- What are the benefits of an FHA loan?
The benefits of an FHA loan are the minimum down payment feature of 3.5%. FHA loans also allow non occupying co-signers to help qualify. They also are more loose as far as income restrictions which allow buyers to buy at a higher price. There are also large credits offered to help with closing costs. Lastly, they are less strict for lower credit scores.
2. What are the benefits of a VA loan?
VA loans offer 100% financing in some cases if the Veteran is eligible. Also, there is no mortgage insurance for these types of loans. Lastly, there are large lender credits you can obtain to help with your closing costs.
3.Is it good to pay additional costs to get the rate and payment down lower? That is a case by case basis on whether it is worth it. The way to calculate whether it is worth paying additional costs known as discount points to lower the rate and payment is by figuring out how long it will take to recuperate the costs in savings of the loan. For example, if you are offered a rate of 4.125% and the payment is $2,000 and it costs no points to obtain. Then another option would be to obtain a rate of 3.875% and the payment is $1,900, but it costs $5,000 in discount points to get that rate. You take $100 per month in savings times 12 = $1,200 per year in savings. It cost you $5,000 to get that rate. That would take you 4 years and 2 months to recuperate that cost in savings by this example. You need to figure out your goals for this property and whether it’s worth paying that. Are you going to be in this house long term to see the benefits of that lower rate and additional expense…..etc. I will help you figure out whether I think it’s worth it for you to pay for the lower rate.
4. Why is there so much paperwork involved in getting a loan?
The paperwork that is needed to close a transaction are rules that we have to abide by set forth by Fannie Mae and Freddie Mac. These government agencies have set forth a set of guidelines that we as lenders have to follow. When you are asked for paperwork or additional paperwork, it’s not the lender and it’s certainly not me…….these are rules that we have to follow in order to complete your transaction. If you need a Jumbo loan (above $636,150) the rules and paperwork typically get even more strict due to the lender forking out a large sum of money to lend.
5. Can I get a gift for my down payment?
Yes, you absolutely can. For a primary residence transaction only. It is very important to know how to properly obtain a gift to avoid additional paperwork and headaches during escrow. It is best for your donor to wire the funds directly into escrow and not co mingle their funds into your account. By doing it this way, the lender will not require to see the source of the donor’s funds. That means they will not have to show their bank statement. This will make your donor very happy to not have to show their bank statement. If it’s an FHA transaction however, the donor will have to show their bank statement/source of funds for the gift.
6. Is it okay to go from a W2 job to a job that gives a 1099?
No it is not and you have to be very careful if you do this. If you were previously a W2 wage earner and take a job that pays you a 1099, you will now be considered an independent contractor/self employed. If that happens, you will need to file 2 years of tax returns with your new income as a 1099 employee in order to be eligible to use your income to qualify for a loan. Be very careful about this.
7. Can I just deposit paper cash into my account and use this to buy a home?
No, you absolutely cannot do that. Cash is the enemy of the mortgage business. All money used for a real estate transaction has to be sourced and paper trailed. Any cash deposited into your accounts will be completely ignored by the lender and cannot be used. The only way to use cash is to deposit the funds 2 months prior to entering into a mortgage transaction so that the funds are “seasoned”.
8. Can I use business funds for a down payment?
This is a tricky one, but yes you technically can. If you use business funds for a down payment, the lender most likely will ask your CPA or tax preparer to write a letter stating that “the use of business funds will not adversely impact the business”. Many CPA’s have an issue writing that letter for liability purposes because they don’t know if it will or not. Best to try and avoid using business funds if possible. Transfer the funds from your business to your personal account 2 months prior to entering into escrow to avoid the hassle.
9. Do I need to disclose all the properties and land I own on the loan application?
Yes, you absolutely need to do that or you will set yourself up for a surprise in escrow. These lenders run a very sophisticated report called a Lexis Nexis report. This report will find any properties that have your name attached to them. If the property is not disclosed in advance and dealt with and accounted for in your debt to income ratios, you are subjecting yourself to a possible issue in escrow. Be upfront about all properties, land…..etc that you own.
10. Are there any other programs available that are not full documentation?
Yes, there are. For many self employed borrowers that don’t qualify, we have programs that will take the work related deposits in your bank accounts over the past year to 2 years and average them for income qualifying. The rate is slightly higher and you need a minimum 20% down, but it’s a creative program to help people qualify that cannot qualify for a standard loan.