I am having a really hard time buying a house. After a few weeks of trying by myself to buy a home. I have come to realize that I REALLY need an agent. I have a month to buy a home and have come across the “short sale” which can take up to 3 months. I have been approved for 200k. I want a townhouse and it seems like all the homes I can afford are way out of town. At the same time I see hundreds of homes in short sale and foreclosures. Here are my questions hopefully you can help me out.

1) If I make an offer 5k-10k higher than asking price on short sale, will the accept faster or will it still take the same amount of time?
2) If I go with bank owned/REO should I have a realtor and also what is the wait time on the approval.
3) What is the best way in going about buying a home in foreclosure/bank owned/short sale?

Real Estate Professionals

Buying a home is one of the most important decisions that most people will make in their lives. It’s likely to be the most expensive asset that most people will ever purchase. With the average home costing the equivalent of several years’ salary, it’s very rare that anyone can save enough money to pay for their residence with savings. The only option that most people have when they’re ready to buy a house is to borrow money in order to pay for it. A loan that is taken out in order to buy a home is known as a residential mortgage. If you’re planning to buy a home, it’s important to understand what a mortgage is and how it works.

A mortgage is a secured loan.

There are two basic kinds of loans – unsecured and secured. An unsecured loan is money that is lent without any sort of collateral, simply on the good credit of the borrower and their promise to repay it. If the borrower defaults on the loan (fails to make the required payments), the only way for the lender to get its money back is to sue the borrower in court. A secured loan is one where the borrower guarantees payment by putting up collateral. If the borrower fails to make the payments as promised, the bank or lending company has the right to take possession of the collateral and sell it to recover their money.

A mortgage is a secured loan in which the house serves as collateral. When you take out a mortgage on a home, you sign a mortgage note that essentially gives the bank partial ownership of the house. Until you make the final payment on your mortgage, the bank or lending company has the right to foreclose on your home if you fail to make the scheduled payments on your loan. That means that they can take possession of your house and sell it to recover any money that’s still owed to them on the loan.

The mortgage rate is the interest that you pay on your loan.

When you borrow money, the bank charges interest on the money lent to you. The interest is expressed as a percentage of the amount that you borrow multiplied by the length of time you take to pay it back. The length of time that it takes you to pay back the loan is called the term of the loan. Most lenders offer mortgages for terms of twenty years, thirty years or forty years. Some lenders offer mortgages for as short a term as ten years, and the most common term for a mortgage is thirty years.

There are many different kinds of residential mortgages. The best known are fixed rate mortgages (FRM) and adjustable rate mortgages (ARM). They are exactly what the names say. If you take out a fixed rate mortgage, your interest rate is guaranteed to stay the same for the life of the loan. If your mortgage rate at signing is 6.25%, it will remain 6.25% until the entire mortgage is paid off. An adjustable rate mortgage is one where the mortgage rate can change based on an index of some sort. If that index goes up, your interest rate goes up. If it drops, the interest rate drops.

There are advantages and disadvantages to both kinds of mortgages. Because a fixed rate mortgage offers a guarantee against interest rate increases, the interest rate usually starts out higher than the mortgage rate for an ARM for the same amount and term. An ARM will spell out specific conditions under which the interest rate can be changed. Generally, the rate is reconsidered every three, six or twelve months. Some ARMs have low initial rates that are guaranteed for a specific period of time – generally two to five years. After the initial period, the interest rate is subject to adjustment according to a specified schedule.

Mortgages carry other costs and fees in addition to the interest charged.

In addition to the interest, most loans also have other costs and fees associated with them. Those costs are often payable at closing, though they are frequently financed and added to the amount of money borrowed for the mortgage. Other costs must be paid before the loan is closed. The costs may include loan origination fees, a loan broker’s fee, the cost of private mortgage insurance and legal fees. Paying those costs up front can reduce the interest rate as well as the total cost of the loan.

Buying points can reduce the interest rate and the cost of your mortgage.

There are a number of ways that you can reduce the total cost of a mortgage. One of the most common is called “buying points”. When you buy or pay for points on your mortgage, you are paying part of the interest up front. One point will cost you 1% of the face value of the loan. If you’re taking out a mortgage for $100,000, you’ll pay $1,000 a point. For each point that you pay on your mortgage, the lender will reduce the interest rate by a certain amount. The exact amount varies from lender to lender. You can find mortgage points calculators online to help you decide whether or not paying points is a good idea in your situation.



Passive Income

If you look at the most stressful events in a person’s life, buying a home is on the top ten list. After all, it’s a big decision – both emotionally and financially. Many home buyers go through an anxious period after they’ve arranged for their mortgage and get ready to move into their new home. Knowing you’ll get a pocketful of cash would sure help, wouldn’t it?

That’s a big part of the attraction of cash-back mortgages. A plump cheque is a psychological boost to home buyers who have just made one of the biggest financial commitments of their lives. As mortgage brokers, we like to work with our clients to ensure that they look beyond the temporary “feel good” of the cash, and weigh their options wisely.

Remember that the cash-back option comes with a trade-off: if you choose not to take the cash back, you can get a lower interest rate. Over time, you could see substantial savings in interest payments.

So, start with the most important question: What will the cash be used for? Is this purchase a priority, and is it worth the difference in the rate? Perhaps you have a plan to take advantage of the cash-back to purchase the household appliances for your new home. The extra $3,000 for new kitchen or laundry appliances may be an urgent immediate need and a higher priority overall than the lower interest rate for your mortgage term.

But here is the second question to discuss with your mortgage broker: What will be the impact of the rate difference over time? You’ll need real-life figures to work out the details for your personal situation, but let’s look at an example*:

Let’s say that your cash-back option pays 1% of the mortgage amount on a two-year deal, 3% on five years, and 5% cash back on a ten-year closed mortgage. And let’s assume that you’re looking at borrowing $100,000 for a 5-year term, amortized over 25 years. Not long ago, you might be looking at the difference between cash back and a rate of 6.60%, or a discounted interest rate of 5.29%.

So what’s the bottom line? Your cash-back option would give you $3,000 up-front, but over your 5-year term, you would pay a little over $6,300 more in interest costs than you would have with the discounted rate. The exact cost of the cash-back option in this example is $3,330.44 – paid out over 5 years.

Is that a good deal? It depends. Did you get the much-needed appliances for your home… or use the funds to manage a high-priority expense? Then you probably got good value from the option. If – five years later – you can’t remember where the money went, then perhaps you didn’t make the best trade-off.



Sell and Rent Back

As everyone knows, buying a home is stressful and one of the most important decisions that one has to make is what kind of mortgage to get. Choosing the mortgage that works best for you and addresses your specific needs can potentially save -or cost you -thousands of dollars over the length of the mortgage.

Perhaps the biggest decision is whether to take a fixed rate (FRM) or an adjustable (ARM) mortgage. A fixed rate mortgage is just that -the interest rate on your loan will not change even if interest rates go up or down. An adjustable rate mortgage will go up or down, depending on the prevailing interest rate at the time. It all depends on the state of the economy, your personal and financial situation and just how much of a risk you want to take. Around 70% of all mortgages are fixed rate.

A fixed rate mortgage offers stability -you do not need to worry about your monthly payment going up, although you may be missing out on a better rate. An adjustable rate mortgage carries an interest rate that is connected to the prevailing market rate -the monthly mortgage payment will be more or less, depending on what the market rate is doing. An adjustable rate mortgage does offer some safeguard – there may be a limit on the amount the rate can change during a certain period; there may also be a limit on the amount that rates can be increased over the length of the loan.

A change in the interest rate can mean a big difference in how much you pay for your home. An interest rate of just one point less can mean a savings of around $50,000 on the average thirty-year mortgage and around $5,000 on the average 15-year mortgage. In addition, an increase in the interest rate of just one or two percent can mean monthly payments that are between $50 and $250 higher. Another option is to take out the fixed rate mortgage and then re-finance if interest rates go lower.

The length or term of the mortgage is also important. Most home buyers opt for the traditional 15 or 30 year mortgage, but it is also possible to take out a mortgage that is 10, 25 or even 40 years. It all depends on how much you can afford to pay each month and how quickly you want to own your home outright -obviously, the shorter the term of the mortgage, the higher your monthly payments are.

It is also possible to take out a 30-year mortgage and when you can afford it, pay more towards the principal, thus making the term shorter. Simply making an extra payment a month will significantly reduce the term of the mortgage -as well as saving a substantial amount in interest charges. If you pay extra, make sure the payment is going towards the principal, rather than the interest.

There are some other options available. An option adjustable rate loan has an interest rate that adjusts every month -it allows homebuyers to enjoy lower monthly payment amounts at first and then to make higher payments later, when they can better afford it. A so-called balloon mortgage offers a payment schedule similar to the traditional 30 year mortgage -but with a shorter term of up to seven years. At the end of the term, the buyer must pay the outstanding balance.

You may also be eligible for an FHA (Federal Housing Authority) loan -a fixed rate mortgage that is designed for home buyers with a low income or poor credit, who are buying a home for the first time. An FHA loan usually requires less of a down payment and offesr a lower interest rate than a regular mortgage. An FHA mortgage loan is also secured to the lender in the event of default by the purchaser.

Another option is a VA (Veteran’s Affairs) mortgage, which applies to buyers who have experience of serving in the military, as well as a surviving spouse. VA loans have several advantages – it’s possible to get a mortgage with little or no down payment, the loans are assumable and there is no penalty for prepaying the loan. However there is a maximum loan amount – in most states this is $417,000 -and you still have to qualify as far as income and credit are concerned.

Your home is probably the biggest single purchase you will make. It is worth taking the time to find the mortgage option that works best for you. The types of mortgages that are available all affect your payments differently. The type of mortgage chosen mostly depends on personal income and the length of time in which you are looking to pay for the mortgage.



Sell and Rent Back

Offset mortgages offer an attractive alternative to traditional mortgages and can save you thousands over the long term.

Buying a home is an exciting time, and it is the biggest financial purchase that most people undertake. The majority of homebuyers cannot afford to buy a house outright and it would be impractical to save up the full amount of the house before you bought it, because you would need somewhere to live in the meantime. Therefore, the usual practice is to take out a mortgage – a loan secured against the property you are buying.

In the United Kingdom, there are different types of mortgages to choose from, which include a mortgage that is a big success in Australia, from where it originated. It is called an offset mortgage. Basically, offset mortgages use the interest earnt from your savings accounts and current accounts against your mortgage interest; and as a result this reduces your overall mortgage repayments.

With offset mortgages, your mortgage account runs alongside all your other accounts, and the net balance for all the accounts is calculated, normally on a daily basis. The interest is then worked out on the overall total you have in your accounts. All the interest you have earnt from your savings and current accounts goes straight into your mortgage account.

As with most mortgages there are variations around this theme, such as a current account mortgage (CAM). Your salary is paid directly into your mortgage account where it immediately reduces your mortgage balance. You can then draw against the account for your normal spending as you would with an ordinary account. The mortgage balance and interest is calculated daily, so even if money were left in your account for a short period, it would still have some positive impact on the cost of your mortgage.

Offset mortgages are very efficient. They will enable you to dedicate the bulk of your savings to reduce your mortgage, which can save you thousands of pounds from the mortgage cost, and allow you to pay off your mortgage early. You would still have the flexibility to divert your savings to other uses, however you would give up some of the savings made on your mortgage.

The drawbacks to offset mortgages, is that the mortgage interest rates can be higher than the deals you could get on other types of mortgages, and there are often no special offers, such as low discounted rates for the first few years. If you tend to keep a low balance in your current account and have little in the way of savings, the benefits you get from combining the accounts may be too small to outweigh the extra cost of the offset mortgage. You also need to be efficient with keeping track of your financial outgoings, especially in the case of a CAM where you have just a single account for both your mortgage and current account.

You do not necessarily need an offset mortgage to pay off your mortgage early. You could have an ordinary mortgage and a completely separate savings account. Then, occasionally you could use your savings to pay off a chunk of your mortgage, which could end in you paying off the mortgage early. However, unlike offset mortgages, you would have to pay the tax that was earnt in the savings account.

An offset mortgage could be the right mortgage choice for you, if you are good with your finances, generally have a high current account balance, have reasonably high savings and you are a taxpayer, particularly a higher rate taxpayer. In the United Kingdom, an increasing number of financial lenders are offering offset mortgages because of the benefits they offer to the customer.



Sell and Rent Back