Can You Use $8000 More for Your Down Payment?

I know that I can. Unfortunately, I do not qualify. But, if you are a first time home buyer, someone who hasn't owned your own home for at least 3 years, you just might be able to take advantage of this.

As of Friday, May 29, 2009, H.U.D. has approved the monetization of the $8000 tax credit. What that simply means is that the tax credit, however much your home purchase qualifies for, can be used for part of your down payment or closing costs. No, the government will not give you a check that you can take to closing, but, lenders are now free to consider this and apply it to your down payment or closing costs.

How this will be done has not yet been determined, but, it will most likely be in the form of a short term "bridge" loan that will be payable at the time you receive your tax credit. I have not seen any programs announced, but expect that within a few days the various banks and other lenders will have packages set up.

What does that mean to you? It will mean that you can possibly afford a more expensive home, or, that you can have lower house payments if you apply your credit to the down payment or closing costs.

Is it a wise thing to do, or the best thing to do for you? That, I cannot tell you. I don't know your situation, and, I am also not a financial adviser. You will need to work that out for yourself, or with the help of a qualified financial adviser.

If you would like more information on the First Time Home Buyer's Tax Credit, or, if you are interested in buying or selling your home or land in Athens-Clarke County, Jackson, Barrow, Madison, Oglethorpe and Oconee Counties, give me a call at 706-207-5290. Or, you can click here to email me with any inquiries. To search for homes and land in and around Athens, GA please visit my website, The Athens Real Estate Page.

Thinking of Buying a Foreclosure?

Well here are some things to think about!

You may have heard on TV or radio, from your friends, from newspapers, magazines or the internet that there are some really good bargains out there in the foreclosure market. In fact, you see some ads about people purchasing homes for 10¢ on the dollar. They are even willing to sell you the information on where you can buy foreclosed homes and properties. But there are some things that they don’t tell you. Here are some of them:

You don’t have to pay for a list of foreclosures in your area – you can get this information for free in several ways. You can go to each banks foreclosure sight on the internet. Or, you can go to a Realtor® and he or she will do the work for you.

You get what you pay for – you may pay only 10¢ on the dollar but that is what the property is worth in today’s market. You get for that price because nobody would pay more.

Most foreclosed upon properties are distressed – In one form or another almost every foreclosed property is distressed, or has problems. They usually need work and many do not qualify for an FHA loan without significant repairs made. Sometimes it might only be repainting, carpet replacement and appliances replaced. Very often there is extensive work required to make the home live-able.

Cash is king – In the foreclosure market the cash buyer typically has the advantage. The bank or other owner of the foreclosed property will usually accept a cash offer over one that needs financing or appraisal approval.

Don’t just get pre-approved, get pre-committed – After cash, the purchase that has pre-committed funds is next in the pecking order. This means that if a loan is required, the lender has already committed to lending the purchaser the money. The only contingency is that the property meets the appraisal requirements. This is beyond pre-approval, where a credit check has been performed and the lender has determined that the client may be eligible to get a loan. And, it is certainly way beyond a pre-qualification which is not much more than recognition that the buyer is still breathing.

Don’t expect a quick response to your offer – most banks will wait for some time before responding to an offer. They are hoping for multiple offers to come in and will wait for that to happen. When they get multiple offers they will then issue a call for “highest and best” offer and will give a deadline for those to be received. Even if there is only one offer they will wait and then either negotiate or ask for highest and best.

You may have to offer, or pay, more than the asking price – Yep; this is a big surprise for many people. You may have to offer more than the asking price, especially when there are multiple offers on the same foreclosed property.

You will get special conditions from the bank before the offer is accepted – Most lenders of foreclosed properties will have special conditions or stipulations for the sale. This may require using a specific closing attorney that might be hundreds of miles away. It will almost always include a shortened due diligence period, the period you will need to perform all inspections, of the property, etc. They may even want you to be approved by a specific lender, although you won’t necessarily have to use that lender. The lender may, or may not, negotiate these conditions. So, if you have a particular attorney you would like to use to close with, you can attempt to negotiate that but don’t expect to have it happen.

Get your financing commitment before you start looking – Get that commitment for funding before you even start looking at a foreclosure. If you find one that you like, very often others will also like it. The best ones don’t stay on the market very long. Get that pre-commitment so that you don’t lose out on an opportunity by not being ready with all your financing requirements taken care of.

You can get renovation funds included in your loan – There is more likely than not going to be problems with a foreclosed home. It is possible to get a loan that will include funding to make any repairs/renovations required to bring the property up to standards to meet the loan eligibility. You can even add that deck, granite countertops, whatever renovations that you would like to make, if you qualify. Check with your lender on the programs available.

Work with someone familiar with the process – This is a strong recommendation. Work with a Realtor® that will guide you through the entire process and know the best ways to get you the property you want, whether for your own home or for an investment.

Armed with the above list, go ahead and look for that foreclosed property. You might not find your dream home, but you might very well find the home that you can make into the home of your dreams. And above all, be patient. You might not, probably won’t, win the first one, but keep it up, it will happen.

Note: This is not to be construed as financial advice or legal advice. Please check with an attorney for any legal recommendations and with a qualified lender for advice on getting pre-committed.

For information on buying or selling real estate in Athens and the surrounding counties, call me at 706-207-5290 or click here to email me. If you would like to search for properties available in this same area, please click to follow the link to The Athens Real Estate Page.

Thinking of Buying a Home - How Much Home Can You Afford

If you are thinking of buying a home you really need to understand how much home that you can afford. Not how high a payment that you are comfortable with, but how high a payment that your lender and loan type/underwriter thinks that you can afford. And, you should find this out before you look for a new home. You don't want to waste your time, or your buying agents time, looking at homes that are out of your price range.

So how can you get an idea of how much home that you can afford? It's a two step process. The first step is determining what your ratios are. But, just what are these ratios, you might ask.

The first is called the Front End Ratio. That is merely how much your cost of housing will be compared to your gross income. Note: it is not how much your loan payment will be but the total cost of housing which includes Principle, Interest (both of which are our loan paymet), Taxes and Insurance. These are commonly referred to as PITI. Gross Income is your total monthly income from all sources: wages, alimony, interest, dividends, social security, etc. Your monthly income is figured by looking at your previous 12 months income and dividing by 12.

Front-End Ratio = (Monthly Housing Expense / Gross Monthly Income) x 100

The second is call the Back End Ratio, or your Debt-to-Income Ratio. This is the total of all your monthly debt payments, including PITI, compared to your gross monthly income. This includes all debts: credit cards, student loans, alimony, child support, gym memberships, etc.

Back-End Ratio = (Total Monthly Debt Expense / Gross Monthly Income) x 100

Lenders use these ratios to calculate risk, or the likelihood of the borrower being able to make their payment on time. The higher the ratio, the greater the risk.

As mentioned earlier, various loan types can and do have different ratio requirements. Below is a list of current ratios. Note: These figures have changed recently and are subject to change at any time under current credit conditions.

FHA & VA - 31 Front End /43 Back End Ratio
USDA Rural Development - 29 Front End / 41 Back End
Conventional - 33 Front End / 45 Back End

Using these figures, if you have a monthly income of $3000.00, under FHA and VA, your total monthly housing expense can be as high as $930.00 and your total debt to income can be as high as $1290.00 a month. For Rural Development, this would be a bit lower, for Conventional, a bit higher. Depending upon where you are looking, your PITI will vary based upon tax rate and insurance. In the Athens Area, for a median home sale of $170,000 taxes could run $160. month and insurance $40 month for a total of $200.00. This means you can afford a home with a loan amount of $730/month. (Note: Taxes and insurance will vary. Those figures are only approximate and will be dependant upon assessment and any exemptions you may be eligible for.)

Lenders usually place more emphasis on back end rations than front end.

The second step is to determine how much home your loan payment will cover. Use the chart below to determine your monthly principal and interest payments at various interest rates for either a 15- or 30-year term.

Interest Rate Factors Per $1000

Interest Rate	15 Yr. Term	30 Yr. Term	Interest Rate	15 Yr. Term	30 Yr. Term
4%	$7.40	$4.77	8%	$9.56	$7.34
4.25%	$7.52	$4.92	8.25%	$9.70	$7.51
4.5%	$7.65	$5.07	8.5%	$9.85	$7.69
4.75%	$7.78	$5.22	8.75%	$9.99	$7.87
5%	$7.91	$5.37	9%	$10.14	$8.05
5.25%	$8.04	$5.52	9.25%	$10.29	$8.23
5.5%	$8.17	$5.68	9.5%	$10.44	$8.41
5.75%	$8.30	$5.84	9.75%	$10.59	$8.59
6%	$8.44	$6.00	10%	$10.75	$8.77
6.25%	$8.57	$6.16	10.25%	$10.90	$8.96
6.5%	$8.71	$6.32	10.55%	$11.05	$9.15
6.75%	$8.85	$6.48	10.75%	$11.21	$9.33
7%	$8.99	$6.65	11.25%	$111.36	$9.52
7.25%	$9.13	$6.82	11.5%	$11.52	$9.71
7.5%	$9.27	$6.99	11.75%	$11.68	$9.90
7.75%	$9.41	$7.16	12%	$11.84	$10.09

1. Find the appropriate interest rate from the chart above.
2. Look across the column to the appropriate term to determine your interest rate factor.
3. Multiply the interest rate factor by your loan amount in $1,000s.
4. Compare that to the payment you reached by applying the ratios.

For instance, if you assume a 30 year loan at 5.5% for a $170,000 home, multiply $5.68 x 170 (the number of thousands in 170,000). Your payment would be $965.60, much higher than you can qualify for. To find out the approximate loan amount, divide $730 by $5.68. Your result will be a $128,500 loan at 5.5%. If you want to buy a home higher than that amount you will need to either make a larger down payment or qualify for a lower interest rate.

Note: This is not to be construed as financial advice. It is merely to provide you a means of approximating the price of a home you may be able to afford. Please check with an experienced lender to determine the exact amount of loan and interest rate you qualify for. They will then be able to give you a more exact price of a home you may be able to get a loan for.

For information on buying or selling real estate in Athens and the surrounding counties, call me at 706-207-5290 or click here to email me. If you would like to search for properties available in this same area, please click to follow the link to The Athens Real Estate Page.

Home Financing - The USDA 100% Rural Development Loan

A few weeks ago I wrote an article about the types of financing available in today's market. Today, I would just like to expand on just one of those types, USDA Rural Development loans.

The U.S. Department of Agriculture is also in the home loan guarantee business, just like the V.A.
Under it's Rural Development 502 Guaranteed Housing Loan Program the USDA is offering 100% loans to qualified buyers. Here are the highlights of the loan program:

• There is no down payment required. Similar to the VA, this is a true 100% loan program.
  
• There is NO Mortgage Insurance. Conventional loans require PMI or Private Mortgage Insurance on loans of greater than 80%. This is usually added to the loan payment. FHA requires MIP, or Mortgage Insurance Premium, part of which is paid at closing and the remainder in the monthly payments.
  
• There is no Cash Reserve Requirement. Some loans and/or lenders require you to have cash reserves, money left over after closing, to cover up to six months of payments. The Rural Development 502 program does not have that requirement. While I am not a financial planner, it does make sense to me to have some cash reserves on hand after your purchase.
• There is no Pre-payment Penalty. You can pay your loan off early with no penalties. Although this is common in today's market, there are still some loans and lenders that will impose a pre-payment penalty.
• You Don't Have to Meet First Time Buyer Requirements. You aren't getting a tax credit, but, you can use this type of loan when moving from one home that you own to another.
• Both new construction and existing homes are eligible. You can by new are a previously ownded home.
• There is no Seller Contribution Limit to Closing Cost. Unlike an FHA loan, if your agent, or you, can negotiate it, the seller can pay all of your closing costs.
• There is no Gift Contribution Limit to Closing Costs. You may get all of your closing costs in the form of a gift from relatives or friends. You are not required to use your own "seasoned" funds.
• It is a Fully Amortized 30 Year Loan. Payments are fixed over the time of the loan. There are no adjustable interest rates or payments. There is no balloon payment.
• You Can Receive a loan for up to 102% of the Appraised Value. Providing you qualify, you can cover some of the closing costs and/or repairs with a loan of up to 102% of the appraised value.

This loan is not available in Athens-Clarke County or in Watkinsville. However, large areas of Oconee, Jackson, Madison and Oglethorpe counties are eligible for this loan program.

For more information on USDA loans contact a qualifed lender who is experienced with this program.

If you have questions on properties available under this program, or, if you are interested in buying or selling your home in Athens and the surrounding counties and communities please call me at 706-207-5290. Or, you can click here to email me with your inquiries. To search for home in Athens, Watkinsville, Oconee County, Oglethorpe County, Jackson County or Madison County, please visit my website at http://www.theathensrealestatepage.com

Buyers - There is Still Money Out There for a Loan - Financing Options

With all of the focus on how tight credit is, you may believe that there is no money out there for a home loan. If that is the case, you are believing wrong. There is still a lot of money available and a lot of lenders who will make that loan. There are even some 100% loans available.

Here is a list of the main types of loans that you can get today:

• FHA - the majority of today's mortgages are being written, or underwritten, by FHA. The requirements are a bit stiffer than they used to be, and the you will need to come up with at least 3.5% of the loan amount to qualify.
• FHA Renovation Loan - there are two types, standard and streamlined. They allow the buyer to renovate a home prior to moving into it. This type of loan can make purchasing distressed or foreclosed properties enticing.
• VA - this is a 100% loan available to honorably discharged U.S. veterans. It can be used more than once, the veteran will just have to get a certificate of eligibility each time he/she wants to use it. All previous VA loans have to be paid off.
• USDA- rural development loan for properties in specific designated zones. This is another 100% loan program. Athens-Clarke County is not eligible but much of Jackson, Madison, Oglethorpe, Oconee, Barrow and Walton County are eligible.
• Reverse Purchase Mortgage - this is a program specifically for seniors over age 62 who can purchase a home for a down payment and have no payments for the rest of their lives.
  
• Conventional - available from mortgage brokers, banks, lenders, etc. Different institutions will have different types of loan programs.
• Owner Financing - sometimes the seller will finance all or part of the purchase price. This may be good for someone with special circumstances who cannot qualify for a loan for some reason but is able to make the payments. A person who is self-employed but with less than 2 years of history might be a candidate for this.

For all loan types (except owner financing) speak with knowledge-able lenders. Not all lenders will be knowledge-able about each loan type. They might not even offer all loan types. And, even if they offer the same loan type, such as FHA Renovation, the programs may be very different. You may want to interview and deal with several lenders and make detailed comparisons before selecting one. And don't forget to get a pre-approval, not pre-qualified, letter. It puts you in a better position to get the home that you want.

For more information on loan types, or, about buying or selling a home or land in Athens and the surrounding counties, call me at 706-207-5290.

Getting to Yes - Negotiating the Deal

Negotiating, we do it every day, in all parts of our lives. When we discuss what to have for dinner, that is a negotiation. When we decide which station to watch, which movie to see, those are negotiations. We do it all the time, often unconsciously. We do it mostly with the little things, and usually it goes very well. We avoid confrontation, sometimes with agility, sometimes not, but we do it.

Negotiating is often viewed as confrontation, with a clear winner and a clear loser, but, it doesn't have to be that way. The best negotiations result in both sides winning, neither side losing. It is called WIN-WIN. Yes, there might be compromise, but it is mutually agreeable compromise.

Whether buying or selling a home, each person wants to get the very best deal that they can. How do we make both sides winners? The simple answer is by doing whatever it takes to make both the buyer and the seller feel good about the transaction. It's getting there that takes the skill.

Here are a few pointers to aide in easing the home buying and selling negotiating process. They apply equally to buyers and sellers:

1. Don't think of this as a win at all costs situation. This is not a contest.
2. Make your offers and counter offers realistic. You, the buyer, are not going to get that house for 10 cents on the dollar. You, the seller, are not going to get paid more than market value for the home.
3. Do not view offers, or counter-offers, as insults. Negotiating is an iterative process, it may often take multiple counter-offers by each party to reach an agreement.
4. Do not immediately respond to offers or counter offers. Take some time to review them. Determine as seller if you can live with what you will net from the offer. Determine as a buyer if you can afford that additional stipulations.
5. You can substitute items of value for money. What does that mean? As a buyer, you can meet an asking price but ask for the appliances to remain, or for a home warranty. As a seller, you can agree to concessions, such as paying a certain amount of the costs to close, but, you can ask for an earlier closing date, or a higher price to cover some of the closing costs.
6. Refrain for providing personal information that may provide leverage to the other party. For instance, as a seller, don't mention that you are being transferred. As a buyer, don't mention that you absolutely love the home and it is what you have dreamed about all of your life.
7. Set a reasonable deadline for response to offers and counter offers. Provide days rather than hours for a response, especially if it involves providing something that is dependent upon the actions of a third party, i.e. getting a survey done, it may take a couple of days to find a surveyor and get the cost of having the survey completed.
8. Keep quiet. Once your offer or counter has been submitted, wait. Don't contact the other side. It puts you in a position of weakness.
   
9. Keep your emotions out of the negotiating process. This is the hardest part of the process, for many, an impossible part of the process. The buyer does not want to pay for you memories of the property. The seller is not there to enable you to afford a boat with the money you will save.
10. At sometime, BAFO. At some point one or the other side will reach BAFO, or Best And Final Offer. If this is the case, make sure that it is stated in your counter offer. It may be the most the buyer can afford, or is willing to pay for the home. It may be the least the seller will take without any further concessions. Either way, when this point is reached, be prepared to say Yes or No. Don't get angry and don't take it personally.
    

And here is my last tip. Get someone to handle the negotiations for you. This could be your Realtor buyers or sellers agent or it could be an attorney or someone else you hire specifically for the negotiation. Some Realtors will handle just the negotiations, and the paperwork for you. But this person should be totally objective about the transaction and able to remain unemotional. This will assure that personalities do not enter into the process.

As your sellers representative, I will present all offers to you, in a very positive manner, along with an analysis of what this means to your bottom line; your net proceeds, your closing date, etc. I will give you time to review the offer, and then we will discuss it. I will present the pros and cons, let you know whether it is reasonable to market value. We can then work out any counter offer strategies, or even a flat out rejection (not recommended).

As your buyers representative, I will work with you on preparing a reasonable offer, to market value and any concessions that might be reasonable, also. Once a counter is received, I will perform the same steps that I would with a seller.

Either way, I will be working to get this negotiation to the point of Win-Win regardless of how many iterations this may take. Whether you use me, another Realtor, an attorney, or do it yourself, this should be your goal; Getting to Yes, Getting to Win-Win.

For information or assistance in buying or selling your home in Athens and the surrounding counties, please call me at 706-207-5290 or click here to email me with your questions and inquiries.

Thinking of Buying a Home - Make a List, Check it Twice

When you go grocery shopping do you have a list of items that you want or need? Perhaps, if you are like me, it's one that your wife puts together for you. Whether it is just a few items or a couple dozen, we always grocery shop with a list.

I see a lot of grocery shoppers with lists. However, I see very few home buyers with lists. Sure, they all have some vision of a home, the home of their dreams, they can see it in their minds. But when out looking at homes for sale, they don't see it in reality. That doesn't mean that the home of their dreams is not out there, it often only means that they really aren't sure what the home of their dreams looks like.

How can you increase the chances of finding the home of your dreams? It really isn't that difficult. Just Make a List. I recommend making what I call the 15 list. First, make a list of 5 attributes that the home of your dreams must have. For seniors, or for couples with an infant or planning on babies, one must have might be a single story ranch or similar home. For families with older children it could be a split bedroom plan. A must have list could look something like this:

Our Dream Home Must Have:

1. Minimum 3 bedrooms, 2 baths
2. Split bedroom plan
3. Handicapped access
4. Fenced backyard
5. Low maintenance yard

Second, list 5 more items that would be nice to have, they could look something like this:

These items would be nice to have in our Dream Home:

1. Granite counter tops
2. Finished basement
3. 2 acres
4. 10 minutes from work
5. brick exterior

And finally, make a list of 5 items that you absolutely don't want (for some people, this is the hardest part). That list could be something like:

These things would make our dream home a nightmare:

1. swimming pool
2. adjacent to school or park
3. gas appliances
4. next to cemetery
5. fixer upper

Note, the above lists are only examples and not suggestions as to what you should want or not want in your dream home. They will be different for everyone. Review this list often, both before you start the home search process and while you are looking. You may be surprised to find that the must have and desirable items may swap places with each other, or even be replaced by other items you hadn't included originally.

You don't have to limit the number to 5 in each category, or even the same amount of items in each group. You might have 7 must haves, 10 nice to haves and only 3 absolutely no way will our home ever have these.

So, when you first think about buying a new home, whether it is your first, or or your tenth, make that list. If you are buying with someone else, make sure you have one list that includes both of your needs and excludes both of your absolutely nots.

For more tips on buying, selling or investing in a home or real estate in or around Athens, GA call me at 706-207-5290. Or you can click here to email me with your inquiry. Please visit my website at The Athens Real Estate Page for information on local properties available.

Get Ready for Your Credit Score to Decline - New FICO Formula Kicks in This Month

FAIR ISAAC is changing the playing field again, implementing it's latest version of credit scoring FICO 2008. And it doesn't appear that the change will be leveling it. The three major credit reporting agencies will be rolling out the new scoring system this year, with Transunion deploying it in January, Equifax in late spring and Experian at some later date.

The new FICO is touted to better predict the likelihood of a default on the part of the borrower. However, many of the changes appear to be designed to lower credit scores. FICO 2008 will place more emphasis on available credit, not just balances. So, even if you are not carrying a balance, if your credit line is reduced, your FICO score could be lowered. It appears, under the new scoring system, the more available credit you have, the better your score would be. (I remember having been rejected for an airline credit card in the early 90's because I had too much available credit even though most of it was unused). You will also have your credit score reduced by having only a few open and active credit accounts.

Supposedly, there are three changes that will benefit credit consumers.

• It will ignore debts gone into collection if original debt is less than $100
• It will not punish single credit set-backs, such as write offs or repossessions as long as all other accounts are in good standing
• It will continue to use some "authorized-user" information (although this is only a change from the fact that they were going to discard it entirely).
  

What will this do to the real estate and mortgage industry? I don't see anything good, at least for the first few months of implementation, especially since at any one time the credit agencies may be using different versions of FICO. That can only lead to confusion. Perhaps, in the long run it will lead to fewer defaults, but until it has rolled out completely, the only change that I can see is some tightening.

Personally, I know that my current FICO score is around 800. I am expecting it to drop just a bit since I am using my cards less and my only installment loan will be paid off in April.

Do you know what your score is? You can get an estimated range here.

Click here to read the complete article about the new FICO 2008 scoring system and how you can take steps to mitigate any lowering of your credit score.

3.5% Buyer Closing Assistance From Freddie Mac

Homesteps.Com, a unit of Freddie Mac is offerring up to 3.5% closing assistance program to buyers of Homestep listed homes. This program is available for contracts received by Jan. 31, 2009 with an escrow close on or before Mar. 14, 2009.

Homesteps will pay up to 3.5% or actual closing costs, whichever is lower for owner occupied, financed homes and up to 1% for owner occupied cash sale homes. Investors are not eligible for this discount.

This looks like a helpful program to assist both buyers getting into homes and to help Freddie Mac sell off some of it's owned property. For complete details clink on the program link.

Can You Use a $7500 Interest Free Loan - Something Good From the new Housing Act and Economic Recovery Act

Can you use a $7500 interest-free loan?

Are you a first time home buyer? Or even a second or third or more times home buyer?

If your answer is yes to both of these, then you may want to consider taking advantage of a provision found in the new Housing and Economic Recovery Act of 2008 and purchase a new home in the next 10 months.

What is it? First time homebuyers are eligible for a “credit” of 10% of the purchase price of a new home, up to a maximum of $7500 on homes purchased between April 9 of this year and July 1, 2009.

What is a first-time home buyer? A first-time home buyer, for the purpose of receiving this credit, is defined as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For a married couple, both husband and wife have to meet the three-year requirement.

Although this is labeled as a credit, it is really an interest-free loan. It does have to be repaid in equal amounts over 15 years. That means, the person(s) receiving the credit must repay $500 a year for 15 years. However, if you apply that $7500 to the principal of a 7% loan, over $4200 in interest would be saved. Or, you could invest in a long-term CD and gain income on the $7500 for 15 years (less the $500 a year you are repaying). You can do what you like with the credit, including pay any taxes owed.

To find out more information on this credit go to the site http://www.federalhousingtaxcredit.com. It will provide you with all of the information you will need to qualify for this credit. It also will direct you to additional resources that will be helpful in buying your home.

Call me at 706-207-5290, or email me with any questions on buying or selling your home in and around Athens or any of the surrounding counties and towns.

Note: This is not legal of financial advice. For legal advice consult an attorney. For financial advice consult a financial advisor.