THE RENOVATION MORTGAGE EQUITY PLAN
How you can purchase a new home with the lowest down payment possible and greatly increase your equity while making your new house your home!
Are you a FUTURE HOME BUYER? Are you looking to purchase a house that will provide you with instant equity? It is what every new home buyer wants! It is possible to find that house if you search hard and long! But, you can shorten that search with the Renovation Mortgage Equity Plan.
Have you been looking at the houses on the market and feeling a bit let down? In today's current housing market every day there are home buyers purchasing a new home and settling for less than what they wanted. Why is that? The current market of available homes is made up of mostly very dated homes, foreclosures, distressed properties, aged and outdated houses! That perfect home is very difficult to find if not near impossible.
Here is the scenario that many home buyers are finding, they are first pre-approved by their mortgage loan officer for what in most cases is a standard 30 year fixed rate mortgage, FHA Conventional, VA or USDA. These are all great mortgage program, you are pre-approved for what you asked for or what your mortgage lender provided you.
Then the home buyer goes looking at and for the houses in the areas they prefer to live, what they find is not what they had hoped for. Sure, the houses are in the neighborhoods, school districts, and areas desired, the houses are the types of homes the home buyer want. The yards are spacious, it’s a ranch, it’s a two story, it has a basement, a garage, it’s what they were looking for except for one thing, it needs a lot of work to make it livable or for that matter what they would want to wake up to every day. So the home buyer goes on looking, and looking, and looking, eventually they end up settling or they continue renting.
There are several mortgage programs available to all home buyers that will allow you to purchase that near perfect home, and turn that ugly duckling home into the beautiful swan that you want. But, what if I told you that not only will these home loan programs allow you to transform any house into that home to be proud of, but within a very short time, months, you can have a home that has doubled, tripled or more in equity.
The FHA 203k mortgage, the Fannie Mae HomeStyle, and VA Renovation mortgages are all specifically designed to provide a home buyer, with the means to fund the repair, rehabilitation and renovation of their near perfect house into the home of their desires. The renovation mortgage will roll into one loan the sales price of your near perfect house and the cost of making it your dream home, I will not get into these home loans in-depth here. If you would like to learn more about the FHA 203k mortgage, the Conventional HomeStyle, or the VA Renovation Mortgages please visit my website at www.bobrutledge.com where you will find all you need to know.
NOTE the FHA 203k mortgage is not the same as the standard FHA 203b mortgage, not all lenders can provide the FHA 203k mortgage which is one of the reasons they do not offer this program to home buyers. The same can be said about the VA Renovation Mortgage and the HomeStyle Renovation Mortgage to an even greater situation. Not all lenders do these types of mortgage programs and most Loan Officers lack the experience you want.
I successfully work with a home buying team every month that will help several home buyers find and secure the home of their dreams using the FHA 203k Renovation Mortgage, the VA Renovation Mortgage, or the HomeStyle Renovation Mortgage in conjunction with the Renovation Mortgage Equity Plan. So much so that I encourage ALL my home buyers not to buy a new home until they find THE house that can quickly turn their LOW down payment into at least a 10% equity stake. In most instances my first time home buyers will have established that 10% to 20% equity stake within three to six months after closing on their new home, even in today’s declining, stagnate, or barely growing house market.
HOW DOES THE FHA 203k EQUITY PLAN WORK
Start with the development of your team, your team will consist of a real estate agent, a mortgage loan officer who is experienced, knowledgeable, and able to do ALL renovation mortgage programs, and a home remodeling General Contractor. Don’t be concerned if you do not immediately have a general contractor available to you, more than likely your real estate agent or loan officer will help you. In many instances the Loan Officer will know the perfect Real Estate Agents and/or General Contractors to refer you to.
Are you willing to do your HOME WORK? I hope so, because the Renovation Mortgage Equity Plan can and will place thousands upon thousands of dollars worth of equity into your home. Equity in your home is the best and generally the most important wealth many of us will accumulate.
To start your real estate agent should be well versed and experienced in putting together a reliable and accurate Comparable Market Analysis, CMA. Your real estate agent should have a very solid knowledge of the housing market in the area you want to live, and last your agent should have a true desire to see you get the absolute best home on the market.
Next, your loan officer should have all the renovation mortgage programs available to them, make sure they have done many renovation mortgages because these home loans are a lot more involved than the normal mortgage. In the hands of an inexperienced lender a renovation home loan can turn into a home buyer’s nightmare. In the right hands the FHA 203k mortgage is fairly easy and will not take more than another couple of weeks to close than a normal mortgage, I usually ask for 45 to 60 days to close.
The general contractor should have experience in home remodeling, renovation and repair work. They should be aware that the renovation mortgage will pay them through an escrow account that will not provide funds to them until work is proven to be complete. The contractor should have a very sharp pencil, meaning that they know how to create thorough and accurate estimates. Last, the contractor may have to visit several houses with you, providing estimates of work, make sure they are willing to do this for you.
Your HOME WORK should include that YOU have your renovation mortgage loan officer team member insure they provide you with a complete working knowledge of the renovation mortgage you will be using and that they PRE-APPROVE you for that mortgage program. The pre-approval will establish the limits of the total loan amount, it also provides you with a virtual wheelbarrow full of money, when you make an offer on your new home the seller will know you are a home buyer to be taken seriously.
Now that you are pre-approved, have your real estate agent team member provide you with a list of candidate houses, these will be homes that match what you are looking for in a home, have all the appearances of a bargain home, priced below the market, and may need some TLC to get the house to be your home.
Drive by and visit the houses with your real estate agent, take with you a note pad and a camera. At every house you visit take extensive notes on the house, note the repairs you feel need to be made, develop a wish list of what you would like have done to the house to make it your home. Are the appliances outdated, you can have them replaced with a renovation home loan. Is the flooring hideous, worn, spotted, shag carpeting, a renovation mortgage can cover that too. Would you like a bigger garage or a garage period! Whatever you can dream of more than likely can be done with a FHA 203k, HomeStyle or VA Renovation home loan. If the house is empty or you have permission take pictures of the house to help you remember that house later.
Keep in mind that your have a real estate professional as one of your team members, ask for and listen to their suggestions and allow them to point out the good and the bad. Your real estate agent is a fountain of knowledge and wants to see you get that great bargain home with a ton of equity potential.
Next, whittle the number of houses to your favorites and most potential homes. Go back and revisit the houses on this new list with your contractor team mate in tow. At each home provide your contractor with your notes and your wish list for that home. Let the contractor do their thing, finding items that need attention or repaired, and have them make suggestions as to remodeling and your wish list. Be taking notes of everything from this visit too. Before you leave that house or very soon after have your contractor provide you with an estimate of cost to make this house your home.
Add the sales price of the house or what you are willing to pay for the house and the estimated cost of repairs does it come in below the amount that your loan officer approved you for? Ask yourself this question; can I see this house as my home? If so, you are ready to move on to the next step. This next step will determine whether you make an offer on the house and for how much. Now that you have established the cost of purchasing this house and bringing it up to what you want in a home have your real estate agent perform a bulletproof CMA based on the repairs, work, and remodeling you will do for this house.
Does the Comparative Market Analysis, CMA, show that this house has the potential to meet your minimum gained equity after your down payment? Yes or No, if yes then keep going. If No, don’t be concerned there are a lot more potential homes out there and coming on the market
Based on the findings of your real estate agent’s work, the CMA, this will determine whether you make an offer or not. Also, it establishes your negotiating start and and end positions. You know the value this house holds so do you can start low and have a stop point OR you make a higher offer and negotiate seller concessions to help reduce the out of pocket cost of purchasing a new home. This is why you have a real estate professional, they are trained and experienced in negotiations.
When using the Renovation Mortgage Equity Plan never buy a new home that doesn’t have at least 10% Equity Potential!The Renovation Equity Plan has helped many home buyers gain near instant equity wealth as well as protect the new home buyer from a declining housing market. In this current housing market a home buyer with a very small down payment can quickly see their investment turn into a situation in which they are more equity rich soon after all the renovation work is completed!
Another advantage of the Renovation Mortgage Equity Plan is that many home buyers are finding that they are gaining a 20% or more equity position which allows them to refinance, soon after the completion of work, to a new mortgage with a lower interest rate and no mortgage insurance. Just the elimination of the required monthly mortgage insurance payment can lower a house payment by 10 to 20 percent. Now you have a home with equity and a lower house payment!
PUT YOUR TEAM TOGETHER TODAY TOMORROW START YOUR HOME WORK
My name is Bob Rutledge and I specialize in renovation mortgages, I am a Certified Renovation Mortgage Specialist, and I close renovation mortgages every month. Most mortgage lenders cannot say that.
I have the ability to close FHA 203k, VA Renovation, and HomeStyle Renovation loans all over the State of Missouri, quickly, easily and with far less stress. I have worked with home buyers and owners not only in St. Louis and the surrounding area, but in Kansas City, Springfield, Cape Girardeau, Columbia, Sikeston and other towns in Missouri.
I am also licensed in Texas, Ohio, Florida, and Illinois. I am quickly gaining experience in these states as well.
We are licensed in 48 states and many of the United States territories. If I cannot help you with your renovation mortgage needs I can refer you to someone that I trust.
If you need help with a renovation mortgage, have questions or would like to apply for a renovation mortgage please free to contact me. Email me at FHA203kbob@gmail.com
Pros and Cons of a Low Down Payment
When it comes to a down payment on your home, are you aiming high or low? The down payment is the number one reason most buyers wait longer than they’d like to buy a home. In fact, many sidelined buyers have the income and qualifications to make the monthly mortgage payment, but lack the down payment.
But, there’s also a misperception about 20 percent down. In a NerdWallet study, 44 percent of Americans believe you need 20 percent or more to buy a home. The reality is that about 60 percent of homebuyers financed their purchase with a 6% or less down payment, according to the National Association of REALTORS®.
But, how low is too low for your down payment?
The fact is there are no cookie cutter mortgages — your home financing will be as unique as you. FHA is known for their low down payments for first-time homebuyers, but many conventional fixed rate loans offer lower than FHA’s 3.5% down.
What about zero down? VA loans for armed service members and qualified veterans provide a great value, including no down payment, relaxed credit requirements and no mortgage insurance. (Plus, down payment programs may help with closing costs and even an equity boost.)
In certain areas there is the USDA Mortgage that also provides a zero down payment option, low interest rates, relaxed credit guidelines, but with income restrictions depending on where and number of people to live in the new home.
Some lenders offer grants to buyers to overcome the down payment hurdle. But, according to guidelines from Fannie Mae and Freddie Mac, lenders can make contributions to a borrower’s down payment or closing costs only after the borrower has contributed a minimum 3% down payment.
“To meet that 3% threshold, the borrower can still come with funds from a relative, a government agency — such as grants from a housing finance agency — or from an employer housing program. That has not changed,” says Lisa Tibbitts, a spokeswoman for Freddie Mac.
Let’s take a look at the pros and cons of a smaller down payment.
The Pros:
You can buy a home sooner. With a lower down payment, you’re putting less down and not saving as long before you get in a home. It can help you secure a loan at today’s low rates and avoid any rent increases that may be on the horizon.
You’ll have more reserve funds on hand. When you buy a home, there are many other related costs, including home repairs and improvements. With a smaller down payment, you’ll avoid being “house poor” as soon as you leave the closing table and can enjoy using some of your hard earned dollars to make the home your own.
Down payment programs can help. Don’t overlook down payment programs as part of your home financing. These programs can help boost your down payment savings or even provide a tax credit for the life of the loan. Some programs provide affordable first mortgages with a very low down payment.
The Cons:
Your monthly payment will be larger. When you put less down, your home loan — and monthly payment — will be larger. Work with your lender to ensure you are comfortable with the monthly payment.
You may be required to pay mortgage insurance premiums. Some down payment programs may waive mortgage insurance (MI), but in most cases if your down payment is below 20 percent, you’ll be required to get MI — it helps manage risk for your lender and protect them if you fail to repay the mortgage. It’s important to note that with a conventional, fixed rate loan and borrower paid MI, you can cancel your mortgage insurance when you reach 20% equity in your home. With an FHA loan, you must continue to pay MI for the life of the loan.
Could hurt in a competitive market. Unfortunately, some sellers see smaller down payments as a negative, although it’s not necessarily true. In fact, the seller may actually earn less on the home from an all cash buyer with a lower offer. Plus, some down payment programs will fund your closing costs — something you won’t have to negotiate with the seller. Put the seller at ease by getting your financing set up early and documenting it in a letter accompanying your offer.
The bottom line? The right down payment for you depends on your situation. Weigh the overall pros and cons of a low down payment and talk with your lender, Bob Rutledge, about what is the best fit for you. Visit www.bobrutledge.com to learn about low down payment options, VA and USDA zero down payment programs, and down payment assistance.
With significant changes to the tax code taking effect this year, homeowners and prospective buyers are revising their plans to take advantage of its sweeping changes. Here’s an analysis based on information from the National Association of Realtors and NerdWalllet.
Tax Rate Reductions. Joint filers with incomes of $77,400 to $400,000, which will include most first-time buyers, will see their tax rates decline from two to four percent when they file their 2018 taxes next year.
Mortgage Interest Rate. Changes in the mortgage interest rate—lowering the cap to mortgages worth o $750,000 from 1 million and excluding interest paid on home equity loans— would affect only the wealthiest first-time buyers directly. The changes will make second homes and equity loans more expensive for first-time buyers in the future.
State and Local Taxes. The new law limits the amount of property taxes and other state and local taxes to $10,000 a year. First-time owners, as well as current owners, will lose the ability to deduct thousands of dollars that they can deduct in 2018, increasing the cost of homeownership, especially in high tax states like New York and California. In the State of Missouri most First Time Home Buyers homes will not have an annual property tax anyway near $10,000.
Student Loan Interest Deduction. Potential first-time buyers and their parents who have been burdened with student loan debt will lose the ability to deduct the interest they pay on their loans. As a result, it will cost them more to pay off their debts to reach a DTI that would qualify them for a mortgage.
Personal Exemptions. Personal exemptions for filers and their dependents, worth $4,150 each in 2017, was eliminated in the new tax law.
Moving Expenses. Taxpayers have been able to deduct some moving expenses related to their employment, but this deduction is eliminated in the new act.
Standard Deduction. Taxpayers must decide whether to take the standard deduction or itemize their deductions. In the past, most homeowners have itemized to take advantage of the mortgage interest deduction and the deduction for state taxes, including property taxes. The new law doubles the size of the standard deduction from $6,000 to $12,000, or $24,000 on a joint return. According to Zillow’s Alexander Casey, under the current setup, roughly 44 percent of U.S. homes are worth enough for it to make sense for a homeowner to itemize their deductions and take advantage of the mortgage interest deduction. Under the new law, that proportion of homes drops to 14.4 percent.
Impact on First-time Buyers: NAR’s research department modeled examples of homeowners as different income levels, mortgage sizes, and family sizes.
A single first-time buyer who purchases a home costing $205,000 and takes out a 30-year fixed rate mortgage at 4% interest. She puts down 3.5 percent. Assuming she buys early in 2018, her first-year mortgage interest would total $7,856, and she would pay real property taxes of $2,050. Under the old law, her taxes for 2018 would fall by $2,098; Under the new law, her taxes would rise by $30. Moreover, the difference between renting and owning was $2,098 under the prior law but shrinks to $637 ($6,060 - $5,423), or $53 per month.
A family of five with an income of $120,000 that buys a $425,000 home with a 10 percent down payment on a 30-year fixed mortgage at a 4 percent. Under the old law, they would save $3,219 by buying. Under the new law their taxes would decline only $100, but if they had remained renters, they would receive a tax cut of almost $2,400. Under the prior law, the tax benefit of buying a home was $3,219. Under the new law, they will get a tax cut $948 ($8,999 - $8,051), a much weaker incentive to buy.
The 3% Down Alternative to FHA
It seems that a lot of people think that Conventional financing requires a minimum down payment of 20% or more.
I am shocked at how many folks I speak to every day that think that a conventional loan is not an option for buying a home with a low down payment.
Both Fannie Mae and Freddie Mac, the conventional mortgages, have special loan programs available that, based on your income, and/or the geographic region you are buying in, allows you to buy with as little as 3% down payment.
Normally Better Credit is Best
With normal conventional loan programs they tend to favor better credit scores, through their risk based pricing they punish borrowers with lower credit scores with costs to the lender that increase interest rates if you are not perfect in the eyes of Fannie or Freddie.
If you’re one of those homebuyers, or homeowners that has excellent credit to decent credit, but not a lot of equity or money for a down payment, you may be surprised at conventional loan options offer.
Fannie Mae HomeReady
Fannie Mae’s HomeReady program is designed to meet the diverse needs of today’s buyers using flexible underwriting guidelines for credit worthy low-to-moderate income borrowers trying to finance a home.
HomeReady Better Features
Income from non-borrowing household members can be considered as a compensating factor to allow debt to income ratio greater than 45%, up to 50%.
Can use income from rental unit and boarder income for qualifying.
Allows non-occupying borrowers, like a parent, to help meet debt to income requirements.
Financing up to 97% loan to value for the purchase of a one-unit principal residence.
Financing up to 95% loan to value for limited cash out refinances, or 97% loan to value if mortgage being refinanced is owned or guaranteed by Fannie Mae.
You are NOT required to be a first time home buyer to qualify for this program
Private mortgage insurance is discounted, in many cases below that of FHA and a regular conventional mortgage.
Gifts, grants, community seconds, and cash-on-hand can be used as a source of funds for down payment and closing costs.
Nontraditional credit is allowed. An example is rental history, or utility and insurance payments.
Qualifying Requirements for HomeReady
Borrowers using HomeReady are required to meet certain criteria that are not necessarily required if you’re using a traditional conventional loan with a maximum loan to value of 95% (5% down payment for purchase).
Homeownership Education Requirement – A homeownership education course may be required unless you have previously taken a course required by a community seconds program, or if you’ve completed a course from a recent attempt to purchase another home.
Income Eligibility – HomeReady is available to any homebuyer or homeowner that meets the income limits of the property location. The income limits may be waived if the property is located in a “targeted” low-to-moderate income Census Tract.
You can look up the income and property eligibility by entering the address of the home you’re interested in into Fannie Mae’s Eligibility Search Tool Here
Freddie Mac Home Possible Mortgages
Freddie Mac’s Home Possible mortgage offer low down payments for low-to-moderate income homebuyers, or buyers in high-cost or underserved communities.
Freddie Mac offers two different low down payment options, Home Possible 95% Loan to Value, and Home Possible Advantage 97% Loan to Value. I will only address the 97% or 3% down payment option.
Home Possible 97% Features
Maximum loan to value 97%. Minimum 3% down payment for purchase.
1-unit single family unit homes, condominiums, and planned unit developments are eligible.
Flexible sources of down payment. Down payment can come from a variety of sources, including friends and family, employer-assistance programs and secondary financing.
No cash-out refinancing is available up to 97% loan to value for borrowers who occupy the property.
Income flexibility. Borrowers with income above the area median income (AMI) may be eligible in high-cost areas. No income limits in underserved areas.
You can check eligibility by using Freddie Mac’s Home Possible Income & Property Eligibility Tool Here.
Private mortgage insurance is discounted, in many cases the monthly mortgage insurance is well below that of a regular conventional mortgage and below that of FHA
All borrowers must live in the property. Non-occupying borrowers not allowed at 97% loan to value.
How Do I Choose The Best Option?
There is very little to no difference between the costs and interest rates of these two programs, so it comes down to your financial situation that may determine which option is best for you. In a sense, the best option chooses you.
FHA, HomeReady, or Home Possible should all be considered for many home buyers that in the past were placed only in a FHA mortgage. What use to be has changed, if yesterday you were a FHA mortgage today you may have a better option
A common example is if you have student loans with Income Based Repayment (IBR) payments. FHA, Freddie Mac, and Fannie Mae all handle this situation differently.
Another example is that the targeted income and property lookup tools offer different results. If you look up a property using Fannie Mae’s HomeReady lookup tool, you may make too much income to qualify, whereas if you look up the same property using Freddie Mac’s Home Possible lookup tool, you may qualify. FHA does not have a maximum income limitation.
If you are considering a new home purchase and want a low down payment option you need to consider a mortgage lender that has experience with FHA, Home Possible, and HomeReady, and is willing to consider all possible options for you.
If you want to talk with me about what options are available to you please contact me, Bob Rutledge, at 314-628-2218 or email me at brutledge@usa-mortgage.com
At the start of many mortgage application I hear my borrowers tell me that they had started the process of 'fixing' their credit BEFORE they spoke with me or any other mortgage lender. This is a mistake that has hurt so many potential home buyers. This is especially true when it comes to collections on your credit report.
Collection companies have done a great job over the years of convincing consumers that paying off collections will raise their credit scores. Many are actually surprised to learn that paying off collections will actually LOWER their credit scores. Collections are usually reported on the credit as a “9” status or collection account. This means the account has already been "written off" and assigned to collections by the creditor. Once an account is reported this way on the credit report, the damage to the credit score is irreversible, unless that item is removed completely from the report. If the account is paid off, the collection company reports that the account now has a $0 balance, but they do not usually delete the item off the report. The account has already become a collection, and the risk of the consumer defaulting on another account is already very high, due to that collection. So their credit score will not go any higher if it is paid off, because paying off a collection after the fact, doesn't lower the risk of defaulting in the future. However, the DATE OF LAST ACTIVITY is updated to the date the account was paid off. So if that account was sent to collections 3 years ago, the date of last activity is 3 years old and the impact to the credit score is not as much. But if the consumer pays off that collection today, they just update the date of last activity to today's date, many times causing the scores to go DOWN as a result. Crazy isn't it?
Also, if you have medical collections most mortgage programs will not require you to remedy medical collections, in essence....we ignore them. Yes, they may be hurting your credit scores, but there are usually other methods available to you to increase your scores. Before you start doing your homework to purchase a new home please contact me or another mortgage professional. Allow us to pull your credit report for you and to discuss what is the best course of action to take, you may be surprised how easy it really is to get your credit scores higher.
You Are Not Alone
I recall the feelings that ran through me when I felt compelled to file for a Chapter 7 bankruptcy, I felt as though I was an outcast and ashamed that I could not handle my obligations. For a very long time I barely admitted it to myself much less my friends. Now I realize that I did not have a solid handle on my finances and it took a couple small set backs to put me into the position of bankruptcy. But, when I look back I see a life lesson that was provided to me and has been instilled well into the fabric of my personal life. I will not allow this to happen ever again. It is this exact lesson that Underwriters and Mortgage Lenders are looking for from borrowers when it comes to providing a mortgage approval for a home buyer after a bankruptcy.As a Mortgage Lender I am in a very unique position to provide both experience and knowledge in help my clients when they come to me for help in the purchase of a new home or the refinance of thier current house after a bankruptcy.
TIME AND PROOF
For the sake of brevity I will not get into all the exact rules for every mortgage program, I do at my website, please visit AFTER BANKRUPTCY here I provide what you need to get you approved.Every mortgage program has specific time periods that you must wait after the discharge of your bankruptcy before you get started. Though most of the programs have exceptions to those wait guidelines, for instance the wait period for FHA is normally 2 years, but there is an exception called Back to Work that allows for only a 12 month wait period.
Something that many Lenders fail on is that after a Chapter 13 bankruptcy has been discharged it is possible to be approved for a FHA mortgage after only 12 months! BUT! You can actually get approved for a FHA mortgage while you are still in the repayment period of your Chapter 13! If you have made at least 12 months of on time payments and if your Trustee agrees you are eligible for a FHA mortgage!
The Underwriters will be looking for validation that you have learned from your bankruptcy. They will want to see that if you have current credit accounts that you are making your payments on time. This is important, to re-establish credit after your bankruptcy and especially with a credit card or two.
COMPENSATING FACTORS
Applying for and getting approved a mortgage application after a Chapter 7 or Chapter 13 bankruptcy requires a stronger than normal application. To strengthen your application requires COMPENSATING FACTORS. Click on the link for a long list of items that you probably already can bring to your application, here are a couple that are important.....
Housing payment shock, you should not have a large increase in what you are paying currently for housing compared to your new house payment.
12 months of on time housing payment, this is an absolute must. There are exceptions if you are living somewhere rent free.
Keep your total debt to income ratio at or below the recommended guidelines of the mortgage program.
YOUR BANKRUPTCY FIXED A PROBLEM
When I was an Underwriter we were told that a bankruptcy should be seen as the borrower recognizing that they had a problem with thier current financial situation and the method of solving that problem was bankruptcy. Now, let's see that the borrower has learned from that life lesson and they are practicing what they learned.
It takes a mortgage lender that adhers to the guidelines of the mortgage programs and don't have overlays that create roadblocks to your approval. It takes a mortgage loan officer that is willing and able to take on your special situation, don't settle!
If you have questions please feel free to visit my website, www.bobrutledge.com or contact me.