A new Fannie Mae study suggests Americans are beginning to consider 2012 a good year to acquire a home.
The GSE released its March National Housing Survey of just over 1,000 Americans and found more citizens expect rents and home prices to increase in the coming months, making today a better time to purchase a residence.
About 73% of those interviewed said buying a home today is a good idea, up from 70% in February.
Thirty-seven percent of those interviewed believe prices will increase, which is up 5 percentage points since February and the highest point reached in more than a year.
About half of the respondents expect both home rentals and purchases will grow over the next 12 months.
Consumers also are more confident about their own finances, with 44% believing their financial situations will get better in the near future.
"Conditions are coming together to encourage people to want to buy homes," said Doug Duncan, vice president and chief economist of Fannie Mae. "Americans' rental price expectations for the next year continue to rise, reaching their record high level for our survey this month. With an increasing share of consumers expecting higher mortgage rates and home prices over the next 12 months, some may feel that renting is becoming more costly and that homeownership is a more compelling housing choice."
Still, 58% of those surveyed believe the economy is still on the wrong track, with only 35% holding a more optimistic view of the nation's economic situation. Twelve percent believe their financial situation will worsen, and 21% believe their income is now significantly higher than it was 12 months ago.
Keep the faith!
Monday, April 23, 2012
How much of your property taxes do you write-off?
The Franchise Tax Board will soon be getting a new computer system and starting with the 2012 tax year, property owners will be required to break down payments into deductible and non-deductible portions when they file.
This change could result in a significant reduction in deductions. Up until this point, property owners claimed the total amount of their property tax bill or as provided on the 1098 form by their mortgage company.
With the tax filing season majorly over, this is a perfect opportunity to interface with your CPA to discuss how this will affect your future filings; and the need for any changes to amounts withheld for the year.
This change could result in a significant reduction in deductions. Up until this point, property owners claimed the total amount of their property tax bill or as provided on the 1098 form by their mortgage company.
With the tax filing season majorly over, this is a perfect opportunity to interface with your CPA to discuss how this will affect your future filings; and the need for any changes to amounts withheld for the year.
Monday, April 9, 2012
FHA to deny mortgage backing for credit disputes above $1,000
As of April 1, potential borrowers with ongoing credit disputes totaling more than $1,000 are no longer eligible for mortgages insured by the FHA.
Under the rule, borrowers must either pay off the outstanding balance on these collections accounts or document a payment arrangement that the lender must then submit to the FHA before closing. The payment arrangement will be counted into the debt-to-income ratio for the new home loan.
The rule excludes disputed accounts from more than two years ago, along with those related to theft. But the lender must document an identity theft or police report on the fraudulent charges.
An FHA spokesman said the rule was designed as another protection for the FHA emergency fund. The fund levels slipped to 0.2 percent of at-risk insurance last year, well below the 2 percent mandated by Congress. The FHA raised insurance premiums on April 1 as well to boost the fund by $1 billion.
See your Mortgage Professional to answer all your questions about the FHA program and all other options available to you.
Under the rule, borrowers must either pay off the outstanding balance on these collections accounts or document a payment arrangement that the lender must then submit to the FHA before closing. The payment arrangement will be counted into the debt-to-income ratio for the new home loan.
The rule excludes disputed accounts from more than two years ago, along with those related to theft. But the lender must document an identity theft or police report on the fraudulent charges.
An FHA spokesman said the rule was designed as another protection for the FHA emergency fund. The fund levels slipped to 0.2 percent of at-risk insurance last year, well below the 2 percent mandated by Congress. The FHA raised insurance premiums on April 1 as well to boost the fund by $1 billion.
See your Mortgage Professional to answer all your questions about the FHA program and all other options available to you.
Tuesday, March 20, 2012
FHA Mortgages are poised to get more expensive
If you're considering buying a house with an FHA mortgage and expect the seller to help out with your closing costs, here's a heads-up: The Federal Housing Administration plans to impose significant restrictions on the amount of money that sellers can contribute at closing in the near future.
On top of that, the FHA also will be raising its mortgage insurance premiums during the coming weeks, increasing charges for new purchasers across the board.
You might ask, why hit us with additional financial burdens right now, just as housing is showing modest signs of recovery in many areas and the spring buying season is getting underway?
One big reason: Over the last six years, the FHA has been the turnaround champ of residential real estate, offering down payments as low as 3.5% despite the recession and housing bust and growing its market share to 25%-plus from 3%. The program is financing 40% or more of all new-home purchases in some metropolitan areas and is a crucial resource for first-time buyers and moderate-income families, especially minorities. With a maximum loan amount of $729,750 in high-cost areas, it is also a force in some of the country's most expensive markets — California, Washington, D.C., New York and parts of New England.
But during the same span of rapid growth, the FHA's insurance fund capital reserves have steadily deteriorated — far below congressionally mandated levels. Delinquencies have been increasing. According to the latest quarterly survey by the Mortgage Bankers Assn., FHA delinquencies rose to 12.4%, compared with a 4.1% average for prime (Fannie Mae-Freddie Mac) conventional fixed-rate mortgages and 6.6% for VA loans.
As a result, the FHA is under the gun — with Congress and within the Obama administration — to get its own house in order, cut insurance claims and rebuild its reserves. The upcoming squeezes on seller contributions and bumps in premiums are steps in this direction.
The seller-contribution cutbacks could be painful, particularly in areas of the country where closing costs and home prices are relatively high.
Here's what's involved: Traditionally the FHA has been uniquely generous in allowing home sellers — including builders marketing new construction — to sweeten the pot for purchasers by chipping in money to defray closing costs. The FHA now allows sellers to pay up to 6% of the price of the house toward their buyers' closing expenses. Fannie Mae and Freddie Mac, by comparison, cap contributions at 3%. The VA's ceiling is 4%.
Under newly proposed rules, the FHA cap would drop to the greater of 3% of the home price or $6,000. In sales involving houses priced at $100,000 or less, this wouldn't change anything ($6,000 equals 6% of $100,000). But on all sales above this threshold, the squeeze would get progressively tighter.
On a $200,000 home, a buyer could today ask the seller to pay for $12,000 of a long list of settlement charges including all prepaid loan expenses, discount points on the loan, interest rate buy-downs and upfront FHA insurance premiums, among others. Under the proposed cutback, the maximum amount would be slashed in half.
On many home transactions, the reductions would force sellers to lower their prices to enable cash-short buyers to get through the closing. In other cases, sales might simply be too far of a stretch for some purchasers.
The proposed cuts are open to public comment through the end of this month but are highly likely to be adopted in much the same form soon afterward. The FHA also is restricting the types of "closing costs" that sellers can pay. Six months' or a year's worth of interest payments or homeowner association dues in advance no longer will be permitted — a serious blow to many builders who use these as financial carrots.
Beyond these changes, FHA also plans significant increases in insurance premiums — upfront premiums will rise to 1.75% from 1%, effective April 1, and annual premiums will increase by 0.1% on all loans under $625,000 and 0.35% on mortgage amounts above that, effective June 1.
William McCue, president of McCue Mortgage Co. in New Britain, Conn., which does a sizable percentage of its business with the FHA, said the cumulative effect of all these increases "will not just crowd first-time buyers out of the FHA market, it will prevent them from owning a home that, absent these new costs, would be affordable."
Bottom line: Nail down your FHA money and seller-contribution negotiations as soon as you can because later looks a lot more expensive.
On top of that, the FHA also will be raising its mortgage insurance premiums during the coming weeks, increasing charges for new purchasers across the board.
You might ask, why hit us with additional financial burdens right now, just as housing is showing modest signs of recovery in many areas and the spring buying season is getting underway?
One big reason: Over the last six years, the FHA has been the turnaround champ of residential real estate, offering down payments as low as 3.5% despite the recession and housing bust and growing its market share to 25%-plus from 3%. The program is financing 40% or more of all new-home purchases in some metropolitan areas and is a crucial resource for first-time buyers and moderate-income families, especially minorities. With a maximum loan amount of $729,750 in high-cost areas, it is also a force in some of the country's most expensive markets — California, Washington, D.C., New York and parts of New England.
But during the same span of rapid growth, the FHA's insurance fund capital reserves have steadily deteriorated — far below congressionally mandated levels. Delinquencies have been increasing. According to the latest quarterly survey by the Mortgage Bankers Assn., FHA delinquencies rose to 12.4%, compared with a 4.1% average for prime (Fannie Mae-Freddie Mac) conventional fixed-rate mortgages and 6.6% for VA loans.
As a result, the FHA is under the gun — with Congress and within the Obama administration — to get its own house in order, cut insurance claims and rebuild its reserves. The upcoming squeezes on seller contributions and bumps in premiums are steps in this direction.
The seller-contribution cutbacks could be painful, particularly in areas of the country where closing costs and home prices are relatively high.
Here's what's involved: Traditionally the FHA has been uniquely generous in allowing home sellers — including builders marketing new construction — to sweeten the pot for purchasers by chipping in money to defray closing costs. The FHA now allows sellers to pay up to 6% of the price of the house toward their buyers' closing expenses. Fannie Mae and Freddie Mac, by comparison, cap contributions at 3%. The VA's ceiling is 4%.
Under newly proposed rules, the FHA cap would drop to the greater of 3% of the home price or $6,000. In sales involving houses priced at $100,000 or less, this wouldn't change anything ($6,000 equals 6% of $100,000). But on all sales above this threshold, the squeeze would get progressively tighter.
On a $200,000 home, a buyer could today ask the seller to pay for $12,000 of a long list of settlement charges including all prepaid loan expenses, discount points on the loan, interest rate buy-downs and upfront FHA insurance premiums, among others. Under the proposed cutback, the maximum amount would be slashed in half.
On many home transactions, the reductions would force sellers to lower their prices to enable cash-short buyers to get through the closing. In other cases, sales might simply be too far of a stretch for some purchasers.
The proposed cuts are open to public comment through the end of this month but are highly likely to be adopted in much the same form soon afterward. The FHA also is restricting the types of "closing costs" that sellers can pay. Six months' or a year's worth of interest payments or homeowner association dues in advance no longer will be permitted — a serious blow to many builders who use these as financial carrots.
Beyond these changes, FHA also plans significant increases in insurance premiums — upfront premiums will rise to 1.75% from 1%, effective April 1, and annual premiums will increase by 0.1% on all loans under $625,000 and 0.35% on mortgage amounts above that, effective June 1.
William McCue, president of McCue Mortgage Co. in New Britain, Conn., which does a sizable percentage of its business with the FHA, said the cumulative effect of all these increases "will not just crowd first-time buyers out of the FHA market, it will prevent them from owning a home that, absent these new costs, would be affordable."
Bottom line: Nail down your FHA money and seller-contribution negotiations as soon as you can because later looks a lot more expensive.
Friday, March 2, 2012
Real Estate Financing ~ Points -vs- No points
The New York Times recently ran an article that covered some basics and provided some stats. Definitions are good if you are not experienced but stats are only fluff because everyone's situation is different so what John Smith does has no bearing on what you should do.
Here's the highlights of the New York Times article but read on to the end as I will make some valid points that you should consider closely before you automatically agree to what your Lender has chosen for you or what information you give to Lenders to quote you on, especially important if you are shopping your loan with 2 or 3 Lenders. so here goes the Times story highlights ...
Points lose favor
With interest rates at or near record lows, many borrowers are seeing little reason to pay points when buying or refinancing a home. Some are even opting for what’s known as “negative points,” agreeing to a slightly higher rate to help pay closing costs.
Making sense of the story
Paying points enables a borrower to “buy down” the interest rate on a mortgage in exchange for an upfront fee. The trend away from points partly reflects borrower sentiment that rates are already low enough, according to industry experts.
A point equals 1 percent of the loan amount, so paying one point on a $250,000 refinancing costs an extra $2,500 at closing, in addition to other mortgage fees, taxes, and escrow amounts. Paying a point usually reduces the interest rate by 0.25 points over its term, so for instance, instead of 4 percent, the rate is 3.75 percent.
The average number of points paid in 2011, according to a Freddie Mac survey, was 0.7 percentage points, less than half the levels people paid in the 1990s. The average has been 0.7 percent for three years, after it hit a low of 0.4 percent in 2007; in 1995 it averaged 1.8 percent, according to Freddie Mac data.
The primary advantages of paying points are a lower rate and monthly payment. To decide if paying points is worthwhile, borrowers should consider two key decisions: How long they plan to live in the home, and how much they can afford in close costs.
Many mortgage professionals suggest following this rule: If the borrower plans to live in the home for at least five years, paying points will help the homeowner to reap savings.
Some borrowers are even going for negative points, which is also called a lender rebate or points in reverse. In exchange for accepting a higher interest rate, the lender agrees to give the borrower a credit, which is usually used for closing costs.
Roger's highlights:
1) If you purchase and pay points, you can write off those points on your taxes. If you refinance and pay points, you can still write them off but you must amortize them over the terms of the loan;
2) When you pay points, you have availed yourself of a lower interest rate so that you realize a savings monthly which helps your cashflow. It generally takes 3-5 years of savings to equal the points you paid up front (depending on the loan amount, rate and term) however from that point until you pay the loan off, refinance or sell the property, you are saving $ _X_ amount monthly after the break even date.
3) If cash is a little tight when you are purchasing or refinancing, you could seek a no point loan or even a no cost loan. ..coupling this with closing credits from the seller could put you into your dreamhouse.
Talk to a Realtor® - your local desert real estate soltions expert is:
Roger A. Sullivan reachable at 760-610-3245 or Roger@RogerASullivan.com
as always - Keep the faith!
Here's the highlights of the New York Times article but read on to the end as I will make some valid points that you should consider closely before you automatically agree to what your Lender has chosen for you or what information you give to Lenders to quote you on, especially important if you are shopping your loan with 2 or 3 Lenders. so here goes the Times story highlights ...
Points lose favor
With interest rates at or near record lows, many borrowers are seeing little reason to pay points when buying or refinancing a home. Some are even opting for what’s known as “negative points,” agreeing to a slightly higher rate to help pay closing costs.
Making sense of the story
Paying points enables a borrower to “buy down” the interest rate on a mortgage in exchange for an upfront fee. The trend away from points partly reflects borrower sentiment that rates are already low enough, according to industry experts.
A point equals 1 percent of the loan amount, so paying one point on a $250,000 refinancing costs an extra $2,500 at closing, in addition to other mortgage fees, taxes, and escrow amounts. Paying a point usually reduces the interest rate by 0.25 points over its term, so for instance, instead of 4 percent, the rate is 3.75 percent.
The average number of points paid in 2011, according to a Freddie Mac survey, was 0.7 percentage points, less than half the levels people paid in the 1990s. The average has been 0.7 percent for three years, after it hit a low of 0.4 percent in 2007; in 1995 it averaged 1.8 percent, according to Freddie Mac data.
The primary advantages of paying points are a lower rate and monthly payment. To decide if paying points is worthwhile, borrowers should consider two key decisions: How long they plan to live in the home, and how much they can afford in close costs.
Many mortgage professionals suggest following this rule: If the borrower plans to live in the home for at least five years, paying points will help the homeowner to reap savings.
Some borrowers are even going for negative points, which is also called a lender rebate or points in reverse. In exchange for accepting a higher interest rate, the lender agrees to give the borrower a credit, which is usually used for closing costs.
Roger's highlights:
1) If you purchase and pay points, you can write off those points on your taxes. If you refinance and pay points, you can still write them off but you must amortize them over the terms of the loan;
2) When you pay points, you have availed yourself of a lower interest rate so that you realize a savings monthly which helps your cashflow. It generally takes 3-5 years of savings to equal the points you paid up front (depending on the loan amount, rate and term) however from that point until you pay the loan off, refinance or sell the property, you are saving $ _X_ amount monthly after the break even date.
3) If cash is a little tight when you are purchasing or refinancing, you could seek a no point loan or even a no cost loan. ..coupling this with closing credits from the seller could put you into your dreamhouse.
Talk to a Realtor® - your local desert real estate soltions expert is:
Roger A. Sullivan reachable at 760-610-3245 or Roger@RogerASullivan.com
as always - Keep the faith!
Thursday, February 23, 2012
Short Sales and Foreclosures - "The Comeback Trail"
The following is a reproduction of an article from today's Desert Sun. In my opinion, it's very informative and provides some good tips. After reading through this, please check out my posting on my Short Sale blog: http://shortsalesully.blogspot.com/2012/02/how-to-bounce-back-from-short-sale.html for some important tips. If you have suffered through one of these situations, you've already had the setback ... make note and avail your self of all the little things necessary to make your 'comeback" simpler and succcessful. Here's the story from Alex Veiga
Next to filing for bankruptcy protection, nothing wrecks your chances of qualifying for a home loan like a foreclosure.
And if you got out from under an oppressive mortgage through a short sale — when the bank agrees to accept less than what the homeowner owes — lenders can look upon you just as unfavorably.
It's a reality that the former owners of the more than 4 million homes lost to foreclosure in the six years since the housing bubble burst will have to confront if they want to own again. But the passage of time makes all the difference.
That's because mortgage-lending guidelines that most banks follow prohibit them from making loans to people with foreclosure or a short sale in their credit history, often for years. Never mind the hit that one's credit score takes.
Still, some of the homeowners who were foreclosed upon when the market first started to skid are now looking to buy and getting loans.
“They're probably going to pay a little higher interest rate, but with rates so low, a higher interest rate of 4 percent is not a big deal,” said Rosa Herwick, a broker and owner of Century 21 JR Realty in Henderson, Nev.
So how likely are banks to approve your mortgage application if you have a real estate-related blemish on your record? And can you do anything to spring yourself from the mortgage penalty box?
It depends on several factors, but largely on whether you had a foreclosure or a short sale.
Foreclosure
Generally, borrowers who have a foreclosure in their credit history can expect to wait two to seven years before a lender will even accept their loan application.
The waiting periods stem from guidelines most banks must follow in order to be able to sell their home loans. That's because potential purchasers, such as Fannie Mae and Freddie Mac, each have a different set of guidelines for the loans they will buy and criteria for whom they deem a qualified borrower.
The fact is, a person's credit score, employment history and other factors that make up one's creditworthiness will take a back seat to these resale guidelines.
If a buyer with a past foreclosure is seeking a government-backed mortgage, the waiting period can vary before they can qualify.
Take the Federal Housing Administration, which insures roughly 30 percent of new loans. Under its guidelines, former homeowners must wait three years from the date of their foreclosure before they can qualify for backing by the agency.
Compare the U.S. Department of Agriculture's housing program, which requires three years, while the time penalty for a VA loan is two years. Fannie Mae and Freddie Mac, which own or guarantee about half of all mortgages, require the longest stretch: seven years after a foreclosure.
In some cases, the waiting periods for a foreclosure can be reduced.
Fannie Mae, for example, allows a three-year waiting period in the event the foreclosure was due to an extenuating circumstance. The company defines this as an event that was beyond the homeowner's control and resulted in a sudden reduction in income or catastrophic increase in financial obligations. Think job layoff, medical bills or divorce.
FHA may grant an exception to its waiting period in the event a wage-earner becomes seriously ill or dies. A divorce may qualify for an exception, but only in certain cases.
Short Sales
The roadblocks for having a short sale in your credit history can be less severe, and in some cases, waived altogether.
FHA requires borrowers who weren't paying their mortgage when they sold their house to wait three years before they can qualify for a home loan. That time penalty may be waived in certain cases, including long-term job loss.
There is no FHA time penalty for homeowners who made their house payments in the 12 months before their short sale.
The size of a down payment can also shorten the waiting period.
A down payment of 20 percent or more will cut Fannie Mae's time penalty on a borrower with a short sale down to two years from seven. Buyers who put down 10 percent can qualify after four years.
Credit scores
It's no longer just a waiting game for homeowners caught up in the earliest stages of the foreclosure crisis in 2007 and 2008.
There's still the impact a foreclosure or short sale has on one's credit score - still very much a factor in qualifying for a loan.
Like most blemishes, foreclosures and short sales will remain in your credit history for seven years.
As a general rule, the higher your credit score, the more it will drop as a result of a bad debt, said Barry Paperno, consumer affairs manager for myfico.com, the consumer website for FICO.
FICO credit scores range from 300 to 850. In simulations, a foreclosure sent a FICO score of about 720 down to as low as 570 and took about seven years to recover fully, assuming everything else being equal.
Still, there are steps one can take to burnish one's tarnished credit rating.
While in the foreclosure penalty box, make sure to pay all your bills on time.
Get more credit. This may sound counterintuitive after a foreclosure, but beefing up your track record of good credit accounts can help boost one's credit score. A car loan or a credit card will do. But if you get a credit card, pay it off every month.
Be patient. A foreclosure's drag on your credit score will decline over time.
Dispute any mistakes on your credit report, which can lower your score.
Don't close your oldest credit accounts. Your score gets a boost from older credit lines.
Scale back your lifestyle, and pocket the savings toward a future down payment.
So I hope you took notes and here's a few tips to add to the list:
1) Keep copies of the checks for any/all payments made in the last 2 years of time you had made payments on the loan (even if they were partial payments) and keep these in a safe spot;
2) If you bank online, print out and keep the monthly statements;
3) Make it a habit to keep all pages of your bank statements (even if it's a blank). When a statement given to a Lender says it's one of 8 pages, they want to see all 8 pages. Just keep these with your tax data after filing yearly and recycle when your purge your tax files.
4) Start the same habit with your paystubs. Down the line this will be crucial;
5) Introduce yourself to AnnualCreditReport.com. This is a free service to order copies of your credit report (you must pay if you want scores but why bother for a few years). You can order one from each of the three companies but if you get in the habit of ordering one every 4 months, you have a rotating means of checking your credit and making sure there are no unexpected reports; and if so, you'll have time to deal with it.
As always ... Keep the faith!!!
Next to filing for bankruptcy protection, nothing wrecks your chances of qualifying for a home loan like a foreclosure.
And if you got out from under an oppressive mortgage through a short sale — when the bank agrees to accept less than what the homeowner owes — lenders can look upon you just as unfavorably.
It's a reality that the former owners of the more than 4 million homes lost to foreclosure in the six years since the housing bubble burst will have to confront if they want to own again. But the passage of time makes all the difference.
That's because mortgage-lending guidelines that most banks follow prohibit them from making loans to people with foreclosure or a short sale in their credit history, often for years. Never mind the hit that one's credit score takes.
Still, some of the homeowners who were foreclosed upon when the market first started to skid are now looking to buy and getting loans.
“They're probably going to pay a little higher interest rate, but with rates so low, a higher interest rate of 4 percent is not a big deal,” said Rosa Herwick, a broker and owner of Century 21 JR Realty in Henderson, Nev.
So how likely are banks to approve your mortgage application if you have a real estate-related blemish on your record? And can you do anything to spring yourself from the mortgage penalty box?
It depends on several factors, but largely on whether you had a foreclosure or a short sale.
Foreclosure
Generally, borrowers who have a foreclosure in their credit history can expect to wait two to seven years before a lender will even accept their loan application.
The waiting periods stem from guidelines most banks must follow in order to be able to sell their home loans. That's because potential purchasers, such as Fannie Mae and Freddie Mac, each have a different set of guidelines for the loans they will buy and criteria for whom they deem a qualified borrower.
The fact is, a person's credit score, employment history and other factors that make up one's creditworthiness will take a back seat to these resale guidelines.
If a buyer with a past foreclosure is seeking a government-backed mortgage, the waiting period can vary before they can qualify.
Take the Federal Housing Administration, which insures roughly 30 percent of new loans. Under its guidelines, former homeowners must wait three years from the date of their foreclosure before they can qualify for backing by the agency.
Compare the U.S. Department of Agriculture's housing program, which requires three years, while the time penalty for a VA loan is two years. Fannie Mae and Freddie Mac, which own or guarantee about half of all mortgages, require the longest stretch: seven years after a foreclosure.
In some cases, the waiting periods for a foreclosure can be reduced.
Fannie Mae, for example, allows a three-year waiting period in the event the foreclosure was due to an extenuating circumstance. The company defines this as an event that was beyond the homeowner's control and resulted in a sudden reduction in income or catastrophic increase in financial obligations. Think job layoff, medical bills or divorce.
FHA may grant an exception to its waiting period in the event a wage-earner becomes seriously ill or dies. A divorce may qualify for an exception, but only in certain cases.
Short Sales
The roadblocks for having a short sale in your credit history can be less severe, and in some cases, waived altogether.
FHA requires borrowers who weren't paying their mortgage when they sold their house to wait three years before they can qualify for a home loan. That time penalty may be waived in certain cases, including long-term job loss.
There is no FHA time penalty for homeowners who made their house payments in the 12 months before their short sale.
The size of a down payment can also shorten the waiting period.
A down payment of 20 percent or more will cut Fannie Mae's time penalty on a borrower with a short sale down to two years from seven. Buyers who put down 10 percent can qualify after four years.
Credit scores
It's no longer just a waiting game for homeowners caught up in the earliest stages of the foreclosure crisis in 2007 and 2008.
There's still the impact a foreclosure or short sale has on one's credit score - still very much a factor in qualifying for a loan.
Like most blemishes, foreclosures and short sales will remain in your credit history for seven years.
As a general rule, the higher your credit score, the more it will drop as a result of a bad debt, said Barry Paperno, consumer affairs manager for myfico.com, the consumer website for FICO.
FICO credit scores range from 300 to 850. In simulations, a foreclosure sent a FICO score of about 720 down to as low as 570 and took about seven years to recover fully, assuming everything else being equal.
Still, there are steps one can take to burnish one's tarnished credit rating.
While in the foreclosure penalty box, make sure to pay all your bills on time.
Get more credit. This may sound counterintuitive after a foreclosure, but beefing up your track record of good credit accounts can help boost one's credit score. A car loan or a credit card will do. But if you get a credit card, pay it off every month.
Be patient. A foreclosure's drag on your credit score will decline over time.
Dispute any mistakes on your credit report, which can lower your score.
Don't close your oldest credit accounts. Your score gets a boost from older credit lines.
Scale back your lifestyle, and pocket the savings toward a future down payment.
So I hope you took notes and here's a few tips to add to the list:
1) Keep copies of the checks for any/all payments made in the last 2 years of time you had made payments on the loan (even if they were partial payments) and keep these in a safe spot;
2) If you bank online, print out and keep the monthly statements;
3) Make it a habit to keep all pages of your bank statements (even if it's a blank). When a statement given to a Lender says it's one of 8 pages, they want to see all 8 pages. Just keep these with your tax data after filing yearly and recycle when your purge your tax files.
4) Start the same habit with your paystubs. Down the line this will be crucial;
5) Introduce yourself to AnnualCreditReport.com. This is a free service to order copies of your credit report (you must pay if you want scores but why bother for a few years). You can order one from each of the three companies but if you get in the habit of ordering one every 4 months, you have a rotating means of checking your credit and making sure there are no unexpected reports; and if so, you'll have time to deal with it.
As always ... Keep the faith!!!
Are you stuck in your underwater home?
Your home has lost value but you are still making the payments. The problem is that you owe more than your home is worth and so you've made the decision to stay right where you are. Well, HEY!, you haven't lost anything until you sell so if you have made the decision to stay put - let's do it the right way - maximize your quality of life
In Staying Put: Remodel Your House to Get the Home You Want, architect Duo Dickinson gives new meaning to the term ‘housebound.’ He uses the term to refer to homeowners who have decided to stay put instead of moving up to a larger home, including those who made that decision because they are upside down on their mortgages: they owe more than the place is worth.
The premise of Dickinson’s book is that staying in even an underwater home can be a smart move - and it doesn’t have to involve making do with a home that no longer works for your needs. Blinging out an upside down home with every gadget and doodad known to man can constitute throwing good money after bad, but there are a handful of upgrades that might make sense for homeowners facing negative equity. For the most part, sensible upgrades to upside-down homes can all be described as things that either:
•make life in the place much more comfortable for the long term - alleviating the want or need to move
•boost the home’s sagging value or saleability for a relatively small investment, and/or
•begin saving the homeowners money - or even earn tax credits - immediately.
Here's five upgrades that might have upside for your lifestyle or bottom line, if you own an underwater home:
1. Cosmetics that boost curb appeal. When your home is mired in negative equity, chances are good that you might have been investing your dollars and cents into keeping your head above water and the property in sound functioning condition - not necessarily keeping the exterior at its most pristine. But if you are looking to boost your home’s value to hit an appraisal mark for refinancing, or even just trying to lure in a buyer to purchase the place as a short sale, primping your home’s exterior cosmetics can be a smart investment. Keep costs down by doing it yourself, or even hiring a reputable handyman to tackle small, but impactful tasks like:
•painting the shutters, eaves, doors and other trims - if you can paint the whole house, great - but if you can’t afford all that, painting the trims and accents can make a massive visual difference in the look and feel of your home, very inexpensively;
•adding fresh, new hardware like a mailbox, house numbers, and a front door or door knockers and kick plates; and
•landscaping - planting lush or fragrant flowers or trees, trimming up overgrown shrubs and even installing low maintenance ground cover can also transform the entire look of your home from the curb.
And while curb appeal is priority number one if you are trying to get your home sold, interior design projects of a similarly small scale can also create massive benefits for your emotions and comfort level for the buck if you’re planning to stay put for the long haul. It’s amazing what a basic paint job in your bedroom, opening (or ditching) your window coverings or installing lighting or shelves can do to make your family happier at home!
2. Economical expansion. If you crave more space and your home can be expanded within its existing footprint, consider an economical expansion - having a professional convert your garage or basement into a rental or mother-in-law type unit can be an especially good investment if you can house more family members or bring in some income within the new living space.
In a similar vein, consider adding a prefab unit in your large backyard or even building on additional square footage, if you can afford it and truly need the space. Before you do, though, make sure you get permits and check in with your local real estate pro to be sure that you’re not just overimproving the place vis-a-vis the neighborhood, digging your negative equity hole beyond your financial or emotional tolerance level or even an extended timeline you might have in mind for selling the place.
3. Greening it up. Upgrades that improve your home’s energy efficiency have inherent value in terms of scoring you points as a good citizen of the planet. But they can also improve your day-to-day living comfort - and decrease your utility bills. Buying solar panels can eliminate your electric bill entirely with an upfront investment; leasing the panels can cost you nothing upfront and keep your energy bills fixed for as long as 20 years!
And personally my favorite home improvement was a tankless water heater - they eliminate the need to pay to keep that big old tank of water hot, and they produce endless hot water - no matter how many showers you take. Endless hot water! (As a side benefit, if you happen to live in earthquake country like I do, you don’t have to worry about strapping the tank or checking to make sure it’s still secure after every tremor or aftershock.)
In many states, green home improvements like these and dual-paned windows, adding insulation or installing efficient heating and cooling appliances might qualify you for tax credits; check with a local tax pro to see what tax advantages you might earn by going green at home.
4. Combining quarters. A home improvement show would be nothing without someone pointing out how gloriously spacious the kitchen/dining room, master bedroom or even two smallest bedrooms could be if they could just (say it with me, folks): “knock out this wall.” If you’ve uttered those very words about your own home, consult with a contractor - many interior walls are relatively easy and inexpensive to remove, even if you might need to leave in and finish off a support beam if the wall does turn out to be load bearing.
I know it’s anathema to some agents to even think about combining two bedrooms into one; for resale purposes the rule of thumb is the more bedrooms, the better. But, here’s the deal:
(a) two teeny-tiny, unusable bedrooms are not better than one, in the eyes of most homebuyers, and
(b) most walls that are easily taken down can be equally easily put back up when it’s time to sell.
If you’ve decided to stay put in your underwater home for the next 10, 20 or even 30 years, there’s no reason resale considerations should stop you from taking down a wall that is preventing you from fully enjoying your home.
5. Built-ins that make things work. Built-in work and storage spaces in your office, garage, craft rooms, kitchen and even otherwise unusable nooks and crannies are uber-useful and can give you the feel of a highly customized luxury home without moving - and without spending much cash. (And window seats? Don't get me started - who doesn’t love a window seat?!) Similarly, functional furniture like loft beds, Murphy beds, pot racks, pantries and armoires can create a highly customized feel and convenient lifestyle, but you can move them around the house - or even take them with you whenever you do decide to move!
Investing to improve a home that is upside down should be done very carefully, and only once you have your personal endgame firmly in mind. The budget you set to spruce up a home you need to divest of via a short sell might be vastly different from the investment you’re willing to make to enlarge a home you plan to house your family in for the next 20 years. So be intentional: get clear on your finances and plan the future for your family and career before you start spending on home improvements in this market climate. At that point, you’ll be in a position to create a regret-free home improvement plan.
As always, Keep the faith!
In Staying Put: Remodel Your House to Get the Home You Want, architect Duo Dickinson gives new meaning to the term ‘housebound.’ He uses the term to refer to homeowners who have decided to stay put instead of moving up to a larger home, including those who made that decision because they are upside down on their mortgages: they owe more than the place is worth.
The premise of Dickinson’s book is that staying in even an underwater home can be a smart move - and it doesn’t have to involve making do with a home that no longer works for your needs. Blinging out an upside down home with every gadget and doodad known to man can constitute throwing good money after bad, but there are a handful of upgrades that might make sense for homeowners facing negative equity. For the most part, sensible upgrades to upside-down homes can all be described as things that either:
•make life in the place much more comfortable for the long term - alleviating the want or need to move
•boost the home’s sagging value or saleability for a relatively small investment, and/or
•begin saving the homeowners money - or even earn tax credits - immediately.
Here's five upgrades that might have upside for your lifestyle or bottom line, if you own an underwater home:
1. Cosmetics that boost curb appeal. When your home is mired in negative equity, chances are good that you might have been investing your dollars and cents into keeping your head above water and the property in sound functioning condition - not necessarily keeping the exterior at its most pristine. But if you are looking to boost your home’s value to hit an appraisal mark for refinancing, or even just trying to lure in a buyer to purchase the place as a short sale, primping your home’s exterior cosmetics can be a smart investment. Keep costs down by doing it yourself, or even hiring a reputable handyman to tackle small, but impactful tasks like:
•painting the shutters, eaves, doors and other trims - if you can paint the whole house, great - but if you can’t afford all that, painting the trims and accents can make a massive visual difference in the look and feel of your home, very inexpensively;
•adding fresh, new hardware like a mailbox, house numbers, and a front door or door knockers and kick plates; and
•landscaping - planting lush or fragrant flowers or trees, trimming up overgrown shrubs and even installing low maintenance ground cover can also transform the entire look of your home from the curb.
And while curb appeal is priority number one if you are trying to get your home sold, interior design projects of a similarly small scale can also create massive benefits for your emotions and comfort level for the buck if you’re planning to stay put for the long haul. It’s amazing what a basic paint job in your bedroom, opening (or ditching) your window coverings or installing lighting or shelves can do to make your family happier at home!
2. Economical expansion. If you crave more space and your home can be expanded within its existing footprint, consider an economical expansion - having a professional convert your garage or basement into a rental or mother-in-law type unit can be an especially good investment if you can house more family members or bring in some income within the new living space.
In a similar vein, consider adding a prefab unit in your large backyard or even building on additional square footage, if you can afford it and truly need the space. Before you do, though, make sure you get permits and check in with your local real estate pro to be sure that you’re not just overimproving the place vis-a-vis the neighborhood, digging your negative equity hole beyond your financial or emotional tolerance level or even an extended timeline you might have in mind for selling the place.
3. Greening it up. Upgrades that improve your home’s energy efficiency have inherent value in terms of scoring you points as a good citizen of the planet. But they can also improve your day-to-day living comfort - and decrease your utility bills. Buying solar panels can eliminate your electric bill entirely with an upfront investment; leasing the panels can cost you nothing upfront and keep your energy bills fixed for as long as 20 years!
And personally my favorite home improvement was a tankless water heater - they eliminate the need to pay to keep that big old tank of water hot, and they produce endless hot water - no matter how many showers you take. Endless hot water! (As a side benefit, if you happen to live in earthquake country like I do, you don’t have to worry about strapping the tank or checking to make sure it’s still secure after every tremor or aftershock.)
In many states, green home improvements like these and dual-paned windows, adding insulation or installing efficient heating and cooling appliances might qualify you for tax credits; check with a local tax pro to see what tax advantages you might earn by going green at home.
4. Combining quarters. A home improvement show would be nothing without someone pointing out how gloriously spacious the kitchen/dining room, master bedroom or even two smallest bedrooms could be if they could just (say it with me, folks): “knock out this wall.” If you’ve uttered those very words about your own home, consult with a contractor - many interior walls are relatively easy and inexpensive to remove, even if you might need to leave in and finish off a support beam if the wall does turn out to be load bearing.
I know it’s anathema to some agents to even think about combining two bedrooms into one; for resale purposes the rule of thumb is the more bedrooms, the better. But, here’s the deal:
(a) two teeny-tiny, unusable bedrooms are not better than one, in the eyes of most homebuyers, and
(b) most walls that are easily taken down can be equally easily put back up when it’s time to sell.
If you’ve decided to stay put in your underwater home for the next 10, 20 or even 30 years, there’s no reason resale considerations should stop you from taking down a wall that is preventing you from fully enjoying your home.
5. Built-ins that make things work. Built-in work and storage spaces in your office, garage, craft rooms, kitchen and even otherwise unusable nooks and crannies are uber-useful and can give you the feel of a highly customized luxury home without moving - and without spending much cash. (And window seats? Don't get me started - who doesn’t love a window seat?!) Similarly, functional furniture like loft beds, Murphy beds, pot racks, pantries and armoires can create a highly customized feel and convenient lifestyle, but you can move them around the house - or even take them with you whenever you do decide to move!
Investing to improve a home that is upside down should be done very carefully, and only once you have your personal endgame firmly in mind. The budget you set to spruce up a home you need to divest of via a short sell might be vastly different from the investment you’re willing to make to enlarge a home you plan to house your family in for the next 20 years. So be intentional: get clear on your finances and plan the future for your family and career before you start spending on home improvements in this market climate. At that point, you’ll be in a position to create a regret-free home improvement plan.
As always, Keep the faith!
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