St. Louis Mortgage Help

Are you about to start the home buying process? Are you currently in the process and you feel overwhelmed with the process of home buying? You’re not alone. Homebuyer surveys find that more people today want to buy a home, but challenges such as saving for a down payment and student loans are keeping them sidelined.

We know the vast majority of buyers (92 percent) use online search at some point in their home buying process. Maybe that’s how you found me at www.bobrutledge.com!

But, before you start picking out your dream house online, take a minute to make sure you grasp these 7 key facts about homeownership.

1. Go back to school (for a day). We know you probably just Goggled “how to buy a home,” but did you know there are homeownership education courses that can really help you prepare? Homebuyer counseling is occasionally required when using a down payment assistance program, but any buyer can benefit. You’ll learn about the home buying process, improving your credit, mortgage terms, planning a budget and more. Plus, a new study finds that by simply participating in these in person or online courses, you’ll reduce your risk of foreclosure by 42 percent.

2. Get an agent. If you aren’t yet a homebuyer, there’s no reason not to have a real estate agent. Your agent’s commission will come from the home you purchase, not your pocketbook. Everybody wins! Even if you don’t think you’ll need help with lots of showings, a real estate agent will help you navigate contracts between you and the seller and set up important things like the home inspection. As a new buyer, you’ll benefit from the expert help.

3. Find the right lender. (PICK ME) Your mortgage lender will help you secure your home financing—and, there are many types of banks and lenders who can help. Unfortunately, according to the Consumer Financial Protection Bureau (CFPB), nearly half of homebuyers don’t shop around for a mortgage lender. Like you, your finances and home buying goals are unique. So, it makes sense to shop around and interview your lender for the job. Find a lender that can work within your parameters and not their own, too many lenders will make YOU

4. Your credit score matters. The type of loan you get, including interest rates and points paid, is primarily determined by your credit score. The better your credit score, the more affordable loan you can get, often with more options for a low down payment. For low down payment loans, your MIDDLE credit score needs to be a minimum of 620. Review your credit report, make adjustments and get prepared so you can enjoy the lowest interest rate possible and save cash over the life of your loan.

5. You don’t need 20 percent down. You may have heard or read that you need 20 percent down. It’s not necessarily a bad thing, but that’s just not the case. And, if using a low down payment can get you in a home now (instead of 3 years from now), you’ll enjoy low rates and get out of a rising rent situation. Low down payment options have been around for a long time. In fact, data shows that low down payment loans with sound underwriting (loan is fully documented, income verified) are just as successful as loan with large down payments.

6. Down payment programs offer savings. Did you know the average down payment assistance benefit is more than $8,000? Many homebuyers don’t know about homeownership programs that can help them get in a home much more quickly and provide a valuable cash cushion for other home buying expenses. You could save on save on your down payment and closing costs, or even get ongoing tax credits. If you would like to see how a low down payment mortgage and down payment programs can help to get you into a new home with zero out of pocket expense follow this link to my ZERO PROGRAM.

7. Don’t forget to budget closing costs. Most buyers focus on saving for a down payment, but your closing costs can run you another 3 to 5 percent of the sales price. It’s important to factor in those costs so you are prepared for the closing table. Ask your agent about negotiating those costs with the seller. In addition, some homeownership programs can help you cover your closing costs.

Posted by Bob Rutledge on May 9th, 2018 3:05 PM

(1) Shopping for a house before a mortgage

It is so much more fun to look at homes than it is to talk about your finances with a lender. So that’s what a lot of first-time home buyers do: They visit properties before finding out how much they are able to borrow. Then, they are disappointed when they discover they were looking in the wrong price range (either too high or too low) or when they find that right home they scramble to get financing, and the mortgage is not something you want to rush or put too little of time in to. In today’s housing market you want to show home sellers you are a serious buyer and able to make a serious offer when you find that right home.

How to avoid this mistake: Talk to a mortgage professional about getting pre-qualified or even preapproved for a home loan before you start to seriously shop for a place. The pre-qualification or preapproval process involves a review of your credit, income and expenses. Having a per-qualification/pre-approval letter in hand will make your offer more competitive, and most offers today must have this letter.

 

(2) Not looking for first-time home buyer programs

 

As a first-time home buyer, you probably don’t have a ton of money saved up for the down payment and closing costs. But don’t make the error of assuming that you have to delay homeownership while saving for a huge down payment. There are plenty of low-down-payment loan programs out there.

Besides low down payment mortgage programs there is a lot of down payment assistance programs available to first time home buyers. Many times the funds that are available to you from DPA (down payment assistance) Programs will cover your entire down payment.

Even if you have saved enough for a low down payment mortgage program keeping your savings in your pocket will allow you to pay with cash for the items you need for your new home. I see too many home buyers use credit to purchase new home items, increasing your monthly credit obligations just after purchasing a new home.

Visit my website at http://www.bobrutledge.com/MODPA to learn more about what is available in the State of Missouri!

How to avoid this mistake: Ask a mortgage lender about your options. You might qualify for a Veterans Administration or U.S. Department of Agriculture loan that doesn’t require a down payment. Federal Housing Administration loans have a minimum down payment of 3.5%, and some conventional loan programs allow down payments as low as 3%. Ask about down payment assistance programs as well. Do your own homework too, search for DPA programs in your area.

 

(3) Not hiring a buyer’s agent

 

Too many home buyers make this mistake! Do not make the mistake of working directly with the seller’s real estate agent, who was first hired and obligated to secure the best price and terms for the seller. Do not be persuaded that a Real Estate Agent can negotiate in all fairness to both sides, it is impossible. As a novice home buyer, you could be overmatched when negotiating with an experienced agent who’s working on the seller’s behalf.

How to avoid this mistake: Work with an exclusive buyer’s agent, who has a duty to work in your best interests. If you do not know a real estate agent, seek out referrals from your friends and family. But, if you are working with a Mortgage Lender they will know many qualified real estate agents in the area and especially an agent who will fit your needs.

 

(4) Using up all of your savings

 

If you buy a previously owned home, it almost inevitably will need an unexpected repair not long after. Maybe you’ll need to replace a water heater, repair a crack in the chimney or get rid of hidden mold.

Having money in your account after you close is one of the best situations for any home buyer. Besides the home repairs that will come, what about the small items that will be needed for your new home the moment you move in.

Using your own funds and not your credit cards will keep you from increasing your debt loan. You have a new house payment, normally at or higher than your previous rent, try not to add to your monthly debt with additional credit card purchases if you don’t have to.

Read about my ZERO PROGRAM at http://www.bobrutledge.com/zero-down-payment-closing-costs and how easy it is for new home buyers keep their savings in their pockets.

How to avoid this mistake: Save enough money to make a down payment, pay for closing costs and moving expenses, and take care of unexpected expenses. This is easier said than done. But you can buy a home with a down payment of much less than 20%, allowing you to conserve your savings.

 

(5) Ignoring a home’s flaws and drawbacks

 

A lot of first-time home buyers fall in love with one of the first properties they look at. They ignore the negatives of the house and its neighborhood.

But you can’t disregard the downsides forever. For example, you might think you’ll be OK with a long commute, but after a few months of spending too many hours stuck in traffic, you’ll wish you had bought a house closer to work.

How to avoid this mistake: Do two things. First, resolve to visit many of houses  before making an offer, you’ll be less likely to fall in love with the first or second or third home you look at.

 

Second, write a list of the attractive and the unattractive qualities of each house, and pay attention to each home’s downsides.

(6) Being indecisive

 

The flip side of choosing a place too quickly is acting too slowly when you find the right home. In a market with more buyers than sellers, you have to move fast.

I see this a lot when I first pre-approve a home buyer, they needed some time to think about it and made an offer two or three days after viewing a house, only to discover that another buyer had swooped in and made a successful offer. This will only happen to you after the first couple times, but by then you will know what you want in a home. If this happens to you know that it is normal and simply a part of the learning process of being a first time home buyer…..all things happen for a reason.

How to avoid this mistake: Once you look at multiple houses, and you get a feel of the market and you know what the market is like and where the prices are at, and you see something you like, don’t hesitate to make an offer, because you and 10 other people will be interested in that same property, this is today’s housing market.

 

(7) Overpaying for a house

 

First-time home buyers tend to pay more than experienced buyers would pay for the same house, according to research conducted by two economists with the Federal Housing Finance Agency. In their analysis of appraisal data from more than 1.7 million home sales, FHFA economists Jessica Shui and Shriya Murthy concluded that first-timers overpay by an average of 0.79%, which was nearly $2,200 per house, according to the data set they examined.

Shui and Murthy pointed to the inexperience of first-time home buyers. Real estate agents say newbie buyers let their emotions take over, too. First Time Home Buyers tend to overlook potential negatives and only look at the positives of a particular house. I tell me home buyers to act with their heads and not with their heart, but I know I am asking for the impossible so just use as much of one as the other.

How to avoid this mistake: Ask your agent for a competitive market analysis, a report that looks at the prices of comparable nearby homes that have been sold recently. And it helps to fully understand the real estate process, so seek out as much information as possible. If you have friend that recently went through the process or are currently seek out their advice.

 

(8) Skipping the home inspection

 

In some markets, a lot of buyers compete for a small number of properties for sale. In these strong seller’s markets, buyers are tempted to waive a home inspection. It gives them a competitive edge over smarter buyers who wouldn’t dream of forgoing an inspection before plunking down hundreds of thousands of dollars for a home.

It’s a HUGE mistake to buy a previously owned home without an inspection because there could be expensive, hidden damage that you wouldn’t spot but an inspector would.

How to avoid this mistake: Simple: NEVER EVER ALLOW THIS TO HAPPEN. Hire a licensed home inspector. Your real estate agent will gladly make a recommendation, but it’s better to hire an inspector of your own choosing who doesn’t depend on your agent for referrals. Plus, require that a home inspection contingency is included in your sales contract, your BUYER AGENT who represent you will help you get this negotiated in the sale contract.

 

(9) Underestimating the costs of ownership

 

After you buy a home, the monthly bills keep stacking up. This can come as a surprise if you’re not ready.

Keep in mind it’s not just your mortgage payment, you’re going to have the utilities bills that you did not or may not have been paying when you rented.

Renters may have been paying these kinds of bills, too. But the new home could very possibly have higher costs simply because your new home is bigger. Your house may come with entirely new bills, such as homeowner association fees.

How to avoid this mistake: Work with a real estate agent who can tell you how much the neighborhood’s property taxes and insurance typically cost. Ask to see the seller’s utility bills for the last 12 months the home was occupied so you have an idea how much they will cost after you move in. Ask for a seller disclosure for every house you are interested in, many times this will help you.

 

(10) Miscalculating repair and renovation costs

First-time home buyers are frequently surprised by high repair and renovation costs. Buyers can make two mistakes: First, they get a repair estimate from just one contractor, and the estimate is unrealistically low. Second, their perspective is distorted by reality TV shows that make renovations look faster, cheaper and easier than they are in the real world.

 

How to avoid this mistake: Assume that all repair estimates are low.

Seek more than one estimate for expensive repairs, such as roof replacements. A good real estate agent should be able to give you referrals to contractors who can give you estimates. But also seek independent referrals from friends, family and co-workers so you can compare those estimates against ones you receive from contractors your agent refers.

Consider purchasing a home in need of repairs with a renovation mortgage program that will allow you to use your mortgage to purchase your home as well as fund the repair/renovation costs all in one new home loan. Want to learn more about renovation mortgages visit my website to Learn More About Renovation Mortgages at http://www.bobrutledge.com/HomeStyle-Renovation-Mortgage

Posted by Bob Rutledge on April 17th, 2018 11:55 AM

The 3% Down Alternative to FHA

It seems that a lot of people think that Conventional financing requires a minimum down payment of 20% or more.

I am shocked at how many folks I speak to every day that think that a conventional loan is not an option for buying a home with a low down payment.

Both Fannie Mae and Freddie Mac, the conventional mortgages, have special loan programs available that, based on your income, and/or the geographic region you are buying in, allows you to buy with as little as 3% down payment.

Normally Better Credit is Best

With normal conventional loan programs they tend to favor better credit scores, through their risk based pricing they punish borrowers with lower credit scores with costs to the lender that increase interest rates if you are not perfect in the eyes of Fannie or Freddie.

If you’re one of those homebuyers, or homeowners that has excellent credit to decent credit, but not a lot of equity or money for a down payment, you may be surprised at conventional loan options offer.

Fannie Mae HomeReady

Fannie Mae’s HomeReady program is designed to meet the diverse needs of today’s buyers using flexible underwriting guidelines for credit worthy low-to-moderate income borrowers trying to finance a home.

HomeReady Better Features

  • Income from non-borrowing household members can be considered as a compensating factor to allow debt to income ratio greater than 45%, up to 50%.

  • Can use income from rental unit and boarder income for qualifying.

  • Allows non-occupying borrowers, like a parent, to help meet debt to income requirements.

  • Financing up to 97% loan to value for the purchase of a one-unit principal residence.

  • Financing up to 95% loan to value for limited cash out refinances, or 97% loan to value if mortgage being refinanced is owned or guaranteed by Fannie Mae.

  • You are NOT required to be a first time home buyer to qualify for this program

  • Private mortgage insurance is discounted, in many cases below that of FHA and a regular conventional mortgage.

  • Gifts, grants, community seconds, and cash-on-hand can be used as a source of funds for down payment and closing costs.

  • Nontraditional credit is allowed.  An example is rental history, or utility and insurance payments.

    Qualifying Requirements for HomeReady

    Borrowers using HomeReady are required to meet certain criteria that are not necessarily required if you’re using a traditional conventional loan with a maximum loan to value of 95% (5% down payment for purchase).

    Homeownership Education Requirement – A homeownership education course may be required unless you have previously taken a course required by a community seconds program, or if you’ve completed a course from a recent attempt to purchase another home.

    Income Eligibility – HomeReady is available to any homebuyer or homeowner that meets the income limits of the property location.  The income limits may be waived if the property is located in a “targeted” low-to-moderate income Census Tract.

    You can look up the income and property eligibility by entering the address of the home you’re interested in into Fannie Mae’s Eligibility Search Tool Here

    Freddie Mac Home Possible Mortgages

    Freddie Mac’s Home Possible mortgage offer low down payments for low-to-moderate income homebuyers, or buyers in high-cost or underserved communities.

    Freddie Mac offers two different low down payment options, Home Possible 95% Loan to Value, and Home Possible Advantage 97% Loan to Value. I will only address the 97% or 3% down payment option.

    Home Possible 97% Features

  • Maximum loan to value 97%.  Minimum 3% down payment for purchase.

  • 1-unit single family unit homes, condominiums, and planned unit developments are eligible.

  • Flexible sources of down payment.  Down payment can come from a variety of sources, including friends and family, employer-assistance programs and secondary financing.

  • No cash-out refinancing is available up to 97% loan to value for borrowers who occupy the property.

  • Income flexibility.  Borrowers with income above the area median income (AMI) may be eligible in high-cost areas.  No income limits in underserved areas.

  • You can check eligibility by using Freddie Mac’s Home Possible Income & Property Eligibility Tool Here.

  • Private mortgage insurance is discounted, in many cases the monthly mortgage insurance is well below that of a regular conventional mortgage and below that of FHA

  • All borrowers must live in the property.  Non-occupying borrowers not allowed at 97% loan to value.

    How Do I Choose The Best Option?

    There is very little to no difference between the costs and interest rates of these two programs, so it comes down to your financial situation that may determine which option is best for you.  In a sense, the best option chooses you.

    FHA, HomeReady, or Home Possible should all be considered for many home buyers that in the past were placed only in a FHA mortgage. What use to be has changed, if yesterday you were a FHA mortgage today you may have a better option

    A common example is if you have student loans with Income Based Repayment (IBR) payments. FHA, Freddie Mac, and Fannie Mae all handle this situation differently.

    Another example is that the targeted income and property lookup tools offer different results.  If you look up a property using Fannie Mae’s HomeReady lookup tool, you may make too much income to qualify, whereas if you look up the same property using Freddie Mac’s Home Possible lookup tool, you may qualify. FHA does not have a maximum income limitation.

    If you are considering a new home purchase and want a low down payment option you need to consider a mortgage lender that has experience with FHA, Home Possible, and HomeReady, and is willing to consider all possible options for you.

    If you want to talk with me about what options are available to you please contact me, Bob Rutledge, at 314-628-2218 or email me at brutledge@usa-mortgage.com

Posted by Bob Rutledge on January 24th, 2018 10:08 AM

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