It's been said that if you can find a home that has most of what you want, you should go ahead and purchase it.  Many first-time buyers are using everything they have for a down payment and closing costs and would have to "live" with the less than perfect home until they can save the money to make the changes.

The FHA 203(k) mortgage allows a borrower to purchase a home and provides additional funds for improvements to be made.  These types of renovations can include kitchen and bathroom remodels, flooring, plumbing, heating and air conditioning systems, additions and other things.

The benefit to the buyer is that they have the opportunity to consider a home that needs repairs and might have been unacceptable without a program like this.  Being a FHA loan, a minimal down payment is required, fair interest rates and generous qualifying requirements.

The 203(k) Streamline can be used for cosmetic improvements, appliances and minor remodeling up to $35,000 in cost.

As you can imagine, this is a specialized program and not all lenders choose to make 203(k) loans.  They usually take longer to process and getting firm bids on the work to be done will be required.  It is important to find out how much experience a lender has with this particular type of loan.

It will also be required that you work with a 203(k) consultant in addition to the mortgage officer.

​For more information, go to Hud.gov.  FNMA has a similar conventional loan program called HomeStyle Mortgage.  Your real estate professional will be able to help with recommendations.  Call me at .

In September, the Federal Reserve raised interest rates for the third time in 2018 and they're expected to go up one more time this year and three times next year.  If you have a Home Equity Line of Credit, HELOC, you're paying more to use that money and it is going to become more expensive.

It may make sense to refinance your home and consolidate the balance of your HELOC to lock in a lower mortgage rate.  Most lenders require that the combination of these loans should not exceed 80% of the home's fair market value and that you have good credit and adequate income to support the payment.

A HELOC is a first or second mortgage that allows the borrower to withdraw money as needed, up to the line of credit provided by the lender.  A draw period is established where the borrower is only required to pay interest. 

Since all HELOC loans are variable rate mortgages, during periods of rising rates, the cost of the funds increase.  However, unlike adjustable rate mortgages that have specified adjustment periods and caps, a HELOC adjusts when the prime interest changes.

The formula for determining available funds on a refinance are to take 80% of the fair market value, which will probably have to be verified by appraisal, less the existing first mortgage and the costs to refinance.  The balance would need to cover the cost of replacing the HELOC.  Any remaining balance may be available for cash to be taken out.

Now is a great time for a mortgage review. In many cases, the equity you have in your home may allow you to eliminate mortgage insurance and substantially lower your monthly payment. As with all tax matters, always consult with a tax professional before making any decisions.  Call us at  for a recommendation of a trusted mortgage professional.
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FHA allows owner-occupants to purchase up to a four-unit property with a minimum 3.5% down payment.  The rent collected on three units could be used to make the payment and the owners' pro-rata share would be less than ¼ of the payment itself.

The owner-occupied unit would be considered their principal residence.  The other three units are treated as rental property and eligible for cost recovery, a non-cash deduction plus all the normal business expenses.  The rental income of the three remaining units is calculated as income and assists the buyer in qualifying.

A homeowner could buy a four-unit, live in one for two years, buy another four-unit with a minimum down payment, move into one unit, rent the other three as well as the previous unit in the first property.  Then, after another two years, repeat the same process over again.

The fifth year, the homeowner/investor would have a total of 11 rental units plus the one that they are occupying.  An acquisition strategy like this might be difficult for a family with children and a single person or couple might find it easier to move more frequently.

As the equity increases in these properties, due to appreciation and amortization, the money could be pulled out through refinancing to purchase additional income properties.  Another objective might be to pay the mortgage off as soon as possible and any cash flow after tax could be applied directly to the principal.

FHA has a nationwide mortgage limit for a four-unit of $521,250 but some high-cost areas have been designated with increased limits.  There are also loan programs for two and three-unit properties with limits of $347,000 and $419,425 with similar exceptions for high-cost areas.

The low mortgage rate and minimal down payments for owner-occupied FHA mortgages makes this strategy attractive because it gives investors an opportunity to highly leverage their investment.  Most non-owner-occupied (investor) mortgages would require 20-25% down payment and have a slightly higher interest rate than for an owner-occupant.

​To learn more about this opportunity, call  and we can give you information on specifics in a variety of areas.

It may be an all too common belief that a person will have a house payment and a car payment for the rest of their lives.  However, with a plan and some determination, you can be mortgage free.

Planning for retirement is obviously important and many times, an activity plagued by procrastination.  Some homeowners' goal is to have their home paid for by retirement, so they won't have payments.  It makes sense to eliminate a sizable recurring expense before they quit working.

By making regular principal contributions in addition to the payments, the debt can be eliminated by the target retirement date.

Assume a homeowner refinanced their $300,000 mortgage at 4% last year for 30 years with the first payment due on May 1, 2017.  With normal amortization, the home will be paid for at the end of the term. 

Additional principal contributions with each payment will save interest, build equity and of course, accelerate the payoff on the home.  An extra $250.00 a month would pay off the mortgage 7.5 years sooner.  $786.81 extra with each payment would pay off the loan in 15 years.

Having a home paid for at retirement has the apparent benefit of no house payment.  A debt-free home is also a substantial asset that could be borrowed against or sold if unanticipated events should occur. 

​To make some projections to pay off your own mortgage, use this use the Equity Accelerator calculator.