JDK Real Estate Solutions, LLC

You may be sitting on a good sized down payment for your new home and not even know it!

Fri, 09 Oct 2009 13:41:00 -0400

There are some other ways to be able to come up with a down payment these days that not everyone knows about.

The most common is to use your 401k. Most 401k programs will allow you to pull out money with no penalty in certain circumstances. Generally, one of them is to use as a down payment on a house purchase.

We've done this with several of our buyers and the process is pretty straight forward, quick and easy.

Here are the steps:

1. Contact your 401k provider and let them know that you would like to get money from your 401k to put down on a house purchase. They will give you instructions on what paperwork needs to be filled out and will tell you the maximum amount you are able to pull out.

2. Fill out the paperwork and get a purchase and sales agreement or lease/option agreement from the seller to show them.

3. Receive a check in the mail within a few weeks at most!

And here's something to think about. If you have enough of a down payment, you may more than likely be able to ask for Owner Financing right away. And if you haven't purchased a home in the past 3 years and have been renting, with the new laws that Obama passed, you would qualify for a $8,000 tax credit for purchasing a home in 2009.

And here's the kicker... the $8,000 comes to you regardless of the rest of your tax return numbers. In other words, it's really not a credit. The government will hand you $8,000 for free and you don't even have to pay it back as long as you live in your new home for a minimum of 3 years.

So let's say that you buy a home through owner financing this year and put $8,000 down as a down payment from your 401k (or any other source of money).

Then let's say that when you file next year's taxes, you don't qualify for a tax refund, or maybe you even owe some money. Regardless of that, the government will still send you $8,000.

If you have a tax refund on your taxes, you would get your refund plus the $8,000!

Now as a disclaimer, I am not giving legal and/or tax advice. Please check with your tax professional for further details.

But imagine this. You can put $8,000 down as a down payment and in a year, the government will return that $8,000 to you to put back into your pocket or back into your 401k!

And... did you know that JDK Real Estate Solutions will take items of value as a down payment? We'll get into that next with how our "Guaranteed Owner Financing" program works.

Sweat Equity

Thu, 17 Sep 2009 15:06:00 -0400

In an economy like today, a good sized down payment is necessary to get into home ownership, but coming up with an adequate down payment may present a challenge.

But there is another option you can look for to help spread out your down payment over time. It's called "sweat equity".

Sweat equity is basically is trading work for equity, meaning you will do the work needed on the house in exchange for a dollar amount that goes towards the purchase of the house.

And if done correctly, banks will honor sweat equity as a legitimate down payment.

So how would this play out? Let's say that you find a house that you want to lease/option and the house needs some work. Maybe it needs new paint and carpet inside. You could offer to take the house "as-is" and do the work over time in exchange for a certain dollar amount to be taken as your down payment.

If the house requires $4,000 in work (verified through professional estimates), rather than letting the owner of the property fix it before letting you move in, you could offer to take the house "as-is" in exchange for $6,000 off the price of the house and $4,000 of that counting as your down payment.

There are 2 questions that many ask at this point:

1. Why would anyone give me $6,000 off the house when it only needs $4,000 in work?

2. Why can't I have the entire $6,000 count towards my down payment?

To answer the first question, a seller would definitely give you an extra 50% in credit off the price of the house because they don't have to spend $4,000 fixing it up themselves. That alone is reason enough for them to give you extra incentive to take the house "as-is." All you have to do is ask.

As to the question of the down payment... remember, banks always want to see that you put down a legitimate down payment. They will not except credits of any kind to be used as a down payment like rental credits.

In order to get the bank to give you $4,000 as a down payment, you will have to show them the repair estimates from a legitimate company.

Now slowly over time you could pay for someone else to do all the work for you, and if you do, make sure you keep all the invoices that were paid to show the total amount you spent.

Or, if you decide to do the work yourself (most of the cost in repairs is labor) and make it a family project to paint your house, all you need to do is keep the invoices showing the purchase of the supplies and then let them know that you did the work yourself.

Either way, the bank will give you a full $4,000 to be counted toward your down payment as long as you have the following:

- Repair estimates from a reputable company showing $4,000
- Receipts and invoices for all the supplies purchased and/or labor hired to do the work
- A document signed at your lease/option signing showing that the seller was giving you $4,000 as sweat equity in exchange for doing the work yourself.

So let's look at what could potentially happen for you.

You are looking at a house worth $175,000 that needs $5,000 in work (mostly paint and carpet). You have $2,500 to put down and are willing to trade sweat for equity. You offer to take the house "as-is" in exchange for $7,500 off the price of the house.

If the seller agrees, as long as you get a document showing that you are getting $5,000 in sweat equity, when it comes time for the bank to give you a loan, you can show the bank that you have $7,500 as a down payment, as well as getting an additional $2,500 off the price of the house.

In this scenario, you could get into a house with $2,500 down but actually show a $7,500 down payment to the bank. And don't forget about the extra $2,500 credit. So for $2,500, you are getting $10,000 off the price of the house!

And if you get on a down payment assistance program, you can add to your down payment each month and really start to grow your down payment to a size that will make you very attractive to the banks. And all with only $2,500 to start (in this example).

That's called leveraging your money!

I know that was a lot of information. Let us know if you have any questions.

And if you haven't personally spoken to us yet to let us know your specific needs and goals as it relates to your home ownership needs, please do so.

You can either email us or call our office at 678-797-1787. We'd be more than glad to consult with you and answer any questions that you may have.

Tip #6 - Lease / Options Pt 3

Wed, 03 Jun 2009 11:25:00 -0400

Today I want to talk to you about "seasoning." This is the process of building up evidence to provide to the bank to let them know that you are a good investment opportunity and not a risk.

When most people apply for loans, because there is nothing besides their credit for the banks to make a decision on, the credit makes or breaks the decision.

But what if there was something other than just credit that the banks could look at to make their decisions? If you could provide that to the bank and give them additional information besides just your credit, you can begin stacking the odds in your favor of getting a loan.

Although many people out there have bad credit scores because of their irresponsibility, there are many out there who had great credit scores and are highly responsible people that simply had something happen to them and ruined their credit.

Some of these things could be: divorce, victim of credit fraud, temporary loss of job, medical expenses, etc.

And if any of you have ever tried to fix your credit or even simply tried to have incorrect information on your credit report fixed, you may have found that this is not an easy task.

"Seasoning", if properly done, is the X-factor that could allow you to qualify for a loan when otherwise you couldn't.

So how do you get "seasoned"? You show the bank that you can afford the mortgage and that you are responsible and can be trusted to pay on time by providing evidence that shows this.

In other words, if the bank were to give you a mortgage and your monthly payments would be $1,300/mo including your taxes and insurance, then you need to show the bank that you can afford that.

Many lease/option buyer's go into a home that may rent for $1,000 and pay on time faithfully for a year or longer only to find that the banks will not accept that as proper "seasoning."

You see, in today's market, the market rent on a property is usually less than what the mortgage on the house would be. So if the mortgage would be $1,300/mo, the bank wants to see that you can afford $1,300/mo, not $1,000.

So how do you solve this dilemna? Do you pay $1,300/mo in rent when the market rent is only $1,000? No. You utilize a down payment assistance program to make up the difference.

If done properly, you can begin to build a convincing file of evidence for the banks.

We'll go into this down payment assistance program further in the next article in a couple of weeks.

If you haven't done so already, please fill out the detailed form on our website telling us exactly what you are looking for so that we can start working on your behalf to locate something for you and also personally consult with you to find the perfect house. It's the "Submit Buyer Info" tab on the left side of our webpage.

Tip #5 - Lease / Options Pt 2

Tue, 19 May 2009 10:55:00 -0400

As I promised last time, we're going to dive into a little more detail on lease/options and some of the things that you should be aware of. We'll do this by answering the questions that I gave you at the end of the last article.

One of the questions I asked last time was: What happens at the end of my lease?

For most people, if you haven't made intentional plans and started the home buying process and set a closing date before the end of your lease/option, you are at the mercy of the property owner.

If they are nice, they could extend out your lease until you actually closed on the property.

But if they wanted to, they could force you out of the home, even if your closing date was set for the day after the end of your lease! I know that sounds horrible, but I hear stories like this all the time.

Why would someone do something like that? Because they never had the intention of selling you the house in the first place. They know that most people who go into a lease/option won't be able to purchase the home in 12 months or less.

So how do you protect yourself?

You want to make sure that your lease/option agreement has it in writing that you are allowed extensions to your lease/option at either 6 or 12 month intervals to allow you extra time to get a loan if you aren't able to get it within 12 months.

Especially in this market, being able to qualify for a loan in 12 months is difficult. In reality, you ought to be thinking 18-24 months to get properly "seasoned" and qualified to get a loan.

Get it in writing!!

In our contracts, we have an automatic 12 month extension at the end of the first 12 months with a 60 day notice and as long as the monthly payments are being made in a timely fashion.

After the 12 month extension, we allow for additional 6 month extensions for as long as necessary as long as payments are being made in a timely fashion.

Our contract basically says that we'll extend the lease as long as necessary.

Especially in this market, this is important. You don't want to get into a situation where you have a ticking time bomb at the end of 12 months.

If the seller really wants to sell the house, then they shouldn't mind extending out the lease/option to accommodate you getting a loan. And if they don't mind, then they shouldn't have any problem putting it in writing on the contract to protect your interest.

Most of the problems people have with lease/options happen because they got to the end of their lease and were forcibly kicked out of the house because they didn't close by the end of their contract, regardless of how well they paid or how much they put down as a down payment up front.

By making sure that you have extensions in your contract, you will protect yourself from this type of situation.

Another important thing to keep in mind is not only to have extensions built into your contract, but to have a definite plan to qualify for a loan.

We'll get more into this next time.

Tip #4 - Not all lease/options are the same

Wed, 18 Mar 2009 09:21:00 -0400

Lease/option seems to be a term that is thrown around a lot these days and it seems like everyone is offering lease/options and everyone wants a lease/option.

But before you jump at the first great lease/option opportunity that you find, be sure to understand what you are getting into and protect yourself from ending up with nothing.

So what exactly is a lease/option?

Here's the simple definition: You lease or rent a house and have the exclusive option to purchase the house within the time frame of your agreement.

Most agreements are for a 12 month period of time. This means that within the 12 month period of your contract, you can purchase the house for the agreed upon price.

Unfortunately, there is great confusion around this concept and many people end up with a bad taste in their mouth.

As a matter of fact, most people who offer lease/options on their properties don't completely understand how the process works. All they know is that they've been told that if they lease/option their house instead of "renting" it, they can get it occupied faster and generally have a better tenant. Plus, the deposits they receive are non-refundable purchase deposits so they don't have to give it back if the tenant doesn't buy the house and they leave.

I've heard many stories from people who put down a sizeable purchase deposit and paid their lease faithfully and on time for 12 months just to be forced out of the house at the end of the lease. I'm hearing more and more of these sad stories.

So what happened? Is that legal? Well, technically it is. And that's why you need to be aware of what you're getting into and protecting yourself from situations like that.

So here are some questions you need to ask yourself:
    - What happens at the end of my lease?
    - What do I need to do to ensure that I will be able to buy the property?
    - Is the seller doing anything to help me buy this house?
    - I understand the lease part, but just exactly how do I go about buying the property?

We'll dive into the details a bit further in the next article.

Tip #3 - Cash Is King

Mon, 09 Mar 2009 20:30:00 -0400

You may have heard this term many times and in many different
contexts during your life, and there is no other place that it is
truer than in real estate in this current market.

Cash opens up opportunities and gives you negotiating power that
wouldn't be there without it.

While everyone is crying that "the sky is falling" in real estate,
there are those who are quietly buying up real estate at rock
bottom bargain prices. How are they able to do this? They have
cash. They don't need banks. They don't need loans. They have
cash.

These buyers have incredible buying power and sellers will bend
over backward to sell them their house because there are no
contingencies. Simply... cash.

Now how does this apply to you if you don't have enough cash to
pay all cash to buy a house?

Well, even if you have some credit issues and are looking for
lease/option or owner finance opportunities to purchase your home,
cash is still king. Cash in the form of a downpayment.

In today's market, even those who have credit scores above 700 are
still being required to bring 20% and sometimes even more to
qualify for a loan.

In a typical lease/option or owner finance opportunity, you will
find that the more of a down payment you have, the more options
and negotiating power you will have.

And with the demand for lease/option and owner finance homes
growing, often times a home will have multiple people trying to
purchase it at the same time. It happens to our company all the
time.

Well, all things being equal, who do you think the home will get
sold to? The one with the largest down payment! Almost every
time!

If you are trying to get into a lease/option or owner finance a
house with little to no downpayment, you will quickly find that
there are not many options for you out there. $800 down and $800
a month is difficult to get in an apartment, let alone a home
purchase.

The ideal number you should be shooting for is 5-10% as a
downpayment.

When you start getting closer to the 10% downpayment range, you
will find that more owner finance opportunities present themselves
to you where you can go straight into home ownership without going
through lease/option.

Hopefully after the last email tip, you have an idea of how much
home you can afford. Your goal now should be to start saving for
your downpayment.

Should you stop once you get to 10%? Absolutely not. The more
you save up for your downpayment, the more negotiation power you
will have, the lower your payments will ultimately be, and the
better your chances of getting a refinance loan in the future to
get to a really low interest rate on your home.

I hope you found this information helpful.

Tip #2 - Know how much home you can afford before shopping

Sat, 28 Feb 2009 18:17:00 -0400

For most of us, we have no idea how much home we can afford. We just know what we can afford each month.

I'm going to help you calculate that number.

The first thing you want to ask yourself is, "What is the absolute most I can afford each month on my house payment, while still leaving just enough cushion to take into account any unforeseen surprises that may arise?"

It is important not to stretch yourself too thin and leave no margin for error. You don't want a blown car tire or a speeding ticket put you in a place where you may not be able to make your payments.

For someone who is trying to get "seasoned" for the banks and create a track record of evidence to increase your odds of getting a loan down the road, the last thing you want on your record is late or missed payments.

Once you've figured out the most you can afford, you need to take into account monthly taxes and insurance that will be included in your payment.

A general rule of thumb, although not completely accurate, would be to figure:
    $150/mo for a house in the $100,000 range
    $200/mo for a house in the $150,000 range
    $250/mo for a house in the $200,000 range

Again, these numbers are not completely accurate and will differ according to the actual property taxes on each property, but it's a good place to start to get a general idea.

So if you can afford $1,200 month, and think you would like to be in a house worth about $150,000, then subtract $200 from your monthly payment and now you know that the amount of your mortgage needs to have a monthly payment of $1,000/mo.

Now we can figure out the size of the mortgage you can afford.

Go to: http://clicks.aweber.com/y/ct/?l=CXMH7&m=1pyGWaVJPlMw6m&b=1O5ehayFowaphpPN1JyULw

This is how it works: Put in the data on 4 of the 5 fields. Then click calculate next to the field you want to find.

To figure out how much mortgage you can afford:

     1. Enter 7.99% in the area for your interest rate. (Although rates are currently lower, this is a good conservative number to use, especially if you had some credit issues in the past).

     2. Enter 360 in the "number of payments through life of loan" field to 30 year loan.

     3. Enter 12 in the "payments per year" field to reflect monthly payments.

     4. Enter the monthly payment you calculated after taking out taxes and insurance in the "monthly payment" field.

     5. Press the calculate button at the top next to the "amount of loan" field to find out how much the loan amount is.

You should now have an idea of how much you can finance and be at your payment range.

Remember to also calculate your down payment. In today's market, getting loans without a downpayment is not an option any more.

You want to anticipate putting at least 10% down to make the chances of getting a loan the greatest.

So take the amount of loan you can afford, multiply it by .10 to figure out 10% of that amount. That is how much you should have as a downpayment.

So if you can afford a $100,000 house, 10% would be $10,000 for a downpayment. So you can actually afford a house that is priced at $110,000 as long as you have $10,000 to put down.

So now that you know how much house you can afford, you will be a much wiser shopper when looking for your new home and avoid getting into a situation where you are in over your head when it comes to your housing costs.

If you don't have much of a downpayment saved up now, this would be a good time to start a "downpayment fund" and start saving a little each month. You'll be surprised how quickly you can build up a sizeable downpayment if you will consistently save each
month. And hopefully after this exercise, you have an idea of how much you need to save.

I hope this helped.

Tip #1: Buying a home with no bank qualifying

Tue, 24 Feb 2009 10:09:00 -0400

Tip #1 - Be sure that you really want to buy a home and have
accurate expectations before you start the process.

What do I mean by that?

A lot of people don't seem to understand the costs associated
with home ownership if they've never owned a home before.

When you purchase a home, these are the extra costs that you need
to be aware of and take into consideration when determining what
type of a payment you can afford each month:

    - Mortgage payment (Principle and Interest)
    - Taxes and Insurance (Usually added to your monthly
      principle and interest)
    - Home Owner's (Condo/Townhome) Association Fees
    - Utilities (Much higher than apartments)
    - Lawncare
    - Home Warranties (Not having them can prove to be very
      costly)

Those are the big ones.

Many times, people will assume that they can afford a certain
payment but quickly realize that what they didn't take into
account may actually break them.

Many of you may already know this information, and if you do,
we can all use a reminder now and then, right?

Well, that's it for now. More tips to come.