Record setting year in the Austin Market!!
March existing home sales
• 2,373 sales in March
• Up 18% from same time last year
• Active listings down 9% for single family
• Average price $230,650 up 12% from last March
• Multi-family prices up 20% from last year!
These numbers reflect a continuing trend of increased demand and decreased supply. This is great news for everyone in Central Texas and signals a great opportunity for investors and first-time homebuyers alike.
40 and 50 year mortgages! Super Size Me!
Have you heard of the newest way to finance your home? Fannie Mae has just started offering 40- year terms on mortgages. One lender out of Southern California is even offering a 50- year mortgage! What is next? 60- year terms? Well, this Loan Officer thinks that these are ridiculous! The amount of money you save monthly by doing an extended term loan is far outweighed by the long-term cost of the loan.
Compare the payments and the interest paid on the chart to the left. By going from a 30 year loan to a 50-year loan you save $64 a month on your payment, BUT you pay an additional $121,000 in interest. If you need to go with the longer term loan to afford the house, I would say that you cannot afford the house to begin with. You want a nice home to live in and raise your family- the last thing you want to be is “House Poor.” What's the point of owning a home if you are struggling to make the payments? Remember, mortgage companies have very liberal guidelines when it comes to qualifying you for a home loan. You need to be the one to tell the mortgage company what type of payment you can realistically afford month to month.
A 50-year mortgage may sound like a good idea; but, once you run the numbers, all that it is another marketing stunt to try and get the mortgage company's phone to ring.
Investing in Real Estate with a Self-Directed IRA
The IRA Partner loan package is monumental to both the real estate and mortgage industries because it opens up opportunities for everyday investors to purchase alternative investments, beyond traditional stocks and bonds, with their IRAs. Now you can purchase real estate with your IRAs, even if you do not have the full required amount in it, by borrowing a portion of the cost at standard industry rates, according to Daniel Cordoba, Certified Estate Advisor and founder of Asset Exchange Strategies, LLC. The introduction of this new lending vehicle is testimony to the fact that self-directed retirement accounts are growing in popularity as individuals seek out alternative ways of investing to take control of their financial futures.
The new loan package gives individuals the ability to invest in real estate with their IRAs without requiring that all of investment be paid for through the IRA. Instead, individuals can leverage a smaller amount, as little as 10% (depending on underwriting requirements) and borrow the remaining amount. This enables investors to purchase transactions with significantly less money as well as potentially create even greater returns by leveraging their money. For the industry it shows that self-directed IRAs can, in fact, have a place in mainstream investment procedures.
With the IRA Partner, the LLC is able to hold title to the property while the IRA remains unencumbered because it is merely contributing the down payment up front. The IRA consequently takes profits based, at a minimum, on its percentage of ownership in the property. Asset Exchange Strategies fullservice staff of tax attorneys works with each investor to determine his or her investment goals in structuring the loan package accordingly.
For more information contact John McClellan 512-279-1150
No money to put down? No problem!
Don’t have a down payment? There are a multitude of loan programs available for just about every borrower. Whether or not you are buying your first home or your next investment house, there is a loan out there for you. FHA requires a 3% contribution from the buyer at closing, but this can come from the seller via one of the many grant programs out there. Fannie Mae has a Flex 100 program that requires only a $500 investment from the buyer. This loan works great for loan amounts above the FHA limit ($200,160 in the Austin area). Even if your credit is not perfect, we have a program that allows you to walk into your new home, even with a credit score as low as 565. Looking to buy an investment house? We can do a no -down-payment loan on an investment house up to a 4plex! WOW! No wonder everyone is buying homes!
The scoop on interest-only loans!
Interest-only loans are getting a bad rap. Why? We see countless news programs talking about the housing bubble in America and how people are using interest-only loans to move into homes they cannot afford. What they don't tell you is that the majority of these people are combining interest-only loans with adjustable rate programs. This can be a bad combination. There is a particularly bad one out there called the pick-a-pay program. Up front it sounds like a great deal, but buyer beware. This loan has 4 payment options; (1) Minimum monthly payment (2) Interest only payment (3) 30 year amortized payment (not fixed) (4) 15 year amortized payment. Typically, the program has a teaser start rate of 1.25%. This sounds great. The only problem is that it adjusts every month! The payment does not change but the rate does. So, while you are making payments based on a 1.25% rate, the bank is really charging you up to 6.75% and adding principal to your loan amount. Instead of paying your loan down, your balance is increasing. As for the other 3 options they are based on a month to month adjustable rate (around 6.75% in today's market). With rates on the rise they could balloon up to 9% or more! In just a couple of months! Best choice if you are going to do an interest only loan is to mix it with a fixed rate mortgage. In this scenario the rate is fixed for 30 years, with the first 10 years being interest only and the last 20 being a fully amortized loan. Remember, if it sounds to good to be true, it probably is.
