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Tag: closing costs (Page 1 of 2)

A Game Changer for Borrowers with Limited Down Payment Options – The HOPER FHA Mortgage

HOPER graphic

I have a new mortgage product available that can give up to $13,000 in down payment or closing funds for FHA borrowers.  

Best of all, it isn’t a down payment assistance program, it’s actual earned income that is used for qualification purposes and can be utilized any way the borrower would like.

shopping cart with money on top of a laptop

HOPER allows homebuyers to earn up to $13,000 (3.5% of the home purchase price) toward the home purchase—with no repayment, no liens, and an interest rate that’s 1%-2% lower than standard down payment assistance (DPA) options.

Unlike standard DPAs, which often come with higher interest rates and restrictions, HOPER gives buyers real financial flexibility.

Additionally, homebuyers qualify for $10,000-$12,000 in tax credits on average within the first year, allowing them to replenish their savings to create an emergency fund. This financial boost can help set them up for long-term success as a homeowner.

Click here for the link to view a video of the program:

HOPER video link

Who is HOPER, and why are they paying FHA homebuyers?

HOPER is a socially-innovative research organization, studying the positive impact that two cash inflows —up to $13,000 at closing and $10,000-$12,000 within a year after closing—along with financial mentorship has on loan performance. Their goal is to prove, through real-world data, that:

  • Savings rates go up
  • Default rates go down

To conduct this research, they pay FHA homebuyers for their participation, much like a second job.

How can borrowers use the 3.5% up to $13,000 from HOPER?

This isn’t a loan—it’s earned income, meaning borrowers have full control over how they use it:

  • Down payment & closing costs – Reduce their upfront cash needed to close.
  • Interest rate buy-down – Lower their monthly mortgage payment.
  • Paying off high-interest debt – Improve their overall financial standing.
  • Savings – Strengthen their emergency fund.
How HOPER funds can be used

Why would a borrower choose the HOPER program when buying a home?

Here’s why HOPER is a game-changer for FHA homebuyers:

HOPER benefits
  • Receive up to $25,000 in financial support—$13,000 upfront + $10,000-$12,000 in tax credits.
  • Lower monthly costs—Reduce or eliminate their electric bill, protect yourself from rising utility costs.
  • Better loan terms—No liens, no repayment requirements, lower interest rates than DPAs.
  • Flexibility—Use their funds strategically to reduce debt, cover costs, or save.

A Real Example

HOPER example

What is required to participate in this project?

1. Buyers are to complete an online financial education course before buying their home (4-6 hours). This equips them with smart money habits and unlocks the 3.5% of the purchase price up to $13K, which is deposited into their savings club account to be used at closing.

2. Sign up for an online financial mentorship course (to be completed within one year of purchasing your home). This prepares them to make wise financial decisions with the $10,000-$12,000 tax credit they will receive, ensuring they build savings instead of spending it.

3. Undergo an energy assessment on the home they are buying. If solar can offset most of their expected electricity use, your home qualifies for the program.

HOPER requirements

Why is solar a required component of the program?

HOPER’s research focuses on reducing loan default risk. The #1 reason homeowners’ default is a lack of savings, especially in the first five years of purchasing the home.

Many new homeowners report having less than $1,000 in liquid savings, meaning any unexpected expense—a job loss, medical emergency, or car repair—can quickly put them at risk of missing mortgage payments.

man wearing safety glasses and gloves holding solar panels on the roof

Here’s how solar helps:

Immediate savings boost: Home buyers receive a 30% tax credit for their solar system, averaging $10,000-$12,000, which can be used to build an emergency fund. This equates to roughly 5-6 months of mortgage payments, providing a financial safety net in the crucial early years of home ownership.

Long-term affordability: Their electric bill is typically the second-largest home expense after the mortgage. By generating most of their electricity from solar, you lock in energy savings and protect yourself from rising utility rates over time. This makes home ownership more sustainable, reducing the risk of financial strain in the future.

How is the solar paid for?

FHA has made it seamless to include the cost of installing solar directly into your mortgage. This means:

  • The solar system is fully paid for on day one—no separate loan, no extra payments.
  • The cost is simply rolled into your mortgage, so you own the system outright.
  • You still benefit from solar incentives, including tax

What will happen to the monthly mortgage payment?

Mortgage bill and calculator

The borrower’s total housing expenses (mortgage + utilities) will remain roughly the same whether they participate in the HOPER program or not.

For example: if adding solar increases the mortgage by $200/month, their electricity bill will typically decrease by roughly the same amount, keeping the overall monthly costs stable.

Who installs the solar?

To ensure compliance with FHA guidelines and timelines, AHA (Attainable Housing Advocates) will get the buyer an energy assessment with a state-approved solar installer.

Once their home’s energy assessment is completed, AHA will provide a solar quote and breakdown of HOPER benefits, allowing them to make an informed decision.

In Conclusion

Do reach out to me for more on this incredible opportunity.  As a reminder, this is not a down payment assistance program, it’s earned income that can be utilized for a down payment or closing costs. 

Finally, the installed solar system is OWNED BY THE HOMEOWNER – there is no lien on the property whatsoever, so selling the home down the road becomes much easier.

The Lending Coach

How Much Can Sellers Contribute Towards Closing Costs?

Pen, calculator, glasses

One of the interesting things about purchasing a home is that the seller can actually help pay for the buyer’s closing costs.

person with keys for real estate

When purchasing a home, prospective buyers will see various expenses beyond the purchase price, including closing costs.

One way to manage these costs is through interested party contributions (IPCs), which are payments made by parties involved in the transaction, such as the seller, builder, lender, or real estate agent.

Interested party contributions can significantly ease the financial burden on buyers by covering a portion of the closing costs, which typically range from 2% to 5% of the loan amount. These costs include fees for appraisals, inspections, title insurance, and loan origination, among others.

paper house labeled closing costs with keys

By negotiating IPCs, buyers can reduce the immediate cash required to finalize the home purchase, making homeownership more accessible. This arrangement is particularly beneficial for first-time homebuyers or those with limited liquid assets.

However, there are limitations and regulations governing IPCs to prevent inflation of property values and ensure fair lending practices. Different loan programs, such as conventional, FHA, and VA loans, have specific caps on the amount of IPCs allowed. Here are the specifics:

Conventional

For conventional loans, the amount of IPCs allowed actually depend on the down payment amount and if the transaction is an investment property purchase.

chart of occupancy type with LTV/CLTV ratio with max IPC

FHA

FHA seller contributions

VA

VA loan seller contribution max
Wood roof and coins

While IPCs can alleviate some financial pressure, it is essential for buyers to consider the potential trade-offs. Accepting seller contributions might lead to a higher purchase price or less room for negotiating other favorable terms.

Buyers should carefully evaluate the overall cost-benefit scenario, ensuring that the contributions genuinely result in a net financial gain.

In Conclusion

By understanding the regulations and potential impacts on loan terms, buyers can strategically use IPCs to their advantage. 

Reach out to me for more information, as I’d be happy to strategize with you to see how to best utilize IPC’s for your next transaction!

The Lending Coach

The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deductions.

Using Gift Funds for Down Payments and Closing Costs – A Primer

Basket of Flowers and Gifts

When it comes to buying a home, one of the biggest obstacles for many buyers is the down payment. But did you know, borrowers can use gift funds for that down payment?

Believe it or not, many homebuyers turn to family and friends for financial help.

Hand Holding a Red Heart

25% of homebuyers ages 23 to 31 and 17% of those ages 32 to 41 received gifts from relatives or friends to help with their down payment, according to the National Association of Realtors.

Secondly, down payment requirements are much different today than they have been in the past, as FHA loans and some conventional loans often have low down payment requirements, as little as 3% in some cases.

And, yes, borrowers can absolutely use gifts from family members toward those down payments!

Who Can Gift Down Payment Funds?

Lending regulations won’t allow borrowers to use a cash gift from just anyone to qualify for a mortgage. The funds usually must come from a family member, such as a parent, grandparent, or sibling.

It’s also generally acceptable to receive gifts from your spouse, domestic partner, or significant other if you’re engaged to be married.

Restrictions on Down Payment Gifts

Both conventional loans and FHA loans allow gifts as down payments.  There is no minimum borrower “contribution” for a one-unit, primary residence, even when bringing in less than 20% down for conventional loans. 

House Made of Puzzles Pieces with Money Printed on It

That gift can cover the entire down payment and the closing costs.

For 2-4 unit primary residential properties, the borrower must make a 5% minimum borrower contribution from their own funds, per lending regulations for conventional loans.  FHA loans do not have this requirement.

After the minimum borrower contribution has been met, gifts can be used to supplement the down payment, closing costs, and reserves.

It’s important to know that gift funds may NOT be used for investment property purchases.

Mortgage Gift Rules by Loan Type

FHA loans: The Federal Housing Administration (FHA) backs mortgages with a minimum down payment of 3.5 percent. The entire amount can be gifted, but the FHA requires a letter and supporting documents from the gifting party.  Bank/asset statements showing the giver has had the funds for 60 days will be required.

Fannie Mae and Freddie Mac Logo

Conventional loans (Fannie Mae/Freddie Mac): When purchasing a single-family residence, the entire down payment can come from a gift. These funds can come from a relative, employer, close longtime friend, or a nonprofit. Freddie Mac also allows borrowers to use wedding gifts, so long as you provide a copy of your marriage license.

VA loans: The U.S. Department of Veterans Affairs (VA) guarantees home loans for eligible military borrowers. VA loans require no down payment, but VA guidelines allow borrowers to put gift funds toward closing costs or a down payment, if they so choose. The documentation rules are similar to those of FHA loans.

USDA loans: The U.S. Department of Agriculture (USDA) guarantees no down payment-mortgages to borrowers with low to moderate income in rural corners of the country. Like the VA loan program, gift money can be used to pay closing costs. Borrowers must provide a gift letter and supporting documents consistent with the gift letter rules of other loan programs.

Documenting a Down Payment Gift

magnifying glass on top of document

Lenders require the borrowers to provide some detailed documentation any time a down payment gift is used. Specifically, the borrowers will need to produce a letter which includes the name of the donor, their relationship, the date and amount of the gift, and a statement that says the money has no expectation of repayment.

Both parties will need to sign the letter and the lender may also require additional documents. For FHA loans, borrowers will need to show copies of the donor’s bank statements to prove that they’re actually in a position to make a gift.

In Conclusion

If your family decides to help you out with a down payment gift, you as the recipient should be extremely grateful.

However, like any large financial move, there are some rules and regulations to consider. So please do reach out to me for more, as it would be my pleasure to help you structure your loan and down payment options.

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Can I Purchase a House with No Closing Costs?

Let’s get this straight and right up front: every real estate transaction will have closing costs – title fees, origination fees for a loan (if you need to finance the property), and recording fees, just to name a few.

So, how can a buyer purchase a house without actually paying those closing costs? Well, read on for more!

What this really means is that the closing charges are folded into the loan balance — if the house can appraise for the selling price plus the closing costs.

And there are pros and cons to doing this, as will be highlight later.

It’s also likely that not every single closing cost can be rolled into your loan. The buyer will most likely still be required to pay some fees at the settlement table. Those specifics will vary by lender.

I’m linking to a fantastic article by Hal Bundrick at Nerdwallet – he’s a personal finance writer as well as a certified financial planner.  You can find the entire article here…but I’ve highlighted a few excerpts:

What Are Closing Costs?

 “Closing costs” is a collective term for the various fees and charges you’ll encounter when buying a home. Some of these fees come from the lender and others come from third parties that are involved in the transaction, like home appraisers, homeowner associations (HOAs), and title companies.

How much are closing costs usually?

On average, homebuyers pay closing costs ranging from 2% to 5% of the purchase price. Unfortunately, this is only a ballpark figure, as there are many variables in each individual transaction. You can find out more specifics on closing costs here…

Many lenders will require that you apply for a loan prior to receiving a more precise estimate of closing costs; however, some lenders are more transparent with their available options and will do the necessary legwork to provide you a better idea of those costs.

Can you buy a house with no closing costs?

The reality is that closing costs have to be paid one way or the other – and by some or all parties in the transaction. Your decision will be whether you pay them with cash when you sign your loan, or as an added expense in each monthly mortgage payment.

How a no closing cost purchase works – it’s all in the financing

Per Bundrick in his article: “lenders can structure no closing cost loans in two ways. The differences between them are subtle, yet the result is the same.”

  1. You finance the closing costs. In this case, the lender will add your closing costs to your total loan balance. Your monthly payments will be slightly higher, and you’ll be paying these closing costs, with interest, for the full term of your loan — so, for example, over a period of 15 or 30 years.
  • The lender will absorb the closing costs in exchange for a higher interest rate. Again, you’ll pay a bit more each month, and your total interest cost will be greater over the life of the loan.

Either way, your monthly payment rises slightly. You’ll pay less at the closing table, but more over the long term.

Is a no closing cost mortgage a good idea?

The answer is….it depends!

If you are a little low on cash and have found your dream home, then yes – rolling $4,000 to $8,000 into your mortgage is a good idea.  It won’t increase your monthly payment by much and generally doesn’t impact qualification.

Also, if you plan on moving, selling, or refinancing in the short term, wrapping your closing costs into the balance can be a good strategy.

However, if you’re going to live in your new home for the long-term, you will pay more over the life of the loan by financing your closing costs or accepting a higher interest rate.

So if this is your forever home and you plan on keeping the mortgage for 7+ years, it’s probably best to pay the closing costs up front.

6 Ways Mortgage Shoppers Are Saving On Closing Costs

It is not uncommon for buyers to find the perfect home right at the top of the their budget. While it is our job as realtors and lenders to always find the most competitive rates, these clients need our expertise more than most.

If getting into a home is contingent on affordable closing costs, there are things that can be done to make this process less stressful.

Source: 6 Ways Mortgage Shoppers Are Saving On Closing Costs | Mortgage Rates, Mortgage News and Strategy : The Mortgage Reports

Lower Your Closing Cost Bill

Depending on the loan amount and the location of the home, loan applicants can pay anywhere from 3% up to about 6% of their home price, in closing costs. While some costs associated with the location of the property cannot be controlled, other steps can be taken to cut costs incurred by the buyer.

Closing costs can accumulate rather quickly as lenders pay for credit reports, attorney services, title services and more.

Those costs are covered by either the borrower, the seller, the lender, or a combination of the three.

It is important to understand what motivates a lender or a seller to cover these costs, as you strategize with your buyers.

Be Aware of the Other Costs that come with a Mortgage Loan

In addition to standard closing costs, buyers should be made aware of other fees associated with a mortgage loan.

Getting buyers ready to hear terms like prepaid interest, homeowner’s insurance, property taxes, escrow deposit for taxes and insurance, and loan discount points, will help the process not seem so daunting, especially to a first time buyer

What Are a Buyer’s Options?

While most people evaluate loans by rate shopping, that is not always the most effective way to choose a loan.

Buyers should know how to compare lender’s charges, and should understand how to avoid paying too many points on a loan.

When possible, advise buyers to close near the end of the month to help save on prepaid interest.

For some buyers, choosing to buy up the interest rate, and not buy it down with loan discount points, can motivate a lender to pay a part or all the closing costs.  

Finally, it is always an option to ask a motivated seller to help with closing costs.

Understanding the costs associated with a loan is important for all the parties involved, as a good deal for a buyer benefits all of us.

Please schedule a time to talk if you are interested in more ways to qualify your buyers. I look forward to getting your clients into the home of their dreams.

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