Low Downpayment Buyers Note!

 Posted by at 9:59 am
Aug 302011

Occasionally taking what appears to be a minority position has its rewards! Several months ago I posted a plea for some objectivity regarding the proposed Qualified Residential Mortgage Requirements. While much of the industry is predicting doom and gloom over the proposed requirements, there’s much to be said in favor of them.

Well, in an article published by RIS Media, I’m joined by a writer who at least somewhat shares my perspective. He offers an interesting twist, however, by pointing out an impact of the doom and gloom predictions. “It seems the speculation and debate surrounding QRM is causing some low-downpayment home buyers to believe they will not be able to obtain financing.”

Interesting–and it makes sense. Those who are crying that these new requirements will “kill” the real estate market, are actually contributing to the depression?

What’s actually needed right now is concrete, objective information. Yes, underwriting standards are higher, but at the same time rates are at historic lows. Those lows mean lower payments and lower payments mean more people can qualify based on debt ratios. Prices are lower. There’s a lot going on that makes it feasible for many more people to buy and “low down payment” mortgages are not going to cease to exist.

The best advice for potential real estate buyers is “turn off the television and put down the newspaper and contact a real estate and/or mortgaging professional and get some credible information regarding your specific situation.”


 Permalink  Posted by at 7:00 am
Aug 062011

The PinchME Promotion is underway… the fundamental idea behind it to make it easy for folks who are interested in a second home. You can try out the search routine here.  Contrary to the slogan, not every one can afford a second home. But if you can afford one,  it is a great time to buy. You might want to check with your bank or mortgage lender before you get too deep into shopping… if you are seriously interested, let me know–I’ll be glad to “hook you up” with a lender and we’ll see if we can make your dream come true.


USDA/Rural Housing Fee Changes

 Posted by at 10:58 am
Jul 312011

I’ve never really pretended to “keep up” with all the mortgage and financing programs and their changes… thankfully, I’m able to depend on a few really good folks to keep me informed or work with clients when the need arises. One of those folks is Ron Taplin at Alpine Mortgage. (You’ll find a link to him in the “Buying Real Estate” Section on the left sidebar.)

Ron recently advised that there are some significant changes coming (effective October 1, 2011) to Rural Housing Fees. You may hear that the “up front fee” is being reduced and that is true: from 3.5% to 2.0%. But that is also not the entire story. There will also be a new annual fee: .30% per year for the life of the loan based on the unpaid balance.

Depending on how long you expect to keep your mortgage, this could be a significant increased cost even though the upfront rate is being reduced by over 40%. The short analysis is that if you are considering buying a home using this type of financing, you’ll want to get moving and get your commitment before October 1st.


Couple Forecloses on Bank!

 Posted by at 6:02 am
Jun 092011

No, the headline is not a mistake. Turnabout IS fair play. It seems that Bank of America (BAC) foreclosed on the wrong house in St. Petersburg Florida–a house which had been bought for cash and had no mortgage. The homeowners spent some 18 months trying to convince BAC of their error, racking up attorney’s fees and other costs in the process.

Ultimately, BAC admitted the error. But in yet another example of the sorts of fiascos surrounding the foreclosure business, they failed to pay the homeowners the court ordered costs. Ultimately, the homeowners went back to court and “foreclosed” on BAC’s branch office in Naples–a judge agreed to allow them to seize bank assets for the unpaid debt. They and their attorney showed up at the branch office with a moving van and a court order. Apparently the branch manager was “visibly shaken” by the order, but BAC found a way to pay up within hours.

If you are currently involved in a short sale or foreclosure, you’ll want to read the entire article. An important piece of this fiasco is that the homeowners bought the home as a foreclosure. There is some speculation that their names got “transposed” during paperwork. This is not the first time things like this have happened. It’s a wonderful story of man biting dog, but it’s also fair warning to anyone involved in foreclosures or short sales.

Read USA Today’s version of the story.

May 252011

Amid the entire current flap, you’ve probably heard some noise about legislation to change the QRM (Qualified Residential Mortgage) requirements. As I understand it, the change would mean:

  • Certain mortgage types would be eliminated
  •  You would need to put a minimum of 20% down
  •  You would need a minimum 690 FICO score
  •  The ratios of income to both the mortgage payment and overall debt would become much more conservative (28% and 36%)

This has caused quite a stir and a certain amount of “the sky is falling” hype. Even the National Association of Realtors has issued a “call to action” requesting REALTORS ask members of congress to defeat this legislation. I’m not so sure that’s a good idea.

First, we need to understand that this doesn’t mean only those who meet the criteria above are going to get a mortgage. There will still be programs available for people who don’t; they’ll just be a bit more costly in terms of interest rates and other costs. (And why shouldn’t lenders be able to charge more for higher risk loans?)

Second, we need to learn the lessons of history. Relaxed borrowing standards are partly responsible for the mess we’ve been in. Accuse me of over-simplification and I’ll probably plead guilty, but let’s not ignore the fact that a ton of “bad loans” were made At least one source reports that delinquency rates are 2 to 2.5 times higher for “non-QRM” loans.. We can debate the reasons, but this seems to be a bit of an effort to set a standard that suggests mortgages should be made to people who can afford to make the payments and have some equity in the balance.

I think that makes sense.

For a slightly different perspective, let’s assume you have your property listed for sale and I’m your agent. Let’s also assume you don’t have a mortgage on it… maybe it’s a second home or piece of land. A buyer approaches us with an offer to purchase but asks for owner financing. No problem, right? He’s offering full price! You’ll get to charge interest…

So far I’ve left out one important detail. When the buyer made that offer I asked him why he was requesting owner financing. He replied, “Well, I just lost my house to foreclosure and can’t get a mortgage.” (Believe it or not, I’ve had this happen more than once and the buyers often don’t “get” the fact that if the bank isn’t going to loan them money, the seller probably won’t either.)

“Ah,” you say. “Let’s make the deal. So what if he can’t pay? I’ll just take the property back and keep any payments he does manage to make.” Before we make the deal, here’s an easy assignment. Call an attorney and ask her just how easy it is to foreclose and how much it costs. Oh, and did I mention that after you finally manage to foreclose Continue reading »


I Thought I Owned It!?

 Posted by at 7:22 am
May 022011

One thing that no longer comes as a surprise to me is the occasional prospective listing client who, it turns out, doesn’t actually (legally) own the property he or she wants to list for sale. Sometimes it’s a mere technicality; sometimes a misunderstanding. These issues are often referred to as “title defects” or “title problems.”

These situations also can affect buyers. During one recent transaction where I represented the buyer we discovered the “seller” ( a corporation) no longer existed–it seems the owner(s) of the corporation dissolved it and took title personally. The good news was they had done it properly. The bad news was they hadn’t told anybody–including their listing agent.  I didn’t point out to him that technically he was no longer the listing agent since his contract was with a non-existent corporation.

Some of the more common are created by confusion over similar names, missing heirs or surviving children left out of a will, wills not probated, signatures of minors or people of questionable competence. Undischarged mortgages and tax liens are also fairly common.  In short, there are a lot of things that can “go wrong” when title is transferred from one owner to another. Sometimes these escape notice for several transactions.

So what happens if somebody comes knocking on your door and announces they believe they have a claim against the title to your property?

You did buy title insurance, right? When you did the Title Insurance Company ordered a title search of public records to determine whether or not someone other than you might have an interest in the property.  Any discovered risks were either mitigated (or excepted) prior to your purchase. That policy is your protection against legal fees and any losses you might suffer based on a claim.

The “even better” news is that most of these policies cover you after you’ve sold the property! But wait, there’s more! You only paid one premium, at closing. (If you financed the property, there were two policies involved–a lender’s policy and an owner’s policy. The lender’s policy covers the lending institution’s interest for the life of the loan.) If you are in the market for a real estate purchase, make sure you understand the concept and buy some peace of mind!


How’s your Credit Karma?

 Posted by at 12:42 pm
Nov 172010

Even if you aren’t considering a home purchase or refinancing you ought to be concerned about your credit. (Your credit score/rating can actually impact what you pay for insurance. One site you might consider spending a little time visiting is Credit Karma. For one thing, they really do offer a FREE (no strings, no trial memberships, etc.) report of your credit score. You’ll also find an opportunity to explore “cost savings” on your credit cards, mortgage, etc. Just remember this is all automated so you’ll want to do some analysis of the recommendations.

All in all, the site is fairly educational and a good tool. Use it wisely!

By the way, “Karma” is defined as “the total effect of a person’s actions and conduct during the successive phases of the person’s existence, regarded as determining the person’s destiny.”  Don’t be the victim of your credit history; determine your destiny!


Seller Financing Caveat

 Posted by at 12:26 pm
Nov 102010

The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) was passed in 2008 as part of the federal Housing and Economic Recovery Act. The act required states to establish a registration/licensing process for loan originators. Maine enacted its versionwhich will take effect January 1, 2011.

 There are exemptions for seller financing of the seller’s principal residence and for financing provided to family members. Thus owner financing of the sale of the owner’s home is exempt and parents financing a child’s purchase are exempt. But a buyer who is fixing up and reselling homes would need to be licensed to take back financing. Previous exemptions based on a maximum number of transactions are gone. The purpose of the law is clearly to disallow or at least discourage private, unregulated financing.

Those considering seller financing beyond the previously noted exemptions should check with the Office of Licensing and Registration.


Can We Bribe A Buyer?

 Posted by at 5:56 am
Aug 012010

While I’ve never been asked exactly that question, it’s sometimes implied–especially given the slow moving market we’re experiencing. There’s an obvious temptation to “get creative” when property goes on the market. After all, what was the tax credit? (And for the linguists: what is the difference between an incentive and a bribe?)

Definitions aside, recent changes in the mortgage industry have an impact. For all practical purposes, there are severe limits on what sorts of  (and how much) incentive sellers can offer a buyer. Savvy buyers are often leery because they recognize gimmicks and the risks associated with “rebates” in any form.

Some of the things that do work :

  • Realistic pricing… there’s very little reason for a buyer to pay more than fair market value and it’s easy for them to have some sense of what that is.
  • Curb appeal matters and the old “one chance to make a first impression” logic applies. Keep the lawn mowed and trimmed, plant a few flowers.
  • Keep the inside neat and fresh. You don’t need to create a sterile look, certainly… but neatness counts.
  • Part of neatness is “decluttering.” Pack up and store 1/3 to 1/2 of your “stuff.” It’ll make the house look bigger and you might discover you don’t miss it!
  • Think “exposure.” Don’t be bashful about letting people know your house is for sale… and make sure the information about it is complete and accurate. Facts are important, but presentation makes a difference.
  • Be patient. At least one study showed that it takes as much as 21 showings to sell a house.

These are “safe” and relatively inexpensive buyer incentives. Remember that an incentive is only an incentive if the buyer wants it! At the same time, understand that once a buyer falls in love they may drive a hard bargain.  Be prepared for low offers even if you’re priced right. A lot of buyers are using the “nothing ventured, nothing gained” approach.


Better Than A Tax Credit?

 Posted by at 8:36 am
Jun 292010

Here’s an article you’ll find interesting if you are buying or selling property… I’ll give you a short version. The article suggests buyers who did not take advantage of the recent tax credit may actually come out ahead.

Why? There are at least two reasons.

First, sellers are taking increasing numbers (and amounts) of price reductions on their listed property simply because buyers are harder to find since the tax credit expired.

Second, interest rates are continuing to drop–nearly half a point since the end of April. Frankly, this one suprised me, you won’t have to go back too far to find posts where I predicted a rise. But my inability to predict this one accurately is the buyer’s gain! A half point difference on a $175,000 loan amounts to a $15,000 savings on a thirty year mortgage.

Of course we must add the disclaimer that “all markets are local” and all generalities are false, but this still can be a very good time to buy. Don’t fret over missing the tax credit, chalk up some even bigger and better savings!