Home prices in August rose for the 4th consecutive month. According to The Standard & Poor's/Case-Shiller report home prices in 20 metropolitan areas across the country increased an average of 1.25% – well above the 0.7% increase that many economists had predicted.
Many people think that this report, along with other recent housing sales reports, indicates that the housing market may have finally found a footing after a three year slump. The housing market has been one of the main causes of the worst recession since the Great Depression. Annually, home prices are still falling, but at a slower rate. According to this report, home prices in the 20 metropolitan areas declined an average of 11.3%. "Broadly speaking, the rate of annual decline in home price values continues to improve," David Blitzer, chairman of the index committee at S&P, said in a statement.
Many people are still worried about the housing market in spite of the positive reports over the past several months. While the housing market has shown strength, it is still vulnerable to increasing unemployment and the expiration of the First Time Home Buyer Tax Credit which expires at the end of November. Some people feel that once the tax credit is no longer available, we may see a sharp reversal of these positive reports. There are several proposals in Congress to extend the tax credit in some form into 2010.
I can be reached at 708.473.7688 or BarkerLoans@gmail.com and, as always, my advice is free!
Tuesday, October 27, 2009
Saturday, October 17, 2009
Cook County Down Payment Assistance Program
The Cook County American Dream Downpayment Initiative Program (ADDI) is an interest-free 5 year forgivable loan, secured by a silent second lien. The home buyer will receive 6% of the sale price (or $10,000, whichever is greater), not to exceed $14,999, toward the down payment and closing costs of for the purchase of a home.
To qualify a homebuyer must be a first time home buyer (FTHB), meaning they have not owned a home in the past 36 months. The homebuyer must also attend a HUD-approved housing counseling course and meet the following income limits based upon the size of their family:
Property must be a single family (no multi unit), owner occupied residence. The property must remain the primary residence of the homebuyer for the entire 5 years for the ADDI loan to be forgiven. The loan is due on sale or if owner moves out before the five year period expires. The maximum sales price for ADDI is $275,200.
Home buyers do not apply directly for the program. They would apply with me for a mortgage and I would provide the documentation on behalf of the homebuyer to secure the secondary financing. The ADDI Program needs at least 40 – 45 days to process the loan request so make sure there is ample time on the sales contract to accommodate this. I highly recommend the homebuyer getting a pre-approval before signing a contract to purchase a home – it will make things move more quickly.
I can be reached at 708.473.7688 or BarkerLoans@gmail.com and, as always, my advice is free!
To qualify a homebuyer must be a first time home buyer (FTHB), meaning they have not owned a home in the past 36 months. The homebuyer must also attend a HUD-approved housing counseling course and meet the following income limits based upon the size of their family:
Property must be a single family (no multi unit), owner occupied residence. The property must remain the primary residence of the homebuyer for the entire 5 years for the ADDI loan to be forgiven. The loan is due on sale or if owner moves out before the five year period expires. The maximum sales price for ADDI is $275,200.
Home buyers do not apply directly for the program. They would apply with me for a mortgage and I would provide the documentation on behalf of the homebuyer to secure the secondary financing. The ADDI Program needs at least 40 – 45 days to process the loan request so make sure there is ample time on the sales contract to accommodate this. I highly recommend the homebuyer getting a pre-approval before signing a contract to purchase a home – it will make things move more quickly.
I can be reached at 708.473.7688 or BarkerLoans@gmail.com and, as always, my advice is free!
Thursday, October 15, 2009
What is a short sale?
Since I first published this article on short sales, they have become even more widespread and many of my clients have been seeking loans to purchase a "short sale." Many people are still not sure how they work, so I thought it a good idea to reprise the article this week.
With the increase in foreclosures lately you may have heard the term “short sale” and wondered what it was. A short sale is when the lender will accept less than the full amount due on a mortgage when a property is sold. Usually, the lender will accept the short sale to avoid the time and expense of a foreclosure.
When a borrower is in default on a mortgage they not only owe the back payments but also may owe late fees, property inspection fees, attorney fees, etc. This can add up quickly to eat up all the equity the borrower had in the property. If the borrower is unable to bring the account current the lender will then foreclose on the property. With a foreclosure, the lender can lose up to 40% of the mortgage amount because of the extra costs involved with foreclosing on a property: attorney fees, court costs, lost interest, eviction costs, property maintenance costs, and selling costs. Foreclosing on a property can also take up to two years in some states. Therefore, it is sometimes in the best interest of the lender to accept the short sale.
It also can be in the best interest of the borrower. They will not have to endure the time and stress of a foreclosure and their credit may not be as adversely affected as it would with a foreclosure. It is quicker and easier and does not subject the borrower to the embarrassment of a foreclosure.
How does it work?
The first thing the borrower should do when they can no longer afford a property is to contact the lender immediately. The last thing a lender wants to do is foreclose on the property. Lenders typically have departments that work with people who are behind on their payments to resolve the situation. If you cannot resolve the default with the lender, and you want to see if they will accept a short sale, they will direct you to the department that handles short sales.
The lender will usually require the borrower to submit a lot of information to the lender in order to consider the short sale. The information required may include:
When the lender reviews all of this they may or may not approve the short sale. If they do not approve the short sale they will proceed with the foreclosure. If they do agree to the short sale you will close on the sale of your property and the lender will take the loss.
So, is the borrower off the hook?
Not necessarily. The lender still has options to try to collect this shortage. As a condition of the short sale the lender may require the borrower to sign a note to repay the shortage. They may also file a collection or a judgment for the amount of the shortage. This is something that an attorney with expertise in this area of real estate needs to be consulted.
Also, the IRS may come after the borrowers for income taxes on the amount of the shortage. If the shortage was forgiven, the lender will report the shortage as income to the IRS and the IRS will collect taxes on this amount. Again, for the specifics on this please consult a tax professional.
With the increase in foreclosures lately you may have heard the term “short sale” and wondered what it was. A short sale is when the lender will accept less than the full amount due on a mortgage when a property is sold. Usually, the lender will accept the short sale to avoid the time and expense of a foreclosure.
When a borrower is in default on a mortgage they not only owe the back payments but also may owe late fees, property inspection fees, attorney fees, etc. This can add up quickly to eat up all the equity the borrower had in the property. If the borrower is unable to bring the account current the lender will then foreclose on the property. With a foreclosure, the lender can lose up to 40% of the mortgage amount because of the extra costs involved with foreclosing on a property: attorney fees, court costs, lost interest, eviction costs, property maintenance costs, and selling costs. Foreclosing on a property can also take up to two years in some states. Therefore, it is sometimes in the best interest of the lender to accept the short sale.It also can be in the best interest of the borrower. They will not have to endure the time and stress of a foreclosure and their credit may not be as adversely affected as it would with a foreclosure. It is quicker and easier and does not subject the borrower to the embarrassment of a foreclosure.
How does it work?
The first thing the borrower should do when they can no longer afford a property is to contact the lender immediately. The last thing a lender wants to do is foreclose on the property. Lenders typically have departments that work with people who are behind on their payments to resolve the situation. If you cannot resolve the default with the lender, and you want to see if they will accept a short sale, they will direct you to the department that handles short sales.
The lender will usually require the borrower to submit a lot of information to the lender in order to consider the short sale. The information required may include:
- Income documentation such as W-2s and pay check stubs to verify the borrowers’ income.
- Bank statements to verify the borrowers’ assets
- Hardship letter – this letter will describe for the lender the reasons the borrowers are in the financial position they are in and will ask the lender to accept the short sale. Borrowers should make this letter sound as sad as possible and back up the story with any documentation you may have such as medical bills, etc.
- Fair market value for the property – depending on the lender they may require an appraisal or may accept an opinion from a local Realtor know as a Comparative Market Analysis (CMA).
- Preliminary proceeds sheet from the sale of the property. This will show the proceeds of the sale of the property after the mortgage is paid off and all other closing costs and fees are paid. This will be negative in the case of the short sale and this negative amount is the amount of the shortage.
- Listing agreement and purchase agreement when they are available.
When the lender reviews all of this they may or may not approve the short sale. If they do not approve the short sale they will proceed with the foreclosure. If they do agree to the short sale you will close on the sale of your property and the lender will take the loss.
So, is the borrower off the hook?
Not necessarily. The lender still has options to try to collect this shortage. As a condition of the short sale the lender may require the borrower to sign a note to repay the shortage. They may also file a collection or a judgment for the amount of the shortage. This is something that an attorney with expertise in this area of real estate needs to be consulted.
Also, the IRS may come after the borrowers for income taxes on the amount of the shortage. If the shortage was forgiven, the lender will report the shortage as income to the IRS and the IRS will collect taxes on this amount. Again, for the specifics on this please consult a tax professional.
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