Category: Recent articles

Be on the ALERT for a growing Real Estate Scam

Published Date 7/6/2018

Today’s homebuyers can unwittingly become targets of scams, as evidenced by a report today by NBC in which it describes how a couple was robbed of their life savings. Citing this as a mere sampling of what can happen, real estate experts say everyone shopping for homes need to stay vigilant.

The news report spoke with multiple homebuyers who fell victim to the same scheme: hackers, intercept emails and pose as agents, conning buyers into wiring or sending their down payments to the thieves’ bank accounts. By the time these victims realize what just took place, the money, as well as the scammers, are long gone.

The story cites the example of a San Jose, CA, a grandmother whose rent was about to be doubled and decided she was to move from the San Francisco Bay Area. Focusing on moving to Ohio, where her grandchildren live and where housing is substantially cheaper, she found a new home for herself south of Cleveland with an asking price around $28,000 — not even a down payment on a property in much of California, but a typical asking price in the rural Midwest.

She offered slightly less to the listing agent and was elated that her price was accepted. She decided to pay cash for the property out of her retirement savings, thrilled to know she would at last live in her own home mortgage-free. Soon afterward, she received an email telling her where to wire her funds. She complied, transferring her $25,400 payment into the designated account. Just a few days later her life changed forever after her real estate agent told her to head to her bank ASAP. There, she found she had wired her money to a fraudulent account. The listing Realtor’s account had been hacked. The buyer was told to stop the transaction, and she did, thinking this nightmare was over. But it wasn’t.

After days of wrangling with her bank in California as well as the bank in which she deposited the funds, the buyer learned her money had already disappeared from the fraudsters’ account, leaving her less than $250 in life savings.

The report cited Dave Walsh, Treasurer for the California Association of Realtors, who says the problem of real estate wire fraud is growing and hackers are now targeting virtually every homebuyer, seller, and agent to capture the huge sums of money changing hands.

“When you realize that’s the depth of the thieves’ efforts to get into — to breach these data firewalls — it’s endless,” Walsh said. “There’s bots everywhere now, and they’re simply attacking any server, including the real estate professionals’ servers, for any kind of data they can get.” The report goes on to say that using the information they get from those private servers; scammers then fabricate documents that trick mortgage brokers, title agents, real estate agents, and consumers into wiring money to the wrong place.

How to protect yourself? The California Association of Realtors says home buyers need to (1) call and verify everything before sending any money. This included your agent, the seller’s agent, the escrow officer, and the title company. (2) Confirm account names and numbers. (3) Call everyone again immediately after the transfer.

The grandmother in question found herself fighting banks, brokers, and even police to no avail and decided to report her dilemma to local news sources.

Attorneys are now involved.

By Erik KinsleyBrowse articles, Real Estate, Recent articles, UncategorizedJuly 6, 2018 No comments yet

Factory Orders Up 0.4% In May

Published Date 7/5/2018

TODAY’S MORTGAGE RATE SUMMARY

HOW RATES MOVE:

Conventional and Government (FHA and VA) lenders set their rates based on the pricing of Mortgage-Backed Securities (MBS) which are traded in real time, all day in the bond market. This means rates or loan fees (mortgage pricing) moves throughout the day, being affected by a variety of economic or political events. When MBS pricing goes up, mortgage rates or pricing generally goes down. When they fall, mortgage pricing goes up.

RATES CURRENTLY TRENDING: NEUTRAL

Mortgage rates are moving slightly lower so far today. The MBS market worsened by -3 bps yesterday. This wasn’t enough to worsen mortgage rates or fees. The rates experienced low volatility yesterday.

TODAY’S RATE FORECAST: NEUTRAL

Factory Orders: The May data was much better than expected gain of 0.4% vs est of 0.0%. Plus April was revised upward significantly from -0.8% to -0.4%.

Economic Optimism: The July IBD/TIPP survey showed that business optimism is very strong with a 56.4 vs est 54.2 reading.

Australia: The Reserve Bank of Australia kept their key interest rate at 1.5%.

Eurozone: PPI YOY was hotter than expected 3.0% vs est of 2.7%. Retail Sales were at 1.4% vs est of 1.5%.

TODAY’S POTENTIAL RATE VOLATILITY: LOW

Mortgage rates are likely to move sideways for today with low volatility. We have a shortened trading day today and markets are closed tomorrow.

BOTTOM LINE:

If you are looking for the risks and benefits of locking your interest rate in today or floating your loan rate, contact your mortgage professional to discuss it with them.

Source: TBWS

By Erik KinsleyBrowse articles, Rate Forecast, Real Estate, Recent articles, UncategorizedJuly 5, 2018July 5, 2018 No comments yet

Keeping Your Head Above Water When Investing In Real Estate

Semantics are alive and well with real estate. You either buy, or you invest. Right? Well, let’s admit there is a slight nuance here. You plan to live in what you “buy,” but the idea of investing carries the connotation of renovating and making a quick buck. Today’s consumers are much more interested than ever to try their hand at flipping. The problem is, many of them have not done their homework, making the path ahead fraught with potentially costly roadblocks.

These days of frantic buying have caused many a consumer to muster up a quick education about real estate, but it may not always be a complete one. In a galaxy not that far away, raising capital for a simple distressed single-family house fix-and-flip used to be met with negative reactions. As a result, the world of real estate investing was at a standstill, and golden opportunities were missed.

HGTV and its reality shows about flips put new steam into the idea of buying the worst property on the best street. Suddenly everyone had a dangerous knowledge about buying distressed real estate, distilled into 50 minutes of airtime. Even Wall Street has recognized the residential rehab craze, sustaining the longest bull market ever, since real estate is a great hedge against a Wall Street correction.

What we are left with is a market full of people doing flips, driving property values up, and fueling the demand for inventory. But someone is bound to get burned. So, how do you start playing the real estate investment game and NOT be the guy who got there too late for those $100 bills being handed out on that proverbial corner somewhere?

Forbes New York Business Council’s Melissa Shea, a 15-year RE investor, and educator, offers some tips, the first of which is to take to heart in the saying that goes, “If you think the price of education is expensive, try ignorance.”

A quality education is key here, but we’re not talking about buying a course from some TV real estate guru standing in front of his yacht while leaning on his Bentley. What he’ll tell you won’t come close to the true reality of a fix-and-flip. Shea’s advice is to “take the money you would pay a guru, buy a house, and flip it by yourself. You’ll lose less money and learn more. The best place to start is local real estate investment clubs and associations. You need local knowledge, not national programs.” She recommends finding local investment clubs and associations by going to CRE Online or to the National Real Estate Investors Association. Don’t let your education stop there, however, she recommends. There is a podcast, among others, called Bigger Pockets that offers real content, excellent education and follows the trends, according to Shea.

And then there is the emotional component. Shea warns you not to get attached to properties, causing you to overlook costly potential errors. “People rationalize, ‘It’s only $3,000 more,’ but you said that three times ago, so now it’s $9,000 more, and you aren’t going to make much of a profit. Don’t lie to yourself. Stick to the numbers; they don’t lie,” she says. She warns against allowing yourself to increase your purchase price and not deluding yourself that the rehab is going to cost less than the quote your contractors gave you. “It’s always more,” she says. “Don’t fool yourself into thinking the property will sell for a higher price than the last house in the area because yours will be ‘so much nicer.’ That’s a recipe for financial disaster.”

Shea also advises you not to be alone on that investment island. “Going it alone is one of the worst mistakes you can make. Personally, I love joint ventures.” Time was when you could be a complete rookie, purchase a property, wait a few months and, without touching the property except for mowing the lawn and emptying the house, make a tidy sum. Even then, it was more likely that you would have lost money or broken even. The real estate market crash, however, served as an expert professor, teaching investors to use reputable attorneys, seasoned Realtors, long-established title companies and reliable lenders, and to network with other investors, she says.

Real estate investing is still not an exact science, according to Shea. “There are plenty of dangers, but if you’re educated, keep a level head, don’t get emotionally involved, and work with an award-winning team, you can enjoy the pleasures real estate investing can bring.”

Source: TBWS

By Erik KinsleyBrowse articles, Real Estate, Recent articles, UncategorizedJuly 2, 2018 No comments yet

What NOT To Do Yourself Before Selling Your Home

Published Date 6/26/2018

It’s not all that uncommon. You tried to fix something in your house using all the analytic skills you apply to other parts of your life, inspired by how easy it looks on HGTV. With all the best of intentions, however, what seemed simple turned into an obviously less-than-expert job. In fact, even your Realtor noticed it when telling you what to do when getting your house ready to sell.

Realtor.com’s Audrey Ference, in her article The Worst Mistakes You Can Make Before Selling Your Home offers us wisdom on why doing some things yourself is not always about saving money and could, in fact, cause you even more cash outlay and possibly a lawsuit when selling your home. Even National Association of Homebuilders’ remodeling chairman Dan Bawden chimes in, saying, “You have to ask yourself: Is it likely to do more harm than good?”

Here are some tasks recommended better left to a professional:

If your house just needs a fresh coat of paint, don’t sweat it. Get thee to a paint store and buy the paint, some brushes, a few rollers and some drop cloths. But if you have cracks in the drywall from a shifting foundation or a evidence of family members taking out frustrations on a wall, hire a pro. Texturing is a bugger and if you don’t get it right, it will look like a bad Bondo job on a car door. In other words, the cure will have been worse than the illness. Call a drywall repair person. Then use that paint.

Even professional contractors who have been in business for years don’t mess with anything inside a heating or cooling system, according to Bawden. These systems are complex and are often connected to both electrical and gas. You could blow out the entire system by doing it wrong, creating a much more expensive repair than if you had never touched it. Besides, any potential buyers of your home would most likely hire an inspector to go over the HVAC system and your goose will be cooked. According to Bawden, even something as simple as installing a smart thermostat can fry your wiring if done incorrectly.

It’s not like installing a fridge, a washer or a dryer when it comes to putting in a dishwasher. Installing it yourself is complicated, involving installing water and drainage lines under the kitchen sink cabinet or changing out existing ones. Doing it wrong could mean flooding your kitchen, ruining your floors, and getting a homeowner’s claim rejected because it’s obvious it was done wrong. Appliance stores offer installation at reasonable prices when buying new, and a plumber may charge around units, or a plumber can handle it for $150 to $500 — well worth the investment.

It may look easy, but it isn’t. “Popping” a new window into an old window opening is fraught with bad omens,according to Bawden. Water can seep into the walls if you don’t reseal the layers properly and it may not be discovered for a few years down the road, when mold becomes a creature instead of a word. Lawsuits get steam not only because of this along with trying to apply siding on your own — both of which deal with keeping moisture out of the walls of your house. Hell hath no fury like a homeowner who can produce medical bills related to a mold issue.

If it’s electrical and it’s more than just putting in wiring for a light fixture, draw the line at any electrical work involving the breaker box. “Not only could you hurt yourself, you could also create a fire hazard, especially if your home isn’t brand-new,” says Ference, who goes on to quote a handyman who talks about how older homes lack safety devices like GFIs (ground fault circuit interrupters). Running new wires or repairing faulty wiring should be left to a professional.

There’s a song from the ‘60s called Up on the Roof, but it shouldn’t be sung by you if you’re thinking about doing anything more than hammering down a shingle or two or replacing chimney pipe roof flashing. Even professional roofers wear harnesses in case of falls so they can keep singing ‘60s songs.

Lastly, we can’t tell you not to fix a running toilet or snake a drain. People do it every day. But when it comes to taking apart leaky or blocked pipes under a sink, you should run in the other direction. Pipes can be tricky to reassemble,particularly when they’re in close proximity to other plumbing components and machinery, such as dishwashers or garbage disposals, according to the article. What might look like an easy fix could actually be a symptom of a larger issue with your system. Even HGTV hosts discover things like this as they rehab what looks to be the worst home on the best street in town.

Source: Realtor.com, NAHB, TBWS

By Erik KinsleyBrowse articles, Real Estate, Recent articles, UncategorizedJune 27, 2018 No comments yet

Realtor Knowledge And Research Are Key When Appraisals Come In Low

Published Date 6/25/2018

As the real estate market continues to sizzle, driving prices ever higher, it’s not unusual for appraisals to be a sticking point. Just because you’ve asked $300K for your home and got an offer at $320K doesn’t mean the appraiser can justify the value all the parties agreed to, however.

There may be limited comparable properties in your neighborhood because no one around you wants to sell. People are simply staying in their homes longer than they used to. So what can you do to make this deal work?

For one, your agent can compile as much market data as possible to challenge the appraisal. While an appraisal is not an exact science, most seasoned appraisers try hard to hit the sales price of the home right on the mark if they have enough data to justify it, so the better your Realtor can state his or her case, the better the chances are that the appraiser will be willing to make a few adjustments.

When an appraisal comes in short of the agreed-to price, however, there are a few reasons for it, including an artificially inflated price resulting from multiple offers. As we mentioned, rising market values due to limited inventory and few comps are a real bugger these days. But an appraiser might also have overlooked a pending sale data that could reflect higher comparable sales when closed. Or the appraiser may have selected comparable sales from the wrong neighborhoods. All of this can be brought to the appraiser’s attention by you or your Realtor.

Your agent should have a good feel for what is going with real estate values, having reviewed the comparable sales and listing and can offer information the appraiser might have missed. This includes amenities in those comparable listings that were included or excluded that affected that home’s value and ultimately the amount of the appraisal — all of which can affect how they view your listing. In very limited cases, the buyer’s lender may send out a second appraisal to get an additional opinion to get things through, because after all — lenders are still in the business of lending money. Their goal is simply to prove to their underwriters that the risk they are taking is justified.

In the case of a low number, the buyer can use the appraisal to negotiate a reduction in the purchase price. That is more common in balanced real estate markets, however. In today’s hot bidding environment, another buyer may be willing to buy the home even when the appraisal comes in a bit low by plunking down more cash to make up the difference.

According to the National Association of Realtors 2018 Confidence Index that was published in May low inventory, interest rates, and multiple offers were the major issues affecting transactions, with only 43% of properties sold at original (or net premium) asking prices.

Source: Washington Post, NAR, TBWS

By Erik KinsleyBrowse articles, Real Estate, Recent articles, UncategorizedJune 26, 2018June 26, 2018 No comments yet

WILL DRIVERLESS CARS AFFECT THE FUTURE OF REAL ESTATE?

It’s happening right under our noses, but few of us know it. The newest commercial parking facilities are being designed with autonomous cars in mind — the ones that drive themselves. Some developers are even going so far as to explore ways to repurpose existing parking garages. The question follows: how could autonomous vehicles change residential real estate? Will it render the two-car garage obsolete and increase livable square footage and home values?

Forbes’ Justin Thompson explored this in his article The Value of Your Home Could Get a Big Twist from Autonomous Cars, where he discusses things like how, after dropping its passengers off, the driverless car could simply (1) return to where the trip originated, (2) circle the neighborhood and wait to be called back, (3) head off to a remote parking spot for a while, or (4) just wait for another passenger, like a taxi or an Uber might do.

So if people are presented with an autonomous, on-demand vehicle service might they simply opt out of car ownership? Thompson says proponents point to the success of current ride-sharing platforms and the behavior of younger generations as evidence that this future is already unfolding.

The appeal is, of course, that autonomous vehicle ride sharing could very well offer the same mobility as car ownership without the major capital outlay expenses like insurance, maintenance, and depreciation.

For real estate purposes, a decrease in car ownership would likely translate to a decrease in the need for garage space. No big deal? Think again. In congested metropolitan areas, such as Los Angeles, where square footage sells for a premium, it would be a huge deal (remember– appraisers do not include garage space in a home’s total square footage). When you figure the current average price per square foot for a residential dwelling in LA County is between $400 and $600, it’s an in-your-face proposition. Thompson explains, “A 100-square-foot increase in the size of a home (which is the difference in size between a typical two-car garage and a typical one-car garage) would translate to an increase of roughly $40,000 to $60,000 in home value for a home in Los Angeles County, California. A shift of that magnitude could well incentivize builders to devote less square footage to garage use and more to the livable area of the house.”

He goes on to imagine the economic effects of this, explaining how an increase in home values would likely lead to a hike in property taxes while local government could expect to see an increase in permitting fees for all those garage conversion projects.

It’s anybody’s ball game whether autonomous vehicles will be adopted and integrated into our society. But it’s fun to think of how very differently both our homes and our lives might be affected.

Source: Forbes, TBWS – Published Date 6/25/2018

By Erik KinsleyBrowse articles, Real Estate, Recent articles, Technology, UncategorizedJune 25, 2018June 25, 2018 No comments yet

Think Staging Your Home Is A Waste Of Time? Think Again…

Bye, Bye Clutter

The most important thing you can do to prepare your home for sale is to get rid of clutter. Make a house rule that for every new item that comes in, an old one has to leave. One of the major contributors to a cluttered look is having too much furniture. When professional stagers descend on a home being prepped for market, they often whisk away as much as half the owner’s furnishings, and the house looks much bigger for it. You don’t have to whittle that drastically, but take a hard look at what you have and ask yourself what you can live without.

Furniture Groupings

There’s a common belief that rooms will feel larger and be easier to use if all the furniture is pushed against the walls, but that isn’t the case. Instead, furnish your space by floating furniture away from walls. Re-position sofas and chairs into cozy conversational groups, and place pieces so that the traffic flow in a room is obvious. Not only will this make the space more user-friendly, but it will open up the room and make it seem larger.

Musical Furniture

Give yourself permission to move furniture, artwork and accessories among rooms on a whim. Just because you bought that armchair for the living room doesn’t mean it won’t look great anchoring a sitting area in your bedroom. And try perching a little-used dining-room table in front of a pretty window, top it with buffet lamps and other accessories, and press it into service as a beautiful writing desk or library table.

Room Transformations

If you have a room that serves only to gather junk, repurpose it into something that will add to the value of your home. The simple addition of a comfortable armchair, a small table and a lamp in a stairwell nook will transform it into a cozy reading spot. Or drape fabric on the walls of your basement, lay inexpensive rubber padding or a carpet remnant on the floor and toss in a few cushy pillows. Voila – a new meditation room or yoga studio.

By 8thnsRecent articlesDecember 9, 2017December 13, 2017 No comments yet

Want To Know The Truth About No Down-Payment Home Loans?

A no down payment mortgage allows first-time home buyers and repeat home buyers to purchase property with no monies required at closing. Other options, including the FHA Home Loan, the HomeReady™ mortgage and the Conventional 97 loan offer low down payment options with a little as 3% down. Mortgage insurance premiums typically accompany low and no down payment mortgages, but not always.

Is A No Down Payment Mortgage Right For You?

It’s a terrific time to buy a home.

Sales are rising, supply is dropping, and prices have increased in many cities and neighborhoods. Compared to next year, today’s market may look like a bargain.

Rates for 30-year loans, 15-year loans, and 5-year ARMs are cheap, which has lowered the monthly cost of owning a home.

The Down Payment Hurdle

However, it’s not the monthly payment that scares off new buyers these days — it’s the prospect of having to put 20% down.

Buyers are earning good incomes, but few have much saved in the bank.

The good news is that there are a bevy of mortgage programs requiring little or no money down and they’re available to the general public — no hoops required.

Want to buy a home with little or nothing down? You can.

Home Buyers Don’t Need to Put 20% Down

In today’s U.S. housing market, home buyers don’t need to make a 20 percent down payment. Many believe that they do, however.

It’s a common misconception that “20 Percent Down” is required to buy a home. And, while that may have true at some point in history, it hasn’t been so since the advent of the FHA loan, which occurred in 1934.

The likely reason why buyers believe a 20% down payment is required is because, with one specific mortgage type — the conventional mortgage — putting twenty percent down means private mortgage insurance (PMI) is not required.

PMI Is Not Evil

Paying PMI is neither good nor bad, but consumers seem to abhor it.

The purpose of private mortgage insurance is to protect the lender in the event of foreclosure — that’s all it’s for. However, because it costs money, private mortgage insurance gets a bad rap.

It shouldn’t.

Because of private mortgage insurance, home buyers can get mortgage-approved with less than 20 percent to put down and, eventually, private mortgage insurance can get removed.

At the rate at which today’s homes are increasing in value, a buyer putting 3% down would pay PMI for fewer than four years.

That’s not long at all. Yet, many buyers — especially first-timers — will put off a purchase because they want to save a larger down-payment.

Meanwhile, home values are climbing.

For today’s home buyers, making a down payment should be consideration, but it shouldn’t be the only consideration.

This is because home affordability is not about the size of your down payment — it’s about whether you can manage the monthly payments and still have cash left over for “life”.

A large down payment will lower your borrowed amount and, therefore, will give you a smaller monthly payment to make each month. However, if you’ve depleted your life savings in order to make that large down payment, you’ve put yourself at risk.

Don’t Deplete Your Entire Savings

When the majority of your money is tied up in a home, financial experts refer to it as being “house-poor”.

When you’re house-poor, you have plenty of money “on-paper”, but little of it available for the everyday emergencies of life.

And, as every homeowner will tell you, emergencies happen.

Roofs collapse, water heaters break, you become ill and cannot work. Insurance can help you with these issues sometimes, but not always.

That’s why you being house-poor can be so dangerous.

Many people believe it’s financially-conservative to put 20% down on a home. If that 20 percent is everything you have, though, putting twenty percent down is the opposite of being financially-conservative.

The true financially-conservative option is to make a small down payment.

Being house-poor is no way to live.

No Down Payment: VA Loans (100% Financing)

The VA loan is a no-money-down program available to members of the U.S. military and surviving spouses.

Guaranteed by the U.S. Department of Veteran Affairs, VA loans are similar to FHA loans in that the agency guarantees repayment to lenders making loans which means VA mortgage guidelines.

VA loan qualification are straight-forward.

VA loan qualifications are available to active duty and honorably discharged service personnel are eligible for the VA program. In addition, home buyers who have spent at least 6 years in the Reserves or National Guard are eligible, as are spouses of service members killed in the line of duty.

Some key benefits of the VA loan are :

You may use intermittent occupancy
Bankruptcy and other derogatory credit do not immediately disqualify you
No mortgage insurance is required

VA loans also allow for loan sizes of up to $636,150 in high-cost areas. This can be helpful in areas such as San Francisco, California; and Honolulu, Hawaii which are home to U.S. military bases.

No Down Payment: USDA Loans (100% Financing)

No Money Down options exist for non-military borrowers, too. The U.S. Department of Agriculture offers a 100% mortgage. The program is formally known as a Section 502 mortgage, but, more commonly, it’s called a Rural Housing Loan.

The good news about the USDA Rural Housing Loan is that it’s not just a “rural loan” — it’s available to buyers in suburban neighborhoods, too. The USDA’s goal is to reach “low-to-moderate income homebuyers”, wherever they may be.

Many borrowers using the USDA Single Family Housing Guaranteed Loan Program make a good living and reside in neighborhoods which don’t meet the traditional definition of rural.

Some key benefits of the USDA loan are :

You may include eligible home repairs and improvements in your loan size
There is maximum home purchase price
Guarantee fee added to loan balance at closing; mortgage insurance collected monthly

Another key benefit is that USDA mortgage rates are often lower than rates for comparable, low- or no-down payment mortgages. Financing a home via the USDA can be the lowest cost means of homeownership.

Low Down Payment: FHA Loans (3.5% Down)

The FHA mortgage is somewhat of a misnomer because the FHA doesn’t actually make loans. Rather, the FHA is an insurer of loans.

The FHA publishes a series of standards for the loans it will insure. When a bank underwrites and funds a loan which meets these specific guidelines, the FHA agrees to insure that loan against loss.

FHA mortgage guidelines are famous for their liberal approach to credit scores and down payments. The FHA will typically insure a home loan for borrowers with low credit scores so long as there’s a reasonable explanation for the low FICO.

The FHA allows a down payment of just 3.5 percent in all U.S. markets, with the exception of a few FHA approved condos.

Other benefits of an FHA loan are :

Your down payment may consist entirely from “gift funds”
Your credit score requirement is 500
Mortgage insurance premiums are paid upfront at closing, and monthly thereafter

Furthermore, the FHA supports homeowners who have experienced recent short sales, foreclosures or bankruptcies through the agency’s Back to Work program.

The FHA insures loan sizes up to $636,150 in designated “high-cost” areas nationwide. High-cost areas include Orange County, California; the Washington D.C. metro area; and, New York City’s 5 boroughs.

Low Down Payment: The HomeReady™ Mortgage (3% Down)

The HomeReady™ mortgage is special among today’s low- and no-downpayment mortgages.

Backed by Fannie Mae and available from nearly every U.S. lender, the HomeReady™ mortgage offers below market mortgage rates, reduced mortgage insurance costs, and the most innovative underwriting idea on more than a decade.

Via HomeReady™, the income of everybody living in the home can be used to get mortgage-qualified and approved.

For example, if you are a homeowner living with your parents, and your parents earn an income, you can use their income to help you qualify.

Similarly, if you have children who work and contribute to household expenses, those incomes can be used for qualification purposes, too.

Furthermore, via HomeReady™, you can use boarder income to help qualify; and, you can use income from a non-zoned rental unit, too — even if you’re paid in cash.

HomeReady™ home loans were designed to help multi-generational households get approved for mortgage financing. However, the program can be used by anyone in a qualifying area; or who meets household income requirements.

Read this complete HomeReady™ Q&A for more on the program.

Low Down Payment: Conventional Loan 97 (3% Down)

Editor’s Note : The Conventional 97 program was originally discontinued in December 2013. It was later reinstated by the Federal Home Finance Agency in late-2014. This section has been updated to reflect the new product’s guidelines.

The Conventional 97 program is available from Fannie Mae and Freddie Mac. It’s a 3 percent downpayment program and, for many home buyers, it’s a less-expensive option as compared to an FHA loan.

Furthermore, the Conventional 97 mortgage allows for its entire three percent downpayment to come from gifted funds, so long as the gifter is related by blood or marriage; or via legal guardianship or domestic partnership; or is a fiance/fiancee.

The Conventional 97 basic qualification standards are :

Loan size may not exceed $424,100, even if the home is in a high-cost market.
The subject property must be a single-unit dwelling. No multi-unit homes are allowed.
The mortgage must be a fixed rate mortgage. No ARMs via the Conventional 97.

The Conventional 97 program does not enforce a specific minimum credit score beyond those for a typical conventional home loan. The program can be used to refinance a home loan, too.

Low Down Payment: The “Piggyback Loan” (10% Down)

The “piggyback loan” program is typically reserved for buyers with above-average credit scores. It’s actually two loans, meant to give home buyers added flexibility and lower overall payments.

The beauty of the 80/10/10 is its structure.

With an 80/10/10 loan, buyers bring a ten percent down payment to closing. This leaves ninety percent of the home sale price for the mortgage. But, instead of giving one mortgage for the 90%, the buyer splits the loan into parts.

The first part of the 80/10/10 is the “80”.

The “80” represents the first mortgage and is a loan for 80% of the home’s purchase price. This loan is typically a conventional loan via Fannie Mae or Freddie Mac; and it’s offered at current market mortgage rates.

The first “10” represents the second mortgage and is a loan for 10% of the home’s purchase price. This loan is typically a home equity loan (HELOAN) or home equity line of credit (HELOC).

Home equity loans are fixed-rate loans. Home equity line of credits are adjustable-rate loans. Buyers can choose from either option. HELOCs are more common because of the flexibility they offer over the long-term.

And that leaves the last “10”, which represents the buyer’s down payment amount — ten percent of the purchase price. This amount is paid as cash at closing.

80/10/10 loans are sometimes called piggyback mortgages because a second loan “piggybacks” on the first one to increase the total amount borrowed.

80/10/10 loans are meant to give buyers access to the best pricing available, so lenders may sometimes recommend an alternate structure. For example, for buyers of condos, a 75/15/10 is advised because condo mortgages get better rates with LTVs of 75% or less.

As another example, interest rates on HELOCs are sometimes better at larger loan sizes. Your lender may recommend that you increase the size of your HELOC, then, to lower your overall loan costs. The choice of your loan’s structure, though, remains yours.

You can’t be forced into borrowing more money on your second mortgage than makes you comfortable.

Mortgage Down Payment FAQ

How can I buy a house with no money down?

In order to buy a house with no money down, you’ll just need to apply for no-money-down mortgage. If you don’t which mortgage loan is your best zero money down option, that’s okay. A mortgage lender can help steer you in the right direction. There are multiple 100 percent mortgages available for today’s home buyers.

Can cash gifts be used as a down payment?

Yes, cash gifts can be used for a down payment on a home. However, when you’re receiving a cash gift, you’ll want to make sure you follow a few procedures.

For example, make sure the gift is made using a personal check, a cashier’s check, or a wire; and keep paper records of the gift, including photocopies of the checks and of your deposit to the bank. Also, make sure that your deposit matches the amount of the gift exactly.

Your lender will also want to verify that the gift is actually a gift and not a loan-in-disguise. Cash gifts do not require repayment.

What are the FHA down payment assistance programs?

FHA down payment assistance programs are available to home buyers and 87% of U.S. single-family homes potentially qualify. Programs will vary by state, so be sure to ask your mortgage lender for which programs you may be eligible. The average home buyer using down payment assistance receives $11,565.

Are there any home buyer grants?

Home buyer grants are available to U.S. home buyers and all are eligible to apply, which are also known as down payment assistance (DPA) programs. DPA programs are widely-available but seldom used — 87% of single-family homes potentially qualify, but less than 10% of buyers think to apply. Your mortgage lender can help you determine which DPAs are best for you.

What are the FHA loan requirements?

The FHA loan requirements are; 1.) You must have a credit score of at least 500; 2.) Income which can be verified using W-2 statements and paystubs, or federal tax returns; 3.) No history of bankruptcy, foreclosure, or short sale within the last 12 months. 4.) You must not be delinquent on your federal taxes, your federal student loans, or any other federal debt.

What are the benefits to putting more money down?

Just as there are benefits to low and 0 money down mortgages, there are benefits to putting more money down on a purchase. For example, when you put more money down on a home, the amount you need to mortgage is less, which reduces your monthly mortgage payment. Additionally, if your mortgage requires mortgage insurance, with more money down, your mortgage insurance will “cancel” in fewer years.

If I make a low down payment, do I pay mortgage insurance?

When you make a low down payment, you’re more likely to pay mortgage insurance (MI), but not necessarily. For example, the VA Home Loan Guaranty program doesn’t require mortgage insurance, so if you use a VA loan, making a low downpayment won’t matter. Conversely, FHA and USDA loans always require mortgage insurance so even with large down payments, you’ll have a monthly MI charge.

The only loan for which your down payment affects your mortgage insurance is the conventional mortgage. The smaller your down payment, the higher your monthly PMI. However, once your home has twenty percent equity, you’ll eligible to have your PMI removed.

If I make a low down payment, what are my lender fees?

The size of your down payment doesn’t relate to your lender fees. No matter how large or how small your down payment, your lender fees should remain equal. This is because mortgage lenders are prohibited from charging higher fees based on the size of your down payment . It should be noted, however, that different loan types may require different services (e.g.; home inspection, roof inspection, home appraisal), and this may affect your total loan closing costs.

What is the minimum down payment for a mortgage?

The minimum down payment for a mortgage are:

VA loan: 0% down payment
USDA loan: 0% down payment
Conventional 97 mortgage: 3% down payment
HomeReady™ mortgage: 3% down payment
FHA loan: 3.5% down payment

In addition to the above programs, down payment assistance programs are often available and provide, on average, more than $11,000 to today’s buyers of homes.

How can I fund a down payment?

A down payment can be funded multiple ways, and your lender will often be flexible. Some of the more common ways to fund a down payment is to use your savings or checking account; or, for repeat buyers, the proceeds from the sale of your existing home.

However, there are other ways to fund a down payment, too. For example, home buyers can receive a cash gift for their down payment or can borrow from their 401k or IRA (although that’s not always wise).

Down payment assistance programs can fund a down payment, too. Typically, down payment assistance programs grants money to home buyers with the stipulation that they live in the home for a certain number of years — often 5 years or fewer.

Regardless of from where you fund your down payment, though, make sure to keep a paper trail. Without a clear account of the source of your down payment, a mortgage lender may not allow its use.

How much home can I afford?

The answer to the question of “How much home can I afford?” is a personal one, and one which should not be left to your mortgage lender.

The best way to answer the question of how much can you afford for a home is to start with your monthly budget and determine what you can comfortably pay for a home each month. Then, using your desired payment as the starting point, use a mortgage calculator to work backwards in order to find your maximum home purchase price.

Note that today’s mortgage rates will affect your mortgage calculations so be sure to use current mortgage rates when you’re doing your calculations. When mortgage rates change, so does home affordability.

Zero Down Mortgage Loans

Zero down mortgages are 100% financed loan types offered by the U.S. Department of Agriculture (USDA loan or “Rural Housing Loans”) and the Department of Veteran Affairs (VA loan). Additionally there are several low down payment options like the FHA loan (3.5% down), the conventional 97% (3% down) and the HomeReady mortgage (3% down).

By 8thnsBrowse articles, Recent articlesDecember 9, 2017December 13, 2017 No comments yet

Why You’ll Adore The Mortgage Interest Deduction During Tax Season!

Soon Uncle Sam is going to be knocking on your door with his hand out. While April 15^th is perhaps our least favorite day of the year, there are things you can do to save on your taxes. For example, you can save a bundle on your taxes by using mortgage interest deductions.

I would never recommend buying real estate because of the tax deductions that you will receive; but since you already have this property, let’s make sure it works for you. One way your house can save thousands of dollars every year is to make sure you are taking all of the allowable IRS deductions.

What is the Mortgage Interest Deduction?

This IRS tax deduction allows you to claim all of the annual interest payments you have made on your mortgage. This can substantially lower your tax bill. It is sort of the IRS’ way of rewarding you helping the economy by buying a home instead of renting.

Your largest mortgage interest deduction is going to be right at the start of your mortgage – now how nice is that? Since you pay more interest than principle in the beginning of your mortgage, your tax deduction will also be larger.

For example, say you financed $250,000 last year when you bought your house. The 30 year mortgage carried an interest rate of 4.5 percent. Your payment is $1,267 per month. During the year of 2016, you will have paid $11,167 in interest. Now wouldn’t you say that is a nice IRS deduction? But as time passes and you start paying less interest and more principle, your deduction is going to diminish. For example, 10 years later, your deduction is only going to be $8,881.

How to Deduct Your Mortgage Interest?

First, if you want to use the mortgage interest tax deduction, then you will have to itemize your deductions instead of taking the standard deduction. What is nice is that most of the online or tax software programs will allow you to test out both scenarios to see which total deduction is higher.

What Other Home Expenses can I Deduct?

Your mortgage interest is, by far, the largest single deduction you will make. But while you are itemizing all your deductions, you might as well include all of the other deductions allowed from owning a home.

On your itemized deduction sheet, you can also claim your property taxes and mortgage insurance. There are also deductions such as installing a home office or renovation work – but just make sure you consult with your CPA first to get all the details.

You need a place to live. You have to pay the interest on your mortgage. You might as well make that money pay you something back. Itemizing your tax deductions, so that you can include all your mortgage interest and other allowable living expenses, is an ideal way to do that.

By 8thnsBrowse articles, Recent articlesDecember 9, 2017December 13, 2017 No comments yet