Las Vegas Real Estate Blog

• Conventional loans - Conventional loans are those that are not guaranteed by the government, as are FHA and VA loans. The primary guidelines for these loans come from Freddie Mac and Fannie Mae, the secondary mortgage market, where most loans are sold. This type of loan usually has the most flexibility because of the huge range of loan products offered, and most of the time the rate is slightly lower than the government insured loans.
• FHA loans - These loans are typically thought of as first time home buyer loans, but actually they can be used by anyone who meets the guidelines. They are usually more forgiving of low credit scores and allow higher debt ratios. Because of this there is an up front mortgage insurance premium (MIP) which is financed into the loan at the start plus a monthly MIP which is equivalent to 1/2% of the original loan amount divided by 12. One of the big advantages of an FHA loan (unlike traditional conventional loans which require that a certain percentage be the borrower's own funds) is that the down payment can be a gift from a relative allowing a buyer into a property who has little or no money to put down. Also on an FHA loan the seller is obligated to pay certain fees for the buyer which on a conventional loan the buyer would normally pay. One of the most popular FHA loan programs is the 2-1 Buy Down. At a cost of 2.625% of the loan amount (points) the buyer's first year payment is 2% lower than the market rate at closing, the second year is 1% lower than the market rate at closing, and years 3 through 30 are at the market rate at closing. This allows the buyer to qualify at a lower interest rate and purchase more house, based on the assumption that his income will be going up in the years ahead.
• VA loans - VA loans are available only to veterans who have VA eligibility. In order to obtain a VA loan, the veteran must acquire from the Veteran's Administration his Certificate of Eligibility or DD-214. VA loans actually allow the highest debt ratios, 44% of all debt combined, and the Veteran is able to literally get into a home with $1 down because the seller is allowed to pay all of the Veteran's closing costs. (Usually the sales price is adjusted to cover the cost of the seller's contribution!) VA loans are also the only kind of loan that may be legally "assumed" by another buyer on a contract for sale without prior permission from the existing lender. This should only be attempted with help from a competent Realtor!!! The terms under which this type of assumption can be done are extremely complicated. And until the new buyer either pays off the existing loan or qualifies to assume it with the lender, the veteran remains liable for the balance which is owed.
• Low or no money down loans - There has been a proliferation of these loan products in recent years designed to help both first time buyers and those with no savings. Most are combined first and second trust deeds totaling 100% of the purchase price. These loans are looking for excellent credit and the interest rate on the second is usually fairly high, between 3 to 4% above the first, but these can be refinanced after a couple of years down to a better rate. Non-profit organizations have also gotten into the mortgage business in the last year. In return for a seller "contribution" of 4% of the sales price, these groups "gift" the buyer with their 3% down payment. Again the sales price is often adjusted to compensate for the seller's contribution. The nice part about these loans is that they are not limited to the lower price ranges but go all the way up to Jumbo loans.
• No income qualifying loans - Sometimes a buyer's income is not sufficient to qualify for the type of loan he needs to get into the type of home he wants. But his credit is great and perhaps he has other sources of income which are not acceptable to the lender such as a part-time job. A no-income qualifying loan puts him into the home he wants. Depending on the buyer's credit scores and how much he is putting down the interest rate is generally 1 to 2% above normal market rate.
• No asset verification loans - When a buyer is making his down payment the lender normally has to track the funds, verifying that they came from the buyer's own accounts. If the buyer is receiving the down payment from other sources that are not "lender approved" (trust funds, gift from someone other than a relative, etc) he may have to choose a no asset verification loan. This loan type usually carries a higher interest rate of 1 to 2% above market.
• 80/10/10 loans - When a buyer  has 10% of the purchase price as his down payment he has to pay the mortgage insurance premium as part of his monthly payment. The mortgage insurance premium portion of this payment is not tax deductible. Many times it makes more sense to take out a 10% second mortgage. Since the first mortgage is now only at 80% of the loan to value there is no mortgage insurance required. Even though the interest rate is higher, the payment is usually less than with the mortgage insurance and all of it is now tax deductible. Also if the buyer does pay off the second mortgage he does not even have to go through the process of petitioning to have the mortgage insurance taken off. Sometimes the seller can even be persuaded to carry this second mortgage. There are other variations on this loan including an 80/15/5 (buyer puts down only 5%) and even possibly an 80/20 (buyer puts down nothing).

• First time home buyer loans (state money) - Periodically during each year the State of Nevada will allocate funds to go towards mortgages for first time homebuyers. This is called a state money loan and typically will run 1/2 to 3/4% lower than the current market rate. This allows a first time buyer to qualify for a better house than he might otherwise be able to afford. There are certain restrictions which apply to this loan including maximum income a buyer may have and maximum sales price allowed. Once a property has been identified, the buyer must then wait for approval of his fund allocation. If the buyer ever moves out of the house it must either be sold or the loan may be assumed by another buyer who must also qualify under the state guidelines. (These properties may not be turned into rental units.) Depending on how long a buyer has occupied the home, upon sale he may be required to pay a percentage of the proceeds on the home to the state.

Applicant Speak: what they say and what they mean by it

I KNOW HOW TO DEAL WITH STRESSFUL SITUATIONS:
I'm usually on Prozac. When I'm not, I take lots of cigarette and coffee breaks.
I SEEK A JOB THAT WILL DRAW UPON MY STRONG COMMUNICATION & ORGANIZATIONAL SKILLS:
I talk too much and like to tell other people what to do.
I'M EXTREMELY ADEPT AT ALL MANNER OF OFFICE ORGANIZATION:
I've used Microsoft Office.
MY PERTINENT WORK EXPERIENCE INCLUDES:
I hope you don't ask me about all the McJobs I've had.
I TAKE PRIDE IN MY WORK:
I blame others for my mistakes.
I'M BALANCED AND CENTERED:
I'll keep crystals at my desk and do Tai Chi in the lunchroom.
I HAVE A SENSE OF HUMOR:
I know a lot of corny, old jokes and I tell them badly.
I'M WILLING TO RELOCATE:
As I leave San Quentin, anywhere's better.
I'M EXTREMELY PROFESSIONAL:
I carry a Day-Timer.
MY BACKGROUND AND SKILLS MATCH YOUR REQUIREMENTS:
You're probably looking for someone more experienced.
I AM ADAPTABLE:
I've changed jobs a lot.
I AM ON THE GO:
I'm never at my desk.
I'M HIGHLY MOTIVATED TO SUCCEED:
The minute I find a better job, I'm outta there.
I HAVE FORMAL TRAINING
I'm a college dropout.
I INTERACT WELL WITH CO-WORKERS:
I've been accused of sexual harassment.
THANK YOU FOR YOUR TIME AND CONSIDERATION:
Wait! Don't throw me away!

Employer Speak: what they say and what they mean by it

ENTRY LEVEL POSITION:
You'll be making minimum wage.
ENTRY LEVEL POSITION IN AN UP AND COMING COMPANY:
You'll be making minimum wage; we'll be bankrupt in a year.
PROFIT SHARING PLAN:
Once it's shared between the higher-ups, there won't be a profit.
COMPETITIVE SALARY:
We remain competitive by paying less than our competitors.
JOIN OUR FAST PACED COMPANY:
We have no time to train you; you'll have to introduce yourself to your coworkers.
NATIONALLY RECOGNIZED LEADER:
Inc. Magazine wrote us up a few years ago, but we haven't done anything innovative since.
IMMEDIATE OPENING:
The person who used to have this job gave notice a month ago. We're just now running the ad.
CASUAL WORK ATMOSPHERE:
We don't pay enough to expect that you'll dress up, although a couple of the real daring guys wear earrings.
COMPETITIVE ENVIRONMENT:
We have a lot of turnover.
MUST BE DEADLINE ORIENTED:
You'll be six months behind schedule on your first day.
SOME OVERTIME REQUIRED:
Some time each night and some time each weekend.
FLEXIBLE HOURS:
Work 40 hours; get paid for 25.
MUST HAVE AN EYE FOR DETAIL:
We have no quality control.
COLLEGE DEGREE PREFERRED:
Unless you wasted those four years studying something useless like Philosophy, English or Social Work.
CAREER MINDED:
Female Applicants must be childless (and remain that way).
APPLY IN PERSON:
If you're old, fat or ugly you'll be told the position has been filled.
NO PHONE CALLS PLEASE:
We've filled the job; our call for resumes is just a legal formality.
PROBLEM SOLVING SKILLS A MUST:
You're walking into a company in perpetual chaos.
REQUIRES TEAM LEADERSHIP SKILLS:
You'll have the responsibilities of a manager, without the pay or respect

Real Estate Ad Phrases

CHARMING - Tiny. Snow White might fit, but five of the dwarfs would have
to find their own place. See "Cute," "Enchanting," and "Good Starter Home."

MUCH POTENTIAL - Grim. Steer clear unless you have a lot of money and
believe your blind dates really did have nice personalities. See
"Ready to Rehab," and "Fixer Upper."

UNIQUE CITY HOME - Used to be a warehouse.

HI-TECH/CONTEMPORARY - Lots of steel shelving with little holes - the
kind your dad used to store tools on in the basement.

DARING DESIGN - Still a warehouse.

COMPLETELY UPDATED - Avocado dishwasher and harvest gold carpeting
or vice versa.

SOPHISTICATED - Black walls and no windows. See "Architect's Delight."

ONE-OF-A-KIND - Ugly as sin.

BRILLIANT CONCEPT - Do you really need a two-story live oak in your
30-foot sky dome? See "Makes Dramatic Statement."

UPPER BRACKET - If you have to ask . . .

YOU'LL LOVE IT - No, you won't.

MUST SEE TO BELIEVE - An absolutely accurate statement.

While we can't resist being a little snarky and asking why they so push the envelope of relevance by coming out with these figures a full six months after the survey period ended, there is some interesting information in the two surveys.

84 lenders participated in the Mortgage Originations Survey, including almost all of the top 30 mortgage originators. During the survey period these respondents originated $681 billion in first mortgages and $163 billion in second mortgages.

The survey found that fixed rate loans, including those with an interest only component, represented 46.2 percent of the dollar volume and 60.5 percent of the actual number of first mortgage loans during the second half of 2006 compared to 43.3 percent and 54 percent of loans originated during the first two quarters of the year.

First-time home buyers accounted for 26.9 percent of home purchases, identical to the figure for the first half of the year. As might be expected, first timers borrowed much less than repeat purchasers; the average first timer mortgage was $197,044 compared to an average of $228,547 for experienced borrowers.

By dollar volume, 19.9 percent of the mortgages were for single family attached homes, 75.1 percent were for single-family detached homes, 1 percent was used for manufactured or mobile homes and 4 percent financed 2-4 family homes.

Reverse mortgages increased 9.5 percent by dollar volume during the second half of the year while the actual number of reverse loans increased 19.1 percent. Loans originated under FHA's Home Equity Conversion Mortgages (HECMs) program represented 87.8 percent of reverse mortgages by dollar amount.

Second mortgages decreased by 5.8 percent from the first half of the year and borrowers were tending to move toward fixed rate, closed end second mortgages which increased by 6.3 percent while open-end second or home equity lines of credit decreased 11.6 percent.

The second study, the Subprime Mortgage Originations Survey, collected information from 13 subprime companies including many of the top 10. Respondents were companies where at least 50 percent of originations are subprime or ones that could break out subprime originations from their total product.

The percentage of subprime loans, by dollar volume, used by first-time home buyers increased from 12 percent to 15 percent in the second half of 2006. 32 percent of the total number of subprime purchase loans was made to a first time buyer as compared to 25 percent in the first half of the year.

The percentage of subprime loans used for repeat and first-time home purchase increased from 46 percent to 47 percent. (This is an exact quote from the report; we assume it means that subprime loans represented 47 percent of all loans used for home purchases).

According to survey results, during both halves of 2006 55 percent of subprime originations by dollar volume were for refinance purposes. 87 percent were cash out in the second half of the year compared with 75 percent in the first half of 2006. However, data for the first half classified 12 percent of refinances as "unknown" or "other purposes" so it is possible that first half cash-out refinances were much higher than presumed.

93 percent of subprime borrowers were owner-occupants, up 1 percent from the first half of the year.

The average dollar amount of a subprime loan in the second half of 2006 was $202,295 compared to $200,167 in the first half.

Borrowers used a mortgage broker for 72 percent of subprime originations in the second half of the year, an increase of 3 percent from the first half of 2006.

ARMs (including Interest Only ARM Loans) comprised 75 percent of subprime originations in the second half of 2006, versus 67 percent of subprime originations in the first half of 2006.

Second mortgages averaged $35,506 compared to $33,555 in the first half of 2006. The increase in the average loan amount along with the rise in the number of second mortgage originations was driven largely by a sharp increase in closed-end loans.