Darel's Wenatchee Area Lending Blog

Chelan and Leavenworth Condo Loans - Don't let the financing scare you

Darel Ansley (Peoples Bank) — Sat, 10 Oct 2009 02:54:34 -0500

With some great prices out there right now for vacation condos in Leavenworth and Chelan, a lot of people are entering the market. With prices coming down, some people ask me if they should wait for them to drop further; I tell them, " When you can buy a condo you like for less than it costs to build, there can never be an oversupply at this price, because if this is the price, no one will build any new ones. So if you didn't catch the absolute bottom of the market, you sure got close"

After you see the great prices, before you make an offer, you better check on financing. A lot of lenders have backed away from doing loans on vacation condos, especially those which can be rented out part of the time. Most condos loans I actually do are for people who started with a lender who said they could finance it as a conventional loan- only to have it get kicked out of underwriting. We do both Fannie Mae condo loans as well as 'non-warrantable' condo loans, and here is the big difference (I'm not smarter than anyone on this, we just checked with Fannie Mae to see what they would take): It is the presence of BOTH a rental pool, AND a nightly rental desk that kicks most of the loans out of FNMA eleigibility.

The other issue is the percentage of units that are investment properties Vs 1st/2nd homes. And then the other new FNMA rule that stops most new condos is that FNMA won't buy a loan for a condo unless 90% of the units have been sold.

So what does this all mean? For Leavenworth and Chelan, only a small number of projects can get Fannie Mae loans (I recently closed one at Kahler Glen). For all other condos, you will need to seek out a community bank that does Portfolio lending (lending their depositors money). These rates can be higher, however 1) If it is a new project, the bank that financed the project is probably offering special financing. and 2) If you save $100,000 or more off of what they used to go for, but you have to pay a higher interest rate SO WHAT; you are saving a bundle overall. Here is some quick math - you think you would like to pay 5% , but let's say the portfolio rate you find is 7%. If the loan amount with the new pricing is $200,000 you pay $1330 a month P/I. That unit used to sell for a $100K more. Even if you could have gotten the 5% you wanted, 5% on $300,000 is $1610 a month.

These deals won't last forever, as there is no more supply coming on the market for a great while. Seek out a competent Realtor in the specific market you are looking at to help you.

Owner-Builders Saving Money

Darel Ansley (Peoples Bank) — Tue, 07 Jul 2009 14:27:41 -0500

This year, probably half of the construction loans I have done have been for owner-builders. This is the term we use for people who are building a home without a general contractor. In reality, the projects vary from individuals who never lift a hammer and just schedule all the subcontractors, to the people who are out there on the project themselves setting their own concrete forms and doing all their own framing and finish work.

For those who are a little nervous about being completely in charge, there are now lots of consultants available, as well as companies who will build everything for you except for the parts you feel comfortable with. Oftentimes they will build the external shell of the house -framed inside with roof,siding, doors and windows. You can then split the rest between your own labor and subcontracting. Basically, if you know which parts you want to do, you can find a builder who will take care of all the rest.

What I have been seeing is a nice drop in materials and labor prices this year, making these projects a great investment for the homeowners, as the cost savings equals additional equity in their homes.

If you are in the greater Wenatchee area, pick up a copy of the July issue of The Good Life magazine; a story inside features my clients the Flittons and the success they had with their owner-builder project in East Wenatchee. I would love to link to the article, but the magazine is not online.

I currently have owner builder homes under construction in Winthrop, Omak, Chelan, East Wenatchee, Leavenworth, Cashmere and Crescent Bar, and just finished one in Wenatchee.

If you are looking for a new home, with prices down for land, construction materials and labor, now would be a good time to check out the option of being your own contractor.

Here are a couple shots of some owner-builder projects currently underway.

Land Finanancing continues in Eastern Washington

Darel Ansley (Peoples Bank) — Wed, 17 Jun 2009 00:39:51 -0500

I was at a meeting with Realtors from Western Washington, and they were amazed that we were still doing lot and land financing. Actually in our market areas of Wenatchee, Chelan, Winthrop, and Leavenworth (plus surrounding Counties), there are actually several community lenders that will lend on land. Each bank has different programs and terms, so it is worth calling around to compare programs before making a decision.

I have seen some great deals out there; your dollar really goes a lot farther than it did a few years ago.

Construction Financing Continues

Darel Ansley (Peoples Bank) — Tue, 03 Mar 2009 13:37:01 -0600

I cringe whenever people ask, "Are you still lending money?"; but I suppose it is a fair question these days. In my markets of Wenatchee, Leavenworth, Chelan, Winthrop and Okanogan County, most of the banks that used to do a lot of construction lending have severely cut back their programs. Some of the things that other lenders have dropped but we still do are:

Owner-Builder Construction Loans

Lot Loans, Land Loans

Modular Home Loans (those delivered in sections)

Kit Home Construction Loans, or panelized home Loans such as Lindal, Viceroy, etc.

Loans for homes where construction has already started

SIP Construction loans, or ICF construction loans

Many of my clients were planning to build a year or two ago, but everyone was too busy. It has turned out to be a huge blessing as prices are coming in much lower than they were in the past.

Many people from the Puget Sound region eventually seek out a simpler life and move over here to Eastern Washington where there is no traffic, the pace is much slower and the sun shines. Whether you want a small town, or wide open spaces; the low cost of building makes it a great time to make your escape.

Click here for some basics on Construction Lending

Investing in Mortgages

Darel Ansley (Peoples Bank) — Fri, 12 Dec 2008 00:27:45 -0600

I lost out on a transaction with one of my clients the other day; but I think they made the right choice by not refinancing with me.

I had financed a spec home for them near Lake Chelan which has not sold. I was in the process of refinancing it into an investment property on a 30 year fixed loan. These days Fannie Mae adds all kinds of extra fees for investment properties, and less than perfect FICO scores etc. They weren't taking any cash out, and the loan is less than 60% of the current appraised value, but it was still going to cost them about $10,000 in fees to get a 6% loan.

The owner called me and said that a freind was looking for a good investment that was safer than the stock market and returned better than CDs, so she asked if she could pay off my client's mortgage and have my client pay her 6% interest.

So the friend gets a safe 6% return on her investment, which beats the stock market by about 50%, and my client gets her new loan without the Fannie Mae loan fees.

Of course, I'm out a nice commission on a $417,000 loan, but I couldn't argue with the logic, and encouraged my client to take advantage of a great opportunity.

When people are lining up for 0% interest on 3 month Treasuries, a mortgage on a trusted friend's property, at a safe loan-to-value, looks pretty good.

Financing an As-Is Home in Wenatchee

Darel Ansley (Peoples Bank) — Tue, 02 Dec 2008 01:05:20 -0600

One fallout from the current market is the increase in homes being sold As-Is. Either a builder was unable to finish, or maybe the house went back to the bank in less than perfect condition. Either way, you end up with Sellers who don't want to put more cash into the house, they just want to sell it. While there are many more in other parts of the country, we in Wenatchee and all over Eastern Washington are seeing more and more of these.

These are huge opportunities; you will see homes for $150,000 that with $30,000 worth of work would be worth $250,000. Instant equity!

Even though these are great deals, most people walk away because they think they need to be a contractor with all the money in cash. You think you can't get a loan, because most lenders won't let you finance a house 'As-Is'. But there is a solution; you can simply buy the house as as part of a construction loan. When we do a regular construction loan, we are simply adding materials and labor to bare piece of ground; in this case we are just adding materials and labor to some level of existing structure.

Down payments can vary, but once again, I would suggest seeking out a smaller community bank for this type of program.

There are a lot of negatives in the market, one of these distressed properties can be a happy start with lots of equity for someone.

You Can Still Buy a Home For Zero Down

Darel Ansley (Peoples Bank) — Thu, 16 Oct 2008 00:25:12 -0500

The subtitle of this message should be the paraphrase of Mark Twain: Bank Liquidity-"The reports of my death have been greatly exaggerated."

The media coverage of the financial and Real Estate news has created a lot of confusion amongst the general public. I have had Realtors tell me that some clients think that all financing for homes has dried up. I have had others shocked when I tell them their client can still get zero down 30 year fixed financing on a home.

I can only speak of what is happening in Washington State and specifically my market area which includes Wenatchee, Leavenworth, Chelan, and Winthrop and the surrounding counties. First a note on bank liquidity; smaller banks which are not publicly traded have not had their stock pummeled, and consequently still have plenty of money to lend. Please remember, banks have to lend money- that is where we get our revenues to pay interest on your CDs and keep the lights on, so we are still moving ahead. Fortunately, we didn't write a bunch of bad loans, so we aren't saddled with a bunch of foreclosures either.

As far as 100% financing or zero down, whatever you want to call it, that still exists for first time homebuyers and Veterans. The program is called HouseKey and is administered by the Washington State Housing Finance Commission. They have done tens of thousands of these loans, and we in our office have done dozens of these every year for at least the last five years.

Now that housing prices have come back down to the affordable range, all we need to remove is the negative news that keeps potential homeowners on the sidelines.

Mortgage Rates Headed Up

Darel Ansley (Peoples Bank) — Thu, 09 Oct 2008 22:37:57 -0500

I am not one that likes to make negative predictions, but the recent financial news leads me to conclude that mortgage rates will be going up. For those who are ready to buy or refinance, I believe now is a good time to lock in your interest rate.

If you want the long version, read on:

Normally a drop in the stock market leads to lower mortgage rates. This is because investors get worried about the future returns from their stocks, and decide instead to put part of their money into guaranteed returns of bonds, including Mortgage Backed Securities. With supply and demand, the price of the bonds goes up- which results in lower interest rates.

In the last few days, In order to finance all their new acquisitions and bailout programs, the government has flooded the market with new bond sales; this has resulted in lower prices for the bonds- which means higher interest rates are being paid.

So now that the Government bonds are providing the funding for the stock market, it gets really confusing. A drop in the stock market no longer equates to a drop in interest rates.

So, as I had stated before the bailout, with all the funding that the government is going to need, bond rates are likely to continue up. And, when the stock market hits bottom and turns around and rallies, rates will really go up.

I have often given opinions about the direction of mortgage rates, with the disclaimer that I don't own a crystal ball, but I need to add my second disclaimer: When I got my degree in Finance, we only studied Free Markets, so I am now totally beyond my area of expertise.

Good Time to Buy in Wenatchee

Darel Ansley (Peoples Bank) — Fri, 03 Oct 2008 12:32:12 -0500

For those people who have been looking at homes and are on the fence, I would encourage you to act now and get your mortgage rate locked in, as I think some of today's events will lead to higher rates in the next few weeks, and possibly even today.

The early warning sign was the fact that the stock market rallied on negative news. This morning's payroll report showed a loss of over 150,000 jobs in September. While this is a negative sign for the economy (these people won't be shopping), the stock market went for the reverse psychology and decided that this news would make the FED lower interest rates to try to help the economy.

This is a set-up for Chairman Bernanke, because if he decides not to lower the Federal Funds rate, the speculative run-up from today would have been false, so the market will fall again - with the blame going to Bernanke, not the speculators.

The other big factor poised to raise rates is the likelihood that Congress will likely approve the bailout today.

As I had posted previously, here in Wenatchee with lots of available homes under $200,000 and many more under the FHA limit of $323,750, and with interest rates currently around 6.0% now is a good time for buyers to get into a home they can afford.

Just to clear the air on some FHA rumors- First Time Homebuyers and Veterans can still do 100% financing- (not all down payment assistance money has gone away), and most other people still only need 3% down (3.5% is not yet in effect).

So if people are ready, now is a good time to close the deal and get into that new home for a great monthly payment.

Against the Bailout

Darel Ansley (Peoples Bank) — Wed, 24 Sep 2008 02:04:07 -0500

Now I know I am not as smart as FED Chief Ben Bernanke and all his advisors, but I have to voice my opinion that this $700Billion bailout is a bad deal for the economy and the country.

First, it will result in a raising of interest rates and a slowing of the economy. This is because the Government will need to finance this plan by issuing more debt (Treasury Bonds, Notes and Bills). Half of these are already owned by Foreign investors, with China and the Oil-producing countries near the top of the list (the others are Great Britain,Japan, Brazil and the unknown people with Carribean bank accounts). In order to bring in $700 Billion in cash, the government will have to issue a ton of debt. The Foreign investors are going to think that our country is run by poor financial managers, and in order to entice them to buy up this debt, we will have to offer more attractive (higher) interest rates to get them to buy.You always demand a higher return as investments get riskier. Already, these investors can buy a German note that pays 1.88% more than we offer. If I was a foreign investor, I would think that the German note is looking like a better deal. So if you want me to buy your US debt, I want to be paid a higher interest rate.

So if the current 10 year US Treasury Note pays 3.88%, and the investors say,"I'm not going to buy up $700 Billion unless you pay 5.88%" Guess what, 30 year mortgage rates would now be over 8%. What does that do for the economy?

Hey, our huge foreign-financed deficit was a big concern to me even without this bailout plan.

The second reason I am against the plan is that it rewards greed and removes risk from our supposedly free-market economy. There are executives from Enron who created these same type of derivatives who had to spend 6 years in the Federal Penitentiary; and the taxpayers are supposed to bail out this latest set of clowns?

These are the people who started the subprime meltdown. It began with the hedgefunds, and then soon all of Wall Street was wanting to rake in Billions from Real Estate by soliciting mortgage companies to sell them loans under terms that were doomed to fail. These loan terms allowed people to buy homes way over what they could afford. The bad loans weren't pushed on these Wall Street firms, they were the ones who paid the mortgage brokers to go find the people to buy houses with little chance of repaying. They then defrauded their shareholders by listing these new Mortgage Backed Securities as Assets on their books.

If Bear Stearns, CitiCorp, Wamu or any of these others made bad financial choices, they should suffer the consequences. I didn't see them running to congress 2 years ago offering to pay the taxpayers their record Billions of dollars of earnings!

So let some banks fail; the consumer will be protected by the FDIC. Some people argue that if we let some big firms fall, there won't be any money to lend. Here is a clue-if banks don't lend money they go out of business, so the remaining banks will be lending. Second clue- somewhere out there in this great big world is $700 Billion that the Government was about to borrow; the world financial markets are all liquid, and that same money is available to lend to any American business or individual who has a good home, business or idea to invest in. Let the free markets flow - the money will go to the people who are likely to pay it back. There may be some unemployment on Wall Street, but what have those highly paid experts done with your 401-K over the last 5 years anyway? They need to find new careers.

Meanwhile with all the fear being spread by the media and the Government, consumers are like deer in headlights; a terrorist attack wouldn't have been this effective at shutting down commerce. Here in our market of Wenatchee, we have great homes available for under $200,000 , strong employment, and with all the media panic, the public doesn't realize that a First Time Homebuyer or a Veteran can still buy these homes with 0 down (and it doesn't end in October), plus anyone else can pick up these well-priced home with just 3% down with FHA financing. Let's get this thing settled so we can get on with getting people into the houses that they want and can afford.

Wenatchee Market Primed for a Rebound

Darel Ansley (Peoples Bank) — Thu, 18 Sep 2008 01:44:02 -0500

It looks like the pieces have fallen into place for home sales to start to pick back up in Wenatchee. The two main factors are lower financing rates and available affordable homes.

A year ago you couldn't find any homes under $200,000 in Wenatchee, but currently there are 70 homes on the Wenatchee/East Wenatchee area MLS for under $200,000. And these are just the Single Family Homes; this does not include condo conversions etc.

The recent Wall Street problems have had a positive impact on mortgage rates; we have seen FHA Mortgage rates in the mid 5% range, which makes these homes affordable. FHA allows for a 3% down payment which can come from family, and FHA allows the seller to contribute up to 6% for closing costs or interest rate buydowns.

The other great program is the HouseKey first time homebuyers program which allows for 100% financing at low rates.

These two new patterns of lower rates and affordable home prices should allow some renters to buy up these lower priced homes and create some move up buyers who can pick from 200 homes in the $200,000-$300,000 range.

The biggest thing holding back this turnaround is that the general public is so focused on the headlines, they don't know that they can buy a home with little or no money down.

While I'm at it, I'll throw in my two cents on the financial meltdown. Housing foreclosures did not cause the problem; slick Wall Street firms did Enron style financing for homes and alllowed people who couldn't afford them to buy homes. Wall Street's own bad investments are just coming back to bite them.

Mortgage Rates Headed Down- But Not Everyone Qualifies

Darel Ansley (Peoples Bank) — Fri, 05 Sep 2008 01:02:38 -0500

Just an update on the economy and mortgage rates- I had mentioned previously that rates are volatile because the inflation news raises rates and recession or slowdown news lowers rates. Mortgage rates have been moving up and down with every news headline.

Here is my best guess from what I read - most of the runup in prices in food and fuel have already happened, so I see inflation cooling off. Plus, because people have been shelling out all their money this year for gas, they don't have much left to buy other things; this is going to drop consumer spending and pull the stockmarket downward, and also bring down mortgage rates.

When it comes to home sales, you need to know about another factor- the rate we quote for a 30 year fixed no longer applies to everybody. The base rate may be going down, but Fannie Mae is now charging higher fees and/or adding to the rate for anything except a perfect loan. For example, beginning November 1st if you have a 719 FICO score and have a down payment of 20-25%, you will have two additional fees, totaling 1%. This means on a $300,000 loan, your customer needs to come up with an extra $3000 in closing costs or pay roughly 1/4% higher mortgage rate. The same loan with a 639 credit score has 3% in additional fees!!, they used to send loan officers to jail for charging fees like that. A year ago, a 639 with 20% down had no added fees. (These are all based on the middle of your three credit scores).

So, in short, not everyone who used to qualify will be able to, and I think Sellers ought to know that their pool of potential buyers is shrinking, because there are a lot of people who think they are potential buyers out there that haven't been in to talk to a lender yet, and may get some startling news that they qualify for less of a house than what they think.

One last item, as Fannie Mae is going to hang people with their credit scores, it is best for people to know theirs. www.annualcreditreport.com is the real 'free' service for Washington State that doesn't make you sign up for a credit monitoring service. Your clients will be able to see the items on their report, and can pay $7-10 to each of the credit bureaus to actually get the scores.

Market support for Wenatchee Homes

Darel Ansley (Peoples Bank) — Thu, 17 Jul 2008 01:18:14 -0500

In the Wenatchee Real Estate market, you have to be careful about too many statistics. I actually took a statistics class or two back at UW many years ago, and we learned about something called sample size. Basically, if you don't have a lot of pieces to measure and slice and dice, it is hard to come up with statistics that mean anything. In Seattle, you can study trends; in Wenatchee, one good weekend of home sales can skew the numbers. It is best to look at the overall picture to see what is happening in Wenatchee Real Estate.

In Wenatchee, we have two markets, the locals and the Doctors/retirees/second home market. People retiring from Puget Sound and moving to the sunshine have more money to spend and buy/build nicer more expensive homes. People who work in the fruit industry or as medical staff etc are not usually buying those homes, they are buying something more in line with their income.

Short term, we have an oversupply in certain market segments, but this is correcting itself as builders are not starting new spec homes to add to the supply. The over supply is really above the $350K price level; at prices below this, there is generally only a 5-7 month inventory. So the over supply is in the more expensive homes, that may be painful if you are trying to sell one of these today, but long-term, these more expensive homes are where the demand will be.

The reason the demand will be there is the same demographic story: as baby boomers in the Puget Sound area retire, they start to notice that there are only 58 clear days a year in Seattle. And with their new found free time they visit the Wenatchee, Leavenworth, Chelan, or Winthrop areas and discover open spaces, no traffic, small town atmosphere, and a glowing orb in the sky that makes everything look pretty and feels warm. A certain percentage of these people will decide to move here.

Currently, we are slowed down a bit as these Seattlites and Eastsiders are having trouble selling their homes, however, the Puget Sound economy doesn't get hit as hard as the rest of the country in times of downturn, because someone has to build those 787 jets that the Arabs can afford to buy, and Microsoft continues to be the 9th largest country in the world.

So I expect we will see some slowness continue this year as people are a little shell shocked with the recent inflation. By next year the price of flying will be outrageous, and a weekend trip to Chelan will make more sense than a vacation in California, and the migration from rain to sunshine will renew.

Winthrop and Methow Valley Construction

Darel Ansley (Peoples Bank) — Tue, 10 Jun 2008 00:10:00 -0500

One of the things I love about my job is that I have to inspect home construction projects every month throughout North Central Washington, which allows me time to enjoy the beauty and wildlife of our area. I recently made my monthly trip up to Winthrop and Mazama in the Methow Valley, and (I apologize to our Puget Sound area readers), it was nothing like my old commute on 405 and I-5 in my past life.

For those that want to escape the rat race and can tele-commute, you ought to check out the Methow or other parts of Okanogan County. I have been financing several lot and land purchases in the area, and there are a lot of choices from small lots in the pines to sprawling large meadows. This isn't Detroit, so don't expect giveaway prices; but spend a couple days up here breathing in the fresh air surrounded by the stillness, and ask yourself what peace is worth. No lot at any price in suburbia can give you that.

The real sale comes Monday morning when you are back in traffic at home after spending a weekend in the Methow Valley, when you ask yourself all kinds of questions about what really happens if I win the rat-race anyway? Just make sure you keep your Realtors card with you so you can call back and make that offer on your own piece of paradise.

I look forward to meeting you when I come up and inspect your new cabin construction project.

Owner-Builder Financing in Eastern Washington

Darel Ansley (Peoples Bank) — Wed, 23 Apr 2008 00:36:06 -0500

I wrote last time that this was a great year for building your own home, and I have had lots of requests for financing. One thing I want to point out to people, is that at this point in time, if you want someone to finance you as an owner builder, you will need some equity in your land or have some cash. This is a t least true in my market of Eastern Washington.

In the past, some lenders would finance 100% of your entire land acquisition and construction, but those programs are gone, and you should plan on having 10-20% down payment. The way to figure this is figure how much you need to borrow (estimated cost of construction plus any loan payoff on your land. This is your maximum loan amount. Divide this by the value of what you are building (cost of construction plus the current value of your land (not what the County taxes you on).

For example you bought some land 2 years ago and paid $60,000. It is now worth $110,000. Lets say you still owe $40,000 on this. Now suppose you want to build a house for $250,000 in building costs. If you don't want to put any cash in, then you want to borrow the $40,000 to pay-off the lot, plus the $250,000 to build the house. Your loan amount is $290,000. The value of what you are building uses the current lot value of $110,000 plus the $250,000 in construction, or $ 360,000. We would confirm this number with an appraiser. So your loan to value is $290,000 divided by $360,000 which my calculator shows to be just over 80%. So a 90% loan program would allow you to add your closing costs and finance everything-because you are using your lot equity as your down payment. For an 80% program, you would need to bring in a few dollars to get your loan amount below 80%, plus you would pay your closing costs out-of-pocket.

People who bought just about any land in Wenatchee, Chelan, Leavenworth, the Methow Valley or Okanogan County 2 or more years ago likely have built up enough equity to build, because our land prices went up and haven't come down.

If you are looking for financing to be your own builder, and you are calling around to various lenders, here is atip to save some time: Instead of telling them about the land or the amount you wantto borrow, or even how long you have been a customer of their bank, just ask, "Do you do Owner-Builder" financing. You will soon find that there aren't many players left in the game.

Wenatchee Owner Builder Financing

Darel Ansley (Peoples Bank) — Mon, 17 Mar 2008 00:10:54 -0500

2008 seems to be a great year to build your own home in the Wenatchee area. I have seen a large increase in the number of clients requesting owner-builder mortgages. Some bought land a few years ago and others are buying their lots now. It looks like people will save some money building their homes this year versus 2007. The reason for this is that every subcontractor and supplier was scrambling last year to keep up with all the projects from their regular builders; this year, fewer builders are starting new speculative projects, which means the subs are a little hungrier and are more reasonable on their pricing.

Financing owner-builder projects is one of the most rewarding things I can do; I love to see someone build a house and gain a bunch of equity from their efforts. The key to this is good planning and organization. Without good planning, an owner-builder project can be costly.

Not everyone who builds their own home lifts a hammer; some do, but many just organize the subcontractors. As you price out all the work tasks of your home, sometimes you will find that a good sub with a professional, fast-working crew can often do a task for less than you can do it for yourself.

If you are considering being your own general contractor, I have a few tips: I should first qualify that I am only speaking from the experience of financing these owner-builder projects in my market areas; greater Wenatchee, Leavenworth, Suncadia, Okanogan County, and Lake Chelan; things may be different in Western Washington or other areas. I work for a smaller community bank, so for these loans, I am very familiar with the details as I not only did the upfront analysis, I did the individual monthly inspections and draws, so I have seen the downstream impacts of little mistakes on the front-end.

If you have never built a home before, I would suggest hiring a consultant to help you manage the project. Some licensed General contractors will simply do this for a fee, or you can hire one to do your main framing and finish carpentry. By doing this, you have someone to help you look at the overall project. One advantage of this is that they can recommend reliable subcontractors who will show up on time; many owner -builder projects have been delayed just waiting for a plumber, etc.

Looking at it from the subcontractor's side; if they were planning to come to your jobsite today, but one of their regular builders, who will give them 4-5 jobs this year, calls and asks them to come out to one of their projects, where do you think the sub is going to go?

Also, when a sub, say an electrician, is writing up your bid, he doesn't know how well your project is going too be managed; you may call him out to do the rough wiring before the roof is dried-in. He is not allowed to proceed, so he has to leave and come back another day. He has to factor in these unknowns about your management into his bid. If a professional is either building your house, or acting as your consultant, that electrician will likely give you a lower bid as he knows he won't have to make extra trips to your jobsite.

The things we need to see for an owner-builder project are 1) a cost breakdown of all major components of the home (foundation, framing, siding, plumbing, etc) with each item backed up by a bid from a licensed subcontractor. 2) A materials list that tells us what you are using, (what type of floors, roofing material, siding, etc) and 3) a set of plans.

If you don't have a consultant helping you, the biggest piece of advice is to not rush the planning; ask the subs lots of questions. Does the concrete bid include the rebar and concrete, pump truck, and finishing? For the plumbing bid, does it include the actual fixtures, or just the labor? Ask lots of questions, get good bids and have some contingency for those unknowns and you should be alright.

One last tip for those who have built a home in the past; almost every owner-builder project that I have seen run over budget has been someone who has built a home in the past, and they proceeded quickly assuming they knew how to do it. Inevitably, they forgot the fire-sprinklers, or they priced a generic floor tile without examining it closely; when they switched to what they really wanted, it was another $4,000 , etc. So the point is, even if you have done this before, take the time to plan.

Lastly, have your lender go through all your bids with you to make sure you haven't overlooked anything. With all the details in place, you should have a great project.

Wenatchee Home Builders Home Show This Weekend

Darel Ansley (Peoples Bank) — Wed, 06 Feb 2008 01:53:43 -0600

This weekend is the 5th Annual NCHBA Home Show in Wenatchee. NCHBA is the North Central Homebuilders Association; so the show is all about construction, remodeling ideas, doors, flooring, decks , windows etc. And of course I am there to help people finance their construction or remodel project. There are no pots and pans or ginsu knives. I have participated in all 5 and I like the fact that it is construction focused and that there is an admission charge. As a vendor, the price of admission keeps it from being overrun with people who are just bored on a weekend, so the people coming through are really serious. This allows us to engage in meaningful conversations with people at our booth as we are not distracted handing out flyers to people who don't want them.

The other nice thing about this show is that 99% of the vendors are from the local area and do business in the local area; these are not people who fly into town to sell a product and then leave. At the website you can get all the times, a list of vendors, and print a $1 off coupon. You'll also find a list of the practical Do-It -Yourself demos that will be presented. If you bring your kids along, they can build a wooden project in the KidZone manned by our local Lowes store.

So come on by, walk around slowly and talk; we are Eastern Washington folks, and were not in a hurry. Tell us about your project and well get you hooked up with the right people to help you out.

Chelan Land Financing

Darel Ansley (Peoples Bank) — Tue, 05 Feb 2008 01:37:35 -0600

Lot and land sales at Lake Chelan seem to be brisk right now; as I am getting inquiries every week from people wanting to finance a building lot or some land. Most people have not financed land before so I hope to remove some confusion with a little explanation. This would also apply to people financing Leavenworth land or a building lot in Wenatchee.

The first thing you will find is most lenders don't want to finance land; especially now. Land is harder to liquidate if the bank ends up taking the property back, and the national lenders who are trying to improve their loan portfolios are dropping their land financing programs. So your first place to start would be a community bank that knows the area.

The next thing you will find is that the loan programs vary widely between lenders; one will want a 30% down payment and the loan will only last 12 months, and the next will take 10% down and give you a 30 year loan. Some offer interest-only programs. Some will only do subdivision lots with full utilities, others will let you do 20 acres or more. So if you are looking at property, you better check out your financing options before you start writing an offer.

One thing that is fairly consistent amongst lenders; because land is a little more risky, there are usually minimum credit score requirements, so you better know where you stand there. I check mine at annualcredit report.com, because you don't have to sign up for any monthly monitoring service. I suggest paying the small fee to each of the three agencies so you can get your actual score; it cost me maybe $7-9 each.

As the banks are usually lending out their own money, rather than selling the loans, the underwriter can sometimes be flexible; for example, we want to see a minimum Equifax score of 680 for a lot loan, but we approved a client in the 620's because he had a credible explanation for his credit, he had a low debt-to-income ratio,and high documented income; we call these things 'strong compensating factors'. Another exception was someone who wanted to finance a 20 acre parcel with 0 down. Of course his national bank turned him down; but we looked at his overall situation and saw an enormous income with millions of dollars in the bank (the one that turned him down), so we wrote the loan. Heck, we probably would have financed a toxic waste dump for this client; it was obvious we would be paid back. On other occasions, we will write the loan to cover the lot purchase and also use another property as extra collateral if the buyer is weak in a certain area (ratios,credit score, down payment).

Before you call a lender,its a good idea to have your overall plan in mind; what are you going to do with the land and when. I would say the most common thing I hear is that the customer wants to acquire the lot now, and plans to build a home on it in 2-3 years. So try to find a loan program that fits your needs, and check the terms. If they are offering an Adjustable Rate Mortgage (ARM), is it amortized over 20 years, or 30 years? What happens after the initial period, does it adjust and keep going, or does it re-set, or does it balloon? If it adjusts, how high can it go?

If you plan to start construction soon, you may be able to combine your land purchase with your construction loan. For more information on construction loans in Eastern Washington click the link.

With the government owning about 80% of Chelan County, and much of the rest in agriculture or on steep unbuildable slopes, supply and demand points to increasing values for your land purchases. Plus the sunshine and recreation continually attracts people from the Puget Sound region to Lake Chelan, the Wenatchee Valley and Leavenworth. All this is to say, if you want a piece of it for yourself, I don't think its going to get any cheaper.

Come and take a look, and then shop around for your financing, you will find 10% down lot loans, interest only lot loans, ARMS and fixed rate lot loans; whatever you need to meet your needs.

Wenatchee Mortgage Market Update

Darel Ansley (Peoples Bank) — Sat, 02 Feb 2008 02:13:16 -0600

In our markets of Wenatchee, Leavenworth and Chelan, we are benefitting from the drop in mortgage rates while not participating in the housing market declines that are hitting some parts of the country. But, as we have local media that just re-prints what the national Press is saying, we have some people sitting on the fence not sure if they should buy right now. The local mountains,lakes, skiing and sunshine with a close proximity to Seattle keeps a steady flow of second home and retirement buyers coming to Wenatchee, Leavenworth and Chelan. The majority of my business is land and construction loans for these people.

I try to get out some financial market news to agents and builders in our market on a regular basis to help them see where the mortgage markets are headed. Because, we do have plenty of potential buyers out there, and a good interest rate is often all it takes for them to jump in.

I was expecting some more volatility in rates than we saw this week, but I don't think we are done with rate declines. The Prime Rate came down a full 1.25% in January and that did not really rally the stock market, it just kept it from a deep decline (so far). I think today's announcement of the first decline in US payrolls in over 4 years is significant. The FED can't lower their short-term rates every week, so when we get a negative report next week, I think you will see the slide continue. Plus, this is going to be aided by the Press; they have been beating the Housing market to death for the past 6 months, and it looks like they are now targeting the whole US Economy.

The attached article appeared by the Associate Press today and highlights what you will see coming. The added words used to 'interpret ' the data for the reader is full of opinion and assumption. The 'Shower of Pink slips' they are talking about is a loss of 17,000 jobs. Against a US non-farm employment of 146 million people, I can't get enough digits on my calculator to figure that percentage. They also mention the economy grinding to a halt and tumbling into recession. As we learned with housing, once the press decides that the economy is crumbling, they will be making headlines out of anything. So, my analysis is that they will succeed in convincing the public that the sky is falling, enough to drive down the stock market and as a result, mortgage rates will continue to drop. It will be a net gain to us, because we won't lose any local jobs (because the sky really isn't falling here) but we will sell a lot of homes because of the low rates. Have a great weekend

Wenatchee Construction Update

Darel Ansley (Peoples Bank) — Tue, 29 Jan 2008 00:31:47 -0600

I have talked to several people this month who are buying land in our area with plans to have a home built in the near future. As most of the questions are similar, I thought I would fill people in on Construction Lending in Wenatchee, Leavenworth and Chelan.

First of all, its Winter here, which is very pretty, but if you didn't pour your foundation beforehand, you'll need to wait until it thaws. Depending on where you are in the area, that can be anywhere from February to May. Also, people who are finishing homes right now are generally moving in without exterior paint, stonework, patios, driveways or sidewalks; those things will be finished up in the Spring. These items are generally completed towards the end of the project, so if you are planning a new home which takes 6 months to build, and you start in July, guess what, you need to plan for this.

If you have never had a home built before, you need to make sure you are working with an experienced builder and lender who can help you through the process. You need to be working one-on-one with people you trust, because who is going to make sure that someone comes out in the spring to finish up those items, and how do they get paid? We can handle all this, but I just want to emphasize that it is alot easier when the lender, appraiser, escrow company and builder all work and live in the same market and know where to find each other; trying to move into your unpainted house in Wenatchee when your lender is in Texas, may pose some problems. Owner-builders need to be especially careful, if it is not something you normally do. If a subcontractor gives you a quote, make sure he knows what time of year you plan to have him up on a ladder. Just some things to think about. I don't mean to put construction fears into people, it is a great thing to do, and it's the majority of my lending; I just want people to be smart and get some good advice.

Right now is a great time to be doing your planning; most builders in our area did not start new spec homes last fall (waiting to see where the market is going), as a result, they have more time right now to review your plans and give you bids. I can't quote it here, as I only heard it 2nd hand, but I heard of someone quoting a cost per square foot today that was at a rate I hadn't heard in 3-4 years.

As of today, all-in-one type construction loans were back down to levels we haven't seen since last Spring, and with the Prime rate coming down, the 'Construction-Only' loans are the lowest they have been in 2 1/2 years. Combine these rates with some good builder quotes, and that new house becomes a reality.

For the details on how a construction loan works, see my Wenatchee Construction post. One place to do your homework: the North Central Homebilders Association is putting on their annual Home Show. There are no frying pans or kitchen knives, its all homebuilding related. Feb 8,9,10 in Wenatchee. You can get a dollar-off coupon and more info here.

Wenatchee Real Estate benefits from Cooling Economy

Darel Ansley (Peoples Bank) — Mon, 28 Jan 2008 23:44:46 -0600

We are very fortunate in the markets of Wenatchee, Leavenworth and Chelan in Eastern Washington. We are able to take advantage of the low mortgage rates driven by the cooling national economy, all without actually having to participate in the cooling economy. Last week was crazy, and it looks like mortgage rates are poised for another wild ride this week.

Last week they plunged briefly on Tuesday to some recent record lows, then they rose late that afternoon and later in the week were back up to almost the December levels. Mortgage rates respond to economic news (see below if you want more detail *), and this week is packed with more critical economic reports than I have ever seen in one week. Since I am not a fortune-teller, I can't tell you what all these reports will say, but odds are some will be positive and some negative, and the result will likely be extreme turbulence.

So here is my advice: Last week, the extreme low rates were only available for about 30 minutes. So if you have a transaction ready to lock, I would tell your loan officer what rate you want, and tell them to lock for you if we hit that rate. If it would benefit you to refinance your own mortgage in the low 5% range, I would suggest getting your application in with enough info that your loan officer can lock for you if rates hit your magic number.

Last Tuesday I called some people and quoted them the great low rates, but by the time we got the info and ran the numbers, the rate was gone; but now we are ready to pull the trigger at a moments notice. For your clients who don't like risk, if they like the monthly payment they can get today, they should probably lock ahead of the roller coaster ride.

*More info if you want it: Remember, Mortgages rates are one of those strange creatures which are not driven by their own supply and demand; more people wanting mortgages does not drive the rates up. Instead, they are driven by Wall Street Investors' view of the stock market. If the investors are concerned that stocks won't provide a good return, they buy securities with a guaranteed return, such as bonds or Mortgage Backed Securities (MBS). These are driven by supply and demand, so when more investors buy them, it drives the price up and the interest rate down

Why I love Living in Wenatchee

Darel Ansley (Peoples Bank) — Sat, 03 Nov 2007 01:02:19 -0500

Most jobs involve some driving; and mine is no exception with construction inspections around Eastern Washington. But I love the outdoors, so I have chosen a great place by living in Wenatchee. Last week I did inspections in Suncadia and Ellensburg. During my drive, besides the sunshine and fall foliage, I saw a 4-point Bull Elk with 3 cows, a coyote, and a flock of about 20 wild turkeys. Now I used to live in the Seattle area, and I will take this drive over the best day on I-405. I forgot to mention that I also saw Mt Rainier that day as well, as you get a clear view when you see it from the east.

Next week I have to run up to Chelan, and that means seeing Big Horn Sheep, this time of year it is almost impossible to not see the sheep and some deer along that road. Last Spring I drove up to Okanogan one day to teach a First Time Homebuyers Seminar with the Community Action Council. I stopped counting Bald Eagles after I got to 20; and its only about a 90 minute drive.

As you can tell, I believe there is a difference in the quality of life you get when living in Wenatchee. Wenatchee gets lots of press for being the top of numerous lists; all I can tell you is, if you like the outdoors, it can't be beat.

Is Mortgage Qualifying Getting Easier?

Darel Ansley (Peoples Bank) — Tue, 30 Oct 2007 00:50:28 -0500

In the last week, it appears that Fannie Mae is loosening the reigns and making mortgage qualifying easier. I won't try to completely explain Automated Underwriting here, but basically, when we as lenders take an application for a loan that will be sold to Fannie Mae or other investor, we gather all the details of the home purchase and all the buyers personal and financial information. We enter the information into our origination software and then send it off to Fannie Mae's Desktop Underwriter (DU) or other similar approval system. What we get back in seconds, is a list of what needs to be verified in our loan file for Fannie Mae to buy the loan.

When the mortgage fallout began, we in the Wenatchee mortgage business were quite frustrated because DU started asking for a lot more documentation than they used to. We were frustrated because our values remain high, but we were getting caught up in Fannie Mae's desire to improve the quality of loans they were buying. Some loans that would have been a slam-dunk Approve/Eligible in March were being declined in June. So we learned to adjust, as nobody has access to the mysterious inner-workings of DU; you just adjust to it's new personality and move on.

But in the last week, I have had three loans where DU waived the requirement for an appraisal!!, I haven't seen that in a long time. I would think this would be one of the last things they would let up on. Is this just happening for our area, or are they issuing Property Inspection Waivers (PIWs) all over the country? I'm not complaining; it speeds up the process and saves my clients money, so keep it coming. I'm just surprised by Fannie Mae's timing on this.

Wenatchee Fall Construction Race

Darel Ansley (Peoples Bank) — Mon, 15 Oct 2007 00:02:06 -0500

It's that time again; every Fall in the Wenatchee area, builders scramble to get their foundations poured before it freezes, giving them a chance to get their homes framed in so they can work inside during the Winter. Some years have been mild, where you could excavate and pour concrete all Winter long. But more typically, we see someone get a late start and be delayed for 2 months and finally pour in February.

Good news this year for people planning a custom home, many good builders are holding off on their spec building to see where the market goes. This means these top builders are available for your custom project. If you have a piece of land and have been waiting to build that house, this is a great time.

I spoke recently with three top architects in our area, and they say they are all very busy with custom home designs; so if you still need plans, I would be getting your appointment set.

Also, construction is sort of immune from the recent mortgage woes as the lot loans and custom construction loans are generally funded directly by the bank, and/or they are backed by one of the large agencies like Fannie Mae. The problems in the mortgage market are primarily related to "Secondary Financing" from hedge funds and mortgage bonds.

If you have never had a construction loan before, fear not! , 90% of people who come looking to get a construction loan are also first-timers, so we will walk you through the whole process. Here is a brief overview of how construction loans work.

If you need a recommendation for sub-contractors or builder, I'd be happy to help. For the Wenatchee, Leavenworth, Chelan, Okanogan areas, you can also contact the Homebuilders Association for referrals.

Great news for Veterans and First Time Homebuyers

Darel Ansley (Peoples Bank) — Thu, 04 Oct 2007 01:29:27 -0500

In the State of Washington, the HouseKey program has resumed it's funding. This means Veterans and anyone who has not owned a primary residence in the last 3 years can get 100% financing for their home purchase, including manufactured homes and condos. The program is offered through specific loan officers who have been certified by the Washington State Housing Finance Commission (WSHFC).

The rates are below market, and have some income and purchase price limitations, but you can still find a few homes to fit the parameters in our part of the state (Eastern Washington).

Here are the current rates as set by the State:

30 year fixed

6.5% 0 origination/discount points

6.25% 1 origination/discount points

6.0% 2 origination/discount points

(They also offer 40 year and interest-only rates)

Income limits for our area are $70,000 for households of 3 or more and $60,000 for households of 1-2 people.

House price cannot exceed $230,000

So, to find the house that fits your budget, you may have to be a little farther from town, but it gets you into a home of your own.

At a time when 100% financing programs are as hard to find as baby pigeons, this one is amazing. If you know any veterans, they don't have to be a first time buyer to qualify. Also, it is amazing that someone can get 100% financing on a manufactured home (doublewide, HUD certified).

A couple more things: It has to be your primary residence, and you need to attend a free class in order to qualify. If there aren't any in your area, contact a WSHFC certified lender to find out about other training options.

Some nay-sayers will tell you that you have to pay recapture tax if you sell your home, but talk to a WSHFC certified lender and they can explain the math to you to see why only 1 person has ever had to pay this tax out of the roughly 50,000 clients.

We have done a lot of these loans in our market, and we are glad the state was able to resume the funding of this program.