Anthony's Blog

Contract for Deed or Land Contract

2008-06-11T01:00:46Z

A Contract for Deed allows a buyer to purchase a home at a negotiated price from a seller with a small down payment. A banking institution will then treat this as a refinance after at least 12 months or more of timely payments made through a third party (checking account) to the seller. This offers the buyer time to build equity in the home, make any necessary home repairs for fixed rate secondary market loans, and time to repair any credit problems prior to bank financing. The big secret is that banks then treat the contract as a refinance with equity built into the home. It is a win win scenario.

Buyer Benefits:

allows monthly buildup of equity
allows the buyer time to repair credit for bank financing

Seller Benefits:

home is sold faster during a slow market
the home is usually sold at a higher price than a normal transaction
upfront cash to seller
the buyer will have greater interest in home maintanance compared to a renter

P.S. A buyer should always have their credit reviewed with a bank prior to entering into a Contract for Deed in order to repair any credit issues prior to obtaining financing upon contract maturity.

Lease with option to buy

2008-05-13T22:09:25Z

A lease with option to buy allows a renter to purchase a home after at least 12 months or more of timely payments made through a checking account to the seller. A buyer usually enters a lease with option to buy with a small down payment and a negotiated purchase price of the home upon the maturity of the lease contract. Sometimes the seller will also credit a monthly portion towards building equity within the home. The bank will treat this as a purchase with prior credits for down payment. It is a win win scenario.

Buyer Benefits:

allows monthly buildup of equity
allows the buyer time to repair credit for bank financing
allows the buyer to find another home without purchasing if they exit pior to contract maturity
allows the buyer to try out the home prior to purchasing

Seller Benefits:

home is sold faster during a slow market
the home is usually sold at a higher price than a normal transaction
upfront cash to seller
the buyer will have greater interest in upkeep compared to a renter
option from buyer can pay Realtor's commission upfront

P.S. A buyer should always have their credit reviewed with a bank prior to entering into a lease with option to buy in order to repair any credit issues prior to obtaining financing upon contract maturity.

about myself

2008-03-19T00:05:19Z

About Myself

I have been a respected lender within the Sauk Valley area since 1998. I am mainly a correspondent lender for US Bank, but I also have other resources. My specialty is in first time home-buyers. Sometimes it takes creative solutions and knowledge to put a challenging transaction together. My borrowers know that I am available 24 hours a day if they have questions. Many times, borrowers find they have more questions as their transaction progresses. I find that if my borrowers are able to get answers to these questions in a timely manner, their stress level is kept to a minimum.

There are many lenders out there, but it those lenders that are willing to listen to the borrower's needs and earn their respect that help them choose from all the mortgage products now available.

My greatest satisfaction comes from having a past client refer someone to me or return themselves. I know that I have gained their trust and that they know that I will give their situation the attention it deserves.

Areas of Expertise

FHA/VA purchase and refinance transactions

Conventional Loans - purchase and refinance up to 40 years, no down payment, no private mortgage insurance

New Construction - portfolio and simultaneous single close construction loans ( able to lock rate prior to construction )

Investment property - portfolio loans for remodeling and flipping

Please feel free to contact me.

abollman@source1mortgage.net or 815-535-1076

Mortgage Rates

2008-03-18T23:49:13Z

Rates - Is it always best to have the lowest rate? We have been accustomed to always asking for the lowest long term fixed rate. Why would we think otherwise?

The lowest rate is best for long term loans. Meaning, the borrower plans to not refinance or move within that term. If a borrower is in this position, they may also have extra cash to apply towards buying down the rate since it may be a tax deduction. This may give the borrower an extra cushion in case future rates may drop. Paying these extra points now may be cheaper than closing costs to refinance the mortgage in the future.
A borrower may pay a slightly higher rate to alleviate closing costs. Many borrowers now a days want to purchase their own home asap. Many of these borrowers have limited funds. The lender can make up this difference by increasing the rate to cover some of the closing costs. This may be beneficial to first time buyers since the majority of them are just buying a starter home and move within 3 to 7 years.
Short term vs long term fixed rates - If a borrower plans to hold the mortgage for only a short term. They may be better off with a fixed rate for 3 to 5 years with an amortization for 30 years. The advantage to this is usually a better rate which adds savings in interest to the customer. They may either be planning to move in the near future or refinance and consolidate debt. ( home remodel, weddings, college, etc. )

Purchasing a flip property with limited funds

2008-03-12T21:28:22Z

Lenders require at least 20% down on investment property. The best way to finance a flip property is to obtain a short term interest only portfolio loan due in 12 months. This increases the buyers cash flow to renovate the property. Some lenders are willing to set up a purchase loan based on the current appraised home value. This allows a buyer to purchase the home with little or no down payment based on the current home equity. A buyer may also have the option of simultaneously allowing the lender to provide a lien against another property that the buyer owns with equity. This would provide extra cash to renovate the flip property. A portfolio loan has lower closing costs and can be set up to allow for no monthly payments. This type of portfolio loan is due in 12 months. The loan can be extended for another 12 months with interest paid for only a couple hundred dollars if needed. Other portfolio loans can be 3 to 7 years long if needed, but require a monthly principal and interest payment with an amortization of up to 20 years.

example= A buyer would like to purchase a flip home for $80,000. The home has a current appraised value of $94,000. This would give the buyer an automatic 15% down payment. Since the bank wants 20% down, this leaves the buyer only needing 5% down plus closing costs.

Bi-Weekly mortgage loans- a smarter alternative

2008-03-03T00:24:09Z

Bi-weekly loans will pay off your mortgage in a shorter amount of time and save a borrower thousands on interest paid. It also accelerates a borrowers equity buildup.

Some lenders charge extra for this type of loan when it is a simple math amortization conversion.

A borrower just needs to apply extra to their principal balance monthly to achieve the same result. This can be done with a normal low fixed rate product vs paying a higher rate lenders may charge for a bi-weekly loan.

Example- 100,000 bi-weekly mortgage offered at 7.5% with a monthly payment of $699.21 will pay off in 23 years with a total interest charge of $110,393.21 or a 100,000 regular 30 year fixed mortgage loan at 6.50% with a monthly payment of $699.06 calculated for 23 years with a total interest of $92,943.59. This gives you a savings of $17,449.62.

Tax tips on mortgage closing costs

2008-03-02T23:02:53Z

I have been advised that a buyer can receive immediate tax savings if they convert the loan costs into lender points paid. Otherwise the tax savings would be written off over the life of the loan. This would be exclusive to a persons primary residence only.

example - your closing costs on a $100,000 home is $1500. If your lender charged 1.5% in points, this would cover your closing costs and become an immediate tax deduction.

Points paid to your lender to reduce your mortgage loan rate may also be an immediate tax deduction.

Please check with your local tax adviser prior to financing.

Why should a seller offer to pay for a buyers closing costs & prepaids?

2008-03-02T21:34:50Z

It opens a seller up to a bigger market of buyers. Many buyers can now get 100% financing, but still need to save for closing costs and prepaids. As a seller you can sell your home for nearly your asking price and profit vs. haggling on a selling price with no seller concessions. See example below based on a sales price of $100,000.

Seller haggles with buyer and accepts a $95,000 offer. The seller has a smaller market which may take longer to find a buyer and has carrying costs. The seller nets $95,000 minus carrying costs.

Seller accepts an offer of $100,000 with a 3% concession to the buyers closing costs and pre-paids. The seller has a bigger market of buyers and sells the home faster with a net of $97,000. There may also be additional tax savings rewards.

What is a recast modification? and what is it used for? A bridge loan alternative.

2008-03-02T21:18:25Z

A recast is used by borrowers that can apply at least 10% towards the principal balance of their mortgage. The lender usually charges a small fee ( $250) to recalculate the borrowers mortgage payment on the reduced principal balance without having to change the locked rate or reset the amortization.

A borrower may use this if there may have been some inheritance or large earnings and they would like to reduce their current mortgage payment.

A borrower may apply this if they used 100% financing to purchase a new home prior to selling their old home. Upon the sale of the old home, they would apply the sale proceeds to lower the mortgage on their new home.

Line of credit vs. a bridge loan

2008-03-02T21:07:12Z

It makes more sense for a borrower that is looking to purchase another home prior to selling their existing home to use an equity loan vs getting a bridge loan. A bridge loan usually will have higher closing costs and fees associated with it than a line of equity loan. Please see example below.

A customer is purchasing a $200,000 home, but still needs to sell their current home worth $100,000. The borrower has a current mortgage of $50,000. The borrower takes out a line of equity against their current home for $40,000 to give them 20% down on the new home with a purchase price of $200,000. The $40,000 equity loan has interest only payments to increase cash flow for the borrower until the home is sold. Or may payoff the current mortgage and get a interest only mortgage on the $90,000 to increase cash flow.

No PMI ( private mortgage insurance ) home loans

2008-03-02T20:48:46Z

More borrowers are now trying to get away from the old traditional loans that charged PMI if you could not afford to put 20% down. PMI is now deductible, but is elected on a year to year approval. There are now many options for mortgage loans without PMI. Below are a couple of options.

1st mortgage at 80% and a second mortgage of up to 20% for a total loan of 100%.

This option allows a low rate on the 1st mortgage which holds the majority of the home loan financed. The second mortgage will be at a higher rate, but on a smaller amount of funds. The second mortgage is usually paid off in 10 to 15 years while the first may be on a 30 year amortization. This loan is usually selected by borrowers that are rate sensitive on the 1st mortgage and plan to pay the second mortgage off as soon as possible.

Another option is a single loan up to 100% that is at a slightly higher rate to compensate for no PMI. The bank can purchase the PMI cheaper than the borrower and passes this on to the borrower at a slightly higher fixed rate. Borrowers will select this type of loan if they plan on staying with that home for quite some time and prefer a single home mortgage payment.

Purchase a home now with Zero Down

2008-03-02T19:21:17Z

There are now many fixed rate programs that offer 100% financing, but most forget that there are still closing costs and escrow that need to be included. This amounts to roughly 3% of the purchase price. When purchasing a home with zero down, a buyer will be closer to a sellers asking price upon asking for up to 3% from the seller to pay for closing costs and pre-paids. Most programs allow the seller to contribute 3-6% back to the buyer.

This helps the buyer keep a savings for repairs or remodels when they move into their new home.
Financing this into the mortgage increases a buyers tax deduction instead of financing this onto a credit card that is not tax deductible on interest.
Sellers also benefits with immediate tax write-offs and a faster sale.