Putting Doctors in a House

“Whatever houses I may visit, I will come for the benefit of the sick…”

If you are a physician, you know the phrase well. It appears in the fifth paragraph of the Hippocratic Oath. Of course, that portion of the oath goes on to affirm your purpose in visiting the home of a patient. Back in the day, Physicians often made “house calls”. Today, the practice continues to different degrees depending on your location. At some point, it became much more practical for the Physician to remain in one place and have the patients come to them.

But, let’s look a little deeper into those 14 words.  Of course, they were a preamble to a behavior when written, but today, they represent a beautiful truth about the life of a Physician and another purpose of visiting homes. I have worked closely with Docs since the mid-1980’s. My interactions included work with specialists, general practitioners, interns and residents. I have counseled them in private offices, doctor’ lounges and coffee shops. I have a pretty good feel for the challenges docs face.  I know another way of reading those 14 words.

Patients seeking remedies and healing are usually very thankful for the cure. From the outside looking in, few of them realize how many ‘balls must be juggled” to keep an office open. DRG’s, HSM’s, medical billing, contracts, etc are all buried beneath “Thanks Doc, I feel better’. Not many stop and realize the Physician move to the area “for the benefit of the sick’.

Most Physicians like to become a part of the community. (It should be no surprise that those that are the healing glue of an area seek out being a part of that area). Community service, even service that comes with a fee, is entrenched in the desire to serve a community.

When a Physician decides to purchase a home or establish a practice in a neighborhood, they are probably going to visit houses (or office buildings or condos). The purpose is to plant their personal flag and establish their place in the community. While, in some ways, it is accurate to say they are no different than any other home buyer or business owner, truth be told, their need of the community is counter-balanced by the communities need for them.

They deserve special attention and assisting Physicians in their home buying has always felt special to me. Once we begin an earnest search, I know I am helping them fulfill another interpretation of that Hippocratic Oath. Whatever house they visit in their home search, they do it for the benefit of the sick. Once they find that home, they become a member of that community and professionally become part of the healing process for their new neighbors and patients.

I would be remiss if I did not mention Sun Trust. They have a Doctor Loan Program. I have a relationship with the leading Sun Trust lender affiliated with this program. He not only works with individual Physicians, he is called upon to speak to large groups about the Sun Trust Doctor Loan Program. He has shared the overview below.

The Doctor Loan Program is a residential mortgage loan developed specifically for medical residents, interns, fellows, Doctors of Osteopathy (DO), and licensed medical physicians that have completed their residency within the last 10 years.

  • Available for both home purchases and mortgage refinances
  • Competitive pricing available along with special relationship discounts
  • Mortgage insurance is not required
  • Maximum of 80.00% Loan-to-Value (LTV) available1 for cash-out refinances
  • Both fixed rate and adjustable rate2 loans are available
  • Available in AL, AK, DE, FL, GA, MD, MS, NC, NJ, PA, SC, TN, VA, WV and DC; available in select counties in NJ and PA
  • No penalty for prepaying your loan
  • Gift funds or seller contributions may be used for closing costs

For licensed medical physicians who have completed their residency within the last 10 years:

  • Maximum of 100%1,3,4 financing for purchases and rate/term refinances with a maximum loan amount of $650,000 for well-qualified borrowers
  • Maximum of 95% financing for purchases and rate/term refinances with a maximum loan amount of $1 million1 for well-qualified borrowers
  • Maximum of 89.99% financing for purchases and rate/term refinances with a maximum loan amount of $1.5 million1

For Residents, Interns and Fellows:

  • Maximum of 100%1,3,4 financing for purchases and rate/term refinances for well-qualified borrowers
  • Maximum loan amount of $417,000

1State law may put further restrictions on the maximum loan to value ratio.
2Adjustable Rate Mortgage (ARM) products have interest rates that may increase after consummation.
3Borrowers should note that 100% mortgage financing will result in no property equity until such time as the loan principal is paid down through regular mortgage payments and/or the property value appreciates. Additionally, if property values decline, you could owe more than your property’s value.
4A down payment may be required if the property is located in a market where properties are declining in value.

Now that may be a lot of information for those outside medical practice. For Physicians, I hope you benefit from it and if you are in the DC area and would like the assistance of a Realtor that understands the demands of your profession and will work diligently to assist you in the purchase of home, please take a moment and fill out the form. All inquiries will be held confidential.

Let’s talk about loans …


O.K. maybe not loans, but I think everyone should have a short primer regarding how folks pay for a house.  It really doesn’t matter if it is a co-op, a condo, a town home or a single family home.  One of the basic rules of contract law includes the need for consideration. Consideration is just a fancy legal term for money. If you want to buy a house, you have to be able to produce the funds at settlement.

Now, if you happen to be loaded and can pay cash for the house, well you can either read through this for information, or you can check out another one of the articles I have written. For those of you that want to buy a home and don’t have cash on hand, this is for you.

For purposes of example, I will use a $500,000 purchase price. You and the seller have agreed on the price. Well now, wait a minute, let’s back up. You really should have an idea about all of this before you begin looking for a home.  The very first question you have to ask yourself after deciding you want to own a home of your own is how much can I pay for a home (keeping mindful that your comfort level should be dictated by what you can afford and not what you would like).

I am not a lender. I can only give you general advice in this area. Let’s make that specific advice. After reading this primer, talk to a bonafide lender! Then talk to another. Keep talking until you find one that you are comfortable with. They will provide the rock that your dreams of owning a home will be built upon. The lender will gather information about you and tell you what you can borrow.

The most basic loan is a conventional loan.  Lenders like this sort of loan because it requires that the borrower (you) contribute at least a 20% down payment.  In the example of a $500.000 purchase, you will be putting at least $100,000 down and the lender will provide the rest of the money. Each month you will make a payment that includes principal and interest.  If you do not have 20% down, you can receive a gift from parents or grandparents or anyone to make up the difference. You will need to provide the lender with proof that it is in fact a gift and not a loan. If you just don’t have the 20% down, you have other options.

The FHA guarantees loans. That just means that your lender will have insurance that some of the money you borrowed is guaranteed to be paid back. If you default, the insurance involved steps in. This guarantee allows lenders to loan money to people that don’t have the 20% down payment available. You still have to have at least 3.5% of the purchase price available, and there are limits on how much money you can borrow. The credit demands are a bit less restrictive. Oh, and you still go through the underwriting process. The FHA has rules about who can qualify and their criteria must be met. Every month you will have a payment that includes principal and interest and the mortgage insurance premium (yep, you have to pay the insurance. if you don’t like that, put 20% down).

Veterans have loan guarantees available to them as well. They can get a VA loan. This type of loan is from lenders but it is guaranteed by the Veteran’s Administration. Another feature of the VA loan is that you don’t have to have any money down. This sounds great, but the flip side is that you will have a higher mortgage and you will have  VA fee as well. The VA doesn’t lend the money. Just like the FHA, they guarantee a portion of the loan. That’s right, you pay the premium for the protection.

In some areas, the USDA guarantees loans. It is very similar to the VA in that, you don’t have to put any money down. Again, remember your loan amount will be higher and your payments will be higher as well. This is a great program if you are purchasing a home in an area where these loans are available.

Of course there are all sorts of hybrid loan types out there. There are terms that vary with lenders.

Things to know.  An ARM is an adjustable rate mortgage.  Simply put, the interest rate is fixed for a short term and then it can go up or down depending on the market. Usually, there is a cap on the interest rate (i.e. the highest amount the interest can be).  Lenders offer these loans at attractive rates. You should always consider what you can afford at the market rate today, that means the size mortgage you are comfortable paying at market rates.  Use the lower rate as a saving not a method to qualify for more home  (if variable rates are lower, borrow less and invest the saved money). NOTE: that is just my opinion. I really believe borrowing money, hoping that your income will go up when the rates go up is a fast track to foreclosure.

An interest only loan is another product some lenders offer. Not a bad deal for the lender. You move in. You pay interest on the loan until the interest only term runs out and then your payment shoots up like a rocket ship on rails. Oops. You can’t pay and the home goes into foreclosure. Interest only loans only have the interest of the lender at heart.

So it is not really confusing. There is a conventional loan and then there are other products available to those that do not have sufficient money saved to buy a home. Lots of people have used the FHA guaranteed loans and VA guaranteed loans and USDA supported loans. They are good loans. As a matter of fact, all loan products are good products if they are used by the right borrower.

Buying a home is a major step. I think it is wise to have some money set aside to invest in your purchase.  Of course, you may use a loan product that does not require that you put that money into the purchase of the home. Home ownership is not cheap. The money should be set aside for maintenance and upkeep. It will be your home after all.

If you have any questions, talk to your lender. If you are in the DC area and do not have a lender, I will provide you with a list of three names. You can call them all.

Once you have been pre-approved and are ready to begin the search, well, that”s my area of expertise. Once you are in my hands, I will review where you are with the lender, offer some advice about fine tuning the financing and then I will listen to you tell me a tale of your dreams and set out to assist you in making those dreams come true.

As always, I am only a phone call away…. 301-509-5111

Hungry for a mortgage loan…No Soup Today!

If you have the time, I would love to put a spin on the real estate market.  You see, there are lots of homes for sale. There are newly built homes in developments just waiting to become neighborhoods, there are resale homes including condos, townhomes, and single family homes.  Homes are for sale by builders, banks, and everyday homeowners.  Sales remain less than one would think, based on the attractive prices of the homes. Why is that?

At first glance, people point the finger at the tightened underwriting for mortgages.  The general assumption goes along the lines of something like, well, they lent money to anyone with a pulse and that idea blew up in their collective faces.  Loans went into default, lenders went belly up faster than a Chesapeake Bay fish fry, the economy was on the brink of disaster and Uncle Sam stepped in.  Programs to assist any and all lenders were created. Acronyms replaced everyday language and those at the top of the pyramid hemmed and hawed until such time as they could fill their own pockets and get out of town. A few did get caught, prosecuted and sent away (I learned on the Real Housewives of New Jersey, going away is the nice way to say someone has gone to jail). As for the rest, they tried to pick up the pieces and put some kind of mortgage lending system back together again.

Are you still with me?  I will not slip into the insider language. Oh, CNN can bandy about terms like bundling and securities and high risk manipulation, I don’t think you need those terms. Simply put, when try to reconstruct what happened, it was revealed that mortgages were tossed into a big pots with lots of mortgages. Let’s just call it a “Mortgage Gumbo” or “Financial Stew”.  The chefs ( the slick folks preparing the meal for sale) took a little of this (medium risk notes) and a little of that (border line higher risk notes) a fair amount of this (high risk notes) and a dash of this (minimal risk notes) for seasoning.  If anyone looked at the mixture, it was hard to define the ingredients. The pot was full and the seasoning masked the contents bubbling below the surface. Once the meal was ready, sales folks slicker than the infamous Clark Stanley (look him up, the original snake oil salesman) began peddling the broth to all takers.

Soon it was discovered that some of the ingredients were toxic. The aroma off the pot sure smelled good, but some of the stuff  mixed in was turning the whole meal bad. People that purchased the mix became ill and realized they had spent money on meals that would never feed them. The kitchen, under duress collapsed. People that bought the bad food demanded their money back. Their demands were met with blank stares and various kitchens boarding up the windows and taking the fast road out of town.

There was such a fuss, people overlooked the source of the bad ingredients. By the time, the focus turned their way, lots of the ingredients were not just spoiled, they were rotten.  All the Chefs turned to their Uncle Sam and said HELP.

They got it.  Like I mentioned, programs with more initials and letters than a world championship anagram crossword puzzle were created. The government of the U.S. of A came riding in on big ole white horse with saddle bags full of riches.  Money was given to the Chefs so they could stay afloat while cleaning up their kitchen. People waiting for a new meal, void of the previous toxins, got in line.  The salesman, lies exposed and and short cuts denied, vanished.

People left in the kitchen now had to divide their time up between preparing new safe meals, marketing the safe meals and sorting out “what the hell happened’ also were tasked with making something of value out of all the bad meals already on tables all across the country.  Now they say, all real estate is local, but this problem cropped up in more places than McDonalds has golden arches.

Yep, that’s the overview. Today, the Fed is buying up bonds and lending money at zero percent and the gap between those that are qualified to buy a home and those that actually can borrow the money seems to be greater today than the morning the country woke up to a collective stomach ache from all the bad stew and gumbo we as a nation had consumed. What the heck is going on?

Let’s take a look at what’s really going on in those kitchens.  They say that one bad apple can spoil the whole bunch.  Same thing happened with those bad loans. They spoiled the whole pot.  Bad loans did not get repaid.  Houses were foreclosed upon and resold at less than market value. Prices began to fall. People found it very hard to get a loan. Demand for homes began to decrease.  Like some sort of four or five year nightmare, things kept falling and nobody was able to wake up.  If you exclude that 1% of the population that politicians like to bandy about, the other 99% of American’s has their current wealth tied up in real estate, they either own it and live in it or own and rent it. When values plummeted, most people suffered.  Sure, it may not have been directly, but we all felt the pinch and the economy went into the proverbial toilet.

Now, some hot shot self proclaimed geniuses will say that there were mitigating factors like wars and global problems.  O.K., but those factors are always in play. Real estate for the first time EVERYWHERE was in the tank and sinking faster than Joe Frazier in the 1973 Superstars event.

Time has passed.  It is still damn near impossible for an average person to get a loan to buy a home.  If the Feds are buying up bonds and lending money at zero percent, why is the housing market in such  poor condition.

Remember the Chefs?  Remember all the batches of crappy stew and gumbo? Stuff has to be sold.  Those bad batches of food are still on the books. Their value is diminished and they can’t be sold until all the bad ingredients are sorted out. No one seems to know just what the hell is in that mix. Oh, they tried to straighten it out.  I’m sure most of you recall the “robo signing” scandal.  Once again the chefs were caught trying to cut corners and move forward. This was really a case of it becoming hotter than hades and they wanted out of the kitchen.

You see, you can’t foreclose if you can’t prove you own the loan.  You can’t move forward if documents supporting your claim are spread between Kansas and Iowa and beyond.  The beauty of the those documents signed at closing is hidden among the dozens of pages that make up the transaction.  It is always in there, in black and white, if you don’t pay, the person or persons holding the note can foreclose.  Well, that paperwork got mixed with other paperwork and loans got sold, and bundled with others and sold again and parsed into pieces and sold again. Homeowner stops paying and no one is quite sure whom has the right to foreclose. Picture a game of musical chairs. The band played on while everyone with their proverbial finger in the pie walked around the chairs. Music stopped and the last lender standing tried to show up and say the paperwork is ours.  When they could not prove it, well hell, they went ahead and decided to create their own proof. Hence…robo signing.

What to do?  It would appear to me that the solution was already in hand.  Way back when the Fed’s stepped in, back in the beginning of this mess ( am I the only one that noticed that everything exploded during the end of the Bush presidency and carried over to the new administration?), money was provided to banks. After all, we had to save the banking system.  OK, we forgot to put any stipulation on how the money would be spent, but they had to pay it back. Surprise, surprise…very little if any of that money trickled down to the consumer.  Banks used it to buy  little banks that were in trouble. Banks used it to reward  the very people that helped orchestrate the fiasco. Banks used it to make sure they increased their net worth.  Then they paid it back.

Now, money is cheap. What the hell is going on?  I’ll tell you what is going on …. re-financing. Now, at first glance this looks like a great thing for home owners.  It is.  People are reducing their monthly payments.  In some cases, lenders are reducing principle and re-financing homes. It is a great time to be in that market.  Oh, the banks are not doing this because their is less risk. The banks are not doing this because the loan to value ratios are terrific. Nope, the banks are bailing out of a paperwork nightmare under the guise of lending money.  They are just shuffling here and rotating there and offering re-fi’s to anyone with a loan.  It is cheaper to just refinance and create a new starting point for the mortgage than try to unravel the convoluted paperwork trail that is supporting the current loan.  Everything old is new again!  Doubt it? Here is a big clue for you.  Lots and lots of people bought homes using more than one loan.  Now, if it ever comes to foreclosure, the first trust gets first dibs on the proceeds, if anything is left, then the second and third etc trusts get to fight over the remains.  Homes that are upside down don’t have much left. The folks sitting at the board room tables realized, if we refinance, we become first and clean again.  No need for “robo signing”. They will have a clean mortgage document and they can foreclose much more easily. People are getting first trust refinanced when they are in total “under water’.  Lender doesn’t care, they know if the loan goes south, they are primary and get bulk of the proceeds. Their cost to foreclose is reduced and their ability is enhanced.

Now, when they are cleaning up their books, do you really think they have any reason to increase the rate of home loans to new buyers?  Every refinance completed improves their balance sheet, if not numerically, certainly from a risk management point of view.  When they determine that they have brought their exposure down to a manageable level, they might loosen the purse strings and begin lending at a bit more relaxed fashion again. But, when the Feds are making it easier for them to clean up the soup, they have no impetus to put more money at risk.

Once, the books are cleaner and the balance sheets are stronger, well interest rates will climb.  Don’t be surprised to see lending requirements relax in direct proportion to the rate interest rates rise. Don’t be fooled by fancy slogans … banks are not your friend, they are in business to make money, as much as possible. If lending to consumers becomes more profitable while becoming less risky, the housing crisis will be over.

For right now, no soup today!

It is no secret what a streamlined 203k can do

The condition of many of the homes for sale today is far from the rosey picture painted by agents in their on-line comments. Often agents put up pictures of the home before the place was destroyed.  Consumers, visiting any one of the 6 million websites that feature homes for sale, are routinely misled about the actual shape of the homes they select to view.

Let’s face it, this kitchen needs more than a little “TLC’ !  Buyers go on their house hunting mission and soon become dismayed at the “real condition” of the homes that are listed “need a little work”.  The first clue is the over grown yard. Abandoned homes often have been stripped of appliances, feature rooms with carpeting that carries suspicious stains, water damage and more. They are often “musty” (I know I am being kind) or down right foul smelling.  The power and water usually are turned off. Many are secured by a deadlock and access is obtained with a key secured in a combo lock box.

Don’t shoot me, I am only sharing the truth. As an industry, we are challenged to sell these properties.  Often, they are “bank owned” or they are in the limbo state where the owner has walked away and the bank is going through the foreclosure process. Some of them are listed as “short sales”, but they have been abandoned and left in a state of disrepair.  Their condition is reflected in their sales price.  The impact of the sale is felt by everyone in the neighborhood.

There is hope.  Many of these trashed properties are not that far removed from their past glory.  “TLC” implies a little elbow grease. These homes need more than can be accomplished on a free weekend.  Despite the visual appearance, there is a wonderful home beneath the rubble. Not only that, home buyers have access to loan programs that will do more that “put lipstick on a pig”.

Rehab a Home with a 203(k)

You might be surprised to learn what you can accomplish using a streamlined FHA 203k.  For starters, there is no minimum amount regarding repairs and you can borrow up to $35,000 for qualified improvements.  What are some of the things you can do?

You can repair or replace a roof !

You can install new windows !

You can install new floors !

You can upgrade the electrical system !

You can install a new HVAC system !

You can install new appliances !

You can remodel the kitchen !

You can change the back of your home from this

to this by adding a deck and patio !

It is no secret what a streamlined 203k can do!  This program allows you to change the old saying “what you see is what you get”.  You can now look beyond the condition of the home you visit and imagine what you can create using the 203k streamlined loan.

When considering what you might want to do and what may be possible, understand, there are limitations. $35,000 may sound like a lot of money (well, it is a lot of money), but home improvements vary in cost. In the DC area,  a new roof can cost about $300 per 100 square feet (that is a 10′ X 10′ area),  new windows will depend on the number of windows (there are several well know companies that will gladly give you an estimate), new flooring can cost about $7 to $11 per square foot, upgrading your electric can cost as much as $2,500, a new HVAC can run $8,000 and kitchen remodels can go from$15,000 and up. Just remember, you can do a lot with the loan.

Your local lender should be able to go over the loan with you. If they do not have someone that has actually done 203k loans, find another lender.  You don’t need the aggravation of having your lender stumble through the requirements at your expense. Use an experienced local lender.

Oh, if you need help finding the right house (in Washington DC  or the Maryland suburbs), well that is one of my services. I also listen to dreams, hold hands and support my clients from home search through settlement. I can be reached easily by calling 301-509-5111.

As is … not so bad with a little help from FHA

It is possible to turn that “pig’s ear” into a “silk purse”.  With a little imagination, input from a good contractor and a 203K loan, you can convert that abandoned bank owned property into a pretty sweet home.

Sure, you visited the property and spent more time stepping over mysterious stains on the floor than you thought could be possible.  OK, the place had been trashed. It is not the only home a non-mortgage paying miscreant attempted to destroy on their way out. Try to remember that they had little regard for the note they signed and the damage they did on their way out was on par for their lack of moral character.  The house didn’t always look that way.

Beneath the rubble and beyond the disrepair, there is a home waiting to be enjoyed.  Try to look beyond what is apparent and visualize what can be.

You need help. It may have only taken one malfunctioning adult to wreak the havoc before you, but it can be repaired.  The home can be restored.  The bank may be saying “as-is”, but you can finance the repairs and upgrades in your purchase loan.

FHA 203 K loans are available and very attractive.  Bank owned and even short sale homes can be purchased using this program. If someone tells you differently, they are wrong. The program is alive and well and there for anyone that qualifies. The down payment is the same as a regular FHA loan (currently 3.5% of the loan amount).

What is a FHA 203k loan and why use one?

When a buyer wants to buy a home that needs repairs they are faced with a couple choices.  They can request that the seller make the repairs, which has usually been the case in home purchases or they can use the power of the FHA 203k loan. If the property being sought is bank owned, there is little choice.  The bank is not going to fix anything.  If you want to finance the home, you only cost effective choice is to use the FHA 203k program.

A FHA 203k loan will allow you to finance the cost of repairs (and in some cases, upgrades) in your new loan amount.  The loan amount can not exceed 110% of the value of the property after improvements.  The value will be determined by an appraiser and a 203k consultant.  In simple terms, if you purchase a home for $300,000 that is in need of repairs that will  cost $50,000 and will be worth $350,000 when the repairs are completed, you can borrow the $350,000. Really, that is the basic concept. Now, I am not a lender and these numbers are just conceptual, but they are pretty darn close to accurate. See, you can make that wreck a home.

There are specific details for the FHA 203k loans.  Some of  the details are.

  •   The Down payment is based on the sale price PLUS the final cost of the repairs x 3.5% so for example:

Sale price is 300,000 (DO not calculate 3.5% on this)  PLUS 50,000 in repairs/costs (which includes certain costs and reserves the lender will require) 350,000 x 3.5%.  Down payment is $12,250.00 (closing costs are separate).

  •  Buyer will hire (the lender can and may recommend) a HUD approved FHA 203k Consultant  to go to the property with the buyer to determine the required repairs and a wish list repairs.

The buyer can add the  fee charged by the consultant  into the mortgage.  The fees vary between $ 400 to $1200 depending on the repairs required.  It would be prudent to check with the consultant prior to scheduling your appointment.

  • The Buyer will obtain estimates from several licensed contractors for the work to be completed depending on how extensive the repairs.

Three estimates are recommended for each contractor but not necessary.  The buyer can act as their own general contractor only if experienced and licensed.  (FHA says experienced, but most investors require the buyer to be licensed)  The contractors must provide documentation to be approved by the lender prior to approval.

The consultant will determine the “required” repairs versus the “wish list repairs”.  You must start with the required repairs and then move on from there for you wish list. This is an important step for the consultant and appraiser so that you don’t over improve the home and exceed the comparable properties in the area.

Eligible Repairs

  1. Structural alterations and additions
  2. Garage (attached /detached/new)
  3. Remodel kitchen or bathroom
  4. Install appliances
  5. Changes to eliminate deterioration and reduce maintenance
  6. Repair swimming pool (up to $1500)
  7. Modernize plumbing/heating/air conditioning/electrical systems
  8. Install or repair roofing /gutters/downspout
  9. Install flooring /title /carpet
  10. Energy conversation improvements
  11. Major landscaping /decks/fencing
  12. Improvements for accessibility ( e.g. handicapped ramp)
  13. Interior and exterior painting
  14. Improvements that are a permanent part of the real estate

Ineligible Repairs

  1. New Tennis court
  2. Gazebo or bathhouse
  3. Additions or alterations to provide for commercial use
  4. Photo mural
  5. Television antenna or satellite dish
  6. New Swimming pool
  7. Outdoor fireplace/hearth/barbecue pit  (Sorry to those of you in California! Sob)

* Once the consultant completes his report of required and wish list repairs, the lender will forward it to the appraiser for an “After Improved Value”.  This is where you may run into problems with OVER improving the property based on current values.  Between the consultant, appraiser and buyer – the FINAL FINAL report will be tweaked to come up with a final report that the contractors will be hired to do.

* So now the file is submitted to underwriting and approved ( you need to qualify at the full amount you are borrowing of course, which may include your current mortgage payment for the home you will live in during the rehab period) and the normal steps for closing will occur.

(Important note – you may include 6 months of mortgage payments in the new loan amount since it’s assumed that you will have TWO housing payments during the rehabilitation of the new home.  This money will be deducted each month during the rehab process) This is optional.

* Closing occurs, and the work begins within 30 days of closing/funding. (This is when your mortgage payments start since this is when you started borrowing the money – however, if you included the 6 months mortgage payments, they will be deducted from escrow starting when your first payment is due)

* Disbursments are made throughout the following 6 months from the escrow account (normally 4 draws with one final inspection, but  this can be increased for higher repair amounts) as the work is completed.

Remember you paid the seller for the price of the home, and then you borrowed an additional amount of X which is sitting in an escrow account to pay the contractors (your total loan is the total amount you borrowed)

Once the last disbursement is made and the final inspection showing COMPLETED AS PER THE CONTRACT……..you are done! You should note that having an experienced lender on your side is crucial!

Of course, some homes do not qualify. Check with your lender.  If you want to view homes, let me know your needs and I will help. I can be reached at 301-509-5111.

USDA Loan Changes coming in October

The USDA has just announced changes to their loan programs. The changes will take effect on October 1st, 2011. At that point, loans which are under the Guaranteed Loan Program will have a .003% annual fee. The fee will be added to the monthly loan payment.  There will still be an upfront fee, but it is be cut almost in half, from 3.5% to only 2%.

This change is the result of increase authority that was given to the USDA as part of legislation passed last year which allowed additional funding for the program. The program has been very successful and allowed buyers a very attractive option for purchasing homes in the designated areas.

The question has been asked, do the changes make the USDA option more expensive?  The Federal Government has always demanded that consumers be made aware of the total cost of loans.  In the real world, most buyers cringe if they are asked to focus on the total cost of a home purchase (if all the payments over 30 years are added together).  I know, it is important information, but the real question about changes has to do with “how are buyers impacted today?”.

Is the zero down USDA loan still going to be a good deal?

I think so.  Obviously, you are going to be better off if you have down payment money available.  Every dollar you put into the purchase of a house reduces the principle that you are going to borrow.  That being said, you may only have enough money to cover a bit more than closing costs on the home.  The reduction in the up front fee that will occur when this change takes place is significant.  Under today’s guidelines, you need almost $3,700 for every $100,00 you borrow.  After October, the amount drops to just about $2,000 for every $100,000 you borrow.  The new monthly fee is roughly $25 per month in the first year.  It decreases based on the principle still due each year.  The end result is that you may qualify for a little bit less of a loan (The $25 month per $100,000 will have to factored in, just like a condo fee or HOA fee is factored in).

As always, the amount of money you can borrow is directly related to how much the lender believes you can pay back on a monthly basis.  That is why, when you sit down with a lender they begin talking about your debt to income ratio.  They are only going to allow a certain percentage of your income to be designated as available to pay the loan. The small increase in the monthly payment will reduce the amount of money you can borrow.

If you are willing to accept that there are limits to what you can buy, the new guidelines offer you a clear picture of how a USDA loan might benefit you.  It is a wonderful program if used properly.

If you have any questions about this or any other real estate information, feel free to contact me.

First Time Buyer Grant Money Is Now Available

First time buyer grant money is now available in the DC area.  There are several sources of this money.  The amount can be as high as $7,500. It almost sounds to good to be true!  There must be a catch. Right?  Well, there is no catch, you only need to qualify for a loan from one of the lenders participating in the plan.  This is grant money.  After you live in the home for five years, it is completely forgiven. (If you move prior to five years, it is forgiven on a pro-rated basis).

Who is funding the plan?  Well, actually the Federal Government is supporting the First Time Buyer Grant Money program by funneling the money through designated lenders across the country.  If you wish to make contact with one of the lenders, information is available at Home Buying Help.

When is the money available?  The limited funds for the First Time Buyer Grant Money have been allocated for this year.  Each lender has a specific amount of money for the program.  Once they run out of  funds, they must wait until either a possible re-replenishment  from the government or the funds are released next year. In my experience, the funds usually last until fall.  The lenders that I work with have all reported that there experience has been the same.

What does it take to qualify?  As I mentioned, the first requirement in receiving the First Time Buyer Grant Money, you have to qualify for a loan (this includes FHA loans). There are income limits.  There is a limit to the amount of home you are seeking to purchase. These limits and amounts vary and you need to actually speak with someone to see if you qualify.

Where do I find out more about the First Time Buyer Grant Money that is now available?  Information about the grant is available at  Home Buying Help.

Why haven’t I heard about this First Time Buyer Grant Money before now?  Possibly, you have not had the chance to deal with a real estate agent that understands all the facets of working with a first time buyer.  The choice of a lender, the selection of a home and the process between your offer and closing take skill.  Experienced agents know there is more to helping a buyer than sending them emails of homes and taking them out on weekends.

How do I take advantage of this First Time Buyer Grant Money?  Well, your first step is to speak with one of the local lenders that has access to the funds. ( Contact Now ).  Once qualified, the money can be used for down payment and/or closing costs on your new home.

First time buyer grant money is now available. If you are interested in learning more, contact me at 301-509-5111.

The first step in Home Buying

The first step in home buying is making an honest evaluation of your current situation.  This review should include several factors.  Of course, you may be emotionally charged about some of your reasons.  I would caution you to sit back and put everything on a pad of paper.

Right now, you might not even be aware of the things you need to consider. It is quite possible, you have read an article or had a conversation with someone and now you think it is time to buy. Let’s take a look at some of the arguments for and against buying now. Using this information will get you started in a focused manner.  Understand, you are an individual and there is no cookie cutter answer. Let’s see if I can’t separate the proverbial chaff from the grain. Hopefully, I can separate fact from fiction with the following.

  • “It is cheaper to buy than it is to rent.” This statement is usually shared by a real estate agent or a mortgage broker. As an aside, in the future when evaluating a statement, take a long look at who stands to benefit financially from the statement.  Now, if you are paying $1,500 a month in rent and you are told that your mortgage payment will only be $1,400 per month, buying still may not be cheaper.  The terms of your loan are very important.  You see, if your situation changes and you can’t pay the $1,500 in rent, you will have to move. If you break your lease, you will have to pay at least a two month penalty ($3,000). Your landlord may agree to accept the money or make a payment plan with you. Your credit may or may not be impacted. If your situation changes and you can not afford the $1,400 per month mortgage, you will have to move.  It doesn’t matter if you use a short sale or turn the keys in or if the lender forecloses, your credit will be impacted. Remember, most leases are for one year, most mortgages are for 30 years.
  • “Buying a home is a good investment”. Hmmm, this statement is usually shared by the same group that shared the first statement.  The most recent melt down of the real estate market should give you a clue to the validity of this argument.  Yes, over the long term ( 20 years or so ) the value of a home has historically  increased.  Depending on who is sharing the statistics, you home could double or triple in value over time.  I am not a financial advisor, but I did spend the night at a Holiday Inn and I promise you that no one can guarantee the future value of any home.  I do know that just about everyone that bought this line in recent memory owns a home that is worth less than they currently owe. From where I sit, that is not a good investment.
  • “Owning a home is the American Dream”. Well, this makes it a perfect tri-fecta. It is another statement shared by the folks that brought you the first two statements.  It is my humble opinion that the American Dream is much more that owning a piece of land. Part of the American Dream includes the freedom to choose whether we rent or we buy or if we just want to push a shopping cart and sleep on a heating grate.  Just because “Madison Avenue” attempts to guide your vision, you don’t have to buy into the hype.

What should you evaluate before beginning the process?  I would encourage you to ask yourself the basic questions that have withstood the test of time.

  1. Why do you have to move and why do you want to buy? Your reason for moving does not have to be the same as your reason for wanting to buy.  They are separate issues.  Wanting to buy must be tempered by your ability to buy.  Your ability to buy can best be evaluated by a loan officer.  It is a simple process.  You tell them about your financial situation and they tell you how much money you can afford to borrow.  Of course, you probably should limit your loan amount to what you are comfortable paying and you should have the evaluation done on a fixed rate loan. Using one of the fancy adjustable rates on  your first home is usually a prescription for disaster.
  2. When do you want to buy? Unless you have other reasons, you should avoid buying when the market favors sellers.  Agents will have me for this, but I believe that October through February is when buyers have the most leverage. (If you can time your purchase around the time between Thanksgiving and Christmas, you may be in a really strong position.)

The first step in home buying is making an honest evaluation of your situation.  Write down the pro’s and con’s. Then sit down with a lender and get a clear picture of your financial situation. Listen to their advice. Then get it all in writing in a good faith estimate and a work sheet. Get both.  Then, if everything is a go, move to step two…make a careful examination of your needs.  I will cover my thoughts on step two in my next article.

As always, if you have any questions regarding the first step in home buying, feel free to contact me.

Snake Oil…makes more sense that sizzle and steak

Trust me…one bottle will cure you in 7 days

There was a time when Snake Oil salesmen travelled from town to town selling their product. They would set up shop on a street corner or in a vacant lot and begin extolling the curative powers of thier elixer.

“Friends, I can see many of you suffering from ill health. I can hear the coughs, the sneezes and the wheezing. You are suffering. Today, you will suffer no more. Buy one bottle of my Mozillo Snake Oil, take a table spoon every morning and I guarantee that within 7 days you will be symptom from. You will be cured! Some of you may remember I was here 6 short months ago. I see Jack Queen over there. Jack, you bought a bottle… tell the folks what happened.”

The older fellow, Jack Queen responded, “Why I was on death’s very door. I took the medicine and 7 days later I was cured. Used it in on Ezra Tucker a month or more back, he is fit as a fiddle today.”

The crowd begins to line up and within a short time, the Snake Oil salesman has sold out of every last bottle he had brought with him.  Men, women and children headed back home to begin the cure. Tissues in hand they made there way to the comfort of warm living rooms and comforter covered beds.

Seven days later, the sun rose on the town and every one of those that had taken the medicine was symptom free. They met one another in the market or at the coffee shop or in the library and shared how wonderful it was to be well again.  They were convinced that the Snake Oil was miraculous.

Then fact seperated fiction and reality replaced illusion … and the Snake Oil salesman had to find a new product. Modern medicine stepped up and revealed that the common cold usually last anywhere from 3 to 7 days. The discomfort is most easily dealt with by staying warm, inside and getting plenty of rest. If you just completely ignore the cold, chances are it will disappear within 7 days. The Snake Oil did have a correlative relationship to the cure…but it was not causational.

This Snake Oil was just as easy to take, but it cured no ills

The most recent products have been the multiple servings from the mortgage industry. They have created all sorts of variable priced loans. A borrower can choose from an “adjustable rate”, a “teaser rate”, “interest only” or one of the other fancy terms used to describe the pandora’s box of options presented them. They are all “legal”. They all do exactly what they claim to do. They all remain available. And, if judged with a careful eye, they are as valid as the Snake Oil of days gone by.  If you take out a mortgage, with one of these instruments, you home will be paid for in full at the end of the term of the loan.

The difference between Snake Oil taken to cure the common cold and this new version is quite apparent. The common cold was going to run its course over 7 days. Regardless of whether or not you took the medicine, you would be cured. The new version requires that you actually follow the terms of your loan.


The salesman may extoll the wonders of a loan that begins at a much lower interest rate (say 3.5%) and he may show the borrower a chart that indicates the monthly payment for a $200,000 loan will only be around $1,360 per month. He will point out that the borrower only need an income of around $57,000 -$58,000 to qualify for this wonderful program.

If asked about the a(djustable) r(ate) part of the loan, the salesman will most likely point out that the borrower is young and will be making more money by the time the loan resets (increases in monthly payment) and the home will probably be more valuable then as well. He will imply…Why wait, you can have more home now? The fine print that caps the loan at 8% is mentioned in passing.

Let’s be very clear. This is all legal. This is all true. This is all based on IF. We have an entire industry in taters because no parent, no boss, no legislature, no official demanded that WHAT IF should be part of the conversation. Literally millions upon millions of people drank the new Snake Oil and IF never happened.

WHAT IF regulations were in place that stated the person with an income of $57,000-$58,000 could only borrow enough for a $135,000 home if the interest rate could cap at 8%? All the other IFS would have little impact on the borrower. Their earlier home payments would be lower, but they would cap out at an amount that the borrower could still afford. (less than $1,400 per month)

A sign of the times

It is time that we stop blaming the Snake Oil and start restricting the salesman. History has proven, when it comes to financial planning and budgeting, we need to be protected from ourselves. Despite the rare headlines pointing out isolated cases of mortgage fraud, most people took the emotional route when borrowing money to buy a home.  They believed that their income would rise. They believed the value of the home would rise. They believed that the mortgage would never reset to the highest limit. They did not believe lies…they believed in maybes. They grasped the IF with both hands and WHAT IF was left to linger in the corner with the reat of the never completed thought processes.

None of the usual reasons offered caused the housing crisis and melt down. The correlation between everything offered is certainly reasonable. Snake Oil will always be around. It really will never harm anyone as long as it is taken with a healthy dose of reality. And in reality, lending money based on hopes and prayers is something that needs to be terminated.

One of the wisest steps the administration could take would be to refuse to guarantee or insure any mortgage loan amount in excess of what the borrower could afford to repay based on the amount borrowed at the maximum interest rate the loan will allow.

Just a thought, of course, I may have sipped some Snake Oil before breakfast this morning.

So You Want to Buy or List a Condo…Will Financing Be Available?


One of the bigger issues today. Don’t think we are just referring to apartment living. Condo’s can also be town homes. The drop in the market, the foreclosures, the economy and several other factors have turned condo’s into nightmares.

If you have cash, you may still be able to get a bargain, but don’t forget the condo association has bills that have to be paid. If several members stop paying, the others have to make up the difference.

If the association fails, the remaining owners become defacto slum lords. No maintenance, no master insurance, etc.

Bridget knows her stuff..read on and take heed!


Via Bridget “Mortgage Mama” McGee (Allied Home Mortgage Capital Corp 410-960-2061):

I got a call yesterday from a realtor (referred to me by Margaret Rome, THANKS MARGARET) who has a client interested in condo living.  There are some fabulous condos on the market, the prices are right, the amenities are fabulous.  For cash buyers, condo living may be a no brainer, but for many the question will be “Will financing be available?”

To determine if the condo is currently approved for FHA financing, click here.

To determine if the condo is currently approved for VA financing, click here. It can take 8-12 weeks for the VA legal department to approve a condo.  Documents including budget and condo docs will be required for review.

The condo association may already be approved for conventional financing by specific investors, your loan officer should be able to determine.  If not, the investor will need at least the following information from any condo association you are considering (if they are not already approved):

  1. 2011 budget
  2. Condo Master Insurance Policy
  3. Signed and Dated Condo Questionnaire

There may or may not be a fee required by the condo associated for gathering the documentation.

Most lenders will  probably not approve financing if:

  • the association is involved in any litigation
  • there is over a 15% delinquency rate on dues
  • the condo is over 20% commercial
  • one entity owns 10% of the condos

Don’t be discouraged if a condo listed for sale is not yet approved for available financing, with some skill, diligence and proper documentation, we can help you to navigate the approval process for condos in Maryland so when someone asks “Will financing be available?”  You can answer “YES” with confidence!

Warm Regards,

Bridget McGee  Maryland Mortgage Mama   Allied Home Mortgage Capital Corp #1448  410-960-2061 EHO