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 earlier 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.

[contact-form]

Technorati Tags: FHA loan, Fixer Upper Inventory, real estate finance

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:

]]> http://www.fixeruppermn.com/mortgages/new-seminars-from-the-minnesota-real-estate-team/feed/ 1 http://www.fixeruppermn.com/miscrealestate/10-down-for-invesotors-through-homepath/ http://www.fixeruppermn.com/miscrealestate/10-down-for-invesotors-through-homepath/#comments Sat, 16 Jan 2010 19:06:29 +0000 Bob http://www.fixeruppermn.com/?p=238 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

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

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

Overall I expect the climate for investors in single family homes to improve greatly.  Here is my reasoning:

1.) The first time home buyer tax credit will either expire or get an extension.  Either way, the pressure on new home buyers to ‘git r done ‘now will decrease.

2.) There have been indications that our historically low interest rates will remain low for some time.

3.) The inventory of bank owned homes shows no signs of abating.  Defaults are still high.  Government programs to keep defaulting homeowners in their homes have missed the mark by a wide margin. There are some who predict we will see even more foreclosures in 2010.

4.) Winter is coming.  Here in the Minnesota buyers tend to hibernate till spring.

5.) The rental market for single family homes remains strong.  This allows patient investors the opportunity to buy and hold for consistent profits.

There are opportunities now, and I expect there will be an even better opportunities in 2010. So if you’ve been sitting on the sidelines so far don’t fret that you have missed the bus.   Hang in there! Get ready for great opportunities this winter.  Check out our seminars. Get your finances together.  And be ready to take advantage of this historic opportunity to invest in real estate.

Technorati Tags: first time home buyers, real estate finance, real estate investing

It’s a two step loan process that has become very popular with clients of The Minnesota Real Estate Team. This purchase program gives today’s buyers an opportunity to buy houses without having to invest a lot of cash. In some cases the cash savings are quite remarkable.

We’re not talking about some new or exotic approach to financing. This is a method that has been used in new construction for as long as I can remember. Believe me, that’s a long time. What’s different about our program is the streamlined processes developed by of our preferred partners at Cornerstone Mortgage. There are now two step rehab programs for both homeowners and investors.

As I said it’s a two step loan process. More accurately it’s two loans and several steps. Loan 1 is a construction loan used to purchase and finance the rehab of a fixer upper. With loan 1 one you get the money you need for both the purchase and the fix up costs. All the money for the purchase comes up front at closing, but the money for the rehab is doled out as the work is completed. This loan requires more time and work from the lender so the terms and interest rates are higher than a normal fixed rate mortgage. For investors buying property these are short term interest only loans from local banks. If you looking to buy a fixer upper to live in there is now a special program called Home ownership Opportunity Program or HOP. HOP is a great program for first time home buyers.

Loan 2 is fixed rate long term mortgage that replaces the short term higher interest construction loan. Usually these are conventional loans, but HOP program allows home owners to use FHA loans for the second loan.

The Concept of Future Value or ARV

So why go though all the hassle of two loans and two closing? The key benefit comes because the lenders of construction and rehab loans are smart enough to realize that your rehab will add considerable value to the property. Before they lend money for a rehab the borrower must pay for a professional appraisal that calculates a ‘future value’ of the property after the rehab is complete.  The value the appraiser comes up wit is called After Repaired Value or ARV.  Basically you get an appraisal with a Future Value rather than current value. This future value is extremely important because loan to value is a key component in mortgage underwriting.

After a buyer completes the rehab the future value or ARV  from that first appraisal is now real equity  built into the property. The underwriters for loan number 2 will now recognized this equity when they calculate their loan to value ratios. The net result is buyers are able to use this new equity towards the loan to value ratio of loan 2 and conserve their cash.

If you are interested in investment property check out Rob Bonahoom’s description of his investor rehab program on his blog Investment Mortgage Guy.

If you are interested in buying a fixer upper home to live in Alec Grebis explains the HOP loan program on his blog The Mortgage Scoop.

Technorati Tags: AVR After repair value