7 Insider Tips You Must Know Before Buying or Selling a Note in Today's Real Estate Market

Did you take back a 2nd mortgage when you sold your property? Perhaps you are collecting payments as part of a structured settlement. Or maybe you're considering buying a cash flow note or taking back a mortgage.

There are certain things that you simply must know if you currently collect payments, or are considering taking on payments in the near future.

1. First and foremost, you must know the value of the Note that you own or are considering buying. What is the present value of the note today? You can guess what it's worth. But would you "guess" at how much your home is worth? Of course not. Find out exactly what the note is worth by having it appraised by a Certified Mortgage Appraiser. A note appraisal determines the current worth of a mortgage using the present value approach, taking into consideration the degree of safety, interest rate, liquidity and the collateral for the note.

2. Where do you find buyers and sellers of mortgages and notes?

Many individuals buy and sell cash flow notes, including the author of this article. Buyers and sellers of notes will often place classified ads in your local newspaper. Or you can run an ad to buy or sell a note. Anyone interested in getting a good return on their investment dollar is a candidate to buy your note.

3. Who is responsible for making the property taxes and insurance payments? Are the payments current? What do you do if they are not current?

The person responsible for making the tax and insurance payments can vary depending on the terms of the mortgage. Before buying or selling a mortgage note, be sure to examine the terms for paying the taxes and insurance. Also verify that the policy is issued for an amount that represents at least the full value of the amount still owed on the note, and that you, as the lender, are listed as the mortgagee on the policy.

4. What should you do if the borrower fails to make a payment on time?

Do not let the borrower get into the habit of making payments later than the due date or grace period. Be polite, but insist on promptness. Be sure to collect late fees if the payment is not received on time or within the grace period. Establish a no tolerance policy for late payments. If late payments persist, notify the borrower in writing of the exact nature of the default and proceed with legal action.

5. What if the borrower files Bankruptcy or has a judgment against them recorded on the property?

If the borrower files bankruptcy and lists you as a creditor you will be notified by the bankruptcy court. In this case, you must stop all collection efforts. Consider hiring an attorney to advice you in this area to avoid legal problems.

6. How do I initiate foreclosure proceedings if legal action is required? Should I hire an attorney or do it myself?

If legal action is required, the Noteholder has the right to initiate foreclosure proceedings. Find an attorney in your area with experience in the area of real estate foreclosure. Declaring a loan to be in default and starting the foreclosure process is a serious matter and should be handled by an attorney familiar with the laws in your state.

7. Should I periodically inspect the property that secures my mortgage note? What if the property is not being maintained properly?

It is the borrower's duty to protect and maintain the value of the property until it is paid in full. However, as the lender you should drive by the property on a regular basis to insure that the property is being properly maintained. If the property is in another state, have someone you know do this for you. Deferred maintenance on a property can seriously diminish the value of you loan.

Steve Groom, CRI, CMA, http://www.HomeBuyersMD.com is a full time real estate Investor in Maryland. In addition to buying & selling real estate and cash flow notes, he is also a Certified Mortgage Appraiser. For a limited time only, he is offering readers a FREE copy of the ?Note Owner?s Manual?, the essential tool for all note owners or note buyers by calling the 24-hour message line toll-free at 1-800-761-3424, ext. 6 to request it, or get it now at the website above.

Risks of Real Estate Auctions

There are various ways to purchase a property. But if you are aiming to buy a house with a price lower than conventional market rates, real estate auctions is one venue swarmed with quality yet relatively inexpensive homes. Then again, you need to be guided about the risks of selecting a property placed in an auction.

Essentially, a property put under auction is a foreclosed property. Once a homeowner receives a Notice of Default, it nears foreclosure and then it would undergo several stages to be put on sale. One of which is the auction. Properties within this set up are those that did not sell through multiple listing services at a given period of time. These homes are usually intended for big investors or buyers backed up with a lump sum of money. This is because the process requires full cash out upon approval of the bid. Buying this property type is not advised for a novice home buyer. Most properties sold through auctions require prospective buyers to disburse 5 percent buyer premium. One needs to have perceptive skills to offer an enticing bid that could overthrow other competitive bidders. The difficulty is enhanced when even the lender bids.

On the other hand, buying a foreclosed property through online auctions brings about other unique risks. Unlike with actual auctions, you are not enabled to easily inspect the property. Be ready to have a property as it is. Say, the furnace is malfunctioning, you cannot just go back and ask the owner to fix it. Conversely, the previous owner can reclaim a property within a redemption period. This happens when the owner recovers his finances, pays his loan and then saves his property from foreclosure. The property cannot be fully owned until the said period expires. Most states have this mechanism. The duration of the period and regulations as to who is eligible for redemption vary per state and/or county. New Jersey allows 10 days and Tennessee has up to 700 days for the redemption period. Note that this system usually occurs in agricultural areas where farmers wait for the payment of their crops, which would then be allocated for repaying their loan. You may also ask the homeowner if you can buy his right of redemption. It usually takes $500 to $1,000.

Be careful in what you are buying. Some auctions are masking the sale of mortgages and liens under the property itself. It would be unfortunate if you unintentionally bought the second mortgage on a home. So it is best that you make sure of the auction rules and property specifications before putting your money down. But despite these risks, it is really a lot more convenient to participate in online auctions. Also it is one factor that may have contributed to increasing the clamor for and exposure of more foreclosed properties at auctions. A lot of buyers are more inclined to online auction as it is less intimidating. There is also the perk to not reserve a slot to be a qualified bidder. For example, you can bid $250,000 at an online auction, put down only 10 percent, and borrow 90 percent. Other courthouse auctions require more collateral. Then again, if you won the bid, you have to come up with the cash in a timely manner.

If you are a veteran real estate investor, then you can enjoy the advantages of having this property. Firstly, you can have massive savings. Immediate ownership is guaranteed as you are required to put down all cash upfront. There are numerous properties in auction that cost way below its original value. For one in Ohio, a two-story home transformed into a multi-family duplex apartment was sold at no-reserve auction for only $3,200, whereas its value was $35,000. This 1,900 square feet property has 11 rooms. Although this particular home needed some repairs and cleanup, there is a remarkable savings from its price.

The Real estate market can be an enjoyable, satisfying and lucrative experience for you. Whether you are a homeowner, a buyer, a landlord or simply a real estate enthusiast, get to know more about the latest in the real estate market now. Read more about it here: Maricopa Real Estate and Maricopa Adult Community Housing.

Using Subject 2 Contracts to Buy Real Estate With Less Than Perfect Credit

Subject 2 is a way to buy real estate without applying for a home mortgage loan. This financing option requires buyers to assume mortgage debt from the property owner. Real estate investors often use Sub2 contracts when selling houses to buyers with less than perfect credit.

Subject 2 is a great option for buyers unable to qualify for a conventional home loan. The property owner transfers the real estate deed to the buyer who becomes responsible for paying remaining loan installments. Loan documents remain in the original mortgagor's name and the new buyer piggyback's off their good credit.  

Instead of entering into a high interest bad credit loan, buyers can take advantage of assuming low interest payments. Buyers should engage in credit repair strategies so they can obtain financing within a year or two.

The primary purpose of entering into a Subject To contract is to let buyers buy a house without a down payment or credit check with the intention of refinancing the loan into their own name as soon as their credit allows them to obtain financing through traditional means.

Entering into Sub2 contracts requires both parties to engage in due diligence. Sellers should obtain financial records to ensure the buyer is financially capable of paying home loan installments. When buyers default on the note, the note holder is responsible for missed payments or runs the risk of losing the property to foreclosure.

Most Subject 2 contracts require buyers to submit loan payments to the servicing lender. However, some sellers require buyers to submit payments directly to them and they will submit payments to the loan provider. In this scenario, buyers run the risk of losing vested funds should the seller default on the mortgage loan.

Subject 2 contracts should be drafted by a real estate attorney to minimize risks for both parties. Sub2 contracts are used in place of bad credit lender loan mortgages to give buyers time to restore their credit rating. Buyers should refinance into a conventional home loan to purchase property rights as quickly as possible.  

In order to be legally binding, Sub2 contracts must be recorded through the court. Subject 2 records the transfer of property rights to the buyer. However, property rights are "subject to" the buyer adhering to contract obligations. If buyers default on their agreement, ownership rights revert back to the seller and the buyer loses all funds invested into the property purchase.

Sellers determine the duration of Subject 2 contracts which typically extend for 2 to 5 years. At the end of the contract, buyers must apply for a home loan or obtain financing through another source such as hard money lender loans.

Hard money loans consist of high-interest loans provided by private real estate investors or investment groups. This is a risky and expensive option for borrowers with bad credit. Therefore, buyers who enter into Subject To contracts should carefully strategize the ability to obtain financing in the future. If buyers cannot obtain financing at the end of the Subject 2 contract they could end up being in default and run the risk of having property rights transferred back to the seller.

When mortgage notes are refinanced the buyer is responsible for costs typically associated with entering into a home loan. Common costs include loan points, home inspections, property appraisals, mortgage insurance, homeowner's insurance, realtor commissions, legal fees, and closing costs.

Real estate investor, Simon Volkov shares information and resources to help sellers and buyers understand the benefits of entering into Subject 2 contracts. His website offers a dedicated article library covering creative financing strategies and alternative home buying solutions at www.SimonVolkov.com.

Real Estate Short Sale - What You Need to Know About Real Estate Short Sales

When a home owner finds themselves in a position of failing to meet mortgage payments, there is an option that does not include foreclosing on the home. A short sale is a home sale where the lender is willing to accept less than the amount owed on the home. While some lenders do not offer short sales for the loans they have secured, and other lenders may choose a foreclosure as being more financially beneficial for the loaning party, others will allow a homeowner to enter into a short sale if all paperwork is filed properly and on time.

The paperwork involved in setting a short sale in motion is the not so short part of the sale. For obtaining permission to begin the short sale process from a lender the homeowner will need the following documents.

o Letter of Authorization. The letter of authorization will need to include the property address, the loan reference number provided by the lender, the name of the home owner or the person holding the loan, the date of the request, and the agents name and address. The agent may be a real estate agent or a lawyer dealing with the financial matters in the case. The letter of authorization will give the lender permission to speak to any outside parties listed in regards to the homes loan and the home loan status.

o Preliminary net sheet. The preliminary net sheet is a financial document proving the amount of money you expect to receive from the sale of the home. The amount of the total sale, any fees, late charges, and real estate charges. The real estate firm handling the short sale will be able to address the preliminary net sheet. To ensure the approval of the short sale, the bottom line of the net sheet should show zero profits going to the seller of the home.

o Letter of hardship. This is one of the most important documents the homeowner will provide to the lender. This letter should read as real and honest as possible. If there are extenuating circumstances surrounding the sale of the home or the loss of income leading up to the late mortgage payments, the lender will need to know these facts in detail.

o Financial documentation. The lender will also need copies of all financial statements and proof of all income and debt. These statements will include assets, income, bank statements, credit card statements and any monetary statements available at the time of the short sale request. Financial statements that prove the homeowner is not in debt will cause the lender to instantly deny the short sale.

o Purchase agreement. The lender will want the listing agreement and purchase agreement agreed upon by the seller of the home and the buyer of the home. The lender has the right to refuse any and all payments in association with the sale of the home that are not required by law. These may include inspections of the home and home protection plans, depending upon the laws of the state.

A short sale will be highly followed by the lending institution. While this sale will certainly remove the burden of an over expensive mortgage from the homeowner, it will leave that homeowner in the hands of the lender. At any time during the short sale proceedings, the lender can choose to remove the authorization and simply foreclose on the home.

To obtain Free Special Report "5 Biggest Mistakes Real Estate Investors Make" go to http://1WealthCreation.com/report.html

The Mechanics of Short Sales in Real Estate

There are not many "ways out", once you are in a tight spot as a home owner, who's going through some financial problems and finding it hard to reimburse the debt amount to his/her lender or mortgagee. Most of the times, you are left with no other options but to withdraw from your home ownership, either by means of foreclosure or "short sale". A short sale occurs when you sell your home (of course with the consent of the lender) to some buyer at a price that's less than the owed amount of debt. In case of a short sale, lenders keep the money, buyers get the home and the sellers are left with ... well, nothing but at least they can save themselves from dishonor and bad credit record that comes with foreclosures or bankruptcy.

Mostly, three major stakeholders are involved in a short sale, namely seller, buyer and lender. Let's discuss the transaction one by one, from their standpoint.

Seller:

Though seller gets nothing (of a monetary value) out of "short sale", still he/she is the one who is the most concerned. As a seller, you should keep some points in mind. First, the lender will not always absolve you of the remaining debt. Second, the credit history doesn't really remain unmarked in case of short sale (though the bad impact is less than the foreclosure). As a seller, you must put forward a very strong case for the bank's loss mitigation department, an application providing valid reasons with documented proofs (especially if you have cited the "decline in property prices" as the reason for short sale).

Lender:

Lender is of the paramount importance in a short sale, buyers and sellers cannot proceed with the deal without the lender's permission (In case there are more than one lenders involved, consent from both parties will be needed). Mostly lending banks permit sellers to carry on with the short sale to save all the costs and complications attached with foreclosures, but not before going through a thorough checking and verification process.

Buyer:

Homes at short sale notices are typically low-priced (not lesser than foreclosures though). But the biggest drawback in going for a piece of "short sale property" is the amount of time it can take before the deal is finalized, mainly because it's not the seller but lender who'll approve or disapprove the offer. As a buyer, it makes sense to involve a real estate agent, who has previously dealt with short sales. Short sale homes are supposed to be in better condition than the foreclosed ones, but you must hire a home inspector to do the inspection in any case.

William King is the director of Dubai Property Real Estate Properties and Pakistan Real Estate Properties. He has 18 years of experience in the marketing and trading industries and has been helping retailers and startups with their product sourcing, promotion, marketing and supply chain requirements.

The Pros And Cons Of Buying A Home Through A Real Estate Auction

There are many pros and cons to buying a home at a real estate auction. Real estate auctions allow people to bid on and buy property at a publicly held sale. Sometimes sellers choose to sell their properties through a real estate auction. Often homes for sale at auction are homes that went into foreclosure. There are both advantages and disadvantages to buying a home through a real estate auction.

The Pros of Public Sales: Buying a Home at a Real Estate Auction

One of the pros of buying a home at auction is the price. Homes sold at a public auction offer deep discounts when compared to homes sold through more traditional channels. Some auctions have no set reserve price, so the homes will sell to the highest bidder no matter how much they bid. Foreclosure auctions often offer buyers enough time to have an inspection done, to learn more about the property and any potential problems. Real estate auctions can make buying a home easy -- there are no negotiations- either a bid is accepted or it is denied. Buyers also often have the opportunity to see what others are bidding at a real estate auction. Closing typically happens quickly, within 30 days of the end of auction.

The Cons of Real Estate Auctions Include Uncertainty

There are a number of cons to buying a home through a real estate auction. In some cases there isn't time for an inspection, and the property may have serious problems not visible to the naked eye. Homes are bought "as is" with no warranty and no recourse if problems are found. Tax liens on properties at foreclosure auctions may become the responsibility of the new homeowners. If the home has been vacant since foreclosure, vandalism or weather-related damages may have occurred. Some earnest money or payment in full is required to buy a home at a real estate auction, but getting pre-approved for a home loan can negate this con.

Comparing prices for homes in the area and doing an inspection before buying any property can prevent a lot of uncertainty when buying a home at a real estate or foreclosure auction.

Compare rates for new home loans from multiple lenders at LowerMyBills.com

Lisa Nichols is a freelance writer, website content strategist and marketing and PR strategy consultant. Originally from Eugene, Oregon, Lisa is currently based in Covington, Kentucky (also known as greater Cincinnati, Ohio).

The Perfect Storm - Investing & Profiting From the Real Estate Market Collapse in Phoenix, Arizona

What Causes A Perfect Storm?

Well that's the million dollar question, isn't it?

What I deem a perfect storm is a set of circumstances that occur once, maybe twice in a lifetime that offers unparalleled opportunity to purchase undervalued real estate at unnaturally depressed prices. There was one similar opportunity in the late 1980s, early 1990s when the RTC (Resolution Trust Corporation - a government-run entity used to liquidate primarily foreclosed commercial assets) had one of the biggest fire-sales of commercial real estate in US history. This was a time that fortunes were made in the acquisition of overly distressed real estate assets. At that time, the market collapse was caused by 3 main factors (1) change in US tax laws affecting real estate investors, (2) Overbuilding, (3) The Savings & Loan banking scandal and fraudulent activity of mortgage lenders and appraisers.

So what's causing the Perfect Storm Today?

(1) Massive residential property speculation in 2003-2006
(2) Too much credit available to purchase and finance real estate which was overused by lenders and uncreditworthy borrowers
(3) The current overall US market decline/recession that is spreading into a global crisis
(4) Current lack of funds for qualified borrowers
(5) Current oversupply of properties for sale

As you can see, there are 2 stages that follow one after another that lead to the creation of a Perfect Storm and opportunity to purchase real estate at incredible values - The Housing Speculation or Run-Up phase and the Market Collapse. We will examine each of these phases so you are more informed on what has led us to this perfect point in time to invest in real estate.

But first, we need to examine the most important issue a real estate investor must evaluate when choosing where and when to purchase a real estate investment - LOCATION.

Underlying Market Strength

I'm sure you've heard the age-old adage, "location, location, location". I have a different spin on this saying. Mine goes more like, "location, timing, cash-flow". Nevertheless, location is still number one on the list. If the underlying market is not strong with potential for rental and value increases in the future, then what's the point of investing in the first place?

First, let's look at Metropolitan Phoenix as a whole for location. Why the heck would you want to buy property in the middle of the desert?
Even though our market is severely depressed right now, Phoenix has shown remarkable resiliency and long term value appreciation for a number of reasons:

(1) Climate - People want to live here because of the warm, sunny weather. It is why snow-birds come in flocks for the winter and to retire. We all know that the baby boomers are reaching retirement age.
(2) Affordability - Phoenix is one of the most affordable places to live in the US. While this statistic took a temporary hit during the last boom, we have fallen back down to being extremely attractive to business based on real estate values, labor pool and overall cost of living. This will continue to attract business, labor and retirees to the area for the long term.
(3) Standard of Living - very high. Ease of commuting, and a fresh young, vibrant city leads people to want to live here.

These factors have led to the remarkable positive population growth Metro Phoenix has experience for the past 50 years. Even during times of economic hardship, people still continue to move here at a remarkable pace. This puts pressure on the housing market and inevitably leads to appreciation.

After deciding that Phoenix is the right spot to invest in real estate, your next task it to pick a sub-market within the metro region that makes the most investment sense. Some of the most important factors include:

(1) Area of greatest price declines
(2) Proximity to employment
(3) Proximity to amenities
(4) Quality of area
(5) Strength of rental market/values

These will be discussed later in this report and a qualified real estate professional can assist you in selecting sub-markets to invest in that match these criteria.

The Residential Housing Value Run-up

Phoenix real estate has always appreciated at a steady pace with the exception of a few massive run-ups in value followed by sharp declines. The decline of the late 1980s was briefly reviewed above. So what has caused the latest mass-speculation and run-up in values between 2003 and 2006?

Well there were a few culprits that acted together to create this latest debacle.

(1) Underlying Market Strength - As stated above, Metro Phoenix has inherent underlying market strength. That is what got the ball rolling and led to the mass speculation for 3+ years.

(2) Cheap Credit - Interest rates came down to unheard of levels making it easier to buy more assets with less money.

(3) Overabundance of Credit - It started in the late 1990s when Bill Clinton passed legislation freeing up credit to allow more people to buy homes - the sub-prime mortgage market was created. People that really shouldn't have been buying homes in the first place were not only buying homes, but purchasing larger properties than they could afford. As credit loosened and values started to increase, a run on equity lines of credit and refinancing freed up the equity in people's homes and allowed them to spend 'invisible' equity in the consumer markets on durable goods and services. This created the economic boom that we all experienced in the early to mid-2000s. The result: even homeowners that bought early in the boom and saw their property values increase 50-100% over a 5-6 year period had little to no equity left in their homes by the end of this appreciation cycle as they leached it all out through equity lines of credit and other borrowing methods.

(4) Investor Stupidity - As values went up and loans became easier to attain, investors started buying property with no money down and buying as many properties as they could get loans for (see next point below). It became an exercise in buy high and hope to sell higher.

It got to the point that, in 2005, there were actually busloads of investors that were driving around in town stopping in new housing subdivisions and lining up to buy new homes. Why did they concentrate on new homes? Because they could purchase a home to be built in the future, put little money down to secure it and watch the value of their property increase for 6-12 months without even owning it yet! Then they would either flip it right away when it was completed or hold it in hopes of it appreciating even more.

Builders were turning away buyers, holding lotteries and using other methods to hold back the swarm because they couldn't build homes fast enough, even as they continued to raise prices on a monthly - sometimes even weekly basis! As a result, new homes were overbuilt in 2004, 2005 and 2006 by a wide margin due to 'fake' demand since many of the buyers were investors with no intention of ever living in the home!

This flawed philosophy worked for 2+ years at which time the greatest fool theory became a reality. You know how it works...As you build a pyramid of fools, there are less and less greater fools as you work your way to the top. When you finally reach the summit the greatest fool at the top looks around and sees no-one dumber than himself to buy his property for more money and so, the whole structure comes crashing to the ground. It took a while for owners of property who were trying to sell to realize that prices were in decline, not going up in mid 2006 which resulted in a massive number of listings coming on the market with few takers. This is further explained below under 'The Market Collapse'.

(5) Lender & Investor Fraud - As the run-up in values was occurring, lenders and investors started to get greedy. Lenders began offering programs that made little or no sense for some homebuyers to get them into a home. Many times, putting a buyer into a home larger than they knew their client could afford with programs that their clients did not fully understand.

Credit was so loose and readily available during this time that many investors and homebuyers were fraudulently misreporting their income too high on 'stated income', 'no-doc' loans and lenders were turning the other cheek and underwriting the loans with no clear proof of the borrower's ability to repay.

The Market Collapse

So why did the proverbial %#$ hit the fan? Greed and loose credit were the culprits and it culminated when investors and homebuyers ran out of money to purchase and overall economy began to slow down as people started running out of capital and credit. As the real estate market began to slow down, property sellers remained steadfast in their belief that their home was worth more money than the current market value as it had been in months past. But it wasn't.

From there, the first phase of the market collapse occurred. Overpriced properties for sale with no buyers. Property owners unrealistically priced their homes for sale too high and buyers began to pull off to the sidelines as they were unwilling to pay the exorbitant prices for homes. Listings began to pile up and very few sales were occurring. Some owners started to realize what was happening and dropped the price of their home to help it sell. As the market leveled off and began to slowly correct, phase two began.....

Investors that were counting on property appreciation soon realized that the end had occurred. They began putting property up for sale en mass further straining the supply side of the market. Because all these investors were buying property based solely on appreciation and NOT cash flow, they soon realized that they would be unable to hang onto their property if they didn't sell them. Some tried to rent, but because they had paid so much for the homes, the properties were unable to cover the expenses. Some investors and homeowners hung on for longer than others, but almost all of them eventually gave in to the realities of declining property values.

This was further compounded by the variety of 'flexible' mortgages that were available to homebuyers and investors including shorter term, loans at lower interest rates. Investors planned on short hold times so naturally obtained lower interest loans with shorter terms as they planned to sell within 1-2 years. As the market declined and those property owners could not sell, these loans became due and because property values were declining, they could not get new loans to cover the value of the old loans. Many more property owners walked away for this reason and it continues today.

As the loans go into default due to non-payment, the owner is left with 2 ways out - short sale or walk away. Many went the route of short sale to minimize the affect on their credit rating and those who could not or would not go that route eventually walked away from their property and let the bank take the property back.

I have another article posted on this site detailing the Pros and Cons to purchasing Short Sales and Bank-owned Properties in Phoenix.

The market was soon flooded with distressed properties of all kinds. This forced home values down further and faster as distressed properties are typically aggressively priced at least 5-10% less than current market value. This cycle has continued to force values down for months to the point where most submarkets in Metro Phoenix have fallen 25-50% in the past 2 years. Some properties have fallen over 60% from their highs 2 years ago.

This has led to further problems in our region. Due to the extent of the downturn and the sheer number of vacant, distressed properties, Many properties are being vandalized by outgoing owners and theft is become much more widespread of vacant properties. This is further compounding the downturn as properties in poor condition are even harder to sell and must be discounted that much more in order to find a willing purchaser.

When Will The Housing Market Hit Bottom?

Good question. Here's the answer.....

I have no clue. In fact, no-one does. But that's' not the most important thing. There is no way to know for certain when the absolute bottom is reached. All you can do is invest wisely NEAR the bottom. Purchase properties that produce positive cash flow (will be explained later), and wait to ride the wave back up.

Why Now?

There are several critical elements in evaluating the state of the residential real estate market and its proximity to turning the corner. Many of these criteria are now pointing to real estate values bottoming out. Here are some of the statistics I have been watching carefully which lead me to believe we are finding resistance that is creating a market bottom.

(1) Housing affordability has shot through the roof
(2) Residential Resales are on the rise
(3) Homebuilding is at a 25 year low
(4) Applications for new mortgages are on the rise

The biggest concerns that still remain are:

(1) The overall economy is weak and likely to get worse before it gets better
(2) Credit is harder to obtain and larger down payments are now the norm when buying real estate making it less available for more people
(3) Still too many foreclosures and short sales coming on the market from the frenzy of a few years ago.

Affordable Housing Is Back!

One of the best indicators on how attractive a specific real estate market is for homeownership is the affordability index. This is a measure of how affordable homes in a particular area are relative to wages and incomes. A number of 65-70 shows considerable value and favorable affordability for a large percentage of the population. As you can see, one of the driving forces of Metro Phoenix growth has always been housing affordability. In the speculation frenzy in the mid-2000s, that affordability plummeted to numbers never seen before. As prices have fallen, you can see the affordability coming back to the point where now, we are above our historical average.

*graph not available on this site*

Residential Resales are Picking up Steam!

As you can see from the following chart (unavailable on this site), sales activity is on the rise, although over 40% of the sales are currently lender-owned properties. This shows that we are starting to hit a resistance at the bottom as people are starting to grab the deals at the bottom of the market. If this trend continues, it could signal the slow-down in price declines and near-term stabilization of our home values.

For these reasons, while I believe we are near the bottom, I think it will be a few years before we see a marked improvement in our area where values begin to rise again. Will it happen? Absolutely! As I have attempted to explain above, the overall Metro Phoenix Market is very strong for numerous reasons and is poised to be a major growth region again - and not too long into the future, either.

So why not wait until things start turning around? Well, you certainly can, but there are 2 reasons why now is the ideal time to get involved.

(1) Abundance of properties (supply) - with so many distressed properties out there of all kinds, you now have your pick of what to purchase and can be more aggressive on price. As the market shifts more towards demand with more buyers chasing good deals, the number of opportunities will certainly diminish, it will be more difficult to find really good deals and there will be more competition to buy them.
(2) Positive Cash flow - prices are so low right now, that it is relatively easy to find residential properties that will produce a positive cash flow. Basically this means that the rental income should cover all the expenses and mortgage costs leaving you with money at the end of the day. This will be explained in greater detail below.

Why Residential Property?

Normally, I don't recommend purchasing individual single family homes because they are harder to manage effectively and usually don't cash flow. The major benefits that they have over other forms of real estate you could invest in are:

(1) Liquidity - Simply stated, there are more buyers for this form of real estate than any other. It is therefore easier to sell when needed for the greatest value.
(2) Appreciation Potential - for the smaller investor, it gives you the greatest potential for appreciation if purchased at the right time because there is such a broad market of buyers for housing
(3) Lower mortgage rates than commercial property investments, typically
(4) Values may have fallen 30-60%, but rents have not really fallen much at all.

In our current market, one of the major faults of residential property has been eliminated. It is now easier than it has been in decades to buy residential property in Metro Phoenix at a positive cash flow.

How Do I Buy Property?

I will begin this section by stating that these are my thoughts and suggestions when evaluating property for purchase based on my experience and common sense. These are guidelines that you may choose to follow at your own discretion. I cannot guarantee results or success for any investment. It is up to you to properly evaluate investment opportunities and make decisions in line with your goals and risk tolerance.

Picking the location

Here are important elements in selecting the area to purchase an investment property

(1) Safe area
(2) Close to highway access
(3) Within 30 minutes drive time of major employment centers
(4) Proximity to shopping and other amenities
(5) Proximity to schools
(6) Strong rental market - I mean with a track record of other properties being rented for rates which you can use to evaluate the viability of the property as an investment

Picking the type of property

These criteria are designed to reduce your liability and investment risk and maximize your upside potential. Size criteria is meant to keep the property in the range of properties that are easiest to lease, rent for the highest value per square foot and are also easiest to sell down the road since they conform to the largest market segment of potential buyers.

For Single Family Homes

(1) 3-4 bedrooms, 2+ baths
(2) 1,200 - 2,000 square feet with 2 car garage
(3) Newer homes are better. Try and stay with 1995 and newer
(4) NO pool/spa in backyard (too much liability and maintenance
(5) Low or No maintenance landscaping is preferable

For Condos

(1) Minimum 2 bedrooms 1.5 baths
(2) Decent amenities in complex (pool, spa, clubhouse)
(3) Stick with larger communities with 100+ units. If you're looking at a smaller complex, make sure to verify the viability of the HOA and fees

The benefit to condos is less overall maintenance required - particularly on the exterior and to the community grounds. The downside is that they may appreciate at a slower pace than single family residential.

Evaluating the numbers

Even in the best worst market that we have to accumulate wealth through real estate, you need to be careful. There are as many, if not more bad deals out there as good deals. Properly evaluating a property will make all the difference between a success investment and an underperforming one.

Before getting to number analysis, let's not forget evaluating the CONDITON of the property. We always recommend that you obtain a HOME INSPECTION on every home you plan to purchase to help insure that you are buying what you think you are buying.

Initial Analysis

Before placing an offer on a property, you want to perform an initial analysis to see if the property will generate a positive cash flow. In order to do this, you should have already been prequalified by a lender so that you know what down payment requirements you will have and what your finance costs will be. Once you know what those cost are, you are ready to evaluate the income and expenses.

Evaluating the INCOME is fairly straightforward. You will want to compare the going rental rates in the area for similar sized homes in fair to good condition and use a figure in the bottom ½ of the going rental rates to be conservative.

Analyzing EXPENSES is a bit trickier. There are a few items that you will need in order to verify costs and come up with a total expense amount. These may be broken down into the following:

Recurring Expenses

Property management - Figure 8-10% of the gross rent will be paid as management fees on single family homes. The more properties you have under management, the better the fee you may be able to negotiate with a management company.

Insurance - You will need to have enough insurance to cover the home and liability to cover accidents, having tenants in the premises. Make sure you have adequate coverage

Taxes

HOA Fees - Many single Family Homes in Phoenix belong to a homeowner association where fees are collected periodically for community maintenance. Please make sure to

Utilities - usually paid for by the tenant on single family residences, so you don't have to worry about this. Check with you property manager for what is typical in their area
Legal/Accounting - many investors forget this one. Remember that you own and investment and need to make appropriate plans to minimize your liability and tax exposure. Please talk to legal and tax specialists for more information. The more property you own, the less this items costs per property since you can spread the cost over all your investments.

Maintenance Costs - you may have to pay someone to maintain the exterior of the home One of the main reasons to buy a home with no pool/spa and low-maintenance desert-style landscaping. Once a tenant is in, they are typically responsible for maintaining these areas.

VACANCY FACTOR - You will not always have a tenant in the property. You need to make allowance for time between tenants. If you price your rent aggressively for the market, 1 month per year as vacancy should be more than adequate.

One-Time Costs

These are costs you will incur in purchasing the property. You may bundle this into the total investment cost along with the down payment you intend to use. They will include:

Escrow fees and other closings costs
Home Inspection
Termite Inspection
Other Inspection Fees (if applicable
Finance Charges (for the loan)

You will be able to prepare an estimate for all these costs prior to putting in an offer on a property. Typically, you will have 10+ days after offer acceptance to run all inspections and tighten up all your figures to make sure your estimates were accurate. If you find something wrong with the home during this time, you will usually have the ability to cancel the contract and get back your earnest money. Speak with your Real Estate Professional for more information about the procedure of placing an offer on a property

Emergency Fund

It's important to always have some extra money put on the side to cover emergency expenses, a tenant that skips out or is delinquent on payments, repairs costs, etc. Always be prepared for the unexpected.

Sample Analysis

Let's work through an example so you may see how a typical investment might look on a single family home:

Our sample property is a single family home with 3 bedrooms, 2 baths and 1,400 square feet for $100,000. We will assume that you will need to put 30% down to purchase this home. A home like this is fairly typical in today's market and might have sold for $180,000 - $200,000+ 3 years ago.

Total Purchase Price $100,000
Down payment (@30%) $30,000
Loan Amount $70,000

Closing Costs
Down payment $30,000
Escrow Fees $1,000
Finance Charges $1,500
Home Inspection $400
Termite Inspection $100
Total Closing Costs $33,000

Income
Monthly Rent $950
Less Vacancy Factor (1 month) $950
Annual Income $10,450

Annual Expenses (est.)
Taxes $800
Insurance $400
Property Management (@9%) $940
HOA fees ($50/month) $600
Maintenance/Repairs/Cleaning $450
Legal/Accounting $250
Total Annual Expenses $3,440

NET OPERATING INCOME $7,010

Annual Mortgage Payments (@ 7.5%) $5,874

Positive Cash Flow $1,136
Return On Initial Investment (ROI) 3.4%
return excludes appreciation

Condition Of Property

There are 3 different types of properties you can look at purchasing as an investment as it relates to condition.

Option A - Property In Good Condition & Ready To Rent

Option B - Property in fair condition but requiring cosmetic repair to make rentable. This is a property that might be bank-owned or otherwise vacant for a while. May have been heavily used or poorly maintained by the previous owner. Work required is more cosmetic in nature and easy to estimate. Things like carpet cleaning or replacement, new appliances, repainting, cleaning, landscape repair, drywall touch-up

Option C - Property in poor condition, requiring major repair and/or replacement. I only recommend this option for seasoned, experienced investors that have a background in home construction, repair and cost analysis. While you may be able to purchase property well below current market values and create instant equity by fixing them up, you can also lose your shirt if you don't know what you are doing.

If you are a beginner real estate investor, I suggest you stick with option A until you get your feet wet and a little more experience with repair and replacement costs.

Be Pragmatic

Remember, it's an investment. Be a Vulcan. Don't exhibit emotions when dealing with buying a property or renting it to a tenant. The numbers have to make sense and the upside must be there. NEVER FALL IN LOVE WITH A HOME YOU'RE BUYING AS AN INVESTMENT. You will not be living in it. Think of it strictly as an income producing asset like a stock or bond. Make sure tenants are properly screened and qualified.

Property Management

It is important to have quality local management to oversee your investment. Yes, it cost more money to pay them, but they help maintain the value of your asset and save you from those calls at 3 am about a plumbing leak. Factor them into the numbers when evaluating an investment and don't buy anything that doesn't positive cash flow without management.

Why Not Commercial?

Commercial real estate like apartments, office, retail and industrial make excellent investments - if purchased at the right time. The consensus among leading real estate investment professionals is that this segment of the market has not bottomed out and likely will not for a while. The time to pick up distressed real estate investments in these asset categories may yet be 3-4 quarters away (from 4th quarter 2008).

Why? Because as the economy fails and the recession heads into full swing, many business eventually fail. This drives up vacancy rates and reduces asset performance while at the same time, reducing rental values as more space competes for limited tenants. Investors start demanding higher rates of return and factor in higher vacancy rates into their calculations of asset value driving the prices of property down. It usually takes some time for property owners to catch on to this market trend and reduce their asking prices to falling market values which further puts strain on values. This is the same scenario that has happened in the residential property arena in mid-to-late 2006 and into 2007. I suspect that there will be many commercial properties that enter default and revert back to the lenders creating opportunities for seasoned investors to purchase commercial real estate assets for very attractive values - but the time has not yet arrived. Patience is warranted in this area.

Copyright Notice

All rights reserved. No part of this publication may be reproduced or transmitted in whole or in part, in any form or by any means electronic or mechanical. Any unauthorized use, reproduction or distribution is strictly prohibited.

Legal Notice

While attempts have been made to verify information provided in this publication, neither the author nor the publisher assumes any responsibilities for errors, omissions, or contradictory information contained in this document.

This document is not intended as legal, investment or tax advice. The reader of this document assumes all responsibility for the use of these materials and information and is urged to do their own investigation prior to purchasing and/or investing in real estate of any kind. Celestial Homes Ltd, Prudential Arizona Properties and the author assumes no responsibility or liability whatsoever on behalf of any reader of these materials.

© 2008 Celestial Homes Ltd.

Ron Cuttler Prudential Arizona Properties 602-418-8800 ron.cuttler@pruaz.com http://www.CanadiansBuyArizona.com

What Is Foreclosure Real Estate?

Changes in the homeowner's finances can result in foreclosure.

When banks reclaim piece of property because the homeowner is no longer able to pay on the loan it is the start of a foreclosure proceeding.

Foreclosure properties are sold based on sum of the debt that is due. Many foreclosure real estate properties are auctioned at foreclosure auctions. The highest bidder wins these auctions.

It the foreclosure property did not sell, and then the creditor gets the title of the foreclosure property. These properties are called real estate owned now.

In view of the fact that foreclosure homes are cheaper compared to brand new homes. They present a great deal of possibilities and potential. Nevertheless, foreclosure real estate properties have been increasing in quantity throughout the last few of years. This is largely due to the growing cost of living, mounting interest rates and many other economic issues. It means additional foreclosure homes to pick from now.

Many Realtors busy in promoting these foreclosure real estate. More often than not, they are attained from foreclosure auctions. These brokers still present these foreclosure homes as great deals.

A number of the foreclosure properties are real estate owned, which have been entered into listings contract to draw more prospective buyers. These Realtors compile a foreclosure listing and it contains all the foreclosed properties availble for sale.

Purchasing foreclosure real estate from brokers or banks is an excellent idea. This guarantees that the property is free from any other claims, liens or other encumbrances. Foreclosure property draws two kinds of consumers: investors and people looking for homes for individual use.

Real estate shareholders can use the foreclosure property as fixer uppers or rental properties that can be put up for sale again for substantial gains. Investing in foreclosure property has been recognized to be very lucrative. The thing to remember is purchase foreclosure homes, which are fundamentally marketable.

First time buyers have started looking into the foreclosure property while looking for a home. These home buyers might look for obtainable foreclosure real estate via the use of foreclosure listings. The arrival of the internet has made it easy for buyers to find foreclosure listings. Foreclosure listings can be found on the internet through searches of more comprehensive lists can be obtained with a Realtor.

It is best to consult a Realtor about foreclosure homes, who has experience in this field. It has a different set of rules than conventional properties making pitfalls that can cost home buyers big much more likely.

Financial institutions that own foreclosure properties will typically have attorneys draw up their own addendums to contracts that place much more risk on the home buyer and limit their recourse should there be problems with the property after closing. Inspections are vital as is having a professional on your side to mitigate the risks involved with these transactions.

Denver Real Estate
Staging Your Home

The Initial Three Costs of a Home Loan

Buying a home is not like buying a TV at Best Buy. When a consumer wants to buy a TV at Best Buy they will go down to the local store, a sales rep will most likely help them, they will choose the right size and style on the spot, they most likely will have the cash for the purchase or if not they can fill out a simple form, pen a best buy credit card, and pay what they do not have in capitol as best buy credit. Best Buy deals offer no interest for months and hopefully the consumer can pay off the TV buy the time the interest starts. Buying a home is a complex and complicated process. Buying a home takes a plan and pre-knowledge of what the buyer is really in the market for. Buying a home takes the assistance of an experienced realtor and financial institutions and dealing with the previous owner and so on. Most importantly, unlike a TV almost no buyers have the capitol on hand to purchase the home without some debt. So the true cost of a home is much much more than just the purchasing price, the cost of a home is the cost of financing on top of the price of the actual property. The cost of financing includes closing costs, loan discount points, and prepaid items.

Closing costs are the highest and most unavoidable costs of financing. Closing costs may be anywhere from two to eight percent of the entire cost of the home. Closing costs more simply defined are the costs that originate with the lender in creating a new loan for a home. The first closing costs come from the initial application of a loan by the simple costs of a credit check. The second closing costs are charged from the inspector who will inspect the home and do an appraisal, or a assessment of the worth of the property. The most prominent closing cost is to actually pay the loan officer through a fee called a loan origination fee. The actual list of closing costs is long. They also include up front insurance, taxes, and other fees that are minor do again do add up to a considerable amount or sum of the actual cost of the entire home. Which is a lot considering that homes are one of the most expensive things most buyers will ever attempt to own in their lifetime.

The second cost associated with financing a home is a cost that is dealing with the actual price charged from a lender for lending their money. Interest is a an actual form of payment to the lender for their offer of lending a loan. The higher the interest rate, the more money the lender will make if the loan is re-paid. So, a home buyer might find it in their interest to pay less interest over time by paying it up front. A lender will give the buyer an option to pay an interest point by some nominal fee. For example a lender might charge the borrower one thousand dollars to bring the interest down from eight to seven percent.

The final cost of taking out a loan are the prepaid items. A great example of a prepaid item is buying a car. Almost everyone who buys a new car from a car dealership will prepay for an extended warranty guaranteeing that if the car has serious issues the dealership will fix it at no extra charge. A home owner will want to prepay for possible disasters like a faulty foundation, or bad electrical, or poor plumbing etc. and will want to pay this before they move into the home allowing the payments to be part of a "warranty."

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Finding The Perfect Home For First Time Buyers

The housing market right now is hanging out somewhere in the basement. In other words, houses are cheaper now than they have been in a long time. This bodes poorly for people looking to sell their house or condo. It's a blessing, though, for first-time home buyers or people looking to buy a new home. Right now you can get houses for far less than what they would actually worth in a better economic state.

Sure, the unknown quantity of buying that first home is scary for everyone. They have never undergone this complex process, don't know what to expect and don't have a clue where to start. A loan application and placing an offer on a home seems way beyond the new home buyer's scope. Take it easy, though. There are ways to make it go smoothly even for the greenest home buyer.

The first thing that you should do when preparing to buy your first is to get a good relator on your side. This way you have someone to help you find the type of house that you are looking for that is also within your budget. They are able to quickly look through all the houses on the market to find the ones that you are likely to be most interested in. This can save you a lot of time and frustration by not looking at houses that are nowhere near what you are looking for.

Another good idea is to look into prequalifying for a home loan. Discuss with your bank the steps you need to take to get a home loan through them. Then research other mortgage companies and check out their rates. You are not obligated to take a home loan from your bank just because you generally do business with them.

You also must have a professional inspect any home you wish to purchase. This will save you from buying a home that needs most repairs than it's worth and may also put you way beyond your budget. Crumbling foundations, leaky roofs, plumbing problems and termite damage can all be hard to spot by the average person viewing the home.

Normally your realtor can put you on to a good, reliable inspector as they deal with this all the time. Also, a good inspector has a pretty good idea of which homes in the area you are looking have serious problems and which ones do not. Your realtor is also instrumental in leading you through the offer process. When you finally do find that dream home, your realtor will help you close the deal and you can get onto the really fun stuff, like signing two ream's worth of paperwork.

First time home buying shouldn't overwhelm you. If you get off on the right foot it's really a pretty structured process. Choosing your first home doesn't have to be scary. When it comes time for you to buy a house, get yourself a good realtor. Then enjoy looking at all the different houses on the market. Feel free to look at as many as you want and don't let anyone pressure you into settling. There are enough houses on the market right now that you have the luxury to keep looking. Some realtors even have connections to home builders who will build your first house to suit. It is a buyers' market. Go on, enjoy the search!

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Obtaining a Dream Home

Obtaining a Dream home is the biggest financial investment for anyone. For those people who are unable to find a good home in their budget, these foreclosure homes are best options for them. If you are able to invest carefulness and a bit of attention, you are able to secure comfortable home for your family. You can purchase foreclosure home at half of their original price, and you can find money lending companies are willing to support buyer like you.

If you are interested in purchase through a bank, then it is a good idea because almost every bank in this country is the leading home loan provider. You can ask the information about foreclosure homes listing that they are selling, and you can also get the information about the process. In most of the times, you will get perfect information from them because every bank is trying to sell these homes in a short time.

Are there any other resources available to purchase a foreclosure home? Yes, you can obtain information from the internet. All that you need to visit some websites in the internet, who offers these foreclosure homes. You can obtain some important details about these foreclosure homes by accessing a comprehensive list displayed in those websites.

You can find the information about these homes in your area, and also you can find them across the country. If you are able to provide some information like place, location and number of bedrooms and some other information, you will get a best deal for you.

And you can obtain some information from a local newspaper, where you can see in real estate section, especially, in weekend editions. If you are living in an area, where the country courthouses are located, then you can obtain some information from them.

Moreover, you can find some excellent information about these foreclosure homes from the department of Housing and urban development, and they are having their own listings.

Even you can find some information about these homes by viewing some billboards, flyers, and some other formats of advertisements. Sometimes, you can directly contact the homeowner to inspect the property and obtain sufficient information, in order to get a best deal.

After getting information from available resources, now you need to look for a finance to complete the deal. For those people, who are trying to obtain home loan from a bank, please be sure that, you are having a good credit score to secure a home loan.

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Purchase Or Invest In Foreclosure Homes

Foreclosure homes are the homes that are repossessed by the lenders because of non-consistent payment on mortgage. The foreclosure of a home happens if the home owner does not pay the monthly payments for three months.

This is being a very popular business these days to invest in foreclosure homes. Foreclosure homes have certain rules and if these rules are not followed by the homeowner, he has to leave the home after foreclosure occurs to the home.

It can be turned into a great deal to purchase or invest in foreclosure homes. The lender party always wishes to sale out the home as quickly as possible for them. The lender just wants to have his money back with any interest. You can negotiate on the cost of the home and sometimes you may get the home for up to 50 percent discounted cost of its actual value. All you have to do is to purchase the home and do some work for the maintenance and finishing of the entire house and then you can sale it out for a quite good amount.

You should look for the regular updated listings for these homes. Now there is tons of website that provides online and daily updated lists of foreclosure homes. They even provide the lists of foreclosure homes that are available in your area. Some newspapers publish the foreclosure lists that are in your local area. These foreclosure listing provider often gives the information like date, time and place of the foreclosure auctions that are going to be held in your area.

Before investing your money you must inspect the foreclosure homes. You may get aware with this about the value of the home. Get the refinance on the mortgage so you need not to pay the whole amount at a time. The bank or finance agency will refinance the loan and you will pay the monthly payments to the lender instead of paying the full amount. If you get the possession of the home then you are free to do whatever you want with this foreclosure home. You may sale it out for a price that will be the addition of cost of purchasing and your profit. Now you may pay the lender full amount of the foreclosure home. If you purchase this foreclosure home you should give attention to its basic structure as the minor or major damages, molding factors, lead paints and others.

Purchasing of investing in foreclosure homes can become a profitable deal for you if you know about the right foreclosure home that means what and where is available. You must inspect the foreclosure home before going to purchase it.

Be a smart buyer and investor by getting the advantages of foreclosure homes.

Find a regularly updated list of foreclosure homes. Get more information on foreclosure homes and repo houses

Buying a Second Home - Seven Steps Toward a Successful Purchase

Think about taking the plunge into second-homeownership? Whether you plan on buying as an investment, a getaway, or a place to eventually retire, take a moment to think about the seven most important steps toward finding and buying your dream second home.

One: Decide whether a second home makes financial sense

Whether or not you consider yourself an investor, you no doubt want your second-house purchase to be a sound financial move. Yet many second-home owners complain that the house cost more than they'd ever imagined. You'll want to tally up your likely expenses, work on building up your cash reserve, and, if you plan on renting out the property, determine how much you can expect from rental income.

Two: Decide where, and what type of home you'll buy

A home in a badly chosen location won't serve anyone's goals--the investor can't sell or rent it, the vacationer won't enjoy it, and the future retiree may have to pick up and move again. You'll need to rely on both market research and your own personal preferences. The type of home you buy is similarly important. The demands of owning a single-family home are different from those of owning a condominium, townhouse, or co-op. Which type of home serves you best will depend on factors such as cost, location, and upkeep. Finally, you'll want to look into unique possibilities such as a fixer-upper, a foreclosure, or a for sale by owner (FSBO) property.

Three: Understand tax implications before you take the plunge

Taxes on your second home come in all shapes and sizes, yet have one thing in common-they can be a burden. However, you can, with some advance planning, save thousands of dollars a year in taxes. For example, sometimes buying a home just over a town's border can significantly trim your annual property tax bill. Or, buying as an individual rather than as a separate business entity, such as a limited liability company (LLC), can mean taking the federal deduction for mortgage interest paid. And, if you sell your second home at a profit down the road, a 1031 Exchange can, in certain situations, help you defer paying the capital gains tax.

Four: Come up with short-term cash and long-term financing

Most people pay for their home with a combination of a down payment and a loan for the remaining amount. The higher your down payment, the lower the loan, and the more house you can therefore afford. In order to come up with down payment cash (ideally, 20% of the purchase price) you may need to get creative. Using equity in your primary home, borrowing against a life insurance policy, or refinancing your car are among the possibilities explored in this book. Most buyers will also need to get a home loan to help with the rest of the financing. The number of mortgage options available today could make anyone's head spin. And some of them may tempt you into highly risky behavior, such as paying only the interest you owe for several months or years, only to be walloped with a large, lump sum payment at the end of the loan period. However, by reviewing various mortgage options and sample payment schedules, and factoring in your own short- and long-term goals, you'll be able to choose a mortgage type that suits you.

Five: Consider Nontraditional Financing

With real estate prices at record highs, you may have a harder time affording a second home than your parents or grandparents did. One unique way to help finance your second home is to tap the "Bank of Family and Friends." That lets you keep the tens of thousands of dollars in interest you'll pay over the life of your mortgage loan within your circle of friends or family, rather than handing it over to a bank. Another money-saving approach is to partner with another purchaser, for example sharing a vacation home in the sun. With home prices rising and incomes fairly stable, sharing the purchase of a second home could easily cut your costs in half. A growing number of people have already discovered that partnering with a family member, a friend, or even a stranger who's looking to invest can make second-homeownership a distinct reality. You'll want to start by determining whether co-ownership with a particular person is likely to work, and draft a written agreement to deal with likely sources of contention in advance.

Six: Be Prepared If You're Planning To Be a Landlord

Some second-homeowners plan to rent out their properties long-term with the intent of eventually turning a profit, while others just want to rent out their property periodically as a means to offset expenses. Either way, you're taking on the role of a landlord, which means more than just following your instincts. Finding good tenants or trustworthy vacation renters, understanding and preparing leases or short-term agreements, and dealing with ongoing management and repairs are just a few of the issues involved with being a landlord. Also, the obligations of managing a long-term rental are quite different from those of a periodic rental.

Seven: Take steps to protect your second home investment

Whether you're buying a second home as a pure investment, for a weekend getaway, or as a place to enjoy your retirement, it's an investment all the same. And, a large one, at that. Protecting your investment starts before you buy and continues long afterwards. For example, you'll want to get a proper home inspection prior to purchasing the property, so as to deal with some repair issues up front and get a sense of what repairs may be looming. You may want to purchase title insurance in case problems such as past claims on the property surface after the purchase. And, your lender will require that you carry homeowner's insurance, to protect your property against damage from such causes as theft, fire, flooding, or windstorms. Taking these protective steps will not only guard your home, but your peace of mind.

Craig Venezia http://www.craigvenezia.com is a contributing real estate writer for the San Francisco Chronicle and the author of "Buying a Second Home: Income, Getaway or Retirement" (Nolo, 2007).

Panelized Home Loan

Have you ever wondered why penalized home loans usually cover up to 100 percent of the home cost? This is because penalized homes are so much faster and easier to build since they are made from high quality pre-fabricated materials. With penalized homes, the biggest equity that you need is 'sweat equity' because basically, you are making your own home.

Sometimes the actual down-payment that you make on a penalized home can go as low as $1000! This is a great way to approach home owning especially if you are buying land with the penalized house. When the time comes that you want to build a more stable, traditional house, you already have the land to build it on and can disassemble the penalized home.

With a modular home, you can be assured of the same comforts and protection that a regular home can provide. Since it is pre-manufactured and delivered and set up on site, this kind of home also goes under a special quality control check and regular inspection by the manufacturing company to assure you of its good quality and durability.

The only negative thing about penalized home loans to make your modular home is that collateral of considerable size has to be put up for you to avail of the loan. Banks and lending houses find penalized homes a greater risk to invest in because, unlike regular homes, a penalized home does not increase with value as it gets older. A regular, traditional home, however, is basically collateral in itself, and in the event that payments are defaulted, the value of the house loan can be redeemed through a resale of the foreclosed house.

For more great information on Panelized Home Loan visit our new website http://www.yourhomeloanguide.com.

Understanding Home Loan Refinancing Costs

Because of declining mortgage rates, many homeowners are choosing to

refinance their home loan. If your home was purchased when rates were

much higher, you may benefit from a new mortgage. Although refinancing is

an attractive mortgage feature, it is not always the best option.

Before refinancing, it is important that you understand the process.

Mortgage Refinance Information

A mortgage refinance creates an entirely new mortgage. This mortgage

replaces the old. Therefore the process is very similar to acquiring the

original loan. Getting a mortgage loan is an extensive process. You

have to review your credit, compare lenders, and pay fees associated with

mortgages. Common mortgage fees also apply to refinancing your home.

Why Refinance Home Mortgage Interest Rate?

Some mortgage experts suggest that the time to refinance is when your

current mortgage rate is about two percentage points above the market

trend. If you refinance with a one point different, the savings are small

and not worth the refinancing costs. This is a great option for those

who purchased their homes when mortgage rates were at 8 or 9 percent. An

interest rate drop will cause a reduction in your monthly mortgage

payment.

An additional reason for refinancing your present mortgage is to get a

fixed rate mortgage. Today, there is a variety of loan programs. These

include adjustable rate mortgages, interest-only mortgages, etc.

Initially, these loans carry low interest rates. However, because the rates

are not fixed, they may increase. As mortgage rates increase, so does

your mortgage.

Home Mortgage Refinance Costs

If you are hoping to get a fixed rate mortgage or a lower interest

rate, be prepared to pay closing costs and mortgage fees. The fees for

mortgages vary. On average, you can expect to pay 3 to 6 percent of the

total loan amount. This does not include down payments.

Typical mortgage fees include application fee, appraisal fee, hazard

insurance, attorney's fee, title search, home inspection, loan

origination fee, and mortgage insurance. To obtain a lower rate, you may have to

pay points. If you refinance with your current mortgage lender, some

fees may be waived.

See my recommended Home Mortgage Refinance Lenders for the lowest rates online.

Carrie Reeder is the owner of ABC Loan Guide.

Top 3 Best Reasons to Check Out VA Home Loans

As the economy suffers and homeowners find themselves caught in mortgages that cost more than their homes are worth, VA loans are becoming increasingly attractive. Whether for purchasing or for refinancing, VA home loans are undoubtedly the best choice in this current market for those who qualify. VA loans have numerous advantages over conventional home loans. Several of these advantages are outlined below.

1. The penalties of having a lowered credit score, lower income, or unstable debt history are lessened with a VA loan. What this essentially means is that lenders are more willing to trust you. They are more willing to take a chance lending money to you, even though you may not have an optimally high credit score.

2. The vast majority of VA loan are zero-down loans, which means you need literally no down payment to set the loan up. This can be advantageous if you can handle the higher principal payments over the course of the mortgage. If not, this may be an unwise idea. Either way, however, you have the option of no down payment, which is difficult to get in this market and provides you with a great deal of flexibility.

3. VA mortgages can be refinanced 100%, meaning that VA borrowers can always use their own home equity to get money for large-scale expenses such as college tuition or emergencies. Refinances can also be done under the VA Streamline program, which allows borrowers to skip the application and inspection parts of the process and speeds the money along. Often, the closing costs of the refinance are paid back later as part of the loan itself, which truly amounts to a low-cost or even no-cost refinance.

A VA loan is one of the best ways to take advantage of today's extremely low interest rates, whether you're planning to purchase or have the opportunity to refinance. If you qualify, VA loans can be extremely beneficial.

Krista Scruggs is an article contributor to Lender411.com. Lender411.com will locate the best mortgage rate in your area by connecting you instantly with up to four qualified lenders. Visit Lender411.com today to compare mortgage rates instantly.

Bad Credit Home Loans and Bad Loans for Homebuyers

After years of going without spa weekends, incredible sushi dinners, each year putting your vacation pay directly into your savings and NOT touching it AND buying all your clothes at Target, you, old wise one, have managed to scrape together enough cash for a down payment- OH MY GOD! You're finally going to be able to buy a house. Just think, no more apartment living and all the indescribable joys that come with it. It's been a grind, but well worth the sacrifice. Or so you think. Now you will actually get to hear yourself say honey, stop the car! as you do your weekend trolling, and patrolling, of the local real estate.

Sorry for the bubble burst, but this situation calls for the biggest set of personal antennas you can get your hands on, and once you get them you must have them up and keep them up.

It doesn't matter whether you're dealing with an agent or private party, they will say almost anything to sell, especially in today's depressed market, There are some key aspects to watch out for. A classic example would be remodels. Some are very well done, top-notch, state-of-the-art, blah-blah-blah. But don't forget, YOU'RE paying for that remodel-times two, possibly three if they think they can get it. If it's a home you're truly serious about, don't be shy.

Ask all the appropriate questions. Who did the remodel? Was it a licensed contractor or company? If so, who? Always get the name and card if you can. Does the home have a new plumbing or heating system? New roof? Name and card, name and card, name and card. You need to know who, or which company is responsible for what has been allegedly done to the home. If you can get a name you might try calling the individual or company to get a feel of their pricing over the phone. Some will be helpful because they want the business, others will insist on an in-house quote only, nevertheless, it's worth a shot.

If you are able to ascertain some remodel pricing you can then compare that against the price being asked for the home, and, of course, the comp's for that area. It is crucial to get the comp's. Chances are there will be some other homes for sale in the same area that are remodels with roughly similar square footage and amenities. Comparing the comp's will allow you to see where you stand and whether or not your dream home is more or less on the mark or simply the gauge of all time. If other similar remodels are coming in under yours, then hello bargaining chip. And don't be afraid to use it. Always ask for the order.

Something else to be on the look out for. Agents or private parties who want to sell the home as is, no inspection. Rule#1, no inspection, no deal. No exceptions. Common sense should be screaming that there's something awry in dreamland. Do the inspection. Do it with your guy, not theirs.

If you enter into a deal with no inspection and the gas heater explodes or the plumbing fails, it'll be your dime, baby. No where to run, no where to hide. I knew a couple who almost purchased an as is home. Luckily, they found out quite by accident the power plant down the block was seeping hazardous fumes into the ground running underneath the houses in the neighborhood. The current owners knew all of this, which is why they wanted to get their 2 year old daughter out of there, pronto. Conscientious? No. Crafty? Well, let's just be thankful the deal fell through.

The bottom line is, buying your first home is a huge decision and commitment, and as the potential buyer you deserve to have ALL the facts, BEFORE you buy.

So, the next time you pull up in front of what might resemble shangri-la, let the sellers come running out with arms-a-waving and lips-a-drooling. You, old wise one, just smile, hand them a kleenex and tell 'em, just the facts,man.

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A Guide to Get a Home Loan Refinance

There are many advantages of a home loan refinance. Staying for a longer period of time, home owners have developed a bit of equity on their home. There can be other ways to get value appreciation for the property. Even the homeowners who have purchased a property in the area where the values have been increased to a considerable level, they could still have potential equity on their home and use it for home improvement, or use it for debt consolidation. Potential problems have to be identified earlier.

The borrower must have understood the nitty-gritty of the loans before hand. They should have a clear understanding on what to expect from the loans. A home loan refinance is no way different from getting the first mortgage loan. Borrowers will make sure that they get the loan amount for lower interests and the lenders will make sure that borrowers are credit worthy before approving the loan. An open conversation with the lender might be useful in exploring all the options. A suitable package that exactly suits the needs must be identified by both the parties.

Borrowers must explicitly express their concerns and purpose of the home loan refinance. Most of them use it to consolidate their debts. Lenders will perform a credit check on the borrowers and on the co-borrowers account history and this is a crucial part of approving the loan. They will also check for the credit history, number of delinquencies, the number of open accounts and the balances on those accounts. A general thumb rule for any lenders is that a prospective buyer should not have debt to income ration that is higher than 36%. They prefer that the total housing expenses not to exceed 28% of the total income. They inspect the salary accounts for this reason. The income to debt ratio level may increase if the buyer has got good credit history in the past.

Making a larger down payment will help you in getting the loan even with bad credit. Borrowers must understand their credit risks and potential future risks before applying the home loan refinance. There should be no discrepancies while submitting the application.

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FHA Home Loans vs Conventional Home Loans

Before you ask your financial institution for a standard, conventional home loan, consider asking about a Federal Housing Administration (FHA) loan instead. In this article we'll cover the basics of an FHA loan, why you should ask for one and how they measure up to conventional home loans. Keep reading to learn more.

What is an FHA home loan?

An FHA home loan is still issued by a private financial provider, but it's insured by the Federal Housing Administration (FHA). Essentially, this provides the lender with greater security and you with lower monthly payments.

Why should I ask for an FHA loan instead of a conventional loan?

1. It's easier to qualify for an FHA loan. Because the mortgage is insured by the FHA and the U.S. Department of Housing and Urban Development, lenders are more likely to issue the loan.

2. You can still qualify with poor credit. Even with past credit problems like a bankruptcy, an FHA loan is easier to qualify for than a conventional mortgage.

3. A lower down payment. An FHA loan only asks for a 3% down payment, which is significantly lower than some banks' requirements of 10-20%.

4. The loan costs less in the long term than a conventional loan. Because the FHA can offer more competitive interest rates, you'll often receive lower rates which will save you a lot of money over the term of your loan.

5. FHA offers foreclosure protection. Unlike many lending institutions, the FHA doesn't want to see your mortgage foreclosed. So, they have a number of programs designed to help homeowners who are in trouble. This can be a great resource if you hit hard times.

6. Energy efficiency credits. The FHA allows prospective homeowners to include the cost of energy efficiency upgrades into their mortgage, meaning you can get extra cash to make your new home more energy efficient.

How do I qualify for an FHA loan?

1. You must meet the basic FHA credit rating requirements. While these are lower than most banks and lending institutions that offer conventional loans, you'll still be subject to a credit check.

2. Your mortgage must not exceed the maximum amount available in your county. On their web site at http://www.hud.gov, the U.S. Department of Housing and Urban Development maintains a list of maximum amounts sorted by county.

3. The property you're buying must not exceed four units.

4. The potential property must be appraised and inspected. You can subtract the cost for this from your down payment requirements.

All in all, an FHA loan works out to a much better borrower's deal than a conventional loan.

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Refinance Home Loan Associated Costs and Fees That Will Shock You

Refinance home loan: Costs discovered

Many individuals who refinance home loan can be surprised that as they go through the process, they discovered the many different costs associated with it. One reason why is because they tend to forget that to refinance home loan is like reliving your first loan application.

Refinance Home Loan Costs

You might not be aware of this fact, but when you are dealing with home loan refinancing costs, you are obliged to pay at least three percent of the remaining balance of the principal.

This figure might sound like it's a lot, however, it actually is even less that what you paid for when you first acquired your home loan - it's just like experiencing the loan application again.

Indeed there are many loan fees that you will be required to pay. Such fees actually vary from state to state. There are also differences when dealing from one lender to another. Do you know that some of the home loan fees are just 15 to 20 dollars in one area, while in a different location, they can be as high as 100 dollars?

The most common refinance home loan fees are the following:

1. Appraisal fee

2. Application fee

3. Review fees

4. Home owner's hazard insurance

Additional Fees That You Should Be Aware About

Apart from these fees, you will likewise be paying for other additional fees such as home inspection fees, title insurance and title search, loan origination fees and mortgage insurance. Once you sum up all these fees, you are definitely looking at a figure that will run up to a thousand dollars or more. However the true amount will be dependent on the type of refinance home loan that you will apply for. It also largely depends on the loan principal amount left.

One important fee that many people ignore when to refinance home loan are the pre payment penalties, which are associated when calculating the home refinance cost and expenses.

There are instances when you are fortunate not to be burdened with such fees. However, there are actually many loans that have these pre payment penalties written in order for them to receive payment once you decide that you want to pay off the home loan sooner or if you have opted to refinance home loan.

Can Certain Fees Be Waived?

Sometimes some of the fees might be waived by your lending agent or company; it is just a matter of requesting them for such favor. Indeed, there are many borrowers who are not aware of the fact that lenders are more than willing to waiving loan fees, or at least reduce them significantly, in order to accommodate more clients by making refinance home loan costs more affordable.

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Where Do VA Home Loans Come From?

Whether refinancing or purchasing, many VA home loan borrowers don't concern themselves with where their funding comes from. However, understanding the VA Loan Guaranty Program and who funds VA loans can be helpful to VA-eligible borrowers.

A VA home loan might also be considered a VA "guaranteed" home loan.  A certain amount of the mortgage loan is guaranteed by the federal government. The VA Loan Guaranty Service administers the home loan program within the Veterans Benefits Administration of the U.S. Department of Veterans Affairs. The money used to purchase or refinance homes doesn't come from any of these government entities; rather, a VA loan is originated and funded by VA-approved private lenders such as banks, savings and loans or mortgage companies.

VA-eligible borrowers can get VA mortgages as part of their veterans' benefits.  VA loans help veterans and active military personnel to purchase and keep homes in recognition of their service to our country. Homes purchases with VA financing must be occupied by the VA-eligible borrower.

Advantages to VA loans over conventional loans may include the following: 

o Equal opportunity loan 

o Zero money down

o Appraised value available to buyer

o Negotiable interest rate

o Funding fee may be financed

o Equal or lower closing costs compared to other loan programs

o No private mortgage insurance (PMI)

o Assumable mortgage

o No penalty for prepayment

o Construction inspection comes with builder warranty and VA assistance to work with builder on any problems that are revealed by inspection

o VA counseling for veteran mortgage holders in financial distress

Most veterans and active military personnel who are VA eligible find that VA home loans are the best option for home loans. VA home loan requirements can be generally easier to qualify for because credit and income standards are less strict than those of other programs. In most cases, no down payment is required for a VA home mortgage. The fact that no PMI is required with a veteran home loan saves VA-eligible borrowers substantial amounts of money each month.

The already great benefits associated with VA home loans are even better thanks to the new law made by the Veterans Benefits Improvement Act of 2008 passed in October of the same year.  The new law increases the VA loan guaranty to $729,750. And, for military personnel qualifying for a VA loan, up to100% of the appraised value of a home can now be refinanced. 

The new VA loan guidelines help private lenders determine how much to lend.  Lenders have to comply with VA income and credit standards; however, lenders can establish more conservative lending policies.

VA approved lenders must charge a lending fee as required by the Department of Veterans Affairs. The fee varies from zero to 3.3% of the loan total.  The funding fee can be worked into the loan so the borrower still pays nothing down.

Veterans who are 10% disabled, or greater, as a result of active military service are exempt from the fee.  Those not exempt can lower the fee by making a down payment.

VA loans are originated and funded by approved VA lenders and guaranteed by the U.S. Department of Veterans Affairs. Lenders must ultimately agree to the terms of each loan. For more information on VA loan programs please see the VA home loan guide.

The Advantages of VA Home Loans

VA home loans prove to be an advantage if you are eligible for one. This loan program was started in 1944 helping returning servicemen in buying their own homes. Serving the military offers many advantages, including finding it easy to get a home loan with 100% financing.

How does it work?

The application process for VA financing is actually the same as with many other mortgage loans. In fact, the VA application form is the same as that used for HUD/FHA and conventional loans. The mortgage lender verifies the applicant's income and assets, and obtains a credit report. Even if you have a poor credit rating, you can still be eligible for a VA home loan.

The lender first analyzes your credit history to find out if you have been making all your credit and utility payments on time. And even if you have been delinquent in your payments, you can work things out with your lender and at most, you may have to make a down payment for the loan.

Are there any fees?

There are no expensive fees to be paid for the processing of the loan. However there are some associated costs you have to pay like appraisal fees, compliance costs and recording fees. For all VA home loans, the funding fee may be paid in cash or it may be included in the loan.

It is important to recognize that while the VA appraisal estimates the value of the property, it is not an inspection and does not guarantee that the house is free of defects. Home buyers should hire a reputable inspection firm to conduct the inspection.(Fees can vary) VA guarantees the loan, not the condition of the property.

The appraised value of the property needs to be enough to cover the loan needed. The lender can then, in most instances, close the loan under VA's automatic procedure. Only about 10 percent of VA loan applications have to be submitted to a VA office for approval before closing.

Who is Eligible?

If you have been honorably discharged from the military then you are likely eligible for the loan. There are other requirements you have to fulfill for the loan, which vary with whether you served full time or in the reserves. Contact the local VA office near you to find out exactly what documents you will need to establish your eligibility.

Sandra Eriksen is the owner of many websites devoted to sharing valuable information. For more articles and resources on different types of mortgages and loans please visit her site at [http://www.loaninfosecrets.com]