Home Ready Mortgage: This loan product is designed by Fannie Mae specifically for homebuyers seeking an alternative to FHA loans. What sets HomeReady Mortgage apart is its unique combination of flexibility and affordability, catering to low to moderate-income borrowers with limited funds. This product offers various features, including low down payment requirements, competitive interest rates, and the option to utilize non-traditional income sources for qualification. Moreover, it provides educational resources and counseling to assist borrowers in making informed decisions throughout the homebuying process.
These loan products also offer reduced down payment options. For instance, borrowers can put down just 3% on a single-family home purchase instead of the 3.5% required for an FHA loan, or 15% down on a 2-family purchase rather than the standard 20% down for a conventional 2-family purchase. Furthermore, loan amounts can reach up to 105% of the purchase price when combined with a qualified community second mortgage. Being a first time -buyer is not a requirement of this loan program. However, homeownership education is required before closing for at least one borrower if all occupying borrowers are first-time homebuyers.
It’s important to note that the HomeReady Mortgage program is income-driven, meaning there are specific income limits for each census tract where the property is located, to be eligible, the borrower’s income must be at or below the limit, usually 80% or less of the county Average Median Income (AMI). Therefore, it is crucial to determine the income limit for the property’s census tract and to work with your loan originator partner to ensure your customer can qualify for the price point of the home, before proceeding.
Documentation Type: Full Docs. – meaning all assets; income; work history; tax returns; credit and other documentation are fully verified. Occupancy: Primary Residence Only
Home Possible Mortgages: Designed by Freddie Mac, this product has many of the same parameters as the Home Ready Mortgage with some key differences. This product offers more flexibility on down payments for multi-unit properties, allowing for 5% down payment on even 2-4 unit buildings. It’s also an income driven loan so one must be careful to ensure that the income limit based on the census tract of the property you are selling allows for affordability for your customers. For this program, home buyer counseling is required. These programs are great for use in emerging markets.
Documentation Type: Full Docs. Occupancy: Primary Residence Only
Bank Statement Only Financing – This is a loan product designed for business owners, free lancers and others that operate cash intensive businesses. The loan product is designed with the premise that these customer groups may not always be able to qualify based on full documentation underwriting due to the nature of how they earn their income. These customers are highly liquid and can usually support a mortgage payment well above what they could qualify for using standard underwriting measures. These products require a larger down payment than traditional loan products for each property type, something that this group of buyers is more comfortable with compared to the typical first-time buyer. This product can be used both for owner occupied, second homes and investment properties. There are no income restrictions and loan amounts expand into the jumbo markets. The income derived from the bank statements are based on a percentage of the monthly average deposits to the account. The percentage amount will vary based on the type of the customer does. A higher percentage of the deposits will be used for office-based customers with little overhead. A lower percentage of the average deposits for business owners selling goods and materials (i.e. retail store owner or home improvement contractor). The key to successfully using bank statement loan products with potential customers is to focus on both the frequency and amounts of the deposits. A customer showing a bank statement with a large amount of funds, but with little or no monthly deposits is not a good candidate for this loan, nor is the customer with frequent small deposits that suddenly deposits a large lump-sum of funds into the account. This loan product depends on the consistency of the customer deposits over a 12- or 24-month period, from a business or personal account. Underwriting requires that the customer be a business owner or can provide documentation that they are an independent consultant. This is usually achieved by providing a copy of any licensing or other credential necessary for the customer to perform their trade.
Documentation Type: Lite Docs- 12 or 24 months of deposit activity
Profit & Loss Statement (P&L) loan product targets a subset of the business owners and free lancers who cannot provide documentation for a full underwrite or on the bank deposit loan program. This loan program is as close to a no-doc loan as one can get. True No- Doc’s loan all but disappeared after the financial crisis of 2008 due to federal regulations. The disappearance of these products took away viable financing options for many of these customers. The loan product simply requests that the borrower prepare a Profit and Loss statement of his or her business activities over the most recent 12-month period. The P&L can be self-prepared, provided the document is co-signed by the customer’s accountant, or it can be prepared directly by said accountant. No further documentation is required for this product. The net income from this document is used to calculate qualifying debt to income ratios for the customer’s purchase or refinance. This program is designed for business owners only. Documentation of business ownership is required. (your customer can’t just say they work for themself). The borrower will have to document all assets used for the purchase or refinance.
Documentation Type: Super Lite Docs. Occupancy: Owner Occupied
Estate Financing: Customers needing to buy out family members in the case of someone passing often find themselves needing to comprehend words like Probate; Estate Taxes; Executorship and Administration – all while in the middle of grieving the loss of their loved one. While there are no mortgages bearing these labels, there are some mortgages that lend themself better suited to assist grieving families to navigate the process of untangling the real estate holdings of a dearly departed. Those looking to liquidate or acquire real property from the estate need a professional who understands how the probate process works and how loan products work in these situations. This customer market can often be invisible because they have no defining socio-economic labels. Becoming an expert real estate agent in this space may be a great option for those realtors who are looking to serve a different market. Working with a lending partner that fully appreciates the nuances of working in this space can help you be that sought out professional in this market.
A Reverse Mortgage is a financial product designed for homeowners aged 62 or older that allows them to convert a portion of their home equity into cash. While a real estate agent typically does not directly facilitate the reverse mortgage process, they can play a role in generating real estate sales by understanding and effectively communicating the benefits of reverse mortgages to potential clients. Here’s how a real estate agent can leverage reverse mortgages to generate real estate sales: For Many real estate agents, Door-knocking is an essential part of generating business. Stand out by doing something counter-intuitive: Educate senior clients about the benefits of reverse mortgages, explaining how they can provide financial flexibility and eliminate monthly mortgage payments. For example: Did you know a reverse mortgage can be used for a purchase transaction? Team up with a Mortgage Broker to develop targeted marketing materials that can be used to identify potential sellers who could benefit from a reverse mortgage, and together provide clients with reliable resources and connecting them with reverse mortgage specialists who can offer detailed guidance.
Renovation Loans such as the Fannie Mae Homestyle the FHA 203K Renovation Loan; VA Renovation Loan; USDA Rural Development Loan, all offer various buyers the opportunity to purchase or refinance a property and include the cost of repairs in a single mortgage. They all aim to provide financing solutions that combine the purchase or refinance of a home with the necessary funds for renovations or improvements. Additionally, these programs typically allow borrowers to include the renovation costs in the overall loan amount, streamlining the financing process and potentially reducing the need for separate loans. Furthermore, these loans often offer flexibility in terms of the types of renovations allowed, ranging from minor repairs to major rehabilitation projects. Lastly, these programs may provide borrowers with options for lower down payment requirements, making homeownership and renovations more accessible for individuals who may have limited upfront funds. Some of these programs even allow for investors home buyers. Fix and Flip loans products renovations loan specifically designed for investors who are looking to acquire – improve – and resale properties. Fix and flip loans offer greater flexibility for these borrowers.
Want to explore any of these products and market opportunities. Reach out to us via email or you can schedule a 15-min consultation.