incentives for the servicers to administer the program to help facilitate short sales.
Unfortunately, the program also created loopholes for servicers to take advantage of the guidelines to make them work primarily in favor of the the servicer, representing the investor, to the disadvantage of the homeower. Some of the loop holes in the orginal HAFA program that made for sometimes insurmountable obstacles are:
(a) the inordinate amount of time it takes for servicers to respond to a borrower when electing to short sale a property and the fact that approval or disapproval of short sales, commonly take 90 or more days. During this time, most buyers who have made an offer on the property are discouraged and lose interest and move on. Thus, the homeowner loses the short sale opportunity. This results in the homeowner often needlessly being forced in to foreclosure and thus defeating the intent and purpose of the HAFA program.
(b) HAFA presently has no guidelines addressing the practice of servicers to completely ignore the underlying property listing agreement between the homeowner as seller and the prospective buyer of the property. Servicers more often than not unilaterally dictate the amount of commission that will be paid to the listing real estate broker. Most listing contracts have a six percent (6%) commission set for payment to the listing real estate broker.
This commission is the thing that motivates the real estate broker to list the property and work very hard to accomplish a sale on a very difficult property. Arbitrarily reducing the commission by servicers because they must approve the sale, often occurs and this knowledge has discouraged the real estate industry from embracing the concept of short sales and thus affects the entire real estate industry in a significant way.
The two obstacles described above account for a significant failure of short sales that otherwise could be successful and benefit the servicer, the homeowner and the real estate industry, which desperately is trying to right itself.
Finally there are new HAFA guidelines proposed that will take place effective February 1, 2011 that removes the obstacles described above along with several others. Here are some of the most important changes that will become effective:
1. No more need to verify income. Only a hardship letter or request for modification via short sale is required.
2. The property being short sold can be vacant or rented out up to 12 months prior to requesting the short sale without regard to whether the borrower has lived in the property so long as it was the borrower’s principle place of residence within last 12 months.
3. Servicers are no longer limited to the 6% cap on extinguishing second, third or other subordinated loans during the short sale process.
4. Servicers are required to respond within 30 days to a borrower’s request for a short sale. Servicers are required to approve or disapprove an offer submitted by a buyer of the property within 30 days of receipt or alternatively to respond with a counteroffer within that 30 day period of time.
5. Servicers must honor the amount of commissions agreed to be paid to the listing real estate broker up to six percent (6%) if that is what is agreed to between the listing broker and the borrower. No offset is allowed by the servicer. This is huge toward getting the real estate sales industry to engage more actively in short sales.
While one should be optimistic and excited about these new guidelines, the reality is that many of the servicers will not take heed and will continue their ways in ignoring rules and regulations. Therefore, it will be necessary for all parties involved in these short sales to be diligent and hold the servicer’s feet to the fire. The difference this time around is that the regulations specifically include language like “the servicer “must” or “shall” follow specific guidelines.These terms “must” and “shall”, although small, make all the difference. The effect is that the guidelines now have muscle that the courts will ultimately enforce under federal regulations and this message is now loud and clear to the servicers.
Real estate brokers, homeowners and others who understand the power of this new “language” change and who let the servicers know that they know the significance will meet with substantial success in the future. Homeowners and persons representing them should keep a copy of the Supplemental HAFA regulations handy when communicating with lender servicer negotiators.
Article Source: http://www.articlesnatch.com
About the Author:
Roy Landers is a California attorney/real estate broker with over 25 years experience in real estate matters.He maintains two real estate blogs at http://www.therealestateinstitute.net, a real estate education site and http://www.renegadeforeclosurefighter.A FREE Newsletter-The Real Estate Playbook is also available at these sites.
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1. What are the most popular mortgages you offer Why are they so popular
2. Which type of mortgage plan do you think would be best for me Why
3. Are your rates, terms, fees, and closing costs negotiable
4. Will I have to buy private mortgage insurance If so, how much will it cost, and how long will it be required (NOTE: Private mortgage insurance is usually required if your down payment is less than 20 percent. However, most lenders will let you discontinue PMI when you ve acquired a certain amount of equity by paying down the loan.)
5. Who will service the loan your bank or another company
6. What escrow requirements do you have
7. How long will this loan be in a lock-in period (in other words, the time that the quoted interest rate will be honored) Will I be able to obtain a lower rate if it drops during this period
8. How long will the loan approval process take
9. How long will it take to close the loan
10. Are there any charges or penalties for prepaying the loan
Used with permission from Real Estate Checklists & Systems, www.realestatechecklists.com.
Reprinted from REALTOR magazine (REALTOR.org/realtormag) with permission of the NATIONAL ASSOCIATION OF REALTORS .
Copyright 2008. All rights reserved.
Bank of America Corporation today confirmed it has joined the other four largest mortgage servicers in agreeing in principle to the terms of a global settlement resolving federal and state investigations into certain origination, servicing and foreclosure practices. The settlement with 49 state attorneys general, the United States Department of Justice and other federal agencies would extend additional relief to homeowners who are struggling to make mortgage payments and to make refinancing options available to more homeowners.
Under the agreements in principle, Bank of America expects to develop new or enhanced programs to provide borrower assistance and refinancing assistance, to make direct payments to state and federal governments and borrower restitution, and to agree to national servicing standards. The agreements in principle are subject to ongoing discussions among the parties and completion and execution of definitive documentation, as well as required regulatory and court approvals.
The company would develop proprietary programs to provide expanded mortgage modification solutions, including broader use of principal reduction if permitted by the mortgage investor. Short sales would be further facilitated, and the company may offer additional assistance programs, for example deeds-in-lieu of foreclosure and funds for families transitioning out of homeownership. Programs for unemployed, military service members and other customers with identified special situations also may be enhanced. On mortgages that Bank of America owns, the company would expand refinancing opportunities or lower interest rates to provide reduced payments for many homeowners who are current on their payments but owe more than the current value of their homes.
Bank of America is finalizing its program enhancements and expects to provide additional details of eligibility requirements and implementation plans following finalization of the settlement terms.
Under an agreement in principle with the Federal Housing Administration (FHA), Bank of Americaalso expects to resolve and otherwise limit its exposure for certain claims relating to the origination of FHA-insured mortgage loans, primarily by Countrywide prior to and for a period following Bank of America’s acquisition of that lender.
Also today, the company has agreed with the Federal Reserve and the Office of the Comptroller of the Currency for the payment of civil money penalties related to conduct that was the subject of consent orders entered into with the banking regulators in April 2011. The company’s payment obligations under those agreements would be deemed satisfied by payments and provisions of relief under the agreements in principle.
Bank of America’s commitments
Bank of America’s commitment under the agreements in principle is $11.8 billion, including the following:
- Approximately $7.6 billion in borrower assistance, including targeted principal reduction.
- Approximately $1.0 billion in refinancing assistance to customers in the participating states.
- Approximately $2.25 billion in direct payments to state and federal governments and in borrower restitution, of which $1.9 billion would be an upfront cash payment and the remaining $350 million, would be paid only if Bank of America failed to meet certain principal reduction thresholds over a three-year period.
- Up to $1.0 billion in payments to settle FHA claims, of which $500 million would be an upfront cash payment, and the remaining $500 million would be paid only if Bank of America fails to meet certain principal forgiveness levels over a three-year period.
The financial impact of the settlements is not expected to cause any additional reserves to be taken over those made during 2011, based on the company’s understanding of the terms of the agreements in principle. The refinancing assistance is expected to be recognized as lower interest income in future periods as qualified borrowers pay reduced interest rates on loans refinanced. Although the company may incur additional operating costs (e.g., servicing costs) to implement parts of the global settlement in future periods, it is expected that those costs will not be material.
Under the terms of the agreements in principle, the federal and participating state governments would provide the participating servicers with releases from further liability for alleged residential mortgage origination, servicing, and foreclosure deficiencies.
In settling origination issues related to FHA loans, the federal government would release Bank of America and its affiliates, including Countrywide, from all claims arising from loans originated prior to April 30, 2009 that were submitted for FHA insurance claim payments prior to this year, and from multiple damages and penalties for loans that were originated prior to April 30, 2009, but have not been submitted for FHA insurance claim payment.
Not included in the agreements in principle are any claims arising out of securitization, including representations made to investors respecting mortgage-backed securities; criminal claims; repurchase demands from the GSEs; and inquiries into the Mortgage Electronic Registration System, among other items.
Housing developers agree that any kind of development is a very cumbersome process, whether it is for-profit or non-profit. There are many issues to consider before starting any project. We offer a list of some ideas to help you get started with your project.
There are a number of things you should consider when designing your project:
- What type of development do you want to pursue: infill, acquisition, preservation, redevelopment, new construction, rehabilitation
- What is your time frame Is this a short-term, long-term, or continuous (such as rental assistance) or limited project
- What are the costs involved: land purchase, materials, permits and fees, labor, management, insurance, etc
- What is the specific need that the project addresses: homelessness, lack of assisted housing, housing for special needs population (elderly, single parents, disabilities, etc.), affordable single family residency housing, affordable multifamily housing, homeownership counseling/education
- What is the proposed service area: neighborhood, city, county
- What are the service criteria Who is going to benefit from the project and what are the criteria used to select participants: need (such as only students for student housing), income, residency area, age group, other
- What are the potential problems: neighborhood opposition, city council disagreement, state regulations, lack of financial support, red tape and permits or liability issues What are the potential solutions Who are your potential allies
- Who is responsible of providing the service How is the service going to be delivered
Once you have the project idea developed, you need to make a specific plan to attain your objective.
Consider all sources of funding from: Federal government (HUD Funds Available, HUD Grants Index, Other HUD Grants Available; local government CDBG or RDA loan and grant funds); other organizations (Clearinghouse Database Search).
Examples of the programs covered by all The Clearinghouse is a source of information on over 200 housing programs, government, private lenders and foundation grants. Each program listing identifies the goals, eligible activities and type of funding, as well as such critical and timely information as application deadlines and current funding of the above providers are: technical assistance, insurance mortgages, construction loan and permanent loans. It is always best to stay in touch with your local planning or housing agency for current information on availability of funding.
Consider global tax credits such as: Low Income Housing Tax Federal (LIHTC) and Low Income Housing Tax State Credit, both administered by the California Tax Credit Allocation Committee and only rental housing projects are eligible; Historic Tax Credits; Housing Tax Exempt Bonds; Renewal Communities; urban Empowerment Zones; and Urban Enterprise Communities (RC/EZ/EC) tax credits for housing rehabilitation and construction; and Tax Information for Charities and Other Non-Profits. Also, search the Low-Income Housing Tax Credit (LITCH) Database to get information on the projects and housing units being produced in your locality (use left menu to access geographic data on LIHTC production).
Consider partners that will help your project: government; nonprofits (consult the Southern California Association of Non-Profit Housing Directory and Northern California Association of Non-Profit Housing Directory); for profits. A partnership has pros (i.e. experience, contacts, advice) and cons (i.e. loss of independence in the planning and implementation process).
Consider other information: HUD information for grantees and nonprofits, Nonprofit participation in housing programs, Office of Community Planning and Development, Establishing a Non-Profit Organization, Tax Information for Charities and Other Non-Profits ; Starting a Business in the U.S. (for profit and non-profit); HUD s Affordable Housing Programs (requiring non-profits participation); HUD s Matrix of Systems per Working Group information of what HUD system or database resource might be useful to you as a non-profit.
Suggestions from Non-Profits
Once you are ready to seek approval for your project and you have thought and planned everything through, you are ready to consider some suggestions gathered from non-profits that have already worked in housing projects.
Consider other things you haven t considered before and that might influence your project: Did you include parking, is it adequate How do you know Did you consider the impact on the local school district Is transportation close by Is this a friendly building Are the materials adequate
Emphasize the good points of your project: Getting a project approved is also a matter of marketing and public relations. Learn how to sell it effectively to the City and its residents. Emphasize amenities, like a projected child care facility, or benefits, like increased home values and tax revenue due to development of a vacant property. Anticipate all possible objections and negative comments about your project, but do not address them before the City Council or any Commission does. Be ready to answer, but do not alert them to objections they have not thought about availability. Its information is primarily geared to assisting housing sponsors (private and nonprofit developers) and units of government.
Know your community: Research demographic and economic characteristics of the area. Do surveys, talk to people, know what they want, know what they need, work with them, gather their support. Use task forces. Offer amenities (i.e. child care center) to make people and officials like you. Do you know if prospective grantees like your project What would they change and what would they keep Why
Know the law: Review and locate the general plan and zoning plans because sometimes they have conflicting data. Look for consistency in housing fabric. Present the law and how the project fits into the law.
Increase density: More dense projects are likely to draw environmentalists support.
Learn from similar nonprofits and developers: Talk to them. Ask about what they could have done better. What went right What went wrong What useful advice do they have for you
Open channels of communication with city officials: Network with the planning department. Educate city attorneys about the law. Speak early before filling of documents. Read and know your staff report and respond to each issue. Know your request. Address each topic in your specific request.
Partnership: Diverse groups accomplish more.
Suggestions from Government Officials
- Ask staff for relief: They might be able to provide some, especially when it comes to affordable housing. It might come in the form of political support, recommendations to a commission, deferred payments or guidance.
- Be aware of what the City is doing: What tools does it have, how can they be used Once the strengths are assessed, a strategy to tackle the problems can be set up.
- Be politically savvy about City Hall: It speeds up the approval process by contacting the right people, and it makes staff s work easier.
- Check the Building and Safety list of nuisance properties: Potential revitalization sites can be found there. Also, ask the city for a list of city owned properties. This is also a good source to find affordable housing sites.
- Educate the public about what affordable housing means.
- Know the community: Know its pros and cons.
- Lobby Council members when there are difficult projects: Get them to assist on your project meetings (private, neighborhood, etc.), agitate.
- Partnership: Profit from other organizations experience and contacts. It is also useful to establish work relationships and to identify sites.
- Possess financial know-how: Learn were the sources of financing for your project are located.
Realize that an outsider has the power to influence the outcome on ways a city staff can t: Staff is bounded to support the position of the elected official it is serving. However, by brainstorming, questioning, dialoguing, depicting alternative scenarios and sharing information with staff, new approaches can be created and that communication process can help shape policy and change outcomes.
The Justice Department, the Department of Housing and Urban Development (HUD) and 49 state attorneys general announced today the filing of their landmark $25 billion agreement with the nation’s five largest mortgage servicers to address mortgage loan servicing and foreclosure abuses.
The federal government and state attorneys general filed in U.S. District Court in the District of Columbia proposed consent judgments with Bank of America Corporation, J.P. Morgan Chase & Co., Wells Fargo & Company, Citigroup Inc. and Ally Financial Inc., to resolve violations of state and federal law.
The unprecedented joint agreement is the largest federal-state civil settlement ever obtained and is the result of extensive investigations by federal agencies, including the Department of Justice, HUD and the HUD Office of the Inspector General (HUD-OIG), and state attorneys general and state banking regulators across the country.
The consent judgments provide the details of the servicers’ financial obligations under the agreement, which include payments to foreclosed borrowers and more than $20 billion in consumer relief; new standards the servicers will be required to implement regarding mortgage loan servicing and foreclosure practices; and the oversight and enforcement authorities of the independent settlement monitor, Joseph A. Smith Jr.
The consent judgments require the servicers to collectively dedicate $20 billion toward various forms of financial relief to homeowners, including: reducing the principal on loans for borrowers who are delinquent or at imminent risk of default and owe more on their mortgages than their homes are worth; refinancing loans for borrowers who are current on their mortgages but who owe more on their mortgage than their homes are worth; forbearance of principal for unemployed borrowers; anti-blight provisions; short sales; transitional assistance; and benefits for service members.
The consent judgments’ consumer relief requirements include varying amounts of partial credit the servicers will receive for every dollar spent on the required relief activities. Because servicers will receive only partial credit for many of the relief activities, the agreement will result in benefits to borrowers in excess of $20 billion. The servicers are required to complete 75 percent of their consumer relief obligations within two years and 100 percent within three years.
In addition to the $20 billion in financial relief for borrowers, the consent judgments require the servicers to pay $5 billion in cash to the federal and state governments. Approximately $1.5 billion of this payment will be used to establish a Borrower Payment Fund to provide cash payments to borrowers whose homes were sold or taken in foreclosure between Jan. 1, 2008, and Dec. 31, 2011, and who meet other criteria.
The court documents filed today also provide detailed new servicing standards that the mortgage servicers will be required to implement. These standards will prevent foreclosure abuses of the past, such as robo-signing, improper documentation and lost paperwork, and create new consumer protections. The new standards provide for strict oversight of foreclosure processing, including third-party vendors, and new requirements to undertake pre-filing reviews of certain documents filed in bankruptcy court. The new servicing standards make foreclosure a last resort by requiring servicers to evaluate homeowners for other loss mitigation options first. Servicers will be restricted from foreclosing while the homeowner is being considered for a loan modification. The new standards also include procedures and timelines for reviewing loan modification applications and give homeowners the right to appeal denials. Servicers will also be required to create a single point of contact for borrowers seeking information about their loans and maintain adequate staff to handle calls.
The consent judgments provide enhanced protections for service members that go beyond those required by the Servicemembers Civil Relief Act (SCRA). In addition, the servicers have agreed to conduct a full review, overseen by the Justice Department’s Civil Rights Division, to determine whether any service members were foreclosed or improperly charged interest in excess of 6 percent on their mortgage in violation of SCRA.
The oversight and enforcement authorities of the settlement’s independent monitor are detailed in the court documents filed today. The monitor will oversee implementation of the servicing standards and consumer relief activities required by the agreement and publish regular public reports that identify any quarter in which a servicer fell short of the standards imposed in the settlement. The consent judgments require servicers to remediate any harm to borrowers that are identified in quarterly reviews overseen by the monitor and, in some instances, conduct full look-backs to identify any additional borrowers who may have been harmed. If a servicer violates the requirements of the consent judgment it will be subject to penalties of up to $1 million per violation or up to $5 million for certain repeat violations.
The consent judgments filed today resolve certain violations of civil law based on mortgage loan servicing activities. The agreement does not prevent state and federal authorities from pursuing criminal enforcement actions related to this or other conduct by the servicers. The agreement does not prevent the government from punishing wrongful securitization conduct that will be the focus of the new Residential Mortgage-Backed Securities Working Group. In the servicing agreement, the United States also retains its full authority to recover losses and penalties caused to the federal government when a bank failed to satisfy underwriting standards on a government-insured or government-guaranteed loan; the United States also resolved certain Federal Housing Administration (FHA) origination claims with Bank of America as part of this filing and with Citibank in a separate matter. The agreement does not prevent any action by individual borrowers who wish to bring their own lawsuits. State attorneys general also preserved, among other things, all claims against the Mortgage Electronic Registration Systems (MERS), and all claims brought by borrowers.
Investigations were conducted by the U.S. Trustee Program of the Department of Justice, HUD-OIG, HUD’s FHA, state attorneys general offices and state banking regulators from throughout the country, the U.S. Attorney’s Office for the Eastern District of New York, the U.S. Attorney’s Office for the District of Colorado, the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Western District of North Carolina, the U.S. Attorney’s Office for the District of South Carolina, the U.S. Attorney’s Office for the Southern District of New York, the Special Inspector General for the Troubled Asset Relief Program and the Federal Housing Finance Agency-Office of the Inspector General. The Department of the Treasury, the Federal Trade Commission, the Consumer Financial Protection Bureau, the Justice Department’s Civil Rights Division, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, the Department of Veterans Affairs and the U.S. Department of Agriculture made critical contributions.
For more information about the mortgage servicing settlement, go towww.NationalMortgageSettlement.com. To find your state attorney general’s website, go towww.NAAG.org and click on “The Attorneys General.”
The joint federal-state agreement is part of enforcement efforts by President Barack Obama’s Financial Fraud Enforcement Task Force. President Obama established the interagency Financial Fraud Enforcement Task Force to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. The task force includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information about the task force visit:www.stopfraud.gov
Eligible homeowners should be contacted by the five participating banks. However, individuals who are interested or concerned may wish to initiate the process by contacting the banks for more information.
Ally / GMAC…………………….. 800-766-4622
Bank of America……………….. 877-488-7814 (M-F 7:00 am to 9:00 pm Central Time and Saturday, 8:00 am to 5:00 pm)
JPMorgan Chase……………….. 866-372-6901
Wells Fargo……………………… 800-288-3212 (M-F, 7:00 am to 7:00 pm Central Time)
So you ve gotten pre-approved on your loan and you ve decided on what type of home you want to buy. And, you ve found your dream home. Now it s time to make an offer on it. This is when the real fun begins.
To make a good offer on a house, look at its fair market value. To get its fair market value, there are two things you can do: get a comparable market analysis (CMA) or have a professional appraisal done.
The CMA is typically done by your real estate agent. Again, this is a good time to have a great, knowledgeable agent. A CMA is a process of looking at comparable sales in your prospective neighborhood. By examining things like size, location and purchase price, a good agent should be able to give a fairly accurate determination of a home s fair market value.
On the other hand, you can choose to have a professional appraisal done on your prospective home. An appraiser estimates the value of the home and will give you an estimated fair market value. However, you will have to pay to have an appraisal done whether you get the property or not.
Q. HOW DO I KNOW IF I’M READY TO BUY A HOME
You can find out by asking yourself some questions:
– Do I have a steady source of income (usually a job) Have I been employed on a regular basis for the last 2-3 years Is my current income reliable
– Do I have a good record of paying my bills
– Do I have few outstanding long-term debts, like car payments
– Do I have money saved for a down payment
– Do I have the ability to pay a mortgage every month, plus additional costs
If you can answer “yes” to these questions, you are probably ready to buy your own home.
Q. HOW DO I BEGIN THE PROCESS OF BUYING A HOME
Start by thinking about your situation. Are you ready to buy a home How much can you afford in a monthly mortgage payment (see Question 4 for help) How much space do you need What areas of town do you like After you answer these questions, make a “To Do” list and start doing casual research. Talk to friends and family, drive through neighborhoods, and look in the “Homes” section of the newspaper.
Q. HOW DOES PURCHASING A HOME COMPARE WITH RENTING
The two don’t really compare at all. The one advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity, take advantage of tax benefits, and protect yourself against rent increases. Also, you may not be free to decorate without permission and may be at the mercy of the landlord for housing.
Owning a home has many benefits. When you make a mortgage payment, you are building equity. And that’s an investment. Owning a home also qualifies you for tax breaks that assist you in dealing with your new financial responsibilities- like insurance, real estate taxes, and upkeep- which can be substantial. But given the freedom, stability, and security of owning your own home, they are worth it.
Q. HOW DOES THE LENDER DECIDE THE MAXIMUM LOAN AMOUNT THAT CAN AFFORD
The lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as car or student loan payments, alimony, or child support. According to the FHA,monthly mortgage payments should be no more than 29% of gross income, while the mortgage payment, combined with non-housing expenses, 4 should total no more than 41% of income. The lender also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.
Q. HOW DO I SELECT THE RIGHT REAL ESTATE AGENT
Start by asking family and friends if they can recommend an agent. Compile a list of several agents and talk to each before choosing one. Look for an agent who listens well and understands your needs, and whose judgment you trust. The ideal agent knows the local area well and has resources and contacts to help you in your search. Overall, you want to choose an agent that makes you feel comfortable and can provide all the knowledge and services you need.
Q. HOW CAN I DETERMINE MY HOUSING NEEDS BEFORE I BEGIN THE SEARCH
Your home should fit way you live, with spaces and features that appeal to the whole family. Before you begin looking at homes, make a list of your priorities – things like location and size. Should the house be close to certain schools your job to public transportation How large should the house be What type of lot do you prefer What kinds of amenities are you looking for Establish a set of minimum requirements and a ‘wish list.” Minimum requirements are things that a house must have for you to consider it, while a “wish list” covers things that you’d like to have but aren’t essential.
Help For First Time Home Buyers
There are many first time home buyer programs available to assist you in your purchase. These programs range from informational courses like this one to federal, state and local government agencies and non-profit groups that can assist you with down payments, lower-than-market rate financing and troubled credit.
Depending on your income and other personal factors, some of these programs can assist you in getting into a home for less than $1,000.
For information about first time home buyer programs and a variety of other home loan assistance programs in California, check out the California Housing Finance Agency’s web site at www.calhfa.ca.gov and the California Department of Housing and Community Development at www.hcd.ca.gov.
Police, teachers, firefighters and other public employees often have access to home loan programs that have favorable down payment options and special income qualifications. If applicable, check with your employee association or retirement system.
When choosing a loan, you’ll be confronted with a variety of choices of how interest rates are applied. There are fixed rate mortgages and adjustable rate mortgages (ARMs). Look at each type of loan carefully and decide, based on your financial situation and ability to stomach roller coaster interest rates, which is best for you!
Fixed rate mortgages are set at a constant interest rate over the period of the loan ‘ usually 15 or 30 years. This provides maximum stability as far as your monthly loan payment is concerned.
ARMs often provide a much lower initial interest rate at the inception of the loan. ARMs are set by an index plus a margin that equals an interest rate for a loan. An index is a gauge of interest rates which fluctuates with current market conditions. The margin is a fixed amount which gets added to the index. There are two different types of ARMs, the standard version that starts to adjust almost immediately after funding and the intermediate ARM, that doesn’t start to adjust for several months to several years.
There is a lot more to know about loans. You can learn more by visiting www.freddiemac.com/homebuyers, www.hud.gov or www.fanniemae.com (click on Homepath) or by simply asking questions of your real estate agent, lender and/or mortgage broker.
If you’re getting an ARM, look for ones with lower margins. Interest rates tend to be similar for most lending institutions, so the real gauge of saving money over time is a lower margin!
Look out for prepayment penalties on your loan! Having one can save you some money every month, but if you refinance or sell your home, you could get hit with thousands of dollars in penalties!