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Tag Archive for 'tips'

Five Tips to Score a Bargain Short Sale

Published

Heindrick

on September 5, 2008

in New Home loan

. 6 Comments

Short sales are nothing new, but the current housing market has put these little gems at the top of every bargain hunters list. Thanks to dropping home prices in California and tighter lending guidelines, you can expect to find a handful of short sales within your area. But, buyer beware. Short sales are not for the faint of heart and can often become more troublesome than they are worth. If you are considering a home that is offered as a short sale, keep these helpful tips in mind.

Be Patient
In a short sale, lenders effectively sell the house below market value and take a loss on their loan. As a result, you can expect every decision to go through a series of supervisor approvals and various department oversights. Sellers are facing financial hardships and lenders are combing through these transactions with a fine tooth comb. There’s nothing certain about short sales - but be patient and your time could pay off.

Investigate
Short sales often result from home owners who either faced financial hardships or were just financially irresponsible. The last thing you want to do is to buy their problems along with the home. Check for unpaid taxes, liens, debts, and any cloud left on the title.

Invest in Success
With the recent popularity of short sales, there are a number of individuals trying to ride this wave as well. Make sure you find a Realtor who has proven success in the very different world of short-sale transactions. Don’t be afraid to simply ask them how many short sale transactions they have completed in the past year.

Find Value
Short sales are sales where lenders accept a purchase price below the amount due on the loan. However, this doesn’t automatically mean you will score a bargain. Actually, you might find many short sales available simply because home prices were so highly inflated in these past few years. Make sure you get a complete analysis of the market area as well as recent comparable sales. Sure, it may seem like a bargain since you’re paying less than the previous owner; but if market values don’t support the sale price, well then that’s no bargain at all.

Get Ready to Buy
If you are serious about finding a bargain, you’d better be serious about buying. In a short sale transaction, everyone is likely to be at the edge of their seats. Make sure you get properly financed and have the means of actually paying once you find this bargain deal. Again, time is of the essence and lenders will have no choice but to process the home into foreclosure if that time runs out.

There’s definitely a lot of action in the short sale market, and with the housing market where it stands - you can definitely expect to see more of these so called “bargains” popping up. Just remember though, short sales are not some super secret get rich quick real estate scheme. Like any transaction, do your research ahead of time before rushing into your new home.

(14 votes, average: 4.57 out of 5)

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HELOC vs. Traditional Second - Which is Right for You?

Published

Heindrick

on August 24, 2008

in Home equity

. 2 Comments

Last week I gave you 5 reasons why a HELOC still makes sense, but today I’m going to revisit a homeowner’s option when it comes to finding a second mortgage. The two main options available are a traditional second-lien mortgage and the ever popular HELOC. But before settling down with either loan, it’s important to find out what each option has to offer you.

Traditional Second-Lien Mortgages
Traditional second mortgages are pretty basic and are about as traditional as can be for a mortgage - except that it is in second-lien position. Typically, these loans offer fixed interest rates for the life of the loan making it a much more stable and traditional loan since there will be hardly any surprises. At closing, the borrower receives all the funds in one lump sum payment. You will find that many home buyers will use a traditional second mortgage so they can make a smaller down payment but still avoid paying mortgage insurance.

Key Highlights of the Traditional Second

Fixed interest rates
Stable monthly payments
Receive funds in one-lump sum at closing
Great for immediate needs [debt consolidation, medical bills]

Home Equity Line of Credit [HELOC]
On the other hand, HELOCs are quite similar to the way credit cards are issued. Instead of a loan that is paid out in one lump sum at closing, you are issued a credit line based on the equity of your home. Now, your initial draw could be for the whole amount, but typically most of the credit line is left untouched and saved for the future. In addition, lenders will issue debit cards and checkbooks which will allow you to tap into these funds at a moments notice. No more paperwork or chatting with customer service, your equity is now easier to access than ever. But, HELOCs do come at a certain cost because of this flexibility. Most notably, HELOC interest rates are adjustable since they are tied to the markets Prime Rate. As a result, payments are susceptible to market forces making them much more volatile than traditional seconds.

Key Highlights of HELOCs

Greater flexibility
Great if you are anticipating the need for cash, but don’t need all of it immediately.
You only pay for what you borrow, not the entire credit line
Available for future needs [home improvements or repairs, college tuition, business investments]
Adjustable interest rates tied to Prime Rate
Sucsceptible to HELOC Freezes [frozen credit lines due to declining home values]

Which to Choose
There are no set answers and choosing the best option will largely depend on your financial situation. For those who prefer stability and have no need for an extended credit line, choosing a traditional second mortgage may just be the right choice. On the other hand, HELOCs have grown quite popular because of their increasing flexibility and currently low interest rates. In addition to comparing the aspects of each loan, you want to focus on your needs and your long term plans both for you and your home. For more information, speak to a mortgage broker in your area and read more about qualifying for a home loan today.

(9 votes, average: 4.44 out of 5)

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Tips for the Self Employed Considering a Mortgage Refinance

Published

Heindrick

on August 20, 2008

in Refinance

. 1 Comment

Oh the joys of being self-employed - the flexibility, the freedom, and the write-offs. But as soon as you start shopping for a home loan, you will find that all that flexibility and freedom gets thrown right out the window.

In its place are stacks of paperwork and documentation that your wage-earning counterparts can often avoid; tie this in with the current lending standards and you may just want to throw in the towel already. Well, all hope is not loss, you will just have to work a bit harder and endure a bit more to get your next home loan. But you are self employed, so hard work and patience shouldn’t scare you right?

Why All The Fuss?

Lenders know that your income is quite sensitive. So while you may have made a killing last year, they know there is no guarantee you will do the same this year.
You make how much? Are you sure? One of the benefits of being self-employed is the ability to write off certain deductions and business expenses - and boy do you use it. As a result, your income shrinks significantly on your financial paperwork.
Abuse of stated income and low documentation. Stated Income and Low Doc loans were catered towards the self-employed borrower due to the nature of their income. But because of recent abuse, lenders are now wary to accept such little documentation on their loans nowadays.

Gather Your Documentation. All of it.

Income Verification - Lenders will want to see proof of your self-employment income through two years of tax returns, profit and loss statements.
Asset Verification - If you claim a certain income, lenders will want to see your assets supporting that type of income. Have your bank statements, investment records, and any other savings documents ready on hand. In addition, some lenders may look at your bank statements to see if the cash flow of deposits supports your income as well.

Keep all this in mind months before refinancing so that you will have time to better prepare yourself. I didn’t mention it too much in this post, but your credit and LTV better be in great shape too. The last thing you want is to take additional hits for low credit and little equity. If you were thinking of purchasing a home, start saving for your down payment too - the advertisements you see are typically aimed towards wage earners and lenders will like to see a larger down payment from you. Read more about qualifying for a home loan today.

(8 votes, average: 4.75 out of 5)

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Heindrick So

About the Author:

Heindrick So is a mortgage consultant at a local Bay Area Real Estate Brokerage - specializing in residential wholesale lending.

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