Barry Ripp ~ East Bay Area Real Estate

Last year, more than two million people were turned down for home loans, according to federal data, often because the applicants didn’t meet certain lender requirements or because their applications were incomplete or otherwise problematic. With lenders’ underwriting criteria becoming more strict in recent years, it’s important buyers know the most common triggers for mortgage-loan rejection. 

• Insufficient income: Lenders want to be sure borrowers can afford to make the mortgage payments. Lenders typically look for at least a two-year track record of income, which could hurt those who have changed jobs recently.
• Cloudy financial picture: Generally, total debt payments, including the mortgage, cannot exceed 45 to 50 percent of a borrower’s adjusted gross monthly income. Overtime and bonuses are included only if the borrower has worked for the same employer at least two years, and has a history of receiving them.
• Poor credit: Lenders typically reject applicants with FICO scores below 620.
• Low appraisal: One of the predominant reasons buyers are turned down for home loans is because the appraisal on the property is too low.
• Property problems: Sometimes issues turn up within a house, like a major repair or safety issue that needs to be addressed, before an application can be approved.
• Information mix-ups: Approximately 12 percent of new mortgage applications were denied because of unverifiable information or incomplete credit applications, according to the Federal Financial Institutions Examination Council.

Related articles

• How to Boost Your Odds of Getting Approved for a Mortgage (dailyfinance.com)
• First-time buyers hit by lenders’ caution (guardian.co.uk)
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When life gets hectic, you might find yourself daydreaming of a mountain get-away or a calming tropical beach, but unfortunately, sometimes it’s just not that easy to get away.  That’s why it’s important to create a no-frills retreat in the most accessible place, no passport required: your home.

About.com suggests finding a quiet corner to designate as your in-house oasis.  Even it if’s not an entire room, be sure your in-house oasis has a different feel than the rest of the house.  (It it’s just a section of a room, invest in a light weight screen to separate it from the rest of the area.)  Make sure it’s away from technology, including telephones, computers or the television.  (And resist the urge to check work e-mail or bring your Blackberry.)

Add to the relaxing ambiance by painting the walls a soothing color.  Experts recommend pale blues and greens or neutrals such as taupe, beige or brown.  Avoid jarring, energetic shades such as bright yellows or reds.  If you do add color, keep it monochromatic so vivid contrasts aren’t distracting.

Next, get rid of clutter.  Then set up a big, comfy armchair and a small table that’s just big enough for a steaming mug of tea, perhaps a plate of food and a lamp.  Less is more when decorating for stress relief.  Add serene family photos to the walls so you’ll be surrounded by the ones you love, and consider placing candles in the area.  Choose scents such as lavender, sandalwood or sage, which can have a calming effect on the mind and body.

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• Creating a scented Oasis in your home (myprettyplace.wordpress.com)
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The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) released its 2012 Housing Market Forecast this week during CALIFORNIA REALTOR® EXPO 2011 in San Jose.  The forecast calls for California home sales and median price to improve only slightly in 2012, as the continuation of the tepid economic recovery, uncertainty about the future, and funding challenges for residential mortgages are expected to keep the market moving sideways, with little foreseeable momentum in either direction.

• The forecast for California home sales next year is for a slight 1 percent increase to 496,200 units, following essentially flat sales of 491,100 homes this year compared to the 491,500 homes sold in 2010.
• “Discretionary sellers will play a larger role in next year’s housing market,” said C.A.R. President Beth L. Peerce.  “Those who held off selling in 2011 may list their homes in 2012, thereby improving the mix of homes for sale compared with the last few years.  Additionally, distressed sales will remain an important segment of the overall market as lenders continue to work through the foreclosure process.”
• The California median home price is expected to increase 1.7 percent in 2012 to $296,000 in 2012, according to the forecast.  Following a double-digit increase in the median price in 2010, the median home price will decrease a projected 4 percent in 2011 to $291,000.
•  “2012 will be another transition year for the California housing market, as the continued uncertainty about the U.S. financial system, job growth, and the stability of the overall economy remain in the forefront for all market participants,” said C.A.R. Vice President and Chief Economist Leslie Appleton-Young.  “An improvement in job growth, consumer spending, and corresponding gains in housing are essential to a broader recovery in the economy, but would-be buyers will remain cautious as they weigh these myriad uncertainties against the clear opportunities presented by today’s very affordable housing market.

Related articles

• Existing Home Sales Hit Five Month High (reliantauburn.wordpress.com)
• Calif. homesellers pocketing more cash (lansner.ocregister.com)
• Home sales jump in August as investors swoop in (usatoday.com)
• US home sales jump 7.7 pct. as foreclosures rise (seattlepi.com)

Housing affordability increased in California in the second quarter as prices dropped from the same period a year earlier, according to the Calif. Assoc of Realtors.

Fifty-one percent of California households could afford a single-family home priced at the median, according to the CAR. That was an increase from 46% during the same period last year, when buyer tax credits fueled the market and pushed up prices. Affordability decreased from the prior quarter, but that was due to seasonal variations that pushed up prices.

Potential buyers needed to earn a minimum annual income of $63,080 to qualify for the purchase of a home priced at the state’s median, $293,580, which is the price at which half the homes sold for more and half for less. The house payment on that purchase, including taxes and insurance, would be $1,580, the group reported, assuming a down payment of 20% and an effective composite interest rate of 4.85%.

During the second quarter, affordability fell in the priciest parts of the state. San Bernardino County was the most affordable in the state, with a rate of 77%, while San Mateo County was the least affordable, with only 21% of households in the state able to afford that county’s median-priced home, the group reported.

That’s great news, so it’s now time we all buy instead of rent. Call me if you need help.

This information was obtained by permission from the Calif Assoc of Realtors.

We are now in the fifth year of a housing crisis in which more than 3 million Americans have lost their homes to foreclosure, with millions more still at risk.

Every initiative to stem the tide of misery has fallen short in the face of continued economic gloom.

Over the next few weeks, several initiatives aimed at reforming the foreclosure process, holding mortgage lenders and services accountable for their past abuses, and creating more effective mortgage workouts are coming to a head.

Typically, banks and other lenders retained almost no financial interest in the mortgages they originated, other than the duty to service them — collect payments and pursue delinquent borrowers, say — for which they received a fee.

Several drawbacks to that system emerged when the housing economy crashed. Because the loans weren’t going to stay on their books, the lenders hadn’t been too careful about whom they lent to and on what terms.

Perhaps the biggest problem is that although the servicers, which include huge banks such as Bank of America and Wells Fargo, are burdened with the responsibility to renegotiate mortgages to keep borrowers out of foreclosure, their authority to do so on behalf of investors is murky.

As a result, though the investor, the borrower and the economy in general benefit if a home is kept out of foreclosure, even if that means its owner makes lower payments than were required by the original mortgage, the servicing banks are leery of renegotiating too aggressively.

The most closely followed remedial effort involves the 50 state attorneys general under the leadership of Iowa Atty. Gen. Tom Miller.

Last March, the group produced propsal for foreclosure reforms that drew fire from some consumer advocates for being too lenient — its provisions include mandates that banks comply with state law in dealing with borrowers, as if that’s a novel concept — and from business interests for putting too much pressure on banks to reduce principal balances for homeowners having trouble keeping up payments on homes with values that have fallen below the mortgage balance.

Information obtained by the Calif. Asso of Realtors & the L.A. Times. For the whole story: http://articles.latimes.com/2011/aug/14/business/la-fi-hiltzik-20110814

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Short sales – a real estate transaction in which the homeowner needs to sell the property, but owes more on the mortgage than the home currently is worth – continue to dominate the housing market, but these real estate transactions aren’t for everyone.

• Typically with a short sale, the homeowner is underwater and has experienced a financial hardship such as a job loss. To limit the damage to his credit rating, a homeowner may attempt to work with his lender to negotiate a short sale. Not only must the bank approve of the short sale itself, it also must agree to the price, since the bank will accept the difference as a loss.
• Unlike foreclosures, in which the owner has walked away and the bank is looking to unload a vacant – and sometimes vandalized – property, a short sale isn’t a distressed home that will sell at an extremely low price. According to data from RealtyTrac, short sales typically sold for nearly 10 percent less than the market price in the first quarter of 2011, whereas foreclosures sold at an average discount of 35 percent.
• Home buyers wanting to purchase a short sale must have patience. In most cases, when a buyer makes an offer on a house, he receives a response from the seller within a few days, or even hours. With a short sale, the bank must approve of the sale and bank representatives are overloaded with cases. It may take 30 days or longer for a buyer to receive a response from the bank.
• In a traditional real estate transaction, it is common for a home buyer who currently owns his home to make his offer contingent on selling his current home. In short sales, most banks will not approve an offer that is contingent on the buyer selling his current home, as too many things can go wrong.
• Banks also typically won’t consider short-sale offers that have inspection contingencies in them, so buyers can either do an inspection prior to making an offer or get no inspections.
• Even with the challenges associated with short sales, buyers don’t have too avoid these transactions. Being prepared ahead of the time and working with an experienced REALTOR® can help buyers avoid frustration and surprises down the line.

In anticipation of the expiration of current loan limits on Sept. 30, 2011, Bank of America has decided to stop accepting conventional and government applications for loan amounts that will exceed the permanent loan amounts.  The deadline to submit loan applications was July 1.

According to an email from Bank of America, conventional loans that exceed the permanent loan limits will now be required to use non-conforming programs.

Barring Congressional action, the maximum FHA, Fannie Mae, and Freddie Mac conforming loan limit will decline to $625,500 beginning Oct. 1, 2011, from the current $729,750 limit, though the majority of counties will fall far below the $625,500 maximum.  The conforming loan limit determines the maximum size of a mortgage that FHA, Fannie Mae, and Freddie Mac government-sponsored enterprises (GSEs) can buy or guarantee.

Non-conforming or jumbo loans typically carry a higher mortgage interest rate than a conforming loan and require a higher down payment, increasing the monthly payment and negatively impacting housing affordability for California home buyers.

This information was obtained from the Calif. Asso. of Realtors, and used with permission.

When deciding which home improvements to make, many homeowners consider the amount of resale value the improvement may or may not make and compare that against the cost of the renovation.   Homeowners concerned with making home improvements that will pay off when it’s time to sell the property, should consider the following tips.

 The first improvement/repair homeowners should consider are those that impact the home’s basic structures and systems.  Potential home buyers generally do not want to face expensive repairs, and if items such as the foundation, roof, air conditioning, water heater, or other basic structure need to be fixed, the property will be considered a fixer-upper and its market price will be discounted accordingly.

Some minor replacements will produce big results for minimal cost.  Replacing and coordinating bathroom and kitchen hardware and fixtures are generally inexpensive, but tend to make a big difference.  The same can be said for getting rid of any dated finishes, such as old wallpaper and brass light fixtures.

Homeowners who don’t know when or even if they will be able to sell their home are advised to choose home improvement projects carefully.  Unless the home is located in an upscale neighborhood and the property already is immaculate, owners can skip expensive upgrades – such as remodeled bathrooms – and focus on the fundamentals.

Information obtained by the Calif. Assco. of Realtors with permission. Photo by Barry Ripp.

Alameda County Planning staff is urging the Board of Supervisors to adopt an ordinance that would require property owners to complete energy efficiency retrofits prior to their homes being sold. The proposal is part of the latest version of the County’s draft Community Climate Action Plan (CCAP). Bay East members and staff worked with the County during 2010 to remove the point-of-sale requirements from the CCAP. However, in response to a threat of litigation from another interest group, County staff is now suggesting the retrofits be added back into the plan.

If the County Supervisors accept the the staff recommendation of including a Residential Energy Conservation Ordinance (RECO) in the CCAP, all homes being sold in Castro Valley, San Lorenzo, Fairview, Sunol and the rest of unincorporated Alameda County would be subject to energy retrofits at the time of sale.

The Alameda County Board of Supervisors will review the draft CCAP at a meeting on May 17.