Effective June 1, 2010, Fannie Mae and other investors have increased the requirements for a salable loan. Going forward:
1) Lenders are responsible for verifying the borrower's social security number.
2) Lenders must obtain documentation from the borrower, confirming that the borrower intends to use the purchased residence as his primary residence.
3) On the day of closing, lenders must confirmt that the amount of debt borrower has, the borrower's payment history, and the borrower's credit score is reconciled with the information the borrower provided when applying.
4) Loans cannot be originated, underwritten, or serviced by companies or people that are on HUD's Limited Denial of Participation List, or on the General Services Administration Excluded Party List.
Keep in mind that this does not mean that a residential loan cannot be made if it does not meet these requirements. You can obtain a residential loan that does not meet these requirements if it is not sold on the secondary market. Unfortunately, those loans are few and far between!
Illinois Real Estate Law Blog
Monday, July 26, 2010
Monday, July 19, 2010
Home Buyer Tax Credit Closing Deadline Extended!
Good news for those homebuyers who were eligible for the home buyer tax credit but could not close by June 30, 2010! If you were unable to close by the deadline, you now have until September 30, 2010 to close your real estate purchase. Because of the backlog of mortgages, Congress decided to extend the deadline for closing.
Keep in mind, if you did not enter into a real estate contract by April 30, 2010, this extension will not help you. The extension is only for those who had a valid, binding real estate contract as of April 30, 2010.
Also, you must be otherwise eligible for the tax credit. In order to qualify for the first-time buyers credit of up to $8,000, you must not have owned a home in the last three years. For the existing homebuyer credit of up to $6,500, you must have owned your home for at least the last five years. Furthermore, the home must be your principal residence, and must cost less than $800,000. Vacation homes are ineligible for the credit. There are income restrictions also. Speak to your accountant and make sure you are eligible!
Keep in mind, if you did not enter into a real estate contract by April 30, 2010, this extension will not help you. The extension is only for those who had a valid, binding real estate contract as of April 30, 2010.
Also, you must be otherwise eligible for the tax credit. In order to qualify for the first-time buyers credit of up to $8,000, you must not have owned a home in the last three years. For the existing homebuyer credit of up to $6,500, you must have owned your home for at least the last five years. Furthermore, the home must be your principal residence, and must cost less than $800,000. Vacation homes are ineligible for the credit. There are income restrictions also. Speak to your accountant and make sure you are eligible!
Friday, June 4, 2010
Problem Tenants in Your Condominium Association?
Associations frequently want to know what they can do when a unit owner rents out their condominium unit to someone who constantly violates rules. Well, assuming the association has not banned rentals altogether, there are a few options available:
1) If the condominium documents allow it, the association can assess fines to the unit for the various rule violations. Unit owners will not want to pay fines for problems their tenants are creating. In this way, unit owners are encouraged to deal more proactively with their tenants. Hopefully the unit owners can convince their tenants to comply with the association's rules, or if not, they can start the eviction process.
2) The condominium board can also terminate the lease. The Illinois Condominium Property Act allows condominium associations to terminate tenant leases, so long as the requirements of the Act are met (i.e. proper notice, eviction proceedings, etc.)
If you have problem tenants in your association, it is wise to address the problems early on, before it gets any worse!
1) If the condominium documents allow it, the association can assess fines to the unit for the various rule violations. Unit owners will not want to pay fines for problems their tenants are creating. In this way, unit owners are encouraged to deal more proactively with their tenants. Hopefully the unit owners can convince their tenants to comply with the association's rules, or if not, they can start the eviction process.
2) The condominium board can also terminate the lease. The Illinois Condominium Property Act allows condominium associations to terminate tenant leases, so long as the requirements of the Act are met (i.e. proper notice, eviction proceedings, etc.)
If you have problem tenants in your association, it is wise to address the problems early on, before it gets any worse!
Friday, May 14, 2010
Home Loans Based on Your Stock Portfolio?
Yes, you read right. It is possible to get a loan to buy a new home based on your stock portfolio. In other words, you may be able to get through the home-buying process without any appraisal of the home and other traditional mortgage paperwork.
In order to get approved for this type of loan, you must have a reasonably high net worth and a significant stock portfolio. The stock will be your collateral, instead of your new home. Of course, the loan will still have to be underwritten based on which stocks you own.
What's the plus side of a loan based on your stock portfolio? Well, there are actually quite a few positives: 1) If you find the right lender, the processing time may be a lot faster than for a traditional home loan; this is especially helpful if you want to close early; 2) Credit scores are not as much of an issue as with traditional mortgages -- that is not to say, however, that your credit score will not be taken into account; 3) The loan typically has a fixed interest rate, which is usually lower than a traditional mortgage rate; and 4) The loan is non-recourse.
Of course, there's a downside as well. What happens if the value of your stocks drop? You have to make up the difference with cash (or other outside financing). Also, you have no option to pre-pay the loan, so you have to work with the lender to find a term that you feel will best meet your needs!
In order to get approved for this type of loan, you must have a reasonably high net worth and a significant stock portfolio. The stock will be your collateral, instead of your new home. Of course, the loan will still have to be underwritten based on which stocks you own.
What's the plus side of a loan based on your stock portfolio? Well, there are actually quite a few positives: 1) If you find the right lender, the processing time may be a lot faster than for a traditional home loan; this is especially helpful if you want to close early; 2) Credit scores are not as much of an issue as with traditional mortgages -- that is not to say, however, that your credit score will not be taken into account; 3) The loan typically has a fixed interest rate, which is usually lower than a traditional mortgage rate; and 4) The loan is non-recourse.
Of course, there's a downside as well. What happens if the value of your stocks drop? You have to make up the difference with cash (or other outside financing). Also, you have no option to pre-pay the loan, so you have to work with the lender to find a term that you feel will best meet your needs!
Monday, May 3, 2010
New Disclosure Rules for Illinois Residential Real Estate Sales
It wasn't too long ago that the Radon Disclosure became a requirement for every residential sale in Illinois. Now, the Radon Disclosure has been modified. What's new? Well, 1) If you're selling a condo or co-op on the third story or higher, you no longer need to provide a Radon Disclosure at all; 2) If you are a seller and your home previously had elevated radon levels which have since been mitigated, you will have space to disclose this on the Radon Disclosure; and 3) A new Radon Disclosure form is now available and should be used whenever a Radon Disclosure is necessary.
There is a also a new Illinois Residential Real Property Disclosure form available! Again, this new form should be used in all Illinois residential transactions. There is one primary difference between the old disclosure and the new one -- now the seller is required to disclose whether or not he is aware if the property has been used as a meth lab in the past.
Real estate agents and for sale by owner homeowners beware -- the law requires the use of the new forms! If you don't have them already and are in the process of selling a house, make sure you obtain and complete these forms right away!
There is a also a new Illinois Residential Real Property Disclosure form available! Again, this new form should be used in all Illinois residential transactions. There is one primary difference between the old disclosure and the new one -- now the seller is required to disclose whether or not he is aware if the property has been used as a meth lab in the past.
Real estate agents and for sale by owner homeowners beware -- the law requires the use of the new forms! If you don't have them already and are in the process of selling a house, make sure you obtain and complete these forms right away!
Thursday, March 18, 2010
New FHA Rules Taking Effect Soon!
Many first-time homebuyers turn to FHA loans these days. After all, FHA loans have lower down payment requirements, and first-time homebuyers don't always have a lot of cash to put down. New FHA regulations, while making the business of lending a bit safer for the FHA, will certainly affect first-time homebuyers, who often have lower credit scores and less money.
What is the FHA doing? Specifically, it's making the following changes:
1) The up-front mortgage insurance premium (UFMIP) will be raised to 2.25%, up from 1.75%, effective April 5, 2010.
2) If the borrower's credit score is 580 or below, the minimum down payment will be increased to 10% of the purchase price of the home. Note that if the borrower's credit scroe is above 580, the current requirement of only a 3.5% down payment stands.
3) Sellers can only provide a maximum of 3% in closing cost credits. Previously sellers were allowed to provide up to 6% in concessions (though in practice, this was rare).
What is the FHA doing? Specifically, it's making the following changes:
1) The up-front mortgage insurance premium (UFMIP) will be raised to 2.25%, up from 1.75%, effective April 5, 2010.
2) If the borrower's credit score is 580 or below, the minimum down payment will be increased to 10% of the purchase price of the home. Note that if the borrower's credit scroe is above 580, the current requirement of only a 3.5% down payment stands.
3) Sellers can only provide a maximum of 3% in closing cost credits. Previously sellers were allowed to provide up to 6% in concessions (though in practice, this was rare).
Wednesday, March 10, 2010
New EPA Rules for Remodeling of Pre-1978 Homes
If you own a home built before 1978, there may be lead-based paint present in your home. Granted, you may have been through numerous remodeling projects, and you may have brand new drywall or paneling. However, unless you've had your home tested and confirmed that it is now lead-free, you have no way of confirming whether there is lead-based paint in your home or not.
The U.S. Environmental Protection Agency (the EPA) has issued new rules, which will take effect on April 22, 2010. If you are doing any remodeling work in your pre-1978 home after that date, you may only hire contractors that are certified by the EPA. Specifically, the EPA will be certifying contractors in practices that are "lead-safe". Of course, if the paint in your house is not being touched, then you may use any contractor you wish. However, most remodeling work does require at least some paint or touch-up. Therefore it is most likely you will have to hire a contractor certified by the EPA.
This new EPA rule applies not only to homes, but to schools and child care centers built before 1978 also, so long as children under the age of six are present in those schools and child care centers. However, the new rule does not apply to minor maintenance, or repairs where less than six square feet of lead-based paint is disturbed. If the work is on the outside of the home or school, the rule only applies if more than twenty square feet of lead-based paint is disturbed.
In order to avoid accidental lead poisoning, anyone with a home built before 1978, or anyone who has children in a school built before 1978, should be diligent to make sure that any lead-based paint present in their home or school does not endanger the health of their family!
The U.S. Environmental Protection Agency (the EPA) has issued new rules, which will take effect on April 22, 2010. If you are doing any remodeling work in your pre-1978 home after that date, you may only hire contractors that are certified by the EPA. Specifically, the EPA will be certifying contractors in practices that are "lead-safe". Of course, if the paint in your house is not being touched, then you may use any contractor you wish. However, most remodeling work does require at least some paint or touch-up. Therefore it is most likely you will have to hire a contractor certified by the EPA.
This new EPA rule applies not only to homes, but to schools and child care centers built before 1978 also, so long as children under the age of six are present in those schools and child care centers. However, the new rule does not apply to minor maintenance, or repairs where less than six square feet of lead-based paint is disturbed. If the work is on the outside of the home or school, the rule only applies if more than twenty square feet of lead-based paint is disturbed.
In order to avoid accidental lead poisoning, anyone with a home built before 1978, or anyone who has children in a school built before 1978, should be diligent to make sure that any lead-based paint present in their home or school does not endanger the health of their family!
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