A listener, Ralph, has a question about refinancing. He says he has the deed to his property, but there’s a note attached to it. He has a monthly $793 payment that he has fallen a couple of months behind on. He wants to know how he can refinance his loan so he can lower his payments.

Ralph, there’s a few things you need to consider:

• You’ll need to get caught up on your payments before you refinance
• There are costs associated to refinancing — you’ll have to get the property reappraised, and pay another round of closing costs.
• Being behind on your payments is serious… Call your lender immediately. Anytime you fall behind on payments, you need to call your lender and explain the situation.

And, there are options available that probably make more sense than refinancing:

• Forbearance, an agreement you reach with your lender, means you’ll stop making your payments or will make smaller payments for a set amount of time
• When that time is over, you’ll have to pay extra to make up for it
• Alternatively, you can make a repayment plan with your lender, to catch up with the past-due amounts on schedule.

Hope that helps!

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John, a listener of Real Estate Today and a first time homebuyer, called in about last week’s segment, where we discussed the merits of 15 and 30 year mortgages. It sounds to him that getting a 30-year loan is the way to go for flexibility, but that he should try to pay it off in 15 years. He wonders if that’s correct ?

Yes, John, that’s exactly right:

• You can pay off any loan more quickly, which saves interest payments
• If you’ve been making bigger payments than your mortgage requires, there’s no problem with cutting back on those payments if you need to – as long as you’re still making the minimum monthly payment.
• The downside of a 30-year loan is a higher interest rate (one quarter or one-half of a percent, usually). So, if you pay off a 30-year mortgage in 15 years, you’re still paying more in interest than you would have with a 15-year mortgage – but you’ll also have the security of knowing you can drop your payments down significantly if you need to without defaulting on your loan.
• Paying off a long-term loan more quickly also means you’re building more equity
• But remember to build your savings as well as your equity – in an emergency, you have more to think about than just mortgage payments. There’s a balance between building up savings and paying down debt.

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This week, let’s look at trees planted along property lines. If a tree is planted on one property, but its branches hang over an adjacent property, which homeowner is responsible for the branches? Also – if there are vines creeping over from one property to the next and are becoming a nuisance, who’s responsible for those?

The rule of thumb here is, if it’s your place? It’s your place! It might not make your neighbor happy, but in most municipalities, if a limb from a neighbor’s tree is hanging over your property, you can trim it, prune it or cut it down, as long as the cuts happen over your property and not your neighbor’s! The same would be true of a creeping vine, or a rambling rosebush — anything on your property is yours to control.

But the down side? If that limb from your neighbor’s tree falls off and hits your house? It’s on you, not him. Check with your insurance company on that one, but in most areas falling limbs are considered ‘Force Majure’ or ‘Acts of God’, and the placements of the roots doesn’t really play a role.

These are the rules of thumb, but it might be different in your area. So if you have a specific problem, call your county or municipal government. They’ll point you in the right direction.

Have a question for Real Estate Today? Drop us a comment – we may use it in an upcoming show!

Question:
Kevin recently divorced, and as part of the dissolution settlement, ended up with a mobile home. He wanted to know if he qualified for the tax credit since he’s never owned a home, and also wanted to know if mobile homes, or manufactured housing, were covered by the tax credit if they don’t have a permanent foundation.

Answer:
Yes, manufactured and modular housing are both covered by the first time home buyer tax credit, as long as they are being used as a primary residence. According to the IRS, you can even use the credit on a manufactured home if you’re renting the land it sits on.

Again, the credit is for 10% of the purchase price, up to $8000. So if you buy a manufactured home for less than $80,000 — you’ll only be able to claim 10% of that. For example, if the home costs you $65,000 you’re only going to be able to claim $6500 for the tax credit.

However, in your case, you won’t be able to claim the credit at all, because you didn’t actually buy the house. Since you received it as part of a settlement and didn’t pay any money for the house, you don’t get to take the credit.

Have a question for Real Estate Today? Drop us a comment! It could be featured in a future show!

Question: I’m thinking of selling my home in the next couple of years, and I want to know how much remodeling I should do in my kitchen and bathroom. I have heard two completely opposing opinions on the matter. Some say it’s not worth redoing, but others say I should do it. Can you provide some clarity on this?

Answer: First, let’s look at the money. Can you comfortably afford to re-do your bathrooms and kitchen? That should be your starting point. This isn’t the time to be pulling out equity from your home if you can avoid it…but if you have the cash saved up, then it might be something to consider.

Remember, that if you invest in your home with upgrades like we’re talking about, you might get your money back when you sell, but you might not. There’s no guarantee that a $25,000 renovation will bring you $25K more at the settlement table. Would you be happy with recouping just a percentage of that?

Second, let’s look at the market in your area. One thing you might do is visit as many open houses as possible in your area, and see whether your ‘competition’ have new bathrooms and kitchens. If they all do, and you don’t, you might be at a competitive disadvantage when it comes time to sell. However, if most of the nearby homes have ‘vintage’ baths and kitchens, it might not be a big issue.

You might also talk to a REALTOR® and get their opinion on this — they’ll know whether those upgrades are essential, or not. Remember, though, it’s still a buyer’s market, so anything a seller can do to make their home ‘shine’ is worthwhile… the competition is fierce!

And last, let’s talk about you. Would you like a new kitchen and bathroom? Would those things make you happy? If so, do it! Enjoy your home. Especially if you’re going to be staying a few years.

Have a question for Real Estate Today? Drop us a comment, and it could be featured in our next show!

Let’s take a look at which is better for you, modifying a loan, or refinancing. If you’ve got a nice income, good credit and you are not underwater on your mortgage loan, you’ll be an excellent candidate for refinancing. Getting a new loan, with new terms is a good way to go.

If you’re looking at refinancing, you can start with your existing lender, but you’re also free to contact other mortgage companies to see if they’re able to cut you a better deal! You’ll have to look at refinancing closely, as there will be costs involved, new closing costs, attorney fees, an appraisal and so on.

But, in the long run it might be well worth it!

On the other hand, if you’re having a tough time financially, or if you’re underwater on your loan, you’ll want to look into loan modification. This may be tough, as many lenders are dragging their feet when it comes to mortgage modifications. Plus, with loan modification, the only lender you’ll be talking with is the one that currently holds your mortgage. In most cases, the only way they’ll even consider a modification is if you can prove financial hardship.

That being said, they might not say “no” either, as they don’t want to lose you as a good customer. The first thing to do is contact your lender and ask them directly if there is a way to modify your mortgage and what their process is to go about it.

Also, check out the government’s web site. ‘Making Home Affordable.’ [link] They have lots of information about loan modifications, and refinancing, aimed at helping you stay in your home!

Question: I’m a 1st time home buyer. I’ve done a credit repair with my mortgage officer, and cleaned my past due accounts. It’s been 90 days and I’ve seen no change in my score, what should I do?

Answer: So, you would like to see your credit score shoot up, right? Well, unfortunately it doesn’t happen overnight, and not even in 90 days. You’ve cleaned your past due accounts but if your credit score is low, then you’ve got to work on rebuilding it, not just giving it a light wash and brush up.

A lot of your credit score is based on payment history, mainly over the past 2 years, so if you’ve been having credit problems over the past couple of years, you’re not going to see a whirlwind recovery. Your credit score is affected the most by what’s been going on in the past 2 years. So, if you have collections accounts, charge offs, and late payments since then, there’s your problem with where your score is coming from.

If you want to see it really fixed, you’ll want to keep your nose clean for at least the next 2 years, perhaps even longer depending on exactly how deep in the hole you were. If you’ve got things like bankruptcies on your sheet, that can give you a black mark for possibly 10 years. It’s not just a case of saying, “hey I paid, give me my credit back”

One main thing to keep in mind that it takes positive credit to build credit. There are 2 types of credit, revolving, like credit cards, and installment, like loan or car payments. You should really have a combination of the 2 to better your score. It doesn’t help that much if you load up on just credit cards, if you’re not able to show that you’re able to repay a personal loan or car loan.

Now I’m not telling you to purposely get yourself into debt to build credit — that’s not smart — it should be used as a tool. Open a couple of secured credit cards, make small purchases, really small, like $20, and pay them in full on time every month. That alone builds credit, without going into major debt.

Now, if you think that there could be something fishy going on, then get copies of your credit reports directly from the 3 credit reporting services, Experian, Equifax and TransUnion. Don’t bother with the companies that offer you a free credit report as you’ll likely have to sign up for a monthly service you probably don’t need which will cost you more. You are entitled to a free report every year, it won’t have your score on it, but you can see if there are any discrepancies that may have been overlooked and you can contact the companies to have them fixed.

But if you’re already doing all this with your mortgage officer, then you should really be talking to them, see what they say as they’re the ones you’ve been working with all this time and are more likely to be able to answer your questions satisfactorily.

Have a question for Real Estate Today? Leave us a comment!

A VA home loan is a good alternative for qualified veterans who don’t want to put 20% down. Historically, the so-called “VA direct home loan program” was designed to offer long-term financing to American veterans and their surviving spouses, provided the spouses do not re-marry. Not all homes are available for a VA loan, though. That’s because the basic intention was to supply home financing in areas where limited funding is available. That usually translates to rural areas or small, isolated towns and cities.

But, here’s what makes a VA loan really attractive: It is one of the only loan programs that still allows the borrower to finance 100% of the home’s value and purchase with zero down. This program also offers two benefits that will substantially lower your monthly payment… PMI, or private mortgage insurance, is not required on a VA loan. And, interest rates can be lower than conventional loans. So, if you’re a veteran in an area you think qualifies, it’s a great way to go.

Ask your REALTOR® for referrals to mortgage brokers in your area — That’s one of many services your REALTOR® can provide. You can also get a VA loan from a bank. Many banks—large and small—offer VA loans.

Have a question for us at Real Estate Today? Drop us a comment!

One of our listeners had an interesting question this week: George wanted to know if you go to an auction and bid, say, $1000 on a $500000, and win, are you liable for the full amount or just what you bid and back taxes? Also, would you need a registered check backed by bank.

If you’ve been swayed by those TV commercials that say you can pick up a mansion for a pittance, that’s not exactly how it works.

Buying at a foreclosure auction can be risky. But it can have huge benefits, too.

First, no, you won’t be picking up a half million-dollar home for a pocket full of change. Here’s why: During most sales at a home foreclosure auction a home is advertised as requiring a minimum bid of at least two-thirds of the value to be considered for sale. Potential buyers have to understand that unless they meet or exceed that stated minimum, the sale will not be completed.

Also, in most cases when you buy at an auction you can inspect the property before the bidding begins. So don’t roll up as the auction’s beginning…and expect to make a full inspection.

And when it comes to paying, chances are what you will need is either hard currency or a cashier’s check. A personal check certainly won’t cut it. What usually happens is when the bid is finalized; the winning bidder has his name and payment information recorded by a representative from the lending institution, typically a legal representative. In most places, a down payment of at least 10% is due by the close of business the day of the sale. But this varies from county to county, state to state, auction to auction, so check with the auctioneer you’re thinking of going to. Some of them even require that cashier’s check for the entire purchase amount within a few hours.

As to the price, you’ll pay what your final bid is, but you will still end up owing any unpaid property taxes and junior liens, those are debts put on the property after the debt which caused the property to kick into legal foreclosure.

Buying at auction also comes with the possibility that the former owner will exercise their right of redemption by coming up with the cash to buy the house back within a certain period of time.
The IRS also has 120 days to redeem the property if back taxes are owed. Redemption laws differ from state to state so you’d have to speak to a local real estate lawyer.

If that hasn’t put you off and If you’re still tempted to buy at a foreclosure auction, find a REALTOR® who is experienced at doing real estate transactions at auction. They have the experience, the background and the knowledge to help guide you through what could be a very tricky transaction.

Do you have a question for us? Drop us a line or a comment!

Question: I am part of a condo association that is having a problem collecting maintenance fees from a renter who won’t pay. Is there anything I can do?

Answer: Well, the problem may be that you’re looking in the wrong place. The responsibility for all the condo fees, maintenance, etc., lie with the unit’s owner, not the tenant. You need to follow the paper trail and look at the contracts.

We’re talking about two contracts here: first, the one between the unit’s owner and the condo association, in which the owner promises to pay his condo fee and any related expenses. And the second is the lease agreement between the unit’s owner and the tenant. If the lease says that the tenant is responsible for maintenance, then he has to pay it.

But that does not relieve the owner of his obligations to the condo association.

In short, the unit’s owner has to pay the condo association any fees it’s due. So take your issue to the owner of the condo — if he can then get that money from his tenant, great, if not then it’s still the owner’s responsibility to pay those fees.

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