The most prominent question that comes into your mind while choosing a retirement plan is “how much is enough.” George Foreman said, “The question isn’t at what age I want to retire, it’s at what income.” There isn’t any definitive figure that can help you survive through retirement and the best strategy is to build a fund that never ends.

For self-employed professionals and small business owners, investing in real estate with a Solo 401k retirement plan could be the answer. Real estate has always been a safe investment option with minimal management requirements. Solo 401k has gained popularity because of its freedom to invest in real estate and similar investment opportunities. For real estate professionals, investing in real estate is the safest investment choice and Solo 401k retirement plan facilitates it.

The investment landscape of Solo 401k investment plan is not only limited to real estate. One can invest in precious metals, private businesses, tax liens, tax deeds and hard money lending. It is important that every investment made with Solo 401k funds should be withdrawn from the Solo 401k account only. At the same time, the capital gains or interest from any such investments should return to the account only.

How to invest in real estate with Solo 401k?

• Understand the eligible property clause: Before you plan to purchase a commercial or residential property, make sure that the property satisfies the legal regulations. First, neither the investor nor any other disqualified person should be the owner of the property. At the same time, the Solo 401k account owner should not use the property for primary residence or office space, or for any other personal use.
• Open Solo 401k account: Choose a Solo 401k retirement service provider and transfer funds from your existing retirement account into the Solo 401k plan. Keep in mind that any purchase made would be under the name of the Solo 401k account.
• Use non-recourse loan for funding: Real estate transactions require large investments and if you do not have sufficient funds; you can use a nonrecourse loan for funding. A nonrecourse loan does not require personal guarantee and it considers the property as collateral.

Once you have the loan, make sure to consult qualified attorneys for the transaction and follow all the rules. The key to achieve success with real estate investments is to comply with regulations and avoid any tax penalties in the process. 

“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.”

Franklin D. Roosevelt

Franklin D. Roosevelt was able to sum together the entire thought process of real estate investors and agents in a single sentence. Real estate business is back on its track after the last recession and property prices are faring well throughout the United States.

As a real estate agent, it is quite common to ignore retirement planning and most of the agents do not have a solid retirement plan in place. In some cases, it could be lack of awareness and in others, overestimation of one’s ability to work. However, if you are to find a retirement plan that can help you in capital funding during a period of financial drought, isn’t that wonderful?

Solo 401k is a retirement plan for self-employed individuals and real estate agents can benefit a lot from it. It has comparatively higher contribution limits and one can contribute up to $53,000 in 2015 (excluding catch up contributions).

“The best time to plant a tree was 20 years ago. The second best time is now.”

Chinese Proverb

Top 3 Benefits of Solo 401k

• Higher contribution limits: $53,000 for 2015 (excluding catch up contributions)
• Flexible investment options: Real estate, private business, precious metals, tax liens, traditional stock and mutual funds
• Loan Option: Borrow up to $50,000 or 50% of fund savings

For real estate agents Loan option is one of the biggest benefits.

Solo 401k Loan Option

• Who can borrow: Every Solo 401k plan participant can borrow up to 50% of fund savings to a maximum limit of $50,000. If you have $100,000 in your solo 401k, you can borrow $50,000. However, if you have $30,000 in your solo 401k, you would be able to borrow up to $15,000 only.
• Interest rate for loan: In most of the cases, it is prime rate (3.25%) or primate rate plus 1% interest.
• Frequency of repayments: A solo 401k loan is repaid on a monthly or quarterly basis with at least one payment per quarter.
• No credit qualifications: You do not have to fulfill any credit qualifications unlike regular bank loans. For realtors, it can be difficult to get a credit during a financial drought and solo 401k loans can help them get necessary funding.
• No tax penalties: Unlike regular retirement plan, you do not have to deal with a tax penalty on borrowing from your Solo 401k until all repayments are made on time.
• Interest paid back to the account: The best part of solo 401k loan option is its low interest rate. Plus, instead of paying interest to another lender, your interest payment will be paid directly into your Solo 401k. Essentially, you are borrowing from yourself, and paying interest to yourself.

Real estate transactions involve different types of fees and Solo 401k loan option can help you handle those. For an instance, you might need money to cover legal costs or research work in the transaction. At the same time, it can help you grab crucial real estate opportunities and offer financial support.  

Exciting News! FHA Is Allowing People that Suffered through Recent Economic Hardships to Apply for a Home Loan with the FHA Back to Work Program.

In the not so distant past people had to wait 3 years or more after suffering through a financial hardship. Bankruptcy, foreclosures and other major financial disasters would sideline people for a number of years before they could buy a house again. However, all that has changed with the FHA Back to Work Program.

Previous Guidelines

For years the FHA program has helped people finance the purchase of a home with a modest 3.25% down payment. In general, the FHA rules for credit and employment history were more forgiving than conventional loan guidelines. However, there were strict rules about waiting a significant length of time after filing bankruptcy, losing a home to foreclosure, getting a loan modification or a deed-in-lieu.

New Guidelines

The Back to Work program waives waiting periods based on certain hardship situations. People that have suffered through the following types of problems are no longer forced to wait multiple years to apply for an FHA loan

* Bankruptcy (either Chapter 7 or Chapter 13)

* Short sale of previous home

* Foreclosure

* Modification of previous mortgage

* Sale of a home due to pre-foreclosure status

* Deed-in-lieu

Due to the recession of the past few years the government has given FHA the ability to relax their rules in order to help people qualify for home loans. Now people will only have to wait 12 months.

Meeting the New Qualifications

For borrowers that have faced a hardship like the ones described above they will need to meet a few qualifications.

First the borrower will need to prove that their current financial condition is recovered from the impact of the financial hardship.

Second, the borrower will need to provide proof that their income declined by a minimum of 20% for 6 months or longer. This can usually be shown by presenting federal tax returns and the supporting W-2 forms.

Finally the borrower will have to agree to complete a counseling session aimed at educating home buyers.

In addition to these items the borrower must re-establish their credit. This does not mean that the scores must be 700+. However, once the hardship has ended the borrower will need to have good payment history on all credit accounts in order to prove that they are able and willing to make their monthly obligations.

Types of Borrowers

The Back to Work program can be used for people buying their first home as well as people buying their second, third, fourth, etc. home. It can also be used with the FHA 203(k) program for people that wish to renovate or modernize a home. Even people that are currently in a Chapter 13 plan could be approved for the FHA back to work program. The court will have to grant permission for the loan and the borrower will have to meet the other requirements.

The recent recession has hit a lot of people and left a lasting impact on them. The Back to Work program is aimed to help these people put the past behind them and return to the stability of owning a home.

Additional Mortgage Information: Mortgage Home Loans Financing

What Kind of Mortgage Fits Your Needs?

No matter the state of the economy, each year the number of new mortgages underwritten reaches millions of homeowners.  Some are buying for the first time while others are downsizing or upsizing.  When rates drop, like they did over the past 2 years, many people seize the opportunity to refinance their home loan.  However, how do people decide on which mortgage to use for their specific need?  An online survey conducted by HSH.com points to some of the factors that influence consumer decisions.

Most Important Factor

It should come as no shock that the most important factor is the interest rate.  Regardless of the type of loan, the size of the loan or the customers home state, everybody is trying to get the best rate for their home loan.  In the survey mentioned above over 45% stated that the rate was the top factor for choosing a loan.

Other items, such as the length of the term and the fees also ranked high in the survey, but none was as vital as the rate.

Deciding How Much to Use for Down Payment

The ability to make a down payment equal to 10%-20% of the home’s price will give the borrower a range of products to choose from.  A large down payment and a solid credit score will usually allow a borrower to qualify for a conventional loan which has the best interest rates.

For borrowers that have a smaller down payment, their options will be limited to FHA, USDA or VA for qualifying veterans.

Choosing the Right Term

With rates at an all-time low many borrowers are actually paying more attention to the term of the mortgage loan as part of the decision process.  While the traditional fixed rate of a 30 year loan remains quite dominant more and more people are looking at different adjustable rate products.  Those borrowers that have refinanced in the past 2 years have often chosen to go down to a 15 or 10 year term in order to drastically cut down on their total interest pay back while also paying off the home sooner.

Brokers Still the Top Choice

When looking for the right mortgage loan a number of people still prefer to use the services of a mortgage broker over a local bank or credit union.  In the survey mentioned earlier over 30% of respondents claimed that they sought the services of a broker rather than another type of lender.  Since brokers typically have access to multiple lenders they can offer any type of mortgage loan and get the best rate too.

Obviously, none of these factors discussed the two biggest items facing a borrower; are they happy with the home and can they afford the mortgage payment?  Beyond those two items, the guidelines mentioned above should help any new borrower pick a loan that is right for their situation.

Additional Mortgage Info:
Home Mortgage Loans

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Assuming an Existing FHA Loan

Most mortgages have a requirement that the loan must be paid in full when the property is sold. However, FHA offers a different option to the seller and buyer. It is possible for the buyer to take over the existing FHA mortgage from the current property owner. This is a very enticing offer for someone that has a mortgage with a great interest rate. Here are the guidelines for an assumable FHA mortgage.

photo credit: 401(K) 2012 via photopin cc[/caption]

Review Existing Loan

The first thing you should do as a potential buyer is review the existing loan documents. Any loan that originated prior to December 1 in 1986 is allowed to go through a “simple assumption” procedure. This means the buyer does not have to qualify for the FHA mortgage. For loans that were originated on after the December date, the buyer will have to qualify for the loan just like any new borrower.

Negotiate a Price with the Seller

Most sellers would like to receive a large part of the equity they paid in to the mortgage over the years since they originated the loan. The price you can negotiate is really dependent on your ability to deal and the seller’s motivation for getting rid of the home. One thing that must be clear; the buyout amount given from buyer to seller cannot be financed in to the existing FHA mortgage. This is money that needs to be paid either in cash or with a loan separate from the mortgage.

It may be possible to convince the seller to finance the buyout amount. This would mean that you have two loans to repay in order to purchase the home.

Talk to a Mortgage Lender

Since you will likely have to qualify for an FHA mortgage loan, it is advisable to talk to a lender experienced with FHA loans. The lender can review your credit file, determine your monthly income per FHA guidelines and find out if you qualify for the loan.

Determine Current Loan Status

You need to find out if the current property owner is up to date on their mortgage payments. If there are any late payments, those payments are transferred to the new buyer. This can be rectified by either paying the amount necessary to get current or requesting a modification of the loan.

Inquire About Down Payment

Since FHA asks for a down payment equal to 3.5% of the price, this rule will apply to someone assuming the loan. In this case, the 3.5% is based on the existing loan balance.

If you are approved for the loan, you may proceed with the closing process. You should ask the lender to contact a local title agency to research the title to ensure there are no liens on the property other than the FHA mortgage. Additional liens will have to be paid in order to transfer the deed in to your name as owner.

VA Mortgage Program Has Good News for Veterans and Their Families

Photo credit: Tony Fischer Photography via photopin cc

Many years ago the United States decided it was a good idea to offer housing benefits for our veterans that were not attainable to other classes of people. The men and women who sacrificed time away from their families and risked their lives in defense of our country deserved the chance to buy a home with attractive features. As time has marched on and the needs of veterans have changed, the VA Mortgage program has made some changes to appeal to even more qualified borrowers.

Spouses of Deceased Veterans

Before the new law, spouses of deceased veterans could only apply for a VA mortgage if the veteran passed away during active duty defending our country or if the veteran passed away due to a disability sustained during duty. However, if the spouse can show that the veteran suffered from a disability sustained during duty for a minimum of 10 years prior to their death, the spouse can now apply for the VA mortgage.

Funding Fee for Certain VA Loans Waived

People in the military are no stranger to paper work. With every VA loan that is approved there is a fee associated with the loan. This funding fee provides money for the new crop of loans, avoiding the use of taxpayer's money.

If a veteran learns that they are eligible for disability pay due to their physical exam prior to discharge then they are allowed to waive the funding fee from the VA mortgage. Previously, a veteran had to receive actual disability pay on a regular basis before the fee could be removed.

Beyond Fixed Rate Loans

Fixed rate mortgages are great for people who are reasonably confident that they will stay in a certain home for many years. Having the mortgage payment set in stone offers stability for the homeowner. However, there are some people, such as veterans and active duty personnel, which may be on the move in a few years. For these people, getting an Adjustable Rate Mortgage (ARM) can make sense. They save money by getting a slightly lower interest rate that is fixed for 3 or 5 years. The new law makes it possible for eligible borrowers to apply for an ARM through the VA mortgage plan.

More Flexibility for Military Families and Individual Parents

For as long as the VA mortgage program has been around, one of the main requirements to the loan has been the veteran's occupancy. A VA loan states that the veteran must live in the home as their primary residence after the loan is completed. The veteran is given some time to move in to the new home, but the requirement is there. For military families in which both spouses are active duty, this can be impossible. Even harder for families that have only one parent who is serving in the military.

The Camp Lejeune act makes it possible for the children of the veteran to meet the requirement of occupancy. This means that dependents can live in the home purchased by their parent or parents through the VA mortgage while the parents sacrifice their time away from loved ones serving our country.

Differences Between FHA and Conventional Mortgages

Across the land the vast majority of home buyers use either a FHA or a conventional mortgage to purchase a property. While these loans are similar in a few ways, there are some pronounced differences. Each one has benefits that cater to a particular group of buyers. Understanding how they are different and which one is best suited to different circumstances will help buyers feel more informed about their financial situation.

FHA Loan

FHA stands for Federal Housing Authority. This agency does not make the loan itself. Instead, they insure FHA loans that are offered by approved mortgage lenders. The lender is protected in the event the borrower does not repay the loan.

FHA is committed to providing basic, conservative loans. A large number of their deals are fixed rate loans even though FHA does allow for adjustable rate mortgages.

Conventional loan

A loan that is not insured by FHA is most likely a conventional mortgage. Mortgage brokers, banks, and credit unions offer a wide variety of conventional loans. Conventional loans have more unique offerings such as interest only type of deal or a combination of a first and second mortgage used for a purchase.

Down Payments

One of the major differences among the two types of loans is the requirement for a down payment. FHA will allow buyers to pay 3.5% of the home's price as a down payment. The money used for the down payment may come from cash on hand, savings, retirement accounts or even a gift from a relative.

For conventional loans, the normal down payment is 20% of the home's value. However, there are quite a few loans that will allow a 10% or 5% down payment. The money used for the down payment must come from the borrowers own funds such as savings, investments or retirement accounts.

Private Mortgage Insurance

Both the FHA loan and conventional loan requires private mortgage insurance (PMI) if the buyer makes a down payment that is less than 20% of the purchase price. This insurance is designed to protect the lender if the loan is not repaid in full.

With a conventional loan, the PMI will be in place until the loan balance is paid down to 80% of the home's value. Typically, the PMI amounts for a conventional loan are higher than a FHA loan.

For an FHA loan, there is a fee charged at the time of the loan closing as well as a monthly amount paid with the loan payments. The monthly amount is enforced until the loan amount reaches 78% of the home's value.

Credit Score Requirements

Conventional loans have usually been reserved for customers with the highest credit scores. Due to the problems faced by the mortgage industry over the past several years, this fact is even more true today. Conventional loans rely heavily on standard credit reports offered by the major credit bureaus. Most conventional mortgages are approved by a computer system and reviewed by underwriters.

On the other hand, FHA loans will allow a slightly lower credit score. In addition, FHA will allow underwriters to go beyond the computer system and make approvals based on a borrower's complete file. Items like residence history, rental history and stable job history can persuade some FHA lenders to approve a loan for people who have scores that are slightly less than perfect.

Understanding Specific Requirements of Appraisal for FHA Loans in Wisconsin

The all-time low mortgage rates combined with affordable home prices have generated a huge growth in business for FHA mortgages. People considering their first home need to understand the specific appraisal requirements for FHA loans in Wisconsin.

Basics of FHA Appraisal

In a nutshell, an FHA appraisal is a conventional appraisal with additional requirements. The goal is to identify any potential repairs that would need to be completed within the next 24 months and have those items addressed before the loan is closed.

It is important to note that an appraiser does not review a home to the depth of a home inspector. A home inspection is still a good idea for a home, especially if it is 5+ years old.

FHA Appraisal Caveats

Only appraisers listed on the FHA approved roster are allowed to inspect homes and complete the evaluation. Before an appraiser is assigned to review a home a FHA case number will be assigned to the loan. The appraisal is valid for the next 90 days. The lender or borrower may change during that time period without the need for a new appraisal.

Any home that has undergone a conventional appraisal within the last 90 days will still need a FHA case number. In addition, the home must be re-inspected to verify FHA specific items. Here is a list of the items:

• Confirm no existence of drainage or water damage
• Ensure water pressure is adequate for the home without any leaks
• Any exterior and interior lead-based paint must be inspected to identify peeling, chipping or cracking
• Identify exterior access for each bedroom
• Insure the minimum 18” egress and ingress from the lot line to the building
• Test the heater to ensure proper working condition as well as air conditioner
• Ensure electrical outlets are in every room and in working order
• Test the fan/hood over the oven for proper working condition
• Ensure screens are present on roof vents and no more than three layers of roof material
• Determine that the electric box has at least 60 amp
• Properly note existing wiring that is exposed as well as cover plates missing from electrical boxes
• Do a brief inspection of crawl space and attic

Any issue found on the interior portion of the home needs to be either repaired or replaced. On the exterior part of the home any issue needs to be repaired or removed.

Specific Areas of Importance

Of the items mentioned above three seem to get the most attention; water problems or drainage issues, lead-based paint and the ingress/egress points. Concerning the ingress/egress points, common problems occur with homes that have a garage touching the lot line. This prevents the homeowner from accessing the exterior wall of the garage in order to paint. If this is the case the neighbor may be asked for an easement in order to grant the homeowner access.

Consultant Required for 203(k) mortgage

Buyers that are approved for a FHA 203(k) mortgage need to understand that the appraiser will be working with a consultant. The consultant must be approved by FHA. This individual will inspect the home and determine the necessary repairs and improvements and formulate an estimated cost. The appraiser will inspect the home and ensure that the consultant has properly identified all necessary repairs in order to conform to the FHA guidelines.

Homebuyers Can Use a FHA Loan to Purchase Property from an Investor

FHA has been the most popular mortgage used by Wisconsin residents looking to purchase their first home. The relaxed credit standards lower down payment requirement and higher debt ratios has allowed many people to purchase a home through this type of loan. However, investors who were in the business of buying a home to simply turn around and sell it for a profit, called flipping, always steered clear of FHA borrowers. FHA had a rule stating a home could not be sold a second time within 90 days of its last purchase. But that has all changed.

Original Intent

The primary reason for this “anti-flipping” rule was discourage fraud on mortgages. However, as time marched on it became apparent that deserving FHA buyers were being denied a home. Many homes have been bought after foreclosure by investors and repaired to make them ready for resell. The FHA ruling prevented the investors from selling and the market has struggled.

Some Rules to Keep in Mind

Although the FHA administration has decided to lift this rule, there are still other guidelines that must be followed when dealing with one of these investment homes.

• The seller of the home and buyer cannot have any type of pre-existing relationship. This could be as simple as a relative selling to a family member or as complex as a business owner selling to a partner or employee.
• In the event that the new sales price is 20% or more than the price paid at acquisition by the investor the loan may be inspected more closely to ensure the value of the property was not artificially raised.

Keep in mind that the original rule was put in place to prevent fraud. In addition, the original rule only came in to effect when a home was bought by an investor and then resold within 90 days. If the investor waits beyond the 90 day window to sell the home most of these issues will not be present.

Protection against Future Fraud

Most lenders are well aware of the abuse that has taken place in the mortgage industry over the past few years and have stepped up their lending standards to catch fraud and illegal practices. Because of the heightened scrutiny, many high ranking managers among the top lenders do not feel that this change in FHA rules will lead to a sudden burst of bad loans. The tighter appraisal restrictions, along with the general awareness of potential problems, should allow banks and mortgage companies to move forward with new FHA loans without falling victim to a scam artist.

Original Post - Using an FHA Loan to purchase from an Investor

Using FHA 203K Loan to Purchase a Fixer-Upper

Across Wisconsin there are a large number of short sale homes available to buyers.  A short sale is a home being sold for an amount less than the existing mortgage balance.  These homes often have a few cosmetic repairs that need to be made in order to make the home more presentable, if not safe.  For years the issue of repairing a home prior to purchase was a catch 22.  The bank or seller was not willing to spend extra money on a home that they are selling.  The buyer could not make the repairs because they did not legally own the home.  The FHA 203k loan solves that problem with ease.

Two Kinds of Loans

The Federal Housing Authority (FHA) offers a loan called the 203k mortgage, named after the code section where the loan is found in the FHA guidelines.  This loan is offered as a Streamline version and the regular version.  The streamline was designed to offer lower amounts designated for repairs and slightly less paperwork.  Both loans are ideal for Wisconsin homebuyers who wish to purchase a home in need of some repairs.

How the Loan Works

The loan program allows buyers to purchase a home based on the sales price.  In addition, the buyers can borrow extra money to make the necessary repairs. Once the loan is approved and closed, the extra money is placed in an escrow account.  The contractor that is doing the work will receive payment once the work is completed. This protects the borrower and the lender against problems with the repair process.

The amount needed for repairs is added to the loan for the purchase and the homebuyer makes one payment, at one interest rate, on the entire loan.  Since mortgage rates are so cheap right now it is a wonderful way to buy a home that may be priced below market value due to some simple fix-ups.

Loan Amounts

The Streamline 203k loan will allow Wisconsin homebuyers to borrow a minimum of $5,000 and a maximum of $35,000 to be used towards the repairs.  The regular 203k loan allows much more as a percentage of the sales price and the estimated appraised value after the proposed repairs have been made.  The regular 203k loan will need the involvement of an appraiser, home contractor and loan officer from the very beginning to make sure the loan and repairs meet the guidelines of the program

What Can be Done with 203k?

Wisconsin homebuyers often ask about the types of repairs that can be done with the Streamline 203k program.  The following list shows some of the more popular tasks accomplished using this type of loan

• New gutters and a new roof
• New Heating and air conditioning system or repairs to the existing system
• Plumbing updates and repairs
• Electrical updates and repairs
• Bath and kitchen remodels, to a lesser extent
• New flooring of any type; wood, carpet, tile
• Painting for both exterior and the interior
• New windows and doors
• Energy efficient appliances

The 203K loan allows many types of repairs and improvements that can greatly enhance the value of a home and give buyers a chance to purchase a place at a savings. This loan is ideal for Wisconsin short sales or foreclosures.

Original Post - Using a FHA 203K Mortgage for Rehab

This communication is provided to you for informational purposes only and should not be relied upon by you. Rock Realty is not a mortgage lender and so you should contact a FHA lender directly to learn more about its mortgage products and your eligibility for such products.

Understanding the No Money down USDA Mortgage

Buying a home in Wisconsin with no down payment is still a reality thanks to the USDA program.  The Rural Development section of the United States Department of Agriculture (USDA) has made great strides in the past two years to educate loan officers and potential borrowers of the benefits of this program.  The mortgage offered by the USDA is quite different from other programs and is a great way for people to purchase a home without a costly down payment.

Mortgage Insurance

Unlike conventional loans and FHA loans, the USDA loan does not require any mortgage insurance.  This means that every dollar of every payment is going towards the principal, the interest or the escrow for the home.

Closing Costs Paid by Seller

A conventional loan allows the seller to pay closing costs up to 3% of the purchase price.  Similarly, FHA will allow the seller to pay closing costs up to 6% of the purchase price.  However, USDA has no limit on the amount that can be paid by the seller.  This means it is possible to find a house and purchase it without paying a down payment or any closing costs.

Property Location

In order to be considered for the USDA loan a home must be located in an area designated as rural by the USDA.  However, would it surprise you to learn that of the 72 counties listed in Wisconsin, 50 of those counties are considered rural?  And the remaining 22 counties have sections that are considered rural. This means that there are numerous homes that could be eligible for this type of loan.

Income Limits

There are also some limits on the person’s income.  The USDA bases the limits on the total number of people that will occupy a home.  For example, a family made up of a mom, dad, and three children under the age of 18 will be allowed more income than just a married couple.  A Wisconsin loan officer can look up the limits for each county and let you know if you meet the guidelines.

Loan Limits

The maximum amount allowed for a USDA loan is different for each county in Wisconsin.  However, the limits are very liberal.  Some counties, such as Ozaukee and Dane, will allow qualifying borrowers to get a loan up to $230,000.

Not For Select Buyers

Some people are under the impression that the USDA loan is only for Wisconsin borrowers looking for their first home.  However, nothing could be further from the truth.  People buying their first home or their fifth home can use the USDA loan.  The only stipulation is that the property must be the borrower’s primary residence.

It has been mentioned in the news a lot in the past three years that mortgage rates are at an all-time low.  When rates are so low it is only a matter of time before they start to rise.  Take the opportunity to talk to a Wisconsin loan officer and find out if you can get a home using the USDA loan.

This communication is provided to you for informational purposes only and should not be relied upon by you. Rock Realty is not a mortgage lender and so you should contact a USDA lender directly to learn more about its mortgage products and your eligibility for such products.

Original Post - Understanding the No Money Down USDA Mortgage

Understanding the New Rules for Jumbo Mortgages

It is true that mortgage rules have become stricter in the last few years.  However, getting a jumbo mortgage in Wisconsin is still a very real possibility.  Borrowers need to understand up front the basic requirements and also how to compare loans to make sure they are getting the best deal.

In the not so distant past homebuyers could get approved for a jumbo mortgage with only a 5% down payment.  In addition, there were no strict requirements for proof of income.  As long as the credit score was 700+, the loan was as good as done.  Things have changed a lot in the past 4 years, not just in Wisconsin but all over the country.  Here are the basic requirements for anyone that wishes to borrow more than the standard $417,000 amount:

• Borrower must pay 20% of the home’s purchase price as a down payment.  The money must come from their own funds, meaning it cannot be a gift.  Borrowers should be prepared to provide copies of bank statements and investment account reports to document where the down payment came from.
• Borrowers will need to provide adequate documentation that reflects their income.  This may come in the form of paystubs and W-2 forms.  For self-employed individuals, the most recent two years tax returns will be required.
• Borrowers should be prepared to look at loans with adjustable rates.  Long term fixed Jumbo loans are possible but the rates are usually significantly higher than the adjustable loan.

Current Property Values

Before buying a home it is a good idea to talk to a Realtor® to find out about trends in property values in the area.  Many places have seen declines in the past 5 years. However, recent reports show that the overall sales in Wisconsin are keeping pace with last year’s numbers.  And the drop in values seems to have hit a low point.  This means that most places like Madison should see at least stable values for the upcoming year and hopefully a rise in values in coming years.

Limits on Intended Purpose

People can only get a jumbo mortgage on a home that they intend to occupy as their primary residence.  This means that for people looking to buy a vacation home or a rental property will not be able to use a Jumbo mortgage for their purchase.

Focus on Other Debt

One of the biggest changes for approving jumbo mortgage applications is the attention given to debt-to-income ratios.  The current guideline is 38%. This number is calculated using the borrower’s gross, monthly income before taxes are deducted.  Lenders want to make certain that borrowers can comfortably afford the large house payment and still have discretionary income left over.

For those borrowers that are considering a jumbo mortgage in Wisconsin the current mortgage rate climate seems like a good fit for buyers.  Low rates along with lenders who are still pushing these loans make it a good investment for a savvy buyer who has a good handle on their finances.

This communication is provided to you for informational purposes only and should not be relied upon by you. Rock Realty is not a mortgage lender and so you should contact a lender directly to learn more about its mortgage products and your eligibility for such products.

Original Post - Understanding the Rules for Jumbo Mortgages

Qualifying for VA Mortgage

For Wisconsin residents that have previously served our country in the armed forces or in the reserves, the VA mortgage is a great way to purchase a home.  This loan is offered to qualified veterans with no money down and no mortgage insurance, making it very affordable.  And the rules for determining who is eligible are quite liberal as well.

Minimum Service Times

People who have served in the Coast Guard, Navy, Marine Corps, Air Force or Army can be considered eligible for a VA loan if they have been discharged and met at least one of the following service times

• At least 181 days of military service during peacetime
• At least 90 days of military service during wartime.

This rule is slightly different for people that enlisted past September 7, 1980 as well as any officer whose service began past October 16, 1981.  For these people they must have completed 24 months of service.

Current Enlisted Military

People that are currently enlisted in full duty for one of the branches of the armed forces can also use the VA mortgage.  After the person has completed 90 days of active service they can apply for a loan.

Service Time for Reserves

Wisconsin residents who have served in the various reserve branches can also be eligible for a VA mortgage.  This applies to any of the Reserve components established with the Marine Corps, Army, Air Force, or Navy as well as the Air National Guard, Coast Guard Reserves and Army National Guard.  For these people they must serve at least 6 years in their chosen Reserve before they are eligible for the VA certificate.

Benefits for Spouses

The spouses of veterans who perished in wartime may also be eligible to apply for a VA mortgage loan. The person would have to meet the other requirements regarding credit and income in order to be approved for the mortgage.

Other Exceptions

There quite a few exceptions for veterans who were not able to complete the minimum service requirements.  If you fall in to one of these categories then you may also be eligible for a Wisconsin VA loan.

• Any person that became disabled during service and received a discharge due to the disability
• People who were discharged after completing only 20 months of a 2 year agreement may be eligible if their discharge was at the convenience of the federal government.
• Discharged due to a personal hardship and have completed either the 181 days in peace or 90 days in war
• Discharged due to a pre-existing medical issue and the person completed either the 181 days in peace or 90 days in war

As you can see from the previous listing, several different people that have served in the military can be eligible for a VA mortgage.  With rates so low, it is a great time to buy a home in Wisconsin and enjoy low payments for years to come.

This communication is provided to you for informational purposes only and should not be relied upon by you. Rock Realty is not a mortgage lender and so you should contact a VA lender directly to learn more about its mortgage products and your eligibility for such products.

Original Post - Qualifying for VA Mortgage

This is an excerpt from a book I am writing called "Buyers Guide to Foreclosures"  (generic title but to the point).

Financing can be a major hurdle for some buyers wanting to purchase a foreclosure because of the condition of the home, which may keep it from qualifying for conventional or traditional FHA loans. The 203k is a great option. I encourage all agents to familiarize themselves with this loan program.

I have an urgent need for a key contact in Loss Mitigation at American Home Mortgage Servicing Inc.

The internal contacts I have are literally the most incompetent people I have ever encountered in a financial institution or loan servicing company.

They demand paperwork, it is provided, then they demand the same paperwork after acknowledging the receipt of the previously requested paperwork

Then they just scheduled the trustees sale date of our home because the requested paperwork was not sent to the correct number even though the paperwork was Correctly sent to the number listed on their letter requesting additional paperwork. REALLY!

I know this sounds absurd but it is happening right now and it is happening to me with my home. The trustees sale date has been set for mid November.

I Need A Key Contact Who Can Review The Transaction And Correct Their Error.

My wife was literally been driven to tears of frustration this morning by their blind incompetence and lack of accountibility. We have very accurate records of the doc requests, timelines kept and errors made at AHMSI. I am looking into legal options to remedy but think it makes a lot of sense to reach out to the REOPro Community for the best alternatives to fix this.

While I expect most to ignore this post due to the lack of interest since "Who cares if another home goes down" but I am hoping that someone in REOPro reads this who knows a way to get me in contact with a person at AHMSI who can fix their mistake.

I know they exist because I know several who can do the same at BofA, Wells Fargo, and Chase.

If anyone has a way to help, I really need to hear from you right away.

Someone ones told me that numbers don't lie, but they can be manipulated. Here is an example, I just read an article titled "Foreclosure Sales Decline Second Straight Month" that makes it sound like it was good news for our market and our economy. I really believe that the numbers are right, but they are not telling an accurate story.

The reason foreclosure sales are down is because the active inventory of REO properties is down due to the robo signing and other factors. I can see that in the past 12 months 90% of the REO transactions have title delays. I guess after the freeze of last year, now title companies have decided to do their job and there have been several delays, up to 7 months for titles to be clear and settlements taking place.

At least in my market in Maryland, the REO inventory has shrunk from last year, I know some brokers have downsized their staff and are now pursuing other venues of revenue like short sales and multi-level network marketing ventures.

But lets face reality the amount of foreclosure files has increase by 1% according to the same article. When I drive around I can see several empty and unkept homes that I know by experience they have been foreclose or they are in the process. I know several "home owners" who still live in their foreclose home after almost a year of the auction date, because the banks are waiting on the courts for the foreclosure ratification, etc.

Lets face it loan modifactions and the lack of control on short sales is not stopping the foreclosure train, it is barely slowing it down. It is a sad thing, but I think there is foreclosure inventory for a long time.

Several lenders, including Freddie Mac, report more than half of homeowners who lose their homes to foreclosure never answer their lenders' phone calls or letters. Instead, homeowners feel embarrassed about being in default, don't believe their lender can help, and erroneously assume that contacting their lender will cause them to lose their home more quickly.

In a press release announced earlier this week, The Short Sale Association of America (SSAA) shared results of a Freddie Mac survey that reported "6 in 10 homeowners in pre foreclosure aren't even aware of the  programs and services available to help them prevent foreclosure."

The release urges real estate professionals to reach out to distressed homeowners, knowing it is highly unlikely they will seek out assistance on their own. 

Note: lenders are still behind the times when it comes to investment properties. They claim to have loan modification and other options for investors, but typically that is not the case.

Costs Will Increase For Buyers Regardless Of Credit Worthiness

Banks Get Conservative
Risk vs. Reward

New home buyers shopping for mortgages will face these fee increases

1. Someone buying a home with credit OVER 740 with 25% or lower down payment will now pay approx .125% more in rate.
2. A borrower with a credit score over 740 refinancing to 80% of the value of their home and taking out additional cash can expect to pay an additional .25% higher in rate.
3. Anyone buying or refinancing a condominium (excluding detached condos) with less than 25% down payment (or equity) can expect an increase in rate of almost .5%
4. Borrowers without larger down payments will see slightly higher rates.
5. Buyers with lower credit scores, they can expect much higher rates.

Fannie and Freddie have learned their lesson. The politics of housing has changed from a congressional mandate to make home ownership more accessable, even to the unquaalified, to a rational and more profitable system. They/we lost a bundle and they are looking at another bad year with foreclosures expected to rise again in 2011.

Related Articles
The Politics of Housing
FHA Reforms Shift The Game
A Recent Survey: Is It Time To Buy Rental Property

Well it seems that now some of the big banks are freezing foreclosure procedures due to their inavility to comply with local laws and regulations that protect the home owners or delay the foreclosure procedures, it seems that some lenders have rush the foreclosure procedures and broke the laws. First started wtih GMAC, then Chase, now Bank of America.

There are several issues with this new moratorium, first there will be more banks adding to this list, and this mess might not be sorted out until March or May of next year, that might be done on purpose because the GSE are pushing for the lender to take action on the late loans, see the news on Wells Fargo last week. http://www.dsnews.com/articles/wells-fargo-puts-stop-to-short-sale-extensions-2010-10-01. Also the OCC ordered the Largest Servicers to review their foreclosure process. This might not affect us because they are liquidating their inventory little by little to avoid a really hard crash and decline of propery values, lets face it, with low prices, low interest and no one is buying, it is hard to say if it is because they are not lending or because there is very little confidence from buyers, but also at the end of the day we all need shelter, so it makes sense to purchase now, and I have seen several potential buyer not been able to qualify for a home mortgage loan.

The other problem I see is the rumble from lawyers and previouse owners, who will try to sue the lenders for not been in compliance with the federal and local laws and regulations of the foreclosure procedures, etc. I did a cash for key on Saturday, and the borrower just kept asking me if my client was following the right procedures, if they were going to join Bank of America and Chase with this issue, etc.

It is going to be interesting to follow this new moratorium, because of the political impact and the possible impact it might have in the business. I think if the foreclosure process was not done correctly, then what would they do, if the house is already sold, can the courts reverse the sales, etc, then we will have the issue of the current owner. Most likely this would be ratified with money, how much? morally the prevoius borrower was in default, but I am sure there could be damages, etc. Would the courts and the credit bureus wipe out the "Foreclosure" from their records so maybe if their finances have change they can get a loan, would the lender try to work something where they can put the previous owner with a new loan or similar loan to the previuos one in one of their houses.

As REO agents I think is important for us to do as many Cash for Keys as possible, this way the previous owner has agreed to relinquish his/her home to the bank, but I am sure there are some loopholes there too. Well maybe the new assignments from the bank would be more like deed in lieu with a lot of legal terms to protect the bank, and I hope we can have the right documents to protect ourselves just in case,