Rates as of November 15, 2013

Rates as of November 15, 2013 *See Below for Assumptions

Average Rates Chart

7 Ways to Build Good Credit.

7 Ways to Build Good Credit.    1. Only borrow what you can afford When you get into the habit of charging only what you can afford, it lets future lenders and creditors know that you are a responsible borrower. You'll find it easier to borrow money and get new credit when you show that you know how to only borrow what you can pay back. Not only that, only charging what you can afford helps you avoid excessive debt. 2. Use only a small amount of the credit you have available Maxing out your credit cards - or even coming close - is irresponsible, particularly if you don't plan to pay the whole balance off within the month. Lenders know that borrowers who max out their cards often have difficulty repaying what they've borrowed. Staying below 50% of your credit limit is wise, below 30% is best to build good credit. 3. Start with only one credit card Many first-time credit card users accumulate a collection of credit cards within their first few years of using credit. Don't make the mistake of opening up too many credit cards too soon. The more credit you have, the more you'll end up using and the harder it will be to keep up with your balances and payments. In addition, too many inquiries into your credit and too many new credit cards can negatively affect your credit score. Learn how to be responsible with credit before you apply for additional credit cards. 4. Pay your credit card balance in full If you're only charging what you can afford to pay, you won't have a problem paying your full balance every month. Paying off your balance each month shows that you're capable of paying bills, something creditors and lenders want to see. Since a large part of your credit score includes timeliness of your payments, paying your balances on time improves your credit. 5. Make all your payments on time Not all of your monthly payments are listed on your credit report, so they don't affect your credit as long as you're paying on time. But any bill can potentially wind up on your credit report if you become delinquent and the account is sent to a collection agency. Keep any negative accounts off your credit report to build a good credit score. A serious delinquency like a debt collection can be hard to overcome. 6. If you carry a balance, do it the right way Having a credit card balance isn't necessarily bad as long as you do it the right way. Pay more than the minimum each month to pay off your balance as quickly as possible. Avoid making late credit card payments and continue to keep your balance at a reasonable level (below 30% of the credit limit). If you follow these principles, carrying a balance won't hurt your credit. 7. Let your accounts age The longer you've had credit, the better it is for your credit score. Leave your oldest accounts open since they help increase your credit age and build good credit. Closing the account won't remove it from your credit report immediately. But, after several years, the credit bureaus will eventually drop old, closed accounts from your credit report.    READ MORE

November 4th Rates

Rates as of November 4, 2013 *See Below for Assumptions

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Tuesday, November 5, 2013, 1:08 p.m.

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Home prices level off with slight Sept. increase

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By Christopher S. Rugaber, Associated Press

WASHINGTON -- A measure of U.S. home prices rose slightly in September from August, a sign that prices are leveling off after big gains earlier this year.

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Real estate provider CoreLogic said Tuesday that home prices increased 0.2 percent in September from the previous month. That's sharply lower than the 0.9 percent month-over-month gain in August and well below the 1.8 percent increase in July.

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Prices still rose 12 percent in September compared with a year ago.

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Higher mortgage rates and steady price increases began to slow home sales in September. As a result, price gains have cooled off.

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Mortgage rates are still very low. And the average rate on a 30-year fixed loan has fallen to 4.1 percent in the past month, down from a two-year high of nearly 4.6 percent over the summer.

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"This deceleration is natural and should help keep market fundamentals in balance over the longer-term," said Anand Nallathambi, president and CEO of CoreLogic.

Lien Avoidance/Lien Stripping - Interesting Information

McFerran & Burns, P.S.

Practicing Real Estate Law in Western Washington since 1986

 

October 28^th, 2013

 

 

Lien Avoidance/Lien Stripping

 

Did you know judgment liens can be removed from a property through bankruptcy?  Did you know a bankruptcy can reduce junior mortgages to the status of unsecured debt?  Today I want to discuss the tools in our bankruptcy tool box that allow us to do just that.

 

Lien Avoidance

The other day a broker called me with a problem.  She had a Purchase and Sale Agreement for a piece of property.  Unfortunately, the seller did not tell her there were two judgments against him.  Her first notice was the title report.  She wanted to know if there was anything that could be done other than paying the judgments.  The answer was yes; if the seller qualifies for a Chapter 7 bankruptcy, the judgment liens can be “avoided.”

Let me explain.  The standard rule in bankruptcy is that debts are discharged, but liens pass through bankruptcy unchanged by the bankruptcy discharge. So, while the debtor is no longer personally liable on the debt, the lien survives.  Fortunately, we have the ability to avoid a judgment lien in a Chapter 7 under Section 522 of the Bankruptcy Code, if it impairs an exemption. 

Both the State of Washington and the Bankruptcy Code allow a debtor to “exempt” a certain amount of value in residential real estate.  If the judgment lien has attached to that real estate and “impairs” the exemption, then the judgment lien can be avoided in its entirety.  The result is a discharge of the debt and the removal of the lien.  

So, how do we determine if the judgment lien impairs an exemption?

The Bankruptcy Code sets for a formula to determine if an exemption is impaired.  Under the Code, if the lien to be avoided and all other liens on the property and the debtors’ exemption exceed the value of the debtors’ interest in the property, the exemption is impaired and the judgment lien can be removed from the property. 

Here’s an example:

In Washington, debtors are allowed to exempt $125,000.00 in equity in real estate.  So, if there is a judgment against the debtors for $20,000.00 and the property is worth $150,000 with a $100,000.00 mortgage, would the judgment lien be avoided?

Mortgage:                                                                                                    $100,000

Exemption:                                                                                                 $125,000

Judgment lien:                                                                                             $20,000

Total of liens and exemption:                                                              $245,000

 

Debtor’s interest in the house (value):                                            $150,000

Because the total of the liens and exemptions on the property ($245,000) exceed the debtor’s interest ($150,000), the judgment lien can be avoided in a Chapter 7.  As a result the debtor’s personal liability would be discharged and the property would be free of the judgment lien.  

Practice Pointer: The filing of a bankruptcy does not automatically avoid the lien.  A separate motion must be filed with the court, and a Court Order avoiding the lien must be obtained.  Due to laziness or lack of diligence, some bankruptcy attorneys do not take this crucial step.  As a result, the lien survives the bankruptcy. Because we focus on real estate issues at McFerran and Burns, we always check for judgments and if appropriate, take the necessary steps to remove judgment liens in Chapter 7 bankruptcies. 

Lien Stripping (Chapter 13)

As indicated above, the standard rule in bankruptcy is that debts are discharged, but liens pass through bankruptcy unchanged by the bankruptcy discharge. So, while the debtor is no longer personally liable on the debt, the lien survives. 

An exception to that rule is provided by Chapter 13. When the value of the collateral available to secure the lien is less than the debt secured by the lien, the lien may be “stripped” off and the debt “crammed down” to the value of the collateral that secures it. The exception to the exception is mortgages on the debtor’s primary residence.  In that case it’s all or nothing.

Here’s how it works.  The first mortgage cannot be modified by a Chapter 13.  The first position lender must be paid its regular payments.  However, if there is more than one lien on the debtor’s residence, and the value of the property is less than the balance on the first mortgage, junior mortgages or liens can be “stripped”, and the debts paid the same as unsecured creditors.  However, if there is any equity above the first mortgage balance, the second gets the same treatment as the first.

I realize this can be confusing.  I think some examples will help to clarify. 

Example #1:  The debtor’s home is worth $150,000.  The first mortgage balance is $175,000 and the second is $100,000.  Even though the balance on the first exceeds the value, the lender in first position is still entitled to its regular payments.  But because the balance on the first mortgage ($175,000) exceeds the value of the property ($150,000), the second mortgage can be stripped.  The second mortgage will be treated as an unsecured debt, and will be paid the same percentage as credit cards and medical debt.  That percentage can be as low as 0% depending on the debtor’s circumstances.  At the conclusion of the Chapter 13 (3-5 years) the second will be removed from the property, and the remaining debt discharged.

Example #2: The debtor owns a home valued at $150,000.  There is a first mortgage of $125,000 and a second with a balance of $100,000.  Because the value ($150,000) is greater than the amount of the first mortgage ($125,000), the second mortgage cannot be stripped.  Both mortgages must be paid according to their terms.  It doesn’t matter how much equity there is above the first.  Even if it’s only $1.00, the second cannot be stripped.

Practice Pointers:

•          The rules are different if the property is not the primary residence of the debtor. 

•          The key to the analysis for either lien avoidance or lien stripping is value.

•          Lien stripping is only available in a Chapter 13, and is not final until the debtor completes the plan payments.

•          Lien avoidance can be used in either a Chapter 7 or a Chapter 13, but only applies to non-consensual (judgment) liens.

•          Lien stripping and lien avoidance can only be accomplished by pleadings separate and apart of the initial bankruptcy filing.  Simply filing a bankruptcy will not strip or avoid any liens or mortgages. 

The rules surrounding lien stripping and lien avoidance are complex, complicated and fact specific.  The methods of stripping and avoiding liens are technical.  Only an experienced bankruptcy practitioner is qualified to give advice and file the appropriate Chapter and the pleadings within the bankruptcy case to accomplish the ultimate goal of removing certain liens from your client’s real estate. I have seen many cases over the years where the debtor’s attorney failed to take the steps necessary to avoid a judgment lien.  The failure and its consequences do not become apparent until the debtor tries to sell the property.  By then, it may be too late.

If your client has an underwater second, we may be able to strip the lien in a Chapter 13.  If you have a client with a judgment lien that’s holding up your sale, maybe we can help. Call 253-284-3838, Option 1 to set up a free bankruptcy consultation.  We have offices throughout the Puget Sound; Tacoma, Seattle (Northgate), Kent, Silverdale, Kirkland and Everett.  At McFerran and Burns, our practice is focused on all things real estate.  Our bankruptcy group is now up and running at full speed.  We want to make sure our clients get the full benefit of their bankruptcy, which may include more than just a discharge. 

If you have a specific question, try our new “McFerran & Burns Legal Line”.  It is available to our industry partners at no cost or expense when you email your questions to us at legalline@mbs-law.com.

Your question will be sent to each of our attorneys.  One of us will get back to you within 24 hours of receipt. It may be an email answer or it may be a phone call back to you so please include your name, agency name and phone number with your question.   There is no charge for this service. The only restrictions are that you must be a licensed real estate professional and it must pertain to areas of our real estate, tax, business and bankruptcy practice. Just email us at legalline@mbs-law.com.

How to Become a Home Buyer this Fall

By Vera Gibbons

Published October 08, 2013

Zillow

• 
  REUTERS

So, you’re finally off the fence and ready to buy a home before prices — and mortgage rates rise any further. Here’s what you need to know about jumping into the market at this time of year.
Know your market
The bottom line is that different markets behave differently during the fall. According to Zillow’s August Real Estate Market Reports, national home values rose 0.4 percent from July, marking the third consecutive month in which monthly home values rose more slowly than the month prior. However, markets in California, Las Vegas and Minneapolis are still seeing an extremely brisk pace of home value appreciation (2 percent or higher). As we exit this year’s selling season, we will start to see a slowdown in home value appreciation.
Selection is limited
Many frustrated sellers who weren’t able to unload their properties during the busy peak spring/summer buying season may take their homes off the market, particularly as the holidays approach and the action comes to a screeching halt. This means you can expect the selection to be even more limited than it currently is in some markets.
There’s room to negotiate
Was there a home you saw and loved a few months ago? Is it still on the market? If it hasn’t sold after one of the hottest real estate summers since the economic downturn, you likely have room to negotiate. While some buyers will pull their homes off the market, others who have been holding out for the best possible price may now be ready to come down. While some homeowners are determined to get a set price, others may simply want out at this juncture.
Check maintenance areas
Fall is the ideal time to check things such as gutter drainage and the general upkeep of the yard. How does everything look? Does anything need repair? Visit the home on a rainy day and see for yourself. Then go inside and check out the furnace, looking for drafts, leakage issues and other possible structural/maintenance problems. If they’re apparent, determine how much money it’s going to take to get everything up to snuff and factor that into your offer, adjusting your price accordingly.

Home Loans: Shopping for a Low Interest Rate

by Morgan Sims on October 9, 2013 in For Buyers, Interest Rates

Today we are excited to have Morgan Sims as our guest blogger.  Morgan is an accomplished writer who has been featured on many blogs with topics ranging from Real Estate to Social Media. – The KCM Crew

Buying a home is likely the biggest purchase you will make, and even more likely a purchase that will require a loan. When dealing with a financial commitment such as this, understanding how to get the lowest possible interest rate could mean a difference of thousands of dollars. Home loans are a complicated business, so here are a few tips to help you shop for the lowest interest rate.

Qualifying for the Lowest Rates

Computer models fix a large percentage of the costs of a home loan with strict prequalification.  Loan officers are not able to give every client that walks in the door the same deal.  It is a good idea to be aware of your own credit score and equity, while also comparing rates in your local market, so you know what to expect.
For the best interest rates you'll likely need a credit score of at least 740 and have 20 percent equity. These figures are a general guide and are always changing.  However, if your score is considerably lower than this and you have low equity, be prepared for heavily increased rates compared to the best that are offered.

Be Prepared

The best thing you can do for yourself to make the loan process easier is to plan ahead and be prepared.  Be sure to gather all the necessary documents before you begin; to ensure timeliness and organization.  You should also prepare for the down payment by saving up monthly.  Depending on the lender and type of loan, you may be required to put anywhere from 2.25% to 20% of the purchase price down.  In addition, keep in mind the estimated closing costs, as many tend to forget to budget for these fees.  It’s never too late to start saving.
Another factor to consider is home insurance costs.  If insurance costs for your area are particularly low, it may free up some additional cash for loan repayments.  Tools like the home insurance calculator allow you to plug in all of your information to get an estimated cost for your home insurance.

Understand your Needs

Before going to speak to anyone about getting a home loan, be sure you are clear about what it is that you're looking for and what parameters you have set.  If for any reason they can't be met, be cautious of alternative offers that are suggested to you, as you may be persuaded down a different path.  

Looking Will Lead to the Right Rate

There’s no easy way around it if you want to find the lowest interest rates on a home loan.  You have to spend a long time looking, and you need a strategy.  It may not be something you're particularly interested in but if it saves you a large sum of money, it’s worth it.
You must compare similar policies; otherwise you're wasting your time, as a sensible comparison is almost impossible.  Consider the closing costs, interest rate, and lock period to ensure that they are comparable offers.

Move Quickly

As they say, time is money. Be sure to respond promptly to your lender if they require any additional information from you so you can keep the process moving.
If you've managed to find a great deal on your home loan, waiting around for ages while you try to better it or find the equity required to close the deal, is likely to end up costing you. Shopping around is certainly in your best interest. However with today’s market on the rise, rates are not likely to stay stagnant. So if you find a great rate that fits your needs don’t wait long to close it.
Also look into getting prequalified for a loan. This process is rather simple and can put you in a much better place to buy, as well as give you a great idea as to what you can expect to borrow.
Taking out a home loan is one of the biggest financial commitments you are likely ever going to make.  Make sure you put in the time to do your research and look around for the best possible deal.