Posts Tagged ‘1st time buyer’

GOODBYE API

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GOODBYE API

As most of us know the badly designed API system has been scrapped and at this time there is no replacement other than a totally stupid temporary process which can serve no purpose other than confusion.  This will produce a score for 2014 based on the average of the prior 3 years (2011, 1012, and 2013).

As the scores for each of these increased each year, it’s obvious that an average will be lower than the actual score for the latest year.

A typical parent is going to see that the score for 2014 was lower than 2013 and assume the school is going downhill.  WRONG.

To get a better feel for reality the parent should review the actual scores for the last 3 API years (2011/12/13), and if they show steady improvement it’s reasonable to assume that trend will continue.

Additional information is available from www.greatschools.org but, like the API method its scoring methodology is very simplistic and the user should read the guidelines for using its results and follow the advice they give.

MY ADVICE! Check out whatever scoring methods are available but assume that’s no more than 25% of the things you should do when evaluating a school. The rest, and most important activities, should be:

1.  Your personal visit to the school. They will welcome you with open arms.

2. Talking to parents in the area of the school.

NOTE: The final API replacement will be some variation of the Common Core Syllabus sponsored by the Federal Government. For the foreseeable future the details of this will be fought out by State and Federal politicians. It all reminds me of the description of a Camel as “A horse designed by a committee”.

BAD DATA = FALSE RESULTS

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Consumers are constantly using the Internet to do research about planned purchases and that is particularly true for home buyers, but the accuracy of listing information is not guaranteed in most cases.
Popular consumer real estate listing sites such as Trulia, Redfin, and Zillow get their Listing Data from the Real Estate Industries Multiple Listing data bases i.e. www.mlslistings.com However, They are not regulated and do not keep the data up to date, typically updating every 7-9 days.
MLS Listings is a tightly regulated industry data base system which dynamically updates itself in real time 24 hours per day, 7 days a week.
If you like flashy graphics and multiple advertisements/solicitations then stick with the Zillows of this world.
If you want accurate data with no adverts then your only source is your local MLS site. In my case that’s www.mlslistings.com.
You can easily find your local service by Googling “xxxxxmls”

FIRST TIME BUYER PROGRAMS-Santa Clara & San Mateo Counties.

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It’s easier than ever for 1st time buyersto to get on the home ownership wagon in Santa Clara and San Mateo Counties.

Official seal of County of Santa Clara

Official seal of County of Santa Clara (Photo credit: Wikipedia)

Each  has a dynamite program which greatly reduces the costs of buying when the buyer has only a small Down Payment (3% for Santa Clara-5% for San Mateo).

In both Counties the program works by providing a very low interest rate Second mortgage for either 17% or 15% of the purchase price. This removes the expensive PMI (Private Mortgage Insurance) with  all it’s costs and bureaucracy.

More information can be found at: www.housingtrustscc.org – for the Santa Clara County MAP Program

www.heartofsmc.org – for the San Mateo HEART Program.

Or drop me an e-mail – bmccord@rwnetwork.com

AND THAT’S NOT ALL.

You can then add the best Federal  Program I know of; The MCC (Mortgage Credit Certificate ) program which provides a substantial IRS Credit. As an example of this it would reduce your Federal Tax Bill by about $240/month on a $400,000 mortgage i.e. $2,880/ year.

NOTE: This is in addition to the normal Tax Relief on Mortgage Interest.

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THE OTHER 10 COMMANDMENTS

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When Applying for a Mortgage Loan
1. Thou shall not change jobs or become self-employed.
2. Thou shall not buy a car, truck or van unless you plan to live in it.
3. Thou shall not use your credit cards or let your payments fall behind.
4. Thou shall not spend the money you have saved for your down payment.
5. Thou shall not buy furniture before you buy your house.
6. Thou shall not originate any new inquiries on your credit report.
7. Thou shall not make any large deposits into your bank account.
8. Thou shall not change bank accounts.
9. Thou shall not co-sign for anyone.
10. Thou shall not purchase anything until after the closing.

MCC. FREE MONEY FROM THE IRS

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Many States, Counties, and Cities have great programs to help 1st Time home buyers, but few if any are better then the Federal Governments Mortgage Credit Certificate (MCC) program.
This turbo charges the existing TAX DEDUCTION for mortgage interest by allowing 15% of it to be taken as a TAX CREDIT.
Here’s an example:
If you pay mortgage interest of $24,000/year you can take 15% of that ($3,600) and deduct it dollar for dollar from your total tax liability.
To put it simply; if your total tax bill was $20,000 it will be reduced to $16,500. You have now got a tax free pay raise of $250/m.
You can now tell your employer to reduce the amount they take from your paystub so you get the benefit of this right away with an extra $250/month in your pocket.
This program is administered by the Counties, and your Mortgage Broker/Bank, but be aware that not all of them are familiar with it. Be prepared to educate them.

PENDING RATIOS STILL IMPROVING

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The ratio between pending sales and listed properties is the best single indicator of future market direction.
Silicon Valleys Pending Home Sales Index (PHSI) has now improved for 16 months in a row from from February 2011 to May 2012.
A PENDING SALE is defined as a Signed Purchase Contract.
Given the Federal Reserves commitment to keep rates down for at least another year this trend seems sure to continue with a steady increase of home prices.

Down Payment Gift Funds

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Fannie Mae, the most important rule maker in the mortgage business, has released this new guideline.
  
“If a borrower receives a gift from a relative or domestic partner who has lived with the borrower for the last 12 months, or from a fiancé or fiancée, the gift is considered the borrower’s own funds and may be used to satisfy the minimum down payment, as long as both individuals will be living in the property.   

This change improves and clarifies how gift funds can be counted when qualifying for a mortgage. This can be the difference between being able to buy that 1st home, and having to continue renting.   

  Thanks to Mario Basura of Broadview Mortgage http://www.Broadviewmortgagecorp.com/MarioBasura for this update. 

    

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Politician Attacks 1st Time Buyers

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Rep. Maxine Waters [D-CA35] recently introduced H.R. 5072,The FHA Reform Act of 2010 which would impose hugely increased monthly payments on anyone buying a home with an FHA insured loan. This is a large majority of all 1st Time Buyers.

Already, effective from April 5th, the upfront Mortgage Insurance Premium was increased from 1.75% to 2.25%, (a 29% increase).

Now, in a further attack on the 1st Time Buyer, this misguided lady proposes a 300% increase on the ongoing monthly Mortgage Insurance payment.

To understand the impact of this consider a new $300,000 purchase with a 30 year fixed FHA loan.at 5.5% interest rate. The monthly payment will go from $1,804 up to $2,051. An increase of 12%.

Put another way; If the maximum you could qualify for was $300,000 before, it would now be only $270,000.

At one fell stroke this bill would eliminate an enormous number of willing buyers at the bottom end of the market.

When you consider that each 1st Time Buyer potentially creates a move up Buyer we can’t afford  this kind of interference in this very fragile recovery.

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Why Choose a REALTOR

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There are many different Business Models in the Real Estate Industry. Here’s just a few examples:

1. Buyer Only Brokers.

2. Buyer Rebate (Kick Back) Brokers.

3. Virtual Office Brokers. No physical location.

4. Reduced Commision Brokers.

5. Fixed Price Brokers.

6. Transaction Facilitation Brokers.

Etc, etc.etc ad infinitum.

All of these and many more are proof that we have a lot of competition in our business, and that the Consumer (Buyer or Seller) has lots of choices.

I won’t try to explain the pro’s and con’s of any of these options, but will strongly suggest that whichever of them you choose you  strongly consider working with a REALTOR.

My reason for this specific advice is as follows:

1. There are more than Half a Million Licensed Real Estate Agents in California. This is the minimum required qualification for the job.

2. Only 165,000 of them are REALTORS who have voluntarily agreed to subscribe to a strict Code of Ethics, and are paying members of their Local, State, and National Associations of Realtors.

Amongst many other services Realtors provide to the public is the web site Realtor.com. the most popular of all on-line Real Estate sites. Check out http://www.realtor.com/.

YOU AND YOUR CREDIT (FICO) SCORE

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 FICO scores measure the risk that an individual will default by evaluating their history of credit management. The exact formulas used are top secret but FICO has given the following components and the approximate importance of each:

35%- Payment History. Late payments of bills such as Mortgage, Credit Cards, Car loans etc will lower a person’s FICO score . Paying bills as agreed over time will improve the score.

30% – Credit Utilization. The ratio of current revolving debt (Credit Card and Charge Account balances) to the total available credit (Credit Limits). Consumers can improve their FICO scores by paying off debt and reducing balances to less than 50% of the available credit. Closing existing revolving charge accounts can have a negative effect on this ratio, and lower your score. Before closing accounts be sure to do some more research, or get qualified advice.

15% – Length of Credit History. Time improves FICO scores without any action other than paying all bills on time.

10% – Types of Credit Used. FICO scores are improved by having a good history of managing multiple types of credit (Installment, Revolving, Consumer finance etc).

10% – Recent Credit Applications. Multiple requests to obtain new credit over a short period of time can hurt an individual’s FICO score. However, individuals shopping for the best rate for a Mortgage or Auto Loan over a short period will not see any negative impact on a FICO score.

For more detail on this and other Credit Related questions the following link is a Gold Mine of factual information.

http://www.myfico.com/CreditEducation/