All Forum Posts by: Ben Duq

I was trying to find some information on the new Making Homes Affordable program and in particular the Modification portion and found the following in a nut shell:

1) Reduce your PITIA (principal, interest, taxes, insurance and association fees) to 31% of your gross income. The Treasury would work with the lenders to get to this level.
2) Pay for performance success payment of up to $1000 per year for 5 years that goes toward the principal.

To qualify you have to be current on your mortgage and your loan has to be a primary residence. The hardest part would be to prove the Reasonably Foreseeable/Imminent Default provision where you have to write or call to determine if your loan can/should be modified due to financial hardship etc.

I am not sure what the new loan will look like, i.e. will it be a 40 year loan, etc. the interest rates for the loan were outlined in what I read and will fall between 2% and the fully indexed amortizing original contract rate or the Freddie Mac primary mortgage market survey rate for a 30 year fixed rate.

Sounds like the bank may forgive some of your principal if they would choose to... I am not sure why they would other than the fact that the Govt would use tax dollars to make the banks whole (which is what they are doing now anyway).

Anyone here anything different or in addition to this bailout?

I heard somewhere that they didn't confiscate gold coins held by citizens during the Great Depression.

I think you are right Alfred, we could be heading into a period of stagflation. From a financial standpoint, I would agree with Jon's post about having your dollars in something that would hedge inflation, usually hard assets such as precious metals, real estate, and even collectibles like art, comic books etc (anyone see in the news about that Action Comics #1 currently bid up to about $230k).
As for starting a business, I would look at providing the necessities, particularly shelter, food etc. Look at Walmart, they have done well in this downturn. The way I look at it, real estate is the best curb of inflation as you can adjust/peg the rent you charge to inflation, and for those other reasons that Jon mentioned earlier (values keep pace and debt is paid back with less valuable dollars)

I must have heard this comment about tax breaks a million times, and while I agree that the tax breaks shouldn't be over emphasized, I think this comment some what distorts the tax benefits. To better summarize it, I would pay you a dollar for something worth a dollar and then you would give me 35 cents.

It is similar to companies that purchase equipment and get an accelerated tax write-off in the current period as an incentive to make the purchase. The new machine should increase productivity and profits which could be offset against the acclerated depreciation.

Theoritically businesses use debt to fund their operations with the assumption that they can make a higher margin than the interest on their debt. I think the same thing applies to real estate investing, your cost of capital should be less than your expected returns from a real estate purchase.

I agree with this simple explanation on using debt. In an economic downturn, those business/individuals with zero to small amounts of debt would be better able to weather the storm. Businesses wouldn't have to worry about slumping sales putting pressure on debt covenants and for an individual they could refinance their existing low debt, to force down monthly payments to a more managable level should they lose their jobs.

For you to be considered a 1st time home buyers here in Hawaii, you can't have owned a stake in real property for the past three years.

I was quoted an interest rate on a good faith estimate and the loan was sent to under writing/ loan approval two weeks ago. Just today my loan officer emailed me and is quoting me a rate about 1.25% higher. Can anyone explain how this could have happened. I thought the rate gets locked in at the point of signing the good faith estimate with the loan rate quoted on the day of preparation. Did my loan officer drop the ball and not lock me in? Or do I have to wait for the loan to come out of underwriting to get a final interest rate?

I am not too familar with QB, but I would think that it should have a fixed asset module. I would enter the purchase price of the property here, and the invoices for any additions to the basis for rehabs etc. I would break out the cost of the land with and the improvements/buildings into different accounts as there are different depreciation/tax rules for these. I am not sure if there is a depreciation module, but if not you will have to calculate the depreciation on a spreadsheet, and set up the amount as a monthly occurring entry.
As for loans, there should be a debt section/module where you can enter in the amount. You should be able to charge your debt payments through this module and it should ask you to classify the interest and principal payments accordingly or similar to the depreciation, you could run an amortization schedule in a spreadsheet and enter in this as a monthly occurring entry (this way is probably not the best method as there is no paper trail).
I am not sure what a resll on land contract is.