The Homebuyer Assistance and Improvement Act of 2010 extends the closing date requirement for the first-time homebuyer tax credit from June 30, 2010, to September 30, 2010. This gives qualifying individuals who, prior to May 1, 2010, entered into a binding written contract to purchase a home, an additional three months to close on the purchase.   Click on the title above and watch the video for additional information.

You’ve heard about the Credit Crunch and its tightening effect on lending guidelines in the mortgage industry, but what does it mean to millions of Americans who need student loans to help pay their college tuition?

The student loan market looked pretty bleak during the first quarter of 2008. Not only did the reduced benefits created by the College Cost Reduction and Access Act in 2007 kick in, but for the first time in 40 years, no bonds backed by student loans were purchased during this time. The new bill, which was good news for students, was funded by cutting subsidies to student lenders already feeling the effects of the credit crunch. According to Forbes, this loss of liquidity spooked a lot of investors of the student loan asset-backed securities market, destabilized Sallie Mae, the largest federal student loan provider and servicer, and sent student lenders into turmoil, as at least 50 federal student loan providers scaled back or ended participation in this type of lending.

Since then, Congress has passed legislation and taken other measures to ensure that student loan companies continue to issue federally subsidized student loans. Now, according to the National Association of Student Financial Aid Administrators (NASFAA), most “traditional” students should have no problem getting federal student loans from the remaining 2,000-plus lenders participating in this market.

For those students forced to seek private or alternate education loans, however, this is a much different story. NASFAA says many students could have trouble getting these types of student loans. Because of this, NASFAA added that private student loans should only be used as a last resort when it comes to paying for college.

Which students are affected?

• Students attending smaller schools and for-profit career or trade colleges, or other institutions that rely heavily on private lenders, will find it more difficult and expensive to gain access to private student loans than they have in the past – especially if they have credit issues.
• Older students, students with poor credit, or those students without a creditworthy co-signer (e.g., mom and dad), are likely to pay higher rates for whatever private student loans they are able to find.
• Students whose college tuition is more than their federal loans provide could also be affected if a) a private loan is necessary to make up the difference or b) the student does not qualify for Federal Perkins or PLUS loans or other types of financial aid programs.
• It’s important to note that financial aid, including Pell Grants, Federal Work Study, and education tax benefits are not affected by the Credit Crunch.

The biggest mistake students and parents can make in these situations is loading up credit cards and taking on expensive private loans to pay for college. Over the course of four or five years, this could really add up and put you or your children in debt for years to come. If you’re a homeowner, however, you may be able to avoid this credit trap by consolidating credit card balances and other debt through a home refinance.

Before you make any major credit decision regarding college tuition, give us a call. We’ll gladly review your finances and help you make the best decision for your specific goals and needs.

The Federal Housing Administration (FHA home loans in Virginia) is eliminating one of the mainstays to its program sometime this summer. Gone will be the 6 percent seller concession and in will be the 3 percent seller concession. The reason for eliminating the concession according to FHA is the 6 percent seller concession exposes them to too much risk. This has been one of the key selling points with FHA for decades. But if sellers and buyers move fast there is a possibility they can still take advantage of the higher seller concession.

The buyers must still save or be gifted the money for the down payment to purchase the home. The current minimum down payment is 3.50% of the sales price. The current guidelines on seller concession allow sellers to pay for all of or part of buyers closing costs when purchasing a property.  Items connected with the transaction such as — loan origination and discount points, state and county transfer stamps and fees, an appraisal, inspections, attorney and title closing costs.  

When it comes to lower priced homes, closing and loan expenses typically represent a higher percentage of the total loan closing costs than on higher prices homes. In Fairfax, Virginia and Northern Virginia, closing costs typically run between 2.50% and 3.50% of the sales price of the home. So on a $300,000 home purchase, that could be an extra $7,500 to $10,500 of out of pocket expenses for a home buyer. Current with FHA financing rules, the contract can be structured so the seller agrees to pay all closing costs up to 6% ($18,000) at settlement. This amount could even include some small required repairs.  Once the rule change takes effect, the max concessions will be a flat 3% of the sales price.

If you use Fannie Mae or Freddie Mac financing, seller concessions is generally limited to 3%  for down payments below 20% of the sales price. Although concessions can be much higher when larger down payments are being used.

Bottom line is this: the helping hand of an FHA home loan is getting smaller and smaller. First the down payment was increased from 2.25% (3% in the new home) to a flat 3.50% down payment. Then a minimum credit score, now a decrease of seller concessions from 6% to 3% of the sales price.

Fairfax, VA  - For the last couple of years, home buyers have benefitted from an affordable combination of lower home prices and lower interest rates. But if you’ve been on the fence about buying a home, or waiting for even better buying opportunities, now might be the time to give us a call to see if buying today makes sense for your individual goals and needs. Even though the government’s popular Home Buyer’s Tax Credit expired on April, 30, 2010, this is still a good time to act, as home affordability is likely to get worse before getting better. Ever since the Federal Reserve’s program to help lower home loan rates and stabilize the housing sector ended in March, 2010, after purchasing a reported $1.25 Trillion in Mortgage Backed Securities, the mortgage market has been very volatile. And despite fluctuations, rates remain good overall; but, as the Federal Reserve sells off some of its huge holdings, supply in the market will increase, and likely lead to higher rates. Don’t wait until higher rates force you out of the market. Give us a call today.

Fairfax, Virginia – Bankruptcy is an uncomfortable subject for a variety of reasons. I have been talking with clients since the economy and housing crisis began over two years ago about bankruptcy. But because I am in the mortgage business and filing for bankruptcy affects one’s ability to get a mortgage I get tons of calls.  The most obvious is the potential havoc it can wreak on your finances. Running a close second is the negative stigma which is often attached to the process. This negativity is important to mention because strong emotions can sometimes lead to unsound financial decisions with devastating results.

Bankruptcy in Fairfax, Virginia becomes a viable option for someone who is “upside down” in terms of cash flow. In other words, when a person has more money going out each month than coming in, bankruptcy should be considered if no reversal of this negative cash flow is within sight. The longer someone waits to explore the various options available, the more serious his or her situation may become.

One of the worst things people can do in this situation is to borrow more money to try and pay off their debts. On paper, this is clearly an unwise financial decision. In the real world, however, it is very common for individuals to pursue this strategy in an attempt to buy time and hold off on filing for bankruptcy. On the surface, this is certainly a noble notion; however it can often compound the problem and serves only to delay the inevitable.

For many homeowners in the midst of this upside down cash flow, speaking to a qualified mortgage professional is a much better option. An experienced loan officer can objectively look at your finances and help you determine if restructuring your mortgage would not only help, but possibly even alleviate any need for bankruptcy.

If bankruptcy is the only option, seek out a reputable bankruptcy attorney and credit counselor. A qualified mortgage specialist can provide references for you as well, as he or she works with these professionals on a regular basis. Reliable references are essential in this case because experienced professionals greatly increase the odds of a successful bankruptcy experience. It’s that simple.

When filing for bankruptcy in Fairfax, Virginia, be completely honest and accurate regarding every aspect of your financial situation. This includes any changes to your income which may occur throughout the process. Bankruptcy is a federal procedure, adjudicated by real judges, and scrutinized by representatives who coordinate with the Department of Justice, the FBI, and the IRS.

Here are some additional steps you can take to make the bankruptcy process as painless as possible:

• Save all paperwork regarding your bankruptcy, and keep it organized. This will prove beneficial after your bankruptcy as you now have all of the pertinent information in one place. Also, be sure to write down your discharge date. It’s surprising how many people forget to do this.
• Establish a household budget. This can be accomplished in many ways, but there are several inexpensive computer programs available which do an excellent job.
• Throughout the bankruptcy, do your best to not only live below your means, but to save as much cash as possible. You never know what you may need it for once the process is completed.
• Be prepared for a barrage of junk mail. There will be sharks on the loose who are hoping to capitalize on your need for credit.

Tips for Rebuilding Credit in Fairfax, Virginia:

• If you must buy a car, focus on transportation as opposed to style. Buy an inexpensive, used car, and try to get a loan for it. It’s a good idea to figure out what your budget allows in terms of a dollar amount first. This means obtaining financing prior to looking for a car.
• Get a secured credit card. Secured credit cards allow for the cardholder to deposit a said amount of money into an account, thus establishing the spending limit of the card. Missed payments result in deductions from the account. Some of these cards will reward responsible borrowers by upping the limit without an additional deposit. Some will even convert the account into a traditional credit card. (Be wary of offers of “easy credit” or any card which asks you to call a 900 number. You will be charged for the call.)
• Meet with a credit repair specialist. Not only can they help you clean up the damage to your credit report, they can advise you on specific ways to rebuild the credit you lost as well.

While it does take time, there is definitely life (and credit) after bankruptcy. Some mortgage lenders will even lend to you within a year or so after a bankruptcy. If you’re in serious financial trouble, the trick is to get the help and advice you need from professionals you trust.

When we think of Valentine’s Day, we usually think of flowers, a box of chocolates and a romantic dinner with the one we love.  Those are very nice ways to show the special people in our lives just how much we love them.

But I want to share with you a way that you can show your love, perhaps one you’ve never thought of.  But before I do, let me share a couple of stories I have heard over the years from clients and other professionals.

“About a year ago, I received a call from a very dear friend of mine.  Her husband of 20+ years had suddenly and unexpectedly passed away.  I dropped everything to be at her side and help her through the agonizing weeks to follow.  Her husband loved her very dearly; there was no doubt about that.  But he had not taken the time to change the beneficiary of his life insurance policy from his ex-wife to the love of his life.   He always meant to, they had even discussed it many times.  But he just never got around to it.”

“Just two days before this past Christmas, I received a call from a loved one that his fiancé had passed unexpectedly in her sleep at the age of 56.  I flew out Christmas Day to be with him during his time of sorrow.  I stayed with him for about a week.  Our time together was spent crying and offering comfort in any way I could.  Together, we accepted the task of trying to find her will and other important paperwork.  But to no avail.  My loved one and his fiancé had co-mingled their finances but now those monies are inaccessible until the will and other important paperwork are found.  It’s been over a month now and nothing has been found.”

You may ask “What does this have to do with Valentine’s Day?”  I’m glad you asked.  I would like to share with you what my wife and I have done to show our love for each other and our families long after we are gone.

We have created what we call “Life Box”.  We took a couple of hours one Saturday morning and went to Staples and bought a small plastic box with lid that holds hanging file folders.  Together, we assembled the contents of the box with all the information one of us would need….leaving nothing to memory or chance.

This time together was very special to both of us. The hardest part of this was actually setting the appointment with the estate attorney. Very few people like to talk about death and taxes. But when done in a way to protect and provide for the future, it can have a lasting affect. But if it does, a lasting sign of our love will be found in “Life Box”.   

I would like to encourage each of you, my friends, my family and my clients, to take a couple of hours and put your “Life Box” together. 

Life Box Contents

• Copy of Will(s) with a note as to where the original can be found.  It is a good idea to provide a copy to the executor of your Will.  
• Provisions for Children:  be sure they are clearly identified.  It is especially helpful for a guardian to leave a note regarding younger children and any special needs or desires they may have.  Keep school info up to date, name, phone and location of doctors, etc. 
• Copy of Life Insurance Policies with a note as to where the originals can be found 
• Copy of Beneficiary page from Life Insurance Policies 
• List of all Banks with account numbers, location, phone number and name of personal contact at the bank.  (Note:  if you are only an account signer, you will not be authorized to sign after the account owner has passed.  Check into a “Payable on Death’ form at your bank. 
• List of Investment Accounts, name and phone number of personal contact 
• Copy of Beneficiary Page for Investment Accounts 
• Location of Safe Deposit Box and the location of the key (many states will lock you out of the safe deposit box once they are aware of the death.  In this situation, they generally will accompany you to the box and only allow the Will to be taken out of the box.  Ask your bank how this is handled and make appropriate plans.) 
• Copy of Health Directive (if you do not have one, go to your local hospital and obtain a blank one and complete it) 
• Copy of Durable Power Of Attorney (can be obtained at local hospital, please note that all Power of Attorney’s cease upon death) 
• Important papers for pets, vet info 
• A personal note that could eliminate stress about other things, for example:  where is the key to the lawn mower, how the gas and oil is mixed for the weed eater, where is the check book kept,
• Any other important info a loved one would need 
• Military Veterans:  please contact us for additional information you will need

Waiting a few extra days or weeks to purchase a home this spring could cost buyers thousands of extra dollars as the office of Housing and Urban Development (HUD) implements several changes for loans guaranteed by the Federal Housing Authority (FHA).

Coming just weeks before the April 30 deadline for the Home Buyer Tax Credit and just days after the March 31 expiration of the Federal Reserve Board’s mortgage backed securities purchase program (which has kept home loan rates artificially low for over a year), these FHA changes make it even more important to act now to save big.

Here are a few reasons why:

On April 5th, the cost of required up-front mortgage insurance for loans guaranteed by the FHA will increase from 1.75% to 2.25%. For a borrower purchasing a $200,000 home with a $7,000 down payment, the up-front mortgage insurance will increase by $965. Up-front mortgage insurance is typically financed in the final loan amount so the impact to a monthly payment will be minimal but overall, the increase is still borne by the borrower both upfront and monthly.

Later this spring, the amount of money that a seller can return to the buyer from their sale proceeds will be reduced from 6% to 3%. The reduction in these “seller concessions” can increase the amount of cash a buyer will be required to pay at closing by $6,000 for a home purchase of $200,000.

There is only one way to avoid being affected by all of these costly changes that lie ahead – submit all FHA mortgage applications by the last week of March.