Third Coast Blog

Wow!  This is so true.  The investor's motto should be the same as the Boy Scouts' - Be Prepared.  And it's hard to maintain your preparedness if you are standing still!  The deals won't come to you.  We need to go to the deals and make them happen.

And I can help you do that!

Galveston has at least one connection to the Shuttle Mission that will be landing in just about one hour from now.  Mission Specialist Christopher Cassidy is one of the astronauts on the current mission.  And his father, Jack Cassidy, my friend and neighbor and real estate investment enthusiast owns multi-family property on the island, just down the street from me!

We are all so very proud of our astronauts, for the pioneering work they do to further our understanding of the universe we live in. 

Thank you Mission Specialist Christopher Cassidy and welcome back to earth!  And thank you Jack for being a great neighbor and friend, especially during the trying times during the aftermath of hurricane IKE.

Jerri Schick, e-PRO Realtor, CDPE

Galveston Island, near Texas

It Was Just Like HGTV!

A young couple attending university called me one day to see a duplex we have for lease.  So I met them there and showed them a sad and neglected apartment.  Such is the state of the market where I live and work, having gone through the hurricane last year, many residences are just not what they used to be.  And that is not a good situation in a community of university students looking for a place to live near the school.   

So I asked them if they had thought about buying a place instead of renting and that it might actually be easier and more financially sound in the long run.  I told them about the $8,000 tax credit for first time home buyers.  I think that is what sold them on the idea.

We sat down at the office and I explained to them how buying a home worked, from getting pre-qualified for a mortgage, the search, the offer, negotiations, the acceptance, appraisals, inspections, closing and filing for their tax credit.  They had lots of questions and did lots of research on their own.  And off we went to find a condo that was walking distance to school and in their price range.

The only bump in the road came when my first time buyers went off on their own and found a FSBO condo that they just fell in love with.  I knew something had happened because I didn't hear from them for a week.  Little did I know that the FSBO sellers were trying to convince my buyers that they didn't NEED a Realtor and that they would be able to buy this condo with the seller's guidance.

OMG.  I could feel my heart start racing with the shot of adrenaline coursing through me when my buyers came to me for advice.  Thankfully, they had talked it over and had come to the conclusion that yes, they probably could do this on their own, but they would feel so much more comfortable and confident having someone trained (and trusted) in real estate sales on their side! 

We worked out how the commission would be paid in a FSBO situation, crafted an offer and I called the sellers to present it.  I told my buyers that it would be best if they left the room while I talked to the sellers.  (My buyers were very nervous!)

Well, it was not pretty!  Neither buyers nor sellers were on the same page about anything even though they had talked together amicably and smiled at one another as they talked over the particulars of the sale.  (That's why you need representation).  Thankfully I had sent my buyers out of the room while I presented the offer to the seller.  So they weren't there when the seller, exasperated, asked to speak to them (so she could harangue a commitment from them).  I simply said they aren't here.  After the phone call, I sent the sellers an email expressing my apologies for any misunderstandings and inviting them to make a counter offer.

Needless to say the FSBO deal didn't work.  But that's okay because I quickly took my young buyers back out and showed them a Bigger, less expensive condo (it didn't have all the pretty things in it) and they were able to see the value even in the empty spaces!

We made the offer on the bigger unit and by now my newbie buyers felt like veterans of the process. 

The closing was last Friday.  They brought me cookies and I ate them all.  They tried to read every word of the closing documents and the closer gently nudged them on.  And afterward we hugged and took pictures. 

And it was, Just Like On HGTV!

This is a re-blog post from an Active Rain member Colleen Craig in Santa Clara California.  She is a mortgage professional and her post summarizes all the great aspects to using a FHA 203k loan product to acquire and rehab your new home!

We have our own FHA mortgage specialist in Galveston County and that is Krista Corkill with Wells Fargo Home Mortgage.  You can reach her at 409-995-0060 if you are interested in finding out more about this type of loan.

203k MADE SIMPLE?

Ok, maybe not, but I will attempt to make it as simple as possible for the client to understand and want to read on.  For many of us in the business who are " in the know"  we forget that we need to go back to the basics and spell it out in simple terms for others to understand.  So I've compiled some information based on my most recent commonly asked questions just this week.

In Southern California, FHA loans were just not utilized over the past 10 or so years because of the FHA Maximum Mortgage limits  But now that the limits have been increased and the prices have decreased, FHA loans have become the most utilized loan in recent months.  HOWEVER, because it was not a popluar loan, you would be amazed at how many lenders/brokers do not know what they are doing.  Especially when it comes to the 203k loan.  I spoke to a client today that was given such mis information it made me cringe. 

 Apparently they told the client that 203k loans were no longer being done (Gee, you think it was after realizing that they had no idea what they were doing?) and they tried to flip them into another loan. This was after telling my client that their loan amount would be for the contract price and the extra money would just be separate and sit in an impound account to be disbursed over the next 6 months.  Ok partially true, the extra amount would be in escrow to be disbursed as the remodel progressed, but for free? Who pays for the extra 50,000 dollars you just borrowed for repairs? Your loan amount is for the entire amount you are borrowing.  Makes sense right? 

So what is a 203k loan and why use one?

When a buyer wants to buy a home that needs repairs utilizing FHA financing, normally the repairs would have to be completed prior to the close of escrow.   The repairs would normally fall on the responsiblity of the seller.  With so many foreclosures in today's market, the bank is the seller.  And many times the home in need of repair is listed "as is".  Which in the past would require a cash buyer or conventional financing.  This is another reason that people in the business decided to shy away from FHA loans.  I believe it was pure ignorance of the programs that were available by the brokers and the realtors couldn't properly prepare their seller for what to expect that gave FHA loans a bitter taste. 

 My associate Jeff Belonger said it best in his post about ignoring what your listing agent tells you about FHA loans

Here we go....203k loans for dummies 

*  203k loans allow you to FINANCE the cost of the repairs in the new loan amount. (Not to exceed 110% of the after improved value determined by the appraiser and 203k consultant) What does this mean?  I buy a house for 200,000 that needs 50,000 in repairs and I can borrow the extra 50,000?  Too good to be true?  NOPE.  That's it in a nutshell....

ok details please.........

*  Down payment is basesd on the sale price PLUS the final cost of the repairs x 3.5% so for example:

Sale price is 200,000 (DO not calculate 3.5% on this)  PLUS 50,000 in repairs/costs (which includes certain costs and reserves the lender will require) 250,000 x 3.5%.  Down payment is $8750.00 (closing costs are separate as usual)

* Buyer will hire (lender can recommend) a HUD approved FHA 203k Consultant  to go to the property with the buyer to determine the required repairs and wish list repairs.

 The fee charged by the consultant can be included in the mortgage.  The fee can range anywhere between $ 400 to $1200 depending on the repairs required.  Please check with the consultant prior to scheduling your appointment.

*Buyer will obtain estimates from several licensed contractors for the work to be completed depending on how extensive the repairs.

Three estimates are recommended for each contractor but not necessary.  The buyer can act as their own general contractor only if experienced and licensed.  (FHA says experienced, but most investors require the buyer to be licensed)  The contractors must provide documentation to be approved by the lender prior to approval.

The consultant will determine the "required" repairs versus the "wish list repairs".  You must start with the required repairs and then move on from there for you wish list. This is an important step for the consultant and appraiser so that you don't over improve the home and exceed the comparable properties in the area.

* Once the consultant completes his report of required and wish list repairs, the lender will forward it to the appraiser for an "After Improved Value".  This is where you may run into problems with OVER improving the property based on current values.  Between the consultant, appraiser and buyer - the FINAL FINAL report will be tweeked to come up with a final report that the contractors will be hired to do.

* So now the file is submitted to underwriting and approved ( you need to qualify at the full amount you are borrowing of course, which may include your current mortgage payment for the home you will live in during the rehab period) and the normal steps for closing will occur.

(BIG PLUS - you can include 6 months of mortgage payments in the new loan amount since it's assumed that you will have TWO housing payments during the rehabiliation of the new home.  This money will be deducted each month during the reahab process) This is optional.

* Closing occurs, and the work begins within 30 days of closing/funding. (This is when your mortgage payments start since this is when you started borrowing the money - however, if you included the 6 mths mtg payments, they will be deducted from escrow starting when your first payment is due)

* Disbursments are made throughout the following 6 months from the escrow account (normally 4 draws with one final inspection, but  this can be increased for higher repair amounts) as the work is completed.

Remember you paid the seller for the price of the home, and then you borrowed an additional amount of X which is sitting in an escrow account to pay the contractors (your total loan is the total amount you borrowed)

Once the last disbursement is made and the final inspection showing COMPLETED AS PER THE CONTRACT........you are done! Simple ast 1 2 3  - okay maybe not, but that's why having an experienced lender on your side is crucial!

There are specific properties and repair requirements for this type of loan. So please call Krista Corkill for specific details if this sounds like the right loan for your new home. 409-995-0060

 Happy Rehabbing!

This is a great synopsis of how a first time home buyer can easily receive the finanacial assistance they need to get into their home!  First time home buyers can also go to this website http://www.hud.gov/offices/adm/grants/fundsavail.cfm to find out more about federal grants available.