Elizabeth Newlin - Arizona Real Estate Agent

Real Estate on TV is all the rage right now. The DIY shows seem to have given way to shows about ‘fixing and flipping’ or remodeling to sell for the most possible money. I am, of course, obsessed. It’s my two passions coming together (have I mentioned that I LOVE TV? I do. Feel free to sneer, I’m used to it. I still love it).

Unfortunately, for the most part I have to enjoy my real estate TV for its drama and the ridiculousness of it all rather than any resemblance to real life. In fact, I watch that show, “Million Dollar Listing” on Bravo primarily so that I can scream at the TV about how stupid, egotistical and cartoonish the agents on it are portrayed. And don’t let me forget to mention my very favorite pseudo-real estate show, “Flipping Out”. How can you not love a gay obsessive-compulsive narcissist with a fixing and flipping business whose primary hobby is driving his friends and employees sometimes literally insane? You can’t. He’s just so lovable.

However, I watched a new real estate-centric show on TLC today that I actually think has a lot of basis in what’s going on in the industry right now. It’s called “Hope for Your Home”. I’m not sure exactly how each episode is different, but this particular episode was about a family who had purchased a home with an adjustable rate mortgage that was just about to adjust. Their payment was going to go from $2000/month to $3000/month and they couldn’t afford the new payment. They needed to refinance their house to get a loan that would have a lower payment, but couldn’t without increasing the value of the house. A real estate professional came into the house and told them what renovations they should do to increase the value of their house and then brought in a team to help them.

I’m not sure how realistic the details of this process with the family were, but the general idea of a home owner in a mortgage with a payment that’s about to increase is a problem affecting way too many people right now. Addressing this problem with a solution other than: A) Suck it up and pay it, or B) Walk away from the house and let the bank foreclose, is inspiration I think this country can use.

Many, if not MOST of the people who purchased houses in 2005 and 2006 in Metro-Phoenix are underneath their loans. Of those people, the ones who got a loan with a fixed rate and who are staying in the house they bought for the next 5 to 10 years are fine and dandy. All of the rest are likely in trouble. That’s a lot of people who can use some solutions right now.

The family on the show turned a half-bath into a full, made the master closet a walk-in, repainted the exterior and generally uncluttered the house. It cost them $10K and according to a mortgage broker, upped the value of the house from $350K to $400K, allowing them to refi for a payment of $2300/month. The numbers were a little neat and tidy to be true, but the work they put into the house and the concepts behind the actions seemed extensive and noteworthy.

It’s a show I’m going to be keeping my eye on.

Have we ever discussed down payment assistance? I’ve explained the program so many times in person that I can’t recall if I’ve ever set the metaphorical pen to paper about the subject. Well let’s just assume for the sake of this post that I haven’t; here’s a quick run-down.

When the market (and the economy) was hot a few years back and the mortgage industry was a thriving, risk-taking, happy-go-lucky thing, there were loan programs that provided 100% financing. A buyer could purchase a property with no money down and wouldn’t even be on the hook for closing costs if he or she could get the seller to agree to pay them. 100% programs were among the first to be cut when things started to sour and mortgage companies began to go belly-up.

The government sponsors what’s called an FHA loan, that allows buyers to purchase a house with only 3% of purchase price down, and this 3% can be gifted to the buyer. This is not a new program at all, but during the boom, there was little reason to use FHA loans and they kind of went out of fashion for a few years. Now that 100% is gone, the FHA loan is the new black, if you know what I mean.

Down payment assistance programs like Ameridream (which is the most well known of the programs, but Nehemiah is another) are a kind of work-around that turns FHA into a 100% loan. FHA stipulates that although 3% down can be gifted to the buyer, it cannot be gifted by the seller (too close to home). So a non-profit organization called Ameridream was created that allows people to donate money to them and they, in turn, gift that money to buyers for their down payments. It allows a seller, if they agree to it, to donate the 3% down payment to Ameridream (plus a $500 service fee) in the name of the buyer of their house and then Ameridream will gift that money back to the buyer, who can then buy the house. I know, it sounds shady, but it’s been taken to court lots of times, and had so far stood up to the scrutiny.

Unfortunately, that has come to an end, at least for the time being. The housing bill that The President recently signed made these down payment assistance programs illegal as of October 1, 2008. The idea is that these loans where people don’t have any money to put down, are much more likely to be defaulted on, thus costing the government more money to pay back the mortgage companies (FHA loans are loans that are made by banks, but insured by the government).

So here’s what it comes down to: if you want to buy a house with no money down, you better do it soon. And by soon I mean like next week. Until this ruling is overturned or appealed, you’re going to need at least 3% of the purchase price of the house you want to buy saved up, or you’re going to be out of luck.