As a Fort Lauderdale mortgage broker, I repeatedly see loan underwriters conditioning borrowers for source of funds proof of down payment and closing costs.  There are some basics that are essential for home buyers looking for a Florida home loan to understand.  The first and most important rule is “Cash is an unacceptable source of money to be used as a down payment or closing costs”. Whether you are considering a Conventional Fort Lauderdale mortgage, or an FHA Ft Lauderdale mortgage, “CASH“ can not be used for the transaction.

All lenders are required to source all funds for a buyer’s down payment and closing costs in connection with a Florida home loan. You will be required to provide the most recent two months of bank or account statements for all funds being used in the transaction.  The underwriter will scrutinize every line item of your bank statements looking for payments of undisclosed debts and every deposit.  Any debt discovered that isn’t on your credit report will be added to your obligations and calculated into your debt ratio.  All deposits over $1,000 will be required to be sourced and proven.  In other words, you’ll need to document where the money came from for each deposit.

One of the most common mistakes I see as a Fort Lauderdale mortgage broker, is the deposit and proof of gift funds.  Remember the rule, “No Cash” applies to gift funds as well.  Ft Lauderdale mortgage underwriting guidelines now require the donor of the gift to provide proof of the ability to give the gift.  In other words, the lender will require a copy of the donor’s bank statement showing the ability to give the gift, as well as proof of the funds leaving their account.  That means if the donor deposits cash to give the gift, those funds can’t be used for the down payment or closing costs either.

When purchasing a home with a Florida home loan, it’s important to plan a few months ahead for your proof of down payment and closing costs.  Your best bet to have a smooth Fort Lauderdale mortgage transaction is to line up your necessary funds and have them already in place in your account 90 days prior to signing a purchase contract.  Otherwise, be prepared to provide acceptable source of funds documentation for all deposits and funds being used in conjunction with your Ft Lauderdale mortgage.

]]> http://bestfortlauderdalemortgage.com/fort-lauderdale-mortgage-mistakes-to-avoid/feed/ 0 http://bestfortlauderdalemortgage.com/lower-your-interest-rate-not-your-offer-price/ http://bestfortlauderdalemortgage.com/lower-your-interest-rate-not-your-offer-price/#comments Fri, 25 Jun 2010 17:00:39 +0000 http://bestfortlauderdalemortgage.com/?p=482 Does A Lower Offer Price Or Lower Interest Rate Have More Value?

When buying a home, too often the focus of getting a great deal is placed solely on negotiating the lowest price on the property.  Does the lowest price always mean the best deal?  Common sense tells us that the less we pay for something, the better the deal we received.  Most times, if a home buyer is paying cash for a property, the lowest price may be the best deal.  However, if one is buying a home with a Fort Lauderdale mortgage, there may be more value to a lower interest rate than a lower offer price.

It’s very common for a home buyer to negotiate their transaction with the seller paying all or part of their closing costs.  This Ft Lauderdale mortgage strategy is most often used to minimize the amount of cash the home buyer has to bring to closing.  As a Fort Lauderdale mortgage broker and CMPS professional, I understand the value of seller paid concessions.  Most FHA mortgage transactions rely on seller paid closing costs to make buying a home possible.  Conventional mortgage transactions are less reliant on seller contributions to make the deal work.

When considering a Fort Lauderdale mortgage in conjunction with buying a home, you may find more value in using seller paid concessions to obtain a lower interest rate rather than negotiating the lowest sales price.  Let me explain and illustrate how this Ft Lauderdale mortgage strategy can help a home buyer get the best deal.

John and Nancy are buying a home priced at $350,000 with a Ft Lauderdale mortgage.  They want to get a great deal, so they are considering reducing their offer price by 4% or $14,000. This would make their offer $336,000 and with a 20% down payment they would have a Fort Lauderdale mortgage amount of $$268,800.  A 30 year fixed rate Florida home loan at 4.75% would give them a monthly payment of $1402.19.  Over the term of the loan, John and Nancy will have paid $235,988 in interest expense and $504,788 in monthly payments.

Now let’s look at buying a home at the asking price of $350,000 and receiving a 4% seller paid contribution that will be used to obtain a lower interest rate. Using the same 20% down payment criteria, John & Nancy would now have a Ft Lauderdale mortgage amount of $280,000.  As a Fort Lauderdale mortgage broker, I would use the 4% seller contribution to get the home buyer a lower interest rate. They could obtain a 30 year fixed rate Florida home loan at 4.0% with a monthly payment of $1336.76.  over the life of the loan John & Nancy will pay $201,235 in interest expense and $481,235 in monthly payments.

This Fort Lauderdale mortgage strategy resulted in saving John and Nancy $34,753 by offering a higher price and using a seller paid contribution to obtain a lower interest rate. Now, here’s the frosting on the cake.  The 4% contribution paid by the seller is recognized by the IRS as prepaid interest and becomes a tax deduction for a home buyer. That means the $14,000 seller paid contribution becomes a tax deduction for John and Nancy.  Assuming they are in a 28% tax bracket, that would provide John & Nancy another $4,000 tax deduction bringing their total savings to almost $39,000.  Imagine, paying more for the home and saving money just by knowing how to structure a Fort Lauderdale to benefit the home buyer. Contact your professional Fort Lauderdale mortgage broker and CMPS professional, Harvey Collier today to help you structure your next Florida home loan.

Harvey Collier  -  First Trust Mortgage – 954-629-6151

When looking to purchase a home with a Fort Lauderdale mortgage, is it more advantageous to the buyer to seek a price reduction in the home or to pay more and receive a seller paid concession?  As a Fort Lauderdale mortgage broker, I’m always surprised this question is not only asked more frequently, but hardly considered at all by most Fort Lauderdale Realtors or their buyers.

Most transactions that include seller paid incentives are typically used to pay buyer’s closing costs.  The most effective use of seller paid concessions is actually using the incentives to lower the buyer’s interest rate.  A Fort Lauderdale mortgage structured with the seller paying points to lower the buyer’s interest rate will greatly out-perform a similar price reduction on the property.

This point is best illustrated by examining an actual case study I recently evaluated for a potential prospect.  It involved the purchase of a Fort Lauderdale foreclosure financed with a Conventional Fort Lauderdale mortgage.  The asking price of the property was $400,000.  The buyer wanted to evaluate whether he would be better served to offer the asking price of $400,000 and request a 3% seller concession, or lower his offer to $388,000 with no concession?

The table below will illustrate the comparison of lowering the offer price by 3% or $12,000 vs. using the $12,000 to buy down the interest rate on a 30 year fixed rate Fort Lauderdale mortgage. Column 1 shows paying asking price with 3% incentive and making required monthly payment ($1574.21).  Column 2 shows paying asking price with 3% incentive and prepaying the $68.45 savings every month (same payment as price reduction).  Column 3 shows reducing the offer price by 3% ($12,000) and receiving no seller incentive.  The results are as follows:

List Price–no prepayment List Price–with prepayment Price Reduction

Sales price                   $400,000                                 $400,000                                          $388,000

Loan Amount              $320,000                                 $320,000                                          $310,400

Interest Rate                   4.25%                                           4.25%                                                  4.875%

Payment                            $1574.21                                 $1574.21                                           $1642.66

Payment Savings              $68.45                                         $68.45                                                    $0

Total Payments                $566,713                                      $566,713                                        $591,359

Total Interest                    $246,713                                      $224,209                                       $280,959

Interest Savings                  $34,246                                        $56,750                                                $0

The results of this case study show that it is clearly more advantageous for a buyer using a Fort Lauderdale mortgage to seek a seller concession vs. a price reduction when purchasing a home.  Paying $12,000 more for the home actually saved the buyer $34,246 in interest expense and $24,646 in total monthly payments using the normal amortization.  If the buyer re-invested the $68.45 monthly payment savings back into the mortgage, the interest savings increases to $56,750.

If that’s not convincing enough, then here’s the frosting on the cake.  A Fort Lauderdale mortgage using a seller paid concession to buy down the interest rate is considered by the IRS as prepaid interest.  As such, the buyer is eligible to deduct the points paid by the seller on their tax return.  Therefore, if the buyer is in a 28% tax rate, they have created an additional $3,360 tax break for themselves on top of the interest and payment savings.

Turbo-charge your Fort Lauderdale mortgage with a seller paid concession instead of seeking a price reduction.  As a professional Fort Lauderdale mortgage broker, I can show you how this strategy can save you money as a buyer or help you sell more homes as a Fort Lauderdale Realtor.

Call Harvey Collier at First Trust Mortgage today to see how much you can save by using this buyer strategy.

Congress has let the National Flood Insurance Program lapse for the third time this year.  The program expiration occurred on June 1st, the first day of  “hurricane season” for the Gulf of Mexico.  Congress has attempted to grant a short-term extension of the National Flood Insurance Program, but efforts have been delayed, as the extension is attached to other legislation in the House and Senate.  All the recent National Flood Insurance Program extensions have been short-term, as Congress hopes to overhaul the program, which will take some time.

Home buyers that are getting a mortgage to purchase their home are required by lenders to have flood insurance if their property is located in a Federal Flood Zone. Homeowners that already have flood insurance won’t be impacted by the lapse.  Nor will buyers of condominiums where the Condo Association has a master flood policy.   However, homeowners seeking to amend their current policy or purchase a new one will have to wait until Congress extends the program.  More urgently, those home buyers purchasing a home located in a Federal Flood Zone and obtaining a mortgage won’t be able to close on their sale until Congress grants another short-term extension.

The NAR has been contacting members and asking them to contact their Congressional Representatives to extend the National Flood Insurance Program sooner than later.  It is feared that if Congress doesn’t act by the end of the month, their could be significant repercussions on other areas of the housing recovery.  A word to the wise, as soon as you have an executed sales contract, check to see if the property is located in a Federal Flood Zone. Hopefully the problem will be resolved soon, but until then it’s important to stay on top of this important issue.

Looking For A Great Deal On A Florida Foreclosure?

One of the best choices you could make to purchase and finance a Florida foreclosure is the Fannie Mae HomePath program.  Fannie Mae markets their own Florida foreclosures using the HomePath brand name.  You can access these listings through your local Real Estate Agent, or directly at the Fannie Mae HomePath website located at: www.HomePath.com .

Fannie Mae HomePath properties are also eligible for special HomePath Financing that can add even more value to your Florida foreclosure purchase.  HomePath financing has several advantages over a traditional Florida home loan:

• Buyers using special HomePath financing can purchase a home with as little as 3% down.
• Unlike traditional Fannie Mae Conventional financing or FHA financing, a low down payment HomePath mortgage doesn’t require “mortgage insurance”.
• Fannie Mae HomePath Financing can be used to purchase an investment property with only 15% down.
• A Fannie Mae HomePath property and mortgage doesn’t require a property appraisal.
• HomePath Financing allows for a 6% seller concession, while Fannie Mae Conventional financing only allows 3% on loans with less than 20% down.  Currently, FHA financing allows for 6%, but that is likely to change to 3% in the near future.

If you want to repair, upgrade, or remodel your HomePath foreclosure, certain properties have been designated to be eligible for a Fannie Mae HomePath Renovation Loan. This special Florida home loan allows a buyer to purchase a HomePath foreclosure and finance the renovation into their mortgage.  Properties that are eligible for HomePath Renovation Financing feature the “Renovation Logo” above on Fannie Mae’s website.

The Fannie Mae HomePath program is a perfect one/two punch to get a terrific deal on a Florida foreclosure and finance it with the perfect Florida home loan.

Harvey Collier and First Trust Mortgage are approved Fannie Mae HomePath lenders.  Contact Harvey Collier today with all your HomePath inquiries.

]]> http://bestfortlauderdalemortgage.com/fannie-mae-homepath-loans-rock/feed/ 4 http://bestfortlauderdalemortgage.com/impact-of-a-florida-foreclosure-on-your-credit-score/ http://bestfortlauderdalemortgage.com/impact-of-a-florida-foreclosure-on-your-credit-score/#comments Sun, 06 Jun 2010 21:53:04 +0000 http://bestfortlauderdalemortgage.com/?p=440 How will a Florida Foreclosure or Short-sale affect your credit report?

Home owners contemplating a short-sale or Florida foreclosure frequently ask how the decision might impact their credit score and overall credit report. For those faced with no other option, the decision to give up your home probably means you’re not making your auto and credit card payments either.  Those in this position will take a severe hit to their credit score and ability to obtain credit in the future.  It will be a rebuilding process that will take several years and careful planning.

A second group of home owners are faced with an investment property they speculated on and are now upside down on their mortgage with no prospect of getting back to even any time soon.  Yet, another group are home owners that bought a primary residence during the peak of the market and are now upside down with little prospect of recovery in the foreseeable future.  Many of these home owners now find themselves faced by what is being referred to as a “business decision”.  The question here is, “What is the cost of continuing to make the payments until the housing market recovers versus walking away from the property?”  Most home owners can make an educated guess how long it will take for the market to recover and do the math to calculate the financial loss.  But, how will the credit report and credit score consequences affect their future going forward?

Anyone contemplating a short-sale or Florida foreclosure, whether it’s an investment property or your primary residence needs to know:

• A Florida foreclosure or short-sale will remain on your credit report for seven years.
• The impact of a Florida foreclosure or short-sale will lessen over time.
• A Florida foreclosure or short-sale is a single negative item on your credit report.
• Limiting the damage to your credit report to only the Florida foreclosure or short-sale will lessen the damage to your credit score.
• Limiting a Florida foreclosure or short-sale to a single negative item can allow you to regain your credit score in as little as two years.

Another common question many home owners ask is “Does it make a difference on your credit report or to your credit score if you do an alternative to foreclosure, such as, a short-sale or deed-in-lieu of foreclosure?”  The credit bureaus evaluate all of these options as “not paid as agreed accounts” and consider them the same for your credit score. When a home owner is considering bankruptcy as an alternative to foreclosure, that will have an even greater impact on your credit score.

So, how much of an impact will a Florida foreclosure or short-sale have on your credit score?

• Those with a 780 or higher credit score can expect a Florida foreclosure or short-sale to lower their credit score about 150 points.
• Those with a 680 credit score can expect their credit score to drop by 100 points.
• Those with a 780 credit score that add a bankruptcy to the Florida foreclosure or short-sale could lower their credit score by 230 points.
• Those with a 680 credit score that add a bankruptcy to the Florida foreclosure or short-sale may lower their credit score by 150 points.

The key to minimizing the damage to your credit report and credit score is to make sure that your “business decision” is held to a single negative item.  However, be aware that you will be unable to qualify for another mortgage for a minimum of 2-3 years after the Florida foreclosure or short-sale action.

An FHA 203k Loan Can Make Florida Foreclosures Your Dream Home

Getting a great deal on a Florida foreclosures isn’t always as easy as you may think.  The best values on Florida foreclosures are usually the Florida homes that are in less than perfect condition to really distressed.  Many Florida foreclosures haven’t had any maintenance for a couple of years and need some work to major renovation to  become habitable again.

It’s not unusual for Florida foreclosures to need a new roof, plumbing or electrical repairs, structural repair or even kitchen and bathroom replacement.  Frequently, disgruntled home owners damage the home in anger on the way out-the-door.  Others rip out kitchen cabinets, bathroom fixtures, A/C units, water heaters and anything else they can take with them to reuse or sell.  Florida foreclosures in this shape, require all cash buyers, as no lender will make a loan on a property that poses a health or safety risk.

Now, you can level the playing field with an FHA 203k Renovation Loan. This Florida home loan is a great solution for those buying Florida foreclosures and needing financing to renovate their Florida homes. An FHA 203k Renovation loan allows a buyer to purchase Florida foreclosures and get a Florida home loan that will  finance the necessary repairs, renovations, or even add-on to their home.

Home Buyers looking for a great deal on Florida foreclosures, should consider an FHA 203k Renovation loan. Imagine, finding that perfect “diamond in the rough”, and turning it into a brilliant gem.  An FHA 203k loan and a little imagination can make Florida foreclosures a terrific value and choice with only a 3.5% down payment required.  You might just find Florida foreclosures + an FHA 203k loan = a marriage made in heaven.

Contact Fort Lauderdale mortgage broker, Harvey Collier, for all your FHA 203k Renovation loan needs.

As a Fort Lauderdale mortgage broker, I’m often asked how a certain property condition may impact the buyer’s ability to get a Ft Lauderdale mortgage on the property.  What exactly is allowed and not acceptable these days for a Fort Lauderdale mortgage?

The rules may vary slightly for a Conventional Fannie Mae loan versus an FHA loan, but both have a common theme.  The property can’t have anything physically deficient that would be considered a ” health or safety ” issue to make a loan.  This includes items such as leaking roof, broken window, faulty wiring or electric service not up to code, missing A/C unit, structural problems, evidence of untreated termite damage, Chinese drywall, defective or inoperable plumbing, etc.  These types of issues pose risk to a lender, not only to their collateral, but opens them to potential lawsuits for liability.

The other major concern you may encounter trying to get a Fort Lauderdale mortgage, especially when purchasing a foreclosure, is missing appliances.  Recently, HUD changed their rules to allow an FHA Fort Lauderdale mortgage on a property without appliances.  Most Conventional Fannie Mae loans require appliances to be in place before making a Ft Lauderdale mortgage. Some lenders will make an exception for missing appliances if the property appraisal states that the property is being valued without the appliances.

Finally, most Ft Lauderdale mortgage lenders or banks have their own overlays (rules or guidelines) they impose over FHA and Fannie Mae regulations.  Even though FHA or Fannie Mae will purchase loans with that criteria doesn’t mean the lender will originate it.  They all worry about the risk of having to repurchase that loan.  That’s why it’s essential to work with your professional Fort Lauderdale mortgage broker, who has access to multiple lenders and knows what each bank will accept or not accept.

Harvey Collier is a Fort Lauderdale mortgage broker with multiple lenders and the experience to find a Fort Lauderdale mortgage to handle most property conditions.

Fort Lauderdale Mortgage Broker Offers Florida Home Loan For Recent Property Flip

Are you an Agent or Buyer that have been faced with the challenge of trying to purchase a recently “flipped” property? One of the most perplexing problems for real estate investors that are buying and selling properties has been bank restrictions on these transactions that involve a Florida home loan. Industry guidelines have required a 90 day waiting period before a buyer can enter into a contract to purchase and be eligible for a Florida home loan.

Real estate investors want to buy and sell as quickly as possible.  Most times they are purchasing a property for cash or with private funds, do a quick rehab and already have a buyer lined up to purchase.  The 90 day wait period to even enter into a contract, has precluded many buyers needing a Florida home loan. The result has been many cash buyers getting a great deal, while those needing a Florida home loan have missed these opportunities.

Earlier this year, FHA passed a temporary waiver of its 90 day “flip rule” and said buyers would be eligible for FHA Mortgage Insurance on transactions without the wait period providing it met certain criteria.  The waiver allowed the investor to resell the property with up to a 20% profit (based on acquisition cost plus documented improvements) with one appraisal  and if over 20% required a second appraisal.  The ultimate decision is up to the underwriter and lender making the Florida home loan.

This announcement was enthusiastically received by Real Estate Agents, Property Flippers and Buyers.  However, like most other lending guidelines today, banks take FHA, or Fannie Mae rules and impose their own overlays on top of them to mitigate their own risk in the transaction.  This has resulted in many lenders being fearful of originating a Florida home loan that is over the 20% profit threshold, even with a second appraisal.  Banks are extremely risk adverse these days and very few have any appetite to potentially buy back a loan.  Unfortunately, lenders are all staying on the safe side of risk and most are still unwilling to allow a transaction that is selling for more than a 20% profit to close without waiting 90 days.

This certainly wasn’t the intent of the waiver period, but it is the reality.  The waiver was created to help the housing market absorb the glut of distressed housing and stabilize sooner.  Most people don’t realize that HUD doesn’t actually provide the Florida home loan, it only provides the lender or bank originating the loan the FHA mortgage insurance protection.  Otherwise, banks wouldn’t make a loan with less than 20% down.

Fort Lauderdale mortgage broker, Harvey Collier, now offers a Florida home loan to purchase a “Flip Home” without a waiting period.  As long as the property value is supported by 2 independent appraisals, the lender has no profit restriction on the transaction.  If you are a buyer or Agent looking to take advantage of a great deal on a recently flipped property, or an investor looking to do a quick flip, First Trust Mortgage has a Florida home loan for you.

What You Need To Know About Gifts For A Ft Lauderdale Mortgage Transaction

There are more requirements these days surrounding the use of gift funds for a Fort Lauderdale mortgage transaction.  It’s not a case of Fannie Mae or FHA suddenly changing their guidelines, it’s more lender fear of proper validation and sourcing of the funds.  No bank wants to risk repurchase of a loan for not following Fannie Mae or FHA guidelines to the letter.  Of course, this has caused the pendulum to swing to the other side and needless to say, most lenders are examining gift funds for a Ft Lauderdale mortgage transaction under the microscope.

So, here’s what you need to know to complete a successful Fort Lauderdale mortgage that involves gift funds:

The Ft Lauderdale mortgage must be the primary residence or second home of the borrower.  The funds must be received as a personal gift from an acceptable donor to apply to down payment, pay closing costs or supplement reserve requirements.  Gifts are not allowed for an investment property purchase with a Florida home loan.

An Acceptable Donor To A Fort Lauderdale Mortgage Transaction Can Be:

• a relative, defined as the borrower’s spouse, child, or any other individual who is related to the borrower by blood, marriage, adoption, or legal guardianship.
• a fiance’, fiancee’, or domestic partner.

An Unacceptable Donor To A Ft Lauderdale Mortgage Would Be:

• the builder
• the developer
• the real estate agent
• any interested party to the transaction

Minimum Borrower Contribution To Florida Home Loan Transaction:

• Conventional financing with a loan-to-value greater than 80% requires the borrower to provide a minimum of 5% of the down payment from their own funds.
• Conventional financing with a loan-to-value of 80% or less can have 100% gift funds for their Fort Lauderdale mortgage transaction.
• FHA financing allows the borrower to receive 100% gift funds for their Ft Lauderdale mortgage transaction.

When gift funds are being used in conjunction with a Florida home loan, there are specific documentation requirements to paper trail not only the receipt of the gift, but also the donor’s ability to give the gift. All borrowers bank statements will reviewed for the most recent two months.  Any large deposits will need to be explained and documented.

Fort Lauderdale Mortgage Documentation Requirements:

• signed gift letter between borrower and donor specifying dollar amount of gift, that no repayment is expected, indicate donor’s name, address, phone number and specify relationship.
• copy of donor’s most recent bank statement showing ability to give gift amount indicated.
• copy of donor’s transaction showing gift coming out of their account.
• copy of donor’s check.
• copy of borrower’s deposit slip from gift funds.
• borrower statement or transaction summary showing receipt of gift funds.

Remember, cash is an unacceptable source of gift funds for a Ft Lauderdale mortgage loan.  The donor can’t provide a cash gift and the borrower can’t make a cash deposit to be used in connection with their Florida home loan. When planning a Fort Lauderdale mortgage involving a gift, it’s best to plan ahead and be sure you can properly validate all the funds being used for the transaction.

A CMPS professional is well qualified to examine and validate any gift funds being used in a transaction.  Contact Harvey Collier, CMPS, for all your gift fund or Florida home loan questions.