Fannie Mae has rescinded a requirement that the lender determines the ability to pay before they will allow the home to be refinanced.  It’s about time that someone realized that many borrowers are genuinely trying to keep their homes, and that they have been trying to make the payments and refinance.  If they already “own” the home, doesn’t it make sense to try to keep that person in the home, rather than have it be another property in the inventory, selling at a discount, just to get it off the market quickly?  The owner is less likely to default on the loan at a lower rate and payment – so doesn’t this just make sense?

The other significant change is that Freddie Mac is waiving the credit score requirement to refinance.  This one made a little less sense to me at first, but as I thought about it, I think about the fact that lenders have been telling people that they wouldn’t modify their mortgages without them first missing at least three payments.  What has that done to the US credit score?  Probably pulled it down quite a bit.  I have heard countless stories of San Diego home owners contacting their lenders for  loan modification, being told to miss payments, and THEN still not getting their modification.  Talk about a bait and switch!

This certainly won’t solve all the problems, but it’s a step in the right direction.  If you think the new changes may apply to you, please contact your lender.  We are always happy to answer questions as well!

1. Mortgage Interest Deductions – This is often your largest single tax deduction, making the difference for most people whether they itemize deductions or take the standard deduction. If your loan is your personal residence, and your mortgage is less than $100,000, you are allowed to deduct 100% of any mortgage interest paid in a calendar year.

2. Property Tax Deductions – Another big deduction. In California, most property taxes are between 1.1% to 2% of the value of the property. This may be as high at $20,000/year on a $1 million home.

These first two items are normally reported to you directly by your mortgage company on a tax statement they will send you in January. Please review your statement and make sure it is correct.

3. Your other large potential deduction is closing cost or refinancing cost deductions! If you have purchased or refinanced a home in 2011, you are able to deduct any discount points, or loan origination fees.

These are the three most common deductions due to owning a home. However, your personal tax representative will be able to review your documents and make recommendations of other deductions, energy efficiency, or other tax credits that are may be available to you! We strongly recommend working with a tax professional to make sure you don’t miss anything!

If you need a recommendation for a Carlsbad accountant or a Carlsbad real estate professional, please feel free to contact The Mewborn Team. We are always happy to help!

3. Closing Cost or Refinance Cost Deductions

Who ever would have guessed that we would actually see interest rates in the 2% to 3% range – especially for a prolonged period of time?  It AMAZES me that these rates have continued.  When I bought my first house in 1997, my interest rate was 8.5%, and everyone told me what a great rate that was.  REALLY????

If you are looking for a $500,000 home today, this is what it would look like at different rates (assuming a $500,000 purchase, 1% in property taxes and $500/year in hazard insurance)

As you can see, just a 3% change in interest rates can make as much of a difference as $1,000/mo in your payment.  As most of us are looking at buying a home, we normally buy at the absolute top of our price range.  We always want the nicest home we can get at the best payment possible.

So, if you are seriously looking for a home, this might be the time to jump into the market!  It seems to be the “perfect storm” for potential buyers – historically low home prices AND historically low interest rates.

If you have any questions, always feel free to contact The Mewborn Team.  We’re always happy to answer any questions or find you a resource that will be able to meet your needs!

By being pre-approved, you know what you qualify for, as well as what the bank will actually lend you -so there aren’t big, disappointing surprises at the “end” of your transaction!

As a lender is looking at whether or not they will lend you money, one of the first, and biggest things they will do, is to look at your debt to income ratio.  What is that?  How is it calculated?

To make it simple – your debt to income is the percentage of your income that is spent on loans (car loans, home loans, credit card debt, etc).  Your other expenses – utilities, insurance, etc are not included in this calculation.

In order to get a loan in today’s environment, your debt to income (DTI) often has to be below 40-45% of your gross income.  So in order to get a better idea of what you can afford, add up all your monthly loan payments and divide it into your total monthly income.  This simple calculation will give you your current debt to income ratio.  It will also tell you how much more monthly debt you can take on to remain below that 40-45% of your gross income.

If you have any questions about calculating what you may be pre-approved for, please contact The Mewborn Team.  We would be happy to work with you and a lender to get you pre-approved for a loan for your future home!

Down 10 to 30 pts. 

Down 25 to 45 pts. 

Down 60 to 80 pts.

Down 90 to 110 pts. 

Down 45 to 65 pts. 

Down 105 to 125 pts. 

Down 85 to 105 pts.

Down 140 to 160 pts. 

Down 130 to 150 pts.

Down 220 to 240 pts. 

Carlsbad, CA - You may know your credit score – but do you have any idea how it is calculated?  In a formula that is so secretive that they could tell you – but then they’d have to kill you, we never know how our actions will affect that score. 

How will your credit score change if you close a credit card?  Should you go through the hassle of a short sale, or just allow your house to go into foreclosure?  What if things are tight, and you go over your credit card limit?

Your credit score is a three digit number normally between 300 and 850.  It is the number used to determine the risk of giving you a loan.Scores over about 715 are considered good scores, and typically will get you the best interest rates.  Scores over 600 and under 715 are moderate scores. 

And although you may get a loan, you may pay a premium interest rate to get it.  Scores under 600 are typically considered to be a high risk borrower.  These borrowers either may not get a loan, or may pay much higher interest rates on their loan.

Although the formula is still a mystery, Fico.com has at least provided a table showing some of the most common penalties to your credit score.

FICO’s information shows that bankruptcy does the most serious damage to a credit score (up to 240 points), followed by foreclosure (up to 160 points) while maxing out a credit card has the least numerical impact (as few as 10 points).

Those with good or excellent credit — so-called prime borrowers — put more points at risk with each mistake. For example, someone with an average credit score of 680 who pays a bill 30 days late will see a drop of 60 to 80 points. But for someone with an excellent credit score — 780 — that same delinquency can cost 90 to 100 points.

If considering whether or not to try to sell your house through a short sale vs. allowing a full foreclosure, please keep in mind that settling a debt (short sale) with a lender can save you 50 to 100 points (and the ability to get another loan in the future) or MORE!  If you have any questions about how this might impact you personally, or how to market your property for a short sale, please contact The Mewborn Team.  We are happy to sit down with you for a no obligation consultation about your best options.

The foreclosure prevention plan, is meant to reduce eligible borrowers’ monthly payments to no more than 31% of their pre-tax income.  In order to qualify, a homeowner must make three on-time monthly payments before they can receive a permanent modification.

Unfortunately there is the typical he said/she said to each loan.  The mortgage companies are complaining that they need more information that the borrowers aren’t providing.  The borrowers are complaining that the mortgage companies keep losing their documents.  So months go by without permanent modifications.

The Obama administration is trying to make changes to their programs allowing mortgage companies to access tax records through the IRS, rather than waiting for borrowers, and approving and moving clients into permanent modifications without their signatures.  They are hoping that this will help streamline the process and help more US homeowners. 

If you are having problems making your mortgage payment.  Contact your mortgage company.  They may tell you that they can not help you until you have missed a payment.  You may want to ask for a forbearance plan.  Although this will still affect your credit, it will allow you to work with your lender to find a more permanent, acceptable solution.

Your home is often the biggest investment you will ever make.  Make the most informed solutions possible.  If you have any Carlsbad or North County Coastal real estate questions, please contact us.

When their situations were really tough, most banks preferred short sales because they were their best opportunity to get the most money back. But with an improving economy, and because the losses on many of these properties have already been written off the books, banks are increasingly reluctant to negotiate a short sale.

Today, banks demand 9.5 weeks to respond to a short-sale request, compared to 4.5 weeks a year ago, according to research firm Campbell Communications. Their reluctance is frequently stymieing sales and frustrating real estate practitioners.

Source: Based on article from Business Week – Christopher Palmeri

2. Don’t buy Carlsbad real estate unless you can afford to stay put.
Although property values have been on the upswing in La Costa and Carlsbad, there are still concerns about a coming wave of foreclosures.  We may have seen Carlsbad property values at their bottom, but that is still unknown.  Don’t buy Carlsbad real estate hoping to flip it quickly at a profit.  Now isn’t the time to take that kind of risk!

3.  Only buy what you can really afford
Most of our recent real estate problems have come from families buying homes they can’t afford.  The average family can afford a home that is 2 1/2 to three times their annual salary.  But take into consideration, your other expenses and debts before you commit to a monthly mortgage payment.

If you have any Carlsbad real estate questions, please contact us.  A home is one of the biggest purchases you may ever make.  Please be informed and make the best decision possible!

1. The tax credit expires on December 1st, 2009.  That means all real estate purchases have to be CLOSED before then.  You can not still be in escrow.

2. If you were hoping to use the tax credit – you can no longer buy a short sale.  Most short sales take about six months to complete.  There is no longer time to complete the short sale process and close escrow before November 30th.

3.  Because of the large amount of buyers, there are often bidding wars on properties under $400,000.  If this is your price range, be prepared to make full price offers, and often be forced to counter above asking price.

4.  Financing is still tight - and slow!  Most “easy” mortgages are taking around 45-60 days to fund. 

If you are looking to take advantage of this First Time Buyer Credit – please consider all these facts above.  In order to close by November 30th, you probably need to be in a contract by September 30th.  You need to be prepared to make strong offers, and you need to work with your professional team of real estate and mortgage consultants to keep the process moving quickly.

If you have any questions about Carlsbad, La Costa, Encinitas, Del Mar, Oceanside, or San Marcos real estate, please call The Mewborn Team.  We specialize in coastal luxury San Diego real estate.  We are happy to serve as your personal real estate advocate!