Five Ways to Come Up with a Down Payment

Coming up with a hefty down payment can be intimidating, but with a little work and ingenuity you can do it. Here are a few ideas for coming up with the needed cash:

1. Down-Payment Assistance Programs
Many states offer down-payment assistance programs. You must go through an application process and qualify based on income and credit, but if you do qualify, these programs are amazing. Typically you will receive a grant for the amount of your down payment; it’s basically free money from the government to encourage responsible citizens to buy their first home.

2. Try to Qualify for an FHA Loan
If you qualify, an FHA loan can make first-time home ownership much easier. FHA-backed loans typically offer more manageable down payments (as little as 3.5 percent compared to the 10-30 percent required for conventional home loans). These loans are subject to credit requirements but sometimes less stringent ones than other loans.

3. Help from Family
If your parents or other relatives are in a financial position to help you purchase your first home, they may be happy to do so. Approach the conversation with a gracious and humble mind frame and don’t expect a specific outcome. Emphasize that you are ready to become a homeowner and begin solidifying your financial future, but that you don’t have enough cash on hand for a down payment.

Perhaps you are planning to get married in the near future. Instead of asking your parents to help you pay for the wedding, ask for help with a down payment—a smaller, more modest wedding may be well worth becoming a homeowner. As long as the gift is less than $13,000 (or $26,000 for a couple), you shouldn’t have to pay income taxes on it, either.

4. Boost Your Income
Instead of looking at your current income and thinking that saving a chunk of money is impossible, ask yourself how you can earn more money. Options include freelancing on the side or getting a job on the weekends working retail or at a restaurant. No matter how you choose to boost your income, the main goal is to continue living on your old income while putting away any extra money.

5. Borrow from Your IRA
While taking out a loan from your retirement account is generally frowned upon and penalized with taxes and early-withdrawal fees, one exception is borrowing from your IRA specifically for a down payment on a house. If you qualify, you can borrow up to $10,000 penalty-free toward a real estate purchase.

Are you thinking about purchasing a home and looking for advice on where to start? Give me a call at (626) 252-0839,  we will sit down and draft out a plan for your specific situation, whether it be buying something this month or 6-12 months down the line, its important to have knowledge and tools available to you. Let me help! 

Are you wondering what your home would sell for in today’s market? Click HERE for a free estimate! 

For a more in depth consultation please contact us directly at (626) 252-0839

Understanding Your Closing Mortgage Paperwork

If you’ve decided to take the leap and become a homeowner, then odds are that you’ll need to apply for a mortgage to make this dream come true. Applying for a mortgage often seems more complicated than it should be—by the end of it all, it may seem like you are drowning in a sea of paperwork. Besides all of the forms that you’ll have to fill out and the documents you’ll need to sign to submit an official application, you’ll also have to sign three mortgage documents on the day of the closing. The following is a closer look at those documents.

Settlement Statement
The settlement statement, which is also referred to as the Closing Disclosure, is a final laundry list of everything you are paying for regarding your home purchase (i.e., fees). This shouldn’t be the first time you see these fees, though. Mortgage lenders are required by law to provide you with a Loan Estimate early on in the loan process. Although a Loan Estimate doesn’t break down your fees into a line-item list the way a Closing Disclosure does, it does let you compare your final closing costs and terms with your initial estimate. Once you receive your Closing Disclosure there is a required waiting period of three days to review the terms before closing. The following are some of the fees that a settlement statement will detail:

  • Real Estate Agent Fees – These are the commissions paid by the seller.

  • Mortgage Lender Fees – These fees typically include the appraisal fee, the credit report fee, and any origination fees for the mortgage rate you chose, as well as other potential loan processing fees.

  • Title Fees – The title fees include the title insurance that you must buy to protect both yourself and your mortgage lender in the event that any third party makes unwarranted claims on your new property. These are charged by the title company that is serving as your settlement agent.

  • Prorated Items – These items can include prepaid mortgage insurance, homeowners insurance (most mortgage lenders require a year’s worth), and more.

  • HOA Fees – The community’s homeowner association may charge you a move-in fee.

Promissory Note
The promissory note, which is often simply referred to as the note, is the document that outlines the terms of your mortgage loan including whether you’ve taken out a 15-year adjustable-rate mortgage or a 30-year fixed-rate mortgage, your mortgage interest rate, your payment intervals, and whether or not you’ll be required to pay a penalty if you pay your loan off early. The promissory note also states that the property you are buying will be used as security by the mortgage lender in case you default on the loan.

Deed of Trust
This document, which is referred to by several different names, including the security instrument and the mortgage, is an agreement that states that you pledge your property as security for the promissory note. The deed of trust consists of three occupancy provisions. You must comply with one of them based on the loan you’ve chosen. These three occupancy provisions are as follows:

  • Owner occupied provision – If the property is your main residency, then you need to move into the home within 60 days of the closing date. You’ll also be required to live there for a minimum of one year before you can use it as a secondary home or as a rental property.

  • Second home provision – If you’ve purchased the property as a second home, such as a vacation home, then you are not allowed to rent the property out.

  • Non-owner occupied provision – Mortgages for non-owner occupied homes tend to require you to pay a higher mortgage interest rate, which means that you can convert the property to an owner-occupied home or a second home if and whenever you want to.

These are the mortgage documents that you’ll need to sign on the date of your closing. It’s a good idea to be prepared for the closing by knowing what it is that you’ll be signing. This way you’ll save time and reduce the amount of confusion you might experience regarding the terms you are agreeing to.

When you decide to sell your house, it is important to be well informed about the local market and current buyer expectations. Take the emotion out of the process. Be realistic about price and know what you need to do to get the best return on your home investment.

1-626-252-0839 Sell While the Market is HOTT!

What’s Your Home Worth? Find out Now!

If you’ve been thinking about selling your home, chances are that you’re excited about the possibility of moving and starting a new chapter of your life. Simply deciding to sell your home isn’t enough, though. The process of putting your home on the market can be overwhelming and time-consuming, so before you try to sell your property, you need to ask yourself a few questions. Being honest with yourself and with the people around you will help you have a more positive selling experience when you’re ready to move.

Fueled by a $370 billion jump in the value of household real estate, household net worth grew $1.7 trillion in the third quarter to $64.8 trillion, the Federal Reserve reported Thursday in its quarterly Flow of Funds report.

And, while the value of owner-occupied household real estate increased, total residential mortgage debt fell $85.8 billion. As a result, owners’ equity increased almost $390 billion. Homeowners’ equity as a percentage of the value of the real estate rose to 44.8 percent, the highest level since 2007, according to the report.

The report is the most comprehensive look at aggregate household and corporate balance sheets and income statements, a sort of blood pressure reading on the economy and its components.

The second quarter drop in mortgage debt marked the 14th straight quarterly drop. According to the report, aggregate mortgage debt at the end of the second quarter was $9.489 trillion, the lowest level in more than six years when homeowners owed $9.49 trillion and their equity represented 57.9 percent of the value of their homes.

The improvement in household net worth more than reversed a $157.2 billion drop in the second quarter. An increase in net worth means assets grew faster than debts.

The increase in net worth is good news for a struggling economy according to the economic theory of “wealth effect” which holds that consumers tend to spend more if they “feel” wealthier, even if income drops and conversely.

Total household debt fell $10.9 billion in the third quarter, essentially flat in percentage terms, a decline of just 0.08 percent. Most of the change in net worth came from asset growth, attributable to the stock market. The value of stock holdings rose $524.4 billion in the third quarter, reversing a $386 billion drop in the second quarter.

The “wealth effect” theory differentiates between the growth in the value of real estate and stock market assets with the change in real estate values having a larger impact on spending.

According to the report, disposable household income increased 0.5 percent or $61.1 billion in the third quarter to $11.9 trillion compared with a 0.7 percent increase or $85.4 billion in the second quarter. Quarterly income growth since the onset of the Great Recession in December 2007 has averaged 0.7 percent including four quarter-quarter declines from the third quarter of 2008 through the third quarter of 2009. (Disposable personal income rose 0.3 percent in the second quarter of 2009).

The slippage in personal income growth signals another challenge to an economy heavily dependent on personal consumption spending which is more than 70 percent of the nation’s Gross Domestic Product.

 

Article by Mark Lieberman, Five Star Institute Economist

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Home Values Up in Q3 Per Fed Report

Fueled by a $370 billion jump in the value of household real estate, household net worth grew $1.7 trillion in the third quarter to $64.8 trillion, the Federal Reserve reported Thursday in its quarterly Flow of Funds report.

And, while the value of owner-occupied household real estate increased, total residential mortgage debt fell $85.8 billion. As a result, owners’ equity increased almost $390 billion. Homeowners’ equity as a percentage of the value of the real estate rose to 44.8 percent, the highest level since 2007, according to the report.

The report is the most comprehensive look at aggregate household and corporate balance sheets and income statements, a sort of blood pressure reading on the economy and its components.

The second quarter drop in mortgage debt marked the 14th straight quarterly drop. According to the report, aggregate mortgage debt at the end of the second quarter was $9.489 trillion, the lowest level in more than six years when homeowners owed $9.49 trillion and their equity represented 57.9 percent of the value of their homes.

The improvement in household net worth more than reversed a $157.2 billion drop in the second quarter. An increase in net worth means assets grew faster than debts.

The increase in net worth is good news for a struggling economy according to the economic theory of “wealth effect” which holds that consumers tend to spend more if they “feel” wealthier, even if income drops and conversely.

Total household debt fell $10.9 billion in the third quarter, essentially flat in percentage terms, a decline of just 0.08 percent. Most of the change in net worth came from asset growth, attributable to the stock market. The value of stock holdings rose $524.4 billion in the third quarter, reversing a $386 billion drop in the second quarter.

The “wealth effect” theory differentiates between the growth in the value of real estate and stock market assets with the change in real estate values having a larger impact on spending.

According to the report, disposable household income increased 0.5 percent or $61.1 billion in the third quarter to $11.9 trillion compared with a 0.7 percent increase or $85.4 billion in the second quarter. Quarterly income growth since the onset of the Great Recession in December 2007 has averaged 0.7 percent including four quarter-quarter declines from the third quarter of 2008 through the third quarter of 2009. (Disposable personal income rose 0.3 percent in the second quarter of 2009).

The slippage in personal income growth signals another challenge to an economy heavily dependent on personal consumption spending which is more than 70 percent of the nation’s Gross Domestic Product.

 

 

Article by Mark Lieberman, Five Star Institute Economist

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Mortgage Rates Fall to New Record Lows … Again (What Are You Waiting For??!)

Industry data released Thursday show borrowing costs for home loans falling to new lows, slipping further from what was already reported as the lowest level for mortgage interest rates in more than a half-century. Economists attribute the continuing declines to ongoing employment concerns and economic uncertainty.

Freddie Mac reports that all fixed- and adjustable-rate mortgage products covered in its regular market study hit all-time record lows for the week ending September 8th.

The GSE now puts the average rate for a 30-year fixed mortgage at 4.12 percent (0.7 point), a drop of 10 basis points from 4.22 percent last week. As a point of reference,

Freddie says last year at this time the 30-year rate was averaging 4.35 percent.

The 15-year fixed rate came in at 3.33 percent (0.6 point) this week in Freddie’s survey. That’s down from 3.39 percent last week. A year ago at this time, the 15-year rate averaged 3.83 percent.

The 5-year adjustable-rate mortgage (ARM) was unchanged this week, matching its all-time low set last week at 2.96 percent (0.6 point). This time last year, the 5-year ARM carried an average rate of 3.56 percent.

Freddie Mac’s study shows the 1-year ARM is now averaging 2.84 percent (0.6 point), down from last week’s average of 2.89 percent. It was 3.46 percent 12 months ago.

“Market concerns over Eurozone sovereign debt default and a weak U.S. employment report for August placed downward pressure on Treasury bond yields and allowed fixed mortgage rates to hit new lows this week,” explained Frank Nothaft, Freddie Mac’s chief economist.

He notes that last month’s jobs data showed no net gains, the poorest showing since September 2010, with the national unemployment rate holding above 8 percent for the 31st consecutive month. That’s the longest stretch of such elevated joblessness in 70 years, according to Nothaft.

 

By Carrie Bay, DSNews.com

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5 Real Estate Resolutions for 2011

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When it comes to New Year’s Resolutions, financial goals like paying off credit cards and doing a better job of saving rank at the very top of most people’s lists, right up there with the perennial goal to take off a few pounds.

But for many Americans, visions of sugarplums had to share mental space this holiday season with visions of home – from buying a new one, to cutting costs in the one they already have.  Whether you rent or you own, here are 5 key real estate resolutions to consider setting for 2011 (plus some pointers on how to fulfill them).

1.  Owners: Accelerate paying your mortgage off. During the bubble era, many homeowners were comfortable with refinancing ad infinitum, so long as they could afford the payment. It was not unusual for homeowners to refi their mortgages every year, pulling cash out for everything from cars to college tuition. After the burst, homeowners who have witnessed friends and neighbors lose their homes are exhibiting a new level of interest in paying their homes off – all the way off. While some money pundits say the cash is better used by investing it, many homeowners seek the security of owning their homes free and clear sooner than planned, which also saves them thousands and thousands of dollars in interest payments over the life of the loan.

Fortunately for them, there are lots of strategies out there for getting your mortgage paid off ahead of schedule. In 2010, we saw the seeds of a trend of homeowners with upwards of 25 years left to pay on their 30-year mortgages with 6.5% interest rates refinancing those loans into low interest 15-year-fixed mortgages, slashing both their rate and the number of years they have left to pay on their loan nearly in half.  Interest rates trended rapidly upwards in December, but rates on a 15-year-fixed rate loan are still very low – just barely above 4.25 percent – so if you’ve had your loan for awhile, you can still cut your interest rate significantly by refinancing into a shorter term loan.

If you can’t refinance for any reason or you simply would rather not commit to the higher mortgage payment on a shorter term loan, here’s a hack you can use to get your existing home loan paid off sooner – effortlessly: pay half the amount of your monthly mortgage payment every two weeks, rather than the full payment once a month. This results in an extra monthly payment per year, and can pay your mortgage off as much as 6 years early!

2.  Renters: Renegotiate your rent. Most resolution-setters looking to save more cash start with cutting out their daily latte and canceling cable.  But housing is your largest expense; saving there can be the equivalent of cutting out dozens of lattes – in one fell swoop.  If you are seeing rents in your building or around town that make yours seem high, or you search Trulia Rentals for your building and find that the rents currently being charged are lower than yours, these are good signs that you might be paying above-market rent.  If that’s the case and/or if you see a high number of vacancies in your building, you should have no qualms about contacting your landlord and renegotiating your rent.

To be an effective negotiator, point out the rental “comparables” which are lower than yours, and explain that the rent is too high for you to continue paying at this level; also, point out that you always pay your rent on time and the other ways in which you are a desirable tenant.  Let your landlord know that you would love to stay in the building, but that you can’t afford to pay above-market rents when there are so many other units available in the area at a lower cost.  Many landlords would rather discount your rent by $50 or $100 than lose a good, paying tenant at a time when they already have so many units to fill.

3.  Sellers: Create urgency for buyers, and get your home sold. If your home lingered on the market in 2010, you may need to take the bull by the horns to get it sold in 2011.  Cut your price to a level slightly below the recently sold comparables; even if you’ve cut the price before, this can create a pricing “sweet spot” where buyers recognize the value and get concerned that such a good deal won’t possibly last.  Same with condition – primp and spruce your home so that it shows so much better than the other homes in your area that buyers will see that they feel compelled to leap off the fence.

Finally, if you’ve had lots of buyers – or even repeat visits from the same buyers – consider making a reverse offer to the buyers who have shown an interest but not yet made an offer.  With a reverse offer, the seller actually puts together a written offer to sell to the buyers, usually at a price or on terms that are more favorable than the property was listed with.  And a smart reverse offer has a pretty short shelf life – by making it expire within a day or two after issuing it, you create a level of urgency not seen since the tax credit was about to expire!

4.  Buyers: Qualify for a mortgage to buy a home. Many would-be buyers have mentally disqualified themselves, despite the great economic climate for buying a home, because they have heard it is so difficult to get a mortgage.  The fact is, with a 620 credit score and a 3.5 percent down payment (plus closing costs, in some cases), an FHA loan can finance the purchase of your home.  Start with the basics – pull your credit reports from AnnualCreditReport.com and check them for errors, following the instructions to dispute any inaccurate information that might drag your score down.  Then, get referrals to a local mortgage broker who can pull your credit score – the same ones the banks will look at – and let you know where you stand, as well as giving you some tasks to boost your score to where you need it to be, if it’s too low.  Don’t talk yourself out of even applying for a home loan; instead, get a professional’s opinion about your purchasing power and their help in getting yourself ready to buy.

The other big to-do list item is saving up  “cash to close” – the money you need for your down payment and closing costs.  Again, work with a real estate broker or agent and the mortgage broker or professional – local to your area – to help you figure out about what your target savings amount needs to be. Then, get started going through your last month’s bank account statements to see where you can eliminate expenses and direct those funds into savings, automatically and every paycheck, ideally.

I suggest setting up a new savings account that you nickname “Home” or whatever gets (and keeps!) you inspired to stockpile your cash there.

5.  Owners: Pay your property taxes. Coming out of the recession, many a cash-crunched homeowner has held onto their homes by the hair on their chinny-chin-chin, through job losses, reduced income and rising adjustable mortgage payments. There’s a major contingent who have been able to keep their mortgage current, but have fallen behind on their property taxes.  Though many states will not foreclose on a home until the taxes are anywhere from 2-5 years delinquent, if you’ve fallen behind on your taxes and are starting to get your financial footing back under you, 2011 would be a great year to get current.  I know this is tough, because you’ll have to start paying your current taxes, plus chip away at the back taxes, but it is possible – just treat it like any other financial project and start devoting whatever you can to the delinquent taxes on a monthly basis.  Also, make sure you have budgeted a monthly savings amount to cover your current taxes, even if you only pay them twice a year, to avoid falling further behind.

Two things that can help:  first, make sure you’re not overpaying. Check the assessed value of your home, as it appears on your tax bill or on your county tax assessor’s website.  Then, visit Trulia, search by your address, and find the recent comparable homes that have sold in your area. If they are selling for significantly lower than your home’s assessed value, dispute the value with the tax assessor.  Most of them offer a dispute form on their websites, and simply require that you tell them what you believe to be the new, lower value of your home and offer them the addresses of recent sales that back your estimated value up.

Second, most tax assessors and/or collectors do offer a long-term payment plan for delinquent taxes. Visit their website or give them a ring – many times, you’ll be required to make a down payment of, say, 10% of what you owe, but then can make low, monthly payments for up to several years to get rid of your arrearages.

 

 

Article on Trulia.com by Tara-Nicholle Nelson

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U.S. home prices drop for fourth straight month

Still on the fence about selling your home? You might want to move sooner than you think!

 

Home prices are dropping in the nation’s largest cities and are expected to fall through next year, as fewer people purchase homes and millions of foreclosures come on to the market.

The Standard & Poor’s/Case-Shiller 20-city home price index released Tuesday fell 1.3 percent in October from September.

All cities recorded monthly price declines. The last time that happened was in Feb. 2009.

Atlanta recorded the largest decline. Prices there fell 2.9 percent from a month earlier. Home prices in Washington dropped 0.2 percent in October, the second monthly decline after five straight increases.

Home prices in Dallas, Portland, Ore., Charlotte, N.C., Tampa, Fla. and Denver have fallen for four straight months.

The 20-city index has risen 4.4 percent from their April 2009 bottom. But it remains 29.6 percent below its July 2006 peak.

This year is on pace to finish as the worst for home sales in more than a decade. High unemployment and tight credit have kept people from buying homes, despite some of the lowest mortgage rates in decades.

Government tax credits gave the ailing industry a boost this spring. But they expired in April, and in recent months, home prices have begun to dip again.

Millions of foreclosures are forcing home prices down and more are expected in the coming year. Many people are holding off on making purchases because they fear the market hasn’t bottomed out, analysts say.

And mortgage rates are rising again. In the last month, rates on fixed mortgages have surged more than a half-point to near 5 percent.

Most experts expect the declines to continue through mid-year with prices on average to lose another 5 percent to 10 percent. The worst price drops will come from cities with a struggling economy and the highest foreclosure rates, while those with better job growth will fare better.

Home prices have declined in 18 of the 20 cities in the past year.

 

 

Copyright © 2011, Los Angeles Times

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