Sugar Blossom

How to Get a Mortgage Broker to Put Up Most of the Money

Nothing-down ?nancing-does it really exist? Or is it just a buzz­word used by real estate gurus selling you a seat in a seminar or a tape on late-night TV?

Today, it really does exist, for some buyers.

And that’s a good thing, too. Most people who want to buy a home often ?nd that the biggest roadblock is coming up with the cash down payment. (So if you’re feeling the pinch, rest assured you’re not alone!)

Let’s face it; we live in a credit society. Afamily with a $100,000 annual income can easily obtain a new car loan with almost nothing down and a $500-a-month car payment. But that same family may not have $5000 in the bank in a savings account. In fact, over 70 per­cent of all families have little or no cash savings. (On the other hand, that other 30 percent or so have whopping big savings accounts!)

What Your Mortgage Payment Includes

• Interest on your loan
• Return of equity (principal)
• Hazard insurance (if you put down less than 20 percent)
• Taxes (if you put down less than 20 percent)

I’m reminded of that old saw about the two investors who want to buy the Empire State Building in New York. The ?rst investor, just returned from a meeting with the sellers, tells the second, “I’ve got good news and bad. The good news is that they’ll take our $100 mil­lion offer.” “Great,” says the second investor. “What’s the bad news?” “They want $500 cash down!”

Where Do I Find a Good Lender?

Before you get a good loan, you must get a good lender. These days they are everywhere. You can go to a single-source lender such as your bank or your credit union. Or a multiple-source lender such as a mortgage broker.

The mortgage broker has the advantage because he or she solicits loans from a wide variety of lenders, including banks, insurance companies, and pools of investors. Often a mortgage broker can match you up with just the right lender for your needs.

Ask your real estate agent for a mortgage broker recommenda­tion. Also, check with any friends, relatives, or associates who recently bought a home. Chances are they used a mortgage broker and can recommend (or steer you away from!) a mortgage broker. As a last resort they are listed in the yellow pages under Mortgage Brokers. (Note: A mortgage banker may not make loans directly to consumers. Look for a mortgage broker.)

Also consider online mortgage brokers. Check a good search engine for them. Also, look into:

www.eloan.com

www.quicken.com

www.lendingtree.com

Will a Lender Give Me 100 Percent of the Purchase Price?

Just a few years ago the “standard” down payment on a home was 20 percent. That’s $40,000 on a $200,000 property, a lot of money for most people.

Today, however, with new ?nancing available from Fannie Mae and Freddie Mac (the “big brothers” of ?nancing who buy most of the loans that lenders and others make on the secondary market), that’s all changed. Today you can easily get ?nancing for 90 percent of your purchase. Depending on your ?nancial situation, you may be able to get 100 percent, sometimes even 103 percent of ?nancing (to help pay for some of your closing costs)! These are called “con­forming” loans. (They conform to Fannie Mae and Freddie Mac underwriting standards.)

Is there a catch?

Of course there is! You have to meet speci?c guidelines set up by the two giant secondary lenders. Generally speaking these guide­lines are as follows:

Underwriting Guidelines for “Big Brothers:” Fannie Mae and Freddie Mac Loans

• Maximum loan amount (as of this writing) is $322,700
• Must meet strict credit guidelines including a strong FICO score (see below)
• Must meet strict income guidelines

Where do you get this “miracle” ?nancing? Almost any bank, mortgage broker, or other large lender can handle it for you. (See Chapter 4 for more details on locating a good lender.)

Tip-Special Loans For Special Borrowers

You do not always need to have great credit or high income to qualify for a conforming loan. Both lenders have special programs that are designed for people with limited income and credit problems. For a few examples (available through lenders, not directly from Freddie Mac or Fannie Mae):

? Affordable Gold^® 5 from Freddie Mac, is designed for moderate-to low-income borrowers. It only requires a 5-percent down payment and is available on a mortgage with terms of 15, 20, and 30 years.

? Freddie Mac’s, Affordable Merit Rate^® Mortgage is a mortgage for borrowers who have had some small credit problems. The loan is for a higher interest rate. If the borrower is able to make 24 con­secutive on-time payments within a four-year qualifying period, the interest rate is reduced.

? Fannie Mae’s Fannie 97^® offers a 97-percent mortgage. There are, however, income and geographic area restrictions. And the bor­rower must participate in face-to-face education programs. And there are other restrictions.

Other Low-Down-Payment Mortgages

There are other ways to get ?nancing with little to nothing down. VA (Veterans Administration) guaranteed loans, up to around $240,000, are for nothing down. FHA(Federal Housing Administration) insured loans, up to around $210,000 are for just a little bit down. (See the next chapter for details on these.)

[tags]Mortgage Broker, Mortgage Paymen, Good Lender, Special Loans[/tags]