10 ways to save you money in 2011

With the tightening of mortgage standards in the past few years, many have questioned, "How can I qualify for a loan these days?" Well, here are 10 tips that can help you get that sought after loan with a decent interest rate, meets your needs, and can save you money!

1. Have the right credit score. Sure it seems like a "no-brainer", but nowadays credit is more important than ever! In the past the best deals required a score of 720. Now, they require a score of 740. With the state of the economy and many people losing jobs, having to short sale, or foreclose on their property... it's fair to say that there aren't a ton of people with this score. If you are one of many who have had a significant impact on their credit in the subsequent years, whether or not you plan to purchase a house within the next year, Contact me. I can get you in touch with a credit repair company that can get you back on track and fix your credit in as little as 90 days!

2. Protect and Preserve your Credit Score. Again, this is an obvious tip, but probably the hardest. It reminds of junior high and high school, when the teacher started off the year by stating, "You all have A's. It's up to you to maintain it." Consider hiring a company like Life-Lock, that can keep you up to date with any misuses or hits on your credit. This will give you the greatest chance of maintaining the credit score you've worked so hard to maintain.

3. Shop Around. Don't just look for who has the best interest rate. Consider the other costs- discount points, and even the type of loan. Is it an adjustable, fixed? Holden Lewis of Bankrate.com suggests comparing the total fees and monthly payments that you would make under 3 or 4 loan deals to figure which option works best for you and your family.

4. Know you're borrowing limit. The FHA suggests that your house payment should equate 31% of your gross monthly income. Some housing counselors suggest a safer 28% or 30%. Roughly, if your monthly income is $4,200 before taxes. According to the FHA percentage of 31% you can afford a monthly house payment of about $1,302. The monthly house payment includes the principal, insurance, taxes and association dues.

5. Don't "reset" your Refinance Calender to 30-years. In other words when you've lived in a property for 5 years, ask your lender to amortize the loan for the remaining years of the old loan. By shortening the length of the loan you end up saving money on interest that is automatically included in your monthly payment. It may raise your monthly payment, but in the long run will actually save you a lot of money.

6. Consider a "no closing cost" Refi. If you are fortunate enough to have positive equity in your home, but you don't have a lot of money around you may think you can't qualify for a refinance. Think again! With a "No Closing Cost" Refi you can get your loan refinanced and not pay anything out of pocket. Holden explains that you end up paying a slightly higher interest rate as the closing cost gets factored in to your monthly payment.

7. Small downpayment? See the feds. Most lenders require 10% of the home price to be used as a downpayment, refinancing requires at least 10% of equity to qualify. For those borrowers with good credit, try applying for an FHA loan. They only require a 3.5% down payment. If you are a veteran, apply for a VA loan, no down payment is required. For those who aren't veterans or won't qualify for an FHA loan go to http://www.americandreamdownpaymentassistance.com/state.cfm?code=NV.The American Dream Down Payment Act is a down payment assistance program that gives grants to assist low-to-mid-income families and uniformed employees such as, policemen, firemen, sanitation, maintenance workers, and teachers achieve homeownership. The link above is for the State of Nevada.

8. Small loans? Act early. In the past lenders were paid a certain percentage of the loan. The more money they lend, the more money they would receive. Changes made April 1st have since made it illegal for lenders to be paid this way. In the past those that needed smaller loans or loans less than $100,000 weren't given the time of day. Now, big lenders like Wells Fargo as well as the small independent lending brokerages are more willing to lend to these kinds of borrowers. Since there are many a home here in Las Vegas that is under $100,000, this change is an important change.

9. Make an extra payment any time of year! You've probably heard that an extra mortgage payment made at the end of the year will shorten the repayment time. This is true. But, you don't have to wait until the end of the year, how about sending in that payment after you received your tax return, or after a bonus? Not only will it save you interest and shorten your repayment, but may come in handy at the end of the year when we all tend to spend a bit more.

10. Behind on your payments? See a housing counselor. According to a study by NeighborWorks America, Delinquent homeowners who receive Department of Housing and Urban Development-certified foreclosure counseling are more likely to keep their houses and not lose them to foreclosure. When late-paying borrowers get counseling, they are more likely to get a mortgage modification, which can reduce their payments. Click here for Housing Counselors in Nevada. http://portal.hud.gov/hudportal/HUD?src=/states/nevada/homeownership/hsgcounseling

The most important factor when deciding on purchasing a property is to shop around! Talk to several lenders- ask about their interest rates, their fees, discuss your needs and find out how much home you can afford. These factors will all come to play when you are ready to purchase a home. Not only will it help aid in the type of home, area and how much to put an offer in on... but can be very helpful when we negotiate the offer- like when asking to have your closing costs paid by the seller!

For more information about the Credit Counseling company, or if you would like to speak with some lenders, please don't hesitate to contact me at kathy.herron@cbvegas.com.

Foreclosure Sales: A First Step in Recovery?

A few years ago when the banks flooded the markets with foreclosures prices dropped fast. Ever since then homeowners have been fearful of another wave referred to as the "shadow" industry that would cause the home prices to go down even further. But economists and real estate agents across the country are noticing that the hardest hit cities are actually seeing the first steps in recovery because out of state and international buyers are scooping up these foreclosures.

The low prices are leading investors to snap up foreclosed homes in Detroit, Las Vegas, Miami, Phoenix and Tampa. The severely low priced homes are reducing prices in the short run, but they're also thinning the supply of homes -- clearing the way for higher prices in the future.
For some buyers, the deals are now too good to pass up. A highrise studio condo on the Las Vegas strip that cost $500,000 at the height of the housing boom is now selling for roughly one-third that price. Across the valley, we've seen an average drop of almost 60%.

News reports suggest that "such sales have helped shrink the combined supply of unsold homes in those five cities by 13 percent over the past year, according to an analysis of local listing data. Home prices in each of those markets are at or below 2002 levels, according to the latest reading of the Case Shiller index."

"If we were to see several consecutive months of supply getting smaller, it would point to an improving housing market," said Celia Chen, senior director at Moody's Analytics. "Even if it is investors buying them, they are renting them out in hopes that prices in the next several years will rise." As of today there are only 14,015 homes currently available here in Las Vegas, which is about a 4 month supply- a great sign we are on our way to a recovery. There are 12,787 homes that currently have offers on them (a bulk of these are short sales waiting on bank approval), and 14,232 homes that have sold year to date.

It's important to get rid of foreclosures and other risky properties so the market can turn around. When foreclosures and distressed properties are sold, home prices fall. But as the supply of cheap homes shrinks, prices stabilize. Homeowners who had put off moving because they didn't want to sell during the downturn grow confident that they can fetch a decent price. That prompts more buying and selling and thus forces home values to rise.

Most of the current foreclosure sales involve investors: Private equity firms; foreign and out-of-state buyers seeking vacation houses; individual investors hoping to rent out or quickly sell properties for a profit.
In March, 35 percent of previously occupied homes sold were bought entirely in cash, according to the National Association of Realtors. Here in Las Vegas it's actually about 50% of all sales.

Economists caution that a second wave of foreclosures could throw the housing market back into turmoil and few see home prices rebounding before the end of this year. However, with the current focus forcing banks to do more to help people stay in their homes, and create programs that shorten the short sale time frame, it's hard for me to believe this will occur again. If anything I think it may just become a small, but consistent, trickle.

Banks Push to Improve Foreclosure Procedures

Time is ticking for banks to improve their foreclosure methods. U.S. regulators have given 14 financial institutions until mid-June to create better processes on their servicing methods and another 60 days to implement the changes.

The changes will no doubt cost the banks a considerable amount of money to implement. Since the foreclosure mess erupted last year, JP Morgan Chase has already spent $1.1 billion to create and apply the changes and Citigroup predicts the changes will boost expenses by as much as $35 million a year.

On Thursday, Fannie Mae and Freddie Mac rolled out new protocol designed to increase the number of successful modifications. The guideline will require servicers to reach borrowers as soon as the first missed payment occurs and will continue to with the intention of modifying the loan. They'll also pay more to the servicers that meet certain benchmarks and establish timelines for banks to modify loans or process foreclosures.

The Regulators have asked the banks to create programs that establish a single point of contact, have deadlines that are "appropriate", and hire more people to facilitate the programs and assist it's borrowers. These are the minimum requirements and some have already made the necessary changes.

Last June, Wells Fargo began assigning two employees to each borrower seeking a loan modification. They found that the program "significantly improved customer communication and the modification process," said spokeswoman. Wells Fargo also plans to expand the same effort to foreclosures and short sales.

Ally Financial has assigned borrowers a team of employees to help them gather documents, execute a final loan modification or advises on other foreclosure alternatives.

J.P. Morgan is working on a software program to make it easier for employees and borrowers to track loan-modification requests. Last year, it started providing some borrowers with a "relationship manager" to advise on the process. No word yet on when the software will be available.

Citigroup now provides borrowers with a single point of contact for gathering documents and handling short sales. In the next months, it will roll out a "concierge" system that will assign a small team of employees to help delinquent borrowers and homeowners at risk of default navigate the system.

Bank of America has begun its version of a single point of contact but declined to provide details. For the past year or so they have used the Equator system that enables better communication and facilitation of short sales between real estate agents and the negotiator. Currently the time frame of the short sale, with the use of this system, is about 5-16 weeks. Bank of America is continues to make changes to their practices in order to reduce this time frame further.

As far as "appropriate" deadlines, the Los Angeles Neighborhood Housing Services says it takes an average of 141 days for borrowers it works with to get an answer after completing an initial loan-modification request. The nonprofit group says Wells Fargo has the fastest turnaround with initial reviews averaging 79 days. A Wells Fargo spokeswoman said 60% of borrowers receive a decision five days after the company receives a complete package, up from 45% a year ago.

Ally Financial said it responds to the average borrower within seven to 10 days of receiving a complete financial package.

At Citigroup, the goal is to give borrowers a final answer about a permanent modification within 22 days of their final trial payment. "On average, we do that," said Sanjiv Das, chief executive of the CitiMortgage unit.

When it comes to staffing, J.P. Morgan said it will add as many as 3,000 new home-lending jobs, BofA said it hired roughly 3,000 people in the first quarter to work on troubled mortgages and Citigroup said it will expand its loan-modification unit by 500 employees. Wells Fargo doesn't expect to increase staffing because according to their reports the number of borrowers behind on loan payments is declining.

As far as how these programs will affect the number of short sales or foreclosures we will have to just wait and see.

Don't Walk Away from your Home

There has been a lot of talk about short sales and loan modifications on various news channels, and in conversations with real estate agents, and those in the industry. But, what about the people who are dissatified with the value of their home and don't qualify for a short sale or modification?

With no solution in sight many homeowners dealing with underwater mortgages who can still afford to pay their mortgages are simply walking away from their mortgage, even when they can afford the payments.

The idea is known as a strategic default and the prospect of simply walking away has increased across the nation. In the past, lenders traditionally looked at the degree of a home's value depreciation to identify the risk of strategic default. But FICO Labs research now shows that these borrowers are only twice as likely to default as those whose home has managed to keep most of it's value.

In fact, true strategic defaulters are found to be savvy investors. They have higher credit scores, and fewer instances of going over credit card limits. The findings show a vast difference from their counterparts. There is even a rise of notable celebrities walking away from their mortgages.

The reality remains, however, that the ramifications of of simply walking away can haunt a homebuyer for years to come. "Walking away is a very serious matter," says Glamis Haro, a lending manager at Union Settlement, a credit union in New York City. "Just one late report on your mortgage can seriously damage you."

"In the past," Haro says, "a 30-day late payment on a home loan could result in 30 to 40 points being deducted from your credit score. But in today's unforgiving credit market, one late payment can now result in up to 100 points being deducted. And lest homeowners think they can take the heat, a late payment stays on the record for 7 long years. After 120 days of no payment, the delinquent homeowner enters what Haro calls "five fives" status – the notation (5-5-5-5-5) made on a borrower's credit report when they've gone beyond the point of no return. "You're considered unbankable," she says. "It could take years of working with a financial adviser to get back into lenders' good graces," she adds.

While there are some experts who claim that walking away is actually beneficial in the long run for struggling homebuyers, the risks often far outnumber the benefits. "A public record, such as a bank judgment or collections account, will affect a borrower's credit for 10 years from the last date of payment -- and any judgment is enforceable for up to 20 years," Haro says.

Karen Metoyer, a housing and credit counselor at Clearpoint, recommends that you work with a HUD-certified housing counselor, if your house is underwater, rather than try to work on a modification or refinance on your own. She says, "having a third party negotiate the modification or refinance helps give your financial situation credibility, because the banks tend to act more quickly in that case." These free counselors will also suggest if perhaps a reverse mortgage, refinance, or modification is your best option.

To find a HUD-certified housing counselor click here: http://portal.hud.gov/hudportal/HUD?src=/i_want_to/talk_to_a_housing_counselor

Short Sales and Taxes

With the tax filing deadline now passed, it's a bit late, but I wanted to give my readers a bit of information about short sales and taxes. If you sell your house via a short sale, is it true you have to pay taxes on the forgiven amount?

Frankly, it depends. Usually under the tax laws, if your debt is canceled or forgiven, it is defined as taxable income. However, Congress thought this didn't make sense: You lose a house by foreclosure (or short sale), and to add insult to injury, you have to pay tax on this phantom income? In response they created the Mortgage Forgiveness Debt Relief Act of 2007. This relief act allows the homeowner to exclude up to $2 million -- if that debt was on your principal residence.

Unfortunately, if the debt forgiven was on a second home/vacation/investment property, then you are out of luck; the amount that was forgiven (or canceled) is considered taxable income.

If your canceled debt was on a refinanced loan, the law gets a bit murky, if you used the refinance proceeds to substantially improve your house, then there is no tax to pay. But if you used those proceeds for other purposes then the cancelled debt is taxed.

The IRS has an excellent, free, publication on this topic, called "Canceled Debts, Foreclosures, Repossessions and Abandonments." It is Publication 4681, and is available on the IRS website -- http://www.irs.gov/pub/irs-pdf/p4681.pdf -- or by calling (800) 829-3676, or (800) TAX-FORM.

Since short sales are a part of the nation's market and will continue to be around for some time. It's important to know this fact. If you know someone who either has or may be considering the short sale option. Please send them this article or direct them to the IRS website for more detailed information.

New Home Builders plan to go "Green"

New Home Builders have announced that consumers can expect to see more and more green homes in the coming years. On Earth Day this Friday, Meritage Homes will begin offering "net-zero" homes or homes that produce as much energy as it consumes. Prices for the homes will start at $140,000-$160,000 and will be available in Arizona, California, Colorado, Nevada, and Texas. Meritage already offers a 9 panel rooftap solar-array as a standard feature, but for a $10,000 upgrade your home can have 24 additional panels that will reduce your utility bills to zero.

"Net-zero" properties are very common in Canada amongst large home builders, but this is the first time a corporate builder has been able to make the homes affordable with this kind of efficiency. With $4 a gallon at the pump, and the cost of living only going up you can expect to see a push to build homes that cost less to operate industrywide. “Shiny granite can only go so far to lure buyers from low-price foreclosures," says Nate Kredich of the non-profit U.S. Green Building Council.

Here in Las Vegas, we are already noticing builders going green. Shea Homes, a family-owned builder, has been providing solar powered options with every new home built for years! When the economy was at it's peak every one of their homes had solar panels automatically included, now they give you the choice. Their new active adult community in the Northeast part of the valley is offering it's consumers 3 choices. The "Complete" package, which is included in every home, offers homeowners a home with Energy-efficient gas forced air heating, energy efficient lighting low-flow fixtures that reduce water usage while maintaining a high-pressure performance, low VOC products, and eco-friendly flooring just to name a few. The "Plus" package adds solar-powered attic fans, an electric vehicle charging station, and a WeatherTrak Smart Sprinkler System. When you purchase a home with the "Ultra" option you can expect your home to be EFL Green Certified. Everything you can imagine that can be green has been put in this home. In addition to the above examples, you can expect windows, ductwork, appliances, solar roof tiles, sensor lights, insulated garage doors, and the ventilation system to be optimized for the lowest carbon footprint. Prices range from $147,000-$247,000 for the Complete, $154,000-$255,000 for the Plus and $177,000-$278,000 for the Ultra.

For more information about Shea Homes' new community, or where you can find more builders in the Las Vegas valley offering green options send me a message, I'd be happy to give you the information or show you what's available.

This just in... Prices at 1990 level, sales increase

Existing home prices here in Las Vegas have reached their lowest level in 21 years! Statistics show that due to the low prices, our city also found an increase in sales which we haven't seen in six years.

"The median price paid for existing single-family homes, condos and town homes fell 10 percent year-over-year in March to $108,000, and for the year is now $109,000," according to a report released by Las Vegas-based SalesTraq.

Buyers took advantage of those low prices in March when 5,114 housing units were sold, the average price per square foot of homes sold in March was $70.57, an 11 percent drop from March 2010.

Cash Investors still lead the pack as they accounted for more than half of sales. 7 out of 10 existing home sales were distressed properties accounting for about 42% of foreclosure sales, 10% were sold at a auction and 18% were short sales. Please note that these statistics account for properties that have actually sold. As of today's date we have over 14,000 properties currently listed, and just under 13,000 properties with accepted offers. A big percentage of these being short sale properties awaiting approval from the bank.

Housing statistics don't show a definitive recovery as of yet, but we're are seeing an increase in sales as seen in the above statistics. I'm also seeing that more people are willing to choose short sales as their option because the converstation is much easier to have amongst each other, the process is getting easier and better. Banks are more willing to accept short sales than they were last year, it's a win win.

In the existing home market, the median price of short sales captured the highest price at $120,000. That was followed by traditional sales at $108,500, foreclosure sales at $106,500 and auctions at $93,500.

Interested in purchasing a home in Las Vegas? Would you like more information about the Las Vegas market? Send me an email and let's get started!