Jay's Mortgage and Investors Blog

Well they did it again. Not as much as expected but a three quarters of a point drop is pretty close to the one point the markets were expecting.

How is this good news for you?

Well for the time being this will lower some rates on some ARM loans over time and could make some of the ones that are getting ready to adjust not adjust nearly as much. This will also have an impact on your credit card rates and might save you a few dollars here and there.

For the investors out there if you read my post yesterday then you know how this is a big help. If you look at the rates I was quoted for short term investment loans then you know what good news looks like.

If anyone has any questions please dont hesitate to contact me.

Top 10 Cash Flow Property Markets

NuWire's rankings of the areas with the best potential for cash flow

Cash flow is one of the most important considerations investors face when making real estate purchases, particularly now that so many markets across the country are struggling. Those seeking high-income property should take cash flow into account first and foremost when deciding whether or not to buy.

Cash flow refers to the amount of cash coming in relative to the amount going out. In ranking the top 10, potential for future appreciation was not considered; this list is ranked on cash flow alone. While appreciation is often the most significant form of profit for real estate investors, cash flow is easier to determine and lower risk.

Although many elements combine to influence cash flow, one of the most important ones is the surrounding market. Areas with lower home prices are more likely to have positive cash flow.

To determine our top 10 cash flow real estate markets, NuWire adjusted the average rent payment for the area according to the rental vacancy rate before comparing it to the amount spent monthly on mortgage payments and upkeep, including utilities, taxes and insurance. Mortgage payments were estimated based on an average loan—30 years at 80 percent loan-to-value and a rate of 6.5 percent—and the median cost of a home in the area. Statistics were gathered from U.S. Census data.

1. Rochester, New York

Despite the fact that Rochester’s population fell by 6.74 percent, from 219,773 to 204,963 between 2000 and 2006, and the fact that it has the highest rental vacancy on this list at 17.9 percent, Rochester still managed to claim the lead as the city with the best cash flow for investors. Homes in Rochester are affordable, at a median price of $67,600, and median monthly upkeep costs and estimated mortgage payments are low, at $418 and $341.82, respectively. The median gross rent in the area is $669.

2. Montgomery, Alabama

Montgomery is the capital city of Alabama and an important regional trade, processing and shipping center. The city was home to 202,443 people in 2006. The median home price in Montgomery is $106,300, with low monthly upkeep costs of $323 and an estimated mortgage payment of $537.51. The rental vacancy rate is lower than in Rochester and most other cities on this list, at 9.6 percent. The median gross rent is $669 per month. Montgomery ranked third on our list of the Top 10 Places to Invest for 2007.

3. Birmingham, Alabama

Birmingham had a population of 217,131 as of 2006. The median price of a house in Birmingham is just $82,000. Median monthly upkeep costs are $347, with the estimated mortgage payment at $414.64. Monthly gross rent is $620.

4. San Antonio, Texas

San Antonio ranked number one on our list of the Top 10 Places to Invest for 2007 and second on our list of the Top 10 Foreclosure Markets for 2007. Home to 1,273,374 people as of 2006, San Antonio retains affordable home prices, with a median of $96,300, in spite of its growing population. Median monthly upkeep is only $374 per month, with an estimated mortgage costing $486.95 per month. The rental vacancy rate for the city is 10.3 percent—on the lower side of this list—and the median gross rent is $678 per month.

5. Garland, Texas

Garland was number two on our list of the Top 10 Places to Invest for 2007. With affordable housing—the median price is $116,100, upkeep costs are $544 per month and estimated mortgage payments are $587.06 per month—in addition to its growing population, which increased 11.64 percent from 2000 to 2006, Garland is attractive to investors. Garland’s median gross rent is $862 per month.

6. Buffalo, New York

Buffalo has a median gross rent of $579 per month despite the fact that its population fell more than 10 percent from 2000 to 2006. As of 2006, 257,758 people lived in the city. The median home price is low, at just $60,900, with upkeep costs at a median of $430 per month and monthly mortgage payments estimated at $307.94. The rental vacancy rate is 10.6 percent.

7. Corpus Christi, Texas

Markets in Texas have been doing well recently; cities in the state took up half of our list of the Top 10 Places to Invest for 2007. Featuring a slowly but steadily growing population that was at 285,175 in 2006, Corpus Christi’s median home price is $95,100. Upkeep costs of $467 per month and estimated mortgage payments of $480.88 per month are affordable and the median gross rent is $714 per month.

8. Shreveport, Louisiana

Shreveport is the cultural and commercial center of the Arkansas-Louisiana-Texas area, and is likely to receive an extra boost from the upcoming Cyber Innovation Center and provisional Cyber Command Center, which together are expected to create 10,000 new jobs in the area, according to KTBS.com. The population of Shreveport was 203,914 in 2006 and the median home price is only $97,000. With a rental vacancy rate of 10.3 percent, low upkeep costs of just $287 per month and mortgage payments estimated at $490.48 per month, Shreveport is a very affordable area for investment. The median gross rent is $585 per month. Shreveport was ranked tenth on our Top 10 Places to Invest for 2007.

9. Detroit, Michigan

The Motor City was home to 834,116 people as of 2006. The rental vacancy rate is slightly higher than the average on this list, at 13.5 percent; this is likely at least partially because of the city’s 12.32 percent decline in population between 2000 and 2006. Median monthly upkeep costs are low, at $455, and the estimated mortgage payment is $463.69 per month. The median price of housing is $97,000 and the median gross rent is $712 per month.

10. Philadelphia, Pennsylvania

With a population of 1,448,394 as of 2006, Philadelphia has a high population density compared to the other cities on this list, which helps to drive up rental rates to $746 per month. Home prices are affordable, at a median of $115,500, and upkeep costs are low, at $393 per month. Average mortgage payments are estimated to be approximately $584.03 per month.

Ok now this is a HUGE pet peeve of mine. BLAME THE MORTGAGE MELTDOWN ALL ON THE MORTGAGE BROKERS. With all the words I could use in response for this thought that has come out of every uneducated and uninformed politicians mouth in the last few months all I have to say is "WHAT A CROCK"

Let me state my reasons for this. 

The BANKS and WALLSTREET created the programs and the underwriting standards that all yes all brokers are required to use. To some how place the blame for the fallout on the shoulders of those of us that had nothing to do with creating the standards in the first place is just another form of a government witch hunt. We played by their rules and are now paying for it.

Why you ask?

Lenders in there own way hate brokers because brokers do 60% of all the residential the loans on the market. The lenders dont make as much money on their loans because that money is made by the brokers. Brokers also present a form of direct and indirect compitition even though the broker might be using them as a lender for some programs but not as their sole lender of choice. Look at who has the bigger lobby in congress. This is like having little red ridinghood get eating lessons from the big bad wolf. Just remember to look at who wrote the programs and underwriting standards and that lenders have their wallets more in mind than what is best for the consumer. Just imagine if their were no brokers and how limited your choices would become as well as how much leg work you would have to do to try and get the best deal.

I do agree that there does need to be an educational standard in the industry. However I go one step further and believe that this should apply to EVERY indivual that originates loans and not just brokers but those inside the banks as well. Brokers in general already have a much higher level of education than the loan officers in the banks. The banks on average give their green loan officers one to two weeks of training and spit them out on the streets as the supposed experts. Yes there was a time when even I was a green newbie. The difference is I have recieved many years of constant training and guidence and I educate myself on as many topics in my industry as possible. For the most part almost all states with a few exceptions have broker licensing requirements. The banks claim an exemption based on their national banking licenses. So here is what the consumer is left with, the broker that is generally required to meet all kinds of licenseing, education, and sometimes experience requirments or they can go to the guy at the bank whom they have no way of knowing whether he has been in mortgage lending for a week or 5 years.

The huge reason that brokers are having such an impact on the market and getting more of the loans is service, suitability, and choice. Brokers service consumers on a very individual level which is comforting to a lot of people. Brokers also are generally more educated in the marketplace and therefore able to find the most suitable products based on informed decisions. The biggest reason is choice. Brokers can shop the market for the best deal and often times save the customer thousands while educating them about their choices.

Now I am not going to close this without saying that there are in fact some bad apples out there both brokers and lenders alike. Those of us that take our businesses very seriously and choose to serve our customers rather than ourselves know the difference. I honestly cant tell you how irritating it is everytime I run across someone that has been burned on a loan just so some guy could take advantge of their lack of knowledge instead of educating them. Please take the time to consider all the facts when you are looking for a loan officer or mortgage broker. Ask lots of questions and if you dont feel right about them move on because there is plenty more and you will know when you have found a good one.

If you have any opinions please let me know.

Hi Everyone

I have some good news for investors looking for financing on 3 and 4 unit properties. Since Fannie Mae changed their guidelines and dropped the highest LTV they would underwrite on 3 and 4 unit properties to 75% we have been forced to either say no or to ask for what as of late has been quite a lot more down. 90% LTV was the norm a year ago but that has all but vaporized. I have been asked time after time in the last few months about getting the old LTV's that just are not there anymore. Till Now.

I have some good news. I have been able to secure on a case by case basis a lending source that is NOT hard money at 85% LTV starting at a 680 Fico full doc.

Now for those of you that are thinking full doc is a nightmare when you are self employed fear not. Self employed individuals are what my source is used to dealing with and they are very easy to work with.

Today I was told that with a 720 that they would do a 3yr fixed at prime + 1 (7%) and a 5yr fixed at Prime + 1.5 (7.5%) all with NO PREPAY. My rate quote for 25% down conventional would start at 6.625% based on today's rates.  So as you can see its not a bad deal to have to come up with 10% less down. Keep in mind the Fed is due to drop rates even further so the rate may get much better very soon.

For those of you that are getting a great deal with a lot of equity or just not quite have the 25% down this might be your ticket to getting the property you want. Even those these are short term notes the beauty is that you will be able to realize the equity gain in a refinance showing a much lower LTV not far down the road and your rate will be very competitive to the rates you would get from a traditional lender. 

If you are close to San Antonio and have a deal that you might want considered please give me a call. It is done on a case by case basis so no matter what part of Texas you are in it might be worth a try and I will be happy to ask.

Happy Investing

Well today we have some positive changes in the world of mortgages. HUD in all is wisdom has finally agreed to raise FHA limits. While they are far from being equal to Fannie Mae and Freddie Mac it is a step in the right direction. They are still working on some of the reforms to make the process smoother and more borrower and lender friendly, but at this point lets take what we can get. Surprisingly the San Antonio Metro area got the highest limits up more than 40% or $132,340. The Austin Metro area not far behind up more than 30% or $88,590. The rest of the state got a modest raise of a little more than 26% or $70,890.

Here are the new FHA limits by county.

For counties in the San Antonio Metro Area: Atascosa, Bandera, Bexar, Comal, Guadalupe, Kendall, Medina, Wilson

One-Family $332,500            Two-Family $425,650

Three-Family $514,500          Four-Family $639,400

For Counties in the Austin Metro Area: Bastrop, Caldwell, Hays, Travis, Williamson

One-Family $288,750            Two-Family $369,360

Three-Family $446,800          Four-Family $555,300

All other Texas Counties:

One-Family $271,050             Two-Family $347,000

Three-Family $419,400           Four-Family $521,250

Fannie/Freddie limits:

One-Family $417,000             Two-Family $533,850

Three-Family $645,300           Four-Family $801,950