Posts Tagged ‘home buyer’

Tales of a Home Buyer – part 1

May 11, 2011

Written by Shawn DeVries

Let me start by saying that this was not my first time.  Not only have I purchased a home before, but I have obviously been on the selling side of the process.  I have experienced a refinance and even rented for a period in my life.  I now work in the lending industry and know the process of buying a home and what to expect.  Yet, I still experienced the same stress, fear, anxiety, worry, excitement, joy, anticipation and ultimate relief that every other home buyer and owner experiences when going through this process.  My emotional range may have something to do with me doing this as a single buyer this time, but I felt it all just the same.

If you are considering purchasing a home, you may wonder just what this journey is all about.  I thought you might like to know.  If you fully understand this process please don’t disregard this series, for I know you will find warm memories and at the very least some great humor as I relate my story to you.

My story really begins nearly three years ago.  After a divorce I relocated back home to start my life over again.  Let me set the stage very clearly by adding that “moving home” was taken quite literally by moving back into my parent’s house.  Oh yeah, I did it.  God bless my parents, for despite their honest intentions and good will, I really don’t think either of us knew what this would all entail.  Most of my belongings were packed into storage with the remaining pieces finding basement corners and emptied closets.  I was prepared for this journey to start over to take some time, but not quite this much time.  Let the fun begin.  Oh, did I mention I have two children in tow?  (I told you my story would have humor.  Ha!)

Fast forward now through the past three years as I find a new career, pay off debt, and save some money all in preparation of buying my own home.  When January of this year finally came, I was ready to go home shopping!  I thought this day would never come.  I knew to take care of my credit over this time and felt it was in great shape.  I had money set aside for the down payment, plus some for reserves.  I had crunched the numbers and knew not only what I could afford, but what I wanted to afford.  Yes, I am a little anal about details sometimes, but I was preparing to buy a home and I wanted no surprises.

Knowing that the first step in buying a home is to get pre-approved I started by gathering my documents (yes all seemingly 4,000 of them) and verifying the information (just short of the blood work) for my Loan Officer as he prepared to pull my credit report.  Despite having a good clue of what to expect, that 15 seconds between him hitting “submit” and seeing the actual report can feel like eternity.  What are my scores?  Did I really behave?  Will that oops from 5 years ago show up now?  What surprises will he find?  Oh please, oh please let my score be above that golden 640 so that I can shop for a house.  See?  Even people who work for lenders have real emotions and understand the angst our clients endure.

Well the report appeared.  Great scores, good behavior paid off, no glaring marks, no surprises, and above the benchmark score needed.  Whew!  My information was then entered into a program that analyzes the data and based on preset criteria makes a decision on whether or not I could be approved for a loan.  However to the borrower the answers feel like: go away you are only kidding yourself; we had better have someone else take a look at this because we’re not so sure; or yeah, we can do that… provided nothing weird happens.  I was relieved to learn that my information was approved.  My pre-approval was then written and off I went to find my house.  This would be a snap.

It’s Baaack! (In a Good Way!!)

June 2, 2010

This past February we posted information on Rural Development (RD) home loans – what it is, how it works, why this is such a great program.  Interest in this program has really grown over the past few years because it is so consumer friendly.  We too have seen a steady increase in RD loans.  Our company continues to underwrite more RD loans than any other lender in the state of Michigan.

Unfortunately, by April of this year funding for the program had already been exhausted for the fiscal year that runs October 1 – September 30.  Kevin Smith, Area Director for Rural Development explained that, “Record demand, not only in Michigan but nationally, for the Guaranteed Rural Housing loan program lead to the full utilization of Congressionally appropriated funding at an early time frame this fiscal year.”

While more federal dollars have not be allocated yet, the US Department of Agriculture Rural Development has decided to continue the program again for the remainder of this fiscal year by issuing conditional commitments again.  What this means is that lenders can conditionally approve and close RD loans. 

The original article we posted on this loan program follows.  Of course you can always contact us directly to for more information (866-982-9823) too.

RD Loans – A Great Option to Consider

An RD loan is a Rural Development home loan offered by the Rural Housing Service specifically for moderate to lower income residents buying homes in rural areas.  A rural area is defined as a community with a population of 10,000 residents or less.  Although some communities located outside of a metropolitan statistical area can qualify with populations up to 20,000 residents. 

In plain English this means if you would like to purchase a home in an area that is not a large city there is a program available.  For most, when you initially think of what a rural area is you might envision acres of farmland or large acreage properties where your neighbor is a mile away.  Not so.  In many instances rural areas are just outside of major cities.  In fact in the state of Michigan, more areas qualify for rural status than areas that do not.  Many of these areas are cozy suburban towns with close knit neighborhoods and strong local schools. 

Another point to note is that the RD loan program cannot be used to purchase or refinance farms or large acre properties where the land far out values the home.  This is a program for consumers who meet the typical credit requirements of obtaining a home loan.  They are just in a slightly lower income bracket and do not have enough funds on hand for a 20%+ down payment.  If this isn’t a program that helps the “little guy” I don’t know what does!  The largest advantage of RD loans is that they currently remain one of the last true “zero down” home loan options.  (VA loans are the other zero down payment option.)

The basic guidelines for an RD loan include:

  • Loans may be used to purchase a single-family, primary residence.
  • On a refinance, the existing loan must already be an RD loan.
  • A borrower must lack sufficient resources to provide a down payment for a conventional loan (typically 20-25% of the purchase price).
  • The RD loan allows a borrower to finance up to 100% of the appraised value of the home without requiring private mortgage insurance. 
  • A one time funding fee is charged and may be financed as part of the loan.  (For purchases, 2% of the loan amount is charged.  On refinances, the fee is .5% of the loan amount.  See you Home Loan Specialist for specific details.)
  • The property must be located in a designated rural area, have all-weather street access, and have approved water and waste systems.
  • The value of the site may not exceed 30% of the total appraised property value.
  • Sellers may contribute up to 6% of the purchase price toward closing costs and pre-paids.
  • Gift funds are allowed.  (Consult a Home Loan Specialist for specific criteria.)
  • Currently, only above ground pools are allowed with RD loans.
  • The property may not be active farmland.

With comparable interest rates, high LTV (loan to value) allowance and no monthly mortgage insurance, RD loans provide a great option to home buyers who may have thought they could not qualify for a home loan.  Talk with one of our Home Loan Specialists (866-982-9823) about the specific details and how this program can work for you.

What Can I Afford?

March 31, 2010

So you have decided that now is the time for you to buy a house.  Perhaps you’ve done some research on what area of town you would like to live, how many bedrooms you’d like, style of home, and other items that are essentials or mere wishes.  But have determined what you can afford?  If you have a monthly payment in mind, is this realistic for your budget?  How do you even determine this?

Calculating this mystical figure is really a simple mathematical equation – no smoke and mirrors.  Let’s start from the lender’s perspective.  They are looking at the percentage of income that your existing debt and future home loan will consume.  The idea is to make sure your new home loan payments do not overwhelm your monthly budget. 

Using industry averages, start by taking your total monthly income and multiplying by 38% (.38).  The answer represents the ideal amount of your new mortgage payment and total debts.  (Debts include installment loans like car payments and revolving debt like credit cards.) 

For example;  If you earn $42,000 a year, your monthly income is $3,500.  ($42,000/12 months = $3,500)

$3,500 x .38 = $1,330

$1,330 is the combined total of current monthly debt and projected house payment.

Take this number ($1,330 in this example) and subtract your total debt.  The answer is the targeted maximum amount of your new home loan payment.  Keep in mind this number reflects the principal payment, interest payment, taxes and home owners insurance.  If you are not using an escrow account for your taxes and insurance, this targeted amount should be lower.

Here’s another way to look at this.  Let’s calculate just a total monthly payment by taking your total monthly income and multiply by 28% (.28).  This again is an industry average where a range of 25 – 30% is the target. 

Using the same numbers as the example above; $3,500 x .28 = $980.  Again this answer represents a principal payment, interest payment, taxes and home owners insurance.

How about another perspective?  What you qualify for, may not represent what you can realistically afford.  Does either of these amounts you just calculated seem realistic for your budget and comfort level?  Depending on your approach to personal finances, this may seem high.  If you currently have a high debt load, this amount may be surprisingly low.  Nothing could be worse than to have the joy of new home squashed by discovering you are now “home rich” but “cash poor”.  

Qualifying amounts should be used as guidelines and not absolute rules.  Consider other factors that contribute to your monthly budget.  How many kids do you have?  Will any of them need braces, require extra medical care or want to go to college someday?  Do you like to travel, try new restaurants or attend sporting events?  Are you adventurous and want to get the “project” home that becomes truly your own? 

When considering what home to buy, also consider that you are committing to a loan that extends over a lengthy period of time.  Thirty (even fifteen) years are a large portion of your life, during which “life” is going to happen.  Be prepared for those occurrences by not over extending yourself with a mortgage payment that keeps you awake at night.

Our intent is to provide some guidance in helping you determine what monthly payment you can undertake based on your particular budget and needs.  If you would like to take this a step further to determine how much house you can afford with these payments, give us a call.  Our business is based on working for you and your long-term goals.  We also have a number of different calculator options on our website to help you make informed decisions when purchasing or refinancing your home.