Mortgage and Portfolio Loan Guide

Embrace the Z

“Acceptance doesn’t mean resignation; it means understanding that something is what it is and that there’s got to be a way through it.”

-Michael J. Fox

When you have a powerhouse website, consisting of a wealth of information, that serves as a resource for millions of people, there are going to be some naysayers. I hear real estate professionals and mortgage pros bad mouthing Zillow as if their negativity will somehow alter the house-hunters buying habits.

Here’s the bottom line: When people think about buying a house, they are likely to use Zillow as a resource at some point in the game.

Why fight it? Why discredit a top resource for buyers, sellers, homeowners, etc? Here are a couple of reasons there is some general push-back:

Home Value

Oh boy, here we go. A potential seller takes a look at the estimate Zillow gives them and they are blown away by the equity they have gained in the last couple years. They are so excited and feel they could make a great profit. There is a feeling of anticipation that they will finally have the opportunity to upgrade to the home of their dreams with the proceeds of the sale of their home. They contact their Realtor to list the home.Stop crying about zillow

Now the Realtor (the real-life expert) has an opportunity to showcase their expertise in the market. There is a bit of a let down because of a difference in opinion of home value between the Realtor and the Zillow estimate. But that’s okay. This is where the opportunity lies. The Realtor is able to tactfully explain how homes in the area that are similar to the seller’s home have sold. This is where the Realtor gets to roll their sleeves up and use the facts.

Fair market value is an opinion. Zillow uses formulas to come up with values which are beyond my pay grade, but that doesn’t mean they are going to be accurate. Let’s be real here. If Zillow was right, there would be no need for an appraiser. And even if a buyer is willing to pay a certain price for a home, the appraiser may still come back and give a different opinion of fair market value. Even more interesting, a different appraiser can come up with a different value than the original appraiser.

Why? Value is an opinion! An opinion of how different factors like age, amenities, condition, location, and size can impact the value of a home. Another huge factor is which comparables (recent sales of similar homes within a reasonable distance from the subject property) to use on the appraisal report. When selecting the comps the appraiser is responsible for finding and using the sales of properties that are most similar to the subject property (the home that is being sold). If the appraisal comes in lower than the agreed upon purchase price the buyer will either have to put more down (depending on the loan program, and how much they were originally putting down) or the purchase price will need to be renegotiated between the buyer and seller.

The estimate of value on Zillow is simply a starting point. It’s on the local experts to be effective communicators on their market, not Zillow-bashers.

Pre-approval

A hopeful home buyer can get a pre-approval in minutes on Zillow. The system will ask for general info and pop out a thumbs up or thumbs down so that the consumer can get an idea of where they stand.

The only problem is that there are so many factors that go into a mortgage approval which require an in-depth evaluation of a borrower, and their current circumstances. These instant pre-approvals go against everything I stand for when it comes to setting proper expectations for a home buyer. However, it does give them a place to start. Yes there are disclosures below it that pretty much state nothing is for sure until you talk to your lender, but that is likely to be overlooked because they already see they’re “good-to-go”.

Again, it’s just a starting point. For a true understanding of where you stand, contact your local loan officer. If you did happen to get a thumbs down, and don’t meet typical mortgage standards, here is a great solution.

So why do people use it?

Well first of all, have you seen the Zillow commercials?

The emotion involved in the home buying process is beautifully expressed in their marketing efforts. Their app is easy to use. Not happy home love only can you find upcoming open houses, but also previous tax info, neighborhood trends, estimated payment, etc. You can save the properties you like, and keep browsing. It’s very user-friendly. Are there other websites that offer the same or similar features? Sure, but I promise you they do not have the online visibility and recognition that Zillow has.

There is an advice section on the website where anyone can ask any question pertaining to home ownership. Consumers ask, experts answer. This is awesome because people are able to discuss private matters without having to give out their personal information. This is a huge win for consumers because they can protect their pride, get their questions answered, and not have to deal with a pushy salesperson. It’s a win/win for everyone.

There are some “experts” on these advice forums that really have no business giving advice, but that’s okay too! The consumer is able to weed through the responses, and decide for themselves who is the most credible resource for their particular situation. At that point they can contact the expert through their Zillow profile. Voila, the referral process begins. Best part? It’s free! Now you have two people connecting who may otherwise would not have crossed paths.

The beauty of this is that the consumer is able to do so much research in one place. Is all the information they find going to be spot on? Probably not, but they are able to connect with an expert who will help them connect the dots, and get answers to the questions that were previously a mystery. All this, done from their couch, while sipping eggnog.

Zillow Testimonials

Last but not least, let’s talk about testimonials. Genuine testimonials. They’re huge. You know it, I know it. So wouldn’t testimonialsit make sense to at least ask for a review on the site that everyone goes to when they research home buying?

People want to know what it’s like working with you before they call you. It’s one thing for you to have testimonials on your personal website or your Facebook page. It’s another thing to have reviews posted on a top website with millions of unique visitors on a daily basis. Alexa.com (a resource for web analytics) tells me that Zillow is the 62nd most popular website in the United States, and ranks 235th in the entire world. Not the 62nd most popular real estate website, but the 62nd most popular website regardless of industry or subject matter. Not only that, but average daily page views per visitor are sitting at about 7.9. That’s an insanely high number of average page views in case you were wondering. Hmm, I wonder if having your stuff on there might be a good idea? Just a thought. Either that or you can keep crying to your friends and family about why it’s such a pile of garbage. Up to you I guess.

Here’s the thing, nothing will ever substitute the special interaction between the homeowner and the real estate pro. Don’t be afraid of the world-wide web robots taking control of the planet. The human connection will always be the irreplaceable element in anything we do. As experts we might as well embrace these tools and leverage them to our advantage. There is enough to go around 🙂

Do you agree? What other advantages do you love about Zillow? What are some other disadvantages that you’re not a big fan of?

Adam Lesner | Mortgage Loan Officer NMLS 198818 | Brighton, Michigan

5 Awesome Advantages of Owning Real Estate

Buying a house isn’t for everyone.

The truth is, it’s kind of a pain in the you-know-what to be a homeowner sometimes. If the power goes out, it’s on you bro, better get a generator. If a window breaks, sorry dude, figure it out.

Even though there are some big responsibilities that come with owning a home, there are some excellent advantages worth mentioning!

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Your payment goes toward something.

Yup, it’s called a mortgage. Every month you pay that sucker, the balance of that home loan goes down (just a bit at first). The only time that isn’t true is if you have an interest only mortgage (not a ton of those still out there), where your payment only goes toward interest for the first X number of years. But for the majority of people, their house payment goes toward building equity and paying that bad-boy down.

The alternative? Pay rent (aka pay someone else’s mortgage for them). This leaves you with a lease agreement that you have to stick with, in a house you really can’t change to your liking. The result? You despise writing that rent check every month because you know that even if you did stay there for 30 years, you would still have next month’s payment due on the 1st. Keep in mind, rent typically increases every year. So not only achievement-18134_640would you be paying someone’s mortgage for them, but when it’s all said and done you’ll be paying a higher payment on something that has no liability attached to it. I know, I know, most people don’t rent in the same house or apartment for 30 years. But whether it’s 30 years or 3 years, do you really want your hard-earned money going into someones pocket and have nothing to show for it after 3 years?

I hear the chirping already… “Adam, not all homeowners have equity after a few years of owning. Heck, some were underwater on their homes in 2009 and they made mortgage payments for 10 years before that.”

Yes, you’re right. I am aware of that. Don’t forget, many people put themselves in that place because they used their home like an ATM. Taking cash out of their home to buy a shiny car, or to keep up with the Joneses. I agree with you… if you continue to cash in your equity, you won’t have any equity to speak of. Yes there were other factors that played into the housing crisis like people getting approved for loans they can’t afford, appraisers trying to meet the needs of lenders, and straight-up fraud. But the mid-to-late 2000’s housing bubble was an exception to the rule. Historically, housing prices move steadily (but reasonably) upward.

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Increased sense of pride.

Yes, too much pride can be a bad thing, but being a homeowner is confidence builder. The thought and preparation it takes to buy a home figure-25590_640requires a lot of guts and strategy.

Think about it… You are sitting in your apartment. Channel surfing. You “accidentally” leave it on HGTV while you reply to a few text messages. “Property Virgins” is on, and buying a house looks fun. You suddenly decide that you are capable of buying a home. You Google: How to buy a home. You find a blog that talks about home ownership, and now you’re feeling super geeked. You call a local Realtor, and she asks you if you’re pre-approved for a mortgage. “Pre-approved?. Umm not yet.” Your Realtor insists that you get pre-approved first, and get your ducks in a row.

You ask your friends and family who to call for a mortgage. The next thing you know you’re gathering up your financial identity and giving it to your mortgage guy. You find out there are a couple of things to work on, and it’s probably going to be about 6 months until it’s time to start looking for a home.

You spend the next six months getting your finances squared away, and following your loan officer’s guidance to a T.

  • Paying down your credit cards.
  • Making no large (unverifiable) deposits into your bank account.
  • Get a couple small collections deleted from your credit report.
  • Now you’re ready.

Your Realtor finds you a sick deal, and you make an offer. You negotiate a price that is a win/win for everyone as long as the seller is willing to do a few repairs that the inspector noted. You give your earnest money deposit. It’s game on. Appraisal is ordered. Thirty-ish days later you bring a crisp cashier’s check to closing for the rest of the funds needed. This was pretty much all of your savings, but you saved for this exact moment! To own your home! Now you have the keys, and you feel like you can sit at the big kids table at Thanksgiving this year.

It all started with a little channel surfing mixed with a dose of inspiration.

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Get more for your money.

dollar-499481_640In Brighton, MI and most of Michigan (if not all) you get more bang for your buck by owning your home instead of renting. Let’s look at a quick example. Here is an actual “for rent” listing on Craigslist right now:

$750 / 2br – 775ft22 BR Condo (Brighton)

Great Location. Beautiful updated 2 BR Condo in Hidden Harbour Condominiums opposite Meijer store in downtown Brighton. Central A/C, appliances, washer dryer in the building. No pets please. Water, hot water, trash pick up, Snow removal included in the rent. Available Dec. 1, 2014. Walk to shopping and near x-ways.

Here is an example “for sale” listing on Craigslist right now:

$59900 / 2br – 950ft2TOWNHOUSE for Sale in Brighton

2 Bedroom, 1.5 bath END unit offers extra windows and light, along with added outdoor living space. New Pergo flooring in kitchen and dining areas, also includes newer stove and frig. Newer windows throughout. Large Master Bedroom (16 x 12), and 2nd bedroom (11.5 x 10) both have mirrored closet doors, ceiling fans and lots of light. Finished basement with new glass block windows has built-in storage areas, along with a large separate laundry room. Neutral colors throughout home. Back door leads to private covered patio area, surrounded by green space & trees. Outside area is large enough to entertain and garden.

Running rough numbers on the second one, it looks like $596 including principal/interest/taxes/insurance/mortgage insurance/homeowners association dues

So for 125 more square feet of living space, you pay $154 less per month.

I pulled that up with a few mouse clicks, there are never-ending examples of this.

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Ability to make a house a home.

Take the above for rent listing for example. “No pets please.” It didn’t say no dogs over 30 lbs. It didn’t say no pit bulls. It didn’t say no snakes. Itpuppy-345334_640 said NO PETS.

Why are there so many restrictions on renting? Well, consider this for a moment. If you owned a home, and rented it out, would you want to give the tenant (renter) the ability to do whatever they wish with the property? No? Why? Because you never know how bad they will trash the home. Resulting in you (the owner) having to renovate the property once the tenant moves out. Who knows how much that will cost? Who knows how bad their 1-year-old boxer tear up the carpet? Well ultimately the owner will have to deal with it. So it’s in the owners best interest to be selective on what will be considered when renting out their property.

When you own your home… you decide. You decide on upgrades, pets, colors, etc. You get to make it yours.

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Tax deduction.

The tax deduction that you get from paying mortgage interest is in many cases the largest tax deduction for many homeowners. Unlike credit card and car loan interest that you pay, the mortgage interest that you pay is tax-deductible. Even wealthy borrowers who could pay off their calculator-158109_640mortgage 3 times over with their assets keep their mortgage because of the tax deduction that it brings.

This is a huge benefit for people who look to consolidate some credit card debt because not only does their overall monthly budget improve, but the interest that they pay results in a larger tax deduction. As I mentioned in the first advantage at the beginning, it’s not wise to use your home like an ATM, and take cash out multiple times just to buy stuff. But if you look at it from a common sense standpoint, many times consolidating debt into your mortgage makes good financial sense. If you find yourself refinancing every couple of years in order to consolidate your credit card debt, there is an issue. Might want to chop those cards up so that you don’t find yourself in the same position over and over.

This might be a helpful resource to answer some questions surrounding your possible tax deduction.

What do you think?

Across the United States it is more cost-effective to own than rent in suburban areas. Do you agree? Leave a comment below and tell share your thoughts.

Adam Lesner | Brighton, MI | Mortgage Loan Officer – NMLS 198818

So Your EX Destroyed Your Credit…

Portfolio Loan

Post-Divorce Mortgage

I have seen it countless times. An otherwise “A grade” borrower is left with no mortgage options because their ex-spouse was extremely irresponsible with their finances while going through divorce. Resulting many times in no other option than having to file for bankruptcy, and even foreclose on their home.

For these types of situations there is hope!

FHA, VA, and conventional guidelines are set in stone. As brutal as it sounds, they don’t really care about the sob story. If you had a nasty divorce which resulted in a bankruptcy, short-sale, or foreclosure you’re pretty much between a rock and a hard place if you have any desire to be a homeowner in the next couple years.

So what can you do? You have been a homeowner since you graduated college 15 years ago. Are you really going to be forced to live with family, or rent? NO. Believe it or not, there are lenders out there that take a common sense approach to mortgage loans for people with bad creditlending. Lenders that will look at your situation from a common sense standpoint, and make every effort to understand exactly what led to the circumstances that you’re in. Lenders that will take into consideration that you fell on hard times, but are now back on your feet. These are the lenders that offer in-house portfolio lending. Lending designed to bring common sense back into the home financing world. Where you don’t have to fit inside the little black and white boxes of the strict government guidelines.

Imagine that?  Being treated like a human being instead of a statistic. What a refreshing concept?

So where do you start? The best thing to do is seek out a small-to-mid-size lender, bank, or credit union which offers portfolio loan financing. Find out what their requirements are for these unique loans. Find out what you can do to prepare as best you can. There are still going to be requirements to meet because they want to make sure you ARE back on your feet, and confirm that you do have the ability to repay the loan.

thumb-422147_640Some things to prepare yourself for when getting a portfolio loan:

  1. You’ll probably be required to put at least 10% down.
  2. Points may be required to cover the level of risk they are taking.
  3. Typically there is no mortgage insurance requirement 🙂
  4. You need to have a verifiable income.

 

Other situations when a portfolio loan may be your best option: unique property you’re looking to buy, self-employed less than two years, bad credit because of an isolated incident like a work injury, etc.



You thought you didn’t have a chance in the world to buy a home, but don’t give up. If you’re back on your feet, and you have at least 10% for down payment, home-ownership may be more within reach than you thought.

portfolio mortgage lenders

 

I invite you to reach out to me directly to see if a portfolio loan is the right fit for you.

At the very least I should be able to point you in the right direction.

 

real estate investment loans

Repair your credit today with Lexington Law

6 Proven Ways to Close on Your Home Lightning Fast

“Dude, so do you think we could close next week?”
“Dude, no. You didn’t even send me your stuff yet.”

I know this might be a shocker for you, but lenders actually want to close your loan. In fact, if it doesn’t close then they have wasted countless hours and resources with nothing to show for. Just like Realtors. The thing is… we have to cover our ‘you-know-what’, and make sure the loan meets all the fun and amazing guidelines that have been put into place.

Here’s the kicker, there are ways to speed up the process and make EVERYONE look good. Want to know how? Awesome! you’ve come to the right place. 

First of all, let’s get one thing straight: It’s going to take about 30-40 days to get to the closing table. That doesn’t mean the clock starts ticking when you found the house on Zillow. That means once you have a fully executed purchase agreement, and you tell me the inspection came back with flying colors, then we get rolling and order the appraisal. Is there such thing as closing quicker than 30 days? Of course. And if you use these techniques below, I promise you’ll be setting yourself up for success.

  • Get your crap together. If your lender has given you a list of stuff that is needed, take an extra 5 minutes to make sure you’ve gotten everything requested. An extra 5 minutes of making sure you included all pages on tax returns and bank statements will save you a couple necessary trips to the fax machine, and possibly a week of being in process. Click here for the list that is detailed and fool-proof.
  • Order inspection as soon as you have an accepted offer. This should be your next phone call after getting the good news that the offer was accepted. Many times your Realtor or lender will have a recommendation as to who should complete the inspection. You want to make sure the home is in reasonable condition, but you don’t want to waste money on an appraisal if the inspection comes back with more than you’re willing to take on. So it’s important to get the inspection done ASAP so you can move onto the appraisal, and get rolling.
  • Be fricken honest. Don’t withhold information from your lender thinking that will reduce bumps in the road. I promise, it will only make things worse. If you communicate something that you think might be a problem, your loan officer will now can be proactively working on a solution for you. The last thing you want is for us to find out something last-minute, and scramble to meet the contract date.
  • Answer your phone. Or at least respond to emails/texts. I know this one seems obvious, but dropping the ball on communication can not happen. Everyone needs to be in the loop as much as possible to simplify the process and maximize efficiency.
  • Get your homeowners insurance in-line. I can’t tell you how many times “the last thing” we’re waiting on is a declarations page from the homeowners insurance company. Not because the company is slow, but because the borrower waited till 48 hours before closing to get a quote. Once you have the appraisal, give your insurance guy a call to put together a policy.
  • Stay in town. Or at least have the means to easily communicate while you’re gone. Buying a home is obviously a big commitment, which involves a lot of moving parts. If someone falls off the map, everything in the process can come to a screeching halt, causing major delays. But if you are leaving, give all parties a heads up, and double-check to see if there is anything that is needed from you.
I can tell you with absolute certainty, if you keep these things in mind when you’re buying a home things will go much smoother for you. 

 

There are so many factors that can create challenges to overcome. Some are fixable, some aren’t. If you let a little bit of your OCD side come out and play, it will work wonders in terms of detail and promptness.

What bumps in the road have you experienced recently that caused a seemingly unnecessary delay?

Zero Down Mortgage – USDA Home Loans

RD loan

Zero Down Mortgage

Did you know that even if you’re not a veteran you can buy a home with a zero down mortgage in many areas? And it’s not too good to be true. There are, however, some restrictions regarding location and income.

The United States Department of Agriculture (USDA) Rural Development guaranteed loan usdalogoprogram is a government loan designed to help low-moderate income earners purchase a home in “rural” areas. However, you may be surprised to see what the government considers to be rural and low-moderate income.

Income

The income restrictions will vary across the country and even across each state. Here is an example for my local market in Livingston County, Michigan. For a guaranteed RD loan the annual household income must be at $93,450 or below. Even if the spouse is not a borrower on the loan, their income will be used as a factor in the household income. USDA looks at the whole picture, not just the applicant. You can use this tool to help you get an idea if your family qualifies for an RD loan in regards to income. Remember when using that tool, you’re looking for qualifying on the guaranteed loan, which will maximize your buying power from in income standpoint.

Location

Many folks are shocked when they take a look to see that their neighborhood is in an area that is considered to be a “rural area” which allows them to get a zero down mortgage. Just outside the metro Detroit area and not far from many major cities Rural Development financing is available. Although the mapping tool on the USDA website is not 100% accurate, you can use this tool to give you an idea of what areas are eligible. You may be pleasantly surprised to find that you don’t have be living “out in the sticks” to be eligible for Rural Development financing.

What is also exciting about RD loans is that you can buy a condo with this program as long as it’s within the eligible geographic limits. Crazy right? Some people call RD loans “farm loans” and you can buy a condo with them. How awesome is that?!

What to Expect

  • Make sure you have your ducks in a row in respect to credit. You don’t need to have perfect credit, but it needs to be reasonable.
  • The process may take a little bit longer than other loans because it needs to get final approval by USDA after the lender approves it. However, right now in my particular market in Michigan, the RD turn time is 2-3 days. So not a significant delay currently.
  • Mortgage insurance is significantly less than FHA on a monthly basis, about 1/3 of what it costs on FHA.

There are so many expenses to consider when buying a home. So if you have an opportunity to buy with a zero down mortgage, and you qualify, why not take advantage of that opportunity?

Watch Video:

6 Reasons Homeowners are Happier People

Happiness thru Homeownership

6 Reasons Owning a Home Will Make You a Happier Person

The economy is getting better. Mortgage rates are still low. Home prices are still fantastic in many areas. But those are just market conditions. Let’s put those aside for now. Instead let’s take a look at why acquiring your piece of the American dream will make you a better person. Below are the reasons you’ll be happier as a result of being a homeowner.

1. Impressing the opposite sex. Chicks dig a guy that can buy his own home. Being a high quality partner in the eyes of our mate is something we all strive for. We are happier when we feel a genuine connection with the person we want to impress. What better way to prove you’re a keeper by showing you have the ambition to be a homeowner? It’s proven that 87.3% of women would be more likely to go on a 2nd date with a guy that owns a home versus a renter (yes, I just made that up, but I’m sure it’s close). Not only that, but your relationship can become more dynamic when you’re not sharing a paper thin wall with “Old Man Smokie” in the apartment unit next door.

2. You will have better credit. Having good credit gives you flexibility, and a feeling of accomplishment. Having bad credit can lead to frustration, and a feeling of being inadequate. When you own a home or are preparing to buy a home you tend to take better care of your credit. What’s the worst that can happen when you’re late on a rent payment? Maybe a late fee coupled with a cold shoulder from your land lord. Big deal? Not really. What’s the worst that can happen if you’re late on your mortgage payment? Credit score drops, and you get denied for financing on that car you promised your daughter for her graduation gift. Pretty serious. So as a result, you’re more inclined to be on top of your finances, and keep things in order as a homeowner. The responsibility of carrying that mortgage naturally motivates you to grow, and become more of a well rounded individual.

3. You can have whatever kind of dog you want. Man’s best friend. When you come home after a long day of work, there they are. Wagging with delightful appreciation. Telling you “Welcome home my friend. I missed you so much. You are an awesome person!” Happiness on four legs. If you’re renting you will be limited to your housing options depending on what kind of dog you have. Don’t believe me? Pull up craigslist, and search “pet friendly” in the rent section. You’ll find a handful of listings. Usually homes that allow dogs up to 20 lbs. Yeah, good luck with that. However, if you buy your own home, you can get the English Mastiff from The Sandlot if you so desire. Restrictions may apply in condominiums, and neighborhoods with strict homeowners association policy.

4.Gets you closer to retirement. If you play your cards right you can feel much more comfortable when it’s time to retire. The vast majority of people don’t stay in a home for 30 years and pay off their original mortgage. But if you are disciplined enough, you can time it out so that you don’t have a housing payment in your golden years. Here is a realistic example: Buy a house at 28. Sell home and upgrade to nicer home at 33, with room for the family to grow. At 38 refinance the home to finish the basement, and do needed upgrades. While raising kids you’ll probably want to keep the payment low and stay on track with a new 25 year mortgage since you’re already 5 years into the mortgage. After the kids graduate college you’ll be an empty-nester at 55. No more college expense allows for higher mortgage payment. With only 8 years left on the mortgage, you put an extra few hundred dollars per month toward the mortgage, and pay it off in 5 years. At age 60 you’re ready to retire with no mortgage payment.                         

5. Better problem solver. Owning a home inspires you to think and fend for yourself. There isn’t some maintenance phone number you can call to have someone come out to fix a leaky faucet. You have to figure it out. Again, this forces you to put on your thinking cap and do things you wouldn’t normally do. When you are put into that position you’ll be surprised on how creative you can actually be. Yes, there may be a considerable amount of swearing involved. Yes, there may be several wasted trips to Lowes. But when you complete a task that you’ve never done before, you become more comfortable taking on bigger challenges.

6. Stronger sense of self worth. Have you ever gone to a friend or family member’s house within the first few months of them buying it? Their whole demeanor is shifted from before they bought their home. There is something special that happens when it actually hits you. When the “I can’t believe it’s really mine” feeling enters your mind, it’s a moment of fulfillment. You think back on all that you have done to get to that point of getting the keys to your front door. The time you spent perfecting your resume to get the job you needed. The months or years it took to save for down payment. The attention to detail it took to pay all your bills on time to have good credit to qualify. It’s a real confidence builder when all the pieces of the puzzle come together.

Are there new challenges and frustration that are involved when owning a home? Of course. But that’s the beauty of it. You learn so much, your patience is tested, and you grow as a result of it all.


Do you have to prove your savings to buy a home?

The Asset Piece of the Mortgage Puzzle

There you are, Mr. Hotshot at the blackjack table. You sat down with a hundred bucks, now you’re up two grand. You’re feeling good, top of the world really, and decide maybe it’s time to call it a night. You cash in your chips with a smile on your assets gamblingface thinking how proud your wife is going to be for the first time in years. Things have been a bit rocky since back in ’06 when you bought her that vacuum for Christmas. But not this time. Today you’re a winner. With these winnings in hand, you finally have enough money saved to move out of mom and dad’s basement and buy a house! Monday morning comes around, and you’re devastated. Your buddy at Easy Peazy Funding has to break it to you that the $2,000 deposit that you made into your bank account needs to be sourced if you want a mortgage. There needs to be a paper trail proving where that cash came from. You’re confused because there is no way to prove you made that money from using mind power, and pure skill. When the denial letter comes in the mail your wife kindly throws your clothes into the front yard. She leaves a note saying something about California, and heading west. The rest is history.

Depressing right? Let’s try to make sure you’re doing all the right things to prepare for buying a home. In this portion of the “keeping your home loan process simple” series, the asset piece of the mortgage puzzle is given to you in a gift basket.

When you’re purchasing a home, get all of your financials in one place so they are easily accessible. You’ll need funds for down payment, escrow account (for taxes and insurance), closing costs, and general reserves. Along with all of your pay information, you’ll need bank statements, retirement statements, brokerage account statements, and proof of any other account you’re using to qualify.

Bank statement

  •  Be ready to provide 2 months consecutive bank statements, including all pages. If it says page 2 of 6 anywhere on the assets for mortgagepage, provide all 6 pages.
  • Make sure that your statement shows your name, address, bank name/logo, account number, balances, and activity on the account. If any of those items are missing you’ll need to provide more information. Many times an online print-off will show your account number, but not your name.
  • Non-sufficient fund (NSF) fees will be evaluated. If you show a habit of having NSFs, your lender may decide that pattern is an indication that you’re not ready to buy a home.
  • If the statement you provide is a shared account (someone other than you is also on the account), the individual you share the account with will need to provide a letter confirming you have full access to the funds.
  • Large deposits need to be sourced. If there are any deposits on your bank statement other than your normal income; you will need to provide a paper trail proving where those funds came from. All jokes aside, you may actually be able to use gambling winnings if the casino provided a slip or coupon confirming the amount won. If you sold a vehicle or jewelry you’ll need a bill of sale. Don’t accept cash from the buyer, ask for a check. Additionally, you’ll need to provide a 3rd party opinion (kelley blue book for example) of value in order to confirm the sale price was not unreasonably higher than fair market value. This is to prevent fraud. So Johnny can’t sell his ford escort to his “neighbor” for $10,000. There might be something fishy going on there in the eyes of your lender.

Retirement and Brokerage Accounts

  • If you’re liquidating retirement funds you should be able to print off a most recent quarterly statement. If you are taking out a loan against your 401k your lender will factor that liability into your debt-to-income ratio. In some cases you may have an additional tax penalty if you withdraw retirement funds prior the being 59 1/2.
  • Above and beyond a recent statement, you’ll need to provide proof the funds needed for closing have been liquidated. You’ll also need to show where those same funds were deposited into. It’s wise to deposit those funds into the same bank account that you’ve already provided statements for. The goal is to keep it simple, so putting those funds into a different account could open a new can of worms.

Gift Funds

It’s acceptable to receive gift funds to help with down payment. Each loan program has it’s own guidelines pertaining to gift funds, but here are a few general points to keep in mind:gift from family
  • The person “gifting” the funds needs to be a family member, or someone with an obvious close personal relationship (like a fiance).
  • You both will need to sign a letter confirming the amount and purpose of the gift funds. The letter will also need to confirm there is no expectation of repayment to the donor (the person gifting the funds). They will also need to show their ability to gift the funds by providing 2 months bank statements.

  Grants

Some states and communities offer grants to assist homebuyers with down payment. As long as the entity providing the grant is credible, the lender should accept the grant as an asset because typically a grant does not require repayment. Some grants require a homebuyer course to be completed by the borrower prior to being eligible for the grant. This is to ensure the individual is aware of the pros and cons of homeownership.
There are many unexpected expenses when buying a home. Cash is king, have your assets in place. Aside from lender requirements there are so many things to consider. Carpet, fence, paint, new locks, blinds, and so much more. If you feel like every penny is being scrutinized by your lender, you’re probably right, and it’s truly for your protection. If you feel like things are getting a bit too tight, it might be best to reconsider your price range.


A couple closing tips… 

Bank statements are valid for 60 days. If you’re house hunting for 5 months, send your lender new bank statements as they become available.

Do not overextend yourself. There will always be something that comes up that never crossed your mind. Leave yourself a cushion for those expenses so you can sleep at night.

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