100% Financing - Yes, It Still Exists!

Much "to do" has been made over the recent housing legislation that has eliminated the use of seller funded DAPS (down payment assistance programs). I can say this - HUD has been against these programs for years, and the new bill was their way of finally getting rid of them - at least for now. But do not fret for too long, as this is not the end all-be all. 100% Financing is alive and well.

For years (at least 20) there has been a 100% financing loan available called the USDA Guaranteed Rural Housing Loan. That's right, the United States Department of Agriculture. It's called the guaranteed loan because like its FHA counterpart, the loan is made by the bank and guaranteed (insured) by the USDA (although the USDA does make direct loans). And you don't have to be a farmer, own a cow, or live on 20 acres to be eligible. Most Lenders and banks did not want to bother with this loan because there are income as well as geographic restrictions to this loan. Also, it was much easier to just use FHA and a seller funded DAP. Well, those days are over, at least for now.

Realtors and lenders alike have been scrambling to find an alternative to FHA financing with nothing down, and right now, this is it. It does come with several caveats though. Here's the breakdown, in a nutshell:

1. This is an income sensitive program. You can not make more than 115% of the HUD median income for the area (county) you are trying to purchase in. Many borrowers will not exceed this limit. For example, a married couple with one child can make upwards of $70,000.00 per year and still qualify. (referring to Pasco County Florida) Not bad for a low income program.
2. This program also has geographical restrictions. The program is intended for homes in rural areas, but you would be surprised to see what qualifies as rural. Many suburban areas qualify. You can check the property's eligibility by going to this link: http://eligibility.sc.egov.usda.gov/eligibility
3. The program is for primary residences only; sorry, no second homes.
4. Fixed Rate only - 30 Years.
5. 102% Maximum financing - 100% of purchase price plus 2% guarantee fee.
6. Maximum 6% seller contribution allowed towards buyers closing costs.
   
7. No Monthly PMI.
8. Maximum loan amount = $417,000.
9. No cash reserves required.
10. Full Documentation Only.

As you can see, this program is not a cure all for your 100% financing blues, but this may be just what the doctor ordered for some of your borrowers who do qualify.


Posted by Joseph P. Mazzei at www.mymortgagebroker.blogspot.com

Concession or Contribution -What's the Difference?

The words "concession" and "contribution" are used synonymously by professionals in our industry, but it is important to realize that they can have two totally different meanings when it comes to a real estate transaction. Allow me to explain.

Some closing costs and prepaid settlement costs generally are paid by the property purchaser, while other costs are the responsibility of the property seller. Other costs may be paid by either the property purchaser or the property seller. When any costs that are normally paid by the property purchaser are paid (indirectly or directly) by someone else, they are considered to be contributions. All contributions may be paid by any interested party to the property sale transaction, although limitations may be imposed on the amount of the contributions. These limits are usually based on the loan to value ratio of a particular loan as well as other factors; and can vary from 2-9% of the purchase price. When a buyer obtains a loan to buy a home and a seller or other interested party pays costs on behalf of the buyer, this is referred to as a "Financing Contribution" or "Seller Contribution". This is a common practice and does not affect the purchase price as long as the contribution is within lending guideline(s).

When a seller or other interested party gives something of value to a buyer as an inducement to purchase such as cash, furniture, vehicles, vacations, personal property, etc.; this is considered a "Seller Concession" and requires a dollar for dollar reduction in the sale price. For example, if the seller were to give a buyer a flat screen television worth $1000, the purchase price must be reduced by $1000. Some items may be left behind for the convenience of the seller, such as an expensive light fixture or chandelier, as long as the appraiser states in the appraisal that no personal property was used in determining the value of the home. Under some circumstances, "Seller Concessions" are permitted without reducing the purchase price, such as on a VA loan, but the concession is limited to 4% of the purchase price. This does not affect or limit the sellers ability to pay reasonable and customary closing costs for the buyer.

As one can see, there can be a distinct difference between a "contribution" and a "concession" when it comes to buying a home. A "concession" is usually associated with an interested party paying closing costs for buyer, whereas a "concession" is associated with an interested party giving something of value to induce a buyer to purchase the home.

Is It Time To Buy?

Is it time to buy yet? You Betcha! Everything is on sale, and that's when i like to shop. Rates are still low, but have been steadily rising. I know a lot of people have been waiting for rates to come down further, but as i stated in an earlier post, i don't think they will. The economy is showing signs of recovery, and there are still plenty of affordable homes as well as loan programs out there. So if you are planning on buying a home, now is a great time.

Avoid Mistakes That Could Cost You Thousands

Selling your home can be an exhausting experience. Last minute walk throughs, inconvenient calls, price adjustments and the possibility of being stuck with two mortgages are real concerns. If you are not completely prepared you could end up losing hundreds, even thousands, of dollars in profit.

The difference between a profitable smooth transaction and a break even, miserable experience is often a fine line. In the majority of cases it comes down to the subtle know how of your professional. By utilizing the knowledge of well trained real estate professionals, you'll ensure the quick, profitable sale of your home. This report is designed to arm you with the knowledge to avoid 11 common mistakes that cost sellers serious money.

1. Refusing to Make Profit Inducing Repairs.

It always costs you more money to sell "as is" than to make repairs that will increase the value of your home. Even minor improvements will often yield as much as three to five times the repair costs at the time of sale. Your agent will be able to point out what repairs will significantly increase the value of your home. Seemingly small fix up jobs can have quite an impact.

2. Not Considering Other Financing Terms.

Cash is not always the most advantageous transaction. Income level, tax benefits and current legislation are all critical factors when considering purchase terms. Professional real estate agents are experts at home transactions and can lead you down the path that will give you the highest yield.

3. Not Provide Easy Access For Showing

Accessibility is a major key to profitability. Appointment-only showings are the most restrictive, while lock box is the least. However there are certain considerations to take into account: your lifestyle, time frame for the desired sale and the relationship with the person representing your interests. The more accessible your home is, the better the odds of finding a person willing to pay your asking price. You never know if the one that couldn't get a viewing was the one that got away. By developing a trusting relationship with an investor, he or she will show the home with your best interests in mind.

4. Priced Too Low/Priced too High.

One critical reason to find an experienced real estate investment professional is to make sure the property is priced appropriately for a timely and profitable sale. If the property is priced too high it will sit and develop the identity of a problem property. If its priced too low it could cost you considerable profits. The real estate market has subtle nuances and market changes that should be re-evaluated by your representative every 10-14 days to help maximize your return.

5. Relying Solely on Traditional Methods To Sell Your Home.

The real estate professional who is innovative and willing to offer new strategies of attracting home buyers will always outperform those who rely on traditional methods. demand around the clock advertising exposure, innovative lead generation methods and lead accountability. These services exist and should be offered on you home sale.

6. Market Timing/Seasonal Selling

Just as a broker who continually follows the trends of stock, your real estate professional continually follows trends of your real estate market.They will know if the market cycle is poised to
net you the most money. Avoid believing that property sales are seasonal, property is always selling.

7. Refusing To Make Cosmetic Changes

The prospective home buyer's first impression is the most important. Hundreds of thousands of home sales have been lost to unkempt lawns, cluttered rooms, bad stains, unpleasant odors- all the seemingly little things. Imagine you were the home buyer and clean your place from top to bottom... military style.

8. Wasting Time with an Unqualified Prospect.

Your representative's responsibility is to screen a prospect's qualifications before valuable time is lost. Be sure to align your self with the right professional and eliminate negotiating with unqualified prospects.

9. Don't Test The Market

Never put your property online to sell unless you are serious. The right professional will find you buyers and if you are harboring indecision... you will blow the sale.

10. Believing You Are Powerless To Make A Difference

Be a part of the team! Take an active role with your real estate professional to see what you can do to facilitate your sale. Networking with professional peers and personal friends often results in the sale of a home. It's s surprising how many homes are sold this way.

11. Believing All Realtors, Brokers and Others Are The Same.

With all the intricate details and critical decisions to be made concerning your home sale, should you rely on anyone but an experienced real estate investment professional? Many friends and family members have been estranged as a result of failing to meet expectations. Your home sale is a time consuming, effort related, difficult task. Maximize your profit by utilizing an experienced real estate investment professional.