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New Housing Bill Will Help

August 3rd, 2008 9:27 PM

The legislation devotes $300 billion to helping troubled homeowners avoid foreclosure. See if you qualify.

The Senate on Saturday passed a $300 billion housing rescue bill aimed at helping troubled homeowners avoid foreclosure and supporting mortgage giants Fannie Mae and Freddie Mac.

President Bush is likely to sign the bill into law within days. After the law kicks in on Oct. 1, thousands of at-risk borrowers will be able to refinance their unaffordable old mortgages into new low-cost fixed-rate loans insured by the Federal Housing Administration (FHA).

The Congressional Budget Office estimates that 400,000 borrowers with $68 billion in loans may benefit from the program - but the bill allows foras many as 1 million or 2 million borrowers to participate in the program.

Here's what homeowners need to know.

Who's eligible?

Qualified borrowers must live in their homes and have loans that were issued between January 2005 and June 2007. Additionally, they must be spending at least 31% of their gross monthly income on mortgage debt to be eligible for the program.

They can be up to date on their existing mortgage or in default, but either way borrowers must prove that they will not be able to keep paying their existing mortgage - and attest that they are not deliberately defaulting just to obtain lower payments.

Before homeowners can get FHA-backed mortgages, they must first retire any other debt on the home, such as a home equity loan or line of credit. Borrowers are not permitted to take out another home equity loan for at least five years, unless it's to pay for necessary upkeep on the home.

To get a new home equity loan, borrowers will need approval from the FHA, and total debt cannot exceed 95% of the home's appraised value at the time.

How can I apply?

Borrowers can contact their current mortgage servicer or go directly to an FHA-approved lender for help. These lenders can be found on the Web site of the Department of Housing and Urban Development.

How does the refinancing process work?

This is a voluntary program, so lenders holding the original mortgage have to agree to rework a given loan before things can get started. The bill requires lenders to make major concessions, writing down the value of the loan to 90% of the home's current value. In areas where prices have plummeted by as much as 20%, that will mean a substantial loss for the lender.

But lenders won't sign off on a workout unless they think that they'll lose less money on that than they would by allowing a home to go through the costly foreclosure process.

Each loan will have to be underwritten by an FHA lender on a case-by-case basis. That means the banks will do a new appraisal to determine the home's current value, as well as examine and verify income statements, bank accounts, job histories and credit scores.

Based on that new appraised home value, the FHA lender must determine how much the original lender has to reduce the original mortgage, so that it will reflect 90% of the home's market value.

If the original lender agrees to the writedown, the new lender buys the old loan and takes over the reworked mortgage.

As part of the deal, the old lender writes off any fees and penalties on the original mortgage, including prepayment penalties, and accepts the proceeds from the new loan on a paid-in-full basis. Additionally, it pays the FHA an up-front premium equal to 3% of the mortgage principal.

What does it cost?

There should be little up-front costs for borrowers to bear. Loan origination fees will vary by lender, but these can usually be paid by the borrower over the life of the loan in the form of a slightly higher interest rate.

However, the refinanced loans do come with many strings. For one thing, borrowers are responsible for paying an insurance premium to the FHA guaranteeing the loan, which will be 1.5% of the principal annually.

Borrowers also agree to share any profits from future home-price appreciation with the FHA. To do that, they'll pay a "3% exit fee" of the mortgage principal to the FHA when they resell or refinance.

Plus, they'll agree to pay the FHA 100% of any profits they realize from higher home prices if they sell or refinance within a year. So if the original loan principal is $200,000 and the home sells for $250,000, the borrower will owe the FHA $50,000, minus costs.

After a year, borrowers will share 90% of the profits with the FHA. The percentage keeps dropping in 10% increments to 50% after the fifth year, where it stays.

What will I save?

Savings depend on what borrowers are paying for their present loan and where they live, but for most people it will be substantial, even after factoring in the FHA fees.

In areas that have sustained huge price drops, such as Sacramento, Calif., where prices have fallen by about 30% over the past year, some loans might be reduced by more than 40%.

Additionally, the FHA loans carry reasonable interest rates, which are fixed for the life of the loan, as opposed to a subprime adjustable-rate mortgage that can jump higher every six months.

Posted by Brenda King on August 3rd, 2008 9:27 PMPost a Comment (0)

Fans Cool

August 26th, 2008 2:12 PM

Visit anytime www.brendakingrealtor.com

Posted by Brenda King on August 26th, 2008 2:12 PMPost a Comment (0)

Buyer's Agent

August 18th, 2008 11:23 AM

A Buyer's Agent is well worth it in a slow market.A house listing used to be an agent’s best friend, but now a qualified buyer is a real gem.

There are not enough buyers out there. Think of it like this: for every 10 homes, there are two buyers. No matter how well-priced the other homes are, eight of them are not selling.”

In this slower market, agents have seen the upside in buyer’s agent contracts.Being a buyer’s agent is a switch in mindset, as house hunters and agents figure out their rights and duties.For both sides’ sake, contracts should be written, not verbal

What to get in writing before signing a buyer’s contract:

- What is the agent’s commission? Will it be negotiated with the seller’s agent and wrapped up in the price of the house?
- How will problems with commission and other contract terms be settled?
- What happens if the seller and the seller’s agent disagree with the buyer’s agent commission?
- What research will the agent do on each house?
- How long will the contract last?
- Is there a nonrefundable retainer fee to the agent or broker for signing the contract?
- If a deal is struck on a house that the buyers find on their own, is the buyer’s agent owed anything?
- After the contract expires, what is the agent owed if there’s a closing or deal on a house first shown by the buyer’s agent during the contract period? How long after the contract expires will the buyer be responsible for paying agent’s commission if such a deal is reached?

Visit any time www.brendakingrealtor.com

Posted by Brenda King on August 18th, 2008 11:23 AMPost a Comment (0)

Open House Tips

August 10th, 2008 9:41 PM

More and more people are turning to the Internet for home listings. Post your ads on popular national and local real estate websites.

No amount of advertising in the world will help you if your customers cannot locate the house. Make sure to provide clear, concise directions on flyers and post plenty of simple but attractive direction signs in the neighborhood.

Be careful of the words you choose to describe the property to customers. Use clear, easily understood descriptors and be wary of using clichéd terms buyers may consider ambiguous or deceptive.

Promote any open house far enough in advance so that people can plan to visit.

Publicize the properties you and your company sell. Many potential customers could be nervous about buying a home in the current economic state. It is important to demonstrate that homes are still selling in large numbers in the area.

Know your customers’ needs: When selecting a time for the open house, keep in mind religious observances or sporting events that could distract the crowd.

Learn all the details about the property in advance. For example, know what schools are nearby, typical weather patterns and property tax and utility information. Do not assume all buyers are familiar with the area.

Offer refreshments to guests. Cold drinks and light snacks in the summer and hot chocolate or coffee in the winter.

Set up a workstation complete with photos of the house during different seasons, full-color flyers detailing the house with various financing options, and signage promoting home warranty protection on the listing.

Encourage the homeowner to invest in a seller’s inspection and have the report highlights available for review at the open house.

Be cheerful and greet each person who walks through the door. Make certain to sound genuine and interested in their questions.

Talk to the buyer. Find out what they are looking for in a home and, if possible, show them why this home could be a good fit for them. Also, do not be afraid to ask about their concerns about the house and if something specific does not appeal to them.

Clean house:

Make sure the house being shown is exceptionally clean. Advise the homeowners to declutter areas and put away personal items such as family photos and children’s drawings. The idea of an open house is for visitors to envision themselves living in this home.

Check the outside of the house for cosmetic flaws. Suggest homeowners touch up paint and tidy the yard.

Have all vehicles out of the driveway on the day of the open house.

Open all blinds and drapes allowing natural light to flood the house.

Turn on desk lamps and make sure all lights in the house are in working order in case a potential customer flips the switch.

Arrive early and set up. Make sure you are at the home at least 15 minutes prior to the open house start time in order to avoid rushing in the door the same time as the possible buyer.

Be wary of using artificial room deodorizers, as many customers could be allergic. Instead, opt for natural candles with light scents.

Have soft music playing in the background on each floor to set the mood.

Sell not only a home, but comfort:

Consumers want to make sure they are investing in a strong home, not a potential nightmare. Make the right first impression by ensuring potential buyers know they have home warranty protection for the first year of homeownership.

By attaching a home warranty to each listing, Realtors can convey confidence in the properties and help demonstrate that their real estate company is looking out for the buyer’s and seller’s best interest.

In this market, it is important to maintain the morale of your firm. Don’t let your agents become discouraged if they don’t see homes moving as quickly as they have in previous years. By putting in a little genuine extra effort, they may find buyers responding and calling on your firm the next time they are in the market for a Realtor.

Posted by Brenda King on August 10th, 2008 9:41 PMPost a Comment (0)