ThomasGoodwin.com

I will over-state the obvious and tell you it’s a buyer’s market for real estate. Great news if you’re a buyer. Even better news? The government wants to help you pay the costs to buy a home.

That’s right, welcome home. It’s more than just a door mat saying. That’s the name of the government program that will help pay your closing costs to buy a home if you meet the following criteria:

1. You do not currently own a home.
2. Your household income is at or less than 80% of the average income for the area where you are looking to buy a home.

So it’s not clear who qualifies because you could very well qualify in one area but not another. If you are looking to buy a home in Hamilton County, Ohio (which is essentially Cincinnati), you would qualify for the 2nd requirement listed above if your household income was at or less than $52,960 for a household of one or two people. That maximum amount of income allowed to qualify for the program is increased to $60,904 for a household with 3 or more people.

In more rural areas, such as Adams County, Ohio (some 3 counties east of Cincinnati and Hamilton County) a couple making $56,640 or less would qualify and a family of 3 or more people would qualify with $66,080 or less in income.

You can see the maximum income amounts allowed by the program as they pertain to all 88 counties in Ohio by visiting the Federal Home Loan Bank of Cincinnati’s website.

If you meet the above requirements, the government (a.k.a. The Federal Home Loan Bank) will let you have up to $5,000 of downpayment assistance. It’s yours for the taking, first come, first serve! It must be used for a home that you occupy, so no rental properties.

The only catch is that if you sell the property within 5 years of taking this downpayment assistance, you will have to repay it to the government on a pro rated basis. For instance, if you sell the home after two years and had received $5,000 of assistance, you would have to repay $3,000. The loan from the government becomes a gift to you at the rate of $1,000 per year. After 5 years, the government says congratulations! You will need to discuss any tax implications of taking this assistance with a tax professional.

This is a grant program, and like most grant programs there isn’t an endless supply of free money to go around… so this is not like the free money that the government is sending out to tax payers as part of the economic stimulus that Congress passed. Once the money for this grant has been dispursed, that’s it… no more money. So if you are thinking of buying and meet the eligibility guidelines above, tell your Realtor and/or Loan Officer to get you into this program right away!

I, unfortunately, cannot take credit for discovering this good news. I found an article about this grant/down payment assistance program in my May 2008 Ohio Realtor newsletter. Therefore, I also cannot accept blame or responsibility for any errors or omissions in this article. I would encourage anyone that is interested in the program or has questions about it to visit the Federal Home Loan Bank of Cincinnati’s website or talk to your mortgage loan officer. That is my disclaimer! I’m just sharing news that I found in my trade publication.

As always, I welcome your comments and feedback…

Whether you are buying or refinancing a home, the mortgage loan process is probably the least amount of excitement you can have and still feel good about the end result - owning a home, building equity, and having a possible tax deduction for the interest that you pay.

But there are fees that can chip away at that happy, responsible home owner feeling. If you see these fees listed on the Good Faith Estimate (that every lender is required to provide to you), you should ask to have them removed or shop around for better deals;

Underwriting Fee
Processing Fee
Non-refundable Loan Application Fee
Document Preparation Fee
Appraisal Review Fee
Loan Origination Fee or Mortgage Origination Fee

There are probably several others that I just haven’t come across. In fact, some of the above can be called different things. What’s important to know is that the lender is trying to pass costs along to you and you are trying to get the loan for as little cost as possible.

For instance, if the lender charges every borrower a $300 underwriting fee, what they have essentially done is used your money to cover their overhead expenses, especially since most underwriting is automated to a great extent and the underwriters only review marginal cases in many banks.

You probably will not be able to get out of paying any of the following fees:

Flood certification fee
Recording Fees
Title Insurance (for the lender)
Title Exam or Title Search
Appraisal Fee
Credit Report fee

The recording fees are those that the bank incurs to “go down to the courthouse” and file the mortgage/lien on the property. It’s essentially a tax that county governments charge, or tax, to keep track of who owns property and who has a loan on the property. When you go to sell property you will pay a conveyance fee (at least in Ohio you will) and it’s usually based on the sale price. Some lenders will waive the credit report fee, I listed it under the “non-negotiables” because it’s usually only about $16. And when the bank is trying to sock you with $175 underwriting fees and $300 processing fees, why fight over the $16 charge… go after the bigger ticket items.

I recently went to refinance and I liked my new interest rate, but I didn’t like that it was going to take over two years to recoup my closing costs in the reduced monthly payment. (What I mean is, if my payment went down $100 by refinancing but I had to incur $2,400 in closing costs on the loan to refinance, it would take me 24 months to recover my closing costs in that lower rate loan and lower monthly payment.) The loan officer was able to knock off the $175 underwriting fee without even going to his manager or consulting with anyone… so the loan officers have some say in the fees. Just make sure you tell them you will be shopping around for the best deal (and stress to them that by “best deal” you mean in terms of lowest closing costs AND lowest rates).

As always, I welcome your comments and feedback…

I called one of my good friends the other day; this guy is both a personal and professional acquaintence of mine as he is a mortgage loan originator (loan officer) for Fifth Third Bank. I was disappointed to learn that Fifth Third Bank had retired a popular mortgage product that I have long touted and promoted to clients: The Good Neighbor Home Loan.

This loan was unique in the respect that it allowed first-time home buyers to borrow 100% of the sale price of the home on a competitive 30-year, fixed rate mortgage WITHOUT having to pay PMI (private mortgage insurance). To qualify as a first-time home buyer the applicant had to not own a home within the last two years. There was also an income limitation (cap, not minimum) so it was great for young professionals, newly weds, recent college graduates, or just your regular working stiffs. The closing costs were very reasonable, too. I want to say that the numerous closings that I had as a Realtor where the borrower used this loan program, the closing costs to the borrower were usually $1,200 to $1,600. Also, the seller could help pay some of the buyer’s closing costs (up to 3% of the sale price I believe) so the buyer could almost walk in and buy the home with no cash at closing.

Now I realize that with the rise in foreclosures and everything you hear on the news about subprime loans and banks having problems with liquidity that this program sounds horrible to a bank for the same reasons it sounds great to buyers! But this wasn’t for your subprime borrower… the buyers had to have good credit to get these loans, conforming loans as opposed to non-conforming. This loan program gave Fifth Third a nice competitive edge in the first-time home buyer market and I can only assume helped build loyalty and helped sell additional products and services. The borrowers were given a half a point reduction on the interest rate of their loans if they had the monthly payment automatically drafted from their Fifth Third checking account. Hence, borrowers then started doing more and more banking with Fifth Third.

I would like to see Fifth Third bring back this loan program. If you bank with Fifth Third and if you are ever in a position where you’re asked by an employee or manager what you like or don’t like about the bank, I hope you will mention that you’d like to see them bring back The Good Neighbor Home Loan Program. In the meantime, there are still many loan programs out there to help first-time home buyers - such as FHA loans. If you have questions or need specific advice, call or stop by the bank of your choice to talk to a lender that you know and trust.

As always, I welcome your comments and feedback…

Yesterday I read an article that National City Corporation, with headquarters in Cleveland, Ohio, is laying off approximately 900 people that work in its mortgage division and is no longer accepting loans from mortgage brokers.

As a quick aside for those readers out there who have never shopped for a mortgage or did not realize there are different types of lenders, we have mortgage bankers and mortgage brokers. A mortgage banker is typically an employee of the bank, “the loan officer” in your friendly neighborhood branch, whereas the mortgage broker is like an independent agent that takes your loan application and sends it to multiple lenders to (supposedly) try to find you the best deal that they possibly can in the market. Mortgage brokers of course charge you a fee to do this service and/or they receive a fee from the lender that makes you the loan.

As the number of foreclosures ticks higher and banks tighten credit standards so fewer people qualify for mortgages, I have noticed an increase in the advertising for non government-backed student loans in the media and especially on tv.

First there were the ads for Astrive, which only caught my attention because they continued to run similar ads with different website addresses. The website address at the bottom of the tv screen always starts with Astrive and then ends in some three-digit number and the usual .com suffix. In the financial world, seeing a company use multiple websites with similar addresses always throws up a red flag in my mind. I am not saying Astrive is a bad company; at this point, I don’t know enough about them. But I am curious why they have multiple website URLs and why they are so similar.

I didn’t think much of the Astrive ads (aside from the various - and seemingly frequently changing - website addresses) because this is the business that Astrive is in. But then I saw a commercial for student loans from Chase Bank. I haven’t seen a commercial for home loans through Chase in quite some time so seeing the commercial for student loans caught my attention immediately.

It is interesting to see that as the mortgage and real estate market has taken a downturn, lenders have turned to student loans, which are repaid over many years - up to 20 in most cases - similar to the 30 years that a home loan is amortized over.

Only time will tell if student loan defaults will become a crisis in our society similar to the foreclosures. Some news commentators and talking heads on tv have speculated that the auto industry may be next with its flat sales and low (or zero) interest loans. Certainly the default risk on a zero percent interest loan is still higher than zero and those loans, when packaged with other interest-bearing loans and sold to investors, would sell at a steep discount.

As always, I appreciate your comments and feedback…

Some of you may remember the tv show Green Acres. Essentially a wealthy couple moves out of a big city penthouse filled with every luxury imaginable into a rural farm setting. Well, the US Department of Agriculture wants to get more people to follow suit… putting a new meaning on Green Acres… think cash…

Brian Volz, Vice President of Western Ohio Mortgage Corp, sent me the following link to the US Dept of Agriculture website. Brian’s company is involved in the piloting of a new progam to make mortgage loans more affordable for those willing to move away from “Times Square” to the “fresh air”. Ok, I will stop with the references to the tv show now.