Types of Renovation Mortgage Programs

Renovation Mortgage Programs

If I had a dollar for every time someone responded to my comment about remodeling and DIY projects with the phrase “welcome to home ownership!”– I’d be rich!  Not everyone has the means to build their pinterest-inspired dream home from the ground up– but what if I told you there are mortgage programs designed to help renovate existing structures?  What if your dream home already exists, and just needs some updates to make it your own?  No DIY-ing required!

Renovations programs are not very well known, and were rather unappealing before the housing crisis.  They were thought to be confusing and complicated.  As a result of the distress caused by the negative housing situation, these type of programs became more attractive to potential home buyers who sought ways to buy homes at a lower price and improve upon them.  The shift in the focus of the consumer has brought the Federal Housing Administration (FHA) 203(k) rehabilitation loan and Fannie Mae HomeStyle Renovation Mortgage to the forefront of financing options for prospective home buyers that are in the market for a fixer-upper. Both of these programs function to refinance existing homes as well.

Two Types of Renovation Mortgage Programs

When purchasing a home with a FHA 203(k) Renovation Mortgage or a Conventional HomeStyle Renovation Mortgage, the funds designated for repairs to the property are placed in an escrow account with the mortgage lender after closing. After all repairs have been made, a final inspection takes place. At this time, all contractors may submit their invoices to the lender to be paid. Renovations may not be completed by the homeowner.

FHA 203(k) Renovation Loan VS. Conventional HomeStyle Renovation

Now, you might be wondering, what is the difference between the two programs? Essentially, 203(k) is an FHA Loan Program while HomeStyle Renovation is a Conventional Loan Program. Each program, therefore, must adhere to its respective guidelines for credit score and debt-to-income limits. FHA has more strict requirements on what types of repairs can be complete to the home while the rule of thumb for the HomeStyle Renovation loan is that it can be anything that increases the value of the home and is fixed to the property. The HomeStyle Renovation Loan can be used to buy or refinance a primary residence, second home (vacation home) or even an investment property while the FHA 203(k) loan is only available on primary residences.

Which Renovation Mortgage Program is Best for Me?

If you have low credit and the property is only in need of minor repairs, the FHA 203(k) would probably be best for you, as it allows credit scores down to 580 and only requires as little as 3.5% down. If your credit score is over 660 however, and you have 5% to put down, you may be better off with a HomeStyle renovation loan, as it would likely give you a lower overall mortgage payment. In any case, if you are unsure, contact a loan officer at Riverbank Finance to discuss each program’s specific guidelines and determine which would be the best fit for you.

Take a look at Fannie Mae’s guidelines for HomeStyle Renovation Loans
Also check out FHA’s 203k Renovation guidelines

Have a specific scenario you’d like to run past us?  Give us a call to speak with one of our licensed loan officers. We would love to recommend the best loan program for you and your situation.

Apply for a Renovation Mortgage

To apply for a Renovation Mortgage call Riverbank Finance today at 1-800-555-2098.

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Who has the Best Fall Donuts in West Michigan?

Cider & Donut Season in West Michigan

Fall is officially upon us, and every good Michigander knows what that means– cider and donuts! A friendly office debate about where to find the best apple cider and donuts in West Michigan inspired a donut tasting at the Riverbank Finance office today.  So, here are the results; a definitive ranking of fall flavored donuts available in West Michigan.

The Donut Participants

  • D’Arts Donuts – Grand Rapids
  • Robinette’s Apple Haus- Grand Rapids
  • Klackle Orchards – Greenville
  • DeBoer’s Bakery- Holland
  • Vander Mill – Spring Lake

The Donut Judging

We judged each donut based on four categories; presentation, freshness, fall flavor, and overall taste. We used a scale of 1-5, 1 being the worst and 5 being the best. Our entire team participated, and we took the average of all categories to come up with our totals.

The Results

  • Best Presentation: TIE between D’Arts and DeBoer’s (4.44)
  • Freshest: Robinette’s (4.88)
  • Fall Flavorful: Klackle’s (4.77)
  • Best Taste: Robinette’s (4.72)

The Winner of the Best Donut in West Michigan

If we HAD to pick just one, it would be Klackle’s in Greenville. Their combined overall score was a 4.36 and their cider was just plain delicious. The market bakery features more than just donuts– they have dozens of mouthwatering goodies and gifts. While you’re there, don’t forget to pick your own apples and pumpkins, and check out all of the farm fun activities!

DONUT settle for just any mortgage company, call Riverbank!

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Call Riverbank Finance today at 1-800-555-2098

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Trended Credit Data: How Will It Affect You?

You may have heard some buzz this spring about mortgage giant Fannie Mae and trended credit data, changes which were set to take effect in June. Just days before the launch, however, the new system was delayed unexpectedly. Well folks, long-awaited Desktop Underwriter 10.0 launched this past weekend, and with it, the requirement that lenders use trended credit data on all new loan casefiles.

What is Trended Credit Data?

Trended credit data is a detailed record of credit history, including payment history and total balance each month. The addition of this new information will allow lenders to more accurately tell the difference between ‘transactors’—borrowers with large balances who pay in full each month—and ‘revolvers’—borrowers with large balances who pay only the minimum payment each month. Until now, existing credit reports could not distinguish the two.

The new credit report will feature trended credit data history on credit cards, HELOCs, student loans, car loans, and mortgages. The actual appearance of credit reports will change very little, but will include 30 months’ history with Transunion and 24 months’ history with Equifax; Experian plans to add trended credit data in January 2017. Neither FICO or VantageScores incorporate trended data into their system at this time.

Example of Trended Credit Data on a Credit Report

The example above shows a revolving account with trended credit data.

Why is This Important?

The addition of trended credit data provides a more detailed picture of a borrower’s credit behavior, rather than the traditional moment-in-time credit snapshot. It allows lenders to better predict your future payment behavior and assess your risk.

“The trended credit data will be used by the DU risk assessment to evaluate how the borrower manages his/her revolving credit card accounts. A borrower who uses revolving accounts conservatively (low revolving credit utilization and/or regular payoff of revolving balance) will be considered a lower risk. A borrower whose revolving credit utilization is high and/or who makes only the minimum monthly payment each month will be considered higher risk.” – Fannie Mae

How will this affect my credit score?

Fannie Mae has not yet released conclusive guidelines as to how trended data will be scored or impact the underwriting process. Financial institutions across the country, however, speculate that this will open up the credit window to potential borrowers previously deemed unworthy. That’s right—trended credit data can turn a denial into an approval!

Even the most responsible borrowers make mistakes, but forgetting to make a payment will cost you more than just a large late fee—it can lower your credit score upwards of 100 points, in some cases! Until now, only years of hard work and waiting for delinquencies to season could rebound a credit score. With the addition of trended data, however, a borrower can effectively counter that late payment within a couple of months. Tendencies such as paying off revolving balances in full, making additional payments, and reducing total amount borrowed over time all demonstrate positive repayment ability and behavior.

Have a specific scenario you’d like to run past us?  Give us a call to speak with one of our licensed loan officers. We would love to recommend the best loan program for you and your situation.

Apply for a Mortgage

Call Riverbank Finance today at 1-800-555-2098

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Using Gift Funds for your Down Payment

Using Gift Funds for your Down Payment

Not everyone has thousands of dollars lying around for a down payment when they are in the market to purchase a home, so receiving a gift can be a great option!  Here’s what you need to know, if you’re lucky enough to receive a down payment gift.

There is a common misconception that you can use whatever monetary gifts your friends and family give you toward your down payment, but it isn’t quite that simple—the source of the funds actually matters more than the amount in your bank account.  If your great aunt’s neighbor’s friend hands you $1,000 in cash, don’t deposit it!  Not only will it be a problem because it is untraceable, but you cannot accept a gift from just anyone.

Who can give a down payment gift?

So, who can give you a down payment gift?  Any immediate family member—parents, grandparents, siblings, or children—can gift funds.  Your significant other can also give you a gift, but only if you are engaged to be married.  Unfortunately, extended family such as aunts, uncles, or cousins would not be permitted to give a down payment gift.

What is a “gift letter”?

Once an eligible family member has committed to giving you a monetary gift, they’ll need to complete a gift letter.  Each lender’s gift letter looks slightly different, but includes the same basic information; the subject property address, the amount of money being gifted, the relationship of the gifter to the giftee, and a statement that the gift is indeed a gift, not a loan in disguise, and will not be repaid.  Both the gifter and giftee must sign and date the letter.

Want an example? Click here to see an Example Home Loan Gift Letter

Don’t do anything without a paper trail

Let’s say, for example, that your grandparents are going to give you a gift of $25,000.  They plan to pull $15,000 from their retirement account and $10,000 from their savings.  In addition to the gift letter, they may need to provide the following documentation:

  • Retirement account statement showing $15,000 available to give
  • Bank statement showing $10,000 available balance in savings account
  • Bank statement showing transfer of $15,000 going in, and $25,000 total available funds

Although the actual requirements may vary depending on the loan program you have chosen, it is best to let the gifter know ahead of time that these documents may be needed.  Next, you will need to provide:

  • Copy of the check from your grandparents to you
  • Bank statement showing the $25,000 cleared your account

Don’t forget to thank your gifter!

Related: Documents You Need to Get a Mortgage

Have a specific scenario you’d like to run past us?  Give us a call to speak with one of our licensed loan officers. We would love to recommend the best loan program for you and your situation.

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Call Riverbank Finance today at 1-800-555-2098

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USDA Lowers Upfront and Annual Fees for RD Loans

USDA Lowers Fees for RD Loans

Great news for homebuyers considering a USDA rural development home loan (RD Loan)!  The already popular zero down mortgage is getting even better. The USDA announced this week that they will be decreasing both the upfront guarantee fee—a closing cost which is financed into the total loan amount at close; and the annual fee—the USDA version of PMI, which is paid monthly.  Effective October 1st, the first day of fiscal year 2017, the upfront guarantee fee will decrease from 2.75% to 1%, and the annual fee will decrease from .5% to .35%.

Now, unless you spend your spare time studying loan program guidelines, that might sound like gibberish—so let’s do some math to show the savings.  On a $200,000 home purchase, the upfront guarantee fee would decrease from $5,500 to $2,000 and the annual fee would decrease from $83 to $58.  That is a savings of $3,500 on the total loan amount and $25 per month over the life of the loan!

Requirements for a USDA Rural Development Loan

You might be thinking, that’s great, but how do I know if a USDA rural development loan is the right fit for me?  I’m glad you asked!  Qualifying for a USDA RD loan is very similar to an FHA mortgage, but requires no down payment and has two important requirements for income limits and location.

Traditionally, when purchasing a home with less than 20% down, most loan programs require private mortgage insurance (PMI) to be added to your monthly payment.  For this reason, USDA loans are more favorable, because their annual fee of .35% is significantly smaller than the .85% required for FHA loans.

Have a specific scenario you’d like to run past us?  Give us a call to speak with one of our licensed loan officers, or check out our USDA Mortgage Calculator.  We would love to recommend the best loan program for you and your situation.

Apply for a Rural Develoment Mortgage

Buying a home with no down payment has never been better. Call Riverbank Finance today at 1-800-555-2098.

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What is a Loan-to-Value (LTV) Ratio?

What is a LTV

If you’ve ever been in the market for a mortgage, you’ve probably heard the phrase ‘loan-to-value ratio’ or ‘LTV’ for short.  Obtaining a new mortgage can be nerve-wracking, even without the financial jargon and acronyms—so let’s talk about LTV, what it means, and how it affects you and your mortgage.

How are Loan-to-Value ratios calculated?

The Loan-to-Value Ratio is essentially the financed amount divided by the home’s value or purchase price, expressed as a percentage.  Let’s say for example that you’ve found a home you’d like to purchase for $200,000 with a down payment of 20% ($40,000).  You would be financing $160,000 of the $200,000 purchase price, which gives you a loan-to-value ratio of 80%.

Why are Loan-to-Value ratios important?

Now that you know what LTV means, let’s talk about why it is important.  The higher your LTV, the greater ‘risk’ you are to your lender.  This, among other factors, determines the interest rate your lender will offer you.  You may be thinking ‘What if I don’t have 20% to put down? What other options do I have?’ Well, I’m glad you asked!  There are many loan programs available today; each with benefits, and its own unique set of guidelines.

  • Conventional loans require, at a minimum, a 3% down payment.  Our new 1% down option, however, allows the borrower to put only 1% down and we contribute the other 2%, leaving the borrower with 3% equity and a 97% LTV.
  • FHA loans require, at a minimum, a 3.5% down payment.  The interest rates are typically higher on FHA than on Conventional, but are more forgiving of borrowers with lower credit or bankruptcy/foreclosure in the past.
  • VA loans and USDA loans are zero down programs, but require that the borrower be a US Veteran (for VA loans) or that the home be located in an eligible, rural area (for USDA loans). 

Generally, the greater the down payment you are able to provide, the lower your LTV will be; the lower your LTV, the better loan terms you will receive.  The most significant rate changes happen in increments of 5%, and when you reach an 80% LTV.   

Still unsure? Have a specific scenario you’d like to run past us? Give us a call to speak with one of our licensed loan officers. We would love to recommend the best loan program for you and your situation.

Apply for a Mortgage

Call Riverbank today at 1-800-555-2098 or apply online today!

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Purchase a Home with a 1% Down Mortgage

1 percent down home loan

Riverbank Finance LLC is excited to offer the new Conventional 1% Down with Equity Boot home loan program. This program is better than 99% financing. You purchase a home with a 1% down payment and we will pay up to a 2% down payment towards your home purchase!

Important Update! Last date for loan submissions is 5/31/2018. Program is being discontinued.

This new 1% down home loan option is a conventional mortgage loan that allows you to purchase a home for one month’s rent payment. There are no more excuses for making money for your landlord when you can buy with a minimal investment.

1% Down Mortgage Rates

Mortgage rates for the 1% Down Mortgage are very competitive with our low rates. Now is a great time to purchase with mortgage rates near the lowest in history. We are also excited to offer this mortgage option with no monthly Mortgage Insurance (PMI). This combination of a low down payment, low mortgage rate, and no monthly mortgage insurance option makes one of the best ways to purchase a home.

1% Down Home Loan Requirements

As with any mortgage, there are qualifications and restrictions for eligibility. A borrower must meet all conventional home loan requirements for credit, income and the property.

Below are a few program specific requirements:

  • Income Limits may apply
  • All borrowers must occupy the property as their primary residence
  • First Time Home Buyer online class required if borrowers have not owned a home in 3 years
  • Cannot have ownership interest in any other residential dwellings
  • Borrowers may receive their 1% down payment as a gift
  • Single Family Homes only
  • 720+ Credit Score Required
  • 45% Maximum Debt to Income Limits
  • 2% Lender Gift towards down payment (Up to $5000 Max)

*Income limited to 100% of Freddie Max Area Median Income Limits (AMI) Apply. If property is located in an Under served Area Census Tract then there are no income limitations. Click here for Michigan Income Limits for the 1% Down Mortgage.

Apply for a 1% Down Mortgage

Call Riverbank today at 1-800-555-2098 or apply online today!

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Borrower contributes 1% down, lender contributes 2% of the loan amount up to $5000 for the down payment and the borrower is responsible for any different to get the required 3% down. The principal and interest payment on a $200,000 30 year Fixed-Rate Loan at 4.375% and 97% loan-to-value (LTV) is $998.57 with 0 points due at closing. The Annual Percentage Rate (APR) is 4.613%. The principal and interest payment does not include property taxes and home insurance premiums, which will result in a higher actual monthly payment. Rates current as of 10/2/2017.

Manufactured Home Loans

manufactured home loan requirements

Finding a lender who will finance a manufactured home can be quite a task, but luckily Riverbank Finance is able to provide programs to help you! It is important to know what to expect and the difference between financing a stick built home and a manufactured home.

There are various programs that will allow for manufactured home financing, including: FHA Loans for Manufactured Homes, VA Loans for Manufactured Homes, and Conventional Loans for Manufactured Homes. For a manufactured home to be eligible for financing, it must have been built after June 15th, 1976.  Below is additional information to know before you purchase a manufactured home.

Manufactured Home Financing Requirements Checklist

  • Built after 1976
  • Not on Rented Land (Trailer Park etc)
  • On a permanent Foundation
  • Has never been moved since initial installation
  • Not in need of major repairs (Leaky roof, holes in flooring etc)
  • Has Original Green Title or Affidavit of Affixture recorded
  • No Additions without Permits
  • All Utilities on and Functional

Manufactured Home Titles

Manufactured homes are titled differently than stick-built homes. For a smooth mortgage process, a buyer needs to find out how the home they are interested in is titled. For manufactured homes, there will be either a green title or an Affidavit of Affixture. The green title is similar to an auto title and must be retired prior to, or at, closing. When the green title is retired, an Affidavit of Affixture application is submitted to the state. This is the process through which the manufactured home becomes legally attached to the property.

What if the Manufactured Home Title is Missing?

If the green title is missing, a replacement must be ordered by the current owners through the Secretary of State; this process can take upwards of two months so should be started immediately if a replacement green title is needed.

If there is already a recorded Affidavit of Affixture tied to the property, then you do not need to worry about the green title.

Manufactured Home Foundation Inspection

When purchasing a manufactured home, an engineer is required to inspect the property and its foundation to verify that it is compliant with wind and snow loan requirements. The engineer will issue an engineer’s certification after the inspection.

Manufactured Home HUD Compliant Data Plate and Tags

Every manufactured home, when built, has two HUD tags and one HUD data plate. The tags are located outside the home, one on each section. The data plate, which is a piece of paper, is in the interior of the home, generally in a cabinet or closet. If any of these are missing, a third part verification is required to be ordered.

If you are aware of the above information, obtaining a mortgage for a manufactured home can be a smooth and enjoyable process. It is important to work closely with your loan officer, title company, real estate agent, and sellers to make sure the manufactured home is financeable and that everyone is on the same page as far as what is required.

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Brexit gives mortgage seekers the gift of low mortgage rates!

Brexit Lowers Mortgage Rates!Mortgage rates have dropped yet again in the wake of the Brexit (Britain voting to leave the European Union).  The world markets have been very volatile since the news broke early Friday morning. Financial instability brings lower mortgage rates. Now is the best time to buy a home or refinance your mortgage to a lower rates that we have seen in years.

At the start of 2016 average mortgage rates for a 30 year fixed rate mortgage hovered around 4.00%. Industry experts advised that rates would continue to climb as the Federal Reserve announced plans to increase their rates throughout 2016. The results have been quite the opposite with current mortgage rates hitting as low as 3.50% for prime borrowers.

June 2016 Mortgage Rates

What Do Low Mortgage Rates Mean for Home Buyers?

With mortgage rates near the lowest point in 3 years, home buyers are able to afford more house for the same payments. Here is an example from Riverbank’s Conventional Mortgage Calculator with a home buyer getting a loan of $250,000 to buy a home.

January 2016 with a 30 year fixed rate mortgage at 4.25% would give the home buyer a principal and interest payment of $1229.85.

June 2016 with a 30 year fixed rate mortgage at 3.5% would give the home buyer a principal and interest payment of $1122.61 which is a $107.24 per month savings.  For the same payment of $1229.85 a home buyer would be able to get a mortgage of $273,882. This increases their buying power by $23,882 for the same payment!

Why Refinance to a Lower Mortgage Rate?

There are several “rules of thumb” when it comes to refinancing your mortgage to a lower rate. Some say if you can drop your rate by ½ of a percent then it makes sense. Others say if you can do it with no costs then it makes sense. The true answer will be different for each individual circumstance.

The way to tell it if makes sense to refinance your mortgage is if you will save more money than the costs of getting a lower rate. For example if it costs $3000 in closing costs but you save $250 per month you will recover your costs in 12 months ($3000 / 12 = 12 months). In this example if you plan on keeping your home for at least 12 months, then anything after that would be money in your pocket.

Should I Refinance to a 15 Year Mortgage Term?

Many home owners are taking advantage of the low mortgage rates to pay off their mortgage faster without increasing their payment significantly. By refinancing to a 15 year mortgage you may save thousands of dollars in interest over the life of your loan. How is that for retiring early?

Here is an example of a home owner refinancing to a 15 year mortgage from a 30 year mortgage.

The homeowner has a $250,000 mortgage and is currently at 4.5% on a 30 year fixed rate. If he pays the minimum payment he will have paid $206,018.10 in mortgage interest. See Riverbank’s Mortgage Amortization Schedule Calculator for more information.

This home owner decides to refinance to a 15 year fixed rate mortgage at 2.875%. If he pays the minimum payments on his new loan his total interest will only be $58,063.75 which saves him $147,954.35!

With these low mortgage rates, now is a great time to start saving. Call a licensed loan officer today at 1-800-555-2098 and request your free rate quote.

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**Mortgage Rate Disclaimer: Recent rate but rates, loan products & fees subject to change without notice. Your rate and term may vary. Fees & charges apply and may vary by mortgage product. Subject to underwriting approval. Application required; not all applicants will be approved.  Important information relating specifically to your loan will be contained in the loan documents, which alone will establish your rights and obligations under the loan plan. Call for details at 1-800-555-2098.