Reno Tahoe Real Estate News » loans

3 Reasons the Term “Strategic Default” Is Misleading

Kevin Bown — Mon, 07 Mar 2011 23:58:17 +0000

In a recent study, the Chicago Booth/Kellogg School Financial Trust Index found that a full 36% of Americans would consider “strategic default”—another term for walking away from your mortgage—if they were underwater (owed more on their home than what it was worth).

Now that more than one in four American homeowners is “underwater,” I feel that it’s important for the community to know the truth about strategic default.

The truth is the foreclosure process carries with it credit issues, current and future employment challenges, issues with security clearance and possible debt collections.

That’s why it is vital to explain the 3 reasons why the term “strategic default” is misleading:

There’s nothing strategic about defaulting on purpose, especially when you have options like short sales, mortgage modifications, and refinance (just to name a few) that may keep you from foreclosure.
The waiting periods to apply for a new mortgage loan are at least five years less in a short sale vs. a foreclosure.
A foreclosure will show up on your credit report every time you apply for a home loan, car loan, new job, etc., and will affect your financial situation for many years to come.

Foreclosures in Washoe County increased by 16% in January 2011 over December 2010, and up 23% over January 2010.

If you are underwater and can no longer afford your mortgage payments, you need to create a genuine strategy to avoid foreclosure, helping to provide stability for you and our community.

If you have any questions about what steps you or someone you care about should take next, contact me today – 775.813.2387!

I offer a free report at http://www.KevinBown.com

FHA Appraisals – What Buyers Should Know

Amy Shocket — Tue, 07 Apr 2009 22:33:44 +0000

Beginning April 1, 2009 FHA (Federal Housing Administration) has added to its appraisal guidelines. With 67% of homes purchased in the Reno-Sparks area in the first quarter of 2009 utilizing FHA financing, there are some key things buyers should know about these changes.

FHA appraisers are required to include a Market Conditions Addendum stating whether the market is declining or stable etc. Appraisers must now include comps that only go back 90 days. They used to go back 6 months. Typically appraisals are done with sold comparables, but now FHA appraisals need to include 2 active or pending sales as well. This is due to the fact that in some cases active listings are priced below the recently closed comparables.

In addition, appraisers will have to adjust active listings to reflect the list-to-sales price ratios of comparable sales. FHA is also looking for the appraiser to include the pricing history of comparables, showing price reductions. If there are known or reported seller concession (closing costs etc.) the appraiser needs to note that.

Lastly, the appraiser will have to calculate the Absorption Rate on the subject property. This shows the number of months of active inventory given the rate of sale in that neighborhood.

Based on this, my recommendation to buyers would be to make sure that you buyer’s agent is preparing a current market analysis on all properties you are considering writing an offer on, going back no more than 90 days. Have your agent calculate the absorption rate as well. Your purchase could be delayed if your offer is over the appraised value of the home.

In The Money

Vicki St. John — Sat, 31 May 2008 20:38:48 +0000

If you’ve served in the United States Armed Forces, you may qualify for a Veterans Administration Loan, commonly called a VA loan. It’s a fabulous way to finance a home, especially your first home, because you can still get 100% financing – no down payment is required! Although the VA does charge a funding fee, which varies depending on what category you are in and your loan to value, it gets added to the loan amount so it is not an out of pocket expense. The other fabulous thing about a VA loan is that there is no mortgage insurance added on to your payment. Mortgage insurance typically gets charged when you borrow more than 80% of the value of the home, and it covers the lender if your home is foreclosed. Interest rates are comparable with rates for conforming conventional loans, making a VA loan one of the very best alternatives in the market today.

I’ve met with many veterans who have been told not to try to get a VA loan for various reasons, and they are amazed when I tell them they should! Be sure that you are talking with a mortgage professional who can do VA loans – not all lenders can – and that your consultant is familiar with VA loans. If you’re buying new construction, there are some additional restrictions, so be sure the builder is willing to comply with the VA guidelines. Your real estate professional also needs to be aware that you are in application for a VA loan, for the veteran is not allowed to pay for certain closing costs and this must be negotiated with the contract to purchase.

If you have been in the Reserves, you can still qualify for a VA loan if you have served a certain number of years, so be sure to ask. Bring your DD-214 with you, along with your income and asset documentation, to the interview with your home mortgage consultant, because she will need a copy in order to get your Certificate of Eligibility from the VA. You do not need excellent credit to get a VA loan, and you can only have one VA loan at a time. A VA loan is one of the best ways to buy a home when you have less than 20% down, so be sure to find out if you qualify.

In the Money…

Vicki St. John — Tue, 06 May 2008 00:26:31 +0000

Have you ever asked a lender if you can have more money than what the home you’d like to buy is worth? Did the loan officer laugh? Not any more – welcome to the FHA 203K Streamline Renovation Loan. With a 3% down payment – which can be saved by you or gifted by a family member, you can borrow up to $35,000 more than the sales price of the home. You can pick the licensed contractor of your choice – or use a national home improvement store – and have the work done after you close escrow and own the home. You can use more than one contractor if you like and you can do just about anything to the home as long as the structural integrity is not compromised, so although you can’t move load bearing walls, you can do just about anything else. Have you looked at a bank owned property that is missing the appliances? With this loan you can get all new appliances (yes, a new clothes washer and dryer too) and put the cost into the loan and have the appliances delivered at the same time as you move in! Have you looked at a home you love but can’t stand the turquoise carpet and the tacky linoleum in the kitchen, but don’t think you can afford to replace the flooring after you move? Now you can! Have you found an older home and would love to buy it, but you’re very energy conscious and can’t afford the energy efficient improvements you would want to make to reduce your monthly utility bills? Buy the older home loaded with character and keep your gas and electric bills down all at the same time. Let your personal creativity soar and turn that fixer-upper into your dream home with one loan, one low interest rate and one closing. FHA has streamlined the process so it’s much easier than you think and the Washoe County loan limits are now up to $403,750 for a single family home. The home has to be your primary residence – no investors, please – and if you live in one unit, you can finance a property up to 4 units with this loan and the loan limit goes up along with the number of units. Call your mortgage professional to learn more.