Category: First Time Home Buyer

Qualifying for a Mortgage with Student Loan Debt

qualifying for a mortgage with student loansIf you are in the market for buying a house it is important to understand the implications of qualifying for a mortgage with student loans. Each year, at least 60% of college attendees take out some form of student loans to help with the ever growing costs of higher education.  While this can be an invaluable investment into one’s future, these loans can pose a challenge when it comes to buying a home.  Recently, new guideline changes have gone into effect that can substantially impact how someone qualifies for a mortgage.

FHA home loans are a great choice for first time home buyers with flexible work history and credit requirements!

The main way student loans impact an individual’s qualification is through their impact on an applicant’s Debt-to-Income Ratio (DTI).  This ratio gives a lender an idea of an applicant’s ability to reliably make monthly payments.  Simply put, this figure is calculated by dividing all monthly debt obligations (ex. Car Loans, Credit Cards, Mortgages, Student Loans, etc.) by gross monthly income.

Each mortgage program has different guidelines that are key to qualifying for a home loan with open student loan debts.  Calculating the monthly costs for student loans is especially tricky if the loans are deferred, in forbearance or not yet in repayment.

Regardless of program type, one of the most important actions a prospective home buyer much can take is to gather the payment documentation for the student loans.  This will allow your mortgage professional to ensure the most accurate qualification and best deal possible. The buyer’s credit report may not always accurately reflect the buyer’s minimum student loan payments which may affect underwriting approval.

Below are a few indicators of how student loan payments will affect a buyer’s debt to income ratio when qualifying for a home loan:

  • Conventional Mortgage with Student Loans
    • Regardless of deferment or forbearance, a payment must be counted against DTI
    • This payment will be calculated by either 1% of the remaining balance or the actual monthly payment, whichever is higher.
    • If a student loan payment is reporting on a credit report some conventional programs may allow this payment to be used even if it is under 1%.
    • Example: $24,000 in total student loans would add a minimum of $240 per month for qualifying purposes.
  • FHA Mortgage with Student Loans
    • Regardless of deferment or forbearance, a payment must be counted against DTI
    • The greater of the actual monthly payment from the credit report or 1% of the remaining balance will be used to calculate a minimum qualifying payment.
    • Income based repayment plans are no longer accepted if they are not fully amortizing.
    • Example: $24,000 in total student loans would add $240 per month for qualifying purposes if no payment is reporting on credit otherwise the underwriter will accept documentation showing the minimum student loan payments.
  • USDA Mortgage with Student Loans
    • Regardless of deferment or forbearance, a payment must be counted against DTI
    • This payment will be calculated by either 1% of the remaining balance or the actual fixed monthly payment, whichever is higher.
    • Income Based Repayment plans are not acceptable if they are less than 1% of the balance.
    • Example: $24,000 in total student loan payment would add a minimum of $240 per month for qualifying purposes.
  • VA Mortgage with Student Loans
    • The actual payment listed on the credit report or account statement will be counted against a borrower’s DTI.
    • Student loan debt may be excluded from DTI if the payment is not scheduled to begin for 12 months after the closing date (Documentation is crucial).

Get Pre-Approved to buy a home when you have student loans

We work with several first time home buyers and even repeat buyers have student loan debt.  It is crucial that you work with an experienced loan officer that knows the guidelines to assist you in qualifying for a mortgage when you have student loans.  With each mortgage program having different loan requirements it is important to understand how your debt to income is affected with each home loan option.

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Freddie Mac 97 Home Loan Offers Alternative to FHA Loan

Buy a Home with only a 3% down payment with Freddie Mac’s 97% Home Loan!

Freddie Mac Offers Alternative to FHA loan
If you are a first-time home buyer or struggle to come up with a conventional down payment for a house, the FHA Loan is no longer your only option. Freddie Mac’s new Home Possible Advantage program is a conventional loan option that adds another possibility to the low down-payment offerings.

Related: Fannie Mae HomeReady 97% financing

Freddie Mac Home Possible is available to all first-time home buyers and those with moderate to low income levels. The type of Home Possible loan you choose depends on your property.

What is the Freddie Mac Home Possible Loan Program?

Home Possible, available December 2014, requires a 5% down payment for those buying a 1-to-4 unit primary residence, condo, PUD (planned unit development), or manufactured home.

Home Possible Advantage, available March 2015, requires a 3% down payment and is only available to those buying a 1-unit primary residence, condo, or PUD.

Mortgage options also vary for the two Home Possible programs:

  1. Home Possible includes fixed-rate mortgages, Adjustable Rate Mortgages for 1 or 2-unit primary residences that are not manufactured homes, and renovation mortgages.
  2. Home Possible Advantage includes fixed-rate mortgages, and renovation mortgages.

To qualify for Home Possible Advantage, you must have a credit score of at least 660. If you are a first-time home buyer, you also must participate in a home borrower education program, such as Freddie Mac’s CreditSmart.

Benefits to the Freddie Mac 97 Home Loan

The largest benefit to the Freddie Mac 97% home loan is the flexibility in down payment options. While a 5% down payment may offer slightly better loan terms, a low down payment mortgage may be a good fit for many homebuyers.

Other Benefits Include:

  • Low Total Mortgage Payments
  • The down payment may be 100% gifted from a family member
  • Lower PMI payments for high credit score borrowers
  • PMI can be removed with sufficient home equity whereas FHA mortgage insurance is permanent
  • Less property condition restrictions compared to FHA requirements
  • Quicker Loan Closings

Which program should I choose for my home purchase?

What’s the difference between Home Possible, Fannie Mae’s 3% down program, and the FHA loan, and which one is right for you? It depends on your financial situation, the property you want to purchase, the requirements of each institution, and your lender’s preferences.

With an FHA loan, you have to put down at least 3.5% of the total home value. Fannie Mae requires a 3% down payment, and Freddie Mac’s Home Possible requires 3% or 5%, depending on the type of property you’re buying.

Whichever option you choose, you’ll have to pay private mortgage insurance (PMI). Anytime you offer a low down payment of less than 20% of the home’s value, you have to pay to insure the lender against default.

For the FHA loan, you’ll have to pay an upfront PMI fee and a monthly fee, which never goes away. If you choose a Freddie Mac or Fannie Mae loan, you can choose between paying an upfront fee with a slightly higher interest rate or a monthly fee, which goes away once you pay 20% of your total loan value.

The Freddie Mac and Fannie Mae 3% down programs are similar but have slightly different regulations, so check with your lender to see which one might be a better fit for your circumstances.

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For more information on Freddie Mac Home Possible, visit http://www.freddiemac.com/homepossible/hp.html.

 

Updates for Fannie Mae Conventional 97% Mortgage Loans

Fannie Mae Logo

FANNIE MAE CONVENTIONAL 97% MORTGAGE LOANS

A Conventional 97% mortgage loan is a Fannie Mae home loan that allows homeowners to purchase a home with only a 3% down payment. It is a great misconception that all conventional mortgage loans require a 20% down payment however many options for alternative financing do exist with low down payments or even no down payments.

The Conventional 97% Mortgage is Back!

The 3% down Conventional mortgage is now back through Fannie Mae’s My Community Mortgage® as well as for standard conventional loans. This program is designed for first time homebuyers that may not have the resources for a large down payment. At least one of the borrowers on the loan must be a first time home buyer in a purchase transaction. The  My Community Mortgage® program is only available for low to moderate income families and may require home buyer education prior to loan closings. The standard conventional mortgage is also designed for first time home buyers but does not have income restrictions.

Related: Fannie Mae HomeReady 97% financing

97% refinance loans will also be made available for those who do not qualify for a HARP refinance but have loans owned by Fannie Mae (see Fannie Mae Loan Lookup tool to confirm eligibility). This high LTV refinance program will be available only as a limited cash-out option which allows a borrower to simply change their interest rate or mortgage term.

Update on the Conventional 97% Mortgage from Fannie Mae Announcement

Announced on December 8th, 2014 Fannie Mae will reinstate the 3% down mortgage program. Fannie Mae’ Executive Vice President Andrew Bon Salle explains,  “This option alone will not solve all the challenges around access to credit.  Our new 97 percent LTV offering is simply one way we are working to remove barriers for creditworthy borrowers to get a mortgage.  We are confident that these loans can be good business for lenders, safe and sound for Fannie Mae and an affordable, responsible option for qualified borrowers.”

Read: Fannie Mae’s Announcement on 97 Percent LTV Option for First-Time Homebuyers

Alternatives to Conventional 97% Mortgage Financing

If a borrower does not meet the eligibility requirements for a Conventional 97% Mortgage, homebuyers may need alternatives for low down payment home loans. One great options is the FHA mortgage program which still only requires a 3.5% down payment.

FHA Mortgages have been very popular over the past several years as they are more flexible on credit and qualifying after bankruptcies and foreclosures. FHA loans also may allow for family members or close friends to gift the down payment.

That’s right, a borrower can buy a home with none of their own money out of pocket which may be limited on 97% Conventional financing. Closing costs may also be paid by the seller with a limit of 6% of the home’s purchase price while Conventional loans limit seller paid closing costs (Seller concessions) at 3%.

Conventional 97 Mortgage Alternatives: USDA Rural Development Loan

Another low down payment mortgage alternative may be the USDA Rural Development Loan which is a no down payment mortgage with 100% financing. While the USDA option may be great to consider, there are downsides.  Currently many USDA field offices are caught up on loan application and are approving Rural Development loans very quickly however at times they do get several weeks behind before reviewing applications.

One major factor of this loan option is that the home must be in a rural area. The USDA guarantee this home loan type to help grow rural communities therefore the location of the home cannot be in a largely urban area (see the USDA’s eligibility website for more information).

USDA Rural Development Loan Benefits:

  • Zero Down Mortgage
  • Lower Mortgage Insurance Premiums (PMI)
  • Government Guaranteed Mortgage Loan
  • Easier to Qualify for than the Conventional 97 Mortgage
  • Lower Mortgage Interest Rates

Conventional 97 Mortgage Alternatives: Conventional 95 Mortgage Loans

Lastly, the Conventional 95% mortgage loan is another great alternative to the Conventional 97% mortgage loan. Not everyone will qualify for the 3% down payment mortgage including those that are not first time home buyers or make too much money for the My Community Mortgage®. With a couple of quick yard sales and postings on craigslist you may be able to come up with the extra cash for a 5% down payment which may offer better financing terms. While only 3% down sounds great, you will be much happier with the lower interest rates and Mortgage Insurance Premiums (PMI) that just a bit more cash will bring.

Conventional 95 Loan Benefits:

  • Low Down Payment Mortgage with only a 5% Down Payment Requirement
  • Lower Mortgage Insurance Premiums (PMI)
  • Government Guaranteed Mortgage Loan
  • Easier to Qualify than the Convention 97 Mortgage
  • Lower Mortgage Interest Rates
  • More Lenders participate in Conventional 95 Financing

Apply for Low Down Payment home loans like Conventional 97% Mortgage Financing

Riverbank Finance would be more than happy to help you review your low down payment home loan options. Apply now for a Conventional 97% mortgage or My Community Mortgage® for first time homebuyers and buy a home with only a 3% down. Call us today at 800-555-2098 or submit a request below for additional information.

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Calculating MI Property Taxes

Calculating Michigan Property TaxesWhen shopping around for a home it is beneficial to check the cost of property taxes.

Property Tax Overview:

Property tax is a levy on property.  It is required to be paid by the owner annually based on the fiscal year. They are collected on a county level and each county has its own system in determining them.

Because each county has its own system, property taxes vary from county to county.  Property tax on homes are based on a tax assessments and millage rates for the local municipality. Counties take many variables into consideration as well: funding needs, property value based in appraisal, school district, transportation, etc.

Because there are a variety of variables considered during the process property taxes are not set, they fluctuate.  Local governments can raise property taxes for a number of reason (this is often seen when the economy starts to take a turn for the worst). Property taxes are set by millage rates that are typically voted on in local elections to cover such things as fire departments, libraries and police departments.

Related: Michigan Property Transfer Tax Estimator

How to calculate Michigan Property Taxes

Calculating Michigan property taxes is an important step when you are buying a new home. If your estimates are off, you could find your budget thousands of dollars off each year.  The easiest way to do the math is to use the Michigan Property Tax Estimator.

You will then complete the following steps:

  1. Enter the SEV (State Equalized Value) found on the property tax records (you will use the SEV to calculate the property taxes for a property that you are purchasing. To calculate the property taxes for the current owner you will use the “Taxable Value” which may be less than the SEV.
  2. Select your Michigan County
  3. Select Your City/Village/Township
  4. Select Your School District

After entering this information you will see two numbers below. One number will be the estimated property tax bill based on a Primary Residence and the other number will be the number based on a non homestead exempt property such as an investment property.

How you affect your property taxes:

Homeowner’s actions often increase their property taxes.  As a home’s value increases so do its property taxes.  For example, if homeowners remodel, re-roof, add a pool or do anything else that would add value to their home, their property taxes may be effected. The local municipal assessor will revisit the property and make value adjustments accordingly.

Michigan Property Tax:

In Michigan, the median home value is $132,200 according to Tax-Rates.org.  Counties collect an average of 1.62 percent of their property’s market value as property taxes; that’s an average of $2,145 each year spent on property taxes – equivalent to 3.8% of most Michigander’s annual income ($55,244)!

Now, as stated above, these statistics are averages of Michigan as a whole.  They do vary, a significant amount! The highest property tax in Michigan is that of Washtenaw County which is at 2.9 percent.  The lowest is in Luce County at .56 percent.

As you can see, location matters for many reasons when choosing a home.

So, when you are shopping around take all expenses into consideration so you are able to make the best and most affordable decision for you and your family.

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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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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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:

Request Information Now!

 

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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