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Neighborhood Stabilization Program (NSP)

February 23, 2009

3273177Obama’s new housing stimulus bill provides $2,000,000,000 in additional funding for the Neighborhood Stabilization Program (NSP). The funds can be used to purchase, manage, repair and resell foreclosed and abandoned properties. In addition, the funds can also be used by states and localities to establish financing methods for the purchase and redevelopment of foreclosed properties.

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$8,000 Tax Credit for 1st-Time Home Buyers

February 20, 2009

money1Whether you’re a Democrat or Republican you’ll probably appreciate the new tax credit for first-time home buyers. Obama signed this bill into effect recently allowing for an $8,000 tax credit available to first-time home buyers for the purchase of a principal residence on or after January 1, 2009 and before December 1, 2009. The credit does not require repayment. Repeat: you don’t have to pay the money back!

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Avoiding Foreclosure – Two Options for Homeowners

February 16, 2009

I just finished reading a Reuters article that said home foreclosures for January of this year were up 57% over January of 2007.

I guess it takes numbers like that do really drive home what’s happening in this country. I knew foreclosures were way up as a result of the subprime mortgage crisis that started last year, but that 57% increase still shocks me.

So lately I’ve been publishing a series of articles to help homeowners avoid home foreclosure altogether. In this article, I’ll explain the two paths a homeowner can take based on his or her financial situation: (1) the “get back on track” option and (2) the “sell the home quickly” option.

Essentially, these two options classify homeowners into one of two camps:

1. Those having temporary financial problems who could still keep the house.
2. Those having long-term problems who can no longer afford the home, period.

Getting Back On Track to Keep the Home

In the first camp, we have those homeowners who have had only temporary financial problems, and expect to get caught up on their mortgage payments. These people can work with their lenders to come up with repayment or reinstatement plans in order to avoid foreclosure while keeping the home.

Generally speaking, you have two options to get caught up on your missed mortgage payments. You can pay back the missed payments as a lump sum (reinstatement), or you can spread that amount over future mortgage payments (repayment plan). These are the two most common options when the homeowner’s financial problems are only temporary.

Selling the Home to Avoid Foreclosure

In the second camp are those homeowners whose financial problems are more long-term in nature. In other words, these homeowners simply cannot afford their homes anymore. These folks can avoid home foreclosure by selling the home, possibly through the real estate short sale technique we covered last week.

This is where the real estate short sale comes into the picture. A short sale is a technique through which the homeowner sells the home for less than the amount owed to the lender, in order to sell the home quickly.

With this technique for avoiding home foreclosure, speed is of the essence. That’s why mortgage lender often allow homeowners to pursue a short sale in the first place … to sell the home quickly and to get the non-performing loan off their books. This is the closest thing to a “win-win” scenario the lender and homeowner will find when foreclosure is imminent.

Obviously there is a lot more to learn about the two primary paths outlined above, and the multiple options that each path presents. My point with this article is simply to help you realize that you do have options when trying to avoid a property foreclosure, and knowing what those options are is the first step to success!

About the Author: Brandon Cornett publishes the Home Buying Institute, a website full of advice on mortgages loans, house hunting, credit scores and more. Learn more or contact the author by visiting www.homebuyinginstitute.com

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5 Tips for Homebuyers Seeking a Mortgage

February 15, 2009

ad-125x125-3Here’s a warning for potential borrowers: Nervous lenders have tough new rules and are paperwork crazy.

“Borrowers are going to have to prove they are the borrower they say they are,” says Keith Gumbinger, vice president of HSH Associates, a mortgage-industry publisher in Pompton Plains, N.J.

Gumbinger says homebuyers should consider these things before they apply for a loan.

1. Down payments are critical. Borrowers should expect to put down at least 10 percent for a “conforming loan” – a mortgage that Fannie Mae and Freddie Mac will purchase.

2. Credit scores count. A 720 on the 850-point FICO rating scale will get a borrower access to the best rates. Rich Bira, branch manager of FCM Direct Lender in Chicago, says: “A score between 720 and 739 gets 0.125 percent added to the rate, a score between 700 and 719 gets 0.375 percent added to the rate, and a score between 680 and 699 gets 0.5 percent added to the rate.”

3. Consider VA and FHA. Borrowers without down payments or with less than stellar credit scores should consider these government-insured loans offered through the Federal Housing Administration of the Veterans Administration.

4. Unearth the records. Before applying, borrowers should organize tax, banking and other records that prove income, savings and debts. They should also expect to be patient about what may seem to be endless requests for information.

5. Get rid of debts. Limiting debts, including what borrowers expect to pay for the mortgage, to less than 43 percent of gross income is important.

Source: Chicago Tribune, Mary Umberger (02/15/09)

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The Reverse Mortgage Loan Explained

February 14, 2009

If you are a senior citizen over the age of 60, and you own a home, I’m willing to bet you’ve been hearing about reverse mortgage loans lately. But why is this lending option so popular among seniors lately, and how does it work anyway? Let’s take a look.

What is a Reverse Mortgage Anyway?

It’s a type of loan that is made against that value of your home. In this way, it’s similar to a home equity loan. But the similarities end there. With a reverse mortgage, the borrower does not have to pay the loan back for as long as they live in the home. So in essence, it’s a way for senior citizens to convert the value of their homes into cash, and without having to repay it right away.

This unique lending option is typically aimed at senior citizens who own their own homes. In fact, the HUD reverse mortgage program (one of the first of its kind) actually has a strict age requirement — applicants must be at least 62 years old for this federally insured program.

As of this writing, the HUD program is one of the most popular. In addition to being 62 or older, applicants for a HUD reverse mortgage must either own the home outright or have a low mortgage balance that can be paid off at closing (with part of the proceeds from the loan).

How Much Can I Borrow?

Here again, the amount will differ from one lender to the next. But in general, the amount you can borrow on this type of mortgage will depend on several factors:

1. Your age
2. The current interest rates
3. The appraised value of your home

This means that people who are older, who have more valuable homes, and who borrow when rates are lower will qualify for a higher amount (generally speaking, of course).

When Do I Pay It Back?

First, keep in mind that the exact details of a reverse mortgage will vary from one lending institution to the next. In most cases, you do not have to pay anything back until (A) you die, (B) you sell the home, or (C) your move out of the home.

In other words, the loan will have to be paid back when the home is no longer your primary residence, for whatever reason. When one of these conditions has occurred, and the loan repayment is due, you (or your estate) will have to repay the amount borrowed plus any lending fees.

Increasingly Popular Among Senior Citizens

The number of reverse mortgages has been rising steadily over the last few years. One reason for this is that there’s a larger pool of potential borrowers each year, because the number of seniors 62 and older is increasing (better medical treatment, better health, etc.). Another reason for the growing popularity has to do with good old-fashioned marketing. The lenders that offer these programs have been pretty active in their marketing efforts lately.

As a result of these and other factors, the number of seniors pursuing this lending option has increased significantly over the last few years. For example, from 2005 – 2006 there was a 56% increase in the number of reverse mortgages granted to senior citizens in the United States.

About the Author: Brandon Cornett publishes the Home Buying Institute, a website full of advice on mortgages loans, house hunting, credit scores and more. Learn more or contact the author by visiting http://www.homebuyinginstitute.com

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How Will Buyers See Your Property?

February 13, 2009

It is important for a property to make the best possible impression on prospective buyers. As they say, “You never get a second chance at a first impression,” and in the world of real estate you usually don’t even get a second chance…period. Either your home knocks their socks off or they’re on to the next property. So put some time and energy into presenting your home properly from the onset.

The following can interfere with a buyer’s appreciation of a property:

Exterior
– clutter
– lawn needs mowing and edging
– untrimmed hedges and shrubs
– dead and dying plants
– grease or oil spots on driveway

Interior
– worn carpets and drapes
– dirty windows, kitchen, baths
– clutter
– pet and smoking odors
– peeling paint, smudges or marks on walls

A small investment in time, money and effort to remove these distractions can lead to stronger offers from buyers.

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Hillsborough County High Schools

February 12, 2009

school_chalkboardThe following is a list of Hillsborough County High Schools:

Please let me know if you see any errors in this list of Hillsborough County High Schools! Thank you.

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Getting Mortgage Quotes Online – Safely and Smartly

February 6, 2009

by Brandon Cornett

The Internet has changed nearly every aspect of the real estate process, and that includes the way we research, compare and apply for mortgage loans. These days, you can use the Internet to save time and energy when shopping for home financing. But there’s a right way and a wrong way to go about it.

In this article, I’ll explain the process of obtaining quotes from lenders via the Web, and how to do it safely and smartly.

Unbiased Advice for Consumers

It’s customary to withhold the author’s bio until the end of an article. But I feel it’s necessary to share something about myself at this point. Many of the mortgage advice articles you find online these days were written by the lenders themselves (or ghost-written on their behalf). But these authors are clearly biased when it comes to this subject. They want to sell mortgage loans — it’s what they do for a living. So their articles are written to educate readers toward a certain product or service.

On the contrary, I am not selling mortgages. I publish a consumer-oriented website full of helpful, unbiased information on this subject. So the purpose of this article is not to educate you toward a certain product or service, but merely to educate you.

The Benefits of Online Quoting

Let’s talk for a moment about the benefits of getting home loan quotes via the Web. The first and most obvious advantage is convenience. Before lending institutions embraced the Internet, you had to spend a lot of time on the phone in order to get multiple quotes. Or even worse, you had to drive around town to local branches and offices.

Using the Internet, however, you can fill out a simple form on a mortgage “aggregator” website and get offers from several lenders in response. This is a big time-saver, and it makes life a lot easier. But it’s not the only benefit of using the Web.

You also have access to a wider variety of mortgage products when you use the Internet to obtain quotes. Some lenders specialize in a certain type of home loan, while others offer a broader range of packages and terms. The Internet opens all of these possibilities up to you. As a direct result, you are more likely to find a mortgage product that matches your financial needs.

Being Smart About the Process

Anytime you conduct financial business online, you have to be smart and cautious in order to protect your identity. That applies to getting loan quotes as well. So let’s talk about the ways you can be a smart consumer when shopping for mortgage offers via the Web.

– Use Trusted Websites — The big names you see on TV all the time (Lending Tree, Ditech, Eloan, etc.) are usually your best option, in terms of security and trustworthiness. These companies have a lot at stake, so they take things like Internet security very seriously. In other words, stay away from “Joe’s Mortgage Emporium” and other questionable websites.

– Learn Your Credit Score — When you request quotes from multiple lenders, they will present you with some basic information. After all, they can’t fully qualify you for a loan or determine the interest rate until they conduct a more formal review of your credit and financial history. So if you know your credit score in advance (and whether you are at, below, or above the average), you’ll be able to determine how realistic those quotes are.

– Determine Your Own Budget — Don’t let a mortgage company suggest what you can or cannot afford, in terms of a monthly payment. You have to determine that for yourself. A lender can only tell you how much of a loan they’ll offer you — not how much you can realistically afford. So use mortgage calculators and other budgeting tools to find out what your limits are with regard to monthly payments.

Conclusion and Summary

The Internet can certainly save you a lot of time when shopping for a home loan. It can also open up a wider range of mortgage products and terms. But like any other financial process, you have to be smart about getting quotes online. Stick with reputable companies and websites. Conduct a financial self-assessment of your own. A little homework goes a long way.

About the Author: Brandon Cornett publishes the Home Buying Institute, a website full of advice on mortgages loans, house hunting, credit scores and more. Learn more or contact the author by visiting http://www.homebuyinginstitute.com

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Home Equity Loans – 3 Common Scams to Avoid

February 5, 2009

Home equity loans remain one of the most popular financing tools among homeowners. It can give you quick access to cash by leveraging the equity (or ownership) you have in your home. It can be an effective way to finance a home renovation, education costs, or even a second home.

But home equity loans also get a lot of homeowners into trouble each year, and in the worst-case scenarios they can even result in foreclosure and loss of the home. On top of that, there are some common scams associated with equity loans and lines of credit. The Federal Trade Commission (FTC) is constantly tracking the latest scams and warning homeowners about them. Here’s a summary of some of the more common scenarios you should watch out for…

1. Equity Stripping

In this scenario, the lender will actually help you “pad” your stated income on the loan application form in order to qualify you for the loan. “Why would they do such a thing?” you might ask. Predatory lenders use this tactic because they don’t care about your actual ability to make the payments — they will simply foreclose on your house and benefit from the equity you’ve built up over the years.

If your income is outside of certain parameters, but the lender says “we can make that work,” you should already be on your guard. That’s red flag #1. If they try to persuade you that you can make payments that seem out of reach, you have another warning sign. You’re the only person who should be making decisions about your ability to pay back a home equity loan!

2. The Helpful Contractor Scam

This scenario usually starts with a home improvement contractor (such as a roofer) who knocks on the door of homeowners to offer their services. Many of the homeowners will say, “Sorry, but that kind of project is not in our budget right now.” The contractor will counter this by saying he works with a lender who can help offset the cost. Long story short — the homeowner signs some papers that turn out to be a home equity loan.

This scam is not as common as it once was. But it still happens on a regular basis all across America, so it’s worth mentioning in our list. Unfortunately, as with many scams, the elderly are often the target with this approach.

The first thing you need to realize is that a reputable contractor will rarely practice door-to-door marketing. That’s the first red flag. Additionally, a contractor should never refer you to a third-party lender — it’s a conflict of interest. That’s the second red flag.

3. Loan “Stacking” or Flipping

I refer to this scam as “loan stacking,” because that’s what takes place. The more common term for it is “loan flipping.” Regardless of what you call it, the scenario goes like this. The lender will offer the homeowner a second equity loan after the homeowner has already received a first one (and made a few payments on it). Basically, the lender refinances the initial loan to grant the homeowner additional money.

In some cases, this will happen more than once. And with each new round of financing, the rates typically get higher and the fees larger. The borrower now has even more money to use for whatever prompted the first equity loan — but they also have a lot more debt spread out over a longer period of time. Homeowners who fall prey to this scam often get in over their heads with all the fees that stack up on them. It’s a good way to lose your home.

Fortunately, They’re Not All Sharks

I don’t mean to scare you away from the home equity loan as a source of financing. On the contrary, it can be a useful tool for a responsible borrower, and there are plenty of reputable lenders that will offer you fair terms and treatment. I’m simply trying to warn you about the common scams that go along with these types of loans.

My advice is to use a lender you’ve heard of before, a company who has been around for a long time and has a reputation at stake. Be a smart consumer when pursuing such a program. Do plenty of research and let common sense guide you.

About the Author: Brandon Cornett is the creator of the Home Buying Institute, an educational website that offers advice to home buyers and homeowner alike. To learn more about home equity loans and other mortgage topics, visit the Institute online at www.homebuyinginstitute.com

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How to Buy a Home With a Low Down Payment

February 4, 2009

It’s no surprise that so many Americans are looking for ways to buy a home with a low down payment.

After all, with so many other costs associated with a home purchase — like closing costs, furniture, moving expenses, etc. — coming up with a large down payment isn’t always an option. So the idea of buying a home with a low down payment can be very appealing to many buyers, especially first time home buyers.

Many people mistakenly believe that a down payment of at least 20 percent is required in all mortgage scenarios. This is the way things were for a long time. But these days, there are more flexible loan programs and terms available to home buyers. In fact, some mortgage lenders will extend loans to qualified buyers with a down payment as low as 5 percent of the purchase price.

Generally, a mortgage loan with a down payment of less than 20 percent is referred to as a low down payment mortgage loan.

But like all things in life (and in home buying), there are special conditions to buying a home with a low down payment. For instance, many mortgage lenders who grant loans with such a low down payment usually require that the loan be insured in some way. This insurance is aptly called mortgage insurance.

Mortgage Insurance for a Low Down Payment
Mortgage insurance is just what it sounds like — insurance on a home mortgage loan. This type of insurance protects the lender financially in the event that a homeowner defaults (ceases to make payments) on the mortgage.

Mortgage lenders usually require mortgage insurance on loans with a down payment of 20 percent or less. In other words, some form of mortgage insurance is almost always required for a low down payment mortgage. The home buyer is usually required to pay the cost of this mortgage insurance.

Two Types of Mortgage Insurance – Government and Private
Let’s recap what we have covered so far. We know that it’s possible to buy a home with a low down payment, and that a 20 percent down payment is not always necessary. We also said that most lenders who offer mortgages with a low down payment (below 20 percent) will also require some form of mortgage insurance. Thus, buying a home with a low down payment almost always requires mortgage insurance.

With that straight, let’s talk about the two types of mortgage insurance — governmental and private.

Government Mortgage Insurance
Government-backed mortgages are usually insured by one of three federal organizations. These mortgages are either insured by (A) the Federal Housing Administration, or FHA; (B) the Department of Veterans Affairs, or VA; or (C) the Department of Agriculture’s Rural Housing Service, or RHS.

Each of these agencies has its own criteria for the types of loans they will ensure. For example, the VA Home Loan program only applies to military veterans or their spouses, and RHS loans are usually reserved for people in rural areas.

The FHA requires a minimum down payment of 3 percent. They also limit the loan amount that they’re willing to ensure based on geographic area.

So this is governmental path to buying a home with a low down payment. When you obtain a mortgage loan backed by one of the federal organizations listed above, you can make a down payment less than the traditional 20 percent.

Private Mortgage Insurance
In addition to the three governmental options above, there are also private companies willing to insure mortgage loans. This too can be a path to home buying with a lower down payment. Private mortgage insurance is aptly referred to as PMI. Private mortgage insurance is available to a much wider audience than the governmental options listed above. For instance, there are no restrictions regarding military service or rural residence.

Private mortgage insurance, or PMI, is available on a wide variety of low down payment home loans and there is no pre-determined limit on the loan amount (as there usually is with the government-backed mortgage loans).

Conclusion
These days, it is certainly possible to buy a home with a low down payment. In this context, “low” refers to a down payment of less than 20 percent. These types of home loans require some form of mortgage insurance, either government insurance or private mortgage insurance (PMI). Here are some resources to help you learn more about home buying with low money down.

About the Author: Brandon Cornett publishes the Home Buying Institute, a website full of advice on mortgages loans, house hunting, credit scores and more. Learn more or contact the author by visiting
www.homebuyinginstitute.com

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