So you’ve been sitting on the fence because you think housing prices will continue to fall, right?  Bad idea, unless you can afford to pay cash for a home outright.  Why?  Because the amount of your payment is determined by the rate at which you borrow.  Here’s an example:

Buy a house today for $218,900 with 20% down and a 30-year fixed rate mortgage at current rates of roughly 5.5% and you’ll find yourself with a payment of about $994/month.

Let’s say you’d rather wait until the price of that home comes down to say, $197,000.  GREAT!  Right?  That’s $21,000 less today than it was a year ago.  But wait, the recession has ended and the fed has increased the rates to 6%,  a mere half percent higher.  Guess what your payment will be.  You got it, $994/month.

The home purchased at $218,000 today will cost you $182,000 in interest over 30 years for a total cost of ownership of $400,000.

If you wait one year and lose one half of one percent, that same home at $197,000 will cost you $182,000 in interest over 30 years for a total cost of ownership of $379,000.

$400,000 – $379,000 = $21,000.

$218,000 – $197,000 = $21,000.

So now that we see that the difference in the total cost of ownership is the same as the difference in sale price, what difference would it make to you whether or not you wait a year.

How much money are you going to waste this year on rent?  How much is a year worth to you?  How important is your time and how are you going to feel one year from today when you’re still stuck in a rental that you can’t truly make into your own home?

The bottom line is, waiting for the price of a home to fall may cost you more than you know.  Why wait?  Buy now.

Friends and Family, I am urging you to consider the demise of down payment assistance programs which will make it very difficult for new home buyers to own.  Currently the down payment assistance programs will be eliminated on October 1st, 2008.  This means that if you have not made an offer on a home and received approval for funding from your lender, you will lose the opportunity to purchase a home with nothing down.

Imagine you’re a first time home buyer with no money. You’re paying $1100 every month for rent, and you make your payments on time, all the time, but you have nothing in the bank with which to purchase a home. You know that renting is a waste of money and that you’re spending to make someone else wealthy but you just don’t know what to do.

Down payment assistance is your only hope. By purchasing a home that is approved for FHA Financing, which requires only 3% down, you can easily make an offer on a home with no money down by utilizing down payment assistance.

What is it?

It’s when you ask the seller to contribute a percentage of the sales price of your new home towards your down payment. The seller cannot legally contribute directly to your down payment, but they can make a donation to a non-profit organization which in turn can help you with your down payment.

It is still very possible for you to purchase a home with FHA insured financing, but you must move quickly and there couldn’t be a better time in history to purchase a home.

If you need help finding that perfect home, please call me (602) 312-3262 and we can get started before it’s too late.

What a buy!!! Just kiddin'...

It’s true!. We haven’t seen opportunities like this in years, and contrary to what the media is saying, this is one of the best real estate markets we have seen in a very long time. Why? Because sellers are desperate to get out of bad financial positions.

When mortgage companies began offering no interest loans with zero down and no proof of income required, a large portion of America decided it was time to buy a home they couldn’t afford on the hopes that it would continue to increase in value the way it had been doing in 2005. In order to get into those loans, they had to agree to outrageous lender terms and many of them went with adjustable rate mortgages without knowing it. Prepayment penalties, adjusted rates and higher monthly payments are what most of the distressed sellers are dealing with. Now that their rates have adjusted, they simply cannot afford the home that they really couldn’t afford in the first place.

With that in mind, the buyer has an advantage over the seller when negotiating a sale because the seller must get out, and short selling their home can be less damaging to their credit than foreclosure. There are a ton of properties on the market that you can get for a great bargain. Buy now, sit on your house for about 5 to 10 years, and you’ll probably experience a fantastic return on your investment. If you wait, you’ll miss out. Call me today to discuss your options. (602) 312-3262.

For years and years the real estate market has been up and down, up and down, a cycle that repeats itself every 7 to 14 years on average.  SEVEN TO FOURTEEN YEARS!!!  That’s long enough to start a family and have kids in elementary school AND high school.  Remember how long 4 years was when you were young?

Are you renting?  Are you living at home, just out of college?  Consider your options now because time is running out.  You don’t want to be someone who’s looking back

What is the market condition?

Today, the market is in distress.  We experienced unnatural gains in 2005 and as a result, we had our second bubble of the new millennium.  The first bubble was the outlandish condition of the stock market, a market where people invested in ideas, not in solid products.  The second bubble was the same but with homes.  People investing in ideas.  The idea that you could purchase a home for $100,000 and sell it for $200,000.  Some people were lucky enough to buy at the right time and sell at the right time, but nobody knew it was going to go down the way it has.

What do I mean when I say that the market is in distress?  In 2003, people were buying homes on adjustable rate mortgages because the interest rates were so low.  In 2005 as people saw the prices of real estate skyrocket, they did one of two things.  They either sold their property, or they pulled money out on interest only loans with adjustable rates to buy cars, boats, other homes (bad timing,) you name it.  A remodeling and new builds went nuts.  Those who sold probably had a legitimate reason to sell and weren’t doing it because they were fearful of a market bubble bursting.  Most of us asked the same question: “If I sell now, where am I going to go?”

Here’s why there is so much distress.  Those adjustable rate mortgages were typically 5 years fixed, then adjustable after that.  If you purchased your home in 2003 on an adjustable rate mortgage, then you pulled money out of your house for who knows what, you are probably experiencing hard times now because your mortgage has expired and has adjusted by around 2 points, and now you can’t afford your payment.  To top it off, your home is worth less than you owe the bank and you can’t pay.  Foreclosure is imminent, you must sell short.

Think of Owning as a Long Term Proposition

Before you own, understand that you need to come to terms with the way the market swings.  If you play the stock market and you have been successful trading short term trades, then perhaps you’ll do well managing real estate the same way, but if you cannot handle the swings, don’t buy real estate.  Buying today means owning for a longer time.

Owning a home builds long term wealth.  As you pay your mortgage, every month a little more of that house becomes yours.  Every year, on average, the value of your investment increases.  History shows that the market always increases over time, barring natural disaster or other completely unexpected anomalies.  Scottsdale is quite solid in its growth history.

What Does the Future Hold?

Nobody knows.  Isn’t that comforting.  The only thing we see are patterns, and right now, the patterns of the past tell us that even though our circumstances are unique compared to other times the market has been in distress, we are not spiraling towards our doom.  In 2008, the number of homes sold has increased.  In 2008, the number of foreclosed properties has increased.  By the end of 2009, when we have a new president in office, and people have cooled down, and interest rates have begun to climb, consumers will be more confident about spending, and more money will be invested in long term real estate holdings.

If you find yourself watching this come true and you haven’t purchased your first home by then, it will be too late.

Start looking today.  Downpayment Assistance is going away.  Think about ownership rather than preference.  Buy something! Find a home that might not be ideal and start building ownership so you can look back in 10 years and say, “Thank you…I am so glad you helped me begin building my wealth when you did, because I would have missed out.”

The world of Real Estate in Arizona is about shift.  July is a big month for the technically savvy agent because our property listing system is being completely overhauled.  But more importantly, it’s a big month for you because the system that you rely on to view property searches is being vastly improved.

Client Gateway is a clunky online system that allows you to see various properties based on searches that I have created for you.  Client Gateway will soon be a think of the past.  The new Flex MLS system enables you to login to a free online “Portal” to your property information.  Through this portal, you have far more information that Client Gateway could ever provide, and the system is much more efficient and responsive.  It’s also fun to use.

Rather than attempt to describe how it works or outline all of the features, I’ve included a link to a video tutorial that you can watch before you get started.

If you’re ready to begin searching for a home and you’d like to have your own personal portal login please complete the form below and I’ll set you up.

cforms contact form by delicious:days

I frequently find myself in conversations with people who are unaware that they could in fact purchase a home.  There is a misconception that homes come with more bills than apartments, and that owning a home locks you in to living in one place forever.  Ownership doesn’t mean you’ll incur additional expenses if you choose the right place for you.

On the latter point, if you’re planning on making a move and you’re hoping to get rich quick, don’t hold your breath.  It costs more to sell a home than it does to buy a home because of the marketing costs involved, so you’ll want to make sure you stay in your home long enough for the value of the home to exceed the brokerage fees you’ll incur when selling.  So, yes, you would probably be looking at a longer stay in a home if you own it than if you rent it, but here’s why it’s a better financial decision for your long term financial growth.

Owning real estate builds wealth.  Renting builds someone else’s wealth.  How can this be?  Let’s look at a simple example.  We’ll take two single adults, Joe and Larry, each making $30,000/year.  (Note: I am not a lender and cannot be held responsible for the accuracy or realism of these calculations, but I’ll do my best.)

Joe Makes $30,000 year.  He rents.  His monthly rent is $1000.00.  For the sake of simplicity, we’ll assume he has no other expenses.  I know, not too realistic, but it cleans the canvas for the brevity of my point.  Joe pays the government based on a 15% tax bracket.  His tax bill for the year will be roughly $4099.00.  That means that of Joe’s $30,000 salary, he takes home $25,901 and of that, he spends $12,000.00 on rent, leaving him with $13,901 for the rest of his discretionary and non-discretionary expenses.

Larry also makes $30,000 / year.  He bought a $160,000.00 home at roughly 6.25% for 30 Years, fixed.  (No idea how mortgages work?  Check out one of my sponsors, Michelle Minnoch.)  His mortgage payment is about $1000.00 / month, but the key difference is that part of the mortgage payment is interest to the lender, and the rest pays down the balance of the loan.  Over the course of one year, where Joe would be throwing away $12,000.00 in rent, Larry only “throws away” $10,100.00 and the difference of $1900 becomes equity in his home and increases in value over time.

So, while Joe has thrown away $12,000.00, Larry has saved nearly $2000.00.  Not only has he saved over the course of the year, he can also reduce his taxable income because the interest paid to the lender is tax deductible.  Where Joe found himself in the 15% tax bracket, Larry can reduce his taxable income by the amount of interest paid out during his first year of ownership which amounts to about $10,000.00.  Larry is still in the 15% tax bracket but he is taxed on only $20,000.00, which means his tax bill will only add up to $2599, a savings of roughly $1500.00 over Joe.

Joe pays Uncle Sam $4099 and throws away $12,000.00 on rent.  Larry pays Uncle Sam $2599 and throws away only $10,000.00 on tax-deductible interest.

When Larry bought his house, he gave himself a $3500 raise.  Joe is still renting.  They both spent $12,000.00.  Which one do you want to be?

If you’re thinking about buying a home but for some reason you don’t believe that you are a qualified candidate, give me a chance to talk to you about it…you owe it to yourself to begin building wealth and living the American dream.

For years now, home buyers have been able to receive down payment assistance when buying homes approved for FHA financing. Basically, when the buyer makes an offer, they ask the seller to contribute a percentage of the sales price towards a non-profit company as a gift towards future home buyers. Since the minimum down payment amount on FHA insured loans is only 3%, the buyers could ask for the seller to provide it.

When you purchase a home, you are not allowed to receive funds from the buyer directly to help you with your down payment. The seller, however, is allowed to gift the down payment to non-profit organizations who then provide the same dollar amount to the Title company at closing, covering your down payment obligations according to FHA rules.

The Department of Urban Housing and Development has issued a release that may end this practice altogether.

The purpose of FHA insured loans is to provide affordability and sustained home ownership. Here is a link to the proposal. It’s long, very long, and some of it is quite annoying to read, but it’s there.

The problem that we have when someone provides a buyer with funding is that it may be unfair to other sellers. If I am selling my home for $300,000.00 and you need an FHA loan whereby you need to come up with $9,000.00 as your down payment, but you don’t have it, I as the seller could, at close of escrow, contribute $9,000.00 of my net proceeds (the money I make on the home) to that non-profit organization. The non-profit would then turn right around and pay you a gift of $9,000.00 towards the down payment.

By offering you the “gift” I’m basically telling you that I’ll pay you to buy my house over the neighbor’s $300,000.00 home. This does two things. It fulfills the down payment requirement by FHA, and allows the home to remain at full price.

We’re looking at these deals as the current “Sub-Prime” loan, and whenever Sub-Prime is mentioned, lenders cringe. What we don’t want is to perpetuate the idea that any average joe can get into homeownership when many of these people have no business buying homes.

Right now in the market, the opportunity to find a great home for the first time home buyer is at the forefront. If you are a first time home buyer, and you have been responsible about your savings and you have the required 3% to put towards the purchase of your home, then it’s likely you’ll be in good standing for years to come as you build equity and wealth through your home ownership. If you’re just looking to get into a home free, then statistics show that it’s more likely that you’ll also be walking away from that home because you have no real investment in it.

Believe it or not, even though you may have heard that lenders have tightened their grip on loans, as long as you meet the conditions of your lender and the Fair Housing Administration, it is very possible to buy a home with nothing down.

It was a beautiful Memorial Day this past Monday, May 26th in Phoenix, Arizona. The sun was out, the air was cool, and the beer tasted magnificent. What a day for a pool party. In my sphere of influence, we have a few regular gatherings in which we share our lives, our ambitions, fears, and failures. Monday happens to be called Lazy Monday, because we get together and cook and eat and talk, and that’s where I had the opportunity to speak with one of my married friends about the realistic possibility of purchasing a home.

One of the interesting facts about their situation is that even though they’re married, even though they’re of age to vote and drink, they consider themselves to be young. Too young. Too young to be responsible enough to purchase their own home. After explaining a few things to them, including the fact that it wasn’t until I had reached age 30 that I had myself purchased a home, it became clear to them that they might just be able to purchase a home, and then they appeared as though they were defeated. They seemed to be down on the fact that they had missed out on an opportunity. You see, they are currently living in a home owned by their parents, and they are planning on moving into another one of their parents’ homes to rent for a year, this June.

The most common objection I hear first time home-buyers offer up is that they don’t have any money to buy a home. It’s an understandable fear. Newly married, tight on the budget, looking for a place in the world, starting out a new career and a new business. Of course it’s overwhelming. But that’s what we’re here for. Our job is to educate the buyer so he or she knows that it’s very possible to own a home, and it’s even possible to get into a home with no money down.

Don’t worry, even though the prospect of no money down in today’s market conjures up thoughts of mortgage fraud, I can assure you there are programs in place to help the first time home buyer.

STEP 1: Get pre-qualified.

Find a good lender and find out where you stand financially. You need to know what you can afford. Remember that renting makes the other guy rich. Develop a baseline from which you can start. If you know how much your lender will loan you, you know what type of home you can purchase. Working out the down payment comes later.

STEP 2: Find the right home.

There are currently 36,224 active listings in Maricopa county that may qualify for FHA financing. Some properties, depending on the ratio of investment properties to owner occupied properties in a given development, are not eligible for FHA financing.

(Note: The Federal Housing Administration does not write loans. They insure loans. Most major lenders can lend within FHA guidelines and according to FHA programs.)

To qualify for any zero down program, you’re going to have to keep your prospective home price at or below the current FHA limits. I can help you find the perfect home by setting up the types of searches that internet search sites only offer members of their local MLS board. Sites like Realtor.com and Trulia.com only allow you to select limited criteria. I can drill down through the data to find very specific information for you, and I have access to the homes, so I can show them to you. Don’t go into the home buying process with the expectation of finding a stellar bargain. What you’re going to focus on is finding a home that you can get into for zero down.  Susan Gruenling of SonoranHouse.com recently wrote in an article entitled “Is the Right Time to Buy Now?” writes:

Buyers, you need to realize that with more homes on the market now you have increased negotiating power. And the negotiating is not limited to just the purchase price, but includes closing costs, closing date, home warranty, HOA transfer fees, repairs and other options. It is important to work together with your Realtor to structure your best offer.

STEP 3: Make an offer on the home.

This is where the zero down payment comes into play. On a conventional loan, it is common to see the buyer ask the seller to cover some of the expenses that the buyer would normally be paying for. For instance, they may ask the seller to contribute up to 6% of the purchase price towards closing costs, pre-paids, and acquisition fees.

So let’s expand on that simple idea. You, the buyer, decide to purchase a home for $100,000. Your offer, when prepared properly by a competent REALTOR, will ask the seller to contribute a percentage of the purchase price towards closing costs. In this case, we’ll ask for 3% concessions. This reduces the amount that you’ll need to borrow from $100,000 to $97,000. We could essentially call this a 97% offer, meaning if the seller accepts your offer, it would be just like offering $97,000 with no concessions, and most sellers will jump on it. Asking for concessions keeps the selling price of the home at $100,000 which helps stabilize the market, rather than reducing the neighborhood pricing.

“Well, that’s fantastic,” you say, “but how does this help me with a down payment, which the FHA financing still requires, and we don’t have?”

Answer: The AmeriDream Down Payment Gift Program

AmeriDream, established in 1999, is a 501(c)(3) charitable organization creating opportunities for qualified low to moderate income individuals and families to purchase affordable homes, improve their financial lives, begin a family legacy, and strengthen their communities. AmeriDream provides a wide range of programs to benefit the individuals and families it serves, including homebuyer education, foreclosure prevention, building affordable homes, and providing financial support through privately-funded down payment gift assistance.

Through the AmeriDream organization, a home seller can be asked by you, the buyer, to contribute up to 10% of the purchase price towards down payment assistance for future home buyers. At closing, AmeriDream will cover the agreed-upon down payment amount from previously collected gifts that other sellers have contributed to AmeriDream.

“Why would the seller want to forfeit some of their net return on their home to benefit the buyer?”

Like I mentioned before, in a market where the seller is motivated, it’s highly likely that a 90% offer would be accepted. If you were to come to the table with a 100% offer, then ask for 3% towards closing costs and 3% down payment gift to AmeriDream, then you’re essentially coming in at a 94% offer, and if the seller was ready to accept 10% less than asking price, they’re sure to accept 6% less. Sure, you could ask for more, in fact, you can ask for up to 6% of closing costs and 10% towards AmeriDream, but this is stretching it, as most sellers will see $16,000.00 lost for every $100,000 of purchase price. Who knows? Perhaps they would take it if they were desperate enough.

The benefit to asking for this type of concession is that it will keep the price of the home where it should be, because you’ll be making a full price offer (provided the home is priced right), and you’ll be purchasing a home where the seller covers your minimum down payment requirements for FHA insured financing.

Make sure you check with your lender to confirm the cap on concessions before you proceed with the home buying process.

STEP 4: Proceed

Step 4 will only occur if the seller accepts your offer, and we’ll save that for another article.

Before the internet existed, the process would have occurred in a different order. You would have first sought out your real estate professional, then you would have begun searching for a home. This is still happening today, but now you have the ability to find the home you love on your own. There’s no substitute, however, for seeing the home in person, and that’s what you’ll need a licensed real estate agent for.

Let’s say that you did find that dream home on the internet. You drove by it a few times, maybe even had the opportunity to talk with the owner when you saw them outside. You’re ready to buy that home, so now what do you do?

Step 1: Assess your financial situation. Do you currently own a home that must sell before you can purchase the new one? Will you need a bridge loan to give you time to switch from one mortgage to the next? Are you a first time home buyer looking for a way to get into a home with as little money out of pocket as possible? Do you have enough money for a downpayment? You may need as much as 30% down in today’s market to qualify for jumbo loans. Do you know what a jumbo loan is? Are you aware that you’ll need to offer up an “earnest deposit” when you make your offer?

These are all things that you need to know about before you take the next step. Being prepared with your information before you approach the lender is going to speed up the process of buying your home.

Step 2: Find a reputable lender and get pre-qualified. The purchase contract in Arizona requires the inclusion of a document called the LSR (Loan Status Report.) Without this document, the contract is incomplete. This is a document that the lender will complete that shows the seller that you are in fact qualified to purchase their home. Why is this important to the seller? If and when the seller accepts your offer, their home will be taken off the market and will only be eligible to receive backup offers in the event that your offer falls through. The seller wants to know that the valuable time spent working with you, the potential buyer, is not wasted, and that is why they want to see that you have a lender who is prepared to fund the loan at close of escrow. The next step in your home-buying process is quite possibly the most important step. Stay tuned for part 2 of “So You Found The Right House, Now What?”

As long as we allow emotion to dictate our financial decisions, we will inevitably fail, because we usually experience a heightened level of anxiety when we’re focused on how “bad it is, was, or could be…”

If we base our outlook on what’s in the “rear view mirror,” as John Foltz suggested at our last meeting, we’ll miss out on the inevitable future, which is, simply, increasing values.

Even though we may not be at the bottom of the curve, the only way we’ll know we’re at the bottom is after it has happened. If you wait until it has passed, and prices begin to increase, the same problem that keeps people from acting on the downside will keep them from acting on the upside. How many out there will see prices start to rise and think, unrealistically, that the prices will come back down again. They’ll wait, and wait, and wait, and they’ll miss the ride up…which is proven to happen over time.

In skateboarding, the athlete looks forward when they travel down one side of a half-pipe. As they approach and enter the downside of the transition, they push with their legs, pumping into the bottom of the curve. This action takes place before they hit the bottom, and it provides them with the momentum to travel beyond the top of the opposite side.

As we approach the bottom, knowing that the market will increase over time, as long as you are able to carry your property, it’s a great time to pump your assets into a home, especially if you’re a first time home-buyer.