The VA loan offers very liberal debt to income ratios. People can qualify for VA home loans with up to a 50% debt to income ratios. The VA loan has no monthly mortgage insurance, making it more affordable than FHA loans. It does have an upfront mortgage insurance of 2.15%, which is more than FHA loans, but slightly less than USDA rural housing loans. The interest rate is very comparable to conventional and FHA rates.

Greg Howell of Republic mortgage mentioned that there is a different mindset with those of the veterans administration, and regular loan approvals. The VA, wants to help get those who served our country in a house. Other loan programs are very careful that they only give loans to well qualified buyers. Income, employment, and credit requirements are not nearly as strict with VA home loans as they are with FHA and conventional loans.

via The VA Loan -100% Mortgage Financing « Logan Real Estate Blog.

This stat is pretty staggering really. Nevada’s real estate market was out of control and they are now suffering the consequences. With the way things are headed in both the national and local real estate market, it’s possible that Logan Real Estate values will decrease.

Is there a way to prevent values from declining? Is there something we can do about it? Well… we can’t really control the external factors associated with the real estate market, the federal government has already tried that, but we can control the amount we owe on our mortgages. The way 30 year amortized mortgages are set up, there is very little principle paid and equity gained during the first few years.

One way to drastically reduce the principle owed is to refinance to a 15 year fixed mortgage. Right now, the interest rates on 15 year fixed mortgages are at all time lows, about 4%. I’m currently in the process of refinancing a property, and am amazed at how quickly principle is reduced with these loan products.  By refinancing, my monthly payment will go up by about $180, but my principal amount will be reduced by an ADDITIONAL $468 in just the first month, and will increase every single month.

In just one year with a 15 year fixed mortgage my principal will be reduced by nearly 5%. So, if the real estate market were to drop 5% in value over the year, my equity percentage would have kept pace.

But, the amazing thing about amortization is that the amount, and rate, of principle payed off increases every year.  During year 5, my mortgage will be reduced 7.5%, year 10, a reduction of 15%, year 14, 50.6% and year 15, it will be reduced 100%. At that point I can say that I actually own the property. With a 30 year fixed mortgage, at the 15 year mark the loan is only 30% paid off. An owner doesn’t achieve 50% equity until year 20.

The attitude towards real estate investments has definitely changed in the five years I’ve been in the business. Five years ago the advice was to borrow with as little as possible to “leverage” your real estate investment, because the value will always increase. Now, the wise decision is to pay your mortgage loan down so one day you can be mortgage free, and actually own an asset. By paying down your mortgage, you are also in position that you can sell if you need too, and if you want to.

via How to Keep From Having an Underwater Mortgage « Logan Real Estate Blog.

Well this is possible with the 203K Housing Loan.

The 203K loan is a loan designed for homes that need work. It was designed for loans that won’t qualify for FHA, because they need major repairs like a roof. This loan is still an FHA backed loan.

In order to qualify there needs to be licensed contractors involved, who can verify that they will do the repairs once the home is purchased. The minimum portion of the loan for the draws is $5,000. The total loan is still under the FHA limits, so $271,500 in most Utah areas. The contractor can take four draws from the repair money to pay for the improvements. Before each draw, an inspector must go out and verify that the previous work was done.

This is for repairs, not for luxury items or additions. It also doesn’t work for homes that have never been occupied. Some landscaping items can be used, but only if it improves value. Appliances can be added, but only after at least $5,000 goes towards the house.

Because the homes sometimes can’t be occupied while the repairs are made, The 203K loan can have payments of up to six months added to the loan while the owner has to live somewhere else.

The loan amount can be 100% of what your cost to fix it up will actually cost, or 96.5% of the repaired appraised value, the normal FHA limit.

The cost of the loan (origination fee) is 1%, plus 1.5% of the Rehabilitation cost, with a minimum of $350. The mortgage interest rate is just two discount points higher than the regular FHA loan.