SAN DIEGO REAL ESTATE AGENT BLOG » REO

BUYING A HOME AFTER A FORECLOSURE

Michael Carter - San Diego Real Estate Agent — Wed, 20 Jan 2010 16:06:06 +0000

Put your fears aside. Just because you have bad credit, filed bankruptcy or gone through a foreclosure does not mean you cannot buy a home. You most certainly can buy a home with bad credit. But you’re going to pay more than a borrower who has sparkling credit.

The Waiting Period After Foreclosure / Bankruptcy

The period between bankruptcy filings is seven years, but the ding to your credit report stays for 10 years.
For better rates with a conforming loan, the wait is four years after filing bankruptcy.
FHA guidelines are two years after a foreclosure, which means you could qualify for as little as 3.5% down.
Hard-money lenders will often make loans six months after filing bankruptcy or a foreclosure, but will a require 20 to 35% down payment. The interest rate will be very high and the loan terms are not as favorable; many will contain prepayment penalties and be adjustable.
Subprime lenders (not to be confused with hard-money lenders) are no longer making 100% financed loans.

How to Improve Your Qualification For a Conforming Loan

Obtain a major credit card. It’s easier to get than you would think after a bankruptcy, for three reasons:

A bankruptcy filing gives you a “fresh start.”
The lender knows you have no debt.
You can’t file bankruptcy again for another 7 years.

Show steady employment on the job for one to two years.
Earn a regular salary or wage (this does not apply to self-employment).
Save a down payment of at least 10%.
Avoid late payments and continue to pay your bills on time; do not fall behind.

How FICO Scores Affect Interest Rates

Differences among FICO scores and how that relates to the interest rate borrowers are charged. The following numbers are in comparison to the interest rate a borrower with a 600 FICO score would pay who did not file bankruptcy or lost a previous home to foreclosure. This scenario assumes the borrower with bad credit is putting down 10% of the purchase price in cash and met the seasoning requirements above.

FICO Score of 600 to 640: + 1.625% over prevailing rate. This means if a borrower with good credit is paying 5.875%, your interest rate would be 7.5%.A $200,000 amortized loan at 7.5% would give you a monthly payment of $1,398.
FICO Score of 560 to 580: +2.875% over prevailing rate. This means if a borrower with good credit is paying 5.875%, your interest rate would be 8.75%.A $200,000 amortized loan at 8.75% would give you a monthly payment of $1,573.
FICO Score of 540 to 559: +3.425% over prevailing rate. This means if a borrower with good credit is paying 5.875%, your interest rate would be 9.3%.A $200,000 amortized loan at 9.3% would give you a monthly payment of $1,653.
FICO Score Under 540 to 500: +3.875% over prevailing rate. This means if a borrower with good credit is paying 5.875%, your interest rate would be 9.75%.A $200,000 amortized loan at 9.75% would give you a monthly payment of $1,718.
FICO Score Under 500: +6.25% over prevailing rate. This means if a borrower with good credit is paying 5.875%, your interest rate would be 12%. With a FICO of less than 500, you will not qualify for a 90% loan, but you may qualify for a 65% loan, therefore, you need to increase your down payment from 10% to 35%.A $200,000 amortized loan at 12% would give you a monthly payment of $2,057.

Comparing Identical FICOs Against Borrowers With No Foreclosure or Bankruptcy

A borrower without a bankruptcy or foreclosure with a 600 FICO would receive an interest rate of 5.875% and pay a monthly payment of $1183 on a $200,000 amortized loan. You can see that filing bankruptcy or having a foreclosure on your record, even with a FICO score of 600, results in an increase in a mortgage payment of $215 over that of a borrower without a bankruptcy or foreclosure. However, that difference in payment will let you buy a home.

Alternative to Bank-Financing

Borrowers who are not satisfied with the rate offered by a conforming lender might want to look at buying a home with seller financing. Land contracts offer a viable alternative. Typically, seller financing offers:

No qualifying.
Lower interest rates.
Flexible terms and down payments.
Fast closing.

You will want to check with your lender every year or so to find out if you qualify for a refinance at a lower rate.

By Elizabeth Weintraub

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Mortgage Delinquencies Are Still Rising, More Foreclosures to Come in 2010

Michael Carter - San Diego Real Estate Agent — Thu, 19 Nov 2009 01:30:54 +0000

Mortgage delinquencies rose for the 11th straight month, reaching 6.25 percent in the third quarter from 3.96 percent a year earlier and 5.81 percent in the second quarter, according to the credit management company TransUnion.

“Until the housing market can consistently demonstrate several months of home value appreciation and the unemployment rate improves, mortgage delinquency will likely continue to rise,” said F.J. Guarrera, vice president of TransUnion’s financial services division.

Mortgage delinquency rates were highest in Nevada and Florida, reaching 14.5 percent and 13.3 percent, respectively. They were lowest in North Dakota and South Dakota at 1.7 percent and 2.3 percent respectively.

The District of Columbia had the highest debt per borrower at $359,788, while West Virginia had the lowest at $97,265.

Source: The Wall Street Journal, Joan E. Solsman (11/17/2009)

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

$8,000 homebuyers tax credit extended

Michael Carter - San Diego Real Estate Agent — Fri, 06 Nov 2009 21:45:39 +0000

President Obama reups popular tax credit through June 2010 and expands it to include people with higher incomes and some who want to trade up into new homes.

NEW YORK (CNNMoney.com) — President Obama signed an extension and expansion of the first-time homebuyers tax credit on Friday.

The $8,000 credit was scheduled to lapse on Dec. 1 but will now be in effect through the end of June. Homebuyers must sign a contract before April 30 and close by June 30. The income limits were also raised: Single buyers can now earn up to $125,000 and still get the full credit while a married couple can earn $225,000.

The bill also made more homeowners eligible to claim the credit on their taxes. First-time buyers — those who have not owned a home in the past three years — still qualify for an $8,000 rebate. But now people who want to trade up can also qualify. Those who have owned and occupied a residence for at least five years out of the past eight can claim a $6,500 tax credit if they close on a purchase by the end of June.

“The new version of the tax credit has the potential to stimulate the housing market even more than the old version due to the fact that more people will qualify under the new rules,” said Gibran Nicholas, chairman of the CMPS Institute, an organization that certifies mortgage bankers and brokers.

Who qualifies?

Nicholas provided four scenarios illustrating how the tax credit rules for existing homebuyers will apply:

• Harry owned a home in 2001 and 2002 but sold it to relocate for a job. He would qualify for the $8,000 first-time-buyer credit because he has not owned a home in the past three years.

• Sue purchased a home in 2004 and has lived there since. If she decides to buy a new home, she would qualify for the $6,500 tax credit because she has lived in the same residence for five consecutive years in the past eight.

• Jane purchased her home in 2002, lived there for five consecutive years before she rented it out in 2007. She would qualify because she was an owner/occupier for at least five consecutive years in the past eight.

• Mark purchased a home in 2006 and lived there for the past three years. He would not qualify because he is neither a first-time homebuyer nor someone who lived in the same primary residence for five consecutive years out of the past eight.

How it helps the economy

Legislators and industry experts expect that the credit will encourage buyers such as Jane and Sue to move up their purchase plans.

“This bill will shift demand from the second half of 2010 into the first half,” said Pat Newport, a real estate analyst with IHS Global Research. “As a result, home sales and prices will get a boost in the first half of 2010, with payback in the second.”

That’s not a bad thing, according to Bill Kilmer, vice president of advocacy for the National Association of Home Builders. It’s important to stabilize real estate markets quickly to help bring the economy out of its tailspin.

The original $8,000 tax credit appears to have helped accomplish that goal: Home prices have inched up the past few months, according to the S&P/Case-Shiller Home Price Index.

Would it have happened anyway?

But critics still see the program as being ineffectual because it rewards buyers who would have purchased a home anyway. Newport estimates that fewer than 400,000 of the 2 million who have claimed the original credit made their purchases solely because of the tax advantages.

Furthermore, buyers do not, in reality, receive the entire benefit. “The credit helped prices stabilize,” said Newport. “So the credit has been split between seller and buyer. The sellers are getting higher prices and buyers paying more than they would have without it.”

The housing industry, however, is pleased with the extension, although the credit has not been quite as effective as they hoped.

The industry thought the credit would provide a ripple effect, with sales to first timers triggering as many three additional “move-up” sales.

That did not happen, according to Lawrence Yun, NAR’s chief economist.

“It did not have the chain reaction impact it was supposed to,” he said. “Instead, many first-timers turned to vacant, foreclosed or other distressed properties the sellers of which were unlikely to be move-up buyers.”

So, the tax credit helped prop up the low end of the market without having much impact on the rest of the spectrum. Expanding the benefit to existing homeowners should boost those segments. That should produce additional benefits, according to Yun.

“Preventing further price decline or even nudging prices up a bit stabilizes housing wealth, which makes homeowners more comfortable in their spending,” said Yun. “They’re more likely to go out to the stores or buy a new car. That provides a boost to the overall economy.”

By Les Christie, CNNMoney.com staff writer

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Senate May Approve Tax Credit Wednesday

Michael Carter - San Diego Real Estate Agent — Wed, 04 Nov 2009 19:52:26 +0000

The U.S. House and Senate are close to an agreement to extend the home buyer tax credit due to expire at the end of this month.

The Senate is expected to vote Wednesday while the House could approve it later in the week – likely before Friday when the monthly report on the unemployment rate will be released.

The measure that is slated to pass would cover homes under contract by April 30. Also, anyone taking the credit from a home purchased in 2010 would be able to take the credit when they pay their 2009 taxes.

First-time home buyers would be eligible for $8,000, but purchasers don’t have to be first-time buyers. Anyone who has owned a home for at least five years could get a $6,500 credit on a new residence.

Income limitations rise under the new plan with individuals earning up to $125,000 a year and couples earning up to $225,000 eligible. People who earn more would be eligible for smaller credits.

The New York Times, Jackie Calmes (11/4/2009)

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

Foreclosure Rate Rises 17 Percent

Michael Carter - San Diego Real Estate Agent — Fri, 02 Oct 2009 14:59:42 +0000

The number of homes lost to foreclosures rose about 17 percent in the second quarter of this year despite the launch of an extensive government program aimed at helping borrowers save their home, according to government data released Wednesday.

Completed foreclosures reached 106,007 during the second quarter, compared with 90,696 during the first three months of the year, according to the report by the Office of Thrift Supervision and the Office of the Comptroller of the Currency, which regulates banks. Their quarterly report examines 64 percent of outstanding mortgages in the country.

The increase was primarily the result of various government and industry foreclosure moratoriums, the report said.

Efforts to keep borrowers in their homes increased during that same period, including the implementation of the Making Home Affordable plan. Under that plan, lenders are paid to lower a borrower’s monthly payments. Government data has shown that since the program was launched in March, nearly 400,000 borrowers have been helped. The Obama administration aims to complete 500,000 loan modifications by November.

But even as that program ramps up, rising unemployment continues to hamper foreclosure prevention efforts. The level of foreclosure actions started during the quarter stayed steady, while the number of seriously delinquent borrowers — those who had missed at least two payments — increased 10 percent, according to the report.

The mortgage data “continued to reflect negative trends influenced by weakness in economic conditions including high unemployment and declining home prices in weak housing markets,” the report said.

The report also reflected the risks still posed by hundreds of thousands of risky home loans known as option adjustable-rate mortgages, which reset to significantly higher payments. With these “option ARMs,” also known as pick-a-pay loans, a borrower chooses how much to pay each month, often less than the interest due. But the payments on these mortgages eventually rise significantly, putting the borrower at risk of losing the home.

More than 15 percent of these types of loans were seriously delinquent during the second quarter, compared with 5.3 percent of all mortgages, according to the report, and 10 percent were in the process of foreclosure. “The risks of these loans and geographic concentration caused them to perform significantly worse than the overall portfolio,” the report said

By Renae Merle

Washington Post Staff Writer

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774

BULK REO TAPE

Michael Carter - San Diego Real Estate Agent — Fri, 18 Sep 2009 01:21:08 +0000

Tired of the hastle of buying REO in auctions or contacting asset managers, try a NEW WAY of buying REO properties.

Got to the website below and enter Access Code: Producer and learn a new way of buying REO.

http://socal.propertytapes.com/

Access Code: producer

Please contact me with any questions.

Michael Carter
San Diego Real Estate Agent
MTC Future Realty
(619) 488-5774