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Real Estate Financing – Ten Ways

July 23, 2012 By

Do you remember when real estate financing meant you saved up enough to put 20% down on a house, and then you got a mortgage loan for the other 80%? Well, you can still do that, but there are many more options now. Here are t

en of them.

1. Gifting programs. In some parts of the country, builders fund foundations that give you a portion of the down-payment, so you can get into a home with as little as a 3.5% down-payment from your own pocket. FHA and other lenders have so far approved of or allowed this.

2. Hard Money Loans.

These and “low-doc” loans, meaning no or low documentation requirements, are back, and you can find them through investment financing lenders. These are for those of you with bad credit

but 20% to 30% to put down on a home. You don’t even have to have a job. Watch out though – these have interest rates of 10-18% or more!

3. FHA loans. The Federal Housing Administration doesn’t actually loan the money, but guarantees your loan for the bank, so they can loan up to 97% of the purchase price, depending on the particular FHA program.

4. VA loans. If you have been in the armed services, have a decent job, and can save two or three paychecks, you can probably get a home with a VA loan.

5. Land contract. Also called “contract for sale” and other names depending on the part of the country you are in, this just means that you make payments to the seller instead of a bank. It’s up to you and them to negotiate down-payment amount, interest rate, and the term of the loan.

6. Seller-carried second mortgages. Some banks will allow you to have as little as 5% into a home purchase, but will then only loan you 80%. The seller can take payments on a second mortgage from you for the other 15%.

7. State housing programs. Almost all states have some sort of financing help in the form of a loan-guarantee program or outright loans for low-income buyers.

8. Family loans. It may not be out of charity that a brother or a friend lends you the money to buy a home. A 7% return might look awfully good if their money is sitting in the bank at 2%.

9. Manufacturer loans. Some manufactured-home companies are arranging financing with 5% or less down for their buyers. They must feel their money is secure, since a good modular on a piece of property is nothing like a mobile home on a rental lot.

10. Credit cards. This is a risky one, but if you have a low-interest credit card, you can use it to come up with the down-payment, especially if you can pay it off soon with a coming tax refund, for example. Banks generally won’t allow this, but you can combine this with seller financing.

Are there more ways to approach real estate financing? You bet. This was just to get you thinking.

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HOA 101

June 17, 2012 By

HOA 101 – Understanding your Home Owners Association

Are you currently considering a home that requires you to become a member of their Homeowners Association? As a member of your neighborhood’s HOA, you are obligated to pay fees

to support management and maintenance. There are obvious pros and cons to living in a neighborhood with an HOA. Here is a short breakdown.

Pros to an HOA
- May maintain and pay for the upkeep of certain community amenities, including tennis courts, pools, neighborhood parks, golf courses and playgrounds.
- Helps to Preserve Property Values. Some HOAs may exercise some standards for how the outside of a home should look, including driveways, keeping garage doors closed, or limiting signs in yards. These standards are meant to keep the neighborhood looking good to keep everyone’s home prices up while luring more buyers to the community.
- May mediate disputes between residents. Should there be any animosity towards neighbors, the HOA can step in as an objective third-party and make a decision for both parties.

Cons to an HOA
- Will add extra cost to your monthly payments. HOA fees vary from community to community and it’s important to add the fee to your monthly mortgage payment so that you can fit it into your overall budget. HOAs are not tax deductible.
- Can sometimes feel like “Big Brother” is watching over you making sure your grass is mowed, landscaping is kept up and has appropriate flowers and

have to have a qualified breed of dog.
- May ask to screen and approve another occupant of your home if you decide to rent your home to outside individuals putting the renter’s move-in time on hold.
- Can raise the dues at any time for any number of reasons, such as assessments, lawsuits, cost of living, or simply because other homeowners aren’t paying. This isn’t common; however, it is a possibility to consider.
- Can evict you or foreclose on your home if you do not pay the dues on time and accumulate back fees and additional fines. These HOA liens are not extinguished in a foreclosure and short sale and will follow you wherever you go. So if you or someone you know is in a distressed situation, they need to stay current on their HOA dues in order to avoid litigation, penalties, and interest (or all of the above).

If you are considering buying a home with a HOA, ask to get a copy of the rules, regulations, and bylaws before you sign the purchase agreement, or make your offer contingent upon your receipt and acceptance of the rules. When managed well, an HOA can offer homeowners amenities that are well worth the dues – and is absolutely worth looking into if you’re in the market for a home.

What are your feelings on HOAs? Have you had positive or negative experiences with them? HOAs are more common in areas of Gilbert and Chandler than they are in Mesa, so sometimes they just come as a by-product of the area you are looking for a new home in. Call me if you have any real estate questions, I’d love to earn your business!

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Building a Real Estate Team

March 28, 2012 By

Investors and home buyers alike constantly ask me for recommendations for various people and companies I work with personally in the real estate business. It is true, I have been building a real estate team that works together well a

nd functions efficiently since the first day I started in real estate just over three years

ago – AND YOU SHOULD TOO!

Especially if you want to get into the home buying and home selling business regularly, become a landlord, learn how to renovate and flip houses, OR become a homeowner for the first time. I cannot stress how important this is and it is one of best tools that you can provide yourself or your own stakeholders/clients in order to create successful real estate business.

Before you begin building a real estate team, make sure you know all the key players:

1. Loan officer.
2. Escrow agent with the title company.
3. Real estate agent.
4. Tax advisor/CPA.
5. Homeowner’s insurance agent.
6. Home inspector.
7. Handymen/Contractors.
8. Real estate attorney (just in case).

Remember, it is not necessarily what you know, but who YOU KNOW and WHO KNOWS YOU! Each of these key players must be able to work together, having the same end in mind in order to be successful. Building a real estate team can be mutually beneficial to the consumer, the real estate agent, loan officer as well as anyone else on your list. Once you’ve begun building a real estate team, keep in mind the goals of that team and the information necessary to keep that team running at peak efficiency. Not to mention, you should consistently seek to maintain the list – either adding new contacts or removing ones either no longer in the business or no longer dedicated to the same goals you or your team

has.

Make sure that you know the changing mortgage guidelines. One of the biggest complaints that consumers have about patronage of real estate and loan combinations is that the real estate agents sometimes seem to be in over their head when it comes to mortgage lending. Make sure your real estate agent is in the know when it comes to factors like changing mortgage guidelines, FHA loans, FHA marketing ideas, or federal regulations regarding mortgage interest and processing can go a long way to instilling confidence in the consumer. One aspect of my career that compliments the real estate business I offer to my clients is my years of experience managing and buying my own properties as well as my accounting experience as a Tax Accountant. I am an investor’s dream as one who understands tax planning, income shifting, and other real estate related tax deductions property owners and landlords can make.

Building a real estate team is the beginning of a successful real estate career or portfolio. Keep your team up to date and educated on the local marketing trends as well as the national market trends. The more education and specialized knowledge in the fields of real estate and mortgage lending that you have, the more appealing your company will seem to your target audience. Providing the highest quality service can go a long way to establishing good customer relations which can lead to referrals and a long-term client base AND repeat customers.

Please comment below and let me know what other key players that are missing from this list that you have found helpful in building your real estate portfolio. And as always, have a nice day and let know if you have any topics you would like to see covered on my real estate blog. Thanks for the opportunity to work with you.

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Door of Opportunity is Still Open for Buyers and Sellers in Phoenix, AZ!

February 23, 2012 By
Mary Kiplagat's First Home

Despite some less than encouraging news about nationwide conditions in the real estate market, this can still be a good time for consumers looking t

o purchase a home. Recent trends towards stabilizing prices, moderating appreciation rates and increasing inventory all work in the favor of homebuyers for several reasons.

First, consumers should realize that “all real estate is local.” National statistics are weighed heavily by what happens in large markets at the extremes and don’t take into consideration many factors that impact local changes in pricing and inventory, such as business growth, employment and other aspects unique to each community.

Increased inventory also means more choices, more time to look at more properties and, once buyers find the home they want to purchase, more room

for negotiation. Closing costs, special assessments, personal property and other terms and contingencies that had been non-negotiable are again open for discussion. Offers that in a hot seller’s market would have gotten laughed off the table are now getting serious consideration, counteroffers and even accepted.

Not only that, but with more properties staying on the market longer and longer, and with fewer and fewer buyers competing for them, some of the pressure on buyers has been reduced. Often in hot seller’s markets, conditions dictate so much of what buyers are able to do, driving so many of their decisions. The pressures of such a market can even force consumers who have to buy – transferees or retirees, for example-to just “settle” on properties that they might not otherwise purchase under other circumstances. But as the pace slows, patience can again become the virtue that it should be, instead of a victim of the market.

Right now in the Phoenix, AZ Real Estate Market though, it has in recent months become a seller’s market and for some purchasers – it is turning into a 3-4 month search unless you are lucky enough to get your offer accepted among the multiple offers being submitted on properties in specific price ranges.

Just ask Mary Kiplagat of Glendale, who recently purchased and closed on a Fannie Mae-owned property after months of searching one that fit her budget and that FHA would insure.  The problem in some price ranges is the condition of properties and the reluctantness of FHA to back the loans on properties in less-than-ideal conditions.  However, with an excellent agent and some patience, everything will eventually work for your own good and you will be as happy as Mary was opening the door to her first home:



Mary Kiplagat's First Home

Buyer's patience pays off in home searches with Mark Hardy, Realtor.


Regardless of the national picture, however, a great place for consumers to start learning about their local market is to consult a professional who will keep their best interests top of mind as they make the decision to buy a home. Agents who help guide their clients through the home-purchasing process-from market analysis to needs assessment to negotiations to closing and beyond.

How do each of you feel about the market conditions?

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Make Buying your Home a Priority in 2012

December 21, 2011 By

Now it makes more sense than ever to purchase your first home or invest in real estate vs. renting and making someone else rich!

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: verdana,geneva;”>Here are 3 points where renters are losing money compared to homeowners:

1. You’re missing out on the appreciation that the property gives to the property owner. Appreciation is a term used in accounting relating to the increase in value of an asset, which means in real estate terms, added value to the property. With price so low, over the next 5-10 years, you will be locking in the appreciation of the building as long as the market cooperates.

2. Renters don’t get to freeze their monthly housing expenses like home buyers can. Of course, many home buyers get mortgage payments with adjustable interest rates and their payments go up over time. However, these payments will not go up over the long term like rising rent payments! A fixed rate mortgage in the 3′s or 4′s – are you kidding me? Those are unbelieve rates and now is the time to lock in an affordable mortgage payment.

3. Renters don’t benefit from tax advantages. Homeowners get income tax deductions. Tax deductions for interest costs, for instance, save tax payers thousands of dollar each and every year. Buy a home this year and write off the loan origination charges for 2011!

Emotional Satisfaction of Home Ownership

Besides losing out on making money with real estate, renters don’t get the same satisfaction of home enjoyment that benefits home buyers. Many landlords won’t allow you to paint your walls in colors that you desire. Also, you won’t feel like fixing up the property with custom window coverings and you get little say in flooring materials. Because you can’t make your personal statement, you won’t feel like you’re HOME as much as home owners who feel emotionally connected to their

property.

As I have practiced real estate, one of the biggest hurdles that would-be buyers cannot seem to overcome is saving enough money to come up with a down payment. With several loan options to choose from, (depending on your credit), FHA and HomePath provide affordable down payment options requiring as little as 3.5% down to purchase a home. People sometimes have this misconception that it requires thousands of dollars for a down payment, but it really does not. With careful planning and just watching what you spend, those considering a purchase can have the funds saved on in no time at all.

Remember, to add in about $2,000 extra for your loan origination and pre-paids. For example, right now in Mesa if you bought a $75,000 home through an FHA loan and put the minimum down payment required (3.5%), and got the seller to contribue $3,000 towards your closing costs, you would to come up with about $3,800-$4,400 to buy a house.

The average rent for a 1,500 sq ft home, 3 bed, 2 bath in the valley is around $1,150 per month. The same house if purchased,

would be $550-$700 per month.

If these amounts sound high (or low) to you, check your local area. Perhaps your monthly rent is only $1,000 and houses cost less than $200,000.

Talk to a qualified mortgage loan officer and see how much of a home you can afford.

If you’re renting, make one of your priorities to buy your own home in 2012.

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The Internet and Home Buying

November 10, 2011 By

There’s no doubt about it, the internet is now an intrinsic part in the process of buying and selling homes. The majority of people looking to buy a home search the web for homes fo

r sale in their desired area. Savvy buyers and sellers can compare stock from the comfort of their homes at any time of day or night. But when it comes time to actually buy, there’s more to it than just clicking send.

For starters, make sure what you are searching through is worthwhile. You may enjoy searching through lists of fancy homes, but if you are spending a lot of time daydreaming about houses you can’t afford, it is a waste of time. That is fine if what you are after is to kill time, but if you want to find a home, look within your price range.

This brings me to another point: getting pre-approved for a mortgage. It truly is the first step to home buying. It tells you exactly what you can afford, thereby giving you a price range to look within. It also tells sellers you are serious, and prevents losing a home you are interested in, while the sellers accept an offer from someone who’s more prepared.

And while you can find homes for sale, and even lots of great buying and selling tips on the internet, nothing beats the knowledge and expertise of a certified real estate agent—a real, live person. There is a lot of legal-talk and small-print involved in real estate sales documents. Do yourself a huge favor and always have a professional, either a real estate lawyer, a Realtor®, or a mortgage broker, have a look over the paperwork of your real estate transaction. Don’t rely on the other parties professionals. After all, they work for the other party. You want an experienced professional who is working for you to verify that the contract is fair and legitimate. Even if you don’t hire them for their full services, most real estate agents will help you with parts of a transaction for a small fee.

Another thing internet listings are great for is comparative shopping. You might see a great home, but aren’t sure if the price is realistic. A few clicks can show you what other homes in the area are selling for, and also what other types of homes are available in the same price range.

If you are searching around on the internet for great listings, look for an agent that is also web savvy. Some agents have very clear, user-friendly, readable, and informative web sites. Then there are those web sites that are just factory filler. You can tell by reading the text if they are trying to appeal to you, or just manipulating search engines to get into the top ten list. If a site doesn’t have a person behind it, one with a bio about themselves, and clear listings of what homes they have for sale, then it isn’t worth your time.

The key is, no matter what you find on the web, your real estate transaction will happen in real life. So it’s best to use the internet as one

of many tools in your search for the perfect home.

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When should I get Pre-Qualified?

July 4, 2011 By

A common question I get is “When do I get pre-qualified in the home buying process?”

The answer may differ in certain situations but ultimately the advantages of ha

ving a prequalification in hand when looking for a house far outweigh any disadvantages:

Situation #1: “I will be buying in 6-8 months, should I get pre-qualified now?” A: The first question I always ask next is: “If you found the perfect home tomorrow, would you still have [or want] to wait?” Before you answer, understand that there is a difference between “having to wait” and “wanting to wait.”  I added “want” to the question prompt because sometimes buyers cannot come up with a valid reason for waiting unless there is something that is preventing them from qualifying (usually financial or credit related problems). If there is nothing preventing you from qualifying, then why pass up the perfect home or lose out on a bargain due to delays of getting pre-qualified after the home is found?

Buyers that have a pre-qualification in hand are more in control of the situation. They have the choice to move now or wait.  If they choose to wait, they may have to have their credit pulled a second time if the lapse in time from their initial credit check is too long.  You can always discuss everything with a loan officer without actually having them pull your credit until the house you want comes along.  This way you have an idea of want price range you should be looking in and allow you to finalize pre-qualification faster at the appropriate time. 

Situation #2: “I’ve been thinking about downsizing into something smaller than the home I currently own.” A: Take 15-20 minutes and make a phone call to your lender of choice.  You may be surprised at what you may qualify for with your current mortgage. This will help you make a more informed decision on your financial future.  Many buyers consider purchasing a second property and renting out one or the other.  This may add an additional income stream helping with one’s retirement.  Although profit margins are smaller for landlords/investors having a mortgage on a home, the current rental demand and rental rates in Arizona are creating situations where homeowners can step into an “instant cash flow” situation by deciding to buy an investment property.

Situation #3: “I want to submit an offer on a home, but I have not been prequalified.” A: You can currently submit an offer on a home in Arizona with no proof of funds or prequalification.  Is it advisable? Not exactly – for at least two reasons.  First: What if you cannot qualify for the amount you need to purchase the property?  Then you are wasting your time, your Realtor’s time, and the seller’s time. Second: if multiple offers are submitted on the same property and you have not included proof of pre-qualification; your offer may not be considered as strong as others.  If they accept your offer they are taking a chance that you may not qualify and the other potential buyers may be long gone by the time it is figured out, thus wasting their time which could be critical depending on their situation.  

Do get out there and start looking for property, but be sure that you are working on your prequalification

and you are comfortable with the payment you will have.  Be reasonable with yourself and always stay within your budget!

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What is an FHA Borrowers Re-Purchase Timeframe following a Short Sale?

May 30, 2011 By

Lately, I have been getting a lot of questions about the timeframe sellers that successfully completed a short sale on their home have to w

ait

before they can buy again.  Because of depressed home prices, many consumers understand the benefits with initiating a short sale (if appropriate to their situation), and then waiting the necessary timeframe required so they can purchase again.  So what are the key requirements to know how soon you can get back into the housing market?

These are the first few questions I ask (and typically even NEED to ASK) whenever I get this question:

  • Did the borrower have an FHA Loan? In Arizona (and perhaps across the country), it is my understanding right now you have to wait 3 full years from the date of the sale before re-purchasing. Credit scores are essentially irrelevant in this situation. Remember, even a short sale will negatively impact your overall credit score but perhaps not to the extent of a foreclosure.
  • If answer above was NO; next question would be “Were you current on your loan?“  If you were able to stay current, (not delinquent on any payments), during the short sale process – there is a strong chance you can re-qualify for a conventional loan as soon as the day following the close of the short sale. (There may be other restrictions that would apply on this subsequent loan – seek a loan officer’s advice for more details or give me a call.)
  • If the answer to above was NO, then plan on waiting 3 years to apply for financing

    again unless you have good fortune and do not need to seek financing on your next home purchase (pay cash).

Hope this helps. If anyone has information that may supplement or correct what I have here, please contribute. If you know anyone in your circle of family or friends that is underwater in their home, please have them give me a call.  There are numerous government programs and options available to them, including a short sale. I just want to help homeowners!

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