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Having a Hard Time Getting a Home Loan?

Well, you are not alone. The lending guidelines have become so strict, it feels like the banks do not even want to make loans. Even well qualified buyers are being put to the test; buyers with high FICO scores, good assets, good income, etc. Times are just different in this market and what I have learned over the past few months more than anything when it comes to getting a home loan, is that it requires a LOT of patience and more time than usual.

Lenders are requiring more paperwork, more time to review loans for approval, very secure income, more reserves, higher level of assets, and more scrutiny and careful consideration when an HOA is involved. The underwriters are being much more careful about reviewing all the information that is provided to them and making sure to dot all their i’s and cross their t’s, especially if a buyer has less than 20% as a down payment for a principle residence.

If you want to buy a home, the first step is to get a preapproval from a lender, however, with what I have run into lately, even with preapproved buyers, is truly that you should really be fully approved for the loan subject to finding a home, including knowing all the conditions you need to provide to get the loan, before you find a home you want to buy. Typically, lenders will only provide preapproval loans that haven’t officially gone to an underwriter for review, since the underwriters typically only look at the loan packages once the buyer finds a home and is in contract.

But, in reality, a loan condition can actually be a deal breaker if a borrower can not meet that condition the underwriter needs to fulfill the requirement for the loan. So, it is better to know if a borrower can even follow through with all the conditions and such before they even enter into a contract on a home they want to buy.

My suggestion for any buyer who wants to buy a home is to really sit down with the mortgage broker and find out ALL of the paperwork that you need to provide and truly have that loan approved subject to finding the actual home. If you are truly approved for a loan with all the conditions and such, when you enter into a contract on a home, your transaction will be much smoother and little to no stress.

If you are buying a condo or townhome, typically the loan will be subject to the HOA documents and for that situation, sometimes things will come up that are completely unforeseen if the underwriter reads something in the HOA documents that doesn’t meet or fit in the guidelines. But, it is hard to avoid that situation because you never really know what an underwriter will think of the HOA documents, unless there is a big red flag like the development is in litigation or something to that effect. Most lenders do not want to lend on a HOA that is in litigation, so most buyers don’t even bother buying a home in a HOA community that is currently in litigation.

The moral of the story is that in these chaotic lending times, it is VERY important to work with a well qualified and experienced mortgage person who has been in the business for a long time and has been through these kinds of cycles before. And, it is important to sit down with your mortgage person and get all the information that they need you to provide upfront. The mortgage person should go through all the information with you and review all the documentation and look for any red flags that may come up and talk about those things upfront. And, if possible, you should be fully approved subject to finding a home, knowing all the conditions you need to meet to get the loan before you go into contract on a home. If there are issues that need to be addressed, it should be addressed before you go into contract on a home. Otherwise, the process is stressful and you will constantly be trying to “catch up” and jump through hoops to get it done, which is no fun at all for any of the people involved.

Also, do not try to “get away” with ANYTHING or think that you don’t need to tell your mortgage person EVERYTHING about your financial situation. Trust me, if you try to avoid disclosing information and such, it will most likely come back to bite you at the wrong time and could cost you the loan. And, if you are in contract at the time, it will cost you the home you want to buy and possibly your deposit. If you are working with a good mortgage person, you need to tell them everything and they know what to do with the information you provide and will properly package your loan accordingly.

Also, keep in mind that right now with the interest rates so great, the staff is working on WAY more loans with WAY less people. There have been a lot of layoffs in the lending industry and the staff is working on a skelton crew, so to speak. Less people are working on more loans, so you can imagine how much time it may take to get through the workload.

All I can advise to make the process as smooth as possible during these crazy times, is to have your ducks in a row the best you can before you find your dream home and go into contract with deadlines.

Credit Scores For Home Loans

Credit rating plays a very important role in getting a good home loan with favorable rates. There are official and unofficial guidelines for determining how credit scores will affect an applicant’s eligibility. Lenders use your FICO credit score to determine the minimum down payment percentage you have to make in order to get a home loan. This makes your credit report the most important factor to consider when seeking a home loan.

It is however very important to understand the different kinds of loans available so you can have a better idea of which one will suit your needs better. The most common type of home loan, is the fixed rate mortgage. As the name suggests, with the fixed rate mortgage, you are fairly certain of the amount you will be paying every month because the interest rates stay the same for the life of the loan. The disadvantage that you are likely to experience with this type of mortgage is that you may pay more interest than other home owners during a low interest period. In my opinion though stick with the fixed rate mortgage so you’re not surprised down the road.

How your credit score affects your mortgage:

To qualify for a mortgage, you will need to produce documents that show proof of income, credit history, a summary of monthly expenses and assets and liabilities. All of these documents are important to the lender so that they can determine whether or not you are a good candidate for the loan you want. In addition to these documents, lenders will look at your credit report to determine your eligibility for a home loan.

For government backed mortgages, the VA and USDA require lenders to review the entire loan profile of an applicant before making an underwriting determination. There are no minimum credit score requirements but several factors can make an applicant ineligible.

For example, an applicant typically with more than one 30 day late payment in 12 month period or has filed for bankruptcy within the last 36 months is ineligible for a government backed mortgage. Other factors include late rent payments, having accounts that have been converted into collections in the past year and having outstanding collection accounts with no payment arrangements.

Credit scores for home loans:

So, the question you probably have on your mind right now is: What are the minimum credit scores for home loans?

Your FICO score will not only affect the type of loan you can get but also the down payment you have to make in order to be eligible for the home loan. Before you look at the official FHA loan requirements, you need to understand the credit report that lenders use when determining your eligibility. Most people often just use one of the three biggest credit bureaus to get their credit report. Lenders on the other hand use a tri-merge report that they get from all of the three bureaus. If there are 3 credit scores, the middle one will be the representative score and hence what the lender will use to determine your eligibility and down payment.

There are official FHA loan requirements that are set by federal law. They outline how your credit score affects your home loan. Applicants with a FICO score of at least 500 are eligible for a home loan. An applicant with a credit score of 500-579 is required to make a down payment of at least 10% and those with scores higher than 579 will only be required to make a down payment of 3.5%.

Make your Credit Rating better:

Based on the information we’ve covered so far it makes a lot of sense to clean up your credit history before you apply for a home loan. The following steps should help you do just that.

· Check all the information to make sure that everything on the credit report is accurate.

· Eliminate any discrepancies you find as they could hurt your chances of having a favorable credit score.

· Pay off all the existing balances on any loans you may currently have. These one-off payments can be very effective in raising your credit score.

· Try to keep your debt below 30% of your credit limit. This is a good way to keep your credit score up.

Depending on who you talk to or the mortgage product you’re referring to, credit scores for home loans can vary. I know a lot of this information is quite redundant for a lot of you out there. But remember this; we have a lot of young up and comers that sooner or later will be looking at buying a home. If we can teach and educate young people on the proper and most productive way to buy a home then that will hopefully make for a stronger economy. More importantly maybe that will assist in helping our children and our children’s children to never have to go through a housing crisis as we did just a few years ago.

Please go to for more information on FHA loan requirements and to get Pre-Approved today.

A Right Approach For a Beneficial Home Loan

Own house is the dream of every person. For a middle class person, it is considered as a life time achievement as it requires quite a huge amount of money. Banks play a pivotal role in fulfilling this basic need. The products they offer and the services they provide are of immense use to people who intend to have their own house. For a safe and beneficial home loan, proper awareness over the products, policies, terms and conditions of the bank is most important as ignorance may result in more payments to the bank in terms of principal and interest components.

With proper planning and a right approach you can avail an easy and beneficial home loan to fulfill your dream of possessing a house. The following ten-step plan will certainly help you in accomplishing the task:

Know about the products: Prior to going for a home loan learn about the products that various banks offer; also know about their terms and conditions. After careful study select a product that suits best to your financial status.

Know about the rate of Interest: This is the most important factor about which you have to think more than once prior to going for a home loan. Plan carefully whether you want to go for a fixed or a floating interest rate plan. Have a good clarity from the bank so as to avoid disappointment in the future. Also if you go for a fixed interest rate plan, make yourself clear if it is fixed for the whole tenure or subjected to changes as per changes in money market conditions.

Know about the repayment Period: Choose an apt repayment schedule as per your financial status and possible future growth. Usually banks offer a tenure ranging from 1 to 25 years for home loans, and 1 to 15 years for mortgage loans. So keeping in mind of your income levels and liabilities choose your own plan for flexible repayments to avoid future disappointments.

Know about the eligibility criteria: Banks usually take fixed and variable income sources into consideration to approve a home loan. They reserve the right to sanction or reject the application if they find any information misleading. So it is advisable to provide useful applicable information only. Once you receive the sanction letter please read it carefully for Interest rate revisions, Sanction conditions, Pre-closure charges and terms and conditions of the bank before signing it.

Legal documents and scrutiny: You must submit all the legal documents pertaining to the property you intend to buy to the bank. So you must collect all the link documents, lay out and plan, and ownership documents from the vendor. It is to be taken care that if there is any legal dispute on the property then the proceeding and judgment copies are also required.

You must verify the legality of the property with a legal advisor prior to buying it. Banks will not hold any responsibility if any legal issue that may arise in future, and the customer has to continue to repay the loan. Remember that bank will not take any responsibility about the legality of the property.

Technical evaluation: Banks evaluate the value of the property based on the standards set by their panel members. You should take all security measures against the deviations both horizontal and vertical which will affect loan processing as well as future transactions. If the property has deviations, you should ask the vendor for the copies of regularization. The property should have the necessary permissions or documents to regularize the deviations according to Building regularization scheme (BRS). Also, check all the details like plot area, sanction area, plot number and the government approved plan valid dates before going for a processing.

Home Loan Agreement: Please read the document carefully before signing it as it is a long term contract between the customer and the bank. Once you sign the document it can’t be altered or modified until you repay the loan in all respects.

Registration: Home Loan processing ends with the registration of your dream property. Take care that the sale deed clearly states about your complete ownership of the property. Remember that even a small mistake can lead to bigger problems. So read the sale deed documents carefully prior to submitting for the registration process.

The vendee should collect all the link documents, Plan copies and tax Paid receipts from the vendor at the time of registration only.

Processing, pre-payment and foreclosure charges: The customers have to pay the processing charges to the bank for the loan availed. The customer should know about the additional charges which bank will make in cases of pre payments and foreclosures. A customer needs to pay a max of 4 % of the outstanding principle along with service tax towards the foreclosure charges of the loan.

Tax exemption: In addition to giving the joy of possessing a house, home loan provides the facility of Tax exemption on the principal and interest paid over a financial period.

A customer can claim tax exemption for the amount paid as stamp duty during the registration process. The Bank will provide you with the provisional certificates to claim the tax exemption from the income Tax department.