Considering Helping Your Child
Buy a Home?
What Parents and/or Co-Signors Need to Know
Within the current housing market, there is great opportunity to be found, especially if you're a first-time home buyer. Home prices are down ... lower than they have been for almost an entire decade. And Interest Rates?? The cost of borrowing, in regards to Interest Rates, is at historic lows ... truly a gift, should you be able to take advantage of them.
With all the positive opportunities that exist, many buyers, along with their families, are looking for ways to take advantage of these current positives by buying properties with the assistance of Co-Buyers/Co-Signors. Most considering this path to home ownership are parents and/or relatives.
As a mortgage lender, it is not uncommon for me to receive questions regarding this method of home buying. "Co-Signing" is happening more and more often. In mortgage terms, this method of buying/borrowing is called being a "Co-Mortgagor" ... a fancy term for "another borrower".
This practice is typically utilized when the "non-occupying" Co-Borrower (let's just say a parent) is the stronger applicant on a mortgage ... and his/her income, credit, and assets make for an approvable loan when the "main borrower/buyer" is not able to qualify for a mortgage on their own. Put another way, the child in this scenario is buying their first home, often has adequate credit ... but lacks the job history or income to qualify on their own.
Considering the (child's) parent's income and credit and debt, makes the loan approvable because the parents' "vitals" help the numbers ... meaning the debt-to-income ratios ... needed to reach the approval level. With FHA, the down payment requirement is only 3.5%, and the Borrower (who MUST occupy the purchase residence) gets as good of Interest Rate as if they had borrowered on the mortgage alone.
Obviously this is great for the son/daughter, but what about the "Co-Signor, Co-Mortgagor, Parent" involved? The fact is, they will share the same debt and note responsibility as the main applicant. That debt/responsibility will appear on their credit report as their mortgage obligation. If the child misses a payment, the parents (Co-Signors/Co-Mortgagors) credit report will show as having a late payment. A very valid reason for all parties involved to give this great consideration prior to agreeing to start the mortgage process.
Consider this tho ... Co-Signors/Co-Mortgagors (in my most recent Co-Signor/Co-Mortgagor case) were considering buying a home on their child's behalf, because they didn't think the child could qualify on their own. These parents were fully-prepared to put forward a 20-25% down payment, purchase the home in their own names, and then move the child in as a tenant. The ability to become Co-Signors/Co-Mortgagors changed the financial scenario they received significantly for them and their child.
How did it change? What are the differences to be found within the two methods of home buying?
The biggest difference is in how the bank perceived their upcoming ownership. Parents that just buy a property outright and rent it to their child are considered investors by the bank lending money. Investors pay higher interest rates to borrow money (typically a minimum of 3/4%) ... and/or their Closing Costs rise several thousand dollars. Why? Because the bank considers this type of loan a higher RISK because of the "occupancy" status of the property.
Now you know a bit about the ins-and-outs of Co-Signing/Co-Mortgaging. But if you're a parent, or someone considering Co-Signing/Co-Mortgaging, you're going to need to know ... where and how do you start the process? What financial documentation will be expected from you? What funds will be subject to verification?
Much of the process of mortgage financing will be the same for Co-Signors/Co-Mortgagors as for the actual resident(s) of the property. A handy list of those financial documents needed for mortgage application can be found via my website, by clicking ... "HERE".
What is probably the most common concern or question I hear from Co-Signors/Co-Mortgagors (parents), is ... "How has the mortgage process changed since I last participated in it"?
There is no denying the truth. For a great many parents the mortgage process will be unrecognizable from their own prior financing experiences. And admittedly, the requests for documentation and verification will seem a bit overwhelming.
But documentation and verification is what is required to move the modern mortgage process along to successful completion. Underwriters and end-lenders will not be deterred from it. Co-Signors/Co-Mortgagors must be prepared to have monies/accounts/downpayments verified, along with their employment, credit/debt, and more, just as their child will.
Now, more than ever, the mortgage process itself is specific to those borrowers taking part in it ... so individual and personalized instructions regarding your financial scenario will be provided by your mortgage lender. Listen. Learn. Comply.
If you do so, those requests are completed in a timely fashion, and the lender's instructions are followed, Co-Signors/Co-Mortgagors can help their child successfully establish credit, obtain historically low interest rates, and buy a home at very friendly housing prices.
Should this be a financial step you are considering within your own family ... contact me, or your own mortgage professional, to obtain information specific to your needs.
Becoming a Co-Signor/Co-Mortgagor for your child could be the gift that sets them down the path to a healthy financial future.
* For personalized mortgage information and service regarding your family's Co-Signor/Co-Mortgagor options in Chicago, Chicagoland, or across the nation, please contact me. I will put my 35 years of mortgage experience and expertise to work on your family's behalf.
I can be contacted through any of the following:
Direct: 815.277.4036 Cell/Text: 708.921.6331
Email: gmundt@thefederalsavingsbank.com
Skype: 630.219.1316
Click here 4 a: NO Cost NO Obligation Mortgage Consultation
"Connecting the Mortgage Dots in Today's
Real Estate Market"
Carra Riley, Cosmic Cow Pie, and
Gene Mundt, Mortgage Lender Answer
YOUR Mortgage/Credit Questions
Looking for answers to your mortgage/credit questions?
Tune-in to Carra Riley's Cosmic Cow Pie blogtalkradio program tomorrow, February 23rd at 10 AM CST to receive the answers you need and seek.
Carra will be talking to me, Gene Mundt ... a mortgage lender at The Federal Savings Bank (formerly known as Chicago Bancorp) regarding some of today's most important and timely mortgage, credit, and home buying questions in a Cosmic Cow Pie segment entitled, "Connecting The Mortgage Dots in Today's Real Estate Market".
Together, Carra and I will be discussing and answering mortgage questions, such as:
As someone with 35 years of mortgage experience, an in-depth, multi-decades background as a licensed real estate appraiser, and as a Certified Financial Planner, I have the extensive knowledge and expertise needed to answer the questions you have ... and also provide the services you need in Chicagoland and across the entire U.S.
It's easy to take part in this Cosmic Cow Pie session. Just dial (347) 994.1903 and ask us your questions! If you can't join us during the live blogtalkradio program, you can listen to a replay of this program at any time. Just go to Carra Riley's Cosmic Cow Pie blogtalkradio site and "click" to listen at your convenience.
I can always answer your mortgage and credit questions at a more convenient time for you through any of the following means:
Direct: 815.277.4036 Cell/Text: 708.921.6331
Email: gmundt@thefederalsavingsbank.com
Website: www.genemundt.com
Skype: 630.219.1316
Have your questions ready! Carra Riley and I look forward to assisting you with all your mortgage/credit questions and needs when you join us tomorrow, February 23rd, at 10 AM CST on Cosmic Cow Pie's blogtalkradio program, "Connecting the Mortgage Dots in Today's Real Estate Market".
See you then!
For more Cosmic Cow Pie and Carra Riley's insights ...
What's Your Point??
Nawwwww ... Not THAT Point!
A great scene, isn't it? But it's not those "points" I'm going to talk about in this blog. No, I'm talking the "points" referred to when discussing mortgage costs and options.
I've had several discussions as of late, with some pretty confused borrowers regarding these "points". They've had no real grasp of exactly what a "point" is prior to our discussion. What it can equate to in cost to them. How the cost of a "point" is figured. This is especially true with first-time home buyers.
Here's what I tell my clients when starting this discussion ...
The best way to think of a "point" cost, is to remember a percentage point equaling the number 1 ...
One percent (1%) = 1 point
One percent (1%) = .01
Then the cost of the "point" should be thought of this way:
Cost of Point = .01 X Your Loan Amount
Okay, let's put some actual dollar amounts into the equation. It will make better sense to you.
Let's say you are borrowing $200,000 for your mortgage. One (1) "point" then costs you an additional $2,000 at Closing.
Here's the math equation for that:
.01 X $200,000 = $2,000
The question I typically hear as a mortgage lender during these conversations is this ... If these "points" COST me as a borrower ... why would, or should, I even think of buying them? What does buying a "point" accomplish for me
Think of "points" (and the dollars associated with them) as interest earned or paid to the bank. The "reward" for you as the Borrower when buying that "point" is the lower interest rate received for the life of their loan at that bank.
Alot to digest, isn't it? It must be remembered too, that as the markets fluctuate, so does the benefit of paying a "point" ... and the resulting reduction in interest rate earned for doing so.
As a rule ...
1 point paid = 1/8% lower interest rate
Again, let's revisit the math we did above for that:
$200,000 Mortgage
Paying 1 "point"
Cost of "point" equals $2,000
Let's say, on the day this "point" and mortgage costs are being quoted to you, the interest rate is lowered by 1/4%. We'll say from 4% interest rate to 3.75% interest rate. The savings realized by the borrower each month (for buying a "point") is then $28.60.
Now, there is one more very important thing to figure into considering a "point" purchase ... and whether it makes sense for you to buy the "point" for your mortgage. And that's, how long you expect to be in the property you are buying or refinancing.
Why does that matter? Again, the numbers tell the story ...
We now know that the amount you save in interest monthly for buying your "point" was figured at $28.60 above ... and that you will pay $2,000 at your closing to receive that monthly savings. So to figure what your "break even" time is ... meaning the point where the savings in interest would equal the dollar amount paid on the "point" ... you do the following:
Amount paid for "point" ... $2,000
divided by:
Amount saved in interest each month ... $28.60
Equals:
70 payments
Knowing how long it takes to payback the savings realized by paying a "point" is absolutely essential when making your decision to buy that "point" ... or not. Then you simply need to consider if you plan on being in the property you are buying long enough to reach that "break even" time.
Helping you understand HOW the savings on "points" are figured ... and HOW buying "points" can affect your bottomline ... is an important part of my job, as your mortgage lender.
But the answer and decision is one that only you, the borrower can ultimately make. I hope that this blog helped you do that ...
* Having an experienced, knowledgeable mortgage lender at your side during the many decisions your are called upon to make during your home buying is crucial. Contact me today. I'll put my 35 years of mortgage experience, knowledge, and expertise to work on your behalf. I'll be very glad to hear from you.
I can be contacted through any of the following means:
Direct: 815.277.4036 Cell/Text: 708.921.6331
Email: gene@chicagobancorp.com
Website: www.genemundt.com
Skype: 630.219.1316
Click here 4 a: NO Cost NO Obligation Mortgage Consultation
Contact me! I'll be more than happy to talk to you NOW ... and get started on assisting you with the refinance or credit repair you want and need. No waiting 60 to 90 days ... and an experienced, knowledgeable, professional mortgage lender and his staff are at your service.
"Rumours" ... catapulted Fleetwood Mac to the top of the charts during the year 1977 ...
And Rumors ... are once again swirling about the amount of down payment a borrower needs to buy a home and obtain mortgage financing in the current market.
Obtaining mortgage loans has become a much more detailed and nuanced process. There is truth to that. And seeing to ... and dealing with these many details ... can likely take mortgage and real estate professionals' focus off the most fundamental of concerns that potential home buyers have. The basics, like that of down payments.
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Mortgage Banker with 35 yrs experience in Lending, Appraising, management. Lends in multiple states. Also an IL Financial planner. 1st-time buyer, Asset-Based Programs, Refinance, and more.
With 35 years in the mortgage/banking industry, I can draw upon a vast background and wealth of experience for the benefit of my customers and business relations. I thoroughly understand the lending and banking processes because I have learned and used each step during my professional lifetime. This extensive background enables me to offer a more complete and indepth mortgage service to my customers and referral contacts.
I many times can facilitate remedies or prevent problems entirely in the processing and closing of loans because of my deeper well of knowledge and experience. I also offer mortgage planning to my customers as a financial tool. This can be a huge benefit in their lives as it assists them in the usage of their most major expenditure and largest asset, their home and mortgage. I am dedicated to the financial success and welfare of all my clients and referral partners.
My lending services extend to many states throughout the U.S. I offer a broad menu of mortgage options for all my clients' needs, including investment properties, retirement and vacation properties, and asset-based programs. Most of the processing of my loans is performed in-house, so I have much greater control of the entire closing process. This allows for greater speed and flexibility in closings for my clients.
Perhaps it's because I am a father of two sons, 27 and 31, that I find working with first-time homebuyers such a joy. These transactions take special care that I am most happy to give. On the other end of the spectrum of those special needs are Reverse Mortgages. Although not an answer for everyone, these mortgages can bring much needed financial relief to my customers. With thoughtful, careful implementation, this form of lending can be a godsend to stressed seniors and their families. The relief reflected in the faces of these people upon the completion of these transactions is well worth the extra time and care I give during the process.
Other programs and services I offer include:
I look forward to earning your trust and future business through thoughtful, knowledgeable and professional lending services.
I realized that Mr. Mundt was an extraordinary, genuine, and professional mortgage lender when I worked with him at the Shorewood, IL office. Mr. Mundt treated me with the utmost respect. I never felt like I was at a job or I was at work; work flew by with ease. Mr. Mundt makes you feel comfortable in every situation. I read a letter he sent to a client. Mr. Mundt couldn't help his client because of her credit situation, but he drafted a courteous letter explaining the circumstances, and even gave her free advice on what she needed to do to get back on track. He could have told her, "you have bad credit, and I can't help you," or he could have not written her at all. Mr. Mundt wrote this letter with supreme understanding, care, and concern, as if he was addressing his own daughter. This compassion for his client impressed me. He isn't out there to become the richest man in town; he is looking out for the well-being of his clients. You don't find these traits in the business industry today, and you find all of this and them some in Mr. Mundt. I am so grateful that I met Mr. Mundt. Prospective customer, count on Mr. Gene Mundt to keep you safe in your home and secure in your future. Amy L. Langoni, CCA
Louise O'Connor
Broker Realtor at Re/Max Team 2000 - Location: Greater Chicago Area IndustryEach time I use Gene's services for my clients we are kept up to date on the progress from the initial consultation to the home closing that he has always attended, just in case there may be any kind of problem at the end. The level of service you receive would lead you to believe you are his only client. Top qualities: Expert, On Time, High Integrity
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