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.

So if you’re in the market for a new home and you are concerned about this, there are a few things you should know before you get too preoccupied with your interest rate.

IMPORTANT INFO ABOUT RATES

First of all, mortgage rates change, and they change VERY OFTEN.  How often?  Well, last month lenders were re-pricing (changing rates) at an average of every 4 hours.  That’s right.  EVERY 4 HOURS.  Remember too that this is just an average, and many times rates have been known to change every 30 minutes or so.  So when your loan officer seems reluctant to speak with you about interest rates, it isn’t because he is trying to mess you over.  More than likely he is just scared to quote you something just to see it change an hour later.  After all, getting a “great mortgage rate” could end up saving you 1/8 % on your rate and consequently a couple hundred dollars in fees.

So what do most people do to “get the lowest rate?”  Society will tell you that the best way to achieve this is to “shop around” and get offers from multiple loan officers.  While in theory this is an excellent idea and supposed to make the process easier, the truth of the matter is that it doesn’t work perfectly.  At least not the way you want it to.

Why not?  Well, as I mentioned before, while you’re trying to figure out which loan is cheapest, or most appropriate, or has the lowest costs, mortgage rates are moving, and they are moving ALWAYS.  Furthermore, being that getting offers from different loan officers can take a week, rates can be totally different even a day later than when you started.  So, timing is everything with this.

RECOMMENDATIONS

So what do we recommend?  How do you get this lowest rate and still not feel like you’re getting the run around?  Well, the best thing you can do is get your shopping done early in the process, because the truth is, most loan officers have access to the same rates.  The better info you give them, whether it be about yourself, the home you desire, or how much you want to pay each month, the better than can serve you.

By doing this you will get a good feel of which individual you want to work with, and you will learn a lot in the process of potential rates and closing costs.  Some loan officers won’t return your calls, some will give you inflated estimates, and some will even tell you they can’t help you out.  These are the folks you need to weed out.  In the end you should be able to decide who you want to work with, and who can serve you the best.

The one you chose should be able to keep you informed about financial trends, and by planning accordingly, they can time your rate lock to when you desire to close, in turn getting you the best rate possible!

DON’T BE AFRAID TO GET YOUR CREDIT PULLED

Oh and one last thing, one of the biggest deciding factors for loan officers when shopping your rate is your credit score.  The higher your score, the better chance you have of getting a lower rate, and vice versa.  So be honest with the person you are working with, and don’t resist if they want to pull your credit.

Luckily, a formal credit pull by a loan officer working for a mortgage company is treated completely different than if you are applying to get 15% off your first purchase at The Gap.   Also, unlike applying for store credit cards, applying for multiple mortgage quotes won’t count as multiple, consumer-initiated inquiries, which is a good thing.

So, if you’re interested in getting a mortgage quote, don’t hesitate to CONTACT US, or you can fill out our QUICK LOAN APPLICATION FORM and we will get back to you as soon as possible.  It always helps to work with someone who is knowledgeable, and at the same time honest.

- Mike

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.

To get pre-approved, you will need to CONTACT one of our loan officers, who can analyze your situation and tell you how much you can afford to spend on a house.

How is this accomplished?  Well, 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 house. This includes running your credit and seeing how much income you earn, and then comparing it to how much you want to spend each month.  They will also take into consideration things such as how much money you have on hand and how much you pay each month towards bills like credit cards.

If you are ready to apply or are interested in getting pre-approved, just select the option below that is most convenient for you.

• Complete our Quick Loan Application Form.   This process usually takes less than five minutes. A loan officer will contact you once we receive your application.

• Give us a call and we will take your loan application over the phone.  817-527-3164 or 817-658-0504

• Send us an email describing your situation and what you are looking to do (purchase, refinance, etc).

• Have a Loan Officer contact you.

As always, if you have any questions please don’t hesitate to contact us and we will get back to you as soon as possible.

DFWMORTGAGEGUIDE.COM is an equal opportunity lender.

The FHA, who lately has originated almost a third of all home loans, is overhauling its system come April 5th of this year.  Why would this be done when its loan program is so successful, so popular?  Mostly this is being done in an effort to bolster it’s balance sheet and falling capital reserves.  In other words, the FHA is attempting to position itself better to ”manage its risk while continuing to support the nation’s housing market”.

Unfortunately this also means that it will become increasingly more difficult to secure an FHA loan.  Ugh.  So without further ado, here are the changes:

The good news is that the biggest expected change (the proposed increase for the FHA minimum downpayment) didn’t make the final cut.  Luckily this means you can still get into a home with 3.5% down.  Whew.

Also, the FHA’S NEW GUIDELINES institute a minimum FICO score of 580 to make this 3.5% downpayment, while requiring 10 percent down for any applicant whose credit score falls lower than this.  That being said, just because they say they will accept a score of 580 doesnt mean the lenders will too.  Individual underwriters, who are often more strict, will probably look to your file with much more favor if your FICO score is at least 620.  Just FYI.

Overall, the trick to securing a solid FHA loan will be finding the perfect bank or lender for your particular situation.  As always, you can CONTACT US and we will review your requirements and find the best loan for you.  One of the benefits of working with us (as Brokers) is that we work with over 70 banks, and we can often find the best lender for your case!

Fortunately though, there is a new program available from the United States Department of Agriculture that offers 100% financing for people that live (or are looking to live) in rural areas.

Why would they do this?  Is it too good to be true?  Well, long story short, the government offers the option of “zero money down” so that people who live in rural areas (who may have always been renters) can finally have access to affordable mortgages. Consequently, this type of loan is often the best scenario for people who live in the country and want to find a place they can call home. 

Another amazing feature of this loan is that 100% of repairs that need to be made to the property can actually be finance into the loan based on “after repair value.”  What this means is that the USDA Rural Development Loan can also be considered a renovation loan as well.  Because of all these qualities, these loans are quite possibly the best option on the market today. 

So you may be asking, what features does this type of financing entail?  What can I do to make this work for ME?  Well, here are some of the benefits of the USDA Rural Development Loan:

- NOT ONLY FOR FIRST TIME HOME BUYERS - This isn’t like the tax credit!

- LOW INTEREST RATES – Just because you are getting a good deal doesn’t mean you will pay more over the long run.  Rates on these loans are generally better than VA and similar to FHA.

- NO PMI (MORTGAGE INSURANCE) - This makes your monthly payment even lower.

- NO LIMIT ON PURCHASE PRICE - Buy what you want!  (Property must still be reasonable for your income)

- NO MINIMUM FICO SCORE- People that have zero credit history may even qualify.  Those with a credit histoty should have a reasonably good score.  Call for more details.

- SELLER CONCESSIONS UP TO 6% - What this means is that the person selling the house can pay for all or some of your closing costs, which saves you even more money.

- NO CASH RESERVES REQUIRED - Most loan programs require you to have a certain amount of money saved up before you can purchase a home.  This is not the case with the USDA Rural Development Loan.

- 100% FINANCING!!! - NO DOWN PAYMENT IS REQUIRED.  That’s right. NO DOWN PAYMENT.

So next is the issue of actually qualifying for the loan.  Here’s what you need to do, and some of the main requirements involved:

 - You must be a legal US citizen or legal permanent resident.

 - Your income must qualify for the house or property you desire.  As a point of reference, your mortgage payment should not exceed 29% of your gross monthly income.

 - The property must be used as a residence (no farms or commerical deals).

 - You can’t already own a suitable residence in the same area as your proposed new property.

 - Your total family income should not be more than 115% of the median United States income.

Probably the biggest requirement for this type of loan is that the property MUST be in a qualified rural area.  What constitutes a qualified rural area? Well, mostly this has to do with Income and Population Density restrictions, but you may be surprised to find out just how many areas around Dallas and Fort Worth in fact qualify.  As always, you can call or CONTACT US and we will review your situation and see if you (or a house you desire) qualifies.  (free of charge too!) 

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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