Is it better to rent or own? It is a matter of opinion. According to the New York Real Estate news, a professor UC Berkeley, who did a case study said it is better to rent all the time. “And not just from a practical standpoint; also from a financial one, Reuters reported.
The reason is that the carrying costs associated with homeownership, such as property taxes and renovations, often cause homeowners to fail to meet their other financial goals, the professor, Rich Arzaga, said.
Of course, there are critics of that logic.
“To state that owning a home is or isn’t a good investment is too simplistic,” said Jeffrey Rogers, president of Integra Realty Resources, a New York-based real estate appraisal firm. “It depends. In times of relatively higher rents, low home values, and low interest rates, it makes sense to own a home. But in a reverse market, it wouldn’t be economically feasible. Over time, those who purchase in down or flat markets with low interest rates come out ahead.”
click here on story: Reuters
According to the New York times, the lenders today have strict guidelines, in order to get pre-qualified for a home loan purchase or a loan approved. There are various reasons for potential buyers, not getting qualified, or loan not getting full approval. One of the main reasons is not only because of FICO scores or income information, but the property itself.
Triggers for rejection
Last year, more than two million people were turned down for homes, according to federal data, often because the applicants didn’t meet certain lender requirements or because their applications were incomplete or otherwise problematic. With lenders’ underwriting criteria becoming more rigorous in recent years, it’s important buyers know the most common triggers for mortgage-loan rejection.
Making sense of the story
-
Insufficient income: Lenders want to be sure borrowers can afford to make the mortgage payments. Lenders typically look for at least a two-year track record of income, which could hurt those who have changed jobs recently.
-
Cloudy financial picture: Generally, total debt payments, including the mortgage, cannot exceed 45 to 50 percent of a borrower’s adjusted gross monthly income. Overtime and bonuses are included only if the borrower has worked for the same employer at least two years, and has a history of receiving them.
-
Poor credit: Lenders typically reject applicants with FICO scores below 620.
-
Low appraisal: One of the predominant reasons buyers are turned down for home loans is because the appraisal on the property is too low. A buyer may think he or she is purchasing a house worth $800,000, but if the appraisal comes in less than that, the lender will not loan the borrower the money.
-
Property problems: Sometimes issues turn up within a house, like a major repair or safety issue that needs to be addressed, before an application can be approved.
-
Information mix-ups: Approximately 12 percent of new mortgage applications were denied because of unverifiable information or incomplete credit applications, according to the Federal Financial Institutions Examination Council.
Read full story
What is a loan modification? A loan modification is when your mortgage terms, rate and payments are modified to reach an affordable monthly payment. You must meet certain criteria to qualify for the most popular loan modification program provided by the government which is called HAMP or Home Affordable Modification Program.
There are various reasons why homeowners are trying to get a loan modification. One of the main reasons is due to a job loss which becomes a financial hardship. And the question is ‘Can I do my own loan modification?’. The answer is YES. If you, the homeowner, is willing to spend time on the phone and do some paperwork, then you can do it.
The first thing a homeowner should do is call their lender (mortgage company), request for the loss mitigation department and ask for a loan modification package. This will let them know that you are willing to work with them on getting your loan back on track. They will give you a list of items that they want. These items can include proof of income, hardship letter which states why you can’t pay the current mortgage, bank statements, and so on. Be honest and provide what they are asking for and let them know your situation. The lenders do not want to hear sob stories but just the facts and a summary of your ability to repay your loan.
If the lender doesn’t respond quickly, be patient. There is a process and many homeowners, like you, have submitted their requests, too. At the same time, keep detailed records of all your calls. Once contact is made, write down the name of the person with whom you spoke, his or her identification number, the date and time of your conversation and a summary of what was said. Also make copies of all your correspondence and other paperwork. Lenders tend to lose things.
Avoid SCAMS from companies who offer services to do your loan modification for a fee. That is illegal. Only pay for services rendered, if any. The main thing is keep informed, keep pushing and stay in communication with your lenders. Nothing will kill your chances of modifying your loan than not communicating your situation to them and waiting until the last minute to work something out.
In understanding the market value of your property, we must deal with some factors that we have no control over. These factors are physical qualities of your property and the competition.
* Physical qualities:
- Location
- Age
- Size of House and Lot
- Floor plan and design style
* The Competition:
- The number of similar properties for sale
- Their prices and financing terms
- Physical Condition
Then there are some factors that have no effect on the current value of your property. These factors are original price and opinions of others.
* Original Price:
- What you originally paid for your house
- Credits or closing costs
- Down Payment
- The actual Sale Price
* Opinions
- What people say your property is worth
- Websites that contain comparable sales
According to the Wall Street Journal, affordable home prices and historically low interest rates have created an ideal situation for many qualified first-time home buyers to purchase a house. Despite this opportunity, some buyers may be overconfident and make mistakes during the home-buying process.
MAKING SENSE OF THE STORY FOR CONSUMERS
-
Some first-time buyers are unaware of the vast amount of paperwork and negotiations that go into purchasing a home. As a result, buyers may think they can save money by forgoing the use of a REALTOR®. However, managing the nuances of offers, inspections, financing, and other pivotal steps when buying a home often causes confusion and anxiety for buyers. Working with a REALTOR®–who is obligated to put the buyer’s best interests first–will help to alleviate buyer concerns during this process.
-
Online mortgage calculators can help buyers estimate the amount of house they can afford, but calculators should not be the sole source for mortgage-approval information. Buyers are advised to meet with a mortgage broker or banker prior to beginning the home search to help determine the loan amount for which they are most likely to be approved.
-
Although there is a large selection of homes available for sale, home buyers should not assume they can make low offers or unreasonable demands. Even in hard-hit housing markets, homes in desirable neighborhoods are receiving multiple offers.
To read the full story, please click here.
Yes, but no need to rush. According to the Wall Street Journal, many housing economists have said that for borrowers with stable incomes, good credit history, and FICO scores of at least 620, now is an opportune time to purchase a home. Although inventory rates are below the long-run average, there still are plenty of options available for buyers of high-end homes. Things to think about are as follows:
Closely-watched indices, including the Standard & Poor’s/Case Shiller Index, indicate that the high end of the market didn’t experience the same dramatic price appreciation as the low end. Home prices in this segment have not declined as steeply as homes in the mid- to low-end of the market. Additionally, many discretionary sellers in the high end—those who do not have to sell their homes—are opting to wait until home prices rise before listing their homes for sale.
The high end of the market also is facing challenges with buyers qualifying for financing. During the height of the market, many high-end home purchases were fueled by exotic mortgage products. Now that those mortgages are no longer readily available, many lenders are requiring borrowers to provide proof of income, such as W-2s and recent paystubs, as well as demonstrate their ability to meet the monthly mortgage obligation.
To read the full story, please click here.
The New York Times
Program will pay homeowners to sell at a loss
In an effort to end the foreclosure crisis, the Obama administration has been trying to keep defaulting owners in their homes. Now it will take a new approach: Paying some of them to leave.
To read the full story, please click here.
Los Angeles Times
Many borrowers in default stay put as lenders delay evictions
Despite being months behind, many strapped residents are hanging on to their homes, essentially living rent-free. Pressure on banks to modify loans and a glut of inventory are driving the trend.
To read the full story, please click here.
Congress has passed new legislation to extend the First Time Homebuyer credit of $8000, until April 30, 2010. e In addition, existing homeowners who has lived in their primary residence in the last five years, qualifies for a $6500 tax credit. For more info, click here.
We receive lots of questions about tax liability of short sales and foreclosures. As real estate brokers we are not licensed to give advice on this topic however we can lead you to the information that may answer your questions.
On December 20, 2007 the Mortgage Forgiveness Debt Relief Act of 2007 was enacted. Usually, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. The Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude certain cancelled debt on your principal residence from income. More information regarding the Mortgage Debt Relief Act can be found on the IRS website below:
http://www.irs.gov/individuals/article/0,,id=179414,00.html
Or the California Association of Realtors, Legal Department has put together an FAQ regarding the taxation of Foreclosures, Deeds in Lieu of Foreclosure, and Short Sales. This is more detailed and specific to California. For more information, please click here.
