A dramatic rise in mortgage closing costs is creating more interest in buying notes from banks – are you in?
A new report from Bankrate.com and CNN Money shows a significant increase in borrowing costs for those purchasing homes in the last year. Year over year combined closing costs were up 6% for good credit borrowers putting down 20% on their new homes. Underwriting fees rose a whopping 8% to an almost outrageous average of $1,730.
This tighter lending market with fewer players has meant that banks, as well as those with capital to lend, can pretty well charge as much as they like if they say yes to loan applications. What many don’t realize is that this actually seriously increases the true APR on home loans, giving many a far worse deal than they thought they were getting. A 3.9% rate, with a 6% APR isn’t anything to brag about.
This also doesn’t take into account the rising costs of other associated borrowing and closing costs, such as taxes, insurance, credit checks, and appraisals. Or the lower net ROI due to tougher terms and lower LTVs.
According to the report, the 5 most expensive markets are:
Those flipping brick-and-mortar houses also take a hit due to higher costs for the end buyer, which can affect sales price potential and net proceeds.
Buying notes from banks eliminates a lot of this – on both ends – and can effectively create even larger net returns for those flipping non-performing notes, while helping those holding them to see their investments retain more value (and actually become more valuable over time as mortgage costs keep increasing).
Not to mention being able to avoid the hassles of day-to-day property management.
Of course, you can always negotiate many mortgage borrowing costs, and those dead set on brick and mortar can find some of the lowest closing costs on distressed REOs in Wisconsin, Missouri, and Kansas.