Financing Loans Archives

Great News for Investors!

NO Money?
NO Problem?
Zero-Down Home Loans Are Back!

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Plan is ‘final crisis-era’ modification program

A day that many in the housing industry thought would never come is finally and actually here, as the Federal Housing Finance Agency is making official what was first reported several weeks ago – widespread principal reduction is coming.

 

Real Estate Investor Deal Analysis Review Training Audio on Single Family Home

Jimmy Moncrief interviews Mike Butler to conduct a real “Deal Analysis Review” on a single family home that Jimmy wants to buy for a rental.

 

Back in May of this year, week of the Kentucky Derby here in my hometown, I had the great privilege and honor to meet Jimmy Moncrief and his sidekick and best friend Brad. Both are from Tennessee and were attending their first Kentucky Derby, a bucket list sort of thing I imagine.

Jimmy is one of my Gold Member and he had requested and scheduled a private one on one coaching/mentoring session, but in a very creative and unique way of doing it.

Jimmy wanted to record it as a live interview of a “Deal Analysis Review” on one of his pending leads on properties to buy. PLUS, Jimmy wanted permission to put it on his own website as a podcast thing. Here is the link to Jimmy Moncrief’s website http://realestatefinancehq.com/turn-landlording-autopilot/

I need your help please. A Little Feedback on the 2 questions below, thanks in advance.

QUESTION: Would You Like to Have Podcasts available from Mike Butler?
(please answer below by entering your answer and comments in reply area)

QUESTION: If you answered Yes, Do You Prefer Audio Only or both Video or Both?
(please answer below by entering your answer and comments in reply area)

 

Below is Jimmy Moncrief’s article and link to the podcast interview.

 


 Landlording on Auto-Pilot: A Simple, No-Brainer System for Higher Profits and Fewer Headaches

  Click Here for Full Video/Article (Members Only)

DODD FRANK FOR TODAY’s INVESTOR

by attorney Harry Borders

PART TWO- RESTRICTIONS ON OWNER FINANCING!!!

 

           

Here’s the GOOD NEWS… Investor buyers can STILL get financing from any source they want.

 

Here’s the TERRIBLE news… Owner occupant buyers now have lots of restrictions place on who they can get a loan from.

 

These new rules impact “contract for deeds” and “Land Contracts” as well as seller retained mortgages (and, of course, the ever present contract for deed in disguise as a lease-option) and private financing. 

So, assuming an owner occupant wants to obtain a loan from a source other than  a bank or mortgage company, here are the new rules.

If the lender only lends once in a 12 month period, the lender:

a) MUST be a “natural” person (i.e. not an LLC or corporation);

b) MUST have owned the property (i.e. no private financing, only owner financing);

c) MUST NOT have built the home in the ordinary course of his/her business;

d) MUST NOT have a negative amortization;

e) MUST be for at least 5 years, and if longer and adjustable, must be tied to an index rate, such as Libor   

 

If the lender lends 2 to 3 times in a 12 month period, the lender MAY be an LLC or corporation.  But the lender also:

a) MUST have owned the property (i.e. no private financing, only owner financing);

b) MUST NOT have built the home in the ordinary course of his/her business;

c) MUST NOT have a negative amortization;

d) MUST be FULLY AMORTIZED;

e) if the rate is adjustable, it must be fixed for at least 5 years, and it must be tied to an index rate, such as Libor; and

f) MUST determine in good faith that the consumer has a reasonable ability to repay the loan (similar to what a loan officer would do).

 

If the lender lends more than 3 times in a 12 month period,

all of the above requirements for a lender lending 2 to 3 times in a 12 month period apply and

IN ADDITION, the lender MUST BE A LICENSED LOAN OFFICER.

           

As you can see, navigating the waters of seller financing has again become tricky.

Please check with your real estate attorney before embarking on a seller financing transaction for a dwelling.

 

Until next time, peace,

hCapture

Harry Borders

Harry@HarryBorders.com

502.894.9200

P.S. Your simple solution to stay out of trouble is to never offer seller financing to any tenant / buyer or owner occupant. You can use Seller Financing to sell to other Investors, not owner occupants.

FLOOD INSURANCE

Earlier this year, your real estate market was devastated with the implementation of the new flood insurance program. Previously, any home in a flood plain, that had a federally insured loan (most do), were required to have flood insurance, no exceptions,
Prior to January 2014, if a buyer got a federally back home loan and borrowed $125,000, their annual flood insurance policy premium is roughly 1% with an annual premium of $1,250 in addition to all of the other regular insurance, etc.
I first learned of this mess when my wife Beth and I had dinner with our next door neighbors, Heidi and Sean. When we met them at the restaurant on a Tuesday evening, they were furious, angry, frustrated and shocked.
Heidi and Sean were selling their previous home, had a contract on it and were scheduled to close on “this friday.” (we are in the restaurant on Tuesday evening.) Heidi just learned on Tuesday afternoon, 3 days before the scheduled closing that their buyer’s already approved loan was being cancelled due to the new flood insurance program that went into effect around January 10th or so.
Heidi and Sean’s annual flood insurance premium for their previous home they were selling was about $2,000.
Their new buyer’s flood insurance premium for the same house, jumped to $23,000 a Year because of the new changes. WOW!  No wonder their buyer’s loan was cancelled.
As you can see, there was no way they could sell their previous home and they rented it for the time being.
This rocked my local market big time and killed many pending real estate transactions and it also did the same for many communities across America.
UPDATE: with a lot of uproar from the real estate industry, our federal government recently passed a bill making some modifications to the federal flood insurance program.
What triggered the original fiasco is the turning off of federal government “subsidizing” flood insurance premiums. Insurance experts explained that the flood insurance premiums were never increased. The extreme price increase occurred when the federal government stopped the funding of flood insurance premiums.
The recently passed new modification to the federal flood insurance program postpones terminating federal assistance in 5 years.
This means for right now, you are ok, but only for 5 years, then the mess is triggered again.
TIP:  If you or your family members or loved ones own real estate in a flood plain, you might want to do some more homework on your local market and give serious consideration to selling now before the bomb drops in 5 years.
My personal concern about all of this flood plain and insurance changes is not so much for the investor, like me and you, but just think about the poor old homeowner. A homeowner who worked their whole life at a job, who considers their home an investment, and in one fell swoop, our federal government just causes these folks to go belly up.
What if these homeowners live on a pension and their flood insurance premium skyrockets from $1,200 a year to $12,000 annually. They are sunk. They can not sell because the value of their home has tanked.
And these homeowners are somebody’s mom and dad, aunt and uncle, brother, sister, and so on.
 
To Your Continued $uccess!
Mike

BLINDSIDED! A TRUE NIGHTMARE KILLS a Real Estate Deal for my neighbor.

Last Tuesday, my next door neighbors invited me and Beth out for dinner at a new upscale restaurant in the “NuLu” part of downtown Louisville. (little did we know the University of Louisville basketball team had a game to play at the YUM center. Traffic was horrible.) They wanted to pick my brain about real estate investing and setting up Self Directed Roth IRAs for their two young sons.

This restaurant takes pride in all menu items are from local producers, including beer and wine. For the first time in over 25 years, I had myself an ice cold Pabst Blue Ribbon beer. It tasted pretty good, but not good enough for me to switch back from an occasional Bud Select here and there.

BLINDSIDED!

My next door neighbors, Heidi and Sean arrived and were visibly upset. They proceeded to tell me about the bad news they received that morning.

Heidi and Sean were selling their previous home, a nice home with a great view overlooking the Ohio River. After almost of year of trying to sell this unique river home, they finally got a buyer to purchase their previous home for approx. $225,000 AND their closing was scheduled to place this Friday.

Just 4 days before their scheduled closing Heidi gets a phone call reporting their buyers can not qualify now for their previously approved loan.

HERE’s WHY

Because of some new, hidden until now, federal regulations involving flood insurance and FEMA, the flood insurance on this property had increased almost 1,000% overnight!

Yes, when Heidi and Sean owned this home, their flood insurance was about $3,000 a year.

Get This!

Their Flood Insurance Premium is $23,000.

Absolutely Insane!

This can not be true!

What in the world is going on?

What about Real Estate Investors and Homeowners?

What gets my goat is how this new flood insurance pricing program “snuck up” on me, you, Heidi and Sean.

FYI, Heidi owns not one, but 3 Keller Williams offices. One in Louisville, another in northern Kentucky, and a third in southern Indiana.

Heidi is very involved in the real estate market and she was blindsided by this. Not a word in advance from our market industry watchdog groups. (I won’t name any group, but you know what I mean)

Here is the link from National Association of Realtors on this new flood insurance reform act

http://www.realtor.org/topics/national-flood-insurance-program-nfip

 

This is Part 1 – too much to write here.

Part 2 – some research reveals what is going on

Part 3 – new opportunities for creative investors

 

What are your thoughts?

Look What Is Cooking in the Lending Business!
 
Utility Bills May WILL Soon Become Part of the Loan Approval Process for Home Buyers! 
 
A great local successful investor, Eric George, is an expert in making homes energy efficient, forwarded this article to me yesterday. Eric shared this very interesting article because the wheels are in motion where the Energy Costs of a Home will be factored into underwriting and the loan approval process.
 
In today’s world, home heating, cooling, and energy costs are a huge part of a family budget. It is apparent, the lending institutions have done their homework and discovered energy efficient homes have a 32% lower default rate.
 
Having this information NOW, can help forecast your future business. By getting this heads up right now, you will be in a much better position as an investor.
  • What will happen to the market values of homes with high utility bills?
  • Will you have a different vision for your rehabs in the future?
  • What about selling your rentals to your tenants or others?
I am not an energy expert and odds are, you are not either.
Unlike Eric, we can only think about the simple things like replacement windows and insulation; but, there is a lot more to it.
 
Question: If I can get Eric to do it, would you be interested in attending a free webinar featuring Eric on these energy efficient home techniques?
 
If so, please click this email and write “Yes, I want a webinar with Eric”
here is the email “News@MikeButler.com
.
Here is the article Eric sent me yesterday
 
 


 
RESNET Calls for Reforms of Housing Market and Mortgage Financing
 
 
RESNET (Residential Energy Services Network) has released a policy proposal that calls for the labeling of a home’s energy performance and More…including the monthly energy savings when calculating home ownership costs in mortgage financing. The intent is to bring transparency to the housing market and introduce greater rationality into mortgage financing.
 
Car and home appliance manufacturers have long been providing consumers with information about the energy efficiency of their products through MPG (miles-per-gallon) stickers and Energy Guide labels. As a result, consumers are able to make better-informed buying decisions.
 
This, however, is not the case for homebuyers who for the most part are not aware of the energy performance of homes they are considering buying.
Making HERS Index scores a requirement for homes financed through federal mortgage programs like Fannie Mae, Freddie Mac, FHA and VA, would be a start in the right direction to addressing this problem.
 
Current federal mortgage underwriting practices fail to take energy savings into consideration when determining the value and affordability of energy efficient homes. However, a recent study showed that energy efficient homes have a 32% less mortgage default rate. Therefore, RESNET proposes the adoption of a new formula to calculate how to determine housing affordability – one that would account for energy savings:
 
Principal 
+ Interest 
+ Taxes 
+ Insurance 
– Monthly Energy Savings (PITI-ES)  
= TOTAL COST
 
The new formula would provide greater accuracy in determining housing affordability, and could make energy efficient  homes more accessible to consumers than they are now.
 
The combination of labeling of a home’s energy performance in federal backed mortgages and the new way of calculating housing affordability in the mortgage loan will help homebuyers better understand the true cost of owning a home and allow energy upgrades to be financed in the mortgage loan.
 
To download the new policy initiative click on RESNET Call for Reform
 
Residential Energy Services Network

Special Thanks to Eric for this very important update of upcoming trends affecting our real estate market.
 
P.S   There’s only 15 Cabins left for the Great Investor Cruise Jan 12-19, 2014 on board the FREEDOM of the SEAS, RCCL. Give Ty a call to reserve your cabin now!

check out this very interesting article on

Foreclosure Fraud Settlement Insider Secrets

Here is the link

http://www.rollingstone.com/politics/blogs/taibblog/while-wronged-homeowners-got-300-apiece-in-foreclosure-settlement-consultants-who-helped-protect-banks-got-2-billion-20130426?utm_source=buffer&utm_medium=twitter&utm_campaign=Buffer%3A%2BDarrellBouldin%2Bon%2Btwitter&buffer_share=bdab7

Mortgage Insurance Has Changed! 

I suspect those of you who are in the market for a mortgage are well aware of the new FHA mortgage insurance increase coming.  It’s only a quarter of a percent increase. ONLY?

Effective April 1, 2013, people who haven’t already gotten their FHA case numbers assigned will be subject to the new bigger and better mortgage insurance premium.  The increase will be between 10 and 15 basis points, depending on the loan.  This is all intended to make the FHA bigger and better – more secure. 

This is a Silent Tax. 

On the average, mortgage folks are looking at an increase of $30 to $40 per month.  This will make qualification more difficult for everyone.

The FHA has a number of other changes coming to a loan office near you.  They are all silent taxes on home owners.  The corker is the inability to drop mortgage insurance after you have paid the balance down to 78%.  In the good old days you could drop the mortgage insurance after you had paid down to the 78% of loan to value ratio.  Starting in June 3, 2012, mortgage insurance will be locked in FOREVER on most loans.

Mortgage insurance adds, let’s say, $175 per month to the monthly payment.  With the increase it will be over $200.  If you assume you will pay down to 78% of the principal in the first ten years, then you have twenty years left on your mortgage.  Whereas you could have dropped the mortgage insurance after the ten year period under the old policies, you now have to continue to pay it for the next twenty years.  That’s only about $42,000 more you will have to pay.  That’s a tax levied by the new Obama laws, plain and simple.  You are paying for all the screw-ups the government and banks have made and continue to make with affordable housing. 

If you are buying, do it now!

from GOLD Member Rod Owens

Ignorance Of The Law

Is NOT Your Get Out Of Jail Free Card

                   While working my full time job as an undercover police detective, I had the opportunity to see a lot of things “behind closed doors.” One of the most powerful phrases most investors and Americans do NOT understand is the title of this short article. I can not tell you how many folks, after being arrested for a crime, would say “I did not know that was against the law.” 

          With the help of media and lenders and our economic market today, the word “real estate” has transformed into an almost bad word. In fact, many consumers are looking for ways to “get back” or get even, or sue the very folks who helped them graduate into homeownership. This means me and you have huge targets on our backs.

          Be very careful in today’s real estate market. Always use the proper disclosures and always do things the right way, the professional way.

          PROTECT YOURSELF NOW! Remember this powerful phrase.

Here’s some simple no-brainer tips and red flags to avoid as a real estate investor.

  • NEVER Buy using a Quit Claim Deed
  • NEVER do “kitchen table closings.” ALWAYS use a “GOOD and REPUTABLE” real estate attorney or title company.
  • ALWAYS buy Title Insurance when you are buying an investment property.
  • If you are selling a property and you want to sell it real bad…. Be very careful about what you do to help your seller. Many times a loan officer or loan broker will ask a Seller to prepare another form or they may ask you to just sign this form and they’ll say “We Do This All The Time.” If you hear this phrase, you might want to run. (Remember, ignorance of the law is not a get out of jail free card.)
  • AVOID buying using a “Contract for Deed, Land Contract, or Agreement for Deed.” Once again, always have a professional full blown closing with a real estate expert attorney or title company. (It is ok for you to sell on Land Contract or Contract for Deed)
  • Some common schemes seen by IRS criminal investigators include:
    • “Property Flipping” — A buyer pays a low price for property, then resells it quickly for a much higher price. While this may be legal, when it involves false statements to a lender who is regulated by the feds, it is not. (Now do you really want to say you are a “FLIPPER” or you “FLIP” Properties… the new F word.) 
    • Two Sets of Settlement Statements — FOLKS, This is FRAUD!
    • Fraudulent Qualifications — Some “professionals” assist buyers who would not otherwise qualify by fabricating their employment history or credit record.

Happy Hunting and watch out for these Red Flags of Fraud.

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