A Home Loan from the USDA?

Yep. it’s true. The U.S. Department of Agriculture has an incredible, but little-known, loan program that can help you purchase a home with little or no money down. If you are thinking of buying a home, this is a program you’ll want to check out.

A common misconception about USDA loans is that you must buy farmland or purchase property in remote communities. That’s not true. These loans are available to people who purchase single-family homes in regular neighborhoods. While the USDA requires that you buy in a “rural” area to qualify for this type of loan, the definition of rural is pretty loose and often includes portions of suburbs of major cities.

 

There are certain loan criteria unique to USDA, such as income limits. But it’s worth investigating because the down payment requirement and other loan terms are so favorable and can really help stretch your home-buying dollars.

So where should you start? Ask your mortgage lender about USDA loans. You also can learn more about USDA loans on the federal agency’s website.

5 Reasons to Buy A Home Now Instead of Spring

5 Reasons to Buy A Home Now Instead of Spring.

by The KCM Crew on November 25, 2013 in For Buyers

Based on prices, mortgage rates and soaring rents, there may have never been a better time in real estate history to purchase a home than right now. Here are five major reasons purchasers should consider buying:

Supply Is Shrinking

With inventory declining in many regions, finding a home of your dreams may become more difficult going forward. There are buyers in more and more markets surprised that there is no longer a large assortment of houses to choose from. The best homes in the best locations sell first. Don’t miss the opportunity to get that ‘once-in-a-lifetime’ buy.

Price Increases Are on the Horizon

Prices are projected to appreciate by over 25% from now to 2018. First home buyers will probably pay more both in price and interest rate if they wait until the spring. Even if you are a move-up buyer, it will wind-up costing you more in net dollars as the home you will buy will appreciate at approximately the same rate as the house you are in now.

Owning a Home Helps Create Family Wealth

Whether you are rent or you own the home you are leaving in, you are paying a mortgage. Either you are paying your mortgage or your landlord’s. The Fed, in a recent study, revealed that the net worth of the average homeowner is 30 times greater than that of a renter.

Interest Rates Are Projected to Rise

The Mortgage Bankers Association, the National Association of Realtors, Freddie Mac and Fannie Mae have all projected that the 30-year mortgage interest rate will be over 5% by the end of 2014. That is an increase of almost one full point over current rates.

Buy Low, Sell High

We would all agree that, when investing, we want to buy at the lowest price possible and hope to sell at the highest price. Housing can create family wealth as long as we follow this simple principle. Today, real estate is selling ‘low’ compared to where it will be next year. It’s time to buy.

MMG Weekly Newsletter

MMG Weekly Newsletter.

REAL insight Newsletter (4th Quarter 2013)

REAL insight Newsletter (4th Quarter 2013).

Help for Underwater Homeowners is Here! HARP 2.0

The HARP 2.0 is an underwater refi program for homeowners. This program could help you lower your payments, or reduce your term on the loan, and or pay off debt with the savings! It can also be for your 2nd or Investment properties!

Warren Buffett Speaks on Housing

Warren Buffett speaks on Housing

 

BUFFETT: I would say the single-family homes are cheap now, too.

BECKY: You would?

BUFFETT: Yeah, single-family homes— but if I had a way of buying a couple hundred thousand single-family homes and had a way of managing— the management is enormous— is really the problem because they’re one by one. They’re not like apartment houses. So— but I would load up on them and I would— I would take mortgages out at very, very low rates. But if anybody is thinking about buying a home— five years ago they couldn’t buy them fast enough because they thought they were going to go up, and now they don’t buy them because they think they’re going to go down. And interest are far lower. It’s a way, in effect, to short the dollar because you can— you can take a 30-year mortgage and if it turns out your interest rate’s too high, next week you refinance lower. And if it turns out it’s too low, the other guy’s stuck with it for 30 years. So it’s a very attractive asset class now.

BECKY: If you are a young individual investor at home and you have your choice between buying your first home or investing in stocks, where would you tell someone is the better bet?

BUFFETT: Well, if I thought I was going to live— if I knew where I was going to want to live the next five or 10 years I would— I would buy a home and I’d finance it with a 30-year mortgage, and it’s a terrific deal. And if I— literally, if I was an investor that was a handy type, which I’m not, and I could buy a couple of them at distressed prices and find renters, I think that’s— and again take a 30-year mortgage, it’s a leveraged way of owning a very cheap asset now and I think that’s probably as an attractive an investment as you can make now. But I think equities are very attractive compared to anything else.

BECKY: But, obviously, they’ve come up quite a bit since you first were telling people you were buying them for your personal portfolio…

BUFFETT: Yeah.

BECKY: …with both hands essentially.

BUFFETT: Right. Yeah, well, I wrote that article— I said if you— if you wait till you see the first robin, spring’ll be over. And— well, spring is over, but we’re not in the dead of winter yet either. And stocks— we were— we were here three years ago and stocks have almost doubled exactly since we sat down three years ago. So they’re not as cheap as they were, but measured against the alternatives, would you rather have cash, would you rather have Treasury bonds, would you rather have, you know, you name it? I would rather own great businesses, and we own a lot of them through stocks and we own a lot of them outright, and I’d love to buy another one this afternoon.

BECKY: OK.  When you take a look at the housing market, you had told us last year when we sat down here that you thought last year could be the turning point, and you pointed out in your annual report this year that you were dead wrong on that call.

BUFFETT: Exactly.

BECKY: We didn’t see the improvement last year, but you do think that we’ll see it this year?

BUFFETT: Well, I think we’re likely to, but— and I’m somewhat chastened by the fact that I sat a year ago and said it would happen by now. But what I do know is that today there are more households being created than houses. Well, if that continues— and it will continue— eventually it gets in balance. And when it gets in balance— gets in balance in different geographies at different times. But when it gets in balance, we will need more than a million residential housing units annually. And when we’re building a billion units, supply and demand will come into balance. Got way out of balance five years ago and it’s taken us a long time to work it off. But it does get worked off, and households are now being formed. The first year after the recession in 2000— after it hit— in 2009, household formation went like this. I mean, that happens in recessions. But that’s changed. I mean, you know, we have four million people, roughly, hitting each age cohort every year, and we form households and they want to be in houses.

How Purchase Loans are Made – A Step by Step Guide

How Purchase Loans Are Made A Step-By-Step Walkthrough 1. Pre-approval – Get pre-approved for a mortgage and know in advance exactly how much house you can afford. Completing this step will also increase your negotiating power since you’ll be viewed as a “cash buyer”. 2. Loan Search – Put yourself in the hands of an experienced mortgage professional, someone who will help you to determine which financing options best suit your needs today and in the future. 3. Loan Application – It’s crucial to supply the lender with as much information as possible, as accurately as possible. All outstanding debts as well as assets and income should be included. 4. Documentation – Paperwork supporting the application must also be submitted. Information commonly sought includes pay stubs, two years’ tax returns, and account statements verifying the source of the down payment, funds to close and reserves. 5. The Hunt – Begin shopping for a house. Once you find the right one, the terms of the sale will be negotiated, including the price and potentially the terms of the loan being sought. 6. Appraisal – Lenders require an appraisal on all home sales. By knowing the true value of the home, the borrower is protected from overpaying. 7. Title Search – This is the time when any liens against the property are discovered. A lien may have been placed on a property to ensure payment of outstanding debts by the owner. All liens must be cleared before a transaction can be completed. 8. Termite Inspection – While most purchase loans do not require a formal inspection for termite and water damage, some loans (especially government loans) allow for the possibility. If problems are found, repairs may be necessary. 9. Processor’s Review – All pertinent information will be packaged by your mortgage professional and sent to the lending underwriter, including any explanations that may be needed, such as reasons for derogatory credit. 10. Underwriter’s Review – Based on the information put together by the loan professional, the underwriter makes the final decision regarding whether a loan is approved. 11. Mortgage Insurance – Many lenders require private mortgage insurance when borrowers put down less than 20 percent on a loan. 12. Approval, Denial or Counter Offer – In order to approve a loan, the lender may ask the borrowers to put more money down to improve the debt-to-income ratio. The borrower may also need a bigger down payment if the property appraises for less than the purchase price. 13. Insurance – Lenders require fire and hazard insurance on the replacement value of the structure. Flood insurance will also be required if the property is located in a flood zone. In California, some lenders require earthquake insurance on condominiums. 14. Signing – During this step, final loan and escrow documents are signed. 15. Funding – At this point, the lender will send a wire or check for the amount of the loan to the title company. 16. Confirmation of Funding – The lender authorizes the disbursement of loan proceeds. 17. Closing – Documents transferring title will now be officially recorded by the County Recorder. 18. Congratulations, you are now a homeowner! If you’d like to learn more, please give me a call. I’d be happy to speak with you!

Down loan the Handbook Here HomeBuyingHandbook

Liquidity – A True Indicator of a Healthy Housing Market

Today, we are again honored to have Ken H. Johnson, Ph.D. — Florida International University (FIU) and Editor of the Journal of Housing Research as our guest blogger. To view other research from FIU, visit http://realestate.fiu.edu/.

What is the definition of a healthy housing market?  Is it a housing market in which home prices are decreasing?  Few would agree with this.  Is it a market in which home prices are increasing?  At first glance, many would agree with this definition.  However, increasing prices cannot be used to diagnose a healthy housing market.  If increasing prices indicate market health, then in 2005 housing markets were “very” healthy, and we know that this is not true.

If pricing does not indicate market health, then what does?  The answer is simple: it is market liquidity and not pricing that indicates the health of a housing market.  Liquidity has been defined in many ways but it basically boils down to: can an individual seller, at a time of their choosing, successfully market their property at or near market value?  We often hear of rates (turn-over and absorption) that are related to this concept.  Unfortunately, these measures are difficult to estimate and they all have something to do with outstanding inventory.  What really matters, regardless of outstanding inventory, is the likelihood that a property will close.  This is the most basic meaning of market liquidity and it can easily be proxied.

All of the data necessary to proxy a particular market’s liquidity (and thereby its health) is available on the daily “hot sheets” of almost every MLS in country.  Since liquidity is really just a batting average all that needs to be done is total the successful transactions (closed properties) and divide these by the failed listing transactions (Expireds + Withdrawns + Cease Efforts + Cancelled)[1][2].  The resulting number is a very close approximate to the probability that any given property listed in that market will close and an increasing trend in this number indicates improving market health.

Implications

Pricing trends do not indicate the health of a housing market.  Keep in mind.  For almost every sell in an increasing market, there is a repurchase at a higher price.  For almost every sell in a decreasing market, there is a repurchase at a lower price.  Thus, pricing is a “double edged sword”.  Gains/Losses on a sell are almost always accompanied by higher/lower repurchases.  Thus, pricing trends can never indicate the health of a particular real estate market.  Instead, it is market liquidly, which can be easily proxied, that actually indicates market health.  After all, the real goal is for a seller of property to be able to transact at or near market value with a high degree of certainty.  Fortunately, most MLS’s around the country have the information at their fingertips to estimate the health of their particular market.

It is liquidity (not price) that matters.

Endnotes – thank you to the KCM CREW and Blog

---

[1] Different MLS’s have similar but not exact designations for these various categories.  The goal is simply to divide successes by failures.

[2] The timing of the calculation will depend on the number of outcomes each day on a particular market’s MLS hot sheet.  The goal is to avoid a mathematically undefined estimate.  Thus, larger markets might do this average daily, while smaller markets might only calculate this average on a monthly basis.

Common Sense Isn’t Common Practice

It used to be that there was logic applied in the world of mortgage lending. An appraiser determined the value of a home by the axiom, “what a reasonable buyer would pay a reasonable seller”. An underwriter weighed the plusses and minuses of a file (after analyzing the income, the assets, the credit profile and the appraisal) and made a judgment call based on their experience.

Loans with sizable down payments used to be more flexible with how income was documented or what quality of credit was required. Even the decision of what made up “good credit” has been reduced to a FICO score. Determining the risk of a loan affected its approval or denial. Further, loans deemed riskier were given less favorable terms (higher rates and/or costs or larger down payments).

But today, everyone has tried to quantify everything and put everything into a matrix. Credit scores are numerical, and the number determines eligibility and cost. Gone is the concept of explaining why you have defects in your credit. We don’t care why, we just look at your score. Appraisers now are being scored and their data being scrutinized to a level most would find mind-boggling. Amenities that make a home worth more for a particular buyer (like a pool or upgraded basement) are virtually ignored. Underwriters have primarily become fact-checkers and quality control as a computer software program underwrites the vast majority of mortgages today.

Gone is common sense. It has been replaced by numerical formulas and a cover-my-behind, justify-everything-with-data mentality. Basically, the pendulum has swung too far. It used to be that lending was too easy (see the subprime debacle), but now we have eliminated too much of the human element. We need common sense back.

People who have saved 30% for a down payment know what they can afford monthly. Don’t they?

People who had a medical challenge two years ago that is not likely to reappear should not have a twenty year credit history destroyed. Should they?

People aren’t likely to overpay for a home with so much inventory and all the media exposure about falling prices. Are they?

Bring back some common sense when we need it most!

-courtesy of the KCM Crew

HUD $100 Dollar Down Program

HUD has approved a program aimed at putting foreclosed homes back into the hands of owner-occupant buyers.

In select states, from now into October of next year, buyers need a down payment of only $100 to purchase a HUD-owned REO home.

The buyer must be an owner-occupant, utilizing financing insured by the Federal Housing Administration (FHA). Standard FHA underwriting guidelines apply, and the sale must be for the full amount of the current list price.

The $100 down payment incentive program has been approved for two of HUD’s four national regions – the regions managed by the Denver Homeownership Center and the Atlanta Homeownership Center. HUD homes in the states listed, as well as the Caribbean are currently eligible for the program.UD’s $100 down payment incentive program can also be applied to an FHA 203k loan, which can be used to fund repairs and renovations on the home. The 203k program allows buyers to finance both the mortgage and additional money for rehabilitation needs with a single government-insured loan.

Matt Martin, CEO of Matt Martin Real Estate Management (MMREM), says this is one of the most exciting features of the new incentive program and should drive a lot of exposure to FHA’s 203k offering. MMREM is under contract with HUD to assist with disposition sales of its repossessed homes. MMREM handles properties throughout 16 states, or about a third of HUD’s REO portfolio. With an FHA 203k loan, “buyers can find a property that needs some TLC, fix it up however they want to, and finance the whole thing for $100,” Martin explained. “MMREM is excited to work with this recent initiative, in a way that it supports putting HUD homes back into the hands of homeowners,” Martin said.

In addition to $100 down instead of FHA’s typical 3.5 percent down payment, HUD says it will also cover up to 3 percent of the closing costs in most cases.

For any question you may have, please feel free to give me a call!