First Stop 4 Home Loans

Can you say “whoopee?” 

Late Wednesday night (June 30th), the Senate took the lead of the House of Representatives and passed the Homebuyer Assistance and Improvement Act which extends the CLOSING date for those eligible to receive the federal tax credit under the American Recovery and Reinvestment Act.  This is part of the bill that was presented.  You can see other details of this bill here.

First time buyers, those who haven’t owned a home in the last three years, as well as current owners who have owned a primary residency 5 of the last 8 years, were eligible for a tax credit if they purchased a primary residence — up to $8000 or $6500 respectively.  The guidelines required buyers to have a signed purchase by April 30th and CLOSE on the home by June 3oth.

The problem was that many of these home purchases were being held up buy a multitude of things — the banks that own the homes, the banks that are considering a short sale for the sellers and even title and mortgage companies.  The argument was that the buyer was not at fault for this delay if they had the signed agreement by April 30th so they shouldn’t be penalized.  Low and behold, buyers now have until September 30th to close on their house to still get the federal tax credit!!

So, if you are one of those people that thought you missed out on the credit because something was preventing you from closing on your home prior to June 30th, yesterday, then you can breathe a sigh of relief!  Good luck with your process and enjoy this awesome gift from the government!

Where have ethics and morals gone in America?  This is certainly a generalization as I know most of you reading this DO have ethics and a good moral compass.  But then there are those people who don’t.  Those people who “stated” income to get into a loan WAY above their means.  Those people who falsified bank statements or W2s or even took another person’s social security number to get a loan.  Those LOAN OFFICERS that suggested these things, suggested doing a 2-year ARM because they can sell in a few  years, suggested the amount of income the borrower “needs” to qualify or suggested a way around the system.  Now, due to this, we’re required to be licensed.   Woohoo … I am sure that will stop people from advising inappropriately.  And speaking of licenses, I officially passed the national exam — so be assured, I am “allowed” to originate loans.  Gosh, I hope so after 16 years of doing this   By the way, this is a long time coming and something I have supported.  Stock brokers are licensed, as are Realtors.  Why we haven’t been is beyond me. 

Did I do stated income loans?  Sure, I did a handful of them — literally less than five.  That’s a very small amount.  Did the people I work with falsify anything?  I have no idea and don’t care to know.  In the instances I can remember, I dealt with self-employed people who made WAY more than what they did on paper, ie federal taxes.  The nice benefit of being self-employed is the write-offs.  As lenders, we appear to penalize them for this.  To some extent we do, but if you tell the IRS you’re making $40K after expenses, but you brought in $100K, then that’s the income — $40K.  It’s a catch-22 for people who are self-employed.  That’s why a stated income program worked.  They’re now illegal in Minnesota and I would be hard-pressed to find a lender willing to do one.  And I get it.  Too many loan officers “coached” their clients.  It’s wrong and it’s caused a world of hurt for the rest of us.

So here we are, in a huge financial crisis and the government is helping people in the above situations “modify” their loans so they can stay in their home.  Don’t get me wrong.  There are thousands of people who were “duped” into certain loan programs with the promise that their credit will improve in 2 years and they could refinance.  This would have been sound advice if the market didn’t tank and values of homes hadn’t dropped.  Now, these people can’t refi AND now can’t make a payment that has possibly doubled.  How can you blame them?  They were told about the best case scenario.  This bugs me, as you can see. 

I am a worry wart — don’t want people upset at me or to come back and say “you told me” and have them in a tizzy over advice I gave.  A few years ago it was practically a requirement to buy a new home NOT contingent on the sale of your old home.  As lenders, we had to count the debt of the OLD house and the NEW house for qualifying.  This makes sense.  But, reality is, how long can someone make 2 house payments?  At some point, just giving up on the old house is easier to do if times get tough.  Heck, it’s not the roof over their heads now.  They still have a place to call home.  I was very upfront with buyers about the potential hazards of doing this.  Ultimately, it’s the buyer’s decision, but I lay it out there — the good, bad and ugly.  And speaking of ugly … in “those” days, if you had a signed lease agreement, you had income we could use to offset the old house payment.  I did a loan where I was given 2 leases for a duplex the borrower owned.  We followed guidelines and used 75% of the rent for qualifying so he and his fiance could move into their new home.  These kids were referred to me by a friend — a loan officer friend that had knowledge of their intent to let the house go.  I found this out about a year later.  To this day, I have no idea if the leases were legit and the renters finally decided to move.  Not a clue.  And I just don’t want to know. 

It’s disturbing to me that I had a part in a loan like that.  I didn’t have the knowledge of the end result, but it makes me feel icky inside that I trusted.  And as my husband will tell you, I trust a little too easy.  It’s my nature to assume you’re being honest unless I see or suspect differently.  Had I known their intention for letting the house go … I would not have done the loan.  My conscience would not have let me.  It’s funny, but we have a disclosure, required by the federal government, that states mortgage fraud is bad, prosecutable to the tune of 30 years in jail and/or one million dollars.  So, what’s funny about that?  The fact we have to “tell” people fraud is bad and not only that, people will still commit it — doesn’t matter if they sign a piece of paper warning them of the consequences.  Unbelievable.

So the moral dilemma as I see it — should we pay our mortgages on time, like we’re supposed to or do we get help from the government for NOT paying them on time?  Hmmmm, reinforcing  and going as far as rewarding bad behavior.  I don’t get it.  Here’s an article that speaks to this too.  I’m not the only one in this conundrum.  And here’s what’s really sad.  Over 50% of those people that modified their loans have already defaulted.  Oh yippee.  That means the government helped subsidize the rate to make the numbers work, paid the lenders a fee to do these types of loans and offer the client a cherry rate.  And what for?

My soapbox is getting slippery and I know views like this shouldn’t be put in blogs, but I feel so strongly about this, about the way the government has handled the misguided, misrepresented and possibly fraudulent buyers that are getting a pat on the back for going against what’s right – disregarding their debts.  As a landlord of a rental unit (used to have two), I am amazed and shocked how many of our tenants pay late or not at all and expected us to deal with it.  How dare us assess a late fee, blatantly addressed in the lease.  When I rented, I paid my rent.  If I didn’t, I was kicked out.  It was that simple.  I was taught that paying what you owe is honorable, ethical and the right thing to do.  It’s how I was raised.  It’s how I will raise my children and how I will continue to advise my clients.  Because these are the right things to do — no moral dilemma on this front.

Okay, so this isn’t new news.  This is the third go-round with the first time buyer tax credit.  The subsequent tax credits have been ”bigger and better” with new additions, making the most recent credit the “best”.  Remember last year — the tax credit that would expire at the end of November?  Wow were people hustling to get their home loans closed by that date. There was a call to action, an actual deadline.  Buy your first home now or lose money!  Let’s get real — you can’t lose money you don’t have, so that wasn’t a great way to get people off the fence and buy.  It was funny how first time buyers were coming out of the woodwork last fall to “cash-in”.  Many of those buyers are still waiting for their “check in the mail”.   It will come and that’s the good news.

But here’s the better news.  The government is willing, yet again, to pay you to buy your first home.  Oh, and if you’re not a first time buyer, no problem.  You get to reap the benefits too if you meet a few qualifications – you must have lived in your home for at least 5 consecutive years out of the last 8 years.  For the non-first time home buyer, you can get up to a $6500 tax credit!  For the first time buyer, you could pocket up to 10% of the sale price with a maximum amount of $8000.  Seriously, I wish I was in the market to buy a home.  There are income restrictions, which most people will fall under, so it’s a mute point.  There has been some talk out there that you can use this tax credit as down payment for your home.  Hmmmm, wouldn’t that be nice … getting money for buying a home prior to actually buying it.  Essentially, this was ixnayed by most, if not all, non-profits because it was too risky to be fronting that kind of money.  Makes sense to me.

The current tax credit is the last tax credit, so they say.  When it’s done, it’s done.  No more Mr. Nice Government.  So what do you have to do to qualify?  Buy a house.  Yep, for the most part, it’s that simple.  Get an offer accepted on your first home, or subsequent home, by April 30th, 2010 and close by June 30th.  My guess is you would have already filed your taxes by the time you close.  Well, I hope so since taxes are due April 15th.  No worries.  You can complete a few forms, the 1040x amendment to your personal taxes and the 5405 which is the specific form for the home buyer tax credit.  This way, you won’t have to wait to file your 2011 tax returns.  Oh, the stuff you can buy to fix up your first home!  Not that you have to use it this way, but the government’s philosophy behind all this is that you will go out and “stimulate” the economy by buying goods and services.  It would sure help me if you did, but there is nothing wrong with using that money to pay off some debt or set aside savings — all are good uses of FREE money!!

But wait; there’s more — can you hear the infomercial music?  If you are a first time buyer, you can use a down payment assistance program and STILL get this credit.  There is plenty of money out there just waiting for you to use.  Best part about this money … it’s totally forgiven if you live in your home for three years as your primary residence.   That’s another blog on it’s own.

So, assuming the government keeps their word and doesn’t extend this tax credit, you do need to act NOW.  I mean, come on, houses at all time lows, rates at all time historic lows and money to help you fund your down payment.  Wowsers, can you say “incentive”?  I think I have beaten this topic a bit too much.  My advice is to ONLY buy if the time is right for you.  Sure, the call to action couldn’t be stronger.  But, if you’re not financial willing or able or have commitment issues, then wait.  There is no reason buying your first home or buying another home if your conscience is saying “don’t”.  I would hate that the pressure to “act now” pressures you to buy.

Feel free to give me a call or email if you want more information on this.  And please, only “act” on this if you won’t regret it later.

Did you know the government extended the first time buyer tax credit?  How about the fact that not all lenders offer down payment assistance programs or first time buyer programs?  It’s pretty amazing to know you’re essentially getting paid to buy a home.  Crazy, isn’t it?  There are many people out there, maybe you included, that have a desire to own a home, but sit on the sidelines due to uncertainty, lack of knowledge of the process or being gun-shy due to stories about another person’s bad home buying experience.  It doesn’t have to be this way!  Buying your first home should be educational, pain-free and believe it or not, FUN!  It’s sad how many people go through this experience without knowing the facts, being given options on first time buyer programs or being led through the process, not slammed into the system of homeownership. 

How would you like to get a grip on your first home-buying experience?  We’d love to help you navigate through this process — educate you, with NO obligation, on the steps you will take to become a homeowner — from the first step of pre-approval to the last step of closing on your home and getting the keys!  Oh, and did I mention it’s FREE*?

We have TWO seminars coming up in February.  These are the same seminars, so feel free to pick the one that fits with your work or home location. 

The South metro seminar is on Thursday the 18th from 6:30-8pm at the Cornerstone Mortgage office located at 436 Gateway Blvd. in Burnsville.  I will be presenting these steps with Realtor, Steve Howe, of the Minnesota Real Estate Team.  The two of us will help you take that first step to home ownership. 

If the North metro is a better fit, then join us Thursday the 25th from 6:30-8pm at the Shoreview Community Center — 4580 Victoria St N #203.  Again, Steve and I will be presenting.  This time we’ll be joined by Realtor, Tony D’Agostino, also with the Minnesota Real Estate Team.  Trust me — you will go away knowing so much more about the process AND will feel more comfortable now that you’re armed with information – info that many lenders just don’t share!!  Both will be a fun and educational evening. 

Please register by calling 952-808-0042 as space is limited.  Hope to see you there!

*ALL of our team’s seminars are FREE of charge. Cornerstone Mortgage is proud to be a drop-off site for the CAP agency, which is a non-profit organization that collects food items and gently used clothing for Scott, Carver and Dakota Counties. If you can, please donate a canned food item, baby food or clean clothing so we can continue to support the families in need!