Real Estate

Refinancing your FHA loan may save lots of money.

I am a licensed realtor and not a lender so I am writing this to inform my clients and others that they may want to sit down with a trusted lender and discuss whether it makes sense to refinance or not. With that being said, I want people to know and understand that if you financed your house with a FHA loan, you are currently paying mortgage insurance which you may now be able to avoid. Mortgage insurance also known as PMI protects the bank in case you default on the loan. It does nothing to protect you.

As of June 3, 2013, FHA changed their policies on mortgage insurance which required the borrower to pay the mortgage insurance  for the life of the loan unless you put 10% or more down  on a 30 year mortgage,  then it fall off after 11 years. On Conventional loans,  mortgage insurance automatically falls off after you have  achieved 78% loan to value based on the original  sales price.  It can be requested to be removed at 80% loan to value  if you call the lender and request it.

In recent years our market has seen great appreciation, especially in the first- time home buyer  market. First time buyers often use FHA loans, since they offer easier credit guidelines. For many borrowers, they invest the minimum 3-1/2% required down payment down, or they may even have obtained down payment assistance.

So, what do you need to do to stop paying the mortgage insurance?

  1. Decide if you plan on stay in the home for at least a few more years or if  you will hire me to sell it.
  2. You will need to know if you have enough equity in the property—at least 22% on a refinance. Call me I can help you with this.
  3. You will need to look at your statement and see how much  monthly mortgage insurance you are paying. This amount could easily be $100-$200 a month maybe more depending on your loan amount.
  4. Verify if there is a repayment or tax consequence for refinancing if you received down payment assistance. Sometimes down payment assistance requires you have the loan for a certain period of time to avoid a partial repayment.
  5. Look at the interest rate you are paying now and have a lender decipher the difference in interest rate. Remember even if you are currently paying a slightly lower rate now, it still may be worth refinancing to avoid the PMI.   This is where you need good counsel , not just someone trying to sell you a refinance that you do NOT need.
  6. Visit with a reputable lender who can give you good advice. You may be able to lower number of years from 30 to 20 or even 15 with your PMI savings.  So, don’t just think, I don’t want to start over on the 30-year note.

Refinancing your home mortgage costs money and with historic low interest rates over the past decade, I have been cautious about the thoughts of my buyers refinancing their home loans. However, it may be time to have a conversation with a reputable lender to see if it makes sense. Even if you don’t have the 22% equity, It may be that you can refinance with a conventional loan with only 10 or 15% equity knowing that in another year or so the PMI may drop off.

If I can be of assistance with your real estate needs or you know someone who is looking to buy, sell or invest in real estate, I would be happy to help them.

Real Estate

Things to look for when buying a Remodel from an investor

Buying a home to renovate in order to resell for a profit in a short period of time is called “Flipping”

These homes are usually remodeled by an investor looking to make a quick profit. Often times these homes were in major disarray when the investor purchased them. Some of the investors purchasing homes and making improvements are very skilled at their craft. They completely go through the property and make sure the roof and foundation are in good condition as well as the plumbing, electrical and hvac systems. I currently work with an investor who only uses licensed professionals and always gets the proper permits. But not all investors do that.

Some investors will cut corners. They may use low-grade materials or do substandard work. There are several ways to hide problems which may later become issues for the new owners. Some investors tend to cover up problems rather than repair problems.

So how does the buyer know what they are buying?

1. Ask the seller for a list of all repairs that they made and verify that all necessary permits were pulled.

2. Make sure you get a complete inspection, remember this seller has not lived in the property and done laundry or showered while running the dishwasher, etc. so verify that the systems work fully.

3. Call the water department and see how many gallons of water have been used since the investor owned the property. Since the investor has not lived there, the usage should be low. If it is high, you might have a leak.

4. Turn all the water and gas off to the property and check the meter to see if it is running. Recheck after 15 minutes. Nothing should be on including the water heater or furnace (sometimes people forget the gas on at the pilot). If the meter is running you may have a leak.

5. If it looks like they tried to cover something up, they probably did.

There are a lot of honest people making a living repairing dilapidated properties and reselling them at a profit. The repairs on these properties are not cheap if they are done correctly. The investor should be able to make a reasonable profit.  In order to correctly repair the properties and make a profit, this often means the investor must have purchased the property for less than half the price they are selling the house.; especially when the house resells for $125,000 or less.  When a seller buys a property and resells it within a 12 month period to a buyer obtaining a FHA loan, the new lender will require a second appraisal.  In addition, unless the property was a repo, the investor must wait 90 days before a contract can be written where a buyer is obtaining a FHA loan.

For more questions regarding real estate in Oklahoma City/ Moore please call me at 405-213-2992 or visit my website www.sandiwalker.com