The bank was saying said they no longer had the proper debt ratios.  They had too much debt when they included the house payment, insurance, and taxes. (as compared to their income)  My clients income had been decreasing over the last two years because of Detroit's poor economy.  We only could use her income because her husband had bad credit, so we could not use his income.

The two issues we had were the insurance was too high, and the house payment was now too high.  So here were my suggestions.

1.)  Originally the client had gotten a quote of $1500 for insurance because the house was so far out into the country.  So I coached my client to start shopping hard for an insurance policy.  Some of the tricks to get a home insurance down is to get a high deductible.  A higher deductible will have a lower insurance premium.  In their case they could switch back to a lower deductible after the loan closed.  I also said to check what would happen if they would switch their cars over to the same policy.  Neither the husband or wife smoked.  The house has updated electric and plumbing.  The house had smoke alarms hard wired in.  We were able to get the home insurance down to $550.  A savings of almost a $1000.

2.) In order to get the house payment down the buyers borrowed money to buy down their interest rate.  Lower interest rate meant lower payment.

3.) Last trick we had to do was to pay off their higher credit cards (the ones with the high monthly payments).  My clients really wanted the home so they liquidated some of their retirement accounts, (some people get a gift to pay off the credit cards)

My clients closed on the house last week.  Sure we had a lot of issues that we had to find solutions for.  But in the end we closed because the clients worked hard to overcome them.

    They got their house!

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"A champion is someone who gets up, even when he can't."~ Jack Dempsey

WHAT SHOULD THEY DO NOW?

How do they buy a new home if they received no money from the sale of their old West Bloomfield home.  My suggestion is to go back to the basics.  Get an least expensive apartment and LIVE BELOW your means.  Yes you have to go back to saving.  For many people that is a foreign concept.  Whether you have lost your home in foreclosure or sold your home and got little or no money that is what you have to do.  100% loans have gone away.  There is only one 100% loan and it is a very specific loan for rural areas.  So basically you have no choice but to save.

You have to have a down payment now!  The only way you are going to get that money is to save it or have somebody give it to you.  So how bad do you want a home?

• Do you want to build equity in a home?
• Do you want a place to call your own?
• Do you want to live in a rental home forever?
• Do you want to hear your neighbors next door all the time?
• Do you want your landlord to tell you what you can and cannot do in your home?

If you want your own home again start saving.  Find a nice safe, convenient rental home or apartment that is close to your work and good schools.  Don't get the most expensive one.  I see this mistake happening all the time. 

People lose their home that their were paying $2500 a month on.  So they go out and rent a home for $2100.  They are crazy.  They need to re-think what they are doing.  Get the $1500-$1700.  Forget about appearances.  LIVE BELOW YOUR MEANS!  So you can save for a down payment for your next home.  It will be good practice for your financial future.

Whether you are planning to buy West Bloomfield real estate, Livonia real estate, or any Metro Detroit real estate live below your means for a while and save some money.  You will be glad you did.  

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So what are we do?  Here is my plan.  There are many great homes in the metro Detroit area that are selling for under $35,000.  If you shop right you can pick up some very nice homes for under $35,000.  Michigan foreclosures that have newer windows, decent roofs, decent kitchens.  Homes that have the basics in good shape.

Many people have IRA's that can be converted into self directed IRA's.  Or some people have home equity loans not run up to the max.  Some people even have cash. 

So here are my thought is buy a decent $35,000 Michigan foreclosure. Let's take this example taxes are going to be $282 and homeowners insurance is $60 a month.  For a total outlay of $342 a month.  Let's say you get $800 a month.  That is $458 cash flow if you bought it cash.  Let's say you took it out of your home equity loan.  You could pay off the house in about 8 years (if you could keep it rented). 

Think about this in numbers.  If you bought 4 of them that would be $1832 a month in income.  Or you would have 4 Metro Detroit homes that would be paid for.  Even if they did not go up in value in 8 years.  They would have paid for themselves.  Plus you have tax deductions too.

Just my thoughts on Buying Michigan foreclosures to build your retirement portfolio.

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But mold in the basement is one area, I think most cash Michigan home buyers should think about the home more.  If you and your family member don't have allergies or asthma this might be a problem that can be corrected.   If you have allergies or asthma you should stay away from Michigan homes with mold.

I think there is opportunity to buy a home at a great price is when the sump pump backs up and floods the basement.  When Michigan home owners walk away from their foreclosed house they shut off the electricity.  Sometimes the bank doesn't even know the homeowners have left.  So when it rains the sump fills up, the basement floods, then the mold starts to grow.  This is what you seeing in these pictures. 

A basement flooding happens quite often in Michigan foreclosed homes because of the electricity being off.  The flooding stops as soon as the electricity is on and sump pump starts working. But by then it is too late.  The drywall is wet and the conditions for mold grow are there.  So the mold grows on the drywall.

 This foreclosed home was in Southfield Michigan.

But when the basement floods the drywall will draw up the water like a sponge.  Then the mold will grow as high up the drywall as the water got absorbed.  The water could have been one or two inches deep and cause all this mold.

What is great is that the mold can be cleaned up.  Of course whoever does the work should be qualified to do the clean up.  Masks and protective clothing should be worn.  But basically gutting the basement down to the cement walls most likely can be the solution.  Then cleaning up the cement walls and repainting can get the home back in livable shape. 

On the other hand when a Michigan home floods because of broken pipes and there is on mold on the ceiling, walls, floor trusses in the basement and on the walls of the main floor.  Then I would run the other way.  That home is a major project.  You may not be able to get all the mold out in a home like that.

So don't cross off the house with the moldy basement if you are a cash buyer.  But if you are a buyer that needs a mortgage then forget about the home and move on.  The only time I ever saw a home get bought with mold was a USDA rural housing loan.  I don't know how it slipped through.    

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 My single woman home buyer was being victimized by a local loan officer.  She was buying a Oakland County MI Lakefront home.  When I first met my lakefront home buyer I called the loan officer to go over what my buyer needed in sellers concessions.  He told me she would need about 3.5% sellers concessions.  I point blank asked him what the closing costs would be in the beginning so I could figure out what was needed.  He had told me there were no points for the loan as my client had great credit.

Well tonight the night before closing my buyer got a big surprise.  Her closing costs were much higher.  Some of the things she was telling me made me nervous.  These were some tell tale signs that you should be nervous about a loan officer.

1. You ask for a good faith and you don't get one
2. You ask for a good faith again and you still don't get a copy
3. Your loan officer says not to worry about how much you have to bring to the closing
4. Your loan officer says you have a lot of money your account and doesn't understand that you need some of that money for car payments, your living expenses, and moving expenses

It's not all his money to spend on loan closing costs.  I didn't get the seller's concessions for him to up his origination fee.  This is what the new HUD form was supposed to stop, but it didn't in this case.  So I had to go to bat for my client.

I called the loan officer and asked what was up.  I reminded him that we had talked and he told me in the beginning what was needed.  So why did my buyer need more now?

He told me his $2600 origination fee covered the $800 underwriting fee and his $700 processing fee.  But what about the other $1100.  Well he went on to tell me he has to charge more for "harder" loans.  I asked him what about what he told me in the beginning.  No real good answer from him.  I said fine, that the buyer and I would call the home office in the morning and get a manager.  I left it at that when we hung up.  Well about 15 minutes later the loan officer called back and said he would give the buyer a $762 credit to reduce the closing costs.

My buyer agreed to take it and move on.  I am glad it wasn't one of my referred loan officers that did that.  My buyer had found this loan officer.  He worked for a good company, but....  I myself don't ever try to change a loan officer that a buyer has.  Unless the company is really bad, or the loan officer is attrocious I don't go there.  I haven't had that problem yet.  I feel the buyer knows what they are doing.

But this loan officer is going on my "DO NOT CALL LIST"

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