Detroit Real Estate

Metro Detroit senior citizens there is now new home purchase help from a major mortgage company.  It is a new loan product designed for senior citizens and I think it has multiple applications.  It is really for senior citizens that have some money.

I am going to give you some rough examples on this new loan product can help you.  This is a general example as they have a specific formula that is based on the seniors age and value of home.  But here is a rough idea of how it works.

The new loan product for seniors is a reverse mortgage purchase loan product.   Let's say a 65 year old Metro Detroit senior citizen wanted to buy a home.  And let's say the purchase price is $100,000.  They will do a reverse mortgage on the house.  If the senior citizen brings a $40,000 down payment to the table the buyer will never have another house payment again.

Basically if the senior citizen (amount needed based on age)  brings 40% to the table they can have a home that will never have another payment the rest of their life.  It is a pretty good deal.  The older the person the less they have to bring to the table. 

The situations I think this might be good for are.

1.)  Retirees that downsizing.  Many Metro Detroit seniors that sell their homes end up with a sizable chunk of cash.  They could buy a smaller house with a reverse mortgage and NEVER HAVE A HOUSE PAYMENT AGAIN.

2.)  Retirees that need more cash for living.  Let's say a retiree is having problems living on the amount they receive each month when they have a house payment.  By buying a house with a reverse mortgage they could have a large amount to live on each month.  It could GIVE MICHIGAN SENIORS MORE CASH FLOW EACH MONTH.

3.)  Michigan seniors that have marginal credit who have money but can't buy the home because of the credit. Even if you have a foreclosure you can buy a home because they don't look at credit history or credit scores.  They will pull your credit buy only to check for federal liens against you.

4.) Michigan seniors that have high debt ratios or limited income.  Yes you can still buy a home.  There is no income verification on the Metro Detroit senior citizens.  You have no payment so they don't care about your income or high debts.  

If you are a Metro Detroit senior that is looking to buy and any of these situations pertain to you give me a call and I will get you in contact with a person that explain this product in detail to you.  

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mortgage lenders are still bending the rules.  I don't know if on purpose or just mistakes but the rules are being stretched.  Yes not as badly as before.  But the underwriting rules are still being broken. 

Yes almost all of the banks and lenders have closed the loopholes of the past.  Gone are sub-prime loans.  Gone are getting the a loan after one year out of bankruptcy.  Gone are stated loans where self-employed people could get a loan without showing any income documentation.  Loans have gotten tougher.  Much, much tougher. 

But some rules are being stretched to get loans done.  I don't know how they are getting done but they are.

No credit scores or credit scores below 620:  My clients recently closed a loan when one of the borrowers had no credit score and very little credit history.  The other borrower had credit history and a decent credit score.  They were turned down by a local lender but Di-Tech was able to get it done. 

High Debt ratios:  I had one loans close where the loan officer told me the back end debt ratio was 51% on a FHA loan.  I was worried that the buyer couldn't afford the house.  I told him not to go that high, but he wanted the house and the loan officer some how got the high debt ratio done.

Owning another house.  You aren't supposed to be able to buy another house and be able to walk away from the first.  Fannie Mae put in a rule that you can't use a lease to off set the first house payment if you don't have 70% equity in the home.  But I have seen two different buyers walk away from homes when they had no equity in the home.  One did get turned down by another lender.  But they got loans anyway.  One was a FHA loan.  It was two different lenders so it is being done.

Over 6% sellers concessions.   Yes you won't believe it.  One of my last buyers that closed this month got over 6% seller paid concessions.  We had 6% concessions in the contract that were paid and then the seller gave some tax pro-rations too.  How that got past a lender and underwriter I don't know.  They even approved the HUD.  So it got past at least two people at the bank.

I can't believe some of this stuff is being done but it is happening.  And if it is happening here in Michigan it is happening across the country.  Feel free to call me with any questions.  

What is PMI?  Here is my PMI explanation.  When your loan officer talks about PMI they mean Private Mortgage Insurance.

Primary Mortgage Insurance (PMI) is required by the lender if don't put 20% down. Lenders require PMI if you don't have 20% equity in the house when you purchase or refinance the home.

Why do banks require PMI?  It is fairly simple there is a higher default rate on loans the less people put down.

• At 20% a certain number of people default on a loan
• but at 15% more people go into foreclosure
• at 10% even more

So banks charge for PMI based on how much you put down.  The historical facts show what percentage go into default.  So the PMI covers the bank's losses in case of default.  You the borrower pay the PMI each month.  You are paying the insurance premium each month when you pay PMI.

It is just the way it is.  If you don't have 20% you are going to be paying PMI.  So the bottom line is you pay PMI to protect the bank from the loss in case you go into foreclosure and the bank has to sell the house for less.

I hope this explanation of PMI helped you.  Have a great night! 

Russ Ravary your Metro Detroit real estate agent 

If you are a Michigan first time home buyer you are probably wondering what type of Michigan mortgage you should get?  One of the easiest ways to determine what mortgage to get boils down to how much money do you have?

Let me break down some of the Michigan mortgage costs that you will incur when you get to the closing table on your Metro Detroit home.

Mortgage closing costs usually range from about $2200 - $2500

Tax pro-ration explanation and escrow explanation.  Tax pro-rations and escrow costs are one full year of the property taxes.  So if the winter and summer taxes are $3500 then you will need $3500 to cover tax pro-rations and escrows.

Down payment is based on what you can afford.  Your choices are usually 3 1/2%, 10%, then any where from 10 to 20%.

For our explanation today let's say the house is $100,000, the taxes are $3000, and your are doing a FHA loan that requires a 3 1/2% down payment.   So let's use:

                      $2200 closing costs

                      $3000  one year property taxes   

                      $3500  FHA  3.5% down payment

                      $8700 total closing costs needed  

The minimum you can come to the closing table with is 3 1/2% of the purchase price.   So in the case above you would need is $3500.  Even that money can be a gift from a family member.  The rest of the money can come from seller concessions.  Seller's concessions explanation.

Don't get discouraged if you don't have enough money yet to buy a home, give me a call, I will sit down and help you plan to buy your Metro Detroit home.

               Russ Ravary

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The cons of buying a Metro Detroit condo

Home buyer checklist

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My quote of the day on New Years resolutions:

We spend January 1 walking through our lives, room by room, drawing up a list of work to be done, cracks to be patched.  Maybe this year, to balance the list, we ought to walk through the rooms of our lives... not looking for flaws, but for potential.  ~Ellen Goodman

When you get a Michigan mortgage you may need escrows...Here is a my explanation of escrows.

Escrow definition:

When you have less than 20% down (less than 20% of the purchase price)  the banks and lenders require you to have escrows.  Escrows are basically a savings account that money is put aside for your taxes and homeowners insurance.  You don't have a choice whether to have escrows or not if you have less than 20% down. 

My thoughts on why banks require escrows are..... you don't have the 20% down payment so you aren't a "grade A" saver.  They think you are a bigger risk.  So the lender or bank want to make sure that you have the money to pay the Michigan property taxes and home owners insurance each year.  So they set up an escrow account.  Each month when you make a house payment you will also be paying 1/12 of your property taxes and 1/12 of your home owners insurance.  So when the home owner insurance bill comes due you have the money to pay it.

The bank takes care of paying them for you.

So now let's give you a real life explanation of escrows and why you need money to set up an escrow account.

Let's say your winter taxes are $1200, summer taxes are $3000, and your homeowners insurance is $600.  Now lets break it down into monthly payments your winter taxes are $100 a month, summer taxes are $250 a month, and your homeowners is $50 a month.  Now lets say you are closing on February 28.  Your first payment is going to be April 1.

So $2500 summer taxes are going to be due July 1.  So you are going be having $250 of your payment go to summer taxes each month.  But you only are going to make April, May, June, and July payments.  That's only 4 payments of $250.  That's a $1000 but you owe $3000.  So where is that money coming from?  You have to set up the escrow account when you go to the closing table.  So you need $2000 for the summer taxes.

Now let's figure out winter taxes due Dec 1.  So you will be having $100 of your house payment go to winter taxes each month.  But again you only are going to make April, May, June, July, August, Sept, Oct, Nov, Dec payments.  You will be short 3 months payments.  3 X $100 so you need $300 for your escrow account.

Again we do the same thing for your home owners insurance policy which will be due next February 28.  So they will collect 1 month of your homeowners insurance.  $50.

So $2000 + $300 + $100 is $2400.  You will need $2400 to set up your escrow account so you will have enough money to pay your property taxes and homeowners insurance when they come due next year.   Every year the banks do a check to make sure there isn't too much money or too little money in your escrow account.  There is a federal formula that that banks and lenders have to use to make sure you have the right amount of money in your escrow account.

If you don't understand this explanation of escrow accounts feel free to call or email me.  My cell is (313) 310-9855 amd email is Yesmyrealtor@gmail.com

Search Metro Detroit homes for sale and get the latest Southeastern Michigan home listings emailed to you so you don't miss out on the great deals!!!

Russ 

For more information click on any of the categories below

 Livonia real estate and Wayne County home buyers tips

Oakland County water front real estate

How much will the property taxes go up after I buy the home

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My quote of the day is:

May all your troubles last as long as your New Year's resolutions.  ~Joey Adams