Affordability & Financing

Great Chart On Credit Scoring; Check this out if your credit might be in danger

March 13, 2010 by Sasha Farmer · Leave a Comment 

I really like this chart on credit scoring- I receive lots of questions from potential buyers about credit, including how they can improve their credit scores in order to prepare for a home purchase.

Whether in the market for real estate or not, these are things that everyone should be aware of pertaining to their credit. If you are interested in learning more about your credit score or looking for ways to improve it, contact me and I will connect you with a lender who can help you through your questions!

[Credit: SpendOnLife.com]

Trying to Utilize FHA Financing? Check this List of Condo Communities to See if They’re Approved!

February 10, 2010 by Sasha Farmer · Leave a Comment 

If you’re planning to utilize FHA financing to purchase your next home, you have to use a little bit of caution when considering condos in Charlottesville, as not all of them are approved for FHA financing.

Check out the link below to see whether or not the condo you’re considering is approved for FHA;

HUD.GOV Condos with FHA Financing

If the condo community you’re considering is not on this list, you may need to check with your mortgage lender to see if you will be able to come up with an alternative type of financing. Additionally, if you live in one of the condos that is not able to provide FHA financing, you should be aware that it may limit the potential number of Purchasers who will have the ability to buy your home on the resale market!

Please give me a call if I can help connect you with a lender who may be able to help you find alternative financing, or get you pre-qualified!

[Photo Credit: http://www.radrounds.com]

New Forms to Claim The First-Time Homebuyer Tax Credit

January 17, 2010 by Sasha Farmer · 1 Comment 

The new forms to submit when claiming the first time homebuyer tax credit have finally been released! Form 5405 will now be needed when submitting a tax claim, and this is likely mainly due to the large numbers of tax fraud we were experiencing in res

ponse to the First Time Homebuyer tax credit. Please be sure to file this along with your claim, so you don’t experience any sort of delay in claiming your credit!

Click HERE to directly download a copy of Form 5405 from the IRS website for yourself.

From the Washington Post coverage of the new forms…

“Form 5405, First-Time Homebuyer Credit and Repayment of the Credit” can be downloaded from the IRS web site.

First-time buyers will have to send a copy (keep your originals!) of one of these documents to back up their claim to the tax credit:

• A copy of their HUD-1 Settlement Statement, complete with dates and signed by all parties.
• Mobile-home buyers can send in a copy of their signed, dated and fully executed sales contract.
• New-home buyers who don’t have a HUD-1 settlement statment must send in a copy of the certificate of occupancy.

All of these documents need to show names, dates, addresses, signatures, and prices.

[From Local Address - New tax forms released for claiming the home buyer credit ]

The experience of my clients thus far has been that getting the credit has been fairly painless. I hope that this will continue through the extension of the credit in 2010, but I would love any feedback you may have!

[Photo Credit: The Backyard Wealth Blog]

Just in from CNNMoney; Trial Loan Modifications DO Hurt Borrowers' Credit

December 29, 2009 by Sasha C. Farmer Realtor · Leave a Comment 

Only weeks ago, I published a post with updated information from an advanced education class I was taking though the CRS (Certified Residential Specialist) program for Realtors, that was discussing different types of distressed sales and loan modifications to your mortgage, and how they would impact your credit score. In that class, we learned that borrowers were being told that taking advantage of the government HAMP (Making Home Affordable) program should not negatively effect their credit score, and that we should encourage borrowers to strongly consider this option before looking down the road of a short sale or foreclosure. Today, CNNMoney exposes several stories from people who have utilized the program, and whose credit scores are mysteriously dropping.

For some, a drop would be completely expected. For those who are behind on mortgage payments and who take the new mortgage arrangement, it is reasonable to expect that their credit would have already been damaged to some extent, just from the mortgage payments that had been missed. However, many other people have been encouraged to look at the HAMP program to re-arrange their mortgage and reduce their payments, even before they are behind on a payment. It is these people who have been squeaking by, trying to make ends meet and who have been making payments, who were being told (even by mortgage officers themselves) that their credit would not be effected. One of those stories is followed in the article today;

Axelrod, a municipal employee who lives outside Chicago, entered a trial mortgage modification program this spring.

He had not fallen behind in his mortgage, but he was finding it harder to make ends meet after his overtime was cut and his property taxes skyrocketed. Told it would not hurt his coveted 750 score, Axelrod secured a $565 reduction in his monthly payments.

Eight months later, Axelrod is still stuck in the trial modification, trying to satisfy his loan servicer’s endless requests for documents.

And to his horror, his credit score has plummeted to 644.

“It’s completely destroyed my credit,” said Axelrod. “If I had known it would affect my score, I would have never entered the program.”

Representatives at JPMorgan Chase (JPM, Fortune 500), which services Axelrod’s loan, are instructed to tell applicants that entering a modification could impact their credit histories, a bank spokeswoman said.

Despite his weakened credit score, there is at least some good news for Axelrod: After being contacted by CNNMoney.com, JPMorgan Chase said his permanent modification had been approved.

[From Trial loan modifications hurt borrowers' credit histories - Dec. 28, 2009]

According to CNNMoney;

The coding alone can impact credit scores, which measure a consumer’s financial health and range from 300 to 850 under the FICO system. The severity depends on how many payments the borrower missed before entering the program. Those who were current in their mortgages could see their scores fall up to 100 points, according to the Treasury Department.

[From Trial loan modifications hurt borrowers' credit histories - Dec. 28, 2009]

For now, it sounds as though a mortgage modification may still certainly have its benefits over a short sale or a foreclosure, if you want to keep your home. However, it is important for everyone to know that for what we can tell, it does not come as “risk-free” as it may have been advertised. This is sure to be a topic we’ll be hearing about more soon, but until then, please be sure to consult your tax advisor and your attorney for advice before beginning a mortgage modification program.

[Hat tip to Lani Rosales at Agent Genius for pointing out this important article.]

According to NAR, 4 out of 10 Recent Buyers Used FHA Loans

December 23, 2009 by Sasha C. Farmer Realtor · Leave a Comment 

As you probably already know, FHA loans are becoming an extremely popular loan device for purchasers in this marketplace. FHA loans used to evoke lots of negative connotations, a few of which were; lots of extra requirements, much longer time to process, and stringent and difficult home inspection standards. However, these hassles have been eliminated, and FHA loans seem to rarely differ in difficulty from pursuing a conventional loan. I expect that the use of FHA loans will only continue to grow into 2010.

According to the most recent REALTORS® Confidence Index, 39 percent of recent buyers purchased a home with a Federal Housing Administration-insured loan. REALTORS® who took part in the November survey also reported that the number of first-time home buyers continued to climb to 51 percent.

“FHA helps provide affordable mortgage financing to home owners, particularly first-time home buyers who are so important in drawing down inventory to help stabilize the current housing market,” said NAR President Vicki Cox Golder. “These recent survey results reaffirm that, despite its current challenges, FHA is a critical part of the American housing fabric.”

—NAR

[From REALTOR® Magazine-Daily News-4 out of 10 Recent Buyers Used FHA Loans]

What is a strategic default?

December 23, 2009 by Sasha C. Farmer Realtor · Leave a Comment 

As defined by Wikipedia…

A strategic default is the decision by a borrower to stop making payments on a home mortgage despite having the financial ability to make the payments. Usually this occurs after a substantial drop in the house’s price such that the debt owed is considerably greater than the value of the property, and is expected to remain so for the foreseeable future. Such borrowers are called “walkaways.”[1]

[From Strategic default - Wikipedia, the free encyclopedia]

As discussed in CRS Course-111 on Short Sales and foreclosures, a strategic default will likely effect your credit score negatively by 140-150 points and will also result in 5-7 negative marks on your credit. This is likely going to be more detrimental than going through the process of a short sale or a loan modification, but is said to not effect your credit score as negatively as filing for bankruptcy.

**Disclaimer: I am a licensed real estate agent and cannot provide legal consulting or tax advice. For counsel on either of these things, please consult your tax accountant or attorney.

Before making any decision to pursue a short sale, a foreclosure, a strategic default, or to file for bankruptcy, it is in your best interest to consult with a licensed Realtor, your tax accountant, and an attorney.

Answer these questions to determine if purchasing a bank owned home/foreclosure is right for you…

December 23, 2009 by Sasha C. Farmer Realtor · Leave a Comment 

Please read carefully through the following items when trying to determine whether or not you are interested in looking at REO (Real Estate Owned) and Foreclosure properties.

1. Would you be okay with a delayed closing? Purchasers of foreclosures may have to wait for a significant amount of time before closing can occur. Are you on a tight deadline to get out of your lease? Are you attempting to take advantage of the Home Buyer Tax Credit (in which homes must close by June 1, 2010?) If so, this may not be the best choice for you.
2. If closing were delayed, would you be okay with re-applying for your loan and possibly losing your current loan lock? All during the time that we are awaiting closing, mortgage rates will be fluctuating, and if the loan lock deadline passes, you will have to re-apply for the loan and incur any related charges.
3. If closing is delayed, will you be able to adjust the timeframe for your date of possession? It is very unlikely that we will be allowed to occupy the property prior to closing, so you would need to have a backup residence in mind, in case of any delays. If this is your primary home, some sort of temporary living arrangement would need to be made, and it may include moving twice- from your current home to the temporary residence, and the temporary residence to your new home.
4. Even if the property is priced extremely competitively, do you have other funds that may be necessary for updating, cleaning up, and repairing the property? Sometimes REO and foreclosed homes will require a significant cash investment just to bring them up to standard living conditions.
5. Are you comfortable purchasing a home “as is”? Most REO and foreclosed homes will come in “as is” condition. A handful of them will not allow any sort of home inspection prior to purchase at all, however most allow a home inspection for information only. Would you be comfortable making any necessary repairs yourself (or with a contractor, of course) and after closing?
6. Would you be willing to sign addenda that heavily sways negotiations in favor of the Lender/Bank who owns the property and overrides most of the standard protections granted to the buyer? Most of these forms override rights that we outline in the standard Virginia Association of Realtors Residential Contract to Purchase. Oftentimes, the lender will allow no revisions to be made to these documents. Some of the changes that are often arranged in the addenda; tougher restrictions on the Purchaser, shorter timelines for the Purchaser to secure a loan, conduct a home inspection, etc, a larger deposit, deposits to be held in the escrow of the lenders choice, and very few provisions that will allow for the Purchaser to get out of the contract and many ways for the lender/seller to walk.
7. Would you be okay with getting up to the week of closing, only to find that the lender received another offer and has chosen to take that offer and void their contract with you? Many of the packages of documents that the lenders have you sign will include a provision allowing for this.
8. Would you be comfortable with your earnest money deposit to be escrowed with a escrow company or attorney of their choice? This money will not be accessible during the time that the property is under contract.
9. Are you prepared to do a title search and purchase title insurance? You will want to verify that the lender does hold title of the property (not all homes transfer from the previous sellers right away). You will also want to make sure that any liens that may have been held against the previous owners (who may have had difficulty paying many bills, aside from their mortgage) have been released and you will have the ability to purchase the home free and clear of liens and encumbrances.

If these items would not cause a major inconvenience for you, then you may be a perfect candidate to purchase a REO or foreclosure property- there are some incredible deals to be had!

Any more thoughts/additions to this list from others who have had bank owned/foreclosure homes?

Please do not hesitate to contact me if you’d like to be set up on a search that will send you foreclosure and bank-owned homes that might meet your search criteria!

An interesting thing about interest rates and value…

December 23, 2009 by Sasha C. Farmer Realtor · Leave a Comment 

I have spoken to many of my clients about this previously, when saying that often a 1/4 point increase in interest rate can result in a higher monthly mortgage payment than would a 5% increase in sales price. What this means, is that the buyers out there who are waiting for the market to “hit bottom” may end up finding that their dream home becomes more expensive, even as the price drops. Marc Roth, writing for BusinessWeek sums it up nicely (emphasis added);

So, what can we learn from the historical trends and numbers?

First, rates have far further to move upward than downward; for more than 30 years, 7% was the low and 18% the high. The norm was 9% in the 1970s, 10% in the mid-1980s through the early 1990s, 7% to 8% for much of the 1990s, and 6% only over the last handful of years.

Second, the last time the long-term trends reversed from low to high, it took more than 20 years (1970 to 1992) for the rate to get back to where it was, and 30 years to actually start trending below the 1970 low.

Finally, the most important lesson is to understand the actual financial impact the rate has on the cost of purchasing and paying off a home.

Every quarter-point change in interest rates is equivalent to approximately $6,000 for every $100,000 borrowed over the course of a 30-year fixed. While different in each region, for the sake of simplicity, let’s assume that the average person is putting $40,000 down and borrowing $200,000 to pay the price of a typical home nationwide. Thus, over the course of the life of the loan, each quarter-point move up in interest rates will cost that buyer $12,000.

[From If You Don't Buy a House Now, You're Stupid or Broke - BusinessWeek]

Don’t just look at list prices when trying to determine the cost of your home- your interest rate may actually have a significantly higher impact.

If you could use a recommendation to a good local lender, who can walk you through all of the stipulations of your financing and help you determine if now is the right time for you to buy, please don’t hesitate to call.

[Image courtesy of http://www.tutor2u.net/blog/files/interest_rates.gif]

How Much Will A Short Sale/Foreclosure Hurt My Credit?

December 23, 2009 by Sasha C. Farmer Realtor · Leave a Comment 

I have had a couple of people over the past few months mention that they may consider a short sale, so that they can just get out from under their homes and move on. While the ramifications of a short sale or foreclosure seem to be getting slightly more lenient in light of all of the predatory lending that has occurred in the past several years, they are still significant.

Here are some general credit score ranges (as provided by the National Association of Realtors CRS Course 111);

• 990: highest calculable credit score.
• 900: 15% of borrowers have a credit score at 990 or above.
• 740: a rough number around which people are usually able to get a good, competitive loan.
• 680: the average credit score.
• 501: lowest calculable score.
• 500: 18% of people have a credit score of 500 or below.

Let’s imagine that you have a credit score of 740 and own your home, but are having trouble making your payments (which may actually be causing your credit score to drop in the meantime). Here are a couple of different options, and their effects;

• A loan modification is said to have no negative impact on credit score.
• A short sale is estimated to impact your credit score between 120-130 points.
• A strategic default will likely impact your score by 140-150 points.
• A foreclosure is said to impact your score by 200+ points.
• Filing bankruptcy is likely to impact your credit score negatively by 355-365 points, putting even most prime borrowers below a score of 500. We are being told that it is still remaining on credit scores for up to 10 years.

Another crucial point to remember is that Virginia is a recourse state, which means that a short sale or foreclosure debt that is not forgiven by the bank, can be pursued later. This may result in credit collectors calling on you for years to come, to collect any remaining debt owed.

Let’s do what we can to help you avoid either of these results if possible. A really interesting fact to be aware of; According to the 11/03/09 issue of USA Today, only 9% of eligible homeowners have had their mortgage modified. There may be better options for you than a short sale or a foreclosure.

**Disclaimer: I am a licensed real estate agent and cannot provide legal consulting or tax advice. For counsel on either of these things, please consult your tax accountant or attorney.

Before making any decision to pursue a short sale, a foreclosure, a strategic default, or to file for bankruptcy, it is in your best interest to consult with a licensed Realtor, your tax accountant, and an attorney.

New Tax Credit for Current Home Owner's Making a Home Purchase and the Extended First Time Buyer Credit

November 7, 2009 by Sasha C. Farmer Realtor · Leave a Comment 

Today, President Obama signed off on the Extended Home Buyer Tax Credit, now to include a credit for current Home Owners.

This new initiative will continue the current $8,000 first time home buyer credit to eligible participants until 2010- July 1, 2010 to be exact, which is when all closings must have occurred. In order to be eligible for this credit, you must have the property under contract no later than April 30, 2010.

It has also expanded the credit to current home owners. Anyone who has used their residence as a primary residence consecutively for 5 our of the last 8 years are also eligible for a tax credit when making their next home purchase. This is a $6,500 credit and the same deadlines still apply; April 30, 2010 for homes to be under contract, and July 1, 2010 for the sale to have closed.

Many of the details are explained in the following PDF document- please contact me with any specific questions!

Click here to download the November 7, 2010 Extended and Expanded Tax Credit.

Short Sale Debt Could Follow You (And Often Does in VA)

October 4, 2009 by Sasha C. Farmer Realtor · Leave a Comment 

If you are considering selling your home as a short sale, and are choosing a short sale instead of a bank foreclosure, you should make sure to read this Washington Post article about short sale debt.

It is very important to know that the debt from a short sale may follow you.  Since we are still early in the history of short sales, we haven’t seen how too many of these will play out, but there is a high likelihood that creditors will come back around to slowly collect the loss over time, so that you end up paying off the short sale debt eventually.  This is one ramification that will occur during a short sale, but that you will not experience if you go into bank foreclosure and then declare bankruptcy.

If you are considering any of these items, you should immediately contact your Realtor, and your tax advisor and/or CPA.

http://www.washingtonpost.com/wp-dyn/content/article/2009/09/24/AR2009092405361.html

Purchasing a Short Sale

July 18, 2009 by Sasha C. Farmer Realtor · Leave a Comment 

Charlottesville is currently seeing a handful of short sales, and for every short sale that we can successfully achieve, we are avoiding a foreclosure hitting our market. Short sales, however, are not for the faint of heart! They are highly unpredictable, and while they can result in an incredible deal on a home, they can also result in frustration and confusion. Here are a few tips and warnings for anyone who is considering making an offer on a short sale.

SHORT – SALE DEFINED: The term “short sale” is used to describe a sale where the debt owing against a property combined with the costs associated with the sale exceed the property’s market value. In a loan default situation (pre-foreclosure) creditor(s) may be willing to agree to allow the property to be sold for less than the loan amount and/or accept less than (or “short”) the amount owed, and may or may not accept the net proceeds of sale as payment in full of the debt.

The sales contract will be between YOU (the Purchaser) and the SELLER, not the LENDER. The sales contract will then have a contingency in it that states that the LENDER must approve the agreement and that allows the SELLER a chance to open this dialogue with the LENDER.

1. Timing is everything! A short sale can take up to 6 months to be approved by a bank. If you are a first time buyer looking to take advantage of the 2009 First TIme Home Buyer Tax Credit, I do not recommend looking at short sales. There is no way to predict whether or not a short sale will close in alignment with any sort of deadline. If you absolutely need to close and be in your home by a certain date, a short sale is probably not for you.
2. What you offer on the home and what a SELLER may agree to and ratify into a contract MAY NOT be the sales price. The LENDER still has to approve any agreement that is made in a short sale, so don’t get your hopes up about the sales price that you’ve agreed upon with the SELLER. The LENDER may counter-offer and ask you to pay a completely different, higher price. The price that the LENDER is willing to take is going to be determined through the help of a third-party broker, who will do a BPO (Brokers Price Opinion) on the home, and who will recommend a value for the home based on recent comparable sold homes.
3. It is recommended that you do your inspections immediately. The PURCHASER will need to take on some risk of lost investment on items like a home inspection or an appraisal. Once the SELLER and PURCHASER have a ratified contract, it is recommended that the PURCHASER go ahead and conduct the home inspection. This inspection will likely be for information only, as the SELLER likely cannot make repairs, and the LENDER likely will not. It is possible that the PURCHASER will spend money on a home inspection only to find out that the LENDER does not approve the sales price and the contract may fall apart, with the PURCHASER being out the cost of a home inspection.
4. Once the LENDER approves the short sale, they will likely require the PURCHASER to close immediately. The lender will often request closing to occur within 7-14 days, so the PURCHASER needs to have their finances in line by then.
5. During all of this, the home is still in pre-foreclosure and CAN progress to foreclosure. A ratified contract on a home does not necessarily stop the foreclosure process from occurring, as sometimes the short sale department (loss mitigation) does not have contact with the foreclosure department, and foreclosure proceedings may begin. If a home does progress all the way to a foreclosure sale, the contract between the PURCHASER and the SELLER becomes void.

All of these items can make purchasing a short sale a very lengthy and sometimes confusing process. Please make sure that you are in a position to purchase a home under all of these conditions before you begin to seek out short sales.

For those of you who DO have the flexibility to purchase under these conditions- happy hunting, and congratulations on the great deals you may be able to find out there!

Charlottesville Mortgage Brokers and Lenders

July 18, 2009 by Sasha C. Farmer Realtor · Leave a Comment 

There are several great mortgage brokers and lender in Charlottesville that I’ve had the pleasure of working with. Here are the top several that I recommend to my clients- they will all have different financing options and all provide top-notch customer service.

Tammy Wilt
Prospect Mortgage

http://www.myprospectmortgage.com/twilt/
44365 Premier Plaza, Ste. 220
Ashburn, VA 20147
Cell: (434) 242-0046
Fax: (866) 573-5907
Tammy.Wilt@prospectmtg.com

Susan McGinnis
StellarOne

https://consumer.stellaronemortgage.com/user/smcginnis//
1807 Seminole Trail, Suite 201
Charlottesville, VA 22901
434.964.2202 Office
434.409.0809 Cell
smcginnis@StellarOne.com

Kenneth Mextorf
SunTrust Mortgage

672 Berkmar Circle
Charlottesville, VA 22901
(434) 979.6003 Office
(434) 996.3574 Cell
Kenneth.Mextorf@SunTrust.com

City of Charlottesville Housing Affordability Program

July 2, 2009 by Sasha C. Farmer Realtor · Leave a Comment 

Just this week the City will be sending out applications for it’s 2009 housing affordability program. The aim of this program is to offer credits of either $375 or $525 (depending on the income of the applicant) toward their 2009 December real estate tax bill.

Criteria is as follows (taken from the Charlottesville Housing Authority Program website at the City of Charlottesville);

You must legally own a qualifying city property as of January 1, 2009
• AND you must live in this home
• AND the current year assessed value on this property is NOT more than $365,000
• AND your federal adjusted household gross income for 2008 is $50,000 or less
• AND you are not receiving funds from the Real Estate Relief fund
• AND you owe no delinquent real ~ taxes and own no other estate property

• Click here to download the Charlottesville Housing Affordability Program Brochure.
• Click here to go directly to the City of Charlottesville website.
• Click here to download the Housing Affordability Application.
• Click here to read the article from NBC29.

The deadline to submit applications for this program is September 1, 2009. Please let me know if you have questions about the program or could use any help applying.

Avoid the Rapid Refund!

January 11, 2009 by Sasha C. Farmer Realtor · 1 Comment 

Dear anyone-who-doesn’t-like-to-throw-money-away,

Please do not pay money for instant tax returns this year! H&R Block and ProTax claim to be doing you a favor by charging you $375 for an instant tax return, but there are many places in Charlottesville and it’s surrounding areas that provide free tax return assistance beginning February 1. If you can fight the urge to file your tax return the day after you get your year end pay stub, you will save lots of money- and isn’t that the whole point of a tax return?

The AARP Tax Aides have several locations in the area (and they are also looking for additional volunteers for anyone who might be willing to help provide tax return support and counseling to the elderly or those in low income tax brackets- contact me for more information about this- it is an extremely rewarding program!)- all of their locations are listed below.

Charlottesville Area Locations;

• Friendship Court/Urban Vision Community Center; Monticello Avenue
• MACAA; 1025 Park Street
• Senior Center; 1180 Pepsi Center
• Albemarle County Office Building; 1600 5th Street
• PVCC; 501 College Drive

Surrounding Counties;

• Fluvanna County Library; 8880 James Madison Highway
• Madison Extension Office War Memorial Building
• Orange Extension Office; 146 Madison Road
• Nelson Memorial Library; 8521 Thomas Nelson Highway, Lovingston 

Some of these locations are by appointment only and others take walk-in’s, and more information will be released about their schedules soon.

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