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Saturday, March 7, 2009
Ten Rules...When Applying for a Mortgage Loan
1. Thou shall NOT change jobs, become self-employed or quit your job.
2. Thous shall NOT buy a car, truck or van (or you may be living in it)!
3. Thou shall NOT use charge cards excessively or let your accounts fall behind.
4. Thou shall NOT spend money you have set aside for closing.
5. Thou shall NOT intentionally omit information from the loan application.
6. Thou shall NOT buy furniture or make other large purchases on credit.
7. Thou shall NOT originate any inquiries into your credit.
8. Thou shall NOT make large deposits without first checking with your loan officer.
9. Thou shall NOT change back accounts.
10. Thou shall NOT co-sign a loan for anyone.
2. Thous shall NOT buy a car, truck or van (or you may be living in it)!
3. Thou shall NOT use charge cards excessively or let your accounts fall behind.
4. Thou shall NOT spend money you have set aside for closing.
5. Thou shall NOT intentionally omit information from the loan application.
6. Thou shall NOT buy furniture or make other large purchases on credit.
7. Thou shall NOT originate any inquiries into your credit.
8. Thou shall NOT make large deposits without first checking with your loan officer.
9. Thou shall NOT change back accounts.
10. Thou shall NOT co-sign a loan for anyone.
Credit Scoring Quick Answers
Boy…do we get this question a lot. “My credit score is terrible…how can I fix it?” Can I still buy a house? Well first off, no credit score is beyond repair...some are just better than others. And even though the mortgage lenders have tightened up their requirements for lending their money to home buyers, that is not to say that even marginal credit scores can’t get you a mortgage.
The standard in the mortgage lending community or benchmark is called…FICO…which stands for Fair, Isaac and Company which provides the credit scoring model. And they have set a FICO score of 680 as the “stake in the ground” by which all other credit scores are measured. I won’t get into how the score is determined…that’s a whole other subject. But anything at 680 or above is considered “A” credit or “A” paper. This means that a buyer can generally get just about any type of mortgage that they want including 100% financing with really good rates. The higher the FICO score goes, the better the mortgage programs get.
Now, if the FICO score is below 680, all is not lost. Some mortgage lenders still have what is called “A minus” programs for buyers that are just below the magical 680 score but still with other good qualifications. I just worked with a first time buyer that had a FICO score of 677 but was still able to get 100% financing. They had to pay mortgage insurance…which with a 680 score would have been eliminated…but still received a very good mortgage rate with no points.
When a buyers FICO score starts falling well below 680…the traditional sub-prime market which has all but vanished…things get a little more challenging. Fortunately, FHA mortgage programs are still available to help these types of buyers and more of the sub-prime lenders are starting to add these to their product lines not only to help these types of buyers BUT ALSO TO STAY IN BUSINESS. Believe me, lenders will do everything they can to help…it’s mutually beneficial after all.
If you want to improve your credit score, here are some tips that might help…
What does a credit score range from?
300 to 850
What is a good score?
680 and above is considered “A” credit.
What determines the credit score?
35% payment history (late collections, charge-offs, public records)
30% account utilization (balances being carried)
15% length of credit history
10% types of credit (mixture is best)
10% inquiries (only the first 10 count)
Should a person payoff their debt?
The only debt that should be paid during the loan process is unsecured debt (credit cards). Paying collections will decrease the credit score due to the date of last activity become recent. But if you do decide to pay off a collection, MAKE SURE that the creditor gives you a letter of deletion first.
What balance should I carry on my credit card to maximize my credit score?
As close to zero as possible. But if you can’t pay them to zero, make sure that all balances are under 50% of the limit, preferably 30%.
How much do inquiries hurt the score?
Between 2 and 50 points…but only for a year from the date of the inquiry. Only the first ten inquiries are counted and all auto and mortgage inquiries made within a 14 day period are treated as one.
Does the score go down if a person runs their own personal credit report?
NO. You can pull your report as many times as you want personally and it will not affect your score. However, the score that you receive from a credit report you ordered will be higher than the credit score from a lender.
How many credit cards should a person have?
3 to 5 cards is best.
Hope this helps a little in trying to understand this whole issue of credit scoring. Needless to say, there are lots of ways to work within the framework that has been established to get a mortgage…even without perfect credit.
The standard in the mortgage lending community or benchmark is called…FICO…which stands for Fair, Isaac and Company which provides the credit scoring model. And they have set a FICO score of 680 as the “stake in the ground” by which all other credit scores are measured. I won’t get into how the score is determined…that’s a whole other subject. But anything at 680 or above is considered “A” credit or “A” paper. This means that a buyer can generally get just about any type of mortgage that they want including 100% financing with really good rates. The higher the FICO score goes, the better the mortgage programs get.
Now, if the FICO score is below 680, all is not lost. Some mortgage lenders still have what is called “A minus” programs for buyers that are just below the magical 680 score but still with other good qualifications. I just worked with a first time buyer that had a FICO score of 677 but was still able to get 100% financing. They had to pay mortgage insurance…which with a 680 score would have been eliminated…but still received a very good mortgage rate with no points.
When a buyers FICO score starts falling well below 680…the traditional sub-prime market which has all but vanished…things get a little more challenging. Fortunately, FHA mortgage programs are still available to help these types of buyers and more of the sub-prime lenders are starting to add these to their product lines not only to help these types of buyers BUT ALSO TO STAY IN BUSINESS. Believe me, lenders will do everything they can to help…it’s mutually beneficial after all.
If you want to improve your credit score, here are some tips that might help…
What does a credit score range from?
300 to 850
What is a good score?
680 and above is considered “A” credit.
What determines the credit score?
35% payment history (late collections, charge-offs, public records)
30% account utilization (balances being carried)
15% length of credit history
10% types of credit (mixture is best)
10% inquiries (only the first 10 count)
Should a person payoff their debt?
The only debt that should be paid during the loan process is unsecured debt (credit cards). Paying collections will decrease the credit score due to the date of last activity become recent. But if you do decide to pay off a collection, MAKE SURE that the creditor gives you a letter of deletion first.
What balance should I carry on my credit card to maximize my credit score?
As close to zero as possible. But if you can’t pay them to zero, make sure that all balances are under 50% of the limit, preferably 30%.
How much do inquiries hurt the score?
Between 2 and 50 points…but only for a year from the date of the inquiry. Only the first ten inquiries are counted and all auto and mortgage inquiries made within a 14 day period are treated as one.
Does the score go down if a person runs their own personal credit report?
NO. You can pull your report as many times as you want personally and it will not affect your score. However, the score that you receive from a credit report you ordered will be higher than the credit score from a lender.
How many credit cards should a person have?
3 to 5 cards is best.
Hope this helps a little in trying to understand this whole issue of credit scoring. Needless to say, there are lots of ways to work within the framework that has been established to get a mortgage…even without perfect credit.
Friday, March 6, 2009
Worry Free Mortgage-Mortgage payments made for you if you lose your job!!!
To see a video from Fox 4 News about this program click the following link.
http://www.myfoxdfw.com/dpp/news/Worry-Free_Mortgage_Plan_Prot
We are proud to partner with Service First and look forward to helping homebuyers protect their home with this terrific program.
John and Wanda
Many Americans today are concerned with job stability and how they are going to make their mortgage payments if they lose their job. Let “WORRY FREE MORTGAGE” help you with life’s unexpected events for up to 2 years.
Mortgage Protection Program
Today the number one reason for mortgage default is loss of employment. This is why the involuntary-loss-of-employment coverage is such a tremendous benefit, protecting homeowners from the very thing that can put their households into financial crisis. Six months of mortgage payments – Qualified homeowners who experience involuntary loss of employment will receive up to $1,800 per month (PITI) for up to six months coverage.
Emergency Fund Program
This service provides homeowners with assistance for certain types of unforeseen financial difficulties. In short, this program is a safety net for homeowners should they experience a short-term financial challenge. This service provides both financial and educational assistance that can relieve the stress of home ownership.
Delinquency Protection Services
This service provides financial protection to homeowners for life’s unexpected events. To assist in creating and maintaining financial wellness, the communication approach to education and counseling is unique and effective. As a result of the Delinquency Protection Services, homeowners typically reach out to the lender even before they miss a payment and certainly before it’s too late.
Take the uncertainty out of home buying!
Call John and Wanda for more details.
http://www.myfoxdfw.com/dpp/news/Worry-Free_Mortgage_Plan_Prot
We are proud to partner with Service First and look forward to helping homebuyers protect their home with this terrific program.
John and Wanda
Many Americans today are concerned with job stability and how they are going to make their mortgage payments if they lose their job. Let “WORRY FREE MORTGAGE” help you with life’s unexpected events for up to 2 years.
Mortgage Protection Program
Today the number one reason for mortgage default is loss of employment. This is why the involuntary-loss-of-employment coverage is such a tremendous benefit, protecting homeowners from the very thing that can put their households into financial crisis. Six months of mortgage payments – Qualified homeowners who experience involuntary loss of employment will receive up to $1,800 per month (PITI) for up to six months coverage.
Emergency Fund Program
This service provides homeowners with assistance for certain types of unforeseen financial difficulties. In short, this program is a safety net for homeowners should they experience a short-term financial challenge. This service provides both financial and educational assistance that can relieve the stress of home ownership.
Delinquency Protection Services
This service provides financial protection to homeowners for life’s unexpected events. To assist in creating and maintaining financial wellness, the communication approach to education and counseling is unique and effective. As a result of the Delinquency Protection Services, homeowners typically reach out to the lender even before they miss a payment and certainly before it’s too late.
Take the uncertainty out of home buying!
Call John and Wanda for more details.
10 Things to Know When Purchasing a HUD Home
All information and instructions (list of homes, how to bid, when to bid, deadlines, etc) can be found on www.SouthwestAlliance.com
An independent FHA-approved appraisal and an inspection are generally completed within two weeks of acquisition of the property, and the reports are sent to the Regional Office. A Property Condition Report (PCR) is then listed and available in the bidding system for buyers and brokers to download. Important: The PCR should not be used in place of an inspection performed by a licensed inspector; however, we highly recommend the review of the PCR prior to putting a bid on the home. Once the FHA appraisal and PCR is completed, a Disposition Plan is determined, and the house is initially listed at the appraised value, according to the FHA financing category that is appropriate, given the current condition of the property. It is important to understand the listing codes and how financing is affected (see below "Three Types of HUD Homes").
When coming to a value for HUD Homes, appraisers (who are chosen by HUD) are required to use other foreclosed properties in their calculation.
There are three types of HUD Homes:
Insurable (IN)- Properties listed in this category appear to meet FHA 203(b) financing requirements. No obvious repairs are necessary for HUD to insure an FHA loan to a qualified Purchaser.
Insurable with Repair Escrow (IE)- If a 203(b) FHA is the financing, the repair escrow must be use for the needed work specified in the listing. In completing the Sales Contract (HUD-9548), the escrow amount is NOT deducted from the net to HUD to derive the amount that will be entered on line #7, NOR is it added to line #3, the purchase price. There is a separate line in Item #4 for the repair escrow amount to be noted.
It is important to note that if a 203(b) FHA is the financing, the lender will add in the repair escrow into the base loan amount of the mortgage (as required by HUD). The lender originating the FHA 203 (b) loan establishes an escrow account for the amount of the repairs. The amount given with the listing includes a 10% contingency. After close of escrow, the lender will inspect work as it is completed on the house and distribute the repair monies as appropriate within ninety (90) days. The cost of the repairs are included in the loan amount and repaid by the borrower as part of the house payment. Any funds in the escrow account not used for the repairs will reduce the unpaid principal balance of the loan.
Note also that properties listed in this category are eligible for a 203(b) FHA loan with required "minimum property standard" (MPS) repairs totaling less than $5000 to be made by the Purchaser, financed by the FHA lender.
Note that the repair escrow only applies to FHA 203(b) financing. If non-FHA financing is used, or if a cash purchase is made for an IE property, the repair escrow does not apply.
Uninsurable (UI)- Properties listed UI, uninsurable, need more extensive repairs after close of escrow and are deemed not eligible for FHA mortgage insurance in their "as-is" condition. Cash, or other financing not involving FHA, is often used to purchase UI properties. However, a special acquisition and rehabilitation FHA loan program called 203(k) is frequently an excellent source of financing for homes in the owner-occupied category.
Note on FHA 203(k) Financing: UI properties are generally eligible for the FHA 203(k) loan program (most condos are excluded, unless specifically noted otherwise). Also, any IN or IE property may be purchased subject to 203(k) financing, instead of 203(b), if the house and the owner-occupant Purchaser's credit justify making improvements in excess of $5,000. Through this program, the lender can provide funds for rehabilitation along with the purchase mortgage.
FHA loans- Can ONLY use the HUD appraisal. Another appraisal CANNOT be ordered if the buyer is utilizing an FHA mortgage. If the buyer is purchasing a HUD Home and not utilizing an FHA mortgage, then an appropriate appraisal will need to be done (i.e., if buyer is going VA, then a VA appraisal will need to be done; if buyer is going Conventional, then a Conventional appraisal will need to be completed).
If 203(b) FHA is the financing - and the buyer bids above the listed price- the difference must be paid in cash and cannot be financed (i.e., If HUD has the house listed for $100,000 and the buyer bids $103,000- the $3000 will be paid out of pocket (as well as any other required down payment, closing cost and prepaids). If FHA financing is being used to purchase a HUD Home, the sales Price cannot be increased past the list price to cover closing cost or to make certain that the buyer gets the bid unless the buyer wants to pay the increased amount in cash.
If 203(b) FHA is the financing, HUD does not require the buyer to obtain another appraisal, have a survey or purchase a owner's title policy (although one is highly recommended).
HUD will only pay a maximum of 3% towards buyers closing cost and prepaids (if it is put in the contract and accepted by HUD). Note that if the buyer chooses to obtain an owner's title policy, HUD will only pay it if it is part of the up to 3% allowed (and only if it is put in the contract and accepted by HUD).
HUD began their $100 down payment incentive program Friday 11/30/07 and it is still is currently in effect. This ONLY applies to the purchase of HUD homes using FHA financing and offering a full price + offer.The $100 down payment is for owner occupants purchasing a HUD Home with FHA financing (203b)- Insured or Insured with Escrow, with full price or higher offers*.
This incentive is also available to owner occupant purchasers who obtain a FHA Home Repair loan (203K).
The buyer is given 45 days from the date of the executed contract (the date that a representative from HUD actually signs the contract). However, it is important that note that closing docs must be to the title company a minimum of seven business days prior to closing. HUD chooses the title company. Extensions after 45 days can possible be obtained from HUD, however, penalties apply.
Other Did You Knows for HUD HomesPower of Attorneys are not allowed for HUD Homes- all parties purchasing the property must be at closing.If the buyer is utilizing any other financing other than FHA, it is important that the property meets those specific guidelines. HUD will not allow any repairs prior to closing and if repairs are called for from the (i.e., VA) appraiser, then we run into a "Catch 22" situation. We will need to discuss the property condition up front.It is important to know that although it is allowed for HUD to pay 3% of the buyers closing cost and prepaids (including a owners title policy if desired), HUD looks at "net" (what they will walk away with) and the bid is a "blind" bid so the buyer wants to make the offer as attractive as possible.
The Good Neighbor Next Door Program is a totally separate program than described above. We will address this program at a later email.
An independent FHA-approved appraisal and an inspection are generally completed within two weeks of acquisition of the property, and the reports are sent to the Regional Office. A Property Condition Report (PCR) is then listed and available in the bidding system for buyers and brokers to download. Important: The PCR should not be used in place of an inspection performed by a licensed inspector; however, we highly recommend the review of the PCR prior to putting a bid on the home. Once the FHA appraisal and PCR is completed, a Disposition Plan is determined, and the house is initially listed at the appraised value, according to the FHA financing category that is appropriate, given the current condition of the property. It is important to understand the listing codes and how financing is affected (see below "Three Types of HUD Homes").
When coming to a value for HUD Homes, appraisers (who are chosen by HUD) are required to use other foreclosed properties in their calculation.
There are three types of HUD Homes:
Insurable (IN)- Properties listed in this category appear to meet FHA 203(b) financing requirements. No obvious repairs are necessary for HUD to insure an FHA loan to a qualified Purchaser.
Insurable with Repair Escrow (IE)- If a 203(b) FHA is the financing, the repair escrow must be use for the needed work specified in the listing. In completing the Sales Contract (HUD-9548), the escrow amount is NOT deducted from the net to HUD to derive the amount that will be entered on line #7, NOR is it added to line #3, the purchase price. There is a separate line in Item #4 for the repair escrow amount to be noted.
It is important to note that if a 203(b) FHA is the financing, the lender will add in the repair escrow into the base loan amount of the mortgage (as required by HUD). The lender originating the FHA 203 (b) loan establishes an escrow account for the amount of the repairs. The amount given with the listing includes a 10% contingency. After close of escrow, the lender will inspect work as it is completed on the house and distribute the repair monies as appropriate within ninety (90) days. The cost of the repairs are included in the loan amount and repaid by the borrower as part of the house payment. Any funds in the escrow account not used for the repairs will reduce the unpaid principal balance of the loan.
Note also that properties listed in this category are eligible for a 203(b) FHA loan with required "minimum property standard" (MPS) repairs totaling less than $5000 to be made by the Purchaser, financed by the FHA lender.
Note that the repair escrow only applies to FHA 203(b) financing. If non-FHA financing is used, or if a cash purchase is made for an IE property, the repair escrow does not apply.
Uninsurable (UI)- Properties listed UI, uninsurable, need more extensive repairs after close of escrow and are deemed not eligible for FHA mortgage insurance in their "as-is" condition. Cash, or other financing not involving FHA, is often used to purchase UI properties. However, a special acquisition and rehabilitation FHA loan program called 203(k) is frequently an excellent source of financing for homes in the owner-occupied category.
Note on FHA 203(k) Financing: UI properties are generally eligible for the FHA 203(k) loan program (most condos are excluded, unless specifically noted otherwise). Also, any IN or IE property may be purchased subject to 203(k) financing, instead of 203(b), if the house and the owner-occupant Purchaser's credit justify making improvements in excess of $5,000. Through this program, the lender can provide funds for rehabilitation along with the purchase mortgage.
FHA loans- Can ONLY use the HUD appraisal. Another appraisal CANNOT be ordered if the buyer is utilizing an FHA mortgage. If the buyer is purchasing a HUD Home and not utilizing an FHA mortgage, then an appropriate appraisal will need to be done (i.e., if buyer is going VA, then a VA appraisal will need to be done; if buyer is going Conventional, then a Conventional appraisal will need to be completed).
If 203(b) FHA is the financing - and the buyer bids above the listed price- the difference must be paid in cash and cannot be financed (i.e., If HUD has the house listed for $100,000 and the buyer bids $103,000- the $3000 will be paid out of pocket (as well as any other required down payment, closing cost and prepaids). If FHA financing is being used to purchase a HUD Home, the sales Price cannot be increased past the list price to cover closing cost or to make certain that the buyer gets the bid unless the buyer wants to pay the increased amount in cash.
If 203(b) FHA is the financing, HUD does not require the buyer to obtain another appraisal, have a survey or purchase a owner's title policy (although one is highly recommended).
HUD will only pay a maximum of 3% towards buyers closing cost and prepaids (if it is put in the contract and accepted by HUD). Note that if the buyer chooses to obtain an owner's title policy, HUD will only pay it if it is part of the up to 3% allowed (and only if it is put in the contract and accepted by HUD).
HUD began their $100 down payment incentive program Friday 11/30/07 and it is still is currently in effect. This ONLY applies to the purchase of HUD homes using FHA financing and offering a full price + offer.The $100 down payment is for owner occupants purchasing a HUD Home with FHA financing (203b)- Insured or Insured with Escrow, with full price or higher offers*.
This incentive is also available to owner occupant purchasers who obtain a FHA Home Repair loan (203K).
The buyer is given 45 days from the date of the executed contract (the date that a representative from HUD actually signs the contract). However, it is important that note that closing docs must be to the title company a minimum of seven business days prior to closing. HUD chooses the title company. Extensions after 45 days can possible be obtained from HUD, however, penalties apply.
Other Did You Knows for HUD HomesPower of Attorneys are not allowed for HUD Homes- all parties purchasing the property must be at closing.If the buyer is utilizing any other financing other than FHA, it is important that the property meets those specific guidelines. HUD will not allow any repairs prior to closing and if repairs are called for from the (i.e., VA) appraiser, then we run into a "Catch 22" situation. We will need to discuss the property condition up front.It is important to know that although it is allowed for HUD to pay 3% of the buyers closing cost and prepaids (including a owners title policy if desired), HUD looks at "net" (what they will walk away with) and the bid is a "blind" bid so the buyer wants to make the offer as attractive as possible.
The Good Neighbor Next Door Program is a totally separate program than described above. We will address this program at a later email.
$8,000 for First Time HomeBuyers
If you are a first-time home buyer, you could be eligible for up to a $8,000 Tax Credit when you file your income taxes! This means you could keep up to $8,000 of income tax you would have likely paid, or receive a larger tax refund. (For example, if you normally file your taxes and get back $2000, add $8000 for a total of $10,000 in your pocket with this offer)
Your home must be purchased between January 1, 2009 and November 30, 2009 and must be your primary residence. The up to $8,000 will not have to be repaid as long as the home buyer lives in the property for a minimum of three years.
Call now to learn more, we are here to help you purchase your next home.
Time is ticking away!!!! Don’t let this great opportunity pass you by!!!!
Your home must be purchased between January 1, 2009 and November 30, 2009 and must be your primary residence. The up to $8,000 will not have to be repaid as long as the home buyer lives in the property for a minimum of three years.
Call now to learn more, we are here to help you purchase your next home.
Time is ticking away!!!! Don’t let this great opportunity pass you by!!!!
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