The short answer to this is “yes”.  Depending on the type of mortgage for which you apply, financial help from blood relatives is permitted.  An FHA mortgage allows your entire down payment to be a gift from a blood relative.  So if your folks or your Grandma or your brother want to help you come up with the cash for a down payment on your first home, they can “gift” you the money.  Of course, there will be rules that have to be followed about how this gift can be made.  A competent mortgage consultant can tell you rules and how to make this happen.

Some conventional loan programs will also permit a gift from a blood relative.   However, once again, the rules for mortgage loans are rapidly changing, especially in today’s recessionary environment, so be sure to work with a lender who stays on top of the details.

If you receive a gift from your family and closing cost help from the seller, you can purchase your first home without spending a dollar from your own pocket.  Isn’t it a great world we live in?

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

Mortgage money comes from banks, investors and mortgage companies.  However, mortgages differ in how they are insured against default.  Let’s say you are applying for an FHA mortgage.  The money can come from US Bank, Wells Fargo, Residential Mortgage Group, Countrywide Mortgage etc.  The bank’s mortgage will be INSURED by the Federal Housing Administration or FHA. 

This is a government mortgage insurance program which is paid for by fees collected from the Home Buyer.  FHA insures the bank so that if the home goes into foreclosure because the buyers are unable to make house payments, FHA makes good the losses suffered by the bank.  This insurance is why banks will loan you money with only 3.5% down payment, the amount FHA requires for its mortgage loan program.  Banks know they can’t lose money on the loan because it’s insured by FHA.

The home buyers pay FHA an insurance premium collected at closing.  Currently, this is 2.0% of the purchase price and it’s added into the mortgage loan and financed by the bank.  The other mortgage  insurance fee is a monthly premium which is .55% of the outstanding loan balance divided into 12 monthly payments.  So you pay mortgage insurance at closing, when you pay for your new home, and monthly thereafter.  FHA fees and rates are considered very competitive with conventional loan programs.

 For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

If you listen to the news, read the newspaper or keep in touch with what’s happening on the internet, you’ve undoubtedly heard of the “mortgage meltdown”.  Many people attribute this “meltdown” with triggering our current recession.  What really happened?

Banks relaxed lending standards and permitted borrowers with less than perfect credit to purchase homes.  Briefly, these borrowers didn’t qualify for the best loans with the best interest rates because they had poor credit.  But the banks let them borrow money anyhow.  The loans that these buyers received were loans in which the interest rate could go up substantially one or two years after purchasing the home.  After the interest rates went up, most of these borrowers were unable to keep up with the rising house payments and surrendered their homes to the bank instead. 

Today, these loans are illegal and were outlawed by congress as of May, 2007.  But they have done their damage.  Many banks and mortgage insurance companies suffered huge losses due to mortgage loan foreclosures.  These same banks and mortgage insurance companies have tightened credit standards so that YOU will have a much tougher time qualifying for the loans with the best interest rates.

Credit is EVERYTHING when applying for a mortgage.  If your credit is shaky or needs work, consult with a mortgage lender BEFORE looking for a home.  You may need to do some work to get those credit scores up.  Have the lender pull a copy of your three credit bureau merged credit report with 3 credit scores.  Be informed.  Knowledge is power.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

Many Home Buyers are surprised to learn that in addition to a down payment, they may need to pay other fees at closing, commonly referred to as “closing costs”.  The amount of these fees will vary from mortgage company to mortgage company.  A good estimate is about 3-3.5% of the purchase price of the home.  

When you are buying your first home, it may be hard for you to come up with enough money for both a down payment and closing costs.  Many first time Home Buyers ask for closing cost assistance from the Seller.  Most mortgage programs will permit the Sellers to help the Buyer pay for their closing costs.  All you need is the Seller’s consent.  Your Realtor will ask the Seller for this assistance when they write up the contract on your new home.  Asking the seller for closing cost help is very commonly done, especially when buying your first home.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

Yes, that’s right.  If you are a First Time Homebuyer and were hoping to get a great deal on a home, but can’t buy till this fall, low mortgage interest rates are good news.  It seems the weak economy, the stalled housing market and the European fiscal crisis are all GOOD news for home buyers.  Because job creation is lagging behind the economic recovery, many areas of Minnesota still have high unemployment.  This translates into home foreclosures as the unemployed struggle and lose the fight to keep up with mortgage payments.  Foreclosures keep home prices low as banks use fire sale pricing to get rid of them.

The housing market took a dive after the end of the special home buyer tax credits.  These special tax credits ended on April 30 and May was a dismal month for home sales.  As home sales slow down, home owners become more motivated to discount their homes’ prices.   We expect to see more advertised low prices over the summer and into the fall.  One report that I read said the Twin Cities was one of the worst areas of the country, better only than Los Vegas, in terms of dropping home values.

The European fiscal crisis has made Wall Street very nervous.  If the European economy goes into a recession, that might stall the United States recovery.  During times of Wall Street panic, the bond market typically does better than the stock market.  Mortgage money is financed through bonds.  When bond sales are good, there is more mortgage money to lend at lower interest rates.  Thus, most experts agree that we will see spectacularly low rates through the end of 2010 and maybe even into 2011.

So… lots of homes on the market at low prices and low interest rates on mortgage money.  Sounds like a buyers’ market to me.  Be sure and plan to take advantage of the great affordable housing out there this year before the ecomony gets back on its feet and these bargains disappear.

For answers to your mortgage and home purchase questions, attend our FREE FIRST TIME HOMEBUYER CLASS offered monthly in the Twin Cities metro area.

Let’s start by explaining what a “closing” is.  When you buy a home, you have to pay for it.  When you sell a home, you have to transfer the ownership to the new Buyer.  The “closing” is when both of these things happen, usually at the same time.  The Buyer pays for the home by signing all the mortgage paperwork.  The mortgage bank then gives the Buyer the money to pay for the home.  The Seller signs title transfer paperwork which puts the house in the new Buyer’s name.  It takes about an hour.

As a Home Buyer, in addition to paying money for the home itself, you will have other fees to pay.  These fees are called Buyer Closing Costs.  These fees fall into four categories.

1.  There are loan related fees.  You will pay your mortgage broker a 1% origination fee (1% of the mortgage amount) and some other fees.  The other fees shouldn’t exceed $500-700.
2. There are title insurance and closer fees.  Your bank requires this insurance to make sure the title of the home is “clear” and no one else has a claim on the home.  The closer, working for the title insurance company, is the person who prepares and processes all the paperwork at closing.
3. There are miscellaneous taxes and fees.  The biggest tax is the mortgage tax which is a state tax.  This is $3.40 per $1000 of mortgage.  There are some courier fees, conservation fees etc.  These are all relatively small.
4. Finally, there are prepaid expenses.  Your bank will require you to buy and prepay for a hazard insurance policy for the first year on the home; and also pay another 2-3 months of hazard insurance premium  into a special savings account called an escrow account.  It will also require you to prepay 6-8 months of property taxes into this account.  Also you will be pre-paying the mortgage interest on the money you are borrowing through to the end of the month in which you close.  The bank uses the money in your escrow account to pay your property taxes and insurance policy when they come due.

These expenses total roughly 3-3.5% of the cost of the home.  As we have discussed in another blog on this website, you can usually negotiate with the Seller to pay these costs on your behalf.  However, these fees are a part of the usual and customary costs of buying a home.  Be sure to include them in your budgeting for a new home.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

The mind boggles!!  $8000 in free cash, very few strings attached, from my favorite uncle, Uncle Sam.  I’m sure you’ve already spent this money in your mind but here area a few more suggestions related to home ownership.

Let’s say you are short of cash for the down payment but you have a blood relative who would “gift” you the money if you promised to repay them some time in the future.  If you were buying a home on an FHA mortgage, you would need 3.5% of the purchase price in down payment money.  For $8000, you could buy up to a $230,000 home (assuming you qualified for that much monthly payment) and take a loan from uncle/aunt/grandma/mom.  You could then collect your $8000 tax credit from Uncle Sam and pay them back this year.    If you’ve read some of our other blogs, you know that the closing costs can be paid by the seller.  You could get into that lovely home for FREE.

Or let’s say you are interested in a home but it needs some redecorating such as new carpet or flooring throughout ($4000), new paint in all the rooms ($300) and some new appliances in the kitchen ($3000).  None of these fixes would make it hard for you to get mortgage approval but they might make it hard for you to LOVE your home.  Buy the home, claim your $8000 tax credit and use the cash to create a home you LOVE.  Put in the carpet, repaint the rooms in custom colors and buy those stainless steel kitchen appliances.  Then sit back and enjoy.

Or let’s say the home is pretty darn nice but the yard isn’t.  It’s been neglected, never had any landscaping or fencing for the kids and the dog, and the deck needs to be removed and rebuilt.  Let’s plan a new deck ($5000) and let’s get some landscapers out there to put in the perennials, replace sod and add a tree or shrub or two ($3000).  From ugly to lovely.  There’s lots more ideas too but these should get you thinking of the POSSIBILITIES for that lovely $8000 First-Time Homebuyer Tax Credit.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

Many Home Buyers are surprised to learn that in addition to a down payment, they may need to pay other fees at closing, commonly referred to as “closing costs”. The amount of these fees will vary from mortgage company to mortgage company. A good estimate is about 3-3.5% of the purchase price of the home.

When you are buying your first home, it may be hard for you to come up with enough money for both a down payment and closing costs. Many first time Home Buyers ask for closing cost assistance from the Seller. Most mortgage programs will permit the Sellers to help the Buyer pay for their closing costs. All you need is the Seller’s consent. Your Realtor will ask the Seller for this assistance when they write up the contract on your new home. Asking the seller for closing cost help is very commonly done, especially when buying your first home.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs. “Simple answers to home ownership questions”.

Each of the three major credit bureaus is going to give you a credit score.  This credit score is calculated differently by each of the bureaus. 

A company called Fair Isaacs invented the FICO credit scoring system. Each credit bureau has their own credit score; Equifax calls their score Scorepower, for instance. Each bureau also sells the VantageScore credit score, a competitor to FICO. Regardless of the system used, the credit score takes into account how much credit you have, how much you use it, how fast you repay your bills, if you have any legal or tax judgments recorded against you and so on.  Even though all three bureaus use VantageScore, credit scores will not be the same for all three. This is because they each track different information.

Not all scoring systems are the same so if you go to get your credit score from Fair Isaacs at FairIsaacs.com, the score will be higher than when you get a score from the credit bureaus.  A mortgage lender will look at all three credit bureau scores and select the middle of the three as the best measure of your current credit.

For more detailed information, come to our FREE NO OBLIGATION FIRST TIME HOMEBUYER class or wait for future blogs.  “Simple answers to home ownership questions”.

The Fair Credit Reporting Act states that you have the right to dispute any inaccurate or derogatory information on your report.  If you do have errors on your credit report, you will want to have them corrected as soon as possible.

You can either call or write to the appropriate credit bureau.  There are three major bureaus reporting on credit in the United States.  When you apply for a home loan, all three credit bureaus are checked by your mortgage consultant.  Each of these bureaus may issue a slightly different report on you.

In order to correct credit report problems, you will have to supply the bureau with the correct information in writing.  If you are unable to provide written proof of their error, you still have the right to formally dispute that account error with the credit bureau.  A good mortgage consultant also will be able to suggest a specific process to follow to make these changes.  Without a good credit report, the costs of your home loan can go up significantly.