I see it every month or hear stories from fellow loan officers that before getting our home buyers under contract on the right home can turn even the most stoic shopper into a bit of a dreamer. From paint colors to planting a garden, picturing yourself in that property is critical for many buyers. It is the house and everything about that next new home that all home buyers consider but I ask that you leave a little room for pragmatism. Remember that getting pre-approved for a mortgage is a first step necessity but once you have that pre-approval, even once you are under contract isn’t a guarantee that you will be APPROVED. That prefix attached to approval is there for a reason, a loan pre-approval is not loan approval.
A better name for pre-approval is truly pre-qualification but that term is not welcomed generally by the seller side of the house you want to purchase, so we play the game. Once you are pre-approved, you have found your home and are under contract you will have more hurdles to clear before a lender legally commits to funding your home loan. Buyers who don’t know any better can inadvertently add obstacles to that path or home ownership or even kill the entire application, between contract and closing day.
Some missteps can be costlier than others. Here’s a look at five of the worst things you can do before buying a home.
1. Go Credit-Crazy
It’s almost become cliché in the mortgage industry, but the warning still bears repeating: Don’t buy a truckload of furniture until after your loan closes. The prohibition goes beyond sofas and tables avoid obtaining credit for any major expense, such as a car, a boat or, yes, a new bedroom set.
Be careful with even minor expenses. If you absolutely need to obtain new credit or add debt before closing, talk with your loan officer as soon as possible. We are now required to check your credit report for new debts and increased monthly payments on your credit cards 24 to 48 hours BEFORE you close to insure that your debt to income ratio has not changed enough to wreck your approval.
New payments are going to affect your monthly debt-to-income ratio and not in a good way. Hard inquiries on your credit report could also lower your credit score. That might hurt your interest rate if you haven’t locked or even knock you out of qualifying range all together.
2. Shuffle Dollars and Cents
Lenders will scour your most recent bank statements as part of the pre-approval and approval process. It’s not like they forget about it after that. They will take another look at your assets and bank records again during the underwriting process and possibly afterward you have an approval.
You will need to explain any unusual deposits or withdrawals. Lenders will require clear documentation and a paper trail if you’re putting gift funds toward a down payment or closing costs. Stuffing a wad of undocumented cash into your account is going to raise red flags. By law, The Patriot Act, we are required to source and season all funds used in a mortgage transaction, this can take time, and possibly kill an approval if we cannot use the money that is in your bank account.
3. Get Behind on Bills
Having a late payment hit your credit report before closing can devastate your deal. Payment history comprises about a third of your credit score.
One solitary 30-day late payment can clip 60 to 110 points from your credit score, especially if you have a very light credit history. And 2 recent 30 day lates is almost always a major concern for an Underwriter. If you have low credit scores and anything below 660 is considered low a credit blemish or inquiry could change the outcome of your approval or change your interest rate, but it isn’t always a huge deal if you had an 800 score, right?
Possibly. But if that 30-day late blemish is a mortgage or rent payment, some lenders will deny your application altogether. Many will require at least 12 consecutive months of on-time payments to qualify for a home loan.
4. Co-Sign on a Loan
Co-signing a loan is arguably a bad financial move whenever you make it. But it’s especially risky during the mortgage lending process. It means you’re financially liable for someone else’s debt. I have seen more co-signed notes become the death of a new mortgage application than you would ever think possible, they are family, they are friends, they would never do anything to hurt me.
Yes, that someone else might be the most responsible person on the planet. Lenders will still need to factor that new monthly obligation into your overall affordability profile. Adding one more debt to the list could stretch too thin your debt-to-income ratio and assets.
5. Changes in Employment
Probably goes without saying, but losing your job is going to be a big problem. Even job-hopping can present some major hurdles. Lenders crave stable, reliable income that’s likely to continue.
Lenders are likely to slam on the brakes if you take a new job in a different field or if you decide to start your own business, or even if you get a promotion but see some or all of your income shift to a commission basis.
The bottom line: Any change to your employment is significant. Keep your loan officer in the loop, and ask questions when in doubt. The last thing you want is to waste time and money on a home loan you’re never going to get.
Throughout the mortgage process, it can also be helpful to monitor your credit scores for changes so you can know whether you need to address any problems. To do that, you can use a free tool like Credit.com’s Credit Report Card, which updates your credit scores and an overview of your credit report every month.
You Loan Officer is not your nemesis, just the opposite, I tell my clients that in today’s mortgage world every borrower comes to the Underwriter as guilty. It is my job as your loan officer to act on your behalf to collect all the necessary information and data to prove your innocence. The more I know the better I can represent you and package your loan application in the best light possible. Do Not Doubt for a minute that eventually we will find out everything, best to tell your loan officer everything up front and during the process so there are no last minute surprises. ONLY GOOD SURPRISES ARE ALLOWED AT THE CLOSING TABLE!
The spring and summer months are traditionally the busiest times of year for the residential real estate market, and locally that will be truer this year. It is a safe bet that the weather will be more cooperative and many families like to move while the kids are on their summer break.Also, in recent years spring, for many regions, has meant more homes on the market and with inventories so low we need more homes on the market, as well as more buyers. With more buyers and a lower than normal inventory we will see fierce competition for the homes that are being sold and an increase in prices.
If you are in the market for a house this spring, there are a number of steps you can take to try to give you an advantage over other homebuyers, including;
With the current housing market be such a seller heavy market many of my home buyers are having a difficult time securing their new home simply because there are so few homes available at the moment and many more home buyers.
Assemble your team members now, allow them to make your game plan, get you prepared, and then act. Your real estate agent knows the market, they understand negotiating, and are willing to share and provide it all to you.
Your lender will know you and your financial situation better than anyone else but you, tell them everything, share with them your wants and needs. We can shape a mortgage program to provide you or nearly any home buyer with what they need. You need help with down payment and/or closing costs most lenders can accommodate this need. You are willing to purchase a near perfect home many lenders can provide mortgage programs that will roll in the costs of making your near perfect home perfect.
With housing prices on the rise again and the inventory of available homes at near record lows, buying a home has become quite challenging for any home buyers but especially first time home buyers with a small budget. If you’re still looking for a sizable home, but don’t want to shell out the big bucks, investing in a fixer-upper house could be a great option for you. With a little bit of work, you could turn a less than perfect house into your dream home, especially if work with an experienced loan officer plus a contractor to do the repairs. However, paying for the house and the repairs might be difficult because many lenders don’t want to finance a house that requires a lot of work. The FHA 203k Renovation Home Loan is the perfect mortgage for those who want to have all the houses listed for sale available to them, won’t settle, dreams of what their home will look like, and is willing to think outside the box. The 203(k) loan includes funds for the purchase, repair/improvement costs, inspection fees, and even six month’s carrying costs.
The program is primarily designed to finance the renovation of homes which serve as the principal residence. Eligible properties are one to four dwelling units that have been constructed for at least one year. The units have to comply with local zoning regulations. Loans might apply to houses moved from one site to another for renovation. Furthermore, also current homeowners can also use the 203(k) loan to refinance existing mortgages. The program has a six-month deadline for completion, though there are extensions available if warranted.
There are two different 203(k) loan options for homebuyers, depending on the scale of the home renovation project. The standard 203(k) program starts with a feasibility study, overseen by an approved consultant, which helps the FHA determine whether the home repairs are justified. Together with the lender, the consultant monitors the project’s progress and conducts a final inspection after completion. The streamlined version is for smaller, less complex projects where no permits, plans or specs are needed. In addition, the homeowners don’t need a consultant and can just use a certified contractor. Below are the basic steps that you need to do if you want to finance your fixer-upper though the 203(k) loan program.
The HARP or Home Affordability Refinance Program has made a small but significant change that will help more homeowners in the St. Louis and St. Charles area, really all of Missouri, refinance their underwater mortgages.
WHAT IS A HARP REFINANCE?
Harp was started in April of 2009, also known as the Home Affordable Refinance Program HARP is designed to allow responsible homeowners to take advantage of lower mortgage rates and payments, even if you owe as much or more on your home than it’s currently worth.
HARP 2.0 is also known as DU Refi Plus, Open Access, the Obama Refinance Program, Making Home Affordable, The Obama Refi, A Better Bargain for U. S. Homeowners, and Relief Refinance.
Key HARP Refinance Benefits:
Basic HARP Qualification Requirements
There are still many homes that are underwater with the value of their home currently being less than what they owe on their mortgage. Plus, they are paying higher interest rates than what's available today. Most would like to take avantage of the lower interest rate but simply cannot. A HARP refinance is helping many borrowers who owe more than what their home is worth.
I am a Mortgage Loan Officer with USA Mortgage and I can help you if you are underwater and your interest rate is too high. I would welcome the opportunity to speak with you about your situation and how it can best be remedied.
Want to Know More About HARP Refinance Program?
Before you call me or any lender I encourage you to learn as much as you can about the HARP 2.0 Refinance Program. Please visit my website as part of your process about learning more about this great loan program. Follow the link below to learn more, there I have a large section devoted to frequently asked questions. If you don't find it there please call me. Learn More about the HARP Refinance Prgram
THERE IS NOW HOPE FOR YOU AND EVERYONE WHO WOULD LIKE TO BE A NEW HOME OWNER WITH LESS THAN PERFECT CREDIT SCORES!
What is a bad credit score for a new mortgage? The chart tells us that the average credit score is 678, so anything less would be considered below average. Most lenders in and around St. Louis are using a 640 credit score as the line to determine a poor credit score.
FHA mortgages is the preferred mortgage program for home buyers who are looking for a bit of leniency when it comes to buying their next new home.
So why is it so difficult to get a loan if you don't have a 640 or higher credit scores when FHA guidelines call for a 580 or higher credit score. The answer is; lender overlays a condition that the lender places on you the borrower to reduced presumed risk of application.
That has changed as we have gone back to being able to provide FHA loans to borrowers with a 580 or higher credit score!
Your credit had stopped you before in becoming a new home owner but now it can be the starting point to your next new home. If I can get you approved via an Automated Underwriting System you are nearly home.
It may be necessary to have you supply your application with an FHA approved compensating factor. There are 10 FHA compensating factors here are a few:
I can help you quickly determine if your new home is right around the corner. Want to see if you qualify for an FHA mortgage today, give me a call or click the link below to find out more information:
FHA and Less Than Perfect Credit Scores
As a Mortgage Loan Officer for nearly 20 years, I have always considered First Time Home Buyers my number one niche. Mostly, I work with home buyers in the St. Louis, St. Charles, Lincoln, Jefferson Counties area but have helped many home buyers all throughout the State of Missouri.
My experience with First Time Home Buyers has shown that there are two items that most first timers are concerned with, getting approved and money.
Getting approved for a mortgage today initially starts with your credit and especially your credit scores. Since 2008 credit scores have become vital to the process of getting approved. Every mortgage program is different than the other and each lender can be different than the next when it comes to minimum needed credit score. A good estimate is that all borrowers on an application will need a minimum middle credit score of 620 or higher for most mortgage programs.
FHA: I start with this mortgage program because it has become the most widely used program for First Time Home Buyers. FHA has a low down payment requirement of 3.5%, very good interest rates, and the easiest of qualification guidelines.
VA: This mortgage program is for qualified Veterans that have served within the Armed Forces. 100% financing, no down payment, low interest rates, no mortgage insurance, and closing cost restrictions that benefit the borrower. Must have a Certificate of Eligibility and a DD214.
USDA Rural Development: Very similar to VA, 100% financing, low interest rates and no mortgage insurance. This program has income limitations being geared to low to moderate income families. There are also geographical restrictions, this is not a program for urban home buyers and not all suburban areas. A link is provided to check addresses at my USDA web page for geographical eligibility.
Conventional: Everyone seems to think that conventional mortgages require a 20% down payment, this is not true. Generally, the minimum is 5% down payment but I now have a conventional mortgage with a minimum 3% down payment. Conventional is harder to qualify for, requiring higher credit scores and tighter guidelines. The optimal borrower should have higher than average credit scores and larger down payment to get the best interest rates.
FHA 203k Renovation Mortgage: with the available housing market being very limited today the FHA 203k Renovation program has become very popular. This is an FHA mortgage that provides the funds to purchase plus rehab, renovate, fix up, modernize, or update the home you want to buy. Low 3.5% down payment, easy qualification guidelines, decent interest rates.
Down Payment Assistance and Grants
Since there are no first time home buyer mortgage programs what is available to help first time home buyers? Down Payment Assistance programs that work hand in hand with the mortgage program you are approved for.
MHDC: This is a down payment assistance program available to all qualified first time home buyers in the State of Missouri. There are two different MHDC programs but the most popular is the Cash Assistance Loan, CAL, which provides funds for down payment help. There is a non-CAL program that sometimes has a lower interest rate than the market rate, but rarely.
MHDC is designed for low to moderate income households, every county has their own income limits determined by the medium income of the area and the household size. The Cash Assistance Loan is a 5 year forgivable second mortgage that provides 3% for down payment assistance.
Ask your lender if they are an approved MHDC lender as not all lenders in the State of Missouri provides this down payment assistance program.
LOCAL GRANTS: Since I work mainly in the St. Louis and St. Charles area I am only aware of other down payment assistance program in the area but I know of a few others in KCMO and Columbia.
There are down payment assistance programs available throughout the entire St. Louis County with Florissant having their own program. Jefferson County and St. Charles County has their own program as well. As does many cities located within St. Charles County, Wentzville, O'Fallon, Dardenne Prairie, St. Charles City, St. Peters, and a couple more.
Local Grant programs are generally second mortgage and some are forgivable some are not. The amount of funds available for assistance can range from $3000 to $5000. They are all income restrictive but as a whole they have much lower income maximums than MHDC.
Work with your lender to help determine the best down payment assistance program for you.
Closing Cost Assistance
Did you know that with many mortgage programs the seller of the house you are purchasing can provide a seller concession that can be used to pay for some to all of your closing costs? Seller concessions can range from a maximum of 3% to 6% of the sales price.
Did you know that many lenders (not all) can provide a credit at closing to help pay for closing costs too?
Little to Zero Out of Pocket
If you can qualify for a mortgage AND down payment assistance plus get help with closing costs from your seller or lender it can be very possible to purchase a new home as a first time home buyer with very little to zero out of pocket expense.
This is the type of first time home buyer mortgage programs that many are looking for but end up with something completely different because they did not work with the right mortgage loan officer. Call me and allow me to show you how this can be done for you too.
Yes, it is possible, regardless of your experiences in the past or what you have heard it is possible to close an FHA 203k Renovation Home Loan in 45 days, maybe less.
If you are a home buyer reading blogs, forums, posts, articles, etc., about the FHA 203k renovation mortgages or if you are a Real Estate Agent that has professional experience with other 203k transactions it might seem impossible to close quickly but let me tell you that it is possible and even very likely if you have an experienced FHA 203k renovation team surrounding you.
I hear it all the time, mostly from real estate agents and other loan officers, how hard these loans are and how much time they take, then I ask two very simple questions - 'how experienced was your FHA 203k Renovation Team?' and 'where did you learn all of this?'. The answer always seems to be I don't know and/or the internet.
If you don't know the experience level of your FHA 203k Renovation Team you are only asking for trouble, delays and the risk of the loan never closing period. And just because you found it on the internet doesn't make it true.
The FHA 203k inherently has more paperwork and extra people involved, the extra paperwork and the extra people involved is a recipe that have a terrible outcome leaving a terrible taste in the mouth of someone who has gone through an FHA 203k nightmare. I am here to tell you the risk is well worth the reward. There isn't a better way to buy a home than having the opportunity to get your bathroom, kitchen, or basement redone. How about a new roof, windows, HVAC, addition, expansion, deck, appliances, or just about whatever else you can consider. All of these items can be financed and so much more.
The FHA 203k rehab/renovation mortgage can be done and without much difference than any other mortgage program, including the time to close the key to making it all happen is EXPERIENCE!
To have a successful closing in 45 days or less you need to have 3 experienced components working for you:
If you are interested in taking advantage of the FHA 203k Renovation Mortgage Program or you are a real estate professional with clients who need this home loan do not be deterred by what you read on the internet or hear from others or you will miss out on a great opportunity. Just remember EXPERIENCE is the key to successfully closing your FHA 203k home loan in 45 days!
A Recent study released by HUD regarding the FHA 203k Renovation Mortgage Program stated that after all work was completed homes that utilized the FHA 203k home loan had over 22% equity in the home.
Imagine what that can mean to a new home buyer who has bought a fixer upper with a 3.5% down payment or the home owner that is wanting to sell their home in the near future but has little to no equity in their home to realize that needed profit.
Buying that new 'bargain' home that is priced to the buyer with instant equity is a near impossible task without planning. Planning home improvements that pay you back requires strategic consideration. There are several home improvements that will provide you with the home that you want and pay you back when the time comes.
Additions: nothing adds value more than a room addition, adding a garage, or a second floor. If additions are done wisely they are the most valuable home improvement when it comes to adding value to your home. Add a second story, expand into a master suite, a new or enlarged garage, create an extra bathroom, or give yourself an extra bedroom.
Kitchen: The kitchen is usually the focal point of most homes and is a major selling point. The appearance and layout of a kitchen can often be a deal breaker in a sale and can greatly increase the value of a fixer upper. Improving a kitchen doesn't have to be a huge investment, just replacing counter tops, key appliances, or cabinet hardware can transform the look and feel.
Basement: Make the most of this bonus space by finishing it for use as a quasi apartment, office, entertainment area, additional living space or combinations of all. A finished basement has appeal to multi-generational households.
Bathroom: Along with kitchens, bathrooms tend to age or become dated quite easily. Neutralize potential design flaws or modernize by replacing the vanity, installing efficient fixtures, and choosing hardware that facilitates easy access for all.
Siding: A tight, tidy home contributes to that initial curb appeal and adds value plus takes major home improvement worries off your hands and that of any future home buyer. New siding will add to the efficiency of your home, update, and add value. Spruce up your home's exterior by installing new siding or by replacing or repairing siding for an eye-catching protective finish.
Decks and Patios: Building a deck or patio is one of the least expensive ways to extend your living space and add value. Composite decking is a great low maintenance option, and even building a deck from pressure-treated wood can bring a high return on investment.
Windows: Installing replacement windows is a home improvement that pays everyone. The home buyer and/or home seller could possibly earn valuable tax credits and the home owner will enjoy lower energy bills. Especially in older homes new windows will increase the value of a home and have the beauty and charm that all home owners desire.
Other great improvements that will add value to your home, new and updated flooring, appliances, front entry doors, utilization of attic and/or dormer space, roofing, and HVAC updates.
Financing the cost of your home improvements especially when you are buying a new home can be challenging. The FHA 203k Renovation mortgage program was designed to help new home buyers finance the cost of purchasing their new home plus adding in to the new mortgage the cost or repairing and renovating the new home.
When you already own you home the cost of repairs and renovation can be costly, and near impossible if you do not have a lot of equity in your home. The FHA 203k program can help solve that problem by refinancing your current mortgage to a low interest rate plus rolling in the cost of the renovation and repairs.
If you are utilizing the FHA 203k loan to prepare for selling your home then you win on all fronts. You have increased the value of your home, rolled the cost into a very low interest rate mortgage, that will get paid off when you sell the home. If you have done your work wisely not only will the buyer of your home helped to off set the costs you will have realized a gain after the sale that was not there when you started.
I am a FHA 203k Renovation Mortgage Specialist, I help home buyers and home owners every day realize their home dreams. If you are looking for other renovation mortgage programs like the Home Style or Home Path Renovation home loan I can help you with that too. Please, if you have any questions or would like to start the mortgage process feel free to contact me.
'What mortgage programs are available for first time home buyers?', I have been a mortgage lender for going on 20 years and I seem to be asked that question nearly every day.
That question has meant many different things to the person who was asking, they were looking for easier qualification, less down payment requirement, no down payment, down payment assistance, lower credit scores and so many other things.
In my 20 years as a mortgage loan officer there has never been a mortgage program specifically for first time home buyers, at least not a mortgage program that has different qualification guidelines for first time home buyers and not everyone else. That is not to say there are mortgages that are better suited for first time home buyers.
FHA has always been referred to as the First Time Home Buyers home loan, it was not designed to be specific to them but the loan suits the needs of many who are purchasing their first home.
Where the confusion, I feel, comes in is with Down Payment Assistance Programs such as MHDC or the local grant programs offered in many of the areas. These down payment assistance programs are only for first time home buyers.
The #1 Best First Time Home Buyer Mortgage
I inform all my first time home buyers about all the loan programs available to them and allow them to make their choices but the one more program that provides the most upside to all first time home buyers is the FHA 203k Renovation Mortgage.
This mortgage program has all the benefits of a regular FHA home loan, low interest rates, easier qualification, lower credit scores, higher debt to income ratio, and it allows for co-signers. But, the added attraction to this loan program is that it allows the borrower to add into the loan amount the cost of renovating their new home.
Today's housing market is not rich in perfect move in ready homes for first time home buyers. In today's housing market as less and less homes come onto the market the perfect homes will have more competition and higher asking prices possibly bidding wars. Many of the perfect homes that are move in ready are really near perfect and actually could use a little extra work to meet the wish list of the new home buyer.
The FHA 203k Renovation Home Loan fixes all these home problems and allows a first time home buyer to explore every home on the market. Imagine finding a foreclosure, distress home, short sale, or a home that isn't perfect, more than likely this home is priced well below the market value. It's a deal! Plus, it has the size, looks, number of rooms, the school district, neighborhood, and garage that you want but it needs work.
The sink is missing, the carpeting is a green shag, there is very ugly wallpaper throughout the house, needs new windows, you would like new appliances, a modern kitchen, and a finished basement. The FHA 203k makes all this possible and much more.
Why go home shopping without being pre-approved for an FHA 203k Renovation loan? Sure, you may end up finding that perfect home and not needing the FHA 203k but you will find your next new home faster when you have the ability to see all the homes on the market.
Interesting fact, HUD came out with a study that stated that after all work is completed on homes with FHA 203k financing that the average retained equity in the home is 22% after only a 3.5% down payment.
Ask yourself this question as a first time home buyer, If I could buy the not so perfect home but end up with the perfect home in 3 to 5 months plus turn my 3.5% down payment into much more equity in that same time shouldn't I keep all my options open?
I am a Certified FHA 203k Specialist and I would like to help you get that perfect first home. I work with first time home buyers every day with all loan programs and down payment assistance program. Allow me to do the same for you.