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Finding Down Payment Funds for Houston Home Buyers

In today’s tight credit markets, behind credit issues, the second most common reason for not being able to qualify for a mortgage loan is a lack of liquidity. This means potential borrowers do not have sufficient funds available for down payment, closing costs, and/or pre-paid interest, taxes and insurance.

Here is some good news:  most closing costs, and even pre-paids, can be funded with seller contributions. Seller contributions are funds that the seller agrees to put towards the buyers closing costs as part of the purchase and sale agreement. Some mortgage programs limit these contributions to around 3% of the purchase price, but others allow up to 6% seller contributions. In many cases, if negotiated properly, all costs associated with closing can be funded by the seller.

Most conventional loans require that down payment resources come from the borrowers own funds, but government loans offer more flexibility. On an FHA loan, for instance, down payment funds can come from gifts as long as the gift is from a direct relative or other person with a demonstrated financial interest in the borrower such as a co-habituating partner or employer. It is important that these funds are truly classified as a “gift” instead of a loan as borrowed funds are generally not acceptable as a down payment source.

One exception to the borrowed funds rule is a loan on assets in a 401k plan. Borrowers are allowed to use proceeds of a loan from their retirement plan for down payment purposes as long as the repayment schedule is counted in the borrower’s debt-to-income ratio. Another little known source of funds that may be used for down payment purposes is assets in an Individual Retirement Account, or IRA. First-time homebuyers, defined by the IRS as not having owned a home in the past two years, can take up to $10,000 penalty-free from an IRA to use for a down payment. Roth IRAs would have no taxation in this case since they are funded with post-tax dollars. An interesting clause in this first-time homebuyer rule is that the homebuyer need not be the owner of the IRA.  As long as the funds are used for a qualified first-time homebuyer purpose, a parent, grandparent, or other relative can use funds from their own account and gift them to their child, grandchild or other relative without the penalty.

For those borrowers with good credit scores but who fall into the low-to-moderate income thresholds established by the US Department of Housing and Urban Development, down payment assistance may be available. Keep in mind that these programs will still require some borrower contributions to cover an earnest money deposit on the sales contract as well as the cost of an appraisal and inspection. Also, funding is not always available so it is important to check with a qualified Houston mortgage lender to ensure funds availability.

One final tip if you are still tight on your down payment funds. If you anticipate receiving a refund on your 2011 tax return, you should file as soon as possible in January. The sooner your return is received and processed by the IRS, the sooner you will receive your refund from the IRS which can be used toward your down payment!

While the overwhelming majority of “no money down” programs left the mortgage financing landscape years ago, borrowers can still obtain mortgage financing without breaking the bank using some of the strategies outlined here.

FHA Loan Limits Extended

FHA Loan Limits Extended

On February 18th, President Obama signed The Agricultural Rural Development, Food and Drug Administration and Related Agencies Appropriation Act of 2012. A provision in this bill reinstated the higher mortgage loan limits that expired on October 1st.  The loan limits had been increased back in 2007 in an effort to stimulate the beleaguered housing markets. The expiration of this provision was proving particularly threatening to high cost markets where alternate mortgage financing is not readily available.

Many Democrats in Congress opposed the increase as did the Obama administration because they felt this would enable FHA to continue to gain market share at the same time the administration wanted private lending to take on a bigger role in home mortgage financing. Ultimately, both the House and Senate voted to advance the bill beyond the votes needed to override a Presidential veto.

The new loan limits for FHA now cap out at $729,750 in designated high cost markets. The loan limit in the Houston area which also includes The Woodlands, Conroe, Tomball, Spring, Katy and other parts of the metro area will remain at $271,050 for a single family property, $347,000 for a duplex, $419,525 for a three-family home, and $521,250 for a four family home. The FHA continues to provide a necessary funding source for home buyers who cannot meet the rigid underwriting requirements in effect for conventional loans and has kept the Houston housing market relatively stable. Getting pre-qualified for an FHA loan is a fairly simple process that only takes a few minutes on the phone with one of our loan officers.

Finding a Mortgage Broker in Houston, The Woodlands, Conroe, and Tomball

Selecting a mortgage broker to work with on refinancing your home or obtaining financing on a new Houston-area home purchase can be a challenge.

There are a number of criteria that are important to any consumer such as service, pricing, and convenience.  But how do you evaluate a mortgage lender on these standards?

Some consumers will automatically visit their bank to obtain mortgage financing, but using them is far from a guarantee that you will receive the best rate or the best service. Keep in mind, the big banks are only representing their own mortgage products, not programs or pricing that is available by other institutions in the wholesale marketplace. Furthermore, when mortgage volume gets high, as it has recently with the large number of refinances, the time to get a loan approved and closed with a large bank goes up dramatically. I have heard from more than one consumer about having to wait three months to get their loan closed.

Other people will simply look for the best rate they can find. This strategy is also not without its pitfalls. While many unscrupulous lenders have left the business in the wake of the mortgage meltdown, there are still some out there who will promise the world and then rarely live up to their word. Often, the lowest rates are offered by lenders who cannot compete on other metrics so they simply try to win your business based solely on rate. This might result in increased closing costs or an inability to promptly return phone calls.

When evaluating mortgage brokers in the Houston area, there are some minimum criteria a consumer will want to consider. First, do some research with the Better Business Bureau www.BBB.org. A good mortgage lender should have a minimum rating of “A”, and even better, be an Accredited Business. This indicates that the BBB has done some additional research on their backgrounds and licensing.  In the mortgage industry, the importance of service cannot be stated enough. You can have the greatest rate in the world, but trying to get a loan closed through an incompetent lender can result in delays, frustration, and the possibility that your loan will never close.  In addition to investigating the lender, you should also do some research on your loan officer. Check out social media sites like LinkedIn for their background and reviews.

Second, although not the only factor, remember that rate is important.   A lender’s quoted rates should be at or below the national averages which can be found weekly on a number of web sites including http://www.freddiemac.com/pmms. You can also check your local newspapers – The Houston Chronicle Sunday Edition has rates posted in the Business section every week.  This is a survey completed by a local research firm who does not charge the lenders for appearing in the survey. Keep in mind that, often, rate surveys show lagging rates, meaning those from a few days to a week ago and can be misleading in a rapidly changing rate environment. Also understand that national marketing firms, like LendingTree, charge a fee to the lenders wanting to appear in their system and these fees can be exorbitant. Many local mortgage brokers and bankers would rather pass savings onto their clients than pay a national marketing firm for a lead.

When obtaining a rate quote, be sure to request a Good Faith Estimate, as this document makes the quoted fees associated with your rate quote binding for ten days. You should also make sure that any rate quotes you receive are within the same day so that you are comparing apples to apples and not giving one lender an advantage of providing a quote after the market has improved.

Lastly, when possible, work with a local lender. While they may not have the marketing power of national lenders, and thus the ability to put television ads in front of you constantly, going local supports your community, and you also have the comfort of knowing that there is a local office you can visit if the need ever arises.

Choosing from whom to obtain a home loan is one of the most important financial decisions a person can make.  It is imperative that any homebuyer/homeowner do so with as much knowledge as possible.

Home Loan Specialists – Houston Mortgage Rate Watch – November 4, 2011

Home Loan Specialists Houston Mortgage Rate WatchAverage rates for the benchmark 30-year fixed mortgage as reported by Freddie Mac stood at 4.00% this week. This represents a decrease of .10% over last week’s average. The average for the 15-year fixed program equaled 3.31%, a decrease on the week of .07%. Both averages are retesting 2011 lows again this week.

What appeared to be cautious optimism over European economics last week has turned sour again as the focus is turning from Greece to Italy. At this week’s G-20 conference in France, leaders refused to add needed funds to the reserve until Italy and Greece resolve growing fiscal issues. Additionally, the US employment report published this morning illustrated a decline from 9.1% to 9.0%. This news was expected to buoy equity markets and increase short-term mortgage rates.

As of this writing, mortgage-backed securities are trading slightly higher meaning that rates will likely drop. Mortgage analysts continue to advise borrowers to lock rates for all loans closing within the next 30 days. Home Loan Specialists is posting par rates for our 30 year fixed (conventional) loans at 3.75% (apr 3.93%) and 15 year at 3.25% (apr 3.57%). We continue to advise refinancing candidates to take immediate action by requesting a refinance breakeven analysis which can be found on our website at www.hlstx.com or by calling us direct at 832-286-1600.

If you prefer a midnight quote, please check out our Rates Page or download our Houston Mortgage Calculator app from iTunes or your devices App Store!

Free Credit Repair Workshop for Houston Homebuyers

If your credit not quite good enough to purchase a home now,  consider attending!

This is your chance to receive FREE advice on how you can repair and rebuild your credit with the possibility of purchasing a home in the near future!

Home Loan Specialists, Inc. and National Credit Federation are teaming up to present a FREE workshop for anyone interested in improving their credit scores.

Saturday, October 22, 2011
10:30 a.m. – 12:30 p.m.
Barbara Bush Library | 6817 Cypresswood | Spring, Texas 77379

Printable Credit Repair Flyer

Click here for a printable version of our flyer to share with friends and family!

Is it Really Possible to Refinance Your Houston Mortgage without Closing Costs

Can money trees grow in Houston?

Are Houston home refinances without closing costs too good to be true?

This question is an important one to Houston homeowners who might be considering refinancing their mortgage at today’s record low rates. Given the economy, it is understandable that many people may not want to part with their hard-earned cash to pay for closing costs or they may not have sufficient funds to cover closing costs.  Don’t fret; you do not have to miss out on the refinancing boom due to a lack of funds. There are ways to cover your costs without breaking the bank.

First, we need to make one thing clear: there is no free lunch. You are not going to get a rock bottom rate with no closing costs.  Anyone who promises this is being disingenuous. Many closing costs are “hard costs” of your loan paid to third parties, independent of your mortgage lender. These include title insurance (the rates for which are set the by the state insurance commissioner in Texas), appraisal, recording costs, and in many cases, escrows for taxes and insurance. Your lender is also not going to work for free. Though their fees may not be charged directly to you, I am often reminded of the old Prego spaghetti sauce commercial that features the tag line “it’s in there”.  Well, so is your lender’s fee.

There are two ways to avoid paying some, or all, of your closing costs out of pocket. One way to do this (and still obtain some of the lowest rates available in the marketplace), is to roll these costs into your loan amount. The benefit of this strategy is that you keep your cash in the bank and get a very low rate. The downside is that you will end up paying more interest over the life of the loan because you are increasing your loan balance by the amount of the closing costs. This is still not a bad strategy, particularly if you plan to remain in your home for several years.

Another possibility is for your lender to pay all or a portion of your costs on your behalf. As we discussed earlier, there is a cost to this. You will have to settle for a higher interest rate. The lender will pay your costs and earn their fee when your loan is sold because the buyer of your loan will pay a premium for a premium rate. Nevertheless, if you can reduce your rate with no additional costs, you are saving money on your mortgage no matter how you slice it. I have been able to help countless homeowners using this strategy over the past month.

If you have a Texas mortgage with a rate of 5% or higher and would like to take a look at your refinancing options, please contact us at info@hlstx.com or at (832) 286-1600.  Many people we talk to about refinancing are astounded at the amount of money they will save over the life of their loan.  We can do a free refinance analysis for you and determine your breakeven point if you do refinance. There is also a Texas Mortgage app available for iPhone and iPad users that uses current rates to give you an idea of monthly payments on a refinancing.  Search the App Store on your device for “Houston Mortgage” or click here to download the app from iTunes.

Contact us today, we will be happy to help you save money!

Houston Mortgage Rate Watch – Refinance Now for Best Rates!

Houston Mortgage Rate Watch – Refinance Now for Best Rates!

AHome Loan Specialists Houston Mortgage Rate Watchverage rates for the benchmark 30-year fixed mortgage as reported by Freddie Mac stood at 3.94% this week. This represents a decrease of .07% over last week’s average.

The average for the 15-year fixed program equaled 3.26%, also a decrease of .02% on the week. Once again, both of these averages set new lows for 2011.

Mortgage bond prices have experienced four straight days of declines this week. This is an indication that mortgage rates have likely reached their support levels and are headed higher in the near future.

The highly anticipated jobs report published Friday morning, illustrated that only 103,000 jobs were added this week and unemployment continues at 9.1%. The market seems to be poised for higher levels of inflation which will drive mortgages rates up at break-neck speed.

Industry analyst are advising borrowers to lock rates for all loans closing within the next 30 days.

Home Loan Specialists is posting par rates for our 30-year fixed (conventional) loans at 3.75% (apr 3.93%) and 15-year at 3.25% (apr 3.57%). We continue to advise refinancing candidates to take immediate action by requesting a refinance breakeven analysis which can be found on our website at www.hlstx.com.

Also, if you are in the market for a new home or are looking to refinance, download our free app for your iPhone/iPad today!  You can find it here on iTunes or, search Houston Mortgage on your device’s App Store.

Home Loan Specialists – Texas Mortgage Rate Watch – September 16, 2011

Home Loan Specialists Houston Mortgage Rate WatchAverage rates for the benchmark 30-year fixed mortgage as reported by Freddie Mac stood at 4.09% this week. This represents a decrease of .03% over last week’s average. The average for the 15-year fixed program equaled 3.30%, also a decrease of .03% on the week.

Once again, both of these averages set new lows for 2011.

Bond investors continue watching the developments in the European Union economies. Germany (this week) has pronounced that they would assist Greece with their critical capital needs to add stability to the Euro. The strength of the German economy appears to be the only factor preventing complete disaster for the EU. Despite the lower averages, major lenders have not reacted with lower mortgage rate postings this week.

Home Loan Specialists is posting par rates for our 30-year fixed (conventional) loans at 3.875% (APR 4.06%) and 15-year at 3.25% (APR 3.57%). We continue to advise refinancing candidates to take immediate action if their existing rate exceeds 4.875% on 30-year loans as long as their outstanding balance exceeds $100,000. It remains an ideal time to uproot old 30-year loans and replace them with 15- (or even 10-year) fixed rate programs as long as no more than 5 to 7 years has elapsed since their current loan was closed.

Why Buying an Investment Property in Houston Makes More Sense than Ever

Houston Buying Investment PropertiesWhy Buying Investment Property in Houston Makes More Sense Now Than Ever

By Mike Lesmeister, CRMS, CMPS

In today’s volatile economic environment, many investors are struggling with decisions regarding their next move. The stock markets are unstable, yields on bank time deposits and other fixed-income investments are nearing record lows, gold has had a huge run-up that, judging from its historical performance, may not be sustainable, and long-term inflation lurks on the horizon.

In this environment, one option to consider is investing in residential real estate. Contrary to the news that housing values are plummeting and you can’t get a mortgage, many investors have silently made a killing by investing in rental properties. Now, these are not the “flip and get rich quick” schemes you see on cable television, but a long-term strategy of meeting increased rental demand in the Houston area by buying homes at distressed prices and financing them at record low, long-term mortgage rates.

The opportunity here is three-fold; through positive cash flow that can be gained on the difference between rental rates and the debt service on the loan, through the tax advantages real estate offers, and through the long-term appreciation and inflation-hedge real estate represents. Currently, the rent-to-mortgage payment ratio in Houston is just below 1%, meaning that the average rent in Houston should cover mortgage repayment on a 100% financed property.  So, when adjusted for down payment, taxes and insurance, it should not be too difficult to find a property that provides positive monthly cash flow.

Houston remains a strong market for rentals as our relatively strong economy continues to attract workers from other states. This population growth, coupled with the need for housing by immigrants and homeowners displaced due to foreclosure or a previous job loss, creates a significant demand for housing, particularly in areas with good schools. It is not uncommon for newly listed rentals to garner several applications within hours of listing.

Financing rental properties is not as easy as it once was, but for investors with cash available and good credit, it is readily available. Potential landlords should expect a 20-25% down payment, have credit scores over 700, and demonstrate cash reserves equivalent to six months’ worth of housing payments. Interest rates and closing costs are slightly higher than those charged on owner-occupied properties, but not significantly so. At current rates, it would not be unusual for a well-heeled buyer to be able to purchase a $100,000 home with 20% down at an interest rate under 5% over 30 years with closing costs totaling $3,000, excluding prepaid interest, taxes, and insurance. This home in the right area could easily fetch over $1,100 in monthly rent. To search properties that might be suitable for investment, visit www.houstononlinehomefinder.com. To get pre-qualified for a mortgage to purchase investment property or for a rate quote from a BBB-accredited mortgage lender, visit www.HLSTX.com.

Many would argue the timing is right for purchasing investment property in Houston where home prices are very affordable relative to other large metropolitan areas. As the economy recovers or inflation starts to show its face, housing prices (and interest rates) will begin to rise which will reduce the affordability of many rental properties.  So be sure to strike when the iron is hot.

Home Loan Specialists – Houston Mortgage Rate Watch – September 9, 2011

Home Loan Specialists Houston Mortgage Rate WatchAverage rates for the benchmark 30-year fixed mortgage as reported by Freddie Mac stood at 4.12% this week. This represents a decrease of .10% over last week’s average.

The average for the 15-year fixed program equaled 3.33%, a decrease of .06% on the week.  Both of these averages set new lows for 2011.

Mortgage-backed security prices have continued to increase this week as the equity markets throughout the world remain under selling pressure. The eager anticipation surrounding President Obama’s Thursday address on job creation did not carry forward in a positive way to stock market trading on Friday.

Also, this week’s jobs data statistics continued to illustrate a total lack of employment growth in the US economy. Simply put: The American investor has lost faith in stocks and is unshakeable in his resolve to avoid risk .

Home Loan Specialists is posting par rates for our 30-year fixed (conventional) loans at 3.875% (APR 4.06%) and 15-year at 3.25% (APR 3.57%).

Our advice to refinancing candidates is to request a breakeven analysis if their existing rate exceeds 4.875% for 30-year terms and 4.125% for 15 year terms. A very simple tool for this purpose can be found on our website (http://www.HLSTX.com/) under mortgage calculators.

Also, remember to check out our Facebook page for more mortgage and other information!

 

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