What's the Deal with Mortgage Lending and Real estate markets?
For the better part of the last ten years, the Texas real estate market has seen some wide swings and some big changes. In the years following the bursting of the real estate bubble in 2007, the housing market has been downright crazy. To use a psychiatric analogy, it’s been rather “bipolar”, if not downright “schizophrenic”. Its bipolar characteristics include wide swings from one extreme to the other, and its schizophrenic qualities include an apparent detachment from reality, sensibility, and an inability for many people to relate to it. While a variety of factors played into the historic decline, mortgage lending played the largest role in the market’s...
Getting Started in Real Estate Investing for 3.5% Down
If you have looked into real estate investing, you are very familiar with the fact that when purchasing an investment property, you need to put down 25% or more as your down payment. FHA, the Federal Housing Administration, insures mort loans today, and for investors that is their down payment minimum for real estate investment loans. We have a little known trick for getting an FHA insured loan on an investment property, for as little as 3.5%. Before getting to the trick to becoming a real estate investor with little money down, we need to explain a couple things first.
What is FHA?
The FHA was started as part of the National Housing Act of 1934 as a way to help the “average joe” purchase a home. Prior to the FHA, to purchase a home you went through a private lender, who usually required a heavy down payment. At that time, shortly after the great depression, very few people had the 20% (or more) to put down to purchase a home. It was well understood that home purchases were crucial to pull the US economy out of the doldrums, so the FHA was created to assist.
The FHA does not directly lend any money. What the FHA does is give a guarantee for private lenders. The FHA provides a rigid set of underwriting guidelines that the lender must follow to be able to take advantage of the FHA guarantee. If the mortgage lender fits all of the FHA guidelines, they are able to provide a mortgage with as little as 3.5% down, but the lender is guaranteed the difference between the smaller...
What exactly is the difference?
Buying a house today has many steps and can sometimes seem overwhelming. Although searching for homes for sale is the fun part, obtaining the right lender, to provide the mortgage, is a critical part that many times gets overlooked. One of the big questions that always comes up is the difference between a Bank and a Mortgage Broker.
In many instances, people feel as if they fully know the difference, but don't have all...