My Beautiful Sacramento

When it comes to purchasing their first home, many people will start looking at real estate ads, driving around neighborhoods, peeking in windows of vacant homes, and dreaming about finding the perfect home to move into.   It's magical, exciting and kind of scary since not everyone has a clear idea of where to start.  You want to pick the home that has what you're looking for and buy it.  Sounds simple enough.  Right? 

Buying a home in today's market can be a challenge.  With an abundance of short-sales and foreclosures up for sale and many buyers wanting to take advantage of low rates and great prices, it is a mad mad world in real estate right now.  You will be best served by getting yourself aligned with some savvy real estate professionals who can guide you through the process from the beginning and help you arrive at the finish line, a closed escrow, and keys to your new home.  Just getting an accepted offer is tough these days.  So you really do want to improve your chances by presenting a strong case.  What makes a strong offer?  An approved buyer. 

Strengthen your buying power by getting pre-approved for a home mortgage.  Pre-approval and prequalified are not the same thing. 

Getting prequalified is easy and will get you started.  Getting prequalified is to give the mortgage advisor your information. Then you can continue to get loan approval which will be getting all information verified before you find a property and save time since a purchase contract is usually contingent upon getting financing.  When you make an offer you will be at an advantage as the seller will know you are much closer to closing.  Once you find the right property you fill in the details and it becomes a full loan application. 

Before you start looking at homes you need to know what price range will fit within your budget.  Get started now.

First, your mortgage advisor will need to know your monthly income, length of time on a job and how much of your monthly income goes towards paying debts.  This is called the debt to income ratio.  There is a standard rule of a maximum top and bottom number which is just as important as your fico score on your credit report.  The debt to income ratio varies with the type of loan product you will be getting.  For example for a conventional loan the standard ratio is 28/36.  It may be slightly higher for FHA or VA loans. 

The first number is the maximum percentage of your gross monthly income that the lender will allow for housing expenses. The total includes payments on the mortgage loan, mortgage insurance, hazard insurance, property taxes, and homeowner’s association dues.  The second number includes your housing expense plus any recurring debts such as credit card payments, auto loans, child support or any other long term obligations. 

Take note of this!  If you are planning to purchase a home, now is not the time to buy a new car or make any major credit card purchases.  Even if you are in escrow, do not purchase a washer or dryer or anything for your new home until after you have closed escrow and received the keys to your home.  People have ruined their chances of getting a home loan because they made credit card purchases during the escrow process.  A new credit report is usually issued before the loan funds.  You must be within the guidelines of the debt to income ratio. 

Next, your mortgage advisor will need to determine your loan to value ratio.  They need to know how much cash is available to cover any down payment, closing costs or prepaid items such as taxes and insurance and how much cash reserves will remain in your accounts after your purchase.  This will also help you determine the kind of loan program that is best for you.  Some loan programs allow the seller to pay a percentage of the closing costs and there are also home buyer assistance programs available. 

Once your mortgage advisor gets this information they can educate you about the loan products and services that will fit with your debt to income and loan to value ratio.  Now you are ready to decide what type of loan you will be getting, such as FHA, VA, Conventional; your interest rate, down payment, and how much cash you will be bringing to the closing table. 

Your mortgage advisor will issue a prequalificaton letter for you to give to your real estate agent.  This will let the real estate agent know that not only are you serious about buying a home but that you qualify and you are able to close the escrow.  It will also help your real estate agent when they present an offer to purchase a property on your behalf. 

The seller may have more than one offer on a particular property and when this happens the seller will look at each offer and consider the down payment amount and the type of financing that the buyer is getting.  The seller is usually most interested in choosing a buyer who can close the transaction.  Presenting a buyer with an approved loan will help seal the deal.

Are you ready to buy a home in the greater Sacramento area?  Do you want to present a strong offer that gets accepted?  There are several ways I can help you get started.  Click here to visit my website.

Photos by BigStockPhoto.com

Saving Your Home From Foreclosure - Home Loan Modification or Short Sale

Well, it has been a couple of months since I wrote my article, Home Loan Modification - Is it possible?

At the time I was terribly frustrated with what I was hearing from those seeking assistance and getting no where.  I wonder if there have been any significant changes to the system that is supposed to help people who desperately want to remain in their homes.  I say, don't give up.

Whatever your situation may be, don't just walk away.  The first place I would visit is: 

www.MakingHomeAffordable.gov.

If they are unable to help you, the second thing I would consider is a short sale.  At least with a short sale there are some benefits that are better than the alternative, which is foreclosure and all the pitfalls that go along with it.  You can still do a short sale if you are current on your mortgage payments. 

I have an excellent resource for information about short sales.  Here in the greater Sacramento area we have a short sale guru.  Her name is Elizabeth Weintraub.  I don't know Elizabeth personally but I have had some interactions with her on the Active Rain Real Estate Network.  We often read and comment on the same blogs. She is also a writer at About.com and specializes on short sale information. 

People who live in the greater Sacramento area often contact me asking for mortgage help.  When they owe more on their home than it is worth, all I can do is offer them resources.  I wish I could do more.

So, now you have two things you can consider before foreclosure.

Here is a good video that explains HOW to go about getting a home loan modification.

I just finished reading an insightful article on the CNBC blog about Big Banks Accused of Short Sale Fraud.  You can read about it by following the link. 

The article is discussing how second lien holders have been taking cash on the side from the real estate agents or the buyers outside of the escrow so that the first lien holder would not know that they were getting paid in order to drop the lien.  

That is not legal. 

Disclosure, disclosure, disclosure!  Everything is to be disclosed.  No secrets, no surprises.

Under no circumstances is there to be any compensation from any party that is not listed on the HUD statement. 

(RESPA is the Real Estate Settlement Procedures Act, the 2008 law requiring that consumers receive disclosures at various times in the transaction. It outlaws kickbacks that increase the cost of settlement services. RESPA is a HUD consumer protection statute designed to help homebuyers be better shoppers in the home buying process, and is enforced by HUD. Read more about it here.).

In the real estate news today, it's everywhere, articles about home loan modification. 

Ah, the elusive thing that we all know is out there but has anybody really seen it?  I'm sure there are those who have successfully arranged and received a home loan modification but I don't know of many and nobody personally who has.  All I hear about is the frustration and defeat of those who have tried to no avail and given up, walked away. 

Tell me I'm wrong.  Tell me that Mighty Mouse has come to save the day! LOL!  I cannot, in good conscience write another article telling people how to get a loan modification or where to seek help unless I hear that more people are actually having some success with getting their home loans modified.

1 in 4 homeowners owe more on their home than it is worth and 7.5 million are behind on their mortgage payments.  Take unemployment into consideration and this is a tough situation.

Many don't know where to turn or how to get help with a mortgage modification and many banks and lenders are under informed and understaffed to deal with this problem.  Yes, this is where the buck stops.  Now, show me the money!

It is confusing for the homeowners because they are being told that programs for helping them get a loan modification exist but when they try to get help nobody seems to know exactly what to do.  In the process they get lost in the shuffle of paperwork, and lost files or un-returned phone calls, etc.  Banks are overwhelmed.  Many people get frustrated and give up. 

"Here I come to save the daaaaaay!"  Okay..... really?  Seriously?

The government is stepping up and offering new guidelines which will help homeowners with loan modifications and will begin fining and publishing a list of lenders who fail to increase the amount of homeowners who are given relief. The government expects to have 375,000 homeowners eligible for permanent mortgage reductions by the end of 2009.

"Eligible" homeowners.  Being eligible and getting it done is not the same thing.  And yes, I know I am being sarcastic.  I had to humor myself if I was going to pass on this valuable news flash.  At first I was just going to state the facts but as I started writing, it hit me that I know very few folks who have ever successfully gotten through the loan modification process.  It seems impossible.

For those who have been successful getting a loan modification it took up to 9 months in some cases.  

I hope with all my heart, that the new guidelines that the government has in place will make getting a home loan modification something that everyone who is eligible can achieve without losing their minds in the process.

If you need help with a loan modification, it's free.  Visit  http://makinghomeaffordable.gov/

Free Photos by BigStockPhoto.com

Many homeowners are finding themselves in financial distress these days as a result of bad loans and unemployment.  They are asking, "How do I refinance when I owe more than my property is worth?" or "How can I get a loan modification?"  With property values in decline many homeowners owe much more on their homes than the property is worth which makes refinancing impossible.  Selling the home seems out of the question because the sales price would not pay off the loans that they owe on the home.  Foreclosure may seem the only action which will cause catastrophic effects on the home-owner's credit.  

Homeowners are in a query of what to do to save their homes from foreclosure and are reaching out grasping straws to find ANY solution that will save them from this awful situation.  Sadly, many become victims of rescue foreclosure scams in a desperate effort to save their homes.  

There are some alternatives.  Don't ignore phone calls or letters from your lender.  Contact your lender to see if you can get a loan modification.  If you find you are getting nowhere with your lender, contact a HUD approved counseling agency.  You can find on at www.hud.gov. You should not have to pay for a legitimate housing counselor. 

Beware of loan modification companies popping up everywhere.  Contact an attorney if you can afford one or contact a local law school.  In Sacramento there is the McGeorge Law School.

Another alternative to foreclosure is a short sale.  In a short sale, the owner/debtor sells the property for less than the outstanding balance owed on the loan.  A short sale will remain on a person's credit report for seven years but has less of an impact and is less costly as a foreclosure.  Usually the a person can still purchase another home within 1 to 3 years after a short sale. The lender must approve the short sale based on their own criteria and the debtor must prove a financial hardship.  Lenders often have loss mitigation departments that evaluate potential short sale transactions. The majority have a pre-determined criteria for such transactions, but they may be open to offers, and their willingness varies. A bank will typically determine the amount of equity (or lack thereof), by determining the probable selling price from an appraisal or Broker Price OpinionBPO or BOV). (abbreviated

Don't let the name fool you.  A short sale is not a "quick sale."  It does sound like it should be quick but it's far from it.  I wonder whose bright idea it was to call it a short sale.  =)  I was pre-qualifying a buyer the other day and she mentioned that she would like to buy a "Quick short sale" property.  It made me realize that not everyone understands or knows about terms that are used in the real estate and loan industry.  I read the mortgage and real estate news daily because it is my job but the majority of the public only reads this stuff when it has to do with them personally.  It is my job to educate and protect the best interest of those who come to me for help. Though I do get a little chuckle out of how the terms are comprehended at times.  Shows how important it is to explain.

Photos courtesy of bigstockphoto.com