Kiddie Condo Loan Requirements Updated

 With all the recent changes to the lending industry, I wanted to provide an update on the latest FHA requirements for their Kiddie Condo Loan.

Kiddie Condo is simply a loan that included a non-occupying co-borrower, usually a parent helping their college age kids qualify for a home.

In prior years, the occupying borrower did not need to be able to qualify on their own, they just needed to have clean credit or no credit.  Here is what has changed for FHA loans:

1. The occupant needs to have credit, 3 tradelines.  With reported credit, they have to have a 620 credit score.   If they do not have a credit score, they have to have 3 alternate sources of credit with consistent, timely payments for at least the most recent 12 months.  Sources can include:  rent, utilities, cable, cell phone or land phone, insurance payments, etc.  Anything that is paid monthly that can be verified with 12 months of canceled checks and verification of payments from the provider.
2. If they do not have a credit score, they need to have a job and partially qualify on their own.  If they have a credit score of at least 620, then they do not.
3. the property can be any property, not just a condo.
4. This is for FHA only, all properties need to meet the 51% owner occupancy requirement
5. 3.5% is the down payment requirement, no down payment assistance is available when using a non-occupant co-borrower
6. 6% is the maximum seller contribution to go toward closing costs, prepaid items, and rate buydown.  NO portion of this can go toward down payment

 

Conventional options do not exist for this type of borrower. For conventional loans, if the “child” cannot qualify on their own, the parent has to purchase the property as an investment property. Here is what is needed for this:

1. 20% down payment is required
2. 680 minimum fico score, and with this score, rates and fees are very costly
3. ideal credit score is 740 and 25% down for best rates
4. If child is on the loan, they have to meet the same credit score requirements.  The lowest middle score of all borrowers is the qualifying score

Hopefully this information helps provide a more clear picture of the wonderful Kiddie Condo Loan.  It’s truly a remarkable loan especially for parents of CSU students that would like to help their son or daughter begin earning valuable credit and reap the benefits of homeownership.

If you would like more information regarding Kiddie Condos in Fort Collins, be sure to visit www.FortCollinsKiddieCondos.com or email me directly at CSUCondoExpert@MikeMalvey.com and I’ll be happy to answer your questions.

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Carbon Monoxide Bill Passed into Law in Colorado

Governor Ritter signed HB 1091 into law.  The new law will cover all new residential construction and existing single-family and multi-family housing units offered for sale, transfer or rent.  

Beginning July 1, 2009, a seller of residential real property containing a fuel-fired heater or appliance, a fireplace, or an attached garage will be responsible for assuring that a carbon monoxide alarm is properly installed within 15 feet of the entrance to each room lawfully used for sleeping.  No person shall have a claim for relief against a property owner or their authorized agent if a carbon monoxide alarm is installed in accordance with the manufacturer’s published instructions. 

HB-1091 covers all existing single-family and multi-family housing units offered for sale, transfer or rent.  In additon, all new residential construction is required to comply.

A Carbon Monoxide Alarm:

• Detects carbon monoxide and produces a distinct, audible alarm;
• Conforms to standards recognized by independent product-safety testing laboratories;
• Is battery powered, plugs into a home’s electrical outlet and has a battery backup, or is connected to an electrical system via an electrical panel;
• May be combined with a smoke detecting device if the combined device has signals that clearly differentiate between the two hazards.

Carbon Monoxide Alarms must be:

• Intalled in all homes with a fuel-fired heater or appliance, a fireplace, or an attached garage;
• Installed within 15 feet of the entrance to each room lawfully used for sleeping.

What a REALTOR® Needs To Know!

• By July 1, 2009, the Real Estate Commission will require each listing contract for residential real property to disclose the requirements specified by HB-1091.
• No person shall have a claim for relief against a property owner or their authorized agent if a carbon monoxide alarm is installed in accordance with the manufacturer’s published instructions.
• A seller of residential real property is responsible for assuring that an operational carbon monoxide alarm is properly installed.
• A buyer of residential real property shall have no claim for relief against any REALTOR® for damages resulting from the operation, maintenance, or effectiveness of a carbon monoxide alarm if the REALTOR® complies with the law.
• Nothing in the legislation precludes local governments from adopting or enforcing more stringent requirements for the installation and maintenance of carbon monoxide alarms.

I hope you find this information helpful.  Please contact me with any questions, Mike@MikeMalvey.com.

 

 

 

 

 

 

 

 

 

Options for Homeowners in Foreclosure in Fort Collins or Northern Colorado

As a certified distressed property expert (CDPE) specializing in the Fort Collins and Northern Colorado real estate market, I have received this extraordinary training which many agents and realtors haven’t.  This training allows me to assess a homeowner’s situation and be able to suggest which of the following strategies or set of strategies a homeowner could use in order to avoid foreclosure.

Here are some of the options a homeowner has to avoid foreclosure.

Reinstatement

If the reason a homeowner missed payments was temporary and it has been resolved then they have the option to reinstate their mortgage right up to the bank sale.  In order to reinstate a mortgage, the homeowner has to pay all missed payments, late fees, and legal fees that are due up to the date that the loan is reinstated.

Forbearance or Re-Payment Plan

If the issue that caused the homeowner to miss payments was temporary and the homeowner is not able to make a one-time reinstatement payment, they may be able to negotiate a forbearance or repayment plan.  The lender may allow the homeowner a given period of time to pay the delinquencies.

Sell the Property

If the homeowner has equity in their property, they can sell it and cure the foreclosure.  Unfortunately, many sellers believe they have to sell much faster than they do and end up taking the first offer that comes along.

Rent the Property

In some cases a homeowner facing foreclosure will have payments low enough to allow them to rent the property and keep up with the mortgage payments.  However, this is often a short-term solution since when taxes and insurance payments come due, many homeowners cannot afford them.

Refinance

If the homeowner has sufficient equity, income and their credit has not been damaged then refinancing may be an option.  Typically, this is a short-term solution if the issue that made the homeowner late in the first place has not been resolved.

Mortgage Modification

A mortgage company may qualify a homeowner for a mortgage modification if the homeowner has the means to afford their mortgage payments or very close to their mortgage payments.  A loan modification is similar to a lower interest refinance where the lender lowers the interest rate on the existing loan in order to lower the payments.  The homeowner will have to qualify for a modification by sending in proof of income and expenses.

Short Refinance

This process involves the refinance of a home with a reduction in the principal balance and often the interest rate as well.  The borrower will have to qualify for this process both in showing a hardship as well as showing the ability to pay the new mortgage often through a fully documented qualification process.

Deed-in-Lieu of Foreclosure

This is sometimes referred to as a “friendly foreclosure.”  The mortgage company agrees to take the deed back in exchange for the property and they typically have no further recourse.  This solution only works in cases where there is one mortgage and there are no liens (or very small liens) on the property or in rare cases where a first mortgage holder will negotiate with the second mortgage holder. 

Bankruptcy

A bankruptcy may stop a foreclosure and allow a homeowner to reorganize their debt and keep the property.  The reality however is that most of the time this is not the case and the bankruptcy only stalls the foreclosure.  If the homeowner is not able to make the payments after bankruptcy, the house will foreclose anyway.  The other major drawback to bankruptcy is that it makes it very difficult for the homeowner to sell the property once the bankruptcy process has started.  It makes it near impossible to negotitate a short sale.

Servicemembers Civil Relief Act (SCRA)

This law provides certain protection to military personnel that are in foreclosure in specific situations.  As it applies to mortgages, the law reads: The SCRA can provide temporary relief from paying your mortgage.  To obtain relief, a military member must show that their mortgage was entered into prior to beginning active duty, that the property was owned prior to entry into military service, that the property is still owned by the military member and that military service materially affects the member’s ability to pay the mortgage.  http://www.uscg.mil/legal/la/topics/sscra/about_the_ssra.htm

Short Sale

When a homeowner owes more on a property than it is currently worth and one of the above solutions do not apply to their situation, there is the option of pursuing a short sale.  Keep in mind that realtors with the CDPE designation, like myself, on average sell 80% of their short sales compared with only 10% by real estate agents that do not have the CDPE designation. 

Those are the options available to homeowners to evaluate in order to avoid a foreclosure based on their unique situation. 

You deserve the best chance to avoid foreclosure and restore hope to your family.  Contact me at ShortSaleExpert@MikeMalvey.com for FREE advice and an opportunity to schedule an in-home consultation.

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Tax Deductions for Rental Income & Expenses

As a realtor in Fort Collins, Colorado and an owner of several rental properties, I feel this is valuable information I copied directly from the IRS website to share with fellow investors and people thinking about investing.  Here are some of the advantages the IRS will allow for deductions as of today.

Topic 414 – Rental Income and Expenses
Generally, cash or the fair market value of property you receive for the use of real estate or personal property is taxable to you as rental income. You can generally deduct expenses of renting property from your rental income. Income and expenses related to real estate rentals are usually reported on Form 1040, Schedule E (PDF). Income and expenses related to personal property rentals are reported on Form 1040 (PDF).

Most individuals operate on a cash basis, which means they count their rental income as income when it is actually or constructively received, and deduct their expenses as they are paid. If you are a cash basis taxpayer, you cannot deduct uncollected rents as an expense because you have not included those rents in income. If a tenant pays you to cancel a lease, this money is also rental income and is reported in the year you receive it. Do not include a security deposit in your income if you plan to return it to the tenant at the end of the lease. But if you keep part or all of the security deposit during any year because the tenant damaged the property or did not live up to the terms of the lease, this money is taxable income in the year this determination is made. If the security deposit is to be used as the tenant’s final month’s rent, you include the money as income when you receive it, rather than when you apply it to the last month’s rent.

Some examples of expenses that may be deducted from your total rental income are depreciation, repairs, and operating expenses. You can recover some or all of your original expenses and improvements by using Form 4562 (PDF) (to report depreciation) beginning in the year your rental property is first placed in service, and beginning in any year you make an improvement or add furnishings. For information on depreciation, refer to Publication 946, How To Depreciate Property. Repair costs, such as materials, are usually deductible. For a discussion of the difference between repairs and improvements, refer to Publication 527, Residential Rental Property (Including Rental of Vacation Homes).

There are special rules relating to the rental of real property that you also use as your main home or your vacation home. For information on income from these rentals, or from renting at an amount less than the fair market value, refer to Topic 415, Renting Residential and Vacation Property (formerly Renting Vacation Property and Renting to Relatives).

If you do not use the rental property as a home and you are renting to make a profit, your deductible rental expenses can be more than your gross rental income, subject to certain limits. For information on these limitations, refer to Topic 425, Passive Activities – Losses and Credits.

For more information on rental income and expenses, including passive activity loss limits, refer to Publication 527.

If you or someone you know would like to learn more about investing in real estate in the Fort Collins area then please contact me for a free investment workshop at RemaxMike@MikeMalvey.com.

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