Archive for Florida foreclosures
Price Reduction vs Seller Paid Concession
Posted by: | CommentsWhich Has More Value, A Price Reduction Or Seller Paid Concession?
When looking to purchase a home with a Fort Lauderdale mortgage, is it more advantageous to the buyer to seek a price reduction in the home or to pay more and receive a seller paid concession? As a Fort Lauderdale mortgage broker, I’m always surprised this question is not only asked more frequently, but hardly considered at all by most Fort Lauderdale Realtors or their buyers.
Most transactions that include seller paid incentives are typically used to pay buyer’s closing costs. The most effective use of seller paid concessions is actually using the incentives to lower the buyer’s interest rate. A Fort Lauderdale mortgage structured with the seller paying points to lower the buyer’s interest rate will greatly out-perform a similar price reduction on the property.
This point is best illustrated by examining an actual case study I recently evaluated for a potential prospect. It involved the purchase of a Fort Lauderdale foreclosure financed with a Conventional Fort Lauderdale mortgage. The asking price of the property was $400,000. The buyer wanted to evaluate whether he would be better served to offer the asking price of $400,000 and request a 3% seller concession, or lower his offer to $388,000 with no concession?
The table below will illustrate the comparison of lowering the offer price by 3% or $12,000 vs. using the $12,000 to buy down the interest rate on a 30 year fixed rate Fort Lauderdale mortgage. Column 1 shows paying asking price with 3% incentive and making required monthly payment ($1574.21). Column 2 shows paying asking price with 3% incentive and prepaying the $68.45 savings every month (same payment as price reduction). Column 3 shows reducing the offer price by 3% ($12,000) and receiving no seller incentive. The results are as follows:
List Price–no prepayment List Price–with prepayment Price Reduction
Sales price $400,000 $400,000 $388,000
Loan Amount $320,000 $320,000 $310,400
Interest Rate 4.25% 4.25% 4.875%
Payment $1574.21 $1574.21 $1642.66
Payment Savings $68.45 $68.45 $0
Total Payments $566,713 $566,713 $591,359
Total Interest $246,713 $224,209 $280,959
Interest Savings $34,246 $56,750 $0
The results of this case study show that it is clearly more advantageous for a buyer using a Fort Lauderdale mortgage to seek a seller concession vs. a price reduction when purchasing a home. Paying $12,000 more for the home actually saved the buyer $34,246 in interest expense and $24,646 in total monthly payments using the normal amortization. If the buyer re-invested the $68.45 monthly payment savings back into the mortgage, the interest savings increases to $56,750.
If that’s not convincing enough, then here’s the frosting on the cake. A Fort Lauderdale mortgage using a seller paid concession to buy down the interest rate is considered by the IRS as prepaid interest. As such, the buyer is eligible to deduct the points paid by the seller on their tax return. Therefore, if the buyer is in a 28% tax rate, they have created an additional $3,360 tax break for themselves on top of the interest and payment savings.
Turbo-charge your Fort Lauderdale mortgage with a seller paid concession instead of seeking a price reduction. As a professional Fort Lauderdale mortgage broker, I can show you how this strategy can save you money as a buyer or help you sell more homes as a Fort Lauderdale Realtor.
Call Harvey Collier at First Trust Mortgage today to see how much you can save by using this buyer strategy.
Fannie Mae HomePath Loans Rock!
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Looking For A Great Deal On A Florida Foreclosure?
One of the best choices you could make to purchase and finance a Florida foreclosure is the Fannie Mae HomePath program. Fannie Mae markets their own Florida foreclosures using the HomePath brand name. You can access these listings through your local Real Estate Agent, or directly at the Fannie Mae HomePath website located at: www.HomePath.com .
Fannie Mae HomePath properties are also eligible for special HomePath Financing that can add even more value to your Florida foreclosure purchase. HomePath financing has several advantages over a traditional Florida home loan:
- Buyers using special HomePath financing can purchase a home with as little as 3% down.
- Unlike traditional Fannie Mae Conventional financing or FHA financing, a low down payment HomePath mortgage doesn’t require “mortgage insurance”.
- Fannie Mae HomePath Financing can be used to purchase an investment property with only 15% down.
- A Fannie Mae HomePath property and mortgage doesn’t require a property appraisal.
- HomePath Financing allows for a 6% seller concession, while Fannie Mae Conventional financing only allows 3% on loans with less than 20% down. Currently, FHA financing allows for 6%, but that is likely to change to 3% in the near future.
If you want to repair, upgrade, or remodel your HomePath foreclosure, certain properties have been designated to be eligible for a Fannie Mae HomePath Renovation Loan. This special Florida home loan allows a buyer to purchase a HomePath foreclosure and finance the renovation into their mortgage. Properties that are eligible for HomePath Renovation Financing feature the “Renovation Logo” above on Fannie Mae’s website.
The Fannie Mae HomePath program is a perfect one/two punch to get a terrific deal on a Florida foreclosure and finance it with the perfect Florida home loan.
Harvey Collier and First Trust Mortgage are approved Fannie Mae HomePath lenders. Contact Harvey Collier today with all your HomePath inquiries.
Impact Of A Florida Foreclosure On Your Credit Score
Posted by: | CommentsHow will a Florida Foreclosure or Short-sale affect your credit report?
Home owners contemplating a short-sale or Florida foreclosure frequently ask how the decision might impact their credit score and overall credit report. For those faced with no other option, the decision to give up your home probably means you’re not making your auto and credit card payments either. Those in this position will take a severe hit to their credit score and ability to obtain credit in the future. It will be a rebuilding process that will take several years and careful planning.
A second group of home owners are faced with an investment property they speculated on and are now upside down on their mortgage with no prospect of getting back to even any time soon. Yet, another group are home owners that bought a primary residence during the peak of the market and are now upside down with little prospect of recovery in the foreseeable future. Many of these home owners now find themselves faced by what is being referred to as a “business decision”. The question here is, “What is the cost of continuing to make the payments until the housing market recovers versus walking away from the property?” Most home owners can make an educated guess how long it will take for the market to recover and do the math to calculate the financial loss. But, how will the credit report and credit score consequences affect their future going forward?
Anyone contemplating a short-sale or Florida foreclosure, whether it’s an investment property or your primary residence needs to know:
- A Florida foreclosure or short-sale will remain on your credit report for seven years.
- The impact of a Florida foreclosure or short-sale will lessen over time.
- A Florida foreclosure or short-sale is a single negative item on your credit report.
- Limiting the damage to your credit report to only the Florida foreclosure or short-sale will lessen the damage to your credit score.
- Limiting a Florida foreclosure or short-sale to a single negative item can allow you to regain your credit score in as little as two years.
Another common question many home owners ask is “Does it make a difference on your credit report or to your credit score if you do an alternative to foreclosure, such as, a short-sale or deed-in-lieu of foreclosure?” The credit bureaus evaluate all of these options as “not paid as agreed accounts” and consider them the same for your credit score. When a home owner is considering bankruptcy as an alternative to foreclosure, that will have an even greater impact on your credit score.
So, how much of an impact will a Florida foreclosure or short-sale have on your credit score?
- Those with a 780 or higher credit score can expect a Florida foreclosure or short-sale to lower their credit score about 150 points.
- Those with a 680 credit score can expect their credit score to drop by 100 points.
- Those with a 780 credit score that add a bankruptcy to the Florida foreclosure or short-sale could lower their credit score by 230 points.
- Those with a 680 credit score that add a bankruptcy to the Florida foreclosure or short-sale may lower their credit score by 150 points.
The key to minimizing the damage to your credit report and credit score is to make sure that your “business decision” is held to a single negative item. However, be aware that you will be unable to qualify for another mortgage for a minimum of 2-3 years after the Florida foreclosure or short-sale action.
Florida Foreclosures + FHA 203k Loan = Marriage Made In Heaven
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An FHA 203k Loan Can Make Florida Foreclosures Your Dream Home
Getting a great deal on a Florida foreclosures isn’t always as easy as you may think. The best values on Florida foreclosures are usually the Florida homes that are in less than perfect condition to really distressed. Many Florida foreclosures haven’t had any maintenance for a couple of years and need some work to major renovation to become habitable again.
It’s not unusual for Florida foreclosures to need a new roof, plumbing or electrical repairs, structural repair or even kitchen and bathroom replacement. Frequently, disgruntled home owners damage the home in anger on the way out-the-door. Others rip out kitchen cabinets, bathroom fixtures, A/C units, water heaters and anything else they can take with them to reuse or sell. Florida foreclosures in this shape, require all cash buyers, as no lender will make a loan on a property that poses a health or safety risk.
Now, you can level the playing field with an FHA 203k Renovation Loan. This Florida home loan is a great solution for those buying Florida foreclosures and needing financing to renovate their Florida homes. An FHA 203k Renovation loan allows a buyer to purchase Florida foreclosures and get a Florida home loan that will finance the necessary repairs, renovations, or even add-on to their home.
Home Buyers looking for a great deal on Florida foreclosures, should consider an FHA 203k Renovation loan. Imagine, finding that perfect “diamond in the rough”, and turning it into a brilliant gem. An FHA 203k loan and a little imagination can make Florida foreclosures a terrific value and choice with only a 3.5% down payment required. You might just find Florida foreclosures + an FHA 203k loan = a marriage made in heaven.
Contact Fort Lauderdale mortgage broker, Harvey Collier, for all your FHA 203k Renovation loan needs.
