Used to be that anyone putting less than 20% down needed private mortgage insurance to protect lenders against borrower default.
Until now. We have partnered with a global lending institution committed to offering up to 100% financing, will contribute up to $4,500 toward closing costs and does not charge PMI!
Too good to be true? We promise, it's not. Contact me for details.
No one has a crystal ball. However, to "make your money when you buy", real estate investment analysis requires a careful look at variables, perhaps most important being projected gross income, at the time of purchase.
Net Operating Income
The amount left over after subtracting expenses from gross income, Net Operating Income (NOI) is crucial. Using a formula known as IRV with the income capitalization approach, NOI helps us to find value as follows:
Net operating income (I) ÷ capitalization rate (R) = value (V)
To find NOI, use income and expense statements for the subject and similar properties to first estimate the potential gross income, then subtract vacancy and collection loss. From this, estimate expenses and subtract them from the effective gross income.
Cap (Capitalization) Rate
Similar to a rate of return, the capitalization rate is the percentage investors hope to get from an investment. With as little information as recent sales data for comparable properties, the formula used to find Cap Rate is as follows:
Net operating income (I) ÷ Sales price (V) = Cap rate (R)
Together with expert market knowledge, this analysis helps us make reasonable projections that help our clients make informed purchase decisions every time.
Reach out to us for a consultation, we look forward to serving you.
Specializing in helping clients build rental portfolio's, at Atlas Real Estate Group we like to change the heading to "...Hello to Building Long Term Wealth".
With a clear understanding the money is made when you buy, we use market knowledge to analyze pricing and project cash flow so that our valued clients make informed decisions going in.
From single family to large apartment buildings, our in-house experts have devised a formula to success over the last decade that works and look forward to serving you.
Down Payment Required
Studies show many would be home buyers don't take the plunge for a variety of reasons, not the least of which is the amount of down payment required. So by a show of hands, how many think the requirement is 20%?
Congratulations, you're in the majority.
Mortgage Insurance Required Above 80% LTV
Though in existence since the late 1800's, it wasn't until the 1950's that mortgage insurance as we know it came into use. Designed to minimize the lender's risk, mortgages that are more than 80% of a home's value require it. Thus the reason many think 20% is the down payment requirement, it's not.
Low Down Payment Programs
In fact, the majority of owner occupant loan programs require less than 5% down (Conventional). FHA only requires 3.5% down where VA/USDA loans require 0% for a down payment!
Closing Costs and Prepaids
In addition, ALL loans will have closing (title, origination, etc) and prepaid costs (taxes, hazard insurance, interest and other expenses), usually totaling 2% - 3% of the loan amount.
How Much Will YOU Need
Doing the math, a qualified borrower will need anywhere from 2% - 8% of the purchase price to cover the down payment, closing costs and prepaid items discussed, or up to $8,000 on every $100,000.
Down Payment Assistance
With many programs that offer to help with down payment and closing costs up to 4% of the purchase price, the truth is many borrowers will have the ability to buy a home with as little as zero out of pocket costs!
Visit this link to see what down payment assistance you may qualify for! http://bit.ly/2oEm058
So what are you waiting for?! Contact your favorite real estate professional for a no cost, no obligation consultation today!
Will reactivating an old account help my credit score? "If the borrower reactivated an old account, would the borrower see a boost in credit score?"
Remember Sub-prime Mortgages?
Nowadays, we are basically able to categorize buyers in one of two ways, those with slightly challenged credit that still qualifies them for competitive interest rates in the 4% range or those who cannot be financed at all. But it wasn't always that way. At one point borrowers were either "A paper", meaning they had "good credit" and qualified for the lowest interest rates and fees available or a sub-prime "bad credit" borrower which were placed in what are now called predatory loans or they were Alt-A, which meant "challenged credit" at slightly better but far from prime rates and fees. Although many in the industry will disagree, as some loan officers made a killing charging front and back-end points to the tune of 1 - 4,5,6% of the loan amount back in the day, others found it unconscionable and are glad those days are over, present company included!
Your Bucket List
But, are they? In 1997, there started being talk about adopting Risk Based Pricing in the mortgage market, an existing model where "lenders assess borrowing costs loan by loan, aided by computerized loan-evaluation systems capable of forecasting the default risk dictated by each mortgage". Each loan having an investor such as Freddie Mac, Fannie Mae and others to guarantee the loan, these investors would then "adjust the guarantee fees" "to more accurately reflect the risks represented by the individual mortgages within a loan pool that an originator wants to sell".
Replacing prime and sub-prime titles with "buckets", lenders are no longer able to charge as much in rates and origination fees, even for "challenged credit" borrowers, which is why we barely see rates deviate much from the 4% range these days and also why "bad credit" borrowers have been forced out of the market, the American dream out of reach for now.
The American Dream
Or is it? A new breed of lender is here to pickup where the subprime lenders, many if not most of them now out of business, left off. With competitive, low interest rate FHA/VA and USDA mortgages down to a 550 FICO score, the dream of home ownership is very much alive and well. Lucky to work with a few, the Axiom Realty Team professionals are standing by to be of service because, with service first, rewards come later.
A trade name of Norberto Villanueva, the Axiom Realty Team at Equity Colorado is a REALTOR member in good standing of the Pikes Peak, Colorado and National Association of REALTORS, holds an Employing Broker level license and is a former REALTIST member of the National Association of Real Estate Brokers. Certified as a Short Sale and Foreclosure Resource (SFR) and a Real Estate Owned (REO) specialist, we focus on win-win-win solutions or none at all, offering expert analysis, acquisition, disposition and specialty finance consultation for retail buyers and sellers as well as private and institutional investors alike.
Contact the Axiom Realty Team at Equity Colorado for all your real estate investment needs by using the contact form found in the lower right of this page. We are the ART of Real Estate and look forward to serving you.
Two weeks ago, we posted a blog which explained that current increases in home prices were the result of the well-known concept of supply & demand and should not lead to conversations of a new housing bubble. Today, we want to look at home prices as compared to current incomes.
Is it a Buyer's or Seller's Market?
In a balanced market, one that is neither in favor of buyers or sellers, there is six - seven months of inventory. In a buyer's market, the amount of inventory is higher resulting in a market that leans in favor of buyers because they have more choices. Conversely, when the amount of inventory is lower the market leans in favor of sellers because buyers have fewer choices. Of course, this we call a seller's market.
According to our friends at Investopedia.com, absorption rate "is the rate at which available homes are sold in a specific real estate market during a given time period".
To calculate this, you divide the number of days in a time frame (30 days) by the number of sold listings in that time (1,150) to get the number of homes sold per day. This number includes all single family, town and patio homes and condos. Then, you multiply that number by the number of active listings (2,033) to get the absorption rate.
Take a look at the graph to the right, which shows a tremendous drop in inventory from July 2015 - February 2016.
As of this writing, in the Colorado Springs market there is less than two months of inventory, 53 days to be exact meaning, we are definitely in a seller's market and have been for quite sometime, along with the entire nation for the most part.
Supply and Demand
Economic principles are such that prices are determined in great part by scarcity meaning, the less of something, the higher its price and real estate is no exception as we see home prices rising steadily in many parts of the country.
To illustrate this in the Colorado Springs market, median prices, that point at which exactly half are higher and half are lower than a set data point, have risen roughly 6.25% from Feb 2015 - Feb 2016 where the average home price has risen even higher to just about 8.2%.
This is called appreciation, which is just one of the many reasons to invest in real estate as opposed to other investment vehicles, such as deposit accounts, CD's, mutual funds, etc., and certainly cars, big screen TV's and the like.
Are We There Yet?
Though climbing due to market conditions, also consider that with interest rates at historic lows, the dream of home ownership is a reality for more consumers, even with the tighter lending restrictions that came about as a result of the market crash, though it is not unheard of for even those with challenged credit to still qualify for a home loan.
So, is now a good time to buy? A good time to sell? Yes!
On the one hand, buyers that are willing and able AKA qualified, and keep in mind qualified is a relative term, are well advised to heed the urgency of now to take the plunge into home ownership. And why not? Prices are rising, meaning now is the time to "buy low and sell high" as they say and take advantage of appreciation all while their affordability is maximized due to the current low-interest rate environment which may change in the future.
On the other, sellers have a unique value proposition: there aren't that many of them around! This means their product (homes) are at a premium that if priced right can sell in days, sometimes hours and many times for more than their asking price!
Thanks for reading.
A trade name of Norberto Villanueva, the Axiom Realty Team at Equity Colorado is a REALTOR member in good standing of the Pikes Peak, Colorado and National Association of REALTORS, holds an Employing Broker level license and is a former REALTIST member of the National Association of Real Estate Brokers. Certified as a Short Sale and Foreclosure Resource (SFR) and a Real Estate Owned (REO) specialist, he focuses on win-win-win solutions or none at all, offering expert analysis, acquisition, disposition and specialty finance consultation for retail buyers and sellers as well as private and institutional investors alike.
Contact the Axiom Realty Team at Equity Colorado for all your real estate investment needs by using the contact form found in the lower right of this page.
We are the ART of Real Estate and look forward to serving you.
Don't Go It Alone
Buyer beware also applies to sellers who buy into the notion they can save money by selling their home by owner (FSBO). First, National Association of REALTOR statistics show only 8% of completed home sales through November 2015 were completed by owner and of those, 38% knew the buyer. This is important because time is money, meaning the homes that did not sell often end up being listed with a REALTOR anyway after much time on the market.
Given the title of this article, you might be wondering why there is so much about selling implications. To state the obvious, every buy-side has a sell-side of the transaction, to which there are many legal implications which many FSBO sites and service providers will not guide you on since they may not be a licensed broker. Ignorance is no excuse, and overlooking even the slightest detail or disclosure can cause significant hassle or financial loss to the unsuspecting seller.
In a landmark case, Conway-Bogue Realty Investment Co. v. Denver Bar Ass’n, 135 Colo. 398, 312 P.2d 998 (1957), the Supreme Court ruled that real estate licensees are allowed the practice of law insofar as helping their clients interpret and complete the extensive documents, forms and processes involved in a legal real estate transaction. This is important because misinterpreting or completing these forms can cost a lot money and the cost of hiring an attorney to help with the process can really add up. Not to mention, the average person rarely completes more than one or two of them in a lifetime as opposed to the licensee who will complete many times that in the normal course of their career. All in all, the commission earned on the contingency of a sale is money well spent.
A trade name of Norberto Villanueva, the Axiom Realty Team at Fathom Realty is a REALTOR member in good standing of the Pikes Peak, Colorado and National Association of REALTORS, holds an Employing Broker level license and is a former REALTIST member of the National Association of Real Estate Brokers. Certified as a Short Sale and Foreclosure Resource (SFR) and a Real Estate Owned (REO) specialist, we focus on win-win-win solutions or none at all, offering expert analysis, acquisition, disposition and specialty finance consultation for retail buyers and sellers as well as private and institutional investors alike.
Contact the Axiom Realty Team at Fathom Realty for all your real estate investment needs by using the contact form found in the lower right of this page.
We are the ART of Real Estate and look forward to serving you.
Turnkey Mortgage and Down Payment Assistance
Not limited to first time home buyers, the “Turnkey” Mortgage is a competitive 30-year fixed-rate mortgage with a Down Payment Assistance (DPA) Grant (no repayment) equal to 4% of the mortgage amount!
Mortgage Tax Credit
Used jointly with the tax credit feature, qualifying first time home buyers receive an annual federal income tax credit equal to 50% of the annual interest they pay on their mortgage loan!
- No “recapture tax”
- Max Income and purchase price limitations
- Available with various lenders!
Additional Down Payment Assistance Programs
We’ve identified over 25 down payment assistance programs to help new and existing home owners with costs to buy or upgrade the home of their dreams while saving tens of thousands, making the dream of home ownership a reality. Visit our Down Payment Resource page to locate additional programs that may help with your home ownership dreams.
The Axiom Realty Team
Norberto Villanueva is a REALTOR©/District Director for the Axiom Realty Team at Fathom Realty in Colorado Springs. A licensed real estate broker since 2002 and a mortgage loan officer/broker for five years before that, we specialize in residential housing and investment solutions. As a Certified Home Buying Advisor, Norberto is able to help most if not all homeowners with the funding necessary to cover most if not all down payment, closing and prepaid costs.