What is a Short Sale?

What is a Short Sale?
A short sale is a short sale is a property that sells for less than the balance owing on its mortgage. A short sale can be an underwater home, an apartment building or even vacant land. If there is a mortgage balance that is greater than the market value of the home, that property is a short sale.

Not every property qualifies as a potential short sale in a bank's eyes. A bank must agree to grant a short sale. Banks are under no obligation to approve a short sale. Banks will grant a short sale if the bank feels it is in the bank's best interest to approve the short sale. It is in the bank's best interest to approve the short sale if the bank will make more money through the short sale than to foreclose. It is estimated that banks might save 25% to 30% on foreclosure costs to grant a short sale over a foreclosure, but some investor guidelines make it more profitable for the bank to foreclose.

What is Necessary for a Short Sale? 
Most short sale transactions are handled by real estate agents who specialize in short sales.
There are 4 essential ingredients to a short sale; however, strategic short sales, those without a hardship, are also possible.

What makes a short sale work are the following:

• An underwater home 
• A willing short sale bank 
• A seller with a hardship 
• A buyer willing to purchase the home

What Role Do Real Estate Agents Play in a Short Sale? 
Some real estate agents throw homes on the market that will never close as a short sale. That's because the agents do not always qualify the short sale sellers. Some agents place unrealistic price tags on the short sale, which the bank will never accept.

It is wise to choose an experienced short sale agent who has closed at least 100 short sales.

Here is what an agent does in a short sale:

• Determines the type of short sale. There are many types of short sales, from Fannie Mae HAFAs to regular, non-GSE HAFAs to a traditional short sale, and a few more in between. 
• Gathers the required paperwork and submits the short sale package to the bank. Sometimes agents outsource this part of the process or they might hire a third-party to negotiate the short sale. 
• Helps the seller to price the short sale home. The price needs to be attractive enough to entice a buyer to wait for short sale approval but high enough to satisfy the bank's BPO. 
• Puts the home on the market. The agent must submit all offers received to the seller. Some offers will be lowball offers because buyers don't know any better. 
• Negotiates the short sale. Sometimes sellers will hire a lawyer to do the short sale, but often it's the agent who negotiates with the bank on behalf of the seller. 
• Submits the short sale approval letter to the seller. Most sellers want a release of liability and no deficiency to do a short sale. State laws tend to govern the terms in the approval letters. 

Sellers should always get legal and tax advice before completing a short sale.

Four Big Money Mistakes First Time Homebuyers Make

Four Big Money Mistakes First Time Homebuyers Make
First-time homebuyers almost always make a few mistakes when buying their home. Perhaps they pay too much, choose the wrong type of mortgage or neglect to budget for needed home improvements.

 Working with a trustworthy, experienced lender can help prevent such mistakes. But consumers also need to take responsibility for their budgets and choices.

 "Before buying a home, consumers need to develop a short- and long-term perspective on their purchase," says Michael Harrison, area director for MetLife Home Loans in Southwest Ohio. Following are the four biggest financial mistakes of first-time homebuyers:

Spending the Maximum on Housing
Lenders qualify buyers based on their incomes and debt-to-income ratios without considering how much the borrowers spend on items such as transportation, savings, food and other necessities.

"A lot of first-time buyers are optimistic about the future and excited about buying a home, so they borrow the absolute maximum they can afford instead of allowing themselves wiggle room for a partial loss of income or for future expenses such as children," Harrison says. Financial experts recommend that consumers decide how much they want to spend each month on housing before meeting with a lender. 

"Every buyer should create their own budget and know their limits," says Stephen Adamo, president of Weichert Financial Services in Morris Plains, N.J. Adamo says many first-time homebuyers experience a sizable change in their housing payments. Some new owners may go from $500 per month in rent to a monthly mortgage payment of $2,000, he says. "You need to deal with payment shock," Adamo says.

Not getting pre-qualified early enough
Meeting with a lender for a buyer consultation and pre qualification for a mortgage should be the first step toward homeownership. Yet many first-time homebuyers wait until they are ready to start house hunting before contacting a lender.

 "It's never too early to set up a free buyer consultation with a lender," Adamo says. "Every buyer needs to get pre qualified early enough in the process so that they can make some changes if they need to or correct errors on their credit report." Some buyers may need to spend up to a year saving more money, increasing their incomes or cleaning up their credit before making an offer on a home.

A buyer consultation should include creating long-term financial goals and strategies for buying property, Adamo says.

Misunderstanding the Importance of a High Credit Score
While most consumers know it's important to have a high credit score, not everyone understands how costly a low score can be.

"All mortgage lending is done with a tier of interest rates and terms based on consumer credit scores," Harrison says.
"A credit score of 720 or above will earn you the best rates and can potentially save you thousands of dollars." A score of 680 to 720 can get you good mortgage rates, while a FICO score of 620 is usually about the lowest score to qualify for most loans, Harrison says. Consumers should learn about credit scores the minute they start working, Harrison says.

Websites such as Bankrate provide information about how to improve your credit score. Even after a mortgage approval, consumers must avoid applying for new credit or taking on new debt, Adamo says, because a second credit check is often required before settlement.

Choosing the Wrong Mortgage Product
First-time homebuyers today typically opt for a 30-year fixed-rate mortgage. Their conservatism is a reaction to stories about the dangers of interest-only mortgages and adjustable-rate mortgages. But Harrison says home loan alternatives to a 30-year-fixed sometimes make more sense.

For example, buyers certain they will be relocated by their companies within five years may find a 5/1 ARM "could be a much better mortgage," he says. "There's no reason to pay a premium for a product you don't need like a 30-year loan," Harrison says.

Homebuyers eager to build equity in their homes or who are older and want to live mortgage-free in retirement should consider a 15-year fixed-rate loan or, if they can afford it, even a 10-year mortgage to reach their goals.

Source:  Bankrate

What is Zillow.com?

What is Zillow.com? 
If you are a real estate professional you probably know about the website Zillow.com. But for the benefit of those who don’t know what Zillow is, it is a real-estate website which is dedicated to giving its hundreds of users tons of information about almost any property in the United States. 


It helps realtors, buyers and sellers educate themselves and be aware of as many details as possible that have to deal with buying a potential home, or in selling a home. It is for this reason that Zillow is the most popular real estate website and why many people make use of it. 


There are hundreds of real estate sites on the internet. Another site is Realtor.com – a great website that lists homes for sale by realtors from all over the United States. 

This is where Zillow.com comes in because it does a good job in completing or filling in the information holes that Realtor.com leaves. Some states have better Zillow coverage than others. 


Currently in the state of Tennessee, Zillow.com brags of its 80-100% coverage. There is about 67 million homes across the United States that Zillow.com covers. 


The best thing about Zillow.com is it’s Zestimate. Zillow uses data that has been combed from public records to determine the square foot of a home, how many rooms it has and then integrates all of this information with the selling prices of recently sold homes within the area in order to determine the Zestimate of your home. 


But what Zillow cannot do here is to determine the added value of extra features of the home like a recently added jacuzzi or upgraded siding and windows. Zestimate is a little controversial because many realtors feel that the estimate they get is not accurate and may give potential home sellers biased expectations when it comes to the value of their home. 


Another thing about Zillow is you don’t need to register to use Zestimate but if you need to update the profile of your home you do have to register. Once you’re signed in you can edit your home’s profile anytime. Any details you can add about your home will allow Zillow to make the Zestimate more accurate. 

Zillow is always adding features to make their website a lot better and useful for everyone. Are you trying to sell your house? Zillow allows its users to list their home for free on the website. And there is also the “Make Me Move” feature which lets you put the amount or budget you need to pack up and move then wait for the offers. 


If you want to know how desirable your home is you can use this feature. There are many reasons why people like Zillow too. Because it starts conversations, it increases awareness and it allows the consumer to get a jumping off point before they set out on their buying or selling venture. 


So Zillow is an especially handy tool for buyers, sellers and realtors right? Not only is Zillow a resource to help market your homes or properties to an even wider audience but it also gives you a better chance of a sales success.


Source:  http://www.openingdoorsllc.com/

What is an Assumable Loan?

An assumable loan is a type of loan that a person can take over or assume. In such a situation, a person doesn’t apply for a brand-new loan. Instead, he takes over a loan that already exists. When a borrower takes over an assumable loan, he usually does not start fresh, with a new balance. He normally takes over only the current balance of the loan, and in many cases, the current interest rate.

Sometimes a person who opts for an assumable loan doesn’t have to qualify for it. This is not always the case, however, as there are also some loan programs that do require those who want to take over another person’s loan to qualify. Since some assumable loans allow the new borrower to assume the loan without qualifying, this situation is often seen as optimal for a person who has bad credit. For example, a person who has bad credit may have great trouble qualifying for a mortgage loan. If he can find a home with an assumable mortgage, however, he can take over the mortgage loan without having his bad credit impair him.

Besides taking on an assumable loan to circumvent credit problems, there are other factors that may make this type of lending situation attractive. In a mortgage situation, for example, a person who takes on an assumable loan can avoid the closing costs he would pay if he were taking on a first mortgage.

Interest rates can be a major benefit for someone who wants to take on an assumable loan. For example, an individual may want to acquire a loan for a property during a time when interest rates are high. If he can find and qualify for an assumable loan that was taken out during a low-interest period, he can pay much less interest than those who take out brand-new loans. Some lenders take steps to avoid having to offer lower-than-current interest rates when a person assumes a loan, however. Many include clauses in their terms that allow them to raise interest rates if a person assumes a loan; typically, this is referred to as a due-on-sale clause.

In most cases, taking on an assumable loan means providing some cash to the person who held the original loan or even taking out a second loan on the same property. For example, a person may take on an assumable mortgage of $80,000 US dollars (USD). If the property he purchases is being sold for $100,000 USD, however, he still has to ensure that the seller receives the full amount. In such a case, he may give the seller the rest of the money out of his savings or from another source. If this is not a possibility, he would usually have to take on another loan in order to meet the seller’s total sale price.

Types of Loans - USDA

USDA stands for United States Department of Agriculture.  Over the last few years USDA or Rural Housing Loan has become the hottest loan in town for most low and moderate income families.  This is because you can get a loan for 100% financing with no Mortgage Insurance.

These programs are tailored towards people who live in Rural Areas.  To determine if the house you are thinking about purchasing is in a rural area and if you meet income qualifications click on the following link:

http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

There are two types of loans that USDA offers

USDA Guaranteed Rural Housing Loans
USDA Guaranteed Loans are the most common type of USDA rural housing loan and allow for higher income limits and 100% financing for home purchases. USDA Guaranteed Loan applicants may have an income of up to 115% of the median household income for the area.   All USDA Guaranteed Loans carry 30 year terms and are set at a fixed rate.


USDA Direct Rural Housing Loans
USDA Direct Housing Loans are less common than USDA Guaranteed Loans and are only available for low and very low income households to obtain home ownership, as defined by the USDA. Very low income is defined as below 50 percent of the area median income (AMI); low income is between 50 and 80 percent of AMI; moderate income is 80 to 100 percent of AMI.  You can click here http://www.rurdev.usda.gov/HSF-Direct_Income_Limits.html and see if you qualify for this loan.

Why choose a USDA Mortgage?

1. USDA loans require NO down payment
2. In some cases you can finance your closing costs, Seller can pay up to 6% of your closings costs so really you don't have to come to the table with ANY money.
3. There are NO prepayment penalties for USDA Rural Housing Loans.
4. USDA loans has no monthly Mortgage Insurance.
5. A USDA loan is available to all Rural areas of the country, provided a market exists for the property and the home meets HUD's minimum property standards.
6. You can use this loan to purchase a New or Existing one family home in Rural Areas.
7. No Manufactured Homes allowed unless it is Brand new (talk to your lender about this)
8. USDA loans are offered at 30 years terms with a fixed interest rate.

What is a VA Loan?

The VA Loan became known in 1944 through the original Servicemen's Readjustment Act also known as the GI Bill of Rights. The GI Bill was signed into law by President Franklin D. Roosevelt and provided veterans with a federally guaranteed home with no down payment. This feature was designed to provide housing and assistance for veterans and their families, and the dream of home ownership became a reality for millions of veterans. The GI Bill contributed more than any other program in history to the welfare of veterans and their families, and to the growth of the nation's economy.


With more than 25.5 million veterans and service personnel eligible for VA financing, this loan is attractive and has many advantages. Eligibility for the VA loan is defined as Veterans who served on active duty and have a discharge other than dishonorable after a minimum of 90 days of service during wartime or a minimum of 181 continuous days during peacetime. There is a two-year requirement if the veteran enlisted and began service after September 7, 1980 or was an officer and began service after October 16, 1981. There is a six-year requirement for National guards and reservists with certain criteria and there are specific rules concerning the eligibility of surviving spouses.


VA will guarantee a maximum of 25 percent of a home loan amount up to $104,250, which limits the maximum loan amount to $417,000. Generally, the reasonable value of the property or the purchase price, whichever is less, plus the funding fee may be borrowed. All veterans must qualify, for they are not automatically eligible for the program.


VA guaranteed loans are made by private lenders, such as banks, savings & loans, or mortgage companies to eligible veterans for the purchase of a home, which must be for their own personal occupancy. The guaranty means the lender is protected against loss if you or a later owner fails to repay the loan. The guaranty replaces the protection the lender normally receives by requiring a down payment allowing you to obtain favorable financing terms.

Types of Loans - VA (Purchases)

Basic Requirements for Purchases

VA loan applicants often wonder about the eligibility of houses they’re considering getting a loan for--sometimes the concerns are about the type of property, for some VA loan applicants the concern might be over the condition of the home. For VA insured mortgages there are local ordinances, federal law, and VA requirements which must be met in order for the home to be approved for a VA insured mortgage.

General requirements and more specific guidelines cover VA loan eligibility. There are rules based on known issues--termites, flood zones and high-voltage power lines. The general requirements are simple enough to understand and provide some flexibility to the lender and appraiser when deciding if a particular property qualifies for a VA loan based on VA minimum property requirements.

The Department of Veterans Affairs requires a home to conform to some basic standards. The property must be inhabitable and provide the customary space for sleeping, cooking, and sanitation. The rules for multi-unit properties or multi-purpose buildings include VA requirements that each living unit contain “dedicated” sleeping, cooking, and sanitary areas.

VA requirements also include rules governing the condition of all typical mechanical systems found in the home. A heating and air conditioning system must be safe to operate and protected from weather and other “destructive elements”. These mechanical systems must have adequate capacity.

They must be able to function properly in the space it is installed in, meaning for example that a home can’t be equipped with a central air system that is too small for the space it must heat or cool.

VA appraisers who find problems or unacceptable issues related to these basic requirements may recommend improvements or alterations. If the property cannot be “reasonably modified” to accommodate these basic requirements, the property could be ineligible for a VA insured home loan. 

 

Should I hire a Real Estate Agent or an Attorney to buy a home?

It's no secret that real estate agents earn high commissions.  Although the commission is usually paid by the seller, the cost may be indirectly passed on to you.  And real estate lawyers charge exorbitant hourly rates. This raises the question -- do you need a real estate agent or attorney to help you buy a home?

 

What the Law Says

Every state has its own set of real estate laws. For the most part, a real estate agent's help is not legally required, though agents can help you with tasks that border on legal ones, such as preparing a home purchase contract. In some states, however, only a lawyer is allowed to prepare the home purchase documents, perform a title search, and close the deal.  This does get done anyways when your lender opens escrow and requires a title search.  You do not need an attorney for that.

 

Reasons to Hire an Agent

The process of buying a house is complex, and most people find it's easiest to get through with an agent by their side.  Paperwork will be flying around like a small tornado, and it can be helpful to have someone familiar with the process to deal with it.  Other parts of the transaction will be happening quickly too -- hiring inspectors, negotiating over who pays for needed repairs, keeping up good relations with the sellers (through their agent) and more. All of this is second nature to an experienced agent.  What's more, experienced real estate agents usually have contacts with good inspectors, mortgage loan brokers, and others who can make your buying process easier. And they know what's considered appropriate behavior and practice in your geographical area.

 

Don't Use the Seller's Agent

One of the best reasons to hire a real estate agent is that the sellers are likely to use their own agent -- and you want to keep that agent from taking over the process. In fact, the seller's agent may pressure you to let him or her represent both of you, in a "dual agency" relationship that primarily benefits the seller. (The less scrupulous sellers' agents don't make it clear that they're working for both people, but if only one agent is involved in your transaction, it's fair to assume that the agent's loyalties are with the seller.) It's better to have your own agent -- or, some experts assert, no agent at all -- than settle for dual agency.

 

Keep Control Over the Process

You're the only one who really knows what you want in a house. Even if your agent is scouting out homes for you, there's a lot to be said for scanning the listings and attending open houses yourself. You may find out that your agent doesn't understand your needs as well as you thought, or won't take you to see "FSBO" (for sale by owner) listings.

 

Educate Yourself

Even if you do use an agent (or a lawyer), it's wise to learn as much as you can about the home-buying process. For example, educating yourself about the market value of comparable homes in the area will protect you against over-aggressive agents who might urge you to bid high for a particular house. And you'll prevent misunderstandings and reduce the stress of being told to "sign here" if you study the contents of the various real estate documents in advance.

 

Reasons to Hire an Attorney

Except in states where it's mandated, an ordinary real estate transaction doesn't require an attorney's help. By now, real estate transactions are so standardized that most people in your state will use the exact same purchase contract, just filling in a few blanks.

However, if legal issues arise that your real estate agent can't answer, you'll need an attorney's help. Although good agents know a lot about the negotiating and contracting part of the process, they can't make judgments on legal questions. For example, what if your prospective new home has an illegal in-law unit with an existing tenant whom you want to evict in order to rent the place to a friend? Only a lawyer can tell you with any certainty whether your plans are feasible. Or, if you're drafting any unusual language for the purchase contract, or are concerned about some language in your mortgage, you may want to have an attorney look the documents over.

 

How Real Estate Agents Are Paid

 

Real estate agents normally work on commission, not salary. They receive their slice only after your home search is over, the contract negotiated, and the transaction complete. (In many cases, they end up doing a lot of work for nothing, perhaps because the buyers lost interest or can't close the deal.) The seller typically pays the commission to both the seller's agent and your agent -- usually around 5% of the sales price, to be split between the two agents. This percentage isn't cast in stone, however. For example, the seller might negotiate the percentage down if the house is particularly expensive. (And in probate sales, the court sets the commission.) Some buyers' agents have even been known to offer the buyer a percentage of their commission at closing.

Variations on the typical commission arrangement also exist. For example, some buyers prefer to hire an agent and pay the commission themselves, figuring it will make the agent more loyal to the buyer's interests, and provide grounds for a drop in the sales price.  Less commonly, you may find an agent willing to perform limited tasks for an hourly fee rather than a full commission (in which case you'd also want to ask the seller to bring down the sales price accordingly). Discount and rebate brokers are also available, usually providing you limited services, or interactions via the Internet, at a commission as low as 1%.

How Attorneys Are Paid

 

Attorneys normally charge by the hour, at rates ranging from $150 to $350. You may also find attorneys who charge flat fees for specific services, such as preparing real estate closing documents. Although attorneys tend to prefer handling the entire case with a "blank check" from you regarding hours to be spent and tasks to be accomplished, you're hiring the attorney, and you can call the shots. If you prefer to hire an attorney for only a limited number of hours, or for specific tasks, such as answering a legal question or reviewing a document, you can negotiate this (and you should record your agreement in writing).

Do I need a Real Estate Agent?

Though the Internet has made it easier to sell your home without an agent, about 93 percent of home sales are still done with some type of real estate agent.  An agent can work independently or for a company that acts as the broker. The broker signs the agreement with the seller. Agents usually get 30 percent to 40 percent of the commission.

There are many reasons why hiring an agent can be helpful:

• Education and experience - A good realtor understands the complex procedure and paperwork involved in selling a home. He or she has hopefully also gone through a licensing program.
• Saves time and energy - You won’t have to spend time scheduling and conducting tours of your home, which cut into your work and weekends.
• Gauging offers - An agent can help discern serious buyers from those who are simply looking.
• The market - A good realtor knows the market and understand trends, which can help your bottom line.
• Negotiation - An agent has the negotiating skills to help you get a good price.
• Professional contacts - Your agent’s contacts with other realtors and with contractors, inspectors, landscapers and the like can help you find a solution for any problem you may encounter.
• Sale price - In some cases, buyers will offer less money to someone who’s not using an agent, believing the seller is trying to save money by not paying commission.
• "Caravans" - Agents sometimes conduct open houses just for buyer agents where buyer agents arrive in groups ("caravans") and check out the house. This is usually a quick process, is more convenient than a traditional open house and allows buyer agents in the area to tell their clients about your home. 

A key tool for real estate agents is the Multiple Listing Service (MLS), a massive online database, which 900,000 agents subscribe to, that contains listings of 90 percent of properties for sale across the United States.  Buyers can access the service for free at realtor.com.  Usually, only subscribing agents can list properties, though in some cases home sellers can pay a fee to list their property.

With all of the benefits that come with using an agent, there are some drawbacks.  Most importantly, it’s very expensive.  Commissions can run up to 6 percent of the house’s sale price, though many agents are willing to negotiate commission, especially in a good housing market.  Working with an agent also requires a certain degree of trust, a willingness to place your most valuable possession in a stranger’s hands and say, “Please help me.” But that, along with letting go of any sentimental attachments you may have to your house, is part of the sale process.

If you’re considering hiring a real estate agent to help you sell your house, you have a choice between a full service agent and a discount service.  A full service agent does it all -- prepares your home, conducts open houses, uses the MLS, produces slick marketing materials and a nice sign for your yard and in some cases, hires a professional photographer to take pictures of your house.

A discount service provides less, though what you get depends on the company. Certainly you will pay less: discount brokers usually charge 2 percent to 4.5 percent commission.  Some discount services pre-screen for qualified buyers, and they should list your house on the MLS. You will have to conduct tours, however, and buyers agents may be more reluctant to show your house because of the lower commission involved (buyer and seller agents generally split commission on a sale). But the service may be worth it if you think you can save money and still get a good price on your house.

Home Inspections and Appraisals

Appraisals and home inspections are both carried out during the sale of a house. Though they both involve a trained professional taking stock of a house, they are performed for distinctly different reasons.

        APPRAISAL

1. • The appraisal is concerned with determining the market value of a house. Mortgage loans are often conditioned on an appraisal; lenders won't put up more than a house is worth. The appraisal can also prevent the buyer from overpaying for a house.

   Inspection

   • The home inspection is aimed at revealing the physical condition of a house. Buyers get a home inspection to reduce the chance of "surprises" after they take possession of the property.

   Appraisal Factors

   • Key factors in an appraisal are the square footage of a house, its general condition, its permanent fixtures, the number of bedrooms and bathrooms, and the value of comparable properties in the area.
     
   

    

    

    

    

    

    

    

    

   Inspection Goals

   • The home inspector isn't as interested in the value of a home, as whether it has hidden problems. An appraiser may note the presence of a gourmet kitchen; the inspector will actually test all the appliances.

   Contingencies

   • Home buyers frequently make their offers contingent on the house being appraised for the sale price, or close to it, as well as on the seller fixing any problems found in an inspection. Such contingencies allow them to back out of the deal without penalty if problems arise.

What should I bring with me to meet with my Loan Officer?

You want to be prepared when you meet with your Loan Officer, they will need to do a pre-approval and check your credit, income and assets.

If you are buying you will need the following:  (If they apply to you)

1. Last 30 days pay-stubs
2. W2's for the last 2 years
3. If Self-employed Last 2 years of Tax Returns with all Schedules, you will most likely need to provide personal Tax Returns and Corporation or Partnership
4. If Self-Employed you'll need to will need a Year to date Profit and loss statement
5. Last 2 Months Statements of your Assets (Bank Statements, IRA, 401K, Life Insurance, Money Market accounts, etc.)
6. Child Support or Maintenance Court Order
7. Social Security Award Letter and last 2 years 1099
8. Social Security Number
9. Date of Birth
10. Address history for the last two years

If you are refinancing you will need all of the above plus:

1. Information for Taxes and Insurance for the homes you own
2. Mortgage Statement

If you rent you will need to provide your Landlord's information, phone number and Name.

Also, you will need to know your automobiles make, year and value.  Personal Property value and any other assets you may have.

Please take in consideration that every lender will require different things, these are just some or more of the requirements you will be asked for.

Be prepared to pay an application fee.  Most institutions charge an Application that varies between $500 - $700  Sometimes that covers for your appraisal and credit report, but not all the times and at times it is Non-Refundable, so ask your lender about the Application Fee. 

Why is your Credit so Important?

Why is your Credit Score so Important? 
Everybody has a credit score calculated at the time your credit report is requested.  That is if you have ever requested credit, meaning a Credit Card, an installment loan or any type of loan that gets reported to a Credit Bureau.

It's based on over 100 different proprietary variables and algorithms developed by Fair Isaac (FICO). The range is 300 to 850. You can get your credit score from Experian or Equifax. Most lenders consider people above 650 to be prime borrowers, meaning they will most likely be approved at favorable rates. According to my credit report from Equifax, 71% of the people with a credit score from 500-550 will default on their credit. Another 51% of buyers with a credit score from 550-600 will default on their credit. That's pretty scary. This is why lenders run your credit report and head straight for your FICO Beacon score.

Do you know your Credit Score?
You should start planning 6 months before you plan to purchase a home.  At this time you want to find out what is in your credit report and if you need to clean something there or pay off some debt so you can be ready to get a mortgage.
Te best way to get a free credit report without getting hit for checking it too often is to go to:

https://www.annualcreditreport.com/cra/index.jsp

 You can request a FREE credit report from this site every 12 months.  This will not give you a score, you will have a choice to purchase one if you decide, but I do believe that the most important thing is to see what is in your report and not worry too much about what your credit score is, unless you really want to know.

Downpayment Options

I have received many calls and heard may people say that they can't afford to buy a home because they don't have 20% down.  There is nothing further from the truth than that.





*  There is a fabulous loan for Rural Areas that is called USDA Rural Housing Development, this Loan has income limits please see the link below to check income limits on your State

http://www.rurdev.usda.gov/HSF-Guar_Income_Limits.html

With this Link you can check Eligibility

http://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do

This Loan is not for everybody but it is a great loan because you don't have to put any downpayment and the best thing is that you have NO Mortgage Insurance, which could result in very good savings in the long run.  I will go into detail later on in a different post.

*  FHA - The Federal Housing Administration, promotes different types of programs to promote home ownership.  FHA is one of them, this program allows you to get into a house with as little as 3.5% down.  This loans in this market are the most popular, but are not for everybody.   They are easy to qualify as you don't have to have perfect credit, just decent credit.  You can check the link below to see what is the Max Loan amount you can get in your area:

https://entp.hud.gov/idapp/html/hicostlook.cfm


*  VA - This loan is guaranteed by the Veterans Administration.  This loan is good for Veterans.  You can get a loan for 100% Financing, meaning NO down payment and NO Mortgage Insurance.

Check the following Link for Eligibility

http://www.benefits.va.gov/homeloans/elig_center.asp

*  Conventional Loans - This loan is your standard 30 year or 15 year Mortgage, pretty much you have to have good credit, your debt-to-income ratios need to be in line.  Even for these type of loans you can come up to the table with as little as 5% down.  Your Mortgage Insurance will be then high but still you will have an option to come to the table with that little down payment.  You will need to have 20% down in order to avoid paying mortgage insurance.

In order to make a decision on how much down you need to put and which loan program is best for you, review your options with your Lender, they will be able to help you and I am sure they will help you decide which loan will better suit your needs.  These are not the only types of loans you can get either, maybe your lending institution has a portfolio loan or another one that will work for you best.

I want to buy a Home... What do I do now?

Here are some of the first steps on what to do when you are ready to purchase your First Home... I will go into detail in a different post.

The first thing you want to do is find out how much you'll be able to afford so you can have a price range in mind.  You need to talk to a Mortgage Lender first, the most common mistake people make is they think, well, I want to buy a house, I'll call a Realtor... Well, that is not the best first step.  If you have a good realtor, most likely he or she will send you to get pre-qualified or pre-approved for a mortgage.  Really, nobody wants to be wasting time.  You don't want to go see a home that you might not be able to afford or he doesn't want to be showing you houses, taking you around town when you are really not sure if you are going to buy anything soon.

Choosing your Mortgage Lender; You want to look at your local bank first, people are afraid to go their own bank sometimes because they think the process is too long or they simply don't know that they do offer mortgages.  Ask, most Banks and Credit Unions now offer Mortgage loans.  Some banks offer no fees, (not all of them, and you have to keep in mind that there is no such thing as free lunch either, they will charge you somehow, either in the interest rate or application fee).  Other banks offer concessions, maybe if you have a checking and savings account they do offer you a discount.  If you have direct withdrawal you might also get a discount.  It will all depend on the institution.  It does not hurt to ask.  Keep in mind not all institutions offer these benefits.   You can also ask friends and family and see where they have gotten their mortgage loan from, they are your best chance if you are unsure on where to get a mortgage loan from.  Talk to the loan officer, if she or he was able to explain the types of loans, downpayment, loan fees, the process, time frames, you have to go to a meeting with lots of questions.  Loan Officers like that,  you need to ask, so don't be afraid to bring a notebook with questions if you need to.  Ask about rates, monthly payment... how much will you be qualified for?  Now, don't make the mistake a lot of people do.  Don't get into too much.  Nobody else than you knows how much you really can afford.  If you know you can only do $1000.00 a month, and your loan officer tells you, you qualify for a payment for up to $1500.00 don't go for it... you have to consider that your mortgage payment is only one of the many new payments you will have, specially if you are not used to paying utilities, maintenance and such.  So be honest with yourself and be wise.  Don't over do it.  That's the main reason why there are so many foreclosures in the United States at the moment.

Now, you are ready to go house shopping.. This will be a very fun time but could be really stressful and at the same time discouraging.  Specially if you are looking at houses weeks after weeks and you can't find anything you like!  Yes! Hire an agent... he or she will be your best friend for the next few weeks or months...  It will have to be somebody you will be comfortable with so choose wisely, again, ask advise from your friends, relatives or co-workers.  If all fails look in the real estate book and call an agent.  This agent can usually show you any house that is available for sale through a Real Estate Agency.  Depending on the State you live, You do not have to pay your agent unless you are selling a home or they tell you they charge for their services, they usually get paid once they sell the home and they do get a percentage from the sale.  Tell them how much money you are pre-approved for and whom you are working with as a lending institution.  It is your choice on how much you want them involved in the loan process, basically both the Lender and the Real Estate Agent work for you, they are both working to get you in your house as fast and easy as possible.  The agent will be the contact in between you and the selling agent.  It is best if you don't have the same agent working for both buyer and seller, it is kind of a conflict of interest and really as much as you can you want to try to avoid that.

Once you have found a house go back to your lender and give them or have your realtor send them the purchase and sale agreement.  This will get started with the loan process.  This process depending on the institution will take between 30 - 60 days.  Don't fret, this is just normal for these times.  Be prepared to be asked for a LOT of paperwork.  You will wonder, why do they need that?  Well, you have to remember, in times like this, Banks have gotten really tight and have more and more guidelines and things change basically daily, so don't be surprised if they ask you:  Where did that $25.00 deposit come from?  Really, it has happened.  True Story in times like these.  Try to give your lender all the information they request in a very timely manner and if you have questions ask them, but usually there is a big reason for them to ask for a certain document.  Will explain the Loan process in a different Post.

When the loan is approved, and closing documents are sent to Escrow.  You will go sign your final loan documents.  These will be:  the lender disclosures, the Note and Deed of Trust and some closing and state disclosures.  You will most likely not get your keys that day.  Again, depending on the State you are in.  Usually you will get keys to the house the day that your money is wired to Escrow and Loan is Funded and Deed of Trust Recorded.

I am tired of Renting... Is Buying a Good Idea?

In most cases it's better to buy instead of rent, and to buy as soon as you can afford to do so. The only exceptions are for people who pay very low rent, or who plan on moving in a few years. So, the first thing you need to do is to figure out whether buying is even a good idea for your situation.

Most people think the benefit in buying is to "stop throwing your money away on rent," but in fact the equity you build from buying is mostly offset by the money you will "throw way" on taxes, insurance, maintenance, and mortgage interest, which renters don't pay. The real benefit from buying is that you freeze your monthly payment for 15 to 30 years, and then you stop paying it altogether and the house is yours!

Use the calculator below to compare the advantages and considerations of owning vs. renting a home.

http://www.ginniemae.gov/rent_vs_buy/rent_vs_buy_calc.asp?Section=YPTH




Savings: Buying

In many cases, the amount of money a renter spends on rent can be about the same as or less than the amount a homeowner spends on a mortgage. With the tax benefit for homeowners, the savings can be significant.


Monthly Expenses: Buying

Your rental company takes part of your rent payment to cover certain housing expenses. When you decide to purchase a home, you accept responsibility for paying for these expenses (listed below). They are additional costs to your monthly mortgage payment and should be included in your budget estimates:

Property Taxes and Special Assessments
Home/Hazard Insurance
Utilities
Maintenance
Home Owner Association (HOA) Fee: Doesn't apply to all purchases. It pays for trash and snow removal and maintenance of common grounds if applicable.
Membership Fee: It may pay for recreational facilities and other services (cable TV).

So, what do you think...?  Are you Ready to be a Home Owner??