The bubble burst and the fallout became the bargains for the survivors
Arguably, it can be said the Housing Industry initiated the economic breakdown. More specifically, the exercise of lending money to the unqualified to purchase or refinance homes began the slide in the early part of this decade. The aggressive parameters of the no documentation programs, option rate plans and inflated values coupled with “blind eye” underwriting has taken the world economy to itsknees. Of course, there is more to it than people buying homes they should not have bought. It was the start of the chain reaction. The millions of unrealistic dreamers promising to repay and investors expecting that repay defaulted on their loans for whatever reasons; they were as varied as their expectation. Those defaults caused neighborhoods to lose value, which cause Lenders to turn into unwilling landlords with decreasing assets, increasing capital outlay and legal challenges. The recipients of the billions dollars of worthless mortgage paper has included investors; big and small, corporations; big and small, cities; big and small, and countries; big and small. Very few escaped the trickling down effects. The result: we are in a predicament that will not go away. Houses are sitting empty while banks lament. Lower and lower the prices go while people wait and wait for basement level bargains. It’s my opinion we are at the bottom, for the affordable crowd. The affordability sectors are the people, mostly young and mostly first timers, who can purchase homes inexpensively and maintain a stable level of their already existing comfortable living. Mortgage payments less than rent payments and cash investments slightly more than a first month rent and a month and a half of a security deposit, including Seller’s concession for Borrower’s cost, has resulted in the beginning age of affordable homeownership. Incidentally, for those naysayers who sound off and caution the low cash investments in purchasing Real Estate, I say baloney. The VA
zero down payment loans have been the steadiest of stability in terms of repayment while demonstrating the lowest rate of delinquency statically. It’s not about the cash investment; it’s about the ability to repay with documented capability. In addition, the “experts” who proclaimed mortgage money is simply not available unless the applicant has a 20 percent down payment and mid-700’s scores are wrong. There is ample amount of money available to the qualified FHA
applicants. This is a refreshing reversal of the “want it all and want it now” generation; their own parents, perhaps. Maybe this age bracket will recognize what homeowners in the 60’s, 70’s and 80’s seem to have understood—it’s about maintaining an affordable and sensible level of comfort. Not possible? Yes, it is possible. Foreclosed homes and file cabinets full of distressed homeowners willing to sell to escape their mortgage payments, while the Lender takes the loss, has created a new stream of affordability. Yes, it is possible! The reality is it’s going on around you. Homes are selling for half of their value of five years ago; the bubble burst and the fallout became the bargains for the survivors. Many of these homes are broken and need help. The good news is there is a program that includes repair money along with mortgage money to purchase; closing on the home is an ‘as is’ condition. The repair cost can include upgrading and repairing; customizing. Specifically, the 203-K Streamline is the more practical of the two plans. The Streamline affords the ability to include up to $35,000 in repair cost while releasing 50 percent of the construction funds at closing to purchase materials. The premise of releasing funds is to ensure construction begins immediately and to avoid the overbearing globs of paperwork that had slowed the process down in the past. Or perhaps, a complete makeover tearing the home down and rebuilding; or adding square footage. Construction cost in excess of $35,000, or structural issues requiring attention, falls under the guides of the 203-K Standard plan. A program more restrictions in terms of the draw process, but a necessary safeguard given the large cost involved. An added bonus is today’s cost of money; interest rates are in the mid to upper four percent range with 30 year fixed terms. The program is the FHA 203-K; the underused and underappreciated jump start plan. Not unappreciated for the resilient and patience of the young and the professional Realtors with the foresight of possibilities. Yes, it’s absolutely possible! Frank Montufar is branch manager of Acre Mortgage in Galloway Township, N.J. Montufar has championed the benefits of the 203-K rehabsince 1993. It’s his contention the 203-K Streamline plan will be astandard means of buying homes in the near future. He can be reached at firstname.lastname@example.org.