Saturday Reporter-Herald July 23, 2011 D1
Real Estate Matters
www.reporterherald.com • Saturday, July 23, 2011 • Reporter-Herald
Options for remodeling old home ILYCE GLINK TRIBUNE MEDIA SERVICES
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uestion: My mother is 80 years old and lives in San Antonio, Texas. Her home is approximately 50 years old. The house needs some serious remodeling. It needs to be leveled, and the beams from the roof are poking into one of her bedrooms. She is still working but wants to retire. Are there any programs that will help her secure a loan to make these badly needed repairs? She doesn’t have much money, and, although my father is a veteran, they are divorced and I don’t think there’s any available assistance there. I’d hate to see my mother move from the property. She really envisions staying there in retirement. Answer: Your mother has three options in this situation: She can apply for a reverse mortgage, she can secure a 203k loan from the FHA, or she can sell the property. A reverse mortgage permits homeowners who are at least 62 years of age to borrow against the equity in their homes without having to sell, sign over the title, or take on a new monthly payment. The reverse mortgage is so named because the payment stream is inverted. In other words, the lender makes payments to you, and the balance and interest is due when you sell the home, move from it permanently (into a nursing home, for example), or pass away. Your email doesn’t say if our mother’s home is already paid off. If it is, a reverse mortgage could be a viable option — if she can get one. Unfortunately, some of the biggest reverse mortgage lenders have stopped making the loans due to a higher than expected level of defaults. In the past year, both Bank of America and Wells Fargo announced they would no longer do reverse mortgages. Your mother might qualify for a reverse mortgage but have difficulty finding a lender who can provide one to her. For more information, she should speak with a HUD-certified housing counselor. You can get more information on this page: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/hecmlist A second option for your mother is an FHA 203k loan, which is specifically designed for properties that need repair or renovation. A lender will give you enough cash to fix your home, and base the amount on how much the repairs will cost and what the property will be worth once the work is complete. There are a number of eligibility restrictions, including income requirements, but you can learn more on the FHA’s website: www.fhainfo.com/fha203k.htm . While your mom wants to stay in I See GLINK/Page E3
The key to
home buying
Secure loan pre-approval before shopping DOMINIQUE DEL GROSSO FOR THE REPORTER-HERALD
“It puts people in the
driver seat
B
uying a house is a serious financial commitment. Sometimes it can be overwhelming, but securing loan pre-approval before starting the house hunt is an easy way to help streamline the process. Fortunately, getting loan pre-approval can make the house hunting experience less concerning and provide a tangible price range by which potential home buyers can easily abide.
with more control of the process.” — Sabrina Lee, senior loan officer with WR Starkey Mortgage in Longmont the potential home buyer with a loan pre-approval letter, which will lay out how much money can potentially be borrowed to purchase a home. A pre-approval amount varies from one buyer to the next. This is because the loan pre-approval amount is based on credit scores and yearly income, and not every potential buyer has the same score or borrowing potential. • Then, a mortgage loan officer will have an open, but up-front conversation with the potential buyer regarding financial comfort levels. A plan for affordable monthly payments will also be addressed.
potential buyer. Most house sellers will only accept bids from buyers who have been granted loan pre-approval first. Loan pre-approval is also important to Realtors, LOAN PRE APPROVAL BREAK DOWN because it’s easier to work with buyers who have a Simply, loan pre-approval tells the mortgage clear number to start. “Most Realtors will not talk loan officer and potential buyer how much money to you or show you any homes until you’ve been can be borrowed to purchase a house, providing a pre-approved,” Lee said. “It (loan pre approval) is clear picture of which homes are affordable and important, because you’re also telling the seller which are not. To secure loan pre approval, that you’re serious.” meeting with a mortgage loan officer in person Fortunately since the housing market crash, is essential. getting loan pre-approval isn’t any harder than it This is important because buying a house is a used to be. Almost anyone can get loan prebig commitment, and being counseled by a proapproval. What is harder now than in the past is fessional can make or break the final sale. UNNECESSARY? THINK AGAIN finalizing the loan once a bid has been accepted Sabrina Lee, a senior loan officer with WR by the seller. Before staring the house hunt, getting preStarkey Mortgage in Longmont, said finding “Pre-approval is not more difficult, but getting approval first isn’t a must, but it’s strongly adsomeone trustworthy to walk through these steps vised by both Realtors and mortgage loan officers. the loans closed is much harder,” Dyer said. “They with is a must. “You want to see what you can qualify for before (underwriters) want more documentation from “Buying a house is the greatest investment you you go out looking because you don’t want to get things in your past about anything that’s reflected can ever make, and you want to make sure it’s on your credit report.” attached to a house you can’t afford,” Lee said. with someone you trust,” she said. “It (loan pre-approval) puts people in the driver Whether getting loan pre-approval first is the During a few in-person meetings, a mortgage priority, it’s important to keep in mind how loan officer will walk the potential buyer through seat with more control of the process.” Deanna Dyer, a broker associate at Dyer Realty, helpful it can be to have a clear budget. the following loan pre-approval process. Inc. in Longmont, echoes Lee’s advice. “It’s Pinpointing both the high and low end of the • First, the mortgage loan officer will take budget is, in the very least, a good place to start. down four pieces of information: potential buyers’ crucial that you know how much money you “It’s never too soon to get an idea of what kind of full name, social security number, current address have to spend, because you don’t want to be house-poor. Meaning, you don’t want to be home you desire, what neighborhood or what your and birth date. With this information, the putting too much of your income toward your mortgage loan officer will run a credit report to house requirements are, but pre-approval for the house payment,” she said. determine a specific credit score. buyer makes things so much easier. It takes the • Next, the mortgage loan officer will present Loan pre-approval isn’t just important for the stress out of the transaction,” Lee said.
Realtors present ideas to save the housing market ified borrowers can obtain safe and sound mortgage financing. The nonprofit trade organization called on regulators to revise the unnecessarily ast week, the National Associa- high down payment requirements of tion of Realtors (NAR) sent a the Qualified Residential Mortgage letter to Shaun Donovan, sec(QRM) exemption from risk retenretary of housing and urban develop- tion requirements under the Doddment, Timothy Geithner, secretary Frank Act. of the treasury, and Gene Sperling, director of the National Economic Council. In the letter, the NAR argued, “Stability in the housing market will lead to a quicker and greater economic recovery.” And, then it offered these recommendations: 1. Policies should ensure that qual-
ILYCE GLINK TRIBUNE MEDIA SERVICES
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In short, NAR believes that if Congress implements a firm requirement that borrowers put down a minimum 20 percent on a conventional mortgage, that would severely limit the number of people who could buy homes. It would tank homebuyer demand, depress home prices further, and cause more fore-
“A strong housing market recovery
is essential
to the nation’s economic strength.”
closures. How long does it take someone who earns an average salary to save up 20 percent for a down payment? NAR says up to 14 years. To their point, it’s hard to even remember your American dream of homeownership after 14 years. “Mortgage availability remains a concern, and borrowers continue to find it increasingly difficult to find affordable mortgage options,” said NAR President Ron Phipps. “Requiring a higher down payment does little to reduce default risk, and only strips homebuyers of their savings I See MARKET/Page E4
— NAR President Ron Phipps
Buying a home that needs work? Call the experts in FHA 203(k) renovation financing. An FHA 203(k) mortgage allows you to finance both your home purchase and renovation with a single loan. Call now to learn more. Vivian DeVoe, VP Mortgage Banker, 970-227-4702 Loans and rates subject to credit approval. FHA conditions and restrictions apply.
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