An ARM a Month Keeps the Collectors Away

An ARM a Month Keeps the Collectors Away
By Landon McGehee

Originally conceived as a means for more affluent homeowners to keep your cash tied up in investments which would produce greater returns than the interest rates they'd be paying, Adjustable-Rate Mortgages have since come into much wider spread use, often as a means for people to live over their heads in homes they couldn't otherwise afford.

Speculative buyers who intended to resell their homes after they had appreciated are now stuck with depreciated homes instead, and feeling the pinch as well. With many of these ARM's reaching their recalculation points now, we're beginning to see the first wave of casualties, and the numbers will only continue to get worse from here.

Highlighting the first point are statistics recently released from the Federal Housing Finance Board. The generally accepted mortgage one can afford is on a house valued at 2 to 2.5 times their annual income. As the housing boom saw a drastic rise in prices this became next to impossible for the average family.

The average house was priced at $283,000, which would require an ideal salary range of $113,520 to $141,900, yet the median household income as of 2003 was just $43,350, meaning the average household can only realistically afford to mortgage a house valued in the $100,000 range. This has been circumvented by using an ARM, providing initially lower interest rates and flexible payment options

Whether home owners of modest means truly understood the implications of what would happen with their rates down the line is unknown. As short-term rates rise and the loan eventually gets recalculated to include the principal, the minimum per month amount owed can jump drastically, often as much as 50% or more, and often eclipse the rates one would owe through a fixed-rate mortgage.

This would seem to be simple math, by paying less than a fixed-rate mortgage for a length of time, it's only natural that one would eventually have fees that surpass it to make up the difference, but many homeowners have been caught off guard by the jump nonetheless.

This isn't to say that ARM's can't be useful and used wisely. When used with their original intent in mind, they can be powerful tools. On a mortgage in the $1 million dollar range, an interest-only mortgage could save the homeowner as much as $1,000 or more per month over a fixed-rate mortgage.

Those savings can then be reinvested with the intention of earning more than the interest rate owing. For people who move around a lot they can also be a great way to pay a minimum monthly amount, allowing them in effect to 'rent' a house for a period of time at a very reasonable rate.

Taking out an ARM or an interest-only loan is a risky proposition for those on the low end of the income bracket barely covering household expenses, and this is being proved in greater numbers as many home owners have been forced to abandon their homes with nothing to show for it due to being overwhelmed with readjusted rates.

As tempting as it can be to live above your means, the smokescreen and mirrors will eventually disappear, leaving you exposed and vulnerable. Be sure to plan ahead and take on a loan that will work for you both now and in the future.

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Sean McAlister

With the Real Estate market where it is ..sellers and investors are more creative than ever. Builders, Land Developers and the like have suddenly found themselves sitting on product with minimal qualified individuals to purchase. There are a lot of builders and house "flippers" that have built a spec home or a "fixed up" a distressed house now cannot find buyers.

These investors need to cover their payments or they are at risk of losing their investment and the house to foreclosure. Herein comes the Lease to Own. I have incorporated this into several houses that I own and could not sell. Investors are more likely to look beyond some credit blemishes as long as you can prove that you can make the monthly payment. It is a win-win. This is a great way to save for a down payment.

How? Well in addition to any contributions towards your savings account monthly and being "Disciplined" as previously mentioned you can maximize your savings through a lease to own. If you are currently renting with a payment of lets say $1000.00 per month you are currently giving 100% of the payment to the landlord.

In a lease to own scenario, the Landlord agrees to set a percentage of the payment towards a down payment to purchase the home. This percentage will vary and can be negotiated. For example, a landlord may agree to allow 30% of the payment to apply towards the down payment to purchase the home. This would equal $300.00 per month of the $1000.00 overall rent payment to be put in a kiddy which equals $3,600 per year. Lets say you are already saving $300 per month outside of your existing rent you now have doubled your savings from $3,600 to $7,200 in just 12 months.

Lease to own deals are common and just take a little research to find. You can also approach existing Builders and investors, in your market, and see if they are willing to entertain the thought. Watch the local paper and trade magazines in your area for houses that have been on the market for a period of time and or express "Motivated Seller" or "Creative Financing Available". These sellers will be more open minded. And for the sellers who are not promoting this but have been sitting on their house for a while may just need to be educated to the idea. This is a great way to move into a house now in which you begin building equity from the start in addition to automatically saving towards a down payment monthly. This is also a great option for individuals who can afford a monthly payment but are strapped with being able to save anything additional. .. this is a cycle that a lot of Americans find themselves in these days. Of course you will need to research the subject a bit and get familiar with the concept if you are not already but this can be one of the best ways to build equity and savings for a house.

Good luck to you

Sean McAlister

When it comes to selling or purchasing a home, it is a big deal and can be one of the biggest transactions you will ever enter into during your life. As with most transactions of this sort, a contract is required. Ah, but what if you are not a lawyer?

Let's start off with the basics. A contract is simply an agreement between two parties in which each promises to do something. In its most basic form a real estate sales contract is an agreement wherein the seller promises to exchange title to the property in exchange for the buyer's promise to hand over a boat load of money. If one party fails to live up to its promise, then that party is in "breach" of the contract and a court action can be filed to enforce the promise.

If you have ever purchased a home, you know a real estate agreement -or- sales contract can be more complex than the simple example in the previous paragraph. You might not know why exactly, but the sheer thickness of the agreement tells you as much. So, what is all that extra stuff? More importantly how can you gain quick access and knowledge to all that extra stuff?

Well I have the answer
Complete Real Estate Forms

With the click of a button, you can download a legal and binding contract in seconds, easily customized to your particular needs. These contracts are approved for all 50 States.

Are You Selling A Home?
Access all of our Real Estate Forms. Forms include: Real Estate Sales Contract, Offer to Purchase Real Estate, Property Disclosure Form, and more.

Need a Real Estate Form Today?
All of these forms open in your Word program. All you have to do is Open, Edit, Save or Print. You will also receive a follow up email with your download link. This link allows you to come back anytime in the future to access your forms.

You will find contracts and agreements such as:

Offer to Purchase Forms
Real Estate Sales Contract s
Quit Claim Deed s
Condo Sales Contracts
Residential Leases
Rental Applications
Property Disclosure Forms
Real Estate Articles's

as well as other resources such as:
Online Listings - Sell your Home Online in your Area's
Real Estate For Sale by Owner Help's
Real Estate Investment Tools and Resources

Real Estate contracts are vital when it comes to buying and selling real estate. For this reason I will be conducting a 4 week course specific to Real Estate Contracts. This course will cover different types of contracts what they mean and when they should be used.

Feel free to link to this site or grab the RSS Feed so that you can have instant access to this valuable information and the 4 week course.

This course will begin within the next couple of weeks and is guaranteed to provide useful helpful insight when it comes to Real Estate Contracts.

And don' forget... you can have access to a Complete Package Real Estate Forms right now!

Remember. You can do anything you put your minds to and have the resources necessary to achieve it!

Wishing you much success
Sean McAlister


Buyer's Agent Smoothes Sometimes Bumpy Road to Foreclosure Purchase

By Rick Sharga, Vice President of Marketing for RealtyTrac

Whether it's the first time or the tenth, buying a home can be both an exhilarating and overwhelming experience. As with any major purchase, there's a significant amount of pressure to make the right decisions about such matters as where and what to buy, and ultimately how much to spend. How can you make sure you get the best deal possible on a property that suits your needs, or find exactly the right property to fit your budget and your lifestyle? Increasingly, many homebuyers are doing this by secure the representation of a Buyer's Agent.

Most people hire a real estate agent to sell their home, but overlook the importance of having an agent when buying a property. While in some cases it's possible to negotiate your purchase through the seller's representative, make no mistake: these seller's representatives are charged with making the sale and negotiating the best deal for their clients — the sellers! With that in mind, it's best to secure your own representation as a buyer, in order to minimize potential conflicts, and make sure your interests are represented.

In the more complex foreclosures market, a Buyer's Agent can be even more valuable. The agent can help you negotiate with the owner before a property comes on the market and can also act as a buffer during the negotiating process to make sure you've completed all the necessary steps before closing. Done right, it's like having your own personal tour guide to help you find your way through the foreclosure buying process.

For buyers looking to uncover substantial bargains in real estate, the foreclosures market does offer a treasure trove of opportunities. Foreclosure properties are some of the best opportunities in real estate today with savings of 10-30 percent below market value. Some properties offer savings of up to 50 percent or more! But like any investment offering a high return, there are sometimes higher risks involved in buying a foreclosure than in buying more traditional real estate. One of the ways to maximize the value while minimizing the risk is to work with Buyers Agents who specialize in this market, with specific experience navigating the twists and turns that come with purchasing a foreclosure.

"If you're in the market for a foreclosure property, you should really take some time to look for an agent with actual foreclosure transaction experience," explains James J. Saccacio, chief executive officer at RealtyTrac, the leading online foreclosure marketplace. "The nuances of this market make it a different animal from conventional real estate, so buyers owe it to themselves to secure a seasoned agent who's familiar with the foreclosures process, and has knowledge of local, regional and state laws."

RealtyTrac's National Agent Network connects prospective buyers of foreclosure properties with local agents who specialize in foreclosures. Homebuyers can go to to identify and research potential home purchases, as well as to find all the tools and professional resources they need to help them close the deal.

Of course, it's also important to consider the agent's knowledge of the area where you wish to purchase property, their ability to close a deal, and their access to other professionals such as attorneys, lenders, and title companies. It's often a good idea to interview two or three agents to ask about their credentials and to test out chemistry, just as you would when selecting any valued business partner. Ask for references from previous buyers to see what people who have been in your shoes have to say about the agent's credentials and demeanor. Ultimately, your agent should make you feel confident that they know how to steer you correctly through the foreclosure buying process.

Here are some questions to ask a prospective buyer's agent if you're buying a foreclosure:

  • Are you a licensed, full-time an agent?

  • Are most of your clientele buyers or sellers?

  • How long have you worked with foreclosure real estate?

  • How many clients are you working with presently?

  • Do you have former clients I can contact as references?

  • How will you help me contact owners in default?

  • Are you familiar with the foreclosure laws in this area?

  • How much commission will I pay as a buyer?

Once you've selected an agent, you'll need to set up some ground rules for how you want to work together, such as times you are available to view homes, expectations regarding the agent previewing properties on your behalf, and courtesies expected by both parties.

Keep in mind that even the most intuitive agents are not mind readers. You need to make your preferences, priorities and spending limits clear up front, so neither party wastes valuable time looking at properties that don't meet your needs.

Finally a word about etiquette: While you don't necessarily have to commit to working exclusively with a single agent (unless you've signed an exclusive agreement with them), it's most proper to ultimately extend your loyalty to an agent who spends a significant amount of effort helping you find a property. Remember, real estate agents work on commission, so the time they spend working on your behalf amounts to nothing if you don't ultimately make a purchase through them. If for some reason, you find that your needs are not being met by a particular agent, it's best to set the record straight early in the process, either to correct the problem or to retain alternate representation.

Working with a Buyers Agent can often result in a net savings on property purchases—whether traditional resale homes or foreclosure properties, and can also help inexperienced home buyers from making costly mistakes in negotiations, contract terms and property research.