Real Estate Information Archive

If you own a condo or a townhome, that is part of an association, it is important to know whether or not your association is on the Federal Housing Administrations approval list.  Due to new laws that took place back in February, this approval list will have a major impact on both buyers and sellers of condos or townhomes. 

Consider this scenario.  Your condo is on the market and you have a potential buyer who is extremely interested in your unit.  Unfortunately, the sale fell through due to the buyer’s inability to obtain financing.  They were interested in purchasing your unit with an FHA loan.  Since your association is not on the FHA’s approval list, because your association never obtained FHA approval, the potential buyer did not qualify for the loan.  This denial was not based on the borrower.  Instead, it was based entirely on the property it was looking to mortgage.

Before these new laws came into effect as an individual unit you could become approved by government-backed loans.  Now however, “spot approvals” have been eliminated and the entire development has to apply for approval before any individual unit can become FHA approved. 

The FHA wants to make sure that the association is in good financial standing and that there is nothing in the governing documents that would violate state or federal law.  There are other stipulations as well such as the project, including common areas, is complete with no special assessments and no legal actions pending, at least half of the units must be owner-occupied, and no more than 10% of the association can be owned by a single entity.

This requirement can greatly hinder your ability to sale your unit in the event that your association is not on the FHA’s approval list.  If your condo or townhome is on the list, it should be easier to sale because it is available to a larger group of people.  FHA loans help people with low incomes get into good housing which broadens your market.  Condo’s and townhomes are also a great place to look for your first home opening up the market to many first time home owners.  With an FHA loan a homebuyer is only required to put down 3.5% as a down payment whereas if the home buyer has to get a conventional loan to buy a condo they must put down 10-20%. 

Another thing to consider is that it is also necessary for your association to be on the FHA’s approved list if you as an owner are looking to refinance with an FHA loan.

As you can tell, being FHA approved is very important for your association. Bring this up at the next HOA meeting and get started on your way to becoming FHA approved.  It may also be important to consider that even though an association may file for approval on their own, there are many firms that offer services in helping to navigate through the process.  It may be beneficial to contact an expert to help you move forward.

In today’s market being a homeowner sometimes isn’t the same as it used to be.  There are a few different stressful situations that you may find yourself in while looking for a way out.  You may have fallen behind on your mortgage payments due to unforeseen circumstances such as layoffs, illness, divorce, or death.  On top of that, the market value of your home could have fallen well below what you currently owe on your mortgage.  When you find yourself in this situation, the concept of a “short sale” is often brought up to avoid foreclosure or the desire to just walk away from being upside down with your mortgage.  If you are looking at participating in a short sale, there a few different things that you need to consider.

A short sale is the process of selling your home for current market value and applying all proceeds to the bank. While you can't walk away with any money from the sale, you have worked with the bank to accept less than what is owed on the mortgage to release their hold on the property.

Since you are unable to pay your lender the entire amount of money owed on the loan, the short sale has to be approved by the lender.  They want to make sure that a short sale is an appropriate solution for each individual circumstance.  Your mortgage lender will look at several factors when deciding on accepting your short sale.  They look to see if you deserve a break due to a financial hardship.  They look to see if it will be beneficial, or more profitable to them, if they move forward with the foreclosure and then sale the home on the open market.  They also want to make sure that the home is not so far below the market value of other homes in the area that the new owner can’t flip the house for a large profit, among other things. 

Thus, it is important to remember that lenders will take a long time before they approve your application for a short sale. They are unsure if by doing so it will be beneficial for them. A short sale involves a loss for the lender referred to as a "short payoff", hence the name "Short Sale".  Before they approve any proposal for a short sale, they will make sure to evaluate all of their options first.  Keep in mind, lenders are under no obligation to approve your short sale and that participation is completely voluntary. 

For this reason, it is imperative you have someone on your side that has a proven track record of getting banks to approve short sales. The agent you choose should be able to provide recent approval letters from banks for the short sales they have completed. There are many things to consider should you find yourself in this situation.  What works for some, may not be the best option for others. Contact us today to find out what options you have and what path would work best for you.

The average American family moves every 5-7 years. Some of these moves are planned while others are the reality of a job transfer, new and more exciting job, or just the necessity to move closer to or farther away from someone. However, if you live in a home that is part of an HOA, mainly a condo or townhouse complex, then you will struggle greatly to sell your home if it's not FHA approved.

Why? According to a recent survey from the home buyers institute, 87% of respondents are planning on buying their next home with an FHA loan. "But people plans can change, those are potential future numbers" you might say. Alright, lets look at the actual numbers. In 2006 FHA loans only accounted for 1.6% of all mortgages for new home purchases. As of 2010 that number is over 50%. Ballooned by the economy. FHA allows you to purchase with as little as 3.5% down as opposed to 5% or 10% required by other loan programs. 

Imagine if you took away over half of your pool of buyers, how much harder would it be to sell your home? Very. FHA loans are loans that are insured by the government against defaults. It's a safety net for banks. The Federal Housing Administration requires all condominiums and townhouse projects to be approved before they will insure a loan. Through February 2010, they would allow for "spot approval" so that one or two units could be approved for a sale even if the rest of the complex isn't. However, since then, FHA has required the entire complex to be approved. 

Don't wait until you lose that perfect buyer at the perfect price you want before you act. If you are not sure if your HOA is FHA approved, contact your HOA manager and find out. Talk with the board and have them start the process of gaining approval. After all, not only will you have a larger pool of buyers to work with, you will also be eligible for FHA refinance programs that carry some of the best rates in the country.

Did you go under contract on your new home before April 30th? Are you nervous that you might miss out on the $8,000 tax credit? Not to fret, according to reports, congress has approved a bill that will extend the deadline to September 30th. So what’s does this mean to Utah home buyers--that you can breath a little easier.

There might be some bad news though for people looking to get a mortgage. If you have been watching the news; you’ll see that Congress is expected to vote on new rules that require financial institutions to guarantee that borrowers can afford to pay back their mortgages. Also, your lender will be required to inform you the ceiling you may pay on a ARM (adjustable rate mortgage). So when the interest rate changes, and it will, your payments will change.

That’s all well and good, but what’s it all mean for me. One thing is that it’s going to be more difficult to get a mortgage, plus it’s going to be a bit more expensive. This may sound bad but it is also a good thing. This is going to ensure that people don’t get into a mortgage that they can’t afford, and that they don’t foreclose on their home.

Rest easy my friends, harder work on taking out a loan just made you sleep easier at night knowing that you can afford the house that your turning into a home.

A report out of Washington today has mortgage rates falling to the lowest point since Freddie Mac began to track rates in 1972. The average rate for a 30 year fixed mortgage was at 4.69%. The previous record was 4.71%

The demand on treasure bonds has sky rocketed since nervous investors have shifted their money from stocks to the safer bonds.

The news about rates is great for the home sales market after a recent report that sales of new homes and existing homes fell dramatically in May after the government tax credits expired.

Even though house affordability indexes are better than they have ever been, many buyers are still too nervous about their jobs and the economy to make the home buying decision.

If you have any questions about current interest rates, purchase financing, or refinancing your current mortgage, call Kristen at 801-913-7367.

One of the more common topics people inquire from me is about buying a home in this economy. The reality is that it's not as hard as people think it is and the benefits of buying right now far outweigh the economic factors. Assuming you have a solid source of income, a decent credit score, and a small down payment, you can purchase a home today. 

A lot of experts are claiming that you must have 20% down payment to purchase a home. This absolutely isn't true. In fact, you can get into a home with as little as 3.5% down payment. On a $150,000 starter home, that's only $5,250, a difference of $24K from what experts are claiming. In fact, there are even amazing deals on starter properties for as little as $100K bringing your total out of pocket investment down to $3,500. And, FHA has some of the best rates available in their history. 

Because of this economy, more people are prone to renting, which has caused a demand on the rental industry. This demand has wreaked havoc on rental prices. With rates so low, at the very least, you are paying less every month for your mortgage than you are on your rent. Not to mention that the majority of your mortgage payment is a tax deduction. Compared to 0% of your rent payment that is tax deductible, and you have the potential to earn back your down payment in the first year of ownership just in your tax deductions. 

The "experts" are screaming caution only for buyers that intend to live in a home for under 24 month's. If you have reliable income, decent credit history, a small down payment, and a minimum level of fiscal responsibility, and you intend to live in the home for at least 5 years, then now is the perfect time to buy. 

This isn't the first housing recession we have gone through and it won't be the last. Every 8-12 years the country cycles through a housing recession and a housing boom. Overall after each cycle, housing still remains at higher values after the recessions than it was before the boom. Buying now will insure you lock in today's prices, and not the increased prices prone to occur during the next boom.

There seems to be a lot of buzz out there about the new health care bill coined "Obamacare". In it, there is a reference to a tax on home sales which has caused many people great distress, especially in Utah. Many blogs, newspapers, editorials, and more are incorrectly reporting this tax as acting like a "general sales tax" on real estate sales. This is not the case.

The current argument most commonly stated is that if a home is sold at $250,000, the owner/seller would be required to pay a 3.8% tax on this sale resulting in a $9,500 tax bill for the sale. This simply is not correct. In fact, most likely the "sales tax" liability on a home of $250,000 will be $0.

The truth about the bill is that if you sell your home for a profit above the capital gains threshold of $250,000 per individual or $500,000 per couple, then you would be required to pay the additional 3.8% tax on any gain realized over this threshold. 

Most people who sell their homes will not be impacted by these new regulations. This is not a new tax on every seller, an important distinction.

If your home is an investment property and you do not qualify for the tax exemption, you may be able to defer the tax liability by performing a 1031 exchange when selling your property --something we have helped many investors do. 

If you would like more information about the how to sale and perform a 1031 exchange please contact us. If you have any questions in regards to qualifying for the capital gains exemption threshold, consult with your accountant.

Trying to understand and manage your credit score is similar to solving a Rubik's Cube. Sometimes an action you take has a result you didn't want. Like a Rubik's Cube, if you understand some basic principals, the puzzle can be solved, and you can easily manage and maintain an excellent credit rating. 

Before you can map your course, you need to know where you are going. Your ultimate goal is "perfect credit". But what is perfect credit? Here is a chart of various credit ratings and how they stack up against each other. This not only shows you where you are going, but where you are along the path.

• 730 - 830 = A+ or "platinum/perfect credit rating"
• 680 - 729 = A or "great credit rating"
• 640 - 679 = B or "good credit rating"
• 600 - 639 = C or "acceptable credit rating"
• 550 - 599 = D or "poor credit rating"
• 549 & below = E or "very poor credit rating"

Now that you know where you are and where you need to be, you need to understand how to get from here to there. Like the Rubik's cube, understanding how a move will result in the alignment of your piece will help you make the best decisions. Let's look at the makeup of the credit score itself.

Payment History - 35%

This is the single biggest factor on your score. Making payments on-time keeps your score healthy and strong. Delinquencies can have a major negative impact right away. Nothing is more important on your credit than your payment history. Missing a $10 payment will have the same negative impact as missing a $1,000 payment. So make all of your payments on time. 

Capacity - 30%

Capacity is the most misunderstood aspect of your credit. This refers to your available capacity, not your total borrowing capacity. If your total borrowing capacity was $15,000, and the balance of all of your credit lines totaled $12,000, you only have $3,000 in available capacity. That means you have utilized 80% of your total borrowing capacity. The optimum ratio to have is 50% or below. That means your total balances should be no more than $7,500 in this example. Having available capacity and not using it shows responsibility and self control. It shows you don't borrow money just because you have the ability to.

Length of Credit - 15%

Have you had a positive account for a long period of time? Great, it's going to have a positive impact on your credit. Newer accounts will have more weight than older accounts. So, that 4 year old credit card that has never been late won't have as much of a positive impact as your 1 year old credit card with 1 late payment. 

Recently Accumulated Debt - 10%

In the last 12-18 month's, how much debt have you incurred (or attempted to incur). How many new accounts do you have? How many inquiries have been made? Applying for too many accounts (whether approved or not approved) can have a negative impact on your credit score.

Mix of Credit - 10%

What types of credit do you have? Installment payments such as car loans, mortgages, and anything with a fixed payment can increase your score. Revolving credit such as credit cards, store credit and anything that has a balance that can change from month to month can impact this category negatively. Loans from finance companies that provide unsecured signature loans tend to have a negative impact in this category as well. 

What actions hurt your credit score? 

Missing payment, regardless of how small the amount can set you back up to 24-month's. Credit Cards at maximum capacity shows you may rely on your credit to live your daily life. Applying for too many credit accounts. Opening up numerous accounts in a short period of time. Having more revolving debt than installment payments. Closing credit cards out will lower your available capacity. Borrowing from finance companies.

What actions can you take to improve your score?

 Pay down your credit cards. Do not close credit cards because capacity will decrease. Move your revolving debt into installment debt. Continue to make payments on time. Open new accounts few and far between. Be consistent and over time acquire a solid credit history. 

Real Estate Agents always tell you “now is the best time to buy”. The question you need to ask is why? Although the comment is always the same, the answer should not be. If “now” truly is the best time to buy, why “now” versus earlier or later? 

Here are 3-reasons why “now” is the best time to buy:

Free Money from Uncle Sam

The original tax credit for first-time home buyers was only a few month’s, not nearly enough time to make much of an impact. The National Association of REALTORS® lobbied for a one-time extension of this credit, which was successful. Buying anytime after April 30, 2010 will mean you don’t get to take advantage of a free gift of $8,000 from Uncle Sam if you are a first-time home buyer. But what if you aren’t? Keep reading.

You may miss out on historically low interest rates. 

Just days ago, MSNBC was featuring stories regarding the sudden spike in mortgage rates. Ben Bernake has already stated that once banks start lending more, he will raise rates. This means that the rates won’t be going down anymore, but they could be going up...soon...and fast. A 1% difference on your interest rate could mean several hundred dollars more on your payment. It may be a decade or more before rates drop this low again. 

You may miss out on historically low home prices.

Home prices have dropped steeply since the “housing bubble” burst. However, as the Fed moves to curb inflation, interest rates will go up. As the economy further stabilizes, especially in Utah, home values have already started to flatten out. In some areas they are even going up. This is a very good sign that we may have hit the “bottom” of the housing market. In 12-18 months when the economy has vastly improved, everybody will be buying. That will create demand. That demand will result in a correction in home values pushing homes $5,000 - $15,000 higher. Competition also means you must fight harder for the home you fall in love with. Avoid competition and higher prices, buy today.

According to a associated press report interest rates for 30-year home loans surged this last week to an eight month high due to an improving economy and the end of a government push to keep rates low. The Federal Reserve program that reduced borrowing costs for consumers ended last week. The Fed has left the door open the the program might be started again if the economy weakens.

The average interest rate on a 30 year fixed mortgage was 5.21 percent this week, up from 5.08 percent just last week and from a low of 4.71 percent in December.

Keep in mind that these rates are national trends and that even though Utah follows the national trends the rates are not exactly matched up. My front line experience is that Utah rates are currently below national rates. Also keep in mind that mortgage interest rates are mostly influenced by long term treasury bonds, not the "Fed Rate". If you have any questions about mortgages, rates, trends, etc., give us a call.