Reno Home Blog

Nevada Bond & Rural Development Loans: An Easy-To-Understand Guide

Guest Interview: Cory and I meet over lunch to talk about NV Bond and Rural Development Loans.  Click here to read the first part of the interview ( about FHA & VA loans).

(Note: this article is not meant to encompass all the nitty-gritty details about these programs. Our hope is that through Cory's insights we can all learn something new and hopefully help you in your decision-making. But I tried my best to include resources with the topics we discussed.  If something is not clear to you or would like to know more, you're more than welcome to call me directly (Joe: 775-338-7653) and I will do my best to help you or recommend someone who can.)

NV Bond Program

• Is a first time home buyer's  program

• In order for borrowers and clients to use the NV bond they must've taken the first time home buyer's class. (FHA and VA does not matter if you're a first time home buyer.)

• NV bond program must be a first time homebuyer. Well that's not exactly true. If you haven't owned a home in the last three years, you are eligible.  The test is you have to provide the past three years record of taxes, and they will check if you have deducted any mortgage interest on your taxes in those years.

• For the right people it is a good loan. It's not a good loan for a first time homebuyer who will have large increases with their pay. You can actually lose your subsidy and re-audit you.

• Another drawback is that it must always be owner-occupied. That's the downfall of NV Bond always has to be owner occupied. You cannot use it to develop a real estate portfolio at all.
  

Additional Resources:

• NV Bond Program Overview (http://nvhousing.state.nv.us/bond_program/mfindex.htm)

• Homeownership Assistance: Nevada (http://www.hud.gov/local/nv/homeownership/buyingprgms.cfm)

Advantages of NV Bond

• It 'piggy backs' off the FHA or VA. It helps with down payment and closing costs. If you got a $100,000 purchase price you've got the $97,000 for the FHA loan while the NV bond loan is going to pay for the difference. It'll be on the 2nd position amortized over 20 years and there will be a $7,500 lien in the second position that has helped pay for your down payment and closing costs.

• It does not piggy back off conventional loans only FHA or VA.

Rural Housing or Rural Development loans

"Is committed to helping improve the economy and quality of life in all of Rural America"

• To be eligible for rural housing is based on geographic location.

• The cool part about Rural development is that if you have $100,000 purchase price but the appraisal came in for 103,000 you can have a loan amount of $103,000 and roll the $3,000 to the closing costs. That's the niche that RD has.

• And the underwriting actually is not much different from a regular FHA loan. Very similar. Good program.

Additional Resources:

• Rural housing loans(http://www.govloans.gov/govloans_en.portal?_nfpb=true&_pageLabel=gbcc_page_browse_loans&_
  nfls=false&bid=401&mode=report&currentSubType=6)
  

• Rural Development news and updates (http://www.rurdev.usda.gov/)
  

CONTACT INFO:

Cory Henderson
Cell: 775-815-5500
Office: 775-828-9500
Email: cory.henderson@mannmortgage.com
Address: 495 Apple St. Suite 105 Reno,Nevada 89502

FHA & VA Loan Programs: What People Are Craving To Know

Guest Interview: Cory and I meet over lunch to talk about FHA and VA loans.

Visit Cory's Chase Nation Page

I met Cory at one of our weekly office meetings.

Cory is a 4'th generation Montanan who finished his bachelor's degree in finance and economics at the University of Montana. 

Shortly after his graduation, he got into the lending industry at the age of 22.  He's been in the business for 17 years. 

I asked him to give us his thoughts on FHA and VA loan programs.  It was time well spent for I gained new understanding on these very important loan programs.  Hope it gives value to you too!

(Note: this article is not meant to encompass all the nitty-gritty details about these programs. Our hope is that through Cory's insights we can all learn something new and hopefully help you in your decision-making. But I tried my best to include resources with the topics we discussed.  If something is not clear to you or would like to know more, you're more than welcome to call me directly (Joe: 775-338-7653) and I will do my best to help you or recommend someone who can.)

FHA Loans (Federal Housing Administration) 

• Allows 97% of purchase price to be refinanced.  So if you have a $100,000 loan, your max loan amount would be $97,000.

• FHA has an upfront mortgage insurance charge plus a monthly mortgage insurance charge. The upfront mortgage insurance is stacked on top of the loan amount. So even though the loan amount is 97,000, that would only be your base loan amount. Your total loan amount would be your base loan amount plus your upfront mortgage insurance premium. So in the last scenario Your total loan amount would probably be closer to 98,600. The extra $1,600 is your upfront mortgage insurance that's financed in.

• FHA allows a little bit more liberal debt-to-income ratio compared to Conventional loans.

• FHA allows for a little bit loser underwriting standards in regards to the credit. So it really is a program that's geared to people who has had issues in the past but have learned form their mistakes.

• FHA is a good loan for people who maybe hasn't saved up enough money for a huge down payment.

• FHA also has FHA Access which you can do 100% financing. However, the rate adjustment on that are stiff. For example if you're quoting 6.25% for a FHA loan, your FHA access would probably be at 7.5% for the extra 3 percent (in down payment).  That's why I don't usually recommend FHA access.

Additional Resources:

• Let FHA loans help you (http://www.hud.gov/buying/loans.cfm)

• FHA loans Wiki (http://en.wikipedia.org/wiki/FHA_loan)
  

VA Loans (Veteran's Affairs)

• VA allows for 100% financing

• VA has what's called a funding fee.

• The myth is that you can only use your VA loan once. That is not true. A veteran has the option to use their VA as many times as they want as long as the previous VA loan has been paid off.

• VA has an upfront funding fee similar to the upfront mortgage insurance that FHA has but VA funding is a little bit more. It's 3% for the first time that you use it. 

        It's 3.25-3.5% for subsequent uses and that's based on the loan amount. So if you have a 100,000 loan. VA funding fee will be $3,000. Again, its calculated very similar to FHA.  You have your base loan amount plus whatever your funding fee or your upfront mortgage insurance is to get your total loan amount. So with VA you'll start with a 103,000 loan with a 100,000 loan.

• VA is very competitively priced. If your veteran, through service, has been disabled, the funding fee can be waived.  In my mind, It's still a very strong program. Its probably right now the best program out there.

Additional Resources:

• Am I eligible for a VA loan (http://www.homeloans.va.gov/eligibility.htm)?

• Frequently asked questions about VA (http://www.homeloans.va.gov/faqelig.htm).
  

• VA loan Wiki (http://en.wikipedia.org/wiki/VA_loan)
  

Who qualifies for a VA loan?

• Anybody who has been honorably discharged from the Armed Services of the United States of America.

• And from that point it's just making sure the Veteran has what's called a DD214 which is the date of discharge papers. And you use that to get your certificate of availability. You can also get that online right on VA's website. If you can't get it over the web, you can request it via snail mail. Great program.

• VA allows for a little bit of Debt-to-Income ratio compared to a Conventional loan.

Some notes about FHA & VA loans

• Both FHA and VA looks at certain aspects of the property. By their mandate they are trying to avoid somebody purchasing a house and having to replace the roof or having to cost them financial hardship.

• Health and safety hazards are usually noted on the appraisal and usually have to be repaired before closing. A bad roof would probably get called and you've got problems with the heating units. All of those things would have to be addressed before you close A FHA or VA loan.

• The major difference bet FHA and VA right now is you can manually underwrite a VA loan with a low of 580 you can't do that anymore for FHA. If there below 580 you'll have to have an automated approval in order to close it. I do believe that that would probably come back in time.

CONTACT INFO:

Cory Henderson
Cell: 775-815-5500
Office: 775-828-9500
Email: cory.henderson@mannmortgage.com
Address: 495 Apple St. Suite 105 Reno,Nevada 89502

It's not just about rate. It is about a great rate with a great plan.

Guest post by Aaron DeHart

Aaron shares this radical thought: "low interest rates by itself is not KING, 'We all have low rates.' "

     "Low Mortgage Rates" Is Not A Selling Feature, It's A Planning Standard

When mortgage rates fell in early-January, it breathed life
into a huge swath of loan officers that were getting ready to
leave the business.

It's a terrible turn of events for homeowners and homebuyers. 
With everyone focused on rate, rate, rate, the
lowest-of-the-low loan officers are in their natural habitat.

Having a low rate carries tangible benefits in the form of a
low (relative) payments.  But, as a point of comparison,
having a low mortgage rate combined with the right
mortgage product is far more important to homeowners.

I won't dispute that low mortgage rates are very attractive
but -- no matter how you slice it -- low mortgage rates do
not create wealth for people without an outside influence.

Turning "low rates" into "long-lasting wealth" requires a
well-planned mortgage strategy and solid execution. 

Unfortunately, homeowners don't get that sort of approach
from the low-rate guy that does not focus on the proper
questions to create a plan   that works for that particular client.

Plus, here's a little secret about the mortgage industry:
We all have low rates.

But ordinary people don't understand the mortgage rate part
of the mortgage industry and get blinded by the promises of
"low rates" .  Low rates are a business standard not a feature.

Not having a well-formed plan leads to irrational mortgage
management including:

1.  Paying fees to buy down a mortgage rate when you believe
mortgage rates will fall in the future

2.  Converting from an ARM to a fixed when you know that you
will be moving in a handful of years

3.  Walking away from a scheduled closing because somebody
offered you a mortgage rate that's 0.250% lower and this is why
falling mortgage rates can be bad for homeowners.  It shifts
attention away from the short- and long-term planning process and
pushes it into instant gratification mode.

These kind of things can be a nightmare for Financial Planners: 
Homeowners can undue years of retirement planning with just one
ill-fitted mortgage at a "great rate"

To properly prepare a client for the right mortgage product, a
loan officer needs to be asking the clients the right questions.

For example:

1.  How long is the client planning on staying in the home.
(This is where ARM's and interest only products come in
to the picture folks.)

2.  Their perceived employment path, changing jobs, pay raises,
possible relocation.

3.  Their investment strategies, aggressive etc. When do they
want to retire?

4.  Children, believe it or not this plays a major role.
(College and how are you going to pay for it?)

5.  How much funds are available to invest in the transaction.

6.  What payment are they comfortable with?

7.  What is their current debt structure?

These are just a few and I tend to even go deeper with the client.

Aaron M. DeHart
VanDyk Mortgage
985 Damonte Ranch Pkwy #120
Reno NV. 89521
775-284-7827
775-284-7828 Fax

Darling...

Photo by: Henny G

I might as well confess to you my dear readers. I am falling in love with it all over again.  I neglected it for three years.  Conventional and Subprime loans just seemed so much more attractive, plain sailing, uncomplicated, undemanding (Or so I thought) .

Like a ship in the night I quietly marooned my numero-uno.

It was a fun three years.  But reality set in.

It's not all as it promised. 

Now I'm paying my dues and I want the real thing. 

As John Eldredge would tell me, "You want the Bahamas, she's the North Atlantic."

FHA loans would you take me back?

Aaron Dehart shares his thoughts on FHA loans:

                                                     ---------------------------           

"FHA loans are designed for first time homebuyers who have little or no money down."

                             ---------------------------

• FHA aka government loans have made a tremendous comeback in the Real Estate and Lending world.

• FHA loans are designed for first time homebuyers who have little or no money down. Although it is not a requirement from FHA to be a first time homebuyer, I highly recommend them for anyone who is putting down less than 10% on a home.

• FHA has no “Pricing adjustments” which means unlike conventional loans, FHA loans will not punish a borrower with a higher rate for having lower credit scores, a higher loan to value, or increased debt to income ratios.

• FHA Loans are traditional full documentation loans, no stated income or no documentation loans. The borrower must provide proof of income, assets, and any other documentation that is required by underwriting. The borrower must prove that they have the ability to repay the loan. There are no pre-payment penalties, which will make it much easier on the borrower to refinance or sale the home if the need arises. Moreover, FHA makes it extremely easy for a client to refinance from an FHA-to-FHA loan, also known as a streamline refinance, requiring very little or minimum documentation from the borrower, since it is just a change in the rate.

• FHA is probably one of the only avenues left that will allow 100% plus financing. There are numerous government-funded programs that assist in down payment and closing cost that help people realize the dream of home ownership. Grants, bonds, private money seconds are a few of the sources that can accomplish this and are not hard to attain.

My friend, the bottom line is very simple; if you are a first time homebuyer or have little or no down payment and have had credit issues in the past, FHA loans will be the best source for you to attain home financing.

They are simple, black and white, make sense loans with make sense underwriting that have helped hundreds of thousands of people attain their dream.

Aaron DeHart

Loan Officer ProStar Home Loans

985 Damonte Ranch Pkwy Ste.120 Reno,NV 89521
775-284-STAR (7827)
aarond@prostarhomeloans.com

www.prostarhomeloans.com

FHA,VA and Conventional loans: An Insider's Look by John Roussel

The mortgage tide has turned.

From virtually anyone being approved for 100% percent financing to 10-20% down payments in order to buy a house; I needed to learn more on the changes in the mortgage industry. 

Hence, John Roussel, A man who possesses what you might call 'infectious enthusiasm' yet is not hopelessly bounded by blind faith (correction: he also has it but not full-blown) often exhibited in our business.  A rare feat, if you ask me.   

Though I quietly disagreed (makes life colorful) with some of his arguments on the current state of our real estate market, he is on the side of the angels. I learned a lot from this guy.

Who is John:  John D. Roussel is owner of ProStar Home Loans with eleven years of mortgage experience in single family lending in Northern Nevada.  He is a member of the Mortgage Bankers and Builder's Association of Northern Nevada.

About this post:  John talks about Conventional loans, VA loans(veteran's administration) and FHA loans (Federal Housing Authority). 

Note: This 3-part article is not meant to encompass all the details regarding the topics mentioned.  Our hope is that through John's experiences we can all learn something new and hopefully aid us in our decision-making.

When and how did you get into the loan business?   

I actually started my undergraduate studies in cellular physiology.  So I'm not working in the field on which I started.   I had planned to attend Michigan State for medical school but my whole family relocated to Reno.  So I followed them and applied at the University of Reno's medical school and had gotten turned down because they've already filled out all their of state student box.

I had to wait for one year to establish my residency and during that year it was the first time I worked at a hospital, and I hated it.  I was so happy that my family relocated and I found out I never wanted to be a doctor in the first place. 

My whole family was in mortgage lending, it was an easy fit.   So that's where I went into eleven years ago.

What's the biggest difference in the mortgage business eleven years ago to now?

Actually, not a huge difference.  I've seen the business in that eleven year period fully cycled.  A lot of the loan programs that came around the last four or five years weren't there eleven years ago.  And a lot of those programs have now gone away.  So we've actually gone back to the lending practices similar to where I first began.
               

How about the changes from 2005 to the present? 

There's two parts to that answer.

Number one: what has Congress and Senate done to enact change? And the second part is how is the lending different?

The first part is they passed a terrific bill: AB440.  Where you can no longer state income without some type of backing documentation. Now, stated income makes sense for a lot of self-employed people who structure their taxes differently.  However, before, you could just state income and never had to give any backing, and the greedy industry was allowing that.

So they passed a bill (AB-440). (What is the AB-440 bill?)

You can no longer state income without some type of document backing, whether it be U.S Dept. Of  Labor, Salary.com or six months average deposit and bank statements.  That law helped tremendously. Congress and Senate on the local level, passed that law and they're trying to pass that on a Federal level.

On the Federal level they passed a number of laws that have helped like the FHA Secure product. (What is the FHA Secure Product? A word from the President)

That law would help a lot of homeowners that was on adjustable rate mortgages that are upside-down in their house.  This will help them fix their situation so that they don't have to go into foreclosure.

"Because Reno and Sparks have been tagged, 'in a declining market'.  It is very difficult to obtain 100% financing when using conventional financing."

That's sub-section one of your question.

Sub-section two: because of all of the profit-taking and the greed that happened in the past few years, many of the loan products that I was able to offer seven months ago no longer exists.  The conventional lending is drying up.

Because Reno and Sparks have been tagged, 'in a declining market'.  It is very difficult to obtain 100% financing when using conventional financing.

There are four major types of financing:  Veteran's administration (Better known as VA), Federal Housing Authority (FHA),Conventional and then Sub-Prime and there's also Private Financing.

However the three that everybody focuses on are  VA,FHA and Conventional.  So a lot of the conventional lending products are number one: hurting you on the loan to value that they're able to offer.  Number two: if you don't have a credit score of greater than 680,  it is going to severely affect your rate.  So conventional financing is becoming to where it's just the crème of the crop, just your 720 borrowers with ten percent down or greater.

If you don't fit those parameters you need to default back to your FHA and VA loans.

 

Tell us more about those loans

FHA has been around forever.  And back in the day (when I started 11 years ago) all of my loans were FHA. All of  these conventional products that have come out within the last four or five years, the ones that caused all the problems, didn't exist.

Ten years ago it was, ' oh you don't have 20% down, ok we're going to do FHA loan' and that's what the market has gone back to.

With FHA, you can still do a 106% financing.   I've told you a while ago that in conventional loans rules change five times a day and we have to keep a whole team just to keep up with that.

Whereas, I printed out the rulebook for FHA two weeks ago and the rulebook was from 1992.  Since 1992 they've released five mortgage E-letters, (a mortgage E-letter is how they announce their programs changes.) Since 1992 they've had five changes in the program.

"With FHA, you can still do a 106% financing."

So everybody is going back to FHA products, which is a terrific law.  It is designed for low to no down payment  loans.  The other good thing here is the mortgage insurance is very inexpensive,because it is a government-backed loan.

Describe your typical FHA borrower?

Nowadays, anybody with less than 10% down payment.  Which is exactly how it was seven to eleven years ago. Anybody with less than 10% down payment is now an FHA borrower.

How about the VA (Veteran's administration) loans?

For any eligible veteran who served in the military. This is a phenomenal loan as far as a zero down payment loan; there is not a superior product in the market. 

You see,FHA has a monthly mortgage insurance charge whereas the VA allows you to finance that on top of your loan amount so that you don't have to pay a monthly amount.  So you get a much lower payment as a veteran on a zero down payment loan.

If you are a veteran and you can exercise your VA benefits in buying a house, there isn't any zero down payment program that's going to surpass it.

 

...Read our 'friendly fire' dialogue on the state of the Reno real estate market

...Read why John loathes negative amortization and sub-prime loans

John Roussel of ProStar Home Loans
985 Damonte Ranch Pkwy Ste.120 Reno,NV 89521
775-284-STAR (7827)
john@prostarhomeloans.com
www.prostarhomeloans.com

Reno Real Estate: Where am I?

Who is John:  John D. Roussel is owner of ProStar Home Loans with eleven years of mortgage experience in single family lending in Northern Nevada.  He is a member of the Mortgage Bankers and Builder's Association of Northern Nevada.

About this post: John briefly tells us about refinancing issues he is experiencing with many of his clients.  Then John and I engage in a dialogue about the current state of the Reno real estate market.

Note: This 3-part article is not meant to encompass all the details regarding the topics mentioned.  Our hope is that through John's experiences we can all learn something new and hopefully aid us in our decision-making.

What's the most recurring question people ask you about loans?

They want to understand the re-financing option because property values have decreased significantly .

It is very important to understand what different loan programs you fit into.  There's just a lot of mis-education out there right now about what's available for the consumer whether you're buying or refinancing a home. The mis-education happens because information comes in so fast that it's taking twenty of us every day to keep up with the updates in the lending rules & regulations.  Education is where it's really lacking.

What have been the issues with refinancing?

A lot of people realize that they owe $320,000 and the house is worth $300,000.  And now they have adjustable rate mortgage that's going to adjust and people may think that there is no hope for that and so a lot people are throwing up their hands and walking away from their homes.

"There's also FHA secure, which as long as you do a 97.75% first loan here in Washoe County you can have an unlimited Loan to Value on a secondary mortgage."

There are so many other options aside from walking away from the house, which a lot of people don't want to do, but they're not being educated as to their choices that they have.  There's loan modification, where somebody negotiates on your behalf in order to take your adjustable rate  and make it to a longer term fixed rate.

There's also FHA secure, which as long as you do a 97.75% first loan here in Washoe County you can have an unlimited Loan to Value on a secondary mortgage.

So even though you're upside down they still have the opportunity to refinance your house to a long term fixed rate product.

What's your two cents on the present real estate market in Reno?

Historically, it has never been a better time to buy.

We're at the bottom of the trough.  A house that you're buying for $250,000 today, a year and a half ago would have cost you $350,000.

And with the Federal Reserve during their next meeting announcing a probable .5% discount rate cut (which they did), it looks like the rates on the long term fix are going to push towards 5%.

So if you look historically on the most ideal time to buy in the Reno-Sparks area, the answer is now or within the next two to three months.  People who were sitting on the fence should not be sitting on the fence anymore.

 

I can almost hear some of my readers saying, “ ok Ian/John how is it a good time to buy when my friend moved in to her new home, and after two months the builders slash their prices by $25,000, how can that be a good time to buy now? Wouldn't it be wiser for me to just wait for the bottom of the market and then buy?”

A lot of people put too much emotion in the home buying process.  And it's a very emotional decision.  However, if you look at the data empirically, over a ten years span, real estate has not gone down in value, period.  Now, this is a history of the United States, including the Great Depression.

So if you're asking me why is it a good time to buy now, a better question is why aren't you investing? Because it is an investment.  You're investing in something that is going to go up in a long period of time.  So as long as you don't do anything that forces your hand in order to move you out of that house; example by taking adjustable rate mortgages or some type,or Heaven forbid, a negative amortization,which is the worst product in the planet.

If you take a long term fixed and you can afford the payment you are not going to lose money ever.  So what if you can get that house for $10,000 less.  What if that same house goes up by $10,000 the next month because we've hit the bottom of the trough and you're back up to appreciation.  Are you going to be kicking yourself?

I see your point John, but people are thinking, “Why don't I wait for another year? For the past two years the builders have been dropping their prices every quarter.  Why don't I just wait for another year or two and get a bigger discount? And by that time my feet will be firmly panted on the ground, rather than sinking $10,000 until who knows when”

Well, how much have they gone down this quarter?

You mentioned 1.6% 

We are towards the bottom end of the trough.  They are going to go up.  Period.  If you just look at the OFHEO index (Office of Federal Housing Enterprise) and you graph it, and I have graphed it over the last five-year period.   We are on the very bottom of that bell curve.

"Now, if you'd ask me six months ago if you should buy a house, I'd say 'yeah,wait' but our drop in property values right  is down to single digits."

So where is it going to stop? It's pretty darn soon actually.  It's probably going to end within the next couple of months.  If you just look at numbers.

So when is the best time to buy? Now.  Before it starts going back up.  Five percent appreciation does not seem like much.  But if you look at it that means a $300,000 investment is going to cost you $15,000 more the next year.  So next year it's going to cost you $315,000.

And it's compounded because now it's five percent of $315,000.  So when is the best time to get in? Again, We're near the bottom of that trough right now.

Now, If you'd ask me six months ago if you should buy a house, I'd say 'yeah,wait' but our drop in property values right  is down to single digits.

 

But isn't it too early to call the market bottom basing it from last quarter's single digit  decrease when multiple quarters before that have been going down?

Not if you graph it over time. Real estate, it always cycles.  It's beautiful and you can count on it.   It's very very easy to make money in real estate.  You can just look at the empirical data and how everything cycles.

We're at the bottom end of the mortgage market meltdown.  There are obviously dropping the rates through the floor in order to stimulate the home buying market.

Here's another way to look at it. Let's say you can get the house for $10,000 less.

However, because the rates are going to hit bottom about five percent on the long term loans.  Then the rates will start to go up, and rates react much more quickly than do home prices.  Obviously, banks have their finger on the pulse with Wall Street.  And they raise rates much quickly than they drop them.

So if we hit that five percent level, and you can save $10,000 by waiting another quarter but the rates go up from 5% to  5.75% you've actually lost money.  If it's only a $10,000 decrease and your rates go up .75% you will lose money within two and a half years.

That doesn't make any sense.  Rates are historically low right now, it's one of the best time to get in the market here in Reno-Sparks.  And I'm not just saying that because I'm in the mortgage business.  You can look up the numbers and if anybody wants to know more you can send me an email and I will give you the websites where I  pull out the numbers, this is empirical data.

And again, if you would've asked me six months ago, “should I buy a home?” My answer would be, “Wait”.

...Read John's take on FHA,VA and Conventional loans

...Read why John loathes negative amortization and sub-prime loans

John Roussel of ProStar Home Loans
985 Damonte Ranch Pkwy Ste.120 Reno,NV 89521
775-284-STAR (7827)
john@prostarhomeloans.com

Negative Amortization and Sub-Prime Loans: What's Not To Loathe?

Who is John:  John D. Roussel is owner of ProStar Home Loans with eleven years of mortgage experience in single family lending in Northern Nevada.  He is a member of the Mortgage Bankers and Builder's Association of Northern Nevada.

Note: This 3-part article is not meant to encompass all the details regarding the topics mentioned.  Our hope is that through John's experiences we can all learn something new and hopefully aid us in our decision-making.

About this post: John shares his heart on what he thinks on the perils of getting a negative amortization and Sub-prime loans. 

Why he is still the number one fan of 30-year fixed rate notes. 

And finally, John answers the proverbial question, " If you had two minutes..."

What can we learn from this market downturn and the tough lessons that came with it? how can we can prevent this from happening again. (meltdowns,sub-prime mess,foreclosures, real estate bubbles)

"My answer to your question is if you can't qualify using a 30-year fixed rate note. You are buying too much home. Period."

We really need to do better at our education. As a country we need to do better. We aren't arming our students with the correct information. They need to understand the home buying process.  They need to understand credit. They need to understand balancing the checkbook. They need to understand some finance; basic skills that are going to get you through life.

My answer to your question is if you can't qualify using a 30-year fixed rate note. You are buying too much home. Period.

If you have to do a 5-year adjustable rate note in order to qualify for that home, and you're not getting significant raises (salary), you're in trouble; you will lose that home. There's a very small segment of the population where an adjustable note make sense.

We as a company don't believe in 'em. If you look at our numbers, in all of the loans we did in 2007, we only did four adjustable rate mortgages . Now we are a company of twenty people, we do a lot of loans, but only four times it made sense(adjustable rate mortgages). That's it.

If somebody can't qualify for a 30-year fixed rate note, they just need to buy less house. And thank God the market has come down where houses are much more affordable.

The people who said two years ago “geez I can't qualify for a 30-year fixed rate note.” What a great position they will be in now! They're getting the same house that they wanted for a hundred thousand dollars less. And now they qualify making the regular income and they don't have to count on making extra money down the road.

Here's another thing I wanted to tell you- negative amortization loans (what is negative amortization?). The negative amortization loans was designed for a specific type of person.

"The negative amortization loans was designed for a specific type of person."

It was designed for an investor who owned a vacation rental. Because the house rents like crazy six months of the year and stalls the other six months. So through this loan they can have the leverage that they need to stay afloat. And that loan as far as I know would be dangerous, to say the least, for everybody else.

Truth be told, it was a complete greed on the lending side to offer negative amortization loans to common people. Thank God they're bringing down legislation to change it. In my eleven years in this business, I have done two negative amortization loans. It made sense for two people. And that was it.

Wall Street and the lending business got really greedy because they saw the future value of these notes. They saw that these notes(negative am, adjustable rates) would be going up in value of nine to ten percent once these things started adjusting.

However they did not factor in that John Q homeowner couldn't make that payment. So they started paying lenders and loan officers exorbitantly more than a 30-year fixed rate note in order to sell that product.

And the greed that was in the industry was what perpetuated a lot of these problems. “If it sounds too good to be true, it is”. It was created within the industry. And I will agree with what Congressmen and the Senators are saying, that there are a lot of greedy people that were trying to take profits. Thank God most of those people are out of the industry by now. There is a reason why the number of licensed mortgage agents in the State of Nevada has gone from 29,536 to 6,800.

 

If you had two minutes with a motivated homebuyer what would you tell her?

1. Buy the smallest house in the biggest/nicest neighborhood. That's where you get the best appreciation.

2. Make sure that you get your loan pre-approved so you can increase your negotiation.

3. Don't go anywhere unrepresented.

4. Make sure your Realtor is a great negotiator and is genuinely representing you.

...Read our 'friendly fire' dialogue on the state of the Reno real estate market

...Read John's take on FHA,VA and Conventional loans

John Roussel of ProStar Home Loans
985 Damonte Ranch Pkwy Ste.120 Reno,NV 89521
775-284-STAR (7827)
john@prostarhomeloans.com

Randi Bennett Part two: Nevada's Real Estate Market, Affordability of Homes In Reno & Troubled Sellers

Read Part One of the interview with Randi here.

About: I asked Randi what she thought about the severe real estate downturn that Nevada has been presently experiencing.   She also shares her thoughts on  the affordability of homes in Reno & Sparks.  Lastly, she gives her opinion on sellers who are struggling to keep/sell their homes.

Note: This 3-part article is not meant to encompass all the details regarding the topics mentioned. 
Our hope is that through Randi's personal experiences we can all learn something new and hopefully aid us in our decision-making.

What do you think happened with Nevada and its gigantic home foreclosure rate, what do you think went wrong and how can we avoid that from ever happening again?

My personal opinion on that is the majority of the foreclosures happened in Las Vegas, Being such a big place and having an unprecedented real estate boom.

But the other thing that was going on was everybody was making such great money.  The country itself was doing good and everybody was making great money but everybody was on stated income,  lenders didn't have to verify what they made or their employment.

Everybody got into adjustable loans and when their two,three and four interest ballooned, rates started to adjust right up in the end of the market.  The market just drops and the value of their home went way down from what they bought it for three years ago. 

So now they can't even refinance to put it in a better rate because they don't have enough equity in their home, it won't appraise now.

 

What do you think about the disparity of the prices of homes on the market versus the seemingly lower wages the locals earn? Do you think the prices of homes  would go down to the point where the average worker would be able to afford a home?

 

The hourly wage is still not priced for new home buyers.  I think some of them will. The biggest one that I talked about was the New homes.  The subdivision homes that are still building will bring their prices down even more and/or pay for the closing costs  to help people get into homes, especially first time home buyers.

I see the new homes dropping even more. Though I don't see the existing homes going too much lower. 

 

What's your opinion on sellers who are upside-down or will just break even if they decide on selling their home at the present time?

It really depends on  their financial situation .The homes  as you have also seen, some have been on the market  for a long time, I mean there are homes that has been in the market over a year trying to sell. 

Depends on how much you want to lose.  You can try and sell it today for the price to break even and ride out the market for say, a month, see if it sells. If it doesn't, then start bringing the price down. Bring it down where you think its going to sell to get it turned around but you might have to come up with the money to actually close escrow.

Continue on to Randi's interview Part Three

Related reading:

• Why do banks take so long to approve a short sale?

• Confessions of a short sale expert

• Introducing a simple guide to short sale

• Randi Bennett talks about short sales and foreclosures

Disclaimer:

The Authors and guest authors Of this weblog/blog try their very best to back the
articles with solid data and research, the information should not be
construed and relied upon as legal or financial advice. The
information presented in this blog (herein referred to as
"information"), is subject to change without notice and may
not always be accurate due to changing market conditions nationally
and locally. The information should not be construed and relied upon
as legal or financial advice. Except where prohibited by law, Joe
Salcedo, guest authors and associates does not accept any liability for any loss or
damage,caused, which may directly or indirectly result from any view,
opinion, information, representation admission or omission, whether
negligent or otherwise, contained on this site, including direct or
indirect, special, incidental or consequential damages. You assume
full responsibility for use of the information provided. 

 

Interview with Randi Bennett: Escrows,Lessons Learned & Advice to Home Buyers & Home Sellers

Randi began her career in 1994,right here in Reno.  With over thirteen years of experience in title and escrow.  And with her incomparable attention to detail, organizational skills and dedication to superior customer service.  She is truly one of the most successful in her field in Reno & Sparks.

Note: This 3-part article is not meant to encompass all the details regarding the topics mentioned. 
Our hope is that through Randi's personal experiences we can all learn something new and hopefully aid us in our decision-making.

About: Randi explains what an escrow is in a nutshell.  She also tells us based from her experience the common problems that occur in real estate transactions for both the buyer and seller side.  And lastly, Randi shares to us what she would tell every home buyer if she had two minutes with them.

What is an escrow?

The Process is different on the West coast and the East coast.  On the West coast a lot of the parties don't meet with each other, whereas on the East coast it's called a round table closing. The buyers,sellers and lender gets together at one time.  All parties then exchange keys and checks and all right there. 

Well, on the West coast buyers come in to sign their loan papers and sellers come in to sign their closing papers.  Then we would have to send everything back to the lenders separately for review of it all one more time.  The lender then sends their money to escrow so we can close the escrow.  And closing for us means that we actually record at the County.  On the East coast they don't do that.  They kind of just record whenever they get the chance.      

What is done here at the title companies in Nevada is that title and escrow are usually within the same company.  So I'm escrow.   And basically what we are is a
disinterested third party. We help everybody and everybody gives us their information. (Buyer,sellers,lenders & Realtors tells us everything) and we don't get to share it with anyone. So we know all the information about the whole transaction to make it as smooth as possible.  That's the whole concept in a nutshell.

Having thirteen years of experience in Title and Escrow, what are the most common problems you have seen happen?

The buyer's money for closing.  What happens 98% of the time is that the buyers come in with the idea of how much they need to close with and the dollar amount is always different.

I mean it's very rare when the buyer comes into my office and says, “oh! Thats exactly what I was thinking  I'd have to come up with.” that is very rare,  and usually it is more than what the buyers expect.

They have to keep in mind that the lenders only disclose to them the loan fees, they kind of have to keep it in the back of their mind that they have proration for taxes, sewer and all those little inspections.

And it could be upwards of a few thousand dollars. So if they're pretty close and they only have so much money to come in with and it comes in higher(than what they expected) at the last minute then that creates a problem. That is one of the biggest hiccups that happen in a transaction.

How about for the sellers side?

The seller's side is actually pretty easy.  Most sellers are pretty aware of the situation.  Most Realtors are very good in educating their clients.  They do a little net sheet form-letting them know how much  money they're going to get back.

The only shocker is their payoff. A lot of sellers think that the principal balance on their statements is the payoff, and it's not.

Interest always pays in the rear so if they made a November payment it only paid October's interest so you still have the entire month of November to pay the interest. So they're thinking their payoff is $199,000, well the payoff comes in at $202,000 That is a $3,000 difference.  That could make or break the deal. That's $3,000 they weren't expecting to pay out.

 

Always be aware that the payoff is little higher than whats written in the statement.

Between the two (buyer and seller) it's usually the payoff is underestimated and the buyer is under quoted.

Your advice for buyers:  if you had two minutes to spend on every home buyer, what would you tell them?

 

My first advice would probably be  to put yourself with a great Realtor, you really need to surround yourself with a Realtor that you can believe in, especially the first time home buyers. They've never been in that process before.

Buyers want to make sure that the Realtor is educated that he/she is going to empower them to understand how the whole process  works.  From looking up properties to showing properties, to viewing homes to writing a contract. All that kind of stuff could be overwhelming.

Once you find the house of your dreams then the rest is pretty much paper work.  You have to trust your Realtor to fill up the offer properly  to do it to the best of their abilities.   And that they can get the repairs taken 'care' of for you and making sure that the escrow goes through smoothly and that they've connected you to a good lender.  I think my best advise is, "to hire A great Realtor.”

Continue on to Interview with Randi Part Two

Related reading:

• Why do banks take so long to approve a short sale?

• Confessions of a short sale expert

• Introducing a simple guide to short sale

• Randi Bennett talks about short sales and foreclosures

 

Disclaimer:

The Authors and guest authors Of this weblog/blog try their very best to back the
articles with solid data and research, the information should not be
construed and relied upon as legal or financial advice. The
information presented in this blog (herein referred to as
"information"), is subject to change without notice and may
not always be accurate due to changing market conditions nationally
and locally. The information should not be construed and relied upon
as legal or financial advice. Except where prohibited by law, Joe
Salcedo, guest authors and associates does not accept any liability for any loss or
damage,caused, which may directly or indirectly result from any view,
opinion, information, representation admission or omission, whether
negligent or otherwise, contained on this site, including direct or
indirect, special, incidental or consequential damages. You assume
full responsibility for use of the information provided.