Home Buying Tip – Make Offers In Writing

 M a k e  a n  O f f e r  i n W r i t i n g
P r e s e n t e d  b y  F r e d d i e  M a c

This is the time to think carefully about what you want and what you can afford. If your offer is accepted, it becomes a legally binding contract. Make sure you don’t include anything in the offer that you’re not totally comfortable with doing.

Make sure you put everything in writing. Offers usually include items like:

·         Proposed purchase price.
Remember, the seller may counter-offer with a higher purchase price – consider that when you decide on your proposed purchase price.

·         Concessions.
This includes things you’d like the seller to help pay for, like closing costs.

·         Conveyances.
This covers any personal property to be included in the sale, like the washer and dryer or the refrigerator.

·         Home inspection contingencies.
Make sure you’re prepared if the home inspection report shows major problems.

·         Earnest money.
Earnest money is a deposit you offer to show you’re serious about purchasing the house. Earnest money is usually held in escrow and applied to your closing costs at settlement. If you fail to meet the terms of your contract, you may lose this deposit.

• Acceptance.
  This covers how long the seller has to respond to your offer before the offer is no longer binding.

·         Mediation and arbitration.
These are legal methods for handling contract disagreements between you and the property seller. These methods are not necessarily beneficial to you, and you do not need to agree to them.

When the Offer Becomes a Contract

Once the seller accepts your offer, the offer becomes a contract – you’ve contracted to buy a house. What’s in a contract varies from state to state, but some common things you’ll find include:

·         Legal description.
This describes the property you are buying in terms of its dimensions relative to a fixed point (like a road) or in relation to a recorded subdivision plat or declaration of condominium. It often includes the street address of the property.

• Selling price and deposit.
  This is the price you and the buyer agreed upon, as well as the amount of earnest money you’ll pay when you sign the contract.
  
• Mortgage contingency.
  A contingency protects you by stating that the sale depends on a lender approving you for a specific mortgage, rate, and term.
  
• Closing date and location.
  The closing date (also called the settlement) can be several weeks to several months away to meet the seller’s and your needs.

·         Conveyances.
Double check these conveyances to make sure that the items are there and are what you and the seller agreed on in the offer.

• Home inspection.
  If you’ve made the contract contingent on a home inspection, this will set an inspection date and provide an explanation of what will happen if the inspection identifies any problems.

·         Possession date.
This is the date you can move in. It’s usually the closing day or very soon after it.

·         Property insurance.
This details the home insurance policy that will cover the property until the closing date. This can be the buyer’s or seller’s policy.

·         Property disclosures.
This includes legal notification of any required information concerning the property (such as copies of documents from the homeowners’ association), issues or problems with the property.

CAROL PERDEW
Prudential California Realty
(209) 239-7979
www.CentralValleyHomes.com

 

FORECLOSURE PREVENTION SUGGESTIONS

This informative article gives suggestions for those borrowers who are having payment problems. This includes some great information and Web sites directed entirely to helping prevent needless foreclosures.  You can know your options to determine the best possible outcome.  This provides some useful resources that are available.

What Should Borrowers Do When They Need Help?

by Jack M. Guttentag
Featured on Yahoo Finance

An uncomfortably large proportion of my mail these days is from borrowers with serious payment problems. In most cases, I can’t help them for the reasons discussed below. With a few common cases, I try.

In one typical case, the borrower has two mortgages which add to an amount well in excess of the value of the property, and can no longer afford both payments. If the same lender holds both mortgages, and if the borrower can afford a reduced payment, his objective should be to persuade the mortgage lender to modify the notes to lower the payments.

The burden of proof is on the borrower. He has to document that he will be forced to default on the existing mortgages but could afford the payment on a new mortgage that would cost the lender less than foreclosure.

A Greater Challenge

If the second mortgage is held by a different lender, the challenge is greater.
The first mortgage lender is unlikely to modify the note so long as the second mortgage lender remains in a position to foreclose.

I suggest that borrowers in this situation approach the second mortgage lender first, with the objective of inducing that lender to get out of the way. The borrower can offer the second mortgage lender an unsecured promissory note for a portion of what is owed on the second mortgage. Since the second mortgage loan has little or no value except as a nuisance, any reasonable offer is likely to be accepted.

The situation described above is only one of many in which troubled borrowers may find themselves. Rarely do they communicate all the information that I would need to find the best possible outcome. Not all have second mortgages, but some have large amounts of non-mortgage debt to complicate the process. While many have negative equity in their properties, some have positive equity. In some cases a loss of income appears temporary, in other cases permanent; in some cases borrowers plan to dispose of the property, in other cases they want to hang on if possible.

A Best Possible Outcome

In principle, there is a “best possible outcome” for every individual situation, but only rarely do borrowers give me all the information I would need to find it, even if I had the time. Few borrowers know what their options might be, and fewer still understand the information they must provide before a best option can be identified. But some useful resources are available.

I have an article on my Web site called “Mortgage Payment Problems: What If You Can’t Pay?” It covers a wide range of possible situations in which borrowers may find themselves, and suggests the remedies that appear most relevant to each situation.

Recently, PMI Mortgage Insurance Company and Genworth Mortgage Insurance Company have developed Web sites directed entirely to helping prevent needless foreclosures. They cover much of the same ground as I do, but they do it better by breaking the problems down into bite-size pieces. Further, they include a number of videos that many people will find easier to follow than written expositions.

Warning: These sites are not easy to find through the main sites of the two companies. For the PMI site, go here. For Genworth, go here. Click on the menu item “Education and Training”.  

These sites are for those who are prepared to invest the time needed to figure out what their options are; they will not hand-tailor a solution for them, but they will provide useful guidance nonetheless.

At a second site, Genworth takes a step toward providing hand-tailored solutions. They provide forms which, when filled out by borrowers, provide the raw materials from which hand-tailored solutions are derived. However, there is no automated assistant to generate solutions; instead the information is referred to a Genworth counselor who will do it manually. Unfortunately (but understandably), the counseling service is available only to borrowers whose lenders have mortgage insurance with Genworth.

That does not mean that this facility is useless for other borrowers in trouble. At some point, every borrower in trouble who expects help must pull together all the information about their financial situation that is relevant to a best possible outcome. If the intention is to go directly to the lender, providing this information at the outset will go a long way toward placing him at the top of the applicant pile rather than at the bottom.

I have been searching for a program that will automate the last step — that is, after the borrower enters all relevant information, it will produce a best possible outcome, for that borrower. While such programs exist, they have been developed for license to major players and I have not yet been able to shake one free for direct use by borrowers. But stay tuned.

 
SEARCH FOR BANK OWNED HOMES AT www.CentralValleyHomes.com

Carol Perdew
Prudential California Realty
(209) 239-7979
www.CentralValleyHomes.com 

 

Help in Understanding the Foreclosure Process

Avoiding Foreclosure
Presented by Freddie Mac

The last thing any homeowner wants to think about is losing the family home. No one expects to lose their house to foreclosure, but by understanding the foreclosure process and what may lead up to it, you can be in a better position to recognize and address potential problems that may impact your ability to make every mortgage payment on time.

What is foreclosure?

In the contract you signed when your mortgage lender loaned you money to buy your house, you agreed that if you can’t repay the loan, the lender can foreclose to take ownership of the house.

If you do not pay your monthly mortgage payment, you are technically in default on your mortgage. State laws vary, but generally, a loan that is as little as 90 days delinquent can be considered in foreclosure.

Your lender may send you a notice indicating that they are starting foreclosure proceedings, but don’t wait; take steps to prevent a foreclosure as soon as you realize you are having trouble paying the mortgage!

• Learn to recognize the warning signs of foreclosure.
• Know what early steps you can take to avoid foreclosure.
• If you are in the midst of a foreclosure, know the dos and don’ts.
• Know where to get help in dealing with issues that could lead to foreclosure.

Have a Plan B.

Don’t wait until you’re in a financial predicament before assessing your options. The time to develop a backup plan is not when things have gotten so bad that you are facing foreclosure, but when things are going well and you can prepare for the unexpected “what if’s” that happen in life.

Quick Knowledge Check

Take our Avoiding Foreclosure Knowledge Check to find out how much you know about protecting your home and avoiding foreclosure.

What to do in special circumstances…

If you are a victim of a natural disaster.
If your property has been damaged or destroyed by a tropical storm, hurricane, tornado, flood, or other disaster, talk to your lender immediately. They often have special disaster relief options to help you.

Check our Protection section for more information on help after a natural disaster.

If you are a service member on or recently released from active duty.
There are special financial relief options in place for service members through the Service Members Civil Relief Act (SCRA). Talk to your lender about them.

If you are a veteran.
The Department of Veterans Affairs has produced a streaming video to provide information to
vets facing foreclosure.

To View Foreclosed Homes got to www.CentralValleyHomes.com

Carol Perdew
(209) 239-7979
www.CentralValleyHomes.com

FHA LOANS HELP IN BUYING HOMES

 

L e t  F H A  L o a n s  H e l p  Y o u

FHA loans have been helping people become homeowners since 1934. How do we do it? The Federal Housing Administration (FHA) – which is part of HUD – insures the loan, so your lender can offer you a better deal. Low down payments Low closing costs Easy credit qualifying What does FHA have for you? Buying your first home? FHA might be just what you need. Your down payment can be as low as 3% of the purchase price, and most of your closing costs and fees can be included in the loan. Available on 1-4 unit properties. Want a fixer-upper? FHA has a loan that allows you to buy a home, fix it up, and include all the costs in one loan. Or, if you own a home that you want to re-model or repair, you can refinance what you owe and add the cost of repairs – all in one loan. Financial help for seniors Are you 62 or older? Do you live in your home? Do you own it outright or have a low loan balance? If you can answer “yes” to all of these questions, then the FHA Reverse Mortgage might be right for you. It lets you convert a portion of your equity into cash. Want to make your home more energy efficient? You can include the costs of energy improvements into an FHA Energy-Efficient Mortgage. How about manufactured housing and mobile homes? Yes, FHA has financing for mobile homes and factory-built housing. We have two loan products – one for those who own the land that the home is on and another for mobile homes that are – or will be – located in mobile home parks. Ask an FHA lender to tell you more about FHA loan products. Find an FHA lender Need advice? Contact a HUD-approved housing counselor or call (800) 569-4287. Need help with your downpayment? State and local governments offer programs that can

 

Carol Perdew
(209) 239-7979
www.CentralValleyHomes.com 

 

Home Buyers Can Use IRA for Down payment

First-time home buyers can tap IRA

Up to $10K can be used for down payment, closing costs

By Tom Kelly,
Inman News

A friend of mine is a single mom who became a real estate salesperson several years ago following her divorce. She had a consistent flow of buyers and sellers until the beginning of the year when the market slowdown became even more apparent in many Pacific Northwest neighborhoods.

She postponed a long-awaited kayak trip because an out-of-state buyer was coming into town with a reportedly all-cash offer for a waterfront cottage. I laughed and teased her about postponing the trip when I found out the man was single.

“That’s got very little to do with it,” she said. “Gone are the days when you relied on an associate to handle any legitimate customer. This one looks like the first great chance in weeks. He’s buying the place with his IRA to use as a second home.”

I stopped laughing and took a deep breath.

“If he’s going to use his IRA, I hope he plans to rent it out.”

The rules for purchasing real estate with an individual retirement account are specific and differ greatly from those that govern conventional rentals and second homes. For example, you cannot buy a second home with an IRA and use it partly for personal use, even though you might rent it to unrelated persons the rest of the year. And, your IRA cannot purchase a real estate asset and then have a “disqualified” person (family member) use it while it is in the IRA. The purchase must be investment property.

For investors, the biggest mistake made with an IRA-purchased property is the misapplication of the 14-10 rule. Under current federal tax laws, the owner of a rental vacation home can use it for 14 days or 10 percent of the amount of time the house is rented, whichever is greater, without jeopardizing its status as a rental property and tax shelter. This is not so with a property purchased with an IRA.

Here are the four basic “no-nos” of real estate IRAs:

• Personal use (unlike rental property)
• Renting IRA property to family, or a partner
• Paying yourself with its income
• Personally guaranteeing a loan
  

To prepare for your real estate IRA, designate the amount of your retirement funds that you wish to use in the property deal and open a new IRA account with an independent administrator. The best place to start is an independent community bank. Many banks will not service real estate IRAs (some will say “never heard of it”) because it must act as owner, such as paying the taxes and collecting servicing fees — paperwork that many lenders don’t want or need.

The only exception to IRA funds being used for a personal residence is reserved for first-time home buyers. A provision in the 1997 Taxpayer Relief Act that allows penalty-free withdrawals of up to $10,000 for the down payment and closing costs. Withdrawals can be made from established IRAs of spouses, parents, children, grandchildren or ancestors as long as they total no more than $10,000. While not be subject to the Internal Revenue Service’s 10 percent early withdrawal penalty, normal income taxes will still apply.

Misinformation given by local IRS offices has added to the IRA confusion. According to a federal tax-court case, a couple was charged income tax for withdrawing their IRAs to buy a home even though their local IRS public-assistance representative said the funds would not be taxable.

Emma and James Clarke each withdrew $16,000 from their IRAs. They wanted to be certain the amounts were not taxable because the Clarkes said they would not be able to purchase the house and pay taxes on the $32,000 withdrawal. According to the Clarkes, they were told no penalty would be assessed. The court ruled that when IRS employees give incorrect interpretations of the law, the IRS is not bound by that advice.

In fact, the IRS is not generally bound by the language of its own publications. The court ruled the Clarkes’ withdrawals were taxable under the rules that generally apply to IRA distributions.

Owning a home is a “forced savings plan.” The money that you put in to home ownership is usually returned — with appreciation — when it’s time to sell. Sometimes the appreciation can offset the amount of interest the borrower has paid on the home loan.

If you are a first-time home buyer, however, and using your IRA funds is the only way you can afford the down payment, check with a tax professional before making the move. He might tell you the “R” in IRA is to be used in retirement and not before.

And, he absolutely will tell you that you cannot use your IRA funds to buy a second home.

Carol Perdew
(209) 239-7979
www.CentralValleyHomes.com

HOMEBUYING TIP – ESTABLISH YOUR CREDIT

F r e d d i e  M a c ’ s  G u I d e  t o  t h e  H o m e  B u y i n g  P r o c e s s
Establishing Your Credit

Don’t have credit, or would like to improve your credit? Building good credit doesn’t have to be difficult, but it does require time and patience. Follow these tips and you’re on your way:

·         Pay your bills on time.
Credit scores emphasize your most recent payment record. Paying on time raises your credit score. If you’ve been late, start paying on time!

·         Pay at least the minimum amount required.
You can always pay more – and it’s a good idea if you can afford to. But you should never pay less than the minimum.

·         Keep your credit card balances low.
Don’t “max out” your credit cards – that can lower your credit score.

·         Don’t apply for too many loans or new accounts.
Applying for a lot of credit in a short period of time may concern lenders that you won’t manage your debt well. Only apply for credit when you need it.

·         Keep your debt-to-income ratio at 20%.
Generally, you should not have debt that’s more than 20% of your net monthly income.

·         Establish credit if you don’t have any.
Open a free or low-cost checking or savings account and make regular deposits. Only write checks when you have money to pay for things. And apply for one or two credit cards, use them carefully, and pay them off each month.

Resources

Do you need help getting your credit in order? Find a credit counselor.

Do you know your credit rights? Look at the FTC’s information on credit and consumer rights.

Are you credit card savvy? Visit PBS’s Frontline Web site for the Eight Things A Credit Card User Should Know.

What if I have nontraditional credit? If you have nontraditional credit (no bank account or credit cards), your lender will work with you to use payment information such as rent and utilities to determine your creditworthiness.

But remember, a bank account is always a good idea and it’s never too late to begin to establish a traditional credit history.

Thanks,
Carol Perdew
(209) 239-7979
wwwCarolPerdew.com