Monday, October 24, 2005

Bad Deals on Mortgages

There is a lot of talk about the boom in Real Estate. I think there is a bigger “boom” and I was proved right in a Los Angeles Times article.

Real Estate lending is at an all time high! A serious problem has arisen that is very deserving of address. Borrowers with good and above average credit are getting stuck with loans usually reserved for sub-prime borrowers.

Freddie Mac (That’s my friend Freddie) said 20% of borrowers who are getting sub-prime loans could get a conventional prime loans, which are usually less expensive.

Its true that lenders are not required to tell borrowers if they can get a better deal elsewhere. So, when applying for a loan, shop first and be vigilant. Talk to multiple lenders and see what they have to say. Don’t let them run your credit or start an application though. Each time a lender runs your credit it will lower your credit score and might put you into the sub-prime category when you shouldn’t be.

Choose a trustworthy lender who takes the time to explain all costs associated with a loan. I like smaller companies versus the giant mortgage mills. I think you’re more likely to get personalized service from someone who really is concerned about your long term loyalty by avoiding big companies that mass-market and draw in customers using catchy slogans.

When considering a loan, even a sub-prime one – remember there are right & wrong ways of using these various loan products.

You should always consult real estate professionals to determine your overall strategy for real estate ownership and which finance methods will help you reach your goals.

And for goodness sake, don’t sign anything you don’t understand. Get a satisfactory explanation before signing.

For tips on getting a better deal on a home loan take a peek at our WikiHow article on getting a better deal on a home loan.

When you’re ready to shop for a loan, e-mail for our Shopping List for Loans. This package contains loads of information that will give you the edge in your negotiation with lenders. Also, you’ll be empowered with a series of questions you should ask every lender you talk to. With this package, even the slimiest mortgage broker will think twice before trying to take advantage of you. Even if they do, you’ll see the warning signs and will know when to walk away.

Tenants in Common Ownership

People desperate to own real estate in this growing market are looking toward Tenants in Common ownership where a group of people, friends or strangers share a mortgage on a multi-unit apartment building.

The Bank of Marin near San Francisco has been offering a “fractionalized mortgage” aimed at buyers of TIC properties. Even first time buyers (a relatively new market).

According to the LA Times, the move toward easier TIC mortgages in the San Francisco area is expected to be duplicated by lenders in other areas.

TICs like Co-Ops are becoming increasingly popular here in the Southland. There are several properties in this category just down the street from me and they’re touted as an affordable way to get a million dollar address without paying a million dollars.

With TIC or Co-op property, owners do not own a specific unit but, a percentage of the entire building. Usually the percentage is equal among the group of owners for example, suppose 10 people bought a property, each would own 1/10th of the entire building. A little bit like owning a portion of your neighbor’s house. In a TIC, you have one deed with 10 names on it. Contrasted with a Co-Op which is a little bit like owning stock in a company. The group holds title under an organization and each owner has a percentage of ownership of the organization.

The Bank of Marin’s product, so novel, kept the phones ringing off the hook according to the bank’s vice-president, Keith Zimmerman.

Here in Long Beach, we have more than 10 listings with units under $200,000. This may be an extremely affordable option for homeownership or an investor starting out.

Sunday, October 23, 2005

Sunday October 23, 2005. Condos & Real Estate investing

So what do we have to discuss today? How about the fact that I’ve noticed condos selling faster in Long Beach but, at discounted sales prices. It seems the price of condos are coming down which, could be good for first time buyers who can’t quite qualify for a single family residence.

Although, in my opinion at least, condos don’t generally appreciate as rapidly as SFRs and as far as the investment in real estate, they really are two very different investments. Condo living works for many people and for others, it takes some getting used to. If buying a condo as a first home purchase, I generally would urge a buyer to consider it their starter home. A vehicle to build equity and learn to be a homeowner. Selecting a condo takes extra care. There are many factors to consider before buying a condo that may affect its value as an investment. Condos potentially, could be much more expensive than first thought because, association fees may be high, the common areas of the complex may need major repair or other unexpected expenses may arise which, as you know are shared by each owner. It is extremely important to thoroughly examine the association’s records before making a condo purchase.
Doing so should alert you to potential problems that may end up costing you much more than you expect to pay or even afford. One thing I like to do in addition to the usual examination of records is, talk to the other owners. Sometimes you get someone who doesn’t want to give you the time of day let alone information, but, most people are eager to discuss the issues of the day. A one on one conversation usually yields far more information than you expect and can empower you at the negotiating table too.

If a single family residence is your goal, but, can’t quite qualify for that loan – Have you considered multiple units? Perhaps a duplex or in Long Beach, we even have tri-plexes and four-plexes, maybe these types of real estate are your way in. Unlike a condo a multi-family unit such as these, carry no association dues or assessments so little surprises are less likely to occur. The added benefit is that you may be able to afford more property than with a standard single family house. The reason is, you can use expected rental income to supplement your monthly income on the loan application. That means you can usually, afford a larger loan – making a bigger (better) investment. It is common in my business, to qualify clients at two or three times their original purchase price when factoring a rental units into their purchase.

The caveat of course, is; you’ll become a landlord. If you don’t mind fixing the occasional leaky toilet or patching a hole in the wall, you might find it very worthwhile. If you are lucky enough to find the right fixer upper, you’ll be better able to increase your profitability on the property too. If you talk to landlords, most say rental property is the best investment, I agree. So while house hunting, consider multi-unit properties, you’ll have a place to live and get paid for doing it!

As always, please feel free to e-mail any questions or comments to we're happy to help in anyway we can