Why to Buy a Home Now
by Phoebe Chongchua
www.RealtyTimes.com with www.MyNvaHomes.com
If you're renting and wondering if you should buy a home, consider what bestselling author, David Bach, says, "The average homeowner is worth 35 times more than the average renter."
He advises renters to take action immediately and start saving part of their paycheck every month to help accumulate a down payment. He also encourages renters to borrow 10-20 percent less than what the bank is willing to lend; that way they're only buying as much home as they can afford.
The longer you rent, the longer it may take you to eventually get into homeownership. If the market conditions have scared you, perhaps you're not looking at the other side of the coin. Owning a home becomes part of your investment portfolio, provides tax benefits, allows you to build equity (it still exists), and, if you buy now, you may get an excellent deal.
According to a MarketWatch news article, buying a home now can provide some real negotiating power to request improvements, price reductions, help with closing costs, and more. "People can get a lot of what they need and almost all of what they want today," said Jay Papasan, one of the authors of "Your First Home".
While poor market conditions have created a troubling situation for some homeowners, the downturn has made the buying market ripe for others. The affordability of homes is better than ever. The National Association of Realtors' housing affordability index concluded that homes in December of 2008 were more affordable than at any other point since 1970 (the start of the index). And with numerous foreclosures on the market and prices dropping in many areas, now is a good time to buy. But in order to make your purchase profitable, here are some things you should consider.
How long will you be in the home? Some experts advise that if you are planning to move within a year, buying may not be the best option because of the expenses associated with moving. However, if you're searching for a place to live for, at least, several years, buying now could be a good choice for you.
How much you can afford. Don't let tighter lending regulations scare you off from making a purchase. Instead, understand what you truly can afford. Don't get caught up in buying too much home. In fact, these days, the trend is moving toward smaller homes -- simpler living.
Mortgage rates drop to historical low. How much home you can afford is affected by mortgage interest rates that, right now, are highly appealing. Good credit, documenting your income, and a substantial down payment will make you a better candidate for the better mortgage rates.
Freedom to choose. Now, unlike several years ago, the market has a large inventory in many areas. The market time to sell a home has increased which creates a large inventory of homes, everything including new, existing, and foreclosures. Buyers can peruse the market and have the freedom to select the home they really want. If you're interest is in a new home, know that many developers are getting more competitive with their pricing because they also have taken a hit by the ailing economy.
Quality of life. Buying a home can create a higher quality of life, giving you pride of homeownership, and something to enjoy improving and developing over the years.
Tax credit benefit. Last summer, the federal government started providing up to a $7,500 tax credit to buyers who have not owned a home in at least three years; the tax credit must be repaid within 15 years. But that figure may increase. The National Home Builders Association and National Association of Realtors are pushing for more significant help for all home buyers -- not just those who are buying for the first time. The Senate, as part of a stimulus package, this month approved a temporary new tax credit to be applied to homebuyers' tax bills. The credit would give buyers 10 percent of the purchase price of any home, up to $15,000. Alan Zibel of the Associated Press writes, "Anyone who buys a home within a year of the bill's signature would qualify. To deter speculators, buyers must occupy the house as their main residence for at least two years." At the time of this writing, the stimulus package had not yet gone to the White House.
Published: February 13, 2009
Thomas Merical
http://www.findahomesellahomenow.com/
Should You Use an IRA LLC or Solo 401(K) to Invest in Real Estate?
by Phoebe Chongchua
www.RealtyTimes.com with www.MyNvaHomes.com
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Nobody would argue that there has been severe disappointment in the stock market performance. That has a lot of people looking for other options such as taking their retirement investment accounts into their own hands. Using the self-directed IRA allows you to enjoy the benefits of contributing to your retirement account while also being able to self-direct those funds into alternative assets such as real estate.
"The simplest way to invest in real estate with retirement accounts is with a self-directed IRA. An IRA has to have a custodian such as a bank or trust company that will hold the assets for the accountholder," says Jeff Nabers, founder of IRA Association of American and CEO of Nabers Group. "You can open a self-directed IRA and then roll your retirement funds into it and then you can ask the custodian to go out and invest based on your wishes," says Nabers.
While this method of using your self-directed IRA to invest in real estate is becoming increasingly more popular, it has its downside. "It can become cost-prohibitive," says Nabers. He says the fees that custodians charge can add up very quickly. And he adds, "The custodians can be slow to react to an accountholder’s needs. Sometimes they might not let you do an investment because of their policies." But Nabers says investors can create an IRA LLC (Limited Liability Company) which allows more freedom to invest in what and when they want. "You can pair your IRA with an LLC. The LLC is created and the IRA accountholder directs the custodian to invest some or all of its funds into the LLC. The accountholder then manages the LLC," explains Nabers.
He says this method doesn’t require accountholders to get approval from a custodian to purchase real estate -- with the IRA LLC the accountholders have complete checkbook control over their funds. However, Nabers says another retirement vehicle that investors are turning to is the Solo 401(k). This investment vehicle provides checkbook control, allows 10 times higher contribution limits than the IRA, and provides the ability to borrow money from your retirement account, and, generally, it helps you avoid the UBIT (Unrelated Business Income Tax) -- a tax that is often created through leveraged real estate ownership. Unlike a self-directed IRA or IRA LLC, the Solo 401(k) allows you to be the actual trustee of the retirement plan directly. You manage the funds and you invest them in what you want. "In an IRA everything about how it works is laid out in a section of the Internal Revenue Service code. With a Solo 401(k), the section about how it works describes how it can work, but how the Solo 401(k) actually works is determined by the planned documents. So, all IRAs work the same but Solo 401(k)s can vary a lot from one plan to the next depending on how the plan documents are written," says Nabers.
"You can set up a Solo 401(k) anywhere; what it comes down to is how flexible and capable the plan will be. You could set up a Solo 401(k) with a stockbroker and then you’ll invest only in stocks, bonds, and funds. Or if you decided to invest in a less restrictive platform, then you open a Solo 401(k) at another company but all that company does is send you a binder on your account and doesn’t offer any real help," says Nabers.
Here are five things to look for before deciding to open a Solo 401(k):
Published: February 6, 2009
Thomas Merical
http://www.findahomesellahomenow.com/
Is A Mortgage Modification For You?
by Broderick Perkins
www.RealtyTimes.com with www.MyNvaHomes.com
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Home loan modifications are designed to save homeownership, but they've also created a new mortgage maze pitted with "buyer bewares."
Both government-sanctioned counseling agencies and local community service agencies concede they have been swamped recently by demand for loan modifications.
The demand stems from a proliferation of federal, state and local level foreclosure relief and bailout efforts from both government and the private lending industry.
Mortgage modifications have been around for years, but those recent relief efforts have raised the profile of the mortgage workouts as an alternative to foreclosures, short sales, auctions, and bankruptcy.
The demand has opened the floodgates of loan modification services now offered by real estate agents, mortgage brokers, attorneys, government agencies, lenders, and other professionals.
No matter where they start, homeowners seeking mortgage modifications are at the mercy of lenders. The workouts are often voluntary and, completed on a case-by-case basis, they frequently come without standardized procedures.
Caught in the lurch, homeowners are finding it tough to know when a modification will work and how to best obtain one. This story and a follow-up next week will shed some light on the subject.
What is a mortgage modification?
A home loan modification, granted only upon the existing lender's approval, permanently reworks some of the terms of an existing mortgage in order to make the loan more affordable to the homeowner.
The strategy is typically designed for homeowners struggling to pay their mortgage, not for those who can pay their mortgage or are eligible for a refinanced loan.
Modifications are generally lender fee-free and involve the lender or loan holder lowering the interest rate and or changing an adjustable-rate mortgage (ARM) to a fixed rate mortgage (FRM) with a 30-year term. Some form of mandated homeownership counseling generally comes with the deal.
Less common loan modifications include adding missed payments to the loan balance and extending the term of the loan. Least common is getting the lender to reduce the principal or wipe out any second mortgages.
A mortgage modification is not a refinanced mortgage -- a brand new loan written to pay off the old home loan.
"A mortgage is one of the most complex transactions there is. A loan modification is also a gray area for a lot of people. So of course people need someone to walk them through the process to tell them this is what you need and this is what you don't need," said Ginna Green, spokeswoman for the California office of the Center for Responsible Lending in Oakland.
Is a loan modification for you?
Greg Pennington, a San Francisco-based mortgage banking consultant and counselor with Parker-Pennington Enterprises, says a loan modification isn't for everyone.
A loan modification may not be viable if:
"You can do a loan modification and not be aware of where you stand. You can get a loan modification for a home you don't want to be in," said Pennington.
A financial, housing or credit counselor can help you determine your best option. Just be prepared to hold down the fort for the 60 to 90 days or more it could take to complete the modification, due to potential complications and document processing times.
Next week: There are three basic ways to approach a mortgage modification, according to consumer advocates.
Published: February 5, 2009
Thomas Merical
http://www.findahomesellahomenow.com/
Market Conditions by Realty Times Staff Zillow.com, the online real estate marketplace, reported this week that home values fell 11.6 percent in 2008. This adds up to a painful $1.4 Trillion loss. Adding to this number, foreclosures made up 19.9 percent of all transactions last year. This was especially prevalent in hard hit areas, such as California. "A witch's brew of economic insecurity, foreclosures and tightened lending standards are helping to keep hard-hit markets down and to widen the scope of markets showing declines in home values,” said Dr. Stan Humphries, Zillow vice president of data and analytics. “As more markets turn down and markets that were already down go deeper, the pace at which value is being erased from the U.S. housing stock is rapidly increasing, with more value wiped out in the fourth quarter of 2008 than was eliminated in all of 2007. The fourth quarter is the first in which we were able to see the effects of the mounting economic insecurity that picked up steam in the fall of last year. People without jobs, or fearing job loss, typically don’t buy homes, no matter how low prices or mortgage rates might be. Public policy, in terms of both job creation and efforts to stem the tide of foreclosures, will have a large influence on when some of these markets find bottom." Published: February 5, 2009
CEO Keller Williams Fairfax Gateway
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