USDA Mortgage Takes Weaker Credit

Begonia in my yard blooming in blue pot

 

 

 

 

 

 

USDA Mortgage can help you buy an owner occupied home with no down payment!

Cash reserves are not required

The minimum FICO score requirement 640.

This mortgage loan is also easy on the credit items:

·          Foreclosure or deed-in-lieu of foreclosure allowed after three years from completion

 

·         Outstanding tax liens or delinquent government debt with no satisfactory arrangements

·         No court-created or affirmed obligation (judgment) caused by nonpayment that is currently outstanding or has been outstanding within the last 12 months.

·         Two or more rent payments paid 30 days or more past due within the last 3 years

·         Accounts which have been converted to collections within the last 12 months (utility

·         bills, hospitals bills, etc.)

·         Collection accounts outstanding, with no satisfactory arrangements for payments, no

·         matter what their age as long as they are currently delinquent and/or due and payable.

·         The lender is responsible to determine what collection accounts, if any, should be paid

·         in full by the applicant prior to or at closing based upon the strength of the credit profile.

·         Evidence of meaningful financial reserves and if the accounts have the potential to

·         affect the lien position or diminish the borrower’s equity must be considered.

·         Any debts written off within the last 36 months.

·          

·         A bankruptcy in which applicant was discharged more than 36 months before

·         application

·         A satisfied judgment completed more than 12 months before the date of mortgage application

·         _ The lender may consider mitigating circumstances to establish the borrower’s intent for

·        USDA mortgages accept weaker credit than FHA and case by case  when the applicant provides documentation that:

·         The circumstances were of a temporary nature, were beyond the applicant’s control,

·         and have been removed (e.g., loss of job; delay or reduction in government benefits or

·         other loss of income; increased expenses due to illness, death, etc.); or

·         The adverse action or delinquency was the result of a refusal to make full payment

·         because of defective goods or services or as a result of some other justifiable dispute

·         relating to the goods or services purchased or contracted for.

·         _ A 24-month history of residency is required on all files.

·         _ Non-purchasing spouse in Community Property States: Except for obligations specifically

·         excluded by state law, the debts of NPS must be included in the applicant’s qualifying ratios when

·         the applicant resides in a community property state or the property guaranteed is located in a

·         community property state. The NPS credit history is not considered a reason to deny a loan

·         application. However, the NPS obligations must be considered in the debt-to-income ratio unless

·         excluded by state law. A credit report must be obtained for the NPS in order to accurately

·         determine the debts that must be counted in the total debt ratio.

·         _ Community property states include: Arizona, California, Idaho, Louisiana, Nevada, New

·         Mexico, Texas, Washington and Wisconsin.

·         _ If borrower is legally separated in a community property state, the Legal Separation

·         Agreement signed by the judge is accepted the same as a divorce decree.

·         _ If the non-borrowing spouse has no Social Security number, due diligence must be

·         completed to assure that indeed there is no SS# assigned. Indications may show up on the

·         tax transcripts or other misc. documentation in the file. The required credit report is run with

·         only zero’s (0) in the SS# fields. It is not acceptable to run the credit report using an ITIN

·         number.

 

_ Short Sales: Evaluation of a borrower’s creditworthiness for borrower(s) who have pursued a

short sale

Collections: Underwriter discretion as to whether they will be required to be paid off or not. Must

not affect first lien position and cannot affect the ability to repay the mortgage debt. If the Underwriter

determines collection accounts may remain open, they must document an adverse credit waiver

and addressing the circumstances surrounding each collection account; specifically,

that the situation was temporary in nature, and beyond the mortgage applicant’s control.

_ Child care expenses are not required to be considered as a recurring liability when calculating

debt-to-income ratios. Child care expenses are utilized to calculate the adjusted gross income in

determining mortgage program eligibility.

Declared Disaster Areas _ From time to time, FEMA announces counties that are affected by natural disasters. For example after the Laguna Beach fire of 1993.

Certain areas of Orange County that are within the scope of this type of mortgage such as Silverado Canyon and Trabuco Canyon.

Property must be located in a rural area as defined by the RHS

o Populations of 10,000 or fewer

o Populations up to 20,000 if located outside a Metropolitan Statistical Area (MSA)

_ To determine if a property is located in a designated rural area, visit the RHS Web site at:

http://eligibility.sc.egov.usda.gov/eligibility/. Click on “Single Family Housing” under

“Property Eligibility”.

oBorrowers adjusted income may not exceed 115% of the Area Median Income (AMI)

_ To determine the income and eligibility limits, the following website walks through the household

members, income, etc. and determines if it fits within the 115% requirement:

http://eligibility.sc.egov.usda.gov. Click on “Guaranteed” under “Income Limits”.

 

 

Why Orange County Home Prices Are Soaring

Robert Shiller says: recovery for housing is in process.

With the numbers of foreclosures, and notice of defaults shrinking in Orange County the real estate market is soaring.

 

Keep growing Orange County Real Estate Prices!

The shortage of homes for sale and rising home sale prices are being driven by three forces: 1. Banks and Wall Street Investors 2. Foreign buyers and 3. Fearful owner occupants who wait to sell or can’t sell because they are upside-down.

The major banks and Wall Street good old boy firms, (many were subprime lenders five years ago) now have reorganized themselves into real estate “investors.”  These all-cash investors are buying distressed property at the low end of the price scale, muscling out first-time homebuyers and smaller mom-and-pop investors. Big investors, like Blackstone, Colony and others, are snatching up low-priced housing units in bulk and renting them out to people who can’t buy. By amassing thousands of rentals, the Wall Street landlords are putting a crunch on housing supply, driving up prices and making millions of dollars. Thank you stodgy bankers for hoarding all the homes under $200000.

The second influence is the increase of foreign nationals buying investment properties in California, Arizona, Florida and Texas. Foreign investors driven by a multitude of Ponzi seminars and gurus who wrote a book on “get rich quick flipping properties in the United States” are buying cheaper housing units sight unseen. I see more Canadian investors than in the past fifteen year cycle. Right behind them are Chinese, Taiwanese, Australian, and Middle Eastern buyers all eager to find properties on the internet and make all cash offers.

As a mortgage lender I am getting several calls a day about our foreign investor loan programs. The biggest problem with these buyers is they have been told nonsense ideas to vest each property in separate LLC’s or entities. They often have complex financials with one parent trust. Unfortunately, with layered financials, their package appears often too complicated to actually show income enough to close on a traditionally priced loan. Canadians don’t have to go through all the fiery paperwork hoops that Americans do to get a home loan. They send in about twenty percent of the information and begin to argue about why so many items are required. The obvious solution is for foreign investors to close with a low documentation loan. Foreign investors are not required to go through the income tests that Americans must complete, but the cost is not in the four percent range. These loans cost around eleven percent and have larger upfront fees due to the high level of risk.

Unfortunately for stability in the market:  home sales and prices are up, but home ownership is down because it’s investors  — not first-time homebuyers —  who are buying up the majority of homes. RealtyTrac  shows  3.5 percent of all home purchases in the first quarter of 2013 were closed by “institutional investors.” Institutional purchases are up 34 percent from a year ago.

Meanwhile, the housing “scarcity” is a result of two factors: 1) borrowers who are “upsidedown”  -they can’t sell, but have hung on making payments out of pride or job reasons, and 2) banks refusing to modify underwater mortgages. Since more than 25 percent of all borrowers — or 11.3 million homeowners— are underwater, these homeowners can’t sell, can’t refinance and can’t get a loan modification.

Many homeowners are waiting to sell because prices are rising in many markets. In Laguna Beach the single family house under a million dollars is gone. A home on Santa Ana that I looked at sixteen months ago listed for $ 850000. They did not get an offer and took it off the market. This month they re-listed for $ 950000 and received multiple offers for larger than full price. No improvements where done to the home.

Sitting vacant are 14.2 million homes, this creates hardship, crime and a giant sink hole in a community. Would you want to live next to the vacant house that squatters are making a fire out of scraps to keep warm in Detroit?

Mortgage Blue Jay in my window, he is ready to soar.

(Curbside appeal of these two planters with waterfalls of flowers in Corona Del Mar)

Still buyers are interested in homeownership.  We all dream big.

 

Orange County California has turned the corner with few foreclosures and a trickle of notice of defaults. Most notice of defaults are located inland Orange County. A number of these properties are unimproved land. Here is a list of the locations that still are upside-down often with two lenders and not listed for sale:

East hill, Coto De Caza

W Martha Lane, Santa Ana

San Antonio, Fountain Valley

N Genesse St, Orange

Mount Neota, Fountain Valley

Mohave Way,  Rancho Santa Margarita

Granada, Newport Beach

N Fairview, Santa Ana

Walker Lane, Fullerton

Cabrosa, Mission Viejo

Foxtail Drive, Yorba Linda

W Palmyra, Orange

E Altura, Orange

Avon Cir, Westminster

Durango River Circle, Fountain Valley

San Angelo, Westminster

Poindexter, Garden Grove

Kings Place, Newport Beach

E Avenida Cornelio, San Clemente

Hopping St, Fullerton

Laguna Beach distressed or foreclosed homes on the market:

Smithcliffs Rd

Wave St

Rockledge Ter

Terrace Way

Wesley Dr

Van Dyke Dr

432 1/2 Jasmine St

Jasmine St

N Portola

432 & 432 1/2 Jasmine St

 

 

 

Garden gate in Corona Del Mar California, one niche market that is soaring

Obamacare Tax

Obama Care 3.8% Tax On Your Investment Real Estate Profits?

Buzzard photograph ©

copyright Caroline Gerardo

OBAMACARE ADDITIONAL INCOME TAX-- ONLY THE WEALTHY WAGE EARNERS PAY FOR THE PEOPLE WHO MAKE $30000- $40000 A YEAR. OR 3.8% OF YOUR REAL ESTATE INVESTMENT GAINS

1.      The tax applies to investment income, not just real estate. When your income is more than the $200,000/$250,000 amount, then the tax formula will be applied to capital gains, interest income, dividend income and net rents (i.e., rents after expenses).

2.      The tax goes into effect in 2013. If you have investment income in 2013, you won’t pay the 3.8% tax until you file your 2013 Form 1040 tax return in 2014. The 3.8% tax for any later year will be paid in the following calendar year when the tax returns are filed. There is still time to plan, because I don't see anyone protesting about paying this.

3.      If you have no income from capital gains, rents, interest or dividends, you will not have to pay this tax, even if you have millions of dollars of other types of income.

4.      The formula that determines the amount of 3.8% tax due will always protect $200,000 ($250,000 on a joint return)  For example, if you are single and have a total of $201,000 income, the 3.8% tax is imposed on  $1,000.

5.      Investment income from rents on an investment property is subject to the 3.8% tax. But: The only rental income that would be included in your gross income and therefore possibly subject to the tax is net rental income: gross rents minus expenses like depreciation, interest, property tax, maintenance and utilities. Most borrowers income taxes that I review who have rental properties tend to net negative numbers. In other words - once they pay their mortgage, taxes, insurance, repairs, depreciation and... they aren't paying income tax on the rental.

6.      The tax was bundled with the health care legislation in 2010. It was SLIPPED to the package just hours before the final vote and without review. National Association of Realtors fought the tax and the tax will be debated during the upcoming tax reform debates in 2013. Why is this not in the news?

7.      The health care reform package (the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010) imposes a new 3.8 percent Medicare contribution tax on the investment income of higher-income individuals. Although the tax does not take effect until 2013, start examining methods to lessen the impact of the tax today. A few methods come to my mind -prepare now: reduce income by deferring, putting into retirement,

8.       “Net investment income” includes interest, dividends, annuities, royalties and rents and other gross income attributable to a passive activity. Gains from the sale of property not used in an active business and income from the investment of working capital are also treated as investment income. Further, an individual’s capital gains income will be subject to the tax. This includes gain from the sale of a principal residence, unless the gain is excluded from income under Code Sec. 121, and gains from the sale of a vacation home. However, contemplated sales made before 2013 would avoid the tax.

9.      This tax also applies to estates and trusts, on the lesser of undistributed net income or the excess of the trust/estate adjusted gross income (AGI) over the threshold amount ($11,200) for the highest tax bracket for trusts and estates, and to investment income they distribute.

10. Net investment income is gross income or net gain, reduced by deductions that are “properly allocable” to the income or gain. This is a key term that the Treasury Department expects to address in guidance, and which we will update on developments. For passively-managed real property, allocable expenses will still include depreciation and operating expenses.
 

11. For real estate with capital gains, this formula puts RED Alert on amounts that increase your property’s basis. It also focuses on investment expenses that may reduce net gains: interest on loans to purchase investments, investment counsel and advice, and fees to collect income. Other costs, such as brokers’ fees, may increase basis or reduce the amount realized from an investment. As such, taxpayers may want to consider avoiding installment sales with net capital gains (and interest) running past 2012. Sellers need to look carefully at what they will net on capital gains on sales of real estate before they list. A few suggestions here: 1031 Exchange, even though the Orange County Real Estate market is increasing- in Newport Beach and Laguna Beach prices have risen about 16-18% - Sellers need to look carefully at capital gain before they close the sale.

12. The tax applies to the lesser of net investment income or modified AGI above $200,000 for individuals and heads of household, $250,000 for joint filers and surviving spouses, and $125,000 for married filing separately. MAGI is your AGI increased by any foreign earned income otherwise excluded under Code Sec. 911; MAGI is the same as AGI for someone who does not work overseas.

    For example: A single individual, with modified AGI of $220,000 and net investment income of $40,000. The tax applies to the lesser of (i) net investment income ($40,000) or (ii) modified AGI ($220,000) over the threshold amount for an individual ($200,000), or $20,000. The tax is 3.8 percent of $20,000, = $760. The tax is not applied to the entire $40,000 of investment income.

 

13.   The tax does not apply to distributions from qualified plans, 401(k) plans, tax-sheltered annuities, individual retirement accounts (IRAs), and eligible 457 plans. But there is no exception for distributions from nonqualified deferred compensation plans subject to Code Sec. 409A. You can defer income, but be careful pulling it all out at once and exceeding the $200000. mark.  However, distributions from these plans (including amounts deemed as interest) are generally treated as compensation, not as investment income.

14. The exception for distributions from retirement plans suggests that potentially taxable investors may want to shift wages and investments to retirement plans such as 401(k) plans, 403(b) annuities, and IRAs, or to 409A deferred compensation plans. Increasing contributions will reduce income and may help you stay below the applicable thresholds. Small business owners may want to set up retirement plans, especially 401(k) plans. If you have not yet established a plan, I suggest  you open one and consider increasing contributions to keep your income under $200000.  

15. Another exception is provided for income ordinarily derived from a trade or business that is not a passive activity under Code Sec. 469, such as a sole proprietorship. Small business owners may avoid the tax and investment income from an active trade or business is excluded. However, SECA (Self-Employment Contributions Act) taxes still remain intact to proprietors and partners. Income from trading in financial instruments and commodities over the income numbers will be paying the 3.8% tax.

 

This may be boring tax news, but very important for Realtors to advise clients who are selling high end Jumbo multi million dollar property. "Mine government" is not yet charging new larger transfer taxes in California, but this 3.8% Federal tax on the wealthy wage earner (I say this because business owners and corporations know how to write off income to avoid the $200,000. income number while w-2 earners like myself will worry about paying this). 

This is not tax advice, just news to plan around if you are a w-2 income earner who works hard and makes a good deal of money.

 

 

 

 

 

 

White Bathroom Remodel

Low cost Bathroom remodels in Orange County California. These clean white looks don't require you to take out a new mortgage to finance. Plan carefully, recycle found objects and keep it simple.

white bathroom

All four of these bathrooms are light and bright. They use combinations of Carrera marble, white prefabricated vanities and pale blue and grey accents. Glass shelf is recycled from other use with new hardware.

white bathroom

This bathroom has a dash of fun with the pink boa as an accent

 A Mirror found at a garage sale painted with white lacquer accents and softens this powder room

selfie in white bathroom

The smaller toile tank is accented with succulent plants and a pretty mirror. 

Oops there's a self portrait with my iphone.

All these remodels were completed for cost less than $10000. Keep the countertop clutter down and store your toothbrush and beauty products in the drawers.

I took a pillow from my linens that is this heavenly calming blue grey and Home Depot scanned it to make paint color for me. Painting is important, I suggest you have small quantities made and roll them on the wall and live with the  color choices a couple days. Examine them at different times of day, and choose when you are totally happy.