The Closing Process When Buying a Home in Farmington Hills MI

The Closing Process When Buying a Home in Farmington Hills MI

The Closing Process When Buying a Home in Farmington Hills MI: A real estate closing, also called a settlement, is the process of transferring ownership of a home from the seller to the buyer. In the context of real estate, “closing” is basically synonymous with “signing.” Reviewing and signing documents is the bulk of what a home buyer does during this process. But that’s not all that happens.

Summary: Come closing day, the buyer and seller will sign all the necessary papers to officially seal the deal; the property title and ownership get transferred from the seller to the buyer; the home buyer will sign a variety of documents prepared by the escrow/closing agent and will also pay whatever closing costs are due; and agent commissions and other funds are distributed by the escrow agent. 

The closing process is usually managed by an escrow agent and sometimes an attorney who specializes in handling real estate closings and preparing the related documents. In some states, the home buyer and seller can close separately at different dates and times. While in other states, both parties must attend closing at the same time and sit at the same table with their respective real estate agents and/or attorneys. 

Even though you and the seller may agree on a closing date, your agent will probably work with your lender and title agency to suggest a timeline that allows them enough time to correctly execute their end of the deal.  

The Steps at Closing

While the logistics mentioned above can vary, the steps at closing are basically the same.  

  • The home buyer will bring a cashier’s check to cover all remaining closing costs and fees. 
  • The property title will be signed over from the homeowner to the buyer, thus transferring ownership.
  • The closing agent (or lawyer or notary) will register the new deed with the appropriate government office. After that, the home buyer will be listed as the official owner of the property. 
  • The respective real estate agent(s) involved in the transaction will receive their commission fees. 
  • The seller will receive any proceeds they earned from the sale, once their mortgage balance and closing costs have been paid off.

Closing day documents

A real estate transaction is a complex process that involves a lot of paperwork, and there are many documents that buyers will need to sign on closing day. Fortunately, the escrow or closing agent will have all of the required documents prepared and ready for the buyer’s signature upon arrival at closing. 

There will be mortgage-related documents, legal disclosures, tax records, and more. It’s not uncommon for buyers to sign their name over a dozen times before all is said and done. Buyers will have to sign the property deed, bill of sale, mortgage agreement and note, transfer tax declaration, and closing disclosure. 

Once the buyer has finished signing all of the closing documents, and all funds have been properly distributed, the deed of ownership will transfer from the homeowner to the buyer. If it is a joint closing, the seller will then hand over the keys. If it is a separate closing, the seller’s agent might deliver the keys (This can vary).

How Farmington Hills MI homebuyers can prepare in the days leading up to closing

Knowing what happens in the days leading up to closing can reduce some of the stress and help ensure a smooth transaction. Here is what you can typically expect to happen: Your mortgage lender will send you a closing disclosure a few days prior to closing. Among other things, the closing disclosure shows how much the buyer has to pay in closing costs. The buyer will then need to obtain a cashier’s check in the amount stated in the closing disclosure.

In some cases, the buyer might wire the money to the title/escrow company, rather than paying by cashier’s check. Typically, the buyer brings a copy of the homeowner’s insurance policy to the closing, or an insurance binder, depending on what the lender requires. During the week prior to closing, last-minute underwriting issues may also be resolved in some cases. 

What Farmington Hills MI homebuyers need to bring on closing day

Buyers need to bring all necessary paperwork with them to closing to make sure nothing is missing, different, or overlooked. Some important documents include: 

  • Cashier’s or certified check – You’ll pay your closing costs with a certified check or a wire transfer from escrow.
  • Proof of homeowners insurance – Lenders require an insurance policy before closing   
  • Photo ID – You’ll need to bring a government-issued identification for the title company.

Closing day check list

Review the following checklist to make sure that you have everything in order so that the closing day process runs as smooth as possible:

  • Contact the closing agent – Once you know who your closing agent is and where they’re located,  contact their offices to see if they have any special instructions for you. They’ll typically have a list of items you’ll need to bring.
  • Review your closing documents – Legally, you should receive your closing documents 3 business days prior to closing. Make sure you read them so you understand what you’re signing and check for any errors. Double-check all of the basics: spelling, numbers, names, etc.  
  • Check the fees – Your most recent loan estimate should be close to your closing disclosure. Some fees may change a little, but there shouldn’t be any big surprises at this stage.
  • Review seller responsibilities – Review your final walk-through checklist to make sure the seller has taken care of all their responsibilities.
  • Be payment ready – Expect to write the check for closing costs. Plan in advance if you are transferring funds from another account so they are cleared.

How much It costs to close on a house in Farmington Hills MI 

Closing costs are the fees that third parties charge and typically include the home inspection fee, premium for homeowners insurance, appraisal fee, credit report charges, attorney expenses, and so forth. Some of these fees, such as earnest money and home inspection fees, will need to be paid before the actual closing day. On average, homebuyers will pay between 3% to 4% of the purchase price of the home in closing fees. For example, if your home costs $300,000, you might pay between $9,000 and $12,000 in closing costs.

The takeaway

Closing on a house in Farmington Hills MI may seem like a cumbersome process, but the toughest part of it is the waiting. If you enlist the help of a skilled Farmington Hills MI REALTOR and other experienced professionals at every stage of the process, you will feel confident and look forward to closing day when you get the keys to your new home!

Partner with award-winning Farmington Hills MI REALTOR® – Tom Gilliam   

Tom Gilliam is proud to be a trusted REALTOR® in Farmington Hills MI for the past 20 years, offering his guidance and expertise to home buyers and sellers. Tom understands that buying or selling a home is a significant financial and life decision and that you are looking for someone you can trust.

As your agent, Tom will protect your interests, advocate for you, negotiate on your behalf, and do whatever it takes to ensure a smooth transaction and the best results possible. He is able to provide the kind of knowledge, skills, dedication, and personalized service you need and deserve. If you or someone you know is interested in Farmington Hill MI real estate, feel free to reach out to Tom directly at (248) 790-5594 or you can get in touch here.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578 

Buying a Home in Farmington Hills MI? Conventional Mortgages 101

Buying a Home in Farmington Hills MI? Conventional Mortgages 101

Buying a Home in Farmington Hills MI? Conventional Mortgages 101: This year, you are finally ready to buy a home in Farmington Hills MI. Whether it is your first time or you are an experienced homebuyer, all the mortgage options out there can be overwhelming. Not all home loans are the same and knowing what kind of loan is most appropriate for your particular situation will prepare you for talking to lenders and getting the best deal.

In this article, we are going to take a closer look at conventional mortgages so that you can determine whether this type of loan is the right one for you. 

  • The majority of home loans are conventional loans
  • Conventional loans typically cost less than FHA loans but they can be harder to qualify for.
  • Conventional loans are not guaranteed in part or in full by the government.
  • Conventional loans are offered by private lenders and may be secured by Freddie Mac or Fannie Mac (government-sponsored entities)  

Conventional loan requirements

Requirements for conventional loans vary by lender, but you typically need to demonstrate credit-worthiness and the ability to make your payment every month. Here are some things that a conventional loan lender might look at:

  • Your credit score. In many cases, the bottom cut-off for conventional loan approvals is a credit score of 620. Though depending on other factors, such as the amount of the mortgage and your income, you may need a higher score to qualify.
  • Your credit history. Mortgage lenders may look more in-depth at your credit than other lenders, and you may be asked to clear up old accounts or negative items before final approval.
  • Your income and debt. The lender wants to ensure that you’re able to pay the required monthly amount. They’ll look at how much you make, as well as how much debt you already have—the ratio of your debt to your income. If your debt is already taking up a large chunk of your income every month, you’re less likely to be able to pay a mortgage and less likely to get approved.
  • The value of the home. Typically, banks won’t approve a loan that’s more than the value of the home in question. You usually have to get the property appraised before a mortgage can be finalized for this reason.

Types of conventional loans 

Conventional loans come in a wide range of types. Here are the five most common forms of conventional financing:

1). Conforming loans

A conforming loan simply means the loan amount falls within maximum limits set by Fannie Mae or Freddie Mac, the government-sponsored enterprises (GSEs) that back most U.S. mortgages. The main difference between Fannie and Freddie comes down to who they buy mortgages from. Fannie Mae mostly buys mortgage loans from commercial banks, while Freddie Mac mostly buys them from smaller banks or “thrift” banks.  Fannie and Freddie must purchase loans that fall within the loan limits set by the Federal Housing Finance Agency, which is why conventional loan limits exist.  The types of home loans that don’t meet these guidelines are considered non-conforming loans.

The 2021 maximum limit for conforming loans on single-family homes is $548,250 for most counties across the U.S. Conforming loans are best for borrowers with good credit and low debt-to-income ratios who are looking to get a mortgage with a loan amount that doesn’t exceed conforming loan limits.

2). Non-conforming or ‘jumbo’ loans

Also known as non-conforming loans, jumbo loans are conventional mortgages that exceed the conforming loan limits in a given area. Higher-end homes are often associated with this loan type. Because their significantly higher balances don’t conform to Fannie Mae and Freddie Mac guidelines, jumbo loans aren’t eligible for purchase by either entity. 

Jumbo loans differ from high-balance loans, which are conforming loans with higher balances to reflect average home prices in high-cost areas such as several counties throughout New York and California. The conforming loan limit on single-family homes in high-cost areas for 2021 is $822,375. Jumbo loans are best for borrows who are looking to finance the purchase of a home that costs more than the conforming loan limit in their county.

3). Fixed-rate loans

A fixed-rate loan is a type of conventional mortgage that has the same interest rate for the life of the loan and won’t change. The principal and interest portion of your monthly mortgage payment will be the same amount each month. You’ll generally pay more interest with a longer-term loan and interest rates typically are higher than rates on adjustable-rate mortgages. It also takes longer to build equity in your home with a fixed-rate mortgage. This type of conventional loan is best for borrowers who plan to stay in their home for at least seven to 10 years and who prefer predictable, stable mortgage payments, so they can more precisely budget other expenses month to month.   

4). Adjustable-rate mortgages (ARMs)

Unlike the stability of fixed-rate loans, adjustable-rate mortgages (ARMs) have fluctuating interest rates that can go up or down depending on market conditions. Many ARM products have a fixed interest rate for a few years before the loan changes to a variable interest rate for the remainder of the term. For example, if you have a 5/1 ARM, your mortgage rate would be fixed for the first five years and then adjust annually for the remainder of the loan term. 

ARMs typically start out with lower rates than fixed-rate mortgages, but you can expect rates to increase over time. Most ARMs have a lifetime cap of 5%. During the years that the rate adjusts, it can go as high as 5% above the initial fixed-rate, according to the CFPB. Adjustable-rate mortgages are best for borrowers who are comfortable with a certain level of risk. If you don’t plan to stay in your home beyond a few years, an ARM could save you big on interest payments.  

5). Non-qualified mortgages

A Non-qualified mortgage (Non-QM) is a loan that doesn’t meet the standards of a qualified mortgage and uses non-traditional methods of income verification to help a borrower get approved for a home loan. This type of conventional loan caters to borrowers with low credit scores or other unique financial situations such as self-employed borrowers or those who rely on commissions or bonuses for a large portion of their income. Non-qualified mortgages will typically have higher mortgage rates and fees than prime mortgages, which are reserved for buyers with excellent credit scores. 

Non-QM loans have gotten a bad rap due to the large number of subprime loans that were doled out before the housing crisis and then went into foreclosure. Thanks to a tightening of federal regulations on the mortgage industry, lenders are now more cautious about who they loan to – non-QM lenders included. But for prospective homebuyers, there are plenty of non-QM lenders who can serve their needs. This type of conventional loan is best for borrowers who have serious blemishes on their credit profile, a DTI ratio above 43% or other unique financial situations, but can comfortably afford a mortgage.

Advantages of conventional loans

Conventional loans usually require less paperwork and can be obtained more quickly than government-insured loans. A conventional loan is a great option if you have a solid credit score and little debt. One of the best advantages of conventional loans is the mortgage insurance (MI). Typical monthly MI for FHA loans is 1.35 percent of the loan amount and in most cases will last for the life of the loan. Whereas typical conventional lending MI can be as low as .50 percent of a loan amount on a 95 percent Loan-To-Value (LTV), depending on your fico score. You can avoid PMI by paying 20% of the loan upfront, which will lower your mortgage payments.  

Conventional loans can be more flexible than FHA or other government-backed loans. Lenders of this type of loan don’t have to follow specific government guidelines, which means they may be able to work with borrowers who don’t fit those requirements. They can also provide mortgages for properties that are more expensive. In most cases, borrowers save money in the long run with a conventional loan because there’s no upfront mortgage insurance fee, and the monthly insurance payments are cheaper. 

Disadvantages of conventional loans

Significant documentation is required with this type of loan to verify income, assets, down payment, and employment. Conventional loans also generally come with a higher bar for approval because they are not guaranteed. Because the lender is taking on all the risk, risk, you may need a higher credit score and stronger debt-to-income ratio to qualify for these loans.

Closing costs on a conventional loan usually must be paid at settlement and can’t be rolled into the mortgage as they can with an FHA loan. Such things as loan origination fees are set by the lender, not the government agency, and may be higher. Additionally, lenders may require processing or application fees not applied with government-insured loans. With a conventional loan, you are also more than likely have to pay PMI if your down payment is less than 20 percent of the purchase price.

The Takeaway

Before you move forward on a mortgage, carefully consider your individual financial situation. Review your circumstances and needs and do your research, so you know which types of mortgage loans are the best fit and most likely to help you reach your goals.

Partner with Award-winning Farmington Hills, MI REALTOR® – Tom Gilliam   

Tom Gilliam is proud to be a trusted REALTOR® in Farmington Hills MI for the past 20 years – offering his guidance and expertise to home buyers and sellers. Tom understands that buying or selling a home is a significant financial and life decision and that you are looking for someone you can trust. As your agent, Tom will protect your interests, advocate for you, negotiate on your behalf, and do whatever it takes to ensure a smooth transaction and the best results possible.

Tom works hard for his clients and is able to provide the kind of knowledge, skills, dedication, and expertise you need when buying or selling a home. Feel free to reach out to Tom directly at (248) 790-5594 or you can get in touch here.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578 

10 Common Mistakes to Avoid When Buying A Home in Farmington Hills MI 

10 Common Mistakes to Avoid When Buying A Home in Farmington Hills MI 

10 Common Buying Mistakes to Avoid When Buying A Home in Farmington Hills MIAre you currently in the market to buy a home in Farmington Hills, MI? If this is your first rodeo as a homebuyer, or if it’s been several years since you last bought a home, knowledge is power. Buying a home comes with many big decisions, and it doesn’t hurt to be mindful of possible pitfalls so you can avoid as many mishaps as possible. Some are minor, some are costly and some even involve buyers purchasing homes that are completely wrong for them.

Here are 10 common home buying mistakes to avoid and and some expert advice to help you on your journey to homeownership:  

1).  House hunting before getting pre-approved  

House shopping can be exhilarating and it can also be taxing, so it’s no surprise that many people want to get going on it right away. However, shopping for a home before getting pre-approved for a mortgage is not a good idea.

Getting pre-approved ensures that you have the financial ability to purchase a home, helps you understand how much home you can afford, and shows sellers that you are serious when making a purchase offer. There’s no need to tour any Farmington Hills MI homes for sale if you don’t know which properties are within your budget.

Sellers are also more likely to consider your purchase offer if they know they are dealing with someone who already has a mortgage pre-approval.

2).  Obtaining a rate quote from only one lender

No two lenders are the same and each one may offer different interest rates, closing costs or other fixed fees. If you don’t shop around, you could miss out on a better deal. By getting quotes from a number of lenders, you’ll be able to choose the one that will save you the most money at the closing table or over the life of the loan.

Pick at least three to five lenders and request quotes on the same day to help you compare apples to apples. According to Freddie Mac, getting a quote from just one additional lender could save you an average of $1,500 over the life of a loan.

Get a quote from 5 different lenders and the average savings doubles. Visit lender websites to learn more about the products they offer and read customer reviews to make sure you’ll be in good hands once the loan closes. Find a lender who is a good fit in costs and in service.  

3). Not checking credit reports and correcting errors

Mortgage lenders will scrutinize your credit reports when deciding whether to approve a loan and at what interest rate. If your credit report contains errors, you might get quoted an interest rate that’s higher than you deserve. That’s why it pays to make sure your credit report is accurate.

You can request a free credit report each year from each of the three main credit bureaus. Errors on your credit reports can cause your credit scores to be lower than they should be, which can affect your chances of getting a loan or credit card and how much interest you pay.

Federal law gives you free access to your credit reports from the three major credit bureaus: Equifax, Experian and TransUnion. Using the government-mandated AnnualCreditReport.com site is the quickest way, but you can also request them by phone or mail. Disputing any credit report errors and getting those negative items removed can be a quick route to a better score.

4).  Buying more home than you can afford

Don’t buy more house than you can reasonably afford. The maximum loan amount on your pre-approval letter doesn’t mean you should look at homes that are priced to match it. The lender may know your income and even your debt-to-income ratio, but that’s all they look at when it comes to monthly expenses.

The lender doesn’t know how much you pay for groceries, gas and insurance, healthcare, school tuition or loans, utilities, and other expenses you might have.  If maxing out the loan amount you qualify for means that you are stretching your monthly budget to the limit, you probably need to find a more affordable home.

Even if you can make your mortgage payments with all of your other monthly expenses, a higher monthly payment can affect other areas of your life. The more money you borrow, the less you’ll be able to put towards important savings such as your 401(k) or emergency fund.

5).  Depleting your savings

One of the biggest mistakes many first-time homebuyers make is spending all or most of their savings on the down payment and closing costs. Some people scrape all their money together to make the 20 percent down payment so they don’t have to pay for mortgage insurance.

This may translate to substantial savings on the monthly mortgage payment, but it’s not worth the risk of living on the edge. Instead, aim to have three to six months of living expenses in an emergency fund, even after you close. Depleting your emergency or retirement savings to make a large down payment is a risk best avoided.

6).  Being Unaware of the hidden costs of owning a home

Many first-time home buyers are unaware of the hidden costs of homeownership because they’ve never owned one. When moving from an apartment to a home, there can be some additional costs that you may not have experience paying as a renter.

These hidden costs include higher utility bills, new utilities like trash removal and recycling, property taxes, homeowners insurance, outdoor maintenance and equipment, maintenance and repair, tools for home improvement and maintenance, furniture to fill more space, etc.

Figure out how much each expense will be, add that amount to your savings goal, and have it saved up before you move in.

7).  Believing that you must have a 20% down payment

There’s still a long-standing myth that you need a 20% downpayment in order to buy a home, but that isn’t actually correct. When you make a bigger down payment on your home purchase, you’ll likely get a better mortgage rate and a lower monthly payment, since you’re not borrowing as much. But that doesn’t mean you should hold off purchasing your first home, or upgrading to a new one, until you have a 20% down payment.

You can get a conventional loan with as little as 3% down or a loan backed by the Federal Housing Administration (FHA) with just 3.5% down. There are also 0% down payment programs available if you’re in the military, or you’re a low- to moderate-income borrower buying a home in a rural community.

Plus, some first-time buyers may qualify for a down payment assistance program through their state or local housing agency.

8).  Not planning for closing costs

Your down payment isn’t the only upfront cost you’ll have as a homebuyer. With such a big emphasis on the purchase price and the down payment, many people fail to plan for closing costs, which can range from around 3% to 6% of your loan amount. To prepare for closing costs, it helps to know what’s included in this major expense.

Although some of these may not be included in your closing costs, common fees include the appraisal, home inspection, property taxes, title and attorney fees, lender fees, application fee, prepaid interest, loan origination fee, discount points, title search fee, mortgage insurance application fee, upfront mortgage insurance, and lender and owner title insurance.

Other costs and specific mortgage fees will depend on where the home you are buying is located and the type of loan you get.

9).  Changing jobs or having income gaps

In order to qualify for a mortgage, you need to show stable job history and consistent income. Your lender will scrutinize your income and employment history over the last two years to determine whether you have that stability.

If you’ve been in between jobs in the past two years, be prepared to explain why.  If you’re looking to take a new job before closing on your mortgage, be strategic because it may delay your loan approval. Communicate potential job changes to your lender and be prepared tp supply any additional documentation they may request.  

10).  Applying for credit or charging up credit before closing

One important home buying mistake you want to avoid is taking on more debt in the middle of the mortgage lending process. This misstep can quickly derail your loan approval. It’s recommended that borrowers not take on any new debt or apply for a credit card until after closing on their new home. The loan underwriting department at the bank may be checking your credit after you’re approved and before the bank funds your loan.

If you max out your credit card or take out an auto loan before your closing, that debt is factored into your mortgage application. More debt pushes up your debt-to-income (DTI) ratio, or the percentage of your gross monthly income used to repay debt. If your DTI ratio exceeds the maximum ratio for your loan program, your loan may not be approved.

Partner with Award-winning Farmington Hills MI REALTOR® – Tom Gilliam   

Tom Gilliam is proud to be a trusted REALTOR® in Farmington Hills MI for the past 20 years – offering his guidance and expertise to buyers and sellers. Tom is able to provide his clients with the kind of knowledge, skills, commitment, and expertise they need and deserve. He also understands that buying or selling a home is a significant financial and life decision and that you are looking for someone you can trust. Tom will protect your interests, advocate for you, negotiate on your behalf, and go the extra mile to ensure a smooth transaction and the best results possible!

If you or someone you know is interested in buying or selling Farmington Hills MI real estate, feel free to reach out to Tom Gilliam directly at (248) 790-5594 or you can get in touch here.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578 

 

Home Loan Programs and Tips For Low-Income Oakland County MI Buyers

Home Loan Programs and Tips For Low-Income Oakland County MI Buyers

Home Loan Programs and Tips For Low-Income Oakland County MI Buyers

Owning your own home is the American dream and being in a lower income bracket doesn’t automatically disqualify you from buying a home. Fortunately, there are a number of low-income home loans available to help you reach your goal of homeownership.

Depending on other important factors such as your credit score, debt, location, and profession, you may be able to qualify for a home loan through one of the following programs: FHA loans, USDA loans, Fannie Mae HomeReady loans, Freddie Mac Home Possible® loans, Good Neighbor Next Door program, and VA loans. 

Before we take a closer look at the eligibility requirements of these different loan programs, here are a few tips for buying a home with low income:

The first thing you’ll want to do is review your credit reports from all three major credit reporting agencies (Equifax, Experian, and Transunion)  and dispute any errors you may find. Make a concerted effort to pay all of your accounts on time and lower your credit usage to below 30% of your available limit. This can help improve your credit score before applying for a mortgage.

You should also try to pay down your outstanding debt (especially credit card balances) which will help lower your debt-to-income (DTI) ratio. Next, you’ll want to get a mortgage pre-approval. When house hunting, sellers are likely to take you seriously if you’ve already been pre-approved when you put in a purchase offer. A pre-approval tells you how much a lender might be willing to lend you, based on a review of your overall financial picture.

After you get a mortgage pre-approval, the next step is to enlist the services of a qualified Oakland County MI real estate agent. Find an agent who is knowledgeable about the local housing market as well as the different home buying programs that are available for low-income borrowers.

Once you’ve found an agent you can work with, start looking at home buying assistance programs. Check with the Michigan State Housing Development Authority (MSHDA) for available homebuying assistance programs, including grants or loans to help cover your down payment or closing costs.

Low-income home loan programs

FHA loans

FHA home loans are loans backed by the Federal Housing Administration (FHA).  An FHA loan can be a good option for first-time homebuyers who may not qualify for a conventional loan or for those who may be struggling to save a 20% down payment. With an FHA loan, a borrower can have a credit rating as low as 500 and a fairly high debt-to-income ratio.

These loans require only a 3.5% down payment, which can come from gifts, and have less stringent requirements for credit rating or income. FHA loans require all borrowers to pay upfront and annual mortgage insurance premiums, no matter their credit score or down payment amount. Borrowers putting the minimum 3.5% down will pay FHA mortgage insurance for the life of the loan.

Eligibility requirements for FHA loans:

  • A 500 to 579 credit score and a minimum 10% down payment
  • A 580 credit score and a minimum 3.5% down payment
  • Meet local county FHA loan limits. Oakland County, MI FHA loan limits range from $331,760 for 1 living-unit home to $638,100 for 4 living-units.  

USDA loans

The U.S. Department of Agriculture also ensures low-income home loans provided by approved lenders up to 90% of the loan amount. USDA loans cater to homebuyers with a modest income. With a USDA loan, no down payment is required, no assets needed to qualify, and no maximum loan amount. 

Eligibility requirements for USDA loans:

  • Preferred 640 credit score
  • Meet local income eligibility requirements. For a family of 1-4 in Michigan, the average household income limit for a USDA loan is around $86,850, and for a family of 5 or more, it can be as high as $143,300.
  • Purchase a home in a designated rural area

Fannie Mae HomeReady® loans

The HomeReady mortgage program from Fannie Mae offers low-income home loans to homebuyers with limited cash for a down payment. Underwriting guidelines are more flexible to make it easier to qualify and both first-time homebuyers and repeat buyers are eligible. If all borrowers on the loan are first-time buyers, at least one borrower must meet the homeownership education requirement, by completing an online course on the Framework website.

Eligibility requirements for Fannie Mae HomeReady® loans:

  • Minimum 620 credit score
  • Minimum 3% down payment
  • Earn a maximum of 80% of the area median income (AMI)

Freddie Mac Home Possible® loans

The Freddie Mac Home Possible® mortgage program also caters to very low-to low-income borrowers with limited down payment funds. Both first-time and repeat homebuyers may qualify. Co-borrowers who do not live in the home can be included for a borrower’s one-unit residence, and borrowers are permitted to have another financed property –  all with competitive pricing and the ease of a conventional mortgage. 1-4 units, condos and planned-unit developments, and manufactured homes are eligible with certain restrictions.  

Eligibility requirements for Freddie Mac Home Possible® loans:

  • Minimum 660 credit score
  • Minimum 3% down payment
  • An income less than or equal to 80% of the Area Median Income (AMI)

HUD’s Good Neighbor Next Door program

With the Good Neighbor Next Door program from the U.S. Department of Housing and Urban Development (HUD), law enforcement officers, teachers (pre-Kindergarten through 12th grade) firefighters, and emergency medical technicians can contribute to community revitalization while becoming homeowners. HUD offers a discount of 50% from the list price of the home.

In return, an eligible buyer must commit to live in the property for 36 months as his/her principal residence. If an FHA loan is used to buy the home under this program, the minimum required down payment is $100. You can also use a conventional or VA loan.

Eligibility requirements for HUD’s Good Neighbor Next Door program: 

  • Work full-time as a pre-K through 12th-grade educator, emergency medical technician, firefighter, or law enforcement officer
  • Buy a home in a HUD-designated revitalization area
  • Must live in the home for at least 36 months (3 years)

VA loans

The U.S. Department of Veterans Affairs (VA) offers a mortgage program to help veterans, service members, and surviving spouses purchase homes. The VA is not a direct mortgage lender, but it does guarantee a portion of the loan so borrowers can receive more favorable loan terms like a lower interest rate. 

If your VA-backed home loan goes into foreclosure, the guaranty allows the lender to recover some or all of their losses. Since there’s less risk for the lender, they’re more likely to give you the loan under better terms.  90% of all VA-backed home loans are made without a down payment. 

There is no minimum required down payment or mortgage insurance requirement. These loans also limit the amount you can be charged for closing costs. There are no VA loan limits  

Eligibility requirements for VA loans:

  • Valid Certificate of Eligibility
  • Preferred minimum 620 credit score
  • Required VA funding fee to offset program costs to taxpayers

Partner with highly-rated Oakland County MI REALTOR® – Tom Gilliam   

Award-winning Oakland County MI REALTOR® – Tom Gilliam provides the kind of knowledge, skills, dedication, and professionalism you need when buying or selling a home. 

With over 20 years of real estate experience, Tom will protect your interests, advocate for you, negotiate on your behalf, and be your trusted guide and advisor every step of the way. Tom works very hard for his clients and will always go the extra mile to ensure a smooth transaction and the best results possible!

If you or someone you know is interested in buying or selling real estate in Oakland County MI, please give Tom Gilliam a call today at (248) 790-5594 or you can get in touch here.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578 

Interested in Purchasing a Foreclosed Home in Oakland County MI?

Interested in Purchasing a Foreclosed Home in Oakland County MI?

Interested in Purchasing a Foreclosed Home in Oakland County MI?

Real estate bargain hunters can find great deals on foreclosures and foreclosed homes in Oakland County MI. The biggest selling point of foreclosed homes is, of course, their marked-down price, which is often significantly lower from other similar properties in the same area, also known as “comparables ” or “comps” in real estate speak. 

Foreclosed homes are available in just about every real estate market across the country, providing opportunities for homeowners and investors alike. Most foreclosures are sold at a sizable discount below market value. Buyers may also take advantage of additional savings such as reduced down payments, lower interest rates, or the elimination of appraisal fees and certain closing costs. 

A REALTOR® for foreclosed homes in Oakland County MI will often know about properties that are nearing foreclosure because they are familiar with the local market, actively network with other agents, and frequently works directly with banks and other lenders.

With access to comprehensive foreclosure listings that include homes already in foreclosure as well as those approaching it, your agent can help you uncover a great deal on a home that you might not find otherwise.  

Locating foreclosures and foreclosed homes in Oakland County MI

One can find foreclosed properties in multiple-listing service (MLS) periodicals and websites, via online real estate searches, bank offices and websites, and through local newspapers. Lenders are increasingly selling their seized assets through real estate agents, so don’t hesitate to ask an Oakland County MI REALTOR® for opportunities.

Some real estate pros even specialize in foreclosure properties, which are often sold well under market value because the owners are eager to unload them.  

Locating foreclosures and foreclosed homes in Oakland County MI greatly depends on what stage the property is in during the foreclosure process. Properties can still be owned by the original homeowner or by an entity such as a bank or the government.

Stages of Foreclosure

Here are the various stages of foreclosure:

1). Pre-foreclosures – A home is in pre-foreclosure after the lender has notified the borrowers that they are in default but before the property is offered for sale at auction. If the homeowner can sell their home during this time, they may be able to avoid foreclosure proceedings. As a result, some homeowners are willing to negotiate. Your agent can help locate those properties that are still in the pre-foreclosure phase. 

2). Short sales – Short sales occur when the lender will accept less for the property than what is owed on the mortgage. Although borrowers don’t necessarily need to be in default of their mortgage for a lender to agree to a short sale, they typically need to prove that they are in fact experiencing financial hardship, such as the loss of a job, which is likely to result in default. Often, the property is worth less than the outstanding balance on the mortgage. 

In order to qualify as a short sale, the lender must agree to accept less than is owed, and the property must be listed as a short sale. A successful short sale helps the lender avoid yet one more foreclosed home on their books as well as the cost and time associated with maintaining that home until its potential sale. Also with a short sale, the likelihood that the borrower/ homeowner will trash the property on his way out the door is reduced.

3). Sheriff’s sale auctions – happens after the lender has notified the borrower of default and allowed a grace period for the borrower to catch up on mortgage payments. An auction is designed for the lender to get repaid quickly for the loan that is in default. Auctions often occur on the steps of a city’s courthouse and managed by the local law enforcement authorities. 

The property is auctioned to the highest bidder at a publicly announced place, date, and time. The large cash outlay required to buy foreclosed property at the Sheriff’s Sale is the biggest deterrent for many buyers. Certified checks and sometimes cash will be required to bid on properties. In addition, you may not be able to inspect a foreclosed property before bidding on it. 

4). REO properties – Properties that don’t sell at auction revert back to the bank or become real estate owned (REO) properties. Cathy has access to extensive listings of such bank-owned properties. REOs are generally purchased “as is,” but buyers can negotiate with the lender to pay for any repairs. 

The option for a home inspection makes REO properties especially attractive to investors because they review the current condition of the property, including any repairs that will need to be made. With short sales or bank-owned (REO) properties, you can finance the purchase with a mortgage. In fact, it’s common to do so.

5). Government-owned properties –  Government foreclosures are residential properties that have been repossessed and put up for sale by a government agency. Several government agencies such as the Housing and Urban Development Department (HUD), the Federal Housing Authority (FHA), the Veteran’s Affairs Department (VA) offer mortgages at special rates for qualified borrowers. 

When a homeowner defaults on their mortgage, these agencies will repossess their property and sell it to recoup money lost on the unpaid loan. Other reasons government properties are sold include homes seized and sold by the IRS due to tax debts and property seized and sold by Homeland Security due to criminal activity. Typically, a government-registered broker must be contacted to purchase a government-owned property.   

Potential pitfalls when buying a foreclosed home in Oakland County MI 

There are some standard difficulties you may encounter when purchasing an Oakland County MI foreclosed home. While foreclosures can be great investments as fixer-uppers, either to live in or resell, these properties will typically come with issues, and the financial rewards of buying one only come after a significant amount of hard work. 

Bank-owned properties are sometimes very dirty because of the amount of time sitting empty,  neglect by the previous owner, or vagrant occupancy. A Home that has been sitting locked up with no air circulating for months can have built-up dirt that causes the entire home to smell. 

Many properties in foreclosure have been poorly maintained and may have water or mold damage, structural issues, or be in violation of codes or other standards. A small leak under the kitchen sink can lead to a mold problem, and a roof leak or burst pipe can lead to major water damage when there is no one in the home to fix it. 

Banks are unlikely to have any knowledge of existing problems with the property since one there has lived in the home. That means you will have to uncover everything yourself, either during the home inspection or through experience after you become the homeowner.  

Vandalism such as graffiti, broken windows, and other damage can also be an issue. After the occupants leave, foreclosures sit abandoned, often inviting criminal activity. Even the prior owners may take fixtures, appliances, windows, crown molding, or anything else of value from the home.

Despite all of the above potential problems, a foreclosed home in Oakland County MI can still be a good deal. If you are up for fixing problems that most people don’t want to deal with, you can purchase a home at a significant discount. 

Financing options for Oakland County MI foreclosed homes and lenders

Buyers should do some research on financing options before shopping for Oakland County MI foreclosed homes. Although you can go the traditional route of using a private lender as you would for a conventional home, some lenders are reluctant to finance a foreclosed home, making the purchase with all cash your only option.

Lenders will typically not give a home buyer money for a home they consider uninhabitable or that appraises below the purchase price. Of course, if you are paying cash, this will not be an issue. If you are not in the position to pay all cash, It’s worth looking into loans from the Federal Housing Administration (FHA) or Freddie Mac.

The HUD Section 203(k) loan program can help in some circumstances. The total amount of your mortgage is based on the projected value of the home after the renovation is completed while also taking into account the cost of the work.  

Keep in mind that when purchasing a foreclosure, negotiating with a bank is very different than negotiating with an individual. A real estate agent who has worked with banks before understands the bank’s processes and can anticipate the bank’s needs to make the transaction go smoother.

Even if you’ve purchased a foreclosure before, it’s still to your advantage to enlist the services of a qualified agent as each bank has its own procedures and timelines. Working with someone who can help navigate the nuances can alleviate a lot of stress. 

Partner with highly-rated Oakland County MI REALTOR® – Tom Gilliam   

Buyers have the opportunity to pay below market value for homes that wouldn’t be available to them under normal circumstances. If done responsibly, and with the guidance of a reputable real estate agent, purchasing a foreclosed home can allow a homebuyer to reap a myriad of benefits.

Inexperienced foreclosure buyers might want to hire a real estate agent for guidance and assistance. Agents have direct access to tools like the Multiple Listing Service (MLS), which they use to share information about properties. 

Oakland County MI REALTOR® – Tom Gilliam has over 20 years of local experience and provides the kind of knowledge, skills, commitment, and professionalism you need when buying or selling a home. As your agent, Tom will protect your interests, advocate for you, negotiate on your behalf, and be your trusted guide and advisor every step of the way.

If you or someone you know is interested in purchasing foreclosed homes in Oakland County MI, please give Tom Gilliam a call today at (248) 790-5594 or you can get in touch here.

Tom Gilliam, REALTOR®
RE/MAX Classic
29630 Orchard Lake Rd.
Farmington Hills 48334
Direct: 248-790-5594
Office: 248-737-6800
Email: Tom @ Homes2MoveYou.com
License #314578  

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