More People Can Qualify For Home Loans!

Don Davis

As of April 20^th ’09 more people will qualify for USDA/Rural (RDH) zero down, 100% home loan financing. The only other true zero down is a VA home loan.

 

As other loan products have tightened up, the USDA/Rural loan program is loosening up.  They are changing their income guidelines from 1 to 8 person households to 1-4 and 5-8.  that means now instead of a single individual or a couple qualifying at a lower income threshold they now will qualify at a higher income threshold. 

 

In Snohomish County, for example a single person buying a home with the RDH program couldn’t make more that about $5,100 per month, and a Couple not more than about $5,800 per month.  The new limits are one, two three and four person household income limit is now about $7,300 per month and households with five to eight people can now make up to $9,700 per month.  And that is after deducting for dependents and child care and any other qualified RDH deductions.  In many instances gross income could exceed these limits, but after qualifying deductions they might be under the limit.

 

The only other catch is location.  The homes need to be in non-metro areas (thus rural). Once again, in Snohomish County, that area is from the King/Sno County line-east of highway 9 up to 140^th in Marysville. At 140^th in Marysville, the area is all areas north, east and west. If that seems confusing just give me a call and I can email you the map. But it leaves a huge amount of the County wide open for these loans as long as you don’t make more than the income limits.  In King County it is a good portion of the east side of the county. In Skagit County it is almost the whole County except for Mt Vernon proper and the same goes for Whatcom County except for Bellingham. RDH figures that if you make more than that, then you could come up with the 3.5% down payment for an FHA loan.

 

This is very good news for anyone looking to buy a home in today’s market.  With the current interest rates either near or at historic lows and the prices of homes at a very affordable range, a lot of people will be able to buy a home for less money down than renting and in a lot of cases the payments may even be less than what landlords are requiring in this market. Oh did I mention that there is no mortgage insurance on these loans either. Couple that with rates that are comparable to convention rates and your payments are about as low as they are going to get.

 

Once the inventory of homes decreases, that will put pressure on the prices again and you may never find a home as affordable as they are today, not to mention if the rates go up, even just a little.

 

Your credit only needs to be ok.  The lenders will consider past bankruptcies (over a year old) and open collection and charge offs.  You only need to have two of your credit scores over 620. Those guidelines are much more lenient than just about any other home loan out there.

 

To find out more or to see if you qualify, just give me a call, 360-652-9994 and we can help you own a home of your own.

Enough Already

Don Davis www.htlnw.com

The media’s job is to report news, and unless they can make it headlines and thus make it bad, it won’t be news.  Yes the economy is in the toilet and yes there are concerns about personal finances. But really, badgering us day in and day out with comments like, “as if the economy isn’t bad enough”.   Well enough already.

 

 

 

Take a break from all the bad news.  Turn it off.  If you’re going to watch TV turn on a movie or watch a ball game (yes the Mariners are off to a great start, and the Sounders are actually exciting to watch). 

With the weather warming up you could take an evening stroll or go to one of the many events that are happing through out the area.  Take up a hobby, read a good book or two, spend time talking with your family members or maybe reach out to old friends. Play some games, get involved in the community.

 

In other words there is nothing you can do about the state of the economy (you can’t possibly spend enough to make a dent) and the media will not let up. So do something else with your time and energy instead of being the prey for the media talking heads. This will not last forever.  This country has been through similar problems before and we have and will come out of it, stronger than before.

 

From my end of things I can tell you that with all that has happened to the housing market, there may never be a better opportunity to buy a home ever again.  That may be pretty bold but consider this.  Interest rates are at historic lows.  That means that ever since records have been kept there have never been better interest rates than we have right now. The prices of homes have adjusted to below average income levels.  They won’t drop any more without a major depression and if that happens then none of us need to concern ourselves with much other than hunting and gathering for survival.  Not likely to happen.

 

For all the negative that has happened and for whatever reasons it happened, there is incredible opportunity that springs from it and if buying a home is something you’ve considered, this might just be the best time ever.

 

As for the media, enough already.

 

Don

Zero Down Home Loans; the “Joe Six Pack Loan”

In the midst of all the stimulus bailouts, credit crunch, tougher lending guideline and requirements for higher scores, there emerges one bright light; USDA, Rural Zero Down Home Loans. That’s right Zero down. No down payment. And the closing costs can be paid by the seller or financed in the loan if the appraisal is high enough so that it is very possible (almost every one) to buy a home with no money out of your pocket!

For all the hassle it takes to get an FHA or Conventional loan today, and they require a down payment, the Rural home loan program is by far the easiest. These loans are for the outlying areas of King, Snohomish, Pierce, Thurston, Skagit and Whatcom Counties (actually all “rural areas of the US). These areas aren’t the remote hinterlands, but rather skirting the city limits of the larger towns and cities in the area. This is the first of several conditions to qualifying for one of these home loans.

The second condition is income. Unlike every other loan that wants you to make more money, this is for moderate to low income brackets. This is based on the county median income and for your county. Snohomish County for example a family of four can make up to $88,400 adjusted gross income per year and still qualify (you could actually make more). The incomes currently are tiered by number of people in the house hold from one to eight and the income limits vary by the number of people residing in the house. This is supposed to change soon to a two tier income platform (allowing even more people to qualify). With a simple phone call we can tell you what you can qualify with your income.

There are no restrictions on the price of the home you would consider, as the price will be restricted by what you can qualify for with your income. So the 750,000 McMansion probably won’t work.

Another condition is credit scores. The Rural Home loan is much less stringent and everyone gets the same great low rate. The Rural home loan will take the middle score of your three credit reports, Equifax, Experian and Transunion. Essentially it doesn’t matter how low one of your scores are as long as two of them are over 620. A lot of people can qualify for a loan with these standards but even better is that they really don’t consider the past credit history to be very important. Even bankruptcy, repossessions and foreclosures have little to no impact on qualification. If you are over two years out of bankruptcy then you still have a chance to finance a home. As well as if you have current collections and charge offs, as long as your score is over 620 it really doesn’t matter. If it isn’t, we can help those that really want to raise their scores.

With the price of homes where they are today, interest rates at record lows and less than perfect credit considered, there couldn’t be a better time to buy a home. The Rural loan program is really the home loan for “Joe Six Pack”. It is the one home loan that can still give you the chance at the American Dream.

As always feel free to contact us regarding any of the current home loan programs at 360-652-9994. or email me at dond@htlnw.com

The New “BailOut” package for Home Owners

Gee, I really wish I could say that they have finally figured this one out, but alas, I fear that it is just more of the same.

“When it is all said and done, there will be more said than done”

I think that about says it all.  The new package, from what I have been able to garner from what I have read, will probably do little if anything to stem the tide of inevitble foreclosures looming on the horizon.  The Government cannot stop the value of home from declining.  Neither can the lenders.  What will stop it is home buyers coming back on the market and buying up the excessive inventory of homes to stabolize the market.

This is already happening in some areas, my local area included, and has for some time.  What controls the value of home in any market is the supply and demand. (that is the same for any commodity. Just look at what happens to the price of anything when the demand goes up and the lupply is limited)  That is what happened in ‘04 and ‘05 and ‘06, there were more buyers than sellers.  The sellers were able to ask full price and often times had multiple offers driving the price up even further.  Not now.

The President and Congress can’t make a market strong if it doesn’t possess the one vital element, and that is a strong local economy. If the local economy is strong and more people are moving in than out of the area then the demand for homes goes up and the prices follow.  If there are more people moving out than in then the demand weakens and so does the prices. supply and demand, it’s just basic economics.

So from what I’ve read about the new package, the current home owner still will not be able to refinance to a lower rate or different terms if they own more than what the house is worth and the lender still has to cooperate.  Not to mention you, as a home owner, has to qualify for the loan.  I dare say that to qualify now vs. when you first obtained the loan, the guidelines have changed so much that it may not work even if you owe less than the value.

Once the final verion is rolled out and the market is tested to make these new programs work, then we’ll se what kind of results come in, if any.  Most of this looks and sounds like the tried and failed FHA Secure. 

My advise is if you are seeking to refinance and you can’t qualify for a new loan with a traditional refinance then contact your current lender and see if you can qualify for the “new ” program.

More Lenders Raise The Credit Score Bar

As 2009 progresses, more and more mortgage lenders are raising the bar on credit scores for government loans FHA, VA and USDA/Rural.

While the government agency backing the loan may not have a minimum credit score requirment, or a lower requirement, the lender can have more stringent requirments.  That is the case most of the lenders are following now.

620 is almost the universal target for a minimum credit score to obtain a government home loan today.  There are a few, us included, that still will consider a minimum of 580, it probably won’t last for long.  And with a score between 580 and 620 there will be a higher interest rate.

So what do you do, and how can you control  the scores?

First of all you must understand the credit scoring system in order to get and KEEP a higher credit score, and to do that you need to have credit to get a score.  A lot of people run in to credit problems at one time or another in their lives, and often times when that happens, they reduce or eliminate credit from their financial lives.  If the Credit bureau has no current credit to rate then your scores will suffer greatly.

It is possible, even with past credit problems including bankrucptcy, to have credit scores in the 700 range with just one or two small credit cards.  Those cards can be secured or unsecured and the credit limit has no effect.  The limit could be $300, $3000 or $30,000 and none will make your score higher than the other.  It is the balance ratio that you carry on that card that will effect the score.  Ideally you should have no balance on the card but make a nominal charge at least once every other month to keep the card active and to maintain a current update on the bureau.  The real purpose of a credit card is not to have debt, but to have a positive credit rating.  Credit cards are loans that have the highest rates and fees of virtually any kind of loan you can get. It is considered bad debt.  But you need to have the cards to show that you can effectively manage debt and keep it paid off.

The credit cards, revolving debt, account for 30% of your credit score.  In other words if you use a 600 score and you pay off your one maxed out credit card your score could, in theory, go up 180 points in one day to 780. There are other factors that can inhibit that much of an increase, but the increase will still be substantial.

This is the Biggest bugaboo most people have in controlling their credit scores is managing their revolving debt.

Working with a competant mortgage professional, we can help you devise a strategy to help increase and manage your credit score to not only obtain a mortgage at favorable rates and terms, but higher scores will also save you considerale money on anything else you finance, including, cars, trucks,RV’s, motorcycles, credit cards, installment loans, lines of credit, insurance and even possible employment and medical care.  YES your credit score is that important.

Be sure to visit our web site at www.htlnw.com for more information and helpful tips on controlling your credit score.

Feel free to comment on this or any of my other postings.

Don Davis

The New $8,000 Tax Credit for Buying a Home

 

Last Updated: February 17, 2009: 12:13 PM ET

NEW YORK (CNNMoney.com) — There’s a nice windfall for some homebuyers in the economic stimulus bill. First-time buyers can claim a credit worth $8,000 – or 10% of the home’s value, whichever is less – on their 2008 or 2009 taxes.

A big plus is that the credit is refundable, meaning tax filers see a refund of the full $8,000 even if their total tax bill – the amount of with holding they paid during the year plus anything extra they had to pony up when they filed their returns – was less than that amount. But there has been a lot of confusion over this provision. Adam Billings of Knoxville, Tenn. wrote to CNNMoney.com asking:

“I will qualify as a first-time home buyer, and I am currently set to get a small tax refund for 2008. Does that mean if I purchased now that I would get an extra $8,000 added on top of my current refund?”

The short answer? Yes, Billings would get back the $8,000 plus what he’d overpaid. The long answer? It depends. Here are three scenarios:

Scenario 1: Your final tax liability is normally $6,000. You’ve had taxes withheld from every paycheck and at the end of the year you’ve paid Uncle Sam $6,000. Since you’ve already paid him all you owe, you get the entire $8,000 tax credit as a refund check.

Scenario 2: Your final tax liability is $6,000, but you’ve overpaid by $1,000 through your payroll with holding. Normally you would get a $1,000 refund check. In this scenario, you get $9,000, the $8,000 credit plus the $1,000 you overpaid.

Scenario 3: Your final tax liability is $6,000, but you’ve underpaid through your payroll with holding by $1,000. Normally, you would have to write the IRS a $1,000 check. This time, the first $1,000 of the tax credit pays your bill, and you get the remaining $7,000 as a refund.

To qualify for the credit, the purchase must be made between Jan. 1, 2009 and Nov. 30, 2009. Buyers may not have owned a home for the past three years to qualify as “first time” buyer. They must also live in the house for at least three years, or they will be obligated to pay back the credit.

Additionally, there are income restrictions: To qualify, buyers must make less than $75,000 for singles or $150,000 for couples. (Higher-income buyers may receive a partial credit.)

Applying for the credit will be easy – or at least as easy as doing your income taxes. Just claim it on your return. No other forms or papers have to be filed. Taxpayers who have already completed their returns can file amended returns for 2008 to claim the credit.

Loan Modifications Will Only Work If……

Loan modifications are becoming big business these days because of the overall state of the economy and the housing industry.  There are literally hundreds of new loan modification businesses around the country being set up each month to “help” you.  I receive at least ten emails a day either to help me set up a loan mod business or to refer clients to an existing loan mod company (they will pay me a commission if I do).

 

Let me make it clear, almost all are bogus.

 

For the record, a loan modification is a request to your lender to modify your current loan to reduce your payment, defer the amount in arrears, lower the interest rate or lower your principle balance and rewrite the loan with new terms.  It could be one, some or all of the preceding.  They will only do any of those with just cause and it would have to be to their benefit.  If you are not in arrears and are capable of making the current payment without duress, you will not get a modification, even if you own more than the house is worth.

 

First of all virtually all of them are illegal.  And it is something you can do without their help what so ever.  Most are illegal because if they collect a fee, they have to deposit the fee in a trust account and itemize the draws and the purpose.  These guys are getting shut down almost as fast as they open.

 

Next and more important, most of them don’t work and you lose your money.  The reason is you can’t qualify for the new terms.  They aren’t going to tell you that until you’ve spent your money. Don’t do it.

 

If you are in trouble, or heading for trouble, with your mortgage, you need to be proactive and make contact with your lender ASAP.  The lender is going to want proof that your current mortgage payment is a financial burden and that if they were to foreclose the lender would lose a substantial amount of money.  That’s right they are looking out for themselves not you.  There is absolutely nothing that a loan mod company can do for you that you can’t do for yourself.  They know that, they just won’t tell you that.  In fact virtually every lender that gets a request from someone other than you calls and explains that you could have done this yourself, all you had to do is call them.

 

To modify a mortgage loan you will have to prove the reason that the loan is no longer working for you.  The biggest reasons are usually a substantial increase in payments (you were on an ARM that adjusted several points and raised the payment to a point that you cannot make it and pay your other bills as well) or you lost or reduced your income.  If it is a lost income and have no prospects of a remedy in the near future, the lender probably will not be interested in working anything out.  They are going to be seeking a permanent solution not something that may be a band aid and have to go through this again in a few months.

 

For a successful modification the lender is going to need, in writing, the purpose (reason) a modification is needed, your current income documented, your current liabilities (other bills), what caused your income or the payment problem and what solution can work for you.  Threatening them with a take it or leave it option will not work.  The people in the lenders loan modification department are trained and willing to help you work out the problem and will do everything in their power to help make a permanent solution work for both you and them.

 

Here are some of the reasons a loan modification will not work:

• You lost your income and have no immediate prospects of regaining employment
• Your income has been reduced and you cannot qualify for a new lower payment
• You got divorced and your income cannot support the current or any new payment arrangement
• Your home is worth less that what you owe, but you can make the current payment.
• You want to reduce your interest rate because the current rates are less than the rate on your loan, but you have no problem with your loan.
• There are more but these are the most obvious.

 

There is no reason for you to spend $1,200 to $4,000 to have a “loan modification company” do what you can do yourself.  I have helped many people successfully renegotiate their mortgage for the right reasons, and it didn’t cost them a dime.  I am not a loan modification company and have no interest in becoming one.  My business is helping my clients obtain financing for a purchase or refinance.  I just happen to know what the lender needs to modify a loan.  I have no dialogue with a lender in a modification and will not do so.  All I can tell a client is what the lender is going to require considering modifying a loan.

 

If you are in need of a modification, before you spend any money that you cannot afford to spend, call me. Just because you spend the money for a loan modification company, it doesn’t mean you have any chance of getting new terms, it just means that you spent the money you couldn’t afford to spend.

 

As always, let me know what you think.  You can email me or I have also posted this on by Blog that you can view from my main website at www.htlnw.com just scroll down the page and lick on my Blog and leave your comments on this posting.

 

Don

Ecomomy, Unemployment Worst in Decades!

That is the headlines I heard on the news this morning. Then I started to do some research. Hmmmm The media is at it again. They will do anything to make things worse than they are. Yes MicroSoft is laying off 5000 jobs out of several divisions. But what the media isn’t saying is that MicroSoft is also HIRING over 3000 jobs for a couple of other divisions. I’ll bet you didn’t know that.
Amazon.com just had one of their best years ever, posting record profits while the media touts all of the doom and gloom from the retail sector. Maybe some of the money people spent was at Amazon and not at the mall, What do you think.

We cannot take everything the media tells us and believe that the sky is falling. They are trying to sensationalize everything and blowing it out of proportion. Their souces are just that sources. The reporters are taking whatever information they get and putting their own spin on it to make it say whatever they want it to say without understanding all of the facts. If they did the the headline might read something like “Microsoft has a net job loss of 2000″ and then explaining that they also have BILLIONS of dollars in reserves and are not in jeopardy of closing it’s doors.

Also not mentioned are about a half dozen new start up companies (what someone is starting a new company in this economic climate?) that are hiring. Estimates are that the 2000 net jobs lost at Microsoft will be absorbed by the new companies opening their doors. That is the facts and the lesser read rags, like the Puget Sound Business Journal at least had the courage to print some of those facts. But you would have to go looking for it.

There is also a lot of other good news for us locally. While Boeing may also be in the news about layoffs, their production plants (which is what we have here. remember Boeing is now headquartered in Chicago) are at full capacity and way behind schedule. they are not going to lay off production workers for the 737,747,767 and 787 aircraft any time soon. Oh that’s not news. the media isn’t saying maybe the rest of the country has some major problems but, locally, we aren’t as bad off.
Also, the media hasn’t reported that our local housing market hasn’t suffered as much as the rest of the country. In fact we never experienced a lot of the factors that went in to the national decline. In Washington State we have a Growth Management Act (GMA) that prevents gross overbuilding of any particular county. Building permits will only be issued based on projected growth and in the first decade of this century (2000 to 2010) Snohomish County will have grown by over 11%. That means we will have added about 80,000 new residents and growing. These people will need a place to live. As well as our children graduating every year and moving out of our home an on their own.
What started the housing boom earleir this decade was the “easy money” for mortgages. Basically if you had a job and were breathing you got a loan. We ran out of homes and there were , at one time, many offers one one home and bidding wars erupted helping to drive the price of homes up. sometimes as much as 20% annual appreciation. When the money dried up the frenzey stopped. The inventory strted building and the market softened, and prices started to decline slightly. That is where we are now.
This trend is coming back around. the stimulus packages are starting to free up a lot of money and mortgages are getting easier to obtain again (mostly government backed loans). We currently have about 6,500 home for sale in Snohomish County and the inventory is declining. Rentals are at a premium because of the low vacancy rate and very few homes are left to rent. Of course the media doesn’t point that out. They would have to spend some time researching and understanding this business and our market.
Once the inventory balances out, and it will, home prices will start to appreciate once more and everyone will breath a sigh of relief. It will take most of 2009 for this to occur but when it does those that own a home or buy one while the prices and interest rates are low will benefit from the current market.
As always let me know what you think!
Don Davis

The Media Just Keeps Pounding Away

I was watching to boob tube on this mornings news, the big headline now is Microsoft to lay off 5000 workers.  The reporter is standing in front of Microsoft headquatrters spewing about the impending layoffs that are going to occur in the next 18 months, due to the economy. (This is the same reporter that I’ve seen reporting from Snoqualmie Pass about how much snow is coming down and the hazardous driving conditions, so he surely must be qualified to dispense his opinion about the state of the economy).

The point here is, first of all MS has employees all over the world that potentially can be affected by a layoff, but the reporter was indicating that they were all coming from the Redmond campus, which they are not.

These are the same type of reporters that report on everything from a police manhunt to a lost puppy. If there is anything that they can blow up and way out of proportion, they will do it. I think they have so blown the economy out of proportion that they have , at least helped, contributed to the state of the economy as it is. And they haven’t the faintest idea as to what they are talking about. 

How do I know that? because in the last month and a half i have received over 1500 visitors to my web site and the vast majority of them couldn’t believe that mortgages were still available!  They tell me that “The news said you could get mortgages now because of the banking problems”

The mortgage money NEVER dried up.  Even with all of the dire news about the “mortgage meltdown” and the “credit crisis” there has always been financing available and even at incredible interest rates.  In fact, as of this writing, there is home loans available for ZERO down payment programs at 5.5% interest.  Is that on the news? Are they shouting from the rooftops to tell you that money is available and the rates are cheap? No, because they can’t make it bad news or they won’t broadcast it unless it can make you feel bad.

Just imagine if the media published something like “This is a great time to buy a home or refinance your current mortgage” and actually helped you to understand what it takes in this economic climate to accomplish that task. In other words a reporter sitting down with someone like me and analyzing the facts and taking more than 90 seconds to report on the air or more than a few paragraphs in print. 

The reason they don’t is that it is not going to sell ads.  Ratings and market share is the reason.  It’s the station or news outlet that “breaks the news” and has the best looking “talking heads”  have the largest market share. And they have a responsibility to their stockholders to make a return for their investments.  (at the end of the broadcast, most of them show their stock ticker and what exchange their stock is sold onS) If this wasn’t true then why are they spending soooooo muuuuch tiiime on the Obama family?  Or reporting about hooow maaaany jooobs are going to be lost at Microsoft?  When was the last time you saw a headline or news trailer about good news?  And how many people are affected by what is reported by the media, even if it has nothing to do with them?  Is there such a thing as “delayed stress syndrome” from the media?

My point is if everyone remembered the old saying “believe half of what you read and nothing of what you hear” maybe the economy wouldn’t be nearly as bad off as the media would want us to believe.

What do you think?

Don

Employment, Population Growth and the Housing Market

 

What do they have in common?  Employment and population growth are the primary factors in the stability of the housing market for any community or geographic area.  This is why our area is so different from most areas of the country that the media reports the bad news about.

 

If the area that you live in experiences high unemployment and a decrease in population this will stress the housing market down.  In other words the demand for homes goes down and consequently the prices decline.  However, when employment is stable and population continues to increase this stresses the housing market upward.  Home prices remain stable and rise as market demands.

 

Snohomish County is the latter.  Our population continues to increase, employment is diverse and the need for homes remains good.

 

What has caused our market issues over the last year or so has less to do with the local market conditions as the money to fund home loans.  We, like the rest of the country, experienced the “easy money” syndrome.  Home loans were too easy to obtain and the inventory of available properties was extremely low, thus driving the prices beyond market norms.  The “easy money” money dried up and now buyers are bound by more traditional lending guidelines.  The inventories inflated beyond normal market ranges and this flattened out our local housing market for a while.  In other words it cooled off and made some adjustments.  We saw some decline in home values from the 2006, 2007 highs and are now closer to what home values were in late 2005 and early 2006.  it is those values that has troubled the homeowners who bought a home during those times on ARM’s that are having trouble refinancing, as their homes are still worth about what they paid for them and lenders are looking for equity in the property to refinance them. If your current mortgage is older than three years old, then there is generally no problem.

 

Snohomish continues to grow in population. According to the government statistics, Snohomish County grew by over 30% from 1990 to 2000. And from 2000 to 2007 grew by 11.9%.  The projection through 2010 is still over 11%.  What accounted for the larger growth in the last decade was a combination of King county running out of buildable land and the more affordable home prices in Snohomish County.  King County is still virtually out of buildable land and Snohomish County will continue to provide affordable home solutions for single family residences.  King County will find substantially more condominium projects to provide for new homes.

 

So what does this mean?  It means that based on the projected growth rate, the current housing starts and the current inventory of new and existing homes, Snohomish County’s inventory of homes will decrease and virtually run out within the next 12 to 16 months.  Home prices will start to increase again as a result of market demand.  That means that everyone who owns a home or buys one soon, should experience appreciation once more.

The entire economy would have to get much worse to keep this from happening.

 

Real estate has historically been stable and there is nothing to indicate that it won’t continue to be, at least locally!

 

Don Davis

Some Positive News About Or Local Real Estate Market

It’s an old saying that is rarely used these days, “Real Estate is Local”.  What that means is that what happens in the rest of the country may have very little to do with the value of homes in our own area.  This couldn’t be truer than it is now.

 

What drives a housing market is not the price of homes or the interest rates.  What drives the value of homes and the demand for homes is employment and the amount of people in any particular area seeking housing.

 

If an area is experiencing high unemployment or, worse yet, businesses closing and people moving out of the area, (like in some areas of the Mid-West) the value of the properties in that area will decline.  This is also true if the local economy is stagnating and the area gets overbuilt with homes. The result is too many houses and not enough people to occupy them.  Thus, the values will decline to accommodate the market.

 

Conversely, if an area has a robust and/or diverse economy and a growing population, then the values of home will remain fairly stable and eventually increase along with demand.  Snohomish County is in this type of market. We have a strong jobs base and a continued population growth projected through 2025.  See Snohomish County : Demographics to see the growth projections for our area.  Virtually all of the communities in Snohomish County are expected to grow substantially in the next 15 years.  At the beginning of 2000 the population of Snohomish County was just over 606,000, that was about a 30% increase over 1990 and in 2008 it had grown to over 686,300 people in just eight years.  At the same time the unemployment rate decreased over the same time frame.

By the year 2025 the projected population capacity for the county is about 948,234 people. For example, Marysville population is expected to be about double that of its 2000 population going from about 45,000 people in 2000 to about 80,000 people in 2025.  This target is only 16 years away.  In the last 10 years Snohomish County has grown by 30%, outstripping Washington’s overall population growth by almost 50%.

 

The reasons for this are jobs.  Not only do we support a large number of Boeing workers, it is not the only game in town anymore.  There is a Naval base that one ship alone brings in 5000 new residence and the support complex in Marysville to accommodate current and veteran military personnel.  We have a large Bio-Tech industry in the County, and then the Technical and related fields like Microsoft and such in and around the County. And if you haven’t noticed all of the new shopping areas that have sprung up in North Snohomish County along with the Tulalip tribes and their two casinos and new huge hotel and the Seattle Premium Outlets.  Not to mention all of the other small to medium size business that is infused throughout the County

 

The average price of a home in Snohomish County is about $100,000 less than a comparable home in North King County.  Plus King County is virtually out of buildable land for new construction leaving people to go north for housing.

 

The State of Washington also has a GMA (Growth Management Act) that contributes to controlling the amount of building permits issued in any particular area of the state.  This is one of the major factors that prevented gross overbuilding in Washington versus other states in the nation. 

 

The majority of the recent housing problems we have experienced locally are not because of overbuilding for our area, it is because of the huge changes in the lending policies of the banks and mortgage lenders.  Earlier in the decade, new and exotic loans became commonplace and people all over the nation were buying homes.  They were getting mortgages that previously weren’t available to them in the past, and aren’t now.  Couple that with the media skewing of reporting what was happening in other markets in the country and ignoring what happens locally, and the slowdown was inevitable.

 

 According to the Census Bureau, at the peak of the housing boom in Snohomish County there were 4,443 homes built in 2005.  Today there are only 64 building permits for December in all of Snohomish County and a total of 1473 for the year.  These are single family residence permits.  There is only one apartment building being constructed right now in the entire county. That is less than half of 2007 for homes and in ’07 there were 33 apartments built. People are going to need to live somewhere and with the current decline in new building, once the current inventory dries up, we will virtually be out of places for people to live.

 

If you read the data and look just a little way into the future you will surely see a brighter picture than what is painted for us now.  The next 6 to 12 months will see a firming up of the real estate market and the values of homes will surely start to increase.  It is just a matter of supply and demand.  The supply will decrease, the demand will increase and the prices will go up.  Let the media cast its doom and gloom of the housing market, it will not stop what is going to happen here.

 

If you own a home, your value will start to increase again.  If you are thinking about buying a home, this might well be the best time to consider doing it.  This is about as affordable as the homes are going to get and if you take into consideration the near historic low interest rates, you’ll get the most buying power you’ll probably ever have for this area.  If you wait until the market starts to go up again, then you’ll simply pay more for the home and likely the interest rate will be higher as well.

 

Locally we have already seen a decrease in existing homes.  As the months progress the current inventory will decline even further, it is already happening.  There are substantially fewer lenders to help you these days (back down to about how many were around 10 years ago) plus there are some tremendous loan opportunities that exist, requiring little or even no down payment and still get an awesome interest rate. Right now, any house under $300,000 could have a mortgage payment under $2,000 per month; a $240,000 home would be under $1,500 per month.  If you look at the rents for houses, it is almost the same to either rent or buy and in many cases it’s only a little more than renting an apartment.

 

So there it is, as briefly as I could state it.  There is a bright future for our local housing market. Don’t pay attention to the news reports about national trends or what happens in Florida, California or Arizona or anywhere else they are reporting, it has nothing to do with our market.  And that is the point; they can’t find the doom here so they look else where, and bring it here.

 

Don Davis

Good Market or Bad Market?

It isn’t whether the market is good or bad, it is where are you going to put your money.  If typical rents for a home are between 1500 and 2000 per month and you could buy a home for the same payment, buy it.  The reason is that for a rent payment, you get nothing in return.  If you own the property, you get the tax deduction and, when the market recovers, you’ll get the appreciation.  We could debate when and where the bottom of the market is or if it has already happened, but consider this.  With the price of homes, at least at this point in time, stable and not expected to decline further locally, and interest rates at or near record lows, how could you not consider buying a home?  For $250,000 to $300,000 in Snohomish County, you could own a home with payment at or under $2000 per month.  If you intend to live in the house longer than five years, then you are considerably better off buying the home rather than renting it.  Even if the prices do fall another 10-15%, if the interest goes up 1% or more, you would net lose nothing.  Buy a home 15% less and pay a higher interest rates and your still in the same payment range. Both ways in 5 to 10 years would still have a home that would be almost the same value appreciating at 4% per year.

What makes the Snohomish County market different from the rest of the country is our employment base.  This is the most major factor in determining property values and creating a market.  If there are no jobs, then there are no people buying a home.  No one wants to move to the area because there is no work. 

However take a market like our, when even in these economic times,  Boeing is still getting new orders for aircraft, Microsoft is doing well, the Biotech industry is solid and by and large the other industries that make up our diverse economy are faring well during these times. 

These are the ingredients for a stable housing market.  The media won’t tell you this because it won’t help them sell ad time or space.  Most of the housing related advertisers have moved away from those media sources anyway because times have changed.  Just look at the Herald real estate section versus Craigslist and you’ll get the point.  So if the media isn’t getting support from these industries, they won’t go out of their way to bring any good news.

Back to the ingredients, stable and growing employment base.  A town will flatten and surely die if the jobs go away.  No one wants to or can live there because they can’t support themselves and their families.  However, if there are job opportunities and growth in the business sector then people will move to and stay in those areas.  Then they need a place to live.  It is that point that drives our market.  We barely have enough housing for the people who live here already and as our children graduate and get jobs and move out, they need a place to live.  As people move in to our area from out of state, they need a place to live.  Locally we are suffering from a “housing hangover” but we weren’t severely overbuilt.  There is a surplus of homes, the majority are owned by the builders, some pre-and foreclosed homes and some just for sale.  When the inventory starts to decline then the market will command more rigid pricing and ultimately increased prices (appreciation). 

Statistically, Snohomish County has hardly any apartment for rent.  The vacancy rate is below 3%.  Few if any complexes are offering “free rent” or any other incentives to get occupants.  Homes for rent are even scarcer for an affordable payment.  The landlord know this, they watch the statistics and have adjusted their rents accordingly.  It is almost impossible to find a decent home in Snohomish County to rent for under $1200 per month and the average rent is over $1600 per month.  plus to rent most want first months rent, last months rent and a security deposit, credit check, background check and the landlord will likely raise the rent each year you rent. And with all of that you’ll still compete with others who want to rent the same house. 

For that payment range you could buy a home.  Right now in Snohomish County there are over 700 listings that you could buy for a payment under $2000 per month.  If the interest rates go up one point 1/3^rd of those home no longer fit.  You’ll pay more.  If the rates stay the same and the prices go up, you’ll pay more.

 

While the news on TV, Radio and the Newspapers isn’t all good, it never has been. After all when was the last time you heard good news?  Take a look at what you pay for rent and look at what you could afford for a mortgage and compare the two.  After tax deductions most people would be surprised that they could buy a home and not have to worry about a rent increase again.

 

Don

Want To Improve Your Credit Score?

Motivated to Improve Credit Scores

 

When faced with low or no credit score, there is one necessity, motivation.

The problem with low scores is that it costs you money for the things you need the score for.  Things like car loans, truck loans, lines of credit, credit cards, insurance premiums and so on.  If you are happy with the rates and terms you get with low scores, then you are not motivated to save money.

 

I have been discussing this with a woman lately who would like to buy the condo she is leasing.  She has sent me countless emails about her credit and even a copy of a credit report she received form one of the “free credit report” companies.  Her scores are low, but more than that she currently has nothing on her report that is positive.  She had problems (a bankruptcy) about four years ago and didn’t do anything at all to re-establish any kind of new credit history.  In addition to that she had a number of collections since the bankruptcy.  This is the typical pattern for those who have had money problems in the past, they “fall off the grid”.

 

In order to establish and then increase a credit score you need to have current accounts in good standing.  It needs to start sometime.  If you are young and have no score and haven’t had money problems, you probably don’t have a score.  to get one established you need to get in the game the bureaus created.  Three to five credit cards, an installment loan and a mortgage is the ideal mix.  You won’t get a mortgage if you have no previous credit history and most likely you won’t get an installment loan (car loan) without a history either.  But you most likely can obtain a credit card or three or four. 

 

Since there are only five things that control your score, 35% is payment history, 30% is balance to credit limit ratio on revolving debt, 15% credit history, 10% mix of credit, and 10% inquiries, it is easy to control the future score.

 

The two items that are the most important is pay all of your reported bills on time.  If you don’t, then don’t expect your scores to big high. They won’t be.  Make sure you are on time or early.  The next is keep your balances low or paid off on your credit cards (revolving debt) the credit cards are loans, not gifts, and need to be treated as such.  The reason today to have credit cards is not to buy stuff.  You need credit cards to obtain a rental car, reserve a hotel room and to help manage your scores, not to charge a bunch of stuff and keep a high balance that you can’t even think of paying off in the next year or two. 

 

Low balances on your cards is the most sure fire way to increase and/or maintain high credit scores.  If you have had credit issues or no credit in the past, small credit limit unsecured cards or secured cards are the quickest way to increase your score.  Charge only minimum amounts each month and pay them off.  Never allow the balance to exceed 10% of your credit limit. If your card has a $500 limit, then never exceed $45.  Remember you are trying to obtain the highest score possible not incur debt that you can’t pay off.  Save the big debt for a car loan or a new home loan.

 

Now back to my conversations with the young woman who wants to buy her condo.  I have given her specific recommendations that cost her little if anything to do.  Things like either secured or unsecured credit cards and a number of merchant cards that almost always issue for small credit limits.  After weeks of emails back and forth, she has yet to implement any of the strategies I have laid out for her.  She says “what if they won’t give me a credit card” or “what if they want this or they want that” my answer is you won’t know unless you try.  This is called selective avoidance.  She wants this to happen but is not motivated enough to do this for herself.  Now she informed me that if she can’t get financing for her condo in the next few months that she may have to move because the owners want to sell it to someone else if she can’t buy it. 

 

Here is the bottom line.  If you want to get or improve your credit scores, then you will have to do the things that will make that happen.  you have to be motivated to make a change!  If you have had credit problems, stop doing what caused the problem and start doing the things that will correct the problems and increase your score.  I can’t, and no one else can help you if you don’t want to help yourself.  I have all kinds of strategies and help for those that want to make their lives better, but I really only want to help those that want to help themselves.  As far as the young woman (as Dear Abby would say “Dear Miss Unmotivated…) who would like to buy her condo?  Good luck.

 

Don Davis

The Big Three

The Three Stooges

 

 

  

Tom LaSorda, left, CEO of Daimler Chrysler AG’s Chrysler Group, Rick Wagoner, center, CEO of General Motors Corp., and Alan Mulally, CEO of Ford,

 

I am having trouble getting my mind around this one.  Here you have three of the most powerful, influential CEO’s in the country who are suppose to lead the icon of industry, the car business. And these stooges come flying in to Washington D.C on their private jets, asking Congress for 25 billion dollars (that’s $25,000,000,000.00).

 

Now they had no plan, other than to request from the esteemed Senators and Congressmen a hand out of cash.  That is taxpayer money (your money and mine) that is supposed to keep them from going bankrupt. 

 

Excuse me, but as a businessman, I don’t recall getting the same invitation.  Oh that’s right, I’m just a small company that has reduced my payroll, reduced my spending, reduced my overhead, reduced my transportation, reduced my expenses and reduced my lifestyle. 

 

But the difference is these guys don’t own their companies.  They are paid multi-million dollar salaries, huge bonuses and provided perks like corporate jets, to screw up.  This is nothing new, for 30 years they have been getting their collective butts kicked by the Imports, and they haven’t learned a damn thing.  For years they have cried about market share, offered price incentives (buy at employee prices) and basically free financing (0% interest for 60 months).  None of that is a long term strategy, or to increase market share by providing the kind of vehicle, the price of vehicle and the quality of vehicle we want or need. 

 

Meanwhile the Imports have built factories in the US, hired workers in the US and outsold all three of them in the US. And send their corporate profits back to their respective countries. All of this has been under their noses for 30 years. 

And now they go jet setting into Washington DC to “respectfully request” a small loan (25 billion) from the benevolent congress of the United States and are finally being asked a few obvious questions like; what are you going to do with the money if you get it and how long will it last until you come back here and ask for more? And what was their answer?  Nothing more that corporate double speak.  And when asked what their plan was…..silence.  They were not even prepared to provide a business plan, an outline or even a basic idea of how they intended to take their 100 year old dynasties and get them to perform in the 21^st century.  They looked like the stooges they are.

 

As business owners we pay our employees first, our taxes second and ourselves third.  They don’t.  Their companies are on the verge of dissolving and they haven’t reduced their personal spending habits and obviously not enough of their companies expenses either.

 

If I were asked (and I’m sure I will be), here are the conditions that I would place on that loan for the “Big Three”

• Show me a comprehensive business plan that will assure your success in the next 5, 10,15 and 20 years and how you intend to be involved in it.
• Reduce your salary to meet your living expenses for your household and if need be reduce your household expenses.  I want to see that budget and see if there is some fat that could be cut from it.
• Any monthly income in addition to your monthly expenses will be in common stock (not preferred stock) of your respective companies.
• Any bonuses will be based on performance of your respective companies.  If the company succeeds so will you, if the company fails, so will you.
• No employment contract.  Your ass is on the line to make these companies function in today’s market environment.  If you can’t perform we’ll find someone who can. No “Golden Parachute”. No pal you can’t take the money and run away leaving a bigger mess than what you already have.
• Sell the jets (Palin did it boys, so could you. I understand eBay is the place to start)
• Drive one of your cars that you produce, and keep it maintained and clean. For Mr. LaSorda let me suggest a Dodge Caravan.  For Mr. Wagoner a nice Chevy Malibu. And for Mr. Mulally a Ford Focus.  I think that will do just fine.
• Next time you come to Washington DC drive that car instead of flying.  Use a hands free cell phone if you need to communicate with corporate.
• Go into the factory and talk with your employees.  Listen to what they have to say, get them involved with the plan you submitted.
• Each day drive a different competitor’s car to experience first hand what you are up against.  Find the things you like about them and the things you don’t like about them.  Then engage your designers, engineers and factory workers to make new machines.
• Report back to me every month with a progress report.  Tell me what is working and what you screwed up.  If you screwed up tell me why and what you are doing to not do it again.

 

I’m pretty sure there are a few more things I could require, but that will do for a start.  After all they are asking for taxpayer money, I’m a taxpayer, shouldn’t I get to help make the rules?

-Don

The Upcoming Holiday Season

Here it comes, all of the tracking of consumer spending and the effects on the economy. 

Every year the media usually starts with “Black Friday” that is the day after thanksgiving where the retailers usually start making their year profitable.  The holiday spending spree!

 

Expect it to lead just about every news story this season for the next two months.  You’ll get the before, during and after.  They’ll tell you about how much you’re not spending and the effects it has on local and national retailers and their fortunes.  It has already started.  The closing of Circuit City (they were already in trouble, it has nothing to do with the economy today) and Linens and Things as well as others. 

 

Now the sales are starting earlier and discounts are deeper.  We are a consumer nation hooked on gadgets, things, cloths and stuff.  Our economy is reliant on you spending your money all through the year to support all of the small and big box stores that fill the malls and community shopping centers.  We are fed a daily diet of “buy this and buy that”.  We are given “for a limited time only”, and “but wait, there’s more…if you order now…”

I laugh at the car companies that advertise special offers “This special is only good until November 21^st”  then on the 22^nd there is another “for a limited time offer” that looks just like the last one.  They’ve been giving special low rate financing offers now for over two decades and the current one is no different that the last one. 

 

Here is the message.  You need to take care of yourself first.  I don’t care what the media has to say about consumer spending being up or down.  What I care about is how you are doing financially.  Do you have an unpaid balance on your credit card that still has last years Christmas presents on it?  If so, maybe you should be one of those that the media cites as “consumer spending is down”. 

How much money do you have in savings?  Have you saved throughout the year to anticipate your holiday budget, or is it coming as a surprise?  Like, gosh Thanksgiving is almost here and I need to go out and start buying presents.  Did you plan for the season?

 

I’m not saying this to be harsh.  It is reality, and in these days of economic uncertainty, one thing you should be certain of is where is your money and how should I, or shouldn’t I spend it. 

 

This may not be the Christmas where the tree has so many gifts that they are stacked, tucked, and overflow behind the chairs and halfway up the stairs.  This may be the year of thoughtful, valued gift giving, or secret Santa’s and community sharing.  I was touched by the little boy dying of leukemia whose wish was to feed the hungry.  His name is Brandon. The news stories show him in bed in, what surely must be his last days on earth at 11 years old.  His wish is to feed the hungry so they won’t have to suffer.  Brandon has every right to complain about his circumstances, to feel sorry for himself and say “why me”.  But he wants to feed hungry people so they don’t suffer.  11 years old and possessing the knowledge that he probably won’t be around for this Christmas, or his next birthday.  That there are no more medical procedures, trial medications or hope to extend his life; and he wants to feed the hungry so they don’t suffer.

 

I’m not even suggesting that we not have a “traditional” Holiday Season.  Do what you do for the holiday season, turkeys, pies, parties, gifts, and the whole thing.  What I would suggest is that we give pause.  Think about what the true spirit of the holidays is.  Put some thought into this season and ignore the consumer spending indexes and graphs and figures.  Ignore whose sales are up and whose sales are down by this percentage or that.  Take a moment and think of what you can do to make this holiday season just a little different, memorable and meaningful to those you love.  Maybe of what you can give of yourself instead of just spending money, of what could do to enrich someone else’s life with a thought, word or deed?  And as we near the New Year, what resolution you can make that you really believe you want to see come true, something that maybe you would really like someone else to do for you or a change that you know you can make in your own little world.

 

For many in our community, this has not been the best year ever.  We have all been touched by something that has adversely affected our families.  I could have been a job loss or change, an unexpected expense. Maybe it was an extended work strike and the effect that had on family and finances.  Maybe it was an illness or a family member or someone you know whose loved one was sent to Iraq, never to return.  Whatever it is, think about what you could give this season to bring a smile or some hope to someone else’s life.  Something that just maybe could make their life a little sweeter, a little brighter. 

 

As my Grandmother always told me, “It’s not what you get, it’s what you give.  And remember you always get what you give”.  What are you giving this season?

 

Have your best holiday season ever,

 

Don

Walk With Me. Let Me Share Real Stories

Walk with me on this journey; I am going to share stories about real people with real life issues.  Some of them are good some will not be so good.  These are stories from people around here just like you, it might even be you.  I all cases the names will be omitted and everyone will be John or Jane with a different, random, last initial so we can keep them separated. 

 

These are things that happen to people in real life trying to get their careers and lives started to trying to find a way to retire in comfort, and the journey in-between. 

 

I will invite your comments, questions and yes, even advice as we take on these things.

 

So you won’t wonder what this is all about, let me share with you what I’m talking about.  First of all I am a mortgage lender.  People come to me wanting to purchase or refinance their home.  That is a pretty simple concept.  However, in the course of this, I am one of the few people in their entire life that gets to (needs to) see every inch of their financial picture, from income, debt, savings, retirement account; everything. I also get to see the past.  I have to obtain a credit report for everyone considering financing and with that I can see seven to ten years in the past.  I also get to help them invent their future.  With a picture of the past (their credit report) and a picture of the present (their complete, present financials) we can talk about doing what they’ve done and what they would like to do.  The old saying is “if you do what you’ve done, you’ll get what you’ve got.”  This is especially true when it comes to paying off high credit card balances with the equity from their home.  If you repeat the past you’ll surely get what you’ve got.  The problem with that is, if done too many time, the equity eventually runs out and there is no solution then.  That is what market we are in now.  The values have flattened for a while and the appreciation isn’t going to help pay off other debts.  In these kinds of meetings with clients, I counsel on their spending habits and how they got to where they are and without changing their behavior, they will be back in my office in two to three years and we will be doing this all over again until they can no longer afford to mortgage their own home.

 

These are the kinds of stories I’ll be sharing.  The clients will be aware of it and encouraged to monitor the postings and comments.  They will asked to obtain a new email address, for anonymity, and post their questions, concerns and comments as well as yours. 

 

I will not be giving out personal information, nor will I be too specific as to anyone being able to figure out who these people might be.  That would not be fair and I certainly don’t want to embarrass anyone.  No my purpose here is for you to be able to recognize yourself in these stories.  Maybe to avoid making a mistake or to reaffirm what you are doing right.  After all that is the real purpose is to have everyone making informed, educated decisions about their finances and their future.

 

 

 

 

 

This first one is pretty simple.  I received and email yesterday from a lady needing some advice about her mortgage.  Here is the emails:

 

            HI DON

 

I WAS READING YOUR ARTICLES AND HAD A SPECIFIC QUESTION ABOUT THE NEW FHA PROGRAM :

 

MY SITUATION IS STRUGGLING TO PAY THE MORTGAGE BUT HAVE YET TO BE IN DEFAULT WITH THE PAYMENTS. I HAVE USED UP MY SAVINGS AND EVEN RENTED OUT PART OF THE HOME TO MAKE PAYMENTS AND RECENTLY HEARD THE PROGRAM WILL ONLY HELP THOSE IN DEFAULT WITH THIS PROGRAM. I HAVE EXCELLECT CREDIT AND HAVE NO OTHER LOANS OR DEBT. WHAT WOULD BE YOUR RECOMMENDATION, SHOULD I STOP MAKING PAYMENTS TO SEE IF THEY WILL HELP ME BECAUSE I WON’T BE ABLE TO LAST MUCH LONGER OR CONTINUE TO HOLD ON AND SEE IF THEY ARE GOING TO HELP THOSE THAT ARE NOT IN DEFAULT ????

 

I THANK YOU VERY MUCH FOR YOUR ATTENTION TO THIS MATTER

Jane

 

 

From: Don Davis [mailto:dond@nwmortgage.net]

 
Subject: RE: MORTGAGE QUESTION

 

Hi (Jane A),

Without having a little more information it is hard to tell you exactly what you should do.  Is the problem about cash flow?  In other words, has there been a reduction in the amount of monthly income that has caused the problem, or is it a rate adjustment that has caused the payments to go up.

If you stop making payments, then it will put you in default and one way or the other you’ll have to make those up.  And there is no guarantee that the lender will help you.  Also for all intents and purposes any of the FHA Secure or Housing Hope programs haven’t been much help.  They still need the lender to participate.  FHA just insures the loan.  But you still need to qualify for the payment and program with the lender.

If the reason that you are having trouble is because of an interruption in income, is that going to get better soon?  Your current lender will work with you on a “work out” or a “loan modification” if there is a reason for the problem and you have a way to eventually make the current payment.

The problem is, if you are having trouble making the payment now , what are you going to do to fix that?  It almost sound like you purchased the home with either someone else or a higher income and now it is hard to make ends meet.

Like I said, without a little more information all I can do is guess at some of the solutions.  If you would, answer these questions and I might be able to be more help;

·         is your income higher or lower than when you bought the house (or was there someone else’s income included then and not now)

·         what is your current income

·         what is your current payment

·         what is your current interest rate on your mortgage

·         when was the last time you financed or refinanced the house

·         what is the approximate value of the house

·         what is your mortgage balance

·         and what caused the current problem.

Jane, you are smarter than most.   I usually get these emails when it is too late, so you’re ahead of the game.  Beyond what I asked for above,  If you need a referral to a local mortgage professional, I know several in your area that might be able to help.

Let me know,
Don

 

 

Don Davis

Branch Manager

HighTechLending branch 741

Office: 360-652-9994

Mobile: 425-244-5754

Fax: 360-652-4248

dond@htlnw.com

www.WaMortgageTips4you.com

13102 58th Ave NE

Marysville, Wa 98271

 

            Hi Don

 

I really appreciate your prompt attention to this matter and as far as calling the lender for the “work out” or “loan modification” I didn’t qualify. Unfortunately, I went that route with no advise and informed them of renting out my property and they didn’t find the need to help me. As far as the questions my current situation is:

 

I bought the house in 2007 for $400,000 with the interest only program and at that time I was making close to $9,000 monthly. I have two mortgages one with      $ 320,000 balance and 6.5% fixed interest and the other with 9.5% variable interest. However, now I am currently making $2500 monthly with a $2600 mortgage. I am the only on the title and mortgage loan no one else is in the mortgage with me and could not and have not refinanced since. I have looked at home around the neighborhood selling for about $260,000 in the recent months. So I am assuming that will be the current value of the home.

 

 

I really hope I have answered all your questions for your accurate advise on my situation. Again, I really thank you as I am now against the wall with what I should do since the last thing I want is to ruin my credit but everyone keeps informing me that the new program will only work with those that have already been in default.

 

Please help, I really welcome any piece of advice or information that you might have with this new upcoming program

 

 

Thank you

Jane

 

 

 

 

 

Subject: RE: MORTGAGE QUESTION

 

Hi Jane,

This is a tough one for me.  Not because I haven’t seen it before, but because of your limited options.  First of all let me say that all I have is the limited information that you have provided and I am not an attorney, therefore am not dispensing any legal advice.  I am only going to give you my opinion from the other side of the country.  I would recommend consulting an attorney prior to proceeding with any option you choose. 

The problem you face is two fold. 1) The current value of your home and 2) the reduction in income.

In order for any of the lenders to consider any kind of work out, loan modification, refinance, FHA Secure or any of the rescue programs, the one factor remains the same; you still need to qualify for the new loan payment.  Your reduction in income will probably prevent any lender willing to find a solution.  If there is a chance for the lender to help out you would have to explain why your income dropped and when or if it will even come close again in the near future.  If that won’t happen in the foreseeable future then I’m afraid they will not be interested in any kind of loan modification or any kind of refinance from any of the rescue programs.  It is not only because someone is in default that would cause a lender to consider your loan.  I have helped many people who are not behind refinance or modify their loan for reasons similar to yours.  In all of the cases however, there was either a temporary income loss, or financial emergency, or a rate adjustment that increased the payment substantially.  All of which caused a hardship.  In all of the cases their income was sufficient to re-establish a new mortgage payment.  I your case, with your current income, the payment you would qualify for would be probably no more than $900 per month.  I know this isn’t what you want to hear but when you bought the house you got the loan because of what you made (or stated that you made) and the same criteria prevails now, even with the rescue plans they want to know if this will solve the problem so it doesn’t reoccur. Which brings me back to the first problem, and that is value of the property.  Unfortunately you live in one of the hardest hit areas as far as declining values.  Even if your current lenders took a “haircut” and willingly took the loss between what you currently owe and the current value, which appears to be about $140,000, you would still need to qualify for the payment.  This has put you between the proverbial rock and a hard place.  I’m afraid that your current lenders (your first and second mortgage) will probably end up losing that anyway, but not by choice.  At this point there has been no bailout or rescue plan that I am aware of, to address these issues for homeowners and lenders specifically. 

I know that you would like to keep your home and more importantly you would like to protect your credit rating.  With the information you have provided me, I honestly don’t see how you will be able to save either one.  Even if the lenders reworked your loan at the homes current value, it would still be almost impossible for you to make the payment (principal, interest, taxes, insurance and mortgage insurance) even at a 6% interest rate your payment looks like it would still be over $1800 per month and with an income of 2500 it leaves very little to live on by time you pay utilities, food and such. And well above the qualifying ratios. 

It will get your lenders attention if you go into default, but unless you have the ability to increase your income anytime in the near future, I think you will find it difficult, if not impossible, to get any lender help work this out for you.  All you will do is get behind in your payments without the ability to catch up.

If you have no way to re-qualify for a loan on the property, at any value, your best option is to put it on the market as a short sale and let the lenders determine how much they lose.  A short sale will do the least amount of damage to your credit.  Your other options would be a foreclosure and/or bankruptcy.  Those would be a worse option.  Unless there is something you haven’t told me, I’m afraid I can’t offer you any other advice.  I am sorry for your situation but once again I would strongly advise you to seek legal counsel to help protect yourself as much as possible.  If you have any other questions please feel free to contact me.

Don

 

Don Davis

Branch Manager

HighTechLending branch 741

Office: 360-652-9994

Mobile: 425-244-5754

Fax: 360-652-4248

dond@htlnw.com

www.WaMortgageTips4you.com

13102 58th Ave NE

Marysville, Wa 98271

 

HI DON

 

I REALLY APPRECIATE ALL YOUR ATTENTION YOU HAVE GIVEN TO MY SITUATION AND THANK YOU. I AM GOING TO TAKE YOUR ADVISE AND  ACTUALLY LOOKING FOR A LAWYER TO SEE WHAT MY BEST OPTION WOULD BE. YOU HAVE BEEN A LOT OF HELP AND REALLY DO WISH THERE WAS A LOT MORE PEOPLE LIKE YOU OUT THERE WILLING TO HELP AND MOST OF ALL WILLING TO LISTEN….. AGAIN THANK YOU

 

 

END OF EMAILS.

 

This is only one of the scenarios I come across everyday.  Although this one is done and she is on her way.  I’ll be engaging others as they start the process. 

 

I will be asking your advice as well as dispensing mine and my thinking behind it.  Sometimes I might be a little tough, but I will  always be honest.

 

Let me know what you think.  Post your comments!!!

 

Don

Do You Understand Your Credit Score?

Oh those three little numbers, 572, 647,756. What do they really mean and why are lenders so concerned about them? Why should you be concerned?

Well the FICO scoring model (Fair Isaac Company developed the software that determines the score, thus FICO) and virtually all of the lenders and creditors adopted the system about 14 years ago. The problem is they didn’t tell you that they were going to do this and they also didn’t tell you what it means and how to get and keep a score well into the 700 range.

With the FICO scoring system the scores range from 350 on the low end to 850 on the high end. Today only about 1 in 1400 people has a score over 800. Conversely about 1 in 7 have a score under has a score under 600. The average for the U.S. is around 660. So half have a score higher and half have a score lower.

First let me say this, the credit scoring system is a voluntary system that the creditors contribute information at their discretion. There is NO LAW that requires them to list your information, good or bad. The credit bureaus are companies in the business to make a profit for their investors, just like any other company, they are not and never have been a government agency. And you have never asked to participate in this system. But you are anyway. There is no law that says any of your information needs to be reported for 7 years, 7 months, 7 days or even 7 minutes. This is just a rule that the bureau’s and creditors came up with for their system. Also, did you ever notice that they are in a big hurry to get the bad stuff on your report, but it seems that they are never concerned with correcting it to make it right?

Anyway, the FICO scoring system is broken down into five factors that control your score. It looks like this:

 

• 35% payment history. I think everyone knows this one. Pay your bills on time. If a reported account is over 30 days late it will get reported and it will lower your score. If your bill is paid 18 days late you will probably have a late fee to pay as well but it will not be listed as late. It needs to be 30 days or more late. After that is 60 days, 90 days and finally collection or charge off. A 60 or 90 day late on your report is worse than a 30 day late.
• 30% of your score is the balance in relationship to your high credit limit on revolving accounts (credit cards). The higher your balance versus your credit limit, the lower your score will go. Ideally you should have little to no balance on your revolving debt but use them for minor purchases each month and pay them off. The bureau is looking for activity on these cards and you need to use them occasionally to keep them active. Revolving accounts also includes accounts that you may not receive a credit card for. Locally “Les Schwab tires” offers credit for wheels and tires. They do not issue a credit card but rather store credit. This is listed on your report as a revolving account so be aware of these kinds of accounts. 3 to 5 revolving accounts are optimum for maintaining high scores. More about credit strategy in another article.
• 15% of your score is your credit history. This is the length of time you have had credit established. This is why someone in their early to mid 20’s compared to someone in their 40’s with the same amount of credit cards, car loan and mortgage can have substantially different scores. It would be the length of time they have had credit established.
• 10% is the mix of credit. The scoring model considers a mortgage, an installment loan and three to five credit cards to be the optimal mix.
• And last 10% is inquiries. This is where creditors pull your credit report for the purpose of granting credit. Any damage to a credit report this may cause is only going to affect your score for no more than 12 months. Depending on the depth of your report (the other above items) inquiries can have a little or a lot of impact. But for no more than 12 months. If your score is low, usually this is not the reason.

 

That’s it. Those are basically the only things that control your score. Understand and control those and you can beat the system.

With that said, there is a time weight that is considered as well. First of all, your recent history has the biggest impact on your score. If you were 30 and 60 days late on your car loan a couple of months ago, your score will be lower because of that. But if you were late on that loan three years ago, it will have virtually no affect on your score today as long as you have made your payments on time since then, The FICO model primarily looks at the last 24 months to determine the likelihood of you making payments on time in the next 24 months. So the older the problem, the less impact it has on your score. More about credit strategy in other articles.

It is critical that you understand these five factors before you decide to employ any strategy to raise your scores or before you do something to destroy your score. This is why many of us who coach clients about their credit score suggest that they never close a revolving account. If you do, you lose the history and a paid account that is easy to control. Remember the lower the balance from the credit limit and the longer you have had the account, the higher the score.

Coming up we’ll explore credit score strategy based on these five factors and show you how to maintain scores in the 700 range or how to increase low scores and keep them in the 700 range, regardless of your credit history.

Don Davis can be reached at 360-652-9994 or visit his web site at http://www.HTLNW.com for other contact information.

Zero Down Payment Mortgage Loans

Yes they still exist.  Not only that they are great loans for first time buyers!

There are Two main Zero Down loans on the market today and they just keep getting better. 

First is the VA loan.  This is available to current, discharged and retired military.  What makes this one so good is that with yur certificate of eligibility, you can purchase a home with no money down and the home seller can contribute up to 4% toward closing costs.  Essentially you can buy a new home without any money out of pocket.  The other thing that makes this loan so attractive is that the seller can also contribute another 4% toward lowering some of your other obligations.  Let’s say you are looking at a $300,000 home.  4% of the purchase price would be $12,000.  The seller can contribute tupto that $12,000 to help you pay off credit cards, student loans, car loan or most any other obligation to help reduce your debt.  Sometimes this is needed for the Vereran to qualify for the payment.  It is a great tool with a great loan.  So if you qualify for a VA loan make sure you let us know!

Second is a loan available to just about anyone.  It is a USDA loan program called a Rural Home Loan.  Here in Snohomish County, about three quarters of the County qualifies for this program.  This, once again, is a true zero down payment loan and there is NO MORTGAGE INSURANCE! So your payment will be lower.  Plus the home seller can contribute up to 6% toward closing costs.  So once again it is possible to purchase a new home with NO MONEY out of your pocket.  There are just a couple of restrictions that apply to this loan. One is location.  The house needs to be outside of the higher poulated areas.  So Edmonds, Lynnwood, Everett and Mill Creek don’t qualify. But Monroe, Lake Stevens, Granite Falls, Arlington and Stanwood are just some of the areas that do.  Just give me a call and I can guide you through this terrific home loan.

If you have any questions or have any comments either post them here, email me or give me a call 360-652-9994.

Don Davis

Mortgage World Has Changed

With all of the things that have occurred in the last year it is hard to wrap it all up in one piece.  But here are the highlights.  I received an update on the Implosion of moertgage lenders that have gone away.  That number is now over 300.  New Century led the way and IndyMac followed almost a year later along with many that were not as familiar.

The US Government has taken over conservatorship of Fannie Mae and Freddie Mac who, by the way, are now reporting record losses.

FHA has changed, and will continue to change their loan guidelines to accomodate the new lending environment.  I think this is where the vast majority of mortgages will be placed in the next year or so.  It does make me wonder that since the government controls FHA, Fannie and Freddie that why Fannie and Freddie don’t align more closely with the FHA guidelines?  Maybe in a year or two they will.

The stock market has boiled down to almost half of it’s value from it’s earleir highs.  As the pundits keep telling you “ride it out” after all no other investment has out performed the stock market over time.

Property values have bottomed out after some markets losing over 50% of their home values.  Count your blessings that we live here in the Puget Sound area where our declines were only a fraction of that.

Now that the worst of the bad news is over and the elections are done (Thank god, no more ad’s) life will start to level out.  it will take some time but I believe the stock market will go up and down in a narrower margin that it has and next year there will be some, not much, but some growth. 

Nationally, unemployment will rise as manufacturing continues to decline.  a lot of businesses will continue to struggle throughout the year and a “rescession” will prevail thru most of the year.

And now with the holiday’s we will be bombarded with retailers ad’s shouting discount and the news media reciting statistics about how mush consumer spending is down.

Well maybe this is the wake up call that America has needed for years.  We have developed into a debtor nation led by credit card debt that is beyond most of our means. Also, we have gone through this decade so far with the lowest savings rate since WWII. 

It is time to change our spending and saving habits.  No longer is living beyond our means in vogue or stylish.  No one cares what you drive or how many shoes you have.  What you should care about is where did all of your money go and what have you got to show for it.  Those that were thrifty are really no worse off now than they were before.  Those that weren’t are now paying the price.  Maxed out credit cards and no savings to fall back on if there is just one missed paycheck, let alone two or three or more.

This isn’t to be sermonizing.  It is only to point out what the polititians didn’t.  And that is you cannot have continued economic growth on the backs of indebted Americans.  Bailing out the banks to the tune of 700 million, only allows them to get back in the business of lending.  It does nothing to bailout you or me.  And now the Auto companies are begging for a piece of that pie.  They want some of it (a huge chunck actually) to help them retool and provide automobiles more like the imports. (Whose been paying attention for the last 20 years as the imports took more and more of their market share?)

This next year (2009) will not be a robust economic year. And it wouldn’t have mattered who was elected President.  There is so much to recover from that it will take most of next year for it to work itself out.

But here is the good news.  The world didn’t cave in. There are still plenty of jobs locally.  And new opportunities will show themselves as the year progresses.  If you own a home in this area, chances are very good that it is still worth more than you paid for it two or three years ago.  If you have owned that home for more than five years you have still realized in excess of a 5% per year appreciation. (5% being the median number over time).  You may not be able to get what you really want for the house if you are trying to sell it right now, but you will still profit.  And because it is your primary residence the proceeds are tax free. ($250,00 for an individual and $500,00 for a married couple)  And if you do sell now there are some other good buying opportunities for your new home.

If this is your first time buying a home, you may be buying at the best possible time.  Home prices have bottomed out and there great deals abound.  couple that with very attractive interest rates and you will be at an advantage.  The only thing you’ll need is good credit scores.  If that is a problem we can help with that too.

Well the world is still here so keep looking forward.  Eventually much better times are ahead

Don

Where is your money?

This is an article that appeared in Chain Leader.

 

New FDIC Rules Apply to Risky Sweep Accounts

Rulings aim to inform commercial depositors of risks in case banks fail.

By David Farkas, Senior Editor — Chain Leader, 10/7/2008 10:31:00 AM

Washington Mutual: one of 16 banks to collapse since February 2007.

All the talk about bank failures is prompting attorney Gary Schildhorn to send out a warning to treasury departments: Review your sweep contracts with your banker.

Schildhorn, a workout specialist with Philadelphia-based Eckert Seamans, represents distressed foodservice franchisees. He says restaurant companies that rely on banks for this service–and many do–should carefully review where their deposits are going. 

In sweep accounts, banks move funds from depositors’ accounts nightly to other financial institutions, often on foreign soil, where the accounts collect interest. In the morning, banks redeposit the money into customers’ accounts. In other cases, dubbed “repo” sweeps, funds are used to buy interest-bearing securities. Both types of sweeps are not likely to be FDIC insured because they are no longer considered deposits.

“Let’s assume you’re a company that has a deposit account in a bank that is also your lender and you have money swept every day into an investment account, say, into Euro dollars or an international bank facility,” he says. “Very few treasury departments have asked themselves what’s their exposure on these deposits if the bank fails.”

Who can blame them? “Until these last few months, whoever figured your bank was going to fail?” he asks. Indeed, from 2005 to 2007 only three banks failed. Since February ‘07, however, 16 banks have been shuttered, including giant Washington Mutual.

New Ruling

Last July the FDIC issued an interim rule establishing the government insurer’s practices for determining deposit and other liability account balances at a failed insured depository institution. The ruling stems from a 2002 lawsuit involving a bank failure in Connecticut in which bank depositors sued the FDIC, arguing their swept accounts were insured and that they were not general unsecured creditors.

Importantly, the new rule requires institutions to prominently disclose to sweep account customers whether the swept funds are deposits (if so, they are insured) and the status of the swept funds if the institution were to fail.

Some depositors, however, direct their funds swept into money market accounts or mutual accounts. Schildhorn believes these are the safest sweeps because the money remains outside the bank until a preset threshold is reached. “Otherwise, your money could be gone [if the bank fails]. A lot of people are just learning about the risks,” he adds.

Lack of Knowledge

An FDIC official speaking on the condition of anonymity acknowledges that company treasurers typically do not understand the level of risk they take by using sweep accounts. It behooves them to do so, the official says.

Schildhorn advises treasurers immediately to ask their bankers for the risk status of their sweep accounts–and how they can eliminate high-risk transfers. The FDIC is still seeking comment on the rulings and has deferred the sweep account disclosure requirement until July 1, 2009.

Knowing the level of risk is crucial because things could get ugly fast in an unstable economy. “In the case of a sweep transferring funds outside the failed institution,” the new ruling states, “the funds will be treated consistent with how they are reflected in the end-of-day ledger balances, which may mean the funds are not an obligation of the depository institution.”

Says Schildhorn: “Unless the money is in something safe like a mutual fund, purchased in the name of the depositor, not the bank, or it’s insured, it could be gone.”

I think in these times it is important to know where your money is and how to keep it safe.  Make sure you understand the difference between a deposit with your bank and an FDIC insured deposit.  Unfortunally the higher the inerest the more risk. Today maybe the less risk the safer.

Don