Surveying Today’s Real Estate Opportunities
If you are thinking of entering the real estate market, whether as a newcomer or after having taken a break, it’s important to understand some of the new developments that have occurred since the recent market upheaval and how you can use those changes to your advantage to make good choices and solid investments that are right for you and your financial goals.
Whether you’re looking to buy an investment property, second home or even a primary residence, there are some new property options that are well worth exploring. Three types of properties that have become very prevalent in today’s real estate market are short sales, foreclosures and REOs. If you’ve never had to deal with buying such a property, your initial reaction might be that the sale will be complicated or protracted, but that’s not necessarily the case.
The common thread for all these types of properties is that the lender has some level of involvement in the sale of the property, rather than just an individual owner. Because so many homeowners owe more than their home is worth or have been unable to keep up with their mortgage payments, it’s not surprising that more of these properties are being listed.
Let’s take a closer look at short sales, foreclosures and REOs to clear up any misconceptions and to demonstrate that these are every bit as solid an opportunity as any other home sale:
Short sales
In a short sale, a homeowner who has experienced some kind of financial hardship and cannot afford to pay the mortgage and the lender that sold them the mortgage enter into an agreement in which the home will be sold for less than the balance of the loan. This represents a good opportunity for the buyer, because the home will be more competitively priced.
Now, you might have heard that short sales are time-consuming and can end in frustration. That’s no longer the case in most instances, thanks to rules that went into effect under the Department of Treasury’s Home Affordable Foreclosure Alternatives Program (HAFA), which have streamlined the process.
In a short sale, you should work with an agent that has some expertise in short sales (the National Association of REALTORS® offers a special certification, in fact). You make your offer directly with the seller’s agent, who coordinates with the seller’s lender. Not long ago a short sale could drag on for months, leaving the buyer and seller in limbo while the lender took its time making decisions; new laws have significantly cut down on the wait time and many short sales are accomplished within a much shorter time frame now.
Foreclosures
Foreclosure is a little more tricky. A home goes into foreclosure when the current owner defaults on his or her mortgage. The home can then go into a foreclosure auction, where it is possible to bid on the home. There is a minimum bid the lender is asking for. Winners must pay the full amount of the winning bid at auction. For a typical homebuyer, this is usually not a realistic scenario.
Any unsold auction property reverts back to the lender and becomes an REO, or real-estate owned property, and the lender must find another way to sell it.
REOs
When a home is put up for sale in a foreclosure auction but is not sold, it becomes an REO. The lender repossesses it, owns it and needs to sell it. Often, REOs represent a good opportunity for prospective buyers, because lenders aren’t in the business of owning homes, so they are motivated to sell.
That said, remember that the lender is still in the game to get the most money it can for the property, and many lending institutions operate departments that oversee their REO properties and take offers on them. Typically, both the lender and the buyer are represented by real estate agents.
REOs are usually somewhat maintained, but can be rough around the edges and need some sizable repairs. This can have a bearing on price. While you will be able to conduct an inspection of the home as you would in any real estate transaction, REOs are often sold “as is,” so if the inspection uncovers costly necessary repairs, the terms of your offer might change.
Perhaps the most important thing to keep in mind when it comes to short sales, foreclosures and REOs is that while they represent excellent home-buying opportunities, they are not fire sales. The sellers, whether the owner or the lender, want to get the most money possible for the property, so it is important to manage your expectations about what constitutes a good bargain.
As you can see, there’s nothing mysterious or hard to understand about these different types of properties in today’s real estate market. I’d love to answer any questions you might have about how these types of properties, and discuss how they can provide solid opportunities for anyone in the market.
 © 2011 W.J. Bradley Mortgage Capital Corp., 201 Columbine Street Suite 300, Denver, CO 80206. Phone #303-825-5670. NMLS ID 3233. Trade/service marks are the property of W.J. Bradley Mortgage Capital Corp. This is not a commitment to lend. Restrictions apply. All rights reserved. Some products may not be available in all states. WJB is not acting on behalf of or at the direction of HUD/FHA or the federal government.
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Pre-Approval & Pre-Qualification
For many new homebuyers, the terms pre-qualification and pre-approval seem interchangeable. But they are not — and the distinction is an important one.
When you get pre-qualified, I perform a quick check to determine generally how large a home loan you can afford. Essentially, when a buyer is pre-qualified, the lender is saying it would most likely approve the buyer for “x” amount.
In order to get pre-qualified, you’ll need to provide me with some basic information on gross monthly income, other reliable reoccurring income, the balances and payments on current debts, and how much money has been saved for a down payment. Qualifying ratios are applied to those figures to determine what percentage of your gross monthly income can be used to pay for the home loan and attached expenses.
Pre-approval goes much deeper. In order to issue a pre-approval, I need to examine and verify your debt, income, savings, assets and credit report to ensure you can repay the loan amount. Where pre-qualification is a sort of educated guesstimate of the buyer’s purchasing power, pre-approval says the prospective lender would definitely be approved for the loan.
This is particularly useful when home shopping for multiple reasons. To begin with, pre-approval instantly lets you know what your actual budget is. When you begin home shopping, knowing what you can afford from the outset will help you and your real estate agent better focus your efforts to find the best home for your money. It sets the scope of your home-buying strategy.
Once you find a home within your budget that you like, being pre-approved provides you with an advantageous position over other buyers, because pre-approval assures the seller that you have access to the loan necessary to back your offer. I will provide you with a letter or certificate demonstrating that you are pre-approved for a certain amount of money, which you can provide as part of your offer.
Would you, a relative or a friend like to learn more, or get pre-qualified or pre-approved for a home loan at no cost? Please contact me and I will be happy to help you!
How can I correct mistakes or dispute information on my credit report?
It’s not easy, but it can be done. Credit bureaus are legally required to investigate disputed information by contacting the creditor that originally supplied them with the information. The three major credit bureaus usually have the same information for each consumer file — but not always. You need only contact the bureau that actually shows an error.
Factual information cannot be removed from a credit report, and the credit bureaus will not automatically remove information from your reports just because you dispute it. You have to prove that information is wrong with supporting documentation before a credit bureau will correct a report. Under the Fair Credit Reporting Act (FCRA), a credit bureau must within 30 days remove or modify a disputed item if it is found to be inaccurate, incomplete or cannot be verified after a reasonable investigation.
Contact information for the three major U.S. credit bureaus:
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Experian P.O. Box 2002 Allen, TX 759013 (888) 397-3742 www.experian.com |
TransUnion P.O. Box 1000 Chester, PA 19022 (800) 888-4213 www.transunion.com |
Equifax P.O. Box 740241 Atlanta, GA 30374 (800) 685-1111 www.equifax.com |
* W.J. Bradley is not a credit counseling or financial advisement firm and this information is for educational purposes only and is not to be taken as guidelines or guarantees to improve your credit or financial situation or eligibility to secure a home loan.
The Fast and the Flawless
Closing on time, with little or no red tape, saves you money, time and worry.
That’s why W.J. Bradley has put together a team of the best processors, underwriters, closers and funders in the business. They’re fast, they’re accurate, and their goal is to make sure you get your loan when you need it. In fact, we have some of the fastest turn times in the mortgage lending industry, measuring the time in hours, not days.
Our entire team is charged with the task of ensuring you have the best customer experience every step of the way. Our Operations team is just as committed to providing you with excellent service as I am! Together, they do the work so you don’t have to worry.
WJB also employs state-of-the-art technology to ensure speed and accuracy when processing your loan. We will keep you apprised of the progress of your application throughout the process and we’re here to answer any questions you have, at any time.
If you’re ready to discuss refinancing a current loan or purchasing a new home, call W.J. Bradley today. We’re building a secure future: yours.
Time for Your Mortgage Review
Your mortgage is one of the cornerstones of your financial foundation, so it’s important that you take some time each year to ensure your fiscal “house” is in order. Each year’s financial planning should include an annual review of your home financing to make sure that your loan is in line with your short- and long-term financial goals, as well as with what’s happening in the marketplace.
Some people call it a mortgage checkup, some people call it a mortgage review, but whatever you call it, ensure that you take some time each year to take a look at your home loan. This is especially true right now. Given the current financing market, now is the perfect time to review your mortgage. Rates are low and you could benefit from a decreased monthly payment as a result.
A mortgage review is especially important if you’ve run into some life changes that could impact how your mortgage fits into your personal finances, such as:
Recasting – A New Way to Cut a Mortgage
Whether you have a jumbo loan or a conforming loan, you might be able to use a little-known strategy called recasting to lower your payments for a small fee. Recasting or re-amortizing allows a borrower to lower their monthly payment on an existing fixed-rate loan without having to apply for a new loan and without having to pay a reappraisal fee. Here’s how it works:
The borrower asks the loan service if he/she can put a large sum of money against the existing mortgage. Ordinarily, this allows a borrower to pay down the loan, but he/she would still have the same monthly payment. With recasting, the mortgage payment would be reduced to match the new lower principal balance. Each lender sets their own fees and requirements to recast. The loan must also be in good standing and permission must be secured from the loan service.
Mortgage recasting resembles a “cash-in” refinancing, which is a newly popular strategy in which a borrower pays down principal on an existing loan in order to qualify for a new loan with a lower interest rate. In recasting, the borrower pays down the principal, but the interest rate and number of payments remains the same.
So, what is the advantage to recasting? Unlike a refinance, there are almost no fees or costs.
How does my home relate to my kids college funding?
Schools require either one or both of the following forms: FAFSA and CSS PROFILE. Most public schools require only the FAFSA, whereas many of the private schools require both the FAFSA and CSS PROFILE. Some even require their own institutional form.
But, it’s important to note that the FAFSA does not look at the primary residence. Whereas the CSS PROFILE does.
Equity in the house is not a good thing as it will be assessed. Talk to Michael about taking a home equity line of credit to reduce the stated equity in the house. A HELOC can provide a number of advantages like helping to pay for school, find you cheaper money, reduces stated equity in the home and the tax benefit of deducting the interest on the loan.
For more information about preparing for your kids’ college education you can contact Mitch at mitch@collegefinancial-consultants.com, toll free at 877-859-3243 or directly at 408-395-1200
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What does a college financial consultant do and why do I need one?
A college financial consultant can help in a variety of different ways. Most, will fill out all the forms for you, in order to provide the piece of mind that comes with knowing that all financial forms are filled out correctly and completely.
Second, they help with planning and ensuring you hit key deadlines. Missing deadlines on applications and financial aid can cost a lot of money in the long run.
Third, a good consultant will know where the money is. The percent of need met and the distribution of that need (need based grants vs. loans) will vary greatly depending upon the school. It would behoove you to know up front which schools can help subsidize the cost and those that can’t.
Lastly, and the most important service a consultant can provide, is to position you to reduce your exposure and in turn increasing your grant aid eligibility. The need analysis for the FAFSA and the CSS PROFILE are complex. It’s guaranteed that a professional who’s helped thousands of clients is far more prepared than if you’re doing it the very first time. A slight oversight or not fully understanding the methodology and how the different variables are weighted can cost you thousands.
For more information about preparing for your kids’ college education you can contact Mitch at mitch@collegefinancial-consultants.com, toll free at 877-859-3243 or directly at 408-395-1200
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