Home prices are at their lowest level since 2004 and continuing to fall, despite a record number of homes on the market. Thirty-year, fixed-rate loans are now available at rates as low as they have ever been, including programs offering 100 percent financing to qualified buyers. Multifamily homes in particular are available at bargain basement prices as lenders seek to shed a growing inventory of foreclosed properties or homes facing foreclosure. For anyone in the market for a primary residence or investment property, this is an excellent time to buy.
Homebuyers
There are numerous federal loan programs – including FHA, USDA, VA and Rhode Island Housing – that are offering up to 100 percent financing to qualified homebuyers. All you need is the ability to pay and good credit – but it doesn’t have to be perfect.
• FHA – With the demise of the subprime market and tightening of Fannie Mae and Freddie Mac guidelines, Federal Housing Administration-insured loans offer competitive interest rates to buyers who lack a large down payment. FHA allows up to 97 percent financing, has lenient credit guidelines, requires no reserves in some cases, permits seller contributions and allows gifts as the source of the down payment. An FHA-insured mortgage may be used to purchase or refinance a new or existing one- to four-family home, a condominium unit or a mobile home on a permanent foundation.
• USDA Rural Dervelopment – The Guaranteed Rural Housing Loan Program is a federally insured mortgage program that permits loans of up to 102 percent of fair market value and allows buyers to finance closing costs. Not only is no down payment required, but there is no limit on seller contributions. Although an up-front 2 percent guarantee fee is required, there are no monthly mortgage-insurance premiums (commonly referred to as PMI), which helps keep monthly mortgage payments down. Eligible buyers cannot have family income in excess of 115 percent of the HUD median income level and the home being purchased must be located in an area designated as “rural.” Surprisingly, most of Rhode Island outside of the East Bay, Woonsocket, Warwick and the Providence Metropolitan area is considered “rural” for purposes of this program. Refinanced loans are also allowed under certain conditions.
Seifert Systems Invests in Energy Efficiency to Strengthen Operations
For manufacturers, energy is more than just another operating expense. It plays a critical role…
Learn More
• VA – The United States Veterans Administration has provided a mortgage-guarantee program that permits 100 percent financing for homes purchased by eligible veterans since 1944. Eligible veterans include those who served during or within certain periods following WWII, the Korean, Vietnam and Gulf Wars, as well as Operation Iraqi Freedom. Also, spouses of deceased veterans and individuals who served in the Selected Reserves or National Guard and meet certain guidelines are also eligible. VA guarantee programs also limit the yearly and overall increase on insured adjustable-rate mortgages. Recently, the limit on refinanced loans has been raised from 90 percent to 100 percent and the maximum loan amount has been increased from $144,000 to $729,750 (depending on where the property is located). This increase in the loan-to-value ratio and maximum loan amount will permit qualified veterans to refinance through the VA, and thereby reduce their mortgage payments and potentially avoid foreclosure.
• Rhode Island Housing – Rhode Island Housing has a federally funded, state-administered loan program which provides for up to 100 percent financing for eligible first-time homebuyers and even certain buyers who currently own a home or have in the past. Because of low maximum income and home purchase-price levels, this program was rendered nearly irrelevant for a time during the recent real estate boom. However, the maximum income level for a family of three or more has been increased to $102,400 and the maximum purchase price increased to $417,000. For homes located in certain areas of Central Falls, Pawtucket, Providence, Newport or Woonsocket, the maximum purchase price for a single- family home or condominium, or existing two- to four-family home, or newly built two-family home is $450,000. In addition, eligible buyers may qualify for down payment or closing-cost grants or to have money for repairs or renovations included in the mortgage loan.
Investors
The amount of bank-owned properties on the market in this state is extremely high at this time – particularly in Providence. Low-income areas of that city were particularly hard hit by foreclosures caused by failed subprime loans. Because of the substantial decline in home prices, these bank-owned properties, as well as homes facing foreclosure (short sales) are available on the market at a substantial bargain. Since many of these homes have been abandoned or vacant for a period of time, they often need repairs which make them ineligible for financing by institutional lenders. Accordingly, investors with cash or access to private loan sources are presented with an excellent opportunity to purchase distressed properties at rock-bottom prices and, often with minimal additional investment in repairs, either rent them out or re-sell them for a profit. Finding multifamily homes in Providence selling for less than $100,000 is not unheard of.
Whether you are a first-time homebuyer or an investor, it is a buyer’s market, and the time to buy is now. •
Richard A Sinapi is president of One Stop Advantage Inc., and principal attorney with Sinapi, Formisano & Company Ltd., both in Cranston.
