Justin Miller

This text is from a Director of Capital Markets and I have included the link for Fannie Mae with the exact details on the change. "Fannie Mae has issued Announcement 09-02, "Updates to Multiple Mortgages to the Same Borrower Policy, Reserve Requirements, Reserves Definition, and Form 3170." In what is good news for "professional borrowers" with multiple investment properties, Fannie Mae is changing their current limit of four financed properties per borrower when the mortgage being delivered to Fannie Mae is secured by an investment property or second home. They will allow "five to ten financed properties per borrower, with certain eligibility and underwriting requirements, including a 720 minimum credit score and 70-75% maximum LTV/CLTV/HCLTV (depending on the transaction and property type). The requirements apply to any investment property or second home loan being delivered to Fannie Mae, regardless of whether Fannie Mae is the investor on the borrower's other mortgages. Second home and investment property loans to borrowers with five to ten financed properties will be accepted for whole loan purchase or delivery into MBS with purchase dates on or after March 1, 2009, and new Special Feature Code 150 will be required at delivery." Brokers everywhere await Wells, Citi, Chase, etc. to follow."

https://www.efanniemae.com/sf/guides/ssg/annltrs/pdf/2009/0902.pdf

This was sent to me this morning from a Director of Capital Markets. "Besides restoring the $729,750 loan limits in some areas, there is now a Republican amendment that would temporarily offer homebuyers a tax credit worth $15,000 or 10% of a home's purchase price, whichever is less, with the option to utilize all in one year or spread out over two years. The credit does not have to be paid back. It would be available to all purchases of any home from date of enactment for one full year - no longer just a first time homebuyer credit, and borrowers would be able to claim the credit against the 2008 tax return. Other items: buyers must occupy the home for two years as their principle residence, it includes a two year recapture provision (if they leave the home in two years they lost the credit), purchases of homes by investors are ineligible, "sunsets" the previous $7,500 Housing Tax credit on the date of enactment, and the credit is not refundable. (The $7500 credit was refundable, but had to be paid back.) Please remember your high school Civics lessons. That the bill is still working its way through Congress, and the House of Representatives must still negotiate with the Senate since the House bill does not contain the credit."

Also, according to the Baltimore Sun, Senate leaders called off plans to vote on President Barack Obama's economic recovery plan late last night in hopes that a group of centrist lawmakers from both parties would be able to fashion a compromise that would cut the cost of the $937 billion bill and win support from at least a few Republicans.

That is a very good question and the answer is that it depends. FHA is a great loan if you are looking to put the least amount down. FHA requires 3.5% down and the maximum loan amount for Broward, Palm Beach, and Miami-Dade Counties is $345,000 starting January 1^st, 2009. The rates on FHA are very good and it has reduced mortgage insurance premiums. The interest rates with FHA are not as credit score driven as conventional. The only draw backs are that FHA requires you to keep the mortgage insurance on for a minimum of 5 years AND until you have 22% equity in the property. It also requires an "Upfront Mortgage Insurance Premium" charge of 1.75% of the loan amount. The 1.75% does get financed into the loan but it is a charge nonetheless.

A conventional loan is a great loan but it requires at least 10% down in Florida but has a maximum loan amount of $417,000. Interest rates can be a little better on conventional loans than with FHA loans depending on your credit score. The mortgage insurance is a little higher than FHA but not by much. Depending on what mortgage insurance company and/or lender, you are only required to keep it on for 1 year and until you have 20% equity in your home.

If you are looking to purchase a condo with an FHA loan then the condo project will have to be FHA approved or get what is called a spot approval. A spot approval is a request for the lender to approve just the individual unit you are looking to purchase. Spot approvals are very hard to get because the condo project cannot have a right of first refusal and must have reserves. Most condos have a right of first refusal. With a conventional loan you must put at least 20% down in Florida but the requirements aren't quite as strict as the FHA spot approval. This can be frustrating to many borrowers looking to purchase a condo but if a lender is not willing to lend on the property it is probably in your best interest to stay away from it anyway. Although the lender is looking out for themselves it ends up protecting you as a borrower too. Some lenders have eliminated financing for condos completely.

If you have at least 10% to put down and credit scores above 720 I would recommend going with a conventional loan. If not, FHA is a great loan too.

That is a great question and there is probably no correct answer. Well, maybe once everything turns around all the experts will come out of nowhere and state that you should've bought. They are great with hindsight.

I have commented on Warren Buffett's quote numerous times "Be greedy when people are fearful and be fearful when people are greedy. He learned this from his mentor Benjamin Graham who wrote the book "The Intelligent Investor" which is an incredible book and I recommend reading it.

My point is to do the opposite of everyone else and don't run with the herd. This is very hard to do especially when emotion and the media takeover our rational thinking. It is very rare that a buyer is in the driver's seat like they are today.

The Census Bureau said the average amount of time someone stays in there home is about 14 years. I bet if you bought during the recession in 1991 when I am sure no one thought was a good time to you ended up doing pretty well.

The average increase on real estate is 6% over time. So let's do the math on say 3% appreciation. If you bought a home for $100,000, put 10% down ($10,000), 3% is $3,000, so your return would be 30%. This is because you use leverage to buy a home. Not only do you get that type of return you also get a tax break and get to live in the home.

Here is another good example on why to buy now. Rates are at a 37 year low and currently at about 4.875% on a 30 year fixed mortgage. If you bought a home today for $100,000, putting 20%, at a rate of 4.875% your principle and interest payment would be $423.37. If you waited 6 months and home prices dropped by 7% on that same house the purchase price would be $93,000 but say rates went up 1% to 5.875%. Your principle and interest payment would be $440.10 which is more per month. The bottom line is that interest rates will not stay this low forever and once the market does turn around interest rates will go up. Notice I didn't say interest rates will skyrocket which is something that can happen. Even 5.875% is an incredible rate. A drop in value of 7% is very large and you also need to keep in mind that you are most likely buying a property today that is worth more than you are paying. This means you have some equity to work with already if values drop more than 7%.

CNBC was talking about what we can expect in 2009 yesterday and one of their comments was that we will see increased sales in Florida and California due to the amount of foreclosures. This is because everything is on sale down here.

If you are speaking with anyone in real estate business (mortgage broker, bank, realtor, etc.) and they log onto www.zillow.com to give you an estimated value for your home you better run away from that person as fast as you can. It is not that it's a bad site but no professional in this business should ever use that as a basis for what your property is currently worth. I always contact my appraiser to find out a range of value. Lenders require an appraisal to have comparable sales within the last 3 months, within certain distances away from the home (Florida about .5 miles), an active listing, and a sale outside of the development.

I currently have a client who went to one of the bigger banks (I won't mention any names) and the loan officer at the bank used Zillow to see if client had the required amount of equity in the home.

Can Zillow be right? Of course they can but a monkey can also throw darts at a list of stocks in The Wall Street Journal and produce a profit. That doesn't mean it's the right way to do it.