My New Blog

You may have seen an earlier post talking about how FHA down payment assistance was going to be eliminated by a new rule from HUD called the "final rule". Well as it turns out HUD has had the rule overturned by a judge who ruled that the HUD "final rule" was built on very limited evidence to support the elimination of the down payment assistance. This is great news for those who are going to be buying a home in the future!

This is to notify you that FHA is not permitted to implement the downpayment assistance rule at this time. Judge Friedman of the United States District Court for the District of Columbia issued a ruling enjoining HUD from implementing the downpayment assistance rule, which was to go into effect today. This injunction is

applicable to everyone affected by the Rule. HUD will provide further guidance as appropriate.

To read the downpayment assistance rule (enjoined) in its entirety and for more information please visit: http://hudclips.org/sub_nonhud/cgi/pdf/4846a.pd

Ray

rwilliams@summit-mortgage.com 

Many clients ask me what style of real estate investing am I a fan of in Denver right now. With the softening of the housing market in Colorado (which has actually been the cycle we have been in for quite some time here), there has been no shortage of opportunity to buy homes at discounted prices. The main reason has been because of the gluten of foreclosures in certain sectors of the Denver metro area. You have seen it on the news, read about it, and even seen the streets lined with foreclosed homes. I am definitely a fan and actively involved in the buy and hold mentality. After growing up in Denver and seeing people purchase homes multiple times in the past in similar real estate markets, I have been excited to see our current state of real estate in Denver.

What exactly caused this foreclosure epidemic you ask? There are so many variables, from over building, to a collapse of our tech economy, or adjustable rate mortgages just to name a few. This is an argument that has no one single answer.

If you are an opportunistic person who has lived in Denver for quite some time you know that this has happened at least twice before in the last 25 years. The reason is plain and simple! Real Estate is cyclical in nature.

So when will prices bottom out? That seems to be one of the hot questions I am getting these days. Truth be told there is no way you can ever know the exact time when that will happen. One problem people have understanding is what it takes to get a bank to accept an offer. The knowledge comes from knowing how much costs go into listing a bank owned (REO) home. There are all the costs they took once they bid the house out of the auction. Add to that carrying costs, agent commissions, seller closing costs to name a few. This means that when you look back on what the bank bought the house for at the auction. You have to figure when it is relisted on the market they (bank) are already factoring what the current market value is for that home. This doesn't mean that you can offer them .50 cents on the dollar for what it is listed for. The bank's listing agent has already done what is called a BPO (broker price opinion). This gives the bank an idea of the current market value of that home. Remember back to the fact that the bank was foreclosed on for a loan that was already an outstanding debt. What you have to remember is that if you can get the house for .85-.88 cents on the dollar (net to the bank) you are doing good.

WHY? because the bank typically relists homes already less then market value. Because typically the houses need repair. So the mentality that you can factor in how much you are going to have to pump into the house to remodel it, then reduce your offer to the bank by that amount is illogical. They already factored that it is in need of repair, remember, when they listed it for the price they did.

I will give you two live examples. Both individuals bought houses that were bank owned. Of course knowing they were going to have to remodel them to get them back into shape. After spending about $15,000 each, they both had their houses reappraised and restructured their mortgages. What this allowed them to do was to recapture the money they used to remodel the homes, and also actually reduce the payment while putting them at an attractive 75-80% loan to value. How do you suppose that is the case? Because I have access mortgages where you can restructure your mortgage based off the newly appraised value. In both of these examples the homes were purchased for close to the listing price of the bank. Also, in both of these examples the net equity remaining in the home after the refinancing of the home and taking about $30K out, was $40-$50K. Not too bad considering they were purchased for close to the list price. This is a great reason to buy the house. Not because in either of these examples it didn't involve work and time. Because with any investment in real estate you have to have realistic expectations and understand it is real work to make money investing in real estate.

That earlier question is coupled by what are the current rates? That too is a complicated question because there are so many variables that go into qualifying you as a borrower. We have been seeing rates in the low to mid six-percent range. Yes, I have even seen under 6% this week. If you are looking to refinance shoot me an email for an honest approach to home lending.

Now back to the reason it is a good time to buy a rental home right now. As I projected a year ago it was going to be good to snap up rental properties. Simply because there are less buyers (especially now that you add the mortgage liquidity crisis). Add to that a sprinkle of economic troubles and you have a recipe for trouble. Many flippers have seen their profit margins deminish quickly with carrying costs of an unsold home, price reductions, and increased seller concessions to get it moved. From the buyers side this means, if you were going to buy your first home you may have either decided to wait or have been forced to wait. You are going to rent longer. Now top that recipe with a gluten of bank owned homes being sold at a discounted price and you have great potential as a real estate investor to pick up your first or another real estate investment. 

Recent reports are showing that the number of available rentals in the metro rental market "condos, single family homes, and other small properties across metro Denver dropped to 3.9 percent during the third quarter, according to a report released today by the Colorado Division of Housing". (John Rebchook, Rockymountainnews.com, 11/20/2007)

If you add those two components together with a consultation from me on how to take the 3 step process to cash flowing on a rental in Denver. You will learn real life real estate investing. Not based on the late night infommercial mentality (which is out there to sell books and products, not real estate). There are definitely some great areas in Denver that are actually appreciating right now, and have foreclosures you can purchase. I can put you with an agent who will find you a great rental property.

Enjoy your day and happy hunting~

Ray

I was forwarded the following email from the CEO of Summit Mortgage this morning and wanted to comment on Brian Chappelle's comments about the mortgage market.  Currently, we have seen an influx of FHA mortgages due to the ever-changing mortgage industry. With most of the trouble due to liquidity from banks as I see it behind us. The shift has been to FHA mortgages for those who don't have large down payments quite simply due to the strength in the rates. Just yesterday I read that the average 30 year fixed rate was 6.59% with a .56 discount point. While at the same time I can tell you that FHA rates would be lower then that by say .25% and you wouldn't have a discount point at all. Now if you are buying or refinancing a $200,000 home that .56 equates to $1,120 of loan costs. Not only would you get a lower payment with FHA, but you would also have saved over $1,100 in costs for the loan.

Now, not always is an FHA the best loan for us as consumers. It can depend on many things including your ability to verify your income, your past credit history, and other facets.

What I agree with is that the FHA mortgages have gone up in volume. If I was doing 3 out of every 10 before. I am doing 8-9 out of 10 right now. There is also a Housing Finance Mortgage that we are authorized by the state to offer. That makes us one of thirteen lenders in Colorado who can offer this loan for you.

Whether you are buying or refinancing, the odds are we are going to make sure you get personalized care to ensure the most competitive terms at the time you close your home loan. We will make sure to talk you through your goals as well to make sure the loan is a right fit for you long-term. It does get expensive if you get the wrong loan and have to refinance 12-24 months down the road because of bad advice. Make sure to email me about your situation and let's see how we can plan your mortgage health.~Ray

"The Current Mortgage Market and FHA

By Brian Chappelle, with the Washington, DC consulting firm Potomac Partners

As everyone knows, there has been unprecedented turmoil in the mortgage markets since late July. Investors have lost all confidence in the performance of the private mortgage backed securities market for all alt-A and subprime products. 

Stated another way, there is no liquidity for mortgage products that comprised 40% of the market in 2006. What does the current market turmoil mean for the future? This shift from alt-A and subprime products is not temporary.

Federal and state regulators have significantly tightened underwriting standards for alt-A and subprime loans. The net effect is that the regulators are institutionalizing (in effect making permanent) the tightening implemented by investors.

Now more than ever, the importance of Federal Housing Administration (FHA) and Veterans Administration (VA) lending is heightened. FHA business has already doubled from last September to this September. 

With the likely implementation of the FHA modernization legislation including higher mortgage limits (i.e., raising the “floor” to $271,050 and the “ceiling” to $417,000) and lower cash investment (i.e. 1.5% instead of 3%), FHA volume could increase another 200-300 percent in the next year. "

We all spend so much time chasing our dreams and looking to better our lives. I have been involved in many different charitable organizations over time, but have found a home with The Denver Phoenix Club. We are a group of guys who help to raise money for the Boys and Girls Clubs of Metro Denver. The Denver chapter is only in its infancy but we have been gaining momentum since last summer. With happy hours, our inaugural 5K, and our annual Holiday Bash/Silent Auction. We have been steadily raising money and all in the good name of the Boys and Girls Clubs of Metro Denver.

We are finalizing the details of our 2nd Annual Holiday Bash and Silent Auction to be held on Thursday December 6th at Jet Hotel. I would love it if you could make it out and join us. Our goal is lofty in our 2nd year. We would love nothing more then to smash through the $10,000 mark we have set for ourselves. Our musician is flying in from Portland, and there is more to be announced!

Please come out, it is for a great cause and you will have a wonderful time celebrating the holiday season with your friends, and even new friends. You can buy online pre-sale until Monday December 3rd or the event sells out as capacity is only 250 at The Jet Hotel.

Invite~http://i71.photobucket.com/albums/i126/willyray75/holidaybash07.jpg

As expected the Fed cut rates again yesterday by .25% , dropping the fed funds rate to 4.50%. While the immediate impact will be on HELOCs, credit card rates, auto loans, and savings accounts. You are unlikely to see benefit in the long-term mortgage rate world. The reason is as always these types of rate cuts historically have an inverse affect on mortgage rates.

More recently, it has been the whispers of inflation and the monthly new non-farm jobs report having the biggest impact on mortgage rates. The Fed spoke yesterday about inflation and it wasn't helpful to mortgage bonds. They spoke about how the readings on core inflation have improved modestly this year, however, recent increases on energy and commodity prices have put upward pressures on inflation.

After this was released the mortgage backed securities (driver of the mortgage rates) dropped immediately while stocks rallied. Friday is the jobs report, so it will be interesting to see what numbers come out. We could see this cause mortgage rates to improve slightly or get worse depending on how those job report numbers fair.

Not to fret, we are still sitting at mortgage rate levels that rival the lowest seen in the last two years. If you are thinking you need to refinance or are looking to buy give me a call so I can preform a goal analysis of your finances and determine the route you should take with your next mortgage.

~Ray

(303)779-0591 x2