Using Excess Cash to Reduce Your Expense Ratios: If you have planned to make a down payment larger than the absolute minimum, you can use the cash that would otherwise have gone to the down payment to reduce your expense ratios by paying off non-mortgage debt, or by paying points to reduce the interest rate. Just make sure that the reduced down payment does not push you into a higher mortgage insurance premium category, which would offset most of the benefit. This happens when the smaller down payment brings the ratio of down payment to property value into a higher insurance premium category. These categories are 5 to 9.99%, 10 to % and 15 to %. For example, a reduction in down payment from 9% to 6% wouldn’t raise the insurance premium, but a reduction from 9% to 4 % would. See Shrewd Mortgage Borrowers Know Their PNPs.
Getting Third Parties to Contribute: Borrowers sometimes can obtain the additional cash required to reduce their expense ratios from family members, friends, and employers, but the most frequent contributors in the US are home sellers including builders. If the borrower is willing to pay the seller’s price but cannot qualify, the cost to the seller of paying the points the buyer needs to qualify may be less than the price reduction that would otherwise be needed to make the house saleable. See Are House Seller Contributions Kosher?
Income Is Not Necessarily Immutable: While borrowers can’t change their current income, there may be circumstances where they can change the income that the lender uses to qualify them for the loan. (mehr …)