2009: Last great real estate investment frontier?
Be optimist or pessimist the numbers do not lie. What do the numbers say about the US real estate market in the last two years? Dismal, at best. John Burns, CEO of John Burns Real Estate Consulting, always gives grades in quick glimpse -and easy to comprehend- A, B, C, D, and F like most public school students his age and mine would have received for homework.
The not so surprising news is that I could find nothing in his report which scored an A. Also not surprising is there are plenty of D’s and F’s (we skipped E for some vapid reason).? Three particular grades should be of interest to every real estate investor and also should be understood why it is of interest.
First there is the D given to the existing home market. This means values are still declining while the existing inventory rose to 10.8% – that means lots of supply (increasing) and at best pent up demand. For the investor this is all green lights. Unfortunately Fannie Mae in some insane moment of cannibalism, or perhaps it was cannibisism, slashed the limit of properties on credit from ten to four. Bad move and a slice at the Achilles heel of the US economy. It is possible they are willing to re-look. All this points to a fantastic time to be a first time real estate investor.
Flying Fickled Finger of Fate
Next there is the F given to the new home market. We all know housing starts have hit the lowest number since reporting began in 1959. While 1959 was a banner year for planet earth that was still a long time ago and a lot of opportunity for bad housing starts have passed. Congratulations to 2008, you win the Fickled Finger of Fate award. What this means for investors is more opportunity for rehabbed properties. While the rules on flipping have changed (you really need to understand the rules before you think you’re going to be the next future felon on TV) you can still successfully acquire and rehab homes for decent profit.
Finally there is the F given to housing supply. With housing starts dipping to an even further record low of 625,000 this means people are stacking up in the homes of relatives, roomate situations in large complexes and more. The need is growing while the market is slowing. Positioning yourself for the future by acquiring one, two or even three single family investment properties in your area may just position you for some very substantial earnings over the next three to five years.
So it there were a category for investment opportunities I would see that as an A+ for the savvy mind. The problem with real estate investing over the last 8 to 10 years was the notion that “anyone could do it”. Sorry, if you cannot keep a job, forget to pay your light bill and have never balanced a check-book you really are not a good candidate to be a reale state investor. On the other hand, if you have 20% down (a very reasonable amount) a credit score in the higher six-hundreds, and patience you owe it to yourself to get into the pool while both ends are reasonably shallow.
Call me, let’s talk 866-946-0120 -Ken
The Wii Fit, Starbucks and Home Loans
What do these three have in common? You! We live in a time when business and pop-culture are not longer separated by thick, gray walls of impenetrable social anti-matter. As a result service providers who once controlled the mortgage banking industry are doing everything they can to present their prospective companies a “the next big thing”. The reality of it is it is the small, local broker and lender who is on the very cutting edge.
Wii Fit is very much the rage among thirty-somethings. There are many thirty-somethings today who can say they met their mate at Starbucks. So why is it the biggest banks still have faith among this super-charged, highly intelligent home owners? The reason I even make that statement is because it is, after all, those very biggest names who did the most damage to the real estate industry. Even one super huge bank which bought the largest lender was also guilty of stuffing people into loans they could not afford.
What makes the local broker or lender more like Wii Fit or Starbucks? Because they are local to your neighborhood or community. The people who work there are people you may very well stand next to at Starbucks. They are the people who care about your community and are more likely to care about your financial health.
Having known many people who at one time or another worked for one of the behemoths by their testimony I can report any appearance of care is of a majority a joke. All they care about is volume and how much they can make on each loan. That goes for every major bank or lender you can name including the ones who are out of business.
We at Novation Mortgage adhere to strict limitations on commissions and earnings. We do not make more for one type of loan than another so no matter which solution you choose our earnings are almost identical. We plan on long term relationships where we are not afraid the borrower will find out how much we make because we never hide it. We are in business to feed our families and pay our own mortgages so we do not work for free like some former national brokers would have had you believe.
As for the so-called “up front” mortgage brokers (not even sure if any of those are still in business) we have never hidden our fees unlike every bank and national lender. We have always disclosed our fees and our income and explained to the home-owner or buyer what each mortgage fee represents.
When you are looking for a home loan in Georgia or Florida there is no higher integrity or commitment to you than Novation Mortgage.
When should I refinance?
With mortgage interest rates on Georgia home loans and Florida home? loans being lower than in recent history many home owners are wondering if they should or even can refinance now. As with anything else it is important to know the goal of refinancing. If your goal is to lower monthly payments by refinancing to a lower interest rate then chances are there has never been a better time to refinance than now.
While today’s mortgage interest rates are lower in Georgia and Florida the important consideration is the current appraised value of your home. Remember that the loan amount to the value of the home is very important. We refer to it as “LTV” which stands for Loan To Value. If your loan to value is higher than 80% you may have to pay a monthly Private Mortgage Insurance “PMI” and you may have a “hit to the rate” or a “hit to pricing”.
The goal of a refinance should be to either lower your monthly expenses or to shorten your payoff term. Many people in past times have used equity from their home to pay off higher interest bills or even to take a trip to Vegas.
To qualify for a conventional mortgage refinance today you should have a middle credit score of 640 or higher, a full time job for at least 2 years in the same line of work, less than 45% of your gross income going to pay all of your financed payments (credit cards, student loans, car loans, personal loans, mortgage payments, etc.) and a home worth at least 20% more than you are borrowing.? You may still be able to refinance if some of these are not met but the cost will be higher.
To know for sure the best thing to do is contact one of my staff members at 678-946-0100
First Time Home Buyer
To the seasoned home buyer today’s economy and real estate industry condition are a little frightening to say the least. One would assume, then, that this is not a good time to be a first time home buyer. The truth, however, is quite the opposite.
The existing home owner is more likely to have existing “baggage” to bring to their next purchase where the first time home buyer is not encumbered with such burdens. The first time home buyer will certainly not be in a negative equity position on their existing home. This is a great position to be in when the market is so full of opportunities to buy properties at well below the price they would have been just a few short months ago.
Financing is available for first time home buyers up to 100% of the purchase price – though 96.5% financing plus a gift or loan from a family member or employer is much more likely. Honestly I would not mind at all being in the position to buy my first home today instead of being in the position I am! There are thousands of deals in the Atlanta area and literally tens of thousands throughout Georgia, Florida and the southeast.
If you are conisdering buying your first home give me a call. I have helped hundreds of people buy their first home or first investment property over the last few years. Your real estate agent knows about real estate regulations and my staff and I are all seasoned experts in the mortgage and finance business. We know things your agent doesn’t even want or need to know.
Call today while home loan mortgage interest rates are still very VERY low and there are plenty of opportunities on the market. In the Atlanta area and north Georgia call 678-946-0100 and in south Georgia and Florida call 866-946-0120
FHA Streamline Refinance
Did you know if you have an existing FHA home loan that you can refinance to a lower rate using something called an FHA Streamline Refinance? The advantage of the FHA streamline refinance is to allow the home owner to refinance from an existing FHA home loan into a new FHA home loan with a lower interest rate resulting in a lower monthly payment. All Georgia and Florida home owners who have an existing FHA home loan are eligible for the FHA streamline refinance.
The most important fact to qualify for the FHA streamline refinance is that the borrower not have been late on any payments during the last 12 months and that the existing home loan be an FHA home loan. Some of the amazing features of the FHA streamline refinance, especially for borrowers in many areas of Georgia and Florida are:
- No appraisal may be needed under most circumstances
- No income verification is required
- Mortgage interest rates are very low right now
- Closing is quicker than a normal refinance
There are only a couple of “downsides” to the streamline refinance which really are not downsides. The most important is that this is not a cash-out refinance. The other is that if you cannot pay the closing costs out of pocket you will need an appraisal on your property.
Not needing an appraisal is huge right now because of the recent declining values in real estate all throughout the southeast and the rest of the nation. This allows the home owner to refinance to today’s lower home mortgage interest rates into a new FHA home loan even though the existing payoff may be more than the present value of the home.
Call my offices today at 678-946-0100 or 866-946-0120 to get more information and to start the process to take advantage of rates that really cannot get much lower if they get lower at all.
How Much Can I Afford?
This sounds like such a simple question, does it not? And it is. The question is simple and the answer should be simple but it is complicated at times by what many of us in the business like to call deceptive advertising. Add to that deception a bit of low integrity and bait and switch and you soon have a national economy falling flat on its face.
Okay, I’ll play nice. But first I want to warn you about some national lenders who advertise some pretty amazing sounding offers. No cost mortgages for example. That really sounds like it should not cost you anything, does it not? And what about interest rates a full percent lower than the competition -that must be a great deal.
The truth is almost everyone’s interest rates are about the same. Almost everyone’s closing costs are about the same, too. Sure, they can vary by an eighth of a percent or more but generally speaking the costs are about the same. What is not the same is how it is presented to you, the honest buyer.
So let me answer the question for you because it is important to know. How much you can afford is based on how much you have saved and how much you earn. If you have little or no down payment you really need to have been on the job for at least two years and have had an income which is not declining for that same period. If so then you should easily be able to afford a mortgage payment of 30% of your gross monthly income.
The lenders will allow you to go higher, all the way to 43% of your gross income or higher. But in truth you really should try and keep it to 30% of your gross. This means if you are earning $4000 per month you should spend no more than $1200 on principal, interest, taxes and insurance.
Again, the lenders will allow you to go higher but I do not recommend it because of so many factors I would have to write a booklet -which I have but because the numbers are outdated it is currently not available. Just try and keep it to around 30% and you will likely have a much less stress free life even if you don’t have that special address you really cannot afford.
Will Mortgage Interest Rates Go Lower?
As a mortgage banker I am asked this question often. Some of my colleagues even answer it often with reckless disregard for the truth.
When asked this question by a blind call in my first reaction as a human would be to ask, “are you kidding?” Wearing my concern for care hat, however, I can only answer honestly with “I don’t know. I don’t think they will go much lower since they have already been at 4.5% with no points for a thirty year fixed mortgage but it is possible.”
Some large national lenders and local brokers alike have tricked many people with rates over the years and that is one thing I have never and will never do. Right now the rates are very low – historically and amazingly low. But here’s more: the rate may not be your rate. Be wary of any offer of a rate more than .125% lower than what you see offered on the Novation Mortgage website where mortgage interest rates are very low.
Once more: the rate may not be your rate.
The rate you see quoted in the newspaper, hear on the ads and see on television is always either the best case scenario or misleading. Unfortunately even I frequently get solicitations from a country wide lender which are nothing short of misleading so be very careful regardless of the name attached to the ad. Especially be very wary of the national lenders.
Call me for some truth even if I do not lend in your area. My name is Ken Cook and my phone number is 678-946-0101. I will tell you exactly what you want to hear: the truth.
Should I Refinance Today?
By the time you read this article everything will have changed. One thing is certain about the mortgage banking industry and that is change. Do not take this as a smack on the face because it certainly is not intended to be but it should be somewhat of a wake-up. The truth is the far above average home owner and real estate investor are not capable of properly answering this question. We, and I include myself, make the terrible mistake of thinking if we know a few terms about something that we understand it well enough to make important decisions. Most people are not capable of making wise or even correct mortgage decisions. The frightening part is most loan officers also do not have any idea how to really determine if a certain mortgage is the best for you.
Be not dismayed: Even financial planners are often wrong with their advice.
So, am I the genius to answer the question? No. But I will give you a little more information than you probably already had to help you make the best possible decision you can make for yourself, your family or your investment strategy. More than that this may help you avoid “tricks” used by the so-called “no closing costs” providers. By the way, “no closing cost home loans” do not exist. There is no such thing as no closing costs. There are always closing costs and one way or another you always pay them. Repeat that to yourself: there is no such thing as a loan with no closing costs. If you refuse to believe that you are beyond help and get everything you deserve. (I write that with a sideways smile.)
There is a long standing argument among many people as to which is more important between interest rates and monthly payments. The bottom line is: nobody can answer for you. They can pontificate for weeks but ultimately it is your decision. So let me direct this to you about the difference between interest rates and monthly payments and how this could become an issue.
Most people automatically assume that if you have a lower interest rate you will have a lower monthly payment. They also often assume, and to their detriment, that a lower payment or lower interest rate may be the best loan. Neither is true and both are true but the paradox is simple to decode. FOr example a fifteen year mortgage has a lower interest rate but a higher monthly payment. A forty year mortgage has a higher interest rate but a lower monthly payment. So which best fits your goal?
For today I can actually offer a loan to the right buyer for 4.75% with no discount points. This loan has an APR of 4.893 which is still phenomenal. What you, Mr. or Ms. Borrower, need to understand about numbers like this is this is not *your* number. In fact it is the best case scenario number. Your rate may in fact be much higher from any and every lender -not just us. There are “hits” to rate and adjustments to pricing which are, in part, dictated by Fannie Mae or Freddie Mac. Those are called Loan Level Pricing Adjustments and they are based on the risk presented to FNMA or FHLMC by the borrower, the property and the type of loan.
If you and I were on the golf course and you asked, “Ken, is this a good time for me to refinance?” If I did not start my answer with, “What are you trying to acheive?” I would be a fool to answer. This may be a great time for you to refinance you loan with interest rates as low as they are today but this may be a horrible time for you to refinance if you are living in a home with an upside down mortgage, you have had a change in careers or an income drop, your debt-to-income ratio is off the charts or any other number of reason. Now, if you are one of the few who qualifies for the advertised rate and you have equity in your home (which you would to qualify for that rate) then yes, this is probably one of the best times in recent history to refinance in to a long term fixed rate mortgage.
Call me and let me be honest with you. We can refinance your Fannie Mae loan in Georgia or Florida and your FHA loan anywhere in the southeast. 866-946-0120
Non-Seasoned Cash Out Refinance on Real Estate Investments
Real estate investor loans. This is a topic with answers which change almost daily. In fact until the middle of November of 2008 we could do non-seasoned cash out refinances for real estate investors based on the new appraised value to 75% of the appraised value. This meant a real estate investor could purchase a home, do the rehab, get the property occupied (or support it with their own debt-to-income ratio) and come to me to pay their self back.
Not any more. Thanks to Fannie Mae and the geniuses in charge it doesn’t matter how stable of a real estate investor you are, how much income you can prove, how much you have available in liquid assets or how high your credit score you cannot get a conventional solution for a non-seasoned cash out refinance on a real estate investment.
Since I do not like to leave you without a solution know this: You just need seasoning. For real estate investment properties to do a cash-out refinance you will need a minimum of six (6) months of seasoning on title. This means from the day you purchase the property and your name goes on title you must wait a minimum of six months to do a cash out refinance through conventional methods.
There are other ways to do a cash out refinance but if you tend to complain about closing costs and interest rates (tongue firmly in cheek but serious) do not bother to call. We are steadfastly brow-beating Fannie Mae to wake up and smell the coffee in regards to high credit, high income and strong asset borrowers. Until then, buy what you can, rehab it and toss it back on the market.
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Daily Rates for Qualified Buyers
Today |
Last Week |
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| 30 Year Fixed | 3.50% | 3.65% |
| 15 Year Fixed | 2.87% | 2.89% |
| 5/1 ARM | 2.66% | 2.57% |
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