Home Buying Tips: Why You Should Consider Seller Financing

If you’re buying a home in the near future, you’re probably trying to figure out how to finance it. You could take out a loan with a bank of course, but that tends to be expensive and not very flexible. You could try to pay in cash, but that only works if you have the money, which isn’t very likely. There is an alternative that you may not have thought of. It’s actually possible to finance your new property directly through the person selling it. Here are some benefits of seller financing for your next property.

Flexibility

This is by far the biggest benefit of seller financing for the buyer. Banks are very rigid in their expectations, but when you finance through the seller, the opposite is true. For example, maybe you don’t have enough for a down payment. You may be able to convince the seller to accept something of value, such as a car, instead. If you’re in a strong negotiating position, you may even be able to avoid the down payment all together. Perhaps in the middle of the loan, you find that you can’t afford a payment. A bank would send you angry letters, charge you fees, and eventually foreclose. A seller, however, could simply allow you to skip a payment, perhaps in exchange for a little extra the next month.

Negotiation

Seller financing can also help negotiation because it adds several new elements. More things that can be negotiated means more chances for both sides to be happy.

Interested in learning more about how seller financing might be the right choice for you? Contact us. We can help you with that, or anything else that you need.

HARP 2.0 Can Help Underwater Homeowners

harp-2.0

For homeowners who are underwater on their conventional mortgage, the government has enacted a new Home Affordable Refinance Program to help eligible participants pay down the principal without having to pay mortgage insurance.

“You can use HARP even if you’re far underwater on your mortgage. There is no loan-to-value restriction under the HARP mortgage program so long as your new mortgage is a fixed-rate loan with a term of 30 years or fewer,” said Dan Green, a loan officer with Waterstone Mortgage in Columbia, Md. “If you use HARP to refinance into an adjustable-rate mortgage, your loan-to-value is capped at 105%.”

The new HARP 2.0 Refinance Program was made available to U.S. homeowners March 17, 2012 and those eligible can refinance by Dec. 31, 2013.

The original HARP program (also known as Making Home Affordable) was started in April 2009 and changes were introduced last fall by the Federal Home Finance Agency and confirmed by Fannie Mae and Freddie Mac. This program had several roadblocks that made it difficult for homeowners to refinance. For instance, the program only assisted those with mortgages with a loan-to-value ratio between 80% and 125%, but in many hard-hit housing markets homes have lost more than half their value making owners ineligible.

To be eligible today, a loan must be backed by Fannie Mae or Freddie Mac, and the mortgage must have a securitization date prior to June 1, 2009. FHA, USDA and jumbo mortgages are not HARP-eligible.

One of the changes in HARP 2.0 is that borrowers will now be able to refinance regardless of how much their homes have depreciated. Previous loan-to-value limits were set at 125%.Appraisals and underwriting have also been eliminated, as most homeowners will no longer be required to get an appraisal or have their loan underwritten, making their refinance process smoother and faster.
Certain risk-based fees for borrowers who refinance into shorter-term loans will either be eliminated or modified. HARP only applies to first mortgages.

“HARP 2.0 is meant for first liens only,” Green said. “Second liens are meant to subordinate. You’ll get to replace your first mortgage and your second mortgage will remain as-is. Just be sure to mention your second mortgage at the time of application so your lender knows to order the subordination for you.”

Remember, the Home Affordable Refinance Program is not meant to save a home from foreclosure. It’s meant to give underwater homeowners a chance to refinance without paying PMI.

Michelle Manter can be reached at 860-716-2227. Prudential Connecticut Realty is an independently owned and operated broker member of BRER Affiliates Inc. Prudential, the Prudential logo and the Rock symbol are registered service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide. Used under license with no other affiliation with Prudential. Equal Housing Opportunity.

Improve Your Credit Score

Improve Your Credit Score

Those about to start house hunting should check their credit score before things get too serious. There is nothing quite as frightening in the mortgage process as learning that your credit report contains a late payment or other blemishes that can prevent you from buying a property.

The higher your credit score, the better your chances are of financing a home. A credit score of at least 620 will give consumers a fighting chance to secure a home loan; 720 should qualify in most cases.

However, a lower credit score doesn’t necessarily mean you can’t finance a home. Credit score repair begins with your credit report. You can request a free copy of your credit report annually from the Federal Trade Commission at AnnualCreditReport.com. Check the report for errors.

Don’t panic if your report contains blemishes. There are steps you can take to fix negative marks, regardless of whether the marks are in error or if you’ve missed a payment or two. The simplest thing to do if you’ve missed a payment is to call the creditor and ask them to erase the negative listing. You can also do this with a well-documented letter. There is no guarantee that a lender will do this, but if you’ve been a good customer through the years, this method has proven to be successful.

If you are one of the many who have defaulted on a student loan you can enter into a “rehab program,” which will get your account back on track after 12 months. This may not be the quick fix you need when buying a home but the sooner you do this the better.

For disputing a negative mark that was not your fault, you can try disputing the account with the credit bureaus as “not mine.”

One quick fix used by borrowers to boost their credit score is to have an older family member with a sound credit rating add you as an authorized user on a credit card. This can help increase your score and you wouldn’t even need the card in your possession.

With more loans requiring higher credit scores today, it’s never too early to start fixing credit challenges.

Michelle Manter can be reached at 860-716-2227. Prudential Connecticut Realty is an independently owned and operated broker member of BRER Affiliates Inc. Prudential, the Prudential logo and the Rock symbol are registered service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide. Used under license with no other affiliation with Prudential. Equal Housing Opportunity.

HAMP Program Extended

President Obama in a recent State of the Union address spoke about homeownership and how the American Dream has dissipated for many due to lingering challenges in housing and mortgage lending.

The President offered hope to more homeowners by extending the Homes Affordable Modification Program (HAMP) until Dec. 31, 2013, and widening the program’s eligibility criteria.

HAMP allows qualifying homeowners with Fannie Mae or Freddie Mac mortgages made prior to June 1, 2009 to refinance to a better rate and more favorable terms. It also provides incentives to participating mortgage lenders that reduce principle for qualifying borrowers.

Millions of additional homeowners may be eligible for HAMP to reduce their homeownership costs and avoid foreclosure. Originally, the program was designed to reduce mortgage borrowers’ debt ratio to 31% of their incomes, and those below that threshold were not eligible. These borrowers may now apply for HAMP consideration, as can borrowers struggling under the weight of other liabilities, such as medical bills.

Eligibility also has been extended to owners of rental properties – as many as 700,000 landlords may qualify for loan modification under HAMP.

Moreover, borrowers who were approved for a HAMP trial period, but did not make the payments as scheduled, would now be eligible for consideration under new guidelines. Also, homeowners who missed payments under an approved HAMP modification would be eligible to reapply under the new rules.

The Obama administration announced it would triple balance-reduction incentives to lenders, paying up to 63 cents for every dollar lenders take off mortgage principal. The administration also said it would offer incentives to Fannie Mae and Freddie Mac to reduce principal on loans. Previously, the government had only offered incentives to private lenders and banks.

If your mortgage is owned, insured or guaranteed by Fannie Mae, Freddie Mac, FHA, VA or USDA you may be eligible for HAMP consideration. Contact your mortgage servicer for details.

Michelle Manter can be reached at (860)716-2227. Prudential Connecticut Realty is an independently owned and operated broker member of BRER Affiliates Inc. Prudential, the Prudential logo and the Rock symbol are registered service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide. Used under license with no other affiliation with Prudential. Equal Housing Opportunity.

Down Payment Tips

 

Many people dream of owning a home but don’t think it’s possible because they lack the resources for a down payment and closing costs. Here are tips for securing that down payment.

1) Borrow from your retirement account: Many people have been investing in a 401(k) plan or traditional IRA for years and first-time homebuyers may borrow up to $10,000 for their down payment without incurring a penalty. For those self-employed or if your employer allows it, you also can borrow up to $50,000 from your current 401(k) and pay yourself back over five years at a low interest rate.

2) Ask family: Sure, you may be too proud to ask for money, but if relatives can help you and your family move into that dream home, isn’t it worth it? If you do get help from a family member, the lender will ask you to sign a gift-letter form, attesting to the relationship. The lender may also require your relatives to explain where they got the money and prove that they are financially able to make such a gift.

3) Look for down payment assistance grants: Down payment assistance and community redevelopment programs offer affordable housing opportunities to first-time homebuyers, low-income and moderate-income individuals and families who wish to own a home.

4) Come to a lease/purchase agreement: Homeowners who can’t sell their homes in this market may consider a lease/purchase agreement, where you rent the home you want to buy and a percentage of your rent is applied toward the down payment. If you go this route, make sure you get a contract outlining all the details so both parties are protected.

5) Add it to the wedding registry: Several mortgage companies allow those getting married to set up a down payment registry. This is a great way to celebrate the joining of two people in matrimony.

6) Cut back and save: If none of the other ways will work for you, there’s always the old fashioned “saving for a rainy day.” Try putting aside 10% of each paycheck and make your meals instead of going out for them. If you’re married, save the money you would spend on birthday, anniversary and Christmas presents and put it toward your house. You also may need to forget that vacation this year.

These sacrifices may seem significant but they will be worth it once you’re inside your own home.

Michelle Manter can be reached at (860)716-2227. Prudential CT Realty is an independently owned and operated broker member of BRER Affiliates Inc. Prudential, the Prudential logo and the Rock symbol are registered service marks of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide. Used under license with no other affiliation with Prudential. Equal Housing Opportunity.

Listing information is deemed reliable, but not guaranteed. This IDX solution is (c) Diverse Solutions 2013.
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