My New Blog

The real estate market took a beating and many people suffered severely but many buyers today still want to have the American Dream and own their own home.

The problem is mortgages are hard to get and people are underemployed, but there is a solution that's making housing a family affair.

USA Today reported that family mortgages are growing in popularity. The chief executive, Timothy Burke of National Family Mortgage, calls the family mortgage "an opportunity to create a win-win".

The idea is that in a time when parents of grown children are looking to earn greater interest on their investment money and simultaneously their grown children are looking to buy a house at a lower interest rate, an intrafamily loan could help both sides.

According to USA Today, more than 12 million in loans has been financed to help families through National Family Mortgage. Those intrafamily loans range from an $18,500 down payment to a refinancing for $1.17 million.

For many parents the stock market is a big risk. So the opportunity to invest in their child's mortgage is a creative solution for both parent and child. In some cases, loans are so difficult to get that even if buyers have 20% down, they can still be rejected. Additionally, some buyers are losing out to cash buyers.

The intrafamily loans are giving some buyers a competitive advantage by allowing them to make an all-cash offer, especially on homes like foreclosures where the market is competitive.

According to the National Association of Realtors (NAR), last year, 9% of first-time homebuyers who made a down payment had received a loan from either a friend or relative. Also in 2010, nearly 30%, of those surveyed for NAR's annual Profile of Home Buyers and Sellers, reported that they received a gift from a friend or relative.

If you're planning to use the intrafamily mortgage, be sure to meet with experts to help guide you through the process. As more parents help their grown kids get into housing, the American dream stays alive for them. NAR found, in the same study, that without the help, buying a home would be very difficult–nearly 36% of first-time homebuyers needed help with a downpayment.

Fueling the interest of parents' involvement in an intrafamily loan are a few powerful factors including: the desire to help family members, the incentive to receive a higher interest return, the increasingly affordable homes, and the concern for their children's economic future.

The intrafamily mortgage may be the next best solution to what has not usually been seen in America but is certainly more popular in other cultures, multi-generational housing.

For more information contact me for a referral to a specialist in that lending field at 714-595-5103

Tax Relief on Mortgage Debt Forgiveness Information

The window is closing rapidly on one of the most important tax-relief provisions enacted by Congress during the housing crisis to help financially strapped homeowners.

Although the 2007 law that allows taxpayers to exclude from income the amount of debt that is forgiven or canceled by their lenders doesn’t expire until Dec. 31, it’s likely to take every bit of the next  11 months for financially troubled homeowners to persuade their banks to either foreclose or allow their houses to be sold for less than they are worth.

Although owners who are struggling to hold on to their homes shouldn’t throw in the towel solely because of the pending tax bite, it is certainly something to consider.

Under the tax code, borrowed money need not be reported as income because you have an obligation to repay.  But if the lender subsequently cancels what you owe, the IRS requires that you report that debt as income because the duty to repay it no longer exists.

So, if you owe $250,000 and your lender forgives $50,000 of that debt in a $200,000 refinancing, that $50,000 is considered income.  If your combined federal and state marginal tax rate is 36%, you would owe $18,000 in taxes.

So when your lender agrees to a short sale, there is NO tax on the difference between the selling price and the amount you owe.  When you lender forecloses, there is NO tax on the canceled debt.  Even when you refinance at a lower loan balance, there is no tax on the difference between what you owed on the old loan and what you owe on the new one.

But unless Congress extends the law – and there is no indications lawmakers are even thinking about that – all residential mortgage debt relief that takes place on or after Jan. 1, 2013, will once again be considered taxable income.

Why worry about this nearly a year before the law changes?   Because the timelines on debt forgiveness decisions by lenders are absolutely horrendous.

There are many factors besides a tax break to consider when deciding whether to give up your house.  What will a foreclosure or short sale do to your all important credit score?  How long will you be precluded from buying another house?  Will the extra income push you into a higher tax bracket?

As always when it comes to such matters, you should consult a tax professional before making any decisions.

Here are a few of the other important rules that you and your tax person need to know:

         The debt relief law applies only to debt incurred to buy, build or improve a person residence.

         The law does not apply to vacation homes or investment properties.

         The maximum amount you can treat as indebtedness is $2 million or $1 million if you are married but filing separately. *For more information, see the IRS Publication 4681.

By Jody Davis / Re/Max Terra Sol

Buying a home is a challenging goal for most hopeful homeowners. But for those who have experienced a bankruptcy, foreclosure or short sale, the hurdles are even higher.

Still, it's not impossible to buy a home after an adverse financial event. In fact, people who have cleaned up their credit and are otherwise qualified to get a mortgage can buy a home as soon as they have outlasted a prescribed waiting period after the bankruptcy, foreclosure or short sale.

Wait a while

The waiting period can last one to seven years. The one-year requirement applies to buyers who completed a Chapter 13 bankruptcy, have a spotless subsequent credit history and want to get a new loan insured by the Federal Housing Administration, or FHA, or guaranteed by the U.S. Department of Veterans Affairs. The seven-year requirement applies to buyers who experienced a foreclosure and want to get a new conventional loan that can be sold to Fannie Mae or Freddie Mac. In between are a number of two-, three- and four-year timelines based on similar criteria and such other factors as whether the buyer's previous mortgage was current at the time of a short sale or the size of the buyer's new down payment as a percentage of the home's purchase price.

Generally speaking, the waiting periods after a bankruptcy tend to be more black and white while the waits after a foreclosure or short sale have more gray areas. In some cases, a waiting period can be waived or shortened if the buyer's bankruptcy, foreclosure or short sale was due to extenuating circumstances or a hardship beyond his or her control.

Technically, it is possible for a buyer whose prior loan wasn't in default at the time of a short sale to get a new FHA-insured loan with no waiting period at all but he adds that he's never encountered anyone in that situation.

Clean credit

Buyers must have very clean or perfect credit histories before they can buy homes after bankruptcy, foreclosure or short sale. A slip-up as small as one late credit card payment could disqualify a post-bankruptcy buyer from some loan programs, even if the waiting period has been completed."Bankruptcy is a serious word! "If you do it, it's a get-out-jail-free card. But once you get out of bankruptcy, you need to be flawless in your credit. Don't even drop a gum wrapper."Credit dings can be difficult to sort out for buyers who experienced a loan modification or short sale, in part because there’s "no consistency" in how lenders report those events to the credit bureaus. Buyers should review their credit reports and correct any errors or clarify the circumstances of adverse items.

Stable employment can be a plus as well. Some loan programs are more lenient than others. "If there was a gap," he says, "it needs to be explained."

Consult a Professional

Given these complexities, buyers are advised to consult a Realtor, loan officer or mortgage broker early on for advice that applies to their personal situation.

"They may think they're fine, but if they're not talking to a professional, their hopes can get dashed or crushed. "That's why you want to speak to someone as soon as you start dreaming it up in your head" that you want to buy a home after a bankruptcy, foreclosure or short sale.

For more information on how short sales, foreclosure and bankruptcy can affect you please contact Jody Davis / Realtor for information on short selling and foreclosures.  Contact your local attorney for all legal advice in regards to bankruptcy.

As the weather begins to turn warmer, many people are beginning to think about their summer plans. Some will fly away to their favorite vacation spot, but taking a vacation to a place you have to fly to can get expensive and can limit where you go and what you can do.

A good alternative can be to have a vacation home that's there for you whenever you want to go.

What Is a Second Home?
A second home is defined as a one-unit property that's located within a reasonable distance from your primary residence. It can be a home that you occupy for some portion of the year or by someone you allow to occupy it. However, to be a second home, it must not be rented or be part of a timeshare arrangement.

So, it might be the cottage you own on the lake a few hours away; it could be a home you let your son live in while he goes to college; or it could be a house you own that your friend and her children moved into because she lost her job. Those are just a few examples.

A growing number of families are buying vacation homes and it's a trend that's likely to continue. If your new vacation home is close enough to your permanent residence, every weekend could be an opportunity to go fishing on the river or skiing down the slopes of your favorite mountain.

Finding a Second Home
Finding a second home doesn't have to be hard. You just need to work with a reputable realtor-one that you can trust and who may come at the recommendation of your friends or family members. Since the Internet is becoming a highly valuable tool, you can also go online to search for a good realtor.

Financing a Second Home
The decision to buy a second home does depend on things like: how affordable the home is, the time it takes to travel to get there, and how likely it is to appreciate. But affordability doesn't have to be the most difficult factor. Lenders these days are offering several types of mortgages that make buying a second home very affordable. You could go with an interest-only mortgage where for a certain amount of time during the loan, you are only required to pay the interest; though, you could add as much principal to your payment as you wanted.

You could also go with a home equity loan. There are some lenders who offer home equity loans for up to $500,000. Or you could go with a jumbo loan if the purchase price of the home is more than $417,000. To get an idea of how much you can afford, try using a home affordability calculator. Then, check with your home loan expert about which financing option is right for you.

So if you have plans to buy a second home, it doesn't have to be difficult at all. Once you find a realtor that you can work with, you have several options to finance it. All it takes is some good research to find out which works best for you.

www.KeepYourHomeCalifornia.org

CalHFA Expands Eligibility of $2 Billion Effort to Assist Homeowners Struggling to Remain in Homes

Keep Your Home California Program Criteria Expanded to Allow More Homeowners to Qualify

SACRAMENTO – The California Housing Finance Agency today announced expanded eligibility criteria for several of the Keep Your Home California programs, making them available to a larger number of families at risk of losing their home.

The federally funded program provides assistance to low and moderate income California homeowners who are struggling to pay their mortgages. Keep Your Home California is part of a broad effort to help families avoid foreclosures, while stabilizing neighborhoods and communities.

Under the U.S. Treasury-approved program changes, California homeowners who,through refinancing or home equity lines of credit accessed the equity in their homes, could now be eligible to receive assistance for the following programs:

Unemployment Mortgage Assistance, Mortgage Reinstatement Assistance and Transition Assistance.

These same programs have also been expanded to include mortgages that were originated after January 1, 2009. (Homeowners who were previously disqualified for one of these reasons are being contacted and offered an opportunity to reapply. Those homeowners are also welcome to contact the Keep Your Home California call center at 888.954.5337.)

“California homeowners have welcomed the assistance provided by Keep Your Home California,” said Steven Spears, Executive Director of CalHFA. “In the two short months since the launch of these programs, we have collected information that has helped us identify areas of improvement to make the programs more effective, particularly given the continued high level of unemployment in California.“

Keep Your Home California was implemented statewide in early February to help fight the ongoing foreclosure crisis in California. The programs are federally funded as part of the U.S. Treasury Department’s Hardest Hit Fund, and are aimed at helping low and moderate income homeowners struggling to pay their mortgages amid the worst real estate crisis in decades.

How to prepare for an upcoming home purchase.

I have a lot of people asking me how to best prepare for a home purchase in the next year or two.

Here are a few tips. I'm more than happy to answer any additional questions anyone considering a home purchase in the next 2 years may have.

How much should you save for a down payment?

If you CAN, try and save 20% of the purchase price as a down payment. Here's why: Mortgage Insurance. Mortgage insurance is getting expensive and can equal hundreds of dollars a month on your mortgage payment. None of which goes toward the principle balance of your loan. If you can save a 20% down payment, you should be able to avoid mortgage insurance altogether. This will significantly lower your monthly payment and/or allow you to qualify for more home. Just remember, if you bump up the cost of the home, you will need to bump up your down payment accordingly. Your payment goes down because you don't have to pay mortgage insurance, but also because you are financing less.

To some people, 20% would be out of reach in the next year or two, but they would still prefer to buy rather than rent. It can be done. If you CANNOT save 20% of the purchase price as a down payment, shoot for 5-10%. The minimum amount required for mainstream financing is 3.5%, but you will also have some additional expenses beyond the down payment. These expenses are called "closing costs" and can include such things as loan fees, appraisal, pre-paid property taxes and homeowner's insurance, title insurance, etc. If your down payment is less than 20%, you will likely have mortgage insurance, either up-front, monthly, or both.

My recommendation for a down payment: 5-10% minimum, try for 20% or more if possible.

What should you do before actually starting to house hunt?

1. Save, save, save that down payment.
2. Keep paying any bills and/or credit on time. This includes car loans, student loans, credit cards, even cell phone bills. With the changes going on in the financing industry, keeping your credit score as high as possible will allow you to qualify for the best interest rate available and will make it possible for you to qualify for financing that those with poorer credit cannot qualify for.
3. Determine whether buying or renting makes the most sense. Start to get a feel for what home values are. What can you buy for x$ per month? What can you rent for x$ per month? You should be able to get a ballpark idea of home values by browsing the local MLS site online. If you know you will not be in the area for at least a few years, continuing to rent and to save for a future purchase may make the most sense. If you are ready to set roots and make the community your home for a while (5-10 years+), buying a home can have its advantages over renting.

A few more things when you start to look:

Don't contact listing agents. They are not the Buyer's "trusted advisor". They are salespeople. Their job is to sell you the homes they have listed. Some might dispute that with you privately, but I'd like to hear them say as much in front of the Seller who hired them to sell their home. Selling those homes is why the Sellers have hired them. Since Sellers usually have professional representation, I believe a Buyer should also, to level the playing field and possibly even to give them an advantage in negotiations.

An Exclusive Buyer's Agent can give you information on market trends, home values, help you with loan shopping, etc. Their job isn't to "sell" you any particular home, but to make sure you are protected and aware of all your options as you try and buy the best home you can at a price and terms most favorable to you, the Buyer, NOT the Seller. Before you do anything else, try and find a reputable Exclusive Buyer's Agent who you can trust to work in your best interest and guide you through the home buying process.

When do we start getting serious?

The time to start getting serious is when you are about 90 days from wanting to be in your new home. This gives you time to go physically through a fair number of available properties, negotiate an agreeable contract on a home and allow for the escrow process to take place where you finish all your financing arrangements, do your home inspections and other professional evaluations of the property, have an appraisal done on the home, etc. etc. You will want to have inspections and evaluations done as early as possible in the process in case you need to renegotiate the agreement based on home conditions or in case you need to move on and find another property.

There is nothing wrong with doing some preliminary research prior to the 90 day mark. But when you start to get close, that is when you want to engage professionals to help you with your searching, financing and other preparations.

If you have any additional questions on this topic, please don't hesitate to call text or email me.

Best of luck as you prepare for homeownership!

• Do you have excellent credit?
• Are you looking to purchase a home within 90 days?
• Are you making a substantial down payment (5% of the purchase price or more) or paying cash for your next home?

If so, don't buy a home without an agent on YOUR side of the transaction!  Call Jody Davis for a consultation @ 714-910-3161

O.C. property owners are raising the prices they want for their properties as the spring selling season begins, according to HousingTracker.net.

That’s interesting because what’s selling seems to be of the cheaper variety. Note that DataQuick’s Orange County latest homebuying report — for the 22 business days ending March 7 – saw the median selling price for all residences off 1.2% vs. a year ago vs. a year ago — and that modest discounting meant sales closed were off 11.5% vs. a year ago.

So what can we learn about Orange County sellers’ current thinking from HousingTracker, that watches trends in asking prices from brokers’ MLS system of homes for sale. In addition, HousingTracker breaks down its data into a pair of neat markers — the 25th and 7th percentiles that let us see how the market’s upper crust and more modest abodes are faring.

From the March report we see …

At the 25th percentile — the median of the lower half of the price spectrum of local homes for sale…

• Selling price was $299,000 – that is up 1.06% vs. the previous month. This is the 2nd consecutive month-to-month gain in pricing at the lower end.
• Yes, the latest 25th percentile price is down 5.6% vs. a year ago. This is the 4th consecutive year-over-year cut in asking prices for these more “affordable” homes.
• Over two years, there’s been an 6.6% increase change in prices set by sellers of these more affordable local homes.

At the 75th percentile — the median of the upper half of the price spectrum of local homes for sale …

• Selling price was $648,447 – that is up 1.15% vs. the previous month and down 11.9% vs. a year ago.
• This is the first gain since June and the 12th consecutive year-over-year cut in asking prices for these more “affordable” homes.
• Over two years, prices asked are down 11.8% on homes in this slice of upper-crust Orange County homes.

Also …

• The gap between these two price points was 117% — flat vs. the previous month nut below 132% a year earlier. The gap peaked at 167% in June and July 2009.
• The overall Orange County median listing price, by this math, was $419,975 – that is 0.2% vs. the previous month and down 6.9% vs. a year ago. Over two years, there’s been an 1.8% drop.
• Supply of Orange County homes for sale in March averaged 13,990 – 16.7% increase vs. a year ago and 0.9% jump vs. same month two years back.

Interest rates on mortgages in March hold steady below 5%: Freddie Mac

Freddie Mac said.

The average 30-year, fixed-mortgage rate increased just 1 basis point to 4.88%, according to Freddie Mac's Primary Mortgage Market Survey. That's up from a rate of 4.95% this time last year. Just one month ago, rates were 5.05% — the only instance in which rates broke 5% this year.

Rates on 15-year FRMs held steady at 4.15% compared to one week prior. The average origination point for Interest rates on mortgages held steady across all product types during the week ending March 10, this type of loan is currently 0.7. The rate for a 15-year FRM was 4.32% one year ago.

According to Freddie Mac, five-year, Treasury-indexed hybrid adjustable-rate mortgages increased slightly to 3.73% from 3.72% one week ago, while one-year, Treasury-indexed ARMs averaged to 3.21%. During the same week in 2010, the rates for these ARMs were 4.05% and 4.22%, respectively.

Freddie Mac Chief Economist Frank Nothaft said positive macroeconomic factors including unemployment are steadying mortgage rates.

"Mortgage rates held steady amid a strong employment report," Nothaft said. " The private sector added 222,000 jobs in February, the most since March 2006 while the unemployment rate fell to 8.9%, the lowest share since April 2009."

The Bankrate survey of large thrifts showed the same trend in mortgage rates; however, rates remain above Freddie Mac's. The rate for a 30-year FRM increased one basis point to 5.04%, the rate for 15-year FRMs rose slightly to 4.32%, and the rate for a 5-year ARM increased to 3.88%.

Forecast: O.C. Home Prices up 2.2% in Year

Orange County home prices will rise 2.2% in the year ended September 2011, according to the latest forecast from housing tracker Veros from Santa Ana.

Eric Fox, Veros’ economic modeling VP, says “affordability is the driver” that will keep local housing prices up. Previously, Veros’ forecast that home price will be up 1.8% in the year ending June 2011.

To Fox, local home affordability – a mix of depressed values and cheap mortgage rates — will largely offset the area’s weak job market. Fox also think rent-seeking investors will play a big role in supporting local home prices, as these cash-rich buyers won’t have the tall hurdles — overall angst or loan qualification challenges — that currently chill some buyers seeking their own shelter.

Nationwide, the strongest major markets by Veros’ forecasting math in the year ending September 2101 will be …

1. Houston, +3.8%
2. Dallas-Fort Worth. +2.7%
3. Amarillo, Tex., +2.7%
4. Anchorage, +2.7%
5. Davenport, Iowa, +2.7%

Fox says in the report: “Texas is looking strong, with four of the top ten markets in the appreciation forecast … California markets are less robust than in previous quarterly updates, but remain steady.”

The weakest in Veros’ forecast for the 12 months anding September 2011?

1. Port St. Lucie, Fla., -7.2%
2. Reno, -7.0%
3. Orlando, Fla. -6.3%
4. Las Vegas, -6.1%
5. Deltona, Fla. -6.0%

Fox offer a glimmer of hope for these markets, saying “Reduced depreciation rates are better news for Florida and Nevada.”

Overall, Fox concludes: “There are tangible indications that things are getting better as time moves on.”

For more information on the O.C. home market call Jody Davis @ Star Harbour Homes at 714-910-3161.