How To Refinance When Your Home Is Underwater
The Federal Housing Finance Agency has extended the government’s Home Affordable Refinance Program by 12 months.
HARP’s new end date is June 30, 2011.
Originally known as Making Home Affordable, HARP aims to help homeowners refinance their mortgage who may otherwise be ineligible because of falling home values.
There are 4 basic HARP criteria every borrower must meet:
- The existing home loan must be guaranteed by Fannie Mae or Freddie Mac.
- Your home must be a 1- to 4-unit property
- You must have a perfect mortgage payment history going back 12 months. No 30-day lates allowed.
- Your first mortgage balance must be 125% or less of your home’s market value
If you’re not sure whether Fannie Mae or Freddie Mac back your mortgage, you can look it up. Fannie’s website is http://www.fanniemae.com/loanlookup; Freddie’s is http://freddiemac.com/mymortgage. If you don’t locate your loan on either website, your mortgage is backed by a third-party and is not HARP-eligible.
For homeowners that meet HARP’s criteria, there are some underwriting details of which to be aware.
First, if your original mortgage does not require mortgage insurance, your HARP mortgage will not require it, either — regardless of your new loan-to-value.
Second, all HARP refinances require income verification. It doesn’t matter if your original mortgage was a stated income or no income verification loan. You should expect to produce 1040s and W-2s for your HARP refinance and asset statements, too.
And, lastly, second (and third) mortgages may not be “rolled in” to a new first mortgage loan balance. Junior lien holders must agree to remain in a junior lien position, regardless of combined loan-to-value.
There is a thorough HARP FAQ section on the government’s website, but it’s for general questions only. For specific Home Affordable Refinance Program information, first make sure you’re program-eligible, then pick up the phone to call your loan officer.
HARP is complex enough that you’ll want to talk with a human before taking a proper next step.
Foreclosures Per Capita | February 2010
According to foreclosure-tracking firm RealtyTrac, foreclosure filings topped 300,000 for the 12th straight month last month as 1 in every 418 U.S. homes received a foreclosure filing.
It’s a small improvement from January and a just 6 percent increase over February 2009.
On a per-capita basis, foreclosure density varied by state:
- Nevada : 1 foreclosure filing per 102 homes
- Florida : 1 foreclosure filing per 163 homes
- Arizona : 1 foreclosure filing per 163 homes
- California : 1 foreclosure filing per 195 homes
Also, as in January 2010, foreclosures across the country were concentrated. 10 states beat the national Foreclosure Per Capita average; 40 states fell below. Like everything else is real estate, it seems, foreclosures are local.
For today’s home buyers, foreclosures represent an interesting opportunity.
Homes bought in various stages of foreclosure are often less expensive than other, non-foreclosure homes. It’s one reason why distressed home sales account for 38 percent of all resales. However, less expensive doesn’t always mean less costly. A foreclosed home may be in various stages of disrepair and they’re often sold as-is, as policy.
Buying new or used can be cheaper than buying broken-down.
Therefore, if you’re in the market for a bank-owned home, make sure you know what you’re buying before you sign a contract. Have qualified professionals review and inspect the property, as needed. Damage to pipes or the property’s structure, for example, may not be so obvious on a walk-though and you’ll want to know about it before you buy.
Also, foreclosed homes are federal tax credit-eligible. Buyers must be under contract by April 30, 2010 and closed by June 30, 2010.
Don’t Rush To Refinance That ARM — It May Be Adjusting To 3 Percent Or Lower
If your mortgage is set to adjust this year, the smart move may be to let it. Today’s conforming mortgages are adjusting lower than ever before — as low as 3 percent. It may not be what you expected when you signed for your ARM several years ago.
The reason why ARMs are adjusting lower is because of how they’re made.
When conforming adjustable-rate mortgages adjust, they adjust according to a pre-determined formula. The formula is the sum of a constant and a variable. The constant is usually 2.25 percent and the variable is a daily-changing interest rate called LIBOR.
The formula looks like this:
New Mortgage Rate = LIBOR + 2.250 percent
LIBOR is an acronym for London Interbank Offered Rate. It’s an interest rate at which banks borrow money from each other. In Fall 2008, when Lehman Brothers fell and sparked a global banking fear, LIBOR spiked as the risk of inter-bank borrowing jumped.
Since then, however, LIBOR is down.
Normalcy is returning to banking and the timing couldn’t be better for homeowners with ARMs. 15 months ago, a homeowner’s ARM may have adjusted to 6 1/2 percent. Today, that same ARM falls to just above 3.
As a strategy play, it might make sense to let your ARM adjust. Or, because fixed rates are still near 5 percent, converting that ARM to a long-term fixed-rate product might make sense, too. The decision is a balance between how low do you want your payment, and how long might you live in your home.
The longer you stay, the more it might make sense to switch to fixed-rate, even though ARM rates are so low.
If you’ve got an adjusting ARM, talk to your loan officer about your choices. Once March ends and the Fed withdraws its mortgage market support, mortgage rates may rise and the fixed-rate option may be gone.
7 Weeks Remain To Find A Home, Claim Up To $8,000 In Tax Credits
In November, Congress extended and expanded the First-Time Home Buyer Tax Credit program to include a subset of “move-up” buyers — homeowners that have owned and lived in their home for 5 of the last 8 years.
The credit ranges up to $8,000 per buyer. There’s now just 7 weeks left to take advantage.
To be eligible, home buyers must be under contract for a new home no later than April 30, 2010, and must be closed no later than June 30, 2010.
In addition to meeting the deadline dates, there’s a basic set of requirements to be tax credit-eligible:
- You can’t purchase the home from a parent, spouse, or child
- You can’t purchase the home from an entity in which the seller is a majority owner
- You can’t acquire the home by gift or inheritance
- Each buyer in the purchase must meet eligibility requirements
There’s other criteria, too.
For one, the sales price on the subject property cannot exceed $800,000. Homes sold for more than $800,000 are ineligible for the tax credit. Furthermore, households earning more than $125,000 as single-filers, or $225,500 for joint-filers, are ineligible.
You can read the complete eligibility requirements at the IRS website, or, you may just find it simpler to speak with your accountant about it. There are some nuances in qualifying for and claiming the tax credit on your returns and getting a professional’s opinion is always wise.
And lastly, don’t forget that government’s tax credit program is a true tax credit. It’s not a tax deduction. This means that a tax filer whose “normal” tax liability is $3,500 and who is eligible for $8,000 in credit will receive a $4,500 refund from the U.S. Treasury.
If you’re currently in the House Hunt, mark your calendar for April 30, 2010. It’s 7 weeks away and you can be sure that as the date gets closer, buyer traffic is going to increase. You may find sellers more willing to negotiate today than several weeks from now.
Geek Gifts : The 16-Piece iPhone Coaster Set
You could call it the Ultimate Geek Gift for an iPhone-toting friend — or even for yourself. It’s a set of 16 coasters made to look like iPhone application icons.
Made by Brazilian firm Meninos, the coasters are constructed from sturdy, medium-density fiber plywood and are coated in vinyl. They’re are roughly 3 1/2 inches square, washable, and feature non-skid, rubber bottoms.
Many of the most popular iPhone icons are included:
- Maps and Compass
- Camera and Photo Albums
- YouTube and iPod
The iPhone coasters sell for $59.99 plus shipping. Arrange them like your phone, or pin them on the wall. Either way, they’ll be a functional conversation piece for your home, or the home of a friend.
Pending Home Sales Drag In January, But Should Rebound For Spring
Fewer homes went under contract in January as the housing market continues to limp through the winter months.
According to the National Association of Realtors®, the Pending Home Sales Index fell to its lowest level in 3 quarters this January. By contrast, in October 2009, the index had touched a 3-year high.
The Pending Home Sales Index measures the number of homes that have gone under contract to sell, but have yet to close nationwide. It’s compiled using data from more than 100 regional listing services and 60-plus brokerages — the sample set encompasses 20 percent of all home resales in a given month.
Economists have come to rely on the Pending Home Sales Index because of its high correlation to actual home sales. 80% of all home marked “pending” close within 60 days. Many of the rest close within 120.
Therefore, when we see Pending Home Sales show weakness like it did in January, we can infer that home resales will remain weak through the spring.
But will they really?
- Fewer sales should drag down home prices, bringing more buyers into the market
- Mortgage rates are still very low, but are poised to rise in just a few weeks
- The home buyer tax credit requires buyers to be in contract by April 30, 2010
In other words, there’s a confluence of factors that could lead to a rush of sales around the country over the next two months, reversing the housing market’s recent momentum.
Tying Friday’s Jobs Report To Rising Mortgage Rates
Conforming and FHA mortgage rates have improved over the last 10 days, but that could all change this Friday with the release of February’s Non-Farm Payrolls report.
Non-Farm Payrolls is the official name of the government’s monthly jobs report and, given the fragile state of the U.S. economy, Wall Street will be watching it closely.
Mortgage rates could spike come Friday morning.
Jobs are an important part of the nation’s recovery. Among other concerns, unemployed Americans don’t spend as much money on goods and services, and are more likely to default on a mortgage. This retards economic growth and increases the potential for foreclosures.
When jobs numbers worsen, therefore, it follows that economic projections worsen, too.
Poor employment figures draw money away from the stock markets and into less-risky bond markets, including mortgage-backed bonds. Mortgage rates improve as a result. Conversely, when jobs numbers improve, stock markets gain and bond markets worsen.
Analysts expect that a net 30,000 jobs were lost in February.
The Bureau of Labor Statistics press release hits at 8:30 A.M. ET, roughly an hour before Friday’s mortgage pricing will be available to consumers. If you’re worried about rates rising on the heels of a strong jobs report, therefore, be sure to get your rate lock in today instead. Once Friday gets here, it may be too late.
How To Properly Screen A Prospective Tenant
According to the the National Association of Realtors®, “distressed homes” represented nearly 2 of every fifth home sold in January 2010. Clearly, real estate investors are taking advantage of good deals on cheap property. But there’s risk involved.
This NBC Today Show interview first ran in March 2009, featuring real estate expert Barbara Corcoran. Despite its age, the message remains relevant. Today may be a terrific time to buy a bank-owned home — just make sure you do your research first. There’s plenty of ways for investors to get burned.
Some of the tips in the video include:
- Buy in your own backyard
- Start small, then build to a bigger portfolio
- Watch receipts — rent rolls don’t matter if tenants aren’t paying rent
Corcoran also gives pointers on how to evaluate a prospective tenant.
Foreclosures should represent a large number of 2010’s total home sales and will offer interesting opportunities to bona fide real estate investors. Before you jump in, make sure to watch the video. The rents you save may be your own.
Remember, the stats and the data are from 12 months ago, but the advice stays meaningful.
San Diego Homes – El Cajon – 92021
Connect with us on Facebook, Twitter, and LinkedIn. San Diego is a great place to call home! Please feel free to contact us with any of your San Diego real estate questions, or questions about San Diego in general. You can search all properties for sale at San Diego home search.