20
Oct
By support
Home Mortgage Tips

Can You Give a Relative a Gift of Cash for a Mortgage Down Payment? Yes – Here’s How

Can You Give a Relative a Gift of Cash for a Mortgage Down Payment? Yes – Here’s HowA new house is a major investment. Even if you have a mortgage, the bank and the seller will still expect a sizeable down payment. That’s why lots of people regularly gift down payments to friends and relatives – it’s a great way to help young people start out on the path of home ownership.

But what are the rules around gifting down payments? Can you simply give someone everything they need? Although it’s a generous thought, it’s not always possible – here’s what you need to know.

Make Sure You Write a Gift Letter

If you’re giving one of your relatives money for a down payment, you’ll need to accompany the money with a gift letter. A gift letter is a letter written to the mortgage company that clearly asserts the money is a gift, not a loan. There are several key components that mortgage companies need to see on a gift letter, so make sure you have everything they need.

You’ll need to include your name, address, and phone number, as well as your relationship to the homeowner and the amount of the gift. Your letter should list the date on which you gifted the money and clearly explain that you do not expect to be repaid. Finally, you’ll need to include the address of the property being purchased and then sign the letter.

Tell Your Relatives to Pay the Right Down Payment Amount

When your relatives give their down payment, they’ll want to ensure they pay the right amount from their own money to ensure they don’t run afoul of any mortgage laws. In a conventional mortgage agreement, the borrower can pay the entire down payment with a gift if their down payment is worth at least 20% of the purchase price. If the down payment is for less than 20%, then the borrower can use gift money, but must also put forward a certain minimum amount that varies by loan type. For mortgages insured by the Federal Housing Administration or the Department of Veteran Affairs, the rules are slightly different.

Giving the gift of a mortgage is a great way to help friends or family members become homeowners. But with mortgages, there are strict rules around gifts. Contact your trusted mortgage professional to learn more about giving the gift of a mortgage.

15
Oct
By support
Home Mortgage Tips

Buying a Home This Fall? Here’s How Your Choice of Neighborhood Will Impact Your Mortgage

Buying a Home This Fall? Here’s How Your Choice of Neighborhood Will Impact Your MortgageIf you’re planning to buy a home in the next few months, you’ll want to ensure you choose a great neighborhood to live in – not just because it can improve your quality of life, but also because it can help you get a mortgage. Neighborhood is a factor that lenders consider when you apply for a mortgage, which is why you’ll want to consider a neighborhood’s mortgage implications as well. Here’s what you need to know about how the neighborhood you buy into affects the kind of mortgage you can get.

A Neighborhood Full of Foreclosed Homes Decreases Your Property Value

Buying a home in a neighborhood full of foreclosures can seem like a great deal, as the owners may be willing to accept a lower price so that they can move into a better area. But buying in a foreclosure-fraught neighborhood brings with it a variety of complexities when it comes to getting a mortgage.

The biggest issue is that being surrounded by foreclosures significantly decreases a property’s value. Foreclosed homes tend to attract a criminal element and increase property taxes due to the need for more emergency services in the area. When it comes to getting a mortgage, this limits the amount you can borrow – no lender will give you more than what the property is worth, no matter what the property sells for.

Better Neighborhood Amenities Help You Get a Mortgage

Mortgage lenders look at a variety of factors when deciding whether to issue a mortgage, and one of them is the property’s saleability. Simply put, saleability refers to the likelihood that the lender will be able to sell the property in the event that the homeowner defaults on the mortgage.

If you take out a mortgage and then go into default, your lender will need to sell the property in order to recover its investment. Great amenities like parks, schools, and fitness centers make a neighborhood and the houses in it more desirable to buyers, which means the bank will have an easier time selling the home – and will be more likely to issue you a mortgage.

Buying into a good neighborhood can help you to get a great mortgage at a great rate. That’s why you’ll want to enlist the aid of a professional mortgage advisor to help you to determine the best neighborhoods for buyers. Call your local mortgage professional to learn more.

14
Oct
By support
Home Mortgage Tips, Home Seller Tips

How Much Should You Budget for Closing Costs? Let’s Take a Look

How Much Should You Budget for Closing Costs? Let's Take a LookIf you’re in the market for a new home, you’re probably trying to budget for all of the expenses that come with a home purchase. After all, the asking price isn’t necessarily the entire amount that you’ll pay – there are other expenses that will factor in to the final price. One such expense is your closing costs.

Closing costs are the miscellaneous fees you’ll pay when you sign the deal to buy your home. But how much do you need to save up for closing costs? Here’s what you need to know.

The General Guideline for What to Expect

Most mortgage advisors will tell you that you should expect to pay about 3 to 5 percent of your mortgage in closing costs. By law, your mortgage provider is obligated to give you a Loan Estimate form which is designed to help you understand the key features, costs, and risks of the mortgage loan. Three business days before the loan closes your mortgage provider will also give you a Closing Estimate form to review all of the costs of the transaction including all closing costs.

How Your Closing Costs Break Down

Your lender will give you a breakdown of costs in your Loan Estimate and Closing Estimate. But in general, there are certain closing costs you can expect to pay.

One cost that most lenders include is the loan origination fee, a small charge to compensate the lender for the time it takes to prepare the initial loan documents. There will also typically be a loan application fee, which can vary per lender.

Your lender may require you to get private mortgage insurance depending on your situation. The title search and title insurance to protect your lender from title fraud is another fee you should consider, and you’ll also likely want to buy title insurance to protect yourself.

There are also several other closing costs to keep in mind, like escrow fees, notary fees, pest inspections, underwriting fees, and the mortgage broker’s commission. All in all, you’ll want to budget approximately $5,000 in closing costs for every $100,000 you borrow.

Closing costs can be quite expensive, which is why you’ll want to make sure you budget appropriately when you buy your new home. A mortgage professional can help you to figure out how much you need to budget for closing costs. Call your local mortgage advisor today to learn more about budgeting for the home buying process.