How many times have you gone out to look at a possible house to buy and discover that you like everything about the house BUT – the windows, the flooring, the size of the closets, the way the bonus room is finished out (or not finished out) or the number of bathrooms? How many times have you thought, “There is no reason to move? We could just stay here in this house for 5-10 more years. Everything about this house still fits our needs BUT – the age of the kitchen and bathrooms, the size or number of bedrooms, the roof and siding need replacing, or the basement still leaks.”

What many homeowners and homebuyers don’t realize is that there is a loan available which will allow for the cost of repairs or renovation to be “rolled in” to a new loan used to buy or refinance an existing home. This loan is referred to by the Federal Housing Administration (FHA) as the 203k loan but I like to call it the “BUT Loan” – for those who like everything about that house – BUT…!

Just think about your current home. Would you like to update the kitchen with granite countertops, new appliances and the latest cabinets? What could you do to your master bathroom to make it more useful or roomy when you both are getting ready for the day or to make room for your Jacuzzi tub which would help you unwind at the end of a busy day? Do the kids need an extra bathroom now that they are getting older? Do you love your neighborhood and everything about your location but desire to build a new master bedroom or family room to give your growing family the space they need?

Have you been shopping to buy a new house closer to work or the schools you like but can’t find a house which has what you need? Are you hoping to move out and far away from the rush of the sprawling city but are only finding old farm houses and houses which are very dated?

The FHA 203k – or the “BUT Loan” will allow you to borrow the money you need to make the house you are considering your DREAM HOUSE since you will be allowed to have the extra money upfront to contract with skilled workmen who will come in and kick out all of the “BUTS” which are keeping you from loving your house. The appraiser will assign the value of your new loan based on the final improved condition of your house after the repairs and renovation is complete. Matter of fact, if you are buying a new home you can even roll in the mortgage payments – up to 6 months – if you are unable to live in you new house while the rehabilitation is being completed.

The down payment on the purchase of a house using the 203k would still only be 3.5% of the improved value and if you are using the this loan to update or improve your current house this entire project could likely be completed at no out-of-pocket cost to you as a home owner except for an appraisal which would cost less than $500 and could likely be refunded at the closing. All other costs could likely be rolled into the new historically low rate loan.

Do you know of family members who are hoping to buy a foreclosed house at a great low price but keep finding houses which are beat up, stripped of the appliances or in dire need of repair or updating? The FHA 203k will make their dreams come true when they find out that they can pick out their own cabinets, counter tops, appliances, flooring, siding, paint and wallpaper and not have to drag out these projects over the next 1-3 years. They can have all of these updates and repairs completed even before they move in and roll all of these costs into their low rate 30 or 15 year mortgage.

This loan takes only a couple of weeks longer to close than a normal purchase or refinance loan to make sure all of the repairs have been carefully calculated and the work has been outlined in detail. Nearly any house would qualify for this “BUT Loan” and many borrowers – even those with some credit blemishes in their past – will qualify for this loan when they might have difficulty getting a conventional loan – with no money allowed to pay for the repairs.

If this sounds like something you might want to know more about check out the website: www.REbuildTennessee.com for more details and some “before and after” photos of houses which have benefitted from the “BUT Loan”. Happy dreaming!

Brian Short (NMLS # 168856) is a nationally certified, state licensed mortgage professional with over 13 years of experience as a “Dream Maker and Problem Solver” in middle Tennessee who works for AmeriFirst Home Mortgage (NMLS # 110139). He can be contacted through his website: www.ProMortgageMatters.com.

Sgt. Joe Friday (Jack Webb) from 50's & 60's hit TV show Dragnet

Buying a home has always been a big decision. But for some people today it’s a difficult decision because of all the conflicting information coming from the media. To make matters worse, that information is often outdated…or even inaccurate.

If you know anyone who is thinking of purchasing a home this year, please share the following information with them:

FACT 1. Mortgage options are still plentiful for borrowers with good credit scores and documented income. All assets & income will need to be fully documented in most all cases for the past 2 years.

FACT 2. There are still programs available, like FHA, that allow as little as 3.5% down payment, and many others that allow less than 20% down.  VA Loans still allow an eligible Veteran to buy a house up to $417,000 with $0 down payment!

FACT 3. Jumbo mortgages are still available on loan amounts even in excess of $2 million dollars.

FACT 4. Vacation/second home financing can be obtained with as little as 25% down, even with jumbo mortgages.

FACT 5. There are FHA Renovation (203k) Mortgages available which can be used to update or repair an existing home. Small projects (under $35,000) can usually be done in such a way where the homeowner or buyer can use up to one-half of this money upfront to purchase materials and then pay the contractor once the project is completed. 

FACT 6. Senior citizens can use their current equity in their home and actually relocate and buy a house and have NO MONTHLY PAYMENT on their new home for the REST OF THEIR LIVES.  The FHA Reverse (Home Equity Conversion) Mortgage can be used by those 62 years of age or older to refinance their currnet home or buy their idea retirement home.

FACT 7. As of today, rates on most mortgages are still at historically low levels when compared to the last 30 years.  Every indication is that rates will likely begin to increase before the end of 2011 – so delay if low interest rates are desired.

FACT 8. Most homes are selling at a big discount relative to 5 years ago.

Make sure your friends and family know the facts! Owning the home of their dreams may not be as hard as they think. Send your friends and family this link and let them know I would be happy to meet with them and help them determine what options are available in their personal situation.

Getting pre-approved for a mortgage BEFORE speaking to a Realtor could help make them a much stronger buyer in the eyes of a seller.

If there’s anyway I can lend a hand, I’ll be happy to do so. Thanks for your help and continued support, and if you have any questions about your own situation call or email me anytime!

The housing market still faces many challenges. High unemployment, foreclosures and other distress sales are keeping negative pressure on prices. This of course is good news if you are looking to buy as low rates and lower prices have brought affordability to record levels.

How Affordable? -Since 1963, it has cost an average of approximately 43% of ‘per capita’ or individual income to finance the cost of a median priced home (20% down payment and prevailing 30 year fixed rate mortgage). Right now, it’s only about half of that cost at approximately 22%.

Are you holding off on a purchase for fear that prices might fall further? – Chances are that some sellers might be thinking the same thing. If you’re smart about it, you can use that as an advantage to strike the best possible deal on a home today for once sellers believe that prices have bottomed or are going back up, your advantage will be gone.

 Rates are low today, who knows about tomorrow? – Gambling on the expectation of a lower price tomorrow at the risk of higher rates can cost much more in the long run than locking in a sure thing today. Ex. $200,000 30 Yr. fixed loan @ 5% = $1073/mo. today vs. $180,000 @ 7% = $1197 per month later.

Own, Rent or Borrow – One way or another, a home is something we all need every day. The numbers here tell the story and it’s no secret that values have fallen, yet over time, that’s not the case. As you can see by the chart, values over the last 10 years show very healthy appreciation. Can you say the same thing about stocks over the same period?

 We don’t get a history lesson in the news because the news is about the moment and the more dramatic the better. That’s what sells advertising and that’s how they get paid. For the rest of us, taking a rational, longer term view of things makes more sense. This is particularly true when it comes to a home, for this is something we are likely to own for many years rather than just moments.

In August of 2010 the National Association of Realtors released a research study highlighting some of the social benefits of homeownership.

Their list included:

- Homeownership stabilizes neighborhoods.

- Homeowners are more likely to participate civically.

- Homeownership produces higher life satisfaction.

- Homeownership fosters less neighbor crime.

- Homeownership and housing stability lower teenage pregnancy and public assistance.

- Homeownership fosters quality property maintenance and improvement.

Most recently the NAR released these timely reminders:

“Good jobs enable people to achieve the American dream of home ownership. And every time a house is built, bought, or sold, jobs are created-lots of them-right here at home.”

- Home sales in this country generate more than 2.5 million private-sector jobs in an average year. For every two homes sold, a job is created.

- Each home sale touches 80 different occupations.

- Every home purchased pumps up to $60,000 into the economy over time for furniture, home improvements, and related items.

- Housing accounts for more than 15% of the Gross Domestic Product, making it a key driver in our national economy.

- Housing has led this country out of six of the last eight recessions.

“America needs jobs. Housing creates jobs. That’s one of the many reasons home ownership matters to people, to communities, to America.”

“Strong federal government support of home ownership equals strong support for American jobs. We urge the Obama Administration and the U.S. Congress—as they debate the new federal budget and reform proposals for the nation’s mortgage finance system—to continue federal support for home ownership.”

“Jobs and Home Ownership. You can’t have one without the other.”

            The US Senate just approved another $2 Billion for the auto industry’s stimulus program referred to as “Cash for Clunkers” after the first $1 Billion was used up last week in only 3 days.  It seems, at first glance, that this auto industry bail-out program might be having some positive affect on another ailing US industry.  At least the players are allowing the program to work.  The Feds are giving away money (whether you agree with this approach or not), the dealers are accepting the qualifying vehicles and giving a $4,500 trade-in allowance toward a new qualifying car, and US consumers are using up the allowed funds to work this program.

            The housing industry has witness many attempts by the Feds to “jump-start” the stalled industry for the past 12-18 months.  One of the first was the FHA Secure Program with “impossible to qualify” underwriting guidelines for those who had made late payments on their adjustable mortgages.  Most of the national wholesalers were not participating and none of the FHA participating lenders would approve these borrowers for this program. 

            The Troubled Assets Recovery Program (TARP) initiated by then Treasury Secretary Henry Paulson and President Bush and expanded by the Obama administration attempted to infuse cash into the ailing national and regional banks so they would be more willing to free up credit to business owners, home owners and borrowers.  However, with the expansion of this TARP program came the announcement that the Feds could jump into the books of any bank who received these funds to determine if they were “financially solvent enough” to avoid a federal government take over.  Some banks refused the money, others returned it and most who received it held on to it to bolster their bottom line figures.  Either way, no credit was freed up and no home owners, home buyers, home builders or Real Estate industry players have received any relief from such a misguided and over funded Federal effort.

            The recent announcement by President Obama to design a federal loan modification program has been met with delays and unresponsiveness by Bank of America and Well Fargo – the nation’s two largest remaining banks holding the largest number of servicing rights on most of America’s residential mortgages.  On the one hand, these banks appear very unwilling to work with their customers to write down loan balances or interest rates to keep the existing home owner in the home, and yet on the other hand, they are all saying that they do not want any more foreclosed properties and the process of foreclosing on US homes is causing home values to dive bomb unlike anything we have ever experienced.

 The one program still being promoted – “$8,000 tax credit of first-time homebuyers” – is far too limited in its scope.  This author was calling for this approach long before the Feds rolled out their version.  However, we were calling for a tax credit for any down-payment and closing costs used to buy a house by ANY buyer.  Only this breadth of a program which would include Real Estate investors, buyers of second homes and “move-up” or “move-down” buyers will truly have any effect of the most critical industry in our downward spiraling US economy. 

            Again, I am calling for the inclusion of those solid borrowers, experienced buyers and business owners to be enticed to get off the sidelines and risk THEIR capital (rather than the future Federal tax revenues for generations to come!) to help get the housing industry out of the dumps. 

            The average first-time homebuyer is still too scared and too inexperienced to be a major player in rescuing the ailing housing industry.  They are fearing for their own job security and seeing house prices plummet causes them to be squeamish about investing what little cash they can scrape together to buy something which may be worth less than what they paid in 2-3 years when they might be ready to sell and buy something bigger or in a different location.  This group of buyers does not have the “staying power” to be the key to a housing industry recovery.  Bring in the Pros!  We need the seasoned home buyers and investors to be encouraged to buy up the housing inventory busting at the seams so builders will be enticed to start building again.

            In the meantime, those who desire to take advantage of the $8,000 tax credit have less than 4 months to get their first-time home purchase selected, financed and closed.  This is not much time in light of heightened underwriting requirements, appraisal delays and turn times in wholesale approval processes.  Those who can benefit from this limited time tax credit must move quickly to get the benefit of the $8,000 “give-away” by the Feds. 

            If you or someone you know has not owned a house in the past 3 years and desire to buy a house before the end of the year to take advantage of this $8,000 refund of all tax withholdings during 2009 and an outright rebate of whatever the difference is between what has been withheld and $8,000, they must get into the game quickly by contacting a Certified Mortgage Professional to get pre-qualified before going out to shop for houses with a Realtor.  The clock is ticking.  There is no promise that the Feds will extend or revamp this program once it expires on December 1, 2009, regardless of how many housing experts, like this author, call for a program which will really help the struggling housing industry.  Sellers are motivated to sell, there is a record-breaking level of houses included in the existing home inventory, and Realtors and Certified Mortgage Professionals have time to give a first-time buyer the time and attention they need to make a great choice to get into (or back into) the housing market.

            The good news is – no “clunker” trade-in is required to participate in this cash give-away.  You can buy anything you want and still get the $8,000 tax credit – a cottage, a castle or a condo!  COME ON DOWN!  You’re already a winner!

Six months after we were told that giving the auto industries $30 BILLION would save them (in spite of the SCREAMING from nobodies like this author and others! See: http://promortgagematters.com/2008/12/05/are-they-still-clueless-a-time-for-real-ideas-to-move-forward/) GM (now affectionately referred to as “Government” Motors!) has taken our money with them – down the drain!

However, that’s not all!  This NEW PLAN to “restructure” GM involves another $50 BILLION from the US Government to this company which is now owned, in part, by the very thugs and shysters (the UAW) who helped bring them to their knees rather than give concessions to keep their employer solvent.  Now GM is owned by the US Government and being run by this Administration (headed by the “Community Organizer in Chief”)  the Unions put in office with the help of  the Black Panther club-toting “poll monitors” and ACORN.

GM stock is now trading at $.70 and has been taken off the Dow 30 but the UAW retirement plan is getting the backing of the US Federal Government.  What about all of those other retirement funds which had played by the rules and bought GM stock when it was selling for $90 at it peak?  Who is backing and guaranteeing those retirees? 

Why does this administration feel the obligation to artificially prop up the union retirees at the expense of the non-union retirees?  Would it have anything about securing future votes or rewarding them for past votes?  Is this really good for our free market economy?  Does this plan to pour another $50-$100 BILLION into GM before the end of 2009 really do anything for 100 MILLION non-union workers who are still fighting every week to make their house payments and keep their jobs?

Just as a reminder, this economic crisis was brought about because of the loss of credit – first in the housing industry, then for business owners, college students, auto dealers, big-box retail chains, etc.  We have now all felt the crash of the loss of credit and free-flowing funds on the secondary banking markets. 

To continue to throw BILLIONS of dollars at each of these failing industries without fixing the PRIME ROOT of this disaster is like trying to use a “Sham-Wow!” to fix a broken dam.  There may be water all over the road but that is not hardly the problem.  Some major concrete reconstruction at the source of the cracks is what is required to keep the water from running over the road.

The issue at stake is shoring up the banking credit markets so the other industries dependent on free flowing credit (i.e. housing, autos, retail, college loans, etc.) can begin to normalize.  Propping up other industries before the banking and credit markets are stabilized is still “throwing good money after bad.” (My dad always said this.  I’m not real sure what it means.  However, I think you get my point!)

During Bill Clinton’s successful run for President against an originally assumed unbeatable George H. W. Bush, who had become nearly an overnight national hero for a seemingly bloodless war to remove Saddam Hussein from his occupation of Kuwait, was given its momentum from a phrase coined by campaign adviser James Carville in 1992 when he chimed “It’s the Economy, Stupid.”  He turned the debate from Bush’s noble handling of foreign affairs to the faltering economy (which Bush had attempted to fix by caving in on his pledge  – “Read My Lips” – for no new taxes during his administration to pacify an uncooperative Democratically controlled Congress).

The Clinton campaign continued to hammer out it focus on the economy -”It’s the Economy, Stupid!”  – and they changed public opinion away from the foreign affairs hero in favor of a small-town southern Governor who had never lived or worked in Washington, DC.

Once again, the attention of the public must be turned – “It’s the Credit Market, Stupid!” – to get this currently distracted administration away from simply returning campaign favors and shoring up organized gangsterism and thugery shrouded in “labor protection” movements and “community organizations.”  The American public must see through this type of “Chicago Style” politics and demand that our elected representatives quit passing out money they don’t have in order to make promises they can’t keep at the expense of generations they won’t ever meet!

Once again, as our elected officials are reviewing the automakers’ plans for $34 Billion of bail-out loans they have found themselves consumed with only the symptoms of the the real issue at the core of our current economic disaster – the FREEZING OF THE CREDIT FOR THE  HOUSING INDUSTRY!
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!

The explanation for the unprecedented downturn in manufacturing, the highest jump in unemployment in 40 years and the seeming irreversible plunge in consumer confidence is the FREEZING OF THE CREDIT FOR THE HOUSING INDUSTRY!

For our politicians and bureaucrats to continue spending time working on 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! 

The $700 Billion promised by the Treasury Secretary to be used for troubled assets and unsellable mortgage backed securities must be used for its original purposes and not to prop-up other sectors of the economy whose recent record breaking losses are only a symptom of FROZEN CREDIT FOR THE HOUSING INDUSTRY!  The housing industry has been in a free-fall for nearly 2 years!  Before any recovery plan will be successful, Congress must require that the Treasury and Federal Reserve not divert that money to other needs until the credit for the housing industry is freed up and thawed out.

Here is our plan to get the housing industry off of “dead center” and get the entire US economy flowing with cash.

1. Open FHA Loans to investors and 2nd home buyers.  Use  the FHA 203 (K) loan (See Dec 1, 2008 article on this site.) to rehabilitate distressed and foreclosed properties and open up the use of the traditional FHA 203(B) Loan for those who can afford and need to buy a second home.  We must move the current homes on the market to those who could quickly buy up the inventory and possibly make some money on speculating on the front end of a housing recovery. 

This move alone, will bring millions of buyers back into the housing market.  Distressed properties do not qualify for Fannie or Freddie loans if they have damage to walls, floors, windows or doors.  Speculators and investors will breathe new life into those houses which need repair before they can be sold in today’s market.  These investors and speculators  have the cash, experience and knowledge to buy up (and repair if necessary) the current glut of houses and make them rental houses, second homes and ideal marketable properties.

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. 

 Those who want to move but still have homes to sell will not be able to be added to the mix of potential home buyers until we can help them find buyers for their properties.  The re-introduction of the DPA’s will bring those first-time home buyers (or those who sold their houses and made nothing on the sale of their home because of depreciating home values) back into the market who have been sidelined since October1.

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. 

How can those who are willing to be part of the solution be rewarded for stepping up to the plate and taking some big swings in order to help get the housing industry flowing with buyers, sellers and builders again?  Give them as many tax incentives as possible to bring them and keep them in the housing market buying and selling and repairing.

Real troubled times require real ideas to deal with the real problem – REAL QUICK!