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How do you buy a house that needs repairs before a bank will lend money?

September 27, 2009 by  
Filed under Featured

Home Repairs Needed

Most people can’t pay cash for a home, even if it is a discounted foreclosure property. That means you need a loan. But, banks don’t want to lend on a home that is not livable. So does that mean you can’t buy distressed properties? Are the deals off limits?

The Federal Housing Administration (FHA) has a loan program just for this situation. It is called a 203(k) loan. These loans are designed to help improve homes and neighborhoods. However the process is quite involved. You need many expensive professionals to help you through the process. You will need plans approved. The money is released as the work progresses and you meet project milestones. It is a process designed for large projects.

For many the red tape is daunting. FHA later realized there was a need for a simpler process. They developed the Streamlined 203(k) program. It won’t work for all projects. There are loan limits, and the scope of the work is limited. It is the 203(k) but simpler. You are limited to $35,000 in repairs. But for many of the homes out there that is enough money to complete the project. The biggest issue is the repairs can’t be structural or involve termite damage and stay within the Streamlined program. For that you will need the full 203(k) loan and process.

Here is what FHA says about the Streamlined 203(k) loan program:

What improvements are eligible under the new Streamlined (k) program?

The Streamlined (k) program is intended to facilitate uncomplicated rehabilitation and/or improvements to a home for which plans, consultants, engineers and/or architects are not required. The Streamlined (k) program includes the discretionary improvements and/or repairs shown below:

  • Repair/Replacement of roofs, gutters and downspouts
  • Repair/Replacement/upgrade of existing HVAC systems
  • Repair/Replacement/upgrade of plumbing and electrical systems
  • Repair/Replacement of flooring
  • Minor remodeling, such as kitchens, which does not involve structural repairs
  • Painting, both exterior and interior
  • Weatherization, including storm windows and doors, insulation, weather stripping, etc.
  • Purchase and installation of appliances, including free-standing ranges, refrigerators, washers/dryers, dishwashers and microwave ovens
  • Accessibility improvements for persons with disabilities
  • Lead-based paint stabilization or abatement of lead-based paint hazards
  • Repair/replace/add exterior decks, patios, porches
  • Basement finishing and remodeling, which does not involve structural repairs
  • Basement waterproofing
  • Window and door replacements and exterior wall re-siding
  • Septic system and/or well repair or replacement

What are the minimum and maximum amounts for repair costs under this program?

Given the need for homeowners to make minor repairs without exhausting personal savings, and in consideration of the increasing cost of materials, the minimum repair cost of $5,000 is eliminated and the ceiling is now raised to $35,000. This revised maximum repair/rehabilitation amount recognizes the cost of making older homes more energy efficient. Note that as described below, when the repairs exceed $15,000, the mortgagee must perform or obtain an inspection to determine that all listed repairs were completed.

If you are interested in homes that will require repairs, then keep this program in mind.

The likely process for streamlined is

  1. Get loan pre-approval with a lender that does 203(k) loans
  2. Search for bank owned homes with our free and easy online search engine
  3. We go together to see in person the homes that interest you
  4. Once you have narrowed your search to a house you might pursue you need to figure out how many dollars of repairs it will take
  5. Make an offer with FHA disclosures and 203(k) indicated
  6. Offer accepted
  7. Contractor quote
  8. Appraisal
  9. Loan process
  10. Home purchase closing
  11. Contractor begins work
  12. First payment to contractor made
  13. Repairs completed
  14. Final inspection
  15. Final payment to contractor made

Take the next step. Contact us for lenders that do 203(k) loans and get pre-approved.

Here is the full document from FHA that documents the program:

Ask for help setting up an automatic home search

September 26, 2009 by  
Filed under Quick

Robot Pillows

A great feature of this website is the automatic home search. You can set this up yourself, or ask us for help. Here is a sample of what I will ask you to get started. This is based on a real email I’ve sent, with the details changed to protect my visitors privacy.

Hello,

I received your request today for help setting up the search robot. I
would be glad to help.

I will need some information to make this useful. We can start off
general, and make the search more specific as we learn more about what
you are looking for in a house.

The home you mention is in Reisterstown. Do you want to limit to
Reisterstown, or cover a larger area? We can center around a location,
like your place of work. We can center on Reisterstown, but zoom out
for a larger area. So first question: What area to search?

The home you were looking at started at $425,000 and has dropped to
$395,000. So question number two: What price range are you looking in?

This home is a detached home. Condos and townhomes are other choices.
So third question: Limit to detached homes?

This home is 3 bedrooms with 2 and a half baths. Is this the minimum
to search for? Fourth question: How many bedrooms and baths?

This home is on a quarter acre of ground. We don’t have to limit this,
but if you like we can find only homes with a certain amount of
ground. Do you want a lawn, or less grounds to care for?

That is good for a start. I will take your answers and setup an
automatic search. Every time a home that meets your criteria comes on
the market, you will get an email. It is a great way to keep a low key
home search on simmer. When something catches your eye, or if you are
ready to look in earnest, we can show you the homes. We arrange
private tours of the homes you choose. Some homes look much better
than their pictures. Seeing the homes in person is one of the exciting
parts of home shopping.

Thanks for stopping by my site at www.HelpShop.com. I hope my
questions put you on the right track for your home search.

In the meantime, I realize you are currently in the information
gathering stage, and may not be ready to “open up” about who you are,
or what your needs are at this time. Be assured this is perfectly
okay, and that Maggie and I will completely respect your online
privacy.

Also, keep in mind that my ability to help you is dependent upon
understanding your particular needs and wants with respect to finding
a home. So when you are ready to explore your real estate needs
further, I will be happy to assist you.

Have a great day, and I look forward to hearing from you.

Peter

Peter Baumbach, Realtor
Long & Foster Real Estate Inc.
Graduate Realtor Institute
peter@helpshop.com
www.HelpShop.com
410-317-7662 (Direct)
410-795-9600 (General Office Line)

Take the next step and send me an email.

Photo credit, Jelene Morris.

How to know more about security deposits than most Maryland landlords

April 28, 2009 by  
Filed under Quick

Comments Off on How to know more about security deposits than most Maryland landlords

Fells Point Door KnockerMaryland law has strong tenant protections, while also giving rights to the owner. As a landlord or tenant, knowing the law will reduce conflict and worry. The law sets down the rights and responsibilities of all parties. Following the rules makes everything easier. When people are treated fairly, and there are rules that set the ground rules of what is fair, there will be less misunderstanding and hard feelings. If you don’t know the rules, it is easy to break them. Breaking these simple rules can be costly.

This excerpt from rentlaw.com should show you why visiting their site is a good idea: “The total amount of the security deposit may not be more than two month’s rent or $50; whichever is greater. If the tenant is charged more, s/he may recover from the landlord up to three times the excess amount and reasonable attorney’s fees. The tenant may demand refund of this excess at anytime while s/he lives in the rental property or within 2 years after s/he moves away.” Also keep in mind that “Any rent that is paid in advance is considered part of the security deposit and is subject to all the restrictions”.

The Washington Post also explains: “After the day your tenancy ends, your landlord has 45 days to return your deposit (plus interest), minus any costs incurred to repair damages.”

The Maryland State Law Library has details on the law written in plain language. It covers the security deposit topic, and many other topics of landlord – tenant law.

This information is not legal advice. For application of the law to your individual circumstances, you should consult an attorney. The information quoted here can and should also be verified by visiting Maryland State Law Library Sources of Maryland Law.

Immigrate to the United States by investing in real estate

April 18, 2009 by  
Filed under Quick

American Flag

Citizens of treaty nations with the United States may be able to get a visa and then Green Card for residency in the United States by investing in real estate. It is difficult to get permission to enter the US as an immigrant, but this looks like a strategy that people are using successfully. You would definitely want to get advice from an immigration lawyer before trying this. But here is the strategy as I understand it:

  1. Buy at least $100,000 of investment real estate in the United States
  2. Get an E-2 investor visa
  3. Travel to the US to manage your real estate investment
  4. You can continue to renew the E2 visa without limit.

But you cannot get a Green Card with an E-2 visa. There is more to the strategy, however, to solve that:

  1. While in the US with the E2 visa, open a company abroad and become an executive of that company
  2. Apply for a change of status to change your visa to an L-1 visa
  3. Wait a year
  4. Apply for an EB-1 Green Card as a manager of your company

There are technical requirements and restrictions that have to be met to make this work. Read more about this strategy at us-immigration-explained.com. If you want to hire an immigration attorney for advice, you can try immigration-investor-visa.com.

E-2 visa Treaty Country List

  • Albania
  • Argentina
  • Armenia
  • Australia
  • Austria
  • Azerbaijan
  • Bahrain
  • Bangladesh
  • Belgium
  • Bolivia
  • Bosnia & Herzegovina
  • Bulgaria
  • Cameroon
  • Canada
  • Chile
  • China (Taiwan)
  • Colombia
  • Congo (Brazzaville)
  • Congo (Kinshasa)
  • Costa Rica
  • Croatia
  • Czech Republic
  • Ecuador
  • Egypt
  • Estonia
  • Ethiopia
  • Finland
  • France
  • Georgia
  • Germany
  • Grenada
  • Honduras
  • Iran
  • Ireland
  • Italy
  • Jamaica
  • Japan
  • Jordan
  • Kazakhstan
  • Korea (South)
  • Kyrgyzstan
  • Latvia
  • Liberia
  • Lithuania
  • Luxembourg
  • Macedonia
  • Mexico
  • Moldova
  • Mongolia
  • Morocco
  • Netherlands
  • Norway
  • Oman
  • Pakistan
  • Panama
  • Paraguay
  • Philippines
  • Poland
  • Romania
  • Senegal
  • Singapore
  • Slovak Republic
  • Slovenia
  • Spain
  • Sri Lanka
  • Suriname
  • Sweden
  • Switzerland
  • Thailand
  • Togo
  • Trinidad & Tobago
  • Tunisia
  • Turkey
  • Ukraine
  • United Kingdom
  • Yugoslavia

Credit Score rules have changed. How does it impact you?

February 6, 2009 by  
Filed under Quick

Piggy Bank

The Fair Isaac Corporation (FICO) changed the rules this Thursday February 5th on how credit scores are calculated. Ironically they are calling the new rules FICO 08 since they were supposed to release them in 2008, but they were late.

Here is a list of some of the changes:

  • Problems with the payment history of debts under $100 now have less impact on your credit score.
  • Problems with larger debts now have a larger impact on your score.
  • Isolated issues with debt will have less impact, as the overall debt picture becomes more important.
  • The existing rule, that the smaller the ratio of existing debt to available debt the better your credit, has become more important.

Today’s lending climate has increased the importance of your credit score in the interest rate, options, or even availability of a mortgage. If you have any issues, talk to us sooner in your home search, rather than later. We can put you in touch with some very helpful lenders that can coach you in improving your credit at no charge. Overall improving credit takes time, so the earlier you start, the more impact you can have. The end result of great credit is substantially lower monthly payments on a mortgage.

NewsChannel5 Via Consumerist.

Photo credit, Fortyseven.

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