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In today’s tight credit market, obtaining approval for financing BEFORE shopping for a home is a crucial step that borrowers must take.   Sellers and buyers are familiar with the phrase Pre-approved” or “Pre-qualified” for a loan.  Many of us assume they mean the same thing.  They don’t.  There is a huge difference between the two terms. 

Pre-Qualification:  Pre-qualification is not a loan commitment, it is a quick indication of whether a borrower should qualify for a loan or not, based solely upon the opinion of a loan officer.  With a pre-qualify situation, the loan officer peeks at the borrowers finances, pay stub and credit report and estimates the approximate amount of a mortgage that the buyer should be able to qualify for. 

The loan officer will usually issue a “pre-qualification” letter or certificate which indicates the borrowers finances have been reviewed and that it appears they could qualify for a mortgage loan.   It is not a guarantee that the borrower will actually be able to get a loan.

• It is easy to determine if you have received a “pre-qualification” letter.  If you have not signed an application and/or you have just given information over the phone…your approval is nothing more than an estimate or opinion made by a loan officer.
• If you have not paid non-refundable fee’s along with the signed application, you have not received a loan commitment by the lender.
• Pre-Qualifications should not be taken seriously by borrower or seller.   Pretty much anyone can get the favorable opinion of a loan officer these days, as they are paid only on commission.

Pre-Approval:  In the case of pre-approval, the borrower actually applies for a loan.  Pre-approval is a written commitment by the lender, not a loan officer, which states the specific amount of money the applicant is qualified to borrow.  Pre-approval involves a loan underwriter and takes some time to complete.  The file contains a detailed credit report, income and down payment verification, along with a confirmation that the borrower has the ability to pay closing costs.   

• If you have met your lender in person, completed an application and paid fee’s, you have started the process to become pre-approved for a loan.
• A letter of pre-approval states a maximum amount of money the borrower can obtain financing for.
• The property address will be added to the loan application and the appraisal will be ordered, once the borrower locates a property.
• The borrowers’ bank and employer will be contacted and the information submitted on the loan application will be verified.

 In Conclusion:

Unfortunately for seller and buyer, the terms pre-qualified and pre-approved are not interchangeable.  The difference between the two terms causes a great deal of confusion and problems.  

Please keep in mind that neither is a guarantee that a mortgage will be issued.  The home must qualify, too.  But, a borrower that is pre-approved for a loan, is the only type of buyer a seller should take seriously.  

                      Your Credit Score has a huge effect on your life and personal finances.  Your credit score not only determines your ability to borrow money at all, but also directly affects the costs of borrowing money.  

Under today’s scoring system, an individual with a high credit score can get a loan for cars, houses, vacations, credit cards, etc. at a much lower rate of interest (ie: lower monthly payments) than a person with a lower score.   To save real money every month…take our advise and boost your credit score with the following 7 Tips.

1. Less Isn’t More:  When it comes to your credit score. Lenders like to see different types of credit in your history file including credit cards, car loans and personal lines of credit.   Lenders are looking to see how you handle different types of debt repayment.
2. Don’t Close Accounts:  Keep your old credit accounts open, even if you have paid the loan in full.  The more available, unused credit you have, the better your score will be.  Your older, established accounts are also more valuable to your credit score and raise your score more than newer ones. 
3. Raise Your Credit Limits:  While it helps your score to have a lot of available, unused credit, opening a new credit account will drop your score in the short term.  A good strategy is to ask your credit company to increase your current credit limit on a regular basis.  A high line of available credit is valuable, whether you need the additional credit or not. 
4. Your Net Worth, Income and Savings Don’t Matter:  The only thing that matters to your credit score is what lines of credit you have open and how you use them.   A cash paying millionaire will likely have a lower credit score than a maid or gardner who use credit.
5. Small Balances and Lots of Cards are Better:  Since you credit score is sensitive to how much “available” credit you have, having small balances on a number of credit cards is better than having a big balance on one card only.  As a rule of thumb, you should only use 30% of the available credit on any one card.  70% of your credit limit should be available and unused.
6. Don’t Shop Around or Apply for Credit:   As ironic as this sounds, your credit score drops each time you have an inquiry to your credit report.   Lenders see inquiries as borrowing activity, whether you accept a loan or not.   (Note: Pass up the come on’s from department stores who offer you 10% off your purchase for applying for a store credit card.   A 10% discount is generally worth far less than the points lost due to the inquiry.)
7. Watch the Calendar:  Pay attention to due dates and minimum payment requirements.  While “pay on time” sounds basic, it can be difficult for many of us to do.

Lease Options, popular in the 70’s and 80’s, are resurfacing  as financing options in the 2008 housing market.    For those unfamiliar with lease options, I will outline what is a lease purchase or lease with the option to purchase?  What are the benefits and drawbacks?  What are the things to watch for? 

NOTE:  Please keep in mind that the information is an overview and is not meant to be construed as legal advise.  Buyers and Sellers should always consult an attorney before signing any legally binding document.

ABC’s of a Lease with an Option to Purchase:

• The buyer pays the seller an option fee for the right to purchase the property on or before a future date.  The amount of the option fee may be substantial or as low as $1.00.
• The purchase price can be fixed at the time of contract or set at the fair market value at the time the option is exercised. (Note:  Most buyers will lock in the future price when the option contract is signed.)
• During the Lease Period, the buyer leases the property from the seller for an agreed upon rental amount.
• The term of the lease option is negotiable, but the term is usually from 1-3 years.
• The Option Fee is generally non-refundable.
• If the buyer does not exercise the option to purchase the property at the end of the lease, the option expires and the seller keeps the option fee.
• Usually, a portion of the rental amount is applied to the future purchase.  (Example:  If the lease is $1200 per month, the seller will apply a credit of $200 per month toward the future purchase price or down payment.)
• The buyer can not assign the lease option without seller approval.
• The Buyer is not obligated to buy the property.

ABC’s of a Lease Purchase: 

• Includes all the standard terms above with the following exceptions.
• The option money is non-refundable and does not apply toward the purchase price or down payment.
• No one else can purchase the property unless the buyer defaults or the option period expires.
• The buyer is responsible for maintenance, all expenses for upkeep, taxes and insurance.
• The buyer is obligated to buy the property.
• The Seller can sue for specific performance in the case of buyer default on a Lease Purchase.

Benefits for Sellers and or Buyers:

• Lease Purchases or Lease Options are usually offered by distressed homeowners or builders. 
• The Seller can often get a higher price than they would with a normal sale.
• The Seller is able to sell the home in a slow market.  Think about it, if the property was easy to sell, the owner would sell it out right for the cash.
• The Seller benefits from locking in today’s prices and gets relief from paying the monthly mortgage.
• In theory, the Seller gets a renter that keeps up the property.  Since the renter intends to purchase the property, they should take care of the home, as if it were theirs.
• The Buyer builds equity through a forced savings plan, as a portion of rent is credited to him, even though the lease payments may exceed market rents. 
• The Buyer hopes to build equity, if the property appreciates during the option period.
• Buyers usually make a small down payment, with little to no qualification, which makes lease purchase a good way to ease into home ownership.
• If the Buyer defaults, the Seller does not refund any portion of the lease payments or the option fee. 

25 YEARS OF REAL LIFE EXPERIENCE:

I have written dozens of Lease Purchase or Lease Option Contracts during the 1980’s real estate crash in Texas.  During that entire period, I never saw one person actually  purchase the property they had an option on. 

The primary reason is often the reason they try to buy with a lease option in the first place…they can’t qualify for a loan.  The second reason for default was that prices continued to fall during the option period and they could buy another home for less money.   The third reason was that the property was in poor condition when they leased it and things became worse with the passing of time. 

If a Seller can not sell, then a lease option or lease purchase may be a sales tool to consider.  They generally generate more monthly cash-flow than renting alone and an option fee is the sellers to keep.  

But note, history proves by a large margin that the tenant will not become the owner, unless their credit situation has improved and the property values increase above the option price.

Bottom Line:  Chances are that 95% of the time, the Seller will get their house back at the end of the option period.

Be forewarned, that the evening news, websites, radio shows, TV programs and foreclosure bus tours that tout foreclosures can be purchased for a bargain, or worse, that they will make the purchaser wealthy in coming years are little more than “paid for” hype.    Don’t buy it.

In my 25 years of real estate experience, I have discovered that for the most part, foreclosures are no bargain.  They are laden with serious problems and lengthy delays, making them “deals” for only those pro’s with patience and a strong stomach.

Foreclosed homes are not wonderful, like the media would have you believe.   The large asset departments that handle foreclosures (REO’s) are managed by employee’s with hundreds of files and no incentive to help the sale close.  They don’t care if the property sells or not, they earn their paycheck, holidays and vacations, in either case.   The truth is that only one of every three offers made to a lender will actually end in closing and Buyers should expect to wait weeks to learn if their offer was accepted. 

In addition to the hassles of dealing with the “could care less” personnel at the lending institutions, getting these homes inspected is also a challenge.  In many cases, entry before the sale is not even possible.  No effort has been made to clean the homes or remove the abandoned trash.   The utilities have long been disconnected.  And, all lenders have a “as is” clause in the sales contract, which states that the lender is not responsible for the condition or repair of these homes, even if they are obvious and necessary.

Another problem with buying foreclosures is that the  owner who lost the home long stopped caring about the property, and in some cases, even retaliated in anger. 

• Always assume if something broke or stopped working, the owner didn’t spend money to fix it.
• Some angry people actually retaliate by attempting to destroy the house. They smash holes in walls and ceilings, plug the drains and turn on the water to flood the home, rip through the sheet rock to steal copper and wiring to sell as scrap.
• They steal the appliances, light fixtures, kitchen cabinets and HVAC units to resell.
• They leave anything and everything behind that they do not want.  In many cases, this even includes helpless animals which are discovered locked inside the abandoned homes.

Buying foreclosures is not for the faint hearted and it is a myth that bank-owned properties are a bargain.  In truth, REO’s are a messy hassle and the cost of repairs often exceeds the value of the home, after the repairs are done.  

I don’t care what commercial you watched or which seminar you attended, if you they haven’t told you this information, they did not prepare you for the reality of the purchasing a home lost to foreclosure.

Thank you for visiting InfoTube Homes for Sale. 

In an effort to soften the sharp housing downturn, the Senate recently passed a $150 Billion Bill to provide relief for homeowners, in theory, for homebuilders, for certain.

The “foreclosure relief” bill, which now moves to the House for approval, sounds helpful, but falls shamefully short on solutions or assistance for homeowners losing their houses.   In fact, the only set aside for those facing foreclosure is a $100 million in counseling assistance, which possibly makes sense to prevent over-borrowing, but accompishes nothing after the fact.

Relief for Homebuyer’s received a mention in the bill, but the real help offered was for the benefit of bankers, developers and builders.   

The bankers and builders receive a $25 Billion Dollar Tax Rebate and plans to steer buyers to their foreclosed properties, with the lure of a $7000 future tax credit.   The bill provided a $0.00 tax credit, if homebuyer’s purchase a home owned by anyone else.

Translation:  Homeowners, who are paying their mortgages on time, will suffer an immediate $7000 loss in home value, as they attempt to compete against lenders, builders and developers when selling their property.

In Conclusion:   The $150 BILLION Dollar Relief bill harms taxpayers and homeowners, and does little for families in financial trouble.  The only “help” offered is for the politicians, banks and the powerful, cash laden, National Association of Home Builders, who threatened to stop handing over millions of dollars in campaign donations, unless they were cut in on the taxpayer give away.   The result.  When the votes were counted… the money counted more.  The Senate sealed the deal by a 84 to 12 margin.

Question:  Have we had enough, already???   Don’t you think if the US Congress really wanted to help the housing market, they would simply offer a $7000 tax credit to anyone who buys a home that they intend to live in (ie: no investors), no strings attached???    Instead, homeowners and buyers are penalized in favor of the banks and builders who likely created this mess in the first place.

Action:  I urge everyone who cares about their home to immediately write their State Representive in protest, before this bill is passed.    We don’t have millions of dollars for lobbiest or bribes to get their attention, but we do have numbers and the power of the pen on our side.

Good news for Homeshoppers.  The nation is bracing itself for a wave of new, mortgage defaults, as early as June.  

The Fed estimates that 1.7 million subprime loans, originated in 2005 at the top of housing boom, will reset in early summer.  The Fed goes on to say that without loan modifications, 1.4 million of those loans could become a problem, spelling more trouble for an already burdened market.

The truth is that foreclosures are only beginning to accelerate, leaving a wake of suffering in their path.  Until the inventories move and owner’s occupy now vacant property, we will likely face further price declines of more than 20% by next year.  

So, who among us will suffer the most??   Simply, the regions and states with the highest foreclosure rates.   

              The Top 10 Foreclosures States:

1. Nevada
2. California
3. Florida
4. Arizona
5. Colorado
6. Georgia
7. Ohio
8. Michigan
9. Massachusetts
10. Maryland

While the news pundits, scholars and politicians debate whether the US is actually in a recession, the hard-working US citizen has no doubt.  We are in a recession and only bottom we see is the one in our empty pocketbooks.

Thanks for visiting www.infotube.net . 

    Is refinancing your Adjustable Rate Mortgage the right choice?    Read the truth about ARM’s, to determine if holding onto your old loan is the right thing to do.

Definitions: 

• Adjustable Rate Mortgage:  A mortgage with an interest rate that may change, usually in response to changes in the Treasury Bill Rate or the Prime Rate.  The purpose of the interest rate adjustment is to bring the interest rate on the mortgage in line with market rates. The borrower is protected by a maximum interest rate (called a “ceiling” or “cap”), which may reset annually.   ARMs usually start with better rates than fixed rate mortgages, in order to compensate the borrower for the additional risk that future interest rate fluctuations will create.
• ARM:  Acronym for Adjustable Rate Mortgage.
• Index:  An Index fluctuates with the economy and serves as an indicator or guide point for current interest rates.   Lenders use a published Index, which varies, to adjust interest rates as the economic conditions change.   Common Indexes for ARMS might be the One-year Treasury Security or the Prime Lending Rate.   The actual Index for any US Security can be found in the financial section of your newspaper, your bank or from a source such as the Wall Street Journal.
• Margin:  A Margin is defined as the number of percentage points the lender adds to the Index to calculate the ARM interest rate at each adjustment period.  The Margin will be locked in at closing and remains fixed during the life of the loan term.  The Margin is not impacted by upswings or downswings in the economy.
• Rate Caps:   Rate Caps are a safe guard, which limit how much loan interest rates can increase over a specific period.  Caps are set by the lender at closing and do not change with the economy.
• Rate Ceiling:  The Rate Ceiling is the top or maximum interest rate the lender can charge, regardless of the economy.  The ceiling is set by the lender at closing.   

4 Ways to determine if Refinancing is in your Best Interest   

1. Learn how the new interest rate for your Adjustable Rate Mortgage will be determined.   Lenders use a published “Index”, as a reference point, then they add a fixed number of percentage points, called a “Margin” to the Index, in order to establish the new interest rate you will pay. 

      For example:  If your Loan specifies the “90 Day T-bill Note” as the Index,  with a  2% Margin, the calculation is:    

                       The 90 Day T-Bill note (Index) at 2.160%                                  PLUS, a 2% Margin                         EQUALS a new interest rate of 4.160%.   

2. Check with lenders to determine what the current interest rates would be for a new, Fixed Rate or ARM.   
3.  Ask your lender for a truth in lending statement that discloses the amount of money you will pay at closing for the new loan.
4. Do the Math.   Divide the loan closing costs by the amount of money you save per month on the new mortgage versus the old one.   The number shown will determine your break even, or the number of months you will need to stay in the property to recoup the closing costs. 

         Example:    If a new loan reduces monthly payments by                             $250 per month and closing costs were $7000,

                            you would need to stay in your home for 

                           28 months to break even.  If you don’t plan to stay

                           that long, refinancing will cost you money. 

5. Keep in mind that if you refinance, you lose the number of years you paid into the Existing Loan.   For example, if you have paid your original 30 year loan for 5 years, the loan would be paid off in 25 years.  If you refinance, the loan starts over at year one, which means 30 years until you are debt free.

Thank you for visiting www.InfoTube.net/Blog.  Please email any questions or comments you have to info@infotube.net.  We will try to discuss the issues in our forum in hopes of assisting others. 

       If you are one of the millions of homeowners who have an Adjustable Rate Mortgage (ARM), be wary of offers of assistance from lenders.  Through a recent experience, I discovered why we should educate ourselves about the terms of our existing loans, before talking with our lenders.

I received a letter this week from Citibank, my lender, entitled “Mortgage Volatility = Mortgage Tranquility”.  The letter, set in threatening bold type, warned that my Adjustable Rate Mortgage was about to RESET.   Triggering fears that my decision to finance with an ARM would come back to haunt me, I interpreted this “call to action” as a sign that my lender was looking out for both of us.  Only after I experienced the “personalized service from the people I know”, did I discover how gullible they still believe we are.

Upon reaching a Citibank agent, I was warned that my mortgage interest rate would jump from 4.375% to 6.75% on June 1^st, 2008.  The agent immediately offered to help me avoid the foreboding event with an offer to refinance my loan at only 6.25%.   My first reaction was “whew, am I lucky”, but then I wondered…”How does this young lady know what interest rates will be in June???”   “Haven’t we heard talk of another interest rate cut on the 18^th of March, for example???” 

Smelling a rat, I decided to learn the logic behind her advice to get rid of my ARM.  I ask what Index rate and Margin she was referring to, so that we could compare the numbers.  Unbelievably, my agent had no

I decided to push on, determined to learn if anyone at Citibank could tell me what facts they relied upon, before recommending a new loan.   On my third attempt, I reached a lady who knew a little

So, I ask the powers that be…What is going on at Citibank??  Where are the people in charge of policing lending practices on behalf of the consumers???  Have I simply misread the daily headlines reporting that millions of homeowners are losing their houses?  Have I misunderstood this crisis to be due in part to our lenders pushing ill-advised loans in exchange for a quick buck?   In spite of all the mournful rhetoric, it appears that little has changed in terms of stopping this behavior or protecting citizens.

My advice for consumers is to remain highly skeptical, when considering any offer from lenders!!   To protect your future, you must arm yourself with the terminology and facts about your present loan.  Take nothing for granted.  Force your lender to prove the numbers that justify their recommendations.    

FAQ:  No lender can honestly recommend refinancing as an option, without first knowing how the old and new loans compare.   Before you are lured into buying a new loan, spending thousands of dollars in closing costs, know what the future pay off will be versus the cost.  Then and only then, can you make an

Thank you for visiting www.infotube.net .  Please check in with us tomorrow, when we demystify the Adjustable Rate Mortgage Loan.

As always, please send your questions or comments to info@infotube.net  

Property Preservation Firms are a hot new service industry breaking out in the real estate field.   As more lenders take on thousands of foreclosed properties, they are enlisting the help of local firms to keep their REO properties in a livable condition, thus preserving the integrity of the neighborhoods.

It is projected that over $1 billion dollars will be paid to property preservation firms in 2008.    The firms are hired, with digital camera in hand, to report emergency situations such as plumbing leaks, roof failures, over grown landscape, downed tree’s and any safety issues they find in the vacant property.  The companies will also continue to watch over the properties to insure that squatters are not living in the homes, nor are the assets, such as appliances, HVAC, etc. being stolen and resold.

To date, there are no major players in this booming, new field.  Reports indicate that there are presently 7000-8000, small “Mom and Pop” business providing these services to lenders.  This leaves a lot of opportunity and money on the table for the forward thinking contractor, realtor or home builder looking for a way to survive and thrive in this downturn.

I would like to applaude the proactive, “Win-Win” measures the lenders are taking.   As they struggle to keep up with the pace of foreclosures and growing number of vacant properties, they seem to understand that the neighborhood its homeowners suffer.  

Funding preservation is a great move which should help neighborhoods remain stable, free of squatters, crime and further deterioration.

If you are one of millions of homeowners who are struggling to keep your home, please check out Hope Now.  Hope Now is a cooperative effort between HUD-approved counselors, investors and lenders to maximize outreach efforts to homeowners in distress. 

Hope Now is a non-profit organization and also offers  useful links and resources for homeowners. 

You can reach a Hope Now counselor by dialing 1.888.995.HOPE or by visiting the website www.hopenow.com

There are a number of ways to offer seller financing on real estate.    How to structure the offer depends upon whether you own your home free and clear or whether you have a loan or loans against the property.    

Please read previous posts on the pro’s, con’s and risks of seller financing before you decide whether bankrolling your sale is the right step for you.

Instructions for Seller Financing with an outstanding loan:

1. Seller and buyer agree to a purchase price.
2. Seller verifies the outstanding loan balance on the current loan or loans.
3. Seller should pre-qualify the Buyer, as any lender would do. (Have the buyer provide 2 years tax returns, a pay check stub year to date and a copy of their credit score and report)
4. Parties determine how much of the gap exists between the purchase price and the outstanding balance, and how much of that balance the seller is willing to finance.   (For example:   If the agreed upon purchase price is $250,000 and the outstanding loan balance is $150,000, the gap is $100,000.  How much of the $100,000 will be financed 80%, 90%, etc.   The remaining percentage will be paid to the seller as a down payment.)
5. Parties determine the interest rate and length of the loan term for the seller financed portion of the purchase.
6. Parties calculate the monthly payment amount of the seller financing.
7. Hire an attorney or title/excrow officer to draft the paperwork for the “wrap around” loan. 
8. The seller must continue to make the payments on the original loan.
9. The seller should require proof of payment for all insurance premiums and property taxes.

NOTE:   A wraparound mortgage requires that the seller receives a payment from the borrower that covers the original mortgage payment and the payment on the second or seller financed portion.

Wraparound mortgages are illegal in some states or may be forbidden by some lenders.   If wraparounds are not allowed, be warned that the lender can call your note due in full and payable now for violating you original loan terms.  If you do not know the terms of your original loan, please check with your lender.

Instructions for Seller Financing with No Outstanding Loan.

1. Seller and Buyer agree to a Purchase Price for the Property.
2. Seller should pre-qualify the Buyer, as any lender would do. (Have the buyer provide 2 years tax returns, a pay check stub year to date and a copy of their credit score and report).
3. Determine the interest rate and length of the loan.  (Typically, seller financing carries a higher interest rate than the bank would charge due to the risk.  Most seller financed loans are amortized over a 30 year period, but the outstanding loan balance will be due in full in 5 to 7 years.  This is arrangement is called a ballon note or loan.  It provides the buyer time to straighten out a credit problem, accrue job history, etc. which will enable them to refinance at a later date and pay off the balance due to the seller.)
4. Calculate the mortgage payment.   (This can be done on the internet or provided by any lender.   The report will show the interest and principle paid and the remaining balance due the seller.)
5. Hire an attorney to draft the formal agreement, spelling out the sales price, loan amount, rate of interest and terms.   The attorney or title company can also close the transaction.

Note:   Seller should always have proof that property taxes and insurance premiums are being paid by the borrower.  Also, it is a good idea to add a late payment fee to the agreement.  Late fee’s will help keep your payments coming on time.   In the case of loan default, the seller may have to foreclose and take the property back.

Seller or owner financing increases the pool of potential or qualified buyers for most real estate, but it has its own considerations.   If you are interested in exploring owner financing, ask yourself the following questions:

1. Will you need the cash you are loaning to the buyer to purchase your next home?  If so, bank rolling the sale is probably a bad idea.
2. Are you willing to assess the creditworthiness of the borrower?  Banks are experts at loan underwriting and analyzing the sources for loan repayment.  If you aren’t willing to do the work, it’s probably a bad idea.
3. Do you need monthly income?   If so, and you are in a low income tax bracket, you will probably do OK, but remember mortgage interest is taxable income.  If you are in a high tax bracket, you would probably do better investing in tax free muni’s.
4. If the buyer/borrower defaults, can you afford to lose the money?   If the buyer stops making payments and you can not the monthly expenses, it’s probably not a good idea?
5. If the borrower defaults on your loan, are you in the postition to foreclose?  Foreclosure can be a lengthy and costly process.   Do your homework to decide if a “worst case” situation is one you are willing to face if necessary.   If you aren’t in the position to foreclose, loaning the money is a bad idea.

If you aren’t willing or can’t do what every smart lender would do, you are better off waiting for a buyer with his own source of funds.    If you can comply with all the conditions, then and only then, should you consider bank rolling your home sale.

If you have decided to learn more about the option of owner or seller financing, our next topic will cover the steps involved in setting a financing transaction in motion. 

Thank you for visiting the InfoTube Real Estate Blog.

In a difficult housing market, seller or owner financing can broaden your pool of buyers,  attract top dollar sales prices and eliminate the hassles of dealing with mortgage lenders.   Owner or seller financing can also boost your profits with good investment returns on your money and provide possible tax savings.    But, while the benefits of seller financing can be vast, please consider the risks before you jump into the banking business.  

• What is Seller Financing?      Seller financing involves extending credit against the purchase price of a home, either by taking a back second note from the buyer or financing the entire purchase, if the seller owns the property free and clear.   In other words, the seller of the property acts as the banker for all or part of the purchase price.
• What are the Benefits of Owner Financing for Sellers?   People who own their property free and clear can offer attractive financing to qualified buyers to help a home seller faster and provide a better return on their investments.   In addition, owner or seller financed homes sell for a higher price.
• Who Should Offer to Finance All or Part of the Sales Price of Their Home?    Ideal candidates own their homes free and clear, or they have older VA, FHA or otherwise assumable mortgages.   Other ideal situations include vacant properties owned by retiree’s or wealthy sellers; vacant properties that have languished on the market for several months; estate or court ordered sale situations and individuals who desire income in installments for tax purposes.
• What are the Biggest Risks Involved in Seller Financing?  The largest risk is Buyer Default.   If the borrower stops making payments, the seller may be forced to initiate the expensive process of foreclosure.  In the event of a buyer default, the seller could lose even more if housing prices have fallen further since the sale. Other risks include property damage or neglect, which can be costly to repair;  repayment deliquency; lack of cash to purchase something else; theft and property destruction.

Later this week we address the topic “How to Offer Seller Financing and What the Terms Should Be”.

Thank you for visiting infotube.net. 

Today’s news from the housing experts was dismal and some what confusing.
First, lenders reported that loan applications had increased in the past few weeks. Why are the number of applications increasing if property is not selling?
The answer lies in the drying up of the lending spigot. Even prime borrowers are discovering that no funds are available for home loans. The lack of available mortgage money means that potential borrowers are being forced to apply to dozens of lenders when searching for a loan. Thus, the increase in the amount of loan applications.
The second bit of news of interest to home buyers and sellers was issued by the large, publically traded home builders. Home builders reported record losses and they still have a glut of unsold home inventory to dump. They also reported they own a 5 year supply of land for development, so they will not be looking for purchases of land tracts anytime soon.
What does that mean to you? Home builders with deep pockets will slash prices, add incentives and will give away thousands of dollars in upgrades and cash to sell these homes. Small builders will likely face foreclosure and bankruptcy in their effort to match the deals offered by the big boys.
What is going on in your housing market? We would love to hear from you about what you see and hear. Thanks for contributing. We will pass the info along to others that are interested.

News that home foreclosures are rising is not a surprise to those that follow the headlines. New studies estimate that 1.1 million families will lose their home over the next 2 years. The brunt of the pain will be felt by those left homeless, with tax problems and ruined credit, but the after shock will be felt by all of us.
Why? Because lenders are not in the real estate business. They must dump these non-performing assets as soon as possible. As they foreclose and take possession of all this property, they will slash asking prices as an incentive to move the inventory. Translation: Lending requirements will continue to tighten, making borrowing harder for everyone and we will all feel the effects of further downward price pressure.
Who is at the most risk of foreclosure?? Anyone who closed on an Adjustable Rate Mortgage (ARM) in 2004-2006 with a low initial “teaser” rate has a 1-in-3 chance of losing their home. If you got a subprime ARM during that period, with a higher than average interest rate, your chances are at 1-in-8.
Where are the most foreclosures taking place? For the most part, area’s with the highest rate of foreclosure are the same ones who experienced a great deal of speculation and unsustainable price increases.
Here’s a rundown on the metro areas with the highest rate of foreclosure filings:

Stockton, Calif. (1 in 88 households)
Merced, Calif. (1 in 100 households)
Modesto, Calif. (1 in 118 households)
Las Vegas
Riverside-San Bernardino, Calif.
Vallejo-Fairfield, Calif.
Sacramento, Calif.
Denver, Colo.
Detroit, Mich.
Miami, Fla.