Importance of Credit Scores when buying a home and what you can do to improve them

View detailsJuly was a busy month for me and I hope it will continue into August.  One thing I ran into several times last month was buyers having a hard time getting financing due to certain things on their credit.  Many felt they would not have any problem getting approved only to find that their credit scores had fallen for one reason or another.  There are many things that can cause your credit scores to fall below what a lender will allow including unpaid Medical bills or consumer loans, late payments on your mortgage, too much debt load, late  payments on credit cards, liens or judgments, bankruptcy, foreclosure or short sales……. and more.  It has always been my policy that my buyer clients have an updated pre-approval letter in hand before we begin looking for homes.  Why?  Because I don’t want you spending weeks searching for homes, find one you absolutely love and then not be able to have it.  Even if you had a pre-approval letter in the past year, they are usually only good for 90 days and need to be updated.  Your credit changes and lender guidelines change and you need to be current.

Did you know that FHA guidelines do not even have a credit score requirement?  That’s right, if you met all their other guidelines, your score does not matter, HOWEVER, most lenders will have what they call an "overlay" that adds that component and sets a minimum credit score requirement.  All lenders are different so it does pay to check a few and see what their minimum score requirements are. 

Knowing what your credit score is and what affects it in a first critical step to getting the best financing available and the lowest payment possible on your new home.  The higher your score, the lower your interest rate.  I posted an article a few years ago after a seminar our company hosted that had some great information about credit scores and I wanted to post the links to that 3 part series:

Myths and Misconceptions of Credit Scores Part 1
Myths and Misconceptions of Credit Scores Part 2
Myths and Misconceptions of Credit Scores Part 3

Once you have your credit scores high enough and you pre-approval letter in hand – you are good to go!  Almost….You do still need to have some cash available for appraisal, inspections, down payment and earnest money deposits.  If you have any questions about getting pre-approved, call me and I can help direct you to the right place – I am happy to help.

Available Financing Programs for Home Purchases in Statesville NC

Can you believe it is already mid-July?  I am not sure where the summer is going but I can tell you that it has been a busy one so far.  A recent article in the Wall Street Journal announced that The U.S. Housing Bust is Over and that housing prices are on the rise.  The numbers show that much of the increase has been due to  investors purchasing homes to rent out as rents are at an all time high right now with little vacancy.In fact, in the last month, I personally have encountered sellers that are refusing to budge on price, multiple offers on a property, new construction selling in under 30 days and loosening credit guidelines for some borrowers.  All signs of an improving market and signs that I for one will welcome.  The opportunity is prime for home buyers and investors with rates under 3.5% this week.  If you have not already taken my FREE investor course, click here to get signed up.  I will be adding some great reports to my website soon that you will love!

Now….Let’s talk about financing options available out there:  If you are a first time home buyers, knowing the different types of financing available can be confusing so I will try to help you out with the basics.  Underwriting guidelines are complicated and will vary from bank to bank and broker to broker, so you may need to check several different sources to get the best program for you.

UDSA Rural Development Website

USDA Rural Development Loans:  These loans are great if you are short on cash.  USDA offers 100% financing for qualified homes.  In the Statesville area, this means homes outside the city limites.  All of Troutman and Mooresville qualify for USDA.  You can check the map for any address you are considering at their website.  These loans are very popular in our area as the buyers can get into a home with very litte money out of pocket.  You can ask the seller to pay your closing costs and will not need a down payment.  USDA does have a income limitation and that can also be found on their website.  There are several types of USDA loans but for the most part, we use the USDA Guaranteed Loan or the USDA Direct Loan (for very low income buyers).  The USDA funding fee is rolled into your loan and rates are based on current market rates.  Talk with your lender about all the details for qualifying.  USDA loans do not have mortgage Insurance.

FHA Loans: The Federal Housing Administration, which is part of HUD, insures your loan so that you can qualify for better terms. They do not actually lend the money, but guarantee the loan for the lender based on certain guidelines set by FHA.  In many cases, the lenders will also have additional qualifying guidelines that may be more stringent than FHA that you will also need to qualify under.  These additional guidelines will vary from lender to lender so be sure to shop around.  With FHA loans, there are many options available depending on situation:  FHA loans do include Mortgage Insurance in the monthly payment.

What does FHA have for you?

Buying your first home?
FHA might be just what you need. Your down payment can be as low as 3.5% of the purchase price, and most of your closing costs and fees can be included in the loan. Available on 1-4 unit properties.

Want a fixer-upper?
FHA has a loan that allows you to buy a home, fix it up, and include all the costs in one loan. Or, if you own a home that you want to re-model or repair, you can refinance what you owe and add the cost of repairs – all in one loan.  Called the 203K Loan.

Financial help for seniors
Are you 62 or older? Do you live in your home? Do you own it outright or have a low loan balance? If you can answer “yes” to all of these questions, then the FHA Reverse Mortgage might be right for you. It lets you convert a portion of your equity into cash.

Want to make your home more energy efficient?
You can include the costs of energy improvements into an FHA Energy-Efficient Mortgage.

How about manufactured housing and mobile homes?
Yes, FHA has financing for mobile homes and factory-built housing. They have two loan products – one for those who own the land that the home is on and another for mobile homes that are – or will be – located in mobile home parks.
BB&T CHIP Loan:  This loan is very similar to the USDA Guaranteed loan as far as qualifying but it allows you to use the 100% loan within the city limits of Statesville.  The Community Housing Investment Program offers no down payment and favorable terms.  There are also limits on income but well worth a look if you want to be close to downtown. This program does not have mortgage insurance allowing for higher buying limits.  Talk to your local BB&T loan officer for all the details.

VA Guaranteed Loan:  For our veterans out there, you may find a great deal on a VA loan.  If you are eligible, you will find lending guidelines are much easier than traditional financing.
A VA-guaranteed loan can be used to:
·         buy a home, a manufactured home, or a condominium
·         buy a lot for a manufactured home
·         build, repair, or improve a home (including energy efficient improvements)
·         refinance an existing loan

A VA-guaranteed loan offers a number of safeguards and advantages over a non VA-guaranteed loan.  For example, the interest rate is competitive with conventional rates with little or no down payment required.  VA-guaranteed loans are made by private lenders, such as banks, savings and loan associations, and mortgage companies.  As with any loan, you must apply directly to the lender.  Your real estate broker can assist you in finding a lender.

NC Housing Agency:  If income has kept you out of the housing market, you may want to take a look at NC Housing Programs.  They offer FHA, USDA Conventional and VA loans at very competitive rates for first time home buyers plus you may quality for up to $8000 in down payment assistance or for a $25000 second mortgage to help with purchasing a new home.  First time home buyers should also check into the MCC (Mortgage Credit Certificates) that is a Federal Tax Credit to assist buyers with low or moderate income.  This is really helpful in helping ot offset your monthly mortgage payment.  Ask your lender about these programs and if you qualify.  For a list of lenders, check out their website.


Fannie Mae Homepath Financing:
  HomePath financing, available only on Fannie Mae-owned properties, offers great benefits — low down payment, no mortgage insurance, expanded seller contributions, and more. HomePath Mortgage is available for move-in ready properties for both owner occupants and investors — a limited number of HomePath lenders also now offer HomePath Mortgage for the LLC borrower. The HomePath Renovation Mortgage provides both the funds to purchase and to renovate in one loan. You also can use the financing of your choice from any lender, such as your local bank, credit union or other financial institution.

OTHER:  You will also have 100% options available with your Credit Union or Conventional products that may fit your situation better.  There are many other sources available for financing your first home or for purchasing an investment property.  Feel free to call me anytime to discuss the various options or for a referral to one of my lenders.  Two of the best are listed below for you!

Continue reading Available Financing Programs for Home Purchases in Statesville NC

What every homebuyer should know about buying a fixer upper

Foreclosed

This week, I wanted to talk about Fixer Uppers.  I show a lot of distressed homes, and many that are not distressed, that need work.  Some may be just cosmetic and some may be structural.  What does it matter?  For investors that are buying homes to flip or to rent, it does not really matter much to them because it is all about paying cash and getting the best deal.  Most investors expect to do work and know what they are looking at – but what about the average first time homebuyer?  

If you are financing your home, repairs will be a big part in getting the home you want.  In most cases, distressed homes are “as is” with “no repairs”.  Depending on the extent of the work to be done, the home you choose may not be able to be financed by your lender.  In many cases, the home does not qualify for FHA or HUD standards and the “seller” will not fix anything, thereby preventing you from putting in an offer on some homes.  If you know that the home will require repairs for financing (your Realtor can tell you this information), you should have a contractor look at the home upfront and give you a quote and breakdown for work to be completed.  When writing up your offer, ask the seller to make those repairs so that you are able to obtain financing  If your offer is strong enough, the seller may consider making those repairs to sell the home.  Your other option is to consider a 203K Renovation loan that will allow you to finance repairs. In many cases, the seller may still refuse to do anything, but you never know until you ask.  This key is to do your homework and submit a strong offer based on current sales and renovation costs.

Here is another good article from Hands on Homebuyer about fixer uppers:

Is the fixer Upper worth Fixing?

Finding a foreclosed home to buy

Please be sure you have a good contractor you can call if you are looking at distressed properties.  You need to know what you are getting because there are no warranties and the bank holds no liability for homes that are damaged or have hidden defects.  It is “buyer beware” and you need to do all your due diligence before you make an offer.  You can get a great deal on a distressed property that may require minimal work – just be informed and do your homework.

Here is one of my archived articles on buying a foreclosed home:

A few things to consider before purchasing a distressed property