Senate passes FHA subprime help

Fri Dec 14 17:42:48 UTC 2007 WASHINGTON (Reuters) - The Senate on Friday overwhelmingly passed legislation that would expand the nation's largest federal homeownership program in a move that could help struggling subprime borrowers avoid foreclosure. The bill would loosen underwriting standards at the Federal Housing Administration so that the program can help 200,000 troubled borrowers save their homes, according to the overseers of the program. The FHA is a Depression-era program conceived in 1934 that was designed to insure the mortgage payments of low-income borrowers who might have trouble winning a loan. The U.S. House of Representatives has already passed its version of FHA reform, and now lawmakers will take the two versions of the bill to a conference where differences are worked out. The bill will then be presented to U.S. President George W. Bush to be signed into law. Supporters of reform have said the program can be retooled to save hundreds of thousands of borrowers from foreclosure as the current mortgage crisis takes hold. "HUD's Federal Housing Administration can provide many homeowners with a fairer, more affordable, and more sustainable alternative to costly subprime loans," Department of Housing and Urban Development Alphonso Jackson said in a prepared statement. As envisioned, the FHA reform legislation would raise the current loan limit from $362,000 to at least $417,000, which is the same cap on loans that binds mortgage finance companies Fannie Mae and Freddie Mac. The final vote was 93 lawmakers in favor and one against.

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Passage of FHA Reforms

Not long ago, FHA lending was just another government-sponsored program unworthy of political attention or media limelight. Now, with no less than three new reform initiatives, FHA is generating excitement, confusion, speculation, and even venom for political pundits and the media.

Fixing Broken ARMs
FHASecure is a new federally-insured (temporary) lending program announced by President Bush on August 31, 2007, and released to FHA-approved lenders on September 4. Qualified homeowners seeking payment relief from their adjustable rate mortgage (ARM) may be able to use FHASecure to restructure their loan into a more stable, fixed-rate program, even if they are already delinquent on payments. "Risk Based" fee schedules, which are to be released shortly, will help price these loans appropriately.

Do You Qualify?

To qualify for an FHASecure loan, borrowers must meet the following five criteria:

1. A history of on-time mortgage payments before the borrower's teaser rate expired and loan reset;
2. 3% equity in the home; or cash to compensate (see your mortgage professional to find out about other methods of meeting this requirement);
3. A sustained history of employment;
4. Sufficient income to make the mortgage payment; and
5. The loan application must be signed no later than December 31, 2008.

Even if you do not meet these criteria, you should still contact a qualified mortgage professional because he or she can often provide you with other resources to help overcome your current challenges and reach your financial goals.

The House Takes Initiative

Last month, the House overwhelmingly passed FHA reform bill HR 1852 (The Expanding American Homeownership Act of 2007). The next step is the Senate where a vote is expected within the next few months.

As the bill stands now, there are a number of significant changes that could dramatically impact home lending, including making FHA loan limits as high as $729,750 in high-cost areas, such as California and Florida. It's uncertain if the Bush administration will support the bill in its current form, but it has several features that could easily reshape FHA lending as we know it.

What could this legislation mean for borrowers in the future, if this initiative is to pass in its current state:

• Lower Down Payments: Authorizes zero and lower down-payment loans for borrowers who can afford mortgage payments but lack the cash for a required down payment. (In fact, options are now available which may help to expand or stabilize certain programs for those who have little to no cash.)
  
  
• Subprime Borrowers: Directs FHA to provide mortgage loans to higher risk (but qualified) borrowers without authorizing unnecessary fee hikes on such borrowers.
  
  
• Reverse Mortgages: Enhances the FHA reverse mortgage loan program to help seniors pay for health and other expenses by removing the loan cap to avoid program shutdowns, raising loan limits, and reducing the maximum fee lenders can charge for these loans.
  
  
• Multifamily Loans: Raises FHA multifamily loan limits so these loans can fully fund construction costs in high-cost areas, and enhances sale of foreclosed FHA rental housing loans to localities so that affordable housing can be maintained in local communities.
  
  
• Higher Loan Limits: Raises the FHA loan limit in each area to the lower of (a) 125% of the local area median home price or (b) 175% of the national conforming loan limit.

Senate's Blueprint for Reform

Read twice and approved by a Senate banking panel on September 19, this is the Senate's version of FHA reform. Again, further steps are necessary before this initiative is to become law. Following are some issues that the legislation is attempting to address:

• Increase loan limits across the board;
• Reduce down payment requirements;
• Simplify FHA requirements for condominiums and housing co-ops;
• Expand reverse mortgage programs;
• Enhance home buyer counseling before and after purchase;
• Establish alternative credit scoring pilot program;
• Enhance fraud protection;

Bottom line

By updating and expanding FHA, lawmakers are clearly invested in removing some of the current limitations in FHA lending. All politics aside, this new flexibility will likely help many homeowners.

Home buyers, home sellers, ARMs holders, and other borrowers looking to refinance, don't allow yourself to be overwhelmed by all of the information surrounding these initiatives. These are the facts. Print out a copy of this article and call your mortgage specialist today. Find out what opportunities are available to help you meet your financial goals.

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House Passes Comprehensive FHA Reform

Washington, DC - The U.S. House of Representatives today overwhelmingly passed H.R. 1852, the "Expanding American Homeownership Act of 2007," which will revitalize the Federal Housing Administration (FHA), a federally insured loan program that for over 60 years has been a reliable source of affordable fixed rate mortgage loans, especially for first-time homebuyers. 

 

The measure, originally introduced by Representative Maxine Waters, Chairwoman of the Subcommittee on Housing and Community Opportunity, and Barney Frank, Chairman of the Financial Services Committee, will enable FHA to serve more subprime borrowers at affordable rates and terms, recapture borrowers that have turned to predatory loans in recent years, and offer refinancing loan opportunities to borrowers struggling to meet their mortgage payments in the midst of the current turbulent mortgage markets.

 

"There is an affordable housing crisis in America.  In recent months, that crisis has exploded beyond the poorest renters and homeowners, to threaten the domestic economy.  H.R. 1852 is a necessary step in walking us back from the brink and in the direction of meeting the housing needs of all Americans," said Chairwoman Waters.

 

            "A revitalized FHA program will help future homeowners realize the dream of home ownership, and will prevent many first time and inexperienced home buyers from being pushed into loans that are unaffordable or difficult to understand," said Chairman Frank.  "The bill we passed today will help people all across America because we have enacted provisions to allow the FHA to insure loans in high cost areas."

 

Specifically, the bill includes the following important provisions:

 

    Lower Down Payments.  Authorizes zero and lower down payment loans for borrowers that can afford mortgage payments, but lack the cash for a required down payment.

 

    Housing Counseling.  Authorizes more than double the current funding level for housing counseling, to help subprime homebuyers and borrowers late on mortgage loan payments.

 

    Subprime borrowers.  Directs FHA to provide mortgage loans to higher risk (but qualified) borrowers, without authorizing unnecessary fee hikes on such borrowers.
Reverse Mortgages.  Enhances the FHA reverse mortgage loan program to help seniors pay for health and other expenses, by removing the loan cap to avoid program shutdowns, raising loan limits, and by reducing the maximum fee lenders can charge for these loans.

 

    Multifamily Loans. Raises FHA multifamily loan limits, so these loans can fully fund construction costs in high cost areas, and enhances sale of foreclosed FHA rental housing loans to localities, so that affordable housing can be maintained in local communities.

 

    Affordable Housing Fund.  Authorizes up to $300 million a year from the bill's excess profits for affordable housing, instead of returning such funds to the General Treasury.

 

    Higher Loan Limits.  Adopts the Frank/Miller/Cardoza amendment that would raise FHA single family loan limits, which now bar loans above 95% of the median home price in each local area and shut FHA out of higher cost home markets.  The amendment raises the FHA loan limit in each area to the lower of (a) 125% of the local area median home price or (b) 175% of the national GSE conforming loan limit.  The amendment also retains the bill's provision for a nationwide FHA loan floor of 65% of the GSE conforming loan limit, and gives HUD authority to raise these loan limit amounts by up to $100,000 "if market conditions warrant." 
 

In addition, the House adopted an amendment to the bill to direct FHA to make available refinancing loans to existing qualified homeowners who are in default or at risk of default due to rate resets or mortgage market conditions, and to authorize lower down payments for such purpose.  The amendment also includes provisions to address problems arising from inflated appraisals.

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Newest and Hottest Real Estate Organization to Come Along in Many Years

How FHA Could Help BorrowersRefinance and Avoid Foreclosure

By Deborah Solomon From The Wall Street Journal Online

As the subprime-mortgage crisis ripples through the broader housing market, the Bush administration is eyeing an often overlooked federal mortgage insurer to help low- and middle-income homeowners avoid foreclosure.

President Bush has balked at allowing mortgage giants Fannie Mae and Freddie Mac to buy more mortgages for their portfolios to ease the credit crunch triggered by rising defaults on home loans to borrowers with poor credit. But he said earlier this month that he supports giving the Federal Housing Administration more flexibility to help those facing foreclosure refinance their homes.

• What's Happening:

The Bush administration is eyeing the Federal Housing Administration, an often-overlooked federal mortgage insurer, to help low- and middle-income homeowners avoid foreclosure.

• How It Would Work:

The FHA could offer refinancing options to homeowners, including those who aren't yet in default, but who risk falling behind on payments that jump when rates are reset.

• What Needs to Happen First:

The effort is likely to jump-start legislation in Congress to give the housing authority more tools to assist homeowners. Senate Banking Chairman Christopher Dodd said recently that FHA reform will be among his top priorities, and a bill passed by committee is set to head to the full House this fall.

Treasury Secretary Henry Paulson, meanwhile, has instructed staff to work with the Housing and Urban Development department, which oversees FHA, to find ways to help individuals caught in the fallout of the credit crunch.

The administration is looking to FHA to offer refinancing options to homeowners, including those who aren't yet in default or foreclosure, but who are at risk of falling behind in their payments on mortgages that were structured to offer payments that were very low at first but then escalated.

The effort is likely to jump-start legislation in Congress to give the housing authority more tools to assist homeowners. Senate Banking Chairman Christopher Dodd (D., Conn.), said recently that FHA reform will be among his top priorities when Congress returns from its August recess. The House Financial Services Committee passed a bill in June that is expected to head to the full House this fall.

For decades, the New Deal-era agency was used by low- and middle-income home buyers who had little or poor credit and would have trouble getting a loan in the primary market. The FHA didn't originate loans, but insured them against default by somewhat risky buyers, giving lenders an incentive to issue a mortgage.

In recent years, the agency lost market share as the market for subprime loans exploded and home buyers of all income levels were offered a range of exotic loan products, such as no-money-down mortgages and interest-only payments. While FHA-insured loans once accounted for roughly 15% of the mortgage market, that number has fallen below 5%.

But many buyers who got subprime loans are beginning to have trouble making their mortgage payments as the attractive initial "teaser" interest rates are reset at much higher levels. While many of those buyers believed they could refinance their loans, that has become much harder as mortgage lenders tighten their standards in the face of defaults and foreclosures. The Center for Responsible Lending estimates as many as 2.2 million loans will reset over the next two years.

FHA says it is constrained from doing more now because of limits on the size of the loans it can back and some requirements that borrowers must meet. While its refinancing business has picked up and the agency expects to refinance about 120,000 loans this year, FHA officials say they could easily double that amount if given greater flexibility.

Among the options being discussed in Congress is eliminating or reducing the required 3% down payment, raising the size of the loans FHA can insure to as much as $417,000 from $362,790, and being able to charge insurance premiums based on a borrower's risk instead of a one-size-fits-all rate.

Federal Housing Commissioner Brian Montgomery said the current rules effectively prevent FHA from helping borrowers in high-cost states, such as California and New York. Most of the loans it insures are in places such as Texas and the Midwest.

For the Bush administration, backing FHA reform offers a way to straddle the growing calls for government assistance to those caught in the subprime mess without advocating a financial bailout.

Fannie and Freddie, backed by a host of Democratic lawmakers, have argued they could provide liquidity to the rattled housing market if allowed to grow their portfolios beyond strict limits.

Their portfolios are capped in part because of accounting scandals at the government-sponsored entities and Mr. Bush has said Congress should pass long-awaited reforms that would tighten oversight of Fannie and Freddie before allowing them to grow.

Today's Rates

30 yr fixed mtg 6.17%
30 yr fixed jumbo mtg 7.13%
15 yr fixed mtg 5.79%
$30K home equity loan 8.47%
7/1 ARM 6.27%
$30K HELOC 7.96%

Still, an administration official said the government is sensitive to the need to help minimize "collateral damage" from the subprime woes, such as massive foreclosures that could hit certain neighborhoods hard and affect property values broadly. To that end, Treasury and HUD are looking to find ways to assist borrowers who are creditworthy, but who got caught in a pinch and are facing higher mortgage payments than they can afford.

One challenge for the administration is trying to identify borrowers who are likely to get hit with a change in their loan payment -- known as a reset -- that could force them to default on their mortgage, and then figuring out ways to help them refinance. Among the possible options are for government agencies such as FHA or Fannie Mae and Freddie Mac to refinance some of those loans at a lower interest rate.

But not everyone is convinced, and FHA reform may run into trouble in the Senate. Alabama Sen. Richard Shelby, the ranking Republican on the Senate Banking Committee, has expressed concern about expanding FHA, saying it could ultimately hurt taxpayers.

"One lesson learned from the current pattern of defaults and delinquencies in the subprime market is that those borrowers with little or no equity in their home will be the most likely to fail," he said at a hearing last month. "We must approach any attempt to expand the program or lower the program's standards with great caution."

About Credit Scores....

Question: You always seem to be advising readers with poor or just OK credit on how to boost their credit scores. What if a person has no credit-card debt, no bad marks on their credit report, no other debt besides car and house, and a credit score of 769? How do I get my credit score into the 800s?

Answer: A score of 769 is extremely good. Congratulations, you obviously know how to handle credit. But to try to push your score to 800 and beyond would be sweating the small stuff. A core of 800-plus won't get you a lower rate or better terms than you can obtain with a 769, so why bother? In the words of a famous Chicagoan, forgetaboutit.

Q: My credit score hovers just below 800, and I have been trying to figure out what to do to get it over 800 simply as point of personal pride. It won't make any difference on my rates, just in how I rate myself.

A: The scoring programs are so intricate -- and somewhat different for each of the major credit depositories -- that it is impossible for me and anyone else to give this kind of advice without first seeing your score and the explanation codes that go along with it. The key lies in the explanation of why you may not have scored as well as you could. Once you see what the program has to say, go from there.

But honestly, you are really wasting your time. A credit score is based on a snapshot of your credit record on a particular day and hour. Since the information in your file changes on at least a monthly basis -- and possibly more frequently -- a small move this week could be offset by something next week.

Therefore, I say take pride in your almost 800 and leave it at that. You are one of the few, the brave, the mighty!

Q: I have been seeing a Countrywide ad on TV in which it is advertised that the borrower pays no closing costs, appraisal and other costs associated with the refinance of a home. Normally this would amount to about $4,500. Of course, this is offered through its retail branches only. Are they servicing the loan until their "costs" are recaptured? Or are they limiting this offer to someone with a 750 credit score (exaggeration intended) and then offering a client with 749 or below a different loan at a much higher rate with "some" closing costs? Smoke and mirrors or bait and switch. Either way, it seems too good to be true.

A: Many lenders offer "no cost" products to prompt homeowners to consider whether a change in their current financing makes sense. In some cases, the costs you mention -- appraisal, etc. -- are covered by charging a somewhat higher rate. In other cases, the lender requires, as you suggest, that the loan be kept in force for a certain period of time. Otherwise, a prepayment penalty is charged so that the lender can recoup all or some of the cost involved in originating the loan.

However, the big guys like Countrywide can and often do offer true "no cost" loans in the hopes that they will be able to cross-sell other, more lucrative products to new customers. In this case, no-cost loans could be considered a loss-leader to get folks in the door.

At least two other large institutions, Bank of America and Washington Mutual, also offer no-cost loans -- no origination fee, annual fee, mortgage insurance or closing fees.

Under WaMu's new Mortgage Plus product, the Seattle-based lender says it will waive more than 30 fees for the borrower, though the specific number depends on the state. It will pay closing fees, which are those associated with the loan. But mortgage taxes, transfer fees and other state and county levies are still the borrower's responsibility.

How can they do it? Either these giant lenders have volume deals with settlement providers or they have people on their staff who do the chores other lenders pay outside vendors to do.

That said, it still behooves a would-be borrower to consider several loan choices before deciding. Depending on how long a borrower plans to stay with the mortgage, it may be less expensive to pay the fees out of pocket or to roll them into the loan principal. As always, take a paper to pencil and figure out the differences.

In fact, Countrywide recently launched a broad national initiative designed to educate mortgage consumers about the fact that they have many options available to them regarding how certain costs are paid when refinancing or obtaining a home loan, no matter which mortgage lender they choose. One of their key messages is that while a no-cost loan may be right for some, it isn't necessarily the best choice for every borrower.

"People clearly understand that there will be costs when they finance a home," said Dan Hanson, managing director of Countrywide. "Home buyers look to us for information, so we've decided to recommit ourselves to educating people about the cost options that work best for their unique situations.

By presenting our customers with a menu of options, they can make an informed choice that's right for them now and into the future. The best choice in the long run isn't necessarily the one with the least out-of-pocket costs, but rather the one that brings the best total value over the life of the loan." Read about borrowers angry at Countrywide.

Nationally syndicated columnist Lew Sichelman has been covering the housing market for 35 years. Because of the volume of mail he receives, he cannot answer individual questions, nor can all questions be answered in this space. E-mail lsichelman@aol.com

My living trust became nearly worthless

Homeowner makes big mistake after refinancing

By Robert J. Bruss Inman News

Nobody, including me, likes to think about death. But it is inevitable, as I was reminded during a recent hospitalization for major surgery. Thankfully, because of the excellent surgeons, nurses and my friends, I came through the experience successfully.

After I recovered, I learned from the doctors I had been very close to death. When I got home and was feeling better, one of the first things I did was review my estate plan.
Purchase Bob Bruss reports online.

In the process, I discovered my old living trust had become nearly worthless. The primary reason was, like most real estate owners, in the last few years I refinanced my properties to take advantage of lower mortgage interest rates. As part of the process, the lenders required me to take my property titles out of my living trust, record the new mortgages, and then put the titles back into my living trust.

But I carelessly didn't follow up and the title companies failed to re-deed my properties back into my living trust. The result was my living trust had become virtually empty because it was "unfunded." If I could make that mistake, think of how many other homeowners and realty investors also have worthless, empty living trusts.

Especially because I wanted to revise my estate plan and change my beneficiaries, I decided to hire a trusts and estates attorney. The total cost, including recording fees, was about $1,300. That is far less than the 3 to 10 percent of gross assets it costs to probate a typical estate.

Frankly, although I am an attorney and could prepare my own living trust to avoid probate costs and delays, I'm glad I hired another attorney.

Among the extra improvements he suggested were (1) a durable power of attorney for lifetime asset management (in case I become unable to manage my assets); (2) a "living will" (also called an advanced health care directive) so the designated person can make health care decisions, such as taking me off life support if there is no reasonable hope for recovery; and (3) a "pour-over will" for any assets omitted from my new living trust. The attorney also made certain all my property titles were correctly transferred to fund my living trust.

EVERYBODY NEEDS A WILL. Shockingly, less than 20 percent of U.S. residents have a written will. For those who have a will, after they die their assets will be distributed according to their wills by the local Probate Court. Probating an estate, even a modest one, usually takes six to 18 months or longer before the heirs can receive their inheritances.

For individuals who die without a written will, the state law of intestate succession determines who will receive their assets. Especially in second marriages, the result is often not what the decedent would have wanted. Again, the local probate court supervises intestate succession distribution, subject to costs and delays.

However, if no written will and no relatives can be found, a person's assets "escheat" to the state. That means the probate court will sell the assets and deposit the proceeds into the state treasury. That is not the result most people want.

HOW TO AVOID PROBATE. Even if you have a written will, it usually won't avoid probate costs and delays. Well-known methods of probate court avoidance include holding real estate titles in joint tenancy with right of survivorship (or as tenants by the entireties between husband and wife) and holding bank accounts or stock brokerage accounts with "payable upon death" designations.

But all these methods have major drawbacks, especially when two or more persons own an asset but one becomes incapacitated such as by Alzheimer's disease, a coma or a severe stroke.

A better alternative to avoid probate costs and delays for most individuals is a revocable living trust. This is simply a method of holding title to major assets, such as a home, investment property, bank accounts, common stocks, mutual funds, and other major assets.

When a living-trust grantor creates a living trust, he is its initial trustor, trustee and beneficiary. That means he can buy, sell, refinance and manage the assets as before.

However, if he becomes incapacitated, then the named successor trustee, such as a spouse or adult child, takes over management and can even sell the assets if necessary. There is no necessity to have a conservator appointed by the probate court. Husband and wife can either have individual living trusts or a joint living trust.

After a living-trust grantor dies, the successor trustee then distributes the living-trust assets to the individuals and/or charities named in the document. The local probate court does not become involved, so distribution usually is completed within six months.

ADVANTAGES OF LIVING TRUSTS. Among the many advantages of a revocable living trust are (1) easy amendments or revocation as desired by the trustor; (2) ownership benefits remain unchanged, including income-tax deductions and the principal-residence-sale tax exemption; (3) avoidance of multistate probates if real estate is owned in more than one state; (4) privacy because living trusts do not become public, as do written wills filed for probate; (5) the successor trustee manages the living-trust assets if the trustor becomes incapacitated; and (6) the successor trustee distributes the assets after the grantor's death.

DISADVANTAGES OF LIVING TRUSTS. Among the few disadvantages of revocable living trusts are (1) no statutory period to limit creditor claims (as occurs in probate court); (2) the cost and inconvenience of "funding" the living trust (usually far less than the cost of probating an estate); (3) when refinancing mortgages, lenders usually require taking real estate out of the living trust for a moment while the mortgage papers are signed and recorded; and (4) a living-trust trustor needs a "pour-over will" or a "back-up will" for any assets that were not included in the living trust.

SUMMARY: Revocable living trusts offer many advantages and few disadvantages to avoid probate costs and delays for heirs as well as conservatorship during the grantor's lifetime.

By avoiding involvement of the local probate court, living-trust beneficiaries usually receive their assets within six months after the decedent's death.

More details are in my new special report, "Pros and Cons of Living Trusts to Avoid Conservatorship and Probate Costs and Delays for Your Heirs," available for $5 from Robert Bruss, 251 Park Road, Burlingame, Calif., 94010, or by credit card at 1-800-736-1736 or instant Internet delivery at http://www.bobbruss.com/.

(For more information on Bob Bruss publications, visit his Real Estate Center

Can You Afford A Home?

The time has come to buy a house. Questions buzz around in your head like a swarm of angry bees: “How much can I borrow? How much do I have to put down? How much will my payments be?” Well, let me suggest starting with the “How much can I borrow?” question.

I know you should never answer a question with a question, but in this case we need to ask a few more questions in order to figure out the answer to our first question, and for those of you who would like start crunching numbers right away, try out these helpful mortgage calculators.

There are many factors you need to take into consideration when purchasing a home. First and foremost, ask yourself what size monthly payment you can afford. When determining how large a mortgage you can afford, be sure to factor in all your current expenses such as car payments, credit card bills, student loans, utilities, and the like.

You may also want to factor in how much you spend on things like entertainment, eating out, and traveling. You don't want to add a mortgage payment and say goodbye to your social life. Instead, you want to make sure that you're not overextending yourself financially and thus ensuring the survival of your social life.


At the present time, most lenders will allow for a whopping debt-to-income ratio of 45% - 50%. Your debt-to-income ratio is the sum of your mortgage payment and any other credit card or loan payments, divided by your monthly gross income. Lenders use this ratio to help determine your credit worthiness.

So, all of your revolving debts along with your mortgage payment divided by your monthly gross income should not exceed the 36% - 45% debt-to-income ratio. So, here’s a quick little formula to help you figure out how much you can afford to put toward your monthly house payment:

--Multiply your gross monthly income by 0.45
--Subtract your non-mortgage debt payments from the result
--What's left is your allowable mortgage payment

So, if we have a couple with a combined monthly gross income of $5000 and they pay $700 a month toward two auto loans and one credit card, they would qualify for a monthly payment of $1550.

Also, be aware that not all of your monthly housing payment goes toward your principal and interest. A portion must go toward homeowner's insurance and property taxes. I mention this because on most mortgage calculators that’ll you use, you’ll need to enter these figures to get an accurate idea of what your real monthly mortgage payment will look like.

Property taxes are typically a percentage of your home's assessed value. To calculate property taxes, local jurisdictions generally multiply the tax rate by a home's assessed value. For example, if you pay 0.5% in property taxes of the assessed value, a home assessed at $250,000 would have a yearly property tax bill of $1,250.

In order to find out the tax rate, you will need to contact your county tax assessor, or a local mortgage broker or bank may be able to assist you. As for the homeowner’s insurance, your best bet is talking to a local broker or bank to get a general idea of what it is for your area.

Mortgage calculators will ask you for a percentage rate sometimes and others will ask for a yearly figure. It can be confusing for a new buyer, so don't be afraid to seek a little assistance.

Figuring out how much you can afford to put toward your monthly house payment is a start. Now, you want to know how much house you can afford. There are mortgage calculators galore that will help you do this, but, as I mentioned above, they will require you to enter real estate taxes, homeowner’s insurance, and interest rates. Some calculators will provide you with figures, but they aren’t necessarily correct, so I would suggest a little leg work.

Once you know how much you can comfortably spend a month toward a home, and you’ve gathered your tax and insurance rates, you only need an idea of what kind of interest rate you’ll get (Oh, did I forget to mention that you can call your local bank or mortgage broker to get pre-qualified as well, and they usually don’t charge anything?).

If you’re curious, try out some mortgage calculators. Once you have a good idea of what you think you can afford, call a local bank or broker and get pre-qualified to see if you’re in the ballpark, and soon you’ll be on your way to owning a home.

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About the Author: Brian Daniel is a loan officer/marketing coordinator for Bend Mortgage Group Ltd. a mortgage company in Bend, Oregon. For more information or help with a Bend, Oregon home loan visit www.bendmortgagegroup.com.

Basics of Borrowing Money

Are you thinking about starting a business but have no money to do it with. Well, you're not alone. This article will tell you the basics of borrowing money.

A loan is money that is borrowed, and has to be paid back along with interest. If the money is borrowed from an institution such as a bank, this is called a commercial loan. Money that is borrowed from a friend or a relative is called a personal loan.

The borrower, or debtor, is the business or individual that takes out the loan. The lender, or creditor, is the source from which the money was borrowed. The term, or period, is the time that is specified during which the borrower has to use the money borrowed before he has to repay the loan. The maturity of a loan is when a loan term reaches its end. The Principal is the amount that is borrowed from the lender.
When you or your business borrows money, the lender wants to know when they will get their money back. Keep this in mind when you are looking for a lending source.

If the business is not able to repay the loan, the lending source has a right to legally come after assets to recoup it's money. The extent to which you are personally liable depends on the business structure your business is operating under.

If you are approved for a loan, that you will have to make scheduled payments (typically on monthly basis) plus interest. A loan can sometimes be set up as a balloon loan. A balloon loan will typically require smaller initial payments and one lump sum of what was borrowed as the final payment at the end of the term.

Borrowing from Institutions
Business loans generally fall into two main categories: short term and long term loans. A short term loan is a loan that is to be payed back within one year. Examples of short term loans include:

Working capital loans
Accounts receivable loans
Lines of credit
Long term loans are loans that are to be payed back typically from one to seven years. Long term loans are typically used for:
an expansion of a business
the purchase of equipment
real estate
Most business loans that are used for starting a business are long term loans.

When you approach an institution for a business loan, it will be looking at you as the business owner as closely as it will be looking at the business itself. One of the ways lending institutions make money is by lending money and they want to be as sure as possible that they get back their money with the interest owed.

The time between applying for a loan and learning that you have been approved (or disapproved) can vary. If you are disapproved, you may be told almost instantly. If you are approved, it may take a few days though it usually takes longer. It may even take several months to learn whether you or your business has being approved for the loan.

Borrowing from Family and Friends
If you don't want to, or can't get a commercial loan, you can consider getting a private loan from family or friends. This is usually real informal. However, you need to be careful because this can lead to ruined relationships.

If you are getting a private loan, it is in the best interest of the lender to have an agreement put in writing. The written agreement should state the principal, the interest charged and the terms of repayment. This puts the lender in better position either write off the loan on his or her tax return or to legally come after you.

You are free to reprint this only if the article link and text are included:

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About the Author: article source: A Guide to Starting a Business at http://www.aguidetostartingabusiness.com

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About ISREP

Welcome to ISREP, pronounced "IS"-"REP", the acronym for the International Society of Real Estate Professionals.

ISREP is a solely owned entity that is entirely an online assembly of professional associates and assistants within the real estate industry.

Affiliation is afforded industry professionals and their assistants through a fee based "membership format" --- an annual or an optional "low fee" lifetime (four times the annual fee price) membership.

Unlike another well known organization, in the U.S. and Canada, ISREP "does not" have restrictions for membership. We feel, if you are an industry professional in good standing with the company you work for, and you are considered an acceptable lawful business by the government jurisdiction in which you are located, than you have the "individual right to join ISREP".

There are two categories of ISREP membership ---

Regular Membership is afforded to Industry Professionals, such as Real Estate Agents, Appraisers, Home Inspectors, Lenders (Loan Officers, Mortgage Brokers & Bankers), Title Co Officers, Escrow Officers (LPO's, etc).

Associate Membership is afforded to industry assistants of the regular membership professions noted above.

ISREP has low membership fees!

ISREP provides both professional and associate members an "online business profile", at "no extra charge". Other organizations charge extra for this service, as much as $350-$400 a year! Once again, ISREP "displays your profile" for consumers to see, at "no extra charge".

Internationally, ISREP links consumers with members and members benefit from direct communication links to other industry professionals and their assistants as well.

ISREP maintains a "resource center" at "no extra charge", providing members access to a whole cross section of industry vendors, an online real estate agent store, publications of all kinds, industry forms, other tools and enhancements to increase business productivity and effectiveness.

In summation, CLICK HERE for the benefits of joining ISREP

Buying Real Estate When It's Not For Sale

Buying real estate can start with a look in the newspaper, a visit to a broker, or a search online. These are all good ways to find your next investment property. You're looking at the same properties as every other investor, of course, so it's not always easy to beat the competition to a great buy.

A better way to find good real estate investments is to look for properties that aren't yet for sale, and make an offer. I bought my first home this way. I put an ad in the paper stating what I was looking for, and soon had a call from an old couple that had been thinking about selling. I bought their place at a good price, and they saved a broker's commission.

Buying investment real estate that isn't for sale starts with a three step search process. First decide what you are looking for. Single family rentals or apartment buildings? Then start looking for properties that fit your criteria. Then contact the owners.

Buying Real Estate From Non-Sellers

Don't limit yourself to "fixer-uppers" or other "problem" properties that seem more likely to have owners willing to sell. Many owners of investment real estate have thought of selling, so you can start with almost any building you like. You never know beforehand if or why a landlord is ready to call it quits. You find out by asking.

Tact is necessary here. Call the owner and tell him you're an investor, not a broker. Let him know that you like what you see. Tell him you can have an offer ready in a week if he's interested. NEVER EVER MENTION THE PRICE VERBALLY AND IF YOU WANT TO RAISE YOUR CHANCES OF GETTING THE PROPERTY, "DO NOT" GO ANY FURTHER IN THE CONVERSATION AT THIS POINT....The seller will do all he can to find out what you had in mind, and tell him first, you wanted to find out if the seller was even interested in selling....and every time there is a question about price or about what your offer will look like, say, "ya know what, since you sound interested, I'll take a day or two, have an offer in writing for you, and let's go from there...."

At this point, this is where you call a BUYERS AGENT (If you are in WA State, call Beryl Gosney at 425-344-2222, a leading buyers agent on Internet and serves Western Washington).....

DO NOT, UNDER ANY CIRCUMSTANCES start negotitating with the seller yourself...I don't care how many homes you've owned, or if you are a seasoned sales person or not, selling homes is unique. Home selling experience specifically, truely makes a difference in the outcome of your deal ---- especially when the buyers agent representing you, is paid by the seller! You see, it most all cases, the buyers agent commision has already been pre-determined in the sellers listing contract, that a commission would be going to the seller agents broker, from the sellers proceeds.

If the seller is not interested, thank him politely when you made the initial call and hang up, an d share the contact info with your buyers agent and ask them to send the homeowner a card or a letter on your behalf. Many investors have bought from owners that changed their minds.

Naturally if you are buying a rental unit, we'll need to see the books. Specifically, you'll need to see the rent roll, listing the units and what they rent for, plus current occupancy, and operating expenses for the last year.

The buyers agent needs to have a confidentiality agreement ready for you to sign and attach with your offer. Your agent should let the owner know that you'll sign it and the agent will deliver it to him before you see the books. He may not want to let the tenants know he's thinking of selling, so inspecting the units may have to wait until you make an offer. Just make an acceptable inspection a contingency in the offer.

Why buy investment properties this way? No competition means you may get a better price. Also, instead of waiting for that perfect property to be listed for sale, you just find it now. Why wait until it's for sale before buying real estate?

How to Create Your Dream Home

(ARA) - Among the clipped lawns and traditional style homes of Green Bay, a cozy log home nestled in the woods is a rarity indeed. Equally rare are the steps the owners have taken to protect their original retreat.

On a hot summer morning, David and Kathy Janczak opened their Green Bay home to visitors who share their passion for log home living. “This is the first time we’ve hosted an open house since renovating our log home,” said Kathy, in the lodge-like great room where the family of five shared meals, celebrated holidays and created hand-made Christmas ornaments.

Nearly 30 years ago, the young couple dreamt of a log home of their own. David, an avid woodworker who had been studying log home construction for some time, promised his new bride Kathy that he would build her a dream home as a wedding gift.

On a 20-acre parcel of land, David diligently set out to fulfill his promise, with Kathy working beside him every step of the way. Completed in 1976, the full log home was an intimate 1,547 square feet. The great room, which was the heart of the home, remains intact today.

Local excitement over their home and many requests prompted David to craft similar log homes for other enthusiasts. This, in turn, created Wisconsin Log Homes Inc., which David continues to oversee today. Both the home and company has grown significantly over the years, a testament to America’s love affair with rustic homes and the simple, comfortable feeling they generate.

While the 60-plus people toured and explored their recently remodeled home, David and Kathy eagerly shared their experiences with both full log and half log construction. As the visitors marveled over the fine craftsmanship and attention to detail, David educated them on the basics of log homes and energy efficiency, including explaining why he developed the Thermal-Log insulated half-log building system 30 years ago.

David says the spacious, yet unpretentious 5,600-square-foot hybrid home “Is a result of 30 years of ideas and experience in log home design and construction.” Designed for entertaining as well as day-to-day living, the home showcases many progressive design elements, all while exuding traditional log home comfort and warmth.

The Janczak home was designed to be one with nature, both indoors and out. Strategically placed doors, windows and bump-outs maximize the surrounding view which includes a pond, wooded area and front water garden. A screen porch and wrap-around architecturally lit stamped concrete patio is the perfect place to relax during sunset at the end of a long day.

Indoors, the couple’s love for natural materials is evident, incorporated into almost every design element. From the chocolate glazed ceramic tile on the floor to the handcrafted antler chandeliers, the space is saturated with various textures. David’s trademark wormy wavy edge trim and custom gnarly railings give the log home a personal artistic touch not readily seen in the industry today.

The custom kitchen designed by Kathy and the company’s in-house interior designer shows how a modern working kitchen can flow effortlessly into an open floor plan typical of log home design. Character cherry cabinets topped with custom crown molding, state-of-the-art appliances cleverly tucked behind cabinet panels and a hand-scraped engineered hickory floor warmed with radiant floor heat are some of the few places where technology meets style in the Janczak home. The raised cabinet at the end of the island has a painted furniture look to it, complete with authentic antler pulls.

As the visitors split up and meandered from room to room, they began to share their ideas and own design inspirations with one another. Some were focused on the architectural elements while others eagerly discussed envisioned floor plans. “The trip to Green Bay was well worth it,” one attendee noted. “This home gives us lots of ideas. The finished product shows much more than any catalog pictures.”

Several visitors were fascinated with the Janczak’s master bath which does not utilize a door. A strategically placed corner whirlpool tub with a mini-chandelier hanging above provides a spa-like view from the master bedroom. A partial wall separates the commode without closing in the space and a glass and tile walk-in shower is both functional and aesthetically pleasing. “This space was actually inspired by the Janczak’s favorite Mexican retreat,” Wisconsin Log Homes resident interior designer Stephanie Gauthier explained. “Beautiful design usually originates from things that we love. These are the elements that make your house a home and uniquely yours.”

The groups were well rounded; some empty nesters, families, newlyweds and even a couple excited about planning a log-inspired bed and breakfast. “I love color and my husband loves structure,” one wife commented in a boldly painted bedroom combined with a knotty pine ceiling and log accented walls. “I am so pleased to see that we can have both.”

The Janczak’s open house was a huge success and an inspiration to many. “We are planning another in the future for those who were unable to attend due to a limited number of reservations available,” Kathy noted. “In the past we held design/build seminars at our headquarters’, but seeing a completed home helps people better visualize what they can actually have.”

For more information about designing and building log homes or to order Wisconsin Log Homes’ comprehensive 156-page planning guide and DVD, log on to www.wisconsinloghomes.com, or call (800) 678-9107.

Courtesy of ARA Content

Facelift for the Middle-Aged Door

How to Recognize and Reverse Signs of Aging at the Front Entry

(ARA) – These days, baby boomers aren’t the only ones worried about showing their age. When it comes to the middle-aged home, the front door is often the first to go.

That’s because exterior doors -- one of the larger openings on the home -- often take the brunt of UV exposure, wind and rain over a period of decades. A Harvard University study shows the average age of a home in the United States is 32 years old and rising, so doors definitely develop their share of “age spots.”

“It’s important to understand the causes and effects of wear and tear on exterior doors because they provide security and energy efficiency benefits, not to mention curb appeal, for the home,” says Shane Meisel, product marketing manager for JELD-WEN doors. “Proper maintenance -- just a little attention over time -- can help extend the life of exterior doors for many years.”

To maintain their youthful appearance, it’s important to regularly inspect exterior doors and repair problem spots, such as fading and the ill effects of water penetration. So with both performance and curb appeal in mind, here is a guide to recognizing and reversing signs of aging on exterior doors.

Anti-Aging Regimen for Exterior Doors

Proper finishing. The first defense against premature aging of doors is proper finishing. It’s important to follow the manufacturer’s directions and be sure to finish all six sides of the door. Even though you may not see the top and bottom, they can be conduits for doors to absorb moisture from the environment, causing swelling and cracking over time.

Correct exposure ratio. The placement of an exterior door plays a major role in its maintenance and longevity. It’s important to determine the amount of overhang that protects the door from sun and rain and understand the UV exposure generated by the direction the door faces. In mild climates, the overhang should equal at least one-half of the door’s height. More severe climates require larger overhangs. The industry term for the correct exposure ratio is “coefficient.”

High-performance materials. New advances in manufacturing technology have taken the worry out of wood doors. JELD-WEN now offers AuraLast wood for U.S.-produced pine wood doors and frames. Thanks to a revolutionary penetrating treatment process, AuraLast wood is guaranteed to resist termites and decay for 20 years, and AuraLast wood frames carry a lifetime warranty.

Periodic inspection and maintenance. Just like any other exterior surface, doors need cleaning and care each year. Homeowners should expect to refinish wood doors every two to five years. For solid wood doors, lightly sand, then wipe away dust with a clean cloth, slightly dampened with mineral spirits. For doors made of other materials, follow the manufacturer’s refinishing recommendations. Apply at least two coats of a fade-resistant exterior polyurethane with an ultraviolet inhibitor, following the manufacturer’s recommendations. Sand lightly between coats and be sure to finish all six sides of the door in the same manner.

Top Tips for Sprucing up the Front Entry

Once the entry door is properly finished and protected, homeowners may want to consider these inexpensive cosmetic upgrades.

1. Consider a new paint color. A touch of color for the front door gives the whole front of the home a lift. JELD-WEN’s new front door selector tool, offered at www.jeld-wen.com, allows homeowners to experiment with different looks online.

2. Install new hardware. This is one of the quickest and easiest ways to spruce up the front entry on your own. Be sure to consider how the color and finish of the hardware coordinates or contrasts with the color and texture of the front door, and select a low-maintenance finish. Examples of new hardware to consider are brass kick plates, door handles, door knockers, locks and even mail slots.

3. Incorporate house numbers and lighting at the entryway. House numbers are a huge trend in “exterior design.” With more stylish options available than ever before, this little weekend project makes a big impact at the front entry. Likewise, a matching exterior light adds a warm and welcoming ambience.

For more door care and maintenance tips from JELD-WEN or to browse new styles for replacement doors, visit www.jeld-wen.com.

Courtesy of ARA Content

It's Time For A Gas War!

by Beryl Gosney, Real Estate Professional

It's time folks! Baby boomers will remember for sure --- the gas rationing and gas lines of the 70's? Remember wage and price controls of the 60's. Remember the California Tax Revolt --- long live Proposition 13!

Well citizens of America, it should be obvious by now, that our country's leadership, (Nancy, Hillary, Harry, George, Dick, or their appointed no-names, are not about to do anything to challenge the billion dollar bonuses to oil industry fat cats, nor lead a fight to curtail our use of that inefficient liquid gold we call petrol.....

It's time for citizens to unite and revolt. Take matters in their own hands, despite government irresponsibility. Citizens need to self police and discipline ourselves ---- we need a GAS Diet!

Today is May 15th and the GAS tank in both my gas guzzlers are less than 1/4 tank. And, as a real estate agent, I need to fill up before the next showing of homes. But loyal me, I'm trying to honor my commitment made earlier in the week.

I got an email that said there would be a nationwide boycott on gas purchased on May 15th so the gas giants would feel the pinch all of a sudden, as they watch their daily revenue come to an abrupt halt.

Stop The GAS Money Rip-Off!

I did my duty, despite running on fumes because I want this boycott to be recognized..... The sad truth is, it didn't even make the local, let alone the national news. That's how divided and out of touch we've become. We can't even assemble a simple one day initiative and stick to it.

If we unite and pursue this GAS thing, it will show the terrorist an American show of strength and we can prove we are in fact, a country of and by the people.

Are you with me on this....are you going to start writing letters to the editors and to members of congress about the gas rip off?

Or, are you just going to continue to dip into the wallet, fill your tank only half full in denial, so you don't have to ever pay $50 to fill your compact, or $70 to fill your mid size and lucky cars tank?

Stand up and be counter folks ---- your single letter can spread like a cancer if you share it with your friends and neighbors. I'm trying to do my part --- are you ready to do yours?

Citizens, we have the "power" to send prices back into the $1.50-$1.60's ---- but it is going to take a collective effort.

Are you up to the task? --- I am!

How to Improve Your Home’s Curb Appeal

(ARA) – Does your home have curb appeal? Better make sure the answer is “YES” before you put it on the market. According to the National Association of Realtors (NAR), it just may make the difference between selling your property quickly, or having it linger on the market for months.

Just a few short years ago, when mortgage rates were low and the economy was booming, homes were selling almost as quickly as they hit the market. NAR statistics show it is now taking an average of four weeks to sell a home.

If it’s taking longer than that in your case, there may be a good reason. Perhaps your asking price is too high, or there’s too much competition in the surrounding neighborhood. Both are problems you can easily deal with.

Ask your realtor to run a report on comparables to see if your price is indeed too high, and in the meantime, drive up to your home and pretend you’re a potential buyer. What is the first thing you notice?

If your attention is focused on cracks in the driveway, paint on the shutters that’s peeling and dead branches hanging from the trees, it won’t take long before you come to the realization that your home isn’t selling because it lacks curb appeal. So what can you do about it? Make a list of the projects you need to complete right away, then run out to the closest home improvement store and buy your supplies.

* The driveway

Often the first step a perspective buyer takes on your property is on the driveway, so make sure it makes the right impression. If your driveway is gray and weathered, or worse, cracked and crumbling, this may scare off buyers. The good news is that repairing and beautifying your driveway can be done quickly and easily, and wow, what a difference it makes.

Start by thoroughly cleaning the surface with a spray on driveway cleaner and letting it dry completely. Once the surface is clean, you can apply your sealer using an applicator that has a squeegee on one side and a brush on the other to spread and smooth the mixture.

There are a lot of asphalt sealers on the market, but do you and your eventual buyer a favor by investing in a product that beautifies and protects. Black Jack Drive-Maxx 700 is a better quality blacktop filler and sealer that contains sand particles to help fill in the small cracks in the surface and it is enhanced with latex which helps with durability. It is a gel based sealer that applies faster, easier and with less mess, what a combination!

It would also be a good idea to have a bottle of Black Jack Blacktop Crack Filler on hand in case cracks should form after the driveway has been resurfaced. You can find both the crack filler and blacktop sealer at Lowe’s and other home improvement stores nationwide. Log on to www.gardner-gibson.com for access to a store locator.

Paint

If the paint on the shutters is peeling away, but the rest of the house looks okay, take the shutters down and repaint them. You may want to repaint the front door to match as well. It would also be a good idea to pressure wash the house and sidewalks, particularly if there are water or dirt marks from the sprinklers.

Landscaping

As far as the landscaping goes, start by removing all the dead branches and leaves from your trees and shrubs, and making sure they have shape to them. Overgrown plants are a big turn off.

You should also be sure the lawn is well maintained. If you don’t have time to cut it every week, and remove the weeds, hire someone to do it for you. And if there’s no color in the yard right now, add some. Pansies, petunias, marigolds and daisies look great whether they’re planted in flower beds or in pots by the front door. Either way, be sure to cover the dirt with mulch, which holds moisture and prevents weed growth.

Other tricks you can try to improve your home’s curb appeal, get a new front door, wash the siding and front windows and replace the weathered mailbox and house numbers. In the grand scheme of things, these small investments will pay huge dividends. They’ll set your home apart from the competition!

Courtesy of ARAcontent

6 Slezy Home Improvement Scams

By Alana Klein • Bankrate.com

It's time for less talk and more action.

Like most homeowners, you probably spent the winter months talking about the various home improvements you'd like to make. Now that's spring is here, it's time to act on those remodeling impulses. After all, spring is a time of renewal, change, and new beginnings.
Unfortunately, it's also a time when crooked contractors come out of the woodwork to prey on innocent homeowners. "Some are actual scam artists, while others are just incompetent or unethical," says Ellis Levinson, a consumer reporter and author of the book "Hiring Contractors Without Going Through Hell."

The good news is that you can protect yourself against these scams. In fact, many scams are easy to detect if you take the time to become an educated, savvy consumer. "Compare prices, call references, and research the project you're undertaking in advance," says Bruce Johnson, author of "50 Simple Ways to Save your House." It seems simple but many people find this process overwhelming.

Levinson calls it emotional laziness. "It's amazing to me how much time people will put it into buying a TV because it's fun. But when it comes to remodeling a kitchen, people have no time. They see it as drudgery," Levinson says. Ultimately, he says, doing the research to protect yourself is much easier than paying for the consequences.

To help you differentiate a scam from the real deal, Bankrate has compiled a list of the most common remodeling scams. Beware of the following key phrases, and remember, if it sounds too good to be true, it probably isn't.

Key phrases to beware of:
• "I just happen to be working in your neighborhood."
• "I have materials left over from another job."
• "I need the cash up front."
• "I have a special offer that's good for today only."
• "I can help you finance the project."
• "I want to use your home as a model."

"I just happen to be working in your neighborhood."This happens when contractors appear at your home unsolicited to inform you that they noticed some problems with your home's (insert: chimney, driveway, windows, plumbing, etc.) while working on a neighboring home.

For example, the contractor might say he or she was on the roof of your neighbor's home and noticed missing shingles on your roof. This may be the case -- but often no repair is needed.

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Money Does Talk!

When buying something, you can buy in one of two markets. The first is buying on terms in the retail market and the second is buying in the wholesale cash market. This can be illustrated by referring to the biggest purchase we all make in our lifetime - Real Estate.

In recent years, when you are buying a house it is easy to get financing of the first mortgage, so the seller is not forced to finance the whole sale. What I mean is the seller doesn’t become your first mortgage holder, the bank lends the money and the seller get the cash. Moreover, he will most likely make some concessions if he doesn’t have to carry back a second trust deed.

Therefore giving the seller all cash, will usually get you a better deal than asking the seller to let you buy the house with a very low down payment, with him carrying back a sizable trust deed. The big savings come when you are buying real estate that doesn’t have easy institutional financing available. The purchase of vacant land can be the best example. My father was interested in buying industrial lots in the city of Montebello, just east of downtown Los Angeles. This was during the 1960’s.

In those days it was common for a buyer to put down 20% and the seller to finance the remaining 80% for 10 years at 8% interest. For example: a $10,000 lot would cost you $2,000 down with $97.06 payments every month. After 10 years the total of the principal and interest payments would be $13,647.45. If you wanted to build on the property you had to pay off the land loan, first. The sellers then would not have to wait the whole 10 years before getting all their money.

Many property owners sold their property because they wanted money and getting the $2,000 wasn’t much money to them. So, my father would offer $5,000 all cash to the sellers. More than 1 out of 5 would take the cash up front instead of waiting for payments over 10 years. By offering the extra $3,000 cash down, my father saved $8,647.45 on the sale ($5,000 on the price reduction, plus the interest on the note). Now that is buying wholesale!!
Buying cars can be done the same way. When you pay retail, the dealer talks monthly payments. If he lowers the price, he’ll raise the interest rate. When you are buying for cash, he can only talk price. When you are leasing an automobile, they don’t even tell you the price!

The major consideration in leasing a car or not, is made by the leasing company to be all about what the monthly payment is going to be and how much extra it is going to cost you when you drive over 12,000 miles per year. Ever financed a used car from a “no credit check” dealer? He gets you for 36% interest on the balance you borrow, after getting a 50% down payment from you. Then if you miss a payment he takes the car and sues you for the difference. Buy what you can afford in cash and save making the lenders rich.

I read a report once that said that the average man makes $1,500,000 over his lifetime. Of that amount, he uses $600,000 to pay the interest on his purchases. Let’s look at the purchase of a home, from a slightly different point of view. A man who makes $1,500,000 in a lifetime will be earning on average about $30,000 a year or $2,500 per month.

He can afford to spend 40% of his income on rent or a mortgage payment. This means that he can afford a $150,000 house. If he can qualify for a 90% loan he would owe $135,000 at 8% amortized over 30 years. That means he pays $221,609.58 interest plus the $150,000 principal to buy this one house and pay it off over 30 years. The interest alone is almost 15% of his lifetime earnings! Buying anything on credit can cost you more than the retail price because you must add the interest to the cost of the item.

My suggestion. Buy for cash and negotiate for the best price you can get. If you must borrow, pay it off in as short a time possible. Also, never borrow for personal consumption. Postpone the purchase long enough to pay cash. If you can’t afford to wait until you save the money, you shouldn’t buy the item. It is just too expensive. To buy on payments raises the cost even higher than the cash price, so it becomes even more expensive. So if you cannot afford the cash price, you definitely cannot afford the financed price. My suggestion is to pay cash and buy wholesale. BUY THE BEST, PAY CASH


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About the Author: Willard Michlin is an Investor, Business Broker, California Real Estate Broker, Accountant, Financial Distress Consultant, Well known Public speaker and Administrative/Business Consultant. He can be contacted at his Ventura, California office by calling 805-529-9854 or by e-mail at kismetrei@earthlink.net. See other articles by Willard at http://www.kismetgroup.com

Death & Taxes

Have you ever owned a stock, or piece of real estate that you wanted to sell? You felt the time was right to take your profit and run. Did you then not follow through with the sale because “the taxes would kill you?” This is what I call “making a decision based on taxes.” It is not “Good Horse Sense.” What is horse sense? This is where the horse knows that a certain spot is dangerous and it will not step there. The rider, not seeing the danger, sometimes pushes the horse to move forward, but the horse refuses. People quite often will not trust their “sense.” Women are known for their “instincts” about people. Men are not always as “sensitive” of their instincts as women are. Lets get back to business instincts.

In the stock market the smart money always says, “Bulls make money. Bears make money. Pigs lose money.” What does this mean? It means, “Never be afraid to take a profit.” If it is time to sell, sell! Take your profit and wait until the time is right to get back in. Taxes sometimes make this very difficult. If you sell, the taxes may eat up 30-50% of the profit.

Then again, if you do not sell, when you think the timing is right, you may lose 100% of the profit and some of the principal. It is always smarter to make your business decision first. It is also very important to not consider the tax consequences while making this sound business decision. After you have decided what you want to do based on sound business strategies, then you see your tax accountant and figure out how to do the deal, so as to pay the lowest possible taxes. Do not do it the other way around. Which means, selling when you have a tax loss or a real loss because there would be no taxes to pay.

Many an investor, because of the fear of taxes, held an investment all the way up and then all the way down. The economy runs in 7 to 10 year cycles of boom and bust. Sell in the booms and buy in the busts. If you do not sell at the top, there is no money to buy at the bottom. If your accountant is worth his fee, he will figure out how to shelter the sale. Do call him before making the sale, so he can tell you how to structure the deal. If he can’t help you, get a new accountant. An accountant’s job is not to do your tax return. It is to advise you how to pay the least taxes using all of the legal tax avoidance techniques, allowed by the IRS.

I have a friend who owned millions of shares of Microsoft. He was worth millions of dollars. Microsoft was the only thing he owned. He was an employee of the company and received stock options. He came to me worried about the company and asked me what to do. I suggested that he sell some of the stock and buy real estate. He was afraid to change horses and paying income taxes worried him. He decided to stick with Microsoft. Two months later Microsoft lost a court case and the stock price crashed. He now tells me “After it goes back up I might diversify.” How much do you want to bet on him doing anything? “After the horse is out of the barn, it is too late to close the gate.”

I met a man who owned an apartment building in the worst part of San Bernardino. In 1991 he was offered $600,000 for his building, but he refused it because of his concerns for capital gains taxes that he would have to pay. Over the next 8 years, the San Bernardino economy went down hill along with the real estate prices. His building became so vandalized that it was eventually boarded up. He sold the building to one person who thought he could repair the building. He couldn’t and our man foreclosed and took the building back. Again he sold the building, for $280,000 this time.

This second buyer also couldn’t make it work and today the second buyer stopped making the payments. He is also going to give the building back. Our man has had lower cash offers but he keeps trying to get as close as he can to that old $600,000 price. Therefore he keeps selling and financing that property so as to get a better price. He hasn’t learned that sometimes it is better to take the money and run.

Never bet the farm on a sure thing. The only sure thing is death and taxes. Also remember that the bank is not going to be nice if you get in trouble. Always have enough cash reserves, and keep your expenses down so you can always have money for food, insurance, gas, etc, and the low house payment. Accountants may give good tax advice but it may not be good business advice. So, NEVER MAKE A BUSINESS DECISION BASED ON TAXES.

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About the Author: Willard Michlin is a Business Broker, California Real Estate Broker, Accountant, Well known Public speaker and Administrative/Business Consultant. He can be contacted at his Ventura, California office by calling 805-529-9854 or by e-mail at kismetrei@earthlink.net. See other articles by Willard Michlin at http://www.kismetbusinessbrokers.com

Best long-term investment in today’s market?

The stock market is very unstable. At this time it is going up and down while interest rates are so low that you want to be a borrower and not a lender. Would you like some suggestions on how can you get the most out of low interest rates while being assured your principal will not disappear while you are trying to make some money? Of course, there is always the danger of borrowing the money and then spending it just because it is there.

So, would you also like to know what is the best way to borrow money at today’s low rates without spending it? Ok, here goes, buy real estate. Not any real estate but real estate that will hold its value, even if single family houses go down. It is apartment buildings. Because apartment rents are still going up, the value of apartment buildings have the best chance of appreciating while everything else goes down.

Low interest rates mean that you can have a positive cash flow at real estate purchase prices you would have lost your shirt on, even two years ago. Rates are currently 4.5% to 6.5% interest rates when we used to pay 9% for apartment loans just a few years ago. Apartments have become a better investment for two main reasons. First, carrying costs (interest costs) have been going down. Second, income has been going up, substantially. Can things be better than this? YES IT CAN.

I have developed two programs. One is to take people with a small net worth and build an estate or self directed IRA (tax free retirement plan) that is worth up to $800,000 in 15 years and that generates an income of $60,000 per year with both still going up after that.

For those that can put together $100,000 to start I have developed a second program where the numbers come in at $1,300,000 net worth, with a $100,000 annual net profit and in only 10 years. Unbelievable? Yes, and with low risk as well! This comes out to be a 25% annual return with no roller coaster stock market ride. I figured out how to do it and it really works. I have done it before and I know many now retired senior citizens that have done it in the past.

The problem today with most 50+-year-old baby boomers is that they never got started on building a retirement fund. So now, instead of having the normal 30 years to build a retirement fund, they need to be there in 10-15 years. It might take one year of financial hell to come up with some cash. (That means no money for anything except accumulating cash) But after that, it can be a sweet painless ride to wealth. The best part is the possibility of failure is less than 10%, if my steps are followed

First: The money is not touched for 10 years. That is why a trust fund, IRA or a self directed retirement plan is a great place to put this.

Second: I have taken my 30 years of real estate experience to develop exactly which properties will give the biggest appreciation and cash flow and also be the best risks. Interestingly, almost everyone I talk to picks the wrong locations to buy until they hear the whole list of criteria.

Now that I have told you the lazy man’s way to riches, let me tell you the downside. You have to have the correct timing on your purchase. In Dec 2001, everything was in place to do these two programs, in Los Angeles County. Unfortunately, by July 2002, the numbers didn’t work any more. They did still work in Florida, for example, but not in Los Angeles. What happens is that prices go up after the rates go down. The seller sees how good a deal the buyer can get and raises the asking prices. So! Your timing to start these programs is very important. Do not be discouraged, though. If the numbers do not work today, it will work sometime tomorrow. The system is sound, and since we are talking long-term wealth accumulation, a little patience can go a long way.

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About the Author: Willard Michlin is an Investor, Business Broker, California Real Estate Broker, Accountant, Financial Distress Consultant, Well known Public speaker and Administrative/Business Consultant. He can be contacted at his Ventura, California office by calling 805-529-9854 or by e-mail at kismetrei@earthlink.net. See other article by Willard at http://www.kismetbusinessbrokers.com

Golf Course & Waterfront Living: Live, Play, Relax

With today’s planned lifestyle communities, golf and boating enthusiasts have an opportunity to purchase the home of their dreams just a chip shot away from the green or stone’s throw from the marina. In addition to an ideal home setting, golf and waterfront community residents enjoy an active and diversified lifestyle experience complete with first-class golf courses, marinas, beaches, spas, clubhouses, recreation areas, fine dining and countless other amenities.

Out of the 10,000 master planned communities across the United States, over 2,500 are built around golf courses and pristine waterfront property. Making sense of all the options can be mind boggling. If you are thinking about relocating to one of these golf and waterfront communities, it is imperative to be able to distinguish one community from the next and more importantly, know what to look for before you buy.

Community Types
In the past, golf and waterfront master planned communities catered to distinct segments of the housing market, namely middle to upper income empty nesters and retirees. Things have changed. Today, golf course and waterfront developments are designed to accommodate budgets of all levels and generally fall into one of two categories: multi-generational and age restricted.

The construction of multi-generational communities represents a recent trend in planned community home building. The underlying idea is to attract a diverse population of families including retirees and young professionals of varying income levels and backgrounds in order to establish a robust and vibrant community. After decades of building age restricted communities, builders and developers have recognized that the traditional elements of planned community living such as security, on-site amenities and low maintenance housing appeal to home buyers of all ages.

Most new communities are multi-generational developments. Vistancia situated in the beautiful Sonoran desert outside of Peoria, Arizona is a recently opened golf community attracting individuals and families of all ages. Since home sales began in March 2004, almost 500 families have moved into this scenic development with 1,700 total acres of open space and a 900-acre mountain preserve.

Conversely, age restricted planned communities are developed for the +55 home owner with amenities and facilities for today’s discerning empty nester and retiree. Typically, the age restriction requires one household resident to be at least 55 in order to qualify for home ownership. Over the last decade, an evolution has occurred with the age restricted community model of yesteryear making way for contemporary activity based developments complete with lavish amenities and world-class recreation areas, not to mention the conventional facilities required by the +55 demographic.

The undisputed leader in age restricted master planned community development is Del Webb. Since the 1960s, Del Webb has constructed numerous age restricted golf and waterfront communities across the United States. Del Webb’s Sun City developments are arguably the most recognizable line of age restricted communities stretching from coast to coast with Sun City Hilton Head in North Carolina and Sun City Lincoln Hill in California.

Location
The most important criterion in selecting a traditional home is location and the same is true when deciding on a golf and waterfront community. The old adage “location, location, location” aside, one has to consider whether the new property will serve as a primary residence, second home getaway or retirement abode. The final location decision is generally based on three primary factors: home use, surrounding area and local weather.

For most of us working folk, our primary residence is located within an hour or so of a major metropolitan center. Don’t fret, there are hundreds of golf and waterfront communities centrally located within driving distance from most major metropolitan areas. If by chance you live near Dallas, you have several options to choose from including Stonebridge Ranch in north Dallas and Black Horse Ranch which is only 25 minutes from downtown. Washington D.C. commuters are also in luck with conveniently located golf and waterfront communities in Virginia, Maryland and Delaware. Belmont Country Club, a Toll Brothers property, is a mere 40 minutes from Washington D.C. in Ashburn, Virginia. These examples represent only a fraction of the actual number of suburban golf and waterfront developments.

The location decision is a bit more complicated and not as clear cut when one considers purchasing a second home retreat or retirement residence. In this situation, other factors come in to play such as the activity and cultural richness of the immediate area and of course, local weather. If you are looking for a second home, would you like to be nestled in the woods away from the hustle and bustle of the city, located in a more suburban area or some in between?

Climate is also an integral factor to take into consideration when purchasing a home particularly if you are feeling abused by recent harsh winters. This may clearly point to a direction that takes you out of your home state or even to another part of the country. Conversely, the summer’s never ending heat may drive you to consider the cooler climates up north. Fortunately, there are 2,500 golf and waterfront communities spread out across the United States from Minnesota to Texas and California to Massachusetts.

What is clear in the case of retirement homes is that good local health care and transportation facilities are a must. For most retirees, living over 60 miles away from the closest hospital or airport is just not an option. In the end, it comes down to striking a balance between modern necessities and the beauty of the great outdoors.

Amenities
Once you have settled on a geographic location, the next area to focus on is amenities. These can vary greatly from one golf and waterfront development to the next. Typically, these expanded ‘goodies’ fall into two categories: conveniences and lifestyle enhancements. Conveniences include such things as security services, home maintenance, gardening services, concierge service, on-site retail and office space, cable television and high-speed internet.

Lifestyle enhancements relate to recreation activities and rest and relaxation befitting an enhanced life of leisure. One can find a mix of facilities at planned communities which support numerous activities like tennis, hunting, boating, skiing, and hiking. To balance the rigors of recreation, planned communities provide residents with rest and relaxation amenities such as spas, clubhouses, wilderness preserves, pools, beaches and fine dining.

With real estate opportunities for every budget, isn’t it about time you looked into moving to a golf and waterfront community that offers unbelievable vistas, year round activities, low maintenance living and first-class amenities?

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About the Author: Robert Flournoy is a staff writer for Golf Home Connect. For additional information on golf and waterfront vacation and retirement homes visit Golf Home Connect© 2005 Home Connect LLC