What NOT To Do When Buying A Home

If you are in the process of buying a home or just beginning your search, you need to be aware of what NOT to do in order for the process to go smoothly.

Do NOT change jobs or become self-employed

The lenders need to see stability in your work history and if you change jobs you are starting the process all over. Plus, they require 1 month pay stubs at the closing of every loan to verify your income and you will not have that by the time your loan closes. Also, if you desire to be self-employed, you must wait until your loan has closed escrow. When self-employed, you are required to have 2 years of tax returns in that profession.

Do NOT open new credit

When you are approved for your loan to buy a home, it is based on the credit history you currently have and the liabilities counted against you. When you open new credit you are telling lenders you are a high risk. Also, it can affect your credit score, which you want to remain as high as possible.

Do NOT buy a new car

This will definitely affect your qualification for buying a home. You should never add more debt when applying for a loan. The new car payment will be counted against you, increasing your debt ratio which ultimately qualifies you for less money. Wait until you own the home before you buy a new car.

Do NOT finance or charge furniture to a credit card

We know how exciting it is when you are buying a house and you want to pick out all your new furniture, but you must wait before you buy the furniture for your home. You don’t want to finance anything in the process of buying a home. You also don’t want to lessen the amount of cash in your bank accounts because lenders like to see 2 months of your funds sitting in your account. So the best thing is to wait to furnish your home until you have the keys in your hand.

Do NOT change your bank

Lenders look for stability when approving a loan for a new borrower to avoid lending to borrowers who are high risk. They need to see 2 months bank statements before approving your loan, so you need to stay with the same bank.

Do NOT be late or miss a payment for any credit account

This is a huge factor. Lenders are providing loans to borrowers who are responsible with credit and can prove they will repay the loan on time. If you are missing payments or have late payments on your credit report, you are telling the lenders you are high risk and they will not lend you the money to buy a home. Be responsible and pay every account on time!

These are a few of the most important things you should not do when buying or thinking of buying a home. Following these guidelines will help your loan transaction go smoothly and get you into your new home faster.

Making The Home Buying Process Easier

Here is an article we would like to share, courtesy of By Referral Only. These are 5 great tips to help any home buyer make the process easier and less stressful.

In reality, there are only five things you need to know and do to make your home buying experience as simple as possible.

1.  Get pre-approved for your loan.

If possible, get “pre-approved” for a loan in the amount you’re willing to borrow.

With this pre-approval, you’re in a stronger position to buy a home when you’re ready – rather than finding your dream home, only to lose it to another buyer because you were waiting on the approval.

2.  Find a great real estate consultant.

Once you’ve decided to buy a home, find a great real estate consultant.  What you’re looking for is a Buyer’s Agent.

This means that the consultant represents YOU as the buyer, rather than the person selling the home. They will have YOUR best interests at heart.  Really good consultants know their markets, and will help you find the best match for your needs and wants. They can also recommend mortgage brokers with whom they’ve worked in the past.

3.  Look before you leap.

Drive around the neighborhood at different times of day.  Get out and walk around and chat with neighbors.  Some people like friendly neighbors, others think of them as nosy. Drive to the local grocery store, laundry, anywhere that you frequent.

Visit nearby schools and see for yourself how the kids behave and how the grounds look.  The point is to see if this is really the type of neighborhood you want to live in BEFORE you make an offer.

4.  Be prepared.

Make sure your contract has reasonable contingencies included to protect you as a buyer.  Reasonable can be things like approval by a home inspector, and title clearance. For the long-term investment, make sure that you buy homeowner’s insurance, and upgrade it as the value of your new home and its contents increase.

5.  Be reasonable.

No home will be without flaws.  Many times it’s these flaws that lend character to older homes, but nonetheless, it will take SOME work to personalize any home.

Preparing yourself with these five simple things – loan pre-approval, a great broker, getting to know the neighborhood, protecting yourself, and being reasonable – will help make the home buying process easier for you and your family.

How Soon Can You Buy After A Short Sale?

Have you recently experience a short sale and wondering when you will be able to purchase a home again?

There are different regulations for different loan types. We will provide the requirements for Fannie Mae, FHA and VA loans for a purchase after experiencing a short sale.

Fannie Mae Loan

With Fannie Mae, one can purchase a home in as little as 2 years after a short sale has been recorded if the buyer is putting 20% down on the home.

There is a 4 year waiting period if the buyer is putting 10% down on the home purchase.

Anything less than 10% will require a 7 year waiting period before being able to purchase a home through Fannie Mae.

FHA Loan

With an FHA loan there are varying circumstances that affect one’s ability to purchase a home. The following information is provided by Hud.gov

Borrowers are not eligible for a new FHA- insured mortgage if they pursued a short sale agreement on his or her principal residence simply to

• Take advantage of declining market conditions
• Purchase at a reduced price a similar or superior property within a reasonable commuting distance.

Borrowers current at the time of Short Sale

Borrowers are considered eligible for a new FHA-insured mortgage if, from the date of loan application for the new mortgage

• All mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale, and
• All installment debt payments for the same time period were also made within the month due.

Borrowers in Default at the time of Short Sale

Borrowers in default on their mortgage at the time of the short sale (or pre-foreclosure sale) are not eligible for a new FHA-insured mortgage for 3 years from the date of the pre-foreclosure sale.

There are exceptions to the following requirements; however, they require extenuating circumstances that are beyond the borrowers control. Hud.gov explains exceptions stating:

Exception: A lender may make an exception to this rule for a borrower in default on his/her mortgage at the time of the short sale if the 

• Default was due to circumstances beyond the borrower’s control, such as death of primary wage earner or long-term uninsured illness, and

• A review of the credit report indicates satisfactory credit prior to the circumstances beyond the borrower’s control that caused the default

These circumstances would need to be discussed with a mortgage lender prior to pursuing a mortgage loan.

VA Loan

The general waiting period for a VA loan after a short sale is 2 years. However, like the other two loan programs, there are different regulations depending on the veteran’s circumstance for a short sale.

According to VALoans.com, a borrower may get approved for a VA loan after short sale, “if the buyer has a qualifying credit score plus a record of dependable payments during the waiting period, sometimes called a “seasoning period” following the short sale.

Anything less than a 2 year waiting period would be determined on the borrowers credit history, circumstance and the lender’s guidelines.

If the short sale was on a VA loan, the applicant may not have full entitlement available for the new loan.

Beat The Stress Of Buying A Home

This is an article we are sending to our clients next month that are in the process of looking for a home. This article is courtesy of ByReferralOnly. Great tips on how to beat the stress of buying a home.

1.  Begin with the end in mind.

Have an ultimate scenario of where you’re trying to be.  What will life be like when you get there?  How will it be better than where you are now?  Dwell on that picture and write it out, fill up at least a page about how it feels in the new place.  This is imperative.

Having the goal in front of you at all times energizes you to achieve it, in spite of setbacks and frustrations.  Emotions will run high and you need an anchor.  You must focus on that future goal when anxiety threatens to get the better of you.

2.   Be flexible.

In your monetary calculations, overestimate by a thousand dollars.  In this market, anything can happen between contract acceptance and closing.  It could be the inspections reveal areas of concern that the seller is unwilling to fix or the repair costs are higher than the amount limited in the contract.

Or the interest rate changes which affects the necessary down payment and closing costs you’ll need to come up with.  As your real estate team, we’ll strive to tie up loose ends as quickly as possible, but remember there is no perfect world.  Most buyers feel a bit overwhelmed when taking on a new mortgage and the responsibilities of a new home.

We’ve seen many buyers get angry when it seems like the cost just keeps going up.  Anger is caused when reality doesn’t match up with the expectations you had in your mind.  If you anticipate this happening in advance, you won’t get angry.  In fact, it’ll probably go better than you expected.

3.  Trust in the process.

There’s just so much to do, it’s easy to panic.  You wonder if it will ever work out.  In fact, when we bought our house, we couldn’t eat for a day, we felt so sick to our stomachs!  You think you’re taking a big chance, but the truth is you’re giving yourself a big chance.

Even though you can’t see every step of the way, as you move towards your goals, the way opens up.  We know that you haven’t moved in a long time and it’s a major upheaval in your life.  But we’ve been there many times before, and we’ll be looking out for you.  Trust that we know the way to get you there.

4.  Get knowledge.

One thing you’ll probably feel during this transition time is being out of control.  It feels like everyone else has taken over your life.  The seller, your Lender, the appraiser, the inspectors, all have the power to say yes or no to your moving plans.

We’ll try our best to let you know ahead of time what your expenses will be, and what the unknowns are.  We’ll tie down the loose ends as soon as possible.  We’ll try to get your loan approved within a reasonable time frame.  We’ll educate you as best we can and let you in “behind the scenes” so you won’t ever feel stupid or out of control.

Loan Option for Veterans & Active Duty Personnel

Did you know there is a special loan program for veterans and those actively serving in the military?

The program is called a VA Home Loan.

What is special about a VA Home Loan?

The VA home loan allows veterans to purchase a home without putting money down for the down payment. This is based on qualifying income, credit history, and most importantly VA eligibility.  With this program, a veteran does not need to provide a down payment, as long as the sales price is not higher than the appraised value. However, one will still need to have money to put towards closing costs.

This loan program is particular appealing to first time home buyers. There is no stress at providing a down payment, which most loan programs require a minimum of 3.5% down or more.

Who is eligible for a VA Home Loan?

There are four groups that are able to receive a VA Home Loan based upon eligibility.

• Veterans
• Active duty personnel
• Reservists/National Guard members
• Some surviving spouses

How do you prove to a lender you are eligible for a VA Home Loan?

It most cases your lender will request a COE (Certificate of Eligibility) on your behalf to ensure you are eligible to receive a VA Home Loan. Borrowers can also receive this certificate on their own by contacting the Department of Veteran Affairs.

Where can you apply for a VA Home Loan?

You can apply with any lender that participates in the VA Home Loan programs. Stateline Funding Corp. is a company among others that offers VA Home Loans.

Best Places to Live in California

Where are the best places to live in California?

Money Magazine recently published the top 100 cities to live based on area, population, number of jobs, schools, average income and other criteria.  Since we are a California Mortgage Lender, we wanted to focus on the 5 California cities that Money Magazine chose as the best.

California cities that made the list:

#6 Irvine

Irvine made the top 10 list of the best cities to live in the United States. One of the reasons Money Magazine chose this city was based on the great location in California. Irvine is only 10 miles from the beach and has tons of bike trails and parks for an active lifestyle.

#27 Cupertino

This city has a population of 58,700 and is located in the heart of Silicon Valley. This is city is extremely diverse and highly educated. According to Money Magazine, 60% or more of the population has a bachelor’s degree or higher. If you are looking for high performing schools, then this is the place for you!

#34 Chino Hills

Chino Hills is known for its safe neighborhoods and great schools. According to Money Magazine, this city actually has a higher median income than Beverly Hills! It’s a beautiful area in Southern California with great shops nearby.

#41 Diamond Bar

According to Money Magazine, Diamond Bar is actually most known for their holiday decorating. Neighbors compete in lawn displays and light displays to be known as the best holiday decorator. This city also had the first dog park known as  Bark Park. The only negative thing about this city is the high taxes they have to pay.

#42 Yorba Linda

The last California city to make the list (above the top 50) was Yorba Linda. This city is located in Orange County and has great trails to run and hike on. Money Magazine recognized this city for its beautiful horse trails within the community. If you are going to live here, you need to keep in mind the price tag that comes along with it. Most homes are around $500,000 or higher.

Buying a Home as a College Graduate

If you have recently graduated and are eager to buy a home, but not sure if you are able to, then this article is for you.

Generally, in order to purchase a home, lenders require a minimum of two years. As a college graduate that is not that case with an FHA home loan.

If you graduated from college, and get a job in a field of work related to your degree, you do not have a waiting period to purchase a home. In this scenario, your college degree would count as previous work so you do not need two years of employment.

Now keep in mind, you must be employed in order to qualify for an FHA loan. Lenders will need your current pay stubs to show your income qualifies for the house payment, as well as making sure your job relates to your degree.

There are many graduates that don’t know about this loan program.

Another great benefit with FHA is the low down payment to buy a home. FHA only requires a 3.5% down payment. For example, if you are purchasing a home of $200,000 you only need to bring in $7,000. Another benefit is your down payment can be a gift from a family member or friend.

An FHA loan is the best way to go for first time home buyers and recent college graduates.

Don’t let a mortgage payment deter you away from purchasing a home. Many college graduates may think they won’t be able to afford a mortgage payment after finishing school. What you don’t realize is that in many cases, rent can actually be more expensive than a mortgage payment.

So if you are a recent college graduate that was just employed, go ahead and look into buying a home with an FHA loan.

Fannie Mae Profits 2nd Quarter

One of the main factors to determine how the real estate market is doing is to actually look at the books of a company such as Fannie Mae. Just posted on Wednesday, August 8^th, Fannie Mae recorded a $5.1 billion profit during the months of April through June. This is a big sign as the company will not need any more bailout money this past quarter.

Fannie Mae received a huge bailout back in 2008 due to being near bankruptcy. This is a good sign that the company is bouncing back as well as the real estate market.

As of the end of the second quarter, Fannie Mae has profited $7.8 billion the first half of 2012. The reason behind the company’s successful quarter is due to “improved home prices, improved sales prices on the company’s real-estate owned properties, and a decline in the single-family serious delinquency rate”, according to executive vice president and chief financial officer, Susan McFarland.

According to Fannie Mae’s press release, single-family serious delinquencies have declined for the ninth consecutive quarter.

Fannie Mae is using these profits to pay back its debts to the Department of Treasury. Fannie Mae has stated to be paying out $2.9 billion to the Department of Treasury for their second quarter dividends.

No one is going to declare a housing recovery as of yet, but it is encouraging when the signs show improvement.

Here is a chart provided my Fannie Mae regarding the withdraws from the Department of Treasury as well as the pay backs between 2008 to 2012.

 

 

 

4 Tips That Can Save You Thousands

We provide monthly newsletters to our clients who are either shopping for a home or wanting to buy relatively soon. This article, written by Randy Glasbergen (2006) talks about 4 tips that can save you thousand when wanting to buy a home.

1. Don’t Get Pre-Qualified.

Get pre-approved.

Do you want to get the best house you can for the least amount of money?  Then make sure you’re in the strongest negotiating position possible.  Price is only one bargaining chip in the negotiations, and not necessarily the most important one.

Often other terms, such as the strength of the buyer or the length of escrow, are critical to a seller.  This process takes anywhere from a few days to a few weeks depending on your situation.  It’s VERY POWERFUL and a weapon we recommend all of our clients have in their negotiating arsenal.

2.  Sell First, Then Buy.

If you have a house to sell, sell it before selecting a house to buy!

Let’s pretend that we go out looking for the perfect house for you.  We find it and

you love it!  Now you have to make an offer to the seller.  You want the seller to reduce the price and wait until you sell your house.

The seller figures that’s a risky deal, since he might pass up a buyer who DOESN’T have to sell a house while he’s waiting for you.

So he says OK, he’ll do the contingency but it has to be a full-price offer.  So you see, you paid more for the house than you could have because of the contingency.  Now you have to sell your existing house, and in a hurry, otherwise you lose the dream house.  So, to sell quickly you might take an offer that’s lower than if you had more time.

3. Play the Game of Nines.

Before house hunting, make a list of nine things you want in the new place.  Then make a list of the nine things you don’t want.  We call this Nine of This and None of That.

You can use this list as a scorecard to rate each property you see.  The one with the biggest score wins!  This helps avoid confusion and keeps things in perspective when you’re comparing dozens of homes.

When house hunting, keep in mind the difference between skin and bones.  The bones are things that cannot be changed such as the location, view, size of lot, noise in the area, school district, and floor plan.  The skin represents easily changed surface finishes like carpet, wallpaper, color, and window coverings.  Buy the house with good bones, because the skin can always be changed to match your tastes.  I always recommend that you imagine each house as if it were vacant.  Consider each house on its underlying merits, not the seller’s decorating skills.

4.  Don’t Be Pushed Into Any House.

Your agent should show you everything available that meets your requirements.  Don’t make a decision on a house until you feel that you’ve seen enough to pick the best one.  Review the Multiple Listing printout with your agent to make sure that you are getting a COMPLETE list.

In the late 1980s, homes were selling quickly, usually a few days after listing.  In that kind of market, agents advised their clients to make an offer ON THE SPOT if they liked the house.  That was good advice at the time.  Today there isn’t always this urgency, unless a home is drastically under-priced, and you’ll know if it is.

 

Tax Payers’ Dollars Not Contributing to Principal Reduction

Reported Tuesday, July 31^st, Fannie Mae and Freddie Mac will not allow some underwater mortgages to reduce the principal amount owed in order to help with foreclosures.

The Obama administration has been pressuring Edward DeMarco, the acting director of the Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, to allow principal reduction on underwater mortgages.

The reason the Obama administration wants Fannie Mae and Freddie Mac to lower the principal is to help reduce the amount of homes resulting in foreclosure.

However, DeMarco has stood his ground and refused to allow Fannie Mae and Freddie Mac to lower the principal balance of underwater mortgages, as it will be coming from the tax payers’ dollars.

Currently, Fannie Mae and Freddie Mac back or own approximately 60% of all mortgages.

The main reason for DeMarco’s refusal in lowering the principal balance is to protect the tax payers’ dollars. According to an article in the LA Times by Jim Puzzanghera, tax payers have contributed $188 billion to the two companies in order to keep them afloat. As of today, $46 billion in dividends has been paid back to the Treasury Department in exchange for the assistance.

DeMarco also believes this program could worsen the underwater mortgage situation, because homeowners may decide to stop paying their mortgages altogether in order to have their principal balance reduced with this program.

DeMarco also explained that Fannie Mae and Freddie Mac offer a variety of programs that will help underwater mortgages. There are programs that lower monthly payments to ease the burden on homeowners that owe more on their home than what it is worth.

From just past experiences, it seems when the government steps in to help our housing situation, there is a negative snowball effect that makes it worse than before. There are programs available to help homeowners in need of lowering their monthly payment, interest rates, and terms.

One of the main programs that helps lower the interest rate and monthly payment of underwater mortgages that are Fannie Mae and Freddie Mac owned is the HARP II program (Home Affordable Refinance Program).

Overall, using more of the tax payers’ dollars to help struggling mortgages is not the solution. DeMarco has made a wise decision in respecting the tax payers’ dollars and realizing that the positive outcome does not outweigh the negative.