Bankruptcy – don’t let it stop you!

BANKRUPTCY

Don’t let A chapter 7 bankruptcy stop you from getting a home mortgage!  Yes, I know, I worked for big banks (who taught us that 7 years waiting was the absolute “law”), little banks (scared of any “b” word), and now I have finally been properly informed, so I want to pass that on to you.

There are 2-4 options (depending on how you count them):

  1. Just 1 day out of bankruptcy discharge – this is a bit of a catch22.  These lenders require rebuilt credit (a decent credit score), reserves (extra money or 2-6 months of payments left over after you make your down payment), and a large down payment (15% minimum for the best credit scores and it goes up to the 35% range from there).   Good news, you can get a gift from family for the down payment, but the reserves have to be yours.
  2. Just 2 years from bankruptcy discharge – plan ahead, because this is a great plan.  FHA and VA allows 2 years after discharge!  A good idea is to rebuild credit (for score) and save up for down payment, closing costs, and reserves.  But with 2 years, this is a great way to get back into a home with a normal down payment (as low as 3.5% or 0% for VA) and a competitive “government loan” rate.
  3. Just 3 years from bankruptcy discharge – USDA rural housing allows 3 years from discharge and also up to 100% financing!  Again, a competitive “government loan” rate.  This is a great option.
  4. Just 4 years from bankruptcy discharge – conventional lending is available again, including both Fannie and Freddie’s programs for low to moderate income with down payment as low as 3%!

Life happens!  Don’t let bankruptcy hold you back from getting back in the home loan game.  Prepare ahead by saving money, rebuilding credit, and getting ready for 1 day to 4 years after discharge, and even better, lookup a lender with all the above options:

Your favorite lender here

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How to move into your new home in 2019!

This is not an exhaustive list, but wanted to put together a simple roadmap of what a prospective homebuyer needs to do:

Get pre-approval – the most important step.  There is nothing like showing a home to someone who can’t buy it, or worse, who thinks they can but hasn’t even taken the first step.  The first step?  Get pre-approved from your favorite lender: Preapproval starts here.

Search for homes in your price range.  You can certainly start on your own, but to truly get a feel for the market, a licensed professional real estate agent can help you negotiate the pitfalls of buying a home and find the right one.   Your lender may have suggestions on who to use or you can choose one on your own.

Make an offer – this step is perhaps the most important negotiating point.  Do you offer list price, higher, lower without offending them?  Do you ask for the picture on the wall, a piece of furniture, closing costs, etc.?  Do you ask for a certain date, inspection period, or home warranty?  There are so many things to think about before you write and sign the offer, again, a professional real estate agent will help you with the process.

Crunch time – after the offer is accepted, it’s time to get serious with your lender.  Anything you forgot to give them up front, and every single request for documentation afterwards, needs to be responded to immediately.  You also need to ask for quotes on homeowner’s insurance and make sure you have everything ready for your move.

Closing – time to pay up the down payment or any other costs involved.  Also, time to coordinate the move, so you leave your place and move to the new one in a timely fashion.  This is the exciting moment you have been waiting for, the moment of getting the keys to your brand new home!

Do you want to make the process easier?  Try to be a responsive buyer, willing to put what you need to into the process at every step.  This will make everything run smoother and easier for you…

Buy a home now for $509,842 or more!

When you see conforming loan amounts go up, it’s easy to say, who cares?   Unfortunately, while homes in the middle part of the country generally have not gone up as much as the coasts, there are a lot of urban areas that need this help to still get a conventional loan.  By the conventional loan limit going up to $484,350, there are simply more families that can buy a home under conventional loan guidelines.

Why did I say $509,842?  Because with 5% down, or $25,492 +/-, that’s the most common down payment off the total home purchase price of $509,842, so we get to the conforming loan amount limit is then $484,350.  So a family previously limited to looking for less, can now still take advantage of conventional mortgage loan rates, terms, and ease of use.

Why did I say more?  Because certain “high cost” areas are $764,763 total purchase price (or $726,525 loan limit).

How do you know how much is the limit in your area?  The best way is to ask your favorite lender for your local area.  Another way is to check online at: Fannie Mae Loan Limit Table

It might be good to note that there are even higher limits for 2-4 unit dwellings.  Also, high cost areas are very fickle, so it’s good to know the borders exactly that apply to where you want to buy.

Why did I say now?  Because direct lenders can offer these options this year, before 2019!  So now is a great time to get started purchasing the home you didn’t think met the requirements for traditional financing.  This is a very practical way for more people to qualify for a home mortgage loan with your favorite lender.

 

Closing cost woes?

I am often asked about options for down payments, closing costs, and how much you actually need to bring to the table.  Since “down payment” to the lender may be different from “total money I have to bring to closing” that you as a buyer are thinking, I just want to give you a couple thoughts of what makes up all those costs you see at the table.

Down payment – the percentage required (or voluntary) by your loan for your portion of the investment in the home.

Title fees – this is a big one, and quite frankly, a substantial one.  If you are buying from another party, not only is the lender going to require that your transaction be an insured closing at a title company, but there may be some very specific requirements placed by the state at additional costs.

Lender fees – it costs something to process your application and documents.  There are a number of behind the scenes checks going on to make sure that everything received was verified.  All of these things cost money.  While you may negotiate some of these, it tends to be pretty standard at one lender to have certain fees, perhaps varying by the loan option chosen, or the state.

Other people fees – appraisals cost money and while some lenders collect that up front, it is still shown on your settlement statement as a cost of doing business.

Government fees – recording, document stamps, the lingo differs by state, but it’s pretty standard.

Escrow reserves – deposit towards property taxes, homeowner’s insurance, etc. for the coming year.

Payoffs to various parties – first year of homeowner’s insurance, property inspections, sometimes home repairs required during the process, appraisals, etc.

As you can see, closing costs is very different from cash to close.  You have the power to negotiate some of them, shop for homeowner’s insurance, and negotiate the seller’s portion of closing costs.  All of these things can help you reduce your cash to close!

 

Non-QM, what? Is that a good thing?

It sure is, it’s a good thing for anyone who doesn’t quite fit in the box of conventional financing.

As I have discussed in that blog, the issue is that conventional home mortgage financing is a very tight box.  It means having a certain credit score, a certain manner of underwriting especially in proving income, and a certain credit history.  Unfortunately, the issue is that there are many, many people that are a “good” credit risk, but do not fit in that box.

Now there are options for the following unconventional options, commonly called “non-qm” (although that’s not exactly the definition) and “non-prime.”    Just some of those are:

  1. One day out of bankruptcy (yes, that subprime options still exists!)
  2. One day out of foreclosure (ditto)
  3. Low credit scores
  4. Delinquent recent mortgage payments (yes, this is possible!)
  5. Departing residence
  6. Delayed financing
  7. Bank statement program.
  8. Non-warrantable condos.
  9. Unique properties.
  10. Asset depletion and pledged assets
  11. Higher than conforming loan amounts
  12. Investment property cash flow Rental properties – Commercial loans or something even better?options.
  13. Foreign nationals

Now, let’s be honest, don’t expect a super low interest rate, (some will be significantly, even 2-8% higher than the going rates).  Don’t expect that you can combine the above together (the old “breathing is good enough” loan).  But at the same time, with a strong down payment or equity position, you can still get financing with one (and sometimes more) of the above conditions.

So don’t let conventional get you down, there are non-QM options, non-prime solutions, for self employed, credit challenged, even some income challenges!

Get started here.

 

Beware of churning!

I am a lender. So many times I am asked what is wrong with having so many credit cards or why not get the discount or zero percent offer?

In one simple phrase, it’s Credit card churning! This is actually dangerous in identity theft and in credit score. How?

1) ID theft – the more cards you have, the harder it is to keep track of them. You can literally forget you have a store card. Then you receive the new card in the mail and remember you still have it! The problem lies in someone else getting it, either from stealing it in the mailbox, or you move and forget to inform that creditor that you moved and changed addresses.

2) Credit score #1 – this is where what’s good for you is in stark contrast with what’s good for your credit score. For example, you get 0% or lots of points for this balance transfer. But if you exceed 30-50% usage on the credit card, it harms your score! Most people max it out to max out their rewards as well. Again, it’s good for you in one way and bad for your credit score. Fortunately, it’s also easy to fix by later paying down the balance or moving it around to another card, but without maxing that card out…

3) Credit score #2 – your credit score rewards long term accounts. If you are constantly opening new (and closing the old) accounts, you are starting over the credit clock. This is actually a negative score factor “too many new accounts” or “length of time unknown.” I would be glad to assist more in the mortgage realm…

Get started here

For more things to avoid with your credit: Explosion of credit can be destructive! How can zero percent be bad?

Why get preapproval?

I would say that despite the abundance of information on this subject, realtors telling people to get preapproved first, and every loan officer I know doing the same thing, this still seems to be a question that comes up regularly. So here is a basic list of why:

  1. You don’t want to waste your own time.  There is nothing worse than desiring something that you can’t have, or can’t afford.  The far better way is to make sure that you can first.  That is in essence what preapproval does.
  2. You don’t want to waste the realtors time or all of the many others involved in scheduling and finding the right home such as the homeowners and their realtors.
  3. You don’t want to be looking for $500,000 houses if you can only afford $250,000.  It doesn’t do anyone any good.
  4. Sometimes there are very specific loan requirements, such as no defects in the home, or not inside the city limits, or not in a certain area to qualify for a particular home.  USDA rocks!
  5. Sometimes there are some small things that you need to do first.  This might be credit wise, such as payoff some bills, make payments on time, etc.  Or it might be save more, get some assets showing in the bank, etc.  All of these you need to know BEFORE making an offer on a home.
  6. Maybe there are some more options that you haven’t considered.  These could be a couple putting the loan in just one person’s name, getting a cosigner, or simply the timing of when to make an offer.  All of this is best to find out ahead of time rather than afterwards.

Looking forward to helping you get in a new home