Bank Loan Requirements – Owner Occupied Homes

Bank Loan Requirements – Owner Occupied Homes

Owner occupied properties generally secure mortgages that are to be used as the owner’s primary residence, according to the Federal National Mortgage Association (Fannie Mae or FNMA). In other words, these are homes where the owners affirm that they intend to live the majority of the time.

In today’s market, lending institutions are extremely cautious about offering real estate loans. Stricter underwriting guidelines, a greater demand for loans, federal rule regulations, and transaction costs all play a role.

Owner Occupied Loans

Owner occupied loans are secured by the first mortgage in Wisconsin or a deed of trust in other states, on the property, usually by the borrower who will be living in the home. The monthly payments cover the principal and interest payments on the loan. Banks typically require that the owner live in the dwelling 50% -100% of the time. Owner-occupied loans are typically priced with long-term, fixed rate interests. For several years, the financing and purchase of real estate has been an incentive to buyers.

Owner occupied loans have become increasingly popular over the years. Properties available through agencies, such as Madison Wisconsin Home Sales, create exciting opportunities for home purchases. Lending institutions recognized some security in providing loans to buyers where the real property may be used as collateral. Usually there is less risk for the lending institution because it is less likely the borrower will abandon their home.

Underwriting and Second Home Guidelines

In order to experience a smoothly running loan transaction, it is necessary to understand the underwriting guidelines and the definition of an owner occupied loan. The majority of loan agencies provide underwriting based on annually published FNMA guidelines. It is also possible for co-signers and mortgage guarantors to be included as owner-occupants, even when they are not living in the home.

The features of an owner-occupied mortgage vary from the investor type to the second home variety. Home buyers need to understand the rules governing both types in order to avoid problems with underwriting and the possibility of being denied for a home loan.

Second-home mortgages are usually located in an area that is considered a resort or vacation area, usually more than one hundred miles away from the main home. According to guidelines, the property may not include any form of rental agreement, nor may it be managed by a company; otherwise it would be considered an investment property mortgage.

Since loans are usually lower for owner-occupied mortgages, underwriters are aware that investors may be attempting to borrow at a lower rate by falsely buying or refinancing a home as a secondary or a primary dwelling. The underwriters apply FNMA tests on the property to ensure true occupancy procedures. With the possibility of loan rates being adversely affected, it is essential to note that mortgage fraud is a federal offense and severe penalties can apply.

Bank Loan Requirements – Investment Property

Bank Loan Requirements – Investment Property

By definition, the financing of investment-property involves a credit arrangement that allows the purchaser the opportunity to buy real-estate property for the purpose of generating income. Investment properties are intended to create income through rental earnings or capital-gains, either by buying the property with the intention of refurbishing and selling it at a profit, or using it as rental property. Properties that fall into this category include: apartments and condos, IRS and commercial properties, single family dwellings, ‘fixer uppers’, HUD and foreclosures, such as Madison foreclosures. Investment purchases require special financing.

Investment Property Loans

Investment properties involve funds that are borrowed with the intention of purchasing investment real estate and ultimately renting out the property to tenants. Lending institutions categorize this type of purchase as an investment-loan, and it is handled differently than underwriting for an owner-occupied loan.

Neighborhood banks sometimes provide better terms and seller financing has gained in popularity. Many investors are realizing the renewed potential in the residential real-estate market.

It is necessary to note that the credit market has become much tighter than in recent years, and it has become somewhat more difficult to procure a secure investment loan for income property. The upside is that with some foresight and ingenuity it is possible to acquire an investment real estate loan.

Tips for Financing Residential Investment Property

Many mortgage companies are reluctant to consider investment property loans. Plan on starting with a reasonably large down payment, as it’s usually necessary to put at least twenty percent down in order to obtain conventional financing. Twenty-five percent down may allow the buyer an even better interest rate.

It also helps if investors have a solid credit score as this has a positive influence on financing prospects and credit terms. In many cases, it is necessary to have a bank reserve that will cover, at the minimum, a half a year’s worth of expenditures (for both personal and investment spending).

The loan process for investment property financing includes different options depending on the buyer’s financial position and the lending prospects. Financing may be through a fixed-rate mortgage, adjustable rate mortgage, and interest-only mortgages, or it may involve balloon payments.

Choosing a Suitable Lender

Rates will vary according to the investment property loan, lenders, and the down-payment terms. Conventional lenders traditionally charge lower rates than many specialized investment-mortgage lenders. For this reason, it is necessary to select the lender that is best suited to your needs. An investment property mortgage calculator will allow you to compare the rates that are provided by different lenders. There are some financial institutions that cater specifically to certain types of properties. Prospective buyers also have used several creative possibilities for financing investment properties.

Are You Buying Property – Location

Are You Buying Property? Seek Promising Locations

With home prices down and interest rates likewise, 2013 looks like an excellent time to buy residential property. Whether you’re looking at Madison foreclosures or more standard house sales, you’ll find a selection of properties to choose from. Of course almost every buyer dreams of purchasing not just a good deal but a great one, a property that will not only maintain its value but increase relative to the Madison Wisconsin home sales market in general. There are a few tips that can help you choose a promising location, for an investment in property that is most likely to pay off.

Clarify your Situation

In the real estate market, there are two items on every potential buyer’s agenda that need to be crystal clear. The first is the potential purchaser’s budget, including both cash on hand and the amount of mortgage funds you are eligible to receive. The second is your purpose in buying the property. If you say it is an investment, that term should be further defined. Are you planning to rent the home out as an income property? Is your intention to “flip” the house – purchase it in a rundown condition (possibly one of the Madison foreclosures that are sold “as is”), renovate it and resell at a tidy profit? Or do you mean to live in the home for a number of years, hoping that it will increase in value?

Location, Location, Location

Choose the location according to your plans for the property. For example, if you would like to rent to students, look at properties within an easy commute of a university; compare typical rents for the area with the amount you hope to receive. A short term vacation rental should provide easy access to popular tourist attractions. A flip will be most successful if it is located in an attractive middle to upper income neighborhood. And if you intend to live in the house yourself, find an area where you and your family will be comfortable and safe, even if it is an up and coming neighborhood.

Dos and Don’ts

Purchasing a home in an area that is coming up in the world can be a very wise move. Assess the neighborhood carefully to see whether it possesses features that lend themselves to revitalization. By the same token, avoid a district with serious drawbacks that are not likely to change. For example, an area that has gracious homes set back from the street is more apt to appreciate in value than one located next to a noisy train line. Compare figures for recent Madison home sales in several neighborhoods to see if you can spot an upward trend. And talk to the professionals – real estate brokers – to see which locations they recommend.

Are There Closing Costs When Buying a Home With All Cash

Are There Closing Costs When Buying a Home With All Cash?

Buying a home with all cash is certainly an accomplishment, and there’s nothing like the secure feeling of owning your own home free and clear. In today’s volatile Madison Wisconsin home sales market, a number of buyers are skipping the mortgage application process and making all cash offers on home purchases. Of course this makes their offers much more attractive to the sellers, who know that cash buyers are in a position to close a deal quickly. But speaking of closing, how does that pan out? Are there any closing costs when a home buyer is paying all cash? The answer is: yes and no. There will still be certain closing costs to pay – although you will avoid some closing costs entirely, while others will be reduced.

Closing Costs You Won’t Have to Pay

Many of the traditional closing costs stem from the home loan process. As an all cash buyer you will avoid the expense of the mortgage application itself, as well as assorted loan origination fees, and the bank attorney. You won’t be required to pay for an appraisal for the bank, although many realtors skilled at Madison home sales recommend that you have one done anyway, to make sure you aren’t paying more than the house is worth. The cost of title insurance will drop by about a third, which is the portion that normally protects the bank’s interest.

Other Closing Costs

The remaining closing costs are not mortgage related. They include title insurance (minus approximately one third), escrow fees and transfer taxes. In the case of a condo, you’ll also have HOA transfer fees. However, there’s a saying in the real estate business: cash is king. Home sellers love the simplicity and security of all cash deals. Because of this, you may well persuade the seller to cover these closing costs as part of the negotiations. All you will have left to pay are the annual property taxes, prorated according to the date you take possession, and recording fees.

Additional Advantages to Buying with All Cash

As well as your savings on closing costs, there are additional advantages to buying a home with all cash. You may get a price discount from a homeowner who is eager to sell fast. You bypass the complicated and lengthy process of applying for a home loan. This is especially important if you are less likely to qualify for a mortgage – as a retiree, a non-American citizen, a real estate investor or a person with a shaky credit history. You have a great chance of beating the competition to buy Madison foreclosures, if there are multiple offers. And you’ll have no restrictions on title transfer in the future.

How Long Does Buying a Home Take

How Long Does Buying a Home Take?

The question of how long the home buying process takes is a tricky one to answer, because there are several steps and a number of variables involved. If you are looking into Madison Wisconsin home sales, you will see that from the time of the contract until you actually take possession is usually about 30 to 60 days. Of course you need to add to that the amount of time it will take you to find the right home for you in the first place, which could be anywhere from a few days to months. However, while the length of your home purchase process can’t be predicted exactly, there are a few things you can do to speed up the procedure.

Get your Financial Act Together

Figure out how much cash you have on hand to put towards a home purchase. Then collect the documentation of your financial status (proof of income, last two pay stubs with year to date figure, last two years’ income tax returns and W2s, deed to your current home – if applicable – and credit history) so that you can go to a local mortgage lender who works with Madison home sales and prequalify for a loan. This will give you an accurate picture of how much home you can afford, and will also put in you in an excellent position to make a deal quickly once you have found a home you love.

Decide What’s Important

House hunting will be a lot smoother if you – and anyone making this major decision with you – know what you want. Settle on your priorities before you are out in the field visiting open houses. Decide, also, what you would be willing to compromise on if something has to give.  For example, you and your family may be prepared to settle for a smaller house in order to live in a premium neighborhood. If your purchase depends on selling your present home, work out the minimum price you are ready to accept, and decide whether you’d be okay with renting for a few months, if necessary, between vacating your old home and moving into a new one. Flexibility can be the key to a fast purchase.

Making an Offer

Once your finances and your priorities are in order, you are in an excellent position to buy a home. Call a broker and start viewing homes. You may wish to see both Madison foreclosures and private sales, or concentrate on only one type. When you find “the” home, make a reasonable offer and let the seller know that you already have done the financial footwork. If your offer is accepted, you will be ready to move ahead with the contract and your loan application ASAP.

How Much Should I Offer When Buying a Home?

How Much Should I Offer When Buying a Home?

So you’ve found a home for sale that you really like? Congratulations! Now you need to figure out how much to offer. This can be a tricky calculation – making too low an offer may turn off the sellers and put you out of the running as a potential buyer, but on the other hand you naturally don’t want to overpay. A real estate broker with up to date knowledge of Madison home sales can help to guide you here, but in the end you will have to decide how much to offer. There are some important factors to consider when working out the amount of your offer.

Learn about the Market

Supply and demand play a leading role here. If you’re looking at a seller’s market, several buyers may be competing to purchase the property and the homeowners could well obtain their full asking price. In a buyer’s market, you can make an offer that is substantially lower. Check the “comps” to see how much similar homes have sold for in the past six months, and how the final selling prices compared to list prices.

Learn about the Sellers

Learn as much as possible about the homeowners who are offering the property for sale. If you can find out why they are selling, you will have a better idea of how urgently they’ll want to close a deal. For example, a well-to-do “empty nest” couple just beginning to consider the possibility of downsizing will be in less of a rush to sell than owners who either can’t keep up the mortgage payments and are trying to prevent their home becoming one more property on the list of Madison foreclosures or are carrying two mortgages because they’ve already bought a new home. Try to see how much they paid for the property originally. If they bought within the past few years and the house has not appreciated much since, that can help determine your offer.

Learn about the Home

There is one very wise question to ask about the home itself. How many days has it been on the Madison Wisconsin Home Sales market? If the For Sale sign has been up for longer than thirty days, the sellers will probably be more open to negotiation. Find out whether there are any issues that are making the house difficult to sell. What is the condition of the property and will it need extensive repairs or remodeling? Last but not least, how well would this particular house fit your needs? If you find a property that is just right for you and your family, you may want to make a higher offer to avoid the risk of losing your dream home.

Is it a Good Time to Consider Buying a Home?

Is it a Good Time to Consider Buying a Home?

The last decade has seen a lot of highs, lows and unexpected events in the residential real estate market. Consumers considering buying one of the Madison Wisconsin home sales today are understandably hesitant, especially if they are first time buyers. After all, a house is probably the single largest purchase most people will make over the course of a lifetime. It’s also a purchase that you live in, one that can substantially affect the quality of your day to day life. So a wise buyer will look at all the angles before jumping into today’s housing market.

Contradictory Factors

One of the outstanding characteristics of the home buying scene at the moment is contradiction. Contrary to the usual pattern, property prices are low while interest rates are … also low. This unusual state of affairs is very positive for buyers and is not likely to last long. There are also a good number of Madison foreclosures on the market as result of the housing bubble which burst so dramatically a few years back. As the market stabilizes and purchases increase, these too are unlikely to stick around much longer. Therefore, all other considerations being equal, now is a very good time to buy a home.

Other Considerations

Just what other considerations come into play? A stable source of income is crucial. Assess how secure your job is and what kind of savings you have to fall back on should you be laid off. Unless this is to be a cash sale, you must qualify for a mortgage. Talk to your local mortgage lender and get started on assembling all the paperwork you will need. Look at the Madison housing market for the neighborhood and type of home you want – are there desirable homes available in your price bracket? Think about your future; to recover the costs of buying and then reselling a home, you will need to live there for at least five years before moving on.

The Bottom Line

If you have put together a down payment and have a steady income and a stable lifestyle, this might be an opportune time to buy. Making a mortgage payment every month means you are building equity, as opposed to just paying out rent. Perhaps you find yourself still uncertain – interested in Madison home sales yet hesitant about whether this is the ideal time for you to take the giant step of buying a home. In that case you can remind yourself that there may never be a perfect time to buy, but right now the market looks very good and if you have been dreaming for a while of home ownership, this might the moment to move forward and make it happen.

Making Lowball Offers

Making Low Ball Offers – Risk Versus Benefit

When you’re seriously looking for a new home to purchase, the first step is to take a good, realistic look at what kind of dollar figure you can afford. Once you are clear about your budget, you should go on to educate yourself about the current market. Check out Madison Wisconsin home sales for the past six months and see how much various sizes of houses sold for, especially in the neighborhoods that most interest you. (Your realtor can provide you with this information.) These two pieces of homework will put you in a great position to make an offer on a home you like.

Making a Low Ball Offer

After viewing a home for sale, you may decide to put in an offer – but for an amount substantially less than the price requested by the owner, often termed a “low ball offer.” General real estate wisdom says that a buyer considers a low ball offer to be lower than 80 percent of the asking price, while the seller thinks it is anything less than 90 percent. You may have a good reason – for example, the house is overpriced compared to recent similar Madison home sales or it needs a good deal of repair work. If this is the first home purchase offer you have made, maybe you’d like to test the waters to see how flexible the seller will be.

Risks

There are two major risks to making a low ball offer on a home for sale. The first is that home owners tend to be quite attached to their property and may have an immediate emotional response to an offer that is far below what they hope for. They might get angry and insulted, or quite simply feel that you are not serious about buying. Either way, they could decide not to waste their time. The second risk lies in the fact that, even if you are prepared to negotiate upward on the price of this particular home, the sellers don’t know that. If someone comes along in the meantime and makes a more attractive bid, they are very likely to accept – and you’ll lose out.

Benefits

On the other hand, making a low ball offer can sometimes work out and save you big money. Besides the cases of homes that are priced well above the market or “fixer uppers,” you may come across a situation where the owners are highly motivated to sell. They may have already bought another house, meaning they need fast cash. Or they may be struggling to pay their mortgage; before their home becomes another one of the Madison foreclosures, they are willing to take a low offer for the sake of a quick deal. If you are lucky enough to find yourself in this situation – fantastic! Just make sure you have done the footwork such as prequalifying for a mortgage so that you are ready to act.

Should I Put Multiple Offers When Buying a Home

Should I Put Multiple Offers When Buying a Home?

There’s no doubt about it, buying a home is a stressful business. Just the thought of making such a life impacting decision, getting approved for a home loan and laying out all that cash is enough to make anybody feel overwhelmed. Then add to that the element of time pressure so often present in Madison Wisconsin home sales, especially if you are both selling your present home and buying a new one and you’ve got a recipe for extreme tension. Under these conditions, waiting to see if your offer on a desirable home has been accepted can be almost unbearable. You may try to beat the game by making multiple offers on various houses, in case some of your offers are delayed or rejected outright.

Repercussions

Unless the offers are written up extremely carefully, you may be taking an enormous risk – the risk of having several of your offers accepted. If you think paying for one home is complicated, imagine if you were to find yourself in the awkward position of being obligated to pay for two or more! At the very least you are likely to lose your deposit. You may cause legal difficulties for the seller as well, particularly in the case of a short sale. The seller may be counting on your offer to save his home from becoming one of the statistics on Madison foreclosures. Your backing out when one of your other offers is accepted can result in severe financial hardship for the current property owner in this type of case.

Protecting your Interest

In today’s volatile market, it can be a good idea to “qualify” – in writing – any offer you make. For example, you can “sunset” your offer – set an expiry date when it quietly drifts off into the sunset and is withdrawn. Or include a refusal option if the seller responds to your offer after a certain period of time. Either of these strategies will ensure that you are not tied to your offer, but can move on and offer on another property after a reasonable amount of time has gone by.

If You Go Ahead with Multiple Offers

In spite of the potential problems, you may decide to go ahead and make multiple offers. One reason for doing so could be that you are an investor playing the market and, yes, you are fully prepared to follow through with purchasing multiple homes. If you are not an experienced professional investor, though, it is strongly recommended to work with a real estate broker who is highly experienced in Madison home sales, and has dealt successfully with multiple offer situations in the past. Another frequently heard recommendation is that you practice full disclosure, so that all the potential sellers in the picture will be aware of what you are doing.

 

Tips on Buying a Property out of the Country

Tips on Buying Property out of the Country

It is possible to invest in valuable property out of the country. There are a few tips though that may help in selecting, purchasing, and closing on your investment. As with any other large expenditure, it pays to do the research before starting your search. Learn about the country and area that you are considering, decide what questions you should ask, and review all of the features of a property that can fulfill your requirements. If it is to be an income generating asset, the questions that you ask will be distinctly different from questions you might ask if a holiday home is what you’re searching for.

Where to Begin

Once you are clear about the type of property you want to buy, the next crucial step is to reduce the desired property location down to a particular country or, more specifically, to a particular region. Consider all of the topics that may be related to purchasing property in an area and begin to list questions that you would like to have answered.

A sound beginning is to research online real estate listings. Real estate websites vary considerably; some sites update their listings regularly while others tend to become outdated. Madison Wisconsin Home Sales, for example, makes a concerted effort to keep up-to-date and accurate in their listings.

It is also helpful to call the seller or broker directly. While your primary contact may be through email, it is beneficial to talk to the agent and inform them that you are a serious potential buyer. Ask about the area you are considering, employment, schools, the housing market in that the area, surrounding locations, as well as specifics about the property.

Visit the Property Location

If at all possible, explore the area. Many foreign real estate agencies, as well as developers, are attracting potential buyers by providing subsidized or even free tours to increase purchasing opportunities. By touring an area, and speaking with locals, prospective buyers have the opportunity to get a handle on many of the legal matters related to foreign investments. They can also receive assistance with navigating the details of title insurance, property management, and financial matters.

Caution should always be exercised when making any significant investment in an overseas market. Madison Home Sales can provide a few additional tips designed to save you time, money, and disappointment. Again, decide where you would like to purchase. If you prefer to build make sure that there are utilities, sewage systems, and accessible roads available to property buyers.  Always take a good look at the local laws and practices surrounding real estate laws in the country where you would like to buy. Do not take anything for granted. Take your time and do not feel pressured. Buying foreign property can be a dream-come-true with a little preparation, planning, and insight.