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South Bend Home Loan

Wednesday, March 29, 2017

How To Win In A Bidding War

It's practically an epidemic in our current housing market.  A buyer finds a house they really like - one that's only been on the market for a couple of days many times - and they make an offer only to find out that there are other offers on the table and theirs isn't the winning one.

It's a rotten situation.  It's even worse when it happens multiple times, which has been the case for a lot of potential home buyers in Michiana.

What if I told you there was a mortgage loan option that would make your offer better and help you to win in this tight market?  There is, and it's called the Ruoff 3 for 1 Program.

What is the Ruoff 3 for 1 Program?

You're going to love this loan option.  The Ruoff 3 for 1 Program is a conventional mortgage that eligible buyers can use and only put 1% down on the purchase of their home.  That's right.  Just 1% of the price is needed for the down payment.




Tell me more.  But first, what do you mean by 'Conventional Mortgage'?

Before I break down the details of the 3 for 1 and how it will make your offer better, let me clarify what I mean by 'conventional mortgage'. In a nutshell, there are two basic types of mortgage loans, government insured loans and conventional loans.  Government insured loans typically offer extra flexibility so they're a good fit for some people but that flexibility comes at a cost of higher fees and/or mortgage insurance being charged for the life of the loan.

If you don't need the flexibility they offer, it's better to skip the extra costs and just go with the plain-vanilla conventional loan.  To learn more about why I prefer conventional for most buyers, click here - Why I (almost) Always Recommend Conventional.

So Who Can Buy With 1% Down?

Conventional loans typically require 5% down but we've had an increase in 3% down options coming on the market lately.  The Ruoff 3 for 1 Program technically is a 3% down option too.  In this case, though, 2% of that 3% down payment is paid by Ruoff, leaving only 1% to be paid by the home buyer.

Let's take a minute to hit the high points on what is needed to qualify:

  1. Credit score - A 680 minimum credit score is needed.
  2. No first time buyer requirement - You do NOT need to be first time buyers (yes!). However, you can't own another house at the time of the loan closing and you will need to take an online home buyer education class.  Don't worry.  It's not hard.  
  3. Purchases only - This is for a purchase only (not a refinance of an existing loan) and that purchase has to be of a single family home.  No rental properties, duplexes or manufactured homes are allowed.
  4. No minimum personal investment or savings required - While you need 1% down, it can be a gift from a family member if needed. This loan also doesn't require any level of additional savings like some loans do, making it even easier to qualify.
  5. Some maximum income limits - Some areas have a maximum income limit meaning that you can't make more than the HUD median Income for that area or you won't qualify.  About 1/3 of our market has no income cap while the rest has a current cap of $52,900.  To see if a cap applies to the house you like, go here - Property Lookup.  

One key thing to know about the income cap - it only applies to the borrower on the mortgage and not to the household.  If there are two people buying a home together and combined they make too much money but alone one of them makes less than the cap, we can look to see if that person qualifies alone so they can use the program.  Both people could still be on the deed to the house in this situation.

So How Does This Make My Offer Better?

I'm happy to explain!  First, the fact that this is a conventional loan makes a difference.  All things being equal, most sellers feel more comfortable with a conventional buyer.  The general impression is that a conventional buyer has a stronger financial picture and will be more likely to close.  Also, conventional loans have lighter property requirements which make sellers more comfortable.

The best way to use this program, though, relates to seller concessions.  It's a common thing for buyers to ask a seller to help cover closing costs on a purchase.  Buyers typically ask for this because they are using their savings to cover the down payment and can't cover both.  If you only need 1% of the price for your down payment though, you can likely cover your own closing costs instead of asking the seller to cover them.  This makes your offer look better when compared to another buyer who is asking for seller help.

Interested?

Of course you're interested!  While Ruoff's 3 for 1 Program isn't a fit for everyone, it's a fit for a whoooole lot of people who are ready to buy now and quit playing the 'someone beat us out' game.  If you'd like to dig deeper to see if this program could help make your offer the winning offer, drop me a line at lori.hiscock@ruoff.com or give me a call at 574-234-5201.


To learn more about low down payment options or any other aspects of home financing, contact Lori Hiscock at lori.hiscock@ruoff.com.  


Lori Hiscock is a Sr. Loan Officer at Ruoff Home Mortgage‘s South Bend office.  One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University.  You can connect with Lori Hiscock or apply online here. NMLS#404320.
Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:

Indiana-DFI First Lien Mortgage Lending License #10994;
IL Residential Mortgage Licensee #MB.6760734;
Michigan 1st Mortgage Broker/Lender License #FL0017496.
Ohio Mortgage Broker Act License #MBMB.850220.000

The Florida Office of Financial Regulation License #MLD1182


Tuesday, January 3, 2017

Can I Buy A House With My Income Tax Refund?

If you're anything like me, you probably start thinking about what you could do with your tax refund months before tax time even hits. Should I pay something off? Take a family trip? Save it for a rainy day?

There are lots of uses for that tax refund money, most of which you'd forget about soon after it was spent.

But...hey, what if you could do something with that money that would change your life?  Is it possible that you could buy a HOUSE with your tax refund?

Yes, you likely could get into a house of your own with your tax refund.

Let's talk about how.

3% Down Conventional

First let me say, there is no 'one size fits all' mortgage type. Some buyers get the most benefit from USDA financing, some from VA, some from FHA and some from conventional. For the majority of my home buyers, though, a conventional mortgage offers the most financial benefits. 

(To learn more about why conventional financing rocks,

In 2016, the requirements for getting a conventional loan lightened with the minimum down payment dropping from 5% of the price to 3% for many buyers, making it an even better option than it was before.  Suddenly a buyer could get all the benefits of a conventional loan (no financed fee, removable PMI, easier home buying process) without having to invest too much upfront.


(To learn about my favorite 3% down conventional option, 

Conventional loans have one unique thing that needs to be considered when trying to buy a house with less money needed upfront, though - the seller concessions cap.

Maximum Seller Concessions

When you're buying a house, you are allowed to ask the seller to help pay for the costs you incur with getting the loan. They can also pay for the items that need covered upfront with a home purchase, like your first year of home insurance and your insurance and tax escrows. Together, these items are typically referred to as 'closing costs and prepaids.'

The seller can't always pay for all of these for you, though. It depends on the price of the home you are buying and the type of loan you are getting. The amount the seller can give is capped as a percentage of the sales price and the percentage allowed is different for different types of loans.

For conventional loans, the most the seller can give is 3% of the price. On lower priced homes (houses under $110,000ish), this will likely not cover all of the costs so you, the buyer, will have to pay for the rest.

Show Me The Numbers Please...

Are you a numbers nerd like me who loves a good chart?  If so, I've got your back!  Here's a table showing how much the buyer would need for the down payment and closing costs/prepaids assuming the seller agreed to pay the maximum that is allowed towards the buyer's cost.  As you can see, the amount the buyer needs stays the same even if the price is lower simply because the seller can't cover all the closing costs on a lower priced home.

Home Price 3% Down Payment  Typical Closing Costs/Prepaids  Max Seller Can Contribute (3%) Amount Needed By Buyer
                            75,000                               2,250                               3,300                               2,250                               3,300
                         100,000                            3,000                               3,300                               3,000                               3,300
                         125,000                            3,750                               3,300                               3,300                               3,750
                         150,000                            4,500                               3,300                               3,300                               4,500

3.5% Down FHA

If you're wanting to buy a lower priced house but can't spend as much upfront as the conventional loan needs, a FHA mortgage might be the better fit.

FHA financing only needs 3.5% down, so not much more than the conventional option, and the seller is allowed to give up to 6% of the price towards your closing costs and prepaids. The seller being able to give more can keep the upfront amount needed on the lower priced house to a more affordable range for many buyers:
Home Price 3.5% Down Payment  Typical Closing Costs/Prepaids  Max Seller Can Contribute (6%) Amount Needed By Buyer
                            75,000                               2,625                               3,300                               3,300                               2,625
                         100,000                            3,500                               3,300                               3,300                               3,500
                         125,000                            4,375                               3,300                               3,300                               4,375
                         150,000                            5,250                               3,300                               3,300                               5,250

IHCDA Next Home

If your tax refund still isn't going to cover the amount needed, you aren't out of the home buying game yet. At that point, we'd see if you could qualify for down payment assistance from IHCDA.

IHCDA stands for Indiana Housing and Community Development Authority. It is a department of the Indiana state government that provides eligible home buyers with down payment assistance. Because of the help provided by IHCDA, many buyers can purchase a home needing only $500-$1,000 to cover the upfront earnest money. They often get that earnest money back at closing too, making this a truly zero down home buying option.   


(To learn about the downsides to this down payment assistance program.

Bottom Line

If none of the options above are a fit for you, there still might be other ways to cover your down payment. Gifts from relatives are often allowable sources as are loans against something you own like a 401(k) or a vehicle.  

Bottom line, there's likely a way to cover your down payment at any time of the year. This time of year with that tax refund money flowing in, though, it might be easier than most.

So...are you wondering if this might be the right time for YOU to buy a house?  I'd be happy to help you figure that out!  Just give me a call or drop me a line at lori.hiscock@ruoff.com.  Together, we'll see if 2017 might be your year to own a home of your own.


To learn more about low down payment options or any other aspects of home financing, contact Lori Hiscock at lori.hiscock@ruoff.com.  


Lori Hiscock is a Sr. Loan Officer at Ruoff Home Mortgage‘s South Bend office.  One of Michiana’s top mortgage loan officers, Lori started her lending career in 1995 after obtaining her bachelor’s degree in Finance from Western Michigan University.  You can connect with Lori Hiscock or apply online here. NMLS#404320.
Ruoff Mortgage Company, Inc. is an Indiana corporation licensed by the Indiana Department of Financial Institutions (DFI) and operates with the following licenses:

Indiana-DFI First Lien Mortgage Lending License #10994;
IL Residential Mortgage Licensee #MB.6760734;
Michigan 1st Mortgage Broker/Lender License #FL0017496.
Ohio Mortgage Broker Act License #MBMB.850220.000

The Florida Office of Financial Regulation License #MLD1182