Chasing the Refi . . .

So you keep hearing that interest rates are low. You're probably asking yourself if it's time to refinance. Well, that depends. Here are a few things to consider:

• Are you currently paying mortgage insurance and will that go away because you have enough equity in your house? If you are able to get rid of the mortgage insurance premium you could actually take that extra payment and put it towards your principal, paying your mortgage down quicker.


• Your payment right now is so high it's painful to make the payment and refinancing would make the payment more manageable.


• Do you have equity in your house? If not, you may be faced with having to refinance into a a FHA loan and that means you will have mortgage insurance.


• Your payment may go down but you may be paying longer. For example, you are 5 years into your 30 year mortgage, you refinance and now the clock starts over because you refinance into a new 30 year mortgage. One way to combat that is to get a 25 year, or even 20 year mortgage.


• What is the cost to refinance? For example, if it costs you $8,000 to refinance and it will lower your payment by $150 a month- how long will it take you for you to recoup the savings? Take $8000 and divide by $150 that would mean it would take you 53 months or 4.5 years to recover that $8000. So unless you're planning on staying in your house for at least 5 or more years you might want to reconsider whether it's worth refinancing. One way to combat the cost is to take your current money being held by your lender for your insurance and taxes (called escrow) and your payment you get to miss the month after you refinance and put that towards your refinance costs. That could cut the costs of the refinance in half, thereby giving you a short time line to recoup the costs of refinancing.

Remember this is all very general, there are a lot variables and more things to consider that aren't discussed. So before you decide to chase the refi craze, run the numbers and make sure they work. You may just decide you're better off right now without refinancing.

For more real estate information be sure and check out http://www.elkesellshomes.com/ or call 301-865-9561

Help! I'm in Financial Trouble!

One of the most stressful times in life is when the joy of home ownership turns into a burden. Let me say this again: IT'S NOT YOUR FAULT! That's the first thing you have to come to realize.

So many variables have played into the current housing market. Most, if not all, were and are out of YOUR control. As I tell my distressed sellers, you are not alone. Look in the grocery store, at work, your kids school, your friends . . . they're going through the same exact crisis, you just don't know it.

There is hope. . .that’s HOPE through the Maryland Department of Housing. http://www.mdhope.org/ Maryland Department of housing has created a site for Maryland Homeowners. They provide a network of counselors and various programs to help you refinance and catch up on payments. This is a great place to start.

Next I highly suggest talking with a lender who is familiar with the HOPE program.
There are several options for you.

□ Reinstatement:
This is where you pay back the lender the outstanding amount that you are behind.

□ Forebearance:
This is a temporary repayment plan where the lender sets up repayment for the amount you are behind.

□ Refinance:
This is when you get a new loan with reduction in monthly payments. Many people are actually finding that their payments will go up if they are in an interest only program.

□ Loan Modification:
This is when the lender allows the original loan terms to be modified. Examples are extending the term of the loan, and sometimes (though rarely) adjusting the loan balance downward.

□ Sell the Property:
You use your savings to pay off the difference between your selling price and what you owe the lender.

□ Rent the Property:
Keep in mind you must keep your loan current. I highly recommend using a property manager when you have a rental property. The last thing you want is your now ‘investment property’ to be destroyed.

□ Short Sale:
This is when you negotiate with the lender for the lender to accept less than what you owe. For most, this is the best option.

□ Deed in Lieu of Foreclosure:
This is called a 'friendly foreclosure'. You are going to the bank and in essence handing them the keys.

□ Bankruptcy:
This is your last resort and typically will stall foreclosure but not prevent it.

One of the options available to you is a 'Short Sale'. No matter where you live in the country, even Frederick Maryland you have probably heard of a ‘Short Sale’. A short sale is when a homeowner owes more to the lender than the market value of a property. For example let’s say you owe $320,000 and your home is now only worth $250,000. So in order to sell the owner has to go to the lender and ask the lender if they will accept less than what they owe.

The lender is not in the 'Home Selling Business'. They don't want your house. It's very costly for a lender to foreclose on a home. Also, a short sale will do much less damage to your credit and will allow you to purchase another home much sooner than if you allow your home to go to foreclosure.

To do a short sale you will need a lot of patience. Every lender has different guidelines and rules. Some lenders will ‘pre approve’ a short sale and some lenders won’t even consider it until you have a contract on your home with a buyer to purchase. Also, the process timing can vary. It can take anywhere from a few weeks to several months for a short sale to be approved by the lender. So be patient. It can work, it just takes time and diligence. Also, keep in mind, if there’s more than 1 lender (like a home equity line, 2nd mortgage or 3rd mortgage) each lender will need to approve the short sale. Each of these lenders have different processes and will take more time to give approval.

I've heard people say they're just going to let their home go to foreclosure. Don't do this if you can help it. People don't realize, but just about everything you do is tied to your credit. Your car insurance, credit cards (they will actually increase your interest-regardless that you've been paying on time to astronomical amounts), cable, phone, cell phone, electric, Employment (even your current employment).

If you have questions and you just don’t know where to start, feel free to give me a call at 301-865-9561 or check out my website at http: //www.ElkeSellsHomes.com

category: Real Estate

Short Sale or Not To Short Sale

I get a lot of calls and questions about short sales. By now, from the media and I’m sure just about everywhere else, you’ve heard what a short sale is. It’s when a owner of a home becomes financially distressed whether it be loss of a job, death, divorce, or some unforeseen circumstance and they can no longer afford their home. They owe more on their home then what they can sell for, so they are going to go to the bank and ask them to accept a lesser amount then what they owe.

First a short sale will do less damage to your credit than letting a property go to foreclosure or doing a ‘friendly foreclosure’ (deed in lieu). Nobody seems to know exactly how much better for your credit score a short sale is rather than a foreclosure, but I consistently hear that your score will drop 100-200 points (I know that’s a big range. . . but nobody will commit). I’ve also heard (and read) that you can purchase a new home, depending on how quickly your credit score recovers, within 6 months to a year if you had good credit prior to the short sale (again note the ‘heard and read’- I haven’t actually seen anyone do it, probably a bit of fear factor after going through this process of ever owning a home again).

I’ve had people ask me should I miss my mortgage payment? Well, no one is going to tell you to miss your payment, however the catch 22 is why would a lender talk/work with you about doing a loan modification or short sale when you’re still able to afford your payment (you could take this as a subtle hint)? On that note: If you find yourself suddenly not being able to afford your mortgage, should you immediately list your house and try and do a short sale? The answer may be no. First thing you should do is contact your lender and see if they’ll work with you and do a loan modification to reduce your payment. It sounds so easy, but it might not be. Some lenders will have you fill out their loan modification package and then have you submit it to them and then submit again, and again, and again. Some lenders it seems can’t keep track of the paperwork, but hang in there. . . it may actually work. I’ve had clients that were able to get their loan modified by several hundred dollars and now are getting back on their feet. I’ve also had several clients however that have gone through the process only to find themselves running out of savings because it took so long and they end up having to do a short sale anyway. Keep in mind it could take 6 months for a lender to actually work out the loan modification with you, in the meantime you could go through your savings and still end up losing your home.

So then the question is do you skip the loan modification and go straight to doing a short sale? Maybe, however in most cases the lender is going to be basing the short sale approval on you having little or no savings. Remember, you’re in financial distress and that’s why they’ll work with you to do a loan modification or short sale.

If you’re at the point where even if the bank were able to do a loan modification you still wouldn’t be able to afford the home or you know it’s time to move on and cut your losses, then the first step is to find a knowledgeable REALTOR who handles short sales. The REALTOR will help you put together a short sale package that will be submitted to the lender. In the meantime your home will be listed, typically 5-10% below market value. Once you have a Sales Contract for your house the ‘short sale package’ will be submitted to the lender along with your contract and Market Analysis showing the history of the sale of your property and value. Usually it takes about 2 to 4 months for the Bank to begin reviewing your file (picture thousands of files on a person’s desk and yours is wedged in the middle). Once they begin reviewing your ‘package’ they will order a BPO (broker price opinion) to determine the value. They’ll have you sign forms, send more paperwork and then finally they will submit your package to an ‘investor’ who actually owns your mortgage to see if the ‘investor’ is willing to accept the short sale/loss. If they accept, within 30 days you go to settlement. . .if not then you may be facing a deed in lieu, also known as a ‘friendly foreclosure’.

The key to the whole process is to work with all parties involved-your lender, buyer, REALTOR, etc. Communication is the key especially when it comes to your buyer. Keep them in the loop. Remember your buyer is going to be waiting 3-6 months to buy your house. Try not to lose hope and always remember in this economy you’re not the only one going through this. I always tell my clients look around the grocery store. Just about everyone you see right now is going through some type of financial hardship. . .and this to will pass. One of my clients had a great point. . .with so many people going through this, when we get to the end of this economic crisis will credit scores really matter anymore? Just makes you think.

Feel free to visit my website: http://www.elkesellshomes.com/ for more information on short sales and foreclosure information. As always I would love to hear your questions, just email me at Elke@ElkeSellsHomes.com

Calling First Time Homebuyers!!

Hi, my name is Elke Thornton-Husch and I’m a REALTOR with RE/MAX 100. Frederick.com has asked me to post an article every other week to keep you, the reader, posted on the real estate market. My goal is to provide you with information to keep you abreast of the market and give you the information you need when buying and selling a home. I would love to get questions from you the reader that I can post. Feel free to send me your questions or a topic you would like discussed to Elke@ElkeSellsHomes.com

Calling first time homebuyers (or not)! Hurry, Hurry-expires December 1, 2009
I’m sure at this point you’ve heard lots about the first time homebuyer tax credit, but what does it mean for you? Contrary to the title ‘First time Homebuyer’ you don’t necessarily need to be a first time homebuyer (check with your accountant to verify). The IRS describes first time homebuyers as someone who hasn’t owned a principal residence in the previous three years prior to purchasing a home.
The tax credit can be as much as $8,000! Here’s how it works. Buyers can take a tax credit (not a deduction) equal to 10 percent of the purchase-up to a maximum of $8000 off of their 2009 income taxes when filed next year. For example buy a house that’s $80,000 or more and you owe $8000 in taxes, you now would owe $0! Here’s the downfall-if you make $75,000 or more single, or $150,000 married filing jointly the tax credit maybe reduced. For more info go to http://www.federalhousingtaxcredit.com/2009/faq.php