THE Blog

FHA To Lift 90 Day Seasoning

Up until now, FHA guidelines stipulated that "a mortgage for a property will not be eligible for FHA insurance if the contract of the sale for the purchase of the property is executed within 90 days of the prior acquisition by the seller." The waiver (planned for 1 year) allows for a lift in the 90 Day seasoning requirement, thus opening up a broader market for home buyers. The waiver will take effect on February 1st, 2010 but is limited to those sales meeting the conditions listed below.

Condition 1:

All transactions must be arms length with no identity of interest between the buyer and seller or other parties participating in the sales transaction.

Underwriters will be looking for the following;

1. Seller holds title to the property
2. LLC's, corporations, or trusts serving as sellers are operating in accordance with applicable state and federal law.
3. No pattern of previous flipping activity (multiple transfers) within the last 12 months.
4. The property was marketed openly and fairly, via MLS, auction, FSBO, or developer marketing
5. Any contracts with an "assignment clause" may be red flagged.

Condition 2:

If the sales price of the property is 20 percent or more over and above the sellers acquisition cost, the waiver will only apply if the lender:

1. Justifies the increase in value by retaining the loan file supporting documentation and or a second appraisal which verifies that the seller has completed sufficient legitimate renovations and repairs.
2. Orders a property inspection and provides the inspection report to the purchaser before closing. The lender can charge the buyer for the inspection. No other party can pay for the inspection besides the lender.

YouTube video on TV news report on FHA 203K Rehab Loan

The video says "it’s a great way for home buyers to get money up front for repairs", but it should state; "it allows you to roll the cost of repairs into your mortgage" and loan ceiling up to $700K which does not apply to all markets. Check HUD's website for loan limits in your area. Issues arise from lenders who are not well versed in the program and as a result do not effectively educate the borrower on program benefits, guidelines, fees, and next steps. Our loan limit in the Chicagoland area is $410,000 for a single family home and increases for 2 to 4 units.

Overall, this is a good video that at least gives folks an idea about another finance option that is great for distressed homes in need of repair.

Wayne Gretzky, Real Estate and You

Hockey Hall of Fame great Wayne Gretzky wasn’t the fastest, the strongest or the biggest. But he was absolutely superb in his execution of the game. When asked what made him so great, he replied, “I didn’t skate to where the puck was – I skated to where it was going.”

As a result, he was at the right place at the right time to make the right move.

Success in today’s market requires the same strategy – analyze the situation, anticipate where the market is going – then “skate” there to make the right move at the right time.

According to the USA Today and the National Association of REALTORS®, the majority of demand in today's housing market is in first-time buyer homes. In fact, more than half of the recent closed transactions were concentrated in lower price ranges.

How can you use this information to invest successfully in real estate?

Join us for our next free teleseminar and my friend Mary Nack, Real Estate Broker with Baird & Warner, will discuss current real estate statistics to show you where the economic “puck” is going. I will then discuss the first step in real estate investing: the loan approval process. In addition, I will briefly discuss government insured financing to show you how you can get those deals happening.

And even if you’re not available at that time, go ahead and register anyway. I will send out an mp3 following the call for you to keep and listen to.

To learn more and to register, go to http://mnack.net now.

The $8,000 tax credit deadline is approaching more quickly than most realize. Any one looking to take advantage of this credit needs to have closed their purchase transaction by Nov. 30^th. Right now, it’s taking approximately 45 to 60 days to close even the simplest of loans. Add to that the time it takes to get pre approved, find the house, etc, etc, and we are at the point where the purchase must be made as quickly as possible. Please, if you are going to take advantage of this credit, you should begin the process as soon as possible. If you’re nervous about taking the first step, I promise I will make the process as smooth and painless as possible. Our dedicated staff knows you are depending on us to get your loan closed, on time, and funded.

There have been rumors lately that our government is already talking about extending the deadline past the current deadline. News reports say discussions won’t begin in earnest until the health care issue has been decided. So if you were hoping that you could wait, it would be recommended to move ahead with your plans if at all possible.

If you have any questions, please call right away. Time is dwindling.

Occasionally, I have been asked…”If foreclosure was avoided by successfully negotiating a short sale, can the difference between the sales price received and the previous mortgage balance be treated as income for tax purposes?”

The Mortgage Debt Relief Act of 2007 specifically addresses this, and was designed to relieve most sellers of the obligation to pay income tax on the amount forgiven, particularly if the property was a primary residence.

If you, or someone you know has recently sold their home as a result of a short sale, I would encourage them to seek legal counsel or consult a tax professional to determine if the short sale in question is protected under this legislation.

Below is a link to the IRS page reflecting FAQ’s on this legislation:

IRS Q & A on the Mortgage Relief Act of 2007

For those who need a loan modification, or know someone that does, I've been reading Jack Guttentag's articles for years, and trust his information to be very useful. Be sure to click "previous column" for additional information. As the article says, there is FREE information and HELP to those that need it, and a link on how to find it. I can help with a refi, if your situation suggests that refinancing your current mortgage is a better option for you.  Call me with any questions.

Click ---> By Jack Guttentag

This is a decent place to look for Bank's REO websites, and their inventory.

Click Here!

REHAB LOANS

Real Estate investors need to refinance? Lower your rate so your property cash flows even better. A 20 to 30 minute interview is all it takes to determine if you qualify. It’s possible that you may not need to provide income or assets, and maybe not even need an appraisal. Contact me directly to get started!

Works well for your owner occupied primary residence too!

The Short and Simple Story of the Credit Crisis.

by Jonathan Jarvis

Worth the click!

Effective March 1, 2009, real estate investors can once again own and finance up to 10 individual properties.  The restriction reversal does come with new minimum requirements, however. 

Homeowners buying their 5th through 10th home must meet the following standards, as set forth by Fannie Mae:

1. 720 credit score
2. 25% downpayment for a 1-unit (30% for a 2-4 unit)
3. No mortgage delinquencies in the last 12 months
4. 6 months of reserves for each investment property

In other words, Fannie Mae is re-opening the lending spigot for real estate investors with good credit, a sizeable downpayment and ample reserves. 

According to Fannie Mae, the change rationale is that experienced investors can “play a key role in the housing recovery”.  Until now, foreclosure auctions have gone at less than full speed because investors unable to pay cash have been halted by the existing 4-property Fannie Mae limit. 

Going forward, expect a more expedient foreclosure liquidation nationwide which should, in turn, provide further support for the housing market.

And lastly, not to be forgotten, homeowners with more than 4 properties can finally participate in the ongoing conforming mortgage Refi Boom. Until now, they’ve been stymied by the 4-property restriction, too.

This decision gives confidence to the real estate investors out there whose goal is to build a portfolio of properties and a substantial passive income.   Contact me at ron_parello@yahoo.com  and take a look at the real estate investment properties available with positive cash flow.

This announcement may not be the news many investors were hoping for, but it is a start. 

That’s correct!  Actually, it has always been available.

If you ask most lenders if it’s possible to write FHA investor deals, they will without hesitation say NO!

FHA is not just owner occupied. Investors can purchase single family properties with 25% down and 15% down for two to four unit properties.

This program is however very property specific. It must be a HUD property that is insured. That includes “insured and insured with escrow”. It disqualifies investors from buying HUD properties that are “uninsured”

Since conventional investor financing has become basically un-functional, FHA is another way to finance a one to four unit investment property.

For more information, and to set up a phone interview, contact me at 708-415-8156 or email me at ron_parello@yahoo.com

A new tax incentive can help!

There is a new and exciting government backed incentive now available to first time home buyers (or anyone that hasn’t owned a primary residence in the past three years). The incentive is a temporary tax refund that is designed to induce first time home buyers to take the plunge into home ownership.

If you’re not familiar with this opportunity, give me a call. I am familiar with this credit, and can help you find buyers that didn’t even know they were qualified. Perhaps with no money down too.  Make your home more attractive to more buyers NOW before there’s a rush to qualify before next year’s deadline.

Does your property qualify? Does your potential buyer qualify? Call me for more info.

There’s good news and bad news coming from Freddie Mac.

Ok, the good news first…

Freddie is following suit with Fannie Mae, in that the dreadful "declining market" is a thing of the past. No longer will either Freddie or Fannie require an additional 5% down payment from home buyers in the areas most hurt by declining values. The problem still persists because the Mortgage Insurance companies still have the last say if the down payment is less than 20% and requires MI!  Yes, that’s the good news…

The bad news from Freddie Mac is that for Investment Property Mortgages, a borrower who owns more than one financed property may not own more than four properties that are financed, including the subject property. That is, they will reduce the number of FINANCED properties allowed, from 10 down to four properties owned under any one entity! That fifth property will not be able to be financed. Unfortunately, holding properties in an LLC or similar, may not help if you’re still responsible for the mortgage. It hasn’t been announced yet, but Fannie Mae may similarly revise their policies as well.

There are other changes from Freddie regarding refinancing. It is now required that a property must be owned more than 6 months in order to consider a cash out refinance.

Thank you to all that attended the teleconference about seller paid buy downs.  If you missed the call, and are interested in the information discussed, please let me know.

Keep an eye on THE Blog for future discussions about "The next generation of loans to attract more buyers" 

I want to invite you to an upcoming FREE teleconference call coming up on June 12th...
The subject "The Secret Every Buyer and Seller Must Know to compete in today’s “Buyer’s Market”

I will be discussing “How to attract more buyers.” This is a secret every buyer and seller must know to compete in today’s “buyer’s market.”
Discover:

• What is a buy down?
• How it saves your Buyer thousands of dollars
• How it attracts more Buyers
• How it increases your Buyer’s BUYING power
• How to offer a seller a buy down
  

Brian Kondas, “Short Sale Seller,”  owner of Home Financial Solutions, Inc. is hosting and will interview me, Ron Parello, “Investor Loan Pro,” in this FREE Teleconference call on Thursday, June 12, 2008 at 7pm.
Toll-free dial-in number (US and Canada): 1-800-261-3225
Conference code: 8977440 

During this short 30 minute conversation, there will be time for questions as well. 

Please RSVP if you plan to attend, by email to ron_parello@yahoo.com .

On May 16th, Fannie Mae announced that there is a policy change effective June 1, 2008. It is in regards to the down payment requirements for conventional, conforming mortgages that the company will purchase or guarantee. The new policy will accept up to 97 % LTV across the board to qualified borrowers for all owner occupied single family primary residence purchases across all geographic locations in the U.S. This announcement coincides with a new automated underwriting system that is able to limit risk layering and assess each loan more precisely. In other words, a borrower who qualified under the old credit risk model, may or may not be qualified using the new credit risk model. And viceversa. This new model will take into consideration the credit history of the borrower and their ability to repay. So, those marginal buyers who were close to qualifying in the past, but declined, may under the new guidelines now qualify to purchase a home. Time to get out your prospect lists and them get re qualified with me!

These changes supersede the current policies that required higher down payments in markets where home prices are declining.  Now all areas will be treated equal. 

Even with the changes mentioned, the Mortgage Insurance companies may follow suit, but right now, still have a weak stomach for risk. Even though Fannie is loosening up a bit, doesn't mean the MI Companies will insure it. And yes, multi unit properties will still be difficult to finance. But this is certainly a step in the right direction. Guidelines for investment loan purchases are also changing, but the specific changes have not yet been announced.

Freddie Mac is also coming out with new lending guidelines in the near future. I will also post these changes and any additional Fannie Mae updates here on THE Blog when they become available.

If you're interested reading in the whole Fannie Mae announcement, or discussing any creative alternatives to financing your investment purchases, feel free to email or call me.

MAYBE SOME GOOD NEWS FOR A CHANGE?

"The Housing Crisis is Over?"

An interesting article from the Wall Street Journal!

The Wall Street Journal

 offers a premier service that has redefined Property Management in Chicago.  If you need property management for your apartment, condo, home or other rental property we can help! Our property management team has over 35 + years combined property management, investment and real estate experience.

We offer the low cost (8% of the monthly rent) and highest value property management services in Chicagoland area!

 includes all services which are required to maintain a fully occupied and successful rental property. We handle all of the day-to-day requirements giving you the support and piece of mind you deserve; including:

• Collection of rents

• Coordination of routine maintenance and repair

• Routine tenant relations and correspondence

• Monthly site visit or drive-by

• Coordination of legal case or matters

• Emergency site visits and repair work

• 24-hour property support - All calls and tenant issues handled directly

• 3rd party vendor work, repairs and maintenance (such as locksmith, plumbing, painting,

roofing, electrical, etc.).

• Coordination of contractor improvements, if directed by investor/owner

• Oversee and manage the initial home renovation for the investor

• Perform activities related to late rent including assessment of late fees

• Process all rent related communications including past due notices, 5-day notices and initiation of eviction process if required

• Received rents are either sent to client or deposited in designated bank account

• Monthly & Year-end accounting of rents received

• Coordinate all city and Section 8 inspections

• Schedule and attend property inspections

• Key contact person for Section 8 inspectors

•  Schedule and attend initial inspections for Section 8 participants
•  Coordinate the completion of punch list items with rehab crew
•  Perform move-out inspection(s)

We never charge high rates for maintenance and repairs to our clients! We offer aggressive pricing on all services so you can feel confident you are getting the best value along with the highest quality. Our clients use us as their single source for all of their property needs. The following is a sample of our additional services performed by our property rehab crews:

• Move Out Cleaning

• Carpet Replacement & Cleaning

• Interior & Exterior Painting

• Yard maintenance and snow removal

• Construction services

Feel free to contact me for more information at ron_parello@yahoo.com 

or call me at 708-415-8156

• 2 copies of the Cost Segregation Report (one for yourself and one for your CPA)

• Instructions for your CPA on proper use of the Cost Segregation Report

• Electronic copies (CD) of pictures of your personal property for your records and for insurance purposes

• An Inventory List that details quantities and descriptions of your personal property

• Serial numbers and models numbers of appliances if readable, to keep on file for insurance purposes

Receipt for Appraisal Service to file as business expense

• A single photo will be provided for multiple items of the same type, whether in the samedwelling or unit. Ex. carpet in the bedroom is the same as in living room, or, same fridgein every apartment.

If you're interested in learning more about Chattel appraisals, email me today at ron_parello@yahoo.com  for the complete report.  Additional information in this detailed report include a case study with a real example of the kind of tax savings you may expect to see.  Also included in the complete report are FAQ's on Chattels, and what your CPA may not be telling you, as well as other additional important information.

• Can significantly reduce taxes

• Can often create an after tax, cash flow positive real estate investment

• Accelerates an often under utilized and legal depreciation

• Cost of the appraisal is tax deductible

• Independent third party verification of assets allowing substantial tax savings

• Creates an inventory with written visual description of personal property. This can be helpful in dealing with insurance companies in the event of a loss.

• Independent chattel appraisals are valuable aides in the event of an audit

• Our services are economical and allow clients to recapture their investment in the first year. Each person's tax situation is different but here is a simple way to look it:

• The average value of personal property found in a 1500 square foot house is approximately $15,000 - $20,000.

• This means that our clients save an average of $3,000 - $4,000 off their taxable income in their first year alone.

• For those in a 25% tax bracket that is approximately a $800 - $1,500 net savings on your tax bill each year for 5 years.

• For $500 cost of a Chattel Appraisal you are looking at approx. 217-347% ROI (return on your investment) in the first two years alone.

NEXT POST......What exactly do I get in the report?