Jim’s Soap Box
Arizona Real Estate Newsletter – November 08
GOOD NEWS – A handful of my prayers were answered today as rates plummeted into the mid 5’s. It is the largest single day reduction in rates I have seen in the last 20 years. The refinance mini-boom I was predicting in September may have arrived this morning with the Feds public commitment to infuse another $800 billion into residential lending organizations.
The goal of my newsletter is to provide educational material mixed with Jim’s unsolicited yet fascinating opinion on the Arizona housing market and real estate ownership in general. If you would like me to address a specific topic in the future, please email it to me and I will respond in the following newsletter.
The Federal Reserve
Nov. 25 (Bloomberg) – this was the lead article from Bloomberg.com this morning
The Federal Reserve took two new steps to unfreeze credit for homebuyers, consumers and small businesses, committing up to $800 billion.
The central bank will purchase as much as $600 billion in debt issued or backed by government-chartered housing-finance companies. It will also set up a program of $200 billion to support consumer and small-business loans, the Fed said in statements today in Washington.
With today’s announcement, the central bank is starting to use some of the unorthodox policy tools that Chairman Ben S. Bernanke outlined as a Fed governor six years ago. Policy makers are aiming to prevent a financial collapse and stamp out the threat of deflation.
The Fed will purchase up to $100 billion in direct debt of Fannie Mae, Freddie Mac and the Federal Home Loan Banks and up to $500 billion of mortgage-backed securities backed by Fannie, Freddie and Ginnie Mae.
“This action is being taken to reduce the cost and increase the availability of credit for the purchase of houses, which in turn should support housing markets and foster improved conditions in financial markets more generally,” the Fed said.
Analysis
The news released this morning is absolutely killing 10 & 30 year bonds. Being that Bonds and 30 year Mortgage notes traditionally have a congruent relationship, mortgage guys (like me) love it when Bonds are in the tank! As of 9:30am this morning (AZ time) the yield on the 10 year Treasury bond is the lowest I have ever seen it (possibly ever) at 3.13%. And the 30 year Treasury bond is also hitting the tailpipe at 3.64%. This is great news for homeowners- Mortgage rates are down!!
Call to Action
The last 3 times this calendar year when rates dipped into the mid to high 5’s it was short lived. I hope that today’s rates have some sustainability but I doubt it. If recent history repeats itself, we have about 2 or 3 days before it jumps back up!
Here are my rates on Nov 25th. These rates assume that you are a perfect borrower*. If you are not that perfect borrower – rates are still very good.
30 year fixed 5.625% (no points)
30 year fixed 5.250% (paying one point)
I know it is 2 days before Thanksgiving, and you’re thinking about oyster dressing, the In-laws, black Friday, & the spread of the Cardinals Eagles game – but you owe it to yourself to call or email me if this can help you.
If these rates cannot help you because you currently have a lower rate – then you really have something to be thankful for this year.
HAPPY THANKSGIVING!!
*** If you know someone who would benefit from my educational newsletters, please forward their name and email address to me and I will add them to our educational circle.
All Best!!
Jim
JIM CUNNINGHAM
Nova Home Loans
8800 E Raintree Drive #180
Scottsdale, AZ 85260
480 614-6413
602 434-8261 cell
jim@novahomeloans.com
http://activerain.com/jcunningham
Tuesday, November 25, 2008
Monday, October 27, 2008
Jim's Soap Box (October 08)
Jim’s Soap Box
Arizona Real Estate Newsletter – October 08
THE GOOD NEWS – New home sales rose 2.7% Nationwide in September – according to the Associated Press. This came as a surprise to many who thought it was going to drop again after an awful August where new home sales dropped 12%. This bounce-back of volume did not really shock me but the reason I mention this to you is that the West was the driving force in September sales. Here is the breakdown of that National average by region.
West +22.7%
South +0.7%
Midwest - 5.7%
East -21.4%
I find this exciting because the fastest cure for the Southwest to get out of this declining market funk is to reduce available inventory. And unsold new homes make up a large percentage of that inventory here in Arizona.
The goal of my newsletter is to provide educational material mixed with Jim’s unsolicited yet fascinating opinion on the Arizona housing market and real estate ownership in general. If you would like me to address a specific topic in the future, please email it to me and I will respond in the following newsletter.
The Prime Rate
The Feds have recently lowered the Prime rate by .5%, and there is widespread speculation that they will lower it again on the 29th of October. This upcoming reduction should be another .5% bringing the prime rate to a net 4%. This will tie the lowest prime has ever been (with 2003). I will admit that this will not solve all the credit problems, but it does reduce the interest payments for those people with current Home Equity balances they cannot refinance.
Other economic experts say that a .5% cut will not have any real effect on the market. But, if a larger cut happens (say .75% to 1.00%) lowing the prime rate into the 3s, it will have a more significant impact on the credit crunch. I guess they are giving a lot of weight to the “New Historic Low” headlines newspapers would give it.
What does that mean to 30 year rates??
The overall goal of this maneuver is to reduce interest rates on the prime side and on the 30 year fixed side (bond market). The last time they predicted a large cut in prime (Feb 08), the 30 year rates came down briefly in anticipation of the prime cut before the event itself. Once they cut Prime, the 30 year rates went up almost a half a point in one day. Will that happen again this time… who knows? My advice to people who are holding out on a transaction to see rates drop (on 10/30) is “don’t get burned.” If you have the rate to make something happen today you should lock in and pull the trigger.
The Election & Who is to Blame
With all of the current campaigning for the presidency, there has been some outstanding finger-pointing by both parties accusing the other for the housing debacle. I have seen everything from White Paper articles, Blogs, video magazines, news reports, and political internet ads accusing all kinds of individuals for our current Economic problems. I have seen “hard evidence” that the following people are solely to blame for this credit crunch issue; Jimmy Carter, Bill Clinton, George W Bush, Indy Mac, Oprah, Oil Companies, every Democrat that ran for public office since 1977, the French, the Director of Freddie Mac, Freddie Mercury (Freddie Mac’s nephew), and even yours truly – Jim the subprime Loan Shark. This may seem a bit sarcastic, because it is.
In my opinion, as someone who has been in the trenches of the housing market for the last 7 years, there are probably well over 100,000 people who should shoulder the blame for this problem. The common denominator for these 100,000 people was simply greed. There were not enough level heads when the housing market was going really good to restrain the lenders & Wall Street.
I am not absolving Realtors, Appraisers, Loan Officers, Underwriters, Lenders, Borrowers, and the like for their part. However, what about the CFO of the A.I.G. Insurance company? What was his motivation to not diversify his portfolio into other vehicles except for Moderate Risk Mortgage Backed Securities? Was it Greed? I would bet on it.
If you wish to wrap your brain around the US financial numbers of the last 10 years I have an unbiased report with lots of good charts and graphs. It is a report from Casey Research called “The Crisis in Pictures”. You do not have to be an MIT graduate to read it (but an MIT graduate did give it to me – thanks Laura). Please respond to this email, requesting a copy of the report, and I will send it as a PDF. I highly suggest reading it if you have the 10 minutes to spare.
*** If you know someone who would benefit from my educational newsletters, please forward their name and email address to me and I will add them to our educational circle.
All Best!!
Jim
JIM CUNNINGHAM
Nova Home Loans
8800 E Raintree Drive #180
Scottsdale, AZ 85260
480 614-6413
602 434-8261 cell
jim@novahomeloans.com
http://activerain.com/jcunningham
Arizona Real Estate Newsletter – October 08
THE GOOD NEWS – New home sales rose 2.7% Nationwide in September – according to the Associated Press. This came as a surprise to many who thought it was going to drop again after an awful August where new home sales dropped 12%. This bounce-back of volume did not really shock me but the reason I mention this to you is that the West was the driving force in September sales. Here is the breakdown of that National average by region.
West +22.7%
South +0.7%
Midwest - 5.7%
East -21.4%
I find this exciting because the fastest cure for the Southwest to get out of this declining market funk is to reduce available inventory. And unsold new homes make up a large percentage of that inventory here in Arizona.
The goal of my newsletter is to provide educational material mixed with Jim’s unsolicited yet fascinating opinion on the Arizona housing market and real estate ownership in general. If you would like me to address a specific topic in the future, please email it to me and I will respond in the following newsletter.
The Prime Rate
The Feds have recently lowered the Prime rate by .5%, and there is widespread speculation that they will lower it again on the 29th of October. This upcoming reduction should be another .5% bringing the prime rate to a net 4%. This will tie the lowest prime has ever been (with 2003). I will admit that this will not solve all the credit problems, but it does reduce the interest payments for those people with current Home Equity balances they cannot refinance.
Other economic experts say that a .5% cut will not have any real effect on the market. But, if a larger cut happens (say .75% to 1.00%) lowing the prime rate into the 3s, it will have a more significant impact on the credit crunch. I guess they are giving a lot of weight to the “New Historic Low” headlines newspapers would give it.
What does that mean to 30 year rates??
The overall goal of this maneuver is to reduce interest rates on the prime side and on the 30 year fixed side (bond market). The last time they predicted a large cut in prime (Feb 08), the 30 year rates came down briefly in anticipation of the prime cut before the event itself. Once they cut Prime, the 30 year rates went up almost a half a point in one day. Will that happen again this time… who knows? My advice to people who are holding out on a transaction to see rates drop (on 10/30) is “don’t get burned.” If you have the rate to make something happen today you should lock in and pull the trigger.
The Election & Who is to Blame
With all of the current campaigning for the presidency, there has been some outstanding finger-pointing by both parties accusing the other for the housing debacle. I have seen everything from White Paper articles, Blogs, video magazines, news reports, and political internet ads accusing all kinds of individuals for our current Economic problems. I have seen “hard evidence” that the following people are solely to blame for this credit crunch issue; Jimmy Carter, Bill Clinton, George W Bush, Indy Mac, Oprah, Oil Companies, every Democrat that ran for public office since 1977, the French, the Director of Freddie Mac, Freddie Mercury (Freddie Mac’s nephew), and even yours truly – Jim the subprime Loan Shark. This may seem a bit sarcastic, because it is.
In my opinion, as someone who has been in the trenches of the housing market for the last 7 years, there are probably well over 100,000 people who should shoulder the blame for this problem. The common denominator for these 100,000 people was simply greed. There were not enough level heads when the housing market was going really good to restrain the lenders & Wall Street.
I am not absolving Realtors, Appraisers, Loan Officers, Underwriters, Lenders, Borrowers, and the like for their part. However, what about the CFO of the A.I.G. Insurance company? What was his motivation to not diversify his portfolio into other vehicles except for Moderate Risk Mortgage Backed Securities? Was it Greed? I would bet on it.
If you wish to wrap your brain around the US financial numbers of the last 10 years I have an unbiased report with lots of good charts and graphs. It is a report from Casey Research called “The Crisis in Pictures”. You do not have to be an MIT graduate to read it (but an MIT graduate did give it to me – thanks Laura). Please respond to this email, requesting a copy of the report, and I will send it as a PDF. I highly suggest reading it if you have the 10 minutes to spare.
*** If you know someone who would benefit from my educational newsletters, please forward their name and email address to me and I will add them to our educational circle.
All Best!!
Jim
JIM CUNNINGHAM
Nova Home Loans
8800 E Raintree Drive #180
Scottsdale, AZ 85260
480 614-6413
602 434-8261 cell
jim@novahomeloans.com
http://activerain.com/jcunningham
Tuesday, September 9, 2008
Fannie Mae, Freddie Mac & Government: What it means to you in the short term
In case you haven’t heard yet, the Federal Government took control of Fannie Mae & Freddie Mac over this last weekend. This means (among other things) that all changes to their loan programs will have to go through congress now. The potential long term effects of this Government intervention are still uncertain, however, the short term effects have been amazing. RATES ARE LOWER.
30 year rates have fallen about .5% in the last 24 Hours. Good borrowers can get a 30 year rate at 5.875% (without a buy down) as of 6:00 this morning. This is good news for people currently entertaining purchases - but is even BETTER news for people looking to refinance. If you have been holding off on refinancing because rates were too high in the mid 6's, now is the time to call your lender and watch rates fall this week. I think there is a strong potential to hit 5.5 sometime this week.
These windows of opportunity have been short lived over the last 18 months. It is a good time to get aggressive.
All Best!
Jim
JIM CUNNINGHAM
Nova Home Loans
8800 E Raintree Drive #180
Scottsdale, AZ 85260
480 614-6413
602 434-8261 cell
jim@novahomeloans.com
http://activerain.com/jcunningham
30 year rates have fallen about .5% in the last 24 Hours. Good borrowers can get a 30 year rate at 5.875% (without a buy down) as of 6:00 this morning. This is good news for people currently entertaining purchases - but is even BETTER news for people looking to refinance. If you have been holding off on refinancing because rates were too high in the mid 6's, now is the time to call your lender and watch rates fall this week. I think there is a strong potential to hit 5.5 sometime this week.
These windows of opportunity have been short lived over the last 18 months. It is a good time to get aggressive.
All Best!
Jim
JIM CUNNINGHAM
Nova Home Loans
8800 E Raintree Drive #180
Scottsdale, AZ 85260
480 614-6413
602 434-8261 cell
jim@novahomeloans.com
http://activerain.com/jcunningham
Wednesday, August 20, 2008
Jim's Soap Box (July & August '08)
Jim’s Soap Box
Arizona Real Estate Newsletter – July & August 08
First off, I would like to proudly announce that July was a great step in the right direction for both me and the mortgage industry here in Arizona. The amount of Purchase Contracts that crossed my desk doubled in July, and I even had a couple of refinances as well. So, for those of you who were “concerned” about the missing July edition of Jim’s Soapbox (you can stop bugging your Internet Service Provider for the lost email) because here it is!
The goal of my newsletter is to provide educational material mixed with Jim’s unsolicited yet fascinating opinion on the Arizona housing market and real estate ownership in general. If you would like me to address a specific topic in the future, please email it to me and I will respond in the following newsletter.
Tunnel Lights Approaching
There is light at the end of the housing tunnel for about 40% of the United States. And more importantly, 60% of us are unknowingly already out of the tunnel. The following is from a White Paper/RISMedia report edited by John Benson. For those of you who regularly read the Soapbox know that I have never been a fan of Big Media, thus the following article really spoke out to me.
When it comes to the national housing market, there is a lot of gloom and doom in the daily newspaper. Just look at a few recent headlines:
• “Home Builder Sentiment, So. California Home Prices Crumble” - USA Today, 7/16/08
• “Home Builders Post Steep Losses as Value of Unsold Land Slips” - New York Times, 7/27/2008
• “Home Prices In May Took A Steep Fall” - The Wall Street Journal, 7/30/2008
“Thank God the economy is not as bad as you read in the newspaper every day.” - Phil Gramm, top economic advisor to Sen. John McCain (R-AZ) Lost amid the uproar caused by Gramm’s proclamation that the U.S. is a “nation of whiners” was a breath of economic fresh air to Realtors nationwide.
The economic recession that the United States is facing has been portrayed in the media as being brought about by the rising cost of oil and the “burst bubble” in the housing market. There is no denying that the cost of oil continues to stand at near record levels. But while the bubble has burst on the housing market, is it really still a nationwide problem?
A recent report contributed to RISMedia, “Why 60% of the U.S. Can Stop Worrying about the Housing Market,” simply states “no.”
While home values did fall as the bubble burst, the media continues to report constant drops across the nation in national home values. The Office of Federal Housing Enterprise Oversight’s (OFHEO) House Price Index (HPI) tells a different story than the media is reporting. Citing data from home sales and appraisals for refinancing, OFHEO reported in May that 35 states saw a positive home value price change in the first quarter of 2008. In addition, 164 MSAs (Metropolitan Statistical Areas) showed positive first quarter appreciation when compared to the same quarter of 2007…
…According to PMI Mortgage Insurance Company’s “Economic & Real Estate Trends” report for summer 2008, almost 68% of the nation’s 322 remaining MSAs experienced positive appreciation during the quarter when MSAs located in California, Florida, Nevada, and Arizona are removed from PMI’s calculations.
Question – If the numbers from the end of this report excluded Arizona should it be considered good news? Heck yes!! The bubble bust over two years ago and now 63% of the nation experienced appreciation in their property from Q1 2007. That is an excellent sign that the worst is over and the remaining hard-hit areas (like AZ) are soon to follow. It is true that AZ still has a large supply of homes available, but we also have 10,000+ people (net) moving to Maricopa County every month. The end of the down cycle will be soon – even if they do not say it on TV!
Decreasing Home Values = Good News??
If your home value dropped since you last financed or purchased it, you might be able to turn it towards your advantage. Your Homeowners Insurance premiums are based primarily on the replacement value of your home. So if the replacement value of your home has dropped over the last 2 to 3 years, you should call your insurance agent to see if your Homeowners Insurance premiums should go down as well. It won’t make you rich,… but you might save a couple hundred bucks a year.
Here is the name of the Insurance Broker that I have worked with for years, and trust very highly. I suggest that you compare your current policy with what she has available using today’s property value.
April Irish
Hill Insurance Services
480.368.5222
airish@hill-ins.com
Bank Owned Property & Short Sale Property
The majority of purchases I have seen in the last 9 months are primarily buyers who are looking at either Bank Owned properties or homes that are being sold “short” to avoid foreclosure. There are simply not that many people looking to buy from private owners these days. Rather, everyone is looking for a smoking deal!
There is no arguing the point that these types of homes will be sold under their appraised value, giving you an immediate equity position. But, like many great deals – there can be a great deal of pain in your butt to actually get the home. My advice to anyone looking to get a bank owned/short sale home is to be ready to be extremely patient.
Bank Owned
A house that falls into foreclosure is eventually possessed by the bank in first lien position on the home’s Title. This is what we call a Bank Owned house. When you negotiate to purchase a Bank Owned home, you will be dealing with an unemotional seller who would like to recoup as much of their loss as possible, and they would like to sell the house quickly. Truth be told, banks prefer to lend money over owning & selling property.
When dealing with a Bank Owned homes (sometimes called a R.E.O.), be prepared to compete against several other buyers simultaneously. Usually the bank will price the home under its appraised value and take offers for up to 3 or 4 weeks before accepting a contract. They will then take the strongest offer. The “strength” of the offer will be a combination of how much the buyers offer, and how much of it they are financing. An all cash buyer will appear stronger than another borrower financing 97%.
Be prepared to outbid people who will offer more than the list price. If you need seller concessions to cover your closing costs, you should bid high enough above the asking price so that the bank will closely net that figure. Also, be prepared for the banks to reject your offer if you are asking too much in concessions to purchase the property.
Many REO properties will be listed and sold “as is”, meaning that they are not interested in fixing anything broken before you take possession. In the case of a government loan (especially FHA) items like the water heater, sink, and the arcadia door will all need to be fixed before your loan will go through. Be prepared to pay for the potential repairs yourself, or experience an escrow hold back during your purchase. The key is to remain patient and prepare yourself to lose negotiations on 2 or 3 houses before you actually get a contract on one you like.
Short Sales
If you think that buying a REO sounds aggravating – check into a Short Sale transaction. A Short Sale happens when the homeowner sells the property to a buyer at a loss to the bank. The seller usually entertains this idea before they slip into Bankruptcy or Foreclosure. This maneuver can actually be in the bank’s best interest too, if it saves them money over the alternative of the foreclosure proceedings and selling another REO. It is definitely in the seller’s best interest because a Short Sale is not nearly as bad to your credit or well being as a Foreclosure is.
So if both parties (Bank & Seller) benefit from the Short Sale what is the problem??
In my opinion - banks are great at lending money –but they are basically inept at selling houses in a timely manner. I cannot speak on behalf of any specific bank, but I would surmise that they are way too bureaucratic to do anything effectively. A bank will not identify an “acceptable” short sale value for a home until that property has actually been listed and there is a contract on the table. They will then take up to 90 days (no kidding) to give an answer. Many times that answer is no, because the offer is too low and the bank cannot justify that much loss on the current loan. The crazy part is that you can’t even ask the bank what an acceptable amount is until you have a contract in hand. You are basically throwing “manure” against the wall and seeing what sticks.
In some cases, the bank will actually respond to the original contract with a counter offer identifying the minimum value they will accept, but that is not often. In the event that you are trying to purchase a short sale property that has 2 liens against it (a 1st & 2nd Mortgage) held by separate lenders – you can double the aggravation and the headaches.
Also, the lien-holding bank reserves the right to cancel the deal any time during escrow for any reason they see fit. So, until you sign your loan docs (and it funds and records) they can cancel your purchase. DO NOT FALL IN LOVE WITH A SHORT SALE PROPERTY – it will break your heart and usually will.
However, if you have the patience and temperament for 6 months of negotiations – a short sale property can be a bargain!
*** If you know someone who would benefit from my educational newsletters, please forward their name and email address to me and I will add them to our educational circle.
All Best!!
Jim
JIM CUNNINGHAM
Nova Home Loans
8800 E Raintree Drive #180
Scottsdale, AZ 85260
480 614-6413
602 434-8261 cell
jim@novahomeloans.com
http://activerain.com/jcunningham
Arizona Real Estate Newsletter – July & August 08
First off, I would like to proudly announce that July was a great step in the right direction for both me and the mortgage industry here in Arizona. The amount of Purchase Contracts that crossed my desk doubled in July, and I even had a couple of refinances as well. So, for those of you who were “concerned” about the missing July edition of Jim’s Soapbox (you can stop bugging your Internet Service Provider for the lost email) because here it is!
The goal of my newsletter is to provide educational material mixed with Jim’s unsolicited yet fascinating opinion on the Arizona housing market and real estate ownership in general. If you would like me to address a specific topic in the future, please email it to me and I will respond in the following newsletter.
Tunnel Lights Approaching
There is light at the end of the housing tunnel for about 40% of the United States. And more importantly, 60% of us are unknowingly already out of the tunnel. The following is from a White Paper/RISMedia report edited by John Benson. For those of you who regularly read the Soapbox know that I have never been a fan of Big Media, thus the following article really spoke out to me.
When it comes to the national housing market, there is a lot of gloom and doom in the daily newspaper. Just look at a few recent headlines:
• “Home Builder Sentiment, So. California Home Prices Crumble” - USA Today, 7/16/08
• “Home Builders Post Steep Losses as Value of Unsold Land Slips” - New York Times, 7/27/2008
• “Home Prices In May Took A Steep Fall” - The Wall Street Journal, 7/30/2008
“Thank God the economy is not as bad as you read in the newspaper every day.” - Phil Gramm, top economic advisor to Sen. John McCain (R-AZ) Lost amid the uproar caused by Gramm’s proclamation that the U.S. is a “nation of whiners” was a breath of economic fresh air to Realtors nationwide.
The economic recession that the United States is facing has been portrayed in the media as being brought about by the rising cost of oil and the “burst bubble” in the housing market. There is no denying that the cost of oil continues to stand at near record levels. But while the bubble has burst on the housing market, is it really still a nationwide problem?
A recent report contributed to RISMedia, “Why 60% of the U.S. Can Stop Worrying about the Housing Market,” simply states “no.”
While home values did fall as the bubble burst, the media continues to report constant drops across the nation in national home values. The Office of Federal Housing Enterprise Oversight’s (OFHEO) House Price Index (HPI) tells a different story than the media is reporting. Citing data from home sales and appraisals for refinancing, OFHEO reported in May that 35 states saw a positive home value price change in the first quarter of 2008. In addition, 164 MSAs (Metropolitan Statistical Areas) showed positive first quarter appreciation when compared to the same quarter of 2007…
…According to PMI Mortgage Insurance Company’s “Economic & Real Estate Trends” report for summer 2008, almost 68% of the nation’s 322 remaining MSAs experienced positive appreciation during the quarter when MSAs located in California, Florida, Nevada, and Arizona are removed from PMI’s calculations.
Question – If the numbers from the end of this report excluded Arizona should it be considered good news? Heck yes!! The bubble bust over two years ago and now 63% of the nation experienced appreciation in their property from Q1 2007. That is an excellent sign that the worst is over and the remaining hard-hit areas (like AZ) are soon to follow. It is true that AZ still has a large supply of homes available, but we also have 10,000+ people (net) moving to Maricopa County every month. The end of the down cycle will be soon – even if they do not say it on TV!
Decreasing Home Values = Good News??
If your home value dropped since you last financed or purchased it, you might be able to turn it towards your advantage. Your Homeowners Insurance premiums are based primarily on the replacement value of your home. So if the replacement value of your home has dropped over the last 2 to 3 years, you should call your insurance agent to see if your Homeowners Insurance premiums should go down as well. It won’t make you rich,… but you might save a couple hundred bucks a year.
Here is the name of the Insurance Broker that I have worked with for years, and trust very highly. I suggest that you compare your current policy with what she has available using today’s property value.
April Irish
Hill Insurance Services
480.368.5222
airish@hill-ins.com
Bank Owned Property & Short Sale Property
The majority of purchases I have seen in the last 9 months are primarily buyers who are looking at either Bank Owned properties or homes that are being sold “short” to avoid foreclosure. There are simply not that many people looking to buy from private owners these days. Rather, everyone is looking for a smoking deal!
There is no arguing the point that these types of homes will be sold under their appraised value, giving you an immediate equity position. But, like many great deals – there can be a great deal of pain in your butt to actually get the home. My advice to anyone looking to get a bank owned/short sale home is to be ready to be extremely patient.
Bank Owned
A house that falls into foreclosure is eventually possessed by the bank in first lien position on the home’s Title. This is what we call a Bank Owned house. When you negotiate to purchase a Bank Owned home, you will be dealing with an unemotional seller who would like to recoup as much of their loss as possible, and they would like to sell the house quickly. Truth be told, banks prefer to lend money over owning & selling property.
When dealing with a Bank Owned homes (sometimes called a R.E.O.), be prepared to compete against several other buyers simultaneously. Usually the bank will price the home under its appraised value and take offers for up to 3 or 4 weeks before accepting a contract. They will then take the strongest offer. The “strength” of the offer will be a combination of how much the buyers offer, and how much of it they are financing. An all cash buyer will appear stronger than another borrower financing 97%.
Be prepared to outbid people who will offer more than the list price. If you need seller concessions to cover your closing costs, you should bid high enough above the asking price so that the bank will closely net that figure. Also, be prepared for the banks to reject your offer if you are asking too much in concessions to purchase the property.
Many REO properties will be listed and sold “as is”, meaning that they are not interested in fixing anything broken before you take possession. In the case of a government loan (especially FHA) items like the water heater, sink, and the arcadia door will all need to be fixed before your loan will go through. Be prepared to pay for the potential repairs yourself, or experience an escrow hold back during your purchase. The key is to remain patient and prepare yourself to lose negotiations on 2 or 3 houses before you actually get a contract on one you like.
Short Sales
If you think that buying a REO sounds aggravating – check into a Short Sale transaction. A Short Sale happens when the homeowner sells the property to a buyer at a loss to the bank. The seller usually entertains this idea before they slip into Bankruptcy or Foreclosure. This maneuver can actually be in the bank’s best interest too, if it saves them money over the alternative of the foreclosure proceedings and selling another REO. It is definitely in the seller’s best interest because a Short Sale is not nearly as bad to your credit or well being as a Foreclosure is.
So if both parties (Bank & Seller) benefit from the Short Sale what is the problem??
In my opinion - banks are great at lending money –but they are basically inept at selling houses in a timely manner. I cannot speak on behalf of any specific bank, but I would surmise that they are way too bureaucratic to do anything effectively. A bank will not identify an “acceptable” short sale value for a home until that property has actually been listed and there is a contract on the table. They will then take up to 90 days (no kidding) to give an answer. Many times that answer is no, because the offer is too low and the bank cannot justify that much loss on the current loan. The crazy part is that you can’t even ask the bank what an acceptable amount is until you have a contract in hand. You are basically throwing “manure” against the wall and seeing what sticks.
In some cases, the bank will actually respond to the original contract with a counter offer identifying the minimum value they will accept, but that is not often. In the event that you are trying to purchase a short sale property that has 2 liens against it (a 1st & 2nd Mortgage) held by separate lenders – you can double the aggravation and the headaches.
Also, the lien-holding bank reserves the right to cancel the deal any time during escrow for any reason they see fit. So, until you sign your loan docs (and it funds and records) they can cancel your purchase. DO NOT FALL IN LOVE WITH A SHORT SALE PROPERTY – it will break your heart and usually will.
However, if you have the patience and temperament for 6 months of negotiations – a short sale property can be a bargain!
*** If you know someone who would benefit from my educational newsletters, please forward their name and email address to me and I will add them to our educational circle.
All Best!!
Jim
JIM CUNNINGHAM
Nova Home Loans
8800 E Raintree Drive #180
Scottsdale, AZ 85260
480 614-6413
602 434-8261 cell
jim@novahomeloans.com
http://activerain.com/jcunningham
Monday, August 11, 2008
100% FHA Financing Still Alive & Kicking
Things are currently changing at a record pace within the mortgage industry. Loan guidelines, programs, and parameters are changing on a weekly basis. Some of the changes have been for the better here in Arizona, but many have been more restrictive to the first time home buyer and real estate investor. I am happy to inform you as of this very moment (8/11/08) 100% financing is still alive and well for borrowers who qualify.
FHA purchases are designed to have a 3% down payment. For years there have been institutions that will “assist” borrowers who need help with the 3% down. The function of these institutions is referred to as Down Payment Assistance or DPA. The most prominent DPA entities (i.e. Ameridream and Nehemiah) will take a 3% gift from the seller and grant it to the buyer to constitute your down payment. The Federal government made ovations to eliminate the DPA programs as of October 2008. Fortunately, enough petition signatures were gathered over the past few weeks to extend the existence of current DPAs indefinitely.
The combination of Down Payment Assistance with negotiated seller contributions (for closing costs & prepaids) creates a platform for home ownership without any money due at the closing table. This is most likely not the best program for everyone looking to buy, but it does give another option to own a home without need a large sum of money to qualify. The USDA Rural Housing program is the other 100% program currently available.
JIM CUNNINGHAM
Nova Home Loans
8800 E Raintree Drive #180
Scottsdale, AZ 85260
480 614-6413
602 434-8261 cell
jim@novahomeloans.com
http://activerain.com/jcunningham
FHA purchases are designed to have a 3% down payment. For years there have been institutions that will “assist” borrowers who need help with the 3% down. The function of these institutions is referred to as Down Payment Assistance or DPA. The most prominent DPA entities (i.e. Ameridream and Nehemiah) will take a 3% gift from the seller and grant it to the buyer to constitute your down payment. The Federal government made ovations to eliminate the DPA programs as of October 2008. Fortunately, enough petition signatures were gathered over the past few weeks to extend the existence of current DPAs indefinitely.
The combination of Down Payment Assistance with negotiated seller contributions (for closing costs & prepaids) creates a platform for home ownership without any money due at the closing table. This is most likely not the best program for everyone looking to buy, but it does give another option to own a home without need a large sum of money to qualify. The USDA Rural Housing program is the other 100% program currently available.
JIM CUNNINGHAM
Nova Home Loans
8800 E Raintree Drive #180
Scottsdale, AZ 85260
480 614-6413
602 434-8261 cell
jim@novahomeloans.com
http://activerain.com/jcunningham
Friday, August 1, 2008
Should I buy a house or rent one?
This is an excellent question to ask yourself before taking action. Despite the economy being sluggish, and fuel prices skyrocketing, the old rules of thumb are still accurate. Here are a few questions to address before you change your address.
• Can I afford the monthly payments?
Keeping your housing payment to 35% of your monthly gross income is a conservative target. If your potential mortgage payment is significantly higher than 35% you should probably rent a little longer until you identify cheaper housing, or increase your income.
• Can I afford a down payment?
The availability of 100% (no money down) financing is all but over. As of Oct 1st, you will need a down payment to attain housing. There are still Teacher A+ programs ranging from 2% down to 5% down (not including closing costs). Of course, the more you put down, the less expensive your monthly payment will be. Nonetheless, if you have 3% to 5% of the purchase price, you can cosider yourself in a strong position to buy a home. If you are coming up short of that mark you should probably keep renting and try to save a little every month.
• What are the long term benefits?
As a home owner you will have the benefits of future equity. Here in Arizona the worst is over and the depreciation has leveled off. We should all see appreciation in property values within the next 2 years. You have the ability to redecorate and change the décor of the home. You also have nice income tax benefits by owning a home.
As a renter you will have the benefit of no maintenance responsibilty in the home. If something breaks, the landlord will come and fix or replace it. Also, you do not have to worry about having to sell the home if you move. Some owners have the ability to keep the home as a rental, but by and large, most people have to sell before the buy again - and it may not sell quickly.
• How long will I live there?
There is no disputing that the longer you wish to live somewhere that the more advantages it is to own your home. The growth in equity will definitely have large benefits over renting.
• Is my credit strong enough?
In general, mortgage lenders are going to want to see that your middle FICO score (on a trimerge report) is over 680. Ther are still programs that will work for scores under 680. But, you will have more finance options at better rates if you ave over the 680 line.
The key here is to find out what your credit score is before you want to make your move. In some cases you credit score can be fixed/improved by putting effort in to clean it over a 60–90 day period. I recommend either a free credit report from the internet – or contact a mortgage lender that will pull your credit and give you council.
Jim
JIM CUNNINGHAM
Nova Home Loans
8800 E Raintree Drive #180
Scottsdale, AZ 85260
480 614-6413
602 434-8261 cell
jim@novahomeloans.com
http://activerain.com/jcunningham
• Can I afford the monthly payments?
Keeping your housing payment to 35% of your monthly gross income is a conservative target. If your potential mortgage payment is significantly higher than 35% you should probably rent a little longer until you identify cheaper housing, or increase your income.
• Can I afford a down payment?
The availability of 100% (no money down) financing is all but over. As of Oct 1st, you will need a down payment to attain housing. There are still Teacher A+ programs ranging from 2% down to 5% down (not including closing costs). Of course, the more you put down, the less expensive your monthly payment will be. Nonetheless, if you have 3% to 5% of the purchase price, you can cosider yourself in a strong position to buy a home. If you are coming up short of that mark you should probably keep renting and try to save a little every month.
• What are the long term benefits?
As a home owner you will have the benefits of future equity. Here in Arizona the worst is over and the depreciation has leveled off. We should all see appreciation in property values within the next 2 years. You have the ability to redecorate and change the décor of the home. You also have nice income tax benefits by owning a home.
As a renter you will have the benefit of no maintenance responsibilty in the home. If something breaks, the landlord will come and fix or replace it. Also, you do not have to worry about having to sell the home if you move. Some owners have the ability to keep the home as a rental, but by and large, most people have to sell before the buy again - and it may not sell quickly.
• How long will I live there?
There is no disputing that the longer you wish to live somewhere that the more advantages it is to own your home. The growth in equity will definitely have large benefits over renting.
• Is my credit strong enough?
In general, mortgage lenders are going to want to see that your middle FICO score (on a trimerge report) is over 680. Ther are still programs that will work for scores under 680. But, you will have more finance options at better rates if you ave over the 680 line.
The key here is to find out what your credit score is before you want to make your move. In some cases you credit score can be fixed/improved by putting effort in to clean it over a 60–90 day period. I recommend either a free credit report from the internet – or contact a mortgage lender that will pull your credit and give you council.
Jim
JIM CUNNINGHAM
Nova Home Loans
8800 E Raintree Drive #180
Scottsdale, AZ 85260
480 614-6413
602 434-8261 cell
jim@novahomeloans.com
http://activerain.com/jcunningham
Wednesday, July 23, 2008
Free Credit Reports
There are many ways to get your hands on a credit report today. But like many things in life, you get what you pay for. There are three major credit reporting bureaus and all three of them are relevant in the mortgage industry; Experian, Equifax, and Transunion. All three of these bureaus can be found on the internet and all three of them will allow you to request a free copy of your credit report.
• experian.com
• transunion.com
• equifax.com
After you receive a copy of your credit report they will try to enroll you into a credit monitoring service with a monthly fee. In some cases, they automatically enroll you and you have to contact them to turn off this service. We are not saying that the credit monitoring service is not without value, but you do not have to pay them just to view your credit. If you find an inaccuracy, you will have to pay a fee to the bureau and then you can dispute the credit item on-line. We recommend direct contact with the bureaus to eliminate the delays and additional fees of middle-men.
There are other popular on-line services that will give you a credit report for free too. The well advertised freecreditreport.com is a good example. They will give you a single bureau (Experian) report for no cost. However, you will begin a free trial membership in their credit monitoring program as well. If you don't cancel your membership within 7-days, you will be billed monthly until you cancel. To dispute any inaccuracies on your report you may have to pay extra fees. It is the same type structure as dealing with Experian directly.
JIM CUNNINGHAM
Community First Financial, LLC
7575 E Redfield Rd Suite 235
Scottsdale, AZ 85260
480-305-8900 ext 305 - office
480-907-2435 - fax
602-434-8261 - cell
jcunningham@communityfirstfinancial.com
www.communityfirstfinancial.com
http://activerain.com/jcunningham
• experian.com
• transunion.com
• equifax.com
After you receive a copy of your credit report they will try to enroll you into a credit monitoring service with a monthly fee. In some cases, they automatically enroll you and you have to contact them to turn off this service. We are not saying that the credit monitoring service is not without value, but you do not have to pay them just to view your credit. If you find an inaccuracy, you will have to pay a fee to the bureau and then you can dispute the credit item on-line. We recommend direct contact with the bureaus to eliminate the delays and additional fees of middle-men.
There are other popular on-line services that will give you a credit report for free too. The well advertised freecreditreport.com is a good example. They will give you a single bureau (Experian) report for no cost. However, you will begin a free trial membership in their credit monitoring program as well. If you don't cancel your membership within 7-days, you will be billed monthly until you cancel. To dispute any inaccuracies on your report you may have to pay extra fees. It is the same type structure as dealing with Experian directly.
JIM CUNNINGHAM
Community First Financial, LLC
7575 E Redfield Rd Suite 235
Scottsdale, AZ 85260
480-305-8900 ext 305 - office
480-907-2435 - fax
602-434-8261 - cell
jcunningham@communityfirstfinancial.com
www.communityfirstfinancial.com
http://activerain.com/jcunningham
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