David Krushinsky - Phoenix Mortgage Professional

Does creative financing still exist or are there ways to purchase homes in Phoenix without traditional financing these days?  If you're like me, you're probably saying, "No way".  If so, read on. 

Recently, I had the privilege of speaking with a real estate investor, by the name of Nick Johnson, that specializes in Short Sales and "Subject To" purchases.  Nick and I got introduced through a mutual friend, Matt Rosen @entrepreneurHI, from Twitter.  I learned a lot about Nick after talking with him for only an hour on the phone.  I learned all about his high regard for his family, his unparalleled ethics and his business philosophy.  Additionally, I also learned he is also the author of the eBook, "Subject2".    

While most of us in the Phoenix area and beyond are all too accustomed with the term Short Sale, "Subject To" was not a practice in which I was all too familiar.  Being the type of individual that prides myself on keeping current with what is available in today's marketplace, I immediately had to do some investigative research.   I figured that I would share a little overview of what I discovered. 

"Subject To", also referred to as "Subject 2" or "Sub2", is a form of creative financing in which the seller deeds the property to the buyer while keeping the existing mortgage note fully intact.  The buyer, typically a real estate investor, simply makes the mortgage payments on the existing mortgage.  These transactions can provide an array of benefits for both the buyers and sellers.

 The buyers do not need to go through the headache (I know all about this) of getting qualified for a new mortgage note.  There is no credit, income or asset verification required.  The investors own the property, but do not assume the loan.  This leaves personally liability on the sellers.  Typically, the main advantage for buyers in these transactions is acquiring a property at a much lower interest rate than if they were to purchase the property outright.

It may seem unbelievable to most of us that a homeowner would deed over their property to another individual, but there are many reasons that sellers find this a great option.  The primary reason that many sellers opt for Sub2 financing is to obtain debt relief.  Some are facing foreclosure and unable to sell their property due to lack of equity.  Owning a property that is "underwater" is a concept that many Arizona homeowners can relate all too well.  Others simply want a fast sale.  They may be moving, transferring jobs, getting married, divorced or a whole list of various scenarios.  

Subject2 contracts should be implemented by a knowledgeable real estate professional.  We've all witnessed the dangers of working with someone who claims to be an expert but has no more expertise than you or me.  A sub2 contract is essentially the same as a standard state approved contract.  The only difference is the 'sub2′ addendum states the terms of the existing loan. 

In today's credit climate, we all know someone who may be struggling to qualify for a loan or continue making their monthly mortgage payments.  I would encourage you, no matter what your preconceived ideas of traditional financing are, to have them contact me before it's too late.  There are many times that I may not be able to help them but I can guide them in the right direction.  Don't let them become just another statistic.

So you've decided that you want to buy a home in Phoenix, AZ.  Besides the many advantages to living in the Valley, interest rates reaching all-time lows coupled with the recent plunge in home prices make Phoenix a very affordable and attractive option.   Nowadays, it is actually cheaper to purchase a home in the Phoenix area than rent.  The only down side to this scenario is that you're short on cash for a down payment.  Unfortunately, you cannot get a gift from your family, you've already tapped out your 401K, you are not eligible for a VA loan, you make too much money to qualify for down payment assistance, and you have no desire to live in a rural area.  So, the question is..... What can you do without a down payment???  Meet the qualifications for the $100 Down Payment HUD Home Program.

Let's take a trip back in time and describe why the availability to finance a home with the $100 Down Payment HUD Home Program arose.  During the housing boom, many of the homes in Phoenix were financed with Conventional loans.  Prior to the run-up in home prices, many first-time homebuyers used FHA loans to purchase housing.  Once home prices started rising at unsustainable levels; homeowners began to refinance their FHA loans into Conventional loans to pull cash out, remove mortgage insurance, and lower their monthly obligations.  Once these homes, now with Conventional financing, went into foreclosure, the banks began to sell their inventory at a discounted price.  At the beginning of 2007, many of the new homebuyers were forced to use a FHA loan due to inability to finance their purchases with Conventional mortgages in Phoenix.  These homebuyers were unknowingly still buying homes at inflated home prices.  Sadly, many of these homes purchased in 2007 and 2008 with FHA loans are currently going into foreclosure.  In most cases, the current values of these homes are significantly less than what is owed.  The $100 Down Payment HUD Home Program is a result of a FHA borrower foreclosing and HUD repossessing the home that is now for sale.    

So Who Qualifies? 

 Now that you've been able to determine you may be able to qualify, here is an outline of the next steps you need to take.

Step 1 - Get pre-qualified for the $100 downpayment HUD Homes Program

Step 2 - Choose search area and type of home (i.e. North Phoenix - 3 bedroom, 2 bath with 1,500 square feet or more)

Step 3 - Create a login and password at our customized database to search homes

Step 4 - Contact us to match you with one of our Realtor partners that can assist you with viewing the homes you are intrested in.  Please note, not all Realtors are trained and educated for HUD homes.  It's very important to work with one of our preferred partners that has experience with HUD homes.

Step 5 - Submit an offer, get acceptance and go through the loan process.

Step 6 - Close on your purchase using an FHA-insured loan.

It can be a very simple process but the first step is to get pre-qualified.

If we believe foreclosure is in our clients best interest, should we propose this as an option and recommend they seek legal counsel?

This morning I was thinking about the many clients I have who are underwater 50-70% in negative equity.  The more I thought about the reality of those clients getting back to the break-even point, where their home is worth what they paid for it, the more I questioned what my advice to them should be.  In Arizona, our foreclosure laws are extremely favored toward homeowners.  I'm not going to pretend to be an expert and give you all the scenarios but, often times, the borrower can walk away without any recourse, or deficiency.    

This brought me to think about the letters behind my name, CMPS.  I am a Certified Mortgage Planning Specialist, and have been since January 2007.  What is CMPS you ask?  CMPS is a training, certification and ongoing membership program for financial professionals who provide mortgage and real estate equity advice. The CMPS Institute was formed as a joint effort by leaders in the mortgage and financial planning industries to raise professional standards among mortgage professionals and integrate sound financial planning advice into the mortgage process.   Note the last sentence, sound financial planning advice.  This leads me to my question.

What would your advice be to a borrower owes $220,000 on a home that's worth $70,000?  Should they continue to pay their mortgage if they have suffered income loss but still have assets?  What if they were advised by legal counsel there is no recourse if they walk away versus do a short sale, where there may be recourse?  One could argue that bad economic advice would be to continue paying on an asset that could take more than 20 years to see the original purchase value versus fixing your credit after foreclosure, which could only take 3-5 years.  The average appreciation rate for Arizona is 5.73025% for a 30 year period.  The 5 and 10 year averages are the same, depending on the years you start and stop. 

Lenders have loss-mitigation departments, which are staffed and have legal counsel.  Why shouldn't a borrower mitigate their own losses too?  Sometimes it's really just a business decision that one faces.  Many business contracts have been broken by the politicians, the people who run these banks and the banks themselves.  Is it immoral?  Is it unethical?  Are we outraged to hear about it??  What do you think?  

Phoenix home buyers looking to take advantage of favorable interest rates, reduced home prices, and a low down payment should consider an FHA loan when buying a new home in which to live.  The Federal Housing Administration (FHA) is a part of the U.S. Department of Housing and Urban Development (HUD).  Since FHA loans are insured by the government, it's easier for a lender to offer you the option of a lower down payment.  FHA home loans allow first time home buyers and current home owners to purchase a home with a 3.5% down payment.  In order to qualify for a FHA loan, you will need to ask yourself the following questions......

READ THE REST OF THE ARTICLE HERE.................

For many years I've attended Sales Mastery, Business Plan or some type of mortgage seminar to continue learning new, innovating ways to build my business.  Many of the top loan officers in our company, and other companies, also attend these events.  It wasn't uncommon for these seminars to have over 3,000 people in attendance.  Unfortunately, there was no Sales Mastery or Business Plan to attend this year.  

The Internet is an amazing tool that we can use to leverage our knowledge, relationships and advertising.  Websites like Twitter, Facebook and Linked In have allowed me the opportunity to connect with some brilliant loan officers in other parts of the country.  I read their blogs, their tweets and look at their status updates on Facebook.  I do what they're doing to help grow my own business.  I write about my own mistakes and also the success that my team has and post those articles in my blog.  I put links on Twitter, Facebook and embed my articles in Linked In.  

In the short time I've been doing this, I've built relationships with many of these people.  Chris Brown helped me get my blog started last year.  Brian Brady gave me a few tips on the phone about writing blogs, which has resulted in about 3-5 leads per week.  I've also received many referrals from loan officers in different states and locally in Phoenix.  I've even been contacted to write articles for print magazines, such as Scotsman Guide.  All of this because of social media.    

The game is changing.  Gone are the days of advertising with flyers and magazines.  Sending out 1,500 mailers to people "hoping" you get a 1% return on your efforts is a losing battle.  The Washington Post just announced yesterday they are shutting down all of their offices around the country except the one in Washington D.C.  If today's loan officer doesn't embrace the new rules within our own business, we will be left behind just like the Post.  During the last 10 years, the media has taught everyone they must get prequalified before even looking at homes.  Today's consumer is turning more toward the Internet and we must learn how to show up in their search results on the first page of Google.  

I'm using this as an invite to learn a new strategy, implementation and execution from the best of the best.  The event is called Mortgage Revolution and is dubbed "a grass-roots movement created by mortgage professionals for mortgage professionals".  I am committed to attending this event January 10-12, 2010 at the Cobb Galleria in Atlanta, GA.  Early-Bird special is $149 until Dec. 1, 2009, then the regular price thereafter is $199. This is a non-profit event and the goal is to raise $250K for charity so that the media has something positive to say about our industry.  To find out more visit their website or shoot me an email.  I hope to see you there.      

Located in the Southwestern part of the United States, Arizona is a state known for its wonderful weather, beautiful scenery and national parks. It is one of the ideal spots for active lifestyles and is easy to see why many potential home buyers are choosing Arizona as their destination of choice. 

The path to home ownership is an exciting time for you and your family, but it is one that may bring additional responsibilities into your life.  Having the assistance of an honest and experienced Arizona mortgage professional can make all the difference during this process. 

Homes that are newly purchased may require additional remodeling or repairs. The FHA 203k loan may be the perfect opportunity to make the necessary repairs for safety and cosmetic upgrades.  There are also other options for VA and FHA loans for "Going Green" on your home mortgage.  Building or remodeling your home with eco-friendly materials can lower utility and water bills, achieve federal tax credits, higher real estate value, purer air quality, reduced waste sent to landfills and conservation of natural resources.

What is Asbestos?

Asbestos is the name given for a group of fibrous minerals that were mined for their qualities as fire resistant, insulation and high durability. Asbestos may still appear in roof shingles, dry wall, attic insulation, popcorn ceilings, joint compounds and electrical wires. It's flame resistant and durable qualities made it an ideal choice for many industries.  Homes built before 1980 may still contain asbestosmaterials. There are now many eco-sustainable options that make the use of asbestos obsolete.

Tips & Important Information on Asbestos

If any asbestos is located in your home, the best thing to do is leave it un-disturbed until a home inspector can determine the best course of action. In many situations, the best action is no action. Asbestos that is disturbed or damaged due to age is known as "friable" asbestos. This is a concern because its toxic fibers can easily circulate and become inhaled.

Although asbestos exposure does not always lead a related illness, long term inhalation of its fibers can cause a rare but severe ailment known as malignant mesothelioma. Asbestos-related illnesses may not appear until 20 to 50 years after exposure, which makes mesothelioma diagnosis even more difficult.

The removal of asbestos must be performed by licensed abatement contractors who are trained in handling dangerous materials. They work under state and federal regulations to ensure no health concerns arise from improper removal.

Arizona "Going Green"

The Arizona Department of Environmental Quality is committed to protecting the public from asbestos-containing materials by educating and assisting with asbestos removal, transport and disposal. The removal of hazardous substances must be performed by professional abatement contractors who are trained in these matters. Eco-friendly options must be considered when the removal is complete.

Implementing green methods of building can have positive environmental, health and economic benefits. These include: Conservation of natural resources, enhance air quality, protect eco systems, energy sustainability, increase property value, improve quality of life, improvement of pulmonary and cardiac health, Reduction of waste.

Environmentally safe alternatives to asbestos include the use of cotton fiber, lycnene and cellulose. There is no need for any products used in construction to be made from asbestos, yet over 3,000 work and home-based materials still contain this toxin.

With growing education and technology in green sustainable energy and building resources, the state of Arizona has taken actions to ensure safety and health is a top priority in this great state. If you are looking for more information on asbestos or mesothelioma please visit www.asbestos.com.

If you're considering remodeling or rehabilitating your home, the FHA 203k program may fit your needs.  If you want more information on the FHA 203k or other rehabilitation loans please contact The Krushinsky Team at 602.695.7575 or david@dkhomeloans.com.

FREE CONTINUING EDUCATION CLASSES FOR ARIZONA REALTORS

You are invited to attend the continuing education seminar " Answers To Tough Questions About Credit In Today's Market" on Wednesday, January 13th from 2:00 pm - 5:00 pm.  This event is FREE and provides (3) three Accredited General Hours towards your continuing education requirements.
 
David Krushinsky, a Certified Mortgage Planning Specialist, will address those tough questions regarding your clients credit in today's real estate industry.  The following are a few key topics that will be discussed:

   -Is it better for your client to file bankruptcy or to foreclose?
    -What is a short sale and how can it affect your clients credit?
    -What about a Deed-In-Lieu of Foreclosure?
    -Foreclosure vs. Short Sale
    -What should my clients do???
    -Many more items to cover!!!

 
Don't miss out on this opportunity to learn about new and changing information and get your questions answered by a mortgage professional. 

The Seminar will be held at the Foothills Recreation & Aquatic Center 5600 West Union Hills Drive, Glendale, AZ 85308 on Wednesday, January 13th from 2:00pm - 5:00pm.
 
Please RSVP to reserve your seat.  For any questions or to RSVP, please contact David Krushinsky at 602-695-7575 or email david@dkhomeloans.com 
 
Hope to see you there!
 
Accredited by C. David McVay School - 3412 E. Dunlap Ave., Phoenix, AZ 85028
602-749-2098 Email: dmcvay@cdavidmcvayschool.com ; www.cdavidmcvayschool.com

Should you tell your clients to dispute items on their credit report during the loan process?  The most common response is typically, "Sure, why not?".  If you are advising your clients to dispute credit items, you may be in for a big surprise.

A few months ago, we prequalified a borrower looking to purchase an investment property.  We knew the transaction wasn't going to be easy, but luckily she had come to us before she began looking for a home.  After pulling her credit report,  we discovered her FICO score was low; however, it still fell within the acceptable range to qualify for conventional financing.  After analyzing the credit accounts, it was apparent that a collection account placed on her credit report by a fitness club was driving down her FICO score.  We reviewed the credit report with the borrower and she did not feel responsible for this collection account. Our recommendation was to dispute the account with the credit bureaus, which she did.

Fast forward two months.  She finds the perfect property and her contract is accepted.  We updated all of her information and sent the file to be underwritten.  The underwriter "suspends" the loan and conditions for the following inforamtion: the disputed account on the credit report must not be shown in dispute; or provide documentation the account does not belong to the borrower; or provide Freddie Mac Loan Prospector (LP) Automated Underwriting Findings.  We cross-reference the guidelines and sure enough, the underwriter is correct.  Here is an excerpt from our underwriting guidelines, which refers to Fannie Mae's Desktop Underwriting (DU) policy: 

DU findings may often times note different accounts reported as Disputed. These accounts are not considered in the credit risk assessment provided in the DU feedback and as such, need to be dealt with exactly as noted in the DU findings.

• The lender must verify the accuracy of the trade line(s) by determining if it belongs to the borrower and by confirming the accuracy of the payment history.
• If the trade line does not belong to the borrower, or the reported payment history is inaccurate, no further action is necessary.
• If the trade line does belong to the borrower and the reported payment history is accurate, it must be taken into consideration in the credit risk assessment. A new credit report must be obtained with the trade line no longer reported as disputed and resubmit the loan case file to DU with the new credit report.
• If the disputed trade line is a mortgage that was past due by two or more payments in the last 12 months, or a foreclosure that has been filed within the last 5 years, the loan is ineligible.

Ok, no big deal.... we'll run the loan through Freddie Mac Loan Prospector and obtain LP findings.  The problem is that sometimes LP does not accept loans that DU will accept and vice versa.  LP would not "accept" this loan.  So we immediately contact the borrower to see if she has received any updates from the credit bureaus since disputing this item.  Big surprise, she has not.  We all know how long this process can take.  We explain the situation to her and she unhappily decides to pay the collection company in order to get the loan completed.  We order a re-score from the credit company with the proof provided to us that the collection is paid in full in order to get the account out of dispute status.  We're on our way.

Fast forward 5 business days.  Everyone is eagerly anticipating receipt of the re-score, as this is our last condition before we can obtain a full approval and order closing docs.  I forgot to mention that this transaction was an "approved" short sale and we only had 17 days to close. We receive an update that the credit re-score has been completed.  We pull a new credit report and the account is still showing in dispute????!!?!?  Apparently, TransUnion called the collection company, but no one answered the phone.  The report was never updated by TransUnion.  Meanwhile, the clock is ticking and everyone is trying to find out if we're going to be able to close before the short sale approval expires.  We have no choice but to order a new re-score.  We send in our request and wait another 5 days business days.  The short sale approval has now expired and we're still two weeks away from closing.   

Finally, we receive the second re-score back and everything looks good.  We send all of the updated information into underwriting and the file gets cleared for closing.  Thankfully, the short sale approval gets extended.  The borrower signs papers and every one lives happily ever after.  The moral of the story is when you're purchasing or refinancing your home; be careful when disputing tradelines on your credit report, even if they aren't your accounts.  If you have additional questions, contact David Krushinsky at 602-695-7575 or david@dkhomeloans.com. 

"So what's my Phoenix home loan rate"?  This is the question asked to loan originators everyday from our clients and prospects.  There is no simple answer and it seems to be getting more complex as the mortgage industry moves toward more risk-based pricing.  Risk-based pricing allows adjustments to par pricing for risk factors such as; FICO scores, loan-to-value percentages, property type (SFR, Condo, 2-4 Units), occupancy (Primary, Vacation or Investment) and mortgage type (Interest Only, Adjustable Rate etc). 

Let's start off with the basic mechanics of fixed mortgage interest rates.  Interest rates are primarily based upon the pricing of Mortgage Backed Securities ("MBS" or "Bonds") issued from Fannie Mae ("FNMA"), Freddie Mac ("FHMLC") and Ginnie Mae ("GNMA").  Think of a Bonds' sales price similar to that of a Stock, it trades up and down during the course of a day.  At the time of writing this article, the FNMA coupon we are tracking is selling for $101.03.  This is down 22 basis points from the previous day's closing price of $100.81.  In simple terms, the consumer would have to pay an additional .22% of their loan amount to have the same rate today that they could have locked in the previous day.

"So... what does all this mean?"

In our example, the client's interest rate could vary from 4.50% - 5.25%.  The mortgage interest rate will depend on how the customer would like to set up their mortgage loan with regard to paying either higher or lower upfront fees.  Clients locking in a rate should consider how long they intend to have this mortgage loan before considering the fees associated with obtaining any rate.  The shorter amount of time you will have the loan, the more it makes sense to pay lower fees and have a higher interest rate.  The longer your time horizon for keeping the loan, the more it makes sense to pay higher upfront fees, also known as buying down the interest rate. 

A client locking in a rate of 4.50% (5.597% APR) today on a 30-year fixed FHA loan should plan on paying all the customary fees with two discount points.  Customary fees would include appraisal, credit report, processing fee, underwriting fee, origination fee, title fees, and recording fees.  That same client could lock in 4.75% (5.747% APR) with 1 discount point, 5.00% (5.896% APR) with no discount points and 5.25% (6.044% APR) without any discount points or origination fee.  An origination and/or discount point is typically 1% of your loan amount.

With so many rates available on a 30-year fixed mortgage, how can a borrower get the best rate? 

First, ask the lender to provide you with a total overall cost analysis.  This should illustrate the proposed savings you will have on the loan options available to you both on a monthly and long-term basis. This analysis should also include total payments, total interest paid, total closing costs and points and balance remaining at a given point in time.  One of the most important metrics to consider is how long you plan on keeping this loan on the home you purchase or refinance when selecting the right mortgage plan.

Second, we recommend working with a professional who watches, articulates and understands the interest rate markets.  If you're a consumer, it's important to understand that interest rates can change daily, even hourly.  So, if you are comparing lender rates and fees - this is a moving target on an hourly basis.  If you are comparing two quotes from different lenders, you may be comparing apples to oranges.  The only way to get a truly accurate comparison is to have the quotes prepared on the exact same day, at the exact same time, with the exact same terms and conditions.  You also must know the length of the lock term (i.e. 15 day, 30 day, 45 day etc.) you are looking to secure, since longer rate locks typically carry slightly higher interest rates.

We provide a daily recommendation to our client's advising them to float or lock their home mortgage interest rate.  In this update, we list the current pricing of the FNMA 30-Year Bond and the previous closing price.  We identify the key current market updates and the daily economic news releases that are influencing interest rates.  We also provide an illustrative picture with our written recommendation, which makes it easily understood.

In conclusion, we feel that having access to valuable information regarding the total overall long-term cost, along with mortgage options that best fit their needs, coupled with market knowledge will allow you to obtain the overall lowest cost mortgage with the best loan rate available. 

For more information on rates, fees and your personal mortgage options, contact The Krushinsky Team at 602-695-7575 or email david@dkhomeloans.com.     

You've been pre-qualified for a 3.5% down-payment, FHA home loan, to buy the house of your dreams in Scottsdale, Arizona.  You and your Realtor have searched for months and finally narrowed it down to one home.  It's a short-sale located in beautiful Scottsdale, AZ.  This is the ideal location; not too far from your office, great schools for the kids, plus terrific dining and night-life for you and your wife. 

Your Realtor is very sharp and has well over twelve years of experience selling high-end homes in Scottsdale.  You make it through the inspection period with no items needing repair.  Your Realtor gives your lender the go ahead to order the appraisal.  The FHA appraiser returns the completed appraisal with a value equal to the sales price.  You're feeling terrific because you've just locked in an incredibly low interest rate of 4.875%, which is fixed for 30 years, on an FHA home loan.

Everything seems to be moving along smoothly, until you get a call from your Loan Officer.  She sounds concerned and you immediately begin to panic.  She tells you that the lender has turned down your loan because the house has a shared well for water, which is connected to more than four homes.  You don't understand why your loan was declined?  Your Realtor doesn't understand either; he has sold many homes in this area without a problem, which were also financed.   

The reason some lenders cannot finance a home with a shared well connected to more than 4 homes, is that it doesn't fall within the standard FHA loan guidelines.  Prior to 2007, many of the homes in Scottsdale were financed with conventional financing.   Therefore, very few Realtors and Loan Officers ever experienced a problem with this specific circumstance.  Self-admitted, many industry professionals need to educate and enhance their knowledge of FHA guidelines.  It is possible for this home to be financed under FHA guidelines; however, it will require some additional documentation, more work from everyone involved, and maybe even a few sleepless nights.  Hopefully, you are working with educated professionals that will be able to alleviate many of those restless nights and extra stress!

This was an actual scenario we experienced with one of our referrals.  Luckily, we were able to fund this client's loan after he received a loan denial from another lender.  Although in order for this loan to work, there are a few specific requirements that need to be met.  First, the water must flow through a valve dwelling service line, so that water may be shut off to each served dwelling without interrupting service to other properties.  Secondly, the well must be connected directly to the pumping energy source (not a dwelling); and the energy being used for pumping must be separately metered.  Finally, the well must be covered by an acceptable well agreement through one of the five documents/entities listed below:

1. Control by Public Utility Commission
2. Trust Deed
3. Third Party Beneficiary Contract
4. Property Owners' Association
5. Franchises from Governmental Authority

The following identifies the additional documentation required in order to close this loan for our client.  These items do carry a few additional fees.      

• Documentation provided by a Septic Inspector stating that the well sits a minimum of 50 feet from the septic tank, 100 feet from the drain and 10 feet from the property line.
• Certified pumping test
• Potable water certification

Special thanks to Beeman Pump Company and A-American Septic Service are in order for making this transaction successful. 

If you're currently considering purchasing a home with a shared well connection to more than 4 homes and need some assistance, please contact David Krushinsky at 602-695-7575 or david@dkhomeloans.com.