How to Buy a Home Without a 20% Down Payment

One of the first things you’ll hear when you start considering homeownership is that you’ll need a hefty chunk of change upfront. Most financial planners recommend putting down a 20% down payment. On the current national median home price of $306,700, that comes to $61,340. And that’s serious money.

But if you don’t happen to have that kind of cash on hand, you’re not alone. Quicken Loans Vice President of Capital Markets Bill Banfield notes that the most common barrier to homeownership isn’t being able to afford the monthly mortgage payment—it’s being able to save the down payment.

Thankfully, there are other ways to go about buying a home that don’t require you to put 20% down, like the following:

Federal Housing Administration loans

The Federal Housing Administration requires a down payment of only 3.5%. Compared to 20%, that’s pretty sweet—but these government-backed mortgages aren’t for everyone. To be eligible, you’ll need a decent credit score, of at least 580. Scores as low as 500 may qualify, but then you’ll need to put 10% down.

Another stipulation is that you’ll have to pay mortgage insurance, an extra fee that’s required on home loans where less than 20% has been put down. There are also limits on how much money you can borrow, with a minimum and maximum between 65% and 115% of the median home price in an area—on average between $271,050 and $625,000. Still, in spite of these restrictions, these loans are plentiful and a boon to home buyers, particularly those who are entering the housing market for the first time.

VA loans

If you or your spouse has served in the military, Uncle Sam has your back! You may quality for a Veterans Affairs loan, which requires 0% down and, unlike FHA loans, no mortgage insurance, since the Department of Veterans Affairs insures the loan on your behalf.

To get a VA loan, you’ll need to present a certificate of eligibility, proving one of the following requirements:

• 90 consecutive days of active duty during wartime (including from Aug. 2, 1990, to the present; see other qualifying dates), or 181 days during peacetime.
• six years in the National Guard member or reserves.
• You were wounded in service, even if you served for less than the specified time.
• You’re a widow or widowers of a member of the military forces who died in action or from injuries suffered while on duty.

USDA rural development loans

The United States Department of Agriculture also offers 0% money-down loans to home buyers who qualify as having low or moderate income. And the threshold for “moderate” can be quite high depending on where you live; in San Francisco, it amounts to $141,000 for an individual.

And while eligible properties are typically in rural regions where space isn’t at a premium, this doesn’t necessarily relegate you to the sticks. A full 97% of the United States is covered under USDA loans; check whether any address or area is covered at USDA.gov.

State and local home buyer programs

The federal government isn’t the only one offering down payment assistance. In fact, there are 2,290 down payment programs across the country that offer financial assistance, kicking in an average of $17,766, according to one study.

Generally, these programs have income limitations and require you to take a home-buyer class. Find programs in your area on the National Council of State Housing Agencies website, or at the Down Payment Resource, which offers a calculator that can show you what you may be eligible for.

Credit unions

You may be able to get a mortgage with no down payment or a limited down payment from a credit union—a nonprofit banking cooperative whose members can typically borrow at lower rates.

In order to qualify, you will probably have to meet limited income requirements—such as a maximum of 80% of the median area income. You’ll also need a decent credit score. But the policies can vary widely, so check. For instance, the San Francisco Federal Credit Union recently offered 100% financing for up to $2 million to borrowers with an average credit score of 747 and $219,000 income.

How to find down payment help in your area

Start by talking with a lender, mortgage broker, or your Realtor to determine not only what home you can afford, but also what programs and financial assistance you might be eligible for. You can also see how much home you can afford by punching your numbers into realtor.com’s mortgage calculator.

Source: Realtor.com, Nichole Odijk DeMario
http://www.realtor.com/advice/finance/20-percent-down-payment-for-a-home/

Identity Theft : Getting Mortgage-Approved When Your Credit Is Stolen

Lenders Have Rules In Place For Credit Theft Victims

If you’re an identity theft victim, getting a mortgage will be harder, but not impossible.

More than 17 million Americans -- seven percent of adults -- experienced at least one incident of identity theft in 2014, according to the U.S. Bureau of Justice Statistics. That number is sure to be higher today.

Identity theft is, unfortunately, a part of life in the information age. But mortgage lenders understand this fact and employ special guidelines in these situations.

Mortgage applicants do not have to forego homeownership plans due to wrecked credit, but proactive response to any incident is important.

Learn how lenders deal with identity theft, and know your options as you apply.

Report Identity Theft Immediately

To have any credibility as a victim, you have to report the incident to your local police and to the government.

For lenders to consider you an identity theft victim, you must:

Provide a copy of a police report
Complete an affidavit of identity theft available from the Federal Trade Commission
Write a letter of explanation
It’s also a good idea to send your documents to all three major credit bureaus -- Equifax, TransUnion and Experian -- and place a fraud alert on your reports.

Lenders must personally contact you to ensure you are the one applying for credit, when a fraud alert is in place.

Get Approved Via "Manual Underwriting"

Once you’ve established that you’re an identity theft victim, lenders can “manually underwrite” your loan file, rather than running it through a computerized automated underwriting system (AUS).

Manual underwriting means a human goes through your credit report and application line-by-line and applies “make sense” guidelines. For example, if your credit history has no major blemishes prior to the identity theft, it’s easier to make the case that you’re a good risk.

The AUS, though, may not issue an approval due to poor, albeit erroneous, information.

Manual underwriting by a human allows lenders to be more flexible when identity theft is involved, but manually-underwritten loans often have tighter eligibility criteria.

For instance, the lender may require lower debt-to-income ratios or larger downpayments than they would if underwriting a file via the computerized system.

Still, a human-generated approval could be a good solution for well-qualified applicants.

Getting Around Credit Score Minimums

Most mortgage programs have minimum credit score requirements, and if they don’t, the lender will impose them.

This can be a major problem: identity theft victims can see their credit scores plummet when the thief opens accounts and doesn’t pay them.

Fannie Mae, Freddie Mac, and government mortgage agencies have different ways of dealing with the credit score requirements.

FHA loans

The U.S. Department of Housing and Urban Development, the overseer of the FHA program, says that applicants must include identity theft affidavits or police reports to dispute fraudulent charges.

The fraudulent accounts can then be excluded from the application.

USDA home loans

Likewise, USDA loan guidelines state that lenders can exclude credit data that is “significantly inaccurate.”

The agency instructs its lenders: “If an applicant does not have a usable credit score in connection with their loan request, then the use of non-traditional credit references is acceptable.”

Non-traditional credit reports are built manually and can include history from utility companies, landlords and other accounts that may not normally be reported to credit bureaus.

VA mortgages

The Department of Veterans Affairs, administrators of the VA home loan program, do not state a minimum credit score for the program. This makes it easier for identity theft victims to get around an inaccurate score if their “real” credit history is acceptable.

However, most VA mortgage lenders impose minimum credit scores. You’ll need to prove you were a victim of credit theft and also work to remove the erroneous information.

Conventional loans

Conventional loan rule makers, Fannie Mae and Freddie Mac, also address identity theft situations.

Freddie Mac says, “For a FICO score to be usable, it must be based on sufficient, accurate information. Too little information, or information that is significantly inaccurate, make the FICO score unusable for mortgage underwriting.”

Fannie Mae’s position is similar: “Lenders are obligated to take action when contradictory, derogatory, or erroneous information would justify additional investigation or would provide grounds for a decision that is different from the recommendation DU delivers.” DU, or Desktop Underwriter, is Fannie Mae’s automated underwriting system.

Talk with your lender about your options based on the home loan for which you apply. There is a good chance there is a workaround available to you.

You Might Pay Higher Interest Rates

Identity theft victims can end up paying higher mortgage rates, unfortunately. That’s because for many programs, borrowers with better credit scores get discounted loan fees, while those with lower scores pay more.

Typically, government-backed mortgage programs are less likely to impose higher fees on lower-score applicants.

Applicants with diminished credit should try a process known as a rapid rescore, which can raise your credit score by more than 100 points in days, not months or years.

Use A Rapid Rescore To Delete Erroneous Credit

If you have written proof that your derogatory credit history is the result of identity theft, you can ask your lender to use a rapid rescore.

Rapid rescoring is a service available only through lenders -- you can’t initiate it on your own.

For $25 to $50 per account, a rescoring service will verify your accounts and remove inaccurate derogatory information, usually in just a few days.

You will need to gather all available documentation regarding the identity theft and submit it to your lender, who will then request the rescore for you.

Your cleaned-up report includes a score unaffected by the identity thief’s fraudulent accounts. If you need a mortgage in a hurry, and you have written proof that your bad credit history is invalid, this is probably the best way to get a mortgage after identity theft.

What Are Today’s Rates?

Mortgage rates are low, and it’s an ideal time to take advantage of low payments, even if you are a victim of credit-related crime. Today’s consumer protections make it easier than ever to qualify despite erroneous credit information.

Get a quote from a lender now. No social security number is required to start, and your information is transferred securely to a knowledgeable lender who can answer your questions.

Source: The Mortgage Reports, Gina Pogol
http://themortgagereports.com/21579/identity-theft-getting-mortgage-approved-credit-score

Where to Buy a Home If You Haven’t Saved for a Big Down Payment

If you’ve been saving to make a down payment on a home, you may not have to put money aside for as long as you’d thought, thanks to the average required down payment being much lower in some markets. And, according to recent research, the average required initial mortgage payment is only getting lower for hopeful homeowners.

For conventional 30-year fixed-rate mortgages in the first quarter of 2016, average down payment percentages ebbed slightly to 16.64%. This figure is down from 17.46% in the fourth quarter of 2015 and 16.98% in the first quarter of 2015. The average down payment was subsequently down over the same time period from $51,721 to an average $49,839, but was up from the year-ago figure of $44,007.

These figures, according to the latest LendingTree national down payment report, also indicate the average down payment for all purchase mortgages such as FHA, VA, non-prime and jumbo mortgages in 2Q/16 was $44,058, accounting for 12.18% of the home’s purchase price. And regarding just FHA mortgages, the average down payment was 8.74% ($16,998), a slight increase from the year ago figure. Meanwhile, the average 1Q/16 jumbo mortgage down payment was 23.89% ($194,950).

Complimenting its findings, LendingTree also released the markets where you can find this low-down-payment real estate. Below are the 10 cities with the lowest down payments as a percent of total mortgage.

Meanwhile, if you want to avoid having to put down a high down payment, don’t look to put down roots in New York, where the average down payment is 19.74%, or $78,979.51. This was followed by California (19.56%/$84,728.78), Hawaii (19.44%/$58,404), New Jersey (19.29%/$64,579) and Washington D.C. (18.50%/$98,440.09). You may notice the actual average down-payment sum doesn’t always correspond with the average down payment percentage, having to do with real estate prices. But, generally, places with higher home costs also demanded a higher down payment percentage.

Regardless of how much money you have saved, lenders will look at your credit report before granting a mortgage loan. Take a look at your credit reports and view two of your credit scores for free on Credit.com. Doing so will help you know if you need to address any errors on your report before applying for a mortgage. And doing what you can to improve your credit score before you apply will not only save you money in interest over the life of a loan, it could help you afford more house as well.

Source: Realtor.com, Credit.com
http://www.realtor.com/advice/buy/where-to-buy-a-home-if-you-havent-saved-for-a-big-down-payment/?iid=rdc_news_hp_carousel_theLatest

Mortgage Payments When You Are In Financial Trouble

None of us can appreciate -- nor anticipate -- the future. Although we always believe it will never happen to us, once in a while, calamity strikes, and then we have to address these very hard and difficult questions.

You own a house, with a sizable mortgage. Suddenly, you (or your spouse) lost their job, and you cannot make the monthly mortgage payments.

There are a number of options you should immediately consider. However, the very first thing you should do is to talk with your lender. Don't just discuss your issues with a low-level employee. Try to go as high up the corporate ladder as you possibly can. And don't be afraid to be honest. Legitimate mortgage lenders will try to work with you, since they don't want to evict you and have to own and carry your house until they sell it.

Here are some of the options which are available to you.

1. Temporary indulgence. Here, the lender, at your request, may grant you a short period of time -- usually not more than three months -- in order to cure any delinquency. However, this is merely temporary relief, and by the end of that short period of time, the borrower must be completely current.

2. Repayment plan. Here, the borrower is given a fixed period of time -- usually not to exceed one year -- in which to bring the mortgage current by immediately making and continuing to make payments in excess of the monthly mortgage payment. It is important to get this repayment plan reduced to a written document, signed by both the lender and the borrower.

3. Special forbearance relief agreement. Here, the regular monthly mortgage payments are suspended or reduced for a period of up to eighteen months from the due date of the first unpaid monthly installment. At the conclusion of this relief period, the regular payments must be resumed; additionally, a comprehensive plan must be agreed upon for the repayment of the amount that has been suspended.

In this case, the lender will make a determination that the default is curable, and based on the current financial and appraisal data, the lender must be satisfied there is a likelihood that the borrower will be able to comply with the repayment plan. Clearly, the burden will be on you to document and justify the plan, so as to satisfy the lender's requirements.

If you are in the military, the Soldier's and Sailor's Relief Act provides various forms of relief, but you should check with your military or civilian lawyer to determine your eligibility under that Act.

4. A short sale. Here, the lender will authorize you to sell the property for what it is really worth, and the lender will get all the proceeds. Let us look at this example. The house can probably be sold at $395,000, but the mortgage is $425,000. The lender may allow you to sell the property for $395,000, giving a real estate broker a commission. The lender gets all the remaining sales proceeds; you get nothing from the sale. However, under this "short sale" approach, you will be relieved of your mortgage. In some cases -- depending on your financial situation -- the lender may want you to pay a portion of the mortgage shortfall; this depends on the lender and is clearly negotiable.

5. Deed in lieu of foreclosure. This is another remedy that may be available to you. Under this arrangement, you deed your property to the lender (or to whomever the lender designates) and this is in lieu of (instead of) foreclosure proceedings. This arrangement is an acceptable and customary procedure when, for example, the borrower is deceased and the estate is willing and able to transfer the property, or the borrower has filed Chapter 7 bankruptcy, and the trustee has abandoned interest in the property.

6. Foreclosure. Here, the lender will sell your property at auction (or in some states at the Courthouse), and you will lose your home and your credit rating (whatever is left of it. Legitimate lenders do not want to foreclose. and they will reluctantly start the process if all else has failed.

7. Bankruptcy. Your final option, of course -- which should be used only as a last resort -- is for you to file bankruptcy. When someone files for bankruptcy, there are many protections that automatically apply from the day the bankruptcy petition is filed with the Bankruptcy Court. The most important protection under the bankruptcy law is known as "the automatic stay." If you are in bankruptcy, no legal action can be taken against your house unless the lender requests the Court for permission to "lift the stay."

You cannot ignore your financial problem, hoping you will win the lottery or find some other immediate source of funds. The level of your cooperation is the most significant aspect that will determine how willing the lender is to similarly cooperate.

Source: RealtyTimes, Benny L. Kass
http://realtytimes.com/consumeradvice/mortgageadvice1/item/43937-20160420-mortgage-payments-when-you-are-in-financial-trouble

Your Debt-To-Income Ratio Can Tell You How Much Home To Buy

DTI Reveals True Home Affordability

Credit scores often get the biggest headlines.

Your three-digit FICO score is a key factor for qualification and mortgage rates.

But there’s another number that does a better job at telling you what you can afford: your debt-to-income ratio, or DTI.

Your DTI is a comparison between your monthly payments and your income. A low DTI denotes you are buying a home well within your means.

Lenders want to see that you are taking on a sustainable housing payment. That’s good for you and them.

Knowing your DTI before you apply is by no means necessary, but it can help buyers form an educated estimate of their price range.

Many buyers will discover that homes in their area are very affordable as they look at their income, current payments, and future housing costs to determine their DTI.

No Two Buyers' Payments Are Alike

The lender never looks at the amount of debt independent of the applicant’s income.

A certain amount of payments can be too much for one consumer and no burden at all for another.

Think of it this way: $4,000 worth of monthly debt obligations are a real problem for consumers who earn a gross monthly income of just $6,000. But that same $4,000 of debt isn’t nearly as problematic for consumers who earn $18,000 a month.

Figuring your debt-to-income ratio isn’t difficult. Divide your recurring monthly debt obligations into your gross monthly income.

For instance, you would have a 25% DTI with an income of $10,000 and payments of $2,500.

While the formula is easy, it helps to think like a lender when you calculate your debt payments.

Calculate Your DTI Like A Lender

Mortgage lenders are the final decision maker. It’s important to understand how they calculate DTI.

The lender will look at your recurring payments for anything financed, such as cars, student loans, and credit card purchases. If you have monthly child care or alimony payments, these also count as part of your recurring monthly debt.

They will not include non-debt monthly payments such as utility payments, cell phone bills, and gym memberships.

If you’re not sure which of your bills the lender will consider debt payments, obtain a free credit report. Consumers have access to a free report once per year from each of the three major bureaus, Transunion, Experian, and Equifax.

Go through the report and add the payment amounts listed. This is exactly how the lender will calculate your non-housing payment total.

Estimate All Parts Of Your Future Housing Cost

After calculating your non-housing debt, the lender will estimate your new monthly housing expenses.

Your future payment amount will consist of a number of pieces.

• Principal
• Interest
• Mortgage insurance, if any
• Property taxes
• Homeowner’s insurance
• Homeowner association (HOA) dues

You can determine your principal and interest payment with any mortgage calculator. Some even estimate your mortgage insurance cost. Property taxes can vary widely by region of the country. Search for home in your area and price range on a real estate website. Each listing should state the amount of taxes, which you can use for your estimate.

Homeowner’s insurance can be anywhere from $50 to $200 or more per month, but for the typical house and borrower, should be around $75.

HOA dues almost always apply when buying a condo, but often when buying a single-family home in some neighborhoods too. Search for homes in desired neighborhoods to check common HOA dues, if any.

Use All Your Income

Most U.S. workers’ paychecks bear little resemblance to their actual income.

A large amount is removed for income taxes, Medicare, and Social Security taxes. In addition, many workers voluntarily contribute to a 401k plan and pay medical insurance premiums too.

The end result is take-home pay that is significantly less than gross income.

Fortunately, the lender will use all your income to calculate your DTI.

In addition, you can also include monthly rental income, any alimony payments you receive, pension income, disability income and many other payments you receive each month.

However, lenders may calculate these income types differently than you would. For instance, only 75 percent of your rental income “counts” toward qualifying income.

Likewise, self-employed income can be difficult to calculate on your own. The lender will deduct any write-offs from total business income.

The point is, be conservative when estimating non-salaried income. Lenders will provide an income analysis as part of the pre-approval process. If you are self-employed, this may be the only way to know your lender-calculated income.

Many Exceptions To The 43% DTI Rule

When applying for a mortgage loan, you want to aim for a debt-to-income ratio that is lower than 43 percent. That’s because 43 percent is the highest DTI many loan types can hit and still be considered a Qualified Mortgage.

A Qualified Mortgage is one that the Consumer Financial Protection Bureau considers sustainable by the buyer. The rule came out of the 2010 Dodd-Frank Act as an effort to protect consumers after the housing downturn of last decade.

But the forty-three-DTI rule is by no means hard-and-fast.

For instance, Fannie Mae’s new program, HomeReadyTM, allows a 50 percent DTI when non-borrower household members are contributing to homeownership costs.

Likewise, FHA loans and VA home loans which receive approvals are considered Qualified Mortgages despite their DTI.

Borrowers who do apply for a loan with a 43 percent cap have options if they are above the DTI limit.

They can target a lower-priced home, which would reduce their estimated new monthly mortgage payment and debt-to-income ratio.

Home buyers can also refinance their auto loan, or consolidate student loans and credit cards to reduce the monthly payment. The lender does not factor in loan balance, but only the minimum amount due each month. Reducing payments helps, even if loan balances don’t change.

Let Your Budget Make The Decision

The key is to get your debt-to-income ratio to a level that is not only attractive to lenders but is also comfortable for you. Your lender might approve you with a debt-to-income ratio of 40 percent, but you might not feel comfortable with monthly obligations that consume that much of your monthly income.

Your payment comfort level may be much lower than the housing expense the lender approves.

Before you apply for a mortgage, take the time to roughly calculate your debt-to-income ratio. This number will tell you plenty about how much of a monthly mortgage payment you can comfortably afford.

And don’t be afraid to be more conservative when it comes to your debt-to-income ratio. Enjoying homeownership starts with sustainable, comfortable costs.

Source: The Mortgage Reports, Dan Rafter
http://themortgagereports.com/20054/your-debt-to-income-ratio-can-tell-you-how-much-home-to-buy

10 Ways Home Buyers Self-Sabotage Their Chances At Homeownership

Let’s face it, you need a strong stomach, a large dose of hang-in-there-and-hold-on-tightly, as well as an ounce or two of patience stored away to make it through a real estate transaction these days. Even “easy” deals can and often do get hung up over minor details. With all the pitfalls ready to snare prospective buyers before they take the keys and begin moving into their love nest, the last thing these consumers need to do is get in their own way!

So, long before you take possession of that cute craftsman, jump for joy at the views from your new condo, or strip down and run around your new private acreage, you need to do everything in your power to avoid these 10 real estate loan killers.

1. Just Sign Here
Although it is tempting to sign up for all those snail mail credit card applications, show some restraint, at least until after you close on the home. Getting approved for more credit can actually lower your credit score and give creditors pause about your ability to repay any new debt. The lenders I know are all great peeps, but they universally do not want to suddenly see credit surprises, so do your utmost to avoid the temptation to acquire more credit card bling.

2. Early Payoff Temptation
Figuratively, just keep your extra cash under the mattress until you are a new homeowner. When you pay off debt it updates your credit score date of last activity. Generally, while paying off debt early can be a smart move, during the home loan process is not the ideal time to have that revelation, as it can have a negative impact on your credit score. Sleep on the funds and pay off those nagging debts after you have the house keys in hand, not before. If you must indulge, make an extra payment across all your balances at the same time.

3. Charge It!
The new thingy, bright and shiny, must have, want so badly can nearly taste it, and fill-in-the-blank item can wait! It.Can.Wait. There is no quicker way to sabotage your home loan than to run up your credit cards while waiting for your loan to get through all the wickets. Your credit score will drop quickly and you may find that incredibly reasonable interest rate is no longer available to you, or worse yet, you no longer qualify for the home loan. A good rule of thumb is to ensure your card balances remain below 30% of their available limit.

4. Credit Card Consolidation
You could get penalized by moving around your balances and maxing out one (or more) card(s). Again, either wait until you own the property or complete the debt consolidate long before you decide to buy a home. If your lender gives you the green light, go for it, otherwise your best move is to make no move at all.

5. Cash is King
It can be, especially if you have fully documented where the money came from. Undocumented funds might as well be fool’s gold as your lender will ignore this unsubstantiated cash. The cash may be legit but it cannot be used to verify your income or as a down payment without a paper trail.

6. Avoid Closure
This is not a Dr. Phil moment! It is a prudent move to avoid closing credit card accounts while getting a home loan. Your debt ratio will go up, your credit history will be affected, and your lender, agent, significant other, etc. will not be happy with the outcome. Check with your lender before making this move, but the exception is closing old accounts showing an available balance if you believe they are already negatively affecting your credit score.

Source: LighterSide of Real Estate, Anita Clark
http://lightersideofrealestate.com/real-estate-life/10-ways-home-buyers-self-sabotage-chances-homeownership

Should I Co-sign My Brother’s Mortgage?

Q. My credit has always been good, and my brother’s credit stinks. He just got married and they want to buy a house. I’m thinking of co-signing the mortgage. What do I need to consider? — Brother

A. It’s very kind of you to want to help your brother, but before you do, you need to understand that you’d be taking a pretty hefty risk.

As someone with good credit, you’ll improve your brother’s chances of getting a loan at favorable rates, and you’ll likely help him improve his credit, said Jeff Rossi, a certified financial planner with Peak Wealth Advisors in Holmdel, NJ.

But here are the pitfalls.

If your brother’s credit is bad, he has obviously had some credit missteps in the past, Rossi says.

“As a co-signer, you’re hoping and trusting that he has no further missteps for the next 30 years, assuming a 30-year mortgage,” Rossi says. “That’s a long time, and the only way you can get off of it is if he refinances or pays off the balance.”

As a co-signer, the mortgage will impact your credit, and as a financial planner, Rossi says he recommends people protect their credit scores at all costs.

“A degraded credit score can cost you future frustration and money,” he says. “My recommendation is to never co-sign something that you don’t have a vested interest in.”

He said the ultimate decision is always a personal one, but sometimes blood is thicker than water, so he understands why you would want to be a co-signer. Still, he cautions against it.

Co-signing a loan will make you equally responsible for the payment of the mortgage, and it will cause an immediate impact to your ability to obtain credit, Rossi says.

He said the immediate impact comes in the form of a higher debt-to-income ratio, which is calculated by dividing your reoccurring monthly debt payment by your gross monthly income.

He offered this example: If your monthly reoccurring debt from your mortgage, student loans and car payments adds up to $1,800, and you earn $6,000 per month, your DTI is 0.30 or 30% (1,800/6,000). Add your brother’s $1,000 mortgage payment, and your DTI is now 46% (2,800/6,000).

“That can impact your ability to take on debt in the future,” Rossi says. “Most car loans look for a DTI of 36% or lower when considering loan applications, so expect an immediate impact if you’re planning to get a car loan in the future, and even more of an impact if you need a mortgage.”

Rossi says there are programs out there that may help your brother get a mortgage on his own. For example, there are Federal Housing Administration loans are sold through FHA-approved lenders, which are insured by the federal government to reduce their risk of loss if a borrower defaults on their mortgage payments.

“The rates are generally a bit higher and come with some additional fees, but they’re more tolerant of borrowers with lower credit scores,” Rossi says. “Your best next step would be to have your brother speak to a mortgage broker with access to a variety of programs to see what type of loans he could secure on his own.”

Source: Realtor.com, from credit.com

http://www.realtor.com/advice/finance/should-i-co-sign-my-brothers-mortgage/?iid=rdc_news_hp_carousel_theLatest

REALTORS®' Top Concerns Heading into 2016

REALTORS®' Top Concerns Heading into 2016

An improving job market, still-low interest rates, and recent measures to make credit more accessible are all offering help to the housing market’s recovery, but several challenges prompting closing delays remain.

The latest REALTORS® Confidence Index conducted in November reveals some of the top concerns on real estate professionals' minds. The survey is based on more than 2,500 responses from members about local market conditions.

Here are some of the most common concerns that REALTORS® raised in the latest survey:

1. New mortgage disclosure rules: The implementation of the TILA/RESPA Integrated Disclosure (TRID) regulations on Oct. 3 has been delaying closings and having an impact on sales, according to members. About 47 percent of respondents reported longer closing times compared to a year ago, up from 37 percent in the October 2015 survey.  It typically took another 40 days to close a sale, up from 35 days in July 2015.

2. Condo financing: REALTORS® continued to report difficulty in obtaining financing for condominium unit purchases because many condominiums are not FHA or GSE eligible. Read more.

3. Tight inventories: A smaller number of homes for sale across the country are limiting choices for buyers and pushing prices up, decreasing housing affordability. REALTORS® particularly reported low inventory of properties in the lower price range and for those that are move-in ready.

4. Tight credit: Stringent credit standards continue to affect sales, particularly for first-time home buyers who are still struggling to qualify for financing, according to the REALTORS® surveyed. “Credit profiles that fail to meet tighter underwriting standards are conditions that continue to work against first-time home buyers,” according to the report.

5. Appraisal issues: “Late” and “low” appraisal valuations was also cited by REALTORS® as being problematic in transactions.

Source: National Association of REALTORS
http://www.realtor.org/reports/realtors-confidence-index

First-Time Home Buyers Have One Big Hurdle to Overcome

It’s no secret: Housing costs are expensive. Rising rents and a strong real estate market are making it harder for first-time buyers to get a piece of the American dream.

Buying a home means getting these four areas of your finances in shape:

• Credit
• Debt
• Income
• Assets

If you do not know where you stand and if you want to make an offer on a home, getting pre-approved is an important first step. Getting your financial house in order should be priority No. 1 if you intend on buying a home now or down the line. A pre-approval involves having a lender ensure that your credit score is sufficient, you have the cash to close on the home, your income supports the debt load plus your other liabilities, and you have the financial character and capacity to make a big-ticket purchase. While credit score, income, and debt allowance are all important puzzle pieces, your cash to close reigns.

The hard reality

There are no more first-time buyer programs available. All the first-time buyer programs that did exist have long since expired.

While there is a possibility of finding a county, state, or HUD program to assist with down payment, the next order of business is coming up with closing costs, which equates to just about 2.5% of the home price (not the loan amount). For a $400,000 home, that’s $10,000 needed just for closing costs, independent of the monies used for the down payment. The challenge that first-time buyers face is having enough money both for the down payment and closing costs.

Here’s what will happen in the following situations:

If you have an excellent credit score, but you don’t have the cash…

Then your home-buying project will get put on hold until you have enough money to seal the deal.

If you have very strong income, even with little debt, but you don’t have the cash…

Then you’re still at Square 1.

To purchase a home, you’ll need at least a 3.5% down payment to get your foot in the door and enough income to support financing a high debt load, due to financing a bigger loan size because you have less cash down.

Here’s a quick cheat sheet for total cash to close on various purchase price points:

 Home price $200,000: down payment + closing costs = $12,000 needed
 Home price $300,000: down payment + closing costs = $18,000 needed
 Home price $400,000: down payment + closing costs = $24,000 needed
 Home price $500,000: down payment + closing costs = $30,000 needed


These examples assume using a 3.5% down FHA Loan. Notice for every hundred thousand dollars in purchase price change on an FHA 3.5% down loan, the total cash to close increases by $6,000. If you’re looking for a home in the midrange, say $350,000—that would be an additional $3,000 needed, totaling $21,000, to close escrow on such a home. Put simply, for every $50,000 increment in purchase price, you’ll need $3,000 more in cash to close.

Mortgage tip: A conventional loan with 5% down could be a better option for dropping private mortgage insurance in the future, as well as avoiding FHA’s upfront mortgage insurance premium, a pricey 1.75% of the loan amount.

Acceptable sources of cash

If you don’t have the cash, there are other practical sources of cash to consider for your home purchase:

• Gift monies—an excellent source of funds used to buy a home, as long as the money can be documented with an executed gift letter; there are no mortgage gift fund limitations.
• Retirement funds—this includes stocks, bonds, IRAs, and 401(k); all of these accounts are acceptable sources for borrowing funds should your financial situation merit doing so.
• Cash value life insurance—this is another form of acceptable funds to procure cash from for your big purchase.
• Security deposit rental—as long as this money can be documented, and you have a working relationship with your landlord, security deposits are acceptable.
• Changing jobs—This is not a lending red flag like it used to be, and, in fact, making the plunge could be to your advantage if you can generate more income to enhance your savings.

Home lending is getting easier

The mortgage requirements for buying a home are loosening. When buying your first home, consider whether you can support a mortgage payment and have the cash necessary for the big-ticket upgrade (this calculator can show you how much house you can afford). If you don’t have the money saved up, or if you don’t have access to the funds, or if the project is on the longer-term projection—that’s OK as long as you’re doing everything you can do to better your financial position by continuing to save, while keeping debts low and manageable. In the meantime, keeping your credit in good shape, or working toward better credit, can give you access to lower interest rates, which can also help the affordability of this big purchase. You can get your credit scores for free every month on Credit.com to track your progress.

Source: Realtor.com, by Credit.com
http://www.realtor.com/advice/finance/first-time-homebuyers-have-one-big-hurdle-to-overcome/

Credit Knowledge And Confidence

Info Graphic of The Week - 6 Myths About Credit Scores

Source: California Association Of Realtors

How Credit History Affects Home Insurance Premiums

In this day and age, it is important to manage and guard your credit score like a hawk. Not only is it important for obtaining a home loan, it is important for getting lower insurance premiums as Shannon Ireland from the Zillow blog points out. However, this rule doesn't apply in California and a few other states that make the practice of using a consumer's credit score in determining an insurance premium illegal. 


How Credit History Affects Home Insurance Premiums