Money Saving Tip! How to Pay NO Closing Costs


When purchasing or refinancing a home, closing costs are a part of every transaction. But you don’t necessarily have to be the one paying for them!

The basic closing costs for any real estate transaction include escrow and title fees, lender fees (including appraisal fee), pre-paid interest, property taxes, and insurance. Closing costs, on average, are 1-2% of the purchase price for a purchase loan, and $3k for a refinance.

 

HOW TO PAY NO CLOSING COSTS:

Sellers, lenders, realtors, and gift donors are all allowed to contribute towards closing costs.

Seller credits can be negotiated as part of the contract negotiations between the buyer and seller.

Lenders have the ability to generate “lender credits” by increasing the interest rate from the going rate.

Realtors are allowed to contribute using their commission (though it rarely happens).

Gift donors are family members who contribute money towards the purchase of the property.

If you have the down payment on a home you want to purchase and are merely missing some or all of the closing costs, don’t let a good deal pass you by. Sellers, lenders, realtors, and family members can all help you get the closing costs paid. Take advantage of the opportunity to get into a property!

Low-Doc Loan Programs. No Income Docs Required!


Low-doc, a.k.a. stated-income, loan programs ruled the loan industry in this country until the economy collapsed in 2008. Many qualified and non-qualified buyers enjoyed the convenience of these easy-to-qualify-for loan programs.

A stated income loan program allows a buyer to “state” their income without having to prove it with tax returns and paystubs.

Today, low-doc loan programs are still available to higher income earners with large cash assets and excellent credit.

 

Here are today’s standard low-doc loan program requirements:

  • 30%-40% minimum down payment.
  • $100k (or more) in cash reserves post-close.
  • 720 minimum FICO score.
  • Excellent credit. No previous credit issues such as a bankruptcy, short sale or foreclosure.
  • Single Family Residences only.

No longer designed for your average home buyer, banks and investors tend to offer these low-doc or stated-income programs for the sole purpose of establishing a business relationship with high-income earners. For those select few, low-doc loan programs are a convenient way to qualify for a home loan.

Top 10 Truths: Escrow


When buying, selling, or refinancing a property, the services of an escrow company will be necessary. Here are the top 10 things you need to know about escrow:

  1. An escrow company is a neutral third party licensed by the California Department of Business Oversight. It receives and disburses money and documents and acts as an intermediary between the buyer, seller, lender, and realtor and follows written instructions provided by them.
  2. Most accurately, the word “escrow” refers to “money held by a third-party on behalf of transacting parties.” Practically, we use the word escrow as short-speak for “escrow company” or “escrow time period.”
  3. Escrow time periods are 30-45 days on average but can be anything the buyer and seller agree upon.
  4. Home owners choose the escrow company. Realtors and lenders make recommendations to the home owner as to which escrow company to choose.
  5. Escrow must be “opened” within 3 days of an accepted offer by a seller. “Opening escrow” is the process of hiring the escrow company and providing escrow instructions and all deposit monies to them. Realtors open escrow for purchase transactions. Lenders open escrow for refinance transactions. But any party in the transaction may open escrow.
  6. Escrow companies charge for their services. Both the buyer and seller split the cost of those services the vast majority of the time. Escrow fees are calculated based on the price of a purchase transaction and are a fixed cost for most refinance transactions.
  7. Buyers, sellers, realtors, lenders, and escrow agents all work as a team to get the transaction finalized. Each party has various contractual obligations and responsibilities— nothing is more enjoyable than when all parties are working in sync as a team!
  8. Escrow must “close” at the agreed upon time period. Closing escrow means all requirements have been met, the title of the property has been transferred to the buyer, and a new deed has been recorded at the county.
  9. Legal consequences may be imposed if a buyer or seller does not meet all their contractual obligations within the agreed upon time period
  10. An escrow company is in charge of the handling monies as well as the signing of loan documents with the buyer. Buyers give their earnest money deposit, down payment, and closing costs to the escrow company. Sellers receive the proceeds of the sale from escrow. Escrow disburses commissions to the agents.

Home buyers are the most excited at the beginning of the home buying process, the most nervous during the escrow period, and the most relieved when escrow closes. Escrow officers are an integral part of the team when buying, selling, or refinancing a property. Remember your friendly escrow officer and consider a thank you call or email after escrow closes. They will absolutely love you for it.

Top 10 Truths: Conventional Loans vs. FHA Loans


Conventional loans and FHA loans are the most common 30-year fixed rate programs out there today.

Here are the top 10 things you need to know about conventional vs. FHA loans:

  1. Conventional loans only require mortgage insurance when the down payment is less than 20%. FHA loans require mortgage insurance on all loans regardless of the down payment.
  2. FHA and Conventional loans both are NOT first-time home buyer programs.
  3.  Conventional Loans charge less in monthly mortgage insurance premiums than do FHA loans. In fact, FHA charges some of the highest monthly mortgage insurance premiums in the business–up to three times more than conventional loans, depending on the buyer’s FICO score.
  4. FHA calculates the cost of monthly mortgage insurance based on the down payment and loan amount. Conventional loans do the same but, in addition, take the borrowers’ FICO score into consideration. FHA’s mortgage insurance premiums are unaffected by a low or high FICO score. A high FICO score makes a big difference in mortgage insurance premiums for conventional loans only.
  5. FHA charges a one-time upfront mortgage insurance fee in addition to monthly mortgage insurance fees. Conventional loans do not have this requirement. FHA does allow the option of financing the fee into the loan OR paying it out of pocket. 99% of all FHA buyers finance the fee into the loan.
  6. FHA requires mortgage insurance for the life of the loan. Conventional loans only require mortgage insurance until 20% equity in the property has been reached, either because the principal loan balance has been paid down or the property has gone up in value.
  7. FHA allows buyers to have less-than-stellar credit yet still qualify for a loan. Conventional loans have stricter credit guidelines.
  8. FHA is best known for the low minimum 3.5% down payment. Conventional loans require 5% down for loans up to $417k and 10% down in “high-balance” areas. Not all counties offer high-balance conventional loans. Check the Fannie Mae website for loan limits in your area.
  9. FHA and Conventional loans both offer a way for buyers to generate lender credits (money) by raising the interest rate slightly from the current rate. FHA loans tend to generate more credits than Conventional loans. Lender credits can be applied to the buyer’s closing costs.
  10. FHA is only a good option if a Conventional loan is not an option.
    Whether you’re just starting to shop for a loan or you’re a seasoned veteran, understanding the details of these loan programs can be a bit confusing. If you have additional questions, email me anytime.

Top 3 Tips to Get Your Offer Accepted TODAY


Getting an offer accepted is never easy, especially when housing inventory is low and home buyers are plentiful. Many properties receive multiple offers from multiple buyers, all bidding on the same property.

Here are 3 top tips to stand out from the crowd and help get your offer accepted!

  • Outbid Your Competition: Buyers have the tendency to want to underbid on a property. Why not overbid instead? Offering an additional $5,000 can make the difference between owning your dream home or having to keep looking and make offers for months to follow. An additional $5,000 to your loan only adds about $30 to your monthly payment.
  • Work with an Expert Realtor: Choosing an expert realtor will help you tremendously. Take their advice and follow their lead! Remember, you’re on the same team. They want you to be highly satisfied so you become a client for life. Expert realtors are always focused on your best interest.
  • Write a Compelling Offer: You want to stand out from the masses and be attractive to the seller. So keep it simple, and avoid asking for long escrows, seller credits, or anything else the seller may find disagreeable, unless you absolutely have to. Once you’re in escrow with an accepted offer, the seller will often be more willing to negotiate.

If you’re offer is not accepted, don’t be too disappointed. Chalk it up to the fact that “it was not meant to be,” learn from the experience, and know that a better property is around the corner waiting for you!

How To Use Your IRA To Flip Houses


How To Use Your IRA To Flip Houses

One of the best investments that one can make is in a house. Houses will frequently appreciate to many times their original value. However, most of us do not have the capital necessary to purchase extra houses and reap the rewards. Additionally, we can make a lot of short term profit by flipping a house, but again, we are often constrained by the amount of cash that we have on hand. However, you can legally use your IRA to purchase a house, and even end up not needing to pay taxes on your profit. This will give you the cash that you need to get started. As a caveat, this method requires a considerable amount of paperwork, attention to detail, and a good work ethic. It is definitely not a method for everyone. With that said, here are some of the steps that you will need to take in order to take an active role in investing in your future.

  • Ensure that you have the funds necessary to fully fund your purchase. You will need a sizeable amount of cash in your IRA to be able to go through with a purchase.
    Convert your IRA into a “self-directed” IRA. This will require some research into the best method for you, but is essential. If it is not done correctly, you will not be able to use these funds while maintaining the limited tax protection.
  • Find an administrator. You will be obliged to find an administrator to serve as the custodian to your self-directed IRA. This means that there will be a third party giving oversight. Ensuring that you find a reputable and trustworthy administrator will be critical in ensuring that you do not end up making mistakes.
  • Look closely at the rules. This is an area where there are many rules governing what can and cannot be done with the property. Generally, you and family members cannot live in the property. While this is typically not what you would be doing while flipping, it is important to ensure that all rules are followed. A violation could lead to huge taxes being levied on your transactions.

Some things to remember are that you need to be very cautious when examining the laws and regulations. Additionally, this is not a passive investment. It will require your time and energy. If you are not willing to give this the attention that it will require, you will not be able to make the money that would otherwise be possible.