The act allows buyers who qualify to get an $8,000 credit on their 2010 taxes.  The original deadline required homebuyers who were under contract by April 30 to close by June 30, 2010. The extension gives buyers until September 30, 2010 to close.

This is great news for buyers who found their closing date delayed because of the length of time it takes for banks to approve short sales and other issues that are outside of their control.

“It just ain’t so”, you immediately reply.  Now, I do admit there are a lot of reasons a house might not sell, and it might well have nothing at all to do with you, but just to make sure, let’s examine one of the main reasons it might just be your fault your house won’t sell:

Your Asking Price is Way Too High

Nobody wants to loose money and that’s a fact.  But the reality of today’s real estate market is that most properties have lost value in the past few years, in some parts of the country as much as 45%.

Real Estate is actually only worth what someone is willing to pay for it, and you have to understand that buyers will not factor any of the following into their offer price:

1. You raised your family in the house and enjoyed countless Christmases, Thanksgivings and Birthdays in it.
2. You spent a fortune putting in that hot tub and installing the Cherub fountain in the back yard.
3. You could have gotten $50,000 more for it in 2004.
4. Two years ago your neighbor got a lot of money for his dump and your house is much better, the best one on the block as a matter of fact. (Truthfully your neighbor probably exaggerated the price he got.)
5. You want some profit to pay off some credit card debt and buy a new car.
6. You need more money than that to cover your mortgage.

No doubt your Realtor provided you with comparables when she came to the listing appointment.  The comparables showed you what houses like yours in your area sold for in recent months.  Based on that info, she arrived at an asking price.

Did the asking price she suggested make you gag? Did you want to throw her out of your house just for even suggesting such a thing? Did you insist on listing it for a significant amount more?

Then its probably your fault that your house hasn’t sold.

Its OK If Its Your Fault

If it is your fault, that’s OK. Wanting more for your property then the market will currently pay does not make you a bad person.  It doesn’t mean your greedy.  It only means that nobody is going to buy it.

But now, you have to make a choice. To sell or not to sell. If you are not even getting anyone interested in seeing your property at all because of your price (believe me your Realtor will tell you if that’s the case), then perhaps it would be better to take it off the market and sell in a few years when prices begin to appreciate again. That’s OK, and really your Realtor won’t mind. Time is money and she really doesn’t want to waste time trying to sell the unsellable.

However, if economic circumstances, a job offer out of town, retirement to sunny Florida or any other reason makes it impossible for you to wait to sell your house, then there really is no other choice than to lower your asking price.  Its painful, but it must be done.  However, taking less for your house might not be that bad.  Here’s why:

It May Not Be So Bad

If you’re selling your property so you can move to a new town, its very likely that housing prices have decreased there as well, and depending on which state, prices might have decrease significantly.   That means that you can get more house for less money then you would have been able to during the market boom.

If creditors are harassing you and you’re selling your property for economic reasons, imagine the  peace you’ll get when everyone is paid off (or at least satisfied) and your living comfortable in a new place with out any more final notices and unsympathetic phone calls.

So, if your condo, co-op or house is not selling, take a moment and ask yourself truthfully, “Is it my fault?  Do I want more money for my house than someone is currently willing to pay for it?”  If the answer is “yes”, don’t feel bad about it, but you do have some decisions to make.

I really liked the simple and sound principles the author outlines in his book that spans the entire life cycle of a mortgage from choosing it to paying it off as quickly as possible.

His explanation of the recent credit meltdown that sent our economy into a free fall is easy to understand by even the most “finance lingo challenged” individual.  Understanding what happened can help you avoid making the mistakes some borrowers did during the mortgage free for all that led some of them to foreclosure.

Also his “avoid consumer debt like the plague” approach to managing personal finances jives with what I’ve had to learn the hard way.

I found this book to be a really informative read and purchased a few copies to give as closing and housewarming gifts.  I think you’ll find it useful as well, especially if you’re a first time home buyer looking to make your first purchase with a mortgage loan.

In light of those facts, what can you do to improve your credit score?   Well first of all, let’s talk about how your credit score or FICO score  is determined.

What is a Credit Score Based On?

A FICO score (or credit score) is a formula created by the Fair Isaac Company, which has recently changed its name to FICO, that uses the information from your credit report to determine how credit worthy you are. 

Your credit report information, which is compiled by the three major credit reporting agencies (Equifax, Experien and TransUnion) is weighted according to the following breakdown of importance:

• 35% – Payment History
• 30% – Total Amount Owed
• 15% – Length of Credit History
• 10% – New Credit
• 10% – Type of Credit Now Being Used

As you can see from the list above, your payment history carries the most weight when it comes to determining your credit score.

What to Do to Improve Your Credit

Since your payment history carries so much weight in determining your  FICO score, the easiest way to improve your score is to pay your bills on time.   Late payments will stay on your credit report for 7 years, affecting your score for a long time.  Paying your bills on time should be a priority.

Another way to improve your score and make it easier for you to get a loan with a great rate is to reduce the total amount you owe.   The amount you owe on credit cards, personal loans, student loans, auto loans and any other financing as well as your Debt to Income percentage will be used by lending institutions to determine if you get a loan, and if so at what rate.

So, if you’re looking to buy that dream house, condo or coop pay your bills on time, and keep the amount you owe to a minimum, and you’ll see your FICO score climb and the interest rate you’re required to pay fall.

To recap what the credit is, it is a dollar-for-dollar reduction in what a taxpayer owes in taxes. For example, if you owe $8,000 in income taxes and you are eligible for the full $8,000 home buyer’s tax credit, you would owe absolutely nothing in federal taxes.

Its still a great time to buy.  Interest rates are still low and housing prices in Brooklyn are either flat are have risen slightly.   If you are looking to buy a house, condo or coop, give me a call and let me help you take advantage of the free money the tax credit represents.

The rent-to-own scenario, which is also called a “lease-option” requires a potential buyer to pay a down payment of as much as 5% of the purchase price up front and pay rent monthly while they live in the property he or she intends to buy at the end of the lease.

Part of the rent goes to the owner, and a portion of the rent, called a “rent credit”, goes into an escrow account and is later applied toward the purchaser’s down payment when he or she is ready to buy.   The price the buyer will pay for the house or condo at the end of the lease is determined at the time the “rent-to-own” or “lease option” contract is signed.

The PROS

1. Its a great way to get into a house or condo that you like now without having a large down payment.
2. It gives you an opportunity to “try” before you “buy”.
3. It gives you time to make repairs to your credit rating if its necessary.
4. The owner is obligated to sell the property to you at the price agreed upon, even if the property increases in value.

The CONS

1. If you decide not to purchase the property at the end of the lease, you loose the down payment you put into the transaction at the start of the lease, however the rent credit monies that has accumulated in the escrow account is refunded.
2. If the property decreases in value, you are required to pay the price agreed upon at the signing of the lease, even if the property is worth less.  If the property does not appraise for the amount agreed upon, you may not be able to get a loan and fail to be able to close on the deal, again loosing you down payment money.
3. If the owner of the property fails to pay the mortgage and the property is foreclosed on, you may loose all the money put into the transaction.

As you can see, there are advantages and disadvantages to purchasing property rent-to-own.  Weigh the pros and cons carefully, and if you decide that rent-to-own is right for you, find out as much as you can about the owner’s financial situation, vigorously negotiate the price to be paid, and have a Real Estate Attorney thoroughly review the lease option contract before you sign it.

For more information about rent-to-own (lease-option) properties available in Brooklyn.  Please feel free to contact me using the phone number below, or via email.

Seller financing is when the seller of the property holds the mortgage for the buyer instead of a bank or some other lending institution. If you own your Brooklyn, New York home outright and you currently don’t need the equity from the house, seller financing might be an option for you.

Exisiting Home Sales Up by 7.2%  according to the National Association of Realtors

New Home Sales Up almost 10% according to the Commerce Department.  That is the biggest monthly change since 2005.

Case-Schiller Home Price Index’s National Composite is up 2.9% in the second quarter of this year over the first quarter. This is the first quarter to quarter increase in over 3 years according to the Commerce Department.

Mortgage Applications up 7.5% last week according to the Mortgage Bankers Association.   30 Year Fixed Rate Mortages average 5.2% and 15 year fixed Rate Mortages average 4.6%.

That’s a lot of good news.  Does this mean we are out of the woods and the happy days of house prices soaring are close at hand?  No, not really.  With national unemployment close to 10% and an estimated 3 million houses going into foreclosure this year alone, the real estate market still has a long way to go before we see wholesale price increases and the booming sales we had before the housing bubble burst. 

However, with interest rates low and housing prices depressed, its a great time to buy if you have the credit score, income and downpayment.  If you’re interested in buying, please feel free to give me a call – 917-544-2662.

There are two types of mortgage loans that are available in these tough economic times, the FHA Loan and the Conventional Loan.

FHA mortgage loans are loans that are insured by the Federal Government and allows anyone who meets certain qualifications to put a minimum of  3.5% down on a house or a condo (Co-ops cannot be purchased with FHA loans).

Here are some examples of how much of a down payment you’ll need if you want to purchase a property using an FHA Loan:

Conventional loans are loans made through lending institutions such as banks and credit unions. Most conventional loans require that you put a minimum of 10% down and, depending on your credit score, you may be required to put down even more.

Here are some examples of how much of a down payment you’ll need if you want to purchase a property using an Conventional Loan:

As you can see from the information above, figuring out how much you’ll need for a down payment is simple.  Of course, if you can put down more then the minimum amounts, that’s terrific.  The larger the amount of your down payment, the less your mortgage will be.

What’s the Down Payment For?

The theory is that when a borrower puts a significant amount of their own money into the purchase of a house, they are less likely to “walk away” from their obligation to repay the mortgage because they don’t want to lose their own money.

An example of that would be, a person buys a $500,000 piece of property.  If they put 10% or $50,000 of their own money towards the purchase, when things get tough, they are less likely to let the loan default.  Why?  Because not only will they loose their place of residence, they will also loose their $50,000 dollars, and that kind of money’s not easy to come by for most of us. 

The recent crash in the housing market where 0% financing was running rampant has proven the above theory to be a sound one.  I was told by a fellow realtor of a client who had purchased a home with 0% financing who walked into the bank he borrowed the money from, put the keys to the house on the loan officers desk and said, “Here you can have your house back.”   He was having a hard time making the payments and decided to simply walk away from the house.  True, his credit would be trashed, but since he put no money into the house, he didn’t loose any.  0% financing is a thing of the past, for now.

How Much Down Payment Money Do I Need?

Today in 2009, with the exception of an FHA loan where you can put 3.5% down on a piece of real estate, most lending institutions require that you have at least 10% of the purchase price to put down when you want to buy a house, condo or co-op.  In some circumstances a lender might require even more.

So, if you want to purchase a co-op in Brooklyn for $200,000 and 10% down is required, you will need at least $20,000 for the down payment. (FHA loans are not available for co-ops)

If you want to buy a house for $400,000 and you qualify for an FHA loan, you will need at least $14,000 or 3.5% of $400,000 for a down payment.

So, before you start searching craigslist.com or going to open houses, or you make that call to your local realtor, you have to have enough money for a down payment before you can purchase that dream home.

If you would like more information about down payments or house buying in general, feel free to give me a call.