Becky Parker's Real Estate Blog | Gilroy, CA | Mortgage, Buy House, First Time Home Buyers, Foreclosures, Short Sales

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Reverse Mortgage Variation For Seniors To Downsize

Posted by Becky Parker | on Tuesday, May 12th, 2009 at 11:22 am
Category: Mortgage.
Tags: , , ,

Borrowers over 62 years of age may sell their current residence and use a reverse mortgage to buy a new home in a single transaction thus allowing them to be mortgage free as long as they stay in the new residence. This unique transaction is being done under a Home Equity Conversion Mortgage (HECM) for Purchase, a form of federally insured reverse mortgage authorized in the Housing and Economic Recovery Act of 2008.

The program is specifically designed for persons 62 years or older who want to move into a smaller home. The program allows the seniors to sell their current residence and use a reverse mortgage to buy a new one, all in a single transaction thus eliminating paying closing costs twice.

If the seniors have equity in their old home, they may use proceeds from the sale for a down payment on the new one, and then take out a reverse mortgage for the rest. They would still have to cover the expenses for two closings but, except for a review of financial obligations, they wouldn’t have to meet any income, credit or asset qualifications for the new loan. Better yet, they will have no monthly payments because the loan doesn’t have to be paid back until the home is sold.

The loans are called reverse mortgages because, instead of paying the lender, the lender pays the homeowner. The amount received is based on the age of the youngest borrower, the value and location of the home and current interest rates. The borrower can take the proceeds in a lump sum, as a line of credit to be tapped as needed; in monthly installments; or in any combination of the three.

Interest and mortgage-insurance premiums accrue on the borrowed amount, but no payments are necessary until the home is no longer occupied or owned by the borrower. In other words, a reverse mortgage need not be repaid until the borrower sells, moves out or passes away.

And since these are non recourse loans, the borrower never owes more than the value of the property. The owed balance will be the original amount borrowed plus the accrued interest and insurance. If the house is worth more than that when it is sold, the heirs will receive the difference. And if it is worth less, the lender will forgive the difference and not demand any monies from the estate.

The only eligibility requirements are that the borrower must be at least 62 and the home must be a primary residence and held in their name. Cooperatives, second homes, vacation properties and some manufactured houses are not eligible.

The limit on how much can be borrowed is currently $625,500, which has recently been extended by Congress.

However if the seniors choose to use the Home Equity Conversion Mortgage for Purchase, they don’t have to use all of their borrowing power to buy another place. If the house costs less than they can borrow, they can use the difference for other purposes. Or, like a regular reverse mortgage, they can take the rest as a line of credit to use in whatever manner they choose.

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Continue To Rent Or Is Now A Good Time To Buy

Posted by Becky Parker | on Tuesday, May 5th, 2009 at 3:25 pm
Category: Buy Home In, Rent.
Tags: ,

With housing prices falling, the lowest interest rates in years, and government tax credits, now may be a good time to go from renting to buying a home. Conditions may not be this ideal for a long time to come.

There are still buyers out there holding out for the "bottom" of the market but because interest rates are so low, now may be the best time to buy. If you are going to hold onto your home for a number of years, the amount of money that is saved on the mortgage will more than make up for the amount the home may decrease in value.

If a decision is made to buy now, the federal government can issue a tax credit of $8,000, which may be received within as little as 10 days (rather than waiting for the tax filing for 2009). In addition, the interest from a mortgage is tax deductible, and in some instances, mortgage payments can be lower than rent payments.

Job insecurities can also weigh heavily on a potential buyer’s mind. To alleviate this issue, the California Association of Realtors has introduced the Housing Affordability Fund’s Mortgage Protection Program .  Under this plan, a first time home buyer that buys a home in 2009 may have their mortgage payments paid up to $1,500 per month if there is a job loss (certain restrictions apply).

For most people, buying their first home is a big, and sometimes scary step, but taking the plunge can be very rewarding.

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Now Is The Perfect Time To Buy For First Time Home Buyers

Posted by Becky Parker | on Wednesday, April 22nd, 2009 at 12:30 pm
Category: First Time Home-Buyers.
Tags: , , , ,

Now may be the perfect time to buy your first home. Interest rates are at their lowest in years, home prices are lower than we have seen them in years, and there are programs to help make a home purchase more affordable such as:

1. Under the American Recovery and Reinvestment Act of 2009, if you buy a home between January 1, 2009, and November 30, 2009, you may be eligible to receive a tax credit for 10% of the purchase price of your home up to a maximum credit of $8,000. Restrictions may apply.

2. At no cost, the California Association of Realtors® has a protection plan called the Housing Affordability Fund Mortgage Protection Program. Under this program, first-time home buyers may be eligible for help in making mortgage payments due to a job loss or a disability for up to six months at $1,500 per month. However, there are limitations and benefits are only available to buyers who use a California Realtor®.

3. The government has recently reinstated the increase of FHA, Freddie Mac, and Fannie Mae loan limits to a maximum of $729,750. This is good news for California homebuyers where housing prices are higher than other parts of the country.

4. Gilroy has down payment assistance through their Block Grant program and monies may be available for Gilroy residents and full-time educators who work in Gilroy but live elsewhere. Funds, if available, are for people with low and moderate incomes. The program is funded by The Department of Housing and Urban Development (HUD) each year (in May) so they may or may not have monies available at all times. I would encourage anyone that would like to buy a home but are having trouble coming up with a down payment to contact the City of Gilroy. These funds, if available, may be applied for by any person or persons attempting to fund a home purchase.

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Mortgage Rates – Second Quarter 2009

Posted by Becky Parker | on Wednesday, April 22nd, 2009 at 12:26 pm
Category: Mortgage Rate.
Tags: ,

Interest rates for a 30-year fixed rate loan are at a low of approximately 4.875% and an average of 5.18%. Your credit rating and whether you pay for points up front will determine the interest rate you are able to get. A point is generally equal to 1% of your loan amount. If you are going to own your home for a short period of time (less than five years), a higher interest rate may not be a bad thing but if you are going to have your loan for a longer period of time (more than five years), you may want to pay a point or two in order to obtain a lower interest rate. In the long run, you will save a lot of money in interest payments.

I would recommend you get pre-approved for a loan before shopping for a home. In the current market, especially for lower priced properties, there have been bidding wars and multiple offers submitted. When a homeowner and/or bank are looking at several offers, they will generally accept the offer from a buyer that has been pre-approved. I would recommend you apply for a mortgage with Princeton Capital because they have already done the research for you. They work with several lending institutions and have negotiated the best rates available. You can either apply at the website or call Lacey Sullivan at 408.848.7952.

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Home Improvement Pays For Itself

Posted by Becky Parker | on Tuesday, April 14th, 2009 at 12:01 pm
Category: Home Improvement.
Tags: ,

For those of you that are unfamiliar with Staging, it is the process of decorating a home that is on the market to make it more marketable. On some occasions, furniture and furnishings are brought in by an outside source such as a professional Stager. The statistics show that in most instances, Staging pays for itself and then some. An added benefit is that the time it takes to sell your home is dramatically reduced.

If you feel that hiring a professional Stager is not in your budget, there are a few things you can do to make your home easier to sell:

  1. Remove all photographs of your family and pets-neutral art is preferable. Potential buyers want to imagine themselves in the home and having pictures of your family on display make it harder to envision their family living there.
  2. De-clutter as much as you can. The less stuff you have on shelves, furniture, mantels, etc. the less distraction it is for the potential buyer. You want the home to look neat and tidy.
  3. Remove any unnecessary or excessive furniture. Buyers will be looking for spacious rooms so if you have for instance, a bedroom that has furniture against every wall, you may want to remove one of the pieces to give the impression that the room is bigger than it really is.
  4. Make sure you have sufficient light in every room. Buyers like homes that are bright and cheery. When showing your home, it is best to have ample lighting in every room.
  5. If possible, remove any pets, pet beds, litter boxes, food bowls, etc., from sight before potential buyers look at your home. Buyers want to rest assured that there have not been “accidents” by pets left on carpets and floors. Also, make sure all pet smells are gone.
  6. Do the basics such as cleaning carpets, windows, bathrooms, and kitchens. When possible, have a professional cleaning service go through your whole house so that everything is sparkling clean. One thing that will turn off a buyer is a dirty house.
  7. If your home has some rooms that are painted in unusual or shocking colors, by all means paint them in a neutral pallet. It is hard for buyers to envision themselves in a home that is painted red, chartreuse, and bright yellow if they like taupe and beige.
  8. Curb appeal is very important. If your front yard is full of weeds, a brown lawn, and overgrown shrubbery, buyers may not even want to look inside. If possible, hire a gardener to trim, weed, and mow.

Doing some or all of the above items will take effort but will benefit you in the long run. Your home will sell faster than other homes in the area that were sold “as is.”

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Short Sales Can Be Tricky

Posted by Becky Parker | on Tuesday, April 14th, 2009 at 11:55 am
Category: Short Sales.

As you know, a Short Sale is when you sell your home for less than your mortgage balance. In today’s market, Short Sales have become very common due to the downturn in the market. If you are a homeowner in Gilroy, you have seen your home values plummet (30% or more). In this market, unless you need to sell your home, I would suggest you wait until home values start to rise. Of course, there are exceptions such as:

  1. You are upgrading to a nicer home and you have equity in your current home-the new home will also be a bargain.
  2. You must move because of a job relocation.
  3. You would like to convert your home to a rental and you will be buying another personal residence.
  4. You are already behind in your mortgage payments.

In order to keep up with the current trends in real estate, Coldwell Banker conducts training classes on an ongoing basis and they are now leading the industry in short sale expertise. We now have a short sale package that makes it easier to work with the banks and thus making it more streamlined. Short sales are tricky and if an agent has not done a short sale, the process can take much longer than it needs to.


How Will A Short Sale Affect My Credit?

  • A short sale is far less damaging on your credit than a foreclosure provided you are not late on your mortgage payments. After the sale of your home, your credit report will note that your mortgage was paid or negotiated and your credit score may go down minimally, if at all. If other payments have been late or missed, of course your score would be adversely affected.

If I Want To Apply For A Fannie Mae Backed Loan (Short Sale Was A Fannie Mae Backed Loan), How Long Must I Wait After A Short Sale?

  • A homeowner who successfully negotiates and closes a Short Sale will be eligible for a Fannie Mae backed mortgage after two years.

If I Want To Apply For A Home Loan With Any Other Mortgage Company, How Long Must I Wait After A Short Sale?

  • There is no restriction on how long you must wait to apply for a home loan because there are no questions on the application regarding a past Short Sale. As I have mentioned previously, if you were not behind on your payments, there should be no mention of the Short Sale on your credit report. However, if the bank has asked for a deficiency judgment, that is another issue.

Will A Short Sale Affect My Employment Status?

  • A Short Sale is not reported on a credit report and therefore is not a challenge to employment.

Could The Bank Come After Me For My Mortgage Deficiency After The Short Sale?

  • Technically, a bank can come after a homeowner for a mortgage deficiency depending upon the type of loan. In many instances, after negotiating with homeowners, banks will give up their right to the deficiency amount. Banks realize that they are better off allowing a Short Sale because the house is more likely to be sold closer to market value. The bank’s costs and responsibility increase with a foreclosure sale.
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Real Estate Trends, April 2009

Posted by Becky Parker | on Tuesday, April 14th, 2009 at 11:47 am
Category: Real Estate.
Tags: ,

Looking at the real estate market for April of 2009, I have both good and bad news to report. Inventory is low right now and for buyers, this can be a real challenge for obvious reasons. There are more buyers in lower price ranges, both investors and first-time home buyers being the majority, thus causing a bidding frenzy for the “nicer” homes. Because a large portion of the available homes are foreclosures and short sales it is essential for buyers to get pre-approved by a lender. In some cases, getting pre-approval from the bank that owns a specific property could be the best way to buy that particular home. Having a pre-approval letter is the best way to be competitive when trying to purchase a home in this market. If you would like to get pre-approved before you begin to search for a home, Princeton Capital can help. They work with a number of lending institutions and have already researched the best rates and terms for you.

On a positive note, there seem to be less foreclosed and short sale properties on the market than we have seen in the past and that is a good sign for both buyers and sellers. For buyers, it means that the selection shows more pride of ownership and transactions are handled more smoothly. For sellers, it means that the market is becoming more stable and homes prices are not falling as quickly in large part due to the volume of foreclosure homes for sale. We will continue to see short sale properties on the market for awhile but as values increase, short sales will decrease.

If you have been hesitant to purchase a home in the past, now may be the right time to acquire your part of the American dream.

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Should I “Shop” for a Home Loan?

Posted by Becky Parker | on Tuesday, April 14th, 2009 at 11:43 am
Category: Questions and Answers.

All lenders are not created equal. Loan terms, points, conditions, and interest rates can vary and doing your homework can be very beneficial and may save you a lot of money over the life of your loan. Just because you have been banking with the same institution for a number of years does not mean they will give you the best loan terms. Companies such as Princeton Capital have done the research for you. Chances are they will be able to give you a comparison of several companies and then you can make an informed decision as to what is the best loan for your situation.

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What is a Pre-Approval Letter and How do I Get Pre-Qualified?

Posted by Becky Parker | on Tuesday, April 14th, 2009 at 11:42 am
Category: Questions and Answers.

In order to get pre-approved, a potential home buyer goes through a precursory qualification process with a lender prior to searching for a home. The lender asks the purchaser questions about income, approximate debt, savings, etc. Upon completion of this process, the lender will issue a pre-approval letter that shows that the purchaser is qualified for a home loan and the maximum amount that may be borrowed. To get pre-qualified simply fill out an application with a lender of your choosing or Princeton Capital online. If you would prefer to speak with someone, you may call 408.848.7952 or 408.476.8032 and speak with Lacey Sullivan in our Gilroy Coldwell Banker office. Lacey is an independent contractor. I recommend Lacey because I know she will do her best to get you the best loan possible in the quickest time. She also has experience working with the City of Gilroy in helping first-time homebuyers buy their home using government assistance.

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What is a Foreclosure or REO Sale?

Posted by Becky Parker | on Tuesday, April 14th, 2009 at 11:40 am
Category: Questions and Answers.

Basically a foreclosure and REO are the same thing -the bank that holds the mortgage on a home takes the house back when the owner has defaulted on their payments. The bank becomes the “seller” and the original “owner” is no longer involved in the transaction sales.

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  • Avg. Days on Market: 72

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