Getting a mortgage OR Getting out from under one!

The facts about getting a mortgage today.

There seems to be a lot of discussion about money not being available now for borrowers. Yes, the pendulum has swung from one extreme to the other.....typical these days.  Americans can't seem to be moderate and make minor adjustments when something needs adjusting, we knee-jerk and go in the opposite direction.  BUT, there is money to lend, so take care of your credit, know what you need to plan for your purchase, and with help from good professionals (lenders, realtors, inspectors, real estate esquires) you should be able to determine what your lifestyle needs are, what is a viable goal, and make that purchase a reality.

What you need for a traditional mortgage:
You must usually meet four criteria in order to get a mortgage backed by Fannie Mae or Freddie Mac, the two government run mortgage agencies:
• The ability to make a 20% down payment, plus closing costs (Closing cost amounts vary depending on your location and the cost of the home you are purchasing, but keep in mind this isn't hundreds you'll need, it is several thousand. Lenders won't allow any of your downpayment to be assistance from the seller, but sometimes you can still request up to approximately 3%—varies by loan type—of the purchase price be paid for you by the seller.)
• Credit Score: Usually you need a minimum score of 620.
• Enough income to afford your payment. A general rule of thumb is no more than 28% of your gross income should go toward your housing costs.
• A loan-to value ration of 80%. Lenders now want the home value to far exceed the mortgage balance because if a borrower defaults, the banks sells the home to recoup the loss. (More on this later.)

What you need for an FHA loan:
• The ability to make a down payment. If your credit score is 580+ you can obatin an FHA loan with 3.5% down, if your credit score is above 500 but below 580, you'll need 10% down... and note some banks will impose a higher standard, many lenders feel they need to be better protected for the loan, so for example you will need a credit score of 640 to obtain an FHA loan with only 3.5% down.
• You'll also need to pay closing costs. (Closing cost amounts vary depending on your location and the cost of the home you are purchasing, but keep in mind this isn't hundreds you'll need, it is several thousand. Lenders won't allow any of your downpayment to be assistance from the seller, but sometimes you can still request up to approximately 3%—varies by loan type—of the purchase price be paid for you by the seller.)

Often FHA is willing to overlook a blemish on a credit report if all of the other factors are favorable. If you've had a bankruptcy or short-sale, it can be tough to get back into your home, but not impossible. Again planning makes it possible. So don't despair.  If you have favorable factors going for you but one obstacle, let's review and remove it. You'll have a timeline for when you'll be able to borrow, and in the meantime can be saving and planning for when you can make that purchase.

Please don't hesitate to contact me at any time with questions.


Recourse versus Non-Recourse States....what is this? (Ohio IS a Recourse State)

This refers to how a state's laws handle the foreclosure process between you and your lender when you are defaulting on your primary home loan. Ohio IS A recourse state.  This means if you let your mortgage go into default, the foreclosure process begins and if you don't contact your lender to work out a loan modification or short sale, you can be sued for the amount of money the lender spends to foreclose on your property AND for the difference that you owe them on the note versus what they obtain from selling your property. In some cases, they can attach to your current wages and be paid from your paycheck. When properties were increasing in value this wasn't necessary as the lender could recoup the investment by selling the home. But in the current market......my advice is if you are having difficulty making your mortgage payment contact your lender (some require you to be a few months in default to discuss loan modification or short sale, but not all). Talk to your lender, share your hardship and financial information to find a solution. If you cannot obtain a loan modification and the lender suggests, or you ask for a short sale, this is the better option over foreclosure.  During a short sale, you work with the bank, a realtor, and you negotiate the amount that you'll be repaying them after the sale of your home is complete. This negotiation occurs once an offer is accepted by you, and the bank reviews a preliminary HUD 1 Settlement Statement. The lender reviews their loss, and your hardship case, and then works out a payment you'll continue to make to them until your agreed upon debt is repaid. You need a good realtor that can analyze the market and strategically price your home to sell, this requires a realtor that is willing to show you the sold comps and what your home is worth, even if it isn't the news you want to hear. Your agent also needs to be persistent and diligent in contacting the lender and obtaining approvals.  Listing your home for what you need or wish for will result in no sale and you'll find yourself back in the position of being foreclosed upon.  So it is best to be realistic on the price to get it sold, and have the opportunity to negotiate with the lender for the amount you'll repay and move forward.

In a non-recourse mortgage state, borrowers are not held personally liable for more than the home’s value at the time that the loan is repaid. The lender may recoup some of its loss through foreclosure (taking title back from you and selling the home). However, the lender may not sue the borrower for additional funds. If the foreclosure sale does not generate enough money to satisfy the loan, the lender must accept the loss.

Each non-recourse state has its own anti-deficiency statutes that prohibit lenders from seeking judgments. In a few cases, anti-deficiency statues do allow lenders to collect a limited amount of money from the borrower (such as the difference between the debt and the fair market value of the property).
Note that in some states (such as California) non-recourse laws apply only to “purchase money” loans (i.e. original home loans that are used to purchase property). Almost all HELOCs and home equity loans are considered recourse loans and lenders for these loans may sue borrowers to recoup loss. (Except in some cases where the second mortgage lender forces the foreclosure.). There has been some speculation that mortgage refinances do not constitute “purchase money” loans. However, there have been no cases to determine this issue one way or the other.

Non-Recourse States
Alaska
Arizona
California
Connecticut
Florida
Idaho
Minnesota
North Carolina
North Dakota
Texas
Utah
Washington

(My Note: Florida and California are among these, and they are two of the highest foreclosure states.  If you can just walk away people think "why not?")

One Action States
In some states, lenders are only permitted a single lawsuit to collect mortgage debt. Laws vary by state.
California
Idaho
Montana
Nevada
New York
Utah

Contact me anytime with questions....I'm always happy to help. I can also refer you to a real estate attorney that I trust if you need one.

Information obtained from helocbasics.com, loansafe.org, continuing educations classes I've taken, and short sales I've performed.

More Good News in a Bad News World!

First, Thank You to everyone that has helped by contacting your state representatives to oppose Congress in removing the Mortgage Interest Deduction (MID) for homeowners. Due to our grass roots efforts and your actions we have 162 Representatives from the House of Representatives supporting H. Res 25 to not further restrict the MID!  Let's continue working to keep our mortgage interest deduction, and stop the mortgage reform from stalling our economy—we are all working too hard to get it to rebound!

Housing activity is increasing! That is a good news for stability here in Central Ohio. We have a higher number of homes that went on the market in May 2011 than in May 2010, but we have a higher number in-contracts too! This indicates a healthy sign for our housing market. Home prices have inched up from April 2011 to May 2011 as well. The May 2011 average sale price is up 2.6% over the the average sale price for April 2011. And, the number of closings from April 2011 to May 2011 were also up—15.7% more closings.  Another positive sign is the average sale amount and number of closings are up over the April and May 2009 numbers.  April and May 2010 did slightly better (4.7% better than 2011) but this spike was due to the government's Home Buyer Tax Credit program that had a deadline of being in-contract by the end of April and closing by the end of June 2010.

So, let's all keep working together and keep Central Ohio a great place to enjoy life!

Listings for June...

If you click any of the first four you can see photos and a virtual tour.  If you want a link to any of these, let me know and I'll email you! The second 4 we don't have the links up yet!

1205 Brittany Ln Upper Arlington Ohio $639,800

4825 Elks Dr Columbus OH $141,900

464E Jeffrey Pl Columbus Ohio $99,800

6360 Well Fleet Columbus Ohio  $79,800

2941 Pickwick Dr $329,900

4026 Reed Road $244,900

1212 Ashland Ave $149,900

1240 Ashland Ave $84,900

Let's Stop the DOOM & GLOOM-at least in real estate!

Whew,  avoided the end of the world a couple of weeks ago!  But wait the continuation of doom and gloom continues..... now we have the “end of the world” type coverage the Case-Shiller housing study is announcing, GEEZ, maybe we are nearing the end.

Just kidding folks, but seriously I am amazed at the attention this report gets. It covers 20 markets, YES ONLY 20, and that is just one of its many flaws. Yet many consider it “the be-all-and-end-all” economic indicator that defines our entire national housing profile. We all know real estate is local, and it is unfortunate that the reporting on a 20-city “national” index can have such a jarring impact on otherwise rational people.

Look at some of the headlines the other day:

“Home prices at lowest point since 2006 bust”
“Home values continue downward churn”
“No relief in sight’ for falling home prices”

And even in paradise – Maui- the front page headline in the paper screamed “Crash Spreads.”   And Maui isn’t one of the 20 markets the report covers. In fact the nearest market covered is San Diego, a mere 2500 miles away!

Ok, if you are a home owner or are buying or selling a home, you have a right to be nervous, but I can’t say this enough. Now is the smartest time in my 10 years in real estate to buy a home if you have the lifestyle reason, financial stability and viability to do so.

And it’s all about “Triple I…P”. Inventory, Interest rates, Incentives and Pricing. Start with inventory, because most communities have seen a rise in the amount of homes on the market, you have more choices. Interest rates for mortgages remain at near-historic lows and have actually trended down over the last 7 weeks, with Freddie Mac reporting 30-year fixed rates now averaging 4.55%. Incentives are the tax advantages to home ownership. And of course, there are prices. Prices are down from mid-decade highs, but in many, many markets are showing stability, slight declines or even increases. Home affordability remains near record levels and the price-to-value proposition in most markets is extremely compelling.

If you are interested in buying a home, you owe it to yourself to contact me to do a review on your options. Look at homes, do a rent vs. buy analysis, explore what is available in your price range.

Don’t just take my word for it. Do your homework.

You might just be surprised that the end of the world isn’t here yet … at least until next month’s report.

Here is some other food for thought – consumer sentiment is improving. Consumer spending has been up 10 months in a row. Also, most economists are predicting a 2.8% GDP growth in Q2 up from 1.8% in Q1, certainly not great but at least going up. Obviously the signs for the economy are showing improvement. Home ownership is an investment in your lifestyle and not for everyone. I am a huge proponent of the longterm benefits of owning. Call, email, or text me anytime! 614-657-2005 Amy Bumpus

Want to keep you home mortgage interest deduction for your taxes? You should be able to choose your own real estate agent!

Take it from Me: The Mortgage  Interest Deduction (MID) is vital  to both home ownership and  our economy! Congress needs to hear from you. Tell your  representatives to LEAVE THE Mortgage Interest  Deduction ALONE!Right now is the right time to urge Congress to  preserve, protect and defend the mortgage interest  deduction (MID) before they whittle down MID at  the expense of other more expedient budget cuts.  Consider the consequences if homeowners and buyers  lose the time-honored and cherished MID deduction.  This tax deduction built the dream of homeownership  in America. The bottom line is you may well lose personally,  and not just on the value of your home, but our  Nation's economy will be affected by this change as well. Your action today is urgent. Please send your email  letter asking your U.S. Representative to cosponsor  H.Res25, a bipartisan House resolution that affirms  the value and importance of the Mortgage  Interest Deduction. We must speak loudly and clearly with one voice to  ensure the further recovery of our economy and the  housing market and educate every legislator about  how much the MID matters.   So please, take action to Preserve, Protect and Defend  the MID.  No economic recovery is possible without a  vibrant housing market. Here is a link to an  inverview with Ronald Phipps, the  President of the NAR, please click this link to watch the  video (it takes a minute to load and start playing): President of National Association of Realtors: Interview on how  losing the Mortgage Interest Deduction affects you. Please don't hesitate to contact me anytime with any questions.  Thank you for your help. Value your home? Value your CHOICE?  I want you to know that when you work with me, I will provide  the service you need, and the service you want! As a realtor, a  licensed real estate sales agent in the state of Ohio, I must be  aligned with a real estate brokerage (in my case Coldwell  Banker King Thompson and am very happy with this brokerage),  but I am an independent contractor. My partners and I run our  own business, create our own standards for service and quality  above what CBKT recommends. Technically, all contracts of  mine belong to the brokerage, not to me or Team Benadum,  and for the most part this works out fine.  However, I spend  my time, my efforts, and my own dollars to build my own  business, and I take responsibility for my clients needs and my  fiduciary responsibility to them—that I am personally sworn to the  State of Ohio licensing to uphold. I take my consulting business  very seriously and if I don't know something I FIND the  ANSWER—AND get the job done. I find it appalling that some  brokerages will not let you out of a listing or buying contract if  you are not happy with your selected realtor/sales agent. Instead,  they offer other realtors within their brokerage to fulfill the  contract.  I guarantee if you are not happy working with my  team, we simply terminate the listing. We provide you with  the paperwork to terminate and remove your home from the  market. Then you can select from any of the licensed realtors  (some are awesome, some are not so good, this is the unfortunate  truth in any industry) in the area...one that you CHOOSE. I know  most of my clients work with Team Benadum because they trust  they'll receive the best possible help. If you don't agree, you  don't have to continue working with us. We are proud to say  that we've terminated very few contracts over the past 10 years  (yes one client of mine decided against a relocation so we  removed the home from the market....with another job opportunity  the relocation dept convinced her to go with another agent, but  she wasn't happy and found she couldn't get rid of the brokerage  she wasn't happy with--she wound up letting the listing expire,  having her price too high prevented a sale and she was rid of  the agent and borkerage). So, if you aren't happy, your best  strategy may be to remove you home from the market and  then find an agent that you are compatible with and can successfully  work with to achieve your goal of selling and/or buying a home.  Don't ever hesitate to call me with any real estate questions... I'm always available to help. I find that we get many referrals from our wonderful clients.   work hard and for the people that want us to work for them!

Federal changes to how you buy your next home!

What? You do want to be able to buy another home, or have your kids buy their own homes someday?

Congress has draft regulations for Qualified Residential Mortgages issued...

With the crazy partisan bickering—can we please stop this and get something done???— do we really know what is going on in our government? From the details of the federal budget (important to all of us, especially homeowners) to the overseas war….the total overhaul of the nation's mortgage finance system seems to be taking a backseat in the media. However, the government is hard at work building the framework that will govern who gets mortgages, for what type of home, and in what type of community that will affect generations to come.

Impact of QRM Regulations

When finalized, the QRM (Qualified Residential Mortgages) regulations will have a big impact on buyer qualification and the ability of many potential buyers to obtain financing. The initial draft contains many new mortgage requirements that include:

*The mortgage may only be for the principle residence with no balloon or interest-only payments.

*Buyers MUST make a minimum 20% down payment.

*Buyers must also pay for associated costs such as title insurance, lender fees and realtor commissions—these costs cannot be financed as part of the mortgage.

*Minimum credit standards for borrowers include provisions that the borrower cannot have any debt delinquencies within the previous two years and all debt payments must be current.

Despite voting to require the implementation of the QRM regulations, members of Congress are now expressing strong reservations over the stringent standards they helped put in place. CAI (Community Associations Institute) is concerned the QRM proposal may be too strict and will potentially exclude most homebuyers from receiving the best-priced and most affordable mortgages. An estimate released by a DC based financial trade association estimates that only 30% of current borrowers will meet the new QRM proposal or to put it more starkly, more than 70% of mortgages in the last decade would NOT meet the QRM standard as proposed. Six federal regulators (the Fed, OCC, FDIC, SEC, HUD, and FHFA) proposed this jointly published Qualified Residential Mortgage (QRM) rule in the federal register on April 19^th, 2011 and comments on the proposed rule are due by June 10, 2011.

CAI will submit comments to ensure the interests of residents in community associations are protected. You can follow the work of CAI and share your thoughts at www.caimortgagematters.org

NAR (National Association of Realtors) has also raised concerns with legislators about the impact these standards will have on the pricing, terms, and availability of non-QRM loans to otherwise creditworthy borrowers, including low and moderate income borrowers who maintain good credit and seek safe loan products to qualify for affordable mortgages. For more information about the issues raised by the proposed rule, please visit NAR's new QRM webpage at http://www.realtor.org/topics/qrm

So, if you want to buy another home someday, or have your kids buy their own homes and actually move out of yours—I suggest you contact your representatives directly as well. Remember to always vote as your first priority to have your needs met and then to speak to your elected officials, they need to hear what their constituents have to say.

Banks Must Get Moving on Loan Modifications!

While you are contacting your government representatives. Tell them you want the banks to work harder to work out loan modification programs on their existing loans with homeowners instead of short sales and foreclosures! The government is helping banks cover their losses, so that means YOU the taxpayer are helping banks and you deserve a voice! Let’s save some time and money. Most of my clients that short sale, or get foreclosed on, want to work with the bank to make up lost payments or modify their loan to a payment they manage with a job loss and change in job/salary— a hardship. I hear from my struggling client borrowers that their banks won't even consider a loan mod request until their mortgage is three months behind--THIS IS CRAZY! Why, instead of banks giving the home to a complete stranger at a discounted price, can't banks help borrowers who truly have a hardship get back on track? This would save so much money and time. Just qualify owners for what they can pay and extend the terms, or reduce the principal. Let's speak out to keep people in their homes! 

Need a Connection? I love helping people find other local people and businesses to help with their needs and help us all locally....just let me know what you are looking for (lenders, painters, flooring, electricians, plumbers, good restaurants, recipes—you name it....and I'll try to put you in touch with someone that does a remarkable job!

Home Sales for 2011 and Interest Rates

Why Home Sales Could Rise This Year

Lawrence Yun, the chief economist of the National Association of Realtors®, reports that the first quarter home sales show the USA currently on track to have existing homes selling at an annualized pace of 5.1 million, which exceeds the 4.9 million for 2010. This year, 2011, should be better for the following reasons:

• More jobs

• Rising stock market wealth

• Rising apartment rents

• Continuing high affordability conditions 

• Home values at historically justifiable levels

• Investors looking to hedge against inflation

• Foreigners buying U.S. homes on the cheap

Other contributing factors to a gain, things that are predicted to happen but haven't yet, like huge bank profits translating into more desire to lend and some reduction to market friction as lenders' short sale approval processes improve, and appraisals becoming less of an issue could also help increase 2011 sales. 

Some obstacles that need to be taken into consideration are the high gas prices that remind us that something is wrong with our economy; and of course, Washington's policymakers  debate about ending government guaranteed mortgages and requiring a minimum downpayment of 20% on conventional mortgages, even though the FHA and VA mortgage programs have very low down payments and have yet to require a single dime of taxpayers' money. And, the  attempts to chip away at the mortgage interest deduction—the middle class will pay it or "let's take it from those working hard because they'll keep paying the bills" approach. 

Something else you'll hear chattered about also is "shadow inventory" (inventory held by banks from foreclosures--these will be in poor condition and have lower values--and homeowners that plan to sell as soon as the market conditions improve) could increase inventory holding values down. But I believe, at least through 2011, improving market delevopments should outweigh the negatives, and as they say, "Don't Sweat the Small Stuff, and it's all small stuff..." (99% of what you worry might happen never does). 

“Home values, despite month-to-month volatility, have been remarkably stable in the range of $160,000 to $170,000 for the past three years,” Yun said. “Stable home prices in turn will steadily lower loan default rates, including strategic defaults.” Here in the Midwest, existing-home sales rose 5.7 percent in April but are 16.4 percent below a cyclical peak in April 2010 (but remember we had the home buying tax credit last spring 2010). The median price in the Midwest was $133,200 in April 2011, down 5.1 percent from a year ago (again higher demand with the tax credit ending).

So what is my take on all of this.....just make your real estate decisions based on your current home needs for shelter and to really enjoy life in.....and I'll help you determine what fits your budget—yes this usually requires compromise to blend your needs and budget, but give me a call...I'll help you find what you need and make sound real estate decisions with less of the "woulduvs, shoulduvs, coulduvs".

Amy Bumpus, Coldwell Banker King Thompson, 614-657-2005

abumpus@insight.rr.com

Interest Rates - Going up or not?

by David Dikeman of Insight Bank

Bad economic news causes money to flow into the safe havens of Bonds and Mortgage Securities. When this happens, mortgage interest rates go down. Good economic news and specifically inflation has the opposite effect. This causes interest rates to increase. Inflation should be rearing it's ugly head as a result of all the money being printed and spent by the US Government. Rates should be on the way up. However, there have been several recent negative economic waves flowing across the world. The upheaval in Egypt and Libya, the Japan Tsunami and resulting nuclear meltdown threat, an most recently, the debt troubles in Greece, Spain, and the Euro Community in general, all these events, have investors worried. Money is staying in safe havens and interest rates remain low.

 

There are some rays of sunshine peaking through the clouds. The US economy seems to be slowly recovering and there have been strong earnings reports from industry. A few more beams of sunshine and inflation will kick in. Interest rate will go up. It's not a matter of "if" but "when". If you're thinking of purchasing a home and you want to get in on interest rates while they're low, now's the time!     

 

David Dikeman, Home Mortgage Consultant

Insight Bank, 614-807-3891 Direct to David

David.Dikeman@InsightBank.com

Need a Connection? I love helping people find other local people and businesses to help with their needs and help us all locally....just let me know what you are looking for (lenders, painters, flooring, electricians, plumbers, good restaurants, recipes—you name it....and I'll try to put you in touch with someone that does a remarkable job!