Archive for the ‘home loans’ Category

Review of "Real Estate Debt Can Make You Rich"

Sunday, January 4th, 2009

Review of the book Real Estate Debt Can Make You Rich by Steve Dexter

While perhaps aimed at newer investors, this book also provides useful information for more experienced investors, and if you are doing fixer upper houses you will find it one of the better books on the subject.

I particularly liked the section describing “rate sheets”. Rate sheets are what lenders, like the author, use to set the interest rate that borrowers receive for their home loans. The more risk factors that a borrower has, the more points they have to pay, and ultimately the higher the interest rate.

The author has a table with a column of all the risk factors that are considered by loan officers, and a column of the points each risk factor will cost you. A few examples:

credit score below 620% = 0.5 points
non-owner occupied with 75-80% down = 2.0 points
loan amount <$100,000 = 0.5 points
loan amount <$50,000 = 1.5 points
manufactured home = 0.5 points.

The whole process is explained in a very understandable way.

The author writes in a style that is very accessible to the reader. He makes it easy for the reader to understand the process behind a loan, and describes how to improve one’s chances of getting the best loan for each individual’s needs.

I liked his point on the value of holding free and clear properties (no mortgages on them), and for rapidly paying down loans with appreciated equity from houses that have appreciated in equity over the years,and not from after-tax income.

The author provides a long list of useful web addresses in the Appendix that I found quite helpful.

This is a book well worth reading.

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There is still loan money available for purchasing investment property

Monday, October 27th, 2008

With all the bad news about Wall Street and the credit market, with banks unwilling to loan money even to each other, what hope is there for the average fixer upper house investor? The situation may not be as bad as you may think!

Here’s why:

1. There is plenty of money available for home mortgage loans, either to purchase or refinance a house. This is because the American home mortgage market has been federalized. Ninety percent of all loans are being made through the Federal Housing Administration (FHA), plus Fannie Mae and Freddie Mac. FHA is owned by the federal government and Fannie and Freddie are operating under federal conservatorship, so all three have complete access to global capital at low rates because their borrowings are guaranteed by the Treasury Department.

2. Despite tougher credit standards, you can still get a loan for 3 percent down
with FHA, or 5 percent down on Fannie Mae and Freddie Mac programs.

3. Interest rates are still at historic lows.

4. Home prices, dragged down by foreclosures and short sales, are at 2003 and 2004

For more details see Kenneth Harney’s article Crises Aside, Would-be Buyers Can Still Get Reasonably Price Loans.

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Chickens Coming Home to Roost, Higher Fees for Home Loans

Saturday, December 8th, 2007

If you plan to buy or refinance a house, you can expect to pay higher fees to mortgage companies. In Kenneth Harney’s article Housing boom’s hangover to give home buyers a dire credit headache, he states that Fannie Mae and Freddie Mac are imposing significant increases in fees for borrowers who have less than 30% down and with credit scores below 680.

Previously, loan applicants with scores above 620 could assume they would receive a good rate. Under the new policies, that go into effect March 1, 2008, where down payment amounts are less than 30%, if the borrower’s credit score is less than 620, a new 2% fee is charged. If the score is between 620 and 639, a fee of 1.75% is charged, between 640 and 659, the surcharge is 1.25%, and between 660 and 670, the fee is .75 to 1.00%.

Some major lenders have already begun imposing new surcharges on applicants. Charges by MGIC Corp., for example, when a down payment is less than 30%, would raise an annual premium by $1,920 to $3,400 on a $200,000 mortgage.

The chickens are coming home to roost from the housing boom and the loan scandal, and they’re not happy campers.

Info on Terry’s Book

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