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The Nuts and Bolts of Home Construction Loans are Complex

Friday, April 7, 2017
by Tom Stachler,ABR,CDPE - Group One Realty Team

Home Construction Loans Are Complex: Here Are the Nuts and Bolts

 

Home Construction Loans Are Complex: Here Are the Nuts and Bolts

The complexities of home construction loans can hit you like a falling two-by-four. Be sure you understand the intricacies before you apply.

Two Types of Construction Loans
There are two main types of home construction loans:

Construction-to-Permanent: With these loans, the lender advances the money to pay for construction. After the home is built, the same lender rolls the loan balance into a standard mortgage. This is by far the more popular option.


With a construction-to-permanent loan, there is one closing. During construction, you pay only interest on the outstanding loan balance. It converts into a mortgage after the home is built. You lock a maximum mortgage rate at the beginning, when construction begins.Stand-Alone Construction: With these loans, it’s often the lender that advances money to build the house. When construction is finished, you get a mortgage to pay off the construction debt.

A stand-alone construction loan could be worthwhile if it allows a smaller down payment. Because this type of loan doesn’t allow you to lock a maximum mortgage rate in advance, you risk a rise in interest rates. Another disadvantage is that your circumstances could change during construction, making it impossible to qualify for a permanent loan—and you pay for two closings: once on the construction loan, and later, on the mortgage.


Your down payment is likely to be at least 20 percent of the loan amount, although some lenders go as low as 10 percent. The lender will determine whether you can afford the loan payments during construction while you’re paying the Rent or mortgage on your current home.More Difficult to Qualify
Qualifying for a construction-to-permanent loan could be more onerous than getting a regular mortgage. This is because the lender doesn’t have the completed house as collateral to back the loan during the construction period.

Have Adequate Savings
The lender will make sure you have savings to pay for unexpected costs. “There are always cost overruns when you are building a home that you may not know about until you are into it. We don’t want them to use every last dime they have before they start,” says Dennice Henshaw, East Side division manager for Washington Federal in Seattle, Wash.


Do Your Due Diligence on the BuilderCost overruns tend to come about because borrowers have a tendency to change their minds about what they want as construction proceeds.

An important aspect of building your home is choosing the right builder. Find one that has built the kind of house you want in terms of price, style and size. Look into the builder’s credentials with the local home builders association and ask for references from previous clients. You could also see if there are any complaints against the builder with the Better Business Bureau.

Typically, your lender will look into the builder’s credit standing, financial situation and licenses, as well as the track record for building similar homes.

Ongoing Inspections
Lenders will conduct routine inspections as the home is built. During this period, the lender pays the builder in stages—called “draws”—and usually sends an appraiser or inspector to make sure that construction proceeds as planned.

Cynthia DeLuca, group mortgage manager for BB&T in Raleigh, N.C., says, “Our clients could get upside down, where they have 50 percent of the loan but the house is only 25 percent done. We look at how much it is going to cost to complete the house to try to stay on track.”

Typically, you sign off on each draw request so that you are kept informed how the work is proceeding.  Check out the area's best lenders before you decide on your next loan at www.LendAnnArbor.com .  Each mortgage broker is either a vice-president or branch manager and all have been in the business for at least 15 years of experience.  

Tom Stachler is one of Ann Arbor's leading realty brokers having over 25 years of experience.  Get the latest listing information directly from the board of realtors MLS system by clicking on the MLS Listings tab above.  More real estate related information and Links can be had under the resources tab above.  

 

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3 Tips for Investing in Residential Real Estate

Sunday, February 19, 2017
by Tom Stachler,ABR,CDPE - Group One Realty Team

3 Tips for Investing in Residential Real Estate in 2017

Businessman presenting financial analysis with charts generated by big data displaying international success and dollar signs

A great deal of the wealth of the top one percent of Americans is built on real estate.

Aside from owning your Home, it used to be that only the wealthy and well-connected were investing in real estate. Unless you knew the right people and were willing to put up a big chunk of money, there were relatively few methods for the average person to invest in real estate aside from just Buying properties and renting them out for income.

Real estate investment has, however, changed dramatically over the last couple of decades. Today individual investors have access to many different real estate-related investments. Moreover, new platforms for investing in residential real estate (that don’t involve the headache of being a landlord) have also proliferated in the last few years.

Here are three ways for individual investors to make profits in real estate today.

Invest in REITS

Real estate investment trusts (REITs) are an increasingly popular option for real estate investing. You can purchase shares in a public REIT just like you buy mutual funds or stocks. The business model of a REIT is owning and/or developing income-producing assets in a particular segment of the real estate market. For example, you can invest in a REIT focusing on commercial real estate, maybe malls or office buildings, or a REIT specializing in residential real estate like apartments or condos.

Many investment advisers suggest using REITs in your portfolio to balance out stock and bond funds and mitigate portfolio risk as this asset class often does well when other investments are performing poorly.

Before investing in a REIT, make sure to understand how the trust is designed and how value is derived from its holdings. Keep in mind that the performance of a REIT is based on cash flow and profits from selling properties, and may not be impacted much by factors that typically drive the performance of stock and bond funds.

While most investment advisors today suggest considering real estate as an alternative investment, the majority suggest it should represent no more than 10-20 percent of your portfolio.

Take a Closer Look at Real Estate Investment Partnerships

Another way to invest in real estate is real estate investment partnerships. Current laws allow investment partnerships to be structured in a number of ways, including tenant in common projects, general partnerships, or limited liability partnerships (LLP) or limited liability corporations (LLC). These structures each have their own advantages and disadvantages, so always do your due diligence on your partners and potential liabilities before investing in a partnership.

Take a close look at how decisions will be made, and how managing partner/partners will be selected (and how they can be removed). Always insist on a written real estate partnership agreement, which should be reviewed by an attorney with experience in real estate transactions.

Limited liability partnerships are frequently established having an experienced property manager or real estate developer as the general partner. Investors are used to provide financing for the projects, and they are typically brought on as limited partners.  

IRA FUNDED PORTFOLIOS

Take a close look at using some of your IRA proceeds to invest in realty assets.  Call Tom to discuss this investment instrument and also Click Here to View Residential Income Properties. 

 

Diversify Your Portfolio with Peer-Based Residential Real Estate Platforms

You can also invest in residential real estate through peer-to-peer lending platforms. Just a few years ago, almost all P2P lending platforms making real estate loans focused on commercial properties.

Fundrise (equity crowdfunding) was one of the first firms to offer residential real estate loan products, launching in mid-2014. SoFi has also recently begun mortgage underwriting. With SoFi, however, nearly all of these P2P home loans are for larger amounts to borrowers with excellent credit.

Other broader peer-based lending platforms based on residential real estate and mortgages that have launched recently include Elevate (UK), LendInvest (UK) and Income& (US).

Academics argue the real estate investment sector has matured enough to become a new asset class along with stocks, bonds and cash. That’s why it’s not surprising that most investment advisors suggest real estate should be a substantial part of all larger portfolios today.

Tom Stachler is a licensed Broker & Builder plus marketing expert for commercial, condo and homes in the Ann Arbor Michigan community and surrounding areas such as Dexter, Saline, Chelsea, Milan Ypsilanti and Pinckney real estate markets.  Note the Search Properties link above to view a complete Inventory of homes and condos for sale.  Also click on the resources tab above for other helpful information Links, contractor discounts and sources.   Have questions want sell your home or get a price ?  Go to  www.MyPrice.guru to get started and see comparable home sales.  Or maybe you want to search for property and view an updated MLS inventory report created for those Buying properties .  Hit the contact me link to the right or call us with any questions because we would love to hear from you.  We also have a Contractor Discount page here on our website or many helpful Links in the tab above for more resources.  

Ann Arbor Real Estate for Sale, Saline Real estate for sale, whatever the need in the surrounding areas, we have it using the navigation tabs above.

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Difference of Opinion Widens Between Appraisers and Homeowners

Wednesday, January 18, 2017
by Tom Stachler,ABR,CDPE - Group One Realty Team

Difference of Opinion Widens Between Appraisers and Homeowners

 

Difference of Opinion Between Appraisers and Homeowners Widens

Appraisers and homeowners are less eye-to-eye on Home value for the first time in six months, with the gap between their opinions widening in December to 1.33 percent, according to Quicken Loans’ National Home Price Perception Index (HPPI). The difference in opinion, says Quicken Loans Chief Economist Bob Walters, helps to impart understanding for homeowners, who often hold their homes at higher value than appraisers.

“It’s our hope that homeowners use the HPPI’s unique data as an insight into their local housing market,” says Quicken Loans Chief Economist Bob Walters. “When consumers have a better grasp of their local market conditions, it can help influence their expectations and ultimately lead to a smoother mortgage or home sales process.”

The latest Quicken Loans National Home Value Index (HVI), at the same time, declined 1.19 percent.

A summary of the HVI:A summary of the HPPI:
Americans’ expectation of their home’s value was an average of 1.33 percent lower than appraisers who valued their home, according to the National HPPI. The gap between actual appraised value and opinions had been narrowing since June, but December’s perception difference of 1.33 percent erases all improvement made in the last few months. Despite the drop in the composite value, significant variations in value continue in various regions of the country, highlighting the regional nature of the real estate market. (For instance, estimates from Philadelphia homeowners were 2.94 percent higher than appraised values; on the other end of the spectrum, appraisals are outpacing expectations of Denver homeowners by 3.04 percent.)

As snow began to fall in much of the country, nationally, so did home values. The average appraisal value dropped 1.19 percent from November to December, according to the National HVI. Despite the dip from the previous month, home values continued to climb higher year-over-year by 3.85 percent nationally; however, this growth is a slower pace than the 5.28 percent annual increase in November. Appraised values showed strongest annual growth in the West, while the Midwest had the slowest gains.

“Home value growth has been mostly driven by enthusiastic buyers vying for a smaller than usual inventory of properties,” says Walters. “Appraised values have dipped along with the seasonal decline in sales around the winter months. It’s yet to be seen if value growth will build as sales rise in the spring, or as construction increases.”

 

Tom Stachler is a licensed Broker & Builder plus marketing expert for commercial, condo and homes in the Ann Arbor Michigan community and surrounding areas such as Dexter, Saline, Chelsea, Milan Ypsilanti and Pinckney real estate markets.  Note the Search Properties link above to view a complete Inventory of homes and condos for sale.  Also click on the resources tab above for other helpful information Links, contractor discounts and sources.   Have questions want sell your home or get a price ?  Go to  www.MyPrice.guru to get started and see comparable home sales.  Or maybe you want to search for property and view an updated MLS inventory report created for those Buying properties .  Hit the contact me link to the right or call us with any questions because we would love to hear from you.  We also have a Contractor Discount page here on our website or many helpful Links in the tab above for more resources.  

Ann Arbor Real Estate for Sale, Saline Real estate for sale, whatever the need in the surrounding areas, we have it using the navigation tabs above.

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Current Home Mortgage Rates and Interest Trend for 2017

Friday, December 23, 2016
by Tom Stachler,ABR,CDPE - Group One Realty Team
Where Are They Now? Mortgage Rates Respond to Fed Hike

Average fixed mortgage rates climbed again for the eighth week in a row following the Federal Reserve’s decision to raise the key rate, according to Freddie Mac’s Primary Mortgage Market Survey® (PMMS®), with the 30-year fixed-rate averaging 4.30 percent with an average 0.5 point—up from last week’s 4.16 percent.

“A week after the only rate hike of 2016, the mortgage industry digested the Fed’s decision and this week’s survey reflects that response,” says Sean Becketti, chief economist at Freddie Mac. “Following Yellen’s speech last Wednesday, the 10-year Treasury yield rose approximately 10 basis points. The 30-year mortgage rate rose 14 basis points to 4.30 percent, reaching highs we have not seen since April 2014.”

The 15-year fixed-rate, according to the Survey, averages 3.52 percent with an average 0.5 point, also up from last week’s 3.37 percent. The 5-year Treasury-indexed hybrid adjustable-rate mortgage moved up, in addition, to an averages3.32 percent with an average 0.4 point.


Average mortgage rates exceeded 4 percent for the first time this year after the election. The Fed expects to raise the key rate three more times in 2017.  For a list of the Ann Arbor Area's Top Mortgage Lenders visit www.LendAnnArbor.com for new Home purchase or re-finance options.  

Tom Stachler is a licensed Broker and Builder marketing condo and homes in the Ann Arbor Michigan community and surrounding areas such as Dexter, Saline, Chelsea, Milan Ypsilanti and Pinckney real estate markets.  Note the Search Properties link above to view a complete Inventory of homes and condos for sale.  Also click on the resources tab above for other helpful information Links, contractor discounts and sources.   Have questions want sell your home or get a price ?  Go to  www.MyPrice.guru to get started and see comparable home sales.  Or maybe you are searching for homes and want to view an updated MLS inventory report created for those Buying properties .  Hit the contact me link to the right or call us with any questions because we would love to hear from you.  We also have a Contractor Discount page here on our website or many helpful Links in the tab above for more resources.  

Ann Arbor Real Estate for Sale, Saline Real estate for sale, whatever the need in the surrounding areas, we have it using the navigation tabs above. 

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Information and Basics about Commercial Mortgages and Loans

Thursday, December 15, 2016
by Tom Stachler,ABR,CDPE - Group One Realty Team

Information and Basics about Commercial Mortgages and Loans

Buying real estate for your small business? It's an exciting move, but also a stressful one.

Expanding to a new location or just renovating your current space is a big step for a small business owner--so you should know the ins and outs of the process before you get too far in over your head.

By learning how to navigate commercial real estate loans, you'll be well equipped to get the best rate and terms for your business. This way, you can get the most out of your commercial real estate loan and save capital for your business.

So, let's start with the basics: How do commercial real estate loans work?

Use this guide to find out.

What is a Commercial Real Estate Loan?

Commercial real estate, as you might've guessed, is real estate that's used only for business purposes. So if you operate your small business through a retail store or office space, you're working out of commercial real estate.

If you have plans to purchase new or existing commercial properties, you can take out a commercial real estate loan to help finance the purchase--and any development or construction after the fact.  Check out the commercial lenders at www.LendAnnArbor.com

Commercial real estate loans are typically options for certain business entities, like a limited liability company or an s-corporation. All this is to say that businesses take out commercial real estate loans, not individuals.

How Do Commercial Real Estate Loans Work?

So, commercial real estate loans help you pay for the sky-high price tags that come attached to your new business property. Got it.

How do they work?

Technically, commercial real estate loans are mortgage loans secured by liens on the commercial real estate you're purchasing--rather than on residential property.

Let's take a step back. What's a lien?

Well, in this specific case, a lien is a legal right that an owner of a property gives to a creditor, serving as a guarantee for the repayment of a commercial real estate loan. If the owner can't fulfill the debt repayment, that credit might be able to seize the asset secured by a lien.

In the end, a lien just gives your commercial real estate lender some protection against the risk that you default on your loan and can't pay them back.

When you take out a commercial real estate loan, you should absolutely expect to have a lien put on at least your business property. But you should also be prepared to make a down payment on your commercial real estate loan.

Before funding your loan, major lenders will typically require a down payment between 20 - 30% of the property purchase price.

Now for the nuts and bolts of commercial real estate loans: repayment terms, interest rates, and fees.

Repayment Term and Schedule

Consider your average residential mortgage--like one you might have on your Home.

A typical residential mortgage is a type of amortized loan, where you repay the debt in regular installments over a fixed period of time, say 30 years.

Unlike residential loans, commercial real estate loans come with two types of terms: intermediate-term loans of 3-5 years or less and long-term loans that last for 5 to 20 years.

Also, a commercial real estate loan might come as an amortized loan--the one you know well--or as a balloon loan.  Many of these loans the lender will rollover provided they feel the property is being properly managed and the borrower financials are still acceptable to the lender.  This is most common.  

An amortized loan gets repaid in fixed installments until you've fully paid the lender back, plus interest.

A balloon loan, on the other hand, requires you to make one big payment at the end in order to pay off your remaining principal.

Let's dig into how balloon commercial real estate loans work.

When you take out a balloon commercial real estate loan, you're given a term typically ranging from 5 to 7 years. You'll have fixed monthly payments through that term, but those payments aren't set up to cover the entire loan repayment. Instead, the monthly payments are calculated as if the loan is a traditional 25- or 30-year mortgage--like a residential mortgage. At the end of your 5- to 7-year term, you'll have paid off only a portion of your principal balance, so the rest is due all at once.

If you're considering a balloon commercial loan option, know this: that last payment could be very high.

You should really only sign on the dotted line for a balloon loan if you know you'll have the cash on hand when it comes time to make the final payment. If you don't, you'll have to refinance your loan or sell your business property to make the balloon payment.

Interest Rates

As with any small business loan, the actual interest rate you get on your commercial real estate loan depends on your type of business, its financial health, and your creditworthiness.

But in general, commercial real estate loans tend to come at a steeper interest rate than a residential mortgage would. Businesses are just riskier to lend to, especially if you're just starting up. Plus, most businesses have less established credit histories than individuals.

You should also know that your interest rate will depend on the kind of real estate lender you work with. Life insurers, for instance, have rates ranging from 3.35 - 4.3%, while banks and credit unions offer rates at 3.35 - 6%. Check out the current averages for the various lender types to make sure you know all your rate options.  Also, some lenders offer loans a prime or up to 1.5 points over prime depending on loan size and client.  

Your interest rate will also depend on your loan-to-value (LTV) ratio. An LTV ratio measures the value of a loan against the value of the property purchased.

Say you're purchasing a $100,000 piece of property. Commercial real estate lenders typically require borrowers to put a down payment of about 20 - 30% of the purchase price. So, you've covered a small portion of the cost and the lender is covering the rest of it by extending you the loan. In this case, the loan-to-value ratio is 70 - 80%.

Here's where your interest rate comes in. If you have a high LTV, you'll likely have a higher interest rate. The lender has more skin in the game, so they have more to lose if you default on your commercial real estate loan. On the other hand, if you've paid more of the purchase price in the form of a down payment--and you have a lower LTV--you'll have a lower interest rate on your loan. You've taken on more of the equity in the property, meaning the lender takes on less risk.

Fees

On top of interest rates, commercial real estate loans will come with fees. Most commercial real estate loans have upfront fees that you'll need to pay.

Upfront fees are bundled into the overall cost of the loan--covering the property appraisal, legal costs, loan application, loan origination, and survey fees. Some commercial real estate lenders will want borrowers to pay upfront fees before the loan is approved. Others will just apply the fees annually.

You should also be aware of fees associated with paying your commercial real estate loan off early. You might have a typical prepayment penalty, but there could also be an interest guarantee, a defeasance, or just a lockout barring you from paying early. All in all, a lender wants to preserve their anticipated gain on a loan, so they might charge you for paying early.

Before you commit to your commercial real estate loan, always ask the lender to clearly explain any and all fees that will be a part of your total cost of borrowing. You wouldn't want to be hit from behind on hidden fees down the line.

Where to Find Commercial Real Estate Loans

Now that you know the basics on commercial real estate loans, where can you find one?

Well, a few different types of lenders offer this kind of financing for small businesses.

Commercial banks, credit unions, commercial mortgage-backed security (CMBS) lenders, life insurers, and the Small Business Administration can all help you secure a commercial real estate loan.

But as a small business owner, your best bet might be to knock on the SBA's door first.

Why You Should Work With the SBA?

The SBA offers commercial real estate financing through their CDC/504 Loan Program. A CDC/504 loan is made specifically for purchases of fixed assets.

A CDC/504 loan from the SBA is either 10 or 20 years. An SBA loan gives borrowers a fixed rate instead of the prime lending rate. This works out better for the borrower because your interest rate is fixed at an increment above the current 5- and 10-year U.S. Treasury yields. In the end, it'll be much easier for you to calculate the exact amount you need to repay.

Almost any owner can apply for a CDC/504 loan as a source of small business funding. To qualify, small business owners will first need to present a feasible business plan and demonstrate some business management expertise. Other noteworthy eligibility requirements are that your business must be worth less than $15 million and have a net income of less than $5 million after taxes.

You'll also need to show your projected cash flow data to prove that you'll be able to repay the loan. And finally, you'll have to prove that your business doesn't have the financial capacity to purchase the real estate with your own funds.

Applying for a Commercial Real Estate Loan

Gearing up to apply for a commercial real estate loan? You'll need to get your financial ducks in order first.

Commercial mortgages tend to have a more rigorous underwriting process than residential loans do.

With commercial real estate loans, having a clear and detailed business plan is crucial. Lenders will not only scrutinize your business, but they'll also carefully consider the property you intend to buy and your plans for using it. Make sure you spell all of this out in your business plan.

Depending on the size of the commercial loan, you'll also need to prove your business's financial strength. Be prepared to submit 3 to 5 years worth of financial documents, like your asset statements, tax returns, corporate accounting reports, and any other relevant information. You'll also need to show your personal financial information and personal credit history.

The Bottom Line with Commercial Real Estate Loans

As with any business loan, make sure you shop around for multiple offers from different lenders.

Your commercial real estate loan will be with you for the long haul, so you should be confident that you're getting the best terms and rate for your business.

Once you've found a good fit for your business, you're well on your way to getting the real estate you need to bring your business to the next level.

Tom Stachler is a licensed Broker and Builder marketing homes and properties in the Ann Arbor Michigan area.  Also search for properties, houses, and condos for sale in Saline, Dexter, Chelsea, Milan and the Ypsilanti real estate markets.  Check out the handy Links and nav tabs above for realty related information and and MLS inventory access above.  

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Real Estate Interest Rates Likely to Rise Post Election Period

Friday, November 18, 2016
by Tom Stachler,ABR,CDPE - Group One Realty Team

‘Relatively Soon’ Rise for Interest Rates as Mortgage Rates Shoot Up Post Election

 

‘Relatively Soon’ Rise for Interest Rates as Mortgage Rates Shoot Up Post Election

Rates have risen about a half percentage point right after the election as I have noticed from some of Ann Arbors local lenders.  A rise in the key interest rate could come “relatively soon,” Federal Reserve Chair Janet Yellen reiterated on Thursday, heightening the probability the Fed will forge ahead with a hike in December, despite initial doubts in the wake of Donald Trump’s presidential victory. Mortgage rates, which generally follow the key rate, shot up this week, with the 30-year fixed rate mortgage topping out at an average 3.94 percent from 3.57 percent the week prior.

“This week, the verdict is in—over the last two weeks, the 30-year mortgage rate jumped 40 basis points to 3.94 percent, almost identical to the 39 basis point increase in the 10-year Treasury yield,” says Sean Becketti, Freddie Mac’s chief economist. “If rates stick at these levels, expect a final burst of Home sales and refinances as ‘fence sitters’ try to beat further increases, then a marked slowdown in housing activity.”

Yellen’s position—which comes as the dust settles after one of the most contentious elections in history—reinforces the sentiments of Federal Reserve Bank of Philadelphia President Patrick Harker and Federal Reserve Bank of St. Louis President James Bullard, who both voiced support for future hikes this week.  

Looking to get a recommendation for low rates while working with a good mortgage lender?  Get a list of the areas best lender by going to www.LendAnnArbor.com for info on numerous firms and the manager or VP to contact for superior service.  All have been in business for at least 15 years.  

Tom Stachler is a licensed Broker and Builder marketing homes and properties in the Ann Arbor Michigan area.  Also search for properties, houses, and condos for sale in Saline, Dexter, Chelsea, Milan and the Ypsilanti real estate markets.  Check out the handy Links for realty related information and and MLS inventory access above. 

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Percentage of Condo Owners Required for Financing

Friday, October 28, 2016
by Tom Stachler,ABR,CDPE - Group One Realty Team

FHA Lowers Condo Owner-Occupancy Requirement in Win for Buyers

The Federal Housing Administration (FHA) has lowered its owner-occupancy requirement for condominiums, marking progress in an issue believed to be preventing homebuyers from entering the real estate market. The action, announced in a mortgagee letter issued this week, lowers the requirement from 50 percent to 35 percent, effective immediately.

Condo projects older than 12 months with at least 35 percent owner occupancy (and less than 50 percent) can qualify for FHA certification, provided other conditions are met. From FHA’s letter:

  • Applications must be submitted for processing and review under the U.S. Department of Housing and Urban Development (HUD) Review and Approval Process (HRAP) option;
  • Financial documents must provide for funding of replacement reserves for capital expenditures and deferred maintenance in an account representing at least 20 percent of the budget;
  • No more than 10 percent of the total units can be in arrears (more than 60 days past due) on their condominium association fee payments; and
  • Three years of acceptable financial documents (defined in the letter) must be provided.

The action is a win for the real estate industry, which has been advocating for changes, and homebuyers, especially first-time buyers for whom condos are the most affordable housing option.

“NAR has been fighting for changes to FHA’s condominium rules for years, and the mortgagee letter announced will bring some much needed relief to the market,” says Salomone. “Condominiums will have a much easier time getting certified by FHA, and Realtors® will have more options for clients looking to purchase a condo with an FHA mortgage. This is a big win for NAR, and while we believe all condominiums should have the rules applied to them equally, we also believe FHA has heard the concerns of Realtors® and is moving in the right direction.”The lowered requirement is a step forward, says National Association of REALTORS® (NAR) President Tom Salomone.

NAR will continue to work with FHA to address transfer fees, commercial space requirements, and other issues, Salomone says.


FHA’s action comes following the passage of the “Housing Opportunity Through Modernization Act,” which mandated the lowered requirement

 

Tom Stachler is a licensed Broker and Builder marketing homes and properties in the Ann Arbor Michigan area.  Also search for properties, houses, and condos for sale in Saline, Dexter, Chelsea, Milan and the Ypsilanti real estate markets.  Check out the handy Links for realty related information and and MLS inventory access above.  


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Tips to Help You Secure Your First Mortgage

Wednesday, October 5, 2016
by Tom Stachler,ABR,CDPE - Group One Realty Team

5 Tips to Help You Secure Your First Mortgage

Unless you are paying full price in cash, you're going to need a mortgage if you want to buy a Home. Fortunately, interest rates for these loans are currently at historic lows, which makes it easier than ever to afford the house of your dreams. Follow these steps if you want to get the best mortgage value for your money.

Check Your Credit Report

Arguably, the one of the most important factor in determining your mortgage is your ability to manage money, which is detailed in your credit report. This document includes such information as the credit accounts that you have, the debt that you're carrying and with whom, your monthly payments and how often you meet payment deadlines or skip them. 

Check Your Credit Score

Your credit score is a number between 300 and 800 that indicates your credit worthiness. Higher numbers, those above 700, will get you the best interest rates and payment terms. Lower numbers, anything under 600, may make it impossible for you to obtain a loan. Much of the information in your credit report determines the score. Not sure what your credit score is? You can find out here!

Fix Problems

Go through your credit report in detail and look for any errors, such as in the amounts owed, the names and addresses of merchants, and your payment history. If you discover any issues, contact the company responsible for the account or the credit reporting company that created the report. By law, they must correct the error, although it might take them a while to do so.

Higher credit scores, those above 700, will get you the best interest rates and payment terms. Lower scores, anything under 600, may make it impossible for you to obtain a loan.

The only areas you cannot correct are accurate financial issues, such as missed or late payments, bankruptcies or judgments against you. If a lender asks you about these problems, be prepared to explain them. Otherwise, these black marks will typically drop off your credit report in about seven years.

Get Prequalified

Before you go on a house hunt, you need some idea of what you can afford. Although the Internet is full of affordability calculators, their results carry no weight with sellers. A calculation that is valuable in real estate offers is prequalification. This is a process where a lender examines your credit information, down payment, and other financial details to determine the mortgage that you can afford. Armed with this information, you can then confine your house hunting to properties in your price range.

Hire a Real Estate Agent

Buying a home is a complex process that involves rules, regulations and standards that you must follow precisely, or your transaction will fall through. You may think that doing this on your own may save you money but it may cost you more in the long run. Obtaining the services of a real estate agent is the best way to ensure that your purchase will be successful and efficient.

Tom and his Team will help you find several homes that meet your pre-qualification amount and your desires. They can also open homes up to you that do not yet exist on any Internet or newspaper listing. Finally, they'll negotiate the best price in your name and fill out all the paperwork, so that all you have to worry about is when you can move in.  Additional Lender info can be found at www.LendAnnArbor.com or contact us for recommendations.  

 

Tom is a Michigan Licensed Broker working in the Ann Arbor Real Estate Market.  Contact 

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Mortgage Rate Trends

Tuesday, October 4, 2016
by Tom Stachler,ABR,CDPE - Group One Realty Team

Will The Presidential Election Create Higher Mortgage Rates?

Will presidential election raise mortgage rates?Will mortgage rates rise or fall because of the election? Will either Trump or Clinton impact the Rent we pay for real estate money?

Since neither the president nor the federal government directly sets mortgage rates no candidate once elected can just sign a proclamation and directly cause interest levels to change. However, the election results could very much change the cost to finance or refinance a Home.

To understand how this might happen consider the Federal Reserve. It has the ability to directly raise bank rates. It can wave its magic wand and rates will rise or fall because it says so. Unlike bank rates, the Fed does not control mortgage rates, but the theory is that if the Fed raises bank rates then mortgage costs will naturally follow in large measure because banks have traditionally been a major source of mortgage funding.

You can see that mortgage rates rise whenever the Fed hints or leaks information that it expects to increase bank charges. And, when the Fed fails to deliver, mortgage rates sink back to lower levels. For example, just before the Fed increased bank rates in December Freddie Mac said the typical 30-year prime mortgage was priced at 3.95 percent versus 3.42 percent last week. That a difference of more than half a percent, or, as some candidates might say, a huge change, the best change.

Mortgage rates today would actually be lower but the banks have parked $2.25 trillion in excess reserves with the Fed, money taken out of circulation. It can be argued that this is a smart strategic move because it makes no sense to lend money at cheap rates, or – take your choice – it can be said that the banks have conspired to raise lending costs, a huge tax on the entire economy.

The ability of banks to raise mortgage rates is now in question. The reason is that an increasing amount of money to finance real estate doesn’t come from banks, it comes from investors worldwide working through nonbanks, mortgage providers not dependent on the traditional banking system for funds. This explains why the Fed raised rates in December and mortgage levels have since taken a nose-dive.

Presidents & Mortgage Rates

But what about our presidential candidates? If one of the two major nominees gets elected will that make a difference in mortgage costs?

The answer, I suspect, is largely no. First, mortgage money flows into the US from across the world. Second, Congress is subject to various lobbyists and many of them don’t want to see higher rates. Third, Wall Street understands that higher rates mean lower corporate profits and that’s bad for business.

But is there any circumstance under which a president cause mortgage rates to rise? Yes. Investors want as little risk as possible and a disruptive presidency could cause interest rates to soar.

So, like the Fed itself, the president is increasingly irrelevant when we look at home financing costs. Then again, the presidency is not without its powers, including the ability to move markets.

Tom Stachler is a real estate broker in the Ann Arbor Michigan area who also works in Saline, Dexter, Chelsea and Ypsilanti residential and income property markets.  Please check out some of the other helpful Links found on this page by using the handy navigation tabs provided above to search for homes and condos for sale in Washtenaw county.  

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Mortgage Interest Rate Prediction

Thursday, September 22, 2016
by Tom Stachler,ABR,CDPE - Group One Realty Team

Rates Hold Steady for Now, Fed Action Points to Possible Hike in December

 

Rates Hold Steady for Now, Fed Action Points to Possible Hike in December

The Federal Reserve kept the benchmark rate unchanged on Wednesday, in a divided vote that alludes to the possibility of a hike before the end of the year.

“The Committee judges that the case for an increase in the federal funds rate has strengthened but decided, for the time being, to wait for further evidence of continued progress toward its objectives,” the Federal Open Market Committee (FOMC) released in statement. “The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run.”

“Our decision does not reflect a lack of confidence in the economy,” Fed Chair Janet Yellen said in a press conference, later adding, “We’re generally pleased with how the U.S. economy is doing.”

Chances of a hike improved after Yellen made note of the economy’s supportive environment during a speech in August, but softening indicators proved otherwise: the U.S. Bureau of Labor Statistics reported modest employment data this month, and housing starts came in less than anticipated in August, among other factors. Still, household wealth grew over $1 trillion in the second quarter of this year (with owner equity at its highest in a decade), and household spending has picked up significantly.Today’s action was largely expected by analysts as policymakers stood fast this summer, despite initially forecasting four hikes this year. The federal funds rate informs the trajectory of mortgage rates, which remain at historic lows.

TransUnion researchers recently found some nine million credit-active consumers would experience “payment shock” if the federal funds rate rose 0.25 percent—the majority of all credit-active consumers, however, would see monthly payments increase a paltry $6.45.

The Fed last raised the key rate in December
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