Why Do I Keep Getting Declined

Loan qualification is not such a complicated business; so, as long as you know what’s going on you may be able to foresee the results of your application. There are some very common reasons for loan denials as well as corrective measure to avoid them. Read on for some existing alternatives that suit low and moderate-income homebuyers.

Reasons For A Loan Decline

Sometimes it isn’t only the debt amount owed by the applicant that prevents qualification for the loan. Extensive credit card usage and revolving accounts indicating increasing account balances approaching the credit card limits can kill the prospects. You need to show moderation to lenders in order for them to confide in you.

Bad Credit History

Bad credit reports featuring frequent late charges, past due accounts, judgments and bankruptcy can reduce chances of loan approval. Guidelines on debt ratios and income requirements are one thing but tolerance of bad credit record, is a different story. Low loan-to-value ratios and debt ratios cannot compensate an unsatisfactory credit history.

No Credit History

Lack of an established credit history can cause problems in loan approval. Even without negative aspects, no record of timely loan repayment or charge accounts is as bad. In such a situation, there is hope of a non-traditional credit history. This involves the lender depending on utility companies, landlords both past and present, among other sources to verify your timely, consistent repayment. If this hasn’t occurred to your lender, suggest it.

Percentage of Financing

The ratio of the loan to the sale price or appraised value of the property whichever is lower, is one of the lender’s considerations. Appraisal of property being substantially lower than purchase price, the loan-to-value ratio (LTV) may be more than the lender can legally approve. For a maximum loan amount, 90 to 95 percent of the purchase price, a low appraisal could make the desired loan too high. Here your options depend on the reasons for the low valuation.

One Loan Decline Is Not The End

One lender’s rejection need not ban you home ownership for good. There’s a lot you can do to improve your chances. Some of these measures may be done quickly while some may take time. However, most problems can be corrected. Take your time and analyze the possibilities, the reasons why your loan request was turned down and do whatever is necessary to rectify that problem.

In order to get approved you can resort to many different means. The most important one is to improve your credit score by applying for small loans and paying all the installments on time. This will create a good credit history. However, If you don’t have the time, you can try offering some kind of collateral like a car or a real estate property or you could apply with the aid of a co-signer (with better credit history and score than you) as this will provide the lender with greater security.

When is the Best Time to Move

As Realtors, we are often asked, "When is the best season to move?" This is a tough question, one we cannot answer for you. Most people are asking about price, do they fluctuate throughout the year? NO. Just the number of homes on the market changes; of course the number of buyers changes as well. Hopefully this article will help you make this decision for yourself and your family.

Time of Year

A common "urban legend" is that you get more money for your home in the spring. This is simply not true. Seasons have no bearing on how much you get for your home, but it does affect how much competition you have. True, more people look to purchase a home in the spring. At the same time, there are more homes on the market for you to compete with. Unfortunately, this is also the time of year when all the "window shoppers" are out. These are people looking for renovation ideas, or who are just "killing an afternoon" looking at open houses. In the winter you will have fewer showings... but they'll be serious buyers. So, should you NOT sell in the spring? Not at all. There is no good or bad time of the year to sell your home. The best time is when you are financially and emotionally ready to move. Not before, and not after.

Children

Many parents wait until the end of a school year before moving the family. At first glance, this makes a lot of sense. Let them finish the year in comfortable surroundings, and don't disrupt their lives until summer holidays have begun. But consider this... Children need friends to play with. By moving the kids a couple of months BEFORE the end of the term, they have the ability to meet their new friends in the new neighborhood. By having these friends, the move will be easier and less confusing for the children. And parents?!? If the kids have friends to play with... they won't be underfoot while you're trying to unpack and organize the house!

Time is on your side

The very fact that you have time on your side could save you thousands. Many sellers that have waited have put themselves in a "have to sell" situation, and have had to accept offers for less than what they wanted. The fact is, when you have time on your side you won't feel pressured to accept an offer that's less than what you want.

Your next property could cost more

If you're buying a new property that's more expensive, you could cost yourself plenty. For example, let's say you're selling a $100,000 property and looking to buy a $150,000 property. If both properties appreciate at the same rate of 3% over the next six months, you gain $3,000 on your existing property. However, the $150,000 property will now cost you $154,500 or a net loss of $1,500. The best suggestion is to get into the home you want; before it gets out of reach for you!

About The Author

John Carle & Sharon Gregresh are Realtors with Royal LePage - ArTeam in St. Albert, AB. They pride themselves on providing more than just real estate sales and listings. Their clients benefit from a much larger spectrum or real estate services. Contact them any time at information@workingtogether.ca or through their website at www.workingtogether.ca They can be reached by phone at (780) 458-5595

Tags: mortgage, mortgage loan, home loan, mortgage tips, financing, mortgage financing, real estate, realtors, mov

When Investors Become Victims of Fraud

A young investor from Atlanta got excited when he heard about a “deal” in Macon, GA. (about 90 miles south of Atlanta)

The property – 2 Duplexes and one single family house. The prices seemed to be a steal compared to Atlanta real estate – only $65K for each duplex and only $45.5K for the house. He didn't know the market at all, but everyone involved was assuring him that this was a great deal.

The mortgage broker, a local Atlanta fella with access to lots of investor loans, was only too glad to help the young investor secure a low doc loan at an interest rate slightly above 10%. The year is 2001. (note: Low doc loans can carry higher interest rates because you are not required to verify assets or income to qualify, but even so, higher rates can kill a deal even when there is no fraud involved. In this case, it only makes matters worse.)

Everything went smoothly and according to plan. The seller was cooperative, a contract was signed for each property, a local closing attorney was already chosen, an appraisal was ordered, and all the pieces just fell into place. The young investor was pleased with all the service. He did not have to worry about a thing. Everything was handled for him.

He had no idea that everyone from the seller to the appraiser to the closing attorney was involved in a real estate mortgage scam that was about to take our young investor to the cleaners, and leave him holding the bag on three properties worth only a fraction of the “appraised” value.

Since the deal was in Macon, and the young investor was busy working full time in Atlanta, he had little, if any time to get down to the Macon area. So, since things were going so well, he tended to depend on the support folks who were working so hard to help him out. After all, he didn't know the Macon market really well, but he figured that with these prices being half what they are in Atlanta, he couldn't go wrong.

This was his first mistake.

Soon after closing, the investor realized he was having a problem renting the properties for enough to cover the mortgages. A trip down to Macon to check things out revealed a sickening situation. The properties were in the worst part of town and were in terrible condition.

The confused investor checked his closing documents. The appraisal, dated one month before the closing, 11/08/2001 indicated that each property was worth exactly the purchase price as stated above. There were comparables that indicated that there were plenty of similar properties in the area also selling for 65 thousand dollars.

As the now concerned investor soon realized, after spending some time carefully reading his previously unread appraisal, things were not as they should be.

For starters, the date on the cover sheet of the appraisal indicated that the appraisal was done just prior to the investors closing date. But, the signature page on the back of the appraisal indicated that it had been done eighteen months earlier. It appeared that the appraisal had actually been used for a previous transaction.

The appraiser who signed the documents was only a new, or “registered” appraiser.

In Georgia, a certified appraiser should have inspected the work and signed off on it. But there was no such signature.

As if that were not enough, the comparable properties used to establish the market value were miles away, and not even located near the subject properties. The zip codes had been changed to make it look as though the comparables were in the immediate area. They were over 8 miles away, even though the appraisal data said they were less than 5 miles away.

In short, the appraisal smelled like an old fish wrapper in the hot Georgia sun.

Did I mention that the properties being purchased were not worth the 65K as shown in the appraisal. To his horror, the investor soon discovered that his new properties were only worth $15,000 apiece!

He was slowly starting to realize that he had been duped. Now he was left owing $180,000 for three properties that were actually worth $45,000 total.

How could such a terrible mistake happen? What about the closing attorney? He works on behalf of the lender. Didn't HE realize that the lender was loaning way too much money for these houses? Why didn't the mortgage broker catch this? HE was the one who worked on the loan. And, anyway, WHO hired the appraiser? What about the seller? How on earth could he expect to sell a $15,000 house for $65,000? Something was terribly wrong.

As it turned out, virtually everyone involved in the transaction was also on the take. No wonder this was such a convenient, full service deal for the investor. Everyone was setting the buyer up. The investor had great credit and good income. He was a class A buyer. Just the kind who is a juicy target for these predatory types who troll the investor clubs like great white sharks looking for an unsuspecting meal.

The parties involved in this fraud pocketed the money from the loans.

This investor will have no easy or penalty free way out of these deals. He will still face foreclosure or possibly bankruptcy, even though the seller wound up in prison, and the attorney lost his license to practice law. But all of that was not enough to get our victim out of the financial obligation that had been created when he signed the closing documents. The lender who ponied up the funds still expects to be paid back. And the courts are not sympathetic to careless investors who get taken.

The only way to protect yourself is to protect YOURSELF. Don't obligate yourself to financial transactions unless you have verified all of the essential details. As always, common sense and a prudent approach always work best. If you do not understand the terms of your deal, get independent, third party advice, even if you have to pay for it. And, read my article on avoiding loan fraud by verifying the appraisal data.

The moral of this story is - “If you don't check up on the details of your deal, no one else will. And if you are careless enough, you will be eaten by the investing sharks faster than a swimmer in a Stephen Spielberg movie.”

Donna Robinson is a real estate investor, author, and consultant located in Atlanta Georgia. You may read more of her articles on her website at http://www.RealEstateInvestorHelp.com or you may contact her by email at drobinson@reihelp.com or call 404 542-9903.

Tags: real estate investing, real estate, mortgage lenders, mortgage financing, real estate fraud

What to Worry About When Renting a Home

As a landlord, when renting your home you can run into several problems. Some tenants may even appear to be the perfect match for you and your home until after they move in and you see what they are really like. The following are several problems you can run into when renting your home.

One of the biggest problems a landlord can face is late payments. Even if the tenant appears to have perfect finances and good references, they can still be late on payments. It is best to document each late payment on behalf of the tenant so you can have ground for an eviction notice should it become necessary.

If you are renting a fully furnished or partially furnished apartment or home there can be problems as to what is your and the tenants when it comes time for the tenant to move out of the residence. Therefore, it is best to clearly state in writing at the time of renting what cannot be removed from the residence. This will help to give you a legal recourse in case something is removed if the tenants do not notify you.

Another common problem is that of improper removal of garbage. If garbage is not collected, not only does the area become unsanitary but also your property can begin to look run down. Therefore, in the contract state how often garbage must be removed.

Along these lines, cleanliness can become an issue with tenants. This cannot only become a health hazard to your tenants but also to the neighbors as well. Therefore, set clear cleanliness guidelines in the contract.

Tags: real estate buying, first time home buyers, real estate trends, buying a home, mortgage financing

What To Look For When Buying Home So Many -- but They're Necessary

A foremost consideration for what to look for when buying home would be your funds. It’s easy to spot what kind of a house you’d like to make your new home -- no need for education there, just a matter of taste -- but how much could you afford to buy is another matter altogether that should not be ignored. You cannot go out and make an offer on a mansion that’s in the heart of the city, definitely not when you are working on a budget that’s a pittance. Finance wizards will tell you readily that you should not buy too much of a house when you don’t have the money for it.

Now, when you have considered the limitations of what you could actually afford, the next step to do in your list of what look when buying home would be location. The property you are about to buy should be in a place that’s just “a stone’s throw away,” so to speak, for the sake of convenience. Take into consideration that, since you’d be shelling out a big slice of your liquid assets to pay for the house up front or for down payment (if it’d be on an installment basis), you won’t have too much left for other basic needs like transportation for yourself and your family, for example. Even the time you’d have to spend stuck in traffic would be precious commodity if your house would be located too far from most of those places you frequent, like your place of work, the church you go to on Sundays, the marketplace and malls where you have to do your shopping, and a good school for your children. So consider strategic location seriously.

Last, but not the least, in your list of what to look for when buying ahome would be comfort and beauty. Of course, you’d want to be the proud owner of a home that you would not hesitate to show off to your friends or to your boss or, if you’re single, to your boss’ single daughter you might have been drooling over, too, for some time now. Your house should not be garish. Keep in mind that a house that is “garish” is tasteless and ugly, and does not give a good impression of the owner. Simple and practical are beautiful -- opt for simplicity and functionality in your house style and in your choice of furniture and fixtures, and you’d earn the admiration of your peers and higher-ups. Your home is an extension of yourself. It is a place of your comfort and peace of mind. Do not make it anything less by a display of poor taste.

What Is A Home Equity Line Of Credit

If you have a home that you have been paying on for several years you may have a lot of usable money (home equity) right under your nose? A home equity loan just may be the perfect way to get your hands on that money to use for paying off those high interest credit cards, home improvements, college tuition, etc.!

Here’s an example of how a Home Equity works: Let’s say that your current home mortgage was originally for $250,000. After several years of paying on that mortgage you now only owe the mortgage company $150,000. In this example, you would have $100,000 in equity in your home. But lets also factor in inflation. Say your current home will appraise, today, for $325,000.00. This means you have a total of $175,000 equity in your home. Most lenders will let you borrow up to a maximum of 80% of the total equity - which in this case is: $325,000 x 80% = $260,000 less your first mortgage balance of $150,000 will equal $110,000 of equity you can borrow.

A home equity loan is a specific type of loan that will allow you to borrow against that "equity" you have built up in your home. Actually there are two "types" of equity loans to be considered. Home equity loans and a Home Equity Line of Credit.

“What’s the difference in a Home Equity Line and a Home Equity Loan?”

A Home Equity Line –
* A line of credit amount established on revolving, variable rate basis. Only requires a minimum payment amount. NOTE: Works very much like a credit card product with the minimum payment feature and a revolving term. * Not intended to payoff at a set maturity date.
* Intended to utilize the equity in the home, usually to qualify as a home mortgage interest deduction (to be determined with your tax consultant). * Not recommended to use to consolidate credit card debts.
* At maturity date, remaining balance is renewed into new home equity line.
* Can usually be obtained with no closing costs promotions at lending institutions.(Most do have a prepayment penalty clause if loan is paid off in short period of time to collect their costs).

A Home Equity Loan –
* Fixed Term and Fixed Rate (usually 36 months – 180 months, depending on lender)
* Utilizes the equity in the home, usually qualifying as a home mortgage interest deduction if qualifies (to be determined by your tax consultant). * Can be first or second mortgage loan.
* Pays off in full at maturity date, and can be accessed by payment book or automatic payment with lending institution.
* Recommended for use when consolidating consumer debts, especially credit card debt, so that will be eliminated when loan paid off.
* Can usually be obtained with no closing costs promotions at lending institutions. (Most do have a prepayment penalty clause if loan is paid off in short period of time to collect their costs).

Why would you want borrow more money out of your home? The number one reason that people take out home equity loans, or home equity lines of credit, is to consolidate their debts. Because a home equity loan is a secured loan, the interest rates are considerably lower than that of credit credits or even personal loans. So if a person had the average credit card debt of say $10,000 they could reduce the total amount of their monthly payments AND reduce how much they owed by taking out a home equity loan, or home equity line of credit. You would then use the cash to pay off your credit card debt and reduce your indebtedness by greatly reducing the amount of your "nondeductible" interest you will pay over the next several years.

Another great reason for taking out a loan of this type is to make improvements on your home. Have you been thinking about remodeling your bathroom, or the kitchen, or maybe adding a swimming pool to your backyard? A greenhouse, or studio to your yard or maybe a sun room? A home equity loan is a great way to finance these types of projects.

Your first step should be to talk to your current mortgage company or your local Bank about your options, but don’t stop there. You will quickly find that there are plenty of Banks and other lenders who are willing to make you a Home Equity loan or extend you a Home Equity Line of credit. So you should shop around for your the best deal - and there are plenty of good deals out there!

Michael Domeck was a multiyear sales and listing award winner for Century 21 and has designed and built many homes over the years. His wife has been doing mortgage financing for over 20 years. Together they can show you what all the "mortgage hype" is all about. Find out the secrets to getting the best mortgage financing at the best rates and the lowest fees. Learn why re-financing may NOT be the best way to go and why!

Tags: home equity, mortgage financing, equity loan

Top 7 Reasons Why FSBOs Fail To Sell Their Home On Their Own!

In the United States, less than 10% of all For Sale by Owners (FSBOs), are successful in selling their home by themselves. That*s because most people just give up because they don*t realize from the beginning the difficulty and complexity of the job ahead. But that*s not the only reason. Here are the seven most common mistakes FSBOs make when selling their home.

1. Failure to price a property at what market conditions will bear.

The number one reason that most FSBOs don*t sell their homes is that they price it too high. Many start counting the money they*re saving on commissions and how much their sale will net. If your house is priced higher than other comparable houses in your market, you will not get the offers you need to sell!

2. Underestimating the time, energy, know how, ability and effort needed to sell a house.

One of the keys to selling your home effectively and profitably is complete accessibility. Many homes sit on the market much longer than necessary because the owner isn*t available to show the property. Realize that a certain amount of time each day is necessary to sell your home.

3. Not being prepared to deal with an onslaught of buyers who perceive FSBOs as targets for *low balling*.

Another challenge of selling a home is screening unqualified prospects and dealing with low-ballers. It often goes unnoticed that much time, effort and expertise is required to spot these people quickly. Settling for a low-ball bid is usually worse than paying any type of professional fee or commission.

4. Lack of knowledge about financing options for the buyer.

Are you prepared to answer questions about financing? One of the keys to selling is having all the necessary information the prospective buyer needs and to offer the buyer options. Think about the last time you purchased something of value, did you make a decision before you had all your ducks in a row? By offering financing options, you give the homebuyer the ability to work on their terms. You*ll open up the possibility of selling your home quicker and more profitably. It*s critical that you locate and establish relationships with a network of financing experts that will help you accomplish your goal profitably.

5. Not fully understanding the legal ramifications and all the necessary steps required in selling a home.

Many home sales have been lost due to incomplete paperwork, lack of inspections or not meeting your state*s disclosure laws. Are you completely informed of all the steps necessary to sell real estate? If not, you may want to consider consulting with a legal or real estate professional.

6. Lack of experience in handling the legal contracts, agreements and any disputes with buyers before or after the offer is presented.

Are you well versed in legalese? Are you prepared to handle disputes with buyers? It is always wise to put all negotiations and agreements in writing. Many home sales have been lost due to misinterpretation of what was negotiated.

7. Not contacting the necessary professionals... title, inspector (home and pest), attorney, and escrow company.

Are you familiar with top inspectors and escrow companies? Don*t randomly select inspectors, attorneys, and title reps. Like any profession, there are inadequate individuals who will slow, delay and possibly even cost you the transaction. Be careful!

Selling a home requires an intimate understanding of the real estate market. If the property is priced too high, it will sit and develop a reputation for being a problem property. If the property is priced too low, you will cost yourself money. Some FSBOs discovered that they lost money as a result of poor pricing decisions. In the final outcome, these mistakes far outweighed the commission they would have paid.

About The Author

Lawrence Allen has over 15 years experience as a marketing professional and a successful real estate investor. His experiences with numerous real estate, marketing and finance professionals has enabled him to develop a marketing system and Ebook for people trying to sell their home on their own. The For Sale By Owner (FSBO) Hassle-Free Home Sale System has received many praises from real estate professionals and home owners alike: http://www.fsbosaleshelp.com

Tags: mortgage, mortgage loan, home loan, mortgage tips, financing, mortgage financing, real estate, realtors, FSB

The Importance Of Location

If you’re just looking for a comfortable home in a decent neighborhood and intending to remain in this home for a long time, location may not be on top of your list of concerns. But if resale value is your priority then you have to think “location, location, location”. It’s that important.

The rule is to buy a house that will appeal to the largest number of future potential buyers. This requires you to make a number of different “location” choices. Which community? Your choice should be narrowed to only a few local communities. You want to buy in a community with a viable and stable economy and a good mixture of commercial and business district. So when you want to sell your house, you can have a reasonable expectation that your community will still be a desirable place to live in. You should also look into the local crime statistics.

Pay close attention to the local schooling system even if you don’t have school-age children or do not intend to have children because many potential buyers often have this concern. Also, property tax in one town maybe higher than others. Usually, potential buyers will choose not to buy a house in the community with higher taxes but it’s not always the case because you will often find that the “cost per square foot” is lower in towns with higher taxes. Meaning, you can buy a bigger house for less money so the mortgage payment plus taxes could result in approximately the same monthly housing costs.

By keeping the above factors in mind before buying, your new home can become a great investment.

Tags: real estate buying, first time home buyers, real estate trends, buying a home, mortgage financing

Should You Buy a House or a Condo

A big debate these days is whether or not to buy a house, or buy a condo. Most of this debate comes from a lack of understanding about condos, and what they are. Hopefully, the following information will prove to be helpful.

When Buying a condo, are you a tenant?

No. That simply isn't true. When you buy a condo, you are buying a part of the corporation, and are thus an equal owner. It is true that you can be forced to move, if you are really disturbing the other owners, or causing problems. But this is true of residential homes as well. If your neighbors complain repeatedly about smell, health concerns, or criminal behavior, then you may be forced to move. The same holds true in condos and houses alike.

The board can force you to pay thousands of dollars arbitrarily, and without notice.

At first glance, this may appear to be true. But keep in mind that the condo association is made up of owners who have the same goal as you… Having a comfortable place to live that is building equity. The members of the condo association do not make any money from their positions. They are owners like yourself, who are volunteering their time. There can, however, be "special levy's" brought about by unexpected maintenance in the building. The same holds true of a house as well; the expenses just come from a different place. Ask anyone who owns a house how much it cost them for their last furnace. Or how much they spent repairing the water leak, and replacing the shingles. The advantage in a condo association is that you share these costs with the other owners, and are forced to save money in advance for these repairs, through the reserve fund.

Condo fees cost too much each month!

Again, not necessarily true. If you were to add up the amount of money that a family spends over 5 years on the maintenance of their house, you'll usually notice that it equals more than 5 years worth of condo fees. Also, many condo associations pay for their monthly expenses as a group. Heat, water, insurance, and maintenance are examples of such expenses. By purchasing as a group, they can often get these services at a lower rate than a single home owner can.

I could never live in such close quarters

That's probably true. Condos aren't for everyone. Every person has to make their own decision, based upon their own lifestyle; now and in the future. If you have 3 large dogs, 3.5 children, and 4 cars… a condo probably isn't for you. But, if you're a single young executive who works 80 hours a week, or you're retired and travel most of the year, then perhaps a condo is the right choice for you. Only you can make that decision, as it is a lifestyle choice. Here are some factors to consider in your decision.

1. How much time do you spend at home?

2. Do you want to shovel walks and mow lawns?

3. Are you used to having your neighbours far away from you?

4. Is the condo association that you're considering favorable to your children's lifestyle?

5. Do you want a low maintenance home, or do you like tinkering in the yard and garage?

6. Who's going to be living there? What are the neighbors like?

In fact, these are issues to consider on any home, not just a condominium. It's just as easy to get "bad" neighbors when you buy a house as it is when you buy a condo. The best advice that can be given is to research your choices, and be objective when choosing a home. My favorite example of this is as follows:

"A friend of mine asked me to help him find a home. He's a single young man who travels 75% of the time for his job and is rarely at home. When he is home, all he wants to do is sleep and watch TV. He wanted to buy an acreage so that he could have privacy. After looking at the amount of continuous maintenance required for an acreage, he realized that acreage living wasn't for him. He's very happy in his apartment style condo."

Make your own decisions, based upon what's best for you. If a condo is where you'll be happiest, then buy a condo. If a house is what's right for you, buy a house.

About The Author

John Carle & Sharon Gregresh are Realtors with Royal LePage - ArTeam in St. Albert, AB. They pride themselves on providing more than just real estate sales and listings. Their clients benefit from a much larger spectrum or real estate services. Contact them any time at information@workingtogether.ca or through their website at www.workingtogether.ca. They can be reached by phone at (780) 458-5595

Tags: mortgage, mortgage loan, home loan, mortgage tips, financing, mortgage financing, real estate, realtors, con

Should I Get My Real Estate License To Be or Not to Be... that is the Question

New investors often ask me whether it would help their investing activity if they became a real estate sales agent.

I actually did start my real estate career as a licensed sales agent. When I decided I wanted to get involved in real estate investing, I did not have any idea how to get started. My only exposure to the investing world had been a few books and the Carleton Sheets course, which I bought back in 1994.

Still not feeling comfortable with the myriad of questions I had, I decided that any action was better than no action, so I got my real estate sales license.

On the positive side, I learned a lot about real estate in general. How to write solid contracts, different forms of title, how to crunch numbers for buyers and how important it was to go out every day and get listings.

Huh? get listings? I did not realize that being an agent was it's own full time business. My broker was adamant about all her agents going out and getting those listings. After all, brokers make their money with listings, so that is what most brokers want you to do.

Investors are more interested in locating properties that they can buy, not properties they can list. It soon became a clash of ideology with my broker. Her disdain for investors did not bode well for my investing career. I ultimately decided not to renew my license.

But I certainly came out of that experience knowing a lot about real estate. It was a great foundational education. But a rather expensive lesson in choosing a business model.

All in all, taking the courses for a sales agent was a big leap for my understanding of the principles of real estate, but the fees and costs associated with being licensed were a definite burden to someone who was not really interested in functioning as a sales agent on a day to day basis.

If I were considering that decision today, knowing what I now know, I would take the sales agent course but I would not plan to take the exam or get my license.

There are advantages both ways. In making your decision, keep in mind your long term objectives.

If one of your objectives is to learn to buy and sell real estate, and you are willing to work with investors, you could have a built in client่le waiting for you.

Investors are always looking for a good sales agent to work with. This could be a great way to build your business and learn investing at the same time.

On the other hand, keep in mind that this business does cost money. You may have to split commissions with your broker. And you will be required to pay fees for things like MLS membership, lockboxes, electronic keys for lockboxes and other items.

You can interview a local broker in your area to find out what costs will be involved. Then you can decide if this course of action makes sense for you. Tip: Be sure your broker is OK with investor activity if you plan to work with investors. You broker will have a lot to do with your success as a sales agent. Choose one carefully.

Donna Robinson is a real estate investor, author, and consultant located in Atlanta Georgia. You may read more of her articles on her website at http://www.RealEstateInvestorHelp.com or you may contact her by email at drobinson@reihelp.com or call 404 542-9903.

Tags: real estate investing, real estate, mortgage lenders, mortgage financing, eminent domain

Should I Get Into Real Estate Investing To Get Out Of Debt

As a general rule, real estate investing is an excellent way to build a solid financial foundation and get out of debt.

But -- you have to do it under the right circumstances, and for the right reasons.

One of the most common scenarios that I see among the new and inexperienced, who have gotten themselves into big trouble with real estate investing, is jumping into a deal that they don’t understand, in hopes of earning a chunk of money quickly so that they can pay off existing personal debts.

Someone along the line gave them the idea that they could solve all their financial problems by jumping into a real estate deal to make quick cash.

If you are desperate for $20,000 and you’re trying to think of a way to come up with it in the next 30 days, you can use real estate as a strategy, but you should be willing to get advice or consult with an independent professional who can give your deal an honest evaluation that is in your best interest.

Many folks get into deals that they barely understand and wind up in a worse financial situation than they had to begin with. I recently counseled with a young man who had excellent credit, documented income and had a "friend" who is an appraiser. The friend approached the young man and said, " I can set you up with some good real estate deals, I’ve got the connections in the business, we can make some big money quickly".

So our young investor jumped in, assuming that his friend had everything under control. He also assumed that he was soon to be on the fast track to financial security. He signed paperwork he barely read. He did not understand how the deals were to work, or how the money would actually be made. He committed his credit as the buyer for the properties, while his friend, the appraiser, would be responsible for all the confusing details the young man did not know anything about.

With no legal advice from an attorney, and without consulting with anyone ahead of time, he signed paperwork that was so poorly written and so vaguely worded that I was shocked when I read it. If only he had contacted me first, this never would have happened.

This young man made three critical mistakes.

A: He thought he was going to make easy money because he had "a friend in the business".

B: He committed his credit and signed as the buyer for deals that he did not understand.

C: He failed to get an independent evaluation of the terms of the deal.

Turns out, his friend the appraiser was engaged in a bit of loan fraud. He inflated the appraised value of the property so that the lender loaned more on the properties than they were actually worth, pocketed the extra cash, and left this young man holding the bag on properties worth about $200,000 with loans outstanding of about $300,000.

Now he will have to borrow more money to fix the properties and try to get them sold in order recover as much cash as he can for the lenders. He may still face foreclosure and possibly even bankruptcy.

Given his lack of experience, he should have gotten professional advice first. For the average new investor, who’s never done a deal, who doesn’t understand real estate that well, or has no experience with writing contracts, you should never, ever, in my opinion, engage in any kind of real estate deal, or give cash to anyone, until you have consulted with someone who knows what to do. Someone who can at least give you the benefit of an educated, independent opinion.

Have someone look at the numbers and evaluate your deal appropriately. They can make educated recommendations about what you need to do. Ultimately, you make your own decision about whether or not to invest.

I waited a number of years before I finally got personally involved in a transaction for investment property.

I wanted to be sure that I understood what was going on.

In my early days, I chose to work for other real estate investors either on a freelance, contractor type basis or in a paid position just so that I could learn enough about the business to understand what was going on. I also became a licensed agent.

But I did not get directly involved until I understood what was happening.

Real estate investing is, in my humble opinion, is one of the best ways on the planet to generate and maintain true wealth.

You can generate income, and build assets through appreciation. Houses are shelter and provide an essential human need. A house has a value that goes far beyond the price. You can't live in your stocks. You can't raise your children inside a bank CD. Real estate makes sense for a lot of very fundamental reasons.

You can make $10,000 in a short period of time. I see it done every day. But the people who are doing it know how the deal works, and most importantly, they understand where their profit is coming from and how they will generate it. They also understand what their risks are and what they will do if plan A does not work out and plan B becomes necessary.

It is a fact that over the long term, investing in real estate is a great way to pay down debts, build income and secure your future -- If you buy right and plan well. Get the help you need, do your due diligence, and make sure you understand the terms of the deal.

Donna Robinson is a real estate investor, author, and consultant located in Atlanta Georgia. You may read more of her articles on her website at http://www.RealEstateInvestorHelp.com or you may contact her by email at drobinson@reihelp.com or call 404 542-9903.

Tags: real estate investing, real estate, mortgage lenders, mortgage financing, real estate financing

Private Property Rights and You

The recent ruling by the Supreme Court of the United States regarding private property and a governments right to confiscate it under the principal of "Eminent Domain" has many real estate owners and investors fearing for the future of private property ownership in America. In case you are not very familiar with what has happened as a result of this court ruling, let me quickly cover the high points.

In New London, Connecticut, the local city government was approached by a large private corporation, who wanted a certain piece of waterfront land upon which to build a new commercial facility. Since New London is economically depressed and needs more jobs and more tax revenue for the city, it was decided by the local government that this new project would be of "public benefit", and therefore it should proceed. Only one problem, a number of private houses were already located on this waterfront land. All but 6 homeowners agreed to the terms of a buyout that would take their houses and demolish them to make way for the new construction.

The remaining 6 owners have fought a long, expensive legal battle just for the right to stay in their homes.

The years-long court battle finally ended with the supreme court ruling in June of 2005. It was decided by the high court that governments have the authority to confiscate private property, including businesses, for any "public purpose", even if the "public purpose" is actually a private, for profit project. Through this ruling the court has broadened the definition of "public benefit" to include any project that can increase tax revenues. This has caused an outcry in the real estate community, over the definition of "Eminent Domain" and it's original intent and purpose.

But what is "Eminent Domain"? and How is it supposed to be used? Here is how my 10 year old real estate agents licensing manual defines "Eminent Domain" (also known as "Police Power"):

"The right of government to take ownership of privately held real estate regardless of the owners wishes. Land for schools, freeways, streets, parks, urban renewal, public housing, and other social and public purposes is obtained this way. Quasi-public organizations, such as utility companies or railroads are also permitted to obtain land needed for power lines, pipes and tracks..."

Note the reference in the above paragraph to urban renewal and public housing. Prior to the 1950's, even this purpose was not considered to be a "public benefit". Up until a 1950's supreme court ruling that allowed governments to take land from so called "slum lords" in the inner cites for urban renewal projects, only roads, parks, freeways, and other truly public uses were considered eligible for the confiscation of private property under the concept of Eminent Domain.

Now, we have another court making making the police powers of the state even broader. But is there really an issue here? Are we all going to lose our house or commercial property because of this ruling?

I think the real problem here is the slow erosion of our private property rights. Like water running through the grand canyon or wind sweeping across monument valley, everything appears to be normal and unchanging. But as with the erosion caused by rain and wind, over a period of years our property rights are slowly being eaten away, and replaced by a new mindset that says the government knows best what to do with all property located within its jurisdiction.

I don't expect anything sudden or dramatic to happen, but make no mistake about it, the erosion of your right to own property will continue. My biggest concern is that in another generation people will begin to lose the concept of private property ownership, and develop a mindset that the government knows best how to control everything.

Communist countries already live under the principal that the state knows best. In the old USSR, under socialism, people were assigned a place to live and a job to work. It was "efficient use of the states resources". Certainly communist China would agree that taking property for the good of all is efficient and makes planning and growth issues easier to deal with. After all, in China, the state has determined that it is in the "publics best interest" to allow each family only one or two children. If you exceed that number, well, it's in the public interest to exterminate those additional babies. So today in China, your children can be confiscated too. But not to worry, it is all in the publics best interest.

There is no power more dangerous to the concept of individual rights and private property ownership than a government in need of money. Add to that the growing belief that people should give up individual rights for the good of society as a whole. Heck, I can see how the city of Atlanta could find it useful and in the public interest to confiscate all the private property in the city and redistribute it so that all the homeless people can have a place to live. We can end homelessness right now if all of us investors who own inner city properties will just give them up so that they can be used to help those who are down on their luck. That would help us all right?

This probably won't happen next week, but give it 10 or 20 years. Once this kind of thinking takes hold and more local governments get into dire financial need, individual property owners will become the "bad guys" who are impeding progress and hindering the public good. Today it is the 6 homeowners in New London, Connecticut, tomorrow it might just be you or your children. Then, it will make "perfect sense" to eliminate private property ownership "for the public good".

Donna Robinson is a real estate investor, author, and consultant located in Atlanta Georgia. You may read more of her articles on her website at http://www.RealEstateInvestorHelp.com or you may contact her by email at drobinson@reihelp.com or call 404 542-9903.

Tags: real estate investing, real estate, mortgage lenders, mortgage financing, eminent domain

Own Or Rent A Home

Home buying is the biggest purchase any of us can make and the decision should not be made lightly. Buying a home is a costly, complex and time-consuming process so many opt to renting instead of owning. But if you’re planning to buy a home and have good reasons in mind, do considering the following before you make your decision.

Advantages

You can have a place “you can call your own”, therefore many strive for home ownership especially those thinking about starting a family. You will have more space for the family and you can do to it whatever you please to suit your taste and lifestyle. Owning a home can also be a great investment because houses usually increase in value over time. Plus the monthly mortgage can serve as a type of savings plan. While renters continually pay rent to a landlord without an opportunity to build up equity. The government also offers various tax rebates and deduction for home owners. Another advantage is that when you own a home, your credit rating goes up significantly as well, thus you can get better loans at a lower interest rate for your other future major purchase.

Disadvantages

You can expect to pay more as a home owner than you did as a renter, especially the first few years. Even when your monthly mortgage payment is lower than your rent, but you must pay property taxes, insurance, utilities and upkeep expenses. You’re also liable for any accidents, injuries and maintenance on your property, as well as any damage that is caused to your neighbor’s property if the causes come from you or your property. The mobility will also be decreased, as a home owner you can not move as easily as renters. If you’re expecting a move to a new location within the next year or two, put the home buying on hold for now. Also, remember your home loan needs to be paid on time, if not the lender may sell the mortgaged property. This is called “foreclosure” and can result in your losing your home, your investment and good credit rating.

Tags: real estate buying, first time home buyers, real estate trends, buying a home, mortgage financing

Learning to Listen - The Key to Better Negotiating Skills

Any experienced, successful investor will tell you that learning to listen to the seller is one of the most important skills you can develop. Many communication problems that arise during negotiations can be traced to poor listening skills. When negotiating with a seller it is your objective to determine their needs and wants.

Beginning investors tend to think of negotiating as trying to persuade a seller to do something, which requires you to talk. But it is very difficult to persuade someone when you don’t know what their motivation is. It is a documented fact that the most successful sales people are those who have the ability to uncover more of their clients needs. You will not discover the sellers needs if you do most of the talking.

One of the most common mistakes that occurs when negotiating is using your listening time to think about what you are going to say next. In his landmark book “The 7 Habits of Highly Effective People”, Steven Covey points out that most of us listen “autobiographically”, meaning we are not really listening to what the speaker is telling us. Instead our minds are busy forming what we will say next in response. This undermines your ability to analyze and understand where the speaker is coming from. It is also a difficult habit to become aware of and correct.

There are two major types of listening skills, Attentive and Interactive. The attentive listener is motivated to listen. Attentive listeners understand that the person who gets the most information from a seller will have the best chance for a successful negotiation. It is a good idea, prior to meeting with a seller, to determine what information you would like to uncover. Set some goals for specific areas that you want to try to gather information on. The more you can learn, the stronger your position will be.

Interactive listeners ask questions. The goal here is to refine the information you have received from attentive listening. Your questions should move from the broad to the narrow, as you attempt to bring the sellers needs into sharp focus. Being able to move seamlessly from attentive to interactve and back to attentive will greatly improve your negotiating results, and help you formulate offers that will be more appropriate for your seller.

Some basic interactive techniques for questioning a seller are as follows:

1. Clarifying: “Can you please clarify your comment about the mortgage?” This may get the seller to add more details than they might have intended.

2. Verifying: A very useful skill for being sure you heard what was actually intended by the seller. “As I understand it, you don’t need much cash up front. Is that correct?”

3. Reflecting: This is acknowledging or paraphrasing the seller’s statements with an empathetic tone. Reflecting can be a very effective way to get someone to open up and say more, where a direct question would result in an evasive answer.

To truly engage in reflective listening you must make no judgements and offer no opinions or solutions. For example, if a seller complains that the last investor who called made a ridiculous offer, you might respond, “It sounds like you were really upset by low monthly payment in that other offer”. This opens the door for the seller to comment further, and perhaps tell you just what they have in mind.

You should also watch for non-verbal hints as well. Body language, tone of voice, and the rate of speech can all be important clues to the sellers needs or intentions. A sellers words may communicate honesty or conviction, while their body language or tone of voice may reveal the opposite intentions.

Clearly the skills involved in negotiation and effective listening are very important for a successful real estate investing career. These skills take time and practice to learn and use effectively. A couple of books you may want to check out are “The 7 Habits of Highly Effective People”, by Steven Covey, and “It’s Negotiable”, by Peter B. Stark.

Donna Robinson is a real estate investor, author, and consultant located in Atlanta Georgia. You may read more of her articles on her website at http://www.RealEstateInvestorHelp.com or you may contact her by email at drobinson@reihelp.com or call 404 542-9903.

Tags: real estate investing, real estate, mortgage lenders, mortgage financing, real estate financing

Is The 50-Year Mortgage For You

During the past few weeks several mortgage lenders have announced that they will now offer 50-year mortgages. This is a curious idea, but not as curious as it could be: At the height of the real estate boom in Japan some homes were financed with 100-year mortgages.

The 30-year mortgage that is now the gold standard of American home finance was once virtually unknown. In the early part of the 20th century most mortgages in the U.S. were "term" loans, mortgages that lasted just five years. Since most of the debt could not be repaid in five years, at the end of the term owners would go out and get replacement five-year mortgages.

This system worked fairly well until the 1930s. Then the Depression drove down employment levels and shredded property values. In the west, the Dust Bowl impacted many states.

But then a new idea arose. The just-formed Federal Housing Administration (FHA) said it would guarantee the repayment of 20-year loans if borrowers would pay insurance fees. Private lenders followed with their own longer-term mortgages and the result was that term loans largely disappeared from the U.S. marketplace.

Over time the accepted definition of "long-term" financing changed from 20 years to 25 years and then to 30 years. Forty-year mortgages have been available since at least the 1980s.

What's the attraction of long-term loans?

Fixed-rate, long-term financing represents stability. If times are tough you don't have to worry about qualifying for a new loan. And if rates are fixed, then rising interest levels are not a concern.

But longer-term loans also have another value: They may allow borrowers to qualify for more financing.

Suppose we want to borrow $300,000 at 6.5 percent interest. With fixed-rate financing, the monthly costs for principal and interest would be as follows:

Monthly Mortgage Payments: Principal & Interest

15-years: $2,613.32

20-years: $2,236.72

25-years: $2,025.62

30-years: $1,896.20

40-years: $1,756.37

50-years: $1,691.15 The list above plainly shows that the longer the term, the lower the monthly cost for principal and interest. The practical advantage of longer monthly payments is that borrowers can obtain larger loans. Compared with 15-year financing, using a 50-year loan would reduce cash costs by more than $900 a month in our example.

Monthly payments are not the only consideration, however. Borrowers should also look at potential loan costs. Because longer-term loans are, well, longer, money is outstanding for a greater period of time than with 30-year financing. The result is that potential interest costs increase substantially with time.

Total Potential Interest:

15-years: $170,397.98

20-years: $236,812.66

25-years: $307,686.45

30-years: $382,633.47

40-years: $543,057.81

50-years: $714,690.40

The huge interest-costs over 50 years surely seem formidable, but is that really the case?

There are several issues to consider.

If you can buy an appreciating property then a long-term loan may be advantageous when compared to the alternative: No financing. If you cannot qualify for other loan products because the monthly cost is too high or for other reasons, then 40- and 50-year financing may be attractive.

If you get a fixed-rate mortgage you have protection against rising interest costs. In effect, a hedge.

If you expect your income to rise in the future, a longer-term loan may allow you to buy now instead of waiting until you have a larger paycheck -- or waiting until prices are higher.

If you have a fixed-rate mortgage and have the right to prepay, in whole or in part, at any time and without penalty, then you have two attractive options: First, as your income grows you can make monthly prepayments that reduce the loan term and cut potential interest costs. Second, if rates decline you can refinance -- an attractive choice given that loans today can often be refinanced without the need for much (or sometimes any) cash at closing. (That's not to say there is no cost to close, but that you can finance closing costs and thus avoid the need to come up with cash.)

This is the biggie: The potential cost over 50 years is not a worry if you only have the loan for five years, 10 years or whatever. Would I get a longer-term mortgage? Actually, I have.

Long ago I bought an investment property with a 40-year loan. Since then rental rates have increased and the property has long thrown off a positive cashflow each month. No less important, the value of the property has increased some 400 percent -- value I would not have if the property could not have been purchased.

So the next time someone mentions a longer-term loan, don't laugh. Check rates, terms and conditions; it may well be that a long-term loan is what you need to get the property you want with the income you have now.

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Peter G. Miller is a syndicated real estate and personal finance columnist who appears 70 newspapers.

Tags: 50 year mortgage, mortgage financing, mortgage trends

How to Structure a "Subject-to" Offer

Ok, let's say you have located a seller who is highly motivated to sell a particular property.

Using your "Check List for Leads" form, you ask the seller focused, specific questions about the most essential criteria of the deal. After questions are answered, you see the following scenario.

3 Bedroom 2.5 Bath
After Repair Value $260,000
Purchase Price: $195,000
(6.5% int, 30 yr fixed - price is sellers payoff on existing loan)
Repairs Zero – Seller had it fixed up already.
Existing Mortgage Payment: $1232.53 (existing payment P&I)
Taxes $2500
Insurance $900
PITI $1515.86 (your actual cost per month with Principal, Interest, Taxes and Insurance)

Keep property location in mind, when thinking of your exit strategy. If property is on a street that is predominantly rental, it may not be wise to plan to retail the property to an owner occupant. When you have a deadline such as a balloon or a note that will have to be paid off at some future point, like in 24 months, your exit strategy must be realistic. The seller is motivated and said that he would consider any offer that would get these payments off his back. He has a dead beat tenant in another property and can't make two payments. In this case, as with many "subject-to" offers, we are only offering the payoff, which is $195K.

The potential advantage of making an offer "subject-to" the existing mortgage is financial. You will not have to qualify for a new loan. You will save thousands in loan origination fees, points, etc. that you could have to pay in conjunction with a new loan. This improves your potential profit margin.

We decide we are willing to offer the seller his payoff, if he is willing to agree to sell, subject-to his existing loan. If the seller is truly motivated, the fact that you can close a "subject-to" very quickly can be a big selling point.

In our example, the seller agrees to the "subject-to" arrangement, but says that he wants this loan off his credit within 24 months. At that point, the buyer must cash the seller out by getting new financing or selling the property.

Some sellers will be smart enough to ask for "perks", like a cash down payment. Other sellers will be too motivated or won't think to ask for anything down. You have to go with the flow of each deal.

When we write a "subject-to" offer, we want to be as specific about our agreement and terms as possible.

The contract form that I use for writing offers has plenty of space on page one, near the blank where you enter the purchase price.

The form used is not important. To be binding, any offer to purchase real estate must be in writing. But there is no standard form. Contracts range from the generic variety that you can buy at the office supply store, to the official forms approved for use by sales agents in your state.

The form that licensed sales agents use, has a "stipulations" section. You can put the terms of your offer in the stipulations section of your contract, or on page one if space permits. It does not matter, as long as the correct terms are spelled out somewhere. The seller could decide to counter-offer, mark out your stipulations, change them, or add new ones.

Below are some clauses that I would write into this offer:

Purchase Price: $195,000 "Subject-to existing mortgage of $195,000, with payments of $1232.53 per month, principal and interest. Buyer agrees to pay off existing mortgage anytime in a period not to exceed 24 months from date of closing of this agreement." (these are the basic terms of our agreement)

"Buyer to purchase adequate insurance protection valued at or above the purchase price of property."

(you want to have insurance anyway, but I like to put this in to make the seller feel more comfortable)

You want to be clear about any and all terms of your agreement with seller. It may be very simple, as in the example above, or there could be other terms that you and the seller will negotiate and agree to.

When negotiating, you will not always be able to discuss terms with a seller prior to making an offer that is "subject-to" their existing mortgage. But, if the seller is not willing to discuss the situation and is not forthcoming with information, then chances are you are talking to the wrong seller. Those who are truly motivated, or have a problem they need to solve, will usually be willing to get into a meaningful discussion of the details. If a seller is difficult to deal with, chances are they are not that motivated.

I don't waste a lot of time in such cases. I explain to sellers that I need certain information in order to determine if there is a way that I can help them. Otherwise, I move on.

Your most likely source for creative deals are those who really need to achieve a specific, sometimes urgent objective, like getting out of debt, or avoiding foreclosure. But there are many reasons for doing a creative deal.

There is nothing really complicated about writing "subject-to" offers. You just need to be clear. It is essential that the language is not confusing. Your objective in writing the offer is to dictate the terms of the existing mortgage. In so doing, you are stating how much you are willing to pay, and how you intend to pay it, and when. Think of the "who", "what", "when", "where", guide to writing, when documenting the offer.

I have also done "subject-to" deals with sellers who were not in financial trouble, but just the opposite. There are sellers who will consider "subject-to" offers because of the tax benefits for them. I have had sellers who did not want to collect a large chunk of cash all at once. Or, a seller who does not want to collect the funds in a particular tax year. "Subject-to" offers can be used to address many different kinds of issues.

We tend to associate creative financing with desperation. And in many cases, sellers are desperate. But in some cases, a "subject-to" deal is merely the most beneficial means to an end for both parties.

Every situation and offer are different. Writing creative offers is a skill that you will develop with time and experience.***

NOTE: This article is intended only for general information purposes, and should not be construed as legal advice. If you need help filling out a real contract, please see your favorite real estate attorney first!

Donna Robinson is a real estate investor, author, and consultant located in Atlanta Georgia. You may read more of her articles on her website at http://www.RealEstateInvestorHelp.com or you may contact her by email at drobinson@reihelp.com or call 404 542-9903.

Tags: real estate investing, real estate, mortgage lenders, mortgage financing, real estate financing

How To Pick An Investing Strategy That Will Work

I often get email's from investors asking me how they can tell which real estate investing strategy is ideal in their city. From the perspective of a new investor it can often be difficult to decide what particular strategy you should use in a given area.

There are two essential ways to break down a real estate market for residential real estate investing. One is geographically and the other is demographically.

In the case of Geographics let's say we have an investor who lives in Cobb County, GA and he or she only wants to buy and sell properties in Cobb County. Since this investor has chosen to limit themselves to a specific geographic location, they will be limited to the deals (i.e. Strategies) that they find most readily available in Cobb County.

For example, if you are in a suburban area that has lots of new construction, you may find more retailing opportunities to owner occupants. You will also find some rentals and virtually nothing suitable for Wholesaling because everything is too new. And, the majority of properties in new areas have very little equity.

If you are in an older area such as inside the city of Atlanta where there are thousands of older properties and many fixer uppers, you are much more likely to find wholesale and rental property deals but relatively little new construction.

So when it comes to choosing a strategy, your choice will be dictated by the situation. Is there a lot of equity to work with? Perhaps wholesaling is the best choice. Is there very little equity to work with? And it's a pre-foreclosure too? Then a short sale might be the only way to make the deal work.

On the other hand many investors choose a strategy and then try to find a house that fits that strategy. For example if you want to be a real estate wholesaler, you have to go where the wholesale deals are.

This is what most professional wholesalers will do. They don't limit themselves to a small geographic area. They travel all over the metro area in order to find all the potential wholesale deals that they reasonably can. They may limit their territory somewhat, but generally they will cover a wide geographic area to find only the wholesale deals.

Their focus will be on contacting owners of older properties that are abandoned, or need lots of repairs. This is because these properties generally represent the best opportunity for lots of equity and a flexible seller.

If you are a wholesaler you don't want to waste your time contacting owners of 2 year-old houses with no equity.

Wholesalers who do this are using the demographic method. They are not looking in a particular location, they are looking for a particular type of seller.

Demographic prospecting means using more of a mass marketing technique, and targeting pre-foreclosures, health issues, job transfers, probate, divorce, and the whole range of life related events that can lead a person to become a motivated seller.

It is more common among professional investors to search for deals demographically rather than limit themselves to specific geographic locations. However this means you must have a willingness to drive sufficient distances to check leads. I personally have driven more than 200 miles in a single day, while viewing as many as 12 properties. At that point I was specifically looking for wholesale opportunities so I had to go where those opportunities were.

Had I wanted to stay close to home, which is located about 45 miles from downtown Atlanta, I would only pursue strategies that work with pretty houses, such as lease options, subject-to or buy and hold, because my geographic area is newer and therefore it contains very few wholesaling opportunities.

It can take you some time to get a feel for the types of deals that are most likely to be found in your area. If you are in an older area mostly built prior to 1970, then chances are very good that you would find more wholesaling opportunities.

If you live in a new area where most of the construction is less than 10 years old you would find more opportunities with less equity.

Retailing to owner occupants on a Lease with Option to Buy, is my personal favorite strategy in suburban neighborhoods that are predominately owner occupied. You can make that deal work at 80% LTV, instead of the 65% LTV you need for wholesaling.

So, one key to determining what strategy to use in what area is to look at the age and condition of the properties in that area and make offers that work for those properties.

In Atlanta, the outlying suburban areas are much more likely to be ideal for retailing, or buy and hold strategies. The in-town neighborhoods in the older parts of the city are better suited to strategies like wholesaling, because older houses tend to have more equity and need repairs.

Newer houses usually have less equity and therefore are better candidates for creative cash flow strategies, like "lease with option to buy", or "subject-to the existing mortgage".

Creative cash flow strategies may require less equity where Wholesaling strategies will require more equity in order for the numbers to work.

Any strategy only makes sense if the numbers work. Regardless of where you are located, and whether your market is "hot" or "cold", the bottom line is -- what will cost you? and, Can you sell it or rent it for more than it will cost?

Donna Robinson is a real estate investor, author, and consultant located in Atlanta Georgia. You may read more of her articles on her website at http://www.RealEstateInvestorHelp.com or you may contact her by email at drobinson@reihelp.com or call 404 542-9903.

Tags: real estate investing, real estate, mortgage lenders, mortgage financing, real estate financing

Home Equity Tips Understanding How Credit Scoring Works with Mortgage Loan Financing

Credit scores are a result of a calculated method creditors use to help establish credit risk and credit worthiness. Information about you and your credit transactions, such as your credit card paying history, the number accounts you have, and the type of accounts (ie. installment, revolving, etc.) Derogatory credit history is also a part of the credit scoring with reporting of late payments, collections, outstanding debt, and the age of your credit, is collected from your credit application and your credit report.

Using a statistical curriculum, creditors evaluate this information to the credit performance for people with comparable profiles. A credit scoring system awards points for each factor that helps forecast who is most likely to repay a debt. The total number of points for credit score will help predict how credit-worthy you are, and the likelihood that you will repay a loan and make the payments in a timely manner, as agreed.

Credit Score Relevance- Credit scores are based on real data and statistics, so it usually is more reliable than subjective or judgmental methods. It treats all applicants objectively. Judgmental methods typically rely on criteria that are not systematically tested and can vary when applied by different individuals.

Credit Scoring History- Years ago creditors sought to develop a system to evaluate consumer credit quickly without needing human intervention. According to the Federal Trade Commission, they developed criteria, where creditors choose a random sample of its customers or a sample of similar customers, if their sample is not large enough, and analyzes it statistically to identify characteristics that relate to creditworthiness. "These factors is assigned a weight based on how strong a predictor it is of who would be a good credit risk." Each creditor can use its own credit scoring model, various scoring models for various types of credit, or a standard model developed by a credit scoring company.

Establishing good credit scores will simply the process of buying or refinancing your home. You will benefit significantly from maintaining high credit scores, and be rewarded with the best possible interest rates for purchases, debt consolidation, and home equity loans. Making late payments and letting accounts go to collections will cause you to labeled as "bad credit" and will result in a low credit score that raises your risk factor and interest rates with mortgage lenders. If you want to freedom to use credit for financing home improvements, or buying an investment property, then establish your credit with a good payment history and you will secure prime credit.

Home Asset Or Debt Trap

Are you using the equity from your home to purchase everyday things? This is a dangerous trend growing more popular every month as millions of Americans tap into the value of their home to fund a lifestyle.

How many times have you heard the saying "Your home is the best investment you'll ever make"? How many times have you also heard that your home will be the most valuable asset you will ever own?

Both of these are as true, if not truer, today than at any time in the past. Unfortunately, spend happy Americans are looking at their home as just another type of ATM, and they are visiting it way to often. These homeowners are using money borrowed against their house to finance expensive vacations, new vehicles, even daily visits to the corner coffee shop.

Our parents wouldn't think of buying furniture with money borrowed against their home. So why is this form of borrowing becoming so popular? Three events have converged to create this dangerous trend.

1. Low interest rates. The past two or three years have seen interest rates unheard of since the 1950's. These low rates encourage people to think they have basically free money to spend however they want to.

2. Real estate value increases. The Office of Federal Housing Enterprise Oversight (OFHEO) reports that their data shows market value of the average home increased nearly 13% in 2004. That is more than any time in the last 25 years. Some areas saw the value of homes double in less than 5 years.

This increase in value is perceived by some people as being a bonus - they didn't have to work for the money, so it doesn't cost them anything. They are right about it not costing them anything, except they forgot that when they borrow money it has to be paid back. That is when the true cost of the debt appears!

The U.S. Department of Commerce reports in 2003 nearly half of the $8 trillion in outstanding mortgage debt was in new mortgage originations. This doesn't mean home equity loans are necessarily bad ideas. Using equity in your home to remodel and make additions can result in solid returns. Even debt consolidation can be a good choice, provided you have solved the problem that caused the debt in the first place.

3. Ease of borrowing. Twenty years ago, lenders wouldn't think of giving you a loan, even against your home, if it would cause your equity to become less than 20%. Some insisted in a percentage closer to 50% equity. Those days are long over.

Today you can go online and find a lender willing to give you a loan equal to 125% the value of your house! If you have a credit of repayment, hold a job, and are still breathing you can probably find a lender willing to let you borrow against your home equity.

The risk created by the convergence of these three factors is the loss of your safety net. As people buy homes at the top end of their range and base mortgages on two incomes something has to give. This "something" has been their savings. Putting aside part of each paycheck has become the low priority in the pile of demands barraging a family's income.

Data released by the Employee Benefit Research Institute reports nearly 45% of all workers hold assets of less than $25,000 (excluding their home). Barely 67% of today's workers are currently saving money in a 401(k) or some investment program, according to a Thrivent Financial Survey.

Does any of this sound familiar to you? The looming debt of mortgage, college, and credit card can seem overwhelming. How can you tip your financial life back into favoring a secure future for yourself and family?

Here are five steps to escape the home equity debt trap.

1. Keep track of expenses. Keep a spending record of everything you spend for one month. The next month, do it again, and the next month too, until you see areas of spending you can cut back and use that money to fund your lifestyle goals, i.e. vacation, college, or a new lawn mower.

2. Create realistic debt reduction goals. List all of your debts with interest rates, outstanding balances and minimum payments. Create a plan to pay down the debt, preferably pay the same set amount each month no matter what the minimums are. Anything extra you pay should go to the smallest debt first. When a credit card is paid off, get rid of it. Perhaps a small reward like a special meal when a goal is reached will help keep you motivated.

3. Preserve your home equity. Having home equity untapped in your house can provide a level of reassurance. Making wise uses of this equity will help you to not exhaust it. When you do tap into your home equity, make sure it is not used to pay for daily living.

4. Pay as little debt interest as possible. Consolidation of debts into low, or no interest loans i.e. credit cards, is acceptable as long as no new debt is acquired and you are paying down your debts each month.

5. Start saving regularly. A fund of money for emergencies will help avoid debt when life throws you a problem. If you consider saving a "non-optional" bill each month, you will develop the find habit of saving. The result is a growing asset base.

The end result of taking these five steps? A minimal-debt life spent living in an affordable home of your own.

Tags: home equity, mortgage financing, second mortgage, mortgage refinancing, debt consolidation

Freddie Mac Loan Investments Decrease Again

Freddie Mac's loan investment dropped for the second straight month in June. It fell to $722.2 billion for the month.

Freddie's total mortgage portfolio increased at an annualized rate of 8.9% year to date, increasing 10.3% for the month. The retained portfolio increased at an annualized rate of 3.4% year to date, but dropped at a rate of 1.4% for June.

The decline was due to loan paydowns, offsetting purchases and increased portfolio sales, which were at the highest levels in 3 years at $13.8 billion.

The debt-fund portfolio provides over 75% of Freddie's profit. It has become a hot debate topic in recent months.

Freddie Mac is the second-largest purchaser of residential mortgages. Both Freddie Mac and its rival, Fannie Mae, are under inquiry after making $15.8 billion in accounting errors since 2000.

The Office of Federal Housing Enterprise Oversight is considering limiting Freddie Mac's growth, much like Fannie Mae has had limits placed on its growth. The Bush administration contends that the high level of assets pose a systematic risk to the U.S. financial markets.

In anticipation of the limits, Freddie has sustained their debt in the $2.6 trillion agency debt market, which includes the Federal Home Loan Bank system and Farmer Mac.

Freddie Mac has announced that it plans to cut it's the outstanding reference debt, the largest and most frequently traded bonds.

"Even if Freddie Mac does not reach an agreement with OFHEO on portfolio growth limits this summer, we do not anticipate more than another $30 billion of portfolio growth the balance of this year," said Jim Vogel, head of agency research.

Up from the $15.7 billion purchased in May, Freddie has announced plans to purchase $19.1 billion in mortgage loans and securities for future settlement in June.

Martin Lukac represents http://www.RateEmpire.com and http://www.1AmericanFinancial.com, a finance web-company specializing in real estate and mortgage rates. We specialize in daily updates, mortgage news, rate predictions, mortgage rates and more. Find low home loan mortgage interest rates from hundreds of mortgage companies!

Tags: freddie mac, federal mortgage lending, mortgage trends, home finance, mortgage financing