Can be used by investors
Conventional financing (less strict than government loans)
Can combine the purchase and renovation or current liability and renovation into one loan.
Required investment based off total cost (acquisition/balance + rehab)
20% down for 1 unit
25% down for 2-4 units
Can be used on high-rise condos (203k’s can’t)
Loan sizes up to the conforming limits for your area
Can be used to close on homes deemed “non-financeable”
Cash-out Investor Rehab loans allowed (with appropriate seasoning*)
Rates 1-1.5% above current market as opposed to hard money lending
Only six months PITI reserves required on subject property
Can fund in all fifty states
A few examples of projects that would be ok:
1) $50,000 cash purchase and a rehab for $150,000 immediately after on a four unit. We would use the equity from the cash as the required investment and the rest would be financed.
2) $10,000 purchase with $140,000 in rehab on a condo (30k down required @ 20%)
3) Free and clear property where renovations already began but funds were running low. Cash-out can recoup initial costs and still take funds out to renovate.
Information provided by:
Rob Weber
Home Mortgage Consultant
Renovation Specialist
Wells Fargo Home Mortgage
511 W North Avenue
Chicago, IL 60610
312.274.4136 Office
847.404.7006 Cell
866.512.0551 Fax
Rob.Weber@wellsfargo.com
www.robweber.com
First-time home buyers who purchase a home before December 1, 2009 may be eligible to take advantage of an $8,000 tax credit as part of the American Recovery and Reinvestment Act of 2009.Qualifying first-time home buyers may claim a tax credit of ten percent of the purchase price, up to $8,000, or $4,000 for married individuals filing separately. The tax credit begins to phase out for those whose adjusted gross income exceeds $75,000, or $150,000 for joint filers.
Buyers must purchase a home before Dec. 1, 2009 to be eligible and the credit may be claimed on a home buyer’s 2008 or 2009 tax return. Filing an amended 2008 return after purchasing a home provides an option to buyers who wish to receive the credit sooner.
Unlike the previous $7,500 credit available to first-time buyers, the credit outlined in the American Recovery and Reinvestment Act of 2009 does not have to be paid back as long as the home remains the buyer’s primary residence for at least 36 months after the date of purchase. First-time buyers, for the purpose of this credit, are those who have not owned a home in three years.
If you or anyone you know would like to take advantage of this program by purchasing a home, please do not hesitate to let me know.
In the midst of the mortgage meltdown, Fannie Mae changed it guidelines limiting investors to a maximum of four mortgages. This limitation affected many investors’ ability to secure financing with reasonable pricing. However, it seems that Fannie Mae has had a change of heart.
Effective March 1, 2009, the four mortgage limited is being lifted. As stated in the February Announcement, “Fannie Mae is committed to providing financing opportunities for high-credit quality, bona fide investors. Experienced investors play a key role in the housing recovery and Fannie Mae’s continued support for investor borrowers is consistent with its mission to provide stability, liquidity, and affordability to the nation’s housing system.” The new limit will be increased to a maximum of ten mortgages.
This financing tool is only for the experienced, responsible investor. A 720 minimum credit score is required, including 25% down on 1-unit purchases and 30% down on 2-4 unit purchases. In addition, the reserve requirements are even more stringent. If the borrower owns one to four financed properties (including the subject property), the borrower must have six months reserves for the subject property and two months reserves for each of the other financed properties. If the borrower owns five to ten financed properties (including the subject property), the borrower must have six month reserves for the subject property and six month reserves for each of the other financed properties.
It is important to note, that Fannie Mae has also expanded the definition of reserves. Normally reserves are measured by the number of months of principal, interest, taxes and insurance (PITI) payments that a borrower could make with personal financial assets. This definition has been expanded to include all components of the monthly housing expense:
PITI, ground rent, special assessments, owner’s association dues (excluding utility charges for individual units), cooperative corporation fees (less the pro rata share of the master utility charges for servicing individual units), and any subordinate financing payments on mortgages the property secures.
The last guideline to address is the Multistate 1-4 Family Rider. This rider is required for closing of all mortgage loans secured by an investment property. The rider authorizes the transfer of rents and revenues to the lender in the case of default.
I must admit, that as a mortgage professional, it was music to my ears to hear and read about Fannie Mae’s new policy updates. I know many investors that were bound by the four mortgage limit who are now excited about the opportunities that exist in the market place. If you are an investor or have been thinking about investing in real estate, now is the time to take action. Pick up the phone and call an experienced loan originator to help you get started.
________________________________________________________________ About the Author:
AC, the Mortgage Closer, is a licensed loan originator in the Chicagoland area. For more information, visit her website at www.ownsomethingtoday.com or her blog at www.realmoneytalks.net.
I wrote an article back on September 24th for InvestWithPassion.com, before the $700 billion Plan (TARP) was approved - which essentially layed out the reason why we needed it and what the potential consequences were without it. (very informative article, you should read it). Shortly thereafter, the plan was approved and it seemed we were heading in the right direction. I don’t think anyone believed that the plan would immediately fix all the problems with the economy, however it was intended to be a start.
According to Neel Kashkari, Assistant Secretary of Treasury, the funds were to be used in the following areas:
Mortgage-backed securities purchase program: Identify which troubled assets to purchase, from whom to buy them and which purchase mechanism will best meet the policy objectives.
Whole loan purchase program: Identify which types of whole residential mortgage loans to purchase first, how to value them, and which purchase mechanism will best meet the policy objectives.
Insurance program: Establish a program to insure troubled assets (mortgage-backed securities and whole loans).
Equity purchase program: Design a standardized program to purchase equity in a broad array of financial institutions.
Homeownership preservation: When mortgages and mortgage-backed securities are purchased, every possible opportunity to help homeowners will be explored, including working with borrowers, counselors and servicers to keep people in their homes.
Executive compensation: The law sets out important requirements regarding executive compensation for firms that participate in the TARP - therefore define the requirements for financial institutions to participate in three possible scenarios: One, an auction purchase of troubled assets; two, a broad equity or direct purchase program; and three, a case of an intervention to prevent the impending failure of a systemically significant institution.
Compliance: The law establishes important oversight and compliance structures, including establishing an Oversight Board, on-site participation of the General Accounting Office and the creation of a Special Inspector General, with thorough reporting requirements.
Sounds like an overall solid plan with potential, right? Well, have you ever heard the term “bait and switch”? It is a term used frequently in the mortgage industry and it usually unfolds at the closing table. Clients (borrowers) are given acceptable fees/closing costs at the initial time of application, however when they get to the closing table (approximately 30 days later) those costs have increased considerably. Usually, because of the emotions involved in closing on the house, this change is overlooked (somtimes intentionally and other times unintentionally). This is an unethical way of doing business and many of my counterparts don’t see the problem operating as such. This is exactly what I believe Treasury Secretary Henry Paulson and the Kashkari team has done here. If you remember, Congress denied the bill several times partially because it did not include any relief for homeowners and it did not establish any restictions on “golden parachutes” for executives. And it was not moving at all until these issues were addressed - hence the final proposal laid out above.
Now in a recent press conference, Paulson states:
“As credit markets froze in mid-September, the Administration asked Congress for broad tools and flexibility to rescue the financial system. We asked for $700 billion to purchase troubled assets from financial institutions. At the time, we believed that would be the most effective means of getting credit flowing again. During the two weeks that Congress considered the legislation, market conditions worsened considerably. It was clear to me by the time the bill was signed on October 3rd that we needed to act quickly and forcefully, and that purchasing troubled assets - our initial focus - would take time to implement and would not be sufficient given the severity of the problem. In consultation with the Federal Reserve, I determined that the most timely, effective step to improve credit market conditions was to strengthen bank balance sheets quickly through direct purchases of equity in banks.”
In other words, we changed our mind and absolutely none ($0) of the $700 billion will be going toward helping homeowners as originally agreed upon. Now it seems to me that he never had any intention of deviating from his orginal plan which did not include assisting homeowners. Instead, once he realized that the original plan was not going through, he decided on the old “bait and switch” technique. I don’t understand, well yes I do understand, why Paulson and his team feel they can start to repair the problems with the economy without addressing the foreclosures - one of the underlying reasons we are in this perdicament.
I remember, a couple of months ago my brother borrowed my vehicle and I ended up driving his for a couple of days. While his vehicle was in my possession, the battery died on me. I had the vehicle towed to a service station and was told the battery had been drained due a faulty alternator. Now I had no clue what he was talking about and asked “so can I just purchase a new battery and be on my way.” The mechanic advised that I could obtain a new battery and the car will probably run for a short period of time, however if the problem with alternator is not addressed - the new battery will eventually be drained also. Eventhough I know very little about cars what he told me made sense, common sense. So I had the alternator and the battery replaced and the car was and still is running fine…
So if we apply that analogy to the current economic situation, essentially Paulson and his boys are trying the replace the battery without addressing the problems with the alternator. Doesn’t it just make sense, as opposed to giving the banks money (”strengthen bank balance sheets”) that they help the homeowners in foreclosure that are causing the bank’s financial problems? Can’t they see that if they start with the homeowners - that this will eliminate the bad debt that the banks are holding and therefore addressing the root cause of their financial problems - common sense. I can remember years ago, my grandmother telling me - “common sense isn’t so common.” As I’ve grown older, I see this more and more in everyday life. Could it be that people sometimes allow greed and power to control their actions? Or maybe it is as Jim Cramer (whom I love) stated a couple of months ago - “THEY KNOW NOTHING!”
Watch Cramer - THEY KNOW NOTHING!!!
____________________________________ About the Author AC Clinton, the Mortgage Closer, is the licensed loan originator, investor, author and entrepreneur. She believe’s that ownership of Real Estate, Stocks/Bonds, Business is the key to obtaining financial independence - Ownsomethingtoday.com.
Some people believe that long gone are the days where you can walk into a property and have equity. Never make an assumption. I have a client that is 24 years old and last week she closed on a spacious single family home that comes with 40k in equity.
11229 S. Parnell in the Roseland area was an REO property that underwent numerous price reductions. I believe a lot of buyers viewed the third bedroom as being small. My client and I viewed it as the perfect home office with plenty of windows to bring in natural sun light.
It takes vision to succeed in the world of foreclosures, short sales, auctions and REO properties. I’m proud of my client because she took a calculated risk which will provide a beautiful home for her and her son. In addition it’s an excellent start to a college fund. Imagine if we all bought our first property at age 24 that came with equity.
All it takes is one property for you to start in the right direction. Now is an excellent time to buy. Call us at 773.454.0274
Coffee or Not, the Bronzeville Coffee house has become my favorite spot to meet with clients and discuss the abundance of REO properties in the area which if managed properly can turn into gold mines. Why? The Bronzeville Coffee House you ask. Well it’s located in the heart of some of the most sought after Single Family Homes, Multi Unit Buildings, and Condo’s. I’ve never had a problem with parking, and the muffins and smoothies are delicious.
I don’t really go for the coffee but, I do buy something because I use their storefront as a regular meeting spot to discuss and show (Free Wi-Fi) what’s HOT-Foreclosures. I love the facts that with a little sweat equity my buyers are making out like bandits. They say it’s a depreciating market but my buyers are amassing a 100k (+) in equity once they complete the renovations on the numerous properties they are acquiring.
Next week we will close on yet another 203(k) loan where my first-time home buyers will have a 135k in equity after they convert a foreclosed three unit brownstone into their single family dream home. Talk about happy clients.
Looking to Buy or Sell in the Bronzeville, North Kenwood, Oakland, Grand Boulevard, Woodlawn, or Hyde Park area my team is here waiting to serve you. Now is an excellent time to buy.
Investors come in all shapes and sizes, whether you are a novice or an old seasoned professional you can always use the expertise of a Realtor®. All real estate licensees are not the same. Only real estate licensees who are members of the NATIONAL ASSOCIATION OF REALTORS® can be called a REALTORS®. We proudly display the REALTOR “®” logo on our business card or other marketing and sales literature. REALTORS® are committed to treat all parties to a transaction honestly. We owe our clients fiduciary responsibilities that include obedience, loyalty, disclosure, confidentiality, accountability, and reasonable care. REALTORS® subscribe to a strict “Code of Ethics” and are expected to maintain a higher level of knowledge of the process of buying and selling real estate.
Real estate transactions involve one of the biggest financial investments most people experience in their lifetime. Transactions today usually exceed $250,000. If you had a $250,000 income tax problem, would you attempt to deal with it without the help of a CPA? If you had a $250,000 law suit, would you deal with it without the help of an attorney? Considering the fact that a Realtor® is an asset would you want to take on the liabilities of doing it on your own, it would be foolish to consider a deal in real estate without the professional assistance of a REALTOR®.
But if you’re still not convinced of the value of a REALTOR®, here are a few more reasons to use one:
1. Your REALTOR® can help you determine your buying powerand plan for your investment. Lack of a plan is the biggest mistake we see new investors make. The first step is to develop a plan based on what you can afford and how long you can afford it. In today’s market, holding times have increased therefore a contingency plan must be in place in order to survive. If you give a REALTOR® some basic information about your available savings, income and current debt, he or she can help you to develop a long term strategic plan to make your investments successful.
2. Your REALTOR® has many resources to assist you in your home search. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your agent to find all available properties. Realtors® have the resources to target specific areas or property types to match the investor with a suitable property.
3. Your REALTOR® can assist you in the selection process by providing objective information about each property. Real estate isn’t easy. Investors don’t make money because they pay too much for their properties. Agents who are REALTORS® have access to a variety of informational resources. REALTORS® can provide local community information on utilities, zoning. Schools, taxes, existing mortgages etc. There are two things you’ll want to know. First, will the property provide the environment I want for an investment? Second, will the property have resale value when I am ready to sell?
4. Your REALTOR® can help you negotiate. There are myriad negotiating factors, including but not limited to price, financing, terms, date of possession and often the inclusion or exclusion of repairs and furnishings or equipment. The purchase agreement should provide a period of time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.
5. Your REALTOR® provides due diligence during the evaluation of the property. Depending on the area and property, this could include inspections for termites, dry rot, asbestos, faulty structure, roof condition, septic tank and well tests, just to name a few. Your REALTOR® can assist you in finding qualified responsible professionals to do most of these investigations and provide you with written reports. You will also want to see a preliminary report on the title of the property. Title indicates ownership of property and can be mired in confusing status of past owners or rights of access. The title to most properties will have some limitations; for example, easements (access rights) for utilities. Your REALTOR®, title company or attorney can help you resolve issues that might cause problems at a later date.
6. Your REALTOR® can help you in understanding different financing options and in identifying qualified lenders. Numerous properties are in need of work. It is ideal for an investor to work with a purchase rehab lender to insure that the property can be financed.
7. Your REALTOR® can guide you through the closing process and make sure everything flows together smoothly. Closing the deal always comes with some anxiety. A Realtor® has experience in different situations and can always shed a positive light as to what is going on until the very end.
8. When selling your home, your REALTOR® can give you up-to-date information on what is happening in the marketplace and the price, financing, terms and condition of competing properties. These are key factors to getting your property sold for the best price, quickly and with minimum hassle.
9. Your REALTOR® markets your property to other real estate agents and the public. Your REALTOR® can recommend repairs or cosmetic work that will significantly enhance the salability of your property. Your REALTOR® markets your property to other real estate agents and the public. In many markets across the country, over 50% of real estate sales are cooperative sales; that is, a real estate agent other than yours brings in the buyer. Your REALTOR® acts as the marketing coordinator, disbursing information about your property to other real estate agents through a Multiple Listing Service or other cooperative marketing networks, open houses for agents, etc.
10. Your REALTOR® can help close the sale of your home. A key to your success is building the right team of professionals. You need a good relationship with at least one Realtor®. It is impossible to build a business as an investor if you’re spending all of your time sitting at an open house. Between the initial sales agreement and closing (or settlement), questions may arise. For example, unexpected repairs are required to obtain financing or a cloud in the title is discovered. The required paperwork alone is overwhelming for most sellers. Your REALTOR® is the best person to objectively help you resolve these issues and move the transaction to closing (or settlement).
