LifeTuner

Thanks to everyone who participated in Thursday evening's online chat with housing expert Tara-Nicholle Nelson. Tara discussed some of the details of the new housing stimulus plan, home buyer tax credits, interest rates and other details. The following is a wrap-up of Q&A that Tara answered from participants.


Q:  My aunt is living in the family home, inherited not purchased. She is looking to downsize, sell the house and purchase another, would she still be considered a first time buyer (under the new tax credit offering)?

Tara:  Whether she's a first-time buyer or not would depend on the specific type of program she's trying to qualify for. Some city/state first-time buyer/down payment assistance programs would probably make an exception. Question - is the property title in her name?
    
Follow-up:  Yes, she inherited when our grandparents passed on.

Tara:  Some city/state programs will allow, say a married woman to become what I call a "born-again" first-time homebuyer if they owned while they were married, got divorced, and then bought single. But in her situation, if she's currently the sole owner and the property is in her name, I'd say she's probably not going to qualify as a first-time homebuyer.

Follow-up:  As to selling the property, we are keeping it in the family, one of my cousins wants to buy it from her.

Tara:  That the cousin detail is interesting, too. The stimulus package $8,000 credit says that for the property you're buying to qualify, it cannot be purchased from a close relative. But close relative is defined as spouse, parent, grandparent, child or grandchild.

Follow-up:  So by that definition, if she sells and doesn't purchase for three years, she would qualify again?

Tara:  Well, this particular credit only applies to deals closed by Dec. 1, 2009 - who knows where we'll be in 3 years!

Tara:  The stimulus plan definition of first-time homebuyer is "someone who did not own another main home at any time during the three years prior to the date of purchase." .... As an aside, one of the super cool features of the stimulus plan tax credit for first-time homebuyers is that even though you're buying in 2009, you can claim the credit on your 2008 tax return. Instant $$$$.



Q:  What is the interest rate right now for people whose ARM (adjustable-rate mortgage) has "expired"? Is it the current rate or do the mortgage lenders generally charge higher?

Tara:  I'm hesitant to quote rates. They differ so much by what kind of loan you're getting, how much equity you have, credit score, etc. And some banks are "fixing" adjustables as low as 2% for their current customers. Others are fixing at whatever rate the loan is currently at, some even higher.



Q:  Is it a good time to buy a home?

Tara:  I think you should decide whether to buy at a certain time based on your life and your family and your finances. Then, decide how to execute your strategy (offer price, mortgage type, etc.) based on the market. With that said, if it's a good time in your life to buy, it's a great time in the market to buy, on sheer affordability.



Q:  Can the lender/bank help you at all if you know that there's a good chance you'll be laid off in 3 months time?

Tara:  Lenders will generally not help until you are in the midst of the hardship and/or have already missed payments, unfortunately. Doesn't hurt to call, as this field evolves VERY rapidly.



Q:  Does some mortgage insurance cover job lay-offs or illness?

Tara:  Private mortgage insurance usually covers the lender's interests when the owner defaults - not the owner's default, unfortunately.... Mortgage insurance does not protect you; it protects the lender.



Q:  Do you anticipate house prices will go down even more? Meaning, shall we buy now or wait for prices to fall even more?

Tara:  Every market (city/state/neighborhood) is very different and will bottom out differently. Plus, quiet as it's kept, many markets are already seeing multiple offers at the entry level, so prices aren't as low as you'd think - already. Buy when it makes sense for you - the average waiter will wait too long.



Q:  What about in the stimulus plan -- is there something in it for those folks who are paying their mortgage on time and aren't upside down?

Tara:  There are some good things in there to encourage banks to modify and refinance loans for folks who are not super upside down (though you can be slightly upside down) and that are still on time with their payments. Check out the new site Obama announced today - http://www.makinghomeaffordable.gov - for details on whether you might qualify. Also, the stimulus plan doesn't consider you upside down if your current mortgage balance is up to 5% greater than your home's fair market value.



Q:  So at this point in time, who is able to do a re-fi? I've been a homeowner for the past 3 years and I was told by Citimortgage a couple months ago that I dont qualify because i dont have equity....is that still correct?

Tara:  As always, it depends.  Most (but not all) homes in America have depreciated over the last few months, rather than going up in value. However, you should talk with a mortgage broker, not just your current lender - if they can get it appraised at a higher value, you may be able to refi that way.

However, it may also make sense to give Citimortgage a call back and ask if you qualify for a refi under the stimulus plan.  If your loan is FHA insured and you owe up to 5% more than the value of your home,  you might qualify.  Check out MakingHomeAffordable.gov for a self-help way to see if your loan might be eligible.



Q:  Let's say you're maybe $10,000 underwater on your mortgage, but you have a job and have no plans to move. Does it really matter under those circumstances?

Tara:  From my point of view, no.  Just like with stocks, sitting around worrying about what your home is worth on a day-to-day basis is totally unproductive, though you might want to have an idea roughly what your place is worth on at least an annual basis.  If your mortgage payments are sustainable based on your income, and you are fine staying in your home, don't get caught up in the mass hysteria about being underwater.  And I promise you, lots of folks would love to be just $10K upside down!



Q:  What are your thoughts on buying a foreclosure? Things to watch out for?

Tara:  Bank-owned properties are some of the best deals out there.  If you go that route, just expect the unexpected from your transaction - these deals are not always smooth.  Also, make sure you work with a Realtor who has experience working on bank-owned properties. You'll want to be sure you read every single thing that comes from the bank/seller, as they often use boilerplate counteroffers and addenda to change the standard real estate practices applicable to your deal.  And, finally, attend your inspections and read the inspection reports - the bank never lived in the place, so they don't know what kind of condition it's in, and they're actually legally exempt from making some disclosures in most states.



Tara-Nicholle Nelson is a housing expert on LifeTuner, host of a regular series for HGTV's Frontdoor.com, and author of "The Savvy Woman's Homebuying Handbook." Through her company, ReThink Real Estate, she helps people work through home-buying decisions and all the related anxieties and questions that come with these big financial moves.