Top Ways to Get Your Down Payment

The most common issue for a first time buyer usually seems to be…"How do I get the money needed for down payment on a home purchase":

1. Get A Gift – With FHA, the buyer can get a give from a relative for the down payment and closing costs. 
2. Down Payment Bridal Wedding Registry – Gives a couple an opportunity to received wedding “gifts” through a dedicated bank account to collect down payment funds for a new home
3. 401K Loan – You can borrow the money from yourself, in most cases this loan will not count against your qualifying debt to income rations and as a first time home buyer the most 401K programs will allow for this transaction,
4. Life Insurance – If you have whole life policy you can either borrow against it or cash it in.  
5. Secured Loan -  If you have an asset that is free and clear such as a vehicle you may be able to get a secured loan against the value of the asset.
6. DPA – Several government entities offer down payment assistance programs for first tie home buyers
7. Sale of Personal Property - With verification of value and bill of sale, the funds form the sale of personal property can be used for the down payment.
8. Human Resources – Some employers offer down payment assistance as a benefit to the employees.  These awards are eligible for down payment through FHA financing.
9. Tax Refund – A buyer can use this years tax refund to become a homeowner.  A copy of this years tax return and a copy of the refund check or bank statement showing the amount of the refund on the deposit is all that is required.
10. Second Job – Even though we may not be able to use this income to qualify the borrow if the borrower has not had the job for 2 years, the cash earned from the second nob can be used for the down payment.
11. Savings/Budgeting – Cutting back on extras along with anyone of the abve mentioned ideas will get you into a home faster.

There are some many reason why now is the best time to purchase your first home.  Please contact me to find out more.

UPDATE: Many homes under contract will not be able to close after September 30 if Congress does not act

In an update to a previous post, the Senate voted in favor of an amendment that would reinstate the heightened conforming loan limits for mortgage loans backed by Fannie Mae, Freddie Mac, and the Federal Housing Administration (FHA). The amendment, introduced by Sens. Johnny Isakson (R-Georgia) and Bob Menendez (D-New Jersey), passed late Thursday with a 60 to 38 vote. 

The conforming loan limit was previously increased on a temporary basis to $729,750, but the rate expired September 30 and returned to its original rate of $625,500.  The house still needs to approve, if approved the conforming loan limit will rise again to $729,750 and remain there through 2013.

Home Appraisal versus Home Inspection

The mortgage settlement process, often referred to as the mortgage closing, can sometimes seem confusing and a little overwhelming. Whether you are buying a new home or refinancing an existing home, there are various fees to be paid and steps to go through. Two steps that are often confused by home buyers are the home appraisal versus home inspection. 

Remember the Difference: Home Appraisal versus Home Inspection
One easy way to remember the difference between an appraisal versus a home inspection is that a home inspection is for your protection. A home inspector will not estimate the value of your home.
Typically, home appraisals are for lenders; home inspections are for buyers.

  
What is a Home Appraisal?
A home appraisal is a document that provides an estimate of a property's price, otherwise known as its market value. Your home will serve as collateral for the mortgage, so a lender will require an independent appraisal on the property prior to the approval of your mortgage loan application. This is to ensure that the mortgage loan amount is not more than the value of the home and lot you want to purchase or refinance. Most lenders will loan you no more than 95 percent of the appraised value of the home or purchase price, whichever is less.

The person who conducts the home appraisal is called an appraiser. This person will consider several factors in developing the home appraisal, including location, square footage, recent sales of similar properties, and construction quality to estimate the property's market value.

There is a fee associated with getting a home appraisal. Some lenders and brokers will include the appraisal fee in the loan application fee; you can ask the lender for a copy of the appraisal. If you are refinancing and have a recent appraisal of the property, some lenders may waive the requirement for a new appraisal. If you are in this situation, you could save a few hundred dollars by using the existing appraisal.

FHA Loans Appraisal

Many mortgages are insured by the federal government through the Federal Housing Administration (FHA.) The FHA requires lenders to get an FHA loans appraisal on properties prior to loan approval. According to the FHA, they require appraisals for three reasons:

• To estimate the market value of the property.
• To make sure that the property meets FHA minimum property requirements/standards for health and safety.
• To make sure that the property is marketable.

An FHA loan appraisal document will indicate property defects that are easily noticeable and found not in compliance with U.S. Department of Housing and Urban Development's minimum property standards. These defects may not be the same as those items noted in the home inspection report. The estimated cost of a property appraisal is $263 to $444, with a nationwide median cost of $292.

What is a Home Inspection?

There are two types of home inspections, those required by the lender and home inspections initiated by the buyer.

A Lender's Home Inspection

A lender, especially one that offers Veteran's Affairs (VA) or FHA-insured mortgages, may require a home inspection and an analysis by an engineer or consultant to check for things like water damage, termite damage, and the structural condition of the home. In rural areas, lenders may want a test of the septic system (if applicable) and a water test to make sure the well and water system will maintain an adequate supply of water for the house. These water tests usually will check for water quantity, not quality. The health department of the local city government may require a water quality test as well, but this might be done outside of the mortgage settlement process and require a separate payment. Keep in mind that a lender's inspection is for the benefit of the lender, not you. You may want to ask for a buyer's home inspection to make sure the property is in good condition. The cost of a lender's home inspection will likely be between $300 and $500.

A Buyer's Home Inspection

Often, a buyer will make the purchase offer of a home contingent on the results of a home inspection. You will have to pay for this inspection. The cost varies by region, but spending hundreds of dollars could save you thousands.

When you make a purchase offer, sometimes called a binder, contingent on the results of a home inspection, it allows you to cancel closing on the deal if an inspector finds problems with the home or property. If deficiencies are found with the home, you may want to renegotiate for a reduced price or require the seller to make repairs to the home. If you are getting a VA or FHA loan, you will need a certificate from a qualified inspector stating that the home is free from pests such as termites and rodents. In this case, you can also make your purchase offer contingent on pest inspection results.

Similar to the lender's home inspection, an inspector should examine the home for structural soundness, water damage, and pests. In addition to these basic home inspection criteria, you may want to have the home inspection include an examination of the condition of the roof and the plumbing and electrical systems. It is also wise to have the home tested for environmental hazards that may not be visible to the casual observer. This may include testing for radon gas emissions, water quality, asbestos, lead-based paint and other toxic materials. If you are making your purchase offer contingent on the results for environmental hazards, make sure this is stated clearly in the conditions of your offer.

Remember, the easiest way to know the difference between an appraisal versus a home inspection is that an inspection is for your protection!

Sources
http://www.federalreserve.gov/pubs/settlement/default.htm

Possible New Downpayment Requirements for FHA

According to newswire, the House Financial Services Committee have drafted a bill to raise the minimum down payment for Federal Housing Administration-backed loans to 5 percent as well as cut FHA loan limits in many markets.

The current minimum requirement for most home buyers is 3.5%

To read the entire article click here. To find out about homes in your area, click here.

FHA Launches Short Refi Opportunity for "Underwater" Homeowners

Federal Housing Administration (FHA) announced earlier this month a new program “FHA Short Refinance” to help responsible homeowners who owe more on their mortgage than the value of their property. Starting September 7th, 2010 FHA will offer certain “underwater” non-FHA borrows who are current on their existing mortgage and whose lenders agree to write off at least 10% of the unpaid principal balance of the first mortgage, have the opportunity to qualify for a new FHA-insured mortgage.

There are qualifications that must be met. The homeowner must qualify for the new loan under standard FHA underwriting requirements and have a credit score equal to or greater than 500. The property must be the homeowner's primary residence. And the borrower's existing first lien holder must agree to write off at least 10% of their unpaid principal balance, bringing that borrower's combined loan-to-value ratio to no greater than 115%.

To read more on this topic, you can refer to FHA’s published mortgage letter that provides guidance.

FHA: Facing Reality

The Federal Housing Administration has been focusing its efforts to shore up its finances on stricter rules for lenders, but in testimony before the House Financial Services Committee on Wednesday, Housing and Urban Development Secretary Shaun Donovan is expected to announce changes to rules for borrowers, requiring more skin in the game.

Changes expected to be announced at the hearings include:

•Borrowers will need to put more money up front. Right now borrowers can put down as little as 3.5 percent. One bill in Congress calls for that to be raised to 5%. Private lenders today require between 10% and 20%. Most want 20% unless your credit score is above 750.
•Borrowers may have to pay more in insurance premiums. Right now that premium is 1.75% of the loan value plus 0.5% or 0.55% per year.
•Sellers will be restricted by how much they can help the borrower. Right now a seller can pay as much as 6% of the home's value in closing costs. The maximum level is expected to be lowered to 3%.
•Borrowers may need better credit scores. Right now the score can be as low as 500. While that's the law, lenders don't usually accept scores that low. The FHA is expected to raise that minimum score. This may not be as noticeable as the other changes because most lenders do expect a higher score, but this change will prevent abusive lenders from lending to unqualified borrowers.

The take away: Change is coming and its time to make the purchase of your new home.

To read the entire article: FHA Finally Facing Reality

HOMEBUYER TAX CREDIT CAN IMMEDIATELY HELP THOUSANDS OF FIRST-TIME HOMEBUYERS TO BUY A HOME

Speaking to the National Association of Home Builders Spring Board of Directors Meeting, U.S. Housing and Urban Development Secretary Shaun Donovan today announced that the Federal Housing Administration (FHA) will allow homebuyers to apply the Obama Administration's new $8,000 first-time homebuyer tax credit toward the purchase costs of a FHA-insured home. Donovan said that today's action will help stabilize the nation's housing market by stimulating home sales across the country.

The American Recovery and Reinvestment Act of 2009 offers homebuyers a tax credit of up to $8,000 for purchasing their first home. Families can only access this credit after filing their tax returns with the IRS. Today's announcement details FHA's rules allowing state Housing Finance Agencies and certain non-profits to "monetize" up to the full amount of the tax credit (depending on the amount of the mortgage) so that borrowers can immediately apply the funds toward their down payments. Home buyers using FHA-approved lenders can apply the tax credit to their down payment in excess of 3.5 percent of appraised value or their closing costs, which can help achieve a lower interest rate.

To read the entire news release click here.