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Showing posts from February, 2016
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How Do Low Credit Scores Affect Mortgage Loans?
While good credit is a requirement for most every mortgage loan, credit doesn’t necessarily have to be pristine. In fact, those with “perfect” credit who have a credit score approaching 850 are very, very hard to find. Credit scores will range from 300 to 850 and while all three major credit repositories of Equifax, Experian and TransUnion provide these scores to a mortgage company when borrowers submit a loan application, those three scores will be different but close to one another. A borrower might have a credit score of 720, 723 and 729 for example. The lender then ignores the lowest and the highest number and uses the middle one when evaluating a loan application. But how does a low credit score affect your mortgage loan?
That depends upon the type of loan program as well as the amount of initial down payment. Generally speaking, lenders can approve a conventional mortgage loan with a credit score of as low as 620 and with certain exc…
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UNDERSTANDING A VA IRRRL REFINANCE The government is big on acronyms and the Department of Veteran’s Affairs is no different. The VA mortgage program has a specific type of refinance loan called the Interest Rate Reduction Refinance Loan, or IRRRL. This is a program unique to the VA and allows those with existing VA mortgage loans refinance with less documentation required and a streamlined approval process. In fact, many VA lenders refer to the IRRRL programs as the VA streamline due to the ease of an approval.

For example, when borrowers use their VA eligibility to buy and finance a home, the approval process is much like any other loan used to buy a home. The lender must document using various third parties the income and assets of the applicant. Applicants will be asked to provide their most recent pay check stubs covering a 30 day period as well as their two most recent W2 forms. If the borrowers are self-employed or otherwise use other types of income to qualify for the loan they …
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WHAT TYPE OF LOAN CAN A MANUFACTURED HOME BUYER TAKE OUT?
When someone is considering a manufactured home they will often ask if there are mortgage programs available just like with any other type of property and if so are they competitive? The answer is there are several loan options and they’re just as competitive as most any other type of home loan. Manufactured housing is becoming increasingly popular among first time buyers especially as housing prices have rebounded and in many cases are simply out of reach for some. Yet the choices of financing offer options that provide an affordable solution when financing a manufactured home.
Financing for a manufactured home comes from two primary loan types, government-guaranteed and conventional. Government guaranteed loans are those underwritten to guidelines set forth by the VA, FHA and USDA. Conventional mortgages are the most common and are loans using guidelines established by Fannie Mae and Freddie Mac. VA loans are available for manuf…
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HOW HAS HOME OWNERSHIP BECOME MORE ACCESSIBLE?

There are tremendous advantages owning a home compared to renting. Yes, renting does have benefits that owning does not but primarily those benefits are geared toward mobility and having the ability to change addresses whenever you want to. But over time, owning and creating wealth through equity as well as the income tax advantages are just too strong to overcome. But for those who have yet to buy their first home they may be sitting on the sidelines thinking it’s too tough of a task to get approved for a mortgage loan these days. But that’s really not the truth.
Over the past 10 years or so, the mortgage industry has made some giant swings. For a time, almost anyone could get approved for a mortgage as lenders devised some rather creative mortgage programs that allowed those with poor credit, instable income or a lack of a down payment to finance a home. Then, the industry put the brakes on loan approvals and the toxic loans that led to t…
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STREAMLINE REFINANCE  VS. CONVENTIONAL REFINANCE
Borrowers do their homework and work with their loan officer and choose the perfect mortgage for their home purchase. Yet even though such careful work is put to good use there can be a time in the future when that loan needs to be replaced with another. A refinance occurs when a new mortgage replaces an existing one. Borrowers can decide to refinance should mortgage rates fall or they want to get out of an adjustable or hybrid mortgage and into the stability of a fixed rate loan. Even changing loan terms to reduce the amount of interest paid over the life of the loan is another good reason to refinance. But once the decision is made to apply for a refinance, there are some options and one of those options is between a streamline and a conventional refinance.
There are two basic types of home loans today, conventional loans and government-backed loans. Conventional loans are those underwritten to standards set by Fannie Mae and Freddie Ma…
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WHY IS A MANUFACTURED HOME A GREAT OPTION FOR FIRST TIME BUYERS?

It’s pretty well known that the greatest challenge for first time home buyers is coming up with enough money for the down payment and closing costs. But it can also be true that the local housing market puts home ownership out of reach for many simply because the median price of homes in the area is too high for some first time home buyers.

FHA loans can help first time buyers because the down payment requirement is only 3.5 percent of the sales price of the home and with a financial gift or grant almost all of the
down payment and associated closing costs can be paid for and the buyers only have to have $500 of their own funds in the transaction. VA loans are also another option but those programs are reserved for veterans and others who have served or active duty. USDA loans can help but they’re reserved for rural and semi-rural areas. Still, that doesn’t address the affordability issue.

Getting financing for a manufactur…
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HOW TO QUALIFY AND USE CONVENTIONAL CASH-OUT PAYOUTS? When homeowners decide it’s time to refinance, whether to get a lower rate, adjust the term or switch from an adjustable rate mortgage to a fixed rate loan, they also have the option of pulling out equity in the form of cash. This is called by the industry a “cash out” refinance. In addition to refinancing the loan and rolling the associated closing costs in with the loan amount, borrowers can add a bit more to the final loan and receive cash at the settlement table. So how does one qualify for a cash out refinance and what can the borrowers use the funds for?
A cash out refinance qualification is much like any other qualification. Borrowers are asked to provide evidence they can afford the new monthly payments with copies of recent pay check stubs and W2 forms. For the self-employed borrowers, they’re also asked to bring their two most recent federal income tax returns. In addition to any existing credit obligations, lenders like to …
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HOW MUCH SHOULD A FIRST TIME BUYER BORROW?


This is a question that should be addressed more often than it is because it’s an important one. A mortgage is a financial commitment and one that buyers will be taking on for quite some time so the proper loan amount and loan terms is very important. Let’s look at how lenders determine how much a first timer should borrow and then get a perspective of what the actual buyers might say.
Lenders use a system of debt-to-income ratios to help determine affordability. When someone first speaks with a loan officer they’re asked to provide some basic information about how much they make each month and any current monthly credit obligations they have such as credit cards or a car payment. The lender then takes no more than 43% of their gross monthly income and subtracts the credit card and car payment for an amount reserved for a mortgage payment. This amount should be approximately one-third of their gross monthly income. Finally, the loan officer the…
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SAVING TO BUY A HOME WITH AN IDA
What’s an IDA? IDA stands for the Individual Development Account and is an excellent way for first time buyers to save up funds to buy a home. IDA funds can be used for a down payment and closing costs but are also available to save for college or trade school or even to start a business however saving for a first home is one of the most popular options. How does an IDA work? The money you save on your own is matched by a third party and can be anywhere from one to four times the amount of your own funds you put back. For example, if you work with a source that matches your deposit 3:1 and you deposit $75 in your account, the program will add another $225, or three times your deposit, until you either reach your goal or hit the matching limit for the program. Most programs limit the total amount saved from $4,000 to $6,000 depending upon the program. In all, there are more than 250 IDA sources across the country.
Imagine that for a moment. Not even the m…
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REFINANCE OPTIONS WITH A LOW CREDIT SCORE
Those who haven’t refinanced to a lower rate or to switch from an adjustable rate loan to a fixed rate product, there’s still time. But what about those that have damaged credit? Are there loan programs that allow for a refinance with low scores?
First, exactly what is a “low” score. Credit scores are three digit numbers that range anywhere from 300 to 850. The higher the score the better the credit, yet scores are relative. What might mean excellent to one person must just be average to another. For conventional mortgages, most lenders ask that a credit score be at least 620. Those with excellent credit, say anyone with a score above 740, are typically offered slightly better interest rates and allowed to have a smaller down payment. But what if the score is below 620? What if the score is under 600 or even 580?
Scores that are sub-600 are often due to a recent event such as a short sale or a bankruptcy. Depending upon the type of loan, borro…
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WHY DO MORTGAGE RATES CHANGE?When deciding whether or not to refinance a loan or start thinking about buying a home, one of the most important factors is the current interest rate. There are fixed rate loans that come in loan terms of 10,. 15, 20, 25 and 30 years and they can all have different rates. Typically, the shorter the loan term, the lower the interest rate. Adjustable rate loans and hybrids can have an initial fixed rate then adjust at a later term such as each year or every six months based upon the terms of the note. But potential borrowers soon discover that not only rates different on different mortgage types but rates can be different from one lender to the next. To complicate matters, those very same rates can be different the very next day. Rates can even change throughout the course of a business day and until the borrowers specifically tell their lender to lock in their rate, borrowers are at the mercy of the market. So, that said, why do mortgage rates change, anyw…
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VA SPOUSE QUALIFICATIONS
For those that are VA home loan eligible, buying and financing a home with little or no money down couldn’t be easier. Many times however, the veteran is married and the spouse will be on the mortgage as well but not have any VA home loan eligibility. Can the veteran add a spouse to the mortgage if the spouse isn’t VA eligible? Sure. Married couples with VA eligibility often have just one of the individuals on the application either a veteran or active duty personnel.
The coborrower in this instance will qualify just like with any other loan type. The spouse must live in the property as the primary residence and qualify based upon income and credit. The VA loan guarantee will apply based upon the amount of entitlement the VA eligible borrower has. When a spouse goes on a VA loan application the spouse must also have a qualifying credit score. VA lenders ask for a credit score for both borrowers from all three credit repositories of Transunion, Equifax and Experi…
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WHEN AND WHY SHOULD SOMEONE CASH OUT REFINANCE?
A cash-out refinance is nothing more than pulling out equity in the form of cash while refinancing an existing mortgage. Yet some may wonder if taking out equity is a good idea and if so, when does a cash out refinance make sense?
There are three primary reasons for someone to refinance an existing mortgage. One is to obtain a lower rate and reduce the monthly payments. The second is to change the loan term to reduce the amount of interest paid to the lender over the life of the loan and the third is to refinance out of an unstable adjustable rate or hybrid mortgage into the stability of a fixed rate loan. A refinance in any of these scenarios can make sense and by reviewing your current situation and speaking with a loan officer, you might be ready to refinance your current loan, especially as rates continue to stay relatively low. But taking out cash? When you take out cash you’re tapping into your current equity. If all you want is some …
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CREATE A PARTNERSHIP WITH YOUR LENDER
Online lenders and “1-800” mortgage companies like to promote the fact that getting a mortgage is as easy as logging onto the internet.  And while that’s true when applying for a mortgage, unless the borrowers know the advantages and disadvantages of various loan types, it’s really not to anyone’s advantage to use a lender that doesn’t provide a relationship, especially when you have questions and you will have those.
Unfortunately, lending guidelines can be confusing for someone not in the industry and while that can be true of any industry, getting a mortgage is a commitment and not so much a transaction. When you buy your first home and use a mortgage to finance it, the sale isn’t the sort where you can change your mind later and get your money back. Not only do you want to make the right financing decision you also want to be crystal clear what you’re getting. This is why it’s important to work with a lender who wants to develop a partnership b…
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HOW DOES A PAST FORECLOSURE AFFECT FUTURE MORTGAGE LOANS?Certainly one of the worst things that can happen to someone’s credit profile is a foreclosure. Lenders go through great lengths to avoid a foreclosure as they’re expensive, time consuming and practically no fun for anyone involved. Borrowers don’t buy homes with the intent to default nor do lenders approve loans hoping they’ll have to take the home away. All in all, it’s a lose-lose situation. But it doesn’t have to be a “forever” situation. In fact, surprisingly, once credit has been reestablished there are options for borrowers who want to buy a home even though there is a recent foreclosure.
Conventional loans, those underwritten to Fannie Mae and Freddie Mac standards do ask that you wait seven years from the sale date of the foreclosure. That’s a long time for most but there are other alternatives for those who want to buy now while rates are still low and before prices go up even further than they already have. If you’re VA…
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WHY YOU SHOULD DITCH YOUR CONVENTIONAL LOAN FOR AN FHA LOAN

For those who have conventional loans, switching to FHA loans could be beneficial for a wide-range of reasons. A loan that is supported by the Federal Housing Administration (FHA) can offer guidelines and terms that are more desirable than a conventional loan or mortgage. The FHA is not the direct source of the loan, but a FHA loan guarantees the loan amount in the borrower's name to the lender. The Federal Housing Administration determines a loan amount based on the average property value in the area and if a buyer needs a specific loan for a mobile home or condominium. 

FHA Loans Are Beneficial to Those with Damaged Credit 
For those with a blemished credit history, a FHA loan is more forgiving than a conventional loan. If an individual has faced financial trouble in the past, then he or she may still be able to qualify for a FHA loan. Furthermore, those who have declared bankruptcy will be able to qualify for a FHA loan o…
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THE MORTGAGE CREDIT CERTIFICATE ASSISTANCE PROGRAM (MCC)
Perhaps one of the most widely available mortgage assistance programs in today’s market is also one of the least-used. That’s because many mortgage lenders shy away from the program due to the way the MCC works. But that’s too bad as the MCC can help buyers qualify for the home they really want. The MCC isn’t complicated, it just takes a lender experienced with the MCC program. The California Housing Finance Agency, or CalHFA teams up with California counties to make sure buyers are aware of the program and have access to it. The MCC is in fact a federal program administered by local lenders and works by converting mortgage interest into a tax credit, helping them qualify for the home they really want. Lenders can use the amount for the annual tax credit as way to boost monthly income and can be sued with most any loan program.
Who can take advantage of the CalHFA MCC program? Borrowers are required to be a first time homebuyer wh…
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THE EXTRA CREDIT TEACHER HOME PURCHASE PROGRAM (ECTP) One of the many ways the state of California rewards its teachers is with the Extra Credit Teacher Home Purchase Program, or ECTP. This special program is one of the many financing assistance options offered by the California Housing Finance Agency, or CalHFA. This program helps those who qualify secure additional funds needed to buy and finance a home by providing cash at the closing table to assist with a down payment and closing costs. It’s an excellent program yet it might be a bit difficult to find lenders who are approved for this assistance. Not because it’s hard to qualify for but many lenders simply ignore it. Not us.

How does it work? The ECTP comes in the form of a junior loan that ranges from $7,500 to $15,000 depending upon the location of the property being financed and can be used toward the down payment. The ECTP is available for teachers, school administrators as well as employees and staff of schools in California a…