DEAN GRAZIOSI: DEAN GRAZIOSI REVIEW – REAL ESTATE FEED BY DEAN GRAZIOSI

Now that you’ve decided to purchase a new home the next step is finding out if you qualify for a home loan.  If you have perfect credit then qualifying will not be a problem.  But if you’re like many people out there, you will have flaws on your credit report, the important thing to find out now is how they will affect your chances of being approved for a home loan.

There are many things that mortgage lenders look at, one is how much debt do you currently have.  Having too much debt can lead to you being denied a home loan.  They’ll see that you’re already overextended and you may have trouble making a mortgage payment.  You should calculate your debt-to-income ratio to see where you stand.  Add up all your monthly bills and divide them into your monthly income.  You will then multiply the result by 100 to get a percentage.  The number represents your debt to income ratio.  Mortgage lenders prefer that number be lower than 28 percent.  If you are higher than 28 percent you may want to begin paying off some of your current debt in order to lower your ratio before applying for a mortgage.

Past-Due accounts also hurt your chances of being approved.  Before applying for a mortgage you may want to pay off any past due accounts that you currently have.  If you are unsure of which debts this includes, obtaining a copy of your credit report will help point them out.  You will have to contact each account holder and either pay off the past due amount in full or set up a payment arrangement.  This will help you pay off amounts that may be too large to pay off at one time.

Checking your credit report for any errors, if you find an error you can contact the reporting agency and appeal it.  This will have the error removed from your credit report.  Even what you feel is a small error may be enough to keep you from getting the loan that you need.  You should check your credit report at least once a year for any errors and have them removed as soon as possible.

Do not open any new charge accounts.  Adding new debt to your pre-existing debt is a sure way to get denied for a home loan.  Lenders want to see that you are responsible with your credit and opening new accounts doesn’t show them that you can be responsible.  If you are applying for a home loan it is important that you not apply for any other lines of credit at the same time.

Applying for a home loan shoes the importance of handling your credit responsibly.  If you have a few blemishes on your credit report it is not the end of the world.  Once you have cleared up any outstanding debt obtain a letter stating that your account has been paid in full.  This will prove to lenders that you are taking the necessary steps to qualify for a home loan.

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Banks sometimes have REOs, otherwise known as Real Estate Owned, which come to them as a result of failed foreclosure auctions. The banks want to get the most out of these properties that they can, but they will also work with investors to complete sales as soon as possible. There are a few breaks that the bank will give you on REOs that you might or might not get otherwise.

Cleaning Up the Past

The first thing the bank will do with an REO property is to clear up all the obligations related to it. The bank will pay off Home Association dues, get tax liens removed by working with the IRS, and erase the mortgage. All these are just preliminary steps. They would usually have to be done anyway by any seller, but since the bank is doing them they are usually done rather quickly.

Repairs and Inspections

The bank may make repairs, at their discretion, if they feel that they will get better offers that way. It might not cost you a lot more to buy the home or property after repairs are completed, though. If the bank does not have other reasonable offers when you arrive, you will often still get the property at nearly the same price. The bonus is that you will have to do less work on it.

As far as inspections go, banks are not going to give you a great number of inspections on the property. However, you will be allowed to conduct your own inspections before buying an REO property if you pay for them yourself. However, the bank will nearly always agree to provide a pest certificate if you request it as a part of the deal.

Title Insurance

REOs generally come with a title insurance policy that is issued to you without extra charge. This is one way the bank cuts closing costs.

Financing

Banks will not always provide financing for an REO home. However, if you are looking for a home that needs quite a bit of work, the bank might be more willing to accommodate you in order to get the property off their books. If they do agree to finance you, they will often give you a lower rate of interest on an REO than they would on most other types of properties.

The Big Deal

The biggest reason to buy REO homes is that they are usually such a great deal. Banks do not want to give them away, but they do want to get them off their books as soon as possible. As long as these homes stay in their inventory, they are a liability rather than an asset. You can offer the bank a way to turn that negative into a positive.

If you make a bid on an REO home, you may not be alone. Sometimes as many as 20 or more bids come in for a single REO in a short time. Do not let this dissuade you. Someone has to get the bid. With the right research and a reasonable attitude, you may get the REO home and all the benefits the bank has to offer you.

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You may have heard by now that the time has come to buy real estate. There is good reason for this. Not only is it a buyer’s market with so many homes up for sale and vacant for long periods of time, but interest rates have plummeted. This means that there has never been a better time to invest in real estate.

The biggest reason now is the time to buy real estate is the fact that the national average mortgage interest rate is at an all time low. People are getting rates as low as 3.28 percent on an ARM thirty year mortgage. Interest rates have not been this low since the seventies. That’s right, it’s been nearly four decades since interest rates were this low, and when you consider inflation, you can only imagine what these low interest rates could mean for the economy.

Of course, getting that low interest rate requires you to have good credit. If you don’t have good credit, you are running on a tight deadline to get it cleaned up to the point where you can qualify for one of these mortgages. Interest rates will not stay this low for long. The best way to bump up your credit score fast is to make sure you have various types of credit accounts, such as taking out a personal loan through your bank rather than just having credit cards. You should pay off or pay down your credit cards as much as possible, so that the amount of debt you have is lower. You should also make sure that any revolving accounts are in good standing.

One of the things to consider when buying real estate in this type of market is the benefits of getting a ten or fifteen year mortgage instead of a thirty year mortgage. The interest rates are even lower if you go with a shorter term. Your payments on a fifteen year mortgage will now be about the same as they would have been on a thirty year mortgage just a few years ago. This means that you could pay off your home quicker, which is great if you are middle aged and looking forward to retirement in fifteen or twenty years.

Of course, another reason it is a great time to buy real estate is that it is a buyer’s market. There are a ton of houses everywhere you look that have been up for sale for quite some time. Sellers are desperate to unload properties, and real estate agents are desperate to make their commissions. This means that you can demand just about any terms, as long as you are offering a reasonable amount of money for the home you will probably have your offer accepted. You can also put in offers that are much lower than the listed sale price, just because people want to get the property sold. This is especially true if the property hasn’t had many offers recently. All in all, now is the best time to buy real estate, so jump on the bandwagon!

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If you are in the process of purchasing a new home, the amount of money needed for a down payment may be more than you expected.  There are some ways in which you may be able to get assistance with your down payment.  If you are in need of assistance with your down payment, there are many programs that may be able to help.

If you are a first time home buyer, there are many programs that may help.  A first time home buyer is anyone who has not had ownership interest in a home within the last three years.  First time home buying programs are not only for those who are purchasing their first home, but can also be applied to anyone who may have had a foreclosure more than three years prior to buying a new home.  This improves your chances of qualifying for assistance greatly.

There are also state agencies that were designed to help buyers with their down payment.  These programs consist of buyers acquiring a loan from the agency in order to cover their down payment.  The buyer is then responsible for paying the money back to the agency on a monthly schedule.  The interest rates on these types of loans are usually lower than what a bank would offer.

You may also qualify for grants that are provided by the state you reside in.  These grants were designed to assist home buyers who are not able to come up with all of the required down payment.  There are certain requirements that must be met in order for anyone to qualify for these types of grants.  Consult your realtor or mortgage broker; they may be able to provide you with more information regarding grants.

If you are a veteran and you qualify for a VA loan, oftentimes there is no down payment required.  The VA loan covers the closing costs and down payment.  If you are a veteran and would like more information on acquiring a VA funded mortgage consult your local Veteran’s Administration office and they will be able to explain what is required.  Your mortgage broker may also be familiar with the requirements of a VA loan and can tell you if you qualify. 

Don’t let you inability to come up with a down payment hinder your dream of purchasing a new home.  There are many programs and agencies that were designed to help people in your situation.  With a little research and legwork, you may be able to qualify for a home loan and have the money required for the down payment.  Coming up with a down payment can be a stressful undertaking, but with the help of the agencies that were put in place to help, it has just gotten easier to buy a new home.

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In today’s market there are plenty of available homes for prospective buyers.  That combined with the low interest rates has many prospective buyers considering purchasing the home of their dreams.  But, there may be potential danger to their dream of home ownership down the road.  Along with worrying about their credit rating and income level, there are also five potential reasons that prospective lenders may decline your application for a home loan. 

The first red flag for potential lenders is if you are currently in the middle of a divorce.  Many lenders refuse to approve a loan for couples who are in the process of getting divorced.  The primary reason that lenders tend to deny these applications is that they are worried that a one person income would affect the potential buyer’s ability to make payments.  It is also important that any person who is applying for a home loan and is in the process of becoming divorced not hide the fact from prospective lenders.  The truth will come out when the lender performs a background check on the individual; if the fact that you’re getting a divorce comes out after a background check is performed, you can kiss your loan goodbye.  The prospective buyer could also face charges of mortgage fraud for lying in their mortgage application.

Another area where lenders may have a problem with a potential buyer is if they have recently switched careers.  A potential buyer who has had a change of careers within the last two years prior to applying for a mortgage may find it difficult to be approved for a mortgage.  Lenders tend to be wary when approving buyers who are not established in their careers, even if their income has increased with the new position.  If you are considering changing careers you should probably wait until after you have secured your home loan. 

If you are involved in a lawsuit at the time of your mortgage application, you may find it difficult to secure a loan.  This is true whether you are a defendant or a plaintiff.  If you are a defendant lenders may feel that you may be hit with a large settlement that may affect your ability to make payments on a loan.  If you happen to be a plaintiff in a lawsuit, lenders may fear that if you happen to lose your case you will be burdened with high attorney fees that need to be paid.  If that is the case, lenders may feel that on top of the attorney fees you will have a difficult time repaying your loan.

Making repairs on your current residence is also something that lenders look at when deciding whether to approve your loan.  Lenders feel that repairs being made on a home should be completed before the application process has been started.  Lenders would prefer that any home repairs be completed prior to buyers applying for a new mortgage.

New debt can be a mortgage approval problem.  Lenders look at the borrower’s debt to income ratio and do not like borrower’s ratios at more than 43 percent of their monthly income.  Acquiring new debt, such as a car loan or high balance on a new credit card may put many borrowers over that 43 percent limit.  It is recommended that borrowers not acquire any new debt until after a mortgage has been secured.

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What do you really want from your real estate purchase? It is a question many people fail to ask themselves.  There may be times when an opportunity presents itself out of the blue, but in most cases it is wise to know what you are looking for ahead of time. Home buying can be especially tricky. Ask yourself some basic questions to pave the way to a better home buying experience.

1. Is the home for your own personal use?

Know whether you are buying to live in, to rent or to sell the home. You will be a better judge of all the features if you know your target market – even if it is simply you.

2. How many bedrooms do you need?

If the home is for you, you already have a good idea of the number of bedrooms that is right for you. If you are buying to rent, you have consider how many bedrooms renters in your area generally need and will pay for. If you are buying to flip and sell, find the hottest market in the area. Three bedroom homes are usually very popular, but in some neighborhoods, the ideal size might be different.

3. Home many square feet do you need?

The obvious answer is: as many square feet as you can get for your money. However, there may be limits on either end of the scale that are not acceptable. For instance, you might find a home with too much space is costly at tax time. You have to decide how important that is to you. On the other hand, a home that is a great buy except for being too small is not really such a great buy after all.

4. How is the home decorated?

Many people are swayed by the styles of the ceiling fans, bathroom tiles or kitchen appliances. Sometimes, they are not even aware that these features have influenced their decision. Keep your head about you and do not make a decision on the basis of something that can be easily changed.

5. What is the parking situation?

In most parts of the country, people drive cars. They need places to park them, and it is usually not satisfactory to have to park far from home and walk in. The number of cars that will fit in the garage should make sense for the number of cars that will probably be owned in a household. Another parking factor is whether you have to park straight in and then back up into heavy traffic to get out. That would be a pain for you, and it will scare away many renters or buyers.

These are but a few of the questions to ask yourself when shopping for a home. If you are going to buy a home, or any real estate for that matter, take a day to brainstorm about all the factors that are important to you in your purchase. You should think about the day-to-day life in the home, whether it is for you or someone else. Consider the types of costs that will be involved in running the home. When you have finished, you will have a checklist to bring on your real estate shopping trip.

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With the real estate market the lowest it’s been in years and the market being flooded daily with foreclosed properties, now may be the perfect time to pick up a home at a large discount.  Although, many foreclosed homes come with their own set of issues, there are some diamonds in the rough that can be found for a fraction of what they are really worth.

Foreclosed homes sell significantly lower than their actual value.  This is due to the fact that the properties are now owned by the bank.  Because banks tend not to have a need for vacant homes that are costing them money to insure and keep in decent shape, they are looking to get rid of them as fast as they can.  What this means for you, is that you may be able to find a home that needs minimal work to make it look like new again. 

There are two ways in which you can purchase a foreclosed home from the bank.  One is dealing directly with the bank and submitting your offer to them, the other is to purchase homes at a bank held auction where bidders determine the selling cost.  If you choose to deal directly with the bank, you may be able to negotiate a better deal than if you were to involve a third party.  The benefit of purchasing a home at auction is that you may be the only person interested in the property and be able to purchase for a lower price than the bank was initially asking.

There are some challenges with purchasing a foreclosed property as well as benefits.  Once all the paperwork has been signed and you are in possession of the property you may discover problems that you weren’t aware of before the purchase was finalized.  To avoid finding yourself in this situation, you may want to have an inspection done on the property so that you are aware of any problems before you close on the property.  An inspection is relatively inexpensive compared to what you may have to pay in order to make the property livable.

You may have heard horror stories about the problems that come from buying foreclosed properties, while some are in dire need of repair there are some out there that are in nearly perfect shape.  One of the most important things you need to do before purchasing a foreclosed property is to do a bit of homework.  By doing some research into any problems the neighbors may have had with plumbing or flooding issues, you will get more information from a friendly neighbor than the bank might offer.  Research is the key to finding a foreclosed property that will need minimal work to become your dream home.

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Have you considered investing in real estate? If so, how do you know you would make a good real estate investor? The fact of the matter is that most people jump into this type of investing without having any clue whether or not they will be good at it. They just think that it is an easy way to make an investment, and that they will learn as they go. This is the largest mistake made by new real estate investors. Here are three ways you can know you are going to be good at real estate investing.

1.      You have good credit and a strong financial well being. This is the most important thing for investing in real estate. You will have to be able to get a mortgage on the property you are investing in, and you will have to have the money necessary to keep up on the mortgage while you are waiting to flip the property or get tenants moved in. If you don’t have good credit or you don’t have any breathing room in your budget, then real estate investments are not for you.

2.      You are a good judge of character and have a sense of urgency when it comes to money. You should be able to judge your potential tenants fairly but accurately in order to make a wise decision on who to rent to. In addition, you need to have a sense of urgency when it comes to money. This means that when a tenant is behind on their rent one month you take action, not wait several months for the problem to correct itself. You have to be proactive and protect your investment. After all, if you are not getting rent anyway it profits you nothing to have tenants. And, if you get rid of non paying tenants, you are making room for ones that might pay on time.

If you are going to be investing in property to flip it, you still need to be a good judge of character in order to get a decent deal on repairs and home improvements that need to be made before you sell the property. In addition, you will need to have that same sense of urgency about money. The sooner you flip a property, the better off you will be financially.

3.      You have knowledge and resources for making repairs or upgrades on properties. Whether you are going to be flipping properties for a profit or renting out properties, you will save a ton of money if you know how to make repairs yourself. Alternatively, you could have resources at your fingertips for these repairs and home improvements, such as friends or family in the business of construction or HVAC. Having these resources and knowledge will go a long way toward saving you money and keeping your profits from a real estate investment high.

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There is a growing trend for Realtors to specialize in one type of home or business real estate. The biggest disadvantage of working with a specialist is that you might not be able to see a variety of properties. Yet, there are many advantages of working with specialist Realtors.

Foreclosure Real Estate Specialists

A Realtor specializing in foreclosure real estate is a good person to work with if you want to invest. A foreclosure specialist will know all the places to find foreclosed properties. She will understand the pitfalls of buying properties through foreclosure auctions and the best ways to avoid them. She may have connections with banks so that she can list foreclosed homes very quickly.

Another type of foreclosure real estate is REO properties that banks hold on their books. The Realtor who specializes in REO deals will know how to find the best houses, how to evaluate the properties, and how to negotiate with the banks. You can work with an REO specialist and you will have all the benefits of her knowledge and experience.

Rental Property Real Estate Specialists

You may want to buy an apartment complex or a group of duplexes to add to your investment portfolio. Some Realtors specialize in just such properties. These specialists can help you find the best areas of the city to have a rental business. They can help assure that you get everything inspected and repaired to your satisfaction before you take possession.

Senior Housing Specialist

A senior housing specialist is a Realtor who works with older adults to find homes that suit their needs. If you are a senior looking for a good home for your retirement, you might seek out such a Realtor. The advantage of using a specialist in this case is that someone familiar with the needs of older adults will be quick to spot problem areas like steep steps, low toilets, and difficult maintenance requirements. She can help you find a solution or steer you to a home that is more suited to your age and condition. If you are in good shape physically and mentally, she can help you find a home that will accommodate your active lifestyle now yet still be suitable for you once you slow down.

Green Building Specialist

A Realtor who specializes in ecologically sound homes can help you tremendously if that is your priority. she should know all the features to look for in a green home such as good insulation, solar panels, and water conservation. Also, she should know green contractors who can be contracted to fix up the home before or just after you purchase it.

No matter what your needs, you can probably find a Realtor who specializes in that area.  It may be very helpful in many cases to have a general Realtor to show you a variety of properties and work with you on a number of different types of purchases. If you want someone with deep experience in a specific real estate transaction you want to make, though, you might want to work with a specialist.

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Regardless of what you are purchasing, real estate or otherwise, practicing due diligence should be of the utmost importance.  We’ve all been there at some point, excited about a new purchase, later to find out that it wasn’t what it was made out to be in some way or another.  This is not a situation you want to find yourself in as a real estate investor!

If you are unfamiliar with what due diligence is, it can be summed up with the word research.  When it comes to practicing due diligence in the real estate business, it simply means to find out everything you can about the property and the surrounding community.  It involves fact-finding that can be very time consuming and tedious but will ultimately paint the picture of whether or not a specific property is a wise investment. 

Here are just a few things you want to find out while researching a property (there are more):

• Before you purchase any property, make sure you gather sales and ownership information.  Your local tax assessor or recorder of deeds office should be able to provide the information you need for this purpose.
• Municipal records will tell you if and when a property owner has applied for rezoning or land development approval.
• One bit of information that is often overlooked is to find out if there are any approved land developments or new community construction plans near your potential property.  This includes any new highway projects.  You can find this out by contacting the local municipality office or land development offices.  This is crucial to researching future property values.
• If you are purchasing a home off the beaten path, make sure you look at your local floodplain maps available through FEMA.  You should also contact the municipal sewer and water authorities in your area to see whether or not your property can be serviced by public water or sewer.

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