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Short Term Loans Make or Break Real Estate Financing
Whether you are putting in an offer or just trying to hold on to a property, there almost always is a cash crunch time that puts your property in jeopardy. We have all heard the stories (or have some of our own) where the last $500 needed for a down payment or even a closing had to be scrounged up in 45 minutes.
The fire drill nature of that kind of financing may be exciting to some. But it really doesn’t matter how that money was found. What does matter is when the buyer works the deal to his or her best advantage.
Finding cash in the current market for any type of purchase has been more challenging the past few years. But that doesn’t mean it is impossible. In California payday loans have sometimes proven to be a smart way to get that last bit of cash, something like the few sips of Gatorade that push the marathon runner through the last mile. A lot of effort goes into the first 95 percent of the race, but it’s the last little bit that finishes the job.
Payday loans are like that Gatorade. Here’s how they work and make sense for the real estate investor:
- If you have a job, you can get one – Your credit score or your willingness to offer property (real estate, car, boat, motorcycle, art) are irrelevant. The loan is based on your rate of pay at your job only.
- Online application is easy and fast – Your loan request will take about 20 minutes to make (for many, it’s more like 10 or 15 minutes). And you’ll get confirmation of the request being accepted in about one hour. More than 85 percent of applicants are approved.
- Money by tomorrow – The lender will send you your money electronically, deposited into your bank account by the next business morning.
Cash crunches are always a time for creative approaches to financing. Be sure to study all your options – and don’t miss an opportunity because you fail to act.
– This is a guest article.
Real estate news July 2
IRS blocks 10% of tax credit applications
The Internal Revenue Service blocked almost 10 percent of U.S. claims for the first-time homebuyer tax credit after receiving erroneous or fraudulent filings, according to a report today.
About $1.22 billion of the $12.6 billion in tax credits claimed through February were denied or frozen after audits, the report from the Treasury Department’s Inspector General for Tax Administration said. The IRS estimated that about 1.8 million taxpayers sought the benefit, which totals as much as $8,000, from the inception in April 2008.
The claims in question included about $9.1 million from 1,295 prison inmates, $18.8 million from people who bought homes before the law took effect and $134 million from situations where more than one filer said they bought the same house, the report said.
Lenders are pushing deed-in-lieus, an alternative to short sales and foreclosures
Mortgage companies say troubled borrowers increasingly are signing up. One of the largest servicers, Bank of America, has mailed out 100,000 deed-in-lieu solicitations to customers in the last 60 days, and its volume of completed transactions is breaking company records, according to officials.
What precisely are deeds-in-lieu? The full name is deeds-in-lieu-of-foreclosure. They are voluntary transfers of property ownership from borrowers to creditors that make court-directed foreclosures unnecessary.
What are the downsides or limitations of deeds-in-lieu for homeowners? Probably the most important, experts said, is that they don’t work for every situation involving serious mortgage default. For example, if you have equity in the property, you’ll probably want to pursue a loan modification first, rather than hand over your equity stake to the lender.
Deeds-in-lieu usually don’t work when there are multiple mortgages from different creditors encumbering the property. Also, though deeds-in-lieu do less damage to borrowers’ credit histories than foreclosures or bankruptcies, they definitely leave a mark. Fair Isaac, developer of the widely used FICO credit score, says on its MyFico website that deeds-in-lieu and short sales are both treated as “not paid as agreed” accounts, and are treated the same by the FICO scoring model.
Fannie no longer looking away at walk-aways
Taking aim at homeowners who are able to pay their mortgage but decide it’s not worth it, Fannie Mae plans to go after them in court and to limit their access to home loans for seven years.
The government-controlled mortgage giant said Wednesday that it would instruct the companies servicing its loans to recommend when it should pursue a so-called deficiency judgment — a court order requiring a defaulting borrower to pay any remaining unpaid portion of the loan after a seized home is sold.
Lenders rarely employ court proceedings to pursue foreclosures in California, nearly always opting instead for a streamlined procedure involving a trustee’s sale of the home. Under state law, however, lenders who opt for court proceedings can obtain a deficiency judgment if the mortgage was used to refinance a home, but not if it was used to finance a purchase.
House holds hearing March 2 on future of mortgage finance
Washington, DC — Financial Services Committee Chairman Barney Frank (D-MA) announced today the committee will hold a hearing on March 2 to begin the process of considering the future of housing finance. The hearing will focus on all the private and public entities that support the mortgage market, which include the Federal Housing Administration, Ginnie Mae, Fannie Mae, Freddie Mac, Federal Home Loan Banks, and private lenders and securitizers. It is the first step in a legislative process to determine the future of housing finance and the federal government’s role in responsible homeownership and the supply of affordable rental housing. Chairman Frank has invited Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan to present the Administration’s perspective, as well as representatives of the advocacy community, academia, and industry to present their ideas on the future of housing finance. Witnesses will be announced at a later date.
California governor proposes expanded, extended housing tax credit
During his State of the State address, Governor Schwarzenegger today announced his 2010 proposals for California. Included in the proposals is a recommendation to set aside $200 million for a new round of $10,000 state tax credits for first-time home buyers. The proposal expands upon the initial $10,000 state tax credit by including both new and existing homes. Last year’s tax credit applied only to new homes.
The tax credit could be combined with the recently extended and expanded federal tax credit for home buyers.
Homebuyer tax credit extended, now includes move-up buyers
From the California Association of Realtors:
The federal government extended the homebuyer tax credit, again providing first time homebuyers with up to $8,000 in subsidy on the purchase of a principal residence. New to the tax credit: a provision for repeat homebuyers, who are eligible for up to $6,500. This sequel to the homebuyer tax credit will expire on April 30, 2010. The original tax credit was set to expire on November 30.
The maximum credit allowed for first time homebuyers remains $8,000. A first time homebuyer is someone who has not owned a home in the three years prior to the close of escrow on the purchase. However, the new credit also makes allowances for “long-time residents,” or those who have owned a principle residence for no less than five of the eight years prior to the close of escrow on the purchase of a new primary residence.
Also, the new version of the credit increases the eligible income limits for buyers. The new credit is available in full to those filing single with a modified adjustable gross income (MAGI) of no more than $125,000 (formerly no more than $75,000), or $225,000 for joint filers (formerly no more than $150,000). Single filers with a MAGI between $125,000 and $145,000 or joint filers with a MAGI between $225,000 and $245,000 are eligible for a reduced credit.
There are additional restrictions taking effect with the new law. Home purchase transactions are not eligible for the credit if:
• the purchase price of the home exceeds $800,000;
• the purchaser is younger than 18; or
• the purchaser can be claimed as a dependent.
Members of the Armed Forces and certain federal employees serving outside the U.S. are given one extra year to use the credit. Eligible taxpayers have until April 30, 2011 to sign the purchase agreement on a qualifying purchase.