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Oobie,
Once when I was starting a business, I needed some "camped funds" (liquid cash placed in a bank account in my name, to use as a back-stop to meet cash-flow needs). I borrowed it from a friend and a partner, put it in my account, let them have the interest it gained, plus another point of interest for them helping me. I never intended or needed to draw on the "camped funds", but it was there to over come a similar requirement if I did. They knew I would honor my debt to them. Maybe a relative or a friend, might consider allowing you the use of some of their savings in that manor. It could be enough to get you over the 4 month mortgage escrow issue that that lender raised with you. - Just a thought. 4 months worth of mortgage payments is not that much money.
Again, different lenders have different requirements or burdens that they will impose on any deal. Checking with other lenders, may allow you to match up your capabilities with thier requirements. So, don't just check with one lender, or bank, or savings and loan.
I think that someone mentioned that FHA will be tough on any issues found with the property, and insist that the things are corrected or want some monetary concessions made from the sale price to accomodate those issues before moving forward with a loan. Sometimes that makes proposals that are based on getting an FHA loan less acceptable to a seller than one that isn't. Maybe someone else can explain that better than I can. I don't have that much experience with FHA loans.
Oobie,
Once when I was starting a business, I needed some "camped funds" (liquid cash placed in a bank account in my name, to use as a back-stop to meet cash-flow needs). I borrowed it from a friend and a partner, put it in my account, let them have the interest it gained, plus another point of interest for them helping me. I never intended or needed to draw on the "camped funds", but it was there to over come a similar requirement if I did. They knew I would honor my debt to them. Maybe a relative or a friend, might consider allowing you the use of some of their savings in that manor. It could be enough to get you over the 4 month mortgage escrow issue that that lender raised with you. - Just a thought. 4 months worth of mortgage payments is not that much money.
Again, different lenders have different requirements or burdens that they will impose on any deal. Checking with other lenders, may allow you to match up your capabilities with thier requirements. So, don't just check with one lender, or bank, or savings and loan.
I think that someone mentioned that FHA will be tough on any issues found with the property, and insist that the things are corrected or want some monetary concessions made from the sale price to accomodate those issues before moving forward with a loan. Sometimes that makes proposals that are based on getting an FHA loan less acceptable to a seller than one that isn't. Maybe someone else can explain that better than I can. I don't have that much experience with FHA loans.
Good Luck!
BH, that's not a bad idea, but often banks want explanation on the source of funds and will not consider gifts or debt for their requirements. Make sure what their rules are before approaching family/friends.
Add to that the fact that I've seen people cross-examined for the "seasoning" of bank funds (i.e. they had to be in the account for a certain duration before they would be counted)... banks can be ridiculous, especially now.
BH, that's not a bad idea, but often banks want explanation on the source of funds and will not consider gifts or debt for their requirements. Make sure what their rules are before approaching family/friends.
Add to that the fact that I've seen people cross-examined for the "seasoning" of bank funds (i.e. they had to be in the account for a certain duration before they would be counted)... banks can be ridiculous, especially now.
Oobie, hope things work out- good luck!
Excellent point HHH. Usually banks will only allow XX% of your down payment to be from a gift from family or friends.
Excellent point HHH. Usually banks will only allow XX% of your down payment to be from a gift from family or friends.
We ran into sort of the same issue when we were looking for a condo. When we started looking the down was 5%. It kept increasing faster than we could save. First to 10% then to 20%, we finally got one at 25%. What we did was to live off a credit card for about a month. This allowed us to put our paychecks directly into savings. Of course, you may not have that kind of time.
Everyone has made some excellent points here! I sent some of the questions over to a friend of mine that does mortgages and this is what he says:
My first question is what is your median credit score? FHA and Conventional Loans allow an absolute minimum of a 620 credit score now of days, with minimal Lenders. There will be hits to your pricing/rate for anyone with a score under 660 but they will still do as low as 620 on both types of Loans. The only reason I can think of, that your Mortgage Broker would have you flip your loan from a Conventional to FHA Loan is because he did not have a Lender that would finance you with the scores you have. There are NO (REAL) downfalls to a FHA Loan unless you have the 20% down, as you do. FHA Loans are great loans for borrowers that either do not have 20% to put down or for borrowers that would rather keep their assets in their accounts. Interest Rates on FHA and Conventional are are very comparable. If you have the 20% down and want to put the money down then yes the Conventional Loan is better because you will not have to pay the 1.75% upfront Mortgage Insurance Premium (MIP) to FHA (Partially Refundable) and you will not have to pay the 0.55% monthly Mortgage Insurance Premium (MIP). Besides for the MIP's to FHA, both loans are very comparable.
On another note, I've had many people of all walks of life get FHA loans. It really has nothing to do with status. The main issue that I run into is all the inspections required for the FHA-i.e. water testing, etc Some individuals or banks don't look favorably on them because of this and some won't accept them at all. They have a higher ratio of falling apart in the inspection periods.
BH, that's not a bad idea, but often banks want explanation on the source of funds and will not consider gifts or debt for their requirements. Make sure what their rules are before approaching family/friends.
Add to that the fact that I've seen people cross-examined for the "seasoning" of bank funds (i.e. they had to be in the account for a certain duration before they would be counted)... banks can be ridiculous, especially now.
Oobie, hope things work out- good luck!
If it is from a close relative, then I don't think you have to worry. I have never had anyone ask me where all my cash came from - ever. Relatives make loans, and can gift up to $10,000 per spouse to each spouse if justification needs to be provided. That's $40,000.00 way more than enough to satisfy a few grand for 4 months worth of mortgage payments - that is there as proof of funds that those payments can be made. I was only trying for them to establish a way to satisfy - what seems to be a petty / arbitrary requirement by the mortgage company anyway. This money only needs to sit for a couple months and then returned - the payment obligations will always rest with Oobie and her husband. So far, they haven't needed others to co-sign the loan.
Relatives have always helped their kids secure financing for important things like home, education, and other important things. I think they'll be ok - either way.
Again, The main thing is to make sure that they can handle the obligations for which they are committing. I don't think that they will have the rug pulled out from under them as long as their income remains steady, and the home value doesn't depreciate in a huge way, like it has for so many others. The later being the reason so many have lost so much!
Yes, banks are looking for reasons to be rediculous right now.
If it is from a close relative, then I don't think you have to worry. I have never had anyone ask me where all my cash came from - ever. Relatives make loans, and can gift up to $10,000 per spouse to each spouse if justification needs to be provided. That's $40,000.00 way more than enough to satisfy a few grand for 4 months worth of mortgage payments - that is there as proof of funds that those payments can be made. I was only trying for them to establish a way to satisfy - what seems to be a petty / arbitrary requirement by the mortgage company anyway. This money only needs to sit for a couple months and then returned - the payment obligations will always rest with Oobie and her husband. So far, they haven't needed others to co-sign the loan.
Relatives have always helped their kids secure financing for important things like home, education, and other important things. I think they'll be ok - either way.
Again, The main thing is to make sure that they can handle the obligations for which they are committing. I don't think that they will have the rug pulled out from under them as long as their income remains steady, and the home value doesn't depreciate in a huge way, like it has for so many others. The later being the reason so many have lost so much!
Yes, banks are looking for reasons to be rediculous right now.
Lenders want to know where you got your down payment money. You may think to yourself, "I'm putting 10% down, why in the world do they care where I got the money?" The reason they care is because foreclosure rates are much lower on borrowers who earned the down payment money themselves. That means that lenders want to know where your down payment money came from. Did you earn it yourself, or did Dear Ole Dad or Aunt Margaret give it to you?
There is sort of a loophole in this whole down-payment-gift-thing. Lenders want to see that the down payment money has been in your account for at least 90 days. You prove this by showing bank statements. If the money has been in your possession for at least 90 days, they assume that you earned it. If the money just showed up in your account one week ago, the lender assumes that someone "gave" you the money for your down payment.
Governmental agencies (Freddie Mac/Fannie Mae) require that lenders "source" the money for down payment and closing costs.
For Conventional loans, you must have at least 5% of your own funds for down payment and the rest can be gifted. Also, if you plan to put down 20%, the entire amount can be gifted in most cases. It must however be a family member or a person closely related somehow.
For FHA loans, your entire down payment can be gifted from a family member.
Most lenders require that your money be seasoned for 60-90 days.
If they see a large deposit, they will need it to be sourced. This is to rule out money laundering, etc.
If your family member gifts you money, the lender will want you to show the donor's ability to gift the money to you. This sometimes means they want to see the "donor's" bank statements to make sure they didn't have that money under a mattress or buried in their back yard. In addition, a gift letter will need to be signed by the donor stating that they understand that the money is a gift and is not a loan to you.
If you deposit this money and it sits in your account for 60 days prior to application, you have nothing to worry about.
If it's deposited after application, you will need to provide "gift" documentation. (i.e. gift letter, proof of transfer into your acct, proof of withdrawal from donors acct, etc.)
You might want to deposit 60-90 days prior to application. You either do it that way or you'll have to have a gift letter and go that route.
For the uninitiated, I think we should elaborate on this "gift down payment money" history issue. During the boom unscrupulous real estate agents and mortgage brokers were "gifting" money to straw buyers making undocumented liar's loans to buy homes that never should have sold at the price they did to people that had no business buying them.
Why? Because the real estate agent got to sell a house and of course net the commission. The mortgage broker got to make a loan at a ridiculous point spread (you need to learn what YSP - yield spread premium means Oobie) and pocket a fat commission. The straw buyer was often paid tens of thousand of dollars for the foreclosure hit that was coming on their credit, because they had no intention of really paying for the house. And, a busted developer who couldn't find anymore suckers to sell to got to unload a hilariously priced house. All of this is why bankers now snicker when you start talking down payment gifts, especially from dubious sources.
Read this for a tour of how it all worked:
Local News: West Palm Beach, Palm Beach County, Martin & St. Lucie Counties | The Palm Beach Post (http://www.palmbeachpost.com/news/content/local_news/epaper/2009/09/26/0926versailles.html - broken link)
Personally, I think if you can't cut it on your own to make the deal work, then you shouldn't be buying a house to begin with. There's no shame in being a renter until you get your life and finances together. We all started, or restarted, somewhere.
Lenders want to know where you got your down payment money. You may think to yourself, "I'm putting 10% down, why in the world do they care where I got the money?" The reason they care is because foreclosure rates are much lower on borrowers who earned the down payment money themselves. That means that lenders want to know where your down payment money came from. Did you earn it yourself, or did Dear Ole Dad or Aunt Margaret give it to you?
There is sort of a loophole in this whole down-payment-gift-thing. Lenders want to see that the down payment money has been in your account for at least 90 days. You prove this by showing bank statements. If the money has been in your possession for at least 90 days, they assume that you earned it. If the money just showed up in your account one week ago, the lender assumes that someone "gave" you the money for your down payment.
Governmental agencies (Freddie Mac/Fannie Mae) require that lenders "source" the money for down payment and closing costs.
For Conventional loans, you must have at least 5% of your own funds for down payment and the rest can be gifted. Also, if you plan to put down 20%, the entire amount can be gifted in most cases. It must however be a family member or a person closely related somehow.
For FHA loans, your entire down payment can be gifted from a family member.
Most lenders require that your money be seasoned for 60-90 days.
If they see a large deposit, they will need it to be sourced. This is to rule out money laundering, etc.
If your family member gifts you money, the lender will want you to show the donor's ability to gift the money to you. This sometimes means they want to see the "donor's" bank statements to make sure they didn't have that money under a mattress or buried in their back yard. In addition, a gift letter will need to be signed by the donor stating that they understand that the money is a gift and is not a loan to you.
If you deposit this money and it sits in your account for 60 days prior to application, you have nothing to worry about.
If it's deposited after application, you will need to provide "gift" documentation. (i.e. gift letter, proof of transfer into your acct, proof of withdrawal from donors acct, etc.)
My advice is to deposit 60-90 days prior to application. Then later provide 2 months bank statements that do not show the deposit. Then it looks as if it was yours.
If you lead a financial institution to believe that you have money that isn't actually yours to get more favorable loan terms or an approval that you may not have gotten, are you committing fraud?
And if you give such advice on how to do such a thing, are you helping to commit fraud?
If you lead a financial institution to believe that you have money that isn't actually yours to get more favorable loan terms or an approval that you may not have gotten, are you committing fraud?
And if you give such advice on how to do such a thing, are you helping to commit fraud?
It's not fraud. That's following their rules. If you have the money in the bank for 60-90 days they consider it yours. If not the it needs to be labeled as a gift. It's pretty cut and dry.
I changed the post but I think that's the way most people handle it.
What you put on the post above is a whole different ball game. If a relative is willing to give you money toward a down payment on a purchase, so be it. I'm telling you how they classify it. You either have it for 60 days or get a gift letter. Straw buyers and all has nothing to do with what Oobie is talking about. I do agree though if she is not able to make the has payments then she shouldn't buy it but if a relative wants to give her some help, I don't see anything wrong with that. Nothing was said about it coming from a dubious source, etc
Last edited by SoFLGal; 01-14-2010 at 06:01 PM..
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