Renovation Mortgage

Why a Renovation Mortgage Could be Perfect for Your Purchase

Numbers you should remember: $110k, $50k and $220k

In this 2017, inventory challenged market, a renovation mortgage is becoming more and more of an option for you to turn an ordinary house into the home of your dreams.

What is a Renovation Mortgage?

Simply (as possible) put, a renovation mortgage is a transaction where you finance in the improvements. However, in order for the lender to take on the risk, the funds are held in escrow and disbursed in progress payments as the work is completed, phase by phase.

The name of the products are either a 203k (FHA) or Homestyle (Conventional)

 

So, how does a Renovation Mortgage work?

In the case of a purchase, you can buy a beaten down home, usually a foreclosure or a home that is dated or otherwise in some state of disrepair.

Purchase Price $110,000

You can get a bid from a contractor for say $50,000 to improve the home to your specifications.

This means you’re financing $160,000.

After the home is complete, the home then becomes worth say $220,000.

Why might this be the perfect option for you in today’s housing market?

In every corner of the real estate market, all we are hearing is “inventory shortage, inventory shortage”! This option can help you turn the house that no one wants, into the home you love!

Buy a home for less than rent

Buying a Home for less per Month than your Rent by the Numbers

This statement always raises an eyebrow…or 10, when I say in this market, with just a moderate down payment, you can buy a home for less than what you pay in rent.
 

Buy a home for less than rent

This is how it comes out by the numbers:

Let’s take a $175,000 house in this market, assuming a 5% down payment.

Principal and Interest  @4.25 817.88
Taxes @1.25% 182.29
Insurance  100.00
Mortgage Insurance    81.74
Total     $1,181.88

 

Lets compare that to a reasonable rent payment in this market of $1,250. This is how we come to prove the statement that you can buy a home for less than your rent.

Even further, after the tax benefits of mortgage interest, and the doors which this immensely valuable deduction opens, the net effect means an amazing savings to the home buyer over renting.

For more information, check out HomesteadU

I Didn’t get the Cash Out I Wanted on My Mortgage Refinance

I Didn’t get the Cash Out I Wanted on My Mortgage Refinance, What can I do?

I Didn’t get the Cash Out I Wanted on My Mortgage RefinanceSo those borrowers who would like to refinance and pull “Cash Out” of your home but were turned down or told the home didn’t appraise for enough, there are some options which you can do fairly quickly to change your outcome.

1. Increase your credit score.

Often, lenders have a limitation on how much cash they can lend, many times, it may be due to credit score. For example, you may be able to borrower up 70% of your home’s value at a 640 score on a conventional loan, but if you have above a 700+ score, you may be able to go up to 85%

2. Apply for a renovation loan.

Many borrowers just want the cash for home improvement, unaware that a renovation loan is what they need. In some cases a renovation loan appraisal can yield a much higher value because it can value the home, “subject to” the improvements being done which is rare. Due to the their technical nature, a renovation loan isn’t common. However, they can be well worth it, with the right circumstances.

3. Apply for a HELOC

A HELOC is a Home Equity Line Of Credit. This is technically a 2nd mortgage but has a lot more flexibility to pull cash out and repay. They also can go to a higher Loan-To-Value than most other products.

So, what do you do if this is you? Like anything when you are dealing with professional services…get a second opinion and ask them about any of the above options.

HUD Homes

When the Going Gets Tough the Tough Buy HUD Homes – Part 1

When first time homebuyers start their search for a new home many are hesitant to consider looking at HUD homes because they are under the misconception that such properties

aren’tworth as much because they are located in blighted areas. This isn’t always true. The current housing market is flooded with HUD government foreclosures in areas at every price point, making a HUD home a viable option for achieving homeownership. Here are some things to consider when it comes purchasing a HUD home.

The good news about shopping for HUD homes is that there are plenty available on the market today. With so many HUD homes out there you’re bound to find one you like, making the dream of homeownership a reality sooner and more affordable than you might think. Finding the HUD home that’s right for you is no different than buying any other home — it takes the same amount of research. Unlike other homes on the market, a real estate agent is the only person who can legally show you a HUD home. Working with a realtor and sharing your wish list and desired area with them is the best way to find the HUD home that’s right for you.

There are government foreclosures in cities all across the country. If you have a specific area or neighborhood in mind, there’s a good chance you’ll find a HUD home in that area and at your desired price point. In some cases the previous owner has simply defaulted on their loan and moved out, leaving the house in excellent condition. However, there are some instances when the home has sustained damage. But if you’re handy, you may be able to benefit from purchasing a HUD home that comes with money in escrow with repairs or specific programs that offer funding for rehabilitating and repairing HUD properties.

Many first time homebuyers never even consider a HUD home because they believe it will be difficult for their bid to win against real estate investors. The truth of the matter is owner occupant buyers have an advantage over investors because investors are not allowed to bid on HUD homes until the property has been listed for 30 days. Working with a real estate agent to submit a competitive bid that’s more likely to be accepted is the best strategy.

Many first time homebuyers save a long time to come up with closing costs and escrow fees. Fortunately, help is available for these expenses when purchasing a HUD home. There are some cases when HUD will pay up to 3% of closing costs for buyers who have negotiated for it in their bid for the home. And depending on the situation, HUD will also pay the escrow fee, potentially saving homebuyers $350-$900. Savings like these make a huge difference when it comes to making the purchase of your new home more affordable.

In “When the Going Gets Tough the Tough Buy HUD Homes – Part II,” we will discuss due diligence, “As Is” foreclosures and things to consider when looking at properties that have been on the market for several months.

How to Calculate Your Mortgage Payoff

It’s a glorious day when the home mortgage is paid off. No longer does the bank have a claim on your home. You are the sole owner. Getting to that point takes time and payment after payment. Many people don’t live long enough to see that day, and others see it quite often as they pay off the mortgage every time they refinance the home.Continue reading

Buying a Home with No Money Down – USDA

Years ago, it was very easy to purchase a home with no money down, or 100% financing. Then this little thing hit called the “mortgage meltdown” hit in 2007 and everything changed where almost every program requires a borrower put some type of down payment on a purchase. However, there are still certain types of mortgages that will finance 100% of the purchase price of your home, they are a US Department of Agriculture(USDA) mortgage and a Veterans Administration(VA) mortgage. We will cover those today. Continue reading

Securing a Home Loan with Bad Credit – Part II

In “Securing a Home Loan with Bad Credit – Part I” we explored mitigating factors borrowers should consider highlighting when it comes to securing a home loan even when you have bad credit.  In addition to highlighting the financial assets you do have, your job security and proving your self-discipline as a saver rather than a spender, there are four other factors you should also highlight.
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Securing a Home Loan with Bad Credit – Part I

When it comes to securing a home loan today one of the biggest misconceptions is that you need to have an excellent credit rating, a large down payment and low debt-to-income ratio with steady significant income.  But the truth is home ownership can happen even if you have bad credit due to a foreclosure or bankruptcy or if you have previously been turned down for a loan.  Here are some things to keep in mind.
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Bank vs Mortgage Lender: What’s the Difference?

The Bank vs Mortgage Lender Difference

Homeowners seeking financing often ask what the difference between a bank and a mortgage lender is when it comes to doing a home loan. Whether it is a refinance home loan or a purchase home loan, there are distinct differences. A bank, as most people are very familiar with, primarily service checking accounts, savings accounts, CD’s, car loans, and sometimes “Home Equity Line of Credit” second mortgage loans. Some may even do first mortgage position loans, though not all. A Home Equity Line of Credit, also known as a HELOC is a secured home loan that is in second lien position to the primary first mortgage loan. This is referred to as a 2nd mortgage. A HELOC is usually a variable rate loan based on “Prime Rate”, which is an index based loan. Continue reading