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
Showing posts with label phoenix. Show all posts
Showing posts with label phoenix. Show all posts
Monday, October 27, 2008
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
Wednesday, July 23, 2008
What is a LSR?
LSR is an acronym for Loan Status Report. After an application is taken by a lender, and they perform their due diligence to approve you in good faith, you get a Loan Status Report. This document states that you have consulted with a lender and you are pre-approved to purchase a house. The letter will have a maximum dollar value on it indicating how much money you have been approved for. It will also indicate what kind of financing you are approved for and the amount of your down payment. This letter is usually submitted with a purchase contract to notify the seller that you have your money, and you are a serious buyer.
We recommend that you always request a custom LSR for each offer you submit. We are firm believers in showing that you are only approved for the amount you are willing to offer. By submitting a LSR showing that you are approved for more money then you are offering, it will sometimes influence the seller to not reduce their price during negotiation because you obviously have the money to pay more.
To acquire a LSR you are going to need to provide the lender with a significant amount of accurate information. Here is a short list of items that they will definitely ask you.
• Name
• Social Security number
• Contact Information
• Residential address for the last 2 years
• Work history for the last 2 years
• Income
• Assets
• Let them pull your credit
There are many other questions a lender can ask you to qualify you for a LSR that are specific to every borrower.
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
www.jimcunninghamcff.blogspot.com
http://activerain.com/jcunningham
We recommend that you always request a custom LSR for each offer you submit. We are firm believers in showing that you are only approved for the amount you are willing to offer. By submitting a LSR showing that you are approved for more money then you are offering, it will sometimes influence the seller to not reduce their price during negotiation because you obviously have the money to pay more.
To acquire a LSR you are going to need to provide the lender with a significant amount of accurate information. Here is a short list of items that they will definitely ask you.
• Name
• Social Security number
• Contact Information
• Residential address for the last 2 years
• Work history for the last 2 years
• Income
• Assets
• Let them pull your credit
There are many other questions a lender can ask you to qualify you for a LSR that are specific to every borrower.
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
www.jimcunninghamcff.blogspot.com
http://activerain.com/jcunningham
Wednesday, June 25, 2008
Jim's Soapbox (June '08)
Jim’s Soapbox
(Arizona Real Estate Newsletter - June 08)
You may have heard recently that this is a great time to purchase investment property. One reason for this is because you can now “cash flow” them again. That sounds like a pretty good idea, but what does that really translate into? What really makes this a better time to buy and hold investment property rather than 18 months ago?
I would like to give you a brief overview on the two major concepts of making money on investment property, and why it is a perfect time to acquire and hold an investment property.
Fix & Flip
I am sure many of you have heard of the term “fix & flip”. This is a good money making technique when the real estate market is steady and the volatility is predictable. The concept is to buy a property that is undervalued compared to the other homes in the area and fix it up. The typical targeted repairs are items like new floors, carpet, paint, window treatments, landscaping, kitchen & bathrooms cabinets, etc.. Ideally, these repairs take only 1–3 months, and then you list the property for sale at a much higher price. The goal is to make enough to cover your repair costs, the temporary mortgage payments, and walk away with $20K – $60K profit on that property. The key to success is to have the right property and to turn the property as quickly as possible.
Obviously, this doesn’t always work as planned, and sometimes you lose money on the deal. Factors that contribute to losing money on a Fix & Flip property are the repair costs being too high, the repairs taking way too long, or the property not selling quickly. Sadly, some Fix & Flippers got stuck with property over a year ago when the market turned, and either took a loss selling it below cost or turned it into a rental property. This is not the ideal strategy to own rental property, because most of these people are still taking a monthly loss renting these properties today. I feel that I am an authority on this topic, because I own one of these types of properties myself.
Cash Flow
This is the concept used to identify property that will make good rentals. The word “Cash flow” refers to the amount of cash a rental home generates and uses on a monthly basis. Cash flow can be used as an indication of a rental home’s financial strength. When it comes to renting out your investment property you would prefer it to have a positive cash flow, whereas you are making a profit on a monthly basis. Due to the high price of housing in Metro Phoenix it is more difficult to find homes with a positive cash flow, but it is not impossible. Here are some of the factors we look at to determine a property’s cash flow.
You should first calculate the monthly cost of the property (sometimes called the nut). You need to consider all costs associated with the property including the Mortgage Payment (Principal, Interest, Taxes & Insurance), Property Management Fees, HOA Dues, Pool Service, Home Warranty, Etc. This monthly cost will not only be covered by your renters, but will also have to be covered by you during times when the property is not rented. Also, take into account if you need immediate repairs to the home to make it ready for renters.
Next, you have to calculate how much you can rent the home for. I highly suggest using a seasoned property manager to help you in this analysis. Not only can this person help you identify the right rental rate, but can also help identify the current occupancy of rentals within the area. That should give you an idea of how long it will take to rent your property. I highly suggest Alan Corradini WEST USA realty (602) 380-7913 cell & alancor@hotmail.com . I have been using him to manage my rental property for the last 6 years, and he is the real deal.
When you subtract the monthly cost (nut) from your potential rent you will get that property’s monthly cash flow number. Most people will gravitate towards properties with a positive cashflow – but some people will also consider properties that simply “break even” with the intent of selling them in a few years at an appreciated value.
Why is this a Good Time to Buy??
One of the biggest factors in finding property with good cash flow will be in the price of the home. Being that the mortgage payment on the property will constitute the largest portion of your cost, you want to find rentable property at a low purchase price. This sounds like common sense (Duh!), but a cheap list price doesn’t always mean it’s a good deal.
Today’s housing market has a record number of short sales, foreclosures, pre-foreclosures, distressed, and bank owned property! Some home prices are down over 30% from where they were 18 months ago. This could easily mark the low price point for home sales for the next few years. When you see the following scenario you might think that those properties are not really available. To that I can honestly say,… have you really looked? Because, you only need to find one property that works!
Example
Here is a single family home (3bd/2ba) in Tempe near the light rail. It is bank owned and they are asking $150K (appraises at $205K) and they will pay all of your closing costs with a full price offer. The property is basically move in ready and needs a little paint. You pay 20% down ($30,000) & finance 80% ($120,000) on a 30 year fixed (6.75%).
The principal & interest payment is $778/mo + $50/mo home owners ins. + $92/mo property taxes = total PITI = $920/month. You also decide to have a property manager (a good idea) for $65/month, and you find no other monthly costs. Your net cost is $985/mo.
Your realtor does their research, and informs you that rent on a 3 bedroom within 2.5 miles of ASU should rent for $1,130/mo. And if you get it listed before August 20th, you should be able to rent in within 2 weeks.
$1,130 rent – ($985) cost = $145/ month in positive cash flow. This seems to be a pretty good scenario worth exploring. Here are the positives,…
• You have the potential to make $145/month cashflow.
• You have a 30 year fixed loan, so every month your principal balance goes down.
• You have an great source of Tax deductions at the end of the year
• You have just acquired a property with $55,000 of equity in it.
The above example is simply one basic scenario out of thousands that exist. There are going to be plenty of properties that have a negative cashflow after thorough analysis. But, the key to finding the right cashflow property begins in the act of building a team and looking for them.
Conclusion
Investment property is not everybody’s cup of tea. However, if you have thought about it in the past, today’s housing market provides great opportunities to buy properties that “cashflow”. If you are waiting for the housing market to reduce inventory and “tighten up” to buy an investment property – you are missing the boat.
There are many other concepts and techniques that I did not touch on today that I will be happy to share with you if you have interest
• Buy investment property as a primary residence (2% - 5% down)
• Buy investment property as a second home (5%-10% down)
• Buy a multiplex (2 – 4 units)
• 8 creative ways to find your 20% down payment
• Purchase an investment property that needs rehab for 10% down
• Buy a new home and use your current home as a rental
I am looking towards a great summer both socially and professionally. If you have any questions on this material, or just want to say “Howdy”, feel free to give me a call or an email.
All Best!!
Jim
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
www.jimcunninghamcff.blogspot.com
http://activerain.com/jcunningham
(Arizona Real Estate Newsletter - June 08)
You may have heard recently that this is a great time to purchase investment property. One reason for this is because you can now “cash flow” them again. That sounds like a pretty good idea, but what does that really translate into? What really makes this a better time to buy and hold investment property rather than 18 months ago?
I would like to give you a brief overview on the two major concepts of making money on investment property, and why it is a perfect time to acquire and hold an investment property.
Fix & Flip
I am sure many of you have heard of the term “fix & flip”. This is a good money making technique when the real estate market is steady and the volatility is predictable. The concept is to buy a property that is undervalued compared to the other homes in the area and fix it up. The typical targeted repairs are items like new floors, carpet, paint, window treatments, landscaping, kitchen & bathrooms cabinets, etc.. Ideally, these repairs take only 1–3 months, and then you list the property for sale at a much higher price. The goal is to make enough to cover your repair costs, the temporary mortgage payments, and walk away with $20K – $60K profit on that property. The key to success is to have the right property and to turn the property as quickly as possible.
Obviously, this doesn’t always work as planned, and sometimes you lose money on the deal. Factors that contribute to losing money on a Fix & Flip property are the repair costs being too high, the repairs taking way too long, or the property not selling quickly. Sadly, some Fix & Flippers got stuck with property over a year ago when the market turned, and either took a loss selling it below cost or turned it into a rental property. This is not the ideal strategy to own rental property, because most of these people are still taking a monthly loss renting these properties today. I feel that I am an authority on this topic, because I own one of these types of properties myself.
Cash Flow
This is the concept used to identify property that will make good rentals. The word “Cash flow” refers to the amount of cash a rental home generates and uses on a monthly basis. Cash flow can be used as an indication of a rental home’s financial strength. When it comes to renting out your investment property you would prefer it to have a positive cash flow, whereas you are making a profit on a monthly basis. Due to the high price of housing in Metro Phoenix it is more difficult to find homes with a positive cash flow, but it is not impossible. Here are some of the factors we look at to determine a property’s cash flow.
You should first calculate the monthly cost of the property (sometimes called the nut). You need to consider all costs associated with the property including the Mortgage Payment (Principal, Interest, Taxes & Insurance), Property Management Fees, HOA Dues, Pool Service, Home Warranty, Etc. This monthly cost will not only be covered by your renters, but will also have to be covered by you during times when the property is not rented. Also, take into account if you need immediate repairs to the home to make it ready for renters.
Next, you have to calculate how much you can rent the home for. I highly suggest using a seasoned property manager to help you in this analysis. Not only can this person help you identify the right rental rate, but can also help identify the current occupancy of rentals within the area. That should give you an idea of how long it will take to rent your property. I highly suggest Alan Corradini WEST USA realty (602) 380-7913 cell & alancor@hotmail.com . I have been using him to manage my rental property for the last 6 years, and he is the real deal.
When you subtract the monthly cost (nut) from your potential rent you will get that property’s monthly cash flow number. Most people will gravitate towards properties with a positive cashflow – but some people will also consider properties that simply “break even” with the intent of selling them in a few years at an appreciated value.
Why is this a Good Time to Buy??
One of the biggest factors in finding property with good cash flow will be in the price of the home. Being that the mortgage payment on the property will constitute the largest portion of your cost, you want to find rentable property at a low purchase price. This sounds like common sense (Duh!), but a cheap list price doesn’t always mean it’s a good deal.
Today’s housing market has a record number of short sales, foreclosures, pre-foreclosures, distressed, and bank owned property! Some home prices are down over 30% from where they were 18 months ago. This could easily mark the low price point for home sales for the next few years. When you see the following scenario you might think that those properties are not really available. To that I can honestly say,… have you really looked? Because, you only need to find one property that works!
Example
Here is a single family home (3bd/2ba) in Tempe near the light rail. It is bank owned and they are asking $150K (appraises at $205K) and they will pay all of your closing costs with a full price offer. The property is basically move in ready and needs a little paint. You pay 20% down ($30,000) & finance 80% ($120,000) on a 30 year fixed (6.75%).
The principal & interest payment is $778/mo + $50/mo home owners ins. + $92/mo property taxes = total PITI = $920/month. You also decide to have a property manager (a good idea) for $65/month, and you find no other monthly costs. Your net cost is $985/mo.
Your realtor does their research, and informs you that rent on a 3 bedroom within 2.5 miles of ASU should rent for $1,130/mo. And if you get it listed before August 20th, you should be able to rent in within 2 weeks.
$1,130 rent – ($985) cost = $145/ month in positive cash flow. This seems to be a pretty good scenario worth exploring. Here are the positives,…
• You have the potential to make $145/month cashflow.
• You have a 30 year fixed loan, so every month your principal balance goes down.
• You have an great source of Tax deductions at the end of the year
• You have just acquired a property with $55,000 of equity in it.
The above example is simply one basic scenario out of thousands that exist. There are going to be plenty of properties that have a negative cashflow after thorough analysis. But, the key to finding the right cashflow property begins in the act of building a team and looking for them.
Conclusion
Investment property is not everybody’s cup of tea. However, if you have thought about it in the past, today’s housing market provides great opportunities to buy properties that “cashflow”. If you are waiting for the housing market to reduce inventory and “tighten up” to buy an investment property – you are missing the boat.
There are many other concepts and techniques that I did not touch on today that I will be happy to share with you if you have interest
• Buy investment property as a primary residence (2% - 5% down)
• Buy investment property as a second home (5%-10% down)
• Buy a multiplex (2 – 4 units)
• 8 creative ways to find your 20% down payment
• Purchase an investment property that needs rehab for 10% down
• Buy a new home and use your current home as a rental
I am looking towards a great summer both socially and professionally. If you have any questions on this material, or just want to say “Howdy”, feel free to give me a call or an email.
All Best!!
Jim
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
www.jimcunninghamcff.blogspot.com
http://activerain.com/jcunningham
Thursday, June 12, 2008
Don't give lenders your credit card!
In any industry you are going to experience good and bad representatives within that industry. Be it an accountant, a mechanic, or a bartender - there are great ones and there are very poor ones. The lending industry is no different. I need to share a true story I heard from a perspective client an hour ago.
I got a just call from a woman named Tanya who lives in Georgia. She found my name & number on Google from an old Active Rain blog I posted in Nov 07. (Active Rain Really Works) Anyway, she wanted my opinion on her recent phone call with Quicken Loans.
Apparently, she had called Countrywide to get approved for a FHA streamline refinance (and did) and then they quoted her a rate. Then called Quicken Loans for a 2nd opinion on a rate and the representative told her this. "Countrywide is currently being purchased by B of A and your loan could be held up for 6 to 9 weeks due to the buyout. Whatever they quoted you will never close within 30 days, so the rate they are giving will surely change before you close..." "...Also, I need your credit card number to lock your rate with our company. We can prepay the appraiser, and cover your application fee with your credit card..." "...you cannot lock your loan without a credit card number..."
Holy Cow! I cannot believe that anyone would actually say that - but I guess I am wrong. Countrywide is an exceptional lender, and I am pretty sure that Quicken even sells their loans to Countrywide. I have never heard of a underwriting or funding delay at Countywide due to their impending merger. They are very solid!
***Listen closely everyone - if any lender asks you for a credit card number to lock your loan DO NOT DO IT! I don't think that they actually use your card in any way to secure a lock for your loan - but I do think it is an act to get you to commit to them and stop shopping around. I also do not believe that Quicken Loans would condone this activity if they knew about it. It is probably a desperate act by a very Jr. Loan officer (I hope).
All you need to provide to lock a potential loan is your name, contact info, your social security number, and the subject property address. All of these items should already be covered during the application process. The bottom line is to beware if someone asks you for your credit card number to lock your loan.
Arm yourself with knowledge!! (& have a great day)
Jim
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
www.jimcunninghamcff.blogspot.com
http://activerain.com/jcunningham
I got a just call from a woman named Tanya who lives in Georgia. She found my name & number on Google from an old Active Rain blog I posted in Nov 07. (Active Rain Really Works) Anyway, she wanted my opinion on her recent phone call with Quicken Loans.
Apparently, she had called Countrywide to get approved for a FHA streamline refinance (and did) and then they quoted her a rate. Then called Quicken Loans for a 2nd opinion on a rate and the representative told her this. "Countrywide is currently being purchased by B of A and your loan could be held up for 6 to 9 weeks due to the buyout. Whatever they quoted you will never close within 30 days, so the rate they are giving will surely change before you close..." "...Also, I need your credit card number to lock your rate with our company. We can prepay the appraiser, and cover your application fee with your credit card..." "...you cannot lock your loan without a credit card number..."
Holy Cow! I cannot believe that anyone would actually say that - but I guess I am wrong. Countrywide is an exceptional lender, and I am pretty sure that Quicken even sells their loans to Countrywide. I have never heard of a underwriting or funding delay at Countywide due to their impending merger. They are very solid!
***Listen closely everyone - if any lender asks you for a credit card number to lock your loan DO NOT DO IT! I don't think that they actually use your card in any way to secure a lock for your loan - but I do think it is an act to get you to commit to them and stop shopping around. I also do not believe that Quicken Loans would condone this activity if they knew about it. It is probably a desperate act by a very Jr. Loan officer (I hope).
All you need to provide to lock a potential loan is your name, contact info, your social security number, and the subject property address. All of these items should already be covered during the application process. The bottom line is to beware if someone asks you for your credit card number to lock your loan.
Arm yourself with knowledge!! (& have a great day)
Jim
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
www.jimcunninghamcff.blogspot.com
http://activerain.com/jcunningham
Tuesday, May 13, 2008
Jim's Mortgage Newsletter May 08
Jim’s Soapbox
(Arizona Real Estate Newsletter - May 08)
My wife Madalyn often says to me “…when one doors closes, another door is opened”. I have found that is a great way to describe today’s Real Estate market here in Metro Phoenix.
A common media-driven perception today is that the Phoenix housing market is far more risky than it has ever been before. I find that to be a funny concept for the media to promote, because in really isn’t accurate. Actually, the risky time to buy real estate in Phoenix was that period of time between the unnatural value boom, and the inevitable drop off. Metro Phoenix had a very stable (appreciating) market for 10+ years leading into the boom, and we have almost returned to the point where property value would have appreciated to without the peak and valley of ’05 to ‘07.
I am not going to argue that everything is roses & rainbows within the housing market right now. However, I would like you to take notice that there are so many other ways to take advantage of Arizona Real Estate, that regardless of the condition of our current market, it always the perfect time to do something.
I would like to share some Real Estate projects and concepts that are booming today. The housing market is not lousy, it is simply different.
· Rehabs
· First Time Purchase
· Investment Purchase
· Home Equity Lines of Credit
Notice that I am not suggesting in any of these concepts that you sell any of your property. You should never sell real estate in a down market unless you really have to. I believe we are almost to the end of the depreciating portion of the cycle – hold on to your property.
REHABS
“Rehab” is a buzz term in our industry for any renovation you plan on doing to an existing home. If you want to add a new bedroom, expand your bathroom, build a guest house, or enclose your patio – you are basically talking about a rehab project.
Today is a great time to renovate your home. Compared to 18 months ago, rehabs are much cheaper per square foot and they get finished in a fraction of the time. In 2006, it could take up to 60 days to get the concrete delivered – not to mention the delays in framing due to the lumber shortage. I am not in the construction industry (I am a lender), but I can attest that projects that took 9 months to complete in 2006, now take about 2 months. The summertime is also a great time to rehab your house in metro Phoenix, because the delays from rain & humid weather are pretty hard to come by.
There are several ways to finance your Rehab project depending how big your project is. Sometimes drawing on a new (or existing) Home Equity Line of Credit is the best way to go for short term money. Also, “one-time” construction loans are a popular option for large scale projects. Either way, you can call me with questions because there are special programs for Rehabs to keep your closing costs to a minimum.
Here is the name of a Rehab Specialist I trust, and have worked with for several years. His name is Marten Niner. His cell phone is (602) 739-7073 & his email address is justintimecontracors@yahoo.com. Martin can both help you with the design of your project and give estimates. He is a good first step in this process.
There are many other great Rehab companies here in Phoenix, just be sure to ask for references before you commit.
PURCHASE YOUR FIRST HOME
In case you haven’t followed the housing trend this year I have great news,… it is a buyer’s market!! The next 6 months, preceding the election, could mark the low tide of property values in Maricopa County. I could not think of a better time to buy than when property is at its lowest. Buy low and Sell high are still pretty good words to live by! Take advantage of distressed property prices and have the seller pay for 100% of your closing costs. The last 8 purchases I financed had the seller paying every penny of the closing costs.
Also, 100% financing is still around. I have FHA programs with Down Payment Assistance (i.e.Nehemiah and Ameridream) that let you purchase with only $500 out of pocket. I have the 102% Rural Housing program if you would like to purchase a home in Anthem, Queen Creek or Buckeye (for $0 out of pocket). If you are not sure if you qualify, call me & I can let you know the next day.
INVESTMENT PURCHASES
Again, in case you haven’t followed the housing trend this year I have great news,…IT IS A BUYER’S MARKET!! This is probably the best time to get an investment property since the summer of 2001! A common complaint that I hear today is the inability to do 100% financing on investment homes. Well, that statement is very true; you are going to need 10% - 20% down to buy an investment property. However, you can actually purchase a home that has a positive “cash flow” now. You can find a pre-foreclosure property with $50K in equity the day you buy it. (You won’t be able to get to that 50K equity out right away, but you could leverage it to your favor in about 366 days J).
I also have a great Hard Money Lender that will allow you to purchase an investment property (that requires a rehab) and they will lend you 90% of the whole project (including the cost of the rehab). So, for 10% down you can buy a Fixer Upper, and finance the repairs all at the same time. I quoted them out last week, and they were charging only 8.875% and 1.5 points. That is a smoking deal!
HELOCs
Even though a lot of banks have run away from selling this type of product, there are still a few banks that do them very well. The advantage of the Home Equity Line of Credit has been two fold. There is the advantage of the low rate and the flexibility to use it. Today the Prime rate is 5% & I have HELOCs with rate as low as Prime -1%. That means you can borrow at a net rate of 4%. I am confident that 4% interest rate beats most credit cards, furniture loans, pool loans, fixed 2nd mortgages, and car loans. It is the most powerful debt consolidation tool available. next to inheritance
The ability to leverage a HELOC to 100% to the value of your home has basically disappeared, but 85% is still available. If you have $10,000 in revolving debt and Equity in your home you should think about consolidating.
I am looking towards a great summer both socially and professionally. If you have any questions on this material, or just want to say “Howdy”, feel free to give me a call or an email. The line about inheritance was a joke – I am trying to keep you on your toes.
All Best!!
Jim
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
www.jimcunninghamcff.blogspot.com
http://activerain.com/jcunningham
Tuesday, January 22, 2008
What did todays rate cut mean??
Today’s prime rate cut of .75% means that mortgage rates are going to continue to drop even lower,.. Right? Not Necessarily!!!
As much as I hope that rates continue to drop for homeowners, this rate cut does not mean that the 30 year rates will go down immediately. Rates have actually dropped significantly over the last 3 weeks on the assumption that the Feds were going to drop the Prime rate at least .50% (and some speculated that it might be as high as 1%). Had the Feds only dropped the rate .25% today, rates would actually have gone up today due to the over speculation from the previous weeks.
Please note that 30-year fixed rates correlate directly to long term bond yields, not the Prime rate. Thus, the outlook for the future of our economy is the most important factor in what 30 year rates do today,.. And unfortunately that is very subjective.
SO WHAT DOES THAT MEAN TO YOU??
The good news is that rates are as good as they have ever been in the last 6 years. If you need to refinance out of an ARM do it now. In fact, my advice for the last 6 years has been pretty consistent, regardless of the market. IF IT MAKES SENSE TO REFINANCE OR PURCHASE TODAY – DO IT. These markets are very difficult to predict, and loan programs are changing (for the worse) every day. I would rather you Ieave .125% on the table by refinancing now, than losing .25% by waiting too long, or worse… losing your ability to refinance.
Arm yourself with knowledge!
Jim
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
www.jimcunninghamcff.blogspot.com
http://activerain.com/jcunningham
As much as I hope that rates continue to drop for homeowners, this rate cut does not mean that the 30 year rates will go down immediately. Rates have actually dropped significantly over the last 3 weeks on the assumption that the Feds were going to drop the Prime rate at least .50% (and some speculated that it might be as high as 1%). Had the Feds only dropped the rate .25% today, rates would actually have gone up today due to the over speculation from the previous weeks.
Please note that 30-year fixed rates correlate directly to long term bond yields, not the Prime rate. Thus, the outlook for the future of our economy is the most important factor in what 30 year rates do today,.. And unfortunately that is very subjective.
SO WHAT DOES THAT MEAN TO YOU??
The good news is that rates are as good as they have ever been in the last 6 years. If you need to refinance out of an ARM do it now. In fact, my advice for the last 6 years has been pretty consistent, regardless of the market. IF IT MAKES SENSE TO REFINANCE OR PURCHASE TODAY – DO IT. These markets are very difficult to predict, and loan programs are changing (for the worse) every day. I would rather you Ieave .125% on the table by refinancing now, than losing .25% by waiting too long, or worse… losing your ability to refinance.
Arm yourself with knowledge!
Jim
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
www.jimcunninghamcff.blogspot.com
http://activerain.com/jcunningham
Friday, December 28, 2007
Bush's subprime rate freeze problem
President Bush recently signed legislation to freeze the introductory 2 year "teaser rate" on all subprime loans for an additional 5 years. The rate freeze will apply to loans taken out between January 1, 2005, and July 30, 2007, and scheduled to rise in 2008 and 2009. This is designed so that on the 25th month of a 2/28 subprime ARM your interest rate does not adjust (up) and increase your monthly payment by $100s of dollars.
Truth be told that this is nothing more than a political move. It looks like Bush is doing something substantial, but it really has no impact. This is what my father likes to call "Air & Scenery", because it really cannot help nearly as many people as they are predicting.
Consider this; one of the criteria to qualify for the rate freeze is to not have been 30 days late since the current loan has been in place. There were so many good 100% financing programs available 1 year ago that good borrowers did not have to get subprime loans for these purchases. I would speculate that 75% (or more) of the subprime loans originated 2 years ago were for legitimate subprime borrowers who had sub 600 FICO scores.
I would venture to guess that well over half of these people have been late on their mortgage in the last 18 months.This means that of all the subprime loans that are "targeted" for this interest rate relief - over 50% of them will not qualify due to their mortgage history.
This does not even consider the other criteria for this rate freeze. The sad truth is that probably less than 25% will get any benefit from this maneuver.
Arm yourself with knowledge!
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
http://www.communityfirstfinancial.com/
http://www.jimcunninghamcff.blogspot.com/
http://activerain.com/jcunningham
Truth be told that this is nothing more than a political move. It looks like Bush is doing something substantial, but it really has no impact. This is what my father likes to call "Air & Scenery", because it really cannot help nearly as many people as they are predicting.
Consider this; one of the criteria to qualify for the rate freeze is to not have been 30 days late since the current loan has been in place. There were so many good 100% financing programs available 1 year ago that good borrowers did not have to get subprime loans for these purchases. I would speculate that 75% (or more) of the subprime loans originated 2 years ago were for legitimate subprime borrowers who had sub 600 FICO scores.
I would venture to guess that well over half of these people have been late on their mortgage in the last 18 months.This means that of all the subprime loans that are "targeted" for this interest rate relief - over 50% of them will not qualify due to their mortgage history.
This does not even consider the other criteria for this rate freeze. The sad truth is that probably less than 25% will get any benefit from this maneuver.
Arm yourself with knowledge!
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
http://www.communityfirstfinancial.com/
http://www.jimcunninghamcff.blogspot.com/
http://activerain.com/jcunningham
What is Locking a loan really mean?
What does it mean when a lender "Locks your Loan".
A common misconception people have of the locking process goes something like this,… The lender/broker asks you if you want to lock in the rate at 6% for 30 days. You agree, and then the broker calls the bank and tells them to set aside X dollars at 6% for the next 30 days. And now that you are locked, you do not have any options to “change” you loan scenario. Be aware my friends, this is not true.
To lock a loan is basically an agreement to a specific “point in time” with a lender. A good way to envision your lock is to write down the date and time that you agreed to lock your rate. Now you and the end lender have agreed to do business under the market conditions surrounding that specific lock time. If you locked right now for 30 days then you would be granted pricing on December 28, 2007 at 9:14 am for the next 30 days regardless of what happens to the "market".
Lenders can have hundreds of different loan programs available every day, and the price that bank is willing to pay brokers for loans are constantly changing. This locking freezes all of the prices given at that time, and keeps them all available to you. So, what does that mean to you??
You have the ability to change many different things in regards to your loan that do not break the lock. You can change the loan amount. You can extend the lock period (for a fee). You can change the loan program (from a fixed to an ARM). You can even change the rate if you wish.
In changing the rate you are not altering how much the end lender is paying the broker for that loan. However, you can "buy down" the rate by paying your broker a fee, or you can raise your rate and have your broker pay for some of your closing costs with the additional money he/she will get for your loan.
So why is this important??
If your loan officer tells you that you cannot change aspects of your loan because you are “already locked” – that is usually not true. This could be a red flag that you are getting into a suspect loan. Be sure to ask direct questions about your lock, and if the answers you get are unclear or vague, you should probably look for another loan officer.
Arm yourself with knowledge!
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
http://www.communityfirstfinancial.com/
http://www.jimcunninghamcff.blogspot.com/
http://activerain.com/jcunningham
A common misconception people have of the locking process goes something like this,… The lender/broker asks you if you want to lock in the rate at 6% for 30 days. You agree, and then the broker calls the bank and tells them to set aside X dollars at 6% for the next 30 days. And now that you are locked, you do not have any options to “change” you loan scenario. Be aware my friends, this is not true.
To lock a loan is basically an agreement to a specific “point in time” with a lender. A good way to envision your lock is to write down the date and time that you agreed to lock your rate. Now you and the end lender have agreed to do business under the market conditions surrounding that specific lock time. If you locked right now for 30 days then you would be granted pricing on December 28, 2007 at 9:14 am for the next 30 days regardless of what happens to the "market".
Lenders can have hundreds of different loan programs available every day, and the price that bank is willing to pay brokers for loans are constantly changing. This locking freezes all of the prices given at that time, and keeps them all available to you. So, what does that mean to you??
You have the ability to change many different things in regards to your loan that do not break the lock. You can change the loan amount. You can extend the lock period (for a fee). You can change the loan program (from a fixed to an ARM). You can even change the rate if you wish.
In changing the rate you are not altering how much the end lender is paying the broker for that loan. However, you can "buy down" the rate by paying your broker a fee, or you can raise your rate and have your broker pay for some of your closing costs with the additional money he/she will get for your loan.
So why is this important??
If your loan officer tells you that you cannot change aspects of your loan because you are “already locked” – that is usually not true. This could be a red flag that you are getting into a suspect loan. Be sure to ask direct questions about your lock, and if the answers you get are unclear or vague, you should probably look for another loan officer.
Arm yourself with knowledge!
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
http://www.communityfirstfinancial.com/
http://www.jimcunninghamcff.blogspot.com/
http://activerain.com/jcunningham
Friday, December 14, 2007
Investment Property Specialist
Did you know that real estate investing has created more millionaires than the stock market! Well, it is absolutely true, and especially in today's "depressed housing market" you can make great money with the right battle plan.
Over the last 6 years I have gravitated to specialize in Investment Property & 2nd Homes. I really enjoy educating my clients, and giving them the tools to make good business choices, in purchasing Phoenix real estate. My client’s goals range from wanting basic tax write offs, to vacation houses, to buying duplexes & fourplexes, to setting up a long term retirement plan through the management of Investment Property. Here is a short list of what you can anticipate when you hire me to work for you.
If you are considering attaining Investment Property in the Phoenix Metro Area, please do not go to your Credit Union for loan approval. Get a Specialist.
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
www.jimcunninghamcff.blogspot.com
http://activerain.com/jcunningham
Over the last 6 years I have gravitated to specialize in Investment Property & 2nd Homes. I really enjoy educating my clients, and giving them the tools to make good business choices, in purchasing Phoenix real estate. My client’s goals range from wanting basic tax write offs, to vacation houses, to buying duplexes & fourplexes, to setting up a long term retirement plan through the management of Investment Property. Here is a short list of what you can anticipate when you hire me to work for you.
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I can show you ways to purchase Foreclosure, Short Sale, and Pre-foreclosure homes and take advantage of an instant equity position.
I can show you different methods to leverage your existing real estate to acquire others.
I can help you with the cash flow analysis of operating your Investment Property.
I can show you the advantage of buying an Investment Property as a 2nd home.
I can demonstrate how to negotiate with the seller to pay all of your closing costs.
I can refer you to Real Estate Agents who specialize in only purchasing Investment property.
I can show you how to purchase real estate at an auction.
I can refinance your investment property or second home.
I have access to multiple portfolio & Hard Money lenders.
I can help you purchase Lots, Spec Homes, Jumbo, Super-Jumbo property types.
If you are considering attaining Investment Property in the Phoenix Metro Area, please do not go to your Credit Union for loan approval. Get a Specialist.
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
www.jimcunninghamcff.blogspot.com
http://activerain.com/jcunningham
What can I expect during the Refinance Procedure?
What can I expect during the refinance procedure?
The Details
Something that is often overlooked within the home loan industry is the education of the client in the steps of doing business together. As the borrower, you should want know what the process is, and what to expect from your loan officer. This is a basic account of the events that take place during a refinance transaction when you are dealing with me.
First Contact – Every loan starts somewhere, and in the technology age it is usually a phone call or an email. Occasionally, it still happens when I meet someone in public and we exchange business cards. But it seems that phone calls, emails, and internet (blog links), are common.
In the first contact we will introduce ourselves and talk briefly about what your basic goals are, and how soon (ideally) you want to take action. The first contact then ends with me saying “…the next step is the application, and that will take about 20-30 minutes. Do you want to do it now, or set a time to do it later this week?”
The Application - A full application is necessary to give you (the borrower) accurate information and loan options. There are hundreds of factors that lenders (banks) take into consideration when approving loans and these should all be identified in the application. The method I prefer, to get the most accurate information, is to interview you over the phone.
The questions that I ask are things you will usually know off the top of your head. I want your Social Security #, work history for last 2 years, information on your home, and basic financial information. As you answer the questions, I enter them directly into my computer. The next part of this phone application is when I ask permission to pull your credit report. We will then briefly review your credit report to identify strengths, weaknesses, and find any inaccuracies in it. I will also tell you your credit scores and even give you a copy of your credit report if you wish.
The last phase of the application is when we discuss your goals in more detail. Typical questions are,… Do you want to simply lower your payment (rate & term) or do you need cash out for debt consolidation or home improvements? How long do you see yourself in that house? Do you want to keep it as an investment property when you move? Do you want to leverage this property to buy additional property? Etc… Some people have simple goals and some are quite complex. In some cases, people just want to know what their options are.
At the end of the application, I will tell you how much time I will need to produce your loan options. Usually, I need 24-48 hours to get back with you – but I will urge you to call me if other ideas or questions come up during this planning window.
Loan Options – At the conclusion of my analysis, I usually come up with one (or more) solutions that will make sense for you (the borrower) to pursue. To make things easier for you to understand, I will email one (or more) Good Faith Estimates (GFE) to you before our upcoming phone call. You will be instructed to print the Good Faith Estimates so that we can review them together over the phone. I always recommend that you print the Good Faith Estimates so you can take notes on them.
We will then review the Good Faith Estimates over the phone, and I will explain the loan program, fees, interest rates, escrows, and estimated payments until you (the borrower) are comfortable with all of the information on the Good Faith Estimate. This process could take a few minutes for some people, whereas others can take well over an hour to understand all of the concepts of this transaction. We will not move forward to the next step of the loan process until I feel you are comfortable with this material.
Also, please note that sometimes my conclusion is that you should not refinance right now, and we revisit this idea in 6 or 12 months.
At this point you (the borrower) will tell me one of three things. All of which are OK.
· You like an option you see, and want to move forward
· You would like a day or two to review the options before choosing
· You would like to either see more options or end the pursuit of refinancing
Once you have made the decision to move forward, we can either Lock the interest rate or Float. Locking is a simple as telling me “I want to lock this rate”.
Locking - This term refers to how we secure the interest rate on your new loan. The bank that your loan is going to, will allow us to “lock in” today’s interest rate that they are offering. They will guarantee that specific rate for a fixed period of time, typically 30 days. I recommend locking the rate at this time and begin processing the loan.
You also have the option to Float. Floating means that you are not locking in today’s rate – rather, we will see what the market does over the next few days (or weeks) and try to get a better rate. We can do this for you in hopes of bettering your situation, but it is a gamble and there are losers.
The truth is that interest rates change every day, and even the savviest financial expert cannot tell you what is going to happen to rates. We can make educated guesses on the future of interest rates, but there are so many variables that affect the market that we can often be wrong. My advice to everyone is, “…If the loan makes sense with the rate you see today, you should lock that rate and move on.”
Send You the Application - You were probably wondering when you were going to get this. Well, after we agree on a Loan Option, I will send you the application and it will be specific to that Loan Option. When you receive the application you will notice that it has already been filled it out with your information. As you review the application you will proofread the answers you gave me, sign it, and send it back.
There will also be a cover letter attached with the application that gives you a list of additional documentation that I will need. This list typically requests items like Pay Stubs, Tax Returns, Bank Statements, Photocopy of Your Driver License, etc… There will also be a return envelope for you to return the application and copies of the items I request. If there are any areas that are not perfectly clear we can review them at this time.
Processing - This is a general term in lending that can mean so many things. In this case I am referring to the internal paperwork that I request on your behalf in addition to your application. We can have dozens of items to collect for your loan, but the big ones are your Appraisal, Title Report, Home Owners Ins., Loan Payoff Amount, HOA, Flood Certification, and Property Tax info. Aside from the Appraisal, all of these items get collected by me without any effort on your part.
The Appraisal does require that the appraiser comes to your home for a brief inspection. He will take pictures of the inside of your home & possibly measure some rooms. Most appraisers will take less than 20 minutes of your time for this inspection. I will have the appraiser to contact you by phone to pick out a time that works well for both of you.
Once my processing is complete, and I receive your application back with the requested documentation, we enter a new stage called Underwriting.
Underwriting – The bank that will be servicing this loan always requests that the loan gets underwritten before they fund it. Underwriting is the process of a special person reviewing all of the information & documentation to verify that all of the loan requirements are met. This process of underwriting usually takes a few hours, however it can take several days before the underwriter can see the file due to their current volume, or where they are physically located.
During the underwriting process, the underwriter can request additional documentation from us if they have any issues with the loan. This additional list of documentation is referred to as “conditions”. In most cases, I will handle all of the conditions myself. On occasion, I may call you to get me more info on something, or to write a letter of explanation to the underwriter.
Once all of our conditions are “satisfied”, we can now move on to you signing the documents on your new loan.
Signing the Documents – Here is when I call you with the good news that your loan has been approved, and to schedule a time for you to sign the final loan Documents. This usually takes place at the Title Company and will take from 30 – 90 minutes depending on how many questions you may have. Be prepared to sign your name about 100 times. If your schedule does not permit you going to the Title Company, I can have a mobile signer come to your home or office at your convenience.
This will actually be the very first time that you see the final numbers on the loan. The more important numbers would be your monthly payment and how much money you will be getting. Up to this moment, everything you have seen in the application and the good faith estimate are truly estimates. Now that you are seeing the final numbers for the first time, you are given a Recission Period to make sure that you are OK with all of the final number you see.
Recission Period - This is basically a 3 day period that begins the day after you sign. It is design for you to reflect upon the numbers you experienced at the signing. The goal is to give you ample time to opt out of the loan if you do not like what the final numbers are. The loan will not fund and you will not be able to collect any money from this refinance until the recission period ends and the loan Funds.
Please note that if you are in a hurry to get the money, that you cannot waive the recission period – and you have to wait the 3 days to get you money.
Funding - The rescission period has ended and the bank has funded the loan. Funding is the act of receiving a wire of money from the bank to the Title Company. I will give you a call and let you know that the loan has funded and the process is complete (or in the case you are cashing out) you can collect your money now. Typically in a cash out scenario, the Title Company will ask you at the signing if you want them to mail the check, hold the check for you to pick up, or if you want a wire transfer to one of your bank accounts.
For those of you who were consolidating your debt, and needed to pay some debt at closing to qualify, those checks will be mailed out by the Title company on this day as well. Congratulations, your refinance is over. Only one thing left to do… refer me to your friends and family. Over 75% of my business is by referral, so do not be surprised when I ask you to refer me if you are pleased with this experience.
Timeline – A typical refinance will take about 3 to 4 weeks to complete from the day I take your Application over the phone. Sometimes we can speed up this process, but do not expect to get your refinance completed in less than 12 business days.
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
www.jimcunninghamcff.blogspot.com
http://activerain.com/jcunningham
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