Home Path Buyers Incentive

Home Path Last Call

Time is running out fast to take advantage of the HomePath Closing Cost Incentive.  Up to 3.5% (of purchase price) in closing cost incentive is available but you must act fast.  Buyers must make their initial offer on a HomePath property by March 31, 2014 and close by May 31, 2014 to qualify.  This additional spiff is only good for owner occupied buyers who request the incentive in their initial offer during the First Look period.  Oregon is one of the eligible states for this offer.  Make sure to put the request for the incentive in line 38 of your addendum in your on line offer.    Last Call!!

By now most people are familiar w/the HomePath program.  Certain homes owned by Fannie Mae are available to qualify for the program and its perks… including this added bonus.  A list of qualifying homes available in your area is available at HomePath.com the official site.  3.5% towards closing costs is no chump change.  Buy a $250,000 house and that adds up to $8750 towards your closing costs.  Be aware that not all loan programs allow seller contributions that high.  Typically, on a conventional loan with 5% down payment the max seller contribution is only 3%.  Still it’s worth asking for it.  

But what if you your closing costs aren’t that high?  On smaller loan amounts this typically isn’t an issue but it can be for larger loans, say those over $200,000.  That’s because some of the closing costs are fixed and don’t rise as the loan amount does. The result is that larger loans have closing costs that are smaller in terms of their percent of price.  You can still capture all this added HomePath incentive (or any seller incentive) by buying down the rate.  Commonly called “points” these additional closing costs can soak up any additional seller paid cost to get a lower rate for the buyer.  But don't wait...

Click Here to visit the HomePath site for additional details on the program and available homes.  If you are a borrower make sure you are working w/a real estate agent that has experience w/this unique program.  And by all means if you are on the fence about buying a home save yourself some green and buy while the cash incentive remains.

Eric Lundberg - NMLS #261588

President, Chinook Mortgage Ltd - NMLS #261588

Eugene, OR.

541.302.3210

www.ChinookMtg.com

Borrowed Funds for Down Payment

In many cases your buyer CAN borrow the money for their down payment.  The most important thing to remember is that the loan must be secured, they must document the value of the collateral and the lender must count the payment when qualifying.  The exception is we don’t have to count the payment if the buyer is borrowing against their own money ie. their 401(k).  It’s not uncommon for a buyer to tap their retirement account for the needed funds to close but it’s critical to do it right to avoid taxes and penalties.  

First, nearly every loan type allows for borrowed funds.  Buyers get in trouble when they take an unsecured loan or credit card advance and try to use those funds for their down payment only to have the lender deny their application.  Using a car as collateral for example is fine and the buyer has their down payment as long as they:

A – Don’t borrow more than the collateral is worth

B – Document the value of the collateral and terms of the loan

C – Prove that they actually own the collateral and

D – The lender counts the payment in their qualifying ratio’s

  

If the buyer is using their retirement funds and they can document that if they don’t repay that loan the lender (the retirement account administrator) will take the money from their retirement account rather than come after the borrower’s assets (like the house!).  This is usually standard procedure and documented in their loan agreement.

Even better, when a buyer borrows against their retirement account the mortgage lender will not count the loan payment when qualifying.  And, as long as it’s a loan and not a withdrawal there is no tax or penalty.  And though it should be obvious…when the buyer repays their retirement loan they are actually paying themselves back.  It was their money to start with!

More on the procedure for borrowed funds.  Your borrower will need to document that they own the collateral they are borrowing against.  Using the car example a copy of the title or registration will work.  Then you need to document the value of the collateral as well.  For a car loan it’s pretty straight forward.  I usually hop on the internet and look up the Kelly Blue Book value and print it out.  Get a copy of their car loan paperwork and it’s done. 

But what if your buyer has something a little more exotic to use as collateral?  The rule is they can use anything they can document.  From cattle to stocks to their antique Martin guitar.  Documenting the value gets a tad more complicated but it’s usually just a matter of getting a professional to give you an estimate of value (or your insurance company may be able to document the insured value).  Take that old guitar down to the local guitar shop and ask them to give you a written appraisal and you’re on your way.

Why wait and scrimp and live on Ramen noodles to accumulate a down payment only to watch home values continue to climb out of reach?  Have your buyer take stock of their assets and leverage them to get into the home of their dreams now. 

Eric Lundberg - NMLS #261588

President, Chinook Mortgage Ltd - NMLS #261588

Eugene, OR.

541.302.3210

www.ChinookMtg.com

Private Money Financing

The loan we love to hate:  Private financing.  What we used to think of as throwing our clients to the sharks has changed dramatically these last few years.  When banks were so tight they squeaked it was the private sector that came to the rescue more than once.  While rarely anyone’s first choice due to their higher interest rates and fees they offer some pretty enticing advantages over bank financing.  Need a loan closed in 72 hours to make your deal happen?  Forget the banks.  Call in the private cavalry to save the day.  Those higher interest rates look pretty good when the alternative is losing the deal.  Not all private money firms are created equal however.  Lucky for us there are some respectable firms right here in town…

It’s true.  Looking for private money can feel like swimming w/sharks.  But, we’re lucky to have several good private money firms in Eugene.  One of the oldest and possibly best known is Gallic Financial often touted for not having pre payment penalties.  After all, most of the time when you need this type of financing it’s a short term fix.  I’ve dipped my own ladle into the private money cauldron more than once and I’ve yet to be sorry.  We bought a duplex for a song at the bottom of the market and it would never (and I mean NEVER) have qualified for any kind of bank financing due to its condition.  Just as important the seller needed cash and needed it now.  Enter the private money financier.  The duplex has since been remodeled and refinanced and a grateful nation thanks the private money folks at Gallic for closing that particular investment emergency.     

What works for private money and what doesn’t?  Some folks think that bad credit = private money.  Not so fast.  Private money companies don’t want a bad credit risk any more than any bank.  Any bad credit better be well explained, in the past and unlikely to reoccur.  What private money lenders are looking for is the one that falls through the cracks at the bank.  An odd property.  A unique employment situation or funds to close coming from an unusual source.  Something that makes sense to everyone but a bank.  And lately there’s been no shortage of those kinds of deals. 

Private money folks have been busier than anyone else during the financial squeeze of the last few years.  And because of that they have become more selective in the types of deals they are interested in funding.  A limited supply of money means they can pick and choose a bit more than in yesteryear.  Don’t be shy about calling them on any deal.  I’ve always been told to call, or have my borrower call, if it even looks like there is a deal to be made.  The private money guys (and gals) tend to be creative and think outside the box.  Maybe they can cross collateralize more than one property.  Maybe they need a cosigner to feel comfortable.  Whatever it takes.  They are masters of creative financing.  Just make sure you have an exit plan.

Eric Lundberg - NMLS #261588

President, Chinook Mortgage Ltd - NMLS #261588

Eugene, OR.

541.302.3210

www.ChinookMtg.com