Fed's Home Loan For Fixer Uppers - FHA 203(k)

Many home buyers have heard of the FHA loan program; however, most are not aware of a secondary loan specificially designed for all home buyers who want to purchase "fixers" and need a loan for the purchase and the rehabilitation. This loan, known as HUD's FHA 203(k) is a great program and one that buyers who aren't afraid of taking on a fixer should seriously consider.

Here is a summary of the program:

- FHA 203(k) is a program that provides loans for the purchase and renovation of fixer properties.

- The program allows for downpayments of as low as 3.5%.

- "Fixers" can range from simply dated to uninhabitable.

- Eligible properties can be between one and four units.

- Can be used to convert single family homes to two-, three , or four units if legal.

- Can apply to demolished homes provided some of foundation remains.

Here's the limitations:

-Investors can't utilize this program.

-Property will need to appraise under market value before the repairs and at market after the repairs.

-"Luxury" upgrades aren't covered but many modernizations like roofs, heating, paint, flooring are considered completely acceptable.

-Buyers must use HUD approved appraiser, lender, and repair contractors.

-Property must be in FHA approved project if property is a condo or has an HOA.

-Interest rates typically run 1% higher than conventional loans and have a little higher closing cost.

Here is our thoughts on who this will benefit:

Overall, the FHA 203(k) program is an amazing program and one that can offer consumers a chance to build equity in a home, beautify a neighborhood, get in with a low downpayment, and obtain a very cheap rehabilitation loan for the repairs. There are many guidelines that buyers will need to be familiar with if they would like to utilize this program. Still, the rules are fairly clear and easy to follow and we think this loan program is just another great gadget in the home buyers toolbelt.

 

What's the most important resources in finding a home? Survey Results

Flipped through some customer surveys from a popular new home builder and found something interesting. A question asked "What do you think were the most important resources were in finding a new home?" The two most popular answers from clients were The Internet and a Realtor. The Internet actually came in first but we're happy coming in 2nd....for now :)

I guess it's really not a huge surprise, the Internet is sort of...well.. AMAZING. Still, I'm glad to see that the public still values a good buyers agent and while we may not be seen as quite "amazing" as the Internet (at least from this survey) there is no doubt that we are still valued. THANK YOU PUBLIC! We try! ;)

Sure this is by no means empirical research and there are a billion other questions that come to mind. Like do they see the one as a replacement of the other, do they prefer them working in tandem, was the survey given before or after negotiations, what kind of experience did they have have with an agent and so on. The point is that on a quick "whatever springs to your mind first" survey the Internet and Realtors are first.

This begs two questions:

1) If you're a Realtor, and you don't have a web presence, what exactly are you waiting for? Your potential clients would really appreciate it!
2) If you are trying to shop for homes strictly online without the help of any professional, maybe it is time to listen to the folks who've already bought something!

As for us, these results just motivate us to keep pushing forward with the things we preach. Give the clients the tools they want (online) and provide the human touch that fills the blanks those tools miss.

Maybe it's just a HUGE coincidence but reading survey likes this makes it a lot easier forking over the checks for the upgrades to our website. By the way, anybody that wants to beta test the new version of our home search just let me know and I'll send you a copy. Have a great week!

-Todd

P.S. We just made a Fan Page over on Facebook, If you like us or what you read give us the thumbs up :)

California Says: No More State Taxes on Forgiven Debt!

As the market shows, many homes are being sold as either short sale or foreclosure properties, and as of yesterday California passed a law in which troubled homeowners don’t have to pay California state income taxes on debt that was forgiven in a short sale, foreclosure, or loan modification.

What is it?

The new California exemption is for indebtedness up to $800,000 and forgiven debt up to $500,000.

For debt forgiven on a loan secured by a “qualified principal residence,” (debt in acquiring, constructing, or substantially improving a residence) borrowers will be exempt from both federal and state income tax consequences.

Who does it Cover?

Debt forgiven in a short sale, foreclosure, or loan modification discharged from 2009 to 2012. For those homeowners who already filled their 2009 taxes, there is a exemption Form 540X amendment that can still be mailed in.

It includes first and second trusts deeds.

The Fine Print:

There are many exemptions under which homeowners cannot qualify for these tax breaks, including:

- Second homeowners or rental property investors
- Bankrupt homeowners
- Insolvent taxpayers (but may still be exempt under other provisions)

For more information regarding the above information and addition exemptions, visit http://www.ftb.ca.gov/aboutFTB/newsroom/Mortgage_Debt_Relief_Law.shtml or http://www.irs.gov/individuals/article/0,,id=179414,00.html.

*This is our paraphrasing of a recent email from our California Association of Realtors.

New Homebuyer Tax Credit For Californians

Assembly Bill 183, the Homebuyer Tax Credit legislation has officially been signed into law! AB 183 provides $200 million in tax credits, half of which is allocated toward first time buyers purchasing existing homes and the other half for first time buyers purchasing new or never occupied homes.


Here's the important dates:

One must purchases a home on and after May 1, 2010, and on or before Dec. 31, 2010
or
One must purchase a home on and after Dec. 31, 2010, and before Aug. 1, 2011, if under contract before Dec. 31, 2010.


How much is the credit?

The credit is the lesser of 5 percent of the purchase price or $10,000, in equal installments over three consecutive years.

Catches?

Purchasers must live in the home for at least two years or pay back the credit!

There's never been more incentive than now as it is currently possible for buyers to get a total of $18,000 in tax credits if they get into escrow by the end of the month! We'd love to help you make this happen.

Vital News for FHA Buyers - 3/5/10

We knew this was coming but it's becoming a reality in the very near future. Buyers need to seriously consider these new changes and how they could make delaying a home purchase in 2010 even more expensive.

On the 5th of April, mortgage insurance for FHA loans will increase by half a percent.

Mortgage insurance is financed in the loan so it isn't a huge increase but it will be felt at closing and during the 30 years worth of payments. If you do not want to have to pay for this increase in mortgage insurance, you will need to be under contract before the 5th of April 2010.

We think the change with even bigger implications will happen in a few months when maximum seller credits will be reduced from 6% of the purchase price down to only 3%. For a buyer purchasing a $400,000 house that could be a potential credit reduction from $24,000 down to $12,000. While our area isn't seeing many if any, buyer credits in the 6% range, some of the harder hit areas of the country will find this to be drastic.

Overall our current market for entry level homes is still very strong. Buyers have yet to see the increased inventory that many have hoped for and interest rates have remained low. FHA buyers can expect that the purchasing of homes in the nicer areas of Orange County will be difficult since sellers are still showing a strong favoritism for conventional or all cash buyers. However, FHA buyers who don't have to have the very best deal in the very best neighborhood or the very worst fixer in the very best neighborhood are finding that these low downpayment loans to be a true reality. Bottomline, if your going FHA you probably will have to compromise. If you can't compromise, save more money for a conventional downpayment.

The New 2010 Home Purchase Contract

They are at it AGAIN! Those California Assoc. of Realtors (CAR) Lawyers are tireless!

The contract to make an offer to purchase a home just went through another round of modifications. We can't believe it but they managed to add stuff without actually making the contract any longer....HURRAY!

Actually, we kind of like some of these changes and feel that they really help to clarify some of the terms of the contract and will better keep unethical folks from being able to offer on a property under the false pretenses of one type of financing and then dubiously switch to a less desirable (from sellers point of view) type later.

We think this may have a profound effect on some earnest money deposits in the future. Hopefully it is a deterrent but only time will tell. To read the new RPA in its entirety click on the picture-------->>>


or go here:

Closing Escrow - The Home is Yours!

The final step of the CA buying process is called closing. Closing is actually short for "closing escrow"and is the time that the escrow company will make sure all the paperwork has been signed, all the money has been collected, and we are ready to transfer ownership of the property.

Assuming your loan has been funded, all parties will be notified we move to recording of the deed and mortage paperwork. If this happens early in the day, some counties will let you record same day. Usually though, the deed and mortgage documents will be recorded next business day.

Escrow is officially closed when escrow recieves confirmation that the deed has recorded and the seller has recieved all proceeds from sale. At this point, the house is yours!

Depending on how your purchase agreement is structured, it is possible to move in on the day escrow is closed, however, it is more common to move in 2-3 days after. The reason is to give the seller time to completely remove everything from the residence. This can be frustrating to some buyers who are anxious to move into their new home. They just need to understand that the many sellers have moved out of a house prior to closing only to have the buyer cancel the contract. This can cause way more problems than having the buyer wait an extra day or three to move in.

Either way, if one is extremely worried about a seller who might not move out, they can always ask for the sale proceeds to be witheld in escrow until the seller has vacated the residence.

Once you get the go ahead that the property is ready for you, it is time to move into your new home, Congratulations!

Buyer's Final Walk Through

One of the last steps in buying a home in CA is what is known as the final walk through. This happens several days before you receive the keys to the property and it is intended to give you a chance to make sure the home is in the same condition as when you last saw it.

This is not a “discovery process” where we will investigate the house for problems, but instead will a time to confirm that the property is in the same condition as before. Major things we look for during a final walkthrough are missing light fixtures, damaged walls or doors, and missing appliances that were supposed to come with the house etc.

If damages are found during the final walk through, your real estate agent will take note, and contact escrow and tell them to stop until the problem has been remedied. The final walk through is not a point of renegotiation, it is really too late in the process for that. We just want to make sure you are not rushed into the purchase of a home where the seller has not performed their contractual obligations.

The final walk through is not mandatory, but for your safety, we recommend it. At the completion, you will be asked to sign a form stating that the entire property is in relatively the same condition as it was before.

Insurance For Your New CA Home

In addition to the other details in escrow, you will also need to check into homeowners insurance (also known as fire insurance). Many lenders will require an insurance policy to be in place prior to funding your loan so the first thing you need to do is ask your lender if you need it. Homeowners insurance is not always necessary, but your lender might require it, so it is important to be asking these questions early. We'd say no later than the first week or two of escrow. If your lender does not require it, we recommend getting a policy anyway after escrow is closed.

It is a good idea to talk to your current insurance providers (car, life, etc.) to discuss insurance policies for your home. If your current provider does not carry homeowners insurance there are many insurance providers that have a policy right for you. Good places to start are State Farm, Allstate, Farmers, etc. Some providers need to send a representative out to the property to determine whether it will qualify. If sending a rep is required, have them contact your real estate agent to schedule an appointment to see the property.

Now that you have got insurance covered, you are redy to move on.

Entry Level Home Sales - The Hottest Selling Market in Orange County CA (part 2)

By now you've read the market update in part 1 so we'd like to change it up again and profile a second buyer. Same exact criteria, only they have a maximum budget of $300,000 for the same area. This is a very typical buyer today and one that we run across everyday. Often times, they will be looking at getting an FHA loan which will further reduce the available inventory open to them. When we run this buyers criteria (not counting FHA limitations) according to the following criteria:

3+ Bed
2+ Baths
1000+ sqft living space
5,000 sqft lot
2+ car garage
max price $300,000


here is what we get:


(16) Anaheim
(3) Buena Park
(2) Fullerton
(2) Garden Grove
(1) La Habra
(1) Orange
(25) Santa Ana
'(1) Stanton
(1) Westminster


That's right, only 54 homes in all of Orange County that fit this!!!!!

Now if you start factoring in area, neighborhood, home condition, floorplan, and loan type it becomes quite obvious why MOST Orange County home buyers are frustrated with the process.

Still Not Convinced?

Here's another angle that really helps to put it in perspective. Right now, in most of these cities we are working with more buyers than there are homes for sale that fit the criteria!! That's right, just us alone! Now take into account all the other agents and the buyers they represent and the picture starts to become crystal clear as to why we are having bidding wars in the middle of a recession!

2 Possible Solutions For First Time Buyers

Ok, we are not trying to be negative here, we want to work towards a solution. Here is what needs to happen. Buyers with similar criteria need to loosen them by dropping city/bed/bath/sq ft/etc requirements or put the home search on hold. They may never get a house that fits their criteria and their current price threshold but this doesn't mean they'll never own a house.

In the meantime, most of them need to be saving some money for a downpayment (hopefully 20%+) to reduce the potential mortgage payment and increase their price threshold. If the market happens to drop later, we'll, they'll be in an even better position! Either way, they're working towards a position of increased buying power by having more downpayment in the current maket, or working their way up into a less competitive price point with more bang-for-your-buck options available.

The tough part of this is that they'll have to come to terms with not owning a home in the near future. Again, many others will still feel it is their time to buy and for them it will take the simple, but often painful, process of reassessing wants vs. needs and ultimately coming to some sort of compromise.

If you want to reasses your wants and needs, you can search through the homes for sale in Orange County to see if there are any new areas that you may be able to consider.

Entry Level Home Sales - The Hottest Selling Market in Orange County CA (part1)

Many homebuyers are under the impression that the current down market is just begging them to be in it. In many areas and price points this is truly the case; however, it is currently not the case in Orange County, CA at the entry-level single family home price point. The main reason.......Inventory (or rather a lack thereof). Here's what we mean:

Going off our most popular search criteria given by our clients in the last 6 months to a year, we profiled the following hypothetical buyer looking for a single family house with:

3+ Bedrooms
2+ Bathrooms
1,000+ sqft of living space
5,000+ sqft lot
2+ car garage
up to $400,000 max

Here's the Results across ALL of Orange County

# of homes fitting criteria in

(1) Anaheim Hills
(80) Anaheim
(13) Buena Park
(2) Brea
(2) Costa Mesa
(14) Fullerton
(28) Garden Grove
(1) Lake Forrest
(10) La Habra
(7) Orange
(6) Placentia
(84) Santa Ana
(10) Stanton

For a Grand Total of Only 262 Homes in the ENTIRE COUNTY!!!

Of this, there are only 90 or so homes meeting the criteria that are in Orange County and not in Anaheim or Santa Ana!!!

These numbers are rather shocking and the biggest reason we have seen the Orange County CA foreclosure real estate market get scorching hot.

Update to Housing Stimulus - Tax Credit Extended and Deepened!

It happened!!! Much of this and last week was a buzz about whether or not the previous housing stimulus package, most notably the $8,000 tax credit, would really disappear at the end of this month. Well, it hasn't! The new tax credit changes have extended the credit until April 30, 2010. This means you must have a home under contract by this time and it must close before July 1, 2010 or the credit disappears.

In addition to this tax credit aimed at first time buyers, lawmakers have extended a second credit to "move up" buyers, those moving from one home to another, up to an amount of $6,500.

Finally, the income thresholds for the first time buyer tax credit have been increased from $75,000 (individually) or $150,000 (as a couple) to $125,000 and $225,000 respectively.

The chart off to the right covers all the details and eligibility requirements of the program. Click on it for the large sized version.

It's really nice to see some relief to the multitude of home buyers out there frantically trying to close in the next 20 days. Attn: home buyers, ThIS IS YOUR BREAK, procrastination time is officially over. :)

Essential Negotiation Tips For Orange County Home Buyers!

Whether you're a buyer or a seller, you want to succeed in the realty marketplace. That's natural and reasonable, but what are the steps you need to take to triumph? Negotiation is a complex matter and all transactions are unique. Both sides--buyer and seller--want to feel that the outcome favors them, or at least represents a fair balance of interests. In the usual case, there is a bit of bluff, some give-and-take and neither party gets everything they want.

Here is a sample of a single part within our 10 part Home Buying Hints Webinar that we're giving away for FREE (a $12 value) to the first 100 people. Be sure you don't miss out on the rest of this hint, along with all 9 other hints by submitting the request below.

-------------------------------------------------------------------------------------------------

Hint #7 - Five Keys to Successful Negotiation So how do you develop a strong bargaining position, one that will help you get the most from a transaction? Experience shows there are five basic keys that will determine who wins at the negotiating table.

1. What Does The Market Say?

At various times, we're in a "buyers" market, a "sellers" market or a market where supply and demand are roughly equal. If possible, you want to be in the market at a time when it favors your position as a buyer or seller. Because all properties are unique, it is possible to buck general trends and have more leverage than the marketplace would seem to allow. For instance, if you have a property in a desirable neighborhood with few sales, you may be able to get a better deal than elsewhere. Or, if you're a buyer who can quickly close, that might be an important negotiating chip when dealing with an owner who just got a new job 500 miles away.


2. Who Has Leverage?

If you're on the front page of the local paper because your business went bust--and the buyer knows it--you have less clout in the bargaining process. Alternatively, if you're among six buyers clamoring for that one special property, forget about dictating an agreement--the owner can sit back and pick the offer which represents the highest price and best terms.............cont'd

-------------------------------------------------------------------------------------------------

Home Buying Hints FREE Report Request (name & valid email required)

---

Name:

Email:



Yes, I know a good value when I see it, by checking the box below and clicking submit, I'd like to be emailed my FREE copy of the Home Buying Hints Webinar!

---

Home Buying Hints Webinar

First-time Buyer's Guide to Understanding the Federal Income Tax Credit

Are you afraid to buy a home now worrying that you might not be able to afford it because of the crash in our economy? No need to worry! The IRS new stimulus plan might help. This policy, effective for purchases on or after January 1, 2009 and before December 1, 2009 has become a hot topic.

Let us make it simple for you...It is a great time to buy a home now! Not only are interest rates lower than 5%, there is also an offer of tax credits. $8,000 is the maximum amount a homeowner can get for credit, no matter how much the purchased home may be. We know that last summer, the refundable credit required a repayment. But the new stimulus plan promises nothing but a refund. There is no repayment by the homebuyer whatsoever. It is just pure heavenly income tax credit.

And who may be qualified for this income tax credit?

• Anyone who purchases a single-family residence, as long as it is the homebuyer's principal residence. This includes condominiums, townhouses, or a co-op.
• First-time homebuyers. Meaning, those who have not owned a home in the 3 years before purchasing an eligible property.
• A homebuyer who utilizes revenue bond financing.
• For a full refund in tax credits, the homebuyer may have a total annual taxable income of no more than $75,000 ($150,000 on a joint return).
• For a reduced tax credit, the homebuyer may have a total adjusted income up to $95,000 ($170,000 on a joint return) or those who qualify as a first-time homebuyer. Also for the first-time homebuyers, if the $8,000 is greater than the tax you owe, then you will get a refund check for the difference.
• A home buyer meeting the basic requirements who purchase before December 1, 2009
  

Obviously, there are many homebuyers who will benefit from these tax advantages when buying real estate in 2009. We advise prospective home buyers to talk with their tax professional first and then see us about finding a home before the deadline. In fact, this new home buying incentive may already be taking effect. According to the California Association of Realtors, buyers took advantage of a 41 percent decline in the median price of an existing home as California home sales doubled in January from a year earlier. We hope this guide will help those considering the purchase of a home in 2009. Please contact us with any further questions.

FICO Scoring Formula Change – Will It Affect Your Ability To Buy A Home?

A new revision to the FICO scoring formula will soon be rolled out. In fact, two of the three credit bureaus have already admitted to the new rules. In effect the credit balances that you carry will matter more than ever to the scoring, but luckily your little missteps will count less.
This update to the credit scoring system (called FICO 08) has been delayed for several months, but it finally will be rolling out early in 2009. It offers a few advantages to the consumers but also includes some serious new risks. The new scoring system is supposed to do a better job of predicting defaults than the classic FICO that we are used to.

Somewhere between 75% and 90% of national lenders use the FICO system to evaluate the credit worthiness of applicants. It is reported that FICO 08 is even more sensitive than the classic FICO to how much of your available credit that you are actually using. If a credit card issuer reduces your credit limit then you could see your credit scores plunge, even if you are not carrying a balance over from month to month.

Also the new formula responds more negatively if your number of open accounts falls, as is the case currently when the card issuers are closing or deactivating accounts that are not used much (those accounts are not very profitable, but still offering risks to the card companies). Your FICO 08 scores can go down with just this reduction of open/available credit.

On the other hand, many changes to the new system are not bad . FICO 08 does provide some improvements, including:

Collections – The new formula does ignore some of the small collections (garbage) that can occur if the original debt is less than $100.00. This is a way overdue improvement.

Credit missteps – The new formula is less punishing to people who have had a repossession or account charge-off as long as the more recent activity is problem free.

Authorized users – The new formula will be factoring in some limited number of authorized user accounts (used by some to improve their own account scores), but supposedly ignore additional ones if they materially affect the score.

Installment loans – The new formula is even more sensitive to the mix of revolving credit (cards, etc) and installment loans (homes, cars). Preference is given to the installment type loans over the revolving type loans and the scores will reflect this preference.

Credit inquiries – This is still a confusing issue, with many experts on both sides. Some believe the new formula will allow more inquiries without punishing the score, while others say this is not true. The best path is still to be very conservative on who and how often your credit is searched

Loan Funding- Show Us The Money!

During the process of buying or selling a piece of real estate, most buyers require a loan in order to purchase the property. There comes a time in the transaction when the money is ready to be exchanged for ownership of the property. Funding of the loan is essentially the transfer of money from the lender to the seller of the property. Actually it is transferred to our third party escrow but for simplicity purposes we can think of it as being transferred to the seller.

After you review and sign your loan documents, the escrow company will send them back to the lender. A final review by the lender’s underwriter takes place and if everything looks good according to the underwriter, the lender will notify the escrow company that they are ready for funding. In other words, the lender is ready to send over the money to complete the purchase of the real estate.

At this time or preferably before, the escrow company will instruct the buyer to bring all necessary closing money (i.e. closing costs and down payment) into escrow to be held until funding. Most of the time when the loan is funded the actual money for the loan is wired over in just a few minutes but in order to fund the loan all conditions and instructions set up in escrow must have been met. This dotting of the i’s and crossing of the t’s is usually what delays the actual funding from happening. Many times underwriters will take a hard second look at the borrower’s financials that may delay the funding a few days. For this reason, we encourage buyers to get their entire loan application and supplementary materials to the lender as quickly in the escrow process as possible.

As you can see, in most real estate transactions funding is a very significant event in the process and a critical component to purchasing your home. Now that you know what the funding process is all about, the only thing left is the closing and recording. You’ll learn about this final step in our next tutorial.

Purchase Agreement Contingencies - A Buyers Emergency Escape

When you wrote an offer to purchase your prospective home, you more than likely had a few safety nets put into action should the deal go sour. These safety nets are known as contingencies and are considered normal buyer protection in our purchase agreements.

The most common contingencies are to:

• See all disclosures from the seller


• Inspect the property


• Obtain acceptable financing for the property


• Have the property appraise at a value equal to or greater than the purchase price

If for any reason you are unable to obtain any of the above, or have an issue with them, no matter how small (ie unacceptable interest rate on loan, too many repairs, or low appraisal) within the first 17 days of the transaction, then you most likely will be able to cancel the entire agreement with zero penalty.

There does come a time in the transaction, usually after the 17th day, that the buyer will need to be ready to remove all of these contingencies of sale. We call this the "release of contingencies" and usually send the buyer a form to be signed stating that they are satisfied with respect to all of the above conditions, are electing to proceed with the transaction, and realize that backing out or failing to close escrow from this point forward could lead to the forfeiture of their deposit.

After the contingency release is complete, a buyer is starting to turn the home stretch toward owning this new piece of real estate. And while the remaining length of track may be short, it is the stretch where most deals are either made or broken. We'll do everything we can to make sure you are able to make it across the finish line with your new home.

Look for our next article on insurance for the first thing we can do to get you there.

Repairs - What Can You Ask For? What Can Happen?

So you've been through the comprehensive inspection report detailing all of the shortcomings of your soon to be new home. At this point, it is natural to feel a little apprehensive about proceeding with the transaction as there is undoubtedly more wrong with the home then you initially thought. This is a normal feeling and in most cases a night or two of sleep will help to put it all in perspective. Remember, most all of the homes on the market are used and do have some defects so it will be an impossibility to even find a home with zero areas of concern. The same also goes for new construction and probably even the property you are currently living within.

The real purpose for a home inspection is awareness. That means you, the buyer, now have the knowledge about the various shortcomings with your property and can make the best decision possible.


What Options Are There After A Home Inspection

Ask For Repairs - Most standard sellers will be open to making a few repairs to the property in order to ease buyer concern. Of course, the property is privately owned so the owner does not necessarily have to do any repairs and some will not. All of this depends on the motivation and general disposition of the properties current owner. It is common practice for buyers to ask for items listed as health and safety issues to be remedied before proceeding. Items such as exposed wiring, broken glass, unstrapped water heaters, and other potential hazards are the most commonly asked for repairs.

How much can you ask for? You can ask for as much as you like, and your certainly not limited to health and safety items, but generally 5-10 items is what we would consider average. Again, the chance of you getting these items fixed will depend on many factors including: the negotiations leading up to the escrow, the sellers feelings toward the buyer, market conditions, and the overall condition of the property. For example, a seller who has endured endless price negotiations leading up to escrow may have such ill feelings towards the buyers that he will not do any repairs to the property. This is also known as selling "as-is."

Ask For Credit - Sometimes in addition to or in lieu of asking for repairs, the buyer will ask for a cash credit to fix the problems on their own. Again, good judgement should be exercised here as it is not likely for a buyer to recieve a credit for a broken pool heater when the seller had been crediting the buyer for it in the negotiations leading up to escrow. Cash credits, on the other hand, can be advantageous as the buyer will be able to fix the problems in any manner they like without worrying about the seller picking an unqualified "low ball" contractor for quick fix. The buyer is not bound to use the money for repairs, in fact, they are free to spend it any way they see fit.

Proceed With The Sale - The above solutions can lead to the continutation of sale when both parties can arrive at a mutually beneficial arrangement. Sometimes, there are so few problems with the home that the buyer is just ready to proceed without any repairs. Other times the buyer will know going into escrow that asking for repairs will be pointless and if don't see any major issues, they also elect to continue on with the transaction. After a home inspection it is perfectly acceptable to continue on with the sale of the home with zero talk of repairs.

Cancel Escrow - Every once in a while the inspection will reveal more problems than the buyer can handle and the buyer will simply cancel escrow without penalty and continue on looking for another property.

Bank Owned And Short Sale Property - With bank owned property, the simple fact is that it is often sold "as-is" from outset so any hopes a buyer may have for repairs will be fruitless. Banks very rarely will acknowledge any information about the property given the unique way in which they acquired title to the property. Since it was acquired through foreclosure, they may have never been given any disclosures about the condition of the property and therefore are not willing to vouch for its shape.

Occasionally, banks will offer cash credit for repairs but they certainly are not under any obligation to do so. In fact, many banks price their properties so well that they recieve multiple offers and may be completely unwilling to accomodate a buyer asking for credit because they have so many backup buyers.

Short sale sellers may be more willing to do repairs and credits but this is often overshadowed by the slow process it may become to ask for considerations. Often times, asking for repairs can kill any time sensitive approval the bank has given so it may not be wise to demand them. More often than not, the price on short sales and bank repo homes is so competitive that it just may not matter to a buyer. This is obviously a good time to consult with your real estate agent about the overall value of the deal.


Some Other Ideas

When you do decide to continue on with a transaction, it would be an excellent idea to keep a copy of the inspection report so that you have some idea of problems you may want to look at remedying in the coming years. This advice alone will pay dividends when it comes time to sell your home.

Look for our next article on understanding your homes appraisal.

Securing Your Financing - Insider Tips for Understanding and Finding Your Home Loan

After being pre-qualified for a home loan, looking at homes for sale in your area, making an offer to purchase, and ultimately entering escrow, it is time for most prospective home buyers to officially arrange some sort of loan in order to purchase a house. Luckily for them, there are a lot of choices in the marketplace and the interest rates for home loans are generally low when compared to hard money and lines of credit loans. The following are a few key points that home loan shoppers will want to clarify with any vendor they are considering obtaining a home loan through:

Interest Rate – This is the rate you will be paying back to the bank on the money borrowed. Ideally, you want as low a rate as possible although there are the following other factors to consider:

Loan Structure - The following are just some of the choices with regards to structure:

Adjustable – The interest rate of the loan will adjust with the money index it is tied to. If that index goes up, so will your interest rate. If it goes down, your interest rate will reduce as well. Adjustable rates are not for everybody as they can lack the peace of mind that a conservative fixed rate loan may provide. They do, however, serve a purpose and may be a good choice at a time of high interest rates or for somebody not looking to hold the property for a long time.

Interest Only – The payment you make is only for the interest on the loan. Your payments will not pay down the principle and reduce your loan balance. Typically, an interest only loan lasts for one to five years before switching back to a principle and interest payment. At this time, you have to pay the entire loan amount in a shorter time frame, say 25 years instead of 30, resulting in a larger monthly payment. The pros and cons are similar to an adjustable rate mortgage.

Fixed – A loan with a fixed or stable interest rate for the duration of the loan.

Conventional – A general term used to describe a loan from a private sector lender with a fixed interest rate.

FHA – A loan subsidized by the Federal Housing Authority, sometimes able to provide 100% financing to qualified buyers. Usually entail a little more paperwork and stricter borrower guidelines.

VA – Loan available to veterans and their spouses with similar guidelines as FHA.

Loan Term - A home loan can be of any term from 0-40 years. The longer the term, the less the monthly payment and the shorter the term, the more you’ll pay monthly. The typical home loan is for 30 years although it is very common for owners to refinance and stretch that term out over many more years.

Points and Fees – Typically, it is wise for buyers to pay a “point” to buy down the interest rate on their loan. A “point” is slang for a fee in the amount of 1% of the loan amount. It is also known as a loan origination fee. For a $400,000 loan, this translates to $4,000. There are zero point loans available to most home buyers but the catch is that you will pay a higher interest rate. You can always pay more than one point to buy the interest rate down further.

Other fees to watch are for processing, underwriting, administration, document preparation, wiring, courier, and notary fees. Typically these extra fees should be substantially smaller than the point charged but you’ll want to have us look at your good faith estimate in order to determine if you are getting a good (or realistic) deal.

Prepayment Penalty – If you plan to sell or refinance the house any time in the near future, you definitely do not want to have a prepayment penalty. In fact, most loans today should not have a prepayment penalty but often lenders will try to slide them in to the unknowing home buyer. A prepayment penalty is a steep fine assessed if you ever want to pay off the entire loan amount before a certain date.

Private Mortgage Insurance – Recently, many lenders are starting to require the payment of private mortgage insurance by the borrower. Private mortgage insurance, or PMI for short, is an insurance policy paid by the buyer in order to protect the bank from the buyer in case of default. PMI can be calculated into the loan and borrowers need to ask their lender if their loan will carry PMI and how much it will cost.

Choices of Lender - There truly are so many choices with regards to mortgage companies that the decision is often overwhelming. Experience has shown that almost everybody promises the world, but few ever deliver. In an effort to save some people future headaches, we've put together a list of preferred vendors for Orange and Los Angeles County home loans. We strongly urge consumers to use these vendors as they have saved many loans for our clients who had originally elected to get a loan elsewhere only to have the company’s claims prove to be empty promises.

Locking Your Loan – The decision to purchase your loan is an orchestration in timing. This is done sometime during the escrow period and is best discussed with your lender and us in order to best weigh the situation and all of its implications. Please avoid procrastinating in the lock of your loan in hopes that interest rates will decline. Unless you have very good reasons for waiting, delaying the loan lock can have disastrous consequences on your home purchase.

Home buyers need to understand that all of these factors weigh into the worth of a home loan, not just the points or interest rate. It is very common for a loan to look terrific when only a few of these factors are considered, only to have it look horrible when all the values are assessed. We urge you to use this checklist, ask lots of questions, have us review your good faith estimate, and ultimately save a big headache by using one of our preferred lenders. After this many years in the business, we have seen it all and have consciously chosen to work only with the best home loan providers. Please take advantage of this.

Move Fast, They Won't Last! - Making Sure You Get Your Shot At Today's Bargain Properties

As contradictory as it may seem given the current market and media headlines, todays serious home buyers are learning very quickly that speed is essential in not only finding the good deals, but making sure you get a chance to purchase them. But what can todays motivated home buyers do to make sure they are fast enough? The following is a quick reference guide.


Speed Three Ways

Internet - the Internet has definately changed the way modern home searching is being conducted. The first thing a homebuyer should do is make sure they are set up with an automatic drip campaign to update them when houses meeting their criteria come up for sale. Thet only thing they have to do then is read their email.

Agent Custom Search - If one has an automatic search working for them, they are officially caught up with the pack. This is a good thing, but since we never recommend just being average, the next step is to have a real estate agent looking for properties that will fit the buyers needs. One will be suprised just how often that second set of eyes picks up on properties that home buyers may have missed all by themselves. Some real estate agents are excellent at filtering the good deals from the mediocre which will help a buyer find the best home in the shortest amount of time.

Go Now, Offer Now - Eventually a home buyer will find a property that interests them and it is of paramount importance to go see these immediately. They shouldn't wait until they have nothing better to do. They need to make seeing what may be their future home a top life priority. Only this kind of dedicated motivation will give home buyers the advantage they need in finding the very best deals. Rest assured that there are others buyers who are this motivated and they will be the ones snatching up all the good deals.

Besides being a very effective technique, making it a habit of being the first ones out looking at the hot new deals can be a very exciting process. The buzz is usally very noticeable at these properties as agent after agent and buyer after buyer will be roaming around the property sizing up its features and agonizing over what price they will have to offer to get it. Everybody suffers from this agony, the best advice is to make a reasonable decision and make it quickly. Waiting much more than overnight is usually suicide to ones chances of obtaining one of these distress sales. By learning to act quickly, homebuyers will be able to take advantage of todays discount real estate.