Monthly Archives: September 2012

How To Get A Yes When You Borrow


Ever wonder if you will get approved to borrow money when buying a home? Well this information is meant to give you the tips and tools to prepare yourself in getting a “YES” from your lender when buying a home.  These great tips are provided by By Referral Only.

Lenders approve loans based on their impression of your ability and INTENT to pay it back.  To figure this out, they look at five things:  creditworthiness, income, job longevity, job stability, and future income prospects.  We’ll tell you how to make sure you look good in each of these things, so that you’ll get a “YES” when you want to borrow money for your new home.

1.  Creditworthiness

Creditworthiness is your history of borrowing and repaying against things like loans, credit cards, rent, and whether you’ve ever filed for bankruptcy.  Find out what credit bureau the Lender uses, then call or visit that same bureau for a copy of your credit report.  Some are even available online.

This is to make sure that there are no errors or surprises that you’ll have to explain to the Lender.  If there are mistakes, it can take a few months to resolve, so it’s good to have a compelling explanation ready when the Lender sees it!  The best way to demonstrate that you are “creditworthy” is to pay your bills in full and on time, particularly for the year or two before you want to get a loan.

2.  Income

Lenders want to know that you have a history of sufficient and consistent income – so that you’ll be able to repay the loan.  So, when you submit your paperwork to a Lender, make sure to take a letter verifying your employment (how long and what your salary is), your last couple of paychecks, and your last couple of W-2 forms.

3.  Job Longevity

Lenders are looking for borrowers who have a stable source of income.  If you can show that you’ve been employed at least a year in the same company, you should be fine.

4.  Job Stability

Again, lenders like stability – they tend to think that your loan payment behavior will reflect your employment behavior.  So, don’t make lateral moves between companies just for the sake of change.  If you make moves, do it for promotion, or to earn more money.

5.  Future Income Prospects

Because most loans are paid back in 15 to 30 years, Lenders are interested in people who will have income for that amount of time.  Young professionals, or those with high-demand skills, are the most appealing to Lenders because their income will only increase over time.  If you can demonstrate that you have a career plan that only gets better over time, you’ll be in a strong position to borrow.

So essentially, pay your bills on time, stay with an employer, have a career path that shows potential, and you’ll be sure to get a “YES” when you borrow.

Lenders are required to tell you what the APR is on any loan that they’re offering to you so you’ll know what the real interest rate is, including all of the additional costs.

So, when you’re calling around looking for the best rates, make sure and ask what the APR is on each loan you’re being told about!

 

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Avoid The Shock of Property Taxes


When buying  a home, especially your first home, there is one big factor to take in to consideration before placing an offer.

The BIG factor is property taxes. Not many people discuss property taxes, especially when browsing for homes. However, this factor can really increase your monthly payment if you are not careful.

When you are working with a mortgage broker and your realtor, discuss with them what your ideal monthly payment with EVERYTHING combined.

This meaning, not just the principal and interest, but also the hazard insurance, taxes and HOA fee if applicable.

These factors all add up to your total monthly payment. Here’s an example of how you could be affected by property taxes:

Let’s say you have a budget of only having a $1,500 house payment including taxes and hazard insurance. Well with taxes (about 1.5% = $200/month), the house that you could afford would be approximately $200,000 with a 3.5% down payment. This would give you a $1,500 house payment with everything combined.

Now the opposite example would be buying  a home without the concern of property taxes included. To get a $1,500 house payment you could afford a home in the range of $250,000. That’s a big difference, but once you receive your property tax bill, your monthly payment could jump up to about $1,800 on the low end.

The main goal of this example is to provide wisdom to the buyers, especially first time buyers, to be aware of what makes up your total mortgage payment. Ask questions during the process and ask about property taxes. You don’t want to move into your new home, just to find out your monthly payment is nothing you expected, or worse yet, prepared for.

Buying a Home When Self Employed


In this economy, many people have taken the turn of events to pursue building their own line of work, and becoming self-employed. Being self-employed is great, but if you are just starting out and trying to buy a home, you need to be aware of the few extra factors that you will need in order to qualify.

Tax Returns

First off, if you are self-employed and wanting to use your income to qualify for the loan, then you will be required to provide 2 years of self-employed tax returns. Without the 2 years of self-employed tax returns, a lender cannot use your income to qualify for the loan.

As a self-employed individual, your income is determined based on what is stated on your tax return. If you reduce your income for deduction purposes, then keep in mind that your income will be whatever is stated on your tax returns.

Another thing that many people don’t know is that when your income is averaged, a lender must subtract your unreimbursed employee expenses that are stated on your tax returns. This unreimbursed category is averaged and subtracted from your monthly income. Keep this in mind when filing your taxes if you are trying to purchase a home a need the extra income.

Change Professions

Similar to being self-employed, if you switch professions ex) teacher to fire fighter, you will need 2 years of tax returns before your income can be used to qualify for a home loan. The reason for this is you need to be in the same line of work for 2 years.

Now, if you switch employers but are still performing the same line of work, then you should not run into problems if you are hourly or salary paid. Commission is more complicated, as it varies month to month.

Profit and Loss

If you are self-employed, there will be other documents that you may be required to provide during your loan. One of the documents would be a quarterly profit and loss statement for your business to show you have sufficient income to pay your mortgage payment.

These are just a few of the main important factors to keep in mind when trying to purchase a home under self-employed. As always, good credit, sufficient assets and reserves are needed in order to qualify for a home loan.

How Soon Can You Buy After A Short Sale?


Have you recently experience a short sale and wondering when you will be able to purchase a home again?

There are different regulations for different loan types. We will provide the requirements for Fannie Mae, FHA and VA loans for a purchase after experiencing a short sale.

Fannie Mae Loan

With Fannie Mae, one can purchase a home in as little as 2 years after a short sale has been recorded if the buyer is putting 20% down on the home.

There is a 4 year waiting period if the buyer is putting 10% down on the home purchase.

Anything less than 10% will require a 7 year waiting period before being able to purchase a home through Fannie Mae.

FHA Loan

With an FHA loan there are varying circumstances that affect one’s ability to purchase a home. The following information is provided by Hud.gov

Borrowers are not eligible for a new FHA- insured mortgage if they pursued a short sale agreement on his or her principal residence simply to

  • Take advantage of declining market conditions
  • Purchase at a reduced price a similar or superior property within a reasonable commuting distance.

Borrowers current at the time of Short Sale

Borrowers are considered eligible for a new FHA-insured mortgage if, from the date of loan application for the new mortgage

  • All mortgage payments due on the prior mortgage were made within the month due for the 12 month period preceding the short sale, and
  • All installment debt payments for the same time period were also made within the month due.

Borrowers in Default at the time of Short Sale

Borrowers in default on their mortgage at the time of the short sale (or pre-foreclosure sale) are not eligible for a new FHA-insured mortgage for 3 years from the date of the pre-foreclosure sale.

There are exceptions to the following requirements; however, they require extenuating circumstances that are beyond the borrowers control. Hud.gov explains exceptions stating:

Exception: A lender may make an exception to this rule for a borrower in default on his/her mortgage at the time of the short sale if the 

  • Default was due to circumstances beyond the borrower’s control, such as death of primary wage earner or long-term uninsured illness, and
  • A review of the credit report indicates satisfactory credit prior to the circumstances beyond the borrower’s control that caused the default

These circumstances would need to be discussed with a mortgage lender prior to pursuing a mortgage loan.

VA Loan

The general waiting period for a VA loan after a short sale is 2 years. However, like the other two loan programs, there are different regulations depending on the veteran’s circumstance for a short sale.

According to VALoans.com, a borrower may get approved for a VA loan after short sale, “if the buyer has a qualifying credit score plus a record of dependable payments during the waiting period, sometimes called a “seasoning period” following the short sale.

Anything less than a 2 year waiting period would be determined on the borrowers credit history, circumstance and the lender’s guidelines.

If the short sale was on a VA loan, the applicant may not have full entitlement available for the new loan.

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