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Our resident lender and co-founder of 5280 Home Tours is David Widlund. For more information, please Click Here
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Lending has gone through massive changes the past couple of years. Its collapse is the primary reason we are able to purchase real estate at such discounted prices today. With all of the changes, many buyers are worried about getting a home loan in this market. And if they can be approved, will they be able to afford the down-payment?
There is mixed news for buyers. The bad news is that not everyone can purchase homes like they could a few years ago. Sub-prime lending is gone. Nearly all 100% purchase programs are gone too. The good news is that conforming and government loans are still here, with low and some no down-payment options available. Rates are as good as they’ve been since the early 1970’s. Investment property loans are still here, also with historically low rates. Private money loans are readily available. Property prices are way down. History tells us that this may be the best time to buy real estate in 25 years or more.
Here are some loan-types and a little about each of them:
Conforming loans:
These loans are underwritten using Fannie Mae or Freddie Mac standards. Conforming simply means that it conforms to the standards of one of the GSE’s – government sponsored entities. These two GSE’s write the guidelines for conforming loans and purchase many of the loans that are underwritten using their standards. The guidelines change with time, but they have been around for decades, securitizing mortgage debt, so that banks and lenders have money to lend on mortgages. For more about Fannie Mae, here is the Wikipedia link. For more about Freddie Mac, click here. These loans are generally the best priced, lowest interest-rate loans available for properties within conforming loan limits. In 2008 the conforming limit for Colorado loans was $417,000. With the various stimulus and bailout packages of late, this number can change based on many circumstances. According to the Freddie Mac Primary Mortgage Market Survey for primary residences, loans originated during the week of May 21, 2009, the average 30-yr fixed rate mortgage was 4.82%, up from 4.71% the week before. Loans for primary residences have been available recently for as little as 5% down payments. Private mortgage insurance is normal again for loans with less than a 20% down payment. In many cases mortgage insurance is tax deductable much like mortgage interest. Conforming loans are available for investment properties with a 20% down payment. General qualifications for conforming loans include:
- Good credit or better. The best rates go to those with 720 FICO scores or better. Scores in the 600s can get conforming loans if there are plenty of other positive compensating factors.
- Easily-proved income. We need to have one to two years documented income with less than half of your monthly income going toward all of your monthly bills, including all real estate costs.
- Sufficient down payment funds. This money needs to be yours, to be documentable, available and not borrowed.
- A conforming property type. This means that the appraisal must support the value of the purchase, and be in functioning condition. Feel free to contact us for any clarification of “functioning condition”.
Government loans:
These loans are insured by several government entities. These are extremely helpful loan programs for primary residences. The rates are nearly as good as conforming. The monthly mortgage insurance costs are usually less than conforming loans. These loans are easier to qualify based on credit. FHA loans will even allow a co-borrower who isn’t living at the purchased property. Here are the three main government loan types:
- FHA – Federal Housing Administration. Now a division of HUD – United States Department of Housing and Urban Development. Originally began in the mid 1930’s to help pull the country out of the Great Depression by providing easy-to-qualify for, low-interest and low-down payment home loans. The FHA has been one of the best things to happen to American home ownership. Before the FHA, fewer than half of Americans were home owners. That mission continues today. FHA loans have virtually the same interest rates as conforming loans, with even easier qualifications. This is, and has been one of the best ways for first-time home owners to purchase real estate. Did you know that you can buy a duplex or a four-plex with an FHA loan? The positives with FHA loans are: Low down payments, low interest rates, easy credit score requirements. The negatives with FHA are: monthly mortgage insurance, upfront mortgage insurance and you may only use an FHA loan for a home you intend to live in. Another great function of FHA loans is that they are assumable. That means that someone else may assume your loan under certain conditions. Currently, you may buy a HUD foreclosure with an FHA loan with only a $100 down payment. There is also a rehabilitation loan which can be available for improving a home under FHA guidelines. For more about FHA click here for the Wikipedia page, or click here for the HUD homepage.
- VA – United States Department of Veteran’s Affairs. The VA loan guaranty program started in 1944 as an alternative to a cash bonus. These loans are available only to qualified U.S. Armed Service Veterans through government-approved lenders. VA loans allow these veterans to purchase real-estate with no money down. The rates are also virtually the same as conforming loans, with no monthly mortgage insurance required. There is an up-front funding fee charged by the V.A. which varies depending on any service-related disability. It is possible with a certain percentage of this disability that no funding fee would be necessary. Some positives with V.A. loans: No down payment required, low rates, no monthly mortgage insurance required, easy qualifying. The negatives are: May only be used for a home you intend to live in, maximum loan amounts can be prohibitive. One other great feature of V.A. loans is that you may borrow enough to make energy-efficiency upgrades to the home at the time of purchase or refinance. For more about the V.A. loan guaranty program click here for the Wikipedia page or click here for the United States Department of Veteran’s Affairs.
- USDA – Unites States Department of Agriculture Rural Housing Program – This is a newer program designed to assist homeowners in rural areas to have greater home buying and financing options. This program allows for 100% purchase loans with no mortgage insurance, and excellent rates. For the USDA Rural development homepage, click here, or for the Wikipedia page, click here.
Private loans:
Usually referred to as “Hard Money” loans, these loans are made by private individuals with the expressed intent of helping an investor purchase a property for quick-turnaround (flipping). These loans are made with minimal documentation, and minimal qualification. They are usually made based solely on the value of the home, sometimes including the cost of making repairs and renovations. A typical term for these loans is 90 days with upfront points of 3% or 4% with the ability to extend them for additional points. Normal interest rates for these loans are 10%-13%. These loans typically aren’t for amateurs, as they require the experience, wisdom and understanding of the market, the property and the risks. If you don’t get this loan paid off within the note period, you will lose it, and lose it quickly. There can be great opportunity with buying a distressed property, fixing it quickly and on budget, then selling it for a profit. However, mistakes can be costly. You must either have the experience of flipping homes, or you must do careful research, and get good advice. Successful flips can earn incredible profits. Please consult with one of our experts to help point you in the right direction.
Our resident lender and co-founder of 5280 Home Tours is David Widlund.
David Widlund is a 7-year veteran of the Greater Denver Area mortgage industry. A Denver native, He graduated from Middle Park High School in Granby, and studied Music Education at Adams State College in Alamosa. David spent the next 15 years traveling and working throughout the Rocky Mountain region from Taos, NM to the Black Hills of South Dakota working in Food and Beverage, earning various awards for excellence in dining.
In 1997, he returned to Denver to begin a new sales and finance career. He worked in venture capital for dot com companies during the explosion of the internet. In 1999 he became the operations manager for one of the up-and-coming telecommunications companies in downtown Denver. Shortly after 9/11, he shifted gears to help build a small brokerage in Lakewood, called Truth In Lending, Inc. When David joined forces with this family-owned mortgage brokerage, there were 7 employees. While becoming the operations manager and building his own origination business, he helped to build the company up to 55 loan officers and 4 offices including locations in Colorado and Houston, TX.
In 2005, he joined forces with America’s Mortgage, L.L.C. where he has formed his own team, DW Home Loans. David is now a full-service mortgage banker and broker with lender relations for most types of mortgages from coast to coast. He has placed an emphasis on using mortgage as part of a strong financial plan. He has spent years studying credit and how to improve peoples scores to get the best possible terms. David has consistently been a leader and an innovator in his industry and individual businesses. He has been amongst the top loan originators at each of the companies he has worked with and has earned the trust of his clientele, based on his 100% repeat and referral percentage during 2007 and 2008.
David’s contact information is:
David Widlund
Sr. Mortgage Planner
America's Mortgage, L.L.C.
7730 E Belleview Avenue
Suite A-100
Greenwood Village, CO 80111
(303) 996-2452 Office
(720) 836-3333 Fax
(720) 979-3288 Mobile
www.dwhomeloans.com |
