Earlier closings may be in home buyers’ best interest

Many home buyers, especially first-time buyers, choose to close escrow as close to the end of the month as possible in order to avoid paying a large sum of cash at closing. However, waiting until the end of the month to close escrow can result in mistakes being made during the loan funding process due to the large volume of paperwork required when purchasing a home, and the short amount of time allotted to close.

MAKING SENSE OF THE STORY FOR CONSUMERS


• Approximately 95 percent of all real estate closings take place during the last week in the month because mortgage interest is collected in arrears, meaning the principal and interest payment is due for the interest accrued during the previous 30-day period. The fewer days that are left in the month when escrow closes, the less upfront interest the borrower has to pay at closing.

• The later in the month that a loan closes, the earlier the first full mortgage payment will be due. To avoid paying a large sum of money at closing and then paying a full mortgage payment a few days later, some real estate experts advise clients to close earlier in the month if possible. Providing the lender with additional time to process the paperwork also will help ensure that mistakes aren’t made that could jeopardize funding the loan on time.

• Cash flow can be a challenge for some borrowers; so many lenders offer a credit for the mortgage interest due at closing if the loan closes early in the month. The exact date differs by lender and is determined by the type of loan. If the mortgage is insured by the Federal Housing Administration (FHA) or guaranteed by the Dept. of Veterans Affairs, a borrower can receive a credit for closing by the 7th of the month. With a conventional mortgage, the credit is typically available if the borrower settles by the 10th of the month.

To read the full story, please click here:
http://www.latimes.com/business/la-fi-lew23-2008nov23,0,5616331.story

What if you don’t qualify for loan modification?

The majority of the mortgage modification programs from the larger lenders only are available to homeowners who either already are in default or are at risk of defaulting on their primary residences. However, some homeowners, in particular those who may default on a vacation home or an investment property, have some options available.

MAKING SENSE OF THE STORY FOR CONSUMERS

• Homeowners who are in default or at-risk of defaulting should contact a reputable credit counseling agency to discuss possible options other than foreclosure. When calling a credit counseling agency, the homeowner should have their loan number, most recent mortgage statement, bank statements and a letter demonstrating financial hardship. To find a credit counselor, visit the U.S. Dept. of Housing and Urban Development’s (HUD) Web site at http://www.hud.gov/offices/hsg/sfh/hcc/hcs.cfm?webListAction=search&searchstate=CA or the non-profit organization National Foundation for Credit Counseling at http://www.nfcc.org/.

• Homeowners should contact their loan servicer as soon as possible to try to work out potential solutions. According to the Federal Housing Finance Agency (FHFA), some borrowers who do not meet the requirements for an existing mortgage modification program may still be considered for a loan adjustment based on personal circumstances.

• If a mortgage modification is not possible, homeowners may want to consider a short sale -- sell the home for less than the amount of the mortgage. Although a short sale enables a homeowner to avoid foreclosure and often causes less damage to the homeowner’s credit score than a foreclosure, the lender must agree to accept the loss and in some cases the homeowner may have to pay taxes on the difference. Also, many lenders are overwhelmed by the large number of short sales being submitted by homeowners, so it could take longer than usual to receive a short-sale acceptance from the lender.

• If a homeowner cannot qualify for a mortgage modification or a short sale, some lenders will consider a deed in lieu of foreclosure, where the homeowner transfers the title to the lender in exchange for debt forgiveness. Properties that have additional debt, such as home equity lines of credit or additional mortgages, may not qualify for a deed in lieu of foreclosure. Homeowners who have additional debt tied to the property must share this information with their lender for consideration when applying for a short sale.


To read the full story, please click here:
http://online.wsj.com/article/SB122643638528218301.html

Be persistent during ordeal of short sale

Approximately one in five homeowners is “underwater” – meaning they owe more on their mortgage than their home is currently worth. For borrowers in default or at risk of defaulting, selling their house for less than is owed, often termed a short sale, may be the only option. However, short sale offers must be accepted by the bank that owns the mortgage, and can take as long as a few months before an offer is accepted.

MAKING SENSE OF THE STORY FOR CONSUMERS

• Some home buyers are submitting unrealistically low offers on bank-owned properties, hoping to purchase a home at a bargain price. Low offers often use valuable time and resources that could be dedicated toward more favorable offers more likely to garner bank approval. It is vital that home buyers work closely with their REALTORS® to submit appropriate offers, especially when dealing with a short sale property.


• Theoretically, short sales should be a win-win for the bank and the homeowner. Although the bank does not receive the full payment on the mortgage, it also does not incur the costs of foreclosure and/or eviction, if necessary. Many homeowners also prefer short sales because it does less damage to their credit score than a foreclosure. However, many real estate experts say that the majority of banks are reluctant to approve short sales, and often let properties go into foreclosure, even when there are reasonable offers on the property. In addition to considering the price, most lenders also take into consideration whether the homeowner can demonstrate financial hardship. If the homeowner is capable of making payments, many lenders will try to work out a loan modification, rather than a short sale.

• Short sales often are more time intensive than traditional transactions and often require additional paperwork. Due to the large number of short sale offers, many take as long as a few months to receive approval. If information or required forms are missing or incomplete, the bank may set the offer aside, which could delay the process and cause the property to go into foreclosure. To expedite the process, it is important that sellers work closely with their REALTOR® to provide all of the necessary paperwork.

To read the full story, please click here:
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/11/30/BUIQ14C4F5.DTL

Predictions For Real Estate 2009

by REIDirectory.net

Last year was lackluster for real estate (to say the least). What is in store for 2009? It’s really anyone’s guess, but here are my thoughts and predictions for the real estate industry for ’09.

Inventory Will Drop: The real estate industry will see the average number of days a property stays on the market fall. By the end of the year, the real estate market should begin stabilizing.

The Credit Crisis Gets Relief – With government assistance and new oversights more money will enter the system. This should cause banks to ease their current, almost impossible to get, loan regulations making it easier to find qualified buyers and move inventory.

The Wait Is Over – Economic conditions deteriorated in 2008 and forced many buyers and sellers to push back their real estate plans. The Bailout Plan will help ease consumer concerns and get the inventory moving.