The Down And Dirty Facts About FHA Loans

The Down And Dirty Facts About FHA Loans

Owner-occupant home buyers do not usually think of themselves as investors who are trying to make money, so they pay full price for a home and get a government insured loan for the purchase, without giving it too much thought. Most of their focus goes into picking the right neighborhood or the right style and location. These are fundamentals that are more important to them than the money. They sort of assume that their home will eventually go up in value.

The other sector is the 20% of buyers and sellers that make up the investing market. These are sellers who sell at a discount, and buyers who buy at a discount. These buyers and sellers are consciously attempting to make a profit, and their objective is to make money or build wealth.

But I believe that all home buyers are real estate investors, for the simple reason that no one buys a home with the intention of losing money. But with government insured loans, this is usually what happens.

As a result of on-going government intervention since the great depression of the 1930’s, today’s mortgage industry has grown into a half-private, half-public money machine that has become a monster.

While government insured loans such as FHA, VA and USDA were created to help low income buyers afford a home mortgage, the result has been very expensive loans that will more than double the costs of a home loan.

Note I said the cost of the loan. Not the cost of the home. The property value is set. It’s the loan costs that go up. And few loans are more expensive than government insured loans that are supposedly designed to help low income buyers.

Most retail buyers using a traditional FHA, (government insured), mortgage to buy a home never even realize the real costs over time. Traditional mortgage loans can be very expensive. In the traditional world, the real cost is more than twice the advertised cost of the home.

Here is a quick example: The FHA Loan

Probably 90% of all ordinary home sales are financed this way. You Borrow $95,000 to buy a home that appraises for $100,000. You bring $3000 to closing to pay the loan origination fee. You bring $5000 to closing for your down payment as required by FHA. You bring $3000 more to closing to cover everything else, like the attorney’s fee, courier fees, processing fees, appraisal fees, taxes, insurance, more fees, and… you get the idea.

So now you “own” a home with the following general numbers:

Appraised Value: $100,000

Down Payment $5000

Loan Amount $95,000

Fees and Costs: $6000

Private Mortgage Insurance, (PMI), currently calculated as follows: 0.078% /12 of the loan amount. Here’s how that looks: $95,000 X.0078 = $741 divided by 12 = $61.75 per month.

This “Private Mortgage Insurance” is the key to your “Government Insured” loan. The premium is added to your monthly mortgage payment. You’ll pay this insurance premium each month for about 20 years. So your $95,000 loan will cost an additional $14,820.00 for mortgage insurance.

Mortgage people will be quick to point out that PMI is what enables lower income buyers to get a home loan with a 5% down payment. Before PMI came along, the required down payment was 20%. On a $100,000 home this would be $20,000 down.

Most folks don’t have 20% down payments any more, so PMI was invented to allow home ownership for people with lower down payments. It has it’s purpose, but most buyers are usually not aware of this significant cost.

There are so many costs associated with traditional mortgage loans, that along with tax and insurance burdens, home ownership is becoming less and less affordable, in spite of “modern” financial tools like PMI.

So, back to our $100,000 does this deal look? Are we gaining equity and building a nest egg if we buy this home with a “traditional” mortgage?

Doing a quick calculation on an ordinary mortgage calculator, I came up with the following:

A $100,000 home, an FHA loan with $5000 down payment, $95,000 loan amount. 30 year fixed interest rate of 6% means you’ll pay:

$ 95,000 amount borrowed. (principal)

$ 110,046.28 in INTEREST

$ 14,820 PMI Insurance (added to monthly payment)

So your little $95,000 home mortgage has turned into an expensive alligator that will actually cost you a minimum of $219,866.28!

So, you start out as a new homeowner already $6000 in the hole, and even if your home doubles in value over the next 30 years, you’ll still LOSE $20,000!

And we haven’t even discussed the costs for property taxes, insurance and on-going maintenance.

Buying a home the traditional way is very expensive and rarely leaves the buyer with any real equity at …

What Is a Restaurant Cash Advance?

What Is a Restaurant Cash Advance?

If you’re the owner of a restaurant business, you have probably heard a lot about restaurant cash advances. But because of an overabundance of information and misleading facts and figures, it can be difficult to understand how exactly this type of funding can help finance your restaurant or food service business.

How, exactly, does a restaurant cash advance work and what can it do for you?

For restaurant owners, receiving funding from a bank can be difficult because of the strict requirements they impose upon potential borrowers. Banks require that restaurant businesses pledge serious collateral or have a high credit score in order to be approved for a loan. The very nature of the food service industry makes it difficult for business owners to meet these requirements.

This is where cash advances (also known as credit card factoring) can help your restaurant business. If your food service business already has been open for at least 6 months and you accept credit cards – you are already qualified to apply to receive this type of funding for your business. You can even have bad credit and still be approved! The cash will be given to you in a rapid fashion – usually between 4 and 7 business days but sometimes even less. You can use this cash for any business-related expense and there are no requirements for how you choose to allocate your funding. Yes – this means you can use your cash for equipment, payroll, renovations, expansion, and more.

So what’s the catch? Nothing! The merchant cash advance company will take an agreed-upon percentage of your future credit card sales as repayment. This means that if you have a slow period, you don’t have to worry as much about repayment during that period. Cash advances are much more accommodating for the ebb and flow style of business that is typical for many restaurants. This is why this type of funding is particularly useful for the restaurant and food service industry, and why many businesses in this industry rely on credit card factoring to thrive.

Using a merchant cash advance is a guaranteed way to see your restaurant business grow and to provide you with the cash you need to take your business to the next level. Remember that you can use the funds you receive for a variety of purposes, giving you the independence and freedom that you value as a small business owner!…

Rehab Loans – Why Working With The Right Lender Is Important

Rehab Loans – Why Working With The Right Lender Is Important

Are your applications for rehab loans being constantly rejected by the lenders? If yes, don’t worry. Almost 90% of real estate investors out there have a hard time getting their rehab loan applications approved by the lenders. I know so because I was one of them too.

It was extremely frustrating to go from one lender to another asking for rehab financing on the properties that I want to fix and flip. I’d apply for a loan and get it rejected. Through experimentation, I understood how rehab loan lenders play the real estate game.

This understanding allowed me to work with the right lenders that are going to help me and kick out the lenders that won’t help me. The key to success in real estate is to get that understanding.

If you can get that understanding, you can fix and flip multiple properties at once. You can use that money you get to buy properties that you can give out for rent and become a land lord yourself. Yep, it’s possible for you or anyone to succeed with real estate investing. But you have to understand the process and how the game works. The game is always against the average investor…

When it comes to rehab loan lenders, there are actually two different types of lenders:

1. Conventional lenders – Conventional lenders are the banks and financial institutions that provide loans for retail properties. The biggest mistake 90% of real estate investors make is to request rehab loans from these lenders. Some private conventional lenders brand themselves as hard money lenders and don’t tell you everything that you need to know about their process.

These lenders don’t give loans to properties that need fix ups because it’s a liability for them. If they do fund the loan for the repair work, they will take up secondary ownership of the property. The primary ownership of the property will go the lender who funded for purchase of the property or the true owner of the property.

Therefore if something like a foreclosure happens on the property, it’s the primary owner that is guaranteed a return on his investment. The secondary owner has no guarantees whatsoever. He will only get the money after the primary owner gets 100% return on his investment.

Even if these lenders play the primary role in the property, they still don’t provide loans to properties that need fix up because of the following reasons:

– They don’t have the resources or skills to fix up properties. Sure, they have money but they really aren’t into real estate investing.

– Some lenders fix certain properties. It’s done only to get rid of the property even at a loss.

– There’s no guarantee of a return on that property.

– There’s a big chance that they are only managing the loan and have already sold the loan related documents to a bunch of investors in the Wall Street. The Wall Street requires a property to meet a lot of regulations before a loan can be successfully funded.

2. Private Rehab Hard Money Lenders – These lenders consist of a group of private investors who pool their money together for various rehab loans given out to real estate investors. These lenders have a real estate background which allows them to fix up a property and resell it even if the borrower was to fail.

These are the lenders that you need to be working with for your rehab loans. They analyze properties and the market where they are lending which allows them to provide loans for properties that need fix up. They understand the risks involved and can bring a profit out of the property investment even if you failed when it comes to repayments.

Their biggest advantage is that their entire decision making process is private and they keep their own paper. They don’t sell documents to other investors like the Wall Street. They assume primary ownership of property and give rehab loans to investors that require financing for purchase of the property as well as the repairs.…

Manufactured Home Financing – Making Home Ownership a Reality

Manufactured Home Financing – Making Home Ownership a Reality

Buying that first home is an emotional experience for everyone who goes through the process. For those first time buyers who are considering a brand new just built house a manufactured home can be a good choice.

This of course raises the question “is manufactured home financing the same as when buying a traditionally built house?” The answer is yes, the vast majority of banks and lending institutions treat factory built home the same as traditional stick built offerings. This makes attaining the dream of new home ownership a reality for those who can secure mortgage financing.

The first thing we need to understand is what exactly a mortgage is?

In the simplest of terms a home mortgage is the most widely used home buying financing option available to consumers today. It is a loan from any one of a variety of lenders that include banks, credit unions, and mortgage brokers for the specific purpose of buying a home. The mortgage lender lends the money at a certain interest rate over a certain term (amount of time) during which the borrower makes payments according to the terms of the loan agreement; usually every month.

The terms and conditions stated in the loan papers are the rules that govern the mortgage throughout the length of its term. The most important part of these is terms and conditions is normally the interest rate as it will ultimately be the major determining factor for the monthly payment and how much house one can afford. Most manufactured home financing loans offer a variety of options when it comes to how the interest rate will affects the terms. The two most common types of mortgages are the fixed rate mortgage and the ARM or adjustable rate mortgage. Just as their names suggest the way they work are pretty straight forward.

The interest rate of the fixed rate mortgage remains the same for the term of the loan, ensuring that the monthly payment will not change until the loan is paid in full. An ARM works a little differently in that the interest can and will adjust at pre-determined dates. This adjustment is based on current rates and because ARM’s usually start at a very low rate it generally adjusts in an upward direction meaning higher monthly payments that can come as quite a surprise to many homeowners. Unless you are dealing with special circumstances it is recommended to avoid adjustable rate mortgages and stick with safer fixed rate financing.

The most important thing to consider when looking for manufactured home financing is your own budget and how those monthly payments will affect it. Remember that the collateral for that mortgage is your home. Stretching your budget too far to buy that “dream home” can create future problems with your finances leading to foreclosure proceedings. As long as you stay realistic with your finances a mortgage is the way to make home ownership a reality.…

Used Auto Loans – The Most Practical Choice to Owning Your Next Car

Used Auto Loans – The Most Practical Choice to Owning Your Next Car

Being able to get a new car these days seems far-fetched for low and middle class income individuals. But is there still hope in getting a car? Yes, there is! Used cars are much cheaper. And though you may not have the cash in your pocket for a second-hand car, you can always apply for used auto loans.

Buying cars this way is a practical move. Not only are second-hand cars more affordable, but the loans for these cars also have lower interest rates. You can often find pre-owned cars that have been well-maintained with fairly low mileage at bargain prices compared to their sticker price when brand new.

However, getting used auto loans is not always a walk in the park. There are things to take note of when applying for one:

• Credit scores still play a vital role in getting loans for used cars at good interest rates. If you have a very poor credit history, then you will likely not be granted a loan. So fix your credit rating first. You can do this by correcting any errors in your credit score, using your credit cards prudently, paying your bills on time, and paying your debts down.

• It is also a must that you buy from used car dealers with good reputations. Doing this avoids the possibility of buying a stolen or smuggled car or one that has too many defects. Otherwise, arrange to have the car thoroughly checked by a qualified mechanic first.

• Before choosing the loan you will apply for, be sure to compare the offers of lending companies. Check out the lengths of payment, interest rates, etc. Keep in mind your credit rating will likely have an impact on the interest rate you end up getting.

• Choose a loan with monthly payments that fit your budget. An estimate of the monthly payment is $20 for every $1,000 borrowed. So that if you are loaned $5,000 then your monthly amortization fee is approximately $100.

• Like loans for brand new cars, have your social security number and your driver’s license ready when applying.

When you finally get your used car financing, make sure to pay your monthly dues on time. The car is your collateral for the loan. Missing a payment gives the lender the authority to take your car away. In addition, it can lower your credit score. Generally, people who pay on time have a credit score of 703. Those with late payments have 605. Having a low score will make it difficult to get another loan in the future. And if you do get another loan, this will surely have very high interest rates.

With used auto loans, you can fulfill your dreams of driving your very own car. Just make sure you choose the right loan for you and pay your monthly dues on time.…

Losing Money in Forex? Here is How to Overcome

Losing Money in Forex? Here is How to Overcome

The forex market can be a great place to make a living, but it can also be a dangerous and costly one if you don’t take the necessary precautions. If you’ve been losing money in forex or simply aren’t making as much as you’d like, here is what you can do to step up your “game”.

Arguably rule number one in the forex market is to always have an exit strategy for any trade which you enact. This can be as simple as telling yourself that you’re going to go short on that trade once the trend reverses to a certain point out of your favor. The most important thing is to follow through on it regardless of the circumstances which many undisciplined and newer traders can have a difficult time with which is among the prime factors which lead to losing money in forex trading.

Employing a forex auto trading program is always a sound idea, regardless of your position in this market. This is program which responds to changes in the market as they occur to automatically trade for you and keep you on the winning sides of the trends around the clock. When I say around the clock, I mean that these programs constantly analyze real time market data 24/7, looking for and anticipating changes which may cost you money so that it, it being the program, can step in and trade the now bad investment away. 

This is ideal for beginners looking to make some early profits in this market even if they don’t know enough about it to trade effectively themselves. But more seasoned traders or anyone who has been losing money in forex trades of theirs can make use of this technology, as well, as the best programs bring in automated profits around the clock without your slightest intervention required, so it’s great for supplementing your existing trading income, or for any trader who doesn’t have the time necessary to devote to effectively trading the forex market themselves.…

What Is Your Real Asset

What Is Your Real Asset

This is a posting about having a mindset that helps in wealth building. It is important to understand the difference between being rich financially and building wealth.

First becoming rich is not just about making money but about having an overabundance of assets (liquid and hard) over and above what you owe. A person that has $200,000 in income but owes $300,000 may be considered to be well off but is poor compared to a person with $50,000 who owes $10,000 because even after paying off the debt the $50,000 person has no obligations on the remaining income but the $200,000 person is bankrupt after paying obligations.

Wealth not only says there is no obligation but having the ability to do what one desires to do without, regard to cost of time or money. The other thing that sets the wealth buildingA�person apart is that their riches come with health, friendships, fulfillment and peace.

The greatest strength of those who build wealth is that they understand the rules of building wealth through studying others, executing the right actions, at the correct time, and learning the conditions under which wealth is made. They don’t just study but put to practice their knowledge and understanding of wealth creation. The main knowledge falls into the following areas:

How to obtain to protect to plan its to leverage to increase financial knowledge.

This does not just make one rich but makes a stronger statement; that ifA� allA�financial assets were taken away from a wealthy person they understand the rules of how to do it all over again, even if the medium used to obtain it is different.

I would like to show an illustration that gives a clue to what is the true asset that builds wealth.

Most believe that when you buy a home from a seller that the home is financed for the amount of sales price minus the down payment or earnest money. Let’s illustrate this with the following:

The house being bought sells for $150,000. $25,000 is paid as earnest money. This leaves closing cost, taxes, and $125,000 to be paid. After signing the paperwork (financing documents) you are given a deed to the property. Everyone congratulates you on being a new home owner. You are also told you now have an asset that will appreciate in value. At this point most believe that they have now financed a house.

Let’s translate.

First the house was not financed. You were financed and the house is actually collateral. Remember your credit was checked, not the houses credit.

Secondly the house is not your asset it is the banks. Remember that asset is not bringing you wealth but it is bringing the bank wealth. If you do not agree, look atA�theA�totalA�amount you pay over time. It is much more than the purchase price of the house if you stick to the terms and make all the payments outlined. It only becomes an asset when you own it outright or market conditions allow you to sell it for more than you paid for it.

Thirdly the bank has identified the real asset and without it no payments would be received. Yes, you guessed it. You are the real asset to the bank. Without you the bank does not have a good loan.

It is a fact that you are and will always be your best asset. It is your ability to dream, think, learn, calculate, analyze, build a team, comprehend and retain knowledge that is your best asset. Before entering into a financial transaction make sure you put your best asset forward.

Always invest in yourself because you are your best asset.A� The next postingA� will beA�how we can invest in our best asset.…