Looking to Buy a ‘Fixer-Upper’? The 203k Program Can Help Make It Happen

Today’s real estate market presents a lot of opportunity for interested home buyers—with the growing supply of foreclosure properties and short sales, there are certainly some great deals to be had.

The problem in buying a “distressed” property, however, is that these homes are often damaged due to lack of maintenance or prolonged vacancy. So while the price tag might be right, the investment necessary to make the home livable might just push buyers well beyond their budgets.

As a member of the Top 5 in Real Estate Network®, however, I have access to the latest information on mortgage and financing options. One particular option that is providing hope for many of today’s home buyers is HUD’s FHA 203k program, a loan that enables buyers to not only secure a mortgage, but receive the funds necessary to improve the home as well.

Here are five facts about the 203k program to help you determine if it might be the right fit for you:

1. The FHA Section 203k program was originally introduced by HUD in 1978 as a program to rehabilitate and repair single-family homes. The 203k is a single mortgage loan that provides funds to purchase a home and make repairs and improvements. A simpler version, the Streamline 203k, was introduced in 2005. This version offers less documentation and lower loan fees for renovations that don’t exceed $35,000.

2. In today’s market, conventional financing, which often requires 20% – 25% down on a home and a perfect credit score, is often hard to come by. However, with less-than-perfect credit and as little as 3.5% down, you can get an FHA loan, such as the 203k.

3. The 203k approval process is a little more complicated than a conventional loan. For example, you’re required to secure renovation costs from an established, licensed contractor and deliver a package of the proper paperwork to the lender to secure FHA approval. Make sure you work with an agent—like a member of Top 5—who is well-versed in the 203k program, or who can connect you with a lender that is.

4. The 203k loan is not just for foreclosure or distressed properties. More than 80% of the homes in America were built before 1990—that’s over 100 million homes that are 20 years old or older—and almost every one is in need of some amount of repair and updating. The 203k loan, therefore, offers advantages for almost any home purchase.

5. The 203k loan is not just for home purchases but can be used to finance a home improvement, as well!

For complete details on the HUD 203k program, you can visit www.fhainfo.com/fha203k.htm. Please feel free to e-mail me, too, since this information can be hard to digest and confusing. Be sure to pass this e-mail on to any friends and family who might also be able to take advantage of a 203k loan.

SCARPA NAMED AS NEW MANAGER AT RE/MAX CLASSIC BASKING RIDGE

(January 28, 2010) – John Bendall, broker/owner of RE/MAX Classic Group Realtors, announces that Anthony Scarpa has been named Manager of the RE/MAX Classic office in Basking Ridge, NJ.

“We are thrilled to welcome Tony to our RE/MAX Classic team and to have him in charge of our Basking Ridge operation,” Bendall said. “Not only does he bring 30 years of experience to the job, but he also has an extensive background in several key real estate market segments.

“This move clearly demonstrates our ongoing commitment at RE/MAX Classic to give our Realtors the best support possible in the industry to help them capture more market share,” Bendall continued.

During his career, Scarpa has served as a vice president of three different REO divisions, as a branch office manager and as a broker/associate. He is a certified specialist in such areas as relocation and luxury home marketing as well as in land and new construction, the segment in which he got his start in 1980.

Scarpa, who also a New Jersey registered builder, has amassed a total sales volume of more than a quarter-billion dollars over the past three decades and has won numerous state and national awards as a top-producing real estate professional. In addition, he has wide-ranging knowledge in both the foreclosure market and in lender relations.

The RE/MAX Classic Group Realtors office in Basking Ridge is located at 47 South Finley Avenue (ZIP 07920) and can be reached at (908) 766-9300.

In addition to its Somerset County-based offices in Basking Ridge and nearby Branchburg, RE/MAX Classic Group Realtors has operations in Berkeley Heights, Union County, and in West Milford, Passaic County. You can learn more about RE/MAX Classic by visiting their Web site at www.classicgroup.remax-nj.com.

FHA Announces Policy Changes to Address Risk and Strengthen Finances

New Measures Will Help FHA Better Manage Risk, While Maintaining Support for the Housing Market and Access for Underserved Communities

1. Mortgage insurance premium (MIP) will be increased to build up capital reserves and bring back private lending
   • The first step will be to raise the up-front MIP by 50 bps to 2.25% and request legislative authority to increase the maximum annual MIP that the FHA can charge.
   • If this authority is granted, then the second step will be to shift some of the premium increase from the up-front MIP to the annual MIP.
   • This shift will allow for the capital reserves to increase with less impact to the consumer, because the annual MIP is paid over the life of the loan instead of at the time of closing
   • The initial up-front increase is included in a Mortgagee Letter to be released tomorrow, January 21st, and will go into effect in the spring.
2. Update the combination of FICO scores and down payments for new borrowers.
   • New borrowers will now be required to have a minimum FICO score of 580 to qualify for FHA’s 3.5% down payment program. New borrowers with less than a 580 FICO score will be required to put down at least 10%.
   • This allows the FHA to better balance its risk and continue to provide access for those borrowers who have historically performed well.
   • This change will be posted in the Federal Register in February and, after a notice and comment period, would go into effect in the early summer.
3. Reduce allowable seller concessions from 6% to 3%
   • The current level exposes the FHA to excess risk by creating incentives to inflate appraised value. This change will bring FHA into conformity with industry standards on seller concessions.
   • This change will be posted in the Federal Register in February, and after a notice and comment period, would go into effect in the early summer.
4. Increase enforcement on FHA lenders
   • Publicly report lender performance rankings to complement currently available Neighborhood Watch data – Will be available on the HUD website on February 1.
     • This is an operational change to make information more user-friendly and hold lenders more accountable; it does not require new regulatory action as Neighborhood Watch data is currently publicly available.
   • Enhance monitoring of lender performance and compliance with FHA guidelines and standards.
     • Implement Credit Watch termination through lender underwriting ID in addition to originating ID.
     • This change is included in a Mortgagee Letter to be released tomorrow, January 21st, and is effective immediately.
   • Implement statutory authority through regulation of section 256 of the National Housing Act to enforce indemnification provisions for lenders using delegated insuring process
     • Specifications of this change will be posted in March, and after a notice and comment period, would go into effect in early summer.
   • HUD is pursuing legislative authority to increase enforcement on FHA lenders. Specific authority includes:
     • Amendment of section 256 of the National Housing Act to apply indemnification provisions to all Direct Endorsement lenders. This would require all approved mortgagees to assume liability for all of the loans that they originate and underwrite
     • Legislative authority permitting HUD maximum flexibility to establish separate “areas” for purposes of review and termination under the Credit Watch initiative. This would provide authority to withdraw originating and underwriting approval for a lender nationwide on the basis of the performance of its regional branches

Do you Want to ‘Move-Up’? The Clock Is Running!

While you’ve probably heard a lot in the media about the government’s efforts to rejuvenate the housing market with the first-time home buyer tax credit, you might have missed the fact that the most recent expansion of the legislation also includes a $6,500 credit for current homeowners who want to purchase a new home…commonly referred to as “moving up.”

As a Member of the Top 5 in Real Estate Network®, I’ve worked with many homeowners who have wanted to move to a new home over the past year, but have stayed put due to a lack of confidence in the market. Now, however, thanks to the tax advantages of the Worker, Homeownership, and Business Assistance Act of 2009, these homeowners are moving off the sidelines and purchasing the homes they’ve always wanted.

But the time to act is now—there is only a short window of opportunity! The move-up buyer credit expires in April of 2010, which means you must contract and close on your home purchase by June 30, 2010. As you know, selecting a home is not a simple process, so start your search now so you don’t miss the deadline.

For starters, here are the key facts you need to know about the move-up buyer tax credit:

1. A qualified current homeowner who wishes to move to a different home (a “move-up” buyer) must have owned and resided in their residence for five consecutive years out of the last eight. It’s not enough that you have been homeowners for five years—you must have been in the same home for five consecutive years.

2. Single taxpayers with incomes up to $125,000 and married couples with a joint income up to $225,000 qualify for the full tax credit. According to Goldman Sachs, these income limits make approximately 70% of current homeowners eligible for the credit.

3. The maximum credit amount for current homeowners is $6,500. Under the new legislation, a tax credit may only be issued for homes purchased for $800,000 or less.

4. Even though the term “move-up” is used to describe these buyers, the credit is not predicated on buying a home of higher value than your current home.

5. Move-up buyers are not required to sell their current home to qualify for the credit. They must reside in the new home for at least three years, but they can keep their existing home and either leave it vacated or use it for rental purposes.

These are just a few of the key facts surrounding the move-up buyer tax credit. If you would like to find out more, including whether or not you are eligible for the credit, please e-mail me. Be sure to forward this email to all your homeowner friends so they can take advantage of this once-in-a-lifetime opportunity.

Welcome to this edition of The Monday Morning Message…..I hope you all had a fantastic weekend filled with fun and enjoyment. I know many of you spent some time doing last minute shopping and final preparations for the upcoming holiday, and I hope you made the most of it. You have worked extremely hard this year and you truly deserve to enjoy this season. I have seen many of you succeed and some of you struggle over the year and I want each one of you to know that I hope you are as proud of yourself as I am of you. Your character, passion, determination, and will to succeed was on display in 2009. Watching great agents like you this past year has reminded me that enormous accomplishments may be had regardless of current circumstances. It was not always easy, but great successes never are. We do not ask for the easy road. We do not pick the short term gain. We do not rise while holding everyone else down. Success has been achieved by all of you. Think about your accomplishments, large or small. Be thankful for them. Be proud of them. Be prepared for more. Thank you for all that you have done and continue to do.

Wishing you all and your families a very Merry Christmas and a Happy Holiday.

ENCOURAGEMENT CORNER…

I wanted to share a word with you that I think is very fitting at this time of year – BELIEVE. I hope that all of you still do, in many things large and small. I hope that all of you share this wonderful concept with all the people you care about. I hope you all never loose this magical idea – Believe.

I Believe we have not come this far to fail or give up now.

I Believe we are meant to go through storms before we see the beautiful sun.

I Believe the kingdom we live in is unshakable.

I Believe family become friends and friends become family.

I Believe all my hard work will pay off.

I Believe 2010 will be the best year of my life so far.

I Believe I have the power to change anything I do not like.

I Believe collectively we are stronger than we are apart.

I Believe love is the solution to all problems.

I Believe time brings about opportunity and thought.

I Believe I have been put on this earth and in this position for a purpose.

I Believe I am capable of anything as long as I have the desire to do it.

I Believe the choices I make are my responsibility alone.

I Believe I am who I am because of all the people in my life.

What do you Believe?

WORDS TO LIVE BY…

I believe that every human mind feels pleasure in doing good to another. Thomas Jefferson

You’ll see it when you believe it. Wayne Dyer

I firmly believe that any man’s finest hour, the greatest fulfillment of all that he holds dear, is that moment when he has worked his heart out in a good cause and lies exhausted on the field of battle – victorious. Vince Lombardi

I believe that unarmed truth and unconditional love will have the final word in reality. This is why right, temporarily defeated, is stronger than evil triumphant. Martin Luther King, Jr.

I can’t believe that God put us on this earth to be ordinary. Lou Holtz

I do not believe a man can ever leave his business. He ought to think of it by day and dream of it by night. Henry Ford

I believe that every right implies a responsibility; every opportunity, an obligation; every possession, a duty. John D Rockefeller

If you believe in what you are doing, then let nothing hold you up in your work. Much of the best work of the world has been done against seeming impossibilities. The thing is to get the work done. Dale Carnegie

LET’S MAKE THIS THE BEST WEEK OF THE YEAR!!!

Highest pending home sales since March 2006
October pending homes sales rose for the ninth straight month and hit their highest levels since March 2006, just about when the housing bubble was at its peak.

According to data released moments ago by the National Association of Realtors, October pending home sales were up 3.7 percent in October, compared to September, and up 32 percent versus October 2008–the biggest annual increase in history. Remember, though, October 2008 was a historic trough, so a year later, there was nowhere to go but up.

Pending home sales — this number of contracts signed, not actual closings — rose in all sections of the country except the West. They were up 20 percent in the Northeast, 11.6 percent in the Midwest and 5.4 percent in the South, but down 11.2 percent in the West, which is not surprising, because that’s where the most overbuilt states — California, Arizona, Nevada — are.

Part of the surge is probably attributable to buyers rushing to take advantage of the government-subsidized first-time home buyer’s credit, which was set to expire at the end of November but now has been extended through April. Also, the bulk of sales still are coming from cheaper houses, with little movement in houses costing more than $250,000.

In other key data out moments ago, the Institute for Supply Management said its November index of U.S. manufacturing came in at 53.6, down from the October number of 55.7, indicating a slowdown of manufacturing.

Also, construction spending in October was largely unchanged compared to September. The weakness came from the commercial side, balancing out a 4.4 percent gain in residential construction.

Lower Your 2009 Tax Debt

As a Top 5 in Real Estate Member, I counsel many clients on a wide range of financial concerns, not just their real estate investments. As 2009 comes to a close, I wanted to alert you to some important information that could save you money come tax time.

In addition to the $8,000 tax break for first-time home buyers and the newly expanded tax credit that includes move-up buyers, new tax-relief bills passed in 2008 provide for a number of other tax breaks that may lower your 2009 tax debt. Plan now and review these breaks with your accountant to see if they could help reduce your tax liability in 2009 and beyond:

• Payroll Tax Credit. For 2009 and 2010, Congress gave workers a 6.2% credit on earned income, applied as lower income tax withholding (there are caps based on income). Recipients of Social Security, Railroad Retirement benefits or Supplemental Security Income, some federal workers, and veterans with disability pensions will get a one-time $250 check. Self-employed workers may be able to reduce quarterly estimated payments to get advance benefits.
• Larger Personal Exemptions. For 2009, each personal exemption you can claim is worth $3,650—up by $150 over 2008.
• Higher Standard Deductions. The standard deduction for married couples filing jointly rises to $11,400 up by $500 from 2008. For singles, the amount increases to $5,700—up by $250 over last year, and heads of households can claim $8,350, a jump of $350.
• Tax Credit for College Tuition. For 2009 and 2010, the Hope credit is replaced by a new credit of up to $2,500 per student a year for four years of college, not just the first two years. It now also covers the cost of books, but begins to phase out based on higher incomes.
• Child Tax Credit. If the credit exceeds the filer’s tax liability, all or part of the credit will be refunded if the filer earns more than $3,000 – down from $12,550 in 2008. (Also, for families with three or more children, the maximum earned income tax credit for 2009 and 2010 rises by $628.50)

Other changes that could affect you include higher income limits for deductible IRAs and Roth IRAs, higher estate tax and gift tax exemptions, credit for energy-saving home improvements, and partial exclusion of unemployment benefits.

To understand how the new tax breaks could save you money, consult with your financial advisor or e-mail me for more information. Be sure to pass this email along to your family and friends—in these tough economic times, we could all use a tax break!

Fast Ways to Update Your Kitchen, Increase Value
While there are many different variables that contribute to selling a home, during the course of my real estate career, I have witnessed one constant: the kitchen.

Today, the kitchen has become more of a multi-functional space than ever before, where cooking happens alongside bill paying and homework, not to mention the kitchen’s role as social hub for family and friends. That’s why it’s more important than ever to buyers and sellers alike that this key room be fresh and inviting.

While home improvement experts report that kitchen remodels provide anywhere from an 80-100% return on investment, based on my years of experience working with homeowners, I have found that just by updating certain aspects, the entire look and feel of the kitchen can be refreshed and modernized—and your home’s value increased in the process.

As design expert Melissa Birdsong, vice president for Trend, Design & Brand at Lowe’s Companies, Inc. (www.lowes.com), says, if the kitchen is outdated and tired, the whole house can feel that way; a few simple updates can make all the difference in getting the green light on the buying decision. So whether you want to update your kitchen for your own lifestyle enhancement or to help move it off the market, try these tips from Birdsong:

1. Color and light are the easiest, most cost-efficient elements to add personality and ambience to the kitchen. Use your vegetable bin and spice cabinet for inspiration! A scheme of natural greens, yellows, mustards and russets washed with dimmable overhead and under-cabinet lighting can add energy as well as create a level of calm.

2. If the existing cabinets are sturdy but the finish is sending out a distress signal, a well-executed paint job can turn it around. Mismatched appliances and worn flooring are other leading visual cues, so if the budget permits, replace them.

3. Last but not least, add sparkle and a new point of view to the kitchen by replacing the metals palette–cabinet hardware, faucet, lighting and outlet covers. A few thoughtfully chosen, simple finish updates can seal the deal.

As a Member of the Top 5 in Real Estate Network(R), I have access to more great ideas for improving your kitchen as well as all areas of your home…both for your own lifestyle enjoyment and to increase your home’s value. Please e-mail me to discuss other ways to improve your home’s value and please forward this email to your social network who may also find it helpful.

Sincerely,

John

John Bendall
RE/MAX Classic Group
Top 5 in Real Estate Member
john@bendallgroup.com
www.centralnewjerseyhomes.com

Want to Refinance? Heed These 10 Appraisal Tips

Refinancing in today’s credit-crunched market can be challenging at best. A successful refinance all begins with the appraisal, used to set the maximum amount you’re allowed to borrow against your home. The problem is, in today’s market, sinking home values are often lowering appraisals as well. If you are considering refinancing your home, heeding these important tips on appraisals before proceeding can improve your refinancing options and save you time and money:

1. Continuously research the value of your home and the other homes in your neighborhood; pay attention to foreclosures in your area as they may drive down the value of your home. As a member of the Top 5 in Real Estate Network®, I am well-equipped to provide you with a detailed assessment of the current value of your home.

2. Since appraisers use “comps” (comparable market sales) of local properties sold within the last six months to value your home, make sure your loan officer leverages their knowledge to research comps in your area, before ordering the appraisal.

3. If you use your own appraiser, research them first and ask your lender to cross check them for any potential issues that may delay the process. Great loan officers will always confirm your appraiser’s credentials. I can also recommend a credible appraiser to work with.

4. Direct your loan officer to work with local, experienced appraisal companies. Local appraisers have a deeper knowledge of the surrounding neighborhood and will likely be more readily available for the home inspection to speed your appraisal process.

5. The appraisal report is yours to keep. Find out in advance who pays for the appraisal—many times appraisal fees are the homeowner’s responsibility and have to be paid up front.

6. New lending regulations require two appraisals in some situations—ask at the beginning whether you’ll need one or two.

7. Commit to your lender before committing to an appraisal. Being comfortable working with your loan officer is imperative. They often will be the liaison between you and the appraisal company.

8. Make sure any major repairs are completed before moving forward with your refinance. Structural damages drive your home value down and jeopardize the approval process for today’s popular government-backed FHA loans.

9. Don’t overestimate the value of making cosmetic home improvements. The expense is rarely justified because in the appraisal world, only improvements that add square footage will significantly increase home value.

10. Rely on market value rather than tax assessments for a realistic appraisal value—in today’s market, tax value and current market value may differ widely, but your lender can only go by appraisal value.

Finally, homeowners should expect their lender to clearly explain the appraisal process and all of the steps for refinancing up front. I can also assist you in the refinance process and help point you in the right direction—just e-mail me with your questions. If you believe this information may be valuable to your social network, please feel free to forward this email.

Sincerely,

John

John Bendall
RE/MAX Classic Group
Top 5 in Real Estate Member
john@bendallgroup.com
www.centralnewjerseyhomes.com

As a leader in real estate, I am repeatedly asked specific questions about today’s market – especially in today’s economy. In an effort to provide more information to my community, I am sending you this Top 5 Real Estate Social Networking Systemsm “e-Article,” in which I provide useful real estate information to my real estate networks. If you find the enclosed information beneficial to your family and friends, I encourage you to forward it to your “social network” as well.

Do You Qualify for the Expanded Home Refinance Program?

The Home Affordable Refinance Program, or HARP, established by the Obama Administration, has been expanded, raising the maximum loan-to-value ratio from 105% to 125%. As a Member of the Top 5 in Real Estate Network®, many clients are asking me if they qualify for the HARP program. If you can answer “yes” to following questions, you may be eligible:

- Are you the owner of a one- to four-unit home?
- Do you have a loan owned or guaranteed by Fannie Mae or Freddie Mac?
- Are you current on your mortgage payments?
(“Current” means that you haven’t been more than 30-days late on your mortgage payment in the last 12 months.)
- Do you believe that the amount you owe on your first mortgage is about the same or less than the current value of your house?

Open to homeowners whose loans are owned or guaranteed by Fannie Mae or Freddie Mac, and covering first mortgages only, the HARP expansion means that an eligible homeowner with a $375,000 mortgage loan may now refinance if the house is worth at least $300,000.

The expansion is aimed at making refinancing available to more people whose homes are now worth less than the amount of their mortgages. As always, the borrower must meet income requirements and be able to afford the loan. Homeowners must also be current on their mortgage payments.

As a homeowner, you may be eligible if:

1. You obtained your mortgage before January 1, 2009
2. The home is owner occupied
3. The primary mortgage is less than $729,500

According to the Federal Housing Financing Agency, the higher loan-to-value refinancing will allow more homeowners to strengthen their finances by taking advantage of lower mortgage rates. HARP borrowers will be able to combine a lower mortgage rate with a faster amortization schedule, which will enable them to get “above water” on their mortgages more quickly.

The program also provides borrowers with an incentive to reduce the term of their loan from 30 years to a shorter-term, fixed-rate mortgage, enabling them to pay down the principal more quickly and reduce lifetime interest payments.

For more information on the HARP program, visit www.makinghomeaffordable.gov or e-mail me john@bendallgroup.com . If you know of others who can benefit from this information, please feel free to forward this email to them.