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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2014 USDA Rural Development Loan Eligibility Updates

USDA Rural Development Home LoansThe National USDA Office in Washington DC has confirmed that they will be using 2010 Census data to update the USDA Rural Development program eligibility maps. Current USDA maps are based on the dated 2000 Census data. This change will not take effect until October 1st, 2014 however the changes will affect many areas nationwide including West Michigan. It is crucial that home buyers, real estate agents and loan officers make note of the upcoming changes ahead of the upcoming deadline.

What is a USDA Rural Development Mortgage?

The USDA Rural Development Mortgage, commonly referred to as an “RD Loan” or “USDA Loan”, is a no down payment mortgage program that allows a home buyer to purchase a home with no money out of pocket. Sellers paid closing costs are also acceptable to cover closing costs, taxes, insurances and escrow setup.

It is important to note that not all borrowers will qualify for RD Loans. There are income limits and property eligibility limitations based on population. This program is intended to serve the rural communities therefore highly populated cities such as Grand Rapids, Kalamazoo, Lansing and Detroit are mostly ineligible for financing.

Future Changes to USDA Loan Eligibility Areas

Changes to eligible areas can be viewed by selecting the applicable program listed under “Future Eligible Areas” at http://eligibility.sc.egov.usda.gov.  It is important to note that all applications must close prior to the deadline date of October 1st, 2014 if it is in a future ineligible area. If a real estate transaction is still in process after this deadline, the borrower’s financing will not be approved.

The Map Below shows changes for the Grand Rapids USDA Rural Development program. While Grand Rapids, MI itself has been an ineligible area for the 100% financing program, many of its surrounding areas have been eligible for USDA Guarantee Housing Loans. The upcoming map updates will affect surrounding areas in West Michigan.

Current 2014 USDA Rural Development Eligibility Areas:

Current 2014 USDA Rural Development  Ineligible Areas Map

 

Future USDA Rural Development Eligibility Areas Starting October, 1st 2014:

2014 USDA rural development future ineligible areas

Future Ineligible Areas for West Michigan USDA Rural Housing Loans

Notable additions to future ineligible areas include Allendale, Ada, Forest Hills, Zeeland, Ferrysburg and North Muskegon. On the positive side, areas opening up as eligible include a small section south of Hudsonville/Jamestown Area and a small sliver of Whiteneyville South East of the I-96/M-6 junction.

While it is much easier to use the USDA eligibility map online, ineligible areas do have written descriptions that determine eligibility.

Michigan Counties with Ineligible Areas include:
  • Allegan
  • Bay
  • Berrien
  • Calhoun
  • Cass
  • Eaton
  • Genesee
  • Ingham
  • Isabella
  • Jackson
  • Kalamazoo
  • Kent
  • Lenawee
  • Macomb
  • Midland
  • Monroe
  • Muskegon
  • Oakland
  • Ottawa
  • Saginaw
  • St.Clair
  • Washtenaw
  • Wayne

For a complete list of ineligible areas in Michigan visit: Michigan USDA Loan ineligible Areas

MI Allegan County USDA Rural Development Ineligible Area:

Urban areas in Allegan County are described as:

Bounded on the North by the County Line, on the East by 52nd Street, on the South by 143rd Avenue, and on the West by 61st Street, North to 146th Avenue, West on 146th Avenue to Lake Michigan.

MI Kent County USDA Rural Development Ineligible Areas:

Urban areas in Kent County are described as:

All that area bounded by a line from the Ottawa County Line along 4 Mile Road, East to Cordes Ave, North to 6 Mile Road, East to Grand River, Southeast following the Grand River to Buttrick Avenue, South to 60th Street, West to Hanna Lake Avenue, South to 76th Street, West to Kalamazoo Avenue, South to 84th Street, West to Homerich Avenue, North to 68th Street, West to County Line and North to beginning

MI Muskegon County USDA Rural Development Ineligible Areas:

Urban areas in Muskegon County are described as:

The City of Muskegon and all of the area from Lake Michigan East on Giles Road extended to Hilton Park Road, South to Heights Ravenna Road, West to Dangl Road, South to I-96, South East to County Line, West to Lake Michigan.

MI Ottawa County USDA Rural Development Ineligible Areas:

Urban areas in Ottawa County are described as:

The City of Grand Haven bounded on the North by the County Line from Lake Michigan to 144th Avenue, South to Ferris Road and West to Lake Michigan.

The area in Tallmadge and Georgetown Townships from the East County Line West on Lake Michigan Drive to the Grand River, South-Southeast to 28th Avenue, South to Bauer Road, West to 48th Avenue, South to Quincy Street and East to the County Line.

The Cities of Holland and Zeeland bounded on the North by Quincy Street from Lake Michigan to 88th Street, South to I-96, and South on I-96 to County Line.

Summary: 2014 USDA Rural Development Loan Eligibility Updates

In summary, the USDA has announced they will change the eligibility areas for RD Loans based off more recent Census data. These changes will affect all homebuyers that are seeking USDA Rural Development financing. Buyers, agents and loan officers should make note of the changes in their areas to prepare for the October 1st, 2014 deadline. All loans must close prior to this date if they are in a Future Ineligible Area.

For additional information on USDA Home Loan call a licensed loan officer at 800-555-2098 or request information below:

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Five Easy Ways to Pay Off your Mortgage Faster

5 easy ways to pay off your mortgage faster.

If you are a person that plans for the future then you most likely have given thought about paying down your mortgage. For many families, your mortgage is the largest debt you have above car loans, student loans, credit cards and personal loans.  You should put an equal amount of focus on paying off this debt quickly as you plan for your retirement.  Here are five easy ways that you can pay your mortgage off faster.

Refinance to a 15 Year Loan and Shorten Your Mortgage Term

A clear answer to pay off your home loan faster is to refinance to a shorter loan term. By shortening your term to a 15 year mortgage or 20 year mortgage, you may be able to avoid thousands of dollars in unnecessary interest over the years of your loan.

For example, if you currently have a 30 year home loan and have paid 5 years, you still have 25 years remaining. Let’s say, your current mortgage payment is $1200 dollars and refinancing to a 15 year mortgage gives you a payment of $1500 monthly. To calculate the total costs of paying off your current mortgage we can use simple math: $1200 x 12 months x 25 years = $360,000 in total payments. After refinancing to a 15 year mortgage we can use the same math: $1500 x 12 months x 15 years = $270,000 in total payments. Refinancing to a 15 year mortgage in this example would save you $90,000 over the life of the loan and allow you to pay off your mortgage quickly.

Enroll in a Bi-Weekly Payment System

Another great option to pay off your mortgage quicker is to enroll in a bi-weekly payment system. There are several great companies that may assist you in paying bi-weekly however it is best to check with your current mortgage servicer to see if they offer this service without additional costs.

Paying bi-weekly is exactly as it sounds; paying a ½ mortgage payment every other week rather than paying once a month.  Doing this payment system allows you to pay down the principal faster which saves on compound interest.

Here is the secret to how bi-weekly payments work: If you pay a half payment every other week, that is 26 half payments made in one year (52 weeks in a year / 2 weeks = 26 payments). This is equivalent to 13 full payments (26 weeks x 1/2 payments = 13 full payments) rather than 12 payments made by paying once per month.

Essentially paying bi-weekly allows you to force yourself to pay one additional payment towards the principal annually. The compounding effect of paying bi-weekly on a 30 year mortgage allows you to pay off your mortgage in 24-26 years. Paying your mortgage on a bi-weekly payment system can save you thousands of dollars in interest and help you pay off your home loan sooner.

Apply Unexpected Income to Your Mortgage Principal (holiday bonuses, tax refunds, yard sales)

Throughout the year you may come into unexpected money from things such as holiday bonuses, tax refunds or even cash yard sales. Did your great Aunt Susie pass and leave you a few thousand dollars inheritance? Did you have a good night at the Casino?  If you have a high level of self-discipline, you may allow this unexpected money to go to work for you by applying it directly to your mortgage.  Applying this additional money to the principal of your mortgage will allow you to pay off your home faster.

Downsize to a Smaller Home to Pay Off your Mortgage Quicker

Another great option to pay off your mortgage more quickly is to downsize to a smaller house. As you get ready for retirement, chances are, you will not need as much space. Your children have already moved out and you have extra bedrooms simply collecting dust. It might make sense to considering selling your home and downsizing to a smaller house or condo.

By selling your current home, you may have equity that you could apply towards the purchase of a smaller, more affordable home or condo. For example, if you sell your home for $300,000 and have a $200,000 mortgage remaining, you would receive $100,000 from the equity. If you buy a new home for only $150,000 then you would only need a $50,000 mortgage. With a home loan that small you should be able to afford a 10 of 15 year home loan which will allow you to be debt free quickly.

Refinance to a Lower Interest Rate and Payment but Continue Paying the Same Amount

The last option to pay off your mortgage more quickly is a less apparent option as the previous examples. Most people would agree that it is beneficial to refinance to a lower rate and payment but many do not think past the initial monthly savings. Rather than buying a new car with the savings from your new, lower mortgage payment, you may want to considering paying the same as you were comfortable paying before your refinance. Every dollar above the minimum payment would go directly towards your mortgage principal and pay off your mortgage quicker.

Use these examples to rethink your retirement and pay off your mortgage quicker. With your mortgage being one of your largest investments, even a small change can compound into major savings over a 30 year period. For a free home loan analysis with a licensed loan officer in your area, call Riverbank Finance at 1-800-555-2098 or request information below.

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Buy a house with your Tax Refund as a Down Payment

Buy a house with your Tax Refund as a Down PaymentThe end of the year can be a very joyous time for many of us. It is a time when we can spend some quality time with our families, experience the joy of giving to others, and reflect on how thankful we are. The end of the year also allows us to reflect on our previous year and come up with next years goals. Some people may have goals and aspirations to try to lose weight, others may try to find a better job or start a small business, and still others may want to buy their first home or even buy an investment property.

If your goal this year is to try to buy a new home you may have an added benefit in trying to buy your first home in the beginning part of the year. One benefit could be using your tax refund and leveraging that money toward the purchase of a new home. This can definitely help first time homebuyers make the unaffordable, affordable. If you used your tax refund you may actually be able to qualify for a larger home and at the same time lower your monthly payment by applying larger down payment and therefore lower you mortgage balance.

The larger the down payment is, the more interest you will save on the loan over time as well. If you truly did some research into what the average home price was selling for in your area I think you would be surprised at how low the monthly payments actually would be. Again, using your tax refund to buy a house could actually reduce your monthly payments.

Many people think it requires a 20% down payment to buy a home however mortgage companies like Riverbank Finance LLC offer mortgages with little to no down payment mortgages. For example, a Conventional mortgage requires only 5% down payment (and it can even be gifted to you from a family member). FHA loans require only a 3.5% down payment which can also be gifted. Both of these home loan options also allow for seller paid closing costs.

Example of how to buy a home with your tax refund:

Example 1: A family receives a $5,500 refund on their income tax returns. This tax refund would allow this family to buy a home with a sales price of $110,000 with a conventional 95% mortgage. A home such as this may have very affordable payments. You may be able to buy a home for less than you pay in rent.

Example 2: A family receives a $3,500 refund on their income tax returns. This tax refund would allow a family to buy a home with a sales price of $100,000 with a FHA mortgage. FHA home loans also offer flexible qualification terms with low credit scores.

If you are currently renting you may be throwing money away. Many times a first time homeowner can lower their monthly housing payment by purchasing a new home as opposed to renting their current home. Another important reason to buy your first home is to help build your own personal wealth. This is something renters cannot do. One of the paths to personal wealth in our country has always been from buying and living in their own home. Homes go up in value and when you make your monthly payment you pay your mortgage balance down as well. Your tax return can help set you on the right path to homeownership and help grow your independent wealth.

Now is a great time to buy. Interest rates are still at historical lows and home price values are still depressed from their historical highs of just 6-7 years ago. This all means that you can afford much more home today then you ever could have in the past. Your tax return refunds could be the answer and help you get a great deal on a new home and in the long run help you build your personal wealth. Be sure to speak with a loan officer to review how much home you can afford by calling us at 800-555-2098 or by requesting information below.

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Top 9 HARP Refinance Myths for Fannie Mae and Freddie Mac Home Loans

Harp mortgage refinance program.With over 2.9 million homeowners refinancing with the Home Affordable Refinance Program (HARP), there are still many people that are not taking advantage by refinancing their homes. There is a variety of reasons in which these homeowners are choosing not to drop their home loan rates with a mortgage refinance. Many of these reasons are simply myths or assumptions that are made based on their prior knowledge of the refinance process. Tracy Mooney, Vice president of Single-Family Servicing and Real Estate Owned (REO), has taken the time to publish an article debunking these top HARP Myths.

HARP Myth 1: I’ve had my loan for many years, and with HARP I’d have to start all over again with a 30-year mortgage.

Answer:  This is incorrect. Borrowers that have had a conventional loan for several years are able to do a HARP refinance and shorten their term. Many borrowers choose to go with a 15 year or 20 year loan and reduce their interest rates while taking several years off their mortgage. A borrower may be able to accomplish this and keep their payment the same as their current 30 year mortgage.

HARP Myth 2: I’m receiving too many solicitations to help me refinance. They must be scams.

Answer: There are several mortgage companies and banks that offer HARP refinancing so these offers may all be legitimate. It is important to note, however, that not all banks and mortgage companies are equal. Most lenders have overlays on top of HARP Eligibility Requirements that prevent them from doing the refinance loan. If you have tried one company and been turned down, it is recommended that you check with another company that may offer programs such as unlimited LTV loans, lower minimum credit scores and both Fannie Mae HARP mortgages and Freddie Mac HARP Mortgages.

HARP Myth 3: I am really underwater on my mortgage. HARP can’t be for homeowners like me.

Answer: HARP has been updated several times since its inception in 2009. Currently both Fannie Mae and Freddie Mac loans allow for unlimited Loan-to-Value (LTV) refinancing. As noted previously, most banks and lenders have overlays and limits for their LTV. It is important to find a mortgage lender that offers higher level LTV refinances for homeowners severely underwater on their home loan.

HARP Myth 4: I recently lost my job, so no one is going to help me refinance through HARP.

Answer: If you have recently lost your job you may still be able to get a lower rate with HARP. Your current mortgage servicer may allow for a HARP Refinance without income in some situations but most lenders will allow you to income qualify using a co-borrower. One of the original borrowers must remain on the loan to qualify. The combined income is what will be used to calculate the Debt-to-Income (DTI). Alternatively, if you have available funds equal to at least 12 months of principal, interest, taxes, and insurance, then you may be eligible without proving income.

HARP Myth 5: My lender doesn’t offer HARP, so I can’t refinance through the program.

Answer: Yes; you may be eligible to refinance through any other mortgage company that offer the HARP Mortgage Program.

HARP Myth 6: My lender doesn’t offer HARP, so I can’t refinance through the program.

Answer: Yes; you may be eligible to refinance through any other mortgage company that offer the HARP Mortgage Program.

HARP Myth 7: I have an adjustable-rate mortgage (ARM), so I am not eligible.

Answer: HARP was created to offer more stable and sustainable mortgage options for homeowners in your very situation. Speak with your loan officer about fixed rate mortgage loans to have long term stability in your payments. Alternatively, you may utilize HARP to extend your adjustable rate mortgage (ARM) for an additional 5 or 7 years at lower rates.

HARP Myth 8: I don’t have enough cash to pay closing costs, so I can’t refinance through HARP.

Answer: Event with a HARP refinance, you may be able to refinance with little or no money out of pocket.  For many homeowners, you may be able to roll any closing costs and pre-paid items such as taxes and insurance into your new mortgage. Some lender may also offer options to credit back money to help cover the expenses of closing costs so you truly have a no cost mortgage. Be sure to speak with your loan officer to review what loan options you are eligible for through HARP.

HARP Myth 9: HARP is only for homeowners who are behind on their payments and in danger of foreclosure.

Answer: The Making Home Affordable program offered two home loan solutions for borrowers that were at high interest rates and were previously unable to refinance. The Home Affordable Modification Program allows homeowners that were behind on their loan payments to apply for a modification of their current terms to allow them to save on their payments. This is commonly confused with the Home Affordable Refinance Program (HARP) which is for clients whom have paid their payments on time and would qualify for a conventional refinance if they did not owe more than their house was worth. The HARP program is for borrowers with good credit that simply want to lower their interest rate and payments.

For more information on the HARP refinance program call a licensed loan officer at Riverbank at 800-555-2098 or request information below:

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Best Hotels in Grand Rapids, Michigan

Family looking at hotels in Grand Rapids, MI

Best Hotels in Grand Rapids, Michigan

When staying in Grand Rapids many people have the desire to stay in the best hotels the city has to offer. There are many great hotels that you and your family can choose from to enjoy. Many people relocating to Grand Rapids want to rest in the city’s best hotels during the tough transition. The luxury hotels offer a true destination with many excellent amenities and features. Here is a list of the best hotels in Grand Rapids, Michigan.

JW Marriot Hotel

The JW Marriot Hotel is arguably the best luxury hotel in Grand Rapids and was the first JW Marriott in the Midwest. Built only in 2007 the hotel is near downtown and is situated near beautiful scenery. Also, nearby are great museums and performance arenas. Rooms include wireless internet access, marble showers, premium cable channels that are watched on large plasma televisions. When out of your room you can enjoy the bar, coffee shop, spa, and the magnificent indoor pool. The hotel has 24 floors and is the sixth tallest building in Grand Rapids.

For more information on the JW Marriot Hotel please visit: http://www.marriott.com/hotels/travel/grrjw-jw-marriott-grand-rapids/

Amway Grand Plaza

The Amway Grand Plaza Hotel is a luxury hotel located in downtown Grand Rapids. With 29 floors it is the third largest building in Grand Rapids. The hotel is situated near great places to visit such as the Public Museum of Grand Rapids, Rapids Children’s Museum, Gerald R. Ford Museum, Grand Rapids Art Museum, and the DeVos Performance Hall. The hotel has a delicious buffet that visitor’s love and the Ruths Chris Steakhouse offers a great quality meal. The premium bedding guarantees great sleep. The hotel also offers great spa and recreation amenities which include tennis, racquetball, and a lovely pool.

For more information on the AmwayGrandPlaza please visit: http://amwaygrand.com/about.html

CityFlats Hotel

The CityFlats Hotel is located in the heart of Grand Rapids and is one of the city’s most eco-friendly hotels. The cool and modern rooms located in the hotel offer a lively and colorful interior. Many of the rooms also have a kitchen to give you the comforts a home with your stay.  Enjoy your music on the iPod docking station and enjoy the premium TV channels on their HDTV. When out of your room feel free to have a drink at one of the hotel’s wonderful bars.

For more information on the CityFlats Hotel please visit: http://www.cityflatshotel.com/grandrapids/

Courtyard Marriott Downtown

The Courtyard Marriott Downtown is also located in the booming downtown Grand Rapids area. Visitors have the benefit of great views of the city as they look out their windows. The sundeck is the perfect place for a tan or to enjoy the sun in the warmer times of the year. The hotel offers a wide range of room choices from standard, double, and deluxe suites. The onsite running track is great for a nice run or jog and a trip to the sports center is excellent for those who enjoy sports and entertainment. The large fitness center has a vast amount of work out equipment, bikes, and even a full-court for basketball. After a work out their pool or Jacuzzi is a good way to relax while staying at this superb hotel.

For more information on the Courtyard Marriott Downtown please visit: http://www.ourcourtyardgr.com

If you are interested in relocating to Grand Rapids feel free to Send us a Message for Help

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How to Apply for a Mortgage Loan

The Mortgage Application Process

The first step to becoming a homeowner is applying for a mortgage. This is a crucial step in the home buying process that cannot be overlooked. Many times, real estate agents even require that you are preapproved by a mortgage company before they will spend their time showing you homes. It is important to know that you will be able to qualify for a home loan once you find the home of your dreams.

Additionally getting preapproved to buy a home, you will be able to confirm your price range. You certainly would not want to be looking at $250,000 homes if you want to keep your mortgage payments under $500 per month. Your loan officer will review your income, assets, and confirm that any credit issues are dealt with prior to placing an offer to buy a home.

When you are ready buy a home, we recommend finding a local mortgage company and speaking with a licensed loan officer.  You may take recommendations from your Realtor or simply do a Google search to find a lender you are comfortable working with.  Whether you choose a bank or mortgage company, the mortgage process will be the same. The standard form used to collect borrower information is called a Uniform Residential Loan Application. This form is commonly referred to in the mortgage industry as the 1003 (Fannie Mae 1003 Form). Here is how to apply for a mortgage:

 Mortgage Type, Interest Rate and Loan Terms:

type of mortgage and loan terms

The first section of a mortgage application is selecting the loan type, interest rate and loan terms.  While your loan officer may advise you on what loan type may be best for your situation, you have the option to apply for the mortgage of your choice.  Common mortgage options including Conventional Loans, VA Loans, FHA Loans and USDA Rural Housing Loans. The loan term is the length of the mortgage you are applying for. Common loan terms include a 30 year fixed rate, 20 year fixed rate and a 15 year fixed rate mortgages. The last section you will decide between a fixed rate mortgage (FRM) and and adjustable rate mortgage (ARM).

Property Information and Purpose of Loan:

Property Information and Purpose of Mortgage

The second section of the mortgage application is the property information and purpose of your loan.  This section you will explain why you are applying for a mortgage. Common reasons for applying for a mortgage include purchasing a home, refinancing, new construction or home renovations.  You will also indicate whether you will be living in the home as your primary residence, using the property as a second home or vacation property or if you will be renting the home as an investment property.

If you know details about the home, you will complete the address, city state and zip.  If you are refinancing then you will complete the details about your current loan and if you are applying for a construction loan then you will complete the construction loan section. If your are buying a preexisting home then leave these sections blank.

Lastly you will indicate the source of the down payment. Common down payment sources include retirement funds, checking or savings accounts, or the proceeds from the sale of your current home.

Borrower Information Section:

borrower information section

The third section of a mortgage application is the borrower information section. This section you will indicate whether you are applying for a home loan by yourself or if you will be using a co-borrower. You will be required to put your full name including your first name, middle initial and last name. Next you will need your social security number and date of birth so your loan officer can pull your credit report. Additional details such as marital status (married, unmarried or separated), home phone number, dependents and present address are required.

Employment Information:

Employment information SectionSection four of the mortgage application is for Employment Information. Borrowers are typically required to provide a two year work history of employment. Details such as employer name and address, years on the job, positions and business phone number are required. You will also need to complete your monthly income information for prior jobs in this section.

Monthly Income and Combined Housing Expense Information:monthly income and housing expense information

The fifth section to the mortgage application is Monthly Income and Combined Housing Expense Information. This section you will start to dive into the numbers of your home loan. You will detail your current income information by breaking down base income, overtime, bonuses, commissions and other income such as business or rental income. The right side will compare your current mortgage or rent payments vs your new estimated mortgage payments. The payment is broken down into Principal and Interest (P&I), insurance, real estate taxes, mortgage insurance (PMI) and home owners association fees.

Assets and Liabilities:

Assets and Liabilities

The sixth section to your mortgage application is for assets and liabilities. This section you will list any assets such as checking accounts, savings accounts, retirement accounts, automobiles and other assets.  Many times you will only need to list the assets that you will use towards the purchase of the home; automobiles and retirement accounts may not be required.

Liabilities are also listed in this section. You will be required to list the name of your creditors, monthly payments and balance owed on your debts. Your liabilities are typically populated when your loan officer pulls your credit report however if you have additional loans that do not report to the credit bureaus you will need to report them here.

Schedule of Real Estate Owned (REO):

Schedule of real estate ownedIncluded in section six of the mortgage application is the Schedule of Real Estate Owned (REO).  This is where you will list any real estate property that you currently own. These properties include your current home (if applicable), vacation homes, investment properties and vacant land.  You will need to include property type, current market value, loan amounts, mortgage payments, taxes and insurance.

Details of Transaction and Declarations:

details of transaction and declarations

Section Seven is the Details of Transaction. This is the detailed list of costs including purchase price, estimated fees, prepaid items and closing costs. The section will also detail the loan amount and the estimated cash required from the borrower at closing.

Borrower Declarations

Section 8 is the declarations from the borrower. The borrower will need to respond to a series of questions about their current situation. These questions are regarding prior bankruptcies, law suits, child support, residency status (citizenship status), and prior home ownership history.

Acknowledgement and Agreement:

acknowledgement and agreement

Section nine of the mortgage application is the acknowledgement and agreement. This section is a large paragraph of legal jargon that the borrower must read and agree to. In summary, this section states that the information you provided is true and accurate, and if you do not pay, your mortgage lender may report delinquency to the credit agencies.  Near the bottom you are advised of your right to receive a copy of the appraisal report.

Information for Government Monitoring Purposes:

information for government monitoring purposes

The tenth section of the mortgage application is Information for Government Monitoring Purposes. This section is information about your Ethnicity, Race and Sex The purpose of this information is to insure that your lender complying with equal credit opportunity and fair housing laws. You are not required to provide this information. If wish to not provide this information the lender is required by law to guess based on physical appearance so do not be offended if this information is inaccurate.

Ready to buy a home? Apply now online:

Download printable 1003 Mortgage Application or complete the form below to be personally assisted in the loan application process.

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Why Property Taxes go up after Buying a Home

Michigan Property Tax ExplanationBe sure to investigate property taxes before you buy a home. Sure, the real estate listing may estimate the current property taxes but you need to take it a step further to get the full tax costs. One common tax number that is overlooked is the SEV or State Equalized Value. Property taxes are based on the real estate’s current Taxable Value however the SEV is an important factor to determine future taxes once a property is transferred to a new owner.

What is the difference between SEV and Taxable Value?

The purpose of the SEV is a tax assessor’s way of giving their opinion of the true assessed value or market value of the home. The assessor’s opinion of market value is double the SEV. Be sure to note that this number may be way off from what a house could actually sell for and should not be relied on for market valuation purposes. The taxable value can be a different number to ensure that taxes do not jump significantly for homeowners that have owned a home for a long period of time.

Related: Michigan Property Transfer Tax Calculator

How Much can Property Taxes Rise Each Year?

Michigan property taxes were updated in 1994 when “Proposal A” was passed to reform real estate taxes. The premise of this law was to limit the increasing of taxes from year to year to a more predictable number. These caps are placed on the taxable value at 5% or the Consumer Price Index (CPI) rate of inflation, whichever is lower. The multiplier number is set by the Michigan State Tax Commission which has adopted the CPI which has maintained roughly 1% annually. This means that the taxable value cannot increase more than the cap each year and the Taxable Value will never be more than the SEV.

Once a property is sold the taxable value resets back to the SEV which has no cap. This is called “uncapping” a property’s taxable value. This process can cause a significant tax increase on the following year after buying a home. If your budget is based off the current taxes and you find yourself owing thousands more annually, you could be in a sticky financial situation.

Below is an informational chart comparing SEV with taxable value in Michigan. Since 1999 most properties have a significantly higher SEV than taxable value. This is the difference taxes would change when it resets at the time of sale.

Taxable value vs SEV value

Here is an example of how to calculate property taxes in Michigan:

EXAMPLE: An elderly couple has lived in a home for many years and has decided to downsize to a condo for easier maintenance. Their Taxable Value is currently at $120,000 and their SEV is currently at $150,000. The millage rate for their area is a total of 38.000 mills.

Here is the math to calculate their current property tax:
(Mills/1000) x Taxable Value = Property Taxes Due
(38.000/1000) x $120,000 = $4,560

Once the property is transferred to the new owner and the taxable value is uncapped and reset to the SEV.

Here is the math to calculate future estimated taxes:
(Mills/1000) x State Equalized Value = Future Property Taxes Due
(38.000/1000) x $85,000 = $5,700

In this example, the homebuyers would see their taxes go up $1140 annually or nearly $100 per month. If this is not accounted for in the homebuyer’s budget this could lead to huge payment shock.

For Current Michigan Property Tax information Visit: http://www.michigan.gov/taxes/0,4676,7-238-43535—,00.html

NOTE: This tool is intended to be used for illustrative purposes only. Estimates are not guaranteed and may be different based on your individual situation. Riverbank Finance LLC does not provide tax or legal advice. It is recommended that you consult with a tax attorney for advice on your situation.

Important Mortgage Program Updates Regarding USDA Loans, Conventional Loans and FHA Loans

FHA back to work program and other important mortgage loan updates

FHA Back to Work Program: Buying a Home after Foreclosure or Bankruptcy

The Federal Housing Administration (FHA) has announced a program that allows a borrower to buy a home sooner after foreclosure, bankruptcy, deed-in-lieu, or short-sale. This new FHA program is called The Back to Work Program. This is an extension of the current FHA Mortgage programs that exist.

Prior to this program, the minimum requirements to buy a home after bankruptcy was 2 years and buying a home after a foreclosure required 3 years. The FHA has waived this guideline allowing homebuyers to qualify for a mortgage with only 12 months after their derogatory credit issue.

Back to Work – Extenuating Circumstances due to an “Economic Event”

To qualify, the borrower must have waited a minimum of 12 months, have no new late payments or collections, take a HUD housing counseling program and be able to document that the credit issues were caused directly from loss of work or reduced income due to economic circumstances. Riverbank Finance offers FHA loan financing down to a 560 credit score which is much lower than the industry standard 640.

All other HUD requirements must be met that can be found on Mortgagee Letter 2013-26 and the HUD 4155.1 FHA Back to Work Program. For more information on this program and other loan options, request information below or call a licensed loan officer at 800-555-2098.

Michigan USDA Rural Development Loan Updates

USDA Rural Development loan processing in Michigan is starting to recover after the government shutdown. Before the shutdown the USDA was behind 6 weeks in processing Rural Development loan applications. Currently they are now only 4 weeks behind in processing loan applications. This does not mean that the USDA is picking up their processing abilities but is more a return to normal.

Initial underwriting turn times are still very quick and should be ready to send to the USDA for final approval in 2-3 weeks. Purchase agreements should be written for at least 45-60 days for Rural Development loans. A good line of communication should be kept with your loan officer to ensure a quick closing.

Conventional Loan and Fannie Mae Mortgage Updates

Recently, Fannie Mae, the government sponsored entity (GSE), has changed their underwriting guidelines. The Conventional Loan changes became effective on 11-16-2013. The main highlights of the changes are below:

  1. Eliminates the low 3% down payment requirement. Fannie Mae has raised the down payment requirement to 5%. A quick note though; 2% of that down payment may be gifted to the purchaser from a close friend or family member.
  2. Interest Only loans and 40 year fixed mortgage programs have been completely eliminated.
  3. ARM loans have become tougher to qualify for based on debt to income (DTI)
  4. No more Expanded Level approvals (EA1, EA2, EA3 etc.)
  5. Easier qualification guidelines on DU REFI PLUS/HARP refinance loans.

Overall, potential new homebuyers with conventional home loans will have to put more money down and may find that it is tougher to qualify for some mortgage loan products. It is always best to consult with a mortgage expert when determining which mortgage loan option may be best. Call the Riverbank Finance home loan experts today at 800-555-2098 so you know your options and if the new Fannie Mae updates affect you and your new loan. For additional information submit an inquiry below.

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