Category Archives: Changes In Real Estate

What Are Some Of The FHA Changes For 2012

Interest rates have been at all time lows for quite some time now.  Not only have interest rates been at all time lows but values have fallen at the same time, in the Santa Maria real estate market you can see homes in Santa Maria that have lost 70% of value from their peak.  Which is the first time in American history where interest rates have fallen in conjunction with home values.  Historically values and interest rates are inverse,  basically when rates go up,  values tend to go down and when values go down interest rates go up.   Depending on where you are at some markets have experienced as much as a 70% loss in value from their highs, as stated previously.  Although the market has been prime for first time home buyers not just investors.  There are still many that are waiting to see what will happen some may be waiting to see if interest rates will drop even more than where they are at or they are hoping to see if values will continue to fall.  Now if you are a CASH buyer you may have some luck just waiting for you.  But if you need financing and buying a home with cash is not something you are able to do then you might want to consider to getting off the fence.  The reality is there are changes coming again to the most popular loan program out there which is FHA financing.  Anyone needing financing should be more concerned with just being able to get financing and being able to be approved for a home which might be more important than just waiting to see what the market is going to do.

The first change coming to FHA loans as of April 1st, is the increase in the PMI primarily the up front cost.  The monthly charge is going up as well but its not as dramatic as the upfront cost.  Currently the upfront cost of the PMI is 1% but its now going up to 1.75% .  The PMI is the principal mortgage insurance in case the borrower defaults on the loan the pmi will cover the cost of the outstanding balance.  So for a 200k loan the upfront cost is 2k but after April 1st the cost will be $3,500.00 that will be an additional cost added to the closing costs for a home loan.

Another change that is coming to FHA loans is how collection and charge off accounts are treated when qualifying for a loan.   Current FHA guidelines ignore Charge-offs and Collections depending on what the collections are.  But starting April 1st, you cannot ignore the balance if all collections and or charge offs combined is over $1k.  Note: Paying “down” of balances on disputed accounts and collections to reduce the singular or cumulative balance to below $1k, is not acceptable resolution of accounts.  The reality is that there will be those that are currently approved for a FHA loan but after April 1st they will no longer be approved.  The 2nd biggest change is the open Judgments having a minimum of 3 months payment history.  Current FHA guidelines requires only first payment made with copy of cancelled check or cashier’s check.  Clients will need to start making payments to show 3 months payment history in order to receive an approval.

There are additional changes coming to FHA loans this year but they have yet to be finalized as well as the effective date of these changes.  Mainly to increase the solvency of the FHA administration and the insurance fund from any further loses so that a bail out is not needed.  One major change that is coming will be the change in the amount of seller contribution to buyers closing costs.  This change will not affect homes under 200k for the most part but homes over 200k will feel the impact of this change.  Future guidelines will limit seller contribution to the greater of 3% or 6k.  Although this is not finalized yet it is an indication of the administrations efforts to change lending guidelines which will make it harder to qualify.  Among other things the new debt ratio which is yet to be finalized as well.   Which is the amount you can have in bills including your mortgage payment in relation to your current income.


The reality is that there will always be those that are waiting to see what the real estate market is doing.   Only to finally find out that they can no longer qualify for a home loan.   There will always be those that qualify for a home loan no matter what.   Although there are those that will find themselves being penny wise and a pound foolish.

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What Are The New FHA PMI FEES Going Into Effect

This is the latest in FHA changes and guidelines that is sure to have an impact on the local Santa Maria real estate market and the values of the homes in Santa Maria as well as across the country since it will make financing more expensive to get a home for first time home buyers.

New premium structure will help protect FHA’s MMI fund

WASHINGTON – As part of ongoing efforts to encourage the return of private capital in the residential mortgage market and strengthen the Federal Housing Administration’s (FHA) Mutual Mortgage Insurance Fund, Acting FHA Commissioner Carol Galante today announced a new premium structure for FHA-insured single family mortgage loans. FHA will increase its annual mortgage insurance premium (MIP) by 0.10 percent for loans under $625,500 and by 0.35 percent for loans above that amount. Upfront premiums (UFMIP) will also increase by 0.75 percent.

These premium changes will impact new loans insured by FHA beginning in April and June of 2012. Details will soon be published in a Mortgagee Letter to FHA-approved lenders.

“After careful analysis of the market and the health of the MMI fund, we have determined that it is appropriate to increase mortgage insurance premiums in order to help protect our capital reserves and to continue encouraging the return of private capital to the housing market,” said Galante. “These modest increases are one of several measures we are taking towards meeting the Congressionally mandated two percent reserve threshold, while allowing FHA to remain a valuable option for low- to moderate-income borrowers.”

The Temporary Payroll Tax Cut Continuation Act of 2011 requires FHA to increase the annual MIP it collects by 0.10 percent. This change is effective for case numbers assigned on or after April 1, 2012. FHA is also exercising its statutory authority to add an additional 0.25 percent to mortgages exceeding $625,500. This change is effective for case numbers assigned on or after June 1, 2012.

The UFMIP will be increased from 1 percent to 1.75 percent of the base loan amount. This increase applies regardless of the amortization term or LTV ratio. FHA will continue to permit financing of this charge into the mortgage. This change is effective for case numbers assigned on or after April 1, 2012.

FHA estimates that the increase to the upfront premium will cost new borrowers an average of approximately $5 more per month. These marginal increases are affordable for nearly all homebuyers who would qualify for a new mortgage loan. Borrowers already in an FHA-insured mortgage, Home Equity Conversion Mortgage (HECM), and special loan programs outlined in FHA’s forthcoming Mortgagee Letter will not be impacted by the pricing changes announced today.

Taken together, these premium changes will enable FHA to increase revenues at a time that is critical to the ongoing stability of its Mutual Mortgage Insurance (MMI) Fund, contributing more than $1 billion to the Fund, based on current volume projections through Fiscal Year 2013.

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Do You Know The Difference Between A Recourse Loan Or A Non-Recourse Loan?

You may have had your home recently foreclosed on and part of the Santa Maria real estate market on a mortgage home loan that you were upside down on, and maybe you may be plain tired and frustrated and about to become another statistic, but what you need to know is your loan recourse or non recourse, and what does that mean?  Just keep in mind the following is intended for general information only please seek legal counsel for your own specific situation.  Most of this information will be how California treats mortgage loans if outside California you may want to see how your state treats mortgage home loans.

This blog will be focused on what the difference is between a recourse and a non-recourse loan because there is a huge difference and most are not aware of the difference.   With all the Santa Maria homes for sale that are either in foreclosure or homes going through the short sale process it is something homeowners should be familiar with. So lets go with an everyday story you bought your house 2003 you paid $280,000.00 you put no money down when you bought your home with one of those popular 80/20 loans.   A couple of years goes buy and now your home is unbelievably worth $500,000.00.  Just like everyone else you get all kinds of good stuff in the mail full of useful advice to consolidate all of you bills and even make some more home improvements and get a new car using the equity of your home and only make one payment and get so much done.  Why wouldn’t you do it, so you take out a loan against the house and now you owe $450,000.00.  Now let’s fast forward to today.

Well the economy is not so good and your home is not worth $500,000.00 in fact its not even worth what you bought it for now.  More like $250,000.00 and you can’t make the payments anymore because the payments are based on what the home is worth.  So you are forced to either do a short sale or just walk away like so many others since you can no longer make the payments on your home.   But before you do just walk away and your home is another foreclosure, here is something to think about.

Loans that are recourse are basically loans, that allows the lender to use legal means to collect the deficiency balance from the borrower after the asset has been taken back and sold.   Kind of like your home now where you have a loan for more than the what the house is worth.  That being said the bank can come after you legally for the difference, which is kind of tough for most people since they don’t carry 100k on them.  Loans that are non-recourse are loans that the bank cannot come after the borrower for the deficiency amount.   For reference you can refer to California Code.  Please keep in mind that this pertains to your home not to your rental properties and investment homes.

In California when you buy a home it is considered “purchase money” whether it be one loan or two loans.  A loan that is considered a purchase money loan is a non-recourse loan.  The problem with most homeowners is that they refinanced their homes and turned their non-recourse loans into recourse loans.    Although if the lender did a non-judicial foreclosure he cannot come after you in the state of California because that is the trade off that they have for doing a non-judicial foreclosure vs. a judicial foreclosure which means going to Court.  So you get the benefit of the “one action rule”.  Unless you had a second that got completely wiped they can come after you for the deficiency and there are still more exceptions to the rule as you read along.

Now here is where it can get tricky if you have two loans but from different lenders and you don’t have enough to pay off the second,,,,, well the second can come after you but if both loans are from the same lender lets say both are with Wells Fargo and not purchase money so for example if you took out a second later you are okay AS LONG AS BOTH LOANS ARE NOT FROM DIFFERENT LENDERS.   The lender will come after you for the difference and can sell your account to collection agencies as well.   That means they can sue you and levy your bank account or even garnish your wages.

IF YOU HAVE AN FHA OR A VA THESE RULES DO NOT APPLY THESE ARE FEDERALLY SPONSORED LOANS AND SUPERSEDE CALIFORNIA STATE LAWS AND ,,,,,,YOU ARE CORRECT ARE RECOURSE LOANS….home being financed after the collapse are FHA financed and yes they can come after you.  I am not sure if you got that all down and I do hope that this made sense to anyone reading this.  If you are unsure if you will be sued seek some legal advice.

BUT THERE IS HOPE If YOU DO A SHORT SALE BEFORE THE YEAR END. For one California has a new law that any lender that agrees to a do a short sale whether it be a second or investment property.  That they will not come after you for any funds owed.  This is a huge weight off the shoulders of many homeowners that may be thinking of having to do a bankruptcy only to protect themselves.  Due to there being a deficiency amount on the money owed to the bank.  Last but not least the home forgiveness act which expires this year DEC 31, 2012.  IRS CONSIDERS ANY DEBT FORGIVEN TO BE TAXABLE INCOME.   So do the math with me you owed $500k you short sale for $250k the IRS WILL TAX YOU $250K UNLESS YOU ARE INSOLVENT OR FILE BK or the home was your primary residence.  But that all changes on Jan 1, 2013 there will be a tax bill unless there are changes in the Govt.  but it seems that even the Govt. is looking for ways to generate money and would not expect a bailout.  If you do not qualify for a loan modification seriously consider a short sale soon.

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California Real Estate Market Numbers

By • Oct 19th, 2011 • Category: October 2011 Journal, real estate newsflash

35,404 new and resale home transactions closed escrow in California during September 2011, up 7% from one year ago when 33,176 sales closed escrow. September is the second month in 2011 in which home sales volume surpassed the corresponding month in 2010.

September’s numbers, however, are down 6% from August; a typical drop for this time of year.

The recovery’s overall bumpy plateau trend continues to reflect a leveling in home sales in 2011, following a decline that set in after mid-2010. Annual home sales volume is expected to remain at or below 2010’s numbers through the end of 2012.

Real estate owned property (REO) resales made up roughly 36% of all sales in the second quarter of 2011— down significantly from 46% one year earlier. However, this still-high proportion of REOs is expected to remain a constant for three or four years to come. In 2012, delinquencies are expected to be more efficiently foreclosed by servicers under contracts with big mortgage banks, which have thus far proven hesitant to foreclose in large numbers. [For our most current data on REOs statewide, see the first tuesday Market Chart, REO Resales.]

Absentee homebuyers (a group generally composed of speculators and investors) accounted for 24% of Southern California (SoCal) sales and 19% of sales in the Bay Area, basically unchanged from August, when absentee buyers made up 25% and 19% of all purchases, respectively. Current absentee levels remain near the historic records of 26% and 20%, respectively, set in January and February of 2011.

“Jumbo loans” (loans over the old conforming limit of $417,000) accounted for 18% of sales in SoCal, level with one year earlier, and 33% of Bay Area sales, a minor slip from 34% one year earlier. 2010 saw a sharp rise over 2009 in the use of Jumbo loans, likely attributable to an increase in foreclosures among high-tier properties and the Federal Housing Administrations  (FHA’s) increase of their loan insurance ceiling to $724,000. Jumbo use remains far below its market share height in the boom times of 2006 and 2007.

FHA-insured loans made up 33% of SoCal mortgage recordings, up 1% from August but down a bit from 35% one year earlier. FHA-insured loans made up 22% of Bay Area mortgages, also level with August and slipping from 24% recorded one year earlier.

first tuesday forecasts this percentage for FHA-insured loans will continue to drop in the future, as buyer’s agents become aware that other government agencies and private mortgage insurers now guarantee almost all types of highly-leveraged conventional loans, including loans with low down payments and down payments from unconventional sources (family loans, gifts).

Importantly, the combined rate of interest and private mortgage insurance (PMI) is currently lower than the combined rate of FHA-insured loans, making the FHA loan less appealing by design. [For a comparative cost analysis of FHA and PMI loans, see the first tuesday Market Chart, FHA, PMI, or neither?]

Adjustable rate mortgages (ARMs) made up 7% of all SoCal mortgages, down 2% from last month, but up 2% from one year ago. ARM use in the Bay Area also dropped, for the first time in recent months, to 13% of all mortgages from 16% in August. Bay Area ARM use remains up from 9% one year ago. This volume of ARMs places no pressure on prices

Cash purchases represented 29% of SoCal and 28% of Bay Area sales in September 2011. Although these numbers are down slightly from February 2011’s record highs of 32% and 32%, respectively, they remain abnormally high in both districts, indicating speculators are still at work.

The ongoing spike in cash purchases indicates that speculators are still optimistic about a potential recovery in real estate sales volume and pricing. Both sales aspects have slipped since late 2010; not a good sign for speculators, who require very high profits to be successful.

first tuesday take: Over the last 12 months, home prices have risen and fallen from quarter to quarter, but show no sign of any sustained increase in sales volume, much less prices. The recent trend in both sales volume and pricing was a slow drop since mid-2010, and both are likely to remain low until employment and homebuyer confidence improve significantly. At the moment, interest rates are slipping and prices are low: the right combination for a sales volume increase in the near future (if employment and confidence can support it). [For more on homebuyer confidence, see the first tuesday Market Chart, Trends in homebuyer expectations; for more on California employment, see the first tuesday Market Chart, Jobs move real estate.]

For now, signs indicate that continued vacillation in both home sales volume and pricing on the washboard plateau of a real estate recovery – one quarter up, the next one down – will be the norm for at least two more years, and will probably continue through 2015. Home sales volume, especially, is unlikely to show any sustained improvement until California experiences 18 continuous months of major monthly increases in employment numbers; support that has yet to begin. [For more on current home pricing, see the first tuesday Market Chart, California tiered home pricing.]

In the absence of increased jobs and confidence numbers, low interest rates and home prices remain the sole drivers of real estate sales volume (with help from well-informed agents). The dynamite combination of low mortgage rates and low home prices is certain to spark a slight rise in sales volume going into 2012, but no more than that. Prices movement is years away.

Be warned: any significant increase in sales volume or prices will lead to a corresponding rise in interest rates and put an end to that run within 12 to 18 months (as occurred in following recessions in 1984 and 1994). Only statewide employment gains of 400,000 plus annually, as took place in the late 1990s, can sustain a full recovery for California’s real estate markets. Another bubble, in real estate or jobs, is entirely out of the question. [For more on the influence of rates on home sales, see the first tuesday Market Chart, Buyer Purchasing Power.]

Even after 2015, expect annual price increases to be modest. If the historical trends at the end of the Great Depression in the 1940s are any guide, real estate prices are not likely to rise at or faster than the rate of inflation reported in the Consumer Price Index (CPI). Today’s interest rates, which remain at essentially zero, will do nothing to bolster pricing.

Remember, the game-changer 2008 recession ended in mid-2009, but an ongoing financial crisis remains, superimposed on the economic recovery. Going forward, real estate (asset) prices cannot (generally) rise faster than the rate of consumer inflation without a drop in interest rates or a jump in the state’s gross domestic product (GDP), as happened in the 1980s and 1990s – neither of which are anywhere on the horizon in California.

Copyright © 2011 by first tuesday Realty Publications, Inc.


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How To Buy A Home In Today’s Market

If you are trying to qualify for one of the many mortgage home loans out there.  And looking for information on how to buy a home in today’s market whether it be in the Santa Maria real estate market or not but still on the fence.  Here are few things to think about whether you should buy a home now or not as well as a few tips..

The last several years since 2007 have been very interesting to say the least.  Ever since the bubble on the real estate market popped causing housing values to plummet.  Has created some unique things to happen.  Such as this is currently the first time in American real estate history that real estate prices have dropped along with interest rates.  So if you are in the market to buy a home here are few tips that you have to know and to keep in mind when shopping for a home.


1)      You Are Not The Only Buyer

Even though there are less and less people that can actually qualify for a home due to new lending standards tightening up.  Homes that do hit the market and priced right will have multiple offers especially when they are at a discount.  If the price is truly a good price having the mentality of trying to low ball the offer even more than what the price is  will only get someone else’s offer accepted over yours.  If you think the price is a good price so will others so expect multiple offers and you may need to be more aggressive in order to get the home you want.  A tactic that some banks are using are under pricing some of the homes just to get the activity and a ton of eye balls on the property with excited buyers, and yes those homes usually sell for a lot more than the listed price.


2)      Its Not That Easy To Get A Loan Anymore.

If you have not bought a home in the last several years or refinanced a home loan you will find out that things are very different.  The last thing you want to do is get bad information from friends and family who bought a home before 07 tell you how and what kind of loan they were able to get.  Things have changed tremendously in the last few years for example now you have to prove you can actually afford the home.  The bank will verify your income including requesting transcripts from the IRS to match what you submit to the bank for income documentation as well as what you report to the IRS.  Also any changes or credit charges that you do will be questioned to make sure you are not taking on any new debt.  Or debt that may have not been reported on your credit report, and overlooked.  After you have submitted all your information to the bank they may even ask you to resubmit it again.

3)      Be Patient

If you are trying to get one of the nicest homes that happen to be one of the best deals on the market.  YOU HAVE COMPETITION and will have to try again and again you will have tons of competition meaning that your offer may not be accepted the first time so be patient on getting the home you want it may actually take several offers and even a few months to get you into a home.

4)      Be Prepared For The Appraisal

Appraisals in today’s market are not as aggressive as they once were that means that many times the appraised value comes in lower than the agreed price.  When this happens one of two things must happen.  Either the price is reduced to the appraised value or the you the buyer has to bring in more money to the table.  Which for many buyers can be tough especially if you are talking about $1,000.00’s of dollars.  Reality is most banks know this but some can be stubborn.  They may not want to lower the price and you will have to walk from the house you wanted.  The bank may have to eventually lower the price but that will not do you any good since it will only benefit the next buyer.


5)      Buying A Short Sale.

Currently the amount of Santa Maria homes on the market as well as in most markets are either foreclosed on or are short sales.  There are a few regular transactions but in the higher end range of homes for sale.   But keep in mind that when dealing with a short sale that they can take months to close.  Before a short sale can even happen the bank holding the mortgage has to approve the short sale process.  Even though the seller of the home  is currently the home owner and may want to sell his home to you he cannot do anything until the bank actually agrees to the short sale process.  Entering the short sale process requires patience, and being aware that it may take months to close the transaction.  Some agents will steer their clients from short sales since they can take longer to close hence it takes longer for them to get paid.  Not to mention some clients really just cannot wait as long as it may take to do the short sale.  But some short sales can take as little as a month but others can take as long as a year.   But that also means that sometimes you have NO competition for that home that can really end up being EXACTLY WHAT YOU WERE LOOKING FOR.  The length of the short sale depends on many factors out of your control and the Agent’s as well as the homeowner.  Sometimes it doesn’t even matter who the bank is.

Reality is real estate prices are at current lows and with interest rates at record lows.  Why wouldn’t you try to buy a home.

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