Increasing a Credit Score

Credit scores have a dramatic effect on a borrowers ability to get the best terms for many types of financing including a home mortgage, a car loan, credit cards, cell phone carriers, utility companies run credit checks, and even some employers rely on credit to screen employees.  To be in in the mortgage industry and the insurance industry, you have to have your credit checked often by regulators. This is how important credit is to the world we live in today

If your credit score does not meet minimum standards you may not even have the ability to get a home mortgage at all.

There are a number of factors that the credit bureaus use to calculate your credit score. One of the most important factors they use is your past payment history which generally accounts for 35% of your credit score. In the mortgage article how to improve a credit score, all the various ways you can achieve and maintain a great credit score are discussed. If you pay attention to these credit scoring factors you will be well on your way to achieving an exceptional credit score.

When it comes to your home there are ways to improve a credit score with specific home finance tips.

Pay Your Bills On Time.

It goes without saying that paying your bills on time is a must if you want to have excellent credit. Above all else you want to make absolutely certain you pay your home mortgage when it is due. As mentioned above, past credit history is a critical factor on how you be viewed by a lender when applying for financing.

There is nothing that will hit your credit harder than a missed payment. Credit scoring agencies will look at a missed mortgage payment in a far more negative light than a missed car or credit card payment. If at all possible you should always consider making your mortgage payment before other bill that are due.

Check Your Credit Report For Errors often

While working in the mortgage industry for many years, I have had the opportunity to see 1st hand that it is easy for credit bureaus to make mistakes on a persons credit report. A credit report error can cost a borrower a lot of money? Any mistake on your report will lower your credit score in negative manner. This makes it vital that you periodically check your credit report for errors but certainly before you try to refinance a mortgage.

If you find an error in your credit report you should make certain that you get it corrected right away! Here are the necessary steps you need to take in order to fix credit report errors. You will want to make certain the errors are corrected before applying for financing.

Postpone Financing Until Your Credit Is In Order

Depending on whether you have discovered a credit report error or had a legitimate blemish on your record in the past could be a reason for postponing a refinance. Removing a credit report error can take a little bit of time but could be worth it in the long run if you factor the difference in rate you will pay without the correction. Unless mortgage rates are climbing dramatically and locking a mortgage rate makes more fiscal sense, you will want to get your financial house in order 1st.

Sometimes there can be unpaid bills that took place a long time ago that come back to haunt you especially if they were turned over to a collection agency. Something as small as a $50 unpaid phone bill could come back to bite you in the form of a higher interest rate on your loan. Just a 1/4 point difference in rate could translate into thousands of dollars over the life of the loan. The good news is that as time goes by the blemish becomes less important in scoring factors.

Paying Off 2nd Mortgages and Equity Lines of Credit

On the surface it may seem like paying off a 2nd mortgage or home equity line of credit (HELOC) is a good idea but it may not be, at least in terms of a credit score going forward. Your credit utilization or what you owe your creditors makes up 30% of the scoring factor that credit companies use to determine your score.

The closing of existing revolving accounts will typically adversely affect the ratio and therefore have a negative impact on your FICO score. You may want to consider lowering the balance but not paying off the loan in one shot.

Pay Your Property Taxes, Income Taxes and Utility Bills On Time

If you find that you are strapped for cash there are certain bills that should always be paid 1st such as a mortgage, car loan and credit card bills. It makes sense to pay these bills 1st because they will have the greatest impact on your credit score. This however, does not make paying your property tax and utility bills on time unimportant.

The good news is that it will usually take a serious delinquency before missed payments are reported and negatively impact your credit score. Most of the time late payments on your property tax bill  or on income taxes won’t effect you for until you are seriously past due, but once they go on your credit, they last for 10 years and have a very bad negative impact on your credit report.  So you cannot neglect these items and you must be proactive to take care of them.

Always keep in mind how you manage your home finances affects your ability to either purchase a home or to refinance and get the best mortgage rates by having your credit in order.

You can contact Ben Gerritsen at: 801-814-2364
https://wedohomeloansforyou.com

FHA Loans V.S a Conventional Loan

You’ve heard the term FHA but probably don’t really understand how vital this loan is in today’s real estate market. Just what makes FHA so important?

FHA is the single most versatile loan program available and without it, literally hundreds of thousands of potential borrowers would not be able to finance a home.

Compared to all other home loan options, FHA is the second most utilized loan and is, by far, the most flexible in many areas such as credit, down payment, reserves after closing, etc. In many cases FHA is not only a great loan option but it’s the ONLY loan option available.

Take a closer look at FHA’s flexibility- down payment for example; FHA only requires 3.5% down payment while a conventional loan requires a minimum of 5% down.

On the surface it doesn’t seem like much but let’s put this in perspective. Given a purchase price of $275,000 FHA would require $4,125 less down than that of a conventional loan (if you’re not quite convinced that is meaningful then just think how long it would take you to save another $4,000).

How about credit scores? This is a big topic these days and rightfully so. If your credit score is 680 (and this is not considered “good” by today’s mortgage standards) and you were applying for a conventional loan with only minimal down payment then your interest rate could be as much as .375% higher than that of a FHA loan. Why? Because conventional loans charge higher rates for lower credit scores. FHA does not. We examined both options with a recent client and the payment on the FHA loan was $57 per month lower. Over 30 years that $57 per month adds up to over $20,000… now that’s real money!

One obstacle that borrowers can be challenged on is the source of their down payment. This can be critical to your loan approval.
A conventional loan requires the borrower to verify that they have at least 5% of their own funds while FHA does not. FHA allows for the entire down payment to be a gift.

A great example of this is a client who just closed on her home. She is a recently divorced mother of two and wanted to buy a home for her and her children. After selling the marital home she had very little equity left over. Fortunately, her parents provided her with a gift for the down payment and she was able to negotiate the seller to pay her closing costs. Because she went through FHA she was able to buy this home with no money of her own. On a conventional loan she would not have been able to purchase a home at this time because she lacked the 5% of her own money. Please don’t misunderstand the intent of this guideline. A financially healthy borrower should have some form of savings but under FHA rules it is not a requirement.

One other advantage of FHA is in regards to mortgage insurance. This is insurance that is required by bank when you’re putting less than 20% down payment.

FHA has their own insurance built into the approval process but this is not the same with a conventional loan. On a conventional loan there is an entirely separate approval process for private mortgage insurance (PMI) and often these guidelines can be more rigid than the bank’s. So keep in mind that just because your bank approves your mortgage doesn’t mean you’ll be able to get that loan if you don’t meet the criteria of the PMI company. Under FHA, one set of guidelines and that’s it.

Regarding private mortgage insurance, a great example of FHA’s flexibility is when you’re purchasing a condominium. If you’re buying a condominium with a credit score under 680 and you are only putting 5% down then you won’t be able to obtain private mortgage insurance. The private mortgage insurance guidelines prohibit this at this time and, therefore, you won’t get the loan regardless of whether your bank approves you! This is not the case with FHA. FHA does not differentiate with separate guidelines. You either qualify for a FHA loan or you don’t. There is no other criterion that has to be met.

The benefits of FHA’s flexibility far outweigh any disadvantages. In recent years there has been some confusion in the real estate market about FHA loans and much apprehension among a few real estate agents who believe that FHA is a harder loan to get approved. They feel that FHA is too rigid with appraisals with respect to the condition of the properties. There was some truth to that statement in that several years ago FHA was more restrictive on appraisals but that has since eased significantly. Today, FHA appraisals are no more restrictive than that of a conventional appraisal.

It’s estimated that there are approximately 14 million potential first time buyers between 25 and 37 years old who are ready to purchase a home. You have to imagine that many of these people will qualify for a conventional loan… but many won’t.

They’ll have circumstances that prevent them from being approved or have financial profiles that make FHA a much better financing alternative. With that said, FHA definitely has its place in this real estate market and is certainly here to stay.

If you are looking for a mortgage and want to work with someone that is very knowledgeable, has great service skills and competitive rates, I would give Ben a call.

FHA 203-K Rehab Loans

How many homes do you know of that are ready to move in and live in it on day one.  How many good deals and great deals are there that need some form of rehab or remodeling to the property.  More than ever before over the past 20 years.

The landscape of the housing market all over the country has changed drastically over the last few years. Foreclosures and short sales have become the norm not the exception. Many of these distressed properties that have been entering the market are not in the best of shape.

Some of them need a major overhaul! They have however, created opportunities for buyers who are looking to invest the time and effort to fix them up either to turn around and resell them or to live in as a permanent residence.

As such, the 203K rehabilitation loan is a terrific mortgage vehicle for those buyers who would like to invest in repairs and improvements in a property. The Federal Housing Administration (FHA) which is a part of the Department of Housing and Urban Development (HUD) is the party in charge of administering various single family mortgage insurance programs.

The 203K is the primary program for the repair and rehabilitation for single family properties.
The 203K rehabilitation loan program is run through FHA approved lenders which submit applications from buyers to have the property appraised and have the buyers credit approved just like in a conventional loan process. The difference is that these lenders fund the mortgage loans and the Department of Housing and Urban Development insures them. HUD does not make direct loans to borrowers.

If you have not had the pleasure of your buyer’s financing with a 203(k) renovation loan then just wait, because soon enough you will. With all of the distressed sales and foreclosure properties abundant, it’s likely that soon you’ll run into that home that needs either a little TLC or some major renovations. Either way, the 203(k) loan is a great financing tool to help a buyer restore a home.

The 203(k) program was originally designed by FHA to help with neighborhood revitalization and is a fantastic loan opportunity to buy a home and put in a new kitchen, bathrooms, update electrical or plumbing… almost any major and minor improvement you want. There is really nothing else available that allows for the flexibility that this program offers. It’s a simple program opens the doors for the average home buyer to receive money to improve a home.

I love this loan for a few reasons: First, the down payment requirements are minimal (only 3.5% of the acquisition cost which is the purchase price plus the renovation costs). What bank do you know of that will give a construction loan to someone putting less than 10% to 20% down? None! And the second reason I love this program is credit. You know that credit score tightening has been big show stopper for many looking to buy a home, let alone buy and finance renovations.

A low FICO score can prevent a home purchase, especially a home purchase with less than 20% down as most mortgage insurance companies have minimum FICO score (some even have their minimum at 680!). Most lenders will usually allow a score of no less than 640 for the 203(k) but some may still allow a score as low as 620.

I also like the fact that with 203(k) you have two options – the Streamlined K as some call it, and the Full K. The real difference between the two are that Simple K allows only up to $35,000 for renovations and have a caveat that improvements cannot be structural in nature. The Full K allows for any permanent improvement and no limit as to the amount as long as the loan does not exceed the maximum loan amount for that county determined by FHA.

There are a few other differences in paperwork between the two types of 203(k) loans but the premise is the same… 203(k) helps move inventory! If you’re sitting on listings or have buyers looking for a fixer upper then the 203(k) is definitely the way to go!
 
For more information on FHA 203-K loans, see also:
203-K Rehab Loans
Q & A's
FHA 203K Loan - Eligible Property
FHA 203-K Loan Streamline Refinance
FHA 203-K Eligible Improvements that can be done

Loan Programs today!

CONVENTIONAL MORTGAGES

This program is a fully amortizing  offers 30, 25, 20, 15 or 10 year fixed rate mortgage and competitive ARM products with full documentation of income and assets. Interest only option loans are available for the first 10 years on a 30-year term mortgage.

For owner occupied homes, getting cash out refinance is allowable up to 85% of the appraised value after having owned the property for 12 months or 85% of the purchase price during the first 12 months of owning the property. Maximum loan amount is $417,000.00 in Utah for Single Family Detached, Condos, PUD’s (Planned Urban Development) for a Single-Family homes with no prepayment penalty. 

Purchase transactions for Conventional loans require a minimum 5% down payment.

FHA MORTGAGE

Backed by the Department of Housing and Urban Development (HUD) this mortgage offers Utah borrowers the ability to put as little as 3.5% down payment and they can even finance allowable closing costs.  The seller can contribute up to 6% of the purchase price towards the buyer’s closing costs.

FHA loans are available in most of Utah for up to $729,750.00.

Streamline and no-cash-out refinances are available up to 97% of the appraised value of the home and cash-out refinances are allowed up to 85% of the appraised value.

203K FHA MORTGAGE

The FHA Section 203(k) insurance program enables Utah borrowers to finance the purchase or refinance of a home and the cost of its rehabilitation through a single mortgage. The FHA 203(k) can help you expand your market reach and help borrowers find affordable financing. The improvements are “streamlined” to only allow a maximum of $35,000 of repair costs to be added to the loan. Improvements can be for a new kitchen, new bathroom, to add a garage or to structurally improve the property.  They can not be used to add amenities such as hot tubs or swimming pools.

VA MORTGAGE

Backed by the Veterans Administration and the federal government it is similar to FHA except that you have to be a qualified Veteran or active duty military person. VA loans are available up to 100% of the purchase price of a home  in Utah and are fully amortizing 30 or 15 year fixed rate, or 5/1 or 3/1 Treasury ARM’s.

JUMBO OR HIGH BALANCE LOANS

Jumbo and High Balance loans offer 30 and 15 year term, fixed rate mortgages and competitive ARM products with full document of income and assets up to $729,750.00 or 115% of the area median home price.

Cash out and No cash out refinances are allowable.  Single family detached, Condos, PUD’s and single-family second homes can be financed with no prepayment penalty.

OFFICER, FIREFIGHTER, TEACHER NEXT DOOR PROGRAM

HUD’s Good Neighbor Next Door initiative is designed to encourage renewal of revitalization areas throughout Utah by providing law enforcement officers, firefighters, emergency medical technicians and teachers an opportunity to purchase homes in these select communities.

HUD provides a substantial incentive in the form of a fifty percent (50%) discount off the list price of eligible properties and a minimum down payment of just $100.  In exchange HUD requires that the buyer live in the home for at least three (3) years as their sole residence.  Borrower may include closing and financing costs in the mortgage amount.

For more information on this program visit http://www.hud.gov/offices/hsg/sfh/reo/goodn/gnndabot.cfm

Homes available through this program can be found at http://www.mcbreo.com/st_utmain.htm

HUD HOMES

FHA has offered special sales incentives for HUD homes in Utah.  These incentives are available to owner occupant home buyers when they purchase a HUD property at the full asking price and using FHA financing and a down payment as little as $100.00.  HUD also pays up to 3% of the list price for closing costs.

A HUD home is a single family home, duplex, triplex or fourplex that is owned by HUD after a foreclosure on an FHA-insured mortgage.

Homes available under this program can be found athttp://www.mcbreo.com/st_utmain.htm

USDA RURAL HOUSING PROGRAM

The Rural Housing Service, an agency of the U.S. Department of Agriculture (USDA), offers loan programs that give qualified borrowers who wish to live in rural areas of Utah the ability to finance up to 100% with little or no down payment and favorable rates and terms.

Applicants for USDA Rural Housing loans may have an income of up to 115% of the median income for the area.

The programs also make funding available to individuals to finance vital improvements necessary to make their homes decent, safe and sanitary.

Homes in all counties of Utah except for Salt Lake and Davis and some areas of Utah County, Washington, Weber and Cache qualify for USDA Rural Housing financing.

FANNIE MAE HOME AFFORDABLE REFINANCE

Making Home Affordable Program, or HARP, is also known as a Fannie Mae Refi-Plus.  This program allows for Utah properties with Fannie Mae purchased loans to rate-and-term refinance without mortgage insurance (if there was no mortgage insurance on the original loan) up to 125% of the property’s appraised value.  Existing second mortgages can not be refinanced into the Home Affordable Refinance and must subordinate to the new first mortgage.

The expectation is that refinancing a Fannie Mae loan will put responsible borrowers in a better position by reducing their monthly principal and interest payments or moving them from a more risky loan structure (such as interest-only or short-term ARM) to a more stable loan product.

HOME PATH PROGRAMS

Home Path financing is for homes that have been foreclosed on by Fannie Mae. Home Path loans only need a 5% down payment, do not have mortgage insurance, do not need an appraisal and have flexible mortgage terms (fixed-rate, adjustable-rate or interest-only). You may qualify even if your credit is less than perfect.  Home Path loans are available to both owner-occupiers and investors.

The down payment can be funded by your own savings, a gift, a grant, or a loan from a nonprofit organization, state or local government, or your employer.

Please feel free to contact me with any questions you may have about these and other loan programs.

https://wedohomeloansforyou.com
801-399-2364 Tel
Ben Gerritsen

6 consequences of the Federal Reserve’s rule on loan officer compensation

6 consequences of the Federal Reserve’s rule on loan officer compensation - Positive or Negative impacts for the consumer, hmmmm.  Here's the real world street facts.

The Federal Reserve’s rules limiting independent loan originatior’s compensation (but not the compensation of big banks) are already hurting the consumer in these six critical areas:

1. The loan officer can not lower their compensation to help the consumer, so the consumer will pay more when unexpected costs or situations occur during the loan process. These can be items like a title insurance policy actually being $100 more than expected or some other costs that come-up at the closing table. It is common practice for the loan officer to cover these overages out of their compensation.
2. The lender will have to pay for the unexpected expenses from #1, thus they will have to increase underwriting and processing fees to build-up a slush fund to pay for the overages when the come-up.
3. The borrower loses options resulting in higher rates and/or fees.
4. Service level will decrease because many smaller companies will exit the business, creating a monopoly for the big banks who then can price-fix fees and rates to their advantage. Reduced competition equates to increased costs to the consumer.
5. Rural areas will suffer with few or no lenders in the areas where bigger banks don’t set-up offices. These are the areas that smaller lenders and brokers excel in service.
6. Lower income borrowers will suffer because lower loan amounts will not be available. We are already seeing many larger lenders increasing the minimum loan amount they are willing to fund. Smaller lenders and brokers again excel in these underserved markets.Minorities will also be vastly underserved. An independent study done by George Washington University evaluating over 2.2 million mortgages originated by both big banks and mortgage brokers found that those loans originated by big banks for minorities averaged nearly 2% more in APR than those originated by mortgage brokers: 2.93% APR less to African American borrowers, 1.182% less to Hispanic borrowers and 2.296% less to lower income borrowers of all ethnic backgrounds.The savings on second mortgages were even greater. Overall, independent mortgage loan originators serve minorities and lower income borrowers much better than big banks do.

          Loan amounts under $60,000 are out the window, a thing of the past.  Low income families   that cannot afford a property that is a higher loan, too bad.  You may meet all of the guidelines, you may have the credit and the income, but thanks to the Federal Reserve and their new policy, you have been sent back to the dog house.  Lenders now are not loaning on smaller loan amounts.  There is not a profit in the business of making mortgage loans because of all of the red tape and regulation that has been imposed on mortgage banks.

There are individuals and families that in the one month that this has been in place that have been affected in a negative manner where they are now unable to obtain financing they have been preparing to get.

If you have a problem with this, don't just sit back, but rather contact your Senator, Congressman, Legislators and those that have the ability in Washington to have their voice heard.

I personally have done this, I have gone into Senator Orrin Hatch's office in Salt Lake City, Utah and voiced my concerns to his staff and asked that this feedback be taken back to Washington D.C. to assist the people being affected.

Watch the video below for a great explanation of how independent mortgage loan originators save you money and how the new Federal Reserve rules will harm you.

Clipped from: www.youtube.com (share this clip)

Is Buying a home really cheaper than renting Today?

According to data released this week by real estate website Trulia, even with the current state of the economy and the real estate market it’s still cheaper to buy than rent in many areas of the United States.

So I thought I’d see how that applies to Utah. Most two bedroom apartments in Salt Lake City rent for around $800 a month, which will buy you a $140,000 house.

Now I know what you’re saying: “Ben, where is anyone going to find a house for $140,000 in Utah?”

Good question. So I consulted the Multiple Listing Service (MLS) to see if there were homes and condos to be had in that price range, and here is what I came-up with:

Salt Lake County: 1,582

Utah County: 720

Davis County: 354

Weber County: 882

Tooele: 174

Sure, all of these aren’t going to be brand new house, and some may require some repair here and there, but if they pass an FHA inspection and you could own for the price of renting and get a mortgage interest deduction at the end of the year than why wouldn’t you do it? With over 3,700 homes for sale under $140,000 along the Wasatch Front you’re bound to find at least one that is just what you’re looking for.

And if having the down payment is a challenge, most major cities and counties have grants available for first time home buyers or individuals and families that have not owned a house in the past three (3) years.

FHA Streamline Refinance, Ogden, Salt Lake City, Provo, Logan, Cedar City, St George, Utah

If you or someone you know has an FHA loan and has not refinanced to lower your payments yet, then this is for you.

Checklines of Documents when refinancing an FHA Streamline loan

Did you know that thousands of home owners who have FHA home loans have utilized the FHA streamline refinance to lower their interest rate. Did you know that they also do this without paying huge mortgage origination fees and the process is relatively simple.

Usually, the FHA streamline refinance does not require an appraisal, which can saves time and also save you money!

The following are basic requirements of an FHA streamlined refinance:

• The mortgage to be refinanced must already be FHA insured
• The mortgage to be refinanced should be current (not delinquent)
• The refinance must lower the principal and interest payment of the previous mortgage payment
• The borrower may not receive cash from loan proceeds in excess of $500
• Any subordinate financing may remain in place as long as it is subordinated on title
• The term of the new mortgage must be the lesser of 30 years or the unexpired term of the mortgage plus 12 years. A borrower cannot refinance from a 15 year loan to a 30 year loan.
• An appraisal is not required unless the closing costs are wrapped into the loan. Streamline refinances without an appraisal are limited to the unpaid principal balance, minus any refund credit of the mortgage insurance premium (MIP), plus the new upfront MIP if it is to be financed in the mortgage
• No termite report is required
• The borrower cannot be late, delinquent, or in default of any federal debt
• Why an FHA streamline loan is for you
• Lower your interest rate FAST!
• Very little money out of your pocket
• Requires little to no financial documentation on your part

Ogden, Utah, Salt Lake City, Utah, Logan, Utah, Cedar City, Utah, St George, Utah, Provo, Utah, Orem, Utah, Layton, Utah, Roy, Utah,