Property Investment: Exploring a Buyer's Perspective

Whether a person is using a VA home loan or conventional loan types, a real estate seller and broker must always look at the buyer's perspective in offering a property. Buyers have their own concerns that may break the deal if not dealt with accordingly. Several factors like the following are drawn out upon looking at their perspective.

Understanding What They Want

As investors, buyers will spend money on the properties. They wish that property sellers and brokers won't sell them properties that don't meet their standards, timeline, financial constraints, and other concerns. They prefer sellers who spend time understanding what they want and hearing out their preferences. Understanding their needs not only increases the chance of closing a deal, but also establishes trust to sellers.

Looking at the Cons

Buyers know that sellers want to close the deal as soon as possible. They will then brag about the house and its amazing features. Buyers do appreciate the good things about the house, but they prefer hearing about the downsides as well. They want complete transparency and disclosure about the house before spending their hard-earned money and loans that they are about to pay in the future. A seller informing buyers about what they need to know about the house, positive or not, makes buyers more confident about their investment.

No Surprises
No one's in for surprises, especially if it involves money-matters. Buyers, particularly a first time home buyer, would want to know about possible fees to incur in buying a house. Aside from simply knowing about these fees, they must also understand what the fees are for to avoid being surprised about them on closing. This allows buyers to set their expectations on the property and finances.

Working with a Professional, but Approachable Brokers

Nothing beats professionalism when it comes to any transaction. Buyers want to be treated professionally by a seller or broker, ensuring effective communication in between parties. Being approachable is also another characteristics buyers look for in a seller. A buyer may have questions about the house or other requests before closing the deal. They want to express their thoughts and opinions about the house, which is easy as long as they negotiate with an approachable, professional broker.

Easy Trusted Professional Referrals

Prospect buyers need to work with other professionals apart from brokers. Being less experienced in the field, they wish sellers would refer them to other professionals who will work on the property to buy. Professionals include appraisers, contractors, lawyers and others. They also expect that brokers will refer trustworthy professionals that have their benefit in mind.

No Pressure

Finally, a buyer doesn't want to be pressured to buy a house. For some, a house may be their only investment and they wish to look around for more options first before settling with a property. They don't want sellers to pressure them to buy their offers nor keep them from checking other offers.

Mortgage lenders and real estate brokers must have buyers' concerns in mind. These points allow them to understand buyers and offer them properties according to their investment needs.

What Is a Reverse Mortgage Loan and How Does It Work?

What is a Reverse Mortgage Loan?

The reverse mortgage loan is a program that enables the borrower to convert part of their home equity into cash. This program is for American citizens 62 years old or older.

The reverse mortgage loan is called as such because instead of the borrower making monthly payments to a lender (like with a conventional mortgage) the lender makes monthly payments to the borrower.

The money the borrower receives provides relative financial freedom to seniors that they can use for home improvements, medical expenses and more.

This program was created as a way to aid retirees with inadequate income use the collected value of their homes to cover their living expenses like basic utilities, food, and medical bills. There are no restrictions as to how the proceeds from the mortgage shall be used by the borrower.

Requirements and Qualifications

Here are the basic requirements a borrower must meet to be able to qualify for a reverse mortgage.

• Age: All borrowers listed on title must be 62 years old or older.
• Residency: The property used as collateral must be the primary residence.
• Primary lien: The reverse mortgage must be the home’s primary lien. If there are any existing mortgage, it must be paid off using the money received from the reverse mortgage.
• Taxes and other Insurance: All real estate taxes, home insurance and other obligations must be current.
• Maintain the properties’ condition: the borrower must ensure that all maintenance and repairs are done on time.

Loan Payment

The borrower is not required to pay off the loan until such time when the last surviving borrower passes away, sells the home, or vacates the home as its primary residence.  It is only then that the loan has to be paid. 

As long as the home is used by the borrower as his primary residence, he is not required to make any monthly loan payments. However, he borrower must have all property taxes, home insurance and other obligations paid and current.

Types of Reverse Mortgage

• Home Equity Conversion Mortgage (HECM)

The FHA Home Equity Conversion Mortgage (HECM) is a reverse mortgage program offered by the Federal Housing Administration (FHA). The FHA joined the Department of Housing and Urban Development (HUD) Office of Housing in 1965.

As with FHA loans, it is a mortgage loan issued by a lender, but is insured by the FHA. This insurance protects both the borrower and the lender.

All borrowers getting HECM are required by the federal government to receive counseling from a third party.

• Proprietary Reverse Mortgage

This type of mortgage has insurance provided by the same company that offers the mortgage. These companies does not follow the same regulations as HECMs, however, as best practice, lenders that provide this type of mortgages imitate the same standards used by the HECM program, including mandatory third-party counseling.

Many banks and financial institutions offer this type of program.

Reverse mortgage rates vary among different states and lenders so it is recommended that you do your research and shop around. You can consult a reputable mortgage broker for assistance and to get the best plan that fits your profile.

FHA Loans for Borrowers

Recently I received an FHA approval for a couple with a credit score of 603. In the past few months I have seen an easing in the credit policies of both conventional and FHA loans and that’s encouraging. Normally, FHA lenders requires at least a 620 credit score to get anything approved. We now have lenders who will do FHA loans for borrowers with credit scores down to 580.

These particular borrowers had a few collections, but their high credit card balances were killing their credit scores. It did help that they had a low debt to income ratio.

Keep in mind: conventional loans, regardless of the down payment still require a credit score of 620 per Fannie Mae and Freddie Mac guidelines.

Loan Programs To Choose

Did you know a buyer purchasing an investment property can put down as little as 15%?  This opens a lot of doors for your investors.  Some of the requirements are… the property be a one-unit detached single family residence, the buyer’s credit score be 720 and above, and the buyer cannot have more than 3 properties already financed.  For your buyers who already have 4 to 9 properties financed, the minimum down payment is 25% and there are credit score and reserve requirements.  

Also, we’ve seen an increase in inquiries regarding Jumbo financing.  We recently quoted a 30 year fixed at 4.375%. (4.439% APR) That’s only .25% higher in the rate than conventional financing. If you have questions regarding Jumbo, Conventional, VA, or FHA financing call or email me.

Important Conventional Loan Guideline Revision Effective Last August 12, 2014

Did you know that if a mortgage debt has been discharged through a bankruptcy, even if the foreclosure takes place after the discharge of the bankruptcy, the borrower is held to the bankruptcy waiting period of 4 years to purchase a home and not the foreclosure waiting period of 7 years?

That’s important to know because many lenders who don’t understand conventional loan guidelines are mistakenly putting borrowers in a FHA Loan which have expensive mortgage insurance requirements and a loan limit of $271,050 in Maricopa County compared to conventional loans which in most cases have lower or no mortgage insurance requirements and a loan limit of $417,000 in Maricopa County.

A conventional 97% loan from Fannie Mae

A conventional 97% loan is a Fannie Mae home loan that allows home buyers to purchase a home with a 3% down payment and get a loan amount up to $417,000.  It is designed for 'first time home buyers' who may not have the resources for a large down payment. A 'first-time home buyer' is defined as a person who has not owned a home in the last three years.

Another great feature of this program is that the entire 3 % down payment can come in the form of a gift from a relative.

Closing costs can be paid by the seller with a limit of 3% of the sales price.

Compare the Conventional 97 to a FHA loan and you will find a lot of benefits to the Fannie Mae product.  The FHA mortgage requires a 1.75% upfront mortgage insurance premium usually added to the loan amount, Conventional 97 does not. The monthly MI on a FHA loan stays on the mortgage for the life of the loan. The Conventional 97% MI will drop off after the loan balances reaches 78% of the original appraised value. FHA is restricted to $271,051 whereas the Conventional 97% program allows loan amounts up to $417,000. FHA does have some advantages, especially for borrowers with lower credit scores and past foreclosures and bankruptcies.

I can guide your clients through the advantages and disadvantages of both the FHA loan and Conventional 97% product.