TOTAL DEBT CANNOT BE TOO EXCESSIVE

When a loan officer runs your information to get you pre-approved, one of the first things they get from your credit report are your total debts and anything else you are obligated to pay each month.  They then factor this with your proposed monthly PITI payment (Principle, Interest, Taxes, Insurance) to get what is known as the “Debt-To-Income” ratio.  This ratio represents how much you will be paying each month compared to how much money you actually bring in.  Your total payments (including credit cards, student loans, car payments etc.) should not exceed more than thirty-six percent of your income.

APPRAISAL

When you get a loan, the note itself is secured by the actual property you buy.  This means that if you don’t pay your mortgage the bank can foreclose on you.  In order to insure that the house is actually worth what you paid, the bank will order an accurate appraisal, which insures to them that they can again sell the property for the same price if this happens.

RESERVES

Lenders will often look at how much money you have in your bank account at the time you are requesting a home loan.  This shows to them that you can still afford to make a payment if you end up losing your job or not making any money in a particular month.  Reserves can include retirement funds or even a 401k savings plan.

PMI

PMI, which is Private Mortgage Insurance, protects the lender in case you default.  This means that a portion of your monthly payment will go directly to the bank as insurance.  In essence it really doesn’t help you at all, and you can’t ever get it back.  Luckily, though, PMI goes away when you reach 20% of your total principle.  (PMI is not included in your loan if you put at least 20% down)

DOWN PAYMENT

You can’t make a down payment for a home loan with someone else’s money, a credit card, or another loan.  If you are interested in doing an FHA loan, you are guaranteed to pay at least 3.5% of the sales price as a down payment.  So if you are looking to get a mortgage for $100,000 you can expect to need at least $3500 to close.  That being said, there are also other closing costs that you can expect to bring as well.  The point being, don’t expect to get a mortgage for free these days, because it just isn’t going to happen.

GOOD OVERALL CREDIT (FICO SCORE)

As mentioned earlier, the most important thing to consider when getting pre-approved for a loan is your credit score.  A high FICO score will entitle you to the lowest rates, a mid level score will entitle you to average rates and a poor score will disqualify you from getting a mortgage at all in many cases.  Don’t worry though, as credit repair specialists can help you out to get your score up in most cases.

Lenders will verify everything aforementioned, including a re-verification of your employment before they allow you to close.  It all may seem a little excessive, but it’s just what happens and there is no way around it unless you have the capability to pay for the whole house in cash.

So, if you have any questions about getting pre-approved or need information about getting your credit score up legitimately, don’t hesitate to CONTACT US and we will get back to you as soon as possible.  If you would like us to review your situation just fill out our QUICK LOAN APPLICATION.

All of this is funded by the US Department of Housing and Urban Development (or HUD) in an effort to provide financial assistance to qualified homebuyers to purchase lender-foreclosed homes with the City of Fort Worth in specific target areas.  Which areas?  Well I’m glad you asked.  Here they are:

• 76131
• 76133
• 76123
• 76112
• 76179
• 76248
• 71637

Obviously the HUD isn’t going to just give this money away to anyone who asks, so there are some qualifying factors you must take into consideration when applying.

First of all, income is the main thing the HUD will want to know when you fill out your application.  The limits are set in advance by HUD, so conversely, your income cannot exceed their parameters in order to qualify.   For example, the maximum allowable household income for a family of 4 is $72,900.  For 5 people it jumps to $85,500.

Secondly, the property you find must be located in the city limits of Fort Worth, and you must occupy it as your primary residence.  So in other words, no investment properties or second homes are eligible for down payment assistance.

So how does the program work?  Basically, eligible homebuyers will receive a deferred-payment loan with no interest or payments at all for 10 years. The only stipulation? You have to stay in the house for 10 years.   After this time period has expired the loan is forgiven.  It is also worth noting, though, that the amount of the deferred-payment loan begins to reduce after five years, so you won’t have to pay back the entire amount if you end up having to move out of the house after 6 or 7 years.

If you are interested in seeing if you qualify for the program, don’t hesitate to CONTACT US and we will review your situation.  If you would like to review the requirements yourself, just visit Fort Worth’s Homepage for more details.

Unless you find yourself in the rare situation of having a few hundred thousand dollars laying around (or stuffed under your mattress), you’re going to have to take out a mortgage if you want to purchase a house. There just isn’t a way around it. So here’s some tips for getting the process started, or as we call it in the mortgage biz, “getting pre-qualified.”

The first thing you are going to need to do is make sure all of  your finances are in order. If managed early (and correctly), this can help so there won’t be any inconvenient roadblocks at the last minute that might prevent you from buying your dream home.

Long story short, lenders are going to look at a few specific things before they give you the green light to go shopping for your first mansion.  Here they are:

1. Your credit history. Pretty much the first thing the banks will do when they see your name is pull a copy of your credit report and check it very thoroughly.  Banks do this because they want to get a clear picture of how you pay your bills, how often, and basically what kind of borrower you are.

2. Do you pay your bills on time?  Do you habitually pay them late? How many different accounts do you have open? How many cards do you have? What are your credit limits for each account and what are your current balances?  Have you ever declared bankruptcy? ETC, ETC, ETC.

Basically, lenders are going to want answers to these questions before they make the all-important decision to lend you their money. But don’t fret if you have a late payment here or there, its not the end of the world. Lenders are more concerned about the frequency in which the late payments were made.  The more late payments, the greater the risk, and vice versa.

3. Your debt-to-income ratio.  You may have heard of this, and while ratio’s may not be your bag, it’s really not too difficult to figure out.  This term basically refers to the amount of money you make compared to how much money you are obligated to spend each month (on things like car payments, insurance, cell phone bills, etc). If your debt is too high in relation to  how much you make, a lender may decline to offer you a mortgage, or they may be wary about how much money they lend.

4. You should also not be surprised if the lender requests you to provide proof of your employment and income. In most cases a couple months worth of recent pay stubs suffice. Even then, the lender may still want to verify that you are indeed making as much as you claim to be. If you have only been at your present job for a year or two they may require proof of employment from your previous employer as well. If you were in school before that, they may request a copy of your transcript.

5. One more large concern for lenders when considering qualifying you for a loan is how much cash you have on hand (or in your checking/savings account).  Don’t be surprised if you are asked for copies of your recent bank statements and retirement fund balances, as well as any stocks, bonds, or other investments you may have.

This is done because the lender wants to make absolutely certain you have enough cash in your reserves to cover the down payment and closing costs without wiping yourself out.

Overall this may seem a little invasive, but don’t worry.  Due to the subprime crisis and all the fraud associate with the industry over the last decade, lenders are having to be increasingly stringent when deciding who they lend money to.  If done correctly, you can get lined up and put in a great house that meets your financial needs and demands!

As always, if you have any questions or need to get qualified yourself, don’t hesitate to give me a call (817-527-3164) or shoot me an email (info@dfwmortgageguide.com)! I’d love to help you out!

- Pate

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