Jason's Blog

TAX CREDIT EXTENSION – IS IT REALLY ALL THAT?

Jason Kotar (Kotar Associates) — Sat, 31 Oct 2009 10:15:58 -0500

The Senate has agreed to extend the tax credit for homebuyers to include contracts signed by April 30, 2010 that close by June 1. The credit for 1^st time homebuyers will remain at $8000 with the income limits raised from $75,000 for individuals and $150,000 for couples to $125,000 and $250,000, respectively.

The proposal also allows existing homeowners who have lived in their home for five consecutive years to receive a tax credit of $6500 if purchasing a home within this timeframe.

What does this all mean? As winter months are not normally high months for buying homes, this extension is unlikely to stimulate any significant incremental buying. Overall, is the five month extension enough? Everything that I have read and heard says "NO"."

As to existing homeowners, if you attended my course, Homes Buyers and Mortgages or read my book of the same name, you know that simply extending an existing program by 5 months will not be helpful to existing owners. These homeowners are probably underwater with their mortgage. And, if they are technically not "upside down" on their loan, the "Buy and Bail" rules, implemented by Fannie, Freddie and FHA, requiring existing homeowners to have a minimum of 25% equity in their existing home in order to be considered for the financing of another home will likely stop them in their tracks.

The House of Representatives is expected to pass their version of this bill within the week. We should expect that it will look similar to the Senate bill.

But, the reality will be that outside of first time homebuyers, the number of people that will take advantage of this credit will be minimal.

I will keep you apprised of further information as it happens.

Jason Kotar, Author

Homes Buyers and Mortgages

More Help for First Time Homebuyers

Jason Kotar (Kotar Associates) — Thu, 22 Oct 2009 10:44:23 -0500

The Federal government just announced a program to help State Housing Finance agencies (HFA's) finance mortgages for first time homebuyers. The fact is that because of the credit crunch, many State HFA's were unable to sell the tax exempt bonds that raise the capital required to enable the agencies to fund mortgages. If you have had any problems with your clients not able to get funding for their mortgage with the HFA, I would have them check back again. Detailed information on the State HFA programs can be found in my book as well as on my website, www.homesbuyersandmortgages.com.

Congress is also considering the extension of the Federal Tax Credit program set to expire November 30, 2009. Under the legislation being considered, the tax credit program would be extended through June 30, 2010. The $8000 tax credit would be available to "all buyers," not just first time homebuyers, with income limitation of $150,000 for individuals and $300,000 for married couples.

I will keep you apprised of these issues in future blogs.

Jason Kotar, Author

Homes Buyers and Mortgages

Can You Sell Your Listing?

Jason Kotar (Kotar Associates) — Sat, 26 Sep 2009 18:00:36 -0500

In teaching my class on Homes, Buyers and Mortgages, I ask the attending Realtors "How many listings in your area are overpriced?" The number most frequently mentioned is 50%. Why is that number so high, particularly in today's market? The most common responses are:

The sellers refuse to accept reality.
Sellers have an inflated, unrealistic view of the value of their property.
Sellers do not understand the impact of distressed properties in their area and the relationship to their home price.

Each of these statements basically says the same thing - sellers want more for their property than they are likely to receive, if they sell the property at all.

In our classroom discussion, the consensus is that it is very difficult to get the seller to be realistic. But, the fact is that if the appraisal does not support the sales price, the alternatives to resolving the situation are limited.

There are a number of non-traditional things that should be considered to aid in marketing the property. As a matter of fact, they can aid you in focusing the property to specific buyers.

Can the property be financed? Is the property a Condo and eligible for FHA or Fannie Mae financing? If not, look to a local lender.
Property location may influence the types of financing options that are available. An example of this is a rural property that may be eligible for US Department of Agriculture - Rural Development loan.
Is it a unique property, such as a farm, that makes a local lender a better option for financing?
Is the property in need of repairs and eligible for the FHA 203-k rehabilitation loan?

The more that you understand about various available financing options, the better you can service your client.

Jason Kotar, Author

Homes Buyers and Mortgages

There is More to Buying a Home than Getting a Mortgage

Jason Kotar (Kotar Associates) — Fri, 18 Sep 2009 18:55:04 -0500

Every homebuyer finds out about their monthly mortgage and escrow payments from their lender which cover principal, interest, taxes, homeowners insurance and mortgage insurance (if applicable). If they are moving into a property managed by a homeowners association, they are also made aware of HOA related expenses.

In my book, Homes, Buyers and Mortgages, I devote a section of the book to "How much home can you afford?" Why have I done this? Because, first time homebuyers may not have considered all of the expenses associated with owning a home. Whether they have lived at home with their parents or rented an apartment, it is not likely that they have been exposed to many of these expenses. Many apartments have utilities included in the rent, some including cable and internet access. They have not had to worry about lawn maintenance, pest control, swimming pool maintenance, security or personal property insurance. Young families are often faced with child rearing expense, including day care, doctors, etc. These expenses may increase when a new home is purchased if the distance to the day care center has increased or, perhaps, the family is forced to find a new service that may be more expensive.

You may already be aware that many first time homebuyer programs require the prospective homeowners to attend education and counseling courses as part of securing a mortgage. This type of education can be invaluable to many buyers who have never owned a home.

Jason Kotar, Author

Homes Buyers and Mortgages

Local Lenders May Be Your Best Bet for a Loan

Jason Kotar (Kotar Associates) — Fri, 11 Sep 2009 20:15:22 -0500

Getting a conventional loan approved for all but the well-to-do with a 700+ credit score can be daunting. To say that Lenders today are risk averse is an understatement. What is a buyer to do if, after having gone to the expense and time of having an appraisal performed on the home they want to purchase, their lender disagrees with the appraisal? What if the property is a farm? What if the buyer, due to a nasty divorce, has poor credit, but has a dependable and good paying job? What if the subject property is a condo that has not been approved by Fannie Mae or FHA? Circumstances such as these are becoming more common place. In most of these cases, the buyer is not likely to get approval from a major out of state bank because decisions about the buyers' qualifications or the property appraisals are being made hundreds or thousands of miles from the subject property and with no real knowledge of the buyer.

This is why local lenders may be your best option for getting a loan approved. A local lender, equipped with local knowledge, is more likely to apply "common sense underwriting" when making a judgment as to the buyer's specific qualifications or the true value of a local property. Does this mean that large regional or national lenders are out of the question? Maybe not, but only if the lender's local affiliate has some degree of autonomy in decision making on loans. Remember that the local lender has a vested interest in their community that a regional or national lender cannot possibly have. The local lender might be willing to consider extenuating circumstances when evaluating the buyer or the property. If necessary, they can even drive by the property and evaluate it, personally.

In my book, Homes Buyers and Mortgages, I discuss the fact that in today's market, buyers should always have two lenders evaluate their loan application. Due to the fact that many loans are being denied for reasons like those stated above, having a local lender in the mix of potential lenders just makes sense.

Jason Kotar, Author

Homes Buyers and Mortgages

Setting False Expectations

Jason Kotar (Kotar Associates) — Tue, 08 Sep 2009 10:41:18 -0500

One of the key elements in the home buying process is the buyer obtaining a mortgage pre-approval letter from a lender. Today, many prospective homebuyers go online to a website of a lender or real estate professional and use a "mortgage calculator" to tell them how much home they can purchase. The problem is that without knowing their credit score and performing a detailed analysis of their income, assets, work history and other factors, the results will be inaccurate.

Defenders of these calculators say that they give the buyer a "ballpark" estimate of how much home they can buy. In today's market, that ballpark estimate is just not good enough. Such estimates could be hundreds of dollars in error in calculating monthly mortgage payments, which could convert to thousands of dollars in error pertaining to the price of the home they can buy.

Does this mean that buyers should not use these calculators? Yes, that is exactly what it means. BEFORE the house hunting process begins, the buyer should meet with a lender and get that pre-approval.

Jason Kotar, Author

Homes Buyers and Mortgages

Are State HFA's Right For You?

Jason Kotar (Kotar Associates) — Fri, 28 Aug 2009 16:39:42 -0500

Jason Kotar, Author

Homes Buyers and Mortgages