How not to buy a home
Posted by property on Aug 27, 2013 in Financial Advise, Real Estate | 0 comments
First, we go driving all over town to find all the houses we would like to live in and burn $50 in gas. We pay for take-out since we didn’t get home until late because we got lost, twice. Next, we try to remember where all these houses were and try to contact an agent to put in an offer on the one we like the most. Since the one we wanted just went under contract because we were not fast enough, we put an offer in for our second choice. The seller likes our offer and asks for a pre-approval letter from the bank, oops. After going to the third bank, we get pre-approved for a loan, but it is not for enough to buy the house we wanted and we don’t have enough money to meet the purchase price; bye-bye second choice. Now we are getting aggravated. Let’s put an offer on the third and fourth choices. The third choice seller takes our offer. We negotiate the finer details and set a closing date. Hurray for us. Two days before closing, the attorney calls and says the bank changed their policy last week and we no longer qualify for the loan. We can’t qualify for a loan now because our credit score dropped from all the other banks pulling our credit. This scenario can be typical if you’re not careful. Here are some things to know about buying your first or next home: Know your credit score and your finances and make the bank tell you if your numbers are good enough to qualify. (Example) “I want to buy a house listed for $120,000. I have a 620 credit score and I make $5500 per month income. Based on these numbers, should I qualify for a loan with your bank?” Of course they have to verify to approve you, but this cuts down the disappointments and the credit inquiries. Have a pre-approval letter from the bank...
Advantages of an LOC part 2
Posted by property on Aug 20, 2013 in Financial Advise | 0 comments
I told you before how much more you can do with a line of credit than you can with a standard loan. Now, let me explain what you are looking for. Most large banks provide the kind of line of credit we want. There are a few things to ask for: – A variable interest rate (not my favorite either, but the way the interest is calculated comes out cheaper anyway.) – Open Line of credit – This is important, some banks offer a LOC that is structured like a loan. You don’t want that; you want as close to a checking account as possible. The account should come with either a debit card or checks and allow you to withdraw or deposit at any time (at least five withdrawals per month). This allows you to deposit income into the account, enabling you to keep the average daily balance low for most of the month and pay bills with that same money as bills come due. What are we going to do with such an account? This account does not charge interest until you pull money out, but as I said earlier, you can control how much interest is charged. Now, use this account to pay off the other debts, ESPECIALLY YOUR MORTGAGE. I will make a 2-5 thousand dollar payment on my mortgage every so often. The interest that I cancel on my amortization schedule is almost double the interest charges on my LOC. One payment can cancel up to $5000 in interest on my mortgage and the interest I pay in my LOC to do this runs around $400-$1000. You’re simply paying $1000 to save $5000; who wouldn’t want to do that? Simply make a payment to the mortgage of around 30-50% of the amount in the LOC (never pull out more than 50% of the total line), then put your income in the account to cancel interest. The money you save (don’t spend) stays in...
Advantages of an LOC (Line Of Credit)
Posted by property on Aug 19, 2013 in Financial Advise, Real Estate | 0 comments
Many people don’t understand the differences between a loan and a Line of Credit. Here is where you will be amazed. Loan – You go to the bank to borrow money. They pay for the item you are interested in (real estate, properties for sale, rental property, etc.) and you have to pay them back at scheduled intervals which include a set amount of interest and principle each month. The payment you send is only credited to your account once a month, no matter how many payments you send in a month. If you pay on the first and they credit that payment to your account on the 30th, that means they have your money to invest for free for 29 days. If that set payment becomes too much to handle, oh well, you signed a contract of some kind and you’re stuck. LOC – Lines of credit are very different. The bank qualifies you for a line based on the equity in an asset (home, rental property, IRA, etc) or the provable income you make. That money is placed in its own account at the bank until you need it. If you don’t withdraw it, you do not get charged. That money can stay on standby forever if you like. Also, an LOC, in most cases (or ask for it), is on a variable interest rate that is not that high. I don’t like variable rates either, but it’s the kind you need to ask for to do what I’m telling you about. The big point of an LOC is the accrued interest is based on the Average Daily Balance, which you can control. In an LOC, the payment you make is credited to the account the same day, and you can take it out tomorrow and it still counts as a payment. You can treat an LOC just like a checking account, if you ask for the right one. Most accounts offer either a debit card...
What banks are looking for in a real estate loan application
Posted by property on Aug 14, 2013 in Financial Advise | 0 comments
Although banks are hungry for the amount of business they had before 2008, they are still required to hold their ground with some regulations that are cutting their own throats. Over the last two months, I have interviewed over twelve (12) banks and lending agencies for loan requirements for my own use and found some hefty requirements. Banks do one of two things with a loan they create. They sell it on the primary market or keep the loan “in house,” meaning they receive the payments and earn the interest themselves. Most of your smaller community banks keep loans “in house,” which means they can make their own rules about the requirements for approving a loan. The rest are sold to Freddie Mac or Fannie Mae, which tell the banks the criteria of the loans they will buy. All banks differ a little in the home loan requirements, but as of this posting, these are the basic minimum requirements for getting a loan approved at the majority of banks. Requirements for standard homes: Debt to income ratio of 38% (no more than 38% of your monthly income goes out in debt payments, i.e. car loan, credit cards, mortgage, etc.) Credit score of 640 or better. Some will go as low as 580, but the interest rate is much higher. WARNING: Do not let them run your credit until they run your financial figures first. Know what your credit score is and ask them if they can offer a loan program based on those numbers. If they can offer something, then let them run your credit to verify the score and credit history you should have already told them about. Bankruptcy – FHA loans require two years’ time after discharge date. If any real estate was lost in the bankruptcy, they require three years from discharge. Most banks are requiring two forms of credit established after the bankruptcy for a twelve (12) month period. Any car loan, credit card...
Owner Financing
Posted by property on Aug 12, 2013 in Financial Advise, Owner Financing | 0 comments
The mainstream media is currently trying to tell everyone that the housing market is getting better, looking up, showing promise. OK, where? As I have said before, the housing market is like every other market place, some cycles are great for the buyer and sometimes the market is great for the seller. Right now it is most definitely the buyer’s time. So, “where are the buyers?” you say. The ones that can buy are getting the best deals they can in REO’s and foreclosures. They are not going to waste their money buying in the retail market when there are so many half-priced houses on the market. The other buyers that are interested in your house are still waiting for the bank to approve them for a loan. Out of all the potential buyers in the market right now, only a small percentage can get funding to actually buy. So, how do I get my house sold without giving it away? Simple; you provide the funding. There are plenty of buyers out there, but many can’t get a loan. There are even more houses on the market to choose from. Therefore, it is important for you to stand out and provide something no one else will: owner financing. Most of the general public won’t finance their personal house because they are afraid. They don’t know what to do. Well, here are some basic steps to make it easy and get your house sold closer to the price you want. Step 1- Offer the financing – tell everyone. Step 2- When you get a PRICE you can accept, check their credit (truecredit.com, annualcreditreport.com, it should be at least a 640). Now iron out the terms, which should include: – Down payment – If you don’t have to have the money right now, ask for enough to cover moving expenses. Lower the down payment, the higher the price they usually pay. – Terms – you can get the balance amortized on any...
