Confused!!! Need help!

[Anonymous]

Ok, first time buyer so I don't really much about purchasing a home process just know what the LO has told me...

FHA loan with down payment program-Question? Why would a LO prefer for us to not use down payment assistance program? She insist we have more room if we pay the down payment and she would do a lender credit and we would also ask the seller for closing cost...we're looking at a loan of not more then $185000, we have like $6000 in savings closing costs would roughly be 5500. She says the rate would also be higher if we use the program vs using a lender credit and sellers assistance? Is there something she is not telling us? I'm just curious....any input will help, thank you!

[StartingOver10]

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@Anonymous wrote:
Ok, first time buyer so I don't really much about purchasing a home process just know what the LO has told me...

FHA loan with down payment program-Question? Why would a LO prefer for us to not use down payment assistance program? She insist we have more room if we pay the down payment and she would do a lender credit and we would also ask the seller for closing cost...we're looking at a loan of not more then $185000, we have like $6000 in savings closing costs would roughly be 5500. She says the rate would also be higher if we use the program vs using a lender credit and sellers assistance? Is there something she is not telling us? I'm just curious....any input will help, thank you!

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You have a very honest loan officer!

Those down payment programs are not all they are supposed to be.  Each one is different so you have to do a little investigation to see what is offered in your area.  In my area, this is what happens:

• the program requires total gross household income to be reported - even if only one party in on the loan
• there are income limitations - if your gross household income exceeds the max allowed, even by a dollar, you don't qualify
• the interest rate is higher
• the closing costs are higher (much higher by thousands of dollars)
• the time to process is very, very long - depending upon the program (think in terms of months here - 3 months is common)
• the program may/will run out of funds before they get around to approving you (happens all the time here)
• there are restrictions on where and what you can buy - in my area they go by zip code
• there are limitations on you for refinancing
• you have to pay back the funds with some programs if you sell within X years (I have seen anywhere from 10 years to 30 years on this one)
• in some of these programs the fact that you have taken a down payment assistance type program limits what you can sell your house for in the future because there is a cap on what you are allowed to receive above the purchase price you paid

If you get assistance from the seller - none of the above apply.

The only way to know for sure is to check into your programs in your areas.  I am a Realtor and for the most part don't get involved with these programs any longer because they are so detrimental for the buyer(s) [and sellers] in my market.  Also, the sellers here don't want anything to do with a program that will affect the closing of their home so that they get strung along for months.  It is very sad.  What I see is that these programs have been turned into a money grab by the people that are involved in the program. 

[Jayank1]

StartingOver10 -

Your response is on the mark, not many, if any are interested in dealing wit buyers going with those loan programs, sellers, loan officers all shy away from them. My situation and price range is a carbon copy of the OP. My mortgage score is 776, 699, 691 with a collections of 6.5 years old and some loan officers show little interest in providing any guidance or advice, of course they don't have to.

[StartingOver10]

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@Jayank1 wrote:

StartingOver10 -

Your response is on the mark, not many, if any are interested in dealing wit buyers going with those loan programs, sellers, loan officers all shy away from them. My situation and price range is a carbon copy of the OP. My mortgage score is 776, 699, 691 with a collections of 6.5 years old and some loan officers show little interest in providing any guidance or advice, of course they don't have to.

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EDIT:  Most of those programs have "preferred lenders". Read:  the program only wants to work with certain lenders where they have made prior arrangements as to fee's (not lower fees either).  So if you feel that a DPA is best for your individual situation, contact the program and find out which lenders they work with - and it will be easier on you. Consider your options carefully because some DPAs cost the buyer extra interest or extra fees.  

You have great scores for a mortgage. Your mid-score is 699 and would be a slam dunk for USDA, FHA/VA type loans. For conventional it might be more expensive, but certainly, there are many lenders that will be able to work with you.

If you have been getting non-responsive loan officers - I would guess you are trying to seek info from those that I refer to as "application takers" that don't really have the experience or the knowledge to help you.

As an example:  I have a buyer that was referred to me (I'm a Realtor) by a past client of mine. This particular buyer has excellent income & credit and no derogs. She was using her own LO that she had been working with for months before she met me. I don't try to move buyers to someone I know unless I see a problem and her LO *appeared* to be okay. Long story short - it turns out that her LO works for a lender that is ultra conservative. The ratios that the lender allows (their overlays) are very, very restrictive, much more so than the normal guidelines.  It was so bad that she really couldn't qualify for anything decent.  Now, with one of my lenders she qualifies for a great home - still at a payment she can afford and not max out her ratios.  

The LO at the buyers' previous lender was totally unaware that that $60k she knocked off my buyer's approval made the difference between getting something decent and something that doesn't exist (difference between $240k and $180k).  

To recap:  there are excellent LO's out there. Many are on this board.  Having said that, you are unlikely to see those great LO's at any big box bank and you won't see them at Quicken. Research your options. If you want a couple of lender referrals pm me or ask your Realtor - your friends and family for a good LO.  They exist

[DallasLoanGuy]

i dont work with ANY down payment assist programs.

always a mess.

you will find some loan officers who do

[Anonymous]

Is it in the best interest of the buyer or LO? I'm just trying to understand what's the big deal, is it because they're more strict and fees and rates are higher for the buyer or just too much to deal with for the LO?
As a buyer what would you guys recommend? Thank you guys!

[Anonymous]

By the way I don't have the best scores, my middle score is right at 650

[StartingOver10]

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@Anonymous wrote:
By the way I don't have the best scores, my middle score is right at 650

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Your score is fine. It is a little low for conventional but still doable. 

The DPAs are a mess they way they are designed. It is more costly for the buyer. It does the opposite of the original intent so the buyer ends up with more fees and higher monthly payments. JMO.

[Anonymous]

There is only one down payment assistance program I will use, the rest are a total nightmare. For the one I use, they allow us to underwrite and fund the loan, so it is still a 30-day close without all of the mess that comes with a second layer of underwriting.

[StartingOver10]

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@Anonymous wrote:

There is only one down payment assistance program I will use, the rest are a total nightmare. For the one I use, they allow us to underwrite and fund the loan, so it is still a 30-day close without all of the mess that comes with a second layer of underwriting.

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We don't have any DPA programs that will allow the lender to underwrite and fund without going through the nighmare secondary layer of underwriting^^^^.  Very interesting that at least some location somewhere put their common sense hat on....