Isi Wu, The Realtor for You

It wasn't too long ago that home buyers made offers without financing contingencies and closed the deal in as short as 14 days following acceptance. Quick closes are virtually impossible today if you're buying a home with the aid of a mortgage. And, it's highly recommended to include loan and appraisal contingencies in your offer.

Following the credit crisis of August 2007, many mortgage lenders closed down. Those that are left have cut their staff due to low demand for mortgages. Also, it's now necessary to actually qualify financially for a home mortgage. This adds time to the loan approval and funding process.

For most mortgages, home buyers are now required to have good credit. They need to provide verification of employment (W-2s or tax returns), verification of the funds needed to close (down payment and closing costs) and verification of reserve funds.

If the funds haven't been sitting in your bank account for a few months, some lenders require proof of where the money came from. Be prepared to provide brokerage statements, and any other supporting documentation that will validate you as a bona fide borrower. Buyers who own other real estate will need to provide even more documentation.

HOUSE HUNTING TIP: It's a good idea to start pulling together all of your financial documents as soon as you're serious about buying a home. Ideally, the paperwork required by the lender should be forwarded to your loan agent or mortgage broker within a couple of days of contract acceptance. You can't wait until the last minute to provide the lenders what they need and expect to close on time.

Before you write an offer, check with your mortgage person to find out how long it will take to process and fund the mortgage. Some lenders are taking 35 to 40 days from acceptance. So, you wouldn't want to commit to a 30-day closing, if this is the case. Make sure that you allow sufficient time in your contract for the appraisal and formal lender underwriting approval. This could take two to three weeks, depending on the lender and on how diligent you are about supplying the documentation.

Your lender or mortgage broker will order the appraisal of the home you're buying. It should be ordered as soon as possible. If you end up not buying the house, you might owe an appraisal fee. However, waiting to order the appraisal could cost you time.

Many lenders require a review appraisal, which is a second appraisal to confirm that the first one is accurate in terms of market value. Ideally, this should be done before you remove your appraisal contingency. If it can't be done within that time frame, ask the seller for an extension.

Before August 2007, it was common practice for lenders to prepare the mortgage documents for the buyers to sign even though all underwriting conditions had not been met. For instance, the lender might have needed proof that you paid a charge-card account down to a zero balance.

Today, many lenders won't issue the mortgage documents until all of the pre-funding conditions have been met. So, you need to be prepared to provide additional documentation that the lender might request, even if it's at the last minute.

Work with a good loan agent or mortgage broker who will help keep you on track throughout the process. And, as outrageous as the lender's requests might seem, don't let it get to you.

Lenders have a lot of due diligence work to do to restore their credibility with investors. The housing market is dependent on investors buying mortgages so that buyers can buy homes.

THE CLOSING: Properly qualifying buyers for mortgages is long overdue.

Fixer-upper properties come in many varieties. Cosmetic fixers usually offer the biggest return on your investment. And, they tend to be a lot less costly than homes that require major renovation.

An ideal cosmetic fixer would be a house that had been somewhat neglected, but that has no serious structural problems. It could be passed over by other buyers because it needs an exterior paint job, new landscaping, new kitchen appliances, floor coverings, updated lighting fixtures and interior paint.

In a down market, these houses can be hard to sell if there is a large inventory of new homes in the area being discounted in price in order to sell. In older established resale markets, buyers usually gravitate to the listings that are in the best condition and leave the fixers for someone else.

It can be difficult to find a good cosmetic fixer in areas such as the San Francisco Bay Area. There, many listing agents advise sellers to prepare their house for sale in order to sell more quickly and for more money. Even so, cosmetic fixers do come along.

Aside from the challenge of finding a diamond in the rough, paying for the fix-up costs can be a show-stopper for many buyers. With the recent credit crisis, most lenders require larger cash down payments. Equity lines of credit are still available, if there is sufficient equity in the house.

It's difficult to buy, fix up and flip a house in this market. Many markets around the country may not yet have seen the bottom of this cycle. A strategy that works for some buyers, particularly if they can do some of the work themselves, is to buy the house and fix it up over time while they live there.

If you claim the house as your primary residence and live in it for over two years, you will be entitled to up to $500,000 of tax-free gain (for a married couple filing jointly; $250,000 for a single filer) when you sell.

It's unlikely that you will realize a sizable gain in a short period of time in the current market. At present most areas aren't experiencing appreciation. This is why it's risky to buy a fixer in this market with the aim of making a fast profit.

HOUSE HUNTING TIP: Larger fixer projects can be problematic and should be carefully thought through, with help from professionals, before going ahead. Special attention should be paid to the scale of the project, the projected costs including an allowance for cost overruns, and the ultimate market value of the house when the renovation is complete.

Once you start changing the footprint of the house, pushing out or changing supporting walls, gutting the kitchen and bathrooms and rearranging the floor plan, the costs can become astronomical. That's OK, if you can afford it and if you plan to enjoy the finished product for a long time to come.

However, it wouldn't be wise to make such an investment if you were planning on moving again within the next five years. You probably wouldn't recoup your investment.

One option would be to scale back the project to something more manageable and less expensive. One risk of remodeling a property is over improving it for the market. It doesn't make good financial sense to do a $500,000 renovation to a house that's worth about $500,000 in its present condition if all the other sales in the neighborhood top out at $750,000.

THE CLOSING: However, if it gives you a house you can live in the next 15 or 20 years, you'll have a chance of recouping some or all of your costs through home-price appreciation.

Anecdotal evidence suggests that in some markets investors are buying foreclosure properties at bargain prices. These properties are located in areas that appear to have good growth potential, and they generate enough rental income to at least offset the holding and maintenance costs. The deal needs to make sense financially regardless of whether there is a big run up in appreciation. The plan is to hold the property for the long term.

There was a time not long ago when investors bought condos and houses even if they didn't produce enough cash flow to cover the carrying costs. Prices were rising so quickly, they could afford a little negative cash flow. The holding period was short and the appreciation payoff was big. According to Standard & Poor's/Case-Shiller 20-city home-price index, prices increased almost 75 percent between February 2000 and February 2008.

In most housing markets, it's not possible to count on appreciation now. The market could be bottoming out in some places, according to some economists. Or prices could move lower before leveling off. It could be years before significant appreciation is again part of the housing picture. With this in mind, is buying a home to live in still a good investment?

Just as the lenders are moving back to basics in terms of qualifying borrowers for mortgages, home buyers should examine the fundamentals of home ownership to determine if they are good candidates.

HOUSE HUNTING TIP: The equity in your personal residence shouldn't be used to pay for vacations, education, new cars and credit-card debt. Many homeowners who participated in serial refinancing when rates were low and money was easy found they had no equity left when the credit crunch hit in August 2007. A good portion of these repeat refinancers now owe more than the current value of their home.

Along the same lines, it's risky to look at your home as a retirement account. It's not a good idea to rob your pension plans in order to purchase a home. This money should be kept for retirement. Some financial advisors suggest that you don't consider the equity in your home as part of your financial portfolio. After all, you will always need to live somewhere. Most people will always need to budget part of their net worth for housing.
Buying a residence hoping for appreciation to increase your net worth is dicey. You may earn appreciation. Nationally, home prices have tended to rise over the long term. But, this doesn't mean that your home will appreciate during the time period you own it.

However, there are plenty of good reasons to buy your own home, if you can afford it. The government subsidizes the cost of home ownership by permitting taxpayers who itemize deductions to write off some or all of the mortgage interest and property taxes they pay. Restrictions do apply. So, check with your tax advisor before making a purchase.

Owning your own home gives you a sense of security. You can choose the community in which you live. You're not at the mercy of a landlord who might issue an eviction notice. If you buy with a fixed-rate mortgage, you know how much you'll be paying over time. Rents, in most places, are subject to increases. It doesn't make sense to spend money fixing up someone else's house so that it feels like yours. And, most landlords will have a say in what you can and can't do -- even down to paint colors.

THE CLOSING: But, if you own it, you can redecorate to your taste

Yes our economy is a mess… and there’s much to be said about the “Bailout/Rescue” plan just passed by Congress… but on the upside of things… if you are considering a move-up or downsizing or investment purchase there is absolutely no better time than now!... Due to this “Bailout/Rescue” plan… Banks have been freed up to make loans again… without the Bailout we would not be able to secure any loans… specifically home loans… now we have the assurance to be able to get those needed loans… recently a 60 year old woman was able to finally purchase her first home… This is an awesome time for anyone to purchase a property at hugely reduced prices.

·       US real estate market is On Sale (foreclosures creating a fire sale with bank owned properties)

·       Best down market in our life time

·       Strongest buyers market in decades

·       Rates are at a 30 year historic low

·       Banks dealing like never before in US history

·       Feds stepped in to put bottom under the financial markets

·       Multiple offers in the many areas- people are now stepping up for the "Sale of a Life Time"

I encourage you to call me!  This is the time to buy… (together we can develop a strategy to help you make a purchase).

· Behind on your mortgage...

· Don’t know when you can make

              a payment…

· Received a Notice of Default...

· Don’t know what to do…

· Don’t know where to start…