investment propertyIf you’ve decided that purchasing an investment property is right for you, the next step is to figure out what constitutes a good investment. You can check what we look for in an investment property here – the post is older, but the idea is the same. Once you know what type of property you want, and in what condition, you need to figure out if a particular property is worth the money - after all, it is an “investment.” There are various formulas to calculate whether an investment is “good” for you. The simplest is the ROI – return on investment. It’s simple because you just need to compare what you’ll get out of it to what you’re going to have to put into it. However, it’s perhaps a little too simple. The three calculations below will provide you with a more strategic outlook on such an investment.

Cash on Cash: Calculating a Good Investment Property

ATAR-Calculator1Cash on Cash Return = Annual Before Tax Cash Flow/Total Cash Invested A higher cash on cash return is typically a better investment (“typically” because it doesn’t account for appreciation/depreciation). This calculation is overly simplistic, but a quick way to determine if further examination is warranted. Let’s say an investor puts $150,000 down on a $600,000 property and expects to generate a $4,000/mo. return on that property, after expenses. The before tax income would be $6,000 x 12 = $72,000. So, (more…)


The latest RMLS Portland Market Action data was released last week, and our latest infographic is below. Two notable points in this data are the inventory level and the average sales price change.

As the infographic notes, there was an increase in new listings and a decrease of closed sales compared to December 2014, which pushed inventory up to a recent high. Looking back at the RMLS Portland Market Action data covering 2012, 2013, and 2014, there has been a trend of increased inventory early in the year. This has been followed by a decline as home sales increase in the spring, With an inventory higher than recent months, but lower than previous years’ January data, it will be interesting to see what inventory does in the coming year.

The second notable feature of the RMLS Portland Market Action data is the shift in average sales price. Although January 2015 shows an increase from January 2014 and the 12 month rolling average sales price also shows an increase, there is a decrease from last month. Home value projections shown an expected increase of about 4% nationwide for 2015. So, it will be interesting to see what happens in the local market in the coming months.

Our Latest RMLS Portland Market Action Infographic:

Jan 2015 RMLS Market Update

 

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One reason it is recommended to get pre-approved for a mortgage early in the home buying process is to reduce barriers once you find a turned down for a mortgageproperty. However, the pre-approval process is not a guarantee. While it is not common, there are occasions when a client has their home selected and is ready and willing to sign, only to have the mortgage denied. The good news is that there may be options available; getting turned down for a mortgage isn’t necessarily the end for every buyer.

What causes one to get turned down for a mortgage?

The first thing to understand about the mortgage process is that a pre-approval is completed by a mortgage professional, not an underwriter. This means that a buyer’s loan is likely to be approved, based on the information the mortgage professional has been provided. An underwriter may have more specific requirements that a buyer may not meet.

optionsAccording to a recent post in the Wall Street Journal, the primary reason reported for denials, for both purchases and refinances, was applicant credit history. Other major reasons may include a high debt-to-income ratio and borrowers with insufficient funds in reserve. These issues may cause problems for some lenders while other lenders may allow some blemishes. If you are denied, you may not be completely out of luck. For many buyers, there are options available.

What to do next:

Step 1: Find out why your mortgage was rejected. Lenders are required by law to issue a written “adverse action notice” within 30 days when rejecting a mortgage. This notice must include the reason for the rejection. Once you know why the mortgage was rejected, you can work to correct any errors on your credit or work with your mortgage professional to see what other options are available.

Step 2: In certain cases, the reason for rejection can be argued to your favor. If that is your situation, you can request a second opinion, just like you might ask a second opinion for a medical diagnosis. Some lenders have a second tier of review that will allow you to present your case – including discussing any issues that are currently marring your credit history. Some buyers have been successful in implementing this step to receive approval.

Step 3: If you are still without a mortgage after the second opinion, or if your lender does not allow it, the next option is to shop around. The underwriter’s job is to assess risk and different lenders have different assessment criteria. One lender may reject your application for a reason that another lender will allow. These three steps are not a failsafe, but they can assist some buyers.

 

OSASuBX1SGu4kb3ozvne_IMG_1088No matter why you were turned down for a mortgage, if there are blemishes on your credit that you know about now, it’s best to take care of these sooner rather than later. And, if you have questions about the mortgage process or about your specific mortgage application, it’s best to discuss them with a mortgage professional who can present options that match your situation.

 

* some photos from freedigitalphotos.net | Stuart Miles


Is Buying a Home Right for me?

Buying a home used to be the default American Dream. The real estate market crash/bursting of the bubble changed the market to some extent. Whereas buyers that could afford $300,000 wanted to spend $350,000, and often could, today’s buyer might be able for afford $300,000 and only be comfortable with a $250,000 purchase. For some, the best decision may be to rent, bucking the “Now is a great time to buy” hoopla. The selection of a real estate agent, a mortgage broker, the inspections you have and understanding the process is more important that ever before. I hope you find these Five Things To Consider When Buying a Home helpful:

1) Selecting an Agent

ID-100244647Your real estate agent should be your trusted advisor. Our role is to give the best advice possible and execute and negotiate your decisions. Your role is to listen to the advice and make the best educated decisions based on the information available. It has to be a mutual, trusted relationship. No two agents are going to be the same. You can look at online reviews, ask for referrals, and interview until you find the right match. A team may have different points of contact that specialize in certain areas of the transaction whereas an individual agent will be your single point of contact from beginning to end. There are pros and cons to both models.

2) Selecting a Lender

Most buyers need a loan to purchase a home. Some are blessed with enough cash to skip this step. Talking to a lender should always be the first or second step in a real estate purchase. If you’ve selected a Realtor®, ask them for their referrals. The working relationship Earnest Moneybetween the lender and the Realtor® is critical to your transaction. “Going local” is also important. There is nothing more
frustrating than trying to get a critical piece of information from a lender that closed at 2PM because they are on Eastern Time. I’ve been told by a mortgage manager that, “we really can’t help with that as we are a call center, not an actual office of lenders.” (more…)


Source: RMLS in Portland, OR | RMLScentral.comAre Portland distressed properties on the upswing? The current data, provided by RMLS and shown on the right, shows that the final quarter of 2014 revealed an increase in distressed homes – markedly in Bank Owned/REO properties. In September 2013, we wrote a blog about a downshift in Portland distressed properties which showed a considerably lower distressed rate of 7%. What does this mean for our market?

Because distressed listings typically sell for 15-20% below market value, this can mean considerable savings for buyers who might be interested – although not everyone will be. Before homebuyers begin rejoicing at such savings, it is important to know what these properties mean for a homebuyer. After all, this option isn’t for everyone.

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The RMLS Portland Market Action report recently released for December 2014 offers insight not just to last month, but as a year-in-review. Our most recent infographic (shown below) provides a visualization of the trends of the last three years. The main theme? It’s a seller’s market so buyers need to position themselves to compete.

RMLS Portland Market ActionOne of the figures that points towards this is the notable 2.3 month inventory level. That level shows that if no other homes were to enter the market, it would take 2.3 months to sell all of the current inventory. The infographic below reveals that it is the lowest in recent years. To give some context, a quick view of our past RMLS Market Action posts reveals that it goes beyond the three years shown. The last time we saw such a low inventory count was back in March of 2006 – over 8 years ago! Low inventory means added value for (more…)


NBC Nightly News just aired a segment on mortgage interest rates and a renewed refi craze. 30 year rates are down from 4.5% this time last year to 3.81%. The experts crystal ball is that rate will remain low but now is the time to act if you are thinking about a refi. Does a refi make sense to you with these interest rates? Talk to a lender and see what your break-even point is. Thinking about buying a home?  I used this mortgage calculator to run these comparisons:

A $300,000 house with 10% down at 4.0% for 30 years has a monthly principle & interest payment of $1289.

A $300,000 house with 10% down at 4.5% for 30 years has a monthly principle & interest payment of $1368

A $300,000 house with 10% down at 5.0% for 30 years has a monthly principle & interest payment of $1449.

A $325,000 house with 10% down at 4.0% for 30 years has a monthly principle & interest payment of $1396.

A $325,000 house with 10% down at 4.5% for 30 years has a monthly principle & interest payment of $1482

A point increase has a bigger impact on the payment than a $25,000 price increase.

Here’s the full segment:


house sky fhaBefore the year even started, 2015 was deemed the “Year of the First-Time Homebuyer.” If the latest changes to the FHA Mortgage Insurance Premium (MIP) is any predictor, this moniker is likely to ring true. The FHA mortgage insurance changes coming into effect on January 26, 2015 will save first time homebuyers entering into an FHA loan a lot of money on their MIP.

What is mortgage insurance?

This type of insurance protects lenders against default by the borrower and is required on mortgages with less than a 20% downpayment. It is paid by the borrower, often in monthly installments though sometimes as a lump sum, with the lender as the beneficiary. With new programs allowing a lower percentage down, many first time homebuyers are encountering their first exposure to this requirement.

What do the FHA mortgage insurance changes mean for you?

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If you’re considering purchasing a home, you’re likely to be asked “have you been pre-approved?” For some, the answer is an easy “yes.” However, for others, it may leave you wondering what the fuss is about – especially if you’re in the “looking” phase. So, why would you want to get a pre-approval letter for mortgage?

First, let’s clear up the misconceptions about what pre-approval is, and isn’t, by looking at the differences between these pre-qualification, pre-approval, and approval:

Pre-Qualified vs. Pre-Approved vs. Approved

Steps to Pre-ApprovalThink of these three as steps towards home ownership, each with an increasing level of weight to your home purchasing power.

The first step is to say “if these things are accurate,” you could get approved for a certain amount; this is the pre-qualification. The second step is to verify the accuracy of your documentation and get official documentation that “these are accurate” and “you are likely to get approved” for a certain amount; this is the pre-approval.

Where the rubber hits the road (or in this case, the stairwell) is when (more…)


Source: Oregon Health Authority

The Environmental Protection Agency (EPA) has designated January as National Radon Action Month. If your home tested positive and you haven’t begun mitigation, or you have made recent changes to your home that may warrant re-testing, we encourage you to take this opportunity to take action. Portland radon issues are real. Recent news posts have covered radon issues in the area including Portland Metro and the Vancouver area. So what is this mysterious gas and what can be done about it?

What is radon?

Simply put, radon is a colorless, odorless, tasteless, and radioactive gas. What this means for homeowners is that it is undetectable through our natural senses, so outside testing must be done, and it is a known carcinogen. It is the second the leading cause of lung cancer after smoking. According to the EPA, an estimated 20,000 lung cancer deaths, each year in the U.S., are radon-related.

How does radon enter the home?

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