Control Your Credit so it Doesn’t Control You!

credit-meterAll throughout school we are graded.  After graduation we tend to have the mindset “YES! I passed! No more teachers, no more grades!”

However, that is not the case – not at all.

From childhood into the first few years of our adult lives we receive report cards stating how well we did on an academic grading scale.  After that, we are graded based on our financial habits: our credit.

So, what is credit?

In its simplest form credit is trust.

If you don’t have good credit, you don’t trust.  If you don’t have trust, you won’t have anything.

Credit gives us the ability to acquire goods and services before making an actual payment or before paying off a balance in full; we are able to borrow money or purchase items on credit.  This system is all done based on an agreement, based on trust, that the balance due will be paid back in a timely fashion.

Your credit could be the deciding factor on weather you are able to become a homeowner or not.

Related: Low Credit FHA loans

Trust must be gained

Likewise, credit must be gained, it is not given.  It is something you must work towards and earn.

Similar to employers needing to see your resume prior to determining if you are right for a position, lenders must look at your credit report to see if you are eligible to receive their trust – that is, to see if they allow you to take out a line of credit: a credit card, a loan, a mortgage, etc.

What is a Credit Report?

A credit report is a financial report card. 

A variety of financial information is taken into account and provided in a credit report: bill payment history, loan repayment history, amount of credit, amount of debt, public records, account types (bank accounts, student loans, mortgages, etc.), bankruptcies, etc.

The information provided on your credit report is used to calculate your credit score. 

What is a Credit Score?

In comparison to the academic grading system, your GPA (grade point average) is equivalent to your credit score (AKA FICO score).

Your grades are used to calculate your GPA; your credit score is calculated by the information in your credit report.

Credit scores are represented by numbers: 300 to 850:

  • Excellent: 720 to 850
  • Good: 680 to 719
  • Average: 620 to 719
  • Poor Credit: 580 to 619
  • Bad Credit: 500 to 579
  • Miserable Credit: 300 to 500

The higher your credit score is the better off you are.  Your score affects whether you are eligible to borrow money, the amount you are eligible to borrow, the interest rates of the loan and the terms you have to abide by.

An excellent credit score of a 720 or higher means that you are a low risk borrower.  In other words, a lender trusts that if they lend to you, you will make all of your payments on time throughout the life of the loan; they trust you.

On the opposite side of the spectrum, if you have a miserable credit score lenders categorize you as a high risk borrower.  That is, they are much less likely to lend to you because they will not trust you enough to pay them back.

If you don’t have the best credit you may still be eligible to buy a home with bad credit by working with the loan officers at Riverbank Finance LLC.   

In sum, the higher your credit score is the more opportunities you will have.

Credit Bureaus

Credit bureaus, or credit reporting agencies, gather your credit information and provide your credit reports.

There are three Credit Bureaus or Credit Reporting Agencies: Equifax, Experian and TransUnion.

It is important to know that not all of your information is reported to each of these bureaus.  One may receive your credit card information, while the other two will not.  Another bureau may receive your mortgage information and not the others, and so on and so forth.  Therefore, each bureau may provide you with a credit report that varies from the other two.

You are entitled to a free annual credit report from each of these bureaus.  You are able to request your credit report(s) at www.annualcreditreport.com (or call 1-877-322-8228).

Riverbank Finance also offer an instant credit report online that you can request for a home purchase.

Better yourself, better your credit!

If you would like your credit score to be higher than what it is you may want to make some lifestyle changes.

Some key pints to live by:

  • Pay your bills, and pay them on time!
  • If you do miss a payment pay it ASAP! Try your hardest to stay current on your bills.
  • Pay off your debt, don’t add onto it.
  • Keep your credit balances low.  Maxing out your credit cards month after month make it seem like you are irresponsible.
  • Do not open unneeded credit accounts.  According to Credit Karma having four to six credit cards open is a healthy if you manage them currently – it will make your look responsible!
  • Check your credit report and make corrections when needed.
  • Do not be afraid to get help! If you are concerned or unsure of what to do when it comes to your credit ask a professional.

Remember, your credit can change your life for the good or for the bad.  Control your credit so it doesn’t control you and our life!

Tips to Avoid Closing Delays when Buying a Home

Things to avoid when buying a home in Michigan.Mortgage Closings are stressful. Let’s not add to it!

Congratulations! You have found the home of your dreams! You have all of your documentations in order! You are ready to move in! All you have to do is close on your mortgage! But wait, did something go wrong that could potentially prolong your loan closing? Was it something you did? Was it something you could have prevented?

When something goes wrong and there is a delay in the close date it can be very disappointing and frustrating.  Unfortunately, we see this happen all too often when home buyers create delays on their own loans. Here are some tips that should be followed during the process to make sure you cause no closing delays.

RELATED: First Time Home Buyer in Michigan

Be accessible and keep in touch with your loan officer

Stay in touch! Do not go out of town and do not change your phone number.  Make sure you are available to all parties involved in your closing. When underwriters or title companies need documents and information they need them now!  So stay connected, check your email and listen to your voice messages.  If information is not given in a timely fashion your closing date won’t be either.

Look for incorrect information on your mortgage documents

Incorrect, misspelled or missing information is a huge problem during the closing process that could delay it.  It is important to check over all documents and information prior to closing.  Correct all information as soon as you notice it is not correct.  Finding out information is not as it should be at closing could delay the process for days.

So, stay connected with your resources and sort out all of the little things as they come – don’t wait until the end!

Things to double-check on your mortgage paperwork include: loan amounts, down payment amounts, interest rates, name spelling, social security numbers, previous addresses, employer information etc.

Do not change jobs, become “self employed” or quit your job

Doing this is a sure way to prolong the process of purchasing a home.  Underwriters require you to provide a month’s worth of paystubs during the process of buying a house.  Therefore, if you change your employment and/or income you will need to provide another month’s worth of paystubs which could lead closing to be pushed back more than six weeks.

If you become self employed, commission based or a contract employee that gets paid by 1099, you may need a 2 year history to prove your income. Changing to self employment will surely delay your loan closing.

Stay with your current employment and income throughout the entire process of purchasing your home.

Managing your Bank Accounts wisely

Do not do anything that could dramatically change what you have in your savings and checking accounts including: transferring large amounts of making large deposits into your bank accounts or making large purchases.

Just because you have to money in your account doesn’t mean you can afford to spend it. If your underwriting approval is based on your current statement balance, spending money by making large purchases could delay your loan closing.

How much you have saved is a big deal to lenders.  It tells them that you have enough for a down payment and that you will be able to pay your monthly mortgage payments.  Changing the assets in your savings and checking accounts could change their minds about you and your financial situation.

When large amounts of money are transferred or deposited a red flag goes up that is often seen by lenders.  This leads them to wonder if you have recently taken out an additional loan (or cosigned a loan) that they are unaware of – is your debt larger than what they thought?

If you are getting a gift for your down payment or closing costs, be sure to speak with your mortgage loan officer about the process that needs to be followed to use these funds. You will need to fully document the source of the funds and provide a letter stating that no repayment is required.

Try your hardest to keep your bank account relatively the same throughout the process and speak with your loan officer before you make adjustments.

Do not jeopardize your credit score

Keep your credit score the same as it was when you were approved for the mortgage.  If it changes it could change your approval status and your eligibility for the mortgage.

Do not take out more debt during this process!

So, try your hardest to keep your credit card balance(s) at a minimum – don’t max them out.  Don’t take out addition loans or cosign loans.  Don’t take out new credit cards and do not close old ones.  And of course, pay your bills on time.

Most Importantly – DO NOT GIVE UP!

There are many hills (some feel like mountains) to climb and many bumps avoid during the closing process.  It is stressful and sometimes frightening but don’t get scared!  Keep chugging along!  If you are unsure of what is going on ASK! Your loan officer will gladly explain exactly what you need to do to have a smooth closing.

There is light at the end of the tunnel – becoming a homeowner is part of the american dream!

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Let’s Pay Our Mortgage, Then Our Credit Cards!

happy couple signing mortgage documentsWhen you pay your bills, how do you prioritize?

Credit cards, mortgage, other bills?  Mortgage, credit cards, other bills?

The normal payment hierarchy, which mortgage lenders expect, ranks mortgages as the top priority when paying bills.

This hierarchy was not managed during The Great Recession – and as most of us personally know, still has a toll on us to this day.  Homeowners started prioritizing their credit cards higher than their mortgages.  People were defaulting on their mortgages, yet they still made it a point to pay off their credit cards.

Mortgages fell to the wayside while credit cards were keep current on.

A patterned formed during this time; as home prices fell so did the amount of people who paid on their mortgages.  This same correlation between home prices and mortgage payments was not seen in areas where home prices did not fall, or did not fall as dramatically (this varied from state to state and from region to region throughout the United States).

The reason:

The equity in many borrower’s homes was lost due to the rough shape of the housing market, and foreclosure on their homes was not immediate.  People felt stuck – they had to priorities against the guidelines of the normal payment hierarchy in order to make it.

And so, an abnormal hierarchy was formed; people held more value in their credit cards and car loans than their mortgage.

Related: Buying a Home with Bad Credit

Credit cards are essential in many of our day to day lives – without them, without immediate money at our finger tips, life would not be the same.

Life wouldn’t be the same without vehicles either.  For many, our vehicles are our only way of transportation.  Without them many people who live an independent lifestyle would have to transition into becoming very dependent on others – not an ideal way of living in such an independently driven society.

In short, not having credit cards or a car would immediately and drastically change our lives – not paying on a mortgage to a home that has no true value just didn’t measure up on the priority list.

Ahhhh, and so we have it, the financial circle of life.  But, don’t loss hope! Our ways of life change as the world and the society that takes up the world alter.

We are now in a transition!!

Now credit-reporting firms have seen a transformation from the abnormal payment hierarchy back to the normal hierarchy – it’s almost there!! This is an important step to increasing home values and getting our housing market back on track.

But why the transition back to normal?

Well, home prices are going up and have been for the past two years!  The negativity of The Great Recession is simmering down. Equity is building.  People are beginning to rank mortgages high again which means less people are defaulting on their mortgages.

That means lenders are slowly beginning to trust borrowers again.  This is great news! Although lenders still have stricter guidelines than Pre-Recession they seem to be lessening them.

That means that people with poor credit who aren’t eligible for a mortgage might be soon – once lenders trust the economy again. Learn how to buy a home with low credit scores.

So, let’s cross our fingers, hope for raising home prices, and mark mortgages first on our priority list!

It’s your first home, don’t let credit hold you back!

buy-a-homeCredit is Crucial!

When you start thinking of buying a home one of the first things you should do is check your credit score.  Contact a loan officer at Riverbank Finance to get a free credit report (or get an instant credit report online now).  If you find that you don’t have good credit, you may not get the best interest rate available – let alone get a loan at all.

Either way, good or bad credit, focus on paying your debt down.  Pay on your credit cards and make sure you are paying all of your bills on time.  You do not want to be turned down when applying for a mortgage, so focus a lot of your energy on raising your credit score.  If you have been turned down in the past due to poor credit score raising it can enable you to be approved in the future!

What is a good credit score, you ask?

720 and above is considered a good credit score, 750-850 is considered excellent!  However, if you do not have a good credit score you might still be eligible for a mortgage.  We have home loan options down to a 560 credit score for FHA loans and have lower score requirements than many banks and mortgage lenders. Check with a loan officer at Riverbank Finance to see if you are eligible for a bad credit mortgage.

Related: FHA loans with a 580 credit score

Save when you can!

Future home buyers should make sure their bank accounts can afford to put a down payment on a house and  have enough additional money to pay the extra fees involved in the home buying process.  Check to see how much of a down payment will be for your dream house and save accordingly.    

Budget, budget, budget!

Oh, did I mention to budget?

Buying a home can be very stressful.  Paying for it can be even more stressful – especially if your ways of living aren’t supported by your budget.  So be proactive about it!  Budget now so you won’t stress in the future.  When you budget ALWAYS consider the future, not just the present; what payment can you afford? What all will you have to pay for?

You know what assuming does . . . so don’t do it!

Do not look at your monthly mortgage amount and assume that you can afford your home.  A lot of other expenses should be considered when budgeting: utilities, amenities, taxes, day-to-day living expenses, etc.  This is a long term investment.  Therefore, your budget should be long term as well.

Remember, being a homeowner should be a rewarding and happy experience, so try not to set a budget that will make you stressed to the max.  Give yourself room to breathe – room to live.

Let the real fun begin!

It’s hard to budget when you aren’t exactly sure how much your future home will cost you.  So, look around for potential homes!  Narrow it down!  What city do you want to live in?  Neighborhood?  Street?  House?  The more specific you are the easier it will be to budget.

Use your resources.

Now, your budget will have to consider a variety of things: the type of loan, the loan amount, the interest rates, the length of time, etc.  These things cannot be known until you are approved by your lender for a mortgage on a specific home.  Talk to your loan officer about these things once you have found a house, they are there to help!  They can find the best loan and interest rates available to fit your situation.

Good luck!

Remember, Riverbank Finance is only a phone call or click away.  So don’t hesitate! Call us today with your questions or concerns.  We are always happy to help :)

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How Mortgage Lenders Choose Your Mortgage Rate

Mortgage loans are detailed products and it is fair to say that one size does not fit all when it homes to home loans. The interest rate that you may qualify for on a mortgage may be different than what others qualify for based on their situation. This short video from MSNBC explains how mortgages work and ultimately how lenders choose your mortgage rate.

Because each homebuyer has a different financial situation, it is important to work with a local mortgage company that offers multiple home loan options.

Below is a short list of mortgage options and their benefits:

Conventional Mortgage: A great mortgage option for high credit score buyers that have 5% or more to use for a down payment. This is one of the only mortgage options that you can get rid of PMI (private mortgage insurance).

FHA Mortgage: FHA loans are great for homebuyers with bumps in their credit past of even first time home buyers. Qualification requirements are easier than conventional mortgages because these loans are insured by the federal government.

VA Loans: A great mortgage for military veterans is a VA Loan which is a zero down mortgage. While there is an up front guarantee fee charged by the Veterans association, there is no monthly PMI which helps to keep payments low and affordable.

USDA Rural Development Loans: The RD loan is great zero down home loan that is great for first time home buyers. This type of mortgage allows a homebuyer to buy a home with no down payment and the sellers can pay your closing costs. Qualifications are easier than conventional mortgages however there are restrictions on income and the location of the home.

What Mortgage Rate Will I Get?

To see what mortgage rate you qualify for call Riverbank Finance at 1-800-555-2098 or request information below.

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The Housing Market is Recovering Thanks to Expanded FHA Guidelines

home-buyers-looking-at-homes-for-sale

Major economic growth has happened within the last few years.  This growth has allowed the housing market to build back up from the Great Recession – bringing home prices up as much as 13% in the past year!

This has help to aid many underwater homeowners to the surface – that is, if they have been able to sell their homes.

Home prices are going up, equity is increasing, but lenders are becoming stricter than ever! Mainly when it comes to credit scores on conventional loans.

Lenders want to ensure their safety, that is, they want to make sure that if they lend to you they will not take a loss because you were unable to make your mortgage payments on time.  Therefore, they take a look at your credit history to make sure you are reliable for a loan.  Nowadays, if you have a less than perfect credit score most lenders will turn you away – scared that you will not be able to fulfill your mortgage obligations.

And so, home prices are on the raise, it would seem as though the economy is too.  But that isn’t the entire truth – yet.

Because of uncertainties lenders have about who they lend to they have begun to become stricter about who they let borrow.  They adapted their guidelines and changed the minimum credit score needed to be eligible to get a mortgage – it has risen.  This has caused many potential mortgage borrowers to be turned away; people who used to be seen as creditworthy are now being turned down for mortgages.

The U.S. Government (FHA and FHFA) has a problem with this trend with the large banks.

The government believes that creditworthy individuals should be able to take out a mortgage and that the minimum credit score should not have changed.  Individuals with good credit, before many lenders raised the minimum credit score needed, should be able to get loans.

As of this month the U.S. Government is making changes to strengthen the present housing market, and to build and strengthen the future economy. The FHA has committed to helping individuals receive loans who meet their credit guidelines.  These loans can be given without the distress of penalty for banks and lending institutions.

According to Ellie Mae the average credit scores on loans closed in April 2014 was 726. Many lenders have increased their minimum credit standards to attract only high credit borrowers. Riverbank Finance LLC has used this as an opportunity to offer loans to the undeserved lower credit score borrowers offering FHA loans down to a 560 credit score.

Since this, some lenders have reduced their minimum credit score needed for eligibility, therefore, more people will be eligible for mortgages.

Hopefully this will help to make the economy strive!

More Information on FHA Mortgages

For more information on low score FHA mortgage loans request information below or call Riverbank Finance LLC at 1-800-555-2098.

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Top 10 Mortgage Mistakes that Slow Down Home Loans

Top 10 mortgage mistakes that hold up the home loan process.

In today’s competitive real estate market it is important to get through the mortgage process quickly and efficiently. Avoid these top 10 mortgage mistakes to keep sellers happy and close your loan quickly!

  1. Mortgage Underwriters are picky! They will not accept incomplete documents. Be sure to provide ALL PAGES of required documents including Bank Statements, Divorce Decrees, Tax Returns etc.
  2. Do not alter or black-out documents. Lets face it, if you applied for a mortgage they already have your personal information. Blacking out account numbers and other information will only create delays.
  3. Underwriting guidelines do not allow items to be added onto a purchase agreement that are not attached to the house. Items such as lawn mowers, T. V.s, audio equipment, and furniture are all culprits that must be removed from the purchase agreement.
  4. Gaps in dates will be a cause of concern for underwriters. There cannot be a gap of employment information or residency information. Also pay stubs and bank statement dates must connect without gaps!
  5. Changing jobs during the home loan process is asking for a delay or loan denial. Even if you are taking a job with higher pay, making the transition is risky business. Underwriters will require a full month of pay stubs which will set you back 6 weeks!
  6. When buying a home you will need to provide bank statements to prove you have money for funds at closing. A common mistake is making large cash deposits without documentation. You will be required to document and explain each deposit.
  7. When you meet with your loan officer to apply for a mortgage, be sure to explain all the details. If you withhold information or bend the facts, underwriters will find out which will cause delays and require extra documentation and explanations.
  8. For purchases, most loan types allow gifts to be given for down payments and closings costs, however, there is a specific process to receive these funds. Gifts also must come from acceptable sources so speak with your loan officer before transferring money.
  9. Applying for other credit while buying a house may cause your loan to be denied. Wait until your loan closes before you take out that loan for new furniture. Underwriters repull credit before allowing you to close. This will alert them if you applied for credit.
  10. Home loans are time sensitive. Rate locks and purchase agreements expire so it is crucial that you return documents quickly! Do now wait until the last minute to send in that update. It takes time to review and approve documents so act quick!

Free Mother’s Day Gift Ideas

Free Mother’s Day Gift Ideas

At Riverbank, it is our goal to help save you money so why not start by cutting down the costs of making mom happy. Don’t let Mother’s Day transition into feelings of stress rather than of love and happiness. Thankfully for you, Riverbank Finance has come up with a list of the top ten mother day gift ideas. Oh, and did I mention these gift ideas are free? Check them out:

Top 10 Free Mother’s Day Gift Ideas:

1) Breakfast in bed

Whether you are a professional chef or not, this Mother’s Day gift idea will make mom’s heart melt and won’t break you fast.

On Mother’s Day get up extra early and raid your mom’s cupboards, cabinets, refrigerator and any other place she may be storing breakfast food. Once you have come up with a good selection of food for a tasty meal get to cookin’! Doing this will save you money and ensure that your mom will be consuming foods that she actually likes.

Remember, it’s the thought that counts. So, even if the meal you cook isn’t award winning, odds are your mom will still love it.

2) Take mom on a relaxing walk

Spring is a beautiful time of the year, full of bright colors and comforting smells- especially in Michigan. This Mother’s Day take mom for a walk down the road, around town or through a nature preserves. On this walk you will be able to express your feelings and gratitude towards your mom. This is a great opportunity for the two of you to relax and bond!

3) Mother’s Day Card

A thoughtful card is a sure way to make mom smile; a handcrafted, thoughtful card is a sure way to make mom tear up. So grab a few pieces of paper, cut out a few cool designs, and construct a unique, one of a kind card for you mom. Inside, describe how much mom means to you. And of course, sign it with love from her favorite child – you!

4) Best Mother Ever Award

Your mom probably has many cards expressing love but, does she have an actual award to prove that love? Create a Best Mom Ever Award on your computer or out of craft paper.

On it state: “The 2014 Best Mother Ever Award goes to _(Insert your mom’s name)_.”

In the bottom right hand corner of the award state: “This award has been presented by _(Insert your name_.”

Now your mom has proof that she is in fact the best mom ever and can rub it in her friend’s faces.

5) Poem

Nothing says I love you more than a heartfelt rhyme or melody! This Mother’s Day use your words and write mom a poem that expresses your love and feelings towards her. Better yet, turn that poem into a song that you can sing to her on Mother’s Day!

6) Draw mom a picture

A picture says a thousand words. So if you are not very good at verbally expressing your feelings draw mom a picture that does it for you! You don’t have to be an artist to create a masterpiece for your mother – she will love your picture no matter what! If you have a few dollars to spare, purchase a nice frame for your artwork so that your mom can hang it on her wall for all to see. If not, your picture will be a great decoration for your mother’s refrigerator!

7) Mow mom’s yard

Mother’s Day is here and that means spring is too! With spring comes the bright colors of nature, beautiful flowers and of course, the much hated lawn work. Your mom probably hates mowing the lawn as much as the next mom. So do mom a solid and mow the lawn for her this Mother’s Day!

8) Wash mom’s car

The birds are back and the pollen is flying! Needless to say, your mom’s car needs a nice bath. Grab your cleaning supplies and make mom’s car squeaky clean this Mother’s Day.

9) Dish Duty

Most families gather together and enjoy a meal on Mother’s Day. If your family engages in this tradition, help mom out and do the dishes! This will give mom time to relax after she has gorged herself from the delicious Mother’s Day meal.

10) Clean the house

If your mom has not already taken part in the annual tradition of spring cleaning you can start for her! You do not necessarily have to deep clean your mom’s house, but that could win you brownie points over your siblings.

Tasks while cleaning include but are not limited to the following: dusting, dishes, vacuuming, organizing, sweeping and mopping.

Happy Mother’s Day!

New MSHDA Grant | MSHDA Down Payment Assistance Flaws

 MSHDA Down Payment Assistance

What everyone is referring to as the new MSHDA grant is not free money. Actually, it is not even a grant. It is a second mortgage that may be used in place of a down payment when buying a new home in the form of down payment assistance. Contrary to what most people assume, it is not free money and must be repaid.

What is the MI Next Home Program?

The MSHDA MI Next Home Program is a program announced February 24th, 2014.  It was highly publicized making its way onto local news channels and newspapers.  Many potential home buyers will have heard of this program so it is crucial to know the details so time is not spent under the assumption that they can received the funds only to find out they do not qualify for the program and cannot complete the closing.

Michigan State Housing Development Authority’s new program is a down payment assistance loan that may be used to pay the down payment, prepaid items and closing costs when buying a new home. An eligible borrower may receive a second mortgage up to $7500 or 4% of the purchase price, whichever is less. This money will be funded to the escrow agent at close and a lien will be recorded against the property. When the property is sold or transferred, the homeowner must repay this money.

Who is Eligible for the MSHDA MI Next Home Program?

While there are some people that may be eligible for the $7500 down payment assistance from the MSHDA MI Next Home Program, many will not qualify due to income limits, too much in assets or even not enough in assets.

A home buyer that may be eligible for the new program must have owned a home in the past. They must be under the income maximum requirements and loan size limits. They also must be able to cover a minimum of 1% of the loan amount with their own assets but still not have assets available to cover the full down payment themselves.

Downsides to the Down Payment Assistance Program (DPA)

While many homeowners would like to keep extra money in their pockets when purchasing a home, the down payment assistance program may not be a wise choice for most home buyers even if they are eligible. The downsides to this DPA program include, potentially higher rates, potentially higher costs, less loan options, a lingering lien that never goes away and unexpected loan denials.

MSHDA Downsides to Consider

  • Not Free Money – It is a Second Lien that MUST be repaid
  • Property cannot be transferred without paying off the 2nd mortgage
  • Property cannot be refinanced without paying off the 2nd mortgage
  • Interest Rates may be Higher
  • Borrower is Required to pay a minimum of 1% in closing costs out of pocket
  • Borrower may not have funds available to cover the down payment on their own
  • Borrower cannot receive down payment funds from the sale of their current home
  • 2nd mortgage never goes away until it is repaid
  • Conventional financing is not available
  • May delay the Home Buying Process as it must be approved by MSHDA after full loan approval
  • There are Income Limitations
  • There are purchase price limitations

MSDHA sets the mortgage rates for the first mortgage that goes with the down payment assistance loan. There is no rate shopping or qualifying for a better rate if you have better credit – it is a take it or leave it rate option.  Below is a comparison of a Rural Development loan with the DPA program and a standard Rural Development mortgage. On Rural Development loans, mortgage insurance, taxes and home owners insurance will be the same so let’s compare just the principal and interest of the loan itself.

Standard RD Loan
MSHDA DPA RD Loan
Interest Rate3.75% / 4.138% APR**4.75% / 4.857% APR**
P&I Payment$ 708.57$ 798.12
Down PaymentZero DownZero Down + 2nd Mortgage
Borrower Required to Pay $0 (seller paid costs)1% = $1,500+ Minimum
Cost Over Life of Loan $255,085.20$287,323.20 + $6000 DPA

**Note: MSHDA rate quoted on 3/22/14 from Michigan.gov | Standard RD Loan quoted with similar costs of 1% origination, 740 credit score for a 100% financing USDA Rural Development loan in Michigan with a 30 day rate lock on 3/22/14. This example is for illustration purposes only. Exact rates, fees and costs may vary based on individual circumstances. Not all will qualify. For buyer to have $0 cost it may require a seller contribution at close. Contact your loan officer for a full mortgage quote based on your scenario.

As you can see from the above example, a home buyer that uses the MSHDA down payment assistance loan may end up paying an additional $32,238 in mortgage interest over the life of the loan. In additional to the extra interest paid, you still have to repay the $6,000 second mortgage. A better alternative may be to do a standard RD loan with seller paid closing costs built into the purchase agreement.

Flaws of the New MSHDA DPA Program

There are several flaws of the new MSHDA DPA program that could affect home buyers from qualifying for the program. Many times, real estate agents and home buyer will not realize that they do not qualify until they already have boxes packed and a purchase contract signed. This can be a very disappointing event in the home buying process.

Borrower Cannot Have Funds of Their Own Available for the Down Payment and Closing Costs

To qualify for the new MSHDA DPA program, a home buyer cannot have the funds available to cover the down payment themselves. This includes in any bank accounts, savings accounts, joint accounts, stocks, bonds, mutual funds, funds from gift letters, money borrowed from IRA/401k accounts, CDs, trust funds and the big kicker – not even equity in real estate. This is a major flaw considering the program is designed for home owners to upgrade or downgrade their homes and have the option to move into a house more suitable for their situation. What many people do not realize is that if you sell your current home and receive money from the sale, this automatically disqualifies you from the program. Even if you own some vacant land as real estate and it has no mortgage, the equity in this real estate may disqualify you from receiving the MSHDA loan.

The Property Cannot be Transferred or Refinanced Without Paying off the MSHDA mortgage

In today’s society it is a sad fact that 50% of all marriages end in divorce. With this statistic, the MSHDA grant could cause a large problem allowing one spouse to fully take over the house in the case of a divorce. The MSHDA 2nd mortgage that is placed on the home requires full repayment upon the transfer of a deed on the property. To record a standard quit claim deed and transfer ownership is not permitted.

This also is the same for those that wish to refinance their MSHDA mortgage. With a higher rate loan for the DPA program, a home buyer may want to refinance their mortgage to a lower rate or term if the opportunity presents itself. This is not allowed if a homebuyer uses the MSHDA funds. They will not make any exceptions in subordinating the 2nd mortgage lien that they place on the home which would be a requirement to refinancing. The home owner must repay the 2nd mortgage in full to qualify for a refinance.

Alternatives to the MSHDA DPA program

If a home buyer chooses not to apply for the MSHDA program or is disqualified for the program there are many great alternatives for home loans. One great mortgage option is the USDA Rural Development Loan which is a zero down mortgage program. A home buyer may be able to buy a home with zero down and nothing out of pocket. USDA mortgage rates are very low and the sellers may pay the closing costs.

If a home buyer is selling their current home and receiving a large chunk of money, they may want to consider a conventional mortgage. With 20% down there will be not mortgage insurance (PMI) which will help keep the payment low and avoid extra costs.

For more information on alternative mortgage options contact Riverbank at 1-800-555-2098 or apply for a mortgage online.

Summary: MSHDA Grant and Down Payment Assistance Flaws

The New MSHDA program is not free money that home buyers can receive when buying a home; it is a 2nd mortgage that must be repaid. There are limitations on income and assets to qualify for the program. If a homebuyer has money in the bank or even receives cash from the home they are selling, they may be denied financing. The rates may be higher for the DPA program than what a standard mortgage can offer and it may require the home buyer to pay more out of pocket than if they buy with a standard mortgage (See the MSHDA comparison chart above). If a home buyer does qualify for the program, it may cause unforeseen issues which may prevent the home buyer from transferring the property or even refinancing.

While there are some home buyers that will be able to utilize the new MSHDA DPA program, many will not qualify and will have great alternatives available. Before you apply for MSHDA it is important to know all the details and how it will affect you and your family now and in the future.

Where to Find more Information about MSHDA

Information about the new MSHDA program was communicated from Michigan.gov and a MSHDA employee, Sarah Nelson Bohné from the Homeownership Division. Information is reliable however not guaranteed and should be verified individually based on your circumstances.

HomePath Mortgage Loans for Buying Fannie Mae Foreclosures in MI

Fannie Mae HomePath MortgageA HomePath Mortgage allows a home buyer to buy a home with a low down payment and flexible mortgage terms with no appraisal, no mortgage insurance and even seller paid closing costs. This unique home loan program offers the best of all financing terms for qualified buyers. This conventional loan product is only available one HomePath eligible homes owned by Fannie Mae.

What is a Fannie Mae HomePath Mortgage Loan?

A HomePath Mortgage is a conventional mortgage loan option available through many banks and mortgage companies that allow a home buyer to buy a Fannie Mae owned home with less requirements compared to a standard conventional mortgage. HomePath home loans are only available on foreclosed homes owed by Fannie Mae whom hires local real estate agents to prepare, maintain and market their HomePath homes for sale.

What are the Benefits of HomePath Mortgage Loans?
  • No lender-required appraisal
  • As of November 16, 2013, HomePath loans require at least a 5% down payment that can be funded by your own savings, a gift, a grant; or a loan from a nonprofit organization, state or local government, or employer.
  • Available for primary residences, second homes and investment properties.
  • Flexible mortgage terms (fixed-rate, adjustable rate, or interest-only)
  • No mortgage insurance (PMI).
  • Low mortgage rates.
  • Seller paid closing costs allowed.
  • Many condo project requirements are waived; ask your lender for details.

How do I apply for a HomePath Mortgage?

Home buyers can apply for a HomePath mortgage online or over the phone. The mortgage company must offer HomePath Loans as a home loan option. It is important to note that not all banks and mortgage companies are approved for HomePath Financing.

Or call 1-800-555-2098 to speak with a mortgage loan officer immediately.

How do I know if I am eligible for a HomePath Mortgage?

Just like any mortgage loan, there are several qualifications required to be eligible for a HomePath Mortgage. When you speak with a loan officer for a mortgage preapproval, they will help to review things such as income, credit and assets.

You will be required to document your income to prove you can afford the payments of a new home. Loan officers will determine your debt-to-income ratio (DTI) and make sure it is in an acceptable range for loan approval.

Credit is another important factor in HomePath Mortgage eligibility. Your loan officer will help you to review your credit report and look for things such as on time payments to your current creditors, proof established credit (typically 3 credit accounts with a 12 month history is required), judgments, previous foreclosures,  previous bankruptcies and collection accounts.

Lastly, you will be required to document assets such as bank accounts or retirement accounts to prove that you have enough money saved up for the 5% down payment that is required for financing.  Many times you will be able to get this money gifted to you from a family member or close friend.

While these are the main HomePath Mortgage qualifications and requirements, there are other factors that your loan officer will help you review to determine if you are eligible for a HomePath Mortgage.

What is the down payment for a HomePath Loan?

The minimum required down payment for a HomePath Loan is now 5% of the purchase price. For example, if you are buying a Fannie Mae HomePath Home for $100,000.00 you will be required to have a minimum investment of $5,000.00 of your own funds as a down payment. Prior to November of 2013, Fannie Mae allowed for a 3% down HomePath Loan however this option is no longer available. The 5% down payment can be a gift from a close friend or family member in many cases. Getting a gift for the down payment requires special paperwork and documentation so be sure to review your situation with a loan officer to make sure you meet the down payment requirements for a HomePath Mortgage.

How do I find HomePath Homes for Sale?

There are many options to find HomePath homes for sale in your neighborhood. To get started we recommend getting a home loan preapproval from a reputable mortgage company. Once you are preapproved you will be able to seek the services from a real estate agent in your area that can help you locate Fannie Mae foreclosures for sale.

Once you are preapproved to buy a home, you may start looking online on site such as www.homepath.com. While you can search the internet on your own, a real estate professional has tools such as the Multiple Listing Service (MLS) which provides up to the minute updates of new real estate listings including HomePath eligible homes. A real estate agent can also help you determine if a house already has offers pending or is already sold. Ask your loan officer if they can recommend a good real estate agent to help with your home search.

How do I know if a home is eligible for a HomePath Mortgage?

Homes that are eligible for a HomePath Mortgage will have the HomePath logo displayed on the listing for the home. Not all foreclosed homes are eligible for the benefits of a HomePath Mortgage. The foreclosure must be owned by Fannie Mae and have the HomePath Mortgage logo displayed to apply for this type of financing.

HomePath Mortgage Logo

This is an example of the Fannie Mae logo that you will find on HomePath Mortgage eligible properties.

Does Fannie Mae allow first time home buyers to purchase a HomePath Home before investors?

Fannie Mae believes it is important to allow first time home buyers and those who will occupy the home as their primary residence an opportunity to buy the home before investors. There is a 15 day period where investors are not allowed to bid on HomePath Homes.  This allows those who will live in the home an opportunity to buy a HomePath Home easier and without the added pressure of real estate investor bids.

Are there different types of HomePath Financing?

There are two types of HomePath Mortgage loan options which are the standard HomePath Mortgage and the HomePath Renovation Mortgage.  It is important to note what type of loan the Fannie Mae owned home can be purchased with. If the home is in good condition, typically Fannie Mae will allow the standard HomePath Mortgage loan. If the home does not meet conventional financing guidelines based on Fannie Mae’s internal appraisal and property condition report, they may allow for the HomePath Renovation Mortgage.

HomePath Renovation Mortgage Financing

homepath renovation mortgage

This logo is an example of homes that are eligible for HomePath Renovation Mortgages.

HomePath Renovation Mortgage Financing has many of the same benefits of the standard HomePath mortgage however it allows for money to be financed in an escrow account for future repairs. The renovation home loan option has additional requirements for approval and is not offered by many lenders. A home buyer using renovation financing can finance in home improvement costs up to $35,000 or up to 35% of the home’s completion value.

  • One time close home improvement loan
  • As of November 16, 2013, HomePath loans require at least a 5% down payment that can be funded by your own savings, a gift, a grant; or a loan from a non-profit organization, state or local government, or employer.
  • Available for primary residences, second homes and investment properties.
  • Flexible mortgage terms (fixed-rate and adjustable rate loan options)
  • No mortgage insurance (PMI).
  • Low mortgage rates.
  • Seller paid closing costs allowed.
  • Many condo project requirements are waived; ask your lender for details.

Where can I get more information on the Fannie Mae HomePath Mortgage?

If you are looking for more information on a HomePath Mortgage and HomePath homes for sale then you are doing the right thing. It is important to do your research and understand how the home buying process works prior to putting an offer on a property for sale.  The internet is a great tool to begin your research, however it is important to note that not all information online can be deemed reliable. You may also wish to speak with a housing counselor in your area to give you free advice on the risks and benefits of owning your own home.

We recommend researching neighborhoods, schools, prices of comparable homes for sale, shopping and other important information about areas of interest. Your real estate agent and mortgage loan officer will also be great tools to assist you with these crucial questions before you buy your home.

For more information on HomePath Mortgage loans call a licensed mortgage loan officer today at 1-800-555-2098 or inquire below.

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