Large Banks Shifting Focus Away From Foreclosures and Toward Alternatives

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After dealing with countless foreclosures banks are starting to smarten up and engage in easier, cheaper and better alternatives to foreclosure. It turns out that despite the millions of customers that have been forced into foreclosure during the past five years, the aftermath of our nation’s biggest mortgage crisis has not affected all people equally and will not do so in the days yet to come.

Those that have qualified for and chosen to pursue loan modifications or short sales have far better long-term results than people that end up with a foreclosed property. But what exactly is the difference between a short sale or loan modification as opposed to a foreclosure? Well, for starters, for banks doing a foreclosure ends up costing a lot of money – which in turn ends up getting passed on to the consumer in one way or the other. Add to that the very negative impact such an action has on the homeowners and you have people with considerably damaged credit.

But as banks have recently begun to announce, they are starting to channel more energy toward providing homeowners with loan modifications that allow monthly payments to be lowered and become manageable. Being able to stay in their home is the single most attractive aspect of a loan modification and banks are leaning toward them because loan modifications cost them so much less to process.

Short sales are the other alternative to foreclosures that are gaining in popularity and frequency. Aside from being able to walk away from an underwater mortgage with considerably less damage to their credit, one of the best outcomes for homeowners that have done a short sale is that they can seek to purchase another home just two or three years later, depending on the market. Add to that the up to $30,000 that banks are willing to pay in relocation assistance and short sales become an attractive option for many borrowers.

Though there is not too much time left, people that do short sales through the end of this year can apply for the Mortgage Forgiveness Debt Relief Act, designed to allow exemption from being taxed on the discharged debt.
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As you find yourself at the crossroads of deciding how to proceed – particularly if you are facing foreclosure – contact our office today so we can evaluate your situation and determine which options work best for you.

Four Essential Components to a Successful Mortgage Pre-Approval

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Slowly but surely the real estate market is inching toward some sort of normalcy.  Still we are experiencing a soft market where there is plenty of inventory and some eager buyers who want to avail the amazing interest rates and other concessions being offered to buyers these days.

While interest rates remain the number one motivation for many buyers who are buying their first home, moving up into something better or investing in a property – the fact remains that the mortgage industry is tight.  Lenders are being faced with myriad regulations both in-house and through the government agencies that are largely insuring many of the loans today.

It is critical that you, as a prospective buyer, obtain prior approval for a mortgage.  Not only will this give you an extra edge over other buyers who many not have done so, but it will also provide you with a snapshot of exactly what you can afford.  Sellers like nothing more than to see a pre-approval letter along with an offer.  It demonstrates that the buyer is serious and it also shows that a lender has offered them a preliminary amount with which to work.

Credit Really Does Matter Most

At one point more than a few years ago there was a plethora of advertisements claiming to provide anyone and everyone with a home loan – regardless of bad credit.  Gone are those days, in fact, credit is the very first thing considered before a loan officer will even process a loan application.  The minimum FICO score for an FHA loan is now 620, with a preference of course to a higher score.  It also goes without saying that the higher a score is the better an interest rate or other terms one will likely enjoy.

Be sure to view your credit report before you embark on a home buying journey. Know exactly what items are on the report, dispute any errors well before you apply for a mortgage so that your chances of getting an approval are greater and rectify any bad credit concerns you may see on the report.

Past Income History Weighs In Heavy

Right up there with credit health is your financial health.  Lenders will require two years of income tax statements along with W2s and any other attached schedules if you are a self-employed borrower.  Your mortgage loan officer will carefully review all aspects of your income and whether you write off any specific expenses.  To help avoid the risk of mortgage fraud, more and more lenders are requiring the 4506t process to be completed, to verify income tax filing accuracy directly with the IRS.  Anything that goes against your income will be carefully weighed in making their decision.

Be Sure You Can Prove The Source of Cash

Large deposits are a major issue that many prospective homeowners do not realize comes up in mortgage loan applications.  Each and every dime must be accounted for when it comes to incoming cash and deposits that are larger than $1000. What this means is that you cannot dip into your secret stash of cash and suddenly present a down payment to your lender.  You must be able to prove the source of all large deposits – both those that appear in the two previous bank statements that will be provided as part of the application and also in case of any new deposits.

Since cash gifts are allowed for down payments and closing costs, this same scrutiny will be applied to those who are providing the cash gift to the buyer.  This means that if friends or family members are helping you with your closing costs, there is a chance each and every one will be required to show the source of their funds.

Job History Shows Responsibility

Lenders need to know that you are reliable and that your income is stable.  The standard method is through an analysis and confirmation/verification of your work history.  It is essential that any and all gaps be accurately reported though lenders prefer to see at least two years on the same job.  Unknowingly to many home loan applicants, things like overtime, shift differentials and self-employment or business income are things that affect the income calculation used to determine eligibility and approval.
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It is not as easy as pie to get a mortgage loan anymore but these days there are still many buyers that are successfully getting into new homes and at historic rates.  It’s more important than ever to be fully prepared going into the process, providing your loan officer with anything they need – in a timely and efficient manner.  This will ensure a smooth transaction for the seller, Realtor – and most importantly, the buyer.

Tips for Pre-Sale Preparedness

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What do we do when we are looking for love, go out to meet others and attract their interest?  We make sure we look our best, present our best effort and highlight our endearing qualities to “reel in” the perfect catch. The real estate market is no different.  When you are selling a home, you are looking for the perfect buyers to show interest in your home and you hope to share with them what it is you love about the house.

Like meeting a new person in the dating scene, selling a home can be a hit or miss game but unless you make the effort to present your home in the best light, you may be in for a string of not-so-perfect buyers that are less than interested in making an offer.  Here are some things you can do to make sure that buyers get that twinkle in their eye when they first set their sights on your home.

Make Them Love It At First Sight

The old adage about not judging a book by its cover certainly does apply to properties but the last thing you want to do is lose a potential sale because you haven’t paid attention to first impressions. Most homeowners these days have watched some HGTV and one of the things that come up in many of their shows is “curb appeal”. Curb appeal refers to how attractive or enticing the exterior of a home is in terms of landscaping, the driveway area, front porch, entryway, garage and other exterior features.

It goes without saying that you should repair any damage and clean up areas that are out of sorts.  Adding soft touches like some flowers or even some professional landscaping can also make a world of difference in buyers’ impressions of the home.  If you are showing a home after dark, one thing you can do is to turn on exterior lights, creating an appealing peek through as people first drive up to the home.

Keep Things Classic, Clean and Clutter-Free

Nothing is more of a turn off to buyers than a home filled with too much stuff. The last thing buyers want to see is closets and counter space bursting at the seams with too many things, an over-abundance of personal items or a mismatched and unattractive arrangement of furniture.  Classic, simple décor with clean lines and neutral colors is most appealing. Not only does this allow them to see the actual house but it also gives them the opportunity to visualize their own customization in the space. 

Walk through the home and remove all extra items that are lying around, clear off kitchen counters and remove all personal items from bathrooms and other surfaces.  Imagine walking into the perfect hotel room – while looking lived-in, the space is still elegant without too many things crowding the space. 

Highlight the Home’s Features

Whether showing off shiny granite countertops, impeccable resurfaced wood floors or displaying the backyard pool – it is important for buyers to be able to see all that the home offers in terms of amenities and features.  If the walkout basement is a strong selling feature, you could clear the area and pose potential uses for the space such as making it a media room or workout area.  When buyers see versatility with which the space is utilized it will create more interest in your home.

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Remember, buying a home is just like finding a new love.  There must be chemistry.  And unless you make the effort to present the home in its best light, chances are you will not find the perfect buyer.