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Texas Bond 77 Down Payment Assistance Program The Texas Department of Housing & Community Affairs has just released a new bond program which will help buyers with their down payment when purchasing a home. Essentially, it can help make an FHA or conventional purchase into a Zero Down Payment home loan. The name is "Bond 77" and is the largest allotment from the State of Texas to date. It appears to have been timed to try to fill the void that was left when the Federal $8K First Time Homebuyer Tax Credit expired. Key Points about the Bond 77 Program - It is NOT a permanent program and funds will be allotted on a first come first served basis and when funds run out the program will terminate when funds are exhausted - Interest rates will be locked for 30 years - Fees will be severely restricted so it will be good for borrowers - It will provide up to 5% of the purchase price towards the down payment and closing costs - It will be treated as a 'silent' Second Lien that will have no interest & no payments and does not have to be repaid for 30 years as long as the borrower resides at the home as their primary residence - It is available to, depending on the area, first time AND existing home buyers - It is available with FHA, Conventional, USDA and VA mortgages - All homebuyers must complete a pre-purchase homebuyer education course through a certified provider and must have the completion certificate prior to underwriting - There are property, purchase price & income restrictions This new program is great for those buyers who qualify and are in need of some assistance with their down payment and/or closing costs. As indicated above, it is a first come first served program. Here is the TDHCA website with additional details: http://www.tdhca.state.tx.us/homeownership/fthb/down-payment-assistance.htm If you have any questions about the Texas Bond 77 Program & whether you are eligible or if you would like to be put in touch with a lender that is qualified by TDHCA to process a Bond 77 mortgage, please feel free to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it . Back to Top HUD $100 Down Payment Purchase Program A program offered by the Department of Housing & Urban Development for buyers who purchase HUD-owned homes. HUD is the department in the government that oversees FHA mortgages. When a homeowner defaults on an FHA mortgage and the home is foreclosed on, the government (HUD) ends up as the owner of the home. Like any bank or lending institution, the government is not in the business of owning homes, so they list the homes on the market and sell them. HUD offers a $100 down payment program for buyers of their homes who meet certain conditions. The buyer would be able to make a down payment of $100 and finance the remaining amount of the purchase price in an FHA mortgage. One of HUDs missions is to increase home ownership in the US and this program helps achieve that by drastically reducing the amount required up front to purchase a home. In addition, HUD will pay up to 3% of the purchase price toward the buyer's closing costs. Currently, in the Austin area, there are over 60 HUD-owned homes available starting as low as $31,000 list price. These include homes built as recently as 2007 and up to 5 bedrooms or 2,500 Sq Ft. All of these homes are eligible for the $100 down payment program. Conditions Required by HUD to be Eligible: - The buyer must plan on living in the home as their primary residency for at least the next 12 months. - The buyer must use FHA financing for the purchase, which means a minimum of a 600 credit score currently. - The buyer must offer, in the bid process, the full list price as determined by the HUD appraisal. The HUD $100 down payment program is not the only financing option that allows for minimal up front cost in purchasing a home. There are several other options, including: - USDA: Mortgages offered for homes in rural areas as determined by the US Department of Agriculture. These mortgages offer 100% financing ($0 down) and no monthly mortgage insurance. - VA: Mortgages offered to veterans of the US Military. These mortgages offer 100% financing (0%) and no monthly mortgage insurance. - FHA: Mortgages offered with insurance from the Federal Housing Administration. These mortgages offer buyers to purchase with as little as 3.5% down payment. If you have any questions about low up-front cost financing options or what homes qualify for these options, please feel free to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it . I have lenders that I work with on a regular basis that can help get you the best rates and closing costs on low up-front cost mortgages. Back to Top The difference between Interest Rate and APR When shopping for a mortgage, lenders are required to provide both an interest rate and an APR, or Annual Percentage Rate. The interest rate, say 5.00%, is used to determine the monthly mortgage payment, including principal and interest, but does not reflect the total cost of the mortgage. The APR combines the interest rate as well as other lender fees to provide a better reflection of the true cost of the mortgage. Some Key Points on Interest Rate vs APR: - Lenders are required, by the 'Truth in Lending Act', to provide the APR percent to borrowers. This is to prevent lenders from luring borrowers with low interest rates while hiding other fees of the mortgage. - The APR takes into account Discount Points, Origination Fees and most Closing Costs. - Some closing costs, like home appraisal and credit report fee, are not included in the APR formula. So, getting a Good Faith Estimate from the lender, which identifies ALL closing costs charged to the borrower, is crucial. - The APR is much more useful & accurate on Fixed Rate mortgages. With Adjustable Rate mortgages, future interest rates are based on forecasts and can be inaccurate. If you have any questions about interest rates, APRs or anything to do with financing, please feel free to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it . I have lenders that I work with on a regular basis that can help get you the best rates and closing costs while communicating the true, full cost of the mortgage. Back to Top What is a Short Sale? A form of pre-foreclosure sale where the lender / bank has agreed to accept an amount that is less than the remaining mortgage amount. Normally in a short sale, the buyer and seller negotiate to an agreed price. Then the lender must approve the short sale. The lender makes the decision to approve or not based on the real estate market, an opinion of the value of the home and the cost incurred with the foreclosure process. If the short sale has a smaller financial loss for the lender in comparison to the likely result of foreclosure and bank-owned sale, the lender normally will approve. Short sales typically were only approved if the owner / borrower was late on payments. Now that is not always the case as some lenders are willing to approve short sales even before a notice of default is issued to the borrower. Generally lenders are more willing to accept short sales now than ever before. Some key benefits to short sales: - For the owner / borrower, a short sale has less of an effect on the credit report & score than a foreclosure does. - For the lender / bank, a short sale is typically faster and less expensive than a foreclosure. - For the buyer, a short sale can result in being able to purchase the home for a reduced price. - My experience has been that there tends to be a lot less damage done to homes that are involved in a short sale as compared to homes that are foreclosed on. Some key disadvantages to short sales: - They can take significantly longer to close due to the bank approval process. Some banks take up to 2 months to return an approval answer and most banks will only process one offer / contract at a time. - Often, there are other lien holders (second mortgage lenders, HOAs, taxing authorities, mechanic's lien holders, etc) who need to approve the short sale as well and are often difficult to locate. - Some banks still hold the owner / borrower liable for any losses after a short sale. In addition, it is very unlikely other lien holders (HOAs, taxing authorities, mechanic's lien holders, etc) will agree to forgive the balance(s) owed. - Although short sales affect a person's credit report less than a foreclosure, short sales are still classified as a settlement. This settlement is typically still reported on the credit report and stays there for 7 years. - If the correct contract documents & addendum are not used, there can be contention as to when the contract is in effect. Whether it is when the buyer & seller agree or when the bank approves can make a huge difference for right to terminate option periods and mortgage approval periods. Short sales can be very beneficial for all parties, but they can also be very challenging to get through. If you have any questions about short sales or are considering a short sale - either as a buyer or seller, please feel free to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it . Back to Top Option Period: An amount of time, specified in a real estate purchase contract, where the seller grants the buyer an unrestricted right to terminate the contract. The buyer benefits from this option period by being able to conduct inspections & request repairs to be completed. The seller is paid an option fee for granting this right. Key Points about Option Periods - The amount of time is negotiated between buyer & seller and is specified in the contract. In Texas, the majority of contracts identify 7 or 10 days for this option period. The 7 or 10 days starts from when the contract is executed, the point of time when both parties fully agree to the contract. - The unrestricted right is just that, unrestricted. The buyer can terminate the contract for ANY reason during the option period. It does not have to be the result of a specific defect identified in an inspection report. The buyer could decide they no longer like the color of the cabinets and they would have the right to terminate the contract within the option period. - The buyer definitely would want to conduct their inspection during this option period. From the inspection report, the buyer can request repairs made to the home or request a reduced purchase price. The seller, however, is under NO obligation to make repairs or lower the purchase price. If the seller says 'No' to the repair requests, the buyer can not force the seller to make repairs. The buyer can only decide to continue with the purchase without those items being repaired or decide to terminate the contract. - The seller MUST be paid money for granting this right to terminate. If there is no consideration (money), the option period is NOT valid nor legally enforceable. In Texas, the majority of contracts identify an amount between $100 and $250 paid for the option period. This consideration is called the "option fee". - If the buyer exercises their right to terminate within the identified time frame of the option period, the buyer would be refunded their earnest money (earnest money will be described in another Definitions & Advice session). The option fee would NOT be refunded, however. The earnest money is typically more substantial (normally 1% of the purchase price, in Texas) than the option fee and therefore much more important for the buyer to have returned / refunded. Terminating a contract during the Option Period is the most common way buyers legally terminate contracts and have their earnest money refunded. However, there are other periods of time specified in the contract or addendums where buyers are legally allowed to terminate the contract and receive their earnest money back. Some examples are: - Financing Approval: The Third Party Financing Addendum specifies a period of time, typically 21 or 30 days, for the buyer to receive full approval for obtaining a mortgage to purchase the home. If the buyer can not obtain approval for a mortgage within the timeframe specified, they may terminate the contract and their earnest money will be refunded. - Home Owners / Condo Owners Association: Buyers of homes or condos that are subject to mandatory associations and fees are allowed a period of time, specified in the contract or addendum, to terminate the contract based on inspection of the association documents. These documents will include information about the specific home & dues owed, the association & financial health and the rules & regulations owners are obligated to follow. If the buyer is not comfortable with any information provided within the documentation, they may terminate within the time frame allowed and their earnest money will be refunded. - Lead Based Paint: If the home was built prior to 1978, it may have lead based paint and an addendum / notification is required. The buyer may decide to have a lead-based paint inspection and if lead-based paint is present, they may terminate the contract within the identified timeframe and their earnest money will be refunded. If you have any questions about the option period or protections afforded to buyers to ensure the return of their earnest money, please feel free to This e-mail address is being protected from spam bots, you need JavaScript enabled to view it . Back to Top Types of Mortgages / Loans Conventional Loans: Conventional loans usually are more lenient with respect to the appraisal and condition of the property. If you are purchasing a "fixer- upper", you may need to use a conventional loan. Also, expensive homes above the FHA loan limit are generally financed with conventional loans. FHA Loans: FHA Loans are insured by the Federal Housing Administration under H.U.D. They usually require less downpayment than conventional loans and are easier to qualify for. VA Loans: VA Loans are guarenteed by the Veterans Administration. A veteran must have served 180 days active service. VA loans can be done with a zero down payment. USDA Loans: Mortgages offered for homes in rural areas as determined by the US Department of Agriculture. These mortgages offer 100% financing ($0 down) and no monthly mortgage insurance. Fixed Rate Loans: Fixed Rate Loans have one interest rate which is fixed for the entire term of the loan. Adjustable Rate Mortgages: Adjustable rate mortgages have an interest rate that is adjusted at certain intervals based on a specific index. Some ARM programs fix the interest rate for an initial period of two to five years, and adjust the rate thereafter at pre-determined intervals. Back to Top Home & Ownership Types Single Family Homes: Single family homes remain the popular choice. Location, size of the home and lot, and amenities affect the price. Condominiums: In the case of condominiums, the buyer owns his or her individual unit and a percentage of the remaining real property, land and amenities. Unit owners belong to a homeowners' association which charges monthly fees for the maintenance of common property. Townhomes: In the case of townhomes, the buyer owns his or her individual unit and the ground under that unit. Each townhome has its own roof. Townhome owners may also belong to a homeowners' association for maintenance of common areas and amenities. Multi-plexes (Duplexes, Triplexes, Fourplexes): Multi-plexes consist of multiple dwelling units (2, 3, 4) constructed as a single building. The buyer can live in one unit and rent out the other unit. Fee Simple: Properties that the land is owned individually, such as single family houses, townhomes on separate lots and other homes where the land has been subdivided. Common: Condos or houses where ownership of some or all of the land is shared between the owners. Fractional: Time shares. Back to Top When You Buy or Sell A Home, What Stays & What Goes? It is always nice to know what you are buying. In the case of a home, what stays with the home vs goes with the seller can make a big difference in how the buyer & seller perceive the sale. There are some general rules that apply to the physical house & garage, anything attached to the house in a 'permanent' manner and anything else. However, the 2 most important rules to live by are: (a) make sure everything that stays and everything that goes is in writing as part of the contract and (b) everything is negotiable. As a General Rule, the following items remain with the house: - The house, garage and obvious improvements: slab or foundation, walls, doors, windows, roof and roofing material, patios or decks, wall to wall carpeting or other flooring, heating & A/C equipment, plumbing fixtures, lighting fixtures, wiring or electrical, etc - Fixtures that are attached to the house: kitchen & bathroom cabinets, built in book shelves, shutters, screens, awnings, ceiling fans, TV antennas or satellite dishes, security & fire detection equipment, garage door openers, chandeliers, wall-mounted mirrors, mailboxes, water softeners, etc - Appliances that are attached to the house: dishwashers, built-in microwaves, ovens, stoves or ranges, built-in wine coolers, etc - Landscaping & exterior fixtures: lawn, shrubbery, flowers, mulch, rocks or stones, inground sprinkler system, inground or above ground pools or spas, pool or spa equipment, attached outdoor cooking equipment, etc - Accessories to the house: window A/C units, fireplace screens, curtains & rods, blinds, window shades, draperies & rods, artificial fireplace logs, controls for satellite or antenna or garage door openers, mailbox & door keys, etc As a General Rule, the following items go with the seller: - Appliances that are NOT attached to the house: refrigerators, washers, dryers, countertop microwaves, etc - Personal property: furniture, clothing, detached book shelves or other storage, linens, throw rugs, pictures, etc Exceptions to the General Rules: - A seller can identify an item, say a special curtain set or chandelier, that they want to keep & not sell with the house. This item would have to be clearly identified in the contract in the Exclusions to property section, the Special Provisions or in an Addendum. It would need to be agreed upon by both buyer and seller, in the contract, for the seller to legally remove the item. - A buyer can identify an item, say a refrigerator or piece of furniture, that they want to remain with the house. This item would have to be clearly identified in the contract in the Special Provisions or in an Addendum. It would need to be agreed upon by both buyer and seller, in the contract, for the seller to legally be required to leave the item. The 2 Most Important Rules to Live By Are: - Get everything in writing. The contract and/or addenda should clearly identify what stays with the house and what goes with the seller. - Everything is negotiable. If the seller wants to keep something that normally stays with the home or if the buyer wants to have something remain with the home that normally goes with the seller...negotiate it in & document the agreement in the contract. Back to Top General Real Estate Definitions - Assessed Value: The value placed on property by the Central Appraisal District as a basis for taxation. - Attorney's Fees: Charges by an independent attorney chosen by the lender to draw the legal documents, i.e. Note, Deed of Trust, etc. - Balloon Payment: An instance in which the final installation payment on a note is greater than the preceeding payments and pays the note in full. - Chain of Title: A history of conveyances and encumbrances affecting the title (ownership) of real property. - Convey or Conveyance: Process of transferring ownership of a property from one person to another. - Courier Fee: Charges for Federal Express or a runner. - Deed: A document which, when properly excised and delivered, conveys (transfers) title (ownership) of real property. - Discount Points: A negotiable fee paid to the lender to secure financing for the buyer. Discount points are up-front interest charges to reduce the interest rate over the life, or a portion, of the loan's term. One discount point equals one percent of the loan amount, i.e. 3 discount points on a $100,000 loan would be $3,000. - Earnest Money: Money deposited by a buyer to indicate and evidence good faith. In Texas, that is normally deposited with a title comapny. - Encumbrance: Anything that affects or limits ownership of real propertry - such as, mortages, liens, easements, or restrictions of any kind. - Escrow Fee: Charged by the title company to service the transaction and to escrow (hold and disburse) money and documents. Usually split between buyer and seller. - Fair Market Value: The price at which a willing seller would sell and a willing buyer would buy, neither being under abnormal pressure. - Mortgage: A legal document that provides security for repayment of a promissory note. - Mortgagee's Title Policy: Required by lender to ensure that lender has a valid lien. It does not protect the buyer. Also required for second mortgages. - Owner's Title Policy: Insures the buyer against loss due to any defect in the title not excepted to or excluded from the policy. - Recording Fee: Charged by the County Clerk to record documents in the public records. Charges are based on the number of pages recorded. - Survey: Survey of property required by lender; shows lot size, easements, any encroachments, locations of improvements, etc. - Tax Certificate: Charged by taxing authorities to present certification showing that the current year's taxes were paid. - Title: In dealing with Real Property, "title" means ownership. Back to Top
The information herein provided is deemed to be reliable but accuracy is not guaranteed
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| Last Updated ( Sunday, 13 March 2011 ) | |||
