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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-employedWhat NOT To Do When Buying A Home

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.

Mortgage Forgiveness Debt Relief Act Extended Through 2013

It’s the first week into the new year, and many financial changes have already occurred that will affect many households. However, one change did not take affect that could have devastated struggling homeowners. The Mortgage Forgiveness Debt Relief Act was extended for another year.Mortgage Forgiveness Debt Relief

Before the end of 2012, we had discussed in previous blog postings, the negative implications this could have caused for many struggling homeowners. This Mortgage Forgiveness Debt Relief Act waived forgiveness of mortgage debt from being counted as taxable income from homeowners who had a short sale or mortgage loan modification. The Mortgage Forgiveness Debt Relief Act was implemented in 2007 and was set to expire Dec. 31, 2012. It was recently reported to be extended to the end of 2013.

How does this Mortgage Forgiveness Debt Relief work? Well as a simple example, many homeowners are struggling with having an “underwater mortgage.” This meaning, they owe more on their home that what it is currently worth in today’s market. In many instances, homeowners are agreeing to short sell their home which gets a bank to agree that they can sell their home for less than what they owe on it.

Example: A homeowner owes $250,000 on their mortgage. They bank agrees they can short sell their home for $200,000. This Mortgage Forgiveness Debt Relief waives them from having to pay taxes on the $50,000 difference.

If this act didn’t pass, many homeowners would be paying taxes on debt that would not have been considered forgiven. Thankfully, for the year 2013, homeowners do not need to worry about this tax affecting them because the Mortgage Forgiveness Debt Relief Act was extended.

Short Sales Increase As 2012 Closes

We are quickly closing out the fourth quarter of the year with only 14 days left. With that being said, we are seeing short sales on the rise as this year comes to a close.

According to a recent article published on CNN Money, the number for short sales that have occurred this year have drastically jumped in comparisShort Sales Increase as 2012 comes to a closeon to last year’s numbers. CNN article states, “During the three months ended Sept. 30, short sales in which homeowners had fallen behind on mortgage payments soared 22% over last year, according to a report released Thursday by online marketing company RealtyTrac. By comparison, short sales by people current on their payments went up 17%.”

Why is there such a drastic increase in the amount of short sales that are closing?

Well the main reason is due to a tax break for homeowners that could possibly be expiring come the end of this year. The tax break that has the potential of expiring, currently helps homeowners who have unpaid mortgage debt not get taxed on the money. This tax break is called the Mortgage Debt Forgiveness Act. However, this act expires Dec 31.

What will happen if the act is not extended?

Homeowners that have unpaid mortgage debt will have to begin getting taxed on the debt. According to Blomquist, the average amount of forgiven debt in a short sale is approximately $95,000.

Because this can really affect homeowners who are experiencing a short sale, many real estate agents are pushing to close as many short sales as possible by the end of the year, to help their clients avoid this tax. As a result, we will most likely see a large jump in the amount of short sales that will occur in this fourth quarter.

However, those that will not be affected are California, Arizona and 10 other states. According to CNN Money, “ One group left out of the benefits of the tax break are homeowners in California, Arizona and 10 other states in which the IRS does not tax forgiven debt because of those states’ laws.”

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.


Refinances on the Rise

Of the many mortgage applications that are being received, the most common request is to refinance a current home loan.

Why are mortgage refinances on the rise?

Many homeowners want to take advantage of the historically low interest rates and reduce their monthly payment. When rates drop, it does not necessarily increase home purchases, but rather increases mortgage refinances.

The demand for refinancing has gone up since rates have dropped below four percent. Homeowners are reducing their monthly payments a great deal, and some even paying off their mortgage early by reducing the length of their term.

According to the Mortgage Bankers Association, nearly 30 percent of refinances are for the HARP 2.0. With the HARP 2.0 program, borrowers are able to refinance their mortgage regardless of equity as long as they are current on their payments.  It is estimated that HARP 2.0 refinances are lowering borrowers’ payments by as much as 26 percent according to the economists at the Federal Reserve Bank of New York.

What other programs are homeowners refinancing under?

The other popular program that has just recently been launched is the Federal Housing Agency’s version of HARP. Changes have been made to the FHA Streamline that will benefit FHA borrowers who have a mortgage owned prior to June 1, 2009. The FHA Streamline is an extremely easy refinance that can be completed in 30 days or less when done correctly. The biggest benefit of this program is that there are no costs involved. The borrower will pay nothing to refinance, and no costs will be added to the loan balance. It is just to lower the borrower’s interest rate and monthly payment.

If you are interested in refinancing your current mortgage to the historically low interest rates you can get started here.

Tips on Buying a Good Home

1. Buy a Home You Can Afford

Make sure when choosing a home that you are comfortable with the mortgage payment. You do not want to purchase a home in a price range that will leave you scrounging for money each month just to make the payment. You need to keep in mind the other payments you still have obligations towards, such as a car payment, student loans and other expenses that add up.

A certified mortgage planning specialist analyzes your debts and will inform you on what a reasonable and realistic house payment is based on your scenario.

2. Make Sure You Can Stay Put

You don’t buy a home with the intention of moving right away. You should only purchase if you are planning on staying put for a few years. A home is an investment. If you are not able to make the commitment of staying in the home for a few years, then you may want to reconsider purchasing at that moment.

3. Get Pre-approved Before Looking

Without a pre-approval from a mortgage broker, you really are not in any position to look at homes. A pre-approval secures the fact that based on your income, assets, debts that you will qualify for a specific price range of homes. You should always seek a pre-approval from a lender to ensure you are not wasting your time, or a realtor’s time in looking for a home.

4. Know Your Credit

If you have issues on your credit report, you want to start getting those fixed before trying to buy a home. You need to also make sure you are current on all credit line payments and not maxing out your credit lines. Also, when you are in the middle of purchasing a home, DO NOT open new lines of credit. You do not want to open any new lines of credit, because that can affect your ability to purchase a home.

5. Do Your Homework

More often than not, homebuyers fall in love with a neighborhood but haven’t done their homework. You need to find more information about the taxes for that area as well as if there is an HOA (Home Owner’s Association) fee. These two things can really increase your monthly payment and you need to be aware of the full cost of the home. You not only have the mortgage payment, but you will also have to pay taxes, insurance and possibly an HOA fee.

A certified mortgage specialist has access to this information for any home on the market. Ask them to research a home in that area to find out what exactly you will be paying.

 6. Choose an Area With A Good School District

If you are just purchasing a home and have small children, or planning on having children, you want to make sure you choose an area that has a good school district. Since a home is an investment, you should only purchase if you are planning on staying a while. You will want a good school district, so do some research on the area before purchasing.

7. Start Saving Your Down Payment

Depending on what loan program you are able to purchase under, you will need to bring in a different down payment. Majority of homebuyers tend to put down anywhere between 3.5 percent to 20 percent of the home price. Start saving the down payment so when it’s time to make an offer on a home, you have the strength of a solid down payment.

8. Work With Respected Professionals

Buying a home is not a simple process, so you need to make sure you are working with the best people to help you through the process. This should be a fun and exciting time, but there will be some stressful moments. Do your research, read reviews, and choose a mortgage professional that knows what they are doing, and has the history to prove it. If you don’t have a real estate agent, your mortgage broker will more often than not guide you to a great real estate agent that will meet your needs.

Discouraged When Buying A Home?

Are you discouraged with your home buying search?

You aren’t the only person who gets discouraged when looking for a home. Homebuyers become emotionally invested in the home search process and can become easily worn out, therefore leading to discouragement.

I am here to provide you a sense of hope in your home buying search. I actually have a personal family member that proves the home buying experience does not have to be a long, drawn out process.

My daughter recently purchased a home and the whole process from the time she got approved to owning the home was 45 days. I’m here to share the advice that I gave her that enabled her to be successful in the home buying process.

1. Partner with a GOOD real estate agent

 I can’t tell you how many times homebuyers complain that the home buying process is taking forever. Well my first question is, “Who is your real estate agent”?

Often times, buyers are working with agents that are not aggressive, knowledgeable or current in the industry. Being partnered with a professional agent who knows what they are doing is going to make all the difference in your experience. I partnered my daughter with our top agent, and she was a huge part in making this process go quickly.

We know the best professionals in this industry

2. Don’t become emotionally attached to a home

This is a huge problem. People become so attached to one specific home that they become blinded to all the other great homes in the area. I’m going to tell you what I told my daughter, put multiple offers down on homes and do not become emotionally attached.

If you become emotionally attached and your offer isn’t accepted, you’re not only losing the home you wanted, but your losing all the time and energy you spent on being emotionally involved in the process.

Now by all means, love the home you are putting an offer on. If you don’t like the home, don’t waste your time. However, be open-minded to qualities in different homes, and put multiple offers down.

My daughter put 4 offers down, and 1 got accepted, which is now her home.

3. Work with a knowledgeable mortgage broker

You need to work with a mortgage broker that knows what they are doing. There are so many guidelines, restrictions, and qualifications that are constantly changing. You need to be working with someone who has experience in the industry and remains up to date to the changes for all the different loans.  

Also, make sure that you are working with a mortgage company that has a great closing ratio. For example, at Stateline Funding Corp., we have a 100% closing rate. That means with us, you will never experience the term you quite often hear, “fell out of escrow”. If we give you our approval, you are qualified to purchase a home.

4. Return and sign documents in a timely manner

Sometimes the homebuyer is the one who slows down the process. There are countless documents that need to be signed that can be time consuming. However, the faster those documents are signed and returned, the faster the loan can be processed. Also, when mortgage brokers request items from the borrower, the faster those items are returned the faster the loan will be processed.

The homebuying process does not need to be 6 months long. Trust me! I have been working in this industry for over 30 years, and I know what it takes to make it go quickly. If you are discouraged in your home search, carefully consider if your real estate agent is the right fit for you. Also, determine if you are being open minded  in your house search. 

If you would like more guidance in the home buying process contact us.

HARP 2.0 – Avoid the “Waiting Game”

Did you know that you do not have to go to a major bank in order to refinance using HARP 2.0?

It’s true! Many consumers believe they either have to contact a major bank or their previous lender in order to refinance. You can actually contact any mortgage lender in your area, which is beneficial to those experiencing the “waiting game”.

For example, Bank of America is one of the major banks that if placing customers on a waiting list due to mass amounts of refinance applications. If you are currently not a customer of Bank of America then some over the phone applications will be placed on a 60 to 90 day hold.

However, with our company, Stateline Funding Corporation, we are able to take refinance applications over the phone and online without making you experience the “waiting game”. One of the benefits of working with a private mortgage company is the one-on-one interaction with the broker themselves. There is no waiting list for those that qualify now under HARP 2.0, so you can take advantage of the low interest rates right away.

After speaking with Fannie Mae, they are still expecting their underwriting systems to be updated by March in order to start servicing homeowners with LTV (Loan-To-Value) ratios over 125%. They already removed the LTV maximums; we are just waiting on the systems to be updated. Once the systems are running, we will definitely provide information for the homeowners who fit that category.

Right now, HARP 2.0 is still accepting applications for LTV ratios up to 125%. If that is your scenario, then you can click here for a free pre-qualification.

Did you look up your mortgage loan using the Fannie Mae or Freddie Mac look up tool?

We have had clients that used the tool and are positive that Fannie Mae or Freddie Mac own their loan, but it shows that it cannot be found. Don’t give up! If you are certain, Fannie Mae is suggesting for all borrowers to contact their servicer to find out. The reason being, Fannie Mae’s look up tool only represents 87% of their loans on file, so yours may not show up due to inaccurate information, or other miscellaneous reasons. Give your servicer a call to find out if you can benefit from HARP 2.0.

You can always contact Stateline Funding Corporation if you have further questions about HARP 2.0.

FHA loan limits increased- Fannie Mae & Freddie Mac remain the same

Recently the FHA loan limits have been increased. There are different loan limits depending on the area in which you live. For the Riverside and San Bernardino area in Southern California, the loan limits have increased to $500,000. This is good news for homebuyers looking in these areas who beforehand were unable to receive a loan over $355,350. For the Los Angeles and Orange County area the FHA loan limits have been increased to $729,750.

This is the first time that FHA has surpassed Fannie Mae and Freddie Mac loan limits. However, we assume that Fannie Mae and Freddie Mac will follow in line and increase their loan limits as well. Nothing is for certain, but we will keep you updated on the decisions that are made. Until that time comes, Riverside and San Bernardino areas can receive a loan limit with Fannie Mae and Freddie Mac of $417,000. The Los Angeles and Orange County areas have a limit of $625,500.

Here is a chart below showing the loan limits for FHA as well as Fannie Mae and Freddie Mac for the counties in California. If you would like to view Fannie Mae and Freddie Mac loan limits for a different state click here

9 Tips to Help You Save For a Down Payment!

Wondering how you are going to afford a down payment for a home? This is a common concern for homebuyers, but we want to provide you with 9 tips to help you save for a down payment. You’ll be able to buy the home of your dreams much sooner.

1. Save

This seems obvious, but the second you start thinking of wanting to buy a home, why not start setting aside money on a monthly or weekly basis. You will see how quickly it adds up. You can enroll for an automatic savings plan with your bank or have a portion of your paycheck get automatically transferred to you savings.

2. Borrow the down payment from your retirement plan

Check the provisions of your retirement plan. You can borrow funds from a 401(k) plan for a down payment or make a withdrawal from an Individual Retirement Account. Be sure you understand the tax consequences, repayment terms and/or possible early withdrawal penalties.

3. Move

Obviously this option is only available for people who already live in a home. By selling your home you may be able to save additional funds if you can move into a less expensive house.

4. Reduce other higher interest rate debt

Debt is stressful, so if you are capable of paying off credit cards with high interest you will be able to start saving. Yes, at first your savings will take a hit and reduce, but the money you will save from higher interest rates will pay-off in the long run. Trust me!

5. Make a deal with the seller

You would be surprised but in some circumstances it is appropriate to ask the seller to carry a second-mortgage to cover your down payment. Typically, you will pay a slightly higher rate for this second mortgage.

6. Sell some investments

7. Get a second job and save your earning

You’ll be putting in extra work but it will be worth it in the end! Focus on your long term goal and understand it’s temporary.

8. Skip a year’s vacation

I know, I know… this seems awful, but try doing a local vacation that does not cost as much money. Also, keep in mind it’s only one year you are giving up a vacation. However, that will put you closer towards achieving your future goal of a new home (where you will make many more memories).

9. Gift from family

Parents and other family members are often anxious to help children buy their first home and may have the means to give you a gift of money for a portion or all of your down payment.

For other down payment tips you can visit our website.

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