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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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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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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Choosing a lender is a very important part of the process of re-financing a home. Understanding the different re-financing options and knowing how each of these options work is very important but none of this matters at all if the homeowner is unable to find a lender who is willing to offer them the rates and terms they are seeking. Choosing a lender can be a long and difficult process but there are some ways to make it easier. One simple way to make it easier is to ask for advice from friends or family members who recently re-financed. Additionally, homeowners can do their own research to determine which lenders are able to offer them the best rate. Finally the homeowner should determine whether or not the finances should be the governing factor in choosing a lender. Surprisingly enough, in most cases it is not.

Ask for Advice from Friends and Family Members

Friends and family members who recently refinanced can be a homeowner’s most valuable resource in the process of selecting a lender. These friends and family members are so valuable because they will most likely be willing to offer you a quite candid opinion of the lender they used. This opinion may be either positive or negative but in either case it is useful to the homeowner. If the opinion is negative the homeowner can remove this lender from their list of lenders to consider. Conversely if the lender comes highly recommended, the homeowner may consider this lender more carefully.

Comparison Shop

Homeowners who want to know which lender is offering them the best interest rate and financial terms should do a great deal of comparison shopping. The homeowner may even consider requesting quotes from each and every lender. This should make it perfectly clear which lenders are willing to offer the homeowner more favorable rates. When comparing these quotes all of the factors should be considered to ensure the quotes are being compared fairly. For example each quote should be broken down to determine the monthly savings, total savings, etc. All of this statistical data will make it much easier for the homeowner to make a wise decision when the time comes.

Consider More than Finances

Finally, while interest rates, loan terms and other financial matters are all certainly important none of these are more important than being treated fairly by the lender. For this reason, the homeowner should carefully consider all of their lenders and should determine whether or not they feel as though the lender is responsive to his needs. For example, a lender who does not return calls in a timely fashion or answer questions truthfully and accurately may not be the ideal lender for a homeowner even if he is the lender who is offering the most favorable rates.

Additionally, homeowners should trust their instincts regarding their trust in the lender. Some lenders simply do not appear to know what they are talking about. Homeowners might be inclined to avoid these individuals because they may end up doing more harm than good during the re-financing process. Conversely some homeowners may be immediately impressed by the honesty and intelligence of another lender. In most cases, the homeowner would likely choose the second lender as long as the rates offered by each lender were comparable.

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Whenever you purchase a piece of real estate, there are certain closing costs involved. Most people know this before they go into negotiation for a mortgage, though the vast majority of investors and potential homeowners do not fully understand what is involved with each of these fees. In addition to the costs discussed below, these can include survey fees, credit checks, home inspection, points and more.

Each lender is different, so consulting your loan officer is the first step to understanding your closing costs. Ask them what kind of origination fees they have, if there are points involved, and what kind of structure they have for property taxes. Many lenders will require a portion of your loan payment go to an Escrow account to pay for property taxes, homeowner’s insurance, and other such necessities to protect their investment. For the duration of the loan, Escrow fees are taken out of monthly payments; however, at the time the loan is approved there may be two or three months’ contribution to the Escrow account up front.

Origination fees are the fees exacted by every lender at the time the loan is approved to cover the paperwork, time with the lending officer, and other such fees. In many cases this is approximately 1% of the loan’s value, but this number can add up quickly so be sure you know what that cost will be before finalizing a loan.

Appraisals are almost always part of the closing cost. Lenders need to be certain that, in the case of a foreclosure, they will be getting a sound, valuable property. This requires that a licensed appraiser come to the prospective property and test its soundness on a range of aspects that may affect its overall value. Depending on the size of the home, this could add anywhere from a couple hundred to a couple thousand dollars to the cost.

The loan officer responsible for your prospective mortgage can cover all the closing costs with you before the loan is finalized. If the officer is unwilling to go over these in fine detail until you understand and are comfortable with all the costs involved, request another loan officer or go to a different lender. Lenders are in the business to help you purchase property and should always be willing to take the time to explain every facet of the process to you so that you can rest assured you’re getting what you’re paying for.

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Thousands of homeowners around the nation have recently become acquainted with the feeling of having a home go into foreclosure. This process generally begins when a homeowner is three or four months behind on their payments. Owners are generally given 120 days (depending on the state) to bring the loan current, plus pay any legal fees accrued through the foreclosure process up to that point.

Often, this means the owners must come up with as much as a couple thousand dollars in addition to the back payments on their property.  For many, especially those who are already financially distressed, this sum is far out of reach on short notice. These owners generally have the choice of either letting the home foreclose, or finding a buyer for the home before the foreclosure goes through. There is another option as well, one in which the owner may give their permission to their lender, or ask permission of the lender, to sell the home in a short sale – or for less than is still owed on the property.

The most obvious advantage to the owner in the case of a short sale is that they will not have a foreclosure on their credit if the home is sold while in pre-foreclosure. Credit scores are quite unforgiving in cases of any loan default, but arguably the worst of all of these as far as the credit is concerned is a mortgage default. These are generally loans with a high balance with a low percentage paid off, and are invariably reported to all the major credit bureaus.

Foreclosures can be costly, and the cost must be borne either by the financial institution initiating the foreclosure, or by the owner who wasn’t able to make their loan payment in the first place. The cost and risk can be significantly reduced for both parties by a short sale, and the lender may claim any difference as a loss on their taxes. In most cases, once a short sale is agreed upon, a deficiency judgment cannot be made against the owners for any difference between the owed amount and the sale price.

Finally, short sales are beneficial to the buyer because they often allow for great discounts off the market value of the property without the hassle and risk of foreclosure auctions. Many times, buyers looking to purchase at auction expend a lot of effort only to have their target property go for higher than their top bid, or not even make it to auction at all. There are a number of ways to buy distressed properties and short sales are but one option to explore when looking to make an investment.

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The terminology used in many real estate transactions, especially those that are meant to be financially beneficial investments, can be confusing to newcomers to the market.  Short sales are particularly confusing.  Most people starting out in real estate investments are primarily accustomed to more common house hunting methods or property buying procedures that involve an eager seller, considering true value, making bids and having them countered or accepted.  The idea of a short sale is somewhat foreign to most of those new investors.
A short sale is instigated when a seller is desperate to get out of a financially draining situation due to the economic market or loss of income.  In those cases, rather than go through an actual foreclosure, they will seek relief from their mortgage lender and request the ability to sell at a lower price than their actual mortgage reflects in order to move the property quickly.
It is important to note that not all lenders will agree to such an arrangement.  However, in some cases they may consider it advisable rather than lose the entire amount of the loan, or taking the property as an un-performing asset that may sit on the market for years doing nothing for their income.
A short sale can allow you to obtain real estate you would otherwise not be able to afford, or give you the ability to turn it over faster because of the lower cost to you and still make a decent profit if sold at a more realistic rate according to the market value.  Using short sales is an excellent strategy, but you should always seek the advice of a reputable real estate lawyer to be sure all of the documents are in order and the original lender is in complete agreement to avoid possible complications at a later date.

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