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USDA Rural Development Repair Escrow

Image 34I believe it is important for home buyers and  professional deal makers to become aware of the USDA Rural Development Repair Escrow program.  You may be interested in or asked to locate properties outside of urban areas, and the USDA Rural Development Program is often your fastest and easiest way to get these deals financed.  It is a 100% loan, it allows a very high tolerance for seller concessions and gift funds, lower monthly mortgage insurance equals lower monthly payments for home buyers and the USDA Rural Development Loan can be qualified with a 620 credit score (most of my competitors require a 640).  In other words, it possibly requires no cash and little credit.

Most Real Estate Agents and home buyers see two primary challenges to the USDA Rural Development Loan:  there is an income limit and the property must be located in an eligible area.  But within one hour of Tulsa, Oklahoma, and Oklahoma City, Oklahoma, there are often thousands of USDA Rural Development properties available and eligible, and the USDA Rural Development income limits are not unrealistic at all.  The primary concern I experience with my USDA Rural Development deals is that many of the  rural homes are not newly constructed, but most often older and in need of a little repair.

USDA Rural Development Repair Escrow provides the funds for your repair solution.

Currently, I have repair escrow programs for Conventional, FHA and Jumbo loans, but the USDA Rural Development Repair Escrow is my favorite to use.  Repairs on done after closing, so we usually close within thirty days.  And yes, it even works for REO, homes that were previously short sales and foreclosed homes.

Home buyers can finance the cost of Home Repairs into their mortgage with the USDA Rural Development Escrow Holdback Program.

Image 141 - Handyman installing doorLast month we had worked hard on getting a USDA Rural Development mortgage for our client only to discover the roof was not insurable.  This caused a huge problem.  The professional inspector my client had hired had made no mention of the roof.  The USDA Rural Development appraiser was completely fine with it.  And now, just days prior to closing, the insurance agent has arrived and informed us that no company would insure the home with the roof in its current condition.

Every mortgage loan program I know of requires the collateral to have hazard insurance, so to no one’s surprise the underwriter required the roof to be repair.  My client was disappointed; he did not want to buy the seller a new roof.  The sellers were especially concerned;  they had contracted to close on a new house the same day, and did not have any money to give to a roofer.

The USDA Rural Development Repair Escrow allows for funds, in the amount up to 10% of the final loan amount (not including the renovation amount), to be used for repairs.

The solution: the buyer and the sellers contracted a modified agreement, and we used an escrow account created with the USDA Rural Development Repair Escrow to provide funding for all of the required repairs.

Please note that the program is not available for cosmetic or buyer “requested” improvements; it is a program for repairs.  And there is an added fee in Oklahoma for managing the escrow account, requiring an additional $650.00 of total closing costs.  For that reason, sometimes I prefer to suggest down payment assistance or approved grant funds to be used to allow us to exceed the loan limitation of 100% of appraisal value.

If you would like to see if your income is within the limitations for an USDA Rural Development Loan, click here.

If you would like to see if a particular property is eligible for a USDA Rural Development Loan, click here.

Copyright 2015 John Regur All Rights Reserved – Originally Posted at: Tulsa Oklahoma Mortgages – John Regur

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What to do During the Mortgage Loan Process?

What to do during the Mortgage Loan Process?

Putting Our Heads TogetherMy friend Randi Wright gave this to me the first week I worked with her, and she has shared a million gems every since.  She is truly one of the great collaborators, at the least, I have ever met.  During the mortgage process, she always confronts a problem by saying, “let’s put our heads together”.  She is one of the great ones, and here are Randi’s top tips for what to do during the mortgage process:

Check Box for completion to the mortgage loan process.During the Mortgage Loan process

Please read!

BE SURE of where your funds for down payment and closing are coming from as early in the process as you can and share with me as soon as possible.  If you are lacking or short on funds that cannot be verified, this can cause delays.

DO NOT apply for auto loans, credit cards, or other accounts which may pull your credit report.  Multiple pulls will most likely lower your FICO score which can change the mortgage rates and programs you qualify for.

DO NOT make excessive purchases on your credit cards. New purchases can cause your debt to income ratio to increase.  Your debt to income ratio is very important for the type of loan you are qualifying for.  Please wait until after closing to buy any new furniture or appliances for your new home.

 

AVOID any NSF or insufficient funds on your bank statements. The whole point of your bank statements is to verify that you have the ability to cover the funds needed for closing and that you have the ability to make your monthly mortgage payments. NSF’s or overdraft fees will kill your loan.

 

DO NOT make deposits other than payroll into your bank accounts that cannot be sourced and verified. What this means:  we will require a copy of the check(s) and deposit slips that match up to your deposits on your bank statements if they do not match up to your paystubs. Transfers from other accounts will also require a copy of a transfer slip, as well as a copy of the statement that the transfer originated from.  People become very upset about having to document their deposits if they are not expecting this, so please be aware of it.

Why do people have to source and verify all their deposits?

 Cash and House during the mortgage process Because we have to insure that:

  1. Another loan is not being used for this transaction
  2. No part of the transaction is from the seller
  3. All gift funds are documented
  4. There are no cash deposits.  Cash will contaminate the account.  Therefore,

    Cash deposits should be avoided; they cannot be verified as coming from a legal source. So do not sell personal items or have a garage sale and deposit the money into your account, it can kill your transaction. Use cash to pay bills, buy gas or groceries and let your payroll deposits add up in your account.

IF LIQUIDATING ASSETS, a complete paper trail will be required.  If you have stocks, mutual funds, retirement accounts, or other investment accounts that will be liquidated and used for the purchase of your home, we will need statements showing the current value, proof of sale or cash out, copy of transaction receipt or deposit slip, and then a new 30 day print out from the account where the money has been placed.  All funds must match up throughout the transaction.  Avoid the addition or subtraction of funds for other purposes during this process.  If taking funds from a 401k, please provide proof that your plan allows this.

Your our credit report can be pulled again anytime during the process.  Your scores and debts cannot change.  If they do change, please let me know immediately so that I can confirm that your loan is still viable.

REMEMBER During the mortgage process you may be asked for additional items.  The requests may seem redundant or excessive and your patience is appreciated.  Securing a home loan can be a smooth process as long as we have all the items needed and receive them in a timely manner.

You can contact me by text, email or phone anytime you have a question during the mortgage loan process!

Copyright 2014 John Regur All Rights Reserved – Originally Posted at: Tulsa Oklahoma Mortgages – John Regur

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Principles of Negotiation for a Pawn Star Broker

Principles of Negotiation for a Pawn Star Broker

Yesterday, while in Vegas for the Sales Leadership Roundtable, I attended a breakfast with Rick Harrison, owner of a $60 million franchise that includes a pawn broker business in Las Vegas and a reality TV show on the history channel.  His show is broadcast in 38 countries, and he showed me a video on his iPhone of his arrival in Singapore.  20,000 screaming fans treating him like one of the Beatles. 2014-03-06 19.22.39-3

So how do you build a $60,000,000.00 business and become world famous?  Well, the first thing you could do is persistently tell yourself you are.  Rick painted “The World famous” on the side of his business 20 years ago, and his vision board has come true.

But to deserve that title you have to work hard and negotiate like a champion.  And Rick is a world class negotiator.  Whether it is negotiating to obtain the only pawn broker license being offered in Las Vegas, or putting his business on Nightline, and a major TV show, to publishing royalties for his book, a New York Times best seller – Rick is his own manager.

And it goes right beside the point that negotiated at his pawn shop all day, every day, without a vacation for the first 10 years of opening his business.

So over the airplane ride home I read the book, and it is an awesome five hour read.  And here is what I took out of it:

WORLD FAMOUS GOLD & SILVER TIPS FOR NEGOTIATION

1 ~ YOU HAVE GOT TO BE ABLE TO WALK AWAY

Identifying a potential deal is exciting, but you have to put in the time to consider all potential roadblocks to your desired position.  The Old Man, Rick’s father, taught him “Your sentimentality isn’t mine.”  Sentimentality cannot be reliably transferred, so it is considered a vanished collateral, and therefore present value doesn’t exist. In the process of negotiation, you always have to consider the time it will it take to arrive at the completed objective.

2 ~ IT’S JUST STUFF

Rick has gone through 10 wedding rings in his marital career, and 1 was so he could get another ring re-sized immediately.  He need some scrap platinum to enlarge a ring so he could satisfy the customer’s urgency, and to make himself some big cash.  It’s just stuff.  You can live without it.  And you will get more.  It’s disposable, superficial stuff.

3 ~ DON’T TIP YOUR HAND

This is where you act out the mastery of the other four principles for negotiation.  And the pawn broker recommends this to the buyer and the seller.  Once you know the other side will capitulate, negotiations are over.  You have to focus on this philosophy to embrace it, because it must show in your body language, tone of voice and attitude.  “If the seller shows he is not willing to walk away, if he indicates through body language or words that he absolutely has to get this done, he’s yours.  He’s also lost money.

4 ~ NEVER GIVE THE FIRST NUMBER

Now in a lot of the business I do, this is impossible.  But his point that all information is power still applies.  And everything said gives further indication toward perceived position in the negotiation process. So play your hand close to your chest.  Another point made is that it’s not your job to educate the other side on their value.  They know where it comes from, what their future needs are.  All that is trying to be done at this point is to see if there can be an agreement.

5 ~ NEVER HAVE A HARSH NEGOTIATION

Rick is a big believer in Karma.  Keep things fair.  Laugh, joke and have fun.  Engage, ask for stories, and tell some.  Again, all information is power.  And personal information tells more about where the other side is coming from.  Allow for people to become more comfortable.  If you have ever watched his show, you have seen the pawn star often tell the story about his side of negotiation.  You can win the negotiation and still ask for referrals.

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Household Budget Detox

Household Budget Detox

Budget

The other day, while reviewing a mortgage application, I was told by the applicant about their 30 day juice diet.  My client had bought a $400 juicer and everday had 3 huge glasses of vegetables and fruit – mostly kale, carrots and apples – and that’s it; they ate nothing.

Why would anyone ever do this?

“To detoxify and loose a bunch of excess weight”, they replied.

Ok, that sounds like a good reason, but as their mortgage advisor I wanted them to take a similiar approach toward their spending habits and household finances.

So how would you detoxify your household finanances and loose a bunch of excess expenditures?

Click here for an simple to use spreadsheet.

Work Within a Budget – We all have probably made one before, but have you ever “worked within one” by reviewing and updating it consistently?  This means simply having a spreadsheet that you record into and review at a steady pace.  You don’t have to track every detail.

Start with a flow chart to classify expenses:

  1. Necessity – fixed payments and not flexible.  Examples are housing payment and car payment.
  2. Necessity but Flexible – can be adjusted.  Examples are utilities and food.
  3. Discretionary – expenses you want to make.  Examples are haircuts, supplies, dry cleaning and entertainment.

Now the hard part:  start slashing items in column three and search for ways to trim column two.

Use automated tools to execute your budget.

  • Use your bank’s bill pay service
  • Set up automatic payments
  • Use bank’s transfer service to put money into savings
  • Pay with debit card so you can track expenditures
  • If you get cash divide the money into envelopes and write the purpose on the envelope

Use the 10/10/10 Savings Rule on every paycheck.

  • 10% saved for short term needs – vacation, birthday/holiday gift giving
  • 10% saved for intermediate needs or emergencies – car trouble, loss of job
  • 10% saved for retirement or real estate investment

Have an accountability partner.  Accountability is in direct proportion with effectiveness and success. Use a family member, close friend or partner to back you up and help you stay on track.  If your finances are more complicated, use a software program, Certified Public Accountant and/or Financial Planner.

A budget can get you there.  The key to these ideas is to have a reasonable budget to begin with, sticking to the process and reviewing results.  If your money problems are too serious to fit your budget seek professional help immediately by contacting a non-profit credit counselor (a church or United Way).

If the article doesn’t answer all of your questions, please don’t hesitate to drop a question in the comments, or for direct communication, please call me at 918-949-7248.

Posted in: Company News, First Time Home Buyers, Household Finances

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