Ray Minyard blogs about how to prepare yourself and your clients for the coming ARM storm.

“It’s true, the FHA has a 3.87 five year adjustable rate mortgage option designed to help keep payments affordable. Unfortunately, it may simply delay the pain until interest rates continue to rise later.

However, with a 2 percent cap on each adjustment/rate increase, it could conceivably buy time for those in unusual short term situations such as temporary illness, job loss of other large expenses.”

There are many options to consider in order to weather this impending ARM storm. Be sure to take a look at Ray’s informative blog about it, and pass on the information to your clients who may come to you with questions, seeking your professional guidance.

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Betty Jung gives us the lowdown on the latest developments.

“Like the rest of the world, real estate seems to be in a state of flux. Not only are prices dropping, markets changing, new laws being drafted, etc. but the Obama Administration is also looking at the overall picture of financing for today and for the long term.

I will give you upcoming changes in laws, etc. from reputable sources. It seems as if in the last two years, almost daily, there have been new laws proposed and adopted.”

It’s important to be on top of the latest developments when it comes to new laws, rules and regulations, or amendments to current laws in the real estate industry, so that you can help navigate your clients in the right direction.

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Yuval Degani posts the latest developments on the upcoming changes.

“Currently, a vast majority of new home buyers purchase their first home with FHA loans. As such, any changes to the FHA will undoubtedly effect this huge group of potential new buyers.

Their goal is to improve loan quality, increase mortgage insurance premiums, change requirements for lender eligibility, and overhaul it’s approach to risk management.”

This is definitely big news, and most likely something people will be talking about, especially your clients who will be turning to you for explanation and advice as to what this will mean for them.

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FHA has made changes to the condominium guidelines, and many REALTORS® are adding up the pluses and minuses. Just how will they affect the already struggling market?

Betty Jung blogs about the new changes coming for condo projects and FHA approvals.

“There are new changes coming for condo projects and FHA approvals that I’ve written about. Many developers who had projects in various stages of development are now pulling back and won’t be building or continuing with them, others are rethinking future projects.

When the economy is good, condos flood the market for sale, and when there’s a recession, there are too many on the market, and they don’t sell. This will change when the market picks up and you will see more condos built once again and condo conversions will also take place.”

Only time will tell how the changing economy and the new FHA guidelines will affect the condominium market, but  Realtors can continue to be educated and informed of the new guidelines.

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Is there a scenario in which a first-time home buyer would prefer an adjustable rate mortgage over a standard or FHA loan?

The simple, short answer is yes.  In my mind, ARMs are a wonderful cash flow tool to utilize in today’s world especially when homes are appreciating in value.

If, you, the buyer:

1) Can afford a normal 15 or 30-year fixed rate loan and plan accordingly

2) Have a way to invest that extra cash flow to be saved on a monthly basis  into something that will give you a better return on your money than tying it up in your home

3) Believe that liquidity is important, for whatever reason

4) Know that you can not just go and spend that extra, saved money without it coming back to roost in the long haul

Then, I think there is an argument to be made fo the fact that an ARM still might make sense for you. But don’t look at it as if it is free money because your required monthly payment is less. You could end up in the same unfortunate situation that played a large role in creating today’s environment.

Dave Congdon is a Broker Associate Islands International Realty in the Brevard County, FL area.

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My wife and I are looking forward to buying our first home this year. However, we go back and forth on one issue: our credit card debt is at about $15,000. Is it better to pay our debt off first and miss out on the $8,000 tax credit? Or, should we get approved and use the loan to pay off the debt and get in on the tax credit?

-Ray

If you have a good FICO (credit score), loans are available with excellent interest rates along with the tax credit. You should check out the FHA loans with 3 percent down!

 
It is absolutely the time to take advantage of this buyer’s market with historically low interest rates. I suggest that you pay down your credit card methodically after you’ve moved.

Karen Crystal, REALTOR® at Ewing & Associates Sotheby’s International Realty, specializes in estate properties. She brings a unique blend of efficiency, honesty, integrity and business-savvy to her clients.

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We are interested in buying an investment property that needs rehab. I am told that it is difficult to get a mortgage on a property that is not currently livable. Is that true? If so, please advise of any creative options.

-Jana

It is absolutely more difficult to get financing on properties that are currently not in livable condition. Even conventional loans with 20 percent down have been getting rejected at the last minute due to A/C components not working properly, roof issues, etc. (this wasn’t so much of an issue in past years…but the banks are tightening up!). However, you DO still have options available to you.

Depending on the repairs needed, a conventional loan just might do the trick (plan on 20 percent+ down payment on the loan).

You could also look into an FHA 203K “Rehab” loan (but make sure you’re working with a lender who has done them before as they can be tricky!). The 203K loan only requires 3.5 percent down (just like regular FHA loans) but there are two appraisals done on the property… an as-is appraisal, and an as-repaired appraisal. You are given the money to purchase the property, and then, contractors submit invoices and the lender pays them off as work is completed (you’re not really allowed much in the way of sweat-equity in this situation, but it can still be quite profitable if you buy the right property!).

As another alternative, you could find a hard-money lender willing to finance the property for you. This would generally be a private party and your interest rate would be higher (usually significantly higher),  BUT they have money to lend, and sometimes they’re a great last-resort.

You could also look for seller-financing (although this generally won’t be an option with bank-owned foreclosure properties).

Another option is to find an angel-investor/partner who can back you financially while you rehab & turn the property, then you split the profits and move on to the next one. This can be a very beneficial relationship for both parties as it allows you to get the funds you need (plan on needing more than you think) and move from property to property as you go without having to re-apply for loans and pay closing costs and etc.

Ultimately, I’d say that your best bet is to get together with a REALTOR® who works specifically with investors and investment property. There’s nothing like having an experienced hand to help guide you on the path. They can assist you with finding lenders (both conventional and hard-money) and also help you to find and analyze the right properties so that you know exactly what you’re getting into.

Best of luck, and if you like nice weather – Hernando County in West Central Florida has some fantastic investment opportunities!

Joshua Hanoud is a REALTOR® for Tropic Shores Realty and specializes in providing a higher level of service to golf course, waterfront, and estate home buyers and sellers in Hernando County and the surrounding Nature Coast area of West Central Florida.

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We are interested in buying an investment property that needs rehab. I am told that it is difficult to get a mortgage on a property that is not currently livable. Is that true? If so, please advise of any creative options.

-Jana

It is absolutely more difficult to get financing on properties that are currently not in livable condition. Even conventional loans with 20 percent down have been getting rejected at the last minute due to A/C components not working properly, roof issues, etc. (this wasn’t so much of an issue in past years…but the banks are tightening up!). However, you DO still have options available to you.

Depending on the repairs needed, a conventional loan just might do the trick (plan on 20 percent+ down payment on the loan).

You could also look into an FHA 203K “Rehab” loan (but make sure you’re working with a lender who has done them before as they can be tricky!). The 203K loan only requires 3.5 percent down (just like regular FHA loans) but there are two appraisals done on the property… an as-is appraisal, and an as-repaired appraisal. You are given the money to purchase the property, and then, contractors submit invoices and the lender pays them off as work is completed (you’re not really allowed much in the way of sweat-equity in this situation, but it can still be quite profitable if you buy the right property!).

As another alternative, you could find a hard-money lender willing to finance the property for you. This would generally be a private party and your interest rate would be higher (usually significantly higher),  BUT they have money to lend, and sometimes they’re a great last-resort.

You could also look for seller-financing (although this generally won’t be an option with bank-owned foreclosure properties).

Another option is to find an angel-investor/partner who can back you financially while you rehab & turn the property, then you split the profits and move on to the next one. This can be a very beneficial relationship for both parties as it allows you to get the funds you need (plan on needing more than you think) and move from property to property as you go without having to re-apply for loans and pay closing costs and etc.

Ultimately, I’d say that your best bet is to get together with a REALTOR® who works specifically with investors and investment property. There’s nothing like having an experienced hand to help guide you on the path. They can assist you with finding lenders (both conventional and hard-money) and also help you to find and analyze the right properties so that you know exactly what you’re getting into.

Best of luck, and if you like nice weather – Hernando County in West Central Florida has some fantastic investment opportunities!

Joshua Hanoud is a REALTOR® for Tropic Shores Realty and specializes in providing a higher level of service to golf course, waterfront, and estate home buyers and sellers in Hernando County and the surrounding Nature Coast area of West Central Florida.

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By Bob Stahl, MyPhoenixMLS.com, for REALTOR.com®

The Dow recently closed above 10,000 – the first time the stock market’s biggest index closed that high since it tumbled from 11,000 last October. And while Bank of America posted a $1 billion quarterly loss last week, many of the country’s other major financial institutions posted healthy profits. Yet even amid that good news, lenders continue to hold tight to their money; borrowing is still far more difficult than it was several years ago (which, to a certain extent, is probably a good thing).

Gone are the days of the no-down loan

At the height of the real estate/mortgage-backed securities boom, demand for mortgage-backed securities was so ferocious that banks couldn’t lend money quickly enough. We’ve all heard of the irresponsible kinds of loans that banks made – $500,000 mortgages to people with $50,000 incomes, stated income loans for people with credit scores of 600, interest-only adjustable rate mortgages with initial interest rates of 1%, the list goes on.

When Wall Street collapsed a year ago, so did those kinds of crazy loans – which is a good thing. But banks went overboard. Afraid of waking up with too little collateral for their debt obligations, banks clamped down on lending – commercial paper markets, some of the safest around, even froze for a while last fall. Since then, lenders have eased up considerably, but credit is still tight. To qualify for a mortgage with a traditional lender these days, you’ll probably need a credit score of at least 680, if not 700, and at least a 10% ¬– if not 15 or 20% – down payment.

So what’s a homebuyer to do?

If you’re a first-time homebuyer, or you’re selling your current home but don’t have a lot of equity built up, thinking about saving 20% of the value of your next home can seem like a tall order – that’s $34,800 on the national average home price of $174,000. Even if you can save $500 a month on top of your rent payment, it could take you 5 or 6 years to save a down payment.

Fortunately, you may have another option.

“90% of loans originated now in Greater Phoenix are FHA loans,” a mortgage broker friend told me the other day. I imagine the percentage is similar in other parts of the country (where home prices fall within the FHA’s limits, at least).

FHA saves the day

That’s because FHA-backed mortgages still feature a 96.5% loan-to-value option, meaning that you can borrow as much as 96.5% of the value of the home you’re buying. And, your 3.5% down payment can come from a family member or your employer (“gifted” down payments are typically not allowed by conventional lenders).

The FHA’s 203(b) Mortgage Insurance program “provides mortgage insurance for a person to purchase or refinance a principal residence. The mortgage loan is funded by a lending institution, such as a mortgage company, bank, savings and loan association and the mortgage is insured by HUD.” Generally, to qualify for an FHA loan you must:

• Meet standard FHA credit qualifications, which are often more relaxed than conventional mortgage qualifications. Qualifications include not having a bankruptcy or foreclosure on your record within the last three years.
• Purchase a home priced within the FHA loan limits (to find out the limit in your area, visit https://entp.hud.gov/idapp/html/hicostlook.cfm).

Other down payment options

Doug Hill wrote a great post earlier this month about the disappearance of down payment assistance programs, which were outlawed by Congress on October 1, 2008. But many cities, counties, and states have other down payment assistance options available – including stimulus money for purchases in neighborhoods heavily affected by foreclosures. Visit http://www.hud.gov/buying/localbuying.cfm for a list of down payment assistance programs in your area.

The upshot

The bottom line is that you don’t need to squirrel away10, 15, or 20% of your next home’s value in cash. With an FHA-backed mortgage, you can buy a home with 3.5% down, and the sources of that 3.5% are flexible. Combined with the first-time homebuyer’s tax credit, set to expire on November 30, and prices that are still relatively affordable, now may well be a great time to buy.

By Bob Stahl, MyPhoenixMLS.com, for REALTOR.com®

The Dow recently closed above 10,000 – the first time the stock market’s biggest index closed that high since it tumbled from 11,000 last October. And while Bank of America posted a $1 billion quarterly loss last week, many of the country’s other major financial institutions posted healthy profits. Yet even amid that good news, lenders continue to hold tight to their money; borrowing is still far more difficult than it was several years ago (which, to a certain extent, is probably a good thing).

Gone are the days of the no-down loan

At the height of the real estate/mortgage-backed securities boom, demand for mortgage-backed securities was so ferocious that banks couldn’t lend money quickly enough. We’ve all heard of the irresponsible kinds of loans that banks made – $500,000 mortgages to people with $50,000 incomes, stated income loans for people with credit scores of 600, interest-only adjustable rate mortgages with initial interest rates of 1%, the list goes on.

When Wall Street collapsed a year ago, so did those kinds of crazy loans – which is a good thing. But banks went overboard. Afraid of waking up with too little collateral for their debt obligations, banks clamped down on lending – commercial paper markets, some of the safest around, even froze for a while last fall. Since then, lenders have eased up considerably, but credit is still tight. To qualify for a mortgage with a traditional lender these days, you’ll probably need a credit score of at least 680, if not 700, and at least a 10% ¬– if not 15 or 20% – down payment.

So what’s a homebuyer to do?

If you’re a first-time homebuyer, or you’re selling your current home but don’t have a lot of equity built up, thinking about saving 20% of the value of your next home can seem like a tall order – that’s $34,800 on the national average home price of $174,000. Even if you can save $500 a month on top of your rent payment, it could take you 5 or 6 years to save a down payment.

Fortunately, you may have another option.

“90% of loans originated now in Greater Phoenix are FHA loans,” a mortgage broker friend told me the other day. I imagine the percentage is similar in other parts of the country (where home prices fall within the FHA’s limits, at least).

FHA saves the day

That’s because FHA-backed mortgages still feature a 96.5% loan-to-value option, meaning that you can borrow as much as 96.5% of the value of the home you’re buying. And, your 3.5% down payment can come from a family member or your employer (“gifted” down payments are typically not allowed by conventional lenders).

The FHA’s 203(b) Mortgage Insurance program “provides mortgage insurance for a person to purchase or refinance a principal residence. The mortgage loan is funded by a lending institution, such as a mortgage company, bank, savings and loan association and the mortgage is insured by HUD.” Generally, to qualify for an FHA loan you must:

• Meet standard FHA credit qualifications, which are often more relaxed than conventional mortgage qualifications. Qualifications include not having a bankruptcy or foreclosure on your record within the last three years.
• Purchase a home priced within the FHA loan limits (to find out the limit in your area, visit https://entp.hud.gov/idapp/html/hicostlook.cfm).

Other down payment options

Doug Hill wrote a great post earlier this month about the disappearance of down payment assistance programs, which were outlawed by Congress on October 1, 2008. But many cities, counties, and states have other down payment assistance options available – including stimulus money for purchases in neighborhoods heavily affected by foreclosures. Visit http://www.hud.gov/buying/localbuying.cfm for a list of down payment assistance programs in your area.

The upshot

The bottom line is that you don’t need to squirrel away10, 15, or 20% of your next home’s value in cash. With an FHA-backed mortgage, you can buy a home with 3.5% down, and the sources of that 3.5% are flexible. Combined with the first-time homebuyer’s tax credit, set to expire on November 30, and prices that are still relatively affordable, now may well be a great time to buy.