By Brian Short, CMC, CRMS, GMA
A long-time friend of mine called me this week about his desire to help first-time home owners or troubled borrowers get into a house of their own – even when mortgage loan options are at their lowest for the past 30 years.
There is a glut of inventory on the Real Estate market, streets lined with motivated sellers, nearly unprecedented low interest rates and complexes full of renters who want to get out and start something for themselves. These prospective home owners want their chance to build home equity, experience the freedom which comes from home ownership and to move out on their own.
What is the solution: Investors buying discounted houses at fire-sale prices, with rock bottom interest rates and then selling them to prospective buyers with a lease-to-own arrangement.
I still contend that an insurgency of Real Estate investors are the ones best qualified to pull the Real Estate market out of its 18-24 month tail spin.
Why?
There is money to be made in Real Estate even in 2009!
Why?
1. Historically low fixed interest rates available even to those who will not live in the houses they might be buying.
2. Historically high number of homes on the Real Estate market needing to be sold by very motivated sellers – most of these homes are still in great shape and need little or no fixing up!
3. Historically high number of recent high school or college grads, newly married, or those who have recently had a child who have come to expect that they should be able to buy a house when they move out on their own.
With the recent lowering of the price of gas and the upcoming change of administration in Washington DC, many will be sensing a renewed interest in moving past the rough times of 2007-2008 and be interested in exploring home ownership.
As I explained to a friend yesterday, all current mortgage loan programs will require 3-5% down payment for any buyer who desires to buy a house in this market. No mortgage company will be able to change that scenario for the time being.
Therefore, those who have not saved up their down payment or have glitches on their credit or employment history need time to let those characteristics heal. A lease-to-own arrangement with a seller is a great way for them to put down some roots, build up some payment history, develop a longer track record on their job and work at paying off or cleaning up some past debt obligations necessary for qualifying for long-term institutional financing.
I have spent hours over the past ten years counseling prospective borrowers who desire to buy a house on my step-by-step plan to pull them out of their specific situation to prepare them for long-term financing. Most people can be successful with this uniquely tailored plan in 2-3 years as long as they have steady income throughout that time period and remain firmly committed to bettering themselves and righting many of the wrongs of their past.
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Our current recession, having officially begun in the last quarter of 2007, is NOT because the auto industry is not selling enough cars to keep their bills paid. The reason for the worst downturn in the US economy in over 40 years is NOT because the retail sector (except for WalMart) is still not seeing any “black” even after “Black Friday”. The reason retailers are still seeing “RED” , even after “Black Friday” is simple – - the FREEZING OF THE CREDIT FOR THE HOUSING INDUSTRY!
symptoms of the REAL PROBLEM will only accentuate the depth of this crisis and delay the turn around. What needs the attention of the Treasury Secretary, Federal Reserve Chairman, Senate Banking Committee and the House Financial Services Committee is what will stimulate the housing industry – plain and simple! 
1. Open FHA Loans to investors and 2nd home buyers. Use the FHA 203 (K) loan (See 
2. Revive the seller-assisted Down Payment Assistance Programs for home buyers who have no down payment money to put toward a home purchase. This will put first-time home buyers back into the market even if they have no cash for down payment purposes. Prior to the October 1, 2008 shut down of these programs by HUD, many in our industry were using the Down Payment Assistance Programs (DPA’s) for as many as 80% of their closed purchase loans. 
3. Provide tax incentives for those who buy houses. We must urge Congress to consider giving a tax credit for any down payment or closing cost money used in the purchase of a house. Homeowners already receive their credit for mortgage interest paid during a year, but that must be expanded to include any monthly payment paid toward principle or mortgage insurance and down payment, closing costs, and repairs made to a distressed or outdated property bought and repaired or updated to be resold or made into a rental. 
