Minnesota Fixer Upper

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Fixer Upper Mortgages

One of the big challenges of buying a home these days is how to buy one of the many distressed houses that need fix-up.   The traditional ways to do this is to either save your cash and fix up with your own funds or take out a construction/rehab loan and later replace this loan with a traditional fixed rate mortgage (see ‘Doing the Two Step‘).  Both of these methods are beyond the means of most home buyer’s.  In an earilier post I talked about one program offered only on Fannie Mae owned properties called HomePath.  Today I want to talk about another program for financing real estate, the FHA 203K,  which a can be used on almost any distressed house.  This program is not available to investors.  But this program can be a great way to create the home of your dreams from what first looks like a run down mess.  The Minnesota Real Estaete Team will sponsor a seminar  Fixin’ to Stay? Use a 203k - Tuesday, March 2nd, 6:30-8PM in Burnsville.

There are two versions of the FHA 203K.  Both loans involve only one mortgage which finances both the purchase and rehab with one mortgage and one closing.

1.) The Streamline FHA 203K is meant for projects under $25,000 which are not too complex in nature.  This is perfect for those neglected homes that need paint, flooring, and non-structural repairs.

2.) The full version or just FHA 203k, can take on just about any rehab project up to tearing down the house and reusing the foundation.

These are great loans in today’s market, because there is so much fixer upper  inventory available today.  The FHA 203K also allows even first time home buyers to customize a home to fit their dreams.

So What’s the catch?

Actually there are a lot of “catches.”   First of all you need to find a lender willing to underwrite an FHA 203K  because not all lenders have the experience and capacity to help a home buyer with a 203K.  It also helps if you have a Realtor who can team with the lender to help you coordinate the complications of a 203K purchase.  Purchasing a house with a 203K requires a step buy step process that will involve a team of professionals to be involved.  The entire team needs to understand the process and paperwork.   There is also an order that should be followed to insure the best outcome.  Understanding, the loan process, the construction process and all the paperwork involved requires teamwork and preparation.   To borrow another sports cliche´ you first  need a game plan and you need a team to carry out that plan. Here are the key players needed besides your lender and Realtor: contractors, inspector, consultant (not needed for Streamline 203K),and appraiser.

FHA 203K Rehab Game Plan

As you might suspect that someone (me)  who writes a blog about Fixer Uppers might be able to help you put together that game plan and find great players for your team.    I’ve put together an online Businesses I Refer list online on my website FYIBob.com.  I have the names and contact numbers of people who would be a great additions to any FHA 203K team.   I can also provide you with great search tools for finding just the right fixer upper to rehab into your dream home.   I can set you up with MLS search functions for your phone for when you are driving around a neighborhood you like,  and an online home search engine you can use on your computer.

If you would like to sit down and discuss your own plans my contact numbers are on the sidebar of this blog.  Or you can use the contact form at the bottom of this post.   The Minnesota Real Estate Team will also be sponsoring a seminar to help you become more familiar with the FHA 203K rehab process. As I mentioned above;  on Tuesday March 2 from 6:30-8 pm Cornerstone Mortgage and the Minnesota Real Estate Team will sponsor “Fixin’ to Stay? Use a 203k!”

Use the contact form to reserve a spot at the seminar, request more information, or set up a one on one consultation.

We are so lucky to have so many talented people on the Minnesota Real Estate Team!

Our team has put together 5 new seminars!!!!

New Short sale Seminars

Some of our talented distressed property experts will be introducing two new Short Sale and Foreclosure seminars.  We hope these group sessions help people realize they are not alone facing this financial crisis. Distressed homeowners can find out ALL their options and ask questions of the experts.   If you can’t make it to one of these seminars we would be happy to help you with one on one counseling at a time and place convenient for you.  If you can’t make your mortgage payment you do have options.  We are committed to helping avoid foreclosure one homeowner at a time.

If you want to learn more about Short Sales and foreclosures I have a special site dedicated to helping people learn more about the short sale process.    Check it out

Two new seminars for First Time home buyers

The first of these seminars is not really new.  It’s a new northern metro location and a Saturday for those in the nothern burbs.   Thursday February 25th, 6:30 -8:00 pm Shoreveiw Community center, 4580 Victoria St N 3203

Next we have a new twist on the First Time Home buyer theme.  In addition to First Time Home buyer information, Mary Alice Short will help people understand how to make offers on Short Sales and Foreclosure and get those offers accepted.  Mary Alice is an expert in Distressed property listing and sales.  This will be a Saturday morning seminar. Saturday February 13th, 9-10:30am,  Cornerstone Mortgage building, 436 Gateway Blvd, Burnsville, MN.

A great new seminar for people who buy those Bank Owned and Short Sale Fixer Uppers.

Fixin’ to stay?  Use a 203k!

This seminar will focus mostly on the 203k  rehab loan program.  However, much of the information would apply to other rehab programs like HomePath. This seminar will be Tuesday, March 2nd, 6:30-8:00 pm., Cornerstone Mortgage building, 436 Gateway Blvd, Burnsville, MN.

For more information call 952-240-5949 or use the contact form below:

Nationally December foreclosure activity saw spike up from November numbers.  In December there was a 42,000 unit rise. to 349,519 new foreclosures nationally.   This is still below July and August numbers. However, this does break the 5 month trend of lower foreclosure rates.  Could this be the beginning of the so called bank owned “Shadow Inventory” coming to market?   Possibly, but that still may not affect our local market.

National Foreclosure Trend 2009

Here in Minnesota we see a slightly different trend.  As in the national graph we see a peak in July 2009.  Following this we see a 4 month down trend with a November spike.   Both Nationally and here in Minnesota the numbers continue to be extremely high.    But so far we are not seeing the huge spike predicted by conspiracy theory pundits who are saying a shadow inventory of bank owned properties will flood the market. Stay tuned for Part 3.

Minnesota Foreclosure Trend 2009

Technorati Tags: Bank owned, Foreclosure Trends, Foreclosures, Shadow Inventory

Fannie Mae, the huge government sponsored secondary mortgage bank, has a program for investors to help unload it’s huge inventory of foreclosed homes.  This special financing is only available on select homes in Fannie Mae’s inventory-BUT this inventory seems to be growing day by day. Besides the lower down payment for investors Fannie also advertises 3% down for Owner occupants.  To further increase buying power the program also includes fix up funds.

Here is a cut and paste right off the HomePath site:

The benefits include:

• Low down payment and flexible mortgage terms (fixed-rate, adjustable-rate, or interest-only)
• You may qualify even if your credit is less than perfect
• Available to both owner occupiers and investors
• Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employer
• No mortgage insurance*
• No appraisal fees
• Also eligible for HomePath Renovation Mortgage (see details below)
• HomePath Mortgage financing is available from a variety of lenders – both local and national

Check out the local inventory on your own.  On the HomePath website you can find a property search feature along with financing information.  If you have any questions as to how to buy, finance, and fix up one of theses Fannie Mae homes give me call.

Technorati Tags: Fixer Upper Inventory, Foreclosures, Investment property, real estate finance

Foreclosure and Housing Price Trends

The Graph above shows the actual raw numbers of what’s going on for foreclosures and home prices nationally.

Shadow inventory refers to the inventory of homes in default that are not yet on the bank  for sale inventory.  Some of this shadow inventory has already gone through the foreclosure process but is not on the market for various reasons.  Depending on who you ask you might get a wide range of what’s going to happen with this inventory in 2010.  Some believe there will be a flood of defaulted houses coming on the market in 2010.   Others claim increased mortgage modifications,  short sales and other methods have already softened the blow.

There is no debate over the large number of defaults that are carrying over to 2010.  What the debate is all about is just how much affect this inventory will have on the housing market.   As the graph above suggests, the actual numbers say that foreclosures peaked in July.   Since that time the number of foreclosures have been slowly declining.   Related to that home prices have been pretty much flat for the last several months.

Personally, I’m skeptical that there will be any flood of foreclosures.  There is enough anecdotal evidence that Short sales and loan modifications are reducing these shadow numbers.  There still be lots of distressed property for sale.  I just don’t see any sudden flood on the horizon.

Technorati Tags: Defaults, Foreclosures, Shadow Inventory

Back on May 1 of this year the Home Valuation Code of Conduct (HVCC) took effect.  This new code was adopted to counteract many of the home appraisal abuses that contributed to the housing bubble that burst in 2008.   One of those abuses was the pressure pt on appraisers to inflate appraisals in order to ‘close the deal.’   Since mortgage companies and real estate agents only get paid when the deal closing, many abuses did occur.  As with most government ‘cures’ this new law is accompanied by unintended night mares.

Heres a link to video clip I ran across that explains the situation:

NAR Video

The HVCC created a sort of firewall between mortgage loan underwriting and those people who hire appraisers.  It’s supposed to help appraisers stay neutral and keep outside influence from gaming the system.    Obviously this is a noble idea.  So what went wrong?

First of all, first of all consider how this code came to be.  Andrew Cuomo,  New York State Attorney General and Fannie Mae came up with this agreement.   After numerous lawsuits Cuomo was able to basically right the code himself through legal intimidation.   The group at the center of the controversy, appraisers were completely left out of the code writing process.

Then in order to comply with the HVCC many mortgage companies decided that the best way to comply was to employ Appraisal Management Companies (AMC).   Even though lenders can hire appraisers themselves if they put appropriate safeguards in place, are choosing to work with appraisal management companies (AMCs) to select appraisers.   The law has been a financial windfall for these paper pushing AMC’s.    In the meantime many small appraisal firms have basically shut down.   AMC’s now are able to select appraisers based mostly on price and fast turnaround.   In some areas appraisers who were getting $350-$400 as independentt appraisers are being paid $175-$200.  AMCs still charge $350-$400, but they stuff as much as they can in their own pockets.  Competition among appraisers benefits the AMCs not the consumer.  A survey of National Association of Realtors members finds that, as a result of the increased use of AMCs, fees to appraisers are going down, appraisals are taking longer, and, perhaps most importantly, deals are falling through when appraisers are chosen who aren’t familiar with a market area.  The well intentioned HVCC is actually hurting the consumer.

Solutions

In the long run I expect that some sane legislation might get the HVCC revised.  We can all hope this happens soon. I’m not holding my breathe.   For my part, I feel it’s my job to help my buyers and sellers now.  I will inform my buyers and sellers of the potential problems in dealing with appraisals coming out of AMCs.   Buyers should be made aware that there are lenders who have taken the proper steps to deal with HVCC  without having to hire AMCs.

Technorati Tags: Andrew Cuomo, Appraisals, HVCC, real estate finance

It’s easy to understand why someone might lack confidence in buying or selling
a home in today’s economic climate, especially if all you pay attention to is our Dooms Day Media.  Bad news sells.   But bad news  deepens our fears and concerns about the economy.  What we have to remind ourselves is that the media likes to be dramatic and it selectively reports negative news to pull in an audience and advertisers.

So how bad is it?

Fact: About 30% 0f all homes in the U. S. are owned free and clear.

Fact: Of the 70% that do have a mortgage less than 4% are in default.

You can choose to see your self as a victim or as a fighter, or even an opportunist.  There are GREAT opportunities out there!  Millions of people are still working and succeeding every day.  People are working, paying their bills, eating in restaurants and buying everything imaginable.  Just today it was announced that retail sales for November exceeded expectations.  Home sales in the Twin Cities are up dramatically from a year ago.  Instead of dwelling on the negative headlines you can choose to focus on the opportunities around you.

Here’s the Good News

Homes are Affordable!

Fact: The housing affordability index is at the highest level it’s EVER been.

For the first quarter of 2009, the Housing Affordability Index hit172.5.  This means that a typical household earning themedian family income ($61,185) would have 172.5% of the income necessary to purchase a median-priced existing single-family home ($169,000) with a 20% down payment—
the highest level of housing affordability in history.

Your Buying power is up!

Fact: Financing rates are near historic lows.

These historically  low rates  along with tax credits and special finance programs makes this a great time to buy a home. Despite what you might read or hear on the nightly news, financing is available for qualified buyers.

It’s your choice to see this recession as a time to be a victim or  a fighter.

Technorati Tags: Buying Power, Dooms Day Media, Home affordability

Daunting, mysterious, scary — are these words that describe your feelings about buying your first home? Just say “no” to the negatives and “yes” to the positives!  Come learn about the buying process, from working with a loan officer to getting pre-approved and house-hunting with a Realtor, to getting your offer accepted and finally closing on YOUR first home!  Learn about the special first-time buyer programs that are available just for you. Many programs offer down-payment and closing cost assistance as well as lower-than-market interest rates.

Join Darcy McDonald of Cornerstone Mortgage and Steve Howe of The Minnesota Real Estate Team as they lay the groundwork for you to travel through the real estate transaction.  This seminar is set up to show you how to get off to a fast start, and prepare you for every step along the way until you reach the end of your journey — moving into your new home. They will also address today’s current marketplace, the extended tax credit and special loans to help you fix up those not-so-nice houses.  After attending this seminar your feelings about buying a home will be fun, exciting, and easy.  Feel free to bring your questions and get ready to become educated on buying your first home!

Call 952-240-5949

Technorati Tags: First Time Home buyer seminar

Are you still using excel spreadsheets to track your rent amounts from each tenant?  Are your bills sitting in huge piles on your desk waiting to be turned into your accountant?  Are you unable to track your monthly cash flow or see if you are even turning a profit at this rental property thing?  Maybe you bought QuickBooks, but never could get past installing it (the software can have a steep learning curve).

Make this one of your New Year’s resolutions, to start using QuickBooks in 2010.  Attend our Free Investment Property 201 seminar series on January 26 at 6:30 in Burnsville.  Deborah Beneke, CPA, from Olsen Thielen will be helping you get started and answering your questions.  She will show you how to set up your accounts, where to classify expenses, and how to automate those monthly mortgage payments and rent collections.  Don’t be intimidated or disorganized any more.

This is an invaluable seminar for anyone that is serious about owning investment properties.  It will fill up fast so sign up on our registration form or call 612-281-5419 for more information

Technorati Tags: Quickbooks, Real estate investment seminar

There is a growing consensus that the short sale process is getting better.  Here is an except of a recent news release:

The U.S. Treasury Department has set guidelines to streamline Short Sales.  The Foreclosure Alternatives Program will provide financial incentives and simplify the process; some key highlights include:

• Response from a lender within 10 days of an offer
• Seller released from all liability for repayment of mortgage debt & entitled to relocation incentive
• Lender paid $1,000 to cover administrative & processing costs
• Property must be listed with licensed real estate agent that does regular business in houses’ neighborhoods
• Lender is prohibited from requiring a reduction in agreed-upon real estate commission

__________________

From what I’m seeing there is also a growing trend among Realtors to become better educated about the Short Sale and Foreclosure process.  There are numerous companies selling education programs to real estate professionals.   Just in the last few months the National Association of Realtors joined in by offering a new certification called SFR or Short Sale and Foreclosure Resource.

Hopefully this will ease the fear of these sales and encourage more buyers to consider  short sales.   Here is a short video explaining the new guidelines:

http://www.youtube.com/watch?v=fkuXvFBYXVU.

Technorati Tags: Foreclosures, Short Sales