FHA Will be Modernized-Effect On Twin Cities MN Real Estate Market May Be Limited

Loan Size on FHA Mortgage Loans Will Be Increased

Here's what we know so far:  There will be an FHA modernization bill that passes this year.  The proposed bill is bouncing back and forth between the House and Senate.  Once thing is for sure, or as sure as we can be at this time, the FHA mortgage loan limit will rise to 125% of the median home price with a cap of $730K  This will have a bigger affect on areas of the country that don't utilize FHA to a great extent at the moment-Areas such as the two coasts which have more expensive housing.  FHA mortgages price better than conventional jumbo loans.  This can make that big house more affordable.

In Minnesota, our average home is just over $200K.  At the same time, this new FHA loan limit will help as it will bring in another financing option to consider.  With regards to refinancing, this might prove to be extremely advantageous.  FHA allows you to refinance up to 97% of a homes value.  Unlike conventional loans, the mortgage insurance-called MIP( mortgage insurance premium) is not predicated on loan to value or credit scores.  For this reason, I could see many people with conventional loans refinancing into an FHA loan in order to get a lower payment.  This will also help on reverse mortgages.  If the limit is increased, people can do larger FHA reverse mortgages in place of conventional reverse mortgages.  So the big question under the new law is how big will the new FHA mortgages be allowed in Minnesota. 

Some sticking points revolve around the down payment requirement with FHA. Will they allow a zero down product.  Fannie Mae and Freddie Mac allow zero down with programs such as the Flex 100, My Community and Home Possible.  FHA may create a similar program.  The lower mortgage insurance with FHA will make a dramatic difference in the housing payment when all the other options are compared side by side.

There are a couple of other points of contention, such as down payment assistance and bonding requirement vs. net worth requirement for mortgage brokers that want to offer FHA loans.  These points are being fine tuned. The future for FHA loans looks very bright indeed. 

To find out more about FHA mortgages and the FHA Secure Mortgage program, visit our website http://www.ventureloanapp.com  and specifically our FHA page http://www.ventureloanapp.com/FHA_20_LOANS.html

Reverse Mortgage Can Help You SELL homes

With the market being a little slower, you might want to look at a new buyer that you may have never considered.  Think about the senior homeowner as a potential buyer using a REVERSE MORTGAGE.  First let's talk about what a reverse mortgage is and how they work. 

For many seniors, home equity is roughly 30-40 percent of their net worth. They are house poor often times and don't have the available funds to make repairs. If you and your spouse are both at least 62 years of age and have significant equity in your home, a reverse mortgage can turn that equity into tax-free cash without forcing you to move or make a monthly payment.  YOU DON'T NEED A JOB AND YOU DON'T NEED CREDIT! Age and equity are the only qualifying factors.

A reverse mortgage can be a worthwhile financial tool if used correctly. At the same time, you could make some serious mistakes with your financial future.  For example, you don't want to take your equity and run down to the casino. 

A reverse mortgage gets its name because of the way it works. Instead of the borrower making payments to the lender, the lender releases equity to the borrower in a number of forms:

· A lump sum cash payment;

· A monthly cash payment;

· A line of credit (which tends to be the most popular option);

When the owner dies or moves away, the house can be sold, the loan paid off and any leftover equity value can go to the living owner or the designated heirs.  Heirs don't have to sell the house. They can either pay off the reverse mortgage with their own funds or refinance the outstanding loan balance within six months with the option of two 90-day extensions that must be applied for. Unfortunately, heirs often discourage people from getting a reverse mortgage because they are afraid of losing their inheritance. 

There are three basic types of reverse mortgages:

· Single-purpose reverse mortgages, which are offered by some state and local government agencies and nonprofit organizations;

· Home Equity Conversion Mortgages (HECMs) are federally insured reversed mortgages backed by the U. S. Department of Housing and Urban Development (HUD);

Some loans are conventional loans, some are proprietary loans held by certain lenders and some are insured by FHA. The size of a reverse mortgage is determined by the borrower's age, the interest rate and the home's value. The older a borrower, the more they can borrow, but the amounts are capped by the maximum FHA loan limit for each city and county. The amounts vary from $200,160 in rural areas to $362,790 in many major metropolitan areas. In Alaska, Guam, Hawaii and the U.S. Virgin Islands, the FHA mortgage limits can be adjusted up to 150 percent of the ceiling based on the area. If the FHA modernization Act is passed, it is possible that the FHA loan limit will be raised.  This would be great, since it seems that FHA is the mortgage loan that generally gives more equity to the senior.

Reverse mortgages have traditionally been chosen by older Americans who can't cover everyday living expenses or who otherwise need cash for such things as long-term care premiums, home health care services, home improvements or to pay off their current mortgage or credit cards greater than their income can support. More recently, though, they've become popular with individuals who see them as a better alternative to home equity lines. Some use the proceeds to supplement monthly income, buy a car, fund travel and second homes. Evaluate with the help of a financial adviser if reverse mortgage funds can be used to restructure estate taxes.

You will have to consult with a financial planner before you're granted this loan - that's one of the requirements. You might consider a CERTIFIED FINANCIAL PLANNER^TM professional to do this because reverse mortgages can be complex and risky. This step can be completed within the first few days of the process. The basic loan closing now takes place in about 30-40 days from the date of application. Generally the only out-of-pocket cost is an appraisal fee ranging from $300- $500.  There is required counseling to make sure that you are making the right decision for you.

Here are other things to consider-some of these are risks:

Cost: Reverse mortgages are generally more expensive than traditional mortgages in terms of origination fees, closing costs and other charges. The basic FHA-backed HECM loan finances these fees into the initial loan balance, and they can run between $12,000 and $18,000. The loans are based on anticipated home value appreciation of four percent a year, so if the housing market is healthy, those costs are generally recovered in a short period of time. But if the housing market sours, it will definitely take longer to recoup those fees.

You'll need to make sure you're not endangering your federal retirement benefits: The basic FHA HECM is designed as tax-free income to the senior receiving their Social Security income. However, if your total liquid assets exceed allowable limits under federal guidelines, you might endanger your benefits. This is another critical reason to work with a financial planner on this decision.

Rates: Reverse mortgages have rates that are typically higher than those charged on conventional mortgages. Interest is charged on the outstanding balance and added to the amount you owe each month.  Again, check the total annual loan cost.

Your mortgage can be called due and payable: The homeowner or estate always retains title to the home, but if you fail to pay your property taxes, adequately maintain your home, pay your insurance premiums, or change your primary residence, the lender can declare the mortgage due or reduce the amount of monthly cash advances to pay those overdue amounts.

Did you know that you can actually use a reverse mortage to buy a house?  How do you do it?  Let's take an example:  maybe you sell you are a senior that sells their home and nets 300K.  Next they can go buy a new home for about 500K, by putting down 300K, and financing the other 200K with a reverse mortgage.  Maybe a senior would like to move from their older house of many years to a new condo or loft. This would be a great way to do it.

Talk to your kids as their ignorance of this product may cause them to give you bad advice. If your house is your major asset, getting involved in a reverse mortgage may not leave much to the next generation - if it appreciates, there may be some difference that the kids can have. That's why that in addition to discussing a reverse mortgage with a financial adviser, seniors need to talk with their family.

You can find out more information at our mortgage website or at the specific reverse mortgage page.

Refinance NOW-Drop in stocks provide the opportunity to lower your rate

Minnesota mortgage broker makes an attempt at explaining complex economic variables.

I am writing this tonight to make you aware of a HUGE opportunity that I perceive in the mortgage market to refinance.  This is called turning a lemon into lemonade.  You might have noticed that the DOW backed off it's high of about 14K to about 12K as of Friday January 18th.  So while we are all losing a ton of money in the market, we can take solace that the trade-off may be a lower cost of borrowing on our debt instruments.  If you have an adjustable rate loan, think about turning it into a fixed rate soon.  In the past week, I've seen rates drop almost 1/2 percent on 30 year fixed rate loans.  In Minnesota, depending on your loan to value, property type, and credit score it may be possible to obtain a  30 year fixed rate mortgage as low at 5.375%.  Maybe this will be the catalyst to kick start renters into becoming buyers.

Today was Martin Luther King day, so the US markets were closed.  In Asia and Europe today, stock markets had a one day drop that we haven't seen since 9/11.  What does this mean for tomorrow?  FEAR is in the air.  The future markets are indicating that the US stock market will follow suit, and drop precipitously.  This of course may or may not occur, as I am writing in advance of tomorrow.  I won't give you advice on what to do in the stock market, other than to indicate that I'm staying the course with my portfolio. Eventually GREED will return to the market.  When that happens, money will flow out of treasuries and mortgages and into the stock market.  When this happens, mortgage rates will increase.  See how the pendulum of fear and greed rule the financial markets?

Let me attempt an explain of the economics behind the recent mortgage rate drops.  We are seeing the affect of huge stock market volatility.  When investors fear the market, they take flight to the 10 year US Treasury notes.  This is a typical benchmark of which mortgages are priced off of.  So, if there is more demand for the safety of bonds and mortgages, the price of these debt instruments will generally go up, which means their yield will go down.  When yields drop, so do the interest rates on the pricing of new debt instruments.  So, the offset to stock market volatility can be lower mortgage rates.  Will this be the silver lining to our current economic problems?  Trillions of dollars of Adjustable rate mortgages NOW have the opportunity to convert their mortgages to fixed rates that are very close to the initial rate on their ARM.  This means the payments might not be that different from which they have become accustomed.  This should help slow the rate of foreclosures as their home remains as affordable as it was when they bought it. 

There are variables to consider too-the federal reserve "imminent" rate cut and the stimulus package that was just proposed.  The rate cut will lower the cost of lines of credit, credit cards and other variable rate debt tied to indexes affected by the rate cut.  This will put more money in the pocket of the consumer and hopefully the economy, which in turn reduces the chances of a recession.   The collective effect should act as a multiplyer, i.e exponential effect. 

Approximately one month ago we had the Mortgage Forgiveness Act of 2007.  Most recently we have the proposed stimulus package and yet another rate cut.  The government is trying.  For some it's not enough.  For others it's too little too late, and for others it's too much.  Regardless of where you sit on that spectrum, action is being put into place.  Let things play themselves out.  Remember a rate cut, new tax law or stimulus package take time to reverberate throughout the economy.  It won't be immediate.  At the same time, I highly recommend you grab this window of opportunity and get a low interest rate on your mortgage if you can.  Visit us online at http://www.ventureloanapp.com

Mortgage Forgiveness Act Provides Income Tax Relief To Foreclosed Homeowners

Remember that real estate investment is part of an overall financial plan-it shouldn't be just stocks, bonds, and mutual funds. Investing in real estate requires specific tax, spending, budgeting and people management advice. Based on your other ass

Remember that real estate investment is part of an overall financial plan-it shouldn't be just stocks, bonds, and mutual funds.  Investing in real estate requires specific tax, spending, budgeting and people management advice. Based on your other assets and your overall financial plan, investment property might be a worthy goal, but only if it fits your investment strategy and if you’re willing to put the time and effort into creating a successful business. Many investors exclude real estate investing because they think it is too difficult.  It really isn't that hard to do successfully, but you do need to educate yourself.  REMEMBER-if you act like everyone else, you will end up like everyone else. 

Don’t spend until you study: If you don’t have an intimate knowledge of neighborhoods, rental rates, commercial traffic or any of a dozen more factors that make real estate investments a particular success in one community and not in others, don’t even start. John Mazzara recently wrote a book entitled "Reality Based" Real Estate Investing.  You can order the book and learn more at http://www.RealityBasedRealEstateInvesting.com There are many helpful tips and technique in addition to some humorous real life stories.

The most successful people in real estate investment have taken the time to learn about the properties they’re buying, sensible ways to borrow and economical ways to manage the buildings they have.  Make sure you assemble a good advisory team around you starting with your financial planner, your tax adviser and an attorney knowledgeable about real estate transactions. They’ll teach you and keep you from making serious mistakes. Experience counts.  Don't pick advisors who've never been involved in what you want to invest in.  You will provide their education.  You can visit http://www.edinamortgage.com to see some of the programs that might for you.

A slower market doesn’t mean a bargain market. Even though the gains of the past 15 years aren’t what they used to be, keep in mind many sellers aren’t terribly desperate to sell and they’re not dropping their prices all that much. Make sure you take the time to study a particular market not only for gains in price, but for stability in rent and overall quality of the property and neighborhood you’re examining.  You might hear about a downtrodden neighborhood ready to “turn,” but that rotation might take years – start slow and pick properties with the best chance of appreciation.  Recently, I've seen some huge opportunities within the Twin Cities marketplace.  At the same time you need to be careful so you know what you're buying, especially if it was bank owned.

Unlike a pure rental property, home ownership is not a real estate investment. If you’re thinking about leapfrogging from one residence to a new one in hopes of huge gains when the market returns, give yourself a reality check. An investment is something you can sell when the moment is right without any hesitation. Is that something you can really do with a home you’ve grown comfortable in? When the market goes up or down, we don’t necessarily think of dumping our principal residence. There are emotional ties as well as physical ties to a home – whereas real estate bought as an investment must produce income during ownership or a profit at the time of sale without exception. We are making a strategic decision to sell one of our rentals at this time because we recognize that for certain reasons, the best time might be now. It is an unemotional decision.  This usually isn't the case if you have a primary residence. 

Real estate is not an automatic ticket out of financial trouble. In fact, you may end up in trouble.  Some people have gambled their way out of debt by buying distressed properties and reselling them at a profit. They’re the lucky ones – and after hearing so much about the “flipping” phenomenon, many of those success stories might be apocryphal. Be aware of your risk tolerance at all times. Think about all the people who joined the "real estate party" late-such as condo buyers at the end of the boom in Florida, Arizona, and Nevada.  Many will take huge losses.  They were a victim of Greed, not careful analysis.

Enter the foreclosure market carefully. With all the reports of subprime borrowers losing their homes in recent months, don’t think those foreclosure numbers will automatically provide you with a can’t-miss opportunity in real estate. Taking advantage of the foreclosure market is both a learning exercise and an emotional one. It takes time to learn all the correct avenues in a community toward investing successfully in failed properties, and actual contact with families losing their homes can be wrenching even if you do know what you’re doing.  Foreclosure and pre-foreclosure investing is not for the faint-hearted. There is a new law change regarding short sales.  Basically, the sellers can sell a home and not have to recognized tax liability on their debt relief.  Debt relief is the amount sold for less the outstanding loan balance.

Cash and credit lines are king. During the white-hot real estate market, people were buying and selling property for little or no money down because lenders were willing to take that risk. Today, in a higher rate environment, that’s definitely changed. While many successful real estate investors choreograph borrowing seamlessly into their strategy, cash is an important decision for down payments and covering ongoing expenses. This is where your advisory team comes in.

Keep your credit report clean: Only borrowers with the highest credit scores will find the best lending deals if they need to borrow. Make sure your credit report is clean before you enter the market. We at Venture Development will be happy to provide you with a copy of your credit report if you live in MN.  There is an upfront cost to you and you will need to fill out our application and credit authorization.  We are a Minnesota mortgage broker, so we ask that only Minnesota residents go to our site and fill out the loan application at http://www.ventureloanapp.com/apply.html

Typical Minnesota Homebuyer Demographic trends

Interest Only Loans Buy 20% More Home With Maximum Interest Deductibility

Getting Today’s Best Returns from a Home Renovation

Countrywide Is Bought By Bank Of America

VA Loans/Mortgages-The key to home ownership

Many people are kept out of the housing market due to lack of sufficient down payment and/or funds available for closing costs.  Yet these potential homeowners can afford to make a rental payment that would be equivalent to a mortgage payment.  In fact, the lack of resources keeps veterans renting instead of becoming owners as they try saving money to buy a home.  Meanwhile home prices continue to appreciate as housing continues to rise in cost.

Here is where the Veteran Home loan program excels over competing loan products.  VA mortgages allow for a home to be financed in one loan up to 100% of the acquired home’s value.  In addition, the seller is allowed to pay most-if not all-of the closing costs and prepaid items.  This means little to no cash out of pocket.  Most housing types are eligible:  residential homes, condominiums, townhouses, manufactured homes, new construction and even 1-4 unit rentals (additional conditions apply).  If lack of available funds is the issue preventing home ownership, VA Loans offer the solution.

Still, very few veterans take advantage this type of mortgage.   It is a shame that more veterans don’t familiarize themselves with this benefit.  The interest rate is the same or lower than most conventional financing.  The mortgage products offered range from 10-30 year fixed rate mortgages, ARM’s (adjustable rate mortgages), and even temporary buy-downs are allowed.  The eligible loan amount is the same as a conforming conventional loan-currently at 417K.   In addition, VA financing can be used for refinancing existing homes. As you can see, the product isn’t the problem.  The product is as competitive as most that is available.  The lack of awareness is the problem.  Ask your mortgage broker or lender to explain your options.  If they don’t offer the VA mortgage, then find someone who does.  We at Venture Development offer VA loans-
http://www.ventureloanapp.com .  In the end, you may end up with a conventional or FHA loan if these products are better suited for your situation.  Until you compare mortgage options you won’t know what is right for you.

Another advantage of a Veteran mortgage is the flexibility found within the underwriting process.  Employment history is very flexible.  Credit for all types of mortgages is more stringent today than in the past.  That being said, the focus is going to be on the last 12 months of payment history.  Underwriting can use alternative sources of credit such as utility bills and cancelled checks if the credit depth is weak.  A prior BK or foreclosure is also forgivable.  Depending on the type of bankruptcy, you would be eligible one to two years following your discharge date if you’ve reestablished positive credit. 

Who is eligible to obtain this loan?  Many veterans and even some of their spouses can obtain a veteran mortgage.  Here is a very short list of who is eligible:  Veterans who served during WWII, Korean Conflict, Vietnam War, or Persian Gulf Conflict AND who have served 90 days of active duty, or have been honorably discharged, or were National Guard/Reservists activated.   Veterans with service during Peacetime periods and active duty military personnel must have had more than 181 days of consecutive active service before becoming eligible.  Reservists and National Guardsmen are eligible after 6 years of enrollment in a selected service.  There is even a program for non active duty spouses.  Consider this:  an un-married spouse of a veteran who died while in service or from a service connected disability or a spouse of a serviceperson who is considered MIA/POW for at least 90 days are also eligible.

Veterans have spent a part of their live defending our way of life.  Freedom isn’t free.  Why shouldn’t they be allowed to participate in the very same American Dream that they selflessly protected for you and me.  The VA loan was created to help those that have helped all of us.  Collectively we can spread the word about the benefits of this unique type of loan.