Quicken loans 2% grant first home buyer

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Quicken loans 2% grant first home buyer

Hunter Byler
Houston, TX · Member since 2016 · 24 posts · 4 votes
Has anyone ever heard of quicken loans giving the buyer a 2% grant to use towards a down payment? This is for first home buyers and you have to take a first home buyer course online and have a FICO score of 680+. Just curious if anyone has experience with this and how the overall process went? Thanks!
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Russell BrazilBusiness Member
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Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
10y

Never heard of it....but even so I would not use it even though it sounds great. They are perhaps the worst lender in the market place.  While this sounds like a good deal...I bet they just build it into the loan with a higher interest rate or higher closing costs...which would be hard to do since they have about the highest rates and costs around.

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  • Russell BrazilBusiness Member
    Moderator
    Real Estate Agent · Washington, D.C. · Member since 2012 · 17k+ posts · 30k+ votes
    10y

    Never heard of it....but even so I would not use it even though it sounds great. They are perhaps the worst lender in the market place.  While this sounds like a good deal...I bet they just build it into the loan with a higher interest rate or higher closing costs...which would be hard to do since they have about the highest rates and costs around.

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    10y
    Agree with Russell about Quicken being your worst choice. And NO, Quicken isn't giving you any grant, those are local govt programs. They, or any other lender, could give you a 2% "lender credit", by charging you a 1/8-1/4 point higher interest rate.
    2Reply
  • Hunter Byler
    OP
    Houston, TX · Member since 2016 · 24 posts · 4 votes
    10y
    Wayne Brooks thanks for reply. I was skeptical because nothing is for "free" they are publicly traded and have to make money somewhere to cover that 2% credit. The thing that was appealing for me is that the property that I am looking at is in need of some immediate updates (need floods currently just concrete) before I can put some renters in. So keeping cash in my pocket is important. I am Pre approved for a conventional loan with 5% down at 3.5% int rate. I have put an offer in with the seller which states in section 12.b the seller pays the closing fees. That way I could lump that in with the mortgage and save more cash for me.
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  • Hunter Byler
    OP
    Houston, TX · Member since 2016 · 24 posts · 4 votes
    10y
    Russell Brazil thanks for reply! Meant to also tag you in my Post above ^^
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  • David Dye
    Real Estate Investor · Torrance, CA · Member since 2015 · 186 posts · 45 votes
    10y

    @Hunter Byler

    Yes, this is a new program that many lenders started offering.  They are marketing it as "2% Gift Equity."

    Basically, you put down 1% and the lender contributes 2% for a total of 3%.  I would steer clear of this program, not because of Quicken, but rather because of how quickly you can go underwater... And yes, it comes at a MUCH higher interest rate...

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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    10y

    @Hunter Byler  To be clear, that "5% down conventional..." is for Owner Occupied only, not a rental property. 

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  • Hunter Byler
    OP
    Houston, TX · Member since 2016 · 24 posts · 4 votes
    10y
    Wayne Brooks correct. I plan on living in the property. This is actually a 3bed 3bath condo in a 29 unit complex that is 77% owner occupied. This is a unique property because it was actually 2 separate units (2b2b + 1b1b) that a wall was taken down in the last to combine the units. I plan on living in the 1bed1bath and renting the other unit out and closing the wall up. See any red flags with this plan?
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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    10y

    Okay, but make sure your lender fully understands.  Sounds like this is still legally two different condominiums?....... which you won't finance with conventional.

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  • Hunter Byler
    OP
    Houston, TX · Member since 2016 · 24 posts · 4 votes
    10y
    Wayne Brooks legally... It's taxed as 1 unit according to tax records. And legally I do not have to tell them that I am going to divide?
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  • Wayne Brooks
    Real Estate Professional · West Palm Beach, FL · Member since 2012 · 23k+ posts · 13k+ votes
    10y

    I guess not, If it's one legal tax ID no.  You may have some appraisal issues, since I'm guessing there are no other 3/3 recent sales in that development.

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  • Hunter Byler
    OP
    Houston, TX · Member since 2016 · 24 posts · 4 votes
    10y
    Wayne Brooks yes that has been the one thing that could be an issue is find comps. There are no other converted units in the complex like that
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  • Stephanie MedellinBusiness Member
    Mortgage Broker · CA · Member since 2014 · 1k+ posts · 644 votes
    10y

    @Hunter Byler  Yes this is a new program being offered.  I've only seen it with one lender so far (not Quicken), but I guess they must be offering it too.

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  • Hunter Byler
    OP
    Houston, TX · Member since 2016 · 24 posts · 4 votes
    10y
    Stephanie Irto Thanks for the reply. I was just curious if anyone has actually used one of these programs and how it went or if you end up getting screwed some way? I have 4 pre approval letters so I am trying to figure out which is the best lender to go with...
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  • Marco G.
    Investor · Dallas, TX · Member since 2015 · 446 posts · 197 votes
    10y
    This type of financing isn't concerning at all...yikes!!! Soon they'll be just handing over the keys and making your first payment for you too!!
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  • Hunter Byler
    OP
    Houston, TX · Member since 2016 · 24 posts · 4 votes
    10y

    @Marco G. thanks for reply... can you please elaborate? 

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  • Stephanie MedellinBusiness Member
    Mortgage Broker · CA · Member since 2014 · 1k+ posts · 644 votes
    10y

    @Hunter Byler  Sorry I don't have much information on it.  I just looked on Quickens wholesale website (we are an approved broker with them) and I don't see any mention of the program, and I haven't received any emails about it either.  Just sent an email to our account rep because I'd like to know if they are offering it!

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  • Hunter Byler
    OP
    Houston, TX · Member since 2016 · 24 posts · 4 votes
    10y

    @Stephanie Medellin

    right, it seems like a good deal if it allows you to only put 3% down of your cash and let the them cover the other 2% to get you to the 5% for conventional loan... 

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  • Stephanie MedellinBusiness Member
    Mortgage Broker · CA · Member since 2014 · 1k+ posts · 644 votes
    10y

    @Hunter Byler  Well, the other company offering this is doing it with their 3% down conventional program.  They are granting 2%, so only 1% down is needed from the buyer.  Has lender paid mortgage insurance and you need 700+ credit.  

    I would assume if Quicken is offering this it would be very similar.  After all, why would you need a 2% grant to reduce the 5% down payment to 3%, when you can just put 3% down anyway as a first time homebuyer.

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  • Hunter Byler
    OP
    Houston, TX · Member since 2016 · 24 posts · 4 votes
    10y

    @Stephanie Medellin

    you can only put 3% down for a FHA loan (which my property does not allow) so the minimum for a conventional loan is 5%.

    Quicken said that I could apply the "bonus" 2% grant to my down payment up to 10% (as long as i am making a down payment less than 10%. So if I put 5% down of my cash and then take the 2% then I would have a 7% down payment. However, their interest rate is a little bit higher than the competition. 

    Should my biggest focus on picking a lender be the interest rate percentage?

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  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    10y

    Assuming closing costs exceed 2%, which they typically do at least in my area, it's easy to bump the rate for a 200 basis points lender credit. Not even a special program or anything.

    If it's a gov't loan (FHA/VA), you do that and then get a streamline refinance (no appraisal, no full underwrite, etc) six months later to go to a current market par interest rate.

    1Reply
  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    10y

    @Hunter Byler, Fannie Mae 3% down is a thing. 

    Here's a commercial and here's where you can look up the income cap in the census tract of the property. 

    TLDR, about 95% of the time any big-name lender is offering some "special, just for you!" program, they are just re-branding some vanilla fannie/freddie/fha product. I'm not even going to share the idiotic name my firm was thinking of giving to HomeReady with lender paid PMI, but yeah we're guilty too.

    1Reply
  • Hunter Byler
    OP
    Houston, TX · Member since 2016 · 24 posts · 4 votes
    10y

    @Chris Mason

    Just got the itemized loan estimate and they have under loan costs "origination charges" - 0.0250% of loan amount.

    This was not included on any of the other loan estimates that I received. 

    The closing costs are definitely higher than 2% here in Houston. 

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  • Chris MasonPro Member
    Moderator
    Lender · CA · Member since 2015 · 9k+ posts · 10k+ votes
    10y
    Originally posted by @Hunter Byler:

    @Chris Mason

    The closing costs are definitely higher than 2% here in Houston. 

     Well, there ya go. Interest rate pricing is a dial you can turn either way. Turn it one way, and the rate goes down while discount points go up. Turn it the other, rate and lender credit both go up.

    Example, deal closing next week. Homeowner owns the property free and clear, but needs access to the capital/equity short term. She's going to pay it back and be mortgage/debt free again within 9 months (& good for her).

    • Loan amount: $270k.
    • Net proceeds to borrower: $275k. This is not a typo.
    • Interest rate: A normal 30 year fixed interest rate, but on a 15 year mortgage. In this case we covered all closing costs and then some not by increasing the rate, but by shortening the loan term. But the concept is similar -- we could have kept it at 30 years and just started increasing the rate.
    1Reply
  • Stephanie MedellinBusiness Member
    Mortgage Broker · CA · Member since 2014 · 1k+ posts · 644 votes
    10y

    @Hunter Byler  Don't underestimate the level of customer service you're going to get during the loan process when choosing a lender.  Ask what their processing times are right now.  If you're under contract for a home and you have a specific closing date or contingency periods, it's going to be a more stressful process if you're constantly worrying about missing deadlines or don't have good communication with the lender.  

    Go with a lender offering reasonable rates and fees with good customer service.  If you're going to compare rates, make sure you're getting quoted on the same exact day or it's really irrelevant since rates fluctuate from day to day.

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  • Hunter Byler
    OP
    Houston, TX · Member since 2016 · 24 posts · 4 votes
    10y

    @Stephanie Medellin thank you for the advice! I didn't really think about the customer service portion of lender.

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