Tuesday, April 26, 2005
Don't put off investing in real estate... Begin TODAY!!!
Are you avoiding investing in real estate? Why? Most likely it is because you are afraid of failure, success or you simply fear the unknown. It may also be because your head is filled with "what ifs." You may find yourself asking yourself: What if I can't resell the real estate after I buy it? What if I can't do the necessary repairs on the property? What if someone gets hurt on my property and sue me? What if I can't make the mortgage payment? These thoughts are bound to make you nervous. However, you need to remember that knowledge is power. You need to learn all that you can possibly learn before diving into investing head first. This means taking time to read books, listen to tapes and network with established real estate investors. Once you begin doing these things, your fears will subside and you will become victorious. So don’t delay, visit my site
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Saturday, April 23, 2005
Non-Conforming home loans
Non-conforming home loans are niche mortgage programs that exist for buyers who do not meet conforming home loan qualifications. Since these loans are driven by your credit score they tend to have a higher interest rate. Here are just a few examples of the many non-conforming home loans that are available:
(1.) If you are self-employed or have a difficult time documenting your actual income then you can get a Stated Income Loans since these loans do not require you to document the income that is shown on the application.
(2.) If you cannot properly document the source of funds and income that is needed to purchase your property, then you can get a NINA (No Income No Asset) home loan since they don't require you to document the income or assets that you list on your loan application.
(3.) If you have strong credit but have been self-employed for less than the required amount of time, then you can get a No Document home loan (No-Docs) which does not require you to disclose your job, income, or assets.
(4.) If you have good credit then you can get 100% Financing through a first and second mortgage that avoids the mortgage insurance requirements or through a stand-alone, all-in-one loan.
Conventional & Jumbo Home Loans
You are eligible for a conventional mortgage if you have a good credit and financial profile. Some of these programs only require that you put down as little as a 3% down payment. However, most home loan configurations require you to have 5% of your own money in the purchase transaction. These conventional mortgages are all underwritten using the same set of guidelines based on rules issued by Fannie Mae and Freddie Mac. However, each program has a slightly different set of advantages and disadvantages. If you want a conventional home loan but the amount that you need to borrow exceeds the conventional limit, then you can move onto the next loan category and get a jumbo home loan. Jumbo home loans are disadvantageous in that they tend to have a higher interest rate than a conventional home loan. It is also important to understand that not all of the same programs are available with jumbo mortgages.
2 Types of Government Insured Home Loans
There are 2 types of Government Insured Home Loans. These include:
(1.) If you have veteran status with one branch of the U.S. military and have a DD-214 then you can get a VA loan. This is a zero down mortgage program that is at market rate for government insured loans and does not require mortgage insurance. Not every lender is able to provide VA loans though.
(2.) FHA loans (first time homebuyer programs) can be used to purchase your property regardless as to whether it's your first or your tenth. An FHA loan requires a minimum down payment which cannot come from gift funds. However, the credit requirements are more lenient, thus allowing non-occupying co-borrowers. In order to be eligible for this type of loan, you must have a valid social security number and the purchase must fall within FHA loan limits which are the same from lender to lender. You should know that not every lender is approved to originate FHA loans though.
What is an ARM?
An ARM is an adjustable rate mortgage. These mortgages have an interest rate that changes over the life of the loan. Since the initial interest rate of an ARM is lower than for fixed rate mortgages, monthly payments are usually lower as well. However, most programs offer rate cap protection which limits the amount interest rates can be increased. If you only plan to own your property for 3 to 5 years then this is your best choice. Just beware that there is always the possibility that your monthly payments may increase due to an increase in interest rates.
What is a fixed rate mortgage?
A fixed rate mortgage is a loan wherein the interest and the principal payments remain the same for the entire period of that loan. Why would this be advantageous to you? Because consistent principal and interest payments means that you won't have to worry about market fluctuations. If you plan to own the property for a long period of time this may be the perfect mortgage for you since they have terms of 30, 20 or 15 years over which they are consistant. These mortgages can be disadvantageous though since they are usually priced higher than adjustable rate mortgages.
A computer program that is heavily weighted towards evaluating your credit or FICO (Fair Isaac Company) score is what is actually used to decide whether or not to offer you credit. Even though each credit reporting agency (Trans Union, Equifax and Experian) uses the same basic model to score your credit, they still will come up with different credit scores because not all creditors report to every credit agency. This results in one lower credit score for you. most mortgage lenders will use the middle credit score to decide whether or not to approve your loan. This score is usually a good indication as to how you, as an individual or a married couple (if you have signed jointly for credit), have paid back the companies from whom you have borrowed money.
Basic property buying steps
Remember your list of goals that you're to have before you begin investing in real estate? Well, this list will help you create a prioritized list of the features that you want to find in your new property along with the reasons why. This list can be used as a search guide and tool to help you find your property. Some items you may want to include on your list are the number of bedrooms; the number of bathrooms; total square footage; closets and storage; the overall appearance of the neighborhood; what services are located nearby; whether or not there is public transportation available; and the traffic and noise that surrounds the neighborhood.
Establish a monthly budget
Once you decide to invest in real estate, you need to set up a monthly budget so you can decide how much money you feel comfortable investing. This is not how much of a mortgage or monthly house payment you qualify for, but how much you are comfortable paying each month. Here are a few things to consider:
(1.) Debt-to-Income Ratio: Your gross monthly income and recurring debts, calculated with your proposed house payment. This is the primary factor that will determine the amount of house you can afford to purchase.
(2.) Front-End Ratio: Your proposed total house payment (Principal, Interest, Taxes, Insurance, Mortgage Insurance and Homeowners Association Fees), divided by your gross monthly income.
(3.) Back-End Ratio: Your total house payment combined with your minimum monthly payment on your debts (automobile payments, credit cards, lines of credit, student loans, etc.) divided by your gross monthly income.
The greatest advantage of real estate investing is...
...the power you are given to leverage your money and investment. This is one case in which appreciation works in your favor. When you rent out a property you make it even more valuable because the monthly mortgage payment is being paid by the renter. This means that someone else is paying for your equity growth in your property. Another great advantage comes from knowing a few advanced real estate techniques. Did you know that you can actually finance the majority of your purchases through other people's money? This is just one of the creative ways that in real estate you can acquire property by using little or no out of pocket money.
Real estate investment is a good investment
Why? Because, when you purchase real estate properly, it is one of the safer investments to make in the United States. The safety lies in the fact that our population continues growing and obviously these people will need a place to live. It is also nice to note that the market rate of real estate has been increasing over time as well. While there are occasional downswings and decreases, this is not the norm. The other reason why investing in real estate is so good is because real estate is affected by the rate of inflation. In recent years, inflation appears to have leveled off but the trend has always been that inflation increases. This trend will continue forcing real estate prices even higher and thus bumping up the price of your properties.
Reporting to credit agencies
While not all creditors will report your prompt payments, most will find a way in which to report your failure to pay, thus effecting your credit score. Hospitals and medical providers do not usually report to credit agencies just as long as you pay them on time for any balance that your insurance company doesn't cover. If you have a problem covering this debt, or have a dispute with your insurance company over who is responsible for the debt, it will end up with a collection company or attorney and thus make its way onto your credit profile negatively impacting your credit scores. You could also go 20 years without bouncing a check and your credit profile will never reflect it until you slip up and let a $15 bounced check remain unpaid and your credit profile will reflect it. This is true even if you pay the debt immediately after becoming aware of it. Why? Because it can take months to reflect as "paid" and then that "paid collection" goes on to remain on your credit profile for years to come. This is why you want to make sure that you don't bounce any checks and if you're in a dispute with your insurance company you want to make sure that you pay the bill and then make the insurance company reimburse you.
Knowledge of real estate is important
Regardless of what the market is doing, if you are armed with good knowledge and negotiation skills you will be successful. An example of this lies in the fact that real estate is one of the best tax strategies for most Americans. Why? Because you can deduct the interest charged on your mortgage payments on your tax returns which in turn reduces the amount you will owe in taxes. There are also numerous other tax advantages for real estate investors, including: paper write off, depreciation, and many expenses that can lower the yearly tax bill.
Friday, April 22, 2005
Hello, my name is Jacques Coquerel and I welcome you here to share tips and advice with you. I am a successful real estate coach and investor in Georgia.