Question: I’m facing tough decisions about my financial future and am considering a short sale on my home. Do I need to miss payments in order to do a short sale?

Answer: The Making Home Affordable initiative may have changed the status quo.  There is new evidence that some lenders are allowing short sales without requiring a home owner to miss payments, especially with the new government incentives to the lenders that have encouraged short sales. However, a home owner would still need to qualify for a short sale by demonstrating an acceptable hardship, by proving financial insolvency, and by documenting a monthly short fall of income. For more information short sales, contact Team Bohannon at Coldwell Banker today.

Question: I am upside down on my Tampa home, and I have 2 mortgages. Can I do a short sale?

Answer: Yes, absolutely. As Certified Distressed Property Experts (CDPEs), we ensure that you are aware of all options including: refinancing, modification, deed-in-lieu, short sale and foreclosure. To qualify for a short sale, you must demonstrate an acceptable hardship, financial insolvency, and a monthly short fall of income. We offer guidance, example hardship letters, a financial worksheet, and a list of documents that you would supply to your lender(s) to help make this case.

Once we have an offer on your home, we submit a package of information that often exceeds 100 pages to both first and second mortgage companies. If the short sale is accepted by the primary lender, then the primary lender usually offers a small amount to the 2nd mortgage company to release the lien. We have had excellent success with both first and second mortgage companies, but the negotiations can take a couple months. One caveat to consider is the HELOC. If your 2nd is really a Home Equity Line of Credit (HELOC), then many of the mega banks have been demanding a more substantial payoff to release this obligation.

Once in the short sale / foreclosure process, many homeowners stop making mortgage payments. If you have a 2nd mortgage or a HELOC, then please do everything possible to make occasional payments on the HELOC or 2nd, as banks have been selling these loans to collection agencies after 180 days without a payment. Once these loans have been charged off, or sold to collections, then the chance of a short sale are greatly diminished. For more information short sales, contact Team Bohannon at Coldwell Banker in Tampa today.

Question: I’m a first-time home buyer and I am not clear on all the costs involved in purchasing a home in Tampa. I have enough money for a down payment, but what other costs will I see? How can I minimize the required costs?

Answer:  The primary costs are listed below, along with some ideas on how to reduce the impact. We recommend contacting a local Tampa lender to obtain a pre-qualification letter and a detail “Good Faith Estimate” of closing costs. Make sure the lender has info about taxes, CDDs (Community Development District) and HOA fees (Home Owner Association) when determining your monthly payment.

 
#1) Escrow Deposit (a.k.a. Earnest Money)
In order to have a valid contract on a home purchase, Florida law requires that you put some money into escrow.  When you make the offer, or upon acceptance, you would write a check to an attorney, title agency, or real estate company who hold the funds on your behalf. At closing, the funds will be credited back to you. The amount of the escrow deposit is negotiable, though 1%-3% of purchase price is customary for “normal” transactions. For “short sale” transactions, we usually see $1000 for escrow. For bank owned homes (REOs),  the banks will dictate the escrow amount (usually 1%-2%).

 
#2) Expenses Before Closing
The home inspector will expect to be paid when the inspection is performed, so you can budget $300-$600 depending upon the size of the home.  Most lenders will charge an application or appraisal fee of $400-$800 in order to start work on a loan.

 
#3) Down Payment
A down payment is the difference between the price of the home and the amount of the mortgage.  If you purchase a $200,000 home with a $180,000 mortgage, then you would bring the $20,000 down payment to closing (10% down, 90% financing). USDA and VA loans allow 100% financing (zero down), while FHA loans require a down payment of at least 3.5%.  Lenders occasionally offer 90-95% financing on conventional loans, though the trend is toward requiring a 20% down payment for conventional loans. Lenders will require proof of down payment funds from your bank account, or a letter from a family member offering to give you funds.  There are also some city, county or state  down-payment assistance programs available to help first-time home buyers (i.e., people who have not owned a home within 3 years).

 
#4) Expenses at Closing
There are several customary charges a buyer can expect when purchasing a home. While costs very from market-to-market, in the Tampa Bay area a buyer can expect to pay for costs related to the loan such as: state documentary stamps on the note, state intangible tax on the note, lender’s title policy, and any lender’s fees / points. Other buyer costs include pest inspection, survey, credit report, tax service fee,  flood certification, HOA fees,  recording fees, underwriting fees, processing fees, closing fees, mortgage insurance, etc. We usually estimate 2%-3% of the purchase price for these costs. In the Tampa real estate market, sellers normally pay for the owner’s title policy and doc stamps on the deed. Again, the best bet is to ask your lender for a Good Faith Estimate well in advance.

 
#5) Pre-paid Items at Closing
In addition to the down payment and closing costs, many lenders require the buyer to pre-pay certain expenses at closing. As a condition for obtaining the loan, many lenders will require buyer’s to pre-pay 3 to 4 months of property taxes, 12 to 15 months of home owner’s insurance, and a year of CDD fees (if the home is in a Community Development District).

 
#6) Minimizing Costs
All of these costs add up. One strategy is to to ask the seller to incorporate some of the closing costs into the sale price. For example, on a 200,000 home, you might ask the seller to contribute up to 6% purchase price ($12,000) toward your closing costs and pre-paids. Savvy sellers know to focus on the bottom line rather than the closing costs. Most lenders will permit a 3%-6% seller contribution. Contact Team Bohannon today for other innovative ideas that we do not advertise.

After a busy week in the financial markets, mortgage rates continue to hold steady near historic lows.  Strong demand at Treasury auctions pushed mortgage rates slightly lower.  However, concerns are mounting that the enormous expansion of government debt and the explosion of the money supply will result in higher interest rates and inflation.

For homes priced under 303,000, FHA loans are available with just 3.5% down (292K max loan in  the Tampa Bay Region). For homes in Pasco County and parts of New Tampa, USDA guaranteed loans allow up to 100% financing. Conventional loans with less than 20% down can be done, but they require PMI, Private Mortgage Insurance. The PMI companies have increased their costs and requirements. Anyone with a credit score below 740 can have a maximum Debt-to-Income ratio of no more than 41.0%, down from 45%. If you plan to finance a home purchase, now would be a great time to take advantage of low interest rates, a wide selection, and purchase prices that are down as much as 50%!

When shopping for a home in  the Tampa Bay area, the natural tendency of a buyer is to want to pay the lowest price possible. It’s important to keep in mind, however, that the sales price is not the only factor that determines what your monthly payment will be. In fact, the impact of higher interest rates can easily nullify any benefit of waiting for a lower price.
 
Why Should I Rush to Buy a Home in Tampa?
While you may have heard discussions in the media about the decline of Tampa Bay area property values … in many Tampa neighborhoods and in specific market segments, the rate of decline appears to be stabilizing. 
 
That being said, it would not be unreasonable for you to want to hold out for an additional decline of 10%, hoping to capture the best possible price. However, as property values have declined in many areas to 2003 levels or lower, waiting longer to pull the trigger could be a mistake. Many Tampa Home Buyers are astounded to see that the lower prices have brought out investors and the result has been multiple offers on many properties. Tampa homes that are priced correctly are creating a lot of interest.

 
Interest Rate Complacency
The problem is that many home buyers have been lulled into a sense of complacency because of extremely low interest rates. Since the Federal Reserve initiated its program of buying mortgage-backed securities, which control the rates people pay for their home loans, rates had been range bound, bouncing between 4.50% to 5.00% for a 30-year fixed-rate loan.
 
But do not be confused by this. These rates are artificially low! Historically, interest rates have been above 6.00%. And any rate obtained below this number is a great deal, especially on homes with price tags from 2003!
 
Markets are Unforgiving
The last two weeks of May showed just how unforgiving the markets can be for people who choose to procrastinate. In just five days last week, interest rates from many lenders increased anywhere from .50% to 1.00% as fixed-income investors demanded more for their money.
 
For anyone who was waiting for prices to drop even more, a 1.00% increase in your interest rate would bring a higher monthly principal and interest payment on a home, even if the price of that same home had fallen an additional 10% in value.
 
If you or someone you know is waiting for Tampa home prices to fall even lower, be aware that while holding out for a lower price may help you win the battle, you could lose the war in terms of monthly payments and overall affordability. With the Federal Reserve scheduled to end its buying of mortgage-backed securities this year, rates only stand to go higher for those that wait. In fact, interest rates are already on the rise and could go higher from here.
 
Clock is Ticking on Free Money
If you, or someone you know, is planning on purchasing a home in the Tampa Bay area this year, be aware that you must take possession before 12/01/2009 to be eligible for a tax credit of up to $8,000. In a survey conducted in March by Move.com, nearly 50% of home buyers are currently unaware that this free money exists in the marketplace. And since over 50% of all buyers are first-timers in today’s market, this could impact a lot of people who aren’t in the know.

These thoughts have been contributed by Bob Saltzman, one of our key Mortgage Broker partners with Home Financing Network. Call Bob at 813 787-7711 for more info about how waiting for the lowest price could really cost you, or someone you know, more in the long run.

Looking for a Bank Owned Foreclosure in the Tampa Bay area? Would you like to buy without a large down payment or PMI?  In tracking REO / Bank Owned Homes throughout Tampa, we want to make sure that you know about these homes:

Wellington Manors: 19724 Prince Benjamin, Lutz , 33549. $319,900
Cory Lake Isles:  10405 Canary Isle Dr, Tampa 33647.  $265,100
Cory Lake Isles: 10941 Cory Lake Dr, Tampa 33647. $190,000
Palm Cove:  7901 Stoney Hill Dr, Wesley Chapel , 33544.  $152,000

All these homes have the advantage of special Homepath financing:
 * They can close in 2-3 weeks
 * They offer a 95% Loan for Homeowners
 * Or a 90% Loan for Investors
 * No PMI (mortgage insurance fees)
 * No Appraisal Fee

For more information, or to schedule a showing, contact Team Bohannon at 813-979-4963.

Great News for home buyers in Tampa - the FHA has restored the 2008 loan limits. Even though the median home price is down 41% from peak levels, the FHA loan limit remains at at over twice the median sale price.  As a result, Tampa home buyers can put down as little as 3.5% on a single family home priced up to $303,108, (max loan amount of $292,500).  Of course a sales price can exceed this number but the down payment would increase. Buyers in Hillsborough, Pinellas, Pasco, and Hernando counties can take advantage of these generous loan limits today. The VA limit remains at $417k. Contact Team Bohannon for more info.

The family mentioned in the previous post about “Buy & Bail” wanted to take advantage of today’s great prices to buy their dream home, a sprawling pool home in New Tampa’s Live Oak Preserve built by Southern Crafted Homes. However, they did not want to sell their old home at a loss. When they asked about renting out the old home, we ran into “buy & bail” restrictions with FHA and Conventional Loans.

Searching for alternate ideas, I asked Bob Saltzman, veteran mortgage broker at HFN for some options. Bob suggested that the buyer consider a USDA loan, which does not yet have the same restrictions. The home was located at an address that was eligible for a UDSA loan with 100% financing! So far so good. The buyers also met the UDSA’s income eligibility guidelines. However, upon further review, the USDA no longer lends on homes with pools.  Back to the drawing board.

Tempted to buy a new home at today’s low prices and great interest rates but wondering what to do with your current home? Maybe you should just rent out your old home and buy the dream home? If the new home is in the same area, there are some new issues to consider.

Lending guidelines now look for “Buy and bail” scenarios, whereby someone would buy a new home and then allow their previous home to go into foreclosure. This premeditated foreclosure scheme is considered mortgage fraud.

“Buy and bail” has become a major issue for lenders. As a result, innocent home owners who want to buy a 2nd home in the same market face a more challenging environment to obtain a loan. Consider this example from of of my clients:

They enjoy living in their Live Oak neighborhood, but want to move up to a larger home with a pool. Even though they had put a substantial down payment on their current home 3 years ago, the value is now close to what they owe. They decided to rent out their current home rather than sell it…. at least until values recover somewhat, and then purchase another house in the same subdivision which is selling at a huge discount. 

In order to avoid “buy & bail” rules with conventional or FHA financing, they would need to prove that they have a at least 30% equity in the old home, and they would need to qualify without using any anticipated rental income from their old home.

Tampa Bay builders started just 697 homes between January & March, a 90% decline from three years ago when 6,043 homes were started in the same quarter of 2006.

Long gone are previously prominent builders such as: Engle Homes, Trans­eastern Homes, Smith Family Homes, Tripp Trademark Homes, Windjammer Home Builders and Nohl Crest Homes. Mercedes Homes and WCI plan to operate under Chapter 11 bankruptcy.
 
MetroStudy notes that unsold inventory from builders has decreased from 3,351 to 2,430 over the last year. For the complete story, click here