Posts Tagged ‘mortgage’

Loans

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About the Author:  Chuck Walden (NMLS #148160) is a loan officer with Prospect Mortgage.  Email Chuck at chuck.walden@prospectmtg.com or call 678-725-8076. Website is www.ChuckWalden.com

As a loan officer, I have to look at every loan as if I’m the underwriter.  If I put myself in her/his shoes, what will I see?  What are potential issues and red flags?  A question asked of me constantly is, what does an underwriter look at when evaluating my loan?  Listed below is my opinion on what can make a strong loan.

First, your credit will be evaluated.  Your credit score is a number which will tell the underwriter if you have been paying bills on time and if you have had any issues related to collection accounts, judgments, liens, bankruptcy, or a foreclosure.  if you have credit cards, are they maxed out?  Your credit score is also a great representation of the likelihood of you making your future house payment.  The higher the score, the more likely you are to make your payment and make it on time.

Second, your debt to income ratio will be evaluated.  Debt to income is basically money coming in verses money going out.  If you make $2500 per month and your bills are $1250 per month, the debt to income ratio is 50%.  The debt to income ratio is also broken down into two numbers.  The first number is your housing ratio. This number is your total house payment (principal,interest, taxes, insurance, and mortgage insurance if applicable) divided by your monthly income.  The strongest number would be anything at 28% or less.  If your number is over 28%, that’s ok.  Loans are approved all the time with a number higher than 28%.  The second number analyzes your total debt.  This would be your future house payment plus all of your other monthly debt divided by your monthly income.  A solid number is 42%.Once again, loans are approved at a higher number up to and including 50%.  The higher the number, the weaker the loan.

Third, the property you are buying will be evaluated.  Lenders do not want to lend money on a home that has issues or that does not appraise for the amount you are purchasing the home for.  The underwriter will look at the appraisal to determine if there are any safety and health issues, comparable sales in the area, square footage, etc. If you are using FHA financing, appraisals are very strict and if anything is noted on the appraisal that could be a concern, then it will be imperative that the issue is resolved before an approval will be granted.  The appraisal is one aspect of the loan that cannot be predicted.

Fourth, your assets will be evaluated.  The underwriter will look at how much money you are putting down on the home and how much you will have after you close.  If you are using every dollar you have to purchase the home, that will be an issue.  Don’t forget, you have to turn on utilities, buy furniture, etc.  All of which will cost money.  The more money you put down the stronger you look to the underwriter.  The more money you have in the bank after you close, the stronger your file will look.  If your bank statements have large deposits or multiple deposits that are not payroll related, you will have to prove where that money came from.

All four of the above items are important and will be looked at as a total picture.  When discussing buying a new home with your loan officer, do not hold anything back.  Layout your problems, concerns, and dreams.  It’s best for everyone involved in the transaction to be upfront and honest right from the beginning.  This will make your home buying experience much less stressful.  Also, when you first start thinking about purchasing a home, call me. Don’t wait until you have already found your dream home.  It’s much better to know how much you can afford and if there are any issues before you even start looking for your home.

I love HomePath and so should you.  HomePath is simply a branding for homes that Fannie Mae has for sale.  Obviously, these are foreclosures and can represent a great opportunity for first time home buyers, move up buyers, or investors.  The types of homes that are available range from condos and townhomes to typical single family residences.

HomePath properties are eligible for HomePath financing. If you are purchasing the property as a primary residence, you can put down as little as 3%, there is no appraisal required, and last but not least, there is no private mortgage insurance (PMI).  Rates are higher but the advantage of no PMI is well worth it.  If you are purchasing a HomePath property as an investment property, you can put down as little as 10%.  As most investors know, cash is king.  Keeping money in your pocket for most investors is very important.

All of Fannie Mae’s properties are listed at www.homepath.com .  You can search by zip code, town, state, price, and number of bedrooms and baths.  I highly encourage you to visit the website if you are in the market to purchase a new home or investment property.  There are awesome deals to be had by all.  Also, you need to pay attention to the logos  that will be represented below each property.  HomePath has two logos pertaining to their homes.  They are HomePath Eligible and HomePath Renovation Eligible.  If the property has both logos, then the home is available for each type of loan.  HomePath Renovation loans will be addressed in future blog posts.

When you place an offer to purchase a Fannie Mae home, they will require you to submit a Pre Approval letter from an approved lender.  It is very important that you deal with a lender who is familiar with this program and is aware of the inner workings of the transaction.  As always, I look forward to serving you.

Mortgage debt

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I’ve discovered over the last twelve months, that potential buyers fall into one of two categories.  The first category is the “experienced” buyer.  This person, or couple, has purchased a home before and are either moving up to a larger house, downsizing due to retirement, or buying a second home or investment property.  Odds are, the last time they purchased a home, they provided their loan officer a bank statement and a pay stub and they were good to go.  Or, if their credit was good enough, they may not have had to show or prove their income at all.  The second category is the first time home buyer.  This person, or couple, has never purchased a home before and are ready due to a marriage, starting a family, or just plain tired of renting.  They have no clue what is going to be required other than what their friends and family have told them.

In case you’re wondering where this is going, let me explain.  Obtaining a mortgage is different.  Obtaining a mortgage requires hard work.  Obtaining a mortgage requires immediate responses when asked for more documentation.  Obtaining a mortgage is difficult.  Obtaining a mortgage is not what it used to be.

In order to make an offer on a home, whether you are a first time home buyer or a seasoned veteran, you need to arm yourself with a preapproval letter.  An experienced loan officer will ask for may things in order to give you a legitimate one.  Once your offer is accepted, the fun begins.  The best way I can explain this is that you and your loan officer are working as a team to put a puzzle together.  You both are trying to create a picture of your credit worthiness to an underwriter who has never seen you or spoken to you.  All the underwriter sees is the information placed in front of them. 

Items you may need are pay stubs, bank statements, tax returns, retirement account statements, a letter of explanation regarding why you would like to purchase the home, letters of explanation and proof of any large deposit that was not payroll related, divorce decrees, Human Resource department contact info, a letter explaining why you were late on a credit card payment three years ago, etc etc etc.  You have got to be organized and patient.  You must understand that the loan officer is working for you and not against you. 

This is the way it is and the way it will be for the foreseeable future.  Of course, every situation is different.  That’s why it is extremely important to contact a loan officer before you even begin looking for your new home.  He or she can guide you through the mine field one step at a time.

Happy Halloween

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Is now a scary time to sell your home? (Excuse the pun and Happy Halloween).  No it’s not and let me tell you why.  Now is the time that you will get the most face time with potential buyers.  I held 18 open houses during the month of October and the number of open house attendees has dramatically improved over this time last year.  Also, as you know, the number of potential buyers searching for homes online is increasing every day.  What if we were in an increasing interest rate environment?  Would fewer people qualify?  Would more people be looking to buy before rates get too high?  We are….yes….and YES.   Due to the daily changing environment of the mortgage world, now is the best time to sell.  With increasing interest rates, fewer people qualify and the ones that can afford it may get “scared” away with a much higher payment.

It’s almost impossible to time the market.  All you can do is deal with the facts.  Whether you are looking to buy or sell, I would say that now is the time.  There are too many market indicators pointing us in that direction.

For decades, grandparents have passed on the knowledge that the best investment you can make is homeownership.  You will have a fixed payment for 20 to 30 years.  At the end of that term, you can live without a house payment. If you need the money, sell your home and rent.

Even though the housing market started to crash in 2006, I believe that our grandparents were right.  Let me give you some examples.  Home prices have gained 42% since 2000.  The market has lost 4%.  According to Trulia, it is cheaper to purchase a new home in 72% of America’s cities than to rent.  In case you haven’t heard, interest rates are at all times lows.  With low rates and low values, you are getting more bang for your buck and keep dollarsin your pocket.  One thing is sure.  Rates and values will start to rise.

I wanted to talk about this today because I know a lot of people are on the fence and are trying to time the market.  Now is the time.  Don’t hesitate … make a decision.  Homeownership is an American dream that we shouldn’t take for granted.  But, just like our grandparents once told us, it is the best investment that you can make.

With mortgage rates down and property values in the gutter, it is an excellent time to buy a home.  If you purchased a home between early 2006 and late 2009, you need to look at refinancing.  Depending on the interest rate you currently have, you could save tens of thousands of dollars on your mortgage.

For example, if purchased your home in 1995 with an interest rate of 9% on a $280,000 loan it would cost you $812,000 over the life of your loan.  If you purchased in 2010, with a 4.25% interest rate on a $280,000 home it would cost you $495,000 over the life of your loan.  That is a savings of $317,000.  Now I know we could all find a use for that money!

If you need someone to analyze your situation, call or email me.  I will answer your call, return your email, and overwhelm you with service.  Mortgage rates change daily and there is no time like the present.

USDA Fundings

Posted: March 22, 2010 in Uncategorized
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Just a quick note to the agents and customers following my blog. USDA is now one of the only options to secure 100% financing. By the end of April, the USDA will be out of funds. There is no word yet on whether those funds will be replenished. Please plan accordingly!