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Got it rent until we figure out where we are staying for 20ish years steady. Also can someone clarify the difference of short sale vs. foreclosure. I've seen a lot more of them by me lately.
himurak fucked around with this message at 04:12 on Nov 1, 2011 |
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Nov 1, 2011 04:10
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himurak posted:Got it rent until we figure out where we are staying for 20ish years steady. Also can someone clarify the difference of short sale vs. foreclosure. I've seen a lot more of them by me lately. Short sales are when the owner of the house tries to sell the house for less than what they owe on the mortgage and hopefully gets the bank to sign off on the transaction. Foreclosures are when the owners of the house have defaulted on the mortgage and the bank has already gone through the necessary steps to foreclose on and take ownership of the house. The bank owns the house at this point. skipdogg fucked around with this message at 15:35 on Nov 1, 2011 |
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Nov 1, 2011 04:18
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skipdogg posted:You know how we all say DO NEVER BUY. Well that goes 50000000000x more for a Condo. DO NEVER BUY A CONDO. Ever. Really. For Reals. Never. Concur, to me they magically combine all of the downsides of renting and ownership with few of the upsides of either.
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Nov 1, 2011 13:40
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Closed on my no cost 3.99% fixed rate 30 year mortgage refi today. Operation twist was a success.
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Nov 1, 2011 16:30
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himurak posted:I've ruled out a traditional house because I don't want to have to care for the exterior of it (lawn/snow removal/etc). I would like others opinions on the matter and if you want/need more info ask. Others have already addressed most of the salient points, but there is a logical error here that is worth pointing out. When you own a condo, you are paying for someone else to do all the exterior care, via your HOA/Condo fees. A committee makes the decisions about how and what to do for that upkeep, and then sends you the bill. When you own a traditional house, you of course have the option of paying someone else to do all the external care of it! As a bonus, you get to be the final decision-maker about who does this work, what they do, how, when, etc. It is also possible to buy a house with no yard or garden, of course, if you prefer not to worry about it. That reduces your expense to just paying someone to wash the windows and paint the house or whatever. So: of the (in my opinion very few) reasons why someone would be better buying a condo than a house, the particular one you cited isn't, really.
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Nov 1, 2011 21:50
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Coming in to defend condo/co-op living though you have to really try and educate yourself on the building/complex you are thinking of buying in before you commit. In my city you aren't buying a house unless you have a budget of 1 million+. Condos/co-ops are very normal here and the biggest thing is just making sure you feel comfortable committing to the condo, since you are stuck with their rule.
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Nov 1, 2011 23:44
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Leperflesh posted:So: of the (in my opinion very few) reasons why someone would be better buying a condo than a house, the particular one you cited isn't, really. Out of curiosity, what about a townhouse?
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Nov 1, 2011 23:50
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As far as I know, a townhouse is just a two-story semi-detached condo; in terms of HOA fees, maintenance responsibilities, parking difficulty, lack of owning the land, busybody rules-nazis, and worse resale-price stability, they're the same. Right?
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Nov 2, 2011 00:58
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This isn't buying a home, but rather, a home equity loan question. I figure that since everyone is talking about buying homes, there will also be knowledge on how to go about this. With the recent death of my mother's cat, my parents have begun thinking about renovating their home. Kind of strange, I know. My mom wants to do it because now she won't have to worry about him being scared by construction. There is a lot of potential for the home but a lot of work must be done. Because my mother is scared shitless of people and my dad is old, they've asked me to undertake this. For the record I'm 21, I go to college in Baltimore and they live outside of DC, I also don't own a car. They would like to plan for everything in the late spring, early summer when I can be home to help manage everything. With all that said, how does one get a home equity loan? My understanding (from reading wikipedia) is that it is a loan taken against their home equity and then paid back, exactly how, I'm not sure if it's $xxx per month or when they eventually decide to sell their home. They bought their home in 1994 for $186,000 and current homes in the neighborhood go for nearly $370,000. The financial bubble got home values up as high as $420,000 and then down to as low as $350,000. In the last two years there has been some rebound in value. The neighborhood is good because the school system is excellent, has the best elementary school in town in walking distance, and has several synagogues within walking distance as well. That being said, my parents home isn't in good condition. I don't know what they could get for the home but it would be sub $300,000. They need new carpets/floors, new kitchen, some fixtures fixed, repaint all the walls, install a bathroom in the basement and probably get a deck built because they are the last home in the neighborhood without a deck. They would also like to improve some of their own personal possessions inside the home, if possible install a mini-library in the basement because they are a professor/historian and library and have thousands of books. I should really talk to a bank, credit union (my dad has been a lifelong part of a credit union in California, I don't know if they would help us but I know in general their interest rates are better) or their mortgage lender but I'd like to know your opinions first. If this is a good idea, if they can see a return on their investment, if it's worth doing even if they aren't going to sell their home, etc etc. Whatever you guys think. I have a half-brother who used to be a mortgage loan officer and now sells (mostly short sale and foreclosed) homes in a lovely part of California. When pressed for information, I just got "lol why don't you talk to a bank." Not much help. Sorry for the wall of text but I would appreciate your guys advice and hopefully I can help my parents.
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Nov 2, 2011 01:23
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Leperflesh posted:As far as I know, a townhouse is just a two-story semi-detached condo; in terms of HOA fees, maintenance responsibilities, parking difficulty, lack of owning the land, busybody rules-nazis, and worse resale-price stability, they're the same. Right? I believe with town homes you're responsible for your own roof, plumbing, HVAC etc. Snow removal and landscaping are shared still, but the HOA fees should be much smaller.
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Nov 2, 2011 01:42
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Leperflesh posted:As far as I know, a townhouse is just a two-story semi-detached condo; in terms of HOA fees, maintenance responsibilities, parking difficulty, lack of owning the land, busybody rules-nazis, and worse resale-price stability, they're the same. Right? Townhouse is a type of housing; condo is a type of ownership. So no, not all townhomes are condos. You can have townhomes that are just attached houses where you own the land, roof, etc. An HOA fee usually covers snow, trash, etc. Of course HOAs are often as bad as condo associations. Generally speaking newer townhomes tend to be of the condo variety, older townhomes (think 90s and before) tend to not be. THs are not bad if you don't mind sharing two walls (does make utilities a little cheaper) and not having much of a yard. You can get more interior space (albeit on more levels) for the same price that what you could with a SFH. Many of the newer ones do have garages or little driveways so parking is not always an issue. In some areas where space is at a premium THs are more common than SFHs and are plenty desirable (most of DC comes to mind here). To me buying a TH near or in a major city makes perfect sense, but if you are way out in the burbs that TH is more likely for people that want ownership, but can't afford a suburb SFH. Realjones fucked around with this message at 03:34 on Nov 2, 2011 |
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Nov 2, 2011 03:29
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Leperflesh posted:As far as I know, a townhouse is just a two-story semi-detached condo; in terms of HOA fees, maintenance responsibilities, parking difficulty, lack of owning the land, busybody rules-nazis, and worse resale-price stability, they're the same. Right? And the term for home-like condos you typically see in listings is "fee simple."
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Nov 2, 2011 05:21
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OK, yeah, I was just thinking about the townhomes they built a shitload of in the southern parts of the bay area during the last thirty years. They're all cookie-cutter attached mini-mansions with the same type of HOAs as condos, but bigger and more expensive. As for desirability/pricing: I'm sure it varies by market. But my distinct impression is that nationwide, condos in particular have been worse-hit than houses, and so I assume it's a similar situation for townhomes. When I do a bit of googling, though, it seems the two are usually listed together, so I can't really back that up with hard data that calls out townhomes on their own.
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Nov 2, 2011 06:17
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Leperflesh posted:OK, yeah, I was just thinking about the townhomes they built a shitload of in the southern parts of the bay area during the last thirty years. They're all cookie-cutter attached mini-mansions with the same type of HOAs as condos, but bigger and more expensive. 59.5->132.0 for condos 68.4->131.7 for SFHs Since 1/1/1995 again.
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Nov 2, 2011 06:38
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Leperflesh posted:So: of the (in my opinion very few) reasons why someone would be better buying a condo than a house, the particular one you cited isn't, really. Sure it is. The kind of person who doesn't want to care for the exterior really doesn't care. Your mistake is in assuming that he has a desire to participate in exterior design. If he's like me, it's 100% unappealing, and I'll gladly subcontract that job to my HOA. You see the landscaping committee as a negative, I see it as a positive. Never mind that the landscaping rates for a community are vastly lower (per resident) than a private residence.
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Nov 2, 2011 06:41
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Leperflesh posted:As for desirability/pricing: I'm sure it varies by market. But my distinct impression is that nationwide, condos in particular have been worse-hit than houses, and so I assume it's a similar situation for townhomes. In urban areas (like mine at least, Minneapolis) prices aren't that bad. It's important to remember that with the overall decline in housing prices, part of it is all the financial fuckery, but a lot of it is homes are places where people no longer want to live. Your exurban community an hour+ away from its corresponding major metro area? Yeah, those prices are never coming back. Transit accessible new urbanist community close to the core? Hell, you could be at pre crash prices already.
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Nov 2, 2011 13:56
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gvibes posted:Case Shiller has SF data as well: What are these numbers? Are townhouses included as SFHes, or as condos?
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Nov 2, 2011 19:53
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Leperflesh posted:What are these numbers? http://en.wikipedia.org/wiki/Case%E2%80%93Shiller_index
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Nov 2, 2011 20:46
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Refinance question: So I'm trying to refinance, and just got my appraisal back at $240k (bought at 268 2 years ago). I owe 206k, giving me ~14% equity. The bank is willing to let me refinance at less than 20%, however I'll be paying PMI of approx $100 a month. I have the option to accept this, which would lead to a payment of $1098 (998 in mortgage, 100 in PMI) or I can come up with $14k and get my principal down to $192k and then not pay PMI, and have a much lower payment of $930. My current payment is $1217 (5.5% on $214,400). I'm a bit up in the air on what to do. On the one hand I don't really wanna come up with 14k, but on the other refinancing and only saving about 120 a month for the first 3-4 years is annoying. After figuring out how it would amortize it seems like I'd end up spending about $4k on PMI before reaching 192k and having it cancel out. Seems like if I'm going to potentially lose 4k in PMI I might as well try and get more out of it and get my principal down to 192k and then enjoy the much lower monthly payments, not to mention I'd break even on that in only 4 years. Thoughts?
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Nov 2, 2011 20:51
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gvibes posted:These are indices of home and condo values. Not sure where townhouses fall. OK, units are important, thanks. I don't think it's especially revealing to point out the index values from 1995, though, since that doesn't really highlight the massive drop that has happened since prices peaked in 2006, and my (increasingly shaky) thesis was that condos and townhouses have been worse-hit since that year, than traditional SFHes. senor punk posted:Refinance question: So, to boil it down, you can tie up (and place at depreciation risk) $14k to save $4k over the next 4 years, is that right? Tough question to answer, I guess; a lot depends on what the opportunity cost is to you (e.g., what would you do with that $14k if you didn't put it into the house). Another factor is how long you intend to keep the house: if your time horizon is much longer than 4 years, the risk of losing some portion of that $14k to depreciation declines. And your assessment of that risk is as good as mine... my best guess is that, nationwide, prices will have bottomed out and perhaps started to recover a little bit in 4 years time, but that they won't be back up to 2006 levels for perhaps a decade or more, if ever. But that of course this will vary wildly by market, to the extent that the national trend is less important than the local situation. Balanced against the risk is the known-quantity of savings on the PMI. So you could also think of it as, would you "invest" $14k if you knew you could make $100/month on that investment? 1200/year on $14k is what, an 8.5% annual return? Guaranteed? Not half bad I'd say. The problem of course being that you can't (necessarily) get the $14k back after 4 years when that return dries up completely, so it's not a direct comparison. Leperflesh fucked around with this message at 22:32 on Nov 2, 2011 |
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Nov 2, 2011 22:24
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GreenCard78 posted:With all that said, how does one get a home equity loan? My understanding (from reading wikipedia) is that it is a loan taken against their home equity and then paid back, exactly how, I'm not sure if it's $xxx per month or when they eventually decide to sell their home. They bought their home in 1994 for $186,000 and current homes in the neighborhood go for nearly $370,000. The financial bubble got home values up as high as $420,000 and then down to as low as $350,000. In the last two years there has been some rebound in value. The neighborhood is good because the school system is excellent, has the best elementary school in town in walking distance, and has several synagogues within walking distance as well. The general process for getting a home equity loan (HELOC) is going to be fairly similar to any other loan. Speak to a loan officer at a mortgage broker or retail branch and they'll take your application, collect the usual loan documents, read over a truckload of disclosures, order an appraisal (probably), title work, etc. Same as any other loan really, the main difference is that HELOCs are much less common these days compared to say 2007 or so, you may need to do a bit of shopping around to find a lender that will have a program available that works for you. Where HELOCs really differ is how they work once the loan is closed. Once the loan is setup, you have a line of credit secured against the home that you can draw on at any time. You may be given special checks to draw on it, some type of debit card, or if you have an existing checking/savings account with the bank you may just be able to transfer funds directly from the account. Generally, HELOCs are setup as a two stage loan. The first stage, the draw period, is typically 10 years long and only during this time frame can you draw on the available balance in your line. HELOCs are generally an adjustable rate, interest only payment during this period so your monthly payment will usually be pretty low (but you're also not paying down any principle). Once the draw period has ended, you'll usually enter the repayment period - normally 15 years long, at this point your credit line is frozen and you begin to pay back the principle and interest. Your interest rate may also become fixed at this point, or it may continue to be adjustable in which case your interest rate would continue to change every year or so. Note that some HELOCs are balloons, meaning that the end of the draw period you are expected to pay the entire amount owed in full (or refinance the balance into a new loan). How high of a line the bank is willing to give you would depend on the value, how much existing financing there is on the property, combined loan to value, etc. The main advantage of a HELOC is that you can access the funds more or less whenever you want and only have to pay interest on the current outstanding balance - so even if you've got a $100k maximum line, if you've only drawn $5k you're only paying interest on that $5k. The downside is that HELOCs will have higher interest rates, and since they're adjustable they can go quite high during the life of the loan depending on the programs caps (how frequently and by how much the interest rate can change). Additionally, once you finish out the draw period you're payments will be amortized over 15 years (or 10, 20, whatever) which is shorter than the standard 30 that most people do these days. If money's tight that may be an issue. And if it's a balloon I hope you're in a position to pony up the cash or be ready to refinance it again. The other option your parents may want to pursue would be either a straight cash out refinance or possibly, depending on the work that needs to be done, a renovation loan. You mention that the house isn't in "good" condition, but the work that you mention mainly seems to be cosmetic/"want" upgrades rather than "this place is a poo poo hole and no one would want to live in it". Under the assumption that the house is in a salable condition, for a straight up cash out refinance your parents can take out a new, larger loan on their home using the proceeds to payoff the current loan and pocket the rest of the money. They can stick it into a savings account and do whatever they want with it - payoff debts, remodel, install a library, whatever. How much they can get would be subject to the outstanding balance on their current loan, appraised value, loan to value restrictions, etc. The main advantages to a cash out refi over a HELOC is that right now fixed interest rates are still pretty low, so even though you'd be paying more currently due to full principle & interest payments you'd probably pay less in the long run and not have to worry about your adjustable rate spiking up 10, 15, 20%, or whatever. A third, pain in the rear end option is to pursue a renovation loan. You'd only want to consider this if the house actually is in a lovely condition and the bank wouldn't otherwise lend you the money. It's a fairly specialized product and not a lot of brokers do them (they are seriously a giant pain in the rear end). A very short explanation of renovation loans is you would work with contractors to get bids on whatever repairs/work you want done on the home, the bids get submitted to the bank along with the loan package and appraisal and, assuming they agree to lend you the money, will hold the renovation funds in an escrow account and dole it out as necessary to the contractors to have the work completed. If you can avoid it, you're much better off doing the other two options and as I mentioned very few people are willing to do them (again, pain in the rear end) so even if you want to go this route it may not be an option. As to whether you should do it/good return on investment/etc., I will leave that to the other financially minded goons in this thread. If you do decide to proceed, definitely discuss your options with a reputable broker who can give you better advice once they've seen your parents financials. And if, for some reason, you go with a renovation loan for the love of god find someone who has a lot of experience with them to handle it for you. I've seen a lot of renovation loans turn into complete clusterfucks because it was the LO/processors 2nd renovation loan ever  Edit: Spelling. And drat that's a lot of words. If you want me to clarify anything let me know. Captain Windex fucked around with this message at 01:06 on Nov 3, 2011 |
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Nov 3, 2011 01:02
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Captain Windex posted:Thank you! This is the kind of explanation I was hoping to get out of my brother, maybe I'll show it to him eventually. It's kind of ironic that the home in question is a town home and the HOA is not as restrictive as a condo like the other posters are discussing. I've got a few questions. You say salable condition and that the repairs are cosmetic. The home itself is in good condition. The foundation, firewalls, bricks on the front, back side, etc are in good condition. HOA keeps that in check. We've never had a problem with gutters or anything else that town homes can have problems with because they are connected to their neighbors. There are a few piping problems that should be addressed, namely the dishwasher and an upstairs bathroom but those haven't been the biggest problem for my parents. My parents grew up washing dishing by hand and although they could spend the money, they just haven't. The upstairs toilet they get along without, they already have two others. Again, they have the money but just haven't felt the need to replace it if they get along without it. I think they had it fixed twice or something and both times the plumber did a shotty job. Fed up, they just moved on. Neither have the mentality I have, I'd have no problem telling the plumber "gently caress you, do your job correctly." All that said, the home isn't in condition to be sold. Not by a long shot. They'd need to do all of this if they ever decided to move. That being said, I don't think they would for a long time. The return may be two hundred thousand dollars (or whatever) but buying a new home is much more expensive then when they bought. They'd get a new home but a new 30 year mortgage at probably an even higher monthly mortgage. I think my mom just wants somewhere nice(r) to live. All that being said, my understanding of the HELOC loan would be a loan of X amount that they could draw upon within Y years to pay for the contractors to come in and do Z work. After everything has been completed, withing Y years, they begin to repay the loan over the predetermined year limit. So if they spent $50,000 on everything and decided it was done, they would end the loan period and begin the payment period of whatever years. The interest rate during the first loan period would change as it entered the second period. I think that is the type of loan that would work best. They could refinance (into infinity) and if, let's say, they still owe $86,000 on the home (I don't know how the mortgage is set up, if they are paying interest primarily first or if it's principle second, etc so I just guessed if the payments were even with 17/30 years) and got refinanced loan for $146,000 (just an example), they would have essentially $60,000 in an account to be used. However, they would be stuck with another 30 years of loans they will die before they are out of. They will, however, probably have a less of a monthly payment ($186,000 vs $146,000) on their mortgage and no additional loan to pay off. That is my understanding of the two options. The third sounds awful and is not being looked into. Thank you for your help! If I've misinterpreted anything, please, let me know. Again, thank you for your help.
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Nov 3, 2011 03:40
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GreenCard78 posted:I've got a few questions. You say salable condition and that the repairs are cosmetic. The home itself is in good condition. The foundation, firewalls, bricks on the front, back side, etc are in good condition. HOA keeps that in check. We've never had a problem with gutters or anything else that town homes can have problems with because they are connected to their neighbors. There are a few piping problems that should be addressed, namely the dishwasher and an upstairs bathroom but those haven't been the biggest problem for my parents. My parents grew up washing dishing by hand and although they could spend the money, they just haven't. The upstairs toilet they get along without, they already have two others. Again, they have the money but just haven't felt the need to replace it if they get along without it. I think they had it fixed twice or something and both times the plumber did a shotty job. Fed up, they just moved on. Neither have the mentality I have, I'd have no problem telling the plumber "gently caress you, do your job correctly." Well, salable from the perspective of the bank is going to be a little different from your idea of salable. Most of the issues you've noted on the property are things that the bank won't know or really care about. What you need to keep in mind is that your appraiser's job is to give an opinion of the value of the property based upon their basic observations of the home. They are NOT home inspectors (and they will mention this every chance they get in the appraisal itself) and so a lot of the issues that you have noted will not be addressed in the appraisal because they have little bearing on the value of the property. If they notice obvious deficiencies in the property they should address them in the report, but most of the nitpicky issues would only be noticed by a home inspection (which is not normally done on a refinance). Your appraiser won't notice/care about a leaky dishwasher. They will (or should) notice if said leaky dishwasher has caused water damage in the basement ceiling which has subsequently resulted in a massive mold infestation. Water damage and mold have serious consequences on the ability to sell the home, having old carpet and needing a fresh coat of paint don't (for the most part). Not sure what you mean about getting along without a bathroom in this context - I assume the plumbing is non functional for that bathroom? Might be OK depending on what's wrong exactly with the bathroom and what your lenders stance is on this (talk to a broker). GreenCard78 posted:All that being said, my understanding of the HELOC loan would be a loan of X amount that they could draw upon within Y years to pay for the contractors to come in and do Z work. After everything has been completed, withing Y years, they begin to repay the loan over the predetermined year limit. So if they spent $50,000 on everything and decided it was done, they would end the loan period and begin the payment period of whatever years. The interest rate during the first loan period would change as it entered the second period. Well, usually the period that they are eligible to draw and the repayment periods are set time frames. Some HELOC programs do allow you to basically "lock in" some or all of the outstanding balance - the portion that gets locked in is basically immediately converted to a principal and interest payment and they are no longer able to access that portion of the line. For example, on a $100k allowed line your parents have taken $40k in draws and they convert that to the repayment period. The $40k then gets repaid based upon a locked in interest rate and they make principal and interest payments, while the remaining $60k of their line is available if they want to continue taking draws for additional funds. That said, this is a very general look at how HELOCs work. Fannie Mae, Freddie Mac, FHA, and VA do NOT offer HELOC products, so anything you're offered is going to be some sort of portfolio program that is going to be fairly specific to your specific lender. For the most part, a Fannie Mae loan is going to be pretty much the same whether you go through Chase, Wells Fargo, or Generic Federal Credit Union. HELOCs will have a high degree of variability between every lender since there's no standard product offerings. GreenCard78 posted:I think that is the type of loan that would work best. They could refinance (into infinity) and if, let's say, they still owe $86,000 on the home (I don't know how the mortgage is set up, if they are paying interest primarily first or if it's principle second, etc so I just guessed if the payments were even with 17/30 years) and got refinanced loan for $146,000 (just an example), they would have essentially $60,000 in an account to be used. However, they would be stuck with another 30 years of loans they will die before they are out of. They will, however, probably have a less of a monthly payment ($186,000 vs $146,000) on their mortgage and no additional loan to pay off. Well, for a standard cash out you have loan terms of 10-30 years available to you so if it's an issue of not wanting to take out a loan that will outlive them they could always get a shorter term loan (assuming they qualify with the increased payment).
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Nov 3, 2011 05:34
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So, just because I want to know. What happens to someone that walks away from a mortgage? Wait.... http://moneywatch.bnet.com/economic-news/blog/make-money/what-happens-when-you-walk-away-from-a-mortgage-loan/261/ This sounds.... surprisingly easy...
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Nov 3, 2011 14:53
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Untagged posted:Does anyone here have any familiarity with the Good Neighbor Next Door program? This was asked a year ago and I couldn't find an answer to it. I've read the details and I know that finding a non-poo poo home in my county where the winning bid will be the list price is low, but in a magical world where this happens you can get 50% off the list price. This seems utterly insane to me, especially because all the caveats seem to be reasonable (primary residence, live there three years). My wife's a teacher and housing prices near us are insane. We make enough to afford a house, like the DC area, have top-tier credit and our only debt is student loans (teachers have to keep taking college courses, so that will probably be forever). I mean, getting a $250,000 house (what is in our comfort zone) for $125,000 with a few hundred down + closing and additional inspection seems like some sort of fairy tale. Which it probably is because of the odds of finding something, but still.
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Nov 3, 2011 15:28
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And... apparently my state is a non-recourse state... http://en.wikipedia.org/wiki/Nonrecourse_debt So... I could theoretically walk away from my home in a year without any financial liability (Beyond taking a hit to my credit score) even if the home is under-water...
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Nov 3, 2011 16:50
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Orange_Lazarus posted:And... apparently my state is a non-recourse state... I think you still owe taxes on the difference between the amount of the debt left to be repaid and the amount they get for selling the house.
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Nov 3, 2011 17:40
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The Aphasian posted:I mean, getting a $250,000 house (what is in our comfort zone) for $125,000 with a few hundred down + closing and additional inspection seems like some sort of fairy tale. Which it probably is because of the odds of finding something, but still.
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Nov 3, 2011 18:13
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Nocheez posted:I think you still owe taxes on the difference between the amount of the debt left to be repaid and the amount they get for selling the house. Not true. The tax hit comes when the bank forgives debt. In a NON-recourse state the bank can not come after you personally and thus can't forgive debt. In a recourse state if they decide not to collect against you it will count as 'debt forgiveness income' and come with a tax bill.
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Nov 3, 2011 18:17
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You're still not off the hook when you're "forgiven" debt though. In a non-recourse state the bank still has to file a 1099-C form for the residual of forgiven debt and you get taxed on that as regular income (not a joke - part of why foreclosure used to mean bankruptcy until recent years after a law passed during the housing crisis). Because you cannot claim losses on a primary residence, I might recommend renting out a house at least briefly before short selling it or something so you can avoid the potential tax burden of the 1099-C. This is moreso relevant if your property value tanked so badly from your purchase price that you'd get a 1099-C for something crazy like your annual income. All this has led me to one conclusion: do never buy during a housing bubble in a recourse state with any more than a 0% down mortgage investment.
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Nov 3, 2011 18:42
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necrobobsledder posted:You're still not off the hook when you're "forgiven" debt though. In a non-recourse state the bank still has to file a 1099-C form for the residual of forgiven debt and you get taxed on that as regular income (not a joke - part of why foreclosure used to mean bankruptcy until recent years after a law passed during the housing crisis). Because you cannot claim losses on a primary residence, I might recommend renting out a house at least briefly before short selling it or something so you can avoid the potential tax burden of the 1099-C. This is moreso relevant if your property value tanked so badly from your purchase price that you'd get a 1099-C for something crazy like your annual income. From IRS.gov: Non-recourse loans:A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral.That is, the lender cannot pursue you personally in case of default.Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income. emphasis mine. In a non recourse state you have no debt with the bank after a foreclosure so there is nothing to be forgiven.
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Nov 3, 2011 19:28
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We are officially under contract. Trying to squeeze everything together and move-in before Thanksgiving. Crossing my fingers hoping the bank moves faster. We aren't too worried because we are working with a local credit union and they seem to care, not like big banks. This a stupid new homeowner question- What about electricity, water, etc.; is that all on when we move in and we just change the information?
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Nov 3, 2011 19:46
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Daeus posted:In a non recourse state you have no debt with the bank after a foreclosure so there is nothing to be forgiven.
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Nov 3, 2011 20:22
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You need to establish service and turn ons for utilities before or slightly after possession if you want to use them from day one. The seller will have them turned off before then unless they are dumb.
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Nov 3, 2011 20:28
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Just go on to each utilities website and sign up as a new customer or transfer your existing service to your new address. The utility company will tell you if there are any problems. For instance when I turned on cable at my house, the previous owner hadn't turned off their service yet so I couldn't start mine. It took a few days but finally they turned it off so I could start my cable service.
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Nov 3, 2011 21:42
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 A lot of  and effort posting follow So you've read this whole thread, and for some dumb reason you still want to buy your own home. Do Never Buy. But if you do really want to buy, hopefully this post will provide some insight and tips on the mortgage process so that you can successfully get the loan to buy the home of your dreams (nightmares). To get it out of the way, I work at a large bank as a mortgage underwriter. My job is to review your loan application, credit report, appraisal, and other supporting documentation and use it to make a decision on whether we will approve you for a loan or not. I'm not going to try to sell you on getting a loan or not, and I will not recommend any particular brokers or banks to go through. I'm also not going to argue about the current financial crisis, housing bust, retarded underwriting practices from 2008 on back, or related topics. This post is simply tips and general information that will hopefully help make the loan process as painless as possible. A few things to note before I get started then: I only do conventional loans, so what I've written here has those in mind primarily. That said, the info mostly is general enough that it should be applicable still to FHA and VA loans as well. If I get into more specific topics I'll try to specify when something applies to just conventional or just government (when I know). KEEP EVERYTHING YOUR BROKER/BANK GIVES YOU. THIS APPLIES TO DOCUMENTS PROVIDED BOTH BEFORE AND AFTER YOUR LOAN CLOSES. DISCLOSURES, GFEs, TILs, YOUR APPRAISAL, NOTE, MORTGAGE. EVERY-loving-THING. This really should go without saying, but I see so many loans where the borrower “can't find” something and it holds their loan up for some dumb reason. You probably won't need them, but we are talking about hundreds of thousands of dollars of money – there is no excuse to not hold onto every scrap of paper as it may become essential later on. There are tons of regulatory changes that have come down over the last few years (particularly in regards to the fees that can be charged to you) and almost all of them protect you if your broker fucks up. Your GFE and TIL are a key component of this. Definitions/Key Terms: GFE – Good Faith Estimate. 3 page document that outlines the fees/costs that you can expect to incur in closing the loan. Lenders are now required to adhere to the fees quoted for the most part (there are some tolerances of what is allowed to change, but it's better than the old system where they could change whatever they wanted, whenever). An important document, definitely hold onto it. An example can be found at http://www.hud.gov/offices/hsg/ramh/res/gfestimate.pdf TIL – Truth in Lending. Another disclosure, this one talks about your interest rate, has an amortization table for your payments, and a few other things. AUS – Automated Underwriting System. The vast majority of loans are actually underwritten in conjunction with an AUS program. Fannie and Freddie each have their own system, and have offshoots that handle the government loans as well. These systems analyze your credit report as well as the stated income, liabilities, assets, etc and make a base decision on whether you are acceptable or not. It is then the underwriter's responsibility to verify the accuracy of the information and review the stuff that can't be automatically reviewed (appraisal, title, occupancy, etc). LTV – Loan to Value. Your loan amount divided by the value of the home, if there is subordinate financing there is also the CLTV or Combined Loan to Value (1st loan + 2nd loan divided by value). This is a large driver of what programs are available to you, mortgage insurance requirements (if any), and the interest rates that are available to you. Lower is better as far as the bank is concerned (this is also where your equity in the property comes from). DTI – Debt to Income. This is the ratio of your expenses versus your income. This is also further split up into front end which is just your housing expense (mortgage payment) and the back end (mortgage payment plus every other debt you have). Again, impacts your eligibility for various loan programs and lower is better. HUD-1 – Document that you'll receive at closing, basically itemizes out every fee/charge that you and the seller pay, shows who gets what, etc. Title Report – This will be ordered for you by the processor/loan officer, the title company does a review of the county records for the property and confirms who owns it, what type of ownership, and what liens, judgments, easements, encumbrances, etc. apply to the property. Having a clear title is very important as it determines that you (or the seller) have legal ownership of the property amongst other things. Left over judgments/liens/etc. can hold up your loan approval and are generally a bad thing. ARM – Adjustable Rate Mortgage. Pretty much what it sounds like, your interest rate can change over the life of the loan. I'll go into more detail about how these work later. IO – Interest Only. Much less common and much stricter standards these days, for the first 10/15 years of the loan you will only be making interest payments on the loan. After that you'll begin to make principal and interest payments for the remaining 20/15 years of the life of the loan (or refinance into a new loan, or sell the house, whatever). Occupancy: Whether a home is going to be your primary residence, second home, or an investment property. Determines program guidelines, documentation requirements, as well as your interest rate. Also has to do with how “believable” a purchase is for owner occupied properties. Currently have a 5000 square foot mansion on the beach and you want to buy an 800 sq ft condo in downtown Detroit as your primary? Probably not. Short Sale- A property where the seller's existing bank has agreed to settle the loan for less than the total amount owed. The sale becomes contingent upon the bank agreeing to the terms of your offer. You can get some good deals here, but it can also cause some massive headaches due to the extra party. Short sales hurt the seller's credit rating/eligibility for future loans less than a foreclosure. Foreclosure – Property has already been repossessed by the bank and the bank is acting as the seller. Fannie Mae/Freddie Mac – The two government sponsored entities that purchase and securitize conventional loans. They set down the standards that conventional loans are underwritten to and so conventional loan requirements are going to be mostly the same between all lenders (though banks will always have a few overlays for various situations where they are more stringent). There are some differences between the two as far as their standards/requirements, but the differences are largely irrelevant as far as you, the borrower, are concerned (gently caress Freddie). MI – Mortgage Insurance. For conventional loans, if your LTV is >80% then you will be required to have MI on the loan. This is an additional cost to your loan that can take a few different forms (monthly premium, paid up front as a lump sum, or paid by the lender in exchange for a higher interest rate are the most common). In the event of your defaulting on the loan, the mortgage insurance company will reimburse your lender for a portion of their loss depending on how much coverage you were required to get. FHA loans have both a monthly component as well as an upfront fee that you pay for coverage which can be financed into the loan amount. VA you just pay an upfront fee, and depending on your circumstances I think that fee can even be waived (disabled vets I think?) I'll add more as I think of them. I'll try to avoid throwing too many technical terms/acronyms at you guys, but I'll be damned if I'm going to fully type out LTV and DTI every time I need to use it. Important People Loan Officer (LO): Takes your initial loan application, discusses various product offerings/options available to you, quotes you fees, etc. Paid on commission, and generally only gets paid if your loan closes. Processor: Once the LO has taken your application and gotten you started on the loan process, the processor will work with you to collect the required documentation, order title, appraisal, probably coordinate your closing, order loan documents, work with the lender, etc. Basically they do all the heavy lifting. Underwriter: Me! Works for the lender you're trying to get the loan through. Reviews the loan application, income, assets, title, appraisal, etc. Confirms the data integrity for the parts that get run through AUS, and verifies that the rest of it meets the banks underwriting standards. You'll (probably) never talk to me directly though, questions/concerns about the process will be addressed by your processor or LO. Settlement Agent: Your title officer, escrow agent, or an attorney that is handling the closing – can take a few different forms depending on the state you're located in. Often the title officer and escrow agent are the same individual/company. Sometimes it's an attorney that specializes in this type of law. Again, method is state specific but the basic role is the same. They handle the loan closing – the funds will be wired to them, they approve your final HUD-1, disburse funds, reconvey the existing liens, record the new mortgages, transfer ownership with the county, etc. Documentation First of all, the documentation I'm listing here is basically the worse case situation you'll run into (as far as time length required), for a lot of loans you can get away with less (so 1 year instead of 2, 1 month instead of 2, etc). That said, if you still have everything mentioned here keep it available but ONLY PROVIDE WHAT YOUR PROCESSOR ASKS FOR, AND NOTHING MORE Quick notes: Asset statements and paystubs are only good for 90 days. Additionally, monthly asset statements should be dated within 45 days of your application, and quarterly statements within 90 days. Paystubs should be dated within 30 days of application. In either case, since they're only good for 90 days you should provide the most recent ones. Credit Report This will be ordered by your LO/processor and will contain information from all 3 credit bureaus (TransUnion, Equifax, and Experian). This is one of the most important documents related to your loan, as it will tell the bank about your historical use of credit, credit score, and your currently outstanding liabilities (which will figure into your DTI later on). There's not a whole lot to them from your perspective, the key factors are the credit score (impacts your program eligibility and what your interest rate will be) and the listing of your liabilities. The credit report should contain all of your revolving debts (credit cards), installment, mortgages, auto leases, etc. It'll tell your bank the current balance, allow credit line, minimum payment, and payment history. The AUS system will analyze the credit report and spit out a recommendation. Assuming the recommendation is acceptable, then congratulations you've gotten past the first major hurdle of the loan approval process. DO NOT OPEN NEW ACCOUNTS OR MAKE ANY MAJOR PURCHASES WHILE THE LOAN IS IN PROCESS, PARTICULARLY IF YOUR DTI RATIOS ARE HIGH This should be a common sense thing, but borrowers do it all the time. I know you're excited for your new home and want to go out and buy all new furniture and a new car and a drat aircraft carrier or something equally absurd while the application is still in process. Don't do it. Credit reports are only good for 90 days, and there are a large number of reasons your bank may re-pull credit on you mid-loan application (we're required to on a certain percentage of loans for quality control purposes). Loans get denied all the time because the applicant took out a new auto loan or racked up a huge balance on their credit cards after the initial credit pull, which was subsequently discovered on a new credit report and they no longer qualified with the new debts. It's a dumb, easily avoidable problem. Income W2 Wage Earners: You'll want to have your current year to date pay stub, and the last two years of W2s handy. An important thing to note is that different types of income have varying time frame requirements. If you're able to qualify using your base salary/hourly rate then just your YTD pay stub will be enough (and probably a W2). If you receive bonus, overtime, or commission AND you need that income in order to qualify for a loan then you have to document a 2 year history of receiving that type of income. To do this your processor will probably need to have your employer complete a written verification of employment to document how much of each type of income you've received over the last 2 years and your income will be calculated appropriately. So if you've just started receiving a totally awesome quarterly bonus, too bad you can't use that as income. Also, for you commissioned goons if >25% of your total income is commission then you'll get treated as a self employed borrower essentially, in which case you're also going to need to provide tax returns. Self Employed: Your income is almost always going to be calculated using your tax returns. Some banks may allow for YTD profit and loss statements as well to help calculate income, but not a lot. You'll want to have your two most recent years tax returns (all filed schedules) handy. If you run an S Corp or similar company where you pay yourself W2 wages you'll want to have the W2s handy as well. You may only need 1 year depending on your AUS response, but again HAVE two years handy but ONLY PROVIDE what you are asked for. For those of you on the fence as to whether you'll be considered self employed or not, ask yourself the following: Does my employer report my earnings on a form 1099 instead of W2? Does commission represent >25% of my earnings? Do I file Schedule C, receive K-1s, or any of the business tax return schedules? If you answered Yes to any, you're self employed. There are other situations that can make you self employed as well, but they're going to be somewhat lender specific. Your bank will also need to verify your employment. For W2 earners this is usually pretty easy, they'll call the employer and speak to payroll/HR and confirm that you're still employed and probably start date and some other easy things. If your company isn't large enough to have a dedicated HR/payroll department then your direct manager, company owner, executive, or some other authoritative person can do it as well. It's probably a good idea to find out from your employer how they do it - some companies use outside vendors such as the Work Number, others require that the employee initiate the request and they will contact the lender directly, that sort of thing. It can definitely save your bank time and help avoid unnecessary delays if we know exactly who to contact to get it done. Self employed borrowers also have to verify employment, but this can be a bit trickier. They generally need to prove the business exists, but different banks have different standards for what is required. Ask your broker what their lender will want to see and act accordingly. On a related note, unless it's completely unavoidable don't quit your job, retire, or anything stupid like that during the application either. We're going to be verifying your employment at the last possible instant, and if you no longer have income then you've got problems. If you do have to switch jobs for whatever reason, be prepared to wait a while to proceed as your lender will probably want to see a few pay stubs come through before they will recalculate your income. Assets Be prepared with two months of current statements or the most recent quarterly statement, depending on type of account. Again, only provide what is required though. Your assets will fall into two basic categories: liquid and reserves. Liquid assets are basically your standard checking and savings accounts, money market funds, most kinds of CDs, etc. Basically depository accounts where you have immediate access to the funds. Only liquid assets may be used to cover your down payment and assorted closing costs. Reserve assets are things like your stocks and bonds, 401k, IRA, etc. There is typically a percentage modifier applied to these types of accounts (60-70% in most cases) that determines how much you are able to qualify with. For example if you have $100,000 in your 401k you are allowed to “use” $60,000 of this to qualify. If you need to use a reserve account to cover a portion of your down payment then you will need to liquidate the funds from that account and transfer them to a checking/savings account of some sort. The entire liquidation and transfer should be paper trailed. How much in the way of assets you'll need to document is mostly determined by the loan program you have selected as well as your AUS response. Once your LO/processor has figured out how much you need to document, you'll want to provide them with enough assets to cover it and nothing more. For example, your down payment and closing costs are going to be $25,000 and your AUS is additionally asking for another $5,000 reserves. That $25k will need to be verified via liquid sources (checking/savings) but the other $5k can be your 401k or whatever (remember that you can only use a portion of the total account balance though). If, on the other hand, you have a checking account with $40k in it then just provide that since it'll cover both your liquid and reserves. IMPORTANT NOTES: - Large deposits into accounts need to be explained and documented. What qualifies as a “large” deposit will depend on your total income, whether it appears to be a regular deposit, if you receive direct deposit, how strict your lender is, etc. Try to look at your bank statement from the perspective of knowing only “I know the guy makes $XXX/month” and see what jumps out at you as “where'd that come from?” Your processor/LO should be able to let you know exactly what you'll need for the deposits if you let them know what the source is. - You've been considering buying for a long time (or you better have been considering for a long time, read the thread if you haven't), so you should have plenty of time and forewarning to remember to hang on to the supporting documentation for any large deposits you may have to make, given the above. Keep copies of your deposit slips, check images, etc. - DON'T MOVE MONEY BETWEEN ACCOUNTS IF YOU CAN AVOID IT. A huge chunk of large deposit issues on asset statements, in my experience, is overly eager borrowers moving their money around so they can consolidate it into a single account to wire out/get a cashier's check from. DO THIS AFTER THE BANK HAS VERIFIED ALL YOUR STATEMENTS. A few days before settlement is when this sort of thing should occur, not in the middle getting your documentation. Your processor and underwriter will have to go through every asset statement and make sure that the deposits/withdrawals are all explained, and if anything isn't fully documented or explained then they'll be sending you off to get more documentation. - The exception to the above is, as previously mentioned, when you're liquidating a reserve account for cash to close. You'll want to provide the relevant source statement, proof of the liquidation, and proof of deposit into the liquid account. Try to keep this to a short time frame as well, a $10k withdrawal and then deposit the next day is a lot easier to accept than “I bought this cashier's check 3 months ago and just deposited it today.” - Provide ALL pages to every asset statement. Yes, ALL PAGES. You and I both know that the last page of your Bank of America statement is that stupid “This Page Left Intentionally Blank” page. I don't care, provide it. This actually goes for every document you provide. All pages, all the time. - Don't black out anything on the statement. Lenders hate blacked out documentation, even if it's inconsequential crap. I don't care that it's just your account number and everything else is visible, my bank won't accept it and many others won't either. Appraisal I won't go into a lot of detail here since you don't have much say or input when it comes to your appraisal, but I'll briefly describe the process and what factors are important for an appraisal to be acceptable. Firstly, your broker/lender will order the appraisal through either an appraisal management company or appraisal company directly. They're usually in the neighborhood of $300-$400 depending on locale, complexity of the property, and additional factors. The appraiser will come out, look over the property, take measurements, take grainy/poorly lit photos, etc. A few days later you'll have a 30-40 page report going into great detail why the home you bought 2 years ago for $400k is now worth $270k (sucker). How do they determine the value of the property? They look for similar properties in the neighborhood that have sold recently (also known as comparables or “comps”) and after adjusting for marketable differences in the properties come up with an opinion of value. Ideally, comps will be within 1 mile of the subject property, dated within 6 months prior to the date of the appraisal, and feature comps that are similar to the subject home in terms of square footage, condition, quality, amenities (pool, deck, sunroom, etc), room count, and other factors that influence market appeal. Incidentally, this is why foreclosures and short sales impact the value of your home so greatly. Foreclosures in particular tend to sell for greatly below market value as the bank is a motivated seller and wants to get rid of the property as quickly as possible. When it sells, then it becomes a potentially usable comparable which can drag down the value of your home accordingly. Appraisers generally do note when they have used foreclosures and try to adjust accordingly, but it still has a net negative impact. I can go into more detail about how comping works (voodoo mainly) if anyone is interested, but it's pretty dry. The short version is they're looking for recent sales nearby your home that have similar feature sets and market appeal, then look at what they sold for and your value is probably somewhere in the middle. General Tips - Allow for more time than you think you're going to need, particularly on purchases (and in your purchase contract in particular). There are a LOT of parties to this transaction, and a screw up on any of their parts can cause delays throughout the whole loan process and most of those delays are things that YOU ultimately are going to pay for. Things get held up in underwriting, title companies run into snags getting title issues resolved, sellers go out of town, you go out of town, whatever. You'd be surprised how many times I get screamed at by loan officers/processors to do something now because “my borrowers are at the signing table!” This is almost always due to poor planning foresight on their part, but that's neither here nor there. - As a corollary to the above, do NOT go out of town anytime around your anticipated settlement date (if you can avoid it). - Avoid faxing documentation if you can, things like purchase agreements (tiny loving text most of the time), photo IDs, overly colorful pay stubs and asset statements can be hard to read after getting faxed around a bunch. If you can access it on your computer, use PDF printer software and send your LO/processor a PDF of whatever you've got, can help immensely with having to resubmit documents multiple times. - Again, and I really can't stress this enough, Provide only the documentation that is requested from you by your broker and nothing more If I only need 1 year of tax returns and you give me 2, then I can't ignore that second year and have to take it into account. At best, giving more than is required is going to create extra unnecessary work for your broker/lender, and at worst it can result in your loan being denied. - Ask questions of your LO/processor. If there's anything you're confused about or you're not sure what you need to provide, ask them. They should be more than happy to answer, and given they only get paid if your loan closes it's generally in their best interest to help you as much as possible. I'll write up some more when I have time if people are interested. If you have specific topics you're curious about I'll try to address them if I can, though keep in mind I work for the bank and not the broker so things like “what should I look for in a broker” or “is this a reasonable quote for fees” aren't really issues I can answer because I don't know or don't deal with it. And my idea of a good broker (one who accepts denials without complaint and never fights conditions no matter how unreasonable) is basically the exact opposite of what you guys would want in a broker  Edits: Proof reading on the fly is the only way to do things. Captain Windex fucked around with this message at 07:03 on Nov 4, 2011 |
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Nov 4, 2011 00:35
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Captain Windex posted:
The only nit I see to pick in a damned good post. It should be Good Faith Estimate of course.
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Nov 4, 2011 03:03
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OneTruePecos posted:The only nit I see to pick in a damned good post. It should be Good Faith Estimate of course. Whoops. Nothing to see here
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Nov 4, 2011 03:17
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That's a great writeup, Windex.
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Nov 4, 2011 05:39
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Captain Windex posted:
I just entereed escrow 3 days ago on a house we're purchasing so this is all immensely helpful. Thanks!
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Nov 4, 2011 06:26
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