Jim's Blog

Purchase & Renovate Your Dream Home, only 3% down, including improvements

Jim Hood (Cumulus/Ann Arbor Radio) — Mon, 14 May 2007 09:47:11 -0500

Are you in the market to purchase a home? Only finding properties that are in rough condition? Are you finding possible good deals but don't have the money to renovate/improve the home?

You have options. In today's Real Estate market, especially in Michigan with all the foreclosures, there are many opportunities for buyers to purchase a home that needs some TLC for a great value, including foreclosed homes.

A large number of first time homebuyers don't have the resources to renovate a home when they first purchase. The solution? FHA 203k Renovation loan.

This type of loan allows you to purchase a property with only 3% down (based on purchase price) and FHA will lend you the money to renovate the home. You can update bathrooms, kitchens, paint, carpet, add a bedroom, add a garage, etc.

You can now buy a home that is in rough condition, put only 3% of the purchase price as a downpayment, and we can lend you up to 6 months of payments while renovation is completed, on top of the money for renovation.

This is a great tool for everyone, especially first time homebuyers, who have a hard time finding a well maintained home in their price range.

American Home Mortgage is a certified FHA 203K lender. If you'd like to hear more about this opportunity please do not hesitate to call. Have a client who could benefit from this? I'll be happy to help.

Sincerely,

Jim Hood

Fed Holds Rates Steady & Impact on Mortgage Rates

Jim Hood (Cumulus/Ann Arbor Radio) — Wed, 09 May 2007 14:19:57 -0500

The Federal Open Market Committee (FOMC -aka The Fed & Ben Bernanke -Fed Reserve Chairman) held the Fed Funds rate steady today at 5.25% (http://money.cnn.com/2007/05/09/news/economy/fed_statement/index.htm?postversion=2007050914 -Fed's Statement)

For clarification purposes I will explain first what the Fed Funds rate is and then what this all means for mortgage rates.

The Fed Funds rate is the rate at which the Federal Reserve Bank will lend money to banks on a short term basis. This rate is determined monthly by the Federal Open Market Committee.

What this means to most people is it is the basis for which our short term interest rates (Home Equity Lines of Credit, Credit Cards, Commercial Loans) are based. The prime rate we see so often is typically 3% above the Fed Funds Rates, therefore todays Prime Rate is 8.25%. The majority of Home Equity Lines of Credit (HELOC) are based on Prime + 0-6%. If you have a home equity line of credit, your interest rate stayed the same today.

What does this mean for Mortgage Rates? Not much, really. First Mortgages are traded on a completely separate market - called the Mortgage Backed Securities Market. This is where mortgages are bundled and sold like bonds.

Naturally, the Fed's statements about the market, long term inflation, and the impact it has on stocks will all indirectly impact mortgage rates, however that is usually the extent of it.

Where do I think rates are headed and why?

First off, if I really knew the answer to this I'd probably be trading on the Mortgage Backed Securities Market. Second, nothing is a guarantee in an open market. Third, these are my opinions and I am not an attorney, CPA or any sort of financial analyst.

Long term mortgage rates appear to be very steady right now. All of the panic we heard about with Sub-Prime has yet to really impact our A paper and 30 year fixed rates. Mortgage rates, historically speaking, are at very attractive levels.

The big buzz word on CNN, CNBC and business news channels is Liquidity (people or institutions with a lot of cash). This has led to a number of very large acquisitions (Mergers) and public companies going private or getting bought out by private equity. All of this liquidity is typically a good thing for mortgages. Investors need somewhere to put that cash for a better than savings account return, such as the Mortgage Backed Securities Market.

If there is a slow down in the economy and the stock market starts to slow down, investors will also be looking for places to put their cash which should help support these levels.

Some of the risks: inflation, foreign investment, foreclosure rate.

The inflation risk is pretty easy to explain. If prices inflate, investors will demand a higher rate of return for their cash investments (banks for example will pay higher interest rates on savings accounts, therefore this will increase our mortgage rates to attract the investment.)

Foreign investment is much more complicated, for example let's take China. China buys billions (lots and lots of them) of Mortgage Backed Securities. They do this to help support their currency as compared to the dollar (this is complicated and over simplified here but the gist is correct.) This keeps our rates low because China comes in and supplies this market with much needed cash. If China were to stop doing this there would be less supply therefore rates would have to increase to attract more investment. (For the record, China's support of their currency vs. the dollar is not the best situation for our economy as a whole and an entirely different topic.)

The foreclosure rate (Number of homes that go into foreclosure per 100) is a measure of risk for this type of security. In other words, if only 0-1% of the homes go into foreclosure it is not very risky. This type of mortgage (A paper) pays less to an investor (because it's not as risky) than a group of loans with a higher foreclosure rate. This is essentially what has happened to the sub-prime market. Too many loans went belly up and the risk was too much for the investors to handle. As long as the A paper loans don't increase their foreclosure rate then we should be okay.

So what did I say about mortgage rates? The Fed Funds rate only indirectly impacts mortgage rates. Right now, mortgage rates continue to remain at attractive levels and don't look to be going up anytime soon. I do not expect rates to move much more than 0-0.5% in the next six months.

If I haven't bored you to death yet, I thank you for reading my summary of the Fed's Rate Decision. Please feel free to correct me, add to this or just say hello.

What to do with Sub-Prime Borrowers?

Jim Hood (Cumulus/Ann Arbor Radio) — Tue, 01 May 2007 13:02:15 -0500

All this news about the sub-prime mortgage woes has everyone running for the hills and sending away what could end up being good business in the end.

Yes, if you watch the news all we hear about is how the sub-prime mortgage market is killing our housing market, (just take a quick look at http://www.mortgageimplode.com/ and see how many sub-prime lenders have gone out of business)putting increased pressure on an already struggling market. An obvious problem is with the reduction in sub-prime loans available is we have somewhat limited our market for purchases & refinances; especially on the lower end of the market. CNN reports today that the housing market is under tremendous pressue with the loss of these sub-prime loans; http://money.cnn.com/2007/05/01/news/economy/homesales/index.htm?postversion=2007050110.

Does this mean that we should turn down these potential borrowers? Heck no! Our job is to educate and assist people in the home purchasing/refinance market. All this means is that we are going to have to work harder to educate and assist our sub-prime borrowers to elevate them to conventional mortgages.

There are many programs availabe to consumers with poor credit; credit counciling is a great tool not only to assist your borrowers in getting a home but in also lowering all their other borrowing costs in the future. Were we really doing any service to customer's with poor credit putting them into homes they could not afford? No, the fact of the matter is we have gotten lazy and instead of educating our customers we were just offering them the easiest loan where they would qualify.

That being said, are there any better referral sources for us than when we assist a customer that is sub-prime and educate them to get them into a conventional mortgage? Personally, these customers are my most loyal.

So don't turn down the sub-prime borrowers, let's educate them, work with them so that if and when they can afford a home we're not putting them into something they can not afford.

Traditionally the housing market is most directly related to jobs and real wages. What has happened to our market is not as much a function of sub-prime mortgage woes as it is home prices have gotten too expensive as compared to real wages. This means we were due for a correction, sub-prime woes or not.

Wages are increasing and when we see home prices come back in line with real wages we will see our market start growing again. Some people predict this to happen next year, I think by the end of the summer we will start to see better numbers.

If you are a Realtor and have sub-prime borrowers that need a good education on credit/mortgage approval I would be happy to assist them.

Make it a great day.

Sincerely,

Jim Hood, American Home Mortgage

866-648-8231 x1004; Jim.Hood@americanhm.com

Housing Market Hits GDP, Inflation an Issue

Jim Hood (Cumulus/Ann Arbor Radio) — Fri, 27 Apr 2007 11:03:40 -0500

The Government reported a slow down in GDP growth with the housing market taking a big bite, almost 1%, out of the GDP number.

The most current reading shows a growth rate of 1.3%, down sharply from 4th quarter 2006 of 2.5% growth rate.

The article on CNN, http://money.cnn.com/2007/04/27/news/economy/gdp/index.htm?postversion=2007042711.

Normally these types of numbers would translate into lower mortgage rates. However, in these numbers there is a real increase in inflation, the core PCE deflator rose 4%, as opposed to 1.7% in the previous quarter. This means that everyday items, excluding volatile energy and food prices, have increase 4% in the quarter, putting real pressure on disposable income and discretionary spending for the consumer.

The real problem may be with the FED Reserve and the Fed Funds rate. As we all know, the Fed is extremely worried about inflation, maybe too much if you watch CNBC, and this number could cause them to either increase or hold rates despite an economy that may be headed to recession. (Normally with these types of GDP numbers we would expect the Fed to contemplate a lowering of rates to boost the economy, unfortunately the PCE core deflator figure runs against this.)

That all being said, there are still strong job numbers -despite a recent increase in unemployment claims. Jobs are the number one driver of the housing market, so as long as we can continue to see increases in job numbers (yes that is more than likely everywhere but the State of Michigan) our housing market should recover nicely.

Now if we can just get the Fed to at least hold and not increase we are likely to continue to see very attractive interest rates for consumers. The liquidity in the international markets should allow us to attract enough investment to hold these rates, if not improve them over the next couple of months.

Have a great weekend everyone!

Jim Hood, American Home Mortgage

866-648-8231 x1004; Jim.Hood@americanhm.com

Home Builder's Facing Difficult Times - Now is the time to Establish Relationships

Jim Hood (Cumulus/Ann Arbor Radio) — Thu, 26 Apr 2007 11:06:37 -0500

As most people have already read, homebuilders accross the nation are struggling. Inventories have increased, prices have dropped and new home sales are down. Almost every national and local homebuilder has been adversly impacted during this down turn.

As CNN reports today, http://money.cnn.com/2007/04/26/news/companies/beazer/index.htm?postversion=2007042609, the news does not seem to be getting any brighter for this year with a possible upturn next year in 2008.

I attended a sales training yesterday and the speaker from my company made a very good point. Now is the time to establish builder relationships. As business is down, builders are looking to get more creative to get rid of their existing inventory. They are more open now, than in busy times, to work with new people and to initiate new ideas.

The example given yesterday is a good one. Basically, the time to get into a market is during the bear market. Take stocks for example, it was better to buy Microsoft/Intel/Cisco during a bear market than a bull market. Get in at the bottom to reap the rewards of a better market.

We all need to work together more now than ever to assist eachother in getting more buyers to the table.

So go talk to our builder friends/referral sources and let's all work together to make sure we can reap the rewards of a bull market - it will be here before we know it.

Sincerely,

Jim Hood, American Home Mortgage 866-648-8231 x1004 or Jim.Hood@americanhm.com

Homes Sales Slide

Jim Hood (Cumulus/Ann Arbor Radio) — Tue, 24 Apr 2007 09:49:29 -0500

Looks like our figures are finally showing what we have all seen over that last 6-12 months. According to CNN.com, http://money.cnn.com/2007/04/24/news/economy/home_sales/index.htm?postversion=2007042410, home sales and prices have dropped.

I'm sure there are a number of reasons for the drop such as sub-prime fallout, an over supply of new and existing homes on the market, and a tightening of credit for new borrowers.

Regardless, where there are challenges there are opportunites. What a great time to be in the market for a new home. Never in my career have I seen buyer's have so much power in the market.

If you're in the market for a new home and/or a second home or investment property it could not be a better time for you.

It's time to dust off the old investment property clients and make them some money. With rates remaining low and possibly headed down, opportunities are here.

Need advice on investment properties, a pre-approval and/or just have a financing question, please do not hesitate to contact me, 866-648-8231 x1004.

Sincerely,

Jim Hood, American Home Mortgage

LaSalle & ABN being sold

Jim Hood (Cumulus/Ann Arbor Radio) — Mon, 23 Apr 2007 10:07:13 -0500

Another mega banking merger is in the works. ABN AMRO is selling out to Barclay's, a British Bank, to create the Fifth larges banking institution in the world. As part of the deal, ABN is going to sell it's LaSalle Bank to Bank of America.

While usually a merger is a good sign for the industry and show's some potential in the market, this move could cost Ann Arbor more jobs. The ABN AMRO jobs that are still here are likely to not be here after Barclay's purchases them.

As far as LaSalle, probably more of the same as Bank of America, a very good bank will be running their operations.

What does this mean for Ann Arbor? Probably not much. The biggest key is whether or not Barclay's will keep the ABN AMRO people here in Ann Arbor. It will also mean all those new signs for LaSalle will have to be changed to Bank of America, not much more.

Who knows, maybe we'll get lucky and Barclay's will invest in Michigan and hire more people locally. It may be a pipe dream but stranger things have happened.

Here's the link on CNN: http://money.cnn.com/2007/04/23/news/international/abn_takeover_barclays.reut/index.htm?postversion=2007042310

Make it a great day!

Jim Hood, American Home Mortgage

1031 Exchanges, Great time for Investors

Jim Hood (Cumulus/Ann Arbor Radio) — Wed, 18 Apr 2007 11:08:10 -0500

In our challenged market it is always important to realize that there are opportunities when there are challenges. I have heard, from various Realtors, that investors are back in Michigan looking to take advantage of Real Estate oppotrunities. This is a good sign for our market and may indicate reaching the bottom; of course only time will tell.

1031 exchanges for our investment clients are great tools to take advantage of a down market. Below is a quick summary of how exchanges work.

1031 tax deferred exchanges allow investors to sell an investment property and then re-invest the gains from that sale to invest in another investment property without having to pay capital gains taxes. This is a simplified explanation but should give you an idea of how they work. I am not a CPA or attorney, just for the record.

So why does this market lend itself for an opportunity to investors, see example below.

The example is easy. Let's say you own an investment property that is worth, $200,000. Let's say the market is off by 10%, so the home is now worth, $180,000. Now take that same scenario and find a home worth $400,000, down 10% is now worth $360,000. As you can see the investor can, if the market turns and hopefully it will, sell the $180,000 home for a $20,000 loss but purchase the $400,000 for a discount of $40,000 (net gain in a better market is $20,000).

As market values slide, cash flow opportunities for investors increase. We've all thought at one point or another in our careers in Real Estate, if I would have only bought 5 years ago, look at what I would be worth today.

In 5 years, that is what we are going to be saying about our market today. If only I would have bought up some of these homes at today's prices to sell at a future date. Hence, investors are best positioned to take advantage of these declining values and turn into positive cash flow and potential large gains for sale at a future date.

Have questions? Please feel free to contact me, 734-913-4346 x1004 or Jim.Hood@americanhm.com.

Now let's go find some investors and help them make some money!

Jim Hood, American Home Mortgage

Equal Housing Lender

Financing a Foreclosure/Deferred Maintenace Home

Jim Hood (Cumulus/Ann Arbor Radio) — Tue, 10 Apr 2007 10:09:51 -0500

Welcome to my first blog! Thank you Todd Waller from Real Estate One for referring me to this resource.

The number of foreclosed homes in Michigan keeps on climbing. All of the issues in Michigan are further compounded by the collapse of the sub-prime mortgage business. As we all know, this has combined to make it a very difficult environment for real estate.

But have no fear, where there are challenges, there are also opportunities. As we see home values decline, this should allow us to market homes to people who once thought they were out of range. We will also see bargain hunters, investors, among others jumping on the opportunities as they arise.

One of the difficulities we are seeing is trying to finance a home that has either not been maintained and/or has been foreclosed. We've all seen them, cabinet's missing, holes in the wall, copper plumbing removed, doors kicked in, appliances missing, etc.

So the question then becomes, how do we match such a challenged property with an opportunistic borrower -especially if the borrower has no cash on hand to make the much needed improvements? The answer, 203K FHA. This is essentially an FHA and renovation loan combined. We can lend for the improvements, up to 6 months of payments (while the work is completed) and the borrower can put as little as 3% of purchase price (not including improvements) down to take advantage of these opportunities.

As this market continues to have issues these opportunities will only get greater. Enough doom and gloom, now is the time to look for the opportunities in our market and get people into great homes at great values!

Thank you for reading and please do not hesitate to contact me with questions, 734-913-4346 x1004.

Sincerely,

Jim Hood

Jim.Hood@americanhm.com