Some rays of positive light are beginning to shine on the American housing industry. The US Department of Commerce has recently reported that home sales are beginning to move up
from depressing lows to a point where a full-scale recovery may soon be developing. That is wonderful news but there still are some bumps along the way. Homeowners are holding onto
their property longer and a number of buyers are stuck with serious credit problems, making it very difficult to obtain conventional mortgage loans from financial institutions. Yet, it is very possible for a prospective buyer who has poor credit ratings to purchase a house. It just means that guerrilla house buying tactics may need to be used. This isn’t as threatening as it sounds. Guerrilla house buying simply means that the road less traveled is used and strategies that are a bit unconventional are considered (this assumes that a standard home mortgage from a bank is conventional means).

Family is a potential source of financing for even the purchase itself. It is largely accepted that an increased down payment translates to more favorable mortgage terms (lower interest rates, etc). In some instances, this can make for the difference between affordable and cost-prohibitive financing. In this scenario, a buyer agrees with a family member on a loan large enough to provide a sizable down payment. In most occurrences, the terms of a family loan comprises a minimal interest rate; in others, the arrangement may consist of repayment of principle only. Utilizing a (now) larger down payment, it is possible for the buyer to arrange a path to home ownership that creatively slashes costly interest rates (and other associated expenses).

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The FHA’s new mortgage insurance premium rates went into effect in mid-June, the second change this year and the fifth in four years. As the FHA works to balance the viability of the insurance program and the projected losses on bad loans, they are making it clear that not all FHA-insured loans are created equal. And that is a good thing – for some homeowners.

The FHA changed the MIP schedule on April 9 and again on June 11, creating tiered rates for existing FHA mortgage holders and home buyers looking to secure an FHA mortgage. With the new schedule, first-time buyers or recent loan-holders are now subject to higher monthly premiums (both upfront and annual) to take advantage of low FHA interest rates.

However, the new schedule rewards existing mortgage-holders by offering significantly lower rates and reduced fees in an effort to get stable homeowners spending more money in the economy. In recent years, existing mortgage-holders may have found it difficult to qualify for the FHA Streamline Refinance due to steadily rising insurance premiums. Streamline Refinancing requires a 5 percent reduction in total mortgage payment for refinancing, a hurdle that many homeowners found difficult to clear.

With the new rates, the FHA has significantly lowered the bar for refinancing to homeowners who have held an FHA mortgage for more than 3 years. This is great news, with USA Today reporting that mortgage rates are continuing to drop to record lows.

What do these changes mean to you?

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Want to give an immediate boost to housing sales? Ron Phipps has a suggestion: Mortgage lenders should look beyond borrowers’ credit scores.

Phipps knows of what he is talking. He’s the president of the National Association of REALTORS and the broker/owner of Phipps Realty in Warwick, R.I. He says that home sales would quickly rise if mortgage lenders used just a bit more flexibility in deciding which borrowers qualified for mortgage financing.

Phipps told me during a recent phone interview that Fannie Mae and Freddie Mac are now looking for borrowers to have FICO credit scores of just under 760. That’s a big change from the days when credit scores in the high 600s were considered strong.

It’s true that borrowers can get conventional mortgage financing with credit scores lower than 760. They may, though, have to pay higher interest rates. And these higher rates might knock some buyers out of the market.

“That 760 score is just so much higher than what the average American homebuyer today has,” Phipps said.

Tightening credit standards have played an important part in the housing slowdown, Phipps said. According to data from the National Association of REALTORS, about 15 percent of creditworthy borrowers haven’t been able to get mortgage financing because of the stricter credit-score requirements of Fannie and Freddie.

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There is no better time to purchase real estate than in today’s economy as prices have evened out, and the inventory proves that it is indeed a buyer’s market. There are many options in which to purchase a real estate investment, whether it is cash or through the traditional methods of conventional mortgage financing, but there are some instances in which homebuyers cannot obtain either. Because of the challenges due to the economy there may have been instances where individuals have suffered a bankruptcy, foreclosure, slightly blemished credit, or perhaps one has a sporadic income in which lenders raise questions about. Whatever the case, there are indeed other alternatives to obtaining a mortgage to purchase real estate for those who are ready and willing to do so.

1. One can choose to borrow from a whole life insurance policy. Whole life insurance policies are insurance policies in which the cash value accumulates over a period of time and it is possible to borrow against the cash value of the policy. One of the best features in borrowing against a whole life policy is that there is no loan qualifying process to go through. It is important to keep in mind though that by borrowing against a whole life policy it does diminish the face value of the policy. If this is an option, it is important to ask the insurance carrier of the whole life policy several questions such as: is there an interest rate on this loan, is the amount I withdraw taxable, could my policy lapse because of this withdrawal, can I pay back the loan to bring back up the original face value that the policy once had? Be smart and realistic. Ask if the negatives outweigh the positives when thinking of borrowing against a whole life policy.

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Maintaining a daily blog content schedule is challenging for full-time real estate agents who dedicate most of their energy to serving the needs of their clients, which is why it’s a good idea to tap the expertise of your local transactional partners for guest posts.

While there are literally thousands of topics real estate agents can blog about that may answer important home buying questions, it’s nearly impossible to publish a complete guide to home ownership without leaning on some of your business partners for a little help.

One of the main benefits of having a comprehensive real estate blog is being able to email quick answers to clients and prospects with a link to an article you’ve written on your own site.

However, as we know, one simple Q&A can easily lead to 10 additional questions as your clients start to realize that every scenario comes with its own unique set of circumstances.

A major frustration many agents have with their lending partners is their lack of communication or timeliness in responding to important questions that may mean the difference between investing a weekend showing homes or waiting a few extra business days for a full underwritten loan approval letter.

The last thing you want is for a client to start searching around the Internet for credit or down payment related answers and then have them end up in another agent’s marketing web. Continue reading this post

Want to make your real estate agent cringe? Say any of these 5 things:

“We would like a tour.”

This usually translates into, “We don’t know the area. We are not ready to buy but would like you to drive us around for several hours showings us the area to see if we like it.” Despite what you may think, real estate agents love to sell homes but really do not want to give tours. If you have been selling real estate for awhile then you have probably given a tour. From my personal experience, people who are unwilling to hop in their own car and tour themselves around are not ready to buy.

“I’d rather find a house and then deal with financing.”

Years ago when just about anyone could get a mortgage this was not such a big deal. However, today it is a different story. Lending guidelines have changed dramatically. The last thing a real estate agent wants to do is go out and show a bunch of houses only to find out later that the buyer cannot get a mortgage. It seems like the pendulum has shifted too far to the other end. I have recently seen some very qualified buyers not get approved for financing. Continue reading this post