Michigan Real Estate Purchase: Lending Update

So, regardless all of the jibber-jabber out of Washington lending is continuing to tighten. I figured I would write just a general overview of some of the significant changes or non-changes here in my blog in case any of these issues may affect you.

First Time Home Buyers: Most of the news for you is good. So much is aimed at finding you and inspiring you to help get the economy moving again, that your business is still in demand. The current change is that banks are looking for a little more investment on your part to ensure that they are making a good investment with you. This doesn’t necessarily mean a down payment, but do expect to be accountable for past credit discretions and to able to show paperwork on where you are getting the money to pay for your appraisal, down payment, or other requirements. This can still be a gift from family, but expect to show proof of where you are getting it. More emphasis if being put on the 620 FICO phenomenon on a daily basis. Those borrowers over 620 will succeed on those under will continue to face more and more hardships as time passes. Open new credit…first and foremost. Always continue to strive to a higher FICO by managing current credit properly and you will be fine.

Buying a Home when you already own one: This is where some of the more significant changes have been made over the last year. If you want to move into a new home as your Primary Residence and already own a home, you will come into a lot of restriction. Even if you have a good reason- such as job transfer, more space, or just want better home at a better price. The banks see you as a huge risk of buying a new home and letting the other home go into foreclosure…and rightfully so. This doesn’t mean that it can’t be done; you will just need to meet the extra requirements. You will need to be able to afford to make the payment on both houses and the rest of your bills within the normal guidelines of 41% of your gross income. You will also need to have 6-12 months of both payments in savings (this can include 401k accounts too, so if you have one that hasn’t been raided by AIG or Countrywide you are in a decent position to obtain financing).

Buying and Investment Property: Ah the Catch 22. Affordable prices driving investors to the market and tightening credit restriction driving them away. Well, let’s face it, if you do not have some cash to work with you are not in a position to invest anyways. The good news is that prices have gotten so low that putting 25% down on a $30,000 property only means about $10,000 out of pocket including closing costs. If you have taken care of your credit over the years you can borrow most of that from sources outside of the mortgage and still leverage the majority of your investment as long as you can show your invest as liquid for two months prior to the purchase- meaning you can get a loan but have to deposit the cash for a few weeks before you find your property. I understand that Michigan is a down economy but I can’t express to you how much I hate seeing Californians being the ones gobbling up our properties when buying the home next door is so much better of an investment for our own neighbors that have the means. Maybe it’s time to weigh how much you are losing in your 401k or stock investments against how much risk you are willing to take…think about it people, you are losing cash hand over fist where it is now.

Buying a Second Home: Well, chances are if you are buying a Vacation Home, you have the resources to do so. You will certainly find that it takes a little extra down payment now, but any changes will not be significant enough to dissuade you.

Overall: Things are continuing to tighten, and they will follow this trend for a while. Don’t believe everything you hear on CNN, it will not serve you well. Most serious buyers will not feel the crunch anymore than has been happening over the last two years, but those that are getting into the market with timid steps will not succeed. You need to have money down, proof of your benefactors, and as always a steady income. Borrowers that do have the means to repay will continue to qualify.

For more in-depth information call or visit our website today
810-953-4266 or www.iconmortgagelending.com

Where to go when you can’t make your mortgage payment.

Life happens and along with it comes many challenges that we all face. These normal challenges can sometimes be magnified when you have a mortgage payment bearing down on you each and every month. There is always help available for you, but it is essential to remember a few things when you are having trouble making your monthly payment.

1. Never Wait!!! Simply missing payments is the worst thing you can do. It is important to be as on top of you payments as you can be, and that does not always mean making the payment. Recognize as early as possible when you know you will not be able to make your payment and contact your lender to let them know that you are having trouble. Often times they will have a solution for you. Simply waiting and waiting and missing payments and avoiding the situation will only further the difficulty in helping you out of your current situation.
2. Never purposely miss a payment. Many times you will hear advice from friends, family, your lender, or from advertisements from companies that claim to help you out of your current situation, or just out of your own anger over a certain situation with your lender. No matter what ANYBODY tells you, if you have the means to make your mortgage payment, the best course of action is to make the payment. Missing a payment will wreck your credit standing and force extreme difficulty on you including other creditors using your lowered credit score as an excuse to raise your interest rates on installment loans or credit card payments only furthering your troubles. Any program designed to help you out of a bad situation will not require you to purposely miss a mortgage payment.
3. Do not refinance your loan simply because you can not afford a singly monthly payment. Now if your monthly payment is too high and you need to lower it, it is a good idea to explore the option of refinancing. But if you can not lower your interest rate and you simply need to pay back taxes or get a month off from a mortgage payment because you are in a bind is not a good reason to refinance. In most cases you will end up with a lot of undue stress and extending your loan balance and term only to end up in the same situation down the line.
4. Read, review, review again, ask questions, and make sure that you FULLY understand the implications of any program your lender offers you that is based on missing a payment or rolling a payment in to the back end of your loan. Most lenders will fail to tell you that they will be marking your payments as late until you make up the missed payment. Meanwhile you are relieved from the payment you didn’t have to make and your lender has ruined your credit and any chance of refinancing. Why would they do that? Duh, because if you can’t refinance then you are forced to keep paying them interest every month!
5. If your lender can not help you, contact a HUD-approved debt counseling agency which are easy found here:
6. Be smart about it. If something seems too good to be true it probably is. If you do get yourself into a situation where you feel taken advantage of, tell your lender about it- you will be surprised how powerful your own words can be if you express yourself to your lender in a calm and confused fashion. If they seem to just run over your concerns with no resolution, don’t be afraid to contact an attorney about the matter. Many attorneys will consult you on the matter without an up-front charge.

If you need further information check out some of these websites:

www.hud.gov
www.hopenow.com
www.greenpath.com
www.fha.gov

Michigan Real Estate Purchase: Credit, or Reaching for Perfection

I know, seems so simple. Pay your bills on time, don’t claim bankruptcy, but there is a lot more to it than that. So, what goes into a good credit score?

 

Good Payment History: Obviously.

 

Length of Payment History: One of the distinct disadvantages of a younger person.

 

Balance to Limit Ratio: For your credit cards it is essential to keep the balance below 50 percent. If you really want to have great credit, 30% is even better. The dollar amount is not important, it’s the percentage.

 

Diversity of Accounts: Mortages, car loans, installment loans, student loans, credit cards, and charge cards they all help to show the variety of debt that you can properly manage.

 

Manageable Inquiries: No more than one per month. This will show that you are not trying to obtain new debt at a rate faster than you can handle.

 

Solely Owned Debt: Fairly new to the credit factor, but it is essential to have debt you obtained on your own rather than cosigned accounts.

 

Take all of these into consideration when trying to perfect your credit and make sure that you can make the payment before obtaining any new debt.

Michigan Foreclosure Purchase: What can the selling banks do or not do?

I have close a lot of foreclosure purchases over the last two years and have ran into some very odd demands from the selling banks. I would like to provide you with some of this information now on what these banks can and can not do that might help you in your own pursuit.

They can demand that you provide them with a pre-approval letter.
They can not demand that you obtain a pre-approval letter from any specific lender or broker. The doesn’t mean you won’t be told otherwise, but RESPA prohibits a seller, real estate agent, insurance agent, or anyone else from demanding an individual use any specific lender.

They can demand that your lender’s pre-approval letter states that you are credit worthy.
They can not demand to have your credit report or credit scores be provided to them. The Gramm-Leach-Bliley Act protects your privacy from any entity involved in the transaction that is not your financial service provider. You can give written permission for the selling bank to see these, but I certainly would advise against it.

They can write purchase agreement addendums that supersede any original terms of the purchase agreement you signed with your Realtor and submitted to them.
They can not hold you to any terms that you do not agree to in writing. Though you may be excited to hear that your offer was accepted, I urge you to sit down with our Realtor and Loan Officer before signing the addendums that come back from the bank.

They can refuse to pay for a title insurance policy and pass the cost on to you.
They can not force any of their closing costs on you without disclosure in the purchase agreement. Seems like more and more we find extra little charges being slipped into transactions. If you didn’t agree to pay it, you don’t have to- just be sure to review your HUD-1 Statement with your loan officer.

I hope this helps some of you out. I am sure more will pop up in the future. If you have any requests for info, just email me matt@iconmortgagelending.com or go to our website: www.iconmortgagelending.com

Michigan Real Estate Purchase: Credit Scores and What to Think about Your Score

I know it is hard to understand exactly what your credit score is, how it is calculated, and especially how it affects you when you want to buy a home. Here is a general, and easy to understand guide to your score in reference to obtaining a mortgage.

 

Below 500: Well I can’t sugar coat it, you are in pretty deep. This is where it may be a good option to seek consultation from a good attorney or a non-profit credit repair service (emphasis on non-profit).

 

501-560: You score is pretty low, but not beyond repair. You will not be able to qualify for a mortgage while your score is in this range. However, if you struggle through some high interest credit cards, maybe a secured card or two, you can bring it up.

 

561-619: You can probably obtain a mortgage, but it will be a very trying experience. You may be better served by simply waiting a month or two, trying to pay down some credit card balances, whatever you can do to optimize your score.

 

620-680: It may still seem just average, but in mortgage terms life is much peachier about the 620 mark. There are some things you won’t be able to do. You may find it difficult to purchase with no money down. But as long as there isn’t something odd about your application keeping you from obtaining a government backed loan, you are golden.

 

680 and up: Yes I realize that your score can get much higher from a 680, but for mortgage purposes there is really not much difference once you are above a 680. Once you get over 720 you may get a very slight rate discount, but nothing noticeable. Today is November 18, 2008 and this breakdown may change as the lending business tightens even more but for now, that’s what it is.

 

I hope this helps, and good luck on all of your financial endeavors.

 

For more in-depth answers or help go to our website:

www.iconmortgagelending.com

First Time Home Buyers: The Credit Conversation and a Confidence Conundrum

Undoubtedly, one of the first concerns of a first time buyer is their credit. What I see in a lot of first timers is merely a confidence issue. Like I said, this starts with credit but permeates every aspect of the loan process. Much like any good team, confidence in each other is really the fuel that fires success. I have this conversation with all of my first time buyers. If you don’t believe in me, don’t use me. The same way that if I don’t believe in you, I won’t work for you. Especially in this foreclosure driven market, you can’t go half-hearted into a trying transaction. What makes so many first time buyers lack confidence in their credit?

 

1. They have only had a few opportunities to get credit. Most potential first time home buyers that don’t get approved, simply have never had any credit. An old collection from Sprint, will not get it done. However, if you have an auto loan or a credit card (preferably both) we are in business. I know it may not seem like much, but it works. Understand that you are at a disadvantage simply because you have had less time, but if you have repaid a debt on time, be confident that you are building credit up…not letting it slip away. If you have been denied in the past, it is likely a lack of other references. This is not as bad when applying for a mortgage as it is when applying for a credit card.
2. Apply now, Free Money….with crippling fees. When young people get young people credit, it normally comes with high annual fees, application fees, fee fees. This normally leads to a charge off and hit to your score. The main thing is- did you ever get credit after that? The more recent the credit, the more it counts. If you have a blemish, don’t freak out. If you have gotten any new credit after the blemish, a good payment history on the new account will wash out and hopefully overcome the blemish.
3. So close yet, so far. So what if you are close but can’t seem to get approved?  If you are within a few points of being able to get a loan, you may need to just wait a month until some of the inquiries on your credit cease to affect you so heavily. When you apply for a loan, someone pulls your credit. If you are young and trying to obtain credit over a few months, then you have had several people pull your credit, probably multiple times for each time you actually applied for credit. This is the type of thing that can take a 620 FICO (easily qualified) to a 599 FICO (extremely hard to qualify). See, all these applications for credit look to a bank as if you are looking to overextend yourself. You are a much bigger risk if you are applying for a lot of credit very quickly, whether you obtain it or not. However, if you wait a month or two to calm this effect you should be fine.

 

Any final words? The best thing to do is to seek a good loan officer that that can guide you through this process and who is willing to work with you to get you into a home or into a position to buy a home.

For more in-depth help or answers, go to our website:

www.iconmortgagelending.com