Financing a new home Build
A lousy economy, rising unemployment and a dismal long-term outlook translate to ideal financing conditions for new-home buyers. A general malaise bordering on depression is wreaking havoc on consumer confidence, another factor fueling financing opportunities.
The tentative real estate market amounts to an ideal window of opportunity for adventurous contrarians. A few favorable financing variables include tax credits, depressed prices and low interest rates. That’s not all. Builders from Vermont to San Diego are offering incredible incentives such as below-market rates of 4.25 percent.
Thinking about financing a new home? Here’s the lowdown from some of the country’s top real estate experts:
Don’t believe everything you read. That’s the word from Neil Garfinkel, a real estate and banking attorney with New York City law firm Abrams Garfinkel Margolis Bergson LLP. While economists and business analysts continue to paint a picture of doom and gloom, Garfinkel says the real estate market has turned around, and he’s been very busy negotiating deals.
“Contrary to what the media is saying, things are happening in the real estate market, ” he says. “People are buying new homes. I don’t know why that news isn’t getting out.”
Take the hint. “Don’t try and time the market and hang back and wait for an ideal buying opportunity, ” Garfinkel advises. “That could be a big mistake because there may never be an ideal time. No expert knows what the real estate market will be like a week from now, no less six or 12 months ahead. If buyers are ready to buy, and everything is order - credit scores and finances are in good shape - they ought to shop around for deals.”
Do it right. A mortgage contingency is a must, Garfinkel insists. In this uncertain real estate market, buyers must have a mortgage contingency built into the contract, he says. “The lending marketplace has changed drastically over the past few years. It was assumed that once buyers got a contract, it was pretty certain that getting a mortgage was a slam dunk.”
Not anymore. Garfinkel’s advice: Don’t assume that getting a mortgage is easy. Securing a mortgage is more important than finding a property.
Know your financing options. Real estate financing expert Michael Sichenzia, president of Deerfield Beach, Florida’s Dynamic Consulting Enterprises LLC, says that there are a few excellent financing options, many of which are a result of a poor economy. Sichenzia, a former mortgage originator who sold mortgages to investors, did a four-year prison stint for mortgage fraud. When released, he turned over a new leaf and dedicated his life to correcting past wrongs and becoming a consumer watchdog, protecting naive homebuyers from predatory lending practices and unscrupulous mortgage brokers.
Sichenzia’s fast buck days are over. He works from dawn to sunset re-negotiating loans on behalf of homeowners and tries to get loan modifications that reduce buyers’ rates, extend terms and lower payments. His most challenging goal is helping homebuyers facing foreclosure find ways to salvage their homes.
Unlike mortage and financial experts who have hefty hourly fees, Sichenzia charges customers a one-time fee of $500 for his service, regardless of the time spent on each client’s case. Often several days are spent working out clients’ finances.
Although the residential housing market is in the proverbial toilet, Sichenzia says there are some excellent financial options for new-home buyers. His two favorites are FHA loans and home builder- and developer-sponsored financing. Here’s the lowdown on each:
The Federal Housing Administration (part of the Department of Housing and Urban Development) was established to help first-time buyers. The amount they can borrow ranges from $271, 050 for single-family homes in low-cost areas to $729, 750 in high-cost cities such as Los Angeles or New York.
Here are some of the benefits of an FHA loan.
However, the FHA is not giving away loans to potentially risky borrowers. It has clear, unbendable rules about borrowers with a history of bankruptcy and foreclosure. If borrowers have declared bankruptcy, two years must have passed from declaration, and they also must have re-established an acceptable credit record. And if a home was lost through foreclosure, they must wait three years and have a clean credit history during that period.
Each state has different FHA requirements. To learn more about FHA loans and banks offering them throughout the United States, contact the U.S. Department of Housing and Urban Development, 451 7th Street S.W., Washington, DC 20410; or call the FHA at 800-225-5342 begin_of_the_skype_highlighting 800-225-5342 end_of_the_skype_highlighting.
Home Builder and Developer Sponsored Financing
Home builders and developers are offering incredible buying opportunities - far beyond free appliances and country club memberships. They include enticing financing incentives, says Sichenzia. In fact, builders are going toe-to-toe with banks and mortgage companies.
“When you consider that half of the 60, 000 builders in the U.S. will be out of business by the end of 2009, ” adds Sichenzia, “it’s no wonder that they’re aggressively competing with lending institutions.”
Sichenzia advises talking to publicly traded builders because there’s less likelihood of running into snares.