Down Payment Options for the First Time Home Buyer, Grants, New Cap, Neighborworks.

Down Payment Options for First Time Home buyers.

 

The majority of first time buyers I encounter have very similar hesitations, and that is coming up with enough money to purchase their first home.

With the student loan crisis bearing down and burdening millions of millennials with extraordinary debt, qualifying for a home seems like a far fetched idea, much less accumulating the down payment to buy one.

With Fannie Mae’s newest development; increasing debt to income ratios and student loan acceptance, that eliminates two of the major obstacles that Millennials are facing.  Now we have to figure out the down payment problem.

But we have already!

There are several loans out there that are perfect for the first time buyer, that either eliminate the down payment completely, subsidize it with grants, or allow you to finance it in a 2nd mortgage to alleviate the burden of spending money you just don’t have.

This comes as a relief for many, because interest rates are still incredibly low and there are incentives for buying right now.  No one can predict how long this market will continue, but we are seeing a shift.  Because of this shift I believe we are seeing regulatory factors lighten in an effort to maintain a consistent increase in the economic burst.

The down payment assistance / subsidize I mentioned earlier are becoming increasingly popular.  There are local, government funded programs like Newcap and Neighborworks; these providers are able to issue grants.  Some of these grants are forgivable, and some are not.   Make sure you read the fine print, and I’m sure whoever assists you will be more than happy to explain.

Ask your lender if they work with these programs, and if you are eligible.  They are sensitive to income limits and household size.  This information is just another reason to work with a qualified loan officer who can explain the utilization of these grants to you.

 

Want to see if you are eligible for grants or down payment assistance?

http://executivemortgagellck.clixonit.com/

Click the link above!

Are you Interested in Buying Investment Properties?

Buying Investment Properties:  The basics

 

With the advent of real estate investing shows like “House Flippers” and “Design on a Dime”, we have seen more interest in the purchase of investment properties than ever before.  This increased demand is a good thing because investment properties are typically a sluggish market compared to that of occupied residencies.

But the question persists, what does it take to actually buy an investment?

First you have to ask yourself what type of investment property are you looking for?  A single family?  A duplex?  A Tri-Plex or a complex?  Once you’ve decided this, you have to know if you will be occupying part of the building or totally renting it out.  Residential mortgages will only extend financing fro 1-4 unit buildings, anything above that will be out of the realm of wholesale residential lending.

These are key factors because they affect the down payment, loan type, interest rate and reserve requirements needed to buy.

Let’s start with the basics:

Owner Occupied Duplex:

If you intend on buying a duplex, living on one side and renting the other to subsidize your mortgage, than this is typically the cheapest and easiest way.  You can do it either FHA or conventionally, depending on your down payment.

FHA owner occupied Duplex will require 3.5% down payment, the same as buying a single family home.   But you HAVE to occupy the property and some lenders will require 3-6 months reserves.  There really is no difference in the interest rate because it’s considered an owner occupied residence.

Conventionally you can buy the same property, but it will require a 15% down payment and you will incur a higher rate.  Investment properties usually carry a higher rate because they are a higher risk to the lender.  If the worst case scenario happened, people are more likely to walk away from their investment properties before their primary residencies.

Non-Owner Occupied Single Family

Purchasing a non-owner occupied single family home will run you a 20% down payment and between 3-6 months reserves for all residencies you own.  Meaning if you own a home, buy another home to rent, you are required to carry 6 months payments in your 401k / Savings / Pension , to ensure that you can make the mortgage payment for 6 months in the event of job loss or financial woe.

Non-Owner Occupied Duplex

You can only purchase a non owner occupied property with a conventional loan.  FHA / VA loans are not designed for this, and if you are caught doing so the penalties could be hefty.

That being said if you are to buy a Duplex you will require a 25% downpayment.  This is because a duplex is a higher risk, because of this risk you will incur a higher interest rate as well.  You will be held to the standard 3-6 months reserves for all financed properties as well.

 

Tri Plex:

Purchasing a Tri Plex (3 unit) comes with all the same regulation as a Duplex.  25% downpayment, same reserve requirements.

 

Complexes: 

Buying an apartment complex with 5 or more units puts your lending needs into a different category.  Typically you will be dealing with a Bank or a local credit union that might advocate a portfolio loan, which may be a 5 year adjustable rate, or a balloon loan.

 

Want to find out if you qualify as an investor?

Click here–> http://executivemortgagellck.clixonit.com/

Understanding The Mortgage Process

Understanding the Mortgage Process:

 

This is often equated to teaching someone a different language.   When you have terms like “Appraisal” and “Inspection” that get intertwined, their meanings become confused and complicate the process.

It would be advantageous to know some basic terminology that the mortgage industry uses:

Loan Estimate: This is the new Good Faith Estimate, it is their initial quote that outlines what costs and rate are involved.

Closing Disclosure: Similar to the Loan Estimate it is the final summation of all costs for your loan, it will also identify how much (if any) you need at close.

Initial Disclosures: This includes your loan estimate and the standard paperwork associated with applying for a mortgage.

Home Inspection: This is frequently confused with the Appraisal, but the home inspection is an independently hired professional, contracted by the client, to inspect the home for defects

Pre Approval / Pre Qualification:  Meeting with a lender to establish the details of what buying a home will cost.  Type of loan, expected cost and what a buyer can afford.

Appraisal: The appraisal is an inspection paid for by the client, where a professional will determine the value of the home being purchased.  It is essentially the lenders home inspection.

Accepted Offer: When a client puts a bid on a home and the seller accepts their price and terms, we not have an accepted offer.  This is where the mortgage process typically begins.

Earnest Money: Money given in good faith from the client to the seller of the home,  assuring the buyers interest.

Origination Cost: The cost from the lender / broker  to work on your loan

Conditional Approval: This is the initial approval on your loan, after we first submit it for review.  The underwriter will ask for several things to complete the file and ensure compliance.

Underwriter: The person who reviews the documentation from the borrower (Taxes / Income / Job history etc) to ensure it’s compliant with the lenders needs.

Title Fees: Third party fees that are required on every purchase and refinance to ensure there are no financial defects with the buyer / seller or house.

Recording Fees: Fees that are used to record the mortgage and deed in the clients name

Escrow / Prepaids: These are not actually costs, but rather the clients money being held in a “savings” account that the lender accesses for the use of paying Homeowners insurance and Real Estate taxes

Equity:  The percentage of the home the client owns, compared to it’s value.  I.E if your home is valued at $100,000 and you owe the lender $80,000.  You have $20,000 in EQUITY, or 20% Equity.

Principle and Interest:  This is the portion of your mortgage payment that goes to the bank to pay them interest and pay down your loan

Taxes and Insurance:  This is the portion of your payment that pays your real estate taxes, homeowners insurance and mortgage insurance.

 

These are terms, if understood, will make the process much smoother and more understandable.

The time frame for buying a house is also a common inquiry I get from many clients,  they are excited to know when they will be receiving the keys to their new home and beginning this chapter of their life.    The following time line is how most loans usually progress, note that Day 1 starts when you have an accepted offer on a home and is based on a 45 day closing schedule:

Day 1:  Accepted Offer – You and the seller have agreed on a price and terms to buy their home

Day 2-3: Initial Disclosures- You will sit down with your loan officer and review the terms and conditions of the proposed loan

Day 4-10: Underwriting (round 1) – You will have reviewed and signed the initial disclosures, and your loan officer will have submitted them for review to the lender for underwriting

**Day 4-10** Appraisal: During this time the appraisal will be ordered and scheduled

**Day 4-10** Home Inspection: Client should be scheduling and receiving their home inspection during this time

Day 10-13: Conditional Approval- You will receive a conditional approval request more documentation to finish your loan.

**Day 10-13** – Appraisal: Your appraisal should be back at this time

Day 14-25 : Working on conditions: The client should be getting the items on the approval, to their loan officer for review

Day 26- 35 : Final Underwrite: We should have everything in at this time for the underwriter to review.  Appraisal / Conditions / Titlework.

Day 36-38: Final Review: We should be getting the clear to close at this time because the underwriter has reviewed and cleared all items.

Day 39-42: Final Disclosures:  At this time the client will be receiving and acknowledging their closing disclosure,  Once this is done we can schedule close

Day 42-45: Closing: Closing will be scheduled at an appropriate time for all parties.  At this time the closing disclosure will be agreed to and acknowledged, and a time and place will be established for closing.

Day 45: CLOSING DAY: The fruits of your labor have come to fruition.  You will meet at the desired location, at the desired time to sign paperwork for your NEW HOME! At this time you will receive your keys and be able to move in immediately after we are done.

 

 

Keep in mind, the above timeline can vary according to certain factors that influence loan closings, things that typically delay loan closings are:

  1. Low Appraisals
  2. Defects in the home
  3. Borrowers opening new lines of credit while the loan is in process
  4. Borrowers not getting the documents to their loan officer in a timely fashion
  5. Borrowers changing jobs during the loan process

So be wary of these common problems, and if you can avoid them you should have a relatively smooth closing and be on your way to home ownership!

 

Want to see how your purchasing timeline would work out?

Find out now, click here –> http://executivemortgagellck.clixonit.com/

 

 

 

 

 

Large Lenders vs. Local Lenders

 

This has been a topic of speculation for some time now, where is the best place to get your mortgage?  Considering it could possibly be one of the largest (if not THE largest) purchase in your life, you may want to do some research into who is a better fit.

This is debate is based on one simple fact:  The borrower and their needs.

Each borrower should analyze what they require most from their lending institution.  Are you a first time buyer with a book of questions?  Do you require attention on the weekends and after hours?  Is the lowest rate the most important thing to you?

If the above sounds familiar, you might want to consider work with a local lending company or a broker.   Smaller brokerages and lending companies tend to have loan officers that work according to their clients schedules, because their income is directly correlated to the satisfaction of these clients, you will have better luck reaching them after hours or on the weekends.  They have to abide by the same rules and regulations that all lenders do, but they tend to give our their cell phone numbers and are well versed in rules of lending.  This combination of assets often provides valuable customer oriented service that most clients appreciate.

But what about rates and cost?

One thing buyers should know? All money for their mortgages comes and goes to the same places regardless of the lender they choose.  This one exception is credit unions and portfolio loans.  (Portfolio loans are a loan that is kept “in house” and the standard regulations don’t necessarily apply)

This means the difference in rates is often the difference in what the lenders are making.  A higher rate equates to higher profit for the lender.

This is why a smaller, local lending company might be a viable option.  They have less overhead expense to cover, and they are often able to provide more competitive deals to their clients because they can negotiate the rate more easily than a large institution.

A smaller broker or lending company will most likely be able to provide all (if not more) options than any of the big guys, at an equal or better rate and cost.

 

Sometimes people have long standing relationships with their bank or credit union, and they have loyalty to them for this reason.  This is an admirable trait people display, but it can cost a substantial amount of money if you don’t do some research.  I would encourage everyone to interview several lenders, a big bank operation, a mortgage bank and a broker, to see the differences.  Without a doubt I imagine you will be surprised .  It’s always important to talk with your lender, do some reading and learn a few things prior to picking one.  With a little research I think you will find a substantial benefit in a local lender.

 

If you would like to find out YOUR mortgage rates today,

http://executivemortgagellckw.clixonit.com/<–   Click Here

 

Justin Scott

NMLS 878581

(920) 530 4484

Executive Mortgage LLC.

NMLS 271650

909. E Walnut Street, Green Bay WI, 54301

How to Make Your Credit Soar

Credit is the singular thing that can make or break you in America, it determines your value in the eyes of lending companies.  It’s a calculated risk model that indicates how well you will perform if a company gives you their money.

Is it always fair? The answer to that is certainly no.

So how do you play the game and become a competitive force in the lending market?    Here area few tricks:

 

Credit Card Usage 

This is probably the most common reason peoples credit ratings are lower than they want.  Not because they are missing payments, but because they are exceeding the threshold for responsible debt usage in the eyes of their credit card companies.

If you owe more than 50% of your credit card limit, you are inappropriately handling your lines of credit.  Say you have a limit of $1,000 on your credit card, and you owe $500 on the very same card; your usage is 50%.  When you reach this limit the credit card companies report you to Experian, Equifax and TransUnion.  Irresponsibly charging more than 50% on your card will begin to bring your credit rating down as the risk of you paying it goes down as well.

 

How do you fix it?

Pretty simply put, you spend less.  Or you pay off more each month.  Ideally card companies want to see you at a 30% or less balance.  If you get in the practice of this, you will notice not only are your monthly obligations less, but your credit will increase dramatically.

 

Medical Collections:

Another common reason people and their credit are suffering.  Medical collections, as we all know medical expenses are very far from affordable.  For this reason, many American’s go into debt and collections for their medical expenses.  The more recent the negative credit is reporting, the more significant the damage to your rating.

 

How to fix it?

If you’ve gone to your medical provider, you know you will be incurring some medical expenses, you realize there are co-pays, deductibles, etc.   Be Prepared for these

When the hospital requests these get paid, and if you cannot afford to pay in full at the time, set up a payment plan.  Most healthcare providers are willing to take an affordable payment each month rather than sell it off to an aggressive collections agency.  Even if you can only pay $5 a month, this could prevent you from going to collections and suffering the credit damage.

Make sure you talk to your medical provider when setting up this payment plan, and ask them if they will sell your debt to a collection agency; even if you’re paying.  Ensure you get it in writing, or recorded via the telephone.  Sometimes healthcare providers sell a debt off even if it’s being collected, and the consumer will be stuck with the payment, and the damaging effects.

 

Bankruptcy and Foreclosure:

A leading cause of unqualified applicants is not from their current credit issues, but their past issues.

Mortgage companies have guidelines that they abide by, they cannot issue a loan within a certain time frame AFTER a bankruptcy or a foreclosure, the risk is too high.  (Typically FHA is 2 years after bankruptcy and 3 years after foreclosure, conventional is 4 years after bankruptcy and 7 years after foreclosure.)

Many people think the bankruptcy is in the past, they’ve served their time and tribulation.  Generally that is true, but a lender wants to see how you’ve handled your credit AFTER the bankruptcy / foreclosure.  That is why it’s a good idea (believe it or not) to re-establish your credit just after an incident.

Credit card companies are more than willing to issue you credit cards after a bankruptcy because they know  you have limited options.  The important thing to do here is re-establish and handle your credit responsibly.

 

How to fix it?

Open up a couple credit cards with low limits, $200-$500.  Put some small ticket items like groceries or gas on these, and pay it off immediately.  Sometimes credit card companies will ask you to “secure” the funds.  You can do this by depositing a few hundred dollars into an account, and “borrowing” against it.  Like your own line of credit.  That way, if you miss a payment, the institution already has your money to cover the cost.

 

There are many reasons people have credit issues, but I’ve listed a few of the more common ones that I experience from a lending standpoint.  If you want to know more, or see if you qualify:

 

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How Lenders Verify Your Employment

A significant part of qualifying for a mortgage is your income, and how a lender verifies your income is 2 ways:

  1. They will verify it via your pay stubs and taxes.

A lender will want to see several pay stubs to verify your hourly rate, or your salary pay.  They are also looking for unusual deductions such as child support or wage garnishments.  They want to now these items because it can have an effect on your ability to repay the loan.

They will also look at your taxes, they do this for several reasons, they want to see if your current pay is in line with what you’ve been making, or if you’ve taken a significant pay decrease.  A pay decrease is something you may have to explain.   They also want to view the addresses listed on top of the Tax returns to verify if it matches with the application.

 

2.  A lender will verify your employment directly with your employer

Another way they ensure your income is aligned with what you’ve stated is a form called “VOE” (Verification of employment).  This is sent directly to the employer and human resources typically fills it out.  It will outline your start date, rate of pay, what your earnings were for the last several years and things like over time as well.

 

The lender will compare all these tidbits of information and automatically take the most conservative estimate.  This will be considered your qualifying income.

 

For this reason it’s very important to understand how an underwriter will look at your file and income.  If your year to date income is lower than your anticipated salary, this will raise questions about how much you are really earning and why.  Most of these things can be explained with things like vacation time, or sick leave.  But they are queries the lender will have if they see it.

Income has a very important role in not only qualifying, but in what type of loan you qualify for.  I’ve mentioned in earlier Blogs that some loans have high and low income limits to qualify.  An example of this would be USDA, depending on county, number of people in the household and property location, you cannot make too much (or too little) to qualify for this no down payment loan.

WHEDA is another example of this, you cannot make to much if you intend on qualifying for the down payment assistance.

 

Want to see if your income qualifies you?

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Click above!

 

 

Fannie Mae NEW Guidelines

This is an exciting time for conventional borrowers because Fannie Mae has just introduced some new changes to the mortgage process that will certainly be a benefit to many borrowers.

 

Student loans have long since been a burden on borrowers, inundating people with enormous debt that is preventing them from qualifying for one of the best investments in their life, a home.

The problem is that regardless of what people owe on their student loans, they are only required to pay an agreed upon amount, this is called an income based repayment plan.   Typically Fannie Mae and Freddie Mac have not concerned themselves with the required payment, but what they expect the payment could be.  If a potential borrower was in an income based repayment plan then the lender would be required to take 1% of the outstanding balance of the loan, and use this as a monthly obligation.

That is CRAZY, that means people that owed $60,000 in student debt, now  have a monthly obligation of $600!   Even if you are only required to pay $100.

This rule has excluded many people from qualifying, but things have changed.  Now Fannie and Freddie will allow us to use the income based payment as the obligation, and OMIT the 1%.  This is fantastic because now more people are going to qualify based on what they actually have to pay every month instead of 1% of the balance.

On top of this change, Fannie and Freddie have indicated they will accept a 50% Debt to Income ratio (Debt to income ratio explained in a previous blog)

So if you combine these two fundamental changes, we will see more qualified applicants getting the mortgage they deserve and not being held up by simple rules that shouldn’t prevent them from buying.

 

Want to see if your debt to income ratio meets the threshhold?

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Click the link above!

 

What is the Debt to Income ratio?

If you are a real estate agent or a homebuyer, chances are you have heard the term “debt to income ratio”  You understand that this is a large part of qualifying, you know it’s significance; but do you know what it is?

It’s not as difficult as you think,

The debt to income ratio formula is exactly what it sounds like, your debts in comparison to your income, expressed as a ratio.

Example:  If you make $2,000 a month and you have $1,000 in debts.  You are at exactly a 50% debt to income ratio.

That is easy math, but where it gets slightly more complicated is when you have to know which debts are included and which are not.

As a simple example, the following debts are included in this calculation:

  1. Credit card payments
  2. Car Payments
  3. Mortgage Payments
  4. School Loans
  5. Child Support and Alimony payments
  6. Personal Loans
  7. Vacation Loans
  8. Recreational Loans
  9. Medical bills over $2,000
  10. Collection accounts over $1,000 (case by case basis)

The following Debts are NOT considered part of the formula:

  1. Phone Bills
  2. TV / Internet
  3. Car insurance
  4. Car repair (including Gas)
  5. Food costs
  6. Average living costs (recreation / etc)

Basically, if it reports on your credit, we have to take it into consideration.

The good news if you have a higher debt loan, is that Mortgage companies are only concerned about the MINIMUM PAYMENTS required to keep your credit in good standing.  This means that even if you have $10,000 in credit card debt, we are only concerned with the MINIMUM required monthly obligation.  This puts the payment at roughly $50 – $200.

 

The only exception to this rule are student loans.   If student loans are in an income based repayment plan, or differed:  We must use 1% of the outstanding balance as a monthly obligation.  This is the most common reason we have to deny loans, is because of student loan debt.

The good news is, Fannie Mae / Freddie Mac just changed this rule.  We will gladly count your minimum required payment regardless if it is in an income based plan.  So your payment could be $5.00 a month, and we will use that.

The only exception is that FHA hasn’t followed in Fannie’s footsteps yet, and are still holding to the 1% rule.

 

Hopefully this has been informative, if you can roughly calculate up your debt to income, please do.  But if you want to see if you qualify:

 

 

Click here:  http://executivemortgagellck.clixonit.com/  

Manufactured Homes and the Details

Depending on your location in the country, manufactured housing becomes a more prevalent option.  Here in Northeast Wisconsin we find that stick built homes are the staple, but if you venture even 15 miles North of Suamico, Manufactured housing becomes a viable alternative.

So what do you do if you want a manufactured home and still need a loan?   Do not worry, it’s still possible.

First off, some lenders will not even touch a manufactured home, they shy away from it because of the value over time.  I am fortunate enough to work for a company that has several outlets available to purchase these homes.

You have two primary options, FHA or Conventional.  If you choose FHA you will be required to use the standard 3.5% downpayment, and some additional provisions come into play.  You will require a foundation certification to prove to the lender that the home is fixed to a foundation and cannot “roll away”,  Lenders use to have a problem with manufactured housing “disappearing” when they went to collect.  So a certification that the property is fixed to a foundation and cannot be moved easily is needed.

Your other option, conventional, is going to require a minimum of 5% down, and will have a more lax policy on this type of home.

Either home will require a specialized appraisal called a “1004C” , it is going to outline certain necessities like a HUD approved tag, and a builders certification.

Typically a manufactured appraisal will cost the borrower a little more, but if you have transparent lender; you will know this beforehand.

 

There are other loan types that allow Manufactured housing, but the guidelines are so strict we rarely see these being accomplished.   An example of this is USDA will allow a manufactured home with zero down, but the home has to be designed, built  and installed according to certain criteria.  No one is allowed to live in the property prior to the USDA buyer occupying it.  So you can see where this would prevent a lot of our buyers from purchasing an existing Manufactured home.

 

Other than that most loans are pretty simple when it comes to manufactured, you should be prepared to spend a little more on an appraisal, and some extra certifications, but if you find the home of your dreams at the price you need; a manufactured property may be the best option (and attainable) for you.

Want to see if you qualify?

http://executivemortgagellck.clixonit.com/  <— Click here

 

Wiring Funds

There is always a new problem to solve in this line of work, whenever you’re dealing with someones financial business, all parties involved want to ensure all the details are accounted for.

This includes, and especially pertains to: Wiring money.

The lender will wire money to the title company, and the title company will disperse the money according to their directions.  The Realtor gets their check, the mortgage company gets theirs, the seller gets their money, etc and so forth.

But you also, as a borrower, have an option to wire your downpayment / closing cost money to the title company.

But make sure you get it right and do it ahead of time.

It can be difficult to know how much to wire, with TRID laws, we are able to get the finalized closing numbers 3 days prior to close, but sometimes it can take that long to wire money from one institution to another.

I recently had an occurrence with a large corporate institution that shall remain nameless, but my client had to wire their down payment funds from this financial establishment, to the title company.  Simply because the financial company did not have any local branches.

The entire process took about 80 hours from initial request, to the title company receiving the ACH wire.  The loan closed on time and we have happy clients, but it was closer than comfort would like.

 

So the point is, if you are intending to wire money, please do so ahead of time, to insure you have sufficient room to allow the funds to arrive and ensure a smooth closing.

Get Pre-approved for your next mortgage loan in the Green Bay, Wisconsin Area