I’ve learned that most people prefer to learn by looking at something, versus just reading about it.  It makes it easier for us to understand the more complicated things.  Because of this, I created a visual graph to compare renting vs owning a home.

I tend to show my clients the long term benefits of owning vs renting, because most renters think short term.  I know I did when I was younger and renting.

Below is a link to a graph were you can visually compare renting vs owning, but you need to know the specifics of what I’m comparing.  Keep in mind, I used more conservative numbers, mostly because most of my clients are in Wisconsin, but in other parts of the country I know rent is much higher than what I’m using below.

Here are the specifics of what I’m using:

• I’m using a current rent payment of $1000.  On a conservative approach, I didn’t assume any future rent increases.
• I used a savings account balance of $10,000 that the renter has and the percent they are receiving in this account is 5%.
• The purchase price of the home is $200,000 and a 5% down payment with a conventional mortgage is $10,000.  Exactly what the renter has saved.
• I used the example of a FHA mortgage, because it has a lower down payment of 3.5%.

I want you to look at my most important tip that most renters don’t know when it comes to the long term benefits of owning vs renting.

Tip:  The rent graph (red) under “Net Worth In 15 Years” shows your what your current investment would be if you didn’t add anymore to the 10k savings, earning a 5% return.  I also set the property appreciation at 0%.  Most investors would agree to move your money to the one that pays you a higher return, even if it takes a bit longer.

Here is the link to the graphs.  http://mcedge.tv/16azqh

Also, the graphs under “Rent vs Principal Paid In 2 Years” is a realistic situation, because many renters will continue renting over the next couple of years.

I hope this helps bring light to renting vs owning, because I do receive lots of positive feedback that looking at graphs help renters understand the rent vs own answer in the long run.

These are great mortgage programs available for home buyers this year.  I keep up on the latest programs available and find things most bankers don’t realize are available.  These programs are available for all buyers, not just first time buyers.  If you have family, friends, or co-workers thinking about buying a home this year, it truly is a great time to buy.  Two main reasons:

1. Loads of cheap inventory that banks need to sell.  You have many homes to choose from.
2. Interest rates are still at historic lows.  We plan on seeing them this low through most of summer, because of the government actions to keep the rates low.

On top of that, here are the most popular programs lately, since most buyers are not looking to do a big down payment.

2011 Mortgage Programs For Buyers

• USDA Rural Housing - This program is one of only two true no down payment programs still available.  On top of no down payment, the buyer can roll the closing costs into the mortgage loan if the value of the home is a bit more than the accepted purchase price.
• Fannie Mae HomePath - This program just announced that Fannie Mae will pay 3.5% of the closing costs for the buyer if they buy a HomePath eligible home.  These are homes that Fannie Mae bought back and is looking to resell.  This credit offer is only good through June 30th, so don’t hesitate with this one.  You can find homes are HomePath eligible here.
• Single Premium MI (mortgage insurance) - This is a way to avoid the MI payment without having to put a 20% down payment.  A single premium MI is considered a closing cost, which can be paid by the seller in the offer to purchase contract.  By paying the MI as a single premium you will not have monthly MI as part of your mortgage payment.  Even if the seller doesn’t agree to pay for closing costs, you can pay this as a one time cost to avoid monthly MI.

There are many other programs available, but the ones above are very beneficial to most buyers.

Whether you are a first time home buyer or a repeat buyer, 2011 is a great year to buy a home. With so many foreclosures and short sales out there, it’s hard not to find a home priced less than it’s current market value.

Here are 3 important tips of advice for buying in 2011:

Get Pre-Approved First

All to often I receive a phone call from a customer that’s looking to get pre-approved for a mortgage, because they already put an offer into a home. Seriously? Even if you know you have great credit, tons of assets, etc. the lending world has basically turned upside down in the recent years. With changes happening almost monthly, mortgage guidelines are much different than the last time you bought a home or think that your good credit and lots of money will get you approved. Yes, those are great, but you will be surprised what changes have been made.

For example, if you are looking to buy a condo, many lenders require a 10% down payment. Even though with conventional mortgage loans you only have to put 5% down, the lenders set their own overlays on top of Fannie Mae guidelines. This is something most buyers don’t even know until they talk to their loan officer.

A pre-approval letter is expected by your realtor and the seller of the home.  They both know how much more difficult it is to get approved for a mortgage, so they expect this letter when you put an offer into a home.  Some realtors even require this before showing you homes.

Know Your Mortgage Options

There are tons of mortgage programs out their for bad credit, no down payment, small down payments, etc. Working with an experienced loan officer will put you in a great position in understanding what options are out there. There are even programs that don’t require PMI (private mortgage insurance) as part of your mortgage payment with less than 20% down. Typically, this can only be avoided if you put have a 20% down payment.

Take the time to ask about these programs and don’t be afraid to ask more questions if you don’t fully understand. Buying a home comes with lots of things to know and understand, especially if you need a mortgage loan.

Foreclosed Homes

There are so many foreclosed homes out there, it’s hard not to find a good deal.  What you need to be prepared for is the condition of the home.  Many foreclosed homes sell “as is”, which means the lender that is selling it will not repair anything, even if you ask.  You may find something small like old 70′s carpet with wall paper only your grandmother would pick out, but you may also find holes in walls, old roofs, basement problems, etc.  You need to be prepared when choosing a home that needs major repairs, because you will be limited on mortgage loans.  There are mortgage programs specifically for homes like this, so make sure your loan officer offers these types of programs, because lenders will not approved a mortgage with a home “as is” if there are major structural problems.

You can take a look at foreclosed homes for free for 7 days at www.RealtyTrac.com

Here are some other posts that will help you with buying a home:

How To Figure Out The Value Of A Home
How To Get A Good Price On A Home

2010 was a crazy year for anyone that that was looking to finance a new home loan.  The lenders guidelines seem to change every other month and the foreclosures or short sale homes buyers wanted, took months for an approval from the banks.  Above all of this, the real estate agents always complained about a common thing:

“This buyer I’m working with hasn’t been pre-approved yet.”

What we found in my area (Milwaukee, WI) was that most buyers, especially first time home buyers, were looking at homes and contacting real estate agents before getting themselves pre-approved for a mortgage loan.  They were doing things backwards.

We come to realize, that almost all future home buyers start with looking online. When they start to look online first, buyers get this emotional trigger to want to see something they like, after looking at pictures.  So, first thing they see is the real estate agents phone number.

We have been seeing this more in Milwaukee than other areas of Wisconsin.  Perhaps, people in the city tend to go online and looks at home versus folks in the country.

So, the best advice I can give for the new year is for buyers to start with step #1, which is talk to your mortgage broker and get yourself pre-approved first.  Sellers and real estate agents know that lending has become hard to come by and they look for a pre-approval letter to filter out the serious buyers from the lookers.

After years of working in the real estate business, I’ve learned one of the most important things a buyer needs to know in order to get the best price on a home.  There is only one reason why people look to buy foreclosed homes, they think they will get a great deal for the home.  Just like anything you buy, say it’s a new car, new furniture, etc. there is one solid piece of information that is like gold when looking for the best deal.

The solid gold information you need to find when searching for a great price on a home, is knowing the seller’s current situation.

Once you know and understand that the seller is desperate to sell, you are at the greatest advantage when you start to negotiate.  An example would be a recent divorce or a spouse that passed away.  Both of these situations have lost half their household income and, usually, the one income remaining is not enough to support the mortgage payments, along with all their other bills.  Believe me, just about every mortgage application I take needs both incomes to approve.

A seller in either one of these situations usually wants to get rid of the home fast, because it helps them to move on from what trauma they just went through.  Price isn’t on their mind, time is more important at this point.

Remember, if you really want a good price from a seller in this situation, then you need to think business and don’t let your emotions take over.  It’s in our nature to feel bad when traumatic things happen to good people, but you just want to buy a good home at a good price.

This kind of mortgage advice can come in handy when looking to buy a home.

The home value is determined by similar homes that have recently sold in the area.

Here is an easy example:

The subject property, meaning the home you are looking at buying, is your standard 3 bedroom, colonial, with about 1500 square feet. Now, there are 2 other similar homes on the same block, both have 3 bedrooms, are colonial, and about 1500 square feet. One of the homes sold for $150,000 and the other sold for $160,000 just a few months ago. These two homes are called comparables.

These two comparable’s give you a good indication that the range in value of the subject property is $150,000 – $160,000.

Now, that was a basic example and in reality, comparables don’t come that cut and dry. Lenders today are getting tighter and tighter with their guidelines, when it comes to the appraised value. I am seeing most underwriters (underwriters are the people that decide whether your loan should be approved or denied) asking for recent home sales within the last 6 months. Going out as far as a year may not be acceptable, in some cases. If the property is located in an urban area, the comparables to use should be within 1 mile, or so.

Visit the nations #1 site for foreclosures and find homes for half the price.

There are many more factors that go into finding comparables, but the important factors that pull the most weight are these:

- Similar type of home. (compare a ranch style to a ranch style)

- Similar square footage. (don’t compare a home with much more than a couple of hundred square foot difference)

- Date of sale. (today’s lenders are looking for sales no older than 6 months and 3 months for really strong ones)

- Distance from the subject property. (try to stay within a mile, but if you have to go farther out that’s ok too)

First time home buyers will find this information very valuable, since most first time buyers don’t understand if they are making a good offer on a home or not.  It also helps to work with a local real estate agent to help with this.

Congress plans to extend this credit into next year and also add a new credit of $6500 for existing home owners.

If you have been a homeowner for 5 years or more, you may qualify for the $6500 on a new home purchase next year.

Read more…

By far, this no down payment mortgage loan has become very popular with first time home buyers this year.  Specifically, Wisconsin has many areas in which the property you are looking to purchase will be eligible for this program.  Wisconsin mainly consists of rural areas.

Here is a direct link to a map that shows the areas of Wisconsin that are eligible for a rural housing loan.
http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do?pageAction=sfp&NavKey=property@11

The rural housing loan does apply throughout the nation, but you have to find the site that pertain to your state.  Each state is going to have different areas that allow eligibility.

To learn more about the details of the Rural Housing Loan, go to no down payment mortgage loans in Wisconsin.

If you’re considering obtaining a mortgage loan or refinancing your current mortgage, it is most likely that you’ve thought about seeking the assistance of an online mortgage broker. While the task appears to be quite easy, you should follow some valuable tips in order to ensure you don’t come across any hitches in the process.

The first factor that you must take into account while looking for an online mortgage broker is to ensure that the broker is a representative of numerous reputed lenders and provides a wide variety of loan products. It is quite crucial to ensure the online mortgage broker is not simply an agent of the lender undercover. If the mortgage broker is the representative of only one lender or bank, it is quite improbable that they would provide you the refinance or mortgage option that is most suitable for your requirements.

Verify the qualifications of your online mortgage broker. Are they member of any associations? Are they recommended? For how many years they have been doing their business? Experience is the most important element when it is a question of mortgage lending and locating the right loan product to suit your necessities. You should always wish to ascertain that your mortgage or refinance is dealt with by somebody proficient, somebody who understands what they are performing.

Just confirm if your mortgage broker is asking for a fee. Some online mortgage brokers ask for a fee simply against providing their services, whereas other brokers don’t. If you don’t think that the broker deserves the additional cost, you should stay away from brokers that ask for an upfront fee.

When your broker gives you a referral, you should request them for an evaluation just to be sure that you are receiving the loan that serves your purposes most effectively. The evaluation should incorporate upfront fees and recurring fees and must be performed on the basis of your actual borrowing amount.

You must confirm that the online mortgage broker would stay around to provide services following the closing of the loan. Precisely, what services are offered by them? If there is a disagreement with the lender, would the broker assist you to sort out the problem or you have to do it single-handedly?

When you visit your broker, just don’t forget the aforementioned advices. Your broker would understand that you’re a well-informed consumer who is serious. Realizing which questions you should pose would help you become convinced and well organized.

Since this blog has been around for almost 2 years now, many new readers may not be aware of some of the other helpful mortgage advice topics that have been shared in the past.  First time home buyers seem to be the type of buyers that are actively looking to buy a home this year, so much of this advice will be for the first time home buyer.  The more mortgage advice that can be absorbed the better. 

Every time I take on a new first time home buyer client, I take the time to educate them with the entire mortgage process.  This is a necessary, because the entire process of buying a home and financing it can be overwhelming.  If there isn’t someone to walk you through the entire process, then take the time to gather up all the mortgage advice posted here.

This year is now being considered one of the best years to buy a home, because of a large tax credit for first time home buyers, interest rates at record breaking lows, and home prices have dropped over the years.  These buyer benefits have helped many people decide that 2009 is a great year to buy a home.

I wanted to remind you of some of the other content on this site that could come in handy when looking to buy a home in 2009.  Use this mortgage advice to your advantage and you will be sure to find a great deal when buying a home this year.

Here are 3 posts worth your time to read:

What is a FHA mortgage loan? – This has become the most popular mortgage loan today.  A detailed look at what the FHA mortgage loan is.

Top 5 questions answered for first time home buyers. – Popular questions and answered that all first time home buyers should know!

Get your mortgage quote in writing. – Talks about what paperwork to look for when getting your mortgage quote in writing.