Loan considerations for a first time buyerLending guidelines are changing on a daily basis for every type of loan: conventional, FHA, VA & commercial.  Nevertheless, there are still very attractive first-time home buyer options available.   If you are or will be a first-time buyer, it is critical to speak with a loan officer before looking at homes.  It is a crushing feeling to view a home, picture making it your own and then find out that you cannot qualify to purchase it.  A loan officer will pull credit, analyze debt-to-income ratios, review assets and income and determine what you can afford.  Presuming a pre-qualification occurs, the loan officer will then be able to provide an array of loan options.  Presently, FHA loans are the predominant loan for first-time home buyers as they ... 12/14/2008

How can you improve your FICO score?To improve one’s credit score, it’s critical to understand the factors influencing a credit score.  The factors that contribute to a FICO score and the weighted percentages for each are as follows:•    35% — timeliness of payments •    30% — the ratio of used debt to allowable debt for consumer credit •    15% — length of credit history (the more credit history and showing proof of consistent timely payment, the better the score) •    10% — types of credit used  •    10% — recent credit inquiries and recent new credit The greatest driver behind a score is making timely payments on all accounts.  Scores will be adversely affected for any payment that is 30 days late or more.  Being late on a mortgage payment will not only crush one’s score, but will al... 12/14/2008

How does your FICO score impact your interest rate on your loan?Low credit scores are deemed greater risk for lenders since the likelihood for defaulting on the loan increases.  As such, lower FICO scores translate into higher interest rates.  Mortgage lenders will group credit scores in a range, usually in 20 or 40 point increments, with interest rates progressively getting better for each higher interval.  For example, a borrower with a middle credit score between 660 – 680 will have a higher interest rate (presuming all other variables being equal) compared to one with a 680 – 700 score.  Typically, when a borrower has a 750+ credit, they will be able to secure the best possible rate, assuming their income, assets, collateral and down payment are acceptable.For qualifying, underwrite... 12/14/2008

What is a FICO score?FICO stands for Fair Isaac Corporation, a company that created the most used credit scoring model in the United States.  An individual’s credit score is calculated through a statistical algorithm and is used as a factor in determining the likelihood of a borrower defaulting on a loan.  FICO scores are generally used for obtaining mortgages, car loans or consumer credit.  The scores are provided from the three major credit reporting agencies: Equifax, Experian and Transunion.  Typically, there is a variance amongst the scores since each agency has a slightly different scoring formula.  FICO scores range from 300 – 850, with higher scores being considered less risky.  For mortgage lending purposes, any score over a 680 is considered good and above a 750 is considered ... 12/14/2008

There are some signs of strengthening in our Denver market.  The metro area's inventory of available resale housing decreased 20% to 23,120 units in October from October 2007.  Some of this reduced inventory is attributed to homeowners taking their properties off the market in frustration because their property is not selling, but lower inventory implies a strengthening market.  Remember, the Denver area had housing inventory of 31,989 units in July 2006. Home sales rose 14% to 4,265 in September compared to the same month last year.  This is due almost entirely to the lower-end of the market (under $180K) selling like hotcakes. October's median selling price for single-family homes decreased 12% to $206,000 from the same month of '07, and was down 4.7% from September's median of $216,1... 12/14/2008

FICO stands for Fair Isaac Corporation, a company that created the most used credit scoring model in the United States.  An individual's credit score is calculated through a statistical algorithm and is used as a factor in determining the likelihood of a borrower defaulting on a loan.  FICO scores are generally used for obtaining mortgages, car loans or consumer credit.  The scores are provided from the three major credit reporting agencies: Equifax, Experian and Transunion.  Typically, there is a variance amongst the scores since each agency has a slightly different scoring formula.  FICO scores range from 300 - 850, with higher scores being considered less risky.  For mortgage lending purposes, any score over a 680 is considered good and above a 750 is considered excellent.  Any score... 12/10/2008

This blog will discuss a type of real estate investment, rental condos or rental homes, in the Evergreen area in Denver.   What this investment is:  Purchase of a residential property to be rented out to tenants, usually on a 6-12 month lease term.  This is how most new landlords get started.  You can hire out all of the property management functions, but in many cases you will do many of them on your own.  There are smaller down payment requirements than for larger rental buildings.  The purchase process and financing process is very similar to what you experienced buying the home you live in now.  It's a great way for beginners to get started.   Equity needed:  Currently 20% - 25% Downpayment.  In some cases you might be able to do it with 10% down, but expect the second mortgage to b... 12/10/2008

Special considerations for Investor loans The talk around the water cooler these days is all about LOANS. Who can get them? At what price? What if I already have a few loans, do I still qualify?  A year or two ago the question was at what price do I get a loan (those were the days!).  Today it is "am I still in the game?"       Here's the deal:  if you have an owner occupied loan and 3 investor loans you cannot buy any more properties and get Fannie Mae / Freddie Mac financing, meaning you can't get a conventional 30-year fixed loan. Now, my hope is that someone reads this and tells me I'm wrong. That would be great!  But as far as I know that is the case.      Where does this leave you?  You can pursue loans that are warehoused by lenders, meaning they are not sold on the backend to Fa... 12/10/2008

  A LOT of agents don't advise their clients to get sewer scopes when they purchase a property. This is a major mistake.  A broken sewer can cost between $3,000 - $10,000 dollars to repair and it only costs $99 ($99Rooter - others are more expensive) to have a tech put a camera down the sewer pipe and videotape the sewer all the way to the mainline. This will tell you  and the-buyer what the condition of the sewer is.      So let's see, we pay to have the furnace inspected but a new furnace will only be about $2,000. We pay to have the roof inspected but that's probably a $4,000 job. So why don't we always inspect the sewer?  One reason is because, let's face it,  Realtors want closings. Many figure if they keep their mouth shut and don't go out of their way to recommend a sewer scope t... 12/10/2008

Investor Series:  Estimating Rents   A lot of clients ask me how to figure out what market rents are in a neighborhood. This is a critical input into the calculations an investor needs to make in order to determine what their return on investment will be on a rental property. So you don't want to screw this up!  Unfortunately, this is one of the many figures new investors get wrong.     One place people go to get rents is Rent-o-Meter. Rent-o-Meter is billed as an online resource to get accurate market rents. In my experience it is anything but!  However, I have a fairly simple solution. Multiply what you see on Rent-o-Meter by  80%  and you'll probably be close. I can't explain why but I find rents on Rent-o-Meter to be about 25% high, so multiplying their rents by 80% will get you clo... 12/10/2008

Investor Series:  Things to look for when you look at roofs   Have you ever driven through Aurora North looking for a rental property and taken a close look at the roofs?   Here's what you'll see: a bunch of 1950's ranches in varying states of repair or disrepair, lawns that are often grassless, old handcrank windows and roofs in almost perfect condition!  This surprised me at first and perplexed me for a long time.  Why, in a neighborhood devastated by foreclosures with properties with massive deferred maintenance are the roofs in such condition?  Really!  Stand in the middle of a typical street and looking at 10 roofs simultaneously, you'll be amazed. Well, it turns out the answer is pretty simple. There was a huge hailstorm in the mid-90's and most of the roofs were replaced by insur... 12/10/2008

Investor Series:  Things to keep in mind when seeing a foreclosed home   As investors we face a number of very real and very scary challenges. Making sense of this market is no mean feat and one has to be very careful with his or her investment. However, we usually think about danger as financial. Unfortunately, on rare occasion it can be even worse than that. The majority of the homes investors are buying these days are vacant and once in a while people break in and live in these properties illegally.  The last thing you want to do is walk in on someone camped out in a house, perhaps conducting illegal an activity.      This is no joke, you want to be HEARD when you walk into a property that is supposed to vacant. So make a lot of noise when you're at the front door. I always knock lou... 12/10/2008

Investor Series:  Understanding Egress Windows   A lot of investors ask what an egress window is and when one is needed. Technically, it's a window for a room below grade that a municipality has deemed large enough to be safe for exit in case of emergency.   While there are some variations, the window needs to be large enough that a firefighter with an oxygen bottle on their back could get in, then carry out an injured person in a fire.  Most often, it's associated with a basement bedroom window, making it a legal bedroom. Basement bedrooms without egress windows are illegal.  Installing an egress window makes them legal.      The confusion is that different cities, counties and agencies have different size requirements and height-above-floor requirements for these windows. Therefore, b... 12/10/2008

Investing in Real Estate 4 - Small (2-4 units) Apartment Building This blog will discuss a type of real estate investment, small apartment buildings, in the Evergreen area in Denver.   What this investment is:  Purchase of duplex, triplex or quadplex to be rented to tenants, usually for 6-12 month terms.  Usually what the rental home / condo landlords graduate to.  In most markets they cost a little more than a rental home, but are much more likely to cash flow on the average month.  Less cash flow risk; if one unit is empty you have other tenants that still help you with the mortgage payment so it doesn't all come out of your pocket.  Many owners will start to delegate some of the property management tasks to an on-site assistant (typically the most responsible tenant), such as yard ma... 12/07/2008

This blog will discuss a type of real estate investment, rental condos or rental homes, in the Evergreen  area in Denver.   What this investment is:  Purchase of a residential property to be rented out to tenants, usually on a 6-12 month lease term.  This is how most new landlords get started.  You can hire out all of the property management functions, but in many cases you will do many of them on your own.  There are smaller down payment requirements than for larger rental buildings.  The purchase process and financing process is very similar to what you experienced buying the home you live in now.  It's a great way for beginners to get started.   Equity needed:  Currently 20% - 25% Downpayment.  In some cases you might be able to do it with 10% down, but expect the second mortgage to ... 12/07/2008

This blog will discuss a type of real estate investment, assignments, in the Evergreen area in Denver.   What this investment is:  An investor who is interested in Assignments gets a property under contract for an attractive price then assigns the contract to another buyer, usually another investor.  The first investor will be paid a fee for the work.  If you don't have much equity to work with, and/or if your credit power is limited, assignments can be a way to get started in real estate investing.  You will need to have a strong "sales" personality to succeed at it, though.    Equity needed:  None, just earnest money.   Importance of credit:  Not important, since you are not purchasing the property yourself.   Importance of experience with contractors:  Not important.  The person that... 12/07/2008

  A LOT of agents don't advise their clients to get sewer scopes when they purchase a property. This is a major mistake.  A broken sewer can cost between $3,000 - $10,000 dollars to repair and it only costs $99 ($99Rooter - others are more expensive) to have a tech put a camera down the sewer pipe and videotape the sewer all the way to the mainline. This will tell you  and the-buyer what the condition of the sewer is.      So let's see, we pay to have the furnace inspected but a new furnace will only be about $2,000. We pay to have the roof inspected but that's probably a $4,000 job. So why don't we always inspect the sewer?  One reason is because, let's face it,  Realtors want closings. Many figure if they keep their mouth shut and don't go out of their way to recommend a sewer scope ... 12/07/2008

  A lot of clients ask me how to figure out what market rents are in a neighborhood. This is a critical input into the calculations an investor needs to make in order to determine what their return on investment will be on a rental property. So you don't want to screw this up!  Unfortunately, this is one of the many figures new investors get wrong.     One place people go to get rents is Rent-o-Meter. Rent-o-Meter is billed as an online resource to get accurate market rents. In my experience it is anything but!  However, I have a fairly simple solution. Multiply what you see on Rent-o-Meter by  80%  and you'll probably be close. I can't explain why but I find rents on Rent-o-Meter to be about 25% high, so multiplying their rents by 80% will get you close (do the math, it works out).    ... 12/07/2008

  Have you ever driven through Aurora North looking for a rental property and taken a close look at the roofs?   Here's what you'll see: a bunch of 1950's ranches in varying states of repair or disrepair, lawns that are often grassless, old handcrank windows and roofs in almost perfect condition!  This surprised me at first and perplexed me for a long time.  Why, in a neighborhood devastated by foreclosures with properties with massive deferred maintenance are the roofs in such condition?  Really!  Stand in the middle of a typical street and looking at 10 roofs simultaneously, you'll be amazed. Well, it turns out the answer is pretty simple. There was a huge hailstorm in the mid-90's and most of the roofs were replaced by insurance companies then. The result is that while you certainly... 12/07/2008

  As investors we face a number of very real and very scary challenges. Making sense of this market is no mean feat and one has to be very careful with his or her investment. However, we usually think about danger as financial. Unfortunately, on rare occasion it can be even worse than that. The majority of the homes investors are buying these days are vacant and once in a while people break in and live in these properties illegally.  The last thing you want to do is walk in on someone camped out in a house, perhaps conducting illegal an activity.      This is no joke, you want to be HEARD when you walk into a property that is supposed to vacant. So make a lot of noise when you're at the front door. I always knock loudly before entering.  Stomp your feet a little. Yell "Hello!" a couple... 12/07/2008