Let me start out by saying that it pays off to do the right thing for your clients. I've ALWAYS lived by this golden rule but the reason I find myself wanting to write about it is BECAUSE anyone that cares to read this (consumer, loan officer or realtor) will hopefully appreciate the loan scenario/program that my client was able to take advantage of and why it would have been easier on me (and other loan officers that watched me painstakingly put this together) to have done an FHA loan vs. My Community.
FHA has been one of my longtime favorite programs. I've been selling them for almost 20 years now so my brain really thinks "FHA." It's been a very competitive program because of its flexible guidelines, lower credit score or no score requirements as well as having a the ability to go up to a combined loan to value of 100%.
So...let me get right to my borrowers scenario:
1. 770 score
2. First Time Home Buyer
3. 5000.00 PLUS in the bank
4. A willing family member to gift her 3.5% down
5. Less than 38% debt ratios
There is more but as you can see...PERFECT borrower for FHA. When running her numbers on the home she found - her proposed payment was 100.00 higher than what her rent was at currently. She got excited BUT knew me well enough (she use to be a realtor) to know that I might know of a better way with a lower payment so I accepted her challenge and decided to find out if she could fit into the Fannie Mae My Community Program and get her a community second. Because the mortgage insurance companies underwrite the files as well, when going conventional, I knew that double and triple checking with their underwriters, our underwriters and the second mortgage bond program underwriters were going to be crucial. Essentially what has to happen when doing a scenario like this is KNOW YOUR GUIDELINES and everyone else's!!
Here are the hurdles that I encountered and resolved:
1. Borrower wanted minimal costs so the seller is paying her closing costs and part of her upfront mortgage insurance. She is paying the rest of the premium out of pocket so her monthly payment is NOW LOWER THAN HER CURRENT RENT!
2. We have GREAT mortgage insurance rates with UG so her out of pocket expenses are much much less than she anticipated and now her family member that was willing and wanting to gift her funds can do it at another time.
3. The community second doesn't allow for the borrower to have more than 3 months PITI or 5000.00 of liquid assets so she is able to pay off a credit card and still qualify for the 100% second all while keeping her account with 5000.00 in it.
Without writing a novel, here is what we are able to do for this borrower.
97% First - 3% Second - Seller pays 3% of closing costs and prepaids and a small portion of the upfront MI, borrower pays the additional single premium of the upfront MI...
And all is well! We now have another happy homeowner, very satisfied real estate agents and I'm happy that I was able to bring it all together.
Side Note: It helps when you have spectacular and knowledgeable people surrounding you. I love Evergreen Home Loans.