Orlando Real Estate

 

The Down Payment

The amount you have available for a down payment will affect what types of loans for which you can qualify. Down payments typically range from 3 to 20 percent of the purchase price for the property.

Tips for Accumulating a Down Payment

  • Save
    Look for ways to reduce your monthly expenditures to save toward a down-payment. You could enroll for an automatic savings plan at your bank to have a portion of your payroll automatically transferred into savings. Most people save a couple of years for their down payment.

  • Borrow the down payment from your retirement plan
    Check the provisions of your retirement plan. You can borrow funds from a 401(k) plan for a down payment or make a withdrawal from an Individual Retirement Account. Be sure you understand the tax consequences, repayment terms and/or possible early withdrawal penalties.

  • Move
    You may be able to save additional funds if you can move into less expensive housing.

  • Reduce other higher interest rate debt
    Paying off credit cards will initially reduce your savings, but the money you will save from higher interest rates will pay-off in the long run.

  • Make a deal with the seller
    In some circumstances, it is appropriate to ask the seller to carry a second-mortgage to cover your down payment. Typically, you will pay a slightly higher rate for this second mortgage.

  • Sell some investments

  • Get a second job and save your earnings

  • Skip a year's vacation

  • Gift from Family
    Parents and other family members are often anxious to help children buy their first home and may have the means to give you a gift of money for a portion or all of your down payment.


Alternative Sources

  • No-down and low-down Mortgages

    • FHA Loans
      The Federal Housing Authority (FHA), which is part of the U.S. Department of Housing and Urban Development (HUD), plays a significant role in helping low- to moderate-income families qualify for mortgages. FHA assists first-time buyers and others who would not qualify for a conventional loan, by providing mortgage insurance to private lenders. Interest rates for an FHA loan are usually the going market rate, while the down payment requirements for an FHA loan are lower than conventional loans. The required down payment can be as low as 3 percent and the closing costs can be included in the mortgage amount.
       

    • VA Loans
      VA Loans are guaranteed by the U.S. Department of Veterans Affairs. Service persons and veterans can qualify for a VA Loan, which usually offers a competitive fixed interest rate, no down payment and limited closing costs. While the VA does not issue the loans, it does issue a certificate of eligibility required to apply for a VA loan.
       

    • Piggy-back Loans
      A second mortgage that closes with the first. Often the first mortgage is for 80% of the purchase price and the "piggyback" is for 10%. The home buyer covers the remaining 10% with their down payment. (Some lenders will write a second mortgage of 15% or even 20% of the purchase price.)
       

    • "Carry Back" Mortgage
      In the case of the seller "carrying back a second mortgage", the seller loans you part of his or her equity. In this scenario, you would finance the majority of the loan with a traditional mortgage lender and finance the remaining amount with the seller. Typically you will pay a slightly higher interest rate on the loan financed by the seller.


  • Housing Finance Agencies
    These agencies offer special loan programs to low- and moderate-income buyers, buyers interested in rehabilitating a home in a targeted area, and other groups as defined by the agency. Working through a housing finance agency, you can receive a below market interest rate, down payment assistance and other incentives.

    • The primary mission of Housing Finance Agencies is to boost home ownership in targeted areas, among first-time buyers and those with little money for down payments. Most of these non-profit agencies were funded with state government seed money and now operate independently.

      Click here for a list of Housing Finance Agencies.


  • Documenting Your Down Payment

    Documenting that the down payment comes from your savings and that you will have savings and/or assets over and above the down payment gives the lender confidence in your strength as a borrower and your ability to repay the loan.

    Take extra care to document the sources for any monies to be used for the down payment or closing costs.

    Acceptable Down Payment & Closing Costs Sources

    • Cash in a bank account
    • Mutual funds / stocks / IRA / 401K
    • Proceeds from the sale of another property
    • Gift from an immediate relative
       

    Click here to learn more about verifying your down payment, closing costs, income and debt.

by David Welch
Orlando Real Estate

 

Posted by David W. Welch on December 6th, 2017 11:15 AM
Last week I filled in for Hazel Hissam. I am on her team working on REO properties in addition to my regular real estate practice. There seem to be a lot of folks (buyers and agents) out there who are unfamiliar with REO sales, so here are a few things you need to know.

The first important thing you need to understand is that REO sellers are a bit different than traditional sellers. They are dealing with thousands of properties across the country. They do intend to sell their inventory, but they really do not care if it is the property you are trying to buy or one of the hundreds of others they are negotiating on at any given time. So, when you start to think "don't they want to sell this property", the answer is yes, but that does not mean they are going to give you what you want. The longer it is on the market, the more negotiable you may find them to be, but if you play the waiting game you may miss out on the property too.

The second important thing you need to understand about REO sales is that each lender, Fannie Mae and Freddie Mac has their own process. You are not going to go around that process, and there are no short cuts to that process. These processes do not need to make sense to you, because they won't. You don't even need to fully understand the process. You do need to understand that when they give you a time frame, you need to meet it. If you do not meet their time frame, they will cancel your offer, and you will go back to square one. Pay attention to the instructions you are given, and follow those instructions. If they say wire the deposit - wire the deposit.

Finally, in Florida if you are purchasing an REO, it will come with a title insurance policy and a marketable title. Liens, home owners association (HOA) fees, taxes, etc., will be settled by the seller at closing. Do not write in extra verbiage on the contract or the sellers addendum stating "seller to provide clear title" or some other language about this. The seller will not sign "written in" terms or addenda with additional terms. I am not a lawyer, your agent is probably not a lawyer either, so if you have concerns about this speak to a real estate lawyer in your state to see how this works where you live. You should do this before signing a contract. You can also have a real estate attorney review the title evidence prior to closing.

Auction - The rules are different for auction properties. Most auctions I am aware of here in The Sunshine State only provide a quit claim deed, and do not warrant anything about the property. You should have your own title search and lien searches performed, before bidding on an auction property. Also, you will likely pay an "auction premium" of 5% of the sales price on top of your offer.
Posted by David W. Welch on November 8th, 2014 10:38 AM

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