Category Archives: Understanding Mortgages

What Stops Most People From Getting Qualified For A Home Loan

If you plan on buying a home this year, here are couple of things to keep in mind.  So you do not kill your chances on getting a home loan this year and stop yourself from getting qualified for a home loan.   This will not cover everything that can keep you from getting a home loan but these are the two biggest things that seem to kill the deals that come my way.

1) This is the number one killer on getting a home loan, and stopping someone from buying a home.  Buying a car, is the number one killer whether that be a new car or a used car.  If you even think it may be a possibility that you want to buy a house this year or the next.  Wait on the car unless you can buy it cash or just changed your mind on buying a home.  Most car loans are for 5 years, so if for example your debt to income does not justify the car payment and a mortgage payment.  You may be looking at 5 years till you get qualified for a home loan.

Another thing even if you are planning on co-signing for your son or daughter that car payment just became your car payment.  If you do not want that debt to be considered as part of your debt, then make sure that your son or daughter gets their own checking account in their name only.  Make sure that they make the payments on time and after one year.  So that way the debt will not be counted against you, and keeping you from qualifying for a home loan.

2) The number two killer for qualifying for home loans.  Is paying your bills.  Even if they are old collections or just small accounts does not matter that it is a $40.00 balance that you may have on your credit card.  If you for some reason forget to pay your bills because you are just too stressed or frustrated for what ever reason.  Then you end up having a 30 day late or maybe even a 60 day late from the last time you had your credit checked and got qualified to buy a home.  So you find your home and submit your offer based off of your last approval.  But then a new credit check is done and now because you have some accounts showing that you paid late.  Your score just dropped a few points that could be enough for you to not qualify for a home loan.  Also if you know you are planning on buying a home don’t get any new cards.  That 10 or 20 % discount is just not worth it.

So don’t buy any new cars or even used ones, if you plan on buying a car in the near future, and pay your bills on time.  Good Luck !!

 

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Does A Mortgage Payment Include The Taxes And The Insurance ?

Mandy asks…

Does a mortgage include property tax and insurance?

My girlfriend and I are looking at buying our first home.   The house is listed at $259,900.  The estimated mortgage that is being shown on the ad for the house is only $1,320.00.  So it seems that it is very cheap for that price. 

This is the first time that we have gone through this as being first time home buyers. I’m just curious that there are no other costs and that we can afford the payment.  And that includes everything so just want to make sure we really can afford it and no surprises.  Thanks.

admin answers:

No.

Sorry but it looks like that $1,320.00 is more than likely nothing more than just the interest and principal.  Meaning that it does not include the taxes and the insurance that is most likely required by your lender for most first time home buyer loans.  Not to mention depending on what type of loan you are getting you will also have Principal Mortgage Insurance (PMI).

I know on many forms of Real Estate forms of advertising whether that be the internet or some kind of print advertising some really nice low payment.  Sorry to say that is not the full picture of what the real mortgage payment is.  Its not that its bait and switch its just not really giving the full picture.  It really is the payment for the loan but the reality is that it is not what your lender will require you to pay for the loan.  It is meant to entice you and get you to call for more information.

For example in Santa Barbara county using 1.25 of the purchase price not the loan amount then dividing by 12 will give us an estimate of your payment for taxes.   That will give you an extra $270.00 a month.  Now being that you are a first time home buyer and if you are not getting a VA loan and getting maybe a FHA loan you will be looking at PMI which is currently a 1.35% factor than divide by 12 giving you $282.00 additional on top of your loan payment.  Now you still have to get homeowners insurance which is required by the bank to have you can choose who you get insurance from, but lets just add $70.00.  So your real payment out the door with nothing else to add unless you are living in a gated area or something like that wiht homeowners Association fees (HOA) your REAL payment would be more like $1,942.00.  I hope this is more of a clear answer for you and good luck!

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Are You Planning On Getting An FHA Loan What You Need To Know

 

David asks…

Does anyone know of any upcoming FHA guideline changes?

I am suppose to be getting FHA. Just worried cause there is so many things going on with the market that in a few weeks it may be impossible to get a loan.

admin answers:

One of the major changes that FHA has done in recent years is the change in how the principal mortgage insurance ( PMI) now works when getting a home loan.  As of June of last year 2013 if you were getting a FHA home loan and were planning only putting down the required 3.5%.  The PMI would be for the life of the loan.  This is a huge difference since it use to be that after 5 years the premium that you were paying for the insurance would go away.

Now if you do plan on putting down more at least 10% then the PMI will only be active for 11 years.  That is assuming that you are doing a 30 year mortgage.   PMI is basically insurance that the Federal Housing Administration  (FHA) charges you the consumer if you want this home loan, hence the term FHA loan.  It really give you no benefit other than being able to get the home loan.   It is really for the banks, in case you do not pay on your mortgage and they have to foreclose on you.   FHA will step in and cover any losses the bank suffer due to the foreclosure.   PMI is calculated based off of your loan amount.  There is a 1.75 % upfront cost that can be financed and then there is the annual fee of 1.35% that is divided by 12.   So for example on a $200k loan the upfront cost would be $3,500.00, and the monthly premium added to your mortgage payment would be $225.00

You can try to avoid paying PMI by trying to qualify for a conventional loan some loans allow you to avoid the monthly PMI with as little as 5%.  As long as you qualify for a conventional loan based off of credit etc.

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How A HARP Loan Can Help You

I recently did a Harp loan refinance for a client of mine.  First off let me say she was already refinancing with a bank in town and after 6 months of working with that bank and after paying for the appraisal she was told that they could not do the refinance.   The loan was a little difficult but not impossible and it did require some extra work on my part.  Not only was I able to do the loan, and get the financing for her but I was able to request a an appraisal waiver so she did not have to pay for another appraisal.   In the end her mortgage payment went from $1,500.00 to $1,150.00.  Now to make things clear she was upside down in her mortgage.  Meaning she owed more on her mortgage than what her house was worth.

The family basically got a raise in their household income by doing nothing other than refinancing their home and taking advantage of the HARP loan program.  It was that simple.  The HARP loan program was just recently extended again till 2015.  What the program does it allows homeowner that are upside on their homes to refinance and lower their mortgage payments by refinancing to the lower interest rates of today.   Now there are a few conditions to this loan in order to qualify.

1)      The loan has to be owned by Freddie Mac or Fannie Mae purchased by them no later than May 31, 2009.

2)      You must be current on your loan and have had no lates on your loan within the last 6 months.

3)      You still have to qualify for the new loan based off your credit and income.

 

The most important thing to remember about the HARP loan is that even if your upside on mortgage and you owe more than what your home is worth you can still possibly refinance your home to take advantage of today’s lower interest rates.

Any questions just shoot me an email and I can see if your home qualifies as well as what is possible.

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