HOME START

The State of Illinois has finally caught up with many of our neighbors. The Home Start Loan Program is now available through Illinois Housing Development Authority. Home Start features two different programs. While this is good news, there are no Vermilion County lenders appearing on the site's data base of participating institutions.

For our purposes we will be focusing only on the Tax Credit Advance Loan, today. You must first qualify for the 30 Year Fix Rate Loan. You may borrow 3.5% of the loan amount not to exceed $6000. This is an interest free loan if it is repaid by June 30, 2010. Failure to do so will lead to the loan becoming a 10 fixed rate loan. You will be required to attend a homebuyer education program. And finally, if you close on or before 11/30/2009, you will earn the First Time Home Buyer tax credit. So don't forget to file form 5405 with your taxes. For complete details please besure to read the plan overview provided by IHDA.

On a related note HR 2801 currently in committee is a promising piece of legislation. Hear are the high lights:

1. Extend the eligibility for the tax credit to all who are purchasing their primary residence.
2. Extending the purchase date through 12/31/2010.
3. To take effect upon passage of the bill.

There are rumors the top rebate will go up from the $8000 offered in the current legislation. This is in Ways and Means at the moment. But I will keep tracking it and keep you posted.

Real Estate News and Trends

I just read an article about buying foreclosures "on the court house steps". WHOA there buddy. They are off the mark. Here is a good example of an article that has no basis in reality. When a property is sold "on the court house steps", the initial bid is the judgment amount. So if the person was upside down, under water or any of those other words bandied about, then the minimum bid will likely be more than the actual value of the home. The mortgage balance, unpaid interest assessed, and legal fees are all part of that amount.

Initial listing prices are typically near the judgment amount when the property does go onto the market. Because many of these homes have challenges, the prices fall to far below market values. Some people being removed from their homes vandalize them as they are moving out.

An analysis I did for our MLS showed that for all foreclosures sold in DABR MLS for 2008, the eventual selling price was 2/3 of the initial list price. Lest you think the Realtors(r) are setting the inflated prices to fatten their commissions, rest assured, we are not setting the prices on foreclosures.

The article does mention a couple of pitfalls you may encounter when buying on the court house steps. Properties are often kept under lock and key until the sale. You are usually buying them sight unseen. The second major draw back the article mentions is the sale price is due in a short period. In IL you must pay the total sale price within 24 hours.

WCIA news aired a good story tonight. Two interesting bits of information I was able to glean: Champaign County's average home prices are almost double those of Vermilion County. The second interesting stat: home prices in Champaign County have declined by 19% compared with last year. Contrast that to the nearly flat pricing in Vermilion County. The one thing both markets have in common is that about 23% fewer homes have sold this year.

Want to buy a new home, but don't have a decent down payment? The NAR (National Association of Realtors (r)) announced that there has been a modification to the $8,000 tax credit, for 1st time home buyers. Stay tuned for further details as they unfold. I spoke with a local mortgage broker who indicated they don't have details, yet. But, I will let you know as soon as we know how the new program will work.

News in Review

Looks like the Feds are letting go of some of the repair money. For mortgages with an 80% 20% split CNN is reporting the Obama administration will be release funds to have the secondary lenders recover what they are losing. The net effect should lower mortgage payments for a few million borrowers.

Here's a story that highlights the importance of knowing what's happening locally. CNN reported prices continue to fall. But remember they are using data from 20 metro markets. The numbers are not a fair reflection of our numbers. And then there's this jewel. If you're as tired of doom and gloom as I am don't read this. It's another reminder of why I encourae people to look closer to home for their news and trends.

I spoke with a mortgage lender today who said they are as busy as they where in 2005. This article talks about the high number of mortgage apps. So why are home sales so soft? What these headlines and the lenders are telling is that most of the activity is from refinancing.

Helpful Links

Here's a summary of useful links featured in my blogs over the past week:

Preparing for home ownership

Buying guide lines

203K Loans

FHA Resource Center

Illinois Association of Realtors Assistance

Central Illinois Debt Management & Credit Education

Free Credit Reports

Declined? Now What? Buying 101 D

I called this 101 D because you have been "declined". It's a serious thing. And I am not trying to make light of the situation. But, this is also not a time for self-pity and withdrawal. Instead, this is a time to take on the problem head on. I found an interesting and helpful article. Here's a quick summary:

1. Ask Why. Can't fix what you don't diagnose.


2. Find a fix ... may be easier than you think ... if not most can be repaired within 1 year.


3. Don't give up ... try some one else. Some times differnt types of lenders, ie a credit union, vs a bank, can make the difference.


4. Try again. Or, as the adage says, "If at first you don't succeed, try, try again." ... recaps the above three points.

For help contact Central Illinois Debt Management and Credit Education, INC. or try e-mailing Mrs Leary directly.

A quick word of warning, do not fall for quick fix credit repair scams. That is a full post of it's own. You can often accomplish the same results for free if you will exert a little effort. Order your free credit report, and then work on eliminating the issues.

An alternative you can pursue at this point is a Contract for Deed ... Caveat emptor: Buyer beware. You will find many of these homes are over priced, in ill-repair, are in less popular areas, or have limited terms. It is this last point that will require you fix your credit, anyway.

Don't go it alone. Get an attorney to help. I can say from personal experience, I will never do another without referring buyers and sellers to different attorneys. Better safe, than sorry.

Home Buying 101 or Three Reasons to Get Pre-qualified

A young couple wants to buy their first home together. They call a Realtor (r) only to be told they need to be pre-qualified at a minimum. But they haven't even seen the first home. What gives?

First things first. Most people think the answer is finding the home. Truly I recommend that be the last step. Prior steps in the process are speaking to a lender, choosing an agent, and, making a wants and needs list.

A good place to start is a home buyers course ... What? School? Are you kidding? Not every one needs this step. But for 1st time buyers or credit challenged buyers a class conducted by a debt management organization, can be a big help. It will give you a neutral starting point and help you get your "ducks in a row". It also helps get FHA approval.
Why find a lender first... three basic concepts to deal with here:

1. What can you afford?
2. How much will you need out of pocket?
3. What terms will be included in the offer?

Question 1: How much can you afford? Getting a pre-qualification will help you discover exactly how much the bank is will to loan. I have seen couple disappointed after finding the perfect house only to be told it was more than they could qualify for. Banks will require certain debt to income (DTI) ratios or loan to value ratios (LTV). Some loan officers (the good ones) will even let you do a pre-approval. In this scenario, you will actually complete the mortgage application before you go out to look.

If you are limited to homes that qualify for a traditional FHA loan, there will be homes that do not meet the FHA specs, you can avoid. Or, if you find a great value in a wonderful neighborhood, you'll know if you can afford a 203 K mortgage that will allow you to buy a home that normally wouldn't qualify for FHA and will include renovation costs in your mortgage.

Question 2: How much will you need out of pocket? That is a question I am asked often. The answer is, "it depends." At a minimum, you should count on a down payment of 3.5% if the house qualifies for FHA. If you are getting a conventional loan it will be between 5 & 20% depending on the lender and the program. This information will also help you determine the closing costs, and other expenses you might need to pay ... Once done, you will know how much of the inheritance you have just received will be left over for furniture.

Question 3: What terms will be included in the offer? In IL and IN we include mortgage terms in the offer. When you submit the offer, it is contingent upon loan approval under certain terms. Things you will need to know are: What interest rate? What LTV % you need? What the length of the loan term will be. (A side note here: if you can afford the higher monthly payment of a 10 or 15 year fixed rate mortgage, it will yield a tremendous savings over the course of the mortgage. If you haven't looked at the options check out good

mortgage calculator. Be sure you look at the amortization schedule to see your total investment in your home.) If you cannot find a home under the terms in the agreed upon contract, you will be able to terminate the contract without penalty.

Now that you know the answers to the three questions, it's time to take the next step: finding the right agent. Will help you with some tips, next time. For more information, check out the helpful HUD guide or this one from the National Association of Realtors.