Mortgage Lending
When someone is ready to buy, they often hop in their car and start browsing the local housing stock for their new home. It can be an exciting venture, especially when you’ve found a few in your price range.

But what is your “price range,” really? Do you know what that corner dream house with the covered patio and finished basement will cost you each month? The truth is, the sticker price in the homebuyers guide is just a part of the total housing cost and doesn’t take into account all the other costs and criteria that a lender will be considering when you apply for a mortgage loan.

There are distinct questions a lender has to answer before they can determine what a mortgage payment is going to look like. We’ll discuss these elements over the next couple installments, but for now… we will start at the beginning.

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When Jon Emler began his search for homes about a year ago, he and his fiancé were interested in finding a house that needed a little bit of fixing up. A carpenter by trade, he didn’t mind putting work into a house…but he wasn’t prepared for what they found.

The Emler House
The Emler House

They found a nearly 1,700-square-foot two-story colonial with attached two-car garage in suburban Boardman, Ohio. Built in 1976, it had a nice façade, big yard, and was on a quiet street…perfect for raising a family. Three bedrooms gives them plenty of space for future kiddos, the wood-burning fireplace gives the family room a nice ambiance that would be perfect during Ohio’s long, cold winters, and the full 950-square-foot basement has plenty of potential. However, after sitting vacant for a year, the house had its blemishes.

“When I first came into the house, we saw that the carpet was stained. The kitchen was nice, but there was woodwork throughout that had been chewed on by a dog. I’m in the Carpenters union, so all I saw was dollar signs.” – Jon Emler

The house needed new trim around the floors, new windows, and was in desperate need of fresh paint. There was a crack in the foundation, and the bathroom floor next to the tub had a hole “so big you could put your foot through it.” The tub itself felt like it might fall through the floor.

“The wood was rotted out and you could see the floor joist.”

(L to R) The basement floor had water damage from leaks, there was a hole in the bathroom flooring by the tub, and lighting fixtures were missing throughout the house.
(L to R) The basement floor had water damage from leaks, there was a hole in the bathroom flooring by the tub, and lighting fixtures were missing throughout the house.

Jon’s fiancé liked the house because after all the DIY fixes, they be able to truly call the house theirs. For the bigger fixes, Jon spoke with his realtor, who brought up the possibility of an FHA 203k loan, which he had never heard of.

He inquired online about the 203k and found an agent in Toledo who said that with a credit score of 645, he was in a good position to be approved. They began the application process and Jon put in a $106,000 bid for the house. After about a month and a half, everything was in place and the paperwork was in to the underwriter.

New lighting fixtures and ceiling fans went into the bedrooms and kitchen
New lighting fixtures and ceiling fans went into the bedrooms and kitchen

Unfortunately, the agent from Toledo said he was declined for reasons that Jon disagreed with. Still, he had 24 days to make a decision on whether or not he wanted to move forward with the house. Jon’s realtor introduced him to me. After working with Jon, I was able to get him a pre-qualification letter after two days.

Basement walls were reinforced with rebar and filled with concrete
Basement walls were reinforced with rebar and filled with concrete

It wasn’t in time to meet the deadline and Jon had to rebid $110,000 to get the house, which worked out to be another $22 per month to his mortgage payment. But after working close with him, we were able to get Jon and his fiancé approved for the 203k loan. For an added bonus, some of the renovations made him eligible for the PowerSaver Grant, which put $2,500 toward his closing costs.

“That was great, especially for someone like me who is a first-time homebuyer. With the money I saved, I was able to buy paint, supplies to patch some holes in the woodwork, a new lawnmower and a grill.”

Admittedly, Jon was eager to move into his new place and get to work, and the 203k process took a little longer than he probably liked. But my office and staff worked with him the entire way, vouching for him when the loan looked like it might be in danger of denied a second time, and even getting all the forms to him digitally so he didn’t have to take time off of work to come in and sign them. From the time he placed his bid to the close of the house, the process took 30 days, and we were able to get him approved for a 30-year fixed mortgage at 5.25%. Jon only had to put down $1,400 in closing costs.

12 new Energy Star-rated windows were installed throughout the house.
12 new Energy Star-rated windows were installed throughout the house.
After renovation, the hole next to the tub was fixed, a new shower, tile, and sink fixtures were installed, and energy-efficient GFCI outlets were put in place
After renovation, the hole next to the tub was fixed, a new shower, tile, and sink fixtures were installed, and energy-efficient GFCI outlets were put in place

In the basement, they ran some new plumbing lines reinforced the north and west walls by filling the core of the block with concrete. They also filled in some of the cracks and waterproofed the walls. Jon and his fiancé will use the money they saved with the Power Saver grant to do the superficial stuff themselves, and he’s already started painting some of the rooms.

“I would highly recommend the 203k to any first-time home buyer, especially if you can find a house that you don’t have to put a lot of money into. Once this is finished and painted and I’m moved in, it’s a brand new house for $126,000.”

Jon Emler

FHA 203k: Before and After

FHA 203k: Before and After

After looking at numerous homes and not finding “the one,” first-time homebuyers Nick and Veronica Getsy were all but resolved to settle on something that was nice…but not perfect. It’s easy to get discouraged when you feel that the market has essentially priced you out of buying your first home.

Our office showed them that they can take a house they like, and turn it into a home they love. With the FHA 203k loan, the Getsy’s were able to find a home that had potential and make renovations that they otherwise wouldn’t have been able to accomplish. Renovations included putting in a new air-conditioner, new energy-efficient windows, all new appliances, a new deck, new fence for the backyard, new carpet, and fresh paint throughout the whole house.

Watch this video to hear their story.

If there was ever any doubt of the popularity of renovation loans, a bit of good news out of AmeriFirst Home Mortgage should put those doubts to rest.

AmeriFirst_HM_logo_750Earlier this month, Inc. Magazine announced AmeriFirst earned the position of 2,192 in its 2014 Inc. 5000 list. This identifies AmeriFirst among some of the fastest-growing companies in America, with the average company this year growing at a rate of 516%.

This honor is a big deal for AmeriFirst, which recorded its best month ever in July. In an article published by Mortgage Professional America Magazine, Dan Moyle, AmeriFirst’s Creative Director of Marketing and Communication, shed some light on the numbers that drove this growth. AmeriFirst closed 625 units in July compared to its 550 monthly average. The company is on track to close nearly 700 in August, Moyle said.

Team at AmeriFirst in Boardman
Team at AmeriFirst in Boardman

One of the reasons for AmeriFirst’s growth is its niche offering of renovation loans. Speaking as a part of the AmeriFirst team, a majority of the business we do revolves around renovation loans, including the FHA 203k loan, HomeStyle loans, and HomePath loans. From our perspective, these loan types have been taking off, particularly among first-time homebuyers who may not be able to put 20% down on a home with a conventional mortgage. Here in Boardman, our success with renovation lending has been very exciting, and I’m proud to say that our office leads AmeriFirst in both renovation lending loan volume and loans closed YTD for 2014.

As the housing market in our area rebounds, no doubt those numbers will continue to climb as we continue to provide the best service to homebuyers in our community. More importantly, we will continue to help put credit-worthy customers in homes that they love.

As always, thanks for reading. Talk again soon…

 

Residential Financial Corporation is now a Ginnie Mae Seller-Servicer. This new privilege allows us to sell our own government insured loans (FHA/VA) without having to sell or depend upon an aggregator like Wells Fargo, Citi, or GMAC. Given the consolidation of the major players in our industry, this approval will allow us to have firm control of our own future in many ways.

Ginnie Mae is the only mortgage-backed security that enjoys the full faith and credit of the U.S. Government. They exist to make affordable housing a reality for millions of low to moderate-incomehouseholds across America by channeling global capital into the nation’s housing markets. With approximately $1.2 trillion of Mortgage-Backed

Securities (MBS) outstanding and more than $4 trillion of cumulative issuance, Ginnie Mae’s MBS program has been a significant contributor to the growth of the secondary mortgage market in the United States. This major milestone achieved by RFC truly reflects our commitment to loan quality and compliance. We’re absolutely thrilled to reach this level!

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On sunny days it’s not hard to notice that people are generally in a better mood. Not only does sunshine make us happier, but there are also plenty of associated health benefits that go along with it; such as increasing bone strength, boost immunity, lower blood pressure, and even fight obesity.  This is mainly thanks to the uptake of vitamin D that naturally occurs while in the sun.

Unfortunately the days have been getting shorter and that’s not going to stop until the end of December. So if you’re thinking about a vacation home to get some sun, definitely consider one of these cities that get the most annual sunshine!

Yuma, Arizona: 90% annual sunshine

Sunniest place in the US and the Earth.  Yuma has a population of around 100,000 people, but during the winter months the population almost doubles! This makes sense intuitively, people just want to escape cold temperatures and snow!

Redding, California: 88% annual sunshine

The population is slightly over 100,000, and is one of the world record holders for the highest average daily temperature above the 40th degree latitude. With places like LA and San Diego being so well known for their sunshine, it might surprise you that they only get 73% and 68% annual sunshine, respectively.

Las Vegas, Nevada: 85%

The well-known entertainment capital of the world has a population of around 2 million people and receives just 4.5 inches of rainfall annually. Las Vegas is also known as Sin City due to the huge gambling resorts, clubs, and uninhibited mentality.

Phoenix, Arizona: 85%

This is the biggest city on the list with 1.5 million residents and 4.5 million individuals in the greater Phoenix area. Average annual rainfall in Phoenix is 8.3 inches.

Tucson, Arizona: 85%

More than 100 miles south of Phoenix, Tucson averages 11.8 inches of rainfall per year. Approximately 550,000 people live in the city and 1,000,000 people live in the greater Tucson area.

Others:

El Paso, Texas: 84%

Reno, Nevada: 79%

Fresno, California: 79%

Flagstaff, Arizona: 78%

Sacramento, California78%

Key West, Florida: 76%

Pueblo, Colorado: 76%

Albuquerque, New Mexico:  76%

Roswell, New Mexico: 74%

North Little Rock, Arkansas74%

Boardman, Ohio (our office location) makes a different list. It ranks 22nd on a list of 101 cities with the LOWEST amount of sunshine! Who’s ready to move?!?