How much do I need to put down on my home loan?

For conventional financing that answer is going to be: it depends. With great credit as little as 5% down has you in a conventional loan. With mediocre credit, 10%. But to eliminate the mortgage insurance you still need 20% down. Sometimes, with a bit more down, you may be able to get a better rate. Having a lender who will talk to you and find out what your needs are and presents different options is the best thing. Robyn Robertson from Suburban Mortgage (480-355-8106) talks to me in this video about different types of conventional loans and what is available today in the ever changing world of home lending.

The home buying process, the loan and what you should know

Once you have found the house and had your offer accepted there is a lot that needs to be completed. If you get all your paperwork into the lender in advance that is one less thing that needs to be done in the first week.

Find out what you qualify for before house shopping

I sat down with Robyn Robertson from Suburban Mortgage today. (480-355-8106) We talked about how just over the phone in a quick conversation she could estimate what you should be able to qualify for in a loan. But before you head out and get serious, be sure to get all the documentation to her to confirm the numbers, and get the Pre-Qual form filled out. It not only helps when submitting your offer, but also makes the first week of the contract process easier with lending requirements already taken care of.

Purchase and Remodel a home with only 3.5% cash out of your pocket

Today I attended a class on the FHA 203 K loan.  It has always been one of those things that sounds really good but is practically impossible to get done.   But I met a team of peeps all working together and getting the FHA 203k loans closed and people into their beautiful homes.

One of the challenges in todays market is that so many of the homes (foreclosures and short sales) are in poor condition.  Having items and issues that need repair in order to get a loan on the property; and with both short sale and foreclosure properties being “As Is” transactions, and no repairs being completed by the seller, getting a loan approved, funded and closed can be like pulling teeth without any Novocain.

In comes the FHA 203K team!

Together, a lender who will complete this type of loan; the home inspector, termite inspector, general contractor, HUD inspector, and a handful of other people that together know what is required, are working in unison to help people purchase these distressed properties, make the needed repairs and do some remodeling and updating at the same time.

How does it work?

The home buyer finds out what they will qualify to purchase.  Working backwards from there, if you qualify for 200,000 and you are going to put 20-35,000 into repairs and remodeling; look for homes priced around 160,000.  At the same time you have the home inspection, also bring in the general contractor and maybe the HUD inspector too.  Find out the cost for what is needed to be repaired and what you would like to have remodeled.  The cost of repairs and remodeling are rolled into the final loan amount. At closing the general contractor gets in the house and makes the repairs and remodeling, a few weeks later the home owner gets to move into their beautiful newly re-done home.

This takes an experienced team, a well oiled machine and fantastic communication.  I am glad to know the players! and to have been invited to join the team and help a few more buyers get into their dream home.

My Credit Score isn’t the same? Why?

When your lender ‘pulls your credit’ they get a Tri-Merged credit report.  That translates to, the single credit report they receive is a compilation of all 3 of the main credit bureaus reports.   The lender will use your Mid-Score.  That is not the average of your 3 scores, but the middle of the 3 scores.

Why do I have 3 different scores?  Shouldn’t they all be the same?

It seems like all the scores should be the same, but each bureau does its own computations; coming up with their own numbers.  Also, some companies only report to one credit agency, not like your mortgage that reports to all 3; So some of the credit agencies have different information to base your credit score on.

The lender will only use your mid-score to determine what type of loan you will qualify for.  So if they do need to do any credit repair, they will just work with the one credit bureau reporting your mid score.

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Correcting my Credit – what’s that all about?

There are many services out there that charge quite a bit to clean up your credit score.  If you are considering purchasing a home, I would suggest first contacting a good mortgage banker and see what could be done quickly, or will it be a process that takes time.

If you sit down with your mortgage person (ask me for a couple of very good ones) you can see what is on your credit.  Sometimes, there are a few things that just haven’t been updated.  If you can provide a statement (an online statement is perfect) that shows you have paid off the balance, or reduced the balance on an account.  That could be enough to bring your score up a few points.

If there are any accounts that are old and unpaid, it could hurt your credit to pay them off.  (I never said that determining credit made sense… )  In this case it may be possible to pay it off as part of your closing, and possibly even settle the debt for less money than owed.

Rescoring your credit can be costly; it runs $30 per account per credit bureau.  With several accounts to update quickly, the costs can add up fast.

Managing your credit repair can be tricky.  If you have the time, (you’re not looking to purchase a home or car right away) you can do it yourself.  Choose any of the services that you can get your credit report from, and check it out yourself.  If there are discrepancies;  get it corrected yourself.  Be sure to DOCUMENT, DOCUMENT, and DOCUMENT as you go with certified letters to confirm receipt, copies of everything and be diligent.

What goes into creating your FICO Score?

Most people (74%) believe your credit score is based on your income.  Not True!

  • 35% is payment history
    • The most important factor in your credit score is your payment history. Making payments on time is key in keeping and getting your score as high as possible.
  • 30% is the amount owed
    • Keep your credit card balances low, at the most have 30% owed and 70% available credit.
  • 15% is the history of your credit
    • How long have you had credit established? If you have all new credit, this could hurt you.
  • 10% is new credit (less than 6 months old)
    • Getting new credit can help someone with little or no credit, if all of your credit is established, not to worry
  • 10% type of credit
    • Diversity is best, a car loan, home loan, and a couple of credit cards.

Great credit requires a delicate balance.  Not too much on credit cards, not only a home loan;  But a balance, on time payments and the time to prove you are credit worthy.

All credit reports are not created equaly

I discovered a few new things at a class on Credit recently.

I had always thought a credit report is a credit report. That is not true. A consumer credit report and a lender credit report are two different critters. If you go to any of the credit reporting services, the score you get today, and the score your loan officer will get on the same day will not likely be the same. The lenders score will be lower.

Why? Well it has to do with the purpose for getting your credit scoring in the first place. For your personal information, for qualifying for insurance, and other smaller concerns, your score will be higher. If you are applying for a loan, especially a loan to purchase or refinance a home, the factors they take into consideration are weighted differently.

If you have excellent credit a few points either way won’t make a difference. With mediocre credit, a few points either way could increase your payment, or keep you from purchasing a home all together.

Why use your Realtors preferred lender?

The short answer: All lenders are not the same.

I recently completed a transaction where the lender was one my client had been working with. I respect the relationships that are built between LO (loan officer) and buyer. My client had been working with this LO building her credit back up and getting to the savings goals she needed to purchase a home.

As we started he promptly emailed me the LSR (Loan Status Report) a document that is included with every offer filled out by both the LO and the buyer. Soon after we were in contract, all going smoothly…. Everything was great.

Till it wasn’t. The LO was never available to answer his phone, he didn’t respond to his email. I finally had to call his office and get connected with his loan processor. The file had been in underwriting for over a week, we had been told we would get the file back in 48 hrs. I had no idea what the delay was. And with no communication, I was fearful of the worst. The selling agent was anxious too. We were supposed to close in just a few days, and I couldn’t get the lender to communicate!

When he did communicate, he assured me that the file would be out of underwriting that afternoon…. But it wasn’t and not the next day or the next… once the file did come out of underwriting it was to be just 48hrs till the documents would be at the title office for signing, and funds were to be sent at the same time as the docs so there would be no delay. It took almost another week to get the docs, and the funds were delayed beyond that.
Thank goodness the seller was patient. We extended the contract again, and again, again and finally closed.

It takes a team to purchase and close on a home. Each person is needed to do their part, working hard behind the scenes to make the transactions move along smoothly. If there is one member of the team not holding up their part, it makes the whole transaction stressful for everyone.

Communication is key, I don’t care if you prefer to communicate via phone, email, text or any other form as long as you communicate.

In this instance the buyer had her belongings packed in a truck and had fully moved out of her previous home, and had to stay with friends as she was homeless during the delays.

Lending changes

I mentioned in one of my previous posts (Down Payment Assistance Programs – are they at an end?)  that Down Payment Assistance was ending as of October 1st.  That is a federal guideline. 

Many of the lenders, knowing this rule was coming into effect, adjusted their guidelines early.  Several lenders no longer accept the Down Payment Assistance loans at all.

If you require down payment assistance and are looking to purchase a home.  You better do it quick.  Most of the lenders require you to be in contract and have your loan locked by the end of August. 

 

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