Great news for California home buyers!

Governor Schwarzenegger today signed AB 183 providing $200 million for home buyer tax credits. The bill allocates $100 million for qualified first-time home buyers who purchase existing homes and $100 million for purchasers of new, or previously unoccupied, homes.

Eligible taxpayers who close escrow on qualified principal residences between May 1, 2010 and December, 31, 2010, or who close escrow on a qualified principal residence on and after December 31, 2010 and before August 1, 2011, pursuant to an enforceable contract executed on or before December 31, 2010, will be able to take the allowed tax credit.

This credit is equal to the lesser of 5 percent of the purchase price or $10,000, taken in equal installments over three consecutive years. Under the bill, purchasers will be required to live in the home as their principal residence for at least two years or forfeit the credit (i.e. repay it to the state). Buyers also must be at least 18 years old and be unrelated to the seller. First-time buyers are defined as those who have not owned a home in the past three years.

To learn more about the California Home Buyer Tax Credit, click here.

In these troubled economic times, when discussing Newport Beach Real Estate with customers, the topic turns to loans, which of course, turns into a conversation about credit scores. Banks are putting prospective borrowers under a microscope. Your credit score is where they begin their investigation of you.

I found this report on Bankrate.com. I hope you find it useful.

Here’s a look at 12 common credit report myths and what the truth really is:

1. Paying my debts will make my credit report instantly pristine.

2. I must give permission for a company to see my credit report.

3. Credit counseling always destroys my credit score.

4. Canceling credit cards boosts my score.

5. Too many inquiries hurt my score.

6. Checking my own credit report harms my standing.

7. FICO scores are locked in for six months.

8. I don’t need to check my credit report if I pay my bills on time.

9. All credit reports are the same.

10. A divorce decree automatically severs joint accounts.

11. Bad news comes off in seven years.

12. I can always pay someone to fix or repair my credit.

1. Paying my debts will make my credit report instantly pristine.

A credit report is a history of your payments, not just a snapshot of where you are at the moment, says Maxine Sweet, vice president of public affairs for Experian, one of the three major credit reporting agencies. As the author of the popular Web column “Ask Max,” she continuously reminds people that you can’t change the past.

2. I must give permission for a company to see my credit report.

It’s scary, but the fact is that unless it’s for employment purposes, your signature or consent is irrelative.

3. Credit counseling always destroys my credit score.

Attending a credit counselor’s debt management program is not considered negative in the scoring models.

“We don’t want consumers to consider credit counseling to be detrimental to their FICO scores,” says Craig Watts, public affairs manager at Fair Isaac Corp., the company that developed the FICO score.

However, if the credit counselor negotiates a lesser contractual obligation, the lender decides how it wants to report that. So if your $500 monthly payment is refigured for $300, the creditor may either legally report that as $200 in arrears every month or reward you for not filing bankruptcy by reporting the account as up to date.

“As long as the accounts are delinquent and not brought up to date, it will be viewed negatively by lenders,” says Deborah McNaughton, owner of Professional Credit Counselors and author of “The Get Out of Debt Kit.” However, she says, “If everything is current, whether it’s a home loan or not, they’re not going to view it as negative. The FICO scores are not affected by it.” The credit score system ignores any reference to credit counseling that may be in your file.

Although credit counseling does not by itself influence your credit score, it is apparent on the report that you’ve been through, or are currently in, counseling — and that is something individual lenders may not like. Or they might never know.

“If they looked manually at your credit report and saw that debts were being repaid through a debt management program, they probably wouldn’t open a new account for you,” Sweet says. Of course, “you shouldn’t be opening a new account if you’re in a debt management plan.” However, most lenders these days will never see your actual report. “They don’t look at reports manually anymore,” Sweet says. “Some small creditors might, but most of any size use automated scoring systems of one model or another.”

Once you’ve successfully emerged from credit counseling with your formerly tattered credit pieced back together, the history of consistent payments is what matters the most. “Even mortgage lenders will work with consumers who have successfully gone through debt management counseling and will work to get them a mortgage,” McNaughton says.

4. Canceling credit cards boosts my score.

Open accounts spells available, potential debt, so better to close them, runs the legend. But experts agree that most creditors want to see at least two or three pieces of active credit to prove you can manage debt responsibly. And, Watts chimes in, those unused cards lying in your jewelry box aren’t wreaking havoc with your score. “The myth is that they look ominous to potential lenders,” he says. “Reality is that paying your bills on time and not being overextended is more important than having $5,000 worth of available credit on a card you’re not using. We continue to evaluate this ‘open to buy’ statistic, and we simply don’t find it falling into one of those highly predictive areas.”

On the other hand, extremes never look good. Opening one charge account occasionally to take advantage of a 10 percent offer is negligible. Going wild and signing up for five during the holiday season probably would invite a decreased score, he says.

5. Too many inquiries hurt my score.

Once upon a time, this statement was true. But get with the times — in this millennium, the credit agencies recognize a shopping mind-set when they see one. If a batch of mortgage or car loan inquiries arrives within 30 days, it doesn’t count at all, Watts says.

“Outside that 30-day period, if we locate a mortgage or car inquiry that occurred 180 days ago, and then see more mortgage- or auto-related hits in the accompanying 14-day window, we err on the consumer’s side and still assume she’s shopping for one item,” he says.

“We really feel like we are capturing the true consumer experience and not holding it against them for being an aggressive or smart rate shopper.”

Furthermore, there’s no such thing as some fixed number of points associated with these inquiries, Watts says.

“Inevitably when a consumer or a lender evaluates a credit file, they think this item must be worth 20 points, this is worth 100 points,” he says. “In reality we design the FICO scoring model so that each credit report item is given a reasonable or statistically valid number of points.”

In English, that means FICO is designed to predict the likelihood that you’ll fall seriously behind in repaying one of your creditors within the next two years. Some things have predictive value and some don’t. Inquiries fall in the middle. “They’re not incredibly predictive, so they’re in the model but they don’t drive the boat,” Watts says.

6. Checking my own credit report harms my standing.

The reporting agencies distinguish between soft and hard pulls. When Target calls to check before issuing its line of credit, the agencies chalk that up as a hard pull and it counts against your score. Personal requests and credit counselors — if they do it correctly, so insist on this as part of your agreement terms — fall under soft pulls, which do not reflect negatively on the evaluation. Using a company that promises credit reports as a perk can turn this myth into a self-fulfilling prophecy, however, McNaughton says. Because they are merchants in disguise, their freebie costs you. Citizens must go directly to the three bureaus if they want a soft pull. Ditto FICO. “Pulling your credit scores is quite empowering,” says Watts. “You have a choice: You can either be very aggressive with your credit management and pull your score with some regularity or take a more passive approach once a year to see how all those credit cards are actually doing.”

7. FICO scores are locked in for six months.

Fair Isaac Corp.’s models are dynamic, meaning that your FICO score changes as soon as data on your credit report change. “When we calculate a score, for all intents and purposes it then goes away and is recalculated the next time someone pulls your file,” says Watts.

8. I don’t need to check my credit report if I pay my bills on time.

When the Consumer Federation of America and the National Credit Reporting Association analyzed credit scores in the summer of 2002, they discovered that 78 percent of the files were missing a revolving account in good standing, while 33 percent of files lacked a mortgage account that had never been late. Twenty-nine percent contained conflicting information on how many times the consumer had been 60 days late on payments. “There can be a lot of other activity going on that you don’t have any clue about,” McNaughton says. In her experience, 80 percent of all credit reports have erroneous information ranging from a wrong birth date to accounts you never applied for.

9. All credit reports are the same.

Way wrong. These days, most creditors across the country do report their information to all three major agencies: Equifax, Experian and TransUnion. But “that was not true in the past,” Sweet says. And, because they are separate companies, the speed in which they update records isn’t necessarily equal.

Additionally, the agencies use inquiry activity to update your address, phone numbers, employment status and the like. Because creditors typically pull only one company’s report, it’s possible that, say, TransUnion doesn’t show your current address.

According to McNaughton, she’s never seen a client yet for whom all three reports spit out the same records and scores.

10. A divorce decree automatically severs joint accounts.

The judge may have rubber-stamped your plans to divide credit card, car and house payments, but that carries absolutely no legal weight with the creditors themselves, Sweet says.

“We see so many people who, a year or two after the divorce, are just outraged and hurt because their credit report reflects their ex-spouse’s missed payments,” she says.

Unfortunately, at that point, they are helpless to erase the damage.

Divorcing parties must contact the creditors and either close current accounts or have the booted name sign a letter of consent for this action. And assuming certain debts isn’t a unilateral decision on your part, says Sweet. Creditors typically do a credit check on your name and if they don’t deem you financially stable enough to assume that $30,000 car loan, for instance, they won’t agree to remove the other person.

11. Bad news comes off in seven years.

Some of it does. Chapter 13 (reorganization of debt) disappears seven years from the filing date. But if you filed Chapter 7 bankruptcy (exoneration of all debt), the window is 10 years from the filing date.

On the good-news side, accounts in bankruptcy can be deleted seven years after the date of your first missed payment, so those individual pieces may disappear before the word “bankruptcy” on your report. And if you pay off or close an account that had no delinquencies or problems, it, too, remains on the record for 10 years rather than the previous seven, say Experian experts. Again, this means positive information hangs around longer, as a consumer benefit.

12. I can always pay someone to fix or repair my credit.

Yes, you can clear up erroneous information posted to your account, such as a repossessed car that you didn’t purchase in the first place, but if you paid your Sears bill three months late in 1997, that’s a hard fact.

Companies claiming to fix your credit deliver on their promises by generating a flood of dispute letters to the credit reporting agencies, which in turn ask the creditor to verify or document the entry. If they cannot, the listing must come off at that time. But if the creditor later does verify or document it, the agency slaps it right back into the file after 30 days.

While many folks in the areas of Newport Beach Real Estate might not need assistance with their home mortgages, there will be some that will need help to keep their homes. If you do need help, the following information might be useful to you.

Signed into law in July, the Federal Housing Administration’s HOPE for Homeowners program began October 1. While it was debated for several months before being approved, it’s been a bit overshadowed by the $700 billion bailout bill. The program, which will offer 30-year fixed mortgages, will end on September 30, 2011. It’s expected that it will be a few weeks before consumers can take advantage of the program because banks just recently received the details. There is also some speculation on how many lenders will actually use of the program. To be eligible for the program, borrowers must meet the following qualifications as listed on the FHA website: Borrowers are encouraged to contact their lender to determine eligibility, but may be eligible if, among other factors:

• The home is their primary residence, and they have no ownership interest in any other residential property, such as second homes.
• Their existing mortgage was originated on or before January 1, 2008, and they have made at least six payments.
• They are not able to pay their existing mortgage without help.
• As of March 2008, their total monthly mortgage payments due were more than 31 percent of their gross monthly income.
• They certify they have not been convicted of fraud in the past 10 years, intentionally defaulted on debts, and did not knowingly or willingly provide material false information to obtain their existing mortgage(s).

HOPE for Homeowners also includes the following provisions:

• The loan amount may not exceed a maximum of $550,440.
• The new mortgage will be no more than 90 percent of the new appraised value including any financed Upfront Mortgage Insurance Premium.
• The Upfront Mortgage Insurance Premium is 3 percent and the Annual Mortgage Insurance Premium is 1.5 percent.
• The holders of existing mortgage liens must waive all prepayment penalties and late payment fees.
• The existing first mortgage must accept the proceeds of the HOPE for Homeowners loan as full settlement of all outstanding indebtedness.
• Existing subordinate lenders must release their outstanding mortgage liens.
• Standard FHA policy regarding closing costs applies, and they may be:
o Financed into the new loan provided the value of the mortgage (including the Upfront Mortgage Insurance Premium) does not exceed 90 percent of the new appraised value of the home.
o Paid from the borrowers’ own assets.
o Paid by the servicing lender or third party (e.g., federal, state, or local program).
o Paid by the originating lender through premium pricing.
o The borrower must agree to share with FHA both the equity created at the beginning of this new mortgage and any future appreciation in the value of the home.
o The borrower cannot take out a second mortgage for the first five years of the loan, except under certain circumstances for emergency repairs.

For more information, you can go to http://www.hud.gov/hopeforhomeowners/ — the updated website for the HOPE for Homeowners program.

With some luck and, hopefully, some smart moves from the government, we will come out the other side of this crisis and once again, feel great about our investments in Newport Beach real estate.

With all the fuss about air pressure in your tires between McCain and Obama, one thing seems to have gotten lost in the back and forth jabs — it works! Correct tire air pressure does improve gas mileage. If you find yourself at the gas station and just can’t stand the idea of paying for air – don’t! Just go up to the window and tell the station attendant to turn on the air pump. Stations are required by state law to provide free air and water to customers who buy gas and diesel. That’s right – Free Air! The next time you are driving around the streets checking out Newport Beach real estate, take time to check out your tires. The money you save can be used to go out and buy yourself a tire pressure guage to keep in your car – or buy a bigger house!

In the hot market of years past, I used to hear this question frequently. Today, not so often, but it still comes up.

The number one reason for hiring a real estate agent is market exposure. If you’re selling your home yourself, you’re marketing to a limited audience. If you have a sign in front of your house, you’re limited to reaching the people who drive by. Even an ad in the local paper reaches a limited market. The way to ensure the highest and best price for your property is to expose it to every single person out there looking for a property—and that’s done through primarily the Internet, direct mailings, print advertising, the Coldwell Banker network and agent networking (marketing to agents). When you factor in what you save versus what you might be losing, you’re better off using a real estate agent. Consider this question: Have you made more money in your life, or saved more? It’s the same in real estate. The bottom line is not whether you save the commission, but what you net at the end of the transaction. I recently watched an owner sell his own house. He was determined to save the commission, and he did—but he sold his house for $85,000 under the most recently sold comparable homes! In the end, he lost much more than he saved. The National Association of Realtors found that agents can sell houses for 27 percent more than people selling themselves. And today in our California market, the disclosure laws have become so burdensome that a person selling his or her home without full knowledge of disclosure requirements could leave themselves exposed to legal action. You’re far better protected if you have a real estate agent who knows the ins and outs of the law and can expose your home to the broadest possible market. I could go on about this topic, but for now, this is enough. I will write more on this from time to time.

If you borrow money — doesn’t everyone? — You know your FICO score is important. The Fair Isaac folks, the ones that deliver FICO scores to lenders, insurance companies, employers, etc., recently announced they are changing the way they calculate the scores.

If you are thinking of looking into a mortgage loan, car loan, any type of credit, you will want to keep up and know the score — Check out this video from Money Talks News.

It usually takes, at least, a month or two for changes to appear in your credit score — planning now may make a difference.

While it may not be easy to change your scores, it is easy to get a free once-a-year look at your history, go to Annual Credit Report and get your copy.