Is it Easier to Walk on Water or Get a Home Loan Today?
True story. A close friend of mine walks into a bank ( I won’t mention the name but the initials are W-e-l-l-s-F-a-r-g-o) to put an equity line of credit on one of his homes. He has an 840 credit score, no debt, owns three pieces of property that are paid for, and almost $750,000 in liquid assets.
Slam dunk huh?….
He gets rejected!!
Amazingly, I have seen many people who would have been “slam dunks” for financing in 2006 get completely shut out of the capital markets in 2010.
And it doesn’t matter whether we are talking about commercial or residential, the factors which determine who gets money from commercial banks (or any institution for that matter) is pretty consistent for all property types. Here are some of the guidelines banks are requiring to get a home loan today:
• 720+ FICO score
• Verifiable and sustainable employment or self employment for
the last two years
• 12+ months of mortgage payments in an immediately
liquid account
• A minimum of 25% in reserves if planning on purchasing an
investment property
• 2 years experience as a landlord/property manager,
if purchasing an investment
• No late payments or foreclosures on real estate debts
These are the basic requirements needed which the lending world wants.
Obviously there is market need for reasonable financing. I had a meeting yesterday morning with a couple of business partners and we were discussing ways to bring capital to the market that didn’t require you show you could change water into wine in order to qualify.
Private investors are looking for ways to make a decent return on their investments and although the Real Estate market has been difficult for the last few years, it remains a solid option for investors to lend money if those of us of the creative mind can package deals and offer investors a good return and create a win-win situation.
I predict a trend of this nature where a good portion of the financing will come from private investors as Fannie Mae guidelines get more stringent and the commercial banks continue to be overly tight.
You will see and hear a lot of this very soon so stay tuned. What are your thoughts?
Sal Cartagine is an award winning Real Estate Broker with 23 years experience specializing in residential, relocation, rentals, investments and property management. Sal can be reached directly at (602) 818-3886
The shots go back and forth across the room. How many teachers were given notice yesterday? Nine?! And the class sizes might be what? 30—35 kids per class room? Shouldn’t we be hiring more teachers and paying them better, not letting them go?
Now let’s decide how are we going to pay for sports programs this year? You’re what, eliminating the girl’s volleyball team and dance team?! More coaches let go? A man in back stands up to say if there is less money, we should cut out sports and focus on academics all together. The crowd bristles at the remark, including me. My wife stands up and fires back. (Go Lisa!)
What’s the reason for all of this? There is a HUGE shortfall in the school budget. But don’t worry; there is a plan. Well, plan “A” is what we have now to cope with the shortfall. All those cuts! That’s the plan? And if the law ISN’T passed then MORE cuts will have to be enacted.
That’s plan ”B”…. That’s plan “B”?? I watch movies. Plan “B” is supposed to be better if not at least as good!! John Wayne’s plan “B” doesn’t include a suicide run into a band of Indians when he is trying to rescue the girl!!
How did we get to this point, where we as parents and teachers are sitting in a community room discussing how many teachers we are going to get rid of and if sport programs are necessary for our kids? How??
IT’S CALLED REALITY. The recession has hit us and hit us hard and principals and teachers are being given the almost impossible task of trying to run their schools and classrooms with less money than is necessary to do the job and they are trying to do it in a way that up holds the standard we all expect.
As a Realtor, the first thing people who move here with families ask is “How’s the schools?” It’s so important, one of the few things I put on my opening page on my website is a service to help Buyers rate schools. If our schools are not up to speed, it affects our ability to attract people to live here!
When I first walked into that budget meeting in the Fountain Hills School District I was against Prop 100 and my wife teaches there! Every fiber of my being goes against any measure to raise taxes. For ANY Reason, I am of the belief that one cent here and another cent there adds up to dollars and slowly we get squeezed into paying higher and higher taxes which I am against.
After the meeting another realization hit me. That, however, distasteful it is in times of emergency, emergency measures are needed. And when I’m sitting in a school budget meeting and I hear talk of classrooms with up to 40 students per teacher and whether after school programs and sport programs that teach kids how to be disciplined and work together outside of the classroom were valuable or not and should stay in the curriculum, then I say it’s a real emergency however got here.
I‘ll put it like this. Maybe you don’t like the police for whatever reason. You had a bad run in with one at some time. But if it’s 2 am and there are two guys in black masks picking at your door to get in, would you call one? Would you be happy to see one? My same feeling with taxes. Don’t want them, but if it helps the situation under a controlled measure I’d like to have the benefit of them.
My point is Arizonans realized the same thing and voted for prop 100 and in the next three years a one cent tax will be initiated to help us through our budget crunch with the money going directly to the schools and emergency services.
Besides helping the situation on the ground it has the important effect of sending a clear message that we care about our schools and services and that Arizona is a place that protects these things even if it goes against our grain and we are willing to make the tough choices. This will help greatly with our recovery in the Real Estate market by keeping Arizona an attractive place for families relocating here by demonstrating our commitment to our schools and services.
I love being an Arizonan. By nature we are fiercely independent and we Arizonans do what is right, criticism & politics be damned and act to do what is necessary. This wasn’t a campaign of fear as it was much a campaign of necessity.
And although I do believe strongly we need to keep pressure on our politicians to continue to cut more unnecessary spending on items in the budget (and they are still there!) the message on the ground from where it matters most, our schools and our families, there has been a clear demonstration of need and we had to respond. And respond we did…the right way, with the passing of prop 100…..What do you think?
Sal Cartagine is an award winning Real Estatet Broker with 23 years experience specializing in residential, relocation, rentals, investments and property management. Sal can be reached directly at (602) 818-3886
Investors are flocking to Arizona in record numbers to take advantage of the deals that can be found here. Here is a Channel 10 news clip.
AZ News Story on Investing
So, I’m in my office and I receive this phone call…
“Hi Sal, I need to find a house rental, I’ve got about $1100 to spend per month, I’d like a pool, at least a 4 bedroom house because my ailing mother and two grown brothers along with my 3 kids will be living with us. I have two dogs, a cat, a ferret and a turtle but he sleeps in the tub and makes no noise. Also my credit isn’t the greatest and the bankruptcy filing should fall off my credit report in about one year. Oh and I’ve been employed about 3 weeks. Can I find a house to rent?
The answer in 2009, “Yes, no problem, I’ll get started right away…”
The answer today, “My advice is for you is to pitch a tent in somebody’s yard and get comfortable!”
If you’ve haven’t noticed lately the home rental markets across the US have seen a boom in recent months, nowhere more so than in Arizona, where foreclosures and short sales are among the highest in the country.
While this has meant a dramatic decrease in home prices over the past year, it’s been a boon to the rental markets. People who have never rented are now renting. They‘ve been forced out of their homes and with no chance of buying a home in the foreseeable future due to the financial circumstances that put them out in the first place. So, they have become renters, many for the first time.
This has increased the demand for rental homes and it’s not uncommon to have three or four applications per rental on any given home. As a result, prices are being driven up and in what is becoming the norm, potential renters are bidding the homes up and driving up prices.
I can tell you exactly when it started. I own a rental home in Fountain Hills. It’s a 4 bedroom with a pool and great views. After a tenant moved out in December of 2009 I listed it at $1495, which is what I got before since I always price at market rent since I don’t want a home to remain vacant. I got no takers, not even lookers as was the case in most of 2009.
I lowered the price to $1395 just after the first of the year. Still nothing. Then all of a sudden in late January a wave hit and I rented it immediately after I got four applications in one week. I rented it to a family who lost their home in a foreclosure. I STILL get calls on it! If I rented it now I could get at least $1600. So goes my timing and my luck.
But it illustrates the fact we are in an investor driven market because if you read my previous article, The Real Estate Word at the Moment is… Cash Flow! http://ow.ly/1Cd2X, it’s the convergence of these two forces that make this an incredibly attractive market to an investor who wants to buy and hold. Just look at what’s going on.
Homes are available to purchase for very low prices and now you have renters, GOOD renters, former homeowners who will most likely be in your home for the next two years, fight to get into your property and pay you top dollar for the privilege! How’s that for an investor win!
With the supply of available rental homes down to 1.5 months, and the foreclosures and short sales continuing to fuel the need for rentals as displaced homeowners need a place to live, the opportunity seems solid for the foreseeable future.
So to all the renters who might fit the description above at the beginning of this article, (and you know who you are…) treat your landlord nicely. Take care of the yard, get along with your neighbors, and make sure the kids and pets (ferrets and turtles included) are kept in check. Looking for greener pastures might not be on the horizon at the moment.
Sal Cartagine is a 23 year veteran of the Real Estate industry specializing in residential sales, rentals, property management and investments working in the Phoenix Metro area.Here is some interesting news on the foreclosure front. Last quarter, more homeowners voluntarily defaulted on their mortgages and chose to walk away from their homes than the total number of mortgages permanently modified to date under the Administration’s year-old Home Affordable Modification Program (HAMP).
According to new data from the team of researchers at the University of Chicago and Northwestern University that first identified “strategic default” behavior last year, the number of homeowners willing to default when the value of a mortgage exceeds the value of their house, even if they can afford to pay their mortgage, has dramatically increased compared to just a year ago.
The percentage of foreclosures that were perceived to be strategic was 31 percent in March 2010, compared to 22 percent in March 2009 and the trend is getting worse.
So here is the rising trend…now we have homeowners who can afford to make the payments and are now walking away because the $400,000 home they bought a few years back is now worth $200,000 and are of the mindset that they will never get back the equity they lost.
So what is the reason for this? One likely reason for this growing trend is the increasing perception that lenders are not going after borrowers who walk away. In December 2009, the average homeowners surveyed said the probability that a lender will go after a borrower is 56 percent, as compared to 54 percent reported in March 2010.
Well imagine that! If there are no consequences or at least no “perceived” consequences, people will take an easier way out or make a strategic financial move and with more and more homeowners believing that lenders are failing to pursue those who default on their mortgages, a growing number of homeowners will walk away from their homes even if they can afford monthly payments.
So what do we make of this? I personally believe there is a huge cost in taking this road, to our country, our economy, and our neighborhoods. We will prolong the recovery process indefinitely as these trends continue but what is more disturbing to me is that the culture or social acceptance of walking away from one’s financial responsibility and the pervasive “everyone owes me” mentality has made it alright to consider these kinds of actions.
If there is a legitimate reason for one to consider a short sale or a bankruptcy they should do so, after all, the laws that make it possible were put there to help those kinds of situations and in the long run have proven the best way to maintain a healthy economy, but in the case where one has the ability and the means to make payments on the home they’re in, they should.
Is it merely a strategic move in an environment of “the bailout” and a case of cut my losses or is there a benefit in sticking it out and owning up to one’s responsibility. What do you think?
Sal Cartagine is a 23 year veteran of the Real Estate industry specializing in residential sales, rental, property management and investments.Collect all the beer bottles, put the waste in the trash bags and of course politely tell anyone who is still lingering about (conscious or otherwise) that it’s time to go home.
Finally, after over two years of existence, the federal homebuyer tax credit is no more.
Expiring Friday night at midnight, what started as a $7500 “credit” that was in reality an interest-free loan, then became an $8,000 fully refundable true tax credit, which was extended and modified yet again to include non-first time buyers, the home buyer tax credit offered by the government is no more.
Yes, if you were under contract to purchase a home by midnight on April 30, and you close on the purchase by midnight June 30, you may be eligible for the tax credit.
There has been a lot of interest in the tax credit and it has been bandied about it being responsible for some of the increase we’ve seen in sales in recent months and that is probably true.
My personal opinion is I’m glad it’s gone. I’m not one who likes government intervention in free markets and I’m of the strong opinion that the market has to right itself. I don’t leap out of my chair and yell “hooray” because a government program is going to make my job easier or put us on the track to recovery.
What actually happened was the tax credit pulled people in the market who were going to buy anyway and condense sales, hence the spike we’ve seen but as for actually generating new sales, I didn’t see it.
You had to qualify as usual and if you got a few perks, so be it but the net result is that all these government programs have and continue to impede the natural flow of recovery and is dragging it out.
Supply and Demand isn’t a theory; it is an economic law. The real estate market wants to be in equilibrium, and inventory and demand and pricing will over time adjust on their own accord to reach this equilibrium.
The road there (wherever “there” is.. a subject for another discussion…) will not be pretty we’ve seen but the less interference, the sooner things will right itself.
As an agent who works with you folks on the front lines, I see the hurt and fear of someone who is losing their home or declaring bankruptcy and I empathize with a lot of the hurt that’s out there right now, but the less intervention we get from the government the sooner we can ride out this mess.
Then it will be time for a REAL party. What’s your opinion?
Sal Cartagine is a 23 year veteran of the Real Estate industry specializing in residential sales, rental, property management and investments.
Sal Cartagine is a 23 year veteran of the Real Estate industry specializing in residential sales, rentals, property management and investments working in the Phoenix Metro area.
Here is some interesting news on the foreclosure front. Last quarter, more homeowners voluntarily defaulted on their mortgages and chose to walk away from their homes than the total number of mortgages permanently modified to date under the Administration’s year-old Home Affordable Modification Program (HAMP).
According to new data from the team of researchers at the University of Chicago and Northwestern University that first identified “strategic default” behavior last year, the number of homeowners willing to default when the value of a mortgage exceeds the value of their house, even if they can afford to pay their mortgage, has dramatically increased compared to just a year ago.
The percentage of foreclosures that were perceived to be strategic was 31 percent in March 2010, compared to 22 percent in March 2009 and the trend is getting worse.
So here is the rising trend…now we have homeowners who can afford to make the payments and are now walking away because the $400,000 home they bought a few years back is now worth $200,000 and are of the mindset that they will never get back the equity they lost.
So what is the reason for this? One likely reason for this growing trend is the increasing perception that lenders are not going after borrowers who walk away. In December 2009, the average homeowners surveyed said the probability that a lender will go after a borrower is 56 percent, as compared to 54 percent reported in March 2010.
Well imagine that! If there are no consequences or at least no “perceived” consequences, people will take an easier way out or make a strategic financial move and with more and more homeowners believing that lenders are failing to pursue those who default on their mortgages, a growing number of homeowners will walk away from their homes even if they can afford monthly payments.
So what do we make of this? I personally believe there is a huge cost in taking this road, to our country, our economy, and our neighborhoods. We will prolong the recovery process indefinitely as these trends continue but what is more disturbing to me is that the culture or social acceptance of walking away from one’s financial responsibility and the pervasive “everyone owes me” mentality has made it alright to consider these kinds of actions.
If there is a legitimate reason for one to consider a short sale or a bankruptcy they should do so, after all, the laws that make it possible were put there to help those kinds of situations and in the long run have proven the best way to maintain a healthy economy, but in the case where one has the ability and the means to make payments on the home they’re in, they should.
Is it merely a strategic move in an environment of “the bailout” and a case of cut my losses or is there a benefit in sticking it out and owning up to one’s responsibility. What do you think?
Sal Cartagine is a 23 year veteran of the Real Estate industry specializing in residential sales, rental, property management and investments.
Collect all the beer bottles, put the waste in the trash bags and of course politely tell anyone who is still lingering about (conscious or otherwise) that it’s time to go home.
Finally, after over two years of existence, the federal homebuyer tax credit is no more.
Expiring Friday night at midnight, what started as a $7500 “credit” that was in reality an interest-free loan, then became an $8,000 fully refundable true tax credit, which was extended and modified yet again to include non-first time buyers, the home buyer tax credit offered by the government is no more.
Yes, if you were under contract to purchase a home by midnight on April 30, and you close on the purchase by midnight June 30, you may be eligible for the tax credit.
There has been a lot of interest in the tax credit and it has been bandied about it being responsible for some of the increase we’ve seen in sales in recent months and that is probably true.
My personal opinion is I’m glad it’s gone. I’m not one who likes government intervention in free markets and I’m of the strong opinion that the market has to right itself. I don’t leap out of my chair and yell “hooray” because a government program is going to make my job easier or put us on the track to recovery.
What actually happened was the tax credit pulled people in the market who were going to buy anyway and condense sales, hence the spike we’ve seen but as for actually generating new sales, I didn’t see it.
You had to qualify as usual and if you got a few perks, so be it but the net result is that all these government programs have and continue to impede the natural flow of recovery and is dragging it out.
Supply and Demand isn’t a theory; it is an economic law. The real estate market wants to be in equilibrium, and inventory and demand and pricing will over time adjust on their own accord to reach this equilibrium.
The road there (wherever “there” is.. a subject for another discussion…) will not be pretty we’ve seen but the less interference, the sooner things will right itself.
As an agent who works with you folks on the front lines, I see the hurt and fear of someone who is losing their home or declaring bankruptcy and I empathize with a lot of the hurt that’s out there right now, but the less intervention we get from the government the sooner we can ride out this mess.
Then it will be time for a REAL party. What’s your opinion?
Sal Cartagine is a 23 year veteran of the Real Estate industry specializing in residential sales, rental, property management and investments. 
