First Time Home Buyer Seminar with Kenton Brown 12
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Transcript:
Now, let’s talk about assets a little bit. This is an interesting thing because the FHA loans used to be for first time homebuyers and you could move in for as little as 3.5%. People don’t know that. Some people think they need to have 20% saved up. You don’t have to have 20% and it’s unrealistic to save 20%. How many of you can save that kind of cash every month or ever year? It’s hard. You’ve got to have a really high income to be able to do that. The other thing that Kenn was talking about is USDA, which is for certain areas and is for low to moderate income buyers. It’s a great zero down loan and there’s no mortgage insurance on it. People don’t know about that. You can go to their website and check it out. It’s pretty cool stuff. Another thing we look at is maximizing leverage. You can get the seller to contribute to closing costs, which lowers the amount of money that you owe back. You can also get the builder to that because they’re trying to get people to move in. There’s a possibility as the lender that we can pay closing costs. Now, the way we do that is to raise the rate, so there’s no free ride there. If you say, “all I have is X,” we’ll figure out a creative way for you to get the money that you’re comfortable with. Maybe even the realtor can help. That gets a little bit tricky because the realtor can’t actually pay that, so what they’d have to do is reduce their commission and then pay it for you in that way. But there’s a way that it can be done. FHA loans allow 100% gift. So if a blood relative gives you the money, you’re on the right track. When I bought my first house, my father gave me a gift. I did pay you back, didn’t I? It was a gift so I didn’t have to pay it back, but I did just cause of my own personal obligation that I felt, and that’s just the way I work. It could be a grand parent, it could be a significant other, it could be anyone out there that says, “I’ll give you a gift because I want you to own a home.” The biggest barrier to some one owning a home is the down payment. The last thing would be a 401k. If you can borrow against the secured asset for your down payment, you have to carry that in your debt ratio because that’s real world stuff, but you can also borrow money from your IRAs. There are some IRS regulations related to that, so you’ll pay a tax on it.
Now, property. The things we look at obviously include credit, income, assets, and collateral. The property is the collateral. If you don’t pay, what’s the value of that asset worth? So we look at that and get an independent appraisal. Now, there’s a lot of heat that you’re reading about in the media right now because a few guys got their appraisers to say the value of the property was more than it actually was. But here again, that’s a media apparition that they love to expand and now we’re getting our politicians involved that love to make laws and rules saying that you can’t have a relationship between mortgage brokers and appraisers. Right now, I’m not allowed to call an appraiser and talk about the value of things because otherwise, I’m colluding with him. The reality is that you want to make sure you get a fair appraisal of the property and that it’s worth what you paid for it. You want that as a consumer too. You don’t want to over pay for a property.