Are "Stated-Income" Loans a Thing of the Past?

Realtors and other self-employed people are finding it harder to get a mortgage even when they have a substantial downpayment. In the past many self-employed took out "stated-income loans," which don't require borrowers to fully document their income. Defaults were low. But as lenders loosened their lending practices and began offering these stated-income loans to other than affluent professionals, they became known in the industry as "liars' loans." Today many banks will not offer them at all.

Underwriting criteria for the self-employed have swung from a simple process to being tighter than any in modern times. The changes are increasingly frustrating a group of borrowers that banks once coveted: affluent self-employed professionals such as doctors, accountants, lawyers, and small business owners.

Banks say they have concerns documenting the self-employed's cash flow due to the deductions and write-offs that the self-employed show on their tax returns. And there are no W-2s to support their income. Lenders are also cautious because the non-salaried can have greater volatility in their annual income.

So as the Feds try to ease the housing crisis, thousands of good borrowers are frozen out of the market.

Credit or a Loan? What About the Benefit?

Many have questioned the first-time home buyers credit, saying it's nothing more than a loan, and thus dismissing it. Technically it is a tax credit, but it does operate as a loan as it must be repaid. BUT, the important thing is to look at the benefit.
The majority of first-time buyers leave the closing table and have little left in savings after the purchase of their home. As new homeowners, they are now facing a mortgage payment that exceeds what they had paid in rent. They have a home to furnish, with more rooms to fill with furniture than their apartment in most cases. They may also need to spend money on painting, some redecorating, carpeting and window coverings. In addition, there are other home ownership necessities such as a lawn mower, ladder, garden tools and the like that must be purchased, not to mention the expense of making any costly repairs or improvements the home may require.
More often than not these purchases are made with a charge card, with interest rates that are upward of 17%. These additional monthly expenses for home-related purchases are in addition to the large monthly mortgage payment they now have. So why wouldn’t a buyer be excited about obtaining the $7,500 tax credit, and having the benefit of repaying it over 15 years without interest?
What if a first-time buyer really liked a home they saw that needed some major repairs or renovation, a home that represented a great buying opportunity? But after much consideration, they decided against buying it. They just didn’t have the financial resources after the closing to accomplish the type of repairs required, such as a new furnace or new roof or new siding or new windows. Wouldn’t the opportunity to obtain $7,500 in an income tax refund possibly be the answer to this type of concern?

Do You Understand the First-Time Homebuyer Credit?

There's a lot of confusion about the new first-time homebuyer tax credit. The fact that it's called a 'credit' is a good part of the confusion. It's not an outright credit since one must repay it. It's more like an interest-free loan. But the loan repayment term is generous - one has 15 years to repay the credit, which can be as high as $7,500.

The reason for the term 'credit' is that the money can be received as a credit against your federal income tax. That is, the $7,500 can be used to reduce your tax liability, or if you have none, or have already paid your taxes through withholding or estimated tax payments, then you will get the money sent to you.

Only homes purchased on or after April 9, 2008 and before July 1, 2009 are eligible for the credit. There are income limits for eligibility: up to $75,000 for single taxpayers and up to $150,000 for married couples. A first-time homebuyer is anyone who has not owned a home the previous three years, and the home you purchase to qualify for this credit must be used as a principal residence.

Any questions? Please feel free to call me at 734-439-8405.

Cool Telephone Techie Tip!

In a hurry? Need to leave a message but don't have time to talk right now? You know if the other party picks up the phone you won't have time to do everything that's on your plate at the moment, but you really need to call and leave a message. So assure yourself of being able to just leave a message this way.

And The Sky Did Not Fall!!!

I certainly don't have the answers for fixing our nation's financial difficulties, but I'm glad the first rushed 'rescue' bill did not pass. It appears there was not such a huge urgency after all as the stock market plummeted yesterday and then rebounded a good ways back up today.

I think everyone in power needs to think this through carefully and listen to the varied 'experts' and then hopefully craft a bill that makes good sense. Or better yet, maybe they can undo or modify the accounting rules that caused the banks' balance sheets to plummet in value and liquidity to shrink in the first place.

In the meantime I've sold 2 properties in the past 10 days and in conversations with other Realtors I find they are selling also. And yes, these buyers are getting mortgages. We are even seeing multiple offers on some of the properties now. It's been my belief for some time now that our housing market in this area of Michigan has bottomed and that we are bouncing along that bottom and it's just a matter of time before we begin to see the market start to edge up.

KISS Approach in Real Estate

Keep It Simple-- One-stop-shopping is desireable in all walks of life. It is especially valuable when buying a home. With Real Estate One you can find all the necessary services under one roof. We have our own mortgage lender, our own title company to handle the title search and the closing, and our own insurance company for your homeowners insurance. With an integrated operation, there is far less likelihood of an issue arising at closing time.

It stands to reason that obtaining all of your home-buying services from one source makes the process easier and less burdensome for the consumer.

Need to Get Rid of "Stuff"?

When it's time to move, we all realize we've been hanging on to stuff we no longer need and now we suddenly want to get rid of it fast. This can at times be difficult to do.

Putting good smaller items on the curbside the day before trash pickup can be simple - seems there's always someone to pick up useful items for their den or garage. This is actually my favorite method of recycling! I love seeing an eager soul jump from their car to snatch a tricycle or lamp or small table, knowing that my castoff is still useful to someone.

For other items or when the weather is just too nasty for putting stuff outside, try these resources:

Friends in Deed at 734-484-7607 They were recently willing to take mattresses and bedding which is very hard to give away and not welcome out on the curb.
Purple Heart at 734-728-4560
Dawn Farms at 734-485-8725
Dr.Raymond Molano at 734-429-2737 who I've heard will take clothes (often hard to find someone to take)
Salvation Army at 734-668-8353 or 734-761-7750

In fact, if you are even thinking of moving, start that clearing out process now - it's less to do when the actual move comes up! Need any other help with your move? Do call me at 800-923-3245. I've lots of resources for all the moving issues!