What is a Supplemental tax bill?

Posted on January 26, 2011 by Colleen Craig

What is a Supplemental tax bill?

In Los Angeles county taxes are paid on a fiscal year starting from July to June of the following  year.

Taxes are assessed on the values as of January 1st of every year.

So when you purchase a home, although your taxes will be calculated based on a certain percentage of the sale price (currently 1.25%) the new bills won’t be adjusted until your property is reassessed.  Reassessments are only done when the tax office receives the transfer information  after closing.  It could take several months for this to take place.

If your seller was paying taxes on a lower assessed amount, you will be getting a separate supplemental bill for the difference between what you owe for the higher amount from the day you closed until the date the new tax bill is generated with the new assessed amount.

You may get two supplemental tax bills depending on when you purchased your home.  For example, If you close on your home in March and the fiscal year is from July to June, you will owe taxes for the bill from March to June of the year you closed and then possibly from July to June of the following year if the reassessment wasn’t done until after the second bill was generated.

What if your taxes are included in your mortgage payment through an impound account?

This is where things get a little tricky.  If your mortgage company has an impound account calculated on the higher amount (which they should), then yes, they should have extra in the account.   However, Supplemental tax bills do not go to the mortgage companies, only to the owners.  Mortgage companies are only allowed to keep a certain amount in excess in the impound account for a certain period of time.  So you may get a refund for the extra amount before you even get the supplemental tax bill and not know what it is for.  Sometimes the mortgage company will adjust your payment DOWN when they get the tax bill before it’s assessed and then there wouldn’t be any extra in the account.  Then when they reanalyze your account on the yearly anniversary, they would have to adjust your payment back up to meet the correct amount to cover the taxes and insurance.

So if you get a notice from your mortgage company that your payment is lower than what your lender estimated, don’t get too excited!  And if you get a refund check, don’t run out shopping!  You will have to pay the bill when it comes in.  But the good news is, it’s only the first year when you purchase a home that you will get the supplemental tax bill.

Now if you purchased a home for LESS than what the house was assessed for which would make the tax amount the seller was paying higher than what you will owe, the opposite would be true, and you would get a refund! Now you can resume shopping.

What if your value decreased after you purchased your home?  You may qualify for an automatic reassessment, or you can request a Decline-in-Value review.  Claim forms are available online and can be filed between June 1 and November 30.   You can find out how to go about the process at http://lacountypropertytax.com or www.assessor.lacounty.gov

By Colleen Craig, SocalMtgPro, The Mortgage Ninja

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No Cost Loan Myths

Posted on January 7, 2011 by Colleen Craig

No Cost Loan Myths

I recently had a client mention that they saw an advertisement from one of the big well known banks about a no cost refinance.  How does this work?  Why would some companies charge fees to purchase or refinance and others do not?

Well it’s quite simple.  They ARE charging you, but you may not realize it.

To obtain a loan for the purchase of a home or to refinance your current loan there are costs involved to all the parties doing the work.  It costs everyone money….. Period.    There are fees for processing, underwriting, appraisals, title, recording etc. (for a complete breakdown, contact a trusted advisor)

Whether or not you realize you are paying for these fees is the question.  Do you really think any company would just give you a product or loan for free when it costs them money to do it?

That is what they advertise, and I’m going to explain how it’s done.

There are two ways for the bank/mortgage company to do this.  See examples below based on a 400,000 loan with $3500 in fees.  (Fees are estimates only, without an impound account and will vary depending on your particular scenario)

1.        Normal 400,000 loan,  with you paying the costs out of pocket

2.       Same loan, adding the costs to the loan amount.

3.       Same loan, keeping the loan amount the same (making you think it’s free) but adding the costs to the interest rate.

So which is the best way to go?  Well it depends on your situation.  If you don’t have the funds to pay the costs up front to keep your payments the lowest, then I would recommend the second option.  We would then add the costs to the new loan amount.  The third option, which is what most banks will advertise as a no cost loan (Keeping your loan amount the same) is the most costly loan because the interest is higher.

See below the difference in interest you would pay over the 30 year term.  The overall cost from paying the costs out of pocket isn’t much different than adding it to your loan amount although the payments are slightly higher.  But adding it to the interest is the highest overall cost. Although you are borrowing the same loan amount, the interest in the long run is much more over the long term.

So in conclusion, is it really a no cost refinance?  I think NOT!

So that old saying of……If it seems too good to be true?…….you know the rest……

This is why it’s imperative to deal with a professional mortgage consultant  who will give you a written a loan analysis of your situation so that you can make an educated decision and know exactly what you are getting before you proceed.

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FHA Streamline 203k loan is a perfect program for foreclosure properties with minimal repairs

Posted on January 3, 2011 by Colleen Craig

The streamline 203k is a perfect program for REO properties with minimal repairs.

Did you know you can tell the bank that they will not be responsible for the repairs?  WOW!  The bottom line not to mention the headaches,  just looked a lot better!   And that FHA buyer that didn’t look so great, just went from mediocre to a GREAT offer!

The FHA 203k Loan allows for the client to finance the cost of repairs needed on a property into their mortgage.  The repairs are done after closing so this is an advantage to the seller or bank that owns the property because they aren’t responsible for the repairs.  This is a great negotiating tool for your client who may be up against other offers which would require the seller/bank to do the repairs!  Are there any foreclosed properties out there in need of repair?  I think so! This is perfect for those REO properties that have missing appliances or plumbing and electrical repairs needed!

STREAMLINE 203k for dummies

The Streamline 203k is for limited repairs requiring little expertise to manage therefore there is no consultant required (Although it depends on the extent of the repairs, I may recommend you get one anyway – It’s worth the cost!).  It is designed for a “streamlined” project where the home can be occupied immediately after closing, and the contractor will receive a single payment at completion. (Maximum of 3 contractors) The maximum amount that can be financed on top of the sale price for the streamline is $35,000 (which includes some fees/reserve/costs) so assume about 30,000 in actual repairs.

Below are the Eligible and Ineligible repairs for the Streamline K

ELIGIBLE:

  1. Repair/replacement of roof, gutters and downspouts
  2. Repair/replacement/upgrade of existing HVAC systems
  3. Repair/replacement/upgrade of plumbing and electrical
  4. Repair/replacement of existing floors
  5. Minor remodeling, such as in the kitchen, which does not involve structural repairs
  6. Exterior and interior painting – including lead-based pain stabilization.
  7. Weatherization:  including storm windows and doors, insulation,, weather stripping, etc.
  8. repair/replacement/upgrade of appliances (may include free-standing ranges, refrigerators, washer/dryers,  and microwaves)
  9. Improvements for accessibility for persons with disabilities
  10. Repair/Replace/add decks,patios and porches
  11. Basement finishing/remodeling/waterproofing (not requiring structural repairs)
  12. Window & Door replacements and exterior wall re-siding.
  13. Septic and/or well repair or replacement

INELIGIBLE:

  1. Major rehabilitation or major remodeling, such as relocation of a load-bearing wall.
  2. New construction, including room addition.
  3. Repairs of structural damage.
  4. Repairs requiring detailed drawings or architectural exhibits
  5. Any rehabilitation activities that require more than two payments per specialized contractor
  6. Landscaping or similar site amenity improvements
  7. Any repair or improvement requiring a work schedule longer than six months
  8. Work items that would necessitate a consultant to develop a work write-up
  9. Work that would cause the borrower to be displaced from the property for more than 30 days during the time of rehabilitation
  10. All items ineligible for the Full Consultant 203k

This works the same way as the Full Consultant 203k program but can be done in less time.  We recommend at least 90 days for the Consultant K program and 45 for the streamline.

The banks want to unload their inventory as quick as possible and with the least amount of costs.  Educate your clients which INCLUDES the bank about this program and close more deals.  This is also a great way to negotiate a short sale if you have a qualified 203k buyer.  But just remember -give it the time it needs and set the expectations up front.   This is why having a certified FHA 203k Lender with experience with this program is crucial.

This program can also be combined with the Energy Efficient mortgage for those clients that are GOING GREEN!

There are so many options and I would be thrilled to help you find  the right program that most people don’t even know exist!

Happy Rehabbing!

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Show me your….ASSETS! – Updated Jan/2016

Posted on January 3, 2011 by Colleen Craig

Show me your assets!  Yep that’s what I said.

I’m talking about your assets to close!

If you or anyone you know is planning on buying a home, you need to read this.

In addition to a credit check, verifying your income and inspecting the property, your mortgage company will be verifying your money.

Stated income and stated asset loans have pretty much fallen off the face of the earth, and investors have gotten stricter when it comes to verifying your assets.

Now what is going to be verified?   Since things have gotten very challenging, it’s best to assume that they will verify anything and everything regarding checking, savings and retirement accounts for the previous 2 months.  We will need to show exactly where all the money is coming from for the down payment and closing costs.  Any large deposits must be documented.    In the past, some investors would consider anything over 1,000 as large.  Now it’s anything over and above your normal payroll/income deposits.  We will request the last two months bank statements when you apply and you will need to keep us updated throughout the process as you receive more statements. RECENT CHANGE:  As long as the large deposits don’t exceed 25% of your Gross monthly income within the month, it is no longer considered a “large deposit” that needs to be documented. So keep checking your statements for any deposits that are not payroll deposits and be aware of what might be questioned.

If you are applying for an FHA loan, you are allowed to get a gift from a family member for the down payment and/or closing costs.  However, it must be fully documented with a gift letter, and proof of transfer from the donors account to your account.  The most recent change is that FHA is requiring us to document any large deposits that may be in the DONORS account prior to the transfer of the gift.  So you can no longer give cash to your brother and have him gift it back to you because there is an obvious cash deposit right before the transfer. If you do have cash or “mattress money” and don’t plan on purchasing for more than 3 months or more, deposit it into your account as soon as possible so that it’s been there for at least 90 days before you need to apply for the loan.

If you are applying for a conventional loan, you will need to document that 5% of the sale price is from YOUR OWN funds which is being used for the down payment.  You must also show where the money is coming from for the closing costs (which can be a gift) PLUS two months reserves.  Reserves are to show that you have at least two months mortgage payments in the bank after you purchase the home.  Again, any large deposits must be fully documented. RECENT CHANGE: Conventional is now allowing the 5% down payment to be 100% gift money!  But the above gift requirements still stand.

If you are applying for a VA loan, there is no down payment required, but the closing costs must be documented and can be a gift or paid for by the seller.

In the past, as long as we DOCUMENTED that you had the funds, you could just show up with the money from anywhere else and it wasn’t questioned.  Now, we need to show the actual withdrawal from the exact same accounts that we verified when you go to closing.  For example, if we verified 10,000 in your savings and 2,000 in your checking and you wired 12,000 from your savings because you made a transfer in order to wire for closing?  You will need to show the transfer from checking to savings before the loan can fund.

Sellers contributions towards closing costs can be used, but vary from loan to loan.  Check with your loan officer at the time of pre-qualification.

So although it may sound daunting, as long as you are educated up front and have all your money in place, it won’t be so difficult down the road.    The best thing to do is get it in a savings account and keep it there!  Don’t be transferring money back and forth and driving your mortgage company, realtor and yourself nuts trying to figure it all out.

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