Auction Planned For Downtown Austin Condo – Sabine On 5th

A selection of the remaining units in downtown Austin’s troubled Sabine On 5th building will be auctioned on February 28th.  A lawsuit filed by residents against CWS, the developer of the Sabine On 5th, and the building’s condominium association (which was under CWS’s control) has been withdrawn as the parties have reached a settlement agreement.  The lawsuit was filed last year as residents grew tired of lack of action by CWS regarding “persistent and major problems” relating to elevator repairs, amongst other problems.

The HOA has been turned over to the owners, which is unusual in buildings where less than 50% of the units are sold.  The specific terms of the settlement agreement have not been released.  Scott Dixon Smith, president of the Sabine On 5th HOA, indicated that “there will be major renovations to the building to alleviate the concerns of the lawsuit.”

Greg Miller, vice president of investments at CWS, has confirmed that steps are being taken to prepare the Sabine for the auction.  27 of the remaining 44 units will be available for bidding.

During the litigation no units were available for sale, and CWS’s loan had twice been posted for foreclosure by Compass Bank.  The first time in September, when Compass Bank granted CWS an extension to remedy issues.  Then in December, it was reposted for January’s courthouse auction.  CWS was able to restructure the debt and is expected to offer most of the remaining inventory for sale via an auction this February.

There were several condo auctions in 2009, and when the Sabine goes to auction, it will be the second major development in downtown Austin to do so.  The first, Brazos Place, was auctioned last year by Kennedy Wilson.  Brazos Place is frequently compared to the Sabine on 5th since both structures are located east of Congress Avenue and are adaptive re-use condo conversions

Originally built as an office building in 1981, and converted into condos in 2007, the Sabine is located along the west bank of Waller Creek, on Sabine St between 5th and 6th Streets.  With the success of developer discounts at 360 Condos and the Shore Condos, the Sabine is the last “attainably” priced building with new inventory left.

FHA Home Loans: Kiddie Condo Program

Gina Pogol

FHA’s non-occupant co-borrow program is nicknamed the "Kiddie Condo" program. But it’s much more. Learn five facts about this loan that could help you with your next new home loan or mortgage refinance.

FHA’s "Kiddie Condo" Program: Five Things You Need to Know

There’s a new trend sweeping the nation. Parents are opting to buy their college students their own digs instead of paying rent for dorms or off-campus housing. Cheap real estate, low mortgage rates, and high room and board fees charged by schools make this a viable investment for many. Parents often choose FHA’s "kiddie condo" plan to make this investment dream happen. But it’s not only for college students and their folks–here are the facts on this program.

Fact #1: You Don’t Have to Buy a Condo

Yep, "kiddie condo" is just a nickname. You can finance a lot of different properties with this loan–a house, condo, even a manufactured home. However, it does have to be a single-unit property. This is to keep people from using the program to buy what is essentially investment property (you couldn’t live in all the units of a fourplex, could you?). FHA will let you buy a duplex, triplex, or fourplex, but then you can only finance up to 75% of the property’s value. However, college students (and regular humans, too) are free to have roommates and charge them rent.

Fact #2: The Co-borrower Doesn’t Have to Be Your "Kiddie"

FHA normally does not allow non-occupying co-borrowers on loans exceeding 75% of the property’s value. But blood is thicker than underwriting guidelines: you can get the maximum financing of up to 96.5% if your co-borrowers are related by blood, marriage, or law (spousal types, parent-types, kids, brothers and sisters, step-kids, aunts and uncles–even "weird" uncles–etc.). But wait, there’s more–even unrelated people who can prove they have a "family-type, longstanding, and substantial" relationship can get a "kiddie condo" new home loan or refinance mortgage together.

Fact #3: You Can Use it to Dump Your Ex

Say you’re going through a divorce. The judge orders you to refinance your mortgage and remove your ex’s name from the home loan. But refinance mortgage lenders won’t approve you because you don’t have enough verifiable income. You could call your parents–they always hated the him/her anyway, right?–who can put their names on the house and loan and help you get approved, make the judge happy, and get your home clear of your past.

Fact #4: All Borrowers Have to Qualify

All borrowers must sign the note and agree to the terms of the loan. And everyone–whether they will be making the payments or not–has to pass a credit check. For college kids with a limited credit history, you can add them to accounts as authorized users and let them "piggy-back" on your good credit rating. This is only allowable for relatives. Or, your kid can use non-traditional credit–cell phone bills, internet service bills, or auto insurance payments to create a credit report.

Fact #5: Whoever Makes the Payments Gets the Tax Deduction

This becomes a factor when one borrower, such as a parent, is in a higher tax bracket than the other, or one borrower itemizes deductions (and could therefore take advantage of the deduction) while the other doesn’t. The IRS is clear–whoever writes the checks takes the deduction. So work that out between yourselves before tax time.

In short, "kiddie condos" can help anyone with a special relationship give someone a hand–not just kiddies and the parents who want them out of the house.

Buying a home for your parents

Here are some factors to consider when deciding whether to establish the purchase as a rental property or second home.

By Steve McLinden of Bankrate.com

Q: Dear Steve,
I am looking at purchasing a home for my aging parents. Should I establish it as rental property or a second home?
— Harold

A: Dear Harold,
It is refreshing that you are returning the favor of providing shelter to the loved ones who once provided yours. Kudos!

The way you structure a home you’re buying for your parents will depend on several factors. To buy a house as a second home, most lenders will require that it be 50 miles or so from the borrower’s home and that the owner occupy the property for part of the year. However, those qualifications can vary from lender to lender and even be bent in certain circumstances, which you’ll see in a moment.

Under the second-home structure, you can deduct interest on a maximum of two residences, which in this case would be your current home and the home you are buying for your parents. Plus, you can deduct property taxes on both as well. Note that it may be a little harder to qualify for a mortgage on a second home because the bank considers the weight of two mortgage payments with no supporting rental-income stream to be an added risk.

What’s your home worth?

Some lenders may insist that your parents become co-borrowers so the house won’t be considered an investment home. However, don’t put your parents on the deed unless it’s absolutely necessary. That asset could count against them in Medicaid tabulations and create some additional red tape when it comes time to sell it down the road.

An investment, or rental home, structure may prove to be your path of least resistance. Before you proceed that way, you should first consider whether your parents can qualify for an option called the Family Opportunity Mortgage, a program at several banks that’s designed to allow family members to help elderly parents. The Family Opportunity Mortgage program allows you to structure the mortgage as a second home with no distance requirements whatsoever. There’s a big catch, though. The parents must have insufficient income to qualify for a mortgage themselves or otherwise be unable to work.

If that equation doesn’t work, and you do go the investment-house route, you would be able to deduct expenses on the place such as repairs, insurance, utilities, cleaning and other maintenance. You would also be taxed on any rent you receive, should you decide to charge your folks a small, nominal sum to cover some of the above-named occupancy expenses.

An experienced certified public accountant or real-estate lawyer could help you best explore all the tax implications of both strategies based on your family’s unique circumstances. There’s no sense in scrimping on a big investment like this one.

And again, way to go, Harold. It’s always nice to see "the good son" in action!

Texas Leads U.S. in High-Growth Cities

A new survey finds the Lone Star State is leading in terms of growth rate and household income. Atascocita, Tex., is No. 1 in the state

Tired of reading about how rotten the real estate market is? Here’s some good news that shows that even during the worst of the recession plenty of American cities, towns, and suburbs continue to grow.

One such place is Atascocita, Tex. A mostly residential community 20 miles from Houston, it gained more than 1,800 households in 2009, an 8% year-over-year increase, according to new data from Little Rock-based data firm Gadberry Group. Over the decade, amenities that have helped attract residents to this wooded locale include Lake Houston, just east of the city; the school district; and proximity to the city of Houston. With new roads in the area under construction, "we’re starting to see major industry start to take a look at the area," says Mike Byers, president of the Lake Houston Area Chamber of Commerce.

Migration levels nationwide stayed low last year as homeowners saddled with pricey mortgages stayed put–but there are some positive trends. Research by the Gadberry Group shows that some areas, resisting the effects of the recession, continue to attract both domestic and foreign migrants and, as an effect, bring in new businesses to provide services. While other cities across the U.S. have contracted, these have continued to grow.

Some states are better off than others, though. As thousands of people left places such as New Orleans and Flint, Mich. (the country’s two fastest-shrinking cities), in the last decade, communities with the best mix of economic activity, proximity to job centers, and a good environment for families continued to grow. While not entirely spared by the economic downturn (some homes in these areas are now in foreclosure), people continued to move in during 2009.

Texas Grew the Most

Texas came out on top of Gadberry’s survey, with four high-growth cities: Atascocita, Katy, Mansfield, and Wylie. The report only included areas larger than 10,000 occupied households that met requirements for growth rate, household income, length of residence, and other factors.

Larry Martin, principal of the Gadberry Group, says many of the places with the biggest housing growth at the beginning of the last decade, such as Nevada, Florida, and Arizona, also saw the biggest drop-off since the economy sank. Texas, however, enjoyed relatively strong housing and job markets over the last 10 years, thanks in large part to the presence of major employers in the robust energy business. As of December, the state unemployment rate was 8.3% (lower than the national rate of 10%), according to data from the Bureau of Labor Statistics. It also had the largest state population growth between July 2008 and July 2009, according to a December release by the Census Bureau. "New homes are still being built and people are still moving into these homes" in Texas, says Martin.

Part of the state’s strength, says Mark Mather, a demographer at the Population Reference Bureau in Washington, D.C., is its diversified economy. Main industries include petroleum refining, chemical production, aerospace, and information technology.

Meanwhile, areas that depended on the housing boom are now dealing with high foreclosure rates. Places such as Summerlin South, Nev., which appear in Bloomberg BusinessWeek’s slide show of fast-growing cities, gained population but, like the rest of the state, may be dealing with high mortgage default rates.

"If you live by migration, you also die by migration," says Kenneth Johnson, senior demographer at the University of New Hampshire’s Carsey Institute. "It doesn’t guarantee continued growth."

 

Venessa Wong, BusinessWeek  Jan 29th, 2010

10 savvy homebuying tips for 2010

 

Consider these pointers before buying a home this year.

By Holden Lewis of Bankrate.com

The housing market, and with it the mortgage landscape, have changed dramatically over the past two years.

Rules for scoring a low-interest mortgage have become stricter, and homebuyers must be savvy and well-prepared to land any home loan. Below are 10 tips to make your homebuying or refinancing odyssey more successful in 2010.

1. Consider an adjustable-rate mortgage.
In late 2009, one in 20 borrowers was obtaining an adjustable-rate mortgage. As mortgage rates rise in 2010, the proportion of ARM borrowers is expected to grow.

The most popular adjustable is the 5/1 ARM, which carries an introductory rate that lasts five years, and then can change annually thereafter. Typically, the introductory rate on 5/1 ARM is lower than the rate on a 30-year fixed. That makes the 5/1 ARM a viable option for borrowers who are sure they will sell their homes within five or six years, before the monthly payments have a chance to skyrocket.

A fixed-rate mortgage is probably the safest option for homebuying. But for people who plan to sell their homes within a few years, a hybrid ARM is worth considering.

What’s your home worth?

2. Get your loan early in the year.
The Federal Reserve plans to stop buying mortgage-backed securities by the end of March. Most mortgage experts believe that rates will rise when mortgages go off Fed support, as private investors require higher rates to compensate for the risk.

3. Know your credit.
As the mortgage world goes back to basics, good deals require high credit scores. Until recently, it took a credit score of 720 or higher to get the best combination of fees and points. Now the best homebuying deals go to borrowers with credit scores of 740 or higher. (Read "Raise your credit score to 740" on MSN Money.)

4. Ask for three or four loan scenarios.
Instead of focusing only on the interest rate, consider more than two combinations of discount points and loan type.

Let’s say your best guess is that you’ll live in the house for eight years. Compare the total fees and monthly payments that you would make under three or four different loan deals. Ask yourself how much it would cost to pay zero discount points and get a higher rate compared with paying discount points in exchange for lower rates. What about a 5/1 or 7/1 ARM?

5. Refinance for the remaining term.
When refinancing a 30-year mortgage, too many people start from the beginning again. When you refinance a 30-year loan that you’ve had for five years, pay off the new loan in 25 years. Just ask the lender to amortize the loan for the remaining period of the old loan.

6. Know your numbers.

Austin Energy Audit (ECAD) What you need to know (FAQ)

Single-Family Homes

1. What is a single-family home?
   The Energy Conservation Audit and Disclosure (ECAD) ordinance defines a single-family home as having fewer than five dwelling units.
2. If I get my electricity from Austin Energy but live outside the city limits, do I need an ECAD audit?
   No. The ordinance applies only to properties both in Austin and that receive electricity from Austin Energy.
3. Is my condominium affected by the ordinance?
   No. Condominiums are not affected by the ECAD ordinance.
4. How old must my home be to require an ECAD audit if I sell it?
   Single-family homes 10 years or older may require an ECAD audit before being sold.
5. What does the ECAD audit report include?
   The ECAD audit report includes the condition and estimated R-value of the attic insulation, the percentage of air leakage through the duct system, the number of windows with direct sunlight for at least an hour a day, and the energy-efficiency rating of the air-conditioning equipment. It also includes suggestions for improving the home’s energy efficiency.
6. What must I provide to a potential home buyer to show that I had an ECAD audit?

VA Loans for Custom Homes 101

If you want to take out a VA home loan, there are a variety of options available to you. You can purchase an existing home, a brand new home, or you can choose to apply for a VA mortgage on a home that is yet to be built. VA loans for custom home construction are definitely available to qualified borrowers, but as with any first-time home purchase there are plenty of frequently asked questions.

• When is the VA loan approved?
• When do I start paying on my VA mortgage?
• Who is responsible for the loan and interest payments while the home is under construction?
• Who pays the builder’s fees?

When the VA mortgage is approved for a custom home project, the loan is closed before construction begins. The portion of the VA loan required to cover the cost of construction are paid out (with written permission from the borrower) and the rest is put into an escrow account for use during the project as needed.

The good news about a VA home loan for a custom home is that the borrower doesn’t make a single mortgage payment until the project is complete. According to the VA, initial payment can be delayed up to a full year. That may sound like a bargain to some, but it’s important to know the term of your loan does not change. If you took a 30 year VA home loan, and construction of your house takes a full year, you’ll be responsible for paying off the loan in 29 years from the date of the closing of the loan–not 30 years from the time you began making payments.

Some investment-savvy borrowers will take the amount of the payments they would be making during the construction period and invest the equivalent in an interest-bearing account, giving a bit extra to use when it comes time to start making those VA loan payments.

During the construction, the builder is responsible for any interest payments required on the VA mortgage during the construction project. VA regulations also forbid the buyer from paying any builder fees that would normally be paid by the construction company (when taking out an interim construction loan, according to VA regulations). You cannot be held responsible for the builder’s hazard insurance, for example, or for title update fees.

It’s important to budget for the VA loan funding fee, which is due no later than 15 days after the loan is closed. Unlike your first VA mortgage payment, the funding fee is not connected to the construction project. Ask your lender about the amount you should set aside for the funding fee.

Extra Mortgage Payments Can Pay Off

 

How much will I save if I make one extra mortgage payment a year?

By Kimberly Lankford, Contributing Editor, Kiplinger’s Personal Finance

I am refinancing to a 15-year mortgage from a 20-year. If I pay one extra monthly mortgage payment per year, how many years will this knock off the mortgage?

Making extra payments will cut down on the length of your mortgage and the amount of interest you pay over the life of the loan. The specifics depend on the size of your loan and your interest rate. To figure out your savings, plug your numbers into our How Advantageous are Extra Payments calculator.

For example, making one extra payment on a 15-year, $300,000 mortgage with a 5% interest rate breaks down to about $200 extra per month. If you pay $2,572 each month instead of the required $2,372, for example, you can cut the number of payments down from 180 to 161 (from 15 years to 13.4) and the total interest paid from $127,029 to $111,653. The higher the interest rate, the more you’ll save by making extra payments.

But before you rush to make the extra payments, think about how else you could use the money. Interest rates are so low now — especially since you’ve just refinanced to a 15-year mortgage — that there may be better places to put the cash.

Paying down high-interest credit-card debt, for example, should be one of your first priorities — the interest rate is probably a lot higher than what you’re paying on your mortgage. Also make sure you have enough money in an emergency fund so you can avoid getting into debt if you have unexpected expenses. And be sure to contribute at least enough money to your 401(k) to receive your employer’s match because that’s a 100% return that you won’t beat anywhere else.

VA Loan Frequently Asked Questions (FAQ) Texas

What is a COE? Where can I get it?

COE stands for Certificate of Eligibility. If you are buying a house you will need to have this available to show you are eligible for the VA loan.  If you need help getting a copy of your COE, mention that when you ask for a no obligation quote.

Why should I get a VA loan versus a conventional loan?

The VA loan is a program set up to help active duty and retired military personnel into homes. They will give you 100% financing on a home at a very competitive rate without having to pay mortgage insurance. With the current “mortgage meltdown” you may have heard about in the news, there really isn’t any other great options for 100% financing.   It’s truly the best way to obtain 100% financing in these volatile days.

What is the difference between a VA loan and a conventional loan?

In today’s changing mortgage market the VA loan is the only legitimate option for 100% financing with a good fixed interest rate.  Conventional loans will cap you at 97%* financing, and will most likely include mortgage insurance.

I am a disabled veteran.  Do I need to pay the VA funding fee?

If you are rated 10% disabled or higher you will be exempt from paying the VA funding fee.  If this is the case, be sure to inform your lender so you won’t be charged at closing

Do VA loans have closing costs?

Yes, all VA loans have closing costs of some sort. You may be able to find a loan with no lender fees, but you will still have to pay for title work and other 3rd party costs involved with buying a house.

What are the benefits of a VA loan?

The VA loan offers 100% financing with no PMI (mortgage insurance). You are eligible for a streamline refinance if rates go down.  Be sure to request a quote for a streamline refinance if you want more information about this.

What is the difference between closing costs and pre-paid items?

Closing costs are costs associated with setting up of the loan, such as underwriting fees, attorney fees, title insurance etc. Pre-paid items are costs associated with the maintenence of your loan such as setting up escrow for taxes and insurance. Pre-paid items also cover any interest your loan will accrue from closing time up until the first day of the following month.

How soon should I apply for a VA loan if I do not have a house in mind yet?

You can get pre-qualified at any time for your VA mortgage, even without a property or house in mind. Many times this is the best way to go so you can predict any problems before you have a sales contract. This will make the process easier for all parties involved.

How much can I borrow with my VA Home Loan?

You can borrow 100% up to $417,000 if you are qualified. On a streamline refinance you can borrow the same amount that you currently owe without needing to go through vigorous underwriting analysis. If you are planning on buying in Alaska or Hawaii then you can go above $417,000.

V.A. Loans vs. Texas Vet Loans

The Texas Veterans Housing Assistance program is sponsored and administered by the Texas Veterans Land Board. It provides Texas Veteran’s home loans at special interest rates.

• Purchase loans only… Not allowed for refinance loans…
• Available for veterans and active military personnel who meet certain Texas residence requirements.
• Texas Vet loans are underwritten as either a VA loan or as a conventional loan.
•  Approval from TVLB is required in addition to the lenders normal approval.
• The standard VA Funding Fee applies to loans using VA guidelines (loans with less than 5% down must go VA).

  The chart below compares the differences between a VA and Texas Vet loan.

VA vs. Texas Vet Loan Comparison Chart
Descriptions	VA Loans	Texas Vet Loans
Eligibility	Veterans in good standing with sufficient VA entitlement to insure loan	Same as VA, plus, must be resident of Texas at time of application & meet Texas Vet residence requirements
Closing Costs	Lower closing costs. Rates with lender paid rebates for lower closing costs to you	Usually higher closing costs. No lender rebates
Maximum Loan Amount	$1,500,000, including financed VA Funding Fee	$325,000, including financed VA Funding Fee
New Construction	No additional requirements	Must be Energy Star labeled & certified
Rates	Many different rates with different amounts of lender rebate for reduced closing costs Rates change daily	Base rate = 5.21% Not as good as VA… Disability Rate = 4.71% Better than VA Rates change Friday at 5:30pm
VA Funding Fee	Required	Required for VA underwritten loans.