Loan Pre-Approval and Credit Scores

So often I hear from prospective buyers that they are afraid the loan pre-approval process will lead to a drastic lowering of their FICO (credit) score because, of course, their credit record must be viewed in the process.
So here it is from the horse's mouth: "Shopping around for an auto loan or mortgage shouldn’t hurt, if you keep your search to six weeks or less", per Craig Watts of Fair Isaac Corporation, the company which developed the FICO credit scoring system used throughout the world of credit.

Other factors that make up your score are length of credit history, how many accounts you've recently opened, balance due on your credit lines and the total amount available to you (keep your balance under 50%), and your payment history counts for 35% of your score. Many times people do not realize that having a 30-day late pay recorded on your credit history can be almost disastrous for some loans, or that the big car purchase or the last minute furniture purchase before you closed escrow may send your credit score over the cliff at the last minute before you close escrow. Yes, the lenders check your credit report once again just before the schedule closing to make sure you're still in good shape.

There are more impacts to your credit score, for instance in a short sale or foreclosure, but this article gives a good basic outline so you know what to expect.

Remember, getting pre-approved for a loan should not be impacting your score negatively, and should not be a reason as to why you can't go forward with the process. Also, if your score does fall for some reason, it will come back up within 60-90 days at a certain rate once you start eliminating the problem. It's important to talk with the loan officer first to find out what is needed or must be changed for qualification for a loan--another mistake people make is going ahead and taking certain actions, such as cancelling a credit card after they paid it off, which actually may hurt rather than help them. So don't be afraid to ask a professional first about what the best course of action might be in terms of qualifying for the loan.

Will the Real Home Value Please Speak Up?

December, 2008 median home price: Is it $387,021 for Los Angeles County, or is it $278,000? Well, for one thing, you have to dig a little deeper. Dataquick's $278,000 median price figure is for "Southern California" which includes at least 5 counties (single family and condos), and if you've been following the reports, you know that Riverside County has taken a very large "hit" thus lowering the overall median for Southern California. The other important thing to know is that condos prices have softened considerably, and are lower overall than detached single family home prices. Zillow's median price of $387,021 is based on Los Angeles County alone, and is considerably higher based on its own calculations of "size and characteristics of homes in the area -- whether they were sold or not -- and other factors". California Association of Realtors for Los Angeles County is $336,980 (not including condos).

The thing to remember is that "all real estate is local". So if you would like to know the prices for your area, contact me for reported sales in your zip code or neighborhood.

Prices are Down and Sales are Up in Southern California

"While sales from September 2007 through last summer were at the lowest in
at least two-decades, they've been up off the bottom ever since."

That's this month's news from Dataquick: in December '08, sales were up over 32% from one year before. An indicator of who is buying is shown by the current typical mortgage payment: $1239 in December, down from $2060 one year previous (remember these Dataquick figures combine condo and single family sales). Many more first-time buyers are now able to buy, and the opportunity is there through the bank-owned properties, short sales and overall price decline. But when the reports show that the residential market in Southern California, even with much market distress, has been "up off the bottom" since last summer, isn't it time for buyers to sit up and take notice? Most recent info from California Association of Realtors (as of end of 3rd quarter, 2008) shows the buyer affordability index is now up to 53% (it was 24% one year before), and their stats on California's existing home sales, up over 84% in December from one year ago. Statewide, the median home price is $281,100 (contact me for local median home prices in your neighborhood).

For a more specific and free market snapshot report for your zip code or city (including Long Beach, Cerritos, Cypress, Anaheim, Seal Beach, Huntington Beach, Yorba Linda, Bellflower, Whittier, Lakewood, Costa Mesa and 21 other cities in Southern California, contact me or visit my web site at http://www.juliahuntsman.com/.

Converting Your Property From Rental To Residence

We haven't been thinking of 1031 exchanges so much in the recent past, but even now, properties ARE selling, so if you've got a move underway, here are 2009 1031 exchange laws you should know about if you're considering moving into your income property and later taking the capital gains exemption as a principal residence.

The Housing Assistance Tax Act of 2008 changed what is known as Section 121 of the Tax Code:
As of January 1, 2009, exclusion must be allocated between the period the principal residence was used as an investment property or second home, and the period of time the residence was used as your principal residence. Any portion of the exclusion amount allocated to the period the property is not used as your principal residence is eliminated.

Suppose you exchange into a rental property which is rented for four (4) years, and then move into this former property and live in it for two (2) years as a principal residence. Then you sell the principal residence and realize $300,000 of gain. Under prior tax law, the you would be eligible for the full $250,000 exclusion and would pay tax on the $50,000 remainder.

Under the new law, the exclusion is prorated as follows (Note: This example does not take into account depreciation taken after May 1997, taxable at 25%):

Two-thirds (4 out of 6 years) of the gain, or $200,000, is ineligible for the $250,000 exclusion.
One-third (2 out of 6 years) of the gain, or $100,000, is eligible for exclusion. [This example was changed to show that the allocation formula takes into account years before the 5 year lookback period in §121(a).]

But, suppose you exchanged into the property in 2007, and rented for 3 years until 2010 prior to the conversion to a principal residence. If you sell the residence in 2013, after three years as a principal residence, only the 2009 rental period would be considered in the allocation for the non-qualified use. Thus, only one-sixth (1 out of 6 years) of the gain would be ineligible for §121 tax exclusion.

So, if you're thinking of property conversion, be sure to check with your accountant or tax preparer about your actual exclusions allowed on your return!

Bay Harbour, Long Beach--Finding Your Next Home

Bay Harbour's private residential area near Alamitos Bay was developed by Warmington Homes in the 1980's. If you're looking for larger single family homes near the cool ocean breezes and great association amenities, this could be for you--plenty of opportunity for exercise with lovely greenbelts, three tennis courts, two pools and spas, and a 24-hour "guard shack" at the gated entry.

Of 198 homes, five are currently on the market and range in size from about 2500-3000 sq. ft., depending on the plans, and range in asking price from $675,000 to $2,500,000. Click on the top photo for listing information. Some sellers are offering incentives on closing costs, so contact me for additional opportunities.

One single story plan is in escrow: 2400 sq. ft.; one single story plan sold for $1,000,000 since October, 2008. Three properties expired from asking price of $998,000 to $2,800,000 since 10/1/2008.

These three- and four-bedroom plans in contemporary Tudor and Mediterranean architecture are open and contemporary layouts designed for gracious living and entertaining. Many features include: cathedral ceilings and crown molding, central air and heat, open family rooms, double-side fireplaces, laundry room, walk-in closets, patios for outdoor dining, direct access from garage and many more individual upgrades with specific properties.
Low HOA fees are another great feature of the association. (Compare to the much higher $400-$500/month fees for luxury condos along Ocean Blvd.)

For current listings, please contact me by phone or e-mail. Asking prices currently range from the higher $900,000s to about $1,500,000, a great price range when comparing to other properties of that size and general location! Or,  see current listings now at my site for Long Beach Condos, Lofts and Association Homes for Bay Harbour.

Julia Huntsman
01188996

Where Are the Buying Opportunities for You?

Just a few points about the 2008-2009 California housing market overall:

Key findings from C.A.R.’s “2008-2009 State of the Housing Market” report include:

Approximately one in five home sales was due to foreclosure, short sale, or default.

Consistent with the increasing trend of distressed sales, almost one of five (19.8 percent) sellers sold their property because the property was in foreclosure, short sales, or default, an increase of 6 percent from 2007.

Distressed properties sold during 2008 had a median sales price of $330,000, a median price per square foot of $197, and a median size of 1,600 square feet.

More than half of the distressed properties sold were Real Estate Owned (REO) (54.8 percent), almost one-third were short sales (31.2 percent) and the remainder were foreclosures (14.1 percent).

Non-distressed properties had a median price of $541,000, a median price per square foot of $315, and a median size of 1,766 square feet.

Lowest Interest Rates in 50+ Years

The e-mails from the lenders are pouring in to my inbox this morning. As of this morning, the 30 year fixed Fannie Mae Rate (conventional loans) is now 4.375%, and the FHA 30 year fixed is 4.750%!!! Even Jumbo 30 year fixed rates to $3 million are now 5.375%!!! And, if you're willing to pay a point (not a bad thing if you plan on living in your home for several years), your rate can be even lower, saving you thousands over the life of your loan, and maybe hundreds off your payment now.

Get on board with the new buying opportunity! Please contact me immediately if you would like to be prequalified for a higher purchase price.

The Cost of Waiting to Buy

I couldn't possibly say this any better, and I've been saying it in the past in several different ways, so I'm going to give you Pat Zaby's article on the topic:

Cost of Waiting to Buy by Pat Zaby

The financial news is full of stories warning about the inability to predict the bottom of the stock market. A 40% decrease in stock prices in one year have uncovered some great values available for investors and buying them at their absolute lowest price will not make much difference for the people who hold them for a while.

Home prices are very much the same. There has been a correction in the market and prices are down in most parts of the country. Combine these with the attractive rates currently available and it is a bargain that everyone will look back on saying that "this was the best time to buy."

Let's make an assumption that the prices may still decline 5% more before they start appreciating again. If while a buyer was waiting for the price on a $250,000 to go down 5% to $237,500, and the interest rate goes up one percent from 5.25% to 6.25%, which is entirely possible, the buyer's monthly payments will increase almost $79 per month.

For most buyers, the monthly payment to control the cost of the home is much more important than the price paid or even the equity in the home.

Or, read on about Warren Buffett's response to the current economic situation, where he says he's never seen people so fearful as now, BUT, he's buying.

Real Estate Downfall, or "Life in the Bunkers"

Taking a break from serious writing here ... (by the way, my last You Tube post was a nice piece on home staging):

What's For Sale in Long Beach under $300,000?

In October, 2007, I wrote a post about properties under $300,000. The picture has changed considerably:

Then, there were 360 houses, condos, co-ops, and own-your-owns available in Long Beach. And now, there are 737 in the same category under $300,000. That's DOUBLE the inventory in that price range! And, the bonus is that right now interest rates are even lower, and may go as low as 4.5% for a 30-year fixed (see Treasury Considers Plan to Stem Home-Price Decline ), and even as we write, the mortgage applications more than doubled last week. Lots of loan guidelines have changed in the last year--one of the important things to remember is that a decrease in your interest rate lowers your payment immediately, as opposed to trying to save more money for your down payment. Try an internet real estate calculator to make simple P&I comparisons.

In the meantime, what is available for about $250,000? MLS P665655 (listing photos shown) is a one-bedroom condo in Stoneybrook, a nice condominium association on the edge of Alamitos Heights and a 5-minute drive to Belmont Shore. List price is $251,000, 13 days on the market as of today, and the association features a beautiful planted landscape with walkways and streams, spa, sauna, two swimming pools, a large clubhouse, tennis courts, weight and locker rooms. Gated parking is located under each condo building, with elevator access to upper floors.

For more info on this or other buying opportunities, just contact me!