by SupremeLending | Jul 29, 2024
If you’re thinking of buying a home, you may want to consider the possibility of seller concessions to help reduce upfront loan expenses. Imagine having a portion of your mortgage closing costs covered or even getting some essential home repairs taken care of without having to dig into your savings. That’s where seller concessions come in, also known as seller assistance. It can be a significant benefit for both buyers and sellers. In this guide, we’ll explore what seller concessions are, seller assist limits, and frequently asked questions.
What Are Seller Concessions?
Seller concessions are contributions paid by the seller that go toward the homebuyer’s closing costs. These can include closing fees, prepaid expenses, or even home repairs or improvements. These concessions can help lower the amount of money a buyer needs to bring to the closing table, making the home purchase more affordable.
The concession amount can be expressed as a percentage of the home’s purchase price or fixed dollar amount.
Examples of What Seller Concessions Can Cover
Seller concessions can be used for a variety of mortgage and homebuying costs including:
- Loan Origination Fees. Fees charged by the lender for processing the loan application.
- Appraisal Fees. This is the cost of having a home appraised.
- Home Inspection Fees. This is the cost of having a home inspected before closing.
- Property Taxes. Prepaid property taxes may be included in closing.
- Title Insurance. This insurance protects the buyer and lender from potential disputes over ownership.
- Discount Points. Also known as mortgage points, these help pay down the interest rate using upfront costs.
- Home Repairs or Improvements. Costs for necessary repairs identified during the home inspection or agreed-upon improvements before the sale.
How Do They Work?
- Negotiation. Seller concessions are typically negotiated as part of the buyer’s and seller’s purchase agreement. This request can be made with help from a real estate agent.
- Agreement. If the seller agrees to concessions, the specific details are outlined in the contract and must not exceed a specified limit depending on the loan type.
- Appraisal. The agreed-upon concessions cannot inflate the property’s value. Lenders require an appraisal to ensure the property’s market value supports the loan amount, including the concessions.
- Loan Approval. The lender will review the agreement and appraisal. This will ensure that the concessions align with the mortgage program’s guidelines.
- Closing. When the loan is ready to close, the costs are applied to the buyer’s closing costs or other agreed-upon expenses.
Who Benefits from Seller Concessions?
Both the buyers and sellers can benefit!
- Buyers. Concessions can lower the upfront costs needed to buy the home, making it easier to afford the property.
- Sellers. Offering concessions can also make the home more attractive for potential buyers, helping sell the home quicker.
Seller Assistance Limits
Limits on how much a seller can contribute vary depending on the loan type and down payment:
Conventional Loans
- Primary residence and second homes:
- 3% maximum with less than 10% down
- 6% maximum with 10-25% down
- 9% maximum with more than 25% down
- Investment properties:
- 2% maximum regardless of down payment
FHA/USDA Loans
- 6% maximum toward closing costs and prepaid items
VA Loans
- 4% maximum toward prepaid items
- No limit for closing costs or reasonable discount points
Frequently Asked Questions
Can the seller cover the entire down payment?
No. Seller concessions cannot be used for the full down payment. They are typically used for closing costs, prepaid expenses, and other associated fees, while meeting the loan guideline limits.
Does seller assistance affect the loan approval process?
Seller concessions themselves do not affect loan approval, but lenders can consider the impact on the Loan-to-Value (LTV) ratio and may require specific guidelines.
How does it impact the home appraisal?
The home’s appraisal must support the purchase price, including any seller contributions. If the appraised value is lower than the agreed-upon price, the lender may require adjustments.
Can a buyer negotiate for concessions?
Yes! Homebuyers can request this during negotiations. It’s essential to work with a knowledgeable real estate agent to help navigate the process.
How do seller concessions benefit first-time homebuyers?
First-time buyers often benefit from this as they may have limited funds for closing costs and other expenses. Seller assistance is another great way for more people to unlock the door to homeownership!
If you’re ready to start your homebuying journey, your local Supreme Lending team is ready to help! Contact us to learn about your mortgage options and get pre-qualified today.
by SupremeLending | Jul 17, 2024
Download a copy of the refinance checklist here.
If you’re considering refinancing* your mortgage, there are several ways you can prepare beforehand to ensure a smooth, timely transaction. The refinancing process requires careful planning and organization, starting with gathering the necessary documentation. Just like applying for a traditional mortgage, lenders will require several documents to refi your loan. They’ll need to review your existing mortgage, finances, debts, and capacity to repay the loan. Here’s a general breakdown of what you’ll need to prepare along with a refinance checklist.
Understanding Your Goals of Refinancing
To refinance an existing mortgage essentially involves replacing it with a new one. The most important step of refinancing is to understand the outcome of your new home loan. Whether you’re looking to change the loan term, reduce the interest rate, or take out cash from your home equity, using a refinance calculator can help you get an estimate of associated costs and new monthly payment.
Refinance Checklist
When you’re ready to begin the refinancing process, it’s time to collect the documents needed to refinance. These include details to help lenders verify your income, current mortgage, debts, assets, and other documents depending on individual situations. Here’s a refinance checklist of basic documents to help guide you in preparing to refinance.
Income Documents
- Pay stubs, past 30 days
- W-2s, past two years
- Tax returns, past two years, if self-employed
- Profit and loss statement, if self-employed
- Social security, pension, disability, or other income verification, if applicable
Home and Mortgage Documents
- Mortgage statement
- Homeowners insurance declarations page
- Homeowners association (HOA) statements, if applicable
Identification
- Driver’s license or state-issued I.D.
- Social Security card
Debt Statements, If Applicable
- Credit card statements
- Student loan balance
- Car loan balance
- Personal loan balance
- Home equity loan
Asset Documents
- Bank statements (checking and/or savings accounts)
- Investment account statements
- Retirement account statements
- Proof of any large deposits or gift funds, if applicable
- Other asset statements
Other Situational Documents, If Applicable
- Bankruptcy documentation
- Divorce decree
- Child support or alimony payments
- Credit or employment gap explanation letter, if requested
- Proof of any rental income collected from investment properties
Simplify Your Refinancing with Supreme Lending
Navigating the refinancing process may seem overwhelming at first, but with Supreme Lending by your side, our experienced mortgage professionals can help guide you every step of the way. From ensuring you gather all necessary documents on the refinance checklist to providing timely updates on your loan status, we’re committed to providing a seamless mortgage experience.
Ready to take the next step in refinancing? Contact your local Supreme Lending branch to get started.
*By refinancing an existing loan, total finance charges may be higher over the life of the loan.
by SupremeLending | Jul 8, 2024
Learn about Supreme Lending’s BEYOND Program, an ITIN Loan Option.
Did you or someone you know just miss out on becoming eligible for a mortgage? Supreme Lending may have the solution with the BEYOND mortgage program, commonly known for being an ITIN loan option. However, it’s so much more than that!
Whether a gig worker, recent college graduate, or multi-generational family, the BEYOND program provides more opportunities for prospective homebuyers who may not yet qualify for an FHA loan. What is the BEYOND mortgage program, who can benefit from it, and how does it work? Read on to discover if this loan option could unlock the door to homeownership.
What Is Supreme Lending’s BEYOND Loan Program?
Essentially, the BEYOND program offers a lower down payment option for homebuyers who may be just beyond eligibility for an FHA loan, including non-permanent resident aliens with an Individual Taxpayer Identification Number (ITIN) or U.S. citizens and individuals who don’t have an established work or tax history.
Through this program, eligible borrowers can buy a primary residence with a purchase sales agreement. Then, they can refinance* down the road into direct ownership if they meet the qualifications in the future. This allows borrowers to get mortgage-ready while holding the equitable title interest.
Who Is the BEYOND Program Designed for?
Supreme Lending’s BEYOND program may be a good ITIN loan option for foreign national borrowers who do not have work authorization or a Social Security Number (SSN). However, ITIN borrowers are not the only people who may benefit from this unique loan program. Gig workers who may not have an established W2 income or newly self-employed people may qualify. Here’s an overview of borrowers who may be eligible for this program:
- Non-permanent resident aliens with an Individual Taxpayer Identification Number (ITIN); no work authorization or SSN required
- For example, ITIN mortgages typically require a higher down payment of 10-20%, so this program offers a more affordable ITIN loan option
- Deferred Action for Childhood Arrivals (DACA)
- 1099 or gig workers
- Borrowers who are relocating or awaiting citizenship
- Borrowers with a new job
- College graduates; deferred student loans do not need to be included in Debt-to-Income (DTI) ratio
- Multi-generational households
- Borrowers with credit issues preventing mortgage approval
How It Works?
- The first step of the BEYOND program is simply determining if the homebuyer qualifies. They will need to meet the program guidelines and get pre-approved for the purchase price limit based on income qualifications. An important starting point is to determine if the borrower has proof of successfully making rental payments within the last year. Several other criteria will also need to be considered.
- Once approved and the buyer makes an offer to buy a qualified property, they’ll enter into a sales contract. The contact is then assigned to a third-party government entity approved by the U.S. Department of Housing and Urban Development (HUD) to purchase the home as an investment.
- The buyer must pay at least a 3.5% down payment along with additional administrative fees.
- An FHA appraisal and home inspection are required.
- The government entity buys the home using an FHA loan.
- The homebuyer also signs a seller-financing agreement with the third-party entity, which gives them a recorded equity interest in the property. This agreement acts similar to a standard mortgage or deed of trust.
BEYOND Loan FAQs
What Proof of Rental History Is Accepted?
A key requirement is for the borrower to provide proof of successfully paying rent for the past year. This could be through checks, money orders, or reviewing bank statements. Living for free with family members will not qualify.
Are There Credit Requirements?
For ITIN borrowers, no credit score is required. For non-ITIN borrowers, a minimum credit score of 600 is required.
What Form of Identification Is Needed?
The borrower will need to present two forms of unexpired government-issued identification. One must be a picture ID (i.e. driver’s license or passport). ITIN borrowers must provide proof of ITIN documentation. Valid IDs from other countries are accepted.
What Upfront Costs Are Required?
Qualified borrowers will need to pay at least the minimum down payment of 3.5% along with program administration fees and the first monthly payment.
Does the Borrower Own the House?
They will have equitable title interest, which is legal ownership. This means borrowers can benefit from any equity gains. However, the title of the home hasn’t been fully transferred. Additionally, for borrowers who do qualify on their own in the future, the loan may be refinanced* into the borrower’s name and have the title transferred.
Homeownership In Reach
With programs like BEYOND, Supreme Lending is committed to providing affordable, flexible mortgages for all. Contact your local branch to see if you may qualify and take the leap into homeownership.
*By refinancing an existing loan, total finance charges may be higher over the life of the loan.
by SupremeLending | Jun 26, 2024
Understanding Down Payment Assistance Programs
When it comes to buying a home, one of the most common misunderstandings is that you need at least a 20% down payment. This misconception can discourage potential buyers, especially first-time homebuyers, from pursuing their dream of homeownership. Good news – there are several low and no down payment options, including down payment assistance programs, designed to help people become homeowners without hefty upfront costs. Discover what down payment assistance is, how it works, benefits, and other lower down payment mortgage options.
What Are Down Payment Assistance Programs?
Down payment assistance (DPA) refers to programs designed to provide financial aid to help cover part or all of the down payment and, in some cases, closing costs associated with purchasing a home. These programs can significantly reduce the upfront costs of buying a home and help more people across the country buy a home.
How Does Down Payment Assistance Work?
Down payment assistance programs are often provided by state and local governments, non-profit organizations, or other entities dedicated to promoting homeownership in local communities. DPA can come in various forms, such as grants, forgivable second loans, deferred payment loans, and tax credits. Down payment assistance programs can have specific guidelines, often targeted for first-time homebuyers and lower income areas.
- Grants. These are funds that do not need to be repaid. Essentially, they are a gift to help cover a home’s down payment.
- Forgivable Loans. When a loan is forgivable, a borrower doesn’t need to repay it after a certain time period and agreed upon criteria is met. For example, living in the primary home for a set number of years.
- Deferred Payment. This refers to loans that do not need to be repaid until the home is sold, the borrower refinances, or the mortgage is paid off.
- Tax Credits. Some down payment assistance programs offer mortgage credit certificates (MCCs) that provide a direct tax credit based on the interest paid on the loan.
Common Eligibility Requirements
While loans and down payment assistance vary by lenders and program guidelines, here’s an overview of some general eligibility criteria that may be considered.
- Income Limits. Many mortgage DPA programs have maximum income limits based on family size and location. Some lenders may consider how a borrower compares to the Area Median Income (AMI).
- Credit Score. Like most mortgages, credit score is a major factor. A minimum credit score is typically required, such as 620 for FHA and VA.
- First-time Homebuyers. Several down payment assistance programs are designed specifically for first-time homebuyers or people who haven’t owned a home within the past three years. Homebuyer education may also be included with the program as well.
- Primary Residence. In general, down payment assistance is used toward owner-occupied primary residences.
- Location. Properties may also need to be in a specific geographic area or within a targeted zone for revitalization to qualify.
- Profession. Some down payment assistance programs may also target specific occupations, such as first responders, educators, or healthcare providers. These options help give back to those who serve our communities.
Benefits of Down Payment Assistance
- Affordability. Evidently, down payment assistance can greatly reduce the amount of upfront costs when buying a home. When getting pre-qualified for a DPA program, you’ll be able to determine the right programs and potential savings.
- Increased Accessibility. Many people who might not have qualified for a traditional mortgage due to lack of savings, may qualify using down payment assistance. This helps open more doors to homeownership in your community.
- Flexibility. Down payment assistance typically can be combined with various loan types, including FHA, VA, and USDA. These typically already have lower down payment requirements to begin with. Work with an experienced, knowledgeable loan officer to discuss your options and understand what you may qualify for.
Types of Assistance
Local and State Bond Programs
Many local, regional, and state governments offer down payment assistance programs. Supreme Lending is proud to partner with these types of organizations to provide a wide range of DPA options across the country. Examples include statewide programs through the Texas State Affordable Housing Corporation (TSAHC) or California Housing Financing Agency (CalHFA), and more localized options, such as the Orange County Housing Finance Authority’s First-Time Homebuyer program.
Specialized Options
Fannie Mae and Freddie Mac also have down payment assistance options, such as HomeReady® and Home Possible® that offer down payment requirements as low as 3% for Conventional loans.
Supreme Lending’s Down Payment Assistance
Through Supreme Lending’s Supreme Dream 100% financing, no-money-down program, qualified borrowers get a 30-year fixed FHA loan, followed by a fully forgivable second loan to be used toward down payment, closing costs, and pre-paids. A unique feature of this program is that no income limits are required and it can be combined with a 2-1 temporary rate buydown.
Other Low Down Payment Mortgages to Consider
- FHA loans can require down payments as low as 3.5%.
- VA loans offer qualified military Veterans 100% financing, meaning zero down payment required.
- USDA loans, guaranteed by the U.S. Department of Agriculture, offer a zero down payment requirement for properties in eligible rural areas.
- Click here for an overview of common down payment requirements broken down by mortgage type.
At Supreme Lending, we’re always looking for innovative ways to help make homeownership more affordable. Whether it’s through local bond programs, low down payment loans, or our own Supreme Dream down payment assistance.
Contact us today to explore your mortgage options and down payment assistance programs.
by SupremeLending | Jun 10, 2024
When it comes to financing your new home, choosing the right mortgage is so important – FHA loans, Conventional mortgages, down payment assistance – there are several options to choose from. Each loan program has its own set of guidelines, benefits, and considerations. Comparing loan types can help you make an informed decision of what may fit your needs and homeownership goals. Let’s examine the difference between these two popular options: FHA loans and Conventional mortgages.
What Is an FHA Loan?
FHA loans are mortgages insured by the U.S. government’s Federal Housing Administration (FHA) against borrower default. They are designed to help more people who may not qualify for Conventional loans achieve homeownership. Here are some key benefits of FHA loans:
- Lower Credit Score Requirements. FHA loans typically require a minimum credit score of 580, which is lower than Conventional loans.
- Low Down Payment. One of the most attractive highlights of FHA loans is the low down payment requirement. Qualified borrowers can put down as little as 3.5% of the purchase price, plus there may be options to include down payment assistance.
- Flexible Debt-to-Income (DTI) Ratio. FHA loans allow higher DTI ratios, making it more feasible for borrowers with existing debt to qualify.
- Assumable Loans. FHA loans are assumable, meaning if you sell your home, the buyer can take over your existing FHA loan. This could potentially help save buyers money on closing costs and interest.
- More Lenient Qualification Requirements. In general, the qualification criteria for FHA loans is more moderate compared to Conventional loans. This helps a broader range of borrowers become homeowners.
What Are Conventional Loans?
Conventional mortgages are loans not insured or guaranteed by any government agency unlike FHA. They are offered by private lenders. Borrowers typically need to have a higher credit score and lower DTI ratio.
- Lower Mortgage Insurance Costs. While FHA requires mortgage insurance premiums (MIP) for the life of the loan, Conventional loans typically only require private mortgage insurance (PMI) until the borrower buys down 20% of the mortgage.
- Higher Loan Limits. Conventional loan borrowers can generally qualify for higher loan limits compared to FHA. This can help borrowers purchase more expensive homes.
- Variety of Loan Terms. Conventional mortgages offer a wide range of loan terms and options, including fixed-rate and adjustable-rate mortgages (ARMs), providing more flexibility.
- Potential for Lower Interest Rates. Borrowers with higher credit scores and larger down payments can often secure lower interest rates with Conventional loans than FHA.
- Conforming & Non-Conforming Options. Conforming conventional loans meet the guidelines of government-sponsored enterprises (GSE), such as Fannie Mae and Freddie Mac. While non-conforming loans do not and can have higher loan amounts, including Jumbo loans.
Frequently Asked Questions About FHA vs. Conventional Loans
Which loan is better suited for first-time homebuyers?
FHA loans are often a great option for first-time buyers due to their lower credit score and down payment options. They provide a pathway to homeownership for those who may not initially qualify for a Conventional loan.
Can I refinance* my FHA loan into a Conventional mortgage?
Yes! Borrowers can refinance an FHA loan into a Conventional one. This could potentially eliminate the FHA’s mortgage insurance requirement if you have enough equity in the home and lead to more flexible terms.
*By refinancing an existing loan, total finance charges may be higher over the life of the loan.
Are there income limits for FHA or Conventional?
FHA mortgages don’t have income limits, but they may have loan limits based on the location of the property. Conventional loans don’t have income limits either, however higher income and a better credit profile can help you qualify for a larger loan amount.
How do I decide which loan is right for me?
Take into concentration your credit score, funds you have for down payment and closing costs, and long-term goals. FHA can be ideal for those with lower credit scores, while Conventional loans may be better suited for borrowers with stronger credit profiles. Getting pre-qualified with Supreme Lending can help give you estimated costs for each option.
Whether you opt for an FHA loan or a Conventional, both options provide pathways to owning your dream home. It’s important to review your current situation, consider the benefits of different loan types, and work with a knowledgeable loan officer to help guide you through the mortgage process.
At Supreme Lending, we’re committed to helping you navigate the homebuying process with ease. Contact your local branch to get started today!
by SupremeLending | May 9, 2024
Learn why FHA loans may be a perfect option for first-time buyers.
While first-time buyers are hunting for their perfect home, they’ll also need to be on the hunt for the perfect mortgage—which may seem more overwhelming and not as enjoyable as touring properties. There are several financing options to choose from and programs available. It’s all about finding the one that fits best. At Supreme Lending, our goal is to provide the guidance you need to make informed decisions and be confident with your loan choice.
In this article, we’re highlighting a mortgage option that is designed specifically to help first-time buyers, FHA loans. Discover the many FHA loan benefits and why this option may be right for you.
Understanding FHA Loans: A Brief Overview
First, what exactly is an FHA loan? The Federal Housing Administration (FHA), a branch of the U.S. Department of Housing and Urban Development (HUD), insures FHA loans, which are issued by approved lenders. This insurance protects lenders against losses if a borrower defaults on their loan, making FHA loans less risky for lenders and consequently more accessible to first-time buyers.
FHA Loan Benefits
1. Low Down Payments.
To help overcome one of the biggest barriers for first-time homebuyers, FHA loans typically require a lower down payment compared to Conventional loans. This makes homeownership more accessible to people who may not have substantial savings or want to pay less upfront costs.
2. Flexible Credit Requirements.
FHA loans are more lenient when it comes to credit, allowing borrowers with lower credit scores to qualify for financing, which is beneficial for those who are still establishing their credit history. See common credit score and down payment requirements here.
3. Assumable Loans.
What does this mean? FHA loans are assumable, which means that if you sell your home, the buyer can take over your FHA loan, potentially offering them a competitive advantage in a rising interest rate environment. Restrictions on assumability may apply.
4. Lenient Debt-to-Income (DTI) Ratios.
DTI compares a borrower’s debt to their monthly income to measure’s their ability to manage monthly mortgage payments. FHA loans often allow for higher debt-to-income ratios compared to Conventional loans.
5. Lower Mortgage Insurance Premiums.
While FHA loans require mortgage insurance premiums (MIP), the premiums are often lower than those of Conventional loans, especially for borrowers with lower credit scores or smaller down payments. In fact, the FHA annual mortgage insurance premium was lowered from 0.85% to 055% in 2023 for most borrowers.
6. Seller Closing Cost Assistance.
Another benefit buyers could take advantage of is negotiating seller concessions to help cover upfront costs. FHA loans can allow sellers to contribute up to 6% toward the buyer’s down payment, appraisal fees, or other associated closing costs.
7. Gift Funds.
Gift funds are given to someone with no expectation of repayment, for example parents gifting their newlywed children money for a down payment. FHA loans allow borrowers to use gift funds from family members or other eligible sources to cover their down payment and closing costs. Note: A gift letter is required to confirm the gift funds.
8. Renovation Loans.
The FHA 203(k) Renovation loan is a home rehabilitation financing option, which allow borrowers to finance both the purchase price of the home and the cost of eligible renovations or repairs into a single loan. This helps buyers afford any necessary improvements and can open their home search to consider fixer-uppers.
9. Streamline Refinancing.
FHA loans offer a streamlined refinancing option, known as the FHA Streamline Refinance. This allows borrowers to refinance their current FHA loan with minimal paperwork and documentation, saving time and money.
10. No Prepayment Penalties.
FHA loans do not have prepayment penalties unlike some traditional mortgages. This allows borrowers to pay off their mortgage early without facing additional fees or charges, which can save money on interest over time.
11. 100% FHA Financing Available.
Did you know Supreme Lending offers two competitive FHA 100% financing options? Through the Chenoa Fund or the Supreme Dream program, these include a 30-year fixed-rate FHA loan paired with a second forgivable loan to be used toward down payment, closing costs, and prepaids.
These benefits make FHA loans an attractive option for first-time homebuyers, offering accessibility, flexibility, and affordability to achieve homeownership.
Ready to get started? Contact Supreme Lending today to learn more about FHA loans or other mortgage services we offer.
