3rd Party Contributions
Who is a typical interested party in a purchase transaction? Sellers, Buyer Agents and Listing Agents are 3rd party contributions.  
 
3rd party contributions are allowed on purchase transactions but can only be applied toward closing costs and prepaids. 
 
3rd party contributions cannot be applied toward Down Payment 
 
Contribution limits apply to any and all 3rd party contributors as an aggregate limit. So, if seller and buyer agent are giving a contribution, the total of their contributions cannot be more than the MAX limits. 
 
We discuss the importance of not having too much 3rd party contributions because of running the risk of leaving money on the table. It is not easy for a lender to estimate exactly what total costs will be because of title aggregate adjustments and seller prorations for taxes, interest, and insurance. We like to be conservative in our number 
 
- FHA loans have is 6% contribution limit no matter what down payment amount 
- VA loans have is 4% contribution limit no matter what down payment amount
 
- Conventional loans on primary and 2nd homes with 10% down or less - MAX is 3% contribution 
 
- Conventional loans on primary and 2nd homes with 10%-25% down - MAX is 6% contribution 
 
- Conventional loans on investment properties on any loan - MAX is 2% contribution 

Recasting a loan: Great strategy to delay large principal reduction and reduce mortgage payment
I)        What is a Re-Cast?
a.        The borrower has the option to make a large principal reduction at nearly any point in the life of the loan and request a “Recasting” of the loan.  What that means: Recasting is the result of a one time “paying down” of the principal and then re-amortizing the loan so the payment actually goes down.  Terms of loan stay the same (Int %, fixed term, etc. except PMI could drop) but payment goes down!
i.        Its like going in a Time Machine back to when we did the loan and you putting a larger down-payment down which lowers your monthly payment
II)        Who would ever do a thing like this (who ALL OF SUDDEN HAS LOTS OF MONEY)
a.        People Not wanting to sell current primary until AFTER buying new primary
b.        People receiving an unexpected large bonus from work!!
c.        People maybe receiving an unexpected inheritance 
III)        Every loan can be a tiny bit different but to Recast you need to do the following:
IV)        To recast:
a.       The borrower must have made at least their 2 payments
b.       The principal reduction must be at least for $10,000.  Higher reductions are fine.
d.       Fees to recast range from $100 to 350 in most cases
e.       Recast only available on Conventional loans, not FHA or VA
V)        WHAT’s NEXT - Ok, you’ve sold your old primary home, or got that BIG juicy bonus from work – now what??
a.        The borrower generally sends three things to servicer:  i) a request for recasting in writing.  ii) the check in the amount of the requested principal reduction.  iii) a check for the Recast fee.  Once received, they will process the request and within 30 to 45 days, the recasting will be completed and the loan modification documents sent to borrower.   The modification letter details the new reduced monthly payment.

This week, we discuss a common question they we from borrowers "How do Solar Panels affect the mortgage and closing process?" We discuss what borrowers need to know about Solar Panels whether they are owned or leased, join us as we dive and discuss the pros and cons of solar panels from the lenders perspective. This is a great episode to share!

- Why insurance is required by a lender?
- How do we come up with the replacement cost?
- How can coverage and deductibles impact loan qualification?
- Why an “independent agent” is the better way to go over a “captive agent”?
- When does a borrower pay the insurance company in the purchase/refinance transaction?

- Why is it important for the bank that you have a down payment?   - Skin in the game
- Why do they care where the money comes from if I have BIG down payment?
- Does the amount of the down payment matter more than where it comes from?
- Can a borrower use cold hard cash they have saved?
- Can borrowed money be used? Say you borrow against equity in your home or a personal loan? – Technically yes BUT the loan needs to be secured by collateral, so it can be a car loan, boat loan, or house equity loan. It cannot come from a personal loan or credit card advance (those would need to be seasoned for 60 days).
- Can gift money be used? VA "yes", FHA "yes", Conventional primary "yes"2nd homes require 5% of own funds and investment properties do not allow gifts
- What about 401K loans and/or IRA distributions?

In today's podcast, we discuss the following;

• What is a Condo Exactly?
• What Makes it different from other property types?
• What are the other basic property types (for reference)?
• Important things for buyer’s to be aware of with a Condo vs Single Family Home
• Warrantable vs Non-Warrantable
• What is a Condo Questionnaire?
• What is the difference between the Master Policy vs Homeowners Policy
• Though cheaper than single family residence, the extra expense of a condo HOA takes away a lot of buying power, approximately $38,000 in purchasing power loss

Escrow Accounts for Prepaids:
- We explain impound accounts and prepaids. Why are they helpful to the banks and borrowers? What is annoying about them?
- 3 prepaid items; Taxes, Homeowners Insurance, and Interest
- How many months of Taxes and Insurance do banks want prepaid?
- How many days of Prepaid Interest?
- Most banks charge 25 basis points to waive the escrow account, Waivers can be done with 20% equity
- We have access to bank/s that do not charge for the escrow waiver
- If the property in flood zone (requiring flood insurance) then the property must have escrow account

Tom and Eddie Knoell discuss a popular question they get from borrowers...How many Points do you charge?...What are points?...can I pay points to buy down my rate? This is a great show to share!

How do student loans affect qualifying for a mortgage?
70% of college students graduate with a significant amount of loans. Student loans balances are climbing every year and it can greatly affect these borrowers when they try to get approved for a mortgage. Tom and Eddie address the impact of student loans on mortgage and which loan programs are more 'student loan' friendly.
- Conventional loans will allow $0 payment if borrower has income based repayment plan setup. If borrower loans are in deferment, we will need to count 1%.
- FHA and VA require 1% minimum rule. If borrower is in repayment, we need to use the greater of the monthly payment on the credit report or 1%

Tom and Eddie Knoell discuss how Credit Scores affect Mortgage Home Loans. 
- What is credit score made of of and how do they relate to mortgages?
- What difference do they make on your mortgage options?
- FHA and Conventional loans have different credit score requirements
- Conventional loan PMI (private mortgage insurance) is influenced greatly by credit scores
- Jumbo loans are very strict on scores