California home permits declined 44 percent in 2009

Home sales up, prices down nationwide
Home sales in 25 metro areas increased 1.5 percent nationwide in November compared with the previous month, and 46.7 percent compared with November 2008, according to a report by Radar Logic Inc.  Prices decreased 4.2 percent across all metro areas surveyed;
Read more: radarlogic.com

New rule affects homeowners in foreclosure avoidance program
The U.S. Dept. of the Treasury and the Dept. of Housing and Urban Development (HUD) recently announced changes to its Home Affordable Modification Program (HAMP).  The changes, designed to help improve the conversion from trial loan modifications to permanent modifications, take effect June 1.  Mortgage servicers may elect to implement the changes sooner.
Read more: latimes.com

Rising FHA default rate foreshadows a crush of foreclosures
The share of borrowers who are falling seriously behind on loans backed by the Federal Housing Administration jumped by more than a third in the past year, foreshadowing a crush of foreclosures that could further buffet an agency vital to the housing market’s recovery.
Read more: washingtonpost.com 

Long commutes make risky borrowers, study says
Mortgage lenders should consider transportation costs associated with living in a particular area when evaluating whether to issue loans to home buyers, according to a new study sponsored by the Natural Resources Defense Council.
Read more: sfgate.com

New wave of foreclosures coming?
For the past year, the Federal Housing Administration has backed home loans that most big lenders wouldn’t touch.
Read more: MSNmoney

Contracts to buy homes inch up in December
The number of people preparing to buy a home rose slightly in December, a positive sign heading into the spring home buying season.
Read more: latimes.com

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However, there are a few things you can do to enhance “curb appeal.” And when that happens, buyers will take notice.

For example, if your home has been on the market for several months, it’s probably time to change our sales approach. There are several factors that we can review to determine improvements that can be made. We may need to make a reassessment of the sales price, as it may be too high for the current market or, instead, we may opt to create a new or updated marketing plan for your home. Marketing your home goes beyond a few ads in the newspaper and a listing on the Multiple Listing Service (MLS). Ask me about all the ways in which I will market your home.

When setting the asking price through a comparative marketing analysis, compare similar homes sold in the winter months. Many owners set their asking price too high because of comparisons with sales prices during peak seasons. Always try to compare like properties sold at the same time of year.

Once you’ve settled on an asking price, it’s time to spruce up the interior and exterior of your home. I recommend opening as many curtains as possible to add light and color to rooms. Also, your might try keeping spring and summer pictures of your home out on tables and in clear view. Photos of your front yard flowers or the backyard shade tree in full summer bloom can help swing many buyers in favor of a purchase.

Staying on top of winter maintenance and chores is another sure-fire way of adding value to your home. A neatly shoveled driveway and cleared walkway can add a nice touch. Make sure the furnace is in good working condition and that the room temperature is kept at a comfortable level. Also, check to see that the basement (if there is a basement) is dry and sealed from any drafts.

Take yourself on a tour of your home. Start on one end and work your way through the house. More than likely you’ll see many previously undiscovered cluttered spaces and needed repairs that might turn off potential buyers.

Don’t overload your home with holiday decorations, either. The buyer should have a chance to see you home in its everyday condition.

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California’s Median Price: First Year-to-Year Gain in Two Years

Housing may be headed for double dip
A recent real estate report indicates that consumers may be taking their time house hunting this winter, which some economists believe could lead to a “double dip” in home prices.  A recent report from  the NATIONAL ASSOCIATION OF REALTORS® (NAR) showed that its pending home sales index declined 16 percent in November to a reading of 96, the first decline after nine consecutive months of gains.
Read more: MSNBC

Schwarzenegger proposes new round of home buyer tax credits
Gov. Arnold Schwarzenegger yesterday proposed a new round of $10,000 state tax credits for buyers of new and existing homes in California. 
Read more: Sacramento Bee

NY Fed: Most successful mortgage modifications reduce borrowers’ principal
Borrowers who receive loan modifications that reduce loan balances and not simply interest rates are far less likely to redefault on their loans, according to a new study from the Federal Reserve Bank of New York.
Read more: WSJ

Losing a home? A tax bite may be next
You might avoid debt-relief taxes if your lender forecloses on your house and cancels your mortgage. But you could still wind up owning a lot of money to the IRS.
Read more: MSN Money

Homeowners forced to buy flood insurance after FEMA redraws maps
Tens of thousands of homeowners in Southern CA are being forced to buy costly flood insurance because new maps issued by a federal agency say they live in a high-risk flood area.
Read more: Los Angeles Times

Real estate faces tough recovery slog
Real estate, which sparked the global economic downturn in 2008, struggled to recover in 2009. But the path to a full return to health is littered with land mines that could send the sector spiraling downward again, possible upending the nascent economic revival.
Read more: The Wall Street Journal

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A buyer’s agent represents you, the buyer, not the seller, and has full fiduciary duties, including loyalty to you. By definition, the buyer’s agent has your best interests in mind throughout the transaction. The percentage of homebuyers with buyer representation has grown significantly in the past decade. According to a recent National Association of Realtors® survey, nearly half (46%) of home buyers used the services of a buyer’s agent last year, and four out of every five buyer’s agent agreements were in writing.

The benefits of buyer representation is the dedication of a buyer’s agent to the home buyer. The buyer’s agent and homebuyer establish a mutual agreement, known as a buyer agency agreement, that will entitle the homebuyer to, but is not limited by:

Loyalty The real estate agent must act in the best interest of the buyer.

Disclosure All material facts such as relationships between agent and other parties, existence of other offers, status of earnest money, seller’s financial condition, property’s true worth, commission split with other brokers, and legal effect of important contract provisions.

Confidentiality Any discussions, facts, or information that should not be revealed to others but does not include responsibility of fairness and honesty in dealings with all parties.

Accounting in dealings Reporting of where any money placed in the hands of the broker is kept.

Reasonable Skill and Care Arriving at a reasonable purchase price and advising the buyer of such, affirmatively discovering material facts and disclosing them to the buyer, investigating the material facts related to the sale. With a buyer agency, the interests of the homebuyer will be represented in the purchase of the home. This scenario is different from a typical transaction where the buyer is not technically represented.

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First, you should write down why you’re looking for a home. For example, are you currently renting and would like to have a home where you can begin building equity? Maybe you have outgrown your existing home or changed jobs which required you to move to a new city. These factors will all have an impact on how you approach your home search.

It is important to identify what you envision your home to look like and what features it should have. Writing this down helps to avoid ambiguity later in the home search process. You should make at least two lists: one should describe everything you would ideally like and the other should list the features of the home that are an absolute must. It is most likely that you will blend the two lists into one as you progress through the homebuying process. This is a natural and evolutionary process that becomes clearer as you determine what you want and what is available.

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What I Can Do For You

Approaching the task of buying a home can be overwhelming. It is a complex event during which there is so much to learn and to consider. How much can I afford? Where will the down payment come from? How much will I need and where can I find the best loan? How do I begin the look for a home, what should I expect from my real estate agent and what type of home is right for me?These questions are just the beginning. Buying a home is one of the largest financial transactions in one’s lifetime, yet most people know very little about it. When embarking on the path to home ownership here are two very important points to remember:

• You can and should understand everything that is happening in the homebuying process.
• You will need to learn some new terms, apply some new concepts and take the time to learn about purchasing a home.

Always remember that you are the most important person throughout the entire real estate process. It is easy to think that many others may have more expertise or clout, but the truth is that you, the buyer, are the one person in this transaction that makes it all happen. If you decide not to buy, the entire process comes to a complete stop.If you plan from the beginning to approach the homebuying process intelligently and with confidence, you are much more likely to buy the home you’ve always wanted, and have the confidence that the best decisions were made.

Steps To Buying A Home

1. Make a decision to rent or buy.
2. Figure out how much you can afford.
3. Find the right real estate agent.
4. Get pre-approved.
5. Decide what kind of home you want.
6. Find the right neighborhood.
7. Begin the home search.
8. Preview the homes.
9. Make an offer.
10. Apply for a mortgage.
11. Have the inspections conducted.
12. Close the transaction.
13. Move into your new home.

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A. Your Maximum Allowable Housing Expense
After you total your gross monthly income, multiply it by 28 percent to get your maximum allowable housing expense.

1. Gross Monthly Income	$
2. Multiply By 28%	x  28%
3. Your Maximum Allowable Monthly Housing Expense	$

B. Your Debt
Now, determine your debt. Credit cards, car payments, student loans, alimony or child support should be included here, as should any debt incurred by your co-borrower, if you have one.

1. Installment and revolving debts (credit cards)	$
2. Car Loans	$
3. Student Loans	$
4. Alimony/Child Support	$
5. Other Long-Term Monthly Debts	$
Total Debt	$

Now that I know this, what can I afford relative to my overall debt?
Most lenders generally will allow you to allocate up to 36 percent of your household income to overall debt, although some lenders will allow you to go up to 40 percent under the right circumstances, including a larger down payment. You can calculate your maximum allowable combined housing and monthly debt in the space below:

1. Your Total Gross Monthly Income	$
2. Multiply By 36%	x  36%
3. Your Maximum Allowable Combined Housing and Monthly Debt	$

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Getting Prepared

If you are buying a house with someone else (spouse, parent, adult child, partner/companion, brother or sister or other relative), you should consider your co-purchaser’s earnings and existing debts as well. Remember, if you apply for a loan with somebody else, you and your coborrower are both legally responsible for repayment of the mortgage.

Your buying power depends on how much you have available for the down payment and how much a financial institution will agree to lend you.

Your down payment
If you are a first-time home buyer, the price you can afford to pay for a house may well be limited by your ability to come up with the required down payment and closing costs. If you haven’t accumulated much savings, you may want to set aside funds for a down payment on a regular basis from your paycheck. Monies in your checking and savings accounts, mutual funds, stocks and bonds, the cash value of your life insurance policy, and gifts from parents or other relatives may all be suitable sources for a down payment.

Private Mortgage Insurance
Depending on the lender and loan type, you may be able to get a mortgage with as little as 3 percent or 5 percent down. However, putting less than 20 percent down often means you will be required to purchase private mortgage insurance. Private Mortgage Insurance (PMI) helps protect the lending institution in case you fail to make payments on your mortgage.

Avoiding PMI
It is possible to get financing with 0-10% down and not pay PMI (Private Mortgage Insurance). This is why 80-10-10 financing was created. It is called 80-10-10 because a lender provides a traditional 80% first mortgage, a 10% second mortgage, and makes a cash down payment equal to 10% of the home’s purchase price. The same principle applies if the borrower can only afford to make a 5% down payment: 80-15-5 financing is also available.

Your closing costs
In addition to the down payment, you will also need to consider closing costs. The closing is the final step during which ownership of the house is transferred to you. The purpose of the closing is to make sure the property is ready and able to be transferred from the seller to you.

Closing costs generally range from 3 percent to 6 percent of the amount of the mortgage. So, if you were to buy a $100,000 house with a 5 percent ($5,000) down payment, you could expect to pay between $2,850 and $5,700 on your $95,000 mortgage. Sometimes, you can negotiate with the seller of a property to pay some of your closing costs, which will reduce the amount of money you will need to bring to closing.

How much a financial institution will lend you
Apart from having available funds for a down payment and closing costs, the other major factor limiting how expensive a house you can buy will be how much you can borrow.

When you apply for a mortgage, the lender will consider both your earnings and your existing debts in determining the size of your loan. Lenders generally use the following two qualifying guidelines to determine what size mortgage you are eligible for:

The amount of money you owe for mortgage payments, property taxes, insurance, and condominium or co-op fee, if applicable, should total no more than 28 percent of your monthly gross (before-tax) income. This is called the Housing Expense Ratio. The amount of money you owe for the above items plus other long-term debts should total no more than 36 percent of your monthly gross income. This is called the total Debt-to-Income Ratio.

Basically, lenders are saying that a household should spend no more than about one-fourth of its income (up to 28 percent) on housing and no more than about one-third of its income (up to 36 percent) on total indebtedness (housing plus other debts). Lenders feel that if they follow these guidelines, homeowners will be able to pay off their mortgages fairly comfortably.

These lender ratios are flexible guidelines. If you have a consistent record of paying rent that is very close in amount to your proposed monthly mortgage payments or if you make a large down payment, you may be able to use somewhat higher ratios. Some lenders offer special loans for low- and moderate-income home buyers that allow them to use as much as 33 percent of their gross monthly income for housing expenses and 38 percent for total debt.

Don’t Despair, There is a Loan For You
When you go to apply for a mortgage, the lender will use all the relevant data — your income, your existing debts, the purchase price of the house, your down payment, the interest rate on the loan, and the cost of property taxes and insurance — and calculate whether you qualify to borrow the amount of money you need to buy the house.

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First, determine your gross monthly income. This will include any regular and recurring income that you can document. It is the average income of a 2 year time period. Unfortunately, if you can’t document the income or it doesn’t show up on your tax return, then you can’t use it to qualify for a loan. However, you can use unearned sources of income such as alimony or lottery payoffs. And if you own income-producing assets such as real estate or stocks, the income from those can be estimated and used in this calculation. If you have questions about your specific situation, any good loan officer can review your documents.

Next, calculate your monthly debt load. This includes all monthly debt obligations like credit cards, installment loans, car loans, personal debts or any other ongoing monthly obligation like alimony or child support. If it is revolving debt like a credit card, use the minimum monthly payment for this calculation. If it is installment debt, use the current monthly payment to calculate your debt load. And you don’t have to consider a debt at all if it is scheduled to be paid off in less than ten months. Add all this up and it is a figure we’ll call your monthly debt service.

In a nutshell, most lenders don’t want you to take out a loan that will overload your ability to repay everybody you owe. Although every lender has slightly different formulas, here is a rough idea of how they look at the numbers. Typically, your monthly proposed housing expense, including monthly payments for taxes and insurance, should not exceed about 28% of your gross monthly income. If you don’t know what your tax and insurance expense will be, you can estimate that about 15% of your payment will go toward this expense. The remainder can be used for principal and interest repayment.

In addition, your proposed monthly housing expense and your total monthly debt service combined cannot exceed about 36% of your gross monthly income. If it does, your application may exceed the lender’s underwriting guidelines and your loan may not be approved.

There are a number of factors within your control that affect your monthly payment. For example, you might choose to apply for an adjustable rate loan that has a lower initial payment than a fixed rate program. Likewise, a larger down payment has the effect of lowering your projected monthly payment.

A lender takes into account many factors that reflect the financial condition of a homebuyer. With a variety of loan programs, buying a home is possible.

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  The Preapproval Letter 

Your friends and family may know you to be reliable, dependable and someone who pays bills on time, but all others in a real estate transaction will require you to prove it. That’s where preapproval comes in. A preapproval letter is more reliable than a pre-qualification letter. In the preapproval process, a lender will examine your finances and will make a preliminary statement on the size of the loan for which you’ll qualify.Preapproval is an involved process. The lender will take all pertinent information regarding your finances and perform an extensive check on your current financial status. This procedure will ultimately give you the exact loan amount that you will be eligible for (depending on what type of loan you decide to select.) Being preapproved lets the seller know that you have gone through an extensive financial evaluation and there should be no unexpected obstacles to buying the home. It makes your offer much more powerful.Preapproval gives you a very good indication of:

• How much down payment you’ll need
• Your closing costs
• Your monthly payment (including PITI: principal, interest, taxes and insurance)
• The type of loan for which you qualify and which best suits your needs; and,
• Special programs for which you may be qualified, including those for veterans, first-time buyers, teachers, etc.

To become preapproved you will need to provide a lender with the following:

• Your employment and income history (including recent pay stubs)
• Your monthly debts
• The amount and source of cash available for the down payment and closing costs

Preapproval letters are not binding on the lender, they are subject to an appraisal of the home you want to purchase and are time sensitive. If your financial situation changes, interest rates rise or a pre-determined date passes, the lender will review your situation and recalculate your maximum mortgage amount accordingly. You can research lenders yourself and ask them to preapprove you.

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