With all of the changes that have taken place in the mortgage industry, one thing that you should see more and more of are FHA loans. They offer one of the lowest down payment options available which make them a natural fit for most 1st time home buyers, although repeat buyers refquently use this loan program as well. Right now, a buyer will need to show that they have 3% of the purchase price to put down on the loan of the home (there has been debate recently about increasing that to 3.5%). This 3% must be documented, like in a savings or checking account. Every loan will have closing costs associated with it i.e. title insurance- origination fees- appraisal- among other costs. These costs can vary, but will typically be 2-4% of the loan amount depending on that loan amount. Sometimes you need to ask for 6% for closing costs. The lower the loan, the higher the % will be due to most of these costs being a fixed amount. There are ways around both of these percentages though. A very common part of purchase agreements, right now, is for the seller to pay for the closing costs of the loan. And, although down payment assistance programs are no longer available, you can have a relative pay your 3% down payment provided that they supply a gift letter and can show proof that they indeed have the 3% that is needed.
When writing the purchase agreement, a buyer must put an earnest deposit with the offer. On most FHA loans in Michiana, this will be from $500 to $1000. This amount will go towards the down payment of the home, but is needed as a show of good faith to the seller that the buyer is serious about purchasing the home. In Indiana, the deposit is held by the listing brokerage in a non-interest bearing account. In Michigan, it is held by the buyers brokerage.Obviously, the more a buyer can put down in earnest, the more serious the buyer comes across. If the sale falls apart due to the part of the seller, the buyer will get their earnest deposit back. If the sale falls apart due to something on the buyer side--like getting cold feet, then the buyer loses the deposit. Most lenders will also require a deposit for the appraisal that they will have to do on the house.
Another benefit to a FHA loan is that they can be assumed by someone. This used to happen a lot about 15-20 years ago. An example of this, is when a homeowner that had bought their home with an FHA loan has decided to sell the home. When they bought it, they may have taken out a mortgae when interest rates were low, let's say 7%. But when they decided to sell the home, rates were at 10%. The purchaser can assume the loan at 7% as long as they can get approved like they would normally have to. The catch on this though, is that usually a homeowner has built up some equity in the home, so the buyer will have to cough up the difference between what is owed and what the seller wants for the house.
Just like with any loan, you will have to have proper documentation of income and credit history in order to get approved for the loan. There are several things with your credit and income that get looked at. You will usually need a credit score of at least 580, but sometimes lower scores are accepted. You have to show a history of credit, preferably with no late payments in the past year. And you will have to have a good debt to income ratio, which will vary depending on which lender you choose. Not all lenders will do FHA loans, so if your lender says that they cannot get you approved, ask them what kind of loan they were trying to approve you for. There are several different programs available, and they may not be a FHA approved lender.
Friday, November 28, 2008
Wednesday, November 26, 2008
An Old Memory for Thanksgiving
As we get older, we tend to reflect back on things with great fondness. Things always seemed so great "back in the day". We get caught up with things happening in our daily lives without much time to reflect in the now. There are a lot of things that I reflect about. Lately, I have been reflecting on old TV shows that I used to love to watch. Happy Days, Cheers, Welcome Back Kotter (that one is obvious for anyone who calls my cell phone), Family Ties--just to name a few. But as Thanksgiving comes tomorrow I am reminded of one show, WKRP in Cincinnati! It had a great theme song, and the cast was VERY funny. Johnny Fever, Venis Flytrap, Bailey-all were good characters. But for me, Les Nesman was the best of the characters of that show! And as I think of Thanksgiving, it always brings a smile to my face when I think of the video that is below. Please ignore the message at the end of the video-the person that posted it on YouTube put it on the video. I hope this brings back a memory or two for you and have a great Thanksgiving!
Tuesday, November 25, 2008
Google and My Church
I love to Google. I Google myself, family and friends to see what comes up. If I don't know the answer to something, I Google the question and "poof" there is an answer. Sometimes I'm stunned by what I see, other times I'm not. Recently I decided to Google the church that I attend, Granger Community Church in Granger, Indiana. Some of the negative things I read really disappointed me. Don't get me wrong, I know that GCC is not a perfect church, but the negatives that I was reading from other christians--were, well, was disappointing
Granger Community Church (GCC) is a little different then your traditional church. They have a band with loud drums and guitars (a little too loud for me sometimes), they use pop culture in an attempt to reach people that a traditional church might be unable to reach. If you were to show up in jeans and a t-shirt, nobody looks down at you, there are no secret hand shakes or "christianese" that is spoken, no special kool-aid that you drink. They just teach the message of Christ in a non traditional, non threatening way that resonates with certain people that could not other wise be reached. For this, GCC is heavily scrutinized for being unconventional. But, wasn't Christ unconventional too? Would Christ use today's technology to reach people? As long as the message is correct, I don't see what the problem is. Please click on these links to see some videos that GCC has made:
Granger Community Church (GCC) is a little different then your traditional church. They have a band with loud drums and guitars (a little too loud for me sometimes), they use pop culture in an attempt to reach people that a traditional church might be unable to reach. If you were to show up in jeans and a t-shirt, nobody looks down at you, there are no secret hand shakes or "christianese" that is spoken, no special kool-aid that you drink. They just teach the message of Christ in a non traditional, non threatening way that resonates with certain people that could not other wise be reached. For this, GCC is heavily scrutinized for being unconventional. But, wasn't Christ unconventional too? Would Christ use today's technology to reach people? As long as the message is correct, I don't see what the problem is. Please click on these links to see some videos that GCC has made:
Monday, November 24, 2008
Short Sale
So, your house is going into foreclosure, you know that you can't keep the house and mentally you have came to terms with the fact you are losing your home. The market is tough and you don't think that you can get what is owed on the house. So now what do you do? What you need to do is contact a REALTOR that knows how to do a short sale. A short sale is when you list and sell your home for less than what is owed on it. Most banks are very willing to do these right now. They would rather take the loss on it now rather than to let the house sit vacant and take more of a loss on it after they have taken the house back. Short sales get marketed just like any other house on the market.
The next question that is usually asked is "Who is responsible for the short?" Because it so common right now, most banks are willing to forgive the shortage if you have a true hardship. You must supply financial documentation and a letter of hardship to the bank. If the hardship or financials do not look right to the bank, they may ask you to sign a promissory note to repay the shortage at a low interest rate over a period of several years. If you have a 2nd mortgage, those can be more tricky to get cleared. It will usually depend on how big the shortage is and once again what your financial and hardship situation looks like. If your 1st mortgage is taking a short, usually your 1st mortgage company will offer a token payoff of $500 to $1000 to the 2nd in order to get them to release the loan. Also, be patient. Once an offer is written on the house it can take over 60 days to get it approved and to the closing table. I've had them take as little as 45 days and I've had them take as long as 5 months to get them closed once an offer is accepted.
Another benefit is that it does not show up on your credit report as a big negative like a foreclosure or bankruptcy does. However, not all REALTORS know how to do a short sale. Not all REALTORS want to do a short sale- in fact most REALTORS do not like to do them and want nothing to do with them because they get paid less and have to do more work. So, it is important to find the right REALTOR. If you have other questions, please feel free to ask.
The next question that is usually asked is "Who is responsible for the short?" Because it so common right now, most banks are willing to forgive the shortage if you have a true hardship. You must supply financial documentation and a letter of hardship to the bank. If the hardship or financials do not look right to the bank, they may ask you to sign a promissory note to repay the shortage at a low interest rate over a period of several years. If you have a 2nd mortgage, those can be more tricky to get cleared. It will usually depend on how big the shortage is and once again what your financial and hardship situation looks like. If your 1st mortgage is taking a short, usually your 1st mortgage company will offer a token payoff of $500 to $1000 to the 2nd in order to get them to release the loan. Also, be patient. Once an offer is written on the house it can take over 60 days to get it approved and to the closing table. I've had them take as little as 45 days and I've had them take as long as 5 months to get them closed once an offer is accepted.
Another benefit is that it does not show up on your credit report as a big negative like a foreclosure or bankruptcy does. However, not all REALTORS know how to do a short sale. Not all REALTORS want to do a short sale- in fact most REALTORS do not like to do them and want nothing to do with them because they get paid less and have to do more work. So, it is important to find the right REALTOR. If you have other questions, please feel free to ask.
Friday, November 21, 2008
Mortgage Crisis and Foreclosure
Because I'm a REALTOR, I get a lot of people asking me about foreclosure since that is a big problem right now. There's a lot to talk about on this topic and it might require a few different posts to cover different aspects. One question I get asked a lot is "how we can fix the mortgage problem that caused this economic mess that we are in?" My answer usually stuns people--for the most part, it's already fixed. What we are dealing with right now is the collateral damage caused by having it broken. This is what I mean. Near the beginning of the year, subprime loans went away. These are loans that were being made to people with questionable credit. The mortgage industry also did away with 80/20 loans and then recently most 100% financing options were done away with. So that's what I meant by being fixed. There are not nearly the number of risky loans available.
I think what people mean to ask is "How can we fix the damage that has been done?" That's a question that is easy to answer, it's just that nobody likes the answer-"We are going to have to ride this wave until it stops." That's the cold hard truth. The real estate market will start to turn upward again when you-the consumer-has confidence again in the market. And confidence is a hard thing to have right now when you see so many Foreclosures out there.
If you are going into Foreclosure, the worst thing you can do, is to do nothing and just let the house go back to the bank. Information varies on this, but I've been told that a bankruptcy will take about 2 years to clear up on your credit and that a Foreclosure takes about 4 years to clear up. Both of these are not good options, but Foreclosure is clearly worse. And chances are if you have missed payments on your mortgage, you have already been missing payments on your car, credit cards and maybe even your utility bills. So, you may have to file bankruptcy no matter what.
What can you do if you are going into foreclosure? 1st--Try to talk to your bank. Depending on your bank, you might be able to get a loan modification or a forebearance. This can be challenging. The reason for this is because of the way banks operate. Let me give you a typical example of what people go through when they call into their bank when they are behind on the mortgage. You call the 800# on your statement, type in your 9 or 10 digit account number and then you get connected to a debt collector. That person's sole job is to collect any money they can from you. They don't seem to care about why you are behind, they just want $3000 from you to get your mortgage caught up. Usually this is about where the conversation ends because you do not have the $3000. If you did, you would not be behind on the payment and people don't know what else to do so they hang up. What people need to do, is keep pressing in and demand to talk to someone in the loss mitigation or workout department. That is where the solutions are.
If that does not work, find a REALTOR that has experience in dealing with this sort of thing. Write out a letter giving him/her permission to talk to the bank about your mortgage on your behalf. Why? Because if I call in, I get the same debt collector as you-only they know there's not a chance that I am going to pay them anything because I'm a 3rd party. Usually, I can get with the right people to talk to about what is going on. If the bank is willing to work things out, and most would like to, they will require certain information from you such as: your last 2 bank statements, your last months pay stubs, they may want tax information, a financial statement and they will definately want a hardship letter explaining why you are in the situation that you are in. If you can show that whatever problem you were having is over with and that you can financially afford the house, they will usually work something out with you. If you cannot show that you can afford the hosue, then they are going to encourage you to try to sell the house.
I think what people mean to ask is "How can we fix the damage that has been done?" That's a question that is easy to answer, it's just that nobody likes the answer-"We are going to have to ride this wave until it stops." That's the cold hard truth. The real estate market will start to turn upward again when you-the consumer-has confidence again in the market. And confidence is a hard thing to have right now when you see so many Foreclosures out there.
If you are going into Foreclosure, the worst thing you can do, is to do nothing and just let the house go back to the bank. Information varies on this, but I've been told that a bankruptcy will take about 2 years to clear up on your credit and that a Foreclosure takes about 4 years to clear up. Both of these are not good options, but Foreclosure is clearly worse. And chances are if you have missed payments on your mortgage, you have already been missing payments on your car, credit cards and maybe even your utility bills. So, you may have to file bankruptcy no matter what.
What can you do if you are going into foreclosure? 1st--Try to talk to your bank. Depending on your bank, you might be able to get a loan modification or a forebearance. This can be challenging. The reason for this is because of the way banks operate. Let me give you a typical example of what people go through when they call into their bank when they are behind on the mortgage. You call the 800# on your statement, type in your 9 or 10 digit account number and then you get connected to a debt collector. That person's sole job is to collect any money they can from you. They don't seem to care about why you are behind, they just want $3000 from you to get your mortgage caught up. Usually this is about where the conversation ends because you do not have the $3000. If you did, you would not be behind on the payment and people don't know what else to do so they hang up. What people need to do, is keep pressing in and demand to talk to someone in the loss mitigation or workout department. That is where the solutions are.
If that does not work, find a REALTOR that has experience in dealing with this sort of thing. Write out a letter giving him/her permission to talk to the bank about your mortgage on your behalf. Why? Because if I call in, I get the same debt collector as you-only they know there's not a chance that I am going to pay them anything because I'm a 3rd party. Usually, I can get with the right people to talk to about what is going on. If the bank is willing to work things out, and most would like to, they will require certain information from you such as: your last 2 bank statements, your last months pay stubs, they may want tax information, a financial statement and they will definately want a hardship letter explaining why you are in the situation that you are in. If you can show that whatever problem you were having is over with and that you can financially afford the house, they will usually work something out with you. If you cannot show that you can afford the hosue, then they are going to encourage you to try to sell the house.
Thursday, November 20, 2008
Christian Leadership and the Election Results
I belong to a men's bible group that meets every Friday morning at Honkers on Day Rd in Mishawaka. This Friday (tomorrow) it is my turn to pick the topic and to lead in discussion. Part of what we will be discussing is how Christian leadership is handling the results of this years presidential election. The scripture quoted in this church sign is "You must not have any other god but me"
I am also using 1 Timothy 2:1-2 which says "I urge you, first of all, to pray for all people. Ask God to help them; interced on their behalf, and give thanks for them. Pray this way for kings and all who are in authority so that we can live peaceful and quiet lives marked by godliness and dignity"
Here are the questions that I am posing to this group:
What are your thoughts on these scriptures?
How do you think Christian leaders are handling the results of this election?
Would Jesus approve of the way that Christian leaders are handling the results of this election?
What do you think of this sign posted outside of a Christian church in Kansas?
Feel free to share your thoughts as well by clicking on the comments icon below this post.
Wednesday, November 19, 2008
Next Wednesday
By next Wednesday, November 26, there will 109 more families between Elkhart and St.Joseph counties that will have their homes taken away from them due to foreclosure. Sixty seven of those families are from Elkhart county and fourty-two from St. Joseph county. Houses ranging in value from $28,000 to $681,000. The house that owes $681,000 is one of only 2 that owes over $200,000. If this is not main street America, then I don't know what is.
A recent magazine artice, I beleive it was in Newsweek, pointed out that Elkhart county has had the largest rise of unemployment from one year to the next in the country. The article continued to write about a recent ordinance that was passed in Elkhart county that limited the number or yard/garage sales to one per family per month due to the large number of families that are having them. Families selling off whatever they can just to put food on the table.
This coming Thursday, November 27, is Thanksgiving. Puts a little perspective on it, doesn't it?
A recent magazine artice, I beleive it was in Newsweek, pointed out that Elkhart county has had the largest rise of unemployment from one year to the next in the country. The article continued to write about a recent ordinance that was passed in Elkhart county that limited the number or yard/garage sales to one per family per month due to the large number of families that are having them. Families selling off whatever they can just to put food on the table.
This coming Thursday, November 27, is Thanksgiving. Puts a little perspective on it, doesn't it?
1st Post
Thanks for checking out my Blog! I hope that you will decide to come back often to see what I will have to say. I will be covering a wide range of topics from Real Estate, Faith/Religion, Baseball, Pugs, Movies and whatever else comes to mind. Also, feel free to check out Twitter. This is also something new that I just started and it seems pretty cool. Anyway, thanks again for checking this out. It is still a work in progress, as everything seems to be, and I'll be posting things of more meaning real soon!
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