Jersey Success Realty, Inc (973) 691-0022

Protect Yourself from Predatory Lenders

Buying or refinancing your home may be one of the most important and complex financial decisions you’ll ever make. Many lenders, appraisers, and real estate professionals stand ready to help you get a nice home and a great loan. However, you need to understand the home buying process to be a smart consumer. Every year, misinformed hmebuyers, often first-time purchasers or seniors, become victims of predatory lending or loan fraud.

Don’t let this happen to you!

Understanding Different Types of Loans

Today’s homebuyer has more financing options than have ever been available before. From conventional (fixed rate) mortgages to adjustable-rate and hybrid loans, there are financing packages designed to meet the needs of virtually anyone.

While the different choices may seem overwhelming at first, the overall goal is really quite simple: you want to find a loan that fits both your current financial situation and your future plans. Though this article discusses some of the more common loan types, you should spend time talking with different lenders before deciding on the right loan for your situation. (more…)

Bargain hunting is searching for and purchasing real estate at a low price with the expectation of re-selling it for profit or renting it for profit. (more…)

Different loans for different home buyers.

Just as there is more than one kind of home, there is more than one way to finance it. Mortgage lenders have come up with many different methods of helping you pay for a home–each one with its own advantages and disadvantages.
(more…)

Motivated Sellers: Mr. & Mrs. Homeowner in debt

This is by far the most overlooked scenario for investors to make a solid profit by buying low and selling high. Many homeowners are under financial or personal pressure to sell their homes. Sometimes, the burden of that pressure causes them to sell their homes quickly at less than full market value. Bankruptcy, divorce, high medical bills, or many other circumstances could play a role for the average Mr. & Mrs. Homeowner to sell fast at a lower price rather than to hold out for top dollar. (more…)

Handyman Specials ( also known as Fixer uppers )

A Handyman Special is a property that requires fixing up, repairs, or renovations that will significantly improve the value of the property. An important factor in making a profit with Handyman Specials is to properly identify repairs that add significant value versus repairs that add little or no value to the finished product. (more…)

Distressed properties

Distress properties are properties that must be sold quickly or at a price below market value for compelling reasons. Distress properties may be acquired through a number of different scenarios including the following:

• Foreclosures
• Sheriff sales
• Estate sales
• Corporate-Owned real estate

These are terms that every homebuyer needs to know.

Adjustable Rate Mortgage (ARM).

A type of mortgage rate loan whose interest rate changes periodically up or down, usually once or twice a year.

Annual Percentage Rate (APR).

Everything financed in your mortgage loan package (interest, loan fees, points or other charges) expressed as a percentage of the loan amount (usually slightly above the actual interest rate alone.)

Assumable Loan.

A loan in which the lender is willing to “transfer” from the previous owner of the home to the new owner, sometimes at the same interest rate, sometimes at a new rate. An assumable loan can make your home more attractive to buyers when you want to sell.

Closing costs.

Costs the buyer must pay at the time of closing in addition to the down payment: including points, mortgage insurance premium, homeowners insurance, prepayments for property taxes, etc. Closing costs average 3%-4% of the loan amount. If you’re buying a HUD Home, you can request they be paid by HUD.

Contingency.

A condition put on an offer to buy a home; such as the prespective buyer making an offer contingent on his or her sale of a present home.

Conventional Mortgage.

A type of mortgage not insured by either the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA), and thus usually requiring a 10%-20% down payment. (HUD Homes may be purchased with a conventional mortgage.)

Earnest money.

Funds submitted with an offer to show “good faith” to follow through with the purchase. Earnest money is placed by the broker in an escrow/trust account until closing, when it becomes part of the down payment of closing costs. (HUD generally requires an earnest money deposit of $500-$2,000.)

Escrow.

A procedure in which documents or transfers of cash and property are put in the care of a third party, other than the buyer or seller.

FHA Financing.

Financing for a loan which will be insured against loss by the Federal Housing Administration–a part of the U.S. Department of Housing and Urban Development (HUD). Such financing only requires a 3%-5% down payment.

Homeowners Insurance.

Insurance that protects the homeowner from “casualty” (losses or damage to the home or personal property) and from “liability” (damages to other people or property). Required by the lender and usually included in the monthly mortgage payment.

Loan Origination Fee.

A fee charged by the lender for evaluating, preparing, and submitting a proposed mortgage loan.

Mortgage Insurance premium (MIP)

A charge paid by the borrower (usually as part of the closing costs) to obtain financing, especially when making a down payment of less than 20% of the purchase price, for example on an FHA-insured loan.

Point

An amount equal to 1% of the principal amount being borrowed. The lender may charge the borrower several “points” in order to provide the loan.

Property Taxes.

Taxes (based on the assessed value of the home) paid by the homeowner for community services such as schools, public works, and other costs of local government. Paid as a part of the monthly mortgage payment.

Title Insurance.

Protects lenders and homeowners against loss of their interest in property due to legal defects in the title.

VA Loan.

A loan guaranteed by the Department of Veterans Affairs against loss to the lender, and made through a private lender. (HUD Homes may be purchased with a VA loan.)

This article was adapted by Jersey Success Realty, with permission, from information from the Federal Department of Housing and Urban Development. Visit the FCIC for more consumer information.