MORTGAGE RATES REPORT

Mortgage Loans to IRAs Available For Real Estate Investors

Investors with money stuck in an IRA,or old employer's 401-k account, have traditionally shunned real estate as an investment.  Custodial fees were high and there was no way to leverage the property through an IRA.  There may be a solution.

Consider a non-recourse, loan to the IRA.  Real estate investors can get a commercial loan, directly to their Individual Retirement Account, through our IRA mortgage program.  A brief rundown:

• the mortgage is non-recourse
• down payment of 35% required (50% down payment in certain states)
• ARM products and fixed rate loans available
• rates are typically higher than conforming mortgage rates
• 25 year amortization only

Not all IRA custodians will be able to administer real property holdings.  A short list of custodians for real estate investments includes:

Lincoln Trust Company 
Trust Administration Services Corporation
PENSCO Trust Company
Sterling Trust Company
Equity Trust Company
Sunwest Trust Company
Self-Directed IRA Services, Inc.
Provident Group

Renovation Financing Can Be Combined with Energy Efficient Tax Credits This Year

Renovation loans can provide financing for energy efficient improvements, which under the American Reinvestment and Recovery Act of 2009 could qualify for a federal tax credit equal to 30% of the cost of the improvements.  There are two types of renovation credits:

Energy Efficient Projects:

The tax credit is limited to $1,500 per home (or $5,000 purchases); unused credit doesn't "carry over".  If tax liability is less than $1,500, the unused tax credit is not "refunded".  All renovation projects must have qualifiying products placed into service prior to December 31, 2010.Not all EnergyStar products qualify.  The list of qualifying products is not limited to but includes:

• windows and doors are most common renovation projects
• some gas or propane water heaters qualify
• certain roofs could qualify for tax credit
• some insulation products qualify for tax credit

Alternative and Renewable Energy Systems:

This credit has no upper limit and may be carried over into subsequent tax years through 2016.  A partial list includes:

• solar water heaters
• solar panels (restrictions apply)
• small wind energy systems
• geothermal heat pumps
  

Renovation loans, specifically designed for financing energy efficient improvements are available through FHA or Fannie Mae.  Energy Efficient Mortgages (EEM) allow for loan amounts to exceed the purchase price of the home for certain improvements.  Combined with the tax credits, this can make the purchase of a home in need of renovation less costly than purchasing a new home.

You might begin the research for your renovation project by using our EnergyStar Home Energy Yardstick Calculator.  Contact us for more information about EEMs.

Demand For Renovation Financing Should Grow

Renovation financing should grow exponentially as mortgage rates rise and a slow real estate recovery takes hold.  Slow price appreciation will encourage buyers to purchase a home at a discount to account for deferred maintenance or questionable decoration.  Moreover, the demand for energy efficient improvements, like double-paned windows and new fuel systems, should grow as people look to reduce their monthly energy bill.  Additionally, the IRS allows for a partial tax credit for energy efficient improvements placed into service in 2010.

The challenge is that all these improvements costs money.  In this new category, "RENOVATION FINANCING", I'll be exploring some of the mortgage loan programs that allow home buyers to borrow money in excess of the purchase price to implement such improvements.  To date, I am familiar with five loan programs:

• VA Energy Efficient Mortgage- allows for $6000 of energy efficient improvements to be financed
• FHA 203-K Renovation Mortgage- allows for larger renovation projects to be financed
• FHA Streamline-K Home Improvement Loan- allows for up to a renovation project up to $35,000 over the purchase price to be financed
• Fannie Mae Energy Efficient Mortgage- allows for energy efficient improvements, up to 115% of the purchase price of a resale home to be financed (up to 105% for newly built homes)
• FHA Energy Efficient Mortgage- allows for up to 105% of the purchase price to be financed for energy efficient improvements.

While I am hardly an expert on construction or renovation loans, I have closed a bunch of them over the past 15 years.  I'm proficient at comprehending loan guidelines and asking underwriters lots of questions.  Expect me to be writing about this topic a lot here as I take courses and start closing more of these loans.

USING LEVERAGE:

Let’s talk about how mortgages can be applied to the Buffett School of Contrarian Economic Theory; you should probably be maxed out to the hilt on your properties. “Mortgage Planning” was a sales technique we debt peddlers used, during the boom. We dressed up serial refinances, to the maximum permitted loan-to-value, and called it “home equity harvesting“. The theory suggested was to make money from arbitrage opportunities by borrowing against your (appreciated) principal residence at x% and investing that money at (1.25) x%.

Red the rest here: http://www.biggerpockets.com/renewsblog/2010/01/22/imprudent-leverage-contrarian-opinion/



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VA NON-ALLOWABLE CLOSING COSTS:



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VA mortgages are a great way for those who served in the United States Armed Forces to purchase a home. Many Southern California sellers have rejected offers using VA financing because they believe they are required to pay certain closing costs for the buyer. We call those closing costs “non-allowables” because the VA won’t insure the loan if the veteran pays them.



Read the rest here: http://www.zillow.com/blog/mortgage/2010/01/23/who-pays-va-non-allowable-closing-costs/