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Moving Up Without Selling My Current Home

CROFTON MD REAL ESTATE Q & A

Q.  How can I take advantage of today’s low prices and interest rates to buy a home, when I can’t even sell my current home?

A.  Most of us think in terms of selling our current home so we can use the equity to purchase our next one.  There are other options for some Crofton area residents, however.  

Postcard - 12th holeIf you’re eligible for a VA or FHA loan, you may be able to purchase that new home without tapping into the equity of your current home.  Good news, in a buyer’s market. 

The FHA down payment is still just 3.5% of the purchase price, and sellers may pay part of the buyer’s closing costs.  There’s talk of increasing this down payment requirement, so it’s important to take advantage of this sooner, rather than later.  Additionally, legislation which sets a loan limit of $560,000 in Anne Arundel County is due to expire in fall.  If that occurs, the loan amount could drop about 25%. 

Veterans can still buy a home with no money down, and sellers may pay all or part of their closing costs.  Many veterans are eligible for a VA home loan, even if they used one in the past.  That’s because homes sold with a VA assumption are likely to have been sold, refinanced, or even paid off by now, freeing up that VA eligibility. 

Many of the same Crofton area residents who qualify for a VA or FHA loan on another home have enough equity to rent their current one with a positive cash flow. 

If you don’t need the equity from your current home to buy now, what are you waiting for? 

P.S. Are you sure you can’t sell your current home?  Have you tried?  31 homes sold in Crofton MD last month, up almost 15% from the same month last year.  35 homes sold in Odenton and 9 homes sold in Gambrills during May 2011.

Copyright Margaret Wioda.  All rights reserved.

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Is This A Good Time to Invest in a Crofton Condo?

Crofton MD Real Estate Q & A

Rent SignQ.  Is this a good time to invest in a Crofton Condo?  Do you think it will be hard to rent?

A.  There was a similar question posted on Trulia earlier this week, about buying a condo in Odenton, and several real estate agents offered responses.  This is one of those “opinion” questions, and there’s no right or wrong answer – just different perspectives, depending on the experiences of each responder.  The following answer to this question is based on my clients’ experiences, particularly during the down real estate market of the ’80’s:

In general, this is a good time to buy real estate because prices and interest rates are low.  And rentals usually go quickly in the greater Crofton area. 

There are three other things for you to consider:

1.  Buying a condo in this market may not be the best investment, since condo and HOA associations are struggling right now.   So many units are either bank-owned or simply not paying their dues…  As a result, associations may be unable to pay for routine maintenance, needed repairs, and other obligations such as management fees and liability insurance. 

It’s extremely important for you to carefully review the association’s financials when you receive your condo resale package from the property owner.  If you’re satisfied with the financial condition of the condo association, you’re not out of the woods yet…

2.  Condo financing may be more difficult for you than financing a detached home.  You can check with your favorite lender to determine if the condo you are considering is on the “approved” list. 

3.  I wrote a blog post in 2009 titled Selling Rental Property is All About the Cap Rate.  It applies no less to buyers of rental property, so you may wish to click through to read it.  This will help you evaluate the numbers, from an investor’s perspective, before you purchase any property for rental.

There’s actually one other thing to consider, as well:  Will your Crofton condo purchase be part of a 1031 Exchange?  If so, I can help you with that.  Just give me a call at 301–346–2923 or email me, using the “contact” tab at the top of this blog.

Copyright 2011.  Margaret Woda.  All rights reserved.

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Why Use FHA Financing?

Home snapshotCrofton MD Real Estate Q & A

Q.  Are there any mortgage loan programs available in this market that don’t require 10–20% down payment for a Crofton area home?

A.  Most Crofton homes fall within the loan limits for an FHA mortgage, and that’s the type of financing I recommend to many of my clients.  The low 3.5% down payment isn’t the only benefit of FHA, however.  Larry Bettag, a mortgage lender in St. Charles, Illinois, provides some additional reasons to consider FHA financing in his blog on Activerain.com:

How Do I Love Thee, FHA – Top 5 Reasons To Consider FHA 

There are many things that people should know about FHA loans. They’re great for a variety of reasons, but I’m going to give you my list of favorite reasons for considering and FHA mortgage.

  1. First time homebuyers can generally come in with less of a downpayment. FHA loans only need 3.5% down. How cool is that?
  2. The entire downpayment for an FHA loan can be in the form of a gift. There are gift restrictions as to who can give you a gift, but generally, if you’re related, you can help someone out by gifting them the entire downpayment and closing costs. Borrowers can put zero of their own money into the transaction. You know that with conventional loans no matter what the borrower needs to put 5% of the purchase price into the transaction, unless the borrower were to receive a gift of at least twenty (yes 20) percent. Makes FHA so much more attactive.
  3. Credit scores and credit in general. – While FHA is slowly inching to mirror the credit requirements of conventional loans, for now, FHA still allows lower credit scores. In fact, scores alone, can’t be used to make a credit decision. Also, when you’re coming out of a Bankruptcy, FHA is so much more forgiving as to the time lines as to when someone can buy a house. Credit scores and credit requirements are so much more lenient with FHA.
  4. Non-Occupant Co-Borrowers- THIS IS A BIGGEE! I do this all the time. The borrower can have someone co-sign with them even if the person who is co-signing isn’t going to live within the property. The loan gets qualified on the income and debt on the borrower and the non-occupant co-borrower together. And still only 3.5% is needed for the downpayment. On conventional loans, 10% down is needed and the borrower still needs to put 5% down against the entire transaction and still qualify for carrying a significant part of the mortgage payment. For FHA, the borrower can not be earning a penny all year, but so long as the borrower and non-occupant co-borrowers combine to qualify together, we’re good to go! I have dads and mom buying homes with kids in college. The kid is the borrower and mom and dad co-sign. Do ’em every year out at Northern Illinois University.
  5. Appraisals – Appraisals used to be so difficult when going FHA. That’s no longer the case. FHA, for the most part, mirrors those of Fannie Mae and Freddie Mac. They do also protect the borrower in that if there were substantial and material defects that would cost the borrower a lot of money in the first year of ownership to fix up, they’ll address those issues, but the same can now be said of conforming loans.

By Larry Bettag.  Re-posted with permission.

I would add one more reason to consider FHA when you buy a Crofton area home:  Streamline re-financing, if you refinance to lower your principal and interest payment during the term of the loan.  Click on the link for details.  

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Should I sell to my tenants?

Crofton Real Estate Q & A

Q.  I rented my home when I relocated across country, but now I’m thinking of selling it to my tenants.  How can I tell if they’re serious about buying?

A.  Funny you should ask about this, since I wrote a blog on this topic for the Maryland Real Estate Blog earlier this week:

Are Your Tenants Serious About Buying Your Home?

You rented your home a few years ago, but now you’re interested in selling it.   Selling a tenant-occupied property has challenges, however, because you must rely on your tenant to keep it show-ready both inside and out (de-cluttered, clean, etc.) and to provide access to prospective buyers.  This co-operation is critical to selling the property.

When you mention “selling” to your tenants, they may express an interest in buying the property.  You’ll probably think, “Wow, that’s too easy to be true!”

In my experience, it IS too easy to be true.

I can’t tell you how many times sellers have contacted me about handling the sale of their home and told me they already have buyers – their tenants.  Unfortunately, tenants rarely purchase the home they occupy; an arm’s length transaction is much more likely.

Food for thought:

  • If your tenants are qualified to purchase a home, they’d probably already own one.
  • If your tenants truly wanted to own a home, chances are they would not be renting now.
  • If your tenants do make an offer on your property, it’s likely they will offer less than fair market value (you know… because this sale will be so “easy”…).

One way to find out if your tenants are serious about purchasing your property is to offer them ten days to submit a written offer prior to marketing the property to other prospective buyers.  This is ample time for them to get pre-approved for a loan and to prepare an offer with their own agent.

If they do submit an offer during that time-frame, your REALTOR® will advise you during each step of the sale to your tenant and advocate for your best interests in negotiations.   Once this reserved period passes, however, you and your agent will know that it’s time to focus on selling your property to someone else, without looking back.

Copyright 2006-11.  All rights reserved.

DISCLAIMER: Information contained in this post is deemed reliable on the date of publication, but it is not guaranteed and it is subject to change without notice.

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I’m Thinking of Buying Waterfront Property…

Crofton Real Estate Q & A

Q.  I’m thinking about selling my Crofton home and buying a waterfront property.  Is there anything special I should look for or consider?

A.  Oh my goodness, yes… there is a lot for you to consider. 

P8240008Fortunately, the Maryland Department of Natural Resources has asked and answered many of the questions that will arise as you run across unfamiliar terms in the listing remarks for waterfront homes –  terms such as “critical area” or “imprevious surface” or “RCA”.

Just click on any of these questions to find the answer on the Maryland Department of Natural Resources website:

Information that is specific to Anne Arundel County waterfront is available at the Anne Arundel County Planning & Zoning office on Riva Road in Annapolis.  For a shortcut to information about critical areas provided online by the county, CLICK HERE.

Buildable waterfront property that is still undeveloped in Anne Arundel County is a rarity – and an excellent investment.   Existing waterfront communities, homes and condos are always in high demand.  If you have ever considered purchasing waterfront property, now is an ideal time to get serious about it.  Today’s low interest rates and the current buyer’s market create an opportunity that may not be available again for years, if ever!

Search waterfront homes for sale in Anne Arundel County:

Feel free to browse through these listings at your own pace, and contact me to see any that interest you.  Contact information is under my photo on this page, or use the “Contact” tab at the top of this page.

Originally posted by the author to Maryland Real Estate Blog 11/29/2007

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