Down payment assistance grants, what are they really? Let’s get this out on the table because there seems to be some confusion and many misleading advertisements. Let me start with the top 5 misconceptions of down payment assistance grants.
1. They are NOT funds from the government- The down payment assistance comes in the form of a grant, meaning when you go to sell your home or refinance you are not required to pay these funds back. BUT these funds are not from a magic bank account that the government provided for those who need assistance. This accompanies a loan program, and are made available to those who qualify (income, credit & purchase price requirements), in order to help make homeownership more attainable.
2. They are NOT separate funds from your loan- The down payment assistance grants are not a separate check you receive for your down payment. The down payment assistance grant IS part of the loan program. They are 30 yr fixed mortgages, with an FHA, VA & Conventional mortgage. When qualifying you need to work with a lender who is approved for these loan programs and can offer them.Meaning, your lender has to offer down payment assistance grants, or you can’t get one.
3. They are NOT only available to first time home buyers- These programs are available to all who can qualify. Restrictions apply.
4. Interest rates are the same as someone who makes their down payment- The mortgages do have a higher interest rate because these loans are perceived as riskier to the bank.The bank is put at increased risk with someone who is unable to put money down and would require a higher rate to cover any risk of default. You could say it is the cost of doing business with a specialty loan program.
5. That they allow you to purchase with no money down- These programs may assist with your down payment but they do require that you put a minimum of $1000 of your own funds or 1% of the purchase price, whichever is greater. There are also closing costs when purchasing a home, which the $1000 requirement will help meet. But you need to understand that there are closing costs and pre-paid items for insurance and escrow setup costs. These items can average around 2-3% of the purchase price, so you need to be prepared to have some money! Money to cover the closing costs, of your earnest money (which gets put towards your closing costs), your home inspection (not required but highly recommended) and your appraisal. If you are able to get seller paid concessions, this can allow for a lower amount needed at closing.But keep in mind the real estate market will drive a seller’s willingness to assist with your closing costs. You can also work with a down payment assistance program that allows the lender to help offset closing costs by adjusting the rate,
I’m hoping this gives a little more clarity about down payment assistance grants but if you still have questions and would like to discuss please give us a call. If you would like to see if you qualify please apply now.
When you are looking to get pre-approved for a home mortgage lenders will analyze your debt to income ratios. This is why it is extremely important that lenders review your pay stubs, W2’s and tax returns. We want to make sure that all your income is being calculated correctly and we are using the actual figures for your income analysis.
The qualifying ratios will vary depending on the loan program and sometimes this can be the deciding factor on which loan you will need to obtain. For many of you this part of qualifying for a loan gets overlooked. You may tend to focus solely on your credit score and how this affects your qualifications. Yes, credit score is important but is only one piece in the puzzle. If you have your credit score down and it is in good standing this is great but don’t forget to consider that although you may have been making your payments on time or maybe you have successfully rebuilt your credit. Did you consider what debt you may have could affect your qualifications for a purchase or refinance?
As a consumer you can review your debt to income and analyze your qualifications. The general rule to debt-to-income ratios is this:
1. Add up all your incurring debt (all debt reflected on your credit report, student loans, car payments, loans, credit cards, personal loans, etc.) NOT phone bills, cell phones, cable.
2. Then add your desired monthly mortgage payment
3. With the total you will now divide this by your GROSS (before taxes) monthly income.
Car payment $400
Student Loan $300
Credit Cards $300
$1000 total monthly debt
$1800 Desired monthly mortgage payment (including taxes & insurance)
$1000 + 1800 = 2800
Gross monthly income $3500
$2800/3500 = .80
With this example the ratio is 80% this is too high and this is only one income. If you are looking to qualify with someone else you will need to do this same process but add in their monthly liabilities and their gross monthly income.
So what would be your options if your ratios are too high? It doesn’t necessarily mean you can’t purchase and/or refinance. There are a few options you can take to help put you in a position to qualify for a home mortgage.
Option one: Lower your monthly debt. This may seem impossible but if there is a will there is a way. You can refinance your student loans for a lower monthly payment, same as your car. You could pay off or down any existing debt.
Option two: If you are unable to lower any of your existing debt then the next option is to lower your desired monthly mortgage payment.
As a general rule of thumb, keep this in mind: FHA your qualifying debt to income ration can’t be higher than 43%, for Conventional your debt to income ration can’t be higher than 36%. Now these numbers may possibly have some flexibility which would be discussed and reviewed by your lender. Please note ideally you do not want to be over these numbers.
Another helpful tool to have would be a mortgage calculator which we have on our website, we also have a mobile app! Check it out and download here!
If you have any questions please contact us and if you are ready to get pre-approved click here.
If you have a judgment on your credit unfortunately you will not be able to get pre-approved for a home mortgage. A judgement needs to be satisfied and released before you can apply for a mortgage. If you are being told that this can be approved with an FHA mortgage you may have received false or inaccurate information.
When you have a judgement on your credit report this is a stopping point for any lender no matter what loan program. A judgement needs to be satisfied, which means it needs to be paid. After being paid it also needs to be released and you will need to file the release and obtain the release of judgement from the county of which is was filed under.
This is extremely important if you are wanting to purchase or refinance. This is one you can’t keep calling different lenders to see if they can help you, this has to be addressed and taken care of. In the long run you will be thankful in getting this satisfied because your credit score will significantly increase.
Listed below are a couple articles with some helpful tips on how to remove judgments on credit.
How to remove a paid judgement
How to remove a judgement on your credit report
If you have any further questions please feel free to give us a call.
Gathering your financials and sending them to a lender is part of the pre-approval process. You’re lender needs to see two months most recent bank statements. This would be primarily your savings and checking accounts but may also include stocks, 401k, IRA’s or any other assets you may have and will be using and/or needing to show. Copies of these statements tend to be the most difficult part of the process.
As I’ve previously written, a lender is not looking to see how many times you go to Starbucks or if you spend money at the medical dispensaries, they are looking for large deposits, insufficient funds, regular payments that don’t seem to align with liabilities on credit report, any seemingly suspicious activities. This is all because of the Patriot Act and anti-money laundering laws.
The other reasons for reviewing bank statements (assets) is to show you have the funds for down payment and closing costs. This may be why more bank accounts may be required (IRA, 401k, Stocks, etc).
If you are like the majority of us, you may have a couple different accounts and transfer funds to and from each other. If this is the case then you will need to provide statements from all accounts in which funds are being transferred.
The last piece of the statements is that you will need to provide ALL pages. This means that the bank statement needs to be the actual statement which will reflect your full name, address and account number (NO transactions summaries) and each statement will reflect the number of pages it includes (ex. 1 of 4) which means you need to send ALL four pages, even the blank or seemingly unimportant pages. I know this can seem silly and doesn’t make sense but an underwriter will require to have ALL pages.
Remember no cash deposits are accepted!! If you had a cash sale for something on Craigslist or Ebay, you will need to provide a proof of sale receipt, transfer of title (if applicable), copy of the ad and then copy of deposit slip. And even with all these documents proving the cash transaction it is still up to the underwriters discretion if they will accept. This is just something to keep in mind if you are planning on selling items to help with down payment and/or closing costs. If possible the best way is to have the cash funds “seasoned” in your account for a couple of months prior to getting pre-approved.
Just remember your lender is on your side and they are not prying or trying to inconvenience you, they are on your team and only doing their job and what is required of them. In order to help you, you need to help them!
If you have any questions please give us a call. If you are looking to get pre-approved fill out our preliminary loan application!
What is Home Buyer Education (HBE)?
It is an educational course that covers the complete process of buying a home and becoming a homeowner. The curriculum includes financial management, credit management, selecting a home, building your buying team (Realtor & lender), mortgage products and disclosures, real estate contract review, inspections, appraisals, closing and post closing information. They also cover Colorado specific programs including down payment assistance (CHAC, HOEP, CHFA). They will also discuss and teach about the mortgage credit certificate (MCC), a tax credit available to first time home buyers and veterans.
As a previous participant of the course I can say from experience they cover items you would never would have thought of, such as, ways to save money on your mortgage over the life of the loan, what to pay attention to regarding a neighborhood of interest, for example they suggest going to the property of interest at different times of the day and just sit outside to listen to the neighborhood sounds, are there dogs that bark at night, do cars speed through the streets, etc. This is just one of the few tips they share.
Whether you are a first time home buyer or just re-entering the housing market I highly recommend attending this class. If you are uncertain on where to begin in the home buying process, this would be a great starting place. Home Buyer Education is not always required but is still highly recommended. There are few loan programs such as the down payment assistance programs, CHFA loans and the MCC that do require a home buyer education certificate and the certificate is good for one year. The class is offered online but again I can't stress enough that attending the class is more beneficial. The online course is $99 and if you attend the course it is free!
Click here to find out more info and to see the schedule. If you have any questions or should need any assistance please contact us.
Purchasing a home for the first time is an exciting yet confusing, overwhelming and can be an intensive process. So where do you start? Well, you can’t purchase without funds, correct? The first place to start is searching for a lender. There are so many outlets to look at online that at some point it becomes too much. As you start your research, gather all the information, start a list with questions you have. Then start searching for a lender.
Remember, you need to look beyond the interest rate. As a first time home buyer you need guidance, education and support throughout the process. You need to start with at least knowing your credit score (FICO) and having some money in the bank. You may find programs that will offer low credit scores and/or no money down. BEWARE! Please keep in mind that if it sounds too good to be true, then it probably is. Now, that being said yes there are programs available for lower credit scores and programs with down payment assistance; if those are items you need to search for then you need to look for lenders who can provide. Those should be the first questions you ask the lender prior to completing a loan application and running your credit.
You should also know the key differences between FHA & Conventional. Just because you don’t have 20% down doesn’t necessarily mean you can’t do a Conventional loan. You can put 3% down on a Conventional loan, it’s just knowing if that option is available to you BUT is it the best option for you. This is where an experienced lender can show you the difference in the two and how each affect the monthly mortgage payment and purchase price.
If you know you are wanting to look for a home in a more rural area then you need to find out information on a USDA loan. You will need to ask the lender if they are experienced and can offer USDA loans. Again, you will want to check with the lender prior to completing a loan application and running your credit.
Are you thinking about purchasing a home that might need a little TLC? Or maybe you’re thinking it might be a better option to find a bank owned home (foreclosure). If so then you should consider a rehab loan. There is an FHA 203k and Conventional rehab loan option. This is where you add the renovation costs into your mortgage. If this is even the slightest bit of interest to you then you need to make sure to ask your lender if they can provide these types of loans.
In conclusion, while you are doing your research make a list of what you are thinking you would be interested in, call lenders, ask questions and then when you feel comfortable make an appointment and meet them. The next step is getting pre-approved. Make sure you know the difference between pre-approved and pre-qualified. *Don’t make an offer on a home if a lender has not looked at your financials!
For more information and if you have any questions please contact us. If you would like to set up a consultation, give us a call.
I receive several calls daily inquiring about our services. Many are first-time home buyers and they always start off by asking if there are any first-time home buyer programs available. Then the next question is “what are your rates right now and what are your fees?”
This is such an ambiguous question. Seriously. A mortgage rate varies depending on loan program (FHA, VA, Conventional, USDA, Jumbo), terms (30 yr. fixed, 15 yr. fixed, ARM, etc.), FICO score, amount of down payment, etc. Do you even know if you should be looking for an FHA or Conventional loan? Do you know the difference between the two? Plus there are other factors, such as do you need down payment assistance (DPA) or are you purchasing in a rural area? These can greatly affect loan programs and ultimately are going to affect the rate and even fees. A better question for a lender is “do you offer multiple loan programs?” And “are you experienced with multiple loan programs?”
The main point I’m trying to get across is that don’t be so quick to be asking about rates and fees without knowing what you're really looking for in a lender. Rates and fees are going to be fairly competitive and should not vary significantly (plus or minus) and if they do that should be a red flag. You need to be aware that not necessarily the lowest rate and/or fees in a lender will equate to the best service or quality of service. My question to you would be “what are you looking for in a lender?”
The importance should be trying to find a lender you feel comfortable with, one that you can talk with and understand, someone who will help guide and educate you, especially if you're a first-time homebuyer. You will want someone who is versed and experienced in multiple loan programs. Don’t let a lender discourage you away from a specific loan program unless they have definitive reasons. You don’t want to be steered away from a specific loan program just because they can’t provide the loan program or because they are not familiar with or uncomfortable with the loan program. Inexperience or feeling a loan program it too complicated is no reason to not offer a program.
Do your research, make calls and ask questions. But be mindful when you ask what are your rates and fees. If you don’t provide needed information and many times financials, don’t expect the rate that is quoted over the phone to be the exact rate you will receive once you go through the pre-approval process. If you’re rate shopping you doesn’t do a service to yourself.
If you have any questions please give us a call.
As you may have already noticed, purchasing a home can be overwhelming, especially if you're a first-time home buyer. There is so much information to absorb and process along with the overwhelming cost and knowing exactly what is expected from you as a buyer. I have had many conversations with first-time home buyers whom have made the comment that they are not working with nor planning to work with a Real Estate agent. My response is always “may I ask why you are not wanting to hire a Real Estate agent to help you?” The answer is usually “because I don’t want to pay or I can’t afford to pay their commission”.
Buyers paying their agents commission seems to be a very common misconception among first-time home buyers. A buyer's Real Estate agents commission is not paid by the buyer, it is paid by the seller. All Real Estate commissions to both the listing agent and the seller's agent are paid by the Seller. Now technically the buyer is paying the commission because the commission agreement is in the sale of the property and the properties listing price includes the Real Estate Commission fees. I know that was a little confusing so stay with me. So, yes again, technicality you as the buyer are already paying for an agent. If you are already paying for a service wouldn’t you want to use the service?
A Real Estate Agent is for your protection, they are educated, trained and licensed to assist you with your purchase contract. They are there to help negotiate your purchase and are looking out for your better interest. There is no reason NOT to hire a Real Estate agent when purchasing a property. Again, you are not paying their commission directly out of your pocket at the time of service, the cost of the home and the closing of the properties proceeds is what pays for the RE agents commission. An no this is NOT part of your closing costs, remember this is priced in the sale of the property, the purchase price. A good source to read more about Realtors and their commissions is www.Realtors.com .
If you have any questions on what it looks like to purchase a home and to see if you would qualify, please give us a call.
Where do I begin when looking to purchase a home? This is the most common comment I hear when I receive calls inquiring about wanting to purchase a home. Whether you are a first time home buyer or someone who has purchased previously but it's been over 2-3 years since you last purchased, this seems to be a common feeling. Purchasing a home can feel very daunting, scary and overwhelming, as it should be. It is one of the largest purchases you will make in your lifetime and should not be taken lightly.
I want to help by noting the main areas I talk to potential clients about when starting the process. These are the key areas of where to start and I hope it helps guide you in the right direction if you are looking to purchase a home and don’t know where to begin.
First, you need to know your credit score (FICO), I’ve written about this previously, it is really important, your credit score reflects your credit worthiness. You need to know if your report is accurate. Review your balances on your credit cards, are they high (close to limit or maxed)? Do you have any late payments? If you know you have credit issues then those need to be addressed. You may have heard that medical collections don’t need to be paid. Main thing is if you have collections of over $2000 they will be required to be paid (always contact a lender if unsure what is acceptable). If your credit score is low you will want to remove collections because they will negatively reflect and affect your FICO score. Make sure to get letters from the collection agency when you satisfy the collection. If you have judgements, they will need to be paid and released. You will need to get the release of judgement from the county in which the judgment was placed (you have to pay for a copy of the release). You are unable to qualify for a mortgage if you have unsettled judgments, no exception. Last item to be aware of on your credit is keeping your credit card balances no higher than 30% of your max available credit limit. If they are higher they will report negatively. Also make note that all your credit liabilities (credit cards, student loans, car loans, etc) on your credit report is what is used to figure your debt-to-income ratios. You want good revolving credit that can help outweigh the negative as well as keeping your monthly expenses in line with your income.
Second, you need to have some money in the bank. Whether you are looking for down payment assistance (DPA) or have gift funds to assist you with a home purchase, you still need to have some assets. DPA does not assist with the closing costs, earnest money (which will get applied towards your closing costs), appraisal fee and inspection. These funds need to be readily available when getting ready to purchase. Besides even if you were able to have minimal costs to purchase, would you really want to go into homeownership with no money in the bank? What if your water heater breaks the first month and you have no money in the bank and credit cards are maxed out? What would you do? It is always advisable to have some reserves.
Last but not least, look for a lender. Don’t contact a realtor until you have spoken to a lender in order to know if you are pre-approved and for what purchase price. Make a list of what you need, even if you are unsure of exactly what you need and looking for, a good lender will help guide and educate you. Remember no question is considered “stupid”. If you know you need down payment assistance, make that known right away. If you have had a bankruptcy or foreclosure, make sure to be upfront even if it has been longer than 4 years ago. Have an idea of what you can afford monthly for a mortgage payment. If you don’t know where to begin, no worries, a good lender will guide you!
If you have any questions and/or feel you are ready to get started, give us a call.
We are very happy when we get a call from a qualified veteran looking to purchase or refinance their home using their VA benefits. First off, thank you for all those who have served. Being a fellow veteran helping other qualified veterans learn the benefits of a VA loan and providing them with the best mortgage available gives me great gratification.
Purchasing a home is an exciting and rewarding time but it can also be stressful and confusing. Many of us have difficultly in saving a down payment and coming up with 20% feels like an impossible feat, more less even 5%. The benefit of VA loans allows for a no down payment and at times no closing costs as well as no mortgage insurance. Yes, there is a VA funding fee (which some veterans may be exempt) but this fee can be rolled into your loan and is what goes towards a "pool" of funds which is what allows VA to keep rates low and assist with your fellow veterans to take advantage of the same VA benefit you are acquiring. Your lender will need a certificate of eligibility (COE), here is a link that can assist you in obtaining a copy of your certificate of eligibility. Your lender can also request your COE but this can take some time and if you are needing to get pre-approved quickly it helps your lender tremendously if you can have your COE ahead of time.
Again, VA loans are the best loans out there, if you would like to learn more about them and are a qualified veteran please give us a call. *Please know that if you are in need of a Jumbo loan you can still use your VA benefits, make sure to ask us how.