Senate Passes Homebuyer Tax Credit Extension

The Senate has passed a bill to give homebuyers another three months to close on their homes and receive tax credits up to $8,000. The Tax Extenders Bill would apply to homebuyers who met the April 30, 2010 deadline with a signed contract to purchase a new or existing primary residence. The amendment would extend the deadline to September 30, 2010 for homebuyers to close on their real estate transaction. The previous deadline was June 30, 2010. The bill now goes to the House of Representatives, where it is expected to pass.

The National Association of Realtors estimates that as many as 180,000 homebuyers have qualified for the tax credit and met the contract deadline of April 30, 2010, but might not be able to close their transaction by the June 30, 2010 deadline due to the sheer volume of loan applications in the pipeline.

If you have any questions about how the federal tax credits and the extension may benefit your clients, please call me today. I’m available for consultation with your customers. Please feel free to share this news, forward this email, or have them call me directly.

The above content is for informational purposes only and should not be used as a substitute for consultation with a tax advisor.

Courtesy of Kimberly Coleman, Branch Manager Prospect Mortgage
NMLS# 254416
20512 SW Roy Rogers Rd., Suite 130
Sherwood, OR 97140
Office: (503) 305-2344
Cell: (503) 476-7020
Fax: (877) 674-6435
Kimberly.Coleman@prospectmtg.com

Before you Buy a Home: 8 Steps to Getting your Finances in Order

We encourage potential homebuyers to get their financial homes in order before purchasing.

1. Develop a family budget. Instead of budgeting what you’d like to spend, use receipts to create a budget for what you actually spent over the last six months. One advantage of this approach is that it factors in unexpected expenses, such as car repairs, illnesses, etc., as well as predictable costs such as rent. Print a Basic Budget worksheet.

2. Reduce your debt. Generally speaking, lenders look for a total debt load of no more than 36 percent of income. Since this figure includes your mortgage, which typically ranges between 25 percent and 28 percent of income, you need to get the rest of installment debt-car loans, student loans, revolving balances on credit cards-down to between 8 percent and 10 percent of your total income.

3. Get a handle on expenses. You probably know how much you spend on rent and utilities, but little expenses add up. Try writing down everything you spend for one month. For instance, if you had spent some amount of money in the previous month for removing dents from your car (perhaps with the help of firms like RJ Don Panelbeaters–reputed providers of courtesy cars for bodyshops), then it would be a good idea to document the expenditure correctly. Going forward, this can help you monitor your monthly expenses and understand how they can vary depending on your different needs. Moreover, this will also enable you to find some great ways to save. Additionally, do not forget to include life insurance within your budget plan, you can get great insurance from places like Globelife to organizing everything before you even move in.

4. Increase your income. It may be necessary to take on a second, part-time job to get your income at a high-enough level to qualify for the home you want.

5. Save for a downpayment. Although it’s possible to get a mortgage with only 5 percent down-or even less in some cases-you can usually get a better rate and a lower overall cost if you put down more. Shoot for saving a 20 percent downpayment.

6. Cost of living. Don’t just plan on saving whatever’s left toward a downpayment. Instead, decide on a certain amount a month you want to save, then put it away as you pay your monthly bills. In order to do this effectively, you will need to know the cost of living in the area where you want to buy a house. The cost of living can vary from city to city, or even from town to town. Comparing the cost of living in your new home with where you currently reside (using resources available at https://homesalesoaklandca.com), you can determine what your expenses will be like and plan accordingly.

7. Keep your job. While you don’t need to be in the same job forever to qualify, having a job for less than two years may mean you have to pay a higher interest rate.

8. Establish a good credit history. Get a credit card and make payments by the due date. Do the same for all your other bills. Pay off the entire balance promptly.

For more helpful resources, visit our Resource Center on the Bella Casa website.

Protect Oregon Homes from New Oregon Transfer Tax

How would you like to see a ‘sales tax’ when you sell your home, which could be as high as 6% like it is in Seattle?

What is a Real Estate Transfer Tax?

A real estate transfer tax is a sales tax on your property. It is imposed by state or local government and collected when you transfer ownership of your home, land, or commercial real estate. It is a form of double taxation that lowers homeowner equity, negatively impacts the process of buying and selling a home, and unfairly targets property owners and lower income residents alike. Typically, once the tax is initiated, the rate can be increased by the state, county or city at any time.

Why are we opposed to a Real Estate Transfer Tax?

Double Taxation. As a resident of Oregon, you already pay taxes on your property based on a portion of your property’s assessed value. This new tax would impose a second tax on your home or property at the point-of-sale.

Loss of Equity. Since a transfer tax would be assessed against the value of your property including the amount you owe on your mortgage(s), the overall equity earned by the seller would decrease.

Damage to the Real Estate Market. Oregon’s housing market is in crisis. The overall higher costs of a transfer tax would only make it more difficult to initiate a successful sale. It would also negatively impact the commercial real estate business and efforts to stimulate our struggling economy.

Punishment of Homeowners. People who move from one house to another should not be punished while others choose not to move. In fact, this is considered discriminatory and harms access to the “American Dream” of home ownership.

An Unfair Impact on Lower-Income Oregon Residents. A real estate transfer tax would impose a higher tax burden on lower income households that typically spend a larger percentage of their income on their home.

This is serious stuff people!

Get involved, protect your home equity, and protect Oregon’s economy!

www.ProtectOregonHomes.com

Tax Credit Still Available for Military Members

Members of the U.S. military, Foreign Service and intelligence communities have another year to purchase a home and claim the home buyer tax credit.

Any service member who is or has been on extended duty for 90 days or more between Jan. 1, 2009 to April 30, 2010, has until April 30, 2011, to sign a sales contract and until June 30, 2011, to close on the property. Both the $8,000 first-time and the $6,500 repeat home buyer tax credits are included in the extension.

The rule that requires buyers to repay the credit if they move out of their home within three years has also been waived for qualified service members if they receive government orders to move.

Special thanks to Kevin Kenagy for providing this information.

Kevin Kenagy, Senior Loan Officer
Hyperiod Capital Group Retail
4640 SW Macadam Ave. Ste. 260
Portland, OR 97239-4232
Direct: 503-313-9072
Fax: 503-595-9330
NMLS ID: 211691
KevinK@hyperionretail.com
www.Hyperionretail.com

What Not to Overlook on a Final Walk-Through

It’s guaranteed to be hectic right before closing, but you should always make time for a final walk-through. Your goal is to make sure that your home is in the same condition you expected it would be. Ideally, the sellers already have moved out. This is your last chance to check that appliances are in working condition and that agreed-upon repairs have been made. Here’s a detailed list of what not to overlook for on your final walk-through.

Confirm that appliances are in working order.
Typically drapery rods mounted to the wall stay with the home.

Make sure that:

  • Repairs you’ve requested have been made. Obtain copies of paid bills and warranties.
  • There are no major changes to the property since you last viewed it.
  • All items that were included in the sale price — draperies, lighting fixtures, etc. — are still there.
  • Screens and storm windows are in place or stored.
  • All appliances are operating, such as the dishwasher, washer and dryer, oven, etc.
  • Intercom, doorbell, and alarm are operational.
  • Hot water heater is working.
  • No plants or shrubs have been removed from the yard.
  • Heating and air conditioning system is working
  • Garage door opener and other remotes are available.
  • Instruction books and warranties on appliances and fixtures are available.
  • All personal items of the sellers and all debris have been removed. Check the basement, attic, and every room, closet, and crawlspace.

Part 4: Avoid Predatory Lending

Solutions Home Buyers Can Use to Avoid Predatory Lenders

We’ve presented many great resources to educate and help you navigate the lending industry. But we can’t emphasize enough how vital personal connections and business relationships are, especially when there is a great deal of money at stake. You can read every website and brochure offered here, but your most important resource remains your Realtor®. (Your Bella Casa Realtor®, or course!)  As self-serving as that may sound, we know from eons of experience how our service and network of credible contacts has saved transactions, saved home buyers money, and prevented awful situations of predatory lending from taking place. Meet your greatest real estate resource here. Continue reading “Part 4: Avoid Predatory Lending”

Part 3: Questions to Ask if the Loan is an ARM

An adjustable-rate mortgage differs from a fixed-rate mortgage in many ways. Most importantly, with a fixed-rate mortgage, the interest rate stays the same during the life of the loan. With an ARM, the interest rate changes periodically, usually in relation to an index, and payments may go up or down accordingly.

Lenders generally charge lower initial interest rates for ARMs than for fixed-rate mortgages. At first, this makes the ARM easier on your pocketbook than would be a fixed-rate mortgage for the same loan amount. Moreover, your ARM could be less expensive over a long period than a fixed-rate mortgage–for example, if interest rates remain steady or move lower.

Against these advantages, you have to weigh the risk that an increase in interest rates would lead to higher monthly payments in the future. It’s a trade-off–you get a lower initial rate with an ARM in exchange for assuming more risk over the long run. Here are some questions you need to consider:

  • Is my income enough–or likely to rise enough–to cover higher mortgage payments if interest rates go up?
  • Will I be taking on other sizable debts, such as a loan for a car or school tuition, in the near future?
  • How long do I plan to own this home? (If you plan to sell soon, rising interest rates may not pose the problem they do if you plan to own the house for a long time.)
  • Do I plan to make any additional payments or pay the loan off early?
  • What is the initial rate?
  • How long will that rate stay in effect?
  • How is the adjusted interest rate determined? (Generally, a specified amount—the “margin”—is added to a current published rate—the “index.”)
  • How often can the rate change?
  • How much can the rate go up each year and over the life of the loan? What is the maximum monthly payment you could be required to pay? Would you be able to afford it?
  • Does the loan set a minimum interest rate?
  • Do the monthly payments gradually decrease the amount you owe even if interest rates increase? (With some loans, the amount you still owe can increase rather than decrease each month—called “negative amortization.”)
  • Does the interest rate increase if your payments are late?
  • Could you qualify for a loan with the maximum interest rate permitted under the mortgage? If not, do you anticipate earning more in the future so you will be able to afford the higher payment?
  • Can the adjustable rate mortgage loan be converted (changed) to a fixed rate without refinancing into a new loan? Is there a charge to convert?

Bella Casa offers a list of referred mortgage lenders. We are often asked for assistance in referring competent, economical, and local people and businesses. There are liabilities prohibiting us from making those choices for you, and we are uncomfortable steering you to only one option. Below we have compiled a list of those we know, or those our clients have done business with and are satisfied with the value and the service they have received.

Part 2: Warning Signs of a Predatory Loan

Remember the old saying:

“If it sounds too good to be true, it probably is!”

It sounds too easy. “Guaranteed approval” or “no income verification” regardless of borrower’s current employment, credit history, and assets. These claims indicate the lender doesn’t care about whether you can afford to make the payments over the long haul.

Excessive fees. Higher lender and/or mortgage broker fees than are typical in your market. Because these costs can be financed as part of the loan, they are easy to disguise or downplay. On competitive loans, fees are negotiable. It is common for home buyers to pay only one percent of the loan amount for prime loans. By contrast, a typical predatory loan may cost five percent or more.

Large future costs. High-risk adjustable rate mortgages where the payment rises a lot after a short introductory period are seldom appropriate for families who already have had problems repaying other loans. Home buyers also should avoid a large single “balloon” payment (a lump sum due at the end of the loan’s term).

Closing delays. The lender deliberately delays closing so the commitment on a reasonably-priced loan expires.

Over-valued property. Inflated appraisals that allow excessive fees to be included in the loan and result in the borrower owing more to the bank than the home is worth.

Barriers to refinancing. Prepayment penalties that make it hard for a borrower to refinance in order to pay off a high-cost loan by taking advantage of a low-cost loan.

No down payment loans. These loans may be split into two mortgages, with one having a much higher cost. Home buyers should be sure they can afford the payments.

Unethical document management. An ethical lender or broker will always require you to sign key loan papers, and they will never ask you to sign a document dated before the date you sign it.

Read Part 1: Beware of Predatory Lending!

Beware of Predatory Lending! Part 1

For most families, buying a home is the biggest and smartest purchase they ever make. One of the keys to success is getting an affordable home loan with fair terms and reasonable costs. Unfortunately, home buyers need to be aware that some loans are not in their best interest. When loans hurt instead of help, they can quickly lead to foreclosure and even bankruptcy.

What are some of the problems connected with predatory lending? Nearly all predatory lending occurs in the “subprime market,” where loans are sold to people with less than ideal credit histories, such as a short work history, high debt, and a record of late payments on credit cards or other debt. Subprime loans have played an important role in helping millions of consumers achieve homeownership, but, unfortunately, some lenders abuse their role and take unfair advantage of vulnerable borrowers. Here are a few examples of problems with predatory loans:

High interest rates and fees. Predatory lenders often charge extremely high interest and fees that are added into the total amount of the loan the borrower must repay. These lenders charge what they can get away with, not a fair amount based on the credit history of the borrower.

Broken promises/“bait and switch.” Sometimes home buyers are offered a new loan or a refinance of an existing loan that seems to meet all of their needs only to find that interest rates and fees have changed when they get to the closing table. Agreeing to last-minute changes can cost thousands of dollars and result in a loan they just can’t afford.

Loans that start low and go high. Adjustable rate loans are popular in today’s market, but many that seem to be affordable are likely to have steep cost increases in the future. Avoid “payment shock” by considering whether you can pay for the loan both now and in the future.

Loan “flipping.” Too many homeowners are persuaded to refinance their mortgage, sometimes repeatedly, when there is no real benefit. Even when a family receives some cash from a refinance, the gains should be weighed against the costs of excessive fees and a higher loan amount. Often a borrower has other options, such as obtaining a second mortgage instead of refinancing the entire existing mortgage.

Steering. Some families who receive subprime loans could qualify for a much more affordable home loan. Predatory lenders use aggressive sales tactics to steer families into unnecessarily expensive loan products.

An upcoming post will address solutions, resources, and tips to avoid these practices of predatory lending. The best protection is to do business with a credible lender. We encourage you to view Bella Casa’s list of referred mortgage lenders.

UPCOMING POSTS
Part 2: Possible Warning Signs of a Predatory Loan
Part 3: Questions to Ask if the Loan is an Adjustable Rate Mortgage (ARM)
Part 4: Avoiding Predatory Lending – Smart Proactive Steps + Resources