Is There a Way to Get Money for Closing Costs Or Other Expenses?

Posts Tagged ‘Housing Stimulus’

Is There a Way to Get Money for Closing Costs Or Other Expenses?

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Q: I’m Purchasing a New Home That’s Being Built and I Close in March. Is There a Way to Get Money for Closing Costs Or Other Expenses?

A: There are many opportunities for home-buyers, especially first-time purchasers, to get free money and other resources to buy a house. First, there’s the federal tax credit available for those who close on a home by April 30, 2010 and close by July 1, 2010. The tax credit goes up to $8,000 for first-time buyers and up to $6,500 for repeat homebuyers. You don’t have to wait until you file your taxes to take advantage of this tax credit. It can be applied in advance toward your closing cost or home down payment. Additionally, there are eight overall sources of aid you can turn to for financial and educational assistance in buying a home of your own. The eight sources include:

•   Federal and/or National Programs
•   State Aid
•   County Initiatives
•   Local/Municipal or City Efforts
•   Non-Profit and Community-Based Organizations
•   Lender-Specific Programs
•   Programs Based on Your Job or Occupation
•   Employer Assisted Housing Initiatives

It’s common for there to be overlap between programs. For instance, a state might offer aid to certain workers, such as teachers, fire fighters, or police officers or a community program might work closely with designated lenders or specific types of national mortgage loan programs. As you read about the staggering array of financial assistance initiatives available nationwide, keep in mind an important trend that is emerging in many communities. Lenders are starting to permit borrowers to layer two, three, or more first-time buyer programs. This means you get the benefit of multiple sources of aid – instead of just one – which allows you to offset higher home prices, and enter a new home in a stronger financial position.

Your First Home

For more information, check out chapter 4 of my book, Your First Home: The Smart Way to Get It and Keep It. The entire chapter is devoted to offering details on each of the eight types of homebuyer assistance programs listed above. It also provides specific listings – for every state in the country – of programs that offer free money to homebuyers.

How Do I Know If I’m Eligible for the Government’s Mortgage Modification Program?

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Author: The Money Coach

If you’ve tried negotiating with your mortgage lender, have adjusted your budget, and done everything in your power to pay your house note, but have still come up short – it may be time to seek government assistance.

Part of President Barack Obama’s $75 billion mortgage rescue plan is aimed at helping people avoid foreclosure – by either refinancing their house notes or modifying their loans. Many lenders, large and small, are even agreeing to delay foreclosure proceedings for homeowners that meet certain criteria. To find out if you’re likely to qualify for government assistance under the Home Affordable Modification Plan, visit http://www.MakingHomeAffordable.gov. This is where you can find out if you qualify for a loan refinance or a loan modification under President Obama’s housing plan.

Are You Eligible for a Loan Modification or Refinance?

To be eligible for a loan modification, you have to meet at least five criteria:

the home must be your primary residence
you must owe less than $729,750 on the home (the federal limit)
you must be having trouble making payments (but you don’t have to be late)
your mortgage must have been received before Jan. 1, 2009; and
your total housing payment (principal, interest, taxes & insurance) must now exceed 31% of your gross income

To be eligible for a loan refinance, your existing mortgage must also be owned or insured by Fannie Mae or Freddie Mac. (That is not a criteria for a loan modification). To find out if your home loan is owned or insured by Fannie or Freddie, contact:

1-800-7FANNIE (8am to 8pm EST)
www.fanniemae.com/loanlookup

or

1-800-FREDDIE (8am to 8pm EST)
www.freddiemac.com/mymortgage

The Obama administration says its plan will help as many as 5 million homeowners refinance their mortgages and save their homes. The government’s loan modification program is designed to lower your interest rate to below 5% — perhaps as low as 2% — so that your payment is no more than 31% of your gross income.

Advice for Those With Delinquent Mortgages

Get Your Documents in Order

Once you determine that you’re eligible for a loan modification, pull together a slew of paperwork: paycheck stubs, your last tax return, recent mortgage statements, an itemized list of your expenses, as well as anything that substantiates your financial hardship – such as those large medical bills, and a letter describing why you fell into trouble in the first place (i.e. a loss of income, etc.). You’ll need all these documents to backup your request for help. Only your current lender can modify the terms of an existing mortgage.

Be Prepared For a Slow Process

One thing to keep in mind is that a loan modification is not mandatory. Lenders are doing these on a “voluntary” basis. Therefore, banks don’t have to reply to you in, say, 30 days, or even in 60 days. However, banks are getting “incentive” payments to do workouts/loan mods, so when President Obama launched this housing rescue plan, nearly all the major banks got on board and agreed to further postponements and freezes on foreclosures. Many of them signed agreements to participate. Here is a list of lenders/loan servicers on board with the program, according to the MakingHomeAffordable.gov website: http://www.makinghomeaffordable.gov/contact_servicer.html.

Contact a HUD-Approved Housing Counselor

If you get stone-walled in trying to negotiate directly with your lender or loan servicer, you’re not alone. The same thing has happened to millions of people. To minimize your frustrations and possibly receive faster help, get a trusted third party involved. Contact a reputable non-profit agency, such as the National Foundation for Debt Management (NFDM), a non-profit agency with HUD-approved housing counselors that can offer you free assistance. Reach NFDM at http://www.NFDM.org or 866-409-6336.

$8,000 Homebuyer Tax Credit Can be Applied to Closing Costs

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Author: The Money Coach

Add one more incentive to the up to $8,000 in tax credits the government is offering first-time home buyers (including those who haven’t owned a home in the last three years): Apply the funds toward your down payment, closing costs or to buy down your interest rate. But note, with this option comes some downsides.

Last week the FHA announced that it will permit lenders to give qualified buyers a short-term bridge loan, up to the amount of their tax credit, to use as down payment assistance.

A bridge loan with a home sale is a temporary loan that “bridges” the gap between the sales price of a new home and a home buyer’s new mortgage until other funds are obtained.

For the home buyer, essentially this means that you are selling, or promising, your tax credit to the lender in exchange for them loaning you the money up front to help cover your closing costs.

Upsides
This is all good news, as applying your tax credit toward your home purchase can help you:

lower how much loan you need to take out, thus lowering your monthly payments
cover your closing costs, which means this may provide you with just enough funds to help you qualify to buy a home.

Downsides

Still need 3.5% down. You cannot use the tax credit loan to cover any part of the 3.5% minimum downpayment that FHA requires, so you will still need to come up with some funds on your own. (You can apply the tax credit loan toward an additional downpayment to, say, help you meet a 5% downpayment, or you can use it to cover other closing costs).
Processing fees deducted. Remember, this option is a loan, and thus is subject to the lender’s fees, which could equal up to 2.5% of your anticipated tax credit. What this means is in the end you will be getting less money back on your tax credit. For example, if you qualify for the full $8,000, but used it toward closing costs, you’d only receive funds toward your purchase equal to $7,800 because $200 (2.5% of $8,000) is paid to cover your lender’s processing fees.So, if you don’t need to take out a bridge loan, don’t and save yourself the extra fees for extra cash in your pocket.

Your First Home: The Smart Way to Get It and Keep It

For more information on buying a home, see my book “Your First Home: The Smart Way to Get It and Keep It.

Do You Qualify to Refinance Your Mortgage Under Obama’s Making Home Affordable Programs?

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Author: The Money Coach

By Lynnette Khalfani-Cox, The Money Coach

If you are a homeowner in good standing with your mortgage, but you can’t seem to get refinancing because your home has lost equity in this declining economy, you might instead qualify to refinance your mortgage to something more affordable under the Home Affordable Refinance plan if you can answer yes to all of the following questions:

Current on your mortgage? If you haven’t been more than 30-days late on your mortgage payment in the last 12 months prior to applying to the program, then yes, you are considered current on your mortgage.
Owner-Occupant? If you live in the home as your primary residence or at least in one of the units of a property you own with four or less units, then yes, you are an owner-occupant.
You owe about what your property is worth? If you owe on your current mortgage close to the appraised value of your property, but not more than 105% of the current market value of the property, then yes, you owe about what your property is worth. The current value of your property will be determined after you apply to refinance, but as an example, if you think your property is worth $200,000 but you owe $210,000 or less on your first mortgage you may qualify.
Fannie Mae or Freddie Mac own your loan? If your loan is owned by or has been securitized by Fannie Mae or Freddie Mac, you should qualify. To find out if either organization backs your loan, call 1-800-7FANNIE or 1-800-FREDDIE or enter your address online at the lookup tool here at Fannie Mae or here at Freddie Mac. Please double check the ownership with your lender or loan servicer. If you do not have a Fannie Mae or Freddie Mac loan, you will not qualify. Note, if your monthly statements come from say, CitiMortgage or Wells Fargo, your loan still could be backed by Fannie or Freddie, so be sure to check.

If You Answered Yes to All
If you were able to answer “Yes” to all of the above questions, you may qualify to have your loan refinanced under the Making Home Affordable — Refinance program and are ready for the next step, which is to call your lender or mortgage servicer at the number listed on your monthly statement. You can also apply through any Fannie Mae approved lender if your loan is backed by Fannie Mae.

If You Answered No to Some
If you could not answer “Yes” to all of the questions, don’t despair. You might qualify for the “loan modification” section of the Making Home Affordable program. To see if you qualify for that option, read my piece, “6 Steps to Determine If You Qualify to Modify Your Mortgage Loan to Lower Monthly Payments.”

Note: You have until June 6, 2010 to apply for and close on this refinance option.

Tip: To learn more about keeping your home, read my book, “Your First Home: The Smart Way To Get It and Keep It.” It has plenty of tips to suit even homeowners who are in their second or third home. See the table of contents and an excerpt in this downloadable PDF.

Ask The Money Coach

Posts Tagged ‘Housing Stimulus’