FINANCE HELPLINE PRESENTS: ALTERNATIVE FINANCING OVERCOMING LAST MINUTE HURDLES finance.car.org (213)

Transcription

1 FINANCE HELPLINE PRESENTS: ALTERNATIVE FINANCING OVERCOMING LAST MINUTE HURDLES finance.car.org (213)

2 Thank you for joining the Webinar! Your phone will be muted, as there are hundreds of Members on the call. Don t forget to turn on your computer speakers or call in to hear the audio. You can shrink the control window by clicking on the right hand arrow. You can type your questions in the chat window and we will do our best to answer in the course of the session. Connect to the audio by 1) Teleconference: Dial (562) Access code Or 2) VoIP: Ensure that your computer speakers are on (a headset is recommended)

3 OVERVIEW Sara Sutachan Manager of Broker & Real Estate Finance Outreach California Association of REALTORS

4 OVERVIEW: WHAT TO LOOK FOR? How to get involved early: Home Inspections Appraisals Required Repairs Lender partners In-Depth knowledge about: Loan programs Underwriting basics Minimum requirements for 1099 wage earners Fannie: HomeReady/HomeStyle FHA 203K Down payment assistance How to address problems: Property issues Provide alternatives Working with lenders Ease of closing

5 TODAY S SPEAKERS Danny Fitzpatrick Wells Fargo Dottie Sheppick Bank of America Jude Landis Fannie Mae

6 Purchase & Renovate SM loans Mortgages with built-in renovation financing Danny Fitzpatrick Renovation Sales Supervisor NMLSR ID For real estate professionals only.

7 Current industry situation At Wells Fargo Home Mortgage, we understand the challenges you may face in today s market: Buyers with limited down-payments and assets after closing Unrealistic buyer expectations Limited inventory- so don t pass up the smaller home or homes that need repairs Damaged or distressed properties may limit the number of interested buyers For real estate professionals only. 7

8 A mortgage with built-in renovation financing may be able to help you attract more buyers Market your listings to help buyers see past undesirable, but changeable, characteristics of a home Available for almost any upgrade, repair or improvement purpose, you can help serve more homebuyers needs Before Expand your buyer s options with financing on a variety of property types For real estate professionals only. After 8

9 What is a mortgage with built-in renovation financing? Improvements are more attainable and convenient with a number of features A mortgage with built-in renovation financing allows a homebuyer to finance the home purchase price plus the cost of improvements in one loan One application, one loan approval, one closing and one monthly mortgage payment Renovation costs are spread throughout the mortgage term The loan amount is based on an appraiser s estimate of what the property value will be with completed improvements Restrictions may apply. Consult a home mortgage consultant for more details For real estate professionals only. 9

10 10 What customers need to know The costs of repairs are included in the monthly mortgage payment Improvements are made after close of escrow A licensed general contractor is required There are loan options for primary residences and investment properties

11 11 Transaction Types Full 203K renovation loan FHA streamline 203K loan Conventional renovation loan Conventional investor renovation loan Purchase or refinance

12 Acceptable properties Single family 2-4 unit Condominiums/PUD s Foreclosures and short sales 5 units being converted for 4 For real estate professionals only. 12

13 Before picture For real estate professionals only. 13

14 Acceptable improvements Modernization and upgrades Windows, doors, flooring, kitchen cabinets, countertops, bathroom remodels, appliances Landscaping, fencing, roofing, paint Add additional units Room additions, bathroom additions Foundation repairs, mold, and termite damage For real estate professionals only. 14

15 After picture For real estate professionals only. 15

16 Conventional renovation loans Allows for luxury items, such as home theatres or swimming pools Often used for buyers with larger down payments No minimum repair limit Total renovation costs cannot exceed 75% of the after-improvement property value Conventional conforming loan limits apply Conventional conforming LTV limits apply Up to 95% for 1-2 unit properties Up to 80% for 3-4 unit properties LTV reductions for market classifications apply For real estate professionals only. 16

17 17 203k renovation loans One mortgage loan at a long-term, fixed or adjustable, rate A minimum of $5,000 requirement for home improvements FHA statutory loan limit for the area, typically a county or city Luxury items are not allowed, except for appliances The loan amount is based on a appraiser s estimate of what the property value will be with completed improvements.

18 Streamline 203k renovation loans Often used for minor repairs and/or cosmetic improvements to the property Up to $35,000 total renovation costs No structural repairs allowed Monthly mortgage payments cannot be financed Repairs must be completed in four months no extensions allowed For real estate professionals only. 18

19 Questions? Let s get started today. Thank you for your time. Danny Fitzpatrick Wells Fargo Home Mortgage Renovation Sales Supervisor danny.r.fitzpatrick@wellsfargo.com NMLSR ID This information is for use by mortgage and real estate professionals only and should not be distributed to or used by consumers. Information is accurate as of date of printing and is subject to change without notice. Wells Fargo Home Mortgage is a division of Wells Fargo Bank, N.A Wells Fargo Bank. N.A. All rights reserved. NMLSR ID AS Expires 11/2015 For real estate professionals only. 19

20 SAMPLE SCENARIOS

21 RECENTLY CLOSED LOANS Purchase $600,000 Renovation $175,000 (Major renovation of older home) Acquisition $775,000 20% down $155,000 (Non-Reno $295,000 out of pocket) New loan $620,000 Purchase $565,000 Renovation $ 75,000 (Unfinished bathroom & Kitchen) Acquisition $640, % down $ 22,400 New loan $617,600

22 RECENTLY CLOSED TRANSACTIONS Purchase $390,000 Renovation $180,000 (Major renovation of older home) Acquisition $570,000 10% down $ 57,000 (Non-reno $219,000 out of pocket) New loan $513,000 Purchase $126,000 Renovation $ 28,000 (Manufactured home with issues) Acquisition $154, % down $ 5,390 (Non-reno likely not traditionally financeable) New loan $148,610

23 GENERAL UNDERWRITING REQUIREMENTS 2 year tax return Verification of assets Credit score check YTD P&L for 1099 borrowers

24 How to make buying a home more affordable

25 What we ll cover 1. Are you ready to be a homeowner? 2. Overview of programs to help make buying a home more affordable 3. Types of programs available to you 4. How to find down payment and cost savings programs 5. Homebuyer programs in action 6. What s next? 2

26 Are you ready to be a homeowner?

27 Let s find out! Ask yourself: - Can I afford to buy a home? - Do I have room to adjust my budget to allow flexibility? - If I bought a home, would I still be able to put money into savings? Determine how much you can comfortably afford to borrow To buy a home you will need: - Good credit - Employment and verifiable income - Money for upfront costs: Down payment - 3.5% to 20% of the purchase price Closing costs - 2% to 5% of the loan amount Please watch our "Preparing for homeownership" webinar for more details or download the summary here 4

28 Overview of programs to help make buying a home more affordable

29 Overview of affordable housing programs Bank of America participates in many programs that could help make home ownership more affordable. These programs are created and offered by state and local housing agencies, nonprofit organizations and employers. Together with an eligible loan, these programs can offer: - Cash to help you at closing - A reduced price in your property - Monthly payment assistance Eligibility for these programs may depend on: - Your income - The location of the house you are buying - The price of the home - Being a first-time homebuyer 6

30 Types of programs available to you

31 Cash to help homebuyers at closing Down Payment Assistance Programs (DAPs) Down payment assistance programs are offered by government agencies, employers and nonprofit organizations - They can be combined with most first mortgage loan types to help make buying a home more affordable 1 Most programs have specific eligibility requirements, including income limits, purchase price limits, first-time homebuyer requirements and/ or location restrictions Borrowers may be required to sign second mortgage documents, including a note that explains the terms of repayment Some loan payments may be required or the payments may be deferred or forgiven, 2 giving borrowers more purchasing power 1 Down payment and/or closing cost assistance programs may not be available in your area. Down payment and/or closing cost assistance amount may be due upon sale, refinance, transfer or repayment of the loan, or if the senior mortgage is assumed during the term of the loan. Some programs require repayment with interest, and borrowers should become fully informed prior to closing. Not all applicants will qualify. Minimum credit scores may apply. Sales price restrictions and income requirements may apply. Homebuyer education may be required. Owner-occupied properties only. Maximum loan amounts may apply. 2 Potential tax implications, consult your tax advisor. 8

32 Cash to help homebuyers at closing Grants Offered by government agencies and nonprofit organizations, and available for most first mortgage loan types Grants may be used for a portion of the borrower's down payment and/ or closing costs There is no second loan created; repayment is not required 9

33 Cash to help homebuyers at closing Employer Assisted Housing (EAH) Programs Employers can provide their employees with down payment and closing cost funds. - These programs may be offered in the form of a second loan or a grant EAH programs are available with most first mortgage loan types EAH programs do not usually have income limits, purchase-price limits or first-time homebuyer requirements, but generally offer favorable terms, such as reduced interest rates or flexible repayment terms 1 1 Potential tax implications, consult your tax advisor. 10

34 Reduce the sale price of the property Deed Restrictions State or local government agencies may require builders to set aside a certain percentage of a new housing development as affordable housing units for modest income borrowers The affordability is secured by a Deed Restriction (also known as inclusionary zoning) Deed Restrictions limit the sales price of affordable homes, usually calculated to allow families at a specific percentage of area median income to qualify For all Deed Restriction programs, the calculation of the loan to value follows first mortgage guidelines, the lower of the sale price or appraised value Most Deed Restrictions include a resale price restriction and/or first right to purchase for the agency 11

35 Monthly payment assistance Mortgage Credit Certificate (MCC) Housing Agencies may issue Mortgage Credit Certificates (MCCs) to eligible homebuyers in their area, which permits eligible borrowers to claim a direct credit of a portion of mortgage interest paid each year borrowers can use this credit against their tax liability, which reduces their federal income taxes and frees up more funds to qualify The MCCs are issued directly by the agency to the borrower, MCCs are not issued by lenders The tax benefit is used as income when calculating ratios Most programs have specific eligibility requirements, including income limits, purchase price limits, first-time homebuyer requirements and/or location restrictions NOTE: Potential tax implications, consult your tax advisor. 12

36 Monthly payment assistance Section 8 Housing Choice Voucher Programs Known as Housing Choice Vouchers, this program is offered by Public Housing Authorities Existing Section 8 Rental Assistance recipients may have an opportunity to convert rental assistance to mortgage payment assistance The monthly mortgage payment assistance is used as additional income to help borrowers qualify for a first mortgage Section 8 Programs may be combined with most first mortgage loan types Most programs have specific eligibility requirements, including income limits, purchase price limits, first-time homebuyer requirements and/or location restrictions 13

37 How to find down payment and cost savings programs

38 Visit the Bank of America Down Payment Resource Center This online tool makes it easy to search for down payment and other cost savings programs that may be combined with a low down payment loan to make buying a home more affordable. * When you visit the site, you can: Search for down payment and cost savings programs you may qualify for, by filling out a simple online form: - Property Information To get started, visit bankofamerica.com/downpaymentcenter * This tool is designed as a resource for potential borrowers and is not a commitment to lend or verification of prequalification or approval in any down payment and/or closing cost assistance program or loan program. Results are for discussion purposes only and are based on information you provided. Accuracy is not guaranteed and products and programs may not be available for your situation. Programs and guidelines subject to change without notice. 15

39 Visit the Bank of America Down Payment Resource Center This online tool makes it easy to search for down payment and other cost savings programs that may be combined with a low down payment loan to make buying a home more affordable. * When you visit the site, you can: Search for down payment and cost savings programs you may qualify for, by filling out a simple online form: - Property Information - Household Information To get started, visit bankofamerica.com/downpaymentcenter * This tool is designed as a resource for potential borrowers and is not a commitment to lend or verification of prequalification or approval in any down payment and/or closing cost assistance program or loan program. Results are for discussion purposes only and are based on information you provided. Accuracy is not guaranteed and products and programs may not be available for your situation. Programs and guidelines subject to change without notice. 16

40 Visit the Bank of America Down Payment Resource Center This online tool makes it easy to search for down payment and other cost savings programs that may be combined with a low down payment loan to make buying a home more affordable. * When you visit the site, you can: Search for down payment and cost savings programs you may qualify for, by filling out a simple online form: - Property Information - Household Information - Special Circumstances To get started, visit bankofamerica.com/downpaymentcenter * This tool is designed as a resource for potential borrowers and is not a commitment to lend or verification of prequalification or approval in any down payment and/or closing cost assistance program or loan program. Results are for discussion purposes only and are based on information you provided. Accuracy is not guaranteed and products and programs may not be available for your situation. Programs and guidelines subject to change without notice. 17

41 Visit the Bank of America Down Payment Resource Center This online tool makes it easy to search for down payment and other cost savings programs that may be combined with a low down payment loan to make buying a home more affordable. * When you visit the site, you can: Review the details of each program that comes up in your search To get started, visit bankofamerica.com/downpaymentcenter * This tool is designed as a resource for potential borrowers and is not a commitment to lend or verification of prequalification or approval in any down payment and/or closing cost assistance program or loan program. Results are for discussion purposes only and are based on information you provided. Accuracy is not guaranteed and products and programs may not be available for your situation. Programs and guidelines subject to change without notice. 18

42 Visit the Bank of America Down Payment Resource Center This online tool makes it easy to search for down payment and other cost savings programs that may be combined with a low down payment loan to make buying a home more affordable. * When you visit the site, you can: Review the details of each program that comes up in your search Connect with a mortgage specialist to get more information and learn about your next steps To get started, visit bankofamerica.com/downpaymentcenter * This tool is designed as a resource for potential borrowers and is not a commitment to lend or verification of prequalification or approval in any down payment and/or closing cost assistance program or loan program. Results are for discussion purposes only and are based on information you provided. Accuracy is not guaranteed and products and programs may not be available for your situation. Programs and guidelines subject to change without notice. 19

43 Visit the Bank of America Down Payment Resource Center This online tool makes it easy to search for down payment and other cost savings programs that may be combined with a low down payment loan to make buying a home more affordable. * When you visit the site, you can: Review the details of each program that comes up in your search Connect with a mortgage specialist to get more information and learn about your next steps Access resources to help you learn more about the types of programs and how they fit within the home buying process - Webinars - FAQs - Home Loan Guide To get started, visit bankofamerica.com/downpaymentcenter * This tool is designed as a resource for potential borrowers and is not a commitment to lend or verification of prequalification or approval in any down payment and/or closing cost assistance program or loan program. Results are for discussion purposes only and are based on information you provided. Accuracy is not guaranteed and products and programs may not be available for your situation. Programs and guidelines subject to change without notice. 20

44 Homebuyer programs in action

45 Example of how a homebuyer program can help you Kristina, a first-time homebuyer with modest income, is interested in purchasing a new home. 22

46 Example of how a homebuyer program can help you Kristina, a first-time homebuyer with modest income, is interested in purchasing a new home. Sale price: $174,000 23

47 Example of how a homebuyer program can help you Kristina, a first-time homebuyer with modest income, is interested in purchasing a new home. To help qualify for a mortgage loan, Kristina needs: Steady income Good credit Cash for down payment Cash for closing costs Sale price: $174,000 24

48 Example of how a homebuyer program can help you Kristina, a first-time homebuyer with modest income, is interested in purchasing a new home. To help qualify for a mortgage loan, Kristina needs: Steady income Good credit Cash for down payment Cash for closing costs Kristina currently has: $49,000 steady annual income Good credit $5,220 in savings for closing costs Sale price: $174,000 25

49 Example of how a homebuyer program can help you Kristina, a first-time homebuyer with modest income, is interested in purchasing a new home. To help qualify for a mortgage loan, Kristina needs: Steady income Good credit Cash for down payment Cash for closing costs Kristina currently has: $49,000 steady annual income Good credit $5,220 in savings for closing costs Sale price: $174,000 She does not have enough money for a down payment. Her lender is requiring 3.5% of the purchase price or $6,090 as down payment for an FHA loan. Note: This scenario is for example purposes only. Some lenders may have additional requirements. 26

50 Example of how a homebuyer program can help you Kristina might be ready to buy a new home sooner than she thinks. After confirming she has met all qualifications, Kristina is able to use a down payment program to provide her entire down payment on an FHA loan. 27

51 Example of how a homebuyer program can help you Kristina might be ready to buy a new home sooner than she thinks. After confirming she has met all qualifications, Kristina is able to use a down payment program to provide her entire down payment on an FHA loan. $167,910 loan from lender 28

52 Example of how a homebuyer program can help you Kristina might be ready to buy a new home sooner than she thinks. After confirming she has met all qualifications, Kristina is able to use a down payment program to provide her entire down payment on an FHA loan. $167,910 loan from lender $6,090 down payment assistance from nonprofit 29

53 Example of how a homebuyer program can help you Kristina might be ready to buy a new home sooner than she thinks. After confirming she has met all qualifications, Kristina is able to use a down payment program to provide her entire down payment on an FHA loan. $167,910 loan from lender $6,090 down payment assistance from nonprofit $174,000 to purchase her new home *Upfront mortgage insurance (UFMIP) is required, 1.75% of the loan amount, to be paid at closing or financed into the loan amount. 30

54 What s next?

55 What to do next Visit the Bank of America Down Payment Resource Center at bankofamerica.com/downpaymentcenter to search for down payment and cost savings programs you may qualify for Get in touch with a Bank of America mortgage specialist to discuss how you may be able to combine a low down payment loan with down payment and cost savings programs we participate in Ask your mortgage specialist or a housing agency about program eligibility guidelines and requirements: Is homebuyer education required? Is this program for first-time homebuyers only? Is there a purchase-price limit? Are there location restrictions? Are there income limitations? 32

56 Resources Find a Nonprofit Housing Counseling Agency at HUD.gov; on the site select Resources, then select HUD Approved Housing Counseling Agencies Watch our consumer education webinars at bankofamerica.com/webinars to learn more about preparing for homeownership, budgeting and managing credit Online resources - Visit our Home Loan guide at bankofamerica.com/homeloaneducation and get answers to frequently asked questions about the mortgage process; access articles and videos about mortgage basics, or use our calculators to estimate how much you can comfortably afford. - Visit bettermoneyhabits.com and build your financial know-how with free tools and information to help you make more confident financial decisions including how to prepare to buy a new home. - Visit bankofamerica.com/downpaymentcenter to find the down payment and cost savings programs we participate in to help make buying a home more affordable. To find an experienced mortgage specialist: - Call us at Visit mortgage.bankofamerica.com 33

57 Thank you Down payment and/or closing cost assistance programs may not be available in your area. Down payment and/or closing cost assistance amount may be due upon sale, refinance, transfer, or repayment of the loan, or if the senior mortgage is assumed during the term of the loan. Some programs require repayment with interest, and borrowers should become fully informed prior to closing. Not all applicants will qualify. Minimum credit scores may apply. Sales price restrictions and income requirements may apply. Homebuyer education may be required. Owner-occupied properties only. Maximum loan amounts may apply. Credit and collateral are subject to approval. Terms and conditions apply. This is not a commitment to lend. Programs, rates, terms and conditions are subject to change without notice. Bank of America, N.A. Member FDIC. Equal Housing Lender 2015 Bank of America Corporation. All rights reserved ARFP5C7K PRES

58 HomeReady Mortgage Help meet the diverse needs of today s buyers with HomeReady Fannie Mae s enhanced affordable lending product October Fannie Mae. Trademarks of Fannie Mae.

59 HomeReady Overview Designed for creditworthy, low- to moderate-income borrowers, with expanded eligibility for financing homes in designated low-income, minority, and disaster-impacted communities. HomeReady lets you lend with confidence while expanding access to credit and supporting sustainable homeownership. Simplicity and certainty for lenders Improved pricing and execution Product features designed to align with today s buyer demographics and support sustainable homeownership Fannie Mae s Economic and Strategic Research group reports a demographic sea change in the housing market, characterized by the rise of the Millennials, increased diversity, and a growing elderly population; and new household growth is being driven by traditionally underserved segments. October

60 Lender Benefits: Enhanced Simplicity and Certainty Underwrite with confidence. Desktop Underwriter (DU ) offers a comprehensive credit risk assessment and eligibility determination, and automated identification of potentially HomeReady eligible loans. Improved and simplified pricing is better than or equal to Fannie Mae standard loan pricing and supports a competitive borrower payment. Standard risk-based pricing waived for LTVs >80% with a credit score >=680 (risk-based loan-level price adjustment cap of 1.50% applies for loans outside of these parameters). Simplified execution. Ability to commingle standard and HomeReady loans into MBS pools and whole loan commitments. October

61 Borrower Benefits: Accessible and Sustainable Financing Low down payment. Up to 97% financing for home purchase with many borrower flexibilities. Flexible sources of funds can be used for the down payment and closing costs with no minimum contribution required from the borrower s own funds (1-unit properties). Conventional home financing with cancellable monthly MI (per Servicing Guide policy); reduced MI coverage requirement above 90% LTV supports competitive borrower payment. Homeownership education helps buyers get ready to buy a home and be prepared for the responsibilities of homeownership. The required training offers an easy-to-use, online course provided by Framework. October

62 Income Eligibility Aligns with Fannie Mae s regulatory housing goals and may assist lenders in meeting applicable Community Reinvestment Act goals Borrower Income Eligibility No income limit: Properties in low-income census tracts 100% of AMI: Properties in high-minority census tracts and designated disaster areas 2015 Eligibility 31% of census tracts 20% of census tracts 80% of AMI: All other properties 49% of all U.S. census tracts AMI = area median income (AMI data source: FHFA) October

63 Product Features DU will automatically identify potentially eligible loans. Underwriting flexibilities include: o Offers an innovative new feature that supports extendedfamily households (will consider income from a non-borrower household member as a compensating factor in DU to allow for a DTI >45% to 50%). o Allows non-occupant borrowers, such as a parent. o Permits rental income from an accessory dwelling unit. o Allows boarder income (updated guidelines provide documentation flexibility). October

64 Product Features (continued) Financing up to 97% LTV (DU is required for LTVs >95%). Borrower is not required to be a first-time buyer; purchase of oneunit principal residence (limited cash-out refi up to 95%). Lower MI requirement than standard (25% for LTVs >90% to 97%). Allows for nontraditional credit. Gifts, grants, Community Seconds, and cash-on-hand permitted as a source of funds for down payment and closing costs. Supports manufactured housing up to 95% and HomeStyle Renovation (approved lenders) to 95%. October

65 Non-Borrower Household Income Feature Extended-family living arrangements are more common among underserved populations, including low- to moderate-income, minority, and immigrant households. Percentage of EIHs by Race/Ethnicity Asian 17% These households often have lower incomes overall, compared with a broader population, and that may impact their access to credit but many also are extended-income households or EIHs. African American Hispanic 20% 25% 0% 10% 20% 30% HomeReady recognizes the growth of extended-family living arrangements by allowing the existence of nonborrower income to be considered. Review the non-borrower household income infographic or other HomeReady resources for details. October

66 Homeownership Education and Post-Purchase Support Comprehensive homeownership education. Requires online course provided by Framework; and offers additional post-purchase support through the life of the loan to help ensure sustainable homeownership. Borrowers will invest 4 6 hours (average) of their time and a modest fee of $75 (paid to Framework) to learn the fundamentals of buying and owning a home, take an online test, and receive a certificate of completion. Although one-on-one counseling is optional for HomeReady, Framework will offer borrowers a referral to a HUD-approved counseling agency for additional assistance. Borrowers also have the option to consult a counselor of their choice. To further promote sustainability, borrowers will have access to postpurchase homeownership support for the life of the loan through Framework's homeownership advisor service. October

67 HomeReady Resources Product matrix FAQs Fast Facts for Loan Officers Homeownership for the Way We Live Today (extended-income households infographic) Comparison of HomeReady with Fannie Mae standard product and MyCommunityMortgage (being retired) Income eligibility lookup (by census tract) and state-by-state eligibility snapshot maps Homeownership education FAQs Training opportunities (coming soon) Bookmark the HomeReady web page: October

68 QUESTIONS? Webinar Questions and Answers will be posted on «Finance Q&As» finance.car.org

69 KEY TAKEAWAYS Getting involved early address property issues prior to getting the loan & appraisal Inform your client of property requirements, available loan programs, DPAs, and alternatives Loan Programs Renovation Loans have same underwriting guidelines as FHA/Conv loans Several different types of down payment and costs savings programs Not all have a FTB requirement Fannie HomeReady Low down payment (up to 97%) Flexible sources of funds can be used for the down payment and closing costs. Conventional home financing with cancellable monthly MI Education requirement

70

71

72 UPCOMING BACK TO BASICS WEBINAR SERIES November 18 th CalHFA Loan and Down Payment Assistance Programs (with CalHFA, Guild Mortgage & Provident Financing) December 9 th Funding and Closing Transactions - "The Art to Getting it Done

73 THANK YOU! finance.car.org downpayment.car.org (213)