HAMP Program Extended

President Obama in a recent State of the Union address spoke about homeownership and how the American Dream has dissipated for many due to lingering challenges in housing and mortgage lending.

The President offered hope to more homeowners by extending the Homes Affordable Modification Program (HAMP) until Dec. 31, 2013, and widening the program’s eligibility criteria.

HAMP allows qualifying homeowners with Fannie Mae or Freddie Mac mortgages made prior to June 1, 2009 to refinance to a better rate and more favorable terms. It also provides incentives to participating mortgage lenders that reduce principle for qualifying borrowers.

Millions of additional homeowners may be eligible for HAMP to reduce their homeownership costs and avoid foreclosure. Originally, the program was designed to reduce mortgage borrowers’ debt ratio to 31% of their incomes, and those below that threshold were not eligible. These borrowers may now apply for HAMP consideration, as can borrowers struggling under the weight of other liabilities, such as medical bills.

Eligibility also has been extended to owners of rental properties – as many as 700,000 landlords may qualify for loan modification under HAMP.

Moreover, borrowers who were approved for a HAMP trial period, but did not make the payments as scheduled, would now be eligible for consideration under new guidelines. Also, homeowners who missed payments under an approved HAMP modification would be eligible to reapply under the new rules.

The Obama administration announced it would triple balance-reduction incentives to lenders, paying up to 63 cents for every dollar lenders take off mortgage principal. The administration also said it would offer incentives to Fannie Mae and Freddie Mac to reduce principal on loans. Previously, the government had only offered incentives to private lenders and banks.

If your mortgage is owned, insured or guaranteed by Fannie Mae, Freddie Mac, FHA, VA or USDA you may be eligible for HAMP consideration. Contact your mortgage servicer for details.

Prudential Towne Realty can be reached at (888) 737-9246. Prudential Towne Realty is an independently owned and operated broker member of BRER Affiliates, Inc. Prudential, the Prudential logo and the Rock symbol are registered service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide. Used under license with no other affiliation with Prudential. Equal Housing Opportunity.

Down Payment Tips

Many people dream of owning a home but don’t think it’s possible because they lack the resources for a down payment and closing costs. Here are tips for securing that down payment.

1) Borrow from your retirement account: Many people have been investing in a 401(k) plan or traditional IRA for years and first-time homebuyers may borrow up to $10,000 for their down payment without incurring a penalty. For those self-employed or if your employer allows it, you also can borrow up to $50,000 from your current 401(k) and pay yourself back over five years at a low interest rate.

2) Ask family: Sure, you may be too proud to ask for money, but if relatives can help you and your family move into that dream home, isn’t it worth it? If you do get help from a family member, the lender will ask you to sign a gift-letter form, attesting to the relationship. The lender may also require your relatives to explain where they got the money and prove that they are financially able to make such a gift.

3) Look for down payment assistance grants: Down payment assistance and community redevelopment programs offer affordable housing opportunities to first-time homebuyers, low-income and moderate-income individuals and families who wish to own a home.

4) Come to a lease/purchase agreement: Homeowners who can’t sell their homes in this market may consider a lease/purchase agreement, where you rent the home you want to buy and a percentage of your rent is applied toward the down payment. If you go this route, make sure you get a contract outlining all the details so both parties are protected.

5) Add it to the wedding registry: Several mortgage companies allow those getting married to set up a down payment registry. This is a great way to celebrate the joining of two people in matrimony.

6) Cut back and save: If none of the other ways will work for you, there’s always the old fashioned “saving for a rainy day.” Try putting aside 10% of each paycheck and make your meals instead of going out for them. If you’re married, save the money you would spend on birthday, anniversary and Christmas presents and put it toward your house. You also may need to forget that vacation this year.

These sacrifices may seem significant but they will be worth it once you’re inside your own home.

Prudential Towne Realty can be reached at (888) 737-9246. Prudential Towne Realty is an independently owned and operated broker member of BRER Affiliates, Inc. Prudential, the Prudential logo and the Rock symbol are registered service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide. Used under license with no other affiliation with Prudential. Equal Housing Opportunity.

Improve Your Credit Score

Those about to start house hunting should check their credit score before things get too serious. There is nothing quite as frightening in the mortgage process as learning that your credit report contains a late payment or other blemishes that can prevent you from buying a property.

The higher your credit score, the better your chances are of financing a home. A credit score of at least 620 will give consumers a fighting chance to secure a home loan; 720 should qualify in most cases.

However, a lower credit score doesn’t necessarily mean you can’t finance a home. Credit score repair begins with your credit report. You can request a free copy of your credit report annually from the Federal Trade Commission at AnnualCreditReport.com. Check the report for errors.

Don’t panic if your report contains blemishes. There are steps you can take to fix negative marks, regardless of whether the marks are in error or if you’ve missed a payment or two. The simplest thing to do if you’ve missed a payment is to call the creditor and ask them to erase the negative listing. You can also do this with a well-documented letter. There is no guarantee that a lender will do this, but if you’ve been a good customer through the years, this method has proven to be successful.

If you are one of the many who have defaulted on a student loan you can enter into a “rehab program,” which will get your account back on track after 12 months. This may not be the quick fix you need when buying a home but the sooner you do this the better.

For disputing a negative mark that was not your fault, you can try disputing the account with the credit bureaus as “not mine.”

One quick fix used by borrowers to boost their credit score is to have an older family member with a sound credit rating add you as an authorized user on a credit card. This can help increase your score and you wouldn’t even need the card in your possession.

With more loans requiring higher credit scores today, it’s never too early to start fix.

Prudential Towne Realty can be reached at (888) 737-9246. Prudential Towne Realty is an independently owned and operated broker member of BRER Affiliates, Inc. Prudential, the Prudential logo and the Rock symbol are registered service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide. Used under license with no other affiliation with Prudential. Equal Housing Opportunity.

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Sellers: Itemize What You’re Taking With You

Believe it or not, after months of searching countless homes, finding the perfect one, negotiating price and finally agreeing to a deal, a sale can fall apart over a disagreement about curtains.

When striking a deal to sell a home, it’s important that you are perfectly clear about what you are taking with you and what you are leaving behind. The general rule is that if something is attached to the structure or the ground, it is real property and stays with the house.

If removing the item would ruin or disfigure the walls, the item generally stays. If you need a tool to remove it, it stays.

Legally, these are called fixtures, which include everything permanently attached to the property such as a fence, built-in appliances, ceiling fans, flowerbeds and shrubs.

Conversely, if you can disconnect, unhook or detach an item from the home with bare hands, it’s free to leave when you do. This is known as personal property and should never be assumed to be part of the sale.

Items that fall into this category are furniture, potted plants, free-standing appliances and an outdoor grill.

A good rule of thumb is to not show your home with any fixtures you are planning to take. Replacing them is the better option.

Every real estate agent has a story about a deal falling through because of an argument about what a buyer thought was staying. For this reason, you should walk in each room with your agent and make a list of things that you will be taking with you.

If you decide to leave the curtains, chandeliers or are open to giving up some of the outdoor furniture, it may just help with a sale. People appreciate the notion of getting something for free, and a savvy agent will hint to a prospective buyer that fixtures and furnishing may be negotiable. Unless the items are really important to you, let them go with the home. Use them to get the price you want and then replace the items in your new home.

By itemizing and discussing all the things that stay and go at the outset, there will be no miscommunication on closing day.

Prudential Towne Realty can be reached at (888) 737-9246. Prudential Towne Realty is an independently owned and operated broker member of BRER Affiliates, Inc. Prudential, the Prudential logo and the Rock symbol are registered service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide. Used under license with no other affiliation with Prudential. Equal Housing Opportunity.

HARP 2.0 Can Help Underwater Homeowners

For homeowners who are underwater on their conventional mortgage, the government has enacted a new Home Affordable Refinance Program to help eligible participants pay down the principal without having to pay mortgage insurance.

The new HARP 2.0 Refinance Program was made available to U.S. homeowners March 17, 2012 and those eligible can refinance by Dec. 31, 2013.

“You can use HARP even if you’re far underwater on your mortgage. There is no loan-to-value restriction under the HARP mortgage program so long as your new mortgage is a fixed-rate loan with a term of 30 years or fewer,” said Dan Green, a loan officer with Waterstone Mortgage in Columbia, Md. “If you use HARP to refinance into an adjustable-rate mortgage, your loan-to-value is capped at 105%.”

The original HARP program (also known as Making Home Affordable) was started in April 2009 and changes were introduced last fall by the Federal Home Finance Agency and confirmed by Fannie Mae and Freddie Mac. This program had several roadblocks that made it difficult for homeowners to refinance. For instance, the program only assisted those with mortgages with a loan-to-value ratio between 80% and 125%, but in many hard-hit housing markets homes have lost more than half their value making owners ineligible.

To be eligible today, a loan must be backed by Fannie Mae or Freddie Mac, and the mortgage must have a securitization date prior to June 1, 2009. FHA, USDA and jumbo mortgages are not HARP-eligible.

One of the changes in HARP 2.0 is that borrowers will now be able to refinance regardless of how much their homes have depreciated. Previous loan-to-value limits were set at 125%.

Appraisals and underwriting have also been eliminated, as most homeowners will no longer be required to get an appraisal or have their loan underwritten, making their refinance process smoother and faster.

Certain risk-based fees for borrowers who refinance into shorter-term loans will either be eliminated or modified. HARP only applies to first mortgages.

“HARP 2.0 is meant for first liens only,” Green said. “Second liens are meant to subordinate. You’ll get to replace your first mortgage and your second mortgage will remain as-is. Just be sure to mention your second mortgage at the time of application so your lender knows to order the subordination for you.”

Remember, the Home Affordable Refinance Program is not meant to save a home from foreclosure. It’s meant to give underwater homeowners a chance to refinance without paying PMI.

Prudential Towne Realty can be reached at (888) (737-9246). Prudential Towne Realty is an independently owned and operated broker member of BRER Affiliates, Inc. Prudential, the Prudential logo and the Rock symbol are registered service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide. Used under license with no other affiliation with Prudential. Equal Housing Opportunity.

The Truth About Radon Gas

There’s a scene in “The Princess Bride” where the villainous Vizzini offers his adversary an invisible, odorless and tasteless poison. While his description is meant to conjure laughs, he could have just as easily been talking about radon gas.

You can’t see, smell or taste radon, yet exposure to the gas can make you sick. In fact, the Surgeon General has warned that radon is the second-leading cause of lung cancer in the United States today after smoking.

Radon comes from the natural (radioactive) breakdown of uranium in soil, rock and water and may sneak into the air you breathe by penetrating your home through cracks in the foundation. It can be discovered in all parts of the country and can cause a dangerous high indoor radon level in any home. According to the Environmental Protection Agency, roughly one out of every 15 homes in the U.S. is estimated to have elevated radon levels.

While it’s not a requirement that you test for radon when you make an offer to buy a home in many places, it’s a good idea to ask for a Radon Inspection Contingency.

A Radon Inspection Contingency can put some structure into getting a “short-term” radon test done on any home to make sure the levels of radon on the lowest level of the home are below the 4.0 pCi/L level.That level was a target set by the U.S. Congress for indoor air quality, and the U.S. EPA enforces that mandate.

If you are preparing to sell your home, you should test for radon before you even put it on the market. This can save valuable time during a real estate transaction, as long as you have all the paperwork and testing data to show the prospective buyer.

The quickest way to detect radon is with short-term tests, which remain in your home for two to 90 days, depending on the device. The most common detectors are charcoal canisters, alpha track, electret ion chamber, continuous monitors and charcoal liquid scintillation.

Test the home in the lowest level that you currently live in, or a lower level not currently used, but which a buyer could use for living space without making renovations. Elevated radon levels can be remedied with a radon-reduction system, which can reduce the gas by up to 99% percent and cost less than $1,000 to buy and install.

Buyers and sellers should be smart about radon. Every new home should be tested after occupancy, even if it was built radon-resistant or with a radon reducing system installed.

Prudential Towne Realty can be reached at (888) (737-9246). Prudential Towne Realty is an independently owned and operated broker member of BRER Affiliates, Inc. Prudential, the Prudential logo and the Rock symbol are registered service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide. Used under license with no other affiliation with Prudential. Equal Housing Opportunity.

Inspect for Code Violations Before you Sell

Code violations can extend the home-selling process or halt it altogether. Therefore, it’s good business to hire a home inspector before placing your home on the market.

A quality home inspector is well-versed in all local codes dealing with electrical, plumbing, building/structural and more, and can help sellers understand any code violations and the steps and costs necessary to meet codes.

Code violations have a way of popping up in paperwork. When the city records a code violation, a fee is assigned to the property, but because the violations don’t appear as a lien on a title search, it can be difficult to ascertain whether a sanction has been assessed that will delay closing.

According to Code Violation Services Inc., Windsor, Colo., violations can include the presence of garbage in a yard, maintenance issues, overgrown lawns, non-sanctioned improvements, safety issues or other dangerous items needing repair in a property.

Here are some of the most common inspection problems:

Bedrooms – All rooms listed as bedrooms must have an operating window with 30 square inches of clearance for fire escape. Bedrooms also must have heat. If a home is listed with three bedrooms, and one does not meet both these requirements, it cannot be legally called a bedroom.

Furnaces and Compressors – Rust in the heat exchange is a common problem that shows up on inspections. So is missing insulation where required by code at the time the house was built or improvement or replacement was installed.

Electrical – Common electrical code violations include junctions not enclosed in a junction box, a lack of GFCI outlets in bathrooms and kitchens or reverse-polarity on outlets. These are inexpensive fixes that can hold up a sale.

Life-saving Equipment – Smoke and carbon monoxide detectors are required by law in most states, and by not having them—or having the proper kind—it will be considered a code violation.

Plumbing – Violations can include everything from dripping faucets to loose toilets to improper drainage.

Structural – While these can be more expensive to fix, if they aren’t taken care of properly, they can prolong or even cancel a sale. Common code violations include rotting wood trim around windows and doors, rotten or delaminating siding and missing flashing on roofs or above windows and doors.

Extra Rooms – Many who renovate basements or add sunrooms do so without permits. For the safety of everyone involved, be sure your improvements and additions are backed by the proper permits and resulting inspections.

Don’t hurt your sale because of code violations that can be easily fixed. Get an inspector, make the changes and enjoy the comfort your efforts bring when the closing comes to fruition.

Prudential Towne Realty can be reached at (888) (737-9246). Prudential Towne Realty is an independently owned and operated broker member of BRER Affiliates, Inc. Prudential, the Prudential logo and the Rock symbol are registered service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide. Used under license with no other affiliation with Prudential. Equal Housing Opportunity.