South Bend Home Loan

Monday, October 29, 2012

The Blessing of a Cut Appraisal

When the appraisal on a home purchase comes in lower than the agreed on price, it’s a very stressful situation for a home buyer.   That was definitely the case for Charlotte, whose appraisal came in $4,000 below the $117,000 price on the condo she was buying this fall. 

I personally wasn’t concerned in Charlotte’s case though.  The $113,000 appraised value that we received actually looked really good to me.  There had been several condominium sales in that development this year and the vast majority had sold for $105,000-$107,000.  The units were all very similar so Charlotte’s Realtor and I both expected the seller to see that it could have been a lot worse and to renegotiate with her on the price.
You can never predict what people might do, though, and this seller did the opposite of what we’d all expected.  He dug in his heels and refused to negotiate so, with a heavy heart, Charlotte walked away from the purchase of her new home. 

There’s no doubt that Charlotte was disappointed. She really liked that condo.  Even worse, she had already sold her previous home and was temporarily staying with some family.  This temporary situation was only supposed to last for a week or two, but now that the purchase had fallen apart, it looked like it could go on indefinitely.  After years of having her own space, living as a guest was taking a toll on Charlotte.

Luckily for her, Charlotte had partnered with Bethany Rowe, an amazing Realtor with At Home Realty Group.  Bethany wasn’t about to give up because the going got tough, and she immediately hit the streets to find Charlotte another home.  In a matter of weeks she found and negotiated a purchase on another wonderful condominium for Charlotte in the same development as the previous one but this one cost $14,000 less than the first one.

So the moral of the story?  Sometimes a home buying disappointment is a blessing in disguise.  Charlotte was definitely discouraged when the initial purchase fell apart, but five weeks later she was able to close on the purchase of the RIGHT home for her, at the right price.  Thanks to the hard work of her excellent Realtor (and me, for getting the second purchase closed super-fast), Charlotte is now happily living in her new home that she purchased at a great great price.  Congratulations Charlotte!

Wednesday, October 17, 2012

The Pay It Now Plan

Yesterday I gave some advice to a buyer that I thought might be beneficial to more than just that one client.  It's the "Pay It Now" approach to preparing for a home purchase.  To learn more about how this could help you (or your buyers) to better prepare for home ownership, enjoy this video blog:

Monday, October 15, 2012

The Realtor Who Cared Enough to Say No

Let me just start by saying that I really like Realtors.  In general, they are a caring, funny, hard -working bunch of entrepreneurs, so – yea - my kind of people. 
Every now and then, though, a Realtor and I butt heads on what a buyer’s price range should be.  I’ve been known to encourage buyers to lower the price range for the home they buy even when they are technically eligible to buy at a higher price.  Not all home buyers really understand their budgets, so when I review their financial situation with them, I talk to them about how wise and realistic it is for them to buy at the very top of their ability.  Realtors don’t always think I should be offering this advice, and I’ve been scolded a few times for it.
Which brings me to my story – Last week I was talking to some first time buyers.  They were eager to buy a home at the top of their price range.  They are financially able to get a loan approved at that level but, as I reviewed their information, I didn’t feel that they should.  They were relying on her part time income and his overtime to make it work, but he’s about to be changing to a new shift that may not have as much overtime and she’s due to have their second child so her part time work may slow down.  While they could make the payments now, I felt that they may not be able to as easily in the future so I told them that.  I asked them to consider buying a lower priced home that gave them more breathing room, and they said they’d give it thought.
A few hours later, my phone rang.  Caller ID said it was their Realtor, who is a gentleman I haven’t worked with a lot.  I’ll admit it – I was nervous as I picked the phone up.  I started bracing myself for him to yell at me about talking his buyers into a cheaper home and wasting his time seeing he’d already been showing them some at the higher price range. 
This Realtor didn’t yell at me though.  He didn’t complain about wasted time or reprimand me about overstepping my role.  Instead, he thanked me.  He said he had been worried that they might be putting themselves into a tight spot and he never wanted that for his clients.  He appreciated me suggesting limits and would support my suggestions when showing them homes.  If they asked to see a home above what I felt was wise, he said “I’ll just tell them no”.

After we hung up the phone, I just stared at it for a minute in shock and delight.  We’ve all heard bad stories about Realtors (and mortgage lenders) who aren’t looking out for the buyer’s best interest.  Here’s proof that some -  likely most – really do.  Thank you, Mr. Realtor, for caring enough to say no.

Wednesday, October 10, 2012

The Best of Both Worlds – Using a Gift with Conventional Financing

If you were to ask a random sampling of mortgage lenders if you could buy a home using conventional financing and a down payment that was a gift from a family member, they’d probably all tell you “No”. 

Guess what?  THEY’RE WRONG.

When structured right, a qualified home buyer can purchase a home with the more advantageous conventional financing terms and gifted down payment money.

Why Would You Want Conventional Financing?
FHA financing is typically the route lenders use when a buyer is using gift funds for a down payment.  Conventional financing is often a better financial option, though, for the following reasons:
  • Lower fees – FHA has a 1.75% upfront mortgage insurance premium that is typically added into the loan balance. This is a fee that you don’t have to pay with conventional financing.
  • Lower monthly Mortgage Insurance (MI) – mortgage insurance is currently at 1.25% annually for FHA loans.  Conventional loan MI rates vary depending on credit score, down payment, etc.  The conventional MI is very likely going to be less than the FHA MI, often significantly less.
  • Lighter home standards – FHA has tighter requirements on the condition of the home.  In our area, interior or exterior peeling paint often becomes a problem with FHA financing.  Conventional financing doesn’t have the same requirements, so some homes will be eligible with conventional financing that couldn’t be purchased with FHA financing.
  • Faster removal of Mortgage Insurance – FHA requires MI to stay on a loan for a minimum of 5 years.  Conventional financing can normally remove it faster (typically 2 year minimum).
Interest rates between conventional loans and FHA loans vary, so sometimes FHA is still a good option just because the interest rate is better.  Given the lower closing costs, mortgage insurance and property requirements, though, conventional financing is often a better option.

So….Why would the other Mortgage Lenders Say “No”?
That’s a great question.  They would likely say no because they just can’t do this.  Many lenders are locked in with one MI company and the MI company is the one that says you can’t have the down payment gifted.  Ruoff Home Mortgage shops your MI to several different companies, though, to get you the best rate and the best terms.  One of the many MI companies out there will allow gifted down payments.  If you need this option, that’s the company we’d use.  Our competitors either won’t, can’t, or don’t even realize this option exists.  In any of those cases, they’re not the lender for you.  Ruoff Home Mortgage is.

Sunday, October 7, 2012

4 Things a First-Time Buyer Should Know

If you’re considering a home purchase, here are four things you should know upfront to help you get started on the process:

1.      Focus on your Credit Score – Your credit score is a critical part of your mortgage approval, so you’ll want to have it reviewed early on in the process.  A person who isn’t credit readily initially can often change that with time.  Having a knowledgeable, qualified mortgage lender review your credit report is absolutely mandatory early on for any hopefully home buyer.
2.      It’s not WHAT you do, it’s THAT you do – buyers often worry that they can’t get a mortgage because they recently started a new job or finished school.  The old myth that you need to be on a job for 2 years to get a mortgage isn’t true.  Banks don’t care WHAT you’ve been doing for the last 2 years.  They care THAT you’ve been doing for the last 2 years.  Have you been employed in some form?  Have you been in school?  The mortgage lender will typically rely on your current income from your current job – even if you’ve only recently started it – as long as you can show them that you’ve been actively working or learning in some form for the last 2 years.

3.      Try to have a Down Payment – Do you need to have a down payment to buy a home?  Probably not.  Most first time home buyers can qualify for a ‘no down payment’ option.  Even though these options are there, you should still try to save up a 5% down payment if you can.  Your closing costs will be cheaper, your interest rate will likely be lower and your monthly PMI will typically be less.

       4.      If you truly need down payment help, explore USDA – If saving up a down payment just isn’t going to work for you, explore USDA financing.   It offers 100% financing to eligible buyers, has good interest rates and very low PMI.  There is a financing fee that is rolled into your loan, so you’ll owe more when you pay the home off, but – on all other fronts – it’s a low cost 100% financing option.  The biggest drawback is that you can only use this loan type when buying a home in an area considered rural, but that area is larger than many think, so it’s worth exploring as you home shop.
Credit score, income and down payment are the three main things that a lender will focus on when approving your mortgage.  To learn more about these and other important aspects of home buying, visit and


Tuesday, October 2, 2012

When Home Buying Seemed Hopeless

Ethel stood in front of me, a pile of papers in her hand and a disheartened look on her face.  “Do you think there’s anything you can do for us?  I’ve just about lost hope of buying our home”. 

This was a rare feeling for Ethel who was a strong woman of faith.  Peace and hope were second nature to her, but her bank had just called and told her that her mortgage was being declined.  She and her husband had planned on moving into their new home that weekend – everything she owned was already boxed up – and now the whole plan was crumbling around her without warning.  This disappointment had her wondering if a home purchase was God’s will for her after all. 
Ethel’s Realtor had also been surprised by the news, but he wasn’t one to admit defeat easily.  Instead, he sent Ethel to me, hoping that we could make a miracle happen.  Not only did we need to find out what went wrong with the previous bank and fix it, we also needed to help Ethel find down payment assistance.  The home buying process had been more expensive than expected causing her down payment money to be absorbed with unexpected costs.

A miracle was what was needed, and a miracle was what was given.  We found the flaw in the other bank’s thinking and re-arranged her financing plan to work around it.  We enrolled Ethel in IHCDA’s down payment assistance program and got her the funds needed to cover the unexpected shortage.  It wasn’t easy and all parties had to work together, but a month later, Ethel and I met up for a much happier occasion – the moment when her Realtor handed her the keys to her very own home.