We hear about these specialty loans every day. They are sold in support of the adjustable rate mortgages, and interest only mortgages that are designed to provide funding to anyone that can "fog a mirror".
In the past, not much happened without a down payment on a home purchase. If we get back to basics, the general expectations would be a down payment of 10% to 20% of the purchase price. The better your credit score the less money needed, depending on your overall package. A down payment of 20% would also eliminate the need for private mortgage insurance (PMI). Getting rid of the PMI is going to save you at least $40 per month on your $100,000 mortgage payment.
A 20% down payment also puts you on much more solid financial ground. This kind of footing makes it possible for you to take maximum advantage of the property appreciation that most real estate investors and home buyers expect.
Another benefit of a good down payment is it mitigates the periodic market reversals that tend to wipe out gains in market value and leave home owners owing more than their property is worth.
I realize that 20% down may seem unattainable for most home buyers. It actually depends on the situation. For example, if you are selling a property that has no mortgage on it, you are an excellent prospect for a 20% cash down payment. Your challenge becomes finding the right buyer. Don't worry, it may not be as difficult as you might think. We can help you think outside the box.
Earlier I mentioned the importance of your credit score. According to the Federal Home Administration, (FHA), "a low down payment is the best predictor of a loan default". Understanding this fact makes it difficult to have much compassion for the so-called "sub-prime lenders" that make poor credit borrowers their primary customers.
Unfortunately too many people have been and continue to be seduced into home buying financial commitments that in too many cases fail. Just look at the news headlines. Every day we read and hear about another sub-prime lender that has suspended making loans, executives have been fired, companies have gone bankrupt, etc.
The human casualties are even greater. RealtyTrac? , the leading online marketplace for foreclosure properties, recently released year-end data from its 2006 U.S. Foreclosure Market Report, which shows more than 1.2 million foreclosure filings were reported nationwide during the year, up 42 percent from 2005 and a foreclosure rate of one foreclosure filing for every 92 U.S. households.
As bad as these facts are, things are poised to get worse. In each of the next two years more than $1 trillion in adjustable rate loans are to begin adjusting! The fallout from these events will be widespread.
For every adversity there is an equal or greater benefit. We must prepare ourselves to make the needed changes to take advantage of the constantly evolving housing marketplace.
I think it was Dr. Martin Luther King, Jr. who said, "We are entertwined in the fabric of destiny. That which affects one of us directly affects all of us indirectly."
The USA has the dubious distinction of a national personal savings rate of -1.2%! Our historical average is between 8% and 10% of income.
Until something changes, the late payments, foreclosures, and bankruptcies will continue to run rampant. Instead of becoming easier, home ownership could become more difficult than ever.
One thing that must be done is for each of us to save more money. You may ask, how does a country with a negative personal savings rate find the money to save? We must learn to work smarter, not harder. We must learn to apply our creative genius to the problems facing us. There are easier, faster, and much smarter ways to buy and sell homes, for example, than we realize.
Instead of trying to save money the traditional way, we must learn to really put our money to work for us more quickly and effectively than ever. Here's an idea. Rather than approach the purchase of your next house in the traditional way, you might consider something a little "outside the box".
Property buyers can change your focus from owning to controlling the property. By using very creative and effective techniques, you will need much less cash to control and actually live in the property than the typical 5% to 20% down payment. It's not uncommon to effectively leverage as little as 2% to 7% into 10% or more in equity within as little as one year! This equity acceleration technique can be used effectively before you are even on title. As a matter of fact, using our techniques, you can build more equity in one year than you will get in five years through normal amortizations!
At the same time property sellers can quickly and easily solve their debt relief and cash flow problems.
The point is this. If you want to keep getting what you're getting, just keep doing what you're doing. Otherwise change is essential. There are 169 different ways to buy a house, and cash is only one of them.
When you get right down to it, down payments are not a dilemma at all. Get outside the box. You just have to know where to go, who to ask, and what to do.
Copyright 2007 TDO Properties, LLC All Rights Reserved. This article may be reprinted as long as the content is not compromised, and the author and web site information is included in the content.
1-800-CASH-TODAY™ Home Buyers has been in the California home-buying business longer than most people have thought of real-estate investing. With real estate's current turn of events, 1-800-CASH-TODAY™ Home Buyers are realizing even greater returns than it did in the up market, but with far stricter set of buying rules… here's how one professional home buying team makes it work so well.
One of these reasons is because of their strong necessity to place their investment criteria in writing, on the office board and in front of their teams faces daily.
Following are four reasons why 1-800-CASH-TODAY™ Home Buyers places such a strong emphasis on their investment criteria and how they realize such HUGE profits when most everyone else are making pennies, breaking even or losing money:
Reason #1 - Educate Your Selling Team By having specific investment criteria, 1-800-CASH-TODAY™ Home Buyers is able to sharpen their focus which leads to the likelihood of finding great deals all the more easy. Great deals are attracted towards 1-800-CASH-TODAY™ Home Buyers because sellers, fellow investors, agents and banks understand what parameters they need to fall within. By letting your selling teams know exactly what your criteria are from the beginning - it sets you in first position for deals and responsiveness.
Reason #2 - Utilize Detailed Cost Analysis Spread Sheets While many investors may stew over a concoction of minimal diligence, "what does my buddies or fellow investor acquaintance say" mentality, and lack of market condition valuations, 1-800-CASH-TODAY™ Home Buyers uses specific investment criteria spread sheets, because it helps them immediately determine if a potential investment fits or does not fit within their cash-buy criteria. By doing so, it will save a tremendous amount of time on determining which deals to "go" and which deals to "throw".
Reason #3 - Be honest and Professional At All Costs By quickly becoming a market leader, our reputation has created a presence that has catapulted others word of mouth from individual home sellers, Realtors™, fellow investors to Asset managers. They are aware of our buying criteria, ethics and prowess. Even content sellers are beginning to spread the word to friends and family of how we were able to help them (or someone they know) out of a bad situation. All of this is directly attributed from following the first three steps mentioned above.
Reason #4: Be Firm Yet Flexible 1-800-CASH-TODAY™ Home Buyers is able to evolve their investment criteria with the fluctuations within the market place, even down to the nuances of certain geographical locations. This "eagle-eye" approach gives them the leading advantage in buying right, selling right and realizing the maximum potential of profitability. It doesn't take much for an area to drop a few points due to an REO bulk sale, of say 100 homes, taking a chunk from your profits or increasing your hold time… so keep a close eye on your buying market.
While there remains a strict rule of thumb that predicates 1-800-CASH-TODAY™ Home Buyers strategies and investment criteria, we would also like to tie-in a more personal approach in the way that Bruckner, a partner of 1-800-CASH-TODAY™ Home Buyers, evaluates additional investment criteria.
Following are Bruckner's personal investment criteria:
1. If he doesn't understand the investment, he doesn't make the investment, period.
2.) Bruckner invests only in areas where the advantage in making a superior ROI equates with minimal time, effort and energy being realized. This lowers risk, magnifies returns, and saves time and effort.
3.) Bruckner doesn't put lots of capital at risk. If he is going to put money into a deal, he makes sure it is a low risk deal. He is never comfortable taking a high risk position with his money or his capital investors funds. Certain Master Criteria are never overlooked though; such as the LTV never exceeding 70, aggressively 40-60% or higher annual rate of return on investment depending on the degree of risk.
5.) The game has to be worth playing. This means that if the deal isn't big enough, why bother? Every deal requires due diligence of some sort. Deals where funds are put at risk or take on personal liability have the highest need for due diligence. When the return is not there, obviously the upside is not there on the whole. This equates to the "go or throw" criteria that 1-800-CASH-TODAY™ Home Buyers employs.
After reviewing our cost/profit analysis spread sheet and when a large profit is neither feasible nor obtainable, not just as a rate of return, but in terms of total profit in a deal, Bruckner doesn't bother taking the next step - but simply looks at the next property.
Here is an analogy: The effort put forth in preparing a gourmet dish from scratch or driving to a 5 star restaurant is the same. Be it, the effort in preparing that meal is the same irrespective of who prepared it. Bruckner prefers to drive to the area it was prepared instead of lamenting over working hard and not smart.
6.) Bruckner also looks to ways to better other individual situations. Many times, he offers credit repair for those homes he buys on short sale, since the seller cannot receive any cash benefit from the sale. Likewise, by offering Seller Financing and creating cash flow to those whose credit has been destroyed and can't move into a new home, it's like a new lease on life. As Bruckner says, "the better good for all will prevail in the winds of uncertainty for years to come."
Both Keith S. Donald & Ford are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Keith S. Donald has sinced written about articles on various topics from Home Buyers Guide, Real Estate and Mortgage. Keith Donald is a professional in private real estate financing. He will consult individuals and small businesses in structuring private paper transactions and turning private paper assets into cash. Mr. Donald is available to assist you with the creation. Keith S. Donald's top article generates over 1600 views. Bookmark Keith S. Donald to your Favourites.
Ford has sinced written about articles on various topics from Small Business, Home Buyers Guide and Real Estate. 1-800-CASH-TODAY™ Home Buyers is poised and ready to add investors to increase our market share in buying Southern California real estate. If you are interested in secure 1st Trust Deed positions and cash flow, go to www.800cashtoday.com. Ford's top article generates over 5400 views. Bookmark Ford to your Favourites.