Thursday, January 01, 2009

Reaping repo rewards - BUY FORECLOSURES WITH NO MONEY DOWN. 100% Financing is NOT Gone

Reaping repo rewards

Want to brave the wild world of foreclosures? Follow this advice.
By David Whitford, editor at large - December 24, 2008

NEW YORK (Fortune) - As home prices continue to skid and foreclosure rates soar (up a further 38% since the third quarter of 2007), some investors are on the lookout for outrageous bargains. Think you're ready to jump in?

Consider paying cash
Some transactions require that you close within days. That's not enough time to get a bank loan. A so-called hard-money loan is an option, but you'll pay 15% plus points, and you can't count on refinancing right away.

Perform due diligence
Foreclosures are typically sold as is, where is, but you can inspect the property before you bid. Even after you put down a deposit, you can change your mind and get your money back. Private auctions typically offer a bigger window for deliberation than public auctions on the courthouse steps.

Hire a licensed appraiser
You don't care how much the lender has discounted the note; all that matters is how much the house is really worth. Only an appraiser can tell you that. Could cost you a few hundred dollars to find out. Could save you a few hundred thousand dollars once you know.

Buy short
Instead of foreclosure, buy what's known as a short sale - a negotiated transaction involving you, the bank, and the homeowner prior to formal foreclosure. You'll have more time to arrange financing - and since the lender has fewer costs to recover, you may get a better price. Check public NOD (notice of default) listings for prospects.

And probably the best option yet, buy a foreclosed home through a private lender who offers 100% financing wth great terms. You don't have to go through all the formal bank processes nd the transaction is ten times more simple than going through a conventional bank.

Parts of this article are contributed by Laura Boyajian.

Refi Madness & Buying a House with NO MONEY DOWN in Today's Market

Refi madness - Falling interest rates are leading to a rush to get cheaper mortgages. Should you join in?

By Les Christie, staff writer ~ December 26, 2008

NEW YORK ( - Falling interest rates are fueling a mortgage refinance frenzy as homeowners rush to reduce their housing payments.

The average rate for a 30-year, fixed mortgage dropped to 5.08% last week, according to the Mortgage Bankers Association, more than a full point lower than just a month ago.

Mortgage applications were up a whopping 48% last week, according to the MBA and more than 80% were from homeowners looking to lower housing costs.

"It's snowing loans," said Steve Habetz, a Connecticut mortgage broker, "and they're all refis."

Among those were Elizabeth Mayer and Michael Keohane, who bought their Manhattan condo just a little over a year ago, financing $220,000 of the purchase price with a 30-year, fixed rate loan of 6.5%. That was affordable, with monthly payments of less than $1,400. But their new 5.25% loan will lower their payment to about $1,215, saving about $175 a month.

"It was a nice holiday gift," said Mayer.

With savings like that, it's no wonder that homeowners are coming out of the woodwork. And mortgage brokers are beating the drums too, advising their clients to let the good times roll.

Mayer said her mortgage broker had kept her informed of interest rate declines ever since she originally purchased her home. "He's been encouraging whenever opportunities arose," she said. "We missed one opportunity last spring when we just weren't able to act on it."

The real estate broker made sure they didn't miss this chance. "He e-mailed me [about it] from South Africa and called when he got back," said Mayer.

Who should refi...
Anyone with high adjustable-rate loans. Folks in this group should try to get into a low fixed rate if they can. Not only will they lower their payments immediately but it would also eliminate the possibility of future increases.

Those who would lower their rate by a percentage point or more. Borrowers who already have a reasonable fixed rate shouldn't jump into a new loan every time rates inch down, according to Orawin Velz, an economist for the Mortgage Bankers Association.

"You should have at least a percentage point difference before you even think about it," Velz said. "If you have a 6.5% loan right now, it would be a great time to refi."

Waiting for a substantial rate decrease makes sense because getting a new mortgage incurs some expenses. There are the costs of a new appraisal and origination and application fees. Plus, a title search and title insurance are usually required.

All those costs, which can add up to $2,000 or $3,000 or more for a typical $200,000 loan, are often rolled back into the mortgage, increasing the principal upon which the interest rates are applied. If that goes up so much that it offsets the interest rate drop, it doesn't make sense to refi.

Those who are planning to stay in their homes for a while. The increased balances usually take a year or two to be wiped out by lower monthly payments, so anyone planning to sell the home during the next few years probably should not refinance, unless the difference in interest rates is very substantial.

The actual rate borrowers get depends, just as with purchase mortgages, on credit scores, income and assets and the value of the home.

"If you have a high credit score and your equity is good, it's like a vanilla cream puff," said Velz. "You're going to get a great rate."

Borrowers with significant equity in their homes. Many homeowners have had much of their home values erased in the post-bubble bust, eliminating much or all of their home equity - the difference between the value of the home and the amount owed on the mortgage.

If a refi borrower's home equity has fallen below 20% of the total appraised home value, the borrower will likely have to purchase private mortgage insurance. The insurance adds a point or two to the monthly mortgage costs, which turns a 5% loan into a 6% or 7% loan, erasing any advantage of refinancing.

"That's the biggest hurdle for refinancing right now," said Velz.

Borrowers who don't think rates will decline much further. Everyone considering refis has to decide whether to wait for interest rates to go even lower, which the Mortgage Bankers Association has been forecasting.

That's only a prediction, though, not a certainty. Rates could turn higher instead.

Borrowers must weigh the advantages of gambling on rates turning around or locking in savings at the present very low rates.

Buy a foreclosed home with no money down, even in today's market. 100% financing isn't to impossible to come by if you go with private financing.