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About Financing a Home…
Most Americans are 90 days away from bankruptcy. Bankruptcy is at an all-time high because people lose their jobs, can't make payments on their home, the bank forecloses after 90 days and bingo! I called my local bank and asked if someone is out of a job, but have a lot of equity in their home; can they take a loan to make the house payments? They laughed me out the door! So if you owe any money on your home at all, it would be wise to take the largest loan possible while you still have a job, put it into a savings account that brings interest to offset the loan cost or better, and then if you have a kid that goes to college, major medical expenses or heavens forbid lose your job, you can still make the payments and don't go belly up. Not only that, the interest on your home loan is tax deductible, while any principal paid on your home is not. It is like putting money under your mattress, but this money you can't get back out when you really need it, except when you are a senior citizen and can make use of a reverse mortgage.
Talking about equity - if you have a lot of equity in your home and you want to re-locate, but need more time to look around than the customary 45 days it takes to close on your home... there is a program called:
Buy before you Sell.They will give you a bridge loan for about 120 days to make an offer on a new home.
If you own a home in Oregon or Washington, I have a cash buyer that will get you out from under. I won't earn a commission on it - nobody will - but I will get a referral fee. It would be a hassle free transaction without much to do and without realtors. Let me know!
Reverse Mortgage: If you know somebody who is 62 or older, banks will do a reverse mortgage on their home, pay off all their bills and don't have any payments. There are many elderly folks out there who have fallen prey to loan sharks because of medical bills. They can pay all of that off and might have some money left over! So keep your eyes open and tell your parents so they can tell their friends. To get such a loan, they need to use a specialty lender. Wells Fargo, First Interstate Bank and many others have a bank officer who specializes in these kinds of loans.
The elderly folks do NOT have to qualify for a loan; they get the money regardless of income, debt, etc. If you know an elderly person who is not in financial trouble, tell them anyway, they might want to make a trip to Europe, buy an airplane or buy your kids a college education! :-) AARP has an array of calculators that might be helpful: AARP calculators.
You want to be leery of
Internet generated loans. They lure you in with a low interest rate but then not only will hit you with points at closing, but also somewhere in the fine print they will have a pre-payment penalty, so they will hit you up again when you are selling the home.
Farm Credit
Regarding rural real estate a Farm Credit might work for you. Contact the local office in Central Point, Oregon
Jumbo Loans :
Fannie Mae and Freddie Mac, the two largest conventional mortgage loan purchasers, have raised their single mortgage loan limit: The 2024 conforming loan limit for Fannie Mae is $766,550 for one-unit properties . This increase allows homebuyers and current home-owners to qualify for a mortgage rate with a lower interest rate.
Jumbo loans are sometimes called "nonconforming loans" because they fall outside of these limits. In 2024, single-family mortgages with balances higher than $802,650 in most U.S. counties (and $1,149,825 in certain high-cost areas) are considered jumbo loans.
Loans for 1 Million and up:
There are a number of options for loans of $1 million and up, including:
SBA loans
The US Small Business Administration (SBA) offers loans up to $5 million that are partially guaranteed by the government. SBA loans are considered the gold standard for small business financing and are often offered by banks and credit unions.
Non-bank lenders
Non-bank lenders may have easier qualification requirements and faster processing times than banks and credit unions, but their rates are usually higher.
Online marketplaces
Online marketplaces like SoFi and "Hard-Money-Lenders" can help you compare financing options and connect with lenders.
Credit Suite
Credit Suite can help with business credit and fundability, and may help you get a million dollar loan sooner.
Other types of loans for $1 million and up include: Working capital loans, Business lines of credit, and Equipment financing.
When applying for a loan, you can expect to meet certain criteria, such as having a good credit score, a certain amount of annual revenue, and having been in business for a minimum number of years. You may also need to provide collateral and a business plan.
Lot loans
OWNER FINANCING: Owner financing is done either with a trust deed or a contract for deed; usually with a large downpayment, such as one third or even half of the purchase price. In Oregon it is mandatory that the payments are being collected by a third party, such as an escrow company for example.
With a trust deed a third party holds the title and when the buyer doesn't pay, the property will be auctioned off. The proceeds go to the seller for the remainder of the loan. If there is a profit it goes to the buyer.
With a contract for deed the seller keeps the title until the loan is paid off. If there is a default, the property reverts to the previous owner. In this case the advantage to the buyer would be that he will have a full year after the default to redeem his property if he can pay the full balance of the loan with all the interest due.
As a rule of thumb, a lot loan or CONSTRUCTION LOAN is always 1% over prime rate, usually with a "floor" of 7.25%. Construction loans are limited to the time until the home is built, but no longer than 18 months interest only, after that time they convert into regular mortgages, which can be paid off over a period of 30 or 15 years. If you would buy the lot without a construction loan, you would have to put 25% of the purchase price down. If you are able to do the construction loan and lot loan in one closing, there is a program where you would only need 10% down of the whole amount, including what the house would cost you. Be aware that the house must be built by a licensed contractor.
Usually BANKS do LOT LOANS, like local banks here, they are very easy going.
Lot loans are usually given with a 25% down and run about one point higher than home loans. You would also have to have the intention of building within a year or two. I usually found it easier to get an equity loan from my home to buy land. Also lot loans are not tax deductible
A loan in the amount of $100,000 at 7% amortized over 30 years will cost you about $665.- in payments per month.
CRP payments (applies only to farms)
The CRP is a conversation program that provides farmland to be seeded back to grass so the deer and antelope can play. Usually the very fertile farm ground is not put into CRP, just the ground which does not produce much in the way of crops. The farmer receives a payment every year for the farmland which he has to keep weed free and in grass only.
Types of Mortgages
Fixed Rate-Fixed Term.
As the title implies, the rate stays the same and the term stays the same throughout the life of the mortgage. The borrower knows that the payment will be the same every month until the loan is paid in full. Actually the payment can change, and likely will go up, as tax and insurance escrow amounts rise over the life of the loan. But the principal and interest amounts will remain the same. Most homeowners choose the 30 year term, but terms of 10, 15,20, 25, or even 40 years are available.
Adjustable Rate.
This type of mortgage became very popular in the eighties as interest rates rose and priced many potential homeowners out of the market. They make it possible for a home buyer to get a loan at a lower interest rate than the prevailing fixed rate. Typically, the lower rate is locked in for the first year, and then adjusts in the subsequent years to reflect the change in interest rates as measured by economic indices such as the prime rate or the one year treasury bill rate. There is usually a limit on how much the rate can go up in a year, typically around 2 percentage points. There is also usually a lifetime limit on the amount of increase, typically around 6 percentage points. An adjustable rate could double in just a few years during a period of high inflation and rising interest rates. On the other hand, during a period of negligible inflation and declining or relatively stable rates, such as we have experienced in recent years, adjustable rate mortgages have not fluctuated very much and many borrowers are very pleased with them. The adjustable rate mortgage is most suitable for the borrowers who think they will be living in a house for just a few years. During a period of economic stability, the total payments on an adjustable rate mortgage can be less than those on a fixed rate loan for several years. Another group of borrowers who are attracted to adjustable rate mortgages are those who want more house than they can afford right now, but who expect to see a higher income, or lower debts, in the next few years. Most of these home buyers refinance their homes to a fixed rate mortgage as soon as their incomes allow them to do so.
Two Step.
A hybrid mortgage that is part fixed rate and part adjustable rate is known as a two-step (the mortgage, not the dance step). These loans usually have a fixed rate during the first 3 to 7 years of a 30 year term and then revert to either a fixed rate or an adjustable rate mortgage. As with one year adjustable rate loans the adjustable or fixed rate at the end of the 3 to 7 year period is usually tied to some predetermined index and includes a margin for the lender. The initial interest rate is usually lower than for the 30 year fixed loans and higher than the adjustable rate loans. The home buyer has the advantage of the lower initial rate but runs the risk of higher rates after the fixed rate period. Like adjustable rate mortgages, these loans usually appeal to home buyers who plan to move within a 3 to 7 year time frame.
FHA, VA, and PMI
These are not types of mortgages but are mortgage insurance programs. Most conventional mortgage products offered by most mortgage companies, banks, savings banks, credit unions and other lenders require a down payment of at least 5%. These insurance programs make it possible for borrowers to buy homes with as little as 3% down under FHA to 0% down under the VA program. Home buyers who put 20% or more down on their purchase do not have this insurance expense. The U.S. Government guarantees the VA mortgage, so eligible borrowers also do not pay for this insurance against default. Some lenders provide an alternative to this insurance in their conventional mortgage products. They give the borrower a choice of the plans. You may choose the plan that provides the "normal" interest rate and pay the mortgage insurance premium monthly, or you may elect for a slightly higher interest rate without any such insurance premium. The rate without the premium usually results in a lower monthly payment than the rate plus premium. Further, the premium payment is not tax deductible, while the additional interest on the alternative is deductible.
If your money is stuck in a Trust Fund, but you need to buy a home now, need money before the hurricane season hits, or some other good reason, contact private equity firms with a focus on growth-stage companies, such as Insight Partners, Shore Capital Partners, Cascadia Capital or Heritage Capital Group all of which provide investment support.
Why should you get pre-qualified or pre-approved before making an offer?
Getting pre-qualified through a lender or by one of our associates is one of the most important things you can do to strengthen your hand when it comes time to make an offer on the house you want to buy. The first question a seller or a seller's agent may ask when presented with an offer is, "Has your buyer been pre-qualified?". In a buyer's market a seller is much more likely to take seriously a low bid or long list of seller paid repairs if he knows that you are financially solid and are ready to close in a short period of time. In a Sellers's market, being pre-qualified is not just important...it's essential. Very often an offer from a non-pre-qualified buyer won't be considered if the seller is being courted by other anxious buyers.
Getting pre-qualified through a particular lender doesn't commit you to place your mortgage with that lender. Most lenders know that and they consider the pre-qualification process as an opportunity to market their services. The idea of a consumer "shopping" for the best rate is now an accepted part of the consumer empowerment movement, just as buyer agency is.
"Pre-qualified" means that appropriate ratio of your debt to income have been calculated and converted to maximum monthly home payments. These are then converted to the amount of mortgage that these payments will support at current interest rates. In some instances, the person pre-qualifying the potential borrower will also ask questions about length of employment, debt history, pending litigation, or bankruptcy history. A credit report may or may not be used, but most of the time it will.
Here are some links regarding your credit:
Library of Congress: https://loc.gov/
To obtain your score:
https://www.myfico.com
https://www.equifax.com
Credit information on the Federal Trade Commission's site at
https://consumer.ftc.gov/credit-loans-debt
"Pre-approval" includes all the steps of pre-qualification. In addition, a detailed credit report and a complete loan application will be required. Then, the lender will issue a letter setting forth the mortgage amount, the interest rate, type of mortgage that was used, and citing two major contingencies. First, you must be able to document savings, income, and debt. Second, the property purchased must qualify.
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