As
banks strive to keep up with demand for their financially
distressed properties, who ever would have thought it would take
4 weeks or more just to get a loss mitigation specialist
assigned to your Purchase Offer? Banks are paying the price, as
they should be. Absorbing the losses, writing down mortgage
balances and lowering interest rates for those folks who can
prove financial hardship. All the while banks are still
required to maintain capitalization ratio and dare not be marked
as a financial institution who accepted bail-out funds. Add
tighter lending guidelines, increased audits, stock holder
demands and lending quotas, what do you get? An industry
consolidating & paying close attention to its own bottom
line. More and more banks are penalizing Buyers $100-$200 per
day if they miss a mutually agreed upon closing date. After
price reduction, lender required repairs and chain of title
delays, banks just want to cut their losses. What can a buyer
do to protect themselves from a bitter seller or seller/bank?
Do your homework. Recognize that Sellers don't want to
deal with an Internet Lender nor a Mortgage Broker. Sellers are
including in their Counter Offers and/or Listing Postings that
the Lender must be "Direct Endorsement Approved". Sellers now
also want a copy of the computer-software generated, "Desktop
Underwriting Findings" in addition to what used to be the
industry-standard pre-approval letter. Home buying is
emotional.
Remember, the 1st stop on the home shopping list is the mortgage
company.
Seek out a mortgage commitment letter (not just pre-approval
letter) strong enough to strike out the financing contingency.
What are you giving up? Nothing, since you already have the
loan. The seller's perception? Can equate to 1% - 2% reduction
in the sales price because the financing is no longer an
element of risk to the seller. Call Cathy Chapman to discuss
your current situation with financing. 301-514-6839 Cell
May 1st marks the date Fannie Mae is to roll out their 105% LTV
(loan-to-value) program designed to help homeowners who want to
refinance but owe more on the property than what it is worth. While we
are still waiting for the details to be confirmed, here is what we know
thus far:
1) Mortgage to be paid off must have been originated prior to 1/1/09.
2) Mortgage must be currently held and/or guaranteed by Fannie or
Freddie.
3) 1st liens only, owner occupied only, full doc only, no new borrowers
nor cosigners, no cash out.
4) 105% max loan-to-value based on current appraisal.
A second part of the offering will provide subsidies to mortgage
companies who agree to lower their borrowers' mortgage
payments based upon calculating the new, lowered mortgage payment not to
exceed 31% of gross monthly income. Borrowers will not be required to
have wrecked their credit in order to get someone at the mortgage
company to listen to them. While these proactive vs. reactive measures
will help, it still leaves many folks with no viable recourse. Excluded
from the new program are those individuals who took exotic type mortgage
loans such as Sub-prime or negative amortization loans. No sympathy for
those who fudged the numbers. At the end of the day, the
Mortgage Lenders should have known better. It is the Mortgage Lenders
who caused the credit crunch and it will be the Mortgage Lenders who get
the economy going again. What many people don't know is that HUD
already has standard programs designed to help folks refinance and stay
in their homes. 30 year fixed rate loans that are safe and
conservative, high LTV, cosigners ok.
On or about May 7th National City Mortgage will roll out a new Jumbo
financing program with loan amounts up to $1,500,000. Previously we
have been limited to the 2008/2009 economic stimulus limits of $625,000
and even less in other geographic areas. This is an exclusive, National
City PNC bank-only funded program being made available independent of
the current administrations efforts to jump-start the economy. Some of
the particulars are:
1) 30 & 15 year fixed rate & 5/1 ARM fully amortizing product
2) Full documentation required
3) Loans up to $1,500,000
4) Maximum Loan-To-Value Ratio 75%
5) Minimum FICO score 720
6) Maximum Debt-To-Income Ratio 40%
7) 6 months PITI (Principal, Interest, Taxes & Insurance) required
Thinking about becoming a Mortgage Broker? Think again. We are not
quite sure why but license renewals for Mortgage Brokers are being
delayed. May have something to do with the public's distaste for such
things like a yield
spread
premium (YSP). What is a YSP? YSP is the money a Mortgage
Broker can make in Points even when he/she charges you Zero Points.
Yes, a Mortgage Broker can collect their fee in Points from the bank
they sell the loan to by charging you a higher interest rate. Check to
see if your lender is a mortgage banker which is Bank-Owned or a Broker.
Financially distressed property continues to dominate
a large part of what is selling today; i.e., Short Sales
and Bank-Owned (REOs) properties. Once a property goes into the foreclosure
process it typically remains off the market for roughly 3 to 9 months, depending on the
number of and complications with the lien holders. The more the
liens on a property, the more time-consuming it will be to get the
property back on the market once it falls into foreclosure status.
So, what used to be location, location, location is now
price, price, price in this market. Short sales can take upward of
6 months as well to get to settlement unless the bank has an efficient
system in place and there are not two different lien holders..
Those sellers who are not in financial distress but who price low
are avoiding the stress and moving on with their lives. More and
more home owner's are going to see their Adjustable Rate Mortgage's
(ARMS) increase and will be unable to pay the mortgage. This will
put them on the path to a Short Sale just like millions of others. Short Sale means that the owner has a loan
balance higher than the value of the property in today's market.
Think about it - there was a heavy volume of Adjustable Rate Mortgages that
people signed up for as late as 2005 and 2006, taking out 3, 5 and 7 year ARM's
thinking there was no end to the rise in values. Unfortunately,
their gamble is coming back to bite them in the behind!
These ARMS started adjusting and pushing people into
a Short Sale. Due to the misfortune of others, opportunities abound
for those not in trouble who are looking to increase their real estate portfolio. So, if
you want to turn the rampant misfortune of others into an opportunity of a
lifetime, give me a call and let's chat about your goals and time
schedule. If you are one in distress, I can help you as well.
Properties where the bank or court are involved are sold
"As-Is" which means don't ask for anything to be fixed. It pays
to read the fine print: Banks are frequently excluding themselves from paying
transfer taxes and recordation fees. Buyer beware. Banks are also
requiring 12 months taxes to be collected in advance. This is in
addition to 6-8 months tax escrow for the lender; a total of 18-20
months of property taxes.
Be
smart. Assemble your team of pros (Realtor, Home Inspector, Title
Agent, Lender, Inspectors for Radon & Termite, and Insurance). Get your Clue Report early
in the process. The Clue Report tells of insurance claims against
a property. Have a plan in case you find repairs that need to be
completed prior to closing on an "as-is" purchase. There are several
possible solutions.
How about unforeseen liens on the title, unusually large
swings in the property's value or the lender requiring a waiting period
from current owner to new owner.
How can
you increase the odds of having the bank (seller) accept your offer vs.
someone else's?
Who can
afford to or wants to wait 30-60+ days to find out your offer was not accepted?
Despite the obstacles and pitfalls, buyers are getting
great deals on properties and they are buying them close to or at the
bottom of the market. Not all Lenders are alike. Remember
the Big 8 of accounting firms? We now have a but a few major
accounting firms. The mortgage industry is no different.
1) Does
your loan officer have 10-25 years of experience in the business at the
same company? My preferred lenders do.
Many over 20 years.
2)
Do you get the sense that your loan officer cares enough about the
outcome of your transaction to go to bat for you when its time to
step-up? My lender contacts do.
FHA
requires a 90 day seasoning period from the time the current seller
closed to the time the new owner closes. If the new sales price is more
than 100% of the original purchase price, a 2nd appraisal is required.
The lower value of the two appraisals will be used in this situation.
Watch for
Fannie Mae and Freddie Mac to increase their minimum down payment
requirements from 5% to 10% coming in the next few weeks.
Looking
for the best deal on a credit card? Blue Cash from American Express
offers 5% cash back at Supermarkets, Gas Stations and Drug Stores. 1.5%
elsewhere. 0% APR on new purchasers for up to 12 months. Great idea:
A credit card that beats a debit card.
Historically, the greatest profits are made in both bull and bear
markets. Real estate, just like stocks, is ripe for adding a balancing
effect to one's portfolio. Double your investment in 3 to 5 years?
It's not out of the question. Consider this: Some market areas in
real estate have dropped 10%, 20% up to 40%. Depending on
the geographic area, a 10% down payment on a $550,000 home that sold for
$799,000 2 years ago, can easily net a fair market value of $650,000 in
2012. That's 100% rate of return in 4 years. Similarly, the same house
with a down payment of 3.5% ($19,250) in 2012 would net a return of 2.5
times the original investment. Sound to good to be true?
Keep in mind
that DC (including MD & VA) is the most economically insulated area in
the country.
It's the last area to get hit by a recession and the 1st to recover.
Realizing this kind of potential profit in real estate is much more
involved than researching and selecting the right stock or mutual fund.
The obstacles and difficulties in today's market are numerous. Here are a few
suggestions to stack the deck in your favor:
1) Be prepared to deal with bank owned properties where the bank/seller
(loss mitigation department) is overloaded with properties for resale.
Understand that many of the properties have been sitting with the
utilities turned off and the mold growing day-by-day. Banks are selling
these properties as-is and will try not to allow any repairs prior to closing.
However, the new mortgage lender will not allow closing to take place
unless the property is safe and habitable for the occupant. My
colleagues and I have assisted several Buyers (and Sellers) to
closing by providing the financing that allows the Seller to be paid off
at closing in the property's "as-is" condition and any required repairs
are done after closing.
2) Sort out carefully what you hear through the media. Lenders are
making loans. Lots of loans; loans to people with good qualifications.
If you are not sure if you can get a mortgage or not sure about what
kind of mortgage you can get, remember that you can get a loan approval
with the property address listed as "to be determined". See how many
people want to serve you once you have the financing firm from a
nationally known and respected mortgage lender.
3) Become familiar with the limitations when comparing
Conventional financing and Government financing. Conventional
financing is Fannie Mae and Freddie Mac. Government financing is
FHA and VA.
Fannie and Freddie set the guidelines for mortgage loans that are both
above $417,000 (Jumbo) and below loan amounts of $417,000 (Conforming).
The down payment requirements with Fannie/Freddie are typically higher
(minimum of 10% or more) and the minimum credit score requirements are
typically higher (680 or more). Fannie and Freddie make available
financing for primary residences, 2nd homes and investment properties
where Government loans (FHA & VA) just do primary residences.
Fannie/Freddie participate in an underwriting guideline that
automatically lowers the loan to value by 5% if the appraiser tells us
the property is located in a "Declining Market Area". Government loans
(FHA and VA) do not require the buyer to front an extra 5% down payment
just because the appraiser tells us the property is located in a
declining market area.
Click on the icon below
to search for your next home
and call me if you see a home you would like to tour.
I will guide, counsel, and negotiate on your behalf
at no cost to you!
I am a Broker, licensed since
1986
having earned distinct designations to assure you
the highest level of competence in the industry!
Simply put, I
will serve as YOUR greatest asset!
