Matching buyers with down-payment assistance

Inman News™, March 21, 2011
By BERNICE ROSS

Lack of a down payment is the No. 1 obstacle to home ownership. What most buyers don’t realize is that there are still hundreds of programs available to help them obtain a mortgage with less than 10 percent down.

I recently interviewed Rob Chrane of Down Payment Resource about an exciting new tool his company has created to assist buyers in obtaining down-payment assistance.

According to Chrane, many people are aware that there are FHA programs available to buyers who have low down payments. Most buyers, however, have come to the mistaken conclusion that it now takes at least 10 percent down to purchase if you use a conventional loan instead of an FHA loan.

Payment assistance comes in many forms. Down Payment Resource connects potential borrowers with available funding for down-payment assistance, fixed-rate mortgages, rehab loans, and more.

What makes this new program exciting is that the Down Payment Resource site works hand in hand with a multiple listing service (MLS) to do two things. First, while there are numerous federal programs available, few people realize how many state and local programs are available as well. These programs often have very different guidelines as well as loan limits.

Down Payment Resource aggregates all the programs for which a particular property would qualify based upon the location and nature of the program. The system then displays an icon on the MLS listing indicating that this particular property is available for down-payment assistance. Borrowers can click on the icon to see which programs are available.

Aggregating all of these programs and tying them to specific properties is a gargantuan task. The system works by linking to the agencies that administer the programs. These agencies maintain the current list of requirements as well as the lenders who offer the programs.

To illustrate, a house we chose at random from the program displayed eight different resources for potential homebuyers who might be seeking down-payment assistance.

Second, the program qualifies buyers as well. A prospective homebuyer completes a simple online form containing eight questions. The user can stay anonymous because the system doesn’t track any identifying information. Once the form is completed, the system informs the user about whether he will qualify as well as providing an offer for a REALTOR® and/or lender to contact him.

While this system is relatively new, the feedback from the MLS systems using it thus far has been very positive. The system is a huge lead-generation tool for agents and brokerages, as well as lending institutions.

The MLS systems that are currently using the system typically purchase it as part of the core services to link to their IDX feed. There is no charge to the agents. The links to the assistance programs are available on the MLS IDX feed and can be posted on the brokerage’s or the agent’s site as well.

There are numerous ways for agents to use the system. First, they can use it as a quick way for new buyers to identify the houses they will qualify for to purchase. This is different from anything in the past, as the system clearly identifies the specific properties that qualify and helps the buyer determine how much he can qualify to borrow. The benefit to the agent is that she doesn’t need to waste time showing properties that don’t qualify.

Agents using the system also have reported that it can be an extremely valuable tool for helping sellers be realistic about their pricing. The way to do this is by using the closing script that’s based upon the notion that “your house has to qualify.”

“Mr. and Mrs. Seller, you already know that in order to sell your house, you need a qualified buyer. Did you know that your house also has to qualify?”

This statement usually surprises most sellers. The normal course of action at this moment is to explain that because more than 90 percent of today’s buyers need a loan, their house has to qualify with a lender.

You introduce your comparative market analysis (CMA) by saying, “So let’s take a look at what properties are qualifying for in this area.”

If a number of properties in this area were eligible for down-payment assistance, it would be wise for the seller to price her property where she can reach the greatest number of potential buyers.

For example, assume that a seller would like to list her property at $300,000. At that price there may be only FHA financing available. On the other hand, if the seller lists her house at $295,000, there are two additional down-payment assistance programs available. Clearly, the best choice for the seller would be to list for a little less and broaden the number of potential buyers for the listing.

Chrane said that he expected a fair amount of pushback from real estate companies that have their own in-house lenders. Once these brokerages started working with the system, however, they realized not only could they generate buyer leads, but they could also generate mortgage leads.

This program exemplifies one of the best ways the MLS systems, brokerages, agents, lenders, and third-party vendors can work with federal, state and local programs to help more buyers achieve their dream of homeownership.

Bernice Ross, CEO of RealEstateCoach.com, is a national speaker, trainer and author of the National Association of REALTORS®’ No. 1 best-seller, “Real Estate Dough: Your Recipe for Real Estate Success.” Hear Bernice’s five-minute daily real estate show, just named “new and notable” by iTunes, at www.RealEstateCoachRadio.com. You can contact her at Bernice [at] RealEstateCoach [dot] com or @BRoss on Twitter.

Call me if you want downpayment information or a referral to a great lender!
Jen McKinnon
Realtor / Investor / CDPE
AGENT REFERRAL NETWORK
The Minnesota Real Estate Team

612.384.1073
jen[at]MnRealEstateTeam[dot]com

Housing Administration Takes Steps to Bolster Capital Reserves For FHA Loans

One note before you start reading this…..please contact your lender for more information on these changes to see how it will affect you. There are many loan options available. Your personal financial situation, credit score and many more factors will influence which loan is best for you.

RISMEDIA, February 17, 2011—As part of ongoing efforts to strengthen the Federal Housing Administration’s (FHA) capital reserves, FHA Commissioner David H. Stevens announced a new premium structure for FHA-insured mortgage loans increasing its annual mortgage insurance premium (MIP) by a quarter of a percentage point (.25) on all 30- and 15-year loans. The upfront MIP will remain unchanged at 1.0%. This premium change was detailed in President Obama’s fiscal year 2012 budget, and will impact new loans insured by FHA on or after April 18, 2011.

“After careful consideration and analysis, we determined it was necessary to increase the annual mortgage insurance premium at this time in order to bolster the FHA’s capital reserves and help private capital return to the housing market,” said Stevens. “This quarter point increase in the annual MIP is a responsible step towards meeting the Congressionally mandated two percent reserve threshold, while allowing FHA to remain the most cost effective mortgage insurance option for borrowers with lower incomes and lower down payments.”

The proposed change was announced last week as part of the Obama Administration’s report to Congress, which outlined the Administration’s plan to reform the nation’s housing finance system. The Administration’s housing finance plan also recommended that Congress allow the present increase in FHA conforming loan limits to expire as scheduled on October 1, 2011.

This premium change enables FHA to increase revenues at a time that is critical to the ongoing stability of its Mutual Mortgage Insurance (MMI) fund, which had capital reserves of approximately $3.6 billion at the end of FY 2010. The change is estimated to contribute nearly $3 billion annually to the Fund, based on current volume projections. It is vital that HUD take action to ensure that FHA will continue to serve its dual mission of providing affordable homeownership options to underserved American families and first-time home buyers while helping to stabilize the housing market during these tough times.

On average, new FHA borrowers will pay approximately $30 more per month. This marginal increase is affordable for almost all home buyers who would qualify for a new loan. Existing and HECM loans insured by FHA are not impacted by the pricing change.

FHA will continue to play an important role in the nation’s mortgage market in 2011. President Obama’s FY 2012 budget projects the FHA will insure $218 billion in mortgage borrowing in 2012. These guarantees will support new home purchases and re-financed mortgages that significantly reduce borrower payments.

For more information, visit www.hud.gov.

Copyright© 2011 RISMedia, The Leader in Real Estate Information Systems and Real Estate News. All Rights Reserved. This material may not be republished without permission from RISMedia.

Looking to buy or sell?
Jen McKinnon
AGENT REFERRAL NETWORK
The Minnesota Real Estate Team
612.384.1073
jen[at]MnRealEstateTeam[com]

So, it sounds like 100% Loan To Value financing is back again (around Aug 16 2010).  Obviously, there are restrictions and you need to talk to a qualified lender to make sure this is the right mortgage product for you.  A couple of lenders I recommend are:

Cornerstone Mortgage (Rob Bonahoom) in Burnsville Minnesota

Bell Mortgage (Alec Grebis) in Bloomington Minnesota

Conventional 100% financing now available

680 minimum credit score

45% Debt-To-Income ratio or less

NO Mortgage ins needed with this program

Must be first time home buyer (not owning a home in the previous 3 years)

Up to 3% in seller paids allowed

Income limits of $83,900 a year for a family of 1-4 people

This program was just unveiled today and it sounds like lenders can not lock anyone in until August 16th so that gives you plenty of time to get out and find the perfect home!  Home inventory in the traditional first time buyer price range (under $200,000) is very high especially in the under $150,000 range.  Just a few months ago investors were going crazy buying up cheap bank owned houses (especially in North Minneapolis) and remodeling them.  Now, because the federal tax credit expired, these sellers are sitting on inventory that they want to sell fast!  Now, don’t get me wrong…it does not mean you can throw out low ball offers all day long, it just means that many of these houses are priced to sell!

For more information about 2 beautifully remodeled homes in North Minneapolis, click on the links below – these houses are move in ready – just about everything is NEW (including most of the plumbing and electrical!).

3318 James Ave N Minneapolis

3842 Humboldt Ave N Minneapolis

Call or email me with any questions!

Jen McKinnon

Real Estate Agent / Investor

AGENT REFERRAL NETWORK

Member of the #1 MN Real Estate Team

612.384.1073

jen@mnrealestateteam[dot]com

The information below about a NEW ZERO Down financing program comes from The Minnesota Housing Finance Agency and more information will be coming soon!
This type of program could mean help for Twin Cities home buyers that are on the fence about buying their first home. From rumors I have heard, there will be income limits and credit requirements for this program (appears to also be geared for first time home buyers).
As always, check with your local mortgage lender to see if you qualify. I’ll post more information when I get updates. A couple of lenders that I like and that have access to these programs are:Alec Grebis with Bell Mortgage and Cornerstone Mortgage.

New Loan Product for the Minnesota Mortgage Program

Minnesota Housing will soon be offering Affordable Advantage, a loan product that helps serve low- and moderate-income borrowers. The product has flexible terms and is one of the few 100 % LTV products available in the market. The product is based on Fannie Mae’s Affordable Advantage™, an initiative developed exclusively for Housing Finance Agencies, including Minnesota Housing.

Contact me for more information or to start the home search process!
Jen McKinnon
Real Estate Agent / Investor
AGENT REFERRAL NETWORK
Member of The Minnesota Real Estate Team
jen[at]MnRealEstateTeam[dot]com
612.384.1073

So, you didn’t get into the real estate market in time to take advantage of the tax credit? Below is a great article from a newsletter I get from Ronny Loew at Waterstone Mortgage.

What’s More Important? Low Rates or Tax Credit
In a recent survey by Prudential Real Estate and Relocation Services, an overwhelming majority of those polled found that when factoring in either low interest rates or the tax credit, low rates were far more important in a decision to purchase a home now.

There’s a good reason for this statistic. For example, if you purchase a home for $300,000 and finance $270,000, and your interest rate for a 30-year fixed rate loan was 5.25% versus 4.75%, you would pay nearly $30,000 more over the term of the loan. This is a significant amount of money!

Since the Fed’s Mortgage Backed Securities purchase program ended on March 31, there has been much volatility and price swings in the markets. Rates overall are off their lows and are often quoted above 5.00% today with no points.

Looked at from another perspective, if prospective home buyers are waiting for home prices to decline a bit more before purchasing a home, but interest rates push higher towards 6.00% in the meantime, waiting could well cost those home buyers more money in the long run.

In fact, let’s say a home buyer delays a transaction but receives a $10,000 reduction off that $300,000 home. If, in the meantime, rates were to rise .75% to 6.00% and the buyer financed 90% of the purchase price, the amount of total payments over a 30-year term would be over $35,000 more than paying the $300,000 purchase price and the 5.25% interest rate.

The Twin Cities real estate market is still HOT and there are great homes at good prices – in ALL price ranges and all areas of the Twin Cities. Please call me to learn more about home buying!

Jen McKinnon
Realtor/Investor
AGENT REFERRAL NETWORK

612.384.1073
jen[at]MnRealEstateTeam[dot]com

Are you a first time home buyer in the Twin Cities? Now is a great time and even better than we saw last year! Hello….$8,000 tax credit!
If you are wondering about First Time Home Buyer financing and assistance, Alec Grebis with Cornerstone Mortgage is a great person to contact. He wrote a great article about this at his blog, The Mortgage Scoop. Remember, talking to a knowledgeable lender is the first step in the home buying process!