The Advice That Makes A Difference

Archive for: August, 2010

Short on cash for a down payment? Here are some of the best resources

Sunday, August 15th, 2010

You’ve found the perfect house. Prices of homes and interest rates are are still low. There’s just one thing standing between you and your dream home: a down payment.

Coming up with a down payment can certainly be the hardest part about being able to afford a new house, especially if this is your first home. However, there are more than just a couple of ways you can do this.

So don’t abandon your homeownership quest just yet. Here are some of the best ways to come up with the cash for your new home.

1. Use Special Programs. There are many programs that are designed for the underfunded purchaser. Many state and local government agencies offer down payment assistance programs and don’t forget some non-profit agencies offer help as well. Each jurisdiction offers a different program. Please contact me for specific guidelines and restrictions for each locality.

2. HUD Homes. FHA offers homes that have been repossessed, however to purchase these homes the required down payment is only $100.  To view these homes in the area you wish to live go to HUD.GOV and search for HUD homes or you can go directly if you click here. Keep in mind not all lenders offer financing for this type of program, make sure your lender is able to provide this type of financing on your behalf.

3. Bridal Registry. In 1996 HUD or FHA released guidelines for creating a special type of bank account for gift funds provided to the borrower from other individuals, called a Homeowner Bridal Registry Account. The intent was to give couples planning to get married the opportunity to amass monetary gifts from friends and family for the specific purpose of making a down payment on a home.

4. Gifts. Gifts can be allowed for 100% of the down payment. However the gift must come from a bona-fide family or family-type member.  Non-profit agencies may provide gift funds, but cannot pay other non-affiliated outside borrower costs. Also, guidelines on gifts can vary based on the type of loan program (i.e. Government or Conventional).

5. Borrow From Your 401K. Do you have a retirement in a company savings plan? Why not borrow against your 401K for the down payment. The cons to this strategy is that the loan would have to be repaid back and the monthly payment would be counted against your debt-to-income ratio. Make sure you consult with a tax professional before attempting to do this strategy.

6. Tap Into Your IRA. If this is your first home purchase, let Uncle Sam (IRS) help you out.  The tax laws will allow you to use up to $10,000 from your IRA for a down payment on a purchase of your first home. If you’re married and you both are first-time buyers, you each can pull from your retirement accounts, meaning a potential $20,000 down payment. Make sure you consult with a tax professional before attempting to do this strategy.

7. Get a Second Job. Get a part-time job to provide your down payment.

8. Increase Your Withholding. If getting a second job doesn’t pan out for you then you may want to increase your withholding in anticipation of your standard deductions in owning a home. You will be able to take home more income and save for your down payment. However, be careful with this strategy as you may want to consult with a tax professional in regarding the potential tax consequences.

9. Sell Your Unwanted Items on Ebay. Yep, I said it. You could have a garage sale or a typical auction to sell your items. Why not sell them on Ebay and get some extra cash to help with your down payment.

Hopefully this will help you think of some ways to come up with a down payment. These 9 are some of the better ones “in my opinion” to use in assisting you to become a homeowner. For other free tips on educating yourself on getting the best out of your home purchase, feel free to click here and sign up for your FREE weekly tips on the path to homeownership. Also, feel free to contact me to discuss even more ways to come up with a down payment.

Until next time…

Geoffrey Bolen
Your Mortgage Advisor For Life
Primary Residential Mortgage, Inc.
Phone: 301-588-4701 x84 | Fax: 301-588-4709
Email: gbolen@primeres.com

P.S. It’s my intentions to continue building lifelong relationships one client at a time and remain your personal mortgage advisor for life. If you know of a friend, family member, or coworker who is looking for financial options, either through purchasing or refinancing a home, don’t keep me a secret. Be sure to call or send me an e-mail, I know someone. Your referrals are the greatest compliment I can receive.

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Why are condos getting harder to finance?

Monday, August 9th, 2010

Condos – As anyone who has been “in the market” for a while knows, loans on condominiums have been getting more expensive and harder to get over the last few years.   Well, it’s getting worse.    Let me explain the what and “guess” the why:

The way it was – The way it was, a condo loan would have additional fees on it equal to .25% of the loan amount.   So, a condo loan for $100,000 would have approximately $250 in additional fees.

The way it is now – if a borrower is at over 75% of the value of the property and has a loan term that is longer than 15 years, the fee for being a condo goes from.25% of the loan amount to .75% of the loan amount.    That’s a 300% increase.   If someone doesn’t want to pay the fee, they are going to end up with approximately a .25% higher rate.

Why are they doing that?  A couple of guestimates:

The reason that the expenses and difficulty of getting loans on condos has been happening because a condo’s value is more closely tied to it’s neighbors than the value of a single family home is.    If the neighborhood that I live in has 30% of the homes in foreclosure (there are 5 that I can tell right now), that’s going to impact the value of my home, probably quite substantially.   But let’s say that I live in a condo project and we’ve got 30% of our condos in foreclosure, that means that not only do I have the impact of my neighbors lower values, but I’ve also got a situation where the homeowner’s association is losing out 30% of the homeowner’s association dues.   That means that they aren’t going to have enough to pay all the bills – the insurance, the maintenance, the lawn maintenance etc.    That will have a bigger impact on the value of a condo in that project and that’s why condo loans are more expensive.

The fact that these costs are increasing says a couple of things:  1) That the losses on loans on condos are not going down, but are probably actually getting worse.   2) That the secondary mortgage market believes either that the market is going to get worse regarding condos or if it’s going to stabilize, it’s stabilizing at a loss level that’s higher than what the current fee levels can support.

In short, the “market” thinks that the condo market isn’t at the bottom yet…….

Until next time…

Geoffrey Bolen
Your Mortgage Advisor For Life
Primary Residential Mortgage, Inc.
Phone: 301-588-4701 x84
Fax: 301-588-4709
Email: gbolen@primeres.com

P.S. It’s my intentions to continue building lifelong relationships one client at a time and remain your personal mortgage advisor for life. If you know of a friend, family member, or coworker who is looking for financial options, either through purchasing or refinancing a home. Be sure to send me an e-mail, I know someone. Your referrals are the greatest compliment I can receive.

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Several Reasons Why Choosing An FHA Mortgage Is Still a Great Bet

Monday, August 2nd, 2010

When exploring your options for financing today, I believe everyone should at least consider an FHA Mortgage.  Today, I want to tell you why:

1. Loan Amounts

The loan amounts available (especially in High Cost Areas, like the Washington, DC metro area) are on a par with Conventional Financing.  In the past, FHA programs were typically only made available to the more low-to-moderate housing price ranges.  Now, practically every community can enjoy the benefits of FHA financing.


2. Old Stigmas Are No Longer True

It used to be that “FHA takes Longer” or “FHA loans are more expensive” or “FHA has tougher appraisal guidelines”.  Over the past few years, FHA has given more and more responsibility to its Direct Endorsed Lenders in the underwriting arena.  Additionally, the Secondary Market has worked to price Mortgage Backed Securities for FHA loans more aggressively.  There is now little difference in turnaround times, pricing, and appraisal issues between FHA and any other loan product.

3. Minimum Down Payment

On FHA loans, you can put as little as 3.5% down. However, there are certain FHA loan programs that allow for you to buy a home for as a little as $100 down (this only applies to HUD owned properties), otherwise the minimum down payment is 3.5%. Conventionally, even the 5% minimum down is very difficult to obtain without pristine credit and strong liquid reserves….more often than not, you need 10% down on most conventional loan products.  This is a huge consideration for first time buyers (who struggle with savings) and move up buyers (who have lost much of their equity over the past few years).

4. Source of funds

While the FHA does require a minimum investment by the Buyer of 3.5%, all of those funds can be gift monies from a family member.  There are many potential home buyers who are unaware of this niche in FHA lending that can help people with sufficient credit and income, but limited cash accumulated, who have relatives looking to help them become homeowners.

5. For now at least, a 6% Seller’s Concession

With so much available inventory, home sellers are more likely to structure transactions wherein they (the seller) will pay the closing costs and or pre-paid expenses on behalf of the buyer.  The ability to reduce or even eliminate closing costs for a buyer is a terrific incentive for the buyer to choose one house over another.  Once again, less cash needed to close is a good thing!  FHA has proposed lowering the amount for sellers to pay from 6% to 3% (Not a great idea). But, for now, 6% is the most liberal sales concession in the market.

6. Leniency of Credit and Income Standards

In so far as the FHA is really a Federal Insurance Program that insures lenders in case of borrower default, the Program gives approved lenders the flexibility to make more common-sense underwriting decisions.  Historically, lenders are more understanding of past credit challenges and more aggressive in income debt ratios because the government insures these loans this in turn, helps get more borrowers approved.

7. FHA Loans Are Assumable

Five to seven years from now, when a home buyer is looking to become a home seller, nearly every expert in the world envisions higher (more “normal”) interest rates of 6.5%-7.5%.   An often-overlooked feature of FHA loans is the fact that a new buyer can take over the seller’s loan at the seller’s interest rate (assuming they qualify based on their income, assets, and credit).  What that means is, if you close today on an FHA loan at 5%, you can sell your home with a 5% mortgage, while your “competition” of home sellers will be handicapped with higher rates.  That factor alone could make your home 5-15% more valuable (because home buyers buy more on monthly payment than they do on sales price).

Hopefully I opened your eyes to explore some things to consider when choosing your mortgage.  Now, FHA is not a perfect loan for everyone (largely due to the costs of the FHA insurance premiums); however, it is a great vehicle for many home buyers.

Feel free to contact me, I would be more than happy to help you with your mortgage financing needs.

Until next time,

Geoffrey Bolen
Your Mortgage Advisor For Life
Primary Residential Mortgage, Inc.
Phone: 301-588-4701 x84
Fax: 301-588-4709
Email: gbolen@primeres.com

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