FSBO Jane

Joint tenancy (also called Joint Tenancy with Right of Survivorship or, JTWROS) basically means two or more people (joint tenants) own property together equally and when one of them dies, the other(s) receives the deceased person’s share.

Advantages of a JTWROS
• Can help avoid probate court
• Both (or all) parties are equal

Disadvantages of a JTWROS
• Commitment with other people = risk
• Less control for deceased (at death, partner gets everything)

This type of tenancy is closely related to:
• Tenancy in Common: More loose, sometimes happens when join tenancies cease to exist
• Tenancy by the Entirety: Just for married couples

There’s still time to buy a home and qualify for the federal tax credit, so home buyers, act now! There are plenty of homes available and plenty of motivated sellers willing to negotiate, with federal tax credits sweetening the affordable prices even further.

If you’re still on the fence, is it due to the down payment required? Then it’s time to examine your options. Have you considered an FHA Loan?

FHA Loans are mortgages issued by federally qualified, government-approved lenders that are insured by the Federal Housing Administration (FHA).

Who are they for?
• They’re made for low- (or moderate-) income buyers who can’t make large down payments.

What do they do?
• Allow the buyer to borrow up to 97% of the value of the home.
• Require just a 3% down payment, which can come via a gift or a grant.

How can you qualify?
• Two years of steady employment
• Good credit - You’ll want at least a 620 score, with less than two 30-day late notices over the last two years
• If you’ve had a bankruptcy: it needs to have been at least two years ago, with excellent credit since then
• If you’ve had a foreclosure: it needs to have been at least three years ago, with excellent credit sine then
• Your mortgage payment needs to be about 30% of your pretax income

So if you’re thinking of buying but unsure if you’d qualify, ask your lender about an FHA Loan. It might be just the answer for you!

Back in June 2009, I introduced you to the Fair Housing Act.

“According to realestatewords.com, the Fair Housing Act is a federal law that prohibits discrimination in housing based on a person’s race, color, religion, sex, handicap, familial status and national origin.”

My main purpose for writing about the FHA is to emphasize that this law does not just apply to the process of buying and selling a home. It extends to the advertising and marketing of any given property, as well. Why? You must advertise to every type of buyer out there. You cannot refer to the following protected categories:

Children

In the example above, the writer informs potential buyers that the fenced-in backyard is ideal for children and pets. Not every person out there has kids…or pets for that matter. The text must read neutral to everyone who may read the listing.

People with disabilities
Just because your mobile home, second story condo or third floor walk-up doesn’t have any ramps or elevators, you should not write that the home “is not handicap accessible.” You cannot discriminate against those with disabilities.

Ethnicities

Although you may not think you are discriminating against different races by mentioning that mostly Asian, African-American, Caucasian, etc., people live in the area, you are implying that mostly Asian, African-American or Caucasian people will feel comfortable in a given area and thus, discriminating against the people that wouldn’t.

When you decide to sell your home FSBO, remember to follow all the guidelines of the Fair Housing Act. There are more than three protected categories. When you’re selling your home, you want to present an equal opportunity for all potential buyers to make an offer. A professional real estate marketing company (like BuyOwner.com!) should do the same.

Many of us will face a multitude of hardships in our lifetime: job loss, divorce, illness, death, etc. Sometimes these issues lead to financial struggles when it comes to paying bills, specifically when it comes to mortgage loans.

What’s the easiest solution? Sell your house to pay your debt.

But what if your home cannot sell for as much money as you owe? Do you have to go through an embarrassing foreclosure process? No! That’s where a short sale comes into play.

What is a short sale? A short sale is when you ask your mortgage lender to accept less money than you owe. Essentially, it’s a forgiveness of debt.

Why would a lender opt for a short sale over foreclosure? By accepting less money than you owe, a lender won’t have to foot the bill for repairing and marketing a foreclosed home. So rather than potentially losing double the money, a lender only loses what you can’t afford to pay.

The Process

1. Enlist the help of a professional (real estate agent or lawyer)
2. Contact your loan provider and submit a financial statement, assuring you have no other assets with which you can repay the loan.
3. If you prove your financial hardship, you will receive a tentative agreement.
4. FSBO: You’ve chosen a lawyer to help with the legalities, but you’re selling your home on your own. You have to market your property, find a buyer, get an offer and present it to the lender. Using an agent: You’ve chosen a real estate to help with the legalities. The agent must market your property, find a buyer, get an offer and present it to the lender.
5. If you have mortgage insurance, the insurer is also decides whether or not the offer is good enough.
6. Once the lender and insurer agree, your short sale is approved and you can sell the property.

What does it mean to have a preapproval on a mortgage loan?

To be preapproved for a mortgage loan means that you, the borrower/potential buyer, has completed a loan application and is approved for a loan. In order to do this, you will provide debt, income and savings documentation to an underwriter (aka lender or bank) that will pre-approve you for a specific amount.

Why do I need a preapproval?

A preapproval is not needed, but it is recommended by many real estate professionals. Say you find the home of your dreams and you want to put in an offer to the owner. Before you do that, you’ll need to figure out how much you can spend on the property. This is done based on the debt/credit/income/savings info you provide, as well as assumptions about interest rates, property taxes and insurance. Also, a seller will be pleased to know that you are serious about the property and already have a payment plan already in the works.

Example: After everything is examined, you are pre-approved for a mortgage loan totaling between $225,000 and $275,000. The home you want is listed at $290,000, and the seller won’t budge on price. Unless you come up with a down payment of $20,000, you will not be able to afford the property.

CMA stands for a Comparative Market Analysis

Designed to aid home sellers, a CMA can be used to determine the appropriate selling price for a residence.

In it, the following pieces of information will likely be provided, compared with one another to see what a fair market value for the area and the home may be:

* Similar homes that have sold recently.
* How long those homes were on the market.
* Homes that have not sold (i.e., expired listings).
* Homes like yours that are currently for sale (i.e., the competition).

When obtaining a mortgage loan, it’s important to find a lender who is willing to offer a rate lock. A rate lock, also referred to as a lock-in, means that the lender issues a commitment to a specific interest rate for a specific period of time. During that period of time, the interest rate cannot fluctuate. This is especially important during the time it takes to file your application, process the loan and approve the loan, which could add up to a few weeks. If you don’t have a locked rate, the interest rate could increase by the time the process is complete. However, with a rate lock, it usually means that you will also not benefit if the interest rate decreases. Your mortgage lender may also require that you pay a fee to lock in your interest rate. Talk to your mortgage lender about what they offer and what rules they follow.

When you take out a mortgage loan, you are required to pay a certain amount per month until that loan is paid off. However, a prepayment is an amount that you pay before the due date, to reduce the principal balance of the loan. This could mean that you pay more than you need to each month or just some months, you send in extra money at a random time of the month, or you pay the mortgage amount in full. You could pay the mortgage in full if the property was sold, if you acquired a large sum of money and want to use it toward the mortgage, or because of a foreclosure.

Because this prepayment occurs before the loan has fully amortized, you may have to pay a prepayment penalty. Still, if you can get the mortgage paid off and not have to worry about it each month, it may be worth paying the penalty. Discuss the rules and options with your mortgage lender to find out what is the best way for you to pay off your mortgage loan as soon as possible.

With the economy in bad shape and loan lenders afraid of not obtaining their payments, acceleration clauses have accelerated in popularity. An acceleration clause is a clause in a deed of trust or mortgage. It allows the lender to demand a payment of part or all of the borrower’s outstanding loan balance. The reasons for a lender to do this vary, but they could be because the property was sold, the borrower defaulted on the loan, or the borrower transferred title to another individual without informing the lender.

How do you avoid having to pay your outstanding loan balance in full? Don’t do anything that goes against the agreement you made with the lender, and if you make any change, such as selling the property or transferring title, inform the lender before they find out on their own. A good relationship between the lender and borrower will prevent the acceleration clause from being used!

What is a 401k?

A 401k is a retirement plan. When you work, you set aside a contribution (the amount is chosen by you) to be deducted from your paycheck each pay period. The money is taken out before taxes, so the investment that grows in the 401k account is not taxed until withdrawal. A 401k is often sponsored by employers who will “match” your contribution; however, an employer is not required to do this.

How much can I set aside?

Generally, you can set aside up to $15,000 or 100% compensation if your salary is less than $15,000.

How can I invest in real estate using my 401k?

You don’t actually invest your 401k money in a property. You would take a loan out against the 401k. This is a risky procedure and should not be considered lightly. However, if you do decide to go through with it, here is what you need to know:

• You are allowed borrow up to 50% of your 401k, up to $50,000.
• The loan must be paid back after five years, but this time frame may be extended for a home purchase.
• If you don’t want to take a big chance on purchasing a $200,000+ home, you could still invest in a trust.

o Companies buy and sell real estate by collecting a pool of investments (your money, another person’s and so on). It’s a safer investment, but it is still risky.

When can I start investing?

If you are taking out a loan, there is no age requirement. However, keep in mind that, unless you retire at the age of 55, you may be fined a 10% penalty if you withdraw any and all 401k money before the age of 59 ½.

Your 401k money is yours to spend. Real estate investing could be lucrative, but be sure to do your homework. Look at the market, and don’t try to spend more than you can afford, especially if you are taking out a loan against your 401k.

Disclaimer: The information contained in this post and throughout FSBOJane.com is for information purposes only and does not substitute for the advice of a financial professional.

FSBOJane.com does not hold itself out as providing any legal, financial or other advice. This site also does not make any recommendation or endorsement as to any investment, advisor or other service or product or to any material submitted by third parties or linked to this website. FSBOJane.com does not offer any advice regarding the nature, potential value or suitability of any particular investment, security or investment strategy.