First Time Homebuyers

Tips for First-Time Home Buyers

If you search the internet for 'home buying' you'll find an abundance of tips and tricks but they're all pretty much the same.

The end result is you purchasing your dream home so we're here to help you through the process from start to finish.

There are 4 categories:

Down Payment Tips

(A) Conventional that conform to standards require as little as 3% down. 20% down no PMI required

(B) FHA (Federal Housing Administration) permit as little as 3.5% FICO Score of 580 or higher

(C) VA requires no down payment, no minimum credit score. May pay a VA funding fee.

Local Assistance Programs

Application Tips

Shopping Time

It's All About the Budget Not The Bass

Mistakes to Avoid

We're here to help you along the way. When you're ready to purchase let us know!

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Gifting Down Payments

Receiving & using a cash gift is one of the most common processes when purchasing a new home. Most forms of cash gifts are used for the 20% down payment.

We've provided a brief breakdown of the process and how to ensure you're not denied from your lender due to in proper gifting.

Down Payments

Down payment "gifts" can make it easier to purchase a home.

Loan programs including FHA, VA, USDA, Conventional, and Jumbo loans, allow the use of cash gifts.



First-time home buyers are most likely to receive a cash gift among all buyer types to make a 20% down payment.

You can often qualify for the lowest mortgage rates offered and with a 20% down payment, there is no requirement for PMI (Private Mortgage Insurance)

Mortgage limits are capped at $484,350 except within those high cost areas where homes exceed the national average

High Cost Areas are capped at $726,525 for single-family homes, and multi-unit homes.

Low-down-payment loans also allow cash gifts for down payment. (ie. as little as 3% down)


Down Payment Letter

There are 3 steps that should be taken in order to avoid denial from your lender:

  1. Correctly Written Gift Letter
  2. Documenting the Gift from the Giftor
  3. Documenting the Receipt of the Down Payment Gift

**There may be tax implications for givers of a cash gift for down payment and for the receivers. Everyone's tax situation is different. Please consult a tax advisory for more information.**


If you have questions about a "Down Payment Gift." Contact Us Today! We will be happy to walk you through the process.



More Pros with the Rate Hikes

Our last few articles have been on the impact that the oncoming rise in interest rates from the Federal Reserve will have on the general public, and more specifically how it will impact those who are in the market for purchasing and refinancing. Janet Yellen has openly stated that a change from the Fed is coming soon due to the growth in our economy. We’ve mentioned both the pros and the cons of an interest rate hike, but lately we’ve been noticing more pros for our borrowers than cons.

One positive impact that this rise in interest rates can have on our current and potential borrowers is the opportunity to free themselves from Mortgage Insurance Premiums. Your Mortgage Insurance Premium is the price that you pay monthly as a part of your mortgage payment that goes into an account to protect your lender if you fall on hard times and happen to default on your loan. A Mortgage Insurance Premium or MIP for short, is usually only required for borrowers who can’t afford to put down 20% of their loan amount when applying for their mortgage loan. Up until January 2013, borrowers were able to cancel their MIP coverage once they had made enough payments and had 20% equity in their home. Now that policies have changed, borrowers no longer have the option of cancelling the MIP on their loan when they reach 20% equity.

However, being the mortgage monsters that we are here at Valley West Mortgage, we’ve recognized a way that borrowers can still break away from the bondage of MIP. With a refinance into a Conventional loan where the requirements are somewhat different than an FHA loan, borrowers can drop their MIP payment (provided they meet the aforementioned requirements).

Borrowers who used the FHA program to purchase their home who have been making regular mortgage payments have been building up equity since the day they made the first payment. Couple that with the fact that the average prices of homes around the United States has gone up in the last 2-3 years and just like that, we’ve found another reason for you to refinance into a Conventional loan. Having equity or monetary value in your home means that you can apply for a Cash-Out refinance. Thinking of going on a vacation? Have a kid going to college? Or maybe you just want to do some home improvement? A Cash Out Refinance would give you the opportunity to refinance your old loan into a new one and get cash back for some of the value that your home holds.

In 2016 about 8% of all the refinances processed were for borrowers who were switching from an FHA loan program to a Conventional loan program. That calculates to about 20,000 of those refinances per month in 2016. With the growth of our economy, it is estimated that the prices of homes will go up by about 5% (according to data found by CoreLogic). Considering the fact that over 2 million borrowers purchased homes using the FHA program in recent years, there is no doubt going to be a large wave of refinances coming from borrowers who wish to refinance in 2017.






When doing your research, always use great sources! Check out the sources for this article below.



FHA Lowers Cost of Mortgage Insurance Premiums, Possibly.

President Barack Obama announced on Wednesday that the Federal Housing Administration (FHA) annual insurance premiums will lower to 0.85 from 1.35, according to an article published by CNBC. This move is said to expand responsible credit borrowing to qualified lenders, according to the article, and is an effort to bring more first-time home buyers into the current market.

Mortgage issuers stocks also fell on Wednesday, according to the report, while home builder’s stocks across the nation rose. Julian Castro, Secretary of the U.S. Department of Housing and Home Development, believes that this move will increase the affordability of American homes over the next few years. He said that taking the premiums down for American citizens will improve opportunities and strengthen financial outcomes. He sees this as a step to reduce risks in the mortgage department and help protect consumers.

According to the article, the reduction in premiums could mean a savings of around $80 a month for a first time applicant to the FHA. In addition, Freddie Mac and Fannie Mae (two federally sponsored second-party mortgagers) announced recently a new 3 percent down payment option requiring private mortgage insurance. This, of course, is for qualified lenders, meaning those in very good credit standing. However, it does compete directly with the FHA, which offers down payment options at a 3.5 percent minimum.

The FHA has been working on building its capital reserves back up, according to the article, and because it is not in the clear yet, some people believe that the decision to make cuts could receive some criticism. To be out of the black, its capital reserves must meet a 2 percent minimum.

“Lowering the premium will bring volume back to the FHA,” said Diana Olick, real estate reporter for CNBC. “But it will also bring back risk.”

Among all the risks, the article reports that the White House administration is clearly looking for ways to increase homeownership by making the process and implementation of a mortgage less reckless for buyers. President Obama is expected to address all this and more on Thursday in Phoenix, where he will give a speech on the improvements in the housing market as well as future plans.

Read the full CNBC Article

What is Personal Mortgage Insurance (PMI)?

While the housing market continues to stabilize across the United States, there’s no guarantee that everyone in need of home financing will have a large down payment. However, you shouldn’t let that stop you from obtaining the mortgage you need for the home you love.

If you can still offer a down payment on your dream home, yet less than 20 percent of the appraisal value of the home, you will be required to obtain personal mortgage insurance (PMI). Personal – or private – mortgage insurance is a policy that protects the lender in the event of a client’s default.

PMI differs from government mortgage insurance in that not everyone will be required to obtain a PMI; however, it can’t hurt to sign up for it regardless. Private companies facilitate PMI’s and act as the beneficiary, while you (the borrower) pays the premium. The rates for a PMI vary depending on how much you borrow and how much you are able to offer as a down payment. Typically, rates for a PMI don’t reach above 2 percent. For example, say you buy a $200,000 house and are able to make a 15 percent down payment. You have to borrow $170,000, with a PMI rate of 0.56 percent. If you multiply your loan amount by the premium (0.0056), that makes your annual premium $952, or a monthly payment of $79.33.

If you are a borrower that needs to obtain or is interested in a PMI, please contact us for further questions and details.

Mortgage Insurance Policy Changes

The Federal Housing Administration (FHA) is changing up-front and monthly Mortgage Insurance (MI) on FHA case numbers dated October 4, 2010 or later. Currently the up-front fee is charged at 2.25% and the monthly fee is based on term and LTV. The up-front fee is being reduced to 1%. The monthly fee is being increased. The matrix below gives the full breakdown:

Upfront Mortgage Insurance Premium (MI)

FHA - Mortgage Insurance Premium Update...

Implementation of the new plan is delayed until October 1st.

After announcing last week that it was lowering upfront insurance premiums
from 2.25% to 1.0% on Sept. 7, the Federal Housing Administration said it’s pushing back implementation until October.
“Based on industry feedback and our desire to have this change implemented successfully in the marketplace, FHA will make the premium fee changes on all new case numbers effective October 4, 2010,” said Vicki Bott, Deputy Assistant Secretary for the Housing and Urban Development.

For details on the upcoming changes, see our earlier post, "Congress has passed H.R. 5981 – FHA Mortgage Insurance Changes…" Posted on August 5th, 2010

Congress has passed H.R. 5981 - FHA Mortgage Insurance Changes...

This bill gives FHA the authority to adjust its annual mortgage insurance premiums.

While there is both good news and bad news for FHA mortgage applicants, this premium restructuring will help to keep FHA stable in the long run. The up-front mortgage insurance has been lowered considerably. This will mean a smaller bite out of consumer wallets in order to close the loan they have applied for. With todays stricter underwriting to qualify, there is less risk of default by new mortgage holders so this move makes sense. Now for the trade-off...

On the other side of the equation, the cost of the monthly amount of mortgage insurance will increase. This could be interpreted as FHA reserves being replenished at a slower rate than before passage of this bill. With the more stable underwriting lowering the risks, consumers can save some of that money that was needed just to close their loan. You will still end up spending that money but, it will be as a slightly higher monthly payment amount. While this is a fair trade off for many, some folks who are right at the limit for the maximum monthly payment they can qualify for, will have to find a way to lower their loan amount to offset the impact of the higher monthly mortgage insurance premium. This change will be effective for all FHA loan applications started on or after September 7th, 2010. While President Obama has not officially signed the bill into law, no veto is expected.

An Introduction to Mortgage Insurance

An Introduction to Mortgage Insurance

Buying your first home can be daunting if you aren’t equipped with the right terms, so today we’re going to introduce to you one of the most widely used terms; Mortgage Insurance or Private Mortgage insurance (MI or PMI)

If your down payment on a home is less than 20 percent of the appraised value or sale price, you need to obtain mortgage insurance.

Mortgage insurance is sometimes referred to as private mortgage insurance, or PMI, in order to differentiate it from FHA and VA insurance types, which are run as government programs. The price of mortgage insurance varies depending on the size of the down payment and the loan, but it typically amounts to nearly 1/2 of 1% of the loan.

When dealing with mortgage insurance the borrower pays the premiums, but the lender is the beneficiary. The coverage protects lenders against the borrower’s default. If a borrower defaults on a mortgage, the insurance company ensures that the lender will be paid in full. Mortgage companies choose insurance providers for their customers, but the borrowers have to pay the bill. Usually, they do so in monthly installments as part of the monthly mortgage payment. But some lenders offer programs whereby the borrower pays the entire insurance premium in a lump sum at closing. This is called “Upfront PMI”.