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CA Only - $10,000 "New Home" buyer Tax Credit‏

Feb. 20th 2009: CA approves $10,000 Tax Credit to "New Home" Buyers. Buy after March 1st, 2009 and before March 1st, 2010 and you'll receive the tax credit for a home purchase that has been certified by the builder to have never been lived in. There are no first time homebuyer or income restrictions. $100,000,000 has been allocated by the state for this program and it's based on a first come, first serve basis.

This is separate from the $8,000 Federal tax credit that does not require the purchase of a previously unoccupied property. The Federal tax credit does require you be a first time home buyer and there are income restrictions but it's possible to qualify for both.

Who's the next person you know who could benefit from this information? More and more information is coming out every day about these programs so feel free to forward this latest post to those who come to mind. This might be their year to make that home ownership dream come true.

Reverse Mortgages - Common Misconceptions

For many people, the idea of owning their home as they move into retirement is very appealing. Those who achieve this goal do it for the reduced monthly obligations and sense of security. But what happens if you find yourself "House Rich & Cash Poor"? For some the answer is a Reverse Mortgage. We've talked about the advantages of RM's before, but I've noticed more and more people continue to have questions and misconceptions about the process. Let me try and clear up a couple of those here.

"It's difficult to qualify for the loan."

A reverse mortgage is qualified based on the equity in the home. The borrower does typically need to have any income to qualify. The qualifications are based on value of the home, maximum loan amounts, and age of clients.

"The borrower could owe more than the value of their home."

Reverse mortgages are "non-recourse" loans, which means that the borrower, the borrower's heirs, or the borrower's estate can never owe more than the appraised market value of the home at loan maturity.

"The lender takes the title of the borrower's home."

A reverse mortgage is simply a lien against the property so the lender does not take the title of the home. The borrower will retain ownership of the property.

"The borrower can be evicted from their home."

A reverse mortgage is not due and payable until the home is no longer occupied as the borrower's primary residence. Even if the borrower has used up all of the funds available, they do not have to leave or sell the home. However, they are required to keep the home insured, pay the property taxes and maintain the home. Failure to meet these obligations could result in a default on the borrower's loan and possibly even foreclosure or a tax sale.

These are just some of the common questions & misconceptions that I've been hearing lately.

Home Loan Modification

2008 has come and gone but two remaining words that prompted a lot of conversation last year were Loan and Modification. They will certainly be even more well known this year. I've learned there are a lot of misinformed people out there and most of the people who could benefit from a loan modification are not raising their hand to ask for help. It's been estimated that 7 in 10 home owners who are classified as distressed in one way or another are not getting the help they need or even know it's out there. That will most likely change in 2009 as there are so many loan modification companies claiming they can help distressed home owners when in reality they will most likely only add to the home owner's over-all debt by taking money for services that will not improve their mortgage terms. Many loan modification companies charge exorbitant fees and much of that is requested up front with no guarantee of a refund if the loan modification cannot be completed.

One misconception is that the home owner needs to be behind in their payments before qualifying for assistance. This is not true. It is much better to anticipate a future potential financial hardship and act before it takes place.

I've been able to partner with two reputable and approved loan modification companies to offer my clients a safe, money back guarantee for seeing if they can qualify for what could be a reduction in payment and no doubt an increase in peace of mind.

Bottoms Up! Attention Fence Riders

One of the most common questions I hear from my clients, friends, family, and people I meet is "So when is this market going to turn around?" I'm always hesitant to answer those questions because I'm not an economist - but the cool thing is that I work closely with some people who are. By that I mean that every bank has a team of economists that help them predict the near future to set lending policies. This is why rates fluctuate, programs come and go, and Lenders that don't do this well go out of business.
If we pay attention, these changes allow us a bit of insight into what some of the smart guys are thinking. Think about it like playing cards. Watching what your opponent does helps you to determine the strength of his or her hand.
Over the last year, all lenders eventually moved to introduce a Declining Market Policy. What does that mean? In areas of depreciating home values, they decreased the allowable amount you could borrow through each program by 5%. That meant that if a specific program allowed you to go to 100% (0 down) they would require an extra 5% (total 5% down). San Diego was just one of these areas.
That was their way of saying that they predicted that home values were going to continue to fall. In order to protect their investment, they required buyers to maintain an increased equity position in the property. We saw this policy become common amongst all levels of lending. Some banks even took this to the extreme by restricting lending to 70% or lower.
In the past week, I've received several notices form various banks that are now lifting their Declining Market Restrictions. Interpretation? This is most likely an indication that the economists working for these lenders are no longer predicting significant declines in home values. They no longer feel the need to forcefully or artificially pad their investments and are again relying on the standard program parameters to set the tone.
I'm not going to claim to be smart enough to predict something as complicated as the national housing market. I am smart enough though to keep an eye on the people who are. And when they start showing me their cards, you can be sure I'm going to pay attention. So has the housing market fully corrected? We can't be certain. However if you combine this latest indication with the increase in purchase interest, reduction in builder supply, and a slow rate increase, it tells a pretty interesting story.