First Ohio Home Finance

This just in from the Franklin County Save our Homes taskforce:

Struggling to pay your mortgage? Have an adjustable rate mortgage or a balloon? Not sure what your mortgage means? Realizing that your lender didn’t escrow and now you have a big property tax bill? Worried about foreclosure?

The Franklin County Save our Homes Taskforce in cooperation with the county treasurer is holding a Borrower Outreach Day on Saturday, September 13, from 10-1. This event will be at Memorial Hall, Board of Elections (Downtown) at 280 East Broad Street in Columbus.

If you are worried about making your next monthly loan payment for any reason, you will have the opportunity to:

• Meet with servicers/lenders privately
• Learn about refinancing
• Learn about foreclosure prevention, legal rights, loss mitigation, and credit counseling.

For more information, please contact:
The Franklin County Treasurer’s Office at 614-462-7503

This event may help you if you are concerned about your mortgage status.  If you need help understanding your home mortgage in Ohio, call us today at 888-818-1850. We are committed to building the wealth of our clients. We want you to succeed in homeownership!

Did you know that Ohio families need no-money-down loans?

The number one incoming search term for this website is 100LTV and 100% loans. People are really looking hard to buy a home with no down payment. No problem, right? There’s 100%, 80/20 split loans, FHA, and the list goes on.

Unfortunately, that’s wrong! Most of these loan products have dried up in the last 12 months – FHA with down payment assistance (DPA) being the only survivor.

Here’s how it works. Sally Buyer wants a home but has no savings. So she writes a contract on a home that includes a line about qualifying for an FHA mortgage. In that negotiation, Sally offers to pay 3% more than list price for the home if John Q. Seller will “donate” 3% of the purchase price of the home plus $400 to a certain “charity.” John Q. Seller agrees because Sally Buyer seems solid and this is a full-price contract – a sale! Sally Buyer also signs an agreement with the “charity” to accept a 3% “gift,” contingent on the sale closing and the seller donating.

These non-profit organizations have been under fire for years because DPA is a loophole that allows home purchases with “no skin in the game” while inflating home prices. But legal challenges from the assistance providers themselves have kept the life support on.

Under the Housing and Economic Recovery Act (HR 3221) recently passed into law, DPA programs will no longer be available as of October 2008. That’s right: no more AmeriDream, Nehemiah or other “charity” gifts to get you an FHA mortgage with no money down!

Using down payment assistance is entirely normal, and many of our clients have used it to good advantage. But it should be remembered that what can help a single family may be a recipe for disaster when it becomes common practice across the country. Mortgages with down payment assistance go into default and foreclosure at nearly three times the rate of those borrowers with some money out of pocket, according to FHA.

And while some groups are trying to save DPA, the solvency of the banking system and FHA is at risk now, so it’s understandable that they would try to stop the bleeding. Especially when you consider that we - the taxpayers - are ultimately holding the bag when it comes to bailing out banks or funding HUD and FHA through our tax dollars.

Nevertheless, this is going to be a blow to our mortgage company, as well as a blow to the entire market here in Ohio.  Maybe it’s smart given the rise of foreclosures.  But 0-down loans are 64% of our FHA purchases, or 13% of total business. So yeah, it hurts when 13% of your company revenue goes whoosh!

If you are looking to buy a home, now is your chance to find a no-money-down loan! You don’t have to be a first-time buyer.  Call before it’s too late!

Well it appears the new housing bill had some concessions for home buyers, but at the expense of home sellers. So what’s up with capital gains tax and mortgage and real estate? Check this out.

With HR 3221, Congress created revolutionary new rules to capture more tax revenue on capital gains - rules that could prove detrimental to many families holding mortgage loans in Ohio. You see, under the old rules, sellers were tax-exempt on up to $250,000 of home sale gains as long as they lived in the home for 2 of the last 5 years.

However, under the new rules effective January 1, 2009, exemptions from capital gain taxes are a more complicated formula based on the actual number of days a home was “primary” residence during the last 5 years.

So if you only lived in a home for 2 years, you will be paying taxes on 60% (3 divided by 5) of gains under $250,000. Would you rather have 40% (2 divided by 5) of your honest gain tax-free — or the current 100%?

Are lawmakers assuming very few are still making real estate gains?  Are they trying to encourage a flurry of sales this year?   How will the IRS determine residency date?  Doesn’t this seem like a raw deal for the average homeowner who ends up renting their old home since they are having a hard time selling?

Check out this sample analysis from AgentGenius.

You bought a home in January 15 2004 and paid $500,000. This has been your primary residence until this year, January 15 2008, when you bought another property and moved your primary residence. Say you sell your original property next year, January 15 2009, for $600,000. Your capital gains are $100,000. Your capital gains exemption formula:

1460 [days] / 1825 [days] = 0.80 x $100,000 = $80,000 Capital Gains Exclusion

Which means you would pay capital gains tax on $20,000. Capital Gains Tax is currently at 15%, so you would pay $3,000 in new taxes that you would have avoided prior to this new law. *Please note this does not account for the state portion of capital gains…

It may sound like a small number when you profit $100,000 to only pay $4200, but what happens if the new government leaders change the Capital Gains Rate? This rate has been as high as 45.5 percent in the past. This is not good for future sellers of real estate.

As always, remember we are a mortgage company.  If you think the new Capital Gains Exclusion rules will impact you personally, get professional advice about it.   If you do not have a qualified accountant, (which we think that’s a critical part of building wealth) we would like to refer one to you.

h/t Dan Green

Think it’s a strange time to invest in real estate? Well, think again. With the discounts offered by home builders and competent Realtors, there are a number of good ways to become invested in real estate.

Some clients are surprised when I mention investing in new homes. Most people think of real estate investment as the rougher multi-family units, such as near college campuses. But those situations are not for everyone.

The hard part about investing – having your units torn up, chasing down rents, patching up 60-80 year old homes – can go away when you buy a new unit. And with builders stinging from a plunge in new buyers, they have begun to offer some genuine discounts that make cash flowing an investment that much easier.

One of these programs is with long-time local builder Dunmoor Homes. Gary Dunn and Bill Moorhead have worked hard to build quality homes and place lease option clients in them. With two-year leases and reasonable cash flow already in place, it’s a good time for investors to step up.

The other thing that really sets Dunmoor Homes apart from a mortgage and personal finance perspective is Bill understands the financial condition, perspective, and traps for average Ohioans. He’s even held countless seminars in the Columbus market called Seven Steps to Smart Homeownership. He makes a personal investment in setting up tenants to succeed so one day they, in turn, can own the place they’ve called home.

I personally can’t think of a better answer to the current foreclosure mess, than to have men with integrity doing everything possible to ensure your neighbor can succeed in the American Dream!

The best way to find out more about this easy way to invest in real estate is to shout out to Bill.Moorhead@DunmoorHomes.com or visit their website at www.1031homes.com.

I had the privilege this morning hearing Steven Anderson talk about Thriving Under Pressure. You’d think I went because the mortgage industry is under tremendous pressure as brokers and lenders sort out who’s on first. There’s a natural tension in mortgage lending that’s accentuated when times get tough. Who drives the industry: the small businessmen and women that find and retain clients, the massive banks that control the regulations and capital, or the US taxpayer that gets to bailout every industry when times get tough? (If you are laughing at that last option, you pass the test.)

Actually, that’s not the main reason I went.

I accepted Tom Broadbent’s invitation because I am challenged by balancing work hours, home life, and volunteering with several organizations. Just like you, I would guess.

Learning to deal with stress benefits every American because, as Steven Anderson said, “We humans are smart enough to kill ourselves.” Specifically, in today’s economy, we need tools to deal with more and more stress from the financial side of our lives. Not only do we run into the aggravation of minding passwords for dozens of bill paying sites, but most Ohio families don’t have enough money to go around each month. There are urgent decisions like enrolling your children in another sport or paying down debt that we all carry.

Here are two important lessons I took away from the seminar that I thought could help you in managing your personal finance.

1. Learn the difference between Acute Stress and Chronic Stress. Making important decisions and dealing with short term problems is acute stress and is actually healthy. Planning and pushing through these experiences stretch you mentally, and can engender that team spirit that many families lack. Chronic stress, on the other hand, is the nagging burdens we carry around. These are nearly always caused by poor choices - either long-term debt like credit cards that we enter thoughtlessly or rashly, or the avoidance of major decisions in our household economy. Make good and decisive choices and your life will be better and longer.
2. Learn the difference between Stress and Anxiety. Stressors are external circumstances that pressure us - like a cucumber seed we can squirt one way when pressured and become anxious, or move right and choose our physical response. Anxiety is the internalizing of stress. Anxiety often gives rise to introversion, depression, and attempting to control others - obviously none of which are beneficial. Using stress to one’s advantage includes a plan to deal with it rather than allowing anxiety and its negative consequences.

The reason I write about this in a personal finance and mortgage blog is WAY too many people these days are allowing poor choices to dictate decisions with long-term consequences - like paying their mortgage on time.

More and more Ohio homeowners with a mortgage are walking away from their homes. Surprisingly, this is not an issue that only affects the low-to-moderate income neighborhoods. Hundreds and hundreds of above-average wage earners have invested in above-average homes with very little skin in the game, while even more Ohio families have bought homes that are at or just beyond the limit of their budget. In either case, floating these purchases becomes impossible with the smallest stressor.

Bottom line is making the hard decisions with an eye to the risks of the future is critical to long term homeownership and overall financial success for Ohioans. If you are having trouble making your mortgage payment, call me and let’s talk about the options. Call your lender. Call someone who isn’t afraid of telling you the truth - I will, even if it means a hard decision for you or a non-profit moment for First Ohio Home Finance. We’re in this together, and we’ll only get out of it together - using all the resources we have.

Thanks to Integrated Leadership’s Steven Anderson and Precision Printing’s Tom Broadbent for today’s inspiration!

In between the stock market volatility and emergency rate cuts and recession talk, last week was full of headlines like talking about home prices at decade lows, linking investment losses to housing gloom, and drawing parallels between current markets and the Great Depression.”

So what is all the noise about?

I find Joe Peffer’s blog particularly helpful as a window into the local markets. There aren’t many Realtors having these kinds of open conversation online, and his is certainly one of the best. Here’s a brief excerpt from Friday’s “nutshell” post.

“Remember that most media stories are greatly effected by larger east and west coast markets and that all Real Estate is Local. Here are some facts and figures on our market, here in Central Ohio.

• Last year was the third highest number of sales ever in Central Ohio. Yes, it was down 4.5% from 2005 and the average sale price is down a `whopping’ 1%, but it was still a good year. Today, compared to 2004, only 3 years ago, we have sold close to the same number of houses and the average sales price is up nearly 3%.
• Inventory levels are at record highs providing prospective homebuyers with the best selection of homes in the history of central Ohio!
• Our home prices are very competitive. Right now, there are more homes for sale than buyers to buy them. The result is that sellers are pricing their homes to compete. As the market corrects itself, home prices will start to increase again. So, buyers should act now while homes are priced to sell!!!
• There are still many great loan programs for deserving buyers.
• The recent Fed cut is good news! Even though a Fed rate cut doesn’t necessarily spell lower mortgage rates, it does mean good news for housing.”

Here’s another great point from Joe:

“Why was the average sales price in Central Ohio down 1%?

• First, because for much of the year we had roughly ten homes on the market for every buyer, many homeowners were forced to drop the selling price of their home in order to compete.
• Second, we had 22 percent fewer homes sell in the $1 million dollar range. Homeowners resistance to drop the price as well as lenders’ temporary aversion toward jumbo loans likely had impact here
• And third, we saw 124 percent more homes sell for less than $30,000. Many of these lower priced homes were purchased by investors who recognized just how favorable the 2007 housing market was and took full advantage of these conditions.”

One last note you will find interesting is this controversy in Massachusetts (and probably a great deal of other places now) where a bankers’ trade group is reporting single-family home sales were down twice as far as the Realtor’s association reported. And average home prices were down 5 times what the Realtor’s reported. The discrepancy apparently stems from the Realtor’s group NOT including homes sold by owner - without a real estate agent.

In my mind, what this issue highlights is that the RESULTS of one’s home sale are much worse when you try to save money by cutting out reputable local professionals. There are dozens of good Realtors in our market. Chances are you will sell your home faster and for more money if you use one.

Ask me if you are interested in buying a home. We will make sure you get a thorough pre-approval and one of the best Realtors in our market. Nothing makes your home purchase smoother!