Down Payment Assistance Through Grants!

Buy v Rent

Recently I heard from some customers that rented a home in a very nice neighborhood that they want to begin the process of stepping up into home ownership.  But there was one problem.  When my customer’s spoke with their mortgage lender they were told they would need a seasoned down payment in order to qualify for the mortgage.  Although it is not uncommon for lenders to want to see a home buyer with some skin in the game, there are programs today that can even help with a home down payment!  So what is a seasoned down payment?  Simply put, its the amount of money that is in your bank account that will be used to cover the down payment and has been in your account greater than 2-3 months.  The reasoning behind the seasoning requirement for this article is not important because what my customer needed is to find the amount of money they don’t have saved with the amount the lender demands to qualify for the mortgage.  The loan my customer wanted was the First-Time Home Buyer loan which only required to have 3.5% of the purchase price in their savings account as a down payment.  Having only been able to save up 1% of the amount (because my customer is renting an expensive house) I told them about programs that are available that could help them obtain a grant towards the down payment.  And best yet, would not have to pay the grant back!  Not everyone will qualify for a grant, but just typing in “house down payment assistance” yielded no less than 2 million results!  Although no one has the time to research (nor will they need to) I am familiar with at least 20 programs in Los Angeles that home buyers can research to determine if they qualify for a house down payment grant.  It is important to note that no matter what direction you chose for down payment assistance, it is vital to communicate which program you chose with the realtor your working with so that when your offer to purchase is submitted that appropriate closing deadlines are planned so that you have enough time to receive the grant funds to fund your escrow.  To become more familiar with down payment assistance this Freddie Mac resource written by Danny Gardner is a perfect first step to understand the options home buyers have available to them.  Go here—–>  http://bit.ly/2od7yBQ

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MIXED MESSAGES!

Who will forget the week of messages we just experienced!  First the (phony) message that set off innocent Hawaiians about ballistic missiles causing panic when instructed to  to seek immediate shelter!  Then football watchers at this Sunday’s Minnesota Viking game wearing Apple Watches being sent messages by their Apple Watch that they might have a heart issue which was actually caused by the excitement (and resulting increase of blood pressure) from the miracle play that resulted in the Vikings victory over the opposing Saints.  Messages people!!!  These events were one more reminder to me that STICKING TO THE PLAN is the only thing we can ever depend on.  This summer I was managing a single family remodeling project that was in its early stages.  An agent and a painter came over to look over the house and told me that I would be lucky to get around $525,000 when the house was finished.  I disagreed.  I told them that the house would be undergoing several floor plan changes that would re-create how the house could be used, thus giving it greater value.   Eyes would roll as you can imagine.  This didn’t deter me.  I was the one with plans in hand and after s

eeing how several similar remodeling projects had performed in the marketplace my plan was grounded reasonable expectations.  The target future value I held onto was $575k.  At times the project didn’t go well.  Work was slow because of the crushing summer heat and the workers just weren’t as productive as when temperatures were cooler.  Labor costs began to exceed budget.  It severely tried my patience.  But by the time the ‘heavy lifting’  was finished, opinions changed.  Agents and vendors alike remarked that $575k would be a good asking price.  Then, a nice break from the heat helped further advance progress so that hardwood flooring and kitchen cabinets could be installed.  The tide had turned.  In the end we finished over budget, with the house taking three months to sell and earning a $595k sales price at closing.  Sometimes you’ll work a project and you’ll field options that will differ from your plan.  If you’ve done your homework, those options are unqualified and should be disregarded as nothing more than a mixed message.  Mixed messages can cause chaos and confusion because they often lack clarity and grounding in facts!  My job was to maximize the value of the house so that when I finished the house it would have a value of at least $575k, potentially more.  When we sold the house above my target value it was one more reminder that STICKING TO THE PLAN is the only thing you can ever depend on.

PS.  I thought you would appreciate the before and after pictures this house project!

NOT Slowing Down at the Holidays

Holidays

The holiday season is such a festive time of year.  December is full of events “all-things-social.”  Mix in holiday shopping, traveling, preparing to travel, packing to travel…life gets busy this time of year!  I recently called a good friend in Phoenix who told me three quarters of her real estate office is out of the office.  I asked “is the office having a holiday party?”  Her response was amusing.  “No, they are out.  Everyone’s coming back after the 1st.”  As we continued to talk I mentioned to her that real estate can slow down this time of year.  Without missing a beat she responded, “We slow down, but some of us have to get things done.  I’m having one of my best months right now with customers who need to close before year end.”  She made a really good point.  For some sellers, renters, exchangers the holiday season doesn’t give their obligations a break till after the New Year.  For example, I’m still getting calls from customers who really need a house rental by the 1st of January.  Add that two local agents contacted me recently with two new listings in which the sellers need to close quickly.  Then I was contacted by two loan officers who are featuring special loan deals this month including no money down and no document programs for new home buyers.  So much for taking a break at the in December!  The amazing thing that I have learned over the years about real estate at the holidays is this:  buyers and renters have so little competition they practically control the deal!  If you think about it, where are most people you may know today?  Online shopping?  Traveling?  Running down to the grocery store to pick up holiday food supplies and beverages for the big meal?  Getting ready for tonights party/concert/program?  One example I can share recently was on a new home lease listing in Inglewood.  After speaking with the owner he explained to me, that even with the house only on the market for 3 days he would be willing to drop the asking rent $100/mos.  just to get a renter in by year end.  3 days on market!  It takes AT LEAST one weekend and a full week for the public to find a new listing, let alone set up an appointment for a showing!  This rarely happens in the spring, summer or early fall in my market.  Another example is of a seller that I made an offer on a single family house that needed major remodeling work.  A real fixer upper as you can imagine it.  Needs everything.  I asked the seller for several concessions including a very delayed closing to allow the bank (which FOR SURE will be working slowly at the holidays) to fund the deal into early February if needed.  The seller’s response was very generous and said “this sounds fine to me.”  WHAT OTHER TIME OF YEAR WOULD THIS HAPPEN?!?!?  Ahhh the holidays.  Yes, even with the shopping, the parties, the meals, those oh-so-social events that make the spirit of the season so rich and festive, there is still work to be done and deals to be had.  Except this time of year, it can really feel like a one person audience.  I don’t know about you but I like the odds of getting deals closed at the holidays more than any other time of the year.  Happy Holidays everyone and a joyous New Year!

Need help getting your deal done?  Contact me at buyorrentmyhomes@hotmail.com!

Paul Krause is a licensed California Realtor #01835890 and General Contractor #1029575 and is based out of Los Angeles, California.

 

NEW LISTING! Downey California!

This is a single family house project which I remodeled in Downey California.  I installed a new 3-ton Central Air Conditioning and forced air heat system, new electrical and sub panel, windows, bathrooms, a fully remodeled kitchen with new cabinets and appliances which features a very open floor plan!  Also includes a studio apartment attached to the 2-car garage which has its own 1-ton Air Conditioning system and forced air heat system so its IDEAL for OWNERSHIP AND INCOME POTENTIAL!  Available IMMEDIATELY, Take a look —->

Front EntraceFront Side yardKitchenKitchen 2Kitchen and Laundry roomDinging Room and living roomMaster BathroomMaster BedroomBedroom 1Bedroom 2Bedroom 3BathroomBathroom ShowerBack YardStudio ApartmentStudio KitchenetteStudio Full BathroomTwo Car Garage

What This Single Mom Did To Keep Her House

House

You arrive home tired and exhausted from a long day at work only to find the house is empty and very quiet.  An envelope addressed to you is left in the usual place where you usually place your things when you arrive home.  Opening the letter you find a one page note:

I’M SORRY BUT I JUST CAN’T HERE ANY LONGER.  I’M MOVING BACK HOME TO SORT THINGS OUT.  TELL THE KIDS I LOVE THEM.

Can you imagine coming home from a long day at work to this letter?!?!  Neither can I!

But for Norah this is exactly what happened.  This was a serious problem.  The spouse, father and income-contributor of the family had just deserted a family that very much depended on him.  Norah had to make some hard choices over the next few weeks.  Because she had made the purchased the home she was living in prior to getting married, her primary residence was in her name only.  After sorting out her situation Norah had approached my colleague with the idea of selling the house for $375,000.  She would then downsize into a less expensive apartment that she and her 2 young children could start over.  Norah felt she had enough equity to cover two years of rent but still had sizable monthly bills.  One of the largest bills was her automobile loan, a stiff $400/month.  Norah still owed $9000.00 on the auto loan so the debt wasn’t going away anytime soon.  After learning about Norah’s circumstance my colleague could see she was in a tough position. Not just because of her bills, but because of her life circumstance.  Loosing the financial and emotional support of her spouse, uprooting her 2 young children, selling the house, moving into new surroundings and into a new apartment.  This would be a lot.  My colleague sat down with Norah and looked at her monthly budget.  There was no question that she earned a good living, but the auto loan was expensive.  Looking deeper into the details my colleague found that Norah had the money to cover the mortgage.  She just didn’t have much left over after paying all her bills.  To provide a solution she suggested that she would be willing to buy the house from Norah with a 5 year option.  As part of her down payment, which would be non-refundable she paid off the car note to the bank.  She then originated a promissory note with Norah in which Norah would pay her $137/month for the next 5 years.  My colleague agreed to reduced the auto loan by $1000 and then deduct it against the Option purchase price she offered.  This would keep the monthly auto payment down.  Even better, she told Norah that if during or at the end of the 5 years she wanted to buy out the option from my colleague, she could purchase the house back at a price they would agree to, or a 10% increase whichever was less.  They agreed to the deal.  Norah had to agree to not miss any payments on auto loan and maintain the property(repairs), taxes and insurance.  So what did this accomplish for both parties?

-Norah was able to continue to live in her house and keep the children in the same school district.

-Norah was able to sell her house at $375,000 without hassle by accepting the option.

-For the next 5 years Norah can sort out her financial goals without the pressure of moving and starting all over again.

-Norah will still be paying down her mortgage debt so if she sells the house in 5 years she will still have received 5 years of mortgage interest deductions on her taxes.

-For the next 5 years if Norah’s financial situation improves she may buy out the option and repurchase the house – thus never moving.

-Norah reduced her monthly expenses by refinancing the auto-loan with the Option buyer at a more affordable payment which will leave her with more money in her pocket at the end of the month.

– The buyer’s option guaranteed a minimum of a 10% increase on the purchase price if Norah were to buy out the option.  A 32% return on investment after paying $9000 to pay off the original auto loan.

-Even if Norah doesn’t buy out the option she agreed to continue to maintain the property (repairs), pay the mortgage, taxes and insurance so the buyer has zero property management issues to deal with.

Although Norah could have sold her home, this solution gave Norah favorable options in which to stabilize her life circumstances to give her the confidence to face her financial challenges from a position of strength.

Don’t overlook WIN-WIN scenarios.  The obvious isn’t always the best solution.

Contact me if your looking for solutions to your housing needs!

buyorrentmyhomes@hotmail.com

 

The Seller Carry-Back Solution

seller-financing

So now you have made years of payments to your mortgage and slow steady appreciation of the market has improved housing prices.  But a recent layoff has just caused a sudden job loss.  The severance being offered will only last a few short months.  A review of personal finances reveals that the house payments that the job supported will be almost impossible to carry through the transition from your outgoing job to a new one.  So you make the decision to downsize your lifestyle till you get solid footing with a new job.  However after you put the house up for sale you notice the offers are well below your asking price.  This is where selling TERMS through a Seller Carry-Back could make the difference between selling your home and not at all!  This is a real scenario:

Selling Price = $400,000

Bank Loan = $150,000

Seller’s Equity = $250,000

You up one morning to find an email from a local builder that believes the house has tons of potential.  Their plan is to add square footage and remodel the kitchen and bathrooms based on the pictures in your listing.  But the buyer thinks the price is too high.  Additionally the builder already has multiple projects in process and cannot borrow all of the funds he would need to finance the purchase and remodeling.  What can you do?  Offer TERMS.  Here is how this recent sale took place.  A seller made an offer to the builder buyer, so that, if the builder would pay the $400,000 asking price, the seller would offer a promissory note of $250,000 with no interest and no payments for the amount of the Seller’s Equity till the builder completed the remodel and sold the house.  The builder would assume the payments on the sellers existing $150,000 Bank Loan.  The builder took the deal and opened escrow.  With the house payments being assumed by the builder, the seller could breathe a sigh of relief.  The whole project would last six months, and resulted in the creation of a newly remodeled home that sold for over $730,000!  The seller closed with the builder for the $400,000.   The builder paid back the $250,000 promissory note (the house equity) and the $150,000 Bank loan when he sold the house to a couple that was looking for a new home in that neighborhood.   By selling the house with TERMS the seller created several opportunities:

  1. The seller was able to sell the house for $400,000.
  2. The buyer builder did not have to qualify or apply for a $400,000 loan to buy the house.
  3. The builder assumed the monthly payments on the Bank Loan.
  4. The builder was obligated to a “Promissory Note” for the seller’s equity ($250,000) with No interest and No payments till he finished and sold the house.
  5. The builder only had to obtain a construction loan for  $125,000 to remodel the house to improve the property.  This reduced the builders out of pocket borrowing costs and reduced the amount of leverage he would need to re-sell the house.
  6. The buyer builder made a profit in the tens of thousands of dollars by only borrowing $125,000 using a seller-financing and a seller carry-back strategy, instead of borrowing the entire $525,000 to achieve the same sales price of $730,000!

This deal is an example of a complete WIN-WIN for both buyer and seller and solved the problem for each party involved!

Closing Delays on the Rise

Closing times are lengthening. The time-to-close averaged 40.5 days from November 2015 to November 2016 compared to 36.7 days the year before, according to data from the National Association of REALTORS®. NAR called the longer times in closing “unexpected” in a recent blog post.

Read moreNew Closing Rules Remain a Challenge

NAR began tracking closing delays following the implementation in 2015 of new mortgage disclosure rules, known as TRID or Know Before You Owe. The new mortgage rules changed the settlement process by adding new closing documents and timelines. Closing times have remained elevated since the implementation of the new rules.

Continue here—>http://realtormag.realtor.org/daily-news/2016/12/16/better-watch-out-closing-delays-rise