CAN I GET A LOAN AFTER FORECLOSURE?
CAN I GET A LOAN AFTER FORECLOSURE?
More than four million homes have been lost to foreclosure since the housing market started its decline. Unfortunately, experts expect many more in the coming years.
When the decline started most of us were not prepared, especially the banks. Mistakes were made and many people were hurt. Sadly, other than filing for bankruptcy protection, nothing wrecks a borrower’s chances of qualifying for a home loan like a foreclosure.
Fortunately, those distressed homeowners who obtained an approved short sale will fare much better.
Lender’s loan guidelines forbid most lenders from making loans to borrowers with a bankruptcy or foreclosure on their credit record from between two and seven years. Naturally, the circumstances for each foreclosure are different. Those circumstances will affect the borrower’s eligibility accordingly. Those who were able to maintain, or regain their income levels to the point of remaining current with payments for all obligations other than the mortgage will qualify sooner than will borrowers who were unable to make any of their payments. Employment history is also an important factor. The longer a borrower is employed at one company, on in the same line of work, the better. A two-year, uninterrupted employment period, is an absolute minimum.
Do not expect to qualify for the most competitive interest rates. Lenders will consider your loan a higher risk and will want a higher yield on their investment to compensate.
The selection of a lender for the new loan will also influence the required wait time. Government-backed loan programs require a borrower to wait a minimum of three years before loan approval. Some portfolio lenders, lenders who do not sell their loans and service them for the duration of the loan, can have shorter wait-time requirements.
The best course of action is to select a loan consultant with whom they feel comfortable dealing, explain the specifics of their situation, and allow their consultant to try to find a lender who will approve and fund a loan. You may learn that you have to wait a little longer. If so, you can use the time to improve your credit record and put some cash aside for the down payment and closing costs. Although waiting may not be something you want to do, you may end up better off as a result.
Select this link for a Mercury News article on this subject:
http://www.mercurynews.com/business/ci_20241918/past-foreclosure-means-waiting-years-new-loan
If you would like your specific situation with a licensed Mortgage Loan Originator in confidence, contact us at (916) 337-0658 or e-mail: Mike@BuyYourVilla.com
MORTGAGE RATES ARE MOVING BACK UP
MORTGAGE RATES ARE MOVING BACK UP
Have you waited too long? 
We have been advising potential buyers for months that housing prices and interest rates are so low that it is time to take the plunge. The present housing market is one that we are not likely to see again in our lifetime. Some have decided to follow our advice while others have not.
Some tell themselves that they are waiting for the bottom of the market. The problem is that the only way to know when we hit the bottom is when we look back at the data for several months so that we can identify when it happened. Hindsight is always 20/20.
We cracked our crystal, so we are not very good at predicting the future. What we can tell you is that mortgage interest rates are on the way up. The average rate for a 30-year fixed-rate mortgage is back above 4% now and the pundits tell us that they are destined to keep going up through 2012 and 2013.
You may not be aware of the fact that a few decades ago people were paying as much as 17%! The low 4% range is still EXCELLENT.
Fortunately, rates are not skyrocketing, so there is still time to act. Of course, the longer you wait the higher rates are going to be.
The current market conditions are also ideal for those with sufficient equity to refinance and lower their monthly mortgage payments. The key factor is the amount of equity an owner has in their property. Anyone with a 25% equity interest in his or her home that is paying 6% or above is just GIVING money to their lien holder. How do you like making investors richer?
Granted, lenders are more particular about whom they loan money to in our current market. The days of the fast and furious lending spree with “Liars Loans” and negative amortization loans have gone the way of the Klondike Gold Rush. However, the award goes to the persistent. They will look back on these good old days, when you could get a mortgage loan for 4%!
Select this link for a recent Wall Street Journal article on this subject:
THIS IS THE BOTTOM OF THE HOUSING MARKET
THIS IS THE BOTTOM OF THE HOUSING MARKET
After years of uncertainty and continued declines in home values, we have arrived! This IS THE BOTTOM OF THE HOUSING MARKET!
Forget what the talking heads are saying on television. Look at the financial press. Story, after story is being published that confirms that we are at the bottom. There will not be another opportunity like this in our lifetime.
During a recent CNBC interview with Donald Trump, he said, “When people come up to me and say, ‘What should I do, Mr. Trump?’ “I say go buy a house.”
Warren Buffet declared that if he had a way to manage them, he would buy a couple of hundred thousand single-family homes and rent them out. Even the famously conservative Robert Shiller, known for the Shiller Report, said that, “it wouldn’t be an obvious mistake to buy a house now.”
Bank of America/Merrill Lynch forecast that housing prices would fall 3.5% in 2012. They just revised that forecast made in November and they now think that prices will increase .5%!
Other current stories advise that in 98 out of the top 100 housing markets in the country, it is cheaper to buy than it is to rent. San Francisco and Hawaii were the notable exceptions.
Make no mistake, no one is saying that home prices are going to increase ten or twenty percent in the next hear. The recovery will be slow. However, predictions are that home prices will have recovered 42% by 2020. So, homeowners will be able to take advantage of home value appreciation once again.
Granted, it is more difficult to qualify for a mortgage in 2012. Lenders are much more cautious than they were in the years of the housing boom. Fortunately, there are indications that they are starting to loosen their guidelines so that more people may qualify. After all, they are in the business of lending money and if they hold too tightly on the reigns, they won’t have any business.
The prudent homebuyer should be paying down their existing debt and putting a little cash away for a down payment in an effort to run the gauntlet of loan qualification.
Ten years from now, those who bought in 2012, will be looking back and congratulating themselves on the smart move they made, buying at the bottom of the market. Will you be one of them?
Here is a link to the U.S.A. Today article about home prices:
Here is a link to the Wall Street Journal article by Alexandra Scaggs:
If you are thinking of taking advantage of this housing market, and wish to get professional assistance, contact us at (916) 337-0658 or e-mail Mike West at Mike@BuyYourVilla.com.
TAX IMPLICATIONS OF A SHORT SALE
TAX IMPLICATIONS OF A SHORT SALE
We recently wrote a post about the new revisions to the HAFA (Home Affordable Foreclosure Alternative) program. The government is getting serious about helping distressed homeowners avoid foreclosure.
When the Treasury department first announced HAFA several years ago, the intent was to help homeowners avoid foreclosure and get the housing market back on track. Unfortunately, several of the original guidelines were too restrictive and not many homeowners were able to qualify. Despite that fact, as lenders became more familiar with the program, more and more homeowners have been able to qualify.
The revised guidelines, designed to increase the number of homeowners that can qualify, are expect them to have that result. This is all good news for homeowners who will be able to keep the foreclosure blight off their credit record. You can review the changes by going to that post from March 16, 2012, by selecting this link: http://www.BuyYourVilla.com/blog .
It is now apparent that more distressed homeowners are going to be able to avoid foreclosure. Although there are several ways to do so, a short sale is the most common solution.
Once the homeowner learns that there is a viable solution, and starts down that path, one of the things that will occur to them is that there may be tax implications, which could result in a nasty tax liability.
Tax code recognizes forgiven debt as taxable income. So, if a homeowner gets the approval to sell their home for $ 100,000 less than they owe that bank, the bank issues a 1099 and the homeowner has to pay income taxes on that forgiven debt. One would suspect that amount, not uncommon in a short sale, would put the homeowner in a slightly higher tax bracket.
Fortunately, for those who act quickly, that may not be a problem. Once again, the government came to the rescue. In 2007, they passed a law that excludes forgiven mortgage debt from the taxes. However, we have to warn you that the tax relief expires on December 31, 2012.
It is possible that the relief may be extended beyond that date, but given the state of our economy, we don’t advise betting on that happening.
So, to make a long story short, if you know someone who is having trouble making their mortgage dept (remember that they do NOT have to be behind with their monthly payments to qualify) have them contact an experienced distressed property expert. Short sales take time and time flies when there is a deadline like this coming at you.
For more information about mortgage debt forgiveness and the associated tax implications, select this link to an excellent RISMedia article.
http://wwwrismedia.com/2012/03/11/what-you-need-to-know-about-cancellation-of-mortgage-debt
If you know anyone who needs professional help, at no charge, in the Greater Sacramento area, have him or her contact us at (916) 337-0658 or e-mail Mike@BuyYourVilla.com
HAFA PROGRAM REVISED AND EXTENDED
HAFA PROGRAM REVISED AND EXTENDED
In 2009, the Obama administration created the HAFA (Home Affordable Foreclosure Alternative) program. The purposes for this government-sponsored initiative is to assist HAMP (Home Affordable Modification Program) eligible homeowners avoid foreclosure. (How the government LOVES acronyms!)
Although both programs got off to a slow start, they are now actually helping distressed homeowners avoid foreclosure. The latest iteration of the program eligibility requirements is less stringent, allowing more homeowners to qualify. Program authors hope that more distressed homeowners will apply, taking advantage of the program and avoiding foreclosure.
The changes include:
- The most important change is the extension of the deadline for submitting for HAFA eligibility, from December 31, 2012, to December 31, 2013.
- The removal of the requirement that the homeowner had to have lived in the property within the last twelve months
- The $ 3000 relocation incentive is now limited to properties occupied by the owner or a tenant at the time of the short sale
- Mortgage payments may now exceed 31% of the homeowner’s gross monthly income. This will allow a homeowner to stay current on their mortgage and still qualify, minimizing that overall impact on their credit.
- Secondary lienholders may now receive up to a maximum of $ 8,500, up from the $ 6,000 previously
- The most dramatic change is that Credit Bureau Reporting will not be Account Status Code 13 (paid or closed account/zero balance) or 65 (account paid in full/a foreclosure was started), which ever is applicable. HAFA approved short sale sellers will have less of a negative blemish on their credit report, much better than a foreclosure.
The hope is that a distressed homeowner can remain current with their mortgage payments, qualify for HAFA, continue to make their payments and execute a short sale with a minimum impact on their credit! An excellent final result.
For more information, select this link to the HAFA web site:
http://www.makinghomeaffordable.gov/programs/exit-gracefully/Pages/hafa.aspx
If you are a distressed homeowner in the greater Sacramento area and need assistance, contact us at (916) 337-0658 or e-mail Mike@SellYourVilla.com
