Buying a New Home in Arizona - 2/4 - Arizona Mortgage Team

102% Financing at 4% Available Now. No Tricks. Here Is How.

July 24, 2009 1 Comment

I know, I know – everyone already knows that you can get 102% financing at 4%.

Wait.

You can?

Yes. You can.

Right now.

No catch.

And I am going to look super smart for telling you this next part about how you actually get this deal…

You buy a house that is designated rural according to the USDA rural database (hint: you might be surprised at how rural it doesn’t have to be) and then by default, you are eligible for the USDA loan program which allows you to finance up to 102% .

102% Financing at 4% Available Now. No Tricks. Here Is How. %spacebasename Ok, so not that big of a deal you might be thinking.

But if interest rates are at 6% today for this program, how do you get it at 4%?

It is called a 2/1 buydown.

No, a 2/1 buydown is not new – they have been around for years. In fact, back in 1995 (give or take a year) I used a 2/1 buydown on my first condo. To keep it short — basically, a 2/1 buydown is where you set aside a small pile of money (yes, you can finance it or get the seller to pay for it) and for the first year of your mortgage, your payment is amortized at a 4% interest rate. The second year of your mortgage, your payment is amortized at a 5% interest rate. Then the remaining 28 years of your mortgage, your payment is at 6% (or whatever the market rate is at that point).

Someone once told me that a good magician never reveals his tricks.

Lucky for me, I am just a loan officer.

Want to learn more about the USDA rural home loan program and how you can borrow 102% of the appraised value of a home at 4%? Call us.

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Filed Under: Arizona Home Financing Options, Buying a New Home in Arizona, USDA Loans Tagged With: Arizona USDA Loan, Arizona USDA Mortgage, Arizona USDA Rural Loan

Can The 8000 Tax Credit Be Used As A Down Payment?

May 13, 2009 14 Comments

Can you use the 8000 tax credit as a down payment for your home?

Not yet.

But that may change soon.

Yesterday, Secretary of Housing and Urban Development Shaun Donovan gave a prepared speech at the National Association of Realtors Real Estate Summit. He said something that was probably beyond interesting when he mentioned that FHA was currently working on a proposal that may involve people being able to use the 8000 tax credit as a down payment.

An excerpt from that speech regarding FHA’s position on the 8000 tax credit being used as a down payment:

And we are taking action to further help the housing market recover. I’m excited to announce here at NAR that FHA’s policy on the “monetization” of the first-time homebuyer tax credit will soon be published. I know that you’ve been waiting anxiously to hear FHA’s position on the matter. We, like you, believe that this new tax credit is not only a tremendous opportunity for first-time homebuyers, but also an enormous benefit for communities struggling to deal with an oversupply of housing. According to estimates by the National Association of Home Builders, this new tax credit will stimulate 160,000 home sales across the nation – 101,000 of which will be first time buyers who will receive the credit. Another 59,000 existing homeowners will be able to buy another home because a first time buyer purchased their home.

We all want to enable FHA consumers to access the tax credit funds when they close on their home loans so that the cash can be used as a downpayment. So FHA will permit trusted FHA-approved lenders and HUD-approved nonprofits, as well as state and local governmental entities to “monetize” the tax credit through short-term bridge loans. We think the policy is a real win for everyone, ensuring that borrowers can tap into the numerous organizations that are already part of the FHA network to receive this additional benefit. FHA will be publishing the details shortly.

Enabling first time homebuyers to use the 8000 tax credit as a down payment would be a big win for the market – it would allow many more people to move into a home who currently may not have enough for a down payment.

We will be sure to keep you posted on developments in this situation as the happen.

(h/t Mark Madsen at MyFHAMortgageBlog for sharing the video about the 8000 tax credit being used as a down payment and the guys at ThinkBigWorkSmall)

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Filed Under: 8000 tax credit, Arizona Home Financing Options, Buying a New Home in Arizona, Government Tagged With: 8000 tax credit as down payment, 8000 tax credit down payment, 8000 tax credit use as down payment

HomePath Mortgage Loan: Maximum LTV (Loan To Value)

April 27, 2009 Leave a Comment

Many people seem to be interested in the Fannie Mae HomePath mortgage program, and one of the most popular questions people have is “how much do I have to have as a down payment?”

In mortgage-speak, how much money you put down when you buy a property is how you calculate what is called a loan-to-value ratio or also commonly referred to as LTV.

As an example, if the sales price of your new home is $100,000 and you put $5,000 down, the loan to value would be 95%.

With the HomePath mortgage loan program, the maximum loan to value allowed by the program depends on what kind of property it is (single family homes have different LTV restrictions than 4 plex’s for example). Also maximum loan to value ratios are different if the property is going to be a primary residence, second home or investment property.

HomePath Mortgage Loan LTV Highlights:

Primary Residences

For a single family home that is going to be a primary residence the maximum LTV is 97% (note: this is 95% with some lenders) and require a 660 credit score.

For a fourplex that is going to be a primary residence, the maximum LTV is 75% and a minimum credit score of 580 is required.

HomePath Second Homes

For a second home that is a single family residence, the maximum LTV is 90% and a 660 credit score is required.

HomePath Investment Properties

For an investment property that is a single family residence, the maximum LTV is 90% and requires a 660 credit score.

As you can see – the amount of money that you are required to put down with the HomePath mortgage program can vary widely depending on the type of property you are purchasing and what your intended use is for it. There are many, many more scenarios that will impact your loan to value requirements (read: how much money you will need as a down payment) so be sure to speak with someone who is familiar with the HomePath mortgage program prior to putting a sales contract in!

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Filed Under: Arizona Home Financing Options, Buying a New Home in Arizona, HomePath Mortgage Loan Tagged With: HomePath LTV, HomePath Mortgage

FHA 203k Streamline or HomePath Renovation Loan: Which Is Best?

April 5, 2009 10 Comments

We get plenty of people asking us questions here and from time to time, we get so many questions about a particular subject, we turn it into a full-blown post because it is popular enough that everyone wants to know about it.

Today’s question comes from a question someone submitted asking about buying a house that “needs a little work” and what kinds of loan options there are:

I am hoping to get an FHA Loan as a first time homebuyer. It is my understanding that if a house needs work, it will not qualify. I do have a house in mind and it does need work (light fixtures, appliances, etc.) Will the 203K loan be an option for me?

FHA 203k Streamline or HomePath Renovation Loan?

The answer to this question is “it depends” – and while the FHA 203k loan may be a great option, you may also be eligible for the new Fannie Mae HomePath renovation loan. They are very similar programs – and while it is close, I personally think that the HomePath renovation loan probably has more advantages over the FHA203k streamline program because of less money down, no appraisal required and no mortgage insurance. Here are just a few of the highlights for the FHA 203k streamline and the Fannie Mae HomePath renovation loan programs:

FHA 203k Streamline Loan Highlights:

The FHA 203k streamline loan has been around for years – but with recent numbers of bank owned properties being bought that need a little work, this loan program has become hot again. Some of the highlights of the FHA 203k streamline loan include:

It works like a construction loan – you are able to buy a home that wouldn’t qualify for FHA financing and finance the repairs that will bring it up to FHA standards
The total amount of the loan is the purchase price plus the amount needed for repairs
FHA has limited the Streamline 203K program to a range between $5,000 and $35,000
The requirements to qualify are the same as a traditional FHA loan
The construction phase can’t begin until the loan closes. The funds to pay the contractor come from escrowed funds at the closing
Up Front Mortgage Insurance Premium and Monthly mortgage insurance are paid to FHA just like a regular FHA loan
Appraisal required

Fannie Mae HomePath Renovation Loan Highlights:

The newest loan program for homes that “need a little work” is the Fannie Mae HomePath Renovation loan. The HomePath renovation loan is only for homes that are currently owned by Fannie Mae and you will qualify to get the HomePath loan through Fannie Mae as well. Because Fannie Mae currently owns so many homes, this is one way that they are helping people get into homes (they are also offering investors the HomeStyle renovation loan program) when the home may be in need of a few minor repairs. Some of the HomePath renovation loan program highlights include:

Financing to fund both your purchase and light renovation
Low down payment and flexible mortgage terms (fixed-rate or adjustable-rate)
Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit, state or local government, or employer
No mortgage insurance

With the inventory of homes so high at Fannie Mae, it is no wonder that they came out with this great program. I woudln’t expect it to be around forever – so don’t be surprised if the program goes away once Fannie Mae sells many of the homes it currently owns.

So which loan program is right for your situation? The easy way that I try to explain this is something like this:

Is the home owned by Fannie Mae? If yes, get a HomePath Renovation loan.
Is the home owned by someone other than Fannie Mae? Time to look into qualifying for a FHA 203k loan.

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Filed Under: Arizona Home Financing Options, Buying a New Home in Arizona, FHA Loans, HomePath Mortgage Loan Tagged With: fannie mae homepath, fha 203k streamline, HomePath Mortgage Loan, homepath renovation

Mortgages For Canadian Citizens: Now Available

April 3, 2009 5 Comments

We now have financing available for Canadian citizens who want to buy a 2nd home here in Arizona. I haven’t been to Canada recently, but someone told me that it can get awfully cold up there during certian times of the year. What better way to thaw-out than buy a home somewhere where you can pretty-much-wear-shorts-every-day-in-January if you want?

Starting about 6 months ago, lenders were pulling out of financing these loans, but we are starting to see some of them come back now. Not a lot of lenders,mind you — but at least one!

Mortgages For Canadian Citizens: Guidelines

Must be a second home
Will loan up to 75% loan-to-value
International credit report required
Verification of mortgage on primary residence
Last 2 pay stubs and 2 years of T4′s required
2 months bank statements
Drivers license and copy of passport
If self employed, last two years of Canadian tax returns along with a profit/loss statement and balance sheet.

Simply put, this is pretty much a full documentation loan for people with good credit. The interest rate on this 30 year fixed rate loan currently is 6.25% with a 3 year 1% hard prepay penalty. This means that if you refinance or sell the home inside of one year, the lender will charge a 1% fee. The interest rate changes from time to time, but not every day.

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Filed Under: Arizona Home Financing Options, Buying a New Home in Arizona, Mortgage Guidelines Tagged With: canadian citizen mortgage, canadian mortgages

Home Path Mortgages: Great HomePath Mortgage Deals From Fannie Mae

April 3, 2009 8 Comments

We are currently working with a couple of people who are buying a home that is owned by Fannie Mae and are getting approved for the new HomePath mortgage program. As mortgage guidelines have gotten tighter over the last couple of years, it is nice to see a program come out that actually has features like no appraisal and no mortgage insurance.

If you are interested in buying a home that is owned by Fannie Mae as your primary residence that is not in need of repairs, the “regular” Fannie Mae HomePath mortgage program is right for you.

You will often see homes that are eligible for this with the logo seen above somewhere on the sales sheets and information about the HomePath program will usually be in the remarks section of the MLS.

HomePath mortgage financing highlights include:

Low down payment and flexible mortgage terms (fixed-rate, adjustable-rate, or interest-only)
You may qualify even if your credit is less than perfect
Available to both owner occupiers and investors
Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employer
No mortgage insurance
No appraisal required — the sales price is the value
No declining markets policy
No loans under $20,000
No more than 10 financed properties
No prepayment penalties

If you are interested in buying a home that is owned by Fannie Mae as your primary residence that is in need of repairs, the HomePath renovation mortgage program is the one that you will want to look into.

You will often see homes that are eligible for this program with the above logo on the sales sheets and will usually find more information in the remarks section of the MLS.

HomePath renovation mortgage highlights:

Financing to fund both your purchase and light renovation
Low down payment and flexible mortgage terms (fixed-rate or adjustable-rate)
Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit, state or local government, or employer
No mortgage insurance

If you are considering buying a home that is currently owned by Fannie Mae, be sure to look into the HomePath mortgage financing program. I don’t remember the last time that I saw a loan program that said “no appraisal, no mortgage insurance and a 3% down payment!” But then again, I don’t remember a time when Fannie Mae owned so many homes. No wonder so many great deals are being had. Don’t miss out!

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Filed Under: Arizona Home Financing Options, Buying a New Home in Arizona, Government, Interest Rates, Mortgage Guidelines, The Business of Mortgages Tagged With: Home Path, Home Path Financing, Home Path Mortgage, HomePath Mortgage, HomePath Mortgage Loan

8000 Tax Credit Questions and Answers

February 26, 2009 62 Comments

Are you interested in buying a new home this year and have questions about the 8000 tax credit? You are not alone.

UPDATE: The 8000 Tax Credit Has Been Extended and Expanded:

$8,000 First-time Home Buyer Tax Credit Expansion Details

The $8,000 tax credit is for first-time home buyers only. For the tax credit program, the IRS defines a first-time home buyer as someone who has not owned a principal residence during the three-year period prior to the purchase.
The tax credit does not have to be repaid.
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.
The tax credit applies only to homes priced at $800,000 or less.
The tax credit now applies to sales occurring on or after January 1, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, a home purchase completed by June 30, 2010 will qualify.
For homes purchased on or after January 1, 2009 and on or before November 6, 2009, the income limits are $75,000 for single taxpayers and $150,000 for married couples filing jointly.
For homes purchased after November 6, 2009 and on or before April 30, 2010, single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

The $6,500 Move-Up / Repeat Home Buyer Tax Credit Details

To be eligible to claim the tax credit, buyers must have owned and lived in their previous home for five consecutive years out of the last eight years.
The tax credit does not have to be repaid.
The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $6,500.
The tax credit applies only to homes priced at $800,000 or less.
The credit is available for homes purchased after November 6, 2009 and on or before April 30, 2010. However, in cases where a binding sales contract is signed by April 30, 2010, the home purchase qualifies provided it is completed by June 30, 2010.
Single taxpayers with incomes up to $125,000 and married couples with incomes up to $225,000 qualify for the full tax credit.

UPDATE: Can The 8000 Tax Credit Be Used As A Down Payment?

Some of the most common questions that we have gotten about this program have been answered by the National Association of Homebuilders who have set up a website to specifically answer these questions.

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Filed Under: Arizona Home Financing Options, Buying a New Home in Arizona Tagged With: 8000 tax credit, Arizona 8000 tax credit

FHA HECM for Purchase Program: From The Inbox

February 7, 2009 1 Comment

We have been getting more than just a few questions lately about the FHA HECM for Purchase program – where seniors can purchase a home using the FHA HECM reverse mortgage program.

Here is one recent question that came in from Frank who is thinking about buying a home in Queen Creek using the FHA HECM for Purchase program.

Frank’s email:

Have you actually done a FHA HECM purchase reverse mortgage? Were there any problems?
We are looking to buy a home in Queen Creek, AZ using an FHA HECM reverse mortgage, and are finding that most banks know very little about this. Contacted <bank name deleted>, and the loan officer had to go and “find out” the answer to every single question.

My reply:

Hi Frank,

Thanks for stopping by!

The HECM for Purchase program was just implemented as of January 1, 2009 – so I would be surprised if there are very many people who have completed one in America.

That said — I do have multiple customers who have been to counseling and completed the HECM for Purchase application – and are now in various stages of finding a home to buy.

The MAIN question that does not have an official answer yet is “will FHA use the appraised value or the purchase price” when calculating the value of the property.

In Arizona (an in other parts of the US as well), there are some significant deals to be had on REO property – where the property may appraise for 200,000 and the bank is willing to sell it for $125,000 – which would mean that under the HECM for Purchase program, they would be required to bring no cash to the deal and make no payments for as long as they live in the home.

When FHA first released the HECM for purchase program, they said that they would allow the appraised value to be used and NOT the sales price – but apparently there is now some confusion on that. So we are waiting for a formal Mortgagee letter from FHA to clarify that topic.

Or – at least – that is what our investors are telling us.

Ok, fire away with any questions you have, I would be happy to answer them.

Best,

Justin

Do you have questions about how the FHA HECM for purchase reverse mortgage program works?

“Fire away!”

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Filed Under: Arizona Home Financing Options, Arizona Reverse Mortgages, Buying a New Home in Arizona Tagged With: Arizona FHA Reverse Mortgage, Arizona Reverse Mortgages, FHA HECM, FHA HECM for Purchase, FHA HECM Reverse Mortgage

Mortgage Discount Points: How To Make Them Free (To You)

January 13, 2009 2 Comments

Does it ever make sense to pay discount points? Depending on the situation, it can sometimes make sense to pay discount points in order to “buy the rate down” even lower than rates currently are.

Discount Points – How They Work
Discount points are paid in order to “buy down” an interest rate from the par value. In the simplest description possible – the way discount points work is that you give the lender a set amount of money up front in exchange for a lower interest rate than they would give you otherwise.

How much money do you need to pay up front in order to get a lower rate? It is never really a set amount – it is negotiable for each individual lender. Because the cost in order to buy down a rate is different between lenders and even different from day to day, it can sometimes be confusing to know “if you pay X in discount points, the rate goes down by Y.”

Discount Points – A Simple Rule of Thumb
A simple rule of thumb when paying discount points is that for every 1 discount point that you pay, the rate will go down by .25%. So as an example, if the par rate were 5% for a 30 year fixed rate mortgage on a $200,000 loan, if you wanted to get a 4.75% rate, it would cost roughly 1 discount point or $2,000 up front.

Using the above example $200,000 loan, if you paid one discount point, here is what the math would look like:

$200,000 x 5% = $1,073.64 monthly payment
$200,000 x 4.75% = 1,043.29 monthly payment
Difference in monthly payment = $30.35 each month or $364.20/year
Break-even = around 6 years.

When Does It Make Sense To Pay Discount Points?
It can make sense to pay discount points when you plan on keeping the loan longer than the break-even point (in years) that you calculated in the above break-even formula.

So using the above example, it may make sense to pay discount points to buy the rate down if you were planning on having the loan longer than 6 years.

Generally speaking, the longer that you plan to have the loan, the more sense it may make to buy the rate down. If you are moving into the home of your dreams and planning on staying there for 30 years – then it may be a wise option to pay a discount point – or maybe even two!

Discount Points – When They Make THE MOST Sense
In my opinion, one thing that is overlooked by many agents and borrowers in today’s market is the chance to have the seller actually pay to buy down your interest rate. Yes, it is possible that the seller can pay your discount points – which will in turn result in a lower rate for you for years to come.

Discount points make the most sense when they are “free” to you because the seller is paying!

By using our simple rule of thumb (1 discount point = .25% lower rate), you can be well-prepared when negotiating with the sellers of the house that you want to buy… and remember, you are 100% guaranteed to get a NO answer if you don’t ask, so be sure to ask the seller to pay at least one discount point!

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Filed Under: Arizona Home Financing Options, Buying a New Home in Arizona, The Business of Mortgages

102% Financing at 4% Available Now. No Tricks. Here Is How.

Can The 8000 Tax Credit Be Used As A Down Payment?

HomePath Mortgage Loan: Maximum LTV (Loan To Value)

FHA 203k Streamline or HomePath Renovation Loan: Which Is Best?

Mortgages For Canadian Citizens: Now Available

Home Path Mortgages: Great HomePath Mortgage Deals From Fannie Mae

8000 Tax Credit Questions and Answers

FHA HECM for Purchase Program: From The Inbox

Mortgage Discount Points: How To Make Them Free (To You)

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