FHFA suspends Mar. 10 notice: rates to go down

FHFA

FHFA

We have been informed that the FHFA has suspended the increased risk enhancement notice published by the GSEs (Government Sponsored Enterprises, aka Fannie/Freddie) on March 10th of this year, which limited acquisition to 7% per aggregator for investment and second home properties. *

When this limit was imposed earlier this year, we saw interest rates for investment and second homes jump within 24 hours by almost a full percentage point! As of yesterday, that 7% limit has been suspended.

Why is this such BIG NEWS? We expect rates to start coming back down. We can’t say for sure yet exactly what that will look like, but I’m predicting that we’ll see a rate improvement of at least 0.5%! We should find investment property rates back in the 3s over the next few days.

Please understand that if you have a rate currently locked, that is your rate. The only way to relock at lower rates would be to let your existing rate lock expire and wait a full 30 days before relocking would be available.

To learn more andsecure your mortgage rate, call us today!

*The March 2021 amendments to senior preferred stock purchase agreements with Treasury imposed additional risk criteria on GSE-acquired loans. One of those restrictions was a 7% limit on GSEs’ acquisition of single-family mortgage loans secured by second home and investment properties.

5 Simple Ways to Succeed in the Real Estate Business

Real estate

Real estateReal estate investors can make serious money through rental income, appreciation, and profits. And as they build equity, they are able to leverage it to buy additional properties and increase their wealth even more.

But as with any form of investment, there are some challenges and risks. That’s why having an investment strategy is key to avoiding potential money pits and reducing volatilities. If you are ready to dive into real estate investing, following are some tips to start off on the right foot:

Set Goals

Make sure you have your short-term and long-term goals clearly stated in a business plan. The investment model best suited for you really depends on why you are in real estate investing and for how long you plan to keep the property. As you build your portfolio, you should always assess whether or not the property you are eyeing fits these goals.

Understand Local Market

Understanding the local market not only allows you to get a general idea of what’s going on now, but also to reasonably forecast what the housing market will look like over the next few years. There are a number of factors that affect the market, including supply and demand, mortgage rates, and the economy.

When new construction has been sluggish and supply limited, you have what’s known as a seller’s market. In this environment, sellers have the upper hand with multiple offers over asking. On the other hand, when there are plenty of homes on the market, it could be a great time to buy as you may secure lower prices.

In addition, lower mortgage rates tend to boost demand as financing becomes cheaper and more people can afford homes. Lastly, a strong economy that boasts high employment rates and wage growth will foster healthy demand and cause prices to go up. 

Make Updates

Home renovations can be an effective way to add value to your investment properties. While some renovations may instantly increase your home’s value, others may not be worth the upfront expense, so it’s important to keep things simple and practical.

Here are some common renovation areas:

  • Adding an extra bedroom or bathroom
  • Giving the inside of the home a fresh coat of paint
  • Upgrading the kitchen
  • Enhancing the curb appeal
  • Creating an exterior entertaining area

Hire a Property Manager

As your real estate portfolio continues to grow, so does the amount of time you will need to dedicate to managing the properties. As they begin to scale, many real estate investors will hire a property management team to handle daily operations. This frees up their time to focus on researching, networking, and closing more deals.

Stay on Top of Real Estate Trends

While the real estate business still involves quite a bit of networking and word of mouth, it would be unwise to discount the use of technology in this day and age. Make sure to arm yourself with the latest apps and tech stack. This may include AI-assisted pricing tools, targeted ads and virtual tours, for example.

Are you ready to invest in real estate and see the value it can provide? RLG would love to help you! Call us today to learn more!

Picking the Right Neighborhood for Your Investment Property

Neighborhood for real estate investment propertyKnowing well the area of town or neighborhood for your investment property plays a big part in a sound financial decision. While factors such as your investment goals and price range can help you winnow out some neighborhoods right off the bat, there will likely be hundreds of cities and neighborhoods that may pass muster – each with its cons and pros.

To make sure you pick the best neighborhood for your investing dollars, you may want to consider the following additional factors.

Safety

Lower crime rates are at the top of real estate investors and homebuyers’ must-have lists. Luckily, there is a wealth of online tools out there to help you research a neighborhood’s safety levels, such as ADT Crime, Neighborhood Scout, and SpotCrime.

A neighborhood that ranks high for safety not only provides peace of mind to buyers and tenants, but it can also keep property values high.

Convenience and Amenities

Convenience and amenities are valuable attractions for homebuyers. A convenient neighborhood is reasonably walkable and located in close proximity to schools, shopping areas, parks, gym, public transport, and more.

When it comes to amenities, consider neighborhoods that boast facilities such as swimming pools, play fields, tennis courts, club houses, community docks, and lakes. Other outside features that can pique homebuyers’ interest are nearby parks, open play meadows, and direct access to water bodies.

Growth

The expectation that the value of the property will continue to appreciate over time should inform investors’ decision when purchasing a home, hence the importance of market dynamics and macroeconomic factors. Look for neighborhoods that display attributes such as higher-than-average population growth rates, job growth rates, rental growth rates as well as low unemployment rates.

More broadly, the tax environment has been a key factor driving investments in the country, as seen in places such as Austin, TX and South Florida.

Are you ready to plunge into investing in real estate? RLG has the tools and resources at its disposal to get you on your way and not waste a moment of your time. Call us today to learn more and experience firsthand the dedicated, personalized customer service and undivided attention that RLG has to offer!

4 Must-Have Apps for Real Estate Investors

Real estate investor on smartphone using real esate appWhile the real estate business still involves quite a bit of networking and word of mouth, it would be unwise to discount the use of technology in this day and age. But with such a wide range of apps available, real estate investors can often become overwhelmed. To help you save treasured time, we narrowed down the extensive list to four apps that every real estate investor should check out. Have a look!

Foreclosure Home Search by USHUD.com

USHUD.com is a totally free list of foreclosures that includes properties owned by the government and all major banks. If you are looking to find homes that sell under the estimated value, make sure to filter out conventional homes and only search for foreclosure homes. The filtering system not only allows you to search by foreclosure or conventional properties, but also by price range as well as the number of beds and baths you want in your future house. Download for GooglePlay or Apple.

Property Fixer

Property Fixer is the ultimate tool for real estate investors who are flipping properties. After entering some information about the property, you can view a flip analysis that shows your profit and return on investment for the flip.

Property Fixer is really helpful when you’re driving around to scout properties. Instead of going back to the office to crunch the numbers on a spreadsheet, you can do your property analysis on-site in a few minutes. Download for Apple.

Rentometer Express

Rentometer Express is a fast and easy way to check rents for apartments and houses anywhere in the U.S. Enter your address and select 1-4 bedrooms to get an instant rent range for that area. To compare your rent, simply add the rent amount to see how it compares with the average rent in your area. Download for Apple.

Zillow

As the most-visited real estate website in the country, Zillow gives you the tools to find millions of listings, some of which may include immersive photos and virtual tours. What’s more, you will find resources such as Zestimate®, Zillow’s home valuation tool, and neighborhood details. Download for GooglePlay or Apple.

Are you ready to invest in real estate and see the value it can provide? RLG would love to help you! Call us today to learn more!

Are You Prepared for a Housing Inventory Surplus?

It goes without saying that real estate supply and demand are off-kilter. Home sales are continuing to fall due to housing shortages. As of late May 2021, existing home sales were down 2.7% to $5.8 million, marking the third consecutive month that activity has dropped off.

In recent times, there have been a number of severe disruptions in the supply chains that collectively led to the current situation, many of which revolve around lumber. The reasons include the U.S.-China trade war, tariffs imposed on lumber imports, supply shortage in transport, pandemic-driven home improvement craze, and new construction. The supply bottleneck in lumber, for one, has sparked much higher prices. In May 2021, lumber prices hit an all-time high of $1,686 per thousand board feet, an increase of 406% from the $333 it was trading at the same time last year.

Historically low interest rates have also played a significant role in fueling the demand for homes. These low rates coupled with the ability to finance over a 30-year term have made housing much more affordable for a large swath of buyers.

Relief may be right around the corner, however. National Association of Realtor (NAR) chief economist Lawrence Yun predicts that we should see further inventory come to the market later this year with more covid-19 vaccinations being administered. He also believes that potential home sellers will become increasingly comfortable listing and showing their homes. In addition, as forbearance activity declines, more foreclosures are likely to hit the market.

With the anticipated uptick in housing inventory on the horizon, real estate investors must stay on their game and prepare ahead. Ridge Lending Group offers a diverse product line available to clients, including conventional loans, commercial loans, short-term bridge loans, non-QM, and unsecured lines of credit.

To learn more about our mortgage programs and products, watch the video below or give us a call today! We would love to help you work with the properties you currently have and multiply your investment portfolio.

Making a Fair Offer on an Investment Property “As Is”

Selling a house “as is” means that the seller is putting the house on the market without making any repairs or improvements to it. There are a number of reasons why people choose to sell a house as is. Perhaps the seller is in financial trouble or must relocate quickly to care for an ailing parent. Sometimes, a home is inherited by an out-of-state relative who doesn’t have the time or resources to maintain or renovate it. More often than not, they simply want to avoid making costly repairs.

Whatever the reasons may be, many real estate investors build their business models around helping homeowners in these kinds of situations to move out and get on with their lives. If you have your eyes set on an investment property listed for sale “as is” and want to make sure it is priced right, your offer should be based on these key factors:

  • Comparable homes in the neighborhood
  • The potential cost of repairs

For example, if comparable homes in the area are worth $250,000 and the cost of repair is around $30,000, a fair market value would be no more than $220,000. Though this math can be helpful in determining how much you may be willing to pay, a fair offer will also factor in whether the area is experiencing a seller’s market, the number of houses available for sale, the growth outlook for the area, and seasonal patterns in the market.

To ensure the purchase makes sense, investors should always elect to do a home inspection. While you will have to foot the bill for the inspection, it is well worth it as it may reveal any additional problems and can often help you negotiate down the final price.

Are you ready to invest in real estate and see the value it can provide? RLG would love to help you! Call us today to learn more.

4 Habits Successful Real Estate Investors Share

Real Estate Investors

Real Estate InvestorsNot long ago, it seemed as though an entire generation had been doomed to live out their adult years paying rent. Millennials were often portrayed in the media as a generation of renters. Other outlets spoke of the housing crunch affecting millennials in rather striking terms and likened the debate around housing policies to “generational warfare.”

While rising home prices still present a formidable challenge to the cohort of young adults – especially in larger urban areas – more and more millennials have taken the jump toward homeownership in the last few years. A 2021 report by the National Association of Realtors on generational real estate trends revealed that millennials currently make up the largest group of homebuyers at 37 percent.

The allure of homeownership comes from the fact that owning a property is one of the fundamental ways of accumulating wealth. In addition to the amount of equity you accrue as you pay down your mortgage, cash flow is a key part of the equation when it comes to building up a stronger financial future. That’s where real estate investing comes into play.

The benefits of investing in real estate include passive income, stable cash flow, tax advantages, and more. If you are ready to jump on the real estate investing bandwagon and take advantage of the current low mortgage rates, make sure you have a game plan in place that will set you up for success and pave the way to financial freedom. Here are four habits successful real estate investors share:

  1. Build Credit

Before you get started in real estate, make sure your finances are in good shape. There is no easy answer as to what credit score you need for a residential or commercial investment property loan as credit requirements can differ greatly among lenders and are based on numerous factors.

As is the case with other loan types, a good credit score will help you secure lower interest rates and more favorable conditions that might require little to none of your own cash up front. Another key factor lenders will look at is debt-to-income ratio (DTI). Your DTI is all your monthly debt payments divided by your gross monthly income. With a lower DTI and the income to support it, you are able to qualify to borrow a larger amount of money.

  1. Make a Plan

Figure out what your short and long-term goals are and solidify them into a business plan. The investment model best suited for you really depends on why you are in real estate investing and for how long you plan to keep the property. Some people may be eyeing passive income, while others have a goal to invest for retirement. Setting your goals from the outset will allow you to zero in on the type of property you should invest in.

  1. Develop a Niche

When you develop and invest within your niche market, you are better able to outperform your competition and secure superior deals as you can target your audience more efficiently and identify pain points to minimize your risks. Once the investor has dominated a particular niche, they can then move on to other niches using the same in-depth approach.

Single-family or multifamily homes, retail or office buildings, industrial or commercial properties, mobile homes, land, student housing, and short-term rentals are just some types of assets you could potentially invest in.

It bears mentioning that a focus on a niche does not necessarily mean being confined to a single location. Make sure that the numbers make sense for you, whether it be investing in smaller cities where prices are lower or in large metropolitan areas.

  1. Invest Now

The current low interest rates make it the perfect time to start investing in real estate. In addition, home prices are expected to continue to rise throughout 2021 for various reasons, one being a bullish stock market.

Are you ready to invest in real estate and see the value it can provide? RLG would love to help you! Call us today to learn more!

Commonly Used Investment Lending Terms from A-Z

There are many terms commonly used in the investment lending world. When you apply for a loan with Ridge Lending Group, here are some that you may come across:

Annual Percentage Rate (APR) – This calculates the cost to the applicant for borrowing money. The APR reflects the interest rate, any points, mortgage broker fees, and other charges that the applicant pays to get the loan. As APR is an easily manipulated number, it may be difficult, if not impossible, to compare different programs and products based on the APR.

Adjustable-Rate Mortgage (ARM) – This is a type of mortgage that has a fixed rate for a set period of time and then the rate is adjusted. The fixed period can be as short as 1 month or as long as 10 years. All ARM’s are based on an adjustable index + a fixed margin = the Fully Indexed Rate

Borrower: Borrower is the primary applicant on a mortgage application.

Consumer Financial Protection Bureau (CFPB) – An agency of the United States government responsible for consumer protection in the financial sector.

Co-Borrower – The additional applicant on a joint mortgage application. A borrower may apply with a co-Applicant/co-Signer, who can be anyone; however, the application will not be considered a joint application.

Debt to Income (DTI) – This is the ratio of the borrower’s gross monthly income to their debt. Front End DTI refers to all housing related debt. Back End DTI refers to all debt, including Front End DTI. It is typically expressed with both numbers separated by a dash. Example: 30/50 (30% Front End DTI, 50% Back End DTI. Back End DTI will always be more than Front End DTI.)

Desktop Underwriter – An automated underwriting engine. DU is used for underwriting Fannie Mae, Freddie Mac, FHA, VA and USDA loans. Each loan product will have its own DU.

Federal Housing Administration (FHA) – The Federal Housing Administration is a United States government agency founded by President Franklin Delano Roosevelt, created in part by the National Housing Act of 1934. The FHA sets standards for construction and underwriting as well as insures loans made by banks and other private lenders for home building.

Federal National Mortgage Association (FNMA or Fannie Mae) – One of two GSE’s (Government Sponsored Enterprises) created by Congress to increase access to mortgages. Mortgages offered under Fannie Mae guidelines are called “conforming” mortgages since they conform to Fannie Mae guidelines.

Federal Home Loan Mortgage Corporation (FRMC or Freddie Mac) – The second of two GSE’s created by Congress to increase access to mortgages. Mortgages offered under Freddie Mac guidelines are also called “conforming” mortgages since they conform to Freddie Mac guidelines.

Home Equity Line of Credit (HELOC) – A revolving line of credit based on the equity in a property. Generally, HELOC’s are based on the prime rate. The All in One First Lien HELOC is based upon the 30-day U.S. Dollar LIBOR.

Housing and Urban Development (HUD) – HUD is responsible for national policy and programs that address America’s housing needs and enforce fair housing laws. It also oversees the Federal Housing Administration (FHA), the largest mortgage insurer in the world.

Interest Only – This is a payment type where none of the required payment goes towards principal. While the required payment will generally be lower than an amortizing payment, the amount owed does not go down since nothing is going towards principal. Like a fully amortizing mortgage, a borrower is allowed to pay extra towards principal.

London Inter Bank Offered Rate (LIBOR) – A benchmark rate that banks use to lend money to each other. It is typically a marker of the state of the economy. In a bubble, the rate will be high. In a recession, the rate will be low.

Loan To Value (LTV) – The maximum percentage of the appraised value of a property that a lender is willing to fund on. This figure will change with loan product, occupancy and property type.

Mortgage Backed Security (MBS) – These are the investment instruments that are bundled by Fannie Mae, Freddie Mac, and Ginnie Mae for sale on Wall Street.

Mortgage Loan Originator / Loan Officer – A licensed professional who receives a residential mortgage or loan application and offers or negotiates terms of a residential mortgage loan.

Non-Owner Occupied (NOO) – Refers to a rental or investment property.

Owner Occupied (OO) – This is the borrower’s principal or primary residence.

Principal-Interest-Taxes-Insurance (PITI) – This is the total housing expense on a monthly basis.  It also includes homeowner’s association fees and monthly mortgage insurance if applicable.

Private Mortgage Insurance (PMI) – This is charged on conforming mortgages that are over 80% LTV. After the loan is paid down to 80% of the properties appraised value, PMI will be canceled by the servicer.

Prepayment Penalty (PPP) – In states that allow it, this is charged by subprime lenders and the occasional conforming lender to assure the lender of making a profitable mortgage investment. A PPP can be either hard or soft. A hard PPP means that the borrower will pay a penalty for paying the mortgage off before a specific time period whether they sell or refinance. Most PPP’s are for 3 years or less. With subprime lenders, the time period will generally be the same as the fixed period of an ARM mortgage. A soft PPP means that the borrower will have to pay a penalty if they sell or refinance within the first year or refinance within the remainder of the PPP.

Prime Rate – A prime rate or prime lending rate is an interest rate used by banks, usually the interest rate at which banks lend to customers with good credit. Some variable interest rates may be expressed as a percentage above or below prime rate.

Real Estate Settlement Practices Act (1974) (RESPA) – Federal law that regulates what must be disclosed to a consumer during a loan transaction and prohibits abusive practices by lenders to consumers.

Truth In Lending Act (1968) (TILA) – Federal law that requires the manner in which banks disclose fees and costs associated with a loan transaction be standardized to enable borrowers to comparison-shop lenders.

TILA-RESPA Integrated Disclosure Rule (TRID) – Instituted by the CFPB as a combination of TILA and RESPA requirement. When TRID is triggered, the loan estimate must go out to a borrower within 3 business days of a complete mortgage application.

The United States Department of Agriculture (USDA) – The U.S. federal executive department responsible for developing and executing federal laws related to rural economic development. The USDA has two loan programs for Primary Residences, the USDA Direct and the USDA Single-Family Housing Guaranteed, which both offer 100% financing on a primary residence purchase or refinance for eligible (low-income) borrowers and eligible (rural) properties.

VA – The United States Department of Veterans Affairs. The VA has loan programs for veterans to receive 100% financing on a primary residence purchase or refinance.

Verification of Deposit (VOD) – This is a form sent to the bank/credit union/savings bank to verify the amount of funds in the account and to provide an average balance over a specified period, usually 60 days.

Verification of Employment (VOE) – This is a form that is sent to the employer to verify employment. Many times, a VOE will be done verbally by the lender just prior to closing.

W-2 – W-2s are tax forms provided by the employer to show total year’s income.

2-4 Unit – Duplex, Triplex or Quadplex. The most units RLG will lend on is 4. Anything more than 4 units will be a commercial transaction.

Investing in Real Estate for Your Financial Future

investing in real estate

Investing in real estateAccording to a recent HousingWire article, investing in real estate could be less risky than investing in the stock market. While the stock market has hit all-time highs this year, it likely belies a market that will be more volatile in the future. During 2020, home prices increased 10% to levels not seen since 2014, while inventory dropped across the country. This created a seller’s market and a successful investment environment.

Investors commonly share the following advice, “Don’t wait to buy real estate, buy real estate and wait.” Home prices are expected to continue to rise throughout 2021 for various reasons, one being a bullish stock market. When you invest in real estate, you invest in a tangible item that is not managed elsewhere. As home prices remain on an upward trajectory, real estate investment continues to be a lucrative way to financial freedom.

To learn more about the benefits of real estate investment in 2021, click here.

Are you ready to invest in real estate and see the value it can provide? RLG would love to help you! Call us today to learn more!

Investment Lending Metrics Explained: Discount Rate, NPV and IRR

Loans for real estate concept, a man and a women hand holding a money bag and a model home put together in the public park., Investment Lending, Real Estate Investment

Loans for real estate concept, a man and a women hand holding a money bag and  a model home put together in the public park., Investment Lending, Real Estate InvestmentFollowing up on our “Investment Lending Metrics Explained” series, we will be breaking down three commonly used terms in the real estate investment industry. Let’s get to it!

Discount Rate

While the discount rate can refer to either the interest rate charged to financial institutions for the loans they take from the Federal Reserve Bank or the rate used to discount future cash flows in discounted cash flow (DCF) analysis, our focus will be on the latter. DCF is a method used by real estate investors to help determine the value of an investment based on its future cash flows. The formula can be written as follows:

DCF = (Cash flow for the first year / (1+r)1)+(Cash flow for the second year / (1+r)2)+(Cash flow for N year / (1+r)N)+(Cash flow for final year / (1+r)

The “r” represents the discount rate, which is the rate used to discount the future cash flows from an investment to the present value to determine if an investment will be profitable. As the formula shows, discount rates are applied to future income streams. Many large brokerage companies conduct discount rate surveys for real estate investors.

NPV

Net Present Value is the value of all future cash flows over the entire life of an investment discounted to the present. It is used to calculate today’s value of a future stream of payments. The net present value analysis subtracts the discounted cash flows from your initial investment.

NPV = (Cash flow/1 + r) N – initial investment

IRR

IRR is the annual rate of growth an investment is expected to generate. IRR is calculated using the same concept as NPV, except it sets the NPV equal to zero. In other words, the IRR represents the discount rate that makes the NPV of future cash flows equal to zero.

0 = (Cash flow/1 + IRR) N – initial investment

Suppose, for example, you have $100,000 to invest in a property, and the rental is estimated to pull in $20,000 in cash flow each year for the 10 years you plan to hang on to the property. The IRR will be the interest earned over the full 10-year period, or 15.1%.

Are you ready to take the plunge of investing in real estate? RLG has the tools and resources at its disposal to get you on your way and not waste a moment of your time. Call us today to learn more and experience firsthand the dedicated, personalized customer service and undivided attention that RLG has to offer!