One of the most popular questions I get from people who are thinking about buying a home is “what are my closing costs going to be?” When I start my answer by saying “it depends…” sometimes I can hear them start to sigh.

But the truth is, closing costs are whatever you want them to be.  Sound crazy? Maybe, maybe not. The truth is – when you buy a house, everyone is going to make money. The appraiser is going to make money. The title company is going to make money. The Realtor is going to make money. The inspector is going to make money. And of course, the bank is going to make money.

But the difference about the bank making money is that you actually have a choice as the borrower on how much the bank makes and whether you want to pay now or pay over the life of your loan.

Lender Closing Costs: What If Your Pay Now?

If you elect to pay your lender closing costs at closing, you can reasonably expect to pay between 1 and 2% of your loan amount in lender closing costs.  These are usually split between origination fees (typically between .5% and 1%)  and processing/underwriting fees (typically about $1,500)

Lender Closing Costs: What If Your Have The Bank Pay?

Having the bank pay your closing costs is simple – and they will be happy to – in exchange for a slightly higher interest rate. Many times, the lender will explain it something like this: your lender fees will be $X and your interest rate will be 5% — or — your lender fees will be $0 and your rate will be %5.5.

Which is a better deal, having the bank pay your closing costs or you paying them yourself?

It depends.

Generally speaking, the longer that you are planning to have the loan, the more sense it will make for you to pay your closing costs and have as low of an interest rate as possible. If you plan on only having the loan for a few years — it will usually make more sense for the bank to pay your closing costs in exchange for a slightly higher rate.

Lender Closing Costs: F-R-E-E

Ok, so now for the big secret. The truth is, there is one other party who may be willing to pay your closing costs… the seller! It is not uncommon for a seller to pay your lender closing costs in exchange for you buying the house. There are a number of different ways to negotiate this, so be sure to work with your Realtor to get great advice here on this one.

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Earlier this month, details were released about the “Making Home Affordable” program as part of the Emergency Economic Stabilization Act that was passed through congress and signed by President Obama.  The Making Home Affordable program offers assistance to homeowners across America in one of two ways: the Home Affordable Refinance Program and the Homeowner Affordable Modification Plan.

While the plan is fairly comprehensive and much better than the FHA Secure plan (it was so ineffective that it has been discontinued) or the FHA Hope for Homeowners plan (it never really got off the ground) it is somewhat unclear if the plan will help homeowners here in Arizona who are struggling with their mortgage and owe significantly more on their mortgage than their home is now worth.

Qualification Requirements for the Home Affordable Modification Program Include:

1. It applies to owner occupied primary residence only
2. Does not apply to loans that have a balance in excess of $729,750
3. Loan must be originated prior to January 2009
4. Debt to income ratio must be greater than 31% of gross income
5. Mortgage payment no longer affordable due to significant change in income or expenses

Home Affordable Modification Program Limitations Include:

1. Doesn’t apply to loans that have a balance in excess of $729,750
2. Borrowers who are unemployed or have insufficient income levels may not qualify
3. Second homes, investment properties or lot loans do not qualify

In short, the Home Affordable Modification Program will help people, but it won’t help everyone. If you think that you may be a candidate for a loan modification under the Home Affordable Modification plan, the first step is to contact your lender, all lenders should be familiar with the plan and be able to give you more information about how you apply for the program.

If your lender is not helpful, you can also contact (free of charge) the Hope Now program to speak with a counselor who is familiar with the program and can help you understand more about your options.

If you are still find it difficult to get help in your situation, we have also provided a list of excellent Arizona loan modification companies/lawyers who can help you. Keep in mind, these people charge a fee for their services and each company has a different fee structure.

Lastly, you can also find more information about the Making Home Affordable loan modification loan program at the official Treasury Department website for the Home Affordable Program.

For as long as I can remember, the Arizona FHA streamline refinance has been a no income, no asset, no credit score loan - meaning, you didn’t fully have to re-qualify for a new loan, you were able to streamline the documentation needed in order to qualify. Recently, many lenders have tightened their guidelines where credit scores are being required on an FHA streamline refinance - where the lender will actually pull a tri-merge credit report and you must have at least a 620 credit score to qualify for the FHA streamline program. This means that many people have recently been turned down for a FHA streamline refinance because they have a low credit score. NO MORE! We now have a lender who will do an FHA streamline with NO CREDIT SCORE REQUIREMENT and only 3 criteria that you need to meet:

1. You can’t have more than 1 30 day late payment on your mortgage in the last 12 months.
2. You must occupy the property as your primary residence.
3. Participating in the FHA streamline program must make financial sense - meaning that the benefits of participating in the FHA streamline refinance program must outweigh the costs involved.

If you are currently in an FHA loan that is above 6% and have a bad credit score but meet these criteria, now is the time to act before rates go up or another lender decides to change their guideline. While it is possible that the guidelines may change for this particular lender at any point in time — we are happy to have found them because virtually all of the other lenders that we are aware of are now requiring a tri-merged credit report with at least a 620 credit score.

There are currently a number of bank-owned properties in the Phoenix metro area that need a few repairs before they are livable. Some need only a few – some need quite a few.

If you are an investor who is considering purchasing a property that is currently owned by Fannie Mae that is in need of a little work – the Fannie Mae Home Style renovation mortgage (a close cousin to the Fannie Mae HomePath renovation mortgage) is the loan program designed for you.

At closing, all funds for renovation will be escrowed in an interest-bearing account. After all renovation work is complete, any remaining funds in the escrow account will be used to pay down the principal balance of the mortgage.

Fannie Mae HomeStyle Renovation Mortgage Highlights:

• Up to 95% LTV
• Renovation funds escrowed in an interest bearing account
• Soft costs (architectural services, engineering, permit fees, etc.) may be financed
• Loans are underwritten to FNMA guidelines
• Credit score minimums range based on LTV requirements and income documentation requirements
• Appraisal must come from an appraisal management company approved by the lender
• There is a 5% declining market LTV hit for properties that are in declining markets
• Mortgage insurance requirements are based on the LTV calculated using the after-improved value of the property or the cost base — whichever is less
• The HomeStyle program is available for refinancing options as well as purchase financing

HomeStyle Renovation Mortgage: More Information

With the HomeStyle renovation mortgage – you can basically do any kinds of repairs as long as the appraised value can support the value and the repairs or improvements are common for the area. The repairs must be completed within six months and can’t be more than 50% of the final appraised value.

When thinking about the HomeStyle renovation mortgage – be sure to consider the types of improvements you are undertaking – many times repairs such as water damage, mold, structural repairs all will require more work than you may initially think.

Is the Fannie Mae HomeStyle renovation mortgage the best loan for investors who want to purchase a property in need of a few repairs? I can’t think of a better one.

HomeStyle Renovation Mortgage    

Lender Guidelines (.pdf, 169K, 4 pages)

Arizona Mortgage Rates for April 7,  2009

If you are an investor who is looking to purchase a home that is currently owned by Fannie Mae but the home needs renovations - Fannie Mae has a great loan program designed just for this situation that is a close cousin to the Fannie Mae HomePath mortgage program but designed just for investors.

It is called the Fannie Mae HomeStyle Renovation Mortgage program.

The HomeStyle Renovation mortgage program allosw borrowers to combine the cost of the home with the costs for renovation or remodeling.

At closing, all funds for renovation will be escrowed in an interest-bearing account. After all renovation work is complete, any remaining funds in teh escrow account will be used to pay down the principal balance of the mortgage.

Fannie Mae HomeStyle Renovation Mortgage Highlights:

• Up to 95% LTV
• Renovation funds escrowed in an interest bearing account
• Soft costs (architectural services, engineering, permit fees, etc.) may be financed
• Loans are underwritten to FNMA guidelines

HomeStyle Renovation Mortgage: More Information

Borrowers can basically do any repairs / renovation to the home that they want as long as the appraisal supports the value, the improvements are common for the area (pools, for example), the repairs can be completed within six months, and the repairs do not exceed 50% of the after imporoved appraised value.

The only types of repair that I would not recommend under the HomeStyle Renovation mortgage program are water damage, mold, and any structural repairs to the foundation and/or load bearing walls. These types of repairs have a tendency to escalate into much larger projects once the builder does the demo and determines what the actual repairs are needed to fix the damage to the property.

Have more questions about the HomeStyle Renovation mortgage? We are happy to help.

We are currently working with a couple of people who are buying a home that is owned by Fannie Mae and are getting approved for the new HomePath mortgage program. As mortgage guidelines have gotten tighter over the last couple of years, it is nice to see a program come out that actually has features like no appraisal and no mortgage insurance.

If you are interested in buying a home that is owned by Fannie Mae as your primary residence that is not in need of repairs, the “regular” Fannie Mae HomePath mortgage program is right for you.

You will often see homes that are eligible for this with the logo seen above somewhere on the sales sheets and information about the HomePath program will usually be in the remarks section of the MLS.

HomePath mortgage financing highlights include:

• Low down payment and flexible mortgage terms (fixed-rate, adjustable-rate, or interest-only)
• You may qualify even if your credit is less than perfect
• Available to both owner occupiers and investors
• Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit organization, state or local government, or employer
• No mortgage insurance
• No appraisal required — the sales price is the value
• No declining markets policy
• No loans under $20,000
• No more than 10 financed properties
• No prepayment penalties

If you are interested in buying a home that is owned by Fannie Mae as your primary residence that is in need of repairs, the HomePath renovation mortgage program is the one that you will want to look into.

You will often see homes that are eligible for this program with the above logo on the sales sheets and will usually find more information in the remarks section of the MLS.

HomePath renovation mortgage highlights:

• Financing to fund both your purchase and light renovation
• Low down payment and flexible mortgage terms (fixed-rate or adjustable-rate)
• Down payment (at least 3 percent) can be funded by your own savings; a gift; a grant; or a loan from a nonprofit, state or local government, or employer
• No mortgage insurance

If you are considering buying a home that is currently owned by Fannie Mae, be sure to look into the HomePath mortgage financing program.  I don’t remember the last time that I saw a loan program that said “no appraisal, no mortgage insurance and a 3% down payment!” But then again, I don’t remember a time when Fannie Mae owned so many homes.  No wonder so many great deals are being had. Don’t miss out!