Rehabilitation is Steps Away

Presenting words of truth written by a Traverse City area mortgage guru, Guy Cole of Countrywide Home Loans.

You’ve driven by it, you’ve gotten out and looked at it, you’ve even went up to the windows and looked inside and said “this place has alot of potential.” But then you’ve said “we can afford it, we just can’t afford to fix it up.” Well, I say, yes you can and this is how: FHA has a program called 203k which actually is set up for this reason. You even get to work with the contractor of your choice, not ours, you can even do some of the work yourself because you look so cool with more paint on you than on the wall. The best part is, it’s all under one mortgage and you have 6 months to complete it. You don’t need an expensive 2nd mortgage or even the infamous HELOC (home equity line of credit). You love the house, you love the location, and you love the potential this house is offering. Don’t pass it up, REHABILITATE IT!!!

Authored by Guy Cole
Countrywide Home Loans
(231) 941-5767 ext. 226

Don’t let the Gimmick Get Ya – Understand Negative Amortization

“Purchase or re-fi your home with ABC Mortgage Co. because we made special lending arrangements for interest rates as low as 1%!!”

You’ve heard the commercial, seen the print, and may have received information at your home. I’m still looking for that 1% deal and I look at rates everyday. There is no magic to this. Interest rates are in the mid 6’s, paying no points 30 year fixed. Can you find lower? Yes. Can you find higher? You bet. This you can be sure of, lenders are not 5% high or low. If that was the case I would be the first one knocking on the door.

Negative amortization occurs when the amount of the payment you are making is less than what you should be paying. For example: $150,000.00 loan amount at 0 points 30 year fixed rate with a 6% payment is $899.33. Now the fun begins. Here’s how they actually reduce your payment, PLUS roll in all of your credit card debt (and let’s throw the vet bill in for good measure). Your home is worth $225,000.00, and an 80% loan to value would be now $180,000.00, and magically all of your troubles are behind you, because they’re giving you all of this for only $665.32 per month! They’re claiming to save you $234.01 per month and your debt is paid off!

Your first response should be, “hold on right there moneybags,” explain how that’s possible. This is what is actually happening: a choice ARM payment, a low introductory offer good for 1 year, 2 years, or even 3 years at 2%, BUT your actual interest rate is 6% (whoops, they didn’t tell you?). A payment at 6% loan amount of $180,000.00 is $1079.19 per month. That’s a difference of $413.87 and guess what? Yes, indeed you guessed it, the remaining $413.87 is being added to your loan amount every month and in nine years you now owe more than your home is worth (are you not tickled green with all that money you thought you were saving?) .

When you do the math and really look into this program (and work close with your lender) this program does in fact work, under the right conditions. Anytime you can spend less to borrower money, that’s excellent money management. Just remember this golden rule in money “if it’s too good to be true, rest assured it is” unless you manage it like a hawk.

Saw this one too..“ if you purchase or re-fi your home with ABC Mortgage – we will buy your gas for one year up to $250.00!” Don’t be fooled by a gimmick. It can be a hard lesson learned.

Authored by Guy Cole
Countrywide Home Loans
(231) 941-5767 ext. 226

Decisions, Decisions…what to do?

Not sure if it is the buyers market we have here in Michigan or if it is another generation of buyers who can’t decide what is best for them.

In my various “careers,” decision making was considered a good personal trait, sought after by employers. It assisted in getting one to the next level. Spouses were endured to their significant others that someone was willing to commit, and making a commitment seemed to indicate a willingness to be part of a family and the American way.

I am sure that because of information overload and millions of buyer options, many real estate buyers seem either unwilling to commit or make decision that will enhance either their fiscal and/or family welfare. Everyone wants to see everything, want every option known to man, and only then will one of the partners finally defer to the other to state “what do you think?” and the process starts over again.

In combat, soldiers (when not governed by political constraint were taught to kill or be killed). Today our lives are governed by indecision, weighing options, gathering ALL information, consultation with significant others, in-laws, out-laws, spiritual advisors, girl friends, former wives, tarot cards, internet analysis, environmental advisors, political advertisements in the form of environmental correctness, and in the meantime, decisions are deferred, good deals are lost and everyone maintains the status quo.

My point, if you are in business, and especially as Realtors, it is sometimes essential that YOU make the decision for buyers. Society today seems to have neutered decision makers.

At least, in the minds of many buyers and sellers, no one can be blamed and no one is responsible: after all they did not make the decision.

Authored by:
Brent Nichols
Principle Associate Broker