In the past, obviously, one of the biggest problems that people have had is saving enough money for the down payment. Particularly, for first time home buyers, that’s a big obstacle. As home prices have risen, the amount of money that’s needed has always gone up proportionately as a result and become an obstacle for many. In the past, on a conventional mortgage, though you could put down as little as five percent, it had to be money from your own funds.
Recent changes are now allowing lenders and the mortgage companies to allow the down payment to gift money. Gift money can come from any relative to be used towards the down payment. The down payment no longer needs to be 100% from your personal funds. This will allow many first time home buyers a greater chance at owning their new home.
United Mortgage Rule changes in down payments that may help many buy a home sooner
Matt: We’re here with Mike Goblet and another segment of Arizona Mortgage News Insider Update. Today, we’re going to talk about rule changes in down payments that may help many to buy a home sooner. It sounds like good news, Mike. Good to see you again.
Mike Goblet: Hi, Matt. It’s good to see you again. There’s been some recent changes in the rules governing down payments that I think are very encouraging and will help many get into the market sooner rather than later, which is really important for many today.
Matt: Absolutely.
Mike: In the past, obviously, one of the biggest problems that people have had is saving enough money for the down payment. Particularly, for first time home buyers, that’s a big obstacle. As home prices have risen, the amount of money that’s needed has always gone up proportionately as a result and become an obstacle for many. In the past, on a conventional mortgage, though you could put down as little as five percent, it had to be money from your own funds.
Even if you were putting down 20 percent, you had to put down at least five percent of your own money and prove that it was yours. On a $200,000 home, particularly, for somebody starting out, the need for that $10,000, and then, the reserves when you own a new home, there are many additional costs that get added it became very large. What’s been changed?
Actually, as a result of some of the stricter laws that came out at the beginning of the year about the qualified mortgage…I don’t know if you remember me talking about that?
Matt: Sure.
Mike: They got stricter with DTI and, actually, the big focus became on the ability to repay, that they had to make sure the consumer had the resources. That’s actually the positive that has now allowed Fannie Mae, in particular, lenders and the MI companies to allow the down payment to become gift money.
Matt: Gift money, what’s that?
Mike: Gift money can come from any relative towards the down payment. A relative, or a fiancÈe, or a domestic partner, in terms of people. It can’t just come from anybody, but they can give you the money. Your parents, for example, can give you the money for a 100 percent of the down payment. Whereas before, you needed at least five percent of your own funds.
Matt: Very cool.
Mike: Now, when you think about it, you can do a loan with just five percent money down. This now creates the opportunity for many to get into the market, that couldn’t get there before.
Matt: So long as they’ve got a rich uncle or cousin to help them out, right?
Mike: Exactly the case. Now, there are some qualifications about the gift money that has to be sourced. By the way, a gift money means it can’t be required to be paid back. It is truly a gift. But as soon as that criteria is met, the money becomes very viable and can be used at any time during the process as going towards the down payment.
I think that’s really exciting news in terms of getting particularly first time home buyers into the market that have the family members or a significant other that they’re dealing with that has the money and can now make that home purchase possible.
Matt: Could that also come from a family trust?
Mike: Entities, that gets a little more difficult. But I guess if they’re one of the trustees on it, the answer is it could. It gets a little more cloudy when you start dealing with entities like that. I’m going to guess the detail can be worked out. The answer is yes.
Matt: Got you. Like a REAP, but within a family confines, set that up to do something like that.
Mike: I never tried to do that. We are dealing now, because this has only been the last few months that the MI companies and the lenders have allowed this. I haven’t had any that came from a family trust, but I’m sure it’s going to be based upon how the trust is structured.
Matt: Very cool.
Matt: Are there any other gems and nuggets of wisdom to share with us?
Mike: Rates are still really holding and been very positive. While they’ve been a little bit up and down, rates are still actually in the mid to low fours, depending upon how you want to approach it.
Were you trying to do a totally no closing cost loan, or just do what’s called the part pricing that we’ve talked about in the past that provides no money towards closing cost? Rates a still great. They’re holding in the low fours, depending upon a lot of the different criteria.
Matt: That’s good news.
Mike: Excuse me?
Matt: Good news. Time to get out there and get active.
Mike: It is, particularly, with this down payment change. Home prices have stabilized for a bit. They’re not rising as fast as they have been in the Phoenix market. There’s a little more inventory coming on. I think now is a great time to be looking for a home.
Matt: With that lead in, Mike, what’s the best way to get in touch with you for those that have questions and want to get started?
Mike: Our full number at the office is 480 503 3533. Call me direct on my cell phone, as well, at 480 220 2329. My email address is mike.goblet@umfginc.com, mike.goblet@umfginc.com.
Matt: Good deal. Thanks for sharing another good segment on Arizona Mortgage News. We’ll look forward to the next go around with you.
Mike: I look forward to it, too. I’ll bring an update on what’s going on with a lot of things, mortgage rates, and, obviously, any new changes that come along.
Matt: Beautiful. Have a great weekend, Mike.
Mike: You too, Matt. Take care.
Matt: Thanks.
