Tag Archives: fha loans

Achieving The American Dream

Achieving The American Dream

The American Dream. Having a loving family, attaining a stable job, and most importantly possessing your own home, even if it’s not in Santa Maria, California or somewhere near the Central Coast. All of these accomplishments can be challenging at times, especially taking the next step of  having your own home. With financial planning and legalities, it all starts with a bit of knowledge of the industry and some research.

Purchasing a Home in the United States

The United States Real Estate market is tremendous, especially the Santa Maria Real Estate area since it is continuing to grow. One thing to keep in mind is that each state has their own unique set of policies, set of laws, and not to mention taxes. So don’t be surprised when you notice different tax rates in various cities and states. Also Keep in mind that their are many incentives for individuals such as veterans who have served our country. Veterans qualify for loans known as VA Loans and many lenders out there offer these kinds of incentives that better help them achieve the home of their dreams.

Property Taxes

As mentioned above, taxes vary by state. So when you are asking yourself how much house can I afford, do not forget to include property taxes as the tend to add up. They are used to fund public projects such as schools, parks, and things such as law enforcement. Knowing ahead of time what kind of taxes you will be paying will give you a better picture of the cost of living in your new home, especially if you are planning on moving out of state; do some research.

Educate Yourself On the Real Estate Market

One should also know what exactly drives house prices in the market, especially in the Central Coast Real Estate area because it has gained popularity in past years. Instability in house prices vary from state to state and from region to region. For example, a home in the Arroyo Grande, California will not have the same price as a beach from property in the Pismo Beach, California area even though their proximity is not to far apart. Same applies to locations such as Los Angeles, California and New York (especially within the city). We at Greater Mortgage Solutions and Valley Hills Realty want to teach you about the macro and micro trends that influence the real estate market. That way you can make a better decision when making a mortgage deal that is being offered to you.

So when you, a family member, or a close friend of yours is ready to achieve The American Dream, consider allowing one of our team of experts at Greater Mortgage Solutions and Valley Hills Realty help you attain the precise mortgage and the home you have always wanted. We are filled with team members that are ready to help you every step of the way.

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What Everyone Should Know About Credit Scores

For starters there are different classifications for what is considered a good credit score. They can also be described as poor, average, good, great, excellent, or even exceptional based on the credit score number that you have. Your credit score will fall within one of these categories, but keep in mind the names for these categories differ from industry to industry but to give you a general idea of how good, or bad your credit score is, we have provided you this article outlining what most lenders or banks, even credit card companies and car dealerships, use to determine the likeliness of providing you with a loan at a reasonable rate. Below there is a pie chart outlining what FICO classifies credit score ratings nationwide.

fico-score-graphic

A good credit score depends on many factors. A credit score when applying for a mortgage is different when applying for a credit card or a car loan at your local dealership.
Based on our experience most credit scores, or what seems to be the average among individuals, fall within 620 to 669. A score between 670 to 680 would be considered above average or generally good credit for most lenders. Anything between 680 and 720 will be measured as excellent or very good credit and will help you attain that interest rate that everyone wants. Now, generally anything above 750 will be seen as exceptional credit, which is what lenders like to see. The higher your score, the better credit decisions lenders will make because they will be more confident that you will repay any future debts.

Credit scores are used by lenders, including banks providing mortgage loans, credit card companies, and even car dealerships to make decisions about whether or not to offer you a reasonable loan and what the terms of the offer (such as the interest rate or down payment) will be. We have broken down the differences among these types of loans below.

Home Loans
Mortgages have two key credit score requirements. The first is the minimum score needed to qualify for the mortgage and the second is also a minimum score but this is for qualifying for a low interest rate. Keep in mind that when buying a home there are many types of loans that one can attain. There are conventional loans, FHA Loans, and VA Loans, all with different minimum credit score requirements.

Credit Cards
Credit card lenders do not reveal their requirements unlike mortgages, credit card issuers don’t disclose their standards. There is no data readily available to the public in regards to credit cards.

Car Loans
Also with car loans, there are no set standards, and credit score requirements vary from one lender to the next. Just like the rest of the type of loans (mortgages and credit cards) it is best to keep your credit score in the above average section of credit score rating. To get the best possible interest rate available as well as the type of loan you can be approved for.

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Can You Have Two FHA Loans ?

Lizzie asks…

If I move and rent out my home under a VA loan, can I buy a house at my new location with an FHA loan?

I purchased a home in summer 2010 using a VA home loan. I expect to be PCS’d (Permanent Change of Station) in 2013. Due to the market, I doubt I can sell my home after only 3 years, but would still like to own my home at my next duty station. I would like to rent our current home after we leave. Because we are just starting out I won’t be able to build up my savings to afford 20% down, so I have been looking at my options. Can I purchase my next home using the FHA program and not have the VA or the FHA people sending me letters?
My credit is currently around 760.

We would have time to put renters in our house before purchasing another. And either way, we will effectively have 2-payments, whether we are renting at our new location or purchasing at our new location. I dont see being able to even break even on our current home yet and therefore we cannot sell it before moving.
Also, our household’s current income is around $7000 before taxes not including any rental income.
Thank you for the insight rswpbc.

admin answers:

Yes you can as long as you qualify with both payments. Since you have no history of being a landlord they may or may not let you offset the payment with rent, and if they do it will only be 75% of the rental income.  Will be the max you will be credited but more than likely even if  you are positive in the rent you will not be given enough credit to offset the mortgage payment.  If the other home does not have at least 30% equity you will need to qualify with both mortgage payments.

To correct other posts…only under very few conditions may you have 2 FHA loans at once. But for the most part the you can only have one FHA loan at a time.  FHA is 3.5% down, not 3%. Also keep in mind that this year the PMI factor is going up and from now on the PMI on a loan is for the life of the loan vs. only 5 years due the the FHA being in the red.

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Should You Get A FHA Loan Or A Conventional Loan ?

Robert asks…

Is FHA worth it now for the house I want or should I wait and get conventional?

I can afford both. If I go with FHA I still want to put down 15%+ to keep the payment lower. But if I went conventional I’d go 20% down but my DTI comes into play which is where I’m on the cusp of not getting approved via conventional because of my DTI.

admin answers:

I think that you should definitely consider the conventional loan. If you make a 20% down payment, then you will not need mortgage insurance.

A FHA loan will include both upfront mortgage insurance as well as monthly mortgage insurance payments. In addition FHA premiums are set to increase in April 2013. (Cancellation policy will change in June 2013).

It is not clear why you would qualify for a FHA loan (with Mortgage Insurance payments) and not qualify for a conventional loan. The DTI requirements for a FHA loan are 31% (upfront DTI which includes all housing related expenses) and 43% for the total DTI. Conventional loans are available up to 45%,

No matter which loan you choose, make sure that you have sufficient capital reserves and emergency savings funds. Also, I recommend that you don’t max out on your DTI. Make sure that you take care of your other debt payments.

I recommend that you shop around. Check out mortgage rates at Bills.com: http://www.bills.com/mortgage-rates/ and then get a quote for different types of loans. Ask the lender for a pre-approval, based on documents which prove your income and credit.  But there is no reason why you would not qualify for a conventional if you qualify for an FHA just because of the PMI not being an issue.  Another thing to think about is that the PMI on a FHA loans is for the life of the loan now so if you can put down 20% why wouldn’t you?

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What Are The FHA Changes For 2013

Reality is that interest rates are still extremely low and depending where you are at in the nation even home prices are still very low.  They may have come up a bit as compared to a year ago but over all they are still low.  Not mention depending on where you live you can probably buy a home with a monthly payment that is the same or even less than what rent will cost you.  I know in Santa Maria, Ca. that holds true for most homes here for sale.   But I also know there are tons of people that can buy a home now but are waiting for one thing or another.   At the same time there are others that have issues with their credit that could buy a home if they just took care of the issues holding them back but for what ever reason still have not done a thing.  Everything is about timing and for those that may need some financing and need to get an FHA loan are going to find it more expensive,  failure to do something can cost you some money.

 

The important thing to know about FHA making these changes, are due to losses that they have been taking.  Right now FHA is in the red $ 32 Billion that is a Billion with a “B”.  In order to keep this loan program afloat and not another bailout deal they have to raise funds and pass those savings on to the new potential borrowers looking to get a home loan.   Right now Mortgage insurance is 1.25% of the loan spread out over the year.  But may be increasing to 1.35 % next  year.  On a 200k loan that is roughly $208.00 vs $225.00, not a big deal right?  Just a $17.00 extra month .. but that is also $204.00 extra a year.  Here is where it gets good, right now mortgage insurance drops off after 5 years.  Well new changes with an FHA loan is that it becomes permanent for the life of the loan and they only way to get rid of it is to refinance into a conventional loan showing that you have more than 20% equity.  So now you can see the cost because even a refinance is not free that alone will cost you at least 3k if you want to get rid of that Mortgage insurance.  But it does not end there.

They will be more additional new consumer counseling programs to insure that consumer knows they are getting into a home loan and can budget accordingly for a home purchase.   Yes this will cost you money as well, reality is nothing is really ever free.   Aside from that there are a few additional changes that will affect underwriting and how easy or not it will be to get that loan.   For example as of next year the Frank Dodd act goes into effect which will limit the debt ratio to 43% a person can have to qualify for a home loan.  What doe that mean anyways?? Debt ratio.  Simply put you make a $ 1,000.00 your  total expenses, credit cards and your new mortgage payment cannot exceed $430.00 a month.  Right now if you decent reserves, you can go as high as 55% debt ratios.   Basically you are going to have make more money  to buy the exact same house next year.

Everything is subject to change but for now this is what is coming.  Basically it will cost you more money to get a home loan and it will get harder.    If you want to see what you can qualify for give me call.

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