During tax season, refunds help many become homeowners! If you’re planning to buy a home in the near future, consider using your tax refund as a down payment option.

We know that saving for a down payment can be a big challenge and even one of the biggest barriers to homeownership. Many people sometimes overestimate the size of the down payment they need.

Often times, a tax refund may cover the entire down payment.  Exactly how much of the down payment you can cover will depend on the amount you want to borrow and the percentage you’re required to put down.  

Depending on your credit history and other factors, there are financing options with much lower down payment requirements besides the typical 20% down. For instance, depending on the program, borrowers can make down payments between 3.5%-10%. Down payment assistance programs can also help you bridge the cash gap. Contact Greenway to find out which programs you could qualify for! Visit our website to learn more about our loan programs.

Mortgage products available for First-time Buyers Offering Low to No Down Payments

• USDA

• VA

• FHA

• Down Payment Assistance

• Conventional

Bottom line:

During tax season, many tax payers have more funds than any other time of the year, so there is no better time to qualify for a new home.  This is a great opportunity – low rates, stable job market, and affordable homes.  Why not buy a home now?

Ready to Take the Next Step?

Greenway Mortgage is here to help. Contact us today to discuss your options. 908-489-4658.

MortgageCast #10 | Benefits of a Renovation Loan

The Renovation Mortgage Process, Renovation Loan Consultant, What Can The Borrower Expect & More!

In this episode of MortgageCast, Erin the Expert discusses the many benefits of using a Renovation Loan to purchase a home in need of repair or to upgrade one you already own.

She starts off talking about renovation loans from the perspective of a purchase transaction and then throws in some info towards the end of the conversation about financing renovations on a property that you already own.

In both types of transactions you are able to borrow against the property’s future value after the improvements to the property are made, which creates immediate equity for the purposes of the loan application.

Primary residences, second homes and investment properties can all be financed with a renovation loan – but these are all meant for homes you are going to hang on to for a while and not for fix and flip projects.

And there's a big difference between renovation and construction loans. With a renovation loan, you are repairing or upgrading an existing home while a construction loan is meant for going ground up – taking an empty lot and building a new home on it.

There's also a common misconception that there is a loan to purchase the home and another for the renovations. A renovation mortgage is ONE loan finances both the purchase of the house, and the costs to renovate it.

The Renovation Mortgage Process

The first step, just like any normal purchase, the buyer and seller agree on the sales price and enter into a sales contract.

What differs is that the buyer obtains an estimate from a contractor for the work that needs to be done.  It is important to note that the borrower is not permitted to do the work themselves, and MUST hire a licensed and insured contractor.

In processing the loan application, we add the sales price and the cost of the renovations from the estimate to come up with a total acquisition cost of the home. The down payment is based on this figure. For example, let’s say the sales price is $200,000 and the renovation costs are $50,000. The down payment will be based on $250,000. So for a 10% down transaction, the down payment is $25,000.

The Loan Consultant

If the renovation costs exceed $35,000, a renovation consultant is required.  The consultant is an independent third party that works for and on behalf of the buyer. Essentially, they are a project manager and facilitates the process between the borrower, contractor and lender. The consultant will come out to the house to look for any possible defects in the property that aren’t addressed by the estimate and will make sure that what IS listed in the estimate will meet minimum property standards for loan approval.

What else can the borrower expect?

Basically, business as usual… not only does the lender need to approve the renovation project, but we do need to review the borrower’s income, assets and credit profile. Once both the credit and project approvals are issued, the borrower will be cleared for closing. It is important to note that given all the work involved with renovation mortgages, the turnaround time from start to finish is a bit longer.

What happens at and after closing?

The loan funds are disbursed at closing – the seller gets their contracted purchase price, and the remainder of the funds are placed into an escrow account that is managed by the lender. Payments called draws are made to the contractor as work is completed. The consultant or an appraiser will come out to the property to make sure the work has actually been done, then a draw check will be issued.

What if the contractor requires money to get started on the project?

The lender can disperse up to 50% of the cost of the materials  (NOT including labor) to get the project started. All other draws will be issued as work is completed.

How do renovation loans work if you already own your home?

There are a number of different ways we can look to tackle this. The easiest way is to take out some cash from the home’s equity to cover the costs of the renovation project. We would do a standard “cash out” refinance transaction and pay off your existing mortgage then hand you a check for the remaining proceeds at closing.

What if there is no equity in the house? Can someone still finance a renovation?

Yes, and it works similarly to the purchase. The homeowner will get an estimate from the contractor – we’ll send a consultant out if needed and the appraiser will inspect your home. The as-is value will be determined, and then the renovation costs will be taken into account to come up with the “end” value. We’ll lend off of that figure when determining the maximum available loan amount and cash that can be disbursed for renovations.

What is required of the contractor?

The estimate the contractor provides needs to be very detailed. It has to separate out the costs of the materials from the labor so we can determine how much money to disburse at closing. Aside from filling out a bunch of paperwork, the contractor will need to provide copies of their license and insurance policies.

Renovation Mortgage Programs

• Greenway's Renovation Mortgage Programs
• FHA 203K Program
• HomeStyle Renovation Loan
• Greenway's $100 Down Payment Mortgage with Renovation Financing

Additional Resources

• (INTERACTIVE) HELOC vs. Cash Out Refinance 
• (BLOG) Are Homeowners Renovating to Sell or Stay?
• (BLOG) Greenway's Renovation Mortgage Programs
• (WATCH) Erin The Expert Speaks about 203K Renovation Loans
• Erin's First Renovation Video - Process and Documentation
• Our 203k Loan Product Page
• Get Erin's Mobile App
• (BLOG) Why Pre-Approval Should Be Step One for First-Time Home Buyers
• Get pre-approved: ecarvelli.greenwaymortgage.com/prequalify
• Mortgage payment calculator
• Erin's mobile app: ecarvelli.mortgagemapp.com
  • With an on-the-go payment calculator and pre-approval request
  • Or text: ETE to 36260
• Website: smt.greenwaymortgage.com
• GreenwayMortgageAtTheShore on Facebook.
• GreenwayMtgSL on Twitter
• LinkedIn: Erin Carvelli

Are you a first time home buyer?

Consider downloading our FREE homebuying guide specifically for those new to the process. It's packed with useful information, checklists and tip sheets to get you off on the right foot.

One of the questions our clients have been asking lately is whether or not they are responsible for paying their Realtor a commission. Good news, if you’re buying a home, you’re off the hook. Many buyers are surprised to learn that real estate commissions come from the “sell side” of a transaction.

Let us explain how real estate commission works.

First, let’s take a look at the difference between a Real Estate Agent and a Real Estate Broker.

Real Estate Agents are self-employed and work under the license of their particular brokers.

Real Estate Brokers are licensed to own and run a real estate brokerage and can hire and mange other real estate agents. They represent clients who are buying or selling real estate. All fees paid to a Real Estate Agent must first pass through the broker.

How much is Real Estate Commission?

The commission owed on a particular real estate transaction is sometimes a flat fee, but is usually the percentage of a sale price and is typically no more that 6%.

For example, say a home sells for $300,000 and the seller’s listing agreement indicates a 6% commission, then the total amount owed is $18,000.

So, who pays that money and to whom?

When someone sells their home using a Realtor, they are responsible for paying the commission out of the proceeds of the transaction. The buyer does not pay. Instead, the buyer’s Realtor is compensated by the listing agent’s broker by splitting up the commission paid by the seller.

There are some exceptions, but all fees usually come out of the sellers’ proceeds while buyers generally pay nothing to the agent who represents them.

Who’s Involved in the Deal?

• Seller
• Listing broker
• Listing agent (represents seller and lists the home on the market)
• Buyer
• Buyer’s broker
• Buyer’s agent (represents the buyer, gets paid from the listing broker’s commission split)

Take a look at this example here to get a better idea of how commission fees are split:

Note: Actual commission amounts and agency/agent splits will vary by transaction

Still have questions on how commission fees work? Contact us today!

We are happy to answer all of your questions!

Fill out the quick form below and one of our Loan Officers will get back to you shortly.

Are you a first-time homebuyer? Download our FREE “Guide To Buying Your First Home". Inside you’ll find everything you need to know about the mortgage process, how to get your house in order, first-time homebuyer programs, handy checklists and so much more!