Category: ‘First Time Home Buyer’

Lenders Only Look At Four Things Before Approving Your Home Loan.

April 20, 2015 Posted by Andre Hemmersbach

Getting a home loan is not as tough as rumor has it! The mortgage approval process simply boils down to the four basic items explained in the following few paragraphs. First time home buyers and even repeat purchasers need not be bewildered by the formulas and methods used by lenders, you just need someone to hold your hand and an expert that knows the home loan rules!

Lenders are looking for what I call the four “C”s and once you understand the concept of these basic requirements everything else starts to make sense.

  • Cash – Lenders look for “skin-in-the-game” as a way to make sure that you have a financial incentive to continue to make the mortgage payment when things get tough. The larger your down payment or equity the less they have to worry about the borrower walking away from the home loan. Minimum down payment requirements range from as little as 0% to as much as 35%

    You will need a home loan to enjoy this light filled room

    Get a home loan and then sit back and enjoy

  • Capacity – Another way of saying income. The lender wants to make sure that the borrowers have sufficient stable income to handle the mortgage, property taxes, insurance and other debts. Key words in the previous statement are SUFFICIENT and STABLE. Lenders will use a combination of pay stubs, W-2 and other documents and compare those to the only reliable source available in our financial system to prove their legitimacy….the IRS and your tax returns. The minimum requirements for income vary widely by program; lender and other factors so make sure you are working with someone that understands the rules.
  • Credit – Simply put – how have you handled other financial promises of repayment in the past? Nowadays it is easy for a lender to figure this out with a copy of your credit report and a number called a credit score. A credit score is numerical representation of your credit risk. Over 700 is good below 620 not so good. By the way there are easy ways to increase your credit score. (Call me to discuss)
  • Collateral – The property you wish to purchase. Lenders are looking for collateral (their security) to be in good shape and free of any health and safety issues. Why not a complete “fixer upper” see the cash bullet above. The lender wishes to protect a borrower from any unforeseen repairs that the borrower cannot afford. Besides the last thing a lender wants to do is to have to fix up a property after having to foreclose on a home loan.

I have been helping people finance their real estate for over 25 years. Whether you are a seasoned real estate investor or first time home buyer my experience and knowledge will insure that your home loan goes smoothly! I would be happy to meet with you for a free consultation to discuss your plans to purchase a home.

Share

Home Affordability Via Loan Rates

April 9, 2015 Posted by Andre Hemmersbach

Interest rates are the key factor in home affordability, not the home sales price. Home buyers mistakenly think that high real estate prices are keeping them from affording a mortgage payment, however, the biggest variable in home buyers affording a home are mortgage interest rates. (See chart below)

Given an annual income of $70,000 between a husband and wife, at the industry standard of 38% debt-to-income (DTI) ratio a couple could afford a mortgage loan of $525,700 at a rate of 3%. For every 1% increase in mortgage rates the borrower’s affordability drops another 10%. If rates were to merely raise 3% a borrower could not afford more than a home loan of $369,700.

Chart

Rate Affordability Chart

 

Please call me for a free consultation to see what size home loan you qualify for.

 

Share

Big Rate Drop Thanks To Oil Prices

January 8, 2015 Posted by Andre Hemmersbach

Big Rate Drop Lower Gas Prices

Lower Gas Prices Big Rate Drop

 

Look at the big rate drop that the mortgage market has served up if you thought that the good news was the $25 you were saving at the pumps. Lower oil prices are deflationary and that has been great news for the big rate drop in the mortgage rates over the last 3 weeks. Coupled with weak economic news out of Europe and another Greek Currency hiccup the change in oil prices have really moved the home loan rates in the right direction is you are looking for a home loan to purchase a home or are currently in a mortgage over 4.25%.

Rates on a 30 year fixed rate have dropped to below 3.625% on the very best borrower profiles (APR 3.689). Many of my clients are also considering a term reduction to really kick up the savings. Refinancing from a 4.25%, 30 year fixed rate taken out last year to a new 20 year fixed rate at 3.375% will save a borrower over $131,000 in interest over those 20 years.

If you would like to see if a refinance would make financial sense, please call me I would be happy to perform a free review your current mortgage through my proprietary mortgage calculator.

Share

Down payment sources

March 20, 2014 Posted by Andre Hemmersbach

The biggest issue facing most borrowers in this market is still saving the down payment and closing costs! I thought I would list a number of resources that are helpful to would be purchasers that are a little short on cash.

  • If you work for a company that has a 401K plan, check with your administrator to find out if you can borrow against your vested balance. Many plans allow for a loan up to 50% of your vested balance or $50,000 for a purchase of a home. Best part about this loan is that most of the time the payments will not count against your qualification ratios.
  • Call your HR department or boss to see if your employer has a company program that will do an employer loan for the purchase of your home. This debt does count against you but I have helped borrowers whose employer had incredible rates of interest for such loans.

    Your Backyard

    Your Next BBQ

  • Cash in a Roth IRA for $10,000. Currently the tax rules allow you to pull up to $10,000 without penalties for the purchase of your first home. (you still need to pay regular income tax on the amount you pull and check with your CPA).
  • Sell stocks or better yet, borrow against stocks or securities you own.
  • Check with Non-profits or your church to see if they have any special down payment assistance programs.
  • Sell or refinance a boat, car or RV.
  • Get a gift from any family member or members (some programs allow for 100% gift funds).
  • Find a co-signer or partner with someone with cash and purchase the property together (you can do an equity share agreement that splits the property price appreciation at the time of sale).
  • If you are a veteran, you do not need a down payment as financing is available at 100% of the purchase price.
  • Look for a seller that will carry a second (usually will not work in a seller’s market)
  • If you have already saved around 3.5% of the sales price for a down payment there are programs available that allow the lender to pay all your closing costs.

Call me I would be happy to discuss your particular situation.

Share

Anatomy Of Your Credit Score

November 23, 2013 Posted by Andre Hemmersbach

A Credit Score is a number that ranks a consumer’s credit risk based on a statistical evaluation of information in the consumer’s credit file. In layman’s terms, it’s a number that represents the risk that you will default on a loan, using your prior payment history and other factors as a benchmark. Statistically speaking, the higher your credit score number the less likely the lender will experience delinquencies or a default on your account. Different industries use different credit score products. For instance mortgage lenders rely on FICO or the Fair Issac Credit Company score to determine your credit risk level for home loans. A car dealer and a credit card company may rely on different credit score products. Each mathematical algorithm used to calculate credit scores is unique and extremely complex, so the information below is a simple explanation of how a FICO credit score works.

A FICO score is based on five different weighted factors as presented in the pie chart below:

The most common question I hear about a borrower’s credit score, is how to quickly increase the borrower’s representative score, so that we can get the borrower approved for a home loan. Sometimes we can also quickly improve a score to get a client a better rate and fee combination. The basics for increasing your credit score are all related to the weighted factors in the chart above and have to do with:

  • Correcting any delinquent payment histories that are incorrect.
  • Paying off account balances.
  • Rearranging account balances.

We have tools available by which we can create a plan that actually allows us to try different credit scenario fixes and measure the resulting credit score improvements. This new tool has already saved many of our clients time, money and frustration and is not available through your standard mortgage conduits. If you are looking to purchase a home in the next six months I would highly recommend a free credit consultation to make sure you have the best possible chance of getting the lowest interest rates on your mortgage.

Finally, when dealing with credit score issues it’s best to get help from someone who understands how credit scores are figured.  Attempting to raise your credit score yourself could be counterproductive as simple mistakes made during the process can actually decrease your credit scores delaying or making your home loan more expensive.  Please call me if I can help you.

Share