Category Archives: Understanding Mortgages

Where Should You Get A Home Loan ?

When it comes to buying a home unless you plan on paying cash, you will be getting a home loan.  The other reality is that there are so many choices, sometimes it can easily be overwhelming on where to go, and who to choose, to getting qualified for a home loan.   Especially when you go online there is an endless places to go to get a home loan.   Buying a home is stressful and its one of the biggest financial decisions that most families will ever make in their lives.  Its a huge investment which carries lots of rewards and of course some risk.   Now just like every industry you have your good and you have your bad.  But in writing this I have to be honest it will biased, and its based solely on my opinion and my experiences you will have to do what you feel is best for you.   Now this is not about whether you should use a bank or a mortgage broker.

If we can agree that buying a home is one of the biggest financial decisions that you will ever make and that it carries a lot of stress along with it.  Why would you use some one that is not local to you or has not been referred over to you personally ?  I am constantly blown away when someone is using someone that is a voice over the phone located in another state to get their home loan.   You are making the biggest financial decision of your life and you are willing to settle for an internet application and a voice over the phone.   I am not sure if I am just old school and not caught up with the times.  But I still believe that being able to look someone in the eye and physically meet them and talk to them and shake their hand, is just not replaceable.

I had a phone call the other day with someone I guess that decided not to go with me and was getting her home loan with someone they found online.  Someone in Texas, now mind you they are in California buying this home.    Escrow is opened offer accepted etc.  but now the fees are coming out to be much larger than what they thought.  Of course they had a slew of questions for me, but reality is I am not the person you choose to do your home loan, why are you not asking him these questions.   “Well sometimes he does not answer and we have to leave messages”.  Again nothing beats the ability to, just walk in someone’s office that happens to be down the street and get your answers.  If someone is local, I want to make sure I can do a good deal for my clients, I live in the same community they do I shop in the same places my kids go to the same schools.  The person over the net does not have much to lose if all goes wrong.

If you are going to use some one out of the area, use some one that is referred over to you, from a friend or family member that can vouch for them.  Not someone that you just clicked an ad on.   If you are going to use someone local, its pretty easy to just ask around and ask some simple questions as well when you meet them you can learn a lot more about that person than you ever will over someone over the internet.

Like I said I was going to be a bit biased, but it is just my opinion to use someone local that you can build a relationship with and some trust, and this advice is more on a human level rather than on a business level but of course just because you use someone local.  It does not mean that person is any better than someone that is not local.  But I think you have a better chance on making sure you are dealing with someone more trust worthy than stranger that you found by clicking an ad online.

Bookmark and Share

What Is The Difference Between The Home Inspection And The Appraisal ?

Buying a home is a very big step and its usually very scary and exciting at the same time.  It really is a big step and of course a lot of stress that comes with it, especially that you want to make sure that you are making the right decision and that the home that you are buying does not have an issues.  That can be a nightmare to know that after all the heartache you went through to get the home loan and now that you owe all this money, that the house you bought is full of issues and its just one thing after another.

Legally when buying a home the seller does have to disclose to you an issues that the home has.  But that is not to say that someone would not mislead or that at the time the really had no issues but due to age and wear and tear it was just a matter of time.  Not to mention if you are buying a foreclosure its a complete buyer beware situation.  In other words its up to you to know if there are any issues with the home.

If you are getting a home loan you have to get an appraisal there is not what if’s about it and of course its not free.  Usually run about $450.00 to 550.00.  Now you do not have to get a inspection but it is recommended.  The appraiser not only provides a report on what the value of the home is but also the condition.  The appraiser is looking for issues that may need to be addressed and he looks for any safety issues that will affect anyone living in the home.  He makes sure there are no roof leaks or loose electrical wiring, plumbing is working etc.  He basically looks for the basics to insure the lender is making a good loan on the property.   But the appraisal must be submitted to the lender doing the loan since it is ordered through the lender.   What ever concerns that the appraiser thinks is an issue will have to be addressed and many times someone will have to make the repairs necessary before the transaction can go forward.

Home inspector will look for every thing from top to bottom.  He will crawl in the attic space he will go under the house.  He will go where no appraiser has gone before.  Now the home inspection is not mandatory but it is recommended.  Many times I get asked if they have to do the home inspection because we got the appraisal done.   The answer is you do not but its for your best interest to know as much as you can about the house being that you are not buying TV, and there is no taking this back to the store.   But keep in mind unless it is something that is structural or a health issue.  What your home inspector finds  does not mean the lender will care to know.  Also the home inspection is not submitted to the lender either.  You can use what comes out in the home inspection to ask for any repairs, but it will be up to the seller whether they want to comply or not.

Any questions just let me know .. Good LUCK !!

Bookmark and Share

Why You Need To Know What Your Debt Ratio Is If You Plan On Buying A Home

The days of easy qualifying to buy a house are over and even if the banks loosen the guidelines in getting a home loan I doubt they will be like it was in the past.  From 2003 to 2007 it was pretty much all you needed to buy a home was a pulse, the Santa Maria real estate market was booming like every other place in the country .  Really all you needed was a pulse back then to qualify and some ID proving who you were, no lie.  Which is probably why we had so many foreclosures including future wannabe Donald Trumps just buying and flipping left and right until the day the party ended then it all came tumbling down.  Now you still needed to have some form credit just not terribly bad credit.  You were able to get a stated income loan with only 580 fico score.  In today’s world 90% of the banks would give you a turned down without blinking with that score.  Back then you stated your income so you can qualify.  No one verified, so if you said you made $10k then you made $10k.

In the new world of the after math of Great Recession which I think was more like a second Depression.  You really have to prove what you make and your bills do really count against you.  What comes into play is what is the amount of debt you have and will have with your new mortgage payment taking into consideration, your taxes and your insurance not just your mortgage payment.   Most lenders will cap you out at 45% debt ratios.  There may be a few that will go higher but till your loan is approved and you have your keys I would recommend you stick with a 45% debt ratio as a guideline.

So lets say you make a $2k a month then your mortgage payment including any car payments, child support , or credit cards cannot exceed $900.00, which is 45% of $2k.  Depending where you live it is going to be very difficult to find a home with a mortgage payment and your bills for less than $900.00.  If you had a car payment of $500.00 then your mortgage cannot exceed $400.00 a month.   So knowing what bills you have that may show up on a credit report will give you an idea of what you may be able to qualify with a monthly payment.

The other 65% is used to survive.  You will still have to buy food , go out and have a life not to mention utilities etc.  Now when trying to figure out your income use the gross if you are a w2 employee. So that is before taxes now if you are self employed you will have to use what you actually reported on your tax return.  Does not matter what your company made its what you reported to the govt.  Usually they can add back in depreciation or one time large capital investments.

So keep in mind when buying that car or what ever it may be that you will have to deduct that from what your income in using to qualify for a home loan.  If you have any questions just let me know.  Good Luck

Bookmark and Share

Will Switching Jobs Kill Your Chances Of Getting A Home Loan ?

Here is the thing when trying to buy a home you do not want to do any moving around if you happen to be in escrow, especially when it comes to the job, because it may make the lender uncomfortable in giving you the home loan.  Which is the last thing you want to do especially after all the hours you put in on looking at all the homes for sale and submitting offers etc.  But lets say you are trying to buy a home some time this year.  But you have job opportunities or thinking about starting your own business etc.

If you have an opportunity to work some where else as long as its along the same lines of work you will be okay.  Typically the lender wants to see 2 year job history along the same line of work or at least as closely related as possible.  But you can also be given that 2 year credit lets say if you were working and going to school for nursing and now you are a nurse.  You will be given credit for those two years as well.  Or if the new job you are landing is considered an elevation of job stature.  You went from being a janitor for example to a correctional officer, you will stay maintain the 2 year job history.

Now lets say you have been cook for the last 10 years and you decide to open your own business.  You will have to two wait two years minimum and what ever you report is what you can use to qualify for a loan.  Does not matter if your business makes $500k but you only report $50k then that is what is used to figure out what you can qualify for.

Another scenario, lets say you are a car salesman and you are paid W2 you get set hours, and set pay but now  your company is going to give you unlimited opportunity to make what ever you want because now you will be 100% commission , 1099 independent contractor.   Well then you will now be considered self employed, as if you were starting your own business.  Again you will have to wait at least two years from the time you went from being a w2 employee to a 1099 independent contractor even if you have been doing the same line of work for years.

So you can switch jobs without ruining your chances of getting a home loan, and buying a home this year.  If you are ever unsure just shoot me a line or ask who ever you plan on getting your loan through if the job change, may kill your loan or not.

Good Luck

Bookmark and Share

Can You Get A Home Loan With Bad Credit ?

charol asks…

bad credit ……………?

is it possible to get a mortgage with bad credit rating, I have a joint mortgage but am being bought out and would like to get my own home.

admin answers:

Some times people that think they have bad credit really is not all that bad.  I do not know what you have on your credit.  But even if you had some questionable credit you can try going to a mortgage broker, being that they work with a variety of banks they might be able to find one with your situation.

But if you do have bad credit many times the interest rate will be higher and sometimes much higher or just not possible depending on what is being reported on your credit.  Really the first thing to do is see some one and have them check your credit.  Also I have had many clients come in and tell me they have bad credit.

Sometimes their credit really was not that bad and they really qualified for a home loan with out having to do any thing.  Other times they did have some issues but nothing that could not be fixed with a few letters and phone calls to the point that at the end of the month they were buying a home.  Other times yes much much worst and there was nothing I can do to save my life their credit was so bad.  But the thing is you will not know just how bad till you go see someone first then go from there.

Good Luck !

 

Bookmark and Share