Buy a House With No Down Payment

I’ve had clients tell me they were ready to buy a house—but then qualify that by saying, just as soon as they get a big load of cash from an insurance suit they have lodged. So I really can’t take them as seriously as I would like. Because who can say what the outcome of an insurance suit will be and when it might happen, if ever.

There are tons of folks who subscribe to the “American Dream of Home Ownership”. These are people with the desire, but often not the ability to make a purchase.

And then again, we can’t forget all the “programs” designed to help families buy a home of their own. For years I was a director at Habitat for Humanity—heck, we gave homes away to families that qualified. And with all due respect, sometimes we had to look pretty hard to find a qualifying family for a house we were ready to build. So if you think you might like a Habitat home, make your application and see what happens.

The people who are pretty sure they wouldn’t qualify to buy a home, usually don’t even consider it. They know they don’t have a down payment or their credit isn’t perfect. But the truth is that with a little time, work, and patience, homeownership can be a reality. You just need the right people in your corner.

So let’s talk about the down payment. You know that’s the big chunk of cash, as much as 20% of the cost of the home you want to buy.  And not having enough down payment often stands in the way of becoming a homeowner for many people. But there are available programs on the city, state, and federal level which can help make the home ownership happen.

In an effort to assist low- to moderate-income individuals achieve homeownership, the Florida First Time Home Buyers (FTHB) program offers borrowers an assortment of down payment assistance options. The assistance comes in the form of a grant, or a 0% interest or low, fixed-rate second mortgage. Only one Florida Housing down payment program can be used by the borrower and only in conjunction with the FTHB program first mortgage products.

For a Federal Housing Administration (FHA) loan, the most common loan type for first-time home buyers, requires a minimum down payment is 3.5 percent. However, a number of nonprofits can help middle-income buyers with down payments. There are loans available which require no down payment at all. VA loans for example are often overlooked when in fact they provide qualifying former military members a zero percent down loan.

Florida Housing’s Homeownership Pool (HOP) program provides down payment assistance on a first-come, first-served basis. Eligible homebuyers are those whose adjusted income does not exceed 80% AMI. Through this program, they can receive a 0% deferred second mortgage loan for the lesser of 25% of the purchase price of the home or $70,000, or the amount necessary to meet underwriting criteria (with the exception of eligible homebuyers with disabilities and eligible homebuyers at 50% AMI or below, who may receive the lesser of up to 35% of the purchase price or $80,000).

If you qualify for a conventional loan (the least-expensive type, which conforms to tougher rules written by giant mortgage companies Fannie Mae or Freddie Mac) you’ll need a down payment of at least 5 percent.

There are also federal programs like the Federal Home Loan Banks’ Affordable Housing Program (AHP). A knowledgeable lender will be able to tell you how much you need to come up with for your down payment and recommend any available grants or assistance programs to help offset the costs.

Once you’ve figured out how to get your down payment taken care of, it’s time to think about closing costs. Closing costs can be one of those unexpected expenses that sneak up and bite you if you are not prepared. They range between two and seven percent of your loan amount - but before you freak out and decide you’re definitely not homebuyer material, there are ways to get help here too.

There are Assistance programs that offer down payment funds often allow funds to be used to pay closing costs.  Depending on the strength of the real estate market in the area in which you are buying, the seller may kick in closing cost assistance.  A good lender may be able to figure out an equation within your particular loan parameters to offset closing costs through a credit.

If you have credit (score) issues, start by addressing these problems as much as a full year before applying for a mortgage. Don’t expect to qualify with anything lower than a median score of 620 on the three credit reports (Experian, Equifax, and TransUnion). The higher the median score, the more likely it is you will qualify without extra effort and the better your interest rate can be.

If your scores are low, go on the offensive. The world of credit repair is complicated and frustrating and often makes no sense whatsoever, but success stories are out there.  Find a mortgage agent you like, and trust—and follow their suggestions.

Dane Hahn is a real estate professional affiliated with Sarasota Realty Associates in Venice, FL. You can reach him at 941-681-0312 or by email at dane.hahn@gmail.com. See him on the web at www.danesellsflorida.com

 

 

 

Limit of short-term rentals Subsection (7) of section 509.032

Florida is ready to vote on a new amendment which will affect not just hotels and larger owners of multiple rental units, but even the little guy, the one with only one unit that he rents out. Picture a retiree with an apartment in his home, or a second cottage—this proposed regulation will cause folks who have invested in real estate for rental income in their retirement, severe heartburn. Section 1. Subsection (7) of section 509.032, Florida. The exact wording of the new amendment follows in italics:

PREEMPTION AUTHORITY.— (a) The regulation of public lodging establishments and public food service establishments, including, but not limited to, sanitation standards, inspections, training and testing of personnel, and matters related to the nutritional content and marketing of foods offered in such establishments, is preempted to the state.

This subsection paragraph does not preempt the authority of a local government or local enforcement district to conduct inspections of public lodging and public food service establishments for compliance with the Florida Building Code and the Florida Fire Prevention Code, pursuant to ss. 553.80 and 633.206.

Supporters of the bill suggest safety issues are the main issue. Overloading a home by renting to too many people, or providing party houses that neighbors hate can now be regulated. But if legislators simply wanted to amend safety issues they would not be repealing the current bill House Bill 883 which protects the property rights in Florida of non-homesteaded owners.

The new law would move more rights away from local goveernments by shifting them to the state. It’s understandable that full time homeowners do not want weekly renters and strangers living next door to them.  Their solution has been to ask government to restrict rentals terms to a minimum of 30 days or even 6 months or 1 year. That is what Venice Florida and other areas have enacted to zone out vacation rentals.

Local governments have the ability to regulate health and safety matters under the existing law (House Bill 833).  The rule of law establishes that they simply can not "target" and "selectively enforce" against vacation rental owners who tend to be non-homesteaded and thus can not vote. Local governments can make laws to disallow a conversion of a garage to a rental for example.  And local governments can create occupancy laws per a house or a condo.

But this law preempts these regulations to the state. In the Orlando area where one week rentals are the norm, the bill would likely put the small short-term renters out of business, which obviously favors the hotel industry. See where this is going? More room-nights at Disney, or fewer tourists who can afford to come to the state, depending on the outcome.

A few years back counties like Sarasota began charging an onerous room tax on the little guys who rented for anything less than 6 months, and now it appears the state is planning to make short term rentals—except where zoning allows for hotel type business—illegal, state-wide.

 

Everyone who owns property and rents short term (or is considering purchasing property) should be deeply concerned of the consequences of this new bill if it passes. And the enactment could potentially raise the issue of a regulatory taking. Florida courts have traditionally held that such a regulation is constitutional, insofar as the results are to prevent new vacation rentals. But traditionally, local governments have grandfathered non-conforming uses to avoid this issue. There is no mandate that exists to require a local government to grandfather current vacation rentals, perhaps that could be added.

While the legislation advanced in committee Feb 4th on 10-3 VOTE, there are legislators willing to stand up and advocate for the rights of property owner. There are still 2 committees to go and there are 4 Representatives who have voiced for compromise. By voting to oppose legislation that unfairly targets vacation rentals, they have demonstrated support for the property rights of individuals and for an important part of Florida’s tourism sector. The legislators who apparently oppose this legislation are:

 

Senator Kelli Stargel                           Stargel.Kelli@flsenate.gov
Representative Mike La Rosa             Mike.LaRosa@myfloridahouse.gov
Representative Greg Steube               greg.steube@myfloridahouse.gov
Representative Carlos Trujillo             carlos.trujillo@myfloridahouse.gov

Dane Hahn is a professional Realtor working with Sarasota Realty Associates, in Venice. You can reach him at 941-681-0312 or by email at dane.hahn@gmail.com. See him on the web at www.danesellsflorida.com

New QM Mortgage Guidelines

I’ve traded a few emails with friendly mortgage agents this week, and I’m discovering that their business is not as strong as the drive-by media would have you think. That’s because the number of homes purchased with a mortgage loan has been dropping steadily since last May. Instead, cash is king for many reasons. Investors generally have cash, and as mortgage rates began creeping up late last year, even average homebuyers started opting to purchase with all cash. That trend may continue as new loan requirements become stricter.

For buyers who need a mortgage, there are a few new guidelines to contend with under the Consumer 

Financial Protection Bureau's Qualified Mortgage (QM). QM is designed to help avoid the borrowing catastrophes that probably caused the housing crisis. These new guidelines are the rules lenders use to prove borrowers' have the ability to repay a loan.

My mortgage originator friend wrote to me saying,”I've begun to set my sights more toward 

commercial loans. My personal minimum commercial loan is a million, which is kind of the threshold for local banks, I think it will be a nice change from the regulatory frustration (of home loans). I can solicit nationwide (don't have to be licensed in each state) and the best thing, regulation is a minimum.”

You can see her concern, especially as the new guidelines state that borrowers may not exceed a debt-to-income ratio of 43 percent. Debt-to-income ratios have already been in place but the new rules don't allow for any mitigating circumstances. That means that not even a significant down payment or large cash reserves will be allowed to offset a higher debt ratio. And remember here, debt from all sources, including auto loans, credit cards, unpaid hospital bills and student loans (and loans that have been long forgotten, which seem to have a way of reappearing when you least expect them).

The incentive to follow these guidelines is huge for the lender. If the mortgages don't meet the QM guidelines, the lender will be required to hold the loan as opposed to selling it to Fannie Mae and Freddie Mac. And lenders generally DO NOT want to hold loans.

The QM requirements also have lower loan limits now than before for conventional conforming loans. The Federal Housing Finance Agency will announce its adjustment of loan limits later this year, because the agency is trying to see what kind of impact the new QM guidelines will have on the housing industry. For most housing markets, the current limits are $417,000 and up to $625,000 in high-cost areas. How these figures will change will be revealed later in 2014.

Origination fees will be limited under the QM requirements, which could make getting a smaller loan more difficult. Origination loan fees will be limited to no more than 3 percent of the loan amount. This could make mortgage lenders less likely to offer smaller loan amounts because they may not always be able to recoup their costs and make a profit.

Self-employed borrowers—like Realtors--already face tough standards when they need a loan, and these standards will be even more strict later in 2014. In the new QM guidelines, all borrowers must prove there is sufficient cash flow to make payments on their loan but self-employed borrowers' incomes typically fluctuate. These borrowers may have cash reserves that they rely on to pay bills when their income is off in a particular month, but even if there is a large amount of money in reserve, it may still be difficult for the self-employed borrower to get a loan approved due to this new "ability-to-repay" QM guideline.

Dane Hahn is a real estate professional affiliated with Sarasota Realty Associates in Venice. You can reach him at dane.hahn@gmail.com or by phone at 941-681-0312. Read his old and new columns at http://reedge.blogspot.com/. See him on the net at www.danesellsflorida.com.

 

 

 

 

FAA Regs for Private Drones

As Realtors we are always looking for better ways to photograph a house. Aerial real-estate photography is becoming an important part of marketing properties, especially high-end homes. Using lightweight radio-controlled helicopters to shoot photos that show homes in context to neighbors, golf courses and other nearby landmarks is a new business, and the federal (FAA) rules are not clear. But Realtor or not, flying drones in the neighborhood will likely be frowned on by the neighbors, especially those who practice their second amendment rights.

 

The FAA does authorize the use of Unmanned Aircraft Systems (UAS) also known as drones, for important missions in the public interest, such as firefighting, disaster relief, search and rescue, law enforcement, border patrol, military training and testing and evaluation. And they allow model airplanes and UAS helicopters to fly in a controlled environment.

 

Today, drones are in our daily vocabulary thanks to our war efforts. And drones perform border and port surveillance for the Department of Homeland Security, they help with scientific research and environmental monitoring for NASA and NOAA, and they support public safety by our law enforcement agencies, help state universities conduct research, and support various other missions for public (government) entities.

 

But not so much in Florida. Florida SB 92 defines what a drone is and limits their use by law enforcement. Under Florida legislation, law enforcement may use a drone only if they obtain a warrant, there is a terrorist threat, or “swift action” is needed to prevent loss of life or to search for a missing person. The law also enables someone harmed by an inappropriate use of drones to pursue civil remedies and prevents evidence gathered in violation of this code from being admitted in any Florida court.

 

Recreational use of airspace by model aircraft is covered by FAA Advisory Circular 91-57, which generally limits operations to below 400 feet above ground level and away from airports and air traffic. The FAA clarified that AC 91-57 only applies to modelers, and specifically excludes individuals or companies flying model aircraft for business purposes. An operator of radio-controlled aircraft can mount a camera on it and shoot video for his or her personal use, but may not sell the photos or video, and therein lies the rub. Some owner/operator/photographers get around the rule by shooting the photographs for free, but charge for a copy on a disk or flash drive. There are many ways to skin a cat, as they say.

 

The FAA is not a prosecutorial agency, but it would send a cease-and-desist letter if it became aware of the unauthorized commercial use of a UAV (unmanned aerial vehicle). By their own admission, there are probably thousands of UAV photographers around the country and the FAA cannot police them all. And there are more up there everyday now that a solid quadcopter is sold at retail in the $500 range. The Federal Aviation Administration estimates that more than 7,500 small UAVs will be flying in the national airspace in the next five years.

 

At the Consumer Electronics Show last month in Las Vegas, the DJI Phantom, a 5-pound aircraft with 14-inch blades, which can fly on battery power for about six minutes with a camera or 25 minutes without, made a big hit. Called a quadcopter, it’s designed as an eye in the sky, and works perfectly for aerial photography. If you’re interested just “Google” them and check out the videos.

 

Dane Hahn is a real estate professional serving Sarasota and Charlotte counties. He is affiliated with Sarasota Realty Associates of Venice. Reach him at 941-681-0312, or dane.hahn@gmail.com. See him on the web at www.danesellsflorida.com

 

 

 

 

Location or Bling

Should I consider buying a new home instead of buying an existing home? New homes are wonderful for many people. They come with new appliances, they are painted the colors of your choice, there aren't any ghosts, many even have a warranty--and unlike new cars, they don't lose 30% of their value the first year. Up north when we sold a new home it came with a hand seeded lawn and 12 shrubs. So the landscaping looked pretty good after about three or four years.
 

Obviously people like new, clean and unused things, and with a new house you have a pretty good chance at getting exactly that, with everything in brand new condition. New home builders have wonderful brochures showing all the extras ($$$) that are available, and various builders give you options to upgrade this or that (all at a cost), to personalize your new home.

But let’s start at the beginning.  Realtors always say, “Under it all is the land”. And then they say the three most important things about a property are, “location, location and location.”  So let’s consider location for a moment.  People have been building homes for hundreds of years, and typically builders pick the best land available (in their price range) on which to build.

So it stands to reason that over the last several hundred years, most of the really good parcels have already been built on, and unless you are considering a home investment costing in the millions, the properties with the best locations will not be in your future. The “tract builders” who have all the open houses and the colorful brochures, are mostly building on less than ideal property--reclaimed swampland, areas along a highway, or in some cases vast ranch lands that have recently been rezoned from Agriculture to Residential with 5 or 6 homes per acre.

Gone are the days of finding a building parcel on a hill with a view of a lush valley of orange groves in one direction and Sarasota or Lemon Bay in the other. So if location is important to you, your choices will probably not include long views, but rather proximity to shopping or highway exits or perhaps a golf course. OK, so the land is only average, but you can still design the home of your dreams, right?  Well not so fast, Bucky. Most of the builders will allow you to make a few modifications to a plan they are happy with, and of course you can ask for upgrades, but don’t try to move a wall or change the location of the front door.

The plans that builders “like” are ones that have been approved by their accountants.  Today's homes are ones that can be built inexpensively, they are generally a couple of boxes on a slab, and are dressed out with a so-called California roof line in the front, and fancy trim around the entry door, so visitors will be impressed. Builders are good at putting lipstick on a pig. Today everything is profit oriented, remember, most of the builders out there are not your more traditional carpenters, but rather publicly traded  corporations.  These companies are in business to show a profit to their stockholders, and the more the better.

If you think that building products are all high quality, well think about all the builders who used Chinese drywall in many new homes throughout the area, with disastrous results. And there other cheaply made products in new homes. Flimsy light fixtures, sub-par water pipe, low quality carpeting, "builder quality" cabinets and countertops can all be substandard, while looking perfect.

Older (existing) homes can be a money pit, but—on the other hand--may provide a better structure with larger rooms on a nicer parcel of land in an established neighborhood, for far less money. Making an offer on an older home can leave over some cash to make the upgrades that are important to you and your family. If what you really wanted is all new appliances, a new AC and new tile floors, you may only need to budget $10-$15,,000 more to put all that into an older home. But whichever you choose, new or old, be sure to get a home inspection before you close your transaction. I once had a new home inspected for a client of mine, and the inspector found the builder forgot to install one of the support beams. So new or not, have an inspection.

Dane Hahn is a real estate professional with Sarasota Realty Associates in Venice, FL. You can reach him at 941-681-0312 or dane.hahn@gmail.com. See him on the net at www.danesellsflorida.com

 

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Dane Hahn