San Mateo Mortgage Blog » Realtors

How to Accept a Down Payment Gift from Family

Chris Williamson — Mon, 08 Mar 2010 21:36:59 +0000

How to Accept a Downpayment Gift from Family the Right Way

Due to the subprime mortgage meltdown and rampant foreclosures in some parts of the country, lenders have tightened lending guidelines. One of the lasting impacts on San Mateo home buyers are the larger downpayments required to purchase a home with both conventional and FHA financing. Lenders want to see buyers put up a greater portion of their own money in hopes they will think twice before defaulting on their mortgage loan.

First Time Home Buyers Have a Lot Going for Them

With the $8,000 first time home buyer tax credit, low mortgage rates and San Mateo County homes at some of the most affordable levels in history, there are a lot of first time home buyers wanting to take advantage of these incentives before the end of the year. But, not every buyer has the money for a downpayment. A lot of my clients are going to their family members to help them come up with some cash so they become homeowners.

Is a Downpayment Gift Part of Your Home Buying Strategy?

If a downpayment gift is part of your San Mateo home buying strategy, there is a right way and a wrong way to go about it. You cannot just deposit money from your parent’s account to your bank account if you want to make it past underwriting (the person at the bank who decides whether or not you will be approved for the mortgage loan).

How Do You Take a Downpayment Gift the Right Way?

Taking a gift is a three step process. It is imperative you follow every step to the letter. If not, the underwriter may not accept your gift funds as a source of downpayment.

Step #1: The Gift Letter

Complete and sign an acceptable Downpayment Gift Letter. An acceptable Downpayment Gift Letter will include the following information:

The amount of the gift
The property address
The relationship of the gifter to the giftee
States the gift is in fact a gift, not a loan
Dated and signed by all parties

I have a template I give to my clients to ensure all of the pertinent information is included. If you need one, fill out the form below and it will be automatically sent to your email.

cforms contact form by delicious:days

Step 2: Leave a Paper Trail

Not only is it important to have the gift letter in place, the underwriter also wants to see a trail of money from one account to another. Wire receipt and a certified check deposit are both acceptable forms. However, a certified check is preferable because all it takes to document is a teller receipt. Make sure the gifter gets a receipt for the check being drawn. The giftee needs to have a deposit receipt with that exact amount to close the loop.

If you prefer to use a wire, you will need to provide a copy of the wire from the donor. This wire has to show that it is from the same account and donor that is documented on the gift letter. You must also show your bank statement showing that you have received the wire into your account for the exact funds.

Step #3: Accept the Gift As-Is

What does this mean? The giftee needs to deposit the gift funds with a live person in the branch (if the gift is via a certified check). The deposit should stand alone (don’t include any other checks or cash with the deposit). This will allow the underwriter to see a clean, strong paper trail.

What Can You Afford?

Don’t let a few unaswered questions keep you from owning a home in 2009! Call or email me today to set up a phone or in person consultation. I’ll look over your financials and help you determine what you can afford.

Need a Referral for a Top Notch Real Estate Agent?

I can introduce you to a knowledageable real estate professional in your area who will make the home buying process seem easy! Just send me an email with the areas you’re considering and I’ll send you their name.

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Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.

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Mortgage Market Update Week of Feb 23

Chris Williamson — Tue, 23 Feb 2010 19:35:50 +0000

Mortgage rates have stabilized from last week and seem to be holding steady, but there are quite a few events this week that could cause the mortgage market to move.

More Govt Debt Hits the Mortgage Market

More Government debt hits the market this week as the US Treasury unloads $126B in securities. Monday $8B in TIPS (Treasury Inflation Protected Securities) hit the market, Tuesday $44B in 2-Year Notes, Wednesday $42B in 5-Year Notes and $32B in 7 Years on Thursday. The last round of auctions did not perform very well and caused the mortgage bond market lower which means higher interest rates. This is one item I will be watching closely this week.

Bernanke Testifying to the House and Senate

On Wednesday and Thursday, Federal Reserve Chairman Ben Bernanke will be testifying on monetary policy before the House of Representatives Financial Services Committee and the US Senate Banking Committee. His comments can be a potential market mover as big news will trump any technical signals we currently have.

Not Quite Ready to Lock? Proceed with Caution

The trend beginning this week is market stabilization, however we recommend to our clients that are floating their interest rates to proceed with caution and be ready to lock if investors start to shift their money out of the bond market.

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New Good Faith Estimate Misses the Mark

Chris Williamson — Thu, 04 Feb 2010 00:05:53 +0000

At the beginning of 2010 new lending guidelines went into effect regarding how loan originators handle the loan process and how closing costs must be disclosed to the buyer. One of the new rules included a nationwide standard Good Faith Estimate (GFE). The purpose of the new Good Faith Estimate is to hold lenders to the fees they quote the buyer and make it easier to compare loan programs and fees between lenders.

New GFE’s Goal: Allow Buyers to Compare Loans

HUDs goal is to make sure that all lenders quote realistic fees and try to avoid any last minute closing cost surprises. This is definitely a plus for the buyer but besides HUDs goal of quoting realistic fees, the new regulations were put into affect to help home buyers make an apples to apples comparison between loan products and fees from different lenders.

Does the New GFE Solve the Problem and Help Home Buyers Shop?

I’d say no. The problem with the new GFE is that lenders are not required to provide a Good Faith Estimate or commit to any fees quoted until a home buyer has an accepted contract to purchase a certain property. This means if you want to compare loan products from different lenders, you really can’t make an apples to apples comparison until you have an accepted contract, which, in my opinion, is too late.

Can’t I Start Shopping for a Loan After I Get an Accepted Contract?

Remember, when you are under contract, you are also under the time constraints of the contingencies in that contract. (A contingency is a legal right to get out of the contract.) In San Mateo County, you typically have 14-17 days to get final loan approval under the financing contingency. Once the clock starts ticking on the contingencies, it is nearly impossible to start shopping for a mortgage loan and close your transaction on time.

Final Verdict? The New GFE Misses the Mark!

Although HUD had good intentions in standardizing the GFE so buyers can accurately compare loan products, the fact that they cannot start to compare loans until they have an accepted contract makes it impossible to gather the information and close the loan while staying within the time frames laid out in the contract.

In my next few posts I will explain how the fees are disclosed, how the loan process has been altered for the buyer and how lenders may start handling the pre-approval process.

Have Questions About the New GFE?

If you have any questions about the new Good Faith Estimate, or would like to schedule a time to sit down and go over the new rules and what you can do as a home buyer to make sure you have a successful transaction, give me a call at (650) 520-0915 or send me an email at info@SanMateoMortgageBlog.com.

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Webinar: Financing a Condo in San Mateo

Chris Williamson — Mon, 11 Jan 2010 21:29:40 +0000

Date/Time: Monday February 8th at 6:00pm

The Department of Housing and Urban Development announced effective December 7th 2009 stricter underwriting guidelines will be required to approve condominiums in San Mateo County. In order for FHA or Fannie Mae (two of the primary loans consumers choose) to approve the condominium for financing, the entire complex will have to be approved by HUD. Currently, condominiums can be approved on a one by one basis. In a few weeks, the health of the entire complex will be highly scrutinized before Fannie Mae or FHA will lend.

What Does this Mean to San Mateo County Home Buyers?

It has just become much harder to finance a condominium in San Mateo County
Longer time periods required for complex approval – may not be realistic to close in 30 days
You must be pre-approved before you enter into a contract – find a loan first, then find a home
New rules are not flexible – if you need a loan, you’ll need to play by them
Some complexes may not be approved – don’t waste your time or money chasing something that will never come to fruition
The entire complex needs to be approved by HUD, not just your unit – no exceptions
You need to work with condominium specialists to help guide you through the transaction – both on the real estate side and the financing side

Why Should You Care?

If you are considering purchasing a San Mateo County condominium in the next several months, your transaction will be impacted as these new rules are implemented. There are several things you can do to front load the approval process. By preparing early, you can minimize problems, minimize money spent and most importantly, not lose the condo you really want.

What Will You Learn During this Webinar?

What are the new guidelines and how they will affect your San Mateo County condominium purchase
What does it mean to be pre-approved before you enter into a contract
What you can do to prepare for the stricter financing guidelines and increase the changes of getting the San Mateo County condo you really want
How you can minimize out of pocket costs during the buying process
How to determine which complexes will never be approved so you don’t waste your time chasing a fantasy
Why it is more important than ever to work with Realtors® and Mortgage Advisors who are San Mateo County condominium experts

Registration Info

To register for this webinar, which will be held on Monday, February 8th at 6:00, please visit our webinar registration page or click the Sign Up button below.

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2009 FHA Loan Limits in San Mateo County

Chris Williamson — Fri, 25 Sep 2009 22:44:46 +0000

What is an FHA loan?

For those of you who don’t know what an FHA loan is, it is a loan insured against default by the Federal Housing Administration (FHA). FHA insures the lender against default by the borrower, which means FHA will pay the lender back should you default. This insurance encourages lenders to make larger loan amounts to more people since the risk for them is very low.

What are the Main Benefits of an FHA Loan?

The main benefits to an FHA loan are:

Low down payment (3.5%) required
Easier to use gift funds for down payment
Easier to qualify
Credit requirements lower than most programs

Is FHA Financing Only for First Time Buyers?

No. Almost anyone can qualify. There are not any income requirements, but there are limits on the loan amounts. You need to have decent credit to qualify, but it doesn’t have to be great.

What are the 2009 FHA Loan Limits in San Mateo County?

In high cost areas, which include San Mateo and Santa Clara County, the most money you can borrow with an FHA mortgage loan are:

Units	Max Loan Amount
1	$729,750
2	$934,200
3	$1,129,250
4	$1,403,400

These are temporary increased figures and may go back down at the end of 2009.

Why You May Decide Against an FHA Loan?

If you need to borrow more than the loan limits, FHA won’t work for you. If you have more than 3.5% available for a down payment, you’ll likely be able to find better financing options provided you have good credit. Also, FHA requires an upfront mortgage insurance premium, which is 1.75% of the loan amount ($12,770.63 for a loan amount of $729,750). This upfront premium can be paid upfront, negotiated and paid for by the seller or you can finance this into the loan. You will also have a monthly mortgage insurance payment on top of your principal and interest payment.

Considering an FHA Loan?

We’ll sit down with you and review your financial goals to determine whether or not an FHA loan is the best option for you. Call us at (650) 520-0915 or send us an email at info[@]SanMateoMortgageBlog.com to schedule a free, no obligation consultation.

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Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.

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2009 San Mateo County Conforming Loan Limits

Chris Williamson — Tue, 15 Sep 2009 00:08:50 +0000

A conforming loan is a loan that meets Fannie Mae and Freddie Mac’s uniform national standards.

Who Are Fannie Me and Freddie Mac?

Fannie Mae and Freddie Mac are governmental organization that purchases and secures residential mortgage loans from lending institutions.

Why, you might ask?

Fannie Mae and Freddie Mac buy loans from banks and lending institutions, like Mortgage California, so these institutions can continue to loan money to consumers. Fannie and Freddie don’t want to be out on the front lines selling mortgages to consumers. Instead, they prefer to buy packages of residential mortgage loans that meet their criteria from banks and other lending institutions and service the loans once they are in place.

What are the Guidelines?

Fannie Mae and Freddie Mac have debt-to-income ratio limits and documentation requirements. Lenders that want to sell their loans to Fannie or Freddie must follow these guidelines, otherwise they will not be purchased. They also will only buy loans up to a maximum loan amount, which is set based on October to October median price changes.

What are the Loan Limits for San Mateo County in 2009?

No. of Units	Conforming Loan Limit
1	$729,750
2	$934,200
3	$1,129,250
4	$1,403,400

These loan limits also apply in Santa Clara County in 2009.

What Happens If I Need a Loan Above This Limit?

You would need what we would consider a Jumbo loan. A jumbo loan is anything above the conforming loan limit. Sometimes these loans can come at a slightly higher cost to consumers (between ¼ and ½ percent) because they are more difficult for a bank or other lending institutions to sell on the secondary market. (Remember, Fannie Mae and Freddie Mac only buy conforming loans.)

How Do I Know Which Loan Program is Best for Me?

Because every person’s financial situation is different, it is best to sit down with a San Mateo Mortgage Advisor and go through your current financial picture and your short and long term financial goals. They will help guide you towards the best decision for your particular financial situation.

Need Help Getting a Loan in San Mateo County?

Give me a call at (650) 520-0915 or send me an email at info[@]SanMateoMortgageBlog.com and we can set up an in person or phone consultation. We’ll review your current financial situation and recommend some programs that would work best for you.

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Chris Williamson is a Mortgage Advisor with Mortgage California specializing in San Mateo Mortgage.

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Maximum Allowed Debt Ratios for San Mateo Mortgage Loans

Chris Williamson — Thu, 03 Sep 2009 21:33:32 +0000

Debt ratios are a percentage of your continuing debt compared to your gross monthly income. Continuing debt would include a car payment, student loans, monthly credit card payments or any other type of debt that will carry over with you and continue with your new San Mateo County home purchase. This does not include utilities or other types of living expenses. Your debt ratio is one of the components a lender will use to determine how much home you can afford and determine their risk in giving you a loan to buy a home in San Mateo County.

What is Your Front End Ratio?

Your front end ratio takes your total house payment, including your monthly tax and insurance payment divided by your monthly gross income. For example, say your San Mateo mortgage payment including taxes and insurance is $3,000 and your gross monthly income is $10,000, your “front end ratio” is 30%.

What is Your Back End Ratio?

Your back end ratio includes your housing ratio plus any other debt listed on your credit report, divided by your gross monthly income. For example, say you have a $3,000 monthly mortgage payment, a $350/month car payment, a $250/month student loan payment and a $100/month credit card payment with a gross monthly income is $10,000. Your total debt per month is $3,700 and your back end ratio is $3,700/$10,000 = 37%

How Does My Debt Ratio Affect How Much I Can Afford?

Each lender and loan program has different guidelines for debt ratios and they are just that…guidelines. There are no hard and fast rules as your assets, down payment and income all could compensate and offset a higher than normal debt ratio.

What is the Maximum Debt Ratio Allowed?

To give you an idea of the lender’s guidelines, the following debt ratios are considered reasonable:

Loan Type	Front End	Back End
Conventional	28%	36%
FHA	31%	43%

Although these are posted guidelines by Fannie Mae, Freddie Mac and FHA, these ratios can be pushed as high as 55% on the backend with compensating factors.

There is Only One Way to Know What You’re Qualified to Borrow

Get pre-approved. Come in and sit down with us, call us on the phone at (650) 520-0915, or send us an email at info[@]SanMateoMortgageBlog.com. We’ll gather all of the necessary information, present loan programs that meet your short and long term financial goals and give you a genuine pre-approval, which will explain exactly how much you can afford in today’s lending market.

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9 Questions to Ask When Financing a Condo with FHA

Chris Williamson — Tue, 18 Aug 2009 22:16:11 +0000

Financing a condo with FHA financing in today’s San Mateo County real estate market is getting more difficult. With FHA lenders tightening their guidelines, borrowers are required to jump through more hoops to buy a condo in San Mateo County. Not only must the borrower be pre-approved and qualified to the lender’s satisfaction, but the complex will be scrutinized as well. Lenders want to make sure the complex is financially sound and has the reserves to make any necessary repairs and do any required maintenance. With the rash of foreclosures in the market, lenders want to make sure they have sufficient collateral to offset their investment.

Which Questions Should Be Asked when Buying a San Mateo County Condo?

We suggest to the San Mateo County Realtors and clients we work with ask the following 9 questions early in the home buying process to avoid any unexpected surprises along the way.

Is the complex FHA approved? You can find out by entering the complex information into HUD’s form. If it is not FHA approved, it doesn’t mean you won’t get the loan. It does require a “spot approval” which requires some extra time.
What has sold in the complex recently? How does it compare to this unit? San Mateo County appraisals are now more thoroughly reviewed and may require two independent reviews.
Is the complex in a flood zone?
Have there been any special assessments in the last three years?
Are there major maintenance or improvement projects anticipated in the next 12 months?
Are there sufficient reserves to cover those expenses?
Is the HOA involved in any lawsuits?
Are at least 85% of the units current on their HOA dues?
Are the buyers aware that “walls-in” insurance is now required by all lenders in addition to the policy the HOA should have on the structure?

Why Ask Why?

These are the same questions the lender will ask, so why not be proactive and learn the answers before too much time, energy, effort and even money is invested in the transaction? Red flags are best addressed from the get go. If ultimately the lender will not make you the loan, why even make an offer? Why not spend the time finding a property that will be approved?

Considering a San Mateo County Condo?

If you are considering purchasing a condo in San Mateo County, contact me today for a free, no obligation consultation. We’ll go over what you can afford and help you put your financial house in order. We can even recommend several great Realtors we’ve worked with that will do a great job finding you a San Mateo County home.

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New Fannie Mae Loan Program for Foreclosures

Chris Williamson — Mon, 27 Jul 2009 23:27:21 +0000

Fannie Mae introduced a new 30 year and 15 year fixed home loan product exclusively for Fannie Mae bank owned properties (REOs) that will allow San Mateo County home buyers to purchase homes for as little as 3% down payment. The maximum loan amount is $417,000 for single family units.

Some Highlights of the Program

Some highlights of FNMA’s HomePath Conforming Loan financing for bank owned properties are:

Single unit properties are eligible for a 3% down payment
Mortgage insurance is not required, which means a lower monthly payment compared to the similar FHA home loan
No appraisal is required
Sellers can contribute up to 6% concessions towards closing costs and other prepaids, but buyer cannot get cash back at closing
Minimum credit score of 580

What are the Program’s Limitations?

The FNMA HomePath conforming loan product will only make loans up to $417,000 for single unit properties and the property must be a Fannie Mae bank owned property. In San Mateo and Santa Clara Counties, this does limit the properties that are eligible, however, for those properties that do qualify, the FNMA HomePath Conforming product is a much better option than other, similar programs.

How Do I Determine if a Property is Eligible?

You can visit HomePath.com and input in the property’s address to determine which properties are eligible.

What are the Maximum Loan Amounts?

No. of Units	Max Loan Amount
1	$417,000
2	$533,850
3	$645,300
4	$801,950

Is this Program Better than FHA?

While the FNMA HomePath fixed rate product does have its limitations, it is a much cheaper loan than FHA loan program. The HomePath program does not require an appraisal and there is no mortgage insurance. FHA requires both. An appraisal can cost between $400 and $500 and depending on the loan amount, FHA can require two appraisals to be performed. FHA also requires two types of mortgage insurance. One is the upfront mortgage insurance premium of 1.75% of the Loan amount ($7,297.50 on a loan amount of $417,000) and a yearly premium of .55% of the loan amount paid on a monthly basis. Mortgage insurance is required for FHA loans for a minimum of 5 years and up until your loan compared to your value of your home reaches 78%. Not having to pay these premiums can be a substantial savings for the borrower.

An additional benefit with HomePath is that it only requires 3% down instead of 3.5% for an FHA Loan.

Can I Buy a Duplex or Triplex?

Yes, this program is available for purchase of a duplex with 5% down payment and loan amounts up to $533,850. For three-four dwelling units, a 25% down payment is required. Three unit dwellings can fetch loan amounts to $645,300 and four unit dwellings can get loan amounts up to $801,950.

What About Second Homes and Investment Properties?

The FNMA HomePath conforming loan product is also available for second homes and investment properties. Second homes require a 10% down payment for one unit properties and Co-ops. Investment properties will require a 10% down payment for 1-2 unit properties and a 25% down payment for 3-4 unit properties.

How Can I Determine if I am Eligible?

To determine if you are eligible for this loan program, fill out our secure online mortgage application or contact us by phone or email and we’ll send you the necessary information to get started today.

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How to Sell Your San Mateo Home Fast in a Buyers Market

Chris Williamson — Thu, 23 Jul 2009 14:00:04 +0000

Considering a Price Reduction? There May Be Another Way

If you have been trying to sell your home for a while now and have received no offers, your agent is probably asking you to consider a price reduction. While this is one way to attract a wider selection of buyers to your home, you may also want to consider offering what is called a seller buy down.

What is a Seller Buy Down?

A seller buy down is when the seller offers to pay points, which is a fancy word for upfront mortgage interest, to buy down, or lower the mortgage interest rate for the borrower. Buying down the interest rate will have a much greater impact on the borrower’s monthly payment than a price reduction.

How Will a Buy Down Impact the Borrower’s Monthly Payment More?

Let’s take a look at an example. Say your home is on the market for $780,000 and you’re considering lowering the price by $20,000. Instead, you consider offering to buy down the interest rate for the borrower and you apply that same $20,000 to a rate buy down. By buying down the rate, you can save the buyer $433 compared to the traditional model. This loan only requires $87,356 income to qualify. By reducing the price of the home by $20,000, you only save your buyer $95/month. This loan requires $94,272 income to qualify. With an interest rate buy down, more buyers are able to afford your home, thus more chances to sell your home.

Considering Selling Your Home in this Buyer’s Market?

If you are considering selling your home in this buyer’s market, an interest rate buy down should be one of the techniques you use to competitively market your home. Call or email me today and I can explain how this program works with your situation. Working together, we can get your home sold fast.

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