[Tina]

This is the summary of the national headline news on December 27, 2024:

Economic Perspective and Employment Situation

The Outlook for Employment:

• The forecasting models for the employment services sector in the US indicate that job declines of 300,000 in December can be reported.
• These suggest declines in some key sectors, such as manufacturing, wholesale, and retail, which makes the slow transition of the economy a bit tricky.

Likelihood of Inflation

There has been a deflationary trend, with the latest CPI data revealing an approximately 3.6% easing from the high inflation that occurred in recent years. Such a shift will lead to considerations regarding the Federal Reserve’s monetary policy in the coming months.

Real Estate Market Status

Worst Case Scenario Visualization:

• On a national scale, average payment rates and flat numbers on owned homes are expected to increase by roughly 3-5% in 2025.
• Other Midwest markets are expected to fare much better as demand and economic conditions strongly promote the real estate systems.

A Growing Concern:

• The number of foreclosure requests made to courts has increased by 15% from the previous year.
• This raises some eyebrows since more and more homeowners are struggling to make ends meet, making stability in housing hard to maintain.

Key Political Developments

Congress Budget Negotiations:

• The US Congress is bracing for negotiations related to the federal budget.
• If not resolved, it could lead to a government shutdown.
• Spending on such budgetary issues as social services and defense remains contentious.
• Over the past few weeks, we have all been witnessing the development of the 2024 presidential race.
• With primaries nearing, candidates are intensifying their campaigns.

Each recent poll indicates a growing competitive landscape with multiple candidates emerging as frontrunners against each of the two major party candidates.

Recent Changes in Healthcare

Newly Identified COVID Variants:

• The new COVID variants aid COVID-19 vaccination efforts by encouraging booster shots during these biker rally seasons.
• With an increasing number of cases within regions, health officials are working on devising new thankful measures.

Wellness Aid:

• Federal programs to tackle the mental body impact of the ongoing pandemic within the United States have also been introduced as aid.

Environmental Threats

Severe Weather:

• Due to extreme weather, heavy flooding and snowfall are occurring in regions across America, and citizens are preparing for possible disruption.
• Hence, emergency services are on standby.

Climate Change:

• The Biden administration is soon rolling out new climate change initiatives to rely on renewable energy sources and reduce emissions.

Cyber Security Issues

New Cyber Security Threats:

• US federal agencies are urging businesses to amplify their security policies due to the ever-increasing threat of cyber attacks.
• At the turn of the new year, the United States must tackle alleviating various socio-economic and political challenges.

What remains to be seen is whether the challenge of pandemic recovery will top the list.

[Tina]

The change in the interest rate after the Feds cut down on their rates could explain the increase in rates on mortgages and treasuries. This is due to market behavior as well as economic factors, which include:

Market Expectations

Future Rate Hikes: Even though the Fed is no longer cutting rates, this does not mean that economic activity is not active. If the Fed cuts rates, the market is always expecting an inflation rate or growth, so when setting investors’ timing with expansionary policies, it is reasonable to set the timing late.

Inflation Concerns

Persistent Inflation: Many economists anticipate inflation will be affected if the purchasing power for constant use is maintained by weaving in higher bond yields. Even investors might want this to protect their assets.

Supply and Demand:

Increased Bond Supply: An increase in bond supply might result from increased government borrowing or expenditure, which creates a high demand for higher yields but lower treasury prices. In the long term, this would certainly raise the mortgage presidential election.

Economic Indicators

Positive Economic Data: A reduction in bond rates would lead to the Fed increasing its lower requirements rate, which could be a consequence of an increase in job rates and higher levels of consumer spending, which could altogether change the market pointers.

Market Sentiment

Investor Sentiment: Changes in investors’ thoughts and feelings over time might cause them to struggle with bond prices and yields. Investors tend to feel that there is uncertainty or likely volatility, which can affect rates of interest.

Term Structure of Interest Rates

Spending Yield Curve: On the other hand, it can also be true that if an increase in long-term rates accompanies the cut in short-term rates, the yield curve can steepen. This further means that despite the Fed attempting to lower short rates to boost the economy, other factors determine long rates.

To sum up, even though the Fed’s cuts aim to ensure economic growth, several market forces might result in a rise in interest. These include expectations of future rate increases, speculation about inflation, constraints on the supply of bonds, and the state of the economy. This might give insight as to why rates might increase even when cuts have been made.

[Tina]

Given your strong credit score of 728 FICO and landlord experience, several loan programs may be available to you, most importantly for purchasing a 6-unit apartment building. Here are some suitable loan options and the documents gateway generally required:

Loan Programs

FHA Multifamily Loans:

Description: Loans for up to 4-6 units can be obtained under the Federal Housing Administration (FHA). These loans normally do not require a high down payment and can go as low as 3.5%.

Eligibility: At least one unit must be used as the borrower’s primary residence.

Conventional Loans:

Description: Any investment property considered for purchase, including a 6-unit apartment building, can be financed through conventional loans. However, a minimum credit score and a 20% down payment for a non-owner-occupied property are required.

Eligibility: Adequate income to pay the mortgage of the target property, properties already on rent, and good credit history qualify for conventional loans.

Commercial Real Estate Loans:

Description: Real estate loans may be suitable for a rental property the borrower does not own. Underwriting guidelines, in this case, usually differ.

Eligibility: A good business model and rent income of other properties are generally required for most lenders.

Portfolio Loans:

Description: For certain mortgage requirements, portfolio loans, as the name suggests, may be better since lenders possess such loans and do not sell them on the secondary market. These may have less strict requirements.

Eligibility: Depends on the lender; owning multiple rental properties might increase your chances.

Required Documents

No matter what kind of loan one applies for, the following standard documentation is required:

Personal Financial Statements:

Provide details regarding your assets, liabilities, income, and expenditures.

Tax Returns:

Individual’s tax returns for the previous 2 or 3 years.

Business tax returns where relevant (for rental).

Proof of Income:

The most recent pay stub or evidence of earning income.

Statements of rental income on the focused properties.

Credit Report:

The lenders will request your credit report; however, one could attach a copy for reference.

Property Information:

The set of documents concerning the 6-unit property, including all purchase papers, property listings, and any leases they may already have.

Rental History:

Proof of your experience in the rental property business, such as current rental contracts and payment history.

Down Payment Verification:

You are explaining the source of the money for your down payment using bank statements or any other evidence.

Suppose you have a credible credit score and experience with rentals. In that case, qualifying for the loan should be no problem, which will help you purchase a 6-unit apartment building. It would be sensible to reach out to a mortgage broker or a lender who deals with multifamily homes to aid you in evaluating your most suitable choices.

[Tina]

Debt-to-Income Ratio:

The debt-to-income ratio is typically 35-45% when financing a yacht or boat. Any reasonable lender would want you to be able to manage the loan while meeting your other financial obligations.

Loan Terms:

Boat and yacht loans range from 10 to 20 years. Only a few lenders can provide an upfront 25 years, while 30 years remain uncommon. It is quite common to find that the maximum maturity of the instrument extends to the total cost and measurements of the vessel.

Credit Score Requirements:

Most lenders require a minimum credit score of 700 for yacht or boat financing. Some may accept 680, but other lenders with 740-plus credit scores would overshadow their interest rates and terms.

Financing a $700,000 Yacht:

A $700,000 yacht will likely require a loan for 15-20 years. Given the large loan amount, acquiring a 30-year amortization will take much work. Lenders would like to see a strong credit score and debt-to-income ratio in order to obtain a loan of that amount.

Best sources of a boat:

An individual can take out loans from marine dealers, banks, and credit unions, which specialize in selling boats and yachts and are the foremost places individuals reach out to get a loan or credit. However, consumers should be aware that manufacturers or dealers might provide them with their type of financing depending on the vessel being purchased. When applying for loans or credit, comparing numerous options before settling for an offer is best.

Financing a luxury yacht or boat can be the same, and it is essential to know and understand these primary factors before approaching a dealer:

Loans assessments:

Assessor’s mortgage insurance avalanches for borrowers, or ownersowners of yachts and boats typically vary between 35 and 45 percent, making it easier for people to secure a loan as they can show some additional means to repay the loan easily. Furthermore, it encourages lenders to approve the loan by showing them that the borrower is financially stable.

Terms of the loans:

It is common to see loans against boats and luxury yachts for around 20 years, and some might provide a time span of close to 30 years with repayments spread out over the decade. Although it’s rare to see such borrowers, there has been evidence that a loan for a vessel span increases to 25-30 years due to its value and size, but it is less conventional to see that.

Previous risks:

Lenders tend to be skeptical when allowing loans to purchase yachts and boats. As such, they have laid down strict policies that allow them to ensure the risk of providing the loan or credit is minimal by screening the borrower’s credit score, with the lowest threshold being 700 and some even recommending greater than 740. However, some lenders are more flexible and accept credit scores less than 740, allowing them to provide loans at a lower default risk. Getting a Loan for a Yacht Valued at $700,000:

On a valuation of $700,000 for a yacht, it is reasonable to assume that the loan period will be between fifteen and twenty years. The expectations of most lenders will be such that they will not issue a thirty-year mortgage on the loan because of its massiveness. Because you ask for sizable obligations, lenders will want to rely on a strong debt-to-income ratio and a good credit profile.

Where to Seek For A Loan:

It is common to seek marine loans to finance boats and yachts from marine lenders, banks, credit unions, and even, in some cases, retailers and manufacturers. Exercising prudence when borrowing from so many payers is critical, as it helps establish the best repayment terms and fees.

To summarize the above, the major points when it comes to boat and yacht financing are as follows:

• Debt-to-income ratio: 35-45% maximum
• Loan period: 10 to 20 years, with some going to 25 years
• Credit rating: 700 and above is ideal, but 680 may be adequate
• $700,000 yacht: likely a 15-20 year loan, especially in the case of purchasers seeking longer terms
• Consider different lenders, including marine experts, banks, and dealers, among others

If you need more clarification or support, please ask me!

[Tina]

Information regarding Property Tax Prorations in Illinois Property taxes in Illinois are paid in arrears, which means that the taxes for a particular year are paid in the next financial year. However, This structure proves extremely impactful to some homebuyers in terms of property tax proration during real estate closings.

Proration of Taxes:

When a homebuyer buys a home, the property seller usually pays some of the property taxes for that year to use in the purchase. Those taxes are prorated, so the buyer can borrow a fraction of their total costs to close the deal.

Use Of Prorate Tax Credit:

Irrespective of the closing date used on the mortgage promissory note, homebuyers in Illinois are permitted to use the prorated credit as part of the mortgage. However, since the buyers must prove that they have a down payment, they are not obligated to take the proration credit with them to the title company since it was granted during closing.

Potential for Benefits:

This system blunts the pain for homebuyers as a lesser amount needs to be paid to close the transaction, which in turn provides greater access to homeownership.

States With Similar Property Tax Proration Practices

Property tax proration practices can be wholly different across the United States. Here are some states that have similar systems where property taxes are paid in such a manner that it is applicable to prorate the same:

New Jersey: Property taxes are paid in arrears, and prorations are applied to real estate transactions on sale as common practices.

Texas: Taxes are also paid in arrears, and prorations are possible occasionally at a given closing.

California: Property taxes are paid in arrears, and prorations have become common in most real estate transactions.

Florida: The practices are the same with property taxes, which are paid in arrears and prorations during closings.

This paper has shown that while many states have similar practices of paying property taxes after-due payment arrangements, the repayment terms differ. For instance, buyers, sellers, loan officers, and realtors based in Illinois must understand these prorations to complete the transactions exhaustively. It is, therefore, of tremendous importance to all parties concerned with real estate transactions to understand local tax laws and corresponding practices.

[Tina]

Non-QM Notes Following Bankruptcy Or Foreclosure

Non-QM (Non Qualified Mortgage) loans, such as reconstruction loans, may be easier for clients who have undergone bankruptcy or foreclosure to get. Here’s a broad synopsis of what benchmark requirements would most likely be associated with these kinds of loans:

Credit Score Requirements

Minimum Credit Score: The minimum score required to qualify for many non-QM lenders is 620, let alone those who have undergone foreclosure. The required score is, however, dynamic and will be determined by the specific lender and loan program. It is reasonable to expect that most lenders will set minimums higher for better terms.

Down Payment Requirements

Down Payment: Besides good credit scores, borrowers may have to make a down payment ranging from 10% to 20% or even higher, depending on the loan, the lender, and the loan. In some cases, a higher down payment reduces the adverse effects of the past credit history.

Credit Requirements

Bankruptcy: Regarding the collapse of a Chapter 7 loan, most renowned and credible borrowing agencies do not implement waiting times, making it possible for many borrowers to refinance immediately after the foreclosure so they may obtain a non-QM loan. However, some terms may vary depending on the borrower’s guidelines and the lender’s profile.

Foreclosure: Like their counterparts, these loans are offered at, and in scenarios after the bankruptcy, and non-QM loans offer the possibility to borrow without a waiting period after a foreclosure. But it must be stated that this depends from one lender to another.

Further Thoughts

Documentation: Hire purchase loans for investors are a form of non-QM facility. They don’t document at least as much as traditional lenders, but some form of income and assets will always be assessed.

Debt-to-Income (DTI) Ratio: The non-QM loan is acceptable even for higher DTI, more than 50% in some cases, which have high capacity actuarial and other positive factors that easily manage high-risk rates.

After going through bankruptcy or foreclosure, non-QM loans can provide a great alternative for borrowers who require no waiting periods. The requirements are as follows:

Credit Score: 620 should not be less.

Down Payment: 10% to 30% down payment.

Credit Requirements: Immediately after a bankruptcy or foreclosure, they might qualify.

DTI Ratio: The debt-to-income ratio should not exceed 50%.

Borrowers should reach out to certain lenders as there is great variability regarding multiple options in the non-QM area.

[Tina]

There are plenty of Options for Self-Employed Borrowers with non-QM Jumbo Loans. Here’s how to choose a Non-QM Jumbo loan that fits well.

Traditional Jumbo Loan Options for Self-Employed Borrowers

Standard Documentation Loans:

Requirements: In most cases, self-employed borrowers are expected to submit two years of personal taxes and business tax returns, profit and loss statements, and sometimes a couple of bank statements.

Potential Borrowers: Self-employed people with reliable income and an acceptable credit score.

Asset Based Loans:

Requirements: Though they haven’t been meant only for self-employed borrowers, some lenders say that others maintain savings, stocks, and retirement accounts, which are acceptable loan qualification assets.

Potential Borrowers: People having enough assets but are inconsistent wage earners.

Non-QM Jumbo Loan Options for Self-Employed Borrowers

Bank Statement Loans:

Requirements: Such loans do not require conventional income verification but use bank statements rather for documentation purposes. This is normally required for about 12-24 months.

Potential Borrowers: Self-employed borrowers whose incomes are undocumented for tax purposes due to fluctuating income or self-employment.

Stated Income Loans:

Requirements: These products allow the borrower to state their income without presenting other documents in detail. Lenders may ask for other proof, like bank statements or contracts, to ascertain income.

Potential Borrowers: Self-employed persons whose incomes are intermittent or do not wish to reveal their complete financial profile.

Debt Service Coverage Ratio (DSCR) Loans:

Requirements: Such loans are based on the property’s cash flow instead of the individual borrower. Hence, the focus is on the rental income from the investment property.

Use Case: Great for self-employed borrowers who are buying rental properties.

Requirements: Only the interest is paid by the Borrowers for some time, leading to lower initial payments.

Use Case: Useful to self-employed people who want to control their cash flow during a certain period.

Self-employed borrowers can avail of various options that cater to their needs, including traditional and non-QM jumbo loans. Traditional loans require full documentation, and non-QM loans do not require much income verification other than considering self-employed income streams. An appointment with an expert mortgage can determine the most suitable option based on one’s needs.

[Tina]

No, not quite. However, the seller financing and rent-to-own methods are similar in magnitude. However, how they address the issue of purchasing a house is different. This is, in turn, explained clearly, with some key differences outlined:

What Is The Concept Of Seller Financing?

When the seller becomes a lender to the buyer of the property, rather than acting as an ‘escrow,’’ it is known as rental repayment or owner financing. The simple fact is that most buyers pay the sellers monthly for several years instead of going to the bank for a mortgage. In some cases, the borrower will still have to make a balloon payment and pay off the rest of the loan within the time indicated in the contract.

Key Features:

The seller and buyer of the property determine aspects such as the purchase price, interest to be paid, the methods and number of times to pay the monthly fees, and the total period for repayment.

A document transfers the property title to the buyer. In most cases, the buyer takes immediate possession of the property after the document is executed.

Normally, the purchase price is part of the loan. It is secured with a seller’s captivating title that goes beyond the loan repayment since it is above respect.

What is Rent-to-Own?

With rent-to-own, also called lease-option or lease-purchase, there is a lease. There is a promise that the lease will yield an additional lease payment to grant the tenant ownership of the property at a future date. A portion of rent can be towards a down payment or buying a house outright.

Key Features:

Offering renters a leasing period is one of the features. The lease contracts usually have one-year time frames and three years.

The purchase price can be finalized from the beginning or when the occupant is ready to exercise his purchasing rights.

The tenant may be granted an option of purchasing the home at the end of the rental term but is not obliged to do so.

‘Rent credits’ occasionally exist when a specific portion of the rent payment is credited towards a sale price when the property is sold or rental units are obtained.

Major Points of Contrast in Seller Financing with Rent Purchase:

Feature Common in Seller Financing Rent to Own

Title: Today’s buyer is also the title owner of a property subject to a loan secured by a deed of trust. Its first option is Temenat, which would be to rent the property. Only rental rights would be granted until they decide to exercise the purchasing option, which entails a title transfer.

Loans Buyer monthly repayments are made directly to the seller, who is the loan’s creditor on the loan. Rent shall be the first amount for the buyer within a limited period, during which a rental buyer must acquire rights to purchase where rental may probably go toward the purchase.

Initial Payment: However, a front down payment must usually be paid. On average, the borrowing or option payment is less than the actual purchase payment.

Loan Mechanics: These monthly remittances to the sellers are classified under seller financing for the seller. Payment plans are fixed periods within which seller financing payments are made to the seller. Rent-to-own is primarily letting out properties on high rates and tenors that enable current occupants an option to purchase the said property at a future date.

Obligation to Buy: The legal constraint to purchase the house remains with the buyer. In this case, the lessee shall have the right to purchase or buy options.

The length of the agreement is standard 5-30 years, except that the payment of lump sums may be durable later on. Typically, the period can be extended from one to three years, during which the lessee opts for the purchase option.

Who Pays For Property Taxes And Maintenance? The taxpayer is the buyer, who pays for remodeling costs and property acquisition. During the lease, the landlord (seller) usually bears the property taxes and ancillary costs.

Flexibility: It is hard to walk away from the deal as the buyer has taken out a loan that the buyer is obligated to—more flexibility. Ultimately, the lessee may decide against purchasing the asset.

Which Option Is Better for You?

Buyer may prefer Seller Financing under the following circumstances:

• They need the original documents immediately and will occupy the property when the deal is closed.
• They have a hefty down payment but need help to obtain a regular mortgage.
• They are “fine” with paying regular taxes and rehabilitation of properties.

Rent-To-Own may be quite appropriate for the buyers who are:

In places where they wish to defer making the payment until they can improve their credit rating and stash some cash for a smaller mortgage or when they are seeking lower interest rates.

Immerse yourself in the area as you prepare to buy the home.

If it becomes necessary to change, they are not ready for purchase.

Seller financing and rent-to-own are the other ways people get houses apart from the traditional method of buying. Still, they vary regarding ownership, payment terms, and flexibility. In this case, the buyer occupies the house right from the start, compared to renting to own, where the tenant has to rent the house before considering buying it. These approaches come with benefits and limitations to buyers, depending on how much people are willing to spend or how long they wish to own a house.

[Tina]

The purchase price determination in the rent-to-own models results from negotiations among the parties. For example, the buyer (tenant) and the seller (landlord) at the time of entry into the agreement. So, in those transactions known as ‘rent to own,’ or leasing with the option of buying, the resident can rent the asset and acquire it on a buy-out basis. Below is the purchasing price that is normally used in practice:

At The Beginning Resolving The Amount Of The Purchase Price

Fixed Price Occupation: The homebuyer needs to know that, in most rent-to-buy schemes, the lump sum of the purchase price is fixed and agreed upon at the beginning of the rental period and is included in the contract of hire purchase…:- It is a straightforward priced arrangement that is simple for both parties, buyer and seller, without the impact of any future volatility in the real estate prices that may occur, selling the property at the pre-agreed price.

Example: If the property is currently worth $300,000, both parties might agree to set the purchase price at $310,000, keeping in mind that the home value will rise during the rental period (for a period ranging from 1-3 years).

Negotiating Strategy: The purchase price is calculated, and the property’s market price at the time of purchase is calculated with an allowance for future appreciation of the property’s value. Due diligence in research shows that home buyers should obtain other homes in the same vicinity as the one they want to ensure that the price they plan to pay is reasonable concerning the head of the property in question. At the same time, most sellers are often boarded with a higher price to counterbalance the expected gain in the market.

The Purchase Price Determined In Consideration Of Future Appraisal

Future Completion Price Option: Some rent-to-own arrangements may peg the price of the home upon purchase at future market value based on an appraisal that will be done when the tenant wants to purchase the house. This can benefit the tenant as the property value decreases. However, in such a case, it would make the purchase rather costly in case house prices appreciate.

For instance, the lease may state that the purchase price will be determined based on an appraisal done after two years. Assuming that the appraised price for the property is $320,000 after two years, the tenant will then be obliged to purchase at that price.

Money From The Initial Contract And The Value They’re Claiming In the Future

Capped Increase: These types of agreements begin with initial pricing strategies but may incorporate price adjustments in time, depending on how the market responds. One method that may also relate to future price adjustments is setting a purchase price that may be increased up to some percentage or capped at certain future appraisals.

For example, the value of the contract may be fixed at $300,000 as the purchase price. Still, it will only increase at five percent a year, so after two years, the price will be a maximum of $315,000.

Agreement and settlement of Rent Credits

Rent credits toward purchase option price: In a few rent-purchase schemes, a part of the monthly rent may be considered an installment towards a security deposit or the final amount payable to the seller. The tenant pays a little more than the market rate rent, and the surplus is put into a fund that will be used to buy the property in time.

Example: For instance, if the monthly rental is $2,000, $200 of that may be applied towards the purchase price or as a down payment applied monthly. Hence, after two years, the tenant would have earned $4,800 in credits as rent.

Market Resources and Comparative Market Analysis

Conduct a Market Analysis: Renter records should be correctly analyzed. The market outlook should be made before the finalization of the rent-to-own agreement so that the amount payable corresponds to the value of similarly located units. Public resources or a real estate agent can help gather comparable sales information within the area.

Look at Market Trends: Consider the general housing market and the local one. When the trend is such that home prices are increasing very fast, there is a high probability that prices will be hindered. Therefore, the settled price may be advantageous to the buyer. Where prices are expected to decrease, it would be beneficial to work towards a price that would be based on a future valuation of the property.

Terms for Negotiating the Purchase Price

Buyer Considerations: The absolute consideration should be sufficient to reflect market potential, taking into account future increases. Where the given amount of payment appears above the market’s present value levels, it makes sense to believe or haggle the venture.

Seller Considerations: Hectic property exorbitant sellers could expect to set a higher purchase price to take care of the expected average appreciation over a rental period. Under this assumption, the rent-to-own option should not mask the bargain price, as a very high price would discourage tenants from purchasing.

Factors Impacting the Agreed Purchase Price

Length of the Lease Term: If the lease purchase amount increases, it will most often be set at a higher amount.

Local Market Conditions: If the home prices are rising quickly, the purchase price will be higher. Conversely, if the market is sluggish, the owner will accept to bring forth a minimal amount.

Home Condition and Improvements: However, if such an improvement is possible for the tenants during the lease period, such costs will be considered liable and even subtler than the acquisition price.

Encourage Professional Assistance

Real Estate Agent: Engage the services of a real estate agent specializing in rent­ to­ own transactions. This is so you can evaluate the purchase price and ensure that the agreement’s terms are in harmony with the prevailing market conditions.

Real Estate Attorney: Before entering such an agreement, it is always prudent to seek advice from a real estate lawyer regarding any rent­ to­ own agreements to ensure all agreement terms are met. This, including the purchase prices, is understood and fair.

There are many ways in which the purchase price for a home, giving proceeds in rent and not transferring any ownership, can be arrived at. This is done by agreeing upon a fixed price initially and deriving the price from future house evaluations. Or even through a combination of these approaches. However, remember to consider such things as market trends, rent credits received, and elapsed time of the lease period when discussing the price you will pay for the purchase. Therefore, market analysis and professional advice will help you decide on a sufficient but reasonable price to buy your house.