When are mortgage borrowers going to learn?

On Friday I heard one of the big three networks is doing yet another expose-style story about how homebuyers got duped into bad mortgages contributing to the foreclosure crisis. All of these stories seem to have one consistent theme – the property buyer/borrower fails to take any responsibility for their situation. Blame the mortgage company, blame the real estate agent, blame the closing agent, blame the government.

 

The preview showed a woman who said that her mortgage lender significantly overstated her income on her loan application and that her mortgage payment was more than what she actually made per month, not even counting her other monthly debts like utilities, gas, food, etc.. (These types of mortgages are legal – they are called stated income mortgages. The lender does not require any documentation to prove the income such as a paystub. But you are not supposed to lie about your income either.)

 

Let’s go back to what we learned when we were kids:

 

• If it sounds too good to be true, it probably is.
• There’s no such thing as a stupid question.
• Stop, look and listen. 
• Caveat Emptor (Let the buyer beware)
• If everyone else jumped off the Golden Gate Bridge, does that mean you should do it?
• 1+1 = 2
• Look both ways before you cross the street.
• Money doesn’t grow on trees.

C’mon people. How did that person think she was going to make the payment every month when it was more than she earned? A first-grader can do that math in a minute. Perhaps the woman on the tv program claims she didn’t know what her payment would be; then let’s review when she should have known:

 

1)      When she spoke with a lender to get prequalified BEFORE going out to look at homes.

2)      When she asked the lender what the payment would be.

3)      The estimated payment on the Good Faith Estimate (GFE) she was provided with at loan application.

4)      At closing when she was shown her estimated payment and probably her payment coupon to make her first payment.

 

The lender wants to profit from the mortgage. Foreclosing on the mortgage is not profitable compared to earning interest for the next 30 years. Again, easy math. The loan officer may have wanted his/her commission so he/she pushed the buyer to get the mortgage. Maybe the real estate agent said it was a great investment. Well, as an adult it is your responsibility to make your own decisions. Each of us get bombarded with advertisements and solicitations 100s of times a day but don’t buy every product or service.

 

If you’re looking to refinance or buy a home, consider those sayings we learned back when we were kids while deciding whether to buy or refinance. Read all the paperwork and ask questions before assuming that just because you qualify that you can afford the mortgage. Get out a calculator and do a budget. Write your budget on paper so it’s real and you can see the whole picture. If you take your income and subtract the average monthly bills and debts and there’s no money left at the end of each month, please don’t get the mortgage. Lenders don’t know everything about your monthly expenses and your lifestyle. By the way, a refinance that lowers your monthly payment isn’t always a good idea. Ask questions and don’t accept an answer that doesn’t make sense or doesn’t match other information you have. If anyone you deal with to buy your home or get a mortgage starts a sentence with “Trust me..” or “It doesn’t say it exactly but…” – RUN. Run fast and far.

 

Come back and read the next blog post for tips –

How to get a mortgage and home that even Mama will like.

 

 

Housing Stimulus – You DON’T have to be a 1st time homebuyer

Housing Stimulus – Can you really get $8,000?

There have been a lot of questions this week about the recently passed economic stimulus package. By far the most popular question is “What the heck does it all mean?”.

It means that people who qualify as first-time buyers (those who have not owned a home for the last 3 years) and make under $75,000 if single and $150,000 if married qualify to receive a credit on your 2009 return which can actually put money back in your pocket. How about buyers who buy a home and want to make improvements? It looks like you will have some money available to fence in your backyard or update the kitchen rather than waiting a year or more to save up the money. The provisions allow a buyer to adjust their withholding on their paycheck to have access to their credit money before filing their 2009 taxes.

Do you have a home to sell?

If you own a home that would appeal to a first-time buyer, now is the time to seriously consider whether you should move into a bigger home and become what the real estate industry calls a move-up homebuyer. Leverage this opportunity if you can. It means home sellers in Raleigh, Cary, Apex, Garner, Durham, Chapel Hill, and Hillsborough priced under $250,000 are expected to have more buyers looking and buying this year.

10 things about the 2009 1st time homebuyer tax credit:

1. You don’t actually have to be a first-time homebuyer
2. You qualify as a first-time buyer if you have not owned a home in the last 3 years AND your spouse has not owned a home in the last 3 years. You are considered a first-time homebuyer if you sold a home have been renting for the past 3+ years.
3. The credit is 10% of the purchase price of a primary residence up to $8,000.
4. You will get the money back even if you don’t have $8,000 in tax liability for 2009. The IRS is allowing it in full or in part to be refunded after you file your taxes.
5. The $8,000 in credit is the equivalent of making approximately $12,000 in gross income this year. (How many months of income is that for you?)
6. Many uses for your credit – pay off revolving debt, rebuild your savings, invest in the local economy by buying local products or services, or improve your new home.
7. If you receive the credit you have to stay in your home for at least 3 years or you have to repay your credit. This provision was added to keep housing speculators from using the credit.
8. The credit is available for purchases between January 1, 2009 and November 30, 2009. So, if you already bought in 2009 – you didn’t miss out!
9. No special forms are required – just proof that you purchased during the time period and be sure you also meet the income and first-time buyer qualifications.
10.  As long as it’s a primary residence, you can buy a condo, townhome, patio home or single family home.

It is important to consult reputable local professionals before making the commitment to buy or sell to make sure you qualify. Contact your real estate agent, mortgage lender and accountant/CPA.

Written by Amy Shair – www.AmyShair.com

Another resource of FAQ regarding the 2009 Federal Housing Tax Credit is available at http://www.federalhousingtaxcredit.com/2009/faq.php