Buying a Tucson Home With Little Or No Money Down
July 15, 2008
Speaking of FHA loans… There are still Buyers out there purchasing homes with basically no money down - or very little money, anyway.
You can do that with an FHA loan - a typical FHA loan is at 97% of value, or 97% LTV. This means that the Buyer has to come up with a 3% down payment, plus another 2-3% typically in closing costs.
But - it’s possible in this market to negotiate an offer where the Seller pays for the closing costs AND the down payment by using a 3rd party gift program, usually a program like AmeriDream or Nehemiah.
Using a program like AmeriDream, the Seller ‘donates’ 3% of the sales price to the AmeriDream program, who then ‘gifts’ it back to the Buyer as their down payment. The Seller can then also contribute towards the Buyer’s closing costs - typically, we’ll ask for about 3% for that too.
The AmeriDream type programs are being contested by HUD, the people who insure FHA loans, because “data clearly demonstrates that FHA loans made to borrowers relying on seller-funded downpayment assistance go to foreclosure at three times the rate of loans made to borrowers who make their own downpayments,” as the commissioner of HUD said in a speech. But for the moment, assistance programs are still available.
Couple of things to bear in mind - a few cautions:
- Homes bought with FHA loans have to be in reasonably good condition. Don’t expect to buy a fix-up home with an FHA loan.
- You might not be negotiating too much on the sales price, as you’ll be getting a 6% discount because of the Seller contributions, even if you pay full price.
- And forgive me for being a bit blunt here, but for some, not being able to save any money for down payment and closing costs is a sign that they’re not ready for the financial responsibility of owning a home.
- Especially in a soft or declining market, plan to stay in the house for several years, as you’ll need a good bit of time to build equity so that when you go to sell the house, there’s enough equity to cover the loans and costs, and still have enough left over to use as a down payment on the next home.
Changes to FHA Loans - What It Means For Tucson Homebuyers
July 14, 2008
Today, July 14th, changes go into effect regarding FHA financing.
Before today, there was a flat up-front fee when you got an FHA loan - called the mortgage insurance premium (UFMIP - UpFront Mortage Insurance Premium). It was set at 1.5% of the loan amount, and most people just added that on top of the loan amount, they financed the MIP.
Also before today, there was a monthly charge, at 0.5% annually, called mortgage insurance (or MI) that an FHA home buyer paid. So on a $200,000 loan: 0.5% of that is $1000, then divide by twelve as that’s an annual figure, and we get an $83.33 MI payment per month, added to your monthly mortgage payment.
This is not the case anymore. As of today, pricing will be risk-based. That means the bigger risk you are as a borrower, the worse your credit is, the more you’ll pay. Because people that are bigger risks tend to default on the loans more, so they get charged more to get a loan.
Now, the up-front MIP will range from 1.25% to 2.25% - remember, that’s the one time fee paid at closing that most people just roll into the loan amount. On a $200,000 loan, that means the up-front MIP would range from $2500 to $4500.
The monthly mortgage insurance will vary to, ranging between 0.5% and 0.55%. That amount will be determined by the loan to value ratio - that is, it will be determined by how big your down payment is.
My friend Shailesh is a lender up in the Phoenix area and has a good explanation of the new FHA guidelines, as well as more information on how first time buyers can get a reduction in the amount of up-front MIP they have to pay.
So what does that mean for the local Tucson home buyer? Well, if you’re getting an FHA loan, it may cost you more to buy a home, depending on your credit score. If you’ve been approved for an FHA loan in the past couple months, it may be time to head back in for another chat with the lender, to see what kind of pricing you’ll have for that FHA loan.
Taking Your Home Off The Market
July 10, 2008
Found in the recent search terms: Should I take my house off the market for a month?
I don’t know. But here’s the discussion that comes to mind: Do you think the market is going to change that much in a month? Real estate markets tend to move more like glaciers than like jets.
What will you do when you put your house back up on the market? Will you keep the same price? Will you change the condition? In the Tucson MLS, withdrawing your home from the market for 30 days will ‘reset’ your days on market count, but any agent worth their salt will check the history (that’s a one click easy check) and see that you were listed before and for how long and at what price.
Also: How much will it cost you to carry the house for another month? If you take your home off the market for a month, then put it back on, let’s say it takes a month to get a buyer and another month to close. That’s 3 more months of mortgage, utilities, taxes, insurance, and HOA fees. Is that total more or less than the amount you’re willing to change your price today?
Or how about this: What will interest rates be in a month? There’s something that can change quickly. What new financing restrictions will there be in a month? How will the availability of home loans stretch or shrink your potential pool of Buyers over the next 30 days?
What was the goal of selling your home in the first place? Has that goal changed?
It’s all about risk, and making that risk as small as possible, right? So after thinking about all of that, should you take your home off the market for a month?
Should You Move to Phoenix or Tucson?
July 9, 2008
Well, Phoenix was named the sweatiest city, an honor it has earned for 5 years, according to the “sweat experts” at Old Spice.
Sure, Tucson is #4 on the list this year. But at least we aren’t at the tip-top of the sweat list.
I’m just sayin’. And now, back to real estate. 
Who The Appraiser Works For
July 8, 2008
Two people found this blog today by searching for appraisal related terms. One person was searching for “neutral appraiser” and the other was “buyer request independent appraiser.”
I’m a little curious what that second situation might be.
But regardless, let’s talk about appraisers.
If you’re getting a home loan, and the lender orders an appraisal, then the lender is the client of the appraiser, not the borrower. Even though the borrower might be the one paying for the appraisal. It’s just a cost that the lender is passing on to you, the home buyer.
However, if you go out on your own, and hire an appraiser, outside of who the lender hires, then you’re the client of the appraisal, you pay for it, you have all rights to the appraisal report.
The whole idea behind getting an appraisal when you buy a home, at least how it usually happens, is that it mitigates risk on behalf of the lender. It has nothing to do with protecting you against over-paying for a home, although some see that as a side effect.
Any appraisers out there want to comment on whether they are neutral parties or not? I would say that appraisers have to justify, very thoroughly and carefully, their opinions of value, but I’m not sure if they have and to whom their duties lie, or if neutral is the right descriptor. Comments?
Keep Your Eyes Open
July 5, 2008
Question from a client today: “Okay Kelley - what do you see here that I don’t?”
You go into a couple thousand homes, you start to see things, little red flags, small oddities that set off alarms in your head.
This is a personal favorite from a couple of weeks ago. This was just off the driveway to a newly constructed home in the middle of an unsubdivided area in Central Tucson.
That’s 3 water meters. For a single house. Something not quite right there.
Part of an agent’s duty is to walk through the house with eyes wide open, to notice those little things, to bring them up to their buyers and sellers, so that they can make good decisions. While agents aren’t home inspectors or a trade specialist like a plumber or electrician, we do have a lot of experience with homes, and often spot little indicators of what may or may not be a big problem.
Like spotting 3 water meters on a single house. Or termite tubes on a foundation at night using only the illumination from a phone. Not to brag or anything…
The Week In Photos
July 3, 2008
Gearing up for 4th of July festivities, busy work week, lots going on. Presenting the highlights of the week, in photos, so far:
The New Logo, finalized:
Checking out retro 50’s Homes:
Interviewing and auditioning new photographers:
Tucson’s newest Associate Brokers at Long Realty and lunch at Cafe Poca Cosa:
Dappled light through a ruby grapefruit tree and ripening pomegranates:
Turns out, this is what storm windows look like, on a lovely wire cut double red brick house. A rarity in these parts. The storm windows, that is:
Have a safe and happy 4th of July!
Patience and Buying A Lender Owned Home
July 2, 2008
Today, there are 67 listings marked as “bank owned,” 110 marked as “lender-owned,” and an additional 63 listings marked as “REO” in the Tucson MLS.
The name of the game with lender owned homes: patience. Banks, in general, don’t care about your timelines.
As long as there’s no bidding war for the home - as can happen when the lenders price the home to sell and FAST - then here’s how this usually plays out:
1. Submit an offer to the listing agent, who then submits it to the bank.
2. Wait. Sometimes wait much longer than the expiration date on your offer.
3. The bank sends back some addendums for you to sign, and may counter offer some of the terms of your offer. There are many, many pages of addendums, in which you give up a plethora of rights, agree to numerous bank-specified terms, and generally agree to abide by their rules, where they have lots of rights and abilities and you have none.
4. You deliberate. You consider. You sign the addendums and send ‘em back.
5. You wait. Again. Deal’s not a deal yet until the bank signs it.
6. The bank signs the addendum and sends it back via the listing agent. Sometimes, the bank even deigns to send it back within a day or two of them executing that addendum. So that they only eat a few days of your limited inspection period.
You want to buy a lender owned property? No problem. But be prepared to be patient. Some banks respond in a day or two, some respond in a week or two.
Actually, that’s nothing compared to the wait times for Bank responses on short sales. But that’s a story for another day.
Photo via Flickr, courtesy of zoomcityzoom
- About Tucson (27)
- Canadians and Tucson (2)
- First Time Buyer (20)
- Home Buying (72)
- Home Selling (48)
- Homeowner Associations (5)
- Loans and Financing (22)
- Market Discussion (3)
- Market Reports (29)
- Odds and Ends (50)
- Purchase Contract (1)
- Relocating (7)
- Repair Renovate Maintain (14)
- Restaurants (13)
- Top Ten (2)
- Tucson Events (19)
- Tucson Homes Explained (17)
- Tucson Land (5)
- Tucson Neighborhoods (18)
