BUY A HOME WITH AN FHA MORTGAGE DEROGATORY CREDIT OK FICO SCORE AS LOW AS 500 OK Allow the Government to HELP you to Buy a Home even with Bad Credit By Eric Lawrence Frazier MBA NMLS 461807 CAL | BRE 01143484
PRESENTATION DISCLAIMER This presentation is for real estate professionals only and is intended for the exclusive use of licensed real estate and mortgage lending professionals in accordance with local laws and regulations . It is not intended for the general public. Rates and programs are subject to change without notice. The Power is Now Inc. is an Equal Opportunity Employer, Real Estate Broker and Mortgage Broker and does not discriminate against individuals on the basis of race, gender, color, religion, national origin, age, disability, veteran status, or other classification protected in originating loans or providing and real estate services.
PRESENTATION DISCLAIMER The Power Is Now Mortgage Services is a Mortgage Brokerage licensed by the State of California Bureau of Real Estate (license #1980407) and the National Mortgage License System and Registry (license #1435243), and is a division of The Power Is Now Inc. (license # 01980407). The Power Is Now Inc. is not affiliated with any state or federal agency. The Power Is Now Real Estate Services is also licensed by the State of California Bureau of Real Estate (licensed #01980407), and is a division of The Power Is Now Inc. The Power Is Now Inc., is an equal housing lender. Our corporate office is located at 3739 6th Street Riverside, CA 92501. Our Telephone and Fax number is 800-401-8994. Eric Lawrence Frazier MBA, is a California licensed Loan Originator (NMLS license # 461807), and a licensed Real Estate Broker (CA Bureau of Real Estate license #01143484). Restrictions may apply to all loan programs. The Information and/or data is subject to change without notice and is intended for real estate and mortgage professionals only. If you are a consumer please contact us for a loan estimate on fees, charges and APR. All loans are subject to credit approval. The information is not a commitment to lend or extend credit. All loans or products are available in California only. The Power Is Now Mortgage Services and Real Estate Services are divisions of The Power Is Now Inc., and are only licensed to conduct business in the State of California.
THE POWER IS NOW FIRST TIME ONLINE HOME BUYER LIVE SEMINAR Eric L. Frazier MBA President and CEO CAL BRE 01143484 NMLS 461807 800-401-8994 x 703 The Power Is Now Inc. CAL BRE 1980407 NMLS 1435243
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The PowerPoint Presentations Are Available Now http://thepowerisnow.com/events/ Download Mobile App & the flyers on the program you are interested in Get started with your loan application online Tonight Buyers: www.applytobuynow.com Real Estate agents: www.neverleaseagain.com Need help?: www.neverrentagain.com
Eric L. Frazier MBA President and CEO CAL BRE 01143484 NMLS 461807 800-401-8994 x 703 The Power Is Now Inc. CAL BRE 1980407 NMLS 1435243
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INTRODUCTION The Power Is Now Inc. The Power Is Now is a multimedia company has been around since 2009 The Power Is Now Inc. is licensed to sale real estate CAL BRE 1980407
The Power Is Now Inc. is license to broker mortgage loans NMLS 1435243 Founder and Broker Eric L. Frazier MBA CAL BRE 01143484 & NMLS 461807 As a Mortgage Brokerage, The Power Is Now Mortgage Services has access to many lenders that offer programs for first time homebuyers, move up buyers, investors, churches, non-profits and foreign nationals. We are a full service mortgage brokerage. 10
MISSION The mission of the Power of Now Inc., is to inspire, educate, and empower real estate professionals, and consumers to build wealth through real estate with information, services and support that will give them the power to act now for their future.
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VISION The vision of the Power is Now is to be a powerful resource for real estate professionals, and consumers to buy and/or sell real estate to achieve their personal, family and business goals to build wealth and leave an inheritance and legacy for their family.
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OUR COMPANY SLOGAN IS OUR NAME The Power Is Now! We are at our best and we maximize our success when we act now.
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THE PATHWAY TO POWER AND WEALTH Is To Own Real Estate Now!
THE POWER IS NOW WEALTH INITIATIVE www.neverrentagain.com Building Wealth with Real Estate
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THE POWER IS NOW WEALTH INITIATIVE Changing your mindset toward financial literacy and wealth building. www.neverrentagain.com FIVE KEY OBJECTIVES
THE POWER IS NOW WEALTH INITIATIVE • 1.
Five Objectives: Knowledge - Knowledge is the Power you need to build wealth.
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Commitment to Financial Independence – We must take Individual responsibility for our lives.
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Knowledge always comes before money or the money will soon be gone.
Commitment requires disclipine and discipline requires a budget and accountability
Investment in real estate - We must prioritize ownership in real property as opposed to personal property.
Real Property appreciates. Personal property depreciates.
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THE POWER IS NOW WEALTH INITIATIVE 4.
Financial and Credit Management - We must live within our means and not abuse credit.
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Credit is not income - It is a convenience for cash. Good credit is the beginning of building wealth. Good credit is a Fico Score of 720 to 799 higher. Great credit is 800 to 850.
Creating Wealth - We must save money to buy real estate & other assets that appreciate in value.
Buy and Hold, or Buy, Sell and Buy again and hold - building a legacy of wealth. We must be intentional about leaving a legacy of wealth and an inheritance for our family. 19
10 POINT WEALTH BUILDING PLEDGE www.thepowerisnow.com 20
THE STATE OF HOUSING ON THE DECLINE FOR AFRICAN AMERICANS 21
Research Study on the Wealth Gap Brandeis University Institute of Asset and social Policy
RESEARCH AND POLICY BRIEF FEBRUARY 2013 The Roots of the Widening Racial Wealth Gap: Explaining the Black-White Economic Divide
Authored by: Thomas Shapiro Tatjana Meschede Sam Osoro 22
RESEARCH STUDY ON THE WEALTH GAP Data for this analysis was derived from the Panel Study of Income Dynamics (PSID), a nationally representative longitudinal study that began in 1968. They followed nearly 1,700 working-age households from 1984 through 2009.
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RESEARCH STUDY ON THE WEALTH GAP â—? The goal of the study was to examine the effect of policy and institutional decision-making on how average families accumulate wealth.
â—? There was a insufficient number of Latino, Asian American, or immigrant households to include in this report but the results can be applied across communities of color.
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MEDIAN WEALTH In 2009, a representative survey of American household revealed That the median wealth of: White families - $113,149 Latino families- $6,325 Black families - $5,677 The Gross Domestic Product of African American is 1.3 Trillion dollars and 1.5 Trillion dollars for Hispanics. Why is the median wealth so low? 25
YOUR POWER IS NOW TO BUILD WEALTH You're not building wealth if you use all your money for consumption. The GDP of African American is 1.3 Trillion dollars (13 out of 182 countries) The GDP for Hispanics is 1.5 Trillion dollars (10 out of 182 countries)
GREAT RECESSION AND GREAT GAP The Wealth Gap Research Report Traced the same 1700 families over a 25-year period (1984-2009) and found that the total wealth gap between White and African-American families nearly tripled, increasing from:
• $85,000 in 1984 to $236,500 in 2009
The Wealth Gap: $152,000 and growing 27
THE STATE OF HOUSING FOR MINORITIES •
The Black/Brown-White Economic Divide Real
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African American and Hispanic communities were hit the hardest by the Great Financial Crises from 2007 to 2009
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They have the farthest to climb to get back into the home ownership before home values get back to their pre-recession prices.
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It may be too late for many because interest rates will be rising and home prices are increasing now.
1994 Blacks & Hispanic Homeownership Rates: 40 & 42% respectively. 2004 Blacks achieved a high of 50% 2014 Blacks were at 42.5% and Hispanics 43.5% Hispanics. 29
LESSONS LEARNED - GREAT FINANCIAL CRISIS 1. Save money – Make it your #1 priority now and not later. 2. Live on a budget – Not hope, faith & beyond your means 3. Establish an emergency fund – Plan for the worse & expect emergencies.
LESSONS LEARNED - GREAT FINANCIAL CRISIS 4. Stop long term financing vehicles - Pay cash or limit financing to 12 mos. 5. Become debt free – Save & buy instead of borrowing and buy 6. Buy a home before you buy expensive personal property
THE STATE OF HOUSING FOR MINORITIES •
The homeownership rate in the U.S. is 63.5 percent overall. The rate among whites is 72.2%, Asians, 56.6%, Hispanic 46.3%, African Americans 41.7%
https://www.census.gov/housing/hvs/files/currenthvspress.pdf
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THE STATE OF HOUSING BY AGE •
The homeownership rate by Age of Householder. Under 35 - 34.7 percent, 35 to 44 - 58.7 percent, 45 to 54 - 69.8 percent, 55 to 64 - 74.8 percent, 65 and over - 79.5 percent.
THE STATE OF HOUSING FOR MINORITIES •
If homeownership continues to be the primary vehicle that Minorities use to create wealth then Minorities are on the path to another Economic Crisis and homelessness!
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It’s time to take action and personal responsibility and build wealth.
WEALTH IS THE DIFFERENCE Wealth provides a measure of security when a job loss or personal crisis occurs.
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Great Recession further exacerbated the wealth gap as Blacks and Latinos disproportionally impacted by the bursting of the housing bubble. Between 2007 and 2010, the average Black and Latino households lost three and four times more wealth, respectively, than the average White household.
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Extrapolating from past trends, we can estimate what the future of wealth inequality will look like in this country. Unfortunately, it doesn’t look good.
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WHY ARE WE BEHIND? OUR STORY Number 1. We were brought here as slaves in 1619 in Jamestown Virginia to aid in the production of tobacco & cotton crops. The Supreme Court case of Dred Scott v. Sandford 1857said that Blacks were not citizens under the Constitution and therefore were not entitled to rights and privileges it promises. •After 238 years of degradation & slavery 40
WHY ARE WE BEHIND? Number 2. The emancipation proclamation and the 13th amendment that passed the Senate April 8th, 1864 and House Jan. 31, 1865. Should have made things better for blacks but life became even worse. Some slaves stay on the plantation for protection because freedom meant giving up their lives. Lynchings and beatings and house burnings were common placed and accepted by society. 41
WHY ARE WE BEHIND? Number 3. The constitution did not view Blacks as citizen until 1866. The Civil Rights Act of 1866 made blacks full U.S. citizens (and this repealed the Dred Scott decision). In 1868, the 14th amendment granted full U.S. citizenship to AfricanAmericans. The 15th amendment, ratified in 1870, extended the right to vote to black males. We have only had the right to vote for 147 years.
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WHY ARE WE BEHIND? Number 4. The Louisiana General Assembly passed a law in 1890 to prevent black and white people from riding together on railroads. In 1896 Plessy vs. Ferguson, a case challenging the law, the U.S. Supreme Court upheld the law. The courts decision was the catalyst to make all public facilities to be separate and equal [“unequal�] throughout the South.
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WHY ARE WE BEHIND? Two years later 1898 the Supreme Court upheld a Mississippi law designed to deny black men to vote. The South then limited the voting rights to those who owned property and other arbitrary and subjective rules.
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WHY ARE WE BEHIND? In 1914 Texas had six entire towns in which blacks could not live. Mobile passed a Jim Crow curfew where Blacks could not leave their homes after 10pm. Many other laws were the precursor to separate but equal [“unequal�] in every aspect of black life: separate bathrooms, water fountains, schools, theaters, hospitals, restaurants, parks and even entertainment venues. 45
WHY ARE WE BEHIND? Title VI of the Civil Rights Act of 1964 prohibits discrimination based on race, color, or national origin in programs and activities receiving federal financial assistance. Title VIII of the Civil Rights Act of 1968 (Fair Housing Act), as amended, prohibits discrimination in the sale, rental, and financing of dwellings, and in other housing-related transactions, on the basis of race, color, national origin, religion, sex, familial status (including children under the age of 18 living with parents or legal custodians, pregnant women, and people securing custody of children under the age of 18), and disability. 46
WHY ARE WE BEHIND? We have the lowest rate of homeownership 41.7% to compared to Latinos at 46.3% and whites at 72.2% We have the highest unemployment rate of 8.1% compared to Latino at 5.6% and whites at 4.1%.
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WHY ARE WE BEHIND? •The black tradition family is under stress: •71% of births outside of marriage is to black woman compared to 29% of births to white women. In 1970, 38% of all births to black women occurred outside of marriage. •50% of black children are being raised by a single parent as opposed to 19% among whites. In 1970 35% of children where living with a black parent as opposed to 10% of white families. •We have highest level of high school drop outs, sexually transmitted disease and the highest community crime rate than any other ethnic group in addition to the highest level of incarnation of black men of any other ethnic group. •This is where we are. Today 2017. 48
WHY ARE WE BEHIND? Every freedom we enjoy today has been paid for by blood. It has been a fight for freedom for African American from our capture in Africa, the middle passage unto the day we step foot on American soil. We have had to survive in country among people who viewed us as less than human. In spite of these things: We are 12% of the population, born out of slavery, poverty but our homeownership rate is on its way up. •We are 12% of the population and our GDP is 1.3 Trillion, 13 out of 182 Countries. 49
WHY ARE WE BEHIND? •We are only 12% of the population and we leaders in sports & entertainment, business, science, medicine, education, law, engineering, computers, software development, and have achieve the highest office in the land.
Can we buy a home? Of course we can!!! 50
How do we close the Gap?
Great Recession further exacerbated the wealth gap as Blacks and Latinos disproportionally impacted by the bursting of the housing bubble. Between 2007 and 2010, the average Black and Latino households lost three and four times more wealth, respectively, than the average White household.
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How do we close the Gap?
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DOWN PAYMENT ASSISTANTCE & LOAN PROGRAMS ARE AVAILABLE WE CAN CLOSE THE GAP THROUGH HOME OWNERSHIP
BUY A HOME WITH AN FHA MORTGAGE DEROGTORY CREDIT OK FICO SCORE AS LOW AS 500 OK Allow the Government to HELP you to Buy a Home even with Bad Credit By Eric Lawrence Frazier MBA NMLS 461807 CAL | BRE 01143484
THE POWER IS NOW MORTGAGE SERVICES •The Federal Housing Administration (FHA) was created as part of the National Housing Act of 1934 in response to the struggling housing industry following the Great Depression. •Before its creation, only 40% of Americans were homeowners. This low homeownership rate was largely due to the limited short-term financing available, •Most loans were offered with three to five-year payment plans and required large down payments often consisting of 50% of the purchase price. •Only the very wealthy were able to purchase a home. 55
THE POWER IS NOW MORTGAGE SERVICES •The FHA's ability to assume the lender's risk allowed home loans to be spread out over longer terms, resulting lower monthly payments and greater access to mortgage funds. •The FHA established two mortgage insurance programs; one for one-to-four-unit single-family residences (SFRs) and one for multifamily housing units. In 1965, the FHA became part of the U.S. Department of Housing and Urban Development (HUD).
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THE POWER IS NOW MORTGAGE SERVICES •The FHA is a government agency, however its funding is selfgenerated. It has insured over 34 million home mortgages and over 47,000 multifamily projects since its inception. •Mortgage Insurance premiums fund the program
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2017 MORTGAGE LIMITS FHA INSURED LOANS
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FHA AREA BETWEEN FLOOR & CEILING
FHA AREAS AT CEILING – 2017
THE LOAN DECISION
FHA 203B MANUAL UNDERWRITING •
Loan Approval Decision – DU – Refer/Eligible – 1 to 3 month reserves may be required if AUS/DU approval is not granted
• • • •
Down Payment Minimum Credit Scores Debt to Income Ratios Compensating Factors
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FHA 203 B - AUTO APPROVAL • Max Debt Ratio: – Debt Ratio determined by AUS/DU Approved/Eligible – No DR Max with AUS approval – No reserves requirement on DU approved loans • AUS/DU Defined: Fannie Mae’s Desktop Underwriter. An automated underwriting system or decision engine that approves loans or refers them an underwriter for approval or denial
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FHA MANUALLY UNDERWRITTEN LOANS, •
Down Payment: – 10% down payment 500 to 579 FICO – 3.5% down payment 580 +
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Minimum Credit Scores: – Minimum Credit scores 500+ – Non-traditional Trade line – Allowed – 3 years seasoning on Foreclosure, Short sale and Bankruptcy. – Do NOT need to be a first time homebuyer (unless you are combining with an MCC – CA only – One Unit only) - No counseling classes needed.
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DEBT TO INCOME RATIOS: 31%/ 43% FHA MANUALLY UNDERWRITTEN LOANS
DEBT TO INCOME RATIOS: 31%/ 43% • To be creditworthy for FHA mortgage insurance, the following debtto-income ratios must be met: • the borrower’s mortgage payment may not exceed 31% of the borrower’s gross effective income, called the mortgage payment ratio; and • the borrower’s total fixed payments may not exceed 43% of the borrower’s gross effective income, called the fixed payment ratio. • [HUD Handbook 4000.1(II)(A)(5)(d)(viii)]
DEBT TO INCOME RATIOS: 31%/ 43% Bob Wages Jackies Wages Rental Income Total Inc.
$ $ $ $
3,500.00 4,000.00 7,500.00
Rent Mortgage Car Payment Car Payment credit cards Student Loans 50K Total Credit/Rent/Mo.
$ $ $ $ $ $ $
2,000.00 300.00 400.00 150.00 416.00 3,266.00
Budget Income taxes 15% Food Electric/Gas bill Water trash Cable Gasoline Household Entertainment clothes/shoe/personal Total Living Expense
$ $ $ $ $ $ $ $ $ $
1,125.00 400.00 200.00 100.00 100.00 400.00 200.00 300.00 200.00 3,025.00
Credit & Rent Mo. Total Living Expense Total Cost of Living
$ $ $
3,266.00 3,025.00 6,291.00
Total income Total Cost of Living Disposable income
$ $ $
7,500.00 6,291.00 1,209.00
Current Housing DR. Rent Vacancy 25% Income Total Income Front DR
$ 2,000.00 $ $ $ 7,500.00 27%
Total Debt to Income Ratio. Montly Debt $ 3,266.00 Montly Income $ 7,500.00 44%
DEBT TO INCOME RATIOS: 31%/ 43% • The maximum DTIs may only be exceeded if significant compensating factors exist. • Compensating factors include: • a demonstrated ability during the past 12-24 months to pay housing expenses greater or equal to the proposed monthly payment; • a down payment of 10% or higher; • a demonstrated ability to accumulate savings; • a history of conservative credit use; • a credit history reflecting an ability to devote a greater portion of income to housing expenses;
DEBT TO INCOME RATIOS: 31%/ 43% • The maximum DTIs may only be exceeded if significant compensating factors exist: • compensation other than income, including food stamps or other public benefits; • the proposed housing payment represents only a minimal increase in the borrower’s housing expenses; • substantial cash reserves; • substantial non-taxable income; • demonstrates potential for increased earnings due to job training or education; and
DEBT TO INCOME RATIOS: 31%/ 43% • The maximum DTIs may only be exceeded if significant compensating factors exist: • the home is being purchased because the primary wage-earner is relocating and the secondary wage-earner has an established employment history, is expected to return to work and has reasonable employment prospects in the new area. • [HUD Handbook 4000.1(II)(A)(5)(d)(ix)]
DEBT TO INCOME RATIOS: 31%/ 43% • The maximum DTIs may only be exceeded if significant compensating factors exist: • However, for manually underwritten loans, borrowers with credit scores between 500 and 580, and borrowers with non-traditional or insufficient credit may not exceed these maximum ratios, regardless of compensating factors. • [HUD Handbook 4000.1(II)(A)(5)(d)(viii)]
DTI MAX. 37%/47% FICO 580 1 COMP. DTI MAX. 40%/50% FICO 580 2 COMP. FHA MANUALLY UNDERWRITTEN LOANS
DTI MAXIMUM OF 37%/47% > 580 • DTI ratios can be pushed to a maximum of 37%/47% for a borrower with a credit score of 580 or higher when one of the following compensating factors exist. When at least two of the following compensating factors exist 40%/40%: • three months’ cash reserves for one-to-two units, or six months’ cash reserves for three-to-four units; • the new monthly mortgage payment is not more than the lesser of $100 or 5% than the previous monthly housing payment, AND they have not had a 30-day late in the last 12 months (for cash-out transactions, no lates are allowed);
DTI MAXIMUM OF 37%/47% > 580 • residual income remaining after subtracting taxes, retirement contributions, the monthly fixed payment, estimated maintenance and utilities and job-related expenses; or • verified and documented significant additional income that is not effective income (this may not be used as the only compensating factor). • has a credit score of at least 580;
DTI PUSHED TO A MAXIMUM OF 37%/47% > 580 • DTI ratios can be pushed to a maximum of 37%/47% for a borrower with a credit score of 580 or higher when one of the following compensating factors exist. When at least two of the following compensating factors exist 40%/40%: • has established credit lines in their own name open for at least six months; and
DTI PUSHED TO A MAXIMUM OF 37%/47% > 580 • carries no discretionary debt (i.e., the housing payment is the only account with an outstanding balance and all revolving debt is paid off each month for at least six months). • [HUD Handbook 4000.1(II)(A)(5)(d)(viii)]
• A borrower’s income consists of their salary and wages. Social security, alimony, child support and government assistance are factored into the borrower’s income to determine their effective income. • The borrower’s effective income before any reduction for the payment of taxes is called their gross effective income.
SHORTER RECOVERY TIME FROM MAJOR CREDIT PROBLEMS
FHA MANUALLY UNDERWRITTEN LOANS
RECOVERY TIME FROM MAJOR CREDIT • FHA loans have 3 years to wait after a Foreclosure – Conventional is 7 years
• FHA loans have a 3 year wait after a Short Sale – Conventional is 4 years
• FHA loans have a 2 year wait after a Bankruptcy – Conventional is 4 years
FHA 203 B • Property Types: – OWNER OCCUPIED ONLY. – 1 to 4 Units properties – Condominiums/Town Homes/PUD – FHA approved. – SFR – Fixer Upper - 203k LOAN.
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The PowerPoint Presentations Are Available Now http://thepowerisnow.com/events/ Download Mobile App & the flyers on the program you are interested in Get started with your loan application online Tonight Buyers: www.applytobuynow.com Real Estate agents: www.neverleaseagain.com Need help?: www.neverrentagain.com
Eric L. Frazier MBA President and CEO CAL BRE 01143485 NMLS 461807 800-401-8994 x 703 The Power Is Now Inc. CAL BRE 1980407 NMLS 1435243
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