6 Things Homebuyers Should Avoid Once They are Preapproved for a Mortgage

black couple loan approved

You have done the hard part in the home-buying process and chosen a lender and a real estate agent to work with. You have also gone out and found the home of your dreams! Best of all, your team has done a great job of negotiating the best deal for you.

Now, as a buyer, all you have to do is sit back and wait for your loan to close … right? Wrong!!

Getting a home loan these days is a very interactive process. I am always amazed by how many clients I work with who come to me unaware of all the pitfalls they face during the loan process. To help avoid any surprises while waiting for final approval, I provide my clients with a short list of “do’s and don’ts” to follow.

Let’s start with the “do’s” …

  1. Do keep the process moving by responding to your loan officers’ requests for documentation as soon as possible.
  2. Do make decisions as soon as is reasonably possible.
  3. Do convey questions or concerns you
  4. Do continue to make all of your rent or mortgage payments on time.
  5. Do stay current on all other existing accounts.
  6. Do continue to work your normal work schedule with no unplanned time off.
  7. Do continue to use your credit as normal.
  8. Do be prepared to explain any large deposits in your bank accounts.
  9. Do enjoy purchasing your home but remain objective throughout the process to help make decisions that are best for you.

After you have been preapproved for your mortgage you will want to refrain from the following…

  1. Do not make any major purchases (car, boat, jewelry, furniture, appliances, etc.).
  2. Do not apply for any new credit (even if it says you are preapproved or “xxx days same as cash”).
  3. Do not pay off charges or collections (unless directed by your loan officer to do so).
  4. Do not make any changes to your credit profile.
  5. Do not change bank accounts.
  6. Do not make unusual deposits into your bank accounts or move money around from one account to another.

Follow these simple rules and you will help to make your loan closing as smooth and hassle-free as possible! Good luck!

Changes to the B of A Short Sale process

Considering a short sale as a Bank of America mortgage holder? Well make sure you hire an experienced, proven short-sale agent and that they are current on that lender’s process.

Below describes some new changes to B of A’s shot sale process imperative tot he successful completion of your short sale.

(Re-Printed from B of A email correspondence 07/31/2014)

Bank of America Help for Homeowners in Sacramento and Elk Groveac

Bank of America Help for Homeowners in Sacramento and Elk Groveac

The new Initiation Package assists a homeowner through the Short Sale process.  Starting mid-July, homeowners will receive a short sale Initiation Package upon initiating a short sale and not being reviewed for a home retention option. Included in the package is the Borrower Election Form that will now be required before proceeding with a short sale.The short sale transaction will no longer continue and no other homeowner documentation or offers will be reviewed until the signed Borrower Election Form is received and verified by the Short Sale Specialist. As a reminder, for your agent, a valid Third-Party Authorization Form is also required and must be verified in order to proceed with the transaction.

As a homeowner, thoroughly read this package including the Homeowner Checklist. This package contains a list of financial documents that may be required to complete a short sale. B of A’s ability to evaluate the homeowner for a short sale, as well as postpone collection and foreclosure efforts, depends on their receipt of all necessary documents. Upon initiation, a Short Sale Specialist will continue to contact your agent, to discuss the next steps in the short sale process.

Initiation Package Includes:

  1. Homeowner Checklist
  2. Information on Loan Assistance Programs
  3. Frequently Asked Questions
  4. Important Notice to Help You Avoid Foreclosure Scams
  5. Borrower Election Form – now required upon initiation
  6. Third-Party Authorization
  7. Request for Mortgage Assistance (RMA) form
  8. IRS Form 4506-T

Please note: initiating directly into a short sale, through Equator, is not an option for Federal Housing Administration (FHA) investor properties. Homeowners must always discuss their situation with their Customer Relationship Manager (CRM), who can help them identify if they qualify for an exception to proceed with a short sale without doing a full home retention review.

Short Sale Customer / Agent Care


If you have questions, first contact your short sale specialist (or closing officer) through Equator messaging. If there’s no response after two days, escalate to the team lead.

For urgent needs (such as a foreclosure postponement) or for escalation beyond the team lead, contact Short Sale Customer/Agent Care at 1.866.880.1232.

Visit the Agent Resource Center at bankofamerica.com/sh

3 “Kee” tips on how to save really quickly for a downpayment!

small ways

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UPDATE: Mortgage Debt Cancellation Tax Relief

National Association of REALTORs

National Association of REALTORs

NAR Issue Brief
Mortgage Debt Cancellation Tax Relief

Update on the current status of the mortgage debt cancellation tax relief provision that expired at the end of 2013. As soon as the last one-year extension was passed on New Years’ Day 2013, NAR began working on another extension of this critical tax provision. With NAR’s encouragement, champions of this provision introduced bi-partisan bills in both the House and Senate (H.R. 2994/S. 1187), to extend the provision for one or two years. Unfortunately, the current prospect of these bills being enacted in the short term is not particularly high. We are facing four big hurdles.

1. The Chairmen of both of Congress’s tax committees (Senate Finance and House Ways and Means) have committed to passing comprehensive tax reform legislation before the end of 2014. As part of reform, they have both indicated that they plan to go through the long list of expiring items, including mortgage debt cancellation, and cull those that are not worthy of permanence and make all the “worthy” ones a permanent part of the tax law. However, tax reform is unlikely to be completed in the coming months. If Congress were to extend the expiring provisions now, it might appear that they were giving up on tax reform. This is not a signal they wish to send.

2. There are over 50 such expiring tax provisions (often referred to as “extenders”). Congress rarely passes single tax provisions by themselves. The rules in both the House (and especially the Senate) could allow for added amendments that would turn a simple bill with wide support into a politically divisive bill.

3. The extension of the tax relief “costs” money to the Treasury. The Joint Committee on Taxation estimates that a one-year extension of the mortgage debt cancellation relief would cost $3.7 billion. Some Members of Congress will insist that amount be offset by raising taxes elsewhere or cuts in spending – an ongoing debate in Congress.

4. The Chairman of the Senate Finance Committee, Senator Max Baucus of Montana, has been nominated by President Obama to serve as the next United States Ambassador to China. His departure from the Senate will turn the chairmanship over to Senator Ron Wyden of Oregon. As with any change in committee leadership, there will be an adjustment period.

In sum, NAR tried to have the extension passed by year-end but it was not possible. Because of the factors listed above, NAR has so far decided not to issue Member-wide Call for Action at this time, but has instead focused on working with Congressional leadership and the bill sponsors to find additional support for moving this legislation now that Congress has returned to Washington. Our lobbyists are in daily meetings with Members of Congress, pressing for an extension and providing the most up to date data on short sales and foreclosures to continue to highlight this as a top priority.

What can you do? First, you can contact your Representative and Senators to urge them to act on these bills. If you are in distressed situation, urge them to do so as well. The more Members hear from constituents, the better.

NAR cautions REALTORS® against giving clients tax advice, as every situation is different, but at this point our best estimate is that Congress will pass some extension of this law, probably late in 2014, and make it retroactive. There is precedent for Congress doing this, but no guarantee.

NAR cautions REALTORS® against giving clients tax advice, as every situation is different, but at this point our best estimate is that Congress will pass some extension of this law in 2014 and make it retroactive. There is precedent for Congress doing this, but no guarantee.

Short Sale Debt Forgiveness is Back!

Debt Forgiveness Elk Grove Short Sales, Sacramento Short Sales

Debt Forgiveness Elk Grove Short Sales, Sacramento Short Sales

The California Association of REALTORS® announced yesterday it received a letter from the California Franchise Tax Board (FTB), obtained by Board of Equalization (BOE) member George Runner, clarifying that California families who lost their home in a short sale are not subject to state income tax liability on debt forgiveness “phantom income” they never received in a short sale.

Last month, in a letter to California Senator Barbara Boxer, the Internal Revenue Service (IRS) recognized that the debt written off in a short sale does not constitute recourse debt under California law, and thus does not create so called “cancellation of debt” income to the underwater home seller for federal income tax purposes. Following the IRS’s clarification, C.A.R. sought a similar ruling by the California FTB. Now with the FTB’s clarification, underwater home sellers are also assured that they are not subject to state income tax liability, rescuing tens of thousands distressed home sellers from California tax liability for debt written off by lenders in short sales.

“We are pleased with the recent clarifications issued by the IRS and California Franchise Tax Board, which protect distressed homeowners from debt relief income tax associated with a short sale in California,” said C.A.R. President Kevin Brown. “We would like to thank Senator Boxer and BOE member Runner for their leadership in obtaining this guidance from the IRS and FTB. Distressed California homeowners can now avoid foreclosure or bankruptcy and can opt for a short sale instead, without incurring federal and state tax liability, even after the Mortgage Forgiveness Debt Relief Act of 2007 expires at the end of the year.”

This is wonderful news for California families still struggling with an underwater home. We still recommend all REALTORS® encourage their clients to speak with a tax professional who can advise them on their specific situation. This information in no way should be taken as either legal or tax advice.

(Sacramento Association of REALTORS® Web Log, Caylyn Brown Thursday, December 5th, 2013)

$5000 More to Help You Move: Distressed California Homeowners May Qualify for California’s Keep Your Home California Transition Assistance Program (TAP)

Elk Grove Short Sales, Sacramento Short Sales

Elk Grove Short Sales, Sacramento Short Sales

If you are financially distressed in the state of California and can no longer afford your home and are pursuing a short sale or a deed in lieu of foreclosure, you may be eligible for financial help with your relocation to alternative housing.   The funds come from the Transition Assistance Program (TAP), part of the Keep Your Home California Program.

The state of California is providing up to $5,000 in transition assistance to qualified homeowners who can no longer afford to stay in their homes.  You must:

• Apply for the funds through www.KeepYourHomeCalifornia.com or (if you are a Bank of America Customer) by calling 1.888.954.5337.

• Maintain your property until your house is sold or returned to the lender via a negotiated deed in lieu of foreclosure.

For qualified homeowners, these state funds may be used in addition to any other transition assistance that you may receive by participating in the Federal Home Affordable Foreclosure Alternatives (HAFA) program or in any other pre-offer short sale program.

To learn more about the Transition Assistance Program’s guidelines, and how you may qualify, please visit the website at http://keepyourhomecalifornia.org. Or call 1.888.954.5337 if you are a Bank of America customer.

3 Things You Didn’t Know About Short Sales

You'll be surprised to learn this about short sales.

You’ll be surprised to learn this about short sales. Elk Grove & Sacramento Short Sales.

Short sales have become a part of the normal fabric of real estate business. At a minimum, most people now understand the term “short sale” doesn’t mean the sale will be short, will take less time, or that the price the home will sell for will be much less than market value.

Surprisingly though, there is still a large segment of the population unaware of what may probably be three of the most important benefits to completing a short sale. With that being said, you too may be surprised to learn that, if you complete a short sale there may be:

1. No cost to you, the seller
That’s right. For the majority of sellers, to complete a short sale is totally free. The proceeds from the sale cover the costs associated with the sale, and your lender approves all fees. For example: title and escrow fees, state mandated items (NHD reports), broker fees for service (commissions), and most lenders even pay outstanding property tax liens!

You should never be asked to pay a fee to complete your short sale. If an agent asks you to pay a fee as a requirement to start or complete your short sale, find another agent.

2. Zero Tax Liability, Zero Deficiency Liability
Tax Liability – In the past, when you completed a short sale, your lender would send you a 1099 and view the forgiven difference as taxable income for the year. This gets filed with your next tax return and, unless you have an exemption, you must pay taxes on the forgiven income. This would, of course, push most people into a new tax bracket requiring you to pay taxes on that forgiven difference.

For example:
Loan Amount Owed $300,000
-Short Sale Price $160,000
Difference $140,000

However, for owner occupied residences, the Debt Forgiveness Act allows tax liability protection on the difference up to $250,000 if you are single, and $500,000 if you are married. President Obama recently extended the act until December 31, 2013. So let’s apply this law to our example above:

Loan Amount Owed $300,000
-Short Sale Price $160,000
Difference $140,000 = FORGIVEN!!
Up to $250,000 (single); $500,000 (married)

In addition, there are numerous exemptions that apply which can enable you to avoid this tax even if it is not your primary residence.

Deficiency (In the state of California) – The California Legislature passed Senate Bill 931 adding Section 580e to the California Code of Civil Procedure and stating that the senior lien holder could not pursue a deficiency judgment after a short sale which they had previously approved. The law equally applies to purchase money, hard money and refinance – as long as there was no cash out.

They later passed Senate Bill 458, amending Section 580e and extending the protection of SB 931, by making it applicable to junior liens as well. In addition to not being able to get a deficiency judgment it provides that after a short sale, no deficiency shall be owed or collected and no deficiency judgment shall be requested or rendered provided the short sale closed escrow and the lender was paid the amount they agreed to accept.

The amended law further provides that the holder of a note shall not require the seller to pay any additional compensation, aside from the proceeds of the sale, in exchange for their consent to the short sale.

How’s that for protection? So, to recap – you get to complete a short sale at no cost to you, your debt and deficiency are also forgiven, and the lender cannot ask you to come in with any additional funds above the amount they agree to accept. What more could you ask for? How about cash back?

3. Cash Back to You
Lenders learned rather quickly the magnitude of the financial responsibilities which came with foreclosed properties; tax liens, outstanding utility bills, property damage, vandalism, etc – all at a very large price tag and not including their standard attorney fees. So not only did it make sense to pay the seller an incentive to remain in the home and keep the home in good condition until close of escrow, but it also helped the seller with moving expenses as well. This turned out to be a win-win situation for everyone. Thus, relocation assistance was born and adopted.

How much assistance you will receive and specific assistance guidelines will vary. For example, if you short sale under HAFA (Home Affordable Foreclosure Alternative), you could receive $3000. However, many lenders now have their own in-house incentive programs which offer relocation assistance anywhere from $3000 to as much as $30,000 or more.

So if you are facing foreclosure, contact Mathews & Co Realty Group with Century 21 Landmark Networ at (916) 678-1803 or me, Keisha Mathews, (team short sale specialist) via direct email at SacramentoShortSaleLady@gmail.com. I would be happy to meet with you to go over your options helping you avoid foreclosure, and explain how you could reap the many benefits as well.

The information contained above is not to be construed as legal or tax advice. Each individual’s personal situation may vary. We at Mathews & Co Realty Group are not tax professionals or attorneys. Please consult a real estate attorney or tax advisor to determine whether the information above is applicable to your individual situation.