Free Special Report Courtesy of Florida’s Most Creative Lenders and Realtors The Most Complete Explanation of What To Expect During The Buying and Borrowing Process.
Many people never buy the home of their dreams simply because they don't think they have enough money for the down payment. They've been told through the years that they need 10 or 20 percent of the purchase price in order to buy a home. Well, this simply isn't true.
So why have so many real estate companies told them this?
Quite honestly, it's because selling homes to people with 10 or 20 percent down is easier than selling homes to people who have little or no money for a down payment. Most real estate sales people would rather go after the "easy sale" than try to help people who have special needs.
As a "By Referral Only" Lender, my mission is clear: To Help People. That is why I’ve created this special report and have posted it on the Web for the world to see.
This report is specially designed for people with good credit and a “good income” and chose not to tie up their money in equity or simply do not have the cash on hand.
Why Create and Post This Information
This information has been produced with the intent of removing the mystery from the no down and low down mortgage process. Most of us would turn this over entirely to a Loan Officer and keep our fingers crossed. This should give you a "bird’s eye" view of what is going on during the entire process.
So why am I compiling this information.
Someone had to! There is no easy way to find out about the things that are discussed in this report. I’ve been researching and compiling information for over 12 years. And have written it with the common man in mind.
So what’s in it for me?
You might be able to take all that I share and go on with life without me. But I’d hope that you would believe that I might be able to be of some help to you. I make my living helping people. If I help you achieve what you want, the byproduct is that I will achieve what I want. It’s a win-win situation. So if you need help with financing, then I'd appreciate the opportunity to be of service.
A little about me. I am Mortgage Loan Consultant, I like to think that we can make things easier for ourselves if we will just stop for a moment and write down and share with others what we’ve learned. I have helped 1600 Families in the last 17 years reach their dream of owning a home and then using the home to create additional wealth. I wish you well in your search for a mortgage or refinancing money. I encourage you to pass on this information to anyone you think it can help.
Where Do I Start?
We move on average every 4-7 years. On your street about 10 percent will move this year. That is about 1 out of every ten homes. These are national averages. You might experience a bit more movement or a bit less, but on average we just can’t stay put.
Usually we are moving to upgrade from one house to another. Or we are transferred with our job. Whatever the reason the results are the same. Once every seven years we are going through the process again. So if you feel like a duck out of water, relax - because you are not alone.
That is why my purpose is to such a wonderful job for my clients that they gladly refer everyone they know.
Getting a loan sounds so easy. You just think; "Let’s go get some money". Well if we did it everyday, it might be a piece of cake. Sometimes it is easy but more often than not there are some glitches to work out. Some of them are small and others large, there is no such thing as an easy loan, I can assure you. Usually big and small glitches can be handled by an experienced professional. And it turns out that there are many people involved in the loan process (discussed later) too.
But let’s get on with it. You start in the beginning of course! So where is the beginning?
Whether you are doing this for the first time, eighth time or the last time you still start at the same place. Call and talk to a loan consultant. Within a few minutes he/she will be able to tell you almost everything you need to know. Based on a short phone conversation you should have a very good feel for what you can afford. You might have to interact a bit with the person but you never have to look them in the eye if you don’t want to.
You cannot solve the entire loan mystery in just a few minutes but you can get a great deal of information that will be helpful to you in your decision making process.
Based on your input (gross monthly pay of you and your spouse or significant other, along with your feeling on how good your credit rating will be and what your monthly bills are) you will be able to get a good feel for how much of a mortgage you will be able to be approved for.
On your credit standing (discussed later), think of your grades in high school. You got A’s, B’s, C’s or ??. Well how do you think the credit people would grade you? A?, A- maybe, C+??. Your credit worthiness is just a guess but it is enough to get the process started. The Loan Consultant most likely can pull a mini credit report later (most often for free) and confirm where you are in your credit history. And all this can be done within a few minutes of your phone conversation. Of course all your input has to be correct.
Well, you’re on your way. You’ve got a feel for what you can afford. It’s time to move on.
Free Analysis of Credit
A quick look-see is taking the next step and asking for the Loan Officer to pull a mini-credit report for you. If they want to charge you for it, give me a call and I’ll get if for you for free.
The mini-credit report will take away most of the unknowns. It will turn up things you may have forgotten about though. Over 80% of all credit reports contain some sort of errors. Good credit should report for ever and bad credit should be removed after 7 years. It can happen. It can be fixed if it is something that is both "bad" and wrong. But let’s just say at this point that the mini credit report will either confirm the good or confirm the not so good. At least the guessing is gone.
With the mini credit in hand it is appropriate to let the Loan Consultant do a little more leg work with you. If he/she wants an application fee at this point, give me a call - I don’t need money yet. What should be done now is the taking of an application over the phone. The application takes about 20 minutes to do. The questions are for all borrowers and they include:
- Where do you live (we’re looking for 2 year history)
- Where do you work (we’re looking for 2 year history)?
- What do you do at work (job title or description)?
- Where do you bank (approximate balance & account numbers for each account)?
- What is your monthly income (before taxes) including overtime, bonuses, etc.?
- Do you have any stocks or bonds or other liquid assets?
- Do you have cash value in your life insurance?
- Do you own a business?
- How many cars do you own, what are they & how much are they worth?
- Other assets (boats, motorcycles, household items, etc.)?
- Your monthly bills?
- Your current rent or mortgage payment? If you rent you will need the landlords name address phone number.
- Your alimony or child support payments, if any?
- Then about a dozen yes/no questions about bankruptcy, judgments, citizenship, etc.
Now there is enough information for a Loan Consultant to state, with some degree of certainty, whether or not you are an ‘A’ borrower. You want to be an ‘A’ borrower because that is the borrower that can obtain the most favorable interest rates. We’ll go into detail later on what the other categories of borrowers are.
If you do happen to be in the "other" category of borrowers you will be referred to as someone that is getting an "ALT A" loan or someone that will be using "Sub Prime lending". And with the information that you have provided the Loan Consultant they will be able to shop your file to a few different underwriters to determine your credit grading. Your "grading" will be based on your credit history and work history as well as other factors. If you do fall into the Sub a category it is not the end of the world. But it will mean that at least for the near future (probably two years) you will not be able to get the lowest published rates. You could be from .5 to 4 percentage points higher the "A" borrower. More about this in a later chapter.
Can I Really Get a Loan?
Unbelievable as it may seem, most people can get a loan. Even with bad credit, no credit, credit blemishes, etc. It is easy to find out if you can get a loan. We will pull credit, run the information through our exclusive "Mortgage Loan Finder Program" and call you with the results.
“But I have had a bankruptcy!” That’s bad, but not bad enough to stop you from getting a loan. But let’s be right up front on this one. It’ll cost you more.
Here’s an example of how it works. Your Uncle Charlie, who you love dearly, is not very good with his money and the whole family knows it. Uncle Charlie comes to you and wants you to loan him $10. You say sure why not. Now Uncle Charlie comes back a week later and asks for another $10. He hasn’t paid back the first $10 but you really love Uncle Charlie and he is so good with the kids, so you give it to him.
There is a knock on the door and there is Uncle Charlie again. This time he wants $100. Now what do you do. He hasn’t paid you the first or second ten that you gave him. Probably time to sit Uncle Charlie down and have a heart to heart with him.
You might tell him, "Uncle Charlie I can’t loan you anymore till you pay what you owe me.”
[That would be like when the lender says you have to pay your judgment or tax lien before they will loan you money.]
You can see that Uncle Charlie is not a very good risk. And that is how they look at people that have not been paying their bills in a timely fashion. So if you have too many 30 day lates or 60 or even 90 day lates, then the Lender is going to be just a little nervous about whether they will get their money back.
Here is how a lender compensates for these concerns when they might have a person that does not have a very good history. They will loan money but the collateral (that which is used to make the lender relax) will have to be more. Typically the house is collateral. But a larger down payment is what makes the lender relax to best. The more money put into the transaction as a down payment the more relaxed they will be. If there is enough down payment they will loan to almost anybody.
The ‘A’ borrower can do 3 %, 5%, 10%, 20% down and find money (a lender) from many sources. That’s because an ‘A’ borrower has a good credit track record. They have historically paid their bills on time.
In the ALT A category their have been some hiccups in the bill paying department and there are lates. This means that those in this category will have to typically do two things. Pay a higher interest rate and have to have more down payment ( 3% and 5% down programs will most likely not be available). As soon as I say that though I must also say that even Sub Prime people can get zero down payment financing - assuming that they aren't too bad a credit risk (more later). The lender is looking for a more secure position (meaning they want more down from the borrower). The thinking is that the borrower putting 10-20% is much more likely to pay their bills and not default because they have more to lose if they do (the 10-20% down payment could be lost if you default).
Hopefully this is not too confusing. But to relate it back to Uncle Charlie, if he wants $100 and pays back the $20 first then you would probably like some collateral (like a Pawn Shop does). You might ask Uncle Charlie to leave his chain saw with you until he brings back the $100.
But to get it even closer to what a lender has to deal with, let’s say that Uncle Charlie wants to buy your cabin in the mountains. It is worth $40,000 and he is willing to buy it if you will carry the mortgage or lend him the money. He says, "I’ll give you $35 down and I’ll pay you the rest over 30 years at 6 % interest."
You probably would be a little nervous with that. But ask yourself why? You’re probably thinking "Is he going to pay me back. He only wants to put $35 down on the property?"
Why isn’t $35 enough? Well, because if Uncle Charlie defaults (doesn’t pay you) he doesn’t have much to lose. He can just walk away very easily. So you would probably want more down payment. But how much more? Probably enough to make it so that you would not be overly concerned if Uncle Charlie decided to just walk away. In other words enough money so that youwould at least get back what you have into it and maybe a little bit of a cushion too. Well that is exactly what the lenders do too.
In the zero down programs they make up for any nervousness by getting a better interest rate. So if the A borrower with 10% down is getting 8% interest the ALT A borrower doing zero down will be several percentage points higher.
Now what about the low interest, 6%. That really is a good deal for Uncle Charlie. But would you like him to pay - 8%, 10%, 15%??? Well because he is family you may not want to make him pay more than the going bank rate. But you can imagine if you were dealing with a stranger that was somewhat of a credit risk you probably wouldn’t want to give him the deal that you normally reserve for your family. Well the same is true with the lender. If the stranger is a credit risk they certainly would not want to give that person the same rate that they would give to someone who has demonstrated they are not a risk. Logical right!
To summarize then, if someone is a higher risk than someone else then they should expect to have to pay more of a down payment and a higher interest rate. That’s the bad news. The good news though is two fold:
First, this is temporary and it too shall pass. If you keep your credit history clean for two years you can refinance and get back into the ‘A’ category with the lower interest rates.
Second, you can most likely get a loan and not have to continue paying rent (definition of rent; to take ones money and make the landlord’s mortgage payment instead of you own).
But I Have Credit Blemishes! Can you Get Creative?
In the last section we discussed the fact that sometimes we have some blemishes on our credit but we could probably get a loan anyway. You really can have bad credit, no credit or credit blemishes. An Experience Loan Consultant can help you work past this.
Two things are going to most likely be affected. The interest rate and the down payment.
Typically what happens is that if you are going to a conventional bank you will have your feelings hurt because they just might tell you to go away. They are not always tactful at doing this either.
So you need to find a mortgage consultant. A mortgage consultant is one that has many sources. Remember loan consultants find solutions to your transaction. Most will have quite a few sources that they can turn to and creative ways to benefit you.
Have you ever needed a part for your car and instead of just going down to the car parts place you decided to call around first. Well if you have done that you will soon find out the parts stores prices vary considerably from store to store. It is too bad that you can’t find a parts store that will search around for you to get the best price and then you just go down pay them and take the part home.
Well with the mortgage consultant that is exactly what they do. They actually call around with the information you have given them and attempt to find a good deal for you. On any given day there will be many lenders willing to lend to someone who is a credit risk. But not all the rates will be the same - just like the parts store.
An example of this is when you want to put a deck on the back of your home. You call 5 contractors to come and bid on it. Why is it that the prices are not all the same? The deck is the same so why not end up with 5 identical bids. Perplexing isn’t it. Well if you could analyze the bids you would probably find that the low bidder didn’t know what he is doing, the high bidder was afraid he might get the job. He knew he had too much work already (but for a higher price he would be willing to try to get the work done). The middle ones were really the best bids.
This is what’s going on with the lenders. Only difference is that they know what the low rate can be. But the higher rates are either because they don’t want that kind of loan (but will except it if they have to - but at a higher rate) or they are new to this particular type of loan and are a bit unsure yet as to whether or not they really want to loan to this type of credit risks.
Should you shop from Bank to Brokers to Consultants? Yes. But I would suggest you do that only until you find someone you feel comfortable with. Once you have someone you feel comfortable with then tell them everything they need to know and let them find the loan and do the shopping for you. If you choose to go from broker to broker they will usually put you on the back burner. They will not give you the priority you deserve because they realize that you may be just sending them on a wild goose chase and they only get paid when they get you a loan, not a wild goose. Once a commitment is made to assist you by the loan consultant you will need to make written application and provide the consultant ALL documentation the lender requires. You should get a written Good Faith Estimate outlining ALL costs rates and terms. It should be free.
It really is quite incredible how far some lenders are willing to go when loaning to someone who is a credit risk. Remember though, higher risk, higher rate.
An actual example: We were targeting people that were being foreclosed upon the past 10 years. We found that during the worst possible thing that could happen to someone that owned a house - foreclosure - we were able to find lenders that were willing to loan money to them.
Bankruptcy and foreclosure are the hardest things to overcome on your credit history and here there are people that are willing to loan to those that fall into this category. And these lenders are full fledged businesses that do this on a regular basis.
Yet another actual example: A fellow came in recently and was in the throws of foreclosure and only had a very short period of time to accomplish getting a loan. Within an hour we had found a source that was willing to loan him the money. The interest was high but it would take the home out of the clutches of foreclosure and even give this man enough to accomplish two more things. Money to paint up, clean up, fix up in preparation to sell the home. And enough money to live on while doing this fix up work. The man was unemployed due to physical disabilities at the time too.
How could this be? Well the home was worth about $300,000 and the owner only owed about $100,000. There was plenty of equity (value in the home after the mortgage is paid was about $200,000). Even though the person had no job, it wasOK because to pay the back mortgage payments and fix the home in preparation to sell and to have enough money to live on during this time, only amounted to about $50,000. The one loaning the money had a cushion of about $150,000 to work with (300,000 - (100,000 + 50,000)). If the man did not pay then the home could be foreclosed on again and the lender would be able to easily get is money back. If that is confusing, give me a call and I’ll go over the fine points.
Hopefully you can see that if you have some bad credit blemishes or even really bad blemishes that the chances are that there is money out there, it will just cost you more.
All of this is based upon you bringing in enough money on a monthly basis or having a large enough equity in your home. You do have to have something to work with.
A Word or Two on Your FICO Score!
Your FICO score or Fair Isaac score is a measure of your credit worthiness. It is a computer generated number that takes into account many varying factors on your credit report. You cannot get your FICO score directly. It is something that the mortgage industry has access to but you do not.
Your credit report has all your credit history. This includes all the open accounts that you have, all their credit limits, amounts presently owed on each account, the monthly payment amount required and any delinquencies. The delinquencies show up when you have not paid on an account for more than 30 days. It also shows 60 & 90 day lates. It shows how many times you have been late with payments too. So your report might show 3X30, 3X60 and 1X90. That would mean you were late 30 days on three separate occasions, three times you were over 60 days late and once you were over 90 days late.
The computer also takes into account how much total credit is available to you and how many inquiries (how many credit reports have been requested recently) have been made on your account.
The report will show any judgments against you, any bankruptcies, any accounts closed, any accounts sent to collection, any charges offs (meaning a business gave up on you and wrote it off), etc.
If things aren’t going well for you then it is a scary report. If all is well it is a great testament to your credit worthiness. It is a very powerful document.
To continue though, the credit report and all that is on it is run through the computer and a score is generated. And for the most part you are stuck with it.
A good credit score is about 620-679. A really good score is 680-719. A fantastic credit score is close to 720-800. In the other direction, a 580-619 is not bad but you are in the ALT A range, you need positive compensating factors to bring this up. In the upper 550-579 your definitely SUB Prime products. And the low 500-549 you are getting tougher to find money. Scores 499 and less can get loans expect to pay about 5% over a bank rate and have a loan of about 65% of value MAX. There are exceptions to all rules and the rules can change any time.
Some obvious things that hurt your credit are "charge offs" by creditors, judgments, late payments (especially late payments on a mortgage), balances being up close to the credit limits, too many open accounts, too many inquiries (more specifically inquiries in different credit areas - shows looking for cars, furniture, credit cards, money to loan, etc.).
If your credit is not so good, you will want to do what you can - but it is not easy at all to get credit cleaned up. I also offer a Free hints on credit clean up it informational only.
How Would I Clean Up My Past!
Most of the time this can be done only by cleaning up the present and waiting for time to heal the wounds.
You can close accounts that you don’t use and you can work to get the balances down on some of the ones that are close to their limits. For instance, say you have a VISA that has a limit of $3,000 and you're at $2990. But you have another card with a limit of $4500. For scoring purposes you would be better off to transfer your balance to the card with $4500 limit (assuming the interest rates are comparable) and closing the lower limit card.
The 30, 60, 90 day lates will be less significant over time. Lenders really want to see a minimum of two years with clean credit. Sometimes there may be good/valid reasons for lates. These, when communicated, will be compensating factors that will be considered. Even bankruptcies can be somewhat mitigated if they are for things like medical reasons (operation that put you down for couple of months). And a Chapter 13 is better than having a Chapter 7. So there are some subtleties.
I’m not a credit expert so this is intended to just be a quick view of this.
Does It Pay to Buy Instead of Rent?
The landlord gets all the money! To me there is no comparison. If you rent you only get a roof over your head, no other benefit. If you wait to save for a down payment, you may never get there. So the sooner you get into a home or a condo the better off you are.
Typically you cannot save enough to keep up with modest inflation. If you are looking at a $200,000 home this year and have $5,000 in the bank, you may be able to get a sellerto pay some closing costs.
I’ve had some tell me that they don’t want to live in a condo. Well that’s silly because most likely they already do (an apartment is a condo without ownership). Why not own your space instead of rent it. Except for the down payment, the rent and mortgage payment may very well be quite close to each other. The big factor is the down payment.
If you do take the approach that you are going to wait a year and save let’s see where you will be. Say you have a combined income of $6,000 per month gross. To stay even with this year you have to put away enough to offset that amount the house will appreciate in value. But worse yet is that if you did get into a $200,000 home now and it appreciated 5%, it would be worth $210,000 next year. That means that you lost the opportunity to gain an increase of $10,000 in one year. And that gain came from a ZERO DOWN investment, and paying some costs out of pocket less than the $5000. Where can you get that kind of a return on your money? If you leave the $5,000 in the bank while you are saving for a home, during the year you will earn approximately $200. That’s a far cry from $10,000. And we haven’t even figured in the tax benefit of being able to deduct your interest from your income taxes.
To continue, you would have to save about $400 per month to be better off next year than you are this year. If things appreciate 5% then your $200,000 home is now $210,000. So by waiting a year and saving you would need to have $10,000 to get the same payment you have this year. If you buy now you would have $10,000 in equity.
Here is a suggestion. If you have family or friends many loans will allow them to give a gift.
What’s This Documentation Stuff I Need?
This comes after you have decided you have someone you like to work with. This is getting down to the point that you are pretty sure you are going through with the purchasing of a home or the refinancing or your home.
That which is required is pretty standard for most situations.
You will need the following:
Exceptions: Sometimes people will want to use a "Lite Doc" or a "Stated Income" or "No Documentation" program. All have advantages but cost extra, typically in the form of a higher interest rate and higher down payment. This is decided on a case by case basis.
How Many People Are Involved?
A Bunch! You might only see the Loan Consultant but there are many people behind the scenes.
Here is just a short description of others that are involved.
Your file will be immediately turned over to a Processor. There may be two of them. One to pull the credit report, order the appraisal and do the various verifications while the other will handle the clearing of all the "conditions" prior to closing.
The credit reporting agency will be working on your file.
The appraiser will be going out to survey the property and compile comparable properties and then write a full report to be included with the appraisal. YOU PAY THE APPRAISER UP FRONT NOT REFUNDABLE.
You will need to PAY for one year of home owners insurance in advance of closing. Additional coverage may be needed case by case depending on the property location.
The underwriter and staff will be the reviewing party to assure that all the requirements of the lender are met. The underwriter submits back the "conditions" to the processor for clearing.
The title company will do a search of the property records to be sure there are no encumbrances and to insure that the owner has the power and the right to convey the title to you. They will also provide title insurance to that affect.
The lender will prepare a closing statement and send it to the title or escrow company to prepare for the closing.
The closing is where you go sign all the papers. The seller signs the property over and the buyer signs there agreement/acceptance. Plus you get to sign a whole bunch of papers for Uncle Sam.
That should give you a feel for the involvement of many the people. You typically have 5-7 companies involved handling various aspects of the process. The typical transaction has about 150 phone calls. A good loan consultant will oversee every critical detail.
What the Heck Does it Cost?
Do NOT use a rule of thumb for an estimate. Every loan is unique. A good consultant can create an estimate in less than 10 minutes.
A good loan consultant will give a written good faith estimate at application. It should give you the rate, terms, and estimate of costs. Then you will also receive a truth in lending statement by law. You will be notified of updates as the loan gets processed.
Sometimes "no closing cost" loans will be advertised. But you know as well as I do that someone is paying for it. You wouldn’t work for nothing would you? Neither will these companies. Just remember that there is no Free Lunch. You will be paying a higher interest rate.
Ask your consultant if they attend local closings if so it is an excellent sign the estimate on day 1 is going to be correct when you close.
How Quick Does This Go?
It can go very quickly. But most often it takes 30 days. And this is assuming that all the documentation mentioned earlier is submitted in the beginning. The gathering of the documentation is the area that most frequently falls apart.
If all the documentation is furnished it is really a pretty straight forward process. Although you the borrower are not familiar with what is going on, everyone else is. They do this job all day everyday. It really isn’t rocket science. It is all quite easy when broken down into smaller steps as you will see in the next chapter.
When problems arise, it is usually because so many different companies and people are involved. It is more a coordination and timing problem than anything else. But as you can imagine, any part of the puzzle not fitting together in a timely fashion will affect others in the process. And that is what usually is the cause of delays.
And if there is a problem with one of the parts of the puzzle it just seems like Murphy’s Law from there on out. "Everything that can go wrong does go wrong."
But be sure that everyone is honestly trying to get the job done. Sometimes underwriters can really cause a concern but they really are trying to make it happen too - but they are tasked with protecting the lender. And certainly the Loan Officer and the mortgage company want the process to work well. That’s because they don’t get paid unless things are completed and the loan goes all the way through the process.
So 30 days is normal - but 14 days is possible.
Stress Free Tip Have Your Real Estate Consultant write the contract to 45 days or sooner.
How Can I Visualize All This!
- You call the Loan Consultant
- You have a general discussion
- Free Credit Analysis (no cost)
- You get a general feel for what you can afford
- You gather and submit full documentation (taxes, pay stubs, etc.)
- You have the Consultant take an application over the phone (no cost)
- [Alternate: Fill out yourself if mailed to you or do it on line ]
- Consultant shops a preliminary file to the underwriter
- You get a preliminary approval for your loan
- Your full file goes to the processors
- The Consultant orders reports, performs Verification of Employment and Deposits, etc.
- Order full credit report - Order verifications/appraisal - Perform appraisal YOU PAY
- Your full file goes to underwriting
- Your file goes to the title company
- The title search is performed
- Your file is sent to the closing department
- Documents are drawn up and final conditions are settled
- You go to closing and verify and sign all loan documents
- You bring a cashiers check and photo ID you get keys.
What’s Next?
Relax. Relax and get started.
The best thing you can do is find a Loan Consultant that you feel comfortable with.
Don’t be lured too much by the no closing costs or very low closing costs. As I said all these businesses have to make money in order to stay open. If the closing costs are low then the interest rate will be higher.
Say for instance you are getting a loan for $100,000. That means the closing costs are going to run between $3000 and $3500. If someone says they will do the closing for say $1000, then you know they have to make it up somewhere else.
As an example, say I quoted you full closing costs and an interest rate of 7.5%. Their rate might be 7.875%. Doesn’t sound like much difference. But over 30 years, on a $100,000 loan, it can amount to a whole lot.
Let’s compare:
7.50% for 30 years = $699.21 per month x 30 years = $251,717
7.875% for 30 years - $725.07 per month x 30 years = $261,024
This amounts to a difference of $9,307 over the life of the loan. It was cheaper to pay the closing costs.
Please feel free to call and ask questions. Don’t feel like any questions are "dumb" questions
Some Commonly Used Purchase Options
Option 1: FHA Loans
This "No Money Down" option, the FHA loan is by far one of the best alternatives for people who want to buy a home and don't have much money to put down. With an FHA loan, you could put down as little as 3% that doesn't have to be your own money. You can get it from friends or relatives, or from a church or non profit entity. Plus, FHA loans are easier to qualify for.
Now, 3 % may seem like a lot to come with, but many people find that when they put their minds to it, 3% is actually possible. While you can't "borrow" the 3 % you can get a "gift" from a family member, borrow from your 401k. or sell some "stuff you have lying around. At the end of this report, we've included a special section with great ideas for raising this small amount required for an FHA loan.
FHA loans do have requirements and restrictions. Not all town homes and condos qualify, and there is a maximum loan amount DEPENDS ON WHERE THE PROPERTY IS. But if you've been dreaming of a new home and think you might be able to scrounge" 3 % this is a great way to go.
Option 2: Owner Financing
Owner financing means exactly that: the owner (or seller) finances a portion of your home purchase. For example, you might borrow 80% of the value of the home from a lending institution and "borrow" the other 20% from the owner. In this situation, the owner "carries back" a second mortgage.
Owner financing can be advantageous, especially to investors who buy up properties and then rent them out. For the average home buyer, however, owner financing is difficult to find and requires some tricky negotiating. Even after successfully negotiating a purchase, it requires some detailed work by qualified attorneys in order to protect the interests of all parties involved.
While you shouldn't rule out owner financing, keep in mind that by looking for someone who is willing to help finance your purchase, you severely limit your choices. There are a lot of houses for sale today, but not a lot where owner financing is an option.
Choice 3 : Lease with option to buy, Rent to own, Shared equity agreements etc...
With these choices, you essentially lease a home some programs even pass the tax deductions on to you. (ask me for details) , but you make larger payments in order to begin accumulating a down payment. During this time you would normally be fixing the house to add value if you buy it or have the landlord pay you to help you accumulate the down payment. For example, if a house would normally lease for $800, you might lease it for $1000/month, with $200 a month and anything the landlord pays you for repairs or improvements going into a special account. At the end of a specified period, you buy the home using the money in that special account as your down payment. However, if you decide somewhere along the line not to purchase the home, all of the money in the special account then goes back to the landlord. Before you choose this choice make sure I have gotten you Pre approved so you are assured that you will be able to live up to your agreement to Purchase the home.
Think of this option as renting with a forced savings account. If you can find someone willing to do this, it's not a bad option. However, most people who are selling their homes need their money out of it in order to buy their next home. So finding someone who is willing to lease to you may prove more difficult. But with my "Preferred Clients" working with my "Preferred Realtors" we even search out these Sellers.
Frequently asked Questions!
I don’t have a Realtor or the one that I have isn’t very interested in helping me find these type of homes can you recommend someone who will help me?
Absolutely, we work with a close knit group of Realtors and with many different companies who meet with us on a weekly basis to "Mastermind" different loan programs andways to get more properties sold using our special financing methods. They require a written commitment from you that they will be your exclusive Realtor and you might be willing to put down a small refundable deposit into a trust account at a closing agent to be used for part of your closing costs. This is to assure them that the extra time and effort they are devoting to finding the right Home for you is spent for someone who is confident they will be buying a home in the near future.
What’s the interest rate?
The rate changes daily. In fact it has been known to change a couple of times in a day. You can lock in a rate when you have a contract and are ready to close.
How Much do I Need to Make?
Here are the WRITTEN guidelines to look at. You take your gross (before taxes) income of all borrowers and multiply times 28%. This is called the front end ratio and is used to determine the upper limit on what you should be paying for a mortgage (includes principal-interest-taxes-homeowners insurance & mortgage insurance if needed). The next think to look at is what is called the back end ratio and it is calculated by taking your gross monthly income times 36%. Your total monthly debt should not exceed this (debts plus mortgage payment).
A good loan consultant can work this out for you in few minutes many times they will know of ways to get a borrower qualified for much more
Do you have a question?
Give me a call. I’d love to help you with the answers to your questions.
Simple Ideas For Raising Money for a Down Payment...
1. Have a Garage Sale.
You'll be surprised how much money you can raise this way, especially if you're willing to give tip some of the junk you've been hoarding for years!
2. Raid Your Savings.
Even if you've been trying to keep a little stashed away, this is important! If your kids have a savings account, ask them if you could borrow from theirs as well!
3. Borrow from Your Retirement Fund.
Many retirement funds (401K, IRAs, etc.) have provisions for you to borrow from them for important reasons. Buying a home counts as an important reason! Check with your plan administrator or your financial advisor about this option! The nice part about this is that as you repay your loan, you pay the interest to yourself.
4. Ask your Family.
This is probably the hardest thing for some to do, but you might be surprised at how willing a family member would be to help you buy a house, even if they have said "No" to you before? When you tried to borrow for other things! If you do this, you'll need a form for your banker stating that this is a gift and not a loan. (Yes, you can still repay your family member. It just? can’t be a formal loan with a specified payment or due date!)
5. Sell Something.
If you look around your house, you might find items that have pretty good value but that you haven't used in a long time. An old coin collection, an old musical instrument that no one plays anymore; an extra freezer you don't really need; a second (or third) car you could do without.
Often, the cash from selling these items can add up quickly!
6. Get the Sellers to Give You the Down Payment.
Use a special, little used Government program that allows the seller to pay your down, closing costs, mortgage insurance, prepaid interest, impound? account. We have been able to get buyers into a home with less than it would ?cost them to rent that same home and payments less than rent after deducting the Federal and State tax savings.
A Bunch of Definitions!
Amortization - this means that you combine the principal and interest of a loan into installment payments such that the loan is paid in full when the term is reached. The interest is much greater in the beginning and as you approach the end of the term the principal paid each time is much greater.
Application - a form used by a lender to record all the necessary information on the person applying for a mortgage.
Appraised value - the estimated value of a property determined by a licensed appraiser.
ARM - adjustable rate mortgage. A mortgage where the interest rate is permitted to vary based on a predetermined index. This means that your monthly mortgage payment could go up or down during the term of your loan.
Balloon mortgage - a mortgage loan that does not pay off the entire debt during the repayment period such that when the payment period end is reached a lump sum of money is required to retire the debt.
Bridge loan - short term loan that bridges a gap between two other loans. Typical use is to bridge the gap between selling one home and purchasing another.
Buydown - a term used to describe paying a premium in order to obtain a lower interest rate on the mortgage.
Cap - the limit on how high interest rate can adjust over the term of the loan on an ARM.
Collateral - property pledged by a borrower to assure loan repayment. Property could be foreclosed on for nonpayment of the mortgage and the house could be sold to recoup the amount owed the lender.
Closing - the time when all parties get together to finalize the transaction.
Closing Costs - these are the fees and expenses associated with the purchase of a home and are paid at the closing. The costs or fees might include loan origination fee, discount points, appraisal, credit report, title insurance, etc.
Commitment - a firm agreement from a lender to loan you the money you requested. In the commitment a mention will also be made to the rate and term of the loan.
Conforming loan - a mortgage loan that conforms to federal guidelines that relate to loan-to-value ratio, term, etc.
Credit report - a report detailing your credit history.
Fixed rate mortgage - a mortgage where the interest rate is fixed for the life of the loan.
Interest rate - the percentage rate charged for the use of borrowed money.
LTV - loan to value ratio. Represents the loan amount requested, divided by the selling price or appraised value whichever is lower.
Non-conforming loan- a loan that does not conform to federal guidelines in regard to the loan-to-value, term, etc.
PITI - principal-interest-taxes-insurance. These are the elements that make up your full mortgage payment.
Preliminary Title Report - preliminary results of a title search by a title company. This happens prior to the issuing the full title report which will insure clear title.
Principal - the amount of money borrowed by you.
Reserves or impounds - money that is set aside to be available pay the real estate taxes and insurance when they come due.
Underwriting - person that ensures that the requirements of the lender are met.
Is It Time to Celebrate Yet?
You bet it is! The hard part is over.
Now you just need to put one foot in front of the other. Find yourself a great loan Consultant and get the process going so you can get into that new house. Or so you can get that cash out to do the remodeling, buy a business, put your kids through college, create wealth, buy another property. We hope we can help you reach your dreams whatever they are. Good luck to you.
Please tell a friend about this site.
www.MaxMortgageConsultants.com
Thanks!
Sincerely,
How To Stop
Wasting Money On Rent And
Own A Home Instead
How To Buy The Home You Always Wanted...
Without All The Money You Thought You Needed
Buying a home can seem like a frightening prospect. Whether it's your first home, or your fifth, so much is at stake — your savings, your credit rating, your financial freedom.
It's difficult to get up the courage to sign on the dotted line, even if you want that home very, very badly.
How do you determine whether or not the purchase of a home makes sense?
What's the easiest way to examine the whole picture, from emotions to economics?
I suggest that you read this entire report before you go house hunting. You'll learn how to separate whims from true needs. You'll discover how to prepare a game plan for your real estate venture, how to research effectively, choose wisely, finance appropriately and survive the whole procedure with your smile intact.
Seven Steps For Success:
1) Establish your needs and wants.
2) Determine how much you can afford.
3) Get prequalified or preapproved by a Lender.
4) Find a good real estate agent to help you.
5) Find a home that meets your needs.
6) Make an offer to buy a home.
7) Save as much as you can on the purchase.
A Lender can let you know what specific loan programs would be best for you. They can also help you understand what it takes to qualify for the loan that you want.
By taking a look at your financial situation and looking at your credit history, a Lender can usually give you a good idea if you can qualify for the loan that you want.
Many Lenders call this "Prequalifying a Buyer." If you would like to be certain that you can be approved for a loan, you may want to ask to be preapproved. In the approval process, all of your documentation is completed and submitted to an underwriter.
The preapproval you get back is an actual loan commitment from a Lender. This means that you definitely qualify for a loan. Talk to your Lender about the costs and time involved, as they are different for each Lender.
The next step is finding a home that also qualifies for the loan.
By the time you've done your homework and completed the suggestions in this report, you will have an excellent overview of how to find and buy your dream home. And you'll have plenty of confidence to back up your decision to buy that special home, too.
Step One: Establish Your Needs And Wants
Begin your search for a perfect home by making a careful assessment of the kind of a home you need and want.
It is recommended that you take the time to do this in writing.
Take time, right now, to be as specific as you can about your particular requirements.
Step Two: Determine How Much You Can Afford
Set up a budget for yourself. Decide how much you can really afford to invest monthly for your house payment.
Be realistic here. Most Lenders want your payment to be no more than 28% of your total monthly income.
Step Three: Get Prequalified Or Preapproved By A Lender
You can save yourself a lot of time and heartache by meeting with a Lender before you start your search for a home.
Step Four: Find A Good Real Estate Agent To Help You
You can learn a lot about an agent by just letting them "agent talk" to you about how they help buyers. Within a few minutes, you will probably be able to determine if their style is compatible with yours.
Questions for agents:
1) Are you knowledgeable about the area of town and price range that we are interested in? (Some agents specialize in only one area or one price range.)
2) Do you have the time to work with us? (This is especially important if you're on a tight deadline.) What procedure will the agent follow in working with you? How often will they update you with new property listings?
3) Can you represent me as my buyer's broker? Ask as many questions as you can upfront. By finding a good agent, you will save yourself huge amounts of time and effort.
Step Five: Find A Home That Meets Your Needs
Five Tips for Successful House Hunting:
1) Keep an organized record of all your research data. Write down comments about the homes that you see. Keep track of your likes and dislikes.
2) Make sure your agent is aware of your time schedule and expectations. Do you like to look at one or two homes in a session? Four? Eight? Discuss this with your agent.
3) Tell your agent about any homes you see that interest you and that you'd like to know more about.
This includes homes you've "discovered" as you've explored the area yourself, or those advertised in the newspaper.
4) If you like to spend time driving around by yourself looking at homes, ask your agent for a list of drive-bys — homes to consider first from the outside.
Your agent can make appointments later to show you the interior of those that appeal to you.
5) Express your likes and dislikes to your agent after you look at a home. Honest communication is essential.
Many buyers are shy and afraid to tell an agent what they really think of a house. They think the agent might take it personally. Remember, the homes don't belong to the agent!
You must be straightforward about your likes and dislikes in order for the agent to do the best job for you.
Step Six: Make An Offer To Buy A Home
Your real estate agent can help you make an offer to buy the home that you want. It is important to know beforehand whom your agent represents.
Some agents work only for the seller. In this case the agent may not be able to advise you what a fair offer to make is.
By looking at what homes are selling for in the area and how long they are taking to sell, you should be able to get a good idea of value.
Step Seven: Save As Much As You Can On The Purchase
There are only two major investments to consider when buying a home. These are the initial investment, which includes down payment and closing costs, and the monthly payment, which includes principal, interest, taxes and insurance.
Here are four ways to save on your initial investment:
1) Choose a low down payment loan. You do not necessarily have to put 20% or even 10% down. You can pay 3% or even ZERO% down on some loans.
2) Some Loans allow someone give you money to pay closing costs. A blood relative, church or nonprofit organization can give you money for closing costs.
3) Ask the seller to pay some of your closing costs as part of your offer. Sellers are usually allowed to contribute to a buyer's closing costs.
4) Try to close with the least amount of insurance at closing you can always add to it after closing. Shop around for your home insurance. A little shopping can save you money.
Here are four ways to keep you monthly payments low:
1) Ask about a loan that doesn't have monthly mortgage insurance premiums.
2) Take advantage of rate lock programs that are currently available. You can lock in a low interest rate as much as 60 days in advance.
3) Remember that interest payments on a primary residential mortgage are fully deductible in most circumstances. Your property taxes may also be deductible. Tax rates definitely favor homeowners.
4) Choose an adjustable rate mortgage. Adjustable rate mortgages (or ARMs) can be up to 5% lower than fixed rates.
Now that you have finished this report, it's time to go out and find the home of your dreams!
Make sure that you cover all of the steps in this report in the proper order. See a Lender first. He or she will help you decide how much of a loan you qualify for.
Then find a good agent to work with. If you don't have one, We can help you find one or ask your friends and work associates for a referral.
Free Report Showing and Preparing Your Home
By Peter Petal
Don't Panic: You come first. This is your home, you have your Life to live, do the best you can and then don't worry.
First Impressions: An inviting exterior insures inspection of the interior. Keep your lawn trimmed and edged, flowerbeds cultivated, the yard free and clear of refuse. Winter lawn, especially in front, is a big asset.
Decorate For A Quick Sale: Faded walls and worn woodwork reduce desire. Do not tell the prospect how the place can be made to look, show them by making it look great. A quicker sale at a higher price will result.
A Clean Home Is A Happy Home: Bright, cheery windows and unmarred walls will assist your sale.
Fix That Faucet: Dripping water discolors the enamel and calls attention to faulty plumbing.
A Day With The Carpenter: Loose doorknobs, sticking drawers and warped Cabinet doors are noticed by the prospect. Have them fixed.
Closet illusions: Clothes properly hung, shoes, hats and other articles neatly placed, will make your closets appear adequate. Pack and store excess items.
Dear To Her Heart Is The Kitchen: Colorful curtains in harmony with the floor and Counter tops add appeal for the lady of the house. Keep oven clean - it often gets inspected.
Check And Re-Check Your Bathroom: Bright and clean bathrooms sell many homes. Keep toilet lids down.
For The Rest of Your Life: Bedrooms are always important features. Arrange them to feel spacious and clean.
The Brighter The Better: Illumination is a welcome sign. For after-dark inspections, turn on your lights from the front porch in and throughout. The prospect will feel a glowing warmth; otherwise impossible to attain. Also turn on lights in the daytime for rooms that are not so bright.
Three's A Crowd: When a Realtor and the prospect arrive you should greet them courteously, then disappear. Children and pets should be kept clear. Don't volunteer any comment unless asked. Remember the prospect is there to vie~ the home.
Shut off the Television: The radio or TV can distract from your home. Let the agent and the buyer talk free of any disturbances.
Love Me, Love My Dog: This does not apply in house selling. Keep pets out of the way, preferably out of the house.
Be Aware of Odors: People will linger in a fresh, pleasant smelling home. Stale air, or bad odors, make them want to get out and can ruin the sale.
Be It Ever So Humble: Please don't apologize for appearance of your home. After all, it is lived in. Let the agent answer any objections that are raised.
A Word To The Wise: Do not discuss price, terms, possession or other factors with the customers. Refer them to us. As a seller, most anything you say could compromise your position. As a third party, a Realtor can better bring the negotiation to a favorable conclusion.
Caution: We ask that you show your house to prospective customers only when accompanied by a Licensed Realtor.
