Real Estate Professionals Redding

Finance “fixers” with FHA 203(k)

Many of the best values on the market at this time are REO properties needing some level of repair. Often this is due to missing stoves, ovens, hotwater heaters, etc..that have been sold by the previous owners. While the house may be in great shape these missing items can prevent buyers from obtaining conventional financing. Even if they could, the cost of buying the home and having to purchase appliances after close of escrow rule it out.

There is a financing option that will work in these cases. It’s the FHA 203(k).

Here are some of the details as posted on the HUD website.

203(k) – How It Is Different
Most mortgage financing plans provide only permanent financing. That is, the lender will not usually close the loan and release the mortgage proceeds unless the condition and value of the property provide adequate loan security. When rehabilitation is involved, this means that a lender typically requires the improvements to be finished before a long-term mortgage is made.

When a homebuyer wants to purchase a house in need of repair or modernization, the homebuyer usually has to obtain financing first to purchase the dwelling; additional financing to do the rehabilitation construction; and a permanent mortgage when the work is completed to pay off the interim loans with a permanent mortgage. Often the interim financing (the acquisition and construction loans) involves relatively high interest rates and short amortization periods. The Section 203(k) program was designed to address this situation. The borrower can get just one mortgage loan, at a long-term fixed (or adjustable) rate, to finance both the acquisition and the rehabilitation of the property. To provide funds for the rehabilitation, the mortgage amount is based on the projected value of the property with the work completed, taking into account the cost of the work. To minimize the risk to the mortgage lender, the mortgage loan (the maximum allowable amount) is eligible for endorsement by HUD as soon as the mortgage proceeds are disbursed and a rehabilitation escrow account is established. At this point the lender has a fully-insured mortgage loan.

Whats better then DAP? DAP Plus!

The City of Redding created the DAP Plus Down Payment Assistance Program in order to increase home ownership in targeted neighborhoods. The Parkview and Martin Luther King Jr. Neighborhoods in Redding are the beneficiary’s of this very attractive down payment assistance program. DAP Plus has a number of advantages over other DAP programs including interest forgiveness, principal and interest credits for homeowner improvements like landscaping, painting or garage construction, even a DAP Plus lease option program for those not able to immediately qualify for the program.

The program encourages stable neighborhoods by rewarding homeowners who live in their homes at least 5 years. The DAP Plus loan accrues simple interest at 3% for the first 30 months and then forgives that interest over months 30 through 60. There are no monthly payments on the DAP Plus loan and it becomes due after 30 years or when the owner sells or the property ceases to be the owners primary residence.

As with the conventional City of Redding Down Payment Assistance Program the buyer must meet program credit and income criteria, be a first time home buyer and the cost of the home cannot exceed $299,250.

Both of these neighborhoods are experiencing tremendous redevelopment and some fantastic housing values can be obtained by those who are qualified and ready. Contact Us for a list of available homes in the Parkview and MLK Neighborhoods that may be purchased using DAP Plus financing.

As always, Happy House Hunting!

Not a First Time Buyer? ”New Futures” is the program for you. Watch for the next article in this series.

City of Redding Down Payment Assistance

Of the several Down Payment Assistance Programs available to Shasta County residents the City of Redding DAP has the highest income and purchase price levels. The maximum income level requirements use a three tiered system of low, median and moderate with correspondingly adjusted levels of assistance. A family of four could make as much as $64,600 and qualify for a $30,000 DAP loan towards the purchase of a home with a cost not to exceed $299,250.

The City of Redding actually has three DAP programs. There is the standard down payment assistance program I am writing about today. I will detail the other two programs, DAP Plus and New Futures later in this series.

The standard City of Redding Down Payment Assistance Program gives the borrower 2 options on repaying the DAP loan.

Option #1 – Equity Share

The borrower pays the City of Redding a percentage of the appreciation based on the market value of the home at the time of payoff.
The percentage is determined by dividing the DAP loan amount by the purchase price.

Example:
$200,000 Purchase price
$ 60,000 DAP loan
(30% of purchase price)
$250,000 Value of home at time of payoff
- 200,000 Purchase price
$ 50,000 Appreciated value
$ 50,000 Appreciated value
x 30% Percent loaned
$ 15,000 DAP share of appreciation
$ 60,000 DAP loan
+15,000 DAP share of appreciation
$ 75,000 DAP loan payoff

Option 2 – Interest Accrual

Simple interest accrues on the DAP loan at 3% per year until the loan is paid in full.
Example:
$ 60,000 DAP loan
x 3%
$ 1,800 Interest accrual per year

The City of Redding DAP also requires that the home meet rather stringent habitability guidelines including clearance of section 1 and 2 pest as well as the repair of any defects noted during the required professional home inspection. For specific information on program requirements contact Jodi White at the City of Redding Housing Division.

With the higher income and price level criteria the City of Redding Down Payment Assistance is the only program that works for quite a few of the buyers we have been working with. The important thing with all DAP programs is that you get qualified before you find the house you want to buy as the process can take a few days. Please Contact Us for a list of homes that meet DAP price and location guidelines.

As always, Happy House Hunting!

Down Payment Assistance Programs

Lower home prices and Down Payment Assistance Programs make housing affordable to many working individuals and families in our area who were priced out just a year or two ago. This is definitely one of the silver linings of our current housing market. Not too long ago it was almost impossible to use DAP programs to actually purchase a home. If the buyer qualified on income there were very few homes that met the habitability standards required by the program. If the home qualified for DAP, it was most likely selling at a price the buyer could not afford to finance.

Not so today. There are now many more qualifying homes on the market that meet DAP guidelines at prices that fit the program. The key is being prepared. As the DAP programs require that you are approved before making the purchase offer If you wait until you find the right house to start the approval process you will most likely miss out on the best values.

There are a number of DAP programs available in Shasta County. Redding, Anderson, Shasta Lake City and Shasta County all have Down Payment Assistance Programs. While they are all somewhat similar there are important differences between them including income limits, housing price limits and repayment. Over the next few days I will be writing about the various programs. As one of our clients is closing escrow today on their first home using the Shasta Lake City Down Payment Assistance Program I have decided to start there. I would like to mention here what a pleasure it was to work with the program director Jessaca Lugo. She is very good at assisting the homebuyer through the process and worked closely with us, the primary lender and the buyers to insure a positive result.

The City of Shasta Lake DAP guidelines are published on their website and include link’s to print out the application. The DAP program is available to first time home buyers (defined as those who have not owned their principle place of residence in the last 3 years or displaced homemakers) whose income does not exceed 80% of the area median income, adjusted to household size. The property must be in the City of Shasta Lake boundaries and can be a single family home, condo or townhome on permanent foundation up to $225,000. DAP funds can be up to 40% of purchase price and repayment is deferred for 30 years at 0% interest. 3% of the total cost must come from the buyer/borrower.

For example, let’s say you qualify for the Shasta Lake City Down Payment Assistance Program and find a house to buy at $200,000. You would have a first mortgage of $120,000 with the lender of your choice. DAP funds would be $80,000 and your 3% investment would be used towards closing costs. With a 30 year fixed rate mortgage at 6.25% your monthly payment including taxes and insurance would be about $1,000.

Income Limits (Subject to Change) are 80% of: 1 person -$30,150, 2-$34,450, 3-$38,750, 4-$43,050, 5-$46,500, 6-$49,950, 7-$53,400, 8-$56,850

Feel free to Contact Us for a list of homes that fit DAP price guidelines.

Turtle Bay Exploration Park – What’s Next?

About Redding

A recent editorial in the Record Searchlight titled “Importance of Turtle Bay not tied to figure” is a reminder to those of us who have enjoyed living in this area for many years just how much the Redding area has matured. With the addition of the Sundial Bridge, Sacramento River trail and Turtle Bay Exploration Park our City is experiencing a growth in cultural, recreational and educational opportunities that have transformed us from a small town indistinguishable from so many others to a vibrant, culturally diverse city.

Everybody has an opinion on Turtle Bay and what direction it should take. I have often considered what changes or additions I would make if I had that ability. The exhibits like “Titanic” or “Bodies Revealed” are wonderful and certainly have great value but are temporary and provide no lasting anchor for Turtle Bay. The Sundial Bridge designed by world renowned architect Santiago Calatrava is certainly a compelling draw for locals and tourists alike but how many repeat visitors does it attract? Do people come to Redding to see the famous bridge or are they simply stopping along the way to have a look?

I believe that one of the things that make’s Redding unique is our proximity to so many rivers and streams that can be fished or floated. Imagine if we were to take advantage of our location as a hub to several major whitewater-kayaking rivers with a Whitewater Park & Kayak Training Center at Turtle Bay. The park could take advantage of the plentiful water of the Sacramento River as well as provide for cleanup and restoration of an area still bearing the scars of gold dredging performed in the early 1900’s and gravel mining during the construction of Shasta Dam.

Using the U.S. National White Water Center in North Carolina and the Truckee River Whitewater Park as models of what works and just as importantly what does not work, a facility could be designed that enhanced the habitat of Turtle Bay and served as a recreational destination anchor to attract tourism by hosting events, training and competition. Companies like the McLaughlin Whitewater Design Group have been building this type of project for some time, with great success. Certainly Kayaking enthusiasts from all over the west coast could enjoy utilizing a facility such as this with the added advantage of day trips to some of the world class natural whitewater river runs in our region. And it’s not just kayakers who would visit our town. In only it’s 4th year the Reno River Festival drew over 32,000 spectators to a 3 day event.

At any rate, that’s my idea. What’s yours? If you have ever had an idea for enhancing the draw and success of Turtle Bay Exploration Park I invite you to share it here. Who knows? Perhaps by sharing your idea it will come true!

Free Credit Report Scams – Know Your Rights

One of the most important factors in whether or not you are able to buy a home and the terms you might expect is your credit score. In fact, your credit history is so important that there is a law that requires each of the nationwide consumer credit reporting companies, Equifax, Experian, and TransUnion, to provide you with a free copy of your credit report, at your request, once every 12 months. The three companies have set up one central website, toll-free telephone number, and mailing address through which you can order your free credit report. The important thing to remember is that there is only one authorized website http://www.annualcreditreport.com/

There are many companies that claim to provide this service. Often they have hidden charges or require that you opt out to avoid being charged after an introductory period. Many of them will be constructed to look like annualcreditreport.com in an attempt to mislead you. You will never be sent an e-mail, a pop up ad or a phone call from annualcreditreport.com asking you to sign up. For more info on credit reports visit the Federal Trade Commission Website.

In order to take advantage of the extraordinary values in today’s buyer’s market it is important that you are pre-approved on financing. As your credit score is such a huge factor it’s a good idea to get your free report. Feel free to Contact Us for additional information on how to get ready to buy now.

Buying REO homes for First Time Buyers

REO stands for Real Estate Owned, commonly thought of as Foreclosure properties. These are properties being sold by a lender after foreclosure and not an auction sale on the courthouse steps. With a few exceptions buying an REO property is very much like purchasing a home from a private seller. Unlike short sales (I will address short sales another time) the response time to an offer is generally pretty fast and escrow lengths of 45 days are typical.

One of the areas that REO properties differ is in the seller’s disclosure requirements. Contrary to common belief the seller is not exempt from all disclosures. Seller is required to disclose known material facts affecting the value of the property, lead based paint, hazard zones like fire and flood zones, smoke detectors, water heater strapping, Meagan’s law and a few more. In addition, both listing and selling agent are required to perform a reasonably competent and diligent visual inspection of accessible areas of the property and disclose to buyer any material facts observed.

Seller is not required to provide buyer with a TDS (transfer disclosure statement), NHD (natural hazard disclosure), Mello-Roos, Improvement bond act, Supplemental property taxes, Private transfer fees or an Earthquake guide. In reality all real estate is sold “as-is subject to inspections” and disclosures are never a substitute for physical inspections. While most REO’s have a shortened buyers inspection period, typically 10 to 15 days it is generally sufficient time to perform detailed professional inspections, review reports and make an informed decision.

Seller contributions towards closing costs of up to 3% of purchase price are very common and often advertised in the listing. This contribution can greatly reduce the amount of cash needed by buyer to close escrow. The mental image many people have on “foreclosures” is a distressed property. Sometimes this is the case but many REO properties are in as good, sometimes better, condition then a conventionally sold property. There are REO properties listed in every price range with many options for you to choose from. Feel free to Contact Us for a list of all REO properties on the market.

Give yourself a raise! Increase your take home pay to make house payment.

You don’t need to go to the boss and ask for a raise you can do it yourself. If you now rent and are thinking of buying a home keep in mind that mortgage interest and property taxes are all tax deductible. Because of this your taxable income will most likely be greatly reduced when you own a home. With that in mind, consider increasing the dependants on your W4 withholding. Use this IRS calculator to see how it changes your take home pay. Of course you should talk with a tax professional for details but we have had many first time buyer clients use this tax strategy successfully to purchase their first home.

Cool Tech Tool for Viewing Redding

About Redding

One of my favorite sites when looking at Redding properties is the City of Redding GIS map. You can view details on homes and land in the city limits including aerial imagery with an overlay of the parcel map. Wonder whether or not the lot stops at that fence or is that creek on the property? This is the place to check it out. You can also see the location of underground water and wastewater lines, proposed roads, school districts and a host of other features. You may need to download the viewer to use but it’s very simple and fun to use. The GIS map does not replace physical inspections of property boundaries and condition but it can certainly be an entertaining way to view our City.