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The United States federal government has just released a new website intended to help homeowners facing financial trouble.  The goal of the website is to facilitate the process of loan modifications and refinances for home owners who are having trouble with getting a short sale or loan modification completed.  The website is quite informative, and contains a calculator which should give you a projected monthly payment cap, should you qualify for a modification, and a way to track and expedite a short sale. 

Feel free to check it out here, and let us know your thoughts!

Here’s what the Federal Reserve Board said about the Economy here in the Wild Wild West:

“Real Estate and Construction
Demand for housing in the District appeared to deteriorate somewhat from the previous period, while demand for commercial real estate was largely unchanged at very low levels. The pace of home sales remained mixed across areas but appeared to decline on net, even as home prices edged up further in some parts of the District. Several contacts noted again that limited availability of nonconforming “jumbo” loans is holding down sales of higher-priced homes in some areas. Conditions in commercial real estate markets remained depressed, as vacancy rates for office and industrial space stayed at very elevated levels in many parts of the District. One California contact noted that although only a few large commercial properties have sold in recent months, the prices received were surprisingly high.”

If you’d like more information about this or any other Market Statistics, especially Laguna Niguel specific, let us know!

Mortgage lenders are concerned with your ability to repay the mortgage. To decide if you qualify for a loan on a new home, they will consider your credit history, your monthly gross income and how much cash you will be able to accumulate, or have accumulated, for a down payment. So how much house can you afford? To know that, you need to understand a concept called “debt-to-income ratios.”

Debt-to-income ratios

The basic types of debt to income ratios are known as front end and back end ratios.  The front-end ratio is the amount of house debt versus the total gross income.  The back-end ratio is the total debt management with house and all other debt versus monthly gross income.

Front-end ratio: The housing expense, or front-end, ratio shows how much of your gross (pretax) monthly income would go toward the mortgage payment. As a general guideline, your monthly mortgage payment, including principal, interest, real estate taxes and homeowners insurance, should not exceed 28 percent of your gross monthly income. To calculate your housing expense ratio, multiply your annual salary by 0.28, then divide by 12 (months). The answer is your maximum housing expense ratio.

Front-end ratio

Maximum housing expense ratio = annual salary x 0.28 / 12 (months)

Back-end ratio: The total debt-to-income, or back-end, ratio, shows how much of your gross income would go toward all of your debt obligations, including mortgage, car loans, child support and alimony, credit card bills, student loans and condominium fees. In general, your total monthly debt obligation should not exceed 36 percent of your gross income. To calculate your debt-to-income ratio, multiply your annual salary by 0.36, then divide by 12 (months). The answer is your maximum allowable debt-to-income ratio.

Back-end ratio

Maximum allowable debt-to-income ratio = annual salary x 0.36 / 12 (months)

Example

Take a homebuyer who makes $80,000 a year. The maximum amount for monthly mortgage-related payments at 28 percent of gross income is $1866. ($80,000 times 0.28 equals $22,400, and $22,400 divided by 12 months equals $1866.66.)

Thinking of some remodels?  Here are a few things that can pay back great dividends when you sell!  

1. Make your kitchen really cook

The kitchen is still considered the heart of the home. For a few hundred dollars, you can replace the kitchen faucet set, add new cabinet door handles and update old lighting fixtures with brighter, more energy-efficient ones. If you have a slightly larger budget, you can give the cabinets themselves a makeover. Rather than spring for a whole new cabinet system, which can be expensive, look into refacing the ones you have. Many companies will remove cabinet doors and drawers, refinish the cabinet boxes and then add brand-new doors and drawers at a price considerably less than new cabinets. Unless the cabinets are mica, a fresh coat of paint can also do the trick.

2. Give appliances a face-lift

If your kitchen appliances don’t match, try ordering new doors or face panels from the manufacturer. Many dishwasher panels are white on one side and black on the other. It can be as simple as removing a couple of screws, sliding the panel out and flipping it over.

3. Buff up the bath

Next to the kitchen, bathrooms are often the most important rooms to update. They, too, can be improved without a lot of cash. Simple things like a new toilet seat and a pedestal sink are pretty easy for homeowners to install, and they make a big difference. You can replace an old, discolored bathroom floor with easy-to-apply vinyl tiles or a small piece of sheet vinyl — often applied right over the old floor. If your tub and shower look dingy, consider regrouting the tile and replacing any chipped tiles. A more complete cover-up is a prefabricated tub and shower surround. These one-piece units may require professional installation, but still can be cheaper than paying to retile walls and refinish a worn tub.

Short Sale Myths

1. You must be defaulting on your mortgage to negotiate a short sale. WRONG. Short sales are not a function of default status on a mortgage. They are the result of the bank mitigating a potential default situation that, in the long run, will cost more money to the investors. We have completed many short sales in instances when the borrower was not in a default situation.

2. Listing my home as a short sale is embarrassing. WRONG. A property can be listed for sale without a sign - this keeps the neighbors from knowing about the short sale, at least for a while.  Also, the fact that the home is a short sale can be kept from widespread public knowledge by a good realtor.

3. Buyers aren’t interested in short sale properties. WRONG. Short Sale properties are often times available at a competitive price to other properties on the market. In many cases, short sale properties are very well cared for and have not had to endure the deferred maintenance of a REO property. Short Sale properties are in great demand in the marketplace.

4. There’s not enough time to negotiate a short sale before foreclosure. WRONG. A good negotiator takes into account the timeline affiliated with a foreclosure. There is always a chance that a short sale can be negotiated. However, the only way to know for sure is to try.

5. The bank would rather foreclose than complete a short sale. WRONG. Banks do not want to foreclose on property. It is expensive and carries a high level of liability once the bank owns that property as an REO. Wherever possible, banks are seeking other loss mitigation options before foreclosure.

6. Short sales are impossible and never get approved. WRONG. Short sales are complicated, but not impossible. We negotiate short sale approvals every day.

THE BEST BUYS ALWAYS COME WHEN OTHERS ARE NERVOUS OR CAN’T BUY. 

Check out this mortgage advice.  See the linked article on mortgage rates and new loan regulations.  Apparently some banks are offering “deeds in lieu” to more distressed homeowners.  For most short sales are a good option.

When you are ready to buy or sell be sure to call the JonRon RE Team at Keller Williams Realty.

BE THANKFUL FOR YOUR FREEDOMS THIS WEEKEND AND BE THANKFUL TO THE ONE WHO GIVES THEM.

I understand ABC (American Broadcasting Company) is somewhat embarrassed by the flag of the USA.  Please remember that FREEDOM ISN’T FREE.  To do our part as Realtors we put 1200 American flags in Laguna Niguel today to help boost the spirit. 

The man I never knew - That man was my uncle who was killed in the Battle of the Bulge in WWII along with three of his gunnery mates.  He and his crew protected a bridge in the Bastogne area just long enough for the retreating GI’s to get to safety and then blow up the bridge.  Thanks to all the vets for their service and for the fact that we are speaking English instead of German or some other language.   Display your colors this weekend and be thankful to God for our freedom.

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Many mortgages today are being resold in the secondary markets. The Federal National Mortgage Association (Fannie Mae) is a government-sponsored organization that purchases mortgages from lenders and sells them to investors. Mortgages that conform to Fannie Mae’s standards may carry lower interest rates or smaller down payments. To qualify, the mortgage borrower needs to meet two ratio requirements that are industry standards.

The housing expense ratio compares basic monthly housing costs to the buyer’s gross (before taxes and other deductions) monthly income. Basic costs include monthly mortgage, insurance, and property taxes. Income includes any steady cash flow, including salary, self-employment income, pensions, child support, or alimony payments. For a conventional loan, your monthly housing cost should not exceed 28% of your monthly gross income.

The total obligations to income ratio is the percentage of all income required to service your total monthly payments. Monthly payments on student loans, installment loans, and credit card balances older than 10 months are added to basic housing costs and then divided by gross income. Your total monthly debt payments, including basic housing costs, should not exceed 36%.

Many home buyers choose to arrange financing before shopping for a home and most lenders will “prequalify” you for a certain amount. Prequalification helps you focus on homes you can afford. It also makes you a more attractive buyer and can help you negotiate a lower purchase price. Nothing is more disheartening for buyers or sellers than a deal that falls through due to a lack of financing.

In addition to qualifying for a mortgage, you will probably need a down payment. The 28% to 36% debt ratios assume a 10% down payment. In practice, down payment requirements vary from more than 20% to as low as 0% for some Veterans Administration (VA) loans. Down payments greater than 20% generally buy a better rate. Lowering the down payment increases leverage (the opportunity to make a profit using borrowed money) but also increases monthly payments.

For calendar month May – DataQuick’s freshest stats — Laguna Beach homebuying patterns showed:

• Homebuying +54% vs. a year ago.
• Laguna Beach’s median selling price was $960,000 – that’s +113% vs. countywide pricing.
• A year ago, that Laguna Beach home-price “premium” was 156% vs. the countywide median selling price.

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While the 80’s television show the A-Team might have been excessively cheesy (although I remember thinking it was awesome), the premise of the show is a good one.  While there may be a load of Realtors out there who offer to sell your home, the complexity of a real estate transaction requires something more than what one single individual, working alone, can accomplish.

Just like in the A-Team, different hats need to be worn by different individuals, rather than just one person - when one person tries to do too many things at once, they inevitably drop the ball. 

Now, this story, of course, has a moral - it pays to hire a team!  While there’s nothing wrong with the individual agent, when it comes time to sell your home, seek out a group of folks who can help you put together the right package for follow up and sales!  The JonRon Real Estate Team is made up of 5 individuals now (more, incidentally, than the A-Team) working together to make your sale smooth and hassle free!   None of us can fly a helicopter, but we’re working on possible mohawks.