Should You Avoid Buying a House with a Sump Pump?

When looking for a new home, your focus tends to be on the number of bedrooms and bathrooms, whether it is in the right school district or how close it is to your place of employment. Unless they are from a flood-prone area, most homebuyers think about things like a sump pump, but the truth is it can make a big difference when choosing a new home.

When do you need a sump pump, and what should you know before buying a house with a sump pump?

What is a sump pump?

A sump pump is a device installed in the basement or lowest level of a home. It is usually placed in an area prone to flooding or rapid snowmelt. The sump pump pumps water out of the home through a system of pipes into another area, such as a storm drain. The idea is that the sump pump keeps your home dry and helps avoid potential water damage on the property.

Are sump pumps bad?

In areas prone to flooding, heavy rains, and rapid snowmelt, sump pumps can actually save your home from potential water damage. If you are looking for homes in a flood-prone or high precipitation area, you will find homes with sump pumps. While the addition of these in a home can be very beneficial, there are some things to consider when looking at a home with a sump pump.

Advantages

Having a home with a sump pump can provide many different benefits for your property and your health. Common advantages include:

• Prevents flooding: there is nothing worse than waking up to a basement full of water. Having a sump pump means that as water comes in, it goes out, reducing the risk of indoor flooding and damage to your home’s foundation.
• Saves money: Water damage to your home’s foundation can be expensive. So can replacing items in your home that are damaged when the water rises.
• Keeping your basement dry ensures that your foundation and your belongings are safe.
• Mold prevention: When water enters your basement, the additional moisture can contribute to mold growth, making you and your family sick.
• Lower your insurance costs: Your insurance company knows how much it costs to repair flood damage, and if you live in an area prone to flooding, the presence of a functional sump pump can help keep your insurance premiums down.
• Keeps you and your belongings safe: With many basements being finished and used as fully functional parts of the home, it is likely going to be filled with your belongings and may even have bedrooms. A sump pump works automatically when it senses water, so you don’t have to worry about waking up to your bed floating and all your belongings soaked.

Disadvantages

Although there are benefits to having a sump pump, there are some things to consider as a new buyer. These include:

• Was the sump pump installed after damage? Oftentimes, homeowners will install a sump pump after a flooding event. So, damage may have already occurred.
• Sump pumps require regular maintenance. Like most home devices, a sump pump will require regular maintenance to help ensure it operates correctly when you need it to.
• Regular replacement is necessary. The average sump pump lasts about ten years, so you will need to budget for regular replacement.

Four things you should know before buying a house with a sump pump

When looking at a home with an existing sump pump, you don’t want to go in blind. You should ask the seller some questions and some extra considerations the home inspector should follow to ensure that the sump pump is effective, not hiding previous damage, and does not require immediate replacement.

Here are five things you should consider when looking at a home with an existing sump pump.

Is there water or structural damage?

In many cases, sump pumps are installed after a major flooding event. When looking at a potential new home, you want to make sure that you look for any signs of water damage in the home.

• Does the basement smell musty?
• Do you see signs of mold or mildew?
• Do the walls have flaking or peeling paint?
• Does the floor seem uneven?

While some of these signs you may notice right away, others require a trained eye. Make sure your home inspector looks for signs of potential water damage that may need addressing. Also, ask the sellers if there is a history of water damage. If requested, they are required to disclose this information.

Does the pump work properly?

Just because you can visibly see a sump pump doesn’t mean it is working correctly. Make sure that you inspect the sump pump to ensure that it is working properly and that there are no leaks. In addition, ask when the current sump pump was installed. Keep in mind these have an average life of only ten years. So, if it’s more than that, you may want to request a replacement before you sign a buyer’s agreement.

Are the sump pump lines buried deep enough?

If the home you are looking for is in an area prone to freezing temperatures, it is essential to make sure the lines from the sump pump are buried deep enough to avoid freezing. If these lines freeze, they can develop cracks and not work efficiently at removing water when it floods.

Is there a backup system?

Unfortunately, heavy rains and flooding are often accompanied by power outages. When the power goes out, so does the sump pump. If there is not a battery-operated backup system, there is a chance that flood damage may have occurred. If not, it may be a good idea to consider adding a backup system if you purchase the home.

Maintaining your sump pump

If you purchase a home with a sump pump, you will need to perform regular maintenance to ensure your pump works when you need it. This maintenance includes keeping the sump pump clean and clear of debris, checking the valve and filter regularly, and testing the system at least once a year.

Understanding a sump pump is essential before purchasing your dream home.

Depending on the area your new home is located, adding a sump pump can be very beneficial. However, before you agree to the sale, you need to understand all the things discussed above.

At Hero Home Programs, we work with borrowers to help them find a quality home and the best possible lending options to help them achieve homeownership. If you are interested in learning more about how we can help, contact us online today.

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Conventional Loan for Mixed-Use Property

Not all properties are created the same. While most residential homes are zoned residential, you may find a home that is zoned as both residential and commercial, or what is known as mixed-use. But, how is buying mixed-use property different than buying a residential property? Can I get a residential loan on a mixed-use property?

Here we take a look at the differences between traditional zoning and mixed zoning and how that can affect the ability to receive a conventional loan for the home of your dreams.

What are mixed-use properties?

When properties are built, they are typically zoned for either residential, commercial, rural, or industrial. However, in some cases, properties hold more than one zoning designation. For example, an apartment complex that also houses a gym or a commercial storefront that also has a residential home on the second and third floor. When a property offers a combination of these different zoning classifications, they are considered multi-use properties.

The construction of multi-use properties has grown in popularity and allows for the integration of different property types within a singular development. If you are self-employed or own your own business, these mixed properties allow you to combine your home and business within a single location. However, when it comes to mixed-use properties and finding a mortgage, there are some differences to consider.

Types of mixed-use loans

Mixed-use loans are available in four different categories: government-backed, commercial, short-term, and residential. The most commonly used loans for this property type are government-backed loans through the SBA or USDA. However, we will look at each type and how they can work for you.

Commercial mixed-use loans

A commercial loan is used typically for commercial properties, such as an office building or shopping center. You can also apply for commercial loans on a mixed-use property, and, unlike government-backed loans, there are no requirements for occupancy. Buildings, however, must be in good condition to qualify. These loans are typically 15-to-30-year loans with interest rates starting as low as 5%.

Eligibility and Requirements

In order to qualify for a commercial mixed-use loan, there are certain criteria that you must meet. Because this is a commercial loan, there is no requirement for occupancy, but you will need to meet the following requirements:

• Security in the property – lenders will expect at least 25% down payment and the addition of property insurance
• LTV Ratio of 75%
• A debt-service coverage ratio (DSCR) of 1.25 or higher
• Lenders will check your business credit score but also require a personal credit score minimum between 660 and 680
• Minimum of two years in business
• May require additional collateral

Government-backed mixed-use loans

Government-backed mixed-use loans, such as through the SBA and USDA, are commonly used for mixed-use properties. The loans available are the SBA’s 7(a) and 504 loans and the USDA Rural Development business loans. These loans often offer lower interest rates on mixed-use properties because they are backed by the government. In addition, these loans allow up to a 90% LTV, helping to reduce the down payment requirement. However, they do have more stringent requirements when it comes to mixed-use property.

Eligibility and Requirements

In order to be eligible for a government-backed mixed-use loan, the main requirement is that at least 51% of the property must be occupied by the owner. If your mixed-use property is intended to be your home residence as well as your business, this should not be a problem. Other additional requirements and eligibility include:

• 680 minimum credit score
• Down payment between 10-20%
• Clean financial history
• A debt-service coverage ratio (DSCR) of 1.25 or higher
• Jobs must be created – for the SBA 504 loan, you must show how the commercial part of the property will create jobs
• Business must have a net worth of less than $15 million
• LTV Ratio of 80-90%

Short-term mixed-use loans

Short-term mixed-use loans can include commercial bridge loans and hard money loans. When purchasing a mixed-use property, these loans are often used when a property does not qualify for other commercial loans due to the disrepair of the property or for buyers that are working to compete with all-cash buyers and need faster funding time for the loan. These loans have higher interest rates, ranging between 5% and 16%, and much shorter terms, averaging six months to six years.

Eligibility and Requirements

Short-term mixed-use loans do not have any occupancy requirements but can be more difficult to obtain. Some of the common requirements include:

• Minimum credit score of 600
• A debt-service coverage ratio (DSCR) of 1.25 or higher
• At least two years in business or at least two to three past rehab projects

Residential mixed-use mortgage loans

In addition to commercial loan options, residential mixed-use loans from Fannie Mae, Freddie Mac, and FHA are also available. However, there are strict requirements that focus more on the residential portion of the property, restricting the amount of the property space that can be used as residential. The types of properties that typically qualify for these mixed-use loans include residential homes with attached offices or studios that are used for business, such as a professional office, beauty salon, or daycare facility.

Eligibility and requirements

Because the goal of these loans is to help people achieve a primary residence, the property must be the borrower’s primary residence. In addition, the borrower must also be the primary owner and operator of the business located on the property. Other requirements include:

• Traditional Fannie Mae/Freddie Mac requirements of 620-640 credit score,
• DTI ratio no higher than 45%
• No more than 25% of the property can be dedicated to commercial use for Freddie Mac/Fannie Mae
• No more than 49% of the property can be dedicated to commercial use for FHA

Advantages and disadvantages of mixed-use developments

As an investor, there are many advantages and disadvantages to purchasing mixed-use properties.

Pros

• Less risk to borrowers: Because of the diversity provided by a mixed-use property, you don’t face as big a risk if you lose a tenant, as income can still come in from other tenants/renters
• More convenient for consumers: mixed-use properties allow for a wide range of businesses, allowing for more consumer traffic
• Mixed-use can be more environmentally friendly: Mixed-use properties allow for the combination of residential and commercial businesses together, in less land. In areas with multiple mixed-use buildings, there is less land dedicated solely to commercial space and customers can walk from home to business, reducing the automobile pollution in the area.

Cons

• Deals can be complex: Mixed-use loans can be time-consuming and complicated to complete. In some cases, financing can take more than a year.
• Properties can be hard to manage: Because your property may include both residential and commercial tenants, property management can be challenging.
• Loans are often hard to find: Not all banks and lenders are willing to offer mixed-use loans, meaning it may take time to find financing that will work.

A mixed-use property can become your dream home

If you are looking at a property that includes both a residential and commercial aspect, you may feel frustrated when trying to find a loan. While mixed-use loans are available, they are not always easy to find and can be very frustrating.

At Hero Home Programs, we understand this frustration and are here to help. For more information, contact us online today.

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ITIN Mortgage Loan Program

When looking to buy a home, many borrowers face numerous challenges when it comes to the application process. Will their credit meet the requirements? Do they have enough income and assets? However, for many foreign nationals without a social security number, the idea of applying for a traditional home mortgage may seem out of reach. The good news is the ITIN number mortgage loan allows many individuals to apply for a foreign national mortgage and achieve the American dream of owning a home. What is an ITIN number, and how do these loans work?

What is an Individual Taxpayer Identification (ITIN) Number?

A Tax Identification Number (TIN) is an umbrella term used to describe various forms of identification used and provided by the Internal Revenue Service (IRS). For most American citizens, the number issued by the IRS is a social security number (SSN). However, not everyone living in the United States is eligible to receive an SSN.

For resident aliens, non-resident aliens, and their dependents or spouses that are not eligible for an SSN, the IRS issues an Individual Taxpayer Identification Number (ITIN) that allows them to file U.S. tax returns and apply for credit. This number may be used as an alternate to a social security number when applying for certain credit, including an ITIN mortgage.

What is ITIN mortgage loan program?

The ITIN mortgage loan program was developed to allow those without a social security number to buy and finance a home in the United States. For example, many Europeans come into the US for business and leisure, only staying for six months as allowed by their visa. In these cases, they often pay taxes to the government and may already have an ITIN number. Instead of renting every time they come to the US, they can purchase a home. This is where the ITIN mortgage loan program offers a solution. When applying for this home loan program, the person uses their ITIN number in place of a social security number in order to verify identity and check credit history.

How Do ITIN loan programs work?

When individuals without a social security number want to apply for a home mortgage, they can use their ITIN number. If they do not have this number already, they can apply to the IRS to issue the number. When applying for a mortgage, they will need to find a lender that offers an ITIN loan program and, when applying, use the ITIN number in place of the social security number. When applying for these loans, the borrower will also need to meet the additional loan requirements. Once completed, the application is processed, similar to a traditional mortgage loan. The buyer then receives the keys to their new home.

Eligibility for an ITIN

As with any mortgage loan, an ITIN loan has minimum requirements to qualify. These requirements can include:

• A Non-Resident in the United States
• Two documents proving identities, such as passports, driver’s license, or national ID card
• Minimum down payment between 10-20%
• Two years of tax returns
• Minimum of two months of bank statements and income verification, such as pay stubs
• Debt-to-income ratio no more than 43%

For those with an ITIN number, building a traditional credit score can be difficult. If you do not have an established credit score, lenders use “non-traditional” credit. Instead, they will require examples of regular, timely payments with items such as rent, utility payments, and insurance.

Advantages and disadvantages of tax-ID loans

As with any traditional loan, there are advantages and disadvantages associated with the ITIN loan program.

Advantages

• No social security card necessary: Using the ITIN number allows you to purchase a home and still abide by the U.S. tax laws.
• No green card needed: You do not need to prove legal residency to qualify.
• Use it to refinance mortgages: You can opt to refinance later down the road when interest rates are more beneficial.
• Build credit with an ITIN: An ITIN number allows you to build credit.
• Better than hard money loans: Hard money loans are often high-interest rate loans that focus on the property's value as collateral. An ITIN loan offers interest rates closer to conventional mortgages.
• Online: In most cases, the entire process can be completed online.
• Allows you to live the American dream: Qualifying for an ITIN loan will enable you to purchase your first home and achieve the American Dream of homeownership.

Disadvantages

• Time constraints: Applying for and receiving your ITIN number can take more than six weeks, so applying well before you plan to seek a mortgage is essential.
• Higher interest rates: This is considered a non-traditional loan, so interest rates are slightly higher.
• Higher denial rates: There is a high rate of ITIN denials due to improper identification. When applying for your ITIN number, you must ensure you provide the proper identifying documentation.
• Not offered by all banks: ITIN loans are not offered by all banks and financial institutions.
• Requires higher down payment: In most cases, an ITIN loan will require a higher down payment than is seen with traditional home loans.

Let us help you achieve homeownership.

The ITIN loan program is designed to help foreign nationals achieve the American dream of homeownership. However, at Hero Home Programs, we understand that the process can be intimidating and difficult to understand. Our goal is to help everyone achieve homeownership, and our team is available to help. Let Hero Home Programs walk you through the home buying process and help you receive the keys to your new home. Request a consultation with us today.

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What is the CalHFA Program?

California has some of the highest property prices in the United States, and this can often be intimidating for first-time home buyers. Established in 1975, the California Housing Finance Agency (CalFHA) was created to support renters and homebuyers by offering financing programs that serve low to moderate-income Californians. These programs provide financing solutions and down payment assistance to first-time homebuyers in California.

What is the CalHFA Program, and how can it help you? What are the CalHFA guidelines, and do you qualify?

CalHFA Home Loan Programs

The CalHFA offers a wide range of first-time homebuyer loan programs that work for both conventional and government-issued loans. They provide access to fixed-rate loans and the options to roll in down payment and closing cost assistance. In addition to traditional borrower requirements, the CalHFA programs require additional requirements that borrowers must meet. These include:

• A minimum credit score of 660
• A debt-to-income ratio below 45%
• Must meet specific income requirements based on your location in California
• Must be a first-time homebuyer (this means no homeownership within the last 3 years)
• Must be a U.S. citizen, permanent resident, or qualified alien
• Attend a home buying counseling course and provide a certificate of completion

In addition, the CalHFA programs have requirements when it comes to the property you are looking to purchase. These can include:

• Sales price must be less than $970,800
• Property must be located in California
• Property must be used as a primary residence
• Property must be a single-family home, though some condos and manufactured homes may be considered
• No land trusts or leaseholds

Once these requirements are met, there are different programs under CalHFA that you may be eligible for. Here we take a closer look at each one.

CalHFA Conventional Mortgage

This program is a first mortgage loan insured through private mortgage insurance on the conventional market. These loans offer a fixed-rate mortgage throughout a 30-year term. The program uses Fannie Mae’s HomeReady underwriting guidelines and offers lower down payments and closing costs. This can be used with the MyHome Assistance program discussed below.

CalPLUS Conventional Mortgage with ZIP

The CalPLUS conventional mortgage offers a slightly higher interest rate on a conventional 30-year fixed mortgage. However, first-time homebuyers can take advantage of the MyHome Assistance program and the Zero Interest Program, or ZIP for closing costs. The ZIP program is a deferred payment, zero-interest second mortgage only available with the CalPLUS Program. With these additional programs, borrowers have access to money that will assist with the down payment and cover all the closing costs, making homeownership easier for low to moderate-income families that cannot come up with a substantial amount of funds at closing.

CalHFA FHA Mortgage

The CalHFA FHA mortgage program offers a 30-year fixed low-interest rate mortgage insured by the Federal Housing Administration. To qualify for this option, you must meet specific borrowing and property requirements put in place by the FHA. Borrowers can also choose to add the MyHome Assistance program to help cover the down payment and closing costs.

CalPLUS FHA Mortgage with ZIP

The CalPLUS FHA with ZIP offers a 30-year fixed-rate mortgage that can be combined with the ZIP program to help cover closing costs. First-time buyers can also take advantage of the MyHome Assistance program to add additional funds toward the down payment and closing costs.

CalHFA Energy Efficient Mortgage

The CalHFA Energy Efficient Mortgage combines the CalHFA FHA loan with an EEM Grant that allows for energy-efficient improvements over and above the maximum FHA loan limit. This grant is for up to 4% of the initial loan and is only available in this program.

CalHFA VA Loans

This loan program provides a VA-insured 30-year fixed interest first mortgage. To qualify, you must meet the VA requirements and the requirements for CalHFA. This can also be combined with the MyHome Assistance Program detailed below.

CalHFA MyHome Assistance Program

CalHFA’s MyHome Assistance Program is a deferred-payment secondary loan that provides borrowers with a loan equaling 3% of the purchase price (conventional loan) up to 3.5% for an FHA or government loan. This loan is designed to home borrowers pay towards down payments and closing costs.

Helping you navigate the CalHFA Programs

At first glance, all these different available assistance programs can be overwhelming for first-time home buyers. At Hero Home Programs, we understand the frustration that comes with the home buying process, and we are committed to helping ensure everyone can achieve home ownership. At Hero Home Programs, we work with borrowers to help them find the best loan options and assistance programs available and walk them through the home loan process. Talk to us today if you want to learn more about how the experts at Hero Home Programs can help you get into the home of your dreams.

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When Do Buying Mortgage Points Make Sense?

When you want to reduce the interest rate on your mortgage loan and, in turn, lower your monthly loan payments, mortgage points are an option. While taking advantage of mortgage points can benefit buyers in the long term, they are not beneficial for everyone. So how do you know if it is worth buying mortgage points? What do the points on home loans really mean for you? To better understand, we offer you a closer look at mortgage points and how they can work to your advantage.

What are mortgage points?

Mortgage points often referred to as buying down the rate, are a way for borrowers to lower the interest rate on their mortgage, which will lower the monthly payments you make and reduce the total you pay throughout the life of the loan. A single mortgage point equals 1% of your total mortgage amount. For example, if you have a $300,000 loan, a point would be $3,000. Paying this $3,000 at closing would unlock a reduced mortgage interest rate by around 0.25%. While you are paying this amount at closing, it is not considered as an addition to your down payment. Essentially, you are purchasing this point from your lender in order to unlock the lower interest rate.

Types of mortgage points

There are two different types of mortgage points when it comes to your new home loan: Discount points and origination points. While both are often simply called points, only one can save a borrower money on the loan's interest.

• Discount points – These points work as described above. The more points you purchase upfront, the lower your mortgage interest rate will be. How many points you can purchase depending on your lender, the type of loan, and the overall housing market at the time.
• Origination points – These points cover the costs of the lender to process your loan. These fees can vary from lender to lender, but you can negotiate these points and, in some cases, roll them into your loan and pay them over time.

Mortgage discount points vs. APR

When you purchase mortgage discount points, they lower your interest rate for the life of the loan, but they will still be a part of your annual percentage rate, or APR, and the true cost of the loan. You are just paying the portion of the interest upfront.

How to calculate mortgage points

Typically, mortgage discount points are 1% of your total loan amount, and each point can lower your interest rate by 0.25%. For example, if your initial loan amount is $200,000 with an interest rate of 4.25, each point would cost $2,000. Purchasing two points would require a $2,000 payment at closing and reduce your interest rate from 4.25 to 3.75. This would decrease your monthly interest payment by $57.65 a month, and you will save $20,753.05 in interest over the life of the loan. However, in order to yield these savings, you will need to stay in the home for at least 49 months without moving or refinancing. Moving or refinancing before this period expires means you will lose money on the points your purchased. This time period is considered the breakeven point.

Is it worth buying mortgage points?

Buying points and whether they will truly benefit you depends on various factors. Buying points may be beneficial if you:

• Plan to stay in your home for a long time
• You understand the breakeven point and do not anticipate the need to refinance or move before that point.

In many cases, buying points is not beneficial for the borrower. These times can include:

• You do not plan to stay in the home for the length of time required to reach the breakeven point
• You plan to pay extra on your monthly mortgage payments
• You do not have the extra money to purchase points
• Buying points will reduce the amount of your down payment – a higher down payment often means a lower interest rate, reduced home mortgage insurance, and lower monthly payments.

Negotiating mortgage points

In theory, all mortgage points are negotiable. The best way to negotiate lower points and closing costs is to apply for mortgages from multiple lenders. When loan offers come in, you can advise each lender that you are talking with other lenders and make them work to earn your business by negotiating lower rates and closing costs. Applying for multiple mortgages will not negatively affect your credit report, as those submitted around the same time are often considered one check. They assume you are shopping around for the best available rates, which is actually encouraged.

Deducting mortgage points on your income taxes

Mortgage discount points are essentially prepaid interest on your loan. So, just like standard mortgage interest, these payments for mortgage points can be deducted from your taxes. The expenses for mortgage points can be itemized on Schedule A.

Mortgage points and closing costs

Mortgage points, both discount and origination points, add to your down payment and additional closing costs, meaning they will increase your upfront expenses when closing on your loan. However, these points do not go toward the equity of your property.

Mortgage points can make a difference.

Mortgage discount points are optional payments offered to borrowers in order to provide savings, but they are not mandatory and, for some, are not beneficial. If you plan to stay in your new home for years, the use of points can be very beneficial in the long term. However, you need to consider things such as how much money you have available for the down payment and additional closing costs. While this may all seem overwhelming, the team at Hero Home Programs is here to help. We strive to help everyone attain homeownership and are here to answer questions and help you find the best mortgage loans, including points, possible in order to help you achieve those goals. To learn more, contact Hero Home Programs today.

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What is an AKA Letter?

Your lender will undoubtedly require you to complete the forms and disclosures required to process the mortgage loan when applying for a mortgage. While many are pretty straightforward, the paperwork can be intimidating. In some cases, your lender may require an AKA letter, triggered when your credit report returns inconsistencies.

But what is an AKA letter, and how do you write an AKA? Let’s take a closer look below.

What is an AKA letter?

An AKA letter stands for ‘Also Know As’ and is a document required to verify that you are who you say you are. Your lender needs to know exactly who they are providing a loan to. And in some cases, your credit report can return to the lender with multiple names used. When this occurs, the lender requires an AKA letter to confirm that the person's name on the loan application is the same as those that appear on the applicant’s credit report. While you may think this sounds odd, the fact is that it is very possible that your credit report has more than one name appearing on it, and the lenders need to know why.

Reasons for an AKA letter

To better understand why you received a request for an AKA letter, let’s take a look at what triggers these requirements.

Every time you apply for any type of credit, it reports your name and address to the credit bureau, providing that information at the time of application. Your credit report maintains this information. So, when a lender pulls your credit report, they can see all of your previous addresses and names used to apply for credit. Why would you have multiple names?

Let’s look at two different scenarios.

Scenario one

In this scenario, John Quincy Smith applies for his first credit card while in college and follows his parent’s advice to use his full name on the application. At this point, the name John Quincy Smith is recorded on his credit report. A few years later, John applies for a car loan but only uses John Smith on the application. At this point, a new name, John Smith, is added to the credit report. In another instance, John applies for another loan over the phone, and the person processing the application spells John’s name wrong, entering it as John Smyth. This goes into his credit report as a third name. You can see how, through your life, you can incur many different variations of your name on your credit report, but they are all you.

However, given John has such a common name, there may be cases where a listing for John Smith may not really be the same as John applying for the mortgage. This is where an AKA letter is necessary.

Scenario two

In the second scenario, we look at Jane Doe. Jan has applied for a few loans or credit cards over the years under Jane Doe, so that name is listed on her credit report. However, a few years ago, Jane married and changed her last name to Smith. However, sometimes she uses her married name and maiden name when applying for loans, so she has Jane Doe, Jane Smith, and Jan Doe Smith all in her credit report. She then gets a divorce and a few years later remarries, changing her last name to Jones. Now there are four different names on her credit report.

How does an AKA letter work?

When your lender requests an AKA letter, they are simply looking for confirmation that the names that appear on your credit report are actually you. At this point, you need to review your credit report to ensure that there is not an incidence like John in the above scenario where there was a listing on his report for another John Smith. Once you confirm the information on your credit report, you can write your AKA letter. This letter does not require a bunch of information and is simply used as a record of identity in your loan file.

Looking at scenario one, we can create a sample letter that John could write to his lender. John’s AKA letter could look like this:

To Whom It May Concern,

During the course of my credit history, I have used different variations of my legal name to include John Quincy Smith, John Smith, and an incorrect spelling of John Smyth, which a creditor inadvertently used. These instances are all me. However, the John Smith listing residing in Los Angeles is not me.

Sincerely,
John Quincy Smith

A similar letter from Jane could read:

To Whom It May Concern,

My maiden name is Jane Doe. I have been married twice, which changed my name to Smith and Jones. All names shown on my credit report are indeed me.

Sincerely,
Jane Jones

While all of these instances may seem obvious and minor, they help protect the lender and ensure that the money they are providing for the loan is going to the correct person.

An AKA letter is a common part of the home lending process.

An AKA letter is a commonly required piece of documentation during the lending process. In most cases, these letters are straightforward to fulfill, unlike many other documents that may be necessary during your mortgage lending process.

At Hero Home Programs, we understand that the home buying process can be intimidating and strive to help everyone achieve homeownership. If you have questions about the lending process and would like help finding the perfect options for your situation, Hero Home Programs is here to help. Contact us online today to learn more.

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Condotel Financing: How Does It Work?

Many homeowners are struggling to finance a condotel or luxury condominium. These properties do not meet the conventional loan requirements of Freddie Mac or Fannie Mae, so there are a limited number of mortgage lenders who will finance these properties. Many specialized lenders will finance a condotel or non-warrantable condominium. What is a condotel, and how do you get a condotel mortgage?

What is a condotel?

A condotel is a combination of a condominium and a hotel and is a unique type of property ownership. Each condotel is a part of a large-scale property that operates similar to a hotel, with a wide range of amenities and resort-style features. A condotel owner purchases a unit within the property and uses it as a second home or vacation spot while renting it out through the main property. Because of this unique arrangement, loans for condotels require different financing requirements and allow for different things. This includes:

Loan information

• Down payment minimum of at least 15%
• Available financing for vacation/second homes up to 85% LTV to $3M
• Available financing as an investment property up to 85% LTV to $3M
• Classification as a second home allowed
• Cash-out options for investment/vacation/2nd home up to 70% LTV

Allowances

• Allows for daily, nightly, weekend, or longer rentals
• High investor concentration
• Loan can qualify for the 1st unit in the complex
• Will finance for individuals/entities owning more than 10% of units

What is a non-warrantable condominium?

A non-warrantable condominium is any condo that does not meet the traditional Fannie Mae or Freddie Mac lending requirements. A condominium is non-warrantable if it features one of the following requirements:

• Requires a membership, such as a golf or country club
• Is part of a continuing care facility
• Is currently party to a lawsuit
• Allows individuals/entities to own more than two units/20% of the property
• The property features commercial space exceeding 35% of total property space
• Has 15% or more of the units that are delinquent on HOA dues
• Operates as a hotel or motel, such as a condotel

Financing for a non-warrantable condominium has the same basic loan standards and allowances as you see with a condotel.

How do condotel loans work?

Condotel loans are considered non-traditional loans as they do not meet the traditional mortgage requirements. However, they still require you to meet certain income, asset, and credit score requirements. In many cases, the loan requirements focus more on the property and the buyer. For example, many lenders will require the condotel to be at least 600 sq. ft. and have basic kitchen facilities and separate bedroom space. Once the requirements are met, the loan process follows the same steps as a traditional loan.

Challenges of getting condotel loans

Condotel or non-warrantable condominium financing is slightly different from a traditional loan. Because a condotel or non-warrantable condo does not meet the requirements of a conventional Fannie Mae or Fannie Mac mortgage, many big bank lenders will not take the risk of underwriting these loans. This means that you will need to find an approved lender specializing in non-standard mortgages. Once you do this, the mortgage process is very similar to a conventional mortgage.

How to get condotel and non-warrantable condo loans?

Once you find a lender specializing in non-traditional mortgages, applying for your loan is not much different. The lender will evaluate the property, ensuring it meets their property qualifications, such as the minimum square footage and property layout. In addition, you must meet their borrower qualifications, including a minimum credit score which is often 680. They will require income and asset information similar to a traditional loan. You must also meet the LTV requirements and have the minimum down payment required. In some instances, lenders will also look at the financial health of the condotel property in general when determining your loan.

When you apply for a condotel or non-warrantable loan, you can expect rates that are at least a half-percent higher than thof or conventional loans. However, because smaller lenders underwrite these loans, mortgage approval times are often shorter than those with big banks.

Let Hero Home Programs help you through the loan process.

Because condotel and non-warrantable loans are considered non-traditional, many borrowers expect them to be difficult. The truth is the hardest part of getting a loan for these properties is finding a lender that underwrites non-traditional mortgages. Once you find one of these lenders, the process is usually very straightforward.

However, at Hero Home Programs, we understand that these unique financing options can be intimidating or confusing. Our goal is to help borrowers achieve their homeownership and our experts can help.

Speak to us today to see how Hero Home Programs can help you achieve the financing you need.

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Benefits of Interest-Only Mortgage Loan

When you are looking to purchase a home, you may consider different loan types, one of which is an interest-only mortgage. What are the benefits of interest-only mortgage loans? What are the disadvantages? When should you consider an interest-only loan?

Here we take a closer look at this loan type and how it may work to your advantage when purchasing a home.

What is an interest-only mortgage loan?

In simple terms, an interest-only loan is a mortgage where you pay just the interest for the first several years of the loan. In most cases, these payments last between three and ten years. It typically lowers your monthly mortgage payment during that period. However, once the interest-only period closes, your payments increase to include both the interest and the principle.

Most interest-only loans are adjustable-rate mortgages (ARM), so your interest rate can increase or decrease throughout both the interest-only and the remaining period. When the interest-only period ends, your loan can either require a lump sum of payments or continue with regular monthly payments that include both the interest and principal balance.

To get a better understanding, let’s look at a basic example:

If your mortgage is on $100,000 with an interest-only ARM at 5% and an interest-only loan period of ten years, you will have a monthly interest-only payment of $417 for the first ten years. When the interest-only period ends, your payment will then include the principal and interest and raise substantially. Keep in mind that if you had a 30-year loan, the principal is now amortized over 20 years instead of 30.

Advantages of an interest-only mortgage loan

Interest-only loans can make good financial sense for buyers in a wide range of different situations. Benefits can include:

• Increasing income: If you are anticipating a substantial increase in income before the end of the interest-only period, this type of loan could allow you to purchase a larger home you know you can afford after the income increase.
• To qualify for a larger home: Because your first payments will be lower during the interest-only period, you may qualify for a larger, more expensive home than you would with a conventional loan.
• Rising home prices: Using this type of loan may allow you to purchase a home before prices rise while still allowing you the time to prepare for the increase in payments after the interest-only payment period ends. It also allows you to buy before the home prices increase, meaning you will gain equity in the home before you begin paying the principal and can refinance later.
• Investment strategy: During the interest-only period, the money that would go toward the principal can be invested elsewhere to get a higher return.
• Tax deductions: As the payments are all interest during the initial period, they are completely tax-deductible.
  Pay the equity on your schedule: You can pay the equity down on your schedule during the interest-only payment period, allowing you to decrease your payments when that period ends.

Disadvantages of an interest-only mortgage loan

While there are many times that this type of mortgage loan is beneficial, there are some disadvantages that can create problems when the interest-only period ends. These can include:

• Rising interest rates are possible with an ARM.
• If you plan to invest the principal payment amounts during the interest-only period, you risk losing or spending the money instead of investing.
• Changes in your situation may leave you unable to afford the larger payments when the interest-only period ends.
• The housing market may decline, and you may not experience the home appreciation you expected. In some cases, the loan balance may be higher than the home’s value, making it impossible to refinance the loan.

Types of interest-only home loans

Interest-only loans are also known as exotic loans, exotic mortgages, and are sometimes referred to as subprime loans. While they were never targeted to those with subprime credit, they did play a large role in the subprime mortgage crisis years ago. For this reason, many interest-only loans of the past are no longer used. There are, however, still interest-only mortgages available that can benefit some home buyers.

Jumbo mortgages

Jumbo mortgages are necessary for home loans that exceed the limits set by the Federal Housing Financing Agency (FHFA). While conforming loan limits can vary by state, as of 2022, the upper limit is currently $647,200. Adding the interest-only to these large loans can allow wealthy buyers to maintain larger returns in the financial markets instead of the mortgage principal. However, to qualify for these jumbo interest-only loans, high qualification standards must be met.

Interest-only home equity lines of credit (HELOC)

Interest-only home equity lines of credit, or HELOCs, are second mortgages that work like credit cards where you borrow against the equity in your home. For example, they are often set up where you can use the credit line as needed during the first ten years while only paying the interest. At the end of the 10-year period, the credit line is closed, and your remaining payments over the next 20 years cover the interest and principal.

30-year interest-only mortgages

These are similar to a conventional 30-year mortgage, with the main difference being you only pay interest payments for the initial period (between 3-10 years). However, because the principal is not paid down during the initial period, monthly principal payments are higher for the remaining 20 years than they would be in a conventional 30-year mortgage. To qualify for these loans, lenders typically require a higher down payment and charge higher interest rates due to the increased risk they are taking with the loan.

Can an interest-only loan benefit you?

While an interest-only mortgage loan can be beneficial for a lot of buyers, it is definitely not for everyone.

At Hero Home Programs, we can help you navigate the home buying and lending process and help you determine if this is a good option for you or if better programs exist to help you achieve your homeownership goal. To learn more about your home loan options, visit Hero Home Programs online today.

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Guide to Closing Costs and Taxes

When you buy, sell, or refinance a home, closing costs are a major part of every transaction. Unfortunately, this can also be costly as many different mortgage fees and closing costs are required to transfer the home into your name. But what do closing costs include? Are taxes included in closing costs? Are any of these costs tax-deductible?

This guide will take a closer look at what is included in your closing costs and what may be considered deductible when it comes to tax time.

What happens at closing?

The purpose of the closing is to transfer ownership of the home to you. During this transfer, it is common to include the seller, real estate agent, your title or escrow company, and a variety of supportive office staff. During closing, you will go through and sign all the forms necessary to transfer ownership of the home. The title or escrow firm collects cashier’s checks for the closing costs and distributes the new keys to you upon completion.

What are closing costs?

Closing costs are essentially how third parties and lenders involved with the processing of a mortgage loan receive payment for their processing. On average, a buyer can expect to pay 3%-6% of their loan amount in closing costs. A few days prior, every buyer should receive a closing disclosure that itemizes all the fees included in the total closing costs.

Third-party closing costs

Third-party closing costs are expenses paid to outside companies and providers that assisted in selling the home.

• Attorney fees: Not all states require the use of attorneys. However, if an attorney is needed, they typically charge a percentage of the selling price but can work for hourly or flat fees.
• Title search costs: Your title company will arrange for a title search before the loan is completed to ensure no liens or lawsuits are involved with the property. They also verify that the seller is the current owner.
• Homeowners insurance: In many cases, your loan may require the first year’s premium of homeowner’s insurance to be paid up-front as part of your closing costs.
• Real estate agent’s sales commission: Real estate agents work for a commission on every property sold. This payment goes directly to the real estate agent.

Finance and lender charges

Finance and lender charges are assessed by your mortgage lender and can cover a wide range of fees and payments. These can vary based on your lender’s requirements but can include:

• Origination or application fees: These fees are for processing your mortgage. They may be a flat fee or a percentage of the loan value.
• Inspections: Inspection fees cover the required inspections necessary to approve your loan. These can include termite inspections or water tests to ensure a well and water system can maintain sufficient water supply to the purchased property.
• Points: A point equals 1% of the loan value and paying points can help you reduce your mortgage rate.
  Document preparation fees: These fees cover the price of all the documents you will be signing during your closing.
• Land survey: Lenders often require a land survey to ensure that no one has encroached on the property. Land surveys are also done to verify buildings and determine improvements on the property.
• Appraisals: These costs cover the appraisal of your property that was used to establish value.
• Credit report: This is the cost of running the credit report required to approve you for your mortgage loan.
• Private Mortgage Insurance: Lenders often require PMI for buyers with a down payment less than 20%.
• Release fees: If the property has current liens against it and the seller has worked with the lien holder to acquire payment from the sale of the property, fees may be necessary to release the lien. In most cases, the seller pays this fee.
• Escrow account: Many lenders require that an escrow account is set up to cover taxes, homeowner’s insurance, and PMI if required. This money is collected monthly and used when these premiums are due.
• Prepaid interest: While your typical first mortgage payment is not due for six to eight weeks after closing, interest on your loan begins accruing immediately. Prepaid interest is the interest that will accrue between the closing date and your first mortgage payment.

Statutory costs and taxes

Statutory costs and tases are the fees collected by state and local agencies necessary for the sale of any property. These will vary by state and county and can include:

• Transfer taxes: This is a common fee required to transfer the title and deed from the seller to the buyer.
• Recording fees for deed: The county clerk typically collects this fee to record the deed transfer and adjust the property tax billing information to the new owner.
• Pro-rated taxes: Depending on when your sale takes place and when local taxes are collected, taxes such as school taxes and county taxes may need to be split between the buyer and seller depending on the occupancy percentage.
• Impound account: Similar to an escrow account, your lender may require an impound account to cover local taxes.
• State and local fees: Some state or local governments may require additional fees, such as a mortgage tax.

Are closing costs deductible?

Not all closing costs are deductible when filing your taxes for the year. However, those fees that are considered taxes or interest are.

Loan points

The IRS considers points as a form of prepaid interest. These are tax-deductible if you meet these conditions:

• The mortgage covers your primary residence
• The mortgage is being used to make upgrades to your primary home
• Paying points is a normal business practice in your area, and you did not pay more than is customary
• You use the cash method of accounting
• The lender charged the normal amount for points
• The cash brought to closing was at least the amount of points charged by the lender
• The points were calculated as a percentage of the loan
• Your closing documents clearly shows how much you paid in points

Prepaid interest

Prepaid interest is the amount of interest paid to cover the period between closing and your first payment.

Property taxes

The state and local property taxes you pay are deductible in the year you pay them. The maximum a married couple can deduct is $10,000 ($5,000 for single) per year for property tax, sales tax, and state and local income tax combined.

Origination fees

The fees the lender charges to underwrite and process your loan, the IRS considers these fees the same as points, making them tax-deductible. These fees can even be deducted if the seller pays them.

Mortgage insurance premiums

The IRS considers four different types: private mortgage insurance (PMI), VA funding fees used for VA loans, USDA guarantee fees towards a USDA loan, and FHA up-front premiums used with FHA loans. This deduction is also dependent on certain income limits. You cannot claim this deduction once your adjusted gross income (AGI) exceeds $109,000.

Closing on your new home

As you can see, closing costs and taxes can cover a wide range of different fees and expenses. In fact, the average buyer will pay between 2-5% of their loan amount in closing costs.

At Hero Home Programs, we understand how intimidating the home closing process can be, and our team is here to help walk you through the process and ensure everything goes smoothly. To learn more, visit us online today.

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FMERR Program: All You Need to Know

Homeowners looking to change their mortgage terms or reduce their interest rates often turn to home refinance loans. Unfortunately, many homeowners find that their homes have dropped in value or live in an area where home values are stagnant. This often means that the homeowner has lost value in their home, and they do not have enough equity to qualify for a standard refinance loan.

The good news is, for those sitting underwater when it comes to home equity, refinance programs, such as the Freddie Mac Enhanced Relief Refinance Program (FMERR), can offer assistance. Here we take a closer look at the program, including FMERR qualifications and eligibility.

What is Freddie Mac Enhanced Relief Refinance (FMERR)?

In areas where the housing market has dropped or remained stagnant, homeowners often find they do not have the equity available in their homes to qualify for a traditional home refinancing mortgage. Created by Freddie Mac, the Freddie Mac Enhanced Relief Refinance (FMERR) program was created to help homeowners with little to no equity in their homes qualify for refinancing. This means that, even with no equity, homeowners can qualify for refinancing at lower interest rates as long as they meet certain other guidelines.

Who qualifies for the FMERR Program?

While home equity is not a requirement for the FMERR program, there are other qualifications that you must meet to qualify and receive loan approval.

1. Loan owned by Freddie Mac

To begin applying for an FMERR loan, Freddie Mac must own your current loan. Because Freddie Mac is taking the risk on this high LTV loan, they limit their program to the loans they originally approved.

For loans owned by Fannie Mae, there is the HIRO program. If you have an FHA, VA, or USDA home loan, a Streamline Refinance loan is your option.

2. Date of loan originations

Your current loan must have an origination date on or after November 1, 2018, to qualify for the FMERR program. In addition, your current mortgage must be at least 15 months old before you can qualify.

3. Loan-to-value (LTV) ratio

Applying for a traditional refinance loan requires a maximum loan-to-value (LTV) ratio to qualify. In contrast, the FMERR has a minimum LTV requirement. For example, you must have an LTV ratio of 97.01% or higher for a single-unit primary residence. In other words, you need to have less than 3% equity in your home to be approved.

3. Debt-to-income (DTI) ratio

Unlike traditional mortgages, there is no maximum debt-to-income (DTI) ratio to be eligible for FMERR refinancing. The new loan is designed to replace an existing loan and often reduces the existing monthly payments. However, lenders must prove a 45% DTI if the payment increases by 20% (this can occur when you switch from an adjustable to a fixed-rate mortgage).

4. Net tangible benefit

The point of any refinance loan is to achieve a benefit, and the FMERR program is no different. Refinancing with the FMERR program must offer at least one of these financial benefits to qualify:

• Lower interest rate
• Reduced monthly payment
• Improvement in mortgage terms
• Change from an adjustable rate to a fixed-rate mortgage

5. Good payment history

Your payment history matters when it comes to an FMERR loan. You must have no 30-day last payments within the past six months and no more than one 30-day late payment within the last 12 months.

6. Credit score

Technically, there is no minimum credit score requirement for the FMERR loan as it is replacing your previous loan with new financing. However, some lenders can establish their own requirements, run a credit score, and have a minimum score requirement.

Should you apply for the FMERR program?

If you are looking to reduce your interest rates or find a mortgage with better terms, then a mortgage refinance is your best option. If you are sitting with little to no equity in your current home, choosing the FMERR program may be your only option.

But what are the pros and cons associated with an FMERR loan?

Pros

• LTV value: Unlike traditional refinancing programs, FMERR allows for refinancing with a much higher LTV ratio and even refinances when you owe more than the current value of your home.
• Save money: A net tangible benefit is a qualification for this program, so you must benefit financially by refinancing. This can be a lower rate, lower monthly payments, and a shorter loan term.

Cons

• Upfront closing costs: As with any mortgage or refinancing, you will be required to pay closing costs on your FMERR loan. This can amount to thousands of dollars, so you will need to budget this expense.
• Limited ARM terms available: While most people choose a fixed-rate FMERR loan, adjustable-rate mortgages are an option but are limited to 5/5, 5/1, 7/1, 10/1, 5/6-month, 7/6-month, or 10/6-month terms.

Refinance your home even when you don’t have the equity

If you are looking to save money or improve the terms of your current mortgage but have limited equity in your current home, a Freddie Mac Enhanced Relief Refinance (FMERR) loan may be the perfect solution.

At Hero Home Programs, we understand how intimidating the home refinancing process can be. Our goal is to help everyone reach homeownership and maintain it at the rates they can afford.

Visit us online today to learn more about how we can help you navigate your home refinancing and find you the best possible rates and programs.

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Can You Get a Second Home Mortgage With FHA?

Many assume that FHA loans are only for first-time homebuyers. While first-time buyers do make up the majority of borrowers that take advantage of these loans, the fact is many borrowers who already own a home or have in the past can take advantage of the benefits associated with an FHA loan.

But can you buy a second home with FHA? While buying a second home with FHA is possible, there are some considerations. Here we take a closer look at the FHA and how it can benefit you when buying a second home or even an investment property.

What is an FHA loan?

An FHA loan is a mortgage loan backed by the U.S. Federal Housing Administration. These loans require lower minimum credit scores and smaller down payments than traditional mortgage loans. While the federal government insures these loans, they are actually administered by FHA-approved lenders. These loans are designed for those who may not qualify for more conventional mortgage loan options.

Can you use an FHA loan on a second home?

An FHA loan is designed to be used to purchase a primary residence. However, there are circumstances when you can purchase a second home with an FHA loan. For example, if you already own a home with an FHA loan but no longer live in it, such as through a divorce, you may be eligible for a second home purchase. Also, if you had a home with an FHA loan and decided to keep that home as an investment and rental property, you could qualify for an FHA loan for your new primary residence.

Before diving into more occasions when you may qualify for a second home FHA, let’s look at the eligibility qualifications for an FHA loan.

Eligibility

• You must have a credit score of 500-579 with a 10% down payment or a score of 580 and above with a 3.5% down payment.
• Verifiable 2-year employment history
• Verifiable income with pay stubs, tax returns, etc.
• Front-end debt ratio of no more than 31% of gross monthly income
• Back-end debt ratio of no more than 43% of gross monthly income
• You must wait two years after a bankruptcy or three years after a foreclosure before applying

Requirements

• FHA approved appraisal that meets the HUD guidelines
• Purchasing a primary residence
• Maintain FHA mortgage insurance on the loan

Aside from these basic FHA requirements, there are other requirements when using an FHA loan on a second home. These can include higher down-payments, higher minimum credit score requirements, and a cash reserve.

Can you have more than one FHA loan at the same time?

While you can qualify for an FHA loan more than once, you can only have one FHA loan at a time under general circumstances. However, there are four scenarios where you may qualify for a second FHA loan while still paying for your first property and FHA loan.

• Job relocation: If you are changing jobs and require a relocation over 100 miles from your current primary residence and do not want to sell your current residence, you may qualify for a second FHA loan to purchase your new primary residence.
• Leaving a joint-owned property: Oftentimes, especially during a divorce, you may be the co-owner of a current home where you no longer reside. In this case, you may qualify for a second FHA loan for your new primary residence.
• You were a cosigner for another property: If you acted as a cosigner for someone else to purchase a home with an FHA loan but never lived in the said home, you may qualify for an FHA loan to purchase your primary residence.
• Growing your family: If your current home no longer meets the needs of your growing family, you may qualify for a second FHA loan to purchase a new primary residence and maintain your first home as a rental property.

Can you purchase an investment property with an FHA loan?

FHA loans are designed to purchase primary residences and not second homes or investment properties. As shown above, there are some scenarios where it is still possible to buy a second property as a primary residence, leaving your first home as an investment property. There are two other times where an FHA loan may be used to purchase investment properties.

• Refinancing an existing FHA loan: Using a streamline refinance, you can refinance an existing FHA loan on a home you no longer live in as long as it lowers your monthly principal and interest payments.
• Multi-family properties: You can qualify for an FHA loan for a multi-family, such as a duplex, as long as one of the units will be used as your primary residence.

Applying for an FHA loan on the second home mortgage

Before you consider applying for an FHA on a second home mortgage, you will want to focus on boosting your credit score and increasing your cash reserves. In addition, start with an FHA mortgage calculator to see how much you can afford when it comes to a second home and what specific qualifications you may need.

Financing your second home with FHA

While financing a second home with an FHA loan is not common, it is still possible. When you purchase the second home as your primary residence, it gives you a second investment home that can add to your overall net worth.

However, at Hero Home Programs, we understand how confusing the home buying process can be. We can help you navigate the FHA home buying process and help ensure you meet the qualifications for a new FHA loan when needed. To learn more about Hero Home Programs and how we can help, visit us online today.

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Your Complete Guide to Mortgage Loan Documents Checklist

When you buy a home, the necessary paperwork for a mortgage application and underwriting can often seem overwhelming. Having a mortgage loan closing documents checklist can help make this process easier and help ensure you have everything ready before it is needed.

Here, we provide all the typical loan information necessary for your application and home closing.

Loan application information

When applying for a home mortgage and going through underwriting, your mortgage lender will need to take a deep dive into your personal and financial life. Unfortunately, this is necessary to help ensure you meet all the necessary loan requirements and guidelines and that you are in the position to afford your monthly mortgage payments. Knowing what information may be required in advance allows you to make sure you have all the necessary paperwork you may need ahead of time to help speed up the process and get you into your new home sooner.

Personal identification

To begin with, you will need to provide personal identifying information. This will include photo IDs and social security cards for every person on the mortgage. You may also need to provide information regarding your marital status and the number of children you have, as well as their personal information.

If you are not a U.S. citizen, you may need to provide proof of permanent residence and immigration status. It can include a copy of your green card, employment authorization documentation, or your approved visa.

Employment and income history

In order to prove that you can make your monthly mortgage payments and afford the amount of your home loan, the lender is going to require documents that confirm your employment and income history. This can include pay stubs from your employer for at least the last 30 days, W-2 forms from the last one to two years, and your income tax returns for the last two to three years.

If you are self-employed, most lenders require at least two years of a steady income in the same self-employment industry. Proof of this can come from client contracts or letters from your current clients. If you own a business, you will need to provide your business license and proof of insurance, as well as at least two years of tax returns, both personal and business.

Profit and loss statements

If you own a business, in addition to the information listed above, you will also need to provide a cash-flow analysis and a year-to-date profit and loss statement verified by a certified accountant.

Bank statements

Your lender will want to ensure that you have the assets available to cover your down payment and closing costs, as well as maintain cash reserves if they are required. To show this, you will need to submit bank statements for at least two to three months.

Investment account statements

If you plan to use money from an investment or retirement account to cover your down payment or closing costs, you will need to provide statements from all these possible accounts. This can include retirement accounts, 401(k) plans, stocks, and certificates of deposit.

Gift letter

If a family member is gifting you the money for your down payment, you will need to acquire a gift form and letter ensuring that this money is a gift and not a loan that is expected to be paid back.

Assets and liabilities

Lenders will need to calculate your debt-to-income ratio to ensure that you have the financial ability to make your monthly mortgage payments. To do this, you will need to provide your bank investment account statements and proof of all debts, such as auto or student loans, credit cards, personal loans, and any other regular expenses.

Credit history

The lender will need to check your credit history, though you are not required to run and submit your own credit report. Instead, your mortgage lender will ask for your permission to run a credit check. If you have a thin credit history, they may ask for alternative credit data, such as utility bills, rent history, cable bills, and more.

Rental history

Some lenders will require you to provide a rental history to show proof of regular monthly housing payments. This can include a list and contact information of your landlords over the last two years.

Signed sales contract

You will need to provide a signed copy of the sales agreement between you and the seller. It is the document that shows the purchase price and all the home details. It also includes the terms you and the seller agreed to.

Proof of additional income

If you rely on additional income, such as alimony or child support, you will need to provide documentation on the amount and duration of these payments. In many cases, this will require a copy of the court order.

Bankruptcy documents

If you have a bankruptcy on your credit history, you will first need to talk with your lender about how long you need to wait before considering a mortgage. You will need to prove that all debts are discharged and no longer outstanding. In addition, if you had a previous foreclosure in your bankruptcy, you may have to wait seven years before you are eligible for a mortgage.

Divorce decree

If you are divorced and pay or receive child support or alimony, your lender is likely to require a copy of your divorce decree to provide proof of income or liability.

Checklist helps

As you can see by the checklist, the required documents and information associated with the home loan process can be overwhelming. At Hero Home Programs, our goal is to help everyone reach homeownership. We research all the available home loan products and discounts you may be eligible for and help walk you through the lending process.

To learn more about how we can help you get into the home of your dreams, visit us online today.

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What is HIRO Mortgage Program?

If you are looking to change your mortgage terms or lower your interest rate, you may consider a home refinance loan. This is a wonderful option for many. However, what if you live in an area where the property values have dropped? A traditional refinance loan requires a minimum of the existing home equity, and many find that they do not qualify because of depressed property values.

The good news is the HIRO loan program is a government refinance program that offers an alternative refinancing option. Here we take a closer look at the HIRO program, how it works, who can qualify, and any other alternative options available to you.

What is the HIRO Program?

The Fannie Mae High Loan-to-Value Refinance Option (HIRO) is a program designed to help homeowners in areas where the property values are stagnant or even falling. In these areas, many homeowners lost equity in their homes, leaving them ‘underwater.’ The goal of the HIRO program is to provide loans to these homeowners, allowing them to refinance into a lower interest rate and monthly payment.

How does the High LTV Refinance Option (HIRO) Program works?

Traditional refinance loans require you to owe less than 80% of your home value. The HIRO loan program lets you refinance with a much lower loan-to-value (LTV) ratio. In fact, there is no maximum ratio if you refinance into a fixed-rate mortgage. There are also some differences regarding how a HIRO loan works.

Let’s take a closer look.

Income verification

Refinancing with HIRO still requires a completely new mortgage and a similar application process. However, this application process offers much more flexibility than traditional mortgage applications. For instance, in many cases, income verification, employment verification, asset checks, and home appraisals are often not necessary. This is partially due to the initial eligibility requirements for the HIRO program, which we will discuss below.

In addition, there are no credit score requirements to qualify for a HIRO loan. As it is intended to replace your current loan, lenders are not required to pull a credit report or require a minimum credit score. There is also no debt-to-income ratio ceiling that must be met for the HIRO program.

Rates

Interest rates for any loan are based on the risk posed by the lender. Because you have little to no equity in the home when you apply for the HIRO program, the lenders are taking higher risks than with other refinance loan options. For this reason, HIRO loans often have a slightly higher interest rate than traditional refinancing options.

Who qualifies for the HIRO mortgage program?

If you are considering a HIRO loan, you must meet several qualifying factors to be eligible.

• Your original mortgage must be dated October 1, 2017, or later
• Your existing mortgage must be at least 15 months old
• All payments must be up to date on your current mortgage. This means no late payments within the last six months and a maximum of one late payment in the last year.
• Your current mortgage must be first-lien financing and not a second mortgage.

Key qualification factors

In addition to the requirements listed above, the HIRO program also has additional key qualification factors for program approval.

1. Fannie Mae backs current mortgage

Because Fannie Mae backs the HIRO program, their first key qualification factor requires that Fannie Mae back your current mortgage. Given that they are taking the risk on this high LTV loan, they want to limit the program to loans they originally approved. If Fannie Mae does not back your current loan, there are additional alternatives we will discuss below.

2. Minimum and maximum LTVs

Traditional refinance loan options require a maximum LTV ratio to qualify. However, as we mentioned, the HIRO program does not have a maximum limit. They do, however, have a minimum LTV ratio. This minimum varies based on the property type. For example, the LTV for a 1-unit primary residence is 97.01% or higher. A 1-unit second home has a minimum LTV of 90.01% or higher, and a 1- to 4-unit investment property has a minimum LTV ratio of 75.01% or higher.

3. Net tangible benefit

The final key qualification factor for the HIRO program is the loan must provide you with a net tangible benefit, meaning you must gain an advantage by refinancing your mortgage.  Examples of a net tangible benefit include:

• Lower interest rate
• Lower principal and interest payment
• Reducing the terms of your loan
• Changing from an adjustable-rate mortgage to a fixed-rate

When should you seek a high LTV refinance?

If you are interested in achieving any of the net tangible benefits above, such as a lower interest rate or shortening the term of your loan, then a mortgage refinance loan is a great option. If the amount of equity in your home is not enough for a traditional loan, then a HIRO program loan offers you the perfect solution.

Alternatives for HIRO Program

Because the HIRO program requires current loans backed by Fannie Mae, it is not open to all homeowners. There are, however, similar programs designed for those with loans backed by Freddie Mac or FHA, VA, and USDA borrowers.

Freddie Mac Enhanced Relief Refinance (FMERR)

The Freddie Mac Enhanced Relief Refinance (FMERR) program is very similar to the HIRO program, with the main difference being it is for those with current loans backed by Freddie Mac. Also, one important requirement is that your current loan must have been originated on or after November 1, 2018.

Streamline refinance

Streamline Refinance is a refinancing option for FAH, VA, or USDA home loans. This loan option works for those with little to no equity in their home requires no credit check or income verification, and follows the basic qualifications of the other programs.

Conclusion

A HIRO loan is a great option for those with little to no equity in their home refinance to reduce their interest rate or monthly payments. At Hero Home Programs, we understand how intimidating the home loan refinancing process can be to homeowners, and we are here to help.

Contact us online today to learn more about how we can help you navigate your refinancing and make the most of your homeownership.

What is HIRO Mortgage Program? Find more on: www.herohomeprograms.com

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Home Loans for Paramedics and EMTs

Emergency medical service (EMS) personnel, such as paramedics and emergency medical technicians (EMT), selflessly give their service to protect and take care of their community every day. Unfortunately, homeownership is often just out of reach despite the vital role they play. However, thanks to special EMS mortgages and mortgage loans for paramedics, many first responders can achieve the dream of homeownership.

Difference between paramedics and EMTs

When it comes to EMS personnel, there are different levels of certification. These certification differences affect the level of care that responders can provide to community members. To better understand the differences, we look at both paramedics and EMTs.

Emergency Medical Technicians (EMTs)

The role of an EMT is to assess a patient and determine if there are any life-threatening injuries or illnesses. Their treatment options focus on basic health procedures, such as CPR, oxygen administration, stabilizing and splinting injuries, or administering epinephrine for an allergic reaction. To become an EMT, you do not need a college degree but rather complete an EMT training program requiring at least 170 hours of education.

Paramedics (PM)

Paramedics are licensed, pre-hospital service providers providing many of the same medical treatments that emergency room staff can. This can include administering medications, starting IV lines, providing airway management, EKG administration and interpretation, and much more. Paramedic training is a college degree program that can take up to two years and include 1,000 to 2,000 hours of training to complete. In many cases, these programs require a college-level anatomy and physiology course before acceptance.

Home buying challenges for first responders

Despite providing life-saving services to the community, wages for EMTs and paramedics often keep homeownership out of reach. According to a 2021 EMS1 survey, more than half of EMS personnel work more than one job. This is despite 63% working more than 50 hours a week and 21% working more than 70 hours a week.

In addition to the mental and physical stress of the job, the inability to make a living wage often leads to burnout. Unfortunately, it usually keeps many EMS personnel from owning their own home.

Home loan programs for EMS providers

The good news is there are many different home mortgage programs available for first responders, including EMTs and paramedics. These programs offer everything from down-payment assistance to reduced fees and grants to help with the down payment.

Here we take a closer look at some of the available assistance options.

Hero Home Programs – First Responder Home Loans

Hero Home Programs and their First Responder Home Loans is a comprehensive program that works with first responders to find all the possible home assistance programs they are eligible for. They research all the possible programs available to you, including down payment assistance, low-cost mortgages, and federal and local grants that are often available for first responders. Once they locate all available options, they also work with you to find the best financing options that complement the additional benefits, making your home buying and financing process much easier, with less work for you to do.

Advantages

• Research is done for you, meaning less work for you
• Credit on closing
• Additional vendor discounts
• They find all available rebates and grants
• Low-rate mortgage loans
• Maximum savings

Eligibility
The Hero Home Program is open to all EMS personnel and first responders.

FHA Loans

A Federal Housing Administration (FHA) loan is insured by the Federal Housing Administration and offered by approved lenders. These loans only require a 3.5% down payment and are designed for low to moderate-income earners.

Advantages

• Small down payments
• Flexible qualifications, with the main requirements being good work. and credit history
• Acceptance of lower credit scores

Disadvantages

• Upfront Funding Fee: This is a fee of 1.75% of the total amount financed. This fee can be paid upfront or rolled into your monthly mortgage payment.
• Mortgage Insurance Premiums (MIP): MIPs are required for the life of all FHA loans.
  It will cost more over the life of the loan.

Eligibility
To qualify for an FHA loan, you must have a verifiable employment history, a credit score between 500-579 for a 10% down payment or over 580 for a 3.5% down payment, and have the home appraised by an FHA-approved appraiser.

HUD Good Neighbor Next Door

The Good Neighbor Next Door program is offered by the Department of Housing and Urban Development (HUD). This program provides homes to first responders at 50% off the listing price. This means if you find a home for $200,000, you will pay monthly mortgage payments of just $100,000. This only applies to select homes in revitalized communities.

Advantages

• Purchase a home for half the asking price

Disadvantages

• Limited selection of homes available for the program
• If multiple people apply for the same home, the applicant chosen is determined by a randomized lottery
• Must stay in the home for a minimum of 3 years

Eligibility
You must be employed full-time as a firefighter, EMT, paramedic, or law enforcement officer with a fire department, EMS unit, or law enforcement agency.

Firefighter Next Door® First Home Buyer Program

If you are a first-time homebuyer or have not owned a home in the past three years, you are eligible for the Firefighter Next Door First Time Home Buyer Program. With this program, you can purchase any home on the market, and you may also be eligible for the Firefighter Next Door Grant and additional down payment assistance.

Advantages

• No application fees or up-front costs
• Easy application process
• Low down payment options
• Grants up to $8,000
• Down payment assistance up to $10,681.00
• Preferred interest rates
• Free appraisal
• Free homebuyer representation
• Discount title fees

Eligibility
The Firefighter Next Door First Time Home Buyer Program is open to all firefighters and first responders, including EMTs and paramedics.

Home buying made easier with Hero Home Programs

As you can see, there are many potential programs available to help first responders achieve their dream of homeownership. At Hero Home Programs, we want to help all those who serve our community, including EMTs and paramedics, navigate the home buying process and find all the possible assistance they can to help achieve their goal of owning a home.

Contact us online to learn more about how we can help you move into your new home for as little as possible.

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Federal Government Employee Mortgage Programs

The home buying process can be stressful for everyone and, in many cases, may seem intimidating. This is especially true for first-time homebuyers.

However, as a government employee, you are eligible for many different home mortgage programs that can make the buying process so much easier and have you enjoying homeownership in no time at all. From special federal employee mortgage loans to mortgage assistance and grants, these programs can save you thousands of dollars and make the home buying process more attainable.

Let’s look at just how these programs work and who is eligible.

Who is a federal government employee?

Government employees are anyone who works for the federal, state, county, or city government. These can include employees from federal government agencies, such as the Department of Agriculture, to librarians and park rangers. In many cases, this also includes teachers in public education and those working in healthcare.

Home buying challenges

While working in many of these professions is rewarding, it can also contribute to financial challenges, making homeownership a little more difficult and often out of reach. Some common challenges associated with government employee positions can include salary limitations and frequent relocations.

1. Salary limitations

For most private sector positions, you can shop around for positions that offer a higher salary and, in most cases, you can expect regular raises and evaluations that contribute to an increase in income. Unfortunately, as a government employee, you may not make as much as those in similar private-sector positions, and salaries are often capped, so room for growth is not always possible. This can make it difficult to save the money necessary for a down payment on a home.

2. Job locations can change frequently

If you work in the military or other areas of the government, relocation is often a part of the job description. This can make it difficult to commit to owning a home. However, you must keep in mind that homeownership is a way to build your assets. While you may need to relocate, you can rent your home out to tenants who will, in the end, pay your mortgage for you.

Public Servant Next Door® First Time Home Buyer Program

Administered by the Teacher Next Door® National Home Buying Program, the Public Servant Next Door program provides grants and down payment assistance to those buying their first home or those who have not owned a home in over three years.

Benefits for first-time homebuyers

If you are a first-time homebuyer, this program offers a wide range of benefits, including:

• No application fees
• No up-front fees
• Easy application process
• Simple Docs Program
• Low down-payment options
• Purchase any home on the market
• Specific loans for first-time buyers
• Preferred interest rates
• Free appraisal
• Free homebuyer inspection
• Discount title fees

Eligibility

The Public Servant Next Door® program is open to all government employees, including city, county, state, and federal agencies. This includes a wide range of positions but is not limited to:

• Administration
• Clerical and office staff
• Engineers and architectures
• Facilities staff
• Computer and IT specialists
• Transportation
• Legal services
• U.S. Postal Service employees
• Inspectors
• Human resource management
• Park rangers

Government employee housing grants

In addition to down payment assistance of up to $10,681.00, the Public Servant Next Door® program also offers all government employees a housing grant of up to $8,000.00 for the home purchase. This is a non-repayable grant.

Mortgages for Champions

Mortgages for Champions is a program offered through RealFi Home Funding Corp. It was created as a thank-you to all the heroes in the community, including all government employees. This program offers the elimination of all lender’s fees and closing costs, which, in many cases, can save home buyers up to $1,700.00 or more.

Benefits for first-time homebuyers

Mortgages for Champions offers the elimination of lender’s fees and closing costs for first-time homebuyers, including:

• No application fees
• No processing fees
• No underwriting fees
• No commitment fees

Eligibility

Mortgages for Champions is a program designed to help those that help the community, including government employees, as well as:

• Educators
• EMTs
• Firefighters
• Law enforcement officers
• Medical personnel
• Military personnel

Mortgage programs can help you get your first home

Many government employees do not know about the many programs available to help during their homebuying process. The Public Servants Next Door® and the Mortgages for Champions programs are only a couple of the many programs that may be available to help you achieve your dream of homeownership.

At Hero Home Programs, we understand how overwhelming the home buying process can be. Our teams will do the research for you and find all the programs you are eligible for to help you save thousands on your home purchase and allow you to purchase the home of your dreams.

Visit us online today to learn more about how the Hero Home Programs work.

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