FHA 90 Flip Day Rule

Post by Ken Grech, a top Simi Valley real estate agent. Search Simi Valley real estate listings.  Many of you have contacted me over recent months about the FHA 90 day “flipping rule” that states that properties sold in the last 90 days are ineligible for FHA financing. 

Although there is no official “FHA Mortgagee Letter” published just yet, effective today, February 1, 2010, David Stevens, assistant Secretary for the HUD Commissioner, stating that they have waived the 90 day flipping compliance rule for 1 year.  The waiver is to be in effect for one year starting today (through Feb.1, 2011).

Although there are still some rules, like the transaction must be an arms length transaction, if the sales price increases by more than 20% there may be justification required to show why the value increased, etc., this is GREAT news for us as it opens up inventory for our clients that was not previously available. 

If you have any questions about the new waiver, please feel free to give me a call or drop me an email.  I would be happy to go over some details with you.

Last Chance for First Time Homebuyers

Post by Ken Grech, a top Simi Valley real estate agent. Search Simi Valley real estate listings. There was a very intersting article in the Los Angeles Times this morning (December 27, 2009)regarding the tax credit that is place for our first time home buyer’s (go to www.latimes.com/business/housingscene article is written by Lew Sichelman). Currently first time home buyers may be qualified to obtain as much as $8,000 tax credit and for move up buyers $6,500 – this benefit will not be renewed past the April 2010 date. Meaning, if you or anyone you may know who may be “on the fence” as to whether or not this is a good time to buy, the answer is a resounding YES!  Interest rates are the lowest they’ve been since 1977, and with this tax credit, it would be a shame for anyone to miss out on this great opportunity to own a home and start building equity. I and my team are ready to help! Please contact me today to start discussing how I can help you find a home for you!

The Best Investment of the Past Decade

Post by Ken Grech, a top Simi Valley real estate agent. Search Simi Valley real estate listings. If you were an investor in the 1990s, would you have done better with stock or real estate?

No doubt a lot of money has been made with stocks. At the same time, the last few years have been a blow-out on Wall Street. Between dot-coms, cable firms and Enron, predictions that the Dow Jones Industrial Average would one day hit 36,000 now seem far removed. Indeed, the Dow has fallen nearly 15 percent in the past few years, from 11497.12 at the end of 1999 to 10021.50 at the end of 2001.

But what about real estate? Has it done any better?

Speaking before the National Press Club, Fannie Mae Chairman and CEO Franklin D. Raines offered this analysis:

It’s January 1990. Three individuals have just received a $10,000 year-end bonus. And they’re trying to decide what to do with the windfall.

John decides to invest his $10,000 in the stock market and, being conservative with his finances, he puts the money in an index fund of S&P 500 stocks.

Bill is excited by the possibilities of the Internet and all the new technology companies, so he puts his $10,000 in a NASDAQ index fund.

Mary has never invested in the stock market. But she’s tired of paying rent every month with nothing to show for it. So she put her $10,000 down on a bungalow listing for about $80,000.

It’s about 12 years later. Assuming they all had to pay for shelter every month, how would you say John, Bill, and Mary did on their $10,000 investment? Who came out better?

Since 1990, the value of the S&P 500 more than tripled. So from his initial investment of $10,000, John made about $22,000, pre-tax.

During the same period, the value of the NASDAQ quadrupled. So Bill’s gain was roughly $30,000, pre-tax.

What about Mary? During the same period, home values increased roughly 4 percent per year nationally. At that rate, the house that Mary bought for $80,000 is now worth about $126,000. And if she sold it, she would have a profit of about $46,000. And that gain would be free of capital gains taxes.

“It is extraordinary,” said Raines, “that after the longest, strongest bull market in history, the average American built more wealth owning a home than she did in the stock market.

“Most Americans invest and earn more in their homes than they invest and earn from their savings accounts, IRAs, stocks, bonds or other investments,” he said.

“During the past ten years, the average stockholder earned $23,000 in the stock market, while the average homeowner earned $44,000 in home equity. Home equity remains the cornerstone of most family wealth.”

But even if the returns from stock market investments and home ownership were the same, real estate would still yield a better net result. Why? While profits from the sale of stock are generally taxable, profits of up to $500,000 for a married couple (and as much as $250,000 for single owners) are typically shielded from taxes when a prime residence is sold.

We certainly hope you enjoyed this information. Please feel free to forward it to anybody who might benefit from it.

Has Your Credit Changed?

Post by Ken Grech, a top Simi Valley real estate agent. Search Simi Valley real estate listings. It’s a combination car, pick-up truck and SUV. You really want it. The features are great, the style is the latest and it’s affordable–after the down payment, the cost is only $300 a month.

“Would you buy this car today if I can include the genuine wood grain, rubberized side moldings?” asks the salesman.

Before emitting a strong “yes,” stop and consider what’s about to happen. You will be increasing your debt load and monthly payments, things which make mortgage lenders edgy. If you want to buy a home in the coming months, you need to carefully consider your financial choices.

The issue here is not cars. If you need a car for safe travel, then safety comes first. But if you merely want a new car–or super-duper music system, an antique guitar, a trip abroad or anything else that increases your monthly costs and is not absolutely and unquestionably necessary–then you should think about mortgages, debt and ratios.

Lenders don’t like risk. A lender’s view of financial perfection means making loans to borrowers who always pay their mortgages. Alas, some people don’t re-pay, so lenders need to limit their risk. They do this by checking the value of the house with an appraisal and by ensuring that borrowers are well-qualified.

The expression “well-qualified” as lenders use the term means something more than finding borrowers with good incomes. Yes, lenders want sufficient income for any level of borrowing, but they also want something more: a sense that borrowers are not burdened with too many bills. To lenders, this means limiting debt and monthly costs.

Lenders typically qualify borrowers on the basis of two measures: front ratios and back ratios. In general terms, these standards work like this:

The “front ratio” is the percent of your gross monthly income used for mortgage principal, mortgage interest, property taxes, and property insurance. Depending on the loan program, lenders might allow 28 to 41 percent of a borrower’s income for “PITI.”

The “back ratio” includes PITI plus car payments, student loan payments, credit card payments, auto loan payments, etc. Back ratios typically range from 36 to 41 percent, but can be greater.

Let’s say you want to borrow $150,000 at 7 percent over 30 years. The monthly cost for principal and interest is $997.95. Let’s also say that the monthly cost for taxes and insurance is $250. The total for PITI is $1,247.95. If a lender will only allow 28 percent of your income for PITI, it means you must earn at least $4,457 before taxes each month to qualify for the loan.

If the lender allows 36 percent of your income for the back ratio, then if you earn $4,457 month, as much as $1,605 is available for housing costs and other monthly debt. Since $1,247 is already committed to PITI, $358 remains for installment loans, credit card debt, and such. ($1,605 less $1,247 = $358).

You see the problem. That nice, shiny car will increase your monthly debt load to the point where you may not qualify for a $150,000 mortgage.

What to do?

- Defer major expenses until after you have closed on your home.

- Do not apply for a mortgage, obtain approval and then take on more credit or installment debt before closing. Lenders re-check credit reports just before settlement. If they see new and unacceptable levels of debt, the mortgage may be declined.

- Obtain a smaller mortgage by paying more cash up front.

- Pay down other consumer debt to reduce monthly payments.

- Consolidate bills to obtain lower monthly costs–but be wary of long-term expenses and transfer fees.

- When possible, switch from high-cost credit cards to lower-cost cards with smaller monthly costs. Be wary of higher future rates and transfer costs.

- Look for mortgage programs with more liberal qualification standards. If you have a strong credit history, such financing should be readily available.

- Ask if lenders can consider “compensating factors” which may allow you to borrow more.If you need more information, please feel free to call with questions regarding mortgage options and qualification standards or visit my website: www.simiishome.com

I certainly hope you enjoyed this information. Please feel free to forward it to anybody who might

Is Now the Time to Buy?

Post by Ken Grech, a top Simi Valley real estate agent. Search Simi Valley real estate listings.  Given the  massive layoffs and declining corporate profits, it’s not unreasonable for would-be purchasers to ask if now is the time to buy real estate.

The answer is this: if you’re looking for that first house or if you’ve thought of moving up, now is as good a time as any to get into the marketplace, and perhaps a better time than seen in recent years.

But how can this be? Let’s look at several key issues.

Interest Rates are Down

If rates for 30-year fixed-rate mortgages are at 8 percent–about where they were a year ago according to HSH Associates, a leading financial publisher–your monthly payment for a principal and interest on a $200,000 mortgage would be $1,467.53. Add in, say, $350 for taxes and insurance and the total monthly payment comes to $1,817.53. If lenders allow 28 percent of your gross monthly income for these four baseline costs, you would need $6,492 monthly to qualify for the loan ($1817.53 = 28 percent of $6,491.17).

But suppose financing is available at today’s rates, perhaps 6.85 percent. Now the monthly cost of principal and interest is $1,310.52. Add in $350 for taxes and insurance and the total monthly cost is $1,660.52. In this case, lenders would require a monthly income of $5,930 to qualify.

In other words, when compared with a year ago, you could get the same loan for $157 less per month and you could qualify with $6,744 less income per year. Lower rates mean more people can qualify for given levels of financing–and that more people can borrow additional dollars.

National Trends

Much is made of national trends and with good reason: national trends are easy to track, get lots of attention and provide useful benchmarks.

That said, national trends do not reflect a baseline reality: real estate is local. If the local population is growing, if the nearby job base is increasing, if nearby new home starts are not sufficient to meet demand and if mortgage rates are low, then you can logically expect local home values to rise over time. It’s not a guarantee–there are no guarantees–but price increases in such situations are at least reasonable.

Perspective

We live in an era of measures, numbers and statistics. For instance, the September jobless rate, according to the Bureau of Labor Statistics, reached 4.5 percent, up from 3.9 percent a year earlier.

But did you also know that while 7 million people were unemployed, 135.2 million had jobs? Did you know that a 4 percent unemployment rate is considered “full employment” by many economists?

As a nation, we’ve been doing so well for so long that any blip on the economic radar tends to get noticed. That’s fair and we should be concerned. At the same time, let’s not ignore the whole picture. Most people are doing well–and will continue to do well.

We’re Having a Recession

A recession is not a hideous event. It’s a slow-down, not a depression. National economies move up and down, so recessions are normal–we had them in 1973, 1980, and 1991. But even with the current slow-down, we still have a $10 trillion economy.

Most people have jobs today and will have jobs tomorrow. Will there be tough times in certain industries? Absolutely. Will some communities be hurt? Yes. But you need to ask what a recession means to you. Have you lost your job? Is your job in jeopardy? Is your household income about to decline?

If no, then what about your housing needs? If you need to buy a first home, if you would like to move up, what objective barriers stand in your way?

It’s true that some prospective buyers will delay purchases because of the current slow-down–and for some buyers, postponement makes sense. But the issue is not what other people are doing, it’s the question of what’s best for you given your particular circumstances.

At the very least, review your personal finances, check mortgage rates, take a look at your local marketplace and consider your needs. You may find that now is indeed a very good time to be a buyer.

I certainly hope you enjoyed this report. Please feel free to forward it to anybody who might benefit from the information.

Do You Have Valuable Papers?

Post by Ken Grech a top Simi Valley real estate agent. Search Simi Valley real estate listings.  While there is much talk of a paperless society, the reality is that you do have important papers–especially if they can’t be found. So before the moment of need arises, now is the time to review what you’ve got and create a checklist of important papers for you and for family, friends and business associates.

Why should you gather such paperwork together? It will help you when it comes time to buy or sell property, figure taxes or create wills and estates. It will also allow others to follow your wishes and directives, make their lives far easier, solidify insurance claims, reduce estate taxes, help children better understand your health history–and theirs–and prevent the needless dissipation of assets that took decades to acquire.

Once these three basic matters are reviewed and resolved, the next step is to assemble paperwork in a way that will help others. A basic checklist looks like this:

People. Who are your executors, trustees and guardians? Does anyone have a durable power of attorney? A medical power of attorney? Etc.

Professionals. Who are your attorneys, tax professionals, real estate brokers, insurance brokers and stock brokers? List names, addresses, phone numbers, e-mail addresses and account numbers.

Real Estate. What do you own? What do you owe? Make a list of properties with a corresponding list of lenders and their account numbers and contact information. Also, for tax and estate purposes, gather closing papers from all property you have owned as well as bills and receipts for major repairs and improvements. Do you have deeds and notes? If yes, where are they kept? Such paperwork can greatly reduce estate taxes or at least simplify such filing requirements.

Finances. Where is your money? List banks, S&Ls, credit unions, stock accounts, mutual funds and other assets. Include contact information and account numbers.

Business Assets. Show company information, stock certificates, partnership agreements, options, trademarks, copyrights and patents.

Insurance. What policies do you have? List policies by company, account number, amounts, etc.

Computers. We live in the computer era and there is little to suggest things might change. So, how about a list of passwords, program titles and ownership records, e-mail addresses, online accounts, etc.?

Liabilities. To whom do you owe money? Think of auto loans, credit card debt, business loans, etc. Include contact information and account numbers.

Personal Papers. Where do you keep birth certificates, Social Security information, marriage certificate(s), divorce decree(s), adoption information, citizenship papers, religious records, retirement information, health records, drivers licenses, military service information, safety deposit box inventories, educational records, passports and family photos?

Personal Property. What do you want done with furniture, art, antiques, family items and the like?

Safety Deposit Box. If you have one, where is it and what is the number? Where is the key? Does anyone else have the key? Does anyone besides you have access?

Burial Information. Do you own a cemetery plot? Do you have a burial policy? Gather paperwork in one place. What are your preferences in terms of services and ceremonies?

Paperwork for Others. Do you have paperwork that is important to others–wills, passports, birth certificates, etc? Make a list and show who gets what.

Copies. Given that you have assembled all the paperwork above, where is it kept? Who has copies of your checklist? What is the date when your checklist was created?

Is building a survivor’s checklist fun? Not hardly. But it’s a responsible thing to do and one of life’s necessities. 

I certainly hope you enjoyed this information. Please feel free to forward it to anybody who might benefit from it.

How to Profitably Refinance

Post by Ken Grech, a top Simi Valley real estate agent.  Search Simi Valley real estate listings.  

For homeowners who thought the federal tax refund checks were a nice surprise, you may be a candidate to save a lot more than a few hundred dollars. Interest rates have dropped to levels not seen in quite a while, so it may pay to pull out your mortgage note and do a bit of comparing.

But before you jump on the refinance bandwagon, here are a few “dos” and “don’ts” that should help in your search for the best refinance option.

- Refresh yourself with the exact terms of your current mortgage. Know your rate, mortgage balance, monthly principal and interest payment, possible pre-payment penalty and the remaining term. A loan officer will have trouble giving you the best advice if he or she doesn’t know your current situation.

- When you get a new mortgage, each monthly payment is divided between interest costs and principal reductions. At first, most of the payment goes to interest, but over time, more and more of the loan is devoted to principal. Refinancing starts the process from scratch, which again means most of the monthly payment goes toward interest. This is not necessarily a bad thing if refinancing means lower monthly payments. Additionally, mortgage interest is usually deductible.

- Don’t get sucked into a “low” rate with high fees. Avoid paying points. One point is equal to 1 percent of the loan amount in cash. If you borrow $200,000, then one point equals $2,000. Generally, if you pay points up front you can get a lower rate–but you have to look at the cost of a point versus the monthly savings from a lower rate. It is rarely advised to pay points to “buy down” the interest rate because of the time it takes to recoup the points. But all situations are different, so a good broker or loan officer will be able to run the numbers and calculate a payback period.

- Consider a “zero closing cost” option if available in your area. Such loans, of course, have costs–they’re just not paid at closing. Instead, you’ll likely pay a somewhat higher rate. Lenders around the country offer refinance rates with no points or closing costs. This will enable you to refinance your home without any out-of-pocket expenses or loss of home equity.

- Think about your objectives before shopping around for a mortgage. Do you want lower monthly payments? A larger loan to take equity out of your house? A shorter-term loan, such as a 15- or 20-year mortgage? If you plan to sell within a few years, what adjustable rate programs are available? Different loans will work best in different situations.

- Don’t take a loan with a pre-payment penalty. These programs can hurt if you pay off the mortgage completely or pay down a large part of the loan early. It’s best to have the freedom to pay off the loan whenever you want.

These are just a few things to think about. With any luck, today’s low interest rates will put some extra money into the pockets of millions of Americans and help our economy move ahead.

I certainly hope you enjoyed this information. Please feel free to forward it to anybody who might benefit from it.

Refinancing Aid Expands To More Borrowers

Post by Ken Grech, a top Simi Valley real estate agent. Search Simi Valley real estate listings. There was a great article about refinancing in the USA Today Money Section dated July 2, 2009.  The article stated that the government will allow more distressed borrowers who owe more  (up to 25% more) than their homes are worth to be eligible for refinancing assistance under an Obama administration housing rescue program.

Currently homeowners who owe 5% more than their homes are worth can refinance mortgages through Fannie Mae and Freddie mac, part of a two-pronged approach to reduce the rapid-fire pace of foreclosures.  On Wednesday, Housing Secretary Shaun Donovan said the program will be expanded, allowing homeowners who owe 25% more than their homes are worth on the market to get refinancing, help through the federal agencies. Owing more on a home than it’s worth is referred to as being “underwater.”

“It’s great. It’s good news,” says Lawrence Yun, chief economist with the National Association of Realtors. “Many homes are way deeper underwater. This means more people can tap into those lower rates. It will enlarge the number of people who can get help.” But other economists questioned how much of a boost it will give toward staving off foreclosures, which have risen about 18% from May 2008, according to a report last month by ReatlyTrac.

Even if more homeowners are eligible for refinancing under the Obama plan, rising interest rates on fixed-rate mortgages are expected to dampen refinancing activity. For many owners, it no longer makes financial sense to refinance. About 15 million homeowners in the USA currently owe more than their homes are worth on the market. In other housing news, NAR reported that an index measuring pending home sales rose 6% compared with May 2008 – the first time the index has risen four month in a row since October 2004 and a sign of some possible stabilization in the housing market.

To read this article, go to www.usatoday.com

Foreclosure Moratorium

Post by Ken Grech, a top Simi Valley real estate agent. Search Simi Valley real estate listings. There seems to be a lot of confusion regarding the long awaited California State 90-Day foreclosure moratorium. This moratorium takes effect on June 15, 2009.  This doesn’t mean foreclosures will stop. Supporters of this moratorium acknowledge the state is likely to see thousands more foreclosures before the the crisis subsides. But the California Foreclosure Prevention Act, passed by lawmakers in February and signed by Governor Schwartzenegger, raises a new hurdle in the foreclosure process. Backers say  it will make lenders try harder to keep borrowers in homes. Starting Monday, loan servicers must prove to the state they have comprehensive loan modification programs in place or be denied rights to foreclose on their schedules. Basically, the law will largely press lenders to follow the Obama administration’s Making Home Affordable Program that began in March. That encourages lenders to cut interest rates or re-write loans to 40-year terms to get payments below 38 percent of  a borrower’s monthly income. Other options include reducing principal and tacking missed payments to the back of the loan. Under the law, California officials also can encourage short sales or deeds in lieu option in which banks accept less than owed for borrowers who wan to leave or don’t qualify for modifications.   This article is very informative. For more detailed information, please go onto www.venturacountystar.com and under the State section, look for this  great article written by Jim Wasserman.

If you, friends or family are in a situation where it seems as though foreclosure is eminent, please contact me directly, I can help. I have vast knowledge on how to handle a short sale. I can be reached at www.simiishome.com or phone or text me on my contact number from my website.

American Flag Etiquette

Post by Ken Grech, a top Simi Valley real estate agent. Search Simi Valley real estate listings. This is the time of year that we all want our homes to look their best, here are some helpful general guidelines on how to showcase your American Flag at your home if choose to.

• The flag should be lighted at all times, either by sunlight or by an appropriate light source.
• The flag should be flown in fair weather, unless the flag is designed for inclement weather use.
• The flag should not be used for any decoration in general. Bunting on blue, white and red stripes is available for these purposes. The blue stripe of the bunting should be on the top.
• The flag should never be used for receiving, holding, carrying, or delivering anything.
• When the flag is lowered, no part of it should touch the ground or any other object.
• The flag should be cleaned and mended when necessary.

For flag etiquette rules for display, visit http://www.usa-flag-site.org/etiquette.shtml