Today's Mortgage Rates

Many first time home buyers choose the FHA loan program to finance their first home. The main reason for this is that a FHA mortgage makes it easy for them to get into a home with a low (3.5%) down payment and competitive interest rates. They also offer options for home buyers to “buy down” the interest rate and allow underwriters to manually approve their loan if they meet the criteria but cannot get approved through the Automated Underwriting System.

But by far one of the more common questions I am asked by first time home buyers who want to get an FHA loan is “can I have someone give me my down payment?”

Yes is the official answer – but it should probably be not just a Yes or No — It should be more of a “Yes, but…”

FHA allows parents to give the down payment to their kids. Or grand parents to their grand children. Or pretty much any immediate family member within reason. The gift cannot be from a “non profit” organization.

Officially, there isn’t a limit as to how much a first time home buyer can receive as a gift, but there are usually some rules that must be met if there is going to be a gifted down payment. First you will need a gift letter that will be submitted with the file to the underwriter that meets these rules:

• Must be from an immediate relative or someone that you have had a long standing relationship with. Yes, there is a little bit of gray area here.
• The person giving the gift must be independent of the entire transaction.
• The funds must be in the account for a period of time to be verified. Typically the underwriters call this “sourced and seasoned” meaning you can document where it came from and how long it has been there.

When putting a gift letter together, it is important to be as descriptive as possible. You want to describe the nature of the relationship of the person giving you the gift along with supporting documentation (bank statements) that shows the deposit into the home buyers account. You will also want to be sure to spell out that it is a GIFT and doesn’t have to be paid back.

Occasionally, underwriters will want more information after they see a gift letter, but usually not if it contains the above basic information.  After all, getting the gift of a down payment from someone you love shouldn’t be that difficult of a thing to document… and it is one of the greatest gifts many first time home buyers could ever get!

With so many lending institutions facing bankruptcy during the current economic downturn there is reason to believe there may be decreases in the amount of funds a homeowner can borrow against the equity of his home. The recent bankruptcy of  Lehman Brothers and the purchase of Merrill Lynch by Bank of America place some concerns in the foreground concerning the future of the current reverse mortgage industry and the levels that are currently available. There also seems to be controversy concerning the limits currently in force under the Housing and Economic Recovery Act of 2009. The National Reverse Mortgage Lenders Association believes current federal regulations allow a limit of $417,000 with an increase to $625,500 in high priced areas. This may mean many homeowners with high value homes may be limited to the Home Equity Conversion Mortgage with a standard limit of $625,500.

 The key issue is to understand what the impact might be if these limits were lowered especially in light of the current cost of homes. In some areas the prices of even high priced homes is dropping significantly thus reducing the need for higher lending limits on reverse mortgages. If you are to compare the current price of homes to those in the past there is likely to be a significant difference in most areas. While this decrease will have no affect on those senior homeowners who already have reverse mortgages in place, it can have a significant impact on those who may look to the possibility of using a reverse mortgage in the future. This may also has disastrous effects on those whose home equity already exceeds the current limits.

If the limits are reduced on reverse mortgages it could make only those homeowners with mid-range homes able to qualify for a reverse mortgage. Those who have worked all of their lives to pay off a home that has a higher value will be unable to really cash in on the true value of their homes. The answer for those homeowners is for those who qualify now but have not done so to take advantage of the reverse mortgage programs at current lending limits while they are still able to do so. 

Whether the limits will actually be dropped on reverse mortgages is yet to be seen, but there is little doubt if this happens it will have a huge impact on the industry as a whole. Though current housing prices have slowed in growth, they still remain at an industry high that dates to better economic conditions. Housing prices are hopefully not going to decrease significantly in value if at all but they are not significantly increasing either. If this trend continues it will also have an affect on the lending limits of reverse mortgages. The ultimate effect this can cause is an increase in both the sales of homes by older homeowners and an increase in the number of foreclosures by those who cannot make their mortgage payments.

A thirteen-year veteran of the mortgage industry, Robert Griffin specializes in reverse mortgages and has helped over 3000 Americans find financial security with a reverse mortgage. The owner of Griffin Financial Mortgage LLC, based in Fort Worth, Texas, his memberships include the National Association of Mortgage Brokers (NAMB), the Mortgage Bankers Association (MBA), the National Reverse Mortgage Lenders Association (NMRLA) and the Better Business Bureau (BBB). Robert Griffin is also co-author of “62 Senior Moments.”

If you’re in Los Angeles this weekend and need help modifying your mortgage, you may want to head over to the Los Angeles Convention Center. The Save the Dream Tour will be rolling into the city Sept. 24-28 to help struggling homeowners restructure mortgage loans.

The tour is run by the Boston-based Neighborhood Assistance Corporation of America (NACA). The organization has already visited other cities and seen about 180,000 people come out for their events. NACA’s Web site says its events have helped many thousands of people restructure their mortgages. Some of those people have gotten loans with 2% interest rates.

So what exactly happens at one of these events? Counselors will be available to discuss your mortgage loan. They will scan in your mortgage documents and send them via computer to about 2,000 loan servicers and mortgage lenders who will be on-site to negotiate more favorable loan terms for borrowers.

NACA’s goal in hosting these events is to help homeowners avoid foreclosure. There were 358,471 U.S. properties that received foreclosure notices in August, up 18% from a year earlier, according to RealtyTrac. Nevada, Florida and California had the highest foreclosure rates.

Other cities scheduled on the Save the Dream Tour include Phoenix and Las Vegas. You can sign up for an appointment at one of the mortgage events at NACA.com.