Be prepared: part 1 $9,125

Are you ready to get in your new home this year? Are you thinking towards the Spring of 2022? How will you get there? By being prepared. Let’s talk dollars and cents this time…

What in the world is $9,125?

Would you like to have $9,125 more towards closing costs and down payment? Find a way to save $25 each day. Maybe it’s a bagged lunch, or no every week night out with friends. Or maybe a few less lattes and a few more free office coffee. Whatever way you choose to save money, $25 times 365 days is $9,125!

Sound like a lot? It could be for most people, so here are some money saving tips: move back home to save rent money. Move in with a friend to share expenses. Sell items you don’t use regularly that you may be still making payments (second vehicles for example). Check out what those antiques, collectibles, or other valuables might be worth. Find a few more deductions this year to get a little more tax refund next year. This is all things you can control and not just gifts.

Yes, USDA and VA loans and maybe even some forms of down payment assistance do have the possibility of going to the closing table with little or nothing or even the unicorn transaction of getting some of your earnest money back! But those cases are rare, and they still don’t address the other items you still need.

You see, the bottom line is that you can’t expect to get into a home for free, no matter what the propaganda says out there. There’s moving expenses, turning on the utilities expenses, decorating expenses, etc. Your best bet to get the home you want is to show you have cash whether it’s required directly or indirectly by the loan you qualify for. The best thing you can do is plan ahead to have the cash you need to offer and buy a home with confidence and the right partners in place to do so. Start with me here.

$0 down doesn’t mean nothing needed!

Maybe we have over-advertised zero down payment programs (down payment assistance). Or some unnamed multi-billion dollar company has emphasized push a button and get a mortgage. Or maybe we just have become like the movie Wall-E and just think it should be easier? Or maybe we once got one of the legendary stated income loans before the crash of 2008?

Why does ZERO down still require something?

1. As I have explained in other blogs, it still requires reserves (Reserves, it’s all about the assets…)
2. As I have explained in other blogs, it still requires other fees to move (All about the Benjamins in buying a house…)
3. Here’s a couple new ones: I recently had a customer who couldn’t even afford the appraisal fee. Realtor threw a fit like a crying baby about it. My question is, then how are they going to afford a plumbing leak, broken appliance, or worse, the roof and air conditioner? You see, the mentality of a renter, “the landlord will fix it,” is way different than the homeowner, “I better learn to fix it or I have to pay someone to.” I feel like every single foreclosure is due to someone really not being prepared to be a homeowner. There are costs, unforeseen costs, and ongoing maintenance costs ALL the time, seriously, speaking from my own experience, so you have to be mentally prepared for them and the first step is to start by learning to save money (The crucial ability to save for a down payment)!
4. You have to put earnest money down. Just like buying a car Friday night (and you want to check your bank Monday morning), the dealer is going to want money to hold that car for you and not sell it to someone else. The home seller wants to know that you are a serious buyer and will hold it for you pending your acquiring financing. This isn’t Craigslist and you can’t hold a house until you get around to it, this is a tough market with multiple bids on every home and you need to be prepared ahead of time.
5. You need movin’ money! I know, it sounds silly, but it’s true, even the underwriter wants to see that you aren’t putting your last penny into buying a home, you have money to move into it!

1. You need decorating money, there is always blinds, paint, carpet, rugs, furniture, even maintenance items of something that doesn’t work or something that you will want to do that the previous owner didn’t leave behind or didn’t have, when you move in your new home.

What does all this mean? It means zero down is zero down payment. It doesn’t mean you don’t have to have (or better said prove) a penny to your name and you can get in a home. It’s just not realistic and it’s setting you up for failure. Yes, you can get a gift towards down payment and closing costs. You can get the seller to pay your closing costs. But it’s just not a good idea to go into a home with the rental mentality. You need to take a class, think it through, and be prepared. When you are ready, my team and I are ready to take you from A to Z…

All about the Benjamins in buying a house…

So when we discuss down payment, closing costs, due diligence before you buy, moving expenses, sometimes reserves (extra money after closing), etc., the costs of buying and closing on a home can seem overwhelming. This is not an exhaustive list, but here are some very common costs involved and ways to manage them…

Down Payment – this seems to be the number one focus, so let’s talk about it first. Lots of people think you have to have a huge down payment, even as much as 20%. But actually there are lots of options for reduced to no down payment (No down payment? Get a gift!, zero down, VA loans rock!). Without getting too far into it, there are 0%, 3%, 3.5%, 5% options. And there’s down payment assistance currently available in all of my states (Why Success Mortgage Partners?)!

Closing costs – rather than give a figure or a percent, let’s just say this can be as much or more than the down payment. There are a number of ways to mitigate this including the seller paying some or all of them, including a certain percentage. FHA loans allow up to 6%, which can easily cover the closing costs and more, other loans are as low as 2%, but either way, it can really help you to reduce these costs.

Reserves – I have addressed this previously (Reserves, it’s all about the assets…), but suffice it to say that most loans do not allow you to spend every penny you have just to get into the home. So having some left over for the first payment(s) or for moving to, decorating, furnishing, etc. your new home just makes sense.

Apart from the above, there is the inspection cost, earnest money (although that goes towards the closing costs), and prepaying of the appraisal or loan application fee (this also goes towards the closing costs). Quite a few of these are out of pocket before and during the contract period and before you even get to closing.

Why is this a big deal? You have to prove where the money comes from or that it exists to the underwriter before you close. It’s best to have this out of the way beforehand rather than in the process.

So what if you are expecting a windfall in the near future? You still can start down the process to see if you qualify now.

So what if you can’t prove where the money came from? Or provide a paper trail? This is a tough one to answer, maybe you have to wait until you can, at least 1-2 months have passed showing the money already in the account, or maybe you just need to find another route to prove the paper trail.

Having the right partner in the process is the best way to make sure you are prepared up front and the process will go so much smoother after that. Start here your journey: https://my.successexpress.app/#/loan-officers/corey@lakestatemortgage

Why Success Mortgage Partners?

I recently switched to Lake State Mortgage, a division of Success Mortgage Partners. I wanted to address some of the new options that I have and to explain the double names.

1. Success Mortgage Partners – there is a real focus on realtor partnerships and new home buyers. This focus resonates with the technology that we have available for our partners, the daily activities that we do, and the options that we have to work together and co-market.
2. Down Payment Assistance – for those that don’t know, I am currently licensed in 9 states (FL, GA, IL, IN, KS, KY, MI, OH, and TX) and now I have down payment assistance currently available in every state, some states with more than one option! So I now have a real advantage to first time homebuyers (FTHB) and even next home buyers…

So, I am sure the question comes up: what’s the deal with the two names? Lake State Mortgage is the branch (DBA) and Success Mortgage Partners is the parent company. For those familiar with realtors, it’s similar to having a “team name” and a company name. The “super sellers” team works for one of the major real estate brokerages. That works the same for me, I work out of my home for Lake State Mortgage (the branch or team) for our parent company Success Mortgage Partners.

Same as always, I will fight to find a way to help my partners and borrowers. I will present the options available now and the possible ways to improve your circumstances (credit, assets, income, etc.) for other options as I always have. Start your path to partnership here: Your favorite lender with more options to help you…

Options are better…

When it comes to a mortgage, options are better.  What options?

Here are the 3 basic options explained…

1. Conventional – I know I have made fun of it as “plain vanilla,” like a box, and sometimes “walk on water and gold plated” only. (Conventional means you have to conform, Feeling squeezed into a mold by your loan officer?)  The fact is that it actually does allow for a wide range of people to get into a home, renovate, and refinance.  But unfortunately, it does not meet the needs of everyone.
2. Government backed – often expressed by the department of the government that covers it, such as FHA (10 reasons why should you consider an FHA loan!) , or USDA rural housing (USDA rocks!), or VA (VA loans rock!).  These often meet the needs of specialized groups of buyers, refinances, and remodels.  For example, there is a 203k, a very common renovation loan (Remodel or rehab loan?). 100% rural financing, and 100% financing for veterans and their surviving spouses.  All of these have particular niches that help to finance what conventional can’t, including the very desirable 100% financing.  But just like conventional, it’s not for everyone as many, many clients do not meet one or the other of the requirements, including modest income, low maintenance required homes, and eligibility requirements.
3. Non-Prime or non-QM – this specialized type of lending breaks all the “rules” that conventional and government backed financing requires (What in the world is Non-QM?).  However, in exchange, it requires more equity either through down payment for a purchase or equity in a refinance.  This covers a host of products from investment properties (for rent), credit challenges, foreign national buyers, unique properties, or even proof of income challenged (self-employed borrower’s special needs to consider their income from a different perspective than just traditional requirements of tax returns).  In exchange for this unique approach to lending, there is often a much higher interest rate than conventional or government lending and their own special set of lending requirements, including the presence of extra funds, or reserves (Reserves, it’s all about the assets…).  There are a host of companies offering one or more of the above options.

Why did I show a picture of a bathroom sink with 2 soap bottles?  Just like it’s a little funner to have the choice of which of the two fragrant soaps to have, the same is true when you are making one of the biggest choices of your life and arguably one of the most important and dear to you, your home’s financing.  It’s simply better to have more than one option on the table, and to do that you need a lender that offers more than the plain soap options, you need a lender who has multiple sources for multiple types of loans (Start here)

Don’t sweat it, get some sweat equity!

What in the world is sweat equity?  FHA loans allow sweat equity.  This is an acceptable form of borrower funds before closing on a proposed construction property.

Here are things that can be included from the borrower:

1. Labor performed.
2. Materials furnished.

How do you prove your sweat equity investment?  Usually receipts for materials, market value of the materials furnished, and the source of the funds.

One very important note is that the tasks to be performed by the borrower must be on the sales contract.   The borrower must also be able to show that they can complete the work (have the ability to do so).  Cleanup, debris removal, and other general maintenance unfortunately do not count.

So what can you do?  Paint?  Carpentry?  Maybe you have a specific construction skill?  Then you could negotiate with your builder to be able to include in the contract from the beginning your share in the project, and use that towards your down payment!

Start here: https://www.successmortgagepartners.com/corey-vandenberg/

USDA rocks!

I am often asked for 100% financing.  If someone is not an eligible veteranVA loans rock!, one of the best ways to get there is USDA Rural Housing home mortgage loans.

Why is USDA so great?

1. 100% financing
2. Technically, you can roll in closing costs if the home appraises for more money
3. There is a 1% fee (compare that to VA and FHA!) that can be financed
4. There is .35% mortgage insurance (compare that to FHA and conventional!)
5. Up to 6% seller concessions (AKA they pay closing costs, prepaids, etc.)

Why doesn’t everyone get a USDA 100% loan?

1. The eligibility area restrictions (Check here for the map)
2. The income limitations (Check here for the limits)
3. Primary residence only
4. In general, no multi-family, sorry.
5. Generally speaking, a little stricter on credit history (compared to FHA for instance) and borrowers eligible.
6. Not all lenders are USDA lenders (What’s the difference between a mortgage banker and a mortgage loan officer at your local bank?)

So if you are looking for a home outside the city limits, it pays to check out USDA as an option for you.  Get started here