Why a First Time Home Buyer should work with a Mortgage Broker

by Dan Havey on August 23, 2011

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Property values being 71% up even thought we had this 51% drop you are talking about the average 4.43% per year since 1992 Right, I did some calculations I was working on a book last year and one of these days I may get around to publishing it, it was called “Real Estate’s Future” and what we were looking at was a statistical model to be able to pick the top and the bottom of all the real estate markets and I hadn’t looked at the thing for about a year until I was working with Michael the other day and I started pulling it out and going let’s run the model and see where we are in regards to the market and we’ll get it to that a little bit later and one of the things I looked at is the last time we saw the bottom of the market was when I was selling houses for the RTC and that was in 1992 the median home price was $76,000 in 1992.

Median home price now is $130,000 that means from 1992 until now it went up 71% that’s after we just saw a 50% decline.

So it is 4% per year on average and where else are you going to get a return like that? Even if you put 3% down on a house you are getting a heck of a lot more than a 4% return then.

If you look at the internal rate of return it is significantly greater Right and don’t buy a house because you are looking at a rate of return, if you are a first time home buyer and you can qualify for this program, if you have been living in an apartment for the last three years and you just want to have a better place for yourself and your family to live I know right now there a lot of fabulous houses out there for $130,000.

I saw one the other day that was listed at $100,000 that I know was probably at least $250,000 a couple of years ago.

Yes, a four bedroom-three bath houses we are currently working on four of our several cases are four bedroom three bath houses at $150,000 or below, in good parts of Maricopa county.

I ran some numbers before as well just looking at the number of homes that sold in Maricopa County in January and in that from $130,000 and below 45% of all the houses that were sold, sold for less than $130,000.

And when I had the example earlier about the median family could buy a $280,000 that was 85% of the market.

85% of all the house that were sold in Maricopa County could be purchased by a family of four with a median income.

And you know with the loan limits the way they are with FHA with 3.5% down you can go all the way up to $358,000 with a purchase price and still only put 3.5% down.

Pretty much anyone can get in I do not know about that I didn’t run the numbers on that but I would probably say that 90-95% of all the houses sold were within the FHA loan limit.

That means you can still get in with 3.5% down, you don’t have to have perfect credit, you can’t have a lot of bumps on it but it doesn’t have to be perfect, you don’t have to have a huge FICO score, do they even look at FICO scores? It’s complicated, the Federal Housing Administration does not have a minimum FICO score or requirement, however all of the mortgage banks have overlays so in other words nobody uses just the FHA guidelines they have their own parameters one of the main reasons why you would want to go to a broker instead of directly to your bank that you have your savings account with is they may or may not have enough overlays that will work in your favor as a broker we have all of the major mortgage banks and we know the guidelines so we can make anyone fit into a house that can get approved Right and that’s always the nice thing about working with a broker because you have let’s say how many banks… you have 20 banks that you are signed up with and you are FHA with all of them so you have 20 different sets of guidelines that you can fit the person into.

If you went to a bank and they had to do an appraisal and a credit check and all that and then they denied you.

You would have to go to a different bank and they would have to do all that same stuff all over again.

When you are working with a broker they do it one time and then shop it to 20 different lenders Yes, and I have to point something out more importantly if you go directly to your bank and you do get declined after you have spent the money on al these different things the process is much more difficult because you have to start all over and then the reason you were declined has to be explained and it is a much more lengthy process where as when working with a broker you don’t have to do that.

We take the hit for you and we move you right into the right lender of your choice.

Hey we will be right back in a few minutes you are listening to the Velocity of Money.

We’ll be right back
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