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The Wave Is Coming

We keep hearing reports that the foreclosure wave is coming. It’s on the news and in the paper. Maybe it is, maybe it isn’t. We have not seen much evidence of it in Sonoma County. Here’s what we know so far… Fannie Mae has been holding back flooding the market with foreclosures so prices stabilize. That is working well. The Medium Price has gone up from $305,000.00 to $320,000.00 since January 2009. Foreclosures for sale have gone down from 350+/- in December 2008 to 116 as of today.

IF the wave is coming you need to prepare now. All offers made on foreclosures require loan approval be attached to the offer. Sometimes 2 loan approvals are required. If you do not have loan approval they will not look at the offer. Get loan approval now!

There are 3 types of loan you can get right now. Fannie Mae and Freddie Mac (usually 30 year fixed, low interest rate loans) for as little as 5% down. FHA an easier standard for loan approval and only 3-1/2% down. And lastly, private money from private individuals. These private money loans are needed if the house (a wreak/dump) does not qualify for the government loans. Private money requires 20% to 25% down, but the private party lending the money does not care what shape the property is in.

The Federal Government is keeping rates low. Normally rates are dictated by the yield on Treasury Bonds. Yields are up and rates should be up, but they are not. The guys on Wall Street are befuddled because the normal measure of interest rates isn’t happening. The “wave is coming” is the “perfect storm” for buying. House prices are low and interest rates are low.

This perfect storm lasts for a brief time, so get approved now and be prepared. Forest Tardibuono is a CA DRE Broker with over 20 years experience in real estate and lending. His number is (707) 523-2099. See website @ sunpacmortgage.com.

WHAT IS A “HARD” MONEY OR “PRIVATE” MONEY LOAN

There are several types of loans you can use to purchase or refinance. This applies whether you are buying a home to live in; a home to rent out; or a commercial building. They include the standard 30 year fixed rate mortgage; the government FHA/VA loans; a commercial property SBA loan; or a private money loan.

Private money is money borrowed from private individuals. I bet you’ve borrowed money from a relative. That was a private money loan. It wasn’t from the bank or some other institution. Most private money lenders/investors lend money through a mortgage company (there are laws that require this).

Why would anyone borrow private money? There are some great advantages. The property you want to borrow against may not be something a bank will lend on. Banks require a property be in good shape. What if you are looking for speed? Hard money loans are generally much faster than a bank loan. What if your credit isn’t bank worthy? A private money lender will lend you money even with bad credit!

Private money loans are based largely on equity. The most you will get is 70% of the value of the property. If it’s worth $300,000.00 you will be able to get $210,000.00 If you want a 100% loan, hard money will not work.

An example of a hard money loan just happened. The borrower had almost all of the money to purchase a house. She needed only $75,000.00 more – but didn’t qualify for a bank loan. The purchase price was $231,000.00. She only wanted to borrower 32% of the value. That loan got done within 4 days for a quick close. She beat out other’s that put in offers for the house. She could and did quickly close and her house payment is the payment on $75,000.00.

Another example, a contractor wanted to buy a dump house. No bank would lend on it because it was so dilapidated. The contractor had enough for a decent down payment and proved he had enough to fix it up for resell. He got a hard money loan was able to fix up the house and pay off the loan within 4 months.

Maybe you need a hard money loan!

[youtube=http://www.youtube.com/watch?v=V2ebzlL4360]

Forest Tardibuono is a CA DRE Broker with over 22 years experience in real estate and lending. His number is (707) 523-2099. See website @ sunpacmortgage.com.

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