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Assistance Programs For Down Payment and Closing Costs

Assistance for the Down Payment and Closing Costs for the purchase of a new home is almost always the biggest hurdle that keep renters from venturing forth into the sometimes mysterious seemingly elusive land of Homeownershiptopia.

There are several different ways to get assistance with down payment and closing costs – some ways more misunderstood than others.

Let’s look at the most popular question that I hear…..

Are there any Down Payment programs available?

The answer is always YES, of course there are down payment assistance programs available.

The more accurate quest 
ion is….”Are there any down payment assistance programs that I qualify for” OR maybe even more accurate a question would be “Are there any down payment programs available that have money to lend”.

You see, most Cities, Counties and States have down payment assistance and closing cost assistance programs available for first time home buyers.

What often prevents home buyers from taking advantage of these programs is either timing or the pure luck of being in the market when the program has funding.

Let’s start with some of the basic qualifying guidelines for almost all down payment and closing costs programs:

1.  You must be a first time home buyer

The HUD definition of a First Time Homebuyer is:

	An individual who has had no ownership in a principal residence during the 3-year period ending on the date of purchase of the property. This includes a spouse (if either meets the above test, they are considered first-time homebuyers.
	A single parent who has only owned with a former spouse while married.
	An individual who is a displaced homemaker and has only owned with a spouse.
	An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations.
	An individual who has only owned a property that was not in compliance with State, local or model building codes and which cannot be brought into compliance for less than the cost of constructing a permanent structure.

What can vary from program to program is which of these are the “definition” and which are the exceptions.

2.  Income or Purchase Price Limitations

Income limits are usually set as a percentage of the Area Median Income or AMI.  Fannie Mae’s website has an Area Median Income Search here.

The AMI for each area is different and will be defined in the guidelines for the program that you are applying for.

I have seen qualifying income limits range from 80% or AMI up to 140% of AMI.

3.  Targeted Homes in Targeted Areas

This is much less common and is usually targeted to foreclosure homes and/or homes located in Geographically targeted low to moderate income areas

Closing Costs Programs

Closing costs are another challenge that many first time homebuyers encounter.  If you’re lucky enough to be in the market when one of the above mentioned City, County or State assistance programs are available you will find many times that these programs will apply to either or both down payment assistance and closing costs.

This is the jackpot, and odds are way better than Vegas that if the program you qualify for has funding, that it will help pay for closing costs.

The State of California CHDAP program is one of those programs that always has funding and is available right now.

Creative Solutions

Check to see if the Down Payment program you qualify for can also be applied to closing costs.

If so, use only the minimum down payment required and apply the rest of the assistance to either pay the Upfront Mortgage Insurance Premium (for FHA loans) or us this money to buy down the interest rate to permanently reduce your mortgage payments and save thousands of dollars of interest over the term of the loan.

Any time you have the ability to opportunity to pay higher closing costs to reduce the interest rate or to keep from “rolling in” costs into the loan amount, you stand to save thousands more than the initial cost of paying the cost up front.

This is a simple fact that most lenders do not share because of the fear of scaring you away with higher closing costs.

If you are educated on all of your options at least you have the ability to be empowered to make an informed decision about how you would like to structure the financing of your new home.

Author:  S Schang

"Is it a good time to buy?"

This is probably one of the most frequently asked questions of my clients right now.  I get it all the time - "Hey Jeremy, is it still a good time to buy?".  It's a great question that everyone should ask themselves.  The trick is that there is no blanket statement that works for everyone. 

Buying Real Estate is a huge decision, not to be taken lightly.  As with most important decisions, weighing if the time is right for you is a very personal process.  So my answer is usually in form a series of questions.  What are your intentions for the property?  How long will you be holding the property?  What do the other aspects of your finances look like right now & into the future?

Then we need to consider the current housing and finance markets in general.  You all know the negative things going on right now, because that's all the news shows.  Here are some important positive notes in favor of buying right now.

• There is no shortage of money available for home mortgages, no freezing of credit to purchase or refinance a house. Why? Because the American mortgage market effectively has been federalized – at least for the time being.
• Loan terms and credit underwriting standards have been toughened up, but you can still put down 3 percent (3.5 percent after Jan. 1) on an FHA-insured mortgage and 5 percent on certain Fannie Mae and Freddie Mac loan programs with private mortgage insurance.
• Despite the global financial system's quakes, mortgage rates not only remain low by historical standards but have actually declined recently.
• Maximum loan amounts through FHA, Fannie and Freddie in high-cost local markets on the West and East coasts continue to be $729,750 through December. In January, the high-cost maximum is projected to dip to approximately $625,000.
• Home prices – pushed by foreclosures and short sales – have rolled back to 2003 and 2004 levels or lower in many of the former boom markets.

So there you have it.  If everything else in makes sense, there's still is a strong argument for buying a home right now.  If you or a friend would like to see if the other aspects of your life line up with the idea of buying right now, just shoot us a quick email for an appointment to explore your options.

Credit Bureaus are Selling Your Info

Who's getting a hold of your private information? 

Did you know that the credit bureaus (Experian, Trans Union, & Equifax) are allowed to sell your information to just about anyone that asks?  We've talked about this before, but many of our clients are once again reporting an increase in this activity.  Lending and financial institutions just need to apply and pay to get access to aspects of your personal information and credit file. 

The most common use of this we see is in the Mortgage arena.  These companies pay the credit bureaus a fee in agreement that when you pull your credit for a mortgage application they are automatically notified.  Most people don't find this out until it's too late.  Almost immediately after their credit is pulled they begin to receive tons of phone calls and letters of uninvited solicitations.  It can be confusing and quite overwhelming. 

These companies can request a surprising amount of information too.  Usually they get your full name, address, phone number, and sometimes even your credit scores.  It's not uncommon for scrupulous companies or individuals to use this information to trick you into thinking you've already spoken with them, or they are somehow affiliated with the company you thought you were working with.  Trust me, the Do Not Call List is not always a deterrent for these guys either.

So what can you do about it? The good news is that you have power!  The best thing to do is to plan ahead.  Goto www.optoutprescreen.com and opt out of their shared information plan.  This is the official site where you can make this change with all 3 Bureaus at once.  Opting Out will officially remove your name from any of lists they sell.  It takes at least 5 days to kick in, so do yourself a favor and do it NOW. 

If you'd like to learn more about ways to limit your exposure to solicitation & mortgage fraud just shoot us an email at protectme@greenmeansgrow.com  and we'll share some of our other secrets with you.

More Car Salesmen?!

One of the questions we find ourselves answering a lot around here is the difference between a Salesperson and a Consultant.  There are numbers of ways to explain the differences-

• Taking Time to understand what's Really Important to the client
• Presenting Options rather than giving Opinions
• Initial Consultation vs. Filling out an application
• Working for Referrals rather than Commission

However I believe that nothing demonstrates, or brings out, one's true colors better than tuff times.  Right now, the Mortgage Industry as a whole has gone through some incredible and drastic changes.  These changes require unprecedented levels of commitment to your clients of time, energy, money, & continued education.  If your heart is not in this to help people get and keep their homes, then you probably ran for the hills already.  If you were in the "Mortgage Game" to just get an easy check, then you probably are already working somewhere else. 

I was again reminded of this idea when I read this article Download not_automatic.pdf .  It talks about how there is a flood of ex-Mortgage Salespeople swarming to the car industry and elaborates on the irony and implications.  It's so true isn't it?  In so many people's minds the Mortgage Industry is now synonymous with the Car Sales Industry.  Too bad.

Well, in many ways I'm glad to see it.  The mass exodus of commission driven sales creeps is a sort of cleaning out of our industry.  Only those who have a true passion to help people and a drive to make things better are still here.  Here at the GreenHouse Group we've made a pledge to ourselves and our clients.  Our pledge is to be more than sales guys.  We're Consultants, and we practice the difference everyday.  If you've worked with us you already know.  If you haven't, give us a call and we'll set up a time to see how a good Mortgage or Real Estate Consultant can help effect your overall Financial Health. 

PS - We're hiring!

Buyers Get What They Deserve from FHA

According to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey - mortgage applications for government-insured products tripled in the past year. Of all mortgage applications accepted during the month of July 2008, 29.1 percent were for government-insured loans (consisting of mostly FHA loans) compared to 8.4 percent in July 2007.

The government-insured share has been increasing since February 2007 and only since the beginning of this year, has the share exhibited significant increases; up from 9.4 percent in January. Since the MBA survey's inception in January 1990, the lowest recorded share was 5.8 percent in August 2005 and the highest was 43.8 percent in February 1990.

There are several reasons why government-insured loans, specifically FHA, have an increased presence in the market:

• In March of this year, the Economic Stimulus Act of 2008 temporarily raised the FHA and conforming loan limits for most areas in the country, which broadened FHA financing for more borrowers. The passage of the Housing Bill in July 2008 made these higher loan limits permanent.

• Data from the U.S. Department of Housing and Urban Development (HUD) indicate that the bulk of these transactions are likely to be homeowners running from subprime ARM products into the relative safety of Fixed Rate Programs.

• FHA loans typically have lower down payments than those offered by Fannie Mae and Freddie Mac. Generally the maximum loan to value (LTV) ratio for FHA loans is 97 percent and 95 percent for the Government Sponsored Enterprises (GSEs).

• Conventional GSE loans typically have higher credit score requirements than FHA loans.

• The difference in interest rates between Conventional and FHA products has nearly disappeared.

Why should you care?  If your lender is not exploring some of the more aggressive Government backed options, then potential home buyers may be paying higher rates, qualifying for less home, or deciding not to buy at all.  If you'd like to know more about some of the special programs the GreenHouse Group is qualified to offer, just shoot us an email or give us a call @          866-310-4002       and we'll let you know how to get what you deserve.

Are 529's Still Top Of Their Class? | Mortgage Planning for College Savings

Since their inception in 1996, the 529 has been the most popularized College Savings Plan...by name.  But what's interesting, is that over that same time 70% of parents saving for College don't use them (money mag).  Some say that they can do it better themselves, others want the flexibility in the open market (maybe others aren't sure that little Bobby or Janie will even make it).  Whatever the reason, we wanted to spend this week's installment of WCW to shine some light on the good & ugly of this wealth tool.

Fees
529 USUALLY beats out a taxable account earning the same return.  So whats the variable?  State management fees.  For example: Take 2 identical families, say they are both in a 28% tax bracket and both start throwing $200p/mo into their 529 when their child turns 5.  Family 1 lives in Utah and family 2 lives in Colorado.  Assuming identical average returns of 5%, when the children turn 18:
Family 1 = $39,100.
Family 2 = $35,900.

*Invest that same amount in a taxable account with equal fees and return and you'll have $36,200 after taxes.  in other words, while Family 1 is $2,900 up, Family 2 actually lost $300 AND HAS CEMENT SHOES for that money.
**Making matters worse, if you don't shop around or go direct, you could be paying as high as 5.75% in management fees ON TOP OF those numbers.  Be sure to shop around for a plan with annual expenses UNDER .5%.

Cement Shoes
Similar to the IRA and 401k that we've all been familiarized with now, the one big drawback comes when you need the liquidity the open market gives you if you think you might use that money for something else.  If you're in a 529, you'll pay income tax on the amount at your bracket + a 10% fee.  If you have the gift of foresight, there are some ways you can account for this when you start, like using a tax-efficient fund or swapping beneficiaries.

Options?
There are some "Educational Savings Plans" available out there that can give you some more variability if you need it, so consult with your financial advisor first if you have one.  If you don't, i know of a great friend that I know, like and trust that I could introduce you to.

You Do The Math
Compare 529 Plans and fees at CollegeSavings.org

Mortgage Planning
And before you go, make sure you ask about why the mortgage on your owner occupied residence could be the most effective pre-planning tool available.  Not JUST as a lever to extract your dormant equity, but also to help plan for what you and your college student CAN qualify for when it comes to State Sponsored Aid.  Eventually, a person might want to know why this is so important.

More important Info - Housing and Econ Recovery Act of 2008 - Part2

Well, last week we received lots of feedback and followup questions from our quick discussion about the implications, benefits and potential drawbacks of the new law.  So we thought we'd broadcast the answers to some of the most common questions we received,  and focus on a couple other components. 

Q:  When will the program begin
A:  The program will begin on October 1, 2008 and is set to end on September 30, 2011.  Homeowners in danger of losing their homes before October 1, however, should not wait to contact their loan servicers and should begin applying for federally insured mortgages now.

Q:  Who is Eligible?
A:  To be eligible to participate in this program, a borrower must:

• Have a loan on an owner-occupied principal residence.  Investors, speculators, or borrowers who own second homes cannot participate in this program.
• Have a monthly mortgage payment greater than at least 31 percent of the borrower’s total monthly income, as of March 1, 2008.
• Certify that he or she has not intentionally defaulted on an existing mortgage, and did not obtain the existing loan fraudulently.
• Not have been convicted of fraud.

Q:  Are lenders required to participate in this program?
A:  No.  The program is completely voluntary for lenders, investors, loan servicers, and borrowers.

Q:  Will the law provide help to those who still cannot afford to own a home?
A: Yes.  The bill includes a number of provisions to increase the supply of affordable housing, which has been a major problem in California pre-dating the current foreclosure crisis.  For example:

• The bill creates a new permanent affordable housing trust fund – financed by Fannie Mae and Freddie Mac and not by taxpayers – to fund the construction, maintenance and preservation of affordable rental housing for low and very low-income individuals and families nationwide in both rural and urban areas. 
• In addition, the legislation provides a temporary increase in the Low-Income Housing Tax Credit and simplification of the credit to help put builders to work to create new options for families seeking affordable housing alternatives.
• Raises conforming loan limits for the FHA, Fannie Mae and Freddie Mac to $625,500.  Because of the high cost of housing in California, a majority of the state’s residents were previously shut out from these programs.  Raising these loan limits will lead to lower interest rates on some loans, greater refinancing opportunities, and enable more borrowers in high cost areas to avoid the type of nontraditional and frequently abusive loans that led to the current crisis.
• Provides couples using the standard deduction with up to an additional $1,000 deduction for property taxes ($500 for individuals).

We all know someone who is in trouble and how important it is for us to be able to help them understand their options.  As professionals in this industry we have a special knowledge, and therefor a certain obligation.  Isn't it then, important for us to be a resource for those not only looking to buy or sell homes, but those who find themselves in trouble after doing so?  If you'd like to learn more about how we can help some you know who is in trouble, or how you can help a new buyer get into a home, just shoot us an email with HERA in the subject line. 

Bush Signs Housing Bill Into Law Today :: The 2 Things You Need To Know

This morning President Bush signed the historic "Housing and Economic Recovery Act of 2008".  Primarily, its purpose is to stem foreclosures, stabilize the economy as well as provide some extra support for First Time Home Buyers.

There are a large handful of very important features that you need to be aware of, but for this week's installment of WateringCan Wednesday we are highlighting 2 very important elements that we believe will have an immediate impact on your practice.

1. First-Time Buyer Tax Credit: the way its written, FTHB's are slated to receive a tax refund worth up to 10% of a home's purchase price, up to a max of $7,500.  The refund serves as an interest-free loan and the homeowner is required to repay it in equal installments over 15 years.  So, its design isn't perfect in that its another cloak much like DPA programs that have to be recouped over time, but it will help big time in hedging against the effect of #2...
2. Elimination of the 3% Seller Contributions Allowed: Looks like they might be doing away with the ol' No Money Down Trick in this new bill.  Not only will they no longer allow that 3% Seller contribution that would soak up the extra from the 97% loan FHA allows, but it looks like they might be extending that number out to 3.5% also.

So keep your eye on these two things as they will have an immediate impact on how you structure your next deal.  And don't forget to get that client in for a thorough Initial Consultation with one of our Mortgage Planners here at your local GreenHouse Group so that they are aware of ALL their options in this brand new marketplace.  Thanks for stoppin in, and Emial us if you have any questions: MyGreenTeam@NoLoanHacks.com.

Referrals | Do You Have An Obligation To Ask?

Ask any Realtor or Mortgage Consultant still able to make a living in this market and I can almost guarantee that a large portion of their business comes from Referrals.  So what makes that professional any different from others who may not be experiencing the same results?  Well, we can imagine that they might have more experience, better sales and communication skills, more active social life, etc.  The list could go on.  But we believe that amongst the very competent and already successful professionals there is still one more thing that can make a huge difference. 

This is the knowledge that you have an obligation to your clients to ask for referrals.  How can that be?  Sounds selfish right?  Well tell me something - Are you good at what you do?  Do you have a unique skill or talent that you let shine through your professional interactions?  Do you represent your clients' interests as if they were your own?  Do your clients thank you for your exceptionally hard work, attention to detail, and relentless pursuit of their dreams?

Let's use a little of our Philosophy 101 skills to step through this logical progression then. 

• Because of your unique skills, experience, and personality, there is no none else who can represent your clients the same way you do. 
• If a majority of your clients say that they wish they knew you last time they bought a house, they would have been better served if they were introduced to you sooner.
• The best way to meet more like-minded clients is to be introduced to those you're already helping.
• You truly believe that buyers will be better off if they work with you, rather than some other Real Estate Hack out there.
• Then isn't it the case that you actually have a RESPONSIBILITY to not only ask for, but purposefully teach your clients how to introduce you to people that need your help?

You can add any of your own rational to this line of reasoning. The bottom line is that once you're comfortable with the idea of the obligation of sharing your light, the rest is a matter of asking.  Here at the GreenHouse Group we have adopted this Responsibility.  That 's why we are here every week to let you know that we believe we are your clients' Best Option.  We believe that your clients will have a better experience and a better product because you chose to introduce them to us.  Who's the next client you know that would appreciate that? 

ARM Readjustment … IN BILLIONS! (Who's Still In?)

This week your loyal compatriots here at the GreenHouse Group have decided to get out of the general knowledge business, and into the results game! 

Our First Target – Targeting Listings

You might not know it if you weren’t looking, you might not feel it if you weren’t tapped into the pulse of the sidewalk – but there’s a ground swell occurring and its culprit are the BILLIONS of ARMS that just reset right under your nose over the last few months. 

Take a look at this chart courtesy of Josh White from First American Title, our "Local Info Expert":

Now, the reason why the time is NOW – is embedded in how and when the result of these resets will show up. They won’t happen right away. But you will see them starting to show up right about….NOW. Lets assume that your next client was one of the one’s whose ARM reset in the peak month of March 2008. While reeling from the shock of the new mortgage amount and still working off the same income (if not less – insert the big R word here) they missed their next payment (May 2008). Now, while the lender is concerned, they connect with the borrower and begin to figure out if it was just a misstep or if this is the first of a series of missed payments that’s about to happen. While the poor communication drags on and the process moves slow, another 30 days moves past and another missed payment. Now it’s June, and your next client is 60 days behind. Red flags go up and as the bank hustles for answers where there are none, another 30 days, and another late payment. Which brings us to 2 very important places in time: 1) 90 days late and the NOD is officially recorded, and 2) the Foreclosure process has commenced. 

This is where they need options. This is where they need council on the differences between Short Sale & Foreclosure. This is where they need YOU.

July is the peak month for Short Sale Listing opportunity. Do you have a action plan and a Short Sale Kit to get started today? Well, if you don’t want to do them then you wont need one. But if you are interested in helping these folks that need your help the most, then ask us what we have for our Realtor Partners that we’ve found works really well to get them from where they are to where they need to be, FAST. 

It might be just what you’re doing, it might be a little different – either way its worth a call because, like Oprah says, “You do what you do when you know what you know, and when you know different, you do different.”

My Toll Free Line is 866-310-4002. I want your Loan Business and I have a responsibility to rescue you from the next loan hacks out there who are hoarding your potential and thwarting your ultimate referrabilty. I can’t wait to help you with your next deal.