Posts Tagged ‘adding cost into mortgage’

• 3 programs to help you buy a house if you can’t get a mortgage.

  
  I think that there are still challenges in today’s real estate market in either buying or selling a house. Suffice it to say that there are  a lot of folks who owe more than what their home is worth (“underwater”).  There are enough people who have credit problems because of the recession that started in 2007.  Lots of recent  college graduates are strapped with student debt and no jobs and living at home. The economic “recovery” has begun but it is taking forever. And certainly the banks and mortgage companies have not eased up that much on underwriting criteria for buyers. An average credit score to get a conventional mortgage is still almost in the mid 700s. FHA  and VA  are still options but I think we  need to do a better job in spreading the word on those programs and how they work. Plus there are concerns regarding FHA continuous funding. FHA mortgage insurance premium is the highest of any program and never goes away until you finally sell.

  I would speculate that with the uncertainty of the economy, that customers are just reluctant to take the risk in owning.

  I’ll offer a few alternatives that you might consider in getting  into the housing market. I mean you have to live somewhere. Might as well be a place of your own. Here are three for your consideration.

  1. Rent with an option to buy. Probably the most well-known and popular. However it can be the most misunderstood program. An “option” is exactly that. You enter into a  lease to rent a home and you agree with the owner that at some point in time you will, or will not, exercise the option to buy the house at an agreed upon price. You may or may not have put up any money toward that option at the lease signing. You and the landlord may have decided that a portion of the rent goes toward the purchase price or the option. Just remember if you don’t exercise the option, you just remain a tenant and have no ownership rights. Whether you get any money back is determined  by the terms of the option agreement.

  2. Lease purchase , land contract or installment contract.  Buyer and Seller enter into an agreement of sale for the purchase of property. The sellers maintain the title to the property during the term of the contract and the buyers have an equitable interest.  A note of caution here to both parties. If the seller has an existing mortgage on the property there may be and probably is a “Due on Sale ” clause in the mortgage documents. This will indicate that if any transfer of equity occurs then the entire loan will become due in full immediately. Depending on the size  of the existing loan, this could cause some major problems for both buyer and seller. Any real estate agent worth their salt will check all recorded documents before proceeding with a proposal. A good real estate attorney needs to be involved for each party. If there is no mortgage , then the owner can act as the bank and transfer title to the buyer . Depending on any down money and credit obligations the equity build up is subject to negotiations at the time of the offer. Again I would recommend a good real estate attorney get involved with any preparation for both buyer and seller.
  One nice benefit of this type of transaction is that the buyers can get the tax benefits of home ownership.

  3. New program. Just heard about this one. A company buys the home for you and the client enters into an agreement of sale to purchase the property within a certain period of time, i.e 5 years. You put up a down payment of 5 or 10% and pay a 3% admin fee to the company at the time of occupancy. You get the house and its yours to live in as a renter at an agreed upon monthly rent and purchase price. The big difference between this and the rent with option is if you do not get a mortgage by the end of the term you get your down payment back. They keep the 3%. You also agree to a 2-3 % annual rent increase during the term. Again this program is for people who have not been able to qualify for a normal mortgage because of unusual catastrophic circumstances.  Lost a job, unusually high medical bills, and then lost a home through foreclosure or just had some hard times and are trying to work yourself back.  That’s why you agree to a 5+ term. And of course if you can a mortgage sooner, there is no prepayment penalty. There are some additional features. Give me a call and we can discuss some additional details.

  A  few “options” to think about. Just leave me a comment. Contact me via Facebook, Linkedin or Twitter or the old fashion ways of email, salvatoreruta13@gmail.com or cell phone 6107372310

   

• And the question is?

  
  Haven’t played Jeopardy in a while or watched it on TV. But I always thought that the premise was a good one. Give someone the answer and see if they can come up with the right question.  It occurred to me that I am usually walking around with what I think are  all the right answers to all kinds of questions. I guess  I might now recognize that I am somewhat pretentious in my conclusion.  I guess I need your help. How about I give you some answers and you give me what you think are the right questions. Hopefully, I can learn something with you and become a better agent.

  You know, years ago when I first got into the Real Estate business, I had a Broker who told me “Sam, you don’t sell real estate, you solve people’s problems”. That’s stuck with me and I think I have done a pretty good job in asking the right questions to solve those problems. But I think its time to get the customer’s take on this and get you to ask some questions. Anyway, lets see where we go with this and work together. I’ll give you the answer. You let me know what the questions should be. I’ll look at your questions and post them later to get some other folks to chime in if they think you are right wron.  Let me give you an example. 3.5% down payment  is the answer. The question might be,” What is an FHA mortgage ? ” Okay, lets give it a try.

  1.  Seller Assist is the answer. What is the question? This is the format which I won’t repeat every time. You’ll get the drift.
  2. No down payment required
  3. 28%/36%
  4. Buyer’s Agent
  5. Seller’s Agent
  6. Multiple Listing Service
  7. Escrow
  8. Radon Gas
  9. Short Sale
  10. Transunion, Experian, Equifax
  11. Title Insurance
  12.Prepaid Items
  13. 2 years worth of tax returns
  14. A real estate agent
  15. Purchase offer

  Okay, that’s enough for now. Give it a shot. Either comment below with your questions or email me if you like. The more I think about it there can be several different questions for the answers. In addition here is  a podcast that will explain how one might go about purchasing a multi family home where you can  live in and collect rent to help pay for your mortgage. If you would like to pursue that let me know. It can be challenging , but it can  be the start of a pretty good investment portfolio.

  Contact me at 610-737-2310 or email me at salvatoreruta13@gmail.com. Appreciate it.

• Spring Market brings confidence, I think.

  

   

  I’m not one who just takes recent economic news as gospel. But having said that, it does look like we are moving forward with a better housing market. Just take a look at this recent post by Don DeZube of the National Association of Realtors.  Spring Market. You have to admit its pretty positive.  The increases are slight but are running ahead of  last year. The office that I manage is up about 6% over last year. That includes all categories: average sale price, less time on the market, list price of homes, total volume sold and total listing volume.

  If there is one problem, it’s that we do not have enough good salable properties on the market. The buyer demand is there and we find ourselves in multiple offer situations. The sellers are happy but the buyers are not. One  cause for the shortage certainly can be attributed in part to  thousands of properties still”underwater”, that is, the owners owe more than the house is worth. Banks are slow in approving possible short sales. Also the Feds have not extended the “debt forgiveness ” provision that allowed sellers to escape the tax consequences of such a sale. There is also some implication  that lenders are holding back millions of stalled foreclosures from the market in the hope that  rising prices will allow the lenders to recoup a larger return of dollars at the “Sheriff Sale”. Who knows…Plus under the new QM rules (Qualified Mortgage), underwriting guidelines are making it  much harder for the average home purchaser to qualify for a mortgage.

  

   

  Lenders are trying to address the above issues by loosing up certain underwriting criteria. Credit scores of 620 and in some cases 550 will get you into a home.  The fact that mortgage applications for all types of  loans are off in some cases 60% from last year might be one reason that lenders are looking for business with less than a truant officer’s mentality. If they don’t lend it, they are not going to make it. Not rocket science.

  Here is an explanation to help you better understand the “QM” rules.

  One last thing that I have mentioned  several times. If you are in financial trouble, wondering about whether you can stay in your home because you are behind in your mortgage, are considering bankruptcy or in a reverse mortgage and you have any questions, please give me a call. Don’t do anything drastic until you have a chance to talk to a  professional. I can recommend several that can help. Call me at 6107372310. No obligation.

   

• So what’s the deal with the Stock Market? Gimme the House instead.

  

   

  I don’t have a clue.  Used to be  able to gauge the housing market by what’s going on in the Stock Market.
  I gave up on that comparison a long time ago. To me it makes absolutely no sense. How can a barometer of the economy change so fast. I mean really, up 200 points one day, down 225 the next. I saw a pundit on a business show the other day that said traders are now using computer programs that make changes in a nano second. How is that possible? They buy, sell  and set the tone for the market before you or I even have a chance to act before our first cup of coffee. Crazy….  There is a thing called “Penny Stocks”. Companies that are looking for money and issue stocks that are worth literally  less than a penny a share. Okay……  I’ll buy a hundred shares for a dollar? Still sounds like a night at the Casinos to me. Kinda like playing the penny slot machines. Maybe I’ll hit it big and get a 1000% return.

  Wall street might be a dead-end for the average family.  But then there is the housing market. The great banking debacle of  2007 seems like a generation ago. Mention to a millennial that their grandparents actually had double-digit interest rates when they bought their first house, they look at you like  you have two heads. But it’s 2014 and there is a zero point 30 year fixed rate at 4.875%.  Pretty good.  The values of homes are rising again and home owners are looking at  increased equity. Buyers are coming out of hibernation but are still a little unsure of how to go about that purchase. One thing that is  a must, is that both buyers and sellers have to be reasonable in negotiating.
  Credit is still a concern but there are programs to address the buyer with as little as 580 credit score. How can that be? I have always said that there are only a few ways that banks can make money. The  main way is to lend it. The refinance boom is over for lenders. That means they have to go after purchasers of homes who need mortgages. Now is a great time to be a buyer and negotiate with a lender for a great rate.  For a really concise explanation of the current market and what you might need for a down payment and minimum credit scores  for  potential buyers, listen to this podcast.

  There is no getting away  from the financial trauma we all experienced over the last several years, but the housing market is coming back and there is no better investment for the average family. The volatility of the stock market is something that a lot of us just don’t want to risk, at least not right now. There’s something about an”Inverted Yield Curve” that leaves me wondering what it all means. Call me for housing info at 6107372310. Or email me at my new email address salvatoreruta13@gmail.com

• Death and Taxes

  

   

  I think you know what I mean. Its inevitable. But I guess I  anticipate the tax portion of this phrase with  utmost dread every year. April 15, or some day real close  when the government comes a calling and tells me to pay up.  God I hate it. and I always pay. Oh I know what  some you are thinking… you  always get money back.  How come I don’t. Well because I basically don’t want to give the government the use of my money interest free all year-long. That what it is. They take it out of my paycheck send it in and then those spend happy bureaucrats use it all year-long without so much as a thank you let alone any interest on it. Where’s the fairness in that?

  No, I’ll take my chances in taking as many exemptions as I can to get as much cash as I can in my paycheck. I’ll pay  up once a year and the penalty. But in the meantime I am using the money for me and my family. But ideally I should zero out, no refund, no penalty. I’m working on that.

  But regardless,you can’t escape. But the good news is, if you are a home  owner and borrowed money to purchase the home ,the mortgage interest is deductible. That, along with any property taxes that you pay. Pray to God that our leaders in Washington stop trying to eliminate these deductions from the average homeowner. That fact that we are almost 18 trillion dollars in debt as a country, leaves little doubt that they will continue to come up with  creative  waves of separating you from your hard-earned money.

  It really is a war. Us fighting to keep it, and them fighting to take it. And even death won’t free you from the tax man. Your  federal estate is taxable over 5.4 million dollars and in some states like Pa. the inheritance tax can be as high as 20%.

  Because of the terrible economic situation that has occurred since the crash of 2007-2008, many folks have found themselves owing money to the Federal government when they thought they were out of the woods and on the way back to stability. Let me give you some examples.

  1. Selling your home short. This is where you received the okay from your lender to sell your home for less than what you owe. Up until the  end of 2013, there was no income tax due on debt forgiveness by a lender for  an owner occupied single family home.  This exclusion  expired at the end of 2013 and Congress has shown no interest in extending this provision. So if you sell underwater in 2014 you may owe a big fat tax bill to Uncle Sam. The only way to escape this is to file Bankruptcy or be declared “Insolvent” by the IRS. There is a difference. Talk to a lawyer and an accountant about these alternatives.

  2. Forgiveness on credit card debt. This is similar to the above scenario except there has never been an exclusion. I have met several folks who have worked long and hard to rearrange credit card debt only to receive a 1099 C from the credit card company indicating that the debt is forgiven but now report it to the IRS as income.

  It really is a shame that folks are trying hard to work out some equitable solution to pay their bills and find out that the hole is some cases is deeper.

  Because of situations I mentioned, it is getting harder and harder  to reestablish oneself for the possible purchase of  a home, let alone pay off debt. But there is hope. Did you know that you can buy a house and get a mortgage after a discharged bankruptcy. Also if you lost a home to foreclosure, yes you can buy another house after a period of time. There are some  new credit caveats for sure, but it is possible. If you are in a Chapter 13 Bankruptcy your time frame is even quicker. Chapter 13 is when you are actually making payments to a creditor under court supervision.

  Look, we all have problems. Some are financial, some are medical, some are emotional. But I am one of those guys that feels if you recognize your limitations and mistakes and are willing to keep on plugging for you and your family, then don’t give up the dream. That’s why I’m here, to discuss the options and give you some advice. Those experts that I can suggest you meet with will help you, not for free, but they won’t break the bank for you again.You owe it to yourself and those you love. But you have to take the initiative. Call me and get started. 6107372310. The first meeting with me is on the house. Click here for some additional 2013 tax tips.

• The old mortgage is back and so are the real buyers.

  

   

  Did you know that you need to have good credit to apply for a mortgage? Did you know that you have to have a job to get a mortgage? Did you know that you have to have a down payment to get a mortgage? Surprised??? Well you might be if you are one of those folks who witnessed and participated in  the debacle that occurred in 2007-2008.

  Yes, it was  loose lending. It seemed like anyone could get financing if they needed it. I won’t go into actual cases right now. I’ll save that for another blog or a beer at a local gin mill. Suffice it to say, it was nuts. There were companies that were even giving home equity loans in addition to first mortgages at a closing with a credit card to top off the craziness.

  Well now we have Dodd-Frank which are new rules and regulationss passed by Congress and signed by the President to govern how lenders must apply stricter standards for getting new mortgages by a consumer. Dodd-Frank also established the Consumer Finance Protection Bureau, to make sure that the financial mess doesn’t occur again. It  provides an avenue for a consumer to file a complaint against a lender if they feel they are being cheated or question how the process is being utilized as they attempt to get a loan of any kind. You can visit them at their web site at  http://www.consumerfinance.gov/The goal is admirable but they have no oversight. They are basically an independent organization working through the Federal Reserve, which has no Congressional oversight.  A problem I think which needs to change in a hurry. They have to be responsible to somebody!

  So what can you expect if you need a mortgage.
  1. A down payment. As little as 3 1/2 % down with an FHA mortgage.  A credit score minimum of 620, depending on the lender. Conventional loan, 5%  down with a minimum credit care in the 700+ area, again depending on the lender.

  2. You need to prove your income. W2’s are fine but if you are self employed and are dealing with a lot of cash and you have large write offs, you are going to have to submit copies of your most current income tax filings.  I can’t help you if you are showing  very little income or substantial losses.  The lenders are not going to buy it.

  3. All funds have to be tracked even if they are gifted funds. So if uncle Louie is going to give you the money, the lenders are going to want proof that he didn’t borrow it from somebody. You need to get into your account at least 3 months before you need to verify it with a lender. If you are a veteran you can borrow everything including all of the down payment. And by the way thanks for your service. Love you folks.

  4. Debt load. The old 28% of your gross monthly income towards principle, interest, insurance and taxes is probably a safe benchmark to determine a monthly maximum payment. You can safely add another  8% of your income to other debt and figure you can still qualify. In some cases lenders will allow you to go as high as 41% on the back end to qualify. I see this mostly in Government loans. But be conservative.  You have to make the payment. Talk to me and I’ll give you a range of loans that you can afford based on the type and down payment.

  Really what has occurred is that we have returned to a normal mortgage lending situation.  A consumer really has to be able to afford  the loan.  And other than veterans, one really has to have some”skin in the game”that is, a down payment. No more interest only loans, no negative amortization loans, where you are interest short on the payment. No more no documentation loans where all you had to do is tell the loan officer how much you earned without proving written verification.  In other words, the truth is back and they are checking to make sure of it. If you need some help in navigating some of these new old rules for getting a loan before you start your home shopping , then give me a call at 6107372310. I’ll be glad to help you. If you are in the market for a home and you meet an agent that does not ask you pre qualifying financial questions and tries to pass you off to a mortgage lender quickly, I would doubt that the agent has the knowledge or the desire to really engage you and provide you with sound financial advice.  Keep searching.

• Can I build the cost of repairs into my mortgage?

  

   

  Can I Build the Cost of Repairs Into My Mortgage?

   

  The FHA 203(k) Streamline loan product is intended to assist homeowners with basic repairs costing up to $35,000. (There is no minimum repair cost threshold.) It is designed to be an easy-to-use program for uncomplicated rehabilitation and/or improvements for which plans, consultants, engineers, and/or architects are not required. (More complex improvements are handled with the FHA 203(k) program that is described in another blog post.)

   

  Use of the Streamline (K) program is limited to properties with the following work category items:

   

  • Repair/replacement roofs, gutters and downspouts
  • Repair/replacement/upgrade of existing HVAC systems
  • Repair/replacement/upgrade of plumbing and electrical systems
  • Repair/replacement of existing flooring
  • Minor remodeling, such as kitchens, which does not involve structural repairs
  • Exterior and interior painting
  • Weatherization: including storm windows and doors, insulation, weather stripping, etc.
  • Appliances – when at least $3,000 of basic home repairs are involved.
  • Appliances may include freestanding ranges, refrigerators, washers/dryers, dishwashers and microwaves and may not exceed $2,000 in total cost
  • Improvements for accessibility for persons with disabilities
  • When a borrower applies for a Streamline(K) mortgage based on repairs identified in a pre-purchase home inspection, he must offer the FHA appraiser information regarding planned repairs and a copy of the pre-purchase home inspection. He must confirm that the repair is necessary and may be accomplished without the need for a fee consultant, work write-up, plans or exhibits. Additionally, the appraiser must note any health and safety deficiency that the proposed repair plan does not address.

   

  Repairs must comply with all local codes and ordinances and the borrower and/or contractor must obtain all required permits prior to the commencement of work.

  Any questions? samruta@yahoo.com or 610-737-2310