Making it Work with Renovation Financing

Here in South Bend, Indiana, buyers are having a tough time.  There just don't seem to be enough good homes on the market right now.  They're looking and looking, but nothing is working.  To make it even worse, when they are finding a good one, it's often sold before they can get an offer in themselves.

Great time to be a seller, right?  Tough time to be a buyer though.

So what should a buyer do?  Keep looking, of course.  Trends like this can change quickly and the right home could come on the market at any time. 

They also should consider some 'out of the box' options like renovation financing.  Renovation financing lets a buyer buy a home that works in terms of size and layout but that may have mechanical or cosmetic issues.  They then roll the cost for upgrades and repairs into the new mortgage to make the home what they want it to be.

Here's a quick overview of the FHA Streamline 203k renovation loan ...

 



To learn more about this and other aspects of mortgage financing, please visit my YouTube channel at www.youtube.com/SouthBendHomeLoan.  If you have specific questions, feel free to contact me at lori.hiscock@ruoff.com.

 

 

Lori Hiscock is a Sr. Loan Officer at Ruoff Home Mortgage‘s South Bend office.  One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University.  You can connect with Lori Hiscock or apply online here. NMLS#404320.

Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:

Indiana-DFI First Lien Mortgage Lending License #10994;
IL Residential Mortgage Licensee #MB.6760734;
Michigan 1st Mortgage Broker/Lender License #FL0017496.

Getting Creative In A Tight Market

Sadly, I'm working with a lot of frustrated home buyers right now.  They want to buy a home.  They're fully preapproved and READY to buy a home.  They just can't find a home.

The Michiana market has had a strong shift in the last 60 days and we now find ourselves with a serious lack of homes for sale.  When a good home goes on the market, it is often selling in days, many times with multiple offers.  Buyers are needing to be quick on the draw.  If they're not, they're finding that the attractive homes are gone before they can even schedule a showing.

This is leading buyers to look at options they typically wouldn't have considered.  Two options that I've had multiple questions on lately are the HomePath Mortgage and the FHA Streamline 203k.

HomePath Mortgage

So what is the HomePath mortgage?  HomePath mortgages are mortgages available to someone who is buying a Fannie Mae foreclosure.  A list of these properties can be found at www.homepath.com. 

Typically, someone can still buy a Fannie Mae foreclosure without using HomePath financing.  Most of these homes are also available with regular conventional financing or FHA.  HomePath is just another mortgage option offered on them that has some unique perks.

One perk of HomePath mortgages is that the down payment is only 5% but there is no mortgage insurance charged.  This can be misleading to buyers though.  They think this means they will pay less for the home.  True, there is no PMI, but the interest rate is higher so the payment typically is about the same. 

The second big perk (and my favorite) is that no appraisal is needed.  One of the biggest challenges with many foreclosures is that the condition of the home is too poor and the lender won't lend on it.  With HomePath, this doesn't come up.  Because the lender doesn't get an appraisal, they know nothing of the condition. The buyer gets to be the one who decides if the condition is acceptable to them with no input from the lender.

HomePath financing comes in two flavors - regular HomePath and HomePath Renovation.  Few lenders offer the Renovation option (I don't) but it does exist.  The website provides lists of lenders to contact if that interests you.

FHA Streamline 203K

For me, renovation financing is best done with the FHA Streamline 203k loan.  This is a FHA loan that allows a buyer to buy a home and roll the costs of repairs to it into their new mortgage.

It's a great option that is highly under-used.  The reason it's under-used is because most lenders and Realtors are afraid of it.  They've seen it go horribly wrong and they don't want to subject themselves or their clients to that.

It can go horribly wrong, but it also can go wonderfully right when managed by a lender who understands it thoroughly and knows how to structure the process so that it flows as it needs to.  If a buyer is willing to invest a bit more time upfront to get educated on the pros and cons of this program and if they're willing to invest extra time during the process to work with contractors for the planning and completing of repairs, this option can help them turn the home that others are passing on into a home that others will envy.

Exploring Options

When inventory is low, buyers definitely will benefit from being open to different options. The HomePath mortgage and FHA 203k are two very good ones, with the 203k being the one that typically offers the most potential for the right buyer.  To learn more about how these options could help you or your client get into a home now, give me a call or drop me an email today!


Lori Hiscock is a Sr. Loan Officer at Ruoff Home Mortgage‘s South Bend office.  One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University.  You can connect with Lori Hiscock or apply online here. NMLS#404320.

Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:

Indiana-DFI First Lien Mortgage Lending License #10994;
IL Residential Mortgage Licensee #MB.6760734;
Michigan 1st Mortgage Broker/Lender License #FL0017496.

How a Database You've Never Heard Of Can Kill Your Sale

It happened just last week.  A young Michiana man was in the process of buying a home through a different mortgage lender.  Closing was a week away when his mortgage originator called him to say that his loan was being denied because there was a hit on his CAIVRS.  Not knowing what the heck CAIVRS was, he called his Realtor.  The Realtor, also not knowing what the heck CAIVRS was, called me. 

This buyer and Realtor aren't alone.  Many, if not most, people in the real estate world don't know what CAIVRS is, yet it is something that can kill a sale without warning.  To help prevent that from happening to you, let me fill you in on just what this deadly little acronym is.

One Dangerous Database

CAIVRS stands for Credit Alert Interactive Voice Response System and it is a database maintained by the federal government that lists people who have defaulted on a debt owed to the Federal government or who have had a government insured/guaranteed mortgage foreclosed on within the last three years.  It also lists people who are currently delinquent on a debt owed to the Federal government.

Examples of Federal debts covered in this database include previous FHA or VA mortgages, Federal student loans and Small Business Administration loans.   For a borrower that had an FHA or VA mortgage foreclosed on, that borrower is not eligible to get another FHA mortgage until three years after the date that HUD paid the insurance claim to the lender. The buyer will show with an open 'hit' in the CAIVRS database until that 3 year window has passed.

The 'Paid Date' Problem

The thing that trips most people up with this is that CAIVRS uses a different date for when that three years begins.  Buyers, Realtors and even many lenders assume the magic three years starts with the date of the sheriff's sale.  For general loan approval guidelines, it does.  For CAIVRS findings, though, it does not.  The date used in CAIVRS is three years from when HUD pays the insurance claim.

These two dates are often far apart.  While a foreclosure is typically viewed as 'final' when the sheriff's deed is filed, HUD may not actually pay the claim for months or even years after that point. 

Case in point - I had a client recently who had a foreclosure in 2009 but continued to pay on the mortgage for two years afterwards even though he wasn't legally obligated (nice guy).  Sadly, HUD didn't pay the claim until he stopped paying on the loan so his three year waiting period to buy a new home turned into five years all because his name was still showing as active in this database. 

What To Do, What To Do

The question then comes up, what if a potential home buyer is showing up with a hit in that CAIVRS database?  If the information in CAIVRS about a borrower with an FHA loan is incorrect, it can be fixed.  FHA will correct the information if the person sends the appropriate documentation showing the correct information to the FHA Homeownership Center that covers their area.  They can locate the correct FHA Homeownership Center by going to the following website and clicking on the applicable state: HUD Home Ownership Centers. 

If, however, the information in CAIVRS is right and the claim was just paid later than expected for some allowable reason, there is nothing the buyer can do but wait.  Until the three years has passed and their name is no longer showing in that database, they are unfortunately not eligible for a new FHA mortgage.

What should a Realtor do?  Realtors often know when a home buyer has had a foreclosure because buyers often share this information.  If you know that your client had a previous FHA or VA foreclosure, ask the mortgage lender early on if they have run the client through CAIVRS yet.  Don't be surprised if they are confused.  This is often a back office step that the upfront person may not be aware of.  Some lenders hold this step until closer to closing and that is dangerous for your buyer.  Ask the lender to run CAIVRS right away to make sure there wasn't a delay on this HUD payment.

If possible, you'd be even better of getting them connected with a lender who is well aware of CAIVRS and will run their name through it before even giving you that pre-approval letter.  That's now my standard procedure with anyone having a foreclosure on their credit report.  I'd be happy to take that additional, important step for you and your buyer.


Lori Hiscock is a Sr. Loan Officer at Ruoff Home Mortgage‘s South Bend office.  One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University.  You can connect with Lori Hiscock or apply online here.

No Down Payment and A Check Back At Closing

Debi and David bought a home last month.  It was a perfect home for them - two bedrooms, two bathrooms, brick exterior, recently remodeled, the works.  Their Realtor was sharp too and managed to negotiate a $72,500 price for them even though things were selling for $75,000+ in the area.

Debi and David were thrilled.  How could they not be?  They got a home of their own, their mortgage payment was significantly less than their rent had been, and they got a check back at closing.

Wait a minute.....did I say that they got a check back at closing?

Yep, I did.  Debi and David used IHCDAs Next Home Down Payment Assistance program to cover their down payment and their sharp Realtor negotiated for the seller to pay the closing costs and prepaid items.  Between these two, all the costs were covered so Debi and David got their full earnest money check back when they closed on the purchase.

Does that sound like an attractive scenario for you or someone you know?  Then let me tell you more!  IHCDA's Next Home Down Payment Assistance is a great program and it's easy for buyers and Realtors to participate in.  Here are the plusses of it:

• No Down Payment - IHCDA gives 3.5% of the price to the buyer.  This is a FHA loan with only 3.5% needed for the down payment so the whole thing is covered.  
• Lower Credit Scores Allowed - buyers with credit scores as low as 660 are considered for approval.
• Fast and Simple - the home buying process doesn't take any longer than normal and the home does not need to meet any higher standard.  The buyer does take an online homebuyer education class but that's about it.  Otherwise, it functions much like a regular FHA purchase.

Of course, there are always a few negatives:

• Higher Interest Rate - the Next Home interest rate is typically a little higher than the regular FHA interest rate.
• Higher Closing Costs - the closing costs are also higher so we normally have to ask for more in seller concessions to cover that.
• Two Year Occupancy - the buyer does have to stay in the home for two years.  If they don't they have to pay some of the money back.  If they do, though, the money is theirs. 

Are those drawbacks something that a buyer should consider?   Certainly, but for most buyers who are having a hard time saving up a down payment, they are well worth it.  To learn more about how Next Home might work for you or for someone you know, give me a call or pop me an email (574-234-5201 or lori.hiscock@ruoff.com). 

Lori Hiscock is a Sr. Loan Officer at Ruoff Home Mortgage‘s South Bend office.  One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University.  You can connect with Lori Hiscock or apply online here.
 

Three Apps Every Michiana Realtor Should Have

There are hundreds of apps out there that Realtors could use.  Which ones are worth the effort of loading and learning though, and which ones are just a waste of your time?

Let me help you with that.  I've researched dozens of Realtor friendly apps and found three that I believe every Michiana real estate agent should have. 

Open Home Pro

Some Realtors love open houses but many do not.  Why?  Because they don't see much benefit for the time invested.  What if you could dramatically increase the quantity and quality of contact information you captured from open house visitors, though?

That's where Open Home Pro comes in.  It's friendly interface makes buyers more willing to provide information and it's survey option allows you to gather more client information than you typically would.  At just $14.99, Open House Pro is a must have app for any Realtors conducting open houses for their clients. 

DocScanner

I love DocScanner and personally couldn't conduct business as smoothly without it.  DocScanner is an easy-to-use app that lets you take pictures of a document with your phone and convert it into a PDF or JPEG file.  What I love best about DocScanner is both how clear the document come out and how easy it is to email them on once 'scanned'.  Trust me, if you invest the $4.99 to get it, you'll use it and love it. 

Mortgage App

I'm going to let you in on a secret.  If you every call me and ask me how much a payment is going to be for a client, I'm not going to log into some fancy-schmancy system to find out.  I'm going to pull out my phone, open this little mortgage app, and get you a fast and easy answer.

I love answering that question so feel free to continue calling me with it, but if you are the type who would like to calculate that answer on your own, you can download this app free of charge by opening this post from your cell phone and clicking here - Mortgage Payment App.  That will let you get a quick payment estimate for your client.  If you then want to double check it with me, just click the "Contact Me" link on any page in the app to call, email or text me with the house information.  I'll get the answer back to you right away.

Apps are great, but only if they provide some benefit.  The three apps listed above are sure to do just that and help you as you grow your business in 2014.


Lori Hiscock is a Sr. Loan Officer at Ruoff Home Mortgage‘s South Bend office.  One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University.  You can connect with Lori Hiscock or apply online here.

2 Ways The Internet Lies To First Time Homebuyers

First time homebuyers tend to love me, and I love them.  They enjoy working with me because I make sure that all of their questions are answered.  I love them because - well - they're just FUN.  They're excited, they're nervous, they're dreaming big dreams....who wouldn't love being a part of that?

There's typically a lot that these first time buyers don't know about the home buying process, but that's ok.  We normally sit down together for a one-on-one Homebuyer Education Meeting before they make an offer on their home to make sure that they know the important things that will make that purchase go more smoothly.

Many times, though, these buyers come into our Homebuyer Education Meeting with some inaccurate information in their heads, information that they typically found online.  Here are two common ways that the internet often lies to the first-time homebuyer...

Misleading Mortgage Calculators

Did you know that the term 'mortgage calculator' is the most commonly searched term involving the word mortgage?  It is...by a landslide.  First time homebuyers understandably want to know how much a home is going to cost them each month so they hop online looking for that answer.

While a first time buyer can easily find a mortgage calculator online and get that payment estimate, it's likely that  the estimate will be missing some pieces.  A mortgage payment typically includes an escrow piece that collects extra money each month and then sets it aside in a savings account for the annual home insurance bill and the property taxes.  Online calculators often don't include that part.  If they do, they typically make inaccurate assumptions on what the cost for insurance and taxes will be. 

The calculators also typically exclude the monthly mortgage insurance.  Mortgage insurance is typically charged each month as part of the payment if a buyer isn't putting 20% or more down on the purchase.  This piece can add up to 15% of the monthly payment, depending on the loan type, so leaving it out can significantly misquote the payment amount. 

Inaccurate Sales Data

The internet is full of housing information these days and many first time homebuyers think it's all accurate.  Bad news guys - It's not.  Most of the sales data found online is outdated at best.  If a first time buyer uses it to gauge how much a home costs in their desired neighborhood or to decide if a home they like is a good deal, they're setting themselves up for disappointment again.  That information is not reliable.

Reliable information comes from a licensed Realtor.  Realtors (and ONLY Realtors) have access to the Multiple Listing Service (MLS) which houses all of the historic and recent real estate sales data.  A Realtor can quickly and easily let the first time homebuyer know what things are really selling for in the area they like and can help them make an informed decision on the fair price to pay for that first home. 

Bottom Line - Talk To The Professionals

Please don't get me wrong.  I love the internet.  The wide array of information found online can definitely benefit a first time homebuyer who is eager to learn.  When it comes to the details of the mortgage financing or the values of targeted homes, though, buyers need to get with the experts.  Find a lender you trust, find a Realtor you trust, then talk to them about your payment and location goals to get quality, accurate information.  You'll be glad you did. 



Lori Hiscock is a Sr. Loan Officer at Ruoff Home Mortgage‘s South Bend office.  One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University.  You can connect with Lori Hiscock or apply online here.

Why I Love Single Female Home Buyers

My home buyers come in all ages and stages, and I get enjoyment from all of them, but I have to admit that I probably like working with the single female home buyers the best.

Why do I love them so much?  In my experience, I've found that single women:

• Have done their math.  The ladies who are ready to take the step into home ownership on their own have typically thought the process through thoroughly.  They have studied their personal budget in depth before they ever meet with me, and they aren't going to buy beyond what they can comfortably afford.
• Are comfortable with asking questions.  If they don't know something, these ladies don't feel like they need to pretend that they do.  They ask.  If it doesn't make sense the first time, they ask again and again if needed until they feel that they truly understand the information.
• Share the emotion of the purchase.  Single female home buyers are often excited, nervous, hopeful, and terrified - sometimes all at once.  They feel these things, they're not embarrassed by it, and they bring me in on the experience with them.
• Want to learn.  I'm a teacher at heart, and my single female buyers often are the best students a teacher could have.  They care about the subject matter and invest the time in listening and learning all that they can.
• Have no patience for being talked down to.  If a Realtor, home inspector, insurance agent or mortgage lender treats them like they aren't equipped to buy a home because of their age or gender (or both), they're done.  No punches will be thrown, but no sales will be made either.  I love that.

A recent study found that single women buying homes currently outnumbers single men buying homes two to one.  Many causes are attributed to this - better educations, higher paying jobs, etc.   Regardless of the 'why' behind it, I love that single women and becoming more interested in owning homes of their own.

If you are a single woman considering a home purchase or you have one in your circle of family and friends, I want to help.  The solo female buyer can feel confident that they will get respect, education, and a sharing of the excitement from me as they embark on this exciting step.

So....come on ladies!  Let's buy some real estate :-).


Lori Hiscock is a Sr. Loan Officer at Ruoff Home Mortgage‘s South Bend office.  One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University.  You can connect with Lori Hiscock or apply online here.