Managing Broker Charles Roberts explains to Channel 7 News the pros of home auctions and foreclosures selling to investors.
To watch, click here
It's fun to be on TV!
I am happy to announce the release of our first book:
The 2009 Guide to Real Estate Investing
The release date is April 1st, 2009. It is a basic guide to investing in DSF Homes, Condos, Fix and Flips, and small (2-4 Unit) apartment buildings. I co-authored it along with my associates Charles Roberts, Michael Canon, and Mike Welk. We basically ran through everything we have learned as investors over the past 10 years or so, and our combined ownership or over 170 rental units played a big part of the book as well.
Some advanced praise has already started to roll in:
Your book is a concise, practical guide for all current and potential real estate investors. Your examples and insight go a long way to help readers establish their investment plans, manage the properties and monitor returns. It's a perfect reference. It was immediately beneficial to me and I can't wait to share it with my clients! Terry
McCullough, Broker Associate, Kentwood Cherry Creek
Terry works with owner occupant as well as investor clients.
I would recommend this book to our clients. This book is straightforward and pragmatic. It doesn't sell or pitch. It gives the direction and guidance that all new real estate investors need to get started. I would recommend this book to anyone getting started with real estate investing. This book serves as both a compass and a map.
Mark Struznik, owner HomeVestors, Metro Properties Inc.
Mark and his team have bought and sold hundreds of investment properties.
It's imperative in today's uncertain economic environment to cover all your bases when looking at an investment property. This book provides the investor with a comprehensive template that should increase the probability of them achieving success. The book provides a good road map.
Bobby Hutchinson, Senior Advisor, Pinnacle Real Estate Advisors
Pinnacle helps investors buy and sell mid-size apartments.
This book is just what I need to help educate my clients. It will help me save a lot of time and it'll help my clients make better decisions.
William Roberts, President, Denver Board of Realtor
Will is a developer and also helps investors buy and sell property.
The 2009 Guide to Colorado Real Estate Investments is a clear reflection of the knowledge and expertise exhibited by Your Castle Real Estate. Even in a severe housing market and economic downturn Your Castle Real Estate's methods benefit their customers. As a professional statistician I am impressed with Your Castle's creative use of data to put them leagues ahead of their competitors.
Kieron Dey BSc, MBA, FSS
Consulting Statistician
The 2009 Guide to Colorado Real Estate Investing is a great field guide for both the experienced
real estate investor as well as the novice. This book clearly describes all aspects of real estate development with thoughtful detail and real life experience. A "must read" for anyone contemplating this type of venture.
Jeff Cline, Cline Design Group
We will be taking orders soon, if you are interested.
Immediately below, please find a bulleted list that highlights the typical loan qualifying criteria. Please keep in mind that there are exceptions and compensating factors to make up for some of them. For instance, significant assets can offset a high debt-to-income ratio.
•· 2 year employment history in the same line of work with no major job gaps. A major job gap is defined as greater than 30 days. However, if a borrower just received a degree and started work in the same field of study, you can use the school history to complete the required two years. If someone is just shy of two years, an underwriter can give an exception for strong FICos, low DTI or solid assets. Or, if a person is laid off or takes maternity leave, an underwriter will typically accept those reasons to not require a 2 year history.
•· 2 years of W2s or tax returns if the person is self-employed. If a borrower owns more than 25% of a business, full business returns will also be required.
•· 2 most recent pay stubs covering at least a 30 day period and reflecting year-to-date earnings
•· 2 most recent year's Schedule E's and first two pages of the 1040 on the tax returns, if the borrower owns rental properties. Rental income will be calculated off of Schedule E compared to executed leases as in year's past.
•· 2 months of liquid assets (checking, savings, stocks, bonds, IRAs, 401k, retirement) to show proof of down payment, closing costs and 6 months worth of mortgage payments. For the latter three accounts, 70% of the value will be used to offset selling and early withdrawal costs. All pages of financial statements are required, even if they are blank.
•· Credit score above 680 is ideal. Lower scores can still secure financing; however, the rate and LTVs will be restricted, as will the mortgage insurance availability.
•· Debt-to-income ratio of at least 50% or below (please see blog topic ‘How to Calculate Debt-to-Income Ratio)
Again, there are exceptions to the above, so if a borrower has specific questions about their situation, they should speak with an experienced mortgage professional directly. Additionally, guidelines are changing on a daily basis, so the above criteria can change with little or no advanced notice.
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Gross monthly income |
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DTI ratio |
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Allowed monthly debt |
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Allowed monthly debt |
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Monthly debt reflected on credit report |
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Limit for new mortgage payment |
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Example |
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Gross monthly income |
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$7,000 |
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DTI ratio |
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0.5 |
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Allowed monthly debt |
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$3,500 |
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Allowed monthly debt |
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$3,500 |
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Monthly debt reflected on credit report |
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Limit for new mortgage payment |
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***Note: if new purchase is an investment AND the borrower has a 2 year landlord history, most lenders |
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will allow 75% of the appraiser's estimate of market rent or current lease terms on the subject property to be included as monthly income. If the borrower owns additional rental properties, the formula to calculate rental income from Schedule E of their tax returns is: (Net income or loss + Depreciation) / 12 = Monthly income or loss It is also important to note that any debt not reflected on the credit report (utility bills, cell phone, gym membership, contributions to life insurance, etc) does not count against this ratio. Essentially, the remaining 50% is supposed to encompass the excess living expenses.
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Almost daily, I get asked this question. It is important to keep in mind that simply because rates are lower and your monthly payment would be reduced, a refinance may still not make sense. Here are several initial questions that you need to ask yourself: How long do I plan on owning the home? How quickly will the closing costs be repaid via monthly savings? What impact does lengthening the term of my loan have on overall interest payments? Can I convert current ARM into a fixed product? Can I shorten the life of my loan?
Here is an actual refinance scenario that I recently closed for a client, on a $275,500 loan amount:
Current Payment: Proposed:
P & I: $1,755 P & I: $1,458
Taxes: $79 Taxes: $79
Ins: $184 Ins: $184
Total PITI: $2,018 Total PITI: $1,721
Factors to Consider
•- Monthly savings of $297 ($1,755 - 1,458)
•- Refinance closing costs (not prepaids) of $2,540 --- 8.5 month payback
•- Current pmts remaining on life of loan $1,755 x 330 pmts = $579,150
Vs.
•- Proposed pmts over life of loan $1,458 x 360 pmts = $524,880
•- $54,270 total savings; however, 2.5 years added to loan
For the above scenario, the borrower planned on making this home his retirement home. Therefore, 8.5 months was a very quick payback. If he planned to sell in less than year, a refinance may have not been logical. His prior mortgage was a 30yr fixed rate at 6.5% on a $276,000 loan amount. The new loan was at 4.875% on a 30yr fixed, with a slightly lower loan amount of $275,500. The borrower had owned the home for 2.5 years.
Refinances are still expensive with underwriting, processing, title and appraisal fees. All of which can be rolled into the loan amount so there's not out-of-pocket expenses (presuming sufficient equity), but fees nonetheless to absorb. These fees are ones that I even incur when originating my own personal loans. There are also tax and insurance escrow requirements, but if you do refinance, you would be refunded your current escrow amount after your present loan was paid off. Thus, it's basically awash.
For refinances, borrowers can opt to pay the escrows out-of-pocket or roll them into the loan. Most people pay out-of-pocket to avoid amortizing the amount over 30 years. Like a purchase, the borrower skip's a month's payment on a refinance. Therefore, with the escrow refund and skipping a month's payment, small out-of-pocket monies will be quickly repaid.
Typically, if the refinance payback is 24 months or less, the borrower plans on owning the home for the foreseeable future and the interest rate is reduced by at least 0.5% (pending on the loan amount), a refinance can be worth pursuing.
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We handle relocation and investment in the Denver metro area, including Centennial, Englewood, Westminster, Highlands Ranch, Parker, Castle Rock, Denver County, Douglas County, and Arapahoe County.
ActiveRain Corp. is not responsible for the accuracy of the site's content (which is written by members of the ActiveRain Real Estate Network) and does not endorse the views of the real estate agents, mortgage brokers, and others listed here.
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