My New Blog

· Ok, here is the scoop as we know it today.

Plan #1- Again, there is NO investor at this time that will accept this option- we are still awaiting word

· Proceeds may be used for down-payment, closing cost or prepaids.

· Amount of Assistance Available- 5% of the total mortgage (including UFMIP) up to the maximum of $7,000.

· Borrowers must complete a pre-purchase homebuyer education course.

· Borrower pays $250 Administrative Fee.

· First 90 days, 0% interest to encourage borrowers to payoff 2^nd lien with tax credit refund.

· Thereafter, 2 year term at 10% interest rate. NOTE that this possible monthly payment will be required to be counted in the income vs expenses ratios regardless if the buyer thinks that they will be paying off the 2^nd lien (for example, $7000 at 10% interest for 24 months would be $323.01 per month). The buyers must qualify for the additional payment in their ratios.

· Available only with FHA loans.

· Tax credit advance loans may NOT result in any cash back to borrower at closing (i.e. cannot receive back earnest money, option fee, appraisal fee paid up front).

· Lender MUST submit a complete loan package to TDHCA a minimum of 20 business days prior to closing. This means that a minimum of total time to close will be approximately 60 days from contract to closing. Reminder that this could also require a lender to lock for 60 days (which is more expensive than a 30 day lock)

· Participating lenders must be approved by TDHCA to participate in the program.

Plan #2- One investor currently

· Proceeds may be used for down-payment, closing cost or prepaids.

· Amount of Assistance Available- 5% of the total mortgage (including UFMIP) up to the maximum of $6,000.

· Borrowers must complete a pre-purchase homebuyer education course.

· Borrower pays $275 Administrative Fee plus 1% Participation Fee (i.e., if the sales price is $150,000- the participation fee will be $1500 plus the $275 Admin Fee)

· Rate is set at 5.75% fixed (so with the cost of the 1% Participation Fee, it would be 5.75 1+1 plus the $275 Admin Fee)

· First 120 days, 0% interest to encourage borrowers to payoff 2^nd lien with tax credit refund.

· Thereafter, 5 year term at 7% interest rate. NOTE that this possible monthly payment will be required to be counted in the income vs expenses ratios regardless if the buyer thinks that they will be paying off the 2^nd lien (for example, $6000 at 7% interest for 24 months would be $118.81 per month). The buyers must qualify for the additional payment in their ratios.

· Available with FHA, VA, USDA, Fannie and Freddie 30 year loans

· TDHCA creates a 2^nd lien that advances the down payment, closing costs and prepaids

· Income limited

· Tax credit advance loans may NOT result in any cash back to borrower at closing (i.e. cannot receive back earnest money, option fee, appraisal fee paid up front).

· Lender MUST submit a complete loan package to TDHCA a minimum of 20 business days prior to closing. This means that a minimum of total time to close will be approximately 60 days from contract to closing.

· Participating lenders must be approved by TDHCA to participate in the program and pay $1000 to participate.

• The $8,000 tax credit is available for first-time home buyers only.

• The tax credit is a true credit. It does not have to be repaid.

• The only repayment requirement is if the home owner sold the home within three years after the purchase.

• Home buyers who file as single or head-of-household taxpayers can claim the full $8,000 credit if their modified adjusted gross income (MAGI) is less than $75,000.

• First-time home buyers would receive an $8,000 tax credit for the purchase of any home on or after January 1, 2009 and before December 1, 2009. To qualify, you must actually close on the sale of the home during this period.

• A refundable credit means that if you pay less than $8,000 in federal income taxes, then the government will write you a check for the difference.

• All homes, whether single-family, townhomes or condominium apartments will qualify, provided that the home will be used as a principal residence and the buyer has not owned a principal residence in the prior three years. This also includes newly-constructed homes.

Understanding Your FICO Score and How it Affects Home Buying  

Home buyers who are seeking a mortgage find out early-on that their credit score plays an important part in the home buying process and in determining the interest rate that a lender offers.

What is a credit score?

A credit score is a number that lenders use to estimate risk. Experience has shown them that borrowers with higher credit scores are less likely to default on a loan.

How are credit scores calculated?

Credit scores are generated by plugging the data from your credit report into software that analyzes it and cranks out a number. The three major credit reporting agencies don't necessarily use the same scoring software, so don't be surprised if you discover that the credit scores they generate for you are different.

Why are credit scores sometimes called FICO scores?

The software used to calculate a great number of credit scores was created by Fair Isaac Corporation--FICO.

Which parts of a credit history are most important?

Use these percentages as a guide:

35% - Your Payment History
30% - Amounts You Owe
15% - Length of Your Credit History
10% - Types of Credit Used
10% - New Credit

Your Payment History Includes:

·         Number of accounts paid as agreed

·         Negative public records or collections

·         Delinquent accounts:

1.    total number of past due items

2.    how long you've been past due

3.    how long it's been since you had a past due payment

What You Owe:

·         How much you owe on accounts and the types of accounts with balances

·         How much of your revolving credit lines you've used--looking for indications you are over-extended

·         Amounts you owe on installment loan accounts vs. their original balances--to make sure you are you paying them down consistently

·         Number of zero balance accounts

Length of Credit History:

·         Total length of time tracked by your credit report

·         Length of time since accounts were opened

·         Time that's passed since the last activity

·         The longer your (good) history, the better your scores

Types of Credit:

·         Total number of accounts and types of accounts (installment, revolving, mortgage, etc.)

·         A mixture of account types usually generates better scores than reports with only numerous revolving accounts (credit cards)

Your New Credit:

·         Number of accounts you've recently opened and the proportion of new accounts to total accounts

·         Number of recent credit inquiries

·         The time that's passed since recent inquiries or newly-opened accounts

·         If you've re-established a positive credit history after encountering payment problems

·         In general, checking to make sure you aren't attempting to open numerous new accounts

Why Rent: Advantages of Home Ownership

It's staggering when you think about the cost of living, especially if you're a renter and not a home owner. If you are currently paying $1,000 a month for rented housing, over the next three years your property management company will effectively have reaped $36,000 of your hard earned cash. In most cases, you know your rent will go up every year, even if you live in an area that has rent control regulations. You're paying the mortgage for the property owner, when you could be building equity in your own real estate investment.

The tax deductions available to homeowners vary, but there are solid rules the IRS lines out for us. Real estate taxes, mortgage interest, pre-paid interest, and interest on construction loans are all things to take into consideration as tax benefits. For first-time home buyers, it makes even more sense to buy right now. Not only are home prices lower than they have been in the last five years, mortgage interest rates, at the time of the writing of this article, are near historical lows – this means your parents and your grandparents couldn't have secured a mortgage at a lower rate than you could've in the last month.

To add to this advantage, the government is offering first-time buyers (anyone who hasn't owned a home in the last three years) a temporary tax credit of up to $8,000 that doesn't have to be paid back. What's great about this credit is one can even amend their 2008 tax return to recapture the credit this year, which means they don't have to wait until next April to get their money.

The Best Could Be Yet to Come
Last year, a study was released by the Joint Center for Housing Studies of Harvard University. The study reflects upon the housing bust that began in 2006 and deepened into 2007 and 2008. While much of what has contributed to the housing market's decline has already been widely covered elsewhere, this report also demonstrates what potentially lies in wait.

During the housing market's boom years of 1995 to 2005, household growth was approximately 12.6 million. In the next decade, 2010-2020, it is estimated that household growth will increase 14.4 million.

This increase in households will come from a number of different factors including households resulting from divorce, "echo boomers" becoming adults, and a continued increase in immigration. Any increase in any one of these areas could lead to an increase in demand for housing in the near future.

The Greater the Need, The Higher the Price
The more you want or need something, the more you are willing to pay for it. It's simple economics. Take housing, for instance. Inventories are up, fewer people are buying today as compared to a few years ago, and prices have declined.

As prices decline, builders build fewer homes. Even though new homes sales were recently reported higher for the month, the number still represents an annualized decline of nearly 1.4 million homes since 2005.

With multiple-year declines in new construction, this simply means that as more people come into the market to buy a home, there will be fewer homes from which to choose, and prices will be forced higher.

So What Now?
While this article is a discussion on whether or not now is a good time to buy, it's also important to look back a little. In just the last few months, the number of homes being sold has increased. Compared to February of 2008, existing homes sales this February increased 5.1% and new home sales were up 4.7% across the country. Even more telling is that in the areas where housing has been hardest hit, buyers are coming out in droves. California, up 83%; Florida, up 24%; Las Vegas, up 28%; Miami, up 47%. Buyers are clearly excited and are looking at property – and more home sales are occurring.

No one can time the market perfectly and find the exact bottom. But even if you don't, it's okay. Interest rates are at their lowest in decades, home prices are extremely low, and this combination yields the greatest increase to home affordability in years.

If you or someone you know is currently renting, I urge you to call me to discuss the many low- and no-down payment loan programs that are currently available to prospective home buyers. My team and I work cohesively with the borrower's financial consultant to ensure the client's long-term goals are met.

Your 15-point Tax-Return Checklist

Face it: The tax fairies aren't going to file your tax return for you. Here's a step-by-step guide to finding and filing those tax-return forms you've been avoiding.

By Jeff Schnepper

It's time to start thinking about getting those taxes done. Maybe you're in a panic. Not to worry. Just follow Schnepper's 15 steps to getting your taxes done, and you'll be much happier. Ready? Here they are:

• Get serious. Unless you're focused, you're going to see that receipt six times rather than the once you need. This is all mental now. Schedule a time to get to work and commit to that time. Then . . .

• Get started. Remember that commitment to get to work? Keep it! This step requires action. Get your pencil and take the blank forms out of the envelope where you've been hiding them, praying that the tax fairies would make them go away. My father reminds me of the old Brooklyn proverb, "A trip of a thousand miles begins with a traffic jam." Get in that "jam," and your tax return will begin to jell. Now . . .

• Get organized. Something has to go on those returns. Get your W-2s together to report wages, your 1099s to report interest and dividends, your 1099Bs for reporting stock and bond sales, and your 1098s for deducting your interest and taxes. The Internal Revenue Service and your accountant both want final numbers. It makes it easier for them and less painful financially for you. Bring either one a shopping bag full of receipts and you're going to feel the pain . . . especially in your wallet.

• Get informed. Have you been following all the changes the U.S. tax code has seen this decade? How about the three new tax bills passed just this year. You can now deduct as much as $500 ($1,000 on a joint return) in real estate taxes paid on your home even if you take the standard deduction! Got a kid in college? Have you used the "Tuition and Fees" deduction (.pdf download) that lets you deduct as much as $4,000 in tuition and fees off your 2008 and 2009 taxes? If not, get educated! If you're "tax simple," the IRS can actually do the return for you, or you can have your return done online -- sometimes even for free. Alternatively, if you're tax-savvy, do your own return after learning all the new rules. A good place to start: the IRS' absolutely free Publication 17 (.pdf download). It's hundreds of pages of everything you need to know about your 2008 tax return and your planning for 2009.

If that's too much, go to a professional.

• Get help. You might remove a splinter from your own finger, but you wouldn't perform heart surgery on yourself. A trip to a tax professional should at least tell you what you're missing. Don't hesitate to ask for help; it's deductible! But call for an appointment now! The later your accountant does your return, the more tired that tax preparer will be. You want your return done when she's at her best.

• Get status. Decide how you're going to file. The lowest rates are with joint returns, but if there are potential high medical or miscellaneous deductions, married filing separate may yield a lower total tax. Do it both ways. Alternatively, a single mother may qualify for the head-of-household rates, which are better than the rates for filing as a single. Sometimes, when a joint return isn't practical, even a married person with a dependent child can qualify for head-of-household rates, which are much better than married filing separate. You need to know the rules.

• Get adjusted. There are certain deductions that are allowed regardless of whether you itemize. Such deductions include IRA and qualified pension contributions, student loan interest, moving expenses, alimony, medical savings account deductions and, for the self-employed, the health insurance deduction and deduction for half the self-employment taxes paid. These are known as "above the line" deductions. The infamous "line" is your adjusted gross income -- line 37 on Form 1040.

• Get itemized. Which is bigger -- your standard deduction or the sum of your itemized deductions? We're now "below the line." The chart to the left of line 39 on your 1040 form for 2008 lists your standard deduction. Compare this amount to your total allowable itemized deductions. That's the sum of your allowed medical expenses, taxes, interest, charitable contributions, casualty and theft losses, and miscellaneous itemized expenses. Always do it both ways . . . and, subject to the alternative minimum tax (and don't even try to get into that), always take the higher amount.

• Get exemptions. For 2008, you get to take off as much as $3,500 from your income for each qualified exemption you have, up from $3,400 in 2007. (The level rises to $3,650 in 2009.) Despite myths to the contrary, these include children who are full-time students under age 24, regardless of how much income they may have. As your income increases, your exemption deduction may decrease. For 2008, on a joint return, your exemption deduction will be phased out between adjusted gross income of $239,950 and $362,450. For singles, the numbers are between $159,950 and $282,450. With the exemption rising in 2009, the phaseouts will increase as well.

• Get credit. A tax credit is the best expense to have. It's a dollar-for-dollar reduction in your taxes. A deduction reduces your tax by your marginal rate. For example, at a 25% rate, a $100 deduction reduces your tax by $25. A credit would reduce your tax by the full $100. Review the potential credits you may be eligible to claim. If you have children, you may qualify for the child tax credit or the child and dependent care credits. Did you adopt? There's an adoption credit. With or without children, you may qualify for education credits and a credit for foreign taxes paid (check your 1099Bs). Don't forget the credit you get for estimated taxes paid, withholding and, if you worked for two or more employers, excess Social Security withheld.

• Get cash. Decide how you're going to file. That's going to affect how quickly you're going to get that refund. If you e-file, and make the IRS happy, you're going to get your money back faster. Alternatively, if you paper file, direct depositing your refund eliminates mail delay and speeds your access to cash. It also eliminates checks lost in the mail. The only reason I can see for not direct depositing with a paper filing is if you just don't have a bank account.

• Get filed. None of this matters if you don't actually get your return to the IRS. If you owe money, there's interest and penalty for not filing, in addition to interest and penalty for not paying. You've done the hard work, now get it off your desk! Or file for an extension.

Changing mistakes on your return
Stacy Johnson of Money Talks provides some quick advice on fixing problems with the IRS before they become bigger problems later.

• Get receipts. If you filed on paper, get a receipt. I always mail my returns certified, return receipt requested. If the IRS doesn't get your return, it wasn't filed. It may have been lost in the mail or lost by the IRS itself. But unless you can prove that it was filed, if the IRS doesn't have it, legally it wasn't filed. Prudence today can avoid disaster tomorrow.

• Get planning. It's not too early to start your 2009 planning now. You can check out tax brackets, standard deductions and exemptions for 2009 here (.pdf download). Once tax season is over, your financial adviser is going to have the time to review your wealth accumulation strategies. Don't put it off. People don't plan to fail; they merely fail to plan.

And finally . . .

• Get real. It's only your taxes -- not life or death! Do your best, but don't obsess. Even the IRS understands that only those with tombstones over their heads never make mistakes. Remember, it's the new, friendly IRS. But, it will charge interest and penalties.

Top 10 Points To Know When Purchasing a Short Sale

Definition: A "Short Sale" is a real estate transaction in which the financial institution holding the mortgage/note agrees to accept less than what is due in order to allow the current homeowner sell their property. Typically this is an option preferred over actual foreclosure. Short sales will not work if there is sufficient equity in the home for the lender to sell it and at least break even. The homeowner must be "upside-down" in their loan. A short sale means the seller's lender is accepting a discounted payoff to release an existing mortgage.

1. Know the Rules of Negotiation- Just because a property is listed with short sale terms does not mean the lender will accept your offer, even if the seller accepts it. Be aware that the seller need not be in default -- to have stopped making mortgage payments -- before a lender will consider a short sale. A lender may consider a short sale if the seller is current but the value has fallen. In addition, the seller may have over-bought and owe more than the home is worth, so a discounted price might bring the price in line with market value, not below it. It is also important to note that if there are two loans, this could be a problem. The first mortgage lender's position is protected by the second lender, unless the second lender does not want to foreclose. For example, if a seller owes $160,000 on the first and $40,000 on the second, offering $160,000 leaves nothing for the second. The first will typically need to give something to the second to gain its cooperation. Because many loans that were originated between 2004-2008 were a 1^st and 2^nd lien (i.e., 80/20; 75/25; 80/15/5, etc) this is a common scenario.

2. Work with a Realtor Who Is Experienced with Short Sales- These transactions take time, skill, perseverance and patienceJ.

3. Work with a Lender that is experienced in financing Short Sales- The Davidson Group is an expert in working with short sales and the intricacies of these types of transactions and we are here to assist you. Simply call us at 972-278-3400.

4. Have Realistic Expectations for the Time it will Take- Once an offer is presented, it can take anywhere from 1 day to 60 days to get an answer if the bank will accept the offer. Regardless if the seller agrees to a contract, the bank must agree to "take the loss"; therefore, the financial institution has the final say to accept a contract. Note that some lenders submit short sales to committee while others have individuals with the decision-making capacity. In either case, typically to even get an answer or a negotiated offer will take time. If you want to close in two weeks, a short sale is not for you. Also see #10.

5. Have Realistic Expectations for the Negotiation of Price- In most cases, the bank/mortgage company will run their own numbers of market prices and knows what the house/neighborhood will bring. You are allowed to offer what you want to, but it does not necessary mean that the bank will accept the offer. In addition, it is important that remember that other buyers are also looking for a "great deal" also and may be placing a contract on the property in addition to yours.

6. Have Realistic Expectations for the Negotiation of Cost- Not every lender will pay closing cost (even if sales price is increased to cover it). Ask up front. Every bank has their own guidelines and it is important to ask up front before writing up the contract. Your realtor can verify with the listing agent as to what limitations that the bank has imposed on an offer. It is best to know this information upfront than to wait two to three weeks after a contract has been offered to find out that the bank will not pay buyer's cost, HOWEVER, the bank has the right not to disclose this information up front and will only allow an offer to be presented without any prior knowledge of what they will allow. It is also important to know that if the seller has an FHA mortgage, HUD will not reimburse lenders for closing cost paid by the seller on a short sale. If the lender allows closing cost paid for the buyer, FHA will not cover that part of the cost of the insurability/ reimbursement of the loan back to the servicer. Also note that generally the lender will not pay for customary items that a seller could pay. These include home protection plans for the buyer and pest / termite inspections.
7. Have Realistic Expectations for Inspections- It is important to understand the Inspection is to make certain that the "big stuff" is function-able (i.e., Heating and AC units, foundation, roof, and plumbing). Inspections are highly recommended for the buyer so that they know the condition of the property and feel comfortable with purchasing it in the "As Is" condition. It is not a "honey-do" list for the seller/bank. See below. It is extremely important that a buyer obtain a home inspection and pay for other types of inspections such as pest, roof, sewers, septic tanks, chimney or fireplace inspections. Do not waive your right to obtain these inspections and make your offer contingent on approving them.

8. Know the Rules Upfront for Repairs - It is important to know up front if the seller/bank will look at the request to fix any issues on the property. In most cases, banks holding foreclosed properties will not do any repairs regardless of what is requested. A buyer will be asked to purchase the property "as is," which means no repairs.

9. Understand what will be Needed for the Lender Appraisal/ Inspections- It is important to make certain that the utilities are on for the appraiser when he goes to the property. If the appraiser travels to the property and the utilities are not on, a return trip will be necessary (and an additional cost will occur to the buyer). Also remember an appraiser can not turn on water at the street, or to a hot water heater, nor can he turn on electric at the panel box.

10. Have Realistic Expectations for the Closing and Funding Time Frames- In most cases, it takes a minimum of three-four weeks to close on a short sale once a contract has been accepted. Closing papers typically must be sent by the lender to the Title Company a minimum of 72 hours in advance. In addition, there are over 10+ companies/positions that are involved in the transaction (i.e., Appraiser, Surveyor, Flood Certification Company, Tax Certifications, Insurance Company, Inspector, Processor, Underwriter, Home Warranty, Warehouse Bank, Title Company, Escrow Officer, etc). It is important to understand that it takes time to purchase a short sale property and it is a team effort to make certain that a smooth and easy closing happens.