Tax Refund = Down Payment?

April 15, 2016

By Brian Short, CMC, CRMS, GMA

In my 18 years as a “Dream Maker, Problem Solver” mortgage professional, I have observed that one of the most disappointing set-backs for a new home buyer is the lack of down payment.  Often times, the prospective home buyer is already in the habit of using some of his or her monthly income for housing by paying rent to a landlord or a roommate, but rounding up several thousand dollars for a down payment can keep many from being qualified to buy a house.

With this being said, there are many loan programs which allow a buyer to buy a house with as little as 3% of the sales price for down payment and some where the down payment can be a gift from a close family member.  There are other loans where a buyer can buy a house with $0 down payment if the buy is a veteran or is buy a house in a rural area or in a city with less than 35,000 population with certain income restrictions.  Even with these very generous federal government home loan options, the lack of a down payment can be the hurdle which will keep a new home buyer from moving forward, especially if they are not currently home owners who are selling a home prior to buying their next home.

tax_refundMY APRIL 15th SOLUTION?   Use this year’s Federal Income Tax Refund for a down payment or for “seed money” to begin a down payment saving account to which a prospective home buy can add a portion each pay period.  It is timely that on this 2016 Tax Day we are reminded that many US workers will receive refunds of anywhere from a few hundred to several thousand dollars in the next few weeks and this money can be used to help BUILD WEALTH rather than buy things which are quickly consumed or used up.

Many financial advisers still consider Real Estate to be a very secure and cost effective way to build wealth and invest for the future.  Who do you know who needs to contact me for help on how to find their down payment solutions for their home purchase?  I can show those you know who dream of home ownership or of buying their NEXT dream home how to move forward in this current maze of home loan options!

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The 5 Steps You Must Take in the Next 2 Months if You Plan to Buy a House This Year!

January 21, 2016

We are now three weeks into the new year.  Energy levels depleted by the holidays have begun to return.  You may have already blown most of your New Year’s Resolutions.  The college football bowls are finished up.  You’re back into your work and family routine.  Downton Abbey is back on PBS and in between “snow days” you’re beginning to make your Super Bowl plans.  What better time to begin to think about your needs and desires for a new home in 2016?!?

I have worked with hundreds of home buyers over the past 18 years as a nationally certified, state licensed mortgage professional and I have found some who have made great preparations to enter into the largest single purchase they will ever make in their lives and I have also met some who are woefully unprepared.  Those who prepare well generally experience a much smoother process and avoid being hit with additional fees for extensions and delays.  If the right steps are taken BEFORE you actually go out to look for a house the new home buyer will find the process manageable, systematic and successful.  Those who rush into a home purchase contract with a seller and Realtors without taking these steps will generally experience an immense amount of stress, confusion and unnecessary pressure from everyone involved in the process – and will be tempted to give up after spending $1,000 – $2,000 of their hard earned and saved money.

plan-ahead-pic

Follow these 5 simple steps to ensure that your home buying process is a success in 2016 and in the future.

What can a prospective home buyer do now to prepare for their upcoming home purchase later this year?  Here are the steps I would recommend:

  1. Get your tax returns for the past 2 years finished and get copies ready to pass off.  Your mortgage professional will be required to submit your completed tax returns and W-2’s for the past 2 years to the underwriter who will approve your loan.  Borrowers who have not completed their taxes or can’t find their returns will delay the underwriting process.  The Loan Processor who will take your file from your mortgage originator and prepare it for underwriting will need to verify the tax returns you submit as the same as what was submitted to the IRS.  This takes a few days and will cause additional delays if your tax returns are not prepared correctly and available to be submitted when you have an accepted offer to buy a house.
  2. Locate and provide your pay stubs for the past 30 days.  It is required for any loan to show that the buyer has the ability to repay the new loan.  You must show a consistent and reliable income stream from somewhere.  Most borrowers can do this with pay stubs from a company where they work.  If the buyer is self-employed it is still possible to do this with tax returns and a year-to-date Profit and Loss statement.  Find your pay stubs if they are on a HR website with your company and begin downloading them each pay period so you have them available to pass off to your originator or his assistant.  Again, this information will be verified by the Processor to make sure that the employer agrees with the information that is found on the pay stub.
  3. Locate and provide your bank statements and all retirement account statements for the past 2 months.  I find is amazing when I hear a borrower tell me that their bank “doesn’t do bank statements any more” when in reality they just don’t know how to navigate within the online banking website of the bank where they have been a customer for many years.  Take the time, now, too find, print or download bank statements every month and save them to a folder on your computer or in your home office cabinet so you will have the bank statements required to get your loan approved.  You will need at least 2 months of statements and in some cases you might need 12 months of statements to show rent payment or the receipt of child support or some other income source you desire to use to help you qualify for your new loan.
  4. Talk to a licensed mortgage professional to help you explore you loan options early.  There aren’t as many loan programs available to a home buyer as there were back before the Credit Crash of 2008 but there still are many options and most mortgage companies will be able to offer many of the same programs.  Banks will generally have fewer options but they also can offer many options to a prospective home buyer.  Your licensed mortgage professional will evaluate the documents we listed above and help you explore which home loan option would be best suited for you.  Some programs are only available for first-time home buyers.  Some programs are only available for those wishing to buy a house outside the city limits or in certain counties.  An experienced, licensed professional will keep up with the ongoing changes in the program requirements and be able to help the new home buyer know what needs to be done in preparation for approval for best loan fit and where the buyer should be looking to find their next home to purchase.
  5. Prepare your down payment and cash required to close your loan.  After talking to your licensed mortgage professional the prospective home buyer will have a good feel for how much cash and down payment will be required – if any.  Some loans allow for the seller to pay for the buyer’s closing costs and require NO DOWN PAYMENT!  Even if no down payment is required, many programs will require the buyer to show that they have 2-3 months of house payments in the bank – just in case the bottom falls out regarding a job or extended health issue.  It is important for the borrower to demonstrate to the underwriter that they know how to manage a checking and savings account and that there are no recent overdrafts on their bank statements.  Get control of your banking accounts and manage your cash flow so it will be easy to prove to the mortgage underwriter that you are now ready to take on a new house payment for the next 30 years and that you can make this payment on time, every time.

This year can be a year of amazing new beginnings and one where life-time accomplishments can be made.  However, without making the necessary preparations in advance, it could also be one of set-backs, disappointments, frustrations and failures.  Follow these steps above to make this year an unimaginable milestone for  well-deserved successes!

Brian Short is a nationally certified, state licensed, dream maker and problem solver who helps provide home loans with LeaderOne Financial Corp.  He can be reached HERE or by calling 615-302-0809.


Revisiting FHA – Increased Loan Limits for 2016

December 10, 2015

2000px-US-FederalHousingAdmin-Logo.svgYesterday, FHA announced the increase of their loan limits beginning on January 1, 2016 to $437,000 for single family residences in the following Tennessee counties: Cannon, Cheatham, Davidson, Dickson, Hickman, Macon, Maury, Robertson, Rutherford, Smith, Sumner, Trousdale, Williamson, and Wilson.  The increase of the FHA loan limits will likely enable increased home-ownership opportunities in these 14 Tennessee counties for many reasons – some of which might be overlooked by the casual observer.

The obvious additional opportunities for those desiring to buy or refinance houses is possibly obvious.  Now home buyers wanting to buy a house up to $452,000 can do so with only a 3.5% down payment!  Buying a $452,000 anywhere in these counties with only a $15,800 down payment is an amazing option for many to consider.  This down payment can come as a gift from a family member and all of the closing costs for this purchase can be paid by the seller or the lender.  This arrangement can be a life-changing opportunity for many who have desire to live in an area where the safety, convenience or educational benefits could reap returns for many generations to come.

Happy Family

Many growing families may find the increased FHA Loan Limits in 2016 to be a lifesaver when considering their need for additional space, improved local schools or safer neighborhoods.

Others many need to refinance their homes or consolidate 1st and 2nd mortgages or other overwhelming debts and need the benefit of refinancing their home with an FHA loan up to 85% of the appraised value.  A borrower using an FHA loan to refinance their home is allowed to draw out this cash with no questions asked for paying off these high payment debt accounts or for making home improvements to their existing house.  The $11,500 increase in the FHA loan limit on January 1 might give those in need the extra breathing room to cause this new refinance loan to make sense for them to accomplish these financial goals to set them up for success for decades to come.

And finally, what many may not be aware of, the uniqueness of FHA underwriting guidelines may allow many who desire to buy or refinance to move forward with their new loan for any of these reasons:

  1. FHA allows for a “non-occupying, co-borrower” to be added to the loan where those who are planning to live in the house might not qualify on their own merits.  Lenders can add a parent, sibling, child, grandparent, aunt, uncle or cousin to the loan application and include their income, assets and credit profile to strengthen the quality of the loan to increase the possibility of loan approval.
  2. FHA allows for financing of mixed-use properties with residential interest rates and guidelines.  This would give a buyer the opportunity to purchase a property designed for use as a business AND a residence to purchase the entire property using FHA qualifying guidelines and still use part of the house for business use.
  3. FHA allows for property owners and home buyers to buy or refinance their homes setting aside additional money for repairs, upgrades, remodeling and rebuilding of the house – all in one loan.  This renovation loan called the FHA 203K is an amazing loan which enables home buyers to buy a distressed house and make it a dream house with all of the features that the new home buyer needs to make this home an investment they will enjoy for decades to come and to improve the entire neighborhood.

FHA loan increases on January 1, 2016 may seem like something that only mortgage geeks like this author might get excited about when really other industry partners and home owners and future home buyers should also welcome as we ring in the New Year!

(Please contact this author for additional details about any of the uses of the FHA Mortgage and how it might be of help to you or those you know.)


One More Chance to Refinance in 2015?

January 4, 2015

IS NOW A GOOD TIME TO REFINANCE?

2015 shirtHomeowners who missed the last refinancing boom have been given another chance.

According to a weekly survey by Freddie Mac, average interest rates for 30-year fixed mortgages fell last week to their lowest level in over a year and a half last week. Interest rates are the lowest the country has seen since mid-2013, and remain close to their lowest level in 50 years.

Not many experts expect rates to stay low, however.

According to the Mortgage Bankers Association, 30-year fixed mortgage rates are likely to rise as early as 2015’s first quarter; and should end the year at 5%. The mortgage industry trade group also predicts rates at 5.4% by 2016.

With current mortgage rates low (but expected to rise), U.S. homeowners are submitting applications to refinance by the tens of thousands.

Refinancing can be a great way to save money, but there are times a homeowner should choose to say “no”. For example, because there are costs associated with refinancing, sometimes, refinancing to a lower interest rate mortgage can be more expensive than keeping your current one.

So, how should you determine whether refinancing is right for you?

First, you will want to understand how refinancing works. Then, you should consider your current financial situation and what you plan to accomplish with a refinance.

Click to get today’s interest rates.

HOW REFINANCING WORKS

The mechanics of a refinance are basic — you give a new mortgage which pays your original mortgage in full, leaving you with just the “new” mortgage(s) on your home.

The interest rate of your new loan; and the term of your new loan may be different for your original, but the property securing the loan is the same.

Many people find it simpler to refinance a home than to get the loan needed at the time of purchase. This is because refinance transactions typically require less paperwork and documentation as compared to a purchase loan.

Refinance mortgage rates may be higher or lower than rates available on a home purchase.

Click to get today’s interest rates.

FACTORS TO CONSIDER PRIOR TO REFINANCING

Low mortgage rates are an excellent reason to refinance a home; however, for today’s homeowners, there are other considerations as well.

How Much Equity Do You Have In Your Home?

In general, homeowners may find it challenging to refinance without sufficient home equity. In mortgage terms, “sufficient home equity” can be defined as have a loan-to-value on your home of 80 percent or better.

However, there are a number of refinance programs available to homeowners with less than 20% equity. Two popular programs are the VA Streamline Refinance and the FHA Streamline Refinance.

Available to homeowners with existing VA and FHA loans, respectively, these two streamlined refinance plans ignore a homeowner’s home equity percentage and allow refinancing based on recent payment history. Homeowners nearly always qualify for the VA or FHA Streamline Refinance if when they’re current with their loans and the refinance shows benefit.

For homeowners with conventional loans backed by Fannie Mae and Freddie Mac, two options exist. The first option is the Home Affordable Refinance Program (HARP) which allows for unlimited loan-to-value; and the 97% LTV program for homeowners with at least three percent equity in their homes.

The 97% mortgage program is available to all homeowners who meet the program criteria; and can be used by homeowners with existing FHA mortgages to “cancel FHA MIP”.

What Is Your Current Interest Rate?

When you can lower your current interest rate, it may be worthwhile to refinance your home.

Lower mortgage rates can mean lower payments but, for many homeowners, the deciding factor in refinancing to lower rates is going to be some variation of “how long it will take recoup your loan closing costs?” For example, if your refinance carries total closing costs of $3,000, and you save $100 monthly with the transaction, the general thinking is that you should not refinance unless you’ll be in your home for at least 30 months.

However, there are other considerations with a refinance including getting “cash out”, and the value of having access to extra money today.

Choosing a lower mortgage rate can be a good reason to refinance — it just shouldn’t be the only reason.

Click to get today’s interest rates.

What Are The Closing Costs To Refinance?

Closing costs are an important consideration when deciding whether to refinance and there are three ways to handle your costs.

The first way to handle your costs is to pay the minimum at closing, in cash or as part of your loan balance. For example, if your closing costs total $2,500, you can opt to bring $2,500 to your closing in the form of a check; or you can add $2,500 to your loan balance.

In both instances, you are paying closing costs from your own money — either as cash or in the form of home equity.

The second way to handle your costs is to elect to pay discount points, which lowers your mortgage rate below “standard” market rates, in cash or as part of your loan balance. 1 discount point costs 1% of your loan size such that a $250,000 loan with 1 point will carry an additional loan fee of $2,500.

In general, paying 1 point will lower your mortgage rate 25 basis points (0.25%). This will result in lower monthly payments and, eventually, you will save more on your payments than you paid in points at your closing. Recouping your discount points could take as few as 12 months or as many as 60.

The third way to handle your closing costs is via a zero-closing cost mortgage. With a zero-closing cost, you willingly accept a slightly higher mortgage rate from your lender in exchange for having all of your loan closing costs paid on your behalf. In general, on a $250,000 loan, a mortgage rate increase of 25 basis points (0.25%) will convert your loan into a zero-closing cost mortgage.

Zero-closing costs mortgages can be sensible for homeowners whom expect to move from their homes in the next few years; or whom expect to refinance within the next 24 months.

For homeowners planning to make their next refinance last 30 years, zero-closing cost loans can be the most expensive route. Mortgage calculators can be a helpful tool to determine which program works best.

Do You Want To “Own Your Home Sooner”

Another consideration for refinancing households is whether you want to extend or reduce the number of years until your mortgage is paid in full.

For homeowners with an existing 30-year mortgage, refinancing to a new 30-year mortgage may yield tremendous monthly savings. However, the new loan will reset your years of indebtedness to thirty. Long-term, you’ll still save money, but you’ll be paying on your loan for more years overall.

Not wanting to “start over” is one reason why the 15-year mortgage is a popular refinance choice. 15-year mortgage offer low mortgage rates and fewer years to repay in full. It should be noted that payments on a 15-year mortgage are higher as compared to 30-year loans, but over the life of the loan, today’s 15-year mortgages save homeowners 65% in mortgage interest costs.

With its huge long-term savings, the 15-year mortgage can be an excellent way to save for homeowners to plan to retirement or to save for college tuition costs.

GET TODAY’S REFINANCE MORTGAGE RATES

Deciding whether to refinance is a personal decision. Consider how long you’ll be in your home, how much you’ll save each month, and how long it will take to recoup your costs. Thankfully, with mortgage rates low, the market is ripe for homeowners to take action.

Click to get started. 


Home Buying Resources for 2013

January 18, 2013

by Brian Short

Home Buyers Handbook cover1.  Brian Short’s Home Buyer’s Handbook – 81 pages, 7 chapters full of step-by-step advice on making one of the most important purchases you’ll ever make in your life.  Take this advice from a PRO.  Download this Handbook and save yourself thousands of dollars of mistakes and hours of wasted time!

Navigating HomePath Cover

2. Navigating the HomePath Mortgage with AmeriFirst & Brian Short – This 9 page booklet gives you the information and details for successfully buying one of Fannie Mae’s recently foreclosed properties in need of a buyer.  My booklet is tested and proven to be authoritative guide for helping you buy a great bargain in a neighborhood of your choice.

203k Guide Cover

3. 203k Guide: Building a Bridge to Home Ownership with Brian Short – “It’s a Jungle Our There” and my 12 page booklet with help you walk through the steps of RENOVATING your existing house or the house you have located which needs your TLC and our loan to make it all possible.


Professional Mortgage Moment – Guessing Again?!?

January 12, 2012

by Brian Short, CMC, CRMS, GMA

Tennessee Mortgage Professional, Brian Short, demonstrates why it is important for mortgage loan customers to use a mortgage professional who will not be simply guessing when it comes to very important final numbers on any mortgage transaction.  http://www.ProMortgageMatters.com