Your credit score will begin to be impacted when you do not make mortgage or loan payments for 30 to 90 days. Usually, if a homeowner is late on mortgage payments he or she is missing other payments as well, which will also negatively impact the overall score. 

This lower credit score can have a tremendous impact on future purchases. Because of a low credit score, lenders will require a much higher interest rate. For example, an auto loan to an “A” credit score holder might be 0% while the same loan to a “D” credit score holder might be 11% or higher.

Credit cards have a default rate and foreclosed homeowners could see their rates jump as much as 30% .

The immediate impact of a foreclosure on your credit report is estimated to be a drop of 100 to 140 points. The bigger impact is from those late payments on other bills which quickly mount up.

Doing a “Deed in Lieu of Foreclosure” with the lender (turning your property over to the bank, sometimes in exchange for cash-anywhere from$1000 to $2500) has the same impact on your score as a foreclosure.

Generally speaking, a foreclosure stays on your credit report for seven years, but this doesn’t preclude past homeowners from buying a home in the future. However, it will be difficult. Fannie Mae recently increased the length of time it takes from the completion of a foreclosure sale until a borrower can get a new mortgage from four to five years. A federally insured FHA loan may be the best avenue to obtain a mortgage after foreclosure, however, the waiting period is at least three years after a foreclosure sale.

According to RealtyTrac, an online marketer of foreclosed properties, foreclosures of all kinds hit another record high in August. Click here to read an article. If you are facing foreclosure, what can you do to keep your home?

First and foremost, contact your lender and try to work something out with them. Here are some options:

REPAYMENT PLAN
When you fall behind on the payments, you’ll talk first with someone from the mortgage servicer’s collections department. The collections department’s aim is to get you caught up, and the sooner the better. The employees there will demand at least a partial payment now and the rest of the payment soon — and a promise that you’ll pay on time each month after you’re caught up.

FORBEARANCE
The loan servicer might agree to suspend payments for a few months, until you get back on your feet financially. A forbearance isn’t for an indefinite period; it might be for one or three or six months, and after that, you’ll be expected to make full payments on time.

Forbearance is most commonly offered to disaster victims and people who have lost their jobs but who feel confident they’ll find well-paying employment quickly. After the forbearance period ends and you’ve resumed making monthly payments, the service will expect you to pay extra each month until you’re caught up. In most cases, you’ll be expected to catch up within a year or 18 months.

LOAN MODIFICATION
A loan modification is similar to a refinance: The lender agrees to alter the loan, but with few or no fees. The lender might reduce the interest rate, change the loan from an ARM to a fixed-rate mortgage, or raise the monthly payment by a few dollars so you pay off the entire loan, including the past-due amount, by the loan’s original end date.

Less frequently, the servicer will tack the missed payments onto the end of the loan. In other words, if you got a mortgage in June 2004 and it’s supposed to be paid off in June 2034, but you miss three payments, the servicer could add those three payments to the back end and push the payoff date to September 2034.

DEED IN LIEU OF FORECLOSURE
This option often is referred to as a “deed in lieu.” The borrower offers to hand over the deed to the property so the lender can take possession of the house and sell it. The lender can refuse to accept a deed in lieu of foreclosure, and it often does, for a couple of reasons. First, the lender has to incur the costs of fixing up the house and paying real estate commissions. A short sale is preferable. Second, the lender inherits any problems with the title. Foreclosure clears away many title problems.

SHORT SALE
In a short sale, you sell the house for less than you owe. You can’t do a short sale without the lender’s permission. With a short sale, you make necessary repairs to the house; pay the real estate commission, taxes and government fees; and give the lender whatever money is left over — a partial payment, if anything. The Mortage Forgiveness Relief Debt Act  passed at the end of 2007, makes the short sale process more realistic for some homeowners. Usually, debt that is forgiven or cancelled by a lender must be included as income on your tax return and is taxable. The Mortgage Forgiveness Debt Relief Act of 2007 allows you to exclude certain cancelled debt on your principal residence from income.
 
BANKRUPTCY
A homeowner filing a Chapter 7 Bankruptcy will forfeit property and eliminate any potential deficiency.  Chapter 13 Bankruptcy provides the homeowner the ability to cure the default over an extended period of time (30-60 months) while maintaining the current monthly payment.  However, this does not change the terms of the mortgage, and since the homeowner cannot afford the current regular monthly payment, they may not be able to afford the current payment plus the delinquency amount.

Before making any decisions about how to proceed if you are facing foreclosure, be sure to get advice from a CPA or financial planner to make sure you have all the facts about how a foreclosure will impact you. A foreclosure on your credit record can have very negative and long lasting effects. 

In what is arguably the largest government intervention into the private sector, this weekend the federal government took control of struggling Fannie Mae and Freddie Mac in an attempt to ease the housing crisis and stabilize the lending market. Most analysts agree that the housing market cannot recover without a fully functioning Fannie Mae and Freddie Mac.

What will this mean for the buyers, sellers, Pleasanton real estate and the larger marketplace?

“Whether this is the beginning of the end or merely the end of the beginning is yet to be determined, however it is certainly the hope that this move will begin to calm the housing market and allow mortgage money to once again flow,” said Paul Nolte, analyst at Hinsdale Investments.

One good sign: mortgage rates dropped this week after the announcement. Analysts stressed cautious optimism as the U.S. government will now be providing mortgage capital, thereby increasing the federal debt.

To read an article about the takeover, click here.

J.D. Power and Associates 2008 Home Buyer and Seller Survey ranked Keller Williams highest among real estate companies in buyer satisfaction.

Keller Williams scored highest in the three home buying categories: agent, office, and services. “When buying a home, customers particularly appreciate agent professionalism, responsiveness to calls and e-mails and the agent’s skill in locating and showing properties in the appropriate price range-all areas in which Keller Williams excels,” said Jim Howland, senior director of the real estate and construction practice at J.D. Power.

 Additionally, the survey found that despite the popularity of online home buying and selling tools, real estate agents are the key to customer satisfaction.

Click here to read all the results of the survey.

 If you’re thinking about buying or selling, we’d be happy to meet with you for a complimentary consultation. Or if you want to keep an eye on home values in your neighborhood, sign up for our Free Market Snapshot Report. Click here to sign up.

Money Magazine’s Annual List of the Best Places to Live is always fascinating. This year’s list highlighted 100 small cities across the U.S.  Irvine was the only California city to break the Top 10, but Fountain Valley and nearby Sunnyvale hit the list at #91 and #94 respectively.

Money Magazine also complied a list of the 25 Top Earning Towns in America. Danville hit the list at #13, Los Gatos at #19, and Lafayette at #21.

Click the links above to see the entire list of Money Magazine’s top picks for 2008 and to read about the the highlighted cities. You’ll also find out how the magazine chose it’s top picks.

Of course, Pleasanton is always at the top our list….

By the way, many of the cities in the Top 100 have very affordable housing, making them great candidates for investors looking to geographically diversify their properties. Let us know if we can help you in one of those cities.