The Short Sale Option

Short Sales offer the homeowner many more benefits than going through a Foreclosure.  In the case of a short sale, the benefits to the homeowner are:

• Only late payments on the mortgage show on a credit report and after the sale of the home, the mortgage will be reported as paid or negotiated.  This could lower a homeowner’s credit score by as little as 50 points if all other payments have been made.  The affect of a short sale can be as brief as 12 to 18 months.
• A Short Sale is not reported on a credit history.  There is no specific reporting item for ‘short sale.’  The loan is typically reported as ‘paid in full, settled.’
• A Short Sale on its own does not challenge most security clearances whereas a foreclosure does.
• A Short Sale is not reported on a credit report and is therefore does not present a challenge to employment.
• In some successful short sales it is possible to convince the lender to give up the right to pursue a deficiency judgment against the homeowner, (i.e., payment of the shortfall or the difference between what was owed and what the bank received.)
• Under the Mortgage Forgiveness Debt Relief Act of 2007, if a deficiency is forgiven or cancelled, the home is a principal residence, and it is worth less than $2 million, the tax on the deficiency will be forgiven.  This benefit applies to homes that are the subject of a Short Sale and a Foreclosure.

Click the links below for more details about The Mortgage Forgiveness Debt Relief Act of 2007

http://www.irs.gov/individuals/article/0,,id=179414,00.html

http://www.whitehouse.gov/news/releases/2007/12/20071220-6.html

• A homeowner who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed mortgage after only 2 yrs.

• An Investor who successfully negotiates and closes a short sale will be eligible for a Fannie Mae backed investment mortgage after only 2 years.

If you feel you are near foreclosure, please contact us at The Cool Team.  We can help you decide what your options are and explain what is in your best interest.

The Four “C’s” in the Loan Process

Having good credit and a steady job just does not seem to be good enough in today’s credit world when it comes to getting your home loan approved.  You need to make an impression.  Below are some great tips I would like to share with you.

Today’s lenders are a picky bunch when it comes to the loan approval.  Even well-qualified borrowers are expected to jump through some pretty high hoops to qualify for financing.

Have no fear. The tips below and suggestions can help you make the best possible impression on the lender of your choice.

Just as job hunters may wonder what top employers want to see on a resume, prospective borrowers may be curious about what lenders look for on a loan application.

The four C’s

The answer may be summed up with a mnemonic called “The four C’s,”

•    Capacity, which refers to the adequacy of the borrower’s income to cover the interest and principal due on the loan, plus property taxes and homeowners insurance.

•    Character, which refers to the borrower’s track record of paying debts, as evidenced by his or her credit history and credit score.

•    Capital, which refers to the borrower’s down payment (or equity) as a percentage of the current value of the home.

•    Collateral, which refers to the safety and soundness of the home and the value of the home as determined by an appraisal relative to the agreed-upon purchase price.

Today’s mortgage broker might use a quadrant with “income,” “credit,” “assets” and “property” in the four corners, but his point is the same as that of the four C’s:  What lenders like to see is strength and stability in all four areas.

Maybe your credit score has some dings or you need a stated-income loan.  Borrowers who are qualified but whose down payment will be less than 20% of the purchase price of the home must withstand a second level of scrutiny. That’s because mortgage insurers also have to approve such loans, and they have “completely different qualification ratios”. Borrowers in this situation should discuss their options with a loan officer who is familiar with lenders’ and insurers’ guidelines.

Have paperwork in order

Lenders rely not on the borrower’s say-so but on a pile of paperwork to verify and document the borrower’s financial position. At a minimum, most borrowers are required to submit the following:

•    One month of paycheck stubs.

•    Two years of W-2 forms.

•    Three months of bank account statements.

Additional paperwork also may be required:

•    If you’re self-employed or earn more than 25% of your income from commissions or bonuses, you’ll need to hand over two years of income tax returns.

•    If you’re divorced, the lender will want a copy of your settlement to ascertain how much alimony or child support you’re obligated to pay or are entitled to receive and the duration of those payments.

•    If you’ve filed for bankruptcy protection within the past seven years, you’ll need to show your bankruptcy papers.

•    If you’ve deferred repayment of student loans, you should provide your deferral agreement as well.

“If (borrowers) have student loans that are going to be deferred for at least 12 months, that may help them qualify, so they would want to bring the account numbers for those loans.  Student loans are counted as debt, but deferral of repayment may strengthen the borrower’s application.

Homebuyer – Tips for Negotiating

Of course, negotiating is a huge part of the homebuying process.  There are some principles that are universal, though.

You’re in a strong bargaining position if:

• You’re an all-cash buyer

• You’re already preapproved for a mortgage

• You don’t have a home that needs to be sold before you can buy

These circumstances give you a little more leeway in negotiating. However, even if you are in a strong position, in a “hot” market, you may want to make your offer more desirable by offering more than asking price. When the market is “soft,” homes tend to sell more slowly, creating a larger pool of homes from which to choose. On the other hand, when the market is “hot,” there may be a limited number of homes to visit and the demand for them may be high.

Overall, here are some suggestions:

• Enter into negotiations with the maximum amount you are willing to pay for the property firmly in mind.

• Keep in mind (and add to the contract) some terms you can live without – then you can make concessions without compromising the items that are important to you.

• Always have a few alternative homes in mind – knowing you have other options will help you stay objective during bargaining and may encourage the seller to be more reasonable.

• Try to ascertain what the seller wants and needs. If, for example, the seller’s new home is not ready by the closing date, you might consider allowing the seller to rent back the home for a short time, provided your schedule permits.

• Terms may be negotiated as well as price, and the changes can result in financial savings.

Garage Sale Organizational Tips

We find that many families use a change of residence as an opportunity to dispose of many outgrown and no-longer-wanted items. It beats taking the items with you and can even put several hundred dollars in your pocket toward buying furnishings for your new home.

As Realtors, we are expected to be wise in all matters relating to a change of residence. Even though garage sales are far from our primary field of expertise, allow us to pass on the best advice we have picked up over the years.

Planning

Allow plenty of time – three to four weeks – to prepare. Choose a date that will not conflict with holidays or other events that might lure prospective customers away. More people are likely to show up on weekends than weekdays. Your sale is likely to attract more customers if you join together with neighbors in a larger effort with more merchandise – some homeowner groups sponsor neighborhood sales that are proving popular.

What to Sell

Practical household goods, bicycles, children’s toys and clothes, sports equipment and garden tools are popular. Adult clothing has less appeal – price accordingly. All items should be clean, polished and in good repair.

Display

Merchandise your items attractively in neat, clean surroundings. Paper tablecloths offer a pretty setting for glass and ornamental items. Cluster things in categories. Place more desirable items toward the back so browsers can notice other merchandise on their way to the most popular items. Have a 25-cent miscellaneous table for young shoppers. Clothes should be sized accurately and hung on a temporary rack.

Logistics

Locate your appliance table near an outlet so customers may try before they buy. Set aside adequate parking and a place to load large items. Have plenty of bags and boxes on hand for packing and newspapers for wrapping glass items. Ideally, a place for trying on clothing should be provided.

Promotion

Place a classified ad in the local papers – include three or four of the more tantalizing items for sale, directions and other pertinent details (you may or may not want to include your phone number). Take advantage of free publicity provided by bulletin boards in grocery stores and other public places. Provide directional signs to your property using an indelible pen. If your house is listed for sale, have your Realtor® hold an open house on the same day, thus increasing traffic for both the house and the sale.

Pricing

Visit other sales to get an idea on how to price things. Remember that garage sale shoppers are looking for deals, so be prepared to bargain and lower your prices. Really valuable items such as antiques should not be sold at a garage sale; they are not likely to bring the desired price from bargain hunters. Nothing is too worthless to be valuable to someone, so have a giveaway box for old magazines and other assorted odds and ends.

Staging

Post a notice that all sales are final and payment must be in cash. Keep ample change in a cash box in a protected spot. Keep a record of sales, especially when there are several sellers. One recording method that is simple and efficient is to use small adhesive stickers to price items, then transfer the sticker to the name of the seller when the item is sold.

Fending Off Foreclosure

It is no secret that foreclosures have increased drastically this year as a result of the subprime lending disaster and a lot of people are wondering if they will be next. For many homeowners there may be options, if they know what to look for and where to look.

In the event that you find yourself struggling to make your mortgage payments, and you fear foreclosure may be in your future, the National Foundation for Credit Counseling (NFCC) has suggested a few possible alternatives. These options to fend off foreclosure include:

* Repayment Plan
* Reinstatement
* Forbearance
* Loan Modification

The Federal Trade Commission wants people to know that these alternatives may not work for everyone especially if you are already three or four mortgage payments behind.

For more information regarding the above alternatives visit the NFCC’s Homeowners Crisis Resource Center website. They can also assist you in locating a certified housing counselor to explore your options in an effort to fend off foreclosure.

Be Aware of the Dangers with Mold

As homeowners we should be aware of the existence and dangers of mold in our homes and how to address the issue before it gets out of control. A lot of times we are unaware that mold may be growing in the corners behind appliances after a water leak, or in the walls of our bathrooms without proper ventilation which is a “growing” concern if you are looking to sell your home.Realty Times Columnist, Phoebe Chongchua has written an informative article that explains the seriousness of mold in our homes and what to look for in a home that you may want to purchase. Read the following article to familiarize yourself with some of the more common signs.

Moving With Chidlren

Moving can be extremely stressful especially if you have children. It is important to be aware of the things that may be a concern to your children when making a move.

A few areas of concern for children when making a move may include:

• Preschool children tend to worry about being left behind or separated from their parents.
• Kids aged 6 to 12 can be concerned with how their daily routines will be affected.
• Teenagers are concerned primarily with fitting in and having their social life disrupted.

A way to ease these concerns may include:

• Communicating with your child about what the new house will be like.
• Take them on a visit of the new home and neighborhood (if possible)
• If you can, visit the school with your child and meet some of the teachers.

Involving your children in the move can help make the transition easier. Your kids can be a great help to you and the move if you involve them such things as:

• Packing some of their own special belongings, and decorate the box with stickers and markers.
• Make plans together on how to decorate their new room.

There is a lot to consider during a move and by involving your children you just may relieve the stress your children are feeling, reduce your own stress and be able to focus more on other aspects of your move!

Moving – Let’s Get Pre-qualified

How much home can you really afford? The first step in buying a home is to have a budget and figure out how much you can actually afford. Your agent or lender can help you with this in a couple of ways:

• Pre-qualifying process This process will give you a general “estimate” of what you will be able to afford.

• Pre-approval process This process will allow your lender to review your finances in more detail in order to determine the amount of money they agree to loan you for your home purchase.

Your lender will review your finances and focus on a few main areas such as:

• Gross monthly income
• Credit history
• Amount of outstanding debts
• Source and amount of money available for down payment and closing costs
• Interest rates, etc.

All these things put together will help your lender determine two important qualifying ratios.

1. Debt-to-Income Ratio Generally the amount of debt you pay each month should not exceed 36 percent of your gross monthly income
2. Housing Expense Ratio Most lenders will not approve your loan if the mortgage payment exceeds 28 to 33 percent of your gross monthly income

These are the first steps in determining how much you can afford when purchasing a new home. For more mortgage and finance information feel free to contact me at any time or visit my Finance Information page.

The Buyer’s Responsibilities

Your role during the escrow process should be an active one. Don’t wait for the seller to volunteer information – stay on top of it yourself and take reasonable care, along with me, your agent, to protect yourself.

For example, when you review the Transfer and Disclosure Statement, TDS, keep an eye out for questions answered “unknown” or left unanswered. Ask about them until you are satisfied with the answers.

Let’s talk about your specific concerns or plans for the property. Concerned about the open parcel behind the house? Ask about it!

You may also wish to investigate the following non-physical conditions, including:

• Governmental zoning, requirements and limitations
• Governmental permits, inspections or certificates
• Limitations, restrictions and requirements affecting use of the property
• Rent and occupancy control
• Schools
• Proximity and adequacy of law enforcement, crime statistics, proximity of registered sex offenders (see section on Megan’s Law) and other criminals
• Proximity to fire, police and other services
• Proximity to commercial, industry or agricultural activities
• Existing and proposed transportation, construction and development, which may affect noise, view or traffic, airport noise, or odor
• Wild and domestic animals, other nuisances, hazards or circumstances

For Further Protection – Home Warranties: Home warranties have become a more popular option on homes for sale. For protection you may wish to have a home warranty that either you or the seller pays for. (It’s negotiable.) Warranties range in price from $300 – $600 and, for a fixed rate, generally cover limited aspects including plumbing, electrical, pest control and a host of other related areas. If you have a problem, generally you’ll pay $35-$50 to have a professional come out inspect and fix problems that are covered. Warranty agents typically are on hand 24 hours a day, 7 days a week to take your calls in emergencies.

A Checklist for Showing Your Home

Fully preparing your home for sale can make considerable difference in the time it takes to sell it. You can help eliminate buyer objections before they arise by making necessary repairs and improvements, some of which are suggested below.
Outdoors
__ Spruce up gardens and lawn; trim shrubbery and replace dead plants.
__ Yard and patio should be neat; outdoor furniture should be clean and in good shape.
__ Clean or paint your front door – remember first impressions last longest!
__ Manicure your front yard, driveway and entry – you can’t sell what you can’t see.

Exterior
__ Check that door numbers, mailbox, and exterior lighting are all in good repair.
__ Touch up with fresh paint as needed.
__ Inspect chimney for cracks or earthquake damage.
__ Repair loose trim, drainpipes and fencing.
__ Clean stains; clean window screens.

Garage
__ Remove clutter; tidy up shelves.
__ Wash floor so it looks clean and spacious.

Living Areas
__ Apply fresh paint as needed…brighten your interiors with neutral-toned paint.
__ Clean draperies and carpets.
__ Replace burned out light bulbs.
__ Clean fireplace, remove smoke stains from wall and mantle.

Kitchen
__ Sinks, appliances and counter tops should sparkle without any clutter.
__ Wax the floor.
__ Clean oven, range and other appliances.
__ Clean tile and grout; replace if necessary.

Bathrooms
__ Clean mirrors, glass, chrome and porcelain surfaces.
__ Replace shower curtain if necessary.
__ Fix any faucet drips or leaks.
__ Clean tile, grout and caulking; replace if necessary.

Closets
__ Doors and drawers should open and close easily.
__ Remove clutter; tidy up shelves and racks.
__ Shoes and clothes should be neatly arranged.

Overall
__ Check the basics around the house. It takes just a minute to check all doors, windows and cabinets to make sure they don’t stick, squeak or are too loose.
__ Clean your furnace & water heater, so buyers know they are looking at a house that has been well maintained.