Home Buying Guide pptx

Seller Carryback and Hard Money Loan Another option for properties that don’t qualify for traditional bank financing but have a potential buyer with enough cash for a down payment, selle

Home Buying GuideRealestate.com

Copyright 2012 RealEstate.comSmashwords Edition

Table of Contents

Introduction

Chapter 1: Money, Money, Money

Chapter 2: This is Not a DIY Project

Chapter 3: Let’s Go Shopping

Chapter 4: Making an Offer They Wouldn’t Dream of RefusingChapter 5: Victory is Sweet: They Accepted Your Offer

Chapter 6: Guide to Foreclosures

Chapter 7: Short Sales 101

Appendix

This e-book contains some of the most information-packed articles written by The

RealEstate.com team of investment experts, mortgage wizards and overall real estate gurus Our aim is to help you on your quest to learn everything you can about buying a home

No matter how bad things were in the past, one thing hasn’t changed: Buying a house is exciting!

So let’s get you going

Should I Buy a Home Now or Wait?

It doesn’t require tea leaves, a crystal ball or any other form of hocus-pocus to take the first step

in determining if this is a good time to buy a home While market conditions should play a role in your decision, the first step toward deciding whether to buy a home now or wait starts with you and the state of your finances

Will Your Personal Finances Allow You to Buy a Home Now?

How’s your credit? Lenders have tightened their FICO® requirements Even FHA has raised the lower end of their acceptable FICO® range.How long have you been in your current job? Lenders now want to see at least two years with the same employer, and no decrease in income

Next, do you have the cash to put down on a home? You’ll need at least 20 percent of the list price of the home if you go with a lender If you obtain an FHA-backed loan, the down payment requirement has a lot to do with your FICO® score

That said, lending has become so tight that sometimes a stellar FICO® score can’t make up for lower income, a spotty job record and even a huge down payment, according to recent news from the Wall Street Journal

Consider These Factors When Timing the Housing Market

If you’re trying to time the market so that you purchase at the bottom, good luck Nobody knows when it will bottom out In fact, real estate agents in some parts of the country say their market has already hit bottom and is now on the way back up

There are signs in the economy, according to some experts, that the real estate market may have

a rosier near future than previously thought These signs include:

So watch the unemployment numbers in your city because when they drop, housing prices may rise But unemployment numbers only help us figure out part of the story

2 The Housing Inventory

A “shrinking inventory” is a real estate term that describes a market in which the number of homes for sale decreases Think of it as supply and demand When there are fewer homes on the market, prices tend to rise, which is a good sign if you plan on selling your home

But it’s not a good sign for the homebuyer First, prices go up when the inventory shrinks so you’ll be forced to pay more if you wait Then, there’s the fact that there will be fewer homes on the market from which to choose So, while a shrinking inventory may be a glimmer of hope for the health of the housing market, for you its proof that you waited too long to buy

3 New Housing Starts

Homebuilders sit out tight economies When people are back to work and spending money again, builders begin new developments While national new housing starts are important, keep an eye

on your state’s trends and those in your local area

While it’s wise to monitor economic indicators to help time your home purchase to coincide with the bottom of the market, there’s also a danger in that The only sure-fire way to know that we’ve hit the bottom of the market is when prices start rising By then, it’s too late

Real estate markets move in cycles and can take excruciatingly long to change, or transform almost overnight The ideal time to buy a home is when both prices and interest rates are low

A Guide to Buying Your First Home

Buying real estate, while once touted as a wise investment toward your future wealth, has become somewhat of a scary prospect to first-time buyers The entire process is confusing; the market is a mess

Home buying is a process and, like any other, there are steps you should take to get you to your goal While it’s natural to be anxious about buying a first home, take the time to follow the steps and, before you know it, you’ll be in your own home

Financing a First Home

One of the unpleasant tasks in the home buying process is figuring out how much house you can afford and then finding a lender to loan you money at an attractive rate and good terms

You’ll need cash for the down payment and, unless you find a seller who is willing to help with them, the closing costs

If you’re on a tight budget, consider some of the government programs The United States

Department of Housing and Urban Development (HUD) backs low-cost, first-time homebuyer loans through the Federal Housing Administration (FHA)

Aside from a conventional FHA-backed loan, you might want to consider purchasing a low-cost fixer-upper and using HUD’s 203(k) program This program provides one loan that pays for both the house and the work required to fix it

No matter which route you decide to take, you’ll need to shop for a loan Take your time when looking for a loan, as rates and terms may vary widely between lenders

Be a Smart Shopper Before Buying Your First Home

Real estate buyer’s agents will tell you that making a wish list is one of the most important steps

to take before looking at houses You’ll actually make the list and then edit it several times If you’re half of a couple, you should both make your own lists

Your original list should be an exercise in dreaming Write down everything your ideal home would have – even if you think these items may be too expensive Let your imagination run wild After it’s complete, go back over it with a more realistic eye If you’re on a tight budget, you may wish to cross off the stables and tennis courts

Once you’ve whittled the list down so that it fits your real world, choose one or two items on which you will not compromise Then, compare your list with your partner’s

Anything that shows up on both lists is a “must have.” That, along with your top must-have and your partner’s can’t-live-without, gives your agent a clear idea on which types of homes to show you and which to exclude.

Next, you’ll need to decide on a neighborhood If you have children, proximity to your chosen schools may be the deciding factor Perhaps a location that provides for a quicker commute to work is your ideal Decide on several areas and use RealEstate.com to run a quick check on housing prices to make sure you can afford to live there Make a list of at least three

neighborhoods that you’re interested in seeing

Now you’re ready to choose an agent Ask friends, family, co-workers and neighbors for

recommendations A direct referral from someone who has experience with an agent is the best way to find a good one When you meet with the agent, hand her the list of must-haves and the neighborhoods in which you wish to view houses, and let her get to work finding you a dream house

You’ve Found a Home – Now What?

Finding a house you wish to purchase is the first step toward what may be smooth sailing or an absolute nightmare Prepare yourself for the worst and, if all goes well, consider yourself lucky.First you’ll make an offer Determine what you want to offer on the house and then follow your agent’s advice as to how appropriate the offer is If the housing market is moving fast, with multiple offers on houses, make your highest and best offer at the outset, as you don’t have time

to bargain If the market is slow, you may want to make a low offer and plan for some forth negotiating Again, your agent is your best ally in this process

back-and-Once the offer is accepted it’s important to adhere to the time limits in the contract Order your home inspection and shop for homeowner’s insurance immediately

You hold the key to a smooth real estate transaction By preparing adequately and choosing the right professionals to help you along the way, you guarantee your success Welcome home!

5 Things to Consider When Buying a Home

The list of the features you want in your new home is personal and, no doubt, as long as your arm The most important of these items are known as “hot buttons” in the real estate business, and not all buyers have the same ones From the must-have hardwood floors to the I’ll-just-be-miserable-without-a-gourmet-kitchen, hot button lists help homebuyers narrow down the list of houses to view If you’re planning on buying a home, compile your list of what to look for, whittle it down to only those items on which you will not compromise, and then make sure your real estate agent gets a copy

1 Put the Horse Before the Cart

Figuring out how much house you can afford and then getting financing for your purchase are the first considerations when buying a home Before you can look for that perfect kitchen, you need to make sure it fits in your budget To determine what you can afford, you’ll need to

calculate:

■ your available cash for a down payment

■ your current debt

■ your monthly income

■ other ongoing monthly expenses

Some buyers check their credit reports and obtain their FICO® score to get an idea of where they stand financially If there are only a few dings on your credit history, it’s a good idea to take care

of them before applying for a loan Better credit means a lower rate on your mortgage loan

2 Choosing Your Community

Choosing your ideal town or city is only part of the decision-making process Now, it’s time to narrow down the choice to a particular area, then a neighborhood or two Local crime statistics can be had by visiting online sites such as the Department of Justice, or by placing a phone call

to the local police department Drive through neighborhoods during different times of the day and week to look for traffic flow, noise levels and other activity If you get lucky, you may find neighbors outdoors and you can stop and chat with them about what it’s like to live in the

neighborhood

3 Don’t Forget the Exterior Features

It’s easy to be overwhelmed by a house you’ve fallen in love with and become blinded to the more practical aspects of actually owning it Lot size and landscaping are important

considerations when buying a home and often overlooked in favor of the home’s interior Who is going to mow that acre of lawn? Are the trees going to lose their leaves every autumn, and, if so,

do you think you’ll be in the mood to dig out the rake and clean them up? Or, will gardener’s fees be in your future? If so, you may need to do some research to determine the monthly cost of

a gardener and add that to your potential house payment The same goes for the pool Pools require weekly to bi-weekly maintenance If you don’t know how to do it yourself, you’ll need to hire someone, adding more to the monthly cost of owning the home

4 Energy and Utilities Add Up

If you’ll be moving to a new area you most likely aren’t up to speed on how much residents typically pay for utilities every month Depending on where you are buying a home, your power, gas and water bills may come as a shock Las Vegans, for instance, pay upwards of $300 a month to cool their homes in the summer – a $500 power bill is not out of the ordinary Ask the seller how much she uses her utilities and what her average bills are Power companies may also divulge this information

If you are concerned about high energy costs, look for homes with improved weather-proofing, energy-efficient appliances and updated electrical wiring

5 Consult a Psychic … or at Least Consider Resale Value

This home may be the biggest investment you make in your life, so dig deep down inside to find your inner investor Just as you wouldn’t pour a ton of money into the stock market before performing due diligence, don’t purchase a home purely on emotion Do some research to try to determine the home’s future desirability The city planning office is a good place to look for information Ask about future development plans for the area Nearby electric power plants, transformer stations and landfills may depreciate the value of the house you want to purchase, so consider carefully what may happen in the future

How Much Down Payment Do I Need for a House?

Lenders like to see the borrower have some skin in the game With borrowers upside down on their homes simply mailing their keys back to the bank, and sticking lenders with negative equity rather than toughing out the down market and keeping their homes, lenders now want to know that you’ve got a personal stake in the deal

By the way … those “no money down” property flippers? The ones who were so obnoxious about six years ago? Yeah, those people and their amateur mortgage brokers are making your lattes

at Starbucks now – and sending their tips to a bankruptcy trustee,

in many cases

As such, unless you fall into a couple of special categories, chances are you’re going to have to come up with some cash as a down payment on your home

Underwriting Standards Have Tightened

Don’t count on trying to get cute The days of trying to camouflage the fact that you have no personal stake in the property by taking out a piggyback loan to boost your down payment from

3 percent to 10 percent are pretty much over That didn’t work out well for lenders, and we’re in

a back-to-basics market now “Ever since the collapse, if you will, there’s no real creative

financing like there used to be four or five years ago,” says Erick Perpich, a Sacramento-area loan officer with Republic Mortgage

“I haven’t seen a piggyback loan in years,” echoes Kimberlie Snyder, a Washington, D.C

underwriter with Bank of America, who primarily handles VA and FHA loans “I know on conventional loans, we don’t do piggies either.”

No Down Payments on VA Loans

You can still do a no-down payment mortgage via a Veterans Administration home loan This is because the federal government stands behind the nation’s veterans, guaranteeing the lender against loss if the veteran should default on the loan VA home loans have the additional

advantage of allowing the borrower to avoid paying primary mortgage insurance premiums, or PMI This can easily save a borrower over $1,000 per year in many markets Otherwise you’d have to pay these premiums until your loan-to-value ratio reached 80 percent

The downside to VA loans is that, normally, you cannot discharge this debt in bankruptcy, as you can with other kinds of debt

One alternative no-money-down option you may wish to explore: The USDA Rural

Development Loan This program will allow you to borrow up to 100 percent of the property, if you qualify, just like a VA loan The program only covers homes in certain designated rural areas Your family income must fall below 115 percent of the median income for your area

Loans are for 30 years at a fixed rate of interest, and you can roll expected repair and

improvement costs into the price of the loan This isn’t a giveaway program: You have to have decent credit to qualify

Funding for this program tends to run out midway through the fiscal year, though For best results, try to apply early in the U.S government’s fiscal year which begins October 1 every year

How Much Down Payment is Needed for FHA Loans?

If you obtain your loan under Federal Housing Administration auspices – the so-called “FHA loan,” you may get into a home with just 3.5 percent down This still means you’ll need $7,000

in cash to put down on a $200,000 house, which can be a tough nut to crack for some borrowers However, FHA loans come with a handy twist: You can receive your down payment as a gift – say, from parents or a rich uncle – and still qualify for the loan Your benefactor should be prepared to document the source of funds

The Federal Housing Administration imposes limits on the loan amount, which vary according to the property’s location You can check the HUD website to find the FHA loan limit for your area

The federal government has long allowed state governments and private charities to provide down payment assistance to those in need In each case, you may be able to get some or all of your 3.5 percent down payment offset via one of these programs Your mortgage representative

or real estate agent may have more information on programs available in your area

One insider tip: In both cases – VA loans and FHA loans – you will still have to come up with closing costs, which are frequently 3 or 4 percent of the loan on the buyer’s side The FHA, however, stipulates which closing costs the buyer can pay and the rest must be paid by the seller One idea that Snyder, a U.S Navy veteran, used when buying her own home, is to ask for a 4 percent sellers’ concession In a buyer’s market, the seller may agree to get the deal to happen “I got money back at the closing,” says Snyder

Down Payments for Conventional Loans

A conventional loan, in nutshell, is any mortgage that doesn’t come with a federal guarantee We’re back to the 5 percent to 20 percent down payment these days on conventional loans Specifics vary with the lender and by location, as well as by whether the loan is “conforming,” that is, within the underwriting standards established by Fannie Mae and Freddie Mac, the major mortgage buyers upstream from the lender As Snyder mentioned, many lenders aren’t buying the piggyback loan solution anymore – conventional borrowers will actually have to pony up real money

There are advantages to putting more money down: If you can reach the 20 percent threshold, you won’t need to pay PMI Plus, more home equity helps your credit score, counts as an asset

on your balance sheet that you can actually borrow against (if you can qualify when you actually need the money!), and puts you in a better position to rent the property on a cash-flow positive basis if things don’t break your way in the future

What About Down Payments for Investment Properties?

If the home is not your primary residence or a second home, then you can expect to have to come

up with more – at least 20 percent, in most cases, depending on the nature of the property

Lenders require the higher down payment because mortgage insurance typically only covers primary residences For the best interest rates, think closer to 25 percent or more – plus reserves against the possibility of vacancy

If you want to hold your property in an IRA, then you will need to come up with at least 35 percent down, plus reserves, advises James Hitt, an advisor in Asheville, North Carolina whose company, American IRA, LLC, specializes in real estate and other nontraditional holdings in retirement accounts “The less you put down, the greater the risk,” cautions Hitt

The Importance of Loan Pre-Approval

Today loan pre-approvals are often more like the girlfriend or boyfriend from hell instead of a dream date come true – you can’t live without them, but they can be a big headache too

So how tough is it to pick up a loan pre-approval today, why are you just teasing yourself by attempting home shopping without one, and why is this the most important and controversial piece of paper since the pre-nup?

You Can’t Get a Date Without a Pre-approval!

How critical is the importance of a loan approval? You probably had a better chance of dating the hottest cheerleader or hunkiest quarterback at high school – back when you had pizza-like acne – than getting an appointment to even look at a home without a mortgage pre-

pre-qualification letter today

No educated real estate agent or seller is going to waste their time showing you a home unless you can prove you have the cash on hand via a proof of funds letter for the entire purchase or a pre-qualification letter Most won’t even bother to talk to you until you go get one

Save Yourself a Lot of Heartache

For homebuyers, the main importance of obtaining a loan pre-approval upfront ought to be recognizing that it can save a ton of time and crushed dreams You don’t want to take your partner out looking at their idea of a dream home only to have to downgrade them from a million dollar waterfront estate to a one-bedroom condo without a view

Get pre-approved, find out how much you qualify for and then streamline your home search.Note that just because you are approved for $X, that doesn’t mean you have to or should max that number out There are always unexpected extra bills, especially as a first-time homebuyer It’s better to sleep at night than to never be able to enjoy your new home and eventually lose it to foreclosure

The Importance of a Pre-approval for Getting Offers Accepted

The best homes at the best prices always sell quickly and often receive several offers within hours of going on the market Even if you have managed to get in to see a home without

contacting a lender and getting pre-approved, no one is likely to take your offer until you have.You don’t want to miss out on your dream home because you kept putting it off

In reality most “pre-qualification” letters are completely worthless You may not want to let your seller or agent in on this secret, but as a buyer you had better know it.

Most of you reading this have received a “pre-approved” offer of credit for something in the mail, only to find out you aren’t when you respond Unfortunately, the same principal applies here

Loan officers and mortgage brokers desperate to capture your business and put new deals in their pipelines will often send you an official looking pre-approval letter based on a five minute phone conversation and a credit check What this normally means is that, based on your statements about your income and assets and your credit score, you should qualify for a loan In reality there are many more variables involved which won’t be analyzed until you have made a formal

application and some that may be specific to the property you are buying, which is unknown at the time of approval In other words, they are worth less than the paper they are printed on

The Importance of a Loan Pre-approval You Can Count On

While you may be fine with winging it, providing your offer gets accepted, an unreliable

qualification letter can cost you big time First, if your loan falls apart, you may lose thousands in deposit money It could also mean paying a lot more than you expected in mortgage fees and rates after you are committed to buying If you don’t or can’t buy or can’t keep up with these higher payments, guess who ends up homeless?

How can you avoid this? No matter how busy you are, take the time to prepare and provide your lender with as much detailed information about your finances as possible, even if he doesn’t ask for it Provide W2s, tax returns, paystubs, bank statements, the works This will help the lender identify and alert you to potential issues later

You can’t afford to be lazy – remember how much is on the line

Defining Loan Types for Mortgages

What is a Mortgage?

If you’re in the market for a house but don’t have the savings to pay for the entire property with cash, you can get a residential mortgage to cover the difference between your down

payment and the sale price of the house

A residential mortgage is a common legal agreement in which an individual borrows money from a bank or person to buy property such as a house or a condominium A mortgage agreement typically states that the borrower must repay the borrowed money and any interest to the lender on a predetermined schedule Should the borrower fail to pay per the contractual schedule, the lender typically has a legal right to take possession of or foreclose on the property Below you’ll find definitions of loan types for some of the most common mortgages available

Fixed-Rate Mortgages

Fixed-rate mortgages are the safest bet if you always want to know what you owe Generally repaid over a period of 15, 20 or 30 years, the interest rate and monthly payments of principal and interest for fixed-rate mortgages are locked in for the duration of the loan If you can secure

a fixed-rate mortgage, you limit the volatility of your loan and know exactly what your payment will be for the lifetime of the loan

Adjustable-Rate Mortgage (ARM)

Also known as variable rate or tracker mortgages, adjustable rate mortgages are designed to adjust to match the market after an initial fixed rate period For instance, a 5/1 arm will start to adjust to an index such as the one-year Treasury or the Cost of Funds Index after a five-year period at a fixed loan rate ARM loans can be appealing because they are often packaged with low initial rates, but once the rates adjust they can potentially cause dramatic and unpredictable swings in mortgage payments that are difficult to budget for

Interest-Only Mortgage

If you expect your income to improve over time and are bullish on the real estate market and your ability to match a growing mortgage payment in the future or refinance, interest-only loans can be a good option In the initial five- or ten-year period of the loan, the borrower only pays interest – no principal – meaning a smaller overall mortgage payment At the end of the interest-only period, either a balloon payment for the balance of the mortgage principal may be due or the payments may increase to pay off the principal within the remaining period of the loan

Private Financing

Private financing, also referred to as private money, can be a good option for people who have been through bankruptcy, foreclosure or other financial troubles and are looking to buy a house This is a financing method where a company or individual person may provide a mortgage loan

to a non-conforming residential buyer who does not qualify for a bank loan These typically are considered high risk and therefore are likely to carry higher interest rates especially if the loans are high-risk They are also largely unregulated Lenders are required to comply with lending laws at the state and local level but not necessarily with banking regulations

Seller Carryback and Hard Money Loan

Another option for properties that don’t qualify for traditional bank financing but have a

potential buyer with enough cash for a down payment, seller carryback and hard money loans are possible options for advancing a residential property sale A seller carryback is when the seller of

a property finances a percentage of a loan Hard money loan is when a mortgage is designed to cover just the loan-to-value ratio on a property Typically, a down payment or some other kind of collateral is required from the borrower to secure this type of loan

VA Loans

Only available to eligible service members who meet specific requirements, home loans from the Department of Veterans Affairs are popular among those who qualify as they require no down payment Additionally, there are limits on lender feeds such as closing, origination and appraisal fees No private mortgage insurance (PMI) is required to secure VA loans, even if service

members opt not to provide a down payment

FHA Loans

The Federal Housing Administration, a division of HUD, insures some types of loans to make homeownership more accessible through lower down payments and closing costs along with more flexible credit requirements If you are buying a first home or a fixer-upper, you may be eligible for an FHA insured loan The FHA also provides reverse mortgages for senior citizens who have paid off most of their mortgage and want to turn their home equity into cash for living expenses

This is only the beginning! There are many other loan types for mortgages, including jumbo loans, second mortgages, reverse mortgages and rural development services loans

For more information on how to shop for loans and understand your rights as a homebuyer, visit HUD.gov, the website of the Federal Housing Administration

What is the VA Home Loan Program and What are the Requirements?

The VA home loan program offers one of the few remaining 100 percent financing mortgage options alive Why have VA loans been ignored and how do you get one?

Why Haven’t You Been Offered a VA Home Loan?

During the recent boom years many mortgage brokers steered their clients toward subprime loans even if they could have been eligible for a VA loan Why?

There are four main reasons:

1 Brokers often made more on subprime loans and exotic mortgages

2 Subprime and exotic loans were easier to qualify for than VA loans

3 Many smaller mortgage brokerages weren’t authorized to make VA home loans

4 Some loan officers simply don’t understand veterans home loans

If you or a spouse has served in the military, then you should absolutely ask about a VA home loan Let’s be honest, not nearly enough is done for our veterans The VA home loan program is perhaps one of the few great VA benefits that really has value, so take advantage of it

Why You Need a VA Home Loan

■ No money down mortgages so you can take advantage of today’s low prices

■ VA home loans normally offer lower rates than other types of mortgages

■ Easy to qualify for

What is the First Step Toward Getting a VA Home Loan?

The U.S Department of Veterans Affairs does not make loans directly Instead you may apply for a VA home loan through any one of hundreds of banks and mortgage companies across the country

Items you will need to provide include:

■ Pay grade if still in the armed forces

■ Tax returns for last two years

■ Most recent pay stubs showing year-to-date earnings

■ Copies of two most recent month’s bank statements

■ Valid photo ID

■ Certificate of Eligibility (COE)

Do You Meet the VA Loan Eligibility Requirements?

Your VA loan eligibility depends on how many days you were active in the military These requirements vary depending on when you served and whether it was during war or peace time Selected members of the National Guard and reserves are also eligible Spouses of those who died during service or from service-related disabilities as well as those who’s spouses are

classified as POW or MIA can also qualify for VA benefits including VA home loans In fact, even those who served for the armed forces of another government who were allies of the U.S during World War II can qualify for a VA home loan

In order to get your Certificate of Eligibility you can have your lender obtain one on your behalf

or apply online through the VA’s website

What are Other Options Besides VA Home Loans?

Those unable to obtain a Certificate of Eligibility or who do not qualify for veterans home loans for other reasons may still be able to find a low down payment home loan solution

USDA home loans also provide 100 percent financing in many areas of the country FHA

mortgages require as little as 3 percent down payment but may also be combined with grants and local government assistance to reduce that number even further

What is an FHA loan?

The United States Department of Housing and Urban Development, better known as HUD, is a government agency that oversees the Federal Housing Administration (FHA) Created in 1934, FHA does not make loans, but provides mortgage insurance made by approved lenders

FHA has come a long way since its inception almost 80 years ago It offers a variety of loan programs to meet the needs of low-to-moderate income and retired Americans Because FHA insures the loan’s repayment should the borrower default on the mortgage, lenders are able to offer low closing costs, attractive interest rates and loans with smaller down payment requirements

Let’s take a look at some of FHA’s most popular loan programs

First-Time Homebuyer Program

With down payments as low as 3.5 percent and most of the closing costs rolled into the loan, FHA’s 203(b) program is ideal for the first-time buyer

Two years ago FHA changed the program, establishing minimum FICO® score requirements:

■ FICO® score of 500 and below – ineligible for an FHA-insured mortgage

■ FICO® score between 500 and 579 – eligible for the loan program but the down

payment on the home must be 10 percent of the purchase price

■ FICO® score of 580 and above – eligible for the maximum loan amount and a 3.5 percent down payment

Remember, these are FHA’s requirements only; lending institutions have additional

requirements Because of this, it may be close to impossible to obtain a mortgage loan with a FICO® score under 580 and very difficult to obtain a loan with a score between 580 and 620.FHA suggests that, because there are costs associated with applying for the loans, buyers with a low FICO® score may want to postpone applying for an FHA-backed loan until their FICO® scores increase to at least 620 Don’t forget that it is possible to repair your credit and raise your score

If you feel you’re ready to apply for a first-time buyer FHA-guaranteed mortgage, you will find a database of FHA-approved lenders at their website

Fixer Property Program

One of the more intriguing FHA-backed loans is the 203(k) program Basically, this is a loan for the purchase of a fixer, or handyman special, which not only covers the purchase price of the home, but the repairs needed to make it habitable as well.

Available only to purchasers who will be living in the home, the loan carries a 3.5 percent down payment to qualified buyers

Steps to obtain a 203(k) loan include:

■ Submit a purchase agreement on a property stating the purchase is contingent on 203(k) loan approval

■ Choose an FHA-approved 203(k) lender (listed at FHA’s website)

■ Compile a proposal outlining the scope of work to be performed, including an itemized list detailing the estimated cost of each repair or improvement

■ An FHA appraiser performs an appraisal to determine the property’s future value – the value after renovations are complete

■ If the loan is approved, it closes and the construction begins

The loan amount will include the purchase price, remodeling costs, “allowable” closing costs and

a reserve fund of 10 to 20 percent of the total cost to repair the property The reserve fund is used for unforeseen repairs that may come up during the construction process

All funds are kept in an escrow account and disbursed according to a pre-determined schedule

Manufactured Home Financing

HUD defines a manufactured home as a structure that is capable of being transported in one or two sections In what they call “traveling mode,” the home must be a minimum of eight feet in width and 40 feet in length

If you are considering the purchase of a manufactured home, FHA may be able to help you with the Title II program

To qualify for the program, the home must be labeled as compliant with Federal Manufactured Construction and Safety Standards Additionally, the home must:

■ Be larger than 400 square feet

■ Have been built after June 15, 1976

■ Be classified as real estate but need not taxed as real estate

■ Be built and remain of a permanent chassis

■ Have a permanent foundation built to FHA standards

■ Have a finished grade elevation beneath the home at or above those in Flood Zones A

or V

The mortgage loan on the property must cover both the home and the site and be for no longer than 30 years.

While lending requirements are stricter than they were before the housing bubble,

FHA-guaranteed loans still provide low-to-moderate income Americans a chance to purchase a home when they otherwise may not be able to

Home Buying and Bridge Loans

Bridge loans have been used for home buying and property investment for decades in order to fill the gap in capital when cash is tied up in other real estate But do they still exist? And if so, how do you get one?

How They Work & Why You Need One

Bridge loans have often been used in the past to fund down payments and finance home buying until equity in a held property can be liquidated

Example: You want to purchase a new home but need a 20 percent down payment which you will only have access to once your current home is sold

A bridge loan could give you the money you need to purchase your new home right away, and then you could pay it back once you sell your old residence

Where Can You Get a Bridge Loan?

Speeding up the home buying process and using bridge loans sounds great right? The bad news

is if you try calling around to local mortgage brokers or most lenders you find advertising online, they will tell you that bridge loans don’t exist for residential properties anymore They have proven just too risky or unprofitable for most lenders in the past So what’s the point in teasing you with this article?

You haven’t just been Punk’d You may find some bridge loans available from local banks if you have a great relationship with the manager and a healthy bank balance However, there are actually many other options available for those interested in home buying and bridge loans to take advantage of current fire-sale prices on real estate and rock-bottom interest rates They are just called by different names

Creative, Alternate Solutions for Finding Bridge Loans

Don’t worry, you don’t have to be a modern day Sherlock Holmes or get involved in any

mortgage lending mischievousness to find alternate solutions for getting the cash you need to lock down that sweet real estate deal you have your eye on

Bridge loan options:

■ Take out a home equity loan

■ Refinance your current home to tap the equity

■ Get a hard money loan

■ Apply for a secured line of credit.

■ Take out a signature/unsecured personal loan

■ Take out a new mortgage loan cross-collateralized by other properties you own

Which is right for you really depends on what your credit looks like and how much equity you have in your current home Home equity loans are likely the least expensive, while hard money loans can be the easiest to get if you have bad credit Personal loans can be used even if you don’t have any equity in your current home

Are Bridge Loans Easier for Real Estate Investors to Find?

The short answer is yes Various breeds of bridge loans exist for both commercial and residential real estate investors

Large commercial lenders frequently provide bridge loans for acquisitions and developments These loans, like hard money loans, are generally cross-collateralized and based on the equity in existing property portfolios They can provide much needed liquidity and often less paperwork and hoops than a residential mortgage loan, but loan-to-values are often very restricted These loans can be used to buy and build hotels, multifamily apartment buildings, churches, strip malls and more

What about home buying for investors interested in flipping houses like on one of those reality

TV shows? Perhaps one of the best things that has come out of the recent housing and lending crisis is the rise of transactional lending An increasing number of transactional lenders are now providing gap loans with up to 100 percent financing, no credit check and no appraisals for those flipping houses and who already have qualified buyers ready to take over their properties This has brought back true no-money-down real estate investing for those who know how to use it correctly You don’t even have to buy one of those awful late night infomercial courses either

Real Solutions for Repeat Homebuyers in Today’s Market

The biggest problems for home buyers seeking financing and bridge loans today are a lack of equity and the fact that it can take so long for their homes to sell in the current market You can negotiate smaller earnest money deposits today and qualify for low down payment programs like

VA home loans, FHA loans and even USDA home loans Though let’s be honest, even if you have stumbled onto your dream home for sale, you don’t need to be paying two mortgages, or you may end up losing both to foreclosure So what to do?

If you are really determined not to let that home buying opportunity go and bridge loans aren’t

an option, and then make sure you rent out your current home on a month-to-month basis while you are waiting for it to be sold Then consider leasing with an option to buy on your dream home so that you don’t have to take out expensive temporary financing until your old home is cashed out, but you can still move in right away

The Pros and Cons of Interest Only Mortgage Loans

Interest only mortgage loans promise a lot more house for your money, but if you aren’t careful they could mean losing your slice of the American dream overnight

Let’s take a look at the real interest only mortgage pros and cons to see if this type of home loan is your ticket to fame and fortune or nothing more than your own personal Bernie Madoff-style pyramid made of straw

What Types of Interest Only Mortgages are Still Available?

Even though many other types of exotic mortgages have gone the way of the dinosaur in the last half dozen years, interest only home loans have managed to hold out and hang on for dear life

It may be a little more difficult to find interest only mortgage loans today, but there are several varieties to choose from, depending on your situation and personal financial goals, and many lenders still offer them

Types of interest only mortgages include:

■ HELOCs (Home Equity Line of Credit)

Interest Only Mortgage Pros: Is IO Right for You?

Interest only home loans can get you into a lot more home for your money This can mean getting into the home of your dreams and not having to settle for less or pay two sets of extra closing costs when you trade up later

If style is everything and you have to look good and have impressive digs to entertain, then an interest only mortgage may be exactly what you need Need a seductive bachelor pad to win the girl of your dreams? A waterfront mansion to keep her? Or a palatial penthouse to win over bosses and new clients? Then seriously consider one of these loans In fact, the bigger the home you buy the more you will save every month

Even if you have the cash to buy your next home outright, rates are very low right now, and interest only payments mean being able to take a tax deduction for the entire amount of your payment Plus, smart investors can take their extra pocket money and invest it for much higher returns than today’s record low mortgages rates, which offsets any interest paid and can provide the additional cash to pay off the home earlier.

For those with other outstanding high-rate debts the monthly savings could be applied to paying those down and off Although, Suze Orman fans probably won’t find her promoting this strategy too often when it comes to putting your principal residence on the line

Real estate investors who are locking into bargain priced homes and those who don’t plan to stay put for the long term can find 5/1 interest only ARMs a perfect match These allow them to profit from any appreciation while maintaining the lowest possible monthly housing payments

Asked who the ideal candidates were for these types of loans, Jim McFadden, a private mortgage banking program manager for Wells Fargo, put it well:

“It would be an executive who earns a moderate salary and whose main income is from bonuses once or twice a year … an interest only mortgage would provide the lowest possible monthly payment for lean months, yet allow the executive to pay down big chunks of principal when bonus time rolls around.”

However, it is also great for those who anticipate their income rising dramatically over the next few years

Interest Only Mortgage Cons:

“Why Not Put on Your Concrete Boots & Take a Swim?”

Obviously, homeowners who took out these types of interest only mortgages during the recent housing boom now make up a large portion of the underwater homes that are being flushed away

in the tsunami of foreclosures

If you aren’t careful, loans that do not amortize themselves and can lead to huge jumps in

payments, or large lump sums of principal due can become extremely toxic to your finances Next thing you know your sweet fiancé has gone bridezilla and is eloping with your attorney, who is helping her take your home and kids, while your business associates get you kicked out of the country club

Make sure you know exactly what you are getting into, how your rate and payments can change, and have a plan in case you decide to stay in your home longer than you thought or can’t sell You may also want to invest in some better friends, and make sure you have a bulletproof pre-nup if you are taking out a loan like this

Let the Fun Begin … Qualifying for Interest Only Mortgages

It should be no great surprise that qualifying for interest only mortgages has become a lot harder

in the last couple of years as with any other type of home loan However, Fannie Mae really took

it to the next level in mid 2010 by making standards so stringent for qualifying for interest only loans that only those with the sexiest credit and most solid financial standing will be able to get

into one This has included raising the down payment requirement on home purchases to 30 percent and minimum credit scores to a ridiculously lofty 740.

Still, if you can get one, have truly educated yourself on interest only mortgage pros and cons, and know how to use them to your advantage – go for it!

Applying For a Mortgage Loan

Buying a home is not something the average American does every day While the purchase process is second nature to real estate and mortgage brokers, it is somewhat mysterious to the rest of us

When asked how to eat an elephant, a wise person once responded, “one bite at a time.” While the home loan process seems like a gargantuan task, it’s easier to understand when it’s broken down into smaller pieces

Act Like a Boy Scout — Prepare!

Wouldn’t it be great if there were a one-stop shop where you could price-compare without having to run all over town? While a mortgage broker rather fits this bill, if you’re more of a hands-on type of shopper, you’ll need to do some legwork Before you go lender shopping, or, before you visit the lender you’ve chosen, get your paperwork in order so that you know exactly where you stand financially and how much house you can afford Submitting all of the required paperwork in an organized fashion also helps speed along the approval process

Although the lender will order your credit reports, if you’re curious about where you stand, credit-wise, it’s a good idea to order your own reports from all three credit reporting agencies You are entitled to one free credit report annually and the Federal Trade Commission cautions consumers to order those reports from the only authorized source, AnnualCreditReport.com.Obtain your FICO® score from the Fair Isaac Corporation (FICO®) This is the score lenders use and it’s compiled from your credit reports With the FICO® score and credit reports, you should be able to ascertain what type of mortgage loan you’ll be offered

Then, gather up the necessary paperwork for the lender Ask the lender exactly what you need to bring with you to the application appointment Although this list is far from exhaustive, when you apply for mortgage loan the typical lender requires:

■ Copies of your last two tax returns

■ Bank and investment account statements from the last two months

■ A copy of your current mortgage papers or your landlord’s contact information if you are a renter

■ Written explanations for any late payments or other negative marks on your credit report

■ A copy of your Social Security card and driver's license

■ Account numbers, balances and payments on any loans, credit cards, car loans,

personal loans, student loans or other obligations

■ Verification of your income, such as pay stubs

■ Divorce information if you're making or receiving alimony or child support payments

■ Veteran certificate of eligibility and DD214, if applicable

■ Copies of bankruptcy papers, if applicable

■ A copy of your purchase agreement if you've made an offer on a new home

Steps to Mortgage Loan Approval

Depending on the housing market in your area and the lender's policies, getting a mortgage loan can be surprisingly quick, or it can be a somewhat lengthy process Some mortgage loans may even get same-day approval if your credit is good and you meet requirements for the down payment and income-to-debt ratio

Applying for a mortgage loan typically involves the following steps:

Application: You submit a home loan application form, along with documentation

Verification: The lender turns your loan package over to its processing department where all of

the information included in the application is verified From there, it goes to the underwriter who makes the decision whether or not to approve the loan

Good Faith Estimate: The lender has three days after your application is submitted to supply

you with a Good Faith Estimate (GFE), outlining the costs of the mortgage loan You will also receive a Truth In Lending Disclosure, outlining the expected monthly payment, the APR and a list of all finance charges

Approval: Once the loan is approved, the lender will send a commitment letter This letter

basically reiterates the information contained in the GFE and the Truth in Lending Disclosure It also contains a deadline, or commitment period, after which the terms may change The borrower typically needs to return a signed copy of this to the lender before the end of the commitment period Read the letter carefully before doing so If you have any questions about anything in the letter, run it by your attorney

The time period from application to approval is stressful for the buyer There may be requests for more information or other delays Being fully prepared when you apply for a mortgage loan goes

a long way in alleviating future problems and toward relieving your stress

Preparation and patience - good words to live by whether eating an elephant or applying for a home loan

The Home Loan Process

Getting a mortgage loan today can seem like a formidable obstacle course if you don’t know what you are getting yourself into Check out this quick guide to getting a mortgage in six easy steps

1 Prepare for Mortgage Success

Set yourself up for success and an easy home loan approval by being prepared Check your own credit and address any erroneous negative items to bump up your score in advance Get together all of your documents including pay stubs, tax returns and bank statements so that you can get accurate quotes and pre-approvals

Being organized will also help you get your loan closed faster and help avoid any last minute delays A few extra minutes spent now could save you thousands of dollars and years of

frustration later

2 Shop for Mortgage Deals

It’s always smart to shop around for the best possible mortgage deal Armed with your

documents in hand, seek out the best quotes based on your individual situation and your future goals Remember that this decision shouldn’t just mean the lowest interest rate but the best overall loan terms from a trustworthy mortgage lender If you aren’t sure how to make sense of all the different fees and rates, compare the APR, which is the fastest and easiest way to tell which loans are really the least expensive Take your time to check out any lenders you are considering applying with, and make sure that they are reputable After all, a low quote is

meaningless if that isn’t what you get when it comes time to close

3 Apply for a Mortgage Loan

Once you have decided which lender you want to go with, make your formal loan application and submit any required documentation Make sure that you understand everything you are signing, and do not hesitate to ask as many questions as you need to Do not be pressured into taking on more loan than you can afford or misrepresenting any of the facts The last thing you want is to wind up losing your home or spending the next 30 years behind bars instead of

relaxing in your new home

includes appraisals, home inspections, homeowners insurance and title insurance Note that a great mortgage lender can help you with these items, but still shop around to make sure you are getting the best rates.

5 Clear Mortgage Loan Conditions

About this time you should be getting your official loan commitment, which specifies your final terms Again, this is where most borrowers still think they are going to just skate through to closing on their new loan but get caught with surprises Underwriters are a special breed of people In fact, some poor loan officers and borrowers wonder whether some of them are human

or have any common sense at all What you need to know is that underwriters often don’t appear

to feel that they are doing their jobs unless they come up with additional items or documentation they want to see before they will sign off on the loan Expect it and take it in stride This is where

a great loan officer or mortgage broker makes all the difference They should be able to foresee potential issues and have you preparing letters or requesting documents ahead of time in

anticipation of this Plus they can also go to bat and try to get these items waived So don’t underestimate the importance of having the best batter on your team!

6 Close It!

Once you clear the underwriter’s conditions it is time to schedule your closing Regardless of whether you are purchasing a new home or are refinancing a current one, always request a copy

of the HUD 1 Settlement Statement before you arrive at the closing so that you are not surprised

or pressured into taking loan terms that are not exactly what they were supposed to be Make sure that you have sufficient cash to bring to the closing if required, and ensure that you have valid identification in the form of a driver’s license or passport to verify who you are

Then sign and get out celebrating – because you just completed one of the toughest feats known

to mankind!

The Many Fingers in the Mortgage Pie

While it’s easy to imagine that the mortgage process involves only yourself and the guy or gal behind the desk who takes your application, there are many people involved, each with his or her own duties So, just who has their hands in your mortgage and why?

The mortgage process typically has the following participants:

The Creditor

Colloquially known as “the lender,” the creditor

in a mortgage loan is technically called the mortgagee This is the lending institution that provides the loan for the property you are purchasing

The Debtor

A debtor is more commonly known as a borrower and technically called the mortgagor This is the party that receives the loan, owing a debt to the creditor

The Mortgage Broker

A mortgage broker is a person who brokers loans That is, he or she shops a variety of lending institutions to find you the best rates and terms

The Loan Officer

This is typically the first person you meet when applying for a mortgage loan The loan officer takes you through the application process, counseling you on which documents to submit She helps you fill out the application, answering any questions you may have The loan officer acts as the lender’s contact person for yourself, your real estate agent and other participants of the mortgage process

The Loan Processor

The loan processor is the person employed by the lending institution to ensure that all of the necessary documentation is present and to verify it for accuracy He then packages up the

documentation and application and sends it to the underwriting department You can read a description of this process on the FHA website

The Underwriter

The underwriter is the most important person in the mortgage loan process, for it is he or she who determines whether or not you get the loan The underwriter’s primary duty is to determine the risk of lending you the amount requested and whether or not that risk is acceptable, according

to standards set forth by the lender To do this, the underwriter analyzes your capacity to pay for the loan - your income He also analyzes your willingness to repay the loan, as evidenced by the payment history outlined in your credit reports The underwriter also evaluates the collateral for the loan - the property you are purchasing - by having it appraised and determining if it is worth

at least as much as the amount you want to borrow

The Appraiser

While a licensed appraiser is typically available for hire by anyone, each lender subcontracts or employs its own appraiser This person is responsible for determining the value of the property for which you need the loan Generally, she uses the values of recently sold comparable

properties, crunches numbers and comes up with a value for this property Adjustments in

valuation employed by the appraiser include the house’s square footage, the lot size, location, upgrades and other features

Escrow Company

The escrow company is an independent third party to the transaction whose duties include the receipt and disbursement of funds, based on the mandates of the contract If your agent hasn’t chosen a particular escrow agent within the company, one will be appointed and act as the

contact during the transaction

Title Company

In some states, such as Oregon, and in some regions, such as Northern California, the title

company is also the escrow company The title company is charged with the responsibility of checking the chain of title - the list of successive owners of a property - for anomalies and

issuing the title insurance policy The title insurance is the guarantee that the party selling the property is the true and legal owner, without impediments, such as liens Depending upon region,

it is the escrow officer, title company representative or an attorney who guides the transaction through the settlement process

Is it Just Me, or Are Lending Standards Getting Tougher?

It’s not just you The heady days of granting hundreds of thousands of dollars in credit to anyone with a driver’s license and a pulse are over

It wasn’t just homeowners who took a bath when the mortgage crisis hit with full force in

2008 and 2009 Bankers got clobbered by the results of their seeming generosity with loans, even as the easy money resulted in home prices getting bid up beyond all reason

Prior to 2006 or so, in the run-up to today’s crisis, buying a home with next to no money down was commonplace For example, in 2005, the median down payment on residential

mortgages was only 2 percent – and 43 percent of borrowers put no money down on their

mortgages Even where underwriting standards nominally required the buyer to put some skin in the game on residential property, mortgage underwriters freely looked the other way as

homebuyers borrowed the down payment from other sources, in so-called “piggyback loans.”Today, things are a lot different – with median down payment figures ranging from a low of 11 percent in North Dakota to a high of 14 percent in New Jersey

Meanwhile, in some markets, at the height of the boom, at least half of new mortgages issued were interest-only loans with negative amortization That is, loan balances were scheduled to go higher, even as buyers made the scheduled payments As a result, thanks to relatively fixed front-end and back-end ratios, credit was awarded to more and more marginal borrowers, ranking lower and lower on the income scale If you consider income a useful indicator of the borrower’s ability to repay the loan, it was a recipe for trouble

That was then, this is now Fast forward to 2010, and we see that more than 26 percent of

mortgage applications were declined that year – a modest increase from 2009, according to information published by the Wall Street Journal The highest rates of declines in the country were in Mississippi (38.6 percent) Vermont (36.6 percent), and Texas (35.1 percent)

And that’s not even accounting for selection bias – people are less likely to apply for mortgages

in the first place compared to 2005 to 2006 and the height of the speculative frenzy in real estate.The burden of tightened underwriting standards is falling particularly hard on the self-employed, who have trouble independently verifying their income

Doug Duncan, Freddie Mac’s chief economist, asserts that the current underwriting standards are just a reversion to the historical norm

As tough as underwriters are now, however, the current rate of declination is actually lower than

it was at its peak in 2007, when mortgage declines reached over 37 percent nationwide

The top three reasons mortgage lenders cite for declining applications:

■ Insufficient collateral

■ Inadequate debt-to-income ratios

■ Poor credit

Some Light at the End of the Tunnel

A handful of lenders – 5 percent of them in 2010 and 8 percent in 2011 – report easing

residential underwriting standards This is an improvement over 2008 and 2009, when nobody was easing at all

Meanwhile, the percentage of lenders who reported tightening standards in 2011 is a substantial

40 percent That is, four out of 10 lenders are still clamping down the screws To be sure, this is the lowest number since 2007 But looking at the data, it is clear that many lenders have imposed several rounds of tightening on their underwriting standards

Why? Bankers are pointing their fingers at Freddie Mac and Fannie Mae, who have let it be known that they will stick originating banks with underperforming loans – by exercising their right to force banks to repurchase them from the mortgage market makers

Credit Scores Matter

But with loans originated in 2005 and 2006 continuing to be a disaster for lenders, they have significantly tightened their credit score cutoffs for their best rates While at one time you could get a loan on very good terms by signing your name and fogging a mirror, these days even a 700 score isn’t enough to land the best terms, in many cases – 720 is the new 650

Is There Mortgage Help For The Employed?

Self-While mortgage rates remain at record lows, major news corporations have continued to report on how much tougher it has become for borrowers to get approved for home loans today

So what options and mortgage help is really available for the self-employed right now?Business owners and other self-employed individuals have often found it more difficult to obtain mortgage financing than their salaried counter parts This is largely due to the income and employment verification requirements and underwriting guidelines which need to be adhered to Unfortunately, while these individuals may enjoy great income levels, verifying income can present an array of hurdles when it comes to getting mortgage help for the self-employed

Even those who have established businesses and verifiable evidence of their incomes have been held back due to the way in which their income is calculated by lenders This is because most lenders and loan programs base their income on the net, adjusted gross income on tax returns, which obviously is kept as low as possible to minimize tax liabilities It is a catch-22 situation Take less deductions, show more income, qualify for a larger mortgage and pay more taxes, or take as many deductions as possible and limit your home loan options

During the recent housing boom we saw the introduction and growth of stated income mortgage loans Sometimes demonized in the press as “liar’s loans” and lumped in the same category of subprime mortgages which were blamed for the bubble, these loans were hugely popular with the self-employed It enabled them to state their real income without having to pay more taxes and get into great stated income home mortgage loans with less money down and better rates

Unfortunately, criticism and abuse of these loans as well as the ensuing regulations have

essentially made stated income home loans illegal for the most part Laws in states like Florida now specifically require that lenders request and consider proof of income when offering

mortgage help for the self-employed

However, exactly what documents are required to verify self-employment today can vary widely between lenders and depending on what type of loan is being applied for Those seeking to purchase new homes with conventional or FHA mortgage loans are required to submit copies of tax returns for the last two years and execute a 4506T, which enables lenders to verify them In order to qualify, the net, adjusted gross income for the last two years is averaged unless the most recent year shows declining income, in which case the lower number will be used The new debt-to-income ratio (DTI) cannot exceed 50 percent of the borrower’s monthly income

However, in a recent interview, 20-year veteran mortgage professional, Lenny Silvestri Jr of Alternative Mortgage Group in Boca Raton, FL revealed that there are more options Firstly, he pointed out that an experienced and knowledgeable loan officer can help borrowers to increase the amount of their income that can be used to qualify by adding back items like depreciation and salaries which were paid to them through their businesses Lenny also unveiled the fact that there are some alternative loan programs which will accept copies of bank statements and use deposit amounts to verify income versus tax returns This is the perfect solution for those who have cash businesses or have been a little slow on filing their taxes or who simply have great accountants who have been able to minimize their tax liabilities Of course, this type of mortgage help for the self-employed does come with above market mortgage rates, and while it may be a great way to cash in on the many current bargains on the housing market, the pros and cons should be weighed carefully.

With all this said about home loans for purchasing new homes it is important to recognize that the rules for refinancing can differ, especially when it comes to mortgage help for the self-

employed who qualify under the government’s Making Home Affordable initiatives A call put into Bank of America’s mortgage hotline revealed that, providing all other eligibility

requirements were met, proof of self-employment and income may be simply limited to needing

to provide a copy of a valid business license

The bottom line is that anyone who is self-employed and who is considering purchasing a new home or who is interested in refinancing could find it a lot easier than they think if they take a few moments to speak with an experienced mortgage professional Certainly, between historic lows on mortgage rates and rock bottom home prices, the opportunities for reducing housing payments and locking into great deals are just too great to let pass by without at least trying to take advantage of them

7 Tips for Home Buying with Cash

Cash is king If you are flush with cash and ready to make a deal, sometimes it’s easier to get acceptance on a lower offer in a competitive situation Because cash buyers get to skip over the treacherous loan qualification process, cash deals are considered to be a “sure thing” and therefore more attractive to sellers

Here are five tips for home buying with cash

1 Leverage your position to the max Because cash buyers get to skip over the loan qualification process, cash deals are more attractive to sellers in many cases Take advantage of this position and ask for terms such as a closing timeline, home repairs, cash allowances, or a homeowner’s warranty You can even ask sellers to cover closing costs as a cash deal contingency

2 Work with a real estate broker or lawyer experienced in closing cash deals This tip could save you money and prevent legal hassles down the line You want someone on your side with

experience and perspective on this kind of deal within your market Even cash deals can hit snags and you want to ensure that you have all of your legal bases covered and that you have clear title on the property when the transaction is complete

3 Make sure that buying a home with cash is right for you financially Before you plow all of your cash into purchasing a residence, you want to carefully consider all of your investment options By choosing a different financial instrument with a rate of return higher than the cost of mortgage interest, you may be able to make more on your money than a mortgage costs in interest Before you tie your cash up in a home, be sure to have plenty of additional money stashed for emergencies and other needs Also, do your due diligence and look for investments that could make you more than a mortgage would cost you (if you’re eligible for a mortgage)

4 Give yourself an out with a “right to inspect.” Because you’ll have generally less information about the property prior to close, you definitely want to provide yourself with an easy out should the home end up being a lemon While a home inspection may add a few days to the closing cycle, it is worth it if you’re buying a home with cash If you’re feeling especially gutsy and the property has been on the market for a while or the seller seems desperate to close, ask them to pay for the inspection Take advantage of your position! Remember, cash is king

5 Estimate sale AND post-sale costs Buying a home with cash can save a pretty penny on the cost of a transaction – and on mortgage interest over the lifetime of a loan Cash buyers are able

to avoid loan origination fees, the cost of a property appraisal, some closing costs and other lender imposed fees Although you save a lot of money upfront, the transaction can end up costing you in the end You’ll make a purchase decision with less information – which could mean a lower valuation or higher taxes than anticipated down the line It also might end up costing you in terms of unexpected home improvement costs or survey and title issues You also may be getting less house for your money by forgoing a mortgage