Author Archives: Leo Linn

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Crowd-sourcing your down-payment?

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Crowd Funding your down payment?


 

You may have heard about a new option for home buyers- using the concept of Crowd Sourcing your down payment, much like GoFundMe. In California where the down payment requirements are typically higher than in other states, and the cost of rent makes saving it even more difficult this option may be attractive to many young home buyers.

How it works is that the prospective buyers sign up for the account and then begin to raise funds from friends & family, often promoting the cause on social media. They are required to get prequalified for the mortgage, and to make the purchase within 12 months of starting the campaign. Donors can be virtually anybody, but pretty much 99% of the time the significant donations will probably come from family or close friends. Donors may give conditionally-with a requirement that the funds be used only for a home purchase, or unconditionally.

Using gift money for down payment isn’t new. You could always use a gift from a family member and in some cases a non-profit organization to provide a down payment, and there have also been government subsidized down payment assistance programs.  There have also been people who were able to skirt the issue by thinking ahead. Lenders verify funds by requesting copies of bank statements for the most recent two heard about a new option for home buyers- using the concept of Crowd Sourcing your down payment, much like GoFundMe. In California where the down payment requirements are typically higher than in other states, and the cost of rent makes saving it even more difficult this option may be attractive to many young home buyers.

How it works is that the prospective buyers sign up for the account and then begin to raise funds from friends & family, often promoting the cause on social media.  They are required to get prequalified for the mortgage, and to make the purchase within a year of starting the campaign. Donors can be virtually anybody, but pretty much 99% of the time the significant donations will probably come from family or close friends. Donors may give conditionally-with a requirement that the funds be used only for a home purchase, or unconditionally.

Using gift money for down payment isn’t new.  You could always use a gift from a family member and in some cases a non-profit organization to provide a down payment, and there have also been government subsidized down payment assistance programs.

There have also been people who were able to skirt the issue by thinking ahead. Lenders verify funds by requesting copies of bank statements for the most recent two months. If the gift is deposited more than 2 months before the process is started it likely won’t show on those bank statements, and is a non- issue.

The reason the issue of where the funds come form is that the lender is concerned that the buyers might not be invested significantly in the home, or may be borrowing the money from an undisclosed source, which would put them, and the lender, at greater risk.  

Whatever your situation, the best first step is to discuss your situation with a mortgage professional and review all of your options.  Ask if this sort of thing would work well for you, and if there are others you may consider in conjunction with or instead of crowd-funding your down payment.

Questions?  Call, email, or fill in the form below! Be sure to forward, like and share!

Leo Linn

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Mortgage Smurf…


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Is Fannie Mae making Mortgages easier?

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I read a report today that suggests that Fannie Mae, the nation’s largest investor in mortgage loans, may be relaxing some of the guidelines for residential mortgage approval in terms of credit and credit scores. Of course, the guidelines have not been released yet, so it’s anyone’s guess what this will actually mean for consumers.

The report also suggests that guidelines will more clearly define what they will accept. This owudl definitley be a good thing, as I find that lenders will approve loans based upon their own interpretation of the guidelines. AIf they are not clear about what the guidelines actually mean they will err on the side of caution, which transaltes into “ when in doubt, decline the loan.” Because of the QM rule a lot of lenders won’t make mortgages in which the DTI (debt to income ratio) exceeds 43%, but some lenders will make the loans with the higher ratios-as long as they get the proper response from FNMA or Freddie Mac’s automated underwriting engine.

So stayed tuned for information on what the new guidelines are and how they will affect your ability to qualify for a mortgage.

If we can help you in any way, please give us a call, and be sure to share us with your family and friends!

Leo Linn

800-200-9329


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Leo Linn

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