Different types of zero down mortgage that you can qualify for. Each one has positive and negative aspects. Read and learn about which zero down mortgage will suit you best.
80/20: The 80/20 loan is simply an 80% first mortgage with a 20% second mortgage for a total of 100% financing. In other words you are getting two loans. This is the most common no down mortgage.
The positive aspect of this loan for a subpime borrower is that the interest is typically much lower than a 100% one loan.
This zero down mortgage is a beneficial loan for conforming borrowers because it will help you avoid mortgage insurance. Mortgage insurance is an insurance policy that you pay and that is of no benefit to you. It simply protects the lender in case of default/foreclosure. Sub-prime loans almost never have mortgage insurance, but be sure to ask.
The negative side of this loan is that you will pay two different sets of closing costs, which could tack on an extra couple of thousand dollars.
Also many people are afraid of having to make two different payments. Have no fear. You are more or less paying the same amount as if it was one loan and typically they are due at the same time.
One final thing to think about is that the second mortgage interest rate will almost always be significantly higher than the first mortgages interest rate.
The seller can typically pay 3% of the purchase price of the home towards closing costs with a conforming loan. With a sub-prime loan the seller can typically pay 6% of the purchase price towards closing costs.
100% One Loan: This type of zero down mortgage is pretty straight forward. It is simply one loan for 100% financing of the purchase price.
Unfortunately sub-prime borrowers will typically pay a much higher interest rate than they would with the 80/20 home loan.
For conforming borrowers the down side is that you will pay mortgage insurance which can range from .55% to 1.94% of the loan amount. The benefit for conforming borrowers is that the interest rate will be lower over all since you will not have a second mortgage. Plus once you have 20% equity in the home you can get the mortgage insurance taken off.
The seller can typically pay 3% of the purchase price of the home towards closing costs with a conforming loan. With a sub-prime loan the seller can typically pay 6% of the purchase price towards closing costs.
2/28 or 3/27: This loan is a very common zero down mortgage for sub-prime borrowers but conforming borrowers can take advantage of this loan as well. This loan is an Adjustable Rate Mortgage also known as an ARM. What this means is that the loan's interest rate is fixed for the first 2 to 3 years of the loan, and then is fully adjustable for the remaining years of the loan.
These loans have caps, meaning they can only fluctuate a fixed percentage per adjustment and have a max in the percentage that they can rise for the life of the loan.
A quick example of this would be as follows. Lets say you have a 2/28 loan and the interest rate is 7% with caps of 3% and 6%. So with the first cap being 3% it can only rise a maximum amount of 3% per adjustment. The second cap of 6% is that the interest rate can only rise by a maximum of 6% for the entire life of the loan. So the worse case scenario is that your interest rate would rise from 7% to 13%. But remember it can also fall as well.
I refer to these types of zero down mortgage as band-aid loans. It gets you into a house and at the end of the 2 or 3 year period you can refinance. Hopefully at this time you are now a conforming borrower and you will qualify for a fixed home loan at a lower interest rate.
The seller can typically pay 3% of the purchase price of the home towards closing costs with a conforming loan. With a sub-prime loan the seller can typically pay 6% of the purchase price towards closing costs.
VA Loan: The VA is 100% financing and has no mortgage insurance. Unfortunately you will need to be a veteran to qualify for this zero down mortgage.
The good thing is that this type of zero down mortgage is underwritten on a case by case basis. So even if you don't have great credit or have other issues such as not having any credit at all, you still have a good chance of getting one of these loans.
Seller can pay all closing costs.
USDA Rural Housing: These 100% loans were once known as farm home loans. They offer zero down mortgage financing and are also underwritten on a case by case basis.
To qualify for one of these zero down mortgage you normally need good credit, but not always. All collections and charge off's will need to be paid. The property can not be located anywhere the USDA (United States Department of Agriculture) deems urban.
There are also income limitations with this program as well as certain criteria that the home must pass.
Seller can pay all closing costs.
Emerging Markets: This is another awesome zero down mortgage. This program is especially useful for home buyer's who have limited or no credit at all. Through this program they allow you to build alternative credit through other bills such as an electric bill, phone bill, rent etc.
There are some income limitations to this loan depending on where the home is located. The income limitations are higher than those with the Rural Development Program.
Seller can pay up to 6% of sales price towards closing costs.
State or Local Financing: Some states also offer a zero down mortgage. These loans come and go depending on funding. They are definitely worth looking into.
For example Oregon has the Oregon Bond Loan.
The requirements for these types of loans will vary but they will be more strict than some of the other types of 100% financing that are available.
You might need to do some footwork for this type of zero down mortgage. You may be surprised to find that your loan officer has never heard about these programs. Because these loans are government sponsored you will need to call, write, or go down to your local government offices. Below are some other government agencies you can contact for special programs.
HUD/FHA 451 7th St. Washington, DC 20410
Fannie Mae 3900 Wisconsin Ave. NW Washington, DC 202-752-7000 Freddie Mac 8200 Jones Beach Drive McLean, Virginia 22101. When you contact your local government agencies about the zero down mortgage. You should also ask about special purchase programs they may be offering as well. Many times government agencies will work with several of the local contractors to build affordable housing.
Basically the government gets a special rate from the contractors and then will subsidize the remaining amount to offer the homes at a much lower cost. For example a home may be worth $125,000 but the government will sell it for only $85,000 to those that qualify.
You can also contact you local building associations to find out about other special programs that they may be involved with. Just look in your phone book for state or local builder associations.
FHA Loan: The FHA loan is not actually a 100% financing loan. They do require at least a 3% down payment. You can use down payment assistance programs to cover the 3% plus your closing costs.
Most people are under the assumption that the government is the one loaning the money. In reality they are insuring the loan in case of a loss. So if you no longer made the payments and the house was foreclosed upon the government pays the lender off and takes the home.
Sunday, April 19, 2009
SUCCESS WITH REAL ESTATE BUSINESS
With the economy in a recession and the real estate market tanking, real estate agents are having a tough time making ends meet. It's getting harder and harder for us to justify spending money on marketing materials when we don't know when we'll see our next commission check.
The problem, of course, is that if we don't market ourselves, then we'll never generate the new business we so desperately need.
In the past, agents have had great success with standard real estate postcards. Agents typically mail out postcards to neighborhoods and their past clients to generate new listings and new buyers. The downside to these mass mailings is that agents can easily spend thousands of dollars on their mailings with printing and postage costs. That money is gone forever and may never bring in any new leads.
As a high volume real estate agent for the past decade, let me share some of the ways you can save money on real estate postcards here:
Target You Mailings
In the past, my real estate team has sent thousands of postcards out each month to every home in many neighborhoods. To reduce expenses, we now only target homes that have recently been on the market and couldn't sell (expired/withdrawn) or homes that have not sold in the past 5 years.
While it takes a bit more research time, the savings have been substantial. Spending a few hours researching a neighborhood can save us over ten thousand dollars a year. All we have to do is pull neighborhood data from our title company and recent listing activity from our MLS. This highly targeted marketing has helped us keep our revenue steady and save money on real estate postcards.
Hand Deliver You Postcards
Uncle Sam keeps raising the cost of a postcard. A large 8 x 6 postcard can cost almost a dollar with first class postage. Another way to save money on real estate postcards is to hand deliver them or have your postcards hand delivered by someone else. You can usually find services that hand deliver fliers for about $0.10 a home. Saving over thirty cents a home can add up very quickly.
If you have the time, hand delivering your postcards yourself allows you to meet your potential clients and can help you build relationships in your community. Shaking their hand and giving them a marketing piece can be extremely effective.
Real Estate Postcards Coupons
With all of the agents trying to save money on their real estate postcards, the printing suppliers are feeling the heat. Because of this, many printers are offering real estate postcard coupons and other deals. Spending an extra 10 minutes using these coupons can save you 10% - 20% on your printing costs!
Besides coupons and ads you may see for your local printers, most of the online printers offer real estate postcard coupons. These deals and discounts can be significant and can help you reach many more clients and spend less of your money.
The problem, of course, is that if we don't market ourselves, then we'll never generate the new business we so desperately need.
In the past, agents have had great success with standard real estate postcards. Agents typically mail out postcards to neighborhoods and their past clients to generate new listings and new buyers. The downside to these mass mailings is that agents can easily spend thousands of dollars on their mailings with printing and postage costs. That money is gone forever and may never bring in any new leads.
As a high volume real estate agent for the past decade, let me share some of the ways you can save money on real estate postcards here:
Target You Mailings
In the past, my real estate team has sent thousands of postcards out each month to every home in many neighborhoods. To reduce expenses, we now only target homes that have recently been on the market and couldn't sell (expired/withdrawn) or homes that have not sold in the past 5 years.
While it takes a bit more research time, the savings have been substantial. Spending a few hours researching a neighborhood can save us over ten thousand dollars a year. All we have to do is pull neighborhood data from our title company and recent listing activity from our MLS. This highly targeted marketing has helped us keep our revenue steady and save money on real estate postcards.
Hand Deliver You Postcards
Uncle Sam keeps raising the cost of a postcard. A large 8 x 6 postcard can cost almost a dollar with first class postage. Another way to save money on real estate postcards is to hand deliver them or have your postcards hand delivered by someone else. You can usually find services that hand deliver fliers for about $0.10 a home. Saving over thirty cents a home can add up very quickly.
If you have the time, hand delivering your postcards yourself allows you to meet your potential clients and can help you build relationships in your community. Shaking their hand and giving them a marketing piece can be extremely effective.
Real Estate Postcards Coupons
With all of the agents trying to save money on their real estate postcards, the printing suppliers are feeling the heat. Because of this, many printers are offering real estate postcard coupons and other deals. Spending an extra 10 minutes using these coupons can save you 10% - 20% on your printing costs!
Besides coupons and ads you may see for your local printers, most of the online printers offer real estate postcard coupons. These deals and discounts can be significant and can help you reach many more clients and spend less of your money.
CHANGE IN REAL ESTATE
A client who bought an apartment complex for $1.5 million. He held it for several years, just about breaking even on a cash-flow basis and enjoying the tax benefits. Unfortunately, the neighborhood changed. The fair market value of the property fell to only $800,000 -- on a good day
Because of the decline in the neighborhood, rents also dropped. His cash flow wasn't sufficient to cover the mortgage, and he faced bank foreclosure. Seeing nothing but further price decreases, he panicked and sold.
Here's where he got killed. While he got $800,000 for the property, he owed the bank more than $1 million. He had to take out a second mortgage on his home to cover the $200,000 difference.
The pain, however, was just beginning. Because of the depreciation he had deducted, his basis in the property was only about $700,000.
Because of the decline in the neighborhood, rents also dropped. His cash flow wasn't sufficient to cover the mortgage, and he faced bank foreclosure. Seeing nothing but further price decreases, he panicked and sold.
Here's where he got killed. While he got $800,000 for the property, he owed the bank more than $1 million. He had to take out a second mortgage on his home to cover the $200,000 difference.
The pain, however, was just beginning. Because of the depreciation he had deducted, his basis in the property was only about $700,000.
Thursday, April 16, 2009
Vital Points about Real Estate
I'm getting people asking me, "How do I hold the right state of mind to manifest, to create, to demonstrate the results that I want?" And bravo! I couldn't put the question better. That's how you want to ask it.
Here's where the challenge comes in. A lot of times--we all understand this--when people want more, they may be coming from a place of lack.
That may or may not be your circumstance--we're talking in the abstract--but when a person is coming from the place of lack, it really is very difficult to have the state of acceptance and gratitude that you need to have. Because you put yourself there and you receive--you be what you want to receive.
You need to have faith--believe that you have received, and you will. "Okay," people ask, "how do I believe that I have received?" The unspoken part of the question is, "…when I obviously haven't?"
Well, there are a lot of different ways to say it, and some of these you've heard. You've got to act as if you have received. Act as if you do have the capacity to deliver on the prospect or the concept, or on the contract that you're negotiating. You've got to pretend to intend.
Pretend to intend, or when you intend, you pretend. Either way you do it, it's Catch-22, fake it 'til you make it.
You put yourself in that position where you will perform, and then it doesn't matter that you were faking it--as in you've never, for instance, done a real estate transaction or done a deal this way, or spoken at a public event. Whatever it is, you put yourself in a position where you will do it.
You've got to think right to get it right. You've got to see it first, you've got to live it first, you've got to be prepared, you've got to know what it is first to receive it. That's the reason why we place so much importance on making your goals and your visualizations and your affirmations present tense--so you get into it and dig in like it's real.
Because your subconscious only knows the present tense--what it feels is real. It's going to accept that as the dominating command to create that life.
If you are taking time every single day to intend--remember, pretend to intend, meditation, create the active in this thing, be a causative force. Pretend to intend. Sit with what you are in the future, feel the feelings, move with the motions, do what it takes, live the life, feel the ecstasy.
Enjoy it, because the subconscious is always going to give you more of whatever's in your mind. If you don't change your thought habits, you're going to continue to get what you've always gotten. You've got to change if you haven't received what you want yet.
Here's where the challenge comes in. A lot of times--we all understand this--when people want more, they may be coming from a place of lack.
That may or may not be your circumstance--we're talking in the abstract--but when a person is coming from the place of lack, it really is very difficult to have the state of acceptance and gratitude that you need to have. Because you put yourself there and you receive--you be what you want to receive.
You need to have faith--believe that you have received, and you will. "Okay," people ask, "how do I believe that I have received?" The unspoken part of the question is, "…when I obviously haven't?"
Well, there are a lot of different ways to say it, and some of these you've heard. You've got to act as if you have received. Act as if you do have the capacity to deliver on the prospect or the concept, or on the contract that you're negotiating. You've got to pretend to intend.
Pretend to intend, or when you intend, you pretend. Either way you do it, it's Catch-22, fake it 'til you make it.
You put yourself in that position where you will perform, and then it doesn't matter that you were faking it--as in you've never, for instance, done a real estate transaction or done a deal this way, or spoken at a public event. Whatever it is, you put yourself in a position where you will do it.
You've got to think right to get it right. You've got to see it first, you've got to live it first, you've got to be prepared, you've got to know what it is first to receive it. That's the reason why we place so much importance on making your goals and your visualizations and your affirmations present tense--so you get into it and dig in like it's real.
Because your subconscious only knows the present tense--what it feels is real. It's going to accept that as the dominating command to create that life.
If you are taking time every single day to intend--remember, pretend to intend, meditation, create the active in this thing, be a causative force. Pretend to intend. Sit with what you are in the future, feel the feelings, move with the motions, do what it takes, live the life, feel the ecstasy.
Enjoy it, because the subconscious is always going to give you more of whatever's in your mind. If you don't change your thought habits, you're going to continue to get what you've always gotten. You've got to change if you haven't received what you want yet.
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