Homebuyers get creative to close the deal

MIAMI — — When Efrain Hernandez couldn't seal a deal before the first-time home buyer tax credit expired this year, he lost faith that he would ever own a house in this real estate climate.

But the enforced wait got him more than the $8,000 federal tax credit.

Hernandez negotiated a contract on a five-bedroom, three-bath home in a development near Homestead, Fla., talking homebuilder Lennar into $40,000 off the list price, getting it to pay $18,000 in closing costs and scoring a $7,500 no-interest loan from Miami-Dade County to lighten his down payment.

"I was finally able to buy the house of my dreams," Hernandez said.

Though cash is now king, new homeowners such as Hernandez are finding ways to buy homes — well-kept ones with current mortgages.
After a long drought, money is becoming available to buy homes. Take Wells Fargo Home Mortgage. Andre Brooks, vice president and regional sales manager for the bank's Florida operation, said his company has made more than $3 billion in mortgages this year in Florida, nearly 20 percent more than last year.

But lending guidelines remain restrictive, said Terry H. Francisco, spokesman with Bank of America, so making purchases often requires creativity and calculation.

Among the options:

FHA

Loans backed by the Federal Housing Administration can require a down payment of just 3.5 percent compared with 20 percent many banks typically require.

But there are limits. For one, like other loans with a down payment less than 20 percent, the buyer must get mortgage insurance.

FHA loans also have a maximum and are available only to people who don't have an FHA loan and plan to make the property their primary residence.

Private loan

Made by a noninstitutional investor who does not advertise as a mortgage lender, this requires networking and personal relationships.

Grant S. Stern, president of Morningside Mortgage Corp., brokered a loan this summer for a condo buyer.

The borrower had made a preconstruction down payment of $90,000 on a two-bedroom, two-bath $300,000 condo. He had another $65,000 cash to close, but Fannie Mae's approval for the project expired with the the developer on the verge of default. With no time to get a conventional bank loan, so Stern arranged for a real estate investor to fund a five-year, fixed-rate loan.

"They said, 'Close in one week.' We closed in one week," he said.

Non Distressed Properties

Part of real estate agent Gene Mastro's strategy for buyers is avoiding foreclosures and short sales — especially by buyers who intend to live in the home they buy.

Owners of nondistressed properties are "more ready to correct problems, any minor deficiencies," said Mastro, who works for Coldwell Banker.

And they may be willing to pay all or part of closing costs, which can range from 2 to 7 percent of the purchase price.

Short-term loan

Another way to cover closing costs is a fast, short-term loan that doesn't show up on credit reports.

Todd Hills noticed that some users of his company, Boomerang Lending, wanted fast cash to pay closing costs. His Colorado-based business works like a pawn shop for those with pricier assets, including paintings and fine jewelry. A recent borrower offered a 1955 Picasso sketch.

"It's not something we've experienced before the last six months," said Hills, company CEO, but "it makes absolutely perfect sense. This is a way this consumer can get the cash that they need."

Lease to own

"It's a purchase agreement with a very delayed closing — three months or three years," Manausa said.

Tom Nisbet and fiancee, Greta Leber, have just such a contract on their condo. They are living in the 1,600-square-foot unit they hope to buy. It comes with two parking spaces, a pool and a gym, and it's close to the University of Miami, where Leber is working on her Ph.D.

After watching others' experiences with short sales and foreclosures, they steered clear. "This is by far the best place we saw on the market," Nisbet said.

State and local aid

While the federal first-time home buyer's tax credit ended months ago, it's not too late for house hunters to get government home-buying help.

Many city or county governments offer their own home buyer subsidies.

Government agencies with home-buying assistance programs say they are fielding lots of calls.

Source: http://articles.chicagotribune.com/2010-11-23/classified/sc-bizspecial-1123-credative-homebuyi20101123_1_home-buyer-tax-credit-mortgages-condo-buyer