30 Mar 2018

Gift Money: Everything You Need to Know

Gift Money: Everything You Need to Know

We get this question more often than most… “ Can my family member help me with my closing costs or down payment?” The answer is yes, but if you are getting gift money to help finance your new home there are a few things you need to remember…

The “Donor” of the gift must be a family member, fiancé or domestic partner. They must prove they have the ability to provide you with the gift by providing a copy of their bank statement, a copy of the canceled gift check and/or a signed letter from their bank saying the funds are available.

The “Gift Letter” is a form we will provide. The donor will need to complete it with basic information and a signed statement that the funds are a gift with no expectation of repayment.

The “Transfer” must be documented carefully. Make a copy of the gift check and deposit slip or of confirmation of the wire transfer. Deposit the gift in the account you’re already using for verification of funds to close. DO NOT combine this deposit with any other incidental deposits. Provide either an online update or the next account statement to show that the deposit cleared into the account.

Some programs allow for the entire down payment to be in the form of a gift. Others may require that you have at least 5% of the purchase price from your own funds. As these rules can vary or change at any time, never hesitate to consult with us for the specifics as they relate to your transaction.

While the documentation requirements may seem excessive at times, please remember that the underwriters are simply following the rules to assure that your down payment is not borrowed and that any allowable gift funds are coming from acceptable sources.

And remember, if you have any questions about the mortgage process, just ask me!

26 Feb 2018

Can You Close a Home With No A/C Unit?

Can You Close a Home With No A/C Unit?

 

The answer is … no,  and this can be a major problem for you and your business. House has had the A/C unit/ pool pump/ water heater stolen or broken and the lender will not close the loan until the equipment is fixed.

Seller or buyer agrees to pay for the repair but will not do so until closing.

This is understandable because the seller does not want to waste money and the buyer does not want to improve a property that he doesn’t own yet.

We have a solution that will allow the property to close, loan to fund, and the repairs to be done within 10 days of funding. We require that you get 2 estimates from licensed contractors. We will stipulate that 1.5 times the amount of the highest bid be put into escrow at closing. Example: highest bid is a $1,000. We will require 1.5 times ($1,500) held in escrow.

Schedule the work to be done shortly after closing. Once work is completed we send out an appraiser for final inspection and then release the funds to the contractor. This program is for minor repairs like the A/C unit, water heater, pool pump etc. It is not to be used on a new roof, kitchen/bath remodel etc. It is not a renovation loan.

Hopefully this information helps you in with you’re A/C Closing questions.

04 Nov 2015

Do I Have to Pay Closing Costs?

Do I Have to Pay Closing Costs?

You Can Have the Seller Pay Your Mortgage Closing Costs!

Closing Cost Options are Limited Since you are out looking for a house and have been pre-approved by us, you will want to understand how closing costs will be paid.You will only have several options for your closing costs to be paid, either by the seller through the sales price or by the buyer with their own money.Try to Have the Seller Pay For Your Closing Costs

 

The ideal situation would be for the seller to pay the buyers closing costs but sometimes the seller will not comply nor do they have to.

Depending upon what type of loan you are approved for, the lender will only allow the seller to pay a certain percentage of the buyers closing costs.

Option #1- Seller Paid Closing Costs
FHA Mortgage and VA Mortgage– Seller can pay up to 6% of the buyers closing costs. Example: Sales Price is $100,000 and the seller can pay up to 6% of the buyers closing costs. That 6% will equal $6,000 to be paid towards the buyers closing costs. Conventional Mortgage– The seller is only allowed to contribute 3% towards the buyers closing costs unless the borrower is using a down payment of 20% or more, then the seller paid closing costs can go to 6%.USDA Loans/ Rural Development– USDA home loans are very unique in that the seller can pay an unlimited amount of the buyers closing costs. If the seller will not pay any of the buyers closing costs the buyer will be able to add the closing costs to the sales price to be financed with their total loan amount.

 

Option #2- Buyer Paid Closing Costs

You pay for your closing costs. Not too many choices here! The buyer pays for their closing costs with their own money or with a gift from a family member.When you are trying to obtain a mortgage, we would prefer that you use your money for a down payment over paying for closing costs.Paying for your own closing costs will give you a better chance of having your contract accepted.

 

The majority of this work begins with choosing the right Realtor that understands how to negotiate your sales contract so you can get your piece of Florida Real Estate!

12 Oct 2015

Do I Need To Sell My Home Before I Can Qualify?

Do I Need To Sell My Home Before I Can Qualify?

Although every situation is unique, it is not uncommon for homebuyers to qualify for a mortgage on a new home while still living in their primary residence.

Perhaps you are outgrowing your current house, or have been forced to relocate due to a job transfer?  Regardless of the motivation for keeping one property while purchasing another, let’s address this question with the mortgage approval in mind:

So, Do I Have To Sell?

Yes. No. Maybe. It depends.

Welcome to the wonderful world of mortgage lending. Only in this industry can one simple question elicit four answers…and all of them may be right.

If you are in a financial position where you qualify to afford both your current residence and the proposed payment on your new house, then the simple answer is No!

Qualifying based on your Debt-to-Income Ratio is one thing, but remember to budget for the additional expenses of maintaining multiple properties. Everything from mortgage payments, increased property taxes and hazard insurance to unexpected repairs should be factored into your final decision.

What If I Rent My Current Property?

This scenario presents the “maybe” and the “it depends” answers to the question.

If you’re not quite qualified to carry both mortgages, you may have to rent the other property in order to offset the mortgage payment.

In that scenario, the lender will typically only count 75% of the monthly rent you are proposing to receive.

So if you are going to receive $1000 a month in rent and your current payment is $1500, the lender is going to factor in an additional $750 of monthly liabilities in your overall Debt-to-Income Ratios.

Another detail that can present a huge hurdle is the reserve requirement and equity ratio most lenders have. In some cases, if you are going to rent out your current home, you will need to have at least 25% equity in order to offset your payment with the proposed rent you will receive.

Without that hefty amount of equity, you will have to qualify to afford BOTH mortgage payments. You will also need some significant cash in the bank.

Generally, lenders will require six months reserve on the old property, as well as six month reserves on the new property.

For example, if you have a $1500 payment on your old house and are buying a home with a $2000 monthly payment, you will need over $21,000 in the bank.

Keep in mind, this reserve requirement is incremental to your down payment on the new property.

What If I Can’t Qualify Based On Both Mortgage Payments?

This answer is pretty straightforward, and doesn’t require a financial calculator to figure out.

If you are in this situation, then you will have to sell your current home before buying a new one.

If you aren’t sure of the value of the home or how your local market is performing, give us a ring and we’ll happily refer you to a great real estate agent that is in tune with property values in your neighborhood.

…..

As you can tell, purchasing one home while living in another can be a very complicated transaction.  Please contact us at anytime so we can review your specific situation and suggest the proper action plan.

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18 Sep 2015

Do I Need To Make Mortgage Payments If My Lender Goes Bankrupt?

Do I Need To Make Mortgage Payments If My Lender Goes Bankrupt?

When mortgage lenders go out of business and are essentially taken over by the FDIC, homeowners are left wondering if they still need to make a monthly payment.

Great thought, and a very common question for many borrowers in the 2006-2010 timeframe.

The short answer is YES, you still have to continue making mortgage payments if your current lender files for bankruptcy or disappears over the weekend.

In order to give a more thorough answer to this popular topic, we’ll need to address the relationship between mortgage loans as liens and mortgage servicers who make money by handling payments.

To put this topic in perspective, 381 banks actually filed bankruptcy between 2006 and 2010 forcing them to cease their mortgage lending activities. And a common misconception borrowers have about their mortgage company is that their agreement should become obsolete once the lender files for bankruptcy or goes out of business.

Based on the way mortgage money is made, packaged and sold on the secondary market as a mortgage backed security, the promissory note (agreement) is actually spread between many investors who rely on a servicing company to collect and manage the monthly payments.

A mortgage is considered a secured asset, where the collateral is real estate.  And, the mortgage note has a separate value to investors and servicers based on the interest and servicing fees they have wrapped up in the monthly payments.

This is why many mortgage notes get sold to other servicers who pay for the rights to service your loan. So basically, even if a mortgage company is bankrupt, someone else is willing to take on the job of collecting payments.

Also, by signing a mortgage note, the borrower is committing to continue making the required payments, regardless of what happens to the mortgage company servicing your loan.

Bullets:

  • Your house is an asset
  • The mortgage note has a separate value to investors
  • Regardless what happens to your mortgage company, you need to make your payments

Also, it’s important to continue making your mortgage payments on time, regardless of which servicing company is sending a monthly statement.  Obviously, keep a good paper trail of those mortgage payments in case there is a mix-up between transitions.

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18 Sep 2015

Who Owns My Home If I Have A Mortgage?

Who Owns My Home If I Have A Mortgage?

Many borrowers believe that when they purchase a property by obtaining mortgage financing, they also own their home.

Technically speaking, full ownership on a property only happens once the mortgage loan amount has been paid in full.

To break this down in more detail, there are a few components of a mortgage:

A Promissory Note is a document signed by the borrower acknowledging their commitment to pay the mortgage back with interest in a specific period of time.

In addition to the terms of repayment, the Note also contains provisions concerning the rights of both parties involved in the agreement.

In some states, a Deed of Trust is used instead of a Mortgage Note. The main difference is that on a Deed of Trust there is a Trustee, which the legal title is vested to in order to secure the repayment of the loan.

There are three parties involved with a Deed of Trust:

1) Trustor – This is the borrower

2) Trustee – This is the entity that holds “bare or legal” title, and is usually the title company which holds the Power of Sale in the event of default and reconveys the property once the Deed of Trust is paid in full.

3) Beneficiary – This is the lender that is getting repaid

Deeds of Trust are easier for lenders to foreclose on than a mortgage because there is no need for a judicial proceeding.

Mortgages on the other hand, have to go through judicial proceedings, which can be expensive and time consuming.

In summary, until you have your promissory note paid in full, you are not the only one with an ownership interest in your property.

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